<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1997
REGISTRATION NO. 333-39585
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OPPENHEIMER CAPITAL, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8290 13-3412614
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
800 NEWPORT CENTER DRIVE, SUITE 100
NEWPORT BEACH, CALIFORNIA 92660
(714) 717-7022
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KENNETH M. POOVEY, ESQUIRE
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
OPPENHEIMER CAPITAL, L.P.
800 NEWPORT CENTER DRIVE, SUITE 100
NEWPORT BEACH, CALIFORNIA 92660
(714) 717-7022
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPY TO:
DAVID C. FLATTUM, ESQUIRE
LATHAM & WATKINS
650 TOWN CENTER DRIVE
COSTA MESA, CA 92626
(714) 540-1235
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
December 31, 1997
If the only securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE(1)
<TABLE>
<CAPTION>
======================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units of limited partnership
interest........................ 20,258,372(3) $32.91(2) $666,703,023 $64,752(1)
======================================================================================================
</TABLE>
(1) Registration fee has been calculated in respect of 6,669,608 units of
limited partner interest because the fee in respect of the remaining
13,588,764 units of limited partner interest has been previously paid.
(2) Pursuant to Rule 457(f)(1) and 457(c), the value of the Partnership Units
has been calculated by reference to the $32.91 average of the low ($32.44)
and high ($33.38) price of Class A LP Units of Limited Partner Interest in
PIMCO Advisors L.P. (which will be exchanged for Units of Limited Partner
Interest in Oppenheimer Capital, L.P. on a one-for-one basis) quoted on the
New York Stock Exchange Composite Tape on December 9, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
[PIMCO ADVISORS LETTERHEAD]
December , 1997
Dear PIMCO Advisors L.P. Public Unitholder:
As you may know, we recently completed a combination of the businesses of
PIMCO Advisors L.P. ("PIMCO Advisors") and Oppenheimer Capital. In the
combination, Oppenheimer Capital, L.P. ("Opcap LP"), a New York Stock Exchange
listed partnership, received 26.1 million PIMCO Advisors units in exchange for
its interest in Oppenheimer Capital. As a result of the combination, Oppenheimer
Capital became a wholly-owned subsidiary of PIMCO Advisors, and Opcap LP's
publicly traded limited partner units became an indirect investment in PIMCO
Advisors. The Oppenheimer Capital merger has resulted in two public investment
vehicles in PIMCO Advisors: direct investments in PIMCO Advisors and indirect
investments through Opcap LP.
You may also know that due to recent legislation, publicly traded
partnerships like PIMCO Advisors and Opcap LP will become subject to a tax on
their gross income from active businesses after December 31, 1997.
As a result of that legislation and pursuant to the provisions of our
partnership agreement, effective December 31, 1997 the public ownership of PIMCO
Advisors and Opcap LP is being combined into a single entity, Opcap LP, which
will change its name to PIMCO Advisors Holdings L.P. In the restructuring, all
of your PIMCO Advisors limited partner units will be contributed to Opcap LP,
and you will be issued an equal number of Opcap LP limited partner units and
become a limited partner in Opcap LP. After the restructuring, each Opcap LP
unit will represent indirectly the same investment you now have in one PIMCO
Advisors unit.
The primary purposes of the restructuring are to (i) permit Public
Unitholders in PIMCO Advisors to continue to maintain an investment in a
publicly traded entity while consolidating all public ownership of PIMCO
Advisors into one entity and (ii) allow PIMCO Advisors to become a private
partnership, which will not be subject to the new tax on its gross income from
active businesses. Management believes that there are several benefits
associated with combining the public ownership in the PIMCO Advisors enterprise
into a single entity. The number of public holders in the one entity will be
greater than the number in either Opcap LP or PIMCO Advisors individually, which
should have a favorable impact on market liquidity. Additionally, the
combination will simplify the organizational structure of the PIMCO Advisors
business and reduce confusion in the marketplace created by two publicly traded
securities representing essentially the same investment. Finally, having a
single public entity will substantially reduce administrative costs. The
restructuring also will benefit the nonpublic unitholders of PIMCO Advisors
because they will retain an interest in a partnership (PIMCO Advisors) that will
not be subject to a new 3.5% federal tax that will be imposed after December 31,
1997, on the gross income of certain publicly traded partnerships, including
Opcap LP.
Because each Opcap LP limited partner unit represents an indirect
investment in one PIMCO Advisors unit, your economic interest in the PIMCO
Advisors business will not be altered or diminished in any way. Also, since our
general partner will remain the controlling general partner of both
partnerships, the restructuring will not result in a change in the management of
your investment.
YOU DO NOT NEED TO TAKE ANY ACTION FOR THE RESTRUCTURING TO OCCUR AND YOU
ARE NOT BEING ASKED TO VOTE ON ANY ITEMS. On December 31, 1997, you will
automatically become a limited partner of Opcap LP and cease to be a limited
partner of PIMCO Advisors. A letter of transmittal to be used for surrendering
your PIMCO Advisors unit certificates in exchange for Opcap LP unit certificates
will be sent to you after December 31, 1997.
The restructuring is intended to be a tax-free transaction for holders of
PIMCO Advisors units. For further information regarding the tax consequences of
the restructuring, you should review the discussion of federal tax matters
included in the accompanying Prospectus.
The accompanying Prospectus gives detailed information about Opcap LP and
the restructuring. We encourage you to read it carefully.
Sincerely yours,
William D. Cvengros
Chief Executive Officer
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 10, 1997
PROSPECTUS
OPPENHEIMER CAPITAL, L.P.
800 NEWPORT CENTER DRIVE, SUITE 100
NEWPORT BEACH, CALIFORNIA 92660
ISSUANCE OF UP TO 20,258,372 UNITS OF LIMITED PARTNER INTEREST OF
OPPENHEIMER CAPITAL, L.P. TO UNITHOLDERS OF PIMCO ADVISORS L.P.
This Prospectus is being furnished to the Public Unitholders (as defined in
the partnership agreement of PIMCO Advisors L.P. ("PIMCO Advisors")) of units of
limited partner interest ("PIMCO Advisors LP Units") in PIMCO Advisors in
connection with the restructuring (the "Restructuring") of the public ownership
of PIMCO Advisors. As of December 31, 1997 (the "Effective Date"), all PIMCO
Advisors LP Units held by Public Unitholders will be contributed by the general
partners of PIMCO Advisors, on behalf of each Public Unitholder, to Oppenheimer
Capital, L.P. (the "Partnership") in return for the issuance to the Public
Unitholders of an equal number of units of limited partner interest in the
Partnership ("Partnership Units"). This action is being taken pursuant to the
power granted by the PIMCO Advisors Amended and Restated Agreement of Limited
Partnership (the "PIMCO Advisors Partnership Agreement").
The Partnership is a Delaware limited partnership which as its sole
business holds general partner units ("PIMCO Advisors GP Units") in PIMCO
Advisors. Each Partnership Unit represents an indirect interest in one PIMCO
Advisors GP Unit. PIMCO Advisors GP Units are entitled to the same economic
benefits as PIMCO Advisors LP Units. Accordingly, after the Restructuring,
Public Unitholders will hold the same economic interest in PIMCO Advisors as
they did before the transaction. Following the Effective Date, all trading in
the PIMCO Advisors Class A LP Units on the New York Stock Exchange ("NYSE") will
cease, and thereafter the Partnership Units will be the sole publicly-traded
investment in the PIMCO Advisors business.
On the Effective Date, Public Unitholders will automatically cease to be
limited partners of PIMCO Advisors and will become limited partners of the
Partnership. Thereafter, Public Unitholders of record on the Effective Date may
receive certificates representing Partnership Units upon surrender of their
PIMCO Advisors LP Unit certificates in accordance with the instructions provided
herein. Public Unitholders will receive one Partnership Unit for each PIMCO
Advisors LP Unit they hold on the Effective Date. Nonpublic Unitholders (as
defined in the PIMCO Advisors Partnership Agreement) will continue to maintain a
direct interest in PIMCO Advisors.
Partnership Units will be traded on the NYSE under the symbol "OCC" until
the Effective Date and under the symbol "PA" thereafter. In addition, it is
expected that after the Restructuring, the Partnership will change its name to
PIMCO Advisors Holdings L.P. PIMCO Advisors Class A LP Units are expected to
continue to be traded on the NYSE until the Effective Date under the symbol "PA"
and thereafter will not be publicly traded. On November 4, 1997, the last
trading day prior to the execution of the agreement and plan of merger relating
to the Oppenheimer Capital Merger (as defined herein), the closing sale prices
for the Partnership Units and PIMCO Advisors Class A LP Units on the NYSE were
$52 3/16 and $30 3/8, respectively. On December 9, 1997, the closing sales
prices for the Partnership Units and PIMCO Advisors Class A LP Units on the NYSE
were $54 3/8 and $32 15/16, respectively.
WE CALL YOUR ATTENTION TO THE FACTORS SPECIFIED UNDER THE CAPTION "RISK
FACTORS AND OTHER IMPORTANT CONSIDERATIONS" BEGINNING ON PAGE 8, WHICH ADDRESS
CERTAIN CONSIDERATIONS RELATING TO AN INVESTMENT IN THE PARTNERSHIP.
NO VOTE OF UNITHOLDERS IS REQUIRED IN CONNECTION WITH THE RESTRUCTURING. NO
PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO SEND A PROXY.
No person is authorized to give any information or to make any
representation not contained in the Prospectus, and any information or
representation not contained herein must not be relied upon as having been
authorized by PIMCO Advisors or the Partnership. This Prospectus does not
constitute an offer of any securities, and does not constitute a solicitation of
a consent or an offer to sell to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation. Neither the delivery of this
Prospectus nor any issuances made hereunder shall, under any circumstances,
create any implication that there has been no change in the assets, properties
or affairs of PIMCO Advisors or the Partnership since the date hereof or that
information set forth herein is correct as of any time subsequent.
------------------------
THE SECURITIES ISSUABLE PURSUANT TO THIS PROSPECTUS HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is December , 1997
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................................................................... 1
RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS....................................... 8
Risks Relating to Ownership of PIMCO Advisors through the Partnership............... 8
Other Risks......................................................................... 10
THE RESTRUCTURING..................................................................... 11
Introduction........................................................................ 11
Terms of the Restructuring.......................................................... 11
Reasons for the Restructuring....................................................... 12
Effects of the Restructuring........................................................ 12
Existing Economic Interests of the Partners......................................... 13
Authority of the General Partner to Effect the Restructuring........................ 14
Background of the General Partners' Restructuring Authority......................... 14
Interests of Certain Persons in the Restructuring................................... 15
Accounting Treatment................................................................ 15
EXCHANGE OF PARTNERSHIP UNIT CERTIFICATES............................................. 15
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS.................................... 16
Overview of Transactions............................................................ 16
Oppenheimer Capital, L.P............................................................ 16
PIMCO Advisors L.P.................................................................. 17
THE PARTNERSHIP....................................................................... 27
General............................................................................. 27
Recent Developments................................................................. 27
BUSINESS OF THE PARTNERSHIP........................................................... 32
Overview............................................................................ 32
General............................................................................. 32
Primary Markets and Strategy for Growth............................................. 33
Investment Management Firms......................................................... 34
PIMCO Advisors Mutual Funds......................................................... 42
Regulation.......................................................................... 43
Competition......................................................................... 44
Properties.......................................................................... 44
Legal Proceedings................................................................... 45
MANAGEMENT OF THE PARTNERSHIP......................................................... 46
Management of the Partnership....................................................... 46
Management of PIMCO Advisors........................................................ 46
Executive Compensation.............................................................. 52
Compensation of Board Members....................................................... 53
Compensation of General Partner..................................................... 53
Compensation Pursuant to Contract................................................... 53
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions........................................................................ 54
Oppenheimer Capital, L.P. 1997 Unit Incentive Plan.................................. 54
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Executive Deferred Compensation Plan................................................ 55
RELATIONSHIP BETWEEN THE PARTNERSHIP AND PIMCO ADVISORS............................... 56
Operating Agreement................................................................. 56
Exchange Rights..................................................................... 56
Expense Reimbursement............................................................... 57
CERTAIN RELATIONSHIPS AND TRANSACTIONS................................................ 57
PGP Indebtedness.................................................................... 57
Withdrawal and Removal of a General Partner of the Partnership or PIMCO Advisors.... 58
Indemnification..................................................................... 58
Contribution Agreement.............................................................. 59
Registration Rights Agreements...................................................... 59
RECENT UNIT PRICES AND DISTRIBUTIONS.................................................. 61
SELECTED FINANCIAL DATA OF OPPENHEIMER CAPITAL, L.P................................... 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF THE PARTNERSHIP.................................................................. 65
The Partnership..................................................................... 65
Oppenheimer Capital................................................................. 66
SELECTED CONSOLIDATED FINANCIAL DATA OF PIMCO ADVISORS................................ 73
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF PIMCO ADVISORS................................................................... 75
Overview............................................................................ 75
Results of Operations............................................................... 75
Capital Resources and Liquidity..................................................... 82
Economic Factors.................................................................... 83
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE PARTNERSHIP..... 84
DESCRIPTION OF THE PARTNERSHIP AGREEMENT.............................................. 86
COMPARISON OF PIMCO ADVISORS LIMITED PARTNER UNITS AND PARTNERSHIP UNITS.............. 90
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................... 96
Tax Consequences of the Restructuring............................................... 96
Tax Classification of the Partnership............................................... 96
Tax Allocations..................................................................... 99
Certain Limitations on Losses and Deductions........................................ 100
Disposition of Partnership Units.................................................... 100
Backup Withholding.................................................................. 101
Certain Additional Tax Considerations for Holders of Partnership Units.............. 101
Special Status Taxpayers............................................................ 101
State and Local Taxes............................................................... 102
LEGAL MATTERS......................................................................... 102
EXPERTS............................................................................... 102
AVAILABLE INFORMATION................................................................. 103
INDEX TO FINANCIAL STATEMENTS......................................................... F-1
</TABLE>
ii
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere or incorporated by reference
in this Prospectus and the Annexes hereto. Public Unitholders are urged to read
this Prospectus and the Annexes in their entirety and should carefully consider
the information set forth under the heading "Risk Factors and Other
Considerations." Unless otherwise indicated, all unit information reflects the
completion of the Oppenheimer Capital Merger and the 1.67-for-one split of the
Partnership Units described in "The Partnership."
THE PARTNERSHIP
The Partnership is a Delaware limited partnership which as its sole
business holds 26.1 million PIMCO Advisors GP Units, representing an
approximately 23.9% interest in PIMCO Advisors.
PIMCO Advisors is one of the nation's largest investment management firms
with approximately $190 billion of assets under management at October 31, 1997
(as adjusted to include the assets under management of Oppenheimer Capital).
PIMCO Advisors offers a broad range of investment management services and styles
to institutional and retail investors, combining the fixed income-oriented
investment management operations of Pacific Investment Management Company
("Pacific Investment Management"), the equity-oriented operations of Oppenheimer
Capital and five smaller affiliated domestic and international equity investment
management firms, and mutual fund operations. PIMCO Advisors provides investment
management services primarily to (i) large institutional clients through
separate accounts, (ii) smaller institutional clients and financial
intermediaries through the institutional share classes of the PIMCO Funds
(described below) and (iii) retail investors through the retail share classes of
the PIMCO Funds, which are sold principally through broker-dealers.
PIMCO Advisors strategy is to pursue growth by marketing the investment
management expertise, performance record and reputation of its seven
institutional investment management firms (the "Investment Management Firms").
The Investment Management Firms are six Delaware partnerships: Pacific
Investment Management, Oppenheimer Capital, Columbus Circle Investors ("CCI"),
Cadence Capital Management ("Cadence"), NFJ Investment Group ("NFJ") and
Parametric Portfolio Associates ("Parametric") and one United Kingdom limited
partnership, Blairlogie Capital Management ("Blairlogie").
The seven Investment Management Firms are structured as separate
subsidiaries. PIMCO Advisors believes this decentralized structure enables the
Investment Management Firms to implement their own distinct investment
strategies and philosophies, providing financial and other incentives for the
managers of each of the firms to render superior performance and client service.
The Managing Directors of the Investment Management Firms have a significant
profits interest in their respective Investment Management Firms, and a number
of them hold substantial direct and indirect economic interests in PIMCO
Advisors.
The Partnership's business results from the November 30, 1997 merger of
Oppenheimer Capital with a subsidiary of PIMCO Advisors (the "Oppenheimer
Capital Merger"). Prior to the Oppenheimer Capital Merger, the Partnership's
only asset was a 67.6% interest in Oppenheimer Capital. In the Oppenheimer
Capital Merger, PIMCO Advisors acquired from the Partnership the remaining 67.6%
general partner interest in Oppenheimer Capital it did not own, as a result of
which Oppenheimer Capital became a wholly-owned subsidiary of PIMCO Advisors and
the Partnership received 26.1 million PIMCO Advisors GP Units.
PIMCO Partners, G.P. ("PGP") is the sole general partner of the Partnership
and is the controlling general partner of PIMCO Advisors.
1
<PAGE> 7
THE RESTRUCTURING
The Restructuring.................. Under the authority conferred by the
PIMCO Advisors Partnership Agreement, the
general partners, on behalf of each
Public Unitholder, will contribute the
PIMCO Advisors LP Units held by the
Public Unitholders to the Partnership. In
exchange for the PIMCO Advisors LP Units,
the Partnership will issue an equal
number of Partnership Units to the Public
Unitholders. Each Partnership Unit
represents an indirect investment in a
single PIMCO Advisors unit. Accordingly,
Public Unitholders will continue to hold
the same economic interest in PIMCO
Advisors as they did before the
Restructuring. Nonpublic Unitholders will
continue to maintain a direct interest in
PIMCO Advisors.
Distribution Ratio................. Each Public Unitholder will receive one
Partnership Unit for each PIMCO Advisors
LP Unit held as of the Effective Date.
Effective Date..................... Following close of business on December
31, 1997.
Total Number of Partnership Units
to be Issued....................... Up to 20,258,372 million Partnership
Units.
Trading Market..................... Partnership Units are currently listed
for trading on the NYSE under the symbol
"OCC" and are expected to be listed for
trading under the symbol "PA" after the
Effective Date.
Risk Factors....................... Unitholders are referred to the matters
discussed in "Risk Factors and Other
Important Considerations."
Primary Purposes of the
Restructuring...................... The primary purposes of the Restructuring
are to (i) permit Public Unitholders in
PIMCO Advisors to continue to maintain an
investment in a publicly traded entity
while consolidating all public ownership
of PIMCO Advisors into one entity and
(ii) allow PIMCO Advisors to become a
private partnership, which will not be
subject to the new tax on its gross
income from active businesses. Management
believes that there are several benefits
associated with combining the public
ownership in the PIMCO Advisors
enterprise into a single entity. The
number of public holders in the one
entity will be greater than the number in
either the Partnership or PIMCO Advisors
individually, which should have a
favorable impact on market liquidity.
Additionally, the combination will
simplify the organizational structure of
the PIMCO Advisors business and reduce
confusion in the marketplace created by
two publicly traded securities
representing essentially the same
investment. Finally, having a single
public entity will substantially reduce
administrative costs. The Restructuring
also will benefit the Nonpublic
Unitholders of PIMCO Advisors because
they will retain an interest in a
partnership (PIMCO Advisors) that will
not be subject to the new federal tax on
gross income that
2
<PAGE> 8
will apply to certain publicly traded
partnerships, including the Partnership,
after December 31, 1997. See "The
Restructuring -- Reasons for the
Restructuring."
Tax Consequences................... The Restructuring is intended to be a
tax-free transaction for the Public
Unitholders. Public Unitholders are,
however, encouraged to seek the advice of
their tax advisor to determine whether
there are any tax consequences that
affect them. See "Certain Federal Income
Tax Consequences."
Relationship with PIMCO Advisors... Following the Restructuring, the
Partnership will remain a general partner
of PIMCO Advisors. The relationship
between the Partnership and PIMCO
Advisors is governed by the PIMCO
Advisors Partnership Agreement and an
operating agreement (the "Operating
Agreement") between the two partnerships
which, among other things, provides for
the maintenance of a one-for-one exchange
ratio between the Partnership Units and
the PIMCO Advisors units held by the
Partnership (excluding the PIMCO Advisors
units underlying the general partner
interest in the Partnership), and
provides for certain exchange rights and
registration rights for Nonpublic
Unitholders. See "Relationship Between
the Partnership and PIMCO
Advisors -- Operating Agreement."
Distribution Policy................ The Partnership will make quarterly
distributions of available cash on each
Partnership Unit. The distributions on
each Partnership Unit will generally be
equal in amount to the distributions
received on the underlying PIMCO Advisors
units held by the Partnership less any
applicable taxes because all of the
expenses (other than taxes) of the
Partnership will be paid by PIMCO
Advisors.
3
<PAGE> 9
STRUCTURE
STRUCTURE -- THE RESTRUCTURING AND AFTER THE RESTRUCTURING
4
<PAGE> 10
SUMMARY FINANCIAL DATA OF OPPENHEIMER CAPITAL, L.P.
The following table sets forth summary financial data of the Partnership
(retroactively restated to reflect a 1.67 to 1 unit split effective December 1,
1997) and Oppenheimer Capital for the three months ended July 31, 1997 and 1996,
and each of the five years ended April 30, 1997. This information should be read
in conjunction with the Financial Statements of Oppenheimer Capital, L.P. and
the Consolidated Financial Statements of Oppenheimer Capital and the related
notes thereto included elsewhere in this Prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations of Oppenheimer
Capital, L.P."
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL, L.P.
-----------------------------------------------------------------------------------
FOR THE THREE
MONTHS
ENDED JULY 31, FOR THE YEARS ENDED APRIL 30,
------------------- -----------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- -------- -------- ------- ------- -------
(UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATING DATA:
Revenues............................... $19,585(3) $12,280 $ 56,046(1) $ 61,316(1) $34,282 $35,091 $30,022
Expenses............................... 685 685 2,720 2,720 3,461 4,038 3,704
------- ------- ------- ------- ------- ------- -------
Net income............................. $18,900(3) $11,595 $ 53,326(1) $ 58,596(1) $30,821 $31,053 $26,318
======= ======= ======= ======= ======= ======= =======
Net income per unit.................... $ 0.72(3) $ 0.45 $ 2.06(1) $ 2.28(1) $ 1.21 $ 1.22 $ 1.04
Distributions declared per unit........ $ 0.57 $ 0.39 $ 2.10(2) $ 1.90(2) $ 1.30 $ 1.28 $ 1.16
Weighted average number of units
outstanding.......................... 25,763 25,656 25,663 24,457 25,277 25,122 25,065
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
JULY 31, -----------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA AT:
Total assets........................... $118,313 $116,149 $110,099 $96,633 $98,116 $98,365
Total liabilities...................... 14,806 17,858 12,713 10,321 10,319 9,683
------- -------- -------- ------- ------- -------
Partners' capital...................... $103,507 $ 98,291 $ 97,386 $86,312 $87,797 $88,682
======== ======== ======= ======= =======
</TABLE>
- ---------------
(1) Includes revenues and a gain on Quest sale of $1.8 million, or $.07 per unit
in fiscal 1997 and $17.7 million, or $.69 per unit in fiscal 1996.
(2) Includes a special distribution related to the Quest sale of $.06 per unit
in fiscal 1997 and $.33 in fiscal 1996.
(3) Includes revenues and a gain on Quest sale of $2.8 million, or $.11 per
unit.
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL
--------------------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED JULY 31, FOR THE YEARS ENDED APRIL 30,
-------------------- --------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- ------- -------- -------- -------- -------- -------
(UNAUDITED) (AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATING DATA:
Revenues.................................. $ 55,043 $41,075 $181,974 $158,215 $129,912 $112,290 $94,733
Expenses.................................. 30,302 23,441 103,064 95,551 83,066 64,683 54,707
------- ------- -------- -------- -------- -------- -------
Operating Income.......................... 24,741 17,634 78,910 62,664 46,846 47,607 40,026
Gain on Quest sale(1)..................... 4,374 -- 2,806 27,725 -- -- --
------- ------- -------- -------- -------- -------- -------
Income before income taxes and minority
interest................................ $ 29,115 $17,634 $ 81,716 $ 90,389 $ 46,846 $ 47,607 $40,026
======= ======= ======== ======== ======== ======== =======
Assets under management at period end (in
billions)............................... $ 60.8 $ 40.4 $ 51.2 $ 40.6 $ 31.8 $ 29.4 $ 26.4
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
JULY 31, --------------------------------------------------------
1997 1997 1996 1995 1994 1993
-------------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA AT:
Total assets............................. $103,055 $ 93,019 $ 76,338 $ 56,129 $ 43,034 $37,677
Total liabilities........................ 54,356 53,044 41,462 41,582 30,557 27,830
Minority interest........................ 396 277 174 87 25 18
-------- -------- -------- -------- -------- -------
Partners' capital........................ $ 48,303 $ 39,698 $ 34,702 $ 14,460 $ 12,452 $ 9,829
======== ======== ======== ======== ======== =======
</TABLE>
- ---------------
(1) Reflects the gain realized by Oppenheimer Capital on the sale of the
investment advisory and other contracts and business relationship for its
twelve Quest for Value mutual funds to Oppenheimer Funds, Inc., on November
22, 1995.
5
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL DATA OF PIMCO ADVISORS
The following table sets forth summary consolidated financial data of PIMCO
Advisors for the nine months ended September 30, 1997 and 1996, and each of the
five years ended December 31, 1996. PIMCO Advisors and its subsidiaries were
formed on November 15, 1994, when Pacific Financial Asset Management Corporation
("PFAMCo") merged certain of its investment management businesses and
substantially all of its assets (the "PFAMCo Group") into Thomson Advisory Group
L.P. ("TAG L.P.") (the "Consolidation"). Under generally accepted accounting
principles, the Consolidation is accounted for as an acquisition of TAG L.P. by
PFAMCo Group, even though the legal form was the reverse. Therefore, the
historical financial statements include the operations of PFAMCo Group, in its
corporate form, prior to the Consolidation and the combined results of PIMCO
Advisors, in its partnership form, for the period since the Consolidation. This
information should be read in conjunction with the Consolidated Financial
Statements of PIMCO Advisors L.P. and Subsidiaries and the related notes thereto
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations of PIMCO Advisors."
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues...................... $344,210 $287,161 $392,024 $323,014 $180,263 $165,856 $120,155
Operating expenses.................. 232,572 190,975 261,978 215,271 145,220 131,447 93,011
Amortization of intangibles, options
and restricted units.............. 31,000 30,852 41,171 42,723 6,202 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income.................... 80,638 65,334 88,875 65,020 28,841 34,409 27,144
Other income, net................... 3,249 2,401 3,454 3,964 1,083 864 1,115
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense.... 83,887 67,735 92,329 68,984 29,924 35,273 28,259
Income tax expense.................. 1,226 834 1,201 517 10,669 15,556 11,405
-------- -------- -------- -------- -------- -------- --------
Net income.......................... $ 82,661 $ 66,901 $ 91,128 $ 68,467 $ 19,255 $ 19,717 $ 16,854
======== ======== ======== ======== ======== ======== ========
Net income allocated to:
General Partner and Class A
Limited Partner units........... $ 45,329 $ 39,421 $ 52,916 $ 46,655 $ 4,976
Class B Limited Partner units..... 37,332 27,480 38,212 21,812 1,128
Pre-Consolidation................. -- -- -- -- 13,151
-------- -------- -------- -------- --------
Total............................... $ 82,661 $ 66,901 $ 91,128 $ 68,467 $ 19,255
======== ======== ======== ======== ========
NET INCOME PER UNIT(1):
General Partner and Class A Limited
Partner units..................... $ 1.06 $ 0.96 $ 1.29 $ 1.16 $ 0.12
Class B Limited Partner units....... $ 1.06 $ 0.76 $ 1.05 $ 0.59 $ 0.03
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING (POST-CONSOLIDATION):
Units outstanding:
General Partner................... 800 800 800 800 800
Class A Limited Partner........... 40,146 40,132 40,135 40,108 40,018
Class B Limited Partner........... 32,983 32,961 32,961 32,961 32,961
-------- -------- -------- -------- --------
Total............................... 73,929 73,893 73,896 73,869 73,779
Weighted average effect of unit
options........................... 3,906 2,915 3,119 1,684 984
-------- -------- -------- -------- --------
Total............................... 77,835 76,808 77,015 75,553 74,763
======== ======== ======== ======== ========
DIVIDENDS/DISTRIBUTIONS............. $104,042 $ 97,560 $131,604 $ 89,613 $ 24,384 $ 22,158 $ 12,950
======== ======== ======== ======== ======== ======== ========
FINANCIAL CONDITION AT END OF
PERIOD:
Total assets(2)..................... $365,728 $373,545 $358,500 $369,592 $379,708 $ 70,388 $ 43,189
Total liabilities................... 86,752 68,802 62,257 38,035 34,179 44,567 17,686
-------- -------- -------- -------- -------- -------- --------
Total Partners' capital(3).......... $278,976 $304,743 $296,243 $331,557 $345,529 $ 25,821 $ 25,503
======== ======== ======== ======== ======== ======== ========
</TABLE>
6
<PAGE> 12
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEARS ENDED DECEMBER 31,
ENDED SEPTEMBER 30, --------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER STATISTICS:
Assets under management (in
millions)......................... $130,632 $104,540 $110,022 $ 95,182 $ 72,175 $ 57,182 $ 43,737
Operating Profit Available for
Distribution(1)................... 113,830 97,763 132,314 111,205 12,306 -- --
Cash flows provided by operating
activities........................ 112,502 119,882 140,446 86,921 25,852 23,620 9,309
Cash flows (used in) provided by
investing activities.............. (16,598) (2,983) (2,446) (17,771) 22,401 (436) (1,149)
Cash flows used in financing
activities........................ (104,042) (97,560) (131,604) (89,238) (2,549) (14,900) (15,800)
</TABLE>
- ---------------
(1) Computed on earnings following the Consolidation. Operating Profit Available
for Distribution is defined by the PIMCO Advisors Partnership Agreement as
the sum of net income plus non-cash charges from the amortization of
intangible assets, non-cash compensation expenses arising from option and
restricted unit plans, and losses of any subsidiary which is not a
flow-through entity for tax purposes.
(2) Upon completion of the Consolidation, approximately $284.9 million of
intangible assets were created. See Note 3 in the Notes to the Consolidated
Financial Statements of PIMCO Advisors L.P. and Subsidiaries.
(3) Stockholders' equity before the Consolidation.
7
<PAGE> 13
RISK FACTORS AND OTHER IMPORTANT CONSIDERATIONS
Each Public Unitholder should carefully read this entire Prospectus,
including the Exhibits and the documents incorporated herein by reference, and
should give particular attention to the considerations discussed below.
When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "intend" and similar expressions are
intended to identify forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), regarding events, conditions and financial trends that may affect the
Partnership's future plans of operations, business strategy, results of
operations and financial position. Prospective investors are cautioned that any
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may differ materially
from those included within the forward-looking statements as a result of various
factors. Factors that could cause or contribute to such differences include, but
are not limited to, those described below under "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Partnership"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations of PIMCO Advisors" and elsewhere in this Prospectus.
RISKS RELATING TO OWNERSHIP OF PIMCO ADVISORS THROUGH THE PARTNERSHIP
The Partnership's operating income is derived from its investment in PIMCO
Advisors GP Units. Therefore, an investment in the Partnership Units will
effectively involve the same risks as the Public Unitholders' current investment
in PIMCO Advisors LP Units. These risks include the following:
RELIANCE ON KEY PERSONNEL AND PROFIT-SHARING PAYMENTS
The ability of PIMCO Advisors and the Investment Management Firms to
attract and retain clients is dependent to a large extent on their ability to
attract and retain key employees, including skilled portfolio managers. Certain
of PIMCO Advisors employees are responsible for significant client
relationships. In particular, PIMCO Advisors depends, to a significant extent,
on the services of William H. Gross of Pacific Investment Management and key
portfolio managers of each of the other Investment Management Firms. Mr. Gross
is one of the best-known fixed income portfolio managers in the United States,
and the loss of his services could have a material adverse effect on PIMCO
Advisors. In order to help retain these and other key personnel, each of the
Investment Management Firms has a substantial profit-sharing plan for its senior
management. Oppenheimer Capital maintains a benefit plan for its senior
management which offers a significant profits interest in the performance of the
Investment Management Firm. The other Investment Management Firms reserve a
substantial percentage of their adjusted net book income for profit-sharing
payments (45% in the case of Pacific Investment Management and CCI, and in the
case of the other Investment Management Firms, 15% of the first $3.0 million of
such income, 25% of the next $2.0 million of such income, 40% of the next $5.0
million of such income and 45% of such income in excess of $10 million). These
profit-sharing payments significantly reduce the amount of the Investment
Management Firms' profits that is distributed to PIMCO Advisors and becomes
available for distribution to unitholders of PIMCO Advisors and indirectly to
unitholders of the Partnership. There can be no assurance that key personnel
will be retained.
COMPETITION
The investment management business is highly competitive. PIMCO Advisors
and its Investment Management Firms compete with a large number of other
domestic and foreign investment management firms, commercial banks, insurance
companies, broker-dealers and other financial services providers. Some of the
financial services companies with which the firms compete have greater
resources, assets under management and administration than PIMCO Advisors and
the Investment Management Firms and offer a broader array of investment products
and services.
8
<PAGE> 14
PIMCO Advisors believes that the most important factors affecting its
success are the abilities, performance records and reputations of its investment
managers, and the development of new investment and marketing strategies. The
relative importance of these factors varies depending on the type of investment
management service involved. Client service is also an important competitive
factor. PIMCO Advisors ability to increase and retain client assets could be
adversely affected if client accounts underperform the market over time or if
key investment managers leave the firms. The ability of PIMCO Advisors and the
Investment Management Firms to compete with other investment management firms is
also dependent, in part, on the relative attractiveness of their investment
philosophies and methods under prevailing market conditions. There are
relatively few barriers to entry by new investment management firms in the
institutional managed accounts business, which increases competitive pressure.
A large number of mutual funds are sold to the public by investment
management firms, broker-dealers, insurance companies and banks in competition
with mutual funds sponsored by PIMCO Advisors. Many competitors apply
substantial resources to advertising and marketing their mutual funds which may
adversely affect the ability of PIMCO Advisors-sponsored funds to attract new
retail clients and to retain retail assets under management.
FACTORS AFFECTING FEE REVENUES
General Considerations
Investment management agreements between Investment Management Firms and
their clients typically provide for fees based on a percentage of the assets
under management, determined at least quarterly and valued at current market
levels. The percentage of the fee applicable to a particular classification of
assets under management is a function of several factors. For example,
investments or strategies which have a higher degree of risk and uncertainty
command a higher percentage fee. Therefore, significant fluctuations in
securities prices or in the investment patterns of clients that result in shifts
in assets under management can have a material effect on PIMCO Advisors
consolidated revenues and profitability. Such fluctuations in asset valuations
and client investment patterns may be affected by overall economic conditions
and other factors influencing the capital markets and the net sales of mutual
fund shares generally, including interest rate fluctuations. Virtually all of
PIMCO Advisors revenues are derived from investment management agreements with
clients that are terminable at any time or upon 30 to 60 days' notice, as is the
case generally in the investment management industry. Any termination of
agreements representing a significant portion of assets under management could
have an adverse impact on PIMCO Advisors results of operations. The investment
management business is highly competitive and fees vary among investment
managers. Some of the Investment Management Firms' fees are higher than those of
many investment managers relative to the average size of accounts under
management. Each Investment Management Firm's ability to maintain its fee
structure in the competitive environment is dependent to a large extent on the
ability of its investment managers to provide clients with service and
investment returns that will cause clients to be willing to pay those fees.
There can be no assurance that the Investment Management Firms will be able to
retain their clients or sustain their fee structures in the future.
Reliance on Performance-Based Fees
Approximately 5.3%, 4.5% and 4.1% of PIMCO Advisors revenues (as adjusted
to combine with the revenues of Oppenheimer Capital) for the nine months ended
September 30, 1997 and the years ended December 31, 1996 and December 31, 1995,
respectively, were derived from performance-based fees. Most of these revenues
are attributable to Pacific Investment Management's operations. To earn a
performance-based fee with respect to an account, the relevant Investment
Management Firm must generally outperform a specific benchmark over a particular
period. Performance-based fee arrangements make revenues more volatile, but also
provide an opportunity to earn higher fees than could be obtained under fee
arrangements based solely on a percentage of assets under management. Pacific
Investment Management's StocksPLUS(R) product, which accounted for $11.3 billion
of assets under management at September 30, 1997, is subject to a
performance-based arrangement in which under-performance relative to the S&P 500
over a particular time period results in no fees being paid by clients, while
superior performance results in incentive fees that are not
9
<PAGE> 15
subject to a cap. In addition to the StocksPLUS accounts, several large fixed
income accounts aggregating approximately $10.9 billion at September 30, 1997,
also have performance-based fee arrangements. Pacific Investment Management's
performance-based fee arrangements, including the StocksPLUS fee arrangement,
can materially affect Pacific Investment Management's revenues, and thus those
of PIMCO Advisors, from period to period.
USE OF DERIVATIVES
The use of derivatives by investors has received national attention in
recent years because of losses suffered on investments in derivatives. The
Investment Management Firms, from which PIMCO Advisors obtains its operating
income, have used derivatives and plan to continue using derivatives in the
future. In particular, Pacific Investment Management has used derivatives since
1980 in various ways, principally to manage portfolio risk and exploit market
inefficiencies.
LIABILITY AS GENERAL PARTNER
After the Restructuring, the Public Unitholders will be limited partners in
the Partnership. The Partnership's sole business is holding PIMCO Advisors GP
Units. As a general partner of PIMCO Advisors, the Partnership is liable for the
obligations of PIMCO Advisors although the PIMCO Advisors assets would be used
first to satisfy such obligations. As limited partners, the Public Unitholders
will not be liable for obligations of the Partnership. However, their investment
in the Partnership may be adversely affected to the extent the Partnership is
required to satisfy PIMCO Advisors obligations.
OTHER RISKS
LACK OF PARTICIPATION IN MANAGEMENT; VOTING
As the sole general partner of the Partnership and the general partner with
a controlling interest in PIMCO Advisors, PGP has ultimate control over the
operations of the Partnership and PIMCO Advisors. Limited partners of the
Partnership have only limited voting rights on matters affecting the
Partnership's business and have no right to participate in the management of the
Partnership or PIMCO Advisors. Holders of Partnership Units have no voting
rights regarding the selection of the management board of the Partnership. If
PGP resigned or was removed as general partner and the limited partners of the
Partnership elected to continue the operations of the Partnership, its successor
would be elected by holders of a majority of Partnership Units outstanding. A
vote of holders of 80% or more of the Partnership Units is required to remove
PGP as general partner of the Partnership, and PGP and its affiliates may vote
their Partnership Units, if any, with respect to removal (while PGP owns no
Partnership Units, 154,356 Partnership Units are owned by PIMCO Advisors, which
is controlled by PGP). However, even if PGP were removed as general partner of
the Partnership, such removal would not affect its status as the controlling
general partner of PIMCO Advisors.
CASH DISTRIBUTIONS
Distributions to limited partners of the Partnership will be dependent upon
distributions by PIMCO Advisors, which, in turn, are dependent upon the
Distributable Cash of PIMCO Advisors. Distributable Cash is defined in the PIMCO
Advisors Partnership Agreement as the Operating Profit Available for
Distribution (as defined below in "Recent Unit Prices and
Distributions -- Distribution Policy") less the amount, if any, required for
expenses, for capital expenditures, for future payments on indebtedness, as
reserves or otherwise in the business of PIMCO Advisors, determined in the
discretion of the general partners. While PIMCO Advisors pays all of the
Partnership's expenses (other than taxes), after December 31, 1997,
distributions on the Partnership Units will be less than those on PIMCO Advisors
units due to tax on the Partnership's gross income from active businesses.
10
<PAGE> 16
THE RESTRUCTURING
INTRODUCTION
Due to recent legislation, after December 31, 1997, certain publicly traded
limited partnerships, including PIMCO Advisors and the Partnership, will become
subject to federal taxation as a corporation unless they elect to be subject to
a tax on their gross income from active businesses or unless their partnership
interests cease to be publicly traded by such date. The limited partner units in
both PIMCO Advisors and the Partnership are currently publicly traded, and they
represent the same economic interest in the business of PIMCO Advisors. In order
to consolidate the public ownership of PIMCO Advisors in one entity and to
prevent PIMCO Advisors from being subject to such a tax while permitting the
Public Unitholders to maintain an investment in a publicly traded entity, PIMCO
Advisors will effect the Restructuring, pursuant to authority granted in the
PIMCO Advisors Partnership Agreement, by contributing, on behalf of the Public
Unitholders, all of the PIMCO Advisors units held by Public Unitholders to the
Partnership effective as of December 31, 1997. In the Restructuring, the Public
Unitholders will receive one Partnership Unit for each PIMCO Advisors unit
contributed on their behalf. Each Partnership Unit will have one underlying
PIMCO Advisors unit. Accordingly, Public Unitholders will continue to hold
indirectly through the Partnership the same economic interest in PIMCO Advisors
as they did before the Restructuring. Effective January 1, 1997, the Partnership
will elect to be subject to the tax on gross income from active businesses
rather than be subject to taxation as a corporation. The general partners of
PIMCO Advisors have expressly been granted authority to effect the Restructuring
without the consent of or other action by the limited partners under the PIMCO
Advisors Partnership Agreement.
TERMS OF THE RESTRUCTURING
TIMING
The Restructuring is expected to occur on December 31, 1997. Failure to
effect the Restructuring on or prior to the Effective Date in the absence of a
change in the applicable tax laws would result in PIMCO Advisors being subject
to a tax on certain of its gross income for part or all of the 1998 taxable
year.
CONTRIBUTION OF PUBLICLY OWNED UNITS TO THE PARTNERSHIP
Following the close of business on the Effective Date, all of the PIMCO
Advisors LP Units held of record by a Public Unitholder will be contributed to
the Partnership. The general partners have the authority to effect this
contribution pursuant to Section 16.1 of the PIMCO Advisors Partnership
Agreement. See "-- Authority of General Partner to Effect the Restructuring."
Upon contribution of the PIMCO Advisors LP Units to the Partnership, the
Partnership will convert the PIMCO Advisors LP Units into PIMCO Advisors GP
Units in accordance with the PIMCO Advisors Partnership Agreement. In exchange
for each contributed PIMCO Advisors LP Unit, the Partnership will issue one
Partnership Unit to the Public Unitholder whose unit is contributed. The
Partnership Units are listed on the NYSE. The general partners of PIMCO
Advisors, on behalf of the Public Unitholders, will take all actions necessary
for the Public Unitholders to be admitted as limited partners of the
Partnership. Following the Effective Date, all trading in the PIMCO Advisors
Class A LP Units on the NYSE will cease, and thereafter the Partnership Units
will be the sole publicly-traded investment in the PIMCO Advisors business.
CONTINUING RELATIONSHIP WITH PIMCO ADVISORS
In connection with the Restructuring, the Partnership and PIMCO Advisors
will enter into an Operating Agreement which will govern the ongoing
relationship of the Partnership and PIMCO Advisors, and provide, among other
things, that: (i) the Partnership shall take such actions as shall be required
from time to time so as to ensure that the number of outstanding Partnership
Units is at all times equal to the number of PIMCO Advisors units held by the
Partnership and its subsidiaries which are allocable to the limited partner
interests in the Partnership, (ii) the Partnership shall provide certain holders
of PIMCO Advisors units a limited right to exchange their PIMCO Advisors units
for Partnership Units (see "Relationship Between the Partnership and PIMCO
Advisors -- Exchange Rights"), (iii) the Partnership shall assume and agree to
perform the obligations of PIMCO Advisors under PIMCO Advisors unit incentive
plans and certain agreements relating
11
<PAGE> 17
to the issuance of PIMCO Advisors units, (iv) the Partnership shall adopt and
maintain one or more unit incentive plans for the benefit of individuals
providing services to the Partnership, PIMCO Advisors and their respective
subsidiaries, and (v) the Partnership shall not engage in any business other
than that incidental to its ownership of PIMCO Advisors units and its status as
a general partner of PIMCO Advisors. See "Relationship Between the Partnership
and PIMCO Advisors -- Operating Agreement."
REASONS FOR THE RESTRUCTURING
GENERAL
The primary purposes of the Restructuring are to (i) permit Public
Unitholders to continue to maintain an investment in a publicly traded entity
while consolidating all public ownership of PIMCO Advisors into one entity and
(ii) allow PIMCO Advisors to become a private partnership, which will not be
subject to the new tax on the gross income from active businesses of publicly
traded partnerships. Management believes that there are several benefits
associated with combining the public ownership in the PIMCO Advisors enterprise
into a single entity. The number of public holders in the one entity will be
greater than the number in either the Partnership or PIMCO Advisors
individually, which should have a favorable impact on market liquidity.
Additionally, the combination will simplify the organizational structure of the
PIMCO Advisors business and reduce confusion in the marketplace created by two
publicly traded securities representing essentially the same investment.
Finally, having a single public entity will substantially reduce administrative
costs. The Restructuring also will benefit the Nonpublic Unitholders of PIMCO
Advisors because they will retain an interest in a partnership (PIMCO Advisors)
that will not be subject to the new federal tax on gross income that will apply
to certain publicly traded partnerships, including the Partnership, after
December 31, 1997.
CONSOLIDATION OF PUBLIC OWNERSHIP INTO THE PARTNERSHIP
Both PIMCO Advisors units and Partnership Units represent an investment in
the business of PIMCO Advisors and both are currently publicly traded on the
NYSE. Management believes that consolidating all of the public ownership of
PIMCO Advisors into the Partnership through the Restructuring should
substantially reduce administrative burdens and costs, increase liquidity and
eliminate confusion in the marketplace, thereby making the Partnership Units
more attractive to investors.
PRESERVATION OF PARTNERSHIP TAXATION FOR NONPUBLIC UNITHOLDERS
Under current law, after December 31, 1997, PIMCO Advisors will become
subject to federal taxation as a corporation unless it elects to be subject to a
federal tax on its gross income from active businesses or unless PIMCO Advisors
Class A LP Units cease to be publicly traded prior to that time (and may be
subject to similar taxes imposed by states in which PIMCO Advisors is subject to
such taxes). By effecting the Restructuring, PGP intends to preserve the current
tax treatment of PIMCO Advisors for its Nonpublic Unitholders by terminating the
public trading of PIMCO Advisors Class A LP Units. See "-- Interests of Certain
Persons in the Restructuring."
EFFECTS OF THE RESTRUCTURING
PUBLIC UNITHOLDERS WILL BECOME LIMITED PARTNERS OF THE PARTNERSHIP
As a result of the Restructuring, the Public Unitholders will cease to be
limited partners of PIMCO Advisors and will become limited partners of the
Partnership. As limited partners of the Partnership, their rights will be
governed by the Amended and Restated Agreement of Limited Partnership of
Oppenheimer Capital, L.P. (the "Partnership Agreement"), rather than the PIMCO
Advisors Partnership Agreement. See "Description of Partnership Units." The sole
business of the Partnership after the Restructuring will continue to be that of
holding PIMCO Advisors GP Units, and each Partnership Unit will represent an
indirect investment in a single PIMCO Advisors unit. Accordingly, Public
Unitholders will continue to hold indirectly through the Partnership the same
economic interest in PIMCO Advisors as they did before the transaction.
Nonpublic Unitholders will remain partners in PIMCO Advisors after the
Restructuring.
12
<PAGE> 18
EFFECT ON DISTRIBUTIONS
As a publicly traded partnership, the Partnership will be subject to a 3.5%
federal tax on its gross income from active businesses after December 31, 1997.
Accordingly, while the Partnership's expenses (other than taxes) will be paid by
PIMCO Advisors, distributions on the Partnership Units will be less than the
distributions received by the Partnership on the PIMCO Advisors GP Units owned
by it. See "Recent Unit Prices and Distributions -- Distribution Policy of the
Partnership."
MANAGEMENT AND CONTROL OF THE PARTNERSHIP
PGP is the controlling general partner of PIMCO Advisors and the sole
general partner of the Partnership. Accordingly, after the Restructuring, Public
Unitholders will continue to hold interests in an entity controlled by PGP. PGP
has delegated its authority to manage the day to day operations of the
Partnership to a management board. See "Management of the Partnership."
PIMCO ADVISORS NOT SUBJECT TO A TAX
As a result of the Restructuring, PIMCO Advisors is expected to be treated
as a non-publicly-traded partnership for tax purposes. Accordingly, Nonpublic
Unitholders will continue to receive distributions from PIMCO Advisors without
any reduction for taxes on the gross income of PIMCO Advisors.
TAX CONSEQUENCES OF THE RESTRUCTURING TO UNITHOLDERS
The exchange of PIMCO Advisors units for Partnership Units is intended to
be treated for federal income tax purposes as a contribution of property to a
partnership in exchange for an interest in the Partnership. As such, under
Section 721 of the Internal Revenue Code of 1986, as amended (the "Code"), no
gain or loss will be recognized by the exchanging party or the Partnership on
the exchange. The exchanging party will have a tax basis in its Partnership
Units equal to the tax basis such party had in the surrendered PIMCO Advisors
units and will have a holding period for the Partnership Units that includes the
holding period that it had for the surrendered PIMCO Advisors units.
Furthermore, the Partnership will have a tax basis in the contributed PIMCO
Advisors units equal to the tax basis of such PIMCO Advisors units in the hands
of the exchanging party and will have a holding period for the PIMCO Advisors
units that includes the holding period for such PIMCO Advisors units in the
hands of the exchanging party. See "Certain Federal Income Tax Consequences."
EXISTING ECONOMIC INTERESTS OF THE PARTNERS
Interests in PIMCO Advisors are divided into units of limited partner
interest and units of general partner interest. PIMCO Advisors GP Units are held
only by general partners of PIMCO Advisors, but have the same economic rights,
including rights to distributions, as PIMCO Advisors LP Units. Limited partner
units of PIMCO Advisors are further divided into Class A units and Class C units
and, until March 1, 1998, Class B units. The general partner units are divided
into Class A units and, until March 1, 1998, Class B units. For each fiscal
quarter ending on or prior to December 31, 1997, the Class A units have had a
priority right over Class B units with respect to distributions. Beginning with
the fiscal quarter ending March 31, 1998, the priority right to distributions
for Class A units will cease and Class A units and Class B units will represent
identical interests in PIMCO Advisors. PIMCO Advisors issued 6.0 million Class C
units of limited partner interest ("PIMCO Advisors Class C units") in connection
with the Oppenheimer Capital Merger. All of the PIMCO Advisors Class C units are
currently held by Opgroup, a wholly-owned corporate subsidiary of PIMCO
Advisors. The PIMCO Advisors Class C units have the same economic rights as the
other PIMCO Advisors LP Units, except that distributions with respect to the
PIMCO Advisors Class C units are limited to $3.00 per annum per unit. Effective
January 1, 1998, the PIMCO Advisors Partnership Agreement will be amended to
entitle the Class C LP Units to a minimum distribution of $2.75 per unit per
year, commencing with the quarter ending March 31, 1998, and to cause the Class
C LP Units to be convertible at the election of the holder into PIMCO Advisors
Class A LP Units on a one-for-one basis. All PIMCO Advisors Class C LP Units are
held by a subsidiary of PIMCO Advisors, and PIMCO Advisors has no present
intention of converting such units.
13
<PAGE> 19
AUTHORITY OF THE GENERAL PARTNER TO EFFECT THE RESTRUCTURING
In order to protect Nonpublic Unitholders from an Adverse Partnership Tax
Event (as defined below), the PIMCO Advisors Partnership Agreement confers on
the general partners broad authority to effect one or more restructurings of
PIMCO Advisors to prevent a change in its partnership tax status. An Adverse
Partnership Tax Event is defined in the PIMCO Advisors Partnership Agreement as
(i) PIMCO Advisors being treated as an association taxable as a corporation,
(ii) PIMCO Advisors being reconstituted as a corporation, or (iii) PIMCO
Advisors otherwise becoming subject to federal taxation on its income, or the
occurrence of another event which would have caused any of (i), (ii) or (iii) to
occur but for the occurrence of a restructuring of PIMCO Advisors.
Section 16.1 of the PIMCO Advisors Partnership Agreement provides that the
general partners may take all actions appropriate to accomplish one or more
restructurings of PIMCO Advisors, without consent of or other action on the part
of any other unitholder and whether or not such actions or omissions may treat
Public Unitholders differently than the general partners and their affiliates or
result in different and more favorable treatment of the general partners and
their affiliates. Such actions expressly include, but are not limited to, (a)
the creation of one or more business entities controlled by the general partner,
affiliates of the general partner or affiliates of PIMCO Advisors, (b) the
transfer of all or any part of the business of PIMCO Advisors or assets of PIMCO
Advisors to one or more existing or newly-created business entities in exchange
for interests in such business entities, which interests may be subject to
substantial restrictions on transfer, (c) the initiation of exchange or
redemption transactions which will permit and may automatically effect, without
the consent of any limited partner, the exchange of some or all outstanding
limited partner units for interests in one or more existing or newly-created
business entities which hold, directly or indirectly, interests in all or any
part of the business of PIMCO Advisors or assets of PIMCO Advisors, (d) the
imposition of substantial restrictions on the transferability of some or all of
the limited partner units (or interests in one or more successor entities) and
(e) causing PIMCO Advisors and any one or more successor entities to enter into
agreements governing their relationships following the restructuring, on terms
and conditions determined by the general partners, including, without
limitation, agreements providing for (i) the issuance and sale by a successor
entity, of its securities and the contribution of the proceeds of such issuance
and sale to PIMCO Advisors, in exchange for units or other PIMCO Advisor
securities, (ii) the acquisition by a successor entity of businesses or assets
and the contribution of such businesses or assets to PIMCO Advisors in exchange
for units, (iii) the adoption by a successor entity of one or more employee
benefit plans involving the issuance of its securities, the assumption by such
successor entity of the outstanding employee benefit plans of such successor
entity to PIMCO Advisors, in exchange for units, and (iv) the exchange of
outstanding units for securities of a successor entity upon request by the
holders of such units, the registration of such securities under federal and
state securities laws in connection with a public offering, and the concomitant
listing of such securities on a national securities exchange. The PIMCO Advisors
Partnership Agreement provides no appraisal or similar rights to any unitholder
with respect to any restructuring, nor does it require that the general partners
obtain an opinion as to the fairness of any restructuring to the Public
Unitholders.
BACKGROUND OF THE GENERAL PARTNERS' RESTRUCTURING AUTHORITY
At the time of PIMCO Advisors organization in 1987, its publicly traded
master limited partnership ("MLP") form offered important tax advantages because
there was no federal income tax at the partnership level. In December 1987,
however, Congress passed the Revenue Act of 1987, one of the provisions of which
provided that MLPs, with certain exceptions not applicable to PIMCO Advisors,
would be taxed for federal income tax purposes as corporations. The tax status
of MLPs existing on December 17, 1987 was "grandfathered" until December 31,
1997. In August 1997, Congress passed the Taxpayer Relief Act of 1997, which
provided, among other things, that any previously grandfathered MLP may elect to
continue its partnership status as an "electing 1987 partnership" if it agrees
to be subject to a tax on its gross income from active businesses in tax years
beginning after December 31, 1997.
PIMCO Advisors current organizational structure (other than its ownership
of Oppenheimer Capital) results from the Consolidation of the investment
advisory businesses of certain subsidiaries of PFAMCo, i.e. Pacific Investment
Management, Cadence, Parametric, NFJ and Blairlogie, with the investment
advisory and mutual fund distribution businesses, including CCI, formerly
conducted under the name of TAG L.P., and its
14
<PAGE> 20
affiliate Thomson Investor Services Inc. As part of the Consolidation, PGP
replaced Thomson Advisory Group, Inc. ("TAG") as the general partner of PIMCO
Advisors.
Concurrent with their approval of the Consolidation, the limited partners
of PIMCO Advisors expressly approved amendments to the PIMCO Advisors
Partnership Agreement which, among other things, conferred on the general
partners broad authority to effect one or more restructurings of PIMCO Advisors
to prevent an adverse change in partnership tax treatment. The amendments to the
PIMCO Advisors Partnership Agreement also modified the fiduciary duties of the
general partners, including expressly relieving the general partners of any
fiduciary or other duties or liabilities to PIMCO Advisors or any unitholder for
any actions taken or omitted to be taken in good faith and without recklessness
with respect to any restructuring, notwithstanding that such actions or
omissions may treat Public Unitholders differently than general partners and
their affiliates and result in more favorable treatment of the general partners
and their affiliates.
INTERESTS OF CERTAIN PERSONS IN THE RESTRUCTURING
The Nonpublic Unitholders, including PGP and certain members of the
Management Board of PIMCO Advisors (the "PIMCO Advisors Management Board"), have
an interest in the Restructuring because, as contemplated by the PIMCO Advisors
Partnership Agreement, PIMCO Advisors will preserve partnership tax treatment
for the Nonpublic Unitholders' investment in PIMCO Advisors. Under current law,
after December 31, 1997, PIMCO Advisors will become subject to federal taxation
as a corporation unless it elects to be subject to a tax on its gross income or
unless PIMCO Advisors limited partner interests cease to be publicly traded
prior to such time as will be accomplished through the Restructuring. After the
Restructuring, the Public Unitholders will own interests in a publicly-traded
partnership that is subject to a tax on its gross income after December 31,
1997. The Nonpublic Unitholders will continue to hold their interests in PIMCO
Advisors, which will not be subject to such a tax on gross income.
ACCOUNTING TREATMENT
The issuance of new Partnership Units in exchange for PIMCO Advisors units
does not create a new basis of accounting since the entities share a common
general partner. In accordance with generally accepted accounting principles,
the Partnership's investment and capital accounts will be increased by the
amount representing the book value of the PIMCO Advisors units contributed.
There will be no accounting recognition given for the exchange in the financial
statements of PIMCO Advisors.
EXCHANGE OF PARTNERSHIP UNIT CERTIFICATES
As of the Effective Date, the Public Unitholders will become limited
partners of the Partnership and cease to be limited partners of PIMCO Advisors.
The PIMCO Advisors LP Units held by Public Unitholders on the Effective Date
will on that date be transferred to the Partnership on the books of the transfer
agent of PIMCO Advisors and reclassified as PIMCO Advisors GP Units in
accordance with the PIMCO Advisors Partnership Agreement. Because the general
partners of PIMCO Advisors will effect the transfer of the Public Unitholders'
units on behalf of the Public Unitholders pursuant to the authority granted to
the general partners by the PIMCO Advisors Partnership Agreement, the Public
Unitholders do not need to take any action for the transfer to occur.
As of the Effective Date, each Public Unitholder will become a limited
partner of the Partnership and receive one Partnership Unit for each PIMCO
Advisors unit it held immediately prior to the Effective Date. As of the
Effective Date, the certificates which formerly represented the Public
Unitholders' PIMCO Advisors Units will be deemed cancelled and of no further
force or effect (except that the certificates must be surrendered as described
below in order to receive certificates for Partnership Units received in the
Restructuring). Public Unitholders may exchange the certificates which prior to
the Effective Date represented PIMCO Advisors LP Units for certificates
representing Partnership Units by completing a letter of transmittal, which will
be sent to the Public Unitholders after December 31, 1997, and mailing the
letter of transmittal, along with their certificates, to the address indicated
in the letter of transmittal. Regardless of whether a Public Unitholder submits
the letter of transmittal and its certificates, the Public Unitholder will be
deemed to own one Partnership Unit for each PIMCO Advisors unit held immediately
prior to the Effective Date and will cease to have any direct ownership interest
in PIMCO Advisors.
15
<PAGE> 21
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
OVERVIEW OF TRANSACTIONS
The pro forma condensed financial statements present the effects on the
Partnership and PIMCO Advisors of three significant events identified herein as
the Opgroup Transaction, the Oppenheimer Capital Merger and the Restructuring.
The Opgroup Transaction. On November 4, 1997 PIMCO Advisors and Oppenheimer
Group Inc. ("Opgroup") completed the acquisition by PIMCO Advisors of 100% of
the outstanding common stock of Opgroup in exchange for 2.1 million PIMCO
Advisors Class A LP Units and the rights to exchange up to $230 million of
outstanding term notes for an additional 6.9 million PIMCO Advisors Class A LP
Units at a rate of $33 1/3 per unit. At that date, Opgroup owned various assets
including an approximate 32.4% interest in Oppenheimer Capital, the 1% general
partner interest in the Partnership and the advisory contracts for eight closed
end mutual funds. The Partnership, at that time, owned the remaining 67.6%
interest in Oppenheimer Capital. Immediately following the acquisition PIMCO
Advisors split the 1% general partner interest in the Partnership into a .01%
general partner interest and a .99% limited partner interest, and sold the
general partner interest to PGP for $80,000, its approximate book value. As
explained further in Note 1 the purchase method of accounting was used by PIMCO
Advisors to record the acquisition of Opgroup. These transactions have no
accounting impact on the Partnership.
The Oppenheimer Capital Merger. In the Oppenheimer Capital Merger,
Oppenheimer Capital merged with a transitory limited partnership subsidiary of
PIMCO Advisors, with the Partnership receiving 26.1 million PIMCO Advisors Class
A GP Units of PIMCO Advisors, representing an approximate 23.9% ownership of
PIMCO Advisors. This transaction involving entities under common control was
accounted for using the book values at PIMCO Advisors. PIMCO Advisors
reclassified the amount representing the non-controlling interest into partners
capital. The Partnership recorded as its investment in PIMCO Advisors an amount
representing the book value of PIMCO Advisors units received. Prior to the
Oppenheimer Capital Merger, the Partnership split its units on a 1.67-for-one
basis, the effect of which was to align the economic interests of PIMCO Advisors
and the Partnership. This split has no accounting impact; however, the
post-split units outstanding have been reflected in all per unit computations
for the Partnership.
The Restructuring. On December 31, 1997, the approximately 22.6 million
PIMCO Advisors LP Units held by Public Unitholders (assuming that all 9.0
million PIMCO Advisors Class A LP Units issued in or issuable as a result of the
Opgroup Transaction will be held by Public Unitholders) will be contributed to
the Partnership in exchange for an equal number of Partnership Units. This
transaction will be recorded by the Partnership at the amount representing the
book value of the PIMCO Advisors LP Units contributed. The Restructuring has no
accounting impact on PIMCO Advisors.
Other. The historical financial information of Oppenheimer Capital, Opgroup
and the Partnership are presented herein based upon calendar year results and
balances since these entities will change to a calendar year end effective
December 31, 1997. Previously Oppenheimer Capital, Opgroup and the Partnership
have utilized a fiscal year end of April 30.
Book value per unit is based upon units outstanding exclusive of the
dilutive effects of options, and deferred unit awards.
OPPENHEIMER CAPITAL, L.P.
The following pro forma condensed financial statements of the Partnership
as of September 30, 1997 and for the nine months then ended, and for the year
ended December 31, 1996 give effect to the Oppenheimer Capital Merger and the
Restructuring transactions described above. The pro forma condensed statement of
financial condition has been prepared as though the Oppenheimer Capital Merger
and the Restructuring had been effected on September 30, 1997 and the pro forma
condensed statements of operations have been prepared as though the Oppenheimer
Capital Merger and the Restructuring had been effected on January 1, 1996.
16
<PAGE> 22
PIMCO ADVISORS L.P.
The following pro forma condensed financial statements of PIMCO Advisors as
of September 30, 1997 and for the nine months then ended, and for the year ended
December 31, 1996 give effect to the Opgroup Transaction and the Oppenheimer
Capital Merger described above. The pro forma condensed statement of financial
condition has been prepared as though the Opgroup Transaction and the
Oppenheimer Capital Merger had been effected on September 30, 1997 and the
condensed statements of operations have been prepared as though the Opgroup
Transaction and the Oppenheimer Capital Merger had been effected on January 1,
1996.
The pro forma information for the Partnership and PIMCO Advisors is
presented for illustrative purposes and does not purport to be indicative of the
results which would have been obtained had the transactions been effected on the
assumed dates, nor is the information intended to be indicative of the results
which may occur in the future. The accompanying Notes to Pro Forma Condensed
Financial Statements should be read for a description of the principal
assumptions made in the preparation of the pro forma information. Management
believes that the assumptions used in the preparation of the pro forma
information are reasonable.
17
<PAGE> 23
OPPENHEIMER CAPITAL, L.P.
PRO FORMA CONDENSED STATEMENT OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1997
ASSETS
<TABLE>
<CAPTION>
OPPENHEIMER
CAPITAL PRO FORMA
OPPENHEIMER MERGER (NOTE RESTRUCTURING POST
CAPITAL, 2) PRO FORMA (NOTE 3) RESTRUCTURING
L.P. ADJUSTMENTS POST MERGER ADJUSTMENTS AND MERGER
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents........ $ 157,197 $ -- $ 157,197 $ -- $ 157,197
Investment in operating
partnership.................... 43,932,954 239,066,002 282,998,956 245,670,755 528,669,711
Intangible assets, net........... 38,220,593 (38,220,593) -- -- --
Note receivable.................. 32,193,000 (32,193,000) -- -- --
Other assets..................... 380,901 -- 380,901 -- 380,901
------------ ------------ ------------ ------------ ------------
TOTAL ASSETS................ $114,884,645 $168,652,409 $283,537,054 $245,670,755 $529,207,809
============ ============ ============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Partners' capital................ $114,884,645 $168,652,409 $283,537,054 $245,670,755 $529,207,809
------------ ------------ ------------ ------------ ------------
Total Partners' capital..... 114,884,645 168,652,409 283,537,054 245,670,755 529,207,809
------------ ------------ ------------ ------------ ------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL......... $114,884,645 $168,652,409 $283,537,054 $245,670,755 $529,207,809
============ ============ ============ ============ ============
Book Value per Unit
Outstanding.................... $ 4.41 $ 10.88 $ 10.88
============ ============ ============
</TABLE>
See accompanying Notes to Pro Forma Condensed Financial Statements.
18
<PAGE> 24
OPPENHEIMER CAPITAL, L.P.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
OPPENHEIMER PRO FORMA
OPPENHEIMER CAPITAL MERGER RESTRUCTURING POST
CAPITAL, (NOTE 2) PRO FORMA (NOTE 3) RESTRUCTURING
L.P. ADJUSTMENTS POST MERGER ADJUSTMENTS AND MERGER
----------- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Equity in earnings of operating
partnership..................... $41,389,363 $ (15,191,689) $26,197,674 $ 22,732,683 $ 48,930,357
Interest........................... 2,414,475 (2,414,475) -- -- --
----------- ------------ ----------- ----------- -----------
Total Revenues............. 43,803,838 (17,606,164) 26,197,674 22,732,683 48,930,357
----------- ------------ ----------- ----------- -----------
EXPENSES
Amortization of intangibles,
deferred compensation........... 1,956,000 (1,956,000) -- -- --
Other.............................. 96,579 (96,579) -- -- --
----------- ------------ ----------- ----------- -----------
Total Expenses............. 2,052,579 (2,052,579) -- -- --
----------- ------------ ----------- ----------- -----------
Income before income tax expense... 41,751,259 (15,553,585) 26,197,674 22,732,683 48,930,357
Income tax expense (note 5)........ -- -- -- -- --
----------- ------------ ----------- ----------- -----------
NET INCOME........................... $41,751,259 $ (15,553,585) $26,197,674 $ 22,732,683 $ 48,930,357
=========== ============ =========== =========== ===========
Earnings per unit.................... $ 1.52 $ 1.01 $ 1.01
=========== =========== ===========
Cash flow per unit................... $ 1.85 $ 1.73 $ 1.73
=========== =========== ===========
Units outstanding -- adjusted for
split
All classes of units............... 26,054,414 -- 26,054,414 22,608,372 48,662,786
Dilutive effect of options and
awards.......................... 1,467,596 (1,467,596) -- -- --
----------- ------------ ----------- ----------- -----------
Total...................... 27,522,010 (1,467,596) 26,054,414 22,608,372 48,662,786
=========== ============ =========== =========== ===========
</TABLE>
See accompanying Notes to Pro Forma Condensed Financial Statements.
19
<PAGE> 25
OPPENHEIMER CAPITAL, L.P.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
OPPENHEIMER PRO FORMA
OPPENHEIMER CAPITAL MERGER RESTRUCTURING POST
CAPITAL, (NOTE 2) PRO FORMA (NOTE 3) RESTRUCTURING
L.P. ADJUSTMENTS POST MERGER ADJUSTMENTS AND MERGER
----------- -------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Equity in earnings of operating
partnership..................... $40,125,810 $ (14,726,366) $25,399,444 $22,040,030 $ 47,439,474
Interest........................... 3,219,300 (3,219,300) -- -- --
----------- ------------ ----------- ----------- -----------
Total Revenues............. 43,345,110 (17,945,666) 25,399,444 22,040,030 47,439,474
----------- ------------ ----------- ----------- -----------
EXPENSES
Amortization of intangibles,
deferred compensation........... 3,912,000 (3,912,000) -- -- --
Other.............................. 128,772 (128,772) -- -- --
----------- ------------ ----------- ----------- -----------
Total Expenses............. 4,040,772 (4,040,772) -- -- --
----------- ------------ ----------- ----------- -----------
Income before income tax expense... 39,304,338 (13,904,894) 25,399,444 22,040,030 47,439,474
Income tax expense (note 5)........ -- -- -- -- --
----------- ------------ ----------- ----------- -----------
NET INCOME........................... $39,304,338 $ (13,904,894) $25,399,444 $22,040,030 $ 47,439,474
=========== ============ =========== =========== ===========
Earnings per unit.................... $ 1.43 $ 0.97 $ 0.97
=========== =========== ===========
Cash flow per unit................... $ 1.91 $ 1.92 $ 1.92
=========== =========== ===========
Units outstanding -- adjusted for
split
All classes of units............... 26,054,414 -- 26,054,414 22,608,372 48,662,786
Dilutive effect of options and
awards.......................... 1,467,596 (1,467,596) -- -- --
----------- ------------ ----------- ----------- -----------
Total...................... 27,522,010 (1,467,596) 26,054,414 22,608,372 48,662,786
=========== ============ =========== =========== ===========
</TABLE>
See accompanying Notes to Pro Forma Condensed Financial Statements.
20
<PAGE> 26
PIMCO ADVISORS L.P.
PRO FORMA CONDENSED STATEMENT OF FINANCIAL CONDITION
AS OF SEPTEMBER 30, 1997
ASSETS
<TABLE>
<CAPTION>
OPPENHEIMER
OPGROUP CAPITAL
PIMCO TRANSACTION PRO FORMA POST MERGER (NOTE
ADVISORS (NOTE 1) OPGROUP 2) PRO FORMA POST
L.P. OPGROUP ADJUSTMENTS TRANSACTION ADJUSTMENTS MERGER
------------ ------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.... $ 33,172,652 $ 34,245,574 $ (32,193,000) $ 35,225,226 $ 32,193,000 $ 67,418,226
Fees receivable.............. 81,617,543 47,180,390 -- 128,797,933 -- 128,797,933
Short term investments....... 24,934,892 3,440,224 -- 28,375,116 -- 28,375,116
Intangible assets, net....... 180,815,838 1,196,100 838,618,536 1,020,630,474 -- 1,020,630,474
Fixed assets, net............ 10,801,603 3,682,175 -- 14,483,778 -- 14,483,778
Other assets................. 34,385,585 3,381,092 -- 37,766,677 -- 37,766,677
------------ ------------- ------------ --------------- ------------- ---------------
TOTAL ASSETS............. $365,728,113 $ 93,125,555 $ 806,425,536 $1,265,279,204 $ 32,193,000 $1,297,472,204
============ ============= ============ =============== ============= ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable, accrued
expenses and other......... $ 24,187,295 $ 9,118,651 $ -- $ 33,305,946 $ -- $ 33,305,946
Accrued compensation......... 53,085,409 16,517,311 -- 69,602,720 -- 69,602,720
Other non current
liabilities................ 9,479,234 263,198,378 (262,193,000) 10,484,612 -- 10,484,612
------------ ------------- ------------ --------------- ------------- ---------------
Total Liabilities........ 86,751,938 288,834,340 (262,193,000) 113,393,278 -- 113,393,278
------------ ------------- ------------ --------------- ------------- ---------------
Non-controlling interest in
subsidiary................. -- 45,063,146 532,933,617 577,996,763 (577,996,763) --
------------ ------------- ------------ --------------- ------------- ---------------
Partners' capital............ 286,063,032 (172,765,681) 535,684,919 648,982,270 610,189,763 1,259,172,033
Unamortized compensation..... (7,086,857) (68,006,250) -- (75,093,107) -- (75,093,107)
------------ ------------- ------------ --------------- ------------- ---------------
Total Partners'
Capital................ 278,976,175 (240,771,931) 535,684,919 573,889,163 610,189,763 1,184,078,926
------------ ------------- ------------ --------------- ------------- ---------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL...... $365,728,113 $ 93,125,555 $ 806,425,536 $1,265,279,204 $ 32,193,000 $1,297,472,204
============ ============= ============ =============== ============= ===============
Book Value per Unit
Outstanding................ $ 3.77 $ 6.92 $ 10.86
============ =============== ===============
</TABLE>
See accompanying Notes to Pro Forma Condensed Financial Statements.
21
<PAGE> 27
PIMCO ADVISORS L.P.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
OPPENHEIMER
OPGROUP CAPITAL
PIMCO TRANSACTION MERGER
ADVISORS (NOTE 1) PRO FORMA (NOTE 2) PRO FORMA
L.P. OPGROUP ADJUSTMENTS POST ACQUISITION ADJUSTMENTS POST MERGER
------------ ------------ ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Investment advisory
fees................... $302,240,609 $159,924,705 $ -- $462,165,314 $ -- $462,165,314
Distribution and servicing
fees................... 40,316,623 3,983,566 -- 44,300,189 -- 44,300,189
Other income.............. 1,652,823 -- -- 1,652,823 -- 1,652,823
------------ ------------ ------------ ------------ ------------ ------------
Total Revenues.... 344,210,055 163,908,271 -- 508,118,326 -- 508,118,326
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Compensation and
benefits............... 151,560,373 67,973,079 -- 219,533,452 -- 219,533,452
Amortization of
intangibles, deferred
compensation........... 30,999,737 10,281,739 31,448,195 72,729,671 -- 72,729,671
Commissions............... 32,188,873 -- -- 32,188,873 -- 32,188,873
Other..................... 45,574,214 18,104,988 -- 63,679,202 -- 63,679,202
Non controlling
interest............... -- 41,652,072 (19,985,011) 21,667,061 (21,667,061) --
------------ ------------ ------------ ------------ ------------ ------------
Total Expenses.... 260,323,197 138,011,878 11,463,184 409,798,259 (21,667,061) 388,131,198
------------ ------------ ------------ ------------ ------------ ------------
Income before income tax
expense................ 83,886,858 25,896,393 (11,463,184) 98,320,067 21,667,061 119,987,128
Income tax expense........ 1,225,610 3,038,553 -- 4,264,163 -- 4,264,163
------------ ------------ ------------ ------------ ------------ ------------
NET INCOME.................. $ 82,661,248 $ 22,857,840 $(11,463,184) $ 94,055,904 $ 21,667,061 $115,722,965
============ ============ ============ ============ ============ ============
Earnings per unit (note
4)........................ $ 1.06 $ 1.07 $ 1.01
============ ============ ============
Units outstanding
All classes of units...... 73,938,686 -- 9,019,608 82,958,294 26,054,414 109,012,708
Dilutive effect of options
and awards............. 3,906,437 -- 703,404 4,609,841 1,467,596 6,077,437
------------ ------------ ------------ ------------ ------------ ------------
Total............. 77,845,123 -- 9,723,012 87,568,135 27,522,010 115,090,145
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying Notes to Pro Forma Condensed Financial Statements.
22
<PAGE> 28
PIMCO ADVISORS L.P.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
OPPENHEIMER
OPGROUP CAPITAL
PIMCO TRANSACTION PRO FORMA MERGER
ADVISORS (NOTE 1) POST (NOTE 2) PRO FORMA
L.P. OPGROUP ADJUSTMENTS ACQUISITION ADJUSTMENTS POST MERGER
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Investment advisory
fees................. $342,707,775 $176,561,199 $ -- $519,268,974 $ -- $519,268,974
Distribution and
servicing fees....... 48,182,499 4,265,670 -- 52,448,169 -- 52,448,169
Other income............ 1,134,108 -- -- 1,134,108 -- 1,134,108
------------ ------------ ------------ ------------ ------------ ------------
Total
Revenues...... 392,024,382 180,826,869 -- 572,851,251 -- 572,851,251
------------ ------------ ------------ ------------ ------------ ------------
EXPENSES
Compensation and
benefits............. 173,526,137 73,424,810 -- 246,950,947 -- 246,950,947
Amortization of
intangibles, deferred
compensation......... 41,171,400 13,714,578 41,930,927 96,816,905 -- 96,816,905
Commissions............. 37,738,954 -- -- 37,738,954 -- 37,738,954
Other................... 47,258,294 27,881,901 -- 75,140,195 -- 75,140,195
Non controlling
interest............. -- 40,361,521 (26,646,681) 13,714,840 (13,714,840) --
------------ ------------ ------------ ------------ ------------ ------------
Total
Expenses...... 299,694,785 155,382,810 15,284,246 470,361,841 (13,714,840) 456,647,001
------------ ------------ ------------ ------------ ------------ ------------
Income before income tax
expense.............. 92,329,597 25,444,059 (15,284,246) 102,489,410 13,714,840 116,204,250
Income tax expense...... 1,201,417 2,805,887 -- 4,007,304 -- 4,007,304
------------ ------------ ------------ ------------ ------------ ------------
NET INCOME................ $ 91,128,180 $ 22,638,172 $(15,284,246) $ 98,482,106 $ 13,714,840 $112,196,946
============ ============ ============ ============ ============ ============
Earnings per unit (note
4)...................... $ 1.17 $ 1.12 $ 0.97
============ ============ ============
Units outstanding
All classes of units.... 73,938,686 -- 9,019,608 82,958,294 26,054,414 109,012,708
Dilutive effect of
options and awards... 3,906,437 -- 703,404 4,609,841 1,467,596 6,077,437
------------ ------------ ------------ ------------ ------------ ------------
Total........... 77,845,123 -- 9,723,012 87,568,135 27,522,010 115,090,145
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying Notes to Pro Forma Condensed Financial Statements.
23
<PAGE> 29
OPPENHEIMER CAPITAL, L.P. AND PIMCO ADVISORS L.P.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. THE OPGROUP TRANSACTION
In its acquisition accounting PIMCO Advisors recorded the net assets
acquired at the fair value of the consideration given, including the assumption
of $230 million of debt payable to Opgroup's former shareholders, assumption of
a $32.2 million note payable to the Partnership and the issuance of 2.1 million
units of PIMCO Advisors Class A LP Units. The pro forma adjustments assume that
the $230 million of debt is exchanged for 6.9 million PIMCO Advisors Class A LP
Units because the cash flow applicable to the units is expected to be higher in
the aggregate than the cash flow from interest on the debt and because such
presentation results in the most conservative presentation of earnings per unit.
Following the closing Opgroup repaid the $32.2 million note, utilizing a cash
advance from PIMCO Advisors. Thus the Opgroup Transaction adjustments reflect a
reduction in cash of $32.2 million, a reduction in debt of $262.2 million and an
increase to Partners' capital of $230 million for these transactions.
Because PIMCO Advisors exercises effective control over Oppenheimer Capital
as its managing general partner, consolidation accounting is used and the
non-controlling interest in this subsidiary was recorded at $578.0 million,
consistent with the values established for PIMCO Advisors interest in
Oppenheimer Capital. The adjustment amount of $532.9 million reflects the
elimination of the historical $45.1 million value of the interest carried in
Opgroup's statements for this non-controlling interest. The adjustment to
increase Partners' capital by $535.7 million results from the assumed exchange
of the $230.0 million of debt discussed above; $64.9 million of value associated
with the issuance of the 2.1 million PIMCO Advisors Class A LP Units; and the
assumption of Opgroup's negative net assets of $240.8 million. The adjustment to
intangibles of $838.7 million reflects the elimination of $1.2 million of
existing intangibles bringing the total intangibles arising from the Opgroup
Transaction to $839.9 million.
These intangibles will be allocated to the value of the businesses
acquired--$32.2 million allocable to the advisory contracts and $807.7 million
to the Oppenheimer Capital business. Management believes the expected life of
each of these intangibles exceeds the 20 year amortization life to be used for
financial statement purposes, which will result in the aggregate annual charge
of $41.9 million reflected in the adjustments to the pro forma condensed
statements of operations. The non-controlling interests, share of this increased
amortization amount is also shown as adjustments. PIMCO Advisors will
continually evaluate the recoverability of the intangible balances by assessing
whether the amortization of the balances over their remaining life can be
recovered through expected undiscounted cash flows from future operations of the
acquired businesses.
At the time of the transaction, key management of Oppenheimer Capital were
granted rights to 1.3 million Partnership Units with an aggregate value of $68
million. After giving effect to the 1.67-for-one unit split of Partnership
Units, PIMCO Advisors will issue 2,171,000 PIMCO Advisors' units to support
these awards. These units will be received upon vesting on the third, fourth and
fifth anniversaries of the closing of the Opgroup Transaction. The cost will be
amortized to compensation expense over a five-year period.
2. THE OPPENHEIMER CAPITAL MERGER
For PIMCO Advisors The adjustments to the condensed statement of financial
condition reflect the contribution of available cash at the Partnership arising
from the aforementioned repayment of the $32.2 million note, and the
contribution of the non controlling interest in Oppenheimer Capital at the book
value of $578.0 million, to PIMCO Advisors in exchange for an equivalent market
value of PIMCO Advisors units--approximately 26.1 million PIMCO Advisors Class A
LP Units. The aggregate book value of the assets contributed of $610.2 million
represents the adjustment to Partners' capital. The adjustments to the condensed
statements of operations eliminate the portion of the net earnings previously
allocated to the non-controlling interest.
24
<PAGE> 30
OPPENHEIMER CAPITAL, L.P. AND PIMCO ADVISORS L.P.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
For the Partnership The adjustments to the condensed statement of
financial condition reflect the receipt of 26.1 million PIMCO Advisors Class A
LP Units from PIMCO Advisors in replacement of its investment in Oppenheimer
Capital and related intangible assets and the cash received from the repayment
of the $32.2 million note. The adjustment of $168.7 million to Partners' capital
reflects establishing the investment in PIMCO Advisors at $283.0 million (the
proportionate amount of PIMCO Advisors Partners' capital). The adjustments to
the condensed statements of operations eliminate the amounts previously recorded
as equity in earnings from Oppenheimer Capital and in replacement thereof record
a proportionate share of PIMCO Advisors' pro forma earnings. The adjustments
also eliminate the interest income and related taxes associated with the note
which was paid off, and amortization of intangibles that no longer exist.
3. THE RESTRUCTURING OF PIMCO ADVISORS
The adjustment of $245.7 million to the investment in operating partnership
represents the Partnership's increased ownership by virtue of its receipt of
22.6 million PIMCO Advisors LP Units, or approximately 20.7% of the outstanding
PIMCO Advisors units, recorded at the per unit book value of PIMCO Advisors. The
Partnership will issue an equal number of its units to the contributing partners
of PIMCO Advisors and Partners' capital reflects the increase associated with
that issuance.
The adjustments to the condensed statements of operations of the
Partnership reflect the inclusion of an approximate 20.7% additional interest in
the pro forma results of operations of PIMCO Advisors, representing the
proportionate ownership of the new interests contributed.
25
<PAGE> 31
OPPENHEIMER CAPITAL, L.P. AND PIMCO ADVISORS L.P.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS (CONTINUED)
4. RECOGNITION OF PROPORTIONATE EARNINGS OF PIMCO ADVISORS
Subsequent to December 31, 1997, Class A LP Units and Class B LP Units of
PIMCO Advisors will participate as one class in earnings and distribution
rights. Accordingly, the historical priority of the PIMCO Advisors Class A LP
Units will no longer exist. The pro forma post-Oppenheimer Transaction and pro
forma post-Oppenheimer Capital Merger results reflect treatment of all units on
an equal basis and as one group, and thus a blended distribution and earnings
per unit at the PIMCO Advisors level as will be utilized in reporting the
results of operations for any unitholder in the future. In addition, all
calculations are based upon the number of units outstanding and the dilutive
effects of options as of September 30, 1997. As a result, the pro forma earnings
per unit and distributions per unit at PIMCO Advisors, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------------- -----------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
CLASS A UNITS
PIMCO Advisors
Earnings per unit....................... $1.29 $1.17 $1.06 $1.06
Distributions per unit.................. $1.88 $1.79 $1.54 $1.54
PIMCO Advisors after the Opgroup
Transaction
Earnings per unit....................... $1.12 $1.07
Distributions per unit.................. $1.92 $1.69
PIMCO Advisors after the Opgroup
Transaction and the Oppenheimer Capital
Merger
Earnings per unit....................... $0.97 $1.01
Distributions per unit.................. $1.92 $1.73
CLASS B UNITS
PIMCO Advisors
Earnings per unit....................... $1.05 $1.17 $1.06 $1.06
Distributions per unit.................. $1.68 $1.79 $1.54 $1.54
PIMCO Advisors after the Opgroup
Transaction
Earnings per unit....................... $1.12 $1.07
Distributions per unit.................. $1.92 $1.69
PIMCO Advisors after the Opgroup
Transaction and the Oppenheimer Capital
Merger
Earnings per unit....................... $0.97 $1.01
Distributions per unit.................. $1.92 $1.73
</TABLE>
5. PROVISION FOR FEDERAL TAX ON PUBLICLY TRADED PARTNERSHIPS
In August 1997, federal tax legislation was passed which permits publicly
traded partnerships to elect to continue to be treated as partnerships for
federal tax purposes. For those partnerships so electing, including the
Partnership, commencing in 1998 there will be imposed a federal tax of 3.5% on
gross income derived from active businesses of the Partnership and any
partnerships in which it holds an interest. In certain states comparable state
legislation is expected to result in the imposition of a state level tax of
approximately 1% calculated in the same manner as the federal assessment and
applied to gross income from the conduct of active businesses in such states.
The accompanying pro forma financial information has not been adjusted to
reflect the imposition of these taxes assuming they had been in effect during
the periods presented. It is expected, however, that cash flow available for
distribution would have been reduced by approximately 11% because of these
taxes.
26
<PAGE> 32
THE PARTNERSHIP
GENERAL
The Partnership is a Delaware limited partnership which as its sole
business holds 26.1 million PIMCO Advisors GP Units, representing an
approximately 23.9% interest in PIMCO Advisors. The Partnership was formed as a
Delaware limited partnership in 1987.
PIMCO Advisors is one of the nation's largest investment management firms
with approximately $190 billion of assets under management at October 31, 1997
(as adjusted to include the assets under management of Oppenheimer Capital).
PIMCO Advisors offers a broad range of investment management services and styles
to institutional and retail investors, combining the fixed income-oriented
investment management operations of Pacific Investment Management, the
equity-oriented operations of Oppenheimer Capital and five smaller affiliated
domestic and international equity investment management firms, and mutual fund
operations. PIMCO Advisors provides investment management services primarily to
(i) large institutional clients through separate accounts, (ii) smaller
institutional clients and financial intermediaries through the institutional
share classes of the PIMCO Funds (described below) and (iii) retail investors
through the retail share classes of the PIMCO Funds, which are sold principally
through broker-dealers.
PIMCO Advisors strategy is to pursue growth by marketing the investment
management expertise, performance record and reputation of its seven Investment
Management Firms. The Investment Management Firms are six Delaware partnerships:
Pacific Investment Management, Oppenheimer Capital, CCI, Cadence, NFJ and
Parametric and one United Kingdom limited partnership, Blairlogie.
The seven Investment Management Firms are structured as separate
subsidiaries. PIMCO Advisors believes this decentralized structure enables the
Investment Management Firms to implement their own distinct investment
strategies and philosophies, providing financial and other incentives for the
managers of each of the firms to render superior performance and client service.
The Managing Directors of the Investment Management Firms have a significant
profits interest in their respective Investment Management Firms, as well as
substantial economic interests in PIMCO Advisors.
The Partnership's business results from the November 30, 1997 merger of
Oppenheimer Capital with a subsidiary of PIMCO Advisors. Prior to November 30,
1997, the Partnership's only significant asset was an approximately 67.6%
interest in Oppenheimer Capital. In the Oppenheimer Capital Merger, Oppenheimer
Capital became a wholly-owned subsidiary of PIMCO Advisors and the Partnership
received 26.1 million PIMCO Advisors GP Units.
PGP is the sole general partner of the Partnership and is the controlling
general partner of PIMCO Advisors. The Partnership has five employees.
The Partnership's principal offices are located at 800 Newport Center
Drive, Newport Beach, California 92660. The Partnership's telephone number is
(714) 717-7022.
RECENT DEVELOPMENTS
The Opgroup Transaction. On November 4, 1997, PIMCO Advisors acquired the
investment advisory assets of Opgroup, including a 32.4% managing general
partner interest in Oppenheimer Capital, the one percent general partner
interest in the Partnership and one percent general partner interests in three
subsidiaries of Oppenheimer Capital and the ownership of Value Advisors LLC, a
newly formed limited liability company holding eight closed-end investment fund
management contracts formerly held by Advantage Advisors, Inc. As consideration
for these assets, the Opgroup stockholders received 2,119,608 PIMCO Advisors
Class A LP Units, rights (the "Opgroup Exchange Rights") to acquire up to
6,900,000 additional PIMCO Advisors Class A LP Units (or, after the
Restructuring, an equivalent number of Partnership Units) at $33 1/3 per unit
upon exchange of 6% Senior Notes due December 1, 2037 of Opgroup (the "Opgroup
Notes") and rights to require PIMCO Advisors to re-purchase some or all of these
units for $25.50 per unit (the "Opgroup Put Rights") (the "Opgroup
Transaction").
27
<PAGE> 33
PIMCO Advisors acquisition of Opgroup's investment advisory assets in the
Opgroup Transaction was accomplished as follows:
(i) Immediately prior to the transaction, Opgroup redeemed certain
shares of its outstanding stock in exchange for (A) $244 million in
available cash, (B) $150 million in Opgroup Notes and (C) an $80 million
face amount Certificate of Long-Term Indemnity Indebtedness (which is
reduced upon the occurrence of certain indemnity obligations with respect
to the investment management assets), which under certain circumstances
converts into an equal principal amount of Opgroup Notes. The Opgroup Notes
are limited in recourse to the assets of Opgroup.
(ii) Following the redemption, a newly-formed, wholly-owned limited
liability company subsidiary of PIMCO Advisors merged with and into
Opgroup. In the merger, Opgroup became a subsidiary of PIMCO Advisors, and
the Opgroup Stockholders received 2,119,608 PIMCO Advisors Class A LP
Units, the Opgroup Exchange Rights, and the Opgroup Put Rights. The Opgroup
stockholders also received certain registration rights with respect to
these units. See "Certain Relationships and Transactions."
(iii) Immediately following the merger, Opgroup, then a subsidiary of
PIMCO Advisors, caused its subsidiary Oppenheimer Financial Corp. ("Opfin")
to contribute (i) the ownership of Value Advisors LLC and the one percent
general partner interest in the Partnership to PIMCO Advisors, and then
(ii) Opfin's 32.4% managing general partner interest in Oppenheimer Capital
and the one percent general partner interests in three subsidiaries of
Oppenheimer Capital to Value Advisors LLC (then a subsidiary of PIMCO
Advisors). In exchange for these contributions, Opfin received 6,000,000
PIMCO Advisors Class C Units. Each PIMCO Advisors Class C LP Unit is
entitled to the same proportionate share of profits, losses and
distributions as a PIMCO Advisors Class A LP Unit, but with a maximum
distribution of $3.00 per year, or $0.75 per quarter subject to a catch-up
on an annual basis. In connection with this transaction, the Partnership
adopted an amendment to its partnership agreement converting the one
percent general partner interest into a one-one hundredth of one percent
general partner interest, with the remaining interest converted to
Partnership Units. PIMCO Advisors then sold the general partner interest in
the Partnership to PGP for $80,000. Subsequent to the closing, PIMCO
Advisors loaned $35 million to Opgroup, and Opgroup used a portion of the
proceeds of this loan to retire the indebtedness owed by Opfin to the
Partnership (the "Opfin Debt").
28
<PAGE> 34
The Opgroup Transaction is depicted in the following diagrams:
BEFORE OPGROUP TRANSACTION
29
<PAGE> 35
AFTER OPGROUP TRANSACTION
30
<PAGE> 36
The Oppenheimer Capital Merger. On November 30, 1997, Oppenheimer Capital
merged with a transitory limited partnership subsidiary of PIMCO Advisors, with
Oppenheimer Capital surviving. As a result of the Oppenheimer Capital Merger,
Oppenheimer Capital became an indirect wholly-owned subsidiary of PIMCO
Advisors, and the Partnership (the other general partner of Oppenheimer Capital
prior to the Oppenheimer Capital Merger, which held a 67.6% interest in
Oppenheimer Capital), received an aggregate of 25.5 million PIMCO Advisors GP
Units and was admitted as a general partner of PIMCO Advisors. Concurrent with
the merger, the Partnership acquired an additional 0.5 million PIMCO Advisors GP
Units for $16.7 million in cash. On December 1, 1997, a 1.67-for-one split of
the Partnership Units occurred having the effect that each Partnership Unit
outstanding after the unit split represents an economic interest in one PIMCO
Advisors GP Unit (after taking account of the 0.3 million PIMCO Advisors GP
Units underlying the general partner interest in the Partnership held by PGP).
OPPENHEIMER CAPITAL MERGER CHART
31
<PAGE> 37
BUSINESS OF THE PARTNERSHIP
OVERVIEW
The Partnership is a holding company which owns 26.1 million PIMCO Advisors
GP Units, representing an approximately 23.9% interest in PIMCO Advisors. PIMCO
Advisors is one of the nation's largest publicly traded investment management
firms with approximately $190 billion of assets under management at October 31,
1997 (as adjusted to include the assets under management of Oppenheimer
Capital). PIMCO Advisors business is conducted principally through the seven
Investment Management Firms, which are subsidiaries of PIMCO Advisors.
GENERAL
The table below sets forth the assets under management of PIMCO Advisors
and its seven Investment Management Firms (as adjusted to include the assets
under management of Oppenheimer Capital) at the dates indicated:
<TABLE>
<CAPTION>
ASSETS UNDER MANAGEMENT (IN MILLIONS)
------------------------------------------------------------------------
AT AT DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------
1997 1996 1995 1994 1993(2) 1992(2)
-------------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Pacific Investment
Management................ $108,531 $ 88,147 $ 76,371 $ 56,883 $53,001 $41,249
Oppenheimer Capital......... 60,915 48,227 37,266 28,508 26,144 26,277
Columbus Circle Investors... 11,462 14,159 12,670 10,304 9,848 8,070
Cadence Capital
Management................ 4,929 3,229 2,393 1,762 1,647 940
Parametric Portfolio
Associates................ 2,519 2,001 1,569 1,546 1,385 932
NFJ Investment Group........ 2,271 1,743 1,455 1,072 966 534
Blairlogie Capital
Management................ 875 673 645 479 97 --
Other(1).................... 45 70 79 129 1,194 2,630
------- -------- ------- ------- ------- -------
Total............. $191,547 $158,249 $132,448 $100,683 $94,282 $80,632
======= ======== ======= ======= ======= =======
</TABLE>
- ---------------
(1) Includes assets under management not advised or subadvised by the Investment
Management Firms. For years ended December 31, 1992 and 1993, includes
assets invested in the Cash Accumulation Trust, a money market fund, which
is currently subadvised by Columbus Circle Investors.
(2) Pro forma as if the Consolidation had occurred on January 1, 1993.
The table below sets forth the aggregate assets under management of PIMCO
Advisors and its seven Investment Management Firms (as adjusted to include the
assets under management of Oppenheimer Capital) by investment type:
<TABLE>
<CAPTION>
ASSETS UNDER MANAGEMENT (IN MILLIONS)
----------------------------------------------------
AT AT DECEMBER 31,
SEPTEMBER 30, ----------------------------------
1997 1996 1995 1994
------------- -------- -------- --------
<S> <C> <C> <C> <C>
Institutional Separate Accounts
Fixed Income............................... $ 78,621 $ 63,388 $ 55,362 $ 42,582
Equity..................................... 49,865 44,053 37,984 28,678
Institutional Mutual Funds(1)
Fixed Income............................... 22,565 19,592 16,732 11,830
Equity..................................... 5,728 5,077 3,768 2,515
Retail Mutual Funds
Fixed Income............................... 3,801 3,262 2,578 2,479
Equity..................................... 20,033 14,939 10,364 7,064
Wrap Fee and Option Management............... 7,649 5,020 2,820 2,930
Retail Money Market.......................... 3,285 2,918 2,840 2,605
-------- ------- -------
Total.............................. $ 191,547 $158,249 $132,448 $100,683
======== ======= =======
</TABLE>
- ---------------
(1) Includes assets managed under pooling arrangements.
32
<PAGE> 38
PIMCO Advisors markets its investment management services to institutional
and mutual fund clients through client service representatives at each of the
Investment Management Firms and through distributors including PIMCO Funds
Distribution Company ("PFD", formerly known as PIMCO Advisors Distribution
Company), a wholly-owned broker-dealer which distributes and markets shares of
the retail mutual funds of PIMCO Advisors.
The revenues of PIMCO Advisors and its seven Investment Management Firms
consist principally of management fees based on the value of assets under
management and in some cases the performance of the advisor. The table below
sets forth management fees for PIMCO Advisors and its seven Investment
Management Firms (as adjusted to combine with the management fees of Oppenheimer
Capital) for the periods indicated:
<TABLE>
<CAPTION>
MANAGEMENT FEES
--------------------------------------------------------------------------
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------------
1997 1996 1995 1994(2) 1993(2) 1992(2)
------------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Pacific Investment Management...... $ 200,433 $222,274 $180,937 $141,218 $144,487 $106,279
Oppenheimer Capital................ 159,925(3) 176,561(3) 147,087(3) 118,933 106,345 88,503
Columbus Circle Investors.......... 43,835 63,698 53,078 44,363 39,460 32,151
Cadence Capital Management......... 17,456 17,873 14,555 12,120 9,504 6,103
Parametric Portfolio Associates.... 3,160 3,466 3,753 4,451 4,505 2,932
NFJ Investment Group............... 6,331 7,271 5,916 4,967 3,795 2,007
Blairlogie Capital Management...... 3,224 3,721 2,916 420 23 --
Other(1)........................... 27,802 20,038 20,455 23,936 20,592 22,805
-------- -------- -------- -------- -------- --------
Total..................... $ 462,166 $514,902 $428,697 $350,408 $328,711 $260,780
======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Includes revenues not directly allocable to the investment management
services of the Investment Management Firms, the management fees of the Cash
Accumulation Trust and intercompany eliminations.
(2) Pro forma as if the Consolidation had occurred on January 1, 1993.
(3) Includes fees from former Advantage Advisers Funds.
A principal component of PIMCO Advisors marketing strategy is the
historical performance of the Investment Management Firms relative to selected
benchmarks over long periods of time. For example, Pacific Investment Management
stresses its record in equaling or exceeding client-selected performance
benchmarks over long periods through a measured risk taking approach that
emphasizes preservation of capital. Over the last 5 years, Pacific Investment
Management's Total Return composite, representing approximately 57% of Pacific
Investment Management's total assets under management at September 30, 1997,
outperformed the Lehman Brothers Aggregate Bond Index by approximately 159 basis
points (8.51% compared to 6.92%) annually on a compound basis after adjusting
for the advisory fees paid to Pacific Investment Management.
PRIMARY MARKETS AND STRATEGY FOR GROWTH
The two primary markets for the investment management services offered by
the Investment Management Firms are the institutional market and the mutual fund
market. Several of the Investment Management Firms also manage private accounts
for high net worth individuals.
INSTITUTIONS
The institutional market for investment management services includes
corporate, government and multi-employer pension plans, charitable endowments
and foundations, and corporations purchasing investment management services for
their own account. Each of the Investment Management Firms serves the
institutional market and conducts its own institutional marketing activities. In
general, the Investment Management Firms' marketing approach targets Fortune
1,000 companies and other large institutional
33
<PAGE> 39
investors. The Investment Management Firms seek to develop client relationships
through investment management performance and focused and responsive client
service. Their business strategies also involve increasing assets under
management for non-US clients, expanding the array of fixed income and equity
products offered to clients, seeking to expand market share with medium and
smaller institutional investors by offering pooled investment vehicles such as
the PIMCO Funds (described below), and otherwise seeking to diversify and expand
their businesses by investment strategy, method of delivery and markets.
MUTUAL FUNDS
Like the institutional market for investment management services, the
mutual fund market has expanded rapidly in recent years.
The mutual fund industry is highly competitive and is characterized by a
high degree of fragmentation and a large and rapidly increasing number of
product offerings. Marketing strategies, product development, business
development, sales expertise and servicing are increasingly important. The
traditional channel for the distribution of mutual funds (other than money
market funds) is through brokerage firms that are not affiliated with the funds'
sponsor organization and that are compensated primarily through front-end sales
loads deducted from the purchaser's investment at the time of the sale.
Increasingly other distribution arrangements and channels have become important.
These include "no-load" or "low-load" funds, sold primarily through direct
marketing efforts or captive sales forces affiliated with the sponsor
organization; "private label" and "proprietary" funds managed by and offered
primarily through, or to customers of, a financial organization such as a
brokerage firm, insurance company or bank; and "back-end load" or "level load"
funds offered through brokerage and other third-party channels, but with
compensation to the selling brokers being funded through commission advances
from the funds' sponsor which are recovered through ongoing charges against fund
assets assessed under Rule 12b-1 under the Investment Company Act of 1940, as
amended, contingent deferred sales charges assessed against shareholders at the
time they redeem their investments, or a combination of such sources.
PIMCO Advisors retail strategy is to build a "brand name" awareness of the
fund group both at the broker-dealer level and the retail investor level,
creating a valuable, long-term franchise. Leveraging off the depth and expertise
of its Investment Management Firms, PIMCO Advisors has recently developed
several new funds to enhance its product line and expects to continue to
supplement its fund offerings.
EXPANSION OPPORTUNITIES
PIMCO Advisors actively seeks opportunities to expand its business and
product offerings through acquisitions, strategic alliances or other business
combinations, and is often in discussions with numerous prospects regarding
possible transactions. While PIMCO Advisors is engaged in certain preliminary
discussions, it has not reached an agreement for any such transaction, and there
can be no assurances that any such transactions will occur.
INVESTMENT MANAGEMENT FIRMS
PACIFIC INVESTMENT MANAGEMENT COMPANY (PACIFIC INVESTMENT MANAGEMENT)
General
Pacific Investment Management had aggregate assets under management at
September 30, 1997 and December 31, 1996 of $108.5 billion and $88.1 billion,
respectively, of which 89.5% and 90.0%, respectively, consisted of fixed income
accounts and 10.5% and 10.0%, respectively, consisted of equity-related
accounts. Pacific Investment Management's clients principally include large and
medium-sized corporate pension and profit sharing plans, public pension plans,
multiemployer pension plans, foreign institutions and foundations and endowment
funds. Its client list includes many of the nation's largest pension funds,
foundations and endowments and other institutional investors.
34
<PAGE> 40
Investment Strategy
Pacific Investment Management believes that its strength in the management
of fixed income assets is derived from its investment philosophy, which stresses
a long-term or secular focus, active management, with measured risktaking, and
the application of strong analytical capabilities across all fixed income market
sectors. Under Pacific Investment Management's investment philosophy, longer
term macro-economic trends are key inputs to portfolio strategy, and moderate
portfolio duration ranges are favored to reduce volatility relative to
client-specified benchmarks. Pacific Investment Management's investment strategy
process begins with a "top-down" approach utilizing an intensive review of
long-term and cyclical trends to anticipate interest rates, volatility, yield
curve shape and credit trends. These forecasts become the basis for the major
portfolio strategies. Pacific Investment Management then uses a "bottom up"
process to select specific portfolio investments.
In managing fixed income investment advisory accounts, within client and
mutual fund guidelines, Pacific Investment Management uses a broad array of
fixed income investments, including investment grade and below investment grade
securities, as well as derivatives. Pacific Investment Management has developed
and employs, in the case of derivatives as well as other instruments, various
risk controls at the portfolio and individual instrument levels in an effort to
evaluate and monitor interest rate, liquidity and credit quality risk.
As part of its active management style, Pacific Investment Management uses
internally developed, proprietary computer software programs in managing its
clients' assets rather than analytical models purchased from outside sources.
Pacific Investment Management believes that its proprietary computer technology
provides it with an important competitive advantage.
Pacific Investment Management has sought to expand its client base beyond
the traditional defined benefit pension market, and has increased its presence
in the defined contribution pension market. Pacific Investment Management's
strategy also involves focusing on financial service aggregators of retail
assets such as unaffiliated sponsors of mutual funds and other registered
investment advisors (including fee-based financial planners) who recommend the
use of "no-load" mutual funds such as the institutional and administrative
classes of PIMCO Funds PIMS Series (as defined below under -- PIMCO Advisors
Mutual Funds) to their clients, and consultant alliances. In addition, Pacific
Investment Management seeks to increase both institutional and retail assets
under management from non-US investors.
Investment Products. Pacific Investment Management offers a range of
investment services for both fixed income and equity assets:
FIXED INCOME PORTFOLIOS. Pacific Investment Management offers a
variety of strategies for clients with fixed income portfolios, designed to
reflect each particular client's investment objective:
Total Return Portfolios -- Pacific Investment Management structures
total return portfolios with the objective of realizing maximum total
return, consistent with the preservation of capital and prudent
investment management across the spectrum of fixed income securities.
This strategy generally results in a portfolio duration of three to six
years. Portfolios utilizing this strategy represented approximately $66
billion of Pacific Investment Management's total assets under management
at September 30, 1997.
Low Duration Portfolios -- Pacific Investment Management has actively
managed low duration accounts since 1979 (overall portfolio duration one
to three years). The objectives in the low duration portfolios are to
preserve principal through investment in low-volatility instruments,
while seeking to achieve superior riskadjusted returns.
Other Duration Specific or Sector Specific Portfolios -- Pacific
Investment Management also offers clients active management of
portfolios based upon specific duration targets (e.g., long duration
portfolios or guaranteed investment contract ("GIC") alternative
products which are designed to outperform GICs) and sector emphases
(e.g., international, high-yield, or mortgages).
International And Other Portfolios. -- Pacific Investment Management, as
investment advisor to a series of offshore funds and individual clients,
provides fixed income investment advice to non-US
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<PAGE> 41
investors. Assets under management for these offshore funds totaled $1.2
billion and $476 million at September 30, 1997 and December 31, 1996,
respectively. Pacific Investment Management also serves as subadvisor
for a series of term trusts investing in mortgage related securities
that are marketed to Japanese investors. These trusts had assets of $1.3
billion and $1.4 billion at September 30, 1997 and December 31, 1996,
respectively. Pacific Investment Management also serves as subadvisor
for nine families of US mutual funds sponsored by other mutual fund
complexes. Total assets under management for these nonaffiliated funds
at September 30, 1997 and December 31, 1996 were $2.7 billion and $3.5
billion, respectively.
EQUITY RELATED PORTFOLIOS. Pacific Investment Management also manages
an enhanced equity based strategy StocksPLUS, which accounted for $11.3
billion of assets under management at September 30, 1997. StocksPLUS
represents a proprietary technique developed by Pacific Investment
Management that combines the active management of stock index futures (to
provide a proxy for equity market returns) with active management of a
short-term fixed income portfolio using much of the same analytics as is
used by Pacific Investment Management in its fixed income portfolios.
Set forth below is a table showing Pacific Investment Management's assets
under management and the number of portfolios at the dates indicated:
<TABLE>
<CAPTION>
ASSETS UNDER MANAGEMENT ($ IN MILLIONS)(1)
---------------------------------------------------------------
AT DECEMBER 31,
AT SEPTEMBER ---------------------------------------------
30,
1997 1996 1995 1994
--------------- ------------- ------------- -------------
NO. AMOUNT NO. AMOUNT NO. AMOUNT NO. AMOUNT
---- -------- --- ------- --- ------- --- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Income Portfolios:
Total Return Portfolios........... 203 $ 62,001 182 $51,078 162 $45,075 153 $34,681
Low Duration Portfolios........... 30 6,687 30 5,829 30 5,365 25 4,253
Other Duration Specific or Sector
Specific Portfolios:
Duration/Specific.............. 16 11,069 17 9,514 10 7,719 11 3,506
GIC Alternatives............... 33 4,676 21 2,918 13 1,968 12 1,634
Mortgages...................... 17 3,966 15 3,545 19 4,514 25 4,649
Global/Non-US.................. 31 4,412 17 3,096 9 1,670 8 1,680
Other.......................... 20 4,337 11 3,318 14 2,359 10 1,750
--- ------- --- ------- --- -------
Total..................... 350 97,148 293 79,298 257 68,670 244 52,153
--- ------- --- ------- --- -------
Equity/Related Portfolios:
StocksPLUS........................ 20 11,342 20 8,838 20 7,591 17 4,636
Other............................. 1 41 1 11 4 110 4 94
--- ------- --- ------- --- -------
Total..................... 21 11,383 21 8,849 24 7,701 21 4,730
--- ------- --- ------- --- -------
TOTAL ASSETS UNDER MANAGEMENT....... 371 $108,531 314 $88,147 281 $76,371 265 $56,883
=== ======= === ======= === =======
</TABLE>
- ---------------
(1) Includes the managed assets of PIMCO Funds.
Performance-Based Fees. Pacific Investment Management's fee schedules are
typically computed as a percentage of assets under management. Pacific
Investment Management's StocksPLUS product, which accounted for $11.3 billion of
assets under management at September 30, 1997, generally is subject to a
performance-based fee schedule in which underperformance relative to the S&P 500
index over a particular time period results in no fees being paid by clients and
superior performance results in incentive fees that are not subject to a cap.
The StocksPLUS fee arrangement can materially affect Pacific Investment
Management's total revenues from period to period.
In addition to the StocksPLUS accounts, several large fixed income accounts
also have performance-based fee arrangements. For these accounts, Pacific
Investment Management must outperform a specified fixed income benchmark over a
particular time period in order to receive a performance-based fee, but
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<PAGE> 42
generally is entitled to a base fee determined with reference to the value of
assets under management. Such arrangements can make Pacific Investment
Management's revenues volatile, but also provide an opportunity to earn higher
fees than could be obtained under fee arrangements based solely on a percentage
of assets under management.
Employees
Pacific Investment Management's 13 Managing Directors have an average of 18
years of industry experience. Of the 13 Managing Directors, three (William H.
Gross, William F. Podlich, III and James F. Muzzy) have been associated with
Pacific Investment Management since its founding and the other ten have been
with Pacific Investment Management for an average of 11 years. At September 30,
1997, the firm-wide staff of 314 included 59 investment professionals, of whom
20 are Chartered Financial Analysts. Pacific Investment Management's portfolio
managers, including the fixed income staff (25 professionals), are responsible
for research and trading. Account managers (40 professionals) are primarily
responsible for client relationship management and/or marketing.
OPPENHEIMER CAPITAL
General
Oppenheimer Capital has over $60 billion in assets under management as of
September 30, 1997. Oppenheimer Capital's fundamental strategy is to
consistently increase its assets under management by providing comprehensive,
cost-effective investment management services to its clients. Oppenheimer
Capital seeks to combine the preservation of capital in falling markets with
market or above-market performance in rising markets.
Investment Strategies
INVESTMENT PHILOSOPHY. Oppenheimer Capital seeks to adhere to a
disciplined, value-oriented investment philosophy, by identifying
company-specific, rather than industry-specific opportunities. By investing
in quality securities that are temporarily out of favor or have been
overlooked, Oppenheimer Capital seeks to preserve capital in falling
markets, reduce volatility compared to the overall market and produce
superior returns. Oppenheimer Capital subscribes to a similar
value-oriented philosophy with respect to fixed income investing.
Oppenheimer Capital seeks to identify the best relative fixed income values
available in the market by capitalizing on market inefficiencies which
occur as a result of unusual volatility, popular misperceptions, temporary
supply or demand shocks and other short-term conditions.
EQUITY INVESTMENT PROCESS. Original company-specific research drives
Oppenheimer Capital's equity investment process. Oppenheimer Capital
develops its own investment rationale internally. While each investment is
unique, Oppenheimer Capital's investment process generally involves four
basic steps. First, Oppenheimer Capital engages in an extensive analysis of
corporate fundamentals, focusing on companies with the following
characteristics: (i) successful cash flow generation and deployment, (ii) a
proven management team whose financial interests are aligned with those of
shareholders, (iii) a strong competitive position with significant barriers
to entry, (iv) sustainable levels of profitability and (v) capital
allocation consistent with creating shareholder value. Second, Oppenheimer
Capital's analysts prepare a written investment thesis, which is actively
reviewed and debated by the Investment Management Firm's investment
professionals. Third, once an investment thesis has been accepted, the
subject company's name is added to an approved list, from which Oppenheimer
Capital selects securities to construct its investment portfolios. Fourth,
Oppenheimer Capital continually reviews each investment thesis to evaluate
company performance and uses this review process to guide Oppenheimer
Capital's future investment decisions regarding securities of the subject
company.
FIXED INCOME INVESTMENT PROCESS. Every fixed income portfolio is
structured according to three critical investment decisions: (i) duration
and yield curve positioning; (ii) sector allocation; and (iii) credit
quality allocation. Based on extensive analysis of current market dynamics
and historical yield
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<PAGE> 43
relationships, Oppenheimer Capital seeks to add value to client portfolios
at each stage of this decision process.
Investments
Oppenheimer Capital applies this disciplined valuation approach across a
complete spectrum of actively managed US and non-US equity investments:
CORE VALUE. Core portfolios consist of large and mid-cap equities,
generally capitalized in excess of $1 billion. The approved list for core
portfolios consists of approximately 75 to 85 companies from which
Oppenheimer Capital professionals construct portfolios of 35 to 45 names
designed to meet specific client objectives.
MID-CAP VALUE. Dedicated mid-cap portfolios give Oppenheimer Capital
clients the opportunity for focused participation in companies capitalized
between $500 million and $5 billion at the time of purchase. From the core
and small-cap approved lists, portfolio managers construct portfolios of 25
to 35 securities.
SMALL-CAP VALUE. Small-cap portfolios seek to take advantage of
mispricings that occur in companies in the $50 million to $1 billion
capitalization range. Portfolios of 55 to 75 securities are selected from a
small-cap approved list of 80 to 100 names.
NON-US AND GLOBAL VALUE. Oppenheimer Capital has established an
international group, Oppenheimer Capital International, to apply its proven
value discipline to international markets.
Revenues
The revenues of Oppenheimer Capital consist principally of investment
management fees generated from accounts under management based primarily on
the value of assets in each account and also, to a limited extent, on
performance. Total operating revenues increased 34.0% for the three months
ended July 31, 1997 to $55.0 million from $41.1 million for the three
months ended July 31, 1996. For the five years ended April 30, 1997,
Oppenheimer Capital's investment management fee income has grown from $79.5
million to $175.8 million, representing a compound annual increase of
17.2%. Investment management fee income for the three months ended July 31,
1997, as compared to the three months ended July 31, 1996, increased 34.6%
from $39.4 million to $53.1 million.
The sources of Oppenheimer Capital's fee income are diversified and
balanced among the public, jointly trusteed and corporate employee benefit
plans, endowments and foundations, and individual and small tax-exempt
institutions which together account for 67% of fee income. Mutual funds and
other commingled products and wrap fee accounts contribute the balance. No
single separately managed account represented more than two percent of
Oppenheimer Capital's total investment management revenues during the year
ended April 30, 1997.
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<PAGE> 44
Assets Under Management
The following table sets forth the amount of assets under Oppenheimer
Capital's management at September 30, 1997 and April 30, 1997, 1996 and
1995 in millions.
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 30, APRIL 30, APRIL 30,
1997 1997 1996 1995
------------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Separate Account Management
Public Employee Benefit Plans............... $14,610 $ 13,172 $ 10,928 $ 8,988
Jointly Trusteed Benefit Plans.............. 12,238 10,659 9,379 7,064
Corporate Employee Benefit Plans............ 8,775 7,294 5,857 4,737
Endowments & Foundations.................... 1,713 1,428 1,106 925
Individuals & Small Institutions............ 700 632 825 623
------- ------- ------- -------
Total Separate Account Management............. 38,036 33,185 28,095 22,337
Wrap Fee...................................... 7,649 6,025 3,469 1,804
Mutual Funds & Other Commingled Products...... 15,230 12,014 9,003 6,256
Option Management(1).......................... -- -- -- 1,397
------- ------- ------- -------
Total............................... $60,915 $ 51,224 $ 40,567 $ 31,794
======= ======= ======= =======
</TABLE>
- ---------------
(1) During fiscal 1996, Oppenheimer Capital withdrew from the option management
business to concentrate on businesses offering higher returns.
At April 30, 1993 and 1994, total assets under management were (in
millions) $26,386 and $29,402, respectively. For the five years ended April 30,
1997, assets under management grew at a compound annual rate of 16.7%.
Investment Products
Separate accounts comprise the majority of assets under management, with
mutual funds and other commingled products, wrap fee accounts and variable
annuities comprising the retail management segment.
SEPARATE ACCOUNT MANAGEMENT. Oppenheimer Capital's traditional, core
business is separate account management, constituting approximately $33.1
billion or 64.8% of assets under management at April 30, 1997. Separate
account management includes institutional clients, such as state and local
public benefit plans, jointly-trusteed (Taft-Hartley) plans and corporate
benefit plans, as well as individual and other tax-free clients. The
minimum size for new investment management accounts is generally $10
million for equity accounts and $15 million for fixed income accounts.
RETAIL MANAGEMENT. Since 1982, Oppenheimer Capital has formed a range
of retail businesses including: (i) wrap fee accounts, programs through
which brokers offer their clients discretionary portfolio management
services; (ii) management of assets for insurance product separate
accounts; (iii) equity open-end mutual funds; (iv) closed-end investment
companies; and (v) money market open-end mutual funds. In fiscal 1996,
Oppenheimer Capital began to implement a strategic decision to withdraw
from selling directly to the retail market, and to instead market directly
to institutions with strong retail distribution capabilities.
NEW BUSINESS INITIATIVES. Over the past several years, Oppenheimer
Capital has introduced a variety of new products, consistent with its
diversification strategy. These products include international equity
management offered through Oppenheimer Capital International, collective
trust funds offered through Oppenheimer Capital Trust Company and SITs.
Recently Discontinued Operations and Significant Dispositions
On January 31, 1997, the Quest For Value Dual Purpose Fund redeemed all
18,004,302 of its income shares for total proceeds of $209 million. On March 3,
1997, the fund began trading as an open-end mutual
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<PAGE> 45
fund and was renamed Oppenheimer Quest Capital Value Fund. Oppenheimer Capital
is currently managing the Oppenheimer Quest Capital Value Fund under a
subadvisory agreement with OFI.
On May 12, 1997, Oppenheimer Capital sold its exclusive license to market
financial products to members of the American Medical Association for $1
million.
Oppenheimer Capital sold its 50% interest in Saratoga Capital Management
during the fourth fiscal quarter of 1997.
Employees
Oppenheimer Capital has a staff of 344 employees, including 43 investment
professionals. The average tenure of these professionals at Oppenheimer Capital
is 9 years, and their average investment experience is 19 years. Besides the
staff of 43 investment professionals, Oppenheimer Capital has a support staff of
301 individuals.
COLUMBUS CIRCLE INVESTORS (CCI)
General
CCI, based in Stamford, Connecticut and established in 1975, manages
discretionary accounts for entities such as corporate, government and union
pension and profit sharing plans, foundations and educational institutions, as
well as accounts for "high net worth" individuals. In addition, CCI has a
private collective investment program for accredited investors. As of September
30, 1997, assets under management by CCI, exclusive of the approximately $5.6
billion of assets of the PIMCO MMS Funds (as defined below under -- PIMCO
Advisors Mutual Funds) and the Cash Accumulation Trust under CCI management,
were approximately $5.9 billion for 102 clients.
CCI's principal equity products consist of its "core" portfolios, which
accounted for approximately $4.3 billion (or 37%) of its assets under management
at September 30, 1997. CCI uses its "positive momentum & positive surprise"
style for these portfolios, which principally consist of "large cap" US equity
securities. CCI also applies its "positive momentum & positive surprise" style
to manage "small cap" portfolios aggregating approximately $3.5 billion (or 30%)
of its assets under management at September 30, 1997; "mid cap" portfolios
aggregating approximately $1.7 billion (or 15%) of its assets under management
at September 30, 1997; and "equity income" portfolios aggregating approximately
$460 million (or four percent) of its assets under management at September 30,
1997. CCI also manages several relatively small fixed income, balanced and
specialized equity portfolios.
While net cash inflows for PIMCO Advisors, as a whole, were significant
($7.6 billion during the first nine months of 1997, $6.7 billion in 1996 and
$6.6 billion in 1995), CCI experienced substantial net cash outflows in 1995,
1996 and the first nine months of 1997, attributable in large part to
underperformance measured against relevant benchmarks in "Large Cap" portfolios.
This trend has continued in the fourth quarter of 1997.
Investment Strategy
CCI's investment strategy has remained essentially unchanged since 1975.
CCI's investment philosophy is based on the premise that companies producing
results which exceed the expectations of investors and Wall Street equity
research analysts will have rising stock prices, while companies with
disappointing results will experience stock price decline. CCI's investment
discipline focuses on the potential for "positive momentum & positive surprise."
CCI monitors numerous factors, including political and economic developments,
secular trends and industry and group dynamics, in addition to company-specific
events, to determine which companies are best-positioned to achieve revenue and
earnings acceleration. In addition to meeting the criteria for potential
"positive momentum & positive surprise," thorough fundamental analysis is
completed prior to making an investment decision. Depending upon market
conditions, CCI seeks to enhance investment performance by writing "covered"
call and stock index options on securities held in equity accounts.
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<PAGE> 46
Seven of the equity portfolios within the PIMCO Funds (plus the Tax Exempt
Fund) currently are managed by the same individuals who manage CCI's individual
and institutional private accounts. Accordingly, the CCI investment philosophy
and techniques described above are also applied to such equity and fixed income
funds. CCI's policy is to accept only new accounts of $10 million or more
(except in its accredited investors program). In 1995, CCI formed Columbus
Circle Trust Company, a limited purpose Connecticut trust company, which enables
CCI to provide trust and investment advisory services to smaller accounts.
Employees
Two of CCI's nine Managing Directors, Irwin F. Smith and Donald A.
Chiboucas, have been with CCI since its founding in 1975. Mr. Smith also
previously served as Chairman and Chief Executive Officer of Thomson Advisory
Group, L.P. At September 30, 1997, CCI had 94 employees, of whom 38 were
investment professionals. In July 1997, Mr. Christopher Burnham jointed the firm
as its Chief Executive Officer and President.
CADENCE CAPITAL MANAGEMENT (CADENCE)
General
Cadence, based in Boston, Massachusetts and established in 1988,
specializes in disciplined, growth-oriented management of equity securities. At
September 30, 1997, Cadence had $4.9 billion of assets under management, managed
separate account portfolios for 77 clients and subadvised five portfolios within
the PIMCO Funds.
Investment Strategy
Cadence is a "growth at a reasonable price" equity manager. Cadence's
philosophy is to participate in the long-term growth of the equity markets by
constructing fully invested portfolios of stocks selling at reasonable
valuations in relation to the fundamental prospects of the underlying companies.
Cadence uses a disciplined, "bottom-up" investment process which utilizes
quantitative screening for favorable fundamental and valuation attributes,
followed by "hands-on" qualitative research to confirm the apparent business
trends. Cadence structures its portfolios to be broadly based, typically
including 80 to 100 issues.
The investment strategy of Cadence involves the application of a
proprietary investment management process to different universes of equity
securities which are usually differentiated by market capitalization into four
categories: large cap (the top 1,000 market cap issues), mid cap (market cap of
over $500 million excluding the largest 250 issues), small cap ($100 million to
$1 billion) and micro cap (up to $100 million). Through this strategy, Cadence
is able to differentiate its investment products while remaining focused on a
single investment style.
Employees
The three Managing Directors of Cadence include David B. Breed, a founder
of the firm; William Bannick, who joined Cadence Inc. in October 1992; and
Katherine A. Burdon, who joined Cadence Inc. in December 1992 and was promoted
to Managing Director in May 1995. Mr. Breed is the Chief Executive Officer of
Cadence and is responsible for the original development and ongoing maintenance
of the investment process. Mr. Bannick is responsible for investment management
and client service. Ms. Burdon is a portfolio manager/analyst with client
services responsibilities and research responsibilities in healthcare,
telecommunications, and broadcast media. Cadence had a total of 28 employees at
September 30, 1997, including seven portfolio managers in addition to Mr. Breed.
PARAMETRIC PORTFOLIO ASSOCIATES (PARAMETRIC)
Parametric, based in Seattle, Washington, and established in 1987,
specializes in the management of broadly diversified domestic and international
equity strategies for tax-exempt and taxable clients. The firm offers active and
indexed strategies which are structured to meet client specific risk and return
objectives.
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<PAGE> 47
Active portfolios seek superior returns relative to an assigned benchmark within
a risk controlled framework, while indexed portfolios are constructed to closely
track an appropriate index. In addition, Parametric manages tax efficient
separate account strategies for a growing clientele of taxable investors.
Parametric uses quantitative techniques in portfolio construction and
management. The active portfolios are designed to maintain economic sector
allocations similar to the benchmark. Security selection is based on a ranking
system which evaluates each stock's exposure to valuation, earnings and momentum
factors. Portfolios are optimized to achieve a diversified group of securities
which have exposure to factors associated with superior return and risk
characteristics.
Parametric manages a wide variety of index funds which extend to both large
and small capitalizations and across value and growth styles. The international
assignments include allocations to developed countries and emerging markets.
At September 30, 1997, Parametric had assets under management of $2.5
billion, managed separate accounts for 29 clients, and served as subadvisor for
two portfolios within the PIMCO Funds and seven portfolios for several
unaffiliated families of funds.
NFJ INVESTMENT GROUP (NFJ)
NFJ, based in Dallas, Texas and established in 1989, is a disciplined,
value-oriented manager of equity securities. NFJ's specialty is investing in a
combination of low P/E stocks with high dividends selected through a proprietary
screening model. NFJ's business strategy involves targeting the U.S. pension and
mutual fund markets with specific attention to the pension consultants which
dominate the pension market. NFJ believes that its value niche and conservative
investment style is attractive to prospective clients because it naturally
complements the styles of other growth or core equity managers. NFJ has
developed a structured process with a systematic buy/sell discipline based on
fundamental research and computer modeling. NFJ's investment philosophy is based
on research showing that portfolios with a combination of low P/E stocks and
high dividends consistently outperform market indices. The low P/E bias is based
on the belief that "out of favor" stocks are not normally subjected to
significant negative earnings surprises because their low P/E ratios already
incorporate the market's negative expectations. The high dividend component
offers an "income cushion" to protect returns when market conditions are
unfavorable. At September 30, 1997, NFJ had assets under management of $2.3
billion, managed separate account portfolios for 25 clients and also served as
manager for seven portfolios within the PIMCO Funds and seven unaffiliated
families of funds.
BLAIRLOGIE CAPITAL MANAGEMENT (BLAIRLOGIE)
Blairlogie, based in Edinburgh, Scotland and founded in late 1992,
specializes in international equity investments. Blairlogie provides an
international investment product that combines country selection strategies with
the systematic application of an investment process more typically used by U.S.
investment firms. Blairlogie focuses its marketing efforts in the U.S. and seeks
to capitalize on increased demand for international investment products by U.S.
pension funds and retail-oriented U.S. mutual funds. Blairlogie's investment
strategy involves the application of fundamental valuation criteria to country
allocations and then to stock selection in order to enhance client returns over
time, while seeking a relatively low level of overall portfolio risk.
Blairlogie's future business strategy may also include the development of
investment management relationships in the United Kingdom and other parts of
Europe. At September 30, 1997, Blairlogie had assets under management of $875
million in the managed separate account portfolios for nine clients and served
as manager for three portfolios within PIMCO Funds and served as subadvisor to
one affiliated and two unaffiliated families of funds.
PIMCO ADVISORS MUTUAL FUNDS
PIMCO Advisors, together with the Investment Management Firms, sponsors and
manages mutual funds for both institutional and retail investors.
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<PAGE> 48
PIMCO FUNDS
In January 1997, PIMCO Advisors restructured its proprietary mutual funds
into a single fund family called "PIMCO Funds" which is comprised of two series:
(i) PIMCO Funds: Pacific Investment Management Series ("PIMCO Funds PIMS
Series"), 24 funds advised by Pacific Investment Management, and (ii) PIMCO
Funds: Multi-Manager Series ("PIMCO Funds MMS Series"), 22 funds advised by
PIMCO Advisors and subadvised by the Investment Management Firms and one
independent subadvisor. The PIMCO Funds PIMS Series are primarily fixed income
funds and the PIMCO Funds MMS Series are primarily equity funds. PIMCO Funds are
offered in up to five different share classes: institutional and administrative
share classes for institutional investors and, for retail investors, Class A
shares (which are "front end" load), Class B shares (which are "back-end load"),
and Class C shares (which are "level load"). The PIMCO Funds now feature a
"unified fee" structure which has specified advisory and administrative fees per
fund. As a result, PIMCO Advisors and Pacific Investment Management (and not the
PIMCO Funds) bear the risk of increases in service costs (including of
third-party service providers such as transfer agents) and will directly benefit
from decreases in those costs.
MARKETING AND DISTRIBUTION
PFD, a wholly-owned subsidiary of PIMCO Advisors, is the distributor for
the PIMCO Funds. PIMCO Advisors uses PFD to distribute the retail share classes
of PIMCO Funds through a large, diversified network of unaffiliated retail
broker-dealers, including many leading full-service broker-dealers. PFD has
selling agreements with over 1,000 broker-dealers and banks. The sales and
marketing personnel develop and support sales and marketing strategies between
PIMCO Advisors and the different retail broker-dealers. Additionally, the
relationships fostered by this group allow PFD's wholesalers to have access to
the branch offices and sales representatives of the retail broker-dealers. At
September 30, 1997, PIMCO Funds had approximately $30.2 billion of assets under
management of which approximately $22.9 billion were in PIMCO Funds PIMS Series
and approximately $7.3 billion were in PIMCO Funds MMS Series.
REGULATION
Virtually all aspects of the investment management business of PIMCO
Advisors are subject to various federal and state laws and regulations. PIMCO
Advisors and its Investment Management Firms are registered with the Commission
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
are registered under various state securities laws. The Advisers Act imposes
numerous obligations on registered investment advisors including fiduciary,
recordkeeping, operational and disclosure obligations. Blairlogie is also a
member of the Investment Management Regulatory Organization in the United
Kingdom. Pacific Investment Management and Parametric are registered with the
Commodity Futures Trading Commission as Commodity Trading Advisors and are
members of the National Futures Association. Pacific Investment Management and
its subsidiary, StocksPLUS Management, Inc., are also registered as Commodity
Pool Operators.
PIMCO Advisors and its Investment Management Firms are subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and to
regulations promulgated thereunder, insofar as they are "fiduciaries" under
ERISA with respect to many of their clients.
The foregoing laws and regulations generally grant supervisory agencies and
bodies broad administrative powers, including the power to limit or restrict any
of the Investment Management Firms from conducting their business in the event
that they fail to comply with such laws and regulations. Possible sanctions that
may be imposed in the event of such noncompliance include the suspension of
individual employees, limitations on the Investment Management Firm's business
activities for specified periods of time, revocation of the Investment
Management Firm's registration as an investment advisor, and other censures and
fines. Changes in these laws or regulations could have a material adverse impact
on the profitability and mode of operations of PIMCO Advisors and its Investment
Management Firms.
The officers, directors and employees of PIMCO Advisors and its Investment
Management Firms may from time to time own securities which are also owned by
one or more of their clients. Under the direction of
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<PAGE> 49
PIMCO Advisors, each firm has adopted internal policies with respect to personal
investment by employees. Each firm requires reports of securities transactions
and restricts certain transactions so as to minimize possible conflicts of
interest.
PFD is registered as a broker-dealer under the Exchange Act and is subject
to regulation by the Commission, the National Association of Securities Dealers,
Inc. and other federal and state agencies. As a registered broker-dealer, it is
subject to the Commission's net capital rule and certain state securities laws
designed to enforce minimum standards regarding the general financial condition
and liquidity of a broker-dealer. Under certain circumstances, these rules limit
the ability of PFD's parent to make withdrawals of capital and receive
dividends. The securities industry is one of the most highly regulated in the
United States, and failure to comply with related laws and regulations can
result in the revocation of broker-dealer licenses, the imposition of censures
or fines and the suspension or expulsion from the securities business of a firm,
its officers or employees.
COMPETITION
The investment management business is highly competitive. PIMCO Advisors
and its Investment Management Firms compete with a large number of other
domestic and foreign investment management firms, commercial banks, insurance
companies, broker-dealers and other financial services providers. Some of the
financial services companies with which the firms compete have greater
resources, assets under management and administration than PIMCO Advisors and
the Investment Management Firms and offer a broader array of investment products
and services.
PIMCO Advisors believes that the most important factors affecting its
success are the abilities, performance records and reputations of its investment
managers, and the development of new investment and marketing strategies. The
relative importance of these factors varies depending on the type of investment
management service involved. Client service is also an important competitive
factor. PIMCO Advisors ability to increase and retain client assets could be
adversely affected if client accounts underperform the market or if key
investment managers leave the firms. The ability of PIMCO Advisors and the
Investment Management Firms to compete with other investment management firms is
also dependent, in part, on the relative attractiveness of their investment
philosophies and methods under prevailing market conditions. There are
relatively few barriers to entry by new investment management firms in the
institutional managed accounts business, which increases competitive pressure.
Selection of advisors by institutional investors often is subject to a
competitive review process relying heavily upon historical performance. As a
result, new firms such as Blairlogie typically require a three to five year
start-up period during which they experience losses and require subsidies.
A large number of mutual funds are sold to the public by investment
management firms, broker-dealers, insurance companies and banks in competition
with mutual funds sponsored by PIMCO Advisors. Many competitors apply
substantial resources to advertising and marketing their mutual funds which may
adversely affect the ability of PIMCO Advisors-sponsored funds to attract new
clients and to retain assets under management. The ability to attract and retain
mutual fund assets in the load mutual funds which PIMCO Advisors offers is
dependent to a significant degree on the ability to attract, retain and motivate
retail brokerage salespersons.
PROPERTIES
The principal offices of the Partnership and PIMCO Advisors are located at
800 Newport Center Drive, Newport Beach, California where it occupies
approximately 10,460 square feet of space under a lease expiring in 2002 and at
2187 Atlantic Street, Stamford, Connecticut where PIMCO Advisors and PFD occupy
approximately 17,200 square feet of space under a sublease expiring in 2002.
Pacific Investment Management's principal offices are located at 840 Newport
Center Drive and 5 Civic Plaza, Newport Beach, California where it occupies
approximately 70,000 square feet of space under leases expiring in 1998.
Oppenheimer Capital currently maintains office space at the following locations:
approximately 40,000 square feet at the Oppenheimer Tower, New York, New York;
39,800 square feet at the Merrill Lynch Tower, New
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<PAGE> 50
York, New York; and 44,000 square feet at 33 Maiden Lane, New York, New York.
CCI's principal office is located at 1 Station Place, Stamford, Connecticut,
where it occupies approximately 31,000 square feet of space under a lease
expiring in 1999. Each location is a modern office building and the demised
space is adequate for the Partnership's and PIMCO Advisors current operations,
but more space may be necessary should PIMCO Advisors business expand.
LEGAL PROCEEDINGS
On November 10, 1997, Richard Buzby filed an action on behalf of a
purported class of limited partners of the Partnership against PIMCO Advisors
and certain individuals associated with the previous general partner of the
Partnership in the Court of Chancery of the State of Delaware, New Castle
County. The complaint alleges, among other things, various breaches of fiduciary
duty, conflicts of interest and unfair dealing in connection with the
Oppenheimer Capital Merger. The complaint seeks compensatory and/or
rescissionary money damages or, alternatively, injunctive relief or rescission
of the transactions. Since that date, certain other complaints have been filed
in the states of Delaware and New York, making similar allegations. These cases
are expected to be consolidated in the Court of Chancery of the State of
Delaware, New Castle County. The Partnership and PIMCO Advisors believe the
suits are without merit, and intend to contest them vigorously.
Except as described above, there are no material legal proceedings pending
or, to the knowledge of management, threatened against the Partnership or PIMCO
Advisors.
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<PAGE> 51
MANAGEMENT OF THE PARTNERSHIP
MANAGEMENT OF THE PARTNERSHIP
The Partnership Agreement provides that the Partnership is managed by its
general partner, PGP. PGP has delegated day to day management of the Partnership
to a management board which has appointed executive officers of the Partnership.
The board members and executive officers of the Partnership are comprised of the
following persons, who also serve as executive officers of PIMCO Advisors:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- --------------------------------- ---- -----------------------------------
<S> <C> <C>
William D. Cvengros.............. 49 Board Member, Chief Executive
Officer and President
Kenneth M. Poovey................ 65 Board Member, Executive Vice
President and General Counsel
Robert M. Fitzgerald............. 45 Board Member, Senior Vice President
and Chief Financial Officer
James G. Ward.................... 43 Senior Vice President and Director
of Human Resources
Richard M. Weil.................. 34 Senior Vice President
</TABLE>
Biographical information with respect to the above-listed individuals is
set forth in "-- Management of PIMCO Advisors."
Because the sole business of the Partnership is that of owning PIMCO
Advisors Units, certain information relating to the management of PIMCO Advisors
is set forth below.
MANAGEMENT OF PIMCO ADVISORS
PIMCO Advisors is managed by its general partners, PGP and the Partnership.
PGP has direct control of the Partnership, and therefore controls PIMCO
Advisors. The general partners have the equal right, power and authority to
manage and control the business and affairs of PIMCO Advisors and to take any
action deemed necessary or desirable by them in connection with the business of
PIMCO Advisors. Any difference arising as to any action connected with the
business of PIMCO Advisors, other than those requiring the unanimous consent of
the general partners, is decided by the general partners holding a majority of
the outstanding PIMCO GP Units.
Each of the following actions require the unanimous consent of all of the
general partners: (i) the constitution of a delegate and the delegation to such
delegate of any of the rights, powers and duties of the general partners and any
revision or revocation of such constitution or delegation; (ii) any merger or
consolidation of PIMCO Advisors with another business entity in which PIMCO
Advisors is not the surviving entity; (iii) any sale of all or substantially all
of PIMCO Advisors' assets; (iv) any incurrence of indebtedness by PIMCO Advisors
or its subsidiaries except in the ordinary course of business; (v) initiation,
consent to or acquiescence in any Insolvency Event (as defined in the PIMCO
Advisors Partnership Agreement) with respect to PIMCO Advisors; (vi) any other
action which would make it impossible for the general partners to carry on the
ordinary course of business of PIMCO Advisors; (vii) any determination, after
the occurrence of an Event of Withdrawal (as defined in the PIMCO Advisors
Partnership Agreement) with respect to a general partner, to carry on the
business of PIMCO Advisors; (viii) any determination or election pursuant to
Section 17.1 of the PIMCO Advisors Partnership Agreement (relating to
dissolution); (ix) any action which would cause an Assignment Event, a Tax
Realization Event or a Termination Event (as such terms are defined in the PIMCO
Advisors Partnership Agreement), or which would, prior to the Restructuring,
cause an Adverse Partnership Tax Event; and (x) and any amendment of Article X
(relating to management) Article XV (relating to indemnification) or Article XVI
(relating to restructurings) of the PIMCO Advisors Partnership Agreement.
In addition to the actions requiring unanimous consent of the general
partners, the rights and powers of the general partners to take the following
actions may not be delegated: (i) any determination or action
46
<PAGE> 52
pursuant to Article XVI of the PIMCO Advisors Partnership Agreement (relating to
the restructuring authority); (ii) admission of any successor or additional
general partner; (iii) any amendment of the PIMCO Advisors Partnership
Agreement; and (iv) any action which would require the approval of partners
other than the general partners.
Other than as provided above, the general partners have jointly delegated
substantially all of the management and control of PIMCO Advisors to the PIMCO
Advisors Management Board. Except as described below, the PIMCO Advisors
Management Board has, in turn, delegated its rights, powers and duties to manage
and control the business of PIMCO Advisors to an Executive Committee.
Pursuant to the terms of the delegation of authority by the general
partners of PIMCO Advisors, the PIMCO Advisors Management Board is composed of
(i) the Chief Executive Officer of PIMCO Advisors; (ii) six other persons
designated by PGP; (iii) three disinterested persons designated by (A)
representatives of the Public General Partners (defined as any general partner
of PIMCO Advisors that has at least one class of equity security outstanding
that is registered under Section 12 of the Exchange Act and which, together with
its subsidiaries, holds PIMCO Units representing more than 95% of its
consolidated assets other than cash and cash equivalents), if any, in proportion
to their ownership of PIMCO GP Units or (B) if there are no Public General
Partners, PGP or its successor as general partner of PIMCO Advisors; (iv) the
Chief Executive Officer and one Managing Director of each of the two Investment
Managing Firms having the greatest total income, determined as of the date of
appointment; and (v) one Managing Director of each of two other Investment
Managing Firms designated from time to time by the Management Board upon the
recommendation of the nominating committee. Pacific Investment Management
Company, a wholly owned subsidiary of Pacific Life Insurance Company ("PIMCO
Inc."), and PIMCO Partners, LLC ("PPLLC"), the general partners of PGP, have
agreed that the six persons designated by PGP (referred to in clause (ii) above)
will be the Chief Executive Officer of the Pacific Investment Management, two
other individuals designated by PPLLC and three individuals designated by PIMCO
Inc. In addition, PIMCO Inc. and PPLLC have agreed that the designees of PGP
designated pursuant to PGP's status as a Public General Partner (as defined in
the PIMCO Advisors Partnership Agreement) will be such individuals as they shall
mutually agree upon.
At any meeting of the PIMCO Advisors Management Board, a majority of the
members present may take any action on behalf of the PIMCO Advisors Management
Board except the following, which generally require the affirmative vote of at
least 75% of the members: (i) the constitution of, or delegation of rights,
powers and duties to, a committee, and the appointment or removal of the members
of a committee; (ii) provision for, prescription of the powers and duties of, or
delegation of rights, powers and duties to, any officer of PIMCO Advisors; (iii)
appointment or removal of any individual as an officer of PIMCO Advisors, unless
such appointment or removal has been recommended by the nominating committee;
(iv) provision of any salary or bonus for any officer of PIMCO Advisors, unless
such salary or bonus has been approved by the compensation committee; (v)
approval of the partnership agreement, operating agreement or profit sharing
plan of an Investment Management Firm, any amendment of any such agreement or
plan, and any increase in the compensation of any Managing Director of an
Investment Management Firm; (vi) removal of a Managing Director of an Investment
Firm; (vii) any issuance of PIMCO Advisors units or any other equity security if
the PIMCO Advisors units issued or subject to issuance upon conversion of such
equity security exceed 20% of the outstanding PIMCO Advisors units; (viii)
certain incurrences of indebtedness by PIMCO Advisors or its subsidiaries; or
(ix) any significant acquisition or disposition of a business by PIMCO Advisors.
The Executive Committee is composed of five members. The members of the
Executive Committee include the Chief Executive Officer of PIMCO Advisors; three
members appointed by the PGP-appointed members of the Management Board; and one
member appointed by the Management Board, upon the recommendation of the
Nominating Committee, which member must have been appointed to the Management
Board by an Investment Management Firm other than Pacific Investment Management.
PIMCO Inc. and PPLLC, the general partners of PGP, have agreed that the three
members of the PIMCO Advisors Management Board designated by PGP to the
Executive Committee will be (a) the Chief Executive Officer of the Pacific
Investment Management, (b) one member designated by PPLLC, who shall be the
chairperson of the Executive Committee and (c) one member designated by PIMCO
Inc.
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<PAGE> 53
Under the terms of the delegation, the Executive Committee has all of the
rights, powers and duties of the PIMCO Advisors Management Board to manage and
control the business and affairs of PIMCO Advisors, except that the Executive
Committee may not: (i) constitute any committee or subcommittee, delegate its
power to any committee or subcommittee, revise or revoke any such constitution
or delegation, or appoint or remove any member of such committee or
subcommittee; (ii) provide for, prescribe the duties of, delegate any rights or
powers to, appoint, or determine the compensation of, any officer of PIMCO
Advisors; (iii) approve any partnership agreement, operating agreement or profit
sharing plan of any Investment Management Firm, any amendment to such agreement
or plan or any increase in the compensation of any Managing Director of an
Investment Management Firm; (iv) remove a Managing Director of an Investment
Management Firm; (v) issue any equity security of PIMCO Advisors; (vi) incur any
indebtedness by PIMCO Advisors or its subsidiaries; (vii) acquire or dispose of
any business of PIMCO Advisors; or (viii) perform any action the authority for
which has been delegated to another committee.
In addition, PIMCO Advisors has an Audit Committee, a Compensation
Committee, and a Unit Incentive Committee of the Management Board, each
comprised of members of the PIMCO Advisors Management Board.
The members of the PIMCO Advisors Management Board and the executive
officers of PIMCO Advisors are as set forth below. The initial terms of all
PIMCO Advisors Management Board members expire on April 30, 1999: PIMCO Advisors
Management Board members thereafter will be appointed to one year terms.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
--------------------------- --- ------------------------------------------------------
<S> <C> <C>
Walter E. Auch, Sr......... 76 Board Member
David B. Breed............. 50 Board Member
Donald A. Chiboucas........ 53 Board Member
William D. Cvengros........ 49 Board Member and Chief Executive Officer
Walter B. Gerken........... 75 Board Member and Chairman
William H. Gross........... 53 Board Member
Brent R. Harris............ 38 Board Member
Donald R. Kurtz............ 67 Board Member
George A. Long............. 56 Board Member
James F. McIntosh.......... 57 Board Member
Kenneth H. Mortenson....... 51 Board Member
William F. Podlich, III.... 53 Board Member
Glenn S. Schafer........... 48 Board Member
Thomas C. Sutton........... 55 Board Member
William S. Thompson, Jr.... 52 Board Member
Benjamin L. Trosky......... 37 Board Member
Kenneth M. Poovey.......... 65 Executive Vice President and General Counsel
Stephen J. Treadway........ 50 Executive Vice President
Robert M. Fitzgerald....... 45 Senior Vice President and Chief Financial Officer
James G. Ward.............. 43 Senior Vice President and Director of Human Resources
Richard M. Weil............ 34 Senior Vice President
</TABLE>
Set forth below is certain biographical information with respect to the
persons who are the members of the Management Board or who serve as executive
officers of PIMCO Advisors or the Partnership:
Walter E. Auch, Sr. Mr. Auch has served as a member of the PIMCO Advisors
Management Board (or a predecessor management board of PIMCO Advisors) as an
independent member and as a member of the Audit Committee, Compensation
Committee and Unit Incentive Committee since the Consolidation in November 1994.
He currently is a management consultant. Mr. Auch was a Director of TAG from
October 1990 until November 1994. He was previously the Chairman and Chief
Executive Officer of the Chicago Board Options Exchange from 1979 to 1986. He is
also a Director of Geotek Industries, Inc., Fort
48
<PAGE> 54
Dearborn Fund, Shearson VIP Fund, Shearson Advisors Fund, Shearson TRAK Fund,
Banyan Strategic Land Trust, Banyan Strategic Land Fund II, Banyan Mortgage
Investment Fund, Express American Holding Corporation and Nicholas/Applegate
Funds.
David B. Breed. Mr. Breed has served as Chief Executive Officer and a
Managing Director of Cadence since the Consolidation in November 1994. From
February 1988 to July 1993, he was a Managing Director and Director of Cadence
Capital Management Corporation, and he was Chief Executive Officer and Chief
Investment Officer thereof until November 1994.
Donald A. Chiboucas. Mr. Chiboucas has served as a member of the PIMCO
Advisors Management Board (or predecessor management boards of PIMCO Advisors)
and the President and a Managing Director of CCI since the Consolidation in
November 1994. Mr. Chiboucas was Senior Executive Vice President of TAG Inc. and
PIMCO Advisors, a member of PIMCO Advisors' Executive Operating Committee and
President of CCI from October 1990 until November 1994.
William D. Cvengros. Mr. Cvengros is Chief Executive Officer of the
Partnership and has served as Chief Executive Officer of PIMCO Advisors and as a
member of the PIMCO Advisors Management Board (or predecessor management boards
of PIMCO Advisors) since the Consolidation in November 1994. In February 1986,
Mr. Cvengros became both Chairman of the Board and Directors of Pacific
Investment Management Company (the predecessor to Pacific Investment
Management). He was associated with Pacific Life Insurance Company ("Pacific
Life") from July 1972 when he joined Pacific Life as an investment analyst. He
was promoted to Executive Vice President, Investment Operations of Pacific Life
in April 1986, and became a Director in January 1988. Mr. Cvengros became Vice
Chairman and Chief Investment Officer of Pacific Life in January 1990 and
remained in such role until November 1994. Mr. Cvengros also served as a
Director of Pacific Mutual Distributors, Inc., Mutual Service Corporation,
PFAMCo, PMRealty Advisors, Inc., and the predecessors of Blairlogie, Parametric,
NFJ and Cadence. He is currently a Director of Furon Corporation and Remedy
Temp.
Robert M. Fitzgerald. Mr. Fitzgerald is Senior Vice President, Chief
Financial Officer and Chief Accounting Officer of the Partnership and PIMCO
Advisors. He joined PIMCO Advisors in February 1995. From April 1994 through
January 1995, he served as a consultant to various companies, including Pacific
Investment Management. From October 1991 until April 1994, he served in various
senior executive positions, including President, at Mechanics National Bank.
Prior to October 1991, he was a partner with Price Waterhouse LLP. He is a
Certified Public Accountant.
Walter B. Gerken. Mr. Gerken has served as Chairman of the PIMCO Advisors
Management Board (or a predecessor management board of PIMCO Advisors) since the
Consolidation in November 1994. Mr. Gerken is also on the Board of Commercial
Mortgage Securities Trust, Inc. Mr. Gerken is the former Chairman of the Board
and CEO of Pacific Life.
William H. Gross. Mr. Gross is a Managing Director of Pacific Investment
Management and has served as a member of the PIMCO Advisors Management Board (or
a predecessor management board of PIMCO Advisors) since the Consolidation in
1994. Mr. Gross joined Pacific Investment Management (the predecessor to Pacific
Investment Management) in June 1971 and became a Managing Director in February
1982. He serves as a Director and Vice President of StocksPLUS and as a Senior
Vice President of PIMCO Funds.
Brent R. Harris. Mr. Harris is a Managing Director of Pacific Investment
Management and has served as a member of the PIMCO Advisors Management Board (or
a predecessor management board of PIMCO Advisors) since the Consolidation in
November 1994. Mr. Harris was a Managing Director of Pacific Investment
Management (the predecessor to Pacific Investment Management) until November
1994. He joined Pacific Investment Management as an Account Manager in June
1985, and became a Vice President in February 1987, a Senior Vice President in
February 1990, a Principal in April 1991 and a Managing Director in April 1993.
Mr. Harris serves on the boards of PIMCO Commercial Mortgage Securities Trust,
Inc. and StocksPLUS. He also serves as a Trustee and Chairman of the PIMCO Funds
and the PIMCO Commercial Mortgage Securities Trust, Inc.
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<PAGE> 55
Donald R. Kurtz. Mr. Kurtz has served on the PIMCO Advisors Management
Board (or a predecessor management board of PIMCO Advisors) as an independent
member and as a member of the Audit Committee, Compensation Committee and Unit
Incentive Committee since the Consolidation in November 1994. Mr. Kurtz was a
Director of TAG from May 1992 until November 1994. From December 1994 until
October 1995, he was acting Managing Director of Domestic Equity Investments at
General Motors Investment Management Corp. Prior thereto, he served as Vice
President or Director, Internal Asset Management at General Motors Investment
Management Corp. from January 1990 and at General Motors Corp. from February
1987 until December 1989.
George A. Long. Mr. Long has served as a member of the PIMCO Advisors
Management Board since November 1997. He also has served as the Chairman and
Chief Executive Officer of Oppenheimer Capital since July 1997, the President of
Oppenheimer Capital since May 1996 and the Chief Investment Officer of
Oppenheimer Capital since 1987. Mr. Long served as a Managing Director of
Oppenheimer Capital from 1992 to May 1996. He also served as an Analyst of
Oppenheimer & Co., Inc. from 1969 to 1982.
James F. McIntosh. Mr. McIntosh has served as a member of the PIMCO
Advisors Management Board (or a predecessor management board of PIMCO Advisors)
as an independent member and as a member of the Audit Committee, Compensation
Committee and Unit Incentive Committee since the Consolidation in November 1994.
Prior to that time, he served as a Director of Pacific Investment Management
Company (the predecessor to Pacific Investment Management), a position he held
since June 1983. He is currently the Executive Director of Allen, Matkins, Leck,
Gamble & Mallory LLP, a law firm, which position he has held from October 1994.
From January 1981 to October 1994, he was Executive Director of Paul, Hastings,
Janofsky & Walker LLP, a law firm.
Kenneth H. Mortenson. Mr. Mortenson has served as a member of the PIMCO
Advisors Management Board since November 1997. He is a Managing Director of
Oppenheimer Capital, a position that he has held since 1987.
William F. Podlich, III. Mr. Podlich is a Managing Director of Pacific
Investment Management and has served as a member of the PIMCO Advisors
Management Board (or a predecessor management board of PIMCO Advisors) since the
Consolidation in November 1994. Mr. Podlich joined Pacific Investment Management
Company (the predecessor to Pacific Investment Management) as a Director in
August 1969 and became a Managing Director in February 1982. Mr. Podlich serves
as a Director of StocksPLUS and of Maxagen Technology, Inc.
Kenneth M. Poovey. Mr. Poovey is Executive Vice President and General
Counsel of the Partnership and PIMCO Advisors. Mr. Poovey has served as
Executive Vice President of PIMCO Advisors since May 1997 and as General Counsel
of PIMCO Advisors since November 1994. Prior to May 1997, Mr. Poovey was a
partner with the law firm of Latham & Watkins with which he has been affiliated
since 1980.
Glenn S. Schafer. Mr. Schafer has served as a member of the PIMCO Advisors
Management Board (or a predecessor management board of PIMCO Advisors) since the
Consolidation in November 1994. He currently serves as a Director and the
President of Pacific Life. Mr. Schafer was the Executive Vice President and
Chief Financial Officer of Pacific Life from April 1991 until January 1995.
Thomas C. Sutton. Mr. Sutton has served as a member of the PIMCO Advisors
Management Board (or a predecessor management board of PIMCO Advisors) since the
Consolidation in November 1994. Mr. Sutton has been the Chairman and Chief
Executive Officer of Pacific Life since January 1990 and a Director of Pacific
Life since 1987. He has been associated with Pacific Life since June 1965 and
became its President in September 1987. Mr. Sutton is also a Director of Edison
International, Newhall Land and Farming Company and The Irvine Company.
William S. Thompson, Jr. Mr. Thompson is a Managing Director and the CEO of
Pacific Investment Management and has served as a member of the PIMCO Advisors
Management Board (or a predecessor management board of PIMCO Advisors) since the
Consolidation in November 1994. Prior thereto, Mr. Thompson was a Managing
Director and the Chief Executive Officer of Pacific Investment Management
Company (the predecessor to Pacific Investment Management). Mr. Thompson joined
Pacific Investment
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<PAGE> 56
Management Company in April 1993. From February 1975 until April 1993, he was
with Salomon Brothers Inc., an investment banking firm, serving as a Managing
Director starting in 1981 and he is currently a Director of Spieker Properties.
Stephen J. Treadway. Mr. Treadway is an Executive Vice President of PIMCO
Advisors and Director, Chairman and President of PFD. He joined PIMCO Advisors
in May 1996. Prior thereto, he was associated with Smith Barney, Inc. for
eighteen years and served in various senior positions, including Executive Vice
President.
Benjamin L. Trosky. Mr. Trosky is a Managing Director of Pacific Investment
Management, and a member of the PIMCO Advisors Management Board. Mr. Trosky
joined Pacific Investment Management Company (the predecessor to Pacific
Investment Management) in October 1990, became a Vice President in April 1991,
and was an Executive Vice President from February 1994 through November 1994. He
served as Executive Vice President of Pacific Investment Management after the
Consolidation, and became a Managing Director in February 1996. Mr. Trosky
currently serves as a Senior Vice President of PIMCO Commercial Mortgage
Securities Trust, Inc.
James G. Ward. Mr. Ward is Senior Vice President and Director of Human
Resources of the Partnership and PIMCO Advisors. Mr. Ward served as Vice
President and Director of Human Resources of PIMCO Advisors April 1995 through
December 1996. Prior to that time, he served as Vice President and Director of
Human Resources for Pacific Investment Management, a position he held beginning
October 1994. From November 1987 through October 1994, he served as Vice
President and Director of Human Resources for Salomon Brothers Inc.
Richard M. Weil. Mr. Weil is Senior Vice President and Secretary of the
Partnership and PIMCO Advisors. Mr. Weil joined PIMCO Advisors in March 1996.
Mr. Weil was a Vice President in the Global Asset Management Group of Bankers
Trust Company from December 1994 through February 1996 and was associated with
the law firm of Simpson, Thatcher & Bartlett from September 1989 through
November 1994.
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<PAGE> 57
EXECUTIVE COMPENSATION
Prior to the date of the Opgroup Transaction, the Partnership did not have
any employees. During such time, the officers of Oppenheimer Capital performed
the management functions on behalf of the Partnership. The current executive
officers of the Partnership are also executive officers of PIMCO Advisors. The
compensation of the executive officers will be allocated between PIMCO Advisors
and the Partnership based on the amount of services provided to each entity. The
following table sets forth the cash compensation paid or allocated with respect
to the three years ended December 31, 1996 for services rendered to PIMCO
Advisors in all capacities by the Chief Executive Officer of PIMCO Advisors (who
is also the Chief Executive Officer of the Partnership) and each of the four
most highly compensated executive officers of PIMCO Advisors or the Partnership
(the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------------
ANNUAL COMPENSATION OTHER RESTRICTED SECURITIES ALL
------------------------------ ANNUAL UNIT UNDERLYING OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SAR COMPENSATION
UNDERLYING POSITION(1) YEAR ($) ($) ($) ($) (#) ($)
- ------------------------- ---- -------- -------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William D. Cvengros...... 1996 $500,000 $950,000 $ 9,500(2) -- -- $ 3,444(3)
Chief Executive Officer 1995 500,000 800,000 4,620 -- -- --
1994 63,847(5) 62,500 -- $3,248,571(4) 400,000 1,915
Stephen J. Treadway...... 1996 $196,730(5) $250,000 -- $ 562,500(4) 100,000 $303,444(3)(6)
Executive Vice
President 1995 -- -- -- -- -- --
1994 -- -- -- -- -- --
Robert M. Fitzgerald..... 1996 $209,500(7) $220,000 -- -- 10,000 $ 30,000(6)
Senior Vice President
and 1995 175,000(5) 175,000 -- -- 30,000 --
Chief Financial Officer 1994 -- -- -- -- -- --
Richard M. Weil.......... 1996 $166,667(5) $ 91,167 -- -- 32,500 $ 75,000(6)
Senior Vice President 1995 -- -- -- -- -- --
1994 -- -- -- -- -- --
James G. Ward............ 1996 $155,000 $105,000 -- -- 10,000 $ 19,000(3)(6)
Senior Vice President 1995 150,000 90,000 -- -- -- --
and Director of 1994 125,000 25,000 $ 18,700 -- 10,000 --
Human Resources
</TABLE>
- ---------------
(1) During fiscal year 1997, George L. Long served as the Chairman and Chief
Executive and Investment Officer of Oppenheimer Capital. In such capacities,
Mr. Long performed management functions on behalf of the Partnership. Mr.
Long's salary for his services in such capacities in the fiscal years ended
April 30, 1997, 1996 and 1995 was $350,000, $350,000 and $350,000,
respectively, and his bonus compensation during such periods was $3,573,000,
$3,825,000 and $2,000,000, respectively.
(2) Represents a bonus paid in lieu of the employer contribution to the PIMCO
Advisors 401(k) Savings and Investment Plan.
(3) Represents the premiums on term life insurance and long-term disability.
(4) Mr. Cvengros was awarded 100,000 PIMCO Advisors Class A LP Units and 100,000
PIMCO Advisors Class B LP Units. These units vest over a five year period,
pay distributions quarterly and had an aggregate value of $3,248,571 at
December 31, 1996. Mr. Treadway was awarded 25,000 PIMCO Advisors Class A LP
Units. These units vest over a five year period, pay distributions quarterly
and had an aggregate value of $562,500 at December 31, 1996.
(5) Mr. Cvengros joined PIMCO Advisors in November 1994, and his salary reflects
a partial year of service. Mr. Treadway joined PIMCO Advisors in May 1996,
and his salary reflects a partial year of service. Mr. Fitzgerald joined
PIMCO Advisors in February 1995, and his 1995 salary reflects a partial year
of service. Mr. Weil joined PIMCO Advisors in March 1996, and his salary
reflects a partial year of service.
(6) Represents amounts deferred under PIMCO Advisors L.P. Executive Deferred
Compensation Plan. An additional amount, which cannot currently be
determined, may be contributed by PIMCO Advisors at such time as the amounts
deferred are invested by the trustee of the plan in PIMCO Advisors Class A
LP Units to cause the effective purchase price not to exceed 85% of the
current market price for Partnership Units (until December 31, 1997, PIMCO
Advisors Class A LP Units) on the investment date.
(7) The salary and bonus amounts for Mr. Fitzgerald include amounts deferred in
the PIMCO Advisors 401(k) Savings and Investment Plan of $9,500 for 1996.
Compensation to key employees who are not executive officers may exceed the
compensation paid to executive officers in any given year.
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The following table provides information on option exercises in 1996 by the
Named Executive Officers, and the value of unexercised options held by each
Named Executive Officer at December 31, 1996:
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS/SARS AT
ACQUIRED VALUE OPTIONS/SARS AT-FY-END(#) FY-END($)
ON EXERCISE REALIZED EXERCISABLE (E)/ EXERCISABLE(E)/
NAME (#) ($) UNEXERCISABLE(U) UNEXERCISABLE(U)
- ------------------------------------ ----------- -------- ----------------------------- ----------------
<S> <C> <C> <C> <C>
William D. Cvengros................. -- -- 400,000(U) $2,754,021(U)
Stephen J. Treadway................. -- -- 100,000(U) 244,505(U)
Robert M. Fitzgerald................ -- -- 40,000(U) 192,840(U)
Richard M. Weil..................... -- -- 32,500(U) 55,880(U)
James G. Ward....................... -- -- 20,000(U) 98,820(U)
</TABLE>
COMPENSATION OF BOARD MEMBERS
PIMCO Advisors pays members of the Management Board who are not employees
of the Partnership, PIMCO Advisors, an Investment Management Firm or Pacific
Life a $20,000 annual retainer plus $750 per in-person meeting ($250 per
conference call meeting) of the Management Board attended and for each meeting
of a committee of the Management Board. Members who are employees of the
Partnership, PIMCO Advisors or any Investment Management Firm or Pacific Life
are not entitled to any additional compensation for their services as Board
members. Pursuant to the terms of the Partnership's 1996 Unit Incentive Plan,
the non-employee members of the Management Board may elect to receive restricted
Partnership Units in lieu of such retainer, with such restricted units valued at
91% of fair market value on the date of issuance.
COMPENSATION OF GENERAL PARTNER
The general partners of the Partnership and PIMCO Advisors receive no
compensation from the Partnership or PIMCO Advisors for services rendered to the
Partnership or PIMCO Advisors as a general partner. Rather, the general
partners' interests in profits and losses of the Partnership and PIMCO Advisors
are based on their interest in the Partnership and PIMCO Advisors, respectively.
Upon liquidation, the liquidating distributions to the general partners will be
based on the number of Partnership Units and PIMCO Advisors GP Units each holds.
Each general partner is reimbursed for all direct expenses paid by it on behalf
of PIMCO Advisors, for all expenses incurred by it in connection with the
business and affairs of PIMCO Advisors and, in the case of a Public General
Partner (as defined in the PIMCO Advisors Partnership Agreement), for all
expenses (other than taxes) of the Public General Partner. The Partnership is a
Public General Partner and, therefore, all of its expenses (other than taxes)
are paid by PIMCO Advisors.
COMPENSATION PURSUANT TO CONTRACT
William D. Cvengros, the Chief Executive Officer of the Partnership and
PIMCO Advisors and a member of the PIMCO Advisors Management Board and the
Executive Committee, is party to an employment agreement with PIMCO Advisors,
the term of which was extended through December 31, 1998 by the management board
of PIMCO Advisors in January 1997. Under the agreement, Mr. Cvengros receives an
annual base salary of $500,000 and a guaranteed annual bonus of $500,000. Mr.
Cvengros is also eligible to receive a discretionary bonus in the target range
of $200,000 to $500,000 (which amount may be increased or decreased upon the
recommendation of the Executive Committee and the approval of the PIMCO Advisors
Management Board). PIMCO Advisors granted Mr. Cvengros options to purchase up to
400,000 PIMCO Advisors Class B LP Units under the PIMCO Advisors 1994 Unit
Option Plan. In 1994, Mr. Cvengros was also granted 100,000 restricted PIMCO
Advisors Class A LP Units and 100,000 restricted PIMCO Advisors Class B LP Units
which are forfeitable to PGP upon certain events of termination. If his contract
is terminated without cause between December 31, 1996 and December 31, 1998, he
is entitled to accrued and
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<PAGE> 59
unpaid salary and bonus payments totaling $500,000 and immediate vesting of all
of his options and restricted units.
Kenneth M. Poovey, Executive Vice President and General Counsel of the
Partnership and PIMCO Advisors, and PIMCO Advisors have agreed to a compensation
arrangement, pursuant to which Mr. Poovey receives an annual base salary of
$300,000. Mr. Poovey is also eligible to receive a bonus in the target range of
$300,000 to $900,000. PIMCO Advisors granted Mr. Poovey 25,000 restricted PIMCO
Advisors Class B LP Units vesting over a three year period, and Mr. Poovey is
eligible, based on performance, for a second grant of up to 25,000 restricted
PIMCO Advisors Class B LP Units in the first quarter of 1998, which will also
vest over a three year period. PIMCO Advisors granted Mr. Poovey options to
purchase up to 50,000 PIMCO Advisors Class B LP Units, which will vest over a
period of five years. Upon his hire in March of 1997, PIMCO Advisors also paid
Mr. Poovey a $100,000 relocation loan which will be forgiven over five years
subject to certain conditions.
In July 1996, PIMCO Advisors made a $250,000 relocation loan to Robert M.
Fitzgerald, Senior Vice President and Chief Financial Officer of PIMCO Advisors
and the Partnership. The loan bears interest at 8% per annum, and $200,000 of
the principal and interest thereon will be forgiven over three years subject to
continued employment. At December 31, 1996, the loan had an outstanding
principal balance of $250,000. In January 1995, PIMCO Advisors made a $100,000
relocation loan to James G. Ward, Senior Vice President, Director Human
Resources of the Partnership and PIMCO Advisors. The loan bears interest at 8%
per annum, and the principal and interest thereon will be forgiven over three
years subject to continued employment. At December 31, 1996, the loan had an
outstanding principal balance of $33,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The members of the Unit Incentive Committee of the Management Board of
PIMCO Advisors are currently Messrs. Auch, Kurtz, and McIntosh, each of whom
were appointed to the Unit Incentive Committee of PIMCO Advisors in November
1997. None of Messrs. Auch, Kurtz or McIntosh have previously served as an
officer or otherwise been engaged as an employee of PIMCO Advisors.
OPPENHEIMER CAPITAL, L.P. 1997 UNIT INCENTIVE PLAN
Prior to the Restructuring, the Partnership and PIMCO Advisors will adopt
the 1997 Unit Incentive Plan (the "1997 Plan"). Pursuant to the Operating
Agreement between the Partnership and PIMCO Advisors, PIMCO Advisors has agreed
to issue to the Partnership a number of PIMCO Advisors units equal to the number
of Partnership Units issued under the 1997 Plan from time to time. See
"Relationship Between the Partnership and PIMCO Advisors."
The 1997 Plan is designed to provide performance incentives for key
employees and consultants of the Partnership, PIMCO Advisors and its
subsidiaries through the grant or issuance of options, restricted units, unit
payments, deferred units, and unit appreciation rights covering Partnership
Units and, in the case of persons qualifying as Nonpublic Unitholders, PIMCO
Advisors units, thereby stimulating their personal and active interest in the
Partnership's and PIMCO Advisors development and financial success, and inducing
them to remain in the Partnership's and PIMCO Advisors employ. The 1997 Plan is
administered by the Unit Incentive Committee of the PIMCO Advisors Management
Board. The aggregate number of Partnership Units that may be issued upon the
exercise of options or rights or may be subject to awards under the 1997 Plan
may not exceed 20,000,000.
Concurrent with the Restructuring, all of the outstanding awards under
PIMCO Advisors unit-based employee benefit plans (the 1996 Unit Incentive Plan,
the Restricted Unit Plan and the 1993 Unit Option Plan) and outstanding awards
under the Amended and Restated Oppenheimer Capital Restricted Option Plan and
the Amended and Restated Oppenheimer Capital Restricted Unit Plan will be
assumed by the 1997 Plan.
Participation by officers and persons deemed to be "directors" of the
Partnership in the 1997 Plan (except to the extent of awards previously granted
under the PIMCO Advisors plans and assumed under the 1997 Plan) is subject to
approval by the holders of the Partnership Units of an amendment to the 1997
Plan
54
<PAGE> 60
providing that officers and persons deemed to be "directors" of the Partnership
are eligible to receive awards under the plan.
EXECUTIVE DEFERRED COMPENSATION PLAN
PIMCO Advisors maintains an Executive Deferred Compensation Plan (the
"Deferred Compensation Plan"). The Deferred Compensation Plan is an unfunded
nonqualified deferred compensation plan pursuant to which (i) a portion of
compensation otherwise payable to certain eligible employees of PIMCO Advisors
and its subsidiaries, including the Investment Management Firms, is subject to
mandatory deferral and (ii) eligible employees of PIMCO Advisors and its
subsidiaries, including the Investment Management Firms, may elect to defer
additional amounts of compensation. The primary purpose of the Deferred
Compensation Plan is to provide deferred compensation to a select group of
management and highly compensated employees. The Deferred Compensation Plan is
not a qualified plan under Section 401(a) of the Code.
An employee's eligibility to participate in the Deferred Compensation Plan
is determined based on that employee's total compensation and the employee's
direct or indirect equity stake in PIMCO Advisors. Employees who have an equity
stake in relation to their compensation in excess of a predetermined ratio based
on their compensation level are not eligible to participate. Subject to this
limitation, each employee of a participating entity whose total compensation is
more than $250,000 is generally eligible to participate in the Deferred
Compensation Plan.
The Deferred Compensation Plan is administered by the Unit Incentive
Committee. PIMCO Advisors and the participating entities will make certain
contributions to a grantor, or "rabbi," trust in connection with the Deferred
Compensation Plan. The trustee under the grantor trust is responsible for
establishing and maintaining for each Deferred Compensation Plan participant a
deferral account that is (i) credited the amount of compensation deferred by
each participant and any additional amounts contributed by a participating
entity and (ii) debited the amount of distributions paid to the participant.
In addition to deferred cash payments, the Deferred Compensation Plan
provides for the issuance of restricted PIMCO Advisors Class A LP Units and
restricted PIMCO Advisors Class B LP Units (collectively, "Restricted Units") to
be distributed on a deferred basis. Pursuant to the Deferred Compensation Plan
provisions permitting the issuance of deferred Restricted Units, PIMCO Advisors
may from time to time issue Restricted Units to the trustee, who shall credit
such Restricted Units to an account maintained for each participant on whose
behalf Restricted Units are issued.
Prior to the Effective Date, the Deferred Compensation Plan will be amended
to cause the plan to be a joint plan of PIMCO Advisors and the Partnership, and
to make employees of the Partnership eligible to participate in the plan. As
amended, the plan will provide that, at such time as a participant becomes
eligible to receive a distribution of any amounts credited to the participant's
account under the Deferred Compensation Plan, such participant (i) if he or she
is not qualified as a Nonpublic Unitholder, will receive from the Partnership a
number of Partnership Units equal to the number of units credited to the
participant's account, in which case PIMCO Advisors will issue to the
Partnership an equal number of PIMCO Advisors GP Units and cancel the units
credited to the participant's account, or (ii) if he or she is qualified to be a
Nonpublic Unitholder, PIMCO Advisors will issue PIMCO Advisors units directly to
the participant, in which case such units may be eligible, pursuant to the
Operating Agreement between the Partnership and PIMCO Advisors, to be exchanged
for Partnership Units, subject to the limitations described in "Relationship
Between the Partnership and PIMCO Advisors -- Exchange Rights."
55
<PAGE> 61
RELATIONSHIP BETWEEN THE PARTNERSHIP AND PIMCO ADVISORS
OPERATING AGREEMENT
The Partnership and PIMCO Advisors are party to the Operating Agreement
which, together with the PIMCO Advisors Partnership Agreement, governs the
ongoing relationship of the Partnership and PIMCO Advisors.
Pursuant to the Operating Agreement, the Partnership agrees to take such
actions as shall be required from time to time so as to ensure that the number
of outstanding Partnership Units is at all times equal to the number of PIMCO
Advisors Units held by the Partnership and its subsidiaries which are allocable
to the limited partner interests in the Partnership. The Operating Agreement
provides that upon any issuance of Partnership Units, the Partnership shall
immediately contribute the consideration, if any, received by the Partnership
for such Partnership Units to PIMCO Advisors in exchange for PIMCO Advisors GP
Units equal in number to the number of such Partnership Units.
The Operating Agreement provides that the Partnership shall, at the request
of PIMCO Advisors from time to time, adopt and maintain one or more unit
incentive plans covering Partnership Units or PIMCO Advisors Units for the
benefit of individuals providing services to the Partnership, PIMCO Advisors and
their respective subsidiaries. Awards under the unit incentive plans to
individuals providing services to PIMCO Advisors and its subsidiaries are to be
determined by the Unit Incentive Committee.
In addition, the Operating Agreement provides that the Partnership assumes
and agrees to perform the obligations of PIMCO Advisors under: (i) the PIMCO
Advisors unit-based incentive plans (the 1993 Unit Option Plan and 1996 Unit
Incentive Plan (but with regard to options outstanding immediately after giving
effect to the Restructuring, only to the extent such options are exercisable to
purchase Partnership Units), the awards of which will be assumed by the 1997
Plan); (ii) the Exchange Right issued by PIMCO Advisors in the Opgroup
Transaction; and (iii) the 1994 Registration Rights Agreement and the 1997
Registration Rights Agreement (each as described under "Certain Relationships
and Transactions -- Registration Rights Agreements").
The Operating Agreement provides that the Partnership may not, without the
written consent of PIMCO Advisors, (a) carry on any business except in
connection with or incidental to (i) the performance of its duties as a general
partner under the PIMCO Advisors Partnership Agreement, (ii) the direct or
indirect acquisition, ownership or disposition of PIMCO Advisors units, and
(iii) its governance and existence; (b) merge or consolidate with or into any
other Person, or sell or otherwise dispose of all or substantially all of its
assets, or effect a recapitalization with respect to the Partnership Units, or
issue or agree to issue any equity securities other than Partnership Units; or
(c) create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to any indebtedness
(other than indebtedness of PIMCO Advisors as to which the Partnership is liable
in its capacity as a general partner of PIMCO Advisors).
The Operating Agreement also provides rights for certain holders of PIMCO
Advisors units and rights thereto to exchange their PIMCO Advisors units for
Partnership Units, subject to certain limitations. These rights are described
below under "Exchange Rights."
EXCHANGE RIGHTS
Pursuant to the Operating Agreement, twice each year, as soon as
practicable after financial statements for the preceding year, or for the first
six months of the fiscal year, as the case may be, are available, the
Partnership shall file a registration statement under the Securities Act (or
prepare a prospectus under a continuing registration statement) covering
Partnership Units to be issued in exchange for Private Units (as defined below)
(a "Registration Statement"). The Registration Statement shall cover resales by
affiliates of the Partnership. Upon the effectiveness of the Registration
Statement, the Partnership shall make an offer to the holders of Private Units
(each, a "Private Unitholder") to acquire some or all of the Private Units held
by them in exchange for an equal number of Partnership Units (an "Exchange").
The Operating Agreement
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<PAGE> 62
defines a "Private Unit" as a PIMCO Advisors unit (i) designated as a Private
Unit in a written certificate executed by PIMCO Advisors and not subsequently
revoked, (ii) issued pursuant to a unit incentive plan covering PIMCO Advisors
units, or (iii) held by the obligees under the $130 million of indebtedness owed
by PGP described in "Certain Relationships and Transactions -- PGP
Indebtedness." Those Private Unitholders who hold Private Units that are subject
to registration rights under the 1994 Registration Rights Agreements will be
entitled to exercise such rights with respect to any Partnership Units received
pursuant to an exchange of such Private Units for Partnership Units that is
permitted under the safe harbor rules and other unit transfer provisions under
the PIMCO Advisors Partnership Agreement.
The exchange rights described above are subject to limitations imposed by
the general partners pursuant to their authority under the PIMCO Advisors
Partnership Agreement. Under these limitations, which are intended to allow
exchanges pursuant to the exchange rights to qualify under an IRS regulatory
safe harbor for avoiding "publicly traded partnership" tax status for PIMCO
Advisors, certain limitations are imposed on the number of Private Units that
may be exchanged in any one year, with exceptions for certain types of "block
transfers" and other exchanges.
EXPENSE REIMBURSEMENT
In accordance with the PIMCO Advisors Partnership Agreement, PIMCO Advisors
pays all of the expenses (other than taxes) of the Partnership. See "Management
of the Partnership -- Compensation of General Partner."
CERTAIN RELATIONSHIPS AND TRANSACTIONS
PGP INDEBTEDNESS
The operations of PIMCO Advisors and the Investment Management Firms may be
affected by the terms of the $130 million of indebtedness owed by PGP. Although
this indebtedness does not constitute an obligation of PIMCO Advisors or any of
the Investment Management Firms, and the documents governing the indebtedness
are not binding on PIMCO Advisors or any of the Investment Management Firms, the
businesses of PIMCO Advisors and the Investment Management Firms have been and
are anticipated to continue to be conducted in compliance with the operating
restrictions in the documents governing the indebtedness in order to avoid a
default thereunder even though contrary courses of action may be in the best
interests of PIMCO Advisors or the Investment Management Firms. The operating
restrictions, which remain in effect until the debt matures in 2001 if the debt
is not prepaid, include, among other things, cash flow and interest coverage
requirements and restrictions on incurrence of indebtedness and liens,
investments, asset sales, mergers and consolidations, affiliate transactions,
issuance of additional PIMCO Advisors units and amendment of the PIMCO Advisors
Partnership Agreement. In particular, financial covenants relating to this
indebtedness could have the effect of inhibiting PIMCO Advisors' use of cash for
any purpose other than for distributions. The indebtedness is non-recourse to
PGP and is secured by, among other things, a pledge of certain PIMCO Advisors
units owned by PGP. In the event of a default under the indebtedness, the
lenders could foreclose upon the pledged PIMCO Advisors units which would reduce
the economic interests in PIMCO Advisors of PGP and its beneficial owners.
Management of PIMCO Advisors is currently in discussions with PGP and its
lenders concerning a modification to such indebtedness wherein PIMCO Advisors
would guarantee such indebtedness in exchange for a fee from PGP and the release
of the restrictions relating to PIMCO Advisors in such indebtedness. Also, PIMCO
Advisors has obtained a commitment from a group of lenders for a $140 million
credit facility and has considered borrowing under the facility and lending to
PGP an amount sufficient for PGP to repay its lenders, thereby eliminating all
restrictions relating to PIMCO Advisors under the PGP indebtedness. There can be
no assurances that any agreement with respect to these matters will be reached,
or as to the terms of any such possible arrangements if an agreement were
reached.
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<PAGE> 63
WITHDRAWAL AND REMOVAL OF A GENERAL PARTNER OF THE PARTNERSHIP OR PIMCO ADVISORS
The Partnership Agreement provides that, except under certain limited
exceptions, the general partner of the Partnership may withdraw as general
partner of the Partnership only if (i) such withdrawal is approved by holders of
a majority of the Partnership Units and the general partner determines that the
Partnership's advisory agreements shall continue to be in effect (a "Partnership
Assignment Determination"), and (ii) counsel renders an opinion that such action
may be taken without approval of all of the partners and that the limited
partners will not lose their limited liability pursuant to Delaware law or the
Partnership Agreement (a "Partnership Limited Liability Determination"), and
provides certain other opinions relating to the status of the Partnership as a
partnership for federal income tax purposes (a "Partnership Tax Determination").
The general partner may be removed by a vote of holders of Partnership Units
holding 80% or more of all outstanding Partnership Units if a successor general
partner is appointed, counsel makes a Partnership Limited Liability
Determination, a Partnership Tax Determination, the general partner makes a
Partnership Assignment Determination and such removal is approved by the
successor general partner. Also, interests in the general partner may be sold or
transferred without any prior approval or consent of the holders of the
Partnership Units.
The PIMCO Advisors Partnership Agreement provides that any general partner
may withdraw as a general partner of PIMCO Advisors only if (a) the general
partner transfers all of its PIMCO Advisors GP Units to an affiliate of such
general partner, and the affiliate is admitted as a general partner of PIMCO
Advisors in accordance with the PIMCO Advisors Partnership Agreement or (b) such
withdrawal is approved by holders of a majority of the units of limited partner
interest (other than those held by the general partners and their affiliates)
and if counsel renders an opinion that the limited partners do not lose their
limited liability pursuant to Delaware law or the PIMCO Advisors Partnership
Agreement (a "PIMCO Advisors Limited Liability Determination"), and provides
certain other opinions relating to the status of PIMCO Advisors as a partnership
for federal income tax purposes (a "PIMCO Advisors Tax Determination") and the
continuation of PIMCO Advisors' advisory agreements (a "PIMCO Advisors
Assignment Determination"). The general partners may be removed by a vote of
unitholders holding 80% or more of all outstanding units if PIMCO Advisors
receives a PIMCO Advisors Limited Liability Determination, a PIMCO Advisors Tax
Determination and a PIMCO Advisors Assignment Determination with respect to such
removal and (ii) if such general partner is the sole general partner, a person
qualified to be general partner, which has agreed in writing to carry on the
business of PIMCO Advisors, is approved by the partners of PIMCO Advisors as
successor general partner. However, by virtue of PGP's and the Partnership's
ownership of units, either of the general partners can veto any such removal.
Also, interests in a general partner may be sold or transferred without any
prior approval or consent of the holders of PIMCO Advisors LP Units.
In the event of withdrawal or removal of a general partner of PIMCO
Advisors, the departing general partner will become a limited partner and its
PIMCO Advisors GP Units will be converted into PIMCO Advisors LP Units. At the
time of such conversion, the departing general partner must pay to PIMCO
Advisors any negative balance in its capital account. If PIMCO Advisors is
indebted to the departing general at the time of its withdrawal or removal,
PIMCO Advisors will repay the general partner, within 60 days, the amount of
such indebtedness, subject to reduction for damages incurred if the general
partner withdraws in violation of the PIMCO Advisors Partnership Agreement. All
outstanding obligations incurred by the departing general partner as general
partner of PIMCO Advisors will be assumed by the successor to the general
partner, or if there is no successor, by the remaining general partners.
INDEMNIFICATION
The Partnership Agreement requires the Partnership to indemnify the general
partner, its affiliates and all of its officers, directors, partners, employees
and agents (collectively, the "Indemnitees") against any and all proceedings in
which the Indemnitees may be involved, or threatened to be involved, as a party
or otherwise by reason of their management of the affairs of the Partnership or
which relates to or arises out of the Partnership or related entities. The
Partnership Agreement provides that such Indemnitees are not entitled to
indemnification with respect to any claim, issue or matter in which they have
been adjudged liable for actual fraud, willful misconduct or gross negligence,
unless and only to the extent that the court in which such action was brought,
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<PAGE> 64
or another court of competent jurisdiction, determines upon application that,
despite the adjudication of liability, but in view of all the circumstances of
the case, the Indemnitee is fairly and reasonably entitled to indemnification
for such liabilities and expenses as the court may deem proper.
The Partnership Agreement also provides that the general partner will not
be liable to the Partnership or the holders of Partnership Units for errors in
judgment or for breach of fiduciary duty (including breach of any duty of care
or any duty of loyalty) unless the general partner's action or failure to act
involved an act or omission that constitutes actual fraud, gross negligence or
willful or wanton misconduct.
The PIMCO Advisors Partnership Agreement provides that PIMCO Advisors will
indemnify (i) any general partner, (ii) any former general partner, (iii) any
person which is or was an affiliate of any general partner or any former general
partner, (iv) any person which is or was an Associate (as defined in the PIMCO
Advisors Partnership Agreement) of any general partner, former general partner,
affiliate of a general partner or former general partner, or PIMCO Advisors or
its subsidiaries and (v) any person which is or was serving at the request of
PIMCO Advisors or any of its subsidiaries, any general partner or any former
general partner as an Associate of another person.
The PIMCO Advisors Partnership Agreement also provides that neither a
general partner nor any indemnitee will be liable to PIMCO Advisors or the
unitholders for errors in judgment or for breach of fiduciary duty (including
breach of any duty of care or any duty of loyalty) unless it is proved by clear
and convincing evidence that the general partner's action or failure to act
involved an act or omission undertaken with deliberate intent to cause injury to
PIMCO Advisors or was undertaken with reckless disregard for the best interests
of PIMCO Advisors.
CONTRIBUTION AGREEMENT
As part of the Opgroup Transaction, Opfin, Opgroup, PIMCO Advisors and
Value Advisors LLC entered into a contribution agreement (the "Contribution
Agreement") pursuant to which Opfin contributed its investment advisory assets
and its 100% interest in Value Advisors LLC to PIMCO Advisors in exchange for an
aggregate initial consideration of 6,000,000 PIMCO Advisors Class C LP Units.
Under the terms of the Contribution Agreement, if PIMCO Advisors or its direct
or indirect subsidiaries (other than Opgroup or Opfin) incurs a loss relating to
or arising from Opfin's investment advisory businesses or which is otherwise
attributable to the Opgroup Merger Agreement, and, as a result of such loss,
Opgroup receives an indemnification payment in excess of any loss incurred by
Opgroup or Opfin attributable to the same loss event (the excess portion
thereof, an "Excess Indemnification Payment"), then (i) if the indemnification
payment is in the form of a reduction of the face amount of the Indemnity
Certificate, Opfin shall return to PIMCO Advisors a number of PIMCO Advisors
Class C LP Units equal to the quotient of (x) 6,000,000 multiplied by the
principal amount of the reduction constituting such Excess Indemnification
Payment divided by (y) $265 million, or (ii) if the Excess Indemnification
Payment is in cash, Opgroup shall distribute the cash to PIMCO Advisors.
In addition, PIMCO Advisors agreed that if Opgroup or Opfin incurs a loss
for which Opgroup does not receive an indemnification payment in cash, PIMCO
Advisors will loan to Opgroup an amount equal to the loss. PIMCO Advisors
further agreed to loan Opgroup an amount sufficient to pay the remaining
principal and interest payments on the Opfin Debt.
REGISTRATION RIGHTS AGREEMENTS
PIMCO Advisors is a party to (i) that certain Registration Rights Agreement
dated November 4, 1997 between PIMCO Advisors and former Opgroup stockholders
(the "1997 Registration Rights Agreement"), and (ii) that certain Registration
Rights Agreement dated as of November 15, 1994 between PIMCO Advisors and
certain of its unitholders (the "1994 Registration Rights Agreement").
The holders of registration rights under the 1997 Registration Rights
Agreement were granted (i) the right to cause PIMCO Advisors to initiate up to
two registrations of their registrable securities (subject to customary
limitations, a minimum sale requirement and priority rights of holders of
registration rights under
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the 1994 Registration Rights Agreement) and (ii) certain piggyback registration
rights in respect of registrations initiated by PIMCO Advisors or by other
holders of registration rights granted pursuant to a separate agreement, subject
to approval of the managing underwriter. In the case of a registration initiated
by PIMCO Advisors, participation in such registration by the holders of
registration rights under the 1997 Registration Rights Agreement and other
registration rights agreements will not be reduced to less than 40%.
The holders of registration rights under the 1994 Registration Rights
Agreement were granted (i) the right to cause PIMCO Advisors to initiate up to
five demand registrations on Form S-1 and an unlimited number of demand
registrations on Form S-3 (subject to customary limitations and a minimum sale
requirement) and (ii) piggy-back registration rights in respect of primary
offerings by PIMCO Advisors similar to those held by the holders under the 1997
Registration Rights Agreement. The holders under the 1994 Registration Rights
Agreement generally have priority over the holders under the 1997 Registration
Rights Agreement with respect to management of the registration process and
inclusion of shares in registrations initiated by holders of registration
rights.
Pursuant to the Operating Agreement, the Partnership has agreed to provide
registration rights with respect to Partnership Units comparable to those
provided for in the 1997 Registration Rights Agreement and the 1994 Registration
Rights Agreement.
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<PAGE> 66
RECENT UNIT PRICES AND DISTRIBUTIONS
The Partnership Units are traded on the NYSE under the symbol "OCC" and the
PIMCO Advisors Class A LP Units are traded on the NYSE under the symbol "PA."
Following the Restructuring, the Partnership expects to change its name to PIMCO
Advisors Holdings L.P. and the Partnership Units are expected to be traded under
the symbol "PA." At the Effective Date, PIMCO Advisors Class A LP Units will
cease to be publicly traded.
The following table sets forth, for the periods indicated, the high and low
trading prices for the Partnership Units as reported on the NYSE and the total
cash distributions paid per Partnership Unit:
PARTNERSHIP UNITS
<TABLE>
<CAPTION>
TRADING
PRICES*
------------- TOTAL CASH
YEAR ENDED APRIL 30, HIGH LOW DISTRIBUTIONS
--------------------------------------------------------- --- --- -------------
<S> <C> <C> <C>
1996
First Quarter.......................................... $24 1/2 $21 1/8 $ 0.550
Second Quarter......................................... 28 24 0.625
Third Quarter.......................................... 29 1/2 27 1.175
Fourth Quarter......................................... 30 3/4 27 3/4 0.825
-------
Total............................................... $3.1750
=======
1997
First Quarter.......................................... $30 $27 1/8 $ 0.650
Second Quarter......................................... 34 1/2 28 0.750
Third Quarter.......................................... 37 3/8 33 1/4 0.950
Fourth Quarter......................................... 38 1/4 32 1/2 1.150
-------
Total............................................... $ 3.500
=======
1998
First Quarter.......................................... $39 7/8 $32 1/8 $ 0.950
Second Quarter......................................... 55 1/2 39 1/8 0.950
Third Quarter (through December 9, 1997)............... 57 3/4 45 3/4 1.510
-------
Total............................................... $ 3.410
=======
</TABLE>
- ---------------
* Unit prices and distributions have not been restated to reflect the
1.67-to-one unit split effective as of December 1, 1997.
On November 4, 1997, the last trading day prior to the execution of the
agreement and plan of merger relating to the Oppenheimer Capital Merger, the
closing price of the Partnership Units was $52 3/16. On December 9, 1997, the
closing price of the Partnership Units was $54 3/8 and there were approximately
1,260 holders of record of the Partnership Units.
61
<PAGE> 67
The following table sets forth, for the periods indicated, the high and low
trading prices for the PIMCO Advisors Class A LP Units as reported on the NYSE
and the total cash distributions paid per PIMCO Advisors Class A LP Unit, GP
Unit and Class B LP Unit.
PIMCO ADVISORS UNITS
<TABLE>
<CAPTION>
TRADING PRICES CLASS A LP
CLASS A UNITS AND GP UNITS CLASS B UNITS
--------------- TOTAL CASH TOTAL CASH
YEAR ENDED DECEMBER 31, HIGH LOW DISTRIBUTIONS DISTRIBUTIONS
- ------------------------------------------------ ----- ----- ------------ -------------
<S> <C> <C> <C> <C>
1995
First Quarter................................. $ 18 1/4 $ 16 7/8 $0.239 $ 0.077
Second Quarter................................ 20 5/8 17 3/8 0.470 0.138
Third Quarter................................. 21 1/4 19 0.470 0.199
Fourth Quarter................................ 21 1/4 19 5/8 0.470 0.259
------ ------
Total...................................... $1.649 $ 0.673
====== ======
1996
First Quarter................................. $ 23 5/8 $ 20 1/2 $0.470 $ 0.444
Second Quarter................................ 22 1/4 20 1/8 0.470 0.318
Third Quarter................................. 22 7/8 20 0.470 0.447
Fourth Quarter................................ 23 7/8 21 3/4 0.470 0.449
------ ------
Total...................................... $1.880 $ 1.658
====== ======
1997
First Quarter................................. $ 27 1/4 $ 20 5/8 $0.470 $ 0.464
Second Quarter................................ 26 20 3/4 0.470 0.435
Third Quarter................................. 3115/16 24 1/2 0.470 0.505
Fourth Quarter (through December 9, 1997)..... 3413/16 29 1/8 0.580 0.580
------ ------
Total...................................... $1.990 $ 1.984
====== ======
</TABLE>
On November 4, 1997, the last trading day prior to the execution of the
agreement and plan of merger relating to the Oppenheimer Capital Merger, the
closing price of the PIMCO Advisors Class A LP Units as reported on the NYSE was
$30 3/8 per unit. On December 9, 1997 the closing price of PIMCO Advisors Class
A LP Units as reported on the NYSE was $32 15/16 per unit. On December 9, 1997,
there were approximately 650 holders of record of the PIMCO Advisors Class A LP
Units, 22 holders of record of PIMCO Advisors Class B LP Units and two holders
of record of the PIMCO Advisors GP Units. The PIMCO Advisors Class B LP Units
(and all PIMCO Advisors GP Units) are not publicly traded.
Distribution Policy of the Partnership
Prior to the Restructuring, quarterly distributions have been paid within
30 business days after the last day of each July, October, January and April to
unitholders of record as of the last day of each fiscal year quarter in respect
to which such distributions were made. Distributions were based on the results
of operations of Oppenheimer Capital. Following the Restructuring, distributions
will be paid within 30 days following the end of each calendar quarter.
The Partnership makes quarterly distributions in an amount equal to 99.99%
of available cash flow to the holders of Partnership Units and 0.01% to the
general partner. The Partnership Agreement requires the general partner of the
Partnership to cause a quarterly distribution to unitholders in an amount equal
to the cash distribution from PIMCO Advisors less applicable taxes. The PIMCO
Advisors Partnership Agreement provides that the general partners shall cause
PIMCO Advisors to distribute to unitholders on a quarterly basis cash in an
amount equal to Operating Profit Available for Distribution less any amount the
general partners deem may be required for capital expenditures, future payments
of indebtedness, as reserves or otherwise in
62
<PAGE> 68
the business of PIMCO Advisors. The PIMCO Advisors Partnership Agreement defines
Operating Profit Available for Distribution as the net income of PIMCO Advisors
for a given period (determined in accordance with generally accepted accounting
principles); provided, that Operating Profit Available for Distribution for such
period as so determined shall be adjusted in accordance with the following
special rules and clarifications:
(a) Operating Profit Available for Distribution shall be determined
without regard to losses of any subsidiary of PIMCO Advisors which is not
treated as a partnership, branch or division for federal income tax
purposes.
(b) Operating Profit Available for Distribution shall be determined
without regard to accrued revenues from performance fees unless such fees
are not subject to forfeiture.
(c) Operating Profit Available for Distribution shall be determined
without regard to any income or deductions attributable to the grant,
amendment, vesting or exercise of any option or other right to purchase or
receive PIMCO Advisors units or other equity securities.
(d) Operating Profit Available for Distribution shall be determined
without regard to any amortization of goodwill and other intangible assets.
The Partnership has changed its fiscal year to a calendar year, and
distributions will be made on a calendar quarter basis commencing December 31,
1997. PIMCO Advisors will declare a distribution for the period ended December
31, 1997 to holders of record of the PIMCO Advisors units immediately prior to
the effectiveness of the Restructuring. The Partnership will also declare a
distribution for the same period to holders of record of the Partnership Units
immediately prior to the effectiveness of the Restructuring. Accordingly,
holders of the Partnership Units prior to the Restructuring will receive a
distribution based on three months performance of PIMCO Advisors and two months
performance of Oppenheimer Capital.
No assurances can be given as to the Partnership's future earnings levels.
Distributions made by the Partnership will depend on PIMCO Advisors
profitability and the profitability of the Investment Management Firms. Such
profitability will be affected in part by overall economic conditions and other
factors affecting capital markets generally, which are beyond the control of the
Partnership and PIMCO Advisors. In addition, the general partners of PIMCO
Advisors may, in determining the amount of distributions, deduct from Operating
Profit Available for Distribution any amount the general partners deem may be
required for capital expenditures, reserves or otherwise in the business of
PIMCO Advisors. To the extent PIMCO Advisors or the Partnership retains profits
in any year, unitholders may have taxable income from the Partnership that
exceeds their cash distributions.
63
<PAGE> 69
SELECTED FINANCIAL DATA OF OPPENHEIMER CAPITAL, L.P.
The following table sets forth selected financial data of the Partnership
(retroactively restated to reflect a 1.67 to 1 unit split effective December 1,
1997) and Oppenheimer Capital for the three months ended July 31, 1997 and 1996,
and each of the five years ended April 30, 1997. This information should be read
in conjunction with the Financial Statements of Oppenheimer Capital, L.P. and
the Consolidated Financial Statements of Oppenheimer Capital and the related
notes thereto included elsewhere in this Prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations of Oppenheimer
Capital, L.P."
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL, L.P.
-----------------------------------------------------------------------------------
FOR THE THREE
MONTHS
ENDED JULY 31, FOR THE YEARS ENDED APRIL 30,
------------------- -----------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- -------- -------- ------- ------- -------
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATING DATA:
Revenues.................................... $19,585(3) $12,280 $ 56,046(1) $ 61,316(1) $34,282 $35,091 $30,022
Expenses.................................... 685 685 2,720 2,720 3,461 4,038 3,704
------- ------- ------- ------- ------- ------- -------
Net income.................................. $18,900(3) $11,595 $ 53,326(1) $ 58,596(1) $30,821 $31,053 $26,318
======= ======= ======= ======= ======= ======= =======
Net income per unit......................... $ 0.72 $ 0.45 $ 2.06 $ 2.28 $ 1.21 $ 1.22 $ 1.04
Distributions declared per unit............. $ 0.57 $ 0.39 $ 2.10 $ 1.90 $ 1.30 $ 1.28 $ 1.16
Weighted average number of units
outstanding............................... 25,763 25,656 25,663 25,457 25,277 25,122 25,065
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
JULY 31, -----------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA AT:
Total assets................................ $118,313 $116,149 $110,099 $96,633 $98,116 $98,365
Total liabilities........................... 14,806 17,858 12,713 10,321 10,319 9,683
------- -------- -------- ------- ------- -------
Partners' capital........................... $103,507 $ 98,291 $ 97,386 $86,312 $87,797 $88,682
======== ======== ======= ======= =======
</TABLE>
- ---------------
(1) Includes revenues and a gain on Quest sale of $1.8 million, or $.07 per unit
in fiscal 1997 and $17.7 million, or $.69 per unit in fiscal 1996.
(2) Includes a special distribution related to the Quest sale of $.06 per unit
in fiscal 1997 and $.33 in fiscal 1996.
(3) Includes revenues and a gain on Quest sale of $2.8 million, or $.11 per
unit.
<TABLE>
<CAPTION>
OPPENHEIMER CAPITAL
-------------------------------------------------------------------------------
FOR THE THREE
MONTHS
ENDED JULY 31, FOR THE YEARS ENDED APRIL 30,
------------------- --------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- -------- -------- -------- -------- -------
(UNAUDITED) (AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATING DATA:
Revenues........................................ $55,043 $41,075 $181,974 $158,215 $129,912 $112,290 $94,733
Expenses........................................ 30,302 23,441 103,064 95,551 83,066 64,683 54,707
------- ------- -------- -------- -------- -------- -------
Operating Income................................ 24,741 17,634 78,910 62,664 46,846 47,607 40,026
Gain on Quest sale(1)........................... 4,374 -- 2,806 27,725 -- -- --
------- ------- -------- -------- -------- -------- -------
Income before income taxes and minority
interest...................................... $29,115 $17,634 $ 81,716 $ 90,389 $ 46,846 $ 47,607 $40,026
======= ======= ======== ======== ======== ======== =======
Assets under management at period end (in
billions)..................................... $ 60.8 $ 40.4 $ 51.2 $ 40.6 $ 31.8 $ 29.4 $ 26.4
</TABLE>
<TABLE>
<CAPTION>
APRIL 30,
JULY 31, --------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA AT:
Total assets.................................... $103,055 $ 93,019 $ 76,338 $ 56,129 $ 43,034 $37,677
Total liabilities............................... 54,356 53,044 41,462 41,582 30,557 27,830
Minority interest............................... 396 277 174 87 25 18
------- -------- -------- -------- -------- -------
Partners' capital............................... $ 48,303 $ 39,698 $ 34,702 $ 14,460 $ 12,452 $ 9,829
======== ======== ======== ======== =======
</TABLE>
- ---------------
(1) Reflects the gain realized by Oppenheimer Capital on the sale of the
investment advisory and other contracts and business relationship for its
twelve Quest for Value mutual funds to Oppenheimer Funds, Inc., on November
22, 1995.
64
<PAGE> 70
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE PARTNERSHIP
The information set forth below is based on the historical financial
condition and results of operations of the Partnership and Oppenheimer Capital,
and does not reflect the effects of the Oppenheimer Capital Merger or the
Restructuring. All information has been retroactively restated, where
applicable, to reflect a 1.67 to 1 unit split effective December 1, 1997.
THE PARTNERSHIP
GENERAL
The primary source of income for the Partnership is its proportionate share
of the net income of Oppenheimer Capital and interest income on a $32,193,000
par value 10% note due from Oppenheimer Equities, Inc. in the year 2012 (the
"Equities note").
REVENUES AND EXPENSES
The Partnership recorded equity in earnings of Oppenheimer Capital for the
three months ended July 31, 1997 and July 31, 1996 of $18.8 million and $11.5
million, respectively. Equity in earnings of Oppenheimer Capital for the three
months ended July 31, 1997 included a gain recognized by Oppenheimer Capital on
the sale of the investment advisory and other contracts and business
relationships of the Quest for Value Dual Purpose Fund, Inc. to Oppenheimer
Funds, Inc. ("OFI") (the "Dual Purpose sale") of $2.8 million. Excluding the
Dual Purpose sale, the increase in equity in earnings of Oppenheimer Capital is
primarily due to the higher operating income of Oppenheimer Capital.
Other expenses consist of New York City unincorporated business tax
("UBT"). For the three months ended July 31, 1997 and July 31, 1996, New York
City UBT totaled $33,000 and $33,000, respectively.
The Partnership recorded equity in earnings of Oppenheimer Capital for the
years ended April 30, 1997, 1996 and 1995 of $52.8 million, $58.1 million, and
$31.1 million, respectively. Equity in earnings of Oppenheimer Capital for the
1997 and 1996 fiscal years included gains recognized by Oppenheimer Capital on
the sale of the Quest for Value Funds investment advisory and other contracts
and business relationships (the "Quest sale") to OFI of $1.8 million and $17.7
million, respectively. Equity in earnings of Oppenheimer Capital, excluding the
Quest sale, increased 26.4% to $51.0 million for the year ended April 30, 1997
from $40.4 million for the year ended April 30, 1996, as a result of higher
operating income at Oppenheimer Capital. Equity in earnings of Oppenheimer
Capital, excluding the Quest sale, increased 30.0% for the year ended April 30,
1996 from $31.1 million for the year ended April 30, 1995, primarily due to
higher operating income at Oppenheimer Capital. Interest income on the Equities
note for each of the years ended April 30, 1997, 1996 and 1995 totaled $3.2
million.
Amortization of goodwill for each of the years ended April 30, 1997, 1996
and 1995 amounted to $2.6 million. Other expenses consist of New York City UBT
computed at a rate of 4% of taxable income. For the years ended April 30, 1997,
1996 and 1995, New York City UBT amounted to $132,000, $132,000 and $873,000,
respectively. The decline in New York City UBT in fiscal 1996 reflects a change
in the tax law effective on January 1, 1995. As of that date, New York City UBT
is imposed on the total income of Oppenheimer Capital, and the Partnership is
allowed to claim a credit for its pro rata share of any New York City UBT paid
by Oppenheimer Capital. Previously, New York City UBT was assessed directly at
the Partnership level.
Net income for the three months ended July 31, 1997 and July 31, 1996
amounted to $18.9 million and $11.6 million, respectively, or $.72 per unit and
$.45 per unit, respectively. Excluding the Dual Purpose sale, net income for the
three months ended July 31, 1997 amounted to $16.1 million, or $.61 per unit.
Net income amounted to $53.3 million or $2.06 per unit based on an average
of 25.7 million units outstanding for the year ended April 30, 1997; $58.6
million or $2.28 per unit based on an average of 25.5 million units outstanding
for the year ended April 30, 1996; and $30.8 million or $1.21 per unit based on
an average of 25.3 million units outstanding for the year ended April 30, 1995.
Included in the net income for
65
<PAGE> 71
the years ended April 30, 1997 and 1996 are gains on the Quest sale, which
amounted to $1.8 million, or $.07 per unit and $17.7 million, or $.69 per unit,
respectively.
TAXES
The Partnership is not subject to federal, state, or local income taxes,
which are the obligations of the individual partners. However, beginning in
calendar year 1998, the Partnership will elect to be subject to a 3.5% federal
tax on its share of Oppenheimer Capital's gross income from the active conduct
of a trade or business in order to retain its partnership status. The imposition
of these taxes will reduce both net income and cash available for distribution
to partners. Similar taxes may be imposed by states in which the Partnership is
subject to such taxes.
LIQUIDITY AND CAPITAL RESOURCES
Until the Oppenheimer Capital Merger, the only business activity carried on
by the Partnership was its investment in Oppenheimer Capital. The Partnership
received quarterly cash distributions from Oppenheimer Capital and receives
interest income from Oppenheimer Equities, Inc. The Partnership distributed its
available cash flow to its partners, which equaled cash distributions from
Oppenheimer Capital plus interest income from the Equities note less New York
City UBT. Consequently, the Partnership did not require any additional liquidity
or capital resources.
Prior to the consummation of the Opgroup Transaction, the Partnership made
quarterly distributions in an amount equal to 99% of available cash flow to the
holders of Partnership Units and 1% to the general partner, Opfin. For the three
months ended July 31, 1997 and July 31, 1996, the Partnership declared
distributions to holders of Partnership Units of $.57 per unit and $.39 per
unit, respectively. Subsequent to the consummation of the Opgroup Transaction,
the general partner interest was reduced to 0.01% and the limited partner
interests were increased to 99.99%. Distributions subsequent to the reduction in
the general partner interest will be made accordingly.
For the years ended April 30, 1997, 1996 and 1995, the Partnership declared
total distributions to holders of Partnership Units of $2.10, $1.90 and $1.30
per unit, respectively. The total distributions for the years ended April 30,
1997 and 1996 included special distributions of $.06 and $.33, respectively,
related to the Quest sale.
OPPENHEIMER CAPITAL
GENERAL
Oppenheimer Capital's results of operations include those of its basic
institutional investment management business and those of its subsidiary
entities; Opcap Advisors ("Advisors"), OCC Distributors ("Distributors"),
Oppenheimer Capital Limited, Oppenheimer Capital Trust Company ("Opcap Trust"),
and 225 Liberty Street Advisers, L.P., formerly AMA Investment Advisers, L.P.
("AMA Advisers"). The results for the quarter ended July 31, 1996 also include
Saratoga Capital Management ("Saratoga"), which was sold on April 29, 1997.
For the periods presented, Oppenheimer Capital's operations have been
characterized by substantial increases in assets under management. This growth
has been from four principal sources. First, new clients have entered into
investment management agreements and existing clients have added funds to their
accounts under management. Second, rising securities price levels have increased
the market values of investment portfolios. Third, mutual funds and variable
annuities managed by Advisors have added to assets under management due to
increased sales and market appreciation. Fourth, wrap fee assets have increased
due to new accounts opened, expanded distribution to broker-dealers and market
appreciation. The growth in assets under management has been tempered by
Oppenheimer Capital's withdrawal from the low fee rate option management
business in fiscal 1996 in order to concentrate on businesses offering higher
returns. For the periods presented, the option management business had no
material effect on revenues or profitability. Revenues are generally derived
from charging a fee based on the net assets of clients' portfolios. All periods
66
<PAGE> 72
presented show increased operating revenue. Revenues for all periods presented
consist principally of investment management fees.
In fiscal 1996, Oppenheimer Capital began to implement a strategic decision
to withdraw from selling directly to the retail market, and to instead market
directly to institutions with strong retail distribution capabilities. In
November 1995, Oppenheimer Capital withdrew from the open-end mutual fund
distribution business (see the Quest sale) and began to eliminate retail
operations at AMA Advisers, completing this process in the first quarter of
fiscal 1997. Oppenheimer Capital also reduced the losses incurred by Saratoga
throughout fiscal 1997, and during the fourth quarter of fiscal 1997 sold its
interest in Saratoga. Additionally, Oppenheimer Capital terminated the
distribution of unit investment trusts during the fourth quarter of fiscal 1997.
QUARTER ENDED JULY 31, 1997
On July 18, 1997, Oppenheimer Capital completed the sale of the investment
advisory and other contracts and business relationships of its Quest for Value
Dual Purpose Fund to OFI, which is unrelated to Oppenheimer Capital. The fund
has been renamed the Oppenheimer Quest Capital Value Fund, and continues to be
managed by Advisors under a subadvisory agreement with OFI.
As shown below, the value of assets under management increased 50.3% to
$60.8 billion at July 31, 1997 from $40.4 billion at July 31, 1996. Oppenheimer
Capital continued to experience growth in its traditional business, the
management of separate accounts for large financial institutions and
high-net-worth individual investors, as well as its newer businesses, including
mutual funds and wrap fee accounts.
<TABLE>
<CAPTION>
AT JULY 31, AT JULY 31, PERCENT
1997 1996 INCREASE
----------- ----------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Separate Account Management.......................... $38,684 $27,456 40.9%
Wrap Fee............................................. 7,505 3,674 104.3%
Mutual Funds & Other Commingled Products............. 14,568 9,306 56.5%
------- ------- -----
$60,757 $40,436 50.3%
======= ======= =====
</TABLE>
YEARS ENDED APRIL 30, 1997, 1996 AND 1995
The value of total assets under management increased 26.3% to $51.2 billion
at April 30, 1997 from $40.6 billion at April 30, 1996. The growth of assets
under management was tempered by the loss of $530 million in mutual fund assets
as a result of the closed-end Quest for Value Dual Purpose Fund redeeming all
income fund shares and converting to an open end fund. For the year ended April
30, 1997, assets under management for separately managed accounts increased
18.1% to $33.2 billion, mutual fund and other commingled products increased
33.4% to $12.0 billion, and wrap fee accounts increased 73.7% to $6.0 billion.
The value of total assets under management increased 27.6% to $40.6 billion
at April 30, 1996 from $31.8 billion at April 30, 1995. The growth of assets
under management was tempered by the loss of $1.5 billion in option management
accounts with a low effective fee rate and a reduction of $300 million in fixed
income mutual fund assets as a result of the Quest sale. For the year ended
April 30, 1996, assets under management for separately managed accounts
increased 25.8% to $28.1 billion from $22.3 billion, mutual fund and other
commingled products increased 43.9% to $9.0 billion from $6.3 billion, and wrap
fee accounts increased 92.3% to $3.5 billion from $1.8 billion.
GAIN ON QUEST SALE
On November 22, 1995, Oppenheimer Capital completed the Quest sale to OFI,
which is unrelated to Oppenheimer Capital, for an Initial Purchase Price Payment
of $41.7 million. In December 1996, a Deferred Purchase Price Payment of $3.8
million was received by Oppenheimer Capital as a result of the assets of the six
merged fixed income funds being at stated levels. The gains on the sale, before
New York City
67
<PAGE> 73
unincorporated business tax ("UBT") and minority interest, amounted to $2.8
million for the year ended April 30, 1997, and $27.7 million for the year ended
April 30, 1996.
Total assets of the twelve funds were $1.7 billion at November 21, 1995.
The six equity funds involved, representing $1.4 billion of those assets,
continue to be managed by Advisors under a subadvisory contract with OFI, which
allows the current portfolio management teams to remain in place. The six equity
funds were renamed the Oppenheimer Quest for Value funds (the "Quest funds").
The six fixed income funds, representing approximately $300 million of those
assets, were merged into comparable funds managed by OFI.
The overall impact of the Quest sale on Oppenheimer Capital's results has
been highly positive. Although the fee rate as a subadviser is less, assets in
the six equity funds have more than tripled to $4.9 billion at June 30, 1997 as
a result of the extensive distribution capabilities of OFI and market
appreciation. In addition, Oppenheimer Capital has eliminated distribution
expenses related to these funds. Reflecting the impact of these various factors,
the profitability of Oppenheimer Capital's mutual fund business has increased
significantly since the Quest sale.
Oppenheimer Capital implemented a portion of the mutual fund distribution
cost savings prior to the close of the Quest sale, and results for the quarter
ended April 30, 1996 reflected those savings. In addition, as a result of the
sale, significant expenditures that would have been made in systems, technology,
sales and marketing capabilities, and new product development have not been
necessary.
On January 31, 1997, the closed-end Quest for Value Dual Purpose Fund (the
"Fund") redeemed all of its income shares as required by its Articles of
Incorporation, and on February 28, 1997, the Fund converted to an open-end fund.
The investment contracts and other business relationships were sold to OFI (the
"Dual Purpose Fund sale"), and Advisors now serves as subadviser to the Fund
under an agreement with OFI. The subadvisory fee is significantly lower than the
management fee previously earned by Oppenheimer Capital. Annual subadvisory fees
related to the Fund are projected at $1.0 million annually, based on assets
under management at June 30, 1997, while Oppenheimer Capital received $5.0
million of investment management fees for the fiscal year ended April 30, 1997.
On July 18, 1997, Oppenheimer Capital received an initial payment of $7.0
million related to the Dual Purpose Fund sale.
OPERATING REVENUES -- QUARTER ENDED JULY 31, 1997
Total operating revenues increased 34.0% for the three months ended July
31, 1997 to $55.0 million from $41.1 million for the three months ended July 31,
1996. Total operating revenues include investment management fees, net
distribution assistance and commission income, and interest and dividends.
Investment management fees increased 34.6% for the three months ended July
31, 1997 to $53.1 million from $39.4 million for the three months ended July 31,
1996 as average assets under management for the three months ended July 31, 1997
increased 35.8% to $55.8 billion from $41.1 billion for the three months ended
July 31, 1996.
Net distribution assistance and commission income increased 13.9% to $1.6
million for the three months ended July 31, 1997 from $1.4 million for the three
months ended July 31, 1996. The increase was due to higher certificate of
deposit commission income resulting from greater demand for funds by banks, and
was offset in part by lower unit investment trust commission income as a result
of Oppenheimer Capital's decision to withdraw from this business during the
fourth quarter of fiscal 1997.
Interest and dividend income increased to $351,000 for the three months
ended July 31, 1997 from $237,000 for the three months ended July 31, 1996. This
increase can be primarily attributed to higher average cash balances.
OPERATING REVENUES -- YEARS ENDED APRIL 30, 1997, 1996 AND 1995
Total operating revenues increased 15.0% for the year ended April 30, 1997
to $182.0 million from $158.2 million for the year ended April 30, 1996 and
increased 21.8% for the year ended April 30, 1996 from
68
<PAGE> 74
$129.9 million for the year ended April 30, 1995. Total operating revenues
include investment management fees, net distribution assistance and commission
income, and interest and dividends.
Investment management fees increased 16.2% to $175.8 million for the year
ended April 30, 1997 from $151.3 million for the year ended April 30, 1996. This
increase is a result of average assets under management increasing 24.7% to
$45.8 billion for the year ended April 30, 1997 from $36.7 billion for the year
ended April 30, 1996. Investment management fee revenue grew less than assets
under management due to the lower subadvisory fee rates earned on the Quest
funds than the advisory fee rate prior to the Quest sale. These lower fee rates
were more than offset by asset growth for these funds and the elimination of
mutual fund distribution expenses. Annual subadvisory fees are projected at
$15.3 million, based on assets under management at June 30, 1997, down slightly
from the previous $15.7 million of annual fees for the twelve Quest for Value
Funds at November 22, 1995. Assets in the six equity funds have more than
tripled to $4.9 billion at June 30, 1997 from $1.4 billion on November 22, 1995,
reflecting record fund sales and market appreciation.
In addition, investment management fee revenue grew less than the increase
in assets under management due to a decline in performance fees earned in fiscal
1997 to $1.2 million from $3.0 million in fiscal 1996. These decreases were
offset in part by investment management fees increasing due to higher fee
realizations resulting from a continued shift in the asset mix toward higher
effective fee rate businesses such as variable annuities and wrap fee accounts.
Investment management fees increased 26.9% for the year ended April 30,
1996 from $119.2 million for the year ended April 30, 1995, primarily as a
result of average assets under management increasing 23.8% for the year ended
April 30, 1996 from $29.7 billion for the year ended April 30, 1995. This
increase also reflects higher fee realizations as a result of a shift in the
asset mix toward the higher fee rate businesses including mutual funds, variable
annuities and wrap fee accounts, and the withdrawal from the option management
business, which had very low fee rates. Offsetting the increase in part was the
lower fee rate earned subadvising the Quest funds as a result of the Quest sale.
Net distribution assistance and commission income decreased 18.9% to $4.9
million for the year ended April 30, 1997 from $6.1 million for the year ended
April 30, 1996. This decrease reflects reduced commission and distribution
income as a result of the Quest sale and lower unit investment trust commission
income due to reduced demand for fixed income unit investment trusts
(Oppenheimer Capital discontinued the distribution of unit investment trusts in
April 1997). This decrease was offset in part by a $1.3 million increase in
certificate of deposit commission income as a result of increased demand for
funds by banks.
Net distribution assistance and commission income decreased 42.0% for the
year ended April 30, 1996 from $10.4 million for the year ended April 30, 1995
primarily as a result of a $3.5 million decline in certificate of deposit
commission income as a result of lower demand for funds by banks, decreased unit
investment trust commission income, and reduced commission and distribution
income as a result of the Quest sale in November 1995.
Interest and dividend income increased 39.7% to $1.3 million for the year
ended April 30, 1997 from $895,000 for the year ended April 30, 1996. This
increase can be attributed to higher average cash balances.
Interest and dividend income increased to $.9 million for the year ended
April 30, 1996 from $275,000 for the year ended April 30, 1995. This increase
can be primarily attributed to the interest earned on the proceeds received from
the Quest sale.
OPERATING EXPENSES -- QUARTER ENDED JULY 31, 1997
Total operating expenses increased 29.3% for the three months ended July
31, 1997 to $30.3 million from $23.4 million for the three months ended July 31,
1996.
Oppenheimer Capital's most significant expense category is employee
compensation and benefits, which includes salaries, bonuses, sales commissions,
incentive compensation and other payroll related expenses. Compensation and
benefits expense increased 36.2% for the three months ended July 31, 1997 to
$24.0 million from $17.6 million for the three months ended July 31, 1996.
Compensation and benefits expense increased
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<PAGE> 75
primarily due to higher incentive compensation costs due to increased new
business, higher operating profits and increased participation by key executives
in incentive compensation plans as a result of industry competitive pressures
and their individual contributions to firm profitability. In addition,
compensation and benefits expenses increased due to higher amortization expenses
related to restricted units granted to certain key employees on May 1, 1997, as
well as staff salary increases and additions to staff to support expanding
businesses. These increases were offset in part by staff reductions as a result
of the sale of Oppenheimer Capital's 50% interest in Saratoga and the decision
to withdraw from the distribution of unit investment trusts.
Occupancy expenses increased 17.7% for the three months ended July 31, 1997
to $1.8 million from $1.5 million for the three months ended July 31, 1996. This
increase was due to adjustments to rent escalation accruals during the quarters
ended July 31, 1997 and 1996.
General and administrative expenses increased 12.1% for the three months
ended July 31, 1997 to $3.1 million from $2.8 million for the three months ended
July 31, 1996. The increase in general and administrative expenses reflects
increased costs incurred in connection with the development of new businesses
and increased investments in computer equipment and software as a result of
increased technical support for professional and administrative staff and higher
professional services expense due to the expansion of Oppenheimer Capital's
business. This increase was offset in part by savings realized from the sale of
Oppenheimer Capital's interest in Saratoga.
Promotional expenses decreased 7.8% for the three months ended July 31,
1997 to $1.4 million from $1.6 million for the three months ended July 31, 1996.
The decrease in promotional expenses was due primarily to the elimination of
costs incurred by Saratoga and the elimination of the retail distribution of
unit investment trusts. This decrease was offset in part by increased travel and
entertainment expenses as a result of new business activities.
OPERATING EXPENSES -- YEARS ENDED APRIL 30, 1997, 1996 AND 1995
Total operating expenses increased 7.9% for the year ended April 30, 1997
to $103.1 million from $95.6 million for the year ended April 30, 1996 and
increased 15.0% for the year ended April 30, 1996 from $83.1 million for the
year ended April 30, 1995.
Oppenheimer Capital's most significant expense category is compensation and
benefits, which includes salaries, bonuses, sales commissions, incentive
compensation and other payroll related expenses. Compensation and benefits
expenses increased 12.9% to $77.7 million for the year ended April 30, 1997 from
$68.8 million for the year ended April 30, 1996 and increased 24.2% for the year
ended April 30, 1996 from $55.4 million for the year ended April 30, 1995. For
both years, compensation and benefits increased primarily due to higher
incentive compensation costs due to increased new business, higher operating
profits and increased participation by key executives in incentive compensation
plans as a result of industry competitive pressures and their individual
contributions to firm profitability. In addition, compensation and benefits
expense increased due to staff salary increases and additions to staff to
support expanding businesses. These increases were offset in part by significant
staff reductions at OCC Distributors, AMA Advisers, and in mutual fund
accounting in fiscal 1996 with most staff reductions occurring after the Quest
sale in November 1995. In fiscal 1997, staff size was reduced as a result of the
sale of Oppenheimer Capital's 50% interest in Saratoga and the termination of
the unit investment trust distribution effort during the fourth fiscal quarter.
Reflecting these reductions, staff size declined to 344 at April 30, 1997 from
348 at April 30, 1996, and from 417 at April 30, 1995.
Occupancy expense decreased 4.4% for the year ended April 30, 1997 to $6.6
million from $6.9 million for the year ended April 30, 1996 and increased 6.8%
for the year ended April 30, 1996 from $6.4 million for the year ended April 30,
1995. The decrease for the year ending April 30, 1997 reflects reduced rent
expense as a result of the termination of leases at AMA Advisers as well as
adjustments made to rent escalation accruals during the fiscal year. For the
year ended April 30, 1996, the increase was attributable to increased
amortization expense relating to leasehold improvements and increased equipment
rental costs.
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Oppenheimer Capital subleases a portion of its space at the Oppenheimer
Tower, World Financial Center, from Oppenheimer & Co., Inc. ("Opco"), an
affiliated broker-dealer, paying a pro rata share of Opco's lease payments,
based on the percentage of total space leased. Oppenheimer Capital is currently
in negotiations to lease an additional 7,500 square feet at Oppenheimer Tower to
house its growing business.
General and administrative expenses increased 1.6% for the year ended April
30, 1997 to $12.5 million from $12.3 million for the year ended April 30, 1996
and increased 15.4% for the year ended April 30, 1996 from $10.7 million for the
year ended April 30, 1995. The rate of growth of general and administrative
expenses slowed in fiscal 1996 and continued in fiscal 1997 as Oppenheimer
Capital realized cost savings from the Quest sale and cost reductions at AMA
Advisers. As a result of the Quest sale in November 1995, Oppenheimer Capital
was able to eliminate all of its outstanding bank loans and related interest
expense. Offsetting these reductions in both fiscal 1997 and 1996 were increased
costs incurred in connection with the development of new businesses and
increased investments in computer equipment and software as a result of
increased technical support for professional and administrative staff and higher
professional services expense due to the expansion of Oppenheimer Capital's
business.
Promotional expenses decreased 16.7% for the year ended April 30, 1997 to
$6.3 million from $7.6 million for the year ended April 30, 1996 and decreased
28.3% for the year ended April 30, 1996 from $10.6 million for the year ended
April 30, 1995. The decrease in promotional expenses for both fiscal years was
due primarily to a reduction in expenses incurred by OCC Distributors as a
result of the elimination of the open-end mutual fund distribution effort, and
the retail operations of AMA Advisers, and was offset in part by increased
expenses in Oppenheimer Capital's new businesses due to increased travel and
entertainment expenses as a result of new business activities. In addition,
promotional expenses decreased in fiscal 1997 due in part to decreased
promotional activities at Saratoga.
OPERATING INCOME -- QUARTER ENDED JULY 31, 1997
Operating income for the three months ended July 31, 1997 increased 40.3%
to $24.7 million from $17.6 million for the three months ended July 31, 1996.
For the three months ended July 31, 1997, the operating profit margin expanded
to 44.9% from 42.9% for the three months ended July 31, 1996 as operating
revenues grew 34.0% while expenses increased only 29.3%.
OPERATING INCOME -- YEARS ENDED APRIL 30, 1997, 1996 AND 1995
Operating income increased 25.9% for the year ended April 30, 1997 to $78.9
million from $62.7 million for the year ended April 30, 1996 and increased 33.8%
for the year ended April 30, 1996 from $46.8 million for the year ended April
30, 1995. For the year ended April 30, 1997, the operating profit margin
expanded to 43.4% from 39.6% for the year ended April 30, 1996; and in the year
ended April 30, 1996, the operating profit margin increased from 36.1% for the
year ended April 30, 1995. The increase in operating income and operating profit
margin for both years is due to rising securities price levels, strong new
business growth and the resultant revenue increase combined with Oppenheimer
Capital controlling the rate of expense growth. In both fiscal 1997 and fiscal
1996, the operating revenue growth rate exceeded the operating expense growth
rate. This was accomplished primarily from the decision to withdraw from the
mutual fund distribution business (the Quest sale), which was completed in the
final quarter of fiscal 1996, and the suspension of retail sales activities at
AMA Advisers. This process, which began in fiscal 1996, was completed in the
first quarter of fiscal 1997. In addition, losses from Saratoga were reduced to
$1.4 million in fiscal 1997 from $2.5 million in fiscal 1996, and during the
fourth quarter of fiscal 1997, Oppenheimer Capital sold its 50% interest in
Saratoga.
TAXES
Oppenheimer Capital is not subject to federal, state, or local income
taxes, which are the obligations of the individual partners. Oppenheimer
Capital, however, was subject to New York City UBT of $1,194,000 for the three
months ended July 31, 1997 and $585,000 for the three months ended July 31,
1996. This increase was due to higher operating income as well as the gain on
the Dual Purpose sale.
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Corporate subsidiaries of Oppenheimer Capital were subject to income taxes
of $24,000 for the three months ended July 31, 1997.
Oppenheimer Capital was subject to New York City UBT of $3.1 million, $3.7
million and $1.2 million, respectively, for the years ended April 30, 1997, 1996
and 1995. The decrease in New York City UBT expense in fiscal 1997 compared to
fiscal 1996 is due to a decline in net income in fiscal 1997 as a result of the
$27.7 million gain recorded for the Quest sale in fiscal 1996, compared with the
$2.8 million gain in fiscal 1997. This decline was offset in part by higher
operating income in fiscal 1997 than in fiscal 1996.
The increase in New York City UBT expense in fiscal 1996 from fiscal 1995
was due to a change in the tax law effective January 1, 1995 imposing taxes on
the total income of Oppenheimer Capital and allowing the Partnership a credit
for its pro rata share of any New York City UBT paid by Oppenheimer Capital.
Prior to January 1, 1995, New York City UBT was assessed directly at the
Partnership level. A second reason for the increase was Oppenheimer Capital's
higher earnings, including the gain realized on the Quest sale.
A corporate subsidiary of Oppenheimer Capital is subject to federal, state
and local income taxes. A foreign corporate subsidiary is subject to taxes in
the foreign jurisdiction in which it is located.
LIQUIDITY AND CAPITAL RESOURCES
Oppenheimer Capital's business is not capital intensive and its working
capital requirements are generally modest. To the extent that additional funds
are required by Oppenheimer Capital (e.g. to support increased investment
management fees receivable or to expand its facilities to accommodate the growth
of its businesses).
On July 31, 1997, Oppenheimer Capital declared a distribution to its
partners of $20.8 million which was paid on August 29, 1997. On April 30, 1997,
Oppenheimer Capital declared a distribution to its partners of $25.3 million
which was paid on May 30, 1997.
Oppenheimer Capital recorded gains on the Quest sale of $2.8 million in
fiscal 1997 and $27.7 million in fiscal 1996. The net proceeds from the sale
were used to pay a special distribution to partners of $2.3 million in fiscal
1997 and $12.6 million in fiscal 1996, and the remaining funds were used to
eliminate bank borrowings and to fund the working capital needs of Oppenheimer
Capital. At April 30, 1997, working capital totaled $30.8 million as compared
with $26.3 million at April 30, 1996 and partners capital increased to $39.7
million from $34.7 million during this same period.
SALE OF AMA LICENSE
In May 1997, Oppenheimer Capital sold its exclusive right to market to
members of the American Medical Association ("AMA") to Scudder, Stevens & Clark,
Inc. for $1.0 million. Simultaneously, Oppenheimer Capital purchased the AMA's
19.9% interest in AMA Advisers for $500,000. The $1.0 million payment was used
to reduce unamortized goodwill. AMA Advisers have been renamed 225 Liberty
Advisers, L.P.
SALE OF SARATOGA CAPITAL MANAGEMENT
On April 29, 1997, Oppenheimer Capital completed the sale of its 50%
interest in Saratoga. The proceeds, which are not significant, will be paid
annually to Oppenheimer Capital over a five year period, ending May 1, 2001.
Oppenheimer Capital continues to manage two portfolios of the Saratoga Advantage
Trust, for which it receives subadvisory fees.
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SELECTED CONSOLIDATED FINANCIAL DATA OF PIMCO ADVISORS
The following table sets forth selected consolidated financial data of
PIMCO Advisors for the nine months ended September 30, 1997 and 1996, and each
of the five years ended December 31, 1996. PIMCO Advisors and its subsidiaries
were formed on November 15, 1994, when PFAMCo merged the PFAMCo Group into TAG
L.P. Under generally accepted accounting principles, the Consolidation is
accounted for as an acquisition of TAG L.P. by PFAMCo Group, even though the
legal form was the reverse. Therefore, the historical financial statements
include the operations of PFAMCo Group, in its corporate form, prior to the
Consolidation and the combined results of PIMCO Advisors, in its partnership
form, for the period since the Consolidation. This information should be read in
conjunction with the Consolidated Financial Statements of PIMCO Advisors and the
related notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
PIMCO Advisors L.P. and Subsidiaries."
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
--------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues......................... $344,210 $287,161 $392,024 $323,014 $180,263 $165,856 $120,155
Operating expenses..................... 232,572 190,975 261,978 215,271 145,220 131,447 93,011
Amortization of intangibles, options
and restricted units................. 31,000 30,852 41,171 42,723 6,202 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income....................... 80,638 65,334 88,875 65,020 28,841 34,409 27,144
Other income, net...................... 3,249 2,401 3,454 3,964 1,083 864 1,115
-------- -------- -------- -------- -------- -------- --------
Income before income tax expense....... 83,887 67,735 92,329 68,984 29,924 35,273 28,259
Income tax expense..................... 1,226 834 1,201 517 10,669 15,556 11,405
-------- -------- -------- -------- -------- -------- --------
Net income............................. $ 82,661 $ 66,901 $ 91,128 $ 68,467 $ 19,255 $ 19,717 $ 16,854
======== ======== ======== ======== ======== ======== ========
Net income allocated to:
General Partner and Class A Limited
Partner units...................... $ 45,329 $ 39,421 $ 52,916 $ 46,655 $ 4,976
Class B Limited Partner units........ 37,332 27,480 38,212 21,812 1,128
Pre-Consolidation.................... -- -- -- -- 13,151
-------- -------- -------- -------- --------
Total.................................. $ 82,661 $ 66,901 $ 91,128 $ 68,467 $ 19,255
======== ======== ======== ======== ========
NET INCOME PER UNIT(1):
General Partner and Class A Limited
Partner units........................ $ 1.06 $ 0.96 $ 1.29 $ 1.16 $ 0.12
Class B Limited Partner units.......... $ 1.06 $ 0.76 $ 1.05 $ 0.59 $ 0.03
WEIGHTED AVERAGE NUMBER OF UNITS
OUTSTANDING (POST-CONSOLIDATION):
Units outstanding:
General Partner...................... 800 800 800 800 800
Class A Limited Partner.............. 40,146 40,132 40,135 40,108 40,018
Class B Limited Partner.............. 32,983 32,961 32,961 32,961 32,961
-------- -------- -------- -------- --------
Total.................................. 73,929 73,893 73,896 73,869 73,779
Weighted average effect of unit
options.............................. 3,906 2,915 3,119 1,684 984
-------- -------- -------- -------- --------
Total.................................. 77,835 76,808 77,015 75,553 74,763
======== ======== ======== ======== ========
DIVIDENDS/DISTRIBUTIONS................ $104,042 $ 97,560 $131,604 $ 89,613 $ 24,384 $ 22,158 $ 12,950
======== ======== ======== ======== ======== ======== ========
FINANCIAL CONDITION AT END OF PERIOD:
Total assets(2)........................ $365,728 $373,545 $358,500 $369,592 $379,708 $ 70,388 $ 43,189
Total liabilities...................... 86,752 68,802 62,257 38,035 34,179 44,567 17,686
-------- -------- -------- -------- -------- -------- --------
Total Partners' capital(3)............. $278,976 $304,743 $296,243 $331,557 $345,529 $ 25,821 $ 25,503
======== ======== ======== ======== ======== ======== ========
</TABLE>
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<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER STATISTICS:
Assets under management (in
millions)............................ $130,632 $104,540 $110,022 $ 95,182 $ 72,175 $ 57,182 $ 43,737
Operating Profit Available for
Distribution(1)...................... 113,830 97,763 132,314 111,205 12,306 -- --
Cash flows provided by operating
activities........................... 112,502 119,882 140,446 86,921 25,852 23,620 9,309
Cash flows (used in) provided by
investing activities................. (16,598) (2,983) (2,446) (17,771) 22,401 (436) (1,149)
Cash flows used in financing
activities........................... (104,042) (97,560) (131,604) (89,238) (2,549) (14,900) (15,800)
</TABLE>
- ---------------
(1) Computed on earnings following the Consolidation. Operating Profit Available
for Distribution is defined by the PIMCO Advisors Partnership Agreement as
the sum of net income plus non-cash charges from the amortization of
intangible assets, non-cash compensation expenses arising from option and
restricted unit plans, and losses of any subsidiary which is not a
flow-through entity for tax purposes.
(2) Upon completion of the Consolidation, approximately $284.9 million of
intangible assets were created. See Note 3 in the Notes to the Consolidated
Financial Statements of PIMCO Advisors L.P. and Subsidiaries.
(3) Stockholders' equity before the Consolidation.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF PIMCO ADVISORS
The information set forth below discusses the financial condition and
results of operations of PIMCO Advisors and its predecessors, and does not
reflect the effects of the Opgroup Transaction, the Oppenheimer Capital Merger
or the Restructuring.
OVERVIEW
PIMCO Advisors was formed on November 15, 1994 when PFAMCo merged PFAMCo
Group into TAG L.P. PFAMCo Group comprised the operations of PFAMCo, an indirect
wholly-owned subsidiary of Pacific Life Insurance Company ("Pacific Life"), and
certain of its wholly-owned investment management subsidiaries. The businesses
of PFAMCo Group contributed to PIMCO Advisors were then contributed to
newly-formed subsidiaries of PIMCO Advisors. These businesses, as well as TAG
L.P.'s former division of CCI, are as follows at September 30, 1997:
Pacific Investment Management and its wholly owned subsidiary, StocksPLUS
Management, Inc. ("StocksPLUS Management"), manages primarily fixed income
investments, with approximately $108.5 billion in assets under management;
CCI and Columbus Circle Trust Company ("CCTC") manages primarily equity and
equity related investments, with approximately $11.5 billion in assets
under management;
Cadence manages equity and equity related investments, with approximately
$4.9 billion in assets under management;
Parametric manages equity and equity related investments, with
approximately $2.5 billion in assets under management;
NFJ manages equity and equity related investments, with approximately $2.3
billion in assets under management; and
Blairlogie manages equity and equity related investments, with
approximately $875 million in assets under management.
PIMCO Advisors, together with these six firms, sponsors and manages mutual
funds for both institutional and retail investors.
PIMCO Funds. In January 1997, PIMCO Advisors restructured its proprietary
mutual funds into a single fund family called "PIMCO Funds" which is comprised
of two series: (i) PIMCO Funds: Pacific Investment Management Series: PIMCO
Funds PIMS Series, 20 funds advised by Pacific Investment Management, and (ii)
PIMCO Funds: Multi Manager Series: PIMCO Funds MMS Series, 21 funds advised by
PIMCO Advisors and subadvised by the Investment Management Firms and one
independent subadvisor. The PIMCO Funds PIMS Series are primarily fixed income
funds and the PIMCO Funds MMS Series are primarily equity funds. All PIMCO Funds
are offered in up to five different share classes: institutional and
administrative share classes primarily for institutional investors and, for
retail investors, Class A shares (which are "front end" load), Class B shares
(which are "back-end load") and Class C shares (which are "level load"). The
PIMCO Funds now feature a "unified fee" structure which has specified advisory
and administrative fees per fund. As a result, PIMCO Advisors and Pacific
Investment Management (and not the PIMCO Funds) bear the risk of increases in
service costs (including of third-party service providers such as transfer
agents) and will directly benefit from decreases in those costs.
RESULTS OF OPERATIONS
GENERAL COMMENTARY
PIMCO Advisors derives substantially all its revenues and net income from
advisory fees for investment management services provided through its investment
management subsidiaries to its institutional and individual clients, and
advisory, distribution and servicing fees for services provided to the PIMCO
Funds.
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Generally, such fees are determined based upon a percentage of client
assets under management and are billed quarterly to institutional clients,
either in advance or arrears, depending on the agreement with the client and
monthly in arrears to the PIMCO Funds. Revenues are determined in large part
based upon the level of assets under management, which itself is dependent upon
factors including market conditions, client decisions to add or withdraw assets
from PIMCO Advisors management, and PIMCO Advisors ability to attract new
clients. In addition, PIMCO Advisors has certain accounts which are subject to
performance based fee schedules wherein performance relative to the S&P 500
Index or other benchmarks over a particular time period can result in additional
fees. These fees accrue on a quarterly or annual basis, depending upon the
specific investment advisory contract. Quarterly fees generally are calculated
based upon a rolling twelve-month performance result. Annual fees have
historically been weighted towards second and fourth quarter billings although
the third quarter of 1997 reflects certain new annual account billings. As a
result, there is a seasonality to the recognition of such fees. Such performance
based fees can have a significant effect on revenues, but also provide an
opportunity to earn higher fees (as well as lower fees) than could be obtained
under fee arrangements based solely on a percentage of assets under management.
Intangible assets of approximately $284.9 million created by the
Consolidation represent the excess of the purchase price over the fair value of
net tangible assets of TAG L.P. deemed acquired by PFAMCo Group. Approximately
$80.7 million of the intangible assets represents the value assigned to PIMCO
Advisors master limited partnership ("MLP") structure. Under previous tax law,
an MLP was exempt from federal and most state and local income taxes through
December 31, 1997. As discussed elsewhere, the tax status has been extended.
However, the value attributed to the MLP structure is being amortized through
the period ended December 31, 1997. The remainder is being amortized over its
estimated life of 20 years.
Net income per unit is computed under the two-class method which allocates
net income to PIMCO Advisors Class A and Class B LP Units in proportion to the
Operating Profit Available for Distribution for each class. Operating Profit
Available for Distribution is defined by the PIMCO Advisors Partnership
Agreement and is computed as the sum of net income plus non-cash charges from
the amortization of intangible assets, non-cash compensation expenses arising
from option and restricted unit plans, and losses of any subsidiary which is not
a flow-through entity for tax purposes. PIMCO Advisors Class A LP and GP Units
are entitled to a priority distribution of $1.88 per unit per year until
December 31, 1997. Because of this, the amount of Operating Profit Available for
Distribution allocated to such units can be greater than the amount allocated to
PIMCO Advisors Class B LP Units. As a result, the net income allocated per PIMCO
Advisors Class A LP and GP Units is currently greater than the net income
allocated per PIMCO Advisors Class B LP Units. In addition, because of the
priority distribution, the initial dilution to net income per unit from the
assumed exercise of options can be applied entirely to PIMCO Advisors Class B LP
Units. However, growth in both net income and Operating Profit Available for
distribution in 1997 beyond the priority levels has resulted in the year to date
allocations as income and distribution, per unit to be equal across all classes.
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996
PIMCO Advisors derives substantially all its revenues and net income from
advisory fees for investment management services provided to its institutional
and individual clients and advisory, distribution and servicing fees for
services provided to its two proprietary series of mutual funds ("Proprietary
Funds").
PIMCO Advisors consolidated 1997 third quarter revenues, including those of
its wholly owned distributor PFD, were $125.1 million compared to $97.1 million
in the third quarter of 1996, up $28.0 million. Advisory revenues were $110.2
million in the third quarter of 1997 compared to $84.7 million for the same
period in 1996, up $25.5 million. For the nine months ended September 30, 1997
PIMCO Advisors consolidated revenues were $344.2 million compared to $287.2
million in the same period of 1996. Revenues at the distributor for the nine
months of 1997 increased to $46.3 million in 1997 from $39.7 million in 1996.
Advisory revenue increases resulted from both the commitment of new assets by
institutional clients and from market appreciation. Performance based fees
amounted to $9.3 million during the third quarter of 1997 as compared to $4.9
million during the same period in 1996. For the nine months ended September 30,
1997 performance fees increased to $20.8 million, from $16.3 million in the
comparable period of 1996. The
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increase in performance based fees occurred in both fixed income portfolio
products seeking to outperform relative benchmarks, and an equity product
seeking to outperform the S&P 500 Index.
Revenues by operating entity were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1997 1996 1997 1996
------ ------ ------ ------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
Pacific Investment Management............... $ 74.4 $ 54.9 $200.4 $162.1
Columbus Circle Investors................... 14.3 15.5 43.8 47.2
Cadence Capital Management.................. 6.8 4.5 17.5 13.0
Parametric Portfolio Associates............. 1.1 0.9 3.2 2.6
NFJ Investment Group........................ 2.4 1.8 6.3 5.4
Blairlogie Capital Management............... 1.1 0.9 3.2 2.8
PFD......................................... 16.3 13.3 46.3 39.7
Other....................................... 8.7 5.3 23.5 14.4
------ ----- ------ ------
$125.1 $ 97.1 $344.2 $287.2
====== ===== ====== ======
</TABLE>
Assets under management, in the aggregate, were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1997 1996 1997 1996
------ ------ ------ ------
($ IN BILLIONS)
<S> <C> <C> <C> <C>
Beginning of period......................... $119.9 $100.8 $110.0 $ 95.2
End of period............................... $130.6 $104.5 $130.6 $104.5
</TABLE>
Compensation and benefits in the third quarter of 1997 of $55.5 million
were $12.3 million higher than the same period in 1996. For the nine month
period, this cost category increased from $128.1 million in 1996 to $151.6
million in 1997. These increases reflect additional staffing, at both Pacific
Investment Management and CCI, as well as higher profit sharing expenses which
are based on profits of each of the Investment Management Firms.
Commission expenses, incurred by PFD related to sales and servicing of
retail mutual funds, increased $2.5 million to $11.7 million in the third
quarter of 1997 compared to the same period a year ago, and increased $4.7
million to $32.2 million for the nine months of 1997 compared to 1996,
reflecting higher trail commissions due to an increased level of qualifying
assets, as well as increased "up front" commissions on higher current sales
levels.
General and administrative expenses amounted to $6.9 million during the
third quarter of 1997, an increase of $2.9 million over the same period a year
ago. This cost category increased by $5.8 million to $18.8 million for the nine
months of 1997 compared to 1996. This increase can be primarily attributed to
the conversion of the retail share classes of the PIMCO Funds to a fixed
administrative fee basis resulting in increases to this cost category for
expenses previously borne directly by the funds. There is a corresponding
increase in revenues related to this conversion. These incremental costs account
for substantially all of this increase.
Occupancy and equipment increased by $147,000 to $2.5 million in the third
quarter of 1997 from the same period a year ago; during the nine months of 1997
these costs increased $550,000 to $7.5 million compared to the same period in
1996. The increase in this expense category can be attributed primarily to
additional office space and equipment as a result of the additional staffing
discussed above.
Other expenses in the third quarter of 1997 increased by $1.4 million from
1996. Such costs for the nine months of 1997 increased $7.1 million to $22.5
million compared to the same period in 1996 due principally to increases in
marketing and promotional costs and professional fees as well as other increases
reflective of inflation and increased staffing.
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<PAGE> 83
PRO FORMA FINANCIAL INFORMATION
Under generally accepted accounting principles, the Consolidation has been
accounted for as an acquisition of TAG L.P. by PFAMCo Group, even though the
legal form was the reverse. Therefore, the historical financial statements
include the operations of PFAMCo Group, in its corporate form, prior to the
Consolidation and the combined results of PIMCO Advisors, in its partnership
form, for the period since the Consolidation.
Due to the different bases of presentation and resulting difficulties in
analyzing comparative historical financial information as a result of the
required accounting presentation, management has included below certain pro
forma financial information as if the Consolidation occurred at the beginning of
1993. Pro forma results eliminate the significant comparative differences in the
historical results of operations arising primarily from different taxation of
corporations and partnerships, from the inclusion of TAG L.P.'s results of
operations in the pro forma results from the beginning of 1993 (rather than only
from the date of Consolidation reflected in the historical financial
statements), and from certain transactions and restructuring effected by the
Consolidation, principally related to the creation and amortization of
intangibles and revised profit sharing arrangements.
The following table summarizes the unaudited condensed pro forma results of
operations of PIMCO Advisors as if the Consolidation discussed above had
occurred on January 1, 1993. The pro forma operating results give effect to:
(i) the Consolidation of PFAMCo Group and TAG L.P.;
(ii) the amendment of existing options under TAG L.P.'s 1993 Unit
Option Plan;
(iii) the adoption of the PIMCO Advisors Class B LP Unit Option Plan;
(iv) the contribution of PFD to PIMCO Advisors in exchange for PIMCO
Advisors Class A LP Units; and
(v) certain transactions effected by PFAMCo Group and TAG L.P. in
connection with the Consolidation, primarily related to intangible
amortization and profit sharing.
78
<PAGE> 84
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
-------- -------- -----------
(ACTUAL) (ACTUAL) (PRO FORMA)
(AMOUNTS IN MILLIONS,
EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C>
REVENUES
Investment Advisory................................. $338.3 $281.6 $ 231.5
PFD................................................. 53.7 41.4 37.6
------ ------ ------
392.0 323.0 269.1
------ ------ ------
EXPENSES
Compensation and Benefits........................... 173.5 149.1 119.7
Commissions......................................... 37.7 28.7 23.1
Marketing and Promotional........................... 11.0 9.1 11.4
Occupancy and Equipment............................. 9.2 8.7 6.7
General and Administrative.......................... 17.6 11.4 7.4
Insurance........................................... 2.6 2.8 1.8
Professional Fees................................... 5.5 3.2 3.4
Amortization of intangibles,
options and restricted units...................... 41.2 42.7 40.7
Other (income) expense (net)........................ 2.6 (1.2) 0.2
------ ------ ------
300.9 254.5 214.4
------ ------ ------
NET INCOME.......................................... $ 91.1 $ 68.5 $ 54.7
====== ====== ======
Net Income per General Partner and Class A Limited
Partner unit...................................... $ 1.29 $ 1.16 $ 1.08
====== ====== ======
Net Income per Class B Limited Partner unit......... $ 1.05 $ 0.59 $ 0.28
====== ====== ======
Revenues by operating entity were as follows:
Pacific Investment Management.................. $222.3 $180.9 $ 142.9
Columbus Circle Investors...................... 63.7 53.0 45.1
Cadence Capital Management..................... 17.9 14.6 12.1
Parametric Portfolio Associates................ 3.5 3.8 4.5
NFJ Investment Group........................... 7.3 5.9 5.0
PFD............................................ 53.7 41.4 37.6
Other(1)....................................... 23.6 23.4 21.9
------ ------ ------
Consolidated PIMCO Advisors.................... $392.0 $323.0 $ 269.1
====== ====== ======
</TABLE>
- ---------------
(1) Includes PIMCO Advisors Institutional Services (formerly PFAMCo) and Mutual
Funds divisions and Blairlogie.
The pro forma information for 1994, given above, is not intended to reflect
the results that actually would have been obtained if the operations were
consolidated during the period presented.
PRO FORMA AND ACTUAL FINANCIAL INFORMATION
Year Ended December 31, 1996 Actual Compared to Year Ended December 31,
1995 Actual
PIMCO Advisors consolidated actual 1996 revenues, including those of its
wholly-owned distributor, PFD, were $392.0 million, compared to revenues of
$323.0 million in 1995. Advisory revenues in this comparison increased $56.7
million to $338.3 million in 1996. PFD's revenues increased $12.3 million to
$53.7 million in 1996. Revenue increases resulted from the commitment of new
assets primarily by institutional clients and increases in the market value of
existing assets under management. These increases were further enhanced by an
increase in performance based fees, which amounted to $22.5 million in 1996 as
79
<PAGE> 85
compared to $19.1 million in 1995. The increase in performance based fees
occurred principally in fixed income portfolio products seeking to outperform
relative benchmarks.
Compensation and benefit expenses in 1996 of $173.5 million were $24.4
million higher than 1995, reflecting additional staffing at virtually all
subsidiaries, and increased profit sharing at the Investment Management Firms
due to improved profitability. The total number of employees increased 5.0% from
521 as of December 31, 1995 to 547 as of December 31, 1996.
Commission expenses increased by $9.0 million or 31.3% in 1996 as compared
with 1995. Commission expenses are incurred by PFD and are paid primarily to
broker-dealers and their sales people for the sale of PIMCO Advisors
retail-oriented mutual funds. These include "up-front" commissions paid at the
time of sale of the mutual funds, "trail" commissions for the maintenance of
assets in the mutual funds and service fee commissions paid for services
provided to mutual fund shareholders. The level of commission expense will vary
according to the level of assets in the mutual funds (on which trail and service
fee commissions are determined) and on the level of sales of mutual funds (on
which up-front commissions are determined). Trail and service fee commissions
are generally paid quarterly beginning one year after sale of the mutual funds.
Therefore, at any given time, trail and service fee commissions will be paid on
only the mutual fund assets that qualify for such payments. In 1996, trail and
service fee commissions increased to $30.3 million, an increase of $6.1 million
or 25.2%, compared to 1995. This increase is related to an increase in the
underlying qualifying assets. Up-front commissions increased from $4.5 million
in 1995 to $7.4 million in 1996, an increase of $2.9 million or 64.4%. This is a
result of increases in total sales volume and the mix of share classes sold.
Marketing and promotional costs increased $1.9 million or 20.9% in 1996
compared to 1995. This increase occurred at most entities, but primarily at PFD
and Pacific Investment Management. At PFD, increased mutual fund share sales
correlate to the increase. At Pacific Investment Management, increased travel
costs comprise the majority of the increase.
Occupancy and equipment costs increased $.5 million or 5.7% in 1996
compared to 1995. The increase relates to increased depreciation of equipment
and inflationary facilities cost increases at all entities.
General and administrative costs increased $6.2 million or 54.4% in 1996
compared to 1995. Pacific Investment Management converted its institutional fund
family to a fixed administrative fee basis in October 1995 resulting in
increases to this cost category for expenses previously borne directly by the
funds. There is a corresponding increase in revenues related to this conversion.
These incremental costs account for approximately $6.0 million of the increase.
Insurance costs decreased $.2 million or 7.1% in 1996 compared to 1995.
This decrease relates principally to PIMCO Advisors decreased cost of coverage
for general partner liability insurance coverage. Offsetting this decline,
partially, were slight increases due to increased assets under management, and
related activities at the Investment Management Firms.
Professional fees increased $2.3 million or 71.9% in 1996 compared to 1995.
This increase resulted primarily from the costs associated with the
restructuring of the three mutual fund "families" in December of 1996.
Other (income) expense, net, includes such items as consulting costs,
reimbursement agreements and income taxes, offset by other income, and reflects
a net increase of $3.8 million in 1996 compared to 1995. This increase is
comprised principally of decreased investment income and lower levels of
reimbursement under agreements with Pacific Life that became effective in
November 1994.
Amortization of intangibles, options and restricted units decreased $1.5
million principally due to the accelerated vesting in 1995 of outstanding
options and restricted units for certain employees terminating during 1995.
Year Ended December 31, 1995 Actual Compared to Year Ended December 31,
1994 Pro Forma
PIMCO Advisors consolidated actual 1995 revenues, including those of its
wholly-owned distributor, PFD, were $323.0 million, compared to pro forma
revenues of $269.1 million in 1994. Advisory revenues in
80
<PAGE> 86
this comparison increased $50.1 million to $281.6 million in 1995. PFD's
revenues increased $3.8 million to $41.4 million in 1995. Revenue increases
resulted from the commitment of new assets by institutional clients and
increases in the market value of existing assets under management. These
increases were further enhanced by an increase in performance based fees, which
amounted to $19.1 million in 1995 as compared to $9.2 million in 1994. The
increase in performance based fees occurred principally in a product line that
seeks to outperform the S&P 500 Index.
Compensation and benefit expenses in 1995 of $149.1 million were $29.4
million higher than 1994, reflecting additional staffing at virtually all
subsidiaries, and increased profit sharing at the investment management firms
due to improved profitability. The total number of employees increased 12.5%
from 463, as of December 31, 1994, to 521, as of December 31, 1995.
Commission expenses increased by $5.6 million or 24.3% in 1995 as compared
with 1994 pro forma. In 1995, trail and service fee commissions increased to
$24.2 million, an increase of $7.9 million or 48.5%, compared to 1994. This
increase is related to an increase in the underlying qualifying assets. Up-front
commissions decreased from $6.8 million in 1994 to $4.5 million in 1995, a
decrease of $2.3 million or 33.8%. This is a result of decreases in total sales
volume and the mix of share classes sold.
Marketing and promotional costs declined $2.3 million or 20.6% in 1995
compared to 1994. This decrease occurred at most entities, but primarily at PFD
and Pacific Investment Management. At PFD, reduced mutual fund share sales
correlate to the reduction. At Pacific Investment Management, reduced
promotional costs comprise the majority of the reduction.
Occupancy and equipment costs increased $2.0 million or 29.8% in 1995
compared to 1994. The increase correlates strongly to new equipment and
facilities for increased staff, primarily at Pacific Investment Management.
General and administrative costs increased $4.0 million or 55.1% in 1995
compared to 1994. Pacific Investment Management converted its institutional fund
family to a fixed administrative fee basis in October 1995 resulting in
increases to this cost category for expenses previously borne directly by the
funds. There is a corresponding increase in revenues related to this conversion.
These incremental costs account for approximately $2.6 million of the increase.
The remaining increase was incurred at all entities and relates to higher levels
of staffing and activity.
Insurance costs increased $1.0 million or 55.0% in 1995 compared to 1994.
This increase relates principally to PIMCO Advisors increased cost of coverage
for general partner liability. Increases due to increased assets under
management and related activities also occurred at the Investment Management
Firms.
Professional fees declined $0.2 million or 5.7% in 1995 compared to 1994.
This decline resulted primarily from increased reliance on internal staffing.
Other (income) expense, net, includes such items as consulting costs,
reimbursement agreements and income taxes, offset by other income, and reflects
a net decrease of $1.4 million in 1995 compared to 1994. This decrease is
comprised principally of increased investment income and higher levels of
reimbursement under an agreement with Pacific Life that became effective in
November 1994.
Amortization of intangibles, options and restricted units increased $2.0
million principally due to the accelerated vesting of outstanding options and
restricted units for certain employees terminating during 1995.
HISTORICAL FINANCIAL INFORMATION ONLY
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
The historical financial statements reflect the results of PFAMCo Group, in
its corporate form for the period January 1, 1994 to November 15, 1994 and PIMCO
Advisors post-Consolidation combined results in its partnership form from
November 16, 1994 to December 31, 1994, and for 1995. This accounting treatment,
known as "reverse acquisition" accounting, is required under generally accepted
accounting principles.
81
<PAGE> 87
Therefore, many of the comparative differences in the results of operations
between 1995 and 1994 are due to the reorganization of PFAMCo Group into
partnership form, the inclusion of TAG's operations in PFAMCo Group's operations
from November 16, 1994, to December 31, 1994, and in 1995, and from transactions
and restructuring that occurred in the Consolidation. The 1994 and 1995 results
also include certain non-cash expenses related to the amortization of intangible
assets created by the Consolidation and from expenses related to option and
restricted unit plans.
PIMCO Advisors 1995 revenues, including PFD, were $323.0 million, compared
to $180.3 million in 1994, up $142.7 million. The increase in revenue results
primarily from the inclusion of TAG in the results of PIMCO Advisors operations
since the Consolidation, and to a lesser extent, from increased assets under
management at the investment management firms.
Compensation and benefits, which includes salaries, employee benefits and
incentive compensation, is the largest expense category. The increase in 1995 of
$31.9 million, to $149.1 million, reflects increased staff levels, higher profit
sharing and the inclusion of TAG in the full year of 1995, compared with only 46
days in 1994.
In addition to the effect of including TAG's operations for a full year in
1995, as compared to only 46 days in 1994, other expense categories reflect the
following fluctuations:
(i) Restricted units and option plans, which came into existence at
the Consolidation, include approximately $2.0 million of amortization
related to the accelerated vesting of outstanding options; and
(ii) Trail and service fee commissions increased approximately $7.0
million as a result of an increase in the underlying qualifying assets.
CAPITAL RESOURCES AND LIQUIDITY
PIMCO Advisors and its predecessor entities' combined business have not
historically been capital intensive. In general, working capital requirements
had been satisfied out of operating cash flow or short-term borrowings. PIMCO
Advisors will make quarterly profit-sharing payments and distributions to its
unitholders. PIMCO Advisors may need to finance profit-sharing payments using
short-term borrowings.
PIMCO Advisors had approximately $58.1 million of cash and cash equivalents
and short-term investments at September 30, 1997 compared to approximately $52.8
million at December 31, 1996, and approximately $52.8 million of cash and cash
equivalents and short term investments at December 31, 1996 compared to
approximately $46.5 million at December 31, 1995. The increases were due to the
timing of payment of certain current liabilities offset by the funding of "B"
Share commissions to brokers. "B" Shares involve the payment of commissions to
the selling broker by the distributor at the time of sale of mutual fund shares.
Through deferred sales charges to the investor, or 12-b1 plans with the mutual
fund, these "front-end" commissions are recouped by the distributor over a
period of years. PIMCO Advisors excess liquidity, after distributions to its
unitholders, is used for general corporate purposes including profit-sharing
payments and brokers' commissions on sales of mutual fund shares distributed
without a front-end sales load. To the extent that the level of such commissions
increases due to the introduction of new products and mutual fund pricing
structures, an alternate financing source may be needed. However, PIMCO Advisors
has made no decision as to the source or necessity of such financing.
PIMCO Advisors distributes substantially all of its Operating Profit
Available for Distribution, after appropriate reserves, to its partners.
Distributions are paid quarterly, in arrears, on the units outstanding to
unitholders of record on the thirtieth day of the first month following each
quarter-end. Actual unit distributions in 1996 were $1.88 for the PIMCO Advisors
GP and Class A LP Units and $1.658 for the PIMCO Advisors Class B LP Units.
These amounts reflect Operating Profit Available for Distribution for the fourth
quarter of 1995 and the first three quarters of 1996, as such distributions are
made in arrears. Actual unit distributions in 1995 were $1.649 for the PIMCO
Advisors GP and Class A LP Units and were $0.673 for the PIMCO Advisors Class B
LP Units. These amounts reflect Operating Profit Available for Distribution for
the 46 day period from the date of Consolidation through December 31, 1994, and
Operating Profit Available for Distribution for the first three quarters of
1995.
82
<PAGE> 88
During the first nine months of 1997, PIMCO Advisors distributed $1.410 per
PIMCO Advisors Class A LP and GP Unit and $1.404 per PIMCO Advisors Class B LP
Unit related to the fourth quarter of 1996's and first two quarters of 1997's
earnings. During the third quarter of 1997, PIMCO Advisors distributed $0.47 per
PIMCO Advisors Class A LP and GP Unit and $0.505 per PIMCO Advisors Class B LP
Unit related to the second quarter of 1997's earnings. PIMCO Advisors declared a
third quarter distribution of $0.58 per PIMCO Advisors Class A LP and GP Unit
payable to holders of record on October 30, 1997. The payment date for this
distribution is November 15, 1997. PIMCO Advisors also declared a third quarter
distribution of $0.58 per PIMCO Advisors Class B LP Unit payable to holders of
record on October 30, 1997. The payment date for this distribution is November
30, 1997.
PIMCO Advisors currently has no long-term debt. In April 1996, PIMCO
Advisors obtained a $25 million, four year revolving line of credit for working
capital purposes. There was no outstanding balance at September 30, 1997, nor
was the facility utilized during the quarter ended September 30, 1997.
ECONOMIC FACTORS
The general economy including interest rates, inflation and client
responses to economic factors will affect, to some degree, the operations of
PIMCO Advisors. As a significant portion of assets under management are fixed
income funds, fluctuations in interest rates could have a material impact on the
operations of PIMCO Advisors. PIMCO Advisors advisory business is generally not
capital intensive and therefore any effect of inflation, other than on interest
rates, is not expected to have a significant impact on its operations or
financial condition. Client responses to the economy, including decisions as to
the amount of assets deposited may also impact the operations of PIMCO Advisors.
Any resulting revenue fluctuations may or may not be recoverable in the pricing
of services offered by PIMCO Advisors.
During the first nine months of 1997, assets under management for PIMCO
Advisors and its subsidiaries increased $20.6 billion. During 1996 and 1995,
assets under management for PIMCO Advisors and its subsidiaries increased $14.8
billion and $23.0 billion, respectively. While net cash inflows year to date in
1997, and 1996 and 1995 for PIMCO Advisors, as a whole, were significant ($7.6
billion in the first nine months of 1997, $6.7 billion in 1996 and $6.6 billion
in 1995), CCI experienced substantial net cash outflows in the same periods
(including $4.9 billion during the first nine months of 1997) predominantly from
its "large cap" separate account clients, attributable in large part to
underperformance measured against relevant benchmarks.
83
<PAGE> 89
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF THE PARTNERSHIP
The following table sets forth pro forma information regarding beneficial
ownership of the Partnership Units as of November 1, 1997, giving effect to the
Restructuring as if it had occurred on that date, by each person who, to the
Partnership's knowledge, is the beneficial owner of more than five percent of
the Partnership Units, each person who may be deemed to be a "director" of the
Partnership or PIMCO Advisors, the Chief Executive Officer of the Partnership
and the Partnership's Named Executive Officers and all officers and persons who
may be deemed to be directors of the Partnership or PIMCO Advisors as a group.
Except as indicated, the address of each person or entity listed below is 800
Newport Center Drive, Newport Beach, California 92660.
<TABLE>
<CAPTION>
PARTNERSHIP PARTNERSHIP PIMCO PERCENTAGE OWNERSHIP
UNITS PRIOR TO UNITS AFTER ADVISORS OF
RESTRUCTURING(1) RESTRUCTURING(1)(2) UNITS(1)(2)(3) PARTNERSHIP UNITS(3)
---------------- ------------------- -------------- --------------------
<S> <C> <C> <C> <C>
FIVE PERCENT HOLDERS (other than
those listed as members of the
PIMCO Advisors Management Board
below)
PIMCO Partners, G.P. ("PGP")(4)...... 0 0 53,790,539 56.7%
Pacific Life Insurance Company
("Pacific Life")(5)................ 0 0 58,988,796 59.0%
Pacific Financial Asset Management
Corporation ("PFAMCo")(5).......... 0 0 58,988,796 59.0%
Pacific Investment Management Company
("PIMCO Inc.")(6).................. 0 0 54,157,107 56.9%
PIMCO Partners, LLC ("PPLLC")(7)..... 0 0 53,933,019 56.8%
Thomson Advisory Group, Inc.......... 0 0 14,380,217 26.0%
William R. Benz, II(8)............... 0 66,000 53,933,019 56.8%
David H. Edington(8)................. 0 184,000 53,933,019 56.9%
John L. Hague(8)..................... 0 184,000 53,933,019 56.9%
Dean S. Meiling(8)................... 0 184,000 53,933,019 56.9%
James F. Muzzy(8).................... 0 184,000 53,933,019 56.9%
William C. Powers(8)................. 0 184,000 53,933,019 56.9%
Frank B. Rabinovitch(8).............. 0 184,000 53,933,019 56.9%
Lee R. Thomas(8)..................... 0 38,000 53,933,019 56.8%
PIMCO ADVISORS MANAGEMENT BOARD
MEMBERS
Walter E. Auch, Sr................... 0 0 1,311 *
David B. Breed....................... 0 0 550,000 1.3%
Donald A. Chiboucas(9)............... 0 0 1,188,892 2.8%
William D. Cvengros.................. 0 320,000 200,000 1.3%
Walter B. Gerken..................... 0 0 1,971 *
William H. Gross(8)(10).............. 0 384,000 53,953,369 57.0%
Brent R. Harris(8)................... 0 184,000 53,933,019 56.9%
Donald R. Kurtz...................... 0 0 5,971 *
George A. Long....................... 320 320 0 *
James F. McIntosh.................... 0 0 5,971 *
Kenneth H. Mortenson................. *
William F. Podlich, III(8)........... 0 64,000 53,933,019 56.8%
Glenn S. Schafer..................... 0 0 0 *
Thomas C. Sutton..................... 0 0 0 *
William S. Thompson, Jr.(11)......... 0 184,000 53,939,019 56.9%
Benjamin L. Trosky(8)................ 0 73,000 53,933,019 56.8%
EXECUTIVE OFFICERS NOT INCLUDED ABOVE
Kenneth M. Poovey.................... 0 10,000 0 *
Stephen J. Treadway.................. 0 40,000 25,000 *
Robert M. Fitzgerald................. 0 20,000 0 *
James G. Ward........................ 0 10,000 500 *
Richard M. Weil...................... 0 10,800 0 *
All directors and executive officers
as a group (21 persons)............ 320 1,299,800 55,939,305 58.3%
</TABLE>
- ---------------
* Less than 1%
(1) Each of the persons and entities listed disclaims beneficial ownership of
any units except to the extent that it has a pecuniary interest in such
items.
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<PAGE> 90
(2) Assumes that all awards under the PIMCO Advisors L.P. 1993 Unit Option
Plan, the 1996 Unit Incentive Plan of PIMCO Advisors L.P. and the PIMCO
Advisors L.P. Restricted Unit Plan (collectively, the "PIMCO Advisors
Plans") have been assumed by the 1997 Plan. The 1997 Plan will assume the
awards under the PIMCO Advisors Plans as soon as practicable after the
Restructuring.
(3) Subject to certain transfer restrictions under the PIMCO Advisors
Partnership Agreement, PIMCO Advisors units are exchangeable semi-annually
on a one-to-one basis for Partnership Units. The percentage ownership
column assumes conversion of only those PIMCO Advisors units held by the
applicable person or entity.
(4) Includes (i) 39,410,322 PIMCO Advisors units held of record by PGP and (ii)
14,380,217 PIMCO Advisors units held by TAG over which PGP may be deemed to
have voting control. Does not reflect .01% general partner interest in the
Partnership.
(5) Includes (i) the 53,790,539 PIMCO Advisors units which may be deemed to be
beneficially owned by PGP, which may be deemed to be beneficially owned by
Pacific Life and PFAMCo, because PIMCO Inc. is a general partner of PGP and
is a wholly-owned subsidiary of PFAMCo, which is a wholly-owned subsidiary
of Pacific Life; and (ii) an aggregate of 5,198,257 PIMCO Advisors units
issued as follows: PIMCO Inc. (366,568 units), Cadence Inc. (32,652 units),
Cadence L.P. (2,665,000 units), NFJ Inc. (18,404 units), NFJ LP (1,057,211
units), Parametric Inc. (18,562 units), and Parametric LP (1,039,860 units)
which may be deemed beneficially owned by PFAMCo because PIMCO Inc.,
Cadence Inc., NFJ Inc., and Parametric Inc., are wholly owned subsidiaries
of PFAMCo and Cadence Inc., NFJ Inc., Parametric Inc., in turn are the
general partners of Cadence L.P., NFJ LP, and Parametric LP, respectively.
As general partners, Cadence Inc., NFJ Inc., and Parametric Inc., have
shared investment and disposition powers with respect to Units held by
Cadence L.P., NFJ LP, and Parametric LP, respectively. The address of each
of the above entities is: 700 Newport Center Drive, Newport Beach,
California 92660.
(6) Includes (i) 366,568 PIMCO Advisors units held of record by PIMCO Inc. and
(ii) the 53,790,539 PIMCO Advisors units which may be viewed to be
beneficially owned by PGP, which may be deemed to be owned by PIMCO Inc.
because PIMCO Inc. is a general partner of PGP.
(7) Includes (i) 142,480 PIMCO Advisors units held of record by PPLLC; and (ii)
53,790,539 PIMCO Advisors units which may be considered to be beneficially
owned by PGP and which may be deemed to be beneficially owned by PPLLC,
which is a general partner of PGP.
(8) Includes the following which may be deemed to be beneficially owned by the
individual as a member of PPLLC. (i) 142,480 PIMCO Advisors units of PIMCO
Advisors held of record by PPLLC; and (ii) 53,790,539 PIMCO Advisors units
which may be considered to be beneficially owned by PGP, and which may be
deemed to be beneficially owned by PPLLC as a general partner of PGP.
(9) Includes 826,082 PIMCO Advisors units which may be acquired upon exchange
of preferred stock of TAG in certain circumstances. The individual
disclaims beneficial ownership of any PIMCO Advisors units that may be
acquired upon exchange of Series B Preferred Stock of TAG.
(10) Includes 18,000 PIMCO Advisors units held by the individual and his spouse,
of which he has shared voting and investment power and 500 PIMCO Advisors
units held by his spouse of which he has no voting or investment power.
(11) Includes (i) 6,000 PIMCO Advisors units held in trusts of which the
individual is trustee and as to which he has sole voting and disposition
power.; and (ii) 142,480 PIMCO Advisors units held of record by PPLLC; and
(ii) 53,790,539 PIMCO Advisors units which may be considered to be
beneficially owned by PGP and which may be deemed to be beneficially owned
by PPLLC, which is a general partner of PGP.
85
<PAGE> 91
DESCRIPTION OF THE PARTNERSHIP AGREEMENT
The following summarizes certain terms of the Partnership Agreement. The
summary is qualified in its entirety by the complete text of the Partnership
Agreement.
Organization and Duration. The Partnership was formed as a Delaware limited
partnership in 1987. PGP is the sole general partner of the Partnership. The
Partnership will dissolve on December 31, 2061 unless sooner dissolved pursuant
to the Partnership Agreement.
Purpose and Business. The purpose and business of the Partnership is
primarily to engage in the investment management and advisory business. The
Partnership may engage in all aspects of the financial services business,
including, but not limited to, the acquisition, development, ownership,
management and distribution of investment advisory businesses and development,
management and distribution of investment companies registered under the
Investment Company Act, as amended, and other pooled investment funds and in
investment, trading and financing activities of all kinds and carry on any
business relating thereto or arising therefrom, including entering into any
partnership, joint venture or other similar arrangement to engage in any of the
foregoing or the ownership of interests in any entity engaged in any of the
foregoing. The Partnership may also carry out any activities that are incidental
or necessary to such business which may lawfully be conducted by a limited
partnership organized under the Delaware Revised Uniform Limited Partnership Act
(the "DRULPA").
Management of the Partnership. As more fully discussed under "Management of
the Partnership," the general partner of the Partnership has full authority and
discretion to manage and control the business and affairs of the Partnership.
The general partner has delegated to the Partnership's management board
substantially all of the general partner's rights, powers and duties to manage
and control the day to day operations of the Partnership. See "Management of the
Partnership." Under the Partnership Agreement, the Limited Partners (as defined
in the Partnership Agreement) have no right or power to take part in the day-to-
day management, operation or control of the Partnership. The Limited Partners
have no rights other than those specifically provided in the Partnership
Agreement or the DRULPA.
The general partner may be removed with the vote of the holders of 80% of
the Partnership Units. Limited Partners have voting rights only on certain
limited matters. Further, approval of actions by or involving the Partnership
may be proposed by, and generally requires the consent of, the general partner.
Limited Partners generally have no right to propose amendments to the
Partnership Agreement or to propose any Partnership action.
Duties of the General Partner. The Partnership Agreement provides that the
general partner will not be liable to the Partnership or the Limited Partners
for breach of fiduciary duty (including breach of any duty of care or any duty
of loyalty) unless the breach involves actual fraud, gross negligence or willful
or wanton misconduct. In addition, the Partnership Agreement provides that
whenever a conflict of interest arises between the general partner or its
affiliates on the one hand, and the Partnership or any of its limited partners
on the other hand (including without limitation any such conflict arising out of
any transaction involving the Partnership and its affiliates), any resolution or
course of action in respect of such conflict of interest, in the absence of bad
faith, shall not be a breach of the Partnership Agreement, any other agreement,
or any duty expressed or implied by law or equity. Where the Partnership
Agreement requires the general partner to make a decision in its discretion or
requires the general partner to act in good faith, the general partner may make
any such decision, so long as such action or decision does not constitute
willful misconduct and is reasonably believed by the general partner to be
consistent with the best interests of the Partnership.
Withdrawal and Removal of General Partner. Except under certain limited
exceptions, the general partner has agreed that it may withdraw as general
partner of the Partnership only if (i) such withdrawal is approved by holders of
a majority of the Partnership Units and the general partner makes a Partnership
Assignment Determination, and (ii) counsel makes a Partnership Limited Liability
Determination, and makes a Partnership Tax Determination. The general partner
may be removed by a vote of Limited Partners holding 80% or more of all
outstanding limited partner units if a successor general partner is appointed,
counsel makes a Partnership Limited Liability Determination and a Partnership
Tax Determination, the
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general partner makes a Partnership Assignment Determination and such removal is
approved by the successor general partner. Also, interests in the general
partner may be sold or transferred without any prior approval or consent of the
holders of the Partnership Units.
Indemnification. The Partnership Agreement requires the Partnership to
indemnify the general partner, its affiliates and all of its officers,
directors, partners, employees and agents against any and all proceedings in
which the Indemnitees may be involved, or threatened to be involved, as a party
or otherwise by reason of their management of the affairs of the Partnership or
which relates to or arises out of the Partnership or related entities. The
Partnership Agreement provides that such Indemnitees are not entitled to
indemnification with respect to any claim, issue or matter in which it has been
adjudged liable for actual fraud, willful misconduct or gross negligence, unless
and only to the extent that the court in which such action was brought, or
another court of competent jurisdiction, determines upon application that,
despite the adjudication of liability, but in view of all the circumstances of
the case, the Indemnitee is fairly and reasonably entitled to indemnification
for such liabilities and expenses as the court may deem proper.
The Partnership Agreement also provides that the general partner will not
be liable to the Partnership or the Limited Partners for errors in judgment or
for breach of fiduciary duty (including breach of any duty of care or any duty
of loyalty) unless the general partner's action or failure to act involved an
act or omission that constitutes actual fraud, gross negligence or willful or
wanton misconduct.
Power of Attorney. Each Limited Partner and each person who executes a
Transfer Application grants to the general partner (and its successors) and the
Liquidating Trustee of the Partnership (as such term is defined in the
Partnership Agreement) an irrevocable power of attorney to execute and file
certain documents agreements and certificates in connection with, inter alia,
the formation, qualification, continuance or dissolution of the Partnership and
certain other matters.
Transfer of Units. Without the approval of the Limited Partners, the
general partner may sell or transfer its general partner interest in the
Partnership to any affiliate of the general partner that agrees to assume the
duties of the general partner and agrees to be bound by the provisions of the
Partnership Agreement. The general partner may also transfer its general partner
interest in the Partnership to a person who agrees to assume the duties of the
general partner and agrees to be bound by the provisions of the Partnership
Agreement in connection with any merger or consolidation of the general partner
or in connection with a transfer of all or substantially all of the general
partner's assets without the approval of the Limited Partners. The general
partner may not sell or transfer its general partner interest to any other
person or entity unless (i) such sale or transfer is approved by a majority of
the limited partnership unitholders, (ii) the purchaser or other transferee of
such interest is, or in connection therewith becomes, a general partner and
(iii) the general partner makes certain assignment, tax and limited liability
determinations.
Except upon the death of a Limited Partner or by operation of law, the
Partnership shall not recognize a transferee of limited partner units unless
such transferee has executed and delivered a transfer application to the general
partner. By executing and delivering a transfer application, the transferee of
limited partner units represents that it has, among other things, requested
admission as a Substituted Limited Partner (as defined by the Partnership
Agreement), executed and agreed to comply with and be bound by the Partnership
Agreement and granted the powers of attorney provided for in the Partnership
Agreement. A transferee shall be admitted to the Partnership as Limited Partner
only with the express consent of the general partner. Until and unless the
general partner consents to the transfer, the transferee will be an Assignee (as
defined by the Partnership Agreement). An Assignee shall receive allocations in
income, gains, credits, deductions, profits and losses of the Partnership
attributable to his interest in the Partnership, but shall not be entitled to
vote. After the general partner consents to the transferee, the Assignee will
become a Substituted Limited Partner.
Notwithstanding the foregoing, no transfer of any Partnership Units shall
be made if such transfer would violate applicable federal and state securities
laws or would affect the Partnership's existence or qualification as a limited
partnership under Delaware law.
Amendment of the Partnership Agreement. The general partner (pursuant to
the general partner's power of attorney) without the approval of any Record
Holder (as such term is defined by the Partnership
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Agreement), may amend the Partnership Agreement at any time to effect a broad
range of changes to the Partnership, including, among other matters, (i) changes
in its name or principal place of business, the admission, substitution or
withdrawal of partners, (ii) changes that are of an inconsequential nature and
do not adversely affect the Limited Partners in any material respect, (iii)
changes that are necessary or desirable to cure any ambiguity, to correct or
supplement any internally inconsistent provisions of the Partnership Agreement
so long as such changes do not adversely affect the Limited Partners, (iv)
changes necessary or desirable to satisfy any requirements of any opinion,
directive, order, ruling or regulation of any federal or state statute, so long
as such change is made in a manner which minimizes any adverse effect on the
Limited Partners, (v) changes necessary or desirable to facilitate the trading
of the Partnership Units or to comply with any rule, regulation, guideline or
requirement of any securities exchange, (vi) changes that are required or
contemplated by the Partnership Agreement, (vii) changes designed to promote
compliance with or continued exemption from various laws (including changes
designed to ensure that the Partnership is not treated as a corporation for
federal income tax purposes), (viii) changes in connection with the issuance of
any class or series of units or other securities of the Partnership and (ix)
other changes specified in the Partnership Agreement or those similar to those
types of changes specified therein.
Generally, if an amendment is proposed by the general partner, it shall be
effective upon its approval by a majority vote unless the Partnership Agreement
requires a greater percentage.
Certain other amendments to the Partnership Agreement require the unanimous
approval of the general and Limited Partners. Such approval is required if the
effect of any amendment would (i) result in the loss of limited liability of the
Limited Partners, (ii) have an effect on the provisions that allocate
distributions and profits and losses or on the voting rights of any of the
partners that is materially adverse to the Limited Partners or the general
partner or (iii) cause the Partnership to be treated as an association taxable
as a corporation for federal income tax purposes.
Voting; Meetings. Meetings of the unitholders may be called by the general
partner or by any Limited Partners holding at least 10% of the issued and
outstanding limited partnership units. Generally, no action may be taken by the
Limited Partners unitholders without a meeting duly called or without written
approval in accordance with the Partnership Agreement.
Unitholders of record on the record date set pursuant to the Partnership
Agreement will be entitled to notice of, and to vote in person or by proxy at,
Limited Partner meetings and to act with respect to matters as to which written
consents may be solicited. Any action that may be taken at a meeting of Limited
Partners may be taken without a meeting Limited Partners owning not less than
the number of Partnership Units that would be necessary to take such action at a
meeting at which all the Limited Partners were present and voted.
The holders of more than 50% of the issued and outstanding units will
constitute a quorum at such a meeting or by proxy, and, with certain exceptions,
matters submitted to Limited Partners will be determined by the affirmative vote
of the Limited Partners holding a majority of the units entitled to vote.
Issuance of Additional Partnership Units and Other Securities. The general
partner is authorized to cause the Partnership to issue Partnership Units or any
other types of securities at any time or from time to time to the general
partner, to Limited Partners or to other persons and to admit them to the
Partnership as additional Limited Partners, all without any consent or approval
of the Limited Partners. Generally, any such additional issuances shall be made
only after receipt of the opinion of an investment banking firm that such
issuance is fair to the Limited Partners from a financial point of view. The
general partner shall have sole and complete discretion to determine the rights,
powers and duties and the consideration and terms and conditions with respect to
any future issuance of such units or securities, without the consent of the
limited partners. However, the approval of holders of a majority of outstanding
Partnership Units held by persons who are not affiliates of the general partner
shall be required in order to issue Partnership Units which rank senior, with
respect to any right to receive distributions, to the units originally issued.
Additionally, under certain circumstances and conditions defined in the
Partnership Agreement, the general partner may make a distribution in
Partnership Units to Record Holders, or subdivide or split Partnership Units and
combine such units.
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Subject to certain exceptions involving changes in the tax laws, any
issuance under the foregoing provisions of the Partnership Agreement shall only
be permitted if the general partner makes an Assignment Determination and a Tax
Determination.
Right to Purchase Partnership Units. The general partner and its affiliates
have the right to purchase or otherwise acquire Partnership Units for their own
account and may, subject to certain provisions in the Partnership Agreement,
sell or otherwise dispose of such units.
Limited Liability. The liability of a Limited Partner who does not take
part in the control of the business of the Partnership and who acts in
conformity with the provisions of the Partnership Agreement will generally be
limited under Delaware law to the amount of such unitholders' capital
contribution to the Partnership in respect of such unitholder's Partnership
Units plus such unitholder's share of the Partnership's assets and undistributed
profits. Under certain circumstances, Limited Partners may also be liable under
Delaware law to return to the Partnership distributions from the Partnership to
the extent that at the time of the distributions after giving effect thereto,
all liabilities of the Partnership, other than liabilities to Limited Partners
on account of their interest in the Partnership, exceed the fair value of the
Partnership's assets. Generally, any such liability is not released by the sale
of limited partner units. Although the Partnership will conduct some level of
direct or indirect operations in several U.S. jurisdictions other than Delaware,
it is believed, but cannot be determined with certainty, that the limited
liability of the Limited Partners will be determined by reference to Delaware
law.
Books and Reports. The general partner is required to keep appropriate
books of the Partnership's business at the principal office of the Partnership.
The books will be maintained for financial reporting purposes on an accrual
basis in accordance with generally accepted accounting principles.
Each Limited Partner, and each Limited Partner's duly authorized
representatives, shall have the right upon reasonable notice and at reasonable
times and at such person's own expense, but only upon his written request and
for a purpose reasonably related to such person's interest as a Limited Partner,
and subject to any confidentiality limitations reasonably imposed by the general
partner in order to protect trade secrets and similar proprietary information
and to comply with applicable securities laws, to inspect and copy certain books
of the Partnership and to have access to certain other records and information
as specified in the Partnership Agreement.
As soon as practicable, but in no event later than 120 days after the close
of each year and 75 days after the close of each quarter, the general partner
shall mail to each record holder certain financial reports as specified in the
Partnership Agreement.
The general partner shall arrange for the preparation and timely filing of
all tax returns of the Partnership showing certain tax information specified in
the Partnership Agreement, and shall use all reasonable efforts to furnish such
tax information to the record holders within ninety days after the close of each
taxable year of the Partnership as is reasonably required by the record holders
for applicable income tax reporting purposes.
Events Causing Dissolution. The Partnership shall be dissolved and its
affairs wound up upon the occurrence of any of the following events: (i) the
expiration of the term of the Partnership; (ii) the withdrawal of the general
partner or the occurrence of any other event that results in the general partner
ceasing to be a general partner of the Partnership (other than by reason of a
transfer); (iii) the bankruptcy of the general partner; (iv) a written
determination by the general partner to dissolve the Partnership; or (v) the
sale by the Partnership of all or substantially all of the Partnership's assets.
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COMPARISON OF PIMCO ADVISORS LIMITED PARTNER UNITS
AND PARTNERSHIP UNITS
PIMCO ADVISORS THE PARTNERSHIP
FORM OF ORGANIZATION
PIMCO Advisors is a limited partnership formed under DRULPA.
The Partnership is a limited partnership formed under DRULPA.
BUSINESS
The PIMCO Advisors Partnership Agreement provides that the purpose of PIMCO
Advisors is (i) to carry on the investment management and advisory business and
(ii) to carry on any other lawful activities for which limited partnerships may
be formed under DRULPA.
The Partnership Agreement provides that the purpose of the Partnership is
(i) to, through an operating partnership, engage in investment advisory services
and (ii) to engage in all other aspects of the financial services business.
VOTING RIGHTS
Under DRULPA and/or the PIMCO Advisors Partnership Agreement, limited
partners have voting rights with respect to (i) the withdrawal, removal,
transfer and replacement of a general partner, (ii) the merger or consolidation
of PIMCO Advisors with another entity, (iii) the sale of all or substantially
all of the assets owned, directly or indirectly, by PIMCO Advisors, (iv) the
dissolution of PIMCO Advisors, (v) the domestication of PIMCO Advisors, (vi)
certain types of amendments to the PIMCO Advisors Partnership Agreement, (vii)
reconstitution, (viii) election, compensation, and approval of a successor
liquidating trustee, (ix) conversion or reorganization of PIMCO Advisors into
another type of legal entity, (x) distributions of publicly traded securities,
other than upon liquidation and (xi) issuance of units which rank senior to the
PIMCO Advisors Class A LP units.
Under DRULPA and/or the Partnership Agreement, limited partners have voting
rights with respect to (i) the withdrawal, removal, transfer and replacement of
a general partner, (ii) the merger or consolidation of the Partnership with
another entity, (iii) the sale of all or substantially all of the assets owned,
directly or indirectly, by the Partnership, (iv) the dissolution of the
Partnership, (v) the domestication of the Partnership, (vi) certain types of
amendments to the Partnership Agreement, (vii) reconstitution, (viii) election,
compensation, and approval of a successor liquidating trustee, (ix) conversion
or reorganization of the Partnership into another type of legal entity, (x)
distributions of publicly traded securities, other than upon liquidation, (xi)
issuance of units which rank senior to the units originally issued and (xii)
capital contribution by the Partnership to the operating partnership, if the
proceeds are to be lent by the operating partnership to an affiliate of the
general partner and if such funds are raised by the general partner causing the
partnership to issue additional units.
Each limited partner unit entitles each holder thereof who is admitted as a
limited partner of PIMCO Advisors to cast one vote on all matters presented to
limited partners.
Each Partnership Unit entitles each holder thereof who is admitted as a
limited partner of the Partnership to cast one vote on all matters presented to
limited partners.
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PIMCO ADVISORS THE PARTNERSHIP
Approval of any matter submitted to limited partners generally requires the
affirmative vote of limited partners holding more than 50% of the units then
outstanding, except that removal of a general partner requires the vote of 80%
of the outstanding units and amendments that would have a material and adverse
effect on a particular class of units must be approved by that class.
Approval of any matter submitted to limited partners generally requires the
affirmative vote of limited partners holding more than 50% of the units then
outstanding, except that removal of a general partner requires the vote of 80%
of the outstanding units, and amendments that would have (a) a material and
adverse effect on the limited partners, (b) would result in the loss of limited
liability of the limited partners or (c) would cause the Partnership to be
treated as an association taxable as a corporation require a unanimous vote of
the Partnership.
Only a general partner may propose amendments to the PIMCO Advisors
Partnership Agreement.
Only the general partner may propose amendments to the Partnership
Agreement.
Any action that may be taken at a meeting of unitholders may be taken by
written consent in lieu of a meeting executed by unitholders sufficient to
authorize such action at a meeting of unitholders.
Any action that may be taken at a meeting of unitholders may be taken by
written consent in lieu of a meeting executed by Unitholders sufficient to
authorize such action at a meeting of Unitholders.
DISTRIBUTIONS AND DIVIDENDS
From and after December 31, 1997, PIMCO Advisors is required to distribute
all Operating Profit Available for Distribution. Prior to December 31, 1997
PIMCO Advisors is required under the PIMCO Advisors Partnership Agreement to
distribute Operating Profit Available for Distribution to the partners of PIMCO
Advisors on a quarterly basis as follows: (i) first to the holders of PIMCO
Advisors Class A LP and GP Units until such holders have received $0.47 per Unit
per calendar quarter (aggregating to $1.88 per Unit per year) since the date of
the 1994 Consolidation, second to holders of PIMCO Advisors Class B LP Units
until such holders have received $0.47 per unit per calendar quarter on a
cumulative basis within a calendar year but not carried over from year to year
and third to all holders of units on a pro rata basis. The PIMCO Advisors Class
C LP Units (all of which are held by a subsidiary of PIMCO Advisors) have the
same rights to distributions as the PIMCO Advisors Class A LP Units, except that
distributions on the PIMCO Advisors Class C LP Units are subject to an annual
limit of $3.00 per unit. Effective January 1, 1998, the PIMCO Advisors
Partnership Agreement will be amended to entitle the Class C LP Units to a
minimum distribution of $2.75 per unit per year, commencing with the quarter
ending March 31, 1998, and to cause the Class C LP Units to be convertible at
the election of the holder into PIMCO Advisors Class A LP Units on a one-for-one
basis. All PIMCO Advisors Class C LP Units are held by a subsidiary of PIMCO
Advisors, and PIMCO Advisors has no present intention of converting such units.
The Partnership is required to distribute quarterly an amount equal to the
excess of (i) the cash distribution from the operating partnership plus the
interest on the Opfin Debt over (ii) the expenses of the Partnership. The
distributions shall be made in proportion to the ownership interest of each
partner.
Prior to the Oppenheimer Capital Merger, the Partnership's distributions
were dependent on the distributions of Oppenheimer Capital. Since the
Oppenheimer Capital Merger, the Partnership's distributions have been dependent
on the distributions of PIMCO Advisors. Because the Opfin Debt has been repaid
and PIMCO Advisors pays the expenses (other than taxes) of the Partnership,
distributions on the Partnership Units will be equal to the distributions on the
PIMCO Advisors units less taxes. Effective January 1, 1998, the Partnership will
be subject to tax on its gross income from active businesses.
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PIMCO ADVISORS THE PARTNERSHIP
TAXATION
Under current law, PIMCO Advisors is not a taxpaying entity. Rather, each
holder of units includes the holder's share of the income and gain and, subject
to certain limitations, the losses, deductions and credits of PIMCO Advisors in
computing taxable income without regard to the cash distributed to the holder.
Generally, cash distributions to holders of units are not taxable, unless
distributions exceed the holder's basis in the units. See "Certain Federal
Income Tax Consequences."
Like PIMCO Advisors, the Partnership is not a taxpaying entity. Rather,
each holder of units includes the holder's share of the income and gain and,
subject to certain limitations, the losses, deductions and credits of PIMCO
Advisors in computing taxable income without regard to the cash distributed to
the holder. Generally, cash distributions to holders of units are not taxable,
unless distributions exceed the holder's basis in the units. Due to recent
legislation, the Partnership will be subject to a 3.5% federal tax (and,
possibly, additional state taxes) on its gross income derived from active
businesses after December 31, 1997. See "Certain Federal Income Tax
Consequences."
A tax-exempt limited partner's share of PIMCO Advisors taxable income
constitutes unrelated business taxable income to the tax-exempt limited partner.
See "Certain Federal Income Tax Consequences."
A tax-exempt limited partner's share of the Partnership's taxable income
constitutes unrelated business taxable income to the tax-exempt limited partner.
See "Certain Federal Income Tax Consequences."
MANAGEMENT
PIMCO Advisors is managed by its general partners: PGP and the Partnership.
PGP has direct control of the Partnership, and therefore controls PIMCO
Advisors. Any difference arising as to any action connected with the business of
PIMCO Advisors, other than those requiring the unanimous consent of the general
partners, is decided by the general partners holding a majority of the
outstanding PIMCO Advisors GP Units.
The business and affairs of the Partnership are managed by its general
partner, PGP.
The general partners have jointly delegated substantially all of the
management and control of PIMCO Advisors to the PIMCO Advisors Management Board
which has delegated to an Executive Committee the authority to manage most
day-to-day operations and policies of PIMCO Advisors.
The general partner has delegated to the Partnership's Management Board
substantially all of the general partner's rights, powers and duties to manage
and control the Partnership.
The general partners may be removed only by vote of 80% of the outstanding
units.
The general partner may be removed only by vote of 80% of the outstanding
units.
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PIMCO ADVISORS THE PARTNERSHIP
POTENTIAL DILUTION
The general partners, generally without the approval of the unitholders,
have the authority to cause PIMCO Advisors to issue additional classes or series
of limited partners interests, and has discretion to determine rights, powers
and duties and the consideration in terms and conditions with respect to any
such issuance; provided, however, that a majority of outstanding limited
partners unaffiliated with the general partner must approve any issuance of
units which rank senior to the PIMCO Advisors Class A LP Units. PIMCO Advisors
will not issue any units or other equity securities unless PIMCO Advisors
receives an opinion of counsel to the effect that the issuance will not cause
PIMCO Advisors to be treated as a corporation for federal income tax purposes.
The general partner, generally without the approval of the Unitholders, has
the authority to cause the Partnership to issue additional classes or series of
limited partners' interests, and has discretion to determine the rights, powers
and duties and the consideration and terms and conditions with respect to any
such issuance; provided, however, that a majority of outstanding limited
partners unaffiliated with the general partner must approve any issuance of
units which rank senior, with respect to any right to receive distributions, to
the units originally issued. In addition, with certain exceptions, any
additional issuances shall be made only after receipt of an opinion of an
investment banking firm that such issuance is fair to the limited partners who
are not affiliates of the general partner from a financial point of view. The
Partnership will not issue any units or other equity securities unless the
general partner determines that the effect of the issuance will not cause the
Partnership to be treated as a corporation for federal income tax purposes, or
cause an "assignment" for regulatory purposes.
MEETINGS
Meetings of limited partners may be called by the general partner, any
liquidating trustee or limited partners holding at least 10% of the issued and
outstanding units.
Meetings of limited partners may be called by the general partner or
limited partners holding at least 10% of the issued and outstanding units.
CONVERSION/EXCHANGE RIGHTS
The units are not convertible into any other securities.
Following the Restructuring, Nonpublic Unitholders will have certain rights
to exchange their PIMCO Advisors units for Partnership Units from time to time.
The units are not convertible into any other securities.
RIGHT TO PURCHASE UNITS
If the general partners determine that there is a substantial risk of the
partnership becoming subject to taxation on its income, the general partners may
initiate redemption transactions which will permit the exchange of some or all
of the limited partner units for interests in one or more successor entities.
If less than 10% of issued and outstanding units are units held by limited
partners, the general partner will have the right to purchase all of the units
held by limited partners for a purchase price based on the recent trading price
of the units.
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PIMCO ADVISORS THE PARTNERSHIP
LIQUIDATION RIGHTS
In the event of the liquidation of the Partnership the assets of the
Partnership remaining after the satisfaction of all debts and liabilities of the
Partnership are distributed to limited partners pro rata in accordance with
their capital accounts.
In the event of the liquidation of the Partnership the assets of the
Partnership remaining after the satisfaction of all debts and liabilities of the
Partnership are distributed to limited partners pro rata in accordance with
their capital accounts.
RIGHT TO COMPEL DISSOLUTION
Under the DRULPA and the PIMCO Advisors Partnership Agreement, the limited
partners may only compel dissolution of PIMCO Advisors if all of the general and
limited partners consent in writing. An election by the general partners to
dissolve PIMCO Advisors may be made under certain circumstances or if approved
by limited partners holding more than 50% of the units held by persons other
than the general partners and their affiliates, voting as a single class.
Under the Partnership Agreement, limited partners may only compel
dissolution of the Partnership with the affirmative vote of 80% of the
outstanding limited partner units. A written determination by the general
partner to dissolve the Partnership will also compel liquidation.
LIMITED LIABILITY
In general, holders of units are limited partners in a Delaware limited
partnership, and do not have personal liability for obligations of PIMCO
Advisors.
In general, holders of units are limited partners in a Delaware limited
partnership, and do not have personal liability for obligations of the
Partnership.
LIQUIDITY AND MARKETABILITY
The units are transferable, provided that no transfer will be made if it
(i) would violate applicable federal and state securities laws, (ii) would cause
an "assignment" for regulatory purposes or would cause PIMCO Advisors to lose
its partnership tax treatment or (iii) would affect PIMCO Advisors' existence or
qualification as a limited partnership under the DRULPA. Following the
Restructuring, significant restrictions will be imposed on the right to transfer
units. Under the PIMCO Advisors Partnership Agreement, following the
Restructuring PIMCO Advisors units will not be transferable unless the transfer
is permitted under certain IRS regulatory safe-harbor rules for avoiding
"publicly traded partnership" tax status for PIMCO Advisors. Under such rules,
and subject to an annual volume limitation, Nonpublic Unitholders will be
entitled to exchange certain PIMCO Advisors units for Partnership Units. See
"Relationship Between the Partnership and PIMCO Advisors -- Operating
Agreement."
The units are transferable, provided that no transfer will be made if it
(i) would violate applicable federal and state securities laws or (ii) would
affect the Partnership's existence or qualification as a limited partnership
under the DRULPA.
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PIMCO ADVISORS THE PARTNERSHIP
CONTINUITY OF EXISTENCE
The PIMCO Advisors Partnership Agreement provides for PIMCO Advisors to
continue in existence until December 31, 2086, unless earlier dissolved in
accordance with the PIMCO Advisors Partnership Agreement.
The Partnership Agreement provides for the Partnership to continue in
existence until December 31, 2061, unless earlier dissolved in accordance with
the Partnership Agreement.
FINANCIAL REPORTING
Until the Effective Date, PIMCO Advisors is subject to the reporting
requirements of the Exchange Act and files annual and quarterly reports
thereunder. After the Restructuring, PIMCO Advisors will not be subject to the
reporting requirements of the Exchange Act and will not file such reports.
The Partnership is subject to the reporting requirements of the Exchange
Act and files annual and quarterly reports thereunder.
CERTAIN LEGAL RIGHTS
Delaware law allows a limited partner, under certain circumstances, to
institute legal action on behalf of a partnership (a partnership derivative
action) to recover damages from a third party or a general partner where the
general partner has failed to institute the action. In addition, a limited
partner may have rights to institute legal action on behalf of the limited
partner or all other similarly situated limited partners (a class action) to
recover damages from a general partner for violations of fiduciary duties to the
limited partners. Limited partners may also have rights to bring actions in
federal courts to enforce federal rights.
Delaware law allows a limited partner, under certain circumstances, to
institute legal action on behalf of a partnership (a partnership derivative
action) to recover damages from a third party or a general partner where the
general partner has failed to institute the action. In addition, a limited
partner may have rights to institute legal action on behalf of the limited
partner or all other similarly situated limited partners (a class action) to
recover damages from a general partner for violations of fiduciary duties to the
limited partners. Limited partners may also have rights to bring actions in
federal courts to enforce federal rights.
RIGHT TO LIST OF HOLDERS; INSPECTION OF BOOKS AND RECORDS
Under DRULPA, limited partners have a right, subject to reasonable
standards as may be established by the general partner, to obtain from the
general partner, from time to time upon reasonable demand for any purpose
reasonably related to the limited partner's interest as a limited partner,
certain information relating to the status of the business and financial
condition of PIMCO Advisors, tax returns, governing instruments of PIMCO
Advisors and a current list of the partners of PIMCO Advisors, provided that the
general partner may keep confidential any trade secrets or any other information
the disclosure of which could damage PIMCO Advisors or violate any agreement or
applicable law.
Under DRULPA, limited partners have a right, subject to reasonable
standards as may be established by the general partner, to obtain from the
general partner, from time to time upon reasonable demand for any purpose
reasonably related to the limited partner's interest as a limited partner,
certain information relating to the status of the business and financial
condition of the Partnership, tax returns, governing instruments of the
Partnership and a current list of the partners of the Partnership, provided that
the general partner may keep confidential any trade secrets or any other
information the disclosure of which could damage the Partnership or violate any
agreement or applicable law.
SUBORDINATION
Subordinated to claims of creditors of PIMCO Advisors.
Subordinated to claims of creditors of the Partnership.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax consequences of
the Restructuring and the receipt, retention, and disposition of Partnership
Units. This discussion is based on the provisions of the Code, the Treasury
Regulations thereunder and rulings and court decisions as of the date hereof,
all of which are subject to change, possibly retroactively. Neither the
Partnership nor PIMCO Advisors has requested a ruling from the Internal Revenue
Service ("IRS") in connection with the Restructuring.
The following discussion is for general information and does not address
all federal income tax consequences that may affect the receipt, ownership or
disposition of Partnership Units, nor does the discussion specifically address
the effect of any applicable state, local, or foreign tax laws. ACCORDINGLY,
EACH PROSPECTIVE HOLDER OF PARTNERSHIP UNITS IS URGED TO CONSULT HIS OR HER TAX
ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX AND
REPORTING CONSEQUENCES ARISING FROM THE RECEIPT, OWNERSHIP AND DISPOSITION OF
PARTNERSHIP UNITS AS THEY MAY RELATE TO HIS OR HER TAX SITUATION.
TAX CONSEQUENCES OF THE RESTRUCTURING
The exchange of PIMCO Advisors LP Units for Partnership Units is intended
to be treated for federal income tax purposes as a contribution of property to a
partnership in exchange for an interest in the partnership. As such, under
Section 721 of the Code, no gain or loss will be recognized by the exchanging
party or the Partnership on the exchange. The exchanging party will have a tax
basis in its Partnership Units equal to the tax basis such party had in the
surrendered PIMCO Advisors LP Units and will have a holding period for the
Partnership Units that includes the holding period that it had for the
surrendered PIMCO Advisors LP Units. Furthermore, the Partnership will have a
tax basis in the contributed PIMCO Advisors LP Units equal to the tax basis of
such PIMCO Advisors LP Units in the hands of the exchanging party and will have
a holding period for the PIMCO Advisors LP Units that includes the holding
period for such PIMCO Advisors LP Units in the hands of the exchanging party.
TAX CLASSIFICATION OF THE PARTNERSHIP
Tax Classification of the Partnership Generally. At present the Partnership
is classified as a partnership for federal income tax purposes, and, as
discussed below under "Publicly Traded Partnership Status," it is intended that
following the Restructuring the Partnership will elect to continue to be treated
as such. In general, entities classified as partnerships under the Code are not
subject to federal income tax (however, as discussed below in "Publicly Traded
Partnership Status," commencing with the 1998 taxable year the Partnership will
be subject to a 3.5% federal tax on its gross income from the conduct of active
trades or businesses, including its share of such gross income derived through
PIMCO Advisors). Instead, all holders of partnership interests are taxable on
their allocable share of the partnership's income or gain, whether or not such
income or gain is distributed. If an entity formed as a partnership under state
law were classified for federal income tax purposes as a corporation, income
would be taxed at the entity level at the then applicable corporate rate of tax
(currently a maximum federal marginal rate of 35%), and distributions to the
partners of such partnership would constitute taxable dividends to the extent of
current or accumulated earnings and profits of the entity.
Publicly Traded Partnership Status. As a result of amendments to the Code
made by the Revenue Act of 1987, pursuant to Code Section 7704(a) "publicly
traded partnerships" are generally treated as corporations under the Code. The
Partnership Units are publicly traded and thus the Partnership constitutes a
"publicly traded partnership" for purposes of Code Section 7704. As discussed
below, since 1987 the Partnership has qualified for a temporary exception to the
application of Code Section 7704(a), and the Partnership believes that under
recent tax legislation it will qualify for an indefinite exception that will be
available for the 1998 and subsequent tax years. However, if the Partnership
were determined at any time to be subject to Section 7704(a) of the Code, the
Partnership would be taxable as a corporation. In this event, the income, gain,
loss, deductions and credits of the Partnership would be reflected only on its
tax return and
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would not be passed through to the holders of Partnership Units. If the
Partnership had positive taxable income for any period, it would be required to
pay tax on such income at applicable corporate rates. The imposition of such tax
would reduce the amount of distributions that would ultimately be made to
holders of Partnership Units. In addition, the amount of any distributions to
holders of Partnership Units would be taxable to them as ordinary dividend
income to the extent of the Partnership's current or accumulated earnings and
profits, regardless of the source from which they were generated. Distributions
in excess of the Partnership's current or accumulated earnings and profits would
be treated as a nontaxable return of capital to the extent of the holder's tax
basis in its Partnership Units and thereafter treated as gain from the sale of
such holder's Partnership Units.
Because the Partnership was publicly traded prior to the effective date of
the amendments made by the Revenue Act of 1987, the Partnership believes that
since 1987 it has qualified and at present continues to qualify for a temporary
(10-year) exception to tax treatment as a corporation under Code Section 7704(a)
(the "temporary exception"). Subject to certain ongoing qualification
requirements that the Partnership believes it satisfies, this temporary
exception permits the Partnership to continue to enjoy partnership status (and
not be treated as a corporation) until December 31, 1997, so long as the
Partnership does not otherwise cease to be taxed as a partnership without regard
to the publicly traded partnership rules before then.
Pursuant to legislation enacted as part of the Taxpayer Relief Act of 1997,
for tax years beginning after December 31, 1997, publicly traded partnerships
that have been covered by the temporary exception will be eligible to elect (an
"electing 1987 partnership") to be covered by another exception to tax treatment
as a corporation (the "elective exception"). Subject to the discussion below, an
"electing 1987 partnership" is exempt from the application of Code Section
7704(a) and therefore will continue to be taxed as a partnership and not a
corporation. An "electing 1987 partnership" is subject to a 3.5% annual tax on
its gross income from the active conduct of any trades or businesses (the "3.5%
PTP tax"). For an "electing 1987 partnership" holding interests in another
partnership, gross income includes the partnership's distributive share of any
gross income from the other partnership's active conduct of a trade or business.
The 3.5% PTP tax cannot be offset by any tax credits and will not be deductible
for federal or state income tax purposes. An "electing 1987 partnership" is a
publicly traded partnership that meets certain eligibility requirements
specified in Code Section 7704(g), properly elects to be subject to Code Section
7704(g), and consents to the application of the 3.5% PTP tax for its first
taxable year beginning after December 31, 1997. The election, once made, applies
to the tax year for which it has been made and for all subsequent tax years,
until revoked by the partnership. Consent of the IRS is not needed to revoke the
election, and, once revoked, the election cannot be reinstated. Notwithstanding
its election, an "electing 1987 partnership" will lose its partnership status as
of the first day after December 31, 1997 on which the partnership adds a
substantial new line of business (within the meaning of Code Section 7704(g)).
The Partnership believes that it will continue to qualify through December
31, 1997, for the temporary exception to corporate tax treatment, and the
Partnership intends to take all necessary action to qualify for the elective
exception commencing with its taxable year that begins on January 1, 1998.
Furthermore, the Partnership does not anticipate either revoking the election or
adding a substantial new line of business. However, because ongoing
qualification for the elective exception will depend in large part upon facts
existing in the future, there can be no assurances that the Partnership will
continue to qualify for the elective exception and could thereafter be subject
to tax as a corporation.
Flow-Through of Partnership Income. Except for the 3.5% PTP tax discussed
above, no federal income tax will be paid by the Partnership itself. Instead,
holders of Partnership Units will be required to report on their federal income
tax returns their allocable share of income, gains, losses, deductions and
credits of the Partnership. The Partnership uses the calendar year for its tax
year, and, as noted above, the Partnership's income, gains and other tax items
are calculated on a monthly basis and allocated for tax purposes to the holders
of Partnership Units as of the last day of each month. The characterization of
any item of profit or loss (e.g., as capital gain or loss rather than ordinary
income or loss) will generally be the same for a holder of Partnership Units as
it is for the Partnership. Tax allocations are discussed further below. Because
a holder of Partnership Units will be required to include Partnership income or
gain in gross income for tax purposes, without regard to whether there are any
distributions from the Partnership, a holder may become liable for
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taxes on Partnership income or gain in excess of the cash distributions received
by such holder. In this regard, because the 3.5% PTP tax will not be deductible
for purposes of calculating the Partnership's net taxable income, the imposition
of such tax will reduce the Partnership's ability to make distributions equal to
its net taxable income (in other words, Partnership net income used to pay the
3.5% PTP tax will be taxable to the Partnership's partners but not available for
distribution.)
Because the activities of the Partnership are expected to consist of
holding PIMCO Advisors GP Units, and the activities of PIMCO Advisors are
expected to consist primarily of holding interests in the Investment Management
Firms, the types of income that the Partnership may realize is expected to be
principally operating income from the operations of the Investment Management
Firms, which will be characterized for tax purposes as if such income were
realized directly by the holders of Partnership Units.
Tax Classification of PIMCO Advisors. At present the Class A LP Units of
PIMCO Advisors are publicly traded, and thus PIMCO Advisors is a publicly traded
partnership subject to the provisions of Section 7704 discussed above. As in the
case of the Partnership, since 1987 PIMCO Advisors has qualified for the
"temporary exception" to tax treatment as a corporation under Section 7704(a),
and PIMCO Advisors believes that under the temporary exception it will continue
to enjoy partnership status (and not be taxed as a corporation) until December
31, 1997. However, unlike the Partnership, PIMCO Advisors does not intend to
elect to be covered by the "elective exception" to corporate tax treatment in
1998 and subsequent years. Instead, effective as of January 1, 1998, the
partnership interests of PIMCO Advisors will no longer be listed or traded on
any securities exchange and PIMCO Advisors will impose significant restrictions
on the private transfer of such interests. Such cessation of public trading and
transfer restrictions are intended to cause PIMCO Advisors to cease, as of
December 31, 1997, to be a publicly traded partnership for purposes of Section
7704, with the result that it will continue to be classified as a partnership
(and not a corporation) for federal tax purposes. If PIMCO Advisors continues to
qualify as a partnership for tax purposes, it will not pay federal tax on its
income, it will not be subject to the 3.5% PTP tax, and its income, gains and
other tax items will be allocated to its partners, including the Partnership, in
the manner described above under "Flow-Through of Partnership Income." Since
PIMCO Advisors will not be eligible after January 1, 1998, to elect to be
covered by the elective exception, it will lose its classification as a
partnership for tax purposes (and thus be taxable as a corporation) if at any
time after January 1, 1998, its partnership interests are deemed to be "publicly
traded" for purposes of Code Section 7704. Because the tax characterization of
PIMCO Advisors partnership interests will depend upon facts existing in the
future, there can be no assurance that in the future the IRS will not attempt to
treat PIMCO Advisors partnership interests as publicly traded and PIMCO Advisors
as a publicly traded partnership taxable as a corporation. Because substantially
all of the Partnership's income is derived from PIMCO Advisors, if the IRS were
to successfully assert that PIMCO Advisors should be classified as a publicly
traded partnership taxable as a corporation, PIMCO Advisors would be taxed on
its income and its after-tax distributions to the Partnership would be taxed as
dividends. See "Tax Classification of the Partnership Generally." Such corporate
tax treatment of PIMCO Advisors would have a material adverse effect on the
Partnership's income and thus on its distributions to the holders of Partnership
Units.
Calculation of Adjusted Tax Basis and Treatment of Partnership
Distributions. In general, a holder's tax basis in his Partnership Units will be
equal to the tax basis such holder had in the PIMCO Advisors LP Units that were
exchanged by such holder for Partnership Units in the Restructuring (for holders
contributing PIMCO Advisors LP Units to the Partnership in exchange for
Partnership Units in the Restructuring), increased by the amount of any
contributions made by the holder to the Partnership and by the holder's
allocable share of any income of the Partnership, and decreased by the amount of
any distributions received by the holder from the Partnership and by the
holder's allocable share of any losses of the Partnership. Increases in a
holder's share of liabilities of the Partnership (if any) are treated as
contributions to the Partnership by such holder and decreases in a holder's
share of such liabilities (if any) are treated as distributions of cash by the
Partnership to such holder.
As described above, holders of Partnership Units are subject to tax on
their allocable share of Partnership income whether or not distributed.
Generally, the receipt of cash distributions from a partnership are not taxable
to the recipient partner except to the extent that such distributions exceed the
partner's tax basis in his
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interest in the partnership. Cash distributions (including deemed distributions
resulting from a decrease in a partner's share of liabilities of the
partnership) in excess of a partner's tax basis in his partnership interest are
treated as gain realized from the sale or other taxable disposition of the
partnership interest. Distributions of assets in kind to a partner from a
partnership generally are not taxable to either the partnership or the recipient
partner, although certain exceptions apply.
Under the Partnership Agreement, items of Partnership income, gain, loss,
deduction and credit are determined on a monthly basis and allocated to holders
who hold Partnership Units as of the last day of such monthly period.
Distributions are made to holders who hold Partnership Units on record dates
determined by the General Partner. As a result, holders who sell Partnership
Units between record dates may be allocated taxable income of the Partnership
without receiving a distribution in respect of such income. Such an allocation
would increase a holder's basis in his or her Partnership Units, however, and
thus to such extent would decrease any gain or increase any loss recognized on a
sale of such Partnership Units.
TAX ALLOCATIONS
Overview. As indicated above, each holder of Partnership Units must include
in taxable income his or her share of the taxable income of the Partnership.
Although the applicable tax rules are complex, it is anticipated that the
reported income of each holder of Partnership Units will generally consist of
two parts:
- first, a share of the taxable income of the Partnership calculated at the
Partnership level (using the Partnership's basis in its assets and
without the benefit of any deductions for goodwill and certain other
intangible assets that are eligible for amortization pursuant to Section
197 of the Code ("Section 197 Intangibles")), and
- second, a deduction taken ratably over 15 years for the amortization of
the portion of the original purchase price of the PIMCO Advisors LP Units
contributed to the Partnership in the Restructuring allocable to Section
197 Intangibles, or, for holders who purchase Partnership Units, the
portion of the original purchase price for such Partnership Units
allocable to Section 197 Intangibles (which generally will be
approximately equal to the excess of the purchase price over such
holder's proportionate share of PIMCO Advisors basis in its assets, in
the former case, or of the Partnership's basis in its assets, in the
latter case).
The treatment of Section 197 Intangibles is discussed further under
"Certain Additional Tax Considerations for Holders of Partnership Units." Set
forth below is a discussion of three of the principal tax rules that are
relevant in determining the taxable income allocable to any holder of
Partnership Units:
Code Sections 704(b). Under Code Section 704(b), taxable income of the
Partnership must be allocated among Partnership Units in a manner that reflects
the allocation of economic income. Thus, the basic allocation rule generally
followed by the partnership is that its taxable income will be allocated pro
rata among Partnership Units.
Section 704(c). If a partner acquires an interest in a partnership in
exchange for a contribution of property to the partnership, the partnership's
initial tax basis in the contributed property may differ from the property's
fair market value at the time of the contribution. In that event, the taxable
income earned by the partnership from such property would differ from the
partnership's "book income" from the property (which would be calculated under
tax accounting principles using as the property's initial book value the
property's fair market value at the time it was acquired by the partnership).
Under Code Section 704(c), the taxable income and deductions of a partnership
generally must be allocated to the partnership interests that were issued in
exchange for property in a way that eliminates the difference between the
partnership's book value and tax basis for the property for which such interest
was exchanged. Regulations allow a partnership to use any one of a number of
reasonable methods for making this adjustment. A similar principle applies when
the capital accounts for outstanding partnership interests are adjusted to fair
market value. The book/tax differences stemming from the capital account
adjustments must be allocated to the partnership interests for which the
adjustments are made. Special allocations of taxable income and deductions made
to a partnership interest under Code Section 704(c) continue to be made even
after the partnership interest is transferred to a
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new owner. The foregoing rules would apply to holders of PIMCO Advisors LP Units
contributing such Units to the Partnership in exchange for Partnership Units in
connection with the Restructuring, as well as to other persons contributing
property to the Partnership in exchange for Partnership Units.
Code Section 754. Finally, the Partnership and PIMCO Advisors each has in
effect, and each Investment Management Firm has made, Code Section 754
elections. As a result, each purchaser of a Partnership Unit will be allowed to
adjust the basis of the Partnership's assets, solely for purposes of computing
the taxable income of such purchaser, in an amount equal to the difference
between the price paid for the Unit and the share of the Partnership's basis in
its assets allocable to that Unit. Substantially all of this adjustment is
expected to be allocated to Section 197 Intangibles, with the result that
purchasers generally can deduct the amount of the adjustment ratably over 15
years. See "Certain Additional Tax Considerations for Holders of Partnership
Units" below.
Certain of the Partnership's allocation methods and assumptions are
designed to deal with some of the practical issues that arise from operating in
the form of a public partnership. While these methods and assumptions have not
been specifically approved by the IRS, and may not be in technical compliance
with Code Sections 704(c) and 754, the Partnership believes that they are
consistent with the purposes of those provisions. However, the IRS could
challenge the allocation methods and assumptions used by the Partnership, and if
such challenge were successful, the taxable income of some holders of
Partnership Units might be increased without any corresponding increase in cash
distributions.
CERTAIN LIMITATIONS ON LOSSES AND DEDUCTIONS.
Holders of Partnership Units are not expected to be allocated losses in
excess of income. However, if this occurs, federal tax law provides for certain
limitations (such as the "passive activity" and "at risk" rules) on a holder's
ability to deduct such losses against income from other sources. The deduction
of interest on debt used to purchase or carry Partnership Units may also be
limited. Holders of Partnership Units should consult their tax advisors with
regard to the possible application of such rules related to limitations on the
deductibility of Partnership losses and investment interest.
DISPOSITION OF PARTNERSHIP UNITS
Gain or loss from a sale or other disposition of a Partnership Unit will
generally be based on the difference between the amount realized and the
holder's adjusted tax basis for such Partnership Unit. The amount realized will
include the holder's share of Partnership liabilities. Any such gain or loss
will generally be taxable as either midterm or long-term capital gain or loss if
the holder has held the Partnership Unit for more than one year but not more
than eighteen months (in the case of mid-term capital gain or loss) or more than
eighteen months (in the case of longterm capital gain or loss). However, a
holder of Partnership Units may recognize ordinary income from sale proceeds
attributable to unrealized receivables and inventory of the Partnership
("Section 751 Assets"). Such ordinary income may exceed net gain realized upon
the sale of Units and may be recognized even if there is a net loss on the sale
of Units. Because amortization deductions with respect to Section 197
Intangibles will be treated as Section 751 Assets, if such Section 197
Intangibles maintain their value, sellers of Partnership Units who have been
allocated amortization deductions attributable to such Section 197 Intangibles
will recognize ordinary income on the sale equal to the amount of amortization
deductions previously taken. If, however, there is a loss on the sale of
Partnership Units and such loss is attributable to the decline in the value of
the Section 197 Intangibles, the loss in some circumstances might be deferred
until a holder disposes of all of his or her Partnership Units.
The IRS has ruled that a partner acquiring multiple interests in a
partnership in separate transactions at different prices must maintain an
aggregate adjusted tax basis in a single partnership interest consisting of the
combined interests in the partnership. Upon a disposition of a portion of such
single interest, the partner would, under the ruling, be required to apportion
equitably his or her aggregate tax basis between the interest sold and the
interest retained. Under this ruling, a holder of Partnership Units that had
acquired PIMCO Advisors LP Units at different prices would in effect be
precluded from selecting which Partnership Units to sell, and thereby from
selectively controlling the recognition of gain or loss.
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Certain Reporting Requirements. In order to comply with Code requirements
and avoid imposition of potentially significant penalties, holders of
Partnership Units transferring any such Units, other than through a broker
subject to the provisions of Code Section 6045, must report such transfer to the
Partnership. In addition, under Code Sections 1060, 755 and related provisions,
transferors and transferees of Partnership Units must report the amount of any
basis adjustment allocated to Section 197 Intangibles. The Partnership intends
to provide holders of Partnership Units with sufficient basis allocation
information to comply substantially with applicable reporting requirements.
Any person who holds Partnership Units as a nominee for another person is
required to furnish to the Partnership: (i) the name, address and taxpayer
identification number of the beneficial owner and the nominee; (ii) certain
information relating to the status of the beneficial owner; (iii) the amount and
description of the Partnership Units held, acquired or transferred for the
beneficial owner; and (iv) certain other information including the dates of
acquisitions and transfers, means of acquisitions and transfers and the
acquisition cost for purposes, as well as the amount of net proceeds from sales.
Brokers and financial institutions are required to furnish certain additional
information on Partnership Units they acquire, hold or transfer for their own
accounts including the amount of net proceeds from sale.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to payments to
noncorporate holders of the proceeds of a sale of Partnership Units and "backup
withholding" at a rate of 31% will apply to such payments if the holder fails to
provide an accurate taxpayer identification number. In addition, distributions
made to or on behalf of a noncorporate holder whose Partnership Units are held
by a broker may be subject to a backup withholding tax unless the holder
complies with certain reporting requirements.
CERTAIN ADDITIONAL TAX CONSIDERATIONS FOR HOLDERS OF PARTNERSHIP UNITS
Section 197 of the Code added by the Revenue Reconciliation Act of 1993,
generally allows an amortization deduction with respect to any Section 197
Intangible acquired by the taxpayer after August 10, 1993 and held in connection
with the conduct of a trade or business. The amount of such deduction is
determined by amortizing the taxpayer's adjusted tax basis in such intangible
ratably over 15 years. Section 197 Intangibles generally include goodwill and
going concern value, among other items.
The portion of the purchase price of an interest in a partnership that is
allocable to Section 197 Intangibles will generally equal the excess of the
purchase price over a partner's proportionate share of the fair market value of
the partnership's assets that are not Section 197 Intangibles, as determined
based on the allocation methods employed by the partnership. In the present
case, the per-Partnership Unit value of such other assets could be affected by a
number of factors, including the issuance of new Partnership Units by the
Partnership. The amount allocated to Section 197 Intangibles by any holder of
Partnership Units could be reduced if the IRS were to challenge the allocation
methods used by the Partnership. See "-- Tax Allocations." Deductions from
amortization of Section 197 Intangibles will decrease the holder's tax basis in
his Partnership Units, and such deductions will be recaptured as ordinary income
upon a taxable disposition of the Partnership Units to the extent that
amortization deductions are not matched by a decline in the fair market value of
the relevant intangible assets. See "-- Disposition of Units."
SPECIAL STATUS TAXPAYERS
The foregoing is a general discussion of federal tax laws related to the
Restructuring and the ownership and disposition of Partnership Units that apply
in the case of most United States taxpayers. Under federal tax laws, however,
additional or different tax rules may apply to persons or entities having a
special status for tax purposes, such as tax-exempt entities, foreign
individuals and entities, regulated investment companies and real estate
investment trusts. A Public Unitholder that is such a special status person or
entity should consult his, her or its tax advisor with regard to the tax
consequences to such holder of the Restructuring and the ownership and
disposition of Partnership Units.
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STATE AND LOCAL TAXES
The above discussion does not address the tax consequences, under
applicable state and local income tax laws, of the Restructuring and the
ownership or disposition of Partnership Units. In this regard, holders of
Partnership Units should note that California has enacted legislation that will
impose a 1% tax on the gross income from active trades and businesses derived
from California sources by electing 1987 partnerships, with such 1% tax to
remain applicable to an electing 1987 partnership so long as it is subject to
the 3.5% PTP tax. It is possible that other states may at some time impose
similar taxes on income derived from such states by an electing 1987 partnership
such as the Partnership. Public Unitholders are urged to consult their tax
advisors with regard to the tax consequences, under state and local income tax
laws, of the Restructuring and the ownership and disposition of Partnership
Units.
LEGAL MATTERS
Richards, Layton & Finger, P.A. has delivered an opinion to the effect
that, upon the consummation of the Restructuring, the Partnership Units offered
pursuant to this Prospectus will be validly issued, fully paid and
nonassessable.
EXPERTS
The consolidated financial statements of PIMCO Advisors L.P. as of December
31, 1996 and for the year then ended and the financial statements of Oppenheimer
Capital, L.P. and the consolidated financial statements of Oppenheimer Capital
as of April 30, 1997 and 1996 and for each of the three fiscal years in the
period ended April 30, 1997, included in this Prospectus have been so included
in reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of PIMCO Advisors L.P., as of
December 31, 1995 and for each of the two years in the period then ended,
included in this Prospectus have been so included in reliance on the report of
Deloitte & Touche LLP, independent auditors, given on the authority of said firm
as experts in auditing and accounting.
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AVAILABLE INFORMATION
The Partnership has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration Statement"
which term shall encompass all exhibits, annexes and schedules thereto) pursuant
to the Securities Act and the rules and regulations promulgated thereunder, with
respect to the Partnership Units described in this Prospectus and the exchange
of PIMCO Advisors LP Units for the Partnership Units in the Restructuring. This
Prospectus constitutes the Prospectus of the Partnership filed as part of the
Registration Statement. Pursuant to the rules and regulations of the Commission,
this Prospectus omits certain information contained in the Registration
Statement. Statements contained in this Prospectus as to the contents of any
agreement or other document are not necessarily complete, and in each instance,
reference is made to the copy of the document filed as an exhibit to the
Registration Statement, each such statement being qualified by such reference.
The Partnership is, and, following the Restructuring, will be, subject to
the informational requirements of the Exchange Act and, in accordance therewith,
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed by the Partnership, and
the Registration Statement, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the Commission at 7 World
Trade Center, New York, New York 10048 and Northwest Atrium Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Partnership's LP
Units are traded on the New York Stock Exchange and, therefore, reports, proxy
statements and other information concerning the Partnership can also be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
ADDITIONAL INFORMATION CONCERNING THE PARTNERSHIP AND A COPY OF THE
REGISTRATION STATEMENT MAY BE OBTAINED VIA THE INTERNET WEB SITE MAINTAINED BY
THE COMMISSION AT HTTP://WWW.SEC.GOV.
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INDEX TO FINANCIAL STATEMENTS
PIMCO ADVISORS L.P.
<TABLE>
<CAPTION>
PAGES
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<S> <C>
Report of Independent Accountants.................................................... F-2
Independent Auditors' Report......................................................... F-3
Consolidated Statements of Financial Condition of PIMCO Advisors L.P. and
Subsidiaries as of September 30, 1997, December 31, 1996 and 1995.................. F-4
Consolidated Statements of Operations of PIMCO Advisors L.P. and Subsidiaries for the
nine months ended September 30, 1997 and 1996 and for the years ended December 31,
1996, 1995 and 1994................................................................ F-5
Consolidated Statements of Changes in Owners' Equity of PIMCO Advisors L.P. and
Subsidiaries for the nine months ended September 30, 1997 and for the years ended
December 31, 1996, 1995 and 1994................................................... F-6
Consolidated Statements of Cash Flows of PIMCO Advisors L.P. and Subsidiaries for the
nine months ended September 30, 1997 and 1996 and for the years ended December 31,
1996, 1995 and 1994................................................................ F-8
Notes to Consolidated Financial Statements........................................... F-9
OPPENHEIMER CAPITAL, L.P.
Report of Independent Accountants.................................................... F-20
Statements of Financial Condition of Oppenheimer Capital, L.P. as of July 31, 1997,
April 30, 1997 and 1996............................................................ F-21
Statements of Income of Oppenheimer Capital, L.P. for the three months ended July 31,
1997 and 1996 and for the years ended April 30, 1997, 1996 and 1995................ F-22
Statements of Changes in the Partners' Capital of Oppenheimer Capital, L.P. for the
three months ended July 31, 1997 and for the years ended April 30, 1997, 1996 and
1995............................................................................... F-23
Statements of Cash Flows of Oppenheimer Capital, L.P. for the three months ended July
31, 1997 and 1996 and for the years ended April 30, 1997, 1996 and 1995............ F-24
Notes to Financial Statements of Oppenheimer Capital, L.P............................ F-25
OPPENHEIMER CAPITAL
Report of Independent Accountants.................................................... F-29
Consolidated Statements of Financial Condition of Oppenheimer Capital as of July 31,
1997, April 30, 1997 and 1996...................................................... F-30
Consolidated Statements of Income of Oppenheimer Capital for the three months ended
July 31, 1997 and 1996 and for the years ended April 30, 1997, 1996 and 1995....... F-31
Consolidated Statements of Changes in the Partners' Capital of Oppenheimer Capital
for the three months ended July 31, 1997 and for the years ended April 30, 1997,
1996 and 1995...................................................................... F-32
Consolidated Statements of Cash Flows of Oppenheimer Capital for the three months
ended July 31, 1997 and 1996 and for the years ended April 30, 1997, 1996 and
1995............................................................................... F-33
Notes to Consolidated Financial Statements of Oppenheimer Capital.................... F-34
</TABLE>
F-1
<PAGE> 110
REPORT OF INDEPENDENT ACCOUNTANTS
To the Equity Board and Partners
of PIMCO Advisors L.P.
In our opinion, the accompanying consolidated statement of financial
condition and the related consolidated statements of operations, of changes in
owners' equity and of cash flows present fairly, in all material respects, the
financial position of PIMCO Advisors L.P. and subsidiaries (the "Partnership")
at December 31, 1996, and the results of their operations and their cash flows
for the year in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
Los Angeles, California
February 14, 1997
F-2
<PAGE> 111
INDEPENDENT AUDITORS' REPORT
PIMCO Advisors L.P. and subsidiaries:
We have audited the accompanying consolidated statement of financial
condition of PIMCO Advisors L.P. and subsidiaries (the "Partnership") as of
December 31, 1995, and the related consolidated statements of operations, cash
flows, and changes in owners' equity for each of the two years ended December
31, 1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial condition of the Partnership as of December
31, 1995, and the results of their operations and their cash flows for each of
the two years ended December 31, 1995, in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
February 2, 1996
F-3
<PAGE> 112
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------------
1997 1996 1995
-------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 33,172,652 $ 41,311,545 $ 34,915,170
Fees receivable.................................. 81,617,543 -- --
Investment advisory fees receivable:
Private accounts.............................. -- 52,261,212 45,344,158
Proprietary Funds............................. -- 9,629,075 8,413,302
Distribution and servicing fees receivable....... -- 4,382,154 3,594,534
Notes receivable................................. 1,715,071 1,569,950 1,230,168
Receivable from PIMCO Advisors Funds............. -- 462,616 337,744
Short term investments........................... 24,934,892 11,520,726 11,531,226
Other current assets............................. 2,747,079 3,924,592 2,282,895
------------ ------------ ------------
Total current assets..................... 144,187,237 125,061,870 107,649,197
Investment in StocksPLUS, L.P...................... 3,398,144 2,629,864 3,384,237
Fixed assets -- Net of accumulated depreciation and
amortization of $9,520,277, $6,979,756 and
$4,415,199....................................... 10,801,603 10,561,346 10,743,184
Intangible assets -- Net of accumulated
amortization of $103,526,109, $76,519,260 and
$40,510,128...................................... 180,815,838 207,822,687 243,831,819
Other non current assets........................... 26,525,291 12,424,534 3,983,358
------------ ------------ ------------
Total assets............................. $ 365,728,113 $358,500,301 $369,591,795
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses............ $ 24,187,295 $ 13,841,641 $ 8,132,005
Commissions payable.............................. -- 8,435,048 6,450,407
Payable to affiliates............................ -- -- --
Accrued compensation............................. 53,085,409 26,027,732 21,246,685
Other current liabilities........................ -- 11,537,236 1,457,800
------------ ------------ ------------
Total current liabilities................ 77,272,704 59,841,657 37,286,897
Other non current liabilities...................... 9,479,234 2,415,883 748,265
------------ ------------ ------------
Total liabilities........................ 86,751,938 62,257,540 38,035,162
------------ ------------ ------------
Partners' Capital:
General Partner (800,000 units issued and
outstanding).................................. 2,708,585 2,986,983 3,456,973
Class A Limited Partners (40,146,155, 40,146,155
and 40,121,155 units issued and
outstanding).................................. 193,293,648 205,420,612 228,465,440
Class B Limited Partners (32,992,531, 32,960,826
and 32,960,826 units issued and
outstanding).................................. 90,060,799 98,369,570 114,806,204
Unamortized compensation......................... (7,086,857) (10,534,404) (15,171,984)
------------ ------------ ------------
Total Partners' Capital.................. 278,976,175 296,242,761 331,556,633
------------ ------------ ------------
Total Liabilities and Partners'
Capital................................ $ 365,728,113 $358,500,301 $369,591,795
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 113
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
NINE MONTHS NINE MONTHS
ENDED ENDED FOR THE YEARS ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, --------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Investment advisory fees:
Private accounts....................... $ 182,364,963 $ 156,571,557 $213,852,081 $192,702,939 $126,913,420
Proprietary Funds...................... 119,875,646 94,575,782 128,855,694 90,772,988 48,822,835
Distribution and servicing fees.......... 40,316,623 35,185,219 48,182,499 38,240,015 4,288,702
Other.................................... 1,652,823 828,408 1,134,108 1,297,933 238,208
------------ ------------ ------------ ------------ ------------
Total revenues.................... 344,210,055 287,160,966 392,024,382 323,013,875 180,263,165
------------ ------------ ------------ ------------ ------------
Expenses:
Compensation and benefits................ 151,560,373 128,119,778 173,526,137 149,163,906 117,197,986
Amortization of intangibles, Restricted
Unit and Option Plans.................. 30,999,737 30,852,315 -- -- --
Commissions.............................. 32,188,873 27,480,251 37,738,954 28,743,396 2,877,497
Restricted Unit and Option Plans......... -- -- 5,162,268 6,713,664 1,162,143
Marketing and promotional................ -- -- 10,981,804 9,066,414 6,594,546
Occupancy and equipment.................. 7,482,631 6,932,010 9,195,606 8,662,499 4,342,777
General and administrative............... 18,834,411 13,019,473 17,629,876 11,433,726 5,842,962
Insurance................................ -- -- 2,621,086 2,799,795 1,118,651
Professional fees........................ -- -- 5,472,729 3,164,410 3,899,758
Amortization of intangible assets........ -- -- 36,009,132 36,009,132 5,039,680
Other.................................... 22,505,987 15,423,389 4,812,078 2,236,996 3,345,535
------------ ------------ ------------ ------------ ------------
Total expenses.................... 263,572,012 221,827,216 303,149,670 257,993,938 151,421,535
------------ ------------ ------------ ------------ ------------
Operating income........................... 80,638,043 65,333,750 88,874,712 65,019,937 28,841,630
Equity in income of StocksPLUS, L.P...... (350,614) 173,556 271,187 225,670 10,722
Other income, net........................ 3,599,429 2,227,716 3,183,699 3,738,980 1,072,221
------------ ------------ ------------ ------------ ------------
Income before income tax expense......... 83,886,858 67,735,022 92,329,598 68,984,587 29,924,573
Income tax expense....................... 1,225,610 833,554 1,201,417 517,133 10,669,295
------------ ------------ ------------ ------------ ------------
Net income................................. $ 82,661,248 $ 66,901,468 $ 91,128,181 $ 68,467,454 $ 19,255,278
============ ============ ============ ============ ============
Net income allocated to:
General Partner.......................... $ 849,602 $ 770,361 $ 1,034,010 $ 912,890 $ 97,522
Class A Limited Partner units............ 44,479,115 38,651,130 51,881,756 45,742,775 4,878,336
Class B Limited Partner units............ 37,332,531 27,479,977 38,212,415 21,811,789 1,128,234
Pre-Consolidation........................ -- -- -- -- 13,151,186
------------ ------------ ------------ ------------ ------------
Total............................. $ 82,661,248 $ 66,901,468 $ 91,128,181 $ 68,467,454 $ 19,255,278
============ ============ ============ ============ ============
Net income per unit (Post-Consolidation):
Net income per General Partner and Class A
Limited Partner units.................... $ 1.06 $ 0.96 $ 1.29 $ 1.16 $ 0.12
============ ============ ============ ============ ============
Net income per Class B Limited Partner
unit..................................... $ 1.06 $ 0.76 $ 1.05 $ 0.59 $ 0.03
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 114
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK FOREIGN GENERAL PARTNER
---------------- PAID-IN RETAINED CURRENCY ---------------------
SHARES AMOUNT CAPITAL EARNINGS TRANSLATION UNITS AMOUNT
------ ------- ------------ ------------ ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994......... 1,000 $ 1,000 $ 10,843,146 $ 14,978,001 $ (812) -- --
Net income...................... 13,151,186 $ 97,522
PFAMCo Group capital
contributions................. 7,775,000
Dividends....................... (9,200,000)
Translation adjustment.......... (50,427)
Deemed dividend, net............ (6,559,420) (8,625,011)
Conversion to partnership....... (1,000) (1,000) (12,058,726) (10,304,176) 51,239 800,000 318,182
TAG contributed capital.........
Goodwill from acquisition....... 3,447,579
Proceeds from Primary
Offering......................
Amended Option Plan grants
(total award).................
Restricted Unit Plan grants
(total award).................
Vesting of options and
restricted units..............
------ ------- ------------ ------------ -------- ------- -----------
Balances, December 31, 1994....... -- -- -- -- -- 800,000 3,863,283
Net income...................... 912,890
Distributions................... (1,319,200)
Exercise of unit options........
Balance of proceeds -- Primary
offering......................
Vesting of options and
restricted units..............
------ ------- ------------ ------------ -------- ------- -----------
Balances, December 31, 1995....... -- -- -- -- -- 800,000 3,456,973
Net income...................... 1,034,010
Distributions................... (1,504,000)
Restricted Unit Plan grants.....
Vesting of options and
restricted units..............
------ ------- ------------ ------------ -------- ------- -----------
Balances, December 31, 1996....... -- -- -- -- -- 800,000 2,986,983
(unaudited)
Net income...................... 849,602
Distributions................... (1,128,000)
Restricted Unit Plan grants.....
Vesting of options and
restricted units..............
------ ------- ------------ ------------ -------- ------- -----------
Balances, September 30, 1997...... -- $ -- $ -- $ -- $ -- 800,000 $ 2,708,585
====== ======= ============ ============ ======== ======= ===========
</TABLE>
(Continued)
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 115
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
CLASS A LIMITED PARTNERS CLASS B LIMITED PARTNERS
------------------------- ------------------------- UNAMORTIZED TOTAL
UNITS AMOUNT UNITS AMOUNT COMPENSATION OWNER'S EQUITY
---------- ------------ ---------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994....... -- -- -- -- -- $ 25,821,335
Net income.................... $ 4,878,336 $ 1,128,234 19,255,278
PFAMCo Group capital
contributions............... 7,775,000
Dividends..................... (9,200,000)
Translation adjustment........ (50,427)
Deemed dividend, net.......... (15,184,431)
Conversion to partnership..... 23,775,000 13,088,231 24,575,000 8,906,250 --
TAG contributed capital....... 14,918,155 9,644,238 8,260,826 1,990,739 11,634,977
Goodwill from acquisition..... 167,285,821 101,459,864 272,193,264
Proceeds from Primary
Offering.................... 1,200,000 19,972,951 19,972,951
Amended Option Plan grants
(total award)............... 31,135,761 $(18,987,077) 12,148,684
Restricted Unit Plan grants
(total award)............... 125,000 2,368,750 125,000 1,691,964 (4,060,714) --
Vesting of options and
restricted units............ 1,162,143 1,162,143
---------- ------------ ---------- ------------ ------------ -------------
Balances, December 31, 1994..... 40,018,155 248,374,088 32,960,826 115,177,051 (21,885,648) 345,528,774
Net income.................... 45,742,775 21,811,789 68,467,454
Distributions................. (66,110,962) (22,182,636) (89,612,798)
Exercise of unit options...... 103,000 374,920 374,920
Balance of proceeds -- Primary
offering.................... 84,619 84,619
Vesting of options and
restricted units............ 6,713,664 6,713,664
---------- ------------ ---------- ------------ ------------ -------------
Balances, December 31, 1995..... 40,121,155 228,465,440 32,960,826 114,806,204 (15,171,984) 331,556,633
Net income.................... 51,881,756 38,212,415 91,128,181
Distributions................. (75,451,272) (54,649,049) (131,604,321)
Restricted Unit Plan grants... 25,000 524,688 (524,688) --
Vesting of options and
restricted units............ 5,162,268 5,162,268
---------- ------------ ---------- ------------ ------------ -------------
Balances, December 31, 1996..... 40,146,155 205,420,612 32,960,826 98,369,570 (10,534,404) 296,242,761
(unaudited)
Net income.................... 44,479,115 37,332,531 82,661,248
Distributions................. (56,606,079) (46,307,763) (104,041,842)
Restricted Unit Plan grants... -- 31,705 666,461 (545,342) 121,119
Vesting of options and
restricted units............ -- 3,992,889 3,992,889
---------- ------------ ---------- ------------ ------------ -------------
Balances, September 30, 1997.... 40,146,155 $193,293,648 32,992,531 $ 90,060,799 $ (7,086,857) $ 278,976,175
========== ============ ========== ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 116
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
NINE MONTHS NINE MONTHS
ENDED ENDED FOR THE YEARS ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, -------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 82,661,248 $ 66,901,468 $ 91,128,181 $ 68,467,454 $ 19,255,278
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 32,315,605 29,553,183 40,916,431 38,972,101 6,339,107
Issuance of restricted units in lieu of directors
fees............................................ 121,119 -- -- -- --
Deferred income taxes............................. -- -- 734,836 270,000 804,116
Amortization of compensation plan................. -- -- -- -- 663,697
Restricted Unit and Option Plans.................. 3,992,888 3,845,466 5,162,268 6,713,664 1,162,143
Unrealized loss (gain) on investments............. (1,256,708) 150,348 53,879 (198,396) (135,376)
Equity in income of StocksPLUS, L.P............... 350,614 (173,556) (271,187) (225,670) (10,722)
Change in operating assets and liabilities:
Change in fees receivable......................... (15,345,101) (5,622,393) (8,920,447) (28,217,386) 7,919,554
Change in receivable from PIMCO Advisors Funds.... -- -- (124,872) 865,614 (618,123)
Change in other assets............................ (14,843,417) (5,495,334) (11,676,643) (3,398,979) (10,838,869)
Change in accounts payable and accrued expenses... (9,626,630) 13,492,355 5,709,636 941,302 (660,816)
Change in commissions payable..................... -- -- 1,984,641 1,714,200 2,413,750
Change in accrued compensation.................... 27,057,677 17,330,853 4,781,047 7,859,345 8,423,141
Change in other liabilities....................... 7,063,351 (56,243) 11,012,219 (1,003,184) (649,686)
Change in payable to affiliates................... -- -- -- (5,841,256) (6,877,311)
Other............................................. 10,910 (43,687) (43,686) 1,811 (1,337,755)
------------ ------------ ------------ ----------- -----------
Net cash provided by operating activities........... 112,501,556 119,882,460 140,446,303 86,920,620 25,852,128
------------ ------------ ------------ ----------- -----------
Cash flows from investing activities:
Purchases of investments.......................... (45,712,557) (517,227) (694,498) (11,334,021) (52,601,192)
Proceeds from sales of investments................ 35,201,306 783,570 783,570 -- 62,247,248
Return of investment in StocksPLUS, L.P........... -- -- 1,600,000 -- --
Investment in StocksPLUS, L.P..................... (2,765,100) (800,000) (700,000) (400,000) --
Cash of acquired entities......................... -- -- -- -- 14,698,855
Proceeds from sale of fixed assets................ 3,000 621,387 644,978 309,575 --
Purchase of fixed assets.......................... (2,804,725) (2,394,268) (3,446,152) (5,982,054) (1,826,800)
Notes receivable advances......................... (520,531) (676,737) (633,505) (364,823) (117,232)
------------ ------------ ------------ ----------- -----------
Net cash (used in) provided by investing
activities........................................ (16,598,607) (2,983,275) (2,445,607) (17,771,323) 22,400,879
------------ ------------ ------------ ----------- -----------
Cash flows from financing activities:
Proceeds from primary offering.................... -- -- -- -- 19,972,951
Cash distributions................................ (104,041,842) (97,560,217) (131,604,321) (89,612,798) --
Unit options exercised............................ -- -- -- 374,920 --
Dividends......................................... -- -- -- -- (22,521,573)
------------ ------------ ------------ ----------- -----------
Net cash used in financing activities............... (104,041,842) (97,560,217) (131,604,321) (89,237,878) (2,548,622)
------------ ------------ ------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... (8,138,893) 19,338,968 6,396,375 (20,088,581) 45,704,385
Cash and cash equivalents, beginning of year........ -- -- 34,915,170 55,003,751 9,299,366
Cash and cash equivalents, beginning of period...... 41,311,545 34,915,170 -- -- --
------------ ------------ ------------ ----------- -----------
Cash and cash equivalents, end of year.............. -- -- $ 41,311,545 $ 34,915,170 $ 55,003,751
Cash and cash equivalents, end of period............ $ 33,172,652 $ 54,254,138 -- -- --
============ ============ ============ =========== ===========
Supplemental schedule of non-cash financing
activities:
Reduction of payable to affiliates by capital
contribution.................................... $ -- $ -- $ -- $ -- $ 7,775,000
============ ============ ============ =========== ===========
Deemed dividend................................... $ -- $ -- $ -- $ -- $ 1,862,858
============ ============ ============ =========== ===========
Supplemental disclosures:
Income taxes paid................................. $ 279,710 356,232 $ 447,724 $ 405,542 $ 15,004,148
============ ============ ============ =========== ===========
Interest paid..................................... $ 67,083 $ -- $ -- $ 18,750 $ 209,171
============ ============ ============ =========== ===========
Fair value of non-cash assets acquired............ $ -- $ -- $ -- $ -- $ 27,995,376
============ ============ ============ =========== ===========
Liabilities assumed............................... $ -- $ -- $ -- $ -- $ 24,642,727
============ ============ ============ =========== ===========
Non-cash assets excluded from the consolidation... $ -- $ -- $ -- $ -- $ 46,431,262
============ ============ ============ =========== ===========
Liabilities transferred excluded from the
consolidation................................... $ -- $ -- $ -- $ -- $ 31,748,537
============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 117
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS
PIMCO Advisors L.P. ("PIMCO Advisors") is a registered investment advisor
that provides a broad array of investment management and advisory services to
institutional and retail mutual funds and to separate accounts of institutional
clients. PIMCO Advisors operates in one industry segment, that of investment
management services.
PIMCO Advisors was formed on November 15, 1994, when Pacific Financial
Asset Management Group ("PFAMCo Group") merged (the "Consolidation") certain of
its investment management businesses and substantially all of its assets into
Thomson Advisory Group L.P. ("TAG"). The PFAMCo Group comprised Pacific
Financial Asset Management Corporation ("PFAMCo"), a wholly-owned subsidiary of
Pacific Mutual Life Insurance Company ("Pacific Mutual"), and certain of its
wholly-owned investment management subsidiaries. The businesses of PFAMCo Group
contributed to PIMCO Advisors were then contributed to newly formed subsidiaries
of PIMCO Advisors.
For the period after the Consolidation, the accompanying consolidated
financial statements include the accounts of PIMCO Advisors and its
subsidiaries. The investment advisor subsidiaries included in these consolidated
financial statements are as follows:
- PACIFIC INVESTMENT MANAGEMENT COMPANY ("Pacific Investment Management")
manages a variety of predominantly fixed income portfolios primarily for
institutions and mutual funds;
- COLUMBUS CIRCLE INVESTORS ("CCI") manages primarily equity securities
using a Positive Momentum/Positive Surprise approach, principally for
institutions and mutual funds;
- CADENCE CAPITAL MANAGEMENT ("Cadence") specializes in disciplined,
growth oriented management of equity securities primarily for
institutions and mutual funds;
- PARAMETRIC PORTFOLIO ASSOCIATES ("Parametric") specializes in highly
quantitative management of domestic and international equity portfolios
primarily for institutions and mutual funds;
- NFJ INVESTMENT GROUP ("NFJ") is a value-oriented manager of equity
securities primarily for institutions and mutual funds; and
- BLAIRLOGIE CAPITAL MANAGEMENT ("Blairlogie") specializes in
international equity securities from its office in Edinburgh, Scotland,
primarily for institutions and mutual funds.
The investment advisor subsidiaries are supported by additional
incorporated subsidiaries:
- PIMCO FUNDS DISTRIBUTION COMPANY (formerly PIMCO Advisors Distribution
Company) ("PFD") serves as the distributor of institutional and retail
mutual funds (the "Proprietary Funds") for which PIMCO Advisors and the
investment advisor subsidiaries provide investment management and
administrative services;
- STOCKSPLUS MANAGEMENT, INC. ("StocksPLUS"), a wholly-owned subsidiary of
Pacific Investment Management, owns approximately 0.125 percent interest
in, and is the general partner of StocksPLUS, L.P. (Note 12); and
- COLUMBUS CIRCLE TRUST COMPANY ("CCTC"), a non bank trust company and
wholly owned subsidiary of CCI, established in November 1995, which
commenced business in January 1996.
Pacific Investment Management, CCI, Cadence, Parametric, NFJ and Blairlogie
are registered investment advisors. PFD is a registered broker/dealer with the
Securities and Exchange Commission and a member of the National Association of
Securities Dealers, Inc.
F-9
<PAGE> 118
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Prior to January 17, 1997, institutional mutual funds managed consisted of
two open-end investment management companies. One series included 18
predominantly fixed income funds. The other series included 12 predominantly
equity funds. The retail mutual funds managed consisted of 17 funds included
within two open-end investment management companies, the PIMCO Advisors Funds
("PAF"), formerly the Thomson Funds, and the Cash Accumulation Trust ("CAT").
With Trustee and shareholder approval, the fund groups were combined into a
single mutual fund complex, the PIMCO Funds, in January 1997, consisting of 41
funds offering retail and institutional share classes.
The accompanying consolidated financial statements for the period prior to
the Consolidation include the accounts of PFAMCo and its wholly-owned
subsidiaries, reflected on a combined basis.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Cash And Cash Equivalents -- PIMCO Advisors invests certain cash
balances in money market funds. At December 31, 1996, this investment is
approximately $25,429,000, of which approximately $814,000 is invested in the
National Money Market Fund of CAT, approximately $595,000 is invested in the
PIMCO Advisors Money Market Fund and approximately $24,020,000 is invested in
non affiliate money market funds. At December 31, 1995, this investment was
approximately $20,844,000, of which approximately $5,738,000 was invested in the
National Money Market Fund of CAT, approximately $4,284,000 was invested in the
PIMCO Advisors Money Market Fund and approximately $10,822,000 was invested in
non affiliate money market funds. Management considers investments in money
market funds to be cash equivalents for purposes of the Consolidated Statements
of Cash Flows. These investments are carried at cost, which approximates market.
b. Investment Advisory Fees -- PIMCO Advisors records investment advisory
fees on an accrual basis. Investment advisory fees receivable for private and
separate accounts consist primarily of accounts billed on a quarterly basis.
Private accounts may also generate a fee based on investment performance, which
is recorded as income when earned and not subject to forfeiture. Investment
advisory fees for the Proprietary Funds are received monthly.
c. Short Term Investments -- The short term investments, as of December
31, 1996 and 1995, are primarily invested in the PIMCO Funds with a short-term
duration objective. The investments are carried at market value. Cost
approximated market value as of December 31, 1996 and 1995.
d. Depreciation and Amortization -- Office equipment, furniture and
fixtures are depreciated on a straight-line basis over their estimated useful
lives, generally five years. Automobiles are depreciated on a straight-line
basis over their estimated lives, generally three years. Leasehold improvements
are amortized on a straight-line basis over the remaining terms of the related
leases or the useful lives of such improvements, whichever is shorter.
e. Other Assets -- Effective May 29, 1995, PFD commenced sale of a "B"
class of mutual fund shares. Under this share structure PFD advances commissions
to independent brokers and is entitled to recoup its marketing costs through an
ongoing fee stream from the respective funds or contingent deferred sales
charges collected from the share purchaser. Such fees are capitalized as
deferred sales charges and amortized on a straight line basis as commission
expense over a period of 60 months. Deferred unamortized marketing costs of
approximately $11,100,000 and $3,600,000 are included in other assets at
December 31, 1996 and 1995, respectively.
f. Income Taxes -- Subsequent to the Consolidation, PIMCO Advisors and its
subsidiaries are predominantly partnerships and, as a result, are generally not
subject to Federal or state income taxes. PIMCO Advisors is subject to an
unincorporated business tax in a certain jurisdiction in which it operates. All
partners of PIMCO Advisors are responsible for taxes, if any, on their
proportionate share of Pimco Advisors' taxable income. Certain corporate
subsidiaries are subject to Federal and state income taxes and file separate tax
F-10
<PAGE> 119
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
returns and account for income taxes under Statement of Financial Accounting
Standards No. 109 ("FASB 109"). The provision for income taxes is determined
using the liability method which gives recognition to deferred tax assets and
liabilities based on the expected future tax consequences of events that have
been recognized in the financial statements or tax returns. In estimating future
tax consequences, FASB 109 generally requires the consideration of all expected
future events other than enactments of changes in the tax law or rates.
g. Foreign Currency Translation -- The assets and liabilities of
Blairlogie, PFAMCo UK Limited and Blairlogie's predecessor company have been
translated into U.S. dollars at the current rate of exchange existing at
year-end. Revenues and expenses were translated at the average of the monthly
exchange rates then in effect.
h. Net Income Allocation -- Net income is allocated in accordance with the
Amended and Restated Agreement of Limited Partnership of PIMCO Advisors. Net
income is allocated among unit holders in the same proportions as cash
distributions. PIMCO Advisors cash distribution policy provides for a first
priority distribution to General Partner and Class A Limited Partner Units
($1.88 per year through December 31, 1997) followed by a second priority
distribution to Class B Limited Partner Units. During the years ended December
31, 1996 and 1995, the second priority distribution was less than the first
priority distribution.
i. Earnings Per Unit -- Earnings per unit are computed based on the
weighted average number of units outstanding, assuming the exercise of dilutive
unit options. Proceeds from the exercise of such unit options are assumed to be
used to repurchase outstanding Limited Partner units under the treasury stock
method. The weighted average number of units used to compute earnings per unit
was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
General Partner and Class A Limited Partner
units........................................ 42,501,469 42,127,833 41,802,420
Class B Limited Partner units.................. 34,513,573 33,425,537 32,960,826
</TABLE>
j. Other -- Certain items have been reclassified to conform with the
current year presentation. All significant intercompany items have been
eliminated in the accompanying consolidated financial statements.
k. Use of Estimates in the Preparation of Financial Statements -- The
financial statements have been prepared in accordance with generally accepted
accounting principles which require management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
3. INTANGIBLE ASSETS
For accounting purposes, the Consolidation between PFAMCo Group and TAG is
treated as a purchase and recapitalization of TAG by PFAMCo Group, or a "reverse
acquisition." Intangible assets of approximately $284.9 million represented the
excess of the purchase price over the fair value of the net tangible assets of
TAG deemed acquired in the Consolidation. A portion of the intangible assets
represents the value assigned to PIMCO Advisor's Master Limited Partnership
("MLP") structure. Under current Internal Revenue code guidelines, an MLP is
exempt from Federal and most state and local income taxes through December 31,
1997. The value attributed to the MLP structure will be amortized over the
period ending December 31, 1997. The remainder will be amortized on a straight-
line basis over its estimated life of twenty years. During the years ended
December 31, 1996, 1995 and 1994, approximately $36,000,000, $36,000,000 and
$5,000,000 of amortization have been charged to expense, respectively.
F-11
<PAGE> 120
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. SUPPLEMENTARY FINANCIAL DATA
The following supplementary financial data presents the actual results of
operations for 1996 and 1995 and the unaudited pro forma results of operations
for 1994 as if the Consolidation discussed in Note 1 had occurred on January 1,
1993, except for the period from November 15, 1994 through December 31, 1994
which reflects actual results. The 1994 pro forma operating results give effect
to:
(a) The Consolidation of PFAMCo Group and TAG;
(b) The amendment of existing options under TAG's 1993 Unit Option Plan;
(c) The adoption of the Class B Limited Partnership Unit Option Plan;
(d) The contribution of PFD to PIMCO Advisors in exchange for Class A
Limited Partner Units; and
(e) Certain transactions effected by PFAMCo Group and TAG in connection
with the Consolidation, primarily related to intangible amortization
and profit sharing.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
(ACTUAL) (ACTUAL) (PRO FORMA)
-------- -------- -----------
(AMOUNTS IN THOUSANDS,
EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C>
Revenues:
Investment advisory............................. $338,341 $281,610 $ 231,475
PFD............................................. 53,683 41,404 37,629
-------- -------- --------
392,024 323,014 269,104
-------- -------- --------
Expenses:
Investment advisory............................. 207,203 171,272 137,246
PFD............................................. 52,522 40,552 36,435
Amortization of intangibles, options and
restricted units............................. 41,171 42,723 40,713
-------- -------- --------
300,896 254,547 214,394
-------- -------- --------
Net income........................................ $ 91,128 $ 68,467 $ 54,710
======== ======== ========
Net income per General Partner and Class A Limited
Partner unit.................................... $ 1.29 $ 1.16 $ 1.08
======== ======== ========
</TABLE>
The pro forma information above is not intended to reflect the results that
actually would have been obtained if the operations were consolidated during the
periods presented.
5. NOTES RECEIVABLE
Pacific Investment Management and PIMCO Advisors have granted loans to
certain employees as part of programs designed to ensure the long-term retention
of those employees. These loans are primarily non-interest bearing and are
generally due within one year of issuance.
F-12
<PAGE> 121
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. FIXED ASSETS
The major classifications of fixed assets are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Office equipment, furniture and fixtures.................. $12,827,368 $ 9,548,212
Automobiles............................................... 9,069 836,152
Leasehold improvements.................................... 4,704,665 4,774,019
----------- -----------
Total fixed assets........................................ 17,541,102 15,158,383
Less accumulated depreciation and amortization............ 6,979,756 4,415,199
----------- -----------
Fixed assets, net......................................... $10,561,346 $10,743,184
=========== ===========
</TABLE>
Fixed assets of certain of the subsidiaries were revalued at their
estimated fair market value in connection with the Consolidation.
7. INCOME TAXES
Subsequent to the Consolidation, only certain subsidiaries are subject to
income taxes directly. The total income tax provision for the affected
subsidiaries is as follows:
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED DECEMBER
31,
-----------------------
1996 1995
---------- --------
<S> <C> <C>
Current expense:
State...................................................... $ 163,669 $105,724
Federal.................................................... 295,215 159,440
Deferred expense:
State...................................................... 197,970 68,378
Federal.................................................... 544,563 183,591
---------- --------
$1,201,417 $517,133
========== ========
</TABLE>
Prior to the Consolidation, PFAMCo's operations and those of its domestic
subsidiaries were included in the combined domestic Federal income tax returns
of Pacific Mutual. PFAMCo's operations and its domestic subsidiaries were
included in the combined California franchise tax return of Pacific Financial
Holding Company ("PFHC"), the parent of PFAMCo. Certain subsidiaries filed
separate state income or franchise tax returns. PFAMCo and its domestic
subsidiaries were allocated an expense or a benefit based principally on the
effect of including their operations in the combined provision as if the
companies filed a separate return in accordance with a tax sharing agreement
between PFAMCo and PFHC.
The provision for taxes prior to the Consolidation was as follows:
<TABLE>
<CAPTION>
PERIOD
ENDED
NOVEMBER
15,
1994
-----------
<S> <C>
Current expense:
State................................................................. $ 2,140,509
Federal............................................................... 7,705,429
Deferred expense:
State................................................................. 156,960
Federal............................................................... 647,147
-----------
$10,650,045
===========
</TABLE>
F-13
<PAGE> 122
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
After the Consolidation, PIMCO Advisors incurred a tax liability of $19,250
in 1994 principally related to the activities of a corporate subsidiary.
Reconciliations of the statutory Federal income tax rates to the effective
income tax rates prior to the Consolidation are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 15,
1994
------------
<S> <C>
Statutory Federal income tax rate applied to income before
Federal income taxes.......................................... 35.0%
State taxes, net of Federal benefit............................. 6.1
Foreign operations.............................................. 3.1
Other........................................................... 0.5
----
Effective income tax rate....................................... 44.7%
====
</TABLE>
8. RELATED-PARTY TRANSACTIONS
Pacific Mutual provided certain support services to PFAMCo Group prior to
the Consolidation. Services for certain of PFAMCo Group's employees include
participation in a pension plan maintained by Pacific Mutual (Note 9g). Charges
for support services, including pension plan participation, amounted to
approximately $2,335,000 for the period ended November 15, 1994.
9. BENEFIT PLANS
a. Profit Sharing and Incentive Programs -- PIMCO Advisors and its
subsidiaries have several profit sharing and incentive programs that compensate
participants on the basis of profitability and discretionary bonuses.
Compensation under these programs was approximately $114,139,000 and $94,487,000
for the years ended December 31, 1996 and 1995, respectively, and was
approximately $10,091,000 for the period from the Consolidation through December
31, 1994. PFAMCo Group had nonqualified profit sharing plans (the "Profit
Sharing Plans") covering certain key employees and other employees. The Profit
Sharing Plans provided for awards based on the profitability of the respective
subsidiary. Such profitability was primarily based on income before income taxes
and before profit sharing. The awards ranged from 40% to 80% of such amounts
depending on the level of profitability. Profit sharing awards were fully vested
at the date of the Consolidation. Profit sharing expense relating to the Profit
Sharing Plans of approximately $68,387,000 is included in compensation and
benefits in the accompanying Consolidated Statements of Operations for the
period ended November 15, 1994.
b. Long Term Compensation -- Long term compensation includes amounts
payable to certain officers of a subsidiary in connection with the discretionary
bonuses discussed above. The amounts payable will be paid on specified dates and
are subject to cancellation upon the occurrence of certain events. In addition,
certain key employees of the PFAMCo subsidiaries participated in Long-Term
Incentive Plans that provided compensation under the Profit Sharing Plans for a
specified period of time subsequent to their termination of employment. These
plans were terminated as of the Consolidation.
c. Executive Deferred Compensation Plan -- PIMCO Advisors and its
subsidiaries have a nonqualified deferred compensation plan pursuant to which a
portion of the compensation otherwise payable to certain eligible employees will
be mandatorily deferred, and pursuant to which such eligible employees may elect
to defer additional amounts of compensation. The plan is unfunded and is
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees, within the meaning
of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income
Security Act of 1974, as amended. Amounts deferred under the plan are held in a
trust and invested by the trustee in Class A Limited Partner Units. PIMCO
Advisors will contribute additional funds or Class A Limited Partner Units to
the trust such that the average purchase price of all units acquired at that
date is not
F-14
<PAGE> 123
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
greater than 85% of the then current market price for such units. No expense was
incurred in 1996 related to this plan.
d. Savings and Investment Plans -- PIMCO Advisors and its subsidiaries
have several defined contribution employee benefit plans covering substantially
all employees. PIMCO Advisors and Pacific Investment Management are the sponsors
of certain defined contribution employee savings and investment plans. The plans
qualify under Section 401(k) of the Internal Revenue Code and allow eligible
employees of PIMCO Advisors and certain of its subsidiaries, to contribute up to
ten percent of their annual compensation as defined, and subject to a maximum
dollar amount determined from time to time by the Internal Revenue Service
("IRS"). Employees are generally eligible following the later of attainment of
age 21 or the completion of one year of credited service. For 1996 and 1995,
PIMCO Advisors and certain of its subsidiaries, matched and contributed an
amount equal to the first five or six percent of annual compensation, subject to
IRS Internal Revenue Service limits, contributed by the employees. In addition,
PIMCO Advisors and certain of its subsidiaries, may elect to make a
discretionary contribution to all participants. The amount expensed by PIMCO
Advisors and its subsidiaries related to this plan during the year ended
December 31, 1996, 1995 and 1994 was approximately $2,017,000, $1,851,000 and
$50,000, respectively.
For 1994, PIMCO Advisors and certain of its subsidiaries, matched and
contributed an amount equal to one half of the first six percent of annual
compensation, subject to IRS limits, contributed by the employees. In addition,
PIMCO Advisors and certain of its subsidiaries, elected to make a discretionary
contribution to all participants. Contributions fully vest to employees after
five years of credited service.
Pacific Investment Management has several defined contribution employee
benefit plans covering substantially all of its employees and made contributions
to the plans ranging from five percent to eleven percent of covered individuals'
base compensation. The aggregate expense recorded is approximately $989,000,
$950,000 and none in 1996, 1995 and 1994, respectively.
e. Restricted Unit Plan -- PIMCO Advisors adopted a restricted unit plan
for the benefit of certain key employees. A total of 150,000 Class A Limited
Partner Units and 125,000 Class B Limited Partner Units have been awarded under
the plan. The units generally vest over a five-year period; however, accelerated
vesting occurred in 1995 upon the departure of a key employee. There are no
additional units available for grants under the plan. The expense under this
plan was approximately $755,000, $2,010,000 and $101,000 during 1996, 1995 and
1994, respectively.
f. Unit Option Plans -- PIMCO Advisors has two unit-option plans, which
are described below. No compensation cost has been recognized for these fixed
unit option plans because the option price approximated the market price on the
date of grant. Had compensation cost for PIMCO Advisors two unit option plans
been determined based on the fair value rather than market value at the grant
dates, PIMCO Advisors net income and earnings per unit would have been reported
as the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net income:
As reported.......................................... $91,128,181 $68,467,454
Pro forma............................................ $90,839,243 $68,368,057
Net income per unit:
Net income per General Partner and
Class A Limited Partner unit:
As reported.......................................... $1.29 $1.16
Pro forma............................................ $1.29 $1.16
Net income per Class B Limited Partner unit:
As reported.......................................... $1.05 $0.59
Pro forma............................................ $1.05 $0.59
</TABLE>
F-15
<PAGE> 124
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the above disclosure purposes, the fair value of each option granted is
estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants in 1996 and 1995,
respectively: dividend yield of 7.7% and 3.5%; expected volatility of 14% and
10%; risk-free interest of 6.30% and 6.80%; and expected lives of 6 and 7 years.
The unit option plans are administered by the Unit Incentive Committee of
the Equity Board of PIMCO Advisors, which determines the key employees and the
terms of the options to be granted. Under the 1993 Unit Option Plan (as
amended), PIMCO Advisors may grant options to its employees up to 3,090,000
Class A Limited Partner Units. Under the 1994 Unit Option Plan, PIMCO Advisors
may grant options to its employees up to 5,600,000 Class B Limited Partner
Units. There are 270,400 Class B Limited Partner Units options available for
future grants at December 31, 1996. The expense under the option plans was
approximately $4,408,000, $4,704,000 and $1,061,000 during 1996, 1995 and 1994,
respectively.
Under both plans, the exercise price for each option reported herein has
been not less than the average trading price of PIMCO Advisor's units for the 20
trading day period prior to the grant date and each option's maximum term is 10
years. There was no material difference between the option price and the market
price on the grant date. The outstanding options vest over a period of not more
than five years and vested options are generally exercisable after January 1,
1998. Following is a summary of the status of both unit option plans:
<TABLE>
<CAPTION>
OPTION PRICE
UNITS RANGE PER UNIT
--------- --------------
<S> <C> <C>
Outstanding, January 1, 1994.............................. -- --
Class A Limited Partner units
Granted................................................. 2,442,130 $2.425-$ 4.85
Class B Limited Partner units
Granted................................................. 5,297,000 $13.53
---------
Outstanding, December 31, 1994............................ 7,739,130 $2.425-$13.53
---------
Class A Limited Partner units
Exercised............................................... (103,000) $2.425-$ 4.85
Class B Limited Partner units
Granted................................................. 109,000 $12.70-$14.68
Canceled................................................ (174,200) $13.53
---------
Outstanding, December 31, 1995............................ 7,570,930 $2.425-$14.68
---------
Class B Limited Partner units
Granted................................................. 227,000 $17.72-$18.81
Canceled................................................ (29,200) $12.78-$13.53
---------
Outstanding, December 31, 1996............................ 7,768,730 $2.425-$18.81
---------
Exercisable:
Class A Limited Partner units........................... 801,110 $2.425
Class B Limited Partner units........................... 200,000 $13.53
---------
Exercisable, December 31, 1996............................ 1,001,110
=========
</TABLE>
g. Other Benefit Plans -- Certain of PFAMCo Group's eligible employees
were included in a Pacific Mutual sponsored defined benefit pension plan, and
health care and life insurance plans that provide post-retirement benefits.
PFAMCo Group was charged an immaterial amount by Pacific Mutual for these plans
prior to the Consolidation. Subsequent to the Consolidation, PIMCO Advisors has
no expense associated with these plans.
F-16
<PAGE> 125
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS
a. Lease Agreements -- PIMCO Advisors and its subsidiaries lease office
space and certain office equipment under noncancelable leases with terms in
excess of one year. Future minimum payments are as follows:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1997.......................................................... $3,560,785
1998.......................................................... 2,523,057
1999.......................................................... 1,705,000
2000.......................................................... 821,122
2001.......................................................... 759,837
Thereafter.................................................... 375,054
----------
Total.................................................... $9,744,855
==========
</TABLE>
Rent expense in connection with these agreements was approximately
$3,772,000, $3,641,000 and $2,379,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
b. Letter Of Credit -- PIMCO Advisors is contingently liable for a letter
of credit in the amount of $738,548 related to PIMCO Advisors membership in a
captive insurance program.
c. Revolving Line of Credit -- PIMCO Advisors has a $25 million, 4 year
revolving credit facility, originated in April of 1996. The facility permits
short term borrowings at a floating rate of interest. The terms of the agreement
include an interest coverage ratio, a fixed charge coverage ratio and a minimum
operating cash flow ratio. The partnership did not utilize this facility in
1996, but was in compliance with the required ratios.
11. NET CAPITAL
PFD is subject to the Uniform Net Capital Rule (Rule 15c3-1) under the
Securities and Exchange Act of 1934, which requires the maintenance of minimum
net capital and requires that the ratio of aggregate indebtedness to net
capital, both as defined, shall not exceed 15 to 1. At December 31, 1996, PFD
had net capital of $3,058,237, which was $2,238,261 in excess of its required
net capital of $819,976. PFD's net capital ratio was 3.73 to 1. At December 31,
1995, PFD had net capital of $1,049,818, which was $515,116 in excess of its
required net capital of $534,702. PFD's net capital ratio was 7.64 to 1. At
December 31, 1994, PFD had $1,156,876 in excess of its required net capital of
$579,935. PFD's net capital ratio was 5.01 to 1 at that time.
12. INVESTMENT IN STOCKSPLUS, L.P.
StocksPLUS accounts for its investment in StocksPLUS, L.P. under the equity
method because StocksPLUS is the general partner in, and exercises significant
influence over the operating and financial policies of StocksPLUS, L.P. (Note
1). The underlying investments of StocksPLUS, L.P. are carried at fair value.
The effect of such accounting does not have a material effect on PIMCO Advisors
consolidated financial statements. StocksPLUS, L.P. has made its investments
with the intent to have its performance exceed that of the S & P 500 Index.
StocksPLUS has mitigated the effects of its pro rata investment in
StocksPLUS, L.P.'s investments through the use of short futures positions. Gains
and losses related to these positions are settled daily. Included in "Short term
investments" in the accompanying Consolidated Statements of Financial Condition
are securities which are used as necessary for deposits made in connection with
the futures positions and are recorded at fair value. The notional amounts of
the contracts do not necessarily represent future cash
F-17
<PAGE> 126
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
requirements, as the contracts are intended to be closed prior to their
expiration. As of December 31, 1996 and 1995, the notional amounts of futures
contracts approximated $2,932,000 and $3,401,000, respectively.
Condensed financial information for StocksPLUS, L.P. is as follows:
SUMMARY OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Assets:
Investments -- at fair value....................... $2,306,673,000 $1,893,770,000
Other assets....................................... 26,481,000 18,685,000
-------------- --------------
Total assets.................................... $2,333,154,000 $1,912,455,000
============== ==============
Liabilities and Partners' Capital:
Liabilities........................................ $ 136,880,000 $ 219,072,000
StocksPLUS' Partner Capital........................ 2,629,000 3,384,000
Limited Partners' Capital.......................... 2,193,645,000 1,689,999,000
-------------- --------------
Total liabilities and partners' capital......... $2,333,154,000 $1,912,455,000
============== ==============
</TABLE>
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net trading gains (losses) on futures.... $292,185,000 $326,096,000 $(30,291,000)
Net gain (loss) in fair value of
securities............................. 12,040,000 31,266,000 (21,278,000)
Interest income.......................... 126,535,000 92,260,000 58,383,000
Fees and commissions..................... (4,631,000) (3,822,000) (878,000)
------------ ------------ ------------
Net income............................... $426,129,000 $445,800,000 $ 5,936,000
============ ============ ============
</TABLE>
13. SUBSEQUENT EVENT
On February 13, 1997, PIMCO Advisors and its affiliate, Thomson Advisory
Group Inc. ("TAG Inc."), and Oppenheimer Group, Inc. and its subsidiary,
Oppenheimer Financial Corp. signed a definitive agreement for TAG Inc. to
acquire a one-third, managing general partner interest in Oppenheimer Capital (a
general partnership), the 1 percent general partner interest in Oppenheimer
Capital, L.P. and 100% of the stock of Advantage Advisers, an affiliate of
Oppenheimer Group, which manages eight closed-end funds. The transaction covers
only the private interests Oppenheimer Group holds in Oppenheimer Capital and
Oppenheimer Capital, L.P. and does not include the publicly traded units of
Oppenheimer Capital, L.P. The acquisition is subject to certain client, lender,
IRS and other approvals, and is expected to take up to six months to complete.
The agreement provides for the acquisition by TAG Inc. of the above listed
assets through a merger with Oppenheimer Group, Inc. in exchange for total
consideration of approximately $233 million in convertible preferred stock to be
issued by TAG Inc. and the assumption of approximately $32 million of debt.
Subsequently, TAG Inc. will contribute the general partner interest in
Oppenheimer Capital to PIMCO Advisors, in exchange for approximately $233
million of newly issued Class A Limited Partner Units, at $25.50 per unit.
F-18
<PAGE> 127
PIMCO ADVISORS L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PIMCO Advisors may be obligated in certain circumstances to purchase such
convertible preferred stock for its issue price. PIMCO Advisors will account for
this transaction using the purchase method. After the closing, operating results
for PIMCO Advisors will include its proportionate share of the operating results
of Oppenheimer Capital.
14. CONSOLIDATED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results for the periods indicated were as follows:
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues................................... $91,220,000 $98,842,000 $ 97,099,000 $104,863,000
Expenses................................... 71,468,000 74,827,000 73,131,000 80,269,000
----------- ----------- ----------- ------------
Income before taxes........................ 19,752,000 24,015,000 23,968,000 24,594,000
Income tax expense......................... 389,000 207,000 238,000 367,000
----------- ----------- ----------- ------------
Net income................................. $19,363,000 $23,808,000 $ 23,730,000 $ 24,227,000
=========== =========== =========== ============
Net income per General Partner and Class A
Limited Partner unit..................... $ 0.31 $ 0.33 $ 0.32 $ 0.33
=========== =========== =========== ============
Net income per Class B Limited Partner
unit..................................... $ 0.19 $ 0.29 $ 0.28 $ 0.29
=========== =========== =========== ============
Market price per Class A Limited Partner
unit:
Low...................................... $20 5/8 $20 1/4 $20 1/4 $19 5/8
High..................................... $23 1/8 $22 $22 3/4 $23 5/8
</TABLE>
<TABLE>
<CAPTION>
THREE THREE
MONTHS MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues................................... $71,118,000 $75,465,000 $ 83,203,000 $ 93,228,000
Expenses................................... 57,934,000 61,158,000 65,799,000 69,139,000
----------- ----------- ----------- ------------
Income before taxes........................ 13,184,000 14,307,000 17,404,000 24,089,000
Income tax expense......................... 44,000 198,000 263,000 12,000
----------- ----------- ----------- ------------
Net income................................. $13,140,000 $14,109,000 $ 17,141,000 $ 24,077,000
=========== =========== =========== ============
Net income per General Partner and Class A
Limited Partner unit..................... $ 0.26 $ 0.26 $ 0.29 $ 0.35
=========== =========== =========== ============
Net income per Class B Limited Partner
unit..................................... $ 0.07 $ 0.10 $ 0.14 $ 0.28
=========== =========== =========== ============
Market price per Class A Limited Partner
unit:
Low...................................... $16 7/8 $17 3/8 $19 $19 5/8
High..................................... $18 1/4 $20 5/8 $21 1/4 $21 1/4
</TABLE>
F-19
<PAGE> 128
REPORT OF INDEPENDENT ACCOUNTANTS
To The General Partner and Limited Partners of
Oppenheimer Capital, L.P.
In our opinion, the accompanying statements of financial condition and the
related statements of income, changes in partners' capital and cash flows
present fairly, in all material respects, the financial position of Oppenheimer
Capital, L.P. (the "Partnership") at April 30, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended April 30, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
New York, New York
July 22, 1997, except as to Note 2(a) which is as of December 1, 1997
F-20
<PAGE> 129
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
AT APRIL 30,
JULY 31, ---------------------
1997 1997 1996
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Cash and short term investments (Note 4).................. $ 101 $ 91 $ 35
Investment in Oppenheimer Capital (Note 2)................ 32,640 26,796 23,362
Distribution receivable (Note 2).......................... 14,050 17,090 11,950
10% note due 2012 from Oppenheimer Equities, Inc. (Note
4)...................................................... 32,193 32,193 32,193
Interest receivable....................................... 538 538 538
Other assets.............................................. 138 136 128
Goodwill, net (Note 2).................................... 38,653 39,305 41,893
-------- -------- --------
Total Assets.................................... $ 118,313 $116,149 $110,099
======== ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Distribution payable to partners.......................... $ 14,806 $ 17,858 $ 12,713
-------- -------- --------
Total Liabilities............................... 14,806 17,858 12,713
-------- -------- --------
General partner's capital................................. 1,049 996 987
Limited partners' capital; 28,306,500 Units authorized;
25,766,928; 25,673,889 and 25,475,967 Units outstanding,
respectively............................................ 102,458 97,295 96,399
-------- -------- --------
Total Partners' Capital......................... 103,507 98,291 97,386
-------- -------- --------
Total Liabilities and Partners' Capital......... $ 118,313 $116,149 $110,099
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 130
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------- FOR THE YEARS ENDED APRIL 30,
JULY 31, JULY 31, -------------------------------
1997 1996 1997 1996 1995
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Equity in earnings of Oppenheimer
Capital (Note 2):
Operating earnings.................. $15,963 $11,468 $51,022 $40,359 $31,054
Gain on Quest sale (Note 8)......... 2,809 -- 1,800 17,734 --
------- ------- ------- ------- -------
Total equity in earnings of
Oppenheimer Capital............... 18,772 11,468 52,822 58,093 31,054
Interest............................ 813 812 3,224 3,223 3,228
------- ------- ------- ------- -------
Total Revenues................. 19,585 12,280 56,046 61,316 34,282
------- ------- ------- ------- -------
Expenses:
Amortization of goodwill (Note 2)...... 652 652 2,588 2,588 2,588
Other expenses (Note 2)................ 33 33 132 132 873
------- ------- ------- ------- -------
Total Expenses................. 685 685 2,720 2,720 3,461
------- ------- ------- ------- -------
Net income............................... $18,900 $11,595 $53,326 $58,596 $30,821
======= ======= ======= ======= =======
Net income per unit (Note 3)............. $ 0.72 $ 0.45 $ 2.06 $ 2.28 $ 1.21
======= ======= ======= ======= =======
Distributions declared per unit.......... $ 0.57 $ 0.39 $ 2.10 $ 1.90 $ 1.30
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 131
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED TOTAL
PARTNER'S PARTNERS' PARTNERS'
CAPITAL CAPITAL CAPITAL
------ -------- --------
<S> <C> <C> <C>
BALANCES AT APRIL 30, 1994................................... $ 892 $ 86,905 $ 87,797
Net income................................................. 308 30,513 30,821
Distributions declared..................................... (332) (32,923) (33,255)
Amortization of restricted unit compensation expense....... 8 851 859
Capital contributions...................................... -- 90 90
------ -------- --------
BALANCES AT APRIL 30, 1995................................... 876 85,436 86,312
Net income................................................. 586 58,010 58,596
Distributions declared..................................... (489) (48,416) (48,905)
Amortization of restricted unit compensation expense....... 11 1,127 1,138
Capital contributions...................................... 3 242 245
------ -------- --------
BALANCES AT APRIL 30, 1996................................... 987 96,399 97,386
Net income................................................. 533 52,793 53,326
Distributions declared..................................... (543) (53,790) (54,333)
Amortization of restricted unit compensation expense....... 15 1,476 1,491
Capital contributions...................................... 4 417 421
------ -------- --------
BALANCES AT APRIL 30, 1997................................... 996 97,295 98,291
(unaudited)
Net income................................................. 189 18,711 18,900
Distributions declared..................................... (148) (14,658) (14,806)
Amortization of restricted unit compensation expense....... 7 655 662
Capital contributions...................................... 5 455 460
------ -------- --------
BALANCES AT JULY 31, 1997.................................... $1,049 $102,458 $103,507
====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 132
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS
ENDED ENDED FOR THE YEARS ENDED APRIL 30,
JULY 31, JULY 31, ----------------------------------
1997 1996 1997 1996 1995
------------ ------------ -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income...................... $ 18,900 $ 11,595 $ 53,326 $ 58,596 $ 30,821
Adjustments to reconcile net
income to net cash provided
by operating activities:
Distributions received (less
than) the equity in
earnings of Oppenheimer
Capital.................... (1,682) 482 (6,662) (14,677) (60)
Amortization of goodwill..... 652 652 2,588 2,588 2,588
(Increase) in other assets... (2) (2) (8) (19) (109)
-------- -------- -------- -------- --------
Net cash provided by operating
activities...................... 17,868 12,727 49,244 46,488 33,240
-------- -------- -------- -------- --------
Cash flows from investing
activities:
Capital contributions to
Oppenheimer Capital............. (631) (273) (530) (300) (86)
-------- -------- -------- -------- --------
Cash flows from financing
activities:
Distributions to partners:
General partner................. (179) (127) (492) (465) (332)
Limited partners................ (17,679) (12,586) (48,696) (46,048) (32,923)
Issuance of limited partnership
units on exercise of
restricted options........... 631 273 530 300 86
-------- -------- -------- -------- --------
Net cash (used in) financing
activities...................... (17,227) (12,440) (48,658) (46,213) (33,169)
-------- -------- -------- -------- --------
Net increase (decrease) in cash
and short term investments...... 10 14 56 (25) (15)
Cash and short term investments at
beginning of period............. 91 35 35 60 75
-------- -------- -------- -------- --------
Cash and short term investments at
end of period................... $ 101 $ 49 $ 91 $ 35 $ 60
======== ======== ======== ======== ========
Supplemental disclosure of cash
flow information (Note 6):
New York City unincorporated
business tax paid............ $ 35 $ 35 $ 140 $ 151 $ 985
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 133
OPPENHEIMER CAPITAL, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION
Oppenheimer Capital, L.P. (the "Partnership"), is a publicly traded limited
partnership owned 1% by its general partner, Oppenheimer Financial Corp.
("Opfin") and 99% by its public limited partners ("Unitholders"). The
Partnership's sole business is its holding of a 67.5% interest in Oppenheimer
Capital (the "Operating Partnership"), a registered investment adviser. Opfin
holds the remaining 32.5% interest in the Operating Partnership. The Operating
Partnership is part of an affiliated group of companies operating in the
financial services industry. The financial statements of the Partnership should
be read in conjunction with the consolidated financial statements of the
Operating Partnership.
NOTE 2 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Financial Statement Presentation
Effective December 1, 1997, the Partnership effected a 1.67 for 1 unit
split of Partnership units. For purposes of these financial statements, all
units authorized and outstanding, and per unit amounts have been restated to
reflect the split of the Partnership units.
(b) Investment in Oppenheimer Capital
The Partnership accounts for its investment in the Operating Partnership in
accordance with the equity method of accounting. The Partnership records as
income its proportionate share of the net income of the Operating Partnership
and credits distributions from the Operating Partnership to its investment in
Oppenheimer Capital. At April 30, 1997, the Partnership had a distribution
receivable of $17.1 million from the Operating Partnership that was received on
May 30, 1997.
(c) Goodwill
The excess of the initial contribution of capital to the Operating
Partnership over fair value of the net assets acquired is being amortized on a
straight-line basis over a period of 25 years. Accumulated amortization at April
30, 1997 and 1996 was $25,388,000 and $22,800,000, respectively. Impairment of
goodwill is measured on the basis of anticipated undiscounted cash flows. At
April 30, 1997, 1996 and 1995, the Partnership determined there was no
impairment of goodwill.
(d) Other Expenses
Other expenses consist of New York City unincorporated business tax at a
rate of 4% of taxable income. The Partnership is not subject to Federal or local
income taxes which are obligations of the individual partners. However, under
current tax law, the Partnership will be taxed as a corporation beginning in
1998.
(e) Statements of Cash Flows
For purposes of reporting cash flows, cash and short term investments
include highly- liquid investments with maturities of three months or less.
(f) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
F-25
<PAGE> 134
OPPENHEIMER CAPITAL, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- NET INCOME PER UNIT
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED FOR THE YEARS ENDED APRIL 30,
JULY 31, -----------------------------
1997 1997 1996 1995
------------ ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
FOR PER UNIT AMOUNTS)
<S> <C> <C> <C> <C>
Net income.................................... $ 18,900 $53,326 $58,596 $30,821
Less 1% applicable to the General Partner..... 189 533 586 308
------- ------- ------- -------
Net income available to the Limited
Partners.................................... $ 18,711 $52,793 $58,010 $30,513
======= ======= ======= =======
Weighted average number of units
outstanding................................. 25,763 25,663 25,457 25,277
Net income per unit........................... $0.72 $2.06 $2.28 $1.21
</TABLE>
NOTE 4 -- TRANSACTIONS WITH AFFILIATED COMPANIES
(a) Cash and Short Term Investments
On occasion the Partnership deposits excess funds with an affiliate and
receives interest at money market rates. In addition, excess funds are also
invested in a money market fund managed by an affiliate. Included in cash and
short term investments at April 30, 1997 and 1996 was $1,000 and $34,000,
respectively, on deposit with Oppenheimer & Co., Inc. ("Opco"), an affiliated
broker-dealer, and $90,000 and $1,000, respectively, invested in the OCC Cash
Reserves Primary Portfolio, which is managed by Opcap Advisors, an affiliated
investment adviser.
(b) 10% par value Note due 2012 from Oppenheimer Equities, Inc.
The Partnership has a $32,193,000, 10% par value note due 2012 from
Oppenheimer Equities, Inc., ("Equities"), a direct wholly-owned subsidiary of
Opfin.
The summary financial position of Equities is as follows:
<TABLE>
<CAPTION>
APRIL 30,
1997
-------------
(IN MILLIONS)
<S> <C>
Total assets.................................................... $ 5,277
Total liabilities, exclusive of subordinated liabilities........ 4,900
Liabilities subordinated to claims of general creditors......... 3
Total shareholder's equity...................................... 374
------
Total liabilities and shareholder's equity...................... $ 5,277
======
</TABLE>
For the year ended April 30, 1997, Equities' net income was $52 million on
total revenues of $974 million.
F-26
<PAGE> 135
OPPENHEIMER CAPITAL, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED APRIL 30, 1997
---------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT FOR PER UNIT AMOUNTS)
<S> <C> <C> <C> <C>
Total revenues.................................... $12,280 $13,308 $16,196(1) $14,262
Net income........................................ $11,595 $12,622 $15,511(1) $13,598
Net income per unit............................... $ .45 $ .48 $ .60(1) $ .53
Distributions declared per unit................... $ .39 $ .45 $ .57(2) $ .69
Market price:
High............................................ $17.964 $20.659 $22.380 $22.904
Low............................................. $16.243 $16.766 $19.910 $19.461
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED APRIL 30, 1996
---------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues.................................... $ 9,862 $10,527 $29,322(1) $11,605
Net income........................................ $ 9,177 $ 9,841 $28,637(1) $10,941
Net income per unit............................... $ .36 $ .38 $ 1.11(1) $ .43
Distributions declared per unit................... $ .33 $ .38 $ .70(2) $ .49
Market price:
High............................................ $14.671 $16.766 $17.665 $18.413
Low............................................. $12.650 $14.371 $16.168 $16.617
</TABLE>
- ---------------
(1) Includes a gain on the Quest sale of $1.8 million, or $.07 per unit in
fiscal 1997 and $17.7 million, or $.69 per unit in fiscal 1996 (see Note 8).
(2) Includes a special distribution related to the Quest sale of $.06 per unit
in fiscal 1997 and $.33 per unit in fiscal 1996 (see Note 8).
NOTE 6 -- SUPPLEMENTAL CASH FLOW INFORMATION
Oppenheimer Capital, L.P. issued 197,922, 197,449 and 156,426 units of
limited partner interest under the Restricted Unit and Restricted Option Plans
in exchange for an additional .18%, .18% and .14% general partner interest in
Oppenheimer Capital for the fiscal years ended April 30, 1997, 1996 and 1995,
respectively.
NOTE 7 -- COMPENSATION PLANS
The Operating Partnership has established a Restricted Unit Plan and a
Restricted Option Plan (the "Plan") for the benefit of certain key employees.
Pursuant to the Plan, an eligible employee is granted the right to receive a
number of units of the Partnership at no cost to the employee ("Rights"), in the
case of the Restricted Unit Plan, and/or the right to purchase a number of units
at the fair market value of such units on the date of grant ("Options"), in the
case of the Restricted Option Plan. The right to receive or purchase units vests
33 1/3% per year at the end of each of the third, fourth and fifth years from
the date of grant. The Partnership transfers to the Operating Partnership the
proceeds from the exercise of Options in exchange for an increase in its general
partner interest in the Operating Partnership. Opfin and the limited partners of
the Partnership incur dilution, in accordance with their respective percentage
interests in the Operating Partnership, upon the vesting of Rights and the
exercise of Options.
No compensation cost is recognized in the statements of income by the
Operating Partnership for Options granted under the Plan because the exercise
price of the Options approximates the market price of the
F-27
<PAGE> 136
OPPENHEIMER CAPITAL, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
units on the date of grant. Had compensation cost for the Options been
recognized based on the fair value of the Options at the date of grant, the
Partnership's net income would have been reported as the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
APRIL 30,
-------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net Income
As reported............................................ $53,326 $58,596
Pro forma.............................................. $53,214 $58,554
Net Income per unit
As reported............................................ $ 2.06 $ 2.28
Pro forma.............................................. $ 2.05 $ 2.27
</TABLE>
For the purpose of the above disclosure, the fair value of each Option
granted is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in fiscal
1997 and fiscal 1996, respectively: distribution yield of 7.3% and 8.0%;
expected volatility of 21% and 22%; risk-free interest rate of 6.36% and 6.96%;
and expected lives of 6 and 7 years.
NOTE 8 -- GAIN ON QUEST SALE
Included in "Equity in earnings of Oppenheimer Capital" for the fiscal
years ended April 30, 1997 and 1996 are gains resulting from the Operating
Partnership's sale of the investment advisory and other contracts and business
relationships for its twelve Quest for Value mutual funds to OppenheimerFunds,
Inc. ("OFI"), which is unrelated to the Operating Partnership. For the years
ended April 30, 1997 and 1996, the Partnership recognized gains of $1.8 million,
or $.07 per unit, and $17.7 million, or $.69 per unit, respectively.
NOTE 9 -- SUBSEQUENT EVENTS
(a) Quest Dual Purpose Fund Sale
On February 28, 1997, the Operating Partnership entered into an agreement
to sell its investment contracts and other business relationships of the Quest
for Value Dual Purpose Fund to OFI. On July 18, 1997, the sale was consummated
and the Partnership recognized a gain on the sale of $2.8 million, or $0.11 per
unit.
(b) Sale of Opfin Interest
On July 22, 1997, Oppenheimer Group, Inc. ("OGI") and its subsidiary,
Opfin, entered into an Amended and Restated Agreement and Plan of Merger,
providing for PIMCO Advisors and its affiliate, Thomson Advisory Group Inc., to
acquire, among other things, Opfin's current 32.4% managing general partner
interest in the Operating Partnership, and Opfin's 1% general partner interest
in the Partnership and in the various subpartnerships of the Operating
Partnership. The transaction covers only the private interests OGI holds in the
Operating Partnership and the Partnership, does not include the publicly traded
units of the Partnership, and is subject to certain conditions being satisfied
prior to closing, including the closing of the sale of the stock of Oppenheimer
Holdings, Inc., an affiliate, to a third party, and consents of certain clients.
It is anticipated that the transaction will close no later than the first
quarter of calendar 1998.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
F-28
<PAGE> 137
REPORT OF INDEPENDENT ACCOUNTANTS
To The General Partners of
Oppenheimer Capital
In our opinion, the accompanying statements of financial condition and the
related statements of income, changes in partners' capital and cash flows
present fairly, in all material respects, the financial position of Oppenheimer
Capital and its subsidiaries (the "Partnership") at April 30, 1997 and 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended April 30, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
New York, New York
July 22, 1997
F-29
<PAGE> 138
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
AT APRIL 30,
AT JULY 31, -------------------
1997 1997 1996
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash and short term investments (Notes 1 and 4)............. $ 32,869 $27,123 $19,744
Investment management fees receivable....................... 57,990 52,357 43,016
Investments in affiliated mutual funds and other sponsored
investment products (Note 4).............................. 3,371 4,347 4,644
Furniture, equipment and leasehold improvements at cost less
accumulated depreciation and amortization of $2,812 and
$2,179 (Note 1)........................................... 3,752 3,795 3,515
Intangible assets, less accumulated amortization of $565 and
$377 (Note 1)............................................. 1,213 1,511 1,699
Other assets................................................ 3,860 3,886 3,720
------- ------- -------
Total Assets...................................... $ 103,055 $93,019 $76,338
======= ======= =======
LIABILITIES, MINORITY INTEREST AND PARTNERS' CAPITAL
LIABILITIES
Accrued employee compensation and benefits.................. $ 18,933 $13,914 $12,873
Accrued expenses and other liabilities...................... 9,152 8,880 7,168
Note payable (Note 8)....................................... -- 400 800
Deferred investment management fees......................... 5,482 4,532 2,870
Distribution payable to partners............................ 20,789 25,318 17,751
------- ------- -------
Total Liabilities......................................... 54,356 53,044 41,462
------- ------- -------
Minority interest........................................... 396 277 174
Partners' capital........................................... 48,303 39,698 34,702
------- ------- -------
Total Liabilities, Minority Interest and Partners'
Capital......................................... $ 103,055 $93,019 $76,338
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE> 139
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS FOR THE YEARS ENDED APRIL 30,
ENDED ENDED ----------------------------------
JULY 31, 1997 JULY 31, 1996 1997 1996 1995
--------------- --------------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Investment management fees (Note
1)............................. $ 53,093 $39,433 $175,814 $151,269 $119,194
Net distribution assistance and
commission income (Note 4)..... 1,599 1,405 4,910 6,051 10,443
Interest and dividends........... 351 237 1,250 895 275
------- ------- -------- -------- --------
TOTAL OPERATING REVENUES......... 55,043 41,075 181,974 158,215 129,912
------- ------- -------- -------- --------
OPERATING EXPENSES:
Compensation and benefits (Note
3)............................. 23,991 17,610 77,664 68,781 55,367
Occupancy........................ 1,757 1,493 6,572 6,873 6,436
General and administrative....... 3,124 2,787 12,494 12,293 10,652
Promotional...................... 1,430 1,551 6,334 7,604 10,611
------- ------- -------- -------- --------
TOTAL OPERATING EXPENSES......... 30,302 23,441 103,064 95,551 83,066
------- ------- -------- -------- --------
OPERATING INCOME................. 24,741 17,634 78,910 62,664 46,846
Gain on Quest sale (Note 6)...... 4,374 -- 2,806 27,725 --
------- ------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST.............. 29,115 17,634 81,716 90,389 46,846
Income taxes (Note 5)............ (1,218) (585) (3,198) (3,627) (1,201)
------- ------- -------- -------- --------
INCOME BEFORE MINORITY
INTEREST....................... 27,897 17,049 78,518 86,762 45,645
Minority interest................ (119) (56) (254) (452) --
------- ------- -------- -------- --------
NET INCOME....................... $ 27,778 $16,993 $ 78,264 $ 86,310 $ 45,645
======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE> 140
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS)
<TABLE>
<S> <C>
BALANCE AT APRIL 30, 1994................................................. $ 12,452
Net income.............................................................. 45,645
Amortization of restricted unit compensation expense.................... 1,280
Distributions declared to partners:
Oppenheimer Financial Corp........................................... (14,313)
Oppenheimer Capital, L.P............................................. (30,690)
Contributions by Oppenheimer Capital, L.P............................... 86
-------
BALANCE AT APRIL 30, 1995................................................. 14,460
Net income.............................................................. 86,310
Amortization of restricted unit compensation expense.................... 1,691
Distributions declared to partners:
Oppenheimer Financial Corp........................................... (22,247)
Oppenheimer Capital, L.P............................................. (45,812)
Contributions by Oppenheimer Capital, L.P............................... 300
-------
BALANCE AT APRIL 30, 1996................................................. 34,702
Net income.............................................................. 78,264
Amortization of restricted unit compensation expense.................... 2,209
Distributions declared to partners:
Oppenheimer Financial Corp........................................... (24,707)
Oppenheimer Capital, L.P............................................. (51,300)
Contributions by Oppenheimer Capital, L.P............................... 530
-------
BALANCE AT APRIL 30, 1997................................................. 39,698
(unaudited):
Net income.............................................................. 27,778
Amortization of restricted unit compensation expense.................... 980
Distributions declared to partners:
Oppenheimer Financial Corp........................................... (6,754)
Oppenheimer Capital, L.P............................................. (14,030)
Contributions by Oppenheimer Capital, L.P............................... 631
-------
BALANCE AT JULY 31, 1997.................................................. $ 48,303
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE> 141
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS THREE MONTHS FOR THE YEARS ENDED APRIL 30,
ENDED ENDED ------------------------------
JULY 31, 1997 JULY 31, 1996 1997 1996 1995
--------------- --------------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 27,778 $ 16,993 $ 78,264 $ 86,310 $ 45,645
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of restricted unit compensation
expense.......................................... 980 535 2,209 1,691 1,280
Depreciation and amortization...................... 247 230 1,019 2,413 1,082
Minority interest, net of distributions............ 119 87 103 87 62
(Increase) in investment management fees
receivable....................................... (5,633) 830 (9,341) (9,839) (4,517)
(Increase) decrease in other assets................ (197) 381 (182) (1,195) 1,300
Increase in accrued employee compensation and
benefits......................................... 5,019 (3,731) 1,041 4,549 1,637
Increase in accrued expenses and other
liabilities...................................... 272 1,859 1,712 290 2,144
Increase in deferred investment management fees.... 950 308 1,662 1,154 93
--------- --------- -------- -------- --------
Net cash provided by operating activities............ 29,535 17,492 76,487 85,460 48,726
--------- --------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets............................ (178) (350) (1,111) (498) (1,634)
Sale of AMA license.................................. 1,000 -- -- -- --
Intangible assets resulting from acquisitions........ (500) -- -- -- (1,689)
Proceeds from sales of mutual funds shares and other
investments........................................ 976 -- 3,132 7,296 2,048
Purchases of mutual funds shares and other
investments........................................ -- (35) (2,819) (7,844) (4,384)
--------- --------- -------- -------- --------
Net cash provided by (used in) investing
activities......................................... 1,298 (385) (798) (1,046) (5,659)
--------- --------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments of) proceeds from bank loans......... -- -- (9,182) 6,446
Issuance (repayment) of note payable................. (400) (400) (400) (400) 1,200
Distributions to partners:
Oppenheimer Financial Corp......................... (8,228) (5,801) (22,280) (21,187) (14,898)
Oppenheimer Capital, L.P........................... (17,090) (11,950) (46,160) (43,415) (30,995)
Contributions by Oppenheimer Capital, L.P............ 631 273 530 300 86
--------- --------- -------- -------- --------
Net cash (used in) financing activities.............. (25,087) (17,878) (68,310) (73,884) (38,161)
--------- --------- -------- -------- --------
Net increase in cash and short term investments...... 5,746 (771) 7,379 10,530 4,906
Cash and short term investments at beginning of
period............................................. 27,123 21,019 19,744 9,214 4,308
--------- --------- -------- -------- --------
Cash and short term investments at end of period..... $ 32,869 $ 20,248 $ 27,123 $ 19,744 $ 9,214
========= ========= ======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid...................................... $ 22 $ 38 $ 112 $ 638 $ 738
========= ========= ======== ======== ========
New York City unincorporated business tax paid..... $ 983 $ 661 $ 3,376 $ 3,701 $ 1,049
========= ========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE> 142
OPPENHEIMER CAPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Consolidation
Oppenheimer Capital (the "Operating Partnership") is a general partnership
owned 32.5% by Oppenheimer Financial Corp. ("Opfin") and 67.5% by Oppenheimer
Capital, L.P. (the "Partnership"). The Operating Partnership is a registered
investment adviser and is part of an affiliated group of companies operating in
the financial services industry.
The consolidated financial statements include the accounts of the Operating
Partnership and its subsidiaries, Opcap Advisors ("Advisors"), OCC Distributors
("Distributors") and AMA Investment Advisers, L.P. ("AMA Advisers, L.P.")
(collectively, the "Subpartnerships"), Oppenheimer Capital Limited and
Oppenheimer Capital Trust Company. All material intercompany balances and
transactions have been eliminated in consolidation.
(b) Cash and Short Term Investments
Short term investments are recorded at cost which approximates market value
and include holdings in money market mutual funds and highly-liquid investments
with maturities of three months or less.
(c) Furniture, Equipment and Leasehold Improvements
Furniture and equipment are depreciated on a straight-line basis over five
to seven year periods. Amortization of leasehold improvements is on a
straight-line basis over the lesser of their economic useful life or the term of
the lease.
(d) Investment Management Fees
Investment management fees are based on written contracts and are generally
computed on the net assets of the managed accounts and recognized in the period
earned.
(e) Statements of Cash Flows
For purposes of reporting cash flows, cash and short term investments
include highly-liquid investments with maturities of three months or less.
(f) Intangible Assets
Impairment of intangible assets is measured on the basis of anticipated
undiscounted cash flows. At April 30, 1997, 1996 and 1995, the Operating
Partnership determined that there was no impairment of the intangible assets.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(h) Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
F-34
<PAGE> 143
OPPENHEIMER CAPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- LONG TERM LEASE COMMITMENTS
The Operating Partnership occupies office premises at various locations,
including the Oppenheimer Tower under an agreement to sublease with Oppenheimer
& Co., Inc. ("Opco"), an affiliated broker-dealer. The Operating Partnership' s
lease commitments for office space under operating leases having noncancelable
lease terms in excess of one year provide for the following minimum annual
rentals:
<TABLE>
<CAPTION>
YEARS ENDING APRIL 30,
----------------------------------------------------------------
<S> <C>
1998....................................................... $ 3,919,000
1999....................................................... 3,919,000
2000....................................................... 3,919,000
2001....................................................... 3,640,000
2002....................................................... 3,310,000
Thereafter................................................. 8,685,000
-----------
Total minimum lease payments.................................... $27,392,000
==========
</TABLE>
The agreements expire at various dates through the fiscal year ending April
30, 2006 and contain provisions for additional charges (e.g., ground rent, real
estate taxes and operating expenses). Office rent expense for the years ended
April 30, 1997, 1996 and 1995 was $5,046,000, $5,348,000 and $5,100,000,
respectively.
NOTE 3 -- COMPENSATION PLANS
The Operating Partnership has established a Restricted Unit Plan and a
Restricted Option Plan (the "Plan") for the benefit of certain key employees.
Pursuant to the Plan, an eligible employee is granted the right to receive a
number of units of the Partnership at no cost to the employee ("Rights"), in the
case of the Restricted Unit Plan, and/or the right to purchase a number of units
at the fair market value of such units on the date of grant ("Options"), in the
case of the Restricted Option Plan. The right to receive or purchase units vests
33 1/3% per year at the end of each of the third, fourth and fifth years from
the date of grant. The Partnership transfers to the Operating Partnership the
proceeds from the exercise of Options in exchange for an increase in its general
partner interest in the Operating Partnership. Opfin and the limited partners of
the Partnership incur dilution, in accordance with their respective percentage
interests in the Operating Partnership, upon the vesting of Rights and the
exercise of Options. A total of 2,475,000 restricted units and/or restricted
options have been authorized under the Plan. The following table shows the
Rights granted and the Options granted with exercise prices of $18.125 to $33.75
at April 30, 1997. As a result of the grant of Rights, the Operating Partnership
recorded deferred restricted unit compensation expense in partners' capital of
$5,977,000, $4,738,000 and $343,000 for the fiscal years ended April 30, 1997,
1996 and 1995, respectively, which amounts are amortized over a five year
period. Amortization of $2,209,000, $1,691,000, and $1,280,000 has been recorded
for the years ended April 30, 1997, 1996 and 1995, respectively. This
amortization results in a charge to compensation and benefits and a
corresponding credit to partners' capital.
F-35
<PAGE> 144
OPPENHEIMER CAPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
RIGHTS OPTIONS EXERCISE PRICE
OUTSTANDING OUTSTANDING PER OPTION
-------- -------- ---------------
<S> <C> <C> <C>
Balances at April 30, 1994........................... 322,950 141,501 $11.375-$28.125
Rights granted..................................... 16,300 -- --
Rights canceled.................................... (3,333) -- --
Units issued with respect to Rights................ (88,167) -- --
Options granted.................................... -- 140,500 $23.625-$24.875
Options exercised.................................. -- (5,501) $11.375-$23.875
Options canceled................................... -- (9,667) $11.375-$ 25.00
------- ------- ---------------
Balances at April 30, 1995........................... 247,750 266,833 $ 13.50-$28.125
Rights granted..................................... 188,540 -- --
Rights canceled.................................... (8,333) -- --
Units issued with respect to Rights................ (103,200) -- --
Options granted.................................... -- 153,000 $ 20.75
Options exercised.................................. -- (15,033) $ 13.50-$ 25.00
Options canceled................................... -- (30,333) $20.625-$ 25.00
------- ------- ---------------
Balances at April 30, 1996........................... 324,757 374,467 $18.125-$28.125
Rights granted..................................... 207,517 -- --
Rights canceled.................................... (14,109) -- --
Units issued with respect to Rights................ (95,851) -- --
Options granted.................................... -- 168,500 $29.375-$ 33.75
Options exercised.................................. -- (22,665) $18.125-$29.375
Options canceled................................... -- (24,000) $ 20.75-$29.375
------- ------- ---------------
Balances at April 30, 1997........................... 422,314 496,302 $18.125-$ 33.75
======= ======= ===============
</TABLE>
No compensation cost is recognized in the consolidated statements of income
for Options granted under the Plan because the exercise price of the Options
approximates the market price of the units on the date of grant. Had
compensation cost for the Options been recognized based on the fair value of the
Options at the date of the grant, the Operating Partnership's net income would
have been reported as the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
APRIL 30,
-------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net Income
As reported............................................ $78,264 $86,310
Pro forma.............................................. $78,098 $86,248
</TABLE>
For the purpose of the above disclosure, the fair value of each Option
granted is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in fiscal
1997 and fiscal 1996, respectively: distribution yield of 7.3% and 8.0%;
expected volatility of 21% and 22%; risk-free interest rate of 6.36% and 6.96%;
and expected lives of 6 and 7 years.
NOTE 4 -- TRANSACTIONS WITH AFFILIATED COMPANIES
(a) Cash and Short Term Investments
On occasion the Operating Partnership deposits excess funds with an
affiliate and receives interest at money market rates. In addition, excess funds
are also invested in a money market fund managed by Advisors.
F-36
<PAGE> 145
OPPENHEIMER CAPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Included in cash and short term investments at April 30, 1997 and 1996 was
$35,000 and $275,000, respectively, on deposit with Opco and $1,567,000 and
$1,675,000, respectively, invested in the OCC Cash Reserves Primary Portfolio,
for which Advisors acts as investment adviser.
(b) Investments in Affiliated Mutual Funds and Other Sponsored Investment
Products
Investments in affiliated mutual funds and other sponsored investment
products are carried at market value.
(c) Distribution Assistance Fees and Expenses
The Operating Partnership receives distribution assistance fees from
various mutual funds and has entered into agreements with various broker-dealers
including Opco to obtain sales-related services in rendering distribution
assistance. Payments to Opco for the Quest for Value equity and fixed income
mutual funds for the years ended April 30, 1996 and 1995 were recorded as
distribution assistance expenses and for financial statement purposes were
netted against distribution assistance fees (see note 6). Payments to Opco for
OCC Cash Reserves are netted against investment management fees. Such payments
totaled $8,902,000, $9,522,000 and $8,496,000 for the years ended April 30,
1997, 1996 and 1995, respectively.
(d) Other Services
Opco provides various services to the Operating Partnership and its
subsidiaries at its cost. Charges pursuant to these agreements are not material.
(e) Affiliated Mutual Funds and Commingled Products -- Investment Management
Fees
The Operating Partnership provides investment management services to
affiliated mutual funds and other commingled products. For the years ended April
30, 1997, 1996 and 1995 amounts earned for these services totaled $15,382,000,
$22,778,000 and $23,088,000, respectively.
NOTE 5 -- INCOME TAXES
Although the Operating Partnership is not otherwise subject to Federal,
state, or local income taxes, it was subject to New York City unincorporated
business tax of $3,143,000, $3,667,000 and $1,201,000, respectively, for the
years ended April 30, 1997, 1996 and 1995.
A domestic corporate subsidiary of the Operating Partnership is subject to
Federal, state and local income taxes. A foreign corporate subsidiary is subject
to taxes in the foreign jurisdiction in which it is located.
NOTE 6 -- GAIN ON QUEST SALE
On November 22, 1995, the Operating Partnership sold the investment
advisory and other contracts and business relationships for its twelve Quest for
Value mutual funds to OppenheimerFunds, Inc. ("OFI"), which is unrelated to the
Operating Partnership. In fiscal 1997 and 1996, the Operating Partnership
received payments of $3.8 million and $41.7 million, respectively, related to
the sale, and recognized pre-tax gains of $2.8 million and $27.7 million,
respectively.
NOTE 7 -- SALE OF SARATOGA CAPITAL MANAGEMENT
On April 29, 1997, the Operating Partnership completed the sale of its 50%
interest in Saratoga Capital Management. The proceeds, which are not
significant, will be paid annually to the Operating Partnership over a five year
period, ending May 1, 2001. The Operating Partnership continues to manage two
portfolios of the Saratoga Advantage Trust, for which it receives subadvisory
fees.
F-37
<PAGE> 146
OPPENHEIMER CAPITAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- SUBSEQUENT EVENTS
(a) Sale of AMA License
On May 12, 1997, the Operating Partnership sold its exclusive license to
market financial products to members of the American Medical Association for $1
million. The proceeds received from this transaction were used to purchase the
remaining 19.9% interest of AMA Advisers, L.P. not owned by the Operating
Partnership and Opfin, and to repay the balance of the original acquisition debt
incurred to purchase AMA Advisers, L.P. AMA Advisers, L.P. has been renamed 225
Liberty Street Advisers, L.P.
(b) Quest Dual Purpose Fund Sale
On February 28, 1997, the Operating Partnership entered into an agreement
to sell its investment advisory and other contracts and business relationships
of the Quest for Value Dual Purpose Fund to OFI. On July 18, 1997, the sale was
consummated and the Operating Partnership received a payment of $7.0 million and
recorded a net gain of $4.2 million.
(c) Sale of Opfin Interest
On July 22, 1997, Oppenheimer Group, Inc. ("OGI") and its subsidiary,
Opfin, entered into an Amended and Restated Agreement and Plan of Merger,
providing for PIMCO Advisors and its affiliate, Thomson Advisory Group Inc., to
acquire, among other things, Opfin's current 32.4% managing general partner
interest in the Operating Partnership, and Opfin's 1% general partner interest
in the Partnership and in the various subpartnerships of the Operating
Partnership. The transaction covers only the private interests OGI holds in the
Operating Partnership and the Partnership, does not include the publicly traded
units of the Partnership, and is subject to certain conditions being satisfied
prior to closing, including the closing of the sale of the stock of Oppenheimer
Holdings, Inc., an affiliate, to a third party, and consents of certain clients.
It is anticipated that the transaction will close no later than the first
quarter of calendar 1998.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
F-38
<PAGE> 147
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Partnership in connection with the issuance and distribution of the securities
being registered (all amounts are estimated except the SEC registration fee):
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $201,533
---------
Printing and engraving expenses................................... 300,000
Legal Fees and expenses........................................... 200,000
Accounting fees and expenses...................................... 50,000
NYSE Listing Fee.................................................. 26,000
Transfer agent and registrar fees................................. 10,000
Miscellaneous..................................................... 20,000
---------
TOTAL........................................................ $807,533
=========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
permits a limited partnership to indemnify and hold harmless any partner or
other person from and against any and all claims whatsoever, subject to such
standards and restrictions, if any, as set forth in its partnership agreement.
Under the Partnership Agreement, the general partner of the Partnership,
its affiliates and all officers, directors, partners, agents and employees of
the general partner and its affiliates will not be liable to the Partnership or
to any Unitholders for any actions or inactions of the general partner or such
other persons if such action or inaction did not constitute actual fraud, gross
negligence or willful or wanton misconduct. The Partnership will indemnify the
general partner and such persons and entities against all losses or liabilities,
costs and expenses (including legal fees and expenses) incurred by the general
partner or any such persons or entities arising from their conduct whenever such
course of conduct does not constitute actual fraud, gross negligence or willful
or wanton misconduct.
In regards to PIMCO Advisors, certain executive officers of PIMCO Advisors
and directors and officers of TAG and Thomson Investor Services, Inc. ("TIS")
are parties to indemnification agreements with PIMCO Advisors pursuant to which
PIMCO Advisors has agreed, to the fullest extent permitted by law, to indemnify
such persons from and against, among other things, all losses, claims,
liabilities, expenses and other amounts arising from any and all claims, actions
or proceedings in which any such person may be involved by reason of his or her
status as an officer of PIMCO Advisors or in connection with such person's
services to TAG and TIS.
The PIMCO Advisors Partnership Agreement provides that each officer and
director of PIMCO Advisors shall be indemnified by PIMCO Advisors against any
and all losses, claims, damages, liability and expense arising from any
proceeding in which any such director or officer may be involved by reason of
his or her status and further shall be advanced expenses in defending any such
proceeding to the fullest extent permitted by law. PIMCO Advisors will not be
permitted to change the indemnification provisions of the PIMCO Advisors
Partnership Agreement for at least six years following the 1994 Consolidation.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, or persons controlling PGP (as the general
partner of the Partnership and the managing general partner of PIMCO Advisors)
pursuant to the foregoing provisions, PGP has been informed that in the opinion
of the Commission such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
II-1
<PAGE> 148
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On November 4, 1997, PIMCO Advisors completed the Opgroup Transaction
described in the Prospectus and issued the securities described therein. The
issuance of such securities was exempt from registration pursuant to Section
4(2) under the Securities Act
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------ -------------------------------------------------------------------------------
<S> <C>
3.1 Amended and Restated Agreement of Limited Partnership of Oppenheimer Capital,
L.P.
3.1.1 Amendment to Amended and Restated Agreement of Limited Partnership of
Oppenheimer Capital, L.P. dated November 4, 1997
3.1.2 Assignment of General Partner Interest and Amendment to Amended and Restated
Agreement of Limited Partnership of Oppenheimer Capital, L.P. dated November 4,
1997
3.1.3 Assignment of General Partner Interest and Amendment to Amended and Restated
Agreement of Limited Partnership of Oppenheimer Capital, L.P. dated November 4,
1997
3.1.4 Amendment to Amended and Restated Agreement of Limited Partnership Agreement of
Oppenheimer Capital, L.P. dated November 4, 1997
3.1.5 Amendment to Amended and Restated Limited Partnership Agreement of Oppenheimer
Capital, L.P. dated as of December 1, 1997
3.1.6 Amendment to Amended and Restated Limited Partnership Agreement of Oppenheimer
Capital, L.P. dated as of December 1, 1997
4.1 Form certificate of Limited Partnership Units (Incorporated by reference to
Exhibit 3.2 of the Partnership's Registration Statement Number 33-3954 on Form
S-3)
5.1 Opinion and consent of Richards, Layton & Finger regarding the validity of the
units being registered
10.1 Promissory Note Issued by Oppenheimer Equities, Inc. (Incorporated by reference
to Exhibit 10.1 of the Partnership's Registration Statement No. 33-39354 on
Form S-3)
10.2 Form of lease with respect to premises at Oppenheimer Tower. (Incorporated by
reference from the Partnership's Registration Statement No. 33-39354 on Form
S-3)
10.3 Lease with respect to premises at World Financial Center, Tower B, New York.
(Incorporated by reference from the Partnership's Annual Report on Form 10-K
for the fiscal year ended April 30, 1993)
10.4 Amended and Restated Oppenheimer Past Service Benefit Plan. (Incorporated by
reference from the Partnership's Registration Statement No. 33-39354 on Form
S-3)
10.5 First Amendment to the Oppenheimer Past Service Benefit Plan. (Incorporated by
reference from the Partnership's Registration Statement No. 33-39354 on Form
S-3)
10.6.1 Executive Deferred Compensation Plan (Incorporated by reference to Exhibit
10.24 of PIMCO Advisors Annual Report on Form 10-K for the fiscal year ended
December 31, 1996)
10.6.2 First Amendment to the PIMCO Advisors L.P. Executive Deferred Compensation Plan
10.6.3 Second Amendment to the PIMCO Advisors L.P. Executive Deferred Compensation
Plan
10.7 Restricted Unit Plan. (Incorporated by reference from the Partnership's
Registration Statement No. 33-35584 on Form S-8)
10.8 Restricted Option Plan. (Incorporated by reference from the Partnership's
Registration Statement No. 33-35584 on Form S-8)
10.9 Lease with respect to premises at 33 Maiden Lane, New York. (Incorporated by
reference to Exhibit 10.9 of the Partnership's Report on Form 10-K for the
fiscal year ended April 30, 1994)
</TABLE>
II-2
<PAGE> 149
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------ -------------------------------------------------------------------------------
<S> <C>
10.10 Acquisition Agreement dated August 17, 1995 among Oppenheimer Capital, Quest
for Value Advisors, Quest for Value Distributors and Oppenheimer Management
Corporation. (Incorporated by reference to Exhibit 10.1 of the Partnership's
Form 10-Q for the fiscal quarter ended October 31, 1995)
10.11 Operating Agreement between PIMCO Advisors and Oppenheimer Capital, L.P. dated
November 30, 1997
10.12 Form of 1997 Unit Incentive Plan
10.13 Amended and Restated Partnership Agreement of Oppenheimer Capital
10.14 Amendment to Amended and Restated Partnership Agreement of Oppenheimer Capital,
dated November 4, 1997
10.15 Assignment of General Partner Interest and Amendment to Amended and Restated
Partnership Agreement of Oppenheimer Capital, dated November 4, 1997
10.16 Amendment to Amended and Restated Partnership Agreement of Oppenheimer Capital,
dated November 4, 1997
10.17 Amendment to Amended and Restated Partnership Agreement of Oppenheimer Capital,
dated as of December 1, 1997
10.18 Amended and Restated Agreement of Limited Partnership of PIMCO Advisors L.P.
dated October 31, 1997
10.19 Assignment of General Partner Interest and Amendment to Amended and Restated
Agreement of Limited Partnership of PIMCO Advisors L.P. dated November 30, 1997
10.20 Cvengros Employment Agreement. (Incorporated by reference from Thomson Advisory
Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.21 Smith Employment Agreement. (Incorporated by reference from Thomson Advisory
Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.22 Chiboucas Employment Agreement. (Incorporated by reference from Thomson
Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.23 Form of Manager Employer Agreement. (Incorporated by reference from Thomson
Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.24 Profit Sharing Plan for Pacific Investment Management Company. (Incorporated by
reference to Exhibit 10.5 of PIMCO Advisors' Report on Form 10-K for the fiscal
year ended December 31, 1994)
10.25 Profit Sharing Plan for Columbus Circle Investors. (Incorporated by reference
from Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.26 Form of Profit Sharing Plan for Investment Management Firms. (Incorporated by
reference from Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)
10.27 PFAMCo Loss Reimbursement Agreement. (Incorporated by reference from Thomson
Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.28 Blairlogie Loss Reimbursement and Recapture Agreement. (Incorporated by
reference from Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)
10.29 Thomson Advisory Group L.P. 1993 Unit Option Plan (as amended through April 20,
1993). (Incorporated by reference to Exhibit 10.65 of Thomson Advisory Group
L.P.'s Report on Form 10-Q for the fiscal quarter ended March 31, 1993)
10.30 Amendment to the Thomson Advisory Group L.P. 1993 Unit Option Plan.
(Incorporated by reference to Exhibit 10.10(B) of PIMCO Advisors' Report on
Form 10-K for the fiscal year ended December 31, 1995)
</TABLE>
II-3
<PAGE> 150
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------ -------------------------------------------------------------------------------
<S> <C>
10.31 Award of Options dated March 10, 1993 to Irwin F. Smith. (Incorporated by
reference to Exhibit 10.68 of Thomson Advisory Group L.P.'s Report on Form 10-K
for the fiscal year ended December 31, 1992)
10.32 Smith Option Amendment Agreement. (Incorporated by reference from Thomson
Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.33 Form of Class I Option Amendment Agreement. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.34 Form of Class II Option Amendment Agreement. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.35 Form of PIMCO Advisors L.P. 1994 Class B LP Unit Option Plan. (Incorporated by
reference to Exhibit 2.12 of Thomson Advisory Group L.P.'s Registration
Statement No. 33-84914 on Form S-4)
10.36 Form of Option Agreement. (Incorporated by reference to Exhibit 2.13 of Thomson
Advisory Group L.P.'s Registration Statement No. 33-84914 on Form S-4)
10.37 PIMCO Advisors L.P. Restricted Unit Plan. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)
10.38 Thomson Advisory Group 401(k) Savings and Investment Plan. (Incorporated by
reference to Exhibit 10.10 of Thomson Advisory Group L.P.'s Report on Form 10-K
for the fiscal year ended December 31, 1991)
10.39 First Amendment to the Thomson Advisory Group 401(k) Savings and Investment
Plan. (Incorporated by reference to Exhibit 10.10(b) of Thomson Advisory Group
L.P.'s Report on Form 10-K for the fiscal year ended December 31, 1993)
10.40 Thomson Advisory Group 401(k) Savings and Investment Plan Submitter Amendment.
(Incorporated by reference to Exhibit 10.10(c) of Thomson Advisory Group L.P.'s
Report on Form10-K for the fiscal year ended December 31, 1993)
10.41 Consolidation Transaction Amendment. (Incorporated by reference to Exhibit
10.18(D) of PIMCO Advisors' Report on Form 10-K for the fiscal year ended
December 31, 1994)
10.42 Third Amendment to the Thomson Advisory Group 401(k) Savings and Investment
Plan. (Incorporated by reference to Exhibit 10.18(E) of PIMCO Advisors' Report
on Form 10-K for the fiscal year ended December 31, 1994)
10.43 Fourth Amendment to the PIMCO Advisors L.P. 401(k) Savings and Investment Plan.
(Incorporated by reference to Exhibit 10.18(F) of PIMCO Advisors' Report on
Form 10-K for the fiscal year ended December 31, 1994)
10.44 Form of Indemnification Agreement executed by certain officers of the
Registrant and certain directors of Thomson McKinnon Asset Management Inc.
(Incorporated by reference to Exhibit 10.21 of Thomas McKinnon Asset Management
L.P.'s Report No. 33-17227 on Form 10-Q for the fiscal quarter ended June 30,
1990)
10.45 Form of Indemnification Agreement executed by certain directors of Thomson
Advisory Group, Inc. (Incorporated by reference to Exhibit 10.22 of Thomson
Advisory Group L.P.'s Report No, 33-17227 on Form 10-Q for the quarter ended
September 30, 1990)
10.46 Form of Amendment No. 1 to Indemnification Agreement. (Incorporated by
reference to Exhibit 10.46 of Thomson Advisory Group L.P.'s Report No. 33-17227
on Form 10-Q for the fiscal quarter ended March 31, 1991)
10.47 The 1996 Unit Incentive Plan of PIMCO Advisors L.P. (Incorporated by reference
to Exhibit 10.22 of PIMCO Advisors Report on Form 10-K for the fiscal year
ended December 31, 1996)
</TABLE>
II-4
<PAGE> 151
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------ -------------------------------------------------------------------------------
<S> <C>
10.48 Credit Agreement dated as of April 12, 1996 between PIMCO Advisors L.P. as
borrower and Citicorp USA, Inc. as initial lender and agent. (Incorporated by
reference to Exhibit 10.23 of PIMCO Advisors Report on Form 10-Q for the fiscal
quarter ended March 31, 1996)
10.49 PIMCO Advisors L.P. Executive Deferred Compensation Plan. (Incorporated by
reference to Exhibit 10.24 of PIMCO Advisors Report on Form 10-K for the fiscal
ended December 31, 1996)
10.50 Employment Agreement: David B. Breed. (Incorporated by reference to Exhibit
10.25 of PIMCO Advisors Report on Form 10-K for the fiscal year ended December
31, 1996)
10.51 Employment Agreement: William H. Gross. (Incorporated by reference to Exhibit
10.26 of PIMCO Advisors Report on Form 10-K for the fiscal year ended December
31, 1996)
10.52 Employment Agreement: John L. Hague. (Incorporated by reference to Exhibit
10.27 of PIMCO Advisors Report on Form 10-K for the fiscal year ended December
31, 1996)
10.53 Employment Agreement: Brent R. Harris. (Incorporated by reference to Exhibit
10.28 of PIMCO Advisors Report on Form 10-K for the fiscal year ended December
31, 1996)
10.54 Employment Agreement: James F. Muzzy. (Incorporated by reference to Exhibit
10.29 of PIMCO Advisors Report on Form 10-K for the fiscal year ended December
31, 1996)
10.55 Employment Agreement: Daniel S. Pickett. (Incorporated by reference to Exhibit
10.30 of PIMCO Advisors Report on Form 10-K for the fiscal year ended December
31, 1996)
10.56 Employment Agreement: William F. Podlich, III. (Incorporated by reference to
Exhibit 10.31 of PIMCO Advisors Report on Form 10-K for the fiscal year ended
December 31, 1996)
10.57 Employment Agreement: William S. Thompson, Jr. (Incorporated by reference to
Exhibit 10.32 of PIMCO Advisors Report on Form 10-K for the fiscal year ended
December 31, 1996)
10.58 Employment Agreement: Benjamin L. Trosky. (Incorporated by reference to Exhibit
10.33 of PIMCO Advisors Report on Form 10-K for the fiscal year ended December
31, 1996)
10.59 Agreement and Plan of Merger dated November 4, 1997 (Opgroup Transaction)
(Incorporated by reference to Exhibit 10.1 of PIMCO Advisors Report on Form
8-K/A dated November 4, 1997)
10.60 Put Right dated November 4, 1997 (Incorporated by reference to Exhibit 10.2 of
PIMCO Advisors Report on Form 8-K/A dated November 4, 1997)
10.61 Exchange Right dated November 4, 1997 (Incorporated by reference to Exhibit
10.3 of PIMCO Advisors Report on Form 8-K/A dated November 4, 1997)
10.62 Note Agreement dated November 4, 1997 (Incorporated by reference to Exhibit
10.4 of PIMCO Advisors Report on Form 8-K/A dated November 4, 1997)
10.63 Contribution Agreement dated November 4, 1997 (Incorporated by reference to
Exhibit 10.5 of PIMCO Advisors Report on Form 8-K/A dated November 4, 1997)
10.64 Certificate of Long Term Indemnity Indebtedness dated November 4, 1997
(Incorporated by reference to Exhibit 10.6 of PIMCO Advisors Report on Form
8-K/A dated November 4, 1997)
10.65 Amended and Restated Release and Indemnity Agreement dated November 4, 1997
10.66 Amended and Restated Tax Indemnity Agreement dated November 4, 1997
10.67 Registration Rights Agreement dated November 4, 1997 (Incorporated by reference
to Exhibit 10.7 of PIMCO Advisors Report on Form 8-K/A dated November 4, 1997)
10.68 Agreement and Plan of Merger dated November 4, 1997 (Oppenheimer Capital
Merger)
10.69 First Amendment to Agreement and Plan of Merger dated as of November 4, 1997
(Oppenheimer Capital Merger)
10.70 Amended and Restated Unit Purchase Agreement dated November 4, 1997
</TABLE>
II-5
<PAGE> 152
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------ -------------------------------------------------------------------------------
<S> <C>
10.71 Form of Restructuring Contribution and Issuance Agreement
11.1 Statement re computation of per unit earnings
23.1 Consent of Richards, Layton & Finger (included as part of Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Price Waterhouse LLP
23.4 Consent of Deloitte & Touche LLP
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
</TABLE>
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Commission Exchange are not required under the
related instructions or are inapplicable and therefore have been omitted.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Partnership pursuant to the foregoing provisions, or otherwise, the Partnership
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Partnership of expenses
incurred or paid by a director, officer or controlling person of the Partnership
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Partnership will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act, and will be governed
by the final adjudication of such issue.
(b) THE UNDERSIGNED REGISTRANT HEREBY UNDERTAKES THAT:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Partnership pursuant to Rule 424(b)(1) or
(4) and 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 153
SIGNATURES
Pursuant to the requirements of the Securities Act, the Partnership has
duly caused this Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
New York on the 10th day of December, 1997.
OPPENHEIMER CAPITAL, L.P.
*
--------------------------------------
William D. Cvengros
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------------
<S> <C> <C>
* Board Member, December 10, 1997
- ---------------------------------------- Chief Executive Officer
William D. Cvengros (Principal Executive Officer)
/s/ ROBERT M. FITZGERALD Board Member, December 10, 1997
- ---------------------------------------- Senior Vice President,
Robert M. Fitzgerald Chief Financial Officer
(Principal Financial and
Accounting Officer)
* Board Member, December 10, 1997
- ---------------------------------------- Executive Vice President
Kenneth M. Poovey
*By: /s/ ROBERT M. FITZGERALD December 10, 1997
- ----------------------------------------
Robert M. Fitzgerald
</TABLE>
II-7
<PAGE> 154
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------ --------------------------------------------------------------------- ------------
<S> <C> <C>
3.1 Amended and Restated Agreement of Limited Partnership of Oppenheimer
Capital, L.P.........................................................
3.1.1 Amendment to Amended and Restated Agreement of Limited Partnership of
Oppenheimer Capital, L.P. dated November 4, 1997.....................
3.1.2 Assignment of General Partner Interest and Amendment to Amended and
Restated Agreement of Limited Partnership of Oppenheimer Capital,
L.P. dated November 4, 1997..........................................
3.1.3 Assignment of General Partner Interest and Amendment to Amended and
Restated Agreement of Limited Partnership of Oppenheimer Capital,
L.P. dated November 4, 1997..........................................
3.1.4 Amendment to Amended and Restated Agreement of Limited Partnership
Agreement of Oppenheimer Capital, L.P. dated November 4, 1997........
3.1.5 Amendment to Amended and Restated Limited Partnership Agreement of
Oppenheimer Capital, L.P. dated as of December 1, 1997...............
3.1.6 Amendment to Amended and Restated Limited Partnership Agreement of
Oppenheimer Capital, L.P. dated as of December 1, 1997...............
4.1 Form certificate of Limited Partnership Units (Incorporated by
reference to Exhibit 3.2 of the Partnership's Registration Statement
Number 33-3954 on Form S-3)..........................................
5.1 Opinion and consent of Richards, Layton & Finger regarding the
validity of the units being registered...............................
10.1 Promissory Note Issued by Oppenheimer Equities, Inc. (Incorporated by
reference to Exhibit 10.1 of the Partnership's Registration Statement
No. 33-39354 on Form S-3)............................................
10.2 Form of lease with respect to premises at Oppenheimer Tower.
(Incorporated by reference from the Partnership's Registration
Statement No. 33-39354 on Form S-3)..................................
10.3 Lease with respect to premises at World Financial Center, Tower B,
New York. (Incorporated by reference from the Partnership's Annual
Report on Form 10-K for the fiscal year ended April 30, 1993)........
10.4 Amended and Restated Oppenheimer Past Service Benefit Plan.
(Incorporated by reference from the Partnership's Registration
Statement No. 33-39354 on Form S-3)..................................
10.5 First Amendment to the Oppenheimer Past Service Benefit Plan.
(Incorporated by reference from the Partnership's Registration
Statement No. 33-39354 on Form S-3)..................................
10.6.1 Executive Deferred Compensation Plan (Incorporated by reference to
Exhibit 10.24 of PIMCO Advisors Annual Report on Form 10-K for the
fiscal year ended December 31, 1996).................................
10.6.2 First Amendment to the PIMCO Advisors L.P. Executive Deferred
Compensation Plan....................................................
10.6.3 Second Amendment to the PIMCO Advisors L.P. Executive Deferred
Compensation Plan....................................................
</TABLE>
<PAGE> 155
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------ --------------------------------------------------------------------- ------------
<S> <C> <C>
10.7 Restricted Unit Plan. (Incorporated by reference from the
Partnership's Registration Statement No. 33-35584 on Form S-8).......
10.8 Restricted Option Plan. (Incorporated by reference from the
Partnership's Registration Statement No. 33-35584 on Form S-8).......
10.9 Lease with respect to premises at 33 Maiden Lane, New York.
(Incorporated by reference to Exhibit 10.9 of the Partnership's
Report on Form 10-K for the fiscal year ended April 30, 1994)........
10.10 Acquisition Agreement dated August 17, 1995 among Oppenheimer
Capital, Quest for Value Advisors, Quest for Value Distributors and
Oppenheimer Management Corporation. (Incorporated by reference to
Exhibit 10.1 of the Partnership's Form 10-Q for the fiscal quarter
ended October 31, 1995)..............................................
10.11 Operating Agreement between PIMCO Advisors and Oppenheimer Capital,
L.P. dated November 30, 1997.........................................
10.12 Form of 1997 Unit Incentive Plan.....................................
10.13 Amended and Restated Partnership Agreement of Oppenheimer Capital....
10.14 Amendment to Amended and Restated Partnership Agreement of
Oppenheimer Capital, dated November 4, 1997..........................
10.15 Assignment of General Partner Interest and Amendment to Amended and
Restated Partnership Agreement of Oppenheimer Capital, dated November
4, 1997..............................................................
10.16 Amendment to Amended and Restated Partnership Agreement of
Oppenheimer Capital, dated November 4, 1997..........................
10.17 Amendment to Amended and Restated Partnership Agreement of
Oppenheimer Capital, dated as of December 1, 1997....................
10.18 Amended and Restated Agreement of Limited Partnership of PIMCO
Advisors L.P. dated October 31, 1997.................................
10.19 Assignment of General Partner Interest and Amendment to Amended and
Restated Agreement of Limited Partnership of PIMCO Advisors L.P.
dated November 30, 1997..............................................
10.20 Cvengros Employment Agreement. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)................................................................
10.21 Smith Employment Agreement. (Incorporated by reference from Thomson
Advisory Group L.P.'s Report on Form 8-K dated July 11, 1994)........
10.22 Chiboucas Employment Agreement. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)................................................................
10.23 Form of Manager Employer Agreement. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)................................................................
10.24 Profit Sharing Plan for Pacific Investment Management Company.
(Incorporated by reference to Exhibit 10.5 of PIMCO Advisors' Report
on Form 10-K for the fiscal year ended December 31, 1994)............
10.25 Profit Sharing Plan for Columbus Circle Investors. (Incorporated by
reference from Thomson Advisory Group L.P.'s Report on Form 8-K dated
July 11, 1994).......................................................
</TABLE>
<PAGE> 156
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------ --------------------------------------------------------------------- ------------
<S> <C> <C>
10.26 Form of Profit Sharing Plan for Investment Management Firms.
(Incorporated by reference from Thomson Advisory Group L.P.'s Report
on Form 8-K dated July 11, 1994).....................................
10.27 PFAMCo Loss Reimbursement Agreement. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)................................................................
10.28 Blairlogie Loss Reimbursement and Recapture Agreement. (Incorporated
by reference from Thomson Advisory Group L.P.'s Report on Form 8-K
dated July 11, 1994).................................................
10.29 Thomson Advisory Group L.P. 1993 Unit Option Plan (as amended through
April 20, 1993). (Incorporated by reference to Exhibit 10.65 of
Thomson Advisory Group L.P.'s Report on Form 10-Q for the fiscal
quarter ended March 31, 1993)........................................
10.30 Amendment to the Thomson Advisory Group L.P. 1993 Unit Option Plan.
(Incorporated by reference to Exhibit 10.10(B) of PIMCO Advisors'
Report on Form 10-K for the fiscal year ended December 31, 1995).....
10.31 Award of Options dated March 10, 1993 to Irwin F. Smith.
(Incorporated by reference to Exhibit 10.68 of Thomson Advisory Group
L.P.'s Report on Form 10-K for the fiscal year ended December 31,
1992)................................................................
10.32 Smith Option Amendment Agreement. (Incorporated by reference from
Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)................................................................
10.33 Form of Class I Option Amendment Agreement. (Incorporated by
reference from Thomson Advisory Group L.P.'s Report on Form 8-K dated
July 11, 1994).......................................................
10.34 Form of Class II Option Amendment Agreement. (Incorporated by
reference from Thomson Advisory Group L.P.'s Report on Form 8-K dated
July 11, 1994).......................................................
10.35 Form of PIMCO Advisors L.P. 1994 Class B LP Unit Option Plan.
(Incorporated by reference to Exhibit 2.12 of Thomson Advisory Group
L.P.'s Registration Statement No. 33-84914 on Form S-4)..............
10.36 Form of Option Agreement. (Incorporated by reference to Exhibit 2.13
of Thomson Advisory Group L.P.'s Registration Statement No. 33-84914
on Form S-4).........................................................
10.37 PIMCO Advisors L.P. Restricted Unit Plan. (Incorporated by reference
from Thomson Advisory Group L.P.'s Report on Form 8-K dated July 11,
1994)................................................................
10.38 Thomson Advisory Group 401(k) Savings and Investment Plan.
(Incorporated by reference to Exhibit 10.10 of Thomson Advisory Group
L.P.'s Report on Form 10-K for the fiscal year ended December 31,
1991)................................................................
10.39 First Amendment to the Thomson Advisory Group 401(k) Savings and
Investment Plan. (Incorporated by reference to Exhibit 10.10(b) of
Thomson Advisory Group L.P.'s Report on Form 10-K for the fiscal year
ended December 31, 1993).............................................
10.40 Thomson Advisory Group 401(k) Savings and Investment Plan Submitter
Amendment. (Incorporated by reference to Exhibit 10.10(c) of Thomson
Advisory Group L.P.'s Report on Form10-K for the fiscal year ended
December 31, 1993)...................................................
10.41 Consolidation Transaction Amendment. (Incorporated by reference to
Exhibit 10.18(D) of PIMCO Advisors' Report on Form 10-K for the
fiscal year ended December 31, 1994).................................
</TABLE>
<PAGE> 157
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------ --------------------------------------------------------------------- ------------
<S> <C> <C>
10.42 Third Amendment to the Thomson Advisory Group 401(k) Savings and
Investment Plan. (Incorporated by reference to Exhibit 10.18(E) of
PIMCO Advisors' Report on Form 10-K for the fiscal year ended
December 31, 1994)...................................................
10.43 Fourth Amendment to the PIMCO Advisors L.P. 401(k) Savings and
Investment Plan. (Incorporated by reference to Exhibit 10.18(F) of
PIMCO Advisors' Report on Form 10-K for the fiscal year ended
December 31, 1994)...................................................
10.44 Form of Indemnification Agreement executed by certain officers of the
Registrant and certain directors of Thomson McKinnon Asset Management
Inc. (Incorporated by reference to Exhibit 10.21 of Thomas McKinnon
Asset Management L.P.'s Report No. 33-17227 on Form 10-Q for the
fiscal quarter ended June 30, 1990)..................................
10.45 Form of Indemnification Agreement executed by certain directors of
Thomson Advisory Group, Inc. (Incorporated by reference to Exhibit
10.22 of Thomson Advisory Group L.P.'s Report No, 33-17227 on Form
10-Q for the quarter ended September 30, 1990).......................
10.46 Form of Amendment No. 1 to Indemnification Agreement. (Incorporated
by reference to Exhibit 10.46 of Thomson Advisory Group L.P.'s Report
No. 33-17227 on Form 10-Q for the fiscal quarter ended March 31,
1991)................................................................
10.47 The 1996 Unit Incentive Plan of PIMCO Advisors L.P. (Incorporated by
reference to Exhibit 10.22 of PIMCO Advisors Report on Form 10-K for
the fiscal year ended December 31, 1996).............................
10.48 Credit Agreement dated as of April 12, 1996 between PIMCO Advisors
L.P. as borrower and Citicorp USA, Inc. as initial lender and agent.
(Incorporated by reference to Exhibit 10.23 of PIMCO Advisors Report
on Form 10-Q for the fiscal quarter ended March 31, 1996)............
10.49 PIMCO Advisors L.P. Executive Deferred Compensation Plan.
(Incorporated by reference to Exhibit 10.24 of PIMCO Advisors Report
on Form 10-K for the fiscal ended December 31, 1996).................
10.50 Employment Agreement: David B. Breed. (Incorporated by reference to
Exhibit 10.25 of PIMCO Advisors Report on Form 10-K for the fiscal
year ended December 31, 1996)........................................
10.51 Employment Agreement: William H. Gross. (Incorporated by reference to
Exhibit 10.26 of PIMCO Advisors Report on Form 10-K for the fiscal
year ended December 31, 1996)........................................
10.52 Employment Agreement: John L. Hague. (Incorporated by reference to
Exhibit 10.27 of PIMCO Advisors Report on Form 10-K for the fiscal
year ended December 31, 1996)........................................
10.53 Employment Agreement: Brent R. Harris. (Incorporated by reference to
Exhibit 10.28 of PIMCO Advisors Report on Form 10-K for the fiscal
year ended December 31, 1996)........................................
10.54 Employment Agreement: James F. Muzzy. (Incorporated by reference to
Exhibit 10.29 of PIMCO Advisors Report on Form 10-K for the fiscal
year ended December 31, 1996)........................................
10.55 Employment Agreement: Daniel S. Pickett. (Incorporated by reference
to Exhibit 10.30 of PIMCO Advisors Report on Form 10-K for the fiscal
year ended December 31, 1996)........................................
</TABLE>
<PAGE> 158
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------ --------------------------------------------------------------------- ------------
<S> <C> <C>
10.56 Employment Agreement: William F. Podlich, III. (Incorporated by
reference to Exhibit 10.31 of PIMCO Advisors Report on Form 10-K for
the fiscal year ended December 31, 1996).............................
10.57 Employment Agreement: William S. Thompson, Jr. (Incorporated by
reference to Exhibit 10.32 of PIMCO Advisors Report on Form 10-K for
the fiscal year ended December 31, 1996).............................
10.58 Employment Agreement: Benjamin L. Trosky. (Incorporated by reference
to Exhibit 10.33 of PIMCO Advisors Report on Form 10-K for the fiscal
year ended December 31, 1996)........................................
10.59 Agreement and Plan of Merger dated November 4, 1997 (Opgroup
Transaction) (Incorporated by reference to Exhibit 10.1 of PIMCO
Advisors Report on Form 8-K/A dated November 4, 1997)................
10.60 Put Right dated November 4, 1997 (Incorporated by reference to
Exhibit 10.2 of PIMCO Advisors Report on Form 8-K/A dated November 4,
1997)................................................................
10.61 Exchange Right dated November 4, 1997 (Incorporated by reference to
Exhibit 10.3 of PIMCO Advisors Report on Form 8-K/A dated November 4,
1997)................................................................
10.62 Note Agreement dated November 4, 1997 (Incorporated by reference to
Exhibit 10.4 of PIMCO Advisors Report on Form 8-K/A dated November 4,
1997)................................................................
10.63 Contribution Agreement dated November 4, 1997 (Incorporated by
reference to Exhibit 10.5 of PIMCO Advisors Report on Form 8-K/A
dated November 4, 1997)..............................................
10.64 Certificate of Long Term Indemnity Indebtedness dated November 4,
1997 (Incorporated by reference to Exhibit 10.6 of PIMCO Advisors
Report on Form 8-K/A dated November 4, 1997).........................
10.65 Amended and Restated Release and Indemnity Agreement dated November
3, 1997..............................................................
10.66 Amended and Restated Tax Indemnity Agreement dated November 3,
1997.................................................................
10.67 Registration Rights Agreement dated November 4, 1997 (Incorporated by
reference to Exhibit 10.7 of PIMCO Advisors Report on Form 8-K/A
dated November 4, 1997)..............................................
10.68 Agreement and Plan of Merger dated November 4, 1997 (Oppenheimer
Capital Merger)......................................................
10.69 First Amendment to Agreement and Plan of Merger dated as of November
4, 1997 (Oppenheimer Capital Merger).................................
10.70 Amended and Restated Unit Purchase Agreement dated November 4,
1997.................................................................
10.71 Form of Restructuring Contribution and Issuance Agreement............
11.1 Statement re computation of per unit earnings........................
23.1 Consent of Richards, Layton & Finger (included as part of Exhibit
5.1).................................................................
23.2 Consent of Price Waterhouse LLP......................................
23.3 Consent of Price Waterhouse LLP......................................
23.4 Consent of Deloitte & Touche LLP.....................................
27.1 Financial Data Schedule..............................................
99.1 Form of Letter of Transmittal........................................
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
OF
OPPENHEIMER CAPITAL, L.P.
Dated as of March 14, 1991
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
<S> <C>
ARTICLE I DEFINITIONS .................................................. 2
ARTICLE II ORGANIZATION ................................................. 5
Section 2.01. Continuation of Partnership ............................ 5
Section 2.02. Name ................................................... 5
Section 2.03. Place of Business ...................................... 6
Section 2.04. Registered Office and Registered Agent ................. 6
ARTICLE III PURPOSES ..................................................... 6
Section 3.01. Purposes and Business .................................. 6
Section 3.02. Powers ................................................. 7
Section 3.03. Changes in the Tax Laws ................................ 7
ARTICLE IV TERM OF THE PARTNERSHIP ...................................... 9
ARTICLE V CAPITAL ACCOUNTS ............................................. 9
Section 5.01. Capital Contributions .................................. 9
Section 5.02. Capital Accounts ...................................... 11
Section 5.03. Negative Capital Accounts ............................. 11
Section 5.04. General Partner Not Personally Liable
for Return of Capital ................................. 12
ARTICLE VI PROFITS AND LOSSES; DISTRIBUTIONS ........................... 12
Section 6.01. Fiscal Year; Fiscal Period ............................ 12
Section 6.02. Determination of Profits and Losses ................... 12
Section 6.03. Allocation of Income and Loss ......................... 13
Section 6.04. Allocation of Income and Loss for Income Tax Purposes.. 13
Section 6.05. Amendment of Allocation Provisions .................... 14
Section 6.06. Liabilities and Reserve ............................... 14
Section 6.07. Distributions ......................................... 14
ARTICLE VII MANAGEMENT ................................................... 16
Section 7.01. Management and Control of Partnership ................. 16
Section 7.02. Powers of General Partner ............................. 16
Section 7.03. Title to Assets of the Partnership .................... 19
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Section 7.04. Other Business Activities of Partners ............... 19
Section 7.05. Transactions with General Partner or Affiliates...... 19
Section 7.06. General Partner's Representation .................... 19
Section 7.07. Liability of General Partner to Partnership
and Limited Partners ................................ 20
Section 7.08. Indemnification of General Partner
and Affiliates ...................................... 20
Section 7.09. Other Matters Concerning General Partner ............ 23
Section 7.10. Purchase or Sale of Units ........................... 23
Section 7.11. Resolution of Conflicts of Interest ................. 23
ARTICLE VIII LIMITED PARTNERS ......................................... 25
Section 8.01. Liability of Limited Partners ....................... 25
Section 8.02. No Management by Limited Partners ................... 25
ARTICLE IX ISSUANCE OF ADDITIONAL INTERESTS IN THE PARTNERSHIP ...... 26
Section 9.01. Additional Issuances of Securities; Additional
Issuance of Units .................................. 26
Section 9.02. Splits and Combinations ............................ 28
ARTICLE X COMPENSATION AND EXPENSES ............................... 29
Section 10.01. Compensation to General Partner .................... 29
Section 10.02. Direct and Indirect Expenses; Expenses
in Connection with Organization of Partnership
and Offering of Units .............................. 29
ARTICLE XI FINANCIAL MATTERS ....................................... 30
Section 11.01. Books and Records .................................. 30
Section 11.02. Financial Statements and Information ............... 31
Section 11.03. Accounting Decisions ............................... 32
Section 11.04. Place Maintained ................................... 32
Section 11.05. Preparation of Tax Returns ......................... 32
Section 11.06. Tax Elections ...................................... 32
Section 11.07. Tax Controversies .................................. 33
ARTICLE XII ISSUANCE OF UNIT CERTIFICATES ........................... 33
Section 12.01. Issuance of Unit Certificates ...................... 33
Section 12.02. Registration of Transfer and Exchange .............. 34
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Section 12.03. Mutilated, Lost, Stolen or Destroyed Certificates......... 34
Section 12.04. Registered Holder......................................... 35
ARTICLE XIII TRANSFER OF GENERAL PARTNER'S INTEREST
AND UNITS; ADMISSION OF NEW PARTNERS...................... 36
Section 13.01. Transfer of General Partner's Interest.................... 36
Section 13.02. Admission of an Additional or Successor General Partner... 37
Section 13.03. Transfer of Units......................................... 38
Section 13.04. Allocations and Distributions Subsequent to Assignment.... 39
Section 13.05. Admission of Substituted Limited Partners; Assignees...... 40
Section 13.06. Admission of Additional Limited Partners.................. 40
ARTICLE XIV WITHDRAWAL AND REMOVAL.................................... 41
Section 14.01. Withdrawal or Removal of General Partner.................. 41
Section 14.02. Interest Upon Withdrawal or Removal....................... 42
Section 14.03. Limitations on Withdrawal or Removal of General
Partner and Election of Successor General Partner......... 43
Section 14.04. Amendment of Agreement and Certificate of Limited
Partnership............................................... 43
ARTICLE XV DISSOLUTION AND LIQUIDATION............................... 43
Section 15.01. No Dissolution............................................ 43
Section 15.02. Events Causing Dissolution................................ 43
Section 15.03. Right to Continue Business of Partnership................. 44
Section 15.04. Dissolution............................................... 45
Section 15.05. Liquidation............................................... 46
Section 15.06. Termination of Partnership................................ 47
ARTICLE XVI AMENDMENTS AND MEETINGS................................... 48
Section 16.01. Amendments To Be Adopted Solely by the General Partner.... 48
Section 16.02. Amendment Procedures...................................... 49
Section 16.03. Amendment Restrictions.................................... 50
Section 16.04. Meetings.................................................. 50
Section 16.05. Notice of a Meeting....................................... 51
Section 16.06. Record Date............................................... 51
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Section 16.07. Adjournment .......................................... 51
Section 16.08. Waiver of Notice; Approval of Meeting;
Approval of Minutes .................................. 52
Section 16.09. Quorum ............................................... 52
Section 16.10. Conduct of Meeting ................................... 52
Section 16.11. Voting and Other Rights of Limited Partners .......... 53
Section 16.12. Action Without a Meeting ............................. 53
ARTICLE XVII POWER OF ATTORNEY .......................................... 54
ARTICLE XVIII RIGHT TO ACQUIRE UNITS ..................................... 56
ARTICLE XIX MISCELLANEOUS PROVISIONS ................................... 57
Section 19.01. Additional Actions and Documents ..................... 57
Section 19.02. Notices .............................................. 58
Section 19.03. Severability ......................................... 59
Section 19.04. Survival ............................................. 59
Section 19.05. Waivers .............................................. 59
Section 19.06. Exercise of Rights ................................... 59
Section 19.07. Binding Effect ....................................... 60
Section 19.08. Consent of Limited Partners .......................... 60
Section 19.09. Entire Agreement ..................................... 60
Section 19.10. Pronouns ............................................. 60
Section 19.11. Headings ............................................. 60
Section 19.12. Governing Law ........................................ 60
Section 19.13. Execution in Counterparts ............................ 60
ARTICLE XX EXECUTION .................................................. 61
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
OPPENHEIMER CAPITAL, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF OPPENHEIMER
CAPITAL, L.P. (the "Partnership") dated as of March 14, 1991, by and among
Oppenheimer Financial Corp., a Delaware corporation ("Opfin"), as General
Partner, and all other Persons who are or shall in the future become Limited
Partners in accordance with the provisions hereof, and who are listed as such
on the books and records of the Partnership.
W I T N E S S E T H :
WHEREAS, Oppenheimer Capital Corp., as the organizational general partner
(the "Organizational General Partner") and Roger W. Einiger, as the
organizational limited partner (the "Organizational Limited Partner")
heretofore formed the Partnership by filing a Certificate of Limited
Partnership with the office of the Secretary of State of the State of Delaware
on May 15, 1987;
WHEREAS, the Organizational General Partner withdrew as general partner and
Opfin was substituted therefor pursuant to an Amended and Restated Certificate
of Limited Partnership filed with the office of the Secretary of State of the
State of Delaware on June 30, 1987;
WHEREAS, the Partners further amended and restated in its entirety the
agreement of limited partnership on July 9, 1987, at which time the
Organizational Limited Partner withdrew as a Limited Partner; and
WHEREAS, Opfin, as the General Partner, has determined, pursuant to
Sections 16.01(d)(i) and 16.01(d)(ii) of the agreement of limited partnership,
that it is in the best interests of the Partnership to amend further the
agreement of limited partnership, which amendments may be made by Opfin, as the
General Partner, without the approval of any other partner of the Partnership;
and
WHEREAS, the General Partner has determined that it is in the best
interests of the Partnership to restate further
<PAGE> 7
the agreement of limited partnership to incorporate such amendments;
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined in
this Article I shall, for the purposes of this Agreement, have the meanings
herein specified.
Affiliate: Any Person (as hereinafter defined) that directly or indirectly
controls, is controlled by, or is under common control with, the Person in
question. As used in this definition, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
Agreement: This Amended and Restated Agreement of Limited Partnership, as
it may be further amended, supplemented or restated from time to time.
Assignee: Any Person to whom one or more Units have been transferred in a
manner permitted under this Agreement and who has delivered a Transfer
Application as required by this Agreement but who has not become a Substituted
Limited Partner.
Certificate: A non-negotiable certificate used by the Partnership
evidencing ownership of one or more Units, substantially in the form of Annex 1
to this Agreement.
Certificate Of Limited Partnership: The Certificate of Limited Partnership
and any and all amendments thereto and restatements thereof filed on behalf of
the Partnership with the office of the Secretary of State of the State of
Delaware, as required under the Delaware RULPA.
Code: The Internal Revenue Code of 1986, as amended to date and hereafter
amended, or any successor
2
<PAGE> 8
statute, and the applicable Treasury Regulations thereunder. Any reference
herein to a specific provision of the Code shall be deemed to include a
reference to the corresponding provision of any successor statute.
Delaware RULPA: The Delaware Revised Uniform Limited Partnership Act, 6
Del. C. Section 17-101, et seq., as amended to date and hereafter amended, or
any successor statute. Any reference herein to a specific provision of the
Delaware RULPA shall be deemed to include a reference to the corresponding
provision of any successor statute.
General Partner: Opfin, any successor to its interest as general
partner in the Partnership pursuant to Section 13.02 hereof, and any additional
general partner admitted to the Partnership pursuant to Section 13.02 hereof.
Limited Partners: The Persons shown as limited partners of the
Partnership on the books and records of the Partnership.
Majority Vote: The written approval of, or an affirmative vote in
accordance with Sections 16.11 and 16.12 hereof by, holders of more than fifty
percent (50%) of the Outstanding Units.
NASDAQ: The National Association of Securities Dealers Automated
Quotation System.
National Securities Exchange: An exchange registered with the Securities
and Exchange Commission under Section 6(a) of the Securities Exchange Act of
1934, as amended.
OGI: Oppenheimer Group, Inc., a Delaware corporation.
Operating Partnership: Oppenheimer Capital, a Delaware general
partnership.
Outstanding: The number of Units shown on the books and records of the
Partnership to be outstanding other than Units held by the Partnership;
provided, however, that for purposes of Article XVI hereof and for the
determination of the affirmative vote required to take any action hereunder,
the number of Outstanding Units shall not include Units held by Assignees.
3
<PAGE> 9
Partner: A General Partner or a Limited Partner.
Person: Any individual, corporation, association, partnership, joint
venture, trust, estate or other entity or organization.
Purchase Price: An amount per Unit equal to 110% of the Unit Price (as
hereinafter defined); provided, however, that if the Units are not listed for
trading on a National Securities Exchange or quoted by NASDAQ, then it shall
equal the fair market value of Units on the date such public announcement is
first made, as determined by the General Partner using any reasonable method of
valuation.
Record Date: The date established by the General Partner as the record date
for purposes of any entitlement hereunder.
Record Holders: The Limited Partner or Assignee in whose name the Units are
registered on the books of a Transfer Agent and, as applied to the General
Partner's interest in the Partnership, the owner thereof, in each case as of the
close of business on any Record Date.
Substituted Limited Partner: A Person who is admitted to the Partnership as
a Limited Partner pursuant to this Agreement in place of, and with all the
rights of, a Limited Partner pursuant to Section 13.05 hereof and who is listed
as a Limited Partner on the books and records of the Partnership.
Transfer Agent: Any bank, trust company or other person appointed by the
Partnership to act as transfer agent for the Units.
Transfer Application: An application and agreement for transfer of Units in
the form described in Section 12.02 hereof.
Unit: The interest of a Limited Partner or an Assignee in the Partnership
representing such fractional part of the interests of all Limited Partners
pursuant to this Agreement as is equal to the quotient of one divided by the
number of Outstanding Units.
Unit Price: An amount per Unit, as of any date of determination, equal to
(i) if the Units are at the time traded on a National Securities Exchange, the
average of,
4
<PAGE> 10
the last reported sale price per Unit regular way or, in case no such reported
sales have taken place on any such date, the last reported bid price per Unit
regular way, on the five trading days immediately preceding the date of
determination, (ii) if such Units are at the time being traded on NASDAQ and
not on a National Securities Exchange, the average of the last sales price or,
in case no such reported sales have taken place on any such date, the average
of the closing bid prices per Unit regular way, on the five trading days
immediately preceding such date of determination, or (iii) if the Units are not
listed for trading on a National Securities Exchange or traded on NASDAQ, an
amount equal to the fair market value of a Unit as of such date of
determination, as determined by the General Partner using any reasonable method
of valuation.
ARTICLE II
ORGANIZATION
Section 2.01. Continuation of Partnership. The General Partner and the
Limited Partners hereby agree to continue, in accordance with the terms and
conditions hereof, the limited partnership formed pursuant to the provisions of
the Delaware RULPA by the filing of the Certificate of Limited Partnership. If
the laws of any jurisdiction in which the Partnership transacts business so
require, the General Partner shall file with the appropriate office in that
jurisdiction any documents necessary for the Partnership to qualify to transact
business in such jurisdiction and shall use its best efforts to file with the
appropriate office in that jurisdiction any documents necessary to establish
and maintain the Limited Partners' limited liability in such jurisdiction. The
Partners further agree and obligate themselves to execute, acknowledge and
cause to be filed for record, in the place or places and manner prescribed by
law, any amendments to the Certificate of Limited Partnership as may be
required, either by the Delaware RULPA, by the laws of a jurisdiction in which
the Partnership transacts business or by this Agreement, to reflect changes in
the information contained therein or otherwise to comply with the requirements
of law for the continuation, preservation and operation of the Partnership as a
limited partnership under the Delaware RULPA.
Section 2.02. Name. The name of the Partnership is Oppenheimer Capital,
L.P. The General Partner shall
5
<PAGE> 11
promptly execute, file and record any assumed or fictitious name certificates
required by the laws of any state in which the Partnership transacts business.
The words "Limited Partnership" shall be included in the Partnership's name
where necessary for the purposes of complying with the laws of any jurisdiction
that so requires. The General Partner in its sole discretion may change the
name of the Partnership at any time or from time to time. The Partnership's
business may be conducted under any other name or names deemed advisable by the
General Partner, including the name of the General Partner or any Affiliate
thereof.
Section 2.03. Place of Business. The principal place of business of the
Partnership shall be c/o Oppenheimer Financial Corp., Oppenheimer Tower, World
Financial Center, New York, New York 10281. The General Partner may hereafter
change the principal place of business of the Partnership to such other place
or places as the General Partner may determine from time to time in its sole
discretion. The General Partner shall give notice of any such change to the
Limited Partners in the first quarterly or annual report delivered to the
Partners after such change, unless the General Partner, in its sole discretion,
determines earlier notice is necessary to protect the interests of the Limited
Partners.
Section 2.04. Registered Office and Registered Agent. The registered
office of the Partnership in the State of Delaware is c/o The Prentice-Hall
Corporation System, Inc., 32 Loockerman Square, Suite L-100, Dover, Kent
County, Delaware 19901 and the name and address of the registered agent for
service of process on the Partnership in the State of Delaware is The
Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100,
Dover, Kent County, Delaware 19901.
ARTICLE III
PURPOSES
Section 3.01. Purposes and Business. The principal purpose and business
of the Partnership shall be to acquire an interest in the Operating
Partnership, and to engage, through the Operating Partnership, in investment
advisory services. The Partnership may also engage in all other aspects of the
financial services business, including, but not limited to, the acquisition,
development, ownership,
6
<PAGE> 12
management and distribution of investment advisory businesses and development,
management and distribution of investment companies registered under the
Investment Company Act, as amended, and other pooled investment funds and in
investment, trading and financing activities of all kinds and carry on any
business relating thereto or arising therefrom, including entering into any
partnership, joint venture or other similar arrangement to engage in any of the
foregoing or the ownership of interests in any entity engaged in any of the
foregoing, and anything incidental or necessary to the foregoing which may
lawfully be conducted by a limited partnership organized pursuant to the
Delaware RULPA.
Section 3.02. Powers. The Partnership shall have the power to do any and
all acts necessary, appropriate, proper, advisable, incidental or convenient to
or for the furtherance of the purposes and business described herein and for
the protection and benefit of the Partnership, and shall have, without
limitation, any or all of the powers that may be exercised on behalf of the
Partnership by the General Partner pursuant to Article VII hereof.
Section 3.03. Changes in the Tax Laws.
(a) If, as a result of a change in the federal income tax laws or the
occurrence of any other event, the General Partner reasonably believes there is
a substantial risk that either the Partnership or the Operating Partnership may
be treated as an association taxable as a corporation:
(i) the General Partner, in its sole discretion, shall have the right,
but not the obligation, to cause the units to be delisted from any securities
exchange on which they may be traded and to take any other steps necessary or
desirable to eliminate the transferability of the Units so as to avoid
classification of the Partnership as an association taxable as a corporation
for federal income tax purposes;
(ii) the General Partner, in its sole discretion, shall have the
right, but not the obligation, to cause the Partnership to transfer its assets,
subject to its liabilities, to a newly formed corporation in exchange for all
of the common stock of such corporation and to distribute such common stock to
the Partners in liquidation of the Partnership;
7
<PAGE> 13
(iii) the General Partner or OGI, each in its sole discretion, shall
have the right (exercisable in accordance with subsection (b) below), but
not the obligation, to offer to exchange OGI common stock (which stock may
or may not reflect the earnings and/or value of the business conducted by
the Operating Partnership and may or may not be voting stock) for the
Partnership's interest in the Operating Partnership and to distribute such
common stock to the Partners in liquidation of the Partnership; or
(iv) if the General Partner or OGI has offered to exchange OGI common
stock for the Partnership's interest in the Operating Partnership in
accordance with the provisions of clause (a)(iii) of this Section 3.03, and
if such proposal has not received a Majority Vote at the meeting called
pursuant to subsection (b) below, then the General Partner, in its sole
discretion, shall have the right, but not the obligation, (A) to cause the
Partnership to redeem the Units for a 20% common equity interest, plus
either a preferred equity interest or debt, of a successor entity to the
Operating Partnership (which successor entity may include a corporation);
or (B) to cause the Operating Partnership to redeem that portion of the
Partnership's interest in the Operating Partnership that exceeds 20% in
exchange for either a preferred equity interest or debt of the Operating
Partnership or a successor entity (which successor entity may include a
corporation). The General Partner may not effect the transaction
contemplated by this clause (iv) if, at the time, the General Partner and
its Affiliates collectively own less than a 50% interest in the Operating
Partnership, directly or through ownership of Units or general partnership
interests of the Partnership.
(b) If the General Partner or OGI desires to make the offer described in
subsection (a)(iii) above, the General Partner shall call a meeting in
accordance with provisions of Article XVI hereof for the purpose of submitting
such offer to a vote of the Limited Partners. The General Partner shall cause
the Partnership to prepare and distribute to the Limited Partners, along with
the notice of such meeting, a description of such offer and such other
information as the General Partner shall deem necessary to comply with
applicable law and the rules, regulations, guidelines and/or requirements of any
National
8
<PAGE> 14
Securities Exchange on which the Units are listed for trading.
(c) Any notice to the Limited Partners pursuant to subsection (b) above
shall contain, and any action allowed to be taken by the General Partner
pursuant to subsection (a)(iv) above shall not be taken without, in each case,
an opinion of a nationally recognized investment banking firm, chosen by the
General Partner in its sole discretion (but not an Affiliate of the General
Partner), that such offer or such proposed transaction, as the case may be, is
fair to the Limited Partners from a financial point of view.
(d) Notwithstanding anything to the contrary set forth in this Section
3.03, no such transaction shall take place unless the Partnership shall have
received a written opinion of independent counsel to the Partnership to the
effect that the Limited Partners would not be liable for the debts and
obligations of the entity in which the Limited Partners have a continuing
equity interest to a greater extent than they would be under the Delaware RULPA.
ARTICLE IV
TERM OF THE PARTNERSHIP
The Partnership commenced on May 15, 1987, the date upon which the
Certificate of Limited Partnership was filed with the office of the Secretary
of State of the State of Delaware, and shall continue until December 31, 2061,
unless dissolved and liquidated before such date in accordance with the
provisions of this Agreement or extended beyond December 31, 2061, pursuant to
a Majority Vote of the Limited Partners.
ARTICLE V
CAPITAL ACCOUNTS
Section 5.01. Capital Contributions.
(a) The initial capital of the Partnership was the aggregate of the
amounts contributed to the Partnership by each Partner. In the case of each
Limited Partner who acquired his Units in connection with the public
9
<PAGE> 15
offering of Units consummated on July 9, 1987 (or pursuant to the underwriter's
over-allotment option), his initial capital contribution was the proceeds to the
Partnership, net of commissions, from the initial sale of a Unit to such Limited
Partner, multiplied by the number of Units purchased by such Limited Partner. In
the case of each Limited Partner who acquired his Units in connection with the
public offering which was consummated on April 23, 1991, his initial capital
contribution shall be deemed the price at which such Units are issued to the
public multiplied by the number of Units purchased by such Limited Partner. No
Limited Partner shall be required or entitled to make any additional capital
contributions to the Partnership.
(b) The General Partner entered into a subscription agreement
pursuant to which it agreed to make a capital contribution in cash on demand in
an amount equal to 1.01% of the aggregate of the initial capital contributions
of the Limited Partners. The General Partner shall not be required to make any
capital contributions to the Partnership other than pursuant to such
subscription agreement; provided, however, that in the event that any
additional Units are issued pursuant to Section 9.01 hereof, the General
Partner shall make such capital contributions or increase its obligation to
make capital contributions pursuant to its subscription agreement as may be
necessary so that the sum of the General Partner's Capital Account and its
obligations pursuant to its subscription agreement, after the admission of such
Partners, shall not be less than one percent of the total Capital Accounts of
all Partners. The obligation of the General Partner pursuant to the
subscription agreement shall be reduced to the extent of any Capital
Contributions thereafter made by the General Partner.
(c) The initial capital contributions of each of the Partners, and
any additional capital contributions by each of them, are referred to
collectively as the "Capital Contributions."
(d) No Partner shall have the right to demand a return of all or any
part of his Capital Contributions during the term of the Partnership, and any
return of such Capital Contributions shall be made solely from the assets of
the Partnership and only in accordance with the terms of this Agreement. No
interest shall be paid on Capital Contributions.
10
<PAGE> 16
Section 5.02. Capital Accounts.
(a) A capital account shall be maintained on the books of the
Partnership for each Partner (his "Capital Account"), consisting of the amount
of his initial Capital Contribution (i) increased by the amount of any
additional Capital Contribution and his share of any Net Income (as hereinafter
defined) allocated to his Capital Account and (ii) decreased by his share of
any Net Loss (as hereinafter defined) allocated to his Capital Account and any
distributions made in respect of his Capital Account.
(b) If any additional Units are to be issued pursuant to Section 9.01
hereof or the General Partner withdraws or is removed pursuant to Section 14.01
hereof, the Capital Accounts of the Partners shall, immediately prior to such
issuance, withdrawal or removal, be adjusted upwards or downwards to reflect
the difference between the book value of the Partnership properties and the
fair market value thereof, as if such gain or loss had been recognized upon an
actual sale of such properties immediately prior to such event and allocated
pursuant to Section 6.03 hereof. In determining such gain or loss, the fair
market value of the Partnership properties, as of the date of determination,
shall equal (i) 101.01% of the product of the number of Outstanding Units, as
of the date of determination, times the price at which such additional Units
are issued or the Unit Price, as the case may be, plus (ii) the amount of any
Partnership indebtedness outstanding as of the date of determination.
(c) Upon the issuance of any Units in fulfillment of the requirements
of the Operating Partnership's Restricted Unit Plan and/or Restricted Option
Plan, the person to whom such Units are issued shall be treated, solely for
purposes of determining such person's Capital Account under this Agreement, as
having made a Capital Contribution equal to the Unit Price of such Units as of
the date of issuance.
(d) It is recognized that adjustments to Capital Accounts under
subsections (b) and (c) above may not be consistent with generally accepted
accounting principles and, therefore, may be ignored for financial statement
purposes.
Section 5.03. Negative Capital Accounts. At no time during the term of
the Partnership or upon dissolution
11
<PAGE> 17
and liquidation thereof shall a Partner with a negative balance in his Capital
Account have any obligation to the Partnership or the other Partners to
restore such negative balance, except as may be required by law or, in the case
of the General Partner, to the extent of its remaining obligation pursuant to
its subscription agreement and under Section 14.02 hereof.
Section 5.04. General Partner Not Personally Liable for Return of Capital.
Notwithstanding anything to the contrary contained herein, the General Partner
shall not be personally liable for the distribution or return of the Capital
Contributions of the Limited Partners or any portion thereof, it being
expressly agreed that any such distribution, return or payment as may be made
at any time or from time to time shall be made solely from the assets of the
Partnership.
ARTICLE VI
PROFITS AND LOSSES; DISTRIBUTIONS
Section 6.01. Fiscal Year; Fiscal Period. The fiscal year (the "Fiscal
Year") of the Partnership for Partnership accounting purposes shall be April
30. A fiscal period (a "Fiscal Period") shall end on the last day of each
calendar month.
Section 6.02. Determination of Profits and Losses.
(a) For Partnership accounting purposes and federal income tax
purposes, the Partnership shall use the accrual method of accounting.
(b) As of the close of business on the last day of each Fiscal
Period, the Partnership's Net Income and/or Net Loss shall be computed and the
Capital Accounts of each Partner shall be adjusted to reflect the allocation
provided below.
(c) "Net Income" and "Net Loss" of the Partnership for any Fiscal
Period shall be calculated in accordance with generally accepted accounting
principles, consistently applied.
12
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Section 6.03. Allocation of Income and Loss. Net Income or Net Loss of the
Partnership, for each Fiscal Period, shall be allocated as follows:
(a) to the General Partner in an amount equal to 1% thereof; and
(b) to the Limited Partners as a group in an amount equal to 99% thereof
and to each Limited Partner in the ratio that the number of Units owned by such
Limited Partner, as of the last day of such Fiscal Period, bears to the total
number of Outstanding Units as of such date.
The allocations to the General Partner and to the Limited Partners as a group,
as well as the percentage in the second sentence of Section 5.02(b) hereof,
shall be adjusted appropriately in the event that the General Partner transfers
any portion of its general partnership interest in the Operating Partnership to
the Partnership in exchange for an increased general partnership interest in
the Partnership.
Section 6.04. Allocation of Income and Loss for Income Tax Purposes.
(a) The taxable year of the Partnership shall be the calendar year. The
General Partner shall have authority to change the taxable year of the
Partnership if the General Partner, in its sole discretion, subject to approval
of the Internal Revenue Service, shall determine such change to be necessary or
appropriate to the business of the Partnership. The General Partner shall give
notice of any such change to the Limited partners in the first quarterly or
annual report delivered to the Partners after such change.
(b) The income, deductions, gains, losses and credits of the Partnership
shall be allocated for federal, state and local income tax purposes by the
General Partner among the persons who were partners during the relevant taxable
year in accordance with such partners' interests, applicable provisions of the
Code and other applicable law and administrative pronouncements (including
Sections 704(b) and (c) of the Code), taking into account the partners' Capital
Accounts for such year and any variations therein, any entry of new partners,
any distributions by the Partnership, any additional Capital Contributions and
the differences between income for tax purposes and profitability for
Partnership accounting purposes.
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Section 6.05. Amendment of Allocation Provisions. To preserve uniformity
of Units and to comply with applicable rules and regulations for the allocation
of income between a transferor and a transferee of Units, the General Partner
may, in its sole discretion, amend the provisions of this Agreement (including
the provisions of Sections 6.02, 6.03 and 6.04 hereof) as appropriate;
provided, however, that no such amendment would have a material adverse effect
on the Limited Partners and that the allocations as so amended would be more
consistent with the principles of Section 704 of the Code.
Section 6.06. Liabilities and Reserve. Liabilities shall be determined in
accordance with generally accepted accounting principles, consistently applied,
and shall include reserves for estimated expenses and, as the General Partner
may deem advisable, reserves for contingencies.
Section 6.07. Distributions.
(a) At least one time with respect to each fiscal quarter and no
later than 30 business days after the end of each fiscal quarter, the
Partnership shall distribute an amount equal to the excess of (x)(i) the cash
distribution from the Operating Partnership and (ii) interest payments received
by the Partnership with respect to such fiscal quarter on the promissory note
issued by Oppenheimer Equities, Inc., dated April 16, 1991, in the principal
amount of $32,193,000, over (y) any costs and expenses described in Section
10.02 hereof, including reserves for such costs and expenses as the General
Partner in its sole discretion deems appropriate, and such reserves for
contingencies as the General Partner may deem advisable pursuant to Section
6.06 hereof.
(b) All distributions, except upon liquidation of the Partnership,
shall be made as follows:
(i) to the General Partner in an amount
equal to 1% thereof, and
(ii) to the Limited Partners as a group in
an amount equal to 99% thereof and to each
Limited Partner in the ratio that the number
of Units owned by such Limited Partner on the
Record Date of such Distribution bears to
the total
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number of Outstanding Units on such Record Date.
The distributions to the General Partner and to the Limited Partners as a group
shall be adjusted appropriately in the event the General Partner transfers any
portion of its general partnership interest in the Operating Partnership to the
Partnership in exchange for an increased general partnership interest in the
Partnership.
(c) Distributions may be in cash or in publicly traded securities;
provided, however, that no distributions of publicly traded securities shall be
made, other than upon liquidation, without a majority vote of Limited Partners
who are not Affiliates of the General Partner. If distributions are made in
publicly traded securities, immediately prior to such distribution, the General
Partner shall determine the fair market value of such securities and adjust the
Capital Accounts of all Partners upwards or downwards to reflect the difference
between the book value and the fair market value thereof, as if such gain or
loss had been recognized upon an actual sale of such securities and allocated
pursuant to Section 6.03 hereof. Each such distribution shall reduce the Capital
Account of the distributee Partner by the fair market value thereof.
(d) So long as the Units are traded on a National Securities Exchange, the
General Partner shall announce the amount and date of any distribution to be
made with respect to the Units and the Record Date for determining the Limited
Partners to whom such distribution is to be made no less than the minimum period
required by such National Securities Exchange before such Record Date. Such
Record Date shall be the last day of the fiscal quarter in respect of which such
distribution is to be made.
(e) The General Partner may withhold taxes from any distribution to any
Partner to the extent required by the Code or any other applicable law. For
purposes of this Agreement, any taxes so withheld by the Partnership with
respect to any amount distributed by the Partnership to any Partner shall be
deemed to be a distribution or payment to such Partner, shall reduce the amount
otherwise distributable to such Partner pursuant to this Agreement and shall
reduce the Capital Account of such Partner.
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ARTICLE VII
MANAGEMENT
Section 7.01. Management and Control of Partnership. Except as otherwise
expressly provided or limited by the provisions of this Agreement, the General
Partner shall have full, exclusive and complete discretion to manage and control
the business and affairs of the Partnership, to make all decisions affecting the
business and affairs of the Partnership and to take all such actions as it deems
necessary or appropriate to accomplish the purpose of the Partnership as set
forth herein. No Limited Partner, as such, shall have any authority, right or
power to bind the Partnership, or to manage or control, or to participate in the
management or control of, the business and affairs of the Partnership in any
manner whatsoever.
Section 7.02. Powers of General Partner. Except as otherwise expressly
provided herein, the General Partner (acting on behalf of the Partnership) shall
have the right, power and authority, in the management of the business and
affairs of the Partnership, to do or cause to be done any and all acts, at the
expense of the Partnership, as the case may be, deemed by the General Partner to
be necessary or appropriate to effectuate the business, purposes and objectives
of the Partnership. The power and authority of the General Partner shall
include, without limitation, the power and authority;
(a) to acquire, own, lease, sublease, manage, hold, deal in, control or
dispose of any interests or rights in personal property or real property;
(b) to negotiate, enter into, renegotiate, extend, renew, terminate,
modify, amend, waive, execute, acknowledge or take any other action with respect
to any lease of any assets of the Partnership;
(c) to pay, collect, compromise, arbitrate or otherwise adjust or settle
any and all other claims or demands of or against the Partnership or to hold
such proceeds against the payment of contingent liabilities, known or unknown;
(d) to borrow money or to obtain credit in such amounts, at such rate of
interest and upon such other terms and conditions as the General Partner deems
appropriate,
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from banks, other lending institutions or any other Person, including the
Partners, and pursuant to indentures, loan agreements or any other type of
instrument, for any purpose of the Partnership;
(e) to make, execute, assign, acknowledge and file on behalf of the
Partnership any and all documents or instruments of any kind which the General
Partner may deem necessary or appropriate in carrying out the purposes and
business of the Partnership; and any Person dealing with the General Partner
shall not be required to determine or inquire into its authority or power to
bind the Partnership or to execute, acknowledge or deliver any and all
documents in connection therewith;
(f) to assume obligations, enter into contracts, including contracts of
guaranty or suretyship, incur liabilities, lend money and otherwise use the
credit of the Partnership, and to secure any of the obligations, contracts or
liabilities of the Partnership, by mortgage, pledge or other encumbrance of all
or any part of the property and income of the Partnership;
(g) to invest funds of the Partnership;
(h) to employ and engage suitable agents, employees, advisers, consultants
and counsel (including any custodian, investment adviser, accountant, attorney,
corporate fiduciary, bank or other reputable financial institution, or any other
agents, employees or Persons who may serve in such capacity for the General
Partner or any Affiliate of the General Partner) to carry out any activities
that the General Partner is authorized or required to carry out under this
Agreement, including, without limitation, a Person who may be engaged to
undertake some or all of the general management, property management, financial
accounting and record keeping or other duties of the General Partner and to
indemnify such Persons against liabilities incurred by them in acting in such
capacities on behalf of the Partnership;
(i) to register, qualify, list or report, or cause to be registered,
qualified, listed or reported, this Agreement or Units issued hereunder pursuant
to the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, any other securities laws of the United States, the securities laws
of any state of the United States, the laws of any other jurisdiction, the rules
of any securities exchange or pursuant to an automated quotation
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system of a registered securities association as the General Partner deems
appropriate;
(j) to qualify the Partnership to do business in any state,
territory, dependency or foreign country;
(k) to sell or dispose of all or a portion of the Partnership's
assets for the benefit of the Partners at the times and on terms determined by
the General Partner, in its sole discretion;
(l) to exercise any and all powers granted to the Partnership in the
agreement of partnership of the Operating Partnership; and
(m) to possess and exercise any additional rights and powers of a
general partner under the partnership laws of Delaware (including, without
limitation, the Delaware RULPA) and any other applicable laws, to the extent not
expressly prohibited by this Agreement; and
(n) to make any changes necessary or appropriate in the Certificates
to facilitate the transfer of Units to, and the holding of Units by, nominees.
In addition to the foregoing, the General Partner shall have the
authority, without the approval of the Limited Partners, (a) for business or
regulatory reasons, to merge or otherwise combine the Partnership and the
Operating Partnership, and (b) to vote in its sole discretion on any proposal
to amend the partnership agreement of the Operating Partnership in any manner
not directly and materially adverse to the holders of Units; provided, however,
that the General Partner shall not enter into any amendment of the partnership
agreement of the Operating Partnership that would be directly and materially
adverse to the holders of the Units without the prior written approval of a
majority of the Outstanding Units held by persons who are not Affiliates of the
General Partner.
The expression of any power or authority of the General Partner in
this Agreement shall not in any way limit or exclude any other power or
authority which is not specifically or expressly set forth in this Agreement.
Notwithstanding any of the foregoing, the Partnership will operate in such a
manner as the General Partner deems reasonable and necessary or appropriate to
preserve the limited liability of the Limited Partners.
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Section 7.03. Title to Assets of the Partnership. Title to assets of the
Partnership, whether real, personal or mixed or tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such assets of the
Partnership or any portion thereof. Title to any or all of the assets of the
Partnership may be held in the name of the Partnership, the General Partner or
of one or more nominees or in "street name," as the General Partner may
determine. The General Partner declares and warrants that any assets of the
Partnership for which legal title is held in the name of the General Partner
shall be held in trust by the General Partner for the use and benefit of the
Partnership in accordance with the terms and provisions of this Agreement. All
assets of the Partnership shall be recorded as the property of the Partnership
on its books and records, irrespective of the name in which legal title to such
assets of the Partnership is held.
Section 7.04. Other Business Activities of Partners. Any Partner or
Affiliate thereof may have business interests or may engage in other business
ventures of any nature or description whatsoever in addition to those relating
to the Partnership, whether presently existing or hereafter created, and may
compete, directly or indirectly, with the business of the Partnership and such
activities shall not be deemed wrongful or improper. No Partner or Affiliate
thereof shall incur any liability to the Partnership or any other Partner as
the result of such Partner's pursuit of such other business interests and
ventures and competitive activity, and neither the Partnership, the Operating
Partnership nor any of the other Partners shall have any right to participate in
such other business interests or ventures or to receive or share in any income
or profits derived therefrom.
Section 7.05. Transactions with General Partner or Affiliates. The
Partnership is expressly permitted to enter into transactions with the General
Partner or any Affiliate thereof provided that the terms of such transactions
are equivalent to terms obtainable by the Partnership from a comparable
unaffiliated third party.
Section 7.06. General Partner's Representation. In addition to its other
duties and obligations, the General Partner further represents, warrants and
agrees that it currently has, and shall use its best efforts to maintain a net
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worth (computed by reference to the current fair market value of its assets and
exclusive of the fair market value of its interests in the Partnership and the
Operating Partnership, its interest in any other limited partnership in which
it is a general partner and any receivables or securities of any such
partnership), at least equal to the amount required to satisfy the net worth
requirement contained in Revenue Procedure 89-12 (or any successor ruling
guideline of the Internal Revenue Service), taking into account all Capital
Contributions to the Partnership by the Limited Partners, including, without
limitation, any such Capital Contributions (or deemed Capital Contributions in
accordance with Section 5.01(a) hereof) in connection with the offering of new
Units pursuant to Section 9.01(a) or (c) hereof.
Section 7.07. Liability of General Partner to Partnership and Limited
Partners. The General Partner, its Affiliates and all officers, partners,
directors, employees and agents of the General Partner and its Affiliates shall
not be liable to the Partnership, to Record Holders or to any Person who has
acquired an interest in the Partnership for any losses sustained or liabilities
incurred, including monetary damages, as a result of any act or omission or
breach of fiduciary duty (including a breach of any duty of care or any duty of
loyalty) of the General Partner or any such other person if the conduct of the
General Partner or such other Person did not constitute actual fraud, gross
negligence or willful or wanton misconduct.
Section 7.08. Indemnification of General Partner and Affiliates.
(a) The Partnership shall indemnify and hold harmless the General Partner,
its Affiliates and all officers, partners, directors, employees and agents of
the General Partner and its Affiliates (individually, an "Indemnitee") to the
fullest extent permitted by law from and against any and all losses, claims,
damages, liabilities, expenses (including legal fees and expenses), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or
investigative, in which the Indemnitee may be involved, or threatened to be
involved, as a party or otherwise by reason of his management of the affairs of
the Partnership, the Operating Partnership or the General Partner or his status
as a General Partner, an Affiliate thereof, or partner, director, officer,
employee
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or agent thereof or a Person serving at the request of the Partnership, the
General Partner or any Affiliate thereof in another entity in a similar
capacity, which relates to or arises out of the Partnership, its property,
business or affairs or the General Partner, its properties, businesses or
affairs or any document filed with or submitted to the Securities and Exchange
Commission or any indemnification of underwriters given in connection therewith,
regardless of whether the Indemnitee continues to be a General Partner, an
Affiliate thereof or a partner, director, officer, employee or agent thereof at
the time any such liability or expense is paid or incurred, and regardless of
whether the liability or expense accrued at or relates to, in whole or in part,
any time before, on or after the date hereof. The negative disposition of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the Indemnitee acted in a manner contrary to the standard set
forth in Section 7.08(b) below. Any indemnification pursuant to this Section
7.08 shall be made only out of the assets of the Partnership and to the extent
provided by the first sentence of this Section 7.08.
(b) An Indemnitee shall not be entitled to indemnification under this
Section 7.08 with respect to any claim, issue or matter in which it has been
adjudged liable for actual fraud, willful misconduct or gross negligence, unless
and only to the extent that the court in which such action was brought, or
another court of competent jurisdiction, determines upon application that,
despite the adjudication of liability, but in view of all of the circumstances
of the case, the Indemnitee is fairly and reasonably entitled to indemnification
for such liabilities and expenses as the court may deem proper.
(c) To the fullest extent permitted by law, expenses (including legal
fees) incurred by an Indemnitee in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of an undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.08.
(d) The indemnification provided by this Section 7.08 shall be in addition
to any other rights to which an
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Indemnitee may be entitled under any agreement, bylaw or vote of the Partners
or as a matter of law or otherwise, both as to action in the Indemnitee's
capacity as the General Partner, an Affiliate thereof or a partner, director,
officer or employee or agent thereof and as to action in any other capacity,
shall continue as to an Indemnitee who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns and administrators
of an Indemnitee.
(e) The General Partner and the Partnership may purchase and maintain
insurance, to the extent and in such amounts as the General Partner shall, in
its sole discretion, deem reasonable, on behalf of Indemnitees and such other
Persons as the General Partner shall determine against any liability that may
be asserted against or expense that may be incurred by such Person in
connection with activities of the Partnership or such Indemnitees, regardless
of whether the Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement. The General
Partner and the Partnership may enter into indemnity contracts with Indemnitees
and adopt written procedures pursuant to which arrangements are made for the
advancement of expenses and the funding of obligations under this Section 7.08
and containing such other procedures regarding indemnification as are
appropriate.
(f) In no event may an Indemnitee subject the Record Holders to personal
liability by reason of these indemnification provisions.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.08 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.08 are for the benefit of the
Indemnitees and their heirs, successors, assigns, administrators and personal
representatives and shall not be deemed to create any rights for the benefit of
any other Persons. The provisions of this Section 7.08 shall not be amended in
any way that would adversely affect the General Partner without the consent of
the General Partner.
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Section 7.09. Other Matters Concerning General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by them, and any opinion of any such Person as to matters that
the General Partner reasonably believes to be within its professional or expert
competence (including, without limitation, any opinion of legal counsel to the
effect that the Partnership would "more likely than not" prevail with respect to
any matter) shall be full and complete authorization and protection with respect
to any action taken or suffered or omitted by the General Partner hereunder in
good faith in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through a duly appointed attorney or
attorney-in-fact. Each such attorney or attorney-in-fact shall, to the extent
provided by the General Partner in the power of attorney, have full power and
authority to do and perform each and every act and duty which is permitted or
required to be done by the General Partner hereunder.
Section 7.10. Purchase or Sale of Units. The General Partner may, on behalf
of and for the account of the Partnership, purchase or otherwise acquire Units
and, following any such purchase or acquisition, may sell or otherwise dispose
of such Units in accordance with applicable law. In addition to the foregoing,
the General Partner and its Affiliates from time to time also may purchase or
otherwise acquire Units for their own account and may, subject to the provisions
of Section 13.03 hereof, sell or otherwise dispose of such Units.
Section 7.11. Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided herein, (i) whenever a conflict
of interest exists or arises between the General Partner or any of its
Affiliates, on the one
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hand, and the Partnership, or any Record Holder, on the other hand, or (ii)
whenever this Agreement or any other agreement contemplated herein or therein
provides that the General Partner shall act in a manner which is, or provides
terms which are, fair and reasonable to the Partnership, the Operating
Partnership, or any Record Holder, the General Partner shall resolve such
conflict of interest, take such action or provide such terms, considering in
each case the relative interests of each party (including its own interest) to
such conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry practices or
principles. In the absence of bad faith by the General Partner, the resolution,
action or terms so made, taken or provided by the General Partner shall not
constitute a breach of this Agreement or any other agreement contemplated
herein.
(b) Whenever in this Agreement or the partnership agreement of the
Operating Partnership the General Partner is permitted or required to make a
decision (i) in its "sole discretion" or "discretion," or under a grant of
similar authority or latitude, the General Partner shall be entitled to consider
only such interests and factors as it desires and shall have no duty or
obligation to give any consideration to any interest of or factors affecting the
Partnership, the Operating Partnership, the Limited Partners or the Assignees,
or (ii) in its "good faith" or under another express standard, the General
Partner shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the partnership
agreement of the Operating Partnership or any other agreement contemplated
herein or therein. Each Record Holder hereby agrees that any standard of care or
duty imposed in this Agreement, the partnership agreement of the Operating
Partnership or any other agreement contemplated herein or under the Delaware
RULPA or any other applicable law, rule or regulation shall be modified, waived
or limited in each case as required to permit the General Partner to act under
this Agreement, the partnership agreement of the Operating Partnership or any
other agreement contemplated herein and to make any decision pursuant to the
authority prescribed in this Section 7.11(b) so long as such action or decision
does not constitute willful misconduct and is reasonably believed by the General
Partner to be consistent with the overall purposes of the Partnership.
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ARTICLE VIII
LIMITED PARTNERS
Section 8.01. Liability of Limited Partners. Except as expressly required
by the Delaware RULPA, no Limited Partner as such shall have any personal
liability whatsoever, whether to the Partnership, to any of the Partners, to the
creditors of the Partnership or to any other Person, for the debts of the
Partnership. Except as otherwise expressly required by the Delaware RULPA, a
Limited Partner as such shall have no liability in excess of (i) the amount of
his Capital Contribution, (ii) his share of any undistributed profits and assets
of the Partnership, (iii) to the extent and for the period required by
applicable law, the amount of his capital in the Partnership returned to him and
(iv) the amount of any distributions wrongfully paid to him. For purposes of
Delaware RULPA Section 17-608, no distribution to any Limited Partner (other
than a distribution upon dissolution of the Partnership) is intended to be a
return or withdrawal of capital. The payment of any such money or distribution
of any such property to a Limited Partner, whether or not deemed to be a return
of capital, shall be deemed to be a compromise within the meaning of Section
17-502(b) of the Delaware RULPA, and the Limited Partner receiving any such
money or property shall not be required to return any such money or property to
the Partnership or any creditor of the Partnership. However, if any court of
competent jurisdiction holds that, notwithstanding the provisions of this
Agreement, any distribution made by the Partnership to a Limited Partner
constitutes a return or withdrawal of capital, any obligation under applicable
law to return the same or any portion thereof to or for the account of the
Partnership or its creditors shall be the obligation of such Limited Partner and
not of the General Partner.
Section 8.02. No Management by Limited Partners. No Limited Partner (other
than the General Partner or any agent or employee of the General Partner, in its
capacity as such, if such Person shall also be a Limited Partner) shall take
part in the day-to-day management, operation or control of the business and
affairs of the Partnership. The Limited Partners shall not have any right,
power, or authority to transact any business in the name of the Partnership or
to act for or on behalf of or to bind the Partnership. The Limited Partners
shall have no right other than those
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specifically provided herein or granted by law where consistent with a valid
provision hereof.
ARTICLE IX
ISSUANCE OF ADDITIONAL INTERESTS
IN THE PARTNERSHIP
Section 9.01. Additional Issuances of Securities; Additional Issuance of
Units.
(a) Subject to Section 9.01(b) and (c) below, in order to raise additional
capital or acquire assets, to redeem or retire Partnership debt, to fulfill the
requirements of the Operating Partnership's Restricted Unit Plan and/or
Restricted Option Plan, as from time to time amended or supplemented, and any
additional incentives or incentive plans as shall hereafter be created for
employees of the Operating Partnership and its subsidiaries, or to obtain funds
to lend or contribute to the Operating Partnership or for any other Partnership
purposes, the General Partner is authorized to cause the Partnership to issue
Units at any time or from time to time to the General Partner, to Limited
Partners or to other Persons and to admit them to the Partnership as additional
Limited Partners, all without any consent or approval of the Limited Partners.
Subject to Section 9.01(b) hereof, the General Partner shall have sole and
complete discretion in determining the rights, powers and duties and the
consideration and terms and conditions with respect to any future issuance of
Units; provided, however, that the approval of holders of a majority of the
Outstanding Units held by persons who are not Affiliates of the General Partner
shall be required in order to issue Units which rank senior, with respect to any
right to receive distributions, to the Units originally issued. The General
Partner is also authorized to cause the Partnership to issue any other type of
security (including, without limitation, secured and unsecured debt obligations
of the Partnership, debt obligations of the Partnership convertible into Units,
or options, rights, warrants or appreciation rights relating to Units, any debt
obligations or any combination of any of the foregoing) from time to time to the
General Partner or to Limited Partners or other Persons on terms and conditions
established in the sole and complete discretion of the General Partner without
the approval of the Limited Partners. The General Partner shall do all things it
deems
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to be appropriate or necessary to comply with the Delaware RULPA and is
authorized and directed to do all things it deems to be necessary or
permissible in connection with any such future issuance, including compliance
with any statute, rule, regulation or guideline of any federal, state or other
governmental agency or any securities exchange on which the Units or other such
security is listed for trading. Any additional issuances pursuant to this
Section (except issuances (i) pursuant to the Operating Partnership's
Restricted Unit Plan and/or Restricted Option Plan or (ii) in connection with
the General Partner's exchange of its general partnership interest in the
Partnership or the Operating Partnership for Units) shall be made only after
receipt of the opinion of a nationally recognized investment banking firm (but
not an investment banking firm which is an Affiliate of the General Partner)
that such issuance is fair to the Limited Partners who are not Affiliates of
the General Partner from a financial point of view.
(b) Any additional capital raised pursuant to Section 9.01(a) hereof
shall be contributed by the Partnership to the Operating Partnership. If all
other partners of the Operating Partnership do not simultaneously make
proportionate capital contributions thereto, the Partnership's interest in the
Operating Partnership shall be increased in proportion to its additional
capital contribution. The approval of a majority of the Limited Partners who
are not Affiliates of the General Partner shall be necessary if the proceeds of
such capital contribution are to be lent by the Operating Partnership to an
Affiliate of the General Partner.
(c) The General Partner or any Affiliate thereof may, but is not
obligated to, make Capital Contributions to the Partnership in the form of cash
or other property (including any portion of its general partnership interest in
the Partnership or the Operating Partnership) in exchange for Units. The number
of Units issued to the General Partner in exchange for any Capital Contribution
in the form of its general partnership interest in the Partnership or the
Operating Partnership shall be a number of Units representing the same direct
or indirect percentage interest in the Partnership or the Operating Partnership
(as the case may be) as the general partnership interest exchanged therefor.
Except as set forth above, the number of Units issued to the General Partner or
any such Affiliate in exchange for any Capital Contribution shall not exceed
the fair market value of the contributed property or the amount
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of cash, as the case may be, divided by the Unit Price of a Unit as of the date
of such issuance. In addition, the General Partner may, but is not obligated
to, exchange its general partnership interest in the Operating Partnership for
an increased general partnership interest in the Partnership, which increase
shall represent the same indirect percentage interest in the Operating
Partnership as the general partnership interest exchange therefor. Any issuance
of Units to the General Partner or any Affiliate thereof or of any increased
general partnership interest in the Partnership to the General Partner on terms
that do not satisfy the standards set forth in this Section 9.01(c) shall be
made only after receipt of the opinion of a nationally recognized investment
banking firm that such issuance is fair to the Limited Partners who are not
Affiliates of the General Partner from a financial point of view.
(d) Any transaction pursuant to this Article IX (other than a transaction
described in Section 3.03 hereof) shall be permitted if (and only if) the
General Partner (i) determines (an "Assignment Determination") that the
advisory contracts with the clients of the Operating Partnership having
accounts representing more than 15% of assets under management will not be
automatically terminated because either (x) the transaction does not cause an
"assignment" as defined in the Investment Advisers Act or the Investment
Company Act, or (y) the requisite consents to preclude such termination have
been obtained and (ii) determines (a "Tax Determination") that the transaction
would not cause the Partnership to be treated as an association taxable as a
corporation for federal income tax purposes.
Section 9.02. Splits and Combinations.
(a) The General Partner may make a distribution in Units to all Record
Holders in accordance with Section 6.07 hereof or may effect a subdivision or
combination of Units, but in each case only on a pro rata basis so that, after
such distribution, subdivision or combination, each Partner and Assignee shall,
subject to Section 9.02(c) hereof, have the same relative interests in the
Partnership as before such distributions, subdivision or combination.
(b) Promptly following any such distribution, subdivision or combination,
the General Partner may cause Certificates to be issued to the Record Holders
of Units as of the applicable Record Date representing the new number of
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Units held by such Record Holder, or the General Partner may adopt such other
procedures as it may deem appropriate to reflect such distribution, subdivision
or combination; provided, however, that in the event any such distribution,
subdivision or combination results in a smaller total number of Outstanding
Units, the General Partner may require, as a condition to the delivery to a
Record Holder of such new Certificate, the surrender of any Certificate held by
such Record Holder immediately prior to such Record Date.
(c) The Partnership shall not be required to issue fractional Units
upon any distribution, subdivision or combination of Units. In the event any
distribution, subdivision or combination of Units would result in the issuance
of fractional Units, each fractional Unit shall either be rounded to the next
highest whole Unit or paid in cash, at the sole discretion of the General
Partner.
ARTICLE X
COMPENSATION AND EXPENSES
Section 10.01. Compensation to General Partner. The General Partner
shall not receive any compensation from the Partnership for services rendered
in its capacity as a general partner of the Partnership.
Section 10.02. Direct and Indirect Expenses: Expenses in Connection
with Organization of Partnership and Offering of Units. The Partnership shall
be responsible for its own expenses and all expenses incurred on its behalf and
shall reimburse the General Partner and its Affiliates for any amounts paid in
connection with such expenses, including all out-of-pocket fees, costs and
expenses actually incurred by the Partnership, the General Partner and its
Affiliates in connection with (a) the qualification of the Partnership to do
business in any state in which the General Partner determines that such
qualification is advisable; (b) the registration of the Units under applicable
federal and state securities laws in connection with the offering thereof; (c)
the distribution of the Units; and (d) the maintenance of listing of the Units
on a National Securities Exchange; including, without limitation, (i) printing,
mailing, filing and recordation expenses; (ii) charges of agents and
appraisers; (iii) expenses of registration and qualification of the Units under
applicable federal and state securities laws; (iv) legal (including tax advice)
and accounting fees
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and disbursements and (v) other out-of-pocket expenses of a similar nature
incurred by the General Partner or any Affiliate of the General Partner in
connection with such activities; provided, however, that the Operating
Partnership shall bear the audit fees, tax preparation fees, transfer agent fees
and bookkeeping expenses of the Partnership, as well as any other expenses that
the Operating Partnership specifically agrees to bear. Any reimbursements to the
General Partner or its Affiliates shall be in addition to any reimbursement to
the General Partner as a result of indemnification pursuant to Section 7.08 of
this Agreement.
ARTICLE XI
FINANCIAL MATTERS
Section 11.01. Books and Records.
(a) The General Partner shall keep, or cause to be kept books and
records with respect to the Partnership, showing assets, liabilities, income,
operations, transactions and the financial condition of the Partnership. The
General Partner shall maintain and preserve all Partnership books and records
for such period as the General Partner, in its reasonable discretion, shall
determine necessary or appropriate, subject to any requirement of federal or
state law.
(b) Each Limited Partner, and each Limited Partner's duly authorized
representatives, shall have the right, at reasonable times and at such Limited
Partner's own expense, but only for a purpose reasonably related to the Limited
Partner's interest in the Partnership as a limited partner and subject to any
confidentiality limitations reasonably imposed by the General Partner in order
to protect trade secrets and similar proprietary information and to comply with
applicable securities laws regarding "inside information": (i) to inspect and
copy the books of the Partnership and other reasonably available records and
information concerning the operations of the Partnership; including copies of
any appraisal reports and copies of the federal, state and local income tax
returns of the Partnership; (ii) to receive a current list of the name and last
known business, residence or mailing address of each Partner; and (iii) to
receive copies of this Agreement and
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the Certificate of Limited Partnership and all amendments or certificates of
amendment, as the case may be, thereto.
Section 11.02 Financial Statements and Information.
(a) All Partnership financial statements shall be accurate and
complete in all material respects, shall present fairly the financial
positions and operating results of the Partnership.
(b) As soon as practicable, but in no event later than 120 days
after the close of each Fiscal Year, the General Partner shall cause to be
mailed to each Record Holder as of the last day of such Fiscal Year reports
containing financial statements of the Partnership and the Operating
Partnership for such Fiscal Year, presented in accordance with generally
accepted accounting principles, including a balance sheet, a statement of
income, a statement of Partners' equity and a statement of changes in financial
position, such statements to be audited by a firm of independent accountants
selected by the General Partner.
(c) As soon as practicable, but in no event later than 75 days after
the close of each fiscal quarter, except the last fiscal quarter of each Fiscal
Year, the General Partner shall cause to be mailed to each Record Holder as of
the last day of that fiscal quarter a report containing such financial
information for that fiscal quarter as the General Partner deems appropriate.
(d) The General Partner shall provide to each Record Holder such
other reports and information concerning the business and affairs of the
Partnership (i) as the General Partner, in its sole and absolute discretion,
may deem necessary or appropriate or (ii) to the extent not provided for in
Section 11.02(b) or (c) hereof, as a Limited Partner requests for a purpose
reasonably related to such Limited Partner's interest in the Partnership as a
limited partner, or (iii) as may be specifically required by the Delaware RULPA
or by any other law or any regulation of any regulatory body applicable to the
Partnership or any rule of any securities exchange on which the Units may be
listed.
(e) The General Partner shall provide any of the reports or other
information referred to in this Section 11.02 to such federal, state or local
governments, governmental agencies, other regulatory entities or securities ex-
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changes as shall be required or as the General Partner, in its sole and
absolute discretion, may deem necessary or appropriate.
Section 11.03. Accounting Decisions. All decisions as to accounting
matters, except as specifically provided to the contrary herein, shall be made
by the General Partner.
Section 11.04. Place Maintained. The books, accounts and records of
the Partnership at all times shall be maintained at the Partnership's principal
office or, at the option of the General Partner, at the principal place of
business of the General Partner.
Section 11.05. Preparation of Tax Returns. The General Partner, at the
expense of the Operating Partnership, shall arrange for the preparation and
timely filing of all returns of the Partnership showing all income, gains,
deductions and losses necessary for federal, state and/or local income tax
purposes, and shall use all reasonable efforts to furnish to the Record Holders
within ninety (90) days after the close of each taxable year of the Partnership
the tax information reasonable required by the Record Holders for federal, state
and local income tax reporting purposes.
Section 11.06. Tax Elections.
(a) Except as otherwise specifically provided herein, the General
Partner shall, in its sole discretion, determine whether to make any available
election under the Code or any applicable state or local tax law on behalf of
the Partnership.
(b) The General Partner shall make the election described in Section
754 of the Code on behalf of the Partnership. The General Partner shall have
the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interest of the Limited
Partners.
(c) The Partnership shall elect to amortize and deduct expenses
incurred in organizing the Partnership over a 60-month period as provided in
Section 709 of the Code.
(d) No election shall be made by the Partnership or any Partner for
the Partnership to be excluded from the
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application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A
of the code or from any similar provisions of any state or local tax laws.
(e) The General Partner shall be the "designated organizer"
responsible for registering the Partnership, if necessary, pursuant to Treasury
Regulation Section 301.6111-IT and as the "designated person" responsible for
maintaining lists of investors in the Partnership pursuant to Treasury
Regulation Section 301.6112-IT.
(f) The General Partner may request permission, pursuant to New York
State Tax Regulation Section 145.17(b), to file, and may file, pursuant to New
York State Tax Law Section 651, a combined New York State nonresident personal
income tax return on behalf of all Record Holders who are "qualified electing
nonresident partners" within the meaning of such section.
Section 11.07. Tax Controversies. The General Partner shall be the
"tax matters partner" of the Partnership within the meaning of Section
6231(a)(7) of the Code and is authorized to represent the Partnership (at the
expense of the Operating Partnership) in connection with all examinations of
the affairs of the Partnership by any federal, state or local tax authorities,
including any resulting administrative and judicial proceedings, and to expend
funds of the Partnership for professional services and costs associated
therewith. Each Partner agrees to cooperate with the General Partner in
connection with the conduct of all such proceedings.
ARTICLE XII
ISSUANCE OF UNIT CERTIFICATES
Section 12.01. Issuance of Unit Certificates. Upon the issuance of
the Units, the General Partner shall cause the Partnership to issue one or more
Certificates registered in the name of each Limited Partner evidencing the
number of Units so issued. Each such Certificate shall be denominated in terms
of the number of Units evidenced by such Certificate. Upon the transfer of a
Unit in accordance with Article XIII hereof, the General Partner shall cause
the Partnership to issue replacement Certificates, in accordance with such
procedures as the General Partner, in
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its discretion, may establish. No Certificate shall be issued representing a
fraction of a Unit.
Section 12.02. Registration of Transfer and Exchange.
(a) The Partnership shall cause to be kept a register in which,
subject to such reasonable regulations as it may prescribe and subject to the
provisions of Section 12.02(b) hereof, the Partnership shall provide for the
registration of Units and the transfer of such Units. The Transfer Agent is
hereby appointed registrar for the purpose of registering Units and transfers
of such Units as herein provided. Upon surrender of any Certificate for
registration of transfer or exchange, and subject to the provisions of Section
12.02(b) hereof, the General Partner shall execute, and the Transfer Agent
shall countersign and deliver, in the name of the holder or the designated
transferee or transferees, as required pursuant to the holder's instructions,
one or more new Certificates evidencing the same aggregate number of Units as
did the Certificate so surrendered.
(b) Every Certificate surrendered for registration of transfer shall
be duly accepted on the reverse side thereof or be accompanied by a written
instrument of acceptance to the same effect in form satisfactory to the General
Partner or the Transfer Agent, as the case may be (a "Transfer Application"),
duly executed, in either case, by the transferee or such transferee's attorney
duly authorized in writing. A transferee who executes a Transfer Application
will, among other things, be deemed to have agreed to be bound by the terms
and conditions of this Agreement as further set forth in Section 13.03(d)
hereof. As a condition to the issuance of any new Certificate under this
Section 12.02, the General Partner may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed with respect
thereto.
Section 12.03. Mutilated, Lost, Stolen or Destroyed Certificates. The
Partnership, through the Transfer Agent, shall issue a new Certificate in place
of any mutilated, lost, stolen or destroyed Certificate previously issued if
the registered owner of such Certificate:
(a) in the case of a mutilated certificate, surrenders the same to
the Transfer Agent or, in the case of a
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lost, stolen or destroyed Certificate, makes proof by affidavit, in form and
substance satisfactory to the General Partner, that such Certificate has been
so lost, stolen or destroyed;
(b) in the case of a lost, stolen or destroyed Certificate (i) requests
the issuance of a new Certificate before the Partnership or the Transfer Agent
has notice that such Certificate has been acquired by a purchaser for value in
good faith and without notice of an adverse claim and (ii) if requested by the
General Partner or the Transfer Agent, delivers to the Partnership such
security as the General Partner may require to indemnify the Partnership and
the Transfer Agent against any claim that may be made on account of the alleged
loss, theft or destruction of such Certificate; and
(c) satisfies any other reasonable requirements imposed by the General
Partner or the Transfer Agent.
When a previously issued Certificate has been lost, stolen or destroyed,
the owner thereof fails to notify the Partnership within a reasonable time
after he has notice of such event, and a transfer of Units represented by the
Certificate is registered before the Partnership receives such notification,
such owner shall be precluded from making any claim against the Partnership or
the Transfer Agent with respect to such transfer or for a new Certificate.
Section 12.04. Registered Holder. The Partnership shall be entitled to
treat the Record Holder as owner of any Units and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such Units on
the part of any other Person, whether or not the Partnership or Transfer Agent
shall have actual or other notice thereof, except as otherwise provided by law
or any applicable rule, regulation, guideline or requirement of any National
Securities Exchange on which the Units are listed for trading. Without limiting
the foregoing, when a Person (such as a broker, dealer, bank, trust company or
clearing corporation, or any agent of any of the foregoing) is acting as a
nominee, agent or in some other representative capacity for another Person in
acquiring and/or holding Units, as between the Partnership on the one hand and
such other Persons on the other hand, such representative Person (a) shall be
the Limited Partner or Assignee (as the case may be) of record and beneficially
(b) must execute and deliver a Transfer Application and (c) shall be bound by
this
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Agreement and shall have the obligations of a Limited Partner or Assignee (as
the case may be) hereunder and as provided for herein.
ARTICLE XIII
TRANSFER OF GENERAL PARTNER'S INTEREST
AND UNITS; ADMISSION OF NEW PARTNERS
Section 13.01. Transfer of General Partner's Interest.
(a) Except as provided in Sections 13.01(b) and 14.01 hereof, the General
Partner shall not (i) withdraw from the Partnership or (ii) transfer all or any
portion of its interest in the Partnership.
(b) The General Partner shall have the right to transfer all or any
portion of its interest in the Partnership (i) to an Affiliate of the General
Partner who is admitted as a General Partner and agrees to assume and be bound
by the provisions of this Agreement, (ii) in connection with a mortgage,
pledge, hypothecation or grant of a security interest in such interest (in
which case the General Partner shall continue to be the General Partner but the
Partnership shall execute an agreement, in form and substance acceptable to the
General Partner and the lender, recognizing the rights and interest of such
lender therein upon foreclosure), (iii) in connection with either the transfer
by the General Partner of its interest in the Partnership upon its merger or
consolidation with or into any other Person or the transfer by the General
Partner of all or substantially all of its assets to another Person, the
admission of such Person as a General Partner and the agreement by such Person
to assume and be bound by the provisions of this Agreement or (iv) upon a
Majority Vote, to any transferee who is admitted as a General Partner and
agrees to assume and be bound by the provisions of this Agreement. A transfer
pursuant to clause (i), (ii), or (iii) of this Section 13.01(b) shall be
permitted without any approval of any Limited Partner.
(c) If the General Partner desires to transfer all or any portion of its
general partnership interest in the Partnership pursuant to Sections 13.01(b)
hereof (other than upon foreclosure pursuant to a mortgage, pledge,
hypothecation or grant of a security interest pursuant to
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clause (ii) thereof) such transfer shall be permitted if (and only if) the
General Partner makes an Assignment Determination and a Tax Determination, and
determines that such transfer would not result in the loss of limited liability
of the Limited Partners under the Delaware RULPA; provided, however, that each
of such determinations shall be based upon the opinion of one or more
independent counsels if such transaction would result in the General Partner
having a general partnership interest in the Partnership of less than 1%.
Section 13.02. Admission of an Additional or Successor General
Partner.
(a) If the General Partner transfers a portion (but not all) of its
interest in the Partnership pursuant to Section 13.01(b) hereof, the transferee
shall be admitted as an additional General Partner, without the approval of any
Limited Partner. Any General Partner or additional or successor General Partner
shall continue the business and operations of the Partnership without
dissolution.
(b) A successor General Partner selected pursuant to Section 14.01
or 14.02 hereof or the transferee of all or any portion of the General
Partner's general partnership interest pursuant to Section 13.01 hereof shall
be admitted to the Partnership as a General Partner effective as of the date
that an amendment of the Certificate of Limited Partnership, adding the name of
such additional or successor General Partner and other required information, is
filed pursuant to Section 2.01 hereof and upon receipt by the transferor or
former General Partner of all the following, all of which shall occur
immediately prior to the withdrawal or removal of the General Partner pursuant
to Section 14.01 hereof:
(i) the successor General Partner's acceptance of, and
agreement to be bound by, all the terms and provisions of this
Agreement, in form and substance satisfactory to the transferor or
former General Partner;
(ii) evidence of the authority of such additional or successor
General Partner to become a General Partner and to be bound by all
the terms and conditions of this Agreement;
(iii) the written agreement of the additional or successor
General Partner to continue the business of
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the partnership in accordance with the terms and provisions of
this Agreement; and
(iv) such other documents or instruments as may be required in
order to effect the admission of the additional or successor General
Partner as a General Partner under this Agreement.
Section 13.03. Transfer of Units.
(a) No Limited Partner may withdraw from the Partnership;
provided, however, that upon a transfer of a Limited Partner's Units and
upon the transferee's becoming a Record Holder, the transferring Limited
Partner shall cease to be a Limited Partner with respect to the Units
transferred, but until such transferee becomes a Record Holder, the
transferor shall continue to be a Limited Partner.
(b) Notwithstanding any other provision of this Article XIII, no
transfer of any Unit shall be made if such transfer (i) would violate the
then applicable federal and state securities laws or rules and regulations
of the Securities and Exchange Commission, any state securities commission
or any other governmental authority with jurisdiction over such transfer or
(ii) would affect the Partnership's existence or qualification as a limited
partnership under the Delaware RULPA.
(c) Any Units, including Units held by the General Partner and/or
its affiliates, may be transferred.
(d) A transferee who has completed and delivered a Transfer
Application shall be deemed, (i) to have requested admission to the
Partnership as a Substituted Limited Partner pursuant to this Article XIII
with respect to the Units transferred; (ii) to have agreed to be bound by
the terms and conditions of and to have executed this Agreement, and to
have agreed to comply with and be bound by this Agreement, and to execute
personally any document that the General Partner may reasonably require to
be executed in connection with such transfer or with the admission of such
transferee as a Substituted Limited Partner pursuant to this Article XIII
with respect to the Units transferred; (iii) to have represented that such
transferee has authority to agree to be bound by this Agreement; (iv) to
have appointed the General Partner and authorized officers and
attorneys-in-fact for such transferee to execute, swear to,
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acknowledge and file any document, including this Agreement, and any amendment
to this Agreement, the Certificate of Limited Partnership, and any amendment to
the Certificate of Limited Partnership, including documents and instruments
necessary or appropriate in any jurisdiction for, and relating to, the
transferee's admission as a Substituted Limited Partner with respect to the
Units transferred and the transferee becoming a party to this Agreement, as more
fully set forth in Article XVII hereof; (v) to have given the power of attorney
set forth in Article XVII hereof; and (vi) to have given the consents and
waivers set forth herein.
(e) Subject to applicable law, the General Partner may omit from the
Certificate of Limited Partnership and from any other certificates and
documents filed in any state in order to qualify the Partnership to do business
therein, and from all amendments thereto, the names and addresses of the
Limited Partners and information relating to the Capital Contributions and
share of profits and losses of the Limited Partners or state such information
in the aggregate rather than with respect to each individual Limited Partner.
(f) Notwithstanding anything to the contrary herein, the Partnership shall
not recognize for any purpose any purported transfer by a Record Holder of all
or any part of a Unit held by such Record Holder until such transfer is shown
on the books and records of the Transfer Agent.
Section 13.04. Allocations and Distributions Subsequent to Assignment.
(a) All profits and losses of the Partnership attributable to any Unit
acquired by reason of an assignment shall be allocated as among Partners and
Assignees (i) in respect of the portion of the Fiscal Year ending on the
effective date of the assignment, to the assignor and (ii) in respect of
subsequent periods, to the Partner or Assignee.
(b) An Assignee shall receive allocations of income, gains, credits,
deductions, profits and losses of the Partnership attributable to his interest
in the Partnership after becoming a Record Holder but shall not become a
Limited Partner unless authorized pursuant to Section 13.05 hereof. The
"effective date" of an assignment of an interest in the Partnership for
purposes of this Section 13.04 shall be the last day of the month in which the
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Transfer Agent receives a Transfer Application and records the transfer on its
books.
(c) Each distribution in respect of a Unit shall be paid by the
Partnership, directly or through any agent, only to the Record Holder of such
Unit as of the Record Date set for such distribution.
Section 13.05. Admission of Substituted Limited Partners; Assignees.
(a) Upon a transfer of a Unit in accordance with this Article XIII,
the Record Holder shall be deemed, subject to the provisions of Section
13.03(f) hereof, to have given the transferee of such Unit the right to seek
admission as a Substituted Limited Partner with respect to the Unit acquired,
in the manner permitted under this Agreement. However, the transferor of a Unit
shall only have the authority to convey to a purchaser or other transferee who
does not execute and deliver a Transfer Application (i) the right to negotiate
such Unit to a purchaser or other transferee and (ii) the right to transfer the
right to request admission as a Substituted Limited Partner to such purchaser
or other transferee in respect of the transferred Units. Subject to the
foregoing, each transferee of a Unit (including any Person, such as a broker,
dealer, bank, trust company, clearing corporation, other nominee holder, or an
agent of any of the foregoing, acquiring such Unit for the account of another
Person) may apply to become a Substituted Limited Partner with respect to the
Unit transferred to such Person by executing and delivering a Transfer
Application at the time of such transfer as provided in Section 13.03. Such
transferee shall become a Substituted Limited Partner at such time as the
General Partner consents thereto, which consent may be given or withheld in the
General Partner's sole discretion, and when any such admission is shown on the
books and records of the Partnership. If the consent of the General Partner is
withheld, such transferee shall be an Assignee.
(b) The admission of a Substituted Limited Partner shall be effected
without the approval of any of the Partners other than the General Partner.
Section 13.06. Admission of Additional Limited Partners. A Person
(other than an initial Limited Partner), including Opfin, who makes a Capital
Contribution to the Partnership shall be admitted to the Partnership as an addi-
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tional Limited Partner upon furnishing to the General Partner (a) acceptance,
in form satisfactory to the General Partner, of all the terms and conditions of
this Agreement, including, without limitation, the power of attorney granted in
Article XVII hereof and (b) such other documents or instruments as may be
required in order to effect his admission as a Limited Partner, and such
admission shall become effective, without the approval of any of the Partners
other than the General Partner, on the date that the General Partner determines
in its sole discretion that such conditions have been satisfied and when any
such admission is shown on the books and records of the Partnership.
ARTICLE XIV
WITHDRAWAL AND REMOVAL
Section 14.01. Withdrawal or Removal of General Partner.
(a) The General Partner covenants and agrees that it will not withdraw
from the Partnership unless such withdrawal shall have been approved by a
Majority Vote or as otherwise permitted under this Agreement.
(b) Subject to the foregoing, the General Partner may withdraw from the
Partnership effective on at least sixty (60) days' advance written notice to
the Limited Partners, such withdrawal to take effect on the date specified in
such notice. The General Partner shall have no liability to the Partnership or
the Partners on account of any withdrawal in accordance with the terms of this
Section 14.01. If the General Partner shall give a notice of withdrawal
pursuant to this Section 14.01, then, prior to such withdrawal taking effect,
the Limited Partners, by a Majority Vote and with the separate written
concurrence of any remaining General Partner, may elect a successor General
Partner. Any remaining and any newly-elected successor General Partner shall
continue the business of the Partnership.
(c) The General Partner may be removed as general partner of the
Partnership by the affirmative vote of holders of eighty percent (80%) of the
Outstanding Units. Any such action by the Limited Partners also must provide for
the election of a successor General Partner and such
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removal shall become effective only upon the contemporaneous admission of the
successor General Partner pursuant to Article XIII hereof. Any remaining and
any newly-elected successor General Partner shall continue the business of the
Partnership.
(d) Written notice of the removal of the General Partner pursuant to this
Section 14.01 shall be served upon the General Partner in the manner set forth
in Section 19.02 hereof. Such notice shall set forth the day upon which such
removal is to become effective, which date shall not be less than thirty (30)
days after the service of the notice upon the General Partner.
(e) A General Partner removed as a general partner of the Partnership
pursuant to this Section 14.01 shall not have any right to participate in the
management or affairs of the Partnership upon the effective date of such
removal.
Section 14.02. Interest Upon Withdrawal or Removal.
(a) Upon the withdrawal or removal of the General Partner under Section
14.01 hereof the Partnership shall distribute to such General Partner an amount
of cash equal to the balance in its Capital Account following the adjustment of
such Capital Account in accordance with Section 5.02(b) hereof.
(b) Notwithstanding anything to the contrary, upon withdrawal or removal
of the General Partner pursuant to Section 14.01 hereof, if the General Partner
has a negative balance in its Capital Account following the adjustment of such
Capital Account pursuant to Section 5.02(b) hereof, the General Partner shall
be required to contribute to the Partnership an amount of cash equal to the
lesser of (i) the amount of its remaining obligation under the subscription
agreement described in Section 5.01(b) hereof or (ii) the amount of such
negative balance.
(c) If, at the time of the General Partner's withdrawal or removal, the
Partnership is indebted to the General Partner under this Agreement or any
other instrument or agreement for funds advanced, properties sold, services
rendered or costs and expenses incurred by the General Partner, the Partnership
shall, within sixty (60) days after the effective date of such General
Partner's departure, pay to the General Partner the full amount of such
indebtedness.
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Section 14.03. Limitations on Withdrawal or Removal of General Partner and
Election of Successor General Partner. Notwithstanding the provisions of
Sections 14.01 and 14.02 hereof, neither the right of the General Partner to
withdraw nor the right of the Limited Partners to remove the General Partner
under Section 14.01 hereof shall be exercised until such time as the General
Partner has made an Assignment Determination and the Partnership shall have
received an opinion of independent counsel that the action in question (i) may
be taken without the approval of all Partners, (ii) would not result in the
loss of limited liability of the Limited Partners under the Delaware RULPA and
(iii) would not cause the Partnership to be treated as an association taxable
as a corporation for federal income tax purposes.
Section 14.04. Amendment of Agreement and Certificate of Limited
Partnership. This Agreement and the Certificate of Limited Partnership shall be
amended to reflect the withdrawal, removal or succession of the General Partner.
Any newly-elected successor General Partner shall continue the business of the
Partnership.
ARTICLE XV
DISSOLUTION AND LIQUIDATION
Section 15.01. No Dissolution. The Partnership shall not be dissolved by
the admission of additional Limited Partners or Substituted Limited Partners or
by the admission of additional General Partners or successor General Partners
in accordance with the terms of this Agreement. The death, Bankruptcy (as
hereinafter defined) or adjudicated incompetency of any Limited Partner shall
not cause a dissolution of the Partnership.
Section 15.02. Events Causing Dissolution. The Partnership shall be
dissolved and its affairs wound up upon the occurrence of any of the following
events:
(a) the expiration of the term of the Partnership, as provided in Article
IV hereof;
(b) the withdrawal of the General Partner or the occurrence of any other
event that results in the General Partner ceasing to be a general partner of
the Partnership (other than by reason of a transfer pursuant to Section
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13.01 hereof or withdrawal occurring upon or after, or a removal effective upon
or after, selection of a successor pursuant to Section 14.01 hereof);
(c) the "Bankruptcy" (as hereinafter defined) of the General Partner;
(d) a written determination by the General Partner to dissolve the
Partnership;
(e) The affirmative vote of holders of eighty percent (80%) of the
Outstanding Units to dissolve the Partnership; or
(f) the sale by the Partnership of all or substantially all the
Partnership's assets;
provided, however, that the Partnership shall not be dissolved upon an event
described in Section 15.02(b) hereof if, within 90 days after such event, all
remaining Partners agree in writing to continue the business of the Partnership
and approve of a successor General Partner.
For purposes of this Agreement, the term "Bankruptcy" of a Partner shall
mean (i) the filing by a Partner of a voluntary petition seeking liquidation,
reorganization, arrangement or readjustment, in any form, of his debts under
Title 11 of the United States Code (or corresponding provisions of future laws)
or any other federal or state insolvency law, or a Partner's filing an answer
consenting to or acquiescing in any such petition, (ii) the making by a Partner
of any assignment for the benefit of his creditors or the admission by a Partner
in writing of his inability to pay his debts as they mature, (iii) the filing of
an involuntary petition under Title 11 of the United States Code (or
corresponding provisions of future laws), an application for the appointment of
a receiver for the assets of a Partner, or an involuntary petition seeking
liquidation, reorganization, arrangement or readjustment of his debts under any
other federal or state insolvency law, provided that the same shall not have
been vacated, set aside or stayed within such 60-day period, or (iv) the entry
against it of a final and nonappealable order for relief under any bankruptcy,
insolvency or similar law now or hereafter in effect.
Section 15.03. Right to Continue Business of Partnership. Upon dissolution
of the Partnership in
<PAGE> 50
accordance with Section 15.02(b) hereof and a failure of all Partners to agree
to continue the business of the Partnership and approval of a successor General
Partner as provided in Section 15.02 hereof or upon a dissolution of the
Partnership in accordance with Section 15.02(c) hereof, then within an
additional 90 days, Limited Partners holding a majority of Outstanding Units
may elect to reconstitute the Partnership and to continue its business on the
same terms and conditions set forth in this Agreement by forming a new limited
partnership on terms identical to those set forth in this Agreement and having
as its general partner a Person elected by such Partners. Upon any such
election by such Partners, all Partners shall be bound thereby and shall be
deemed to have consented thereto. Unless such an election is made within 180
days after dissolution, the Partnership shall conduct only activities necessary
to wind up its affairs. If such an election is made within 180 days after
dissolution, then:
(a) the reconstituted Partnership shall continue until the end
of the term set forth in Article IV hereof unless earlier
dissolved in accordance with this Article XV hereof;
(b) if the successor general partner is not the former General
Partner, then Section 14.02 hereof shall apply; and
(c) all necessary steps shall be taken to cancel this
Agreement and the Certificate of Limited Partnership and
to enter into a new partnership agreement and certificate
of limited partnership, and the successor managing general
partner may for this purpose exercise the powers of
attorney granted in Article XVII hereof;
provided, however, that the right of partners holding a majority of
Outstanding Units to elect a successor general partner and to reconstitute and
continue the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an opinion of counsel to the
effect set forth in Section 14.03 hereof.
Section 15.04. Dissolution. Except as otherwise provided in Section
15.03 hereof, upon the dissolution of
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the Partnership, the Liquidating Trustee (as defined in Section 15.05 hereof)
or the General Partner, as the case may be, promptly shall notify the Partners
of such dissolution.
Section 15.05. Liquidation. Upon dissolution of the Partnership,
unless an election to continue the business of the Partnership is made pursuant
to Section 15.03 hereof, the General Partner, or, in the event the dissolution
is caused by an event described in Section 15.02(b) or (c) hereof and there is
no other General Partner, a Person or Persons approved by a Majority Vote (the
"Liquidating Trustee"), shall liquidate the Partnership. The Liquidating
Trustee or the General Partner, as the case may be, shall:
(a) first, pay (or make provision for the payment of) all creditors
of the Partnership, other than Partners who are creditors, in satisfaction of
liabilities of the Partnership in the order of priority provided by law;
(b) second, pay, on a pro rata basis, all creditors of the
Partnership that are Partners to the extent otherwise permitted by law, in
satisfaction of liabilities of the Partnership; and
(c) third, determine the fair market value of the Partnership's
assets and adjust the Capital Accounts of all the Partners upwards or downwards
to reflect the difference between the book value of such assets and the fair
market value thereof, as if such gain or loss had been recognized upon the
actual sale of such assets and allocated pursuant to Section 6.03 hereof, and
distribute such assets (whether in cash or in kind) to each Partner pro rata in
accordance with his Capital Account.
The Liquidating Trustee, if other than the General Partner, shall be entitled
to receive such compensation for its services as may be approved by a Majority
Vote. The Liquidating Trustee shall agree not to resign at any time without
sixty (60) days prior written notice and, if other than the General Partner,
may be removed at any time, with or without cause, by written notice of removal
approved by a Majority Vote. Upon dissolution, removal or resignation of the
Liquidating Trustee, a successor and substitute Liquidating Trustee (who shall
have an succeed to all rights, powers and duties of the original Liquidating
Trustee) shall be approved within ninety (90) days thereafter by a Majority
Vote. The right to approve of a
<PAGE> 52
successor or substitute Liquidating Trustee in the manner provided herein shall
be recurring and continuing for so long as the functions and services of the
Liquidating Trustee are authorized to continue under the provisions hereof, and
every reference herein to the Liquidating Trustee will be deemed to refer also
to any such successor or substitute Liquidating Trustee approved in the manner
herein provided. Except as expressly provided in this Article XV, the
Liquidating Trustee approved in the manner provided herein shall have and may
exercise, without further authorization or approval of any of the parties
hereto, all the powers conferred upon the General Partner under the terms of
this Agreement (but subject to all the applicable limitations, contractual and
otherwise, upon the exercise of such powers) to the extent necessary or
desirable in the good faith judgment of the Liquidating Trustee to carry out
his duties and functions hereunder (including the establishment of reserves for
liabilities that are contingent or uncertain in amount) for and during such
period of time as shall be reasonably required in the good faith judgment of
the Liquidating Trustee to complete the winding up and the liquidation of the
Partnership as provided for herein. In the event that no Person is selected to
be the Liquidating Trustee as herein provided within one hundred twenty (120)
days following the event of dissolution, or in the event that the Limited
Partners fail to approve a successor or substitute Liquidating Trustee within
the time periods set forth above, any Partner may make application to the Court
of Chancery of the State of Delaware to wind up the affairs of the Partnership
and, if deemed appropriate, to appoint a Liquidating Trustee and to establish
its compensation.
Section 15.06. Termination of Partnership. Except as otherwise provided
in this Agreement, the Partnership shall terminate when all of the assets of
the Partnership, after payment of or due provision for all debts, liabilities
and obligations of the Partnership, shall have been distributed to the Partners
as provided for in Article VI hereof, and the Certificate of Limited
Partnership shall have been canceled in the manner required by the Delaware
RULPA.
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ARTICLE XVI
AMENDMENTS AND MEETINGS
Section 16.01. Amendments To Be Adopted Solely by the General Partner. The
General Partner (pursuant to the General Partner's powers of attorney from the
Record Holders described in Article XVII hereof), without the approval of any
Record Holder may amend any provision of this Agreement, and execute, swear to,
acknowledge, deliver, file and record all documents required or desirable in
connection therewith, to reflect:
(a) a change in the name of the Partnership or the location of the
principal place of business of the Partnership;
(b) the admission, substitution, termination or withdrawal of Partners in
accordance with this Agreement;
(c) a change that is necessary or, in the opinion of the General Partner,
advisable to (i) qualify the Partnership as a limited partnership or a
partnership in which the Limited Partners have limited liability under the laws
of any state or (ii) ensure that the Partnership will not be treated as an
association taxable as a corporation for federal income tax purposes;
(d) a change that is (i) of an inconsequential nature and does not
adversely affect the Limited Partners in any material respect; (ii) necessary
or desirable to cure any ambiguity, to correct or supplement any provision
herein that would be inconsistent with any other provision herein, or to make
any other provision with respect to matters or questions arising under this
Agreement that will not be inconsistent with the provisions of this Agreement,
in each case so long as such change does not adversely affect the Limited
Partners; (iii) necessary or desirable to satisfy any requirements, conditions
or guidelines contained in any opinion, directive, order, ruling or regulation
of any federal or state statute, so long as such change is made in a manner
which minimizes any adverse effect on the Limited Partners; (iv) necessary or
desirable to facilitate the trading of the Units or to comply with any rule,
regulation, guideline or requirement of any securities exchange on which the
Units are or will be listed for trading, compliance with any of which the
General Partner deems to be in the
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interests of the Partnership and the Limited Partners; or (v) required or
contemplated by this Agreement;
(e) a change in any provision of this Agreement that requires any action
to be taken by or on behalf of the General Partner or the Partnership pursuant
to the requirements of applicable Delaware law if the provisions of applicable
Delaware law are amended, modified or revoked so that the taking of such action
is no longer required;
(f) a change that is necessary to implement the provisions of Section
3.03, Section 6.05 or Section 9.01 hereof;
(g) an amendment that is necessary, in the opinion of counsel to the
Partnership, to prevent the Partnership or the General Partner or its directors
or officers from in any manner being deemed an "Investment Company" subject to
the provisions of the Investment Company Act of 1940, as amended, being deemed
an "Investment Adviser" subject to the provisions of the Investment Advisers
Act of 1940, as amended, or being subjected to "plan asset" regulations adopted
under the Employee Retirement Income Security Act of 1974, as amended, whether
or not substantially similar to plan asset regulations currently applied or
proposed by the United States Department of Labor; or
(h) any other amendments similar to the foregoing.
The authority set forth in Section 16.01(e) hereof shall specifically
include the authority to make such amendments to this Agreement and to the
Certificate of Limited Partnership as the General Partner deems necessary or
desirable in the event the Delaware RULPA is amended to eliminate or change any
provision now in effect.
Section 16.02. Amendment Procedures. Except as specifically provided in
Section 16.01 and 16.03 hereof, all amendments to this Agreement shall be made
solely in accordance with the following requirements:
(a) Amendments of this Agreement may be proposed only by the General
Partner;
(b) If an amendment is proposed, the General Partner shall seek the
written approval of the holders of the requisite number of Units or call a
meeting of the Limited Partners to consider and vote on a such proposed
amendment.
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A proposed amendment shall be effective upon its approval by a Majority Vote
unless a greater percentage is required by this Agreement; and
(c) The General Partner shall notify all Partners upon final adoption
of any proposed amendment.
Section 16.03. Amendment Restrictions. Except as otherwise provided
in Section 3.03 hereof, notwithstanding the provisions of Sections 16.01 and
16.02 hereof, no amendment to this Agreement shall be valid without a unanimous
vote of the Partners if such amendment would (a) result in the loss of limited
liability of the Limited Partners, (b) have an effect on the provisions that
allocate distributions and profits and losses or on the voting rights of the
Partners that is materially adverse to the Limited Partners or the General
Partner, or (c) cause the Partnership to be treated as an association taxable
as a corporation for federal income tax purposes. Assignees who have not been
admitted to the Partnership as Substituted Limited Partners shall have no right
to vote under this or any other provisions of this Agreement.
Section 16.04. Meetings. Meetings of the Limited Partners may be
called by the General Partner or by Limited Partners owning at least
twenty-five percent (25%) of the Outstanding Units. Limited Partners desiring
to call a meeting shall deliver to the General Partner one or more notices in
writing stating that the Limited Partners signing such notices wish to call a
meeting and indicating the purposes for which the meeting is to be called.
Action at the meeting shall be limited to those matters specified in the
notices of the meeting. Within sixty (60) days after receipt of such notices
from Limited Partners, or within such greater time as may be reasonably
necessary for the Partnership to comply with any statutes, rules, regulations,
listing agreements or similar requirements governing the holding of a meeting
or the solicitation of proxies for use at such a meeting, the General Partner
shall send a notice of the meeting to Limited Partners as of a Record Date
established for such purpose pursuant to Section 16.06 hereof. A meeting shall
be held at a reasonable time and convenient place determined by the General
Partner on a date not more than sixty (60) days after the mailing of notice of
the meeting to Limited Partners. Limited Partners may vote either in person or
by proxy at any meeting. Each Limited Partners shall have one vote for each
Unit owned by such Partner. No action shall be taken by the Limited Partners
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without a meeting duly called and held or without written approval in
accordance with Section 16.12 hereof. The right of Limited Partners to call
meetings pursuant to this Section 16.05 shall not in any way infer that a
Limited Partner has any right to propose amendments to this Agreement.
Section 16.05. Notice of a Meeting. Notice of a meeting called
pursuant to Section 16.04 hereof shall be given either personally or in writing
or by mail or other means of written communication addressed to each Limited
Partner at the address of such Limited Partner appearing on the books and
records of the Partnership or the Transfer Agent. An affidavit or certificate
of mailing of any notice or report in accordance with the provisions of this
Article XVI executed by the General Partner, Transfer Agent or mailing
organization shall constitute conclusive (but not exclusive) evidence of the
giving of notice. If any notice addressed to a Limited Partner at the address
of such Limited Partner appearing on the books and records of the Partnership
or Transfer Agent is returned to the Partnership or Transfer Agent by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver such notice, the notice and any subsequent notices
or reports shall be deemed to have been duly given to such Limited Partner
without further mailing if they are available for the Limited Partners at the
principal office of the Partnership for a period of one year from the date of
the giving of the notice to all other Limited Partners.
Section 16.06. Record Date. For purposes of determining the Limited
Partners entitled to notice of or to vote at a meeting of the Limited Partners,
the General Partner shall set a Record Date, which Record Date shall not be less
than ten (10) days nor more than sixty (60) days prior to the date of such
meeting (unless such requirement conflicts with any rule, regulation, guideline
or requirement of any securities exchange on which the Units are listed for
trading, in which case the rule, regulation, guideline or requirement of such
securities exchange shall govern).
Section 16.07. Adjournment. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting and a new
Record Date need not be fixed if the time and place of such adjourned meeting
are announced at the meeting at which such adjournment is taken, unless such
adjournment shall be for more than forty-five (45) days. At the adjourned
meeting, the Partnership may
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transact any business that would have been permitted to be transacted at the
original meeting. If the adjournment is for more than forty-five (45) days, or
if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XVI.
Section 16.08. Waiver of Notice; Approval of Meeting; Approval of
Minutes. The transactions of any meeting of Limited Partners, however called
and announced and wherever held, are as valid as though they had been approved
at a meeting duly held after regular call and notice, if a quorum is present
either in person or by proxy and if, either before or after the meeting, each
of the Limited Partners entitled to vote, not present in person or by proxy,
signs a written waiver or notice, or approval of the holding of the meeting, or
an approval of the minutes thereof. All such waivers and approvals shall be
filed with the Partnership records and made a part of the minutes of such
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting; provided, however, that no such waiver shall occur
when the Limited Partner disapproves, at the beginning of the meeting, the
transaction of any business at such meeting because the meeting is not lawfully
called or convened; and, provided, further, that attendance at a meeting is not
a waiver of any right to disapprove the consideration of any matters required
to be included in the notice of the meeting, but not so included, if the
disapproval is expressly made at the meeting.
Section 16.09. Quorum. Limited Partners holding more than fifty percent
(50%) of the Outstanding Units, whether represented in person or by proxy,
shall constitute a quorum at a meeting of Limited Partners. The Limited
Partners present at a duly called or held meeting at which a quorum is present
may continue to transact business, notwithstanding the withdrawal of Limited
Partners resulting in less than a quorum, if any action taken (other than
adjournment) is approved by the requisite number of Limited Partners specified
in this Agreement. In the absence of a quorum, any meeting of Limited Partners
may be adjourned from time to time by the affirmative vote of a majority of the
Units represented either in person or by proxy at such meeting.
Section 16.10. Conduct of Meeting. The General Partner shall be solely
responsible for convening,
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conducting and adjourning any meeting of Limited Partners, including, without
limitation, the determination of Persons entitled to vote at such meeting and
existence of a quorum for such meeting, the satisfaction of the requirements of
Section 16.04 hereof with respect to such meeting, the conduct of voting at
such meeting, the validity and effect of any proxies represented at such
meeting and the determination of any controversies, votes or challenges arising
in connection with or during such meeting or voting. The General Partner shall
designate a Person to serve as chairman of any meeting and further shall
designate a Person to take minutes of any meeting which Person, in either case,
may be, without limitation, a Partner or an employee or agent of the General
Partner. The General Partner may make all such other regulations, consistent
with applicable law and this Agreement, as it may deem advisable concerning the
conduct of any meeting of the Limited Partners, including regulation in regard
to the appointment of proxies, the appointment and duties of inspectors of
votes and the submission and examination of proxies and other evidence of the
right to vote.
Section 16.11. Voting and Other Rights of Limited Partners.
(a) Only Limited Partners on the Record Date set pursuant to Section
16.06 hereof shall be entitled to notice of, or (subject to the right to vote
by proxy) to vote at, a meeting of Limited Partners.
(b) With respect to Units that are held for a Person's account by a
nominee Record Holder (such as a broker, dealer, bank, trust company or earning
corporation, or an agent of any of the foregoing), in whose name the
Certificates evidencing such Units are registered, such nominee Record Holder
shall in exercising any voting rights in respect of such Units, vote such Units
in favor of, and at the direction of, the Person on whose behalf such nominee
Record Holder is holding such Units, and the Partnership shall be entitled to
assume such Record Holder is so acting without further inquiry.
Section 16.12. Action Without a Meeting. Any action that may be
taken at a meeting of the Limited Partners may be taken without a meeting if one
or more approvals in writing setting forth the approval of the action so taken
are signed by Limited Partners owning not less than the minimum numbers of Units
that would be necessary to
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authorize or take such action at a meeting at which all the Limited Partners
were present and voted. Prompt notice of the taking of action without a meeting
shall be given to the Limited Partners who have not approved thereof in writing.
The General Partner may specify that any written ballot submitted to Limited
Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time, which shall not be less than
forty-five (45) days, specified by the General Partner. If a ballot returned to
the Partnership does not vote all the Units held by a Limited Partner, such
ballot shall not be deemed to have cast a vote for the Units that were not
voted. If approval of the taking of an action by the Limited Partners is
solicited by any Person other than by or on behalf of the General Partner, the
written approvals setting forth such approval shall have no force and effect
unless and until (i) they are deposited with the Partnership in care of the
General Partner and (ii) approvals sufficient to take the action proposed are
dated as of a date not more than ninety (90) days prior to the date sufficient
approvals are deposited with the Partnership.
ARTICLE XVII
POWER OF ATTORNEY
Each Limited Partner and each Person who executes a Transfer
Application (including any additional or Substituted Limited Partners), hereby
irrevocably constitutes, appoints and empowers the General Partner (and any
successor by merger, transfer, election or otherwise) and any Liquidating
Trustee, and each of the General Partner's authorized officers and
attorneys-in-fact, with full power of substitution, as the true and lawful
agent and attorney-in-fact, with full power and authority in his name, place
and stead to make, execute, verify, consent to, swear to, acknowledge, make
oath as to, publish, deliver, file and/or record in the appropriate public
offices (i) all certificates and other instruments including, at the option of
the General Partner, this Agreement and the Certificate of Limited Partnership
and all amendments and restatements thereof, that the General Partner deems
appropriate or necessary to form and qualify, or continue the qualification of,
the Partnership as a limited partnership (or a partnership in which the Limited
Partners have limited liability) in the State of Delaware and all jurisdictions
in which the Partnership may or may intend to conduct business
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or own property; (ii) all other certificates, instruments and documents as may
be requested by, or may be appropriate under the laws of, any state or other
jurisdiction in which the Partnership may or may intend to conduct business or
own property; (iii) all instruments that the General Partner deems appropriate
or necessary to reflect any conveyances and other instruments or documents,
including a Certificate of Cancellation, that the General Partner deems
appropriate or necessary to reflect any amendment, change or modification of
this Agreement in accordance with the terms hereof; (iv) all conveyances and
other instruments or documents that the General Partner deems appropriate or
necessary to effectuate or reflect the dissolution, termination and liquidation
of the Partnership pursuant to the terms of the Agreement; (v) any and all
financing statements, continuation statements, mortgages or other documents
necessary to grant to or perfect for secured creditors of the Partnership,
including the General Partner and its Affiliates, a security interest, mortgage,
pledge or lien on all or any of the Partnership Assets; (vi) all instruments or
papers required to continue the business of the Partnership pursuant to Article
XV hereof; (vii) all instruments (including this Agreement and the Certificate
of Limited Partnership and amendments and restatements thereof) relating to the
admission of any Partner pursuant to Article XIII hereof; (viii) all other
instruments as the attorneys-in-fact or any one of them may deem necessary or
advisable to carry out fully the provisions of the Agreement in accordance with
its terms.
Nothing herein contained shall be construed as authorizing any Person
acting as attorney-in-fact pursuant to this Article XVII to take action as an
attorney-in-fact for any Limited Partner to increase in any way the liability
of such Limited Partner beyond the liability expressly set forth in this
Agreement, or to amend this Agreement except in accordance with Article XVI
hereof.
The appointment by each Limited Partner and Person executing a
Transfer Application of the Persons designated in this Article XVII as
attorneys-in-fact is a power of attorney coupled with an interest in
recognition of the fact that each of said Persons will be relying upon the
power to act pursuant to this power of attorney for the orderly administration
of the affairs of the Partnership. The foregoing power of attorney is hereby
declared to be irrevocable, and it shall survive, and shall not be affected by,
the subsequent death, incompetency, dissolution,
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disability, incapacity, bankruptcy or termination of any Limited Partner or any
Person executing a Transfer Application and it shall extend to such Person's
heirs, successors and assigns. Each Limited Partner and each Person who
executes a Transfer Application hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action taken as attorney-in-fact
under this power of attorney in accordance with this Agreement. Each Record
Holder shall execute and deliver to the General Partner, within fifteen (15)
days after receipt of the General Partner's request therefor, all such further
designations, powers of attorney and other instruments as the General Partner
deems necessary to effectuate this Agreement and the purposes of the
Partnership.
ARTICLE XVIII
RIGHT TO ACQUIRE UNITS
(a) Notwithstanding any other provision of this Agreement, in the event
less than ten percent (10%) of the Outstanding Units are held by Persons other
than the General Partner or its Affiliates, the General Partner shall have the
right, which right it may assign and transfer to the Partnership or any
Affiliates of the General Partner, exercisable in its sole discretion, to
purchase all but not less than all of the Units that remain outstanding and
held by Persons other than the General Partner and its Affiliates, at the
Purchase Price.
(b) In the event the General Partner, any Affiliate of the General
Partner or the Partnership elects to exercise such right to purchase Units
pursuant to subsection (a) above, the General Partner shall mail written notice
of such election to purchase (hereinafter in this Article XVIII called the
"Notice of Election to Purchase") to the Record Holders of Units at least ten
(10), but more than sixty (60) days prior to the Purchase Date. Such Notice of
election to Purchase shall also be published at least once during such period
in the national edition of the Wall Street Journal. The Notice of Election to
Purchase shall specify the date of purchase and the Purchase Price and state
that the General Partner, its Affiliate or the Partnership, as the case may be,
elects to purchase Units, upon surrender thereof in exchange for payment, at
such office or offices of the Transfer Agent as the Transfer Agent may specify,
or as may be required by any National Securities Exchange on which the
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Units are listed or admitted to trading. Any such Notice of Election to
Purchase mailed to a Record Holder of Units at his address as reflected in the
records of the Transfer Agent shall be conclusively presumed to have been given
whether or not the owner receives such notice. On or prior to the date of
purchase, the General Partner, its Affiliates or the Partnership, as the case
may be, shall deposit with the Transfer Agent cash in an amount equal to the
aggregate Purchase Price of all Units to be purchased. If the Notice of
Election to Purchase shall have been duly given as aforesaid at least ten (10)
days prior to the date of purchase, and if on or prior to the date of purchase
the aggregate Purchase Price shall have been deposited with the Transfer Agent
in trust for the benefit of the holders of Units subject to purchase as
provided herein, then from and after the date of purchase and notwithstanding
that any Certificates shall not have been surrendered for purchase, all rights
of the holders of such Units (including, without limitation, any rights
pursuant to Articles V, VI and XVI hereof shall thereupon cease, except the
right to receive the Purchase Price therefor, without interest, upon surrender
to the Transfer Agent of Certificates, and such Units shall thereupon be deemed
to be transferred to the General Partner, its Affiliate or the Partnership, as
the case may be, on the record books if the Transfer Agent and the Partnership,
and the General Partner or any Affiliate of the General Partner or the
Partnership, as the case may be, shall be deemed to be the owner of all such
Units from and after the date of purchase and shall have all rights as the
owner of such Units (including, without limitation, all rights as owner of such
Units pursuant to Articles V, VI and XV hereof).
(c) At any time from and after the date of purchase, a holder of an
Outstanding Unit subject to purchase as provided in this Article XVIII may
surrender his Certificate evidencing such Unit to the Transfer Agent in
exchange for payment of the Purchase Price therefor, without interest thereon.
ARTICLE XIX
MISCELLANEOUS PROVISIONS
Section 19.01. Additional Actions and Documents. Each of the Partners
hereby agrees to take or cause to be taken such further actions, to execute,
acknowledge, deliver
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and filed or cause to be executed, acknowledged, delivered and filed such
further documents and instruments and to use best efforts to obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of the Agreement, whether
before, at or after the closing of the transactions contemplated by this
Agreement.
Section 19.02. Notices. All notices, demands, requests or other
communications which may be or are required to be given, served or sent by a
Partner or the Partnership pursuant to this Agreement shall be in writing and
shall be personally delivered, mailed by first-class, registered or certified
mail, return receipt requested, postage prepaid, or transmitted by telegram or
telex, addressed as follows:
(a) If to the General Partner:
Oppenheimer Financial Corp.
Oppenheimer Tower
World Financial Center
New York, New York 10281
Attention: General Counsel
(b) If to a Record Holder:
The last known business, residence or mailing address of such Record Holder
reflected in the books and records of the Partnership or the Transfer
Agent.
(c) If to the Partnership:
Oppenheimer Capital, L.P.
c/o Oppenheimer Financial Corp.
Oppenheimer Tower
World Financial Center
New York, New York 10281
Attention: General Counsel
Each Partner and Assignee and the Partnership may designate by notice in
writing a new address to which any notice, demand or communication may
thereafter be so given, served or sent. Each notice, demand, request or
communication which shall be delivered, mailed or transmitted in the manner
described above shall be deemed sufficiently given, served, sent or received
for all purposes when delivered in person or when sent to a Person at the
address on the books
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and records of the Partnership or the Transfer Agent by first class mail or by
other means of written communication.
Section 19.03. Severability. The invalidity of any one or more
provisions hereof or of any other agreement or instrument given pursuant to or
in connection with this Agreement shall not affect the remaining portions of
this Agreement or any such other agreement or instrument or any part thereof;
and in the event that one or more of the provisions contained herein or therein
should be invalid, or should operate to render this Agreement or any such other
agreement or instrument invalid, this Agreement and such other agreement and
instruments shall be construed as if such invalid provisions had not been
inserted.
Section 19.04. Survival. It is the express intention and agreement of
the Partners that all covenants, agreements, statements, representations,
warranties and indemnities, made in this Agreement shall survive the execution
and delivery of this Agreement.
Section 19.05. Waivers. Neither the waiver by a Partner of a breach
of or a default under any of the provisions of this Agreement, nor the failure
of a Partner, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right, remedy or privilege hereunder, shall
thereafter be construed as a waiver of any subsequent breach or default of a
similar nature, or as a waiver of any such provisions, rights, remedies or
privilege hereunder. The Partners hereby waive any right of partition and any
right to take any other action which otherwise might be available to them for
the purpose of severing their relationship with the Partnership or their
interest in the Partnership Assets from the interests of the other Partners.
Section 19.06. Exercise of Rights. No failure or delay on the part of
a Partner or the Partnership in exercising any right, power or privilege
hereunder and no course of dealing between the Partners or between a Partner
and the Partnership shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein expressly provided are cumulative and
not exclusive of any other rights or remedies which a Partner or the
Partnership would otherwise have at law or in equity or otherwise.
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Section 19.07. Binding Effect. Subject to any provisions hereof
restricting assignment, this Agreement shall be binding upon and shall inure to
the benefit of the Partners and their respective heirs, devises, executors,
administrators, legal representatives, permitted successors and assigns.
Section 19.08. Consent of Limited Partners. By acceptance of a Unit, each
Limited Partner expressly approves and agrees that whenever in this Agreement
it is specified that an action may be taken upon the affirmative vote of less
than all the Limited Partners, such action may be so taken and each such
Limited Partner shall be bound by the results of such action.
Section 19.09. Entire Agreement. This Agreement contains the entire
agreement among the Partners with respect to the transactions contemplated
herein, and supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein and therein.
Section 19.10. Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the Person may require.
Section 19.11. Headings. Article, Section and subsection headings
contained in this Agreement are inserted for convenience of reference only,
shall not be deemed to be part of this Agreement for any purpose and shall not
in any way define or affect the meaning, construction or scope of any of the
provisions hereof. All references herein to Articles, Sections and subsections
are to Articles, Sections and subsections of this Agreement unless otherwise
specifically stated.
Section 19.12. Governing Law. This Agreement, the rights and obligations
of the parties hereto and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the State of Delaware.
Section 19.13. Execution in Counterparts. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required; and it
shall not be necessary that the signatures of, or on behalf of, each party, or
that the signatures of all Persons required to bind any party, appear on each
counterpart; but it shall be
60
<PAGE> 66
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the Persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Agreement to
produce or account for more than such number of counterparts as contain one
signature of, or on behalf of, each of the parties hereto.
ARTICLE XX
EXECUTION
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, or
have caused this agreement to be duly executed on their behalf, as of the day
and year first hereinabove set forth.
GENERAL PARTNER:
OPPENHEIMER FINANCIAL CORP.
By: [SIG]
------------------------
LIMITED PARTNER:
All Limited Partners now and hereafter admitted as limited partners of the
Partnership pursuant to Powers of Attorney now or hereafter executed in favor
of, and delivered to, the General Partner.
OPPENHEIMER FINANCIAL CORP.
BY: [SIG]
-------------------------
ATTEST:
[SIG]
- -----------
<PAGE> 1
EXHIBIT 3.1.1
AMENDMENT NO.
TO
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL, L.P.
This Amendment No. , dated as of November 4, 1997 (the "Amendment"), to
the Amended and Restated Agreement of Limited Partnership of Oppenheimer
Capital, L.P. (the "Partnership") is made and entered into by Oppenheimer
Financial Corp., a Delaware corporation ("Opfin"), as General Partner.
W I T N E S S E T H
WHEREAS, the Partnership was formed by filing a Certificate of Limited
Partnership with the office of the Secretary of State of the State of Delaware
on May 15, 1987;
WHEREAS, the agreement of limited partnership was amended and restated
in its entirety in the Amended and Restated Agreement of Limited Partnership of
the Partnership, dated as of March 14, 1991 (as heretofore amended, the
"Partnership Agreement"); and
WHEREAS, Opfin, as the General Partner, has determined, pursuant to
Sections 16.01(d)(i) and 16.01(d)(ii) of the Partnership Agreement, that it is
in the best interests
<PAGE> 2
of the Partnership to amend further the Partnership Agreement, which amendments
may be made by Opfin, as the General Partner, without the approval of any other
partner of the Partnership.
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants hereinafter set forth, it is hereby agreed as follows:
1. Amendments.
A. Section 6.03 of the Partnership Agreement is hereby amended
by adding the following language:
If the General Partner transfers all of its interest in the
Partnership during any Fiscal Period of the Partnership, (i) the
former General Partner's share of the Net Income or Net Loss of
the Partnership for the Fiscal Period in which the transfer
occurs shall be that portion of the General Partner's 1%
allocable share of the actual Net Income or Net Loss of the
Partnership for such Fiscal Period that the number of days in
such Fiscal Period prior to the day of transfer bears to the
total number of days in such Fiscal Period; and (ii) the new
General Partner's share of the Net Income or Net Loss of the
Partnership for the Fiscal Period of transfer shall be that
portion of the General Partner's 1% share of the actual Net
Income or Net Loss of the Partnership for such Fiscal Period
that the number of days in such Fiscal Period beginning on and
following the day of transfer bears to the total number of days
in such Fiscal Period.
B. Section 13.02(b) of the Partnership Agreement is hereby
Amended by adding the following language:
In the case of a transfer described in the last sentence of
Section 6.03, however, the transfer shall be considered
effective as of the day before the day
2
<PAGE> 3
of transfer and the profits and losses of the Partnership for
the Fiscal Period of transfer shall be allocated between the
former General Partner and the new General Partner in accordance
with the provisions thereof.
2. Successors and Assigns. This Amendment shall be binding upon, and
shall enure to the benefit of, the parties hereto and their respective
successors and assigns.
3. Full Force and Effect. Except to the extent modified hereby, the
Partnership Agreement shall remain in full force and effect.
4. Counterparts. This Amendment may be executed in counterparts, all of
which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all such parties are not signatories to the original or
same counterpart.
5. Choice of Law. This Amendment shall be interpreted in accordance with
the laws of the State of Delaware (without regard to conflict of laws
principles), all rights and remedies being governed by such laws.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of
the date first set forth above.
GENERAL PARTNER:
OPPENHEIMER FINANCIAL CORP.
BY: /s/
--------------------------------
Name:
Title:
4
<PAGE> 1
EXHIBIT 3.1.2
ASSIGNMENT OF GENERAL PARTNER INTEREST
AND AMENDMENT TO
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL, L.P.
This Assignment of General Partner Interest and Amendment to the Amended
and Restated Agreement of Limited Partnership of Oppenheimer Capital, L.P.,
dated as of November 4, 1997 (this "Assignment and Amendment Agreement"), is
entered into by and among Oppenheimer Financial Corp., a Delaware corporation
and the sole general partner ("Opfin"), PIMCO Advisors L.P., a Delaware limited
partnership ("PALP"), and all other persons or entities who are or shall in the
future become, limited partners.
W I T N E S S E T H:
WHEREAS, Oppenheimer Capital, L.P. (the "Partnership") has been formed as
a limited partnership under the Delaware Revised Uniform Limited Partnership
Act (6 Del.C. Section 17-101, et seq.) (the "Act") pursuant to a Certificate
of Limited Partnership of the Partnership, as filed with the office of the
Secretary of State of the State of Delaware (the "Secretary of State") on May
15, 1987, (as amended, the "Certificate"), and an Agreement of Limited
Partnership of the Partnership, dated as of May 15, 1987 (as amended and
restated, and subsequently amended, the "Agreement");
WHEREAS, Opfin is the sole general partner of the Partnership;
WHEREAS, pursuant to that certain Contribution Agreement, dated as of
November 4, 1997, Opfin desired to assign, transfer and convey all of its
interest in the Partnership as a general partner of the Partnership (the
"General Partner Interest") to
<PAGE> 2
PALP, and Opfin desires to withdraw from the Partnership as a general partner of
the Partnership;
WHEREAS, PALP desires to acquire the General Partner Interest presently
held by Opfin and PALP desires to be admitted to the Partnership as a successor
general partner of the Partnership;
WHEREAS, Opfin and PALP desire to accomplish the foregoing in accordance
with the Agreement which Agreement expressly permits the consummation of the
foregoing transactions without any further act, vote or approval of any limited
partner of the Partnership; and
WHEREAS, the undersigned, being all of the partners of the Partnership, to
accomplish the foregoing, desire to amend the Agreement in the manner set forth
herein.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Assignment. Notwithstanding any provision in the Agreement to the
contrary, for value received, the receipt and sufficiency of which are hereby
acknowledged, upon the execution of this Assignment and Amendment Agreement by
the parties hereto, Opfin does hereby assign, transfer and convey the General
Partner interest to PALP. Ofpin has made an Assignment Determination (as defined
in the Agreement) and a Tax Determination (as defined in the Agreement) prior
to the assignment and transfer described in this Section 1.
2. Admission. Notwithstanding any provision in the Agreement to the
contrary, PALP is hereby admitted to the Partnership as a general partner of the
-2-
<PAGE> 3
Partnership. The admission shall be effective upon the filing of an amendment
to the Certificate in the office of the Secretary of State which reflects the
fact that PALP is a general partner of the Partnership, and shall occur, and
for all purposes shall be deemed to have occurred, immediately prior to the
withdrawal of Opfin from the Partnership as a general partner of the
Partnership.
3. Withdrawal. Notwithstanding any provision in the Agreement to
the contrary, Opfin hereby withdraws from the Partnership as a general partner
of the Partnership. The withdrawal shall be effective upon the filing of an
amendment to the Certificate in the office of the Secretary of State which
reflects the fact that Opfin is not a general partner of the Partnership and
shall occur, and for all purposes shall be deemed to have occurred, immediately
after the admission of PALP to the Partnership as a general partner of the
Partnership.
4. Continuation. The parties hereto agree that following the
withdrawal of Opfin from the Partnership as a general partner of the
Partnership, PALP is authorized to and hereby agrees to continue the business
of the Partnership without dissolution.
5. Books and Records. PALP shall take all actions necessary under
the Act and the Agreement, to evidence the withdrawal of Opfin from the
Partnership as a general partner of the Partnership and the admission of PALP
to the Partnership as a general partner of the Partnership.
6. Future Cooperation. Each of the parties hereto agrees to
cooperate at all times and after the date hereof with respect to all of the
matters described herein, and to execute such further assignments, releases,
assumptions,
-3-
<PAGE> 4
amendments of the Agreement, notifications and other documents as may be
reasonably requested for the purpose of giving effect to, or evidencing or
giving notice of, the transactions contemplated by this Assignment and
Amendment Agreement.
7. Binding Effect. This Assignment and Amendment Agreement shall be
binding upon, and shall enure to the benefit of, the parties hereto and their
respective successors and assigns.
8. Execution in Counterparts. This Assignment and Amendment Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
9. Agreement in Effect. Except as hereby amended, the Agreement shall
remain in full force and effect.
10. Governing Law. This Assignment and Amendment Agreement shall be
governed by, and interpreted in accordance with the laws of the State of
Delaware, all rights and remedies being governed by such laws, without regard
to its conflict of laws rules.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Amendment Agreement to be duly executed as of the day and year first above
written.
OPPENHEIMER FINANCIAL CORP.
By: /s/ KENNETH M. POOVEY
--------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
-4-
<PAGE> 5
PIMCO ADVISORS L.P.
By: /s/ KENNETH M. POOVEY
----------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
LIMITED PARTNERS
All Limited Partners that have been, or
are hereafter, admitted as limited
partners of the Partnership, pursuant
to powers of attorney or other
authorizations recited in favor of or
granted to the General Partner
By: OPPENHEIMER FINANCIAL CORP.,
general partner
By: /s/ KENNETH M. POOVEY
----------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
-5-
<PAGE> 1
EXHIBIT 3.1.3
ASSIGNMENT OF GENERAL PARTNER INTEREST
AND AMENDMENT TO
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL, L.P.
This Assignment of General Partner Interest and Amendment to the
Amended and Restated Agreement of Limited Partnership of Oppenheimer Capital,
L.P., dated as of November 4, 1997 (this "Assignment and Amendment Agreement"),
is entered into by and among PIMCO Advisors L.P., a Delaware limited partnership
and the sole general partner ("PALP"), PIMCO Partners, G.P., a California
general partnership ("PGP"), and all other persons or entities who are or shall
in the future become, limited partners.
WITNESSETH:
WHEREAS, Oppenheimer Capital, L.P. (the "Partnership") has been
formed as a limited partnership under the Delaware Revised Uniform Limited
Partnership Act (6 Del.C. Section 17-101, et seq.) (the "Act") pursuant to a
Certificate of Limited Partnership of the Partnership, as filed with the office
of the Secretary of State of the State of Delaware (the "Secretary of State") on
May 15, 1987, (as amended, the "Certificate"), and an Agreement of Limited
Partnership of the Partnership, dated as of May 15, 1987 (as amended and
restated, and subsequently amended, the "Agreement"),
WHEREAS, PALP is the sole general partner of the Partnership;
WHEREAS, PALP desires to assign, transfer and convey all of its .01
percent (.01%) interest in the Partnership as a general partner of the
Partnership (the "General Partner Interest") to PGP and PALP desires to withdraw
from the Partnership as a general partner of the Partnership;
<PAGE> 2
WHEREAS PGP desires to purchase the General Partner Interest
presently held by PALP, and PGP desires to be admitted to the Partnership as a
successor general partner of the Partnership,
WHEREAS, PALP and PGP desire to accomplish the foregoing in
accordance with the Agreement which Agreement expressly permits the consummation
of the foregoing transactions without any further act, vote or approval of any
limited partner of the Partnership; and
WHEREAS, the undersigned, being all of the partners of the
Partnership, to accomplish the foregoing, desire to amend the Agreement in the
manner set forth herein.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Assignment. Notwithstanding any provision in the Agreement to the
contrary, for value received, the receipt and sufficiency of which are hereby
acknowledged, upon the execution of this Assignment and Amendment Agreement by
the parties hereto, PALP does hereby assign, transfer and convey the General
Partner Interest to PGP. PALP has made an Assignment Determination (as defined
in the Agreement) and a Tax Determination (as defined in the Agreement) prior to
the assignment and transfer described in this Section 1. PGP shall pay $80,000
to PALP for the General Partner Interest hereby being assigned to PGP.
2. Admission. Notwithstanding any provision in the Agreement to the
contrary, PGP is hereby admitted to the Partnership as a general partner of the
Partnership. The admission shall be effective upon the filing of an amendment to
the Certificate in the office of the Secretary of State which reflects the fact
that PGP is a general partner of the
-2-
<PAGE> 3
Partnership and shall occur, and for all purposes shall be deemed to have
occurred, immediately prior to the withdrawal of PALP from the Partnership as a
general partner of the Partnership.
3. Withdrawal. Notwithstanding any provision in the Agreement to the
contrary, PALP hereby withdraws from the Partnership as a general partner of the
Partnership. The withdrawal shall be effective upon the filing of an amendment
to the Certificate in the office of the Secretary of State which reflects the
fact that PALP is not a general partner of the Partnership and shall occur, and
for all purposes shall be deemed to have occurred, immediately after the
admission of PGP to the Partnership as a general partner of the Partnership.
4. Continuation. The parties hereto agree that following the
withdrawal of PALP from the Partnership as a general partner of the Partnership,
PGP is authorized to and hereby agrees to continue the business of the
Partnership without dissolution.
5. Books and Records. PGP shall take all actions necessary under the
Act and the Agreement, to evidence the withdrawal of PALP from the Partnership
as a general partner of the Partnership and the admission of PGP to the
Partnership as a general partner of the Partnership.
6. Future Cooperation. Each of the parties hereto agrees to
cooperate at all times from and after the date hereof with respect to all of the
matters described herein, and to execute such further assignments, releases,
assumptions, amendments of the Agreement, notifications and other documents as
may be reasonably requested for the
-3-
<PAGE> 4
purpose of giving effect to, or evidencing or giving notice of, the transactions
contemplated by this Assignment and Amendment Agreement.
7. Binding Effect, This Assignment and Amendment Agreement shall be
binding upon, and shall enure to the benefit of, the parties hereto and their
respective successors and assigns.
8. Execution in Counterparts. This Assignment and Amendment
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
9. Agreement in Effect. Except as hereby amended, the Agreement
shall remain in full force and effect.
10. Governing Law. This Assignment and Amendment Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
Delaware, all rights and remedies being governed by such laws, without regard to
its conflict of laws rules.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Amendment Agreement to be duly executed as of the day and year first above
written.
PIMCO PARTNERS, G.P.
By: Pacific Investment Management Company,
a General Partner
By: [SIG]
---------------------------------------------
Name:
Title:
-4-
<PAGE> 5
BY: PIMCO PARTNERSHIP
a General Partner
BY: [SIG]
---------------------------------------------
Name:
Title:
PIMCO ADVISORS L.P.
By: /s/ KENNETH M. POOVEY
------------------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
LIMITED PARTNERS
All Limited Partners that have been, or are
hereafter, admitted as limited partners of the
Partnership, pursuant to powers of attorney or
other authorizations recited in favor of or
granted to the General Partner
By: PIMCO ADVISORS L.P.,
general partner
By: /s/ KENNETH M. POOVEY
------------------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
-5-
<PAGE> 1
EXHIBIT 3.1.4
AMENDMENT
OF
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
OPPENHEIMER CAPITAL, L.P.
This amendment (this "Amendment") dated as November 4, 1997 is made by
PIMCO Advisors L.P., a Delaware limited partnership, in its capacity as sole
general partner (the "General Partner") of Oppenheimer Capital, L.P., a Delaware
limited partnership (the "Partnership"), pursuant to Section 16.01 of the
Amended and Restated Agreement of Limited Partnership, as amended (the
"Partnership Agreement") of the Partnership. Capitalized terms used in this
Amendment which are not defined herein are defined in the Partnership Agreement.
This Amendment is made so as to conform the Partnership Agreement to the
changes in the Code and relevant provisions of state income tax laws which
permit a limited partnership to be taxed as a partnership without regard to the
economic interest of the general partners, and to conform the fiscal year of the
Partnership to that of the General Partner.
1. Section 5.01(b) of the Partnership Agreement is amended to read in full
as follows:
"(b) The General Partner entered into a subscription agreement pursuant
to which it agreed to make a capital contribution in cash on demand in an amount
equal to 1.01% of the aggregate of the initial capital contributions of the
Limited Partners, reduced to the extent of any capital contribution thereafter
made by the General Partner, so as to ensure that the sum of the General
Partner's Capital Account and its obligations pursuant to its subscription
agreement shall not be less than one percent of the total Capital of all
Partners. Notwithstanding such subscription agreement, (i) upon the
effectiveness of this Amendment, the General Partner shall exchange 99% of its
general partner interest for Units as provided in Section 9.01(c), and (ii)
thereafter, the General Partner shall be required to make only such Capital
Contributions as shall be sufficient to ensure that the General Partner's
Capital Account shall not be less than one-hundredth of one percent of the total
Capital Accounts of all Partners."
2. In Section 5.02(b), the number "101.01%" is changed to "100.0101%"
3. The first sentence of Section 6.01 is amended to read: "The fiscal year
(the "Fiscal Year") of the Partnership for Partnership accounting
purposes shall be the calendar year."
4. In Section 6.03, the number "1%" is changed to "0.01%," and the number
"99%" is changed to "99.99%."
5. In Section 6.7(b), the number "1%" is changed to "0.01%," and the number
"99%" is changed to "99.99%."
<PAGE> 2
6. This Amendment shall be binding upon, and shall enure to the benefit
of, the parties hereto and their respective successors and assigns.
7. Except as amended by this Amendment, the Partnership Agreement shall
remain in full force and effect.
8. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, all rights and
remedies being governed by such laws, without regard to principles of
conflict of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
GENERAL PARTNER
PIMCO ADVISORS L.P.
By: /s/ KENNETH M. POOVEY
---------------------------
Kenneth M. Poovey
Executive Vice President
LIMITED PARTNERS
All Limited Partners that have been or
are hereafter, admitted as limited
partners of the Partnership, pursuant
to powers of attorney or other
authorizations recited in favor of or
granted to the General Partner
By: PIMCO Advisors L.P. General Partner
By: /s/ KENNETH M. POOVEY
---------------------------------
Kenneth M. Poovey
Executive Vice President
<PAGE> 1
EXHIBIT 3.1.5
AMENDMENT TO
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL, L.P.
This Amendment to Amended and Restated Limited Partnership Agreement of
Oppenheimer Capital, L.P., dated as of December 1, 1997 (this "Amendment"), is
entered into by and among PIMCO Partners, G.P., a California general
partnership, and the general partner (the "General Partner"), and all other
persons or entities who are or shall in the future become, limited partners.
W I T N E S S E T H :
WHEREAS, Oppenheimer Capital, L.P. (the "Partnership") has been formed
as a limited partnership under the Delaware Revised Uniform Limited Partnership
Act (6 Del.C. ss.17-101, et seq.) (the "Act") pursuant to a Certificate of
Limited Partnership of the Partnership, as filed with the Office of the
Secretary of State of the State of Delaware on May 15, 1987, and an Agreement of
Limited Partnership of the Partnership, dated as of May 15, 1987 (as amended and
restated, and subsequently amended, the "Partnership Agreement");
WHEREAS, the General Partner is the sole general partner of the
Partnership;
WHEREAS, the General Partner desires to amend the Partnership Agreement
in accordance with Section 16.01 of the Partnership Agreement; and
WHEREAS, the General Partner has determined that this Amendment does
not adversely affect the Limited Partners (as defined in the Partnership
Agreement) in any material respect;
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Amendment to Section 6.01 of the Partnership Agreement. Section 6.01
of the Partnership Agreement is hereby amended by deleting the date "April 30"
in the first
<PAGE> 2
sentence of Section 6.01 of the Partnership Agreement, and inserting in lieu
thereof, the date "December 31".
2. Future Cooperation. Each party hereto agrees to cooperate at all
times from and after the date hereof with respect to all of the matters
described herein, and to execute such further documents as may be reasonably
requested for the purpose of giving effect to, or evidencing the transactions
contemplated by, this Amendment.
3. Binding Effect. This Amendment shall be binding upon, and shall
enure to the benefit of, the Partners (as defined in the Partnership Agreement)
and their respective successors and assigns.
4. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
5. Agreement in Effect. Except as hereby amended, the Partnership
Agreement shall remain in full force and effect.
6. Governing Law. This Amendment shall be governed by, and interpreted
in accordance with, the laws of the State of Delaware, all rights and remedies
being governed by such laws, without regard to principles of conflict of laws
rules.
<PAGE> 3
IN WITNESS WHEREOF, the Partners have caused this Amendment to be duly
executed as of the day and year first above written.
GENERAL PARTNER:
PIMCO PARTNERS, G.P.
By: /s/ RICHARD M. WEIL
--------------------------------
Richard M. Weil
Senior Vice President
Pursuant to authorization
granted to the Management Board
pursuant to that certain Written
Action dated November 4, 1997
LIMITED PARTNERS
All Limited Partners that have been,
or are hereafter admitted as limited
partners of the Partnership, pursuant
to powers of attorney or other
authorizations recited in favor of or
granted to the General Partner.
By: PIMCO PARTNERS, G.P.,
its General Partner
By: /s/ RICHARD M. WEIL
--------------------------------
Richard M. Weil
Senior Vice President
Pursuant to authorization
granted to the Management Board
pursuant to that certain Written
Action dated November 4, 1997
<PAGE> 1
EXHIBIT 3.1.6
AMENDMENT TO
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL, L.P.
This Amendment to Amended and Restated Limited Partnership Agreement of
Oppenheimer Capital, L.P., dated as of December 1, 1997 (this "Amendment"), is
entered into by and among PIMCO Partners, G.P., a California general partnership
and the general partner (the "General Partner"), and all other persons or
entities who are or shall in the future become, limited partners.
W I T N E S S E T H :
WHEREAS, Oppenheimer Capital, L.P. (the "Partnership") has been formed
as a limited partnership under the Delaware Revised Uniform Limited Partnership
Act (6 Del.C. ss.17-101, et seq.) (the "Act") pursuant to a Certificate of
Limited Partnership of the Partnership, as filed with the Office of the
Secretary of State of the State of Delaware on May 15, 1987, and an Agreement of
Limited Partnership of the Partnership, dated as of May 15, 1987 (as amended and
restated, and subsequently amended, the "Partnership Agreement");
WHEREAS, the General Partner is the sole general partner of the
Partnership;
WHEREAS, the General Partner desires to amend the Partnership Agreement
in accordance with Section 16.01 of the Partnership Agreement; and
WHEREAS, the General Partner has determined that this Amendment does
not adversely affect the Limited Partners (as defined in the Partnership
Agreement),
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Amendment to Section 16.04 of the Partnership Agreement. Section
16.04 of the Partnership Agreement is hereby amended by deleting the number
"twenty-five percent (25%)" in the first sentence of Section 16.04 of the
Partnership Agreement, and inserting in lieu thereof, the number "ten percent
(10%)".
<PAGE> 2
2. Amendment to Section 16.12 of the Partnership Agreement. Section
16.12 of the Partnership Agreement is hereby amended by deleting the number
"forty-five (45)" in the second sentence of Section 16.12 of the Partnership
Agreement, and inserting in lieu thereof, the number "ninety (90)".
3. Future Cooperation. Each party hereto agrees to cooperate at all
times from and after the date hereof with respect to all of the matters
described herein, and to execute such further documents as may be reasonably
requested for the purpose of giving effect to, or evidencing the transactions
contemplated by, this Amendment.
3. Binding Effect. This Amendment shall be binding upon, and shall
enure to the benefit of, the Partners (as defined in the Partnership Agreement)
and their respective successors and assigns.
4. Execution in Counterparts. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
5. Agreement in Effect. Except as hereby amended, the Partnership
Agreement shall remain in full force and effect.
6. Governing Law. This Amendment shall be governed by, and interpreted
in accordance with, the laws of the State of Delaware, all rights and remedies
being governed by such laws, without regard to principles of conflict of laws
rules.
<PAGE> 3
IN WITNESS WHEREOF, the Partners have caused this Amendment to be duly
executed as of the day and year first above written.
GENERAL PARTNER:
PIMCO PARTNERS, G.P.
By: /s/ RICHARD M. WEIL
-----------------------------------
Richard M. Weil
Senior Vice President
Pursuant to authorization granted
to the Management Board pursuant to
that certain Written Action dated
November 4, 1997
LIMITED PARTNERS
All Limited Partners that have been,
or are hereafter admitted as limited
partners of the Partnership, pursuant
to powers of attorney or other
authorizations recited in favor of or
granted to the General Partner.
By: PIMCO PARTNERS, G.P.,
its General Partner
By: /s/ RICHARD M. WEIL
-----------------------------------
Richard M. Weil
Senior Vice President
Pursuant to authorization granted
to the Management Board pursuant to
that certain Written Action dated
November 4, 1997
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
December 10, 1997
Oppenheimer Capital, L.P.
800 Newport Center Drive, Suite 100
Newport Beach, California 92660
Re: Oppenheimer Capital, L.P.
-------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Oppenheimer Capital,
L.P., a Delaware limited partnership ("Opcap LP"), in connection with the
matters set forth herein. At your request, this opinion is being furnished to
you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of executed or
conformed counterparts, or copies, of the following:
(a) The organizational documents of Opcap LP, listed on Schedule A
attached hereto;
(b) Amendment No. 1 to the registration statement (the "Registration
Statement") on Form S-1, including a prospectus (the "Prospectus"), as filed by
Opcap LP with the Securities and Exchange Commission on December 10, 1997; and
(c) A Certificate of Good Standing for Opcap LP, dated December 10,
1997, obtained from the Secretary of State of the State of Delaware.
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Oppenheimer Capital, L.P.
December 10, 1997
Page 2
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Opcap LP Agreement (as defined in Schedule A hereto).
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (c) above. In particular,
we have not reviewed any document (other than the documents listed in
paragraphs (a) and (c) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent
with the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
accurate and complete in all material respects.
With respect to all documents examined by us, we have assumed that (i)
all signatures on documents examined by us are genuine, (ii) all documents
submitted to us as originals are authentic, and (iii) all documents submitted
to us as copies conform with the original copies of those documents.
For purposes of this opinion, we have assumed (i) that at the time of
the issuance of the Units (as defined in the Opcap LP Agreement) in accordance
with the Registration Statement (the "Opcap LP Units"), the Opcap LP Agreement
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof including with respect to the admission of partners to,
and the creation, operation, management and termination of Opcap LP, and that
the Opcap LP Agreement and the Opcap LP Certificate are in full force and
effect and have not been amended, (ii) except to the extent provided in
paragraph 1 below, the due organization, incorporation or formation, as the
case may be, and valid existence in good standing of each party to the
documents examined by us under the laws of the jurisdiction governing its
organization, incorporation or formation and the legal capacity of natural
persons who are signatories to the documents examined by us, (iii) that each of
the parties to the documents examined by us has the power and authority to
execute and deliver, and to perform its obligations under, such documents, (iv)
the due authorization, execution and delivery by all parties thereto of all
documents examined by us, (v) that the Opcap LP Units are issued to the public
limited partners (the "Additional Limited Partners") of PIMCO Advisors LP, a
Delaware limited partnership, in accordance with the Registration Statement and
the Opcap LP Agreement, and (vi) that prior to the issuance of Units to the
Additional Limited Partners, (a) Opcap LP shall have received an opinion of a
nationally recognized investment banking firm (but not an investment banking
firm which is an Affiliate of the General Partner) that such issuance of Units
to the Additional Limited Partners in accordance with the Registration
Statement is fair to the Limited Partners who are not Affiliates of the General
Partner from a financial point of view, and (b) the General Partner makes an
Assignment Determination and a Tax Determination pursuant
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Oppenheimer Capital, L.P.
December 10, 1997
Page 3
to Section 9.01(d) of the Opcap LP Agreement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered only
with respect to Delaware laws and rules, regulations and orders thereunder
which are currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. Opcap LP is validly existing in good standing as a limited
partnership under the laws of the State of Delaware.
2. Assuming that the Additional Limited Partners, as limited partners of
Opcap LP, do not participate in the control of the business of Opcap LP, upon
issuance of the Units in accordance with the Registration Statement, the Units
will be validly issued and will represent valid and, subject to the
qualifications set forth herein, will be fully paid and nonassessable limited
partner interest in Opcap LP, as to which the Additional Limited Partners, as
limited partners of Opcap LP, will have no liability in excess of their
obligations to make payments expressly provided for in the Opcap LP Agreement
and their share of Opcap LP's assets and undistributed profits (subject to the
obligation of an additional limited partner of Opcap LP to repay any funds
wrongfully distributed to it).
3. There are no provisions in the Opcap LP Agreement the inclusion of
which, subject to the terms and conditions therein, or, assuming that the
Additional Limited Partners, as limited partners of Opcap LP, take no action
other than actions permitted by the Opcap LP Agreement, the exercise of which,
in accordance with its terms and conditions therein, would cause the Additional
Limited Partners, as limited partners of Opcap LP, to be deemed to be
participating in the control of the business of Opcap LP.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 as amended, or the rules and regulations of the
Securities and Exchange Commission. Except as stated above, without our prior
written consent, this opinion may not be furnished or quoted to, or relied upon
by, any other Person for any purpose.
Very truly yours,
JGL/SHS/sc
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SCHEDULE A
1. The Certificate of Limited Partnership of Opcap LP, dated as of May
15, 1987, as filed in the office of the Secretary of State of the State of
Delaware (the "Secretary of State") on May 15, 1987.
2. The Agreement of Limited Partnership of Opcap LP, dated as of May
15, 1987.
3. The Amended and Restated Certificate of Limited Partnership of Opcap
LP, dated as of June 30, 1987, as filed in the office of the Secretary of State
on June 30, 1987.
4. The Amended and Restated Agreement of Limited Partnership of Opcap
LP, dated as of June 29, 1987.
5. The Amended and Restated Agreement of Limited Partnership of Opcap
LP, dated as of July 9, 1987.
6. The Amended and Restated Agreement of Limited Partnership of Opcap
LP, dated as of March 14, 1991 (the "Amended and Restated Opcap LP Agreement").
7. The Assignment of General Partner Interest and Amendment to the
Amended and Restated Opcap LP Agreement, dated as of November 4, 1997
("Amendment No. 1"), relating to the transfer of general partner interest by
Oppenheimer Financial Corp. to PIMCO Advisors L.P.
8. The Amended and Restated Certificate of Limited Partnership of Opcap
LP, dated as of November 4, 1997, as filed in the office of the Secretary of
State on November 4, 1997.
9. The Amendment of the Amended and Restated Opcap LP Agreement, dated
as of November 4, 1997 ("Amendment No. 2"), relating to the reduction of the
general partner interest from 1% to .01%.
10. The Assignment of General Partner Interest and Amendment to the
Amended and Restated Opcap LP Agreement, dated as of November 4, 1997
("Amendment No. 3"), relating to the transfer of the .01% general partner
interest in Opcap LP to PIMCO Partners, G.P., a California general partnership
(the Amended and Restated Opcap LP Agreement as amended by Amendment No. 1,
Amendment No. 2 and Amendment No. 3 is hereinafter referred to as the "Opcap LP
Agreement").
11. The Amended and Restated Certificate of Limited Partnership of Opcap
LP, dated as of November 4, 1997 (the "Opcap LP Certificate"), as filed in the
office of the Secretary of State on November 4, 1997, naming PIMCO Partners,
G.P. as the general partner of Opcap LP.
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EXHIBIT 10.6.2
FIRST AMENDMENT TO THE PIMCO ADVISORS L.P.
EXECUTIVE DEFERRED COMPENSATION PLAN
PIMCO Advisors L.P., a Delaware limited partnership, by
resolution of its Equity Board, adopted The PIMCO Advisors L.P. Executive
Deferred Compensation Plan (the "Plan"), effective as of December 1, 1996, for
the benefit of its employees who are Eligible Participants (as defined therein)
in the Plan.
In order to provide for the issuance of restricted Class A Units
(as defined in the Plan) and Class B Units (as defined herein) to be deferred in
connection with the Plan, this First Amendment to the Plan has been adopted by
the Equity Board of the Partnership, effective as of June 1, 1997. This First
Amendment and the Plan constitute the Plan in its entirety.
Article XI is hereby added to read in its entirety as follows:
ARTICLE XI
DEFERRALS OF RESTRICTED UNITS
Section 11.1 - Definitions
Whenever the following terms are used in the Plan with the first
letter capitalized, they shall have the meanings specified below unless the
context clearly indicates to the contrary.
(a) "Class B Units" shall mean Class B units of limited
partner interest in the Partnership.
(b) "Restricted Class A Units" shall mean Class A Units
issued by the Partnership to the Trustee under the Plan that are subject
to vesting conditions specified by the Equity Board upon the issuance of
such Class A Units.
(c) "Restricted Class B Units" shall mean Class B Units
issued by the Partnership to the Trustee under the Plan that are subject
to vesting conditions specified by the Equity Board upon the issuance of
such Class B Units.
(d) "Restricted Unit Account" of a Participant shall mean
his individual account and all subaccounts therein, if any, in the Plan
established in accordance with Section 11.2.
(e) "Restricted Units" shall mean Restricted Class A Units
or Restricted Class B Units, or both.
(f) "Vested," when used with reference to a Participant's
Restricted Unit Account (and the subaccounts therein, if any) shall mean
nonforfeitable, except as provided in the Plan.
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Section 11.2 - Restricted Unit Account
(a) The Trustee shall establish and maintain for each Participant
a Restricted Unit Account to which shall be credited the number of Restricted
Class A Units and Restricted Class B Units allocated thereto under Section 11.3.
(b) To the extent the Restricted Class A Units or Restricted
Class B Units credited to a Participant's Restricted Unit Account vest in
accordance with the terms and conditions of the issuance of such Restricted
Units, such Account shall be credited with the number of Class A Units or Class
B Units, as the case may be, that vest in accordance with the terms and
conditions of such issuance, and such Account shall be debited with such number
of Restricted Class A Units or Restricted Class B Units.
(c) A Participant's Restricted Unit Account and shall be credited
or debited with the amounts determined under Section 11.5, debited the amounts
forfeited under Sections 11.6 or 11.7, and debited the amounts distributed under
Section 11.8 or 11.9.
Section 11.3 - Issuance of Deferred Restricted Units
The Equity Board of the Partnership may from time to time issue
Restricted Class A Units or Restricted Class B Units to the Trustee on behalf of
a Participant under the Plan. Except as otherwise provided in Section 11.7,
Class A Units, Class B Units or other amounts credited to a Participant's
Restricted Unit Account hereunder shall be distributed to the Participant on a
deferred basis in accordance with this Article XI. The Equity Board of the
Partnership shall determine, in its sole discretion,
(a) the Participants on whose behalf Restricted Units
deferred under the Plan are to be issued,
(b) the number and type of Restricted Units issued on
behalf of any Participant,
(c) the vesting terms and conditions applicable to the
Restricted Units issued on behalf of a Participant,
(d) the minimum period for which such Restricted Units
shall be deferred, and
(e) the other terms and conditions applicable to the
Restricted Units issued on behalf of a Participant.
A Participant shall receive written notice of the issuance of Restricted Units
on behalf of such Participant under the Plan. The terms and conditions of such
issuance shall be set forth in a Deferred Restricted Unit Agreement, which shall
be in such form as is determined by the Equity Board.
2
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Section 11.4 - Deferral Election
A Participant on whose behalf Restricted Units under the Plan are
issued shall elect the number of years that such Restricted Units shall be
deferred, and shall elect the form of distribution of the Class A Units, Class B
Units and other amounts to be distributed from such Participant's Restricted
Unit Account. A Participant shall set forth on his Restricted Unit deferral
form:
(a) his consent that he, his successors in interest and
assigns and all persons claiming under him shall be bound, to the extent
authorized by law, by the statements contained therein and by the
provisions of the Plan as they then exist and as they may be amended
from time to time,
(b) the number of years (not to be less than five, or, if
greater, such minimum number of years specified by the Equity Board in
the Deferred Restricted Unit Agreement) that such Restricted Units shall
be deferred pursuant to this Article XI,
(c) the form of distribution of the Class A Units, Class B
Units and other amounts credited to such Account elected in accordance
with Section 11.8,
(d) whether, and the extent to which, interest and
distributions in respect of such Participant's Restricted Unit Account
shall be reinvested by the Trustee in Class A Units or Class B Units,
and
(e) such other information as may be required for the
administration of the Plan.
Such Restricted Unit deferral form shall be in the form specified by the
Committee from time to time. A Participant shall complete and deliver his
Restricted Unit deferral form not less than 30 days after the issuance of
Restricted Units on behalf of such Participant under the Plan.
Section 11.5 - Reinvestment of Unit Distributions
(a) To the extent directed by a Participant, amounts distributed
in respect of the Restricted Class A Units or Class A Units credited to such
Participant's Restricted Unit Account shall be reinvested by the Trustee in
Class A Units. Absent such direction, amounts distributed in respect of the
Restricted Class A Units or Class A Units credited to such Participant's
Restricted Unit Account shall be distributed in accordance with such
Participant's directions set forth on his Restricted Unit deferral form.
(b) To the extent directed by a Participant, amounts distributed
in respect of the Restricted Class B Units or Class B Units credited to such
Participant's Restricted Unit Account shall be reinvested by the Trustee in
Class B Units. Absent such direction, amounts distributed in respect of the
Restricted Class B Units or Class B Units credited to such Participant's
Restricted Unit Account shall be distributed in accordance with such
Participant's directions set forth on his Restricted Unit deferral form.
3
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Section 11.6 - Vesting of Restricted Units; Vesting of Restricted Unit Accounts
(a) The Restricted Units credited to a Participant's Restricted
Unit Account shall vest or be forfeited in accordance with the terms and
conditions of the issuance of such Restricted Units. Any Restricted Units that
are forfeited in accordance with such issuance shall be transferred and
distributed by the Trustee to the Partnership.
(b) Except as provided in subsection (a) and Section 11.7, a
Participant's interest in his Restricted Unit Account shall at all times be
Vested.
Section 11.7 - Forfeiture upon Certain Events
Upon a Participant's Termination of Employment, all Class A
Units, Class B Units or other investments credited to the Participant's
Restricted Unit Account hereunder shall continue to be held by the Trustee until
the expiration of the deferral periods prescribed by Section 11.8; provided,
however, that all Restricted Class A Units, Restricted Class B Units, Class A
Units, Class B Units or other amounts credited to such Participant's Restricted
Unit Account hereunder shall be forfeited, and shall be transferred and
distributed by the Trustee to the Partnership, in the event that the Committee
determines that such forfeiture is merited because such Participant has engaged
in gross misconduct, including fraud, theft, serious violations of federal or
state securities laws or regulations, or willful and persistent violation of the
Partnership's or any Employer's policies established for the purpose of
compliance with federal or state securities laws.
Section 11.8 - Deferral Period; Distribution of Class A Units, Class B and Other
Investments
(a) The Class A Units, Class B Units and other amounts credited
to a Participant's Restricted Unit Account hereunder shall be distributed to
such Participant at the expiration of the deferral period applicable to the
Restricted Units credited to such Account. The Trustee shall, subject to Section
10.5, transfer to the Participant the number of Class A Units, Class B Units and
other amounts credited to the appropriate subaccount of his Restricted Unit
Account, less any amounts required to be withheld by law, in one of the
following methods, as elected by the Participant upon the issuance of such
Restricted Units:
(i) The transfer of such Class A Units, Class B Units and
other amounts in one lump sum, or
(ii) The transfer of such Class A Units, Class B Units and
other amounts in any fixed number of annual or more frequent
installments (not exceeding 20 years or four installments per year) as
is designated by such Participant, the number of Class A Units or Class
B Units included in each such installment to be determined by dividing
the then current number of Class A Units or Class B Units to be
transferred by the remaining number of installments to be paid;
provided, however, that if the Participant fails to make such an election within
30 days after the issuance of such Restricted Units, the applicable subaccount
of his or her Restricted Unit Account shall be distributed as provided in
paragraph (i).
4
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(b) If a Participant elects to receive Class A Units, Class B
Units and other amounts in one lump sum as provided in paragraph (i) of
subsection (a), then the Participant shall receive the Class A Units, Class B
Units and other amounts to be transferred not later than the date which is 30
days after the end of the expiration of the applicable deferral period. If a
Participant elects to receive Class A Units, Class B Units and other amounts in
installments as provided in paragraph (ii) of subsection (a), then the
Participant shall receive each installment of the Class A Units, Class B Units
and other amounts to be transferred not later than 30 days after the end of each
installment period.
(c) A Participant's Restricted Unit Account (and the applicable
subaccount therein) shall be debited with the Class A Units, Class B Units and
other amounts distributed to such Participant in accordance with this Section
11.8.
Section 11.9 - Benefits upon Death of a Participant
(a) Upon the death of a Participant, and subject to Section 10.5,
any Class A Units, Class B Units and other amounts credited to the Participant's
Restricted Unit Account, less any amounts required to be withheld by law, shall
be distributed by the Trustee in one lump sum to such Participant's Beneficiary
or Beneficiaries, notwithstanding the deferral period set forth in this Article
XI. Such payment shall be made not later than 60 days after the end of the
calendar quarter in which the Participant's death occurs. For purposes of this
Section 11.9, a Participant's Beneficiary or Beneficiaries shall be such
Participant's Beneficiary or Beneficiaries as determined in accordance with
Section 8.2.
(b) A Participant's Restricted Unit Account shall be debited with
the Class A Units, Class B Units and other amounts distributed to such
Participant's Beneficiary or Beneficiaries in accordance with this Section 11.9.
Section 11.10 - Other Provisions
(a) Except as otherwise provided in this Article XI, all
Restricted Unit Accounts established pursuant to this Article, and the rights of
all Participants thereunder, shall be subject to the applicable provisions of
the Plan, and any Rules of the Plan as may be established pursuant to the terms
thereof. All amounts held by the Trustee pursuant to the Restricted Unit
Accounts shall be subject to the applicable provisions of the Plan and the Trust
Agreement.
(b) A Participant shall have no right to receive a distribution
of the Class A Units, Class B Units or other amounts credited to his Restricted
Unit Account, except to the extent that such Class A Units, Class B Units or
other amounts become Vested in accordance with the terms of the Deferred
Restricted Unit Agreement pursuant to which the Restricted Units were issued to
such Participant's Restricted Unit Account and such Class A Units, Class B Units
or other amounts are distributed in accordance with this Article XI.
(c) No part of the Restricted Unit Account of a Participant shall
be liable for the debts, contracts or engagements of such Participant, his
Beneficiary or Beneficiaries or successors in interest, or be taken in execution
by levy, attachment or garnishment or by any other
5
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legal or equitable proceeding, nor any such person have any rights to alienate,
anticipate, commute, pledge, encumber or assign any benefits hereunder in any
manner whatsoever except to designate a Beneficiary or Beneficiaries as provided
in Section 11.9.
(d) The rights of a Participant to Restricted Units, Class A
Units, Class B Units or any other amounts credited to his Restricted Unit
Account shall be no greater than the rights of an unsecured general creditor of
the Employer, as provided in Section 10.3.
Executed at Newport Beach, California.
PIMCO ADVISORS L.P.
By:
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Title:
---------------------------
Date:
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6
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EXHIBIT 10.6.3
SECOND AMENDMENT TO THE PIMCO ADVISORS L.P.
EXECUTIVE DEFERRED COMPENSATION PLAN
PIMCO Advisors L.P., a Delaware limited partnership, by
resolution of its Equity Board, adopted The PIMCO Advisors L.P. Executive
Deferred Compensation Plan (the "Plan"), effective as of December 1, 1996, for
the benefit of its employees who are Eligible Participants (as defined therein)
in the Plan.
In order to provide for participation in the Plan by individuals
liable to income tax in Canada, this Second Amendment to the Plan has been
adopted by the Equity Board of the Partnership, effective as of August ___,
1997. This Second Amendment, together with the First Amendment and the Plan,
constitute the Plan in its entirety.
Article XII is hereby added to the Plan to read in its entirety
as follows.
ARTICLE XII
BENEFITS EARNED WHILE A RESIDENT OF CANADA
Section 12.1 - Definitions
Except as expressly provided in this Section 12.1, words and
phrases defined in the Plan shall have the same meanings in this Article XII as
they do elsewhere in the Plan. Whenever the following terms are used in this
Article XII with the first letter capitalized, they shall have the meanings
specified below unless the context clearly indicates to the contrary.
(a) "Additional Amount" shall mean any Class A Units
credited to a Participant's Deferral Account under Section 6.2(c) of the
Plan.
(b) "Canadian Balance," in relation to the Deferral
Account of a Participant for a Plan Year, shall mean that portion, if
any, of the Deferral Account that can reasonably be considered to relate
to Canadian Compensation of the Participant for such Plan Year.
(c) "Canadian Compensation" for any Plan Year shall mean
1. that portion, if any, of the Compensation of a
Participant for the Plan Year attributable to the period in such
Plan Year during which such Participant is a resident of Canada;
and
2. any Additional Amount credited to a
Participant's Deferral Account at a time in such Plan Year when
such Participant is a Resident of Canada.
(d) "Resident of Canada" shall mean an individual liable
to income tax in Canada under the laws of Canada by reason of the
individual's residence in Canada.
<PAGE> 2
Section 12.2 - Bonus Compensation Limit
The amount of a Participant's Canadian Compensation for a Plan
Year that is deferred under the Plan shall not exceed the portion of the
Canadian Compensation that can reasonably be considered to be Bonus Compensation
(at the sole discretion of the Committee) of such Participant for the Plan Year.
Section 12.3 - Special Vesting Schedule
Notwithstanding any provisions in this Plan to the contrary, a
Participant's Canadian Balance in relation to a Plan Year shall vest in and be
distributed to such Participant no later than the end of the third year
immediately following such Plan Year.
Executed at Newport Beach, California.
PIMCO ADVISORS L.P.
By:
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Title:
-----------------------------
Date:
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2
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EXHIBIT 10.11
OPERATING AGREEMENT
This Operating Agreement (this "Agreement") is entered into as of
November 30, 1997 by and between Oppenheimer Capital, L.P., a Delaware limited
partnership ("Opcap"), and PIMCO Advisors L.P., a Delaware limited partnership
("PIMCO Advisors"). Capitalized terms not otherwise defined herein are defined
in the Amended and Restated Agreement of Limited Partnership of PIMCO Advisors
(the "PIMCO Advisors Partnership Agreement").
RECITALS
1. On the date of this Agreement, the general partner of PIMCO
Advisors admitted Opcap as an additional general partner of PIMCO Advisors.
2. Upon the closing of the transactions (the "Merger") contemplated
by that certain Agreement and Plan of Merger dated as of November 4, 1997
between PIMCO Advisors, Value Advisors Transitory L.P., a Delaware limited
partnership, and Oppenheimer Capital, a Delaware general partnership
("Oppenheimer Capital"), Opcap will be issued 24,981,285 Class A GP Units in
exchange for (i) its interest in Oppenheimer Capital and (ii) cash in the amount
of approximately $32,200,000.
3. Following the Merger, the general partners of PIMCO Advisors will
effect a restructuring (the "Restructuring") pursuant to which all Class A LP
Units held by Public Unitholders will be exchanged for units of limited partner
interest in Opcap (each, an "Opcap Unit").
4. Immediately following the Restructuring, the trading of the Class
A LP Units on the New York Stock Exchange will cease, and Opcap will be the sole
publicly traded company through which Partnership Interests in PIMCO Advisors
are held.
5. The parties wish to confirm their mutual understanding with
regard to their relationship following the Restructuring.
AGREEMENT
Section 1. Definitions.
Exchange is defined in Section 5(a).
Exchange Right is defined in Section 3.
<PAGE> 2
Exchanging Unitholder is defined in Section 5(b).
Merger is defined in the Recitals to this Agreement.
Opcap Unit is defined in the Recitals to this Agreement.
Oppenheimer Capital is defined in the Recitals to this Agreement.
PIMCO Advisors Partnership Agreement is defined in the Recitals to
this Agreement.
PIMCO Advisors Unit means a Class A or Class B GP or LP Unit.
Private Unit means a PIMCO Advisors Unit (i) designated as a Private
Unit in a written certificate executed by PIMCO Advisors and not subsequently
revoked, (ii) issued pursuant to a Unit Incentive Plan covering PIMCO Advisors
Units, or (iii) held by the noteholders pursuant to that certain Amended and
Restated Note Agreement, dated as of September 26, 1997, as amended, between
such noteholders and PIMCO Partners G.P., a California general partnership.
Private Unitholder is defined in Section 5(a).
Registration Statement is defined in Section 5(a).
Restructuring is defined in the Recitals to this Agreement.
Unit Incentive Plan means a plan (including without limitation a
deferred compensation plan) providing for the issuance of Equity Securities,
options or rights to acquire Equity Securities, or rights based upon the value
of Equity Securities or otherwise relating to Equity Securities, to or for the
benefit of individuals providing services to the Persons specified therein.
1994 Registration Rights Agreement is defined in Section 3.
Section 2. Unit Parity.
(a) Opcap shall take such actions as shall be required from
time to time so as to ensure that the number of outstanding Opcap Units is at
all times equal to the number of PIMCO Advisors Units held by Opcap and its
Subsidiaries which are allocable to the limited partner interests in Opcap.
(b) Upon any issuance of Opcap Units, Opcap shall immediately
contribute the consideration, if any, received by Opcap for such Opcap Units to
PIMCO Advisors in exchange for Class A GP Units equal in number to the number of
such Opcap Units.
2
<PAGE> 3
Section 3. Assumption of Certain Obligations of PIMCO Advisors.
Opcap hereby assumes and agrees to perform the obligations of PIMCO
Advisors under:
(i) the 1993 Unit Option Plan, 1994 Class B LP Unit Option
Plan and 1996 Unit Incentive Plan of PIMCO Advisors, but with regard to options
outstanding immediately after giving effect to the Restructuring, only to the
extent such options are exercisable to purchase Opcap Units;
(ii) that certain Exchange Right issued by PIMCO Advisors on
November 4, 1997 (the "Exchange Right");
(iii) that certain Registration Rights Agreement made
effective as of November 15, 1994 between PIMCO Advisors and certain holders of
PIMCO Advisors Units (the "1994 Registration Rights Agreement"); and
(iv) that certain Registration Rights Agreement made effective
as of November 4, 1997 between PIMCO Advisors and certain holders of PIMCO
Advisors Units.
Section 4. Unit Incentive Plans.
Opcap shall, at the request of PIMCO Advisors from time to time,
adopt and maintain one or more Unit Incentive Plans covering Opcap Units or
PIMCO Advisors Units for the benefit of individuals providing services to Opcap,
PIMCO Advisors and their respective Subsidiaries. Awards under the Unit
Incentive Plans to individuals providing services to PIMCO Advisors and its
Subsidiaries shall be determined by the Unit Incentive Committee of the Equity
Board of PIMCO Advisors or its successor.
Section 5. Right to Exchange Private Units for Opcap Units.
(a) Twice each year, as soon as practicable after financial
statements for the preceding year, or for the first six months of the fiscal
year, as the case may be, are available, Opcap shall file, or take down from the
shelf, a registration statement under the Securities Act covering Opcap Units to
be issued in exchange for Private Units (a "Registration Statement"). The
Registration Statement shall cover resales by Affiliates of Opcap. Upon the
effectiveness of the Registration Statement, Opcap shall make an offer to the
holders of Private Units (each, a "Private Unitholder") to acquire some or all
of the Private Units held by them in exchange for Opcap Units (an "Exchange").
(b) The offer shall provide that any Private Unitholder which
accepts the offer (each, an "Exchanging Unitholder") shall receive one Opcap
Unit for each Private Unit tendered for Exchange. The other terms and conditions
of the offer shall be determined by
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agreement between Opcap and PIMCO Advisors. Opcap shall provide to the Private
Unitholders reasonable notice of the offer, and a reasonable opportunity to
tender their Private Units in the Exchange.
(c) As promptly as practicable after the surrender of Private
Units for Exchange, Opcap shall assign, transfer and deliver to the Exchanging
Unitholder at the principal office of Opcap, or if requested, by mail to the
Exchanging Unitholder at its address noted on the notice of exchange, a
certificate for the number of Opcap Units to be delivered in the Exchange.
(d) Opcap Units issued and delivered in an Exchange shall be duly
authorized, validly issued, fully paid and nonassessable and, if applicable,
free of any lien, encumbrance or other adverse claim.
(e) An Exchanging Unitholder will become the holder of record of
the Opcap Units issued to it in the Exchange as of the close of business on the
day its PIMCO Advisors Units are surrendered for exchange, accompanied by a duly
completed and executed notice of exchange and such other duly and completed
documents and instruments in such form as shall be specified in the notice of
the offer of exchange.
(f) A Private Unitholder shall have the right, at its option, to
tender any or all of the Private Units held by it to Opcap for exchange into
Opcap Units, for the purpose of offering the Opcap Units received in the
exchange pursuant to a Registration Statement which is filed or becomes
effective under the 1994 Registration Rights Agreement, at the rate of one Opcap
Unit for each Private Unit tendered for exchange. In order to exercise this
right, such Private Unitholder shall surrender the certificates evidencing the
Private Units to be exchanged, duly endorsed to the order of Opcap, at the
principal office of Opcap, accompanied by a duly completed and executed notice
of exchange and such other duly completed and executed documents and instruments
in such form as shall be reasonably prescribed from time to time by Opcap. The
provisions of Section 5(c), (d) and (e) shall apply to such exchange as though
such Private Unitholder were an Exchanging Unitholder and such exchange were an
Exchange.
(g) The rights given to Private Unitholders by this Section 5 are
subject to, and shall be limited by, any transfer restriction that may be
imposed on the Private Unitholders from time to time by PIMCO Advisors pursuant
to the terms of the PIMCO Advisors Partnership Agreement or a duly adopted
Written Action of the general partners of PIMCO Advisors.
Section 6. Negative Covenants.
Without the prior written consent of PIMCO Advisors, Opcap shall
not, and shall not permit any of its Subsidiaries to:
(i) carry on any business except in connection with or
incidental to (i) the performance of its duties as a general partner under the
PIMCO Advisors Partnership
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Agreement, (ii) the direct or indirect acquisition, ownership or disposition of
PIMCO Advisors Units, and (iii) its governance and existence;
(ii) merge or consolidate with or into any other Person, or
sell or otherwise dispose of all or substantially all of its assets, or effect a
Recapitalization with respect to the Opcap Units, or issue or agree to issue any
Equity Securities other than Opcap Units; or
(iii) create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
any Indebtedness.
Section 7. Miscellaneous.
(a) This Agreement may not be amended, modified or waived except
by written instrument executed by the parties hereto.
(b) This Agreement constitutes the entire agreement of the
parties hereto, and supersedes all prior agreements and understandings, written
and oral, among the parties with respect to the subject matter hereof.
(c) When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
(d) All notices and other communications hereunder shall be in
writing and shall be deemed given (a) when delivered in person, (b) when
transmitted by telecopy (with written confirmation), (c) on the third Business
Day following the mailing thereof by certified or registered mail (return
receipt requested) or (d) when delivered by an express courier (with written
confirmation) to the parties at their respective principal offices.
(e) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement is intended or shall be construed to confer upon any
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 party
hereto without the prior written consent of the other party hereto.
(f) 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.
(g) This Agreement, the legal relations between the parties and
the adjudication and the enforcement thereof, shall be governed by and
interpreted and construed in
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accordance with the substantive laws of the state of Delaware, without regard to
choice of law principles.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first above written.
OPPENHEIMER CAPITAL, L.P.
By: /s/ KENNETH M. POOVEY
---------------------------------------
Kenneth M. Poovey
Executive Vice President
PIMCO ADVISORS L.P.
By: /s/ KENNETH M. POOVEY
--------------------------------------
Kenneth M. Poovey
Executive Vice President
6
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EXHIBIT 10.12
1997 UNIT INCENTIVE PLAN
OF PIMCO ADVISORS HOLDINGS L.P.
AND PIMCO ADVISORS L.P.
PIMCO Advisors Holdings L.P., a Delaware limited partnership
("Holdings"), and PIMCO Advisors L.P., a Delaware limited partrnership ("PIMCO
Advisors", and together with Holdings, a "Partnership" or collectively the
"Partnerships") have adopted the 1997 Unit Incentive Plan (this "Plan"),
effective _________ ___, 1997, for the benefit of their board members, eligible
employees and consultants.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for board members, key
Employees (as defined below) and consultants to further the growth, development
and financial success of the Partnerships by personally benefiting through the
ownership of Units (as defined below) and/or rights which recognize such growth,
development and financial success.
(2) To enable the Partnerships to obtain and retain the services
of board members, key Employees and consultants considered essential to the long
range success of the Partnerships by offering them an opportunity to own Units
in the Partnerships and/or rights which will reflect the growth, development and
financial success of the Partnerships.
ARTICLE I.
DEFINITIONS
1.1. General. Wherever the following terms are used in this Plan
they shall have the meaning specified below, unless the context clearly
indicates otherwise.
1.2. Additional Deferred Units. "Additional Deferred Units" shall
mean Additional Deferred Units awarded under Article VII of this Plan.
1.3. Award Limit. "Award Limit" shall mean 200,000 Units.
1.4. Board. "Board" shall mean the Management Board of PIMCO
Advisors or any successor board established by the general partner(s) of PIMCO
Advisors.
1.5. Code. "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.6. Committee. "Committee" shall mean the Unit Incentive
Committee of the Board.
1.7. Corporate Subsidiary. "Corporate Subsidiary" shall mean any
corporation in an unbroken chain of corporations if 50 percent or more of the
total combined voting power of all classes of stock of the first corporation is
owned by a Partnership, and each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50 percent or
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more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
1.8. Deferred Units. "Deferred Units" shall mean Units awarded
under Article VII of this Plan.
1.9. Employee. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of a
Partnership, or of any corporation that is then a Corporate Subsidiary, or of
any partnership, limited liability company or corporation that is then a
Partnership Subsidiary, whether such employee is so employed at the time this
Plan is adopted or becomes so employed subsequent to the adoption of this Plan.
1.10. Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.11. Executive Committee. "Executive Committee" shall mean the
Executive Committee of the Board.
1.12. Fair Market Value. "Fair Market Value" of a Unit as of a
given date shall mean (i) the closing price of each such Unit on the principal
exchange on which Units are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if such Units were not traded on the trading day
previous to such date, then on the next preceding date on which a trade
occurred, or (ii) if such Units are not traded on an exchange but are quoted on
the Nasdaq Stock Market or a successor quotation system, the mean between the
closing representative bid and asked prices for the Units on the trading day
previous to such date as reported by the Nasdaq Stock Market or such successor
quotation system, or (iii) if such Units are not publicly-traded on an exchange
and are not quoted on the Nasdaq Stock Market or a successor quotation system,
the Fair Market Value of each such Unit as established by the Committee (or the
Board, in the case of Restricted Units granted to Independent Board Members)
acting in good faith.
1.13. Grantee. "Grantee" shall mean an Employee or consultant
granted a Unit Payment, Unit Appreciation Right or an award of Deferred Units
under this Plan.
1.14. Incentive Unit Option. "Incentive Unit Option" shall mean
an Option which conforms to the provisions of Section 422 of the Code concerning
"incentive stock options" and which is designated as an Incentive Unit Option by
the Committee.
1.15. Independent Board Member. "Independent Board Member" shall
mean a member of the Board who is not an Employee.
1.16. Issuer."Issuer" with respect to an Option, a Restricted
Unit, a Deferred Unit, a Unit Payment or a Unit Appreciation Right, shall mean
the issuer of the Unit underlying the Option or Unit Appreciation Right, the
issuer of the Restricted Unit or Deferred Unit, or the issuer of the Unit issued
as a Unit Payment or underlying an Option granted as a Unit Payment.
1.17. Member. "Member" shall mean a member of the Board.
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1.18. Non-Qualified Unit Option. "Non-Qualified Unit Option"
shall mean an Option which is not designated as an Incentive Unit Option by the
Committee.
1.19. Option. "Option" shall mean a Unit option granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the Committee, be either a Non-Qualified Unit Option or an Incentive Unit
Option; provided, however, that Options granted to consultants shall be
Non-Qualified Unit Options.
1.20. Optionee. "Optionee" shall mean an Employee or consultant
granted an Option under this Plan.
1.21. Partnership. "Partnership" shall mean PIMCO Advisors
Holdings L.P., a Delaware limited partnership, or PIMCO Advisors L.P., a
Delaware limited partnership.
1.22. Partnership Subsidiary. "Partnership Subsidiary" shall mean
any partnership or limited liability company 50% or more of the profits or
capital interest of which is owned, directly or indirectly, by a Partnership.
"Partnership Subsidiary" shall also mean any corporation that would be a
Corporate Subsidiary with respect to a partnership or limited liability company
that is a Partnership Subsidiary if such partnership or limited liability
company were treated as a Partnership. For purposes of this definition, PIMCO
Advisors is a Partnership Subsidiary of Holdings.
1.23. Payment. "Payment" shall mean the amount paid and/or
applied by an Optionee pursuant to Section 5.2(d) of this Plan.
1.24. Plan. "Plan" shall mean the 1997 Unit Incentive Plan of
PIMCO Advisors Holdings L.P. and PIMCO Advisors L.P.
1.25. QDRO. "QDRO" shall mean a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
1.26. Restricted Units. "Restricted Units" shall mean Units
awarded under Article VI of this Plan.
1.27. Restricted Unitholder. "Restricted Unitholder" shall mean
an Independent Board Member, Employee or consultant granted an award of
Restricted Units under Article VI of this Plan.
1.28. Rule 16b-3. "Rule 16b-3" shall mean Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.
1.29. Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended.
1.30. Termination of Consultancy. "Termination of Consultancy"
shall mean the time when the engagement of an Optionee, Grantee or Restricted
Unitholder as a consultant to a Partnerhsip, a Corporate Subsidiary or a
Partnership Subsidiary is terminated for any reason, with
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or without cause, including, but not by way of limitation, a termination by
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with a Partnership, a
Corporate Subsidiary or a Partnership Subsidiary. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
good cause, and all questions of whether particular leaves of absence constitute
Terminations of Consultancy. Notwithstanding any other provision of this Plan, a
Partnership or any Corporate Subsidiary or Partnership Subsidiary has an
absolute and unrestricted right to terminate a consultant's service at any time
for any reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
1.31. Termination of Membership. "Termination of Membership"
shall mean the time when a Restricted Unitholder who is an Independent Board
Member ceases to be a Board Member for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, removal, death
or retirement; but excluding (i) terminations where there is simultaneously
established an employment relationship between the former Board Member and a
Partnership or any Corporate Subsidiary or Partnership Subsidiary and (ii) at
the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by a Partnership or a
Corporate Subsidiary or Partnership Subsidiary with the former Board Member. The
Board, in its sole and absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Membership with respect to
Independent Board Members.
1.32. Termination of Employment. "Termination of Employment"
shall mean the time when the employee-employer relationship between the
Optionee, Grantee or Restricted Unitholder and a Partnership or any Corporate
Subsidiary or Partnership Subsidiary is terminated for any reason, with or
without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i) at
the discretion of the Committee, terminations where there is a simultaneous
reemployment or continuing employment of an Optionee, Grantee or Restricted
Unitholder by a Partnership or any Corporate Subsidiary or Partnership
Subsidiary, (ii) at the discretion of the Committee, terminations which result
in a temporary severance of the employee-employer relationship and (iii) at the
discretion of the Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by a Partnership or a Corporate
Subsidiary or Partnership Subsidiary with the former employee. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Employment; provided, however, that, with respect to
Incentive Unit Options, a leave of absence, change in status from an employee to
an independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision of
this Plan, either Partnership or any Corporate Subsidiary or Partnership
Subsidiary has an absolute and unrestricted right to terminate an Employee's
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employment at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in writing.
1.33. Units. "Units" shall mean units of limited partner interest
in a Partnership, but excluding any warrants, options or other rights to
purchase units.
1.34. Unit Appreciation Right. "Unit Appreciation Right" shall
mean a unit appreciation right granted under Article VIII of this Plan.
1.35. Unitholders. "Unitholders" shall mean holders of Units.
1.36. Unit Payment. "Unit Payment" shall mean (i) a payment in
the form of Units, or (ii) an option or other right to purchase Units, as part
of a deferred compensation arrangement, made in lieu of all or any portion of
the compensation, including, but not by way of limitation, salary, bonuses and
commissions, that would otherwise become payable to a key Employee or consultant
in cash, awarded under Article VII of this Plan.
ARTICLE II.
UNITS SUBJECT TO PLAN
2.1. Units Subject to Plan.
(a) The securities subject to Options, awards of Restricted
Units, awards of Deferred Units, Unit Payments or Unit Appreciation Rights shall
be Units. The aggregate number of Units which may be issued upon exercise of
such Options or rights or upon any such awards under the Plan shall not exceed
Twenty Million (20,000,000) The Units issuable upon exercise of such Options or
rights or upon any such awards may be either previously authorized but unissued
Units or treasury Units.
(b) The maximum number of Units which may be subject to Options,
rights or other awards granted under the Plan to any individual in any calendar
year shall not exceed the Award Limit. To the extent required by Section 162(m)
of the Code, Units subject to Options which are canceled continue to be counted
against the Award Limit and if, after grant of an Option, the price of Units
subject to such Option is reduced, the transaction is treated as a cancellation
of the Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Award
Limit. Furthermore, to the extent required by Section 162(m) of the Code, if,
after grant of a Unit Appreciation Right, the base amount on which unit
appreciation is calculated is reduced to reflect a reduction in the Fair Market
Value of Units, the transaction is treated as a cancellation of the Unit
Appreciation Right and a grant of a new Unit Appreciation Right and both the
Unit Appreciation Right deemed to be canceled and the Unit Appreciation Right
deemed to be granted are counted against the Award Limit.
2.2. Add-Back of Options and Other Rights. If any Option, or
other right to acquire Units under any other award under this Plan, expires or
is canceled without having been fully exercised, or is exercised in whole or in
part for cash as permitted by this Plan, the number of Units subject to such
Option or other right but as to which such Option or other right was not
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exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Units which are delivered by the Optionee or Grantee or withheld by a
Partnership upon the exercise of any Option or other award under this Plan in
payment of the exercise price thereof may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any Restricted Units
are forfeited by the Grantee or repurchased by a Partnership pursuant to Section
6.8 hereof, such Units may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
3.1. Eligibility. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option; provided, however, that notwithstanding anything in Section 3.4(a)(i) to
the contrary, no Option may be granted by the Committee except and unless the
recipient thereof shall have been recommended by the Executive Committee.
3.2. Disqualification for Unit Ownership. No person may be
granted an Incentive Unit Option under this Plan if such person, at the time the
Incentive Unit Option is granted, owns securities possessing more than ten
percent (10%) of the total combined voting power of all classes of securities of
a Partnership or securities of any then existing Corporate Subsidiary or
Partnership Subsidiary unless such Incentive Unit Option conforms to the
applicable provisions of Section 422 of the Code.
3.3. Qualification of Incentive Unit Options. No Incentive Unit
Option shall be granted unless such Option, when granted, qualifies as an
"incentive stock option" under Section 422 of the Code. No Incentive Unit Option
shall be granted to any person who is not an Employee.
3.4. Granting of Options.
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees and select from
among the key Employees or consultants (including Employees or
consultants who have previously received Options or other awards under
this Plan) such of them as in its opinion should be granted Options;
(ii) Subject to the Award Limit, determine the number of Units to
be subject to such Options granted to the selected key Employees or
consultants;
(iii) Determine whether such Options are to be Incentive Unit
Options or Non-Qualified Unit Options and whether such Options are to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code; and
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(iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(v) Upon the selection of a key Employee or consultant to be
granted an Option, the Committee shall instruct the Secretary of the
Issuer (or Issuers) to issue the Option and may impose such conditions
on the grant of the Option as it deems appropriate. Without limiting the
generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a
condition on the grant of an Option to an Employee or consultant that
the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Units or Deferred Units, Unit
Appreciation Rights, Unit Payments or other rights which have been
previously granted to him under this Plan or otherwise. An Option, the
grant of which is conditioned upon such surrender, may have an option
price lower (or higher) than the exercise price of such surrendered
Option or other award, may cover the same (or a lesser or greater)
number of Units as such surrendered Option or other award, may contain
such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number
of Units, the price, the exercise period or any other term or condition
of such surrendered Option or other award.
(vi) Any Incentive Unit Option granted under this Plan may be
modified by the Committee to disqualify such Option from treatment as an
"incentive stock option" under Section 422 of the Code.
ARTICLE IV.
TERMS OF OPTIONS
4.1. Option Agreement. Each Option shall be evidenced by a
written Unit Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Issuer (or Issuers) and which shall contain such terms
and conditions as the Committee shall determine, consistent with this Plan. Unit
Option Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Unit Option Agreements evidencing Incentive Unit
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2. Option Price. The price per Unit of Units subject to each
Option shall be set by the Committee; provided, however, that (i) in the case of
Incentive Unit Options and Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price shall
not be less than 100% of the Fair Market Value of the underlying Unit on the
date the Option is granted; (ii) in the case of Incentive Unit Options
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granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
securities of a Partnership or of any Corporate Subsidiary or Partnership
Subsidiary, such price shall not be less than 110% of the Fair Market Value of
the underlying Unit on the date the Option is granted.
4.3. Option Term. The term of an Option shall be set by the
Committee in its discretion; provided, however, that, in the case of Incentive
Unit Options, the term shall not be more than ten (10) years from the date the
Incentive Unit Option is granted, or five (5) years from such date if the
Incentive Unit Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of securities of a Partnership or of any Corporate
Subsidiary or Partnership Subsidiary. Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Unit Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such Option
relating to such a termination.
4.4. Option Vesting
(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that, unless the
Committee otherwise provides in the terms of the Option, no Option shall be
exercisable by any Optionee who is then subject to Section 16 of the Exchange
Act within the period ending six months and one day after the date the Option is
granted; and provided further that unless otherwise determined by the Committee
at the time of grant of an Option, Options shall become fully vested on the date
which is thirty (30) days prior to the effective date of any transaction
described in Section 4.4(b)(iii)(A) or (B) unless in connection with any such
transaction, arrangements have been made for the continuation of such Options or
the substantial economic equivalent thereof. At any time after grant of an
Option, the Committee may, in its sole and absolute discretion and subject to
whatever terms and conditions it selects, accelerate the period during which an
Option vests.
(b) Except as otherwise determined by the Committee in connection
with an award, Options granted under the Plan shall be exercisable only (i)
following January 1, 1998 in accordance with the terms hereof, (ii) during the
30-day period prior to and including the effective date of the dissolution or
liquidation of the Issuer (with respect to the Options covering Units of such
Issuer), or (iii) unless arrangements have been made for the continuation of
such Options or the economic equivalent thereof, during the 30-day period prior
to and including the effective date of (A) the sale of all or substantially all
the assets of the Issuer or (B) the merger or consolidation of the Issuer with
another entity in which Issuer (or any successor entity in which the Unitholders
of the Issuer hold at least fifty percent (50%) of the total common equity
outstanding immediately following the transaction) is not the surviving entity,
in each case in a transaction effectively constituting a sale of the Issuer or
its business to a third party or parties (in each case, with respect to the
Options covering Units of such Issuer). The Partnership shall give written
notice to any Optionee that Options held hereunder have become exercisable under
the circumstances described in clause (ii) or (iii) of this paragraph at least
thirty (30) days prior to the effective date of the relevant transaction. Except
as otherwise determined by the Committee in connection with
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the grant of Options, in any of the circumstances set forth in clauses (i), (ii)
or (iii) hereof, Options held by the relevant Optionee shall be exercisable only
to the extent vested as of the date of exercise, and Options (including vested
Options and any unvested Options) held upon the first to occur of (x) the
expiration of any period set forth in clause (ii) or (iii) of this paragraph, or
(y) the date which is the end of the Issuer's tenth full fiscal year after the
date of grant of the relevant Options, shall expire and terminate.
(c) No portion of an Option which is unexercisable at Termination
of Employment or Termination of Consultancy, as applicable, shall thereafter
become exercisable, except as may be otherwise provided by the Committee either
in the Unit Option Agreement or by action of the Committee following the grant
of the Option.
(d) To the extent that the aggregate Fair Market Value of Units
with respect to which "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive unit option plans of the Partnerships and any
Corporate Subsidiary or Partnership Subsidiary) exceeds $100,000, such Options
shall be treated as Non-Qualified Unit Options to the extent required by Section
422 of the Code. The rule set forth in the preceding sentence shall be applied
by taking Options into account in the order in which they were granted. For
purposes of this Section 4.4(d), the Fair Market Value of Units shall be
determined as of the time the Option with respect to such Units is granted.
4.5. Consideration. In consideration of the granting of an
Option, the Optionee shall agree, in the written Unit Option Agreement, to
remain in the employ of, or to consult for, the Issuer (or Issuers) or any
Corporate Subsidiary or Partnership Subsidiary for a period of at least one year
(or such shorter period as may be fixed in the Unit Option Agreement or by
action of the Committee following the grant of the Option) after the Option is
granted. Nothing in this Plan or in any Unit Option Agreement hereunder shall
confer upon any Optionee any right to continue in the employ of, or as a
consultant for, the Issuer (or Issuers) or any Corporate Subsidiary or
Partnership Subsidiary, or shall interfere with or restrict in any way the
rights of the Issuer (or Issuers) or any Corporate Subsidiary or Partnership
Subsidiary, which are hereby expressly reserved, to discharge any Optionee at
any time for any reason whatsoever, with or without good cause.
ARTICLE V.
EXERCISE OF OPTIONS
5.1. Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional Units and the Committee may require that, by the terms of the Option,
a partial exercise be made with respect to a minimum number of Units.
5.2. Manner of Exercise. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Issuer or his office:
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(a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on Unit certificates
and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Issuer for the
Units with respect to which the Option, or portion thereof, is exercised.
However, the Committee may in its discretion (i) allow a delay in payment up to
thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of Units owned by
the Optionee, duly endorsed for transfer to the Issuer with a Fair Market Value
on the date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) subject to the timing requirements of Section
5.3, allow payment, in whole or in part, through the surrender of Units then
issuable upon exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option or exercised
portion thereof; (iv) allow payment, in whole or in part, through the delivery
of property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee, or (vi) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv) and (v). In the case of a promissory note, the Committee may also
prescribe the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note or by a
loan from the Issuer when or where such loan or other extension of credit is
prohibited by law.
5.3. Certain Timing Requirements. At the discretion of the
Committee, Units issuable to the Optionee upon exercise of the Option may be
used to satisfy the Option exercise price or the tax withholding consequences of
such exercise, in the case of persons subject to Section 16 of the Exchange Act,
only (i) during the period beginning on the third business day following the
date of release of the quarterly or annual summary statement of sales and
earnings of the Issuer and ending on the twelfth business day following such
date or (ii) pursuant to an irrevocable written election by the Optionee to use
Units issuable to the Optionee upon exercise of the Option to pay all or part of
the Option price or the withholding taxes made at least six months prior to the
payment of such Option price or withholding taxes.
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5.4. Conditions to Issuance of Unit Certificates. The Issuer
shall not be required to issue or deliver any certificate or certificates for
Units purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The completion of any registration or other qualification of
such Units under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Committee shall, in its absolute discretion, deem necessary or
advisable,
(b) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(c) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience; and
(d) The receipt by the Issuer of full payment for such Units,
including payment of any applicable withholding tax.
5.5. Rights as Unitholders. The holders of Options shall not be,
nor have any of the rights or privileges of, Unitholders in respect of any Units
purchasable upon the exercise of any part of an Option unless and until
certificates representing such Units have been issued by the Issuer to such
holders.
5.6. Ownership and Transfer Restrictions. The Committee, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of Units purchasable upon the exercise of an Option as it deems
appropriate. Any such restriction shall be set forth in the respective Unit
Option Agreement and may be referred to on the certificates evidencing such
units. The Committee may require the Employee to give the Issuer prompt notice
of any disposition of Units acquired by exercise of an Incentive Unit Option
within (i) two years from the date of granting such Option to such Employee or
(ii) one year after the transfer of such units to such Employee. The Committee
may direct that the certificates evidencing Units acquired by exercise of an
Option refer to such requirement to give prompt notice of disposition.
ARTICLE VI.
AWARD OF RESTRICTED UNITS
6.1. Eligibility. Any Employee or consultant selected by the
Committee pursuant to Section 6.2(a)(i) shall be eligible to be granted
Restricted Units. Each Independent Board Member shall be eligible to be granted
Restricted Units at the times and in the manner set forth in Section 6.3.
6.2. Award of Restricted Units to Eligible Employees and
Consultants.
(a) The Committee shall from time to time, in its absolute
discretion:
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(i) Select from among the key Employees or consultants (including
Employees or consultants who have previously received other awards under
this Plan) such of them as in its opinion should be awarded Restricted
Units; and
(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Units, consistent with this
Plan.
(b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Units. In all cases, legal consideration shall be
required for each issuance of Restricted Units.
(c) Upon the selection of a key Employee or consultant to be
awarded Restricted Units, the Committee shall instruct the Secretary of the
Issuer to issue such Restricted Units and may impose such conditions on the
issuance of such Restricted Units as it deems appropriate.
(d) Notwithstanding anything herein to the contrary, no
Restricted Unit may be granted by the Committee under this Section 6.2 except
and unless the recipient thereof shall have been recommended by the Executive
Committee.
6.3. Award of Restricted Units to Independent Board Members.
During the term of the Plan, each person who is an Independent Board Member
shall be eligible to make an election to receive all or any portion (but with a
minimum of 20%, if any such election is made) of his annual retainer fee in the
form of Restricted Units. Such an election must be in writing, must be delivered
to the Secretary of the Issuer and shall apply to retainer fees payable from and
after the date that the election is made. Unless otherwise permitted by the
Board, such elections shall be made no more than once with respect to
compensation payable in any calendar year. The number of Restricted Units to be
issued pursuant to such an election shall be determined by dividing the portion
of the Independent Board Member's retainer fee that is to be paid in Restricted
Units by ninety-one percent of the Fair Market Value of a Unit on the date that
the Restricted Units are issued. Restricted Units shall be issued on the date
that the retainer fee would otherwise be paid. All restrictions on such units
shall lapse at the expiration of the Independent Board Member's term; provided
however, that in no event may Restricted Units be sold, assigned or otherwise
transferred until at least six months have elapsed from (but excluding) the date
on which the Restricted Units were issued. Unless otherwise permitted by the
Board, an election with respect to compensation payable in a given calendar year
shall be irrevocable
6.4. Restricted Unit Agreement. Restricted Units shall be issued
only pursuant to a written Restricted Unit Agreement, which shall be executed by
the selected key Employee or consultant and an authorized officer of the Issuer
and which shall contain such terms and conditions as the Committee (or the
Board, in the case of Restricted Units granted to Independent Board Members)
shall determine, consistent with this Plan.
6.5. Consideration. As consideration for the issuance of
Restricted Units, in addition to payment of any purchase price, the Restricted
Unitholder shall agree, in the written Restricted Unit Agreement, to remain in
the employ of or to consult for the Issuer or any Corporate Subsidiary or
Partnership Subsidiary for a period of at least one year after the Restricted
Units are issued (or such shorter period as may be fixed in the
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Restricted Unit Agreement or by action of the Committee following grant of
Restricted Units), or, in the case of an Independent Board Member, to serve as
an Independent Board Member until the expiration of his term. Nothing in this
Plan or in any Restricted Unit Agreement hereunder shall confer on any
Restricted Unitholder any right to continue in the employ of, or as a consultant
for, the Issuer or any Corporate Subsidiary or Partnership Subsidiary, or to
serve as an Independent Board Member, or shall interfere with or restrict in any
way the rights of the Issuer or any Corporate Subsidiary or Partnership
Subsidiary, which are hereby expressly reserved, to discharge or remove any
Restricted Unitholder at any time for any reason whatsoever, with or without
good cause.
6.6. Rights as Unitholders. Upon delivery of the Restricted Units
to the escrow holder pursuant to Section 6.9, the Restricted Unitholder shall
have, unless otherwise provided by the Committee (or the Board, in the case of
Restricted Units granted to an Independent Board Member), all the rights of a
holder of Units with respect to such Units, subject to the restrictions in his
Restricted Unit Agreement, including the right to receive distributions paid or
made with respect to the Units; provided, however, that in the discretion of the
Committee (or the Board, in the case of Restricted Units granted to Independent
Board Members), any extraordinary distributions with respect to Units shall be
subject to the restrictions set forth in Section 6.7.
6.7. Restriction. All Restricted Units issued under this Plan
(including any Units received by holders thereof with respect to Restricted
Units as a result of unit distributions, unit splits or any other form of
recapitalization) shall, pursuant to the terms of each individual Restricted
Unit Agreement, be subject to such restrictions as the Committee (or the Board,
in the case of Restricted Units granted to Independent Board Members) shall
provide, which restrictions may include, without limitation, restrictions
concerning voting rights and transferability and restrictions based on duration
of employment with a Partnership, Partnership performance and individual
performance; provided, however, that no Restricted Units granted to a person
subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months have elapsed from (but excluding) the date
on which the Restricted Units were issued, and provided, further, that by action
taken after Restricted Units are issued, the Committee (or the Board, in the
case of Restricted Units granted to Independent Board Members) may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Restricted Unit Agreement.
Restricted Units may not be sold or encumbered until all restrictions are
terminated or expire. Unless provided otherwise by the Committee (or the Board,
in the case of Restricted Units granted to Independent Board Members), if no
consideration was paid by the Restricted Unitholder upon issuance, a Restricted
Unitholder's rights in unvested Restricted Units shall lapse upon Termination of
Employment or, if applicable, upon Termination of Consultancy or Termination of
Membership with the Partnerships.
6.8. Repurchase of Restricted Units. The Committee (or the Board,
in the case of Restricted Units granted to Independent Board Members) shall
provide in the terms of each individual Restricted Unit Agreement that the
Issuer shall have the right to repurchase from the Restricted Unitholder the
Restricted Units then subject to restrictions under the Restricted Unit
Agreement immediately upon a Termination of Employment or, if applicable, upon a
Termination of Consultancy or Termination of Membership, at a cash price per
Restricted Unit equal to the price per Unit paid by the Restricted Unitholder
for such Restricted Units; provided, however,
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that provision may be made that no such right of repurchase shall exist in the
event of a Termination of Employment, Termination of Consultancy or Termination
of Membership without cause, or following a change in control of the Issuer or
because of the Restricted Unitholder's retirement, death, disability or
otherwise.
6.9. Escrow. The Secretary of the Issuer, or such other escrow
holder as the Committee (or the Board, in the case of Restricted Units granted
to Independent Board Members) may appoint, shall retain physical custody of each
certificate representing Restricted Units until all of the restrictions imposed
under the Restricted Unit Agreement with respect to the Units evidenced by such
certificate expire or shall have been removed.
6.10. Legend. In order to enforce the restrictions imposed upon
Restricted Units hereunder, the Committee (or the Board, in the case of
Restricted Units granted to Independent Board Members) shall cause a legend or
legends to be placed on certificates representing all Restricted Units that are
still subject to restrictions under Restricted Unit Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
ARTICLE VII.
UNIT PAYMENTS, DEFERRED UNITS AND ADDITIONAL DEFERRED UNITS
7.1. Unit Payments. Any key Employee or consultant selected by
the Committee may receive Unit Payments in the manner determined from time to
time by the Committee. The number of Units shall be determined by the Committee
and may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Units or other specific performance criteria determined
appropriate by the Committee, determined on the date such Unit Payment is made
or on any date thereafter. Notwithstanding anything herein to the contrary, no
Unit Payment may be granted by the Committee except and unless the recipient
thereof shall have been recommended by the Executive Committee
7.2. Deferred Units/Additional Deferred Units
(a) Any key Employee or consultant selected by the Committee may
be granted an award of Deferred Units in the manner determined from time to time
by the Committee. The number of Deferred Units shall be determined by the
Committee and may be linked to the market value, book value, net profits or
other measure of the value of Units or other specific performance criteria
determined to be appropriate by the Committee, in each case on a specified date
or dates or over any period or periods determined by the Committee. Units
underlying a Deferred Unit award will not be issued until the Deferred Unit
award has vested, pursuant to a vesting schedule or performance criteria set by
the Committee; provided however, that no Deferred Units granted to a person
subject to Section 16 of the Exchange Act shall vest until at least six months
have elapsed from (but excluding) the date on which the Deferred Units were
issued. Unless otherwise provided by the Committee, a Grantee of Deferred Units
shall have no rights as a Unitholder with respect to such Deferred Units until
such time as the award has vested and the Units underlying the award have been
issued. Notwithstanding anything herein to the contrary, no Deferred Units may
be granted by the Committee except and unless the recipient thereof shall have
been recommended by the Executive Committee
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(b) On the date that a holder of Units would receive a dividend
or other distribution in respect of such Units, the Committee shall grant to
each Key employee or consultant who has been granted Deferred Units of the same
Issuer and class additional Deferred Units ("Additional Deferred Units") of such
Issuer and class in an amount equal to the amount of such dividend or other
distribution, divided by the Fair Market Value of such Units on the date such
dividend or other distribution was paid, and multiplied by the number of
Deferred Units of such Issuer and class held by such Key employee or consultant
on the record date for such dividend or distribution. For purposes of
determining the number of Additional Deferred Units to be granted pursuant to
the preceding sentence, any fractional Unit greater than 50% shall be rounded up
to one Unit and any fractional Unit less than 50% shall be disregarded. Any
Additional Deferred Units granted pursuant to this Section 7.2(b) shall be
subject to the provisions of this Plan; provided, however, that any Additional
Deferred Units granted hereunder shall be subject to the vesting schedule
applicable to the unvested portion of the Deferred Units to which it relates.
7.3. Deferred Unit Agreement, Unit Payment Agreement. Each award
of Deferred Units, Additional Deferred Units and/or Unit Payments shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized officer of the Issuer and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
7.4. Term. The term of an award of Deferred Units, Additional
Deferred Units and/or Unit Payments shall be set by the Committee in its
discretion.
7.5. Exercise or Payment Upon Termination of Employment. An award
of Deferred Units, Additional Deferred Units and/or Unit Payments is exercisable
or payable only while the Grantee is an Employee or consultant; provided,
however, that the Committee may determine that the award of Deferred Units,
Additional Deferred Units and/or Unit Payments may be exercised or paid
subsequent to Termination of Employment or Termination of Consultancy without
cause, or following a change in control of a Partnership, or because of the
Grantee's retirement, death, disability or otherwise.
7.6. Consideration. In consideration of the granting of an award
of Deferred Units, Additional Deferred Units and/or Unit Payments, the Grantee
shall agree, in a written agreement, to remain in the employ of, or to consult
for, the Issuer or any Corporate Subsidiary or Partnership Subsidiary for a
period of at least one year after such award of Deferred Units, Additional
Deferred Units and/or Unit Payments is granted (or such shorter period as may be
fixed in such agreement or by action of the Committee following such grant).
Nothing in this Plan or in any agreement hereunder shall confer on any Grantee
any right to continue in the employ of, or as a consultant for, the Issuer or
any Corporate Subsidiary or Partnership Subsidiary, or shall interfere with or
restrict in any way the rights of the Issuer or any Corporate Subsidiary or
Partnership Subsidiary, which are hereby expressly reserved, to discharge any
Grantee at any time for any reason whatsoever, with or without good cause.
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ARTICLE VIII.
UNIT APPRECIATION RIGHTS
8.1. Grant of Unit Appreciation Rights. A Unit Appreciation Right
may be granted to any key Employee or consultant selected by the Committee. A
Unit Appreciation Right may be granted (i) in connection and simultaneously with
the grant of an Option, (ii) with respect to a previously granted Option or
(iii) independent of an Option. A Unit Appreciation Right shall be subject to
such terms and conditions not inconsistent with this Plan as the Committee shall
impose and shall be evidenced by a written Unit Appreciation Right Agreement,
which shall be executed by the Grantee and an authorized officer of the Issuer.
The Committee, in its discretion, may determine whether a Unit Appreciation
Right is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code and Unit Appreciation Right Agreements evidencing Unit
Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of section
162(m) of the Code. Without limiting the generality of the foregoing, the
Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Unit Appreciation Right to an Employee
or consultant that the Employee or consultant surrender for cancellation some or
all of any unexercised Options or awards of Restricted Units, Deferred Units,
Unit Appreciation Rights, Unit Payments or other rights which have been
previously granted to the Employee or consultant under this Plan or otherwise. A
Unit Appreciation Right, the grant of which is conditioned upon such surrender,
may have an exercise price lower (or higher) than the exercise price of the
surrendered Option or other award, may cover the same (or a lesser or greater)
number of Units as such surrendered Option or other award, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of Units, the price, the
exercise period or any other term or condition of such surrendered Option or
other award. Notwithstanding anything herein to the contrary, no Unit
Appreciation Rights may be granted by the Committee except and unless the
recipient thereof shall have been recommended by the Executive Committee.
8.2. Coupled Unit Appreciation Rights.
(a) A Coupled Unit Appreciation Right ("CUAR") shall be related
to a particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.
(b) A CUAR may be granted to the Grantee for no more than the
number of Units subject to the simultaneously or previously granted Option to
which it is coupled.
(c) A CUAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to Issuer unexercised a
portion of the Option to which the CUAR relates (to the extent then exercisable
pursuant to its terms) and to receive from the Issuer in exchange therefor an
amount determined by multiplying the difference obtained by subtracting the
Option exercise price from the Fair Market Value of a Unit on the date of
exercise of the CUAR by the number of Units with respect to which the CUAR shall
have been exercised, subject to any limitations the Committee may impose.
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8.3. Independent Unit Appreciation Rights.
(a) An Independent Unit Appreciation Right ("IUAR") shall be
unrelated to any Option and shall have a term set by the Committee. An IUAR
shall be exercisable in such installments as the Committee may determine;
provided, however, that unless the Committee otherwise provides in the terms of
the IUAR, no IUAR granted to a person subject to Section 16 of the Exchange Act
shall be exercisable until at least six months have elapsed from (but excluding)
the date on which the IUAR was granted. An IUAR shall cover such number of Units
as the Committee may determine. The exercise price per Unit of Units subject to
each IUAR shall be set by the Committee. An IUAR is exercisable only while the
Grantee is an Employee or consultant; provided, however, that the Committee may
determine that the IUAR may be exercised subsequent to Termination of Employment
or Termination of Consultancy without cause, or following a change in control of
a Partnership, or because of the Grantee's retirement, death, disability or
otherwise.
(b) An IUAR shall entitle the Grantee (or other person entitled
to exercise the IUAR pursuant to this Plan) to exercise all or a specified
portion of the IUAR (to the extent then exercisable pursuant to its terms) and
to receive from Holdings an amount determined by multiplying the difference
obtained by subtracting the exercise price per Unit of the IUAR from the Fair
Market Value of a Unit on the date of exercise of the IUAR by the number of
Units with respect to which the IUAR shall have been exercised, subject to any
limitations the Committee may impose.
8.4. Payment and Limitations on Exercise.
(a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash or in Units (based on the Fair Market Value of
such Units as of the date the Unit Appreciation Right is exercised) or a
combination thereof, as determined by the Committee. To the extent such payment
is effected in Units, it shall be made subject to satisfaction of all provisions
of Section 5.4 hereinabove pertaining to Options.
(b) Grantees of Unit Appreciation Rights who are subject to
Section 16 of the Exchange Act may, in the discretion of the Board or Committee,
be required to comply with any timing or other restrictions under Rule 16b-3
applicable to the settlement or exercise of a Unit Appreciation Right.
8.5. Consideration. In consideration of the granting of a Unit
Appreciation Right, the Grantee shall agree, in the written Unit Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Issuer or
any Corporate Subsidiary or Partnership Subsidiary for a period of at least one
year after the Unit Appreciation Right is granted (or such shorter period as may
be fixed in the Unit Appreciation Right Agreement or by action of the Committee
following grant of the Unit Appreciation Right). Nothing in this Plan or in any
Unit Appreciation Right Agreement hereunder shall confer on any Grantee any
right to continue in the employ of, or as a consultant for, the Issuer or any
Corporate Subsidiary or Partnership Subsidiary, or shall interfere with or
restrict in any way the rights of the Issuer or any Corporate Subsidiary or
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Partnership Subsidiary, which are hereby expressly reserved, to discharge any
Grantee at any time for any reason whatsoever, with or without good cause.
ARTICLE IX.
ADMINISTRATION
9.1. Unit Incentive Committee. The Unit Incentive Committee shall
consist of two or more Independent Board Members appointed by and holding office
at the pleasure of the Board, each of whom is a "disinterested person" as
defined by Rule 16b-3 and, if such person were a director of a corporation,
would otherwise meet the requirements for an "outside director" for purposes of
Section 162(m) of the Code
9.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options or awards of Restricted Units, Deferred
Units, Unit Appreciation Rights or Unit Payments are granted or awarded, and to
adopt such rules for the administration, interpretation, and application of this
Plan as are consistent therewith and to interpret, amend or revoke any such
rules. Notwithstanding the foregoing, the Board shall conduct the general
administration of the Plan with respect to Restricted Units granted to
Independent Board Members. Any such grant or award under this Plan need not be
the same with respect to each Optionee, Grantee or Restricted Unitholder. Any
such interpretations and rules with respect to Incentive Unit Options shall be
consistent with the provisions of Section 422 of the Code
9.3. Compensation; Professional Assistance; Good Faith Actions.
All actions taken and all interpretations and determinations made by the
Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Unitholders, Holdings and all other interested
persons. No members of the Committee or Board shall be personally liable for any
action, determination or interpretation made in good faith with respect to this
Plan, Options, awards of Restricted Units, Deferred Units, Unit Appreciation
Rights or Unit Payments, and all members of the Committee and the Board shall be
fully protected by the Partnerships in respect of any such action, determination
or interpretation.
ARTICLE X.
MISCELLANEOUS PROVISIONS
10.1. Not Transferable. Options, Restricted Unit awards, Deferred
Unit awards, Unit Appreciation Rights or Unit Payments under this Plan may not
be sold, pledged, assigned or transferred in any manner other than by will or
the laws of descent and distribution or pursuant to a QDRO, unless and until
such rights or awards have been exercised, or the units underlying such rights
or awards have been issued, and all restrictions applicable to such units have
lapsed. No Option, Restricted Unit award, Deferred Unit award, Unit Appreciation
Right, Unit Payment or interest or right therein shall be liable for the debts,
contracts or engagements of the Optionee, Grantee or Restricted Unitholder or
his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any
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attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may
exercise an Option or other right or award (or any portion thereof) granted to
him under the Plan, unless it has been disposed of pursuant to a QDRO. After the
death of the Optionee or Grantee, any exercisable portion of an Option or other
right or award may, prior to the time when such portion becomes unexercisable
under the Plan or the applicable Unit Option Agreement or other agreement, be
exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's or Grantee's will or under the then applicable
laws of descent and distribution.
10.2. Amendment, Suspension or Termination of this Plan. This
Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Committee or the Board.
However, without approval of the Unitholders of the Partnerships given within
twelve months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 10.3, increase the limits imposed
in Section 2.1 on the maximum number of Units which may be issued under this
Plan or modify the Award Limit, and no action of the Committee may be taken that
would otherwise require Unitholder approval as a matter of applicable law,
regulation or rule. No amendment, suspension or termination of this Plan shall,
without the consent of the holder of Options, Restricted Unit awards, Deferred
Unit awards, Unit Appreciation Rights or Unit Payments, alter or impair any
rights or obligations under any Options, Restricted Unit awards, Deferred Unit
awards, Unit Appreciation Rights or Unit Payments theretofore granted or
awarded, unless the award itself otherwise expressly so provides. No Options,
Restricted Units, Deferred Units, Unit Appreciation Rights or Unit Payments may
be granted or awarded during any period of suspension or after termination of
this Plan, and in no event may any Incentive Unit Option be granted under this
Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is adopted
by the Partnerships; or
(b) The expiration of ten years from the date the Plan is
approved by the Unitholders of the Partnerships under Section 10.5.
10.3. Changes in Units or Assets of an Issuer; Acquisition or
Liquidation of an Issuer and Other Corporate Events.
(a) Subject to Section 10.3(e) but notwithstanding any other term
of this Plan, in the event that the Committee determines that any unit
distribution (whether in the form of cash, units, other securities or other
property), recapitalization, reclassification, unit split, reverse unit split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of an Issuer, or exchange
of units or other securities of an Issuer, any issuance of warrants or other
rights to purchase units or other securities of an Issuer, or any other similar
transaction or event, in the Committee's sole discretion (or in the case of
Restricted Units granted to Independent Board Members, the Board's sole
discretion), affects the Units such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or
19
<PAGE> 20
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, Restricted Unit award, Unit
Appreciation Right, Deferred Unit award or Unit Payment, then the Committee (or
the Board, in the case of Restricted Units granted to Independent Board Members)
shall, in such manner as it may deem equitable, adjust any or all of:
(i) the number and kind of units (or other securities or
property) with respect to which Options, Unit Appreciation Rights or
Unit Payments may be granted under the Plan, or which may be granted as
Restricted Units or Deferred Units (including, but not limited to,
adjustments of the limitations in Section 2.1 or the maximum number and
kind of Units which may be issued and adjustments of the Award Limit),
(ii) the number and kind of units (or other securities or
property) subject to outstanding Options, Unit Appreciation Rights or
Unit Payments, and in the number and kind of outstanding Restricted
Units or Deferred Units, and
(iii) the grant or exercise price with respect to any Option,
Unit Appreciation Right or Unit Payment.
(b) Subject to Section 10.3(e) but notwithstanding any other term
of this Plan, in the event of any transaction or other event described in
Section 10.3(a) which results in Units being exchanged for or converted into
cash, securities (including securities of another partnership or a corporation)
or other property, the Committee will have the right to terminate this Plan as
of the date of the event or transaction, in which case all Options, rights and
other awards granted under this Plan shall become the right to receive such
cash, securities or other property, net of any applicable exercise price.
(c) Subject to Section 10.3(e) but notwithstanding any other term
of this Plan, in the event of any transaction or other event described in
Section 10.3(a) or any unusual or nonrecurring transactions or events affecting
an Issuer, any affiliate of such Issuer, or the financial statements of such
Issuer or any affiliate, or of changes in applicable laws, regulations or
accounting principles, the Committee (or the Board, in the case of Restricted
Units granted to Independent Board Members) in its discretion is hereby
authorized to take any one or more of the following actions whenever the
Committee (or the Board, in the case of Restricted Units granted to Independent
Board Members) determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Option, right or other
award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:
(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Restricted Units granted to Independent Board Members) may
provide, either automatically or upon the Optionee's request, for (x)
the purchase of any such Option, Unit Appreciation Right or Unit
Payment, or any Restricted Units or Deferred Units for an amount of cash
equal to the amount that could have been attained upon the exercise of
such Option, right or award, (y) realization of the Optionee's rights
had such Option, right or award been currently exercisable or payable or
(z) the
20
<PAGE> 21
replacement of such Option, right or award with other rights or property
selected by the Committee (or the Board, in the case of Restricted Units
granted to Independent Board Members);
(ii) In its sole and absolute discretion, the Committee (or the
Board, in the case of Restricted Units granted to Independent Board
Members) may provide, either by the terms of such Option, Unit
Appreciation Right, Unit Payment, award of Restricted Units or Deferred
Units or by action taken prior to the occurrence of such transaction or
event that it cannot be exercised after such event;
(iii) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Restricted Units granted to Independent Board Members) may
provide, either by the terms of such Option, Unit Appreciation Right,
Unit Payment, Restricted Unit or Deferred Unit or by action taken prior
to the occurrence of such transaction or event, that for a specified
period of time prior to such transaction or event, such Option, right or
award shall be exercisable as to all units covered thereby,
notwithstanding anything to the contrary in (i) Section 4.4 or (ii) the
provisions of such Option, Unit Appreciation Right or Unit Payment, or
Restricted Unit or Deferred Unit.
(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Restricted Units granted to Independent Board Members) may
provide, either by the terms of such Option, Unit Appreciation Right,
Unit Payment, award of Restricted Units or Deferred Units or by action
taken prior to the occurrence of such transaction or event, that upon
such event, such Option, right or award shall be assumed by the
successor partnership or corporation, or a parent or subsidiary thereof,
or shall be substituted for by options, rights or awards covering
securities of the successor, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of securities and
prices; and
(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Restricted Units granted to Independent Board Members) may make
adjustments in the number and kind of units (or other securities or
property) subject to outstanding Options, Unit Appreciation Rights or
Unit Payments, and in the number and kind of outstanding Restricted
Units or Deferred Units and/or in the terms and conditions of (including
the grant or exercise price), and the criteria included in, outstanding
Options, rights and awards and Options, rights and awards which may be
granted in the future.
(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board in the
case of Restricted Units granted to Independent Board Members) may
provide either by the terms of a Restricted Unit award or Deferred Unit
award or by action taken prior to the occurrence of such transaction or
event that, for a specified period of time prior to such event, the
restrictions imposed under a Restricted Unit Agreement or a
21
<PAGE> 22
Deferred Unit Agreement upon some or all Restricted Units or Deferred
Units may be terminated, and, in the case of Restricted Units, that some
or all of such Restricted Units may cease to be subject to repurchase
under Section 6.8 after such event.
(vii) None of the foregoing discretionary terms of this Section
10.3(c) shall be permitted with respect to Restricted Units granted
under Section 6.3 to Independent Board Members to the extent that such
discretion would be inconsistent with the requirements of Rule 16b-3.
(d) Subject to Section 10.3(e) and 10.9, the Committee (or the
Board in the case of Restricted Units granted to Independent Board Members) may,
in its discretion, include such further provisions and limitations in any
Option, Unit Appreciation Right, Unit Payment or Restricted Unit or Deferred
Unit agreement or certificate, as it may deem equitable and in the best
interests of Holdings price.
(e) With respect to Incentive Unit Options and Options and Unit
Appreciation Rights intended to qualify as performance-based compensation under
Section 162(m), no adjustment or action described in this Section 10.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such Option or Unit Appreciation Right to fail to so qualify
under Section 162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent such
adjustment or action would violate Section 16 or the exemptive conditions of
Rule 16b-3. The number of Units subject to any Option, right or award shall
always be rounded to the next whole number.
10.4. Approval of Plan by Unitholders. This Plan will be
submitted for the approval of the Unitholders of the Partnerships within twelve
months after the date of the Board's initial adoption of the Plan. Options, Unit
Appreciation Rights or Unit Payments may be granted and Restricted Units,
Deferred Units or Additional Deferred Units may be awarded prior to such
Unitholder approval, provided that such Options, Unit Appreciation Rights or
Unit Payments shall not be exercisable and such Restricted Units, Deferred Units
or Additional Deferred Units shall not vest prior to the time when this Plan is
approved by the Unitholders.
10.5. Tax Withholding. The Issuer shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee,
Grantee or Restricted Unitholder of any sums required by federal, state or local
tax law to be withheld with respect to the issuance, vesting or exercise of any
Option, Restricted Unit, Deferred Unit, Additional Deferred Unit, Unit
Appreciation Right or Unit Payment. Subject to the timing requirements of
Section 5.3, the Committee (or the Board, in the case of Restricted Units
granted to Independent Board Members) may in its discretion and in satisfaction
of the foregoing requirement allow such Optionee, Grantee or Restricted
Unitholder to elect to have the Issuer withhold Units otherwise issuable under
such Option or other award (or allow the return of Units) having a Fair Market
Value equal to the sums required to be withheld.
10.6. Loans. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or receipt of an
Option, Unit Appreciation Right
22
<PAGE> 23
or Unit Payment granted under this Plan, or the issuance of Restricted Units or
Deferred Units awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.
10.7. Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Restricted Units granted to Independent
Board Members) shall have the right (to the extent consistent with the
requirements of Rule 16b-3) to provide, in the terms of Options or other awards
made under the Plan, or to require the recipient to agree by separate written
instrument, that (i) any proceeds, gains or other economic benefit actually or
constructively received by the recipient upon any receipt or exercise of the
award, or upon the receipt or resale of any Units underlying such award, must be
paid to the Issuer, and (ii) the award shall terminate and any unexercised
portion of such award (whether or not vested) shall be forfeited, if (a) a
Termination of Employment, Termination of Consultancy or Termination of
Membership occurs prior to a specified date, or within a specified time period
following receipt or exercise of the award, or (b) the recipient at any time, or
during a specified time period, engages in any activity in competition with the
Issuer or any Corporation Subsidiary or Partnership Subsidiary, or which is
inimical, contrary or harmful to the interests of the Issuer or any Corporation
Subsidiary or Partnership Subsidiary, as further defined by the Committee (or
the Board, as applicable).
10.8. Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of this
Plan, this Plan, and any Option, Unit Appreciation Right or Unit Payment
granted, or Restricted Units or Deferred Units awarded, to any individual who is
then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange
Act) that are requirements for the application of such exemptive rule. To the
extent permitted by applicable law, the Plan, Options, Unit Appreciation Rights,
Unit Payments, Restricted Units and Deferred Units granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule. Furthermore, notwithstanding any other provision of this Plan,
any Option or Unit Appreciation Right intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.
10.9. Effect of Plan Upon Options and Compensation Plans. Nothing
in this Plan shall be construed to limit the right of either Partnership (i) to
establish any other forms of incentives or compensation for Employees,
Independent Board Members or consultants of such Partnership or any Corporate
Subsidiary or Partnership Subsidiary or (ii) to grant or assume options or other
rights otherwise than under this Plan in connection with any lawful partnership
action including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock, units or assets of any
corporation, partnership, firm or association.
23
<PAGE> 24
10.10. Compliance with Laws. This Plan, the granting and vesting
of Options, Restricted Unit awards, Deferred Unit awards, Unit Appreciation
Rights or Unit Payments under this Plan and the issuance and delivery of Units
and the payment of money under this Plan or under Options, Unit Appreciation
Rights or Unit Payments granted or Restricted Units or Deferred Units awarded
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including, but not limited to, state and federal
securities laws and federal margin requirements) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of counsel
for the Partnerships, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Issuer, provide
such assurances and representations to the Issuer as the Issuer may deem
necessary or desirable to assure compliance with all applicable legal
requirements. To the extent permitted by applicable law, the Plan, Options,
Restricted Units awards, Deferred Unit awards, Unit Appreciation Rights or Unit
Payments granted or awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
10.11. Titles. Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or construction of this Plan.
10.12. Governing Law. This Plan and any agreements hereunder
shall be administered, interpreted and enforced under the internal laws of the
State of Delaware without regard to principles of conflicts of laws.
* * *
I hereby certify that the foregoing Plan was duly adopted by the
Management Board of PIMCO Advisors Holdings L.P. effective _____________ __,
1997, and by the Management Board of PIMCO Advisors L.P. effective _____________
___, 1997.
Executed on this ____ day of _______________, 199__.
By:
_________________
_________________
24
<PAGE> 1
EXHIBIT 10.13
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL
Dated as of March 14, 1991
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I DEFINITIONS............................................ 1
ARTICLE II ORGANIZATION AND TERM.................................. 4
Section 2.01 Formation and Name of Partnership........ 4
Section 2.02 Place of Business........................ 5
Section 2.03 Activities in Delaware................... 5
ARTICLE III PURPOSES............................................... 6
Section 3.01 Purposes and Business.................... 6
Section 3.02 Powers................................... 6
Section 3.03 Changes in the Tax Laws.................. 6
ARTICLE IV TERM OF THE PARTNERSHIP................................ 7
ARTICLE V CAPITAL ACCOUNTS....................................... 7
Section 5.01 Capital Contributions.................... 7
Section 5.02 Capital Accounts......................... 8
Section 5.03 Negative Capital Accounts................ 9
Section 5.04 Partners Not Personally Liable for
Return of Capital...................... 9
ARTICLE VI PROFITS AND LOSSES; DISTRIBUTIONS...................... 10
Section 6.01 Fiscal Year.............................. 10
Section 6.02 Determination of Profits and Losses...... 10
Section 6.03 Allocation of Income and Loss............ 10
Section 6.04 Allocation of Income and Loss for Income
Tax Purposes........................... 11
Section 6.05 Liabilities and Reserve.................. 11
Section 6.06 Distributions Other than Upon
Liquidation............................ 12
ARTICLE VII MANAGEMENT............................................. 13
Section 7.01 Management and Control of Partnership.... 13
Section 7.02 Powers of Managing Partner............... 13
Section 7.03 Restrictions on Management............... 15
Section 7.04 Title to Partnership Assets.............. 16
Section 7.05 Other Business Activities of Partners.... 16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C> <C> <C>
Section 7.06 Transactions with Partners or Affiliates. 17
Section 7.07 Liability of Partner to Partnership
and Other Partners..................... 17
Section 7.08 Indemnification.......................... 17
Section 7.09 Other Matters Concerning the Partners.... 20
Section 7.10 Resolution of Conflicts of Interest...... 21
ARTICLE VIII COMPENSATION AND EXPENSES.............................. 22
Section 8.01 Compensation to Managing Partner......... 22
Section 8.02 Expenses of the Partnership.............. 22
Section 8.03 Reimbursement of Certain Expenses
of Op L.P. ............................ 22
ARTICLE IX FINANCIAL MATTERS...................................... 22
Section 9.01 Books and Records........................ 22
Section 9.02 Financial Statements and Information..... 23
Section 9.03 Accounting Decisions..................... 24
Section 9.04 Place Maintained......................... 24
Section 9.05 Preparation of Tax Returns............... 24
Section 9.06 Tax Elections............................ 24
Section 9.07 Tax Controversies........................ 25
ARTICLE X ISSUANCE OF ADDITIONAL INTERESTS....................... 25
ARTICLE XI TRANSFER OF INTERESTS AND ADMISSION OF NEW PARTNERS.... 26
Section 11.01 Transfer of a Partner's Interest......... 26
Section 11.02 Admission of Transferees as Partners..... 27
Section 11.03 Allocation and Distributions Prior
to Admission........................... 27
ARTICLE XII DISSOLUTION AND LIQUIDATION............................ 28
Section 12.01 Events Causing Dissolution............... 28
Section 12.02 Dissolution.............................. 29
Section 12.03 Liquidation.............................. 29
Section 12.04 Termination of Partnership............... 31
ARTICLE XIII AMENDMENTS............................................. 31
Section 13.01 Amendments to Be Adopted Solely by
the Managing Partner................... 31
Section 13.02 Amendment Procedures..................... 32
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE XIV POWER OF ATTORNEY....................................... 33
ARTICLE XV MISCELLANEOUS PROVISIONS................................ 34
Section 15.01 Additional Actions and Documents.......... 34
Section 15.02 Notices................................... 34
Section 15.03 Severability.............................. 35
Section 15.04 Survival.................................. 36
Section 15.05 Waivers................................... 36
Section 15.06 Exercise of Rights........................ 36
Section 15.07 Binding Effect............................ 36
Section 15.08 Entire Agreement.......................... 36
Section 15.09 Pronouns.................................. 37
Section 15.10 Headings.................................. 37
Section 15.11 Governing Law............................. 37
Section 15.12 Execution in Counterparts................. 37
ARTICLE XVI EXECUTION............................................... 38
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT OF
OPPENHEIMER CAPITAL
THIS PARTNERSHIP AGREEMENT OF OPPENHEIMER CAPITAL (the "Partnership"),
amended and restated as of as of March 14, 1991, by and between Oppenheimer
Financial Corp., a Delaware corporation ("Opfin"), and Oppenheimer Capital, L.P.
("Op L.P."), a Delaware limited partnership.
W I T N E S S E T H:
WHEREAS, Opfin, as the managing partner of the Partnership, and Op L.P.
entered into a Partnership Agreement, dated as of June 25, 1987 (the
"Partnership Agreement"); and
WHEREAS, Opfin has determined, pursuant to Sections 13.01(d)(i) and
13.01(d)(ii) of the Partnership Agreement, that it is in the best interests of
the Partnership to amend the Partnership Agreement as set forth herein, which
amendments may be made by Opfin, as the managing partner of the Partnership,
without the approval of any other partner of the Partnership; and
WHEREAS, Opfin has determined that it is in the best interests of the
Partnership to restate the Partnership Agreement to incorporate such amendments;
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise specifies or requires, the terms defined in
this Article I shall, for the purposes of this Agreement, have the meanings
herein specified.
<PAGE> 6
Advisers Act: The Investment Advisers Act of 1940, as amended.
Affiliate: Any Person (as hereinafter defined) that directly or
indirectly controls, is controlled by, or is under common control with, the
Person in question. As used in this definition, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
Agreement: This Amended and Restated Partnership Agreement, as it may
be further amended, supplemented or restated from time to time.
Assignment and Assumption Agreement: The Assignment and Assumption
Agreement between Opfin and the Partnership pursuant to which Opfin contributed
certain assets formerly owned by Oppenheimer Capital Corp. and its
subsidiaries, subject to certain liabilities, to the Partnership.
Assignment Determination: The meaning set forth in Section 3.03 hereof.
Capital Account: The meaning set forth in Section 5.02(a) hereof.
Capital Contributions: The meaning set forth in Section 5.01(e) hereof.
Cash Available for Distribution: The meaning set forth in Section 6.06
hereof.
Closing Date: July 9, 1987.
Code: The Internal Revenue Code of 1986, as amended to date and
hereafter amended, or any successor statute, and the applicable Treasury
Regulations thereunder. Any reference herein to a specific provision of the
Code shall be deemed to include a reference to the corresponding provision of
any successor statute.
Company Act: The Investment Company Act of 1940, as amended.
2
<PAGE> 7
Fiscal Quarter: A quarter ending October 31, January 31, April 30 or
July 31 of each Fiscal Year. The term "current Fiscal Quarter" shall mean the
most recent Fiscal Quarter with respect to which any determination hereunder is
being made. The Managing Partner shall have the authority to change the Fiscal
Quarter if the Managing Partner, in its sole discretion, shall determine such
change to be necessary or appropriate to the business of the Partnership.
Fiscal Year: The meaning set forth in Section 6.01 hereof. The term
"current Fiscal Year" shall mean the Fiscal Year which includes the current
Fiscal Quarter.
Managing Partner: Opfin, in its capacity as the managing partner of the
Partnership, and any successor to Opfin in such capacity.
NASDAQ: The National Association of Securities Dealers Automated
Quotation System.
National Securities Exchange: An exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Securities
Exchange Act of 1934, as amended.
Net Income and Net Loss: The meanings set forth in Section 6.02(c)
hereof.
OGI: Oppenheimer Group, Inc., a Delaware corporation.
Op L.P. Agreement: The Agreement of Limited Partnership, amended and
restated as of March 14, 1991, by and between Opfin, as general partner, and
the limited partners of Op L.P. referred to therein, as such agreement may be
further amended, supplemented or restated from time to time.
Op L.P. Unit: The interest of a limited partner in Op L.P.,
representing a fractional part of the interests of all limited partners of Op
L.P. equal to the quotient of one divided by the number of Op L.P. Units deemed
to be outstanding under the Op L.P. Agreement.
Over-allotment Option: The meaning set forth in Section 5.01(a) hereof.
3
<PAGE> 8
Partner: Any partner of the Partnership.
Percentage Interest: At any date, a percentage determined for each
Partner by dividing (a) the sum of such Partner's Capital Contributions plus or
minus any adjustment to such Partner's Capital Account pursuant to Section
5.02(b) hereof by (b) the amount of all of the Partner's Capital Contributions
plus or minus all adjustments to the Capital Accounts of all Partners pursuant
to Section 5.02(b) hereof.
Person: Any individual, corporation, association, partnership, joint
venture, trust, estate or other entity or organization.
Tax Determination: The meaning set forth in Article X hereof.
Unit Price: An amount per Op L.P. Unit, as of any date of determination,
equal to (i) if the Op L.P. Units are at the time traded on a National
Securities Exchange, the average of, the last reported sale price per Op L.P.
Unit regular way or, in case no reported sales have taken place on any such
date, the last reported bid price per Op L.P. Unit regular way, on the five
trading days immediately preceding the date of determination, (ii) if such Op
L.P. Units are at the time being traded on NASDAQ and not on a National
Securities Exchange, the average of the last sales price or, in case no such
reported sales have taken place on any such date, the average of the closing bid
prices per Op L.P. Unit regular way, on the five trading days immediately
preceding such date of determination, or (iii) if the Op L.P. Units are not
listed for trading on a National Securities Exchange or traded on NASDAQ, an
amount equal to the fair market value of an Op L.P. Unit as of such date of
determination, as determined by the General Partner of Op L.P. using any
reasonable method of valuation.
ARTICLE II
ORGANIZATION AND TERM
Section 2.01 Formation and Name of Partnership. Opfin and Op L.P. formed
and established the Partnership on June 25, 1987, pursuant to the provisions of
the Delaware Uniform Partnership Law (6 Del. C. Section 1501, et seq.) Opfin and
Op L.P. hereby agree, in accordance with the terms and
4
<PAGE> 9
conditions hereof, to continue to conduct the Partnership under the name of
Oppenheimer Capital, or such other name as the Managing Partner may from time
to time determine. The Managing Partner shall promptly execute, file and record
any assumed or fictitious name certificates required by the laws of any state
in which the Partnership transacts business. The Managing Partner in its sole
discretion may change the name of the Partnership at any time or from time to
time.
Section 2.02 Place of Business. The principal place of business of the
Partnership shall be Oppenheimer Tower, World Financial Center, New York, New
York 10281. The Managing Partner may hereafter, in its sole discretion, change
the principal place of business of the Partnership and establish other places
of business for the Partnership.
Section 2.03 Activities in Delaware. The Managing Partner agrees that
the Partnership shall:
(a) maintain a registered office in the State of Delaware;
(b) maintain The Prentice-Hall Corporation System, Inc. ("PH")
as agent for service of process or such other agent for service of process
located in the State of Delaware and agrees that process may be served upon
such agent in the State of Delaware (for PH currently at 32 Loockerman Square,
Suite L-100, Dover, Kent County, Delaware 19901);
(c) maintain an office in the State of Delaware for the
transaction of business and at which business shall be transacted;
(d) maintain at least one employee in the State of Delaware;
(e) maintain a telephone and a telephone directory listing in
the State of Delaware;
(f) maintain a bank account and a banking relationship in the
State of Delaware;
(g) maintain assets with a custodian located in the State of
Delaware; and
(h) file tax returns in the State of Delaware.
5
<PAGE> 10
ARTICLE III
PURPOSES
Section 3.01. Purposes and Business. The principal purpose and
business of the Partnership shall be to provide, directly or through
subpartnerships or subsidiaries, a full range of investment advisory services,
and engage in the acquisition, development, ownership, management and
distribution of investment advisory businesses and the development, management
and distribution of investment companies registered under the Company Act and
other pooled investment funds. The Partnership may also engage in investment,
trading, financing and financial services activities of all kinds and carry on
any business relating thereto or arising therefrom, including entering into any
partnership, joint venture or other similar arrangement to engage in any of the
foregoing activities or owning interests in any entity engaged in any of the
foregoing activities; investing in securities issued by OGI or its Affiliates;
and anything incidental or necessary to the foregoing which may lawfully be
conducted by a general partnership organized pursuant to the Delaware Uniform
Partnership Law.
Section 3.02. Powers. The Partnership shall be empowered to do any and
all acts necessary, appropriate, proper, advisable, incidental or convenient to
or for the furtherance of the purposes and business described herein and for
the protection and benefit of the Partnership, including, without limitation,
any or all of the powers that may be exercised on behalf of the Partnership by
the Managing Partner pursuant to Section 7.02.
Section 3.03. Changes in the Tax Laws. If, as a result of a change in
the Code or the occurrence of any other event, the Managing Partner reasonably
believes there is a substantial risk that the Partnership will be treated as an
association taxable as a corporation, then the Partnership shall have the right,
but not the obligation, to transfer its assets to a newly formed corporation in
exchange for all of the common stock of such corporation and to distribute such
common stock to the Partners in liquidation of the Partnership; provided,
however, that, notwithstanding the foregoing, no such transaction shall take
place unless the Managing Partner determines that the advisory contracts with
the investment advisory and investment company advisory clients of the
Partnership
6
<PAGE> 11
having accounts representing more than 15% of assets under management will not
be automatically terminated because they have not been assigned, as the term
"assignment" is defined in the Advisers Act or the Company Act, or the
requisite consents to preclude such termination have been obtained (an
"Assignment Determination").
ARTICLE IV
TERM OF THE PARTNERSHIP
The Partnership commenced on June 25, 1997 and shall continue until
December 31, 2061, unless dissolved and liquidated before such date in
accordance with the provisions of this Agreement or unless extended beyond
December 31, 2061 pursuant to the written consent of Partners having more than
50% of the Percentage Interests.
ARTICLE V
CAPITAL ACCOUNTS
Section 5.01. Capital Contributions.
(a) On June 25, 1987, Op L.P. made a Capital Contribution in
the amount of $10.00. As of the Closing Date, this amount was refunded to Op
L.P., and Op L.P. made a Capital Contribution in an amount equal to the
proceeds received by it from the public offering of Op L.P. Units consummated
on the Closing Date, excluding the proceeds from the exercise of the
Over-allotment Option granted to the underwriters in connection with the public
offering of Op L.P. Units consummated on the Closing Date (the "Over-allotment
Option"), net of all expenses relating thereto payable by Op L.P. (the
"Transferred Proceeds").
(b) On June 25, 1987, Opfin made a Capital Contribution in the
amount of $10.00. As of the Closing Date, this amount was refunded to Opfin,
and Opfin made an initial Capital Contribution consisting of the assets
described in the Assignment and Assumption Agreement subject to the liabilities
assumed therein, the value of which Capital Contribution was equal to
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(i) the excess of
(x) 101.01% of the Transferred Proceeds, divided by
(y) .303; over
(ii) 101.01% of the Transferred Proceeds.
(c) As promptly as possible following the receipt by Op L.P. of
proceeds, if any, from the issuance of additional Op L.P. Units, including Op
L.P. Units issued to participants in the Restricted Unit Plan and/or Restricted
Option Plan (as such terms are defined in the Op L.P. Agreement) of the
Partnership, Op L.P. shall contribute the proceeds of such issuance to the
Partnership (net of all expenses relating thereto payable by Op L.P.) as an
additional Capital Contribution. Except as set forth in Section 5.01(c), no
Partner shall be required to make any additional Capital Contribution to the
Partnership.
(d) Any additional Capital Contributions shall be credited to a
Partner's Capital Account as of the last day of the month in which the Capital
Contribution is made.
(e) The initial Capital Contributions of the Partners, and any
additional Capital Contributions by them, are referred to collectively as the
"Capital Contributions."
(f) No Partner shall have the right to demand a return of all
or any part of his Capital Contribution during the term of the Partnership, and
any return of such Capital Contribution shall be made solely from the assets of
the Partnership and only in accordance with the terms of this Agreement. No
interest shall be paid on Capital Contributions.
Section 5.02. Capital Accounts.
(a) A capital account shall be maintained on the books of the
Partnership for each Partner (its "Capital Account"), consisting of the amount
of his initial Capital Contribution (i) increased by the amount of any
additional Capital Contribution and such Partner's share of any Net Income
allocated to its Capital Account and (ii) decreased by such Partner's share of
any Net Loss allocated to such Partner's Capital Account and any distributions
made to such Partner.
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(b) If any additional Capital Contributions are made, the
Capital Accounts of the Partners shall, immediately prior to such contribution,
be adjusted upwards or downwards to reflect the difference between the book
value of the Partnership properties and the fair market value thereof, as if
such gain or loss had been recognized upon an actual sale of such properties
immediately prior to such event and allocated pursuant to Section 6.03(b)
hereof. In determining such gain or loss, the fair market value of the
Partnership properties, as of the date of determination, shall equal (i) the
quotient of (x) the product of (A) 1.01 times (B) the number of Op L.P. Units
outstanding, as of the date of determination, times (C) the Unit Price, divided
by (y) the Percentage Interest of Op L.P., plus (ii) the amount of any
Partnership indebtedness outstanding as of the date of determination.
(c) Upon the issuance of any Op L.P. Units in fulfillment of
the terms of the Restricted Unit Plan and/or the Restricted Option Plan, Op
L.P. shall be treated, solely for purposes of determining its Capital Account
under this Agreement, as having made a Capital Contribution equal to the Unit
Price of such Units as of the date of issuance; provided, however, that, in the
case of Op L.P. Units issued pursuant to the Restricted Option Plan, Op L.P.
has simultaneously transferred the exercise price to the Partnership.
(d) It is recognized that adjustments to Capital Accounts under
subsections (b) and (c) above may not be consistent with generally accepted
accounting principles and, therefore, may be ignored for financial statement
purposes.
Section 5.03. Negative Capital Accounts. At no time during the term of
the Partnership or upon dissolution and liquidation thereof shall a Partner
with a negative balance in his Capital Account have any obligation to the
Partnership or the other Partners to restore such negative balance, except as
may be required by law.
Section 5.04. Partners Not Personally Liable for Return of Capital.
Notwithstanding anything to the contrary contained herein, no Partner shall be
personally liable for the distribution or return of the Capital Contributions
of any other Partner or any portion thereof, it being expressly
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agreed that any such distribution, return or payment as may be made at any time
or from time to time shall be made solely from the assets of the Partnership.
ARTICLE VI
PROFITS AND LOSSES; DISTRIBUTIONS
Section 6.01. Fiscal Year. The fiscal year (the "Fiscal Year") of the
Partnership for Partnership accounting and tax purposes shall end on April 30.
The Managing Partner shall have authority to change the Fiscal Year, for either
accounting or tax purposes, if the Managing Partner, in its sole discretion,
subject to approval of the Internal Revenue Service, shall determine such
change to be legally required or to be necessary or appropriate to the business
of the Partnership.
Section 6.02. Determination of Profits and Losses.
(a) For Partnership accounting purposes and federal income tax
purposes, the Partnership shall use the accrual method of accounting.
(b) As of the close of the last day of each Fiscal Quarter of
the Partnership, the Partnership's Net Income and/or Net Loss shall be
computed and the Capital Accounts of each Partner shall be adjusted to reflect
the allocation provided below.
(c) "Net Income" and "Net Loss" of the Partnership for any
Fiscal Quarter shall be calculated in accordance with generally accepted
accounting principles, consistently applied.
Section 6.03. Allocation of Income and Loss.
(a) At the end of each Fiscal Quarter of the Partnership,
one-third of Net Income or Net Loss of the Partnership for such Fiscal Quarter
shall be allocated, for each calendar month therein, to those Persons who, as
of the last day of such month, were Partners.
(b) Except as provided in Sections 6.03(c) and 6.03(d) hereof,
the allocation of Net Income and Net Loss, as to each month, shall be in
accordance with a Partner's Percentage Interest as of the last day of such
month.
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(c) If Net Income for a Fiscal Quarter exceeds the amount of
the distribution for such quarter ("Excess Net Income"), one-third of the
Excess Net Income shall be allocated to each Partner for each calendar month in
such quarter in accordance with such Partner's Percentage Interest; provided,
however, that to the extent that Partners received distributions with respect
to any prior Fiscal Quarter in excess of Net Income (an "Excess Distribution"),
the Excess Net Income shall first be allocated pro rata among such Partners in
accordance with, and to the extent of, their Excess Distribution.
(d) Notwithstanding the foregoing provisions of this Section
6.03, if the Partnership and Op L.P. are combined pursuant to the authority
contained in Section 7.02 hereof, any state or local taxes which are imposed
upon the surviving limited partnership primarily by reason of the tax status of
the limited partners may be specifically allocated to such limited partners by
the Managing Partner, in as fair a manner as possible, and the Net Income or
Net Loss of the surviving limited partnership, and the allocations thereof, for
the Fiscal Quarter shall be appropriately adjusted.
Section 6.04. Allocation of Income and Loss for Income Tax Purposes.
The income, deductions, gains, losses and credits of the Partnership shall be
allocated for federal, state and local income tax purposes among the Persons
who were Partners during the relevant taxable year in accordance with such
Partners' interests, applicable provisions of the Code and other applicable law
and administrative pronouncements (including Sections 704(b) and (c) of the
Code), taking into account the Partners' Capital Accounts for such year and any
variations therein, any distributions by the Partnership, any reimbursement of
expenses of any Partner, any additional Capital Contributions and the
differences between income for tax purposes and profitability for Partnership
accounting purposes.
Section 6.05. Liabilities and Reserve. Liabilities shall be determined
in accordance with generally accepted accounting principles, consistently
applied, and shall include reserves for estimated expenses and, as the Managing
Partner may deem advisable in its sole discretion, reserves for contingencies.
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Section 6.06. Distributions Other than Upon Liquidation.
(a) At least one time with respect to each Fiscal Quarter and no
later than 30 business days after the end of each Fiscal Quarter, the
Partnership shall distribute all of its excess cash with respect to such Fiscal
Quarter ("Cash Available for Distribution") as determined by the Managing
Partner, in its sole discretion, taking into account the Partnership's financial
condition, results of operations, payment of interest or principal on any
indebtedness, cash requirements (including capital expenditures and possible
acquisitions) and general economic conditions. Such distributions shall be made
to all Partners in accordance with their Percentage Interests.
(b) In addition to the distributions contemplated by Section
6.06(a) hereof, the Managing Partner is authorized to make, at such time and
from time to time as the Managing Partner shall elect in its sole discretion,
any other distributions in cash or in kind to all Partners in accordance with
their Percentage Interests. If a distribution is made in kind, immediately prior
to such distribution, the Managing Partner shall determine the fair market value
of the property distributed and adjust the Capital Accounts of all Partners
upwards or downwards to reflect the difference, if any, between the book value
and the fair market value thereof, as if such gain or loss had been recognized
upon an actual sale of such property and allocated pursuant to Section 6.03
hereof. Each such distribution shall reduce the Capital Account of the
distributee Partner by the fair market value thereof.
(c) The Managing Partner may withhold taxes from any
distribution to any Partner to the extent required by the Code or any other
applicable law. For purposes of this Agreement, any taxes so withheld by the
Partnership with respect to any amount distributed by the Partnership to any
Partner shall be deemed to be a distribution or payment to such Partner,
reduce the amount otherwise distributable to such Partner pursuant to this
Agreement and reduce the Capital Account of such Partner.
(d) If, as a result of a change in the Code or the occurrence
of any other event, Op L.P. should cease to be treated as a partnership for
federal income tax purposes or the Partnership effects a transaction pursuant
to Section 3.03 hereof or Section 3.03 of the Op L.P. Agreement
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all distributions shall be made to all Partners on a pro rata basis in
accordance with their respective Percentage Interests.
ARTICLE VII
MANAGEMENT
Section 7.01. Management and Control of Partnership. Except as otherwise
expressly provided or limited by the provisions of this Agreement, the Managing
Partner shall have full, exclusive and complete discretion to manage and control
the business and affairs of the Partnership and to take all such actions as it
deems necessary or appropriate to accomplish the purpose of the Partnership as
set forth herein. In the event that Opfin transfers all of its interest in the
Partnership to another Person, it shall, prior to such transfer, designate a new
Managing Partner.
Section 7.02. Powers of Managing Partner. Except as otherwise expressly
provided herein, the Managing Partner (acting on behalf of the Partnership)
shall have the right, power and authority, in the management of the business
and affairs of the Partnership, to do or cause to be done any and all acts, at
the expense of the Partnership, as may be deemed by the Managing Partner to be
necessary or appropriate to effectuate the business, purposes and objectives of
the Partnership. The power and authority of the Managing Partner shall include,
without imitation, the power and authority:
(a) to acquire, own, lease, sublease, manage, hold, deal in,
control or dispose of any interests or rights in personal property or real
property;
(b) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any other action
with respect to any lease of any assets of the Partnership;
(c) to pay, collect, compromise, arbitrate or otherwise adjust
or settle any and all other claims or demands of or against the Partnership or
to hold such proceeds against the payment of contingent liabilities, known or
unknown;
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(d) to borrow money or to obtain credit from banks, other
lending institutions or any other Person, including the Partners and their
Affiliates, and pursuant to indentures, loan agreements or any other type of
instrument, for any purpose of the Partnership; provided, however, that money
borrowed or credit obtained from a Partner or an Affiliate of a Partner shall
be at such rate of interest and upon such other terms as are no less favorable
to the Partnership than those obtainable from an unaffiliated third party;
(e) to make, execute, assign, acknowledge and file on behalf of
the Partnership any and all documents or instruments of any kind which the
Managing Partner may deem necessary or appropriate in carrying out the purposes
and business of the Partnership; and any Person dealing with the Managing
Partner shall not be required to determine or inquire into its authority or
power to bind the Partnership or to execute, acknowledge or deliver any and all
documents in connection therewith;
(f) to assume obligations, enter into contracts, including
contracts of guaranty or suretyship, incur liabilities, lend money and
otherwise use the credit of the Partnership, and to secure any of the
obligations, contracts or liabilities of the Partnership, by mortgage, pledge
or other encumbrance of all or any part of the property and income of the
Partnership;
(g) to invest funds of the Partnership;
(h) to purchase Op L.P. Units, whether in the open market,
through privately negotiated transactions or pursuant to Section 9.01 and/or
Article XVIII of the Op L.P. Agreement;
(i) to employ and engage suitable agents, employees, advisers,
consultants and counsel (including any custodian, investment banker,
accountant, attorney, corporate fiduciary, bank or other reputable financial
institution which may be an Affiliate of the Managing Partner, or any other
agents, employees or Persons who may serve in such capacity for the Managing
Partner or any Affiliate of the Managing Partner) and to designate, in the sole
discretion of the Managing Partner, any employees or agents as officers of the
Partnership with titles including but not limited to "chairman," "managing
director," "president," "vice president," "treasurer," "secretary,"
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"assistant treasurer" and "assistant secretary," each of whom shall serve at
the pleasure of the Managing Partner, to carry out any activities that the
Managing Partner is authorized or required to carry out under this Agreement,
as and to the extent authorized by the Managing Partner, including, without
limitation, to represent the Partnership in its dealings with third parties, to
execute any kind of document or contract on behalf of the Partnership, to
propose, approve or disapprove of or take action for and on behalf of the
Partnership with respect to the operations of the Partnership, or to undertake
some or all of the general management, property management, financial
accounting and record keeping or other duties of the Managing Partner; and to
indemnify such Persons against liabilities incurred by them in acting in such
capacities on behalf of the Partnership;
(j) to qualify the Partnership to do business in any state,
territory, dependency or foreign country; and
(k) to possess and exercise any additional rights and powers of
a general partner under the partnership laws of Delaware and any other
applicable laws, to the extent not expressly restricted by this Agreement.
In addition to the foregoing, the Managing Partner shall have the
authority, for business or regulatory reasons, to (a) convert the Partnership
into a limited partnership with the Managing Partner as a general partner, Op
L.P. as a limited partner and the remaining Partners having such interests as
the Managing Partner shall determine and (b) concurrently therewith, combine
(by merger or otherwise) the Partnership with Op L.P.
The expression of any power or authority of the Managing Partner in
this Agreement shall not in any way limit or exclude any other power or
authority which is not specifically or expressly set forth in this Agreement.
Section 7.03. Restrictions on Management. Notwithstanding the generality
of Section 7.02, the Managing Partner shall not, without the express written
consent of all of the Partners:
(a) incur any indebtedness (other than in the ordinary course
of business or for investments in
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securities and/or to satisfy margin deposit requirements for investments in
commodities) for money borrowed;
(b) cause the Partnership, except in the ordinary course of the
Partnership's business, to guaranty, endorse or become contingently liable upon
the obligation of any other Person; or
(c) sell or dispose of all or substantially all of the
Partnership's assets (provided that sales of client receivables or sales
pursuant to a liquidation under Article XII shall not be restricted hereunder);
provided, however, that engaging in short sales or selling options or futures
"short" shall not be deemed to be incurrence of indebtedness for purposes of
this Section 7.03.
Section 7.04. Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed or tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the Managing Partner or of one or more nominees
or in "street name," as the Managing Partner may determine. The Managing
Partner declares and warrants that any Partnership assets for which legal title
is held in the name of the Managing Partner shall be held in trust by the
Managing Partner for the use and benefit of the Partnership in accordance with
the terms and provisions of this Agreement. All Partnership assets shall be
recorded as the property of the Partnership on its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
Section 7.05. Other Business Activities of Partners. Any Partner or
Affiliate thereof may have other business interests or may engage in other
business ventures of any nature or description whatsoever, whether presently
existing or hereafter created, and may compete, directly or indirectly, with
the business of the Partnership and such activities shall not be deemed
wrongful or improper. No Partner or Affiliate thereof shall incur any liability
to the Partnership as the result of such Partner's pursuit of such other
business interests and ventures and competitive activity, and neither the
Partnership nor any of the other Partners shall have any right to participate
in such other
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business interests or ventures or to receive or share in any income or profits
derived therefrom.
Section 7.06. Transactions with Partners or Affiliates. In addition to
transactions described in this Section 7.06 or otherwise specifically
contemplated by the terms and provisions of this Agreement, the Partnership is
expressly permitted to enter into other transactions with any Partner or any
Affiliate thereof provided that the terms of such transactions are equivalent
to terms obtainable by the Partnership from a comparable unaffiliated third
party. Without limiting the generality of the foregoing, the Partnership is
permitted to (i) allocate, in a reasonable manner, consistent with past
practices, the costs and expenses incurred by the Managing Partner in
connection with the ownership and operation of its businesses, including the
Partnership, (ii) use the brokerage, investment banking, underwriting and
mutual fund distribution services of Oppenheimer & Co., Inc. ("Opco") in
effecting transactions on behalf of the Partnership and pay Opco commissions
or fees in accordance with Opco's then current rates for unaffiliated third
parties and (iii) make other loans to Partners and their Affiliates on
commercially reasonable terms. Loans made to Opfin or its Affiliates (including
Op L.P.) shall bear interest at an annual rate at least comparable to the cost
to Opco of borrowings of a similar nature, amount and term.
Section 7.07. Liability of Partner to Partnership and Other Partners.
No Partner or any of its Affiliates, officers, directors, employees and agents
shall be liable to the Partnership or to any other Partner for any losses
sustained or liabilities incurred, including monetary damages, as a result of
any act or omission or breach of fiduciary duty (including a breach of any duty
of care or any duty of loyalty) of the Partner or any such other Person if the
conduct of the Partner or such other Person did not constitute actual fraud,
gross negligence or willful or wanton misconduct.
Section 7.08. Indemnification.
(a) The Partnership shall indemnify and hold harmless the
Partners, their Affiliates and all officers, directors, partners, employees and
agents of the Partners and their Affiliates (individually, an "Indemnitee") to
the fullest extent provided by law from and against any and all losses, claims,
damages, liabilities, expenses (including
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legal fees and expenses), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise by reason of
his management of the affairs of the Partnership or a Partner or his status as
a Partner, an Affiliate thereof, or partner, director, officer, employee or
agent thereof or a Person serving at the request of the Partnership, a Partner
or any Affiliate thereof in another entity in a similar capacity, which
relates to or arises out of the Partnership, its property, business or affairs
or the Partners, their properties, businesses or affairs or any document filed
with or submitted to the Securities and Exchange Commission or any
indemnification of underwriters given in connection therewith, regardless of
whether the Indemnitee continues to be a Partner, an Affiliate thereof or a
partner, director, officer, employee or agent thereof at the time any such
liability or expense is paid or incurred, and regardless of whether the
liability or expense accrued at or relates to, in whole or in part, any time
before, on or after the date hereof. The negative disposition of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not, of itself, create a presumption
that the Indemnitee acted in a manner contrary to the standard set forth in
Section 7.08(b) below. Any indemnification pursuant to this Section 7.08 shall
be made only out of the assets of the Partnership and to the extent provided by
the first sentence of this Section 7.08(a).
(b) An Indemnitee shall not be entitled to indemnification
under this Section 7.08 with respect to any claim, issue or matter in which it
has been adjudged liable for fraud, willful misconduct or gross negligence,
unless and only to the extent that the court in which such action was brought,
or another court of competent jurisdiction, determines upon application that,
despite the adjudication of liability but in view of all of the circumstances
of the case, the Indemnitee is fairly and reasonably entitled to
indemnification for such liabilities and expenses as the court may deem proper.
(c) To the fullest extent permitted by law, expenses (including
legal fees) incurred by an Indemnitee in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand,
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action, suit or proceeding upon receipt by the Partnership of an undertaking by
or on behalf of the Indemnitee to repay the amount with respect to which it
shall be determined that the Indemnitee is not entitled to be indemnified as
authorized in this Section 7.08.
(d) The indemnification provided by this Section 7.08 shall be
in addition to any other rights to which an Indemnitee may be entitled under
any agreement, bylaw or vote of the Partners or as a matter of law or
otherwise, both as to action in the Indemnitee's capacity as a Partner, an
Affiliate thereof or a partner, director, officer or employee or agent thereof
and to action in any other capacity, shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of an Indemnitee.
(e) The Managing Partner and the Partnership may purchase and
maintain insurance, to the extent and in such amounts as the Managing Partner,
in its sole discretion, deems reasonable, on behalf of Indemnitees and such
other Persons as the Managing Partner shall determine against any liability
that may be asserted against or expense that may be incurred by such Person in
connection with activities of the Partnership or such Indemnitees, regardless
of whether the Partnership would have the power to indemnify such Person
against such liability under the provisions of this Agreement. The Managing
Partner and the Partnership may enter into indemnity contracts with Indemnitees
and adopt written procedures pursuant to which arrangements are made for the
advancement of expenses and the funding of obligations under this Section 7.08
and containing such other procedures regarding indemnification as are
appropriate.
(f) For purposes of this Section 7.08, the Partnership, the
Managing Partner or any Affiliate thereof shall be deemed to have requested an
Indemnitee to serve as a fiduciary of an employee benefit plan whenever the
performance by him of his duties to the Partnership, the Managing Partner or
such Affiliate also imposes duties on, or otherwise involves services by, him
to the plan or participants of beneficiaries of the plan. Excise taxes assessed
on an Indemnitee with respect to an employee benefit plan pursuant to
applicable law shall be deemed "fines" within the meaning of Section 7.08(a)
hereof, and action taken or omitted by him with respect to an employee
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benefit plan in the performance of his duties for a purpose reasonably believed
by him to be in the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is in, or not opposed to, the best
interest of the Partnership.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.08 because the Indemnitee had an interest in
the transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.08 are for the benefit of
the Indemnitees and their heirs, successors, assigns, administrators and
personal representatives and shall not be deemed to create any rights for the
benefit of any other Persons.
Section 7.09. Other Matters Concerning the Partners.
(a) Each Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(b) Each Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants
and advisers selected by them, and any opinion of any such Person as to matters
that such Partner reasonably believes to be within its professional or expert
competence (including, without limitation, any opinion of legal counsel to the
effect that the Partnership would "more likely than not" prevail with respect
to any matter) shall be full and complete authorization and protection with
respect to any action taken or suffered or omitted by the Partner hereunder in
good faith and in accordance with such opinion.
(c) Each Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through a duly appointed attorney or
attorney-in-fact. Each such attorney or attorney-in-fact shall, to the extent
provided by such Partner in the power of attorney, have full power and
authority to do and perform each and every act and duty which is permitted or
required to be done by such Partner hereunder.
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Section 7.10. Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between a Partner or any of its
Affiliates, on the one hand, and the Partnership or any other Partner or any of
such Partner's Affiliates on the other hand, or (ii) whenever this Agreement or
any other agreement contemplated herein or therein provides that any Partner
shall act in a manner which is, or provides terms which are, fair and reasonable
to the Partnership or any Partner, such Partner shall resolve such conflict of
interest, take such action or provide such terms, considering in each case the
relative interests of each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by any Partner, the resolution, action or terms so made, taken or provided
by such Partner shall not constitute a breach of this Agreement or any other
agreement contemplated herein or therein.
(b) The Managing Partner shall establish a Conflicts Committee
consisting of at least three members of its Board of Directors, one of whom
will not be an employee, officer or stockholder of the Partnership, the
Managing Partner or any of their Affiliates (the "Independent Director").
Notwithstanding the provisions of Section 7.10(a) hereof, in the event that a
business opportunity comes to the attention of the Managing Partner, which
opportunity may be taken by the Partnership, the Managing Partner or any
Affiliate thereof, and the Managing Partner cannot reasonably determine, based
upon past practices, the appropriate party to take advantage of such
opportunity, such determination shall be made by agreement of the Independent
Director and at least one of the other members of the Conflicts Committee.
(c) Whenever in this Agreement the Managing Partner is
permitted or required to make a decision (i) in its "sole discretion" or,
"discretion," or under a grant of similar authority or latitude, the Managing
Partner shall be entitled to consider only such interests and factors as it
desires and shall have no duty or obligation to give any
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consideration to any interest of or factors affecting the Partnership or any
Partners, or (ii) in its "good faith" or under another express standard, the
Managing Partner shall act under such express standard and shall not be subject
to any other or different standards imposed by this Agreement or any other
agreement contemplated herein or therein.
ARTICLE VIII
COMPENSATION AND EXPENSES
Section 8.01. Compensation to Managing Partner. The Managing Partner
shall not receive any compensation from the Partnership for services rendered
in its capacity as a Managing Partner.
Section 8.02. Expenses of the Partnership. The Partnership shall be
responsible for its own expenses and for the reimbursement to the Managing
Partner and its Affiliates of all out-of-pocket fees, costs and expenses
actually incurred by any of them on behalf of the Partnership. In addition, the
Partnership shall be responsible for its pro rata share of expenses of the
Managing Partner and its Affiliates. Such expenses shall be allocated by the
Managing Partner on a reasonable basis.
Section 8.03. Reimbursement of Certain Expenses of Op L.P. The
Partnership shall pay the annual audit fees, tax preparation fees, transfer
agent fees and bookkeeping expenses incurred by, or on behalf of, Op L.P. The
Partnership may, in the sole discretion of the Managing Partner, but shall have
no obligation to, pay any other expenses incurred by Op L.P.
ARTICLE IX
FINANCIAL MATTERS
Section 9.01. Books and Records. The Managing Partner shall keep, or
cause to be kept, books and records with respect to the Partnership, showing
assets, liabilities, income, operations, transactions and the financial
condition of the Partnership. The Managing Partner shall maintain and preserve
all Partnership books and records for such period as the Managing Partner, in
its reasonable
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discretion, shall determine necessary or appropriate, subject to any
requirement of federal or state law.
Section 9.02. Financial Statements and Information.
(a) All Partnership financial statements shall be accurate and
complete in all material respects and shall present fairly the financial
positions and operating results of the Partnership.
(b) As soon as practicable, but in no event later than 120 days
after the close of each Fiscal Year, the Managing Partner shall cause to be
delivered to each Partner as of the last day of such Fiscal Year reports
containing financial statements of the Partnership for the Fiscal Year,
presented in accordance with generally accepted accounting principles,
including a balance sheet, a statement of income, a statement of Partners'
equity and a statement of changes in financial position, such statements to be
audited by a firm of independent accountants selected by the Managing Partner.
(c) As soon as practicable, but in no event later than 75 days
after the close of each Fiscal Quarter, except the last Fiscal Quarter of each
Fiscal Year, the Managing Partner shall cause to be delivered to each Partner
as of the last day of that Fiscal Quarter a report containing such financial
information for that Fiscal Quarter as the Managing Partner deems appropriate.
(d) The Managing Partner shall provide to each Partner such
other reports and information concerning the business and affairs of the
Partnership (i) as the Managing Partner, in its sole discretion, may deem
necessary or appropriate, or (ii) to the extent not provided for in Section
9.02(b) or (c) hereof as such Partner requests for a purpose reasonably related
to its interest in the Partnership.
(e) The Managing Partner shall provide any of the reports or
other information referred to in this Section 9.02 to such federal, state or
local governments, governmental agencies, other regulatory entities or
securities exchanges as shall be required or as the Managing Partner, in its
sole discretion, may deem necessary or appropriate.
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Section 9.03. Accounting Decisions. All decisions as to accounting
matters, except as specifically provided to the contrary herein, shall be made
by the Managing Partner.
Section 9.04. Place Maintained. The books, accounts and records of the
Partnership at all times shall be maintained at the Partnership's principal
office or, at the option of the Managing Partner, at the principal place of
business of the Managing Partner.
Section 9.05. Preparation of Tax Returns. The Managing Partner, at the
expense of the Partnership, shall arrange for the preparation and timely filing
of all returns of the Partnership showing all income, gains, deductions and
losses necessary for federal, state and local income tax purposes, and shall
use all reasonable efforts to furnish to each Partner within 90 days after the
close of each taxable year of the Partnership the tax information reasonably
required by such Partner for federal, state and local income tax reporting
purposes.
Section 9.06. Tax Elections.
(a) Except as otherwise specifically provided herein, the
Managing Partner shall, in its sole discretion, determine whether to make any
available election under the Code or any other applicable state or local tax
law on behalf of the Partnership.
(b) The Managing Partner may make the election described in
Section 754 of the Code on behalf of the Partnership. The Managing Partner shall
have the right to seek to revoke any such election upon the Managing Partner's
determination that such revocation is in the best interest of Op L.P.
(c) The Partnership shall elect to amortize and deduct expenses
incurred in organizing the Partnership over a 60-month period as provided in
Section 709 of the Code.
(d) No election shall be made by the Partnership or any Partner
for the Partnership to be excluded from the application of any of the
provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state or local tax laws.
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(e) The Managing Partner shall be the "designated organizer"
responsible for registering the Partnership, if necessary, pursuant to Treasury
Regulation Section 301.6111-IT and as the "designated person" responsible for
maintaining lists of investors in the Partnership pursuant to Treasury
Regulation Section 301.6112-IT.
Section 9.07. Tax Controversies. The Managing Partner shall be the "tax
matters partner" of the Partnership within the meaning of Section 6231(a)(7) of
the Code and is authorized to represent the Partnership (at the expense of the
Partnership) in connection with all examinations of the affairs of the
Partnership by any federal, state or local tax authorities, including any
resulting administrative and judicial proceedings, and to expend funds of the
Partnership for professional services and costs associated therewith. Each
Partner agrees to cooperate with the Managing Partner in connection with the
conduct of all such proceedings.
ARTICLE X
ISSUANCE OF ADDITIONAL INTERESTS
(a) Subject to paragraphs (b) and (c) below, in order to raise
additional capital or acquire assets, to redeem or retire Partnership debt or
for any other Partnership purposes, the Managing Partner is authorized to cause
the Partnership to issue, at any time and from time to time, on such terms and
conditions as it, in its sole discretion, determines, partnership interests in
the Partnership having such rights, powers and preferences as the Managing
Partner shall designate and debt obligations of the Partnership, including
secured and unsecured debt obligations and debt obligations convertible into
general partnership interests; provided, however, that the issuance of such
interests or securities shall be permitted if (and only if) the Managing
Partner (i) determines that the transaction would not cause the Partnership to
be treated as an association taxable as a corporation for federal income tax
purposes (a "Tax Determination") and (ii) makes an Assignment Determination.
(b) The affirmative vote or written consent of the holders of
more than 50% of the Op L.P. Units not held by the Managing Partner and its
Affiliates shall be necessary (x) if the proceeds of any additional Capital
Contribution are to be lent by the Partnership to an
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Affiliate of the Partnership or (y) in order to issue general partnership
interests which rank senior, with respect to any right to receive
distributions, to the general partnership interest of Op L.P.
(c) The Partnership shall not issue any additional or increased
general partnership interests to any Partners otherwise than as a consequence of
the Restricted Unit Plan and the Restricted Option Plan and the exchange of
interests in the Partnership for interests in Op L.P., or unless it has
received an opinion of a nationally recognized investment banking firm, chosen
in the sole discretion of the general partner of Op L.P. (which investment
banking firm may not be an Affiliate of such general partner) that the issuance
of such general partnership interest is fair to the limited partners of Op L.P.
from a financial point of view.
ARTICLE XI
TRANSFER OF INTERESTS AND ADMISSION OF NEW PARTNERS
Section 11.01 Transfer of a Partner's Interest.
(a) A Partner shall not (i) withdraw from the Partnership or
(ii) except as provided in Section 11.01(b), 11.01(c) or 11.01(d) hereof,
transfer all or any portion of its interest in the Partnership.
(b) A Partner, other than Op L.P., shall have the right to
transfer all or any portion of its interest in the Partnership (i) to an
Affiliate of the Partner, (ii) in connection with a mortgage, pledge,
hypothecation or grant of a security interest in its interest, (iii) in
connection with a transfer by the Partner of all or substantially all of its
assets to another Person, and the admission of such Person as a general
partner, (iv) to any transferee; provided, however, that no transfer may be
made under this clause (iv) unless Opfin or an Affiliate of or successor to
Opfin remains the Managing Partner after such transfer or the holders of a
majority of the outstanding Op L.P. Units not owned of record or beneficially
by Opfin or its Affiliates consent to the transfer, and (v) to any transferee
if necessary to avoid any material adverse consequences to the Partners of the
Partnership resulting from a change in any applicable law or regulation or
interpretation thereof.
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(c) A Partner who is also the general partner of Op L.P. or an
Affiliate thereof shall have the right to transfer all or any portion of its
interest in the Partnership to Op L.P. in exchange for Op L.P. Units or an
increased general partnership interest in Op L.P. (upon the terms set forth in
Section 9.01 of the Op L.P. Agreement).
(d) Op L.P. shall not transfer any part of its general
partnership interest except for transfers made pursuant to Section 3.03 of the
Op L.P. Agreement upon a liquidation of Op L.P.
(e) If a Partner desires to transfer all or any portion of its
interest in the Partnership pursuant to Section 11.01(b) hereof (other than
upon foreclosure of a mortgage, pledge, hypothecation or grant of a security
interest pursuant to Section 11.01(b)(ii) hereof) or 11.01(c) hereof, such
transfer shall be permitted if (and only if) the Managing Partner makes an
Assignment Determination and a Tax Determination.
Section 11.02. Admission of Transferees as Partners. The transferee of
all or any portion of a Partner's partnership interest pursuant to Section
11.01 hereof shall be admitted to the Partnership as a Partner upon:
(i) the transferee's acceptance of, and agreement to be bound
by, all the terms and provisions of this Agreement, in form and
substance satisfactory to the Managing Partner;
(ii) evidence of the authority of such transferee to become a
Partner and to be bound by all the terms and conditions of this
Agreement; and
(iii) the consent of the Managing Partner, which may be withheld
in its sole discretion.
No Partner shall be permitted to withdraw from the Partnership until
the transferee is admitted as a Partner of the Partnership.
Section 11.03. Allocations and Distributions Prior to Admission.
(a) All profits and losses of the Partnership attributable to
any Partnership interest acquired by
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<PAGE> 32
reason of an assignment shall be allocated (i) in respect of the portion of the
Fiscal Year ending on the effective date of the assignment, to the assignor and
(ii) in respect of subsequent periods, to the assignee.
(b) An assignee of a partnership interest shall receive
allocations of income, gains, credits, deductions, profits and losses of, and
distributions from, the Partnership attributable to such partnership interest
after the effective date of the assignment.
(c) The "effective date" of an assignment of an interest in the
Partnership for purposes of this Section 11.03 shall be the last day of the
month in which the Managing Partner receives written notice of such assignment.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.01. Events Causing Dissolution. The Partnership shall be
dissolved and its affairs wound up upon the occurrence of any of the following
events:
(a) the expiration of the term of the Partnership, as provided
in Article IV hereof;
(b) the withdrawal, death, adjudication of insanity,
dissolution or Bankruptcy (as hereinafter defined) of the next to the last
remaining Partner, it being understood and agreed that upon the withdrawal,
death, adjudication of insanity, dissolution or Bankruptcy of any Partner other
than the next to last remaining Partner, the Partnership shall not be wound up
but shall be reconstituted and the business continued; or
(c) a determination of the Managing Partner, or the written
consent of Partners having more than 80% of the Percentage Interests, to
dissolve the Partnership.
For purposes of this Agreement, the term "Bankruptcy" of a Partner
shall mean (i) the filing by a Partner of a voluntary petition seeking
liquidation, reorganization, arrangement or readjustment, in any form, of its
debts under Title 11 of the United States Code (or corresponding provisions of
future laws) or any other federal or state insolvency law, or a Partner's
filing an answer consenting
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to or acquiescing in any such petition, (ii) the making by a Partner of any
assignment for the benefit of its creditors or the admission by a partner in
writing of its inability to pay its debts as they mature, (iii) the expiration
of 60 days after the filing of an involuntary petition under Title 11 of the
United States Code (or corresponding provisions of future laws), an application
for the appointment of a receiver for the assets of a Partner, or an
involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other federal or state insolvency law,
provided that the same shall not have been vacated, set aside or stayed within
such 60-day period, or (iv) the entry against it of a final and non-appealable
order for relief under any bankruptcy, insolvency or similar law now or
hereafter in effect.
Section 12.02. Dissolution. Upon an event described in Section 12.01
hereof, the Partnership shall be dissolved and liquidated; provided, however,
that if the Partnership is dissolved because of the dissolution of Op L.P. and
Op L.P. is subsequently reconstituted and its business is continued, the
Partnership shall be deemed to be reconstituted and continued on the same terms
and conditions set forth in this Agreement. The Liquidating Trustee (as defined
in Section 12.03 hereof) promptly shall notify the Partners of such dissolution.
Section 12.03. Liquidation. Upon dissolution of the Partnership, the
Managing Partner, or, in the event there is no Managing Partner, a Person or
Persons selected by Partners having more than 50% of the Percentage Interests,
shall liquidate the Partnership (the "Liquidating Trustee"). The Liquidating
Trustee shall:
(a) first, pay (or make provision for the payment of) all
creditors of the Partnership, other than Partners or their Affiliates who are
creditors, in satisfaction of liabilities of the Partnership in the order of
priority provided by law;
(b) second, pay, on a pro rata basis, all creditors of the
Partnership that are Partners or their Affiliates to the extent otherwise
permitted by law, in satisfaction of liabilities of the Partnership; and
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(c) third,
(i) determine the fair market value of the Partnership's
assets,
(ii) adjust the Capital Accounts of the Partners upwards or
downwards to reflect the difference between the book value of such
assets and the fair market value thereof, as if such gain or loss had
been recognized upon an actual sale of such assets and allocated
pursuant to Section 6.03 hereof, assuming an actual distribution under
Section 6.06 hereof, and
(iii) distribute such assets (whether in cash or in kind) to
each Partner pro rata in accordance with such Partner's Capital Account
as so adjusted.
The Liquidating Trustee, if other than the Managing Partner, shall be
entitled to receive such compensation for its services as may be approved by
all of the Partners. The Liquidating Trustee shall agree not to resign at any
time without 60 days' prior written notice and, if other than the Managing
Partner, may be removed at any time, with or without cause, by written notice
of removal approved by all of the Partners. Upon dissolution, removal or
resignation of the Liquidating Trustee, a successor and substitute Liquidating
Trustee (who shall have and succeed to all rights, powers and duties of the
original Liquidating Trustee) shall be selected within 90 days thereafter by
consent of all of the Partners. The right to appoint a successor or substitute
Liquidating Trustee in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidating Trustee
are authorized to continue under the provisions hereof, and every reference
herein to the Liquidating Trustee will be deemed to refer also to any such
successor or substitute Liquidating Trustee appointed in the manner herein
provided. Except as expressly provided in this Article XII, the Liquidating
Trustee appointed in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all the
powers conferred upon the Managing Partner under the terms of this Agreement
(but subject to all the applicable limitations, contractual and otherwise, upon
the exercise of such powers) to the extent necessary or desirable in the good
faith judgment of the Liquidating Trustee to carry out his duties and functions
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hereunder (including the establishment of reserves for liabilities that are
contingent or uncertain in amount) for and during such period of time as shall
be reasonably required in the good faith judgment of the Liquidating Trustee to
complete the winding up and the liquidation of the Partnership as provided for
herein. In the event that no Person is selected to be the Liquidating Trustee
as herein provided within 120 days following the event of dissolution, or in
the event that the Partners fail to select a successor or substitute
Liquidating Trustee within the time periods set forth above, any Partner may
make application to the Court of Chancery of the State of Delaware to wind up
the affairs of the Partnership and, if deemed appropriate, to appoint a
Liquidating Trustee and to establish its compensation.
Section 12.04. Termination of Partnership. Except as otherwise provided
in this Agreement, the Partnership shall terminate when all of the assets of
the Partnership, after payment of or due provision for all debts, liabilities
and obligations of the Partnership, shall have been distributed to the Partners
as provided for in Article VI hereof.
ARTICLE XIII
AMENDMENTS
Section 13.01. Amendments to Be Adopted Solely by the Managing Partner.
The Managing Partner, without the approval of any other Partner, may amend any
provision of this Agreement, and execute, swear to, acknowledge, deliver, file
and record all documents required or desirable in connection therewith, to
reflect:
(a) a change in the name of the Partnership or the location of
the principal place of business of the Partnership;
(b) the admission, substitution, termination or withdrawal of a
Partner in accordance with this Agreement;
(c) a change that is necessary or advisable in the opinion of
the Managing Partner to ensure that the Partnership will not be treated as an
association taxable as a corporation for federal income tax purposes;
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(d) a change that is (i) of an inconsequential nature and does
not adversely affect the Partners in any material respect; (ii) necessary or
desirable to cure any ambiguity, to correct or supplement any provision herein
that would be inconsistent with any other provision herein, or to make any
other provision with respect to matters or questions arising under this
Agreement that will not be inconsistent with the provisions of this Agreement,
in each case so long as such change does not adversely affect the Partners;
(iii) necessary or desirable to satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation
under any federal or state statute, so long as such change is made in a manner
which minimizes any adverse effect on the Partners; or (iv) required or
contemplated by this Agreement;
(e) an amendment that is necessary or appropriate, in the
opinion of independent counsel to the Partnership, to prevent the Partnership,
Op L.P. or the Managing Partner or its directors or officers from in any manner
being deemed an investment company pursuant to the provisions of the Company
Act or from being subject to "plan asset" regulations adopted under the Employee
Retirement Income Security Act of 1974, as amended;
(f) a change in any provision of this Agreement that requires
any action to be taken by or on behalf of the Managing Partner or the
Partnership pursuant to the requirements of applicable Delaware law if the
provisions of applicable Delaware law are amended, modified or revoked so that
the taking of such action is no longer required;
(g) a change that is necessary to implement the provisions of
Section 3.03 hereof or Section 3.03 of the Op L.P. Agreement; or
(h) any other amendments similar to the foregoing.
The authority set forth in Section 13.01(d) hereof shall specifically
include the authority to make such amendments to this Agreement as the Managing
Partner deems necessary or desirable in the event the Uniform Partnership Law
of Delaware is amended to eliminate or change any provision now in effect.
Section 13.02. Amendment Procedures. Except as provided in Section
13.01 hereof, any proposed amendment
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shall be effective only upon the consent of Partners having more than 50% of
the Percentage Interests.
ARTICLE XIV
POWER OF ATTORNEY
Each Partner hereby irrevocably constitutes, appoints and empowers the
Managing Partner (and any successor by merger, transfer or otherwise), any
Liquidating Trustee and each of the Managing Partner's authorized officers and
attorneys-in-fact with full power of substitution, as the true and lawful agent
and attorney-in-fact of such Person's use or benefit, to make, execute, verify,
consent to, swear to, acknowledge, make oath as to, publish, deliver, file
and/or record in the appropriate public offices (i) all certificates and other
instruments, including, at the option of the Managing Partner, this Agreement
and all amendments and restatements thereof, that the Managing Partner deems
appropriate or necessary to form and qualify, or continue the qualification of,
the Partnership in the State of Delaware and all jurisdictions in which the
Partnership may or may intend to conduct business or own property; (ii) all
other certificates, instruments and documents as may be requested by, or may be
appropriate under the laws of, any state or other jurisdiction in which the
Partnership may or may intend to conduct business or own property; (iii) all
instruments that the Managing Partner deems appropriate or necessary to reflect
any conveyances and other instruments or documents that the Managing Partner
deems appropriate or necessary to reflect any amendment, change or modification
of this Agreement in accordance with the terms hereof; (iv) all conveyances and
other instruments or documents that the Managing Partner deems appropriate or
necessary to effectuate or reflect the dissolution, termination and liquidation
of the Partnership pursuant to the terms of the Agreement; (v) any and all
financing statements, continuation statements, mortgages or other documents
necessary to grant to or perfect for secured creditors of the Partnership,
including the Managing Partner and its Affiliates, a security interest,
mortgage, pledge or lien on all or any of the Partnership Assets; (vi) all
instruments or papers required to continue the business of the Partnership
pursuant to Article XII hereof; (vii) all instruments (including this Agreement
and amendments and restatements thereof) relating to the admission of any
Partner pursuant to Article XI hereof; and (viii) all other instruments as the
attorneys-in-fact or any
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one of them may deem necessary or advisable to carry out fully the provisions
of the Agreement in accordance with its terms.
The appointment by each Partner of the Persons designated in this
Article XIV as attorneys-in-fact is a power of attorney coupled with an
interest in recognition of the fact that each of said Persons will be relying
upon the power to act pursuant to this power of attorney for the orderly
administration of the affairs of the Partnership. The foregoing power of
attorney is hereby declared to be irrevocable, and it shall survive, and shall
not be affected by, the subsequent death, incompetency, dissolution,
disability, incapability, bankruptcy or termination of any Partner and it shall
extend to such Person's heirs, successors and assigns. Each Partner hereby
waives any and all defenses that may be available to contest, negate or
disaffirm the action taken as attorney-in-fact under this power of attorney in
accordance with this Agreement. Each Partner shall execute and deliver to the
Managing Partner, within fifteen (15) days after receipt of the Managing
Partner's request therefor, all such further designations, powers of attorney
and other instruments as the Managing Partner deems necessary to effectuate
this Agreement and the purposes of the Partnership.
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.01. Additional Actions and Documents. Each of the Partners
hereby agrees to take or cause to be taken such further actions, to execute,
acknowledge, deliver and file or cause to be executed, acknowledged, delivered
and filed such further documents and instruments and to use best efforts to
obtain such consents, as may be necessary or as may be reasonably requested in
order to fully effectuate the purposes, terms and conditions of the Agreement,
whether before, at or after the closing of the transactions contemplated by
this Agreement.
Section 15.02. Notices. All notices, demands, requests or other
communications which may be or are required to be given, served or sent by a
Partner or the Partnership pursuant to this Agreement shall be in writing and
shall be personally delivered, mailed by first-class, registered or certified
mail, return receipt requested,
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postage prepaid, or transmitted by telegram or telex, addressed as follows:
(a) If to the Managing Partner:
Oppenheimer Financial Corp.
Oppenheimer Tower
World Financial Center
New York, New York 10281
Attn: General Counsel
(b) If to Op L.P.:
Oppenheimer Capital, L.P.
c/o Oppenheimer Financial Corp.
Oppenheimer Tower
World Financial Center
New York, New York 10281
Attn: General Counsel
(c) If any other Partner, as such Partner's address appears on
the books and records of the Partnership.
Each Partner may designate by notice in writing a new address to which any
notice, demand or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication which shall be delivered, mailed
or transmitted in the manner described above shall be deemed sufficiently
given, served, sent or received for all purposes at such time as it is
delivered to the addressee (with an affidavit of personal delivery), the return
addressee (with an affidavit of personal delivery, the return receipt, the
delivery receipt or (with respect to a telex) the answer back being deemed
conclusive (but not exclusive) evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
Section 15.03. Severability. The invalidity of any one or more
provisions hereof or of any other agreement or instrument given pursuant to or
in connection with this Agreement shall not affect the remaining portions of
this Agreement or any such other agreement or instrument or any part thereof;
and in the event that one or more of the provisions contained herein or therein
should be invalid, or should operate to render this Agreement or any such other
agreement or instrument invalid, this Agreement and such other agreements and
instruments shall be construed as if such invalid provisions had not been
inserted.
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Section 15.04. Survival. It is the express intention and agreement of
the Partners that all covenants, agreements, statements, representations,
warranties and indemnities, made in this Agreement shall survive the execution
and delivery of this Agreement.
Section 15.05. Waivers. Neither the waiver by a Partner of a breach of
or a default under any of the provisions of this Agreement, nor the failure of
a Partner, on one or more occasions, to enforce any of the provisions of this
Agreement or to exercise any right, remedy or privilege hereunder, shall
thereafter be construed as a waiver of any subsequent breach or default of a
similar nature, or as a waiver of any such provisions, rights, remedies or
privileges hereunder. The Partners hereby waive any right of partition and
any right to take any other action which otherwise might be available to them
for the purpose of severing their relationship with the Partnership or their
interest in the Partnership Assets from the interests of the other Partners.
Section 15.06. Exercise of Rights. No failure or delay on the part of a
Partner or the Partnership in exercising any right, power or privilege
hereunder and no course of dealing between the Partners or between a Partner
and the Partnership shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein expressly provided are cumulative and
not exclusive of any other rights or remedies which a Partner or the
Partnership would otherwise have at law or in equity or otherwise.
Section 15.07. Binding Effect. Subject to any provisions hereof
restricting assignment, this Agreement shall be binding upon and shall inure to
the benefit of the Partners and their respective heirs, devisees, executors,
administrators, legal representatives, successors and assigns.
Section 15.08. Entire Agreement. This Agreement contains the entire
agreement among the Partners with respect to the transactions contemplated
herein, and supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein and therein.
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Section 15.09. Pronouns. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the Person may require.
Section 15.10. Headings. Article, Section and subsection headings
contained in this Agreement are inserted for convenience of reference only,
shall not be deemed to be part of this Agreement for any purpose and shall not
in any way define or affect the meaning, construction or scope of any of the
provisions hereof. All references herein to Articles, Sections and subsections
are to Articles, Sections and subsections of this Agreement unless otherwise
specifically stated.
Section 15.11. Governing Law. This Agreement, the rights and
obligations of the parties hereto and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Delaware.
Section 15.12. Execution in Counterparts. To facilitate execution, this
Agreement may be executed in as many counterparts as may be required; and it
shall not be necessary that the signatures of, or on behalf of, each party, or
that the signatures of all Persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the Persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Agreement to produce or account for more than such number of counterparts
as contain one signature of, or on behalf of, each of the parties hereto.
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ARTICLE XVI
EXECUTION
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement,
or have caused this Agreement to be duly executed on their behalf, as of the
day and year first hereinabove set forth in the State of Delaware.
OPPENHEIMER FINANCIAL CORP.
By: /s/ MICHELLE M. KRISTEL
-------------------------------
Name: Michelle M. Kristel
Title: Legal Assistant
OPPENHEIMER CAPITAL, L.P.
By: Oppenheimer Financial Corp.,
General Partner
By: /s/ MICHELLE M. KRISTEL
---------------------------
Name: Michelle M. Kristel
Title: Legal Assistant
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State of Delaware )
) ss.:
County of New Castle )
On this 19th day of April, 1991, before me personally appeared Michelle
Kristel, to me known, who duly acknowledged to me that she is the duly
authorized representative of Oppenheimer Financial Corp., the general partner of
Oppenheimer Capital, L.P., a limited partnership, that the foregoing instrument
was signed on behalf of said partnership and that the same is the free act and
deed of same partnership.
/s/ LISA M. HARRISON
------------------------
Lisa M. Harrison
Notary Public
My commission expires: [Illegible seal]
August 2, 1992
[seal]
<PAGE> 44
State of Delaware )
) ss.:
County of New Castle )
On this 19th day of April, 1991, before me personally appeared Michelle
Kristel, to me known, who duly acknowledged to me that she is the duly
authorized representative of Oppenheimer Financial Corp., a corporation, that
the foregoing instrument was signed on behalf of said corporation by
authorization of its Board of Directors and that the same is the free act and
deed of same corporation.
/s/ LISA M. HARRISON
------------------------
Lisa M. Harrison
Notary Public
My commission expires: [Illegible seal]
[Illegible Date]
[seal]
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 2
TO
AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL
This Amendment No. 2, dated as of November 4, 1997 (the "Amendment"), to
the Amended and Restated Partnership Agreement of Oppenheimer Capital is made
and entered into by and between Oppenheimer Financial Corp., a Delaware
corporation ("Opfin"), and Oppenheimer Capital, L.P., a Delaware limited
partnership ("0p, L.P." and together with Opfin, the "Partners").
W I T N E S S E T H
WHEREAS, Oppenheimer Capital, a Delaware general partnership (the
"Partnership"), was formed under the Delaware Uniform Partnership Law, 6 Del.
C. Section 1501, et seq., pursuant to the Partnership Agreement of the
Partnership, dated June 25, 1987 (the "Original Partnership Agreement");
WHEREAS, the Original Partnership Agreement was amended and restated by
the Amended and Restated Partnership Agreement of the Partnership, dated as of
March 14, 1991, and was further amended by Amendment No. 1 to the Amended and
<PAGE> 2
Restated Partnership Agreement, dated as of June 15, 1994 (as heretofore
amended, the "Partnership Agreement");
WHEREAS, the Partners are the only partners of the Partnership; and
WHEREAS, the Partners desire to further amend the Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual promises and obligations
contained herein, the parties, intending to be legally bound, hereby agree as
follows:
1. Amendments.
A. Section 6.03(a) of the Partnership Agreement is hereby
amended by adding the following language:
Notwithstanding the foregoing, if Opfin transfers all of its
interest in the Partnership during any Fiscal Quarter of the
Partnership,
(i) its share of the Net Income or Net Loss of the
Partnership for (w) each full month, if any, in such
Fiscal Quarter prior to the month in which such transfer
occurs, shall be Opfin's Percentage Interest as of the
last day of such month of the actual Net Income or Net
Loss of the Partnership for such month and (x) the month
in which the transfer occurs, shall be Opfin's
Percentage Interest as of the close of the day
immediately preceding the day of transfer of that
portion of the actual Net Income or Net Loss of the
Partnership for
2
<PAGE> 3
such month that the number of days in such month prior
to the day of transfer bears to the total number of days
in such month; and
(ii) Opfin's transferee shall be allocated as its share of
the Net Income or Net Loss of the Partnership for the
Fiscal Quarter of transfer (y) for the month in which
the transfer occurs, its Percentage Interest, determined
as of the close of the day of transfer, of that portion
of the actual Net Income or Net Loss of the Partnership
for such month that the number of days in such month
beginning on and following the day of transfer bears to
the total number of days in such month and (z) for each
full month, if any, in such Fiscal Quarter after the
month in which such transfer occurs, its Percentage
Interest as of the last day of such month of the actual
Net Income or Net Loss of the Partnership for such
month.
B. Section 6.03(b) of the Partnership Agreement is hereby
amended by deleting the current text in its entirety and substituting in lieu
thereof the following:
(b) Except as provided in Sections 6.03(a), 6.03(c) and
6.03(d) hereof, the allocation of Net Income and Net
Loss, as to each month, shall be in accordance with a
Partner's Percentage Interest as of the last day of such
month.
C. Section 11.03(a) of the Partnership Agreement is hereby
amended by adding the following language:
In the case of a transfer described in the second sentence of
Section 6.03(a), the profits and losses of the Partnership for
the Fiscal Quarter of transfer to be so allocated between the
assignor and the assignee shall be computed in accordance with
the provisions thereof.
3
<PAGE> 4
D. Section 11.03(c) of the Partnership Agreement is amended by
adding the following language:
provided, however, that, in the case of a transfer described in
the second sentence of Section 6.03(a), the "effective date"
of the assignment shall be the day before the day of transfer.
2. Successors and Assigns. This Amendment shall be binding upon, and
shall enure to the benefit of, the parties hereto and their respective
successors and assigns.
3. Full Force and Effect. Except to the extent modified hereby, the
Partnership Agreement shall remain in full force and effect.
4. Counterparts. This Amendment may be executed in counterparts, all of
which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all such parties are not signatories to the original or
same counterpart.
5. Choice of Law. This Amendment shall be interpreted in accordance with
the laws of the State of Delaware (without regard to conflict of laws
principles), all rights and remedies being governed by such laws.
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first set forth above.
OPPENHEIMER FINANCIAL CORP.
BY: [SIG]
-------------------------------------
Name:
Title:
OPPENHEIMER CAPITAL, L.P.
By: Oppenheimer Financial Corp.
By: [SIG]
-------------------------------------
Name:
Title:
5
<PAGE> 1
EXHIBIT 10.15
ASSIGNMENT OF PARTNER INTEREST
AND AMENDMENT TO
AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL
This Assignment of Partner Interest and Amendment to the Amended and
Restated Partnership Agreement of Oppenheimer Capital, dated as of November 4,
1997 (this "Assignment and Amendment Agreement"), is entered into by and
among Oppenheimer Financial Corp., a Delaware corporation and the managing
partner ("Opfin"), Value Advisors LLC, a Delaware limited liability company
and the successor managing partner ("Value Advisors"), and Oppenheimer
Capital, L.P., a Delaware limited partnership and a partner ("Opcap L.P.")
W I T N E S S E T H:
WHEREAS, Oppenheimer Capital (the "Partnership") has been formed as a
general partnership under the Uniform Partnership Law of the State of Delaware
(6 Del. C. Section 1501, et seq.) (the "DUPL") pursuant to an Amended and
Restated Partnership Agreement of the Partnership, dated as of March 14, 1991
(as amended, the "Partnership Agreement");
WHEREAS, Opfin is the sole managing partner of the Partnership and Opcap
LP is the only other partner of the Partnership;
WHEREAS, Opfin desires to designate Value Advisors as the Managing Partner
(as defined in the Partnership Agreement) and immediately thereafter assign,
transfer and convey all of its interest in the Partnership as a partner of the
Partnership (the "Partner Interest") to Value Advisors pursuant to the
Contribution Agreement, dated as of
<PAGE> 2
November 4, 1997, among the parties named therein (the "Contribution
Agreement"), and Opfin desires to withdraw from the Partnership as a partner of
the Partnership;
WHEREAS, Value Advisors desires to become the Managing Partner and to
purchase the Partner Interest presently held by Opfin, and Value Advisors
desires to be admitted to the Partnership as a successor partner of the
Partnership;
WHEREAS, this Assignment and Amendment Agreement is being adopted pursuant
to the provisions of the Partnership Agreement and is an amendment to the
Partnership Agreement that may be adopted by the Managing Partner without the
approval of Opcap L.P.; and
WHEREAS, the undersigned, being all of the partners of the Partnership, to
accomplish the foregoing, desire to amend the Partnership Agreement in the
manner set forth herein.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Assignment. Notwithstanding any provision in the Partnership
Agreement to the contrary, for value received, the receipt and sufficiency of
which are hereby acknowledged, upon the execution of this Assignment and
Amendment Agreement by the parties hereto, Opfin does hereby assign, transfer
and convey all rights in, title to, and interest in, the Partner Interest
pursuant to the Contribution Agreement to Value Advisors. Immediately prior to
such assignment and transfer, Opfin, pursuant to the Partnership Agreement,
including, without limitation, Section 7.01 of the Partnership Agreement,
hereby, prior to such assignment and transfer set forth in this Section 1,
designates Value Advisors as the new Managing Partner. Opfin, prior to such
transfer, has
-2-
<PAGE> 3
made an Assignment Determination (as defined in the Partnership Agreement) and
a Tax Determination (as defined in the Partnership Agreement).
2. Admission. Notwithstanding any provision in the Partnership Agreement
to the contrary, Value Advisors upon its execution delivery of the Assignment
and Amendment Agreement is hereby admitted to the Partnership as a partner of
the Partnership and the Managing Partner. The admission shall be deemed to have
occurred, immediately prior to the withdrawal of Opfin from the Partnership as
a partner of the Partnership.
3. Withdrawal. Notwithstanding any provision in the Partnership
Agreement to the contrary, Opfin hereby withdraws from the Partnership as a
partner of the Partnership. The withdrawal shall be deemed to have occurred,
immediately after the admission of Value Advisors to the Partnership as a
general partner of the Partnership.
4. Continuation. The parties hereto agree that following the withdrawal
of Opfin from the Partnership as a partner of the Partnership, Value Advisors
is authorized to and hereby agrees to continue the business of the Partnership.
5. Books and Records. Value Advisors shall take all actions necessary
under the DUPL and the Partnership Agreement, to evidence the withdrawal of
Opfin from the Partnership as a partner of the Partnership and the admission of
Value Advisors to the Partnership as both a partner of the Partnership and the
Managing Partner.
6. Future Cooperation. Each of the parties hereto agrees to cooperate at
all times from and after the date hereof with respect to all of the matters
described herein, and to execute such further assignments, releases,
assumptions, amendments of the Partnership Agreement, notifications and other
documents as may be reasonably requested
-3-
<PAGE> 4
for the purpose of giving effect to, or evidencing or giving notice of, the
transactions contemplated by this Assignment and Amendment Agreement.
7. Binding Effect. This Assignment and Amendment Agreement shall be
binding upon, and shall enure to the benefit of, the parties hereto and their
respective successors and assigns.
8. Execution in Counterparts. This Assignment and Amendment
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which constitute one and the same instrument.
9. Agreement in Effect. Except as hereby amended, the Partnership
Agreement shall remain in full force and effect.
10. Governing Law. This Assignment and Amendment Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
Delaware, all rights and remedies being governed by such laws, without regard
to principle of conflict of laws rules.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Amendment Agreement to be duly executed as of the day and year first above
written.
VALUE ADVISORS LLC
By: /s/ KENNETH M. POOVEY
-------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
OPPENHEIMER FINANCIAL CORP.
By: /s/ KENNETH M. POOVEY
-------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
-4-
<PAGE> 5
OPPENHEIMER CAPITAL, L.P.
By: /s/ KENNETH M. POOVEY
-------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
-5-
<PAGE> 1
EXHIBIT 10.16
AMENDMENT TO
AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL
This Amendment to Amended and Restated Partnership Agreement of
Oppenheimer Capital, dated as of November 4, 1997 (this "Amendment Agreement"),
is entered into by and among Value Advisors LLC, a Delaware limited liability
company and the managing partner ("Value Advisors") and Oppenheimer Capital,
L.P., a Delaware limited partnership and a partner ("Opcap LP") (each of Value
Advisors and Opcap LP are each a "Partner" and are collectively the "Partners").
WITNESSETH:
WHEREAS, Oppenheimer Capital (the "Partnership") has been formed and was
continued as a general partnership under the Uniform Partnership Law of the
State of Delaware (6 Del.C. Section 1501, et seq.) pursuant to an Amended and
Restated Partnership Agreement of the Partnership, dated as of March 14, 1991
(as amended, the "Partnership Agreement");
WHEREAS, the Partners are the sole partners of the Partnership;
WHEREAS, the Partners desire to amend the Partnership Agreement in order
to clarify and confirm that the merger of the Partnership with or into another
business entity does not violate Section 11.01(d) of the Partnership Agreement;
WHEREAS, each of the Partners has determined that this Amendment of the
Partnership Agreement is not directly and materially adverse to the holders of
Units (as defined in the Op L.P. Agreement) (as defined in the Partnership
Agreement); and
<PAGE> 2
WHEREAS, the undersigned, being all of the partners of the Partnership,
to accomplish the foregoing, desire to amend the Partnership Agreement in the
manner set forth herein.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Amendment to Section 11.01(d) of the Partnership Agreement. Section
11.01(d) of the Partnership Agreement is hereby amended by adding immediately
after the words "liquidation of Op L.P.", the words ", provided, however, no
such transfer shall be deemed to occur upon the merger of the Partnership with
or into an other business entity".
2. Future Cooperation. Each Partner agrees to cooperate at all times
from and after the date hereof with respect to all of the matters described
herein, and to execute such further documents as may be reasonably requested for
the purpose of giving effect to, or evidencing the transactions contemplated by,
this Amendment Agreement.
3. Binding Effect. This Amendment Agreement shall be binding upon, and
shall enure to the benefit of, the Partners and their respective successors and
assigns.
4. Execution in Counterparts. This Amendment Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
5. Agreement in Effect. Except as hereby amended, the Partnership
Agreement shall remain in full force and effect.
-2-
<PAGE> 3
6. Governing Law. This Amendment Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware, all rights
and remedies being governed by such laws, without regard to principles of
conflict of laws rules.
IN WITNESS WHEREOF, the Partners have caused this Amendment Agreement to
be duly executed as of the day and year first above written.
VALUE ADVISORS LLC
By: /s/ KENNETH M. POOVEY
---------------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
OPPENHEIMER CAPITAL, L.P.
By: PIMCO PARTNERS. G.P.,
its General Partner
By: Pacific Investment Management Company,
a General Partner
By: /s/ SHARON A. CLEWER
--------------------------------------------
Name:
Title:
By: PIMCO PARTNERS LLC,
a General Partner
By: /s/ [SIG]
--------------------------------------------
Name:
Title:
-3-
<PAGE> 1
EXHIBIT 10.17
AMENDMENT TO
AMENDED AND RESTATED PARTNERSHIP AGREEMENT
OF
OPPENHEIMER CAPITAL
This Amendment to Amended and Restated Partnership Agreement of
Oppenheimer Capital, dated as of December 1, 1997 (this "Amendment Agreement"),
is entered into by and among Value Advisors LLC, a Delaware limited liability
company and the managing partner ("Value Advisors") and Oppenheimer Capital,
L.P., a Delaware limited partnership and a partner ("Opcap LP") (each of Value
Advisors and Opcap LP are each a "Partner" and are collectively the "Partners").
W I T N E S S E T H :
WHEREAS, Oppenheimer Capital (the "Partnership") has been formed and
was continued as a general partnership under the Uniform Partnership Law of the
State of Delaware (6 Del.C. ss. 1501, et seq.) pursuant to an Amended and
Restated Partnership Agreement of the Partnership, dated as of March 14, 1991
(as amended, the "Partnership Agreement");
WHEREAS, the Partners are the sole partners of the Partnership;
WHEREAS, the Partners desire to amend the Partnership Agreement to
change the Fiscal Year (as defined in the Partnership Agreement) from "April 30"
to "December 31";
WHEREAS, pursuant to Section 6.01 of the Partnership Agreement, Value
Advisors as the Managing Partner (as defined in the Partnership Agreement), has
the authority to change the Fiscal Year, for either accounting or tax purposes,
if Value Advisors, in its sole discretion, subject to approval of the Internal
Revenue Service, shall determine such change to be legally required or to be
necessary or appropriate to the business of the Partnership;
WHEREAS, Value Advisors as the Managing Partner has determined that the
change of the Fiscal Year for accounting and tax purposes is necessary or
appropriate to the business of the Partnership;
<PAGE> 2
WHEREAS, each of the Partners has determined that this Amendment of the
Partnership Agreement is not directly and materially adverse to the holders of
Units (as defined in the Op L.P. Agreement) (as defined in the Partnership
Agreement); and
WHEREAS, the undersigned, being all of the partners of the Partnership,
to accomplish the foregoing, desire to amend the Partnership Agreement in the
manner set forth herein.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Amendment to Section 6.01 of the Partnership Agreement. Section 6.01
of the Partnership Agreement is hereby amended by deleting the date "April 30"
in the first sentence of Section 6.01 of the Partnership Agreement and inserting
in lieu thereof, the date "December 31".
2. Future Cooperation. Each Partner agrees to cooperate at all times
from and after the date hereof with respect to all of the matters described
herein, and to execute such further documents as may be reasonably requested for
the purpose of giving effect to, or evidencing the transactions contemplated by,
this Amendment Agreement.
3. Binding Effect. This Amendment Agreement shall be binding upon, and
shall enure to the benefit of, the Partners and their respective successors and
assigns.
4. Execution in Counterparts. This Amendment Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
5. Agreement in Effect. Except as hereby amended, the Partnership
Agreement shall remain in full force and effect.
<PAGE> 3
6. Governing Law. This Amendment Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware, all rights
and remedies being governed by such laws, without regard to principles of
conflict of laws rules.
IN WITNESS WHEREOF, the Partners have caused this Amendment Agreement
to be duly executed as of the day and year first above written.
VALUE ADVISORS LLC
By: /s/ RICHARD M. WEIL
-----------------------------------
Name: Richard M. Weil
Title: Senior Vice President
OPPENHEIMER CAPITAL, L.P.
By: PIMCO PARTNERS, G.P.,
its General Partner
By: /s/ RICHARD M. WEIL
------------------------------
Richard M. Weil
Senior Vice President
Pursuant to authorization
granted to the Management
Board pursuant to that certain
Written Action dated
November 4, 1997
<PAGE> 1
EXHIBIT 10.18
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PIMCO ADVISORS L.P.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Adjusted Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Admission Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Adverse Partnership Tax Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Approved by the Unitholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assignment Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assignment Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Book-Tax Disparities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cadence Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Carrying Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificate of Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Certificate of Limited Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class A Carryover Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Class A Quarterly Priority Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class A Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class B Carryover Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class B Quarterly Priority Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class B Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class C Carryover Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class C Quarterly Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class C Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Contributed Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Contributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Delaware Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Defense Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Delegate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Departing General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Designated Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Disinterested Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Distributable Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Equity Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Event of Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Exchange Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Former General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
GP Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Heldover Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Incorporation Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Incorporation Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Insolvency Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Interim Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Investment Management Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Limited Liability Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Liquidator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
LP Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Minimum Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Nasdaq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
NFJ Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
National Securities Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Net Income or Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Net Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Nonpublic Unitholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Operating Profit Available for Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Parametric Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Partnership Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PFAMCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PIMCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PIMCO GP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PIMCO Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Public Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Public General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Public Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Public Unitholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Recapture Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Reconstituted Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Restructuring Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Securities Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Short Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Successor Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Tax Realization Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Taxable Income or Taxable Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Termination Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Thomson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Total Contributed Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Treasury Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Unaffiliated Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Unitholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Unit Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Unrealized Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Unrealized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Written Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II The Partnership and the Partners . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.1 Continuation of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.3 Names and Addresses of Partners . . . . . . . . . . . . . . . . . . . . . . . . 15
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Section 2.4 Principal Office, Registered Agent and Registered Office . . . . . . . . . . . 15
Section 2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III Purpose and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV Units and Other Partnership Securities . . . . . . . . . . . . . . . . . . . . 16
Section 4.1 Classification and Conversion of Units . . . . . . . . . . . . . . . . . . . . 16
Section 4.2 New Classes or Series of Units or Other Securities . . . . . . . . . . . . . . 17
Section 4.3 Issuance of Units and Other Securities . . . . . . . . . . . . . . . . . . . . 18
Section 4.4 No Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.5 Recapitalizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V Certificates for Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1 Issuance of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2 Lost, Stolen, Mutilated or Destroyed Certificates . . . . . . . . . . . . . . . 19
Section 5.3 Registered Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI Transfer of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.2 Transfer of GP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.3 Transfer of LP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.4 Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.1 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.2 Capital Account Calculations and Adjustments. . . . . . . . . . . . . . . . . . 22
ARTICLE VIII Distributions and Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.1 Cash Distributions During the Interim Period . . . . . . . . . . . . . . . . . 24
Section 8.2 Cash Distributions After the Interim Period . . . . . . . . . . . . . . . . . . 25
Section 8.3 Special Cash Distributions Prior to Restructuring . . . . . . . . . . . . . . . 25
Section 8.4 General Rules with Respect to Distributions . . . . . . . . . . . . . . . . . . 26
Section 8.5 Allocations of Income and Loss . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.6 Special Provisions Governing Capital Account Allocations . . . . . . . . . . . 27
Section 8.7 Allocations for Tax Purposes . . . . . . . . . . . . . . . . . . . . . . . . . 29
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Section 8.8 Monthly Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IX Accounting and Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.3 Taxable Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.4 Preparation of Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.5 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.6 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.7 Tax Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.8 Tax Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE X Concerning the General Partners . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.1 Management of Partnership Business . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.2 Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.3 Reimbursement of the General Partners . . . . . . . . . . . . . . . . . . . . . 35
Section 10.4 Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.5 Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.6 Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.7 Notice of Event of Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.8 Operating Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.9 Equity Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE XI Concerning the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.1 Participation in Control of Partnership Business. . . . . . . . . . . . . . . . 38
Section 11.2 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.3 Access and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XII Admission of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.1 Admission of General Partners . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 12.2 Admission of Limited Partners. . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.3 Admission of Underwriters and Their Transferees . . . . . . . . . . . . . . . . 41
ARTICLE XIII Withdrawal or Removal of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 13.1 Withdrawal or Removal of General Partners . . . . . . . . . . . . . . . . . . . 41
Section 13.2 Interest of Departing General Partner . . . . . . . . . . . . . . . . . . . . . 42
Section 13.3 Business to Be Carried On After Event of Withdrawal . . . . . . . . . . . . . . 43
Section 13.4 No Withdrawal of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . 43
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ARTICLE XIV Partnership Meetings; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 14.1 Partnership Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 14.2 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 14.3 Notice of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 14.4 Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 14.5 Waiver of Notice; Consent to Meeting; Approval of Minutes . . . . . . . . . . . 44
Section 14.6 Quorum and Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 14.7 Conduct of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 14.8 Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 14.9 Voting and Approval Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 14.10 Amendments to Be Adopted Solely by the General Partners . . . . . . . . . . . . 47
Section 14.11 Amendment Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XV Indemnification and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15.2 Indemnification Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 15.3 Indemnification Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 15.4 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15.5 Source of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15.6 Scope of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 15.7 Effect of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 15.8 Limitations on Liability of Indemnitees . . . . . . . . . . . . . . . . . . . . 52
ARTICLE XVI Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 16.1 Power of General Partners to Effect a Restructuring . . . . . . . . . . . . . . 53
Section 16.2 Incorporation Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 16.3 Consent to Actions Taken in Connection with Restructuring . . . . . . . . . . . 57
ARTICLE XVII Dissolution and Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 17.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 17.2 Reconstitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 17.3 Liquidator; Liquidation and Distribution . . . . . . . . . . . . . . . . . . . 58
Section 17.4 Reports Following Termination . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE XVIII General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 18.1 Addresses and Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 18.2 Titles and Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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Section 18.3 Pronouns and Plurals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 18.4 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 18.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 18.6 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 18.7 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 18.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 18.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 18.10 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 18.11 Invalidity of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 18.12 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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TABLE OF EXHIBITS
Exhibit A Certificate for Class A LP Units
Exhibit B Admission Application
<PAGE> 10
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PIMCO ADVISORS L.P.
This Amended and Restated Agreement of Limited Partnership of PIMCO
Advisors L.P. (this "Agreement"), which is dated and shall be effective as of
12:00 midnight Pacific Standard Time on October 31, 1997 (the "Effective
Time"), is by and among PIMCO Partners, G.P., a California general partnership,
all other Persons who have been admitted to the Partnership as Limited Partners
as of the date of this Agreement, and all Persons who become Limited Partners
after the date of this Agreement. Capitalized terms used in this Agreement
shall have the meanings ascribed to such terms in this Agreement.
This Agreement amends and completely restates that certain Amended and
Restated Agreement of Limited Partnership of PIMCO Advisors L.P. dated as of
October 31, 1994, as the same was previously amended by that certain First
Amendment to Amended and Restated Agreement of Limited Partnership of PIMCO
Advisors L.P. dated as of April 25, 1995 and effective as of January 1, 1995.
In consideration of the covenants, conditions and agreements contained
herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I shall, for the purposes of this
Agreement, have the meanings set forth herein.
Adjusted Property shall mean a Partnership Asset the Carrying Value of
which has been adjusted pursuant to Section 7.2.
Admission Application shall mean a written application executed and
delivered to the Partnership by a Person which (i) proposes to make a
Contribution in accordance with this Agreement or (ii) acquires one or more
Certificates by transfer from a Unitholder, by which such Person requests
admission as a Limited Partner, requests that the records of the Partnership
reflect such admission, and agrees to comply with and be bound by this
Agreement. Except as otherwise determined by the General Partners, such
Admission Application shall be in substantially the form of Exhibit B attached
to this Agreement.
<PAGE> 11
Adverse Partnership Tax Event shall mean (i) the Partnership (A) being
treated as an association taxable as a corporation, (B) being reconstituted as
a corporation, or (C) otherwise becoming subject to federal taxation on its
income, or (ii) the occurrence of an event which would have caused one of the
foregoing to occur but for the occurrence of a Restructuring.
Affiliate of a Person shall mean any Person directly or indirectly
controlling, controlled by or under common control with such Person. As used
in this definition of Affiliate, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
Agreement shall mean this Amended and Restated Agreement of Limited
Partnership of the Partnership, as it may be amended, supplemented or restated
from time to time.
Approved by the Unitholders shall mean, with respect to a meeting of
Unitholders, approved by Unitholders holding a majority of the outstanding
Units present at such meeting in person or by proxy and entitled to vote,
voting as a single class, and with respect to an action of Unitholders without
a meeting, approved by Unitholders holding a majority of the outstanding Units
entitled to vote, voting as a single class.
Assignee shall mean a Person who is a transferee of a Certificate and
who has executed and delivered an Admission Application, but who has not been
admitted to the Partnership as a Limited Partner.
Assignment Event shall mean an event which would cause the assignment
(within the meaning of the Investment Advisers Act of 1940, as amended, or the
Investment Company Act of 1940, as amended) of advisory contracts representing
more than 15% of the assets under management by the Partnership and its
Subsidiaries.
Assignment Opinion shall mean an Opinion of Counsel to the effect that
a specified event is not an Assignment Event, or that based upon the consents
which have been obtained from clients, such event would not result in the
termination of advisory contracts representing more than 15% of the assets
under management by the Partnership and its Subsidiaries.
Associate of a Person shall mean any individual who is a stockholder,
partner, member, director, manager, trustee, member of any Delegate or other
board or committee, officer, employee, agent or fiduciary of such Person.
Book-Tax Disparities shall mean the differences between a Partner's
Capital Account balance, as maintained pursuant to Section 7.1, and such
balance had the Capital Account been maintained strictly in accordance with tax
accounting principles (such disparities reflecting the differences between the
Carrying Value of either Contributed Property or Adjusted Property, as adjusted
from time to time, and the adjusted basis thereof for federal income tax
purposes).
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Business Day shall mean any day other than a Saturday, Sunday or legal
holiday recognized or declared as such by the Government of the United States
or the State of New York.
Business Entity shall mean a corporation, a business trust or
association, a real estate investment trust, a common-law trust, a limited
liability company or an unincorporated business, including a general or limited
partnership or registered limited liability partnership.
CCI shall mean Columbus Circle Investors, a Delaware general
partnership, or its Successor.
Cadence Partners shall mean Cadence Partners L.P., a California limited
partnership, or its Successor.
Capital Account shall mean a capital account established and maintained
pursuant to Article VII.
Carrying Value shall mean (i) with respect to Contributed Property, the
fair market value of such Contributed Property at the time of contribution as
determined by the General Partners, reduced (but not below zero) by all
amortization, depreciation and cost recovery deductions charged to the Partners'
and Assignees' Capital Accounts pursuant to Section 7.2 with respect to such
Contributed Property, and (ii) with respect to any other Partnership Asset, the
adjusted basis of such Partnership Asset for federal income tax purposes, as of
the time of determination. The Carrying Value of any Partnership Asset may be
adjusted from time to time in accordance with Sections 7.2(b), (c) and (d), and
to reflect changes, additions or other adjustments to the Carrying Value for
dispositions, acquisitions or improvements of Partnership Assets, in a manner
consistent with federal income tax principles.
Certificate shall mean a certificate of Partnership Interest issued by
the Partnership, evidencing ownership of one or more Units, such certificate to
be in such form or forms as may be adopted by the General Partners, and which,
in the case of Class A LP Units, shall initially be in substantially the form of
Exhibit A attached to this Agreement.
Certificate of Cancellation shall mean a certificate of cancellation
within the meaning of Section 17-203 of the Delaware Act.
Certificate of Limited Partnership shall mean the Certificate of
Limited Partnership of the Partnership, and any and all amendments thereto and
restatements thereof, filed as required under the Delaware Act.
Class A Carryover Amount shall mean, with respect to each Class A Unit
and Class C Unit and with respect to each fiscal quarter or Short Period ending
after March 31, 1995, the positive amount, if any, by which (i) the Class A
Quarterly Priority Amount for the immediately
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<PAGE> 13
preceding fiscal quarter exceeded (ii) the amount distributed with respect to
each Class A Unit and Class C Unit for such immediately preceding fiscal
quarter.
Class A Quarterly Priority Amount shall mean, with respect to each
Class A Unit and Class C Unit and with respect to each fiscal quarter ending
after December 31, 1994, the sum of (i) $0.47 (subject to adjustment in the
case of a Recapitalization), plus (ii) any Class A Carryover Amount applicable
to such Class A Unit or Class C Unit with respect to such fiscal quarter. In
the case of any Short Period, the Class A Quarterly Priority Amount shall mean,
with respect to each Class A Unit and Class C Unit and with respect to such
Short Period, the sum of (i) an amount equal to the product of $0.0052 (subject
to adjustment in the case of a Recapitalization) multiplied by the number of
days in such Short Period, plus (ii) any Class A Carryover Amount applicable to
such Class A Unit or Class C Unit with respect to such Short Period.
Class A Unit shall mean a GP Unit or an LP Unit having those special
rights and obligations specified in this Agreement as being appurtenant to a
"Class A Unit" and shall include the GP Units and Class A LP Units outstanding
prior to the Effective Time and all GP Units and LP Units issued after the
Effective Time which are designated as Class A Units pursuant to Section 4.3.
Class B Carryover Amount shall mean, with respect to each Class B Unit
and with respect to each fiscal quarter or Short Period ending after March 31,
1995, the positive amount, if any, by which (i) the Class B Quarterly Priority
Amount for the immediately preceding fiscal quarter exceeded (ii) the amount
distributed with respect to each Class B Unit for such immediately preceding
fiscal quarter; provided, however, that with respect to the first fiscal
quarter, or Short Period within the first fiscal quarter, of any fiscal year,
the Class B Carryover Amount shall be zero.
Class B Quarterly Priority Amount shall mean, with respect to each
Class B Unit and with respect to each fiscal quarter ending after December 31,
1994, the sum of (i) $0.47 (subject to adjustment in the case of a
Recapitalization), plus (ii) any Class B Carryover Amount applicable to such
Class B Unit with respect to such fiscal quarter. In the case of any Short
Period, the Class B Quarterly Priority Amount shall mean, with respect to each
Class B Unit and with respect to such Short Period, the sum of (i) an amount
equal to the product of $0.0052 (subject to adjustment in the case of a
Recapitalization) multiplied by the number of days in such Short Period, plus
(ii) any Class B Carryover Amount applicable to such Class B Unit with respect
to such Short Period.
Class B Unit shall mean a GP Unit or an LP Unit having those special
rights and obligations specified in this Agreement as being appurtenant to a
"Class B Unit" and shall include the Class B LP Units outstanding prior to the
Effective Time and all GP Units and LP Units issued after the Effective Time
which are designated as Class B Units pursuant to Section 4.3.
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<PAGE> 14
Class C Carryover Cap shall mean, with respect to each Class C Unit
and with respect to each fiscal quarter or Short Period ending after March 31,
1995, the positive amount by which (i) the Class C Quarterly Cap for the
immediately preceding fiscal quarter exceeded (ii) the amount distributed with
respect to each Class C Unit for such immediately preceding fiscal quarter;
provided, however, that with respect to the first fiscal quarter, or Short
Period within the first fiscal quarter, of any fiscal year, the Class C
Carryover Cap shall be zero.
Class C Quarterly Cap shall mean, with respect to each Class C Unit
and with respect to each fiscal quarter ending after December 31, 1994, the sum
of (i) $0.75 (subject to adjustment in the case of a Recapitalization), plus
(ii) any Class C Carryover Cap applicable to such Class C Unit with respect to
such fiscal quarter. In the case of any Short Period, the Class C Quarterly
Cap shall mean, with respect to each Class C Unit and with respect to such
Short Period, the sum of (i) an amount equal to the product of $0.0083 (subject
to adjustment in the case of a Recapitalization) multiplied by the number of
days in such Short Period, plus (ii) any Class C Carryover Cap applicable to
such Class C Unit with respect to such Short Period.
Class C Unit shall mean an LP Unit having those special rights and
obligations specified in this Agreement as being appurtenant to a "Class C
Unit" and shall include all LP Units issued after the Effective Time which are
designated as Class C Units pursuant to Section 4.3.
Code shall mean the Internal Revenue Code of 1986, as in effect from
time to time, and applicable rules and regulations thereunder. Any reference
herein to a specific section or sections of the Code shall be deemed to include
a reference to any corresponding provision of future law.
Commission shall mean the Securities and Exchange Commission.
Consolidation Date means November 15, 1994.
Contributed Property shall mean any Contribution other than cash.
Contribution shall mean any cash, property, services rendered or a
promissory note or other obligation to contribute cash or property or to
perform services, which a Partner contributes to the Partnership in its
capacity as a Partner.
Contributor is defined in Section 12.2.
Delaware Act shall mean the Delaware Revised Uniform Limited
Partnership Act, as it may be amended from time to time, and any successor to
such Act.
Defense Notice is defined in Section 15.3.
Delegate is defined in Section 10.2.
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<PAGE> 15
Departing General Partner shall mean the Person which, as of the
effective date of any withdrawal or removal of a General Partner pursuant to
Section 13.1, has as of such date so withdrawn or been removed as a General
Partner.
Designated Member is defined in Section 10.8.
Disinterested Director shall mean an individual who is not and has
not, within the prior five years, been an officer or employee of the
Partnership or an officer, employee or partner of a General Partner or an
Affiliate of the Partnership or a more than 5% Unitholder, partner or
stockholder of the Partnership, a General Partner or any of their Affiliates.
Distributable Cash for a fiscal quarter shall mean cash equal to the
Partnership's Operating Profit Available for Distribution for such fiscal
quarter less the amount, if any, required for expenses, for capital
expenditures, for future payments on Partnership indebtedness, as reserves, or
otherwise in the business of the Partnership, as determined by the General
Partners.
Effective Date is defined in Section 16.2.
Effective Time is defined in the preamble to this Agreement.
Equity Security shall mean a share of capital stock, a partnership or
limited liability company interest, or other equity interest, or any security
convertible or exchangeable, with or without consideration, into any such
security or interest, or carrying any warrant, option or right to subscribe to
or purchase any such security or interest or any such convertible or
exchangeable security, or any such warrant, option or right.
Event of Withdrawal with respect to a General Partner shall mean (i)
its withdrawal as a General Partner pursuant to Section 13.1; (ii) its
withdrawal as a General Partner in violation of this Agreement; (iii) its
removal as a General Partner pursuant to Section 13.1; (iv) an Insolvency Event
with respect to such General Partner; or (v) a Termination Event with respect
to such General Partner.
Exchange Shares is defined in Section 16.2.
Expenses is defined in Section 15.1.
Former General Partner shall mean (i) Thomson or (ii) any other Person
which has withdrawn or been removed as, or otherwise ceased to be, a General
Partner.
General Partner shall mean (i) PIMCO GP in its capacity as general
partner of the Partnership, or (ii) any other Person which has been admitted as
a successor or additional general
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<PAGE> 16
partner of the Partnership pursuant to this Agreement, in each case so long as
such Person has not withdrawn or been removed as, or otherwise ceased to be, a
general partner of the Partnership.
GP Unit shall mean a Unit representing a portion or all of a General
Partner's Partnership Interest, and shall include all GP Units held by PIMCO GP
immediately prior to the Effective Time, and Units acquired by a General
Partner after the Effective Time, whether by contribution, conversion or
transfer, which are designated as GP Units.
Heldover Certificate is defined in Section 16.2.
Incorporation Notice is defined in Section 16.2.
Incorporation Restructuring is defined in Section 16.2.
Indebtedness shall mean with respect to any Person, (i) any liability,
contingent or otherwise, of such Person (A) for borrowed money (whether or not
recourse of the lender is to the whole of the assets of such Person or only to
a portion thereof), (B) evidenced by a note, debenture or similar instrument
(including a purchase money obligation) given in connection with the
acquisition of any property or assets, (C) for any letter of credit or
performance bond in favor of such Person, or (D) for the payment of money
relating to a capitalized lease obligation; (ii) any liability of any other
Person of the kind described in the preceding clause (i), which such Person has
guaranteed or which is otherwise its legal liability, contingent or otherwise;
(iii) any obligation secured by a lien to which the property or assets of such
Person are subject, whether or not the obligations secured thereby shall have
been assumed by or shall otherwise be such Person's legal liability; (iv) all
other items, which in accordance with generally accepted accounting principles,
would be included as a liability on the balance sheet of such Person on the
date of determination; and (v) any and all deferrals, renewals, extensions or
refinancing of, or amendments, modifications or supplements to, any liability
of the kind described in any of the preceding clauses (i), (ii), (iii) or (iv).
Indemnitee shall mean any General Partner, any Former General Partner,
any Person which is or was an Affiliate of any General Partner or any Former
General Partner, any Person which is or was an Associate of any General Partner
or any Former General Partner or any such Affiliate, any Person which is or was
serving at the request of the Partnership or any of its Subsidiaries, any
General Partner or any Former General Partner as an Associate of another
Person, or any Person which is or was an Associate of the Partnership or any of
its Subsidiaries. A Person shall be deemed to be serving as a fiduciary of an
employee benefit plan at the request of the Partnership whenever the
performance by such Person of his duties to the Partnership or any Subsidiary
of the Partnership also imposes duties on him or otherwise involves services by
him to such plan or the participants or beneficiaries of such plan.
Insolvency Event with respect to a Person shall be deemed to have
occurred (i) when it (A) makes an assignment for the benefit of creditors; (B)
files a voluntary petition in bankruptcy;
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<PAGE> 17
(C) is adjudged a bankrupt or insolvent, or has entered against it an order for
relief in any bankruptcy or insolvency proceeding; (D) files a petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation; (E) files an answer or other pleading admitting or failing to
contest the material allegations of a petition failed against it in any
proceeding of this nature; or (F) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of such Person or of all or
any substantial part of its properties; or (ii) (A) 120 days after the
commencement of any proceeding against such Person seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, if the proceeding is not
dismissed, or (B) 90 days after the appointment without such Person's consent
or acquiescence of a trustee, receiver or liquidator of such Person or of all
or any substantial part of its properties, if the appointment is not vacated or
stayed, or 90 days after the expiration of any such stay, if the appointment is
not vacated.
Interim Period shall mean the period between November 15, 1994 and the
earlier of (i) December 31, 1997 or (ii) the occurrence of an Adverse
Partnership Tax Event.
Investment Management Company shall mean any division or Subsidiary of
the Partnership which is principally engaged in the investment advisory
business.
Limited Liability Opinion shall mean an Opinion of Counsel to the
effect that a specified event would not cause the Limited Partners to lose
their limited liability under the Delaware Act.
Limited Partner shall mean any Person which is a Limited Partner at
the Effective Time, or is admitted as a Limited Partner pursuant to Section
12.2 or 12.3, and which has not ceased to be a Limited Partner.
Liquidator shall mean the Person serving as Liquidator pursuant to
Section 17.3(a).
LP Unit shall mean a Unit representing a portion or all of a Partner's
or Assignee's Partnership Interest, and shall include all LP Units held by any
Partner immediately prior to the Effective Time, Units acquired by a General
Partner after the Effective Time, whether by contribution, conversion or
transfer, which are designated as LP Units, and all Units held by any Person
other than a General Partner at any time.
Minimum Gain shall have the meaning set forth in Treasury Regulation
Section 1.704-2(b) and (d).
Nasdaq shall mean the Nasdaq National Stock Market.
NFJ Partners shall mean NFJ Partners L.P., a California limited
partnership, or its Successor.
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National Securities Exchange shall mean (i) an exchange registered
with the Commission under Section 6(a) of the Securities Exchange Act, or (ii)
Nasdaq.
Net Income or Net Loss shall mean an amount equal to the Partnership's
taxable income or taxable loss for a relevant period. Net Income and Net Loss
shall be determined in accordance with Section 703(a) of the Code (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), and adjusted as provided in Sections 7.2, and further
adjusted to reflect any adjustments resulting from amended returns, claims for
refund and tax audits.
Net Value shall mean (i) in the case of any Contribution, the fair
market value of such Contribution reduced by the outstanding balance of any
indebtedness either assumed by the Partnership upon such Contribution or to
which such Contribution is subject when contributed; and (ii) in the case of a
distribution of Partnership Assets to a Partner, the fair market value of such
Partnership Assets reduced by the outstanding balance of any indebtedness
either assumed by such Partner upon such distribution or to which such
Partnership Assets are subject when distributed. In each case, fair market
value shall be determined by the General Partners.
Nonpublic Unitholder shall mean (i) any General Partner or Former
General Partner, (ii) Cadence Partners, Parametric Partners, PIMCO Partners or
NFJ Partners, (iii) any Subsidiary of Pacific Mutual Holding Company, a
California mutual corporation, (iv) any executive officer of the Partnership or
managing director of an Investment Management Company or any corporation,
partnership, limited liability company or trust in which such individual is a
controlling shareholder, general partner, manager or trustee, or (vi) any
Person designated as a Nonpublic Unitholder in a Written Action.
Operating Profit Available for Distribution shall mean, for any
period, the net income of the Partnership (determined in accordance with
generally accepted accounting principles); provided, that Operating Profit
Available for Distribution for any period as so determined shall be adjusted in
accordance with the following special rules and/or clarifications:
(i) Operating Profit Available for Distribution shall be
determined without regard to losses of any Subsidiary of the Partnership which
is not treated as a partnership, branch or division for federal income tax
purposes.
(ii) Operating Profit Available for Distribution shall be
determined without regard to accrued revenues from performance fees unless such
fees are not subject to forfeiture.
(iii) Operating Profit Available for Distribution shall be
determined without regard to any income or deductions attributable to the
grant, amendment, vesting or exercise of any option or other right to purchase
or receive Units or other Equity Securities.
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(iv) Operating Profit Available for Distribution shall be
determined without regard to any amortization of goodwill and other intangible
assets.
Opinion of Counsel shall mean a written opinion of counsel selected by
the General Partners, who may be regular counsel to the Partnership, a General
Partner, a Limited Partner or any of their Affiliates, but may not be in-house
counsel to any of such Persons.
Parametric Partners shall mean Parametric Partners L.P., a California
limited partnership, or its Successor.
Partner shall mean any General Partner or Limited Partner.
Partnership shall mean the limited partnership heretofore formed and
continued pursuant to this Agreement and the Delaware Act.
Partnership Accountants shall mean such nationally recognized firm of
independent public accountants as is selected from time to time by the General
Partners to act as the Partnership's independent public accountants.
Partnership Assets shall mean all assets and property, whether
tangible or intangible and whether real, personal or mixed, at any time owned
by the Partnership or its Subsidiaries.
Partnership Interest shall mean, as to any Partner or Assignee, such
Partner's or Assignee's share of the profits and losses of the Partnership and
the right to receive distributions of Partnership Assets.
Percentage Interest shall mean, as to each Partner or Assignee, the
quotient of (i) the Partnership Interest of such Partner or Assignee divided by
(ii) the total Partnership Interests of all Partners and Assignees
. Person shall mean a natural person, general or limited partnership,
limited liability company, trust, estate, association, corporation, custodian,
nominee or any other individual or entity in its own or any representative
capacity.
PFAMCO shall mean Pacific Financial Asset Management Corporation, a
California corporation, or its Successor.
PIMCO shall mean Pacific Investment Management Company, a California
general partnership, or its Successor.
PIMCO GP shall mean PIMCO Partners, a California general partnership,
or its Successor.
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PIMCO Partners shall mean PIMCO Partners, LLC, a California limited
liability company and the managing general partner of PIMCO GP, or its
Successor.
Proceedings is defined in Section 15.1.
Public Company shall mean a Business Entity which has at least one
Public Security outstanding.
Public General Partner shall mean a General Partner which is a Public
Company and which, together with its Subsidiaries, holds Units and other
Partnership Interests representing more than 95% of the fair value of its
consolidated assets other than cash and cash equivalents.
Public Security shall mean a class or series of Equity Security which
is registered under Section 12 of the Exchange Act.
Public Unitholder shall mean any Unitholder which is not a Nonpublic
Unitholder.
Recapitalization is defined in Section 4.5.
Recapture Income shall mean any gain recognized by the Partnership
(but computed without regard to any adjustment required by Section 734 or 743
of the Code) upon the disposition of any Partnership Asset that does not
constitute capital gain for federal income tax purposes because such gain
represents the recapture of deductions or reductions in basis for tax credits
previously taken with respect to such Partnership Asset.
Reconstituted Partnership shall mean a new limited partnership formed
in the manner described in Section 17.2.
Record Date shall mean the date as of which the identity of, and Units
held by, the Unitholders will be determined for purposes of (i) receiving
notice of and voting at any meeting of Unitholders, (ii) receiving notice of
any proposed action by written approval and giving or withholding approval,
(iii) exercising any other rights with respect to any action or proposed action
of Unitholders, or (iv) receiving any distribution or report.
Restructuring shall mean any action, event, transaction or series of
actions, events or transactions that the General Partners believe is reasonable
likely tol prevent or avoid the occurrence of an Adverse Partnership Tax Event
or a Tax Realization Event or both.
Restructuring Corporation is defined in Section 16.2.
Securities Act shall mean the Securities Act of 1933, as amended, and
any successor to such statute.
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Securities Exchange Act shall mean the Securities Exchange Act of
1934, as amended, and any successor to such statute.
Short Period means any period which is less than a fiscal quarter.
Subsidiary of a Person shall mean a subsidiary of such Person within
the meaning of Regulation S-X under the Securities Act.
Successor of a Person shall mean the Business Entity, if any, which
succeeds to the ownership of all or substantially all of its assets.
Successor Entity shall mean a Business Entity described in clause (ii)
or (iii) of Section 16.1(a).
Tax Opinion shall mean an Opinion of Counsel to the effect that a
specified event would not cause an Adverse Partnership Tax Event.
Tax Realization Event shall mean any one or more events, conditions or
circumstances in which, or as a result of which, any Partner or any of its
Affiliates realizes or is reasonably likely to be treated as realizing, either
directly or through allocations of Partnership income, income for federal
income tax purposes (including without limitation capital gain income), with
respect to all or any part of the difference between (i) the value of any
property contributed (or deemed contributed under applicable law) by such
Partner or Affiliate to the Partnership, determined either as of the time of
such contribution (or deemed contribution) or the time of such realization, and
(ii) such Partner's or Affiliate's or the Partnership's basis, for federal
income tax purposes, in such property, other than as a result of a sale of such
property by the Partnership exclusively for cash.
Taxable Income or Taxable Loss, when referring to allocations made to
a particular class of Units or to a particular Partner or Assignee, shall mean
the gross income less applicable deductions, computed for federal income tax
purposes, allocated to such class of Units or Partner or Assignee.
Termination Event with respect to a General Partner shall mean, (i) if
such General Partner is an individual, his death or the entry by a court of
competent jurisdiction of an order adjudicating him incompetent to manage his
person or his property; (ii) if such General Partner is acting as a General
Partner by virtue of being a trustee of a trust, the termination of the trust
(but not merely the substitution of a new trustee); (iii) if such General
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Partner is a partnership, the dissolution and commencement of winding up of the
partnership; (iv) if such General Partner is a corporation, the filing of a
certificate of dissolution or its equivalent for the corporation or the
revocation of its charter and the expiration of 90 days after the date of
notice to the corporation of revocation without a reinstatement of its charter;
(v) if such General Partner is an estate, the distribution by the fiduciary of
the estate's entire Partnership Interest; or (vi) if such General Partner is
not an individual, partnership, corporation, trust or estate, the termination
of the General Partner.
Thomson shall mean Thomson Advisory Group Inc., a Delaware
corporation.
Total Contributed Income of an Investment Management Company shall
mean the aggregate net income of such Investment Management Company (calculated
in accordance with generally accepted accounting principles applied
consistently for all Investment Management Companies and excluding
extraordinary items) for the then most recent three complete fiscal years of
the Partnership (or, for three years following the Consolidation Date, the
number of complete Partnership fiscal years which have elapsed since the
Consolidation Date). Total Contributed Income for each Investment Management
Company shall be recalculated annually based on, and upon receipt of, the
Partnership's annual audited consolidated financial statements.
Transfer (and related words) with respect to Units shall mean or refer
to a transaction by which a Unitholder transfers one or more Units to another
Person, and shall include a sale, assignment, gift, exchange or any other
disposition of Units, but shall not include any change in the ownership of such
Unitholder.
Transfer Agent shall mean (i) with respect to the Class A LP Units,
The First Chicago Trust Company of New York or any other bank, trust company or
other Person appointed by the General Partners to act as transfer agent or
registrar for the Class A Units, and (ii) with respect to any other class or
series of Units, the Person (who may be a General Partner or an Affiliate of a
General Partner) appointed to act as transfer agent or registrar for such class
or series of Units.
Treasury Regulations shall mean the federal income tax and procedure
and administration regulations as promulgated by the U.S. Treasury Department,
as such regulations may be in effect from time to time. All references in this
Agreement to provisions of the Treasury Regulations shall be deemed to refer to
successor regulatory provisions to the extent appropriate in light of the
context in which such Treasury Regulations references are used.
Unaffiliated Holders of any class or series of Units or other
Partnership Interests shall mean all holders of such class or series of Units
or other Partnership Interests other than (i) any General Partner or Former
General Partner or any of their respective Affiliates, (ii) Cadence Partners,
Parametric Partners, PIMCO Partners or NFJ Partners or any of their respective
Affiliates, (iii) any officer or employee of the Partnership or any of its
Subsidiaries, or (iv) any officer, employee, general partner or holder of more
than 5% of the outstanding Equity Securities of the General Partner or any of
its Affiliates other than the Partnership.
Underwriter is defined in Section 12.3.
Unit shall mean a portion or all of the Partnership Interest of a
Partner or Assignee representing such fractional part of the Partnership
Interests of all of the Partners and Assignees
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as shall be determined by the General Partners in connection with the issuance
of Units; provided, however, that each Unit shall represent the same fractional
part of the Partnership Interests represented by all of the outstanding Units
as is represented by each other Unit. The relative rights, powers and duties
appurtenant to a Unit of any class and series and those appurtenant to the
Partnership Interest represented by such Unit shall be identical, and such
terms are used interchangeably in this Agreement.
Unitholder shall mean (i) a General Partner, or (ii) a Limited Partner
or, for purposes of Articles VII and VIII and Sections 17.3(c) and (d), in the
case of a Limited Partner who has Transferred his Partnership Interest and
whose Transferee is an Assignee, such Assignee. For purposes of Articles VII
and VIII only, the term "Unitholder" shall also mean the beneficial owner of
one or more Units held by a nominee Limited Partner in any case in which such
nominee Limited Partner has furnished the identity of such owner to the
Partnership pursuant to Section 6031(c) of the Code.
Unit Price shall mean an amount per Unit of a given class or series as
of any date of determination equal to: (i) if the Units of such class or series
are listed or admitted to trading on one or more National Securities Exchanges,
the average of the last reported sales prices per Unit of such class or series
or, in case no such reported sale takes place on any such day, the average of
the last reported bid and asked prices per Unit of such class or series, in
either case on the principal National Securities Exchange on which the Units of
such class or series are listed or admitted to trading, for the five trading
days immediately preceding the date of determination; or (ii) if the Units of
such class or series are not listed or admitted to trading on a National
Securities Exchange, an amount equal to the fair market value of a Unit of such
class or series as of such date of determination, as determined by an
independent appraiser selected and retained by the General Partners on behalf
of and for the account of the Partnership; provided, however, that in the case
of Units of a class or series not listed or admitted to trading on a National
Securities Exchange and to be issued pursuant to an employee benefit plan, the
Unit Price shall be determined by the General Partners.
Unrealized Gain, as of any date of determination, shall mean the
excess, if any, of the fair market value of a Partnership Asset (as determined
under Section 7.2(c) or (d) as of such date of determination) over the Carrying
Value of such Partnership Asset as of such date of determination (prior to any
adjustment to be made pursuant to Section 7.2(c) or(d) as of such date).
Unrealized Loss, as of any date of determination, shall mean the
excess, if any, of the Carrying Value of a Partnership Asset as of such date of
determination (prior to any adjustment to be made pursuant to Section 7.2(c)
or(d) as of such date) over the fair market value of such Partnership Asset (as
determined under Section 7.2(c) or (d) as of such date of determination).
Written Action shall mean (i) an action by written consent of the
General Partner, or if there is more than one General Partner, an action by
unanimous written consent of the General
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Partners if such action is specified in Section 10.1(c), or by written consent
of General Partners holding a majority of the GP Units if such action is not
specified in Section 10.1(c) or (ii) if a Delegate has the rights and powers to
take such action, a written action of such Delegate.
ARTICLE II
THE PARTNERSHIP AND THE PARTNERS
Section 2.1 Continuation of the Partnership.
The General Partners and the Limited Partners hereby continue the
Partnership as a limited partnership pursuant to the provisions of the Delaware
Act.
Section 2.2 Name.
The name of the Partnership shall be "PIMCO Advisors L.P." The
business of the Partnership shall be carried on under such name or under such
other name as the General Partners may from time to time determine. "Limited
Partnership," "Ltd" or "L.P." (or similar words or letters) shall be included in
the Partnership's name where necessary or appropriate to maintain the limited
liability of the Limited Partners or otherwise for the purpose of complying with
the laws of any jurisdiction.
Section 2.3 Names and Addresses of Partners.
The General Partner of the Partnership is PIMCO GP, and the
address of the General Partner is 800 Newport Center Drive, Newport Beach,
California 92660. The names and business, residence or mailing addresses of the
Limited Partners and the date upon which each such Person became a Limited
Partner are as set forth from time to time in the books and records of the
Partnership.
Section 2.4 Principal Office, Registered Agent and Registered Office.
(a) The principal office of the Partnership is located at
800 Newport Center Drive, Newport Beach, California 92660. The General Partners
may change the location of the Partnership's principal office within or without
the State of Delaware and may establish such additional offices of the
Partnership within or without the State of Delaware as they may from time to
time determine.
(b) The name of the registered agent for service of
process on the Partnership in the State of Delaware is The Corporation Trust
Company. The address of the registered agent and the address of the registered
office of the Partnership in the State of Delaware is Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
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Section 2.5 Term.
The Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until December 31, 2086, unless earlier terminated in accordance with
the Delaware Act or this Agreement.
ARTICLE III
PURPOSE AND POWERS
Section 3.1 Purpose.
The purpose of the Partnership is (i) to carry on an investment
management and investment advisory business and (ii) to carry on any other
business which limited partnerships may carry on under the Delaware Act.
Section 3.2 Powers.
The Partnership shall have and may exercise any and all powers
and authority conferred by the laws of Delaware upon limited partnerships formed
under the Delaware Act, including any and all powers and authority that may be
exercised by the General Partners pursuant to the Delaware Act or this
Agreement.
ARTICLE IV
UNITS AND OTHER PARTNERSHIP SECURITIES
Section 4.1 Classification and Conversion of Units.
(a) The Partnership Interests of the Partners and
Assignees are divided into GP Units and LP Units, the GP Units are further
divided into Class A Units and Class B Units, and the LP Units are further
divided into Class A Units, Class B Units and Class C Units.
(b) A General Partner shall have the right, at such
General Partner's option, at any time to convert a portion, but not all, of the
GP Units held by such General Partner into LP Units of the same class. The rate
at which LP Units shall be delivered upon conversion of GP Units shall initially
be one LP Unit for each GP Unit, and shall be adjusted to reflect any
Recapitalization occurring after the Effective Time. Unless the LP Units
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issuable on conversion are to be issued in the name of the General Partner, the
General Partner shall provide funds to the Partnership sufficient to pay any
transfer or similar tax with respect to the issuance. LP Units issued on
conversion of GP Units shall be deemed to have been issued, and such GP Units
shall be deemed to be canceled and retired, as of the close of business on the
date Certificates evidencing such GP Units are surrendered to the Partnership
for conversion.
(c) A General Partner shall have the right, at such
General Partner's option, at any time to convert a portion or all of the Class
A LP Units or Class B LP Units held by such General Partner into GP Units of
the same class. The rate at which GP Units shall be delivered upon conversion
of LP Units shall initially be one GP Unit for each LP Unit, and shall be
adjusted to reflect any Recapitalization occurring after the Effective Time. GP
Units issued on conversion of LP Units shall be deemed to have been issued, and
such LP Units shall be deemed to be canceled and retired, as of the close of
business on the date Certificates evidencing such LP Units are surrendered to
the Partnership for conversion.
(d) As of the close of business on March 1, 1998, each
Class B GP Unit shall be converted into and exchanged for one Class A GP Unit,
and each Class B LP Unit shall be converted into and exchanged for one Class A
LP Unit, adjusted in each case to reflect any Recapitalization occurring after
the Effective Time.
Section 4.2 New Classes or Series of Units or Other Securities.
The General Partners may create a class or series of Units, other
Equity Securities or other Partnership securities that was not previously
outstanding, without the approval of the Limited Partners. Any such class or
series of Units or other securities shall have such designations, preferences
and relative participating, optional or other special rights, powers and duties,
including preferences, rights and powers senior to existing classes or series of
Units or other securities, as shall be determined by the General Partners,
subject to any required approval of Unitholders, including without limitation:
(i) the rights of such class or series of Units or other securities to share in
profits and losses of the Partnership and the allocation, for federal income and
other tax purposes, to such class or series of Units or other securities of
items of Partnership income, gain, loss, deduction and credit; (ii) the rights
of such class or series of Units or other securities to share in distributions
of Partnership Assets; (iii) the rights of such class or series of Units or
other securities upon dissolution and liquidation of the Partnership; (iv)
whether such class or series of Units or other securities is redeemable by the
Partnership and, if so, the price at which, and the terms and conditions on
which, such class or series of Units or other securities may be redeemed by the
Partnership; (v) whether such class or series of Units or other securities is
issued with the right of conversion into or exchange for any other class or
series of Units or other securities and, if so, the rate at and the terms and
conditions upon which such class or series of Units or other securities may be
converted into or exchanged for such other class or series of Units or other
securities; and (vi) the rights of such class or series of Units or other
securities to vote on matters relating to the Partnership and this Agreement.
The designations, preferences and relative participating, optional or other
special rights, powers and duties of any such class or series of Units or other
securities shall be set forth in an amendment to this Agreement.
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Section 4.3 Issuance of Units and Other Securities.
(a) The Partnership may issue Units of any class or
series, other Equity Securities, or other Partnership securities, in amounts,
for consideration and on terms and conditions determined by the General Partners
without the approval of the Limited Partners; provided, however, that except as
provided in Article XVI, (i) the Partnership may not issue Units which are
senior to the Class A Units, without the approval of Unaffiliated Unitholders
holding a majority of the outstanding Class A Units held by Unaffiliated
Unitholders; and (ii) the Partnership may not issue any Units or other Equity
Securities unless the Partnership receives a Tax Opinion with respect to such
issuance.
(b) The Partnership shall not issue fractional Units;
instead, each fractional Unit shall be rounded to the nearest whole Unit or an
amount equal to the product of such fraction and the Unit Price on the date of
issuance shall be paid in cash by the Partnership, as may be determined by the
General Partners.
Section 4.4 No Preemptive Rights.
No Partner, Assignee or other Person shall have any
preemptive, preferential or other similar rights with respect to any additional
Contributions or any offer, issuance or sale of Units, other Equity Securities
or other Partnership securities.
Section 4.5 Recapitalizations.
(a) The Partnership may make a distribution of Units with
respect to outstanding Units, effect a subdivision or combination of outstanding
Units, or take a like action (each, a"Recapitalization"). The Partnership shall
not effect a Recapitalization unless the respective Percentage Interests of the
Partners and Assignees immediately after the Recapitalization are the same as
their respective Percentage Interests immediately before the Recapitalization.
(b) The General Partners shall select a Record Date as of
which a Recapitalization shall be effective and shall notify each Unitholder of
the Recapitalization. The Partnership may issue to the Unitholders as of the
Record Date new Certificates representing the additional Units issued in the
Recapitalization, and may implement such other procedures to reflect the
Recapitalization as may be determined by the General Partners.
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ARTICLE V
CERTIFICATES FOR UNITS
Section 5.1 Issuance of Certificates.
Upon the issuance of Units to any Partner or other Person, the
Partnership shall issue and deliver to such Partner, or to such other Person
upon such other Person being admitted as a Partner, one or more Certificates in
the name of such Partner or other Person evidencing such Units, in such
denominations as such Partner or other Person may request. Upon the written
request of any Transferee of Units accompanied by one or more Certificates
properly endorsed and cash in the amount of any applicable transfer tax, the
Partnership shall issue and deliver to such Transferee, upon such Transferee
being admitted as a Partner, replacement Certificates in the name of such
Transferee in such denominations as such Transferee may request. Upon the
written request of any Unitholder accompanied by one or more Certificates
properly endorsed, the Partnership shall issue and deliver to such Unitholder
replacement Certificates in the name of such Unitholder in such denominations as
such Unitholder may request, in accordance with such procedures as the
Partnership may reasonably establish.
Section 5.2 Lost, Stolen, Mutilated or Destroyed Certificates.
(a) The Partnership shall issue a new Certificate in place
of any Certificate previously issued if the registered owner of the Certificate:
(i) makes proof by affidavit, in form and
substance satisfactory to the Partnership, that a previously issued Certificate
has been lost, destroyed or stolen;
(ii) requests the issuance of a new Certificate
before the Partnership has notice that the Certificate is subject to an adverse
claim by another Person or has been acquired by a purchaser for value in good
faith and without notice of an adverse claim;
(iii) if requested by the Partnership, delivers to
the Partnership a bond, in form and substance satisfactory to the Partnership,
with such surety or sureties and with fixed or open penalty as the Partnership
may direct, to indemnify the Partnership against any claim that may be made on
account of the alleged loss, destruction or theft of the Certificate; and
(iv) satisfies any other reasonable requirements
imposed by the Partnership.
(b) When a Certificate has been lost, destroyed or
stolen, and the owner fails to notify the Partnership within a reasonable time
after he has notice of it, and a Transfer of the Units represented by the
Certificate is registered before the Partnership receives such
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notification, the owner shall be precluded from making any claim against the
Partnership or any Transfer Agent for such Transfer or for a new Certificate.
(c) If any mutilated Certificate is surrendered to the
Transfer Agent, the Partnership shall execute and deliver in exchange therefor
a new Certificate evidencing the same number of Units as did the Certificate so
surrendered.
(d) As a condition to the issuance of any new Certificate
under this Section 5.2, the Partnership may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Transfer Agent) connected therewith.
Section 5.3 Registered Owner.
The Partnership shall be entitled to treat a Unitholder as the owner of
the Units registered in such Unitholder's name on the books and records of the
Transfer Agent for all purposes, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such Units on the part
of any other Person, regardless of whether it shall have actual or other notice
thereof, except as otherwise provided by law or any applicable rule, regulation,
guideline or requirement of any National Securities Exchange on which the Units
are listed or admitted for trading. When a Person is acting as a nominee, agent
or in some other representative capacity for another Person in acquiring or
holding Units, as between the Partnership on the one hand and such Persons on
the other hand, such nominee (i) must execute and deliver an Admission
Application, (ii) shall be the Limited Partner or Assignee (as the case may be)
of record and beneficially, and (iii) shall be bound by this Agreement.
ARTICLE VI
TRANSFER OF UNITS
Section 6.1 Transfer.
Except as provided in Article XVI, no Units shall be Transferred
except in accordance with the terms and conditions set forth in this Article
VI. Any Transfer or purported Transfer of any Units not made in accordance with
this Article VI or Article XVI shall be null and void.
Section 6.2 Transfer of GP Units.
(a) A General Partner may Transfer any or all of its GP
Units to an Affiliate of such General Partner which has been admitted as a
successor or additional General Partner pursuant to Section 12.1(a).
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(b) A General Partner may mortgage, pledge, hypothecate,
grant a security interest in or otherwise encumber any or all of its GP Units,
and Transfer any or all of its GP Units to any Person in a forced sale pursuant
to the foreclosure of, or other realization upon, any such encumbrance;
provided, however, that if the Transferee is not a General Partner, such GP
Units shall be converted into LP Units as provided in Section 4.1(b).
(c) A General Partner may Transfer any or all of its GP
Units to any Person in connection with the withdrawal of such General Partner
pursuant to Section 13.1(b); provided, however, that if the Transferee is not a
General Partner, such GP Units shall be converted into LP Units as provided in
Section 4.1(b).
Section 6.3 Transfer of LP Units.
A Partner may Transfer any or all of its LP Units to any Person;
provided, however, that except upon the death of a Unitholder or by operation of
law, the Partnership shall not recognize a Transfer of LP Units unless the
Transferee, if not a Partner or the Transferee of an Underwriter, has executed
and delivered an Admission Application to the Partnership or, if delivered to
the Transfer Agent, the Transfer Agent has delivered such Admission Application
to the Partnership.
Section 6.4 Restrictions on Transfer.
No Transfer of Units shall be made if such Transfer (i) would violate
the then applicable federal and state securities laws or rules and regulations
of the Commission, any state securities commission or any other governmental
authorities with jurisdiction over such Transfer, (ii) would result in an
Assignment Event or an Adverse Partnership Tax Event or (iii) would affect the
Partnership's existence or qualification as a limited partnership under the
Delaware Act.
ARTICLE VII
CAPITAL ACCOUNTS
Section 7.1 Capital Accounts.
(a) The Partnership shall maintain for each Partner and
Assignee (which terms for purposes of this Section 7.1, Section 7.2 and Article
VI shall refer to the beneficial owner of an interest held by a nominee in any
case in which the nominee has furnished the identity of such owner to the
Partnership pursuant to Section 6031(c) of the Code) a separate Capital Account
in accordance with Section 704 of the Code. Such Capital Account shall be
INCREASED BY (i) the cash amount or Net Value of all actual and deemed
Contributions made by such Partner or Assignee to the Partnership and (ii) all
items of Net Income computed in accordance with Section 7.2(a) and allocated to
such Partner or Assignee pursuant to Sections 8.5 and 8.6 and DECREASED BY (i)
the cash amount or Net Value of all actual and deemed distributions of
Partnership Assets
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made to such Partner or Assignee and (ii) all items of Net Loss computed in
accordance with Section 7.2(a) and allocated to such Partner or Assignee
pursuant to Sections 8.5 and 8.6.
(b) Upon the issuance of any Units to or for the benefit
of any Associate of the Partnership or any of its Subsidiaries, or any
successor to such Associate, as compensation for services rendered or to be
rendered to the Partnership or any of its Subsidiaries by such Associate, such
Associate or his or her successor shall be deemed to have made a Contribution
to the Partnership in an amount equal to the product of (i) the number of Units
so issued, and (ii) the Unit Price on the date of such issuance.
Section 7.2 Capital Account Calculations and Adjustments.
(a) For purposes of computing the amount of any item of
income, gain, deduction or loss to be reflected in the Partners' and Assignees'
Capital Accounts, the determination, recognition and classification of any such
item shall be the same as its determination, recognition and classification for
federal income tax purposes (including any method of depreciation, cost
recovery or amortization used for this purpose), provided, that:
(i) In accordance with the requirements of
Section 704(c) of the Code and Treasury Regulation Section
1.704-1(b)(2)(iv)(d), any deductions for depreciation, cost recovery or
amortization attributable to Contributed Property shall be determined as if the
adjusted basis of such Contributed Property on the date it was acquired by the
Partnership was equal to the Carrying Value of such Contributed Property. Upon
an adjustment pursuant to Section 7.2(c) to the Carrying Value of any
Partnership Asset subject to depreciation, cost recovery or amortization, any
further deductions for such depreciation, cost recovery or amortization
attributable to such Partnership Asset shall be determined as if the adjusted
basis of such Partnership Asset was equal to the Carrying Value of such
Partnership Asset immediately following such adjustment.
(ii) Any income, gain or loss attributable to the
taxable disposition of any Partnership Asset shall be determined by the
Partnership as if the adjusted basis of such Partnership Asset as of such date
of disposition was equal in amount to the Partnership's Carrying Value with
respect to such Partnership Asset as of such date.
(iii) Subject to the provisions of Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), the amounts of any adjustments to the
bases (or Carrying Values) of Partnership Assets made pursuant to Section 743
of the Code shall not be reflected in Capital Accounts, but the amounts of any
adjustments to the bases (or Carrying Values) of Partnership Assets made
pursuant to Section 734 of the Code as a result of the distribution of
Partnership Assets by the Partnership to a Partner or Assignee shall (A) be
reflected in the Capital Account of the Partner or Assignee receiving such
distribution in the case of a distribution in liquidation of such Partner's or
Assignee's Partnership Interest and (B) otherwise be reflected in Capital
Accounts in the manner in which the unrealized income and gain that is
displaced by such
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adjustments would have been shared had the Partnership Assets been sold at
their Carrying Values immediately prior to such adjustments.
(iv) The computation of all items of income, gain,
loss and deduction shall be made, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such
items are not includable in gross income or are neither currently deductible
nor capitalizable for federal income tax purposes. For this purpose, amounts
paid or incurred to organize the Partnership or to promote the sale of
Partnership Interests that are neither deductible nor amortizable under Section
709 of the Code, and deductions for any losses incurred in connection with the
sale or exchange of Partnership Assets disallowed pursuant to Section 267(a)(1)
or 707(b) of the Code, shall be treated as expenditures described in Section
705(a)(2)(B) of the Code.
(b) Generally, a Transferee of a Partnership Interest
will succeed to the Capital Account relating to the Partnership Interest
Transferred. However:
(i) If the Transfer causes a termination of the
Partnership under Section 708(b)(1)(B) of the Code, the Partnership shall be
deemed to have contributed all Partnership Assets and Partnership liabilities
to a new reconstituted partnership in exchange for one hundred percent of the
interests in such reconstituted partnership, and immediately thereafter, the
Partnership shall be deemed to have dissolved and distributed all interests in
the reconstituted partnership to the Partners and Assignees, followed by the
continuation of the business of the Partnership by the reconstituted
partnership. In such event, the Carrying Values of the Partnership Assets shall
be adjusted immediately prior to such deemed distribution pursuant to Section
7.2(d) (and such adjusted Carrying Values shall constitute the fair market
values of such Partnership Assets upon their deemed contribution to the
reconstituted Partnership). The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of Section
7.1 and this Section 7.2
(ii) If the Transfer is of LP Units held by a
General Partner, and if immediately prior to such Transfer such General Partner
has a negative Capital Account balance, then the Transferee shall be credited
with a zero balance in its Capital Account relating to such LP Units, and such
General Partner shall retain its negative Capital Account balance.
(c) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), in connection with either (i) a Contribution (other than
a de minimis amount) by a new or existing Partner or Assignee in consideration
for a Partnership Interest or (ii) a distribution of Partnership Assets (other
than a de minimis amount) in consideration for a Partnership Interest, the
Capital Accounts of all Partners and Assignees and the Carrying Values of all
Partnership Assets may be adjusted (consistent with the provisions hereof)
upwards or downwards to reflect any Unrealized Gain or Unrealized Loss
attributable to each Partnership Asset, as if such Unrealized Gain or
Unrealized Loss had been recognized upon an actual sale of such Partnership
Asset at such time and had been allocated to the Partners and Assignees
pursuant to Sections 8.5 and 8.6. For
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purposes of determining such Unrealized Gain or Unrealized Loss, the fair
market value of Partnership Assets shall be determined by the General Partners.
(d) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(e), immediately prior to the actual or deemed distribution of
any Partnership Asset in kind, the Capital Accounts of all Partners and
Assignees and the Carrying Values of such Partnership Asset shall be adjusted
(consistent with the provisions hereof) upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership Asset as if
such Unrealized Gain or Unrealized Loss had been recognized upon an actual sale
of such Partnership Asset immediately prior to such distribution and had been
allocated to the Partners and Assignees, at such time, pursuant to Sections 8.5
and 8.6. For purposes of determining such Unrealized Gain or Unrealized Loss,
the fair market value of Partnership Assets shall be determined by the General
Partners.
ARTICLE VIII
DISTRIBUTIONS AND ALLOCATIONS
Section 8.1 Cash Distributions During the Interim Period.
With respect to each fiscal quarter ending on or prior to the end of
the Interim Period, commencing with the fiscal quarter ending December 31, 1994,
the Partnership shall distribute an amount in cash equal to the Distributable
Cash for such quarter. Such distributions shall be made to Unitholders of record
30 days after the last day of each such fiscal quarter, and shall be paid on
Class A Units and Class C Units not more than 45 days, and on Class B Units not
more than 60 days, after the last day of each such fiscal quarter. Such
distributions shall be made in accordance with the following priorities:
(i) First, to such Unitholders holding Class A
Units or Class C Units, pro rata in accordance with their Class A Units and
Class C Units, without regard to whether such Units are Class A Units or Class
C Units, until the cash distributions made pursuant to this clause (i) with
respect to each Class A Unit and Class C Unit equal the Class A Quarterly
Priority Amount;
(ii) Second, to such Unitholders holding Class B
Units, pro rata in accordance with their Class B Units until the cash
distributions made pursuant to this clause (ii) with respect to each Class B
Unit equal the Class B Quarterly Priority Amount; and
(iii) Third, to such Unitholders holding Class A
Units, Class B Units or Class C Units, pro rata in accordance with their Class
A Units, Class B Units and Class C Units, without regard to whether such Units
are Class A Units, Class B Units or Class C Units, until the
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cash distributions made pursuant to the preceding clauses (i) and (ii) and this
clause (iii) with respect to each Class A Unit, Class B Unit and Class C Unit
equal the Class C Quarterly Cap;
(iv) Fourth, to such Unitholders holding Class A
Units or Class B Units, pro rata in accordance with their Class A Units and
Class B Units, without regard to whether such Units are Class A Units or Class
B Units; provided, however, that the Partnership may withhold distributions to
the holders of Class B Units to protect the distributions in respect of the
Class A Units and Class C Units in future fiscal quarters.
Section 8.2 Cash Distributions After the Interim Period.
With respect to each fiscal quarter ending after the end of the Interim
Period, the Partnership shall distribute an amount in cash equal to the
Distributable Cash for such fiscal quarter. Such distributions shall be made to
Unitholders of record 30 days after the last day of each such fiscal quarter,
and shall be paid not more than 60 days after the last day of each such fiscal
quarter. Such distributions shall be made in accordance with the following
priorities:
(i) First, to such Unitholders holding Class A
Units, Class B Units or Class C Units, pro rata in accordance with their Class
A Units, Class B Units and Class C Units, without regard to whether such Units
are Class A Units, Class B Units or Class C Units, until the cash distributions
made pursuant to this clause (i) with respect to each Class A Unit, Class B
Unit and Class C Unit equal the Class C Quarterly Cap;
(ii) Second, to such Unitholders holding Class A
Units or Class B Units, pro rata in accordance with their Class A Units and
Class B Units, without regard to whether such Units are Class A Units or Class
B Units.
Section 8.3 Special Cash Distributions Prior to Restructuring.
(a) Immediately prior to the effectiveness of the first
Restructuring, the Partnership shall, if the regular quarterly distribution for
the fiscal quarter ending before the effectiveness of the Restructuring has not
been paid, pay such distribution as provided in Section 8.1 if such fiscal
quarter ended on or prior to the end of the Interim Period, and otherwise as
provided in Section 8.2.
(b) Immediately prior to the effectiveness of the first
Restructuring, but after the distribution, if any, required by Section 8.3(a),
the Partnership shall distribute an amount equal to cash on hand of the
Partnership, less cash required for expenses, for capital expenditures, as
reserves or otherwise in the business of the Partnership or any successor to
the business of the Partnership after the Restructuring, as determined by the
General Partners. Such distribution shall be made as provided in Section 8.1 if
such distribution is made during a fiscal
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quarter ending on or prior to the end of the Interim Period, and otherwise as
provided in Section 8.2.
Section 8.4 General Rules with Respect to Distributions.
(a) The General Partners are also authorized to
distribute Partnership Assets in kind. Any Partnership Asset distributed in
kind shall be valued at its fair market value on the date of distribution and
shall be distributed in accordance with Sections 8.1and 8.2. Capital Accounts
and Carrying Values shall be adjusted in accordance with Section 7.2(e).
(b) The General Partners shall specify a Record Date for
any distribution, and any Partnership Assets distributed shall be distributed
to the Unitholders of the relevant class or series as of the Record Date.
(c) Any amount of taxes withheld pursuant to Section
10.4, and any amount of taxes, interest or penalties paid by the Partnership to
any governmental entity, with respect to amounts allocated or distributable to
a Unitholder shall be deemed to be a distribution or payment to such Unitholder
and shall reduce the amount otherwise distributable to such Unitholder pursuant
to this Article VIII.
(d) Distributions made to Unitholders shall be made to
"Unitholders"as defined in Article I without regard to the last sentence of the
definition of "Unitholder".
(e) The Partnership shall not make a distribution to any
Partner on account of its Partnership Interest if such distribution would
violate Section 17-607 of the Delaware Act or other applicable law.
Section 8.5 Allocations of Income and Loss.
(a) For Capital Account purposes, except as otherwise
provided in Section 8.6, Net Income and Net Loss of the Partnership shall be
determined and allocated as set forth in this Section 8.5, and allocations of
Net Income and Net Loss shall be deemed to be allocations of proportionate
shares of the items of income, gain, loss and deduction from which Net Income
and Net Loss are calculated.
(b) Net Income and Net Loss of the Partnership shall be
determined with respect to each fiscal month of the Partnership's existence,
and allocations of such Net Income and Net Loss with respect to each such month
shall be made annually.
(c) If the Partnership has Net Income for a taxable year,
Net Income for such taxable year shall be treated as earned in those months in
which the Partnership earned Net Income, in proportion to the Net Income earned
by the Partnership in each of such months. Net Income thus treated as earned in
particular months shall be allocated among the Unitholders in
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the same proportions as any distributions would have been made with respect to
the fiscal quarter in which the relevant month falls if all of the Net Income
treated as earned in such fiscal quarter were distributed to the Unitholders as
provided in Sections 8.1 or 8.2, as the case may be. Although Sections 8.1 and
8.2 require distributions of cash to classes of Unitholders to be determined
with reference to prior distributions of cash, for purposes of making
allocations pursuant to the previous sentence, references in such Sections to
prior distributions of cash should be read to refer to prior allocations of Net
Income pursuant to this Section 8.5(c) with respect to prior fiscal quarters.
(d) If the Partnership has a Net Loss for a taxable year,
such Net Loss shall be treated as incurred in those fiscal months in which the
Partnership incurred a Net Loss, in proportion to the Net Loss incurred by the
Partnership in each of such months. The Net Loss treated as incurred in each
such month shall be allocated (i) first, to the Unitholders having positive
Capital Account balances so as to cause their respective Capital Account
balances to be in (or, if not possible, closer to) the same proportion to each
other as their respective Percentage Interests and then in accordance with
their respective Percentage Interests until all such positive balances have
been eliminated; and (ii) thereafter, any additional Remaining Net Loss shall
be allocated to the General Partners in respect of their GP Units. To the
extent subsequent Net Income of the Partnership does not exceed Net Loss
allocated pursuant to this Section 8.5(d), such Net Income shall be allocated
to the General Partners in respect of their GP Units until such allocated Net
Income equals Net Loss allocated to the General Partners pursuant to Section
8.5(d)(ii), thereafter to the Unitholders in the same proportions and amounts
as Net Loss was allocated pursuant to Section 8.5(c)(i). For purposes of this
Section 8.5(d), the determination of Capital Account balances shall be made
after giving effect to all distributions of cash made with respect to fiscal
quarters or years before the month in question pursuant to Sections 8.1, 8.2
and 8.3.
Section 8.6 Special Provisions Governing Capital Account Allocations.
(a) In the event that any Partner or Assignee has a
deficit Capital Account at the end of any Partnership fiscal year which is in
excess of such Partner's or Assignee's obligation (including any deemed
obligation under Treasury Regulations or Temporary Treasury Regulations), if
any, to restore an amount to the Partnership, and such excess deficit exists
following the allocations referred to in Sections 8.5(d) and (e), such Partner
or Assignee shall be allocated Net Income in proportion to such remaining
excess deficit amounts.
(b) If any Partner or Assignee unexpectedly receives any
adjustments, allocations or distributions described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), Net Income or items of income and gain shall be
specially allocated to such Partner or Assignee in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, a
deficit in its Capital Account (computed as provided in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(3)) as quickly as possible. This Section 8.6(b) is
intended to constitute a "qualified income offset" within the
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meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(3) and shall be
interpreted to comply with the requirements of such regulation. Any special
allocations of items of income or gain pursuant to this Section 8.6(b) shall be
taken into account in computing subsequent allocations of Net Income or Net
Loss so that the net amounts of any items subsequently so allocated shall, to
the extent possible, be equal to the net amounts that would have been allocated
to each Partner if such special allocations had not occurred.
(c) In the event there is a net decrease in Minimum Gain
during a Partnership taxable year, the Partners shall be allocated items of
income and gain in accordance with Treasury Regulation Section 1.704-2(f). Any
Partner's share of Minimum Gain shall be determined in accordance with Treasury
Regulation Section 1.704-2(g). This Section 8.6(c) is intended to comply with
the minimum gain chargeback requirement of Treasury Regulation Section 1.704-2
and shall be interpreted and applied in a manner consistent therewith. Any
special allocations of items of income or gain pursuant to this Section 8.6(c)
shall be taken into account in computing subsequent allocations of Net Income
or Net Loss so that the net amounts of any items subsequently so allocated and
the special allocations shall, to the extent possible, be equal to the net
amounts that would have been allocated to each Partner or Assignee if such
special allocations had not occurred.
(d) To the extent required by Treasury Regulation Section
1.704-2(i), any tax items of the Partnership that are attributable to a
non-recourse debt of the Partnership that constitutes "partner non-recourse
debt" as defined in Treasury Regulation Section 1.704-2(b)(4) shall be
allocated in accordance with the provisions of Treasury Regulation Section
1.704-2(i). This Section 8.6(d) is intended to satisfy the requirements of
Treasury Regulation Section 1.704-2(i) (including the partner nonrecourse
minimum gain chargeback requirements) and shall be interpreted and applied in a
manner consistent therewith. Any special allocations pursuant to this Section
8.6(d) shall be taken into account in computing subsequent allocations of Net
Income or Net Loss so that the net amounts of any items subsequently so
allocated and the special allocations shall, to the extent possible, be equal
to the net amounts that would have been allocated to each Partner or Assignee
if such special allocations had not occurred.
(e) The General Partners shall make special allocations
of Net Income or Net Loss or items of income, gain, loss or deduction to GP
Units as may be necessary to permit conversion of such Units to LP Units in
accordance with Section 4.1(b). For purposes of allocating income, gain, loss
or deduction to LP Units that were converted from GP Units for periods
following such conversion, the Units shall be deemed as of the effective date
of such conversion to have been allocated the same amount of income, gain, loss
and deductions and to have received the same distributions as the LP Units
outstanding prior to such conversion.
(f) If and to the extent that any Partner or Assignee is
deemed to recognize income as a result of any transaction between such Partner
or Assignee and the Partnership pursuant to Section 482, Section 483, Sections
1272-1274 or Section 7872 of the Code, or any similar provision now or
hereafter in effect, any corresponding loss or deduction of the
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Partnership shall be allocated to the Partner or Assignee who was charged with
such income. In addition, if all or part of the deductions claimed by the
Partnership for compensation to its employees is disallowed, the income
attributable to such disallowed deductions will be specially allocated to the
General Partners, and any subsequent deductions related to such compensation
will be specially allocated to the General Partners.
(g) In addition to the other special allocations that the
General Partners may make under this Section 8.6, to preserve uniformity of
Units (subject to the priority distribution rights of certain classes of Units)
the General Partners may make special allocations of Net Income or Net Loss or
items of income, gain, loss or deduction, but only if such allocations would
not have a material adverse effect on the Unitholders (other than the General
Partners) and if they are consistent with the principles of Section 704 of the
Code.
(h) To the extent necessary that the Partnership will not
be treated as a corporation or as an association taxable as a corporation for
federal or state income tax purposes, the interests of the General Partners in
each material item of Partnership income, gain, loss, deduction or credit shall
be equal to at least 1% of each such item at all times during the existence of
the Partnership. If any General Partner receives an allocation under this
Section 8.6(h) that such General Partner would not otherwise have received,
subsequent allocations of Net Income or Net Loss shall, to the extent possible
(and subject to this Section 8.6(h)), be made so that the net amounts of Net
Income or Net Loss allocated to the Partners are the same as they would have
been had allocations not been made pursuant to this Section 8.6(h).
Section 8.7 Allocations for Tax Purposes.
(a) Except as otherwise provided in this Section 8.7, for
federal income tax purposes each item of income, gain, loss and deduction of
the Partnership shall be allocated among the Partners and Assignees in the same
proportion as items comprising Net Income or Net Loss, as the case may be, are
allocated among the Partners. Credits shall be allocated as provided in
Treasury Regulation Section 1.704-1(b)(4)(ii).
(b) In the case of Contributed Property, items of income,
gain, loss, depreciation, amortization and cost recovery deductions
attributable to such property shall be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code that takes into
account the variation between the Net Value of such property and its adjusted
basis, at the time of contribution, to the extent such allocation reduces
Book-Tax Disparities.
(c) In the case of Adjusted Property, items of income,
gain, loss, depreciation and cost recovery deductions attributable thereto
shall (i) first, be allocated among the Partners and Assignees in a manner
consistent with the principles of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized Loss attributable to such property
and the allocation thereof pursuant to Section 8.5(d) or (e) to the extent such
allocation reduces
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Book-Tax Disparities, and (ii) second, in the event such property was
originally Contributed Property, be allocated among the Partners and Assignees
in a manner consistent with Section 8.7(b).
(d) To the extent permissible under applicable Treasury
Regulations, the amount of any gain from a taxable disposition of property
allocated to (or recognized by) a Partner or Assignee (or its successor in
interest), for federal income tax purposes pursuant to the above provisions
shall be deemed to be Recapture Income to the extent such Partner or Assignee
has been allocated or has claimed any deduction directly or indirectly giving
rise to the treatment of such gain as Recapture Income.
(e) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated to
the Partners or Assignees in accordance with the provisions hereof shall be
determined without regard to any adjustment made pursuant to Section 743 of the
Code; provided, however, that such allocations, once made, shall, if an
election under Section 754 of the Code is in effect, be adjusted as necessary
or appropriate to take into account those adjustments permitted by Section 743
of the Code, and any adjustments made pursuant to Section 734 of the Code shall
be allocated to the extent permitted under and in accordance with the rule of
Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
(f) The General Partners shall make special allocations
of Net Income or Net Loss or items of income, gain, loss, deduction or credit
that are consistent with the principles of Section 704(c) of the Code and shall
amend the provisions of this Agreement as appropriate to reflect the proposal
or promulgation of Treasury Regulations under Subchapter K of the Code or
otherwise to cause allocations hereunder to be respected for federal income tax
purposes. The General Partners may adopt and employ such methods and procedures
for (i) the maintenance of book and tax capital accounts, (ii) the
determination and allocation of adjustments under Sections 704(c), 734 and 743
of the Code, (iii) the determination and allocation of Net Income, Net Loss,
taxable income, taxable loss and items thereof under this Agreement and
pursuant to the Code, (iv) the determination of the identities and tax
classification of Unitholders, (v) the provision of tax information and reports
to Partners and Assignees, (vi) the adoption of reasonable conventions and
methods for the valuation of assets and the determination of tax basis, (vii)
the allocation of asset values and tax basis, (viii) conventions for the
determination of cost recovery, depreciation and amortization deductions and
the maintenance of inventories, (ix) the recognition of the Transfer of Units,
and (x) compliance with other tax-related requirements, including without
limitation the use of computer software and filing and reporting procedures
similar to those employed by other publicly-traded partnerships, as they
determine are necessary and appropriate to execute the provisions of this
Agreement, to comply with federal and state tax laws, and to achieve uniformity
and fungibility of Units (subject to the priority distribution rights of Class
A Units. If the General Partners determine, based upon advice of counsel, that
no reasonable allowable convention or other method is available to preserve the
uniformity of Units (subject to the priority distribution rights of certain
classes of Units) or the General Partners so
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elect, Units may be separately identified as distinct classes to reflect
differences in tax consequences.
(g) Unless otherwise required by the Treasury Regulations
under Section 704(c) of the Code, with respect to property owned by or
contributed to the Partnership, the General Partners shall apply the principles
of Section 704(c) of the Code in accordance with the "traditional method" under
Treasury Regulations Section 1.704-3.
Section 8.8 Monthly Allocations.
(a) Subject to applicable Treasury Regulations, the
Partnership will treat Unitholders of record at the opening of business on the
first day of a fiscal month as being the only Unitholders with respect to such
Units during such month. If any Unit is Transferred during any month, such
items attributable, under the conventions of Section 8.5, to each Unit for such
month shall be allocated to the holder of such Unit on the first day of such
month. Distributions shall be made to the Unitholders as of the applicable
Record Date as provided in Sections 8.1 and 8.2.
(b) The General Partners may revise, alter or otherwise
modify such methods of allocation (i) to the extent that they determine that
the application of such methods would result in a substantial mismatching of
the allocation of Net Income or Net Loss attributable to a period and the
distribution of cash attributable to the same period as between the Transferor
and Transferee of the Partnership Interest and/or Unit Transferred that could
be minimized by the application of an alternative tax allocation method, or
(ii) to the extent necessary to conform the Partnership's tax allocations to
the requirements of any regulations issued by the Treasury Department or
rulings of the Internal Revenue Service.
Section 8.9 Allocations Upon Dissolution.
If upon dissolution of the Partnership pursuant to Article XVII, and
after taking into account all allocations of Net Income and Net Losses (and
other tax items) under this Article VIII, distributions, if they were to be made
to Unitholders in accordance with their respective Capital Accounts, would
result in unequal distributions on their Units, then (i) gross items of income
and gain (and other tax items) for the taxable year of final distribution, and,
to the extent permitted under Section 761(c) of the Code, gross items of income
and gain (and other tax items) for the immediately preceding taxable year, shall
be allocated first to the Class A Unitholders until the Capital Account balance
allocable to each Class A Unit is equal, (ii) the same procedure shall be
followed with respect to Class B Units until the Capital Account balance
allocable to each Class B Unit is equal, and (iii) the same procedure shall be
followed with respect to Class B Units until the Capital Account balance
allocable to each Class B Unit is equal.
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ARTICLE IX
ACCOUNTING AND TAX MATTERS
Section 9.1 Books and Records.
The Partnership shall maintain complete and accurate books and records
with respect to the Partnership's business, and such books and records shall at
all times be kept at the principal office of the Partnership. The Partnership
may maintain its books and records in other than written form, if such form is
capable of conversion into written form within a reasonable time. The
classification, realization and recognition of income, gains, losses,
deductions, credits and other items for financial reporting purposes shall be
on the accrual basis in accordance with generally accepted accounting
principles.
Section 9.2 Fiscal Year.
The fiscal year of the Partnership shall be the same as its taxable
year for federal income tax purposes.
Section 9.3 Taxable Year.
The taxable year of the Partnership shall be the calendar year. The
General Partners may change the taxable year of the Partnership to another year
permitted by the Code.
Section 9.4 Preparation of Tax Returns.
The Partnership shall prepare and timely file such returns relating to
Partnership income, gains, losses, deductions and credits, as may be required
for federal, state and local income tax purposes, and within 90 days after the
close of the taxable year, the Partnership shall mail to the Limited Partners
the tax information reasonably required for their federal, state and local
income tax reporting purposes. The classification, realization and recognition
of income, gains, losses, deductions, credits and other items for federal income
tax purposes shall be on the accrual basis.
Section 9.5 Tax Elections.
(a) The General Partners may make the election under
Section 754 of the Code in accordance with applicable regulations thereunder.
In the event the General Partners make such election, the General Partners
reserve the right to seek to revoke such election upon their determination that
such revocation is in the best interests of the Unitholders.
(b) The General Partners shall determine whether to make
any other elections available under the Code or under any state's tax laws on
behalf of the Partnership.
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Section 9.6 Withholding.
The General Partners are authorized to take any action that they
determine to be necessary and appropriate to cause the Partnership to comply
with any withholding and reporting obligations imposed by law, including
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code.
Section 9.7 Tax Controversies.
PIMCO GP is the Tax Matters Partner (as defined in Section 6231 of the
Code) and is authorized to represent the Partnership in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with PIMCO GP and to do or to refrain from doing any or all
things reasonably required by the PIMCO GP to conduct such proceedings.
Section 9.8 Tax Opinions.
The requirement, as a condition to any action proposed to be taken
under this Agreement, that the Partnership be furnished a Tax Opinion (i) shall
not be applicable if the Partnership is at such time treated in all material
respects as an association taxable as a corporation for federal income tax
purposes, and (ii) shall be deemed satisfied by an Opinion of Counsel containing
such conditions, limitations and qualifications as are acceptable to the General
Partners.
ARTICLE X
CONCERNING THE GENERAL PARTNERS
Section 10.1 Management of Partnership Business.
(a) The General Partners (i) shall have the exclusive
right and full power and authority to manage and control the business and
affairs of the Partnership and to take any action deemed necessary or desirable
by them in connection with the business of the Partnership, and (ii) except as
otherwise provided in this Agreement, may take any action, including without
limitation the amendment of this Agreement, without the approval of the Limited
Partners. References in this Agreement to the "General Partners" shall be
deemed to be references to the "General Partner" if there is only one General
Partner.
(b) If there is more than one General Partner, the
General Partners shall have equal rights, power and authority in the management
and control of the business and affairs of the Partnership, and each of them
shall have the rights, power and authority of the General Partners specified in
Section 10.1(a); provided, however, that any difference arising as to any
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action connected with the business of the Partnership, other than those actions
specified in Section 10.1(c), shall be decided by General Partners holding a
majority of the outstanding GP Units.
(c) If there is more than one General Partner, the
following actions shall require the consent of all of the General Partners:
(i) the constitution of any Delegate and the
delegation to such Delegate of any of the rights and powers of the General
Partners to manage and control the business and affairs of the Partnership, and
any revision or revocation of any such constitution or delegation;
(ii) any merger or consolidation of the
Partnership with or into any other Business Entity in which the Partnership is
not the surviving entity;
(iii) any sale or transfer of all or substantially
all of the Partnership Assets;
(iv) any incurrence of Indebtedness by the
Partnership or any of its Subsidiaries except in the ordinary course of
business;
(v) initiation, consent to or acquiescence in any
Insolvency Event with respect to the Partnership;
(vi) any other action which would make it
impossible for the General Partners to carry on the ordinary business of the
Partnership;
(vii) any determination or election pursuant to
Section 17.1;
(viii) any determination, after the occurrence of an
Event of Withdrawal with respect to a General Partner, to carry on the business
of the Partnership;
(ix) any action which would cause an Assignment
Event, a Tax Realization Event or a Termination Event, or which would, prior to
the Restructuring, cause an Adverse Partnership Tax Event; or
(x) any amendment of this Article X or Article
XV or XVI.
Section 10.2 Delegation.
(a) The General Partners have the power and authority by
Written Action to constitute one or more boards or committees, and to delegate
any or all of the General Partners' rights and powers to manage and control
the business and affairs of the Partnership to one or
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more of such boards or committees (each, a "Delegate"). Such delegation by the
General Partners shall not cause any General Partner to cease to be a general
partner of the Partnership.
(b) The General Partners may not delegate their rights
and powers with respect to any of the following actions:
(i) any determination or action pursuant to
Article XVI;
(ii) admission of any successor or additional
General Partner;
(iii) any amendment of this Agreement;
(iv) any action which would require the approval
of Partners other than the General Partners; or
(v) any action described in Section 10.1(c).
(c) Except as otherwise provided in a Written Action
constituting a Delegate and delegating rights and powers to such Delegate, such
Delegate has the power and authority to constitute and appoint one or more
committees or subcommittees of such Delegate and to provide for, prescribe the
duties of, and appoint one or more individuals as officers of the Partnership,
and to delegate to one or more of such committees or subcommittees or one or
more of such officers any or all of the rights and powers delegated to it by
the General Partners.
Section 10.3 Reimbursement of the General Partners.
(a) Each General Partner shall be reimbursed on a monthly
or such other basis as the General Partners shall determine (i) for all direct
expenses paid by it on behalf of the Partnership (including amounts paid by it
to any Person to perform services for the Partnership), (ii) for all expenses
(other than taxes) incurred by it in connection with the business and affairs
of the Partnership, and (iii) in the case of a Public General Partner, for all
expenses (other than taxes) incurred by it.
(b) The General Partners shall not receive any
compensation from the Partnership for services provided to the Partnership as
General Partners.
Section 10.4 Outside Activities.
Except as provided in a Written Action, no General Partner shall carry
on any business except in connection with or incidental to (i) the performance
of its duties as a General Partner under this Agreement, (ii) the direct or
indirect acquisition, ownership or disposition of Units and other Partnership
Interests, and (iii) its governance and existence.
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Section 10.5 Certain Transactions.
(a) A General Partner or its Affiliate may make a loan to
the Partnership on terms that are fair to the Partnership. The Partnership
shall reimburse such General Partner or Affiliate for any costs incurred by it
in connection with the borrowing of funds obtained by such General Partner or
Affiliate and loaned to the Partnership.
(b) A General Partner or its Affiliate may render
services to the Partnership on terms that are fair to the Partnership.
(c) A General Partner or its Affiliate may sell, transfer
or convey assets or property to, or purchase Partnership Assets from, the
Partnership, or use or lease Partnership Assets, on terms that are fair to the
Partnership.
(d) Before entering into any transaction described in
this Section 10.5, the General Partners or their Delegates shall determine that
the proposed terms of such transaction are fair to the Partnership. In the
absence of bad faith on the part of the General Partners or their Delegates in
making a determination, such determination shall be conclusive and binding on
the Partners and Partnership.
Section 10.6 Conflicts of Interest.
Any conflict of interest between a General Partner or any of its
Affiliates, on the one hand, and the Partnership or any other Partner, on the
other hand, other than a transaction described in Section 10.5, shall be
resolved by the General Partners. In the absence of bad faith on the part of
the General Partners in resolving a conflict of interest, such resolution shall
be conclusive and binding on the Partnership and the Partners.
Section 10.7 Notice of Event of Withdrawal.
A General Partner which suffers an event that is, or with the passage
of a period specified in the definition of "Insolvency Event" or "Termination
Event" in Article I would become, an Event of Withdrawal, shall immediately
notify each other General Partner, or if there is no other General Partner,
each Limited Partner, of the occurrence of the event.
Section 10.8 Operating Board.
(a) As soon as practicable on or after November 15, 1994,
the General Partners shall establish an Operating Board of the Partnership
which, prior to the date which is four (4) months after the earlier of January
1, 1998, or the first Restructuring, shall consist of twelve (12) members as
follows: (i) the Chief Executive Officer from time to time of PIMCO, who shall
serve as the Chairperson of the Operating Board, (ii) six (6) managing
directors of PIMCO designated by PIMCO from time to time, (iii) three (3)
managing directors of CCI
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designated by CCI from time to time, (iv) one (1) managing director of any
Investment Management Company other than PIMCO or CCI designated by a majority
in Total Contributed Income of all such Investment Management Companies, and
(v) the Chief Executive Officer from time to time of the Partnership. Members
of the Operating Board designated by the Investment Management Companies are
referred to as "Designated Members." Notwithstanding the provisions of Article
XIV, this subsection (a) may not be amended prior to the date which is four (4)
months after the earlier of January 1, 1998 or the first Restructuring.
(b) This Section 10.8 and the defined terms referred to
only in this Section 10.8 shall be deleted in their entirety on the date which
is four (4) months after the earlier of January 1, 1998, or the first
Restructuring, and this Agreement shall be restated to reflect such deletion.
Section 10.9 Equity Board.
(a) As soon as practicable on or after November 15, 1994,
the General Partners shall establish an Equity Board of the Partnership which,
prior to the reconstitution of the Equity Board pursuant to subsection (b)
below (which shall not occur prior to the earlier of January 1, 1998, or the
first Restructuring), shall consist of the Chairperson from time to time of the
Operating Board, the Chief Executive Officer from time to time of the
Partnership, and ten (10) persons appointed as follows: (i) two (2) persons
appointed by PIMCO Partners, (ii) three (3) persons appointed by PFAMCO, (iii)
two (2) persons appointed by a majority in interest of the Series B Preferred
shareholders of TAG Inc., and (iv) three (3) Disinterested Directors appointed
by the members of the Equity Board who are not Disinterested Directors. Prior
to the reconstitution of the Equity Board: (i) the initial terms of office of
the members of the Equity Board appointed pursuant to this subsection (a) other
than the Disinterested Directors, the Chairperson of the Operating Board and
the Chief Executive Officer of the Partnership, shall end on the last day of
the calendar year next following the date of their appointment; (ii) the
initial terms of office of the Disinterested Directors shall end on December
31, 1994, 1995 and 1996 respectively; (iii) the succeeding terms of office of
appointed members shall be one (1) year; (iv) not later than one (1) month
prior to the expiration of the terms of office of the appointed members of the
Equity Board, they shall be reappointed or their successors shall be appointed
in accordance with the preceding sentence, to take office as members of the
Equity Board upon the expiration of such terms; (v) an appointed member of the
Equity Board may be removed at any time by the party or parties which appointed
him or her; and (vi) upon the resignation, removal or death of an appointed
member of the Equity Board, his or her successor shall be appointed by the
party or parties which appointed him or her. Notwithstanding the provisions of
Article XIV , this subsection (a) may not be amended prior to the earlier of
January 1, 1998, or the first Restructuring.
(b) This Section 10.9 and the defined terms referred to
only in this Section 10.9 shall be deleted in their entirety on the earlier of
January 1, 1998, or the first Restructuring, and this Agreement shall be
restated to reflect such deletion.
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ARTICLE XI
CONCERNING THE LIMITED PARTNERS
Section 11.1 Participation in Control of Partnership Business.
A Limited Partner shall not participate in the control of the business
of the Partnership within the meaning of the Delaware Act.
Section 11.2 Reports.
(a) Not later than 90 days after the close of each fiscal
year, the Partnership shall mail to each Partner an annual report containing
financial statements of the Partnership for the fiscal year, including a
balance sheet and statements of operations, partners' equity and changes in
financial position, prepared in accordance with generally accepted accounting
principles and accompanied by the opinion of the Partnership Accountants, and
such other information as the General Partners may deem appropriate.
(b) Not later than 45 days after the close of each fiscal
quarter, except the last fiscal quarter of each fiscal year, the Partnership
shall mail to each Partner a quarterly report for the fiscal quarter containing
financial statements of the Partnership for the fiscal quarter prepared in
accordance with generally accepted accounting principles, and such other
information as the General Partners may deem appropriate.
(c) The Partnership may, in lieu of delivering an annual
or quarterly report, deliver to each Limited Partner a copy of the Form 10-K or
10-Q, as the case may be, filed by the Partnership pursuant to the Securities
Exchange Act.
Section 11.3 Access and Confidentiality.
(a) Each Partner has the right, subject to such
reasonable standards, including standards governing what information and
documents are to be furnished, at what time and location and at whose expense,
as may be established by the Partnership, to obtain from the Partnership from
time to time upon reasonable demand for any purpose reasonably related to the
Partner's interest as a Partner:
(i) True and full information regarding the
status of the business and financial condition of the Partnership;
(ii) Promptly after becoming available, a copy of
the Partnership's federal, state and local income tax returns for each year;
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(iii) A current list of the name and last known
business, residence or mailing address of each Partner;
(iv) A copy of this Agreement, the Certificate of
Limited Partnership and all amendments thereto, together with executed copies
of any written powers of attorney pursuant to which this Agreement, any
Certificate of Limited Partnership and all amendments thereto have been
executed;
(v) True and full information regarding the
amount of cash and a description and statement of the Net Value of any
Contribution made by each Partner and which each Partner has agreed to make in
the future, and the date on which each Partner became a Partner; and
(vi) Other information regarding the affairs of
the Partnership as is just and reasonable.
(b) The General Partners shall have the right to keep
confidential from the Limited Partners for such period of time as the General
Partners deem reasonable, any information which the General Partners reasonably
believe to be in the nature of trade secrets or other information the
disclosure of which the General Partners in good faith believe is not in the
best interest of the Partnership or could damage the Partnership or its
business or which the Partnership is required by law or by agreement with a
third party to keep confidential.
(c) Any demand under this Section 11.3 shall be in
writing and shall state the purpose of such demand.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of General Partners.
(a) If a General Partner proposes to Transfer any or all
of its GP Units to an Affiliate of such General Partner pursuant to Section
6.2(a), such Affiliate shall be admitted as a General Partner without the
approval of any other Partner.
(b) Except as provided in Sections 12.1(a), 13.1(b),
13.1(c), 17.1 or 17.2, a Person shall be admitted as a General Partner only if
such admission is proposed by the General Partners and Approved by the
Unitholders.
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(c) A Person shall not be admitted as a General Partner
unless the Partnership receives (i) a Limited Liability Opinion, a Tax Opinion
and an Assignment Opinion, (ii) a copy of this Agreement amended to reflect the
admission of such Person as a General Partner, (iii) the written agreement of
such Person to carry on the business of the Partnership, and (iv) such other
documents or instruments as may be required under this Agreement and applicable
law in order to effect the admission of such Person as a General Partner.
Section 12.2 Admission of Limited Partners.
(a) A Person other than an Underwriter which is not a
Partner and which acquires one or more Certificates by Transfer from a
Unitholder other than an Underwriter shall apply to be admitted as a Limited
Partner by executing and delivering an Admission Application to the Partnership
at the time of such Transfer. Such Person shall be an Assignee and be bound by
this Agreement as an Assignee from the close of business on the Business Day on
or next following the date on which such Person delivers a properly completed
and executed Admission Application to the Partnership, to the close of business
on the Business Day on which such Person is admitted as a Limited Partner
pursuant to Section 12.2.(e).
(b) An Assignee shall have an interest in the Partnership
equivalent to that of a Limited Partner with respect to the profits and losses
of the Partnership and the right to receive distributions of Partnership
Assets. With respect to voting rights attributable to LP Units that are held by
an Assignee, the General Partners shall be deemed to be the Limited Partner
with respect thereto and shall, in exercising the voting rights in respect of
such Units on any matter, vote such Units at the written direction of such
Assignee. If no such written direction is received, such Units will not be
voted. An Assignee shall otherwise have none of the rights of a Limited
Partner.
(c) A Person other than an Underwriter which proposes to
make a Contribution in accordance with this Agreement (a "Contributor") shall
apply to be admitted as a Limited Partner by executing and delivering an
Admission Application to the Partnership.
(d) A Person which executes and delivers an Admission
Application to the Partnership pursuant to this Section 12.2 shall be admitted
as a Limited Partner only with the consent of the General Partners, which
consent may be granted or withheld in the sole and complete discretion of the
General Partners. Such consent shall be deemed to have been given, in the case
of an Assignee, at the close of business on the seventh Business Day of the
fiscal month immediately succeeding the fiscal month in which an Admission
Application properly completed and executed by such Person is received by the
Partnership, and in the case of a Contributor, at the close of business on the
Business Day immediately preceding the day on which the Contribution is to be
made, unless the General Partners have withheld their consent prior to such
time.
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(e) A Person which delivers to the Partnership a properly
completed and executed Admission Application pursuant to this Section 12.2
shall be admitted as a Limited Partner and shall become bound by this Agreement
as a Limited Partner at the close of business on the Business Day upon which
the General Partners consent to such admission.
Section 12.3 Admission of Underwriters and Their Transferees.
If the Partnership or any Partner sells any Units pursuant to an
underwritten public offering, then each underwriter ("Underwriter") shall
execute and deliver an Admission Application to the General Partners. An
Underwriter shall be admitted as a Limited Partner without the consent of the
General Partners and shall become bound by this Agreement as a Limited Partner
upon receipt of such Admission Application and payment of the consideration for
the Units being sold in such offering, and such payment shall constitute a
request by such Underwriter that the records of the Partnership reflect such
admission. Each initial Transferee of an Underwriter shall be admitted as a
Limited Partner without the consent of the General Partners and shall become
bound by this Agreement upon payment for the Units so Transferred, and such
payment shall constitute a request by such initial Transferee that the records
of the Partnership reflect its admission and the appointment and authorization
of the General Partners as its representatives for the purpose of executing
amendments or restatements of this Agreement and any certificates required to
be filed under the Delaware Law.
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF PARTNERS
.
Section 13.1 Withdrawal or Removal of General Partners.
(a) A General Partner may withdraw from the Partnership
as a General Partner without the approval of any other Partner if it Transfers
all of its GP Units to an Affiliate of such General Partner as provided in
Section 6.2(a), and such Affiliate is admitted as a General Partner as provided
in Section 12.1.
(b) Except as provided in Section 13.1(a), a General
Partner shall not voluntarily withdraw from the Partnership as a General
Partner unless (i) the Partnership receives a Limited Liability Opinion, a Tax
Opinion and an Assignment Opinion and (ii) such withdrawal is approved by
Unitholders holding a majority of the outstanding Units, other than the Units
held by such General Partner and its Affiliates, voting as a single class. If
there is only one General Partner, the General Partner shall call and hold a
meeting of the Unitholders to consider the withdrawal of the General Partner.
Such meeting shall be held no sooner than 180 days after the date of such
notice, and any Unitholder may, by notice to the Partnership at least 120 days
prior to the date of the meeting, propose a successor General Partner. Any
proposed successor General Partner shall be a candidate for successor General
Partner at such meeting only if it is qualified to
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be a General Partner and has agreed in writing to carry on the business of the
Partnership. If the withdrawal is approved, but no successor General Partner is
Approved by the Unitholders on the first ballot of such meeting, a second
ballot shall be held as soon as practicable thereafter in order to consider the
approval of the candidate that received the most votes in the first ballot, and
if such candidate is not Approved by the Unitholders on the second ballot, the
General Partner shall be entitled to withdraw, and upon such withdrawal the
Partnership shall be dissolved and liquidated pursuant to Article XVII. If a
candidate is Approved by the Unitholders as successor General Partner, it shall
be admitted to the Partnership as the General Partner as provided in Section
12.1 immediately prior to the withdrawal of the Departing General Partner.
(c) A General Partner may be removed as a General Partner
by vote of Unitholders holding 80% or more of the outstanding Units, voting as
a single class. A General Partner may not be removed unless (i) the Partnership
receives a Limited Liability Opinion, a Tax Opinion and an Assignment Opinion
with respect to such removal, and (ii) if such General Partner is the sole
General Partner, a Person qualified to be General Partner, which has agreed in
writing to carry on the business of the Partnership, is Approved by the
Unitholders as successor General Partner. Such Person shall be admitted to the
Partnership as a General Partner as provided in Section 12.1 immediately prior
to the removal of the Departing General Partner.
Section 13.2 Interest of Departing General Partner.
(a) A Departing General Partner shall become a Limited
Partner, and its GP Units, if any, shall be converted into LP Units pursuant to
Section 4.1(b). At the time of such conversion, the Departing General Partner
shall pay to the Partnership an amount equal to any negative balance in its
Capital Account.
(b) If the Partnership is indebted to the Departing
General Partner at the effective date of its withdrawal or removal for funds
advanced, properties sold or services rendered to the Partnership by the
Departing General Partner, the Partnership shall, within 60 days after such
date, pay to the Departing General Partner the full amount of such
indebtedness; provided, however, that if the Departing General Partner has
withdrawn as a General Partner in violation of this Agreement, the Partnership
may offset against the amount of such indebtedness any damages resulting from
such breach.
(c) If the Departing General Partner has withdrawn or
been removed as a General Partner in accordance with Section 13.1 without
dissolution of the Partnership, the successor to the Departing General Partner,
or if there is no successor, the remaining General Partners, shall (i) assume
all outstanding obligations incurred by the Departing General Partner as a
General Partner of the Partnership, and (ii) take all such action as shall be
necessary to terminate any guarantees of the Departing General Partner and any
of its Affiliates of any obligations of the Partnership. If for whatever reason
the creditors of the Partnership will not consent to such termination of
guarantees, the successor to the Departing General Partner, or if there is no
successor, the remaining General Partners, shall indemnify the Departing
General
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Partner for any costs and expenses incurred by the Departing General Partner on
account of such guarantees pursuant to an agreement reasonably satisfactory in
form and substance to the Departing General Partner.
Section 13.3 Business to Be Carried On After Event of Withdrawal.
Upon the occurrence of an Event of Withdrawal, the business of the
Partnership shall be carried on by any remaining or newly-admitted General
Partners.
Section 13.4 No Withdrawal of Limited Partners.
A Limited Partner may not withdraw from the Partnership as a Limited
Partner; provided, however, that upon a Transfer of Units by a Limited Partner
in accordance with Section 6.3 and the admission of the Transferee as a Limited
Partner, the Transferor Limited Partner shall cease to be a Limited Partner
with respect to the Units so Transferred.
ARTICLE XIV
PARTNERSHIP MEETINGS; AMENDMENTS
Section 14.1 Partnership Meetings.
Meetings of Unitholders may be called by the General Partners or the
Liquidator or by Unitholders holding at least 10% of the outstanding Units. Any
Unitholder calling a meeting shall specify the number of Units as to which the
Unitholder is exercising the right to call a meeting, and only those Units shall
be counted for the purpose of determining whether the 10% standard of the
preceding sentence has been met. Unitholders shall call a meeting by delivering
to the Partnership one or more notices in writing stating that the signing
Unitholders wish to call a meeting and indicating the specific purposes for
which the meeting is to be called. Action at the meeting shall be limited to
those matters specified in the notice of the meeting, and no Unitholder may
propose, at such meeting, any other matter to be considered by the Unitholders.
Within 60 days after receipt of such a notice from Unitholders or within such
greater time as may be reasonably necessary for the Partnership to comply with
any statutes, rules, regulations, listing agreements or similar requirements
governing the holding of a meeting or the solicitation of proxies for use at
such a meeting, the Partnership shall send a notice of the meeting to the
Unitholders. A meeting shall be held at a reasonable time and convenient place
determined by the General Partners or the Liquidator, as the case may be, on a
date not more than 60 days after the mailing of notice of the meeting. No action
shall be taken at any meeting unless the Partnership has received a Limited
Liability Opinion, a Tax Opinion and an Assignment Opinion with respect to such
action.
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Section 14.2 Record Date.
The General Partners or the Liquidator, if any, shall set a Record Date
for the determination of the Unitholders entitled to notice of and to vote at a
meeting or adjourned meeting of Unitholders, which shall not be less than 10
days nor more than 60 days before the date of the meeting (unless such
requirement conflicts with any law, rule, regulation, guideline or requirement,
including any requirement of any National Securities Exchange on which the Units
are listed or admitted for trading or any other regulatory agency, in which case
such law, rule, regulation, guideline or requirement shall govern).
Section 14.3 Notice of Meeting.
Notice of a meeting called pursuant to Section 14.1 shall be given in
writing either personally or by mail or other means of written communication
addressed to each Unitholder of record as of the close of business on the Record
Date for the meeting at the address of such Unitholder appearing on the books of
the Transfer Agent. An affidavit or certificate of mailing of any notice in
accordance with the provisions of this Section 14.3 executed by an officer of
the Partnership, the Transfer Agent or a mailing organization shall be prima
facie evidence of the giving of notice. If any notice addressed to a Unitholder
at its address is returned to the Partnership by the United States Postal
Service marked to indicate that the United States Postal Service is unable to
deliver it, such notice and any subsequent notices shall be deemed to have been
duly given without further mailing if they are available for the Unitholder at
the principal executive office of the Partnership for a period of one year from
the date of the giving of the notice to all other Unitholders.
Section 14.4 Adjournment.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting and a new Record Date need not be fixed if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 60 days. At the adjourned
meeting, the Partnership may transact any business that might have been
transacted at the original meeting. If the adjournment is for more than 60 days
or if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with Section 14.3.
Section 14.5 Waiver of Notice; Consent to Meeting; Approval of Minutes.
The transactions of any meeting of Unitholders, however called and
noticed, and wherever held, are as valid as though effected at a meeting duly
held after regular call and notice if a quorum is present either in person or by
proxy and if, either before or after the meeting, each of the Unitholders
entitled to vote who is not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. All waivers, consents and approvals shall be filed with the
Partnership records or made a part of
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the minutes of the meeting. Attendance of a Unitholder at a meeting shall
constitute a waiver of notice of the meeting, except when the Unitholder
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened; provided, that
attendance at a meeting shall not be deemed to constitute a waiver of any right
to object to the consideration of matters required to be included in the notice
of the meeting, but not so included, if the objection is expressly made at the
meeting.
Section 14.6 Quorum and Required Vote.
(a) The presence in person or by proxy of a majority of
the Units entitled to vote shall constitute a quorum at a meeting of
Unitholders; provided, that if a separate vote by certain Unitholders or by a
class or series of Units is required by this Agreement, the presence in person
or by proxy of a majority of Units held by such Unitholders or a majority of
the outstanding Units of such class or series, present in person or by proxy
and entitled to vote, shall constitute a quorum with respect to that vote.
(b) At any meeting of the Unitholders duly called and
held in accordance with this Agreement at which a quorum is present, the
affirmative vote of the majority of Units present in person or by proxy and
entitled to vote, or such different or higher percentage as may be required by
this Agreement, shall be the act of the Unitholders; provided, that if a
separate vote of certain Unitholders or by a class or series of Units is
required by this Agreement, the affirmative vote of the majority of Units held
by such Unitholders or a majority of the outstanding Units or such class or
series, present in person or by proxy and entitled to vote, or such different
or higher percentage as may be required by this Agreement, shall be the act of
such Unitholders or such class or series
(c) The Unitholders present at a duly called or held
meeting at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Unitholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by
Unitholders holding the requisite percentage of Units specified in this
Agreement. In the absence of a quorum, any meeting of Unitholders may be
adjourned from time to time by the General Partners or upon the affirmative
vote of Unitholders holding a majority of the Units represented either in
person or by proxy and entitled to vote, but no other business may be
transacted.
Section 14.7 Conduct of Meeting.
The General Partners or the Liquidator, if any, shall have the
exclusive right and full power and authority to conduct any meeting of
Unitholders, and shall determine the Persons entitled to vote, the existence of
a quorum, the satisfaction of the requirements of this Article XIV, the conduct
of voting, the validity and effect of any proxies, and the determination of any
controversies, votes or challenges arising in connection with or during the
meeting or voting. The General Partners or the Liquidator, as the case may be,
shall designate an individual to serve as
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chairman of the meeting, and shall further designate an individual to serve as
secretary and to take the minutes of the meeting, in either case including,
without limitation, a Partner, an employee or agent of a General Partner, or an
officer of the Partnership. All minutes shall be kept with the records of the
Partnership maintained by the General Partners. The General Partners or the
Liquidator, as the case may be, may make such other regulations consistent with
applicable law and this Agreement as they may deem advisable concerning the
conduct of any meeting of the Unitholders, including regulations in regard to
the appointment of proxies, the appointment and duties of inspectors of
election, and the submission and examination of proxies and other evidence of
the right to vote.
Section 14.8 Action Without a Meeting.
(a) Any action that may be taken at a meeting of the
Unitholders may be taken without a meeting if written approvals setting forth
the action so taken are given by Unitholders holding not less than the minimum
number of Units that would be necessary to take such action at a meeting at
which all the Unitholders were present and voted. Prompt notice of the taking
of an action without a meeting shall be given to the Unitholders who have not
approved such action.
(b) If the General Partners or the Liquidator, if any,
submit an action or actions to the Partners for written approval, the General
Partners or the Liquidator, as the case may be, shall set a Record Date for the
determination of the Unitholders entitled to give or withhold written approval
of such action or actions, which shall not precede the date on which the Record
Date is determined and shall not be more than ten days after such date (unless
such requirement conflicts with any law, rule, regulation, guideline or
requirement, including any requirement of any National Securities Exchange on
which the Units are listed or admitted for trading or any other regulatory
agency, in which case such law, rule, regulation, guideline or requirement
shall govern).
(c) If any Person other than a General Partner or the
Liquidator, if any, submits an action or actions to the Partners for written
approval, the Record Date for the determination of the Unitholders entitled to
give or withhold written approval of such action or actions shall be the date
on which the first duly executed written approval setting forth the action or
actions taken or proposed to be taken is delivered to the Partnership at its
principal office by hand or by registered or certified mail, return receipt
requested (unless such requirement conflicts with any law, rule, regulation,
guideline or requirement, including any requirement of any National Securities
Exchange on which the Units are listed or admitted for trading or any other
regulatory agency, in which case such law, rule, regulation, guideline or
requirement shall govern).
(d) No written approval shall be effective unless (i)
such written approval sets forth the action or actions taken or proposed to be
taken, and is delivered to the Partnership within 90 days after the Record Date
for the determination of the Unitholders entitled to give or
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withhold written approval of such action or actions and (ii) the Partnership
receives a Limited Liability Opinion and a Tax Opinion with respect to such
action or actions.
Section 14.9 Voting and Approval Rights.
(a) Unless otherwise specified in this Agreement,
Unitholders shall have one vote for each Unit held by them.
(b) Only Unitholders who are Unitholders on the Record
Date determined pursuant to Section 14.2 shall be entitled to notice of, or to
vote at, a meeting of Unitholders. Only Unitholders who are Unitholders on the
Record Date determined pursuant to Section 14.8 shall be entitled to notice of,
or to give or withhold written approval of, any action for which written
approvals are solicited.
(c) With respect to Units that are held for a Person's
account by another Person (such as a broker, dealer, bank, trust company or
clearing corporation, or an agent of any of the foregoing), in whose name such
Units are registered, such other Person shall, in exercising any voting or
approval rights in respect of such Units on any matter, vote such Units or give
or withhold written approval with respect to such Units at the direction of the
Person on whose behalf such other Person is holding such Units, and the
Partnership shall be entitled to assume it is so acting without further
inquiry.
(d) Each Unitholder entitled to vote at a meeting of
Unitholders or to give or withhold written approval of any action may authorize
another Person to act for such Unitholder by proxy. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only so long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the Unit itself or an interest in the
Partnership generally.
Section 14.10 Amendments to Be Adopted Solely by the General Partners.
The General Partners, without the approval of any Limited
Partner, may amend any provision of this Agreement to reflect:
(i) a change in the name of the Partnership or
the location of the principal place of business of the Partnership;
(ii) the admission, substitution, withdrawal or
removal of Partners in accordance with this Agreement;
(iii) a change that the General Partners determine
is appropriate in order to qualify the Partnership as a limited partnership or
a partnership in which the Limited Partners have limited liability under the
laws of any state or to ensure that the Partnership will not be
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treated as a corporation or as an association taxable as a corporation for
federal income tax purposes;
(iv) a change that the General Partners determine:
(A) does not adversely affect the holders of any class or series of Units in
any material respect, (B) is appropriate in order to satisfy any requirement,
condition or guideline contained in any federal or state statute or any rule,
regulation, requirement, condition or guideline of any federal or state agency,
(C) is appropriate in order to facilitate the listing or trading of the Units
on or otherwise to comply with any rule, regulation, requirement, condition or
guideline of any National Securities Exchange, or (D) is necessary in order to
effect the purposes of this Agreement, or to cure or otherwise correct any
ambiguity, error or omission in any provision of this Agreement;
(v) the designations, preferences and relative
participating, optional or other special rights, powers and duties of any newly
created class or series of Units;
(vi) a change that the General Partners determine
is appropriate in connection with the creation or issuance of any class or
series of Units, other Equity Securities, or other Partnership securities; or
(vii) a change that the General Partners determine
is appropriate in connection with any action taken pursuant to Article XVI.
Section 14.11 Amendment Procedures.
(a) All amendments to this Agreement, except those
described in Section 14.10, shall be adopted as follows:
(i) Any such amendment shall be proposed by the
General Partners.
(ii) Any such amendment proposed by the General
Partners shall be effective upon its approval by Unitholders holding a majority
of the outstanding Units, voting as a single class; provided, however, that if
(A) the proposed amendment would materially and adversely affect the rights or
preferences of holders of any class or series of Units or other Partnership
Interests, it must also be approved by Unaffiliated Holders holding a majority
of the outstanding Units of such class or series, or a majority in interest of
such Partnership Interests, as the case may be; or (B) the proposed amendment
would change the percentage of Units or other Partnership Interests required to
take any action, it must also be approved by Partners holding at least the
percentage of Units or other Partnership Interests which would be changed by
the proposed amendment.
(b) The General Partners shall notify all Unitholders
upon final approval or disapproval of any amendment proposed by the General
Partners.
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ARTICLE XV
INDEMNIFICATION AND RELATED MATTERS
Section 15.1 Indemnification.
(a) The Partnership shall indemnify each Indemnitee and
hold it harmless from and against any and all losses, claims, damages,
liabilities, expenses (including legal fees and expenses), judgments, fines,
settlements and other amounts, whether joint or several (collectively
"Expenses"), arising from, based upon or incurred in connection with any and
all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, by reason of its status as
an Indemnitee (collectively "Proceedings"), if the Indemnitee acted or failed
to act in good faith and in a manner it reasonably believed to be in, or not
opposed to, the best interests of the Partnership and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful. The termination of any Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Indemnitee acted in a manner contrary to
that specified in the preceding sentence; provided, however, that neither
Thomson nor any of its Affiliates shall be entitled to indemnification
hereunder to the extent that such Person shall be entitled to indemnity under
Section 11.2(a) of the Purchase and Option Agreement dated as of July 24, 1990
by and among Thomson, Thomson McKinnon Inc., a Delaware corporation, Thomson
McKinnon Holdings Inc., a Delaware corporation, Thomson McKinnon Securities
Inc., a Delaware corporation, Thomson McKinnon Asset Management Inc., a
Delaware corporation, Thomson McKinnon Fund Distributors Inc., a Delaware
corporation, and the Partnership.
(b) Excise taxes assessed on an Indemnitee with respect
to an employee benefit plan are Expenses, and any action or failure to act by
such Indemnitee in a manner it reasonably believed to be in, or not opposed to,
the best interests of such plan shall be conclusively deemed to be in, or not
opposed to, the best interests of the Partnership.
Section 15.2 Indemnification Agreements.
The Partnership may enter into an indemnification agreement
with any Indemnitee, which agreement may include, without limitation, some or
all of the following provisions:
(i) that such Indemnitee shall be indemnified as
provided in Section 15.1;
(ii) that if such Person is successful, on the
merits or otherwise, in any Proceeding, it shall be indemnified against all
Expenses actually and reasonably incurred by it or on its behalf in connection
with any Proceeding; that if such Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more but
less than
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all claims, issues or matters in such Proceeding, the Partnership shall
indemnify such Person against all Expenses actually and reasonably incurred by
it or on its behalf in connection with each successfully resolved claim, issue
or matter; and that, for these purposes, and without limitation, the
termination of any claim, issue or matter in such Proceeding by dismissal with
or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter;
(iii) that the Partnership shall from time to time
advance all Expenses actually and reasonably incurred by or on behalf of such
Indemnitee in connection with any Proceeding, and that each such advance shall
be made within 20 days after the receipt by the Partnership of a statement
listing Expenses incurred by such Person since the date of the last statement;
(iv) that such Indemnitee shall be presumed to be
entitled to indemnification under such agreement if such Person has properly
submitted a request for indemnification and that the Partnership shall have the
burden of proof to overcome that presumption; and
(v) that if the Person empowered or selected to
determine whether such Indemnitee is entitled to indemnification shall not have
made such determination within a stated period, such Indemnitee shall be
entitled to such indemnification, with such exceptions as may be provided in
such agreement.
Section 15.3 Indemnification Procedures.
Except as otherwise provided in any agreement for indemnification
entered into pursuant to Section 15.2:
(i) If an Indemnitee receives notice of any
Proceeding with respect to which the Indemnitee may be entitled to
indemnification under Section 15.1 or such agreement, the Indemnitee shall
promptly give notice to the Partnership of such Proceeding. To the extent that
delay in giving such notice, or failure to give such notice, materially
prejudices the Partnership, the Indemnitee shall not be entitled to
indemnification.
(ii) The Partnership shall from time to time
advance all Expenses actually and reasonably incurred by or on behalf of an
Indemnitee in connection with any Proceeding, upon receipt by the Partnership
of an undertaking by or on behalf of the Indemnitee to repay such advances if
it shall be determined that the Indemnitee is not entitled to be indemnified
under Section 15.1 or such agreement.
(iii) The Partnership may assume the defense of any
Proceeding, with counsel reasonably acceptable to the Indemnitee, by giving
notice to the Indemnitee (a "Defense Notice") of the Partnership's election to
do so. In the event that the Partnership so elects to assume the defense of a
Proceeding, the Partnership will not be liable to the Indemnitee for any
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attorney's fees or expenses incurred by the Indemnitee with respect to the
defense of such Proceeding after the date of the Indemnitee's receipt of the
Defense Notice, provided that:
(A) The Indemnitee shall continue to
have the right to employ counsel in any such Proceeding at the Indemnitee's own
expense; and
(B) If (1) the employment of counsel by
the Indemnitee has previously been authorized in writing by the Partnership, or
(2) the Partnership shall have reasonably concluded, and shall have given
notice to the Indemnitee, that there may be a conflict of interest between the
Partnership and the Indemnitee in the conduct of such defense, or (3) the
Partnership shall not, in fact, have employed counsel to assume the defense of
such Proceeding, then the fees and expenses of the Indemnitee's counsel shall
be paid by the Partnership in accordance with Section 15.1 or such agreement.
(iv) The Partnership may, without the consent of
the Indemnitee, settle any claim in any Proceeding for which it is obligated to
provide indemnification under Section 15.1 or such agreement, and, as a
condition to the Indemnitee's receipt of such indemnification, the Indemnitee
shall take all such actions required to cooperate in effecting such settlement;
provided, however, that the Partnership shall not settle any claim in any
manner that would impose any penalty or limitation on the Indemnitee without
the Indemnitee's written consent (which may not be unreasonably withheld or
delayed).
Section 15.4 Insurance.
The Partnership may purchase and maintain insurance for the benefit of
one or more Indemnitees against any Expenses incurred by them, regardless of
whether the Partnership would have the power to indemnify such Indemnitees
against such Expenses under this Agreement.
Section 15.5 Source of Payment.
Any indemnification under this Article XV shall be paid solely out of
any insurance purchased pursuant to Section 15.4, or Partnership Assets; and the
General Partners, Limited Partners and Assignees, and their Affiliates, shall
have no liability for any such indemnification.
Section 15.6 Scope of Indemnification.
The indemnification provided by Section 15.1 (i) shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the Unitholders, as a matter of law or otherwise, (ii)
shall continue as to an Indemnitee which has ceased to serve in a capacity for
which the Indemnitee is entitled to indemnification, (iii) shall inure to the
benefit of the heirs, successors, assigns, administrators and personal
representatives of the Indemnitee, and (iv) shall not be deemed to create any
right to indemnification for the benefit of any other Persons.
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Section 15.7 Effect of Amendments.
No amendment of this Agreement shall limit or otherwise adversely
affect the right of any Indemnitee to indemnification for any act, or failure to
act, which occurred prior to the adoption and effectiveness of the amendment
Section 15.8 Limitations on Liability of Indemnitees.
(a) The General Partners shall not be liable to the
Partnership or any Partner or Assignee for any action or failure to act on the
part of any Delegate or any committee, subcommittee or officer appointed by
such Delegate, so long as the General Partners appointed such Delegate in good
faith and with reasonable care. Neither a Delegate nor its members, if any,
shall be liable to the Partnership or any Partner or Assignee for any action or
failure to act on the part of any committee, subcommittee or officer appointed
by such Delegate in good faith and with reasonable care.
(b) An Indemnitee shall not be liable to the Partnership
or any Partner or Assignee for breach of fiduciary duty (including breach of
any duty of care or any duty of loyalty) to the Partnership or any Partner or
Assignee unless it is proved by clear and convincing evidence that the
Indemnitee's action or failure to act was undertaken with deliberate intent to
cause injury to the Partnership or was undertaken with reckless disregard for
the best interests of the Partnership.
(c) An Indemnitee may rely upon and shall be protected
and shall incur no liability in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties. An Indemnitee shall not be liable to the Partnership, any Partner or
Assignee or any other Indemnitee for, and shall be protected in, acting or
refraining from acting, in good faith reliance on the provisions of this
Agreement, and the good faith exercise of any of the powers or rights granted
to an Indemnitee by this Agreement or pursuant to the delegation of power and
authority permitted by this Agreement, shall not constitute a breach of
fiduciary duty to the Partnership, any Partner or Assignee or any other
Indemnitee.
(d) An Indemnitee may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any opinion of any such Person as
to matters that such Indemnitee reasonably believes to be within such Person's
professional or expert competence shall be full and complete authorization and
protection in respect to any action taken or suffered or omitted in good faith
and in accordance with such opinion.
(e) In making a determination pursuant to this Agreement,
the General Partners or their Delegates shall take into account such factors as
they consider to be appropriate
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in the circumstances and shall have no duty or obligation to take any other
factors into account. If any such determination is to be made in "good faith,"
or under another express standard, the General Partners or their Delegates
shall act under such express standard and shall not be subject to any other or
different standards.
(f) If any transaction contemplated by this Agreement is
required to be "fair" to the Partnership, the fairness of such transaction
shall be determined in context with all similar or related transactions and
with all other transactions and relationships among the Persons involved and
their respective Affiliates.
ARTICLE XVI
RESTRUCTURING
Section 16.1 Power of General Partners to Effect a Restructuring.
(a) If at any time the General Partners determine that as
a result of (i) the enactment (or imminent enactment) of any legislation, (ii)
the publication of any temporary or final regulation by the United States
Department of the Treasury or any ruling by the Internal Revenue Service, (iii)
a judicial decision, or (iv) otherwise (including, without limitation, the
expiration of the period provided under Section 10211(c) of the Revenue Act of
1987, Pub. L. 100-203, as amended by Section 2004(f)(2) of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, during which certain
partnerships may be exempt from the treatment applicable to "publicly traded
partnerships" under Section 7704 of the Code, but not including the General
Partners' voluntary adoption of tax accounting methods or the use of special
allocations which are not required for federal income tax purposes), there is a
substantial risk of an Adverse Partnership Tax Event or a Tax Realization
Event, then the General Partners may take any and all actions that the General
Partners deem appropriate to accomplish one or more Restructurings. Such
actions authorized pursuant to this Section 16.1(a) include, but are not
limited to:
(i) The creation of one or more Business Entities
controlled by the General Partners, Affiliates of the General Partners or
Affiliates of the Partnership.
(ii) The transfer of all or any part of the
business of the Partnership or the Partnership Assets to one or more existing
or newly-created Business Entities in exchange for interests in such Business
Entities, which interests may be subject to substantial restrictions on
transfer.
(iii) The initiation of exchange or redemption
transactions which will permit and may automatically effect, without the
consent of any Limited Partner, the exchange of some or all outstanding LP
Units for interests in one or more existing or newly-created Business
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Entities which hold, directly or indirectly, interests in all or any part of
the business of the Partnership or the Partnership Assets.
(iv) The imposition of substantial restrictions on
the transferability of some or all of the LP Units (or interests in one or more
Successor Entities) for both limited and extended periods of time, which
restrictions may provide for damages (including forfeiture) for attempted
Transfer in violation of such restrictions.
(v) Causing the Partnership and any one or more
Successor Entities to enter into agreements governing their relationships
following the Restructuring, on terms and conditions determined by the General
Partners, including without limitation agreements providing for (A) the
issuance and sale by a Successor Entity of its securities and the contribution
of the proceeds of such issuance and sale to the Partnership, in exchange for
Units or other Partnership securities; (B) the acquisition by a Successor
Entity of businesses or assets and the contribution of such businesses or
assets to the Partnership in exchange for Units; (C) the adoption by a
Successor Entity of one or more employee benefit plans involving the issuance
of its securities, the assumption by such Successor Entity of the outstanding
employee benefit plans of the Partnership, and contribution of the proceeds of
issuance and sale of securities under any employee benefit plans of such
Successor Entity to the Partnership, in exchange for Units; and (D) the
exchange of outstanding Units for securities of a Successor Entity upon request
by the holders of such Units, the registration of such securities under federal
and state securities laws in connection with a public offering, and the
concomitant listing of such securities on a National Securities Exchange.
(b) Without limiting the power and authority of the
General Partners provided in this Section 16.1 to effect one or more
Restructurings at any future time, unless the General Partners determine that
an Adverse Tax Consequence would otherwise occur prior to January 1, 1998, no
Restructuring may be effected that will, prior to November 30, 1997, (i)
restrict the transferability of LP Units held by the Public Unitholders, (ii)
cause an Adverse Partnership Tax Event, or (iii) restrict the ability of
Nonpublic Unitholders to convert LP Units into interests in a Successor Entity.
In addition, the General Partners may not, in effecting a Restructuring,
subject any Limited Partner to liability to Partnership creditors without such
Limited Partner's consent.
(c) The power and authority of the General Partners to
effect (or not to effect) one or more Restructurings (including, without
limitation, an Incorporation Restructuring as provided in Section 16.2) was a
bargained-for and material condition of the willingness of the General Partners
and their Affiliates to enter into the Partnership Agreement. The power and
authority of the General Partners to effect (or not to effect) one or more
Restructurings includes the power and authority to effect one or more
Restructurings that result in benefits to one or more Partners or their
Affiliates (including without limitation the General Partners or their
Affiliates) that are not enjoyed by all Partners, and that may result in
disadvantageous consequences to one or more Partners that are not suffered by
all Partners or their Affiliates (including without limitation the General
Partners or their Affiliates). No Limited Partner shall have any cause of
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action against, or right to receive any compensation from, the Partnership, the
General Partners or their Affiliates or any other Limited Partner or its
Affiliates, as a result of or in respect of (i) any Restructuring or the
disparate effects thereof on any one or more Partners, (ii) the failure of the
General Partners to effect any one or more Restructurings, or (iii) the General
Partners' determination to effect a particular Restructuring or Restructurings
instead of any other Restructuring or Restructurings, unless it is proved by
clear and convincing evidence that the action or failure to act of the General
Partners involved an act or omission undertaken with deliberate intent to cause
injury to the Partnership or was undertaken with reckless disregard for the
best interests of the Partnership.
Section 16.2 Incorporation Restructuring.
Without in any manner limiting or otherwise restricting the power and
authority of the General Partners to effect one or more Restructurings as
provided in Section 16.1, the General Partners are authorized to effect a
Restructuring (the "Incorporation Restructuring") as follows:
(i) If the General Partners determine to effect
an Incorporation Restructuring, they shall deliver to the Transfer Agent
written notice (the"Incorporation Notice") of the election and shall cause the
Transfer Agent to mail a copy of the Incorporation Notice to all Unitholders at
least 30 days prior to the effective date of the proposed Incorporation
Restructuring (the"Effective Date"). The Incorporation Notice also shall be
published at least once in all editions of a daily newspaper of national
circulation printed in the English language. The Incorporation Notice shall
specify the Effective Date and the number of shares of common stock
(the"Exchange Shares") that shall be issued in exchange for each surrendered
Unit by the corporation (the"Restructuring Corporation") formed or otherwise
utilized by the General Partners to effect the Incorporation Restructuring. Any
such Incorporation Notice mailed to a Unitholder at its address as reflected in
the records of the Transfer Agent shall be conclusively presumed to have been
given regardless of whether the Unitholder receives such notice.
(ii) The General Partners shall cause the
Restructuring Corporation to be formed under the laws of the State of Delaware.
The Restructuring Corporation shall take all requisite actions and effect all
requisite filings and applications so that its common stock shall be listed on
or admitted to trading on the National Securities Exchange on which the Class A
LP Units are then listed or admitted to trading, or on another National
Securities Exchange as deemed appropriate by the General Partners.
(iii) Prior to the Effective Date, the Public
Unitholders shall surrender the Certificates for all of the Units held by them,
and any Nonpublic Unitholder may surrender the Certificates for any or all of
the Units held by it, at such office or offices of the Transfer Agent for the
Class A LP Units as such Transfer Agent may specify, or as may be required by
any National Security Exchange on which the Class A LP Units are listed or
admitted to trading.
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(iv) Prior to the Effective Date, the
Restructuring Corporation shall deposit with the Transfer Agent for the Class A
LP Units certificates evidencing sufficient Exchange Shares for issuance in
exchange for (A) all Units held by the Public Unitholders, and (B) all Units
surrendered for exchange by Nonpublic Unitholders.
(v) From and after the Effective Date, (A) all
rights of the Public Unitholders under this Agreement and the Delaware Act
shall cease and terminate, (B) all rights of the Nonpublic Unitholders under
this Agreement and the Delaware Act, to the extent of the Units surrendered by
them, shall cease and terminate, (C) all Units held by Public Unitholders and
all Units surrendered by Nonpublic Unitholders shall be deemed to have been
transferred to the Restructuring Corporation on the books and records of the
Partnership, and (D) the Restructuring Corporation shall be deemed to be the
holder of all such Units from and after the Effective Date for all purposes of
this Agreement.
(vi) As soon as practicable after the Effective
Date, the Transfer Agent for the Class A LP Units shall deliver to the
Unitholders which surrendered Certificates for Units certificates evidencing
the Exchange Shares to be issued to them in exchange for such Certificates
(vii) For a period of six years following the
Effective Date, the Transfer Agent for the Class A LP Units shall continue to
hold the Exchange Shares deposited with it pursuant to clause (iv) and not
delivered in exchange for Certificates, and shall receive, hold in trust and
invest and reinvest all dividends and distributions in respect of such Exchange
Shares. Such Transfer Agent shall, from such dividends and distributions and
the income, if any, therefrom, pay all taxes payable with respect to such
dividends, distributions and income, and all costs and expenses reasonably
incurred by such Transfer Agent with respect to the receipt, holding in trust
and investment and reinvestment of such dividends, distributions and income.
All such dividends, distributions, income, costs and expenses shall be
allocated pro rata to such Exchange Shares.
(viii) At any time during the six years following
the Effective Date, any Public Unitholder which failed to surrender one or more
Certificates pursuant to clause (iii) (each, a "Heldover Certificate"), may
surrender such Certificate to the Transfer Agent for the Class A LP Units, and
upon such surrender such Transfer Agent shall deliver to such Public Unitholder
a certificate evidencing the Exchange Shares deliverable in exchange for such
Certificate plus the amount of the dividends, distributions and income, less
the amount of the costs and expenses, allocated to such Exchange Shares
pursuant to clause (vii). At the close of business on the last day of such
six-year period, such Transfer Agent shall deliver to the Restructuring
Corporation the Exchange Shares, if any, then held by such Transfer Agent,
together with the amount of the dividends, distributions and income, less the
amount of the costs and expenses, allocated to such Exchange Shares pursuant to
clause (vii).
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(ix) In connection with and as an integral part of
the Incorporation Restructuring, the General Partners shall have the power and
authority to take such actions as they deem appropriate to cause the Units to
cease, effective as of the Effective Date, to be either (A) traded on an
established securities market or (B) readily tradable on a secondary market or
the substantial equivalent thereof, as such terms are interpreted and applied
for purposes of Section 7704(b) of the Code. The General Partners shall also
have the power and authority to take any other actions they deem appropriate to
avoid the classification of the Partnership, from and after the Effective Date,
as a publicly traded partnership for purposes of Section 7704 of the Code.
(x) The General Partners shall have the power and
authority to prescribe and effectuate such procedures and rules as they deem
appropriate to implement the Incorporation Restructuring.
Section 16.3 Consent to Actions Taken in Connection with Restructuring.
Each of the Limited Partners approves, ratifies and confirms the
execution, delivery and performance by the General Partners of all documents and
instruments, and the taking of all actions and the doing of all things, deemed
appropriate or necessary by the General Partners in connection with any
Restructuring pursuant to this Article XVI, and agrees that the General Partners
are authorized to execute, deliver and perform such documents and instruments,
and to take such actions and do such things, without the approval of the Limited
Partners.
ARTICLE XVII
DISSOLUTION AND LIQUIDATION
Section 17.1 Dissolution.
The Partnership shall be dissolved and its affairs shall be wound up
upon:
(i) the expiration of its term as provided in
Section 2.5;
(ii) the written determination by the General
Partners that projected future revenues of the Partnership will be insufficient
to enable payment of projected Partnership costs and expenses or, if
sufficient, will be such that continued operation of the Partnership is not in
the best interests of the Partners;
(iii) the written election of the General Partners
to dissolve the Partnership following the occurrence of an Adverse Partnership
Tax Event;
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(iv) the written election of the General Partners
to dissolve the Partnership, which is approved by Unitholders holding a
majority of the outstanding Units held by Persons other than the General
Partners and their Affiliates, voting as a single class;
(v) the sale of all or substantially all of the
Partnership Assets, other than in connection with a Restructuring;
(vi) the written consent of all of the Partners;
(vii) the occurrence of an Event of Withdrawal,
unless (A) the remaining General Partners carry on the business of the
Partnership, or (B) within 90 days after such Event of Withdrawal, not less
than a majority in interest of the remaining Partners agree in writing to
continue the business of the Partnership and to the appointment, effective as
of the date of such Event of Withdrawal, of one or more additional General
Partners if necessary or desired, and the Partnership receives a Limited
Liability Opinion, a Tax Opinion and an Assignment Opinion with respect to such
continuation: or
(viii) entry of a decree of dissolution under the
Delaware Act.
Section 17.2 Reconstitution.
Within 180 days following an Event of Withdrawal that results in the
dissolution of the Partnership, a majority in interest of the remaining Partners
may agree in writing to reconstitute and continue the business of the
Partnership by forming a Reconstituted Partnership on the same terms as are set
forth in this Agreement and to appoint one or more general partners of the
Reconstituted Partnership; provided, however, that no such agreement shall be
effective unless the Partnership has received a Limited Liability Opinion, a Tax
Opinion and an Assignment Opinion with respect to such reconstitution and
continuance. If such an agreement is duly and timely made, all of the Limited
Partners of the Partnership shall continue as limited partners of the
Reconstituted Partnership.
Section 17.3 Liquidator; Liquidation and Distribution.
(a) Upon dissolution of the Partnership, unless the
Partnership is reconstituted pursuant to Section 17.2, the remaining General
Partners, if any, or if there is no remaining General Partner, the Former
General Partner, if any, whose withdrawal as a General Partner pursuant to
Section 13.1(b) resulted in the dissolution, or if there is no such Former
General Partner, a liquidator or liquidating committee Approved by the
Unitholders, shall be the Liquidator. The Liquidator (if not a General Partner)
shall be entitled to receive such compensation for its services as may be
Approved by the Unitholders. The Liquidator shall agree not to resign at any
time without 15 days' prior written notice and (if not a General Partner or
Former General Partner) may be removed at any time, with or without cause, by
notice of removal Approved by the Unitholders. Upon resignation or removal of
the Liquidator, a
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successor Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be Approved
by the Unitholders.
(b) Upon dissolution of the Partnership and until the
filing of a Certificate of Cancellation, the Liquidator may, in the name of and
for and on behalf of the Partnership, prosecute and defend suits, whether
civil, criminal or administrative, gradually settle and close the business of
the Partnership, dispose of and convey the Partnership Assets, discharge or
make reasonable provision for all Partnership liabilities, and distribute to
the Partners any remaining Partnership Assets, all without affecting the
liability of the Limited Partners and without imposing the liability of a
general partner on the Liquidator (if not a General Partner). A reasonable time
shall be allowed for the winding up of the Partnership so as to minimize any
losses otherwise attendant upon such winding up.
(c) Upon the winding up of the Partnership, the
Partnership Assets shall be distributed in the following order of priority,
unless otherwise provided by law:
(i) to creditors of the Partnership, including
Partners and Assignees who are creditors, to the extent otherwise permitted by
law, in satisfaction of Partnership liabilities (whether by payment or the
making of reasonable provision for payment) other than liabilities for which
reasonable provision for payment has been made and liabilities for
distributions to Partners and former Partners pursuant to Section 8.1 or 8.3
with respect to fiscal quarters ending before the dissolution of the
Partnership;
(ii) to the creation of a reserve of cash or other
Partnership Assets for contingent liabilities in an amount, if any, determined
by the Liquidator;
(iii) to Partners and former Partners in
satisfaction of liabilities for distributions pursuant to Section 8.1 or 8.2
with respect to fiscal quarters ending before the dissolution of the
Partnership; and
(iv) to the Unitholders in accordance with their
respective Capital Accounts.
(d) If upon dissolution of the Partnership the Liquidator
determines that immediate liquidation of any or all of the Partnership Assets
would be impracticable or would cause undue loss to the Partners, the
Liquidator may defer for a reasonable time the liquidation of any such
Partnership Assets except those necessary to satisfy the liabilities of the
Partnership to its creditors, and may distribute to the Unitholders, in lieu of
cash, as tenants in common and in accordance with the provisions of Section
17.3(c), undivided interests in such Partnership Assets. Any such distribution
in kind shall be subject to such conditions relating to the management and
disposition of the Partnership Assets so distributed as may be determined by
the Liquidator and to any agreements governing the operation of such
Partnership Assets. The Liquidator shall determine the fair market value of any
Partnership Assets distributed in kind.
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(e) After dissolution of the Partnership, upon demand by
the Liquidator, (i) each General Partner, if any, shall contribute to the
Partnership cash in an amount equal to any negative balance in its Capital
Account, and (ii) each Former General Partner, if any, shall pay to the
Partnership cash in an amount equal to any negative balance in its Capital
Account as of the date it became a Former General Partner, less the amount of
any cash paid to the Partnership by such Former General Partner after such date
with respect to any negative balance in its Capital Account.
Section 17.4 Reports Following Termination.
Within a reasonable time following the termination of the Partnership,
the Liquidator shall deliver to each of the Partners financial statements
setting forth the assets and liabilities of the Partnership as of the date of
liquidation, the amount retained as reserves pursuant to Section 17.3(c), and
each Partner's share of the distributions made pursuant to Section 17.3(c).
ARTICLE XVIII
GENERAL PROVISIONS
Section 18.1 Addresses and Notices.
The address of each Partner for all purposes shall be the address set
forth on the books and records of the Transfer Agent (or, if there is no
Transfer Agent for a particular class or series of Units, on the books and
records of the Partnership). Any notice, demand, request or report required or
permitted to be given or made to a Partner under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
to the Partner at such address by first class mail or by other means of written
communication.
Section 18.2 Titles and Captions.
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Section 18.3 Pronouns and Plurals.
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
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Section 18.4 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking all actions as may be necessary or
appropriate to achieve the purpose of this Agreement.
Section 18.5 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 18.6 Integration.
This Agreement and the Exhibits hereto constitute the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
Section 18.7 Creditors.
Except for the provisions of Section 8.4(e) and Section 17.3(c), none
of the provisions of this Agreement shall be for the benefit of, or shall be
enforceable by, any creditor of the Partnership.
Section 18.8 Waiver.
No failure by any party hereto to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute a waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 18.9 Counterparts.
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto. Each party
shall become bound by this Agreement immediately upon affixing its signature
hereto or agreeing to become bound hereby, independently of the signature or
agreement to be bound of any other party.
Section 18.10 Applicable Law.
The parties agree that all of the terms and provisions of this
Agreement shall be construed under and governed by the substantive laws of the
State of Delaware, without regard to the principles of conflict of laws.
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Section 18.11 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the remaining provisions of this Agreement shall
be construed and enforced so as to carry out the purpose of this Agreement.
Section 18.12 Merger.
The Partnership may merge with, or consolidate into, one or more
Delaware limited partnerships or other business entities (as defined in Section
17-211(a) of the Delaware Act), if such merger or consolidation is approved by
the General Partners and Approved by the Unitholders. In accordance with Section
17-211 of the Delaware Act (including Section 17-211(g)), an agreement of merger
or consolidation approved by the General Partners and Approved by the
Unitholders, may (i) effect any amendment to this Agreement, or (ii) effect the
adoption of a new partnership agreement for the Partnership if it is the
surviving or resulting limited partnership of the merger or consolidation. Any
amendment to this Agreement or adoption of a new partnership agreement made
pursuant to the foregoing sentence shall be effective at the effective time or
date of the merger or consolidation. The provisions of this Section 18.12 shall
not be construed to limit the accomplishment of a merger or of any of the
matters referred to herein by any other means otherwise permitted by law.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
GENERAL PARTNER
PIMCO PARTNERS
By: PIMCO PARTNERS LLC,
a California limited liability company,
General Partner
By:________________________________________
Title:_____________________________________
By: PACIFIC INVESTMENT MANAGEMENT COMPANY,
a California corporation,
General Partner
By:________________________________________
Title:_____________________________________
LIMITED PARTNERS
All Limited Partners that have been, or are
hereafter, admitted as limited partners of the
Partnership, pursuant to powers of attorney or other
authorizations recited in favor of or granted to the
General Partner
By PIMCO PARTNERS, General Partner
By: PIMCO PARTNERS LLC, a California limited
liability company, General Partner
By:________________________________________
Title:_____________________________________
By: PACIFIC INVESTMENT MANAGEMENT COMPANY, a
California corporation, General Partner
By:________________________________________
Title:_____________________________________
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EXHIBIT 10.19
ASSIGNMENT OF GENERAL PARTNER INTEREST
AND AMENDMENT TO
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
PIMCO ADVISORS L.P.
This Assignment of General Partner Interest and Amendment to Amended
and Restated Agreement of Limited Partnership of PIMCO Advisors L.P., dated as
of November 30, 1997 (this "Assignment and Amendment Agreement"), is entered
into by and between PIMCO Partners, G.P., a California general partnership
("PGP"), and Oppenheimer Capital L.P., a Delaware limited partnership ("Opcap
LP").
WITNESSETH:
WHEREAS, PIMCO Advisors L.P. (the "Partnership") has been formed as a
limited partnership under the Delaware Revised Uniform Limited Partnership Act
(6 Del. C. sec. 17-101, et seq.) (the "Act") pursuant to a Certificate of
Limited Partnership of the Partnership, as filed with the office of the
Secretary of State of the State of Delaware (the "Secretary of State") on
September 3, 1987 (as amended and restated, the "Certificate"), and an Agreement
of Limited Partnership of the Partnership (as amended and restated on October
31, 1997, the "Agreement");
WHEREAS, PGP is the sole general partner of the Partnership;
WHEREAS, Opcap LP is an "Affiliate" of PGP, as defined in the
Agreement;
WHEREAS, in contemplation of the merger contemplated by that certain
Agreement and Plan of Merger, dated November 4, 1997, as amended, PGP desires to
transfer one unit of general partner interest in the Partnership to Opcap LP
(the "General Partner Interest") and admit Opcap LP as an additional general
partner of the Partnership;
<PAGE> 2
WHEREAS, Opcap LP desires to be admitted to the Partnership as an
additional general partner of the Partnership; and
WHEREAS, PGP and Opcap LP desire to accomplish the foregoing in
accordance with the Agreement which Sections 6.2 and 12.1(a) and (c) therein
expressly permit the consummation of the foregoing without any further act, vote
or approval of any limited partner of the Partnership.
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Assignment. Notwithstanding any provision in the Agreement to the
contrary, for $31.56 received, the receipt and sufficiency of which are hereby
acknowledged, upon the execution and delivery of this Assignment and Amendment
Agreement by the parties hereto as of the date hereof, PGP does hereby assign,
transfer and convey the General Partner Interest to Opcap LP. PGP has obtained a
Limited Liability Opinion, a Tax Opinion and an Assignment Opinion prior to the
assignment and transfer described in this Section 1.
2. Admission. Notwithstanding any provision in the Agreement to the
contrary, Opcap LP is hereby admitted to the Partnership as a general partner of
the Partnership. The admission shall be effective at the time provided in the
Amended and Restated Certificate of Limited Partnership of the Partnership filed
in the office of the Secretary of State which reflects the fact that Opcap LP is
a general partner of the Partnership, and shall occur, and for all purposes
shall be deemed to have occurred, simultaneously with the assignment of the
General Partner Interest to Opcap LP.
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3. Continuation. Opcap LP, together with PGP, does hereby agree to
carry on the business of the Partnership without dissolution and to be bound by
the Agreement.
4. Books and Records. PGP and Opcap LP shall take all actions necessary
under the Act and the Agreement, to evidence the transfer of the General Partner
Interest and the admission of Opcap LP to the Partnership as a general partner
of the Partnership.
5. Future Cooperation. Each of the parties hereto agrees to cooperate
at all times from and after the date hereof with respect to all of the matters
described herein, and to execute such further assignments, releases,
assumptions, amendments of the Agreement, notifications and other documents as
may be reasonably requested for the purpose of giving effect to, or evidencing
or giving notice of, the transaction contemplated by this Assignment and
Amendment.
6. Binding Effect. This Assignment and Amendment Agreement shall be
binding upon, and shall enure to the benefit of, the parties hereto and their
respective successors and assigns.
7. Execution in Counterparts. This Assignment and Amendment Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
8. Agreement in Effect. Except as hereby amended, the Agreement shall
remain in full force and effect.
9. Governing Law. This Assignment and Amendment Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
Delaware, all rights and remedies being governed by such laws, without regard to
its conflict of laws rules.
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<PAGE> 4
IN WITNESS WHEREOF, the undersigned has caused this Assignment and
Amendment Agreement to be duly executed as of the day and year first above
written.
PIMCO PARTNERS, G.P.
By: Pacific Investment Management
Company, a General Partner
By: /s/ SHARON A. CHEEVER
--------------------------------
Name: Sharon A. Cheever
-------------------------
Title: Vice President
-------------------------
By: PIMCO PARTNERS LLC,
a General Partner
By: /s/ ERNEST L. SCHMIDER
--------------------------------
Name: Ernest L. Schmider
-------------------------
Title: Secretary
-------------------------
OPPENHEIMER CAPITAL, L.P.
By: PIMCO PARTNERS, G.P.,
General Partner
By: Pacific Investment Management
Company, a General Partner
By: /s/ SHARON A. CHEEVER
--------------------------------
Name: Sharon A. Cheever
-------------------------
Title: Vice President
-------------------------
By: PIMCO PARTNERS LLC,
a General Partner
By: /s/ ERNEST L. SCHMIDER
--------------------------------
Name: Ernest L. Schmider
-------------------------
Title: Secretary
-------------------------
4
<PAGE> 1
EXHIBIT 10.65
AMENDED AND RESTATED
RELEASE AND INDEMNITY AGREEMENT
RELEASE AND INDEMNITY AGREEMENT (this "Agreement") dated as of November
3, 1997, by and among Oppenheimer Group, Inc., a Delaware corporation
("Opgroup"), CIBC Wood Gundy Securities Corp., a New York corporation ("CIBC"),
Oppenheimer Financial Corp., a Delaware corporation ("Opfin"), and PIMCO
Advisors L.P., a Delaware limited partnership ("PIMCO LP").
W I T N E S S E T H
WHEREAS, certain capitalized terms used herein are defined in Section 1
hereof;
WHEREAS, Opgroup, Oppenheimer Equities, Inc., a Delaware corporation and
an indirect wholly-owned subsidiary of Opgroup ("Equities"), and CIBC have
entered into a Stock Acquisition Agreement (the "CIBC Agreement"), dated as of
July 22, 1997, as amended, providing for the acquisition of all of the stock of
Oppenheimer Holdings, Inc. a Delaware corporation and an indirect wholly-owned
subsidiary of Opgroup ("Holdings"), by CIBC from Equities (the "CIBC
Acquisition");
WHEREAS, Opgroup, Opfin, PIMCO LP and PIMCO Advisors Transitory Merger
LLC ("Transitory Sub") have entered into an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of the date hereof, providing for the merger of
Transitory Sub with and into Opgroup (the "Merger");
WHEREAS, PIMCO LP, Transitory Sub, Opgroup, Opfin and each Opgroup
Subsidiary are sometimes referred to collectively herein as the "PIMCO Group",
and CIBC, Holdings, Opco and Advantage Advisers (exclusive of the business to be
transferred to Value Advisors pursuant to the terms of the Merger Agreement, and
exclusive of the Excluded Affiliates), and the Subsidiaries of Advantage
Advisers, are sometimes referred to collectively herein as the "CIBC Group".
<PAGE> 2
WHEREAS, the CIBC Group is acquiring the Brokerage Business and the
PIMCO Group is acquiring the Money Management Business, in each case from the
same sellers;
WHEREAS, it is the intention of the parties that each of the CIBC Group
and the PIMCO Group release the other from any claims of one group against the
other attributable to the operation of the Brokerage Business and the Money
Management Business, respectively, prior to the Effective Time, and to provide
for reciprocal indemnities between the PIMCO Group and the CIBC Group for claims
by third parties attributable to the business of the other prior to the
Effective Time;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
contained herein, the parties agree as follows:
1. DEFINITIONS.
(a) General. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Advantage Advisers" shall mean Advantage Advisers, Inc., a
Delaware corporation.
"Authorized Representative" shall mean the person appointed by
Opgroup prior to the Acquisition and such person's successor (if any), who shall
be appointed by the Managing Trustees.
"Brokerage Business" shall mean the businesses conducted by
Holdings, Opco and Advantage Advisers, or any of their respective Subsidiaries
(exclusive of the business to be transferred to Value Advisors pursuant to the
terms of the Merger Agreement).
"CIBC" shall have the meaning set forth in the preamble to this
Agreement.
"CIBC Acquisition" shall have the meaning set forth in the
recitals to this Agreement.
"Effective Time" shall have the meaning ascribed to such term in
the Merger Agreement.
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<PAGE> 3
"Excluded Affiliates" shall have the meaning assigned to such
term in the CIBC Agreement.
"Indemnified Party" shall mean any Person which is seeking
indemnification from an Indemnifying Party pursuant to the provisions of this
Agreement.
"Indemnifying Party" shall mean any party hereto from which an
Indemnified Party is seeking indemnification pursuant to the provisions of this
Agreement.
"Indemnity Trust" shall have the meaning assigned thereto in the
Merger Agreement.
"Losses" 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 or demands (but not
including Tax Liabilities) that are imposed upon or otherwise incurred, suffered
or sustained by the relevant party and asserted by a third party.
"Merger" shall have the meaning set forth in the recitals to
this Agreement.
"Merger Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Merger Date" shall mean the date on which the Merger occurs.
"Money Management Business" means the business conducted by
Opgroup and its Subsidiaries prior to the Effective Time, exclusive of the
Brokerage Business.
"Opco" shall mean Oppenheimer & Co., Inc., a Delaware
corporation.
"Opgroup" shall have the meaning set forth in the preamble to
this Agreement.
"Opgroup Subsidiary" shall have the meaning assigned thereto in
the Merger Agreement.
"Overpayment Rate" shall mean a rate of 10% per annum.
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<PAGE> 4
"Person" shall mean and include any individual, partnership,
limited liability company, joint venture, corporation, association, joint stock
company, trust, unincorporated organization or similar entity.
"PIMCO LP" shall have the meaning set forth in the preamble to
this Agreement.
"Present Value Benefit" shall have the meaning set forth in the
Merger Agreement.
"Seller Trust" shall have the meaning assigned thereto in the
CIBC Agreement.
"Subsidiary" shall have the meaning assigned thereto in the
Merger Agreement.
"PIMCO" shall have the meaning set forth in the preamble to this
Agreement.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, gains, ad valorem, value added, transfer,
franchise, profits, inventory, goods and services, capital stock, license,
withholding, payroll, employment, social security, unemployment, disability,
excise, severance, stamp, documentary stamp, occupation, property, mortgage
recording and estimated taxes, together with any interest, penalties, or
additions thereto imposed by any governmental taxing authority (domestic or
foreign).
"Tax Liabilities" shall mean all liabilities for Taxes.
"Value Advisors" shall mean Value Fund Advisors, LLC, a Delaware
limited liability company.
(b) Other Definitional Provisions.
(1) From and after the Effective Time, the term "PIMCO
Group" shall be deemed to include Value Advisors.
(2) Any terms used but not defined in this Agreement
shall have the meanings ascribed thereto in the Merger Agreement.
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<PAGE> 5
(3) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(4) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
2. Releases.
--------
(a) Release by PIMCO Group. Effective at the Effective Time, each
member of the PIMCO Group hereby releases and absolutely and forever discharges
each member of the CIBC Group and their respective shareholders, directors,
officers, employees, affiliates, agents and successors, of and from any and all
claims, demands, damages, debts, liabilities, accounts, loss of profits, loss
of goodwill, obligations, costs, expenses, actions and causes of action of
every kind and nature whatsoever, whether now known or unknown, suspected or
unsuspected, choate or inchoate, existing on or arising prior to the Effective
Time, which it has, owns or holds, or at any time [may ever have, against any
member of the CIBC Group with respect to the Brokerage Business (other than
Losses arising from claims against the PIMCO Group by third parties in
connection with the Brokerage Business).
(b) Release by CIBC Group. Effective at the Effective Time, each
member of the CIBC Group hereby releases and absolutely and forever discharges
each member of the PIMCO Group and their respective shareholders, directors,
officers, employees, affiliates, agents and successors, of and from any and all
claims, demands, damages, debts, liabilities, accounts, loss of profits, loss
of goodwill, obligations, costs, expenses, actions and causes of action of
every kind and nature whatsoever, whether now known or unknown, suspected or
unsuspected, choate or inchoate, existing on or arising prior to the Effective
Time, which it has, owns or holds, or at any time may ever have, against any
member of the PIMCO Group with respect to the Money Management Business (other
than Losses arising from claims against the CIBC Group by third parties in
connection with the Money Management Business).
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<PAGE> 6
(c) Certain Restrictions. Nothing in this Section 2 shall be
deemed a release by any party of any provisions of this Agreement or the
Transition Agreement.
3. INDEMNIFICATION.
(a) Indemnification by PIMCO LP. Except as limited by Section
3(e) hereof, PIMCO LP shall indemnify and hold harmless CIBC and its
shareholders, directors, officers, employees, affiliates, agents and successors
from and against all Losses, whether arising prior to the Effective Time or
thereafter, of any member of the CIBC Group arising from the operation of the
Money Management Business prior to the Effective Time.
(b) Indemnification by CIBC. Except as limited by Section 3(e)
hereof, CIBC shall indemnify and hold harmless PIMCO LP and its shareholders,
directors, officers, employees, affiliates, agents and successors from and
against all Losses, whether arising prior to the Effective Time or thereafter of
any member of the PIMCO Group arising from the operation of the Brokerage
Business prior to the Effective Time.
(c) Payment. If the Indemnifying Party is required to indemnify
the Indemnified Party pursuant to this Section 3, the Indemnified Party shall
submit its calculations of the amount required to be paid pursuant to this
Section 3 (which shall be net of the Present Value Benefit realized or
realizable by the Indemnified Party), showing such calculations in sufficient
detail so as to permit the Indemnifying Party to understand the calculations.
Subject to the following sentence, the Indemnifying Party shall pay to the
Indemnified Party, no later than 10 days after the Indemnifying Party receives
the Indemnified Party's calculations, the amount that the Indemnifying Party is
required to pay the Indemnified Party under this Section 3. If the Indemnifying
Party disagrees with such calculations, it must notify the Indemnified Party of
its disagreement in writing within 10 days after receiving such calculations.
(d) No Duplication. No payments pursuant to this Section 3 shall
be duplicative of (i) any payments under Article X of the Merger Agreement or
vice versa or (ii) any payments under Article VIII of the CIBC Agreement or vice
versa. To the extent that, without regard to this Section
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<PAGE> 7
3(d), any Person has a right to be indemnified under both this Agreement and the
Merger Agreement (or both this Agreement and the CIBC Agreement) with respect to
any Loss, such Person's indemnification right with respect to such Loss shall be
governed exclusively by this Agreement.
(e) Tax Matters Are Not Covered Hereby. Notwithstanding anything
herein to the contrary, no release or indemnification shall be provided herein
for claims with respect to Taxes and/or Tax Liabilities, which are the subject
of that certain Tax Indemnity Agreement of even date herewith.
Any payments by PIMCO LP pursuant to this Agreement shall be
considered to have been made on behalf of, and in lieu of actual contribution of
funds to, OpGroup. Any indemnification payments by CIBC pursuant to this
Agreement shall be considered to have been made to OpGroup.
4. COOPERATION; MAINTENANCE AND RETENTION OF RECORDS. From and after the
Effective Time, the members of the PIMCO Group and the CIBC Group, respectively,
shall provide any Indemnifying Party such assistance and documents as may be
reasonably requested by such party in connection with any matter that is a
subject of this Agreement, and the requesting party shall pay any reasonable
out-of-pocket expenses incurred in connection therewith.
5. PROCEEDINGS.
(a) Notice. An Indemnified Party shall promptly notify the
Indemnifying Party in writing of any communication with respect to any pending
or threatened claim in connection with a Loss (or an issue related thereto) for
which the Indemnifying Party may be responsible (an "Indemnifiable Action"). The
Indemnified Party shall include with such notification a true, correct and
complete copy of any written communication, and an accurate and complete written
summary of any oral communication, so received by it or its affiliates. The
failure of the Indemnified Party timely to forward such notification in
accordance with the immediately preceding sentence shall not relieve the
Indemnifying Party of its obligation to pay such Loss, except to the extent that
the failure timely to forward such notification materially prejudices the
ability
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<PAGE> 8
of the Indemnifying Party to contest such Loss or increases the amount of such
Loss.
(b) Defense. The Indemnifying Party shall have the right, at its
option and at its own expense, to be represented by counsel of its choice, and
to defend against, negotiate, settle or otherwise deal with (collectively,
"Defend") any Indemnifiable Action which relates to any Loss indemnified against
hereunder; provided, however, that no settlement shall be made without the prior
written consent of the Indemnified Party, which consent shall not be
unreasonably withheld, and provided further, that, if the Indemnifying Party
elects not to Defend the proceeding, the Indemnified Party may Defend same, and
the Indemnifying Party shall reimburse the Indemnified Party, quarterly, upon
presentation of invoices showing payment(s), for the Indemnified Party's actual
out-of-pocket expenses (including legal expenses) incurred in connection with
such defense. An Indemnified Party may, at its option and at its sole expense,
join in the defense of any Indemnifiable Action, even if such action is already
being defended by the Indemnifying Party.
6. PAYMENTS. Any payment required by this Agreement that is not made on
or before the date provided hereunder shall bear interest after such date at the
Overpayment Rate. All payments made pursuant to this Agreement shall be made in
immediately available funds.
7. AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written agreement signed by all of the parties hereto.
8. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without reference to choice
of law principles, including matters of construction, validity and performance.
9. NOTICES. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand
or by telecopy or on the date of
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<PAGE> 9
receipt indicated on the return receipt if mailed (registered or certified,
return receipt requested, properly addressed and postage prepaid):
If to CIBC, to:
CIBC Wood Gundy Securities Corp.
425 Lexington Avenue
New York, NY 10017
Attention: General Counsel
Facsimile: (212) 856-4283
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: James B. Carlson, Esq.
Facsimile: (212) 262-2792
If to PIMCO LP, to:
PIMCO Advisors L.P.
800 Newport Center Drive, Suite 100
Newport Beach, California 92660
Attention: General Counsel
Facsimile: (714) 717-7076
with a copy to:
Latham & Watkins
650 Town Center Drive
Costa Mesa, California 92626
Attention: David C. Flattum, Esq.
Facsimile: (714) 755-8290
If to the Indemnity Trust or the Seller Trust, to:
The Indemnity Trust or Seller Trust
Oppenheimer Tower
World Financial Center
200 Liberty Street
New York, New York 10281
Attention: Roger W. Einiger and
Robert I. Kleinberg, Esq.
Telephone: (212) 667-7300
Telecopy: (212) 945-2369
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<PAGE> 10
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Robert Todd Lang, Esq.
Facsimile: (212) 310-8007
Such names and addresses may be changed by notice given in accordance with this
Section 9.
10. ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties hereto with respect to the subject matter contained herein, and
supersedes and cancels all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter.
11. HEADINGS; REFERENCES. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
13. PARTIES IN INTEREST; ASSIGNMENT; SUCCESSOR. Neither this Agreement
nor any of the rights, interest or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
14. SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions hereof.
If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may
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<PAGE> 11
enforce such restriction to the maximum extent permitted by law, and each party
hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
15. EFFECTIVE DATE. This Agreement shall become effective upon the
occurrence of the CIBC Acquisition; provided, however, that it shall terminate
and be null and void and of no force and effect with respect to the rights and
obligations of Opgroup and PIMCO LP upon any termination of the Merger
Agreement.
16. OTHER AGREEMENTS NOT AFFECTED HEREBY. Nothing contained in this
Agreement shall be deemed to enlarge, diminish, or otherwise modify, in any way,
the rights and obligations of the parties under the Merger Agreement or the CIBC
Agreement.
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<PAGE> 12
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all as
of the day and year first written above.
OPPENHEIMER GROUP, INC.
By: [SIG]
----------------------------------------
Name:
Title:
CIBC WOOD GUNDY SECURITIES CORP.
By: [SIG]
----------------------------------------
Name:
Title:
PIMCO ADVISORS L.P.
By: [SIG]
---------------------------------------
Name:
Title:
12
<PAGE> 1
EXHIBIT 10.66
AMENDED AND RESTATED TAX INDEMNITY AGREEMENT
AMENDED AND RESTATED TAX INDEMNITY AGREEMENT (the "Agreement") dated
as of November 3, 1997 by and among Oppenheimer Group, Inc., a Delaware
corporation ("Opgroup"), CIBC Wood Gundy Securities Corp., a New York
corporation ("CIBC"), Thomson Advisory Group Inc., a Delaware corporation
("TAG") and PIMCO Advisors L.P., a Delaware limited partnership ("PIMCO LP").
WITNESSETH
WHEREAS, Opgroup, Oppenheimer Equities, Inc., a Delaware corporation
and an indirect wholly-owned subsidiary of Opgroup ("Equities"), and CIBC have
entered into a Stock Acquisition Agreement, dated as of July 22, 1997, as
amended by Amendment No. 1 to the Stock Acquisition Agreement, dated as of
November 3, 1997 (the "Acquisition Agreement"), providing for the acquisition of
all of the stock of Oppenheimer Holdings Corp., a Delaware corporation and an
indirect wholly-owned subsidiary of Opgroup ("Holdings"), by CIBC from Equities
(the "Acquisition");
WHEREAS, Opgroup, Oppenheimer Financial Corp., a Delaware
corporation and a wholly-owned subsidiary of Opgroup ("Opfin"), PIMCO LP and
PIMCO Advisors Transitory Merger LLC, a Delaware limited liability company and a
wholly-owned subsidiary of PIMCO LP ("PATM"), have entered into an Agreement and
Plan of Merger, dated as of November 4, 1997 (the "Merger Agreement"), providing
for the merger of PATM with and into Opgroup (the "Merger");
WHEREAS, it is contemplated that the Merger will occur at least one
day after the consummation of the Acquisition;
WHEREAS, the parties hereto entered into a Tax Indemnity Agreement
dated as of July 22, 1997 (the "Original Agreement") to provide for the payment
of tax liabilities and entitlement to refunds thereof, allocate responsibility
for, and cooperation in, the filing of tax returns and provide for certain other
matters relating to Taxes (as defined herein) of Opgroup and its subsidiaries;
and
WHEREAS, the parties hereto wish to amend and restate the Original
Agreement to reflect the Acquisition Agreement and the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings contained herein, the parties agree as follows:
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<PAGE> 2
1. DEFINITIONS.
(a) General. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Acquisition" shall have the meaning set forth in the recitals to
this Agreement.
Acquisition Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Acquisition Date" shall mean the date on which the Acquisition
occurs.
"Authorized Representative" shall mean the person or persons
appointed by Opgroup prior to the Merger to so serve hereunder and any
successor(s) who shall be appointed by the Managing Trustees.
"CIBC" shall have the meaning set forth in the preamble to this
Agreement and shall include any successor thereto.
"CIBC Post-acquisition Group" shall mean the affiliated group of
corporations, within the meaning of Section 1504(a) of the Code, which includes
CIBC from and after the Acquisition Date, and any member of such group, and
shall include the corporations (as constituted for state law purposes) which
comprised the Holdings Subgroup.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Combined Return" shall mean a consolidated, combined or unitary
income Tax Return that includes one or more members of the Opgroup Subgroup and
one or more members of the Holdings Subgroup.
"Effective Time" shall have the meaning ascribed to such term in the
Merger Agreement.
"Equities" shall have the meaning set forth in the recitals to this
Agreement.
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<PAGE> 3
"Excluded Affiliate" shall have the meaning ascribed to such term in
the Acquisition Agreement.
"Excluded Liability" shall have the meaning ascribed to such term in
the Acquisition Agreement.
"Foreign Subsidiary" shall mean, with respect to any Person, (i)
each corporation, partnership, joint venture or other legal entity, in each case
organized in a jurisdiction other than the U.S. or any subdivision thereof, of
which such Person owns, either directly or indirectly, 50% or more of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership organized in a jurisdiction other than the U.S. or any subdivision
thereof in which such Person or another Subsidiary of such Person is the general
partner or otherwise controls such partnership.
"Good Faith Estimate" shall have the meaning set forth in Section
3(e)(2).
"Governmental Authority" shall have the meaning ascribed to such
term in the Merger Agreement.
"Holdback Amount" shall have the meaning ascribed to such term in
the Acquisition Agreement.
"Holdings" shall have the meaning set forth in the recitals to this
Agreement.
"Holdings Good Faith Estimate" shall have the meaning set forth in
Section 3(e)(2).
"Holdings Tax Payment Subaccount" shall have the meaning set forth
in Section 3(e)(3)(i) hereof.
"Holdings Subgroup" shall mean each member of the Opgroup
Consolidated Group that would have been a member of an "affiliated group" within
the meaning of Section 1504(a) of the Code, of which Holdings was the common
parent, if (i) before the Acquisition Date, no corporation owned stock of
Holdings that met the requirements of Section 1504(a)(2) of the Code, and (ii)
Holdings had no direct or
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<PAGE> 4
indirect subsidiaries that were not its direct or indirect subsidiaries as of
the date of the Acquisition Agreement.
"Holdings Subgroup Tax Amount" shall have the meaning set forth in
Section 3(d)(1) hereof.
"Indemnification Amount" shall have the meaning set forth in Section
4(c) hereof.
"Indemnified Party" shall mean any Person which is seeking
indemnification from an Indemnifying Party pursuant to the provisions of this
Agreement.
"Indemnifying Party" shall mean any party hereto from which an
Indemnified Party is seeking indemnification pursuant to the provisions of this
Agreement.
"Indemnity Trust" shall have the meaning ascribed to such term in
the Merger Agreement.
"Independent Accounting Firm" shall mean a nationally recognized
independent accounting firm, jointly selected by the Managing Trustees and OGI
and/or CIBC; or, if the parties cannot agree on such accounting firm, the
accounting firm selected as follows: the Managing Trustees and OGI and/or CIBC
shall submit the name of a nationally recognized independent accounting firm
that has not provided, in the two years prior to the date the name of such firm
is submitted for selection pursuant to the terms hereof, professional
Tax-related services worth more than $100,000 to any of Opgroup, PIMCO LP, CIBC
or their respective affiliates, and the "Independent Accounting Firm" shall mean
the firm selected by lot from these two or three firms.
"Losses" 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
(including for the payment of Taxes), expenditures, proceedings, judgments,
awards or demands that are imposed upon or otherwise incurred, suffered or
sustained by the relevant party.
"Managing Trustees" shall mean the trustees of the Seller Trust and
the Indemnity Trust.
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"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Merger Agreement" shall have the meaning set forth in the recitals
to this Agreement.
"Merger Date" shall mean the date on which the Merger occurs.
"OGI" shall mean Opgroup after the Merger and shall include any
successor thereto.
"OGI Post-Merger Group" shall mean the affiliated group of
corporations, within the meaning of Section 1504(a) of the Code, of which OGI is
the common parent from and after the Effective Time, and any member of such
group, and shall include the corporations which comprised the Opgroup Subgroup.
"OGI Post-Merger Tax Amount" shall have the meaning set forth in
Section 3(b)(3) hereof.
"Opcap" shall mean Oppenheimer Capital, a Delaware partnership.
"Opcap LP" shall mean Oppenheimer Capital, L.P., a Delaware limited
partnership.
"0pfin" shall have the meaning set forth in the recitals to this
Agreement.
"Opgroup" shall have the meaning set forth in the preamble to this
Agreement.
"Opgroup Consolidated Group" shall mean the affiliated group of
corporations, within the meaning of Section 1504(a) of the Code, of which
Opgroup is the common parent, and any member of such group.
"Opgroup Good Faith Estimate" shall have the meaning set forth in
Section 3(e)(2).
"Opgroup Subgroup" shall mean Opgroup, Opfin, Equities and Value
Advisors and each other member of the Opgroup Consolidated Group that is not a
member of the Holdings Subgroup.
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"Opgroup Subgroup Tax Amount" shall have the meaning set forth in
Section 3(d)(2) hereof.
"Opgroup Tax Payment Subaccount" shall have the meaning set forth in
Section 3(e)(3)(ii) hereof.
"Overpayment Rate" shall mean the annual rate of interest specified
in Section 6621(a)(1) of the Code (or similar provision of state, local or
foreign tax law, as applicable) for overpayments of Tax.
"Person" shall mean and include any individual, partnership, joint
venture, corporation, association, joint stock company, trust, unincorporated
organization or similar entity.
"PIMCO LP" shall have the meaning set forth in the preamble to this
Agreement and shall include any successor thereto.
"Post-Acquisition Taxable Period" shall mean a taxable period that,
to the extent it relates to a member of the Holdings Subgroup, begins after the
Acquisition Date.
"Post-Merger Taxable Period" shall mean a taxable period that, to
the extent it relates to a member of the Opgroup Subgroup, begins after the
Merger Date.
"Pre-Acquisition Taxable Period" shall mean a taxable period that,
to the extent it relates to a member of the Holdings Subgroup, ends on or before
the Acquisition Date.
"Pre-Merger Taxable Period" shall mean a taxable period that, to the
extent it relates to a member of the Opgroup Subgroup, ends on or before the
Merger Date.
"Present Value Benefit" shall mean the present value (based on a
discount rate equal to the short-term applicable federal rate as determined
under Section 1274(d) of the Code at the time of determination, and assuming
that the Indemnified Party will be liable for Taxes at all relevant times at the
maximum marginal rates) of any income tax benefit; provided, however, that the
tax rates applicable to a partnership shall be deemed to be those applicable to
a Subchapter C corporation. For this purpose, an income tax benefit shall
include depreciation and amortization deductions attributable to an increase in
tax basis as well as a tax deduction (to the extent available
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for a prior or subsequent taxable year), whether or not such benefit results in
an actual receipt of a Refund.
"Proceeding" shall mean any audit or other examination, or any
judicial or administrative proceeding, relating to liability for or refunds or
adjustments with respect to Taxes.
"Refund" shall mean any reduction in liability for Taxes, including
by means of a credit, offset or otherwise against a current Tax Liability or one
that is agreed to or conceded by a taxpayer in a Proceeding or by means of a
refund of a prior Tax Liability.
"Represented Party" shall have the meaning set forth in Section 8(d)
hereof.
"Section 338(h)(10) Elections" shall have the meaning ascribed to
such term in the Acquisition Agreement.
"Section 381 Attribute" shall have the meaning set forth in Section
3(b)(3)(i) hereof.
"Seller Trust" shall have the meaning ascribed to such term in the
Acquisition Agreement.
"Straddle Period" shall mean a taxable period that, to the extent it
relates to a member of the Holdings Subgroup, includes, but does not end on, the
Acquisition Date and, to the extent it relates to a member of the Opgroup
Subgroup, includes, but does not end on, the Merger Date.
"Surviving Corporation" shall have the meaning ascribed to such term
in the Merger Agreement.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, gains, ad valorem, value added, transfer,
franchise, profits, inventory, goods and services, capital stock, license,
withholding, payroll, employment, social security, unemployment, disability,
excise, severance, stamp, documentary stamp, occupation, property, mortgage
recording and estimated taxes, together with any interest, penalties, or
additions thereto imposed by any governmental taxing authority (domestic or
foreign).
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"Tax Allocation Agreement" shall mean the Second Amended and
Restated Federal Income Tax Allocation Agreement, dated June 10, 1988, by and
among Opgroup and the corporations listed on Exhibit A thereto, as amended.
"Tax Liabilities" shall mean all liabilities for Taxes.
"Tax Payment Account" shall mean the bank account established
pursuant to Section 2.3 of the Acquisition Agreement.
"Tax Payment Deposit Amount" shall have the meaning set forth in
Section 3(e)(2).
"Tax Payment Subaccount" shall mean the Holdings Tax Payment
Subaccount, the Opgroup Tax Payment Subaccount, or both of them, as the context
requires.
"Tax Return" shall mean all reports and returns required to be filed
with respect to Taxes.
"Tentative Calculations" shall have the meaning set forth in Section
3(e)(1).
"Tower A Associates" shall have the meaning ascribed to such term in
the Acquisition Agreement.
"U.S." shall mean the United States of America.
"Value Advisors" shall mean Value Advisors LLC, a Delaware limited
liability company.
(b) Other Definitional Provisions.
(1) Any terms used but not defined in this Agreement shall
have the meanings ascribed thereto in the Merger Agreement and/or the
Acquisition Agreement.
(2) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
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(3) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
2. CERTAIN OPERATING CONVENTIONS AND PROCEDURES.
(a) Termination of Taxable Years. For U.S. federal income Tax
purposes, (i) the taxable year of each member of the Holdings Subgroup shall end
as of the close of the Acquisition Date, but (ii) the taxable year of each
member of the Opgroup Subgroup shall not end as of the close of the Merger Date.
(b) Allocation of Straddle Period Tax Liability and Procedures. The
allocation of any Tax Liability between the portion of any Straddle Period
ending on the Acquisition Date or the Merger Date, as the case may be, and the
portion of such Straddle Period after such date shall be made by means of a
closing of the books and records of the members of the Holdings Subgroup as of
the close of the Acquisition Date and/or the Opgroup Subgroup as of the close of
the Merger Date, as the case may be, in each case as if a taxable period ended
as of the close of such date; provided, however, that exemptions, allowances or
deductions that are calculated on an annual basis (including, but not limited
to, depreciation and amortization deductions) shall be allocated between the
period ending on such date and the period after such date in the proportion
which the number of days in each such period bears to the total number of days
in the Straddle Period.
(c) Allocation of Income from Flowthrough Entities.
(1) CIBC and the Authorized Representative shall take all
actions necessary to allocate items of income, gain, loss, deduction and credit
of any partnership or "flowthrough" entity, in which any member of the Holdings
Subgroup owns an equity interest immediately after the Acquisition for the
taxable period that includes the Acquisition Date, between the Holdings Subgroup
and the CIBC Post-Acquisition Group as if the taxable period of such flowthrough
entities ended as of the close of the Acquisition Date. As promptly as possible
after the end of the fiscal quarter during which the Acquisition occurs, CIBC
shall cause any such partnership or flowthrough entity to deliver to the
Authorized Representative a pro forma Schedule K-1 showing the allocable shares
of partnership items attributable to the equity interests held by any members of
the Holdings Subgroup for the portion of the taxable period ended as of the
close of the Acquisition Date. The Authorized Representative shall have the
right to review and approve such Schedules K-1 (and any amendments thereto),
which approval shall not unreasonably be withheld.
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<PAGE> 10
(2) OGI and the Authorized Representative shall take all
actions necessary to allocate items of income, gain, loss, deduction and credit
of Opcap and Opcap LP (and any other partnership or "flowthrough" entity in
which any member of the Opgroup Subgroup owns an equity interest immediately
prior to the Merger) for the taxable period that includes the Merger Date
between the Opgroup Subgroup and the OGI Post-Merger Group as if the taxable
period of such flowthrough entities ended as of the close of the Merger Date. As
promptly as possible after the end of the fiscal quarter during which the Merger
occurs, OGI shall cause both Opcap and Opcap LP (and any other such partnership
or flowthrough entity) to deliver to the Authorized Representative a pro forma
Schedule K-1 showing the allowable shares of partnership items attributable to
the equity interests held by any members of the Opgroup Subgroup for the portion
of the taxable period ended as of the close of the Merger Date. The Authorized
Representative shall have the right to review and approve such Schedules K-1
(and any amendments thereto), which approval shall not unreasonably be withheld.
(d) The Authorized Representative.
(1) Prior to the Acquisition Date, Opgroup shall appoint one or
more individuals to serve as the Authorized Representative hereunder. Each of
the parties hereto shall take all actions necessary (including, without
limitation, those set forth in Section 8(d) hereof) to provide the Authorized
Representative with the requisite authority to carry out each of its prescribed
functions hereunder.
(2) CIBC and PIMCO LP shall each permit the Authorized
Representative, if otherwise serving as an employee of it or of one of its
affiliates, to serve as the Authorized Representative hereunder and to utilize
the services of those individuals otherwise reporting to the Authorized
Representative. In addition, the Authorized Representative shall be authorized
to retain the services of such outside accountants and/or attorneys to assist in
the preparation of the requisite Tax Returns and in the handling of any Tax
Proceedings and, except or otherwise provided in Section 8 hereof, to pay
reasonable fees and other charges for such services.
3. FILING OF TAX RETURNS; PAYMENT OF TAXES.
(a) Tax Returns Required to Be Filed Prior to Acquisition Date.
Opgroup shall prepare and file or cause to be filed all Tax Returns of Opgroup,
any member of the Opgroup Consolidated Group and any Foreign Subsidiary of any
member of the Opgroup Consolidated Group required to be filed (after giving
effect to any valid extension of time in which to make such filings) prior to
the Acquisition Date
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and shall pay or cause to be paid all Taxes shown to be due and payable on such
Tax Returns.
(b) Tax Returns for Pre-Acquisition and/or Pre-Merger Taxable
Periods, Combined Returns.
(1) Subject to the joint participation requirements of Section
3(b)(3) hereof, the Authorized Representative shall prepare or cause to be
prepared, for Pre-Acquisition Taxable Periods and for Pre-Merger Taxable
Periods, (A) all required Combined Returns, (B) all other required consolidated,
combined or unitary Tax Returns that include one or more members of the Opgroup
Consolidated Group and (C) all other Tax Returns required to be filed on a
separate return basis by any member of the Opgroup Consolidated Group or any
Foreign Subsidiary thereof, in each case, which Tax Returns are not required to
be (after giving effect to any valid extensions), and are not, filed on or prior
to the Acquisition Date or the Merger Date, as the case may be. The books and
records of Opgroup and each of its Subsidiaries will be maintained, and the
federal, state and other income Tax Returns of each such corporation will be
filed, so as to properly reflect the operations of each such corporation through
the end of the Acquisition Date and/or the Merger Date.
(2) Subject to the joint participation requirements of Section
3(b)(3) hereof, the Authorized Representative shall prepare or cause to be
prepared all required Combined Returns which cover a Straddle Period. The books
and records of Opgroup and each of its Subsidiaries will be maintained, and the
federal, state and other income Tax Returns of each such corporation will be
filed, so as to properly reflect the operations of each such corporation through
the end of the relevant Straddle Period.
(3) (i) To the extent any Pre-Acquisition Taxable Period or
Pre-Merger Taxable Period is included on a Combined Return that is required to
be filed after the Acquisition Date and whether or not such Combined Return
covers a taxable period that is a Straddle Period, the Authorized Representative
shall permit each of CIBC and OGI, if it elects to do so, to jointly participate
with the Authorized Representative in the preparation of such Combined Return.
To the extent any Tax Return for a Pre-Acquisition Taxable Period or Pre-Merger
Taxable Period that is not a Combined Return is required to be filed after the
Acquisition Date (A) by Holdings and/or any member of the Holdings Subgroup, the
Authorized Representative shall permit CIBC, if it so elects to do so or (B) by
Opgroup and/or any member of the Opgroup Subgroup, the Authorized Representative
shall permit OGI, if it elects to do so, to jointly participate with the
Authorized Representative in the preparation of such
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Tax Return. Such joint participation shall be conducted in good faith and shall
include, but not be limited to, participation by CIBC and/or OGI, as the case
may be, in all material aspects of the Tax Return preparation; provided,
however, that CIBC or OGI, as the case may be, shall have primary responsibility
for that portion of any Tax Return that covers the post-Acquisition or
post-Merger portion of any Straddle Period except that, if an item reported on
the post-Merger portion of a Combined Return for a Straddle Period would have
been reported on a Tax Return of a member of the Holdings Subgroup, had such
member remained a member of the Opgroup Consolidated Group, but is instead
reported by a member of the OGI Post-Merger Group by reason of Section 381 of
the Code or similar provisions of state or local law (a "Section 381
attribute"), CIBC shall have primary responsibility for the preparation of that
portion of such Tax Return with respect to such item; and provided further,
however, that the Authorized Representative shall have responsibility for
overall coordination of such joint participation process. In each case, CIBC
and/or OGI also shall be provided with a copy of each such Tax Return at least
20 days before the due date for its filing. OGI shall also be provided
concurrently with each Combined Return a statement setting forth in reasonable
detail a calculation of the portion, if any, of the Taxes shown to be due on
such Combined Return which is attributable to any member of the OGI Post-Merger
Group after the Merger Date pursuant to Section 2(b) hereof (the "OGI
Post-Merger Tax Amount").
(ii) Each of CIBC and OGI shall have the right to
consult with the Authorized Representative regarding any calculations or
positions taken on the Tax Returns of which they were entitled to participate in
the preparation and, irrespective of whether such joint participation was
elected, to review and approve (such approval not to be unreasonably withheld)
each such Tax Return for 10 business days following its receipt thereof;
provided, however, that, except as provided in subsection (iii) below, CIBC or
OGI shall be deemed to have unreasonably withheld its approval of such Tax
Return unless, as the basis for withholding such approval, the position deals
with an issue arising solely in the post-Acquisition or post-Merger portion of
any Straddle Period included on a Combined Return (in which event, assuming the
existence of a reasonable basis (within the meaning of Section 6662 of the Code)
therefor, CIBC or OGI, as the case may be, may control the decision as to the
appropriate position with respect thereto) or CIBC or OGI demonstrates, by
providing to the Authorized Representative an opinion of counsel reasonably
acceptable to the Authorized Representative or of a "Big Six" accounting firm to
such effect, that substantial authority (within the meaning of Section 6662 of
the Code) does not exist for a position taken on such Tax Return. The failure of
CIBC or OGI to propose any changes to any such Tax Return within such 10
business day period shall be deemed to constitute CIBC's or OGI's approval
thereof.
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(iii) If, however, CIBC and/or OGI propose that the
Authorized Representative change a proposed position on a Combined Return or
another Tax Return that reflects a Tax Liability of at least $100,000, in each
case that is required to be filed after the Acquisition Date, and the Authorized
Representative cannot demonstrate, by providing to CIBC and/or OGI, as the case
may be, an opinion of counsel reasonably acceptable to CIBC and/or OGI, as the
case may be, or of a "Big Six" accounting firm to such effect, that the
Authorized Representative's proposed position is more likely than not to be
sustained if challenged by the relevant Governmental Authority, if the
Authorized Representative does not change such Tax Return to reflect such
proposed change, and if the issue does not involve a matter which otherwise is
an Excluded Liability, an amount of cash shall be retained in the Tax Payment
Account equal to the amount by which the Tax Liability with respect to all such
Tax Returns, if prepared in a manner that reflected such proposed changes on all
such Tax Returns, would have exceeded by more than $1 million, in the aggregate,
the liability reflected on such Tax Returns as finally filed by the Authorized
Representative. Such amounts shall be distributed from time to time to the
Seller Trust after the expiration of the statute of limitations for the taxable
periods with respect to which the Tax Returns giving rise to the retention of
such amounts relate.
(iv) Subject to Section 3(e) hereof, the Authorized
Representative shall (A) file or cause to be filed all Tax Returns to which this
Section 3(b) applies and (B) shall pay or cause to be paid from the Tax Payment
Account all Taxes shown on such Tax Returns to be due and payable, including the
portion of such Taxes attributable to the OGI Post-Merger Tax Amount (which
amount shall be timely deposited into the Tax Payment Account by OGI).
(c) Tax Returns for Post-Acquisition and Post-Merger Taxable
Periods.
(1) CIBC shall be responsible for (i) preparing and filing or
causing to be prepared and filed all Tax Returns required to be filed by any
member of the Holdings Subgroup or any Foreign Subsidiary thereof for any
Post-Acquisition Taxable Period and (ii) paying any Tax Liability due with
respect to such Tax Returns.
(2) OGI shall be responsible for (i) preparing and filing or
causing to be prepared and filed all Tax Returns required to be filed by any
member of the Opgroup, Subgroup or any Foreign Subsidiary thereof for any
Post-Merger Taxable Period and (ii) paying any Tax Liability due with respect to
such Tax Returns.
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(d) Non-Combined Tax Returns for Straddle Periods.
(1) The Authorized Representative shall prepare, and CIBC
shall file or cause to be filed (except to the extent provided in Section
3(d)(1)(i) below, in the form and manner so prepared by the Authorized
Representative), all Tax Returns (other than a Combined Return) of or which
include any member of the Holdings Subgroup or any Foreign Subsidiary thereof
for a Straddle Period. The Authorized Representative shall provide CIBC with
each such Tax Return at least 20 days prior to the due date for filing thereof,
together with a statement setting forth in reasonable detail a calculation of
the portion of the Taxes shown to be due on such Tax Return which is allocable
to the Holdings Subgroup through the Acquisition Date pursuant to Section 2(b)
hereof (the "Holdings Subgroup Tax Amount").
(i) CIBC shall have the right to review and approve
(which approval shall not be unreasonably withheld) each such Tax Return for 10
days following receipt thereof; provided, however, that CIBC shall be deemed to
have unreasonably withheld its approval of such Tax Return unless, as the basis
for withholding such approval, the position deals with an issue arising solely
in the post-Acquisition portion of the Straddle Period (in which event, assuming
the existence of a reasonable basis (within the meaning of Section 6662 of the
Code) therefor, CIBC may control the decision as to the appropriate position
with respect thereto) or CIBC demonstrates, by providing to the Authorized
Representative an opinion of counsel reasonably acceptable to the Authorized
Representative or of a "Big Six" accounting firm to such effect, that
substantial authority (within the meaning of Section 6662 of the Code) does not
exist for a position taken on such Tax Return. The failure of CIBC to propose
any changes to any such Tax Return within such 10-day period shall be deemed to
constitute CIBC's approval thereof. CIBC and the Authorized Representative shall
attempt in good faith mutually to resolve any disagreements regarding such Tax
Returns prior to the due date for filing thereof; provided, however, that the
failure to resolve all disagreements prior to such date shall not relieve CIBC
of its obligation to file (or cause to be filed) any such Tax Return in the form
and manner in which it was prepared by the Authorized Representative. Any
disagreements regarding such Tax Returns which are not resolved prior to the
filing thereof shall be promptly resolved pursuant to Section 7 hereof.
(ii) CIBC shall pay or cause to be paid the Tax
Liability due with respect to any Straddle Period Tax Return of a member of the
Holdings Subgroup; provided, however, that, no later than 5 business days prior
to the due date for filing any such Tax Return (taking into account extensions),
the Authorized
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Representative, subject to Section 3(e) hereof, shall cause a check to be drawn
on the Tax Payment Account to the extent of the Holdings Subgroup Tax Amount.
(2) The Authorized Representative shall prepare, and OGI shall
file or cause to be filed (except to the extent provided in Section 3(d)(2)(i)
below, in the form and manner so prepared by the Authorized Representative), all
Tax Returns (other than a Combined Return) of or which include any member of the
Opgroup Subgroup or any Foreign Subsidiary thereof for a Straddle Period. The
Authorized Representative shall provide OGI with each such Tax Return at least
20 days prior to the due date for filing thereof, together with a statement
setting forth in reasonable detail a calculation of the portion of the Taxes
shown to be due on such Tax Return which is allocable to Opgroup Subgroup
through the Merger Date pursuant to Section 2(b) hereof (the "Opgroup Subgroup
Tax Amount").
(i) OGI shall have the right to review and approve
(which approval shall not be unreasonably withheld) each such Tax Return for 10
days following receipt thereof; provided, however, that OGI shall be deemed to
have unreasonably withheld its approval of such Tax Return unless, as the basis
for withholding such approval, the position deals with an issue arising solely
in the post-Merger portion of the Straddle Period (in which event, assuming the
existence of a reasonable basis (within the meaning of Section 6662 of the Code)
therefor, OGI may control the decision as to the appropriate position with
respect thereto) or OGI demonstrates, by providing to the Authorized
Representative an opinion of counsel reasonably acceptable to the Authorized
Representative or of a "Big Six" accounting firm to such effect, that
substantial authority (within the meaning of Section 6662 of the Code) does not
exist for a position taken on such Tax Return. The failure of OGI to propose any
changes to any such Tax Return within such 10-day period shall be deemed to
constitute OGI's approval thereof. OGI and the Authorized Representative shall
attempt in good faith mutually to resolve any disagreements regarding such Tax
Returns prior to the due date for filing thereof; provided, however, that the
failure to resolve all disagreements prior to such date shall not relieve OGI of
its obligation to file (or cause to be filed) any such Tax Return in the form
and manner in which it was prepared by the Authorized Representative. Any
disagreements regarding such Tax Returns which are not resolved prior to the
filing thereof shall be promptly resolved pursuant to Section 7 hereof.
(ii) OGI shall pay or cause to be paid the Tax Liability
due with respect to any Straddle Period Tax Return of a member of the Opgroup
Subgroup; provided, however, that, no later than 5 business days prior to the
due date for filing any such Tax Return (taking into account extensions), the
Authorized
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Payment Subaccount shall be equal to Holdings Good Faith Estimate multiplied by
105%.
(ii) The "Opgroup Tax Payment Subaccount" shall be
established in favor of OGI and the Seller Trust. The amount of the Opgroup Tax
Payment Subaccount shall be equal to the Opgroup Good Faith Estimate multiplied
by 105%.
(4) Subject to Section 3(e)(6) hereof, amounts in the
respective Tax Payment Subaccounts shall be free from the claims of CIBC (in the
case of the Opgroup Tax Payment Subaccount) and OGI (in the case of the Holdings
Tax Payment Subaccount) and shall be held for the purposes set forth in this
Section 3(e) and Section 2.3 of the Acquisition Agreement.
(5) Except with respect to an Excluded Liability, CIBC shall
have the authority to make payments from the Holdings Subaccount to Governmental
Authorities on behalf of the Holdings Subgroup and OGI shall have authority to
make payments from the Opgroup Subaccount to Governmental Authorities on behalf
of the Opgroup Subgroup, after one day's notice to the Authorized
Representative, if CIBC or OGI, as the case may be, reasonably believes that
such payment is required to avoid incurring interest, penalties or other
additional Tax Liabilities with respect to any taxable period of the Opgroup
Consolidated Group that includes the Acquisition Date or any taxable period
ending before the Acquisition Date for which Tax Returns are not filed until
after the Acquisition Date.
(6) Notwithstanding anything in Section 3(e)(4) hereof or
Section 2.3(b) of the Acquisition Agreement to the contrary, after (i) filing of
all Tax Returns that the Authorized Representative believes are required to be
filed with respect to such Tax Payment Subaccount (with the good faith
concurrence of OGI or CIBC, as the case may be), (ii) payment of Taxes with
respect to which amounts in the Tax Payment Subaccount were deposited and (iii)
the payment pursuant to the proviso in Section 2.3(b) of the Acquisition
Agreement, amounts remaining in a Tax Payment Subaccount shall be transferred
(x) by CIBC, with respect to any amounts remaining in the Holdings Tax Payment
Subaccount, to the Opgroup Tax Payment Subaccount, or (y) by OGI, with respect
to any amounts remaining in the Opgroup Tax Payment Subaccount, to the Holdings
Tax Payment Subaccount; provided, however, that, if any amounts have been
released pursuant to this Section 3(e)(6) to a Tax Payment Subaccount, any
amounts remaining in the recipient Tax Payment Subaccount shall be distributed
directly to the Seller Trust after the filing of all Tax Returns that the
Authorized Representative believes are required to be filed with respect to such
Tax
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Payment Subaccount (with the good faith concurrence of OGI or CIBC, as the case
may be), the payment of Taxes with respect to which amounts were allocated to
such Tax Payment Subaccount and the making of the payment described in clause
(iii) above in this Section 3(e)(6); and provided further, however, that, after
the filing of all federal, state and local income and franchise Tax Returns and
other material Tax Returns, CIBC and OGI may jointly authorize interim partial
distributions to the Seller Trust from the two Tax Payment Subaccounts.
4. RESPONSIBILITY AND INDEMNIFICATION FOR TAXES.
(a) Responsibility of and Indemnification by CIBC. Except as
otherwise provided in Sections 3 and 4(b) hereof, CIBC shall be responsible for,
and, except as otherwise provided in Section 4(b) hereof, CIBC shall indemnify
and hold harmless OGI and its shareholders, directors, officers, employees,
affiliates, agents and successors from and against all Losses of any member of
the OGI Post-Merger Group arising from, any and all Taxes attributable to any
member of the Holdings Subgroup for any Pre-Acquisition Taxable Period,
Post-Acquisition Taxable Period, or Straddle Period.
(b) Responsibility of and Indemnification by PIMCO LP. Except as
otherwise provided in Section 3 hereof, PIMCO LP shall be responsible for, and
PIMCO LP shall indemnify and hold harmless CIBC and its shareholders, directors,
officers, employees, affiliates, agents and successors from and against all
Losses of any member of the CIBC Post-Acquisition Group arising from, any and
all Taxes (1) attributable to any member of the Opgroup Subgroup for any
Pre-Merger Taxable Period, Post-Merger Taxable Period, or Straddle Period
(including any disallowance of deductions claimed with respect to the interest
of Opfin in Tower A Associates in Pre-Merger Taxable Periods or Straddle
Periods); or (2) attributable to any member of the Holdings Subgroup by reason
of an increase in the grossed-up purchase price, as described in Treas. Reg.
Section 1.338(h)(10)-l(f)(2)(ii)(A), for the Section 338(h)(10) Elections over
that reported on the Tax Returns filed in accordance with Section 3(b)(3)
hereof, and CIBC shall have no obligations to OGI or PIMCO LP pursuant to
Section 4(a) with respect to such Losses. Any indemnification payments by PIMCO
LP under this Section 4(b) shall be considered to have been made on behalf of,
and in lieu of an actual contribution of funds to, OGI.
(c) Procedure for Payment.
(1) Subject to the provisions of Sections 3 and 8 hereof, to
the extent CIBC or OGI is responsible for a payment of Taxes under Sections 4(a)
or 4(b)
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hereof, respectively, such responsible party shall promptly pay (or cause to be
paid) such Taxes to the appropriate Governmental Authority when due.
(2) If the Indemnifying Party is required to indemnify the
Indemnified Party pursuant to this Section 4, the Indemnified Party shall submit
its calculations, in sufficient detail so as to permit the Indemnifying Party to
understand the computation thereof, of the amount required to be paid pursuant
to this Section 4, which shall be net of the Present Value Benefit realized or
realizable by the Indemnified Party (such net amount being the "Indemnification
Amount"). Subject to the following sentence, the Indemnifying Party shall pay to
the Indemnified Party, no later than 10 days after the Indemnifying Party
receives the Indemnified Party's calculations, the Indemnification Amount. If
the Indemnifying Party disagrees with such calculations, it must notify the
Indemnified Party of its disagreement in writing within 10 days of receiving
such calculations. Any dispute regarding such calculations shall be resolved in
accordance with Section 7 of this Agreement.
(d) Time Limits. Any claim under this Section 4 with respect to a
Tax Liability must be made in accordance with the notification procedures of
Section 8 hereof and no later than thirty (30) days after the expiration of the
applicable statute of limitations for assessment of such Tax Liability.
5. CARRYBACKS AND CARRYOVERS.
(a) In the event that any member of the OGI Post-Merger Group
realizes any loss, deduction, credit or other Tax attribute in any taxable
period (or portion thereof) beginning after the Merger Date, such member may, to
the extent permitted by law, utilize such loss, deduction, credit or other Tax
attribute and obtain any available Refund, including by carrying back such loss,
deduction, credit or Tax attribute to a prior Opgroup Consolidated Group taxable
year; provided, however, that (except as provided in the second proviso in this
sentence), to the extent such carryback is elective, such member of the OGI
Post-Merger Group may only carry back such item with the consent of the
Authorized Representative (which may be withheld in its sole discretion if the
taxable period to which such item may be carried back has not yet been subject
either to audit or to a prior or concurrent mandatory carryback); and provided
further, however, that, if such item is the result of a disallowance of a
Section 381 attribute that was claimed by a member of the OGI Post-Merger Group
for a Straddle Period, such item shall be carried back to prior taxable years of
the Opgroup Consolidated Group or the OGI Post-Merger Group, as the case may be,
to the extent permitted by law, unless CIBC notifies OGI in writing that such
item is not to be so
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carried back. CIBC shall cooperate with OGI in seeking from the appropriate
taxing authority any Refund that reasonably would result therefrom. Except to
the extent that such Refund is the result of a disallowance of a loss,
deduction, credit or other Tax attribute claimed by, or a reduction in an item
of income or gain reported by, a member of the Opgroup Consolidated Group for a
Pre-Acquisition Taxable Period or the pre-Acquisition portion of a Straddle
Period or is attributable to the disallowance of a Section 381 attribute (in any
such event such Refund shall be paid first to CIBC to offset any related
increase in Tax Liabilities borne by CIBC for Pre-Acquisition Taxable Period(s)
or Straddle Period(s) (to the extent not previously indemnified under the
Acquisition Agreement or this Agreement) and second to the Seller Trust), OGI
shall be entitled to any Refund (or other Tax benefit including any interest
thereon received from such taxing authority) realized by a member of the OGI
Post-Merger Group attributable to such loss, deduction, credit or other Tax
attribute.
(b) In the event that any member of the CIBC Post-Acquisition Group
realizes any loss, deduction, credit or other Tax attribute in any taxable
period (or portion thereof) beginning after the Acquisition Date, such member
may, to the extent permitted by law, utilize such loss, deduction, credit or Tax
attribute and obtain any available Refund, including by carrying back such loss,
deduction, credit or other Tax attribute to a prior Opgroup Consolidated Group
taxable year; provided, however, that, to the extent such carryback is elective,
such member of the CIBC Post-Acquisition Group may only carry back such item
with the consent of the Authorized Representative (which may be withheld in its
sole discretion if the taxable period to which such item may be carried back has
not yet been subject either to audit or to a prior or concurrent mandatory
carryback). OGI shall cooperate with CIBC in seeking from the appropriate taxing
authority any Refund that reasonably would result therefrom. Except to the
extent that such Refund is the result of a disallowance of a loss, deduction,
credit or other Tax attribute claimed by, or a reduction in an item of income or
gain reported by, a member of the Opgroup Consolidated Group for a Pre-Merger
Taxable Period or the pre-Merger portion of a Straddle Period (in either which
event such Refund shall be paid first to OGI to offset any related increase in
Tax Liabilities borne by the Opgroup Subgroup for Pre-Merger Taxable Period(s)
or Straddle Period(s) (to the extent not previously indemnified under the Merger
Agreement or this Agreement) and second to the Seller Trust), CIBC shall be
entitled to any Refund (or other Tax benefit including any interest thereon
received from such taxing authority) realized by a member of the CIBC
Post-Acquisition Group attributable to such loss, deduction, credit or other Tax
attribute.
(c) In the event that any Excluded Affiliate realizes any loss,
credit or other Tax attribute in any taxable period (or portion thereof)
beginning after the Merger
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Date, such member may carry back such loss, credit or Tax attribute to a prior
Opgroup Consolidated Group taxable year. CIBC and OGI shall cooperate with the
Authorized Representative in seeking from the appropriate taxing authority any
Refund that reasonably would result from such carryback. The Seller Trust shall
be entitled to any Refund (or other Tax benefit) realized by any Excluded
Affiliate (including any interest thereon received from such taxing authority)
attributable to such carryback.
(d) The OGI Post-Merger Group also shall be entitled to the benefit,
in Post-Merger Taxable Periods, of any net operating loss, capital loss or other
carryforward, unused investment, foreign tax or other credit arising in a
Pre-Merger Taxable Period of the Opgroup Consolidated Group (including from any
member of the Holdings Subgroup); provided, however, that members of the CIBC
Post-Acquisition Group shall have priority with respect to the benefit, in
Post-Acquisition Taxable Periods, of any carryforward which is legally available
from the Holdings Subgroup. OGI or CIBC, as the case may be (the "Recipient"),
shall apply the Present Value Benefit of such carryforward in the following
order of priority: (1) to offset any resulting increase in Tax Liabilities for
Pre-Acquisition or Pre-Merger Taxable Period(s) (to the extent not previously
indemnified under the Acquisition Agreement, the Merger Agreement or this
Agreement), (2) to the Recipient to the extent of any uncompensated Losses for
Pre-Merger or Pre-Acquisition Taxable Periods, (3) to the non-Recipient to the
extent of any uncompensated Losses for Pre-Acquisition or Pre-Merger Taxable
Periods, and (4) to the Seller Trust.
6. COOPERATION; MAINTENANCE AND RETENTION OF RECORDS. CIBC shall, and
shall cause the Members of the CIBC Post-Acquisition Group, OGI shall, and shall
cause the members of the OGI Post-Merger Group, and the Managing Trustees shall,
and shall cause the Authorized Representative, to provide a requesting party
with such assistance and documents as may be reasonably requested by such
requesting party in connection with (i) the preparation of any Tax Return, (ii)
the conduct of any Proceeding, (iii) any matter relating to Taxes of any member
of the Opgroup Consolidated Group, the Opgroup Subgroup, the Holdings Subgroup,
the CIBC Post-Acquisition Group, or the OGI Post-Merger Group and (iv) any
other matter that is a subject of this Agreement, and the requesting party shall
pay any reasonable out-of-pocket expenses incurred by the assisting party in
connection therewith. CIBC, OGI and the Managing Trustees shall retain or cause
to be retained all Tax Returns, schedules and workpapers, and all material
records or other documents relating thereto, until the expiration of the statute
of limitations (including any waivers or extensions thereof) of the taxable
years to which such Tax Returns and other documents relate or until the
expiration of any additional period that any party reasonably requests, in
20
<PAGE> 21
writing, with respect to specific material records or documents. A party
intending to destroy any material records or documents shall provide each other
party with reasonable advance notice and the opportunity to copy or take
possession of such records and documents. The parties hereto will notify each
other party in writing of any waivers or extensions of the applicable statute of
limitations that may affect the period for which the foregoing records or other
documents must be retained.
7. DISPUTES. If the parties disagree as to the amount of any payment to be
made under, or any other matter arising out of, this Agreement, the parties
shall attempt in good faith to resolve such dispute, and any agreed upon amount
shall be paid to the appropriate party. If such dispute is not resolved within
15 days, the parties shall jointly retain the Independent Accounting Firm to
resolve the dispute. The fees of the Independent Accounting Firm shall be borne
equally by the parties having the dispute, and the decision of such Independent
Accounting Firm shall be final and binding on all parties involved. Following
the decision of the Independent Accounting Firm, the parties shall each take or
cause to be taken any action that is necessary or appropriate to implement such
decision of the Independent Accounting Firm, including, without limitation, the
prompt payment of underpayments or refund of overpayments, with interest
calculated on such overpayments and underpayments at the Overpayment Rate from
the date such payment was due through the date such underpayment or overpayment
is paid or refunded.
8. PROCEEDINGS.
(a) Notification.
(1) CIBC shall, promptly upon receipt of notice thereof by any
member of the CIBC Post-Acquisition Group, notify the Managing Trustees in
writing of any communication with respect to any pending or threatened
Proceeding in connection with a Tax Liability (or an issue related thereto) of
any Member of the Opgroup Consolidated Group for a Pre-Acquisition Taxable
Period or a Straddle Period. CIBC shall include with such notification a true,
correct and complete copy of any written communication, and an accurate and
complete written summary of any oral communication, so received by a member of
the CEBC Post-Acquisition Group.
(2) OGI shall, promptly upon receipt of notice thereof by any
member of the OGI Post-Merger Group, notify the Managing Trustees in writing of
any communication with respect to any pending or threatened Proceeding in
connection with
21
<PAGE> 22
a Tax Liability (or an issue related thereto) of any Member of the Opgroup
Consolidated Group for a Pre-Merger Taxable Period or a Straddle Period. OGI
shall include with such notification a true, correct and complete copy of any
written communication, and an accurate and complete written summary of any oral
communication, so received by a member of the OGI Post-Merger Group.
(3) The Managing Trustees shall, promptly upon receipt of
notice (1) from CIBC, notify OGI in writing of any communication with respect to
any pending or threatened Proceeding in connection with a Tax Liability (or an
issue related thereto) for a member of the Opgroup Subgroup and (2) from OGI,
notify CIBC in writing of any communication with respect to any pending or
threatened proceeding in connection with a Tax Liability (or an issue related
thereto) for any member of the Holdings Subgroup. The Managing Trustees shall
include with such notification a true, correct and complete copy of any written
communication, and an accurate and complete written summary of any oral
communication, so received.
(b) Pre-Acquisition and Pre-Merger Taxable Periods and Straddle
Periods. The Authorized Representative shall have the primary responsibility to
represent the interests of the members of the Opgroup Consolidated Group, the
Holdings Subgroup, the Opgroup Subgroup and any Foreign Subsidiary thereof in
any Proceeding relating to Pre-Acquisition and/or Pre-Merger Taxable Periods
and/or Straddle Periods and to employ counsel of its choice at its expense;
provided, however, that (i) CIBC and OGI each shall be permitted to participate
(at its own expense) in any such Proceedings and all hearings relating thereto
and the Authorized Representative's counsel shall give due consideration to all
comments and suggestions received from CIBC and OGI; (ii) the Authorized
Representative shall not settle any dispute or tax issue with a taxing authority
without the consent of CIBC or OGI, as the case may be, which consent, in each
case, shall not unreasonably be withheld; and (iii) primary responsibility shall
shift to OGI at such time, if ever, that the asserted Tax Liabilities exceed the
then balance in the Indemnity Trust or to CEBC at such time, if ever, that the
asserted Tax Liabilities exceed the then balance of the Holdback Amount; and
provided further, however, that primary responsibility with respect to any item
shall shift to CEBC or OGI, as the case may be, if they are responsible to the
other under Sections 4(a) or 4(b) but are not entitled to indemnification for
Losses attributable to such item under the Acquisition Agreement or the Merger
Agreement, respectively.
(c) Post-Acquisition and Post-Merger Taxable Periods.
(1) CIBC shall have the sole right to represent the interests
of the CIBC Post-Acquisition Group (or any member thereof) in any Proceeding
relating to a
22
<PAGE> 23
Post-Acquisition Taxable Period; provided, however, that the Seller Trust shall
be permitted to participate at its own expense in any such Proceeding; and
provided further, however, that, if CIBC has asserted (or is reasonably likely
to assert) that the Seller Trust may be liable for indemnification under the
Acquisition Agreement, CIBC shall not settle or otherwise resolve any dispute or
tax issue with a taxing authority without the consent of the Seller Trust, which
consent shall not unreasonably be withheld.
(2) OGI and PIMCO LP shall have the sole right to represent the
interests of the OGI Post-Merger Group (or any member thereof) in any Proceeding
relating to a Post-Merger Taxable Period; provided, however, that the Indemnity
Trust shall be permitted to participate at its own expense in any such
Proceeding and provided further, however, that, if OGI has asserted (or is
reasonably likely to assert) that the Indemnity Trust may be liable for
indemnification under the Merger Agreement, OGI and PIMCO LP shall not settle or
otherwise resolve any dispute or tax issue with a taxing authority without the
consent of the Indemnity Trust, which consent shall not unreasonably be
withheld.
(d) Power of Attorney. Each member of the CIBC Post-Acquisition
Group and the OGI Post-Merger Group (each a "Represented Party") shall execute
and deliver to the Authorized Representative any power of attorney requested by
the Authorized Representative in connection with any Proceeding described in
Section 8(b) hereof; provided, however., that such power of attorney is required
to permit the Authorized Representative to conduct such Proceeding; and provided
further, however, that such power of attorney shall not negate any right of a
Represented Party to consent to settlements provided in Section 8(b) hereof or
to otherwise act on its own behalf pursuant to this Agreement.
9. INTEREST; METHOD OF PAYMENT. Any payment required by this Agreement
that is not made on or before the date such payment is required to be made
hereunder shall bear interest after such date at the Overpayment Rate. All
payments made pursuant to this Agreement shall be made in immediately available
funds.
10. COVENANT TO EFFECT SECTION 338(h)(10) ELECTIONS. CIBC, Opgroup, the
Authorized Representative, OGI and PIMCO LP shall take or cause to be taken all
actions required by applicable law to make valid Section 338(h)(10) Elections
with respect to Holdings, Oppenheimer & Co., Inc., Advantage Advisers, Inc., to
the extent
23
<PAGE> 24
designated by CIBC, any other subsidiary of Holdings, and, to the extent
designated by the Authorized Representative, any Excluded Affiliate.
11. TERMINATION OF PRIOR TAX SHARING AGREEMENTS. This Agreement shall take
effect on the Acquisition Date and shall replace all other agreements, whether
or not written, in respect of any Taxes between or among any members of the
Opgroup Subgroup on the one hand and the Holdings Subgroup on the other,
including the Tax Allocation Agreement; provided, however, that this Agreement
shall not supersede any agreements with respect to Taxes set forth in the
Acquisition Agreement and/or the Merger Agreement. All such replaced agreements
shall be cancelled as of the Acquisition Date to the extent they relate to any
members of the Holdings Subgroup and as of the Merger Date to the extent they
relate to any members of the Opgroup Subgroup, and any rights or obligations of
any members of the Opgroup Subgroup or Holdings Subgroup existing under such
agreements thereby shall be fully and finally settled without any payment by any
party thereto.
12. AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written agreement signed by all of the parties hereto.
13. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without reference to choice
of law principles, including matters of construction, validity and performance.
14. NOTICES. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand
or by telecopy or on the date of receipt indicated on the return receipt if
mailed (registered or certified, return receipt requested, properly addressed
and postage prepaid):
24
<PAGE> 25
If to CIBC, to:
CIBC Wood Gundy Securities Corp.
425 Lexington Avenue
New York, NY 10017
Attention: General Counsel
Facsimile: (212) 856-4283
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: James B. Carlson, Esq.
Facsimile: (212) 262-2792
If to OGI or PIMCO LP, to:
PIMCO Advisors L.P.
800 Newport Center Drive, Suite 100
Newport Beach, California 92660
Attention: General Counsel
Facsimile: (714) 717-7076
with a copy to:
Latham & Watkins
650 Town Center Drive
Costa Mesa, California 92626
Attention: David C. Flattum, Esq.
Facsimile: (714) 755-8290
If to the Managing Trustees, to:
The Indemnity Trust (or The Seller Trust)
World Financial Center
Oppenheimer Tower
New York, NY 10281
Attention: Roger W. Einiger
Robert I. Kleinberg, Esq.
Facsimile: (212) 667-5088
25
<PAGE> 26
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Robert Todd Lang, Esq.
Facsimile: (212) 310-8007
Such names and addresses may be changed by notice given in accordance with this
Section 14.
15. ENTIRE AGREEMENT. Except with respect to a party's indemnification
rights under the Acquisition Agreement or the Merger Agreement, this Agreement
contains the entire understanding of the parties hereto with respect to the
subject matter contained herein, and supersedes and cancels all prior
agreements, negotiations, correspondence, undertakings and communications of the
parties, oral or written, respecting such subject matter.
16. HEADINGS; REFERENCES. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Articles", "Sections" or "Exhibits" shall be deemed to be references
to Articles or Sections hereof or Exhibits hereto unless otherwise indicated.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
18. PARTIES IN INTEREST; ASSIGNMENT; SUCCESSOR. Neither this Agreement nor
any of the rights, interest or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended to
confer upon any other Person, other than the Seller Trust and the Indemnity
Trust, any rights or remedies under or by reason of this Agreement.
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<PAGE> 27
19. SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, each party agrees that a court of
competent jurisdiction may enforce such restriction to the maximum extent
permitted by law, and each party hereby consents and agrees that such scope may
be judicially modified accordingly in any proceeding brought to enforce such
restriction.
20. EFFECTIVE DATE. This Agreement shall become effective upon the
occurrence of the Acquisition Date; provided, however, that it shall terminate
and be null and void and of no force and effect with respect to the rights and
obligations of OGI and PIMCO LP upon any termination of the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Amended and
Restated Tax Indemnity Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the day and year first written above.
OPPENHEIMER GROUP, INC.
By: [SIG]
---------------------------------------
By:
Title:
CIBC WOOD GUNDY SECURITIES CORP.
By: [SIG]
---------------------------------------
By:
Title:
PIMCO ADVISORS L.P.
By: [SIG]
---------------------------------------
By:
Title:
27
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THOMSON ADVISORY GROUP INC.
By: [SIG]
---------------------------------------
By:
Title:
28
<PAGE> 1
EXHIBIT 10.68
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 4, 1997 (this
"Agreement"), between PIMCO Advisors Transitory Merger I L.P., a Delaware
limited partnership (the "First Partnership"), Oppenheimer Capital, a Delaware
general partnership (the "Second Partnership"), and PIMCO Advisors L.P., a
Delaware limited partnership ("PALP").
WITNESSETH:
WHEREAS, the Second Partnership desires to acquire the properties
and other assets, and to assume all of the liabilities and obligations, of the
First Partnership by means of a merger of the First Partnership with and into
the Second Partnership;
WHEREAS, Section 17-211 of the Delaware Revised Uniform Limited
Partnership Act, 6 Del.C. Section 17-101, et seq. (the "Delaware RULPA"),
authorizes the merger of a Delaware limited partnership with and into a Delaware
general partnership;
WHEREAS, the First Partnership and the Second Partnership now
desire to merge (the "Merger"), following which the Second Partnership shall be
the surviving general partnership;
WHEREAS, PALP, in its capacity as the general partner of the
First Partnership (the "First GP"), and Value Advisors LLC, a Delaware limited
liability company ("Value Advisors") and a wholly-owned subsidiary of PALP, in
its capacity as the sole limited partner of the First Partnership, have approved
this Agreement and the consummation of the Merger;
WHEREAS, both partners of Second Partnership, Value Advisors, the
managing partner of Second Partnership ("Second GP") and Oppenheimer Capital,
L.P., a Delaware limited partnership ("Opcap LP"), have approved this Agreement
and the consummation of the Merger;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
<PAGE> 2
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
(a) On such date as the Second GP shall determine, after
satisfaction or, to the extent permitted hereunder, waiver of all conditions to
the Merger, by the First GP and the Second GP, the Second Partnership, which
shall be the surviving general partnership, shall merge with the First
Partnership and shall file a certificate of merger substantially in the form of
Exhibit 1 hereto (the "Certificate of Merger") with the Secretary of State of
the State of Delaware and make all other filings or recordings required by
Delaware law in connection with the Merger. The Merger shall become effective at
such time as is specified in the Certificate of Merger (the "Effective Time").
(b) At the Effective Time, the First Partnership shall be merged
with and into the Second Partnership, whereupon the separate existence of the
First Partnership shall cease, and the Second Partnership shall be the surviving
general partnership of the Merger (the "Surviving Partnership") in accordance
with Section 17-211 of the Delaware RULPA.
SECTION 1.02. Exchange of Interests. At the Effective Time:
(a) The general partner and limited partner interests in the
First Partnership outstanding immediately prior to the Effective Time shall be
exchanged for the partnership interests in Second Partnership held by Opcap LP,
and all rights in, title to, and interest in, the partnership interests held by
Opcap LP in Second Partnership shall automatically vest in PALP and Value
Advisors in accordance with their percentage ownership interest in the First
Partnership, and shall be owned by PALP and Value Advisors, free and clear of
any lien, claim or interest of any person or entity, and the general partner and
limited partner interests in the First Partnership shall cease to be outstanding
upon such exchange; and
(b) The partnership interest in the Second Partnership held by
Opcap LP outstanding immediately prior to the Effective Time shall be exchanged
for 24,981,285 Class A GP Units in PALP, and all rights in, title to, and
interest in, such Class A GP Units in PALP shall automatically vest and be owned
by Opcap LP free and clear of any lien, claim or interest of any person or
entity.
ARTICLE II
THE SURVIVING PARTNERSHIP
SECTION 2.01. Partnership Agreement. The amended and restated
partnership agreement of the Second Partnership, as amended, in effect at the
Effective
<PAGE> 3
Time shall be the partnership agreement of the Surviving Partnership unless and
until amended in accordance with its terms and applicable law. The name of the
Surviving Partnership shall be Oppenheimer Capital. The partners of the
Surviving Partnership at the Effective Time shall be Value Advisors and PALP.
PALP shall automatically be admitted as a partner of the Surviving Partnership
at the Effective Time. Immediately after the admission of PALP as a partner of
the Surviving Partnership, Opcap LP shall cease to be a partner of the Surviving
Partnership and shall own no partnership interest in Surviving Partnership. At
the Effective Time, the business of the Second Partnership shall, to the fullest
extent permitted by law, be continued by Value Advisors, as Managing Partner,
and PALP, as the other partner of the Surviving Partnership, without dissolution
and winding up.
ARTICLE III
TRANSFER AND CONVEYANCE OF ASSETS
AND ASSUMPTION OF LIABILITIES
SECTION 3.01. Transfer, Conveyance and Assumption. At the
Effective Time, the Second Partnership shall continue in existence as the
Surviving Partnership, and without further transfer, succeed to and possess all
of the rights, privileges and powers of the First Partnership, and all of the
assets and property of whatever kind and character of the First Partnership
shall vest in the Second Partnership without further act or deed; thereafter,
the Second Partnership, as the Surviving Partnership, shall be liable for all of
the liabilities and obligations of the First Partnership, and any claim or
judgment against the First Partnership may be enforced against the Second
Partnership, as the Surviving Partnership, in accordance with Section 17-211 of
the Delaware RULPA.
SECTION 3.02. Further Assurances. If at any time the Second
Partnership shall consider or be advised that any further assignment, conveyance
or assurance is necessary or advisable to vest, perfect or confirm of record in
the Surviving Partnership the title to any property, or right of the First
Partnership, or otherwise to carry out the provisions hereof, the proper
representatives of the First Partnership as of the Effective Time shall execute
and deliver any and all proper deeds, assignments, and assurances and do all
things necessary or proper to vest, perfect or convey title to such property, or
right in the Surviving Partnership, and otherwise to carry out the provisions
hereof.
<PAGE> 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SECOND PARTNERSHIP
The Second Partnership represents and warrants to the First
Partnership that:
SECTION 4.01. Partnership Existence and Power. The Second
Partnership is a general partnership duly formed and validly existing under the
laws of the State of Delaware.
SECTION 4.02. Partnership Authorization. The execution, delivery
and performance by the Second Partnership of this Agreement and the consummation
by the Second Partnership of the transactions contemplated hereby have been duly
authorized by all necessary partnership action on its part. This Agreement
constitutes a valid, binding and enforceable agreement of the Second
Partnership.
SECTION 4.03. Governmental Authorization. The execution, delivery
and performance by the Second Partnership of this Agreement and the consummation
of the Merger by the Second Partnership require no action by or in respect of,
or filing with, any governmental body, agency, official or authority other than
the filing of the Certificate of Merger in accordance with Delaware law.
SECTION 4.04. No Violation. The execution, delivery and
performance by the Second Partnership of this Agreement and the consummation by
the Second Partnership of the transactions contemplated hereby do not and will
not (i) violate the partnership agreement of the Second Partnership, (ii)
violate any provision of any law, rule or regulation applicable to the Second
Partnership, (iii) breach, or result in a default under, any existing obligation
of the Second Partnership under any provision of any agreement, contract or
other instrument to which the Second Partnership is a party or by which it or
its property is bound or (iv) breach or otherwise violate any existing
obligation of the Second Partnership under any court or administrative order,
writ, judgment or decree that names the Second Partnership and is specifically
directed to it or its property.
<PAGE> 5
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE FIRST PARTNERSHIP
The First Partnership represents and warrants to the Second
Partnership that:
SECTION 5.01. Partnership Existence and Power. The First
Partnership is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware.
SECTION 5.02. Partnership Authorization. The execution, delivery
and performance by the First Partnership of this Agreement and the consummation
by the First Partnership of the transactions contemplated hereby have been duly
authorized by all necessary partnership action on its part. This Agreement
constitutes a valid, binding and enforceable agreement of the First Partnership.
SECTION 5.03. Governmental Authorization. The execution, delivery
and performance by the First Partnership of this Agreement and the consummation
of the Merger by the First Partnership require no action by or in respect of, or
filing with, any governmental body, agency, official or authority.
SECTION 5.04. No Violation. The execution, delivery and
performance by the First Partnership of this Agreement and the consummation by
the First Partnership of the transactions contemplated hereby do not and will
not (i) violate the partnership agreement of the First Partnership, (ii) violate
any provision of any law, rule or regulation applicable to the First
Partnership, (iii) breach, or result in a default under, any existing obligation
of the First Partnership under any provision of any agreement, contract or other
instrument to which the First Partnership is a party or by which it or its
property is bound or (iv) breach or otherwise violate any existing obligation of
the First Partnership under any court or administrative order, writ, judgment or
decree that names the First Partnership and is specifically directed to it or
its property.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to the Obligations of Each Party. The
obligations of the Second Partnership and the First Partnership to consummate
the Merger are subject to the satisfaction of the following conditions as of the
Effective Time:
<PAGE> 6
(i) no provision of any applicable law or regulation and
no judgment, injunction, order or decree shall prohibit the
consummation of the Merger; and
(ii) all actions by or in respect of or filings with any
governmental body, agency, official or authority required to
permit the consummation of the Merger shall have been obtained;
and
(iii) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 shall have expired or terminated.
ARTICLE VII
COVENANT OF PALP
PALP shall not engage in a Recapitalization (as defined in PALP's
Amended and Restated Agreement of Limited Partnership dated October 31, 1997)
prior to the Effective Time.
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time:
(i) by mutual written consent of the Second GP, on behalf
of the Second Partnership, and the First GP, on behalf of the
First Partnership; or
(ii) by either the Second GP, on behalf of the Second
Partnership, or the First GP, on behalf of the First Partnership,
if there shall be any law or regulation that makes consummation
of the Merger illegal or otherwise prohibited, or if any
judgment, injunction, order or decree enjoining the First
Partnership or the Second Partnership from consummating the
Merger is entered and such judgment, injunction, order or decree
shall become final and nonappealable.
SECTION 7.02. Effect of Termination. If this Agreement is
terminated pursuant to Section 7.01, this Agreement shall become void and of no
effect with no liability on the part of any party hereto.
<PAGE> 7
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. General Partner Authorization. Each partner of the
Surviving Partnership shall be authorized, at such time in its sole discretion
as it deems appropriate to execute, acknowledge, verify, deliver, file and
record, for and in the name of the Second Partnership and, to the extent
necessary, the Second GP, the partners of the Second Partnership, the First GP
and the limited partner of the First Partnership, any and all documents and
instruments including, without limitation, the partnership agreement of the
Surviving Partnership and the Certificate of Merger, and shall do and perform
any and all acts required by applicable law which either partner of the
Surviving Partnership deems necessary or advisable, in order to effectuate the
Merger.
SECTION 8.02. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement.
SECTION 8.03. Amendments; No Waivers. (a) Any provision of this
Agreement may, subject to applicable law, be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed by the Second GP, on behalf of the Second Partnership, and by the First
GP, on behalf of the First Partnership.
(b) No failure or delay by any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 8.04. Integration. All prior or contemporaneous
agreements, contracts, promises, representations, and statements, if any,
between the First Partnership and the Second Partnership, or their
representatives, are merged into this Agreement, and this Agreement shall
constitute the entire understanding between the First Partnership and the Second
Partnership with respect to the subject matter hereof.
SECTION 8.05. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party hereto.
SECTION 8.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
giving effect to principles of conflicts of law.
<PAGE> 8
SECTION 8.07. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received the counterpart hereof signed by the other party hereto.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized representatives as of the day and
year first above written.
PIMCO ADVISORS TRANSITORY
MERGER I L.P.
By: PIMCO Advisors L.P.,
its general partner
By: /s/ KENNETH M. POOVEY
--------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
By: Value Advisors LLC,
its Limited Partner
By: /s/ KENNETH M. POOVEY
--------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
OPPENHEIMER CAPITAL
By: Value Advisors LLC,
its Managing Partner
By: /s/ KENNETH M. POOVEY
--------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
By: Oppenheimer Capital, L.P., a Partner
By: /s/ KENNETH M. POOVEY
--------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
PIMCO ADVISORS L.P.
By: /s/ KENNETH M. POOVEY
--------------------------------
Name: Kenneth M. Poovey
Title: Executive Vice President
<PAGE> 1
EXHIBIT 10.69
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of November
4, 1997 (this "Amendment"), between PIMCO Advisors Transitory Merger I L.P., a
Delaware limited partnership (the "First Partnership"), Oppenheimer Capital, a
Delaware general partnership (the "Second Partnership"), and PIMCO Advisors
L.P., a Delaware limited partnership ("PALP").
WITNESSETH:
WHEREAS, the First Partnership, the Second Partnership and PALP are
parties to that certain Agreement and Plan of Merger dated as of November 4,
1997 (the "Merger Agreement");
WHEREAS, the parties hereto desire to amend the Merger Agreement to
increase the consideration to be issued by PALP in the merger contemplated
thereby;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Section 1.02(b) of the Merger Agreement is hereby amended to provide
that the number of Class A GP Units to be issued by PALP shall be 25,490,757.
2. Except as amended hereby, the Merger Agreement shall remain in full
force and effect.
3. This Amendment shall be construed in accordance with and governed by
the laws of the State of Delaware, without giving effect to principles of
conflicts of law.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized representatives as of the day and
year first above written.
PIMCO ADVISORS TRANSITORY
MERGER I L.P.
By: PIMCO Advisors L.P.,
its general partner
By: /s/ ROBERT M. FITZGERALD
--------------------------------
Name: Robert M. Fitzgerald
Title: Senior Vice President
By: Value Advisors LLC,
its Limited Partner
By: /s/ ROBERT M. FITZGERALD
--------------------------------
Name: Robert M. Fitzgerald
Title: Senior Vice President
OPPENHEIMER CAPITAL
By: Value Advisors LLC,
its Managing Partner
By: /s/ ROBERT M. FITZGERALD
--------------------------------
Name: Robert M. Fitzgerald
Title: Senior Vice President
By: Oppenheimer Capital, L.P., a Partner
By: /s/ ROBERT M. FITZGERALD
--------------------------------
Name: Robert M. Fitzgerald
Title: Senior Vice President
PIMCO ADVISORS L.P.
By: /s/ ROBERT M. FITZGERALD
--------------------------------
Name: Robert M. Fitzgerald
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.70
AMENDED AND RESTATED UNIT PURCHASE AGREEMENT
This Amended and Restated Unit Purchase Agreement ("Agreement") is made
effective as of November 4, 1997 by and between Oppenheimer Capital, L.P.
("Opcap LP") and PIMCO Advisors L.P. ("PIMCO Advisors") with respect to the
following:
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated
November 4, 1997 between Oppenheimer Capital, a Delaware general partnership
("Opcap"), PIMCO Advisors Transitory Merger I L.P ("PATMLP") and PIMCO Advisors,
PATMLP will merge with and into Opcap, resulting in Opcap becoming a subsidiary
of PIMCO Advisors and Opcap LP receiving Class A units of general partner
interest in PIMCO Advisors ("Class A GP Units") in respect of its interest in
Opcap; and
WHEREAS, the parties desire to enter into this Agreement to provide for
the issuance to Opcap LP of additional Class A GP Units immediately after the
Merger under certain circumstances;
WHEREAS, the general partner of Opcap LP has determined that such Class
A GP Units to be acquired by Opcap LP pursuant hereto will be acquired on terms
that are equivalent to or better than terms obtainable by Opcap LP from a
comparable unaffiliated third party;
NOW THEREFORE, the undersigned in consideration of the premises,
covenants and agreement contained herein, do hereby agree as follows:
Section 1. Definitions.
The terms defined in this Section 1 shall, for the purposes of this
Agreement, have the meanings set forth herein.
"Class A GP Units" has the meaning set forth in the recitals.
"Closing" means the closing of the Merger.
"Exchange Rate" means 1.67, adjusted as provided in Section 3.
"LP Units" means the limited partner units of Opcap LP.
"Merger" means the merger contemplated by the Merger Agreement.
"Merger Agreement" has the meaning set forth in the recitals.
"Pre-Merger Period" means the period commencing November 5, 1997 and
ending at the Effective Time of the Merger.
<PAGE> 2
"Recapitalization" by a party hereto means a distribution of
partnership units with respect to outstanding partnership units, a subdivision
or combination of outstanding partnership units or a like action.
Section 2. Firm Purchase.
Immediately following the Closing, Opcap LP shall to contribute
$16,757,338 to PIMCO Advisors, and PIMCO Advisors shall issue 547,178 Class A GP
Units to Opcap LP.
Section 3. Purchase in case of Subsequent Issuance by Opcap LP.
a. If Opcap LP issues any LP Units during the Pre-Merger
Period, other than in connection with a Recapitalization with respect to the LP
Units, Opcap LP shall, immediately following the Closing, contribute any
consideration received in connection with the issuance of such LP Units to PIMCO
Advisors, and PIMCO Advisors shall issue Class A GP Units to Opcap equal to the
number of LP Units issued during the Pre-Merger Period multiplied by the
Exchange Rate.
b. If Opcap LP effects a Recapitalization during the
Pre-Merger Period, the Exchange Rate in effect on the opening of business on the
day following the effective date for the Recapitalization shall be adjusted so
that Opcap LP shall be entitled thereafter to receive under Section 3(a) the
number of Class A GP Units that Opcap LP would have received after the
Recapitalization if the Closing Date had occurred immediately prior to the
Recapitalization.
Section 4. Successive Adjustments.
The provisions of Section 3(b) shall apply similarly to successive
Recapitalizations.
Section 5. No Recapitalzation at PIMCO Advisors.
PIMCO Advisors agrees not effect a Recapitalization during the
Pre-Merger Period.
Section 6. General.
This Agreement is a contract made under the laws of the State of
Delaware, and shall be construed in accordance with the internal laws of the
State of Delaware, without regard the principals of conflict of laws.
<PAGE> 3
Section 7. Effect.
This Agreement amends, restates and supersedes in all respects that
certain Unit Purchase Agreement between the parties hereto dated as of November
4, 1997.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first set forth above.
PIMCO ADVISORS L.P.,
a Delaware limited partnership
By: /s/ ROBERT M. FITZGERALD
------------------------------------
Robert M. Fitzgerald
Senior Vice President
OPPENHEIMER CAPITAL, L.P.,
a Delaware limited partnership
By: /s/ ROBERT M. FITZGERALD
------------------------------------
Robert M. Fitzgerald
Senior Vice President
<PAGE> 1
EXHIBIT 10.71
RESTRUCTURING CONTRIBUTION AND ISSUANCE AGREEMENT
This Restructuring Contribution and Issuance Agreement dated as of
December 31, 1997 (this "Agreement"), is entered into by and between the Public
Unitholders of PIMCO Advisors L.P., a Delaware limited partnership ("PIMCO
Advisors"), and Oppenheimer Capital, L.P., a Delaware limited partnership
("Opcap LP"). Initially capitalized terms used herein and not otherwise defined
herein are defined in the Amended and Restated Agreement of Limited Partnership
of PIMCO Advisors L.P. dated October 31, 1997 (the "PIMCO Advisors Partnership
Agreement").
RECITALS:
WHEREAS, pursuant to Section 16.1 of the PIMCO Advisors Partnership
Agreement, if the General Partners of PIMCO Advisors determine that as a result
of, among other things, the enactment of legislation, there is a substantial
risk of an Adverse Partnership Tax Event or a Tax Realization Event, the
General Partners have the authority to effect one or more Restructurings of
PIMCO Advisors, including, but not limited to, (a) the creation of one or more
Business Entities controlled by the General Partners, Affiliates of the
General Partners or Affiliates of PIMCO Advisors, (b) the transfer of all or
any part of the business or assets of PIMCO Advisors to one or more existing or
newly-created Business Entities in exchange for interests in such Business
Entities, (c) the initiation of exchange or redemption transactions which will
permit and may automatically effect, without the consent of any Limited
Partner, the exchange of some or all of the PIMCO Advisors LP Units for
interests in one or more existing or newly-created Business Entities, (d) the
imposition of substantial restrictions on the transferability of some or all of
the PIMCO Advisors LP Units, and (e) causing PIMCO Advisors and any one or
more Successor Entities to enter into agreements governing their relationships
following the restructuring, on terms and conditions determined by the General
Partners, including agreements relating to the issuance of and sale of
securities of the Successor Entity, the acquisition by a Successor Entity of
businesses or assets and the contribution of such businesses or assets to PIMCO
Advisors in exchange for PIMCO Advisors Units, the adoption by a Successor
Entity of employee benefit plans for the benefit of PIMCO Advisors employees
and the exchange of outstanding PIMCO Advisors units for securities of the
Successor Entity upon request by the holders of PIMCO Advisors Units;
WHEREAS, pursuant to Section 16.3 of the PIMCO Advisors Partnership
Agreement, the General Partners have the authority to execute, deliver and
perform all documents and instruments, and to take all actions and do such
things that the General Partners deem necessary and appropriate in connection
with any Restructuring pursuant to Article XVI of the PIMCO Advisors
Partnership Agreement, without the approval of the Public Unitholders (the
"Authorization");
WHEREAS, the General Partners of PIMCO Advisors have determined that as
a result of legislation enacted as part of the Taxpayer Relief Act of 1997,
there will be an Adverse Partnership Tax Event unless the PIMCO Advisors Class
A LP Units cease to be publicly traded
<PAGE> 2
prior to January 1, 1997, and have determined it appropriate to effect a
Restructuring of PIMCO Advisors wherein each Public Unitholder will contribute
its PIMCO Advisors LP Units to Opcap LP in exchange for an equal number of
units of limited partner interest in Opcap LP ("Opcap LP Units");
WHEREAS, the restructuring will result in each Public Unitholder
ceasing to be a Limited Partner of PIMCO Advisors and being admitted as a
limited partner of Opcap LP;
WHEREAS, pursuant to Sections 9.01 and 13.06 of the Amended and
Restated Agreement of Limited Partnership of Oppenheimer Capital, L.P. dated
March 14, 1991, as amended (the "Opcap LP Partnership Agreement"), the general
partner of Opcap LP has the authority to issue additional limited partner
interests and admit additional limited partners upon making an Assignment
Determination and a Tax Determination, as those terms are defined in the Opcap
LP Partnership Agreement, and upon obtaining an opinion of a nationally
recognized investment banking firm that such issuance is fair to the limited
partners who are not affiliates of the general partner from a financial point
of view (a "Fairness Opinion");
WHEREAS, the general partner of Opcap LP has made an Assignment
Determination and a Tax Determination, and has obtained a Fairness Opinion from
Lazard Freres & Company LLC;
WHEREAS, PIMCO Partners G.P., a California general partnership ("PGP"),
and Opcap LP, as general partners of PIMCO Advisors and pursuant to the power
and authority granted to them under the PIMCO Advisors Partnership Agreement
including, without limitation, Sections 16.1 and 16.3, desire to cause the
PIMCO Advisors LP Units held by the Public Unitholders to be contributed to
Opcap LP in exchange for an equal number of Opcap LP Units; and
WHEREAS, PGP, as the general partner of Opcap LP, desires to cause
Opcap LP to accept contributions from the Public Unitholders of their PIMCO
Advisors LP Units in exchange for issuance of an equal number of Opcap LP Units
and to admit the Public Unitholders as limited partners of Opcap LP;
NOW, THEREFORE, the undersigned, in consideration of the premises,
covenants and agreements contained herein, do hereby agree as follows:
1. Contribution. Pursuant to the Authorization, in exchange for an
equal number of Opcap LP Units, each Public Unitholder, individually, and the
Public Unitholders, collectively, upon the execution and delivery of this
Agreement by the parties hereto as of the date hereof, do hereby contribute,
transfer and convey all their PIMCO Advisors LP Units to Opcap LP. Upon
execution of this Agreement, Opcap LP does hereby assume the rights and
obligations assigned to such units in the PIMCO Advisors Partnership Agreement.
2. Issuance and Admission. In exchange for the contribution to
Opcap LP of the PIMCO Advisors LP Units, Opcap LP does hereby issue to each
Public Unitholder a number of Opcap LP Units equal to the number of PIMCO
Advisors LP Units contributed by such Public Unitholder pursuant to Section 1.
Concurrent with the contribution and issuance of the units of limited partner
interest herein, each Public Unitholder is hereby admitted as a limited partner
of Opcap LP. Upon the issuance of the Opcap LP Units as set forth herein, PGP
in its capacity as
2
<PAGE> 3
general partner of Opcap LP shall cause Opcap LP to issue one or more
certificates evidencing the number of Opcap LP Units so issued. PGP shall also
cause the registration of the issuance of Opcap LP Units issued hereunder.
3. Acceptance and Binding. Pursuant to the Authorization, each
Public Unitholder does hereby become a limited partner of Opcap LP, accepts all
of the terms and conditions of the Opcap LP Partnership Agreement and agrees to
comply with and be bound by the Opcap LP Partnership Agreement, as the same may
be amended from time to time including granting the power of attorney in
accordance with Article XVII of the Opcap LP Partnership Agreement.
4. Books and Records. The parties hereto shall take all actions
necessary under the Delaware Revised Uniform Limited Partnership Act, the PIMCO
Advisors Partnership Agreement and the Opcap LP Partnership Agreement to
evidence the contribution of the PIMCO Advisors LP Units to Opcap LP, the
issuance of the Opcap LP Units to the Public Unitholders, and the admission of
the Public Unitholders as limited partners in Opcap LP.
5. Binding Effect. This Agreement shall be binding upon, and shall
enure to the benefit of, the parties hereto and their respective successors and
assigns.
6. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
7. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware, all rights
and remedies being governed by such laws, without regard to its conflict of
laws rules.
[Signatures Follow]
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed as of the day and year first above written.
PUBLIC UNITHOLDERS
All Public Unitholders of PIMCO Advisors
L.P. pursuant to authorizations recited
in favor of or granted to the General
Partner under Section 16.3 of the
Amended and Restated Agreement of
Limited Partnership of PIMCO Advisors
L.P. dated October 31, 1997, as amended
By: PIMCO PARTNERS, G.P.,
General Partner
By: PACIFIC INVESTMENT MANAGEMENT
COMPANY, a General Partner
By:
--------------------------------
Name:
Title:
By: PIMCO PARTNERS LLC,
a General Partner
By:
--------------------------------
Name:
Title:
4
<PAGE> 1
EXHIBIT 11.1
Statement Re Computation of Per Unit Earnings
Net Income Per Unit
(In thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Net Income ................................................ $18,900 $11,595
Less 1% applicable to the General Partners ................ 189 116
------- -------
Net Income available to the Limited Partners .............. $18,711 $11,479
======= =======
Weighted average number of units outstanding .............. 15,427 15,363
======= =======
Net income per unit ....................................... $ 1.21 $ .75
======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 14, 1997
relating to the financial statements of PIMCO Advisors L.P. as of December 31,
1996 and for the year then ended, which appears in such Prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Los Angeles, California
December 9, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF PRICE WATERHOUSE LLP
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated July 22, 1997, except as
to Note 2(a) which is as of December 1, 1997, and of our report dated July 22,
1997, relating to the financial statements of Oppenheimer Capital, L.P. and the
consolidated financial statements of Oppenheimer Capital, respectively, as of
April 30, 1997 and 1996 and for each of the three years in the period ended
April 30, 1997, which appear in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
December 9, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-39585 of Oppenheimer Capital, L.P. on Form S-1 of our report dated February
2, 1996, relating to the consolidated financial statements of PIMCO Advisors
L.P. and subsidiaries as of December 31, 1995 and for each of the two years in
the period then ended appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
December 9, 1997
Costa Mesa, California
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF FINANCIAL CONDITION AND STATEMENTS OF INCOME FOUND ON PAGES 3
AND 4 OF THE PARTNERSHIP'S FORM 10-Q FOR THE PERIOD ENDING JULY 31, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,689<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 118,313<F2>
<CURRENT-LIABILITIES> 14,806
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 103,507<F3>
<TOTAL-LIABILITY-AND-EQUITY> 118,313
<SALES> 0
<TOTAL-REVENUES> 19,585
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,900
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,900
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
<FN>
<F1>CURRENT ASSETS IS COMPRISED OF CASH ($101), DISTRIBUTION RECEIVABLE ($14,050),
AND INTEREST RECEIVABLE ($538)
<F2>TOTAL ASSETS INCLUDE CURRENT ASSETS PLUS INVESTMENT IN OPPENHEIMER CAPITAL
($32,640), A NON-TRADE NOTE RECEIVABLE ($32,193), GOODWILL ($38,653) AND OTHER
ASSETS ($138)
<F3>OTHER SHAREHOLDERS EQUITY IS COMPRISED OF GENERAL PARTNER'S CAPITAL ($1,049)
AND LIMITED PARTNERS' CAPITAL ($102,458)
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
OPPENHEIMER CAPITAL, L.P. -- LETTER OF TRANSMITTAL
To accompany certificates of Class A LP Units of
PIMCO ADVISORS L.P.
- --------------------------------------------------------------------------------
DESCRIPTION OF UNITS SURRENDERED (Please fill in. Attach separate schedule if
needed)
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
Name(s) and Address of Registered Holder
If there is any error in the name or address shown below,
please make the necessary changes Certificate Numbers Number of Units
- ---------------------------------------------------------------------------------------------------------
==========================================
==========================================
------------------------------------------
TOTAL UNITS
</TABLE>
- --------------------------------------------------------------------------------
The undersigned represents that I (we) have full authority to surrender without
restriction the Certificate(s) for exchange. Please issue the new Certificate in
the name shown above to the above address unless instructions are given in the
boxes below.
Mail or deliver this Letter of Transmittal, or a facsimile, together with the
certificate(s) representing your Units, to ChaseMellon Shareholder Services,
L.L.C., the Processing Agent, at one of the following addresses: Method of
delivery of the certificate(s) is at the option and risk of the owner thereof.
See Instruction 1.
BY HAND/OVERNIGHT COURIER:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
120 Broadway - 13th Floor
New York, NY 10271
BY MAIL:
ChaseMellon Shareholder Services, L.L.C.
Reorganization Department
Post Office Box 768
Midtown Station
New York, NY 10018
[ ] ----------------------------------------------------------------------------
Check here if you cannot locate your Certificate(s) and require
assistance in replacing them. Upon receipt of notification of this Letter
of Transmittal, the Agent will contact you directly with replacement
instruments. See Instruction 5.
----------------------------------------------------------------------------
TELEPHONE 1-800-777-3674
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
--------------------------------------------------- ---------------------------------------------------
Complete ONLY if the new Certificate is to be Complete ONLY if the new Certificate is to be
issued in a name which differs from the name on the mailed to some address other than the address
surrendered certificate(s). reflected above. Mail to:
Issue to:
Name: Name:
--------------------------------------------------- ---------------------------------------------------
Address: Address:
=================================================== ===================================================
--------------------------------------------------- ---------------------------------------------------
(Please also complete Substitute Form W-9 on the
reverse AND see instructions regarding signature
guarantee. See Instructions 3, 4 and 6)
</TABLE>
- ------------------------------------------------------------
<PAGE> 2
YOU MUST SIGN IN THE BOX BELOW
============================================================
<TABLE>
<S> <C>
SIGNATURE(S) REQUIRED SIGNATURE(S) GUARANTEE(S) (IF REQUIRED)
Signature(s) of Registered Holder(s) or Agent See Instruction 3
--------------------------------------------------- ---------------------------------------------------
Must be signed by the registered holder(s) EXACTLY Unless the units are tendered by the registered
as name(s) appear(s) on unit certificate(s). If holder(s) of the units, or for the account of a
signature is by a trustee, executor, administrator, member of a "Signature Guarantee Program"
guardian, attorney-in-fact, officer for a ("STAMP"), Stock Exchange Medallion Program ("SEM")
corporation acting in fiduciary or representative or New York Stock Exchange Medallion Signature
capacity, or other person, please set forth full Program ("MS") (an "Eligible Institution"), the
title. See Instructions 2, 3 and 4. above signature(s) must be guaranteed by an
Eligible Institution. See Instruction 3.
--------------------------------------------------- ---------------------------------------------------
Registered Holder Authorized Signature
--------------------------------------------------- ---------------------------------------------------
Registered Holder Name of Firm
--------------------------------------------------- ---------------------------------------------------
Title, if any Address of Firm - Please Print
Date: Phone No. ---------------------------------------------------
Date:
</TABLE>
============================================================
2
<PAGE> 3
INSTRUCTIONS FOR SURRENDERING CERTIFICATES
(Please read carefully the instructions below)
1. Method of Delivery: Your old Certificate(s) of Class A LP Units of PIMCO
Advisors L.P. and the Letter of Transmittal must be sent or delivered to the
Processing Agent. Do not send them to the Partnership. The method of delivery of
Certificates to be surrendered to the Processing Agent at one of the addresses
set forth on the front of the Letter of Transmittal is at the option and risk of
the surrendering unitholder. Delivery will be deemed effective only when
received. IF THE CERTIFICATE(S) ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED AND PROPERLY INSURED, IS SUGGESTED. A return envelope is
enclosed.
2. New Certificate issued in the Same Name: If the new certificate is issued in
the same name as surrendered certificate is registered, the Letter of
Transmittal should be completed and signed exactly as the surrendered
certificate is registered. Do not sign the Certificate(s). Signature guarantees
are not required if the Certificate(s) surrendered herewith are submitted by the
registered owner of such Units who has not completed the section entitled
"Special Issuance Instructions" or are for the account of an Eligible
Institution. If any of the Units surrendered hereby are owned by two or more
joint owners, all such owners must sign this Letter of Transmittal exactly as
written on the face of the certificate(s). If any Units are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations. Letters of Transmittal executed by trustees, executors,
administrators, guardians, officers of corporations, or others acting in a
fiduciary capacity who are not identified as such in the registration must be
accompanied by proper evidence of the signer's authority to act.
3. New Certificates issued in Different Name: If the section entitled "Special
Issuance Instructions" is completed then signatures on this Letter of
Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents' Medallion Program (each an "Eligible
Institution"). If the surrendered Certificate(s) are registered in the name of a
person other than the signer of this Letter of Transmittal, or if issuance is to
be made to a person other than the signer of this Letter of Transmittal, or if
the issuance is to be made to a person other than the registered owner(s), then
the surrendered Certificate(s) must be endorsed or accompanied by duly executed
unit powers, in either case signed exactly as the name(s) of the registered
owners appear on such Certificate(s) or unit power(s), with the signatures on
the Certificate(s) or unit power(s) guaranteed by an Eligible Institution as
provided herein.
4. Special Issuance and Delivery Instructions: Indicate the name and address in
which the new Certificate is to be sent if different from the name and/or
address of the person(s) signing this Letter of Transmittal. The unitholder is
required to give the social security number or employer identification number of
the record owner of the Units. If Special Issuance Instructions have been
completed, the unitholder therein will be considered the record owner for this
purpose.
5. Letter of Transmittal Required: Surrender of Certificate(s), Lost
Certificate(s): You will not receive your new Certificate unless and until you
deliver this Letter of Transmittal, properly completed and duly executed, to the
Processing Agent, together with the Certificate(s) evidencing your units and any
required accompanying evidences of authority. If the Certificate(s) has (have)
been lost, stolen or destroyed, check the box on the reverse of this Letter of
Transmittal and send the Letter of Transmittal to the Processing Agent. In such
event, the Processing Agent will forward additional documentation necessary to
be completed in order to replace such lost or destroyed Certificate(s) and then
to effect the exchange.
6. Substitute Form W-9: Under the Federal Income Tax Law, a non-exempt
unitholder is required to provide the Processing Agent with such unitholder's
correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 below.
If the Certificate(s) are in more than one name or are not in the name of the
actual owner, consult the enclosed Substitute Form W-9 guidelines for additional
guidance on which number to report. Failure to provide the information on the
form may subject the surrendering unitholder to 31% federal income tax
withholding on the payment of any cash. The surrendering unitholder must check
the box in Part III if a TIN has not been issued and the unitholder has applied
for a number or intends to apply for a number in the near future. If a TIN has
been applied for and the Processing Agent is not provided with a TIN before
payment is made, the Processing Agent will withhold 31% on all payments to such
surrendering unitholders of any cash consideration due for their former Units.
Please review the enclosed Guidelines for Certification of Taxpayers
Identification Number on Substitute Form W-9 for additional details on what
Taxpayer Identification Number to give the Processing Agent.
7. Form W-8 "Certificate of Foreign Status": If you are a nonresident alien
individual, foreign entity, or exempt foreign person not subject to certain U.S.
information return reporting or backup withholding rules, you are required to
provide the Processing Agent with the information requested on the attached Form
W-8. Failure to provide a TIN or Form W-8 or substitute form may subject the
surrendering unitholder to 31% federal income tax withholding on the payment of
any cash. Please review the General Instructions of the Form W-8 for details on
how to properly complete the form.
3
<PAGE> 4
PAYER: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- --------------------------------------------------------------------------------
-----------------------------------------------------
- --------------------------------------------------------------------------------
I,2I,4
CERTIFICATION -- Under penalties of perjury, I certify that: (1) The Number
shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me), AND (2) I am not subject to backup
withholding either because I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2).
Also see instructions in the enclosed Guidelines
- --------------------------------------------------------------------------------
PLEASE SIGN HERE Signature Date
- --------------------------------------------------------------------------------
Social Security No. or
Employer
PART I -- PLEASE
PROVIDE YOUR TIN IN
Identification No.
SUBSTITUTE FORM W-9
THE SPACE AT THE RIGHT
AND CERTIFY
Department of the Treasury
BY SIGNING AND DATING
BELOW
Internal Revenue Service
PART II -- For Payees exempt
from backup withholding, see
the
Payer's Request for Taxpayer
PART III
enclosed Guidelines For
Certification of Taxpayers
Identification
Identification Number (TIN)
AWAITING TIN: [ ]
Number on Substitute Form W-9
and complete as instructed
therein.
