SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 16, 1998
Conning Corporation
(Exact Name of Registrant as Specified in its Charter)
Missouri 0-23183 43-1719355
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
700 Market Street, St. Louis, Missouri 63101
(Address of Principal Executive Offices) (zip code)
Registrant's telephone number, including area code: (314) 444-0498
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 16, 1998, the Registrant's indirect wholly owned subsidiaries,
Conning Asset Management Company ("CAM") and Conning & Company ("CC") completed
the acquisition of substantially all of the assets and certain liabilities of
Noddings Investment Group, Inc. ("NIG") and Noddings & Associates, Inc. ("NA")
from NIG and NA, respectively, pursuant to an Asset Purchase Agreement by and
among CAM, CC, NIG, NA, Thomas C. Noddings, John G. Noddings, Edna F. Noddings
and the Registrant (the "Purchase Agreement"). The assets acquired consisted
principally of contracts with investment advisory clients, working capital of
the business and other intangible assets. NIG is engaged in the business of
providing investment advisory services with a focus on convertible securities on
behalf of institutional clients and high net worth individual clients. NA
provides broker-dealer services on behalf of institutional clients and high net
worth individual clients, including clients of NIG. The purchase price was
approximately $4.5 million in cash (including acquisition expenses), with
additional contingent consideration in the amount of up to $27 million in cash
payable over a three year period after the closing, based on meeting certain
financial targets. The purchase price was paid from CAM's and CC's available
cash. The Registrant intends to continue to use the assets acquired for
generally the same purposes as such assets were used by NIG and NA prior to the
acquisition. The purchase price was determined on the basis of arms-length
negotiations between CAM and CC and NIG and NA based on a variety of factors,
including, but not limited to, comparable transactions, historical and projected
operating results, and cash flow valuation models.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of the business acquired.
2
<PAGE>
The following audited financial statements of Noddings & Associates, Inc. are
submitted herewith:
Report of Independent Auditors..........................................F-1
Statement of Financial Condition at March 31, 1998......................F-2
Statement of Operations for the year ended March 31, 1998...............F-3
Statement of Changes in Stockholders' Equity for the year ended
March 31, 1998........................................................F-4
Statement of Cash Flows for the year ended March 31, 1998...............F-5
Notes to Financial Statements...........................................F-6
The following audited financial statements of Noddings Investment Group, Inc.
are submitted herewith:
Report of Independent Auditors..........................................F-8
Statement of Financial Condition at March 31, 1998......................F-9
Statement of Operations for the year ended March 31, 1998..............F-10
Statement of Changes in Stockholders' Equity for the year ended
March 31, 1998.......................................................F-11
Statement of Cash Flows for the year ended March 31, 1998..............F-12
Notes to Financial Statements..........................................F-13
The following unaudited condensed financial statements of Noddings & Associates,
Inc. are submitted herewith:
Statement of Financial Condition at September 30, 1998.................F-15
Statement of Operations for the nine months ended September 30, 1998...F-16
Statement of Changes in Stockholders' Equity for the nine months ended
September 30, 1998...................................................F-17
Statement of Cash Flows for the nine months ended September 30, 1998...F-18
Notes to Condensed Financial Statements................................F-19
The following unaudited condensed financial statements of Noddings Investment
Group, Inc. are submitted herewith:
Statement of Financial Condition at September 30, 1998.................F-20
Statement of Operations for the nine months ended September 30, 1998...F-21
Statement of Changes in Stockholders' Equity for the nine months ended
September 30, 1998...................................................F-22
Statement of Cash Flows for the nine months ended September 30, 1998...F-23
Notes to Condensed Financial Statements................................F-24
(b) Pro Forma financial information (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 1998.........F-25
Condensed Consolidated Statement of Income for the year ended
December 31, 1997....................................................F-26
3
<PAGE>
Condensed Consolidated Statement of Income for the nine months ended
September 30, 1998...................................................F-27
Notes to Pro Forma Condensed Consolidated Financial Statements.........F-28
(c) Exhibits.
2.1 Asset Purchase Agreement, dated December 16, 1998, by and among
Conning Asset Management Company, Conning & Company, Noddings
Investment Group, Inc., Noddings & Associates, Inc., Thomas C.
Noddings, John G. Noddings, Edna F. Noddings and Conning Corporation
23.1 Consent of Altschuler, Melvoin and Glasser, LLP
4
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Noddings & Associates, Inc.
We have audited the accompanying statement of financial condition of Noddings &
Associates, Inc. as of March 31, 1998, and the related statements of operations,
changes in stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Noddings & Associates, Inc. at
March 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Chicago, Illinois /s/ Altschuler, Melvoin and Glasser, LLP
May 1, 1998
F-1
<PAGE>
Noddings & Associates, Inc.
Statement of Financial Condition
March 31, 1998
Assets
Cash and cash equivalent $ 422,417
Investments, at value (cost - $8,155) 7,013
Receivables:
Brokers 966,495
Affiliates 23,690
Other 13,248
Other 2,640
-----------
$ 1,435,503
===========
Liabilities and stockholders' equity
Payable to affiliates 162,810
Accounts payable and accrued liabilities 677,072
Deferred rent 70,904
-----------
910,786
Stockholders' equity:
Class A common stock, no par value; 5,000 shares
authorized, 750 shares issued and outstanding 7,500
Class B common stock, no par value; 15,000 shares
authorized, 6,750 shares issued and outstanding ----
Additional paid-in capital 255,000
Retained earnings 262,217
-----------
Total stockholders' equity 524,717
-----------
$ 1,435,503
===========
See accompanying notes.
F-2
<PAGE>
Noddings & Associates, Inc.
Statement of Operations
Year ended March 31, 1998
Revenues
Commissions $ 1,748,528
Interest 8,623,238
Dividends 29,727
Change in unrealized appreciation/depreciation of investments 1,386
Other 189,923
-----------
10,592,802
Expenses
Short interest rebates paid 7,572,710
Compensation and related benefits 1,737,866
Occupancy and equipment rental 385,440
Clearing fees 217,974
Marketing 147,711
Office supplies and expenses 97,925
Professional fees and dues 59,924
Communications 33,545
Net realized loss on investments 19,726
Other operating expenses 20,263
-----------
10,293,084
-----------
Net income $ 299,718
===========
See accompanying notes.
F-3
<PAGE>
Noddings & Associates, Inc.
Statement of Changes in Stockholders' Equity
Year ended March 31, 1998
Additional
Common Paid-in Retained
Stock Capital Earnings Total
--------- ---------- ---------- ---------
Balance at March 31, 1997 $ 7,500 $ 255,000 $ (17,501) $ 244,999
Net income ---- ---- 299,718 299,718
Distributions to stockholders ---- ---- (20,000) (20,000)
--------- --------- ---------- ----------
Balance at March 31, 1998 $ 7,500 $ 255,000 $ 262,217 $ 524,717
========= ========= ========== ==========
See accompanying notes.
F-4
<PAGE>
Noddings & Associates, Inc.
Statement of Cash Flows
Year ended March 31, 1998
Cash flows from operating activities
Net income $ 299,718
Adjustments to reconcile net income to net cash provided by
operating activities:
Net realized loss on investments 19,726
Change in unrealized appreciation/depreciation
of investments (1,386)
Changes in assets and liabilities:
Increase in receivable from brokers (178,838)
Increase in receivable from affiliates (11,203)
Increase in other receivable (6,707)
Decrease in other assets 901
Increase in payable to affiliates 104,948
Decrease in accounts payable and accrued liabilities (57,105)
Increase in deferred rent 40,562
----------
Net cash provided by operating activities 210,616
Cash flows from investing activities
Cost of securities purchased (80,494)
Proceeds from securities sold 59,149
----------
Net cash used in investing activities (21,345)
Cash flows from financing activities
Distributions to stockholders (20,000)
----------
Net cash used in financing activities (20,000)
----------
Net increase in cash and cash equivalent 169,271
Cash and cash equivalent at beginning of year 253,146
----------
Cash and cash equivalent at end of year $ 422,417
See accompanying notes.
F-5
<PAGE>
Noddings & Associates, Inc.
Notes to Financial Statements
1. Organization
Noddings & Associates, Inc. (the Company) is a securities broker-dealer
registered with the Securities and Exchange Commission, a member of the National
Association of Securities Dealers, Inc., and a commodity introducing broker
registered with the Commodity Futures Trading Commission and a member of the
National Futures Association.
2. Significant Accounting Policies
Revenues and expenses from customers' securities and commodities transactions
are recorded on a trade date basis.
The Company considers its investment in a money market mutual fund as a cash
equivalent.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. Commitments
An affiliate of the Company has an office lease that expires December 31, 2006.
The Company is allocated a portion of the rent expense. Rent expense
approximated $139,200 for the fiscal year ended March 31, 1998.
The Company is an introducing broker and clears all transactions with and for
customers on a fully disclosed basis. In accordance with the clearing agreement
with PaineWebber, Inc., securities transactions are cleared by Correspondent
Services Corporation, an affiliate of PaineWebber, Inc., and commodity
transactions are cleared by PaineWebber, Inc. The Company promptly transmits all
customer funds and securities to its clearing broker. In connection with this
arrangement, the Company is contingently liable for its customers' transactions.
4. Related Parties
Operations of the Company's affiliates have been conducted by personnel of the
Company. The Company allocates certain expenses to an affiliate that totaled
$2,185,136 for the fiscal year ended March 31, 1998.
F-6
<PAGE>
Noddings & Associates, Inc.
Notes to Financial Statements (continued)
The Company earns commissions from transactions with various affiliates. In
addition, the Company shares with its clearing broker in a portion of the
interest income rebate resulting from the short securities positions from
certain affiliates. Total commissions and interest earned from affiliates for
the fiscal year ended March 31, 1998 were $875,278 and $612,516, respectively.
5. Tax Status
The Company's tax year-end is December 31. The Company has elected S corporation
status, and therefore, no provision for federal income taxes has been made. The
Company is liable for Illinois replacement tax, based on its taxable income.
6. Employee Benefit Plans
Effective December 31, 1992, the Company terminated its profit-sharing plan.
Once certain necessary approvals are obtained, all assets will be distributed to
the participants in accordance with the plan agreement.
The Company sponsors a defined contribution 401(k) plan covering eligible
employees. The Company did not make a contribution to this plan during fiscal
1998.
7. Net Capital Requirements
The Company is subject to the net capital rule of the Securities and Exchange
Commission (SEC). This rule prohibits a broker/dealer from engaging in any
securities transaction at a time when: (a) its aggregate indebtedness exceeds 15
times its net capital; or (b) its net capital is less than $100,000, as those
terms are defined by the rule. At March 31, 1998, the Company's net capital and
required net capital were $475,786 and $100,000, respectively, and its ratio of
aggregate indebtedness to net capital was 1.91 to 1. Additionally, the Company
is required by its clearing broker to maintain minimum net capital of $100,000.
F-7
<PAGE>
Report of Independent Auditors
The Stockholders
Noddings Investment Group, Inc.
We have audited the accompanying statement of financial condition of Noddings
Investment Group, Inc. as of March 31, 1998, and the related statements of
operations, changes in stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Noddings Investment Group, Inc.
at March 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Chicago, Illinois /s/ Altschuler, Melvoin and Glasser, LLP
May 1, 1998
F-8
<PAGE>
Noddings Investment Group, Inc.
Statement of Financial Condition
March 31, 1998
Assets
Current assets:
Cash and cash equivalent $ 264,583
Receivables:
Management and incentive fees 404,249
Affiliates 298,345
Other 3,609
-----------
Total current assets 970,786
Office furnishings and equipment, net of accumulated
depreciation of $518,039 153,075
Employee loan 82,035
-----------
Total assets $ 1,205,896
===========
Liabilities and stockholders' equity
Current liabilities:
Payable to affiliates 14,315
Accounts payable and accrued liabilities 183,594
-----------
Total current liabilities 197,909
Deferred rent 47,269
Stockholders' equity:
Class A common stock, no par value; 50,000 shares
authorized; 1,000 shares issued and outstanding 949,682
Class B common stock, no par value; 50,000 shares
authorized; 9,000 shares issued and outstanding ----
Retained earnings 11,036
-----------
Total stockholders' equity 960,718
-----------
Total liabilities and stockholders' equity $ 1,205,896
===========
See accompanying notes.
F-9
<PAGE>
Noddings Investment Group, Inc.
Statement of Operations
Year ended March 31, 1998
Revenues:
Management and incentive fees $ 3,180,100
Gains from interest in affiliated partnerships 61,968
Other 30,239
-----------
3,272,307
Expenses:
Compensation and related benefits 2,135,336
Occupancy and equipment expense 179,558
Marketing 160,019
Professional fees and dues 61,068
Other 126,568
-----------
2,662,549
Net income $ 609,758
===========
See accompanying notes.
F-10
<PAGE>
Noddings Investment Group, Inc.
Statement of Changes in Stockholders' Equity
Year ended March 31, 1998
Common Retained
Stock Earnings Total
---------- ----------- -----------
Balance at March 31, 1997 $ 949,682 $ (298,722) $ 650,960
Net income ---- 609,758 609,758
Distributions to stockholders ---- (300,000) (300,000)
---------- ----------- -----------
Balance at March 31, 1998 $ 949,682 $ 11,036 $ 960,718
========== =========== ===========
See accompanying notes.
F-11
<PAGE>
Noddings Investment Group, Inc.
Statement of Cash Flows
Year ended March 31, 1998
Cash flows from operating activities
Net income $ 609,758
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 77,116
Gains from interest in affiliated partnerships (61,968)
Changes in assets and liabilities:
Increase in management and incentive fees receivable (53,811)
Increase in receivable from affiliates (239,684)
Increase in other receivables (3,609)
Increase in payable to affiliates 1,848
Increase in accounts payable and accrued liabilities 139,858
Increase in deferred rent 27,041
----------
Net cash provided by operating activities 496,549
Cash flows from investing activities
Purchases of office furnishings and equipment (89,478)
Decrease in employee loans 11,355
Distributions from affiliated partnerships 61,968
----------
Net cash used in investing activities (16,155)
Cash flows from financing activities
Contribution from stockholders ----
Distributions to stockholders (300,000)
----------
Net cash used in financing activities (300,000)
----------
Net increase in cash and cash equivalent 180,394
Cash and cash equivalent at beginning of year 84,189
----------
Cash and cash equivalent at end of year $ 264,583
==========
See accompanying notes.
F-12
<PAGE>
Noddings Investment Group, Inc.
Notes to Financial Statements
1. Organization and Business
Noddings Investment Group, Inc. (the Company) is a registered investment advisor
incorporated in the state of Illinois. The Company's business is to serve as
investment advisor to several affiliated limited partnerships (the
partnerships), various individually managed accounts, and certain customers of
Noddings & Associates, Inc. (N&A), a registered broker/dealer. The stockholders
of the Company are also the stockholders of N&A. In addition, the Company serves
as the general partner of the partnerships.
2. Significant Accounting Policies
The Company considers its investment in a money market mutual fund as a cash
equivalent.
Office furnishings and equipment are carried at cost and depreciated on the
straight-line method over estimated useful lives.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. Related Parties
Operations of the Company have been conducted by personnel of N&A. Certain
expenses of the Company were paid by N&A and allocated to the Company. These
expenses totaled $2,185,136 for the year ended March 31, 1998.
The Company acts as the investment manager to certain partnerships and receives
management and incentive fees from these partnerships based on terms defined by
the partnership agreements. Total management and incentive fees earned from
affiliates for the year ended March 31, 1998, were $1,038,633, of which $277,541
is included in receivable from affiliates at March 31, 1998. In addition, as
general partner of the partnerships, the Company is allocated a 1% interest in
the profits or losses of each partnership. For the year ended March 31, 1998,
$61,968 was allocated, of which $20,804 is included in receivable from
affiliates at March 31, 1998.
F-13
<PAGE>
Noddings Investment Group, Inc.
Notes to Financial Statements (continued)
4. Lease Commitment
As of January 1, 1998, the Company entered into an office lease that expires
December 31, 2006. The lease provides for rent escalations based on the lessor's
taxes, maintenance, and other operating costs. Total rental expense for fiscal
1998 amounted to $232,000, of which $139,200 was allocated to N&A for the year
ended March 31, 1998.
Minimum future rents due under the above lease are approximately as follows:
Fiscal Year Amount
----------- ----------
1999 $ 169,000
2000 174,000
2001 179,000
2002 185,000
2003 190,000
Thereafter 764,000
-----------
$1,661,000
===========
5. Tax Status
The Company's tax year-end is December 31. The Company has elected S corporation
status and, therefore, no provision for federal income taxes has been made. The
Company is liable for Illinois replacement tax, based on its taxable income.
F-14
<PAGE>
Noddings & Associates, Inc.
Condensed Statement of Financial Condition
(unaudited)
September 30, 1998
Assets
Cash and cash equivalents $ 465,151
Investments 3,733
Receivables:
Brokers 911,041
Affiliates 5,516
Other 10,350
Other 7,546
----------
$1,403,337
==========
Liabilities and stockholders' equity
Accounts payable and accrued liabilities $ 817,182
Deferred rent 73,519
----------
890,701
Stockholders' equity:
Class A common stock, no par value; 5,000 shares
authorized, 750 shares issued and outstanding 7,500
Class B common stock, no par value; 15,000 shares
authorized, 6,750 shares issued and outstanding ----
Additional paid-in capital 255,000
Retained earnings 250,136
----------
Total stockholders' equity 512,636
----------
$1,403,337
==========
The accompanying notes are an integral part of the condensed
financial statements.
F-15
<PAGE>
Noddings & Associates, Inc.
Condensed Statement of Operations
(unaudited)
Nine Months ended September 30, 1998
Revenues
Commissions $ 801,796
Interest 6,185,196
Dividends 27,350
Change in unrealized appreciation/depreciation of investments 25,419
Other 68,380
-----------
7,108,141
Expenses
Short interest rebates paid 5,398,220
Compensation and related benefits 974,383
Occupancy and equipment rental 154,302
Clearing fees 213,232
Marketing 67,818
Office supplies and expenses 39,264
Professional fees and dues 69,134
Communications 33,026
Other operating expenses 31,440
-----------
6,980,819
-----------
Net income $ 127,322
===========
The accompanying notes are an integral part of the condensed
financial statements.
F-16
<PAGE>
Noddings & Associates, Inc.
Condensed Statement of Changes in Stockholders' Equity
(unaudited)
Nine Months ended September 30, 1998
Additional
Common Paid-in Retained
Stock Capital Earnings Total
-------- ---------- ---------- ----------
Balance at December 31, 1997 $ 7,500 $ 255,000 $ 127,814 $ 390,314
Net income ---- ---- 127,322 127,322
Distributions to stockholders ---- ---- (5,000) (5,000)
-------- --------- --------- ----------
Balance at September 30, 1998 $ 7,500 $ 255,000 $ 250,136 $ 512,636
======== ========= ========= ==========
The accompanying notes are an integral part of the condensed
financial statements.
F-17
<PAGE>
Noddings & Associates, Inc.
Condensed Statement of Cash Flows
(unaudited)
Nine months ended September 30, 1998
Cash flows from operating activities
Net income $ 127,322
Adjustments to reconcile net income to net cash provided by
operating activities:
Net realized loss on investments 928
Change in net unrealized appreciation/depreciation
of investments 2,753
Changes in assets and liabilities:
Decrease in receivable from brokers 262,260
Decrease in receivable from affiliates 13,507
Increase in other receivable (1,995)
Decrease in accounts payable and accrued liabilities (265,681)
Increase in deferred rent 28,951
----------
Net cash provided by operating activities 168,045
Cash flows from investing activities
Cost of securities purchased (1,355)
----------
Net cash used in investing activities (1,355)
Cash flows from financing activities
Distributions to stockholders (5,000)
----------
Net cash used in financing activities (5,000)
----------
Net increase in cash and cash equivalent 161,690
Cash and cash equivalent at beginning of period 303,461
----------
Cash and cash equivalent at end of period $ 465,151
==========
The accompanying notes are an integral part of the condensed
financial statements.
F-18
<PAGE>
Noddings & Associates, Inc.
Notes to Condensed Financial Statements
Note 1 - Basis of Presentation
The accompanying unaudited financial statements should be read in conjunction
with the financial statements and notes for the year ended March 31, 1998. In
the opinion of management, the financial information reflects all adjustments
which are of a normal recurring nature and are necessary for a fair presentation
of the financial position, results of operations, and cash flows for the interim
period. The results of operations for the interim period are not necessarily
indicative of the results to be expected for the entire year.
F-19
<PAGE>
Noddings Investment Group, Inc.
Condensed Statement of Financial Condition
(unaudited)
September 30, 1998
Assets
Current assets:
Cash and cash equivalent $ 384,164
Receivables:
Management and incentive fees 322,026
---------
Total current assets 706,190
Office furnishings and equipment, net of accumulated
depreciation of $549,879 121,235
Employee loan 77,299
---------
Total assets $ 904,724
=========
Liabilities and stockholders' equity
Current liabilities:
Payable to affiliates 14,320
Accounts payable and accrued liabilities 160,712
---------
Total current liabilities 175,032
Deferred rent 49,012
Stockholders' equity:
Class A common stock, no par value; 50,000 shares
authorized; 1,000 shares issued and outstanding 949,682
Class B common stock, no par value; 50,000 shares
authorized; 9,000 shares issued and outstanding ----
Accumulated deficit (269,002)
---------
Total stockholders' equity 680,680
---------
Total liabilities and stockholders' equity $ 904,724
=========
The accompanying notes are an integral part of the condensed
financial statements.
F-20
<PAGE>
Noddings Investment Group, Inc.
Condensed Statement of Operations
(unaudited)
Nine Months ended September 30, 1998
Revenues:
Management and incentive fees $ 1,279,107
Losses from interest in affiliated partnerships (33,722)
Other 163,137
-----------
1,408,522
Expenses:
Compensation and related benefits 1,377,184
Occupancy and equipment expense 118,618
Marketing 122,451
Professional fees and dues 59,945
Other 39,791
-----------
1,717,989
-----------
Net loss $ (309,467)
===========
The accompanying notes are an integral part of the condensed
financial statements.
F-21
<PAGE>
Noddings Investment Group, Inc.
Condensed Statement of Changes in Stockholders' Equity
(unaudited)
Nine Months ended September 30, 1998
Retained
Common Earnings
Stock (Deficit) Total
----------- ------------ ------------
Balance at December 31, 1997 $ 949,682 $ 312,965 $ 1,262,647
Net loss ---- (309,467) (309,467)
Distributions to stockholders ---- (272,500) (272,500)
----------- ------------ ------------
Balance at September 30, 1998 $ 949,682 $ (269,002) $ 680,680
=========== ============ ============
The accompanying notes are an integral part of the condensed
financial statements.
F-22
<PAGE>
Noddings Investment Group, Inc.
Condensed Statement of Cash Flows
(unaudited)
Nine months ended September 30, 1998
Cash flows from operating activities
Net loss $ (309,467)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 50,028
Losses from interest in affiliated partnerships 33,722
Changes in assets and liabilities:
Decrease in management and incentive fees receivable 552,532
Decrease in receivable from affiliates 15,782
Decrease in other receivables 3,609
Decrease in payable to affiliates (76,114)
Decrease in accounts payable and accrued liabilities (412,529)
Increase in deferred rent 19,300
-----------
Net cash used in operating activities (123,137)
Cash flows from investing activities
Sales of office furnishings and equipment 2,574
Decrease in employee loans 9,861
Distributions to affiliated partnerships (945)
-----------
Net cash provided by investing activities 11,490
Cash flows from financing activities
Distributions to stockholders (272,500)
-----------
Net cash used in financing activities (272,500)
-----------
Net decrease in cash and cash equivalent (384,147)
Cash and cash equivalent at beginning of period 768,311
-----------
Cash and cash equivalent at end of period $ 384,164
===========
The accompanying notes are an integral part of the condensed
financial statements.
F-23
<PAGE>
Noddings Investment Group, Inc.
Notes to Condensed Financial Statements
Note 1 - Basis of Presentation
The accompanying unaudited financial statements should be read in conjunction
with the financial statements and notes for the year ended March 31, 1998. In
the opinion of management, the financial information reflects all adjustments
which are of a normal recurring nature and are necessary for a fair presentation
of the financial position, results of operations, and cash flows for the interim
period. The results of operations for the interim period are not necessarily
indicative of the results to be expected for the entire year.
F-24
<PAGE>
<TABLE>
<CAPTION>
Conning Corporation and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheets
As of September 30, 1998
(unaudited)
Pro Forma
Noddings Pro Forma Condensed
Noddings & Investment Adjusting Consolidated
Conning Associates Group Entries Conning
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 30,288,429 $ 465,151 $ 384,164 $ (4,629,441)[F1,2] $ 26,508,303
Short-term investments 23,091,892 - - - 23,091,892
Accounts receivable, net 9,246,060 926,907 322,026 - 10,494,993
Marketable equity securities 251,390 3,733 - - 255,123
Prepaid expenses & other current assets 506,504 7,546 - - 514,050
------------ ------------ ------------ ------------- ------------
Total current assets 63,384,275 1,403,337 706,190 (4,629,441) 60,864,361
Non-marketable investments at value 3,926,859 - - - 3,926,859
Equipment & leasehold improvements net 1,416,332 - 121,235 - 1,537,567
Deferred income taxes 3,225,630 - - - 3,225,630
Goodwill 37,921,783 - - 3,176,250 [F1] 41,098,033
Other assets 2,734,950 - 77,299 - 2,812,249
============ ============ ============= ============= ============
Total assets $112,609,829 $ 1,403,337 $ 904,724 $ (1,453,191) $113,464,699
============ ============ ============= ============= ============
LIABILITIES & SHAREHOLDERS EQUITY
Current liabilities:
Compensation payable $ 9,616,515 $ - $ - $ - $ 9,616,515
Deferred revenue 3,411,961 - - - 3,411,961
Due to affiliates 4,150,759 - 14,320 - 4,165,079
Income taxes payable 1,661,251 - - (185,648)[F3] 1,475,603
Accounts payable and other accrued
expenses 14,951,082 817,182 160,712 - 15,928,976
------------ ------------ ------------ ------------- ------------
Total current liabilities 33,791,568 817,182 175,032 (185,648) 34,598,134
Accrued rent liability 3,169,669 73,519 49,012 - 3,292,200
Other payables 360,000 - - - 360,000
------------ ------------ ------------ ------------- ------------
Total liabilities 37,321,237 890,701 224,044 (185,648) 38,250,334
------------ ------------ ------------ ------------- ------------
Common stock 132,558 7,500 949,682 (957,182)[F1] 132,558
Additional Paid in Capital 73,157,845 255,000 - (255,000)[F1] 73,157,845
Retained earnings (deficit) 8,395,677 250,136 (269,002) (55,361)[F1,2,3] 8,321,450
Treasury stock (6,397,488) - - - (6,397,488)
------------ ------------ ------------ ------------- ------------
Total common shareholders' equity 75,288,592 512,636 680,680 (1,267,543) 75,214,365
============ ============ ============ ============= ============
Total liabilities and shareholders'
equity $112,609,829 $ 1,403,337 $ 904,724 $ (1,453,191) $113,464,699
============ ============ ============ ============= ============
</TABLE>
See notes to pro forma condensed consolidated financial statements.
F-25
<PAGE>
<TABLE>
<CAPTION>
Conning Corporation and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income
For the year ended December 31, 1997
(unaudited)
Pro Forma
Pro Forma Condensed
Noddings & Noddings Adjusting Consolidated
Conning Associates Investment Entries Conning
<S> <C> <C> <C> <C> <C>
Revenues:
Asset management and related fees $ 49,502,655 $ 10,401,493 $ 3,180,100 $ - $ 63,084,248
Research services 15,478,709 - - - 15,478,709
Other income 1,634,143 171,583 92,207 (181,500)[F2] 1,716,433
------------ ------------ ------------ ------------- ------------
Total revenue 66,615,507 10,573,076 3,272,307 (181,500) 80,279,390
------------ ------------ ------------ ------------- ------------
Expenses
Employee compensation & benefits 33,632,314 1,737,866 2,135,336 - 37,505,516
Short interest rebates paid - 7,572,710 - - 7,572,710
Occupancy and equipment costs 3,552,179 385,440 179,558 - 4,117,177
Marketing and production costs 5,674,545 463,610 160,019 - 6,298,174
Professional services 1,992,032 59,924 61,068 - 2,113,024
Amortization of goodwill and other 2,968,964 - - 165,000 [F1] 3,133,964
Other operating expenses 3,352,641 53,808 126,568 - 3,533,017
------------ ------------ ------------ ------------- ------------
Total expenses 51,172,675 10,273,358 2,662,549 165,000 64,273,582
------------ ------------ ------------ ------------- ------------
Operating income 15,442,832 299,718 609,758 (346,500) 16,005,808
Interest expense 300,261 - - - 300,261
------------ ------------ ------------ ------------- ------------
Income before provision for
income taxes 15,142,571 299,718 609,758 (346,500) 15,705,547
Provision for income taxes 6,226,242 - - 236,450 [F3] 6,462,692
------------ ------------ ------------ ------------- ------------
Net income (loss) $ 8,916,329 $ 299,718 $ 609,758 $ (582,950) $ 9,242,855
============ ============ ============ ============= ============
Preferred stock dividends 963,127 - - - 963,127
------------ ------------ ------------ ------------- ------------
Net earnings (loss) available to
common shareholders $ 7,953,202 $ 299,718 $ 609,758 $ (582,950) $ 8,279,728
============ ============ ============ ============= ============
Earnings per share:
Basic $ 1.13 $ 1.17
Fully diluted $ 0.80 $ 0.83
</TABLE>
See notes to pro forma condensed consolidated financial statements.
F-26
<PAGE>
<TABLE>
<CAPTION>
Conning Corporation and Subsidiaries
Pro Forma Condensed Consolidated Statement of Income
For the nine months ended September 30, 1998
(unaudited)
Pro Forma
Pro Forma Condensed
Noddings & Noddings Adjusting Consolidated
Conning Associates Investment Entries Conning
<S> <C> <C> <C> <C> <C>
Revenues:
Asset management and related fees $ 46,242,381 $ 7,014,342 $ 1,279,107 $ $ 54,535,830
Research services 12,816,500 - - - 12,816,500
Other income 1,882,218 93,799 129,415 (136,125)[F2] 1,969,307
------------ ------------ ------------ ------------- ------------
Total revenue 60,941,099 7,108,141 1,408,522 (136,125) 69,321,637
------------ ------------ ------------ ------------- ------------
Expenses
Employee compensation & benefits 28,473,128 974,383 1,377,184 - 30,824,695
Short interest rebates paid - 5,398,220 - - 5,398,220
Occupancy and equipment costs 3,449,639 154,302 118,618 - 3,722,559
Marketing and production costs 5,277,236 320,314 122,451 - 5,720,001
Professional services 1,719,100 69,134 59,945 - 1,848,179
Amortization of goodwill and other 2,008,403 - - 123,750 [F1] 2,132,153
Other operating expenses 3,244,616 64,466 39,791 - 3,348,873
------------ ------------ ------------ ------------- ------------
Total expenses 44,172,122 6,980,819 1,717,989 123,750 52,994,680
------------ ------------ ------------ ------------- ------------
Operating income (loss) 16,768,977 127,322 (309,467) (259,875) 16,326,957
Interest expense 193,218 - - - 193,218
------------ ------------ ------------ ------------- ------------
Income (loss) before provision for
(benefit from) income taxes 16,575,759 127,322 (309,467) (259,875) 16,133,739
Provision for (benefit from) income taxes 7,049,700 (185,648)[F3] 6,864,052
============ ============ ============ ============= ============
Net income (loss) $ 9,526,059 $ 127,322 $ (309,467) $ (74,227) $ 9,269,687
============ ============ ============ ============= ============
Earnings per share:
Basic $ 0.72 $ 0.70
Fully diluted $ 0.67 $ 0.66
</TABLE>
See notes to pro forma condensed consolidated financial statements.
F-27
<PAGE>
Conning Corporation and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
These pro forma condensed consolidated financial statements should be read
in conjunction with Conning Corporation and Subsidiaries' ("Conning") audited
financial statements filed with the Securities and Exchange Commission ("SEC")
filed on Form 10-K in March 1998 and the unaudited condensed consolidated
financial statements for the nine month period ended September 30, 1998 filed
with the SEC on form 10-Q in November 1998. The pro forma condensed consolidated
balance sheet presents the combined balance sheets of Conning and Noddings &
Associates and Noddings Investment Group (together, "Noddings") as of September
30, 1998. The pro forma condensed consolidated statement of income for the year
ended December 31, 1997 combines the statement of income of Conning for the year
ended December 31, 1997 with the statements of operations of Noddings for the
year ended March 31, 1998. The pro forma condensed consolidated statement of
income for the nine months ended September 30, 1998 combines the statements of
income of Conning and the statements of operations of Noddings for the nine
months ended September 30, 1998.
F1 The acquisition of Noddings will be accounted for as a purchase
transaction. As a result, the pro forma excess cost over fair value of net
assets acquired was approximately $3.3 million for Noddings as of the
closing date. The annual amount of goodwill amortization is $165,000, based
on a 20-year amortization period. The goodwill is considered deductible for
Federal income tax purposes. The pro forma condensed consolidated financial
statements are exclusive of any additional contingent consideration that
may be paid in the future subject to meeting certain financial targets
during the three years following the closing.
F2 Represents the impact of the investment income lost related to the cash
consideration paid for Noddings for the nine month period ended September
30, 1998 and for the year ended December 31, 1997.
F3 The income tax expense reflected on the December 31, 1997 pro forma
statement of income and the income tax benefit reflected on the September
30, 1998 pro forma statement of income are computed at an effective rate of
42%. Prior to the acquisition, Noddings' legal structure was an S
corporation and, therefore, incurred no Federal or state income tax.
F-28
<PAGE>
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.
Date: December 30, 1998 CONNING CORPORATION
By: /s/ Leonard M. Rubenstein
Name: Leonard M. Rubenstein
Title: Chairman and Chief Executive
Officer
5
===========================================
Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
JOHN G. NODDINGS,
THOMAS C. NODDINGS,
EDNA F. NODDINGS,
NODDINGS & ASSOCIATES, INC.
NODDINGS INVESTMENT GROUP, INC.,
CONNING & COMPANY
AND
CONNING ASSET MANAGEMENT COMPANY
DATED AS OF DECEMBER 16, 1998
===========================================
<PAGE>
TABLE OF CONTENTS
Section 1.A. Definitions...........................................1
ARTICLE I -- THE ASSET PURCHASE........................................13
Section 1.1. General.....................................13
Section 1.2. Closing Date................................13
Section 1.3. Closing Deliveries..........................13
Section 1.4. Post-Closing Asset Changes..................13
Section 1.5. Post-Closing Adjustment.....................14
Section 1.6. Allocation of Purchase Price................15
Section 1.7. Contingent Consideration....................16
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS..............................20
Section 2.1. Organization and Related Matters............20
Section 2.2. Authority; No Violation.....................20
Section 2.3. Acknowledgment and Approvals................21
Section 2.4. Ownership...................................21
Section 2.5. Regulatory Documents........................22
Section 2.6. Financial Statements........................23
Section 2.7. Ineligible Persons..........................23
Section 2.8. Contracts...................................24
Section 2.9. Funds.......................................24
Section 2.10. Investment Advisory Agreements..............25
Section 2.11. No Other Broker.............................26
Section 2.12. Legal Proceedings...........................26
Section 2.13. Compliance with Applicable Law..............26
Section 2.14. Insurance...................................27
Section 2.15. Labor and Employment Matters................27
Section 2.16. Employee Benefit Plans; ERISA...............27
Section 2.17. Technology and Intellectual Property........29
Section 2.18. No Adverse Change...........................30
Section 2.19. Real Property...............................30
Section 2.20. Filing Documents............................30
Section 2.21. Customer and Distributor Relationships......30
Section 2.22. Disclosure..................................31
Section 2.23. Year 2000 Plan and Inventories..............31
-i-
<PAGE>
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE BUYERS............31
Section 3.1. Organization and Related Matters............31
Section 3.2. Authority; No Violation.....................32
Section 3.3. Acknowledgments and Approvals...............32
Section 3.4. Ineligible Persons..........................32
Section 3.5. No Other Broker.............................33
Section 3.6. Filing Documents............................33
ARTICLE IV -- COVENANTS................................................33
Section 4.1. Conduct of Business by the Company..........33
Section 4.2. Investment Management Agreements............36
Section 4.3. Investment Advisory Agreement
Acknowledgments.............................36
Section 4.4. Maintenance of Records......................36
Section 4.5. Further Agreements..........................37
Section 4.6. Further Assurances..........................37
Section 4.7. Efforts of Parties to Close.................37
Section 4.8. Confidentiality and Announcements...........37
Section 4.9. Access; Certain Communications..............38
Section 4.10. Regulatory Matters; Third Party Consents....38
Section 4.11. Notification of Certain Matters.............39
Section 4.12. Expenses....................................40
Section 4.13. Third Party Proposals.......................40
Section 4.14. Voting of Shares............................41
Section 4.15. Updating Financial Statements...............41
ARTICLE V -- CONDITIONS TO CONSUMMATION
OF SHARE PURCHASE.............................................41
Section 5.1. Conditions to Buyer's Obligations...........41
Section 5.2. Conditions to the Company's and the
Shareholders' Obligations...................43
Section 5.3. Mutual Conditions...........................44
ARTICLE VI -- INDEMNIFICATION..........................................44
Section 6.1. Survival of Representations,
Warranties and Covenants....................44
Section 6.2. Obligations of the Company
and the Shareholders........................45
Section 6.3. Obligations of Buyer........................45
Section 6.4. Procedure...................................45
Section 6.5. Survival of Indemnity.......................47
Section 6.6. Minimum Losses..............................48
Section 6.7. Maximum Indemnification.....................48
Section 6.8. Setoff Against Holdback Amount
and Contingent Consideration................48
Section 6.9. Exclusive Remedy............................48
-ii-
<PAGE>
ARTICLE VII -- TERMINATION.............................................49
Section 7.1. Termination.................................49
Section 7.2. Survival After Termination..................49
ARTICLE VIII -- TAX MATTERS............................................50
Section 8.1. Tax Representations.........................50
ARTICLE IX -- MISCELLANEOUS............................................51
Section 9.1. Amendments; Waiver..........................51
Section 9.2. Entire Agreement............................51
Section 9.3. Interpretation..............................51
Section 9.4. Severability................................52
Section 9.5. Notices.....................................52
Section 9.6. Binding Effect; Persons
Benefiting; No Assignment...................53
Section 9.7. Counterparts................................53
Section 9.8. Governing Law...............................53
Section 9.9. Arbitration.................................53
Section 9.10. Specific Performance........................54
Section 9.11. WAIVER OF JURY TRIAL
AND PUNITIVE DAMAGES........................54
Section 9.12. Guaranty....................................54
-iii-
<PAGE>
LIST OF SCHEDULES
Schedule 1.A(2) Knowledge of Company
Schedule 1.A(3) Knowledge of
Schedule 1.3 Amount of consideration per Shareholder
Schedule 2.2(b) No Conflicts
Schedule 2.3 Approvals
Schedule 2.4 Stock Ownership
Schedule 2.5(a) Regulatory Documents
Schedule 2.6 Financial Statements
Schedule 2.8 Contracts
Schedule 2.9(a) Funds
Schedule 2.9(f) Performance of each Investment Advisory Account
Schedule 2.11 Brokers, Finders
Schedule 2.12 Legal Proceedings
Schedule 2.13(a) Permits
Schedule 2.13(b) Administrative Proceedings
Schedule 2.13(c) Record Keeping
Schedule 2.13(e) Company Memberships
Schedule 2.14 Insurance
Schedule 2.15 Labor and Employment Matters
Schedule 2.16(a) Company Plans
Schedule 2.16(c) Qualified Plans
Schedule 2.16(i) Contingent Obligations to Employees
Schedule 2.17(a) Intellectual Property - List
Schedule 2.17(b) Intellectual Property - Infringement
Schedule 2.18 Adverse Changes
Schedule 2.19 Real Property
Schedule 2.21 Customer and Distributor Relationships
Schedule 3.3 Approvals
Schedule 4.1(ii) Conduct of the Company Business - Contemplated Issuances
Schedule 4.1(ix) Conduct of the Company Business - Further Indebtedness
Schedule 4.1(xi) Conduct of the Company Business - Asset Transfers
Schedule 4.1(xix) Conduct of the Company Business - Salary Increases
Schedule 4.17 Year 2000 Compliance
Schedule 4.2 Form of Amendments to Limited Partnership Agreements
Schedule 5.1(k) Limited Partnerships Party to the Reimbursement Agreement
Schedule 5.1(l) Form of Notice to Limited Partners
Schedule 8.1 Tax Matters
-iv-
<PAGE>
LIST OF EXHIBITS
Exhibit A-1 Employment Agreement between CAMC and John G. Noddings
Exhibit A-2 Employment Agreement between CAMC and Thomas C. Noddings
Exhibit A-3 Employment Agreement between CAMC and Susan C. Christoph
Exhibit B-1 Reimbursement Agreement
Exhibit 5.1(e) Form of Opinion of Gardner, Carton & Douglas
Exhibit 5.1(k) Form of Reimbursement Agreement between Buyer
and Thomas C. Noddings and John G. Noddings
Exhibit 5.2(d) Opinion of Counsel to Buyer
Exhibit 5.2(f) Closing Letter Agreement
-v-
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of December 16, 1998, by and among
CONNING CORPORATION, a Missouri corporation ("Conning"), CONNING & COMPANY, a
Connecticut corporation ("CC"), CONNING ASSET MANAGEMENT COMPANY, a Missouri
corporation ("CAMC", and together with CC, "Buyer"), JOHN G. NODDINGS, THOMAS C.
NODDINGS, EDNA F. NODDINGS (individually, a "Shareholder" and collectively, the
"Shareholders"), NODDINGS & ASSOCIATES, INC., an Illinois corporation ("NA") and
NODDINGS INVESTMENT GROUP, INC., an Illinois corporation ("NIG" and together
with NA, the "Company").
WHEREAS, CC is a registered broker-dealer and deems it to be in its best
interest to acquire substantially all of the assets of NA;
WHEREAS, CAMC is a registered investment adviser and deems it to be in its
best interest to acquire substantially all of the assets of NIG;
WHEREAS, NA, as a registered broker-dealer, deems it to be in its best
interest to sell substantially all of its assets to CC;
WHEREAS, NIG, a registered investment adviser, deems it to be in its best
interest to sell substantially all of its assets to CAMC;
WHEREAS, the Shareholders are the owners of the Shares (defined below) of
the Company, which Shares constitute all of the issued and outstanding shares of
the capital stock of the Company;
WHEREAS, Conning, NA, NIG and the Shareholders are parties to a Stock
Purchase Agreement, dated October 15, 1998 (the "Stock Purchase Agreement"),
which is being terminated simultaneous with execution of this Agreement;
WHEREAS, John G. Noddings, Thomas C. Noddings and Susan C. Christoph each
have entered into or intend to enter into an employment agreement with Buyer
dated as of the date hereof in the form attached respectively as Exhibit A-1,
A-2 and A-3 hereto; and
WHEREAS, the parties hereto intend to execute or cause to be executed the
Reimbursement Agreements in the form attached hereto as Exhibit B-1.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and
subject to the conditions and other terms herein set forth, the parties hereto
hereby agree as follows:
1
<PAGE>
Section 1.A Definitions. For all purposes of this Agreement (as defined
below), the following terms shall have the respective meanings set forth in this
Section 1.A (such definitions to be equally applicable to both the singular and
plural forms of the terms herein defined):
"Account" shall mean any Investment Advisory Account.
"Acquired Assets" shall mean all right, title and interest in and to all of
the assets of the Company, including, without limitation, to the extent they
exist, all of its (a) Cash, (b) leaseholds and subleaseholds therein,
improvements, fixtures, and fittings thereon, (c) tangible personal property
(such as machinery, equipment, inventory of supplies and furniture), (d)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (e) leases, subleases, and rights
thereunder, (f) agreements, contracts, indentures, mortgages, instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder, (g) accounts, notes and other receivables, (h) securities, (i)
claims, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set off, and rights of recoupment (excluding any
such item relating to the payment of Taxes), (j) franchises, approvals, permits,
licenses, orders, registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies, and (k) books, Records,
ledgers, files, documents, correspondence, lists, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials; provided, however, that the Acquired Assets shall not
include: (i) qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign qualifications, taxpayer
and other identification numbers, seals, minute books, and other documents
relating to the organization, maintenance and existence of the Company as a
corporation, (ii) any of the rights of the Company under this Agreement (or
under any agreement between the Company on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement), (iii) any Cash
paid to the Company by Buyer as part of the Total Purchase Consideration, (iv)
any Company Plan (v) tax returns; (vi) books and records required to by company
be maintained by Applicable Laws; (vii) rights of NA or NIG under the
Reimbursement Agreement (viii) NA's broker-dealer registration with the
Securities and Exchange Commission and certain states together with NA's
memberships in the NASD and any other self-regulatory organization, national
securities exchange, board of trade or similar organization; (viii) prepaid
expenses; (ix) insurance policies any (xii) advances to employees; or (xiii)
accounts receivable from NIG.
"Acquired Business" shall mean the Noddings Division operated by Buyer
after the Closing.
"Acquisition Proposal" shall have the meaning set forth in Section 4.12.
2
<PAGE>
"Administrative Services Agreement" shall mean the Administrative Services
Agreement of even date herewith between CC and NA.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as amended,
and the rules and regulations of the SEC thereunder.
"Affiliate" shall mean any individual, partnership, corporation, entity or
other person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the person
specified, except that, with respect to Buyer, "Affiliate" shall not include any
shareholders of Buyer or any person controlling such shareholders.
"Agreement" shall mean this Asset Purchase Agreement among the
Shareholders, the Company and Buyer, as such may hereafter be amended.
"Amended and Restated Closing Agreement" shall mean that certain Amended
and Restated Closing Agreement of even date herewith by and among the parties
hereto.
"Applicable Law" shall mean any domestic or foreign federal, state or local
statute, law, ordinance, rule, administrative interpretation, regulation, order,
writ, injunction, directive, judgment, decree, policy, guideline or other
requirement (including those of the NASD) applicable to the Shareholders, the
Company, Buyer or any of their respective Affiliates, properties, assets,
officers, directors, employees or agents, as the case may be.
"Approved Asset Differential" shall mean an amount equal to the excess, if
any, of (i) the Initial Managed Asset Amount, over (ii) the Approved Managed
Asset Amount.
"Approved Managed Asset Adjustment" shall mean an amount equal to:
(x) if the Approved Asset Differential is less than or equal to fifteen
percent (15%) of the Initial Managed Asset Amount, then zero; or
(y) if the Approved Asset Differential is greater than fifteen percent
(15%) of the Initial Managed Asset Amount, then the amount equal to
(expressed as a percentage) the amount obtained by dividing (A) the
Approved Asset Differential by (B) the Initial Managed Asset Amount.
"Approved Managed Asset Amount" shall mean the assets in all active
Investment Advisory Accounts for which the Company provides investment advisory
services in respect of which the investment advisory clients related thereto
have consented or been deemed to have consented to the assignment (as determined
in accordance with Section 4.2 hereof) of their respective Investment Advisory
Agreement to CAMC hereunder in each case as of the close of business on the day
prior to the Closing Date, determined as follows: the aggregate assets of such
3
<PAGE>
Investment Advisory Accounts shall be deemed to be equal to the sum of (i) the
aggregate assets under management of active Investment Advisory Accounts for
which the Company provides investment advisory services as of the close of
business on June 30, 1998 or, if later created, as of the date on which such
Investment Advisory Account was created, plus (ii) the aggregate amount of
assets deposited in Investment Advisory Accounts described in clause (i) from
such date to the close of business on the date immediately prior to the Closing
Date, based upon the respective asset values at the time of such deposits, minus
(iii) the aggregate amount of assets withdrawn, or for which oral or written
notice of withdrawal has been given, from Investment Advisory Accounts described
in clause (i) (including terminated Investment Advisory Accounts) from the close
of business on June 30, 1998 to the close of business on the date immediately
prior to the Closing Date, based upon the respective asset values at the time of
such withdrawals or terminations.
"Assumed Contracts" shall mean all Contracts listed on Schedule 2.8A;
provided that, if the assignment of any such Contract to Buyer requires the
consent of the other party thereto, such Contract shall only constitute an
Assumed Contract if Buyer shall have received from the other contracting
party(ies) on or prior to Closing a valid consent to the assignment of such
Contract to the applicable Buyer.
"Assumed Liabilities" shall mean (a) all Liabilities of the Company set
forth on the face of the September 30, 1998 Balance Sheets (rather than in any
notes thereto), (b) all Liabilities of the Company that have arisen after
September 30, 1998 in the Ordinary Course of Business (other than any Liability
arising out of, relating to, or in the nature of, or caused by, any breach of
contract, breach of warranty, tort, infringement, violation of law, or
environmental matter), (c) all Liabilities of Buyer, as the Company's assignee,
arising after the Closing under the terms of the Assumed Contracts; provided,
however, that Buyer shall not assume any Liabilities relating to the
Broker-Dealer Agreements until the end of the Administrative Services Period and
Buyer will not assume or be responsible for (i) any Liability of the Company for
Taxes, (ii) any Liabilities which arise from or relate to any event, action or
failure to act occurring prior to the Closing, including, without limitation,
any breach or default by the Company under any Assumed Contract, or any tort
committed by the Company, (iii) any Liability of the Company for the unpaid
Taxes of any Person (other than the Company) under Reg. ss.1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise, (iv) any obligation of the Company to
indemnify any Person (including any of the Shareholders) by reason of the fact
that such Person was a director, officer, employee, or agent of the Company or
was serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such indemnification is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant to
any statute, charter document, bylaw, agreement, or otherwise), (v) any
Liability of the Company for costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, (vi) any Liability or
obligation of the Company under this Agreement (or under any side agreement
between the Company on the one
4
<PAGE>
hand and the Buyer on the other hand entered into on or after the date of this
Agreement) (vii) any Liabilities of the Company to employees or related to
employment, including, without limitation, under any Company Plan; or (viii) any
Liabilities of NIG to NA. All of such Liabilities that are not expressly assumed
by Buyer will constitute Retained Liabilities. Notwithstanding anything to the
contrary contained in this Agreement or any document delivered in connection
herewith, Buyer's obligations in respect of the Assumed Liabilities will not
extend beyond the extent to which the Company was obligated in respect thereof
and will be subject to Buyer's right to contest in good faith the nature and
extent of any Liability.
"Broker-Dealer Agreements" shall mean the agreements listed on Schedule
2.8B.
"Business Day" shall mean any day that the NYSE is normally open for
trading and that is not a Saturday, a Sunday or a day on which banks in the
State of New York are generally closed for regular banking business.
"Buyer" has the meaning set forth on the first page hereof and includes any
direct or indirect successor or assign.
"Buyer Material Adverse Effect" shall mean with respect to any matter or
matters affecting the Buyer having a material adverse effect on the business,
assets, financial condition or results of operations of the Buyer and their
Subsidiaries taken as a whole or on the ability of the Buyer to complete the
Closing.
"Cash" shall mean cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance with GAAP
applied on a basis consistent with the preparation of the Company Financial
Statements.
"Closing" shall have the meaning set forth in Section 1.2.
"Closing Balance Sheets" shall have the meaning set forth in Section 1.5.
"Closing Date" shall mean (a) the later to occur of (i) December 16, 1998
or (ii) the fifth Business Day after the conditions set forth in Article V have
been satisfied or waived; or (b) such other date as Buyer, the Company and the
Shareholders shall agree.
"Closing Purchase Consideration" shall mean (a) a promissory note in the
initial principal amount of $200,000 which promissory note shall mature in full
one day following the Closing and which shall bear interest at the rate of six
percent (6%) per annum, (b) the assumption by Buyer of the Assumed Liabilities
and (c) payment to the Escrow Account of an amount equal to (x) $3,800,000 minus
(y) an amount equal to $4,000,000 multiplied by the Approved Managed Asset
Adjustment and minus (z) an amount equal to the Estimated Adjustment under
Section 1.5 hereof;
5
<PAGE>
"Closing Warrant Managed Asset Amount" shall mean the aggregate assets in
the Investment Advisory Accounts which invested in the SFX Warrants as of the
close of business on the day immediately prior to the Closing Date which the
Company has estimated to be $21,143,937.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth on the first page hereof.
"Company Balance Sheets" shall have the meaning set forth in Section 2.6.
"Company Financial Statements" has the meaning set forth in Section 2.6(a).
"Company Material Adverse Effect" shall mean with respect to any matter or
matters affecting either of NA or NIG or any of its respective Affiliates having
a material adverse effect on the business, assets, financial condition or
results of operations of NA and NIG taken as a whole or on the ability of either
of NA or NIG to complete the Closing.
"Company Plan" has the meaning set forth in Section 2.16(a).
"Confidentiality Agreement" shall mean that certain letter agreement, dated
August 4, 1998, relating to confidential information provided by the Company to
Buyer and their Affiliates.
"Contingent Consideration" has the meaning set forth in Section 1.6.
"Contract" has the meaning set forth in Section 2.8.
"Controlled Group Liability" means any and all liabilities under (i) Title
IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the Code,
(iv) the continuation coverage requirements of section 601 et seq. of ERISA and
section 4980B of the Code, and (v) corresponding or similar provisions of
foreign laws or regulations, other than such liabilities that arise solely out
of, or relate solely to, the Company Plans.
"Convertible Business" shall mean the business of providing investment
management services utilizing investment strategies based on investing in bonds,
preferred stock or warrants that are convertible or exercisable into common
stock of an issuer as well as clearing arrangements associated with hedging
investment strategies.
"Employment Agreements" shall mean those certain employment agreements of
John G. Noddings, Thomas C. Noddings and Susan C. Christoph referred to in the
introduction to this Agreement in the forms attached respectively as Exhibits
A-1, A-2 and A-3.
6
<PAGE>
"Encumbrance" shall mean any lien, pledge, security interest, claim,
charge, easement, limitation, commitment, encroachment, restriction or
encumbrance of any kind or nature whatsoever, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the rules, regulations and class exemptions of the Department of
Labor thereunder.
"ERISA Affiliate" means any entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the Company, or that is a member of the same
"controlled group" as the Company pursuant to Section 4001(a)(14) of ERISA.
"Escrow Account" shall mean the escrow account established among the
Company, Buyer, JGN, TCN, State Street Bank and Trust Company, as escrow agent.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Fund" shall mean a limited partnership, limited liability company or other
entity formed for the purpose of conducting investing activities.
"GAAP" shall mean generally accepted accounting principles as used in the
United States of America as in effect at the time any applicable financial
statements were prepared or any act requiring the application of GAAP was
performed.
"Governmental Authority" shall mean any government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including the SEC or any other government authority, agency, department, board,
commission or instrumentality of the United States, any State of the United
States or any political subdivision thereof, and any court, tribunal or
arbitrator(s) of competent jurisdiction, and any governmental or
non-governmental self-regulatory organization, agency or authority (including
the NYSE and the National Association of Securities Dealers, Inc.).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnifiable Claim" shall mean any Loss for which a party is entitled to
indemnification under this Agreement.
"Indemnified Party" shall mean the party entitled to the benefits of
indemnification hereunder.
7
<PAGE>
"Indemnifying Party" shall mean the party obligated to provide
indemnification hereunder.
"Independent Accounting Firm" shall mean a reputable accounting firm
mutually agreed to by Buyer and the Shareholders, other than any accounting firm
that has performed regular and substantial services for Buyer, the Company, or
any of their Affiliates during the past five years.
"Initial Managed Asset Amount" shall mean an amount equal to the assets of
all active Investment Advisory Accounts for which NIG provides investment
advisory services, in each case as of the close of business on June 30, 1998,
which the parties agree is $263,800,000.
"Intellectual Property" has the meaning set forth in Section 2.17(a).
"Investment Advisory Account" shall mean an account, including
broker-sponsored, institutional and private client accounts that is not a
registered investment company for which NIG provides advisory, sub-advisory,
distribution, management or marketing services pursuant to an Investment
Advisory Agreement, a distribution agreement or any other agreement.
"Investment Advisory Agreement" shall mean any investment advisory
agreement, sub-advisory agreement, agreement or contract entered into by NIG for
the purpose of providing investment advisory services, or to manage any
Investment Advisory Account of a client other than a registered investment
company or series thereof.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" or "knowledge" shall mean actual knowledge and, in the case of
knowledge of the Company, shall mean, on and prior to the Closing Date, actual
knowledge of any of the officers of the Company listed on Schedule 1.A(2) and,
from and after the Closing Date, the actual knowledge of the Shareholders, and,
in the case of knowledge of the Buyer, shall mean actual knowledge of any of the
officers of the Buyer listed on Schedule 1.A(3).
"Liability" shall mean any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Loss" shall mean any and all claims, losses, liabilities, costs,
penalties, fines and expenses (including reasonable expenses for attorneys,
accountants, consultants and experts), damages, obligations to third parties,
expenditures, proceedings, judgments, awards, settlements or demands that are
imposed upon or otherwise incurred, suffered or sustained by the relevant party.
8
<PAGE>
"Multiemployer Plan" shall have the meaning set forth in Section 2.16(a).
"Multiple Employer Plan" shall have the meaning set forth in Section
2.16(a).
"NA Acquired Assets" shall mean those Acquired Assets to be transferred by
NA to CC on the Closing Date.
"NA Assumed Liabilities" shall mean those Assumed Liabilities to be assumed
by CC from NA on the Closing Date.
"NA Balance Sheet" has the meaning set forth in Section 2.6(a).
"NA Bill of Sale and Assignment" shall mean the bill of sale delivered by
NA to CC in connection with the consummation of the transactions contemplated
hereunder.
"NA Purchase Consideration" shall mean the portion of the Total Purchase
Consideration allocated to the NA Acquired Assets as set forth in Schedule 1.6
attached hereto.
"NASD" shall have the meaning set forth in Section 2.5(a).
"Net Acquired Assets" shall mean the Acquired Assets, less the Assumed
Liabilities.
"Net Acquired Assets Calculation" shall have the meaning set forth in
Section 1.5.
"Net Revenues" shall mean all revenues of the Acquired Business determined
in accordance with GAAP consistent with the accounting principles employed by NA
and NIG, respectively, in the audited financial statements for the year ended
March 31, 1998 minus any intercompany revenue that would be eliminated in
consolidation and any rebate credited to a client account. Net Revenues as used
herein shall include revenues of NA during the Administrative Services Period
(as defined in the Administrative Services Agreement) minus intercompany revenue
from Buyer or Buyers' affiliates that would be eliminated if NA were
consolidated with Buyer and any rebate credited to a client account.
"NIG Acquired Assets" shall mean those Acquired Assets to be transferred by
NIG to CAMC on the Closing Date.
"NIG Assumed Liabilities" shall mean those Assumed Liabilities to be
assumed by CAMC from NIG on the Closing Date.
"NIG Balance Sheet" has the meaning set forth in Section 2.6(a).
9
<PAGE>
"NIG Bill of Sale and Assignment" shall mean the bill of sale delivered by
NIG to CAMC in connection with the consummation of the transactions contemplated
hereunder.
"NIG Funds" has the meaning set forth in Section 2.9(a).
"NIG Purchase Consideration" shall mean the portion of the total Purchase
Consideration allocated to the NIG Acquired Assets as set forth in Schedule 1.6
attached hereto.
"Noddings Division" shall mean the division of Buyer that conducts the
business conducted by the Company prior to the Closing.
"Non-Third Party Claim" has the meaning set forth in Section 6.4(e).
"NYSE" means the New York Stock Exchange, Inc.
"Operating Site" shall mean Two Mid America Plaza, Suite 920, Oakbrook
Terrace, Illinois 60181, which is the only office at which the Company conducts
business.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Permits" has the meaning set forth in Section 2.13(a).
"Person" shall mean any individual, corporation, company, partnership
(limited or general), joint venture, association, trust or other entity or
similar contractual arrangement or relationship.
"Pre-Closing Period" has the meaning set forth in Section 8.4(a).
"Qualified Plans" shall have the meaning set forth in Section 2.16(c).
"Records" shall mean, with respect to any Person, all records and original
documents (and copies thereof) in the Person's Possession as of the Closing Date
(a) which pertain to or are utilized by such Person to administer, reflect,
monitor, evidence or record information respecting the business or conduct of
such Person, or (b) necessary or appropriate for such Person to comply with any
Applicable Law, including records kept or filed in accordance with any
Securities Laws, and shall include in the case of (a) and (b) above, all such
records maintained on electronic or magnetic media, or in the electronic data
base system of or used by such Person.
"Regulatory Documents" shall mean, with respect to a Person, all forms,
reports, registration statements, schedules and other documents filed, or
required to be filed since January 1, 1993 by such Person pursuant to the
Securities Laws.
10
<PAGE>
"Reports" shall have the meaning set forth in Section 2.9(g).
"Retained Liabilities" shall mean all Liabilities of the Company other than
the Assumed Liabilities, including, without limitation: (A) any Liabilities of
the Company to employees or related to employment, including, without
limitation, under any Company Plan, (B) any Liabilities of the Company for
federal, state, local or foreign income, transfer, sales, use or other Taxes,
including, without limitation, Taxes arising in connection with the consummation
of the transactions contemplated hereby (including any Taxes arising because the
Company is transferring the Acquired Assets or because the Company has deferred
gain on any Deferred Intercompany Transaction (as defined in Treas. Reg. ss.
1.1502-13)), (C) any Liability of the Company for the unpaid Taxes of any Person
(other than the Company) under Treas. Reg. ss.1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract or
otherwise, (D) any Liability of the Company for costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby, (E) any
Liability or obligation of the Company under this Agreement (or under any
agreement between the Company on the one hand and the Buyer on the other hand
entered into on or after the date of this Agreement), or (F) any Liability or
obligation of the Company to the Shareholders, by contract or otherwise.
"Right" shall have the meaning set forth in Section 4.1(ii).
"SEC" shall mean the Securities and Exchange Commission, or its successor.
"SFX Warrants" shall mean the Class B Warrants of SFX Broadcasting, Inc.
purchased by or on behalf of certain Investment Advisory Accounts.
"Securities" shall mean any security as defined in the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act; the Advisers Act; and state "blue sky" laws.
"Shareholder" has the meaning set forth on the first page hereof.
"Shares" means (i) 750 shares of Class A common stock, no par value, of NA,
(ii) 6,750 shares of Class B common stock, no par value, of NA; (iii) 1,000
shares of Class A common stock, no par value, of NIG, and (iv) 9,000 shares of
Class B common stock, no par value of NIG which shares constitute all of the
issued and outstanding shares of NA's and NIG's capital stock, respectively.
11
<PAGE>
"Stock Purchase Agreement" shall have the meaning set forth in the recitals
hereof.
"Subsidiary of a Person" shall mean an Affiliate of such Person where fifty
percent (50%) or more of the voting stock (or of any other form of general
partnership or other voting or controlling equity interest in the case of a
Person that is not a corporation) of which is beneficially owned by the Person,
directly or indirectly, through one or more other Persons.
"Tax Return" shall mean any return, report, information statement, schedule
or other document (including any related or supporting information and including
any Form 1099 or other document or report to third parties) with respect to
Taxes.
"Taxes" shall mean all federal, provincial, territorial, state, municipal,
local, foreign or other taxes, imposts, rates, levies, assessments and other
charges (and all interest and penalties thereon), including, without limitation,
all income, excise, franchise, gains, capital, real property, goods and
services, transfer, value added, gross receipts, windfall profits, severance, ad
valorem, personal property, production, sales, use, license, stamp, documentary
stamp, mortgage recording, employment, payroll, social security, unemployment,
disability, estimated or withholding taxes, and all customs and import duties,
and all interest and penalties.
"Third Party Claim" has the meaning set forth in Section 6.4(a).
"Total Purchase Consideration" shall mean the Closing Purchase
Consideration plus the amount, if any, of the Contingent Consideration.
"Transaction Agreements" shall mean the agreements set forth as Exhibits
A-1, A-2, A-3, B-1 and 5.2(f).
"Treasury Regulations" shall mean regulations promulgated under the Code.
"45 Day Warrant Managed Asset Amount" shall mean the aggregate assets in
the Investment Advisory Accounts which invested in the SFX Warrants as of the
45th day after the Closing Date, determined as follows: the aggregate assets of
such Investment Advisory Accounts shall be deemed to be equal to the sum of (i)
the aggregate assets under management of such Investment Advisory Accounts as of
the close of business on the date immediately prior to the Closing Date, plus
(ii) the aggregate amount of assets deposited in Investment Advisory Accounts
described in clause (i) from such date to the close of business on the 45th day
after the Closing Date, based upon the respective asset values at the time of
such deposits, minus (iii) the aggregate amount of assets withdrawn, or for
which oral or written notice of withdrawal has been given, from Investment
Advisory Accounts described in clause (i) (including terminated Investment
Advisory Accounts) from the close of business on the date immediately prior to
the Closing Date to the close of business on the 45th day after the Closing
Date, based upon the respective asset values at the time of such withdrawals or
terminations. For purposes of this paragraph, there shall
12
<PAGE>
be a presumption that the withdrawal of the assets described in clause (iii)
will not apply to such assets that (i) were transferred into a different
Investment Advisory Account; (ii) were withdrawn as a result of the death of a
client; or (iii) were held in an account that was terminated at the direction of
Buyer.
"Warrant Asset Differential" shall mean an amount equal to the excess, if
any, of (i) the Closing Warrant Managed Asset Amount, over (ii) the 45 Day
Warrant Managed Asset Amount.
"Warrant Managed Asset Adjustment" shall mean an amount equal to:
(x) if the Warrant Asset Differential is less than or equal to fifteen
percent (15%) of the Closing Warrant Managed Asset Amount, then zero;
or
(y) if the Warrant Asset Differential is greater than fifteen percent
(15%) of the Closing Warrant Managed Asset Amount, then the amount
equal to (expressed as a percentage) the amount obtained by dividing
(A) the Warrant Asset Differential by (B) the Initial Managed Asset
Amount.
"Wire Transfer" shall mean a payment in immediately available funds by wire
transfer in lawful money of the United States of America to such account or to a
number of accounts up to, but not in excess of, ten accounts, as shall have been
designated by written notice to the paying party.
"Year 2000 Compliant" means that all software and hardware of the Company
and its Affiliates (a) uses date data century recognition, and, as appropriate,
same century and multi-century formulas and date values in each instance for all
calculations for which a date is used, (b) will not abnormally end or provide
invalid or incorrect results as a result of date data, specifically including
date data which represent or reference different centuries or more than one
century; and (c) otherwise conforms with the current industry standards in order
that such software will fully perform without any errors or other problems due
to the year being greater than 1999 (including, without limitation, errors or
other problems due to the year 2000 having three zeros in it or the year 2000
being a leap year).
ARTICLE I
THE ASSET PURCHASE
Section 1.1. General. On the terms and subject to the conditions set forth
in this Agreement, on the Closing Date, (i) NA agrees to sell, transfer, assign,
convey and deliver to CC and CC agrees to purchase and accept from NA the NA
Acquired Assets for the NA Purchase Consideration, and (ii) NIG agrees to sell,
transfer, assign, convey and deliver to CAMC and
13
<PAGE>
CAMC agrees to purchase and accept from NIG, the NIG Acquired Assets for the NIG
Purchase Consideration; provided that, the Broker-Dealer Agreements shall not be
assigned to CC until the end of the Administrative Services Period (as defined
in the Administrative Services Agreement).
Section 1.2. Closing Date. The consummation of the purchase and sale of the
Acquired Assets as contemplated hereby (the "Closing") shall be held on the
Closing Date at 10:00 a.m. (local time) at the offices of LeBoeuf, Lamb, Greene
& MacRae, L.L.P., 225 Asylum Street, Hartford, Connecticut 06103, or at such
other place and time as the parties shall mutually agree. Each party hereto
agrees to use its reasonable best efforts to satisfy promptly the conditions to
the obligations of the parties hereto in order to expedite the Closing.
Section 1.3. Closing Deliveries. At the Closing, the Shareholders and the
Company shall deliver to Buyer the documents required to be delivered pursuant
to Section 5.1. Buyer shall (i) deliver the Closing Purchase Consideration to
Buyer or the Escrow Account in the respective amounts set forth on Schedule 1.3,
with the cash portion thereof to be delivered by Wire Transfer to the Escrow
Account to the account or reasonable number of accounts designated in writing by
the Company at least four business days prior to the Closing and (ii) deliver,
or cause to be delivered, the documents required to be delivered pursuant to
Section 5.2.
Section 1.4. Post-Closing Asset Changes. If the Warrant Managed Asset
Adjustment is greater than zero, then NIG shall pay to CAMC within five (5) days
after notice from CAMC, an amount in cash equal to the Warrant Managed Asset
Adjustment multiplied by the Closing Purchase Consideration (the "Warrant
Consideration Adjustment").
Section 1.5. Post-Closing Adjustment. (a) As soon as reasonably practicable
following the Closing Date, and in no event more than thirty Business Days
thereafter, the Company shall prepare and deliver to the Buyer and the
Shareholders balance sheets of NA and NIG as at November 30, 1998 (the
"Adjustment Date"), unless the Closing Date occurs at the end of the month
whereupon the Closing Date will be the Adjustment Date, prepared in accordance
with GAAP applied on a consistent basis as applied in the preparation of the
Company Balance Sheets, with only such deviations from GAAP and/or their
consistent application as are referred to in the notes to the Company Balance
Sheets and in this Section 1.5(a) (the "Closing Balance Sheets"), together with
a schedule calculating the Net Acquired Assets Calculation (as defined herein)
(the "Closing Price Documents"). The Net Acquired Assets Calculation shall be
equal to the depreciates or amortized book value of the Acquired Assets minus
the Assumed Liabilities as such amounts are set forth on the Closing Balance
Sheets. The parties agree that, based upon the estimated Closing Balance Sheets
prepared by the Company, the Net Acquired Assets Calculation will result in an
adjustment in excess of $200,000 in favor of Buyer and that the Closing Purchase
Consideration will therefore be reduced by $200,000 (the "Estimated
Adjustment"). The final determination of the Net Assets Calculation shall be
made in accordance with this Section 1.5. The intent of this adjustment
provision is that Buyer will receive the benefit of the operation of NA and NIG
from November 30, 1998 until the Closing Date. Notwithstanding
14
<PAGE>
the foregoing, if there shall be a material change in the assets or liabilities
of the Company between the Adjustment Date and the Closing Date, either Buyer or
the Company may change the Adjustment Date to the Closing Date by giving written
notice to the other party and in such event all references to the Adjustment
Date herein shall be deemed to refer to the Closing Date. In preparing the
Closing Balance Sheets, (i) accruals and reserves shall not be reduced or
increased from the levels reflected in the Company Balance Sheets for reasons
other than cash payments and (ii) the Closing Balance Sheets shall exclude the
effect of the sale of the Acquired Assets to Buyer, and the other transactions
contemplated hereby. The parties shall consult with one another and cooperate in
the preparation of the Closing Price Documents in accordance with this Section
1.5, including, without limitation, providing full access to such working papers
and information relating to the preparation thereof as reasonably requested by
the other party.
(b) Within ten Business Days after delivery of the Closing Price Documents
to the Company, the Company may dispute all or any portion of the Closing Price
Documents by giving written notice (a "Notice of Disagreement") to Buyer setting
forth in reasonable detail the basis for any such dispute (any such dispute
being hereinafter called a "Disagreement"). The parties shall promptly commence
good faith negotiations with a view to resolving all such Disagreements. If the
Company does not give such a Notice of a Disagreement within the ten-
Business-Day period set forth herein, the Company and the Shareholders shall be
deemed to have irrevocably accepted such Closing Price Documents in the form
delivered to the Company by Buyer.
(c) If the Company shall deliver a Notice of Disagreement and Buyer shall
not dispute all or any portion of such Notice of Disagreement by giving written
notice to the Company setting forth in reasonable detail the basis for such
dispute within ten Business Days following the delivery of such Notice of
Disagreement, Buyer shall be deemed to have irrevocably accepted the Closing
Price Documents as modified in the manner described in the Notice of
Disagreement. If Buyer dispute all or any portion of the Notice of Disagreement
within the ten-Business-Day period described in the previous sentence, and
within ten Business Days following the delivery to the Company of the notice of
such dispute the Company and Buyer do not resolve the Disagreement (as evidenced
by a written agreement among the parties hereto), such Disagreement shall
thereafter be referred by either of the Buyer or the Company to an Independent
Accounting Firm for a resolution of such Disagreement in accordance with the
terms of this Agreement. The determinations of such firm with respect to any
Disagreement shall be rendered within ten Business Days after referral of the
Disagreement to such firm, shall be final and binding upon the parties, the
amount so determined shall be used to complete the final Closing Price Documents
and the parties agree that the procedures set forth in this Section 1.5 shall be
the sole and exclusive remedy with respect to the determination of the Net
Acquired Assets Calculation as of the Closing Date. Buyer, the Company and the
Shareholders shall use their best efforts to cause the Independent Accounting
Firm to render its determination within the ten-Business-Day period described in
the previous sentence, and each shall cooperate with such firm and provide such
firm with access to the books, records, personnel and representatives of it and
such other information
15
<PAGE>
as such firm may require in order to render its determination. All of the fees
and expenses of any Independent Accounting Firm retained pursuant to this
paragraph (c) shall be paid by the party who did not prevail in the
Disagreement.
(d) Promptly after the Closing Price Documents have been finally determined
in accordance with paragraphs (a), (b) and (c) of this Section 1.5 (including by
means of a deemed acceptance of such documents by the Company or by Buyer as
provided in paragraphs (b) and (c), respectively), but in no event later than
five Business Days following such final determination (i) if the Net Acquired
Assets Calculation as of the Closing Date as determined pursuant to this Section
1.5 is less than $1,200,000, the Company shall deliver to Buyer an amount equal
to the difference by Wire Transfer and (ii) if the Net Acquired Assets
Calculation as of the Adjustment Date as determined pursuant to this Section 1.5
is greater than $1,200,000, the Buyer shall deliver to the Company an aggregate
amount equal to the excess by Wire Transfer, which amount shall be allocated
among NA and NIG on a pro rata basis in accordance with the percentage of the
Closing Purchase Consideration paid to each such entity. For purposes of the Net
Acquired Assets Calculation, the Company will be credited the full amount of the
Estimated Adjustment. If the amount payable described in the immediately
preceding sentence is not paid within ten (10) Business Days following such
determination, it shall be accompanied by interest thereon calculated at the
prime rate of The Chase Manhattan Bank for the period from the Closing Date to
the date on which such payment is made.
(e) Any payment made by the parties pursuant to Section 1.5(d) shall be
treated as an adjustment to the Total Purchase Consideration.
Section 1.6. Allocation of Purchase Price. The Total Purchase Consideration
shall be allocated to the Acquired Assets in accordance with Schedule 1.6
attached hereto. The Company, the Shareholders and Buyer shall prepare and file
Tax Returns in a manner consistent with such allocation.
Section 1.7. Contingent Consideration. (a) In addition to the Closing
Purchase Consideration, if any of the conditions described below are satisfied,
Buyer shall pay to the Company additional cash consideration in the aggregate
amount set forth below (the "Contingent Consideration"):
(i) if the average aggregate Net Revenues of the Acquired Business for
the three year period commencing on the first day of the month in which the
Closing occurs and ending on the day preceding the third anniversary of
such commencement date (the "Contingent Period") are at least $4.0 million
but not more than $8.0 million, then Buyer shall pay to the Company the
amount of aggregate Contingent Consideration determined pursuant to the
following formula:
X = A - (B + C)
16
<PAGE>
X = Contingent Consideration
A = 1.05 multiplied by the average aggregate Net Revenues of the
Acquired Business for the Contingent Period
B = 4,000,000
C = an amount equal to the sum of (a) $4,000,000 multiplied by the
Approved Managed Asset Adjustment, and (b) the Warrant
Consideration Adjustment
(ii) if the average aggregate Net Revenues of the Acquired Business
for the Contingent Period are greater than $8.0 million but not greater
than $15.0 million, then Buyer shall pay to the Company the amount of
aggregate Contingent Consideration determined pursuant to the following
formula:
X = A - (B + C)
X = Contingent Consideration
A = 1.55 multiplied by the average aggregate Net Revenues of
the Acquired Business for the Contingent Period
B = 4,000,000
C = an amount equal to the sum of (a) $4,000,000 multiplied by the
Approved Managed Asset Adjustment, and (b) the Warrant
Consideration Adjustment
(iii) if the average aggregate Net Revenues of the Acquired Business
for the Contingent Period are greater than $15.0 million, then Buyer shall
pay to the Company the amount of aggregate Contingent Consideration
determined pursuant to the following formula:
X = A - (B + C)
X = Contingent Consideration
A = the lesser of (i) $31.5 million or (ii) the product of 1.80
multiplied by the average aggregate Net Revenues of the Acquired
Business for the Contingent Period
17
<PAGE>
B = 4,000,000
C = an amount equal to the sum of (a) $4,000,000 multiplied by
the Approved Managed Asset Adjustment, and (b) the Warrant
Consideration Adjustment
(b) If the conditions set forth below are satisfied, the Buyer shall make
advances of a portion of the Contingent Consideration to the Company in the
amounts set forth below within 60 days after the end of each of the first two
years of the Contingent Period:
(i) If the aggregate Net Revenues of the Acquired Business for the first
year of the Contingent Period exceed $4.0 million, then Buyer shall
advance to the Company an amount determined pursuant to the following
formula:
X = A - (D - C)
X = Advance
A = aggregate Net Revenues of the Acquired Business for the first year
of the Contingent Period.
B = 1.05, if A is greater than $4.0 million but not more than
$8.0 million; 1.55 if A is greater than $8.0 million but not
more than $15.0 million; or 1.80, if A is greater than
15.0 million.
C = $4,000,000
D = The lesser of (i) $31.5 million or (ii) the product of A multiplied
by B.
(ii) If the average aggregate Net Revenues of the Acquired Business for the
first two years of the Contingent Period exceed $4.0 million, then
Buyer shall advance to the Company an amount determined pursuant to
the following formula:
X = A - (D - C)
X = Advance
18
<PAGE>
A = the average aggregate Net Revenues of the Acquired Business for such
two-year period.
B = 1.05, if A is greater than $4.0 million but not more than $8.0
million; 1.55 if A is greater than $8.0 million but not more
than $15.0 million; or 1.80, if A is greater than $15.0 million.
C = $4,000,000 plus the amount paid pursuant to Section 1.6(b)(i).
D = The lesser of (i) $31.5 million or (ii) the product of A multiplied
by B.
(iii) Any advances made pursuant to this Section 1.6(b) shall reduce
the amount of any Contingent Consideration payable after the termination of
the Contingent Period on a dollar for dollar basis. In the event that the
Contingent Consideration payable to the Company following the termination
of the Contingent Period is less than the aggregate amount of the advances
made to the Company, the Company agrees, jointly and severally, to repay to
Buyer within ten (10) days after determination of the amount of Contingent
Consideration payable (the "Due Date"), the amount of advances received,
together with interest at the prime rate of The Chase Manhattan Bank plus 2
percent from the tenth day after the due date to the date of repayment to
Buyer.
(c) Within 45 days after the end of each year of the Contingent Period,
Buyer shall prepare and deliver to the Company a statement of Net Revenues of
the Acquired Business for the immediately preceding year (the "Statement of Net
Revenues"). Within ten days after delivery of the Statement of Revenues to the
Company, the Company may dispute the Statement of Revenues by giving written
notice (a "Notice of Disagreement") to Buyer setting forth in reasonable detail
the basis for any such dispute (any such dispute being hereinafter called a
"Disagreement"). Any Disagreement under this Section shall be resolved in
accordance with the procedures set forth in Section 1.5 hereof. Any Contingent
Consideration payable under this Agreement shall be paid 60 days after the
expiration of the Contingent Period or, if later, the date all Disagreements
relating to such Contingent Period have been finally resolved.
(d) For purposes of the calculation of Contingent Consideration, Buyer
agree as follows:
(i) to allocate any revenues attributable to Convertible Business from
accounts of NA or NIG existing at Closing to the Acquired Business, as
appropriate, provided that revenues from accounts of NA or NIG existing at
Closing attributable to business other than Convertible Business shall be
allocated to the Acquired Business, as
19
<PAGE>
appropriate, up to a maximum amount for all revenues attributable to
business other than Convertible Business not exceeding 10% of the total
revenues of the Acquired Business without taking into account revenues
attributable to business other than Convertible Business described in
Section 1.7(d)(ii);
(ii) to allocate any revenues attributable to Convertible Business
which is produced by sales representatives employed by NA or NIG as of
Closing to the Acquired Business, as appropriate, provided that revenues
produced by sales representatives employed by NA or NIG as of Closing
attributable to business other than Convertible Business shall be allocated
to the Acquired Business, as appropriate up to a maximum amount for all
revenues attributable to business other than Convertible Business not
exceeding 10% of the total revenues of the Acquired Business without taking
into account revenues attributable to business other than Convertible
Business described in Section 1.7(d)(i);
(iii) to allocate new investment management opportunities relating to
Convertible Business (whether for existing clients of Buyer's other
divisions or business units or new clients) produced by sales
representatives of Buyer's divisions or business units (other than the
Acquired Business) among the Acquired Business on the one hand and any
other divisions or business units of Buyer, on the other hand, fairly based
upon (v) the source of the opportunity; (w) the history of the relationship
with the potential client; (x) the investment objectives of the potential
client; (y) the identity of the personnel who will provide the investment
management services; and (z) such other factors as the Buyer determine are
materially relevant to achieve a fair allocation consistent with providing
the highest quality services to the client; and
(iv) not to change its accounting policies in any way that has a
material adverse effect on the calculation of the revenues of the Acquired
Business.
Nothing contained in this Section of the Agreement shall be deemed to create an
obligation on the part of the Buyer or their Affiliates, whether express or
implied, to continue all or part of the Acquired Business, to sell or not sell
any of the assets of the Company used in the operation of the Acquired Business,
to continue or discontinue offering products or services offered by NA or NIG as
of the Closing Date, or to develop new products or offer new services, and
nothing contained in this Section or in the Agreement shall create a duty on
behalf of Buyer to facilitate the ability of the Company to earn the Contingent
Consideration.
20
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS
NA, NIG, Thomas C. Noddings and John G. Noddings jointly and severally
represent and warrant to Buyer as of the date of this Agreement as follows:
Section 2.1. Organization and Related Matters. Each of NA and NIG is an
Illinois corporation, duly incorporated, validly existing and in good standing
under the laws of the State of Illinois. Each of NA and NIG has the corporate
power and authority to carry on its business as it is now being conducted and to
own, lease and operate all of its properties and assets. Each of NA and NIG is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned, leased or operated by it makes such qualification
or licensing necessary except where the failure to be so qualified or licensed
is not reasonably expected to have a Company Material Adverse Effect. The copies
of the Certificate of Incorporation and By-laws and any amendments thereto of
each of NA and NIG heretofore delivered to Buyer are complete and correct copies
of such instruments as in effect as of the date of this Agreement. Neither of NA
nor NIG has any Subsidiaries.
Section 2.2. Authority; No Violation. (a) Each of NA, NIG and the
Shareholders has full power, corporate or other, and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by all
requisite action, corporate or other, on the part of NA, NIG and the
Shareholders, and no other proceedings, corporate or other, on the part of NA
and NIG (including without limitation any approval of the Shareholders) or the
Shareholders are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by NA, NIG and the Shareholders and (assuming the due
authorization, execution and delivery of this Agreement by Buyer) constitutes a
valid and binding obligation of NA, NIG and the Shareholders, enforceable
against NA, NIG and the Shareholders in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by NA, NIG or the
Shareholders, nor the consummation by NA, NIG or the Shareholders, as the case
may be, of the transactions contemplated hereby to be performed by them, nor
compliance by NA, NIG or the Shareholders with any of the terms or provisions
hereof, will (i) violate any provision of the Certificate of Incorporation or
By-laws of NA or NIG, or (ii) except as set forth in Schedule 2.2(b), and
assuming that the consents and approvals referred to in Section 4.2 hereof are
duly obtained, (x) violate, conflict with or require any notice, filing, consent
or approval under any Applicable Law to which either of NA, NIG or any of its
respective Affiliates or any
21
<PAGE>
of their properties, contracts or assets are subject, or (y) violate, conflict
with, result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination, cancellation or modification under, accelerate or result in a right
of acceleration of the performance required by, result in the creation of any
Encumbrance upon the Acquired Assets or require any notice, approval or consent
under any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which NA, NIG or any of the
Shareholders is a party, or by which NA or NIG, any of the Shareholders, or to
the knowledge of the Company or any of the Shareholders, any of their respective
properties or assets, may be bound or affected.
Section 2.3. Acknowledgment and Approvals. Except for acknowledgments,
approvals and notices as are set forth in Section 4.2 and Schedule 2.3, no
consents or approvals of or filings or registrations with any Governmental
Authority or third party are necessary in connection with (i) the execution and
delivery by the Company and the Shareholders of this Agreement and (ii) the
consummation by the Company and the Shareholders of the transactions
contemplated hereby.
Section 2.4. Ownership of Acquired Assets.
(a) (i) The NA Acquired Assets include all properties and assets used or
useful in NA's business and all assets shown on the September 30, 1998 balance
sheet of NA, except for properties disposed of in the Ordinary Course of
Business and assets specifically excluded. NA has good and marketable title to,
or a valid leasehold interest in, all of the NA Acquired Assets free and clear
of all Encumbrances or restriction on transfer, and NA has the full and
unrestricted power to sell, assign, transfer and deliver, and the execution and
delivery by NA of the NA Bill of Sale and Assignment will convey to CC the NA
Acquired Assets in accordance with the terms of this Agreement and free and
clear of Encumbrances.
(ii) The NIG Acquired Assets include all properties and assets used or
useful in NIG's business and all assets shown on the September 30, 1998 balance
sheet of NIG, except for properties disposed of in the Ordinary Course of
Business and assets specifically excluded. NIG has good and marketable title to,
or a valid leasehold interest in, all of the NIG Acquired Assets free and clear
of all Encumbrances or restriction on transfer, and NIG has the full and
unrestricted power to sell, assign, transfer and deliver, and the execution and
delivery by NIG of the NIG Bill of Sale and Assignment will convey to CAMC the
NIG Acquired Assets in accordance with the terms of this Agreement and free and
clear of Encumbrances.
(b) The Shareholders own beneficially and of record all of the Shares in
the respective amounts set forth on Schedule 2.4. No Shareholder (i) owns
beneficially or of record 50% or more of the outstanding voting stock of NA or
NIG; (ii) has the contractual power presently to designate 50% or more of the
directors of NA or NIG; or (iii) "controls" NA or NIG, as defined by the HSR
Act, and 16 C.F.R. ss.801.1(b) (1998). There are no shares of capital stock of
the
22
<PAGE>
Company issued or outstanding other than the Shares. All of the Shares are duly
authorized, validly issued, fully paid, nonassessable and free of any
pre-emptive rights. Except as set forth in Schedule 2.4, there is no outstanding
option, warrant, convertible or exchangeable security, right, subscription,
call, unsatisfied pre-emptive right or other agreement or right of any kind to
purchase or otherwise acquire (including, without limitation, by exchange or
conversion) from the Company or the Shareholders any capital stock of the
Company, whether issued and outstanding, authorized but unissued or treasury
shares. There are no agreements or understandings of any kind with respect to
the voting of the Shares. The Company does not have any Subsidiaries, and except
as set forth in Schedule 2.4 does not own, directly or indirectly, any equity or
other ownership interest in any Person.
Section 2.5. Regulatory Documents. (a) Except as set forth in Schedule
2.5(a), since January 1, 1993, each of NA and NIG has timely filed all material
forms, reports, registration statements, schedules and other documents, together
with any amendments required to be made with respect thereto, that were required
to be filed with any Governmental Authority, including the SEC and the National
Association of Securities Dealers, Inc. ("NASD"), and have paid all fees and
assessments due and payable in connection therewith. NIG is and has been since
September 11, 1987 duly registered as an investment advisor under the Advisers
Act and is not required to be registered as an investment advisor in any state
where it is not currently registered. Schedule 2.5(a) lists the states in which
NIG is registered as an investment advisor or is subject to notification or
filing fee requirements. NIG's federal registration and each state registration
is in full force and effect. NA is and has been since April 22, 1977 duly
registered as a broker-dealer under the Exchange Act and is not required to be
registered as a broker-dealer in any state where it is not currently registered.
Schedule 2.5(a) lists the states in which NA is registered as a broker-dealer.
NA's federal registration and each state registration is in full force and
effect.
(b) As of their respective dates, the Regulatory Documents of NA, NIG and
its Affiliates filed since January 1993 complied in all material respects with
the requirements of the Securities Laws, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Regulatory
Documents, and none of such Regulatory Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company has previously delivered or made available to Buyer a
true, correct and complete copy of each such Regulatory Documents filed with the
SEC after January 1, 1993 and prior to the date hereof (including a Form ADV of
NIG and a Form BD of NA) and will deliver to Buyer promptly after the filing
thereof a true, correct and complete copy of each Regulatory Document filed by
the Company or their Affiliates with the SEC after the date hereof and prior to
the Closing Date.
Section 2.6. Financial Statements. The Company has previously delivered to
Buyer copies of (x) the audited balance sheets of each of NA and NIG as of March
31st for the fiscal years 1996, 1997 and 1998, and the related audited
statements of income, changes in shareholders'
23
<PAGE>
equity and cash flows for the fiscal years 1996, 1997 and 1998, inclusive, in
the case of the 1996 statements, accompanied by the report of Ernst & Young, and
in the case of the 1997 and 1998 statements accompanied by the audit report of
Altschuler, Melvoin and Glasser LLP, independent public accountants with respect
to each of NA and NIG and (y) the unaudited interim balance sheets and related
statement of income, changes in shareholders' equity and cash flows of the
Company at or for the period ending June 30, 1998 (collectively, the statements
referred to above being referred to as the "Company Financial Statements" and
the balance sheets as of March 31, 1998 being referred to as the "Company
Balance Sheets"). The balance sheets referred to in the previous sentence
(including the related notes, where applicable) present fairly, in all material
respects, the financial position of each of NA and NIG as of the dates thereof,
and the other financial statements referred to in this Section 2.6 present
fairly, in all material respects, (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount) the
results of its operations and its cash flows for the respective fiscal periods
therein set forth; each of such balance sheets and statements (including the
related notes, where applicable) comply in all material respects with applicable
accounting requirements with respect thereto; and, except as set forth in
Schedule 2.6, each of such balance sheets and each of such statements (including
the related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved (except, in the case of
unaudited Company Financial Statements, for the absence of notes). Except for
(i) those liabilities that are fully reflected or reserved against on the
Company Balance Sheets, (ii) liabilities incurred in the ordinary course of
business consistent with past practice since the date of the Company Balance
Sheets and which are not material, individually or in the aggregate, and (iii)
as set forth in Schedule 2.6, neither NA nor NIG has any liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise
and whether due or to become due, which are or would be required by GAAP to be
shown on its consolidated balance sheet or the footnotes thereto.
Section 2.7. Ineligible Persons. Neither NIG nor to the knowledge of the
Company any "affiliated person" (as defined in the Investment Company Act)
thereof, as applicable, is ineligible pursuant to Section 9(a) or 9(b) of the
Investment Company Act to serve as an investment adviser (or in any other
capacity contemplated by the Investment Company Act) to a registered investment
company. Neither NIG nor to the knowledge of the Company any "associated person"
(as defined in the Advisers Act) thereof, as applicable, is ineligible pursuant
to Section 203 of the Advisers Act to serve as an investment adviser or as an
associated person to a registered investment adviser. Neither NA nor to the
knowledge of the Company any "associated person" (as defined in the Exchange
Act) thereof, as applicable, is ineligible pursuant to Section 15(b) of the
Exchange Act to serve as a broker-dealer or as an associated person to a
registered broker-dealer.
Section 2.8. Contracts. Schedule 2.8 sets forth a complete and accurate
list as of the close of business on the day preceding the date hereof of all
written or oral contracts, agreements, guarantees, leases and executory
commitments to which either of NA or NIG is a party or by which any of its
respective properties or assets are bound which: (w) contain obligations of
either of NA or NIG in excess of $10,000; (x) which involve payments based on
profits or revenues of
24
<PAGE>
either of NA or NIG; or (y) which are otherwise material to its businesses,
properties or assets, including any Investment Advisory Agreements or
distribution agreements (hereinafter referred to collectively as the
"Contracts"). A complete and accurate summary of all material terms of each oral
contract is set forth in Schedule 2.8. To each of the Company's and
Shareholders' knowledge, each of the Contracts is in full force and effect and
enforceable in accordance with its terms. Except as set forth in Schedule 2.8
and the contracts relating to the Accounts referred to in Section 4.2, neither
the Shareholders nor the Company has received written notice of cancellation of
or default under or intent to cancel or call a default under any of the
Contracts. Except as set forth in Schedule 2.8 and the contracts relating to
Accounts referred to in Section 4.2, to the Company's or any Shareholder's
knowledge, there exists no event or condition which with or without notice or
lapse of time or both would be a breach or a default on the part of the Company
or on the part of the other party to such Contracts. Schedule 2.8A sets forth a
complete list of all Assumed Contracts. Schedule 2.8B sets forth a complete list
of all Broker- Dealer Agreements.
Section 2.9. Funds. (a) Schedule 2.9(a) sets forth a true, complete and
correct list, as of the date hereof, of each Fund for which NIG currently acts
or has previously acted at any time within three years prior to the date hereof
as general partner, investment adviser, subadviser (collectively, the "NIG
Funds") and indicates those Funds for which the Company has been the sponsoring
entity or a participating entity.
(b) The Company has not sponsored or participated in the distribution by
public or private offering of any interests in any limited partnerships or other
entities or Persons other than the NIG Funds and Funds in which NA has acted as
a distributor.
(c) All information provided in writing by the Company expressly for use in
(i) the offering documents with respect to offerings and sales of the interests
in the NIG Funds and (ii) filings by such NIG Funds with the SEC, did not, as of
their respective dates, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(d) The offering and sale of the limited partnership interests or other
securities representing interests in the NIG Funds were not required to be
registered under the Securities Act or state securities laws and otherwise
complied in all material respects with applicable Securities Laws.
(e) The Company has previously provided to Buyer the financial statements
relating to the NIG Funds and the other Investment Advisory Accounts for the
years ended December 31, 1995, 1996 and 1997 and the eight months ended August
31, 1998 (collectively, the "Investment Advisory Account Financial Statements").
Except with respect to the effects of the SFX Warrants, the Investment Advisory
Account Financial Statements referred to in the
25
<PAGE>
preceding sentence (including the related notes, where applicable) fairly
present the financial information presented therein as of the dates thereof and
comply in all material respects with GAAP consistently applied during the
periods involved (except, in the case of unaudited Investment Advisory Account
Financial Statements, for the absence of notes). All balance sheets or
statements of assets contained in the Investment Advisory Account Financial
Statements reflect the current fair market values of the investment assets
included therein as of the dates of such balance sheets or statements of assets.
(f) Schedule 2.9(f) sets forth the performance of each of the Investment
Advisory Accounts (including the NIG Funds) which were active as of August 31,
1998 for the years ended December 31, 1995, 1996 and 1997 and the period from
January 1, 1998 to August 31, 1998 (the "Performance Documents"). Except with
respect to the effects of the SFX Warrants, the performance information set
forth in the Performance Documents fairly sets forth the performance of the
Investment Advisory Accounts (including the NIG Funds) for the periods
consistently applied during the periods involved (except for the absence of
notes) and applicable Securities Laws.
(g) The investors who have purchased limited partnership interests or other
securities representing interests in the NIG Funds are "qualified clients" as
defined in 17 C.F.R. 275.205-3 or are otherwise exempt from the compensation
restrictions contained in Section 205(a)(1) of the Advisers Act.
Section 2.10. Investment Advisory Agreements. (a) No Investment Advisory
Agreement to which NIG is a party is or has been subject to Section 15 of the
Investment Company Act. Each such Investment Advisory Agreement has been
performed by NIG in accordance with all Applicable Laws. Each client who is a
party to an Investment Advisory Agreement with NIG is a "qualified client" as
defined in 17 C.F.R. 275.205-3 or is otherwise exempt from the compensation
restrictions contained in Section 205(a)(1) of the Advisers Act. All parties who
have executed Investment Advisory Agreements with NIG, since August 20, 1998, if
any, satisfy the new conditions of 17 C.F.R. 275.205-3, or are otherwise exempt
from the compensation restrictions contained in Section 205(a)(1) of the
Advisers Act.
(b) For each transaction where NA has acted as a broker or dealer with
respect to NIG's clients, the Company has complied with applicable provisions of
the Advisers Act except where the failure to comply would not have a Company
Material Adverse Effect.
Section 2.11. No Other Broker. Other than as indicated on Schedule 2.11, no
broker, finder or similar intermediary has acted for or on behalf of, or is
entitled to any broker's, finder's or similar fee or other commission from, the
Company or any of the Shareholders or any of their Affiliates in connection with
this Agreement or the transactions contemplated hereby.
26
<PAGE>
Section 2.12. Legal Proceedings. Except as set forth on Schedule 2.12,
there are no legal, administrative, arbitral or other proceedings, claims,
suits, actions or governmental or regulatory investigations of any nature that
are pending or, to the Company's and Shareholders' knowledge, threatened against
or relating to the Company, the NIG Funds, the Accounts or any of their
respective properties, assets or businesses or that challenge the validity or
propriety of the transactions contemplated by this Agreement. There is no
injunction, order, judgment, decree, or regulatory restriction imposed upon the
Company, the NIG Funds, the Accounts or any of their respective properties,
assets or businesses which, individually or in the aggregate, are reasonably
expected to have (i) a Company Material Adverse Effect or (ii) a material
adverse effect on the parties' ability to consummate the transactions
contemplated by this Agreement.
Section 2.13. Compliance with Applicable Law. (a) Except as disclosed in
Schedule 2.13(a), each of NA and NIG holds all licenses, franchises, permits and
authorizations (collectively, "Permits") necessary for the lawful ownership and
use of its properties and assets and the conduct of its businesses under and
pursuant to every, and has complied in all material respects with each, and is
not in default in any material respect under any, Applicable Law relating to it
or any of its assets, properties or operations, except in any case where the
failure to hold any such Permit would not have a Company Material Adverse
Effect, and neither NA nor NIG nor any Shareholder knows of any outstanding
violations of any of the above or has not received written notice asserting any
such violation. All Permits are valid and in good standing and are not subject
to any suspension, modification or revocation or proceedings related thereto,
except in any case where the failure to hold any such Permit would not have a
Company Material Adverse Effect.
(b) Except as disclosed on Schedule 2.13(b), since January 1, 1993 and
except for normal examinations conducted by any Governmental Authority in the
regular course of the business of NA or NIG or, to the knowledge of NA and NIG
or any Shareholder, the NIG Funds, no Governmental Authority has initiated any
administrative proceeding or, to the knowledge of any of the Shareholders,
investigation into or related to the business or operations of NA or NIG. Except
as set forth in Schedule 2.13(b), there is no unresolved violation, criticism or
exception made in writing by any Governmental Authority with respect to any
report or statement by any Governmental Authority relating to any examination of
NA or NIG.
(c) Except as set forth on Schedule 2.13(c), to the knowledge of each of
the Shareholders, each of NA or NIG has at all times since January 1, 1993
maintained records which accurately reflect transactions in reasonable detail,
and accounting controls, policies and procedures sufficient to ensure that such
transactions are recorded in a manner which permits the preparation of financial
statements in accordance with GAAP and applicable regulatory accounting
requirements.
(d) Each officer, director, employee and consultant of NA and NIG holds,
and has held at all relevant times while such person served in such capacity,
all licenses, permits and
27
<PAGE>
authorizations necessary for the lawful performance of such person's duties on
behalf of NA and NIG.
(e) Schedule 2.13(e) sets forth a complete and accurate list of each of the
Company's memberships in commodities exchanges, boards of trade, clearing
organizations and trade associations, and a description of the type of
membership and the type of registered holder thereof. To the Company's and the
Shareholder's Knowledge, all such memberships and similar privileges of each of
NA and NIG are in good standing.
Section 2.14. Insurance. All of the Company's insurance policies and bonds
are listed in Schedule 2.14. To the knowledge of the Company, each such
insurance policy or bond is in full force and effect and the Company has not
received notice or any other indication from any insurer or agent of any intent
to cancel any such insurance policy or bond.
Section 2.15. Labor and Employment Matters. Except as set forth in Schedule
2.15, (i) no collective bargaining agreement or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association, exists which is binding on NA or NIG, (ii) each of NA
and NIG is, and has at all times been, in compliance with all Applicable Laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work, and occupational safety and health, and is not
engaged in any unfair labor practice except for such noncompliances and
violations which, individually and in the aggregate would not have a Company
Material Adverse Effect, and (iii) there is no labor strike, dispute, slowdown
or stoppage actually pending or to the knowledge of NA and NIG threatened
against or affecting NA or NIG.
Section 2.16. Employee Benefit Plans; ERISA. (a) Schedule 2.16(a) includes
a complete list of all bonus, profit sharing, compensation, termination, stock
option, stock appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance, termination pay,
welfare and other employee benefit plans, agreements and arrangements, labor
agreements, trusts, funds and other arrangements in effect as of the date hereof
for the benefit or welfare of any director, officer, employee or former employee
of NA or NIG or pursuant to which NA or NIG has any liability, contingent or
otherwise (a "Company Plan"). Except as otherwise disclosed in Schedule 2.16(a),
each Company Plan is in compliance with all Applicable Laws including ERISA and
the Code. No Company Plan is subject to Title IV of ERISA or Section 302 of
ERISA or Section 412 or 4971 of the Code. No Company Plan is a multiemployer
plan (as defined in Section 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a
plan that has two or more contributing sponsors at least two of whom are not
under common control, within the meaning of Section 4063 of ERISA (a "Multiple
Employer Plan"), nor has NA or NIG or any ERISA Affiliate, at any time within
the preceding six years, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
28
<PAGE>
(b) Buyer has had an opportunity to examine the records of, and request
information concerning the Company Plans and, with respect to each such request,
Company has delivered or made available to Buyer a true, correct and complete
copy of each of the following to Buyer's satisfaction: (i) each writing
constituting a part of such Company Plan, including without limitation all plan
documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (iii) the current summary plan description,
if any; (iv) the most recent annual financial report, if any; and (v) the most
recent determination letter from the IRS, if any. Except as specifically
provided in this Agreement or the foregoing documents delivered or made
available to Buyer, there are no amendments to any Company Plan that have been
adopted or approved nor has the Company undertaken to make any such amendments.
(c) Schedule 2.16(c) identifies each Company Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code ("Qualified
Plans"). The IRS has issued a favorable determination letter with respect to
each Qualified Plan that has not been revoked, and there are no existing
circumstances nor any events that have occurred since the date of such
determination letter that could reasonably be expected to affect adversely the
qualified status of any Qualified Plan or the related trust. No Company Plan is
intended to meet the requirements of Code Section 501(c)(9).
(d) All contributions required to be made to any Company Plan by Applicable
Law or by any plan document or other contractual undertaking, and all premiums
due or payable with respect to insurance policies funding any Company Plan, for
any period through the date hereof have been timely made or paid in full or, to
the extent not required to be made or paid on or before the date hereof, have
been fully reflected on the Company Financial Statements.
(e) There does not now exist, nor do any circumstances exist that are
reasonably likely to result in, any Controlled Group Liability following the
Closing. Without limiting the generality of the foregoing, neither the Company
nor any ERISA Affiliate has engaged in any transaction described in Section
4069, 4204 or 4212 of ERISA.
(f) The Company has no liability for life, health, medical or other welfare
benefits to former employees or beneficiaries or dependents thereof, except for
health continuation coverage as required by Section 4980B of the Code or Part 6
of Title I of ERISA and at no expense to the Company other than administrative
expense.
(g) Except as provided in this Agreement or the Amended and Restated
Closing Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
employee of the Company.
29
<PAGE>
(h) There are no pending or, to the knowledge of the Company, threatened
claims (other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Company Plans,
any fiduciaries thereof with respect to their duties to the Company Plans or the
assets of any of the trusts under any of the Company Plans which could
reasonably be expected to result in any material liability of the Company to the
Pension Benefit Guaranty Corporation, the Department of Treasury, the Department
of Labor or any multiemployer plan.
(i) Set forth on Schedule 2.16(i) is an accounting of all
obligations, contingent or otherwise, of the Company (other than obligations to
pay base salary in the ordinary course of business consistent with past
practice) owing or payable to, or on behalf of, employees or former employees of
the Company that are not accrued or otherwise reflected on the Company Balance
Sheets.
Section 2.17. Technology and Intellectual Property. (a) Attached hereto as
Schedule 2.17(a) is a list of all material (i) domestic and foreign registered
trademarks and service marks, registered copyrights and patents, (ii)
applications for registration or grant of any of the foregoing, (iii)
unregistered trademarks, service marks, trade names, logos and assumed names,
(iv) computer software (including custom developed software), and (iv) licenses
for any of the foregoing, in each case, owned by the Company or used in or
necessary to conduct the business of the Company. The items on Schedule 2.17(a),
together with all other trademarks, service marks, trade names, logos, assumed
names, patents, copyrights, trade secrets, computer software (including custom
developed software), licenses, formulae, customer lists or other databases,
designs and inventions currently used in or necessary to conduct the business of
the Company constitute the "Intellectual Property."
(b) Except as set forth in Schedule 2.17(b), the Company has ownership of,
or such other rights by license, lease or other agreement in and to, the
Intellectual Property as is necessary to conduct its business as presently
conducted. The Company has not infringed or violated any trademark, trade name,
copyright, patent, trade secret right or other proprietary right of others
except to the extent any infringement or violation that is not, individually or
in the aggregate, reasonably expected to have a Company Material Adverse Effect.
Neither the Company nor the Shareholders has received written notice of any
claim respecting any such violation or infringement. Other than as set forth in
Schedule 2.17(b), to the knowledge of each of the Shareholders, there is no
reason to believe that upon consummation of the transactions contemplated hereby
the Company will be in any way more restricted than as of the date hereof in the
use of any of the Intellectual Property under any Applicable Law, contract or
otherwise, or that use of such Intellectual Property by the Company will as a
result of such consummation violate or infringe the rights of any Person, or
subject the Company to liability of any kind, under any Applicable Law, contract
or otherwise.
30
<PAGE>
Section 2.18. No Adverse Change. Except as provided on Schedule 2.18, since
March 31, 1998, (i) each of NA and NIG has operated its business only in the
ordinary course of business consistent with past practice; (ii) there has been
no material adverse change in the financial condition, results of operations,
assets or business of NA and NIG taken as a whole, provided that if the
condition set forth in Section 5.1(h) is satisfied, the failure to obtain
written or implied consents from, or new Investment Advisory Agreements with,
Investment Advisory Accounts shall not be taken into account in determining if a
material adverse change shall have occurred; and (iii) neither NA nor NIG has
taken any action or suffered any event that if taken or suffered after the date
hereof would violate Section 4.1 of this Agreement.
Section 2.19. Real Property. The assets of the Company that consist of
leasehold interests in real property are listed in Schedule 2.19, together with
annual lease payments and all Encumbrances thereon. All offices where the
Company presently conducts its business are subject to leases listed in Schedule
2.19. The Company does not have any interest in any real property except for the
leases set forth in Schedule 2.19. The Company has furnished Buyer with true,
correct and complete copies of all leases listed in Schedule 2.19. To the
knowledge of the Company, all leases listed in Schedule 2.19 are in full force
and effect in accordance with their respective terms, and there is not any
existing default or event which with notice or lapse of time or both would
become a default under any such lease.
Section 2.20. Filing Documents. None of the information regarding NA, NIG,
the Shareholders or any of their respective Affiliates supplied or to be
supplied by NA, NIG or the Shareholders included or for inclusion in any
documents to be filed with any Governmental Authority in connection with the
transactions contemplated hereby will, at the respective times such documents
are filed with any Governmental Authority, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 2.21. Customer and Distributor Relationships. To the Company's
knowledge, except as set forth on Schedule 2.21, since January 1, 1993, there
have been no complaints or disputes (in each case set forth in writing) with
customers of Investment Advisory Accounts that have not been resolved which are
reasonably expected to result in a Company Material Adverse Effect.
Section 2.22. Disclosure. Each Schedule and each document attached as a
Schedule is true, correct, and complete in all material respects. To the
knowledge of each of the Shareholders, no representation or warranty by NA, NIG
or the Shareholders in this Agreement or any Schedule referred to herein or in
any agreement to be delivered hereunder contains any untrue statement of a
material fact or any omission of a material fact necessary to make the
statements contained herein and therein, in light of the circumstances under
which the statements were made, not misleading.
31
<PAGE>
Section 2.23. Year 2000 Plan and Inventories. Company has provided Buyer
with a complete and accurate copy of its written plan to become Year 2000
Compliant, including current estimates of the anticipated costs associated with
implementing all necessary modifications and replacements of software and
hardware owned by, used by, or licensed or leased by or to Company. A copy of
said plan or any documents or correspondence evidencing such plan have been
provided to Buyer in two three ring binders marked "Noddings Year 2000
Compliance Plan Documents." In addition, Company has, with respect to it and
each of its Affiliates, provided Buyer with completely and accurately filled out
"Systems Inventory Worksheets for the Year 2000" and "Facilities and Equipment
Inventory Worksheets for the Year 2000." Assuming the due implementation of the
foregoing Year 2000 compliance plans, the Company does not anticipate that Year
2000 problem will result in a Company Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
CC and CAMC jointly and severally represent and warrant to the Company and
the Shareholders as of the date of this Agreement as follows:
Section 3.1. Organization and Related Matters. CC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Connecticut. CAMC is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Missouri. Each of CC and CAMC has
the corporate power and authority to carry on its business as it is now being
conducted and to own, lease and operate all of its properties and assets. Each
of CC and CAMC is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned, leased or operated by it makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not have a Buyer Material Adverse Effect. The copies
of the organizational documents and any amendments thereto of each of CC and
CAMC heretofore delivered to the Company are complete and correct copies of such
instruments as in effect as of the date of this Agreement.
Section 3.2. Authority; No Violation. (a) Each of CC and CAMC has full
power, corporate or other, and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by all requisite action, corporate or
other, on the part of each of CC and CAMC, and no other proceedings, corporate
or other, on the part of each of CC and CAMC or its shareholders are necessary
to approve this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of CC and CAMC and (assuming the due authorization, execution and delivery of
this Agreement by the Company and
32
<PAGE>
the Shareholders) constitutes a valid and binding obligation of each of CC and
CAMC, enforceable against each of CC and CAMC in accordance with its terms.
(b) Neither the execution and delivery of this Agreement by CC or CAMC, nor
the consummation by CC or CAMC of the transactions contemplated hereby to be
performed by it, nor compliance by CC or CAMC with any of the terms or
provisions hereof, will (i) violate or conflict with any of the provisions of
the certificate of incorporation or by-laws of CC or CAMC, (ii) conflict with or
violate, or constitute a default or a breach under or result in the acceleration
or termination of (or entitle any person or entity to accelerate or terminate)
any obligation under any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument or any order, award, writ, decree,
judgment or ruling to which either CC or CAMC is subject or, to the best
knowledge of CC and CAMC, any of its property is bound, or (iii) contravene any
law, rule or regulation applicable to CC or CAMC except, in the case of any of
the foregoing described in clauses (ii) and (iii) above, which does not
materially impair the ability of CC or CAMC to consummate the transactions
contemplated hereby.
Section 3.3. Acknowledgments and Approvals. Except for acknowledgments,
consents, approvals and notices as are set forth in Schedule 3.3, no consents or
approvals of or filings or registrations with any Governmental Authority or
third party are necessary in connection with (i) the execution and delivery by
CC or CAMC of this Agreement and (ii) the consummation by CC and CAMC of the
transactions contemplated hereby except for such consents or approvals, the
failure of which to obtain, either individually or in the aggregate, is not
reasonably expected to have a Buyer Material Adverse Effect.
Section 3.4. Ineligible Persons. Neither of CAMC or CC nor, to the
knowledge of Buyer, any "affiliated person" (as defined in the Investment
Company Act) thereof, as applicable, is ineligible pursuant to Section 9(a) or
9(b) of the Investment Company Act to serve as an investment adviser (or in any
other capacity contemplated by the Investment Company Act) to a registered
investment company. Neither of CAMC or CC nor, to the knowledge of Buyer, any
"associated person" (as defined in the Advisers Act) thereof, as applicable, is
ineligible pursuant to Section 203 of the Advisers Act to serve as an investment
adviser or as an associated person to a registered investment adviser. Neither
of CC nor, to the knowledge of Buyer, any "associated person" (as defined in the
Exchange Act) thereof, as applicable, is ineligible pursuant to Section 15(b) of
the Exchange Act to serve as a broker-dealer or as an associated person to a
registered broker-dealer.
Section 3.5. No Other Broker. Except to the extent that Brian Smith is
deemed to have acted for Buyer with respect to the transactions contemplated
hereby, no broker, finder or similar intermediary has acted for or on behalf of,
or is entitled to any broker's, finder's or similar fee or other commission
from, Buyer or any of its Affiliates in connection with this Agreement or the
transactions contemplated hereby.
33
<PAGE>
Section 3.6. Filing Documents. None of the information regarding the Buyer
or any of their Affiliates supplied or to be supplied by Buyer included or for
inclusion in any documents to be filed with any Governmental Authority in
connection with the transactions contemplated hereby will, at the respective
times such documents are filed with any Governmental Authority, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
ARTICLE IV
COVENANTS
Section 4.1. Conduct of Business by the Company. During the period from the
date of this Agreement and continuing through the Closing Date, except as
expressly contemplated or permitted by this Agreement or with the prior written
consent of Buyer, each of NA and NIG shall (a) carry on its business in the
ordinary course consistent with past practice; (b) make all reasonable efforts
to preserve its present business organization and relationships; (c) make all
reasonable efforts to keep available the present services of its employees; and
(d) make all reasonable efforts to preserve its rights, franchises, goodwill and
relations with its customers and others with whom it conducts business. Without
limiting the generality of the foregoing, except as expressly permitted by this
Agreement or consented to in writing by Buyer, neither of NA nor NIG shall
directly or indirectly, and the Shareholders shall not cause NA or NIG, to:
(i) amend, or agree to amend its Certificate of Incorporation or
By-laws (or comparable instruments), or merge with or into or consolidate
with, or agree to merge with or into or consolidate with, any other Person,
subdivide or in any way reclassify any shares of its capital stock, or
change or agree to change in any manner the rights of its outstanding
capital stock;
(ii) except as set forth on Schedule 4.1(ii), issue or sell or
purchase, or issue any option, warrant, convertible or exchangeable
security, right, subscription, call, unsatisfied pre-emptive right or other
agreement or right of any kind to purchase or otherwise acquire (including,
without limitation, by exchange or conversion) (each a "Right"), or enter
into any contracts, agreements or arrangements to issue or sell, any shares
of its capital stock;
(iii) incur any additional indebtedness for borrowed money or
guarantee the indebtedness of other Persons, except in the ordinary course
of business consistent with past practice;
(iv) waive, or agree to waive, any right of material value to its
business;
34
<PAGE>
(v) make, or agree to make, any material change in its accounting
methods or practices for Tax or accounting purposes or make, or agree to
make, any material change in depreciation or amortization policies or rates
adopted by it for Tax or accounting purposes unless otherwise required by
law or GAAP;
(vi) materially change, or agree to materially change, any of its
business policies or practices that relate to its business, including,
without limitation, fee structure, fee waivers, expense reimbursement,
interest rate management, security selection, sales and marketing,
personnel, budget or product development policies;
(vii) make any loan or advance to any of the Shareholders or the
Company's Affiliates, officers, directors, employees, consultants, agents
or other representatives (other than travel advances made in the ordinary
course of business consistent with past practice), or make any other loan
or advance otherwise than in the ordinary course of business consistent
with past practice;
(viii) sell, offer to sell, abandon or make any other disposition of
any of its material assets, except in the ordinary course of business
consistent with past practice; grant or suffer, or agree to grant or
suffer, any Encumbrance on any of its material assets;
(ix) except as set forth in Schedule 4.1(ix) and except in the
ordinary course of business consistent with past practice or in amounts
less than $10,000 in the aggregate, incur or assume, or agree to incur or
assume, any liability or obligation (whether or not currently due and
payable) relating to its business or any of its assets;
(x) make any material change in its overall investment strategy or mix
of products;
(xi) enter into, or agree to enter into, any contract, agreement or
arrangement with any of its Affiliates except in the ordinary course of
business consistent with past practice; provided that no assets or Accounts
of the Company will be transferred or assigned to an Affiliate of the
Company except as set forth on Schedule 4.1(xi) hereto;
(xii) declare dividends or declare or make any other distributions of
any kind payable to the Shareholders, or make any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(xiii) create, renew, amend, terminate or cancel, or take any other
action that may result in the creation, renewal, amendment, termination or
cancellation
35
<PAGE>
of, any lease or Contract, except in the ordinary course of business and as
are not, in the aggregate, reasonably expected to have a Company Material
Adverse Effect; enter into or amend, or agree to enter into or amend, (x)
any agreement pursuant to which it agrees to indemnify any party on behalf
of its business except in the ordinary course of business and except as
contemplated in Section 5.1(k) hereof, or pursuant to which it agrees to
refrain from competing with any party with respect to its business or (y)
any investment advisory, subadvisory, management, distribution, marketing,
custody or other services agreement relating to the NIG Funds or, other
than in the ordinary course of business consistent with past practice, the
Accounts;
(xiv) take any action impairing its rights under any Contract other
than in the ordinary course of business consistent with past practice;
(xv) adopt, amend, renew or terminate any Company Plan or any other
employee program, agreement, arrangement or policy between the Company and
one or more of its employees, other than in the ordinary course of business
consistent with past practice;
(xvi) commit any act or omission which constitutes a breach or default
under any Contract or material license to which it is a party or by which
it or any of its properties or assets is bound, the effect of which, in the
aggregate, are reasonably expected to have a Company Material Adverse
Effect;
(xvii) enter into any new line of business unrelated to the business
as currently conducted;
(xviii) acquire or agree to acquire in any manner, including by way of
merger, consolidation, purchase of an equity interest or assets, any
business or any corporation, partnership, association or other business
organization or division thereof;
(xix) except as set forth in Schedule 4.1(xix), materially increase
the salary or wages of any Company employees; or
(xx) agree (by contract or otherwise) to do any of the foregoing.
Section 4.2. Investment Management Agreements. On or prior to the Closing,
the Company shall substitute CAMC as the investment manager under all Investment
Management Agreements for the NIG Funds and appoint CAMC as the general partner
to the NIG Funds, forms of such consents and amendment agreements necessary to
effectuate the foregoing are
36
<PAGE>
attached hereto as Schedule 4.2, provided that such amendments shall be
effective on and after the Closing.
Section 4.3. Investment Advisory Agreement Acknowledgments. The Company
represents and warrants that it has informed investment advisory clients that
are parties to Investment Advisory Agreements of the transactions contemplated
by this Agreement. The written consent of each such client to the deemed
assignment to Buyer of its Investment Advisory Agreement has been requested and
the Company shall use its reasonable best efforts to obtain such consent. Buyer
agrees that consent for any Investment Advisory Agreement may be obtained by
requesting written acknowledgments as aforesaid and informing such client of:
(a) the intention to complete the transaction contemplated hereby, which will
result in a deemed assignment of such Investment Advisory Agreement to Buyer;
(b) the Company's intention to continue the advisory services, pursuant to the
existing Investment Advisory Agreement with such client after the Closing if
such client does not terminate such agreement prior to the Closing; and (c) that
the consent of such client will be implied if such client continues to accept
such advisory services for at least 40 days after receipt of such notice without
termination.
Section 4.4. Maintenance of Records. Through the Closing Date, each of NA
and NIG will maintain its Records in the same manner and with the same care that
such Records have been maintained prior to the execution of this Agreement, and
each of the Shareholders shall, and shall use its reasonable best efforts to
cause its Affiliates to, deliver to the Company as of the Closing all Records of
the Company. From and after the Closing Date, each party to this Agreement shall
permit the other parties and their Affiliates reasonable access to any
applicable Records of such party in its possession reasonably necessary in
connection with any claim, action, litigation or other proceeding involving the
party requesting access to such Records or in connection with any legal
obligation owed by such party to any Governmental Authority or any present or
former client thereof.
Section 4.5. Further Agreements. The parties hereto shall use their
reasonable best efforts to cause John G. Noddings, Thomas C. Noddings and Susan
C. Christoph to execute employment agreements as of the Closing Date with CAMC.
Section 4.6. Further Assurances. Each party to this Agreement shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby, together with other consolidation activities. For a
reasonable period of time after the Closing Date upon the request of Buyer, the
Company, its Affiliates and the Shareholders shall promptly execute and deliver
such further instruments of assignment, transfer, conveyance, endorsement,
direction or authorization and other documents as Buyer may reasonably request
to effectuate the purposes of this Agreement.
37
<PAGE>
Section 4.7. Efforts of Parties to Close. During the period from the date
of this Agreement through the Closing Date, each party hereto shall use its
reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent to the consummation of the transactions contemplated hereby, including
the execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the transactions
contemplated hereby. During the period from the date of this Agreement and
continuing through the Closing, except as required by Applicable Law or with the
prior written consent of the other parties to this Agreement, no party to this
Agreement shall take any action which, or fail to take any reasonable action the
failure of which to be taken, would, or would reasonably be expected to, (a)
result in any of the representations and warranties set forth in this Agreement
on the part of the party taking or failing to take such action being or becoming
untrue in any material respect; (b) result in any conditions to the Closing set
forth in Article V not being satisfied; (c) result in a material violation of
any provision of this Agreement; or (d) adversely affect or materially delay the
receipt of any of the requisite regulatory approvals.
Section 4.8. Confidentiality and Announcements. (a) The parties agree to be
bound by and comply with the provisions set forth in the Confidentiality
Agreement, the provisions of which are hereby incorporated herein by reference.
(b) Notwithstanding Section 4.10(a), Buyer may issue any press release
related to this Agreement or the transactions contemplated hereby and make any
filing with the SEC or other regulatory authority required by law; provided
that, with respect to any such press release or filing prior to the Closing
Date, Buyer shall consult John G. Noddings as to the form of such disclosures.
Section 4.9. Access; Certain Communications. (a) Between the date of this
Agreement and the Closing Date, subject to any Applicable Laws relating to the
exchange of information, the Company shall afford to Buyer and their authorized
agents and representatives reasonable access, upon reasonable notice and during
normal business hours, to all contracts, documents, Records and information of
or relating to the assets, liabilities, business, operations, personnel and
other aspects of the business of the Company. The Company shall cause its
personnel, attorneys and accountants to provide assistance to Buyer in Buyer's
investigation of matters relating to the purchase of the Shares, including
allowing Buyer and their authorized agents and representatives access to the
Operating Sites and data processing facilities; provided, however, that Buyer's
investigation shall be under the general coordination of the Company and shall
be conducted in a manner which does not unreasonably interfere with the
Company's normal operations, customers, and employee relations.
(b) Buyer will hold, and will cause its directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information obtained pursuant to Section
4.9(a) in confidence to the extent required by, and in accordance with, the
provisions of the Confidentiality Agreement.
38
<PAGE>
Section 4.10. Regulatory Matters; Third Party Consents. (a) The parties to
this Agreement shall cooperate with each other and use their reasonable best
efforts promptly to prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals, waivers and authorizations of all
third parties and Governmental Authorities which are necessary or advisable to
consummate the transactions contemplated by this Agreement. If any required
consent of or waiver by any third party (excluding any Governmental Authority)
is not obtained prior to the Closing, or if the assignment of any Contract would
be ineffective or would adversely affect any material rights or benefits
thereunder so that Buyer would not in fact receive all such rights and benefits,
the parties hereto, each without cost, expense or liability to the other (except
as provided in Article VI hereof), shall cooperate in good faith to seek, if
possible, an alternative arrangement to achieve the economic results intended.
The parties to this Agreement will have the right to review in advance, and will
consult with the other on, in each case subject to Applicable Laws relating to
the exchange of information, all the information relating to Buyer, the Company
or the Shareholders, as the case may be, which appear in any filing made with,
or written materials submitted to, any third party or any Governmental Authority
in connection with the transactions contemplated by this Agreement; provided,
however, that nothing contained herein shall be deemed to provide any party to
this Agreement with a right to review any information provided to any
Governmental Authority on a confidential basis in connection with the
transactions contemplated hereby. The parties to this Agreement agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Authorities necessary or advisable to consummate the transactions contemplated
by this Agreement and each party will keep the others apprised of the status of
matters relating to completion of the transactions contemplated herein. The
party responsible for a filing as set forth above shall promptly deliver to the
other parties hereto evidence of the filing of all applications, filings,
registrations and notifications relating thereto (except for any confidential
portions thereof), and any supplement, amendment or item of additional
information in connection therewith (except for any confidential portions
thereof). The party responsible for a filing shall also promptly deliver to the
other parties hereto a copy of each material notice, order, opinion and other
item of correspondence received by such filing party from any Governmental
Authority in respect of any such application (except for any confidential
portions thereof). In exercising the foregoing rights and obligations, Buyer,
the Company and the Shareholders shall each act reasonably and as promptly as
practicable.
(b) Each party to this Agreement shall, upon request, furnish each other
with all information concerning themselves, directors, officers and stockholders
and such other matters as may be reasonably necessary or advisable in connection
with any statement, filing, notice or application made by or on behalf of Buyer,
the Company or any Shareholder to any Governmental Authority in connection with
the transactions contemplated by this Agreement (except to the extent that such
information would be, or relates to information that would be, filed under a
claim of confidentiality).
39
<PAGE>
(c) The parties to this Agreement shall promptly advise each other upon
receiving any communication from any Governmental Authority whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any requisite regulatory approval will not be obtained or that
the receipt of any such approval will be materially delayed.
Section 4.11. Notification of Certain Matters. (a) Each party to this
Agreement shall give prompt notice to the other parties of (i) the occurrence,
or failure to occur, of any event or existence of any condition to such party's
knowledge that has caused or is reasonably expected to cause any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate in any respect at any time after the date of this Agreement, up to
and including the Closing Date, and (ii) to such party's knowledge, any failure
on its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. In connection with the
Closing, the Company, the Shareholders and Buyer will promptly supplement or
amend the various Schedules to this Agreement, subject to the reasonable review
and approval thereof by the other parties hereto, to reflect any matter which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such Schedules or which is necessary to
correct any information in such Schedules which was or has been rendered
inaccurate thereby. The parties' right to reasonable review and approval of
supplements or amendments to the Schedules shall not include the right to reject
any supplement or amendment containing factual information which renders such
Schedules more correct or complete. No such supplement or amendment to the
Schedules or notices shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article V hereof or compliance by
any party hereto with its covenants and agreements set forth herein, or for any
other purpose hereunder, but shall be deemed to modify the Schedules and the
Agreement from and after the Closing.
(b) During the period from the date of this Agreement to the Closing Date,
the Company will, upon request, cause one or more of its designated
representatives to periodically confer with representatives of Buyer and to
report the general status of the ongoing operations of the Company. The Company
will promptly notify Buyer of any material change in the conduct of its business
or in the operation of the properties of the Company and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of significant
litigation involving the Company, and will keep Buyer fully informed of such
events.
Section 4.12. Expenses. Except as otherwise expressly provided herein,
Buyer, on the one hand, and the Shareholders, on the other hand, shall each bear
their respective direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby; provided that fees of counsel to the Company
incurred in connection with the transactions contemplated hereby that are fully
accrued on the Closing Balance Sheets may be charged to the Company.
40
<PAGE>
Section 4.13. Third Party Proposals. None of the Company, the Shareholders,
or any of their respective Affiliates and agents shall directly or indirectly
solicit, encourage or facilitate inquiries or proposals, or enter into any
definitive agreement, with respect to, or initiate or participate in any
negotiations or discussions with any Person concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or of any equity
interest in, the Company or any merger or business combination with the Company
other than as contemplated by this Agreement (each, an "Acquisition Proposal")
or furnish any information to any such Person. The Company, the Shareholders and
any of their respective Affiliates and agents shall notify Buyer within one
Business Day if any Acquisition Proposal (including the terms thereof) is
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated with, any of the Company, the
Shareholders or any of their respective Affiliates and agents. The Company and
the Shareholders shall, and shall cause their respective Affiliates, officers,
directors, employees, representatives and advisors to, immediately cease or
cause to be terminated any existing activities, including discussions or
negotiations with any parties, conducted prior to the date hereof with respect
to any Acquisition Proposal and shall seek to have all materials distributed to
such Persons by the Company, the Shareholders or any of their respective
Affiliates or agents returned to the Company promptly. None of the Company, the
Shareholders or any of their respective Affiliates shall amend, modify, waive or
terminate, or otherwise release any Person from, any standstill, confidentiality
or similar agreement or arrangement currently in effect. The Company and the
Shareholders shall cause their respective officers, directors, agents, advisors
and Affiliates to comply with the provisions of this Section 4.13.
Section 4.14. Voting of Shares. During the period from the date of this
Agreement and continuing through the Closing Date, and except as otherwise
provided herein, none of the Shareholders shall (a) deposit its Shares into a
voting trust or enter into a voting agreement or arrangement with respect to
such Shares or grant any proxy with respect thereto or (b) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect acquisition or sale, assignment, pledge, transfer or other
disposition of any of its Shares or (c) vote his shares in favor of any
Acquisition Proposal or any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company or the Shareholders hereunder or that would result in any of the
conditions set forth in Sections 5.2 or 5.3 not being fulfilled.
Section 4.15. Updating Financial Statements. The Company shall deliver to
Buyer, as soon as they are available, copies of the unaudited interim statements
of financial condition and related statements of operation, changes in
stockholders' equity and cash flows of the Company at or for the period ending
September 30, 1998; the balance sheets referred to above (including the related
notes, where applicable) shall present fairly the financial position of the
Company as of the date thereof; the other financial statements referred to above
shall present fairly (subject to recurring audit adjustments normal in nature
and amount) the consolidated results of its operations and its cash flows for
the respective fiscal periods therein set forth; each of such balance sheets and
statements (including the related notes, where applicable) shall comply in all
material respects
41
<PAGE>
with applicable accounting requirements with respect thereto; and each of such
balance sheets and financial statements (including the related notes, where
applicable) shall have been prepared in accordance with GAAP consistently
applied during the periods involved (excepted for the absence of notes).
ARTICLE V
CONDITIONS TO CONSUMMATION
OF SHARE PURCHASE
Section 5.1. Conditions to Buyer's Obligations. The obligations of Buyer to
consummate the transactions contemplated hereby shall be subject to the
following conditions, any of which may be waived in writing by Buyer:
(a) Each of the representations and warranties of the Company and the
Shareholders set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; provided, however,
that for purposes of determining the satisfaction of the condition contained in
this Section 5.1(a), no effect shall be given to any exception in such
representations and warranties relating to knowledge, materiality, or a Company
Material Adverse Effect, and such representations and warranties shall be deemed
to be true and correct in all material respects only if the failure or failures
of such representations and warranties to be so true and correct without regard
to materiality and Company Material Adverse Effect exceptions do not represent
in the aggregate a Company Material Adverse Effect;
(b) The Company and the Shareholders shall have performed and complied in
all material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by them at or prior
to the Closing Date;
(c) Each of NA and NIG shall have delivered to Buyer a certificate, dated
as of the Closing Date, signed on behalf of NA or NIG, as the case may be, by
John G. Noddings, its Managing Director confirming the satisfaction of the
conditions contained in paragraphs (a) and (b) of this Section 5.1;
(d) Each of the Shareholders shall have delivered to Buyer a certificate,
dated as of the Closing Date, signed by such Shareholder confirming the
satisfaction of the conditions contained in paragraphs (a) and (b) of this
Section 5.1;
42
<PAGE>
(e) Buyer shall have received the opinion of Gardner, Carton & Douglas,
Company's counsel, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit 5.1(e);
(f) John G. Noddings, Thomas C. Noddings and Susan C. Christoph shall each
have duly executed and delivered his or her respective Employment Agreement;
(g) Buyer shall have received the consent of Altschuler, Melvoin and
Glasser, LLP to use its audit reports relating to the Company Financial
Statements in any filings or reports required to be made by Buyer with the SEC.
(h) The Approved Managed Asset Amount shall be equal to or greater than 75%
of the Initial Managed Asset Amount.
(i) All oral agreements to which the Company is a party shall have been
terminated without liability to the Company or shall have been superseded by
written agreements containing the same material terms as such oral agreements
and in a form acceptable to Buyer.
(j) NA and NIG shall have delivered the NA Bill of Sale and Assignment and
the NIG Bill of Sale and Assignment to CC and CAMC, respectively, and shall have
executed and delivered such other instruments of conveyance, transfer and
assignment as shall be satisfactory to Buyer in its sole discretion.
(k) Thomas C. Noddings, NA and NIG, as appropriate, shall have entered into
a Reimbursement Agreement in the Form of Exhibit B-1 attached hereto (the
"Reimbursement Agreement" and, collectively, the "Reimbursement Agreements")
with each limited partnership listed in Schedule 5.1(k) and shall have paid (or
shall direct the payment out of the Closing Purchase Consideration) to the
limited partnerships named in Schedule 5.1(k) the respective amounts set forth
in Schedule 5.1(k) in accordance with the terms of the Reimbursement Agreement.
(l) NIG shall have prepared and delivered to Buyer for mailing written
notices to each of the limited partners of the limited partnerships listed in
Schedule 5.1(k) in the form attached hereto as Schedule 5.1(l).
Section 5.2. Conditions to the Company's and the Shareholders' Obligations.
The obligation of the Company or the Shareholders to consummate the transaction
contemplated hereby shall be subject to the following conditions, which may be
waived in writing by the Company and the Shareholders respectively as to
themselves:
(a) Each of the representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the
43
<PAGE>
Closing Date as though made on and as of the Closing Date; provided, however,
that for purposes of determining the satisfaction of the condition contained in
this Section 5.2(a), no effect shall be given to any exception in such
representations and warranties relating to knowledge, materiality, or a Buyer
Material Adverse Effect, and such representations and warranties shall be deemed
to be true and correct in all material respects only if the failure or failures
of such representations and warranties to be so true and correct without regard
to knowledge, materiality, and Buyer Material Adverse Effect exceptions do not
represent in the aggregate a Buyer Material Adverse Effect;
(b) Buyer shall have performed and complied in all material respects with
all agreements, covenants, obligations and conditions required by this Agreement
to be performed or complied with by it at or prior to the Closing Date;
(c) Buyer shall have delivered to the Company and Shareholders a
certificate, dated as of the Closing Date, signed on behalf of Buyer by its
Chief Financial Officer confirming the satisfaction of the conditions contained
in paragraphs (a) and (b) of this Section 5.2;
(d) The Company shall have received the opinion of either internal counsel
of the Buyer or LeBoeuf, Lamb, Greene & MacRae, L.L.P., special counsel to the
Buyer, dated as of the Closing Date, substantially in the form attached hereto
as Exhibit 5.2(d);
(e) The Buyer shall have duly executed and delivered the Employment
Agreements and they shall not have been breached or terminated by Buyer; and
(f) The Buyer shall have executed the Closing Letter Agreement in the form
of Exhibit 5.2(f).
(g) The Buyer shall have executed and delivered Assumption Agreements to NA
and NIG with respect to the Assumed Liabilities.
Section 5.3. Mutual Conditions. The obligations of each party to this
Agreement to consummate the transaction contemplated hereby shall be subject to
the following conditions, any of which may be waived in writing by both the
Company and the Shareholders respectively as to themselves, on the one hand, and
Buyer, on the other hand:
(a) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement shall be in
effect. No proceeding initiated by any Governmental Authority seeking an
injunction shall be pending. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits, restricts or makes illegal consummation
of the transactions contemplated hereby;
44
<PAGE>
(b) All consents, waivers, authorizations and approvals required from all
Governmental Authorities to consummate the transactions contemplated hereby
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired; and
(c) The parties shall have executed and delivered the agreements referred
to in Section 4.5.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Survival of Representations, Warranties and Covenants. All
representations and warranties of the parties contained in this Agreement,
including any schedules made a part hereof, and any covenants or other
agreements the performance of which is specified to occur on or prior to the
Closing or the Closing Date, shall survive the transactions contemplated hereby
for a period of two years following the Closing Date; provided, however, that
the representations and warranties of the Company and the Shareholders contained
in Section 8.1 shall survive the transactions contemplated hereby for a period
from the Closing Date until the expiration of the applicable statutory period of
limitations. Any covenant or other agreement herein any portion of the
performance of which may or is specified to occur after the Closing shall
survive the transactions contemplated hereby indefinitely or for such lesser
period of time as may be specified therein.
Section 6.2. Obligations of the Company and the Shareholders. From and
after the Closing Date, each of NA, NIG, Thomas C. Noddings and John G. Noddings
hereby agrees, jointly and severally, to indemnify, defend and hold harmless
Buyer and their respective employees, officers, partners and other Affiliates
from and against any and all Losses which any of them may suffer, incur or
sustain arising out of, attributable to, or resulting from: (a) any inaccuracy
in or breach of any of the representations or warranties of the Company or the
Shareholders made in this Agreement (it being agreed that solely for purposes of
establishing whether any matter is indemnifiable pursuant to this clause (a),
the accuracy of the representations and warranties made by the Company or the
Shareholders shall be determined without giving effect to the qualifications to
such representations and warranties concerning materiality or Company Material
Adverse Effect); (b) any breach or nonperformance of any of the covenants or
other agreements made by the Company or the Shareholders in or pursuant to this
Agreement; (c) the investment by any Investment Advisory Account in the SFX
Warrants; (d) any fees payable to Brian Smith or his employer in connection with
the transactions contemplated hereby; and (e) the Retained Liabilities,
including without limitation all Losses (including all attorneys' fees, expenses
and other costs as they are incurred) arising from the litigation styled
Noddings Investment Group, Inc. and Noddings Warrant Limited Partnership v.
Capstar Communications,
45
<PAGE>
Inc. pending in the Court of Chancery for the State of Delaware in and for New
Castle County. Without limiting the foregoing, each of Thomas C. Noddings and
John G. Noddings hereby waives any claim for contribution or indemnity from
Buyer and their respective employees, officers, partners and other Affiliates
with respect to any and all Losses incurred or to be incurred by any Indemnified
Party that are indemnified pursuant to this Section 6.2.
Section 6.3. Obligations of Buyer. From and after the Closing Date, Buyer
hereby agrees to indemnify, defend and hold harmless the Company and the
Shareholders and their respective employees, officers, directors, partners and
other Affiliates from and against any and all Losses which any of them may
suffer, incur, or sustain arising out of, attributable to, or resulting from:
(a) any inaccuracy in or breach of any of the representations and warranties of
Buyer made in this Agreement (it being agreed that solely for purposes of
establishing whether any matter is indemnifiable pursuant to this clause (a),
the accuracy of the representations and warranties made by Buyer shall be
determined without giving effect to the qualifications to such representations
and warranties concerning knowledge, or materiality, (b) any breach or
nonperformance of any of the covenants or other agreements made by Buyer in or
pursuant to this Agreement and (c) the failure to pay or discharge any of the
Assumed Liabilities.
Section 6.4. Procedure.
(a) Notice of Third Party Claims. Any Indemnified Party seeking
indemnification for any Loss or potential Loss arising from a claim
asserted by a third party against the Indemnified Party (a "Third Party
Claim") shall give written notice to the Indemnifying Party specifying in
detail the source of the Loss or potential Loss under Section 6.2 or 6.3,
as the case may be. Written notice to the Indemnifying Party of the
existence of a Third Party Claim shall be given by the Indemnified Party
promptly after notice of the potential claim; provided, however, that the
Indemnified Party shall not be foreclosed from seeking indemnification
pursuant to this Article VI by any failure to provide such prompt notice of
the existence of a Third Party Claim to the Indemnifying Party except and
only to the extent that the Indemnifying Party actually incurs an
incremental out-of-pocket expense or otherwise has been materially damaged
or prejudiced as a result of such delay.
(b) Defense. Except as otherwise provided herein, the Indemnifying
Party may elect to compromise or defend, at such Indemnifying Party's own
expense and by such Indemnifying Party's own counsel (which counsel shall
be reasonably satisfactory to the Indemnified Party), any Third Party
Claim. If the Indemnifying Party elects to compromise or defend such Third
Party Claim, it shall, within 30 days after receiving notice of the Third
Party Claim (10 days if the Indemnifying Party states in such notice that
prompt action is required), notify the Indemnified Party of its intent to
do so, and the Indemnified Party shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Third
Party Claim. If the Indemnifying Party
46
<PAGE>
elects not to compromise or defend against the Third Party Claim, or fails
to notify the Indemnified Party of its election to do so as herein
provided, or otherwise abandons the defense of such Third Party Claim, (i)
the Indemnified Party may pay (without prejudice to any of its rights as
against the Indemnifying Party), compromise or defend such Third Party
Claim (until such defense is assumed by the Indemnifying Party) and (ii)
the costs and expenses of the Indemnified Party incurred in connection
therewith shall be indemnifiable by the Indemnifying Party pursuant to the
terms of this Agreement. Notwithstanding anything to the contrary contained
herein, in connection with any Third Party Claim in which the Indemnified
Party shall reasonably conclude, based upon advice of its outside legal
counsel, that (x) there is a conflict of interest between the Indemnifying
Party and the Indemnified Party in the conduct of the defense of such Third
Party Claim or (y) there are specific defenses available to the Indemnified
Party which are different from or additional to those available to the
Indemnifying Party and which could be materially adverse to the
Indemnifying Party, then the Indemnified Party shall have the right to
direct the defense of such Third Party Claim with the participation of the
Indemnifying Party. In such an event, the Indemnifying Party shall pay the
reasonable fees and disbursements of counsel of the Indemnifying Party and
one counsel to all the Indemnified Parties. Notwithstanding the foregoing,
neither the Indemnifying Party nor the Indemnified Party may settle or
compromise any claim (however, if the sole settlement relief payable to a
third party in respect of such Third Party Claim is monetary damages that
are paid in full by the Indemnifying Party, the Indemnifying Party may
settle such claim without the consent of the Indemnified Party) over the
objection of the other; provided, however, that consent to settlement or
compromise shall not be unreasonably withheld by the Indemnified Party. In
any event, except as otherwise provided herein, the Indemnified Party and
the Indemnifying Party may each participate, at its own expense, in the
defense of such Third Party Claim. If the Indemnifying Party chooses to
defend any claim, the Indemnified Party shall make available to the
Indemnifying Party any personnel or any books, records or other documents
within its control that are reasonably necessary or appropriate for such
defense, subject to the receipt of appropriate confidentiality agreements.
(c) Settlement. If a settlement offer solely for money damages is made
by a third party claimant, and the Indemnifying Party notifies the
Indemnified Party in writing of the Indemnifying Party's willingness to
accept the settlement offer and pay the amount called for by such offer,
and the Indemnified Party declines to accept such offer, the Indemnified
Party may continue to contest such claim, free of any participation by the
Indemnifying Party, and the amount of any ultimate liability with respect
to such Indemnifiable Claim that the Indemnifying Party has an obligation
to pay hereunder shall be limited to the lesser of (i) the amount of the
settlement offer that the Indemnified Party declined to accept plus the
costs and expenses of the Indemnified Party prior to the date the
Indemnifying Party notifies the Indemnified Party of the Indemnifying
Party's
47
<PAGE>
willingness to settle or compromise such Third Party Claim and (ii) the
aggregate Losses of the Indemnified Party with respect to such claim.
(d) Miscellaneous. The procedures set forth in Section 6.4(a)-(c)
above shall apply solely with respect to Third Party Claims and shall not
be deemed to apply to, or otherwise affect or limit, an Indemnified Party's
rights under this Agreement with respect to any claim other than a Third
Party Claim.
(e) Notice of Non-Third Party Claims. Any Indemnified Party seeking
indemnification for any Loss or potential Loss arising from a claim
asserted by any party to this Agreement against the Indemnifying Party (a
"Non-Third Party Claim") shall give prompt written notice to the
Indemnifying Party specifying in detail the source of the Loss or potential
Loss under Section 6.2 or 6.3, as the case may be. Written notice to the
Indemnifying Party of the existence of a Non-Third Party Claim shall be
given by the Indemnified Party promptly after the Indemnified Party becomes
aware of the potential claim subject to the limitation of the survival
period; provided, however, that the Indemnified Party shall not be
foreclosed from seeking indemnification pursuant to this Article VI by any
failure to provide such prompt notice of the existence of a Non-Third Party
Claim to the Indemnifying Party except and only to the extent that the
Indemnifying Party actually incurs an incremental out-of-pocket expense or
otherwise has been materially damaged or prejudiced as a result of such.
Section 6.5. Survival of Indemnity. Any matter as to which a claim has been
asserted by formal notice pursuant to Section 6.4 and within the time limitation
applicable by reason of Section 6.1 that is pending or unresolved at the end of
any applicable limitation period under this Article VI or Applicable Law shall
continue to be covered by this Article VI notwithstanding any applicable statute
of limitations (which the parties hereby waive) or the expiration date set forth
in Section 6.1 until such matter is finally terminated or otherwise resolved by
the parties under this Agreement or by a court of competent jurisdiction and any
amounts payable hereunder are finally determined and paid.
Section 6.6. Minimum Losses. Except for Losses arising out of, attributable
to or resulting from any failure by the Shareholders to comply with Section 1.5,
no party shall have any right to obtain indemnification under this Agreement
until aggregate Losses of such party and its Affiliates (for purposes of this
section the Shareholders shall be deemed to be an Affiliate) and the successors
and assigns of such party and its Affiliates exceed $50,000, after which time
the aggregate amount of Losses in excess of such amount shall be recoverable in
accordance with the terms hereof.
Section 6.7. Maximum Indemnification. Except for Losses arising out of,
attributable to or resulting from any failure by Seller to comply with Section
1.5, no party shall have any right to obtain an indemnification payment under
this Agreement to the extent amounts received by such
48
<PAGE>
party and its Affiliates and the successors and assigns of such party and its
Affiliates as indemnification payments hereunder exceed the Total Purchase
Consideration minus the net amount of income taxes paid by Shareholders with
respect to the Total Purchase Consideration that is nonrefundable after giving
effect to any indemnification payments hereunder.
Section 6.8. Setoff Against Holdback Amount and Contingent Consideration.
The Buyer shall have the option of recouping all or any part of any Losses it
may suffer (in lieu of seeking any indemnification to which it is entitled under
this Section 6) by notifying the Company that the Buyer are reducing the
Contingent Consideration which may be payable to the Company pursuant to Section
1.7 hereof. In any such case, the Buyer shall specify how such reduction shall
be applied in its notice to the Company.
Section 6.9. Exclusive Remedy. The remedies set forth in this Article VI
shall be the exclusive remedies for the Buyer, the Company and the Shareholders
with respect to any Loss for which indemnification is provided to such party
hereunder but shall not preclude any assertion by Buyer or Shareholders, as the
case may be, of any causes of action for fraud or specific performance in
situations in which only equitable relief would be suitable to address the
injury or potential injury. Nothing in this Article VI shall limit the remedies
available to an Indemnified Party to enforce its right to indemnification.
ARTICLE VII
TERMINATION
Section 7.1. Termination. (a) This Agreement may be terminated prior to the
Closing as follows:
(i) by written consent of the Shareholders, the Company and Buyer;
(ii) by the Company and the Shareholders on the one hand or Buyer on
the other hand if a condition to the terminating party's obligation to
close set forth in Section 5.3 (or 5.1 or 5.2, as the respective case may
be) cannot be satisfied prior to the date set forth in Section 7.1(a)(iv)
below unless caused by the breach of any covenant or agreement under this
Agreement (x) by any of the Company or the Shareholders, in the case of a
termination by the Company and the Shareholders, or (y) by Buyer, in the
case of termination by Buyer;
(iii) by the Company and the Shareholders on the one hand or Buyer on
the other hand (provided that the terminating party is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements or
49
<PAGE>
any of the representations or warranties set forth in this Agreement on the
part of the Company or the Shareholders, in the case of a termination by
Buyer, or on the part of Buyer, in the case of a termination by the Company
and the Shareholders, which breach is not cured within thirty (30) days
following written notice given by the terminating party to the party
committing such breach, or which breach, by its nature, cannot be cured
prior to the Closing; and
(iv) by Buyer on the one hand or the Company and the Shareholders on
the other hand, if the Closing has not occurred on or before March 31,
1999;
Notwithstanding Section 7.1(a)(ii)-(iv) hereof, a party who is or whose
Affiliate is in material breach of any of its obligations or representations and
warranties hereunder shall not have the right to terminate this Agreement
pursuant to Section 7.1(a)(ii)-(iv).
(b) The termination of this Agreement shall be effectuated by the delivery
by the party terminating this Agreement to each other party of a written notice
of such termination. If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided in Section 7.2.
Section 7.2. Survival After Termination. If this Agreement is terminated in
accordance with Section 7.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become void and of no further force and
effect, without any liability on the part of any party hereto, except for the
provisions of Sections 4.8 and 4.12. Notwithstanding the foregoing, nothing in
this Section 7.2 shall relieve any party to this Agreement of liability for a
material breach of any provision of this Agreement or any agreement made as of
the date hereof or subsequent thereto pursuant to this Agreement.
ARTICLE VIII
TAX MATTERS
Section 8.1. Tax Representations. The Company and the Shareholders
represent and warrant to Buyer as of the date hereof that:
(a) Except as set forth on Schedule 8.1(a), all material Tax Returns of the
Company with respect to federal income taxes or any state Taxes required to be
filed on or before the Closing Date have been filed or will be timely filed on
or before the Closing Date in accordance with all applicable laws, and all such
Tax Returns are true, correct and complete in all material respects;
50
<PAGE>
(b) The Company has timely paid all Taxes shown to be due on the Tax
Returns described in Section 8.1(a);
(c) The Company has made adequate provision in the Company Financial
Statements for all federal income taxes and all state Taxes payable by the
Company for all periods reflected therein;
(d) Except as set forth on Schedule 8.1(d), there is no action, suit,
proceeding, investigation, assessment, adjustment, audit or claim now proposed
or pending against or with respect to the Company in respect of any Tax;
(e) Except as set forth on Schedule 8.1(e), there are no outstanding
waivers or other agreements extending any statutory periods of limitation for
the assessment of Taxes of the Company;
(f) The Tax Returns of NA and NIG with respect to federal income taxes and
Illinois income taxes through the years ended December 31, 1990 and 1991,
respectively have been examined and the examination concluded or are Tax Returns
with respect to which the applicable period for assessment, giving effect to
waivers and extensions, has expired;
(g) There are no liens for Taxes upon the assets of the Company except for
liens for current Taxes not yet due;
(h) The Company is not subject to withholding under Section 1445 of the
Code with respect to any of the transactions contemplated hereby;
(i) Except as set forth on Schedule 8.1(j), the Company has never been a
member of any affiliated, consolidated, combined or unitary group or been a
party to any tax sharing agreement or arrangement;
(j) Each of NA and NIG made a valid election to be treated as an S
corporation under the Code (and corresponding Illinois law) to which all persons
whose consent was required gave such consent and such election became effective
for each of NA and NIG's respective tax years beginning 1984 and 1987,
respectively, and each of NA and NIG is, and has been since such date, an S
corporation (as defined in Section 1361 of the Code).
51
<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.1. Amendments; Waiver. This Agreement may not be amended, altered
or modified except by written instrument executed by all the parties hereto. The
failure by any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provision nor
in any way to affect the validity of this Agreement or any part hereof or the
right of such party thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this Agreement shall be held to
be a waiver of any other or subsequent breach or noncompliance.
Section 9.2. Entire Agreement. This Agreement (including Schedules,
certificates, lists and documents referred to herein, and any documents executed
by the parties simultaneously herewith or pursuant thereto) constitutes the
entire agreement of the parties hereto, except as provided herein, and
supersedes all prior agreements and understandings, written and oral, among the
parties with respect to the subject matter hereof. The Stock Purchase Agreement
is hereby terminated in its entirety and shall be of no further force or effect.
Section 9.3. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the first paragraph of this Agreement.
52
<PAGE>
Section 9.4. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 9.5. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if (a) delivered in person, (b) mailed
by certified or registered mail (return receipt requested) or (c) delivered by
an express courier (with written confirmation) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to any Shareholder:
c/o Noddings & Associates, Inc.
Two Mid America Plaza, Suite 920
Oakbrook Terrace, Illinois 60181
Attention: John G. Noddings
If to the Company:
Noddings & Associates, Inc. and Noddings Investment Group, Inc.
Two Mid America Plaza, Suite 920
Oakbrook Terrace, Illinois 60181
Attention: John G. Noddings
In each case with copies to:
Gardner, Carton & Douglas
321 North Clark Street
Suite 3400
Chicago, Illinois 60610
Attention: Stephen A. Tsoris
53
<PAGE>
If to Buyer:
Conning & Company and Conning Asset Management Company
c/o Conning Corporation
700 Market Street, Suite H-26
St. Louis, MO 63101
Telecopy: (314) 444-0727
Attention: Fred M. Schpero
With copies to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
Goodwin Square, 13th Floor
225 Asylum Street
Hartford, CT 06103
Telecopy: (860) 293-3555
Attention: Thomas L. Fairfield
Section 9.6. Binding Effect; Persons Benefiting; No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Nothing in this Agreement is
intended or shall be construed to confer upon any entity or person other than
the parties hereto and their respective successors and permitted assigns any
right, remedy or claim under or by reason of this Agreement or any part hereof.
This Agreement may not be assigned by any of the parties hereto without the
prior written consent of each of the other parties hereto; provided that the
Company may assign any of its rights hereunder to the Shareholders, except that
no assignment by the Company shall relieve the Company of any of its obligations
hereunder.
Section 9.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement, it being understood that
all of the parties need not sign the same counterpart.
Section 9.8. Governing Law. THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE
PARTIES AND THE ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED BY
AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF MISSOURI, WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS
THEREOF.
Section 9.9. Arbitration. Any claim or dispute arising out of or relating
to this Agreement which is not settled by the parties within sixty days after
notice thereof is first given
54
<PAGE>
by any party to the others shall be finally settled under the Commercial Rules
of the American Arbitration Association (the "AAA"). The arbitration shall be
conducted in the City of St. Louis, Missouri, by a panel of three arbitrators,
selected by the AAA. Any arbitration hereunder shall be governed by the Untied
States Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award rendered
by the arbitrator may be entered by any court having jurisdiction thereof.
Section 9.10. Specific Performance. The Company, the Shareholders and Buyer
each acknowledge that, in view of the uniqueness of its business and the
transactions contemplated by this Agreement, each party would not have an
adequate remedy at law for money damages in the event that the covenants to be
performed after the Closing Date have not been performed in accordance with
their terms, and therefore agree that the other parties shall be entitled to
specific enforcement of the terms hereof in addition to indemnification
hereunder and any other equitable remedy to which such parties may be entitled.
Section 9.11. WAIVER OF JURY TRIAL AND PUNITIVE DAMAGES. THE PARTIES TO
THIS AGREEMENT AGREE TO WAIVE ANY RIGHT TO A JURY TRIAL AS TO ALL DISPUTES AND
ANY RIGHT TO SEEK PUNITIVE DAMAGES.
Section 9.12. Guaranty. Conning Corporation hereby guarantees the prompt
performance by Buyer of their covenants and obligations hereunder. In the event
of non-performance by Buyer of any of their covenants or obligations hereunder,
Conning Corporation shall promptly perform such covenants and obligations.
[THE REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be executed as of the date first above written.
BUYER: COMPANY:
CONNING & COMPANY NODDINGS & ASSOCIATES, INC.
By: By:
Name: Name:
Title: Title:
CONNING ASSET MANAGEMENT NODDINGS INVESTMENT GROUP, INC.
COMPANY
By: By:
Name: Name:
Title: Title:
GUARANTOR: SHAREHOLDERS:
CONNING CORPORATION
By:
Name: JOHN G. NODDINGS
Title:
THOMAS C. NODDINGS
EDNA F. NODDINGS
56
<PAGE>
EXHIBITS
57
<PAGE>
SCHEDULES
58
Exhibit 23.1
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement of
Conning Corporation on Form S-8 (File No. 333-42781) of our reports, each dated
May 1, 1998, on our audit of the financial statements of Noddings Investment
Group, Inc. and Noddings & Associates, Inc. as of March 31, 1998 and for the
year then ended, which reports are included in this Current Report on Form 8-K.
Chicago, Illinois /s/ Altschuler, Melvoin and Glasser, LLP
December 30, 1998
