<PAGE> 1
================================================================================
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 MARCH 31, 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
May 10, 1999 was 58,828,454.
================================================================================
<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-9)
Item 3. Quantitative and Qualitative Disclosures About Market Risk. (Pages
F-9 to 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 first quarter of 1999, UAM issued an aggregate of 278,057
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 its acquisitions of certain of its subsidiaries. The
exercise prices of the warrants ranged from $14.50 to $23.00 per
share.
During the first quarter of 1999, UAM issued 50,000 shares of its
Common Stock in exchange for 50,000 Exchangeable Preferred Shares of
Integra Capital Management Corporation, a subsidiary of UAM. This
issuance was exempt from registration under Section 4(2) of the
Securities Act of 1933. UAM had originally issued the Exchangeable
Preferred Shares as consideration for its acquisition of Integra. On
February 18, 1999, UAM filed a registration statement on Form S-3 to
register these 50,000 shares of its Common Stock for resale.
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 - United Asset Management Corporation Amended
and Restated 1994 Stock Option Plan [as further
amended and restated as of March 31, 1999].
<PAGE> 3
Exhibit 10.2 - Amended and Restated Consulting Agreement by and
between United Asset Management Corporation and
David I. Russell as of January 1, 1999.
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 March 31, 1999.
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
May 11, 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
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months Ended March 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues $217,695,000 $241,820,000
- --------------------------------------------------------------------------------
Operating expenses:
Compensation and related
expenses 109,069,000 119,554,000
Amortization of cost assigned
to contracts acquired 26,088,000 26,833,000
Other operating expenses 39,146,000 45,063,000
- --------------------------------------------------------------------------------
174,303,000 191,450,000
- --------------------------------------------------------------------------------
Operating income 43,392,000 50,370,000
- --------------------------------------------------------------------------------
Non-operating expenses:
Interest expense, net 15,834,000 10,837,000
Other amortization 1,159,000 898,000
- --------------------------------------------------------------------------------
16,993,000 11,735,000
- --------------------------------------------------------------------------------
Income before income tax expense 26,399,000 38,635,000
Income tax expense 11,298,000 16,537,000
- --------------------------------------------------------------------------------
Net income $ 15,101,000 $ 22,098,000
================================================================================
Basic earnings per share $.25 $.32
Diluted earnings per share $.25 $.31
Dividends declared per share $.20 $.20
================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-1
<PAGE> 5
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
March 31, December 31,
1999 1998
(Unaudited)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 126,069,000 $ 153,616,000
Investment advisory fees receivable 156,941,000 169,061,000
Other current assets 11,956,000 12,419,000
- -----------------------------------------------------------------------------------------
Total current assets 294,966,000 335,096,000
Fixed assets, net 41,071,000 42,148,000
Cost assigned to contracts acquired, net 911,647,000 931,815,000
Other assets 130,194,000 130,452,000
- -----------------------------------------------------------------------------------------
Total assets $1,377,878,000 $1,439,511,000
=========================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 117,889,000 $ 143,559,000
Accrued compensation 80,180,000 108,222,000
- -----------------------------------------------------------------------------------------
Total current liabilities 198,069,000 251,781,000
Senior notes payable 734,000,000 687,521,000
Subordinated notes payable 197,355,000 202,840,000
Deferred income taxes 30,271,000 27,525,000
- -----------------------------------------------------------------------------------------
Total liabilities 1,159,695,000 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 361,561,000 360,781,000
Retained earnings 136,176,000 140,751,000
Accumulated other comprehensive income (10,248,000) (10,132,000)
- -----------------------------------------------------------------------------------------
488,192,000 492,103,000
Less treasury shares at cost (270,009,000) (222,259,000)
- -----------------------------------------------------------------------------------------
Total stockholders' equity 218,183,000 269,844,000
- -----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,377,878,000 $1,439,511,000
=========================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
F-2
<PAGE> 6
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Three Months Ended March 31, 1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Cash flow related to operating activities:
Net income $ 15,101,000 $ 22,098,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Amortization of cost assigned to contracts acquired 26,088,000 26,833,000
Depreciation 3,618,000 3,072,000
Amortization of goodwill and other 1,968,000 1,639,000
- --------------------------------------------------------------------------------------
Net income plus amortization and depreciation 46,775,000 53,642,000
Changes in assets and liabilities:
Decrease in investment advisory fees receivable 13,401,000 18,598,000
Increase in other current assets (1,445,000) (934,000)
Decrease in accounts payable and accrued expenses (24,243,000) (13,663,000)
Decrease in accrued compensation (28,031,000) (64,110,000)
Increase in deferred income taxes 474,000 746,000
- --------------------------------------------------------------------------------------
Net cash flow from (used in) operating activities 6,931,000 (5,721,000)
- --------------------------------------------------------------------------------------
Cash flow related to investing activities:
Cash additions to cost assigned to contracts acquired (4,997,000) (22,883,000)
Change in other assets (3,785,000) (16,878,000)
- --------------------------------------------------------------------------------------
Net cash flow used in investing activities (8,782,000) (39,761,000)
- --------------------------------------------------------------------------------------
Cash flow related to financing activities:
Purchase of treasury shares (71,159,000) (50,288,000)
Additions to notes payable, net 47,329,000 47,784,000
Issuance or reissuance of equity securities 11,274,000 12,895,000
Dividends paid (12,290,000) (13,888,000)
- --------------------------------------------------------------------------------------
Net cash flow used in financing activities (24,846,000) (3,497,000)
- --------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash flow (850,000) (193,000)
- --------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (27,547,000) (49,172,000)
Cash and cash equivalents at beginning of quarter 153,616,000 173,638,000
- --------------------------------------------------------------------------------------
Cash and cash equivalents at end of quarter $ 126,069,000 $ 124,466,000
======================================================================================
</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 March 31, 1999 and their results of
operations and cash flows for the three months ended March 31, 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 $58,827,000 and $55,209,000
at March 31, 1999 and December 31, 1998, respectively. The accumulated
amortization of cost assigned to contracts acquired was $624,802,000 and
$598,621,000 at March 31, 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. During the three-month period ended March 31,
1999, the Company repurchased 3,057,000 shares of its common stock at a cost of
$71,159,000, including certain shares repurchased under the terms of the
Company's systematic program. In addition, exercises of warrants and stock
options, as well as the issuance of stock to former owners of affiliates in
connection with purchase price commitments, resulted in the Company
extinguishing subordinated notes, receiving cash proceeds and issuing stock as
follows:
Three Months
Ended
March 31, 1999
--------------
Subordinated notes extinguished $ 5,136,000
Cash proceeds received $ 10,449,000
Treasury shares reissued 907,838
As of March 31, 1999, the Company held 10,942,041 treasury shares.
Warrants for the purchase of 8,089,000 shares and stock options for the purchase
of 8,393,000 shares were outstanding at weighted average exercise prices of
$23.88 and $22.71, respectively.
F-4
<PAGE> 8
Note 4
The components of comprehensive income for the three months ended March
31, 1999 and 1998, respectively, are set forth below:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net income $ 15,101,000 $ 22,098,000
Other comprehensive income:
Foreign currency translation adjustment 91,000 478,000
Unrealized gain on marketable securities, net 102,000 --
Less: reclassification adjustment for gains
realized in net income (309,000) --
------------ ------------
Comprehensive income $ 14,985,000 $ 22,576,000
============ ============
</TABLE>
Note 5
The Company operates in one business segment, that is, as investment
advisors, managing both domestic and international investment 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 institutional and other clients.
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
------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Domestic revenues $198,005,000 $ 220,369,000
Foreign revenues $ 19,690,000 $ 21,451,000
Domestic long-lived assets $921,514,000 $1,002,132,000
Foreign long-lived assets $161,398,000 $ 177,492,000
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The revenues of UAM's affiliated firms are derived primarily from fees
for investment advisory services provided to institutional and other clients.
Investment advisory fees are generally a function of the overall fee rate
charged to each account and the level of assets under management by the
affiliated firms. Assets under management can be affected by the addition of new
client accounts or client contributions to
F-5
<PAGE> 9
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 $195.8 billion as of March 31, 1999,
compared to $201.4 billion at the start of the year. During the quarter, net
client cash flow reduced assets under management by $6.5 billion, offsetting
$900 million added to these assets through investment performance.
AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED AND OPERATING CASH FLOW (NET
INCOME PLUS AMORTIZATION AND DEPRECIATION)
Cost assigned to contracts acquired, net of accumulated amortization,
represented approximately 66% of the Company's total assets as of March 31,
1999. Amortization of cost assigned to contracts acquired, which is a noncash
charge, represented 15% of the Company's operating expenses for the three months
ended March 31, 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.
Although the contracts acquired are typically terminable on 30-days
notice, analyses conducted by independent consultants retained by UAM and the
experience of UAM's firms to date have indicated that: 1) contracts are usually
relatively long-lived; 2) the duration of contracts can be reasonably estimated;
and 3) the value of the cost assigned to contracts acquired can be estimated
based on the present value of its projected income stream.
The cost assigned to contracts acquired is amortized on a straight-line
basis over the estimated weighted average useful life of the contracts of
individual firms acquired. These lives are estimated through statistical
analysis of historical patterns of terminations and the size and age of the
contracts acquired as of the acquisition date.
When actual terminations differ from the statistical patterns developed,
or upon the occurrence of certain other events, the Company updates the lifing
analyses discussed above. If the update indicates that any of the estimates
should be shortened, the remaining cost assigned to contracts acquired will be
amortized over the shorter life commencing in the year in which the new estimate
is determined. The Company regularly performs reviews for potential impairment
of the value of contracts. If the review indicates that the carrying value of
the contracts is impaired, the asset is adjusted to its estimated fair value.
Cost assigned to contracts acquired is amortized as an operating
expense. It does not, however, require the use of cash and therefore, management
believes that it is important to distinguish this expense from other operating
expenses in order to evaluate the performance of the Company. Amortization of
cost assigned to contracts acquired per share referred to below has been
calculated by dividing total amortization by the same number of shares used in
the diluted earnings-per-share calculation.
For purposes of this discussion, Operating Cash Flow is defined as net
income plus amortization and depreciation, as reflected in the Company's
Condensed Consolidated Statement of Cash Flows. Management uses Operating Cash
Flow not to the exclusion of net income, but rather as an additional important
measure of the Company's performance.
F-6
<PAGE> 10
OPERATING RESULTS
THREE MONTHS ENDED MARCH 31, 1999
COMPARED TO
THREE MONTHS ENDED MARCH 31, 1998
Revenues were $217,695,000 for the three months ended March 31, 1999
compared to $241,820,000 for the first quarter of 1998. Revenues declined due to
the effect of negative net client cash flow as well as the effect of Heitman
Financial Ltd. selling its non-retail property management operation during the
third quarter of 1998. Partially offsetting this decrease was the impact of
positive market performance which generated higher fee revenues.
Compensation and related expenses together with other operating expenses
were $148,215,000 compared to $164,617,000 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 $26,088,000 compared to $26,833,000 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 $17,210,000 from $12,129,000, 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 $26,399,000 compared to $38,635,000
in 1998, reflecting the circumstances described above. The Company's annual
effective tax rate approximated 43% for both of the three-month periods ended
March 31, 1999 and 1998.
Net income was $15,101,000 compared to $22,098,000 reflecting the net
results of the events discussed above. Diluted earnings per share were $.25 for
the first quarter of 1999 compared to $.31 in the first quarter of 1998,
reflecting the effect of the Company's common stock repurchased and the
Company's lower average common stock price, partially offset by the impact of
the issuance of shares of common stock and the hypothetical exercise of warrants
and stock options on the calculation of earnings per share under the treasury
stock method. Amortization of cost assigned to contracts acquired per share
increased to $.43 in the first quarter of 1999 from $.37 in 1998. Operating Cash
Flow was $46,775,000 in the first quarter of 1999 compared to $53,642,000 in
1998 due to the circumstances discussed above.
CHANGES IN FINANCIAL CONDITION; LIQUIDITY AND CAPITAL RESOURCES
The Company generated $46,775,000 of Operating Cash Flow for the three
months ended March 31, 1999. This Operating Cash Flow 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
F-7
<PAGE> 11
diversified industries. As of March 31, 1999, the Company had drawn down
$334,000,000, leaving $416,000,000 available under its $750,000,000 Reducing
Revolving Credit Agreement.
Management believes that the Company's existing capital, together with
Operating Cash Flow and borrowings available under its revolving line of credit,
will provide the Company with sufficient resources to meet its present and
reasonably foreseeable future cash needs. Management expects that the principal
uses of financial resources will be to repurchase shares of the Company's common
stock, to provide further support for investing in the growth initiatives of
existing affiliates, to 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 and have conducted
surveys of all of their software and hardware vendors. As part of this program,
the Company and its affiliates are testing, modifying, upgrading or replacing
their computer software applications and systems, and seek to be substantially
Year 2000 compliant by June 30, 1999.
The Company and its affiliates also addressing Year 2000 issues related
to non-information technology (non-IT) systems, including embedded software and
equipment (e.g. elevators, telephone systems, etc.), and addressing the
compliance of key business partners. The Company and its affiliates have
substantially completed an assessment of its non-IT systems and service
providers and fare in the process of gaining assurances that they will be Year
2000 compliant, and seeks to have these assurances by June 30, 1999.
The Company and its affiliates are in the process of developing
contingency plans in the event that the IT or non-IT systems or any of their key
service providers are not Year 2000 compliant by the end of 1999. The
contingency plans, which are expected to be substantially complete by the end of
1999, will address how to mitigate risks associated with the worst reasonably
likely failures of systems at critical dates in both the short term and the long
term. Any Year 2000 compliance problem of the Company, any of its affiliated
firms, any of its vendors and any other company with which it conducts business
could have a material adverse effect on the Company's consolidated financial
position, consolidated results of operations or consolidated cash flows.
To date, the Company and its affiliates have incurred expenses in the
amount of approximately $1,400,000 and expect to incur an additional $1,100,000
related to this issue. These costs, which principally represent consulting fees,
are being expensed as incurred. The Company has performed, and expects to
continue to perform, modifications, upgrades and replacements of its computer
software applications and systems through the Company's ongoing maintenance
program. Therefore, the Company has not incurred, and does not expect to incur,
significant incremental expenses for such modifications, upgrades and
replacements. The Company does not segregate payroll or other internal costs
specifically devoted to its efforts to address Year 2000 issues, but does not
believe these costs to be significant. The expenses of the Company's affiliated
firms related to the Year 2000 issues are funded out of the share of revenues
that is reserved for the affiliates under revenue sharing agreements and do not
affect the share of revenues retained by the Company. The total cost associated
with becoming Year 2000 compliant is not expected to be material to the
Company's consolidated financial position, consolidated results of operations or
consolidated cash flows.
F-8
<PAGE> 12
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 will be
filed with the SEC and made available to clients.
The estimates and conclusions herein contain forward-looking statements
and are based on management's best estimates of future events. These statements
should be read in conjunction with the Company's disclosures under the heading
"Forward-looking Statements" detailed below.
On January 1, 1999, 11 European Union member states adopted the "Euro"
as their common national currency. This currency will replace existing national
currencies in all participating countries over a period ending July 1, 2002.
During this period, both the Euro and existing national currencies will be
accepted. The Company and its affiliates have established plans to address the
operational and information system issues related to the Euro conversion and do
not expect any costs incurred to have a material adverse effect on the Company's
consolidated results of operations or its consolidated cash flows.
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.
F-9
<PAGE> 13
The Company had $334,000,000 outstanding under its $750,000,000 Reducing
Revolving Credit Agreement (the Credit Agreement) as of March 31, 1999. Interest
rates available for amounts outstanding under the Credit Agreement are
currently: prime, 1.875% over LIBOR or a money market bid option. In addition,
an annual commitment fee, payable on the daily average unused portion of the
Credit Agreement, is currently .375%. The effective interest rate on the
outstanding borrowings at March 31, 1999 was 6.5% compared to 6.12% at March 31,
1998.
At March 31, 1999, the Company also had $197,355,000 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
UNITED ASSET MANAGEMENT CORPORATION
Exhibit 11
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the three-month period ended March 31, 1999
Basic Earnings per Share
Income available to common
shareholders $15,101,000 60,573,000 $ .25
=======
Effect of Dilutive Securities (1) -- 658,000
----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $15,101,000 61,231,000 $ .25
=========== =========== =======
==============================================================================================
For the three-month period ended March 31, 1998
Basic Earnings per Share
Income available to common
shareholders $22,098,000 69,542,000 $ .32
=======
Effect of Dilutive Securities (1) -- 2,345,000
----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $22,098,000 71,887,000 $.31
=========== =========== =======
==============================================================================================
</TABLE>
(1) Options on 3,842,000 and 1,815,000 shares of common stock and warrants
on 3,018,000 and 1,530,000 shares of common stock were outstanding
during the three-month periods ended March 31, 1999 and 1998,
respectively, but were not included in computing diluted earnings per
share because their effects were antidilutive.
F-11
<PAGE> 1
EXHIBIT 10.1
UNITED ASSET MANAGEMENT CORPORATION
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
[AS FURTHER AMENDED AND RESTATED AS OF MARCH 31, 1999]
PREAMBLE
--------
The plan (the "Plan") comprises three subplans: Subplan A covers options to
be granted to any key employees, including officers, and any non-employees
(other than directors) who provide important services to United Asset Management
Corporation, a Delaware corporation ("UAM") or any of its subsidiaries or
parents. Subplan B covers options to be granted to employees of UAM or of its
subsidiaries who are subject to the income tax laws of the United Kingdom, to
the extent that such options can be granted with favorable income tax treatment
under such United Kingdom laws. Subplan C covers options to be granted to
non-employee directors of UAM.
Subject to the adjustments provided in the Plan, the aggregate number of
shares of Common Stock of UAM which may be issued and sold pursuant to incentive
stock options (as defined below) granted under Subplan A or Options (as defined
below) granted under Subplan B of the Plan shall not exceed 11,900,000 shares of
Common Stock (as defined below), which may be either authorized but unissued
shares or treasury shares.* Except as provided below, the aggregate number of
shares of Common Stock which may be issued and sold pursuant to non-incentive
stock options (as defined below) granted under Subplan A or Subplan C of the
Plan shall not exceed the number of shares specified in the preceding sentence
(subject to the adjustments provided in the Plan), less (1) the number of shares
issued pursuant to Subplan A incentive stock options and Subplan B Options and
(2) the number of shares underlying outstanding Subplan A incentive stock
options and Subplan B Options. Notwithstanding the foregoing, additional shares
of Common Stock may be issued and sold pursuant to non-incentive stock options
granted under Subplan A or Subplan C in amounts up to the number of additional
shares reserved for such purpose from time to time under one or more written
resolutions adopted by the Committee (as defined below). The additional shares
of Common Stock that the Committee may reserve for non-incentive stock options
pursuant to the preceding sentence shall meet the following requirements: (1)
all such additional shares must have been reacquired by UAM for not more than
their fair market value at the time of reacquisition and (2) as of the date of
the Committee's resolution to reserve the additional shares, the cumulative
amount received in cash by UAM upon the exercise of options granted under the
Plan shall not be less than the aggregate amount paid for the reacquired shares
that are included in such resolution or in any prior resolution to reserve
additional shares. If any option granted under the Plan shall terminate or
expire without being fully exercised, the shares which have not been purchased
will again become available for purposes of the Plan.
- -----------------
* Of these 11,900,000 total shares, 6,400,000 were originally reserved under the
Plan by action of the shareholders in 1994 and 5,500,000 have been reserved
under the amended and restated Plan by action of the shareholders in 1997.
<PAGE> 2
SUBPLAN A--U.S. SUBPLAN PORTION OF THE
--------------------------------------
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
-------------------------------------------
[AS FURTHER AMENDED AND RESTATED MARCH 31, 1999]
------------------------------------------------
1. PURPOSE OF SUBPLAN A
The purpose of this Subplan A is to encourage key employees, including
officers, of UAM and any present or future subsidiary and parent of UAM
(hereinafter collectively referred to as the "Company") as well as non-employees
(other than directors of UAM) who provide important services to the Company to
acquire shares of common stock of UAM, $.01 par value per share (the "Common
Stock"), and thereby increase their proprietary interest in the Company's
success and provide an added incentive to remain in the employ of the Company.
For purposes of this Subplan A, the words parent and subsidiary shall be
interpreted in accordance with Section 422 and Section 424 of the Internal
Revenue Code of 1986, as from time to time amended (the "Code"). It is intended
that options granted under this Subplan A shall constitute either "incentive
stock options" within the meaning of Section 422 of the Code, or "non-incentive
stock options", as determined by the Committee named in Section 3 of this
Subplan in its sole discretion and indicated on each form of option grant (the
"Option Grant"), and the terms of this Subplan and the Option Grants shall be
construed accordingly.
2. SHARES RESERVED UNDER SUBPLAN A
Subject to the adjustment provided in Section 9, the aggregate number of
shares of Common Stock which may be issued and sold pursuant to options granted
under this Subplan A of the Plan shall be determined in accordance with the
Preamble above.
3. ADMINISTRATION
Except to the extent otherwise provided in Subplan B, the Plan shall be
administered by a committee (the "Committee") consisting of not less than three
(3) members of the Board of Directors of UAM (the "Board"). Each of the members
of the Committee shall be a person who in the opinion of counsel to the Company
is (i) a "non-employee" as such term is used in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Act"), and (ii) an "outside
director" as such term is used in Treasury regulation Section 1.162-27(e) (3)
under Section 162(m) of the Code. The Committee shall be appointed by, and shall
serve at the pleasure of, the Board of Directors. A majority of the members
present at any meeting at which a quorum is present, and any acts approved in
writing by all the members of the Committee without a meeting, shall constitute
the acts of the Committee. The Committee shall have the powers granted to it in
Sections 3, 4, 5, 7 and 8 of this Subplan A. The Committee is authorized to
interpret this Subplan A and, subject to the provisions of the Subplan, to
prescribe, amend, and rescind rules and regulations relating thereto. The
Committee is further authorized, subject to the express provisions of this
Subplan A, to alter or amend the form of Option Grant attached hereto as Exhibit
A and to make all other determinations necessary or advisable in the
administration of the Subplan. The interpretation and administration by the
Committee of any provisions of this
1
<PAGE> 3
Subplan A and the Option Grant shall be final and conclusive on all persons
having any interest therein.
Notwithstanding any other provision of this Plan, if the Committee
determines that a person to whom an option may be granted under this Subplan A
will neither be a "covered employee" within the meaning of Section 162(m) of the
Code nor an employee subject to the short-swing profits rules of Section 16(b)
of the Act at any time from the date of grant until the end of the term of any
option which could be granted under this Subplan A at the time of such
determination, such options may be granted to such person by a committee
consisting of any number of members of the Board, any or all of whom would not
then be eligible to serve on the Committee. With respect to all options referred
to in this paragraph, the committee referred to in this paragraph shall have all
powers otherwise granted to the Committee in Sections 3, 4, 5, 7 and 8 of this
Subplan A, but the committee referred to in this paragraph shall not otherwise
administer this Subplan A.
No members of the Committee or of any committee referred to in the
preceding paragraph or of the Board shall be held liable for any action or
determination made in good faith with respect to the Plan, this Subplan A, or
any option granted hereunder.
4. OPTION GRANTS
Options to purchase shares of Common Stock under this Subplan A may be
granted to key employees (including officers and directors who are employees) of
the Company and to non-employees who provide important services to the Company.
The term "Employee" will include, for purposes of this Subplan A key employees
as well as such non-employees who provide important services to the Company. In
selecting the Employees to whom options will be granted and in deciding how many
shares of Common Stock will be subject to each option, the Committee shall give
consideration to the importance of an Employee's duties, to his experience with
the Company, to his future value to the Company, to his present and potential
contribution to the success of the Company, and to such other factors as the
Committee may deem relevant. Subject to the express provisions of the Plan and
the form of Option Grant incorporated herein by reference as from time to time
altered or amended, the Committee shall have authority to determine with respect
to each Option Grant the number of installments, the number of shares of Common
Stock in each installment, and the exercise dates, and, to the extent not
inconsistent with the applicable provisions of the Code, if any, may specify
additional restrictions and conditions for any Option Grant. Each incentive
stock option shall expire not later than ten years from the date of the grant of
such option.
Except as provided in Section 7 of this Subplan A, no incentive stock
option may be granted to any Employee who, at the time such option is granted
owns stock possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company within the meaning of Section 422 of the
Code. Non-employees who provide services to the Company shall not be eligible to
receive incentive stock options under the Plan.
The date of grant of an option under this Subplan A shall be the date the
Committee votes to grant the option, but no optionee shall have the right to
exercise his option until the Company has executed and delivered the Option
Grant to such optionee. Each option granted under this
2
<PAGE> 4
Subplan A shall be evidenced by and subject to the terms and conditions of the
Option Grant which is incorporated into the Plan by reference as from time to
time altered or amended.
No incentive stock option may be transferred by the optionee, other than by
will or the laws of descent and distribution. An incentive stock option can be
exercised during such individual's life only by him. Notwithstanding the
foregoing, the Committee may grant non-incentive stock options under this
Subplan A or under Subplan C that are transferable (subject to any terms and
conditions imposed by the Committee) by the optionee, either directly or in
trust, to one or more members of the optionee's family. Following any transfer
permitted pursuant to this paragraph, of which the optionee has notified the
Committee in writing, such option may be exercised by the transferee(s), subject
to all terms and conditions of the Option Grant. For these purposes, the members
of the optionee's family are only the optionee's: (i) spouse; (ii) lineal
descendants; (iii) lineal ancestors; and (iv) siblings and spouses and children
of such siblings.
5. OPTION PRICE
The price per share at which each option granted under this Subplan A may
be exercised shall be determined by the Committee subject to the provisions of
this Section 5. In the case of an incentive stock option, the exercise price
shall not be less than the fair market value per share on the date of the grant,
as determined by the Committee in accordance with applicable provisions of the
Code then in effect. In the case of a non-incentive stock option, the exercise
price shall not be less than 50% of the fair market value per share on the date
of grant, as so determined. In no event shall the option price per share for any
option under the Plan be less than the par value per share.
6. LIMITATION ON AMOUNT
The aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by an individual during any calendar year under
all plans of the Company shall not exceed $100,000. To the extent that the
aggregate value of such options (determined in the order in which they were
granted) exceeds such amount, such options shall be treated as non-incentive
stock options.
The maximum number of shares with respect to which any options may be
granted under the Plan (including this Subplan A) to any individual during any
single calendar year shall be 300,000 shares.
7. SPECIAL RULE FOR 10 PERCENT SHAREHOLDERS
The Committee may grant incentive stock options under this Subplan A to
Employees who own more than 10 percent of the combined voting stock of the
Company if (i) at the time of the Option Grant the price per share at which the
option may be exercised is at least 110 percent of the fair market value of the
stock subject to the option and (ii) such option is not exercisable after the
expiration of five years from the date such option is granted.
8. NON-INCENTIVE STOCK OPTIONS
3
<PAGE> 5
Notwithstanding the provisions of Sections 4, 5, 6 and 7 of this Subplan A,
the Committee may grant options which in one or more respects do not meet the
requirements for incentive stock options established by Section 422 of the Code.
The Committee shall indicate on each Option Grant whether an incentive stock
option within the meaning of Section 422 of the Code or a non-incentive stock
option is thereby granted.
Except as otherwise provided in this Subplan A, the Committee, in its sole
discretion, shall establish the terms and conditions for each non-incentive
stock option which it grants. Such terms and conditions may, but need not,
include some or all of the provisions of Sections 4, 5, 6 and 7 of this Subplan
A with respect to incentive stock options. If the Committee grants an option
which in all respects meets the requirements for incentive stock options it may
nonetheless designate such option a non-incentive stock option on the Option
Grant.
9. ADJUSTMENT OF SHARES RESERVED UNDER THE PLAN
The aggregate number and kind of shares reserved under the Plan, the
maximum number of shares as to which options may be granted to any individual
and the option price per share shall be appropriately adjusted by the Board in
the event of any recapitalization, stock split, stock dividend, combination of
shares, or other similar change in the capitalization of the Company, but no
adjustment in the option price shall be made which would reduce the option price
per share to less than the par value per share, and any adjustment in the option
price for options granted under Subplan B of the Plan shall be subject to the
requirements of Rule 5 of Subplan B.
10. DISSOLUTION OR REORGANIZATION
(A) VESTING PROVISIONS
(1) Notwithstanding anything to the contrary in this Subplan A, or in the
Option Grant, an optionee may purchase the full amount of shares of Common Stock
for which options have been granted to such optionee (the "optioned shares") and
for which the options have not been exercised, upon the occurrence of any of the
following events (individually and collectively a "Change of Control" over the
Company):
(a) STOCK TRANSFER OF 20% OR MORE. The acquisition by any individual,
entity or group (within the meaning of Sections 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934 (the "Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Act) of 20 percent or more of either (i) the then
outstanding shares of the 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 the directors (the
"Outstanding Company Voting Securities"); provided, however, that no
change in such beneficial ownership percentage that results solely
from a change in the aggregate number of outstanding shares of Common
Stock or Outstanding Company Voting Securities shall constitute a
Change of Control; provided further, however, that the following
acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege); (B) any acquisition
by the
4
<PAGE> 6
Company or by any corporation controlled by the Company; (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the
Company; or (D) any acquisition by any corporation pursuant to a
consolidation or merger, if, following such consolidation or merger,
the conditions described in clauses (i), (ii), and (iii) of paragraph
(c) below are satisfied; or
(b) CHANGE IN INCUMBENT BOARD OF 50% OR MORE. Individuals who, as of
November 19, 1998 (the "Effective Date"), constitute the Board (the
"Incumbent Board") ceasing for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved by
a vote or resolution 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 either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(c) MERGER WITHOUT CONTINUITY OF OWNERSHIP IN EXCESS OF 60%. Adoption
by the Board of a resolution approving an agreement of consolidation
of the Company with or merger of the Company into another corporation
or business entity in each case, unless, following such consolidation
or merger, (i) more than 60 percent of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such consolidation or merger and/or the combined voting power of the
then outstanding voting securities of such corporation or business
entity entitled to vote generally in the election of directors (or
other persons having the general power to direct the affairs of such
entity) is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Common Stock and Outstanding
Company Voting Securities immediately prior to such consolidation or
merger in substantially the same proportions as their ownership,
immediately prior to such consolidation or merger, of the Common Stock
and/or Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding the Company, any employee benefit plan (or
related trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person
beneficially owning, immediately prior to such consolidation or
merger, directly or indirectly, 35 percent or more of the Common Stock
and/or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 35 percent or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such consolidation or merger or the
combined voting power of the then outstanding voting securities of
such corporation or business entity entitled to vote generally in the
election of its directors (or other persons having the general
5
<PAGE> 7
power to direct the affairs of such entity) and (iii) at least a
majority of the members of the board of directors (or other group of
persons having the general power to direct the affairs of the
corporation or other business entity) resulting from such
consolidation or merger were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
consolidation or merger; provided that any right which shall vest by
reason of the action of the Board pursuant to this paragraph (c) shall
be divested, with respect to any such right not already exercised,
upon (A) the rejection of such agreement of consolidation or merger by
the stockholders of the Company or (B) its abandonment by either party
thereto in accordance with its terms; or
(d) SALE OF ASSETS OR DISSOLUTION. Adoption by the requisite majority
of the whole Board, or by the holders of such majority of stock of the
Company as is required by law or by the Certificate of Incorporation
or By-Laws of the Company as then in effect, of a resolution or
consent authorizing (i) the dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the assets of
the Company, other than to a corporation or other business entity with
respect to which, following such sale or other disposition, (A) more
than 60 percent of, respectively, the then outstanding shares of
common stock of such corporation and/or the combined voting power of
the outstanding voting securities of such corporation or other
business entity entitled to vote generally in the election of
directors (or other persons having the general power to direct the
affairs of such entity) is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportions
as their ownership, immediately prior to such sale or other
disposition, of the Common Stock and/or Outstanding Company Voting
securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company or
such corporation or other business entity and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 35 percent or more of the Common Stock and/or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 35 percent or more of,
respectively, the then outstanding shares of common stock of such
corporation and/or the combined voting power of the then outstanding
voting securities of such corporation or other business entity
entitled to vote generally in the election of directors (or other
persons having the general power to direct the affairs of such entity)
and (C) at least a majority of the members of the board of directors
(or other group of persons having the general power to direct the
affairs of such corporation or other entity) were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company; provided that any right which shall vest by
reason of the action of the Board or the stockholders pursuant to this
paragraph (d) shall be divested, with respect to any such right not
already exercised, upon the abandonment by the
6
<PAGE> 8
Company of such dissolution, or such sale or other disposition of
assets, as the case may be.
(2) Notwithstanding subsection (1) hereof, holder(s) of any unexercised
option(s) that meet the requirements for incentive stock options under Section
422 of the Code (the rights being "ISO Rights", and such holder being an "ISO
Optionee"), may elect at any time to waive the applicability of subsections (1)
hereof to such ISO Optionee's ISO Rights.
(3) Notwithstanding subsections (1) or (2) hereof, after a Change of Control,
and upon adoption of a plan of dissolution, liquidation, merger, consolidation,
or reorganization of the Company (the "Event"), the Board may decide to
terminate each outstanding option granted under this Subplan A. If the Board so
decides, such option(s) shall terminate as of the effective date of the Event,
but the Board shall suspend the exercise of all outstanding options a reasonable
time prior to the Event, giving each optionee not less than fourteen days' prior
written notice of the date of suspension, prior to which an optionee may
purchase in whole or in part the shares available to him as of the date of
receipt of the notice. If the Event is not consummated, the suspension shall be
removed and all options shall continue in full force and effect, subject to the
terms of their respective option grants.
(B) Expired Options
Nothing herein shall allow the optionee to purchase optioned shares, the
options for which have expired.
11. AMENDMENT AND TERMINATION OF PLAN AND SUBPLAN A
The Board may amend, suspend, or terminate the Plan and/or this Subplan A,
including the form of Option Grant incorporated herein by reference. No such
action, however, may, without approval or ratification by the shareholders,
increase the maximum number of shares reserved under the Plan except as provided
in Section 9 of this Subplan A, Rule 5 of Subplan B, or Section 8 of Subplan C,
alter the class or classes of individuals eligible for options, or make any
other change which, pursuant to the Code or regulations thereunder or Section
16(b) of the Act and the rules and regulations promulgated thereunder, requires
action by the shareholders. No such action may, without the consent of the
holder of the option, alter or impair any option previously granted.
In any event, the Plan shall terminate 10 years from the date of adoption
of the amended and restated Plan by the Board of Directors, or if earlier, from
the date of its approval by the shareholders. Any shares remaining under the
Plan at the time of termination which are not subject to outstanding options and
any shares which thereafter become available because of the expiration or
termination of an option shall cease to be reserved for purposes of the Plan.
12. RIGHT TO TERMINATE EMPLOYMENT
Nothing contained herein or in any Option Grant executed pursuant hereto
shall restrict the right of the Company to terminate the employment of any
optionee at any time.
7
<PAGE> 9
13. DATE OF ADOPTION
The date of adoption of this amended and restated Plan by the Board is
January 20, 1997, as further amended by action of the board effective on
November 19, 1998, December 29, 1998, and March 31, 1999.
14. DATE OF APPROVAL
The date of approval of this amended and restated Plan by the shareholders
and the Plan's effective date is May 15, 1997.
8
<PAGE> 10
SUBPLAN B--UK SUBPLAN PORTION OF THE
------------------------------------
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
-------------------------------------------
[AS FURTHER AMENDED AND RESTATED MARCH 31, 1999]
------------------------------------------------
RULES OF THE UNITED ASSET MANAGEMENT CORPORATION
EMPLOYEE SHARE OPTION SCHEME
1. DEFINITIONS
In this Scheme (hereinafter sometimes referred to as the "UK Subplan"),
unless the context otherwise requires, the following words and expressions
shall have the following meanings:
"Act" the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder
"Adoption Date" the date on which the Scheme is adopted by the
Company
"Associated Company" the meaning given to that term in Section 416 of
the U.K. Income and Corporation Taxes Act 1988
"Auditors" the auditors for the time being of the Company
(acting as experts and not as arbitrators)
"Board" the board of directors of the Company
"Change of Control" the meaning given to that term in Rule 6.1 of this
Scheme
"Code" the U.S. Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder
"Committee" the committee established by the Board pursuant to
Rule 10.4
"Company" United Asset Management Corporation
"Control" the meaning given to that word by Section 840 of
the U.K. Income and Corporation Taxes Act 1988
"Date of Grant" the date on which an Option is, was or is to be
granted under the Scheme
"Effective Date" 19 November 1998
"Eligible Employee" any employee of any Participating Company who is
subject to the income tax laws of the United
Kingdom and who is normally required to devote to
his duties not less than 20
9
<PAGE> 11
hours per week (excluding meal breaks) (in the
case of an employee who is also a director of any
Participating Company, 25 hours per week
(excluding meal breaks)) and is not precluded by
paragraph 8 of Schedule 9 from participating in
the Scheme
"Event" the dissolution, liquidation, merger,
consolidation, or reorganization of the Company
"Group" that group comprising all of the Participating
Companies
"Incumbent Board" the individuals who, as of the Effective Date,
constitute the Board
"Issued Company Voting the then issued voting securities of the Company
Securities" entitled to vote generally in the election of the
Board
"Market Value" on any day the closing sales price in U.S. Dollars
of a Share as derived from the consolidated tape
of The New York Stock Exchange for such day or, if
such day, as not a trading day or if no Shares
sold on such day, such closing sales price on the
next previous trading day on which a sale
occurred
"Option" a right to purchase Shares under the Scheme
"Option the certificate embodying an Option granted in
Certificate" accordance with these Rules
"Option Holder" an individual to whom an Option has been granted
pursuant to the Scheme
"Participating the Company and any other corporation which it
Company" Controls
"Person" any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Act
"Plan" the United Asset Management Corporation 1994 Stock
Option Plan, of which this Scheme is an integral
part
"Price" the price determined by the Committee in U.S.
Dollars at which each Share subject to an Option
may be acquired on the exercise of that Option,
which price shall be, subject to Rule 5, not less
than the higher of:
10
<PAGE> 12
(i) the par value (if any) of a Share and
(ii) the Market Value of a Share on the Date
of Grant of that Option
"Relevant Emoluments" the meaning given to that term in sub-paragraph
(2) of paragraph 28 of Schedule 9 by virtue of
subparagraph (4) of that paragraph
"Rules" the terms of the Scheme, as expressed herein and
as amended from time to time
"Schedule 9" Schedule 9 to the U.K. Income and Corporation
Taxes Act 1988
"Scheme" this U.K. Subplan, as set forth in these Rules as
amended from time to time
"Share" a share of common stock, U.S. $.01 par value, in
the capital of the Company which satisfies the
conditions specified in paragraphs 10 to 14
inclusive of Schedule 9 and which may either be an
authorized but unissued share or a treasury share
"Sterling Value" in respect of an Option, the sterling equivalent
of the appropriate Price, calculated by reference
to the U.S. Dollar/Sterling exchange rate
prevailing on the Date of Grant of that Option
"Subplan A" the portion of the Plan applicable to key
employees of, and non-employees (other than
directors of the Company) who provide important
services to, a Participating Company
"Subplan C" the portion of the Plan applicable to non-employee
directors of the Company
"Subsisting Option" an Option which has neither lapsed nor been
exercised or released, given up, or surrendered by
its holder
"UK Subplan" the portion of the Plan comprising the Scheme as
set forth in these Rules
"Year of Assessment" year beginning on any 6th April and ending on the
following 5th April
Where the context permits the singular shall include the plural and vice versa
and the masculine shall include the feminine. References to any Act or statute
shall include any statutory
11
<PAGE> 13
modification, amendment or re-enactment thereof. Headings are for ease of
reference only and shall not affect the construction or interpretation of these
Rules.
2. GRANT OF OPTION
2.1 Subject to the terms of these Rules, the Committee may at its absolute
discretion, from time to time, grant Options to any Eligible Employees
under the Scheme by issuing Option Certificates to them, complying with
Rule 2.2 below.
2.2 Each Option Certificate shall be under seal and shall specify:
i. the Date of Grant of the relevant Option;
ii. the number of Shares for which the Option is granted (which shall
not be so large that the grant of an Option for that number of
Shares would cause the applicable limits specified in Rule 3 to
be exceeded);
iii. the Price at which the relevant Shares can be acquired; and
iv. any conditions on the Option imposed by the Committee, including
(without limitation) any vesting schedule.
In addition each Option Certificate shall indicate that Options cannot be
transferred, assigned or charged and that any purported transfer,
assignment or charge shall cause the relevant Option to lapse forthwith.
Each Option Certificate shall be accompanied by a "form of acceptance" (as
described in Rule 4.3) which shall indicate that the Option to which it
relates will automatically lapse if the Option holder does not sign and
return such form to the Company within 3 months of the Date of Grant.
3. LIMITATIONS
3.1 Subject to adjustment as provided in Rule 5, the aggregate number of
Shares in respect of which Options may be granted under the Scheme on any
Date of Grant or which may be issued and sold pursuant to such Options
shall not exceed 6,985,367 Shares, less (i) any Shares then subject to any
outstanding incentive stock option granted under Subplan A of the Plan or
previously issued pursuant to any such incentive stock option and (ii) any
shares that are then subject to any outstanding non-incentive stock option
granted under Subplan A or Subplan C or previously issued pursuant to any
such non-incentive stock option and are not reacquired shares (as described
in the Preamble to the Plan). If any Option granted under the Plan shall
lapse or shall be released, given up or surrendered without being fully
exercised, the Shares which have not been purchased under the Option shall
again become available for purposes of the Plan.
12
<PAGE> 14
3.2 No Option shall be granted to an Eligible Employee if immediately following
such grant he would hold Subsisting Options with an aggregate Sterling
Value exceeding (pound)30,000.
For the purposes of this Rule 3.2. Options shall include all Options
granted under this Scheme and all options granted under any other scheme
approved under Schedule 9 and established by the Company or any Associated
Company.
3.3 The maximum number of Shares with respect to which any options may be
granted under the Plan (including this UK Subplan) to any individual during
any single calendar year shall be 100,000 Shares.
4. EXERCISE OF OPTIONS
4.1 Any Option which has not lapsed may be exercised only after the earliest of
the following events:
i. the first anniversary of the Date of Grant;
ii. the death of the Option holder;
iii. the Option holder ceasing to be an employee of any Participating
Company by reason of injury, disability, redundancy or retirement
or, at the discretion of the Committee, for any other reason;
iv. a Change of Control of the Company, but only in respect of an
Option granted after April 1, 1999.
Provided always that when granting an Option the Committee may provide that
the Option or any part of it shall not become exercisable under sub Rules
4.1 (i), (ii) or (iii) above until after such time(s) as the Committee
determine and any such restriction on the Option's exercisability shall be
set forth in the Option Certificate for that Option. For the avoidance of
doubt, once an Option has become exercisable under Rule 4.1 (iv), it shall
be exercisable in full.
4.2 Once an Option has become exercisable under Rule 4.1 above, it may be
exercised either in whole or in part at any time unless or until it shall
lapse under Rule 4.3 below, but subject in all cases to Rule 7 below.
4.3 An Option shall lapse on the earliest of the following events:
i. the expiry of three months from the Date of Grant, unless the
Option holder has previously given notice to the Company of his
acceptance of the Scheme's Rules using the form of acceptance
supplied to him with the relevant Option Certificate;
13
<PAGE> 15
ii. subject to a shorter period specified in the Option Certificate,
the tenth anniversary of the Date of Grant;
iii. subject to a shorter period specified in the Option Certificate,
the first anniversary of the Option holder's death;
iv. the Option holder ceasing to be an employee of any Participating
Company by reason of gross misconduct;
v. subject to a shorter period specified in the Option Certificate,
the expiry of three months after the date on which the Option
holder ceases to be an employee of any Participating Company
otherwise than by reason of death or gross misconduct in
circumstances in which sub-clause (iv) applies;
vi. the Option holder being adjudicated bankrupt; and
vii. the first date upon which the Option holder purports to transfer,
assign or charge the Option.
5. VARIATION OF SHARE CAPITAL
In the event of any capitalization or rights issue or any stock split or
stock dividend or any consolidation, sub-division or reduction of capital
by the Company, the number of Shares subject to any Option and the Price
payable for each of those Shares shall be adjusted in such manner as the
Auditors confirm to be fair and reasonable provided that:
i. the aggregate amount payable on the exercise of any Option in
full is not increased;
ii. the Price of a Share is not reduced below its par value if any;
iii. no adjustments shall be made without the prior approval of the
Board of Inland Revenue; and
iv. following the adjustment the Shares continue to satisfy the
conditions specified in paragraphs 10 to 14 inclusive of Schedule
9.
6. CHANGE OF CONTROL
6.1 A Change of Control shall be the occurrence of any of the following events:
i. STOCK TRANSFER OF 20% OR MORE
the acquisition by a Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Act) of 20 percent or
more of either (a) the then issued Shares of the Company or (b)
the combined voting power of the Issued
14
<PAGE> 16
Company Voting Securities; provided, however, that no change in
such beneficial ownership percentage that results solely from a
change in the aggregate number of outstanding Shares or Issued
Company Voting Securities shall constitute a Change of Control;
provided further, however, that the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege); (B) any acquisition by the
Company or any Associated Company; (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any Associated Company; or (D) any acquisition
by any corporation pursuant to a consolidation or merger, if,
following such consolidation or merger, the conditions described
in clauses (a), (b), and (c) of Rule 6.1(iii) below are
satisfied; or
ii. CHANGE IN INCUMBENT BOARD OF 50% OR MORE
the Incumbent Board ceasing for any reason to constitute at least
a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company's
shareholders, was approved by a vote or resolution 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 either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
iii. MERGER WITHOUT CONTINUITY OF OWNERSHIP IN EXCESS OF 60%
the adoption by the Board of a resolution approving an agreement
of consolidation of the Company with or merger of the Company
into another corporation or business entity in each case, unless,
following such consolidation or merger, (a) more than 60 percent
of, respectively, the then issued shares of common stock of the
corporation resulting from such consolidation or merger and/or
the combined voting power of the then issued voting securities of
such corporation or business entity entitled to vote generally in
the election of directors (or other persons having the general
power to direct the affairs of such entity) is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Shares and Issued Company Voting Securities
immediately prior to such consolidation or merger in
substantially the same proportions as their ownership,
immediately prior to such consolidation or merger, (b) no Person
(excluding the Company, any employee benefit plan (or related
trust) of the Company or such corporation or other business
entity resulting from such consolidation or merger and any Person
beneficially owning, immediately prior to such consolidation or
merger, directly or indirectly, 35 percent or more of the
15
<PAGE> 17
Shares and/or Issued Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 35 percent or more
of, respectively, the then issued shares of common stock of the
corporation resulting from such consolidation or merger or the
combined voting power of the then outstanding voting securities
of such corporation or business entity entitled to vote generally
in the election of its directors (or other persons having the
general power to direct the affairs of such entity) and (c) at
least a majority of the members of the board of directors (or
other group of persons having the general power to direct the
affairs of the corporation or other business entity) resulting
from such consolidation or merger were members of the Incumbent
Board at the time of the execution of the initial agreement
providing for such consolidation or merger; provided that any
right which shall vest by reason of the action of the Board
pursuant to this paragraph (iii) shall be divested, with respect
to any such right not already exercised upon (A) the rejection of
such agreement of consolidation or merger by the shareholders of
the Company or (B) its abandonment by either party thereto in
accordance with its terms; or
iv. SALE OF ASSETS OR DISSOLUTION
the adoption by the requisite majority of the whole Board, or by
the holders of such majority of stock of the Company as is
required by law or by the certificate of incorporation or by-laws
of the Company as then in effect, of a resolution or consent
authorizing (a) the dissolution of the Company or (b) the sale or
other disposition of all or substantially all of the assets of
the Company, other than to a corporation or other business entity
with respect to which, following such sale or other disposition,
(A) more than 60 percent of, respectively, the then issued shares
of common stock of such corporation and/or the combined voting
power of the issued voting securities of such corporation or
other business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct
the affairs of such entity) is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Shares and/or Issued Company Voting Securities immediately prior
to such sale or other disposition in substantially the same
proportions as their ownership, immediately prior to such sale or
other disposition, of the Shares and/or Issued Company Voting
Securities, as the case may be, (B) no Person (excluding the
Company and any employee benefit plan (or related trust) of the
Company or such corporation or other business entity and any
Person beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, 35 per cent or more of
the Shares and/or Issued Company Voting Securities, as the case
may be) beneficially owns, directly or indirectly, 35 percent or
more of, respectively, the then issued shares of common stock of
such corporation and/or the combined power of the then
outstanding voting securities of such corporation or other
business entity entitled to vote generally in the election of
directors (or other persons having the general power to direct
the affairs of such entity) and (C) at least a majority of the
members of the board of directors (or other group of
16
<PAGE> 18
persons having the general power to direct the affairs of such
corporation or other entity) were members of the Incumbent Board
at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of
assets of the Company; provided that any right which shall vest
by reason of the action of the Board or the stockholders pursuant
to this paragraph (iv) shall be divested, with respect to any
such right not already exercised, upon the abandonment by the
Company of such dissolution, or such sale or other disposition of
assets, as the case may be.
6.2 In the event of a Change of Control of the Company, notwithstanding any
decision of the Board restricting the Option's exercisability under Rule
4.1, all Options shall be exercisable in full or in part at the Option
holder's discretion provided that one of the events referred to in Rule
4.1(i) to (iv) has occurred.
6.3 Notwithstanding Rule 4.1, after a Change of Control, and upon the
adoption of a plan for an Event, the Board may elect to terminate each
Subsisting Option. If the Board so elects, such Option shall terminate as
of the effective date of the Event, but the Board shall suspend the
exercise of all Subsisting Options a reasonable time prior to the Event,
giving each Option holder not less than fourteen days written notice of the
date of suspension, prior to which an Option holder may purchase in whole
or in part the Shares available to him as of the date of receipt of the
notice. If the Event is not consummated, the suspension shall be removed
and all Options shall continue in full force and effect, subject to the
terms of their respective Option Certificates.
6.4 For the avoidance of doubt, nothing in this Rule 6 shall entitle an Option
holder to exercise an Option which has previously lapsed.
7. MANNER OF EXERCISE OF OPTIONS
7.1 No Option may be exercised by an individual at any time when he is
precluded by paragraph 8 of Schedule 9 from participating in the Scheme.
7.2 An Option shall be exercised by the Option holder, or as the case may
be his personal representative, giving notice to the Company in writing of
the number of Shares in respect of which he wishes to exercise the Option
and making arrangements reasonably acceptable to the Committee for payment
of the appropriate amount, and submitting the relevant Option Certificate.
Any such notice shall be effective on the date of its receipt by the
Company.
7.3 Shares shall be allocated and issued pursuant to a notice of exercise
within 30 days of the date of exercise.
8. RIGHTS ATTACHING TO SHARES
All Shares allocated pursuant to the exercise of an Option shall rank pari
passu in all respects with all other Shares in issue at the date of such
allocation.
17
<PAGE> 19
9. AVAILABILITY OF SHARES
The Company shall at all times procure that it can secure the issue or the
transfer of sufficient Shares to permit the exercise of all Subsisting
Options.
10. LOSS OF OFFICE
If any Option holder shall cease to be an employee of a Participating
Company within the Group for any reason, he shall not be entitled by way of
compensation for loss of office or otherwise howsoever to any sum or other
benefit to compensate him for any loss of any right under the Scheme, and
in returning the form of acceptance referred to in Rule 4.3 he shall be
deemed to have agreed to this.
11. ADMINISTRATION AND AMENDMENT
11.1 No member of the Committee or the Board shall be held liable for any action
or determination made in good faith with respect to the Plan, the UK
Subplan, these Rules or any Option granted hereunder.
11.2 The cost of establishing and operating the Scheme shall be borne by the
Participating Companies in such proportions as the Board shall determine.
11.3 The Board may from time to time suspend or terminate the Plan and/or the UK
Subplan or amend these Rules or the form of Option Certificate, provided
that:
i. no such action may, without approval or ratification by the
Company's shareholders, increase the maximum number of Shares
reserved under the UK Subplan (except as provided in Rule 5) or
under the Plan (except as otherwise expressly provided in the
Plan), alter the class or classes of employees eligible for
Options, or make any other such change which, pursuant to Section
16(b) of the Act and the rules and regulations promulgated
thereunder, requires action by the Company's shareholders;
ii. except as provided in Rule 11.5, no such action may detrimentally
affect an Option holder as regards an Option granted prior to the
taking of such action; and
iii. no amendment to these Rules shall have effect until approved by
the Board of the Inland Revenue.
11.4 The Scheme shall be administered by the Committee, the members of which
shall be appointed by and shall serve at the pleasure of the Board (subject
to the restrictions of this Rule 11.4). Notwithstanding the foregoing,
until and unless the Board shall have constituted the Committee pursuant to
this Rule 10.4, the committee serving from time to time as administrator of
the Plan generally shall also serve as the Committee for purposes
18
<PAGE> 20
of the UK Subplan. Actions taken by a majority of the members present at
any meeting of the Committee at which a quorum is present, and any acts
approved in writing by all members of the Committee without a meeting,
shall constitute the acts of the Committee. The Committee shall have all
powers of administration granted under these Rules, except such powers as
are expressly reserved to the Board. The Committee is authorized to
interpret these Rules and, subject to the provisions of Rule 11.3, to
prescribe, amend, and rescind rules and regulations relating thereto. The
Committee is further authorized. subject to the express provisions of the
Plan and these Rules, to alter or amend the form of Option Certificate
pursuant to which Options may be granted under the Scheme from time to time
and to make all determinations necessary or advisable in the administration
of the Scheme. The interpretation and administration by the Committee of
any provisions of the Plan and the UK Subplan, including these Rules, and
any Option Certificate issued pursuant to the Scheme shall be final,
binding and conclusive on all persons having any interest therein.
11.5 Any notice or communication to be given by or on behalf of the Company
to any Eligible Employee may be given by personal delivery or by sending
the same by ordinary post to his last known address in which case it shall
be deemed to have been received on the day after it was posted. Any notice,
document, option, share certificate or other communication sent by post
shall be sent at the risk of the Eligible Employee involved.
11.6 Unless otherwise provided any notice or other communication to be given
by an Eligible Employee to the Company shall be regarded as having been
properly given if sent or delivered to the company secretary of the
Participating Company by whom he is employed at that company's registered
office, any such communication being effective only upon receipt.
11.7 The Scheme shall at all times be read in accordance with the provisions
of the U.K. Income and Corporation Taxes Act 1988 and insofar as any of its
Rules shall be inconsistent with any of the said provisions and/or with any
requirements of the Board of Inland Revenue necessary for its approval or
continued approval under the said Act they shall be deemed automatically
varied or deleted in such a way as to ensure compliance with the same.
19
<PAGE> 21
SUBPLAN C--NON-EMPLOYEE ("ELIGIBLE") DIRECTOR PORTION OF THE
------------------------------------------------------------
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
-------------------------------------------
[AS FURTHER AMENDED AND RESTATED MARCH 31, 1999]
------------------------------------------------
1. PURPOSE OF SUBPLAN C
The purpose of this Subplan C is to grant options to purchase shares of the
common stock, $.01 par value (the "Common Stock"), of United Asset Management
Corporation (the "Company") to Eligible Directors (as defined in Section 4 of
this Subplan) of the Company at market value on the date of grant, and to permit
the granting of stock options to Eligible Directors at an exercise price less
than market value at the date of grant as an alternative to the payment of
Directors' fees in cash. The Company believes that the granting of such options
will serve to enhance the Company's ability to attract and retain the services
of such persons, to provide additional incentives to them and to encourage the
highest level of performance by them by offering them a proprietary interest in
the Company's success. The Company also believes that the Plan will encourage
directors to make greater equity investment in the Company, more closely
aligning the interests of the directors and the stockholders.
2. SHARES RESERVED UNDER SUBPLAN C
Subject to the adjustment provided in Section 8, the aggregate number of
shares of Common Stock which may be issued and sold pursuant to options granted
under this Subplan C of the Plan shall not exceed 800,000 shares (or, if less,
the then remaining aggregate number of shares determined in accordance with the
Preamble to the Plan), which may be either authorized but unissued shares or
treasury shares. If any option granted under the Plan shall terminate or expire
without being fully exercised, the shares which have not been purchased will
again become available for purposes of the Plan.
3. ADMINISTRATION
This Subplan C shall be interpreted and administered by a committee (the
"Committee") consisting of not less than three (3) members of the Board of
Directors of the Company (the "Board") appointed pursuant to Section 3 of
Subplan A of the Plan. The interpretation and administration by the Committee of
any provisions of the Plan and any option granted thereunder shall be final and
conclusive on all persons having any interest therein.
No members of the Committee or the Board shall be held liable for any
action or determination made in good faith with respect to the Plan or any
option granted thereunder.
4. OPTION GRANTS
"Eligible Directors" shall mean directors of the Company who are directors
on the date of grant and who are not officers or employees of the Company. All
options granted under this Subplan C shall be non-incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
20
<PAGE> 22
(a) REGULAR OPTIONS
Each Eligible Director who is such on the 30th day following the
date on which each Annual Meeting of the Stockholders of the Company
(the "Annual Meeting") is held during the term of the Plan shall on
such 30th day be granted a stock option to purchase 14,000 shares of
Common Stock. Each such option is defined herein as a "Regular
Option."
The date of grant of an option to an Eligible Director under this
Subplan C shall be the applicable day referred to immediately above.
(b) DISCOUNTED OPTIONS
(i) Subject to such other rules as the Committee may adopt
from time to time, during the term of the Plan, options to purchase
Common Stock at a discount from fair market value on the date of grant
("Discounted Options") shall be granted to any Eligible Director who,
no later than June 30, with respect to the six-month period following
such date, and no later than December 31, with respect to the
six-month period following such date (each six month period, a
"Semi-Annual Period"), has filed with the Company an irrevocable
election to receive a stock option in lieu of all or a specified
portion (expressed in terms of a percentage of the Semi-Annual Fee) of
the Semi-Annual Fee (as defined in Subsection 4(b) (iii)) earned or
expected to be earned by such Director for the Semi-Annual Period
specified in the election.
(ii) Discounted Options shall be granted to an electing
Eligible Director on the first day (July 1 or January 1) of each
applicable Semi-Annual Period.
A separate election must be made for each Semi-Annual Period,
although a Director may specify that a particular election shall apply
to future Semi-Annual Periods unless amended or revoked; provided,
however, that no amendment or revocation may be made with respect to a
Semi-Annual Period after the applicable election date for such
Semi-Annual Period. The Director shall not be entitled to receive in
cash any portion of the Semi-Annual Fee for which an election has been
made to receive an option.
(iii) Option Formula. The number of shares of Common Stock
subject to each Discounted Option granted to any Eligible Director for
a Semi-Annual Period shall be equal to the nearest number of whole
shares of Common Stock, with cash payment for fractional shares,
determined in accordance with the following formula:
Semi-Annual Fee = Number of Shares
-----------------------
Fair Market Value minus
Discounted Option Price
21
<PAGE> 23
"Discounted Option Price" and "Fair Market Value" shall be defined as set
forth in Section 5 below. "Semi-Annual Fee" shall mean the quarterly retainer
fees which the Director will be entitled to receive during a Semi-Annual Period
for serving as a Director pursuant to the policy in effect for each year during
the term of the Plan, but expressly excluding fees paid for attendance at or
participation in meetings of the Board or any committee thereof; provided,
however, that if a Director elects to receive a stock option in lieu of only a
portion of the Semi-Annual Fee, the Semi-Annual Fee for purposes of the
foregoing formula shall equal the portion of the Semi-Annual Fee so elected. For
purposes of this Subplan C, "Semi-Annual Fee" shall also not include expenses
reimbursed by the Company for attendance at or participation in meetings of the
Board or any committee of the Board or fees for any other services to be
provided to the Company.
5. OPTION PRICE
(a) REGULAR OPTION
The price per share at which each Regular Option granted under
this Subplan C to an Eligible Director may be exercised ("Regular
Option Price") shall be the fair market value of the Common Stock as
determined by the closing sales price of such Common Stock on the
consolidated tape of the principal exchange on which such Common Stock
is traded on the date of grant, or if there are no sales on such date,
on the trading day next preceding the date of grant on which a sale
took place, or, if the Common Stock is not so traded, then as
determined by a principal market maker for such Common Stock selected
by the Committee ("Fair Market Value").
(b) DISCOUNTED STOCK OPTIONS
The price per share at which each Discounted Option granted under
this Subplan C to an Eligible Director may be exercised (the
"Discounted Option Price," the Regular Option Price and the Discounted
Option Price being sometimes hereinafter referred to as the "Option
Price") shall be seventy-five percent (75%) of the Fair Market Value
of the Common Stock on the date the Discounted Option is granted.
(c) In no event shall the Option Price per share for any option under
this Subplan C be less than the par value per share.
6. TERMS OF GRANT
Each option granted under this Subplan C shall be evidenced by and subject
to the terms and conditions of an Option Grant attached hereto as Exhibit A.
Each Option Grant executed and delivered to an Eligible Director shall contain
the following terms and conditions. Each option shall expire five years from the
date of grant of such option, and shall be exercisable in full beginning on or
after the date which is six months after the date of grant thereof; provided,
however, that any option granted between March 31, 1999 and August 31, 1999,
inclusive, shall be exercisable in full beginning on or after the date on which
the Option Grant representing such option is delivered to the optionee. Each
Eligible Director to whom an option is granted may
22
<PAGE> 24
exercise such option from time to time, in whole or in part, during the period
that it is exercisable, by payment of the Option Price of each share purchased.
The Option Price of each share purchased shall be paid in cash, or by delivery
or deemed delivery of other shares of the Company's Common Stock owned by the
Eligible Director with an aggregate Fair Market Value equal to the product of
the Option Price multiplied by the number of the shares to be purchased, or by
withholding by the Company of the number of shares of its Common Stock otherwise
issuable upon exercise of the installment with an aggregate Fair Market Value
equal to the product of the Option Price multiplied by the number of the shares
(including such withheld shares) to be purchased, or by delivery of irrevocable
instructions to a broker promptly to pay to the Company the exercise price of
the shares to be purchased, or in any combination of the forms of payment. A
deemed delivery of shares shall mean the offset by the Company of a number of
shares to be purchased against an equal number of shares of the Company's Common
Stock owned by the Eligible Director. If, however, the applicable Committee
established pursuant to Section 3 of this Subplan C determines in good faith
that an exercise of an option through the delivery or deemed delivery or
withholding of shares of the Company's Common Stock or through delivery of
irrevocable instructions to a broker is not in the best interest of the Company,
the Committee may withhold the right to so exercise the option and require
payment of the purchase price in cash.
The shares of Common Stock issued upon exercise of an option granted under
this Subplan C will be acquired for investment and not with a view to
distribution thereof unless there shall be an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), with respect
thereto. In the event that the Company, upon the advice of counsel, deems it
necessary to list upon official notice of issuance shares to be issued pursuant
to the Plan on a national securities exchange or to register under the 1933 Act
or other applicable federal or state statute any shares to be issued pursuant to
the Plan, or to qualify any such shares for exemption from the registration
requirements of the 1933 Act under the Rules and Regulations of the Securities
and Exchange Commission or for similar exemption under state law, then the
Company shall notify each Eligible Director to that effect and no shares of
Common Stock subject to an option shall be issued until such registration,
listing or exemption has been obtained. The Company shall make prompt
application for any such registration, listing or exemption pursuant to federal
or state law or rules of such securities exchange which it deems necessary and
shall make reasonable efforts to cause such registration, listing or exemption
to become and remain effective. Nothing in this Subplan C or in the Option Grant
will confer upon any Eligible Director the right to continue as a director of
the Company. The shares of Common Stock issued on exercise of the option shall
be subject to any restrictions on transfer then in effect pursuant to the
Certificate of Incorporation or Bylaws of the Company.
Options granted under this Subplan C shall be transferable (subject to any
terms and conditions imposed by the Committee) by the optionee, either directly
or in trust, to one or more members of the optionee's family. Following any
transfer permitted pursuant to this paragraph, of which the optionee has
notified the Committee in writing, such option may be exercised by the
transferee(s), subject to all terms and conditions of the Option Grant. For
these purposes, the members of the optionee's family are only the optionee's:
(i) spouse; (ii) lineal descendants; (iii) lineal ancestors; and (iv) siblings
and spouses and children of such siblings.
23
<PAGE> 25
7. TERMINATION OF DIRECTORSHIP
An Eligible Director's right to participate in this Subplan C shall
automatically terminate if and when such Director becomes an employee of the
Company. Options granted to an Eligible Director shall cease to be exercisable 6
months after the date such Director ceases to be a director for any reason other
than death. If an Eligible Director ceases to be a director on account of his
death, any option previously granted to him, whether or not exercisable at the
date of death, may be exercised by his executor, administrator or the person or
persons to whom his rights under the option shall pass by will or the applicable
laws of descent and distribution, at any time within 12 months after the date of
death, but in no event after the expiration of the option.
8. ADJUSTMENT OF SHARES RESERVED UNDER THE PLAN
The aggregate number and kind of shares that may be issued under this
Subplan C, the maximum number of shares as to which options may be granted to
any individual and the Option Price per share shall be appropriately adjusted by
the Board in the event of any recapitalization, stock split, stock dividend,
combination of shares, or other similar change in the capitalization of the
Company, but no adjustment in the Option Price shall be made which would reduce
the Option Price per share to less than the par value per share.
9. DISSOLUTION OR REORGANIZATION
Prior to a dissolution, liquidation, merger, consolidation, or
reorganization of the Company (the "Event"), the Board may decide to terminate
each outstanding option. If the Board so decides, such option shall terminate as
of the effective date of the Event, but the Board shall suspend the exercise of
all outstanding options a reasonable time prior to the Event, giving each
optionee not less than fourteen days written notice of the date of suspension,
prior to which an optionee may purchase in whole or in part the shares available
to him as of the date of receipt of the notice. If the Event is not consummated,
the suspension shall be removed and all options shall continue in full force and
effect subject to the terms of their respective Option Grants.
10. AMENDMENT AND TERMINATION OF SUBPLAN C
The Board may amend, suspend, or terminate this Subplan C, including the
form of Option Grant incorporated herein by reference. No such action, however,
may, without approval or ratification by the shareholders, increase the maximum
number of shares reserved under this Subplan C except as provided in Section 8,
alter the class or classes of individuals eligible for options, or make any
other change which, pursuant to the Code or regulations thereunder or Section
16(b) of the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder, requires action by the shareholders. No such action may,
without the consent of the holder of the option, alter or impair any option
previously granted.
24
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT was originally made as of the 1st day of
January, 1993, and is now amended and restated as of the 1st day of January,
1999, by and between UNITED ASSET MANAGEMENT CORPORATION, a Delaware
corporation, having its principal office at One International Place, Boston,
Massachusetts 02110-2607 (the "Company") and DAVID I. RUSSELL (the
"Consultant").
W I T N E S S E T H :
WHEREAS, the Company desires to expand its operations in the United
Kingdom and Continental Europe;
WHEREAS, the Consultant possesses knowledge regarding certain European
financial markets, and is familiar with the Company and its goals for expansion
in the United Kingdom and Continental Europe;
WHEREAS. The Company desires to retain the services of the Consultant
to advise and assist the Company with research and negotiations regarding
potential acquisition candidates of partners located in Europe;
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Consultant
hereby agree as follows:
1. TERM. The Company shall retain the Consultant to provide,
and the Consultant hall provide, his services as described under Section 5 below
(the "Services"), for a one-year period (the "Term"), with such Services to be
performed as reasonably requested by the Company. The Term shall be
automatically renewed for an additional Term of one year on December 31 of each
year, unless earlier terminated by written notice by either party within 30
days of the end of each year.
2. CONSULTING FEE. With the expectation that the Consultant shall
perform services an average of 2 1/2 days week during the Term, the Company
shall pay the Consultant a consulting fee at the rate of $225,000 per year.
<PAGE> 2
3. EXPENSES. The Company shall reimburse the Consultant for
office expenses incurred during the Term in accordance with applicable budgets
approved by the Company's Board of Directors from time to time, and shall
reimburse the Consultant for one-hundred (100%) of his reasonable travel and
living expenses and other reasonable expenses actually incurred by him in
connection with Services he is performing for the Company. Services and expenses
shall be invoiced on a quarterly basis to the attention of the Company's Chief
Financial Officer. Invoices for such services and expenses shall be paid by the
Company within 30 days of actual receipt by the Company.
4. TERMINATION. Either party may terminate this Agreement at any
time upon 90 days' written notice to the other. In the event of any termination
for any reason, the Consultant shall be paid consulting fees pro rated to the
effective date of termination. All out-of-pocket expenses reasonably incurred up
to the effective date of termination shall in such event also be reimbursed by
the Company.
5. SCOPE OF WORK. It is agreed that the Consultant shall:
(a) Attend meetings and contribute advice, guidance, knowledge,
consultancy and direction regarding possible acquisition
candidates or partners located in the United Kingdom and
Continental Europe (the "European Candidates").
(b) Conduct research regarding the European Candidates.
(c) Make initial contacts with the European Candidates in order to
introduce the Company to the European Candidates and to learn
more about them.
(d) Maintain a steady interaction with the European Candidates.
(e) Assist with travel arrangements for Company travel relating to
the European Candidates.
(f) Assist in negotiations with European Candidates.
(g) Such other consulting or other services as the Company may
reasonably request from time to time relating to the
development of the Company's business in the United Kingdom
and Continental Europe and such other locations as the Company
and the Consultant agree.
6. RELATIONSHIP BETWEEN CONSULTANT AND COMPANY. The relationship
of the Consultant to the Company is that of an independent contractor, not that
of an agent or employee, and each party hereto agrees that it shall not
represent such relationship as being
2
<PAGE> 3
Otherwise to third parties. Nothing contained in this Agreement shall constitute
or be construed to be or create a partnership, joint venture or lease between
the Company and the Consultant. The Consultant shall not have the authority to
bind the Company unless expressly authorized to do so in a particular instance
by vote of the Company's Board of Directors.
7. BINDING AGREEMENT. The terms, covenants, conditions,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire agreement between the parties hereto, and no prior oral or written, and
no contemporaneous oral, representations or agreements between the parties with
respect to the subject matter of this Agreement shall be of any force and
effect. Any additions, amendments or modifications to this Agreement shall be of
no force and effect unless in writing and signed by both the Consultant and the
Company.
9. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed for all purposes by the laws and public policy of The
Commonwealth of Massachusetts applicable to contracts executed and wholly
performed within such Commonwealth. In enforcing such governing laws and public
policy, a court of competent jurisdiction shall afford all relief which a
Massachusetts court would afford under the circumstances.
Executed as an instrument under seal as of the date first written
above.
CONSULTANT
/s/ David I. Russell
---------------------------------------
David I. Russell
UNITED ASSET MANAGEMENT
CORPORATION
By: /s/ Frank H. Kettle
------------------------------------
Franklin H. Kettle,
Executive Vice President
3
<PAGE> 1
UNITED ASSET MANAGEMENT CORPORATION
Exhibit 11
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the three-month period ended March 31, 1999
Basic Earnings per Share
Income available to common
shareholders $15,101,000 60,573,000 $ .25
=======
Effect of Dilutive Securities (1) -- 658,000
----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $15,101,000 61,231,000 $ .25
=========== =========== =======
==============================================================================================
For the three-month period ended March 31, 1998
Basic Earnings per Share
Income available to common
shareholders $22,098,000 69,542,000 $ .32
=======
Effect of Dilutive Securities (1) -- 2,345,000
----------- ----------
Diluted Earnings per Share
Income available to common
shareholders + assumed conversions $22,098,000 71,887,000 $.31
=========== =========== =======
==============================================================================================
</TABLE>
(1) Options on 3,842,000 and 1,815,000 shares of common stock and warrants
on 3,018,000 and 1,530,000 shares of common stock were outstanding
during the three-month periods ended March 31, 1999 and 1998,
respectively, but were not included in computing diluted earnings per
share because their effects were antidilutive.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000796370
<NAME> UNITED ASSET MANAGEMENT CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 126,069
<SECURITIES> 0
<RECEIVABLES> 156,941
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 294,966
<PP&E> 99,234
<DEPRECIATION> (58,163)
<TOTAL-ASSETS> 1,377,878<F1>
<CURRENT-LIABILITIES> 198,069
<BONDS> 931,355<F2>
0
0
<COMMON> 703
<OTHER-SE> 217,480
<TOTAL-LIABILITY-AND-EQUITY> 1,377,878
<SALES> 0
<TOTAL-REVENUES> 217,695
<CGS> 0
<TOTAL-COSTS> 148,215
<OTHER-EXPENSES> 26,088<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,993
<INCOME-PRETAX> 26,399
<INCOME-TAX> 11,298
<INCOME-CONTINUING> 15,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,101
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
<FN>
<F1>INCLUDES COST ASSIGNED TO CONTRACTS ACQUIRED, NET OF 911,647.
<F2>INCLUDES SENIOR NOTES PAYABLE OF 734,000 AND SUBORDINATED NOTES PAYABLE OF
197,355.
<F3>REPRESENTS AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED.
</FN>
</TABLE>
