<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1999 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
-------------------------------
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 outstanding of the registrant's common stock as of
November 5, 1999 was 58,655,624.
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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-10)
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
(Page F-10)
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 1999, UAM issued an aggregate of
222,564 shares of its Common Stock upon the exercise of warrants.
This issuance was exempt from registration under Section 4(2) of
the Securities Act of 1933. UAM had originally issued the
warrants, as consideration for the acquisition of one of its
subsidiaries, to certain principals of that subsidiary. These
principals subsequently assigned these warrants to an unaffiliated
third party. The exercise price of these warrants was $16.50 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 - Forms of Agreements with Certain Employees.
Exhibit 11 - Calculation of Earnings Per Share (Page F-11).
Exhibit 27 - Financial Data Schedule.
(b) There have been no reports on Form 8-K filed by the
Company during the quarter ended September 30, 1999.
<PAGE> 3
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 9, 1999 /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
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $217,215,000 $226,745,000 $654,252,000 $722,941,000
------------ ------------ ------------ ------------
Operating expenses:
Compensation and related
expenses 107,752,000 108,023,000 327,132,000 352,740,000
Amortization of cost assigned
to contracts acquired 26,218,000 28,473,000 78,813,000 86,118,000
Other operating expenses 38,351,000 43,094,000 116,288,000 134,512,000
------------ ------------ ------------ ------------
172,321,000 179,590,000 522,233,000 573,370,000
------------ ------------ ------------ ------------
Operating income 44,894,000 47,155,000 132,019,000 149,571,000
------------ ------------ ------------ ------------
Non-operating expenses:
Interest expense, net 16,164,000 14,802,000 48,500,000 38,115,000
Other amortization 1,182,000 1,319,000 3,525,000 3,122,000
------------ ------------ ------------ ------------
17,346,000 16,121,000 52,025,000 41,237,000
------------ ------------ ------------ ------------
Income before income tax expense 27,548,000 31,034,000 79,994,000 108,334,000
Income tax expense 11,794,000 13,281,000 34,238,000 46,366,000
------------ ------------ ------------ ------------
Net income $ 15,754,000 $ 17,753,000 $ 45,756,000 $ 61,968,000
============ ============ ============ ============
Basic earnings per share $ .27 $ .27 $ .77 $ .92
Diluted earnings per share $ .27 $ .27 $ .76 $ .89
Dividends declared per share $ .20 $ .20 $ .60 $ .60
============ ============ ============ ============
</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,
1999 1998
(Unaudited)
-------------- --------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 121,703,000 $ 153,616,000
Investment advisory fees receivable 161,942,000 169,061,000
Other current assets 10,945,000 12,419,000
-------------- --------------
Total current assets 294,590,000 335,096,000
Fixed assets, net 38,569,000 42,148,000
Cost assigned to contracts acquired, net 864,093,000 931,815,000
Other assets 132,453,000 130,452,000
-------------- --------------
Total assets $1,329,705,000 $1,439,511,000
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 109,735,000 $ 143,559,000
Accrued compensation 95,234,000 108,222,000
-------------- --------------
Total current liabilities 204,969,000 251,781,000
Senior notes payable 686,053,000 687,521,000
Subordinated notes payable 191,851,000 202,840,000
Deferred income taxes 27,042,000 27,525,000
-------------- --------------
Total liabilities 1,109,915,000 1,169,667,000
-------------- --------------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share: 703,000 703,000
Capital in excess of par value 361,810,000 360,781,000
Retained earnings 138,875,000 140,751,000
Accumulated other comprehensive income (7,245,000) (10,132,000)
-------------- --------------
494,143,000 492,103,000
Less treasury shares at cost (274,353,000) (222,259,000)
-------------- --------------
Total stockholders' equity 219,790,000 269,844,000
-------------- --------------
Total liabilities and stockholders' equity $1,329,705,000 $1,439,511,000
============== ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-2
<PAGE> 6
UNITED ASSET MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flow related to operating activities:
Net income $ 15,754,000 $ 17,753,000 $ 45,756,000 $ 61,968,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Amortization of cost assigned to contracts acquired 26,218,000 28,473,000 78,813,000 86,118,000
Depreciation 3,446,000 3,359,000 11,162,000 9,817,000
Amortization of goodwill and other 1,991,000 1,658,000 5,952,000 4,141,000
------------ ------------ ------------ ------------
Net income plus amortization and depreciation 47,409,000 51,243,000 141,683,000 162,044,000
Changes in assets and liabilities:
Decrease in investment advisory fees receivable 1,588,000 11,411,000 7,105,000 26,265,000
Decrease in other current assets 4,687,000 5,662,000 1,460,000 2,610,000
Decrease in accounts payable and accrued expenses (11,527,000) (3,083,000) (31,428,000) (17,566,000)
Increase (decrease) in accrued compensation 9,951,000 17,596,000 (12,943,000) (21,465,000)
Increase (decrease) in deferred income taxes (2,776,000) (373,000) (4,352,000) 1,920,000
------------ ------------ ------------ ------------
Net cash flow from operating activities 49,332,000 82,456,000 101,525,000 153,808,000
------------ ------------ ------------ ------------
Cash flow related to investing activities:
Cash additions to cost assigned to contracts acquired -- (417,000) (5,134,000) (29,578,000)
Change in other assets (8,828,000) (15,856,000) (13,310,000) (38,647,000)
------------ ------------ ------------ ------------
Net cash flow used in investing activities (8,828,000) (16,273,000) (18,444,000) (68,225,000)
------------ ------------ ------------ ------------
Cash flow related to financing activities:
Purchase of treasury shares -- (76,171,000) (88,095,000) (205,552,000)
Additions to (reductions in) notes payable, net (32,947,000) 47,974,000 (9,196,000) 127,163,000
Issuance or reissuance of equity securities 4,834,000 6,549,000 18,576,000 23,823,000
Dividends paid (11,768,000) (13,269,000) (35,954,000) (40,949,000)
------------ ------------ ------------ ------------
Net cash flow used in financing activities (39,881,000) (34,917,000) (114,669,000) (95,515,000)
------------ ------------ ------------ ------------
Effect of foreign exchange rate changes on cash flow 1,027,000 (43,000) (325,000) 391,000
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 1,650,000 31,223,000 (31,913,000) (9,541,000)
Cash and cash equivalents at beginning of period 120,053,000 132,874,000 153,616,000 173,638,000
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $121,703,000 $164,097,000 $121,703,000 $164,097,000
============ ============ ============ ============
</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, 1999 and their results of
operations and cash flows for the three- and nine-month periods ended September
30, 1999 and 1998. These Financial Statements should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Note 2
Accumulated depreciation of fixed assets was $66,371,000 and
$55,209,000 at September 30, 1999 and December 31, 1998, respectively. The
accumulated amortization of cost assigned to contracts acquired was $674,007,000
and $598,621,000 at September 30, 1999 and December 31, 1998, 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. For the three- month period ended September 30,
1999, the Company did not repurchase any shares. For the nine-month period ended
September 30, 1999, the Company repurchased 3,800,800 shares of its common stock
at a cost of $88,095,000, including certain shares repurchased under the terms
of this program. During the three- and nine-month periods ended September 30,
1999, 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:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1999 September 30, 1999
------------------ ------------------
<S> <C> <C>
Subordinated notes extinguished $3,672,000 $ 9,987,000
Cash proceeds received $1,102,000 $13,839,000
Treasury shares reissued 282,488 1,399,786
</TABLE>
As of September 30, 1999, the Company held 11,193,893 treasury shares.
Warrants for the purchase of 7,793,000 shares and stock options for the purchase
of 8,515,000 shares were outstanding at weighted average exercise prices of
$24.17 and $22.75, respectively.
F-4
<PAGE> 8
Note 4
The components of comprehensive income for the three- and nine-month
periods ended September 30, 1999 and 1998, respectively, are set forth below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income: $15,754,000 $17,753,000 $45,756,000 $61,968,000
Other comprehensive income, net:
Foreign currency translation
adjustment 2,482,000 (3,406,000) 3,536,000 (6,539,000)
Unrealized gain (loss) on
marketable securities (40,000) -- 513,000 --
Less: reclassification adjustment
for gains realized in net income -- -- (1,162,000) --
----------- ----------- ----------- -----------
Comprehensive income $18,196,000 $14,347,000 $48,643,000 $55,429,000
=========== =========== =========== ===========
</TABLE>
Note 5
The Company operates in one business segment, that is, as investment
advisors, managing both domestic and international portfolios for corporate,
government and union benefit plans, mutual funds, individuals, endowments, and
foundations. Although each affiliated firm operates under its own name with its
own investment philosophy and approach, the firms' regulatory environments and
the economic characteristics of their products, services, client bases, and
manner of distribution are similar. Therefore, the affiliated firms are
aggregated as one business segment.
Revenues and long-lived assets shown below are classified according to
the affiliate's geographic location. Revenues are derived primarily from fees
for investment advisory services provided to institutions, mutual funds, and
other investors. These 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.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Domestic revenues $197,518,000 $205,727,000 $594,724,000 $657,929,000
Foreign revenues $ 19,697,000 $ 21,018,000 $ 59,528,000 $ 65,012,000
Domestic long-lived assets $876,772,000 $961,912,000 $876,772,000 $961,912,000
Foreign long-lived assets $158,343,000 $171,856,000 $158,343,000 $171,856,000
</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 institutions, mutual funds and
other investors. 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
F-5
<PAGE> 9
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 $193.6 billion as of September 30,
1999, compared to $205.9 billion under management on June 30, 1999. Market
performance subtracted $9.5 billion from UAM's assets under management,
reflecting a decline in equity markets in the United States during the 1999
third quarter, and net client cash flow reduced these assets by an additional
$2.6 billion during the period. The sale of an affiliate, Nelson, Benson &
Zellmer, Inc., subtracted approximately $200 million from the total.
AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED
Cost assigned to contracts acquired, net of accumulated amortization,
represented approximately 65% of the Company's total assets as of September 30,
1999. Amortization of cost assigned to contracts acquired, which is a noncash
charge, represented 15% of the Company's operating expenses for both the three-
and nine-month periods ended September 30, 1999. 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.
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.
The Company regularly performs reviews of estimated lives as well as
for potential impairment of the value of contracts. 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. 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.
F-6
<PAGE> 10
OPERATING RESULTS
THREE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1998
Revenues were $217,215,000 for the three months ended September 30,
1999 compared to $226,745,000 for the third quarter of 1998. Revenues declined
due to the effect of negative net client cash flow, partially offset by the
impact of positive market performance over the past 12-month period which
generated higher fee revenues.
Compensation and related expenses together with other operating
expenses were $146,103,000 compared to $151,117,000 in 1998, primarily
reflecting lower operating expenses and compensation earned by employees of
existing affiliated firms in accordance with revenue sharing plans. Amortization
of cost assigned to contracts acquired was $26,218,000 compared to $28,473,000
in 1998. The decrease was the result of various factors including certain cost
assigned to contracts acquired being fully amortized at the end of 1998,
partially offset by the recording of additional purchase price commitments
associated with prior-year acquisitions.
Interest expense increased to $17,558,000 from $16,765,000 in 1998,
primarily due to the increase in the Company's debt level from stock repurchases
over the past 12 months.
Income before income tax expense was $27,548,000 compared to
$31,034,000 in 1998, reflecting the circumstances described above. The Company's
annual effective tax rate approximated 43% for the three-month periods ended
September 30, 1999 and 1998.
Net income was $15,754,000 compared to $17,753,000 in 1998, reflecting
the results of the events discussed above. Diluted earnings per share were $.27
for both the third quarter of 1999 and 1998. Diluted earnings per share were
affected 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, and by the effect of the
Company's common stock repurchased over the past 12-month period and the
Company's lower average stock price. Amortization of cost assigned to contracts
acquired per share increased to $.44 in the third quarter of 1999 from $.43 in
1998. Net income plus amortization and depreciation was $47,409,000 in the third
quarter of 1999 compared to $51,243,000 in 1998, and EBITDA (earnings before
interest, taxes, depreciation and amortization) was $75,367,000 in the third
quarter of 1999 compared to $79,326,000 in 1998 due to the circumstances
discussed above. Management uses the last two statistics not to the exclusion of
net income, but rather as an additional important measure of the Company's
performance.
F-7
<PAGE> 11
NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1998
Revenues were $654,252,000 for the nine months ended September 30, 1999
compared to $722,941,000 for the first nine months of 1998. Revenues declined
due to the effect of negative net client cash flow, partially offset by the
impact of positive market performance which generated higher fee revenues.
Compensation and related expenses together with other operating
expenses were $443,420,000 compared to $487,252,000 in 1998, primarily
reflecting lower operating expenses and compensation earned by employees of
existing affiliated firms in accordance with revenue sharing plans. Amortization
of cost assigned to contracts acquired was $78,813,000 compared to $86,118,000
in 1998. The decrease was the result of various factors including certain cost
assigned to contracts acquired being fully amortized at the end of 1998,
partially offset by the recording of additional purchase price commitments
associated with prior-year acquisitions.
Interest expense increased to $52,577,000 from $43,457,000 in 1998,
primarily due to the increase in the Company's debt level resulting from stock
repurchases, as well as an increase in the Company's borrowing rates.
Income before income tax expense was $79,994,000 compared to
$108,334,000 in 1998, reflecting the circumstances described above. The
Company's annual effective tax rate approximated 43% for the nine-month periods
ended September 30, 1999 and 1998.
Net income was $45,756,000 compared to $61,968,000 reflecting the net
results of the events discussed above. Diluted earnings per share were $.76 for
the nine months ended September 30, 1999 compared to $.89 for the nine months
ended September 30, 1998. Diluted earnings per share were affected 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, and by the effect of the Company's common stock
repurchased over the past 12-month period and the Company's lower average stock
price. Amortization of cost assigned to contracts acquired per share increased
to $1.32 for the nine months ended September 30, 1999 from $1.24 in 1998,
primarily due to the circumstances discussed above. Net income plus amortization
and depreciation was $141,683,000 for the nine months ended September 30, 1999
compared to $162,044,000 in 1998, and EBITDA was $224,421,000 for the nine
months ended September 30, 1999 compared to $246,525,000 in 1998 due to the
circumstances discussed above.
CHANGES IN FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES
The Company's internally generated cash and additional borrowings under
the Company's line of credit were primarily used 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, 1999, the Company had drawn down
$283,000,000 leaving $467,000,000 available under its $750,000,000 Reducing
Revolving Credit Agreement.
Management believes that the Company's existing capital, together with
internally generated cash 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 provide further support for
investing in the growth initiatives of existing affiliates, to repurchase shares
of the Company's common stock, to
F-8
<PAGE> 12
pay shareholder dividends, to acquire additional investment management firms,
and to fund commitments due or potentially due to former owners of affiliated
firms.
Increases or decreases in interest rates affect UAM's costs of
operations chiefly through raising or lowering 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 SYSTEM-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 and its affiliates have retained a consulting firm since
1997 to help develop and implement a program to assess their Year 2000
readiness. The Company and its affiliates have substantially completed
inventories of their computer hardware and software programs, have conducted
surveys of all of their software and hardware vendors, and have substantially
completed the testing, modification, upgrading or replacement of their computer
software applications and systems.
The Company and its affiliates are also addressing Year 2000 issues
related to non-information technology (non-IT) systems, including embedded
software and equipment (e.g. elevators, telephone systems, etc.). The Company
and its affiliates have substantially completed an assessment of its mission
critical non-IT systems and service providers and have gained assurances from
substantially all of their key service providers that they will be prepared for
Year 2000.
The Company and its affiliates are also developing contingency plans in
the event that the IT or non-IT systems or any of their key service providers
are not substantially Year 2000 compliant by the end of 1999. The contingency
plans, which are substantially complete, address how to mitigate risks
associated with the worst reasonably likely failure of systems at critical dates
in both the short term and the long term. A major Year 2000 compliance problem
of the Company, any of its affiliated firms, any of its vendors, or 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.
Through September 30, 1999, the Company and its affiliates have
incurred expenses of approximately $1,800,000 and expect to incur an additional
$350,000 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
F-9
<PAGE> 13
agreements and do not affect the share of revenues retained by the Company. The
total cost associated with preparing for the Year 2000 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 disclose their Year 2000 readiness in Forms ADV-Y2K or BD-Y2K which have been
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.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking
statements." 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 that 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 that: 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; the investment management business
is highly competitive; the investment management business is susceptible to
internal shifts and frequently requires firms to adapt; and UAM's affiliated
firms depend significantly on key employees. These and other risk factors are
identified and more thoroughly explained in Exhibit 99.1 to UAM's Annual Report
on Form 10-K filed on March 25, 1999 with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information provided below updates that which was previously
presented in Item 7A, Quantitative and Qualitative Disclosures About Market
Risk, of the Company's Form 10-K for the year ended December 31, 1998.
The Company had $283,000,000 outstanding under its $750,000,000
Reducing Revolving Credit Agreement (the Credit Agreement) as of September 30,
1999. Interest rates available for amounts outstanding under the Credit
Agreement are currently: prime, 1.875% over LIBOR or a money market bid option.
The effective interest rate on the outstanding borrowings at September 30, 1999
was 7.32% compared to 7.14% at September 30, 1998. In addition, an annual
commitment fee, payable on the daily average unused portion of the Credit
Agreement, is currently .375%.
At September 30, 1998, the Company also had $191,851,000 of
subordinated notes outstanding which mature at various dates through March 2005
and have interest rates ranging from 5.5% to 7.5%.
F-10
<PAGE> 14
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, 1999
Basic Earnings per Share
Income available to common
shareholders $15,754,000 58,916,000 $ .27 $45,756,000 59,457,000 $ .77
======= =======
Effect of Dilutive Securities (1) -- 123,000 -- 367,000
----------- ---------- ----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $15,754,000 59,039,000 $ .27 $45,756,000 59,824,000 $ .76
=========== ========== ======= =========== ========== =======
====================================================================================================================================
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 (2) -- 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
=========== ========== ======= =========== ========== =======
====================================================================================================================================
</TABLE>
(1) Options on 6,713,000 and 5,217,000 shares of common stock and warrants on
7,288,000 and 5,865,000 shares of common stock were outstanding during the
three- and nine-month periods ended September 30, 1999, respectively, but
were not included in computing diluted earnings per share because their
effects were antidilutive.
(2) 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.
F-11
<PAGE> 1
Exhibit 10.1
This Exhibit contains three forms of agreements, which have been marked
as Forms "A," "B," and "C," respectively. The Company has entered into an
agreement, on one of these forms, with each executive officer, as indicated
below.
Form A:
Norton H. Reamer
Charles E. Haldeman, Jr.
William H. Park
Franklin H. Kettle
Form B:
Joseph R. Ramrath
Richard S. Robie III
Form C:
George D. McClelland
Amit M. Nanavati
Juliana M. Coyle
Kevin P. O'Brien
<PAGE> 2
FORM A
AGREEMENT by and between United Asset Management Corporation, a Delaware
corporation (the "COMPANY") and _________ _________ (the "EXECUTIVE"), dated as
of the 12th day of July, 1999.
The Board of Directors of the Company (the "BOARD"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first date
during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "CHANGE OF CONTROL PERIOD" shall mean the period commencing on the
date hereof and ending on the second anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate two years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Company shall give notice to the Executive that the Change
of Control Period shall not be so extended.
<PAGE> 3
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "CHANGE OF
CONTROL" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (i) the then outstanding shares of common stock of the Company (the
"OUTSTANDING COMPANY COMMON STOCK") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"INCUMBENT BOARD") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets or stock of another corporation (a "BUSINESS
COMBINATION"), in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
-2-
<PAGE> 4
Combination) beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
3. PROTECTED PERIOD. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second anniversary of such
date (the "PROTECTED PERIOD").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Protected
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.
(ii) During the Protected Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Protected Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Protected Period, the
Executive shall receive an annual base salary ("ANNUAL BASE SALARY"), which
shall be paid at a
-3-
<PAGE> 5
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company] in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Protected Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year ending during the Protected Period, an annual
bonus (the "ANNUAL BONUS") in cash at least equal to $__________ (the "RECENT
ANNUAL BONUS"). Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Protected Period,
the Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company.
(iv) WELFARE BENEFIT PLANS. During the Protected Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans and programs) to the
extent applicable generally to other peer executives of the Company, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company.
-4-
<PAGE> 6
(v) EXPENSES. During the Protected Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company.
(vi) FRINGE BENEFITS. During the Protected Period, the Executive shall be
entitled to fringe benefits, including, without limitation, parking and payment
of club dues, in accordance with the most favorable plans, practices, programs
and policies of the Company in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company.
(vii) OFFICE AND SUPPORT STAFF. During the Protected Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the Executive by the
Company at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as provided generally at
any time thereafter with respect to other peer executives of the Company.
(viii) VACATION. During the Protected Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Protected Period. If the Company determines in good faith that the Disability of
the Executive has occurred during the Protected Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "DISABILITY EFFECTIVE DATE"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"DISABILITY" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
-5-
<PAGE> 7
(b) CAUSE. The Company may terminate the Executive's employment during the
Protected Period for Cause. For purposes of this Agreement, "CAUSE" shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason or without Good Reason. For purposes of this
Agreement, "GOOD REASON" shall mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not
-6-
<PAGE> 8
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than as provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by
the Executive for Good Reason or without Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
12(b) of this Agreement. For purposes of this Agreement, a "NOTICE OF
TERMINATION" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The failure
by the Executive or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively, from asserting
such fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "DATE OF TERMINATION" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason or without Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER THAN
FOR CAUSE, DEATH OR DISABILITY. If, during the Protected Period, the Company
shall
-7-
<PAGE> 9
terminate the Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the excess (if any)
of (A) the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable (whether in one or more
installments), including any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed for less than
twelve full months), with respect to the most recently completed fiscal
year during the Protected Period, if any (such higher amount being referred
to as the "HIGHEST ANNUAL BONUS") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, over (B) the amounts of
any installments of the Annual Bonus with respect to the fiscal year in
which the Date of Termination occurs that have already been paid to the
Executive, and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2), and (3) shall be hereinafter
referred to as the "ACCRUED OBLIGATIONS"); and
B. the amount equal to the product of (1) three and (2) the sum of (x)
the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and
C. an amount equal to three times the aggregate employer contributions
made to the Executive's accounts in the Company's qualified and
nonqualified defined contribution pension plans with respect to the most
recent plan year that ended before the Effective Date or, if higher, any
subsequent plan year, plus the amount of any accrued but unvested portion
of the Executive's accounts in such plans that the Executives forfeits;
(ii) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue health and dental benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and their families, provided, however, that if the Executive becomes
reemployed with another
-8-
<PAGE> 10
employer and is eligible to receive health or dental benefits under another
employer provided plan, the benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility; and
(iii) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and
its affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "OTHER BENEFITS").
(b) DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Protected Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company to the estates and beneficiaries of peer
executives of the Company under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Protected Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be terminated for Cause during the Protected Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation
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<PAGE> 11
previously deferred by the Executive, and (z) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Protected Period, excluding a termination for Good Reason,
this Agreement shall terminate without further obligations to the Executive,
other than for Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "CODE").
9. REDUCTION IN CERTAIN PAYMENTS.
(a) For purposes of this Section 9: (i) a "Payment" shall mean any payment
or distribution in the nature of compensation to or for the benefit of the
Executive, whether paid or payable pursuant to this Agreement or otherwise; (ii)
"Agreement Payment" shall mean a Payment paid or payable pursuant to this
Agreement (disregarding this Section); (iii) "Present Value" shall mean such
value determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of
the Internal Revenue Code of 1986, as amended (the "Code"); and (iv) "Reduced
Amount" shall mean an amount expressed in Present Value that maximizes the
aggregate Present
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<PAGE> 12
Value of Agreement Payments without causing any Payment to be nondeductible by
the Company because of Section 280G of the Code.
(b) Anything in the Agreement to the contrary notwithstanding, in the event
PricewaterhouseCoopers (the "Accounting Firm") shall determine that receipt of
all Payments would subject the Executive to tax under Section 4999 of the Code,
the aggregate Agreement Payments shall be reduced (but not below zero) to meet
the definition of Reduced Amount. For purposes of reducing the Payments to the
Safe Harbor Amount, only amounts payable under this Agreement (and no other
Payments) shall be reduced.
(c) If the Accounting Firm determines that aggregate Agreement Payments
should be reduced to the Reduced Amount, the Company shall promptly give the
Executive notice to that effect and a copy of the detailed calculation thereof,
and the Executive may then elect, in his or her sole discretion, which and how
much of the Agreement Payments shall be eliminated or reduced (as long as after
such election the Present Value of the aggregate Agreement Payments equals the
Reduced Amount), and shall advise the Company in writing of his or her election
within ten days of his or her receipt of notice. If no such election is made by
the Executive within such ten-day period, the payments under Section 6(a)(i)(B)
shall be reduced first, and if any further reduction is necessary, the Company
may elect which other Agreement Payments shall be eliminated or reduced (as long
as after such election the Present Value of the aggregate Agreement Payments
equals the Reduced Amount) and shall notify the Executive promptly of such
election. All determinations made by the Accounting Firm under this Section
shall be binding upon the Company and the Executive and shall be made within 60
days of a termination of employment of the Executive. As promptly as practicable
following such determination, the Company shall pay to or distribute for the
benefit of the Executive such Agreement Payments as are then due to the
Executive under this Agreement and shall promptly pay to or distribute for the
benefit of the Executive in the future such Agreement Payments as become due to
the Executive under this Agreement.
(d) As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or distributed by the
Company to or for the benefit of the Executive pursuant to this Agreement which
should not have been so paid or distributed ("Overpayment") or that additional
amounts which will have not been paid or distributed by the Company to or for
the benefit of the Executive pursuant to this Agreement could have been so paid
or distributed ("Underpayment"), in each case, consistent with the calculation
of the Reduced Amount hereunder. In the event that the Accounting Firm, based
upon the assertion of a deficiency by the Internal Revenue Service against
either the Company or the Executive which the Accounting Firm believes has a
high probability of success determines that an Overpayment has been made, any
such Overpayment paid or distributed by the Company to or for the benefit of the
Executive shall be treated for all purposes as a loan to the Executive which the
Executive shall repay to the Company together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code; PROVIDED, however,
that no such loan shall be deemed to have been made and no
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<PAGE> 13
amount shall be payable by the Executive to the Company if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Executive is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
(e) All fees and expenses of the Accounting Firm in implementing the
provisions of this Section 9 shall be borne by the Company.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "COMPANY" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions
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<PAGE> 14
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
IF TO THE COMPANY:
United Asset Management Corporation
One International Place
Boston, Massachusetts 02110
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will" and,
subject to Section 1(a) hereof, prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the
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<PAGE> 15
Executive shall have no further rights under this Agreement. From and after the
Effective Date this Agreement shall supersede any other agreement between the
parties with respect to the subject matter hereof [, INCLUDING WITHOUT
LIMITATION THE EMPLOYMENT AGREEMENT DATED AS OF MARCH 1, 1998 BETWEEN THE
COMPANY AND THE EXECUTIVE] [INCLUDE IN HALDEMAN AGREEMENT ONLY].
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<PAGE> 16
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-------------------------------------
[Executive]
UNITED ASSET MANAGEMENT
CORPORATION
By:
------------------------------------
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<PAGE> 17
FORM B
AGREEMENT by and between United Asset Management Corporation, a Delaware
corporation (the "COMPANY") and _________ _________ (the "EXECUTIVE"), dated as
of the 12th day of July, 1999.
The Board of Directors of the Company (the "BOARD"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first date
during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "CHANGE OF CONTROL PERIOD" shall mean the period commencing on the
date hereof and ending on the second anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate two years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Company shall give notice to the Executive that the Change
of Control Period shall not be so extended.
<PAGE> 18
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "CHANGE OF
CONTROL" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (i) the then outstanding shares of common stock of the Company (the
"OUTSTANDING COMPANY COMMON STOCK") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"INCUMBENT BOARD") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets or stock of another corporation (a "BUSINESS
COMBINATION"), in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
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<PAGE> 19
Combination) beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
3. PROTECTED PERIOD. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second anniversary of such
date (the "PROTECTED PERIOD").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Protected
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.
(ii) During the Protected Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Protected Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Protected Period, the
Executive shall receive an annual base salary ("ANNUAL BASE SALARY"), which
shall be paid at a
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<PAGE> 20
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Protected Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year ending during the Protected Period, an annual
bonus (the "ANNUAL BONUS") in cash at least equal to $__________ (the "RECENT
ANNUAL BONUS"). Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Protected Period,
the Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company.
(iv) WELFARE BENEFIT PLANS. During the Protected Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans and programs) to the
extent applicable generally to other peer executives of the Company, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company.
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<PAGE> 21
(v) EXPENSES. During the Protected Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company.
(vi) FRINGE BENEFITS. During the Protected Period, the Executive shall be
entitled to fringe benefits, including, without limitation, parking and payment
of club dues, in accordance with the most favorable plans, practices, programs
and policies of the Company in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company.
(vii) OFFICE AND SUPPORT STAFF. During the Protected Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the Executive by the
Company at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as provided generally at
any time thereafter with respect to other peer executives of the Company.
(viii) VACATION. During the Protected Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Protected Period. If the Company determines in good faith that the Disability of
the Executive has occurred during the Protected Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "DISABILITY EFFECTIVE DATE"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"DISABILITY" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
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<PAGE> 22
(b) CAUSE. The Company may terminate the Executive's employment during the
Protected Period for Cause. For purposes of this Agreement, "CAUSE" shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason or without Good Reason. For purposes of this
Agreement, "GOOD REASON" shall mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not
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<PAGE> 23
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than as provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by
the Executive for Good Reason or without Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
12(b) of this Agreement. For purposes of this Agreement, a "NOTICE OF
TERMINATION" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The failure
by the Executive or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively, from asserting
such fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "DATE OF TERMINATION" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason or without Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
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<PAGE> 24
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER
THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Protected Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the excess (if any)
of (A) the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable (whether in one or more
installments), including any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed for less than
twelve full months), with respect to the most recently completed fiscal
year during the Protected Period, if any (such higher amount being referred
to as the "HIGHEST ANNUAL BONUS") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, over (B) the amounts of
any installments of the Annual Bonus with respect to the fiscal year in
which the Date of Termination occurs that have already been paid to the
Executive, and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2), and (3) shall be hereinafter
referred to as the "ACCRUED OBLIGATIONS"); and
B. the amount equal to the product of (1) three and (2) the sum of (x)
the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and
C. an amount equal to three times the aggregate employer contributions
made to the Executive's accounts in the Company's qualified and
nonqualified defined contribution pension plans with respect to the most
recent plan year that ended before the Effective Date or, if higher, any
subsequent plan year, plus the amount of any accrued but unvested portion
of the Executive's accounts in such plans that the Executive forfeits;
(ii) for three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue health and dental benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive, as in
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effect generally at any time thereafter with respect to other peer executives of
the Company and their families, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive health or dental
benefits under another employer provided plan, the benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility; and
(iii) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and
its affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "OTHER BENEFITS").
(b) DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Protected Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company to the estates and beneficiaries of peer
executives of the Company under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Protected Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be terminated for Cause during the Protected Period, this Agreement shall
terminate without
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<PAGE> 26
further obligations to the Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date of Termination, (y) the
amount of any compensation previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Protected Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "CODE").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "PAYMENT") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are
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incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "EXCISE TAX"), then the Executive shall be entitled to
receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The payment
of a Gross-Up Payment under this Section 9(a) shall not be conditioned upon the
Executive's termination of employment. Notwithstanding the foregoing provisions
of this Section 9(a), if it shall be determined that the Executive is entitled
to a Gross-Up Payment, but that the portion of the Payments that would be
treated as "parachute payments" under Section 280G of the Code does not exceed
110% of the greatest amount (the "SAFE HARBOR AMOUNT") that could be paid to the
Executive such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the amounts
payable under this Agreement shall be reduced so that the Payments, in the
aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts
payable hereunder, if applicable, shall be made by first reducing the payments
under Section 6(a)(i)(B), unless an alternative method of reduction is elected
by the Executive. For purposes of reducing the Payments to the Safe Harbor
Amount, only amounts payable under this Agreement (and no other Payments) shall
be reduced. If the reduction of the amounts payable under this Agreement would
not result in a reduction of the Payments to the Safe Harbor Amount, no amounts
payable under this Agreement shall be reduced pursuant to this Section 9(a).
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP or such other certified public accounting firm as may
be designated by the Executive (the "ACCOUNTING FIRM") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is
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<PAGE> 28
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
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<PAGE> 29
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
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<PAGE> 30
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "COMPANY" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
IF TO THE COMPANY:
United Asset Management Corporation
One International Place
Boston, Massachusetts 02110
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
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<PAGE> 31
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will" and,
subject to Section 1(a) hereof, prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date this Agreement
shall supersede any other agreement between the parties with respect to the
subject matter hereof.
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<PAGE> 32
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
---------------------------------
[Executive]
UNITED ASSET MANAGEMENT
CORPORATION
By:
------------------------------
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<PAGE> 33
FORM C
AGREEMENT by and between United Asset Management Corporation, a Delaware
corporation (the "COMPANY") and _________ _________ (the "EXECUTIVE"), dated as
of the 12th day of July, 1999.
The Board of Directors of the Company (the "BOARD"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the first date
during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "CHANGE OF CONTROL PERIOD" shall mean the period commencing on the
date hereof and ending on the second anniversary of the date hereof; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Change of Control Period shall be automatically extended so as
to terminate two years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Company shall give notice to the Executive that the Change
of Control Period shall not be so extended.
<PAGE> 34
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "CHANGE OF
CONTROL" shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (i) the then outstanding shares of common stock of the Company (the
"OUTSTANDING COMPANY COMMON STOCK") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"INCUMBENT BOARD") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company or
the acquisition of assets or stock of another corporation (a "BUSINESS
COMBINATION"), in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
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<PAGE> 35
Combination) beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
3. PROTECTED PERIOD. The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second anniversary of such
date (the "PROTECTED PERIOD").
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the Protected
Period, (A) the Executive's position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most significant of those
held, exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles from such location.
(ii) During the Protected Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Protected Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Protected Period, the
Executive shall receive an annual base salary ("ANNUAL BASE SALARY"), which
shall be paid at a
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<PAGE> 36
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Protected Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date and thereafter at least annually. Any increase in Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after any such
increase and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year ending during the Protected Period, an annual
bonus (the "ANNUAL BONUS") in cash at least equal to $__________ (the "RECENT
ANNUAL BONUS"). Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer the receipt
of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Protected Period,
the Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company.
(iv) WELFARE BENEFIT PLANS. During the Protected Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, employee life, group
life, accidental death and travel accident insurance plans and programs) to the
extent applicable generally to other peer executives of the Company, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company.
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(v) EXPENSES. During the Protected Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company.
(vi) FRINGE BENEFITS. During the Protected Period, the Executive shall be
entitled to fringe benefits, including, without limitation, parking and payment
of club dues, in accordance with the most favorable plans, practices, programs
and policies of the Company in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company.
(vii) OFFICE AND SUPPORT STAFF. During the Protected Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the Executive by the
Company at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as provided generally at
any time thereafter with respect to other peer executives of the Company.
(viii) VACATION. During the Protected Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Protected Period. If the Company determines in good faith that the Disability of
the Executive has occurred during the Protected Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "DISABILITY EFFECTIVE DATE"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"DISABILITY" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
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<PAGE> 38
(b) CAUSE. The Company may terminate the Executive's employment during the
Protected Period for Cause. For purposes of this Agreement, "CAUSE" shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason or without Good Reason. For purposes of this
Agreement, "GOOD REASON" shall mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not
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<PAGE> 39
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than as provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement to
the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by
the Executive for Good Reason or without Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
12(b) of this Agreement. For purposes of this Agreement, a "NOTICE OF
TERMINATION" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice). The failure
by the Executive or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively, from asserting
such fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "DATE OF TERMINATION" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason or without Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
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<PAGE> 40
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER
THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Protected Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the excess (if any)
of (A) the product of (x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable (whether in one or more
installments), including any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed for less than
twelve full months), with respect to the most recently completed fiscal
year during the Protected Period, if any (such higher amount being referred
to as the "HIGHEST ANNUAL BONUS") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, over (B) the amounts of
any installments of the Annual Bonus with respect to the fiscal year in
which the Date of Termination occurs that have already been paid to the
Executive, and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of
the amounts described in clauses (1), (2), and (3) shall be hereinafter
referred to as the "ACCRUED OBLIGATIONS"); and
B. the amount equal to the product of (1) two and (2) the sum of (x)
the Executive's Annual Base Salary and (y) the Highest Annual Bonus; and
C. an amount equal to two times the aggregate employer contributions
made to the Executive's accounts in the Company's qualified and
nonqualified defined contribution pension plans with respect to the most
recent plan year that ended before the Effective Date or, if higher, any
subsequent plan year, plus the amount of any accrued but unvested portion
of the Executive's accounts in such plans that the Executive forfeits;
(ii) for two years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue health and dental benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive, as in
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<PAGE> 41
effect generally at any time thereafter with respect to other peer executives of
the Company and their families, provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive health or dental
benefits under another employer provided plan, the benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility; and
(iii) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the Company and
its affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the "OTHER BENEFITS").
(b) DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Protected Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company to the estates and beneficiaries of peer
executives of the Company under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Protected Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be terminated for Cause during the Protected Period, this Agreement shall
terminate without
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<PAGE> 42
further obligations to the Executive other than the obligation to pay to the
Executive (x) his Annual Base Salary through the Date of Termination, (y) the
amount of any compensation previously deferred by the Executive, and (z) Other
Benefits, in each case to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Protected Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "CODE").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 9) (a "PAYMENT") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are
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<PAGE> 43
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "EXCISE TAX"), then the Executive shall be entitled to
receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The payment
of a Gross-Up Payment under this Section 9(a) shall not be conditioned upon the
Executive's termination of employment. Notwithstanding the foregoing provisions
of this Section 9(a), if it shall be determined that the Executive is entitled
to a Gross-Up Payment, but that the portion of the Payments that would be
treated as "parachute payments" under Section 280G of the Code does not exceed
110% of the greatest amount (the "SAFE HARBOR AMOUNT") that could be paid to the
Executive such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the amounts
payable under this Agreement shall be reduced so that the Payments, in the
aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts
payable hereunder, if applicable, shall be made by first reducing the payments
under Section 6(a)(i)(B), unless an alternative method of reduction is elected
by the Executive. For purposes of reducing the Payments to the Safe Harbor
Amount, only amounts payable under this Agreement (and no other Payments) shall
be reduced. If the reduction of the amounts payable under this Agreement would
not result in a reduction of the Payments to the Safe Harbor Amount, no amounts
payable under this Agreement shall be reduced pursuant to this Section 9(a).
(b) Subject to the provisions of Section 9(c), all determinations required
to be made under this Section 9, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP or such other certified public accounting firm as may
be designated by the Executive (the "ACCOUNTING FIRM") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is
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required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
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indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
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(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "COMPANY" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
IF TO THE COMPANY:
United Asset Management Corporation
One International Place
Boston, Massachusetts 02110
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
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(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company is "at will" and,
subject to Section 1(a) hereof, prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date this Agreement
shall supersede any other agreement between the parties with respect to the
subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
---------------------------------------
[Executive]
UNITED ASSET MANAGEMENT
CORPORATION
By:
------------------------------------
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<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, 1999
Basic Earnings per Share
Income available to common
shareholders $15,754,000 58,916,000 $ .27 $45,756,000 59,457,000 $ .77
======= =======
Effect of Dilutive Securities (1) -- 123,000 -- 367,000
----------- ---------- ----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $15,754,000 59,039,000 $ .27 $45,756,000 59,824,000 $ .76
=========== ========== ======= =========== ========== =======
====================================================================================================================================
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 (2) -- 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
=========== ========== ======= =========== ========== =======
====================================================================================================================================
</TABLE>
(1) Options on 6,713,000 and 5,217,000 shares of common stock and warrants on
7,288,000 and 5,865,000 shares of common stock were outstanding during the
three- and nine-month periods ended September 30, 1999, respectively, but
were not included in computing diluted earnings per share because their
effects were antidilutive.
(2) 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000796370
<NAME> UNITED ASSETS MANAGEMENT CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 121,703
<SECURITIES> 0
<RECEIVABLES> 161,942
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 294,590
<PP&E> 104,940
<DEPRECIATION> 66,371
<TOTAL-ASSETS> 1,329,705<F1>
<CURRENT-LIABILITIES> 204,969
<BONDS> 877,904<F2>
0
0
<COMMON> 703
<OTHER-SE> 219,087
<TOTAL-LIABILITY-AND-EQUITY> 1,329,705
<SALES> 0
<TOTAL-REVENUES> 654,252
<CGS> 0
<TOTAL-COSTS> 443,420
<OTHER-EXPENSES> 78,813<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,025
<INCOME-PRETAX> 79,994
<INCOME-TAX> 34,238
<INCOME-CONTINUING> 45,756
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,756
<EPS-BASIC> .77
<EPS-DILUTED> .76
<FN>
<F1>Includes cost assigned to contracts acquired, net of $864,093.
<F2>Includes senior notes payable of $686,053 and subordinated notes payable of
$191,851.
<F3>Represents amortization of costs assigned to contracts acquired.
</FN>
</TABLE>
