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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2 TO
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
---------------
PIMCO ADVISORS HOLDINGS L.P.
(Name of Issuer)
---------------
PACIFIC LIFE INSURANCE COMPANY
PACIFIC ASSET MANAGEMENT LLC
PIMCO HOLDING LLC
PIMCO PARTNERS, LLC
PIMCO PARTNERS, G.P.
PIMCO ADVISORS HOLDINGS L.P.
(Name of Person(s) Filing Statement)
---------------
Units of Limited Partner Interest
(Title of Class of Securities)
---------------
69338P10
(CUSIP Number of Class of Securities)
---------------
David Carmichael
PACIFIC LIFE INSURANCE COMPANY
700 Newport Center Drive
Newport Beach, California 92660
(949) 219-3011
Richard M. Weil
PIMCO ADVISORS HOLDINGS L.P.
800 Newport Center Drive
Newport Beach, California 92660
(949) 219-2200
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
Copies to:
Karen Bertero David C. Flattum
Gibson, Dunn & Crutcher LLP Latham & Watkins
333 South Grand Avenue 650 Town Center Drive
Los Angeles, CA 90071 Costa Mesa, CA 92626
(213) 229-7000 (714) 540-1235
This statement is filed in connection with (check the appropriate box):
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a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [_] The filing of a registration statement under the Securities Act of
1933.
c. [_] A tender offer.
d. [_] None of the above.
</TABLE>
Check the following box if soliciting material or information statement
referred to in checking box (a) are preliminary copies: [X]
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee**
$1,921,362,097.50 $384,273
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* This amount is based upon a merger involving the purchase of 49,583,538
units of limited partnership interest in PIMCO Advisors Holdings L.P. at
$38.75 per unit. Pursuant to, and as provided by, Rule 0-11(b)(1), the
amount required to be paid with the filing of this Schedule 13E-3 is
$384,273.
** The amount of the filing fee calculated in accordance with Exchange Act
Rule 0-11 equals 1/50th of 1% of the value of the securities proposed to
be acquired.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $384,273
Form or Registration No.: Preliminary Schedule 14A
Filing Party: PIMCO Advisors Holdings L.P.
Date Filed: December 20, 1999
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INTRODUCTION
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-
3") is being filed by Pacific Life Insurance Company, a California corporation
("Pacific Life"), Pacific Asset Management LLC, a Delaware limited liability
company ("PAM"), PIMCO Holding LLC, a Delaware limited liability company
("PHLLC"), PIMCO Partners, LLC, a California limited liability company
("PPLLC"), PIMCO Partners, G.P., a California general partnership ("Partners
GP") and PIMCO Advisors Holdings L.P., a Delaware limited partnership (the
"Partnership"), in connection with the acquisition of the Partnership by
Allianz AG through the merger of an indirect subsidiary of Allianz of America,
Inc., a Delaware corporation ("Allianz of America") with the Partnership
pursuant to an Implementation and Merger Agreement, dated October 31, 1999, as
amended, by and among Allianz of America, PAM, the Partnership, PIMCO Advisors
L.P. ("PIMCO Advisors"), PPLLC, PHLLC, Partners GP, and other parties named
therein (the "Merger Agreement"). By filing this Schedule 13E-3, the
signatories do not concede that Rule 13e-3 under the Securities Exchange Act
of 1934 is applicable to the merger or other transactions contemplated by the
Merger Agreement.
Allianz of America, a subsidiary of Allianz AG, will acquire the Partnership
by merging an indirect subsidiary of Allianz of America into the Partnership,
with the Partnership as the surviving entity. In the merger, all of the
outstanding limited partner and general partner units in the Partnership will
be converted into the right to receive cash in an amount per unit equal to the
Unit Price which will be $38.75, without interest and subject to potential
downward adjustment as described in the Merger Agreement. As a result of the
merger, the Partnership will become an indirect wholly-owned subsidiary of
Allianz of America. Following the merger, all of the equity interests in the
Partnership will be indirectly owned by Allianz of America. The former
unitholders in the Partnership will no longer have an interest in the
Partnership and therefore will not participate in its future earnings and
growth. Additionally, the Partnership's units will no longer trade on the New
York Stock Exchange, price quotations for the units will no longer be
available and the registration of the Partnership's units under the Securities
Exchange Act of 1934 will be terminated.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire substantially all of the remaining interests in PIMCO
Advisors at the Unit Price, other than those interests beneficially owned by
PAM. PAM will retain an investment in PIMCO Advisors through a new general
partner to be formed by PAM and a subsidiary of Allianz of America. As a
result of the transactions, Allianz of America will control PIMCO Advisors,
having acquired approximately 70% of the outstanding partnership interests in
PIMCO Advisors.
This Schedule 13E-3 is being filed with the Securities and Exchange
Commission concurrently with a preliminary proxy statement filed by the
Partnership pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Proxy Statement"). A copy of the Proxy Statement is
attached hereto as Exhibit (d)(1). The following cross reference sheet is
being supplied pursuant to General Instruction F to Schedule 13E-3 and shows
the location in the Proxy Statement of the information required to be included
in this Schedule 13E-3. The information contained in the Proxy Statement,
including all exhibits thereto, is expressly incorporated herein by reference
and the responses to each item are qualified in their entirety by reference to
the information contained in the Proxy Statement and the exhibits thereto.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Proxy Statement.
CROSS REFERENCE SHEET
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<CAPTION>
Item in Schedule 13E-3 Location in Proxy Statement
---------------------- ---------------------------
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1. Issuer and Class of Security
Subject to the Transaction
(a)................................ Cover Page and "SUMMARY--Parties to the
Merger--The Partnership"
(b)................................ "SUMMARY--The Transactions and --Record
Date and Quorum"
(c)................................ "PRICE RANGE OF UNITS AND DISTRIBUTIONS"
</TABLE>
1
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<CAPTION>
Item in Schedule 13E-3 Location in Proxy Statement
---------------------- ---------------------------
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(d)............................. "PRICE RANGE OF UNITS AND DISTRIBUTIONS"
(e)............................. *
(f)............................. "DIRECTORS AND MANAGEMENT"
2. Identity and Background
(a)-(d); (g).................... "SUMMARY--Parties to the Merger;" "THE
TRANSACTION--Parties Involved in the
Transactions;" and "DIRECTORS
AND MANAGEMENT"
(e)-(f)......................... *
3. Past Contacts, Transactions or
Negotiations
(a)(1).......................... "DIRECTORS AND MANAGEMENT"
(a)(2).......................... "DIRECTORS AND MANAGEMENT"
(b)............................. "DIRECTORS AND MANAGEMENT"
4. Terms of the Transaction
(a)............................. "SUMMARY;" "THE TRANSACTION;" "SPECIAL
FACTORS--Financial Interests of Certain
Persons in the Transaction;" and "THE
MERGER AGREEMENT"
(b)............................. "SUMMARY--Financial Interests of Certain
Persons in the Transaction;" "THE
TRANSACTION;" "SPECIAL FACTORS--Financial
Interests of Certain Persons in the
Transaction;" and "THE MERGER AGREEMENT"
5. Plans or Proposals of the
Issuer or Affiliate
(a)-(g)......................... "THE TRANSACTION--Plans for the Partnership
After the Merger and--The Subsequent
Transactions;" "SPECIAL FACTORS--Financial
Interests of Certain Persons in the
Transaction;" "THE MERGER
AGREEMENT;""EFFECT OF THE MERGER ON THE
PARTNERSHIP UNITS;" and "PRICE RANGE OF
UNITS AND DISTRIBUTIONS"
6. Source and Amount of Funds or
Other Consideration
(a)............................. "SUMMARY--Financing for the Merger" and
"FINANCING FOR THE MERGER"
(b)............................. "THE TRANSACTION--Payment of Expenses"
(c)............................. *
(d)............................. *
7. Purpose(s), Alternatives,
Reasons and Effects
(a)-(c)......................... "SPECIAL FACTORS--Recommendation; Reasons
for the Merger" and "THE TRANSACTION"
</TABLE>
2
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<TABLE>
<CAPTION>
Item in Schedule 13E-3 Location in Proxy Statement
---------------------- ---------------------------
<S> <C>
(d).............................. "SPECIAL FACTORS--Recommendation; Reasons
for the Merger; --Background to the
Transaction; --Opinion of Our Financial
Advisor and --Financial Interests of
Certain Persons in the Transaction;"
"EFFECT OF THE MERGER ON THE PARTNERSHIP'S
UNITS;" "THE TRANSACTION--The Subsequent
Transactions and --Financial Interests of
Certain Persons in the Transaction;" and
"MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES"
8. Fairness of the Transaction
(a)--(b)......................... "SPECIAL MEETING OF UNITHOLDERS--
Recommendation of Our General Partner" and
"SPECIAL FACTORS--Recommendation; Reasons
for the Merger; --Background to the
Transaction; --Opinion of Our Financial
Advisor and --Other Information Considered"
(c).............................. "SUMMARY--Vote Required" and "SPECIAL
MEETING OF UNITHOLDERS--Voting of Proxies
and Quorum"
(d).............................. "SPECIAL FACTORS--Opinion of our Financial
Advisor and --Other Information Considered"
and "DIRECTORS AND MANAGEMENT"
(e).............................. "DIRECTORS AND MANAGEMENT"
(f).............................. *
9. Reports, Opinions, Appraisals
and Certain Negotiations
(a)--(c)......................... "SPECIAL FACTORS--Recommendation; Reasons
for the Merger; --Background to the
Transaction; --Opinion of Our Financial
Advisor; and --Other Information
Considered;" "Appendix B: Opinion of
Salomon Smith Barney," "Appendix C: Opinion
of McLagan Partners, Inc.," and "Appendix
D: Opinion of Goldman, Sachs & Co."
10. Interest in Securities of the
Issuer
(a).............................. "VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF" and "SPECIAL FACTORS--Financial
Interests of Certain Persons in the
Transaction"
(b).............................. *
11. Contracts, Arrangements or
Understandings with Respect to "SPECIAL FACTORS--Background to the
the Issuer's Securities........ Transaction and --Financial Interests of
Certain Persons in the Transaction;" "THE
TRANSACTION--The Subsequent Transactions
and --Financial Interests of Certain
Persons in the Transaction;" "THE MERGER
AGREEMENT" and "DIRECTORS AND MANAGEMENT"
</TABLE>
3
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<CAPTION>
Item in Schedule 13E-3 Location in Proxy Statement
---------------------- ---------------------------
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12. Present Intention and
Recommendation of Certain
Persons with Regard to the
Transaction
(a)............................. "THE TRANSACTION--Purpose and Structure of
the Transaction;" "SPECIAL FACTORS--
Recommendation; Reasons for the Merger" and
"DIRECTORS AND MANAGEMENT"
(b)............................. *
13. Other Provisions of the
Transaction
(a)............................. "THE TRANSACTION--No Appraisal Rights"
(b)............................. *
(c)............................. *
14. Financial Information
(a)............................. "SELECTED CONSOLIDATED FINANCIAL DATA" and
"WHERE YOU CAN FIND MORE INFORMATION"
(b)............................. *
15. Persons and Assets Employed,
Retained or Utilized
(a)............................. "SPECIAL MEETING OF THE UNITHOLDERS--
Solicitation of Proxies; Expenses;" "THE
TRANSACTION--Payment of Expenses;" "SPECIAL
FACTORS--Background of the Transaction" and
"FINANCING FOR THE MERGER"
(b)............................. "SPECIAL FACTORS--Background of the
Transaction; --Opinion of Our Financial
Advisor and --Other Information Considered"
and "SPECIAL MEETING OF THE UNITHOLDERS--
Solicitation of Proxies; Expenses"
16. ADDITIONAL INFORMATION........ *
17. MATERIAL TO BE FILED AS
EXHIBITS
(a)-(f)......................... Separately filed with this Schedule 13E-3.
</TABLE>
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* The Item is inapplicable or the answer thereto is in the negative.
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) The information set forth in Cover Page and "SUMMARY--Parties to the
Merger--The Partnership" in the Proxy Statement is hereby incorporated herein
by reference.
(b) The information set forth in "SUMMARY--The Transactions" and "SUMMARY--
Record Date and Quorum" in the Proxy Statement is hereby incorporated herein
by reference.
(c) The information set forth in "PRICE RANGE OF UNITS AND DISTRIBUTIONS" in
the Proxy Statement is hereby incorporated herein by reference.
(d) The information set forth in "PRICE RANGE OF UNITS AND DISTRIBUTIONS" in
the Proxy Statement is hereby incorporated herein by reference.
4
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(e) Not Applicable.
(f) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement is hereby incorporated herein by reference.
Item 2. Identity and Background.
This Schedule 13E-3 is being filed by Pacific Life, PAM, PHLLC, PPLLC,
Partners GP and the Partnership. The information set forth in "SUMMARY--
Parties to the Holdings Merger;" "THE TRANSACTION--Parties Involved in the
Transactions" and "DIRECTORS AND MANAGEMENT" in the Proxy Statement is hereby
incorporated herein by reference.
The information set forth in "DIRECTORS AND MANAGEMENT" as to each executive
officer of each of the filing parties is incorporated herein by this
reference.
(e)--(f) Each of Pacific Life, PAM, PHLLC, PPLLC, Partners GP and the
Partnership represents that, during the last five years, neither it, nor any
person controlling it, nor, to the best of its knowledge, any of the persons
described in "DIRECTORS AND MANAGEMENT" in the proxy with reference to it, has
(i) been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree, or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations.
(a)(1) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement with respect to transactions by affiliates involving the issuer is
hereby incorporated herein by reference.
(a)(2) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement with respect to contracts and negotiations by affiliates involving
the issuer is hereby incorporated herein by reference.
(b) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement with respect to contracts and negotiations by affiliates involving
the issuer is hereby incorporated herein by reference.
Item 4. Terms of the Transaction.
(a) The information set forth in "SUMMARY;" "THE TRANSACTION;" "SPECIAL
FACTORS--Interests of Certain Persons in the Transaction;" and "THE MERGER
AGREEMENT" in the Proxy Statement is hereby incorporated herein by reference.
(b) The information set forth "SUMMARY--Financial Interests of Certain
Persons in the Transaction;" "THE TRANSACTION;" "SPECIAL FACTORS--Financial
Interests of Certain Persons in the Transaction;" and "THE MERGER AGREEMENT"
in the Proxy Statement is hereby incorporated herein by reference.
Item 5. Plans or Proposals of the Issuer or Affiliate.
(a)--(g) "THE TRANSACTION--Plans for the Partnership After the Merger;"
"SPECIAL FACTORS--Background of the Transaction;" and "--Financial Interests
of Certain Persons in the Transaction;" "THE TRANSACTION--The Subsequent
Transactions;" "THE MERGER AGREEMENT;" "EFFECT OF THE MERGER ON THE
PARTNERSHIP'S UNITS;" and "PRICE RANGE OF UNITS AND DISTRIBUTIONS" in the
Proxy Statement is hereby incorporated herein by reference.
Item 6. Source and Amount of Funds or Other Consideration.
(a) The information set forth in "SUMMARY--Financing for the Merger" and
"FINANCING FOR THE MERGER" in the Proxy Statement is hereby incorporated
herein by reference.
5
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(b) The information set forth in "THE TRANSACTION--Payment of Expenses" in
the Proxy Statement is hereby incorporated herein by reference.
(c) Not Applicable
(d) Not Applicable.
Item 7. Purpose(s), Alternatives, Reasons and Effects.
(a)--(c) The information set forth in "SPECIAL FACTORS--Recommendation;
Reasons for the Merger" and "THE TRANSACTION" in the Proxy Statement is hereby
incorporated herein by reference.
(d) The information set forth in "SPECIAL FACTORS--Recommendation; Reasons
for the Merger;--Background to the Transaction;--Opinion of Our Financial
Advisor; and --Interests of Certain Persons in the Transaction;" "EFFECT OF
THE MERGER ON THE PARTNERSHIP'S UNITS;" "THE TRANSACTION--The Subsequent
Transactions and --Financial Interests of Certain Persons in the Transaction;"
and "MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES" in the Proxy
Statement is hereby incorporated herein by reference.
Item 8. Fairness of the Transaction.
(a)--(b) The information set forth in "SPECIAL MEETING OF UNITHOLDERS--
Recommendation of Our General Partner" and "SPECIAL FACTORS--Recommendation;
Reasons for the Merger; --Background to the Transaction; --Opinion of Our
Financial Advisor and --Other Information Considered" in the Proxy Statement
is hereby incorporated herein by reference.
(c) The information set forth in "SUMMARY--Vote Required" and "SPECIAL
MEETING OF UNITHOLDERS--Voting of Proxies and Quorum" in the Proxy Statement
is hereby incorporated herein by reference.
(d) The information set forth in "SPECIAL FACTORS--Opinion of Our Financial
Advisor and --Other Information Considered" and "DIRECTORS AND MANAGEMENT" in
the Proxy Statement is hereby incorporated herein by reference.
(e) The information set forth in "DIRECTORS AND MANAGEMENT" in the Proxy
Statement is hereby incorporated herein by reference.
(f) Not Applicable.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a)--(c) The information set forth in "SPECIAL FACTORS--Recommendation;
Reasons for the Merger;--Background to the Transaction; --Opinion of Our
Financial Advisor; and --Other Information Considered;" "Appendix B: Opinion
of Salomon Smith Barney," "Appendix C: Opinion of McLagan Partners, Inc." and
"Appendix D: Opinion of Goldman, Sachs & Co." in the Proxy Statement is hereby
incorporated herein by reference.
Item 10. Interest in Securities of the Issuer.
(a) The information set forth in "VOTING SECURITIES AND PRINCIPAL HOLDERS
THEREOF" and "SPECIAL FACTORS--Financial Interests of Certain Persons in the
Transaction" in the Proxy Statement is hereby incorporated herein by
reference.
(b) Not Applicable.
6
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Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities.
The information set forth "SPECIAL FACTORS--Background to the Transaction
and --Financial Interests of Certain Persons in the Transaction;" "THE
TRANSACTION--The Subsequent Transactions and --Financial Interests of Certain
Persons in the Transaction;" "THE MERGER AGREEMENT" and "DIRECTORS AND
MANAGEMENT" in the Proxy Statement is hereby incorporated herein by reference.
Item 12. Present Intention and Recommendation of Certain Persons with Regard
to the Transaction.
(a) The information set forth in "THE TRANSACTION--Purpose and Structure of
the Transaction;" "SPECIAL FACTORS--Recommendation; Reasons for the Merger"
and "DIRECTORS AND MANAGEMENT" in the Proxy Statement is hereby incorporated
herein by reference.
(b) Not Applicable.
Item 13. Other Provisions of the Transaction.
(a) The information set forth in "THE TRANSACTION--No Appraisal Rights" in
the Proxy Statement is hereby incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 14. Financial Information.
(a) The information set forth in "SELECTED CONSOLIDATED FINANCIAL DATA" and
"WHERE YOU CAN FIND MORE INFORMATION" in the Proxy Statement is hereby
incorporated herein by reference.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) The information set forth in "SPECIAL MEETING OF THE UNITHOLDERS--
Solicitation of Proxies; Expenses;" "THE TRANSACTION--Payment of Expenses;"
"SPECIAL FACTORS--Background of the Transaction;" and "FINANCING FOR THE
MERGER" in the Proxy Statement is hereby incorporated by reference.
(b) The information set forth in "SPECIAL FACTORS--Background of the
Transaction; --Opinion of Our Financial Advisor and --Other Information
Considered;" and "SPECIAL MEETING OF THE UNITHOLDERS--Solicitation of Proxies;
Expenses."
Item 16. Additional Information.
The information set forth in the Proxy Statement and the Appendices thereto
and the Exhibits hereto is incorporated herein by reference.
7
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Item 17. Material to be Filed as Exhibits.
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(a) Not Applicable.
(b)(1)* Fairness Opinion of Salomon Smith Barney, dated October 29, 1999, is
incorporated by reference from Appendix B of the Proxy Statement
attached hereto in Exhibit (d)(1).
(b)(2)* Financial Presentation of Salomon Smith Barney to PIMCO Partners,
G.P. dated October 29, 1999.
(b)(3)* Presentation of Lazard Freres & Co. LLC to certain managing
directors of Pacific Investment Management Company and Kenneth M.
Poovey dated July 30, 1999.
(b)(4)* Presentation of Lazard Freres & Co. LLC to certain managing
directors of Pacific Investment Management Company and Mr. Poovey
dated August 24, 1999.
(b)(5)* Presentation of Lazard Freres & Co. LLC to William S. Thompson and
Mr. Poovey dated September 20, 1999.
(b)(6)* Presentation of Lazard Freres & Co. LLC to the members of PIMCO
Partners, LLC, dated October 29, 1999.
(b)(7)* Opinion of McLagan Partners, Inc., dated October 29, 1999.
(b)(8)* Presentation of Goldman, Sachs & Co. to directors of Pacific Life
Insurance Company dated October 29, 1999.
(b)(9)* Opinion of Goldman, Sachs & Co. dated October 31, 1999.
(c)(1)* The Implementation and Merger Agreement, dated October 31, 1999, as
amended, by and among Allianz of America, PAM, the Partnership,
PIMCO Advisors L.P. ("PIMCO Advisors"), PIMCO Partners, LLC, PIMCO
Holding LLC, PIMCO Partners, G.P., and other parties named therein
is incorporated by reference from the Proxy Statement attached
hereto in Exhibit (d)(1).
(d)(1) Copies of each of the Proxy Statement of PIMCO Advisors Holdings
L.P., Letter to Unitholders and Notice of Special Meeting of
Unitholders, filed with the SEC on March 3, 2000.
(d)(2) Press Release Issued on October 31, 1999 incorporated by reference
from Exhibit 99.1 of Form 8-K filed on November 1, 1999.
(e) Not Applicable.
(f) Not Applicable.
</TABLE>
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* Previously filed.
8
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: March 3, 2000
PACIFIC LIFE INSURANCE COMPANY, a
California corporation
/s/ Sharon A. Cheever
By ___________________________________
Name: Sharon A. Cheever
Title: Vice President
PACIFIC ASSET MANAGEMENT LLC,
a Delaware limited liability company
By: Pacific Life Insurance
Company, a California
corporation, member
/s/ Sharon A. Cheever
By ________________________________
Name: Sharon A. Cheever
Title: Vice President
PIMCO HOLDING LLC,
a Delaware limited liability company
By: Pacific Asset Management LLC, a
Delaware limited liability
company, Member
By: Pacific Life Insurance
Company, a California
corporation, Member
/s/ Sharon A. Cheever
By ___________________________
Name: Sharon A. Cheever
Title: Vice President
PIMCO PARTNERS, LLC, a California limited
liability company
/s/ William S. Thompson
By _______________________________
Name: William S. Thompson
Title: Chief Executive Officer
1
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PIMCO PARTNERS, G.P., a California
general partnership
By: PIMCO Partners, LLC, a California
limited liability company,
General Partner
/s/ William S. Thompson
By ________________________________
Name: William S. Thompson
Title: Chief Executive Officer
By: PIMCO Holding LLC, a Delaware
limited liability company,
General Partner
By: Pacific Asset Management LLC,
a Delaware limited liability
company, Member
By: Pacific Life Insurance
Company, a California
corporation, Member
/s/ Sharon A. Cheever
By__________________________
Name: Sharon A. Cheever
Title: Vice President
PIMCO ADVISORS HOLDINGS L.P.,
a Delaware limited partnership
By: PIMCO Partners, G.P., a
California general partnership,
General Partner
By: PIMCO Holding LLC, a Delaware
limited liability company,
General Partner
By: Pacific Asset Management
LLC, a Delaware limited
liability company, Member
By: Pacific Life Insurance
Company, a California
corporation, Member
/s/ Sharon A. Cheever
By_____________________________
Name: Sharon A. Cheever
Title: Vice President
2
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By: PIMCO Partners, LLC, a California
limited liability company, General
Partner
/s/ William S. Thompson
By _______________________________
Name: William S. Thompson
Title: Chief Executive Officer
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
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(a) Not Applicable.
(b)(1)* Fairness Opinion of Salomon Smith Barney, dated October 29, 1999, is
incorporated by reference from Appendix B of the Proxy Statement
attached hereto in Exhibit (d)(1).
(b)(2)* Financial Presentation of Salomon Smith Barney to PIMCO Partners, G.P.
dated October 29, 1999.
(b)(3)* Presentation of Lazard Freres & Co. LLC to certain managing directors
of Pacific Investment Management Company and Kenneth M. Poovey dated
July 30, 1999.
(b)(4)* Presentation of Lazard Freres & Co. LLC to certain managing directors
of Pacific Investment Management Company and Mr. Poovey dated August
24, 1999.
(b)(5)* Presentation of Lazard Freres & Co. LLC to William S. Thompson and Mr.
Poovey dated September 20, 1999.
(b)(6)* Presentation of Lazard Freres & Co. LLC to the members of PIMCO
Partners, LLC, dated October 29, 1999.
(b)(7)* Opinion of McLagan Partners, Inc., dated October 29, 1999.
(b)(8)* Presentation of Goldman, Sachs & Co. to directors of Pacific Life
Insurance Company dated October 29, 1999.
(b)(9)* Opinion of Goldman, Sachs & Co. dated October, 31 1999.
(c)(1)* The Implementation and Merger Agreement, dated October 31, 1999, as
amended, by and among Allianz of America, PAM, the Partnership, PIMCO
Advisors L.P. ("PIMCO Advisors"), PIMCO Partners, LLC, PIMCO Holding
LLC, PIMCO Partners, G.P., and other parties named therein is
incorporated by reference from the Proxy Statement attached hereto in
Exhibit (d)(1).
(d)(1) Copies of each of the Proxy Statement of PIMCO Advisors Holdings L.P.,
Letter to Unitholders and Notice of Special Meeting of Unitholders,
filed with the SEC on March 3, 2000.
(d)(2) Press Release Issued on October 31, 1999 incorporated by reference
from Exhibit 99.1 of Form 8-K filed on November 1, 1999.
(e) Not Applicable.
(f) Not Applicable.
</TABLE>
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* Previously filed.
<PAGE>
[LETTERHEAD OF PIMCO]
PIMCO ADVISORS HOLDINGS L.P.
Special Meeting of Unitholders
Merger Proposed -- Your Vote is Very Important
Dear PIMCO Advisors Holdings L.P. Unitholder:
On behalf of the general partner of PIMCO Advisors Holdings L.P. (the
"Partnership"), I cordially invite you to attend the special meeting of the
unitholders of the Partnership to be held on April 28, 2000 at 9:00 a.m. local
time, at the Four Seasons Hotel, 690 Newport Center Drive, Newport Beach,
California 92660. At the meeting you will be asked to vote upon a proposal to
adopt and approve the Implementation and Merger Agreement, dated as of October
31, 1999, as amended, by and among Allianz of America, Inc., Pacific Asset
Management LLC, the Partnership, PIMCO Advisors L.P., PIMCO Partners, LLC,
PIMCO Holding LLC, PIMCO Partners, G.P., and other parties to the merger
agreement, the resulting merger of an indirect subsidiary of Allianz of America
into the Partnership and the other transactions contemplated by the merger
agreement.
If the merger agreement, the merger and the other transactions contemplated
by the merger agreement are adopted and approved:
. the Partnership will be acquired by Allianz of America through a merger
of an indirect subsidiary of Allianz of America into the Partnership;
. all of the outstanding units of limited and general partner interest in
the Partnership will be converted into the right to receive cash in an
amount equal to $38.75 per unit, without interest and subject to
potential downward adjustment as described below, resulting in no further
public ownership of the Partnership; and
. following the merger, subsidiaries of Allianz of America will, in a
series of transactions, acquire substantially all of the remaining
interests in PIMCO Advisors L.P. for the same per unit purchase price you
are receiving, other than those beneficially owned by Pacific Asset
Management LLC, one of the two owners of our general partner, which will
exchange its approximate 30% interest in PIMCO Advisors L.P. for a new
security representing a fixed return plus a variable return based on the
operating profits of Pacific Investment Management Company on the terms
described in the proxy statement.
The proposed transactions will result in aggregate payments by Allianz of
America and its affiliates of approximately $3.2 billion in cash for the
interests in the Partnership and PIMCO Advisors L.P. reflecting a $4.8 billion
valuation of PIMCO Advisors L.P. The completion of the transactions
contemplated by the merger agreement is dependent on numerous conditions
described in the proxy statement. In particular, Allianz of America is not
obligated to complete the transactions if the revenue
<PAGE>
base of PIMCO Advisors L.P. declines prior to the closing of the transactions,
for reasons other than market movements, to less than 75% of its September 30,
1999 level or if William H. Gross, William S. Thompson and at least 60% of the
other managing directors of Pacific Investment Management Company do not remain
employed by Pacific Investment Management Company.
The unit price of $38.75 may be reduced if the revenue base of PIMCO
Advisors L.P. decreases, for reasons other than market movements, below 85% of
its September 30, 1999 level. Any reduction would be based on how far revenues
fell below the 85% level; but in no event would you receive less than $31.00
per unit ($31.78 if the settlement of the outstanding unitholder litigation
described in the proxy statement is approved by the court). At January 31,
2000, applicable revenues were at 100.34% of the September level. See the proxy
statement for details.
On July 6, 1999, the day before the press first reported discussions between
the Partnership and Allianz AG, the parent of Allianz of America, the
Partnership's units of limited partnership interest, which are traded on the
New York Stock Exchange under the symbol "PA", closed at $29.56. On October 4,
1999, the date prior to the announcement by the Partnership of discussions with
Allianz AG, the Partnership units closed at $30.50. On October 29, 1999, the
last trading day prior to the execution of the merger agreement, the
Partnership units closed at $34.69 per unit. On February 10,
2000, the Partnership units closed at $37.81. If the merger agreement, the
merger and the other transactions are approved, the Partnership units will no
longer be traded on the New York Stock Exchange.
The proxy statement gives you detailed information about the proposed
transactions and includes the merger agreement as an appendix. You can also get
information about the Partnership from publicly available documents we have
filed with the SEC. We encourage you to read carefully this entire document,
including its appendices.
After careful consideration, PIMCO Partners, G.P., our general partner, has
determined that the merger agreement, the merger of an indirect subsidiary of
Allianz of America into the Partnership and the other transactions contemplated
by the merger agreement are in the best interests of the Partnership and its
unitholders and recommends that you vote "FOR" the merger agreement, the merger
and the other transactions contemplated by the merger agreement. In coming to
this determination, our general partner considered the opinion of our financial
advisor Salomon Smith Barney Inc., dated October 29, 1999, that the
consideration to be received by you pursuant to the merger agreement and in the
merger was fair to you from a financial point of view as of the date of that
opinion. A copy of the written opinion of our financial advisor is attached to
the proxy statement as Appendix B, and you should read it carefully and in its
entirety. The opinion of Salomon Smith Barney is dated October 29, 1999 and
opines as to the fairness as of that date only. Salomon Smith Barney is not
obligated to update its opinion. Events could occur prior to the date of the
special meeting which could result in a different valuation or conclusion if
the opinion was reissued on that date. In the event that there are material
changes to the terms of the proposed transactions or other material changes or
conditions affecting the Partnership or its business, our general partner will
consider the advisability of requesting an updated fairness opinion at that
time. As of the date of this proxy statement, the general partner does not
believe any such material changes have occurred.
You should be aware that our general partner and its affiliates have
conflicts of interest in the proposed transactions which include:
. Pacific Asset Management LLC, one of the owners of our general partner,
will not sell its approximate 30% interest in PIMCO Advisors L.P. to
Allianz AG. Instead, it will exchange
<PAGE>
its interest for a new security described in the proxy statement which
will be subject to put and call rights which may result in a future sale
of such interest to Allianz of America; and
. certain members of PIMCO Partners, LLC, the other owner of our general
partner, are also the managing directors of Pacific Investment
Management Company and will receive employment-related compensation in
the aggregate, of up to $492.5 million in cash and Allianz AG stock,
payable over a five year period contingent on continued employment, as
well as closing payments of approximately $703.3 million in cash and
Allianz AG stock in settlement of pre-existing unit-based entitlements,
assuming a unit price of $38.75 and a per share value of Allianz AG
stock of $273.99, the average trading price for such stock for the 30
days prior to the public announcement of discussions between Allianz AG
and PIMCO Advisors. As of March 2, 2000, the closing price of the
Allianz AG stock was $346.94 per share, increasing the value of the
payments described above to $505.8 million and $729.9 million,
respectively. See pages 66 to 74 of the proxy statement for detailed
information regarding benefits to be received by these persons.
Our executive officers will also receive significant employment-related
compensation and payments in satisfaction of pre-existing unit based
entitlements as a result of the transactions in the aggregate, of up to $39.3
million contingent on continued employment. In addition, Pacific Asset
Management LLC's ultimate parent corporation is having discussions with Allianz
AG about possibly being acquired by Allianz AG.
The Partnership's partnership agreement provides that the general partner
may resolve all conflicts of interest in good faith and may rely on a fairness
opinion and other expert opinions in doing so. Having received the fairness
opinion described above and taking into account the other matters described in
the proxy statement, in approving the proposed transaction the general partner
did not retain an independent and disinterested third party to represent the
unaffiliated unitholders.
YOUR VOTE IS VERY IMPORTANT. The merger and the other transactions
contemplated by the merger agreement cannot be completed without the approval
of the holders of a majority of the units outstanding as of the record date
established by our general partner. We are inviting you, as a unitholder of the
Partnership, to vote on the merger agreement, the merger and the other
transactions contemplated by the merger agreement and to attend a special
meeting of our unitholders if you would like to vote in person. Whether or not
you plan to attend the special meeting, please take the time to vote by
completing and mailing the enclosed proxy card to us at the address set forth
in the proxy statement.
If you are a registered holder of Partnership units, you are encouraged to
vote by telephone by calling (800) 840-1208 or to vote on the Internet by
visiting the website listed on your proxy card, www.eproxy.com/pa, and
following the instructions on the website. Certain holders who hold their
Partnership units through a bank or broker may also vote using the telephone or
Internet by dialing the toll free number or visiting the Internet website
address printed on your voting form supplied by your bank or broker.
Please call our investor relations department at (877) 407-7699 or our proxy
solicitor, D.F. King & Co., Inc., toll free at (800) 207-2872 if you have any
questions or need assistance with the voting procedures.
If you date and mail your proxy card without indicating how you want to
vote, your proxy will be counted as a vote "FOR" the merger agreement, the
merger and the other transactions
<PAGE>
contemplated by the merger agreement. If you abstain or if you do not instruct
your broker how to vote any units held for you in "street name," the effect
will be a vote against the merger agreement, the merger and the other
transactions contemplated by the merger agreement.
/S/ William D. Cvengros
William D. Cvengros
Chief Executive Officer
PIMCO Advisors Holdings L.P.
Proxy statement dated March 3, 2000 and first mailed to unitholders on or about
March 6, 2000.
<PAGE>
[LOGO OF PIMCO LETTERHEAD APPEARS HERE]
PIMCO ADVISORS HOLDINGS L.P.
800 Newport Center Drive
Newport Beach, California 92660
---------------
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD ON APRIL 28, 2000
---------------
Dear PIMCO Advisors Holdings L.P. Unitholder:
NOTICE IS HEREBY GIVEN that a special meeting of unitholders of PIMCO
ADVISORS HOLDINGS L.P. (the "Partnership") will be held on April 28, 2000, at
9:00 a.m. local time at the Four Seasons Hotel, 690 Newport Center Drive,
Newport Beach, California 92660. A proxy card and a proxy statement for the
special meeting are enclosed.
The special meeting is for the purpose of considering and acting upon the
following:
1. To adopt and approve the Implementation and Merger Agreement, dated as
of October 31, 1999, as amended, by and among Allianz of America, Inc.,
Pacific Asset Management LLC, the Partnership, PIMCO Advisors L.P.,
PIMCO Partners, LLC, PIMCO Holding LLC, PIMCO Partners, G.P., and other
parties to the merger agreement, the merger and the other transactions
contemplated in the merger agreement. The merger agreement provides
that:
. Allianz of America will acquire the Partnership through a merger of
an indirect subsidiary of Allianz of America into the Partnership,
and all of the outstanding units of limited and general partner
interest in the Partnership will be converted into the right to
receive cash in an amount equal to $38.75 per unit, without interest
and subject to potential downward adjustment to a minimum of $31.00
per unit as described in the proxy statement, resulting in no
further public ownership of the Partnership; and
. following the merger, subsidiaries of Allianz of America will, in a
series of transactions, acquire substantially all of the remaining
interests in PIMCO Advisors, L.P. at the same per unit price you are
receiving, other than those beneficially owned by Pacific Asset
Management LLC, which will exchange its approximate 30% interest in
PIMCO Advisors, L.P. for a new security representing a fixed return
plus a variable return based on operating profits of Pacific
Investment Management Company on the terms described in the proxy
statement.
2. To consider and act upon such other matters as may properly come before
the special meeting or any adjournment of the special meeting.
<PAGE>
You should be aware that our general partner and its affiliates have
conflicts of interest in the proposed transactions. Information about these
conflicts of interests can be found in the proxy statement in the section
"Special Factors--Financial Interests of Certain Persons in the Transaction."
Any action may be taken on the foregoing proposals at the special meeting on
the date specified above or on any date or dates to which the special meeting
may be adjourned. Only unitholders of record at the close of business on
February 29, 2000 will be entitled to notice of, and to vote at, the special
meeting or any adjournment of the special meeting.
The proxy statement describes the merger agreement, the proposed merger and
other transactions contemplated by the merger agreement. You are cordially
invited to attend the special meeting in person. Whether or not you plan to
attend the special meeting, to ensure that your vote will be counted, please
vote in one of the following ways:
. by completing, dating and signing the enclosed proxy card and returning
it promptly in the enclosed postage-paid envelope;
. if you are a registered holder, by visiting the website,
www.eproxy.com/pa, and voting on the Internet, or by calling (800) 840-
1208, toll-free, and voting by telephone;
. if you hold your Partnership units through a bank or broker, by calling
the phone number or visiting the Internet website printed on the voting
form provided by your broker or bank; or
. by attending the special meeting and completing a ballot at that time.
You may revoke your proxy in the manner described in the proxy statement at
any time before it is voted at the special meeting. Executed proxies with no
instructions indicated will be voted "FOR" adoption and approval of the merger
agreement, the merger and the other transactions contemplated by the merger
agreement.
If you have any questions or need assistance in completing your proxy,
please contact our investor relations department at (877) 407-7699 or our proxy
solicitor, D.F. King & Co., Inc., toll free at (800) 207-2872.
BY ORDER OF THE GENERAL PARTNER,
/s/ William D. Cvengros
William D. Cvengros
Chief Executive Officer
PIMCO Advisors Holdings L.P.
Newport Beach, California
March 3, 2000
Your vote is important. Whether or not you plan to attend the special
meeting, to vote your units, please complete, date, sign and return the proxy
card as soon as possible in the enclosed postage-prepaid envelope, or call
(877) 407-7699, toll-free, and find out more about voting by telephone or over
the Internet.
Please do not send your unit certificates at this time. If the merger is
consummated you will be sent instructions regarding the surrender of your
certificates.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................................... 1
SUMMARY..................................................................... 5
The Transactions.......................................................... 5
Our General Partner's Recommendation...................................... 5
Date, Time and Place...................................................... 6
Purpose of the Special Meeting............................................ 6
Record Date and Quorum.................................................... 6
Vote Required............................................................. 7
Parties to the Merger..................................................... 7
The Merger Agreement and the Merger....................................... 7
Effective Date of the Merger.............................................. 7
Opinion of Our Financial Advisor.......................................... 8
Other Information Considered.............................................. 8
Financial Interests of Certain Persons in the Transaction................. 9
Certain Effects of the Merger............................................. 10
Conditions to the Merger.................................................. 10
Termination of the Merger Agreement....................................... 11
Termination Fee........................................................... 11
Financing for the Merger.................................................. 12
Regulatory Approvals...................................................... 12
Material United States Federal Income Tax Consequences.................... 12
No Appraisal Rights....................................................... 12
Recent Developments....................................................... 12
SELECTED CONSOLIDATED FINANCIAL DATA........................................ 14
SPECIAL MEETING OF UNITHOLDERS.............................................. 17
Date, Time and Place...................................................... 17
Purpose................................................................... 17
Recommendation of Our General Partner..................................... 17
Record Date and Units Outstanding......................................... 17
Solicitation of Proxies; Expenses......................................... 17
Voting of Proxies and Quorum.............................................. 18
Revocability of Proxies................................................... 19
Payment of Cash Merger Consideration...................................... 19
Other Business............................................................ 19
Principal Offices......................................................... 19
THE TRANSACTION............................................................. 20
Overview.................................................................. 20
Parties Involved in the Transactions...................................... 20
PIMCO Advisors Related Parties............................................ 21
The Merger: The Acquisition of the Partnership............................ 22
The Subsequent Transactions............................................... 23
Treatment of Employee Benefit Awards...................................... 29
Financial Interests of Certain Persons in the Transaction................. 30
Payment of Expenses....................................................... 30
No Appraisal Rights....................................................... 31
Benefits and Detriments to Holders of Partnership Units................... 31
Plans for the Partnership After the Merger................................ 31
Conduct of Business of the Partnership if the Merger is not Consummated... 32
Accounting Treatment...................................................... 32
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SPECIAL FACTORS............................................................. 33
Recommendation; Reasons For The Merger...................................... 33
Recommendation............................................................ 33
Reasons for the Merger.................................................... 33
Background of the Transaction............................................... 38
Opinion Of Our Financial Advisor............................................ 44
Other Information Considered................................................ 52
Lazard Freres & Co. LLC................................................... 52
Opinion of Financial Advisor to Pacific Life ............................. 58
Management Compensation Consultants....................................... 63
Financial Interests of Certain Persons in the Transaction................... 64
The Partnership........................................................... 65
Partners GP............................................................... 67
Partners LLC.............................................................. 67
PHLLC and PAM............................................................. 75
CERTAIN FINANCIAL PROJECTIONS............................................... 80
REGULATORY APPROVALS........................................................ 83
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...................... 83
Conversion of Partnership Units into Cash................................. 84
Backup Withholding........................................................ 84
FINANCING FOR THE MERGER.................................................... 84
LITIGATION CHALLENGING THE MERGER........................................... 84
EFFECT OF THE MERGER ON THE PARTNERSHIP UNITS............................... 86
THE MERGER AGREEMENT........................................................ 87
The Merger and Subsequent Transactions.................................... 87
Representations and Warranties............................................ 87
Covenants................................................................. 88
Conditions to Obligations to Effect the Transactions...................... 93
Termination............................................................... 94
Amendment and Waiver...................................................... 95
Assignment................................................................ 96
Indemnification and Benefit Plan Reductions............................... 96
DIRECTORS AND MANAGEMENT.................................................... 97
The Partnership........................................................... 97
PAM....................................................................... 97
Partners LLC.............................................................. 100
PRICE RANGE OF UNITS AND DISTRIBUTIONS...................................... 101
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF............................. 102
Security Ownership of Certain Beneficial Owners and Management............ 102
INDEPENDENT ACCOUNTANTS..................................................... 104
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.................. 104
WHERE YOU CAN FIND MORE INFORMATION......................................... 105
APPENDIX A--IMPLEMENTATION AND MERGER AGREEMENT............................. A-1
APPENDIX B--OPINION OF SALOMON SMITH BARNEY................................. B-1
APPENDIX C--OPINION OF MCLAGAN PARTNERS, INC. .............................. C-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What am I being asked to vote upon?
A: You are being asked to vote to adopt and approve the merger agreement, the
acquisition of the Partnership by Allianz of America through a merger of an
indirect subsidiary of Allianz of America into the Partnership and the
other transactions contemplated by the merger agreement.
If the merger is completed, each of your units of limited partnership
interest will be converted into the right to receive a cash payment and you
will have no ongoing ownership stake in the continuing business of the
Partnership, which will survive as an indirect subsidiary of Allianz of
America. In the merger, you will be entitled to receive $38.75 in cash for
each unit you own, without interest and subject to potential downward
adjustment. In no event will you receive less than $31.00 per unit ($31.78
per unit if the settlement of outstanding unitholder litigation described
in the proxy statement is approved by the court).
Following the merger, subsidiaries of Allianz of America will acquire
substantially all of the remaining interests in PIMCO Advisors L.P. at the
same per unit purchase price you are receiving, other than the interests
beneficially owned by Pacific Asset Management LLC, which will exchange its
approximate 30% interest in PIMCO Advisors L.P. for a new security
representing a fixed return plus a variable return based on the operating
profits of Pacific Investment Management Company. The new security being
received by Pacific Asset Management LLC will be subject to put and call
rights which may result in a future sale of such interest to Allianz of
America.
PIMCO Advisors L.P. is the operating partnership of which the Partnership
owns approximately 44% as a general partner. As a result of the
transactions contemplated by the merger agreement, Allianz of America will
control PIMCO Advisors L.P., having acquired approximately 70% of the
currently outstanding partnership interests of PIMCO Advisors L.P.
Q: Why is the General Partner recommending the sale of the Partnership to
Allianz of America?
A: Our general partner has determined that the merger agreement, the merger
and the other transactions contemplated by the merger agreement are
advisable, fair to you, and in your best interests, and our general partner
recommends that you vote to adopt and approve the merger agreement, the
merger and the other transactions contemplated by the merger agreement. In
reaching these conclusions we were influenced by several factors,
including:
. The price to be paid per unit which represents a 30% premium over the
200-day moving average of the closing price of the Partnership's units
prior to July 7, 1999 ($29.80), the day the press first reported
discussions between PIMCO Advisors L.P. and Allianz AG. We believe that
if the merger is not completed, absent other factors, the Partnership's
unit trading price will revert back to its historical range.
. Our belief that long-term success in the investment management business
requires significant global growth and presence, particularly in Europe.
Due in part to the significant costs required to establish a substantial
foreign presence, we do not believe we are likely to achieve this in the
near term through internal growth. After investigating a number of
alternatives which did not involve a sale of the business, we concluded
that the acquisition proposed by Allianz of America produced the best
value to our unitholders.
1
<PAGE>
. The trends in the equity markets since 1997, which have favored growth
and index strategies and disfavored value strategies. These trends have
resulted in significant net asset outflows from our value managers. Our
value managers accounted for approximately 34.1% of our total revenues
from portfolio management in 1998 and approximately 27.7% of our total
revenues from portfolio management in 1999.
. The opinion of Salomon Smith Barney stating that, as of October 29,
1999, and based upon and subject to the factors and assumptions set
forth in the opinion, the consideration to be received by you was fair
to you from a financial point of view, and the opinion of McLagan
Partners, Inc., a compensation consultant, stating that, subject to the
factors and assumptions set forth in the opinion, the retention
incentive arrangements being provided to executives of Pacific
Investment Management Company under the merger agreement were
reasonable.
Q: What will I receive if the merger agreement is approved?
A: Each Partnership unit that you own as of the date of the merger will be
converted into the right to receive cash in the amount of $38.75, without
interest and subject to potential downward adjustment as described in next
paragraph.
Q: Under what circumstances could I receive less than $38.75 per unit?
A: You will receive less than $38.75 per unit only if the revenue base of PIMCO
Advisors L.P. declines by the last calendar month-end prior to the closing
date of the merger, for reasons other than market movements, to less than
85% of its September 30, 1999 level. In that event, the amount you receive
per unit would be reduced by 2% for each 1% this amount falls below the 85%
threshold, subject to a maximum reduction of 20%. If the settlement of the
unitholder litigation described in this proxy statement is approved by the
court, then the adjustment to the unit price for your units will be reduced
to 1.8% for each 1% decline below the 85% threshold, with a maximum
reduction of 18%. In no event will you receive less than $31.00 per unit
($31.78 if the settlement is approved) if the merger is approved and
consummated.
There will be no downward adjustment to the $38.75 unit price in the merger
unless we experience net outflows of assets far in excess of any we have
experienced in the past. Our baseline September 30, 1999 revenue base was
$780.8 million. On January 31, 2000 our revenue base was $783.5 million
representing 100.34% of its September 30, 1999 level.
Q: Who is Allianz of America?
A: Allianz of America is a holding company that owns several insurance and
financial services companies and is a subsidiary of Allianz AG. Allianz AG
and its subsidiaries comprise the world's second largest insurance group as
measured by premium income.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. We must
obtain unitholder, client and regulatory approvals first, and hope to
complete the merger as soon as possible after the special meeting.
Q: When and where is the special meeting?
A: The special meeting will take place at the Four Seasons Hotel, 690 Newport
Center Drive, Newport Beach, California 92660, on April 28, 2000 at 9:00
a.m. local time.
2
<PAGE>
Q: What do I need to do now?
A: We urge you to read this proxy statement carefully, including its
appendices, and to consider how the merger affects you as a unitholder. You
also may want to review the documents referenced under "Where You Can Find
More Information" on page 104.
Q: How do I vote?
A: You can vote in one of the following ways.
. Indicate on your proxy card how you want to vote, and sign and mail your
proxy card in the enclosed return envelope as soon as possible so that
your units will be represented at the special meeting. If you sign and
send in your proxy and do not indicate how you want to vote, your proxy
will be counted as a vote for the merger and the merger agreement,
unless your units are held in a brokerage account.
. If you are a registered holder of Partnership units, call (800) 840-
1208, toll-free and vote by telephone, or visit the website
www.eproxy.com/pa and vote on the Internet.
. If you hold your Partnership units through a bank or broker you may vote
by telephone or over the Internet at the telephone number or Internet
website printed on your voting card provided by your bank or broker.
. Attend the special meeting and complete a ballot at that time.
Q: If my units are held in "street name" by my broker, will my broker vote my
units for me?
A: Your broker will not vote your units for you unless you provide
instructions on how to vote. It is important therefore that you follow the
directions provided by your broker regarding how to instruct your broker to
vote your units. Because holders of a majority of the outstanding units
must adopt and approve the merger agreement, the merger and the other
transactions, broker non-votes will have the same effect as votes against
approval of the merger and the merger agreement.
Q: May I change my vote?
A: Yes. You may change your vote at any time before your proxy is voted at the
special meeting. You may do this in one of three ways. First, you may send
a written notice stating that you would like to revoke your proxy. Second,
you may complete and submit a new proxy card. If you choose either of these
two methods, you must submit your notice of revocation or your new proxy
card to us at the principal office of the Partnership. Third, you may
attend the special meeting and vote in person. Simply attending the special
meeting, without voting in person, will not revoke your proxy. If you have
instructed a broker to vote your units, you must follow directions received
from your broker to change your vote or to vote at the special meeting.
Q: Should I send in my unit certificates now?
A: No. After the merger is completed, we will send you written instructions
for receiving your cash payment in exchange for your units.
3
<PAGE>
Q: What are the tax consequences of the merger to me?
A: In general, upon conversion of your Partnership units into cash pursuant to
the merger, you will recognize gain or loss for tax purposes equal to the
difference between the amount of cash received (plus your share of the
Partnership's liabilities, if any) and your adjusted tax basis in your
Partnership units. Such gain or loss will generally be capital gain or
loss, except that you will recognize ordinary income to the extent any cash
received is attributable to tax deductions previously allocated to you
relating to goodwill and certain other Partnership assets.
Q: Who can help answer my questions?
A: If you would like additional copies of this proxy statement or if you have
questions about the merger agreement, the merger and the other transactions
contemplated by the merger agreement, including how to complete and return
your proxy card or how to vote by telephone or on the Internet or would
like more information about the Partnership, you should contact:
PIMCO Advisors Holdings L.P.
800 Newport Center Drive
Newport Beach, California 92660
Attention: Investor Relations
(877) 407-7699
or
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Telephone: (800) 207-2872
4
<PAGE>
SUMMARY
This summary highlights selected information from this proxy statement and
may not contain all of the information that is important to you. To understand
fully the transactions contemplated by the merger agreement and for a more
complete description of the legal terms of the transactions, you should read
carefully this entire document and the documents to which we refer you in this
proxy statement. See "Where You Can Find More Information" on page 104.
The Transactions
The Implementation and Merger Agreement, dated as of October 31, 1999, as
amended, by and among Allianz of America, Inc., Pacific Asset Management LLC
("PAM"), PIMCO Advisors Holdings L.P. (the "Partnership"), PIMCO Advisors L.P.
("PIMCO Advisors"), PIMCO Partners, LLC ("Partners LLC"), PIMCO Holding LLC
("PHLLC"), PIMCO Partners, G.P. ("Partners GP"), and other parties to the
merger agreement provides for the acquisition of the Partnership by Allianz of
America through a merger of an indirect subsidiary of Allianz of America into
the Partnership. In the merger, all of the outstanding units of limited and
general partner interest in the Partnership will be converted into the right to
receive cash in an amount equal to $38.75 per unit, without interest and
subject to potential downward adjustment (the "Unit Price"). As a result of the
merger, the Partnership will become an indirect wholly-owned subsidiary of
Allianz of America and you will have no ongoing stake in the continuing
business of the Partnership.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire substantially all of the remaining interests in PIMCO
Advisors at the same per unit purchase price you are receiving, other than
those beneficially owned by PAM, which will exchange its approximate 30%
interest in PIMCO Advisors for a new security representing a fixed return plus
a variable return based on the operating profits of Pacific Investment
Management Company on the terms described in this proxy statement. PIMCO
Advisors is the operating partnership of which the Partnership owns
approximately 44% as a general partner. As a result of the transactions,
Allianz of America will control PIMCO Advisors, having acquired approximately
70% of the currently outstanding partnership interests of PIMCO Advisors.
As described more fully below, the unit price of $38.75 may be reduced if
PIMCO Advisors' revenue base decreases, for reasons other than market
movements, below 85% of its September 30, 1999 level. Any reduction would be
based on how far revenues fell below the 85% level; but in no event would you
receive less than $31.00 per unit ($31.78 if the settlement of the outstanding
unitholder litigation is approved by the court). At January 31, 2000,
applicable revenues were at 100.34% of the September level.
See "The Transaction" for a more detailed discussion of the proposed
transactions, including charts which illustrate the various steps of the
proposed transactions.
Our General Partner's Recommendation
Our general partner has determined that the merger agreement, the merger and
the other transactions contemplated by the merger agreement are advisable, fair
to you, and in your best interests, and our general partner recommends that you
vote to adopt and approve the merger
5
<PAGE>
agreement, the merger and the other transactions contemplated by the merger
agreement. In reaching these conclusions our general partner was influenced by
several factors, including:
. The price being paid per unit which represents a 30% premium over the
200-day moving average of the closing price of the Partnership units
prior to July 7, 1999 ($29.80), the day the press first reported
discussions between PIMCO Advisors and Allianz AG. We believe that if
the merger is not completed, absent other factors, the Partnership's
unit trading price will revert back to its historical range.
. Our belief that long-term success in the investment management business
requires significant global growth and presence, particularly in Europe.
Due in part to the significant costs required to establish a substantial
foreign presence, we do not believe this is likely to be achieved in the
near term through internal growth. After investigating a number of
alternatives which did not involve a sale of the Partnership, we
concluded that the acquisition proposed by Allianz of America produced
the best value to our unitholders.
. The trends in the equity markets since 1997, which have favored growth
and index strategies and disfavored value strategies. These trends have
resulted in significant net asset outflows from our value managers. Our
value managers accounted for approximately 34.1% of our total revenues
from portfolio management in 1998 and approximately 27.7% of our total
revenues from portfolio management in 1999.
. The opinion of Salomon Smith Barney stating, among other things, that,
as of October 29, 1999, and based upon and subject to the factors and
assumptions set forth in the opinion, the consideration to be received
by you was fair to you from a financial point of view, and the opinion
of McLagan Partners, Inc., a compensation consultant, stating that,
subject to the factors and assumptions set forth in the opinion, the
retention incentive arrangements being provided to executives of Pacific
Investment Management Company under the merger agreement were
reasonable.
Date, Time and Place
The special meeting of the unitholders of the Partnership will be held at
9:00 a.m. local time on April 28, 2000, at the Four Seasons Hotel, 690 Newport
Center Drive, Newport Beach, California 92660.
Purpose of the Special Meeting
At the special meeting, you and our other unitholders will consider and vote
on the proposal to adopt and approve the merger agreement attached to this
proxy statement as Appendix A, the merger of the Partnership, the other
transactions contemplated by the merger agreement and any other matters
properly presented for a vote.
Record Date and Quorum
We have fixed the close of business on February 29, 2000 as the record date
for the determination of unitholders entitled to notice of, and to vote at, the
special meeting and any adjournment of the special meeting. Each unitholder of
record as of the record date will be entitled to one vote for each unit then
owned. As of the record date, there were 50,060,365 Partnership units
outstanding, held of record by approximately 1,530 registered holders. The
holders of a majority of outstanding Partnership units must be present in
person or represented by proxy to constitute a quorum.
6
<PAGE>
Vote Required
The affirmative vote of the holders of a majority of the Partnership units
outstanding on the record date is required to adopt and approve the merger
agreement, the merger of the indirect subsidiary of Allianz of America into the
Partnership and the other transactions contemplated by the merger agreement.
Properly signed and dated proxies, including those given over the telephone or
Internet, that do not include voting instructions will be voted "FOR" the
merger agreement, the merger and the other transactions contemplated by the
merger agreement. Because the affirmative vote of a majority of the outstanding
Partnership units is required for approval, properly signed and dated proxies,
including those given over the telephone or Internet, marked "ABSTAIN" and
broker non-votes will have the same effect as votes against adoption and
approval of the merger agreement, the merger and the other transactions
contemplated by the merger agreement.
Parties to the Merger
The Partnership
The Partnership is a publicly traded Delaware limited partnership owned .01%
by its general partner, PIMCO Partners, G.P., and 99.99% by its public limited
partners. The Partnership's primary source of income is its proportionate share
of the net income of PIMCO Advisors. As of January 31, 2000, the Partnership
held approximately 50 million general partner units of PIMCO Advisors,
representing an approximate 44% general partner interest in PIMCO Advisors.
PIMCO Partners, G.P. and other private holders hold the remaining interests in
PIMCO Advisors.
Allianz of America
The limited partnership that will merge with the Partnership is an indirect
subsidiary of Allianz of America. Allianz of America is a holding company that
owns several insurance and financial service companies, including Fireman's
Fund Insurance Company. Allianz of America is a Delaware corporation, and its
principal offices are located at 55 Greens Farms Road, P.O. Box 5160, Westport,
Connecticut 06881. Its telephone number is (203) 221-8500.
Allianz of America is a subsidiary of Allianz AG. Allianz AG and its
subsidiaries comprise the world's second largest insurance group as measured by
premium income and are leading providers of financial services, particularly in
Europe. Allianz AG has guaranteed the obligations of Allianz of America and its
affiliates under the merger agreement.
The Merger Agreement and the Merger
The merger agreement is attached to this proxy statement as Appendix A.
Please read the merger agreement carefully and in its entirety. It is the legal
document that governs the merger.
Effective Date of the Merger
The merger will become effective at the time and date specified in the
certificate of merger to be filed with the Secretary of State of the State of
Delaware pursuant to the Delaware Revised Uniform Limited Partnership Act. We
expect such filing and effective time to occur as soon as practicable after the
special meeting, subject to adoption and approval of the merger agreement, the
merger and the other transactions contemplated by the merger agreement at the
special meeting and the satisfaction or waiver of the other conditions to
completing the transactions provided in the merger agreement.
7
<PAGE>
An exchange agent will forward to you detailed instructions with regard to
the surrender of certificates, together with a letter of transmittal, as soon
as reasonably practicable following the closing of the merger. You should not
submit your certificates to the exchange agent until you have received these
materials. Payment for units will be made to you as promptly as practicable
following the determination of the merger consideration and receipt by the
exchange agent of your certificates and other required documents. No interest
will be paid or accrued on the cash payable upon the surrender of certificates.
Opinion of Our Financial Advisor
We retained Salomon Smith Barney to act as a financial advisor in connection
with the merger and the merger agreement to render its opinion as to the
fairness from a financial point of view of the consideration to be received by
you under the merger agreement. Salomon Smith Barney provided an opinion, dated
October 29, 1999, stating that, as of that date and based upon and subject to
the factors and assumptions set forth in the opinion, the consideration to be
received by you in the merger was fair from a financial point of view to you,
taking into consideration the terms of the transactions, including the
arrangements with respect to PAM's continuing ownership interest in PIMCO
Advisors following the closing of the transactions and the retention and
incentive arrangements to be entered into with management. In its analysis,
Salomon Smith Barney made numerous assumptions with respect to the Partnership
and PIMCO Advisors. Such assumptions and estimates contained in Salomon Smith
Barney's analysis and the valuation ranges resulting from any particular
analysis are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by such analysis. The opinion of Salomon Smith Barney is
dated October 29, 1999, and opines as to the fairness as of that date only.
Salomon Smith Barney is not obligated to update its opinion. Events could occur
prior to the date of the special meeting which could result in a different
valuation or conclusion if the opinion was reissued on that date. In the event
that there are material changes to the terms of the proposed transactions or
other material changes or conditions affecting the Partnership or its business,
our general partner will consider the advisability of requesting an updated
fairness opinion at that time. As of the date of this proxy statement, the
general partner does not believe any such material changes have occurred.
Salomon Smith Barney has received $2 million in exchange for its services.
The full text of the written opinion of Salomon Smith Barney, which sets forth
a description of assumptions made, matters considered and limitations on its
review, is attached as Appendix B to this proxy statement. You are urged to
read this opinion carefully in its entirety.
Other Information Considered
In connection with the transactions contemplated by the merger agreement,
Partners LLC also considered analyses performed by Lazard Freres & Co. LLC and
PAM's corporate parent considered the opinion of Goldman Sachs & Co. described
below.
Lazard Freres. Lazard Freres was retained by the Partnership to assist in
the structuring and analysis of the proposed transactions. It made a series of
presentations to Partnership management and members of Partners LLC which
provided financial and comparative analysis as the transactions
8
<PAGE>
evolved. Lazard Freres was not requested to and did not render an opinion,
appraisal or report with respect to the fairness of the proposed transactions.
In exchange for its services, Lazard Freres will receive $9.2 million if the
proposed transactions are consummated, of which a non-refundable retainer of
$950,000 has already been paid.
Opinion of Financial Advisor to Pacific Life. Goldman Sachs was retained by
Pacific Life Insurance Company ("Pacific Life"), the direct parent corporation
of PAM, to act as its financial advisor in connection with the proposed
transactions and to evaluate the fairness, from a financial point of view, to
Pacific Life of the consideration to be received by Pacific Life pursuant to
the merger and related exchange transaction. The opinion of Goldman Sachs and
the related financial
analyses are described under the caption "Opinion of Financial Advisor to
Pacific Life." Also more fully described under that caption is the compensation
to be received by Goldman Sachs in exchange for the services provided to
Pacific Life, which includes a retainer of $1 million and a fee of $500,000
upon rendering the opinion to Pacific Life described in this proxy statement.
Financial Interests of Certain Persons in the Transaction
In considering the recommendation of our general partner with respect to the
merger and the merger agreement, you should be aware that PHLLC and Partners
LLC, the two general partners of our general partner, and their members have
conflicts of interests in the proposed transactions including:
. PAM (PHLLC's parent company) will not sell its approximate 30% interest
in PIMCO Advisors to Allianz of America Instead, it will exchange its
interest for a new security representing a fixed return plus a variable
return based on operating profits of Pacific Investment Management
Company. The new security will be subject to put and call rights which
may result in a future sale of that interest to Allianz of America; and
. certain members of Partners LLC, the managing directors of Pacific
Investment Management Company, will receive employment-related
compensation in the aggregate, of up to $442.5 million in cash payments
and up to 182,488 shares of Allianz AG stock with an assumed value of
$50.0 million, over a five year period contingent on continued
employment, as well as aggregate closing payments of approximately
$603.3 million in cash and approximately 364,977 shares of Allianz AG
stock with an assumed value of $100.0 million in settlement of pre-
existing unit-based entitlements (certain employment termination
agreements entered into in 1994 and outstanding unit options), as a
result of the transactions, assuming a unit price of $38.75 and a per
share value of Allianz AG stock of $273.99, the average trading price
for such stock for the 30 days prior to the public announcement of
discussions between Allianz AG and PIMCO Advisors. As of March 2, 2000,
the closing price of the Allianz AG stock was $346.94 per share,
increasing the payments in stock referenced above to $63.3 million and
$126.6 million, respectively.
In addition, our executive officers will receive significant employment-
related compensation and payments in satisfaction of pre-existing unit based
entitlements as a result of the transactions in the aggregate, of up to $39.3
million contingent on continued employment, which presents them with actual and
potential conflicts of interest.
9
<PAGE>
Furthermore, PAM's ultimate parent corporation, Pacific Mutual Holding
Company ("PMHC"), is having discussions with Allianz AG regarding a possible
acquisition of PMHC by Allianz AG.
PHLLC's parent corporation is Pacific Life. Pacific Life's indirect
investment, through its subsidiaries, in PIMCO Advisors represents an important
part of its overall business. As one of the two general partners of our general
partner, PHLLC is involved in the management of PIMCO Advisors, and the
continued management involvement in PIMCO Advisors forms a part of Pacific
Life's ongoing business plan. This affiliation has enhanced Pacific Life's
identity in certain strategic financial services markets. The relationship
between the entities has proven and continues to prove useful in branding,
marketing and selling a number of Pacific Life products and services.
Additionally, Pacific Life utilizes the investment services of Pacific
Investment Management Company and other investment services of PIMCO Advisors.
In this respect, PAM's ownership interest in PIMCO Advisors differs from that
of the investment interest represented by the limited partner units. Although
Pacific Life concluded that the retention by PAM of a management interest in
the general partner of PIMCO Advisors was consistent with Pacific Life's
business plan, Pacific Life believes, based on the information described
elsewhere in this proxy statement, that the consideration offered to the other
partners by Allianz of America is fair to, and in the best interest of, the
Partnership's unitholders.
The Partnership's partnership agreement provides that the general partner
may resolve all conflicts of interest in good faith and may rely on a fairness
opinion and other expert opinions in doing so. Having received the fairness
opinion described above and taking into account the other matters described in
the proxy statement, in approving the proposed transactions the general partner
did not retain an independent and disinterested third party to represent the
unaffiliated unitholders.
See "Special Factors--Financial Interests of Certain Persons in the
Transaction" for a more detailed discussion of these different interests,
including without limitation the discussion under "Special Factors--Financial
Interests of Certain Persons in the Transactions--PHLLC and PAM" regarding
Pacific Life's reasons for causing PAM to retain an interest in PIMCO Advisors
rather than selling that interest in the proposed transactions.
Certain Effects of the Merger
If the merger is completed, all of the Partnership's equity interests will
be indirectly owned by Allianz of America. You will no longer have any interest
in, and will not be a unitholder of, the Partnership, and therefore will not
participate in our future earnings and growth. Instead, your units will be
converted into the right to receive the cash consideration described above for
each Partnership unit you hold. In addition, our Partnership units will no
longer be traded on the New York Stock Exchange, price quotations for our
Partnership units will no longer be available and the registration of our
Partnership units under the Securities Exchange Act of 1934 will be terminated.
Conditions to the Merger
The completion of the transactions contemplated by the merger agreement (the
"Closing"), including the merger of an indirect subsidiary of Allianz of
America into the Partnership, depends on the satisfaction of a number of
customary conditions, including the accuracy of representations and warranties,
compliance with pre-closing covenants, absence of injunctions or similar legal
10
<PAGE>
impediments which prevent the Closing, receipt of material third party
consents, compliance with certain regulatory requirements and receipt of
necessary government and regulatory approvals and consents. Particularly
noteworthy conditions include:
. the merger will not be effected unless our unitholders approve the
merger agreement, the merger and the other transactions contemplated by
the merger agreement;
. Allianz of America need not complete the merger if the revenue base of
PIMCO Advisors declines prior to the Closing, for reasons other than
market movements, to less than 75% of its September 30, 1999 level; and
. Allianz of America need not complete the merger unless William H. Gross,
William S. Thompson and at least 60% of the other managing directors of
Pacific Investment Management Company remain employed at the Closing.
In addition, certain other events must occur, including the amendment or
adoption of certain employee benefit plans, the execution of certain employment
contracts with key executives, the restructuring of Pacific Investment
Management Company into a limited liability company and the execution and
delivery of closing documentation.
Termination of the Merger Agreement
The merger agreement may be terminated by consent of the parties and for
certain failures of representations, warranties or covenants, as well as:
. if the transactions contemplated by the merger agreement have not been
consummated by September 30, 2000;
. if our unitholders fail to approve the merger agreement, the merger and
the other transactions contemplated by the merger agreement;
. if our general partner withdraws or adversely modifies its approval or
recommendation of the merger agreement;
. if we enter an agreement involving an acquisition transaction which our
general partner determines in good faith to be superior to the terms of
the merger agreement; or
. by Allianz of America if PIMCO Advisors' revenue base has declined, at
the end of two consecutive calendar months, for reasons other than
market movements, to less than 75% of the September 30, 1999 level.
Termination Fee
PIMCO Advisors will be required to pay Allianz of America a termination fee
of $180 million ($120 million if the unitholder litigation settlement is
approved) if either:
. the merger agreement is terminated by our general partner in connection
with entering into an agreement involving a superior acquisition
proposal; or
. the merger agreement is terminated by Allianz of America following the
failure of our general partner to recommend the merger to the
Partnership unitholders, and, within 12 months after such termination,
the Partnership, PIMCO Advisors, Partners LLC, PAM, Partners GP or PHLLC
subsequently enters into another binding agreement for a transaction
implementing an acquisition proposal.
11
<PAGE>
Financing for the Merger
The merger is not conditioned upon Allianz of America obtaining financing.
The obligations of Allianz of America and its affiliates under the merger
agreement have been guaranteed by Allianz AG.
Regulatory Approvals
To complete the merger and the other transactions contemplated by the merger
agreement, we must make filings and receive authorizations from various federal
and state governmental agencies in the United States and various governmental
agencies of foreign jurisdictions. It is possible that some of these
governmental authorities may impose conditions for granting approval. We
anticipate receiving the necessary regulatory approvals, but no one can be sure
that we will obtain all the required regulatory approvals within the time frame
contemplated by the merger agreement.
Material United States Federal Income Tax Consequences
In general, upon the conversion of your Partnership units into cash pursuant
to the merger, you will recognize gain or loss for United States federal income
tax purposes equal to the difference between the amount of cash you receive,
plus your share of the Partnership's liabilities, if any, and your adjusted tax
basis in your Partnership units. The gain or loss will generally be capital
gain or loss, except that you will recognize ordinary income to the extent any
cash received is attributable to previously allocated amortization deductions
relating to (i) goodwill of the Partnership that is eligible for amortization
pursuant to Section 197 of the Internal Revenue Code of 1986, as amended, and
(ii) other unrealized receivables and inventory of the Partnership within the
meaning of Section 751 of the Internal Revenue Code of 1986, as amended (which
amount attributable to such other unrealized receivables and inventory is not
expected to be material to you).
No Appraisal Rights
Holders of the Partnership units are not entitled to dissenting unitholders'
appraisal rights or other similar rights under Delaware law or the
Partnership's partnership agreement.
Recent Developments
On January 26, 2000, we announced our financial and operating results for
the quarter and fiscal year ended December 31, 1999. The Partnership's net
income for the fourth quarter ended December 31, 1999, was $18.6 million, or
$0.35 per unit (after $0.04 per unit of non-recurring items) and its net income
for the year ended December 31, 1999, was $74.3 million or $1.43 per unit
(after $0.18 per unit of non-recurring items). Net income for the Partnership
during the fourth quarter of 1999 was $21.0 million, or $0.39 per unit before
the effect of non-recurring items, compared with net income of $20.4 million,
or $0.40 per unit, for the fourth quarter of 1998. For fiscal year 1999, net
income increased 9.7% before the effect of non-recurring items and was $83.5
million, or $1.61 per unit, compared to net income of $76.1 million, or $1.52
per unit, for the same period in 1998.
The net income of PIMCO Advisors for the fourth quarter of 1999 was $57.2
million before the effect of non-recurring items, compared with net income of
$55.2 million in the fourth quarter of 1998. Revenues in the fourth quarter of
1999 increased 7.2% to $244.4 million from $228.0 million in the fourth quarter
of 1998. For fiscal year 1999, net income rose 8.8% before the effect of non-
12
<PAGE>
recurring items, and was $226.7 million compared with net income of $208.4
million for the same period in 1998. Annual revenue rose 12.7% to $960.6
million in fiscal year 1999, compared to $852.4 million for the same period in
1998. Including the effect of the non-recurring items, net income at PIMCO
Advisors for fiscal year 1999 was $205.7 million.
The Partnership's earnings for the fourth quarter of 1999 were affected by
costs related to the proposed transaction between Allianz of America and PIMCO
Advisors of approximately $0.04 per unit, lower than expected performance fees,
and continued net asset outflows from our value managers. The Partnership also
expects to incur additional costs during 2000 related to the proposed
transaction.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected financial data of the Partnership,
retroactively restated to reflect a 1.67 for 1 unit split effective December 1,
1997, for the nine months ended September 30, 1999 and 1998, for the year ended
December 31, 1998, for the eight months ended December 31, 1997 and for the
four years ended April 30, 1997. The tables also set forth selected financial
data for Oppenheimer Capital for the eight months ended December 31, 1997, and
for the four years ended April 30, 1997 and selected consolidated financial
data of PIMCO Advisors for the nine months ended September 30, 1999 and 1998
and for the five years ended December 31, 1998. In the fourth quarter of 1997,
PIMCO Advisors acquired Oppenheimer Capital, and the Partnership's investment
in Oppenheimer Capital was exchanged for an interest in PIMCO Advisors.
Accordingly, the PIMCO Advisors data include the performance of Oppenheimer
Capital from November 4, 1997, and the Partnership data consist of the
performance of PIMCO Advisors from December 1, 1997. PIMCO Advisors and its
subsidiaries were formed on November 15, 1994, when PAM merged certain of its
investment management businesses and substantially all of its assets (the "PAM
Group") into Thomson Advisory Group L.P. ("TAG LP") (the "Consolidation").
Under generally accepted accounting principles, the Consolidation was accounted
for as an acquisition of TAG LP by the PAM Group. Therefore, the historical
financial statements of PIMCO Advisors include the operations of the PAM 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
financial statements of the Partnership, the consolidated financial statements
of PIMCO Advisors and the consolidated financial statements of Oppenheimer
Capital, and the related notes thereto, included in our report on Form 10-K for
the fiscal year ended December 31, 1998 and our Quarterly Reports on Form 10-Q
for each of the three fiscal quarters ended March 31, June 30 and September 30,
1999, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations of PIMCO Advisors Holdings L.P." found in the same Form
10-K and Forms 10-Q.
<TABLE>
<CAPTION>
PIMCO Advisors Holdings L.P. (5)
------------------------------------------------------------------------------------
For the For the
Nine Months Ended For the Eight Months
September 30, Year Ended Ended For the Years Ended April 30,
----------------- December 31, December 31, ---------------------------------------
1999 1998 1998 1997 1997 1996 1995 1994
-------- -------- ------------ ------------ -------- -------- ------- -------
(Unaudited)
(Amounts in thousands, except per unit amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ 67,434 $ 66,341 $ 90,682 $ 45,737(3) $ 56,046(1) $ 61,316(1) $34,282 $35,091
Expenses................ 11,728 10,622 14,537 1,605 2,720 2,720 3,461 4,038
-------- -------- -------- -------- -------- -------- ------- -------
Net income.............. $ 55,706 $ 55,719 $ 76,145 $ 44,132(3) $ 53,326(1) $ 58,596(1) $30,821 $31,053
======== ======== ======== ======== ======== ======== ======= =======
Diluted net income per
unit................... $ 1.08 $ 1.11 $ 1.52 $ 1.68 $ 2.04 $ 2.27 $ 1.21 $ 1.22
======== ======== ======== ======== ======== ======== ======= =======
Distribution declared
per unit............... $ 1.76 $ 1.61 $ 2.18 $ 2.05(4) $ 2.10(2) $ 1.90(2) $ 1.30 $ 1.28
======== ======== ======== ======== ======== ======== ======= =======
Weighted average number
of units outstanding... 49,057 47,238 47,257 25,768 25,663 25,457 25,277 25,122
Book value per unit..... $ 9.27 $ 9.69 $ 9.52 $ 8.97 $ 6.39 $ 6.38 $ 5.70 $ 5.37
Financial Condition at
End of Period:
Total assets............ $491,582 $521,184 $503,996 $438,964 $116,149 $110,099 $96,633 $98,116
Total liabilities....... 32,406 53,305 42,377 30,627 17,858 12,713 10,321 10,319
-------- -------- -------- -------- -------- -------- ------- -------
Partners' capital....... $459,446 $467,879 $461,619 $408,337 $ 98,291 $ 97,386 $86,312 $87,797
======== ======== ======== ======== ======== ======== ======= =======
</TABLE>
- -------
(1) Includes revenues and a non-recurring gain 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 non-recurring gain of $.06
per unit in fiscal 1997 and $.33 per unit in fiscal 1996.
(3) Includes revenues and a non-recurring gain of $2.8 million, or $.11 per
unit.
(4) Includes a special distribution related to the non-recurring gain of $.07
per unit.
(5) Prior to December 31, 1997, the Partnership was known as Oppenheimer
Capital L.P.
14
<PAGE>
<TABLE>
<CAPTION>
PIMCO Advisors L.P.
----------------------------------------------------------------------------
For the Nine Months
Ended September 30, For the Years Ended December 31,
--------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- -------- -------- --------
(Unaudited)
(Amounts in thousands, except per unit amounts and assets under
management)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Total revenues.......... $ 716,195 $ 624,406 $ 852,432 $ 516,669 $392,024 $323,014 $180,263
Operating expenses...... 504,684 415,851 571,458 347,453 261,978 215,271 145,220
Amortization of
intangibles, options
and restricted units... 68,105 60,205 80,805 51,676 41,171 42,723 6,202
---------- ---------- ---------- ---------- -------- -------- --------
Operating income........ $ 143,406 $ 148,350 $ 200,169 $ 117,540 $ 88,875 $ 65,020 $ 28,841
========== ========== ========== ========== ======== ======== ========
Net Income.............. $ 154,039 $ 153,154 $ 208,376 $ 118,330 $ 91,128 $ 68,467 $ 19,255
========== ========== ========== ========== ======== ======== ========
Diluted Net Income per
Unit(1):
General Partner and
Class A Limited Partner
units.................. $ 1.32 $ 1.35 $ 1.83 $ 1.45 $ 1.29 $ 1.16 $ 0.12
========== ========== ========== ========== ======== ======== ========
Dividends/Distributions
Declared(2):........... $ 227,364 $ 192,687 $ 271,345 $ 208,713 $131,604 $ 89,613 $ 24,384
========== ========== ========== ========== ======== ======== ========
Financial Condition at
End of Period:
Total assets(3)......... $1,479,775 $1,431,333 $1,412,038 $1,334,884 $358,500 $369,592 $379,708
Total liabilities....... 427,477 373,702 352,951 280,819 62,257 38,035 34,179
---------- ---------- ---------- ---------- -------- -------- --------
Partners' capital....... $1,052,298 $1,057,631 $1,059,087 $1,054,065 $296,243 $331,557 $345,529
========== ========== ========== ========== ======== ======== ========
Other Statistics:
Assets under management
(in billions).......... $ 256.2 $ 225.9 $ 244.2(4) $ 199.5(4) $ 110.0 $ 95.2 $ 72.2
Operating profit
available for
distribution(1)........ $ 221,923 $ 213,574 $ 289,191 $ 173,166 $132,314 $111,205 $ 12,306
</TABLE>
- --------
(1) Computed on earnings following the Consolidation. Operating Profit
Available for Distribution is defined by the Amended and Restated Agreement
of Limited Partnership of PIMCO Advisors L.P. 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) PIMCO Advisors L.P. accelerated its distribution declaration record date by
one month effective December 31, 1997, resulting in five quarterly
declarations in fiscal 1997.
(3) Upon completion of the acquisition of Oppenheimer Capital, approximately
$897.5 million of intangible assets were recorded. Upon completion of the
Consolidation, approximately $284.9 million of intangible assets were
recorded. See Note 3 in the Notes to the Consolidated Financial Statements
of PIMCO Advisors L.P. and Subsidiaries.
(4) Includes Oppenheimer Capital.
15
<PAGE>
<TABLE>
<CAPTION>
Oppenheimer Capital
--------------------------------------------------------
For the Eight-
Months Ended For the Years Ended April 30,
December 31, -----------------------------------------
1997 1997 1996 1995 1994
-------------- -------- -------- -------- --------
(Amounts in thousands, except assets under
management)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $148,937 $181,974 $158,215 $129,912 $112,290
Expenses................ 83,951 103,064 95,551 83,066 64,683
-------- -------- -------- -------- --------
Operating income........ 64,986 78,910 62,664 46,846 47,607
Gain on Quest sale...... 4,374(2) 2,806(1) 27,725(1) -- --
-------- -------- -------- -------- --------
Income before income tax
expense and minority
interest............... $ 69,360 $ 81,716 $ 90,389 $ 46,846 $ 47,607
======== ======== ======== ======== ========
Financial Condition at
End of Period:
Total assets............ $ 86,236 $ 93,019 $ 76,338 $ 56,129 $ 43,034
Total liabilities....... 38,654 53,044 41,462 41,582 30,557
Minority interest....... 213 277 174 87 25
-------- -------- -------- -------- --------
Partners' capital....... $ 47,369 $ 39,698 $ 34,702 $ 14,460 $ 12,452
======== ======== ======== ======== ========
Other Statistics:
Assets under management
(in billions).......... $ 61.4 $ 51.2 $ 40.6 $ 31.8 $ 29.4
</TABLE>
- --------
(1) Reflects the gain realized on the sale of the investment advisory and other
contracts and business relationship for the twelve Quest for Value mutual
funds to OppenheimerFunds, Inc. in November 1995.
(2) Reflects the gain realized on the sale of the investment advisory and other
contracts and business relationship of the Quest Dual Purpose Fund to
OppenheimerFunds, Inc. in July 1997.
16
<PAGE>
SPECIAL MEETING OF UNITHOLDERS
Date, Time and Place
We are furnishing this proxy statement to you in connection with the
solicitation of proxies on the form enclosed with this proxy statement by our
general partner for use at a special meeting of our unitholders to be held on
April 28, 2000, at 9:00 a.m. local time, and at any and all adjournments
thereof, for the purposes described below under "Purpose." The meeting will be
held at the Four Seasons Hotel, 690 Newport Center Drive, Newport Beach,
California 92660. This proxy statement and the enclosed form of proxy are being
mailed to you and our other unitholders on or about March 6, 2000.
Purpose
The purpose of the special meeting is to consider and vote on the proposal
to adopt and approve the merger agreement, the resulting merger in which all of
our Partnership units will be exchanged by way of merger for the right to
receive $38.75 per unit in cash, without interest and subject to potential
downward adjustment to not less than $31.00 per unit ($31.78 per unit if the
unitholder litigation settlement is approved) as described in this proxy
statement under "The Transaction--The Merger: The Acquisition of the
Partnership," and the other transactions contemplated by the merger agreement.
Following the merger, we will no longer be publicly owned. You may also be
asked to transact other business that may properly come before the special
meeting or any adjournment of the special meeting.
Recommendation of Our General Partner
PIMCO Partners, G.P., our general partner, has approved the merger
agreement, the merger and the other transactions contemplated by the merger
agreement and recommends that you vote "FOR" approval of the merger agreement,
the merger and the other transactions contemplated by the merger agreement. See
"Special Factors--Recommendation; Reasons for the Merger."
Record Date and Units Outstanding
Our unitholders as of the close of business on the record date of February
29, 2000 are entitled to receive notice of, and to vote at, the special
meeting. Our outstanding Partnership units of limited partnership interest
constitute the only class of securities entitled to vote at the special
meeting, and each such Partnership unit entitles the holder of record to one
vote. At the close of business on February 29, 2000 we had 50,060,365
Partnership units issued and outstanding, held of record by approximately 1,530
registered holders.
Solicitation of Proxies; Expenses
Our general partner makes this solicitation on our behalf. Allianz of
America and PAM will share equally the costs of the solicitation. Our officers
and employees and our affiliates may also solicit proxies by telephone,
telegraph, telecopy or personal interview, but they will not receive additional
compensation for these solicitation activities. We have retained the services
of D.F. King & Co., Inc., for a fee and related costs, estimated at $100,000,
to assist in the solicitation of proxies. Allianz of America and PAM will
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for reasonable and documented expenses incurred by them in sending proxy
materials to you and our other unitholders.
17
<PAGE>
Registered Unitholders. If you are a registered unitholder, you are
encouraged to take advantage of the easy and cost-effective Internet and
telephone voting that the Partnership offers. To vote over the Internet, go to
the Internet website address on your proxy card, www.eproxy.com/pa, and follow
the instructions. Have the control number printed on your voting form in hand
when using the telephone or Internet voting options. To vote by telephone,
simply dial the toll-free number (800) 840-1208.
Other Unitholders. Certain unitholders who hold their Partnership units
through a bank or a broker may also vote using the telephone or Internet. To
vote over the Internet, go to the Internet website address printed on your
voting form supplied by your bank or broker and follow the instructions. Have
the control number printed on your voting form in hand when using the telephone
or Internet voting options. To vote by telephone, simply dial the toll-free
number printed on the voting form supplied to you.
You may also vote by completing, dating and signing the proxy card and
returning it in the enclosed postage pre-paid envelope as soon as possible.
Please call our investor relations department at (877) 407-7699 or our proxy
solicitor, D.F. King & Co., Inc., toll-free at (800) 207-2872 if you have any
questions or need assistance with the voting procedures. As the date of the
special meeting approaches, you may receive a telephone call from a
representative of D.F. King & Co., Inc. if we have not yet received your vote.
D.F. King & Co., Inc. may ask you for authority, by telephone, to permit D.F.
King & Co., Inc. to sign a proxy on your behalf. D.F. King & Co., Inc. will
record all instructions it receives from you and our other unitholders by
telephone, and each proxy it signs in accordance with those instructions and
the procedures set forth below is intended to indicate accurately the
unitholder's identity and voting instructions.
When soliciting a proxy by telephone, the D.F. King & Co., Inc.
representative is required to ask you for your full name, address, social
security or employer identification number, the number of Partnership units you
own and title, if the person giving the proxy is authorized to act for an
entity, such as a corporation. The representative will also confirm that you
have received this proxy statement. The representative will then explain the
voting process. D.F. King & Co., Inc. is not permitted to recommend to you how
to vote, other than to read any recommendation included in the proxy statement.
D.F. King & Co., Inc. will record your instructions and transmit them to the
official tabulator and, within 72 hours, send you a letter or mailgram to
confirm your vote. That letter will also ask you to call D.F. King & Co., Inc.
immediately if the confirmation does not reflect your instruction correctly.
Voting of Proxies and Quorum
If the proxy is properly executed and returned and not revoked, your
Partnership units will be voted as specified in the proxy. Each Partnership
unit that you own on the record date entitles you to one vote. To be voted, the
proxy must be received by our Secretary prior to voting. Our transfer agent
will administer an automated system to tabulate votes cast at the special
meeting.
If you properly execute and date your proxy, but do not include voting
instructions, your Partnership units will be voted "FOR" the approval of the
merger and the merger agreement. If you properly execute and date your proxy
and mark "ABSTAIN" your units will be counted for the purposes of determining
whether there is a quorum and will have the same effect as a vote against
approval of the merger and the merger agreement. If your Partnership units are
held by your broker, your broker will not vote your units for you unless you
provide instructions to your broker on how to
18
<PAGE>
vote your units. Broker non-votes will be counted as present for purposes of
determining the existence of a quorum and will have the same effect as votes
against approval of the merger and the merger agreement.
A majority of the outstanding Partnership units entitled to vote,
represented in person or by proxy, will constitute a quorum at the special
meeting. The affirmative vote of the holders of a majority of the Partnership
units outstanding on the record date is required to adopt and approve the
merger agreement, the merger and the other transactions contemplated by the
merger agreement. For these purposes, the vote of Partnership units which are
held by affiliates of the Partnership will be counted. As of February 29, 2000,
affiliates of the Partnership owned 465,440 units representing less than 1% of
the outstanding Partnership units.
Revocability of Proxies
You may revoke any proxy given pursuant to this solicitation at any time
before its use by:
. delivering to us a written notice of revocation;
. duly executing a proxy bearing a later date with voting instructions; or
. attending the special meeting and voting in person.
Payment of Cash Merger Consideration
We currently expect the effective time of the merger to occur during the
second quarter of 2000, subject to obtaining requisite approvals and
satisfaction or waiver of the terms and conditions of the merger agreement. See
"The Transaction" and "The Merger Agreement--Conditions to Obligations to
Effect the Transactions." Detailed instructions with respect to the surrender
of your unit certificates, together with a letter of transmittal, will be
forwarded to you by the exchange agent appointed by us and approved by Allianz
of America, promptly following the effective time. You should not submit your
unit certificates to the exchange agent until you receive these materials. The
exchange agent will send payment of the merger consideration to you as promptly
as practicable following determination of the merger consideration and receipt
by the exchange agent of your certificates and other required documents. No
interest will be paid on the merger consideration.
Other Business
As of the date of this proxy statement, we know of no other business that
will come before the special meeting for action. If any other matter is
properly presented for consideration and action at the special meeting,
however, the proxies will be voted with respect to those matters in accordance
with the best judgment and in the discretion of the proxy holders.
Principal Offices
Our principal executive offices are located at 800 Newport Center Drive,
Newport Beach, California 92660. Our phone number is (949) 219-2200.
19
<PAGE>
THE TRANSACTION
Overview
The Merger. The merger agreement provides for the acquisition of the
Partnership by Allianz of America through the merger of an indirect subsidiary
of Allianz of America into the Partnership. In the merger, all of the
outstanding limited partner and general partner units in the Partnership will
be converted into the right to receive cash in an amount per unit equal to the
Unit Price, which will be $38.75, without interest and subject to potential
downward adjustment to not less than $31.00 per unit ($31.78 per unit if the
unitholder litigation settlement is approved) as described below. As a result
of the merger, the Partnership will become an indirect wholly-owned subsidiary
of Allianz of America.
As a result of the merger, all of our equity interests will be indirectly
owned by Allianz of America. You will no longer have any interest in, and will
not be a unitholder of, the Partnership, and therefore will not participate in
our future earnings and growth. Instead, you will have the right to receive the
cash consideration described above for each unit you hold. In addition, the
Partnership units will no longer be traded on the New York Stock Exchange,
price quotations of the Partnership units will no longer be available and the
registration of the Partnership units under the Securities Exchange Act of 1934
will be terminated.
Subsequent Transactions. Following the merger, subsidiaries of Allianz of
America will, in a series of transactions (the "Subsequent Transactions"),
acquire substantially all of the remaining interests in PIMCO Advisors at the
Unit Price, other than those beneficially owned by PAM, which will retain an
interest in PIMCO Advisors through a new general partner to be formed by PAM
and an affiliate of Allianz of America. As a result of the transactions,
Allianz of America will control PIMCO Advisors, having acquired approximately
70% of the outstanding partnership interests of PIMCO Advisors, and PAM will
retain an interest in PIMCO Advisors on the terms described in this section
under "The Subsequent Transactions--New Advisors Class E Units."
Parties Involved in the Transactions
The transactions contemplated by the merger agreement are complex and
involve multiple parties. In order to facilitate your understanding of the
transactions, the following is a list of parties to the transaction. The
parties will be referred to throughout this proxy statement by the terms
ascribed to them below:
Allianz Parties
Allianz AG refers to Allianz AG, a German Aktiengesellschaft.
Allianz of America refers to Allianz of America, Inc., a Delaware
corporation, the sole stockholder of AAM and a subsidiary of Allianz AG.
AAM refers to Allianz Asset Management Incorporated, a Delaware corporation,
a wholly-owned subsidiary of Allianz of America and the sole member of Allianz
GP Sub upon its formation.
Allianz GP Sub refers to Allianz GP Sub LLC, a Delaware limited liability
company which is a subsidiary of Allianz of America and is the sole member of
Advisors Merger Sub, the sole limited partner of Merger Sub and, following the
merger, will be the sole limited partner of the Partnership. The sole member of
Allianz GP Sub is AAM.
PacPartners refers to Pacific-Allianz Partners LLC, a Delaware limited
liability company which will be formed with an affiliate of Allianz of America
and PAM as its sole members. PacPartners will be the general partner of PIMCO
Advisors following the Advisors Merger.
20
<PAGE>
Advisors Merger Sub refers to Advisors LP Merger Sub LLC, a Delaware limited
liability company which is a wholly-owned subsidiary of Allianz GP Sub and will
ultimately merge into PIMCO Advisors.
Holdings LP GP refers to Holdings LP General Partner LLC, a Delaware limited
liability company which will be the sole general partner of Merger Sub.
Merger Sub refers to Holdings LP Merger Sub L.P., a Delaware limited
partnership which is a wholly-owned subsidiary of Allianz GP Sub and Holdings
LP GP and will ultimately merge into the Partnership.
Under the terms of the merger agreement, Allianz of America may assign any
or all of its rights and obligations or the rights and obligations of any of
its subsidiaries under the merger agreement to another direct or indirect
subsidiary of Allianz of America upon written notice to PIMCO Advisors so long
as the guarantee of those obligations by Allianz AG continues in effect.
PIMCO Advisors Related Parties
Pacific Life refers to Pacific Life Insurance Company, a California
corporation whose principal business is to act as a life insurance company.
PAM refers to Pacific Asset Management LLC, a Delaware limited liability
company and a wholly-owned subsidiary of Pacific Life. PAM is the sole member
of PHLLC. PAM's principal business is to indirectly hold interests in PIMCO
Advisors.
PacFin refers to Pacific Financial Products, Inc., a Delaware corporation, a
wholly-owned subsidiary of PAM and a limited partner of PIMCO Advisors.
PHLLC refers to PIMCO Holding LLC, a Delaware limited liability company, a
wholly-owned subsidiary of PAM whose principal business is to act as a general
partner of Partners GP.
Partners LLC refers to PIMCO Partners, LLC, a California limited liability
company, whose principal business is to act as the managing general partner of
Partners GP and a limited partner of PIMCO Advisors. Partners LLC is owned by
the current and former managing directors of Pacific Investment Management
Company.
Partners GP refers to PIMCO Partners, G.P., a California general
partnership, whose sole business is to act as a general partner of PIMCO
Advisors and the sole general partner of the Partnership. The two general
partners of Partners GP are PHLLC and Partners LLC.
Partnership refers to PIMCO Advisors Holdings L.P., a Delaware limited
partnership, the issuer of your NYSE-traded Partnership units. The Partnership
is a general partner of PIMCO Advisors, owning approximately 44% of the
outstanding PIMCO Advisors units.
PIMCO Advisors refers to PIMCO Advisors L.P., a Delaware limited partnership
which acts as an investment advisor, is the operating partnership of the
Partnership and owns several investment management companies including Pacific
Investment Management Company and Oppenheimer Capital.
Pacific Investment Management Company refers to Pacific Investment
Management Company, a Delaware general partnership and a subsidiary of PIMCO
Advisors.
Principal Offices
The principal executive offices of the Partnership, Partners GP and Partners
LLC are located at 800 Newport Center Drive, Newport Beach, California, 92660.
The phone number is (949) 219-2200. The principal executive offices of Pacific
Life, PAM and PHLLC are located at 700 Newport Center Drive, Newport Beach,
California, 92660. The phone number is (949) 219-3011.
21
<PAGE>
[CHART OF STRUCTURE OF PIMCO AND ALLIANZ ENTITIES PRIOR TO THE MERGER APPEARS
HERE]
*1% of Pacific Life is owned by an employee stock ownership plan.
The Merger: The Acquisition of the Partnership
Allianz of America will acquire the Partnership by way of the merger of
Merger Sub into the Partnership, with the Partnership as the surviving entity
in the merger. As a result of the merger, each of the Partnership units will be
converted into the right to receive the Unit Price, an amount in cash equal to
$38.75, without interest and subject to potential downward adjustment to not
less than $31.00 per unit ($31.78 per unit if the unitholder litigation
settlement is approved) as described below. In addition, each of the units of
general partner interest in the Partnership held by Partners GP will be
converted into the right to receive the Unit Price. As of the date of this
proxy statement, there were 50,060,365 Partnership units outstanding, held of
record by approximately 1,530 registered holders and 5,099 units of general
partner interest in the Partnership outstanding, held by our general partner,
Partners GP.
As a result of the merger, each limited partnership interest in Merger Sub
will be converted into a limited partnership interest in the Partnership and
the general partner interest in Merger Sub will be converted into a general
partner interest in the Partnership. Accordingly, Allianz of America,
indirectly through subsidiaries, will own all of the partnership interests in
the Partnership after the merger.
The merger will occur once all conditions in the merger agreement have been
met, including the approval and adoption of the merger agreement, the merger
and the other transactions contemplated by the merger agreement by holders of a
majority of the Partnership units, which is the subject of this proxy
statement. See "The Merger Agreement--Conditions to Obligations to Effect the
Transaction" for a description of the conditions. A certificate of merger will
be filed with the Secretary of State of the State of Delaware specifying the
effective time and date of the merger.
Adjustment to Unit Price. The Unit Price will be adjusted downward if PIMCO
Advisors' revenue base, expressed as a revenue run-rate, as of the calendar
month-end immediately prior to the
22
<PAGE>
Closing is less than 85% of the revenue run-rate on September 30, 1999. In such
event, the Unit Price will be reduced by 2% for each 1% that the revenue run-
rate falls below 85%, subject to a maximum reduction of 20%. If the settlement
of the unitholder litigation described in this proxy statement is approved by
the court, then the adjustment to the unit price for your units will be reduced
to 1.8% for each 1% decline below the 85% threshold, with a maximum reduction
of 18%. In no event will you receive less than $31.00 per unit ($31.78 if the
settlement is approved) if the merger is approved and consummated. See
"Litigation Challenging the Merger." As a result, the Unit Price can range
between $38.75 and $31.00 per unit or, if the settlement is approved, $31.78.
For example, if the settlement is approved:
<TABLE>
<S> <C> <C>
Revenue
Run-Rate Unit Price % Reduction
----------- ---------- -----------
85% or more $ 38.75 0%
80% 35.26 9%
75% or less 31.78 18%
</TABLE>
The "revenue run-rate" of PIMCO Advisors is calculated based on the
aggregate annualized investment advisory and subadvisory fees for all accounts
managed by PIMCO Advisors and its subsidiaries, and is calculated to exclude
the impact of market movements as described below. Revenue run-rate is
determined by multiplying the "adjusted assets under management" for each such
account by the applicable annual fees for such account at such date (excluding
performance-based fees). Adjusted assets under management for an account means
the amount of assets under management by PIMCO Advisors and its subsidiaries at
September 30, 1999, as adjusted for net cash flows (additions, withdrawals and
reinvestments), new accounts and terminated accounts. For these purposes,
assets are treated as withdrawn if notice has been received communicating an
intention to withdraw the assets (unless the notice has been revoked) or in the
case of registered investment company clients, if the shareholders of that
entity do not approve the assignment of the related advisory agreement which
will occur in connection with the transactions with Allianz of America.
The calculation of revenue run-rate excludes the effects of market
movements. In light of the historical growth of our largest subsidiary, Pacific
Investment Management Company, and the historical stability of its fixed income
customer base, it would require a significant and unanticipated change to our
previous client redemption history to cause a downward adjustment in the Unit
Price. There will be no downward adjustment in the Unit Price unless PIMCO
Advisors experiences net outflows of assets far in excess of any it has
experienced in the past. Increasing the length of time prior to the Closing
could increase the risk of loss of revenue run-rate and, therefore, the risk of
a downward adjustment to the Unit Price.
At September 30, 1999, the date of the baseline revenue run-rate
determination, the revenue run-rate was $780.8 million. In order for there to
be a downward adjustment to Unit Price, revenue run-rate would have to fall
below $663.7 million. As of January 31, 2000, the revenue run-rate was $783.5
million, representing 100.34% of its September 30, 1999 level.
The Subsequent Transactions
Immediately following the merger, subsidiaries of Allianz of America will,
in a series of transactions, acquire substantially all of the remaining
interests in PIMCO Advisors, other than those beneficially owned by PAM, which
will retain an interest in PIMCO Advisors. As a result of the transactions,
Allianz of America will control PIMCO Advisors, having acquired approximately
70% of the outstanding partnership interests of PIMCO Advisors. These
transactions are summarized below.
23
<PAGE>
Acquisition of Partners GP, PHLLC and Assets of Partners LLC
Immediately following the merger, Allianz GP Sub will acquire Partners GP
through an acquisition of the managing general partner interest in Partners GP
from Partners LLC and of the member interests of PHLLC, the other general
partner of Partners GP, owned by PAM in the transactions described below.
Allianz GP Sub will acquire from Partners LLC its 142,480 class A units of
limited partnership interest in PIMCO Advisors (the "Advisors Class A Units")
for cash in an amount per unit equal to the Unit Price, and will acquire
Partners LLC's general partner interest in Partners GP for nominal
consideration of $100 (a total consideration of $5,521,200 at a Unit Price of
$38.75).
Allianz GP Sub will then acquire PHLLC, the other general partner of
Partners GP. Prior to this acquisition, PHLLC will have distributed to PAM the
22,008,213 Advisors Class A Units beneficially owned by PAM through Partners
GP. The remaining 17,402,107 Advisors Class A Units which will then be owned by
PHLLC, directly and through its interest in Partners GP, are subject to the
terms of certain Employment Termination and Non-Competition Agreements entered
into in 1994 (the "1994 Employment Termination Agreements") under which PHLLC
is the obligor. These agreements provide for noncompete payments to be made to
certain current and former managing directors of Pacific Investment Management
Company equal to the distributions on, or sale proceeds of, the 17,402,107
Advisors Class A Units beneficially owned by PHLLC. Accordingly, while PHLLC
will directly and indirectly own 17,402,107 Advisors Class A Units, it will
have offsetting obligations under the 1994 Employment Termination Agreements to
pay all cash received with respect to those units. Allianz GP Sub will buy
PHLLC for nominal consideration of $100 and will assume the obligations under
the 1994 Employment Termination Agreements described below.
Following these acquisitions, Allianz of America will control PIMCO
Advisors, owning Partners GP and the Partnership, the two general partners of
PIMCO Advisors.
[CHART OF STRUCTURE FOLLOWING THE MERGER AND THE ACQUISITION OF THE GENERAL
PARTNER APPEARS HERE]
*1% of Pacific Life is owned by an employee stock ownership plan.
24
<PAGE>
Satisfaction of 1994 Employment Termination Agreements
As noted above, the 1994 Employment Termination Agreements require PHLLC to
pay to the current and former managing directors of Pacific Investment
Management Company who are parties to those contracts noncompete payments equal
to distributions on, or sales proceeds of, an aggregate of 17,402,107 Advisors
Class A Units. In connection with the merger, the eight managing directors who
are parties to such contracts and who are still acting as managing directors of
Pacific Investment Management Company and one former managing director of
Pacific Investment Management Company have agreed to amend their 1994
Employment Termination Agreements. Each person who has agreed to an amendment
will receive at Closing a payment equal to the Unit Price multiplied by the
number of units which relates to his 1994 Employment Termination Agreement (the
"ETA Payment"), in satisfaction of the noncompete payments payable under that
agreement. The amendments will provide that the noncompete arrangements in the
1994 Employment Termination Agreements will, with some modification remain
binding on the current and former managing directors. Each amendment will
provide:
. a covenant not to compete for five years from the Closing (or, for the
former managing director, for the remainder of the term of his
covenant);
. an agreement to repay the ETA Payment if the noncompete covenant is
violated during the five-year period; and
. the cessation of any further noncompete payments under the 1994
Employment Termination Agreement.
Except as provided below, payments will be made in cash and in stock of
Allianz AG. Two of the eight current managing directors of Pacific Investment
Management Company, who are not full-time employees of Pacific Investment
Management Company but who will continue as consultants, and the one former
managing director will receive their ETA Payments solely in cash. The aggregate
payment at the Closing to the current and former managing directors whose 1994
Employment Termination Agreements will be amended will have a value of $649.3
million, based on 16,231,637 Advisors Class A Units, a Unit Price of $38.75 and
an assumed value of $273.99 per share of stock of Allianz AG, the average
trading price for Allianz AG stock for the 30 days prior to public announcement
of discussions between Allianz AG and PIMCO Advisors. Of such aggregate
amounts, at the Closing, Mr. Thompson, the Chief Executive Officer of Pacific
Investment Management Company, and Mr. Gross, the Chief Investment Officer of
Pacific Investment Management Company, will receive ETA Payments in cash and
Allianz AG stock with an aggregate value of $42.7 million and $251.3 million,
respectively (assuming a Unit Price of $38.75 and a value of $273.99 per share
of Allianz AG stock as described above). Because a portion of the payments will
be made in stock of Allianz AG, the value of these payments will fluctuate
based on the price per share of that stock. As March 2, 2000, the trading price
of the Allianz AG stock was $346.94 per share, increasing the aggregate value
of the ETA Payments to $675.9 million, of which Messrs. Thompson and Gross will
receive $45.0 million and $264.7 million, respectively.
The 1994 Employment Termination Agreement of one former managing director of
Pacific Investment Management Company will not be amended, and he will not
receive any payments at Closing with respect to his agreement. Following the
Closing, PHLLC, which will then be an indirect subsidiary of Allianz of
America, will continue to make noncompete payments under that agreement to that
former managing director. Following the acquisition of Partners GP described
above, Allianz of America will cause Partners GP to retain a number of Advisors
Class A Units equal to those with respect to which payments are due under the
remaining 1994 Employment Termination Agreement. In the Advisors Merger
described below, those units will be converted into new Class B Units of
25
<PAGE>
limited partnership in PIMCO Advisors (the "Advisors Class B Units"). The new
Advisors Class B Units will have a liquidation preference equal to the Unit
Price and include the right to receive a distribution equal to 7.5% of the Unit
Price per annum, payable quarterly. Unless the Advisors Class B Units are
redeemed on the terms described below, through the period ending in November
2036, PHLLC, which will then be a subsidiary of Allianz of America, will make
noncompete payments based on the distributions from those new Advisors Class B
Units. Commencing five years after the Closing, the former managing director
may require that any or all Advisors Class B Units on which his employment
termination payments are based be redeemed at the Unit Price (plus accrued and
unpaid distributions) by PIMCO Advisors, and commencing ten years after the
Closing, or earlier upon certain circumstances, PIMCO Advisors may redeem the
Advisors Class B Units at the Unit Price (plus accrued and unpaid
distributions) in its discretion. Upon any such redemption, the redemption
price will be paid to the former managing director who is a party to the
remaining 1994 Employment Termination Agreement, in accordance with that
agreement. In addition, the former managing director may elect to receive that
cash immediately upon the execution of an amendment similar to those described
above in which the managing directors agree to extend the duration of the non-
competition provisions.
Contributions to PacPartners
Following the acquisitions of PHLLC and Partners GP, Allianz GP Sub and PAM
will make or cause to be made contributions to a new limited liability company,
PacPartners, which will serve as the general partner of PIMCO Advisors
following the completion of the transactions under the merger agreement.
Allianz GP Sub will cause PHLLC to contribute 16,231,637 Advisors Class A Units
and the Advisors GP Unit (all of the units acquired from Partners LLC, PHLLC
and Partners GP other than those to be held at Partners GP following the
Closing) in exchange for 100% of the Class A Interests of PacPartners.
PAM will then contribute to PacPartners its 22,838,416 Advisors Class A
Units in exchange for 100% of the Class E Interests of PacPartners. These
Advisors Class A Units comprise all of the Advisors Class A Units PAM
beneficially owns (directly and through subsidiaries) other than those owned by
its corporate subsidiary PacFin. If $130 million in nonrecourse indebtedness
(the "Contributed Note") is not repaid by Partners GP then, subject to the
consent of lenders to Partners GP, PAM will contribute to PacPartners the
Advisors Class A Units which are subject to the Contributed Note. The number of
Advisors Class A Units to be contributed may be reduced by 15,741 if consents
of certain partially owned limited partnership subsidiaries of PAM are not
obtained. Under those circumstances, the units not contributed will be
converted to cash at the Unit Price in the Advisors Merger along with all other
units in those partially owned limited partnership subsidiaries.
As described below, in the Advisors Merger, PacPartners will receive a
number of new Advisors Class E Units based on the number of Advisors Class A
Units contributed by PAM to PacPartners. The Class E Interests of PacPartners
owned by PAM will entitle PAM to receive distributions equal to the
distributions received by PacPartners on the Advisors Class E Units, less any
required principal or interest payments on the Contributed Note, if it remains
outstanding, and certain expenses of PacPartners.
Contributions to Advisors Merger Sub
Immediately after the formation of PacPartners, in preparation for the
Advisors Merger, PacPartners will contribute its Advisors Class A Units to
Advisors Merger Sub, a wholly-owned
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limited liability company subsidiary of Allianz GP Sub, which, at that time,
will hold cash received from Allianz of America in an amount sufficient to
satisfy all of its obligations in the Advisors Merger.
PacPartners will contribute its Advisors Class A Units to Advisors Merger
Sub in exchange for Class A Units and Class E Units of limited partner interest
in Advisors Merger Sub, with these Class A and Class E Units being issued in
proportion to the Class A and Class E Interests in PacPartners owned by PHLLC
and PAM, respectively. PacPartners will also contribute its PIMCO Advisors
general partner unit to Advisors Merger Sub for an Advisors Merger Sub GP Unit.
Allianz of America will cause the Partnership to contribute its Advisors GP
Units (49,564,071 as of October 31, 1999) to Advisors Merger Sub in exchange
for Advisors Merger Sub Class A Units.
PAM will cause PacFin to contribute all of its 14,380,217 Advisors Class A
Units to Advisors Merger Sub in exchange for 1,438 Class E units of limited
liability company interest in Advisors Merger Sub (representing one Class E
unit for each 10,000 Advisors Class A Units contributed).
[CHART OF STRUCTURE PRIOR TO THE ADVISORS MERGER APPEARS HERE]
*1% of Pacific Life is owned by an employee stock ownership plan.
Advisors Merger
Following the above described transactions, Advisors Merger Sub will merge
into PIMCO Advisors, with PIMCO Advisors being the surviving entity in the
merger (the "Advisors Merger").
In the Advisors Merger:
. All Advisors Class A Units, other than those owned by Advisors Merger
Sub and Partners GP (which will then be an indirect subsidiary of
Allianz of America), will be converted into the right to receive cash at
the Unit Price.
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. The Advisors Class A Units and the one Advisors GP Unit held by Advisors
Merger Sub will be cancelled. The 1,170,470 Advisors Class A Units held
by Partners GP will be converted into the new Class B Units of PIMCO
Advisors described above.
. Advisors Merger Sub Class A Units held by PacPartners and the
Partnership will be converted into new Class A Units of PIMCO Advisors.
. The Class E Units in Advisors Merger Sub held by PacFin and PacPartners
will be converted into new Class E Units of limited partnership in PIMCO
Advisors ("Advisors Class E Units").
. PacPartners will be admitted as the general partner of PIMCO Advisors.
. All Class C Units of PIMCO Advisors (owned by a subsidiary of PIMCO
Advisors) will remain outstanding. All Class D Units of PIMCO Advisors
(owned by the managing directors of the PIMCO Equity Advisors division)
will remain outstanding.
[CHART OF STRUCTURE FOLLOWING THE CLOSING OF ALL CONTEMPLATED TRANSACTIONS
APPEARS HERE]
*1% of Pacific Life is owned by an employee stock ownership plan.
New Advisors Class E Units
As a result of the Advisors Merger, PAM, through its subsidiary PacFin and
its interest in PacPartners, will maintain its investment in PIMCO Advisors
through beneficial ownership of Advisors Class E Units. The Advisors Class E
Units will be entitled to distributions which, on an annual basis, in the
aggregate will equal:
. $1.05 per Advisors Class A Unit previously beneficially owned by PAM, a
fixed return representing the historical returns from PIMCO Advisors'
retail and equity asset management business; plus
. 20% of the adjusted operating profit available for distribution
("Adjusted OPAD") of Pacific Investment Management Company.
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For these purposes, the Adjusted OPAD of Pacific Investment Management
Company will be calculated in accordance with the provisions of the Pacific
Investment Management Company Profit Sharing Plan in effect at the Closing,
before payment of profit sharing bonuses under that plan and without taking
into account:
. income attributable to performance fees which are subject to forfeiture;
. deductions for annual compensation paid to employees above $450,000,
adjusted for inflation after the year 2000;
. deductions attributable to certain option and deferred compensation
benefits; and
. severance and executive retention payments paid pursuant to the merger
agreement.
The calculation will also exclude the effect of:
. certain costs and revenues associated with the provision of management
or subadvisory services with respect to certain assets; and
. the subsidy, if any, by Allianz of America to the Pacific Investment
Management Company bonus pool in 2000 through 2002.
The distributions with respect to the Advisors Class E Units were designed
to limit PAM's return to a variable return based on the operating profit of
PIMCO Advisors' fixed income asset management business, plus a fixed return
representing PAM's historical returns from PIMCO Advisors' retail and equity
asset management business. Allianz AG negotiated a fixed return for the retail
and equity business in order to provide it with the flexibility it requires to
restructure the PIMCO Advisors' retail and equity asset management business and
combine it with existing Allianz AG equity asset management businesses.
Pursuant to the agreements between Allianz AG and the Pacific Investment
Management Company managing directors, Allianz AG is committed to continue to
permit the Pacific Investment Management Company fixed income business to
operate autonomously. More details on the arrangements with Pacific Investment
Management Company are found in "Special Factors--Financial Interests of
Certain Persons in the Transaction--Partners GP--Partners LLC."
In connection with the Closing, Allianz of America and PAM will enter into a
put and call agreement providing for the possible disposition of the Advisors
Class E Units. See "Special Factors--Financial Interests of Certain Persons in
the Transaction--Partners GP--PHLLC and PAM."
Treatment of Employee Benefit Awards
1998 Unit Incentive Plan. In connection with the Closing, all outstanding
unit options under the 1998 Unit Incentive Plan of PIMCO Advisors Holdings L.P.
and PIMCO Advisors L.P. (the "1998 Unit Incentive Plan"), whether exercisable
or not, will be cancelled and terminated and will thereafter represent the
right to receive a cash payment equal to the excess of the Unit Price over the
exercise price per unit of such unit option, multiplied by the number of units
subject to such unit option, together with interest on such amount at 8% per
annum from the effective time of the merger through the date such payment is
made. It is anticipated that such payment will be made approximately 100 days
following the Closing. Based on the number of outstanding unit options as of
January 31, 2000, and assuming a Unit Price of $38.75, it is expected that an
aggregate of $150 million, together with interest on such amount at 8% per
annum from the effective time of the merger through the date such payment is
made as described in the preceding sentence, will be paid in settlement of
these unit options following the Closing. Deferred unit awards under the 1998
Unit Incentive Plan will, after the
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<PAGE>
Closing, reflect the right to receive, on the vesting date of such deferred
unit award, cash equal to the Unit Price, multiplied by the number of units
underlying such award, plus interest at 8% per annum from the Closing through
the vesting date of such awards. Deferred unit awards will continue to vest
according to their existing vesting schedules. For additional discussion of the
1998 Unit Incentive Plan, see "Special Factors--Financial Interests of Certain
Persons in the Transaction--The Partnership--Unit Option Awards" and "--
Partners GP--Partners LLC--Unit Options and Deferred Compensation Plan."
Executive Deferred Compensation Plan. The Executive Deferred Compensation
Plan of PIMCO Advisors Holdings L.P. and PIMCO Advisors L.P. (the "Deferred
Compensation Plan") provides for mandatory and elective deferrals of
compensation, as well as deferral of awards of deferred restricted units.
Amounts deferred are credited to a trust and invested in Advisors Class A
Units. In connection with the Closing, the Advisors Class A Units held by the
trustee, other than those related to deferred restricted unit awards, will be
exchanged for cash in an amount per unit equal to the Unit Price. Under the
terms of the plan, any unvested account balances reflecting discount investment
or reinvestment of deferred compensation will vest at the Closing. Each
Advisors Class A Unit representing an unvested deferred restricted unit held in
the trust generally will not vest, and will be exchanged by the plan trustee
for a note from Allianz of America with a principal balance equal to the Unit
Price multiplied by the number of unvested units. The note will bear interest
at 8% per annum and be payable as and when the deferred restricted units would
have vested under their existing vesting schedules. Following the Closing, it
is expected that plan participants' account balances will be measured by, and
the assets held by the plan's trustee will be invested in, such investments as
may be individually directed by each participant. For additional discussion of
the Deferred Compensation Plan, see "Special Factors--Financial Interests of
Certain Persons in the Transaction--The Partnership--Deferred Compensation
Plan."
Financial Interests of Certain Persons in the Transaction
The merger agreement also sets forth additional benefits that will be
received by the executive officers and management board members of the
Partnership as well as the members of PHLLC and Partners LLC, who own Partners
GP, our general partner. These interests include new employment and consulting
agreements and retention payments intended to maintain those employment and
consulting relationships. These persons will receive aggregate cash payments of
up to $470.7 million and 182,488 shares of Allianz AG stock, payable in most
instances over a five year period contingent on continued employment in
employment-related compensation, as well as aggregate closing payments of
$614.5 million in cash and 364,977 shares of Allianz AG stock in settlement of
pre-existing unit based entitlements in connection with the transactions. The
shares of Allianz AG stock described above would have an assumed aggregate
value of $50.0 million and $100.0 million, respectively, at $273.99 per share
which was the average closing price for such stock for the 30 days prior to the
public announcement of discussions between Allianz AG and PIMCO Advisors. As of
March 2, 2000, the closing price of the Allianz AG stock was $346.94 per share,
increasing the value of such stock to $63.3 million and $126.6 million,
respectively. Each of these interests is described more completely in "Special
Factors--Financial Interests of Certain Persons in the Transaction."
Payment of Expenses
It is currently anticipated that the expenses of PIMCO Advisors related to
the merger and the Subsequent Transactions will be approximately $30 million to
$35 million, of which $20 million to $25 million or $0.18 to $0.22 per
Partnership unit, will be borne by PIMCO Advisors after taking
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into account the obligations under the merger agreement of PAM and Allianz of
America to pay a portion of those expenses. These transaction expenses will
reduce PIMCO Advisors' operating profit available for distribution and,
therefore, the distributions payable on your Partnership units prior to the
Closing, or if the Closing does not occur, during calendar year 2000. See "The
Merger Agreement--Certain Covenants--Expenses."
Estimated fees and expenses (rounded to the nearest thousand) to be incurred by
the Partnership or PIMCO Advisors in connection with the merger and the
Subsequent Transactions are as follows:
<TABLE>
<S> <C>
Investment Banking Fees and Expenses........................... $11,200,000
SEC Filing Fees (Partnership Proxy)(1)......................... 384,000
Legal Fees and Expenses(1) .................................... 2,000,000
Printing and Solicitation Fees and Expenses (Partnership
Proxy)(1)..................................................... 250,000
SEC Filing Fees, Legal Fees, Printing and Solicitation Fees and
Expenses (Fund Proxies)(1).................................... 18,000,000
Accounting Fees................................................ 500,000
Miscellaneous Fees(1).......................................... 500,000
-----------
$32,834,000
===========
</TABLE>
- --------
(1) Portions of these expenses will not be borne by the Partnership or PIMCO
Advisors but will be paid by Allianz of America and PAM. In particular,
pursuant to the terms of the merger agreement, PAM and Allianz of America
have agreed to each bear 50% of the expenses incurred by the Partnership in
connection with the solicitation of the Partnership's unitholders, and
Allianz of America has agreed to bear 50% of the expenses incurred by the
Partnership in connection with the solicitation of shareholders of the
registered investment companies.
No Appraisal Rights
Holders of the Partnership units are not entitled to dissenting unitholders'
appraisal rights or other similar rights under Delaware law or the
Partnership's partnership agreement.
Benefits and Detriments to Holders of Partnership Units
Our general partner believes that the merger will result in the following
benefits to you as a holder of Partnership units: realizing the value of your
investment in the Partnership in cash at a price which is higher than the
historical trading price of the Partnership units and which represents a
substantial premium to the market price for the Partnership units prior to the
reporting by the press of discussions between the Partnership and Allianz AG
and eliminating the risk of a decline in the value of your investment in the
Partnership.
The primary detriment to you, as a holder of Partnership units, is that you
will cease to have any ownership interest in the Partnership and will cease to
participate in future earnings or growth, if any, of the Partnership or benefit
from increases, if any, in the value of the Partnership. In addition, most
holders of Partnership units are expected to recognize a taxable gain upon the
completion of the merger.
Plans for the Partnership After the Merger
Immediately following the completion of the merger and the other
transactions contemplated by the merger agreement, the Partnership will be an
intermediate holding company, 100% owned by Allianz GP Sub and having Advisors
Class A Units as its only assets. The Partnership will have no
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<PAGE>
subsidiaries. Although Allianz of America currently has no definitive plans or
proposals for an extraordinary transaction involving the Partnership or a
restructuring of the Partnership, Allianz of America may, as part of
rationalizing the holding company structure through which it controls PIMCO
Advisors or for other reasons, cause the transfer of such Advisors Class A
Units to another affiliate of Allianz of America, wind up and dissolve the
Partnership or take similar steps. In any event, it is not expected that the
current officers of the Partnership will continue to serve, because the
Partnership will not require any management personnel separate from the
general partner of the Partnership. Allianz of America will control the
Partnership and PIMCO Advisors after the Closing, and PAM will not have the
authority to direct actions taken by either the Partnership or PIMCO Advisors.
However, PacPartners and PIMCO Advisors will not be able to take specified
actions without PAM's prior approval. See also the information under
"Summary--Certain Effects of the Merger" and "Special Factors--Financial
Interests of Certain Persons in the Transaction--Partners GP--PHLLC and PAM--
Continuing Investment in PIMCO Advisors."
Conduct of Business of the Partnership if the Merger is not Consummated
If the merger and the Subsequent Transactions are not consummated, the
business and operations of the Partnership are expected to be conducted
substantially as currently conducted.
Accounting Treatment
The merger will be accounted as a purchase under U.S. generally accepted
accounting principles.
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SPECIAL FACTORS
Recommendation;
Reasons For The Merger
Recommendation
Our general partner and its general partners, Partners LLC and PHLLC, as
well as PHLLC's parent entities PAM and Pacific Life, believe that the merger
and the terms of the merger agreement are fair and in the best interests of the
Partnership and our unaffiliated unitholders. Accordingly, Partners LLC and
PHLLC caused our general partner to approve the merger agreement, the merger
and the other transactions contemplated by the merger agreement and our general
partner, Partners LLC, PHLLC, PAM and Pacific Life recommend approval of the
merger agreement, the merger and other transactions contemplated by the merger
agreement by the limited partnership unitholders of the Partnership as set
forth below.
Reasons for the Merger
We have pursued a growth strategy to increase the amount and diversification
of assets under management by PIMCO Advisors and its subsidiaries. We have
pursued that strategy both through internal investment and through targeting
existing investment managers and selectively acquiring or hiring those that
have demonstrated strong investment performance or who are expected to provide
complementary products and investment philosophies to PIMCO Advisors' existing
investment management groups.
We began exploring opportunities for expansion into the European market in
particular because with the prospect of the adoption of the Euro, we believed
that the time was appropriate to take advantage of significant new
opportunities in the European fixed income market. We believe the adoption of
the Euro presents the opportunity to build a fixed income market in Europe with
significantly more breadth and depth than has historically been the case.
Historically, the European fixed income market has been based on country
specific economic analysis and currency trends. The European fixed income
market which is currently developing presents the opportunity for Pacific
Investment Management Company to apply its expertise and proprietary methods to
this new and growing market.
Through this process, we have come to believe that the failure to capitalize
on this new market opportunity could have adverse impacts on our business:
. Recent mergers and combinations in the financial services industry are
producing large and powerful global companies able to provide a full
range of financial services through well developed retail distribution
channels.
. While PIMCO Advisors has a leading position in the domestic fixed income
market, its presence in the equity market and retail distribution is
relatively small compared to many of our competitors.
. While the US market is still the largest in the world, significant
growth is taking place outside the US, particularly in Europe.
Based on the globalization of the securities markets, the increasing
consolidation of financial services companies resulting in large and powerful
global players and the opportunities presented by financial changes in Europe,
we believe that the continued future success of PIMCO Advisors will depend in
part on becoming a global financial services company with significant depth in
overseas markets, particularly in Europe.
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<PAGE>
We also came to believe that strategies necessary for future growth entailed
increasing risks:
. Expansion outside the U.S. requires incurring substantial costs for
building the infrastructure and large-scale retail distribution channels
needed to compete effectively in these markets on a meaningful scale.
Our partnership structure makes this difficult, as these costs would
have a significant negative impact on our current distributions, while a
return on investment would not be expected in the near term. PIMCO
Advisors has been pursuing offshore growth in recent years with
expansions into London, Tokyo, Singapore, Sydney and other financial
centers, which have shown some promise but have also been expensive and
presented challenges to obtaining the scale and level of distribution
necessary.
. While the PIMCO Equity Advisors division achieved significant investment
success and business growth during the last year (assets under
management have grown from $4.5 billion to $9.6 billion from inception
at January 4, 1999 through December 31, 1999), conditions in the equity
markets generally have disfavored our much larger value and growth at a
reasonable price investment styles. Assets managed by Oppenheimer
Capital, a value manager, Cadence Capital Management, a manager in the
growth at a reasonable price style, and NFJ Investment Group, another
value manager, together comprised $64.5 billion of assets under
management at September 30, 1999, which represented 76.1% of our equity
assets and 24.9% of our total assets under management at that date.
Oppenheimer Capital has been experiencing net asset outflows for seven
consecutive quarters through December 31, 1999.
These challenges to internal growth led us to believe that long term
success, particularly internationally, made it important to form a strategic
alliance or merge with a suitable global partner from among the larger European
and global financial services companies, where PIMCO Advisors could combine its
expertise with a partner's strength in the European market.
We have from time to time engaged in discussions with global investment
banks and other investment advisors and financial services companies. In
pursuit of this goal to expand globally and into Europe in particular, these
discussions included exploring the possibility of expanding into foreign
markets through a business combination. In pursuing this strategy, we worked
closely with PIMCO Advisors' financial advisor, Lazard Freres & Co. LLC, to
better understand the European and global investment advisor and financial
services markets and the strategic alternatives for an expansion by PIMCO
Advisors into the European market. Our discussions are summarized in the
following section, "--Background of the Transaction."
Factors that we considered in evaluating prospects included:
. A demonstrated ability to distribute investment products in targeted
markets;
. Complementary investment management and product capabilities providing
opportunities for operating synergies;
. Commitment to the investment management business, including the
willingness to share access to customers, commit resources and leverage
corporate relationships;
. The cultural "fit" between the companies, including track record with
other joint ventures, long or short-term orientation and the extent and
the nature of the control it would expect to exercise;
. Whether it desired to be a regional, European or global player; and
. Investment management operations outside of Europe.
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<PAGE>
While we did not enter into these discussions with the intention of selling
the Partnership, neither did we rule out the possibility that a sale could
produce the best value for our unitholders. These discussions did not result in
any offers, other than from Allianz AG. Among other things, our structure as a
partnership made many otherwise potentially attractive combinations
unattractive because of tax and structural concerns. For example, any
transaction involving the exchange of the stock of a buyer either for your
units or for the assets of the Partnership or PIMCO Advisors generally would
have been a taxable event for you without providing you (or the Partnership or
PIMCO Advisors) with any cash to pay the related tax liabilities. This is
because such an exchange would have been treated as a taxable disposition of
either your units or the assets of the Partnership or PIMCO Advisors, resulting
in the recognition of taxable gain without the receipt of cash attributable to
such gain. In addition to these significant tax issues, a non-cash transaction
with a foreign buyer would be problematic if (as is the case with Allianz AG)
the buyer did not have securities traded in the United States. Also, such a
transaction could result in our unitholders receiving shares which reflected a
very different investment--a large global financial services company (Allianz
AG has significant worldwide insurance operations) of which our investment
advisory business would be only a portion. Finally, it was imperative that a
transaction result in the right business "fit" between parties to produce the
synergies necessary to achieve the highest value for the PIMCO Advisors
business in any combination, whether a sale or purchase.
As part of this process we considered appropriate valuations for the
Partnership's equity. In consultation with our advisors, we examined the
valuation metrics and methodologies described below under "--Opinion of Our
Financial Advisor," which include peer group analysis, valuations and market
premiums found in other transactions in our industry, and valuations based on
discounted cash flows.
We believe the Allianz transaction meets these criteria. We believe the sale
of the Partnership to Allianz of America as contemplated by the merger
agreement is in the best interests of our unitholders. In determining to
approve and recommend unitholders' approval of the merger and the merger
agreement, and in reaching its determination that the merger and the merger
agreement are fair to and in the best interests of the Partnership's limited
partnership unitholders, our general partner, in consultation with the
Partnership's executive officers, considered the following:
1. Our review and analysis of PIMCO Advisors' business, current and future
financial condition, current earnings and earnings prospects, and the
competitive business environment facing PIMCO Advisors, noting in
particular the development of global financial services companies
through mergers and combinations, the challenges facing our equity and
retail distribution businesses and the growth of the European market
which presents significant new, although uncertain, opportunities for
our investment advisory business;
2. Historical market prices of the Partnership's limited partnership units
and the fact that the per unit consideration of $38.75 to be paid in the
merger represents a premium for the publicly traded limited partnership
units of approximately 31% over the unit price on July 6, 1999, the last
trading day before the press reports of discussions between PIMCO
Advisors and Allianz AG began affecting the Partnership's unit price,
approximately 27% over the unit price on October 4, 1999, the last
trading day before the Partnership announced negotiations with Allianz
AG, approximately 12% over the unit price on October 29, 1999, the last
trading day prior to the execution of the merger agreement and
approximately 30% over the 200 day moving average of the closing price
of the Partnership units prior to July 7, 1999;
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<PAGE>
3. Our conclusion, after review and analysis, that long term success in the
investment management business requires significant global growth and
presence, particularly in Europe, which we concluded we were unlikely to
achieve in the near term through internal growth, due in part to
significant costs that would be required to establish a substantial
foreign presence.
4. A review of the following possible alternatives to the merger:
. the prospects of continuing operations as they now stand and the
risks in the operation of our current business, including challenges
in competing with large global financial service providers in an
increasingly consolidated industry, challenges to the growth and
expansion of our equity operations and the risks associated with the
global expansion considered necessary to our future prospects;
. the costs of building a European operation through internal growth
alone, and chances of success in doing so;
. forming a joint venture with or acquiring European or global asset
management companies;
. the value to unitholders of the alternatives and the timing and
likelihood of actually achieving additional value from these
alternatives;
. structural and tax impediments to certain alternative transactions
due to our organization as a partnership; and
. the possibility that PIMCO Advisors' future performance might result
in a lower unit price than the merger consideration;
5. Our conclusion, following the investigation of the foregoing
alternatives which did not involve a sale of the business, that the
transaction proposed by Allianz AG produced the best value to our
unitholders;
6. The financial presentation of Salomon Smith Barney, including its
opinion, dated October 29, 1999, as to the fairness from a financial
point of view of the consideration to be received by the public holders
of Partnership Units and certain holders of Advisors Class A Units in
connection with the merger, as described below in "--Opinion of Our
Financial Advisor";
7. The opinion of McLagan Partners, Inc., dated October 29, 1999, which
concluded that the proposed management retention incentive arrangements
for executives of Pacific Investment Management Company are reasonable
and suitable to achieve the objective of retaining and motivating these
employees; and
8. The likelihood of consummation of the merger and the other transactions
contemplated by the merger agreement, including an assessment of the
risks associated with obtaining necessary federal and state regulatory
approvals and the possibility of the merger and the other transactions
contemplated by the merger agreement not being consummated even if
approved by unitholders.
The opinion of Salomon Smith Barney is dated as of October 29, 1999 and
opines as to the fairness as of that date only. Salomon Smith Barney is not
obligated to update its opinion. Events could occur prior to the date of the
special meeting which could result in a different valuation or conclusion if
the opinion was reissued on that date. In the event that there are material
changes to the
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<PAGE>
terms of the proposed transactions or other material changes or conditions
affecting the Partnership or its business, our general partner will consider
the advisability of requesting an updated fairness opinion at that time. As of
the date of this proxy statement, the general partner does not believe any such
material changes have occurred.
In view of the wide variety of factors considered in connection with our
evaluation of the merger agreement, we did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the foregoing
factors. We viewed our position and recommendation as being based on the
totality of the information presented to and considered by us. However, the
financial measures given particular weight by us included the 31% premium to
the trading price of the Partnership units the day prior to the first press
reports about the proposed transaction as discussed above, and the discounted
cash flow analysis provided by Salomon Smith Barney, which concluded that the
Unit Price was within a range of values from $28.82 to $45.57 per Partnership
unit implied by its analysis. See "--Opinion of Our Financial Advisor." We
believe a discounted cash flow analysis is a good measure of the Partnership's
and PIMCO Advisors' value in light of their partnership structures which
provide for continuous distribution of cash flow through quarterly
distributions.
Financial measures that we considered but did not believe to be as relevant
to a determination of fairness include (i) valuation based on net book value,
because we believe that the net book value of the Partnership and PIMCO
Advisors, as determined under generally accepted accounting principles, is not
indicative of market value because of the Partnership's significant goodwill
and the continuous distribution of cash flows to the limited partners which
prevents net book value from adequately measuring potential growth of the
business and (ii) analysis of going concern value and of liquidation value,
because the value-added assets of the Partnership and PIMCO Advisors are its
portfolio managers, not traditional hard assets which can be sold.
While the foregoing discussion of the information and factors we considered
is not intended to be all-inclusive, it does constitute a summary of the
material information we considered in determining to recommend approval of the
merger agreement, the merger and the other transactions contemplated by the
merger agreement.
We believe the proposed transaction is procedurally fair to the unaffiliated
unitholders. The Partnership's partnership agreement provides that our general
partner has the exclusive right and full power to manage and control the
business of the Partnership and provides that our general partner may approve
or disapprove, without a vote of limited partners, a merger in which the
Partnership is the surviving entity. The Partnership's partnership agreement
provides that our general partner may resolve all conflicts of interest in good
faith and may rely on a fairness opinion and other expert opinions in doing so.
Having received the fairness opinion described above and taking into account
the other matters described in this proxy statement, in approving the proposed
transaction our general partner did not retain an independent and disinterested
third party to act solely on behalf of unaffiliated unitholders or submit the
decision for approval of a board of independent persons. In accordance with the
Partnership's partnership agreement and Delaware law, the transactions were
approved by our general partner, Partners GP, through action of its two owners,
Partners LLC and PHLLC (through board approval of its member, PAM). The
Partners GP partnership agreement requires that both owners approve mergers
involving the Partnership.
Additionally, our general partner determined to put the matter to a vote of
the limited partners. While the Partnership's partnership agreement does not
require that the proposed merger be put to a vote, in light of the significance
of the transaction to the Partnership and its unitholders, as well as conflicts
of interest of our general partner and its owners inherent in the transaction,
our general partner has decided to seek the approval of the unitholders.
Section 17-211(b) of the Delaware
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Revised Uniform Limited Partnership Act provides that, unless otherwise
provided in the partnership agreement, a merger or a consolidation shall be
approved by all general partners and by limited partners who own more than 50%
of the then current percentage in the profits of the limited partnership owned
by all limited partners. Because every limited partner will be entitled to
vote, the vote is not limited to unitholders unaffiliated with our general
partner. However, as of February 29, 2000, affiliates of our general partner
held less than 1% of the Partnership's units and, as a result, are not expected
to significantly impact the vote.
Background of the Transaction
As an ongoing part of our growth strategy, we have from time to time engaged
in discussions with global investment banks and other investment advisors and
financial services companies. In furtherance of our desire to expand globally
and into Europe in particular, these discussions included exploring the
possibility of expanding into foreign markets through a business combination.
For more about this strategy and the reasons for the merger, see "--
Recommendation; Reasons for the Merger."
In pursuing this strategy, PIMCO Advisors worked closely with its financial
advisor, Lazard Freres, to better understand the European and global investment
advisor and financial services markets. In particular, on July 15, 1998, Lazard
Freres made a presentation to Mr. William Thompson, the Chief Executive Officer
and a managing director of Pacific Investment Management Company and the Chief
Executive Officer of Partners LLC, certain other managing directors of Pacific
Investment Management Company and Mr. Kenneth Poovey, Chief Operating Officer
of the Partnership and PIMCO Advisors. The presentation of Lazard Freres
focused on the European investment advisor and financial services markets and
various strategic alternatives for an expansion by PIMCO Advisors into the
European market. In addition, the presentation explored the business objectives
to be sought in an expansion into the European market and discussed the
criteria to be employed for evaluation of potential business partners in the
event that the strategic alternative for expansion into the European market
involved a business combination. The presentation concluded by reviewing
potential candidates for a business combination that would allow PIMCO Advisors
to expand into the European market.
Commencing in January 1998 and continuing through the summer of 1999,
representatives of PIMCO Advisors engaged in discussions with global financial
services firms which did not result in any offers. Among other things, our
structure as a partnership made many otherwise potentially attractive
combinations unattractive because of tax and structural concerns. For example,
any transaction involving the exchange of the stock of such a firm either for
your units or for the assets of the Partnership or PIMCO Advisors generally
would have been a taxable event for you without providing you (or the
Partnership or PIMCO Advisors) with any cash to pay the related tax
liabilities. This is because such an exchange would have been treated as a
taxable disposition of either your units or the assets of the Partnership or
PIMCO Advisors, resulting in the recognition of taxable gain without the
receipt of cash attributable to such gain. In addition to these significant tax
issues, a non-cash transaction with a foreign buyer would be problematic if (as
is the case with Allianz AG) the buyer did not have securities traded in the
United States. Also, such a transaction could result in our unitholders
receiving shares which reflected a very different investment--a large global
financial services company (Allianz AG has significant worldwide insurance
operations) of which our investment advisory business would be only a portion.
Finally, it was imperative that a transaction result in the right business
"fit" between parties to produce the synergies necessary to obtain the highest
value for the PIMCO Advisors business in any combination, whether a sale or
purchase.
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In the summer of 1998, representatives of PIMCO Advisors contacted Dr.
Joachim Faber, then Chief Financial Officer and Member of the Board of
Management of Allianz Versicherungs--AG, to discuss the possibility of an
acquisition by PIMCO Advisors of Allianz AG's asset management operations. At
that time, Dr. Faber expressed that Allianz AG was not in a position to engage
in such discussions. In September 1998, Dr. Faber contacted Mr. Poovey and
expressed an interest in exploring a possible transaction between Allianz AG
and PIMCO Advisors.
Between October 1998 and July 1999, various representatives of PIMCO
Advisors and Allianz AG engaged in a series of meetings at which the parties
explored the possibilities for a combination of the two companies. The
meetings, which took place in California, New York and Germany, enabled Allianz
AG and PIMCO Advisors to learn about each other's businesses, asset management
operations, corporate cultures and management styles.
During these discussions, representatives of Allianz AG indicated their
desire to explore a transaction structure that would enable Allianz AG to
acquire majority ownership and control of PIMCO Advisors. The parties discussed
a transaction which would involve the acquisition in a cash transaction by
Allianz AG of the Partnership's 44% interest in PIMCO Advisors and
substantially all of the other interests in PIMCO Advisors other than those
beneficially owned by PAM, which the parties understood not to be available for
sale. Representatives of PIMCO Advisors told representatives of Allianz AG in
meetings held on March 2 and 3, 1999, that terms of a potentially acceptable
transaction would likely include a unit price in the range of $40, continued
autonomy in the management of PIMCO Advisors' investment management
subsidiaries, Pacific Investment Management Company's assuming global
responsibility for fixed income asset management for the combined companies,
and the establishment of appropriate employee retention and incentive
arrangements in order to preserve the business of PIMCO Advisors.
On May 21, 1999, PIMCO Advisors retained Lazard Freres to advise it in
connection with strategic discussions with Allianz AG.
In June 1999, representatives of Putnam, Lovell, De Guardiola & Thornton,
Inc., the financial advisor retained by Allianz AG, discussed with Mr.
Thompson, Mr. William Gross, Chief Investment Officer and Managing Director of
Pacific Investment Management Company, and Mr. Poovey the terms outlining a
possible transaction with Allianz AG. The proposal contemplated the purchase
for cash of all of the interests in PIMCO Advisors other than those indirectly
beneficially owned by PAM at a unit price in the range of $36.
On July 7, 1999, the press first reported that discussions about a potential
transaction were occurring between PIMCO Advisors and Allianz AG. The day
before the press report, the closing price of the Partnership units was $29.56
per unit.
On July 13, 1999, the Partnership, PIMCO Advisors and Allianz AG entered
into a confidentiality agreement, contemplating the exchange of confidential
financial and operating information between the parties.
On July 14 and 15, 1999 Dr. Diethart Breipohl, Chief Financial Officer and a
Member of the Board of Management of Allianz AG, and Dr. Faber met with Mr.
Gross, Mr. Thompson, three other managing directors of Pacific Investment
Management Company and Mr. Poovey in New York City, to discuss, among other
items, the organization of the management of Allianz AG fixed income assets by
Pacific Investment Management Company and issues related to the restructuring
of Pacific Investment Management Company, including the terms of its management
after the Closing.
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On July 24 and 25, 1999, Mr. Poovey met in Munich with Dr. Faber to review
and discuss the possible integration of the companies' respective asset
management businesses and the challenges that presented.
On July 29, 1999, Allianz AG delivered to Partners LLC summary initial terms
for a proposed transaction. The proposal contemplated the acquisition for cash
of all interests of PIMCO Advisors other than those beneficially owned by PAM
at a unit price in the range of $36 for a total ownership of approximately 70%,
acquisition of control over Partners GP through the purchase of Partners LLC on
substantially the terms finally agreed (although based on a $36 unit price),
the satisfaction of the 1994 Employment Termination Agreements at that unit
price paid in cash and Allianz AG stock, a retention and bonus pool for
employees of PIMCO Advisors and its subsidiaries of $100 million per year for
five years, the management of Allianz AG fixed income assets by Pacific
Investment Management Company resulting in an estimated $10 million annual
contribution to the PIMCO Profit Sharing Plan, and suggested a reduction in the
PIMCO Profit Sharing Plan to 30% of profits funded by a ten year buy down
program.
On July 30, 1999, representatives of Lazard Freres made a presentation to
Messrs. Thompson and Gross, certain other managing directors of Pacific
Investment Management Company and Mr. Poovey. The presentation reviewed the
transaction structure proposed by Allianz AG in which Allianz AG would acquire
approximately 70% of the interests in PIMCO Advisors, including all of the
interests in the Partnership. In addition, the presentation provided a
preliminary valuation analysis of the transaction, including an analysis of
historical financial results for PIMCO Advisors, market performance of
Partnership units, comparison of other merger and acquisition transactions
including premiums paid and analysis of transaction valuations. The
presentation is described in more detail under "--Other Information
Considered--Lazard Freres."
On August 3, 1999, Dr. Breipohl, Dr. Faber, Dr. Helmut Wimmer, Director of
Participations of Allianz AG, and a representative of Putnam Lovell met with
Messrs. Thompson, Gross and Poovey and a representative of Lazard Freres in
London to continue to discuss the economic terms of the transaction proposed by
Allianz AG. Differences included the unit price ($36 vs. $40), the terms of
changes to the PIMCO Profit Sharing Plan and proposed terms of executive
retention payments.
On August 24, 1999, representatives of Lazard Freres made another
presentation to Mr. Thompson, certain other managing directors of Pacific
Investment Management Company and Mr. Poovey. The presentation provided an
overview of the fixed income assets managed by Allianz group, including
insurance assets, third party retail assets and third party institutional
assets. In addition, the presentation analyzed the pro forma impact of these
assets on the financial performance of Pacific Investment Management Company.
The presentation also analyzed the current proposal for the proposed
transaction by comparing the quality of earnings from insurance assets. The
presentation concluded by examining various potential alternatives to certain
aspects of the terms of the transaction proposed by Allianz AG and the impact
such alternatives would have on the investment advisory fee revenues of PIMCO
Advisors.
Commencing on August 24, 1999, a data room was set up at the offices of
Lazard Freres which permitted Allianz AG to begin the due diligence process.
PIMCO Advisors provided Allianz AG with information about all aspects of its
business and permitted the Allianz AG due diligence team to interview various
members of the management of PIMCO Advisors.
In late August and early September 1999, there were numerous conference
telephone calls and meetings with representatives of PIMCO Advisors, Pacific
Investment Management Company and Allianz AG and their respective financial
advisors to discuss the transaction structure. PAM and its
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legal advisors participated in one of these meetings in August, and PAM was
updated on the status of discussions by PIMCO Advisors. During this period,
representatives of PIMCO Advisors had tentative discussions with other
potential candidates for a business combination that did not result in any firm
offers.
On August 25, 1999, Pacific Life, the indirect parent corporation of PAM,
and Goldman, Sachs & Co. ("Goldman Sachs") agreed that Goldman Sachs would
provide Pacific Life with financial advisory services in connection with, among
other things, the possible sale of Pacific Life's interest in PIMCO Advisors.
On September 17, 1999, Allianz AG delivered to Partners LLC a revised
outline of terms for a proposed transaction. The proposal contemplated the
acquisition for cash of all interests of PIMCO Advisors other than those
beneficially owned by PAM at a unit price in the range of $38 for a total
ownership of approximately 70%, acquisition of control over Partners GP through
the purchase of Partners LLC on substantially the terms finally agreed
(although based on a $38 unit price), the satisfaction of the 1994 Employment
Termination Agreements at that unit price paid in cash and Allianz AG stock,
initial terms of put and call arrangements for the interest of PAM that would
be retained following the proposed transaction, a refinement of the retention
and incentive arrangements for employees, allocated between Pacific Investment
Management Company and other PIMCO Advisors employees and having terms
substantially as finally agreed, more detail on the management of Allianz AG
fixed income assets by Pacific Investment Management Company including a
proposed fee schedule and a $10 million minimum annual contribution to the
PIMCO Profit Sharing Plan, a proposal regarding governance matters, and a
suggested reduction in the PIMCO Profit Sharing Plan to 30% of profits funded
by a ten year buy down program.
On September 20, 1999, representatives of Lazard Freres made an additional
presentation to Mr. Thompson, other managing directors of Pacific Investment
Management Company and Mr. Poovey. The presentation provided an overview of
proposed terms of a transaction with Allianz AG, a preliminary valuation
analysis of the transaction, an analysis of the offer by Allianz AG and a
discussion of the fixed income assets under management of Allianz AG, including
insurance assets, which were being proposed to be managed by Pacific Investment
Management Company if the proposed transaction were consummated. The
preliminary valuation analysis analyzed the Partnership's historical market
performance, comparative premium analysis for comparable acquisitions, a
discounted cash flow analysis, a valuation analysis and analysis of the offer
at various prices. These internal meetings continued on September 21, 1999.
On September 22 and 23, 1999, Dr. Faber and representatives of Putnam Lovell
met with Messrs. Thompson, Gross and Poovey and representatives of Lazard
Freres in Carmel, California to negotiate the remaining major open business
items. While open issues remained, in particular the issues of unit price and
the continuing investment of PAM in PIMCO Advisors, these meetings resulted in
a general understanding between PIMCO Advisors and Allianz AG as to the
resolution of most other business issues, including an understanding of most
governance and structural issues. Following these meetings the parties agreed
to begin drafting the transaction documents.
From the middle of September to the October 31, 1999 signing of the merger
agreement, PAM and Allianz AG negotiated the terms of the put and call
arrangements relating to the interest to be retained by PAM. In particular, PAM
and Allianz AG discussed the prices at which the put or call rights could be
exercised by PAM or Allianz AG, the circumstances triggering the put or call
rights, and whether the put or call prices would be subject to maximum and
minimum prices.
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On October 4, 1999, in New York City, Messrs. Thompson, Gross and Poovey met
with Dr. Breipohl and Dr. Faber and each of their respective financial and
legal advisors to further discuss the structural terms of the proposed
transaction.
On October 5, 1999, PAM and its legal advisors met with legal advisors to
Allianz AG to negotiate the terms of PAM's continuing investment in PIMCO
Advisors. Open business issues included the economic terms of the retained
interest, whether PAM's interest would remain as an interest held through PIMCO
Advisors' general partner or be held directly at the PIMCO Advisors level,
Allianz AG's desire to have flexibility to restructure the Partnership's retail
and equity asset management businesses, PAM's approval rights over significant
actions affecting the Partnership's fixed income asset management business, the
put and call arrangements and the circumstances under which the put and call
arrangements could be exercised by either PAM or Allianz AG. On that same day
the press reported discussions between Allianz AG and PIMCO Advisors for a
potential business combination. After the close of trading on the New York
Stock Exchange, the Partnership issued a press release and on the morning of
October 6, Allianz AG issued a press release as well, each of which confirmed
the existence of discussions between PIMCO Advisors and Allianz AG for a
possible business combination, and that the unit price discussions were between
$38 and $39 per unit.
On October 8, 1999, PIMCO Advisors and the Partnership retained Salomon
Smith Barney as an additional financial advisor in connection with the merger
and the merger agreement to render its opinion as to the fairness, from a
financial point of view, of the consideration to be received by the public
holders of Partnership units and certain holders of Advisors Class A Units in
connection with the merger. While the Partnership had no reason to believe that
Lazard Freres would not provide a fairness opinion if requested by the
Partnership, the Partnership requested the opinion from Salomon Smith Barney
because it desired the view of a third party who had not been involved in the
negotiation and structuring of the transaction.
During the week of October 11, 1999, PIMCO Advisors, PAM, Allianz AG and
their respective legal and financial advisors negotiated documentation for the
transaction. These negotiations were conducted by means of meetings among
certain participants at the offices of counsel to Allianz AG in New York during
the course of the week, and two videoconferences on October 12 and 15. These
negotiations addressed the open business items relating to the transactions,
including the terms of any possible indemnity to be given by PAM or the members
of Partners LLC to Allianz AG for certain breaches under the merger agreement.
On October 22, 1999, at a regularly scheduled meeting of the board of
directors of PMHC, the ultimate parent corporation of PAM, senior management
and PMHC's financial advisor, Goldman Sachs, and legal advisor, Gibson, Dunn &
Crutcher LLP, discussed with the board of directors the following:
. The status of the negotiations with respect to the proposed
transactions, including the negotiations with respect to PMHC's
ownership in the Partnership and PIMCO Advisors;
. The principal terms and conditions of the merger agreement and related
transaction documents;
. The potential benefits and risks to the non-PMHC unitholders associated
with the sale of control of the Partnership to Allianz AG; and
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. The potential benefits and risks associated with PMHC's continued
ownership in PIMCO Advisors in a non-control position.
On October 22, 1999, McLagan Partners, Inc., management compensation
consultants, were retained to analyze and opine upon the reasonableness of the
proposed retention incentive arrangements being provided to executives of
Pacific Investment Management Company in the proposed transaction.
During the week of October 25, 1999, the parties and their legal and
financial advisors met in Newport Beach, California to negotiate documentation
for the transaction, including the documentation relating to PAM's retained
interest in PIMCO Advisors. On October 29, 1999, representatives of Allianz AG
and our general partner agreed on a unit price of $38.75 for the proposed
transaction, subject to satisfactory completion of definitive documentation and
receipt of necessary board and general partner approvals.
PMHC's board of directors held a special meeting on October 29, 1999, at
which senior management updated the board of directors on the status of
negotiations relating to the terms and conditions of the merger agreement and
related transaction documents, including the documentation relating to PAM's
retained interest in PIMCO Advisors. The board of directors also received a
financial presentation of Salomon Smith Barney regarding the financial terms of
the proposed transaction. See "--Opinion of Our Financial Advisor" for a
summary of the material financial analyses included in Salomon Smith Barney's
financial presentation and a description of the material information and
materials reviewed by Salomon Smith Barney in connection with its presentation.
Additionally, the Partnership's management reported to the PMHC board of
directors that the Partnership, Partners GP and Partners GP's partners had
received an opinion of McLagan Partners, Inc., which concluded that the
retention incentive arrangements being provided to executives of Pacific
Investment Management Company contemplated by the proposed transaction were
reasonable in light of industry practice and historical compensation of the
individuals. Goldman Sachs delivered its opinion that the consideration to be
received by PAM in exchange for the Advisors Class A Units beneficially owned
was fair to Pacific Life, from a financial point of view. At the special
meeting, the PMHC board of directors appointed a special committee comprised of
three outside directors and Thomas C. Sutton, Chairman of the Board of
Directors and Chief Executive Officer, which was authorized to approve the
final terms of the proposed transactions on behalf of PMHC's subsidiaries.
On October 29, 1999, the members and management board of Partners LLC, the
managing general partner of Partners GP, including Mr. Thompson, Mr. Gross and
the other managing directors of Pacific Investment Management Company who had
been participating in the negotiations of the proposed transaction, held a
meeting to discuss the status of negotiations and the principal terms and
conditions of the merger agreement and the related transaction documents. At
the meeting, Lazard Freres made a presentation which summarized in detail the
terms of the proposed transaction between PIMCO Advisors and Allianz AG.
Salomon Smith Barney presented their fairness opinion, made a financial
presentation regarding the financial terms of the proposed transaction and
reviewed with the general partners of the Partnership and PIMCO Advisors a
financial and comparative analysis of the Partnership and PIMCO Advisors. The
presentation of Salomon Smith Barney included an overview of the transaction, a
general discussion of PIMCO Advisors, comparative operating performance of
similar companies and a valuation of PIMCO Advisors. See "--Opinion of Our
Financial Advisor" for a summary of the material financial analyses included in
Salomon Smith Barney's financial presentation and a description of the material
information and materials reviewed by Salomon Smith Barney in connection with
its presentation. The general partner was also presented with and considered
the opinion of McLagan Partners, Inc. analyzing the reasonableness of the
retention incentive arrangements being provided to the executives of Pacific
Investment Management Company in the proposed transaction. In addition to the
members and
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management board of Partners LLC, representatives of PHLLC, Mr. Thomas Sutton,
Chairman and Chief Executive Officer of Pacific Life, Mr. Schafer, President of
Pacific Life, and two members of the special committee of the Board of
Directors of PMHC were in attendance during the portion of the meeting in which
the presentation of Salomon Smith Barney was made.
After discussion, the management board of Partners LLC, constituting all of
its members, approved the merger agreement, the merger and the other
transactions contemplated by the merger agreement and authorized management to
finalize the terms of the transaction documents and authorized the Partnership
and PIMCO Advisors to enter into the merger agreement and to submit the merger
agreement and the merger to the Partnership's unitholders for approval.
On October 31, 1999, the special committee of the PMHC board of directors
reconvened to continue its consideration of the proposed transactions. The
special committee received presentations from PMHC's senior management and
PMHC's legal advisors regarding the proposed final terms and conditions of the
merger agreement and related transaction documents. After discussion and due
consideration, the special committee of the PMHC board of directors unanimously
approved the merger agreement, the merger and the other transactions
contemplated by the merger agreement on behalf of the relevant PMHC
subsidiaries and authorized management to finalize the terms of the transaction
documents.
On October 31, 1999, Partners LLC and PHLLC, on behalf of Partners GP and
for the Partnership and PIMCO Advisors, approved the merger agreement and the
related transactions. On October 31, 1999, the Supervisory Board of Allianz AG
approved the merger, the merger agreement and the other transactions
contemplated by the merger agreement. Following these approvals, the merger
agreement was signed and press releases announcing the transaction were issued.
Opinion of Our Financial Advisor
Salomon Smith Barney has acted as a financial advisor to the Partnership and
PIMCO Advisors in connection with the merger of the Partnership with a
subsidiary of Allianz of America and the related transactions described in this
proxy statement. In connection with the engagement, Salomon Smith Barney
rendered an oral opinion to the general partners of the Partnership and of
PIMCO Advisors (the "General Partners") on October 29, 1999 to the effect that,
as of such date and based upon and subject to the factors and assumptions set
forth in the presentation, (i) the consideration to be received in the merger
by the holders of Partnership units, other than Excluded Holders (as defined
below), (the "Partnership Covered Units"), was fair, from a financial point of
view, to such holders, and (ii) the consideration to be received in the related
transactions by the holders of Advisors Class A Units, other than Excluded
Holders, (the "Advisors Covered Units"), was fair, from a financial point of
view, to such holders. For purposes of such opinion, "Excluded Holders" means
Pacific Life Insurance Company and each of its affiliates (including those
entities holding Advisors Class A Units underlying the 1994 Employment
Termination Agreements (the "ETA Units")), Partners LLC, Partners GP and each
of the managing directors of Pacific Investment Management Company (including
any units held for the benefit of such persons). Salomon Smith Barney
subsequently confirmed its oral opinion by delivery of a written opinion dated
October 29, 1999.
Salomon Smith Barney's opinion, and the presentation of Salomon Smith Barney
to the General Partners, was only one of many factors taken into consideration
by the General Partners in making their determination to approve the merger and
the related transactions. The terms of the merger and the
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related transactions were determined through negotiations among PIMCO Advisors,
the Partnership, PAM and Allianz AG, and were approved by the General Partners.
In connection with the preparation of Salomon Smith Barney's opinion, Salomon
Smith Barney was not engaged by the Partnership or PIMCO Advisors to solicit
third-party indications of interest for the acquisition of all or any part of
the Partnership or PIMCO Advisors. The decision to enter into the merger and
the related transactions and to accept the consideration to be paid to holders
of Partnership Covered Units and Advisors Covered Units, as contemplated in the
merger agreement, was solely that of the General Partners and Salomon Smith
Barney did not recommend the amount of consideration to be paid in the merger.
The full text of Salomon Smith Barney's opinion, which sets forth the
assumptions made, general procedures followed, matters considered and
limitations on the review undertaken by Salomon Smith Barney, is included as
Annex B to this Proxy Statement. Salomon Smith Barney's opinion should be read
carefully and in its entirety. Salomon Smith Barney's opinion is directed only
to the fairness, from a financial point of view, of the consideration to be
received in the merger and the related transactions by the holders of
Partnership Covered Units and Advisors Covered Units to such holders, and it
does not address the underlying business decision to effect the merger and the
related transactions. It was provided for the information of the Partnership,
PIMCO Advisors, Partners GP, Partners LLC and PHLLC in the evaluation of the
merger and the related transactions, and is not intended to be and does not
constitute a recommendation to any holder of Partnership units or Advisors
Class A Units as to how such holder should vote on any matters relating to the
merger and the related transactions. The summary of Salomon Smith Barney's
opinion set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of Salomon Smith Barney's opinion.
In connection with rendering its opinion, Salomon Smith Barney:
. reviewed the October 27, 1999 draft of the merger agreement (including
its exhibits) in the form provided to Salomon Smith Barney, and took
into account the terms of the merger and the related transactions set
forth therein, including the terms of PAM's continuing investment in
PIMCO Advisors, as described in "--Financial Interests of Certain
Persons in the Transaction--Partners GP--PHLLC and PAM," and the
incentive and retention payments being made pursuant to the merger
agreement, as described in "--Financial Interests of Certain Persons--
Partners GP--Partners LLC;"
. reviewed certain publicly available business and financial information
that Salomon Smith Barney deemed relevant relating to the Partnership,
PIMCO Advisors and the industries in which they operate, including
information with respect to assets under management and allocation among
products, types of clients served, historical asset inflows and product
performance;
. reviewed certain internal non-public financial and operating data and
other information provided to Salomon Smith Barney by the management of
the Partnership and PIMCO Advisors relating to the Partnership's and
PIMCO Advisors' respective businesses, including certain forecast and
projection information as to the future financial results of such
businesses, see "Certain Financial Projections."
. reviewed certain publicly available business and financial information
with respect to certain other companies Salomon Smith Barney believed to
be relevant or comparable in certain respects to the Partnership and
PIMCO Advisors, including information with respect to assets under
management and allocation among products, types of clients served,
historical asset inflows and product performance, and the trading
markets for such other companies' securities;
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. reviewed and analyzed certain publicly available and other information
concerning the trading of, and the trading market for, the Partnership
units;
. reviewed the financial terms (including arrangements with management and
controlling persons to the extent publicly available) of certain
business combinations and acquisition transactions that Salomon Smith
Barney deemed reasonably comparable to the merger and the related
transactions and otherwise relevant to Salomon Smith Barney's inquiry;
. discussed with members of senior management and other officers,
employees and representatives of the Partnership and PIMCO Advisors the
foregoing, including the past and current business operations, financial
condition and prospects of the Partnership and PIMCO Advisors; and
. considered such other information, financial studies, analyses,
investigations and financial, economic, market and trading criteria as
Salomon Smith Barney deemed relevant to its inquiry.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for Salomon Smith
Barney, or publicly available. Salomon Smith Barney also assumed that the final
form of the merger agreement (including its exhibits) would not vary in any
respect that is material to Salomon Smith Barney's analysis from the last draft
reviewed by Salomon Smith Barney. With respect to the financial projections for
PIMCO Advisors and the Partnership provided to, discussed with or reviewed for
Salomon Smith Barney by the management of PIMCO Advisors or the Partnership,
respectively (the "Projections"), Salomon Smith Barney was advised by
management of PIMCO Advisors and the Partnership, respectively, and Salomon
Smith Barney assumed, that such Projections were reasonably prepared on bases
reflecting the best currently available estimates and judgments on the part of
management of PIMCO Advisors or the Partnership, as applicable, as to the
future financial performance of PIMCO Advisors or the Partnership, as
applicable. Salomon Smith Barney expressed no view as to such Projections or
information or the assumptions on which they were based. Salomon Smith Barney
also assumed, based upon discussions with management of PIMCO Advisors and the
Partnership, that the combined value of the cash and common shares of Allianz
AG to be received with respect to each ETA Unit pursuant to the merger
agreement is equal to the Unit Price to be received by holders of Partnership
Covered Units and Advisors Covered Units.
Salomon Smith Barney did not assume any responsibility for making or
obtaining any independent evaluations or appraisals of any of the assets or
liabilities of the Partnership or PIMCO Advisors, nor for conducting a physical
inspection of the properties and facilities of the Partnership or PIMCO
Advisors, and Salomon Smith Barney was not furnished with any such evaluation
or appraisal. Salomon Smith Barney relied upon counsel to the Partnership and
PIMCO Advisors with respect to interpretations of the provisions contained in
the constituent documents and related agreements of the Partnership and PIMCO
Advisors and the application of applicable law to such documents and
agreements. Salomon Smith Barney's opinion necessarily was based on market,
economic and other conditions as they existed and could be evaluated on October
29, 1999, and Salomon Smith Barney assumed no responsibility to update or
revise its opinion based upon circumstances or events occurring after October
29, 1999.
In connection with rendering its opinion to the General Partners, Salomon
Smith Barney performed a variety of financial analyses, the material portions
of which are summarized below. The
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summary of such analyses set forth below does not purport to be a complete
description of the analyses underlying Salomon Smith Barney's opinion or of
Salomon Smith Barney's presentation to the General Partners. In addition,
Salomon Smith Barney believes that its analyses must be considered as a whole
and that selecting portions of such analyses and the factors considered
therein, without considering all such analyses and factors, could create an
incomplete view of the analyses and the process underlying Salomon Smith
Barney's opinion. While the conclusions reached in connection with each
analysis were considered carefully by Salomon Smith Barney in arriving at
Salomon Smith Barney's opinion, Salomon Smith Barney made various subjective
judgments in arriving at its opinion and did not consider it practicable to,
nor did it attempt to, assign relative weights to the individual analyses and
specific factors considered in reaching its opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In
addition, the process of preparing a fairness opinion necessarily requires a
broad range of subjective judgments with respect to appropriate comparable
companies and transactions, appropriate multiples of various selected financial
data, appropriate discount rates and other financial and other factors.
Analyses and estimates of the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities actually may be sold. No public company utilized as a comparison is
identical to the Partnership or PIMCO Advisors, and none of the other
transactions utilized as a comparison is identical to the proposed merger and
related transactions. Accordingly, any analysis of publicly traded comparable
companies or comparable transactions is not mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies involved and other factors that
could affect the public trading value of the companies or company to which they
are being compared. The range of valuation for any particular analysis should
not be taken to be the view of Salomon Smith Barney of the actual value of the
Partnership or PIMCO Advisors. In its analyses, Salmon Smith Barney made
numerous assumptions with respect to the Partnership and PIMCO Advisors,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of the
Partnership and PIMCO Advisors. The estimates contained in such analyses and
the valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by such
analyses.
Financial Analyses
The following is a summary of the material financial analyses performed by
Salomon Smith Barney in connection with its opinion dated October 29, 1999.
Normalized Price Analysis. As an initial step in its analysis, Salomon Smith
Barney considered the market price per Partnership unit as of July 1, 1999,
five business days before the first public statement by Allianz AG regarding a
potential transaction between Allianz AG and the Partnership, and found such
price to be $29.38.
So as to be able to compare the implied valuation ranges resulting from the
various financial analyses set forth below to a Partnership unit value that
excluded the effects of speculation regarding the terms and timing of a
potential transaction, Salomon Smith Barney selected a group of publicly traded
investment advisors that it considered to be comparable to the Partnership as a
"control group," and examined the changes in their per share market prices for
the period from July 1, 1999 until October 28, 1999 (the day before Salomon
Smith Barney rendered its opinion to the General Partners). Salomon Smith
Barney calculated the average change in price for the members of such
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control group over that period, weighted by market capitalization, and found
that average to be a decline of 15.7%. Applying such percentage decline to the
market price per Partnership unit as of July 1, 1999, Salomon Smith Barney
obtained a "normalized" price per Partnership unit of $24.38, which it
considered to be a reasonable approximation of the price per Partnership unit
that might have been expected to exist on October 28, 1999 absent public
statements regarding a potential transaction.
In considering the results of its various financial analyses set forth
below, Salomon Smith Barney compared the implied valuation ranges resulting
from such analyses to the actual price per Partnership unit as of July 1, 1999
of $29.38, the actual price per Partnership unit price as of October 28, 1999
of $34.13, and the "normalized" price per Partnership unit as of October 28,
1999 of $24.38. For the purposes of the public market comparable company
analysis and precedent transaction analysis described below, Salomon Smith
Barney determined implied valuation ranges for Advisors Class A Units (rather
than Partnership units) because Advisors Class A Units are the only material
asset of the Partnership, and the Advisors Class A Units have a greater value
than Partnership units as a result of the excise taxes payable by the
Partnership with respect to its share of PIMCO Advisors' revenues. In the case
of the discounted cash flow analysis described below, Salomon Smith Barney
performed separate valuations with respect to Advisors Class A Units and
Partnership units so as to specifically take into account the excise taxes
payable by the Partnership by analyzing the value of projected cash flows to be
received by holders of the respective units.
Public Market Comparable Company Analysis. Using publicly available
information, Salomon Smith Barney analyzed, among other things, the operating
performance and market valuation of three groups of publicly traded investment
advisors considered by Salomon Smith Barney to be comparable to PIMCO Advisors
and the Partnership. In order to analyze market valuation, Salomon Smith Barney
calculated a variety of trading multiples, including firm value as a percentage
of assets under management ("AUM") and as a multiple of last twelve months
("LTM") revenues and earnings before interest, taxes, depreciation and
amortization ("EBITDA"), and market value as a multiple of LTM cash flow and
earnings, and as a multiple of estimated 1999 and 2000 earnings per share (as
provided by I/B/E/S).
The first group utilized by Salomon Smith Barney consisted of broadly
comparable "pure play" investment advisors organized as taxable corporations
(the "Taxable Peer Group"), and included Affiliated Managers Group, Inc.,
AMVESCAP Plc, BlackRock, Inc., Eaton Vance Corp., Federated Investors, Inc.,
Franklin Resources, Inc., Gabelli Asset Management Inc., The John Nuveen
Company, Neuberger Berman Inc., Phoenix Investment Partners, Ltd., T. Rowe
Price Associates, Inc., United Asset Management Corporation and Waddell & Reed
Financial, Inc. The second group consisted of investment advisors organized as
taxable corporations whose businesses or growth characteristics more closely
resembled those of PIMCO Advisors (the "Selected Peer Group"), and included
BlackRock, Inc., Phoenix Investment Partners, Ltd., T. Rowe Price Associates,
Inc. and Kansas City Southern Industries, Inc. The third group consisted of
investment advisors organized as master limited partnerships (the "MLP Peer
Group"), and included Alliance Capital Management Holding L.P. and Nvest, L.P.
Using the comparable operating data for PIMCO Advisors, Salomon Smith Barney
calculated the implied valuation range for Advisors Class A Units based upon
the average multiple for each of the measures of value described above, and the
average of such implied valuation ranges for each Advisors Class A Unit.
Based upon such analysis and assuming net indebtedness of approximately $98
million and 120.3 million diluted Advisors Class A Units outstanding, Salomon
Smith Barney determined an
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implied valuation range of $21.04 to $25.78 per Advisors Class A Unit using the
Taxable Peer Group, $22.92 to $25.19 per Advisors Class A Unit using the
Selected Peer Group, and $17.86 to $21.90 per Advisors Class A Unit using the
MLP Peer Group.
Precedent Transaction Analysis. Salomon Smith Barney reviewed publicly
available information with respect to 13 precedent transactions occurring from
1994 to 1999 involving the acquisition of investment advisors that were
considered by Salomon Smith Barney to be comparable to PIMCO Advisors with
respect to size and/or business mix. For each such precedent transaction,
Salomon Smith Barney calculated a variety of transaction multiples, including
firm value as a percentage of AUM and as a multiple of LTM revenues and EBITDA,
and equity value as a multiple of LTM pre-tax income and earnings.
Using the comparable data for PIMCO Advisors, Salomon Smith Barney
calculated the implied valuation range for Advisors Class A Units based upon
the average multiple for each of the measures of value described above, and the
average of such implied valuation ranges for each Advisors Class A Unit. Based
upon such analysis, Salomon Smith Barney determined an implied valuation range
for each Advisors Class A Unit of $29.24 to $35.84.
Discounted Cash Flow Analysis. Based on the Projections, Salomon Smith
Barney performed a discounted cash flow ("DCF") analysis on PIMCO Advisors to
determine an implied valuation range for each Advisors Class A Unit, based on
discounting (1) projected distributions for five years ending in 2004 and (2) a
terminal value based on projected 2004 distributions.
Salomon Smith Barney first reviewed a "base case" scenario assuming a
discount rate of 13% and a 9.0x terminal value multiple. In addition, Salomon
Smith Barney reviewed the sensitivity of such analysis by calculating the value
of each Advisors Class A Unit assuming a range of discount rates from 11% to
16%, and a range of terminal value multiples from 7.0x to 11.0x.
Based upon such analysis, Salomon Smith Barney determined the following base
case implied value per Advisors Class A Unit and implied valuation range per
Advisors Class A Unit based on the sensitivity analysis:
<TABLE>
<CAPTION>
Implied Value per Advisors Class A Unit
---------------------------------------
<S> <C>
Base Case............................ $36.98
Sensitivity Analysis................. $28.41 - $45.74
</TABLE>
In order to analyze the effect of the excise taxes payable by the
Partnership with respect to its share of PIMCO Advisors' revenues, Salomon
Smith Barney also performed a separate DCF analysis with respect to the
Partnership. This analysis was based on the same methodology and discount rates
as used for PIMCO Advisors, but used projected distributions by the Partnership
rather than PIMCO Advisors, and increased the terminal value multiples to
reflect the higher multiple of LTM distributions represented by a specific unit
price. The Partnership base case analysis used a 10.0x terminal value multiple,
and the Partnership sensitivity analysis used a range of terminal value
multiples from 8.0x to 12.0x.
Based upon such analyses, Salomon Smith Barney determined the following base
case implied value per Partnership unit and implied valuation range per
Partnership unit based on the sensitivity analysis:
<TABLE>
<CAPTION>
Implied Value per Partnership Unit
----------------------------------
<S> <C>
Base Case................................. $37.14
Sensitivity Analysis...................... $28.82 - $45.57
</TABLE>
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Retained Pacific Life Units. In connection with rendering its opinion,
Salomon Smith Barney took into account the terms of the merger and the related
transactions set forth in the merger agreement (including its exhibits),
including the terms of PAM's continuing investment in PIMCO Advisors.
As discussed in more detail under "--Financial Interests of Certain Persons
in the Transaction--Partners GP--PHLLC and PAM," PAM will exchange the Advisors
Class A Units currently held by certain of its affiliates (other than the ETA
Units) for newly issued Class E Units (the "Retained Units"). The Retained
Units will be entitled to receive cash distributions which, on an annual basis,
in the aggregate, will equal: (1) a "variable component" equal to 20% of
Pacific Investment Management Company's adjusted operating profit available for
distribution, and (2) a "fixed component" equal to $1.05 per annum per Advisors
Class A Unit previously beneficially owned by PAM. Based upon discussions with
management of PIMCO Advisors and the Partnership, Salomon Smith Barney assumed
that the variable component, which was defined to include only the fixed-income
portion of PIMCO Advisors' existing business, would not be materially impacted
by the merger and the related transactions, and that the fixed component is
substantially equivalent to the historical distributions from PIMCO Advisors'
retail and equity asset management business that will be excluded for purposes
of calculating the variable component described above.
In addition, pursuant to certain purchase and sale arrangements with Allianz
of America, at any time following the Closing, PAM will have the right to
require Allianz of America to purchase all of the Retained Units at a per-unit
price equal to (1) 14.0 (which was based upon the multiple of projected 1999
distributions per Advisors Class A Unit represented by the Unit Price),
multiplied by (2) LTM distributions made with respect to such unit (the "Put
Price"), subject to a maximum price of $60.00 per unit previously beneficially
owned by PAM. In addition, at any time after December 31, 2002, Allianz of
America will have the right to purchase all of the Retained Units at a price
per unit equal to the Put Price, provided that the Put Price is greater than
$50.00 per unit previously beneficially owned by PAM. In the event of a change
of control of PMHC, Allianz of America will have the right to purchase all of
the Retained Units at the end of the year in which the change of control occurs
at a price per unit equal to the higher of the Put Price and the Unit Price.
Salomon Smith Barney performed a DCF analysis by calculating the net present
value of projected distributions with respect to each Retained Unit. The base
case DCF assumed 7.5% annual growth in Pacific Investment Management Company's
pre-bonus profits, a 15% discount rate with respect to the variable component
of the distributions, and the purchase of the Retained Units by Allianz of
America at the end of 2002, the first opportunity for Allianz of America to
purchase such Retained Units absent a change of control of PMHC. In addition,
Salomon Smith Barney reviewed the sensitivity of such analysis by calculating
the value of such units assuming growth in Pacific Investment Management
Company's adjusted net profit ranging from 2.5% to 20%, discount rates ranging
from 11% to 19% for the variable component, and year of purchase ranging from
2000 to 2004. The fixed component of the distributions was discounted using a
7% discount rate in all scenarios. Salomon Smith Barney used a higher discount
rate for the variable component of the projected distributions so as to take
into account the increased business and market risk associated with such
variable component relative to the fixed component.
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Based upon such DCF analysis, Salomon Smith Barney determined the following
base case implied value per Retained Unit and implied valuation range per
Retained Unit based on the sensitivity analysis:
<TABLE>
<CAPTION>
Implied Value per Retained Unit
-------------------------------
<S> <C>
Base Case.................................... $38.91
Sensitivity Analysis......................... $36.91 - $52.99
</TABLE>
In considering the results of the above analysis, based upon discussions
with management of PIMCO Advisors, Salomon Smith Barney assumed that the
agreement of PAM was required in order to structure the transactions
contemplated by the merger agreement so as to enable Allianz AG to achieve more
favorable tax treatment with respect to the purchase of the ETA Units and
certain Advisors Class A Units underlying employee options ("Option Units"),
and that the incremental value to Allianz AG of such favorable tax treatment is
approximately $4 per ETA Unit and Option Unit (or approximately $2 per Advisors
Class A Unit owned by PAM and its affiliates for their own accounts.)
Salomon Smith Barney is an internationally recognized investment banking
firm that regularly engages in the valuation of companies and their securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
and corporate, estate and other purposes. The Partnership and PIMCO Advisors
retained Salomon Smith Barney as a financial advisor because of its reputation,
expertise in the valuation of companies, substantial experience in transactions
such as those contemplated by the merger agreement and familiarity with the
investment management industry.
Salomon Smith Barney, in the ordinary course of business, has from time to
time provided, and in the future may continue to provide, investment banking,
financial advisory and other related services to the Partnership, PIMCO
Advisors, Pacific Life, Allianz AG and/or their respective affiliates, as the
case may be, for which it has received or will receive fees. In addition, in
the ordinary course of business, Salomon Smith Barney or its affiliates may
trade in the debt and equity securities of the Partnership, Allianz AG and/or
their respective affiliates, as the case may be, for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities. In addition, Salomon Smith Barney or its
affiliates serve as investment subadviser and/or distributor for certain
registered investment companies sponsored by affiliates of the Partnership and
receive customary fees for such service, and Salomon Smith Barney and its
affiliates (including Citigroup Inc. and its affiliates) may maintain other
business relationships with the Partnership, PIMCO Advisors, Allianz AG and/or
their respective affiliates.
Pursuant to the terms of Salomon Smith Barney's engagement, the Partnership
and PIMCO Advisors paid Salomon Smith Barney a fee of $2,000,000 for the
delivery of Salomon Smith Barney's opinion to the General Partners, and have
agreed to reimburse Salomon Smith Barney for its reasonable travel and other
out-of pocket expenses incurred in connection with its engagement (including
the reasonable fees and disbursements of its counsel), and to indemnify Salomon
Smith Barney and certain related persons against certain liabilities, including
liabilities under the federal securities laws, arising out of Salomon Smith
Barney's engagement.
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Other Information Considered
Lazard Freres & Co. LLC
Early in our discussions with Allianz AG, the Partnership retained Lazard
Freres to assist us in analyzing the proposed transaction. The Partnership
selected Lazard Freres because of its knowledge of our business (we have worked
with them in the past) and its expertise and its reputation in investment
banking and mergers and acquisitions. Lazard Freres is an internationally
recognized investment banking firm and is continually engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements, leveraged buyouts and valuations for real
estate, corporate and other purposes.
As described in this proxy statement under "--Background of the
Transaction," representatives of Lazard Freres participated in a number of
meetings regarding the Allianz AG discussions, and provided financial and
comparative analyses of the proposed transaction as it evolved. Lazard Freres
was not requested to and did not render an opinion, appraisal or report with
respect to the proposed transaction.
The following is a summary of the material financial and comparative
analyses performed by Lazard Freres in connection with the merger and the
subsequent transactions. A copy of each presentation delivered by Lazard Freres
has been filed as an exhibit to the Schedule 13E-3 filed with the Commission by
PAM, Pacific Life, PHLLC, Partners LLC, Partners GP and the Partnership and is
available for inspection and copying at the principal executive offices of the
Partnership during its regular business hours by any unitholder or such
unitholder's representative who has been so designated in writing, upon written
request and at the expense of the requesting unitholder or representative.
In formulating its analyses, Lazard Freres assumed and relied upon, without
independent verification, the accuracy and completeness of all information
publicly available or reviewed by or discussed with Lazard Freres. Lazard
Freres did not independently value or appraise the assets or liabilities of
PIMCO Advisors and did not assume any responsibility for matters concerning the
solvency of or issues relating to the management of PIMCO Advisors, Allianz AG
or any other entity. Lazard Freres also relied upon the advice of management of
PIMCO Advisors that the financial forecasts and other information that were
provided to or discussed with Lazard Freres were reasonably prepared based on
the best currently available estimates and judgments of PIMCO Advisors'
management as to the future financial performance of PIMCO Advisors and
expressed no view as to such forecasts or the assumptions on which they were
based. If the proposed transactions are consummated, Lazard Freres will receive
$9.2 million in exchange for its services, of which a non-refundable retainer
of $950,000 has already been paid. Lazard Freres assisted the Partnership in
the structuring and analysis of the transactions from its inception. While the
Partnership had no reason to believe that Lazard Freres would not provide a
fairness opinion if requested by the Partnership, the Partnership requested a
fairness opinion from Salomon Smith Barney because it desired the view of a
third party who had not been involved in the negotiation and structuring of the
transactions.
July 30, 1999 Presentation
On July 30, 1999, representatives of Lazard Freres made a presentation to
Messrs. Thompson and Gross, certain other managing directors of Pacific
Investment Management Company and Mr. Poovey. The presentation outlined the
proposed structure of a transaction based on the terms proposed by Allianz AG
on July 29, 1999, provided a preliminary valuation analysis of the proposed
transaction and concluded with an analysis of the fixed income assets of
Allianz AG.
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Proposed Transaction Overview. The presentation included an overview of the
terms of the transaction, including:
. the relative ownership of PIMCO Advisors following the merger and
the subsequent transactions;
. the purchase price;
. the liquidation of the 1994 Employment Termination Agreements;
. the "buy down" of the Pacific Investment Management Company bonus
pool;
. the retention and bonus incentives; and
. the management by Pacific Investment Management Company of assets
currently managed by the Allianz group.
For a more detailed discussion of the structure and terms of the merger and
the subsequent transactions, see "The Transaction."
Financial Review of PIMCO Advisors. Following its discussion of the proposed
transaction, Lazard Freres provided a financial review of PIMCO Advisors,
setting forth PIMCO Advisors' historical assets under management ("AUM"), its
operations and balance sheet as well as the operating performance of PIMCO
Advisors by segment. The Lazard Freres presentation also set forth management's
projected financial performance of PIMCO Advisors through the year 2005.
Although these July projections reflected financial performance measures that
were generally 6% to 8% higher than those contained in the more recent
projections described under "Certain Financial Projections" because the July
projections were based on earlier financial information (third quarter results
were not then available), the Partnership believes these July projections are
substantially similar to the projections set forth under "Certain Financial
Projections." See page 77. The financial review concluded with the presentation
of a chart graphing the year-to-date market performance of the Partnership
units.
Initial Valuation Analysis. Lazard Freres then presented an initial
valuation analysis of PIMCO Advisors. This preliminary analysis was intended to
provide a range of unit prices that holders of Partnership units and the
Advisors Class A Units might receive in a transaction involving a business
combination. The analysis focused on three different valuation methods: a
comparison of public company trading statistics, a comparison of recent mergers
and acquisitions and a discounted cash flow analysis. Lazard Freres also
provided an analysis of premium amounts paid in recent acquisition
transactions. A summary of the results of each of these analyses is set forth
below.
Public Company Trading Statistics. Lazard Freres reviewed and compared the
actual financial, operating and stock market information of selected public
companies in lines of business believed to be generally comparable to those of
PIMCO Advisors. These companies included the master limited partnerships of
Alliance Capital Management Holding L.P. and Nvest, L.P., as well as Franklin
Resources, Inc., AMVESCAP PLC, T. Rowe Price Associates, Inc., Waddell & Reed
Financial, Inc., Federated Investors, Inc., The John Nuveen Company, Eaton
Vance Corporation, United Asset Management Corporation, Affiliated Managers
Group, Inc., Gabelli Asset Management Inc., Phoenix Investment Partners, Ltd.
and Conning Corporation.
Specifically, Lazard Freres analyzed the respective multiples of the firm
values of these companies to their historical operating revenues, operating
income and AUM. Lazard Freres then derived a range of implied per unit equity
values for PIMCO Advisors by applying the multiples from the comparable
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company analysis to corresponding data for PIMCO Advisors prepared by its
management. Lazard Freres then narrowed those ranges by focusing on the medians
of the high and low implied per share equity value ranges. The resulting
implied per unit equity value range was $30.50 to $35.25.
Merger and Acquisition Transactions. Lazard Freres reviewed selected
publicly available financial and stock market information for the ten following
transactions involving the acquisition of entities in the financial services
industry with a product mix, growth, margin or other characteristics comparable
to those of PIMCO Advisors with transaction values ranging from $240 million to
over $5 billion:
. the acquisition of Frank Russell Company, valued at $950 million, by The
Northwestern Mutual Life Insurance Company in August 1998;
. the acquisition of Chancellor LGT Management, Inc., valued at $1.15
billion, by AMVESCAP PLC in January 1998;
. the acquisition of Mercury Asset Management Group, valued at $5.08
billion, by Merrill Lynch & Co., Inc. in November 1997;
. the acquisition of Scudder, Stevens & Clark, valued at $1.66 billion, by
Zurich Insurance Company in June 1997;
. the acquisition of Chancellor Capital Management, Inc., valued at $260
million, by Liechenstein Global Trust, A.G. in July 1996;
. the acquisition of RCM Capital Management, valued at $390 million, by
Dresdner Bank AG in January 1996;
. the acquisition of Miller Anderson & Sherrerd LLP, valued at $350
million, by Morgan Stanley Group Inc. in June 1995;
. the acquisition of Brinson Partners Inc., valued at $870 million, by
Swiss Bank Corporation in August 1994;
. the acquisition of BlackRock Financial Management L.P., valued at $240
million, by PNC Bank Corp. in June 1994; and
. the acquisition of the Dreyfus Corporation, valued at $1.92 billion, by
the Mellon Bank Corporation in December 1993.
Lazard Freres analyzed the respective multiples of the transaction value for
these transactions to the historical operating income, revenues and AUM of the
selling firm. Lazard Freres then derived a range of implied per unit equity
values for PIMCO Advisors by applying the multiples from the precedent
transactions listed above to corresponding data for PIMCO Advisors prepared by
its management. Lazard Freres then narrowed those ranges by focusing on the
medians of the high and low implied per share equity value ranges. The
resulting implied per unit equity value range was $35.25 to $42.50.
Discounted Cash Flow Analysis. Lazard Freres performed a discounted cash
flow analysis of management's projections of free cash flow of PIMCO Advisors
for the years ended December 31, 1999 through December 31, 2005. As part of its
analysis, Lazard Freres assumed, among other things, discount rates of 12% to
16%, and terminal multiples of the operating profits available for distribution
of 9.0x to 11.0x. Based on this analysis Lazard Freres then derived a range of
implied per unit equity values for PIMCO Advisors from $37.00 to $41.75.
Lazard Freres also reviewed the publicly available information concerning
premiums paid in fourteen acquisition transactions of entities in the financial
services industry with transaction values ranging from $2 billion to $10
billion. Lazard Freres analyzed the information from these
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transactions using three criteria: the purchase price as a percentage premium
of the one-day-prior trading price, the purchase price as a percentage premium
of the one-week-prior trading price and the purchase price as a percentage
premium of the four-weeks-prior trading price. Lazard Freres then derived a
range of implied per unit equity prices for PIMCO Advisors by applying the
premiums from the precedent transactions to the unit prices of PIMCO Advisors
Holdings. Lazard Freres then narrowed those ranges by focusing on the medians
of the high and low implied per share equity ranges. The resulting implied
equity value range was $38.50 to $41.50.
In addition, the presentation noted the consideration proposed to be paid to
all holders of interests in the Partnership and PIMCO Advisors, which included
cash amounts to be paid to unitholders and in satisfaction of payments due
under the 1994 Employment Termination Agreements. Employing a hypothetical per
unit purchase price of $36 resulted in an aggregate implied consideration of
$4.3 billion. The presentation also stated the effect of combining that
aggregate unit based consideration with all amounts proposed to be paid as
retention and incentive amounts to management. This aggregation of purchase
price and other payments resulted in an equivalent per unit amount of $40.19,
for an aggregate consideration of $4.8 billion.
Fixed Income Assets of the Allianz Group. The presentation concluded with a
discussion of the fixed income assets under management of the Allianz group,
including insurance assets, that were proposed to be managed by Pacific
Investment Management Company following the merger and the subsequent
transactions. The analysis concluded by setting forth a projection of the
increase in total income to Pacific Investment Management Company that could
occur as a result of its management of the Allianz group assets. As a result of
the management of these additional assets, it was estimated that the total
income of Pacific Investment Management Company might increase by $28.4 million
in the year 2000 and by $62.6 million in the year 2002.
August 24, 1999 Presentation
On August 24, 1999, to assist PIMCO Advisors in its business due diligence
regarding fixed income assets managed by Allianz AG, representatives of Lazard
Freres made a presentation to Mr. Thompson, certain other managing directors of
Pacific Investment Management Company and Mr. Poovey. The report provided an
overview of the fixed income assets managed by Allianz group, including
insurance assets, third-party retail assets and third party institutional
assets. In addition, the presentation analyzed the pro forma impact of these
assets on the financial performance of Pacific Investment Management Company.
The potential contributions of these assets to Pacific Investment Management
Company vary as follows:
. for managing insurance assets, Pacific Investment Management Company
would receive a base fee and be eligible for performance fees that
increase as certain hurdles are obtained;
. for managing retail assets Pacific Investment Management Company
would provide a model portfolio and receive subadvisory fees; and
. for third-party institutional assets inside and outside Germany,
Pacific Investment Management Company would have an economic
interest allowing for participation in the profits and losses of the
business of managing those assets.
The summary compared estimates of the expected economic impact of Allianz
AG's fixed income assets to estimates that were based on input from Pacific
Investment Management Company's management. For 1999, Allianz AG projected a
total income of $60.2 million; management projected
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a total income within the range of $15.4 million to $23.9 million. For 2002,
Allianz AG projected a total income of $106.4 million; management projected a
total income within the range of $51.5 million to $61.9 million. The estimates
of the expected impact of Allianz AG's fixed income assets prepared by Allianz
AG and Pacific Investment Management Company differed primarily because of more
optimistic assumptions by Allianz AG of the amount of performance fees that
would be received by Pacific Investment Management Company as a result of
managing the fixed income assets of the Allianz group.
As a result of this comparison of the projected contributions to Pacific
Investment Management Company, Lazard Freres identified several key issues
relating to the structure of the proposed management of the Allianz AG fixed
income assets by Pacific Investment Management Company. These issues included
the following:
. the base fees relating to the insurance assets would cover only the
costs of Pacific Investment Management Company and therefore its
profit would be highly sensitive to the performance fees;
. there is considerable uncertainty involved in estimating the
performance fees, due in part, to the restrictions on investment of
the insurance funds;
. the profits associated with the retail assets are based on the
assumption that the model portfolio can be provided at no marginal
cost; and
. Pacific Investment Management Company would have limited ability to
control the costs of the European investment organizations.
While the final terms of the proposed transactions did not address these
post-transaction operational issues and the uncertainties associated with these
issues remained, the general partner determined to proceed with the transaction
based on its analysis of the overall benefits of the transaction.
September 20, 1999 Presentation
On September 20, 1999, representatives of Lazard Freres delivered an updated
version of its July 30, 1999 presentation to Messrs. Thompson and Poovey. The
presentation began by again summarizing the proposed terms and structure of the
transaction. Lazard Freres then presented a revised valuation analysis based on
figures updated through September 16, 1999. In addition, the presentation
provided a discussion of the fixed income assets under management of Allianz
AG, including insurance assets, which would be managed by Pacific Investment
Management Company if the proposed transaction were consummated.
Valuation Analysis. In the September 20, 1999 presentation, Lazard Freres
updated each of the individual valuation analyses that it presented in its July
30, 1999 presentation. The Public Company Trading Statistics were updated to
include market information through September 16, 1999. The Mergers and
Acquisitions Transactions section was updated to include data on additional
transactions which provided additional comparative data. These transactions
were: the acquisition of M&G Investment Management, valued at $2.93 billion, by
Prudential in March 1999; the acquisition of AIM Management Group, valued at
$1.74 billion, by INVESCO PLC in November 1996; and the acquisition of Global
Asset Management, valued at $675 million, by Union Bank of Switzerland which
occurred in September 1999 after the preparation of the July presentation. The
Discounted Cash Flow Analysis section was refined to reflect updated
outstanding unit count and outstanding
56
<PAGE>
indebtedness. The updated and additional information resulted in revised ranges
of per unit equity value for each of the different analyses. The chart below
sets forth the revised ranges of per unit equity value for PIMCO Advisors under
each of the analyses performed by Lazard Freres:
Equity Value Ranges
<TABLE>
<CAPTION>
Low High
------ ------
<S> <C> <C>
Public Company Trading Statistics............................. $27.00 $32.00
Merger and Acquisition Transactions........................... 34.50 41.75
Discounted Cash Flow Analysis................................. 36.50 41.50
</TABLE>
The Market Premium Analysis section was updated to include data on three
additional transactions. The resulting implied equity value range was $38.50 to
$41.50. In addition, the presentation once again noted the consideration
proposed to be paid to all holders of interests in the Partnership and PIMCO
Advisors, which included all cash amounts to be paid to unitholders and in
satisfaction of payments due under the 1994 Employment Termination Agreements.
Employing a hypothetical per unit price of $38 resulted in an aggregate implied
consideration of $4.6 billion. The presentation also stated the effect of
combining that aggregate unit based consideration with all proposed amounts to
be paid as retention and incentive amounts to management and amounts
contributed to the Pacific Investment Management Company bonus pool. This
aggregation of purchase price and other payments resulted in an equivalent per
unit amount of $42.66, for an aggregate consideration of $5.1 billion.
Fixed Income Assets of the Allianz Group. The presentation included a
discussion of the fixed income assets under management of the Allianz group,
including insurance assets, that were proposed to be managed by Pacific
Investment Management Company following the merger and the subsequent
transactions. The analysis concluded by setting forth a projection of the
increase in total income to Pacific Investment Management Company that might
occur as a result of its management of the Allianz group assets. As a result of
the management of these additional assets, it was estimated that the total
income of Pacific Investment Management Company might increase within the range
of $21.7 million to $26.8 million for the year 2000 and within the range of
$41.3 million to $51.8 million for the year 2002.
October 29, 1999 Presentation
On October 29, 1999, at the meeting which Partners LLC convened to consider
Allianz AG's offer, representatives of Lazard Freres made a presentation
outlining the key provisions of the proposed transaction. The presentation also
discussed the anticipated contribution of the Allianz group's fixed income
assets to Pacific Investment Management Company.
Proposed Transaction Overview. The presentation discussed the terms of the
merger agreement and the subsequent transactions. For a more detailed
discussion of the structure and terms of the merger and the subsequent
transactions, see "The Transaction."
Fixed Income Assets of the Allianz Group. The presentation concluded with a
discussion of the fixed income assets under management of the Allianz group,
including insurance assets, that will be managed by Pacific Investment
Management Company following the merger and the subsequent transactions. The
analysis concluded by setting forth a projection of the increase in total
income to Pacific Investment Management Company that might occur as a result of
its management of the Allianz group assets. As a result of the management of
these additional assets, it was estimated that the total income of Pacific
Investment Management Company would increase within the range of $21.9 million
to $27.1 million for the year 2000 and within the range of $41.3 million to
$51.8 million for the year 2002.
57
<PAGE>
Opinion of Financial Advisor to Pacific Life
Pacific Life, the direct parent corporation of PAM, retained Goldman Sachs
to act as its financial advisor in connection with the proposed transactions
and to evaluate the fairness, from a financial point of view, of the
consideration to be received by Pacific Life pursuant to the merger agreement
and the Continuing Investment Agreement between Allianz of America and PAM (the
"investment agreement"). On October 29, 1999, Goldman Sachs delivered its oral
opinion to Pacific Life's
board of directors that as of the date of such opinion, the consideration (with
the assumptions as described below) to be received by Pacific Life under the
merger agreement and the investment agreement was fair from a financial point
of view to Pacific Life. The opinion was confirmed by delivery of a written
opinion dated October 31, 1999.
The full text of the written opinion of Goldman Sachs dated October 31,
1999, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with their opinion, has been filed with the
Commission as Exhibit 99(b)(9) to the Schedule 13E-3 of PAM, Pacific Life,
PHLLC, Partners LLC, Partners GP and the Partnership filed in connection with
this proxy statement and is incorporated herein by reference.
In connection with its opinion, Goldman Sachs reviewed, among other things:
. the merger agreement and the investment agreement;
. the Amended and Restated Agreement of Limited Partnership of PIMCO
Advisors dated June 30, 1999;
. the Amended and Restated Agreement of Limited Partnership of the
Partnership dated June 30, 1999;
. the annual reports on Form 10-K of the Partnership;
. the quarterly reports on Form 10-Q and other interim reports of the
Partnership;
. the annual reports to shareholders of Pacific Life for the five years
ended December 31, 1998 and quarterly reports of Pacific Life;
. audited GAAP financial statements of Pacific Life, PIMCO Advisors and
the Partnership for the five years ended December 31, 1998;
. statutory annual statements filed by Pacific Life with the Insurance
Department of the State of California for the five years ended December
31, 1998;
. internal financial analyses and forecasts for Pacific Life prepared by
the management of Pacific Life; and
. internal financial analyses and forecasts for PIMCO Advisors prepared by
the management of PIMCO Advisors.
Goldman Sachs also held discussions with members of the senior management of
Pacific Life, PIMCO Advisors, Allianz AG and Allianz of America regarding the
exchange of Advisors Class A Units beneficially owned by PAM for beneficial
ownership of Advisors Class E Units, including the put/call arrangement (the
"Exchange") and the other transactions contemplated by the merger agreement and
the investment agreement. In addition, they discussed PIMCO Advisors' past and
current business operations, financial condition and future prospects. Goldman
Sachs reviewed the reported price and trading activity for the Advisors Class A
Units, compared financial and stock market information for PIMCO Advisors with
similar information for other companies the securities of which are publicly
traded, reviewed the financial terms of recent business combinations in the
asset management industry specifically and in other industries generally, and
performed other studies and analyses as it considered appropriate.
58
<PAGE>
Goldman Sachs relied upon and assumed the accuracy and completeness of all
of the financial and other information reviewed by it for purposes of rendering
its opinion. The management of PIMCO Advisors informed Goldman Sachs that PIMCO
Advisors had not prepared formal forecasts beyond the current fiscal year.
Goldman Sachs noted that its review with respect to these forecasts, with the
consent of Pacific Life, was based on estimates for PIMCO Advisors published by
the Institutional Brokers Estimate System. In addition, Goldman Sachs did not
make an independent evaluation or appraisal of the assets or liabilities of
PIMCO Advisors or any of its subsidiaries and was not furnished with any such
evaluation or appraisal. Goldman Sachs had not been requested to evaluate, and
it expressed no opinion as to, the tax implications to Pacific Life of the
Exchange or the transactions contemplated by the Exchange. Goldman Sachs also
had not been requested to evaluate, and it expressed no opinion as to, the cash
or other distributions that may be made to Pacific Life as a holder of Advisors
Class E Units. With the consent of Pacific Life, Goldman Sachs evaluated the
consideration to be received by Pacific Life pursuant to the Exchange and
related transactions assuming Pacific Life had fully exercised on the date of
its opinion its put option with respect to its Advisors Class E Units as
contemplated by the put/call arrangement and received upon such exercise the
cash consideration being paid for the Advisors Class A Units for all of its
Advisors Class E Units. Although Goldman Sachs evaluated the consideration from
a financial point of view, it was not asked to and did not recommend the
specific consideration payable in the merger, the Exchange or the related
transactions. No other instructions or limitations were imposed by Pacific Life
on Goldman Sachs with respect to the investigations made or procedures it
followed in rendering its opinion.
Goldman Sachs' advisory services and the opinion were provided for the
information and assistance of Pacific Life's board of directors in connection
with its consideration of the transaction contemplated by the merger agreement
and the investment agreement and do not constitute a recommendation to any
holder of Partnership units or Advisors Class A Units as to how such holder
should vote on any matters related to the merger or the related transactions.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its October 31, 1999 written opinion
to Pacific Life's board of directors. The summaries of financial analyses
include information presented in tabular format. In order to more fully
understand the financial analyses used by Goldman Sachs, the tables must be
read together with the full text of each summary. The tables alone do not
constitute a complete description of Goldman Sachs' financial analyses.
(1) Premiums Analysis. Goldman Sachs analyzed the premiums implied for PIMCO
Advisors in the Exchange assuming Advisors Class A Unit prices of $38.00 and
$39.00 based on the trading price of the Advisors Class A Units on October 28,
1999, the date which was two trading days prior to the signing of the merger
agreement, July 6, 1999, the trading day prior to the date on which the press
first reported discussions between PIMCO Advisors and Allianz AG, and based on
an adjusted undisturbed price which is the estimated trading price for the
Advisors Class A Units adjusted for changes in the market value of publicly
traded master limited partnership stocks of asset managers between July 6, 1999
and October 28, 1999. Goldman Sachs then compared these results to the premiums
paid in selected financial services transactions having transaction values
greater than $1.0 billion since 1998. Goldman Sachs calculated the low, median
and high premiums in these financial services transactions based on the trading
market prices of the acquired companies four weeks prior to the announcement of
these transactions.
59
<PAGE>
The results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
Implied Premiums for Selected Financial Services
PIMCO Advisors at Transaction Premiums
----------------------- -------------------------------
$38.00 $39.00 Low Median High
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Unit Price on October
28, 1999 ($34.13)...... 11.4% 14.3% 0.7% 27.2% 69.4%
Undisturbed Unit Price
on July 6, 1999
($29.56)............... 28.6% 31.9% 0.7% 27.2% 69.4%
Adjusted Undisturbed
Unit Price ($23.47).... 61.9% 66.2% 0.7% 27.2% 69.4%
</TABLE>
(2) Selected Transactions Analysis. Goldman Sachs reviewed and compared
certain financial information in the Exchange with corresponding financial
information in the following 33 selected transactions with transaction values
greater than $500 million in the asset management industry:
. Putnam Investments' acquisition of Thomas H. Lee & Co. in July 1999
. Wachovia Corporation's acquisition of OFFITBANK Holdings Inc. in May
1999
. Prudential Corporation plc's acquisition of M&G Group plc in March 1999
. WestLB's acquisition of Criterion Investment Management in April 1999
. American International Group, Inc.'s acquisition of John McStay
Investment Counsel, L.P. in April 1999
. First Union Corporation's acquisition of Tattersall Advisors Group Inc.
in February 1999
. Oppenheimer Funds Inc.'s acquisition of Trinity Investment Management
Corporation in December 1998
. Axa Investment Managers, S.A.'s acquisition of Barr Rosenberg Series
Trust in October 1998
. Northwestern Mutual Life Insurance Company's acquisition of Frank
Russell Company in August 1998
. Liberty Financial Companies, Inc.'s acquisition of Crabbe Huson Group in
June 1998
. Robeco Group's acquisition of Weiss, Peck & Greer LLC in May 1998
. Value Asset Management's acquisition of Grosvenor Capital Management in
February 1998
. AMVESCAP plc's acquisition of Chancellor LGT Asset Management in January
1998
. Robeco Group's acquisition of RREEF America LLC in December 1997
. Legg Mason, Inc.'s acquisition of Brandywine Asset Management Inc. in
December 1997
. PIMCO Advisors' acquisition of Oppenheimer Capital (67%) in November
1997
. Merrill Lynch & Co., Inc.'s acquisition of Mercury Asset Management
Group plc in November 1997
. Commerzbank AG's acquisition of Montgomery Securities Inc. in August
1997
. Generale de Banque S.A.'s acquisition of Harbor Capital Management
Company in July 1997
. Refco Group Ltd's acquisition of Forstmann-Leff Associates in May 1997
. United Asset Management's acquisition of Thomson Horstmann & Bryant Inc.
in April 1997
. Affiliated Managers Group's acquisition of Gofen & Glossberg Inc. in
March 1997
. United Asset Management's acquisition of Pacific Financial Research,
Inc. in March 1997
. Phoenix Duff & Phelps Corporation's acquisition of GMG/Seneca Capital
Management LLC in February 1997
. PIMCO Advisors' acquisition of Oppenheimer Capital (33%) in February
1997
60
<PAGE>
. Countrywide Credit Industries' acquisition of Leshner Financial in
December 1996
. Goldman Sachs' acquisition of Liberty Investment Management Inc. in
October 1996
. New England Investment Companies, L.P.'s acquisition of Jurika & Voyles,
Inc. in September 1996
. New England Investment Companies, L.P.'s acquisition of Aldrich Eastman
& Waltch Inc. in September 1996
. Liechtenstein Global Trust's acquisition of Chancellor Capital
Management in July 1996
. Goldman Sachs' acquisition of CIN Management in July 1996
. United Asset Management's acquisition of Clay Finlay, Inc. in July 1996
. Merrill Lynch & Co., Inc.'s acquisition of Hotchkiss & Wiley in May 1996
Goldman Sachs compared, among other things, the multiples for latest 12
months (through September 30, 1999) revenue, earnings before interests, taxes,
depreciation and amortization ("EBITDA"), and net income implied for PIMCO
Advisors by the Exchange assuming Advisors Class A Unit prices of $38.00 and
$39.00 against corresponding multiples, to the extent available, derived from
the selected transactions based on the purchase prices paid in these
transactions. Goldman Sachs also compared the percentage of assets under
management ("AUM") as of September 30, 1999 against corresponding percentages
derived from the selected transactions.
The results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
Implied Multiples/
Percentages for
PIMCO Advisors at Selected Transaction Multiples
-------------------- ---------------------------------
$38.00 $39.00 Low Median High
--------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenue.................... 4.6x 4.7x 3.1x 4.8x 11.6x
EBITDA..................... 13.7x 14.1x 9.5x 11.2x 24.9x
Net Income................. 20.6x 21.2x 15.8x 22.5x 35.7x
% of AUM................... 1.7% 1.7% 0.9% 2.2% 4.5%
</TABLE>
(3) Selected Companies Analysis. Goldman Sachs reviewed and compared certain
financial information for PIMCO Advisors to corresponding financial information
for the following 14 asset management companies and two asset management
limited partnerships:
Asset Managers
. Franklin Resources, Inc. . United Asset Management
. AMVESCAP plc . John Nuveen Company
. T. Rowe Price Associates, Inc. . Blackrock, Inc.
. Federated Investors, Inc. . AMG
. Waddell & Reed, Inc. . Gabelli Asset Management Inc.
. Neuberger Berman . Phoenix Investment Partners, Ltd.
. Eaton Vance Corporation . Conning & Company
Master Limited Partnerships
. Alliance Capital Management Corporation
. Nvest Companies, L.P.
Goldman Sachs compared, among other things, the multiples for earnings per
share ("EPS") for estimated calendar years 1999 and 2000 implied for PIMCO
Advisors by the Exchange assuming
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<PAGE>
Advisors Class A Unit prices of $38.00 and $39.00 against corresponding
multiples derived from the selected companies. EPS estimates for calendar year
1999 of $1.50 and $1.68 were based on estimates of the management of PIMCO
Advisors and Institutional Brokers Estimate System ("IBES"), respectively, and
EPS estimates for calendar year 2000 of $2.03 were based on estimates of IBES.
The results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
Implied
Multiples for Selected
PIMCO Companies
Advisors at Multiples
------------- -----------------
$38.00 $39.00 Low Median High
------ ------ ---- ------ -----
<S> <C> <C> <C> <C> <C>
Estimated 1999 EPS (PIMCO Advisors)............. 25.3x 26.0x 8.4x 12.6x 20.6x
Estimated 1999 EPS (IBES)....................... 22.6x 23.2x 8.4x 12.6x 20.6x
Estimated 2000 EPS (IBES)....................... 18.7x 19.2x 7.3x 10.7x 16.2x
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary described above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable
to PIMCO Advisors or Allianz of America or the contemplated transaction.
The analyses were prepared solely for purpose of Goldman Sachs' providing
its opinion to Pacific Life's board of directors as to the fairness from a
financial point of view of the consideration (including the assumptions as
described above) to Pacific Life and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or their respective advisors, none of Pacific Life,
PIMCO Advisors, Allianz AG, Allianz of America, Goldman Sachs or any other
person assumes responsibility if future results are materially different from
those forecast.
As described above, Goldman Sachs' opinion to Pacific Life's board of
directors was one of many factors taken into consideration by Pacific Life's
board of directors in making its determination to approve the merger agreement
and the investment agreement. This summary does not purport to be a complete
description of the analysis performed by Goldman Sachs and is qualified by
reference to the written opinion of Goldman Sachs attached as an exhibit to the
Schedule 13E-3 of PAM. A copy of the presentation delivered by Goldman Sachs
has been filed as Exhibit 99(b)(8) to the Schedule 13E-3 filed by PAM with the
Commission and is available for inspection and copying at the principal
executive offices of Pacific Life during its regular business hours by any
holder of Partnership Units or any of its representatives who has been so
designated in writing upon written request and at the expense of the requesting
party.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Pacific Life, having provided investment banking services to
Pacific Life from time to time, including having acted as its financial advisor
in connection with its reorganization in September 1997 to a
62
<PAGE>
mutual holding company structure and having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the merger agreement and the investment agreement. Goldman Sachs has also
provided investment banking services to PIMCO Advisors from time to time. In
addition, Goldman Sachs has provided investment banking services to Allianz AG
from time to time, including having acted as its financial adviser in
connection with the sale of its subsidiary San Francisco Re in November 1996,
as its financial advisor in connection with its acquisition of AGF in May 1998
and as a co-manager for three of its debt issuances from 1996 to 1998. Also, in
September 1999, Paul Achleitner, a managing director of Goldman Sachs, was
named chief financial officer of Allianz AG effective January 1, 2000.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Pacific Life, PIMCO Advisors and Allianz AG for its own account and for the
accounts of customers. In addition, Goldman Sachs may provide investment
banking services in the future to PIMCO Advisors and Allianz AG.
Pursuant to a letter agreement amendment dated August 25, 1999, Pacific Life
engaged Goldman Sachs to act as its financial advisor in connection with, among
other things, a potential sale of its minority interest in PIMCO Advisors.
Pursuant to the terms of the letter agreement, Pacific Life has agreed to pay
Goldman Sachs a retainer fee of $1.0 million, an advisory fee of $500,000
payable upon rendering the opinion to Pacific Life described in this proxy
statement, and a transaction fee of 0.30% of the net present value of the
aggregate consideration (as described in the letter agreement amendment),
subject to a maximum amount of $6.0 million, payable upon the exercise of the
put and call arrangements in the Exchange, less the advisory fee. Pacific Life
has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including reasonable attorney's fees and expenses, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the federal securities laws.
Pacific Life does not currently intend to request an updated opinion from
Goldman Sachs. If a significant event regarding the merger or Exchange occurs,
such as a material amendment to the merger agreement or investment agreement
modifying the consideration provided for in the merger or Exchange, the Pacific
Life board of directors would consult with management and its legal and
financial advisors and take into account, consistent with its fiduciary duties,
all relevant facts and circumstances existing at that time, including general
market, economic and business conditions.
Management Compensation Consultants
An important aspect of our discussions with Allianz AG was ensuring the
retention, after the Closing, of the key executives at Pacific Investment
Management Company, our premier fixed income manager. Accordingly, as part of
our evaluation of the proposed transaction with Allianz of America, we retained
McLagan Partners, Inc. to analyze and opine upon the reasonableness of the
payments proposed to be made under the PIMCO Advisors L.P. Retention Plan for
Executives of Pacific Investment Management Company (the "PIMCO Retention
Plan") being provided to the executives of Pacific Investment Management
Company in the proposed transaction. We selected McLagan Partners because of
their knowledge of our business and their expertise and reputation as
management consultants in the financial services industry. McLagan Partners is
an internationally recognized management consulting firm providing compensation
consulting and customized performance and compensation reports to the world's
leading financial services organizations. Their compensation related services
include annual and long-term incentive plan design, retention plan design and
evaluation in the context of mergers and acquisitions and surveys of pay
levels. McLagan Partners received $50,000, plus reimbursement of expenses, as
consideration for its services.
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<PAGE>
In developing their opinion regarding the retention arrangements, McLagan
Partners reviewed the proposed form of PIMCO Retention Plan, and considered,
among other things:
. Competitive market practices associated with acquisition-related
incentive programs.
. Pacific Investment Management Company's historical compensation
practices and expected current year compensation levels.
McLagan Partners also engaged in discussions with management of the
Partnership, including the director of human resources, and reviewed a summary
of the overall terms of the proposed transaction and the proposed form of
employment contracts for the managing directors of Pacific Investment
Management Company. Their analysis of external market practices included
observations regarding the level of retention payments, which tends to increase
in acquisitions driven by strategic business concerns, the timing of payments,
generally coinciding with a perceived period necessary for integration of the
acquired firm, individual award levels, which generally coincide with the
ability to impact future business results, and award levels as a multiple of
annual cash compensation.
The opinion assumed the following:
. The loss of Pacific Investment Management Company executives and senior
investment talent would have a materially adverse impact on PIMCO
Advisors' total enterprise value.
. The retention incentive arrangements are not intended as substitutes for
ongoing base salary and bonus compensation.
. The primary objective of the retention incentive arrangements is to
retain and motivate key executives and investment talent subsequent to
the transaction.
. A five year retention period is required to integrate the Pacific
Investment Management Company business practices and processes, and the
collective knowledge and expertise of its staff, into the Allianz group.
Based on its analysis and assumptions, McLagan Partners opined that the
proposed retention incentive arrangements for Pacific Investment Management
Company under the PIMCO Retention Plan are reasonable in light of competitive
market practices and, moreover, existing compensation practices and levels at
Pacific Investment Management Company. Further, McLagan Partners opined that
those retention incentive arrangements are suitable to the Allianz group's
presumed objectives of retaining and motivating the officers of Pacific
Investment Management Company in the context of the contemplated acquisition.
Financial Interests of Certain Persons in the Transaction
The merger that you are being asked to approve is one of several
transactions contemplated by the merger agreement. These transactions taken
together create interests in several entities and persons that are different
from and in addition to your interests as a unitholder of the Partnership. You
should be aware of these other entities and persons and their interests in the
merger transactions that are different from yours.
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<PAGE>
The Partnership
The executive officers and members of the Management Board of the
Partnership have conflicts of interest in the proposed transactions which
include:
. vesting and cash out of unit option awards and vesting of certain
subaccounts under the Partnership's Deferred Compensation Plan;
. employment agreements;
. retention and severance payments; and
. indemnification and insurance.
In considering the fairness of the merger to the unitholders of the
Partnership, the general partner of the Partnership took into account these
interests. These interests are summarized below. None of the executive officers
or members of the Management Board of the Partnership are employees
or affiliates of Partners GP or its general partners, PHLLC and Partners LLC,
other than Ernest L. Schmider who was admitted as a member of Partners LLC
effective as of January 1, 2000.
The following chart summarizes various employment related payments to each
of the executive officers and members of the Management Board in connection
with the proposed transactions.
<TABLE>
<CAPTION>
Deferred
Compensation
Unit Options Plan
Annual --------------------------- ---------------- Total
Retention Expected Units Dollar Potential
Payment/ Number Avg. Payment to Vest Benefit Payment
Annual Number of of Exercise Assuming at Assuming Assuming
Name Salary Payments(1) Options Price Merger Closing Merger Merger(3)
- ---- -------- ------------ ------- -------- ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William D. Cvengros(2).. $ 0 $1,667,000/3 250,000 $16.65 $5,525,000 0 $ 0 $10,525,000
Kenneth M. Poovey....... 400,000 5,000,000/2 30,000 21.81 508,200 19,654 761,593 11,269,793
Richard M. Weil......... 275,000 500,000/5 75,500 26.49 925,630 3,446 133,532 3,559,162
Stephen J. Treadway..... 350,000 1,000,000/5 105,000 22.75 1,680,000 25,668 994,635 7,674,635
Robert M. Fitzgerald.... 250,000 300,000/5 69,000 27.65 765,900 2,600 100,750 2,366,650
James G. Ward........... 200,000 240,000/5 26,000 29.80 232,700 154 5,967 1,438,667
Ernest L. Schmider...... 246,620 600,000/5 86,000 21.21 1,508,440 2,675 103,656 4,612,096
</TABLE>
- --------
(1) The retention payments to officers other than Mr. Cvengros are contingent
on continued employment.
(2) Mr. Cvengros has announced his intention to resign at the end of the first
quarter of 2000.
(3) The total payments listed herein do not include the executive's annual
salary and are contingent upon continued employment.
Unit Option Awards. As of the Closing, all outstanding unit options under
the 1998 Unit Incentive Plan, whether exercisable or not, will be cancelled and
terminated and will represent the right to receive a cash payment equal to the
excess of the Unit Price over the exercise price per unit of such unit option,
multiplied by the number of units subject to such unit option, together with
interest on such amount at 8% per annum from the Closing through the date such
payment is made. It is anticipated that such payment will be made approximately
100 days following the Closing.
Deferred Unit Awards. Deferred unit awards under the 1998 Unit Incentive
Plan will, after the Closing, reflect the right to receive cash equal to the
Unit Price, multiplied by the number of units underlying such award, plus
interest at 8% per annum from the Closing through the vesting date of such
awards. Deferred unit awards will continue to vest according to their existing
vesting schedules.
Deferred Compensation Plan. The Advisors Class A Units held in the trust
under the Deferred Compensation Plan (other than those related to deferred
restricted unit awards) will be exchanged by
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<PAGE>
the plan's trustee for cash in an amount per unit equal to the Unit Price.
Under the terms of the plan, any unvested account balances reflecting discount
investment or reinvestment of deferred compensation will vest. Each Advisors
Class A Unit representing an unvested deferred restricted unit held in the
trust generally will not vest, and will be exchanged by the plan trustee for a
note from Allianz of America with a principal balance equal to the Unit Price
multiplied by the number of unvested units. The note will bear interest at 8%
per annum, will be payable as and when the units vest on the original vesting
schedule and will be guaranteed by Allianz AG. Following the Closing, it is
expected that plan participants' account balances will be measured by, and the
assets held by the plan's trustee will be invested in, such investments as may
be individually directed by each participant.
Most of the executive officers will benefit from the transaction in that the
unvested portions of account balances reflecting discount investment or
reinvestment of deferred compensation will vest at Closing. In addition, all of
the deferred restricted units held in the plan account for the benefit of
Mr. Treadway will vest and therefore be exchanged with all other vested units
in the plan for cash equal to the Unit Price. While these unvested plan
balances will vest at the Closing, all amounts deferred must remain in the
trust through the end of the scheduled deferral period.
Employment Agreements. The merger agreement provides that in connection with
the Closing, PIMCO Advisors will enter into employment agreements with Robert
M. Fitzgerald, Kenneth M. Poovey, Stephen J. Treadway, James G. Ward and
Richard M. Weil. The initial term of each executive's employment agreement will
be two years, beginning January 1, 2000, with automatic renewal in the absence
of notice from PIMCO Advisors or the executive six months prior to the
expiration of the term, for successive one year periods. The annual salary
under the employment agreements for each of Messrs. Fitzgerald, Poovey,
Treadway, Ward and Weil will be $250,000, $400,000, $350,000, $200,000 and
$275,000, respectively. In addition, each of the executives will receive annual
performance based bonuses, retention payments (as described below) and be
entitled to participate in the benefit plans and programs of PIMCO Advisors
that are open to employees in similar positions. Mr. Poovey's agreement
provides for a minimum annual performance-based bonus of $1.5 million for each
year of the initial two year term of the agreement. In addition, Mr. Poovey's
employment agreement reflects his right to use an apartment in New York City as
well as his right to purchase the apartment both of which rights predate the
merger agreement.
If an executive's employment is terminated for any reason other than for
cause by PIMCO Advisors or voluntarily by the executive, all amounts payable
under the employment agreement, including, but not limited to the salary and
retention payments will immediately become payable as if he continued to be
employed through the term of the employment agreement, the executive will
continue to receive performance bonuses on such dates as if the executive had
continued to be employed through the term of the employment agreement, but in
amounts which are tied to the previous year's performance bonus (and not to the
current year's results), the executive's awards under the 1998 Unit Incentive
Plan will immediately vest, and PIMCO Advisors will continue to provide all of
the benefits set forth in the employment agreement through the end of the
current term of the employment agreement in effect as of the date of
termination.
Retention and Severance Payments. In connection with the transactions
contemplated by the merger agreement, PIMCO Advisors will adopt the PIMCO
Advisors L.P. Transition and Retention Plan. The plan provides for transition
payments for departing employees and retention awards payable over two to five
years contingent on continued employment to key employees remaining with the
business. In addition, the plan provides for incentive awards for employees in
the retail and equity groups which vest over five years based on achievement of
performance goals. Mr. Cvengros,
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who has elected not to continue his employment with PIMCO Advisors following
the Closing, will receive a transition award of $1.667 million in each of the
three years following the Closing. Mr. Poovey will receive a retention award of
$5 million per year for two years conditioned on continued employment, and
Messrs. Weil, Fitzgerald and Ward will receive retention awards of $500,000,
$300,000 and $240,000, respectively, per year for five years conditioned on
continued employment. Mr. Treadway will receive a retention award of $1 million
per year for five years conditioned on continued employment and be eligible for
an additional award of up to $1 million per year for five years upon the
satisfaction of certain performance goals by PIMCO Advisors' retail business.
In addition, Mr. Schmider will receive a retention award under the retention
plan for executives of Pacific Investment Management Company (described under
"--Partners GP--Partners LLC" below) of $600,000 per year for five years
conditioned on continued employment.
Indemnification and Insurance. Pursuant to the merger agreement, Allianz of
America has, for a period of six years from the Closing, agreed that it will:
. not, and cause each of its subsidiaries not to, amend or modify any
provision of any partnership agreement, limited liability company
agreement or indemnification agreement pursuant to which any of the
Partnership, PIMCO Advisors, PAM, Partners GP, Partners LLC or PHLLC or
to which any officer, director, member, partner or other controlling
person of such entities is or may be entitled to exculpation or
indemnification, and Allianz of America will cause PIMCO Advisors to
honor any such provision and to pay to the intended recipient any
amounts to which such person is properly entitled under such provisions;
and
. not take any action which causes the termination or cancellation of any
extension of directors' and officers' liability insurance for partners,
members, managing members, directors and officers of the Partnership,
PIMCO Advisors, Partners LLC, PHLLC, PAM and Partners GP, unless such
insurance is replaced.
PIMCO Advisors will purchase an extension of its current directors' and
officers' liability insurance coverage for a premium of not more than $150,000
per year.
Partners GP
Partners GP is a general partnership with two partners, PHLLC and Partners
LLC. PHLLC is a subsidiary of PAM. Partners LLC is the managing partner of
Partners GP, and is owned and managed by the current and former managing
directors of Pacific Investment Management Company. You should be aware of
their respective interests.
Partners LLC
Partners LLC is the managing partner of Partners GP. Partners LLC owns
142,480 Advisors Class A Units, which will be purchased by Allianz GP Sub at
the same Unit Price as you receive. PHLLC will also sell its general partner
interest to Allianz GP Sub for nominal consideration of $100.
The members of Partners LLC are all of the current and certain former
managing directors of Pacific Investment Management Company. The members of
Partners LLC are William R. Benz, Robert W. Burns, Christopher P. Dialynas,
Mohammed A. El-Erian, William H. Gross, John L. Hague, Pasi M. Hammalainen,
Brent R. Harris, Brent L. Holden, Margaret E. Isberg, John S. Loftus, Dean S.
Meiling, James F. Muzzy, William F. Podlich III, William C. Powers, Ernest L.
Schmider,
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Lee R. Thomas, William S. Thompson Jr., and Benjamin L. Trosky (each of the
foregoing, the "PIMCO Managing Directors") as well as David Edington and Frank
Rabinovitch, who are former managing directors. As members of Partners LLC,
these persons will receive benefits in the merger transactions different from
your interests as unitholders of the Partnership. These include:
. new employment and consulting agreements for the PIMCO Managing
Directors;
. restricted stock awards for certain PIMCO Managing Directors;
. eligibility of PIMCO Managing Directors to participate in the PIMCO
Profit Sharing Plan, Class B Unit Purchase Plan and PIMCO Retention
Plan;
. amendment and satisfaction of certain 1994 Employment Termination
Agreements;
. benefits associated with the Pacific Investment Management Company
restructuring;
. vesting and cash out of unit option awards and vesting of certain
subaccounts under the Partnership's Deferred Compensation Plan for the
PIMCO Managing Directors; and
. indemnification and insurance.
Certain members of Partners LLC will receive employment-related
compensation, in the aggregate, of up to $442.5 million in cash payments and up
to 182,488 shares of Allianz AG stock with an assumed value of $50.0 million,
over a five year period contingent on continued employment, as well as
aggregate closing payments of approximately $603.3 million in cash and
approximately 364,977 shares of Allianz AG stock with an assumed value of
$100.0 million in settlement of pre-existing unit-based entitlements (the 1994
Employment Termination Agreements and outstanding unit options) as a result of
the transactions. In addition, such persons will have the opportunity to
participate in the other employee benefits programs described below. Of such
amounts, in connection with the closing, Mr. Thompson, the Chief Executive
Officer of Pacific Investment Management Company, will receive payments in cash
and Allianz AG stock with a potential assumed aggregate value of $103.5
million, of which $48.5 million will be received at the closing in satisfaction
of pre-existing unit based entitlements and up to $55.0 million of which will
be received over a five year period conditioned on continued employment. In
connection with the closing, Mr. Gross, the Chief Investment Officer of Pacific
Investment Management Company, will receive payments in cash and Allianz AG
stock with a potential assumed aggregate value of $462.4 million, of which
$263.4 million will be received at the closing in satisfaction of pre-existing
unit based entitlements and up to $199.0 million of which will be received over
a five-year period conditioned on continued employment. The value of payments
to each of the members of Partners LLC described above assumes a Unit Price of
$38.75 and a value of $273.99 per share of Allianz AG stock, the average
trading price for such stock for the 30 days prior to the date of public
announcement of discussions between Allianz AG and PIMCO Advisors. As of March
2, 2000, the closing price of the Allianz AG stock was $346.94 per share,
increasing the stock component of employment related compensation to be
received by the members of Partners LLC to $63.3 million, all of which will be
received by Messrs. Thompson and Gross, and increasing the stock component of
the closing payments in settlement of pre-existing unit-based entitlements to
be received by the members of Partners LLC to $126.6 million, of which Messrs.
Thompson and Gross will receive $10.8 million and $63.7 million, respectively.
In considering the fairness of the merger to the unitholders of the
Partnership, the members and management board of Partners LLC took into account
these additional interests which are
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summarized below. Such considerations took into account the fact that benefits
being received pursuant to the amended Profit Sharing Plan and the consequent
adoption of the Class B Unit Purchase Plan resulted from the desire of Allianz
AG to restructure or modify pre-existing contractual arrangements, and that the
benefits under the 1994 Employment Termination Agreements, the Unit Options and
the Deferred Compensation Plan resulted from the desire of Allianz AG to
settle, at the same per unit price being paid to the public, those pre-existing
contractual arrangements. Further, they took note of the fact that retention
payments are customary in transactions involving the acquisition of investment
advisors in order to retain and motivate key investment managers, and that the
retention payments proposed by Allianz AG were found to be reasonable by
McLagan Partners in its opinion.
Employment and Consulting Agreements. In connection with the transactions
under the merger agreement, each of the PIMCO Managing Directors is expected to
enter into a new employment or consulting agreement with Pacific Investment
Management Company. The general terms of these agreements are set forth below.
The initial term of the employment agreements will be five years from the
Closing (seven years for Messrs. Gross and Thompson). Each managing director
will receive an annual salary, and will be entitled to participate in the
Pacific Investment Management Company Non-Qualified Profit Sharing Plan (the
"PIMCO Profit Sharing Plan"), the Pacific Investment Management Company Class B
Unit Purchase Plan (the "Class B Unit Purchase Plan"), and the PIMCO Advisors
L.P. Retention Plan for Executives of Pacific Investment Management Company
(the "PIMCO Retention Plan"). Additionally, the contracts provide for
participation in health, welfare, insurance, pension and other benefit plans
and programs.
If the managing director voluntarily terminates his or her employment, if
his or her employment is terminated for cause, or if the Executive Committee of
Pacific Investment Management Company terminates his or her employment, then
all obligations of Pacific Investment Management Company under the related
employment agreement will terminate. The agreement allows the Executive
Committee of Pacific Investment Management Company to terminate a managing
director, with or without cause, by the affirmative vote of four of its five
members.
If an employment agreement is terminated for any other reason, the relevant
managing director will have the right to continue to be paid his or her base
salary for one year from the date of termination or the then scheduled
termination date of the agreement, whichever is earlier; the managing director
will continue to receive all amounts payable under the PIMCO Profit Sharing
Plan and the PIMCO Retention Plan, as if the managing director had remained
employed through the termination date; in the case of Messrs. Thompson and
Gross, all shares of restricted stock that would have vested as a result of
their continued employment will immediately vest; and all units purchased by
the managing director under the Class B Unit Purchase Plan will (i) in the
event of death or incapacity of the managing director, be repurchased by PIMCO
Advisors in accordance with the terms of the plan and (ii) in the event of an
involuntary termination other than for cause or by the Executive Committee of
Pacific Investment Management Company, upon payment of any outstanding amounts
due under the purchase note, become released units owned by the terminated
managing director and subject to repurchase by PIMCO Advisors upon the exercise
of the terminated managing director's put right in accordance with the terms of
the plan. Additionally, in the event of an involuntary termination or
termination by death, the reduction provisions of the PIMCO Retention Plan
shall cease to be applicable.
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In addition, the employment agreements of each of Messrs. Thompson and Gross
provide for a grant of restricted stock of Allianz AG (described below), and
provide that if such managing director's employment terminates other than for
cause, by affirmative vote of the Executive Committee of Pacific Investment
Management Company, by death or incapacity, or voluntarily, then:
. his participation percentage in the PIMCO Profit Sharing Plan will be
fixed at a specified percentage and he will continue to participate in
the PIMCO Profit Sharing Plan according to that percentage through the
expiration of the term of the employment agreement; and
. he will be entitled to all benefits accrued under the restricted stock
agreement and all awards to be made under the agreement, both fixed and
discretionary, will vest immediately.
In recognition of their anticipated contribution to both Pacific Investment
Management Company and Allianz of America, Messrs. Gross and Thompson will be
awarded restricted stock of Allianz AG in connection with the transactions. On
each of the first five anniversaries of the closing date, 9,124 shares of
Allianz AG stock (worth approximately $2.5 million at $273.99 per share, the
average of 30 day trading price prior to October 4, 1999, the date of public
announcement of discussions between PIMCO Advisors and Allianz AG) will vest
for each of Messrs. Thompson and Gross. On each such date, each of Messrs.
Gross and Thompson also will be eligible for vesting of up to 9,124 additional
shares of Allianz AG stock to be awarded at the discretion of the Chief
Executive Officer of the Allianz Asset Management division of Allianz group.
Two of the PIMCO Managing Directors, Messrs. Meiling and Podlich, will enter
into five year consulting agreements with Pacific Investment Management
Company. Each consultant will receive an annual consulting fee and will be
entitled to participate in the PIMCO Retention Plan. Messrs. Meiling and
Podlich will be entitled to receive, subject to the satisfaction of certain
conditions, up to an aggregate of $43.6 million over a five year period
pursuant to the consulting arrangements and the PIMCO Retention Plan.
Additionally, the consulting agreements provide for participation in health,
welfare, insurance, pension and other benefit plans and programs.
If the consultant voluntarily terminates his consulting arrangement or if
his consulting arrangement is terminated for cause, then all obligations of
Pacific Investment Management Company under the consulting agreement will
terminate. If the agreement is terminated for any other reason, the consultant
will have the right to continue to be paid his base consulting fee for one year
from the date of termination or the scheduled termination date of the
agreement, whichever is earlier, and the consultant will continue to receive
all amounts payable under the PIMCO Retention Plan, as if the consulting
arrangement had continued through the scheduled termination date.
Reorganization of Pacific Investment Management Company; Profit Sharing
Plan. The PIMCO Managing Directors currently have the right to substantial
autonomy in the management of the business of Pacific Investment Management
Company, and also have the right to participate in the 1994 Non-Qualified
Profit Sharing Plan of Pacific Investment Management Company. Under the 1994
profit sharing plan, the PIMCO Managing Directors and other executive employees
share in a bonus pool equal to 45% of the adjusted net profit of Pacific
Investment Management Company. Both the management rights and the profit
sharing bonus pool are guaranteed to the PIMCO Managing Directors through the
organizational documents of Pacific Investment Management Company and their
existing employment agreements, and cannot be changed without a supermajority
vote of the PIMCO Managing Directors.
Pursuant to the merger agreement, the PIMCO Managing Directors will agree to
a modification of these arrangements. First, the PIMCO Managing Directors will
agree to the reorganization of
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Pacific Investment Management Company into a limited liability company, with
PIMCO Advisors as the managing member. The existing structural management
rights of the PIMCO Managing Directors will be replaced by a revocable
delegation by PIMCO Advisors to the PIMCO Managing Directors of management
rights similar to those they currently enjoy.
While the delegation of authority is revocable at any time, Allianz of
America has agreed that if PIMCO Advisors revokes its delegation of authority
without making a good faith determination that internal circumstances exist at
Pacific Investment Management Company that are not being effectively addressed
by management and which, if continued, would likely result in a substantial
impairment to the value of Pacific Investment Management Company, then the
following will occur:
. all amounts payable to the PIMCO Managing Directors under the PIMCO
Retention Plan will vest and be paid to the PIMCO Managing Directors as
if they remained employed by Pacific Investment Management Company,
whether or not they remain employed;
. provisions of the PIMCO Retention Plan requiring the forfeiture of
retention payments in the event that Allianz of America suffers an
indemnified loss under the merger agreement and the repayment of
retention payments in the event that a PIMCO Managing Director violates
his non-competition covenants will cease to be applicable;
. the covenants not to compete in the 1994 Employment Termination
Agreements will terminate at the earlier of eighteen months from the
date of revocation or at their scheduled termination date;
. all shares of restricted stock of Allianz AG awarded to Messrs. Thompson
and Gross will vest, including those shares subject to discretionary
vesting, and the restricted period for those shares will terminate;
. all put rights, call rights and rights of repurchase which are
exercisable by PIMCO Advisors upon the termination of employment or
disability of a participant under the Class B Unit Purchase Plan will be
cancelled and terminated; and
. all other put rights, call rights and repurchase rights under the Class
B Unit Purchase Plan will continue to be exercisable according to the
terms, and at the times, set forth in the Class B Unit Purchase Plan,
except that the call or put price will be the greater of such price
calculated as if the right had been exercised at the time of the
improper revocation of authority and such price calculated at the time
the right is exercised.
In addition, the PIMCO Managing Directors will agree to an amendment of the
1994 profit sharing plan in the form of a new plan, the PIMCO Profit Sharing
Plan, which will reduce over five years the profit sharing percentage from 45%
to 30% of adjusted net profit. Also, the PIMCO Profit Sharing Plan will be
amended to provide that the net profits from which the bonus pool is calculated
shall be deemed to include the net profit of certain other fixed income
investment advisors owned by Allianz AG and its affiliates. In addition, for
the first two years following the Closing, the profit sharing pool will be
guaranteed a minimum contribution of at least $10 million per year from the
management of insurance assets of affiliates of Allianz AG. Allianz AG has
guaranteed all of Allianz of America's obligations in this regard.
Class B Unit Purchase Plan. In connection with the reduction in amounts
payable under the PIMCO Profit Sharing Plan, Pacific Investment Management
Company and PIMCO Advisors will adopt the Class B Unit Purchase Plan to allow
participants to purchase Class B Units in Pacific Investment Management Company
(the "PIMCO Class B Units") which, in the aggregate, will entitle the holders
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to distributions equal to up to 15% of the adjusted net profit of Pacific
Investment Management Company (computed in accordance with the PIMCO Profit
Sharing Plan). One-fifth of the PIMCO Class B Units will be sold each year for
the five years during which the profit sharing pool is being reduced. Each of
the PIMCO Managing Directors will be eligible to participate in this plan. The
compensation committee of Pacific Investment Management Company will determine
which participants may purchase PIMCO Class B Units and the number of PIMCO
Class B Units that each participant may purchase.
The PIMCO Class B Units will be purchased pursuant to full recourse notes
bearing interest at the rate of 7% per annum. The principal amount of the notes
will amortize as follows:
. for units purchased in the years 2000 and 2001, all of the note
principal will be due in the fourth year after purchase;
. for units purchased in the year 2002, one-half of the note principal
will be due in each of years 2005 and 2006; and
. for units purchased in 2003 and 2004, one-third of the note principal
will be due in each of the second, third and fourth years after
purchase.
The base compensation of each participant will be increased in an amount equal
to the principal amortization applicable to notes given by such participant to
purchase PIMCO Class B Units. PIMCO Class B Units purchased under the plan will
be held in escrow by PIMCO Advisors and will be released from escrow as
principal payments on the related note are made. The PIMCO Class B Units may
not be transferred without the consent of PIMCO Advisors.
Each year, up to 20% of the PIMCO Class B Units purchased under the plan
will be subject to repurchase by PIMCO Advisors at the "Call Price," determined
by multiplying the PIMCO Class B Unit distribution amount for the previous
calendar year by a multiple, ranging from 5 to 14, based on Pacific Investment
Management Company's investment performance and revenue growth, and multiplying
that amount by 1.02.
In addition, unless otherwise provided in a participant's employment
agreement, upon a termination of employment of a participant other than as a
result of death or disability, PIMCO Advisors will have the right to repurchase
a number of PIMCO Class B Units equal to the unpaid principal balance of the
related note divided by the original purchase price, and in each of the three
years following such termination, PIMCO Advisors will have the right to
repurchase some or all of such participant's remaining PIMCO Class B Units at
the Call Price. Finally, unless otherwise provided in a participant's
employment agreement, upon the death or disability of a participant, all vested
PIMCO Class B Units will be repurchased by PIMCO Advisors at a price equal to
the average of the Call Price and the Put Price (defined below) and any
unvested PIMCO Class B Units will be repurchased at the original purchase
price.
Each Participant has a corresponding right to cause PIMCO Advisors to
purchase at the Put Price on March 31 of each year, up to 20% (on a cumulative
basis) of such participant's PIMCO Class B Units. In addition, in each of the
three years following a termination of employment each participant has the
right to cause PIMCO Advisors to purchase some or all of the participant's
PIMCO Class B Units. Amounts payable in connection with the put and call rights
under the Class B Unit Purchase Plan are subject to reduction in the event of
an indemnified loss by Allianz of America or its affiliates under the merger
agreement.
The "Put Price" is determined by multiplying the PIMCO Class B Unit
distribution amount for the previous calendar year by a multiple, ranging from
6 to 12, based on Pacific Investment Management Company's investment
performance and revenue growth, and multiplying that amount by 1.02.
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PIMCO Retention Plan. The PIMCO Retention Plan will be adopted in connection
with the Closing to provide fixed and variable retention arrangements for each
of the PIMCO Managing Directors and other key employees of Pacific Investment
Management Company. Fixed retention awards will vest and be paid over a period
of three to five years. Variable retention awards will be based on performance
relative to established benchmarks. In connection with the Closing, each of the
PIMCO Managing Directors will be awarded fixed retention payments which are to
vest and be paid ratably over five years. The nineteen PIMCO Managing Directors
will in aggregate be awarded retention payment grants of $88.5 million per year
for each of the five years following the Closing, subject to continued
employment. The PIMCO Managing Directors will not be eligible for any variable
retention awards under the PIMCO Retention Plan. Amounts payable under the
PIMCO Retention Plan are subject to reduction in the event of an indemnified
loss by Allianz of America or its affiliates under the merger agreement. In
addition, the awards under the PIMCO Retention Plan provide that one-half of
all amounts paid to a participant must be repaid to PIMCO Advisors if the
participant violates non-competition obligations.
Employment Termination Agreements. The 1994 Employment Termination
Agreements require PHLLC to pay eight current and two former managing directors
of Pacific Investment Management Company who are parties to those contracts
noncompete payments equal to distributions on, or sales proceeds of, an
aggregate of 17,402,107 Advisors Class A Units. In connection with the merger
agreement, the eight managing directors who are parties to such contracts and
who are still acting as managing directors of Pacific Investment Management
Company and one former managing director of Pacific Investment Management
Company have agreed to amend their 1994 Employment Termination Agreements. The
eight current managing directors who have agreed to amend their 1994 Employment
Termination Agreements are Messrs. Gross, Hague, Harris, Meiling, Muzzy,
Podlich, Powers and Thompson and the former managing director who has agreed to
amend his 1994 Employment Termination Agreement is Mr. Edington. Under the
amendments each of the current and former managing directors will receive at
Closing the ETA Payment, equal to the Unit Price multiplied by the number of
units which relate to his 1994 Employment Termination Agreement in satisfaction
of the noncompete payments payable under that agreement. The amendments will
provide that the noncompete arrangements in the 1994 Employment Termination
Agreements will, with some modifications, remain binding on the current and
former managing directors. Each amendment will provide:
. a covenant not to compete for five years from the Closing (or, for the
former managing director, for the remainder of the term of his
covenant);
. an agreement to repay the ETA Payment if the noncompete covenant is
violated during the five-year period; and
. the cessation of any further noncompete payments under the 1994
Employment Termination Agreement.
Except as provided below, payments will be made in cash and stock of Allianz
AG. Each of Messrs. Meiling and Podlich, who are not full-time employees of
Pacific Investment Management Company, and Mr. Edington, who is a former
managing director, will receive his ETA Payment entirely in cash.
The aggregate payment at the Closing to the eight current and one former
managing directors whose 1994 Employment Termination Agreements will be amended
will consist of $549.3 million in cash and 364,977 shares of stock in Allianz
AG. Based on 16,231,637 Advisors Class A Units, a Unit Price of $38.75 and an
assumed value of $273.99 per share of Allianz AG stock, the average
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trading price for Allianz AG for the 30 days prior to public announcement of
discussions between Allianz AG and PIMCO Advisors, the payments will have an
aggregate value of $649.3 million. Because a portion of these payments is made
in stock of Allianz AG, the value of these payments will fluctuate based on the
price per share of that stock.
Mr. Rabinovitch, a former managing director and party to a 1994 Employment
Termination Agreement has elected not to amend his 1994 Employment Termination
Agreement. Following the Closing, PHLLC, which will then be an indirect
subsidiary of Allianz of America, will continue to make noncompete payments to
him under his agreement. Following the acquisition of Partners GP described
above, Allianz of America will cause Partners GP to retain a number of Advisors
Class A Units equal to those on which payments are due under the remaining 1994
Employment Termination Agreement (1,170,470 units). In the Advisors Merger,
those units will be converted into new Advisors Class B Units. The new Advisors
Class B Units will have a liquidation preference equal to the Unit Price and
will be entitled to a distribution equal to 7.5% of the Unit Price per annum,
payable quarterly. Unless the Advisors Class B Units are redeemed on the terms
described below, through the period ending in November 2036, Allianz of America
will cause PHLLC to make noncompete payments based on the distributions from
those Advisors Class B Units. Commencing five years after the Closing, the
former managing director may request that any or all Advisors Class B Units on
which his employment termination payments are based be redeemed at the Unit
Price (plus accrued but unpaid distributions) by PIMCO Advisors, and commencing
ten years after the Closing, or earlier upon certain circumstances, PIMCO
Advisors may redeem the Advisors Class B Units at the Unit Price (plus accrued
but unpaid distributions) at its discretion. Upon any such redemption, the
redemption price will be paid to him in accordance with his 1994 Employment
Termination Agreement. In addition, he may elect to receive that cash
immediately upon the execution of an amendment similar to those described above
in which such managing directors agree to extend the duration of the non-
competition provisions.
Unit Options and Deferred Compensation Plan. As described above under "--The
Partnership--Unit Option Awards" and "--Deferred Compensation Plan," as of the
Closing, holders of unit option awards and participants in the Deferred
Compensation Plan will benefit from the transactions. Unit option awards,
whether or not vested, will be converted into the right to receive cash
following the Closing equal to the excess of the Unit Price over the exercise
price of the option as of the Closing, together with interest on such amount at
8% per annum through the date such payment is made. Certain unvested
subaccounts in the Deferred Compensation Plan will vest and units in the trust
will be exchanged for cash at the Unit Price (or the right to receive cash upon
vesting of deferred restricted unit awards), which is expected to be invested
as directed by plan participants.
As of December 31, 1999, the PIMCO Managing Directors hold unit option
awards for an aggregate of 2,478,000 Advisors Class A Units, at an average
exercise price of $16.92 per unit, which will result in payments of
approximately $54 million in the aggregate at the Closing, based on a Unit
Price of $38.75. Approximately 13.7% of these unit options (representing
approximately $7.4 million of such amount) will be unvested immediately prior
to Closing. In addition, the PIMCO Managing Directors participate in the
Deferred Compensation Plan. At the Closing, 268,793 Advisors Class A Units,
having a value of $10,415,729 based on a Unit Price of $38.75, attributable to
unvested subaccounts of the PIMCO Managing Directors under the Deferred
Compensation Plan will vest.
Indemnification and Insurance. In addition, Partners LLC, Partners GP and
each executive officer, director, member, partner or other controlling person
of those entities will have the benefits of
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<PAGE>
the indemnification and insurance previously described under "--The
Partnership--Indemnification and Insurance."
PHLLC and PAM
The sole member of PHLLC is PAM, a subsidiary of Pacific Life. PAM has
several interests in the transaction that are different from the interests of
the Partnership's unitholders. These interests include:
. PAM (PHLLC's parent company) will retain an interest in PIMCO Advisors
subject to put and call rights which may result in a future sale of
PAM's interest to Allianz of America; and
. indemnification and insurance.
In addition, PAM's ultimate parent corporation, PMHC, is having discussions
with Allianz AG regarding a possible acquisition of PMHC by Allianz AG. PAM
considered these interests, described below, when evaluating the fairness of
the merger and the other transactions contemplated by the merger agreement to
the unitholders of the Partnership.
Pacific Life's indirect investment, through its subsidiaries, in PIMCO
Advisors represents an important part of its overall business. As one of the
two general partners of our general partner, Pacific Life's indirect subsidiary
PHLLC is involved in the management of PIMCO Advisors, and the continued
management involvement in PIMCO Advisors forms a part of Pacific Life's ongoing
business plan. This affiliation has enhanced Pacific Life's identity in certain
strategic financial services markets. The relationship between the entities has
proven and continues to prove useful in branding, marketing and selling a
number of Pacific Life products and services. Additionally, Pacific Life
utilizes the investment services of Pacific Investment Management Company and
other investment services of PIMCO Advisors. In this respect, PAM's ownership
interest in PIMCO Advisors differs from that of the investment interest
represented by the limited partner units. Although Pacific Life concluded that
the retention by PAM of a management interest in the general partner of PIMCO
Advisors was consistent with Pacific Life's business plan, Pacific Life
believes, based on the information described elsewhere in this proxy statement,
that the consideration offered to the other partners by Allianz of America is
fair to, and in the best interest of, the Partnership's unitholders.
The identity and background of the current directors and executive officers
of PAM and its parent entities, PMHC, Pacific LifeCorp and Pacific Life, are
described under "Directors and Management."
Continuing Investment in PIMCO Advisors. PAM beneficially owns 37,218,634
Advisors Class A Units which, unlike the units owned by other unitholders of
PIMCO Advisors and the Partnership, will not be sold for or converted into cash
along with the other interests in the Partnership and PIMCO Advisors.
Through a series of transactions ending with the Advisors Merger, PAM,
through its subsidiary PacFin and its interest in PacPartners, will maintain
its investment in PIMCO Advisors in the form of 3,722 Advisors Class E Units
(this number may be reduced by two Class E Units to the extent that the
consents of certain partially owned limited partnership subsidiaries of PAM are
not obtained (in which case, Advisors Class A units held by the limited
partnership subsidiaries will convert to cash at the Unit Price in the Advisors
Merger along with all such other units in those partially owned
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<PAGE>
limited partnership subsidiaries)). The Advisors Class E Units will be entitled
to distributions which, on an annual basis, in the aggregate will equal:
. $1.05 per Advisors Class A Unit previously beneficially owned by PAM, a
fixed return representing the historical returns from PIMCO Advisors'
retail and equity asset management business; plus
. 20% of the Adjusted OPAD of Pacific Investment Management Company.
For these purposes, the Adjusted OPAD of Pacific Investment Management
Company will be calculated in accordance with the provisions of the Pacific
Investment Management Company Profit Sharing Plan in effect at the Closing,
before payment of profit sharing bonuses under that plan and without taking
into account:
. income attributable to performance fees which are subject to forfeiture;
. deductions for annual compensation paid to employees above $450,000,
adjusted for inflation after the year 2000;
. deductions attributable to certain option and deferred compensation
benefits; and
. severance and executive retention payments paid pursuant to the merger
agreement.
The calculation will also exclude the effect of:
. certain costs and revenues associated with the provision of management
or subadvisory services with respect to certain assets; and
. the subsidy, if any, to the Pacific Investment Management Company bonus
pool in 2000 through 2002.
The distributions with respect to the Advisors Class E Units were designed
to limit PAM's return to one based on PIMCO Advisors' fixed income asset
management business, plus a fixed return representing the historical return
from PIMCO Advisors' retail and equity asset management business. Allianz AG
negotiated a fixed return for the retail and equity business so it would have
the flexibility it requires to restructure the PIMCO Advisors' retail and
equity asset management business and combine it with existing Allianz AG retail
and equity asset management businesses. Pursuant to the agreements between
Allianz AG and the Pacific Investment Management Company managing directors,
Allianz AG is committed to continue to permit the Pacific Investment Management
Company fixed income business to operate autonomously. More details on the
Pacific Investment Management Company Non-Qualified Profit Sharing Plan are
found in "--Partners GP--Partners LLC--Reorganization of Pacific Investment
Management Company; Profit Sharing Plan."
The Advisors Class E Units will be subject to put and call options held by
PAM and Allianz of America, respectively. The put option held by PAM will allow
it to require Allianz of America, on the last business day of each calendar
quarter following the Closing, to purchase all of the Advisors Class E Units
owned directly or indirectly by PAM. The price at which Allianz of America must
purchase the Advisors Class E Units will be the Per Unit Value plus an amount
meant to approximate any accrued but unpaid distributions on the Advisors Class
E Units (the "Call Price"). The "Per Unit Value" means an amount per Advisors
Class E Unit equal to 14.0 multiplied by the sum of (A) $10,500, representing
$1.05 per Advisors Class A Unit beneficially owned by PAM prior to the
transaction, plus (B) 20% in aggregate of the Adjusted OPAD of Pacific
Investment Management Company for the most recently completed four calendar
quarters, computed to exclude certain performance fees, subject to adjustment
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<PAGE>
for certain losses of Allianz of America covered by the indemnification
provisions of the merger agreement, but in no event will the Per Unit Value be
an amount greater than $600,000 (or $60 per Advisors Class A Unit beneficially
owned by PAM prior to the transaction).
The call option held by Allianz of America will allow it, on any April 30,
July 31, October 31 or January 31 beginning on January 31, 2003, to require
that PAM sell or cause to be sold to Allianz of America all of the Advisors
Class E Units owned directly or indirectly by PAM at the then prevailing Call
Price. Allianz of America may only exercise this call option if the Per Unit
Value of the Advisors Class E Units is at least $500,000 (or $50.00 per
Advisors Class A Unit beneficially owned by PAM prior to the transaction) at
the time. Additionally, Allianz of America will have a call option that will
become exercisable on the last business day of any calendar year in which a
change of control occurs for PMHC. The price per Advisors Class E Unit to
exercise this call option will be the greater of $387,500 (or $38.75 per
Advisors Class A Unit beneficially owned by the PAM prior to the transactions),
subject to downward adjustment if the Unit Price is adjusted downward, and the
then prevailing Call Price. Allianz AG has guaranteed, subject to certain
conditions, the obligations of PHLLC under the PacPartners limited liability
company agreement and of PacPartners under the PIMCO Advisors partnership
agreement.
In connection with entering into the put and call arrangements, PAM will
agree that it and its subsidiaries will not compete with PIMCO Advisors'
business, without the consent of Allianz of America and subject to specified
exceptions.
PAM initially will be the beneficial owner of 100% of the outstanding
Advisors Class E Units. A portion of the Advisors Class E Units will be held
through PAM's wholly-owned subsidiary, PacFin, and the remaining portion will
be held through PAM's ownership of the Class E Interests in PacPartners, which
will be the general partner of PIMCO Advisors following the Advisors Merger.
PacPartners initially will have two members: PHLLC, which will then be an
indirect wholly-owned subsidiary of Allianz of America, and PAM. PHLLC will be
the managing member of PacPartners and (generally) will have full authority and
control over all actions taken by PacPartners as the general partner of PIMCO
Advisors. However, the PacPartners limited liability company agreement and the
PIMCO Advisors partnership agreement will provide that PHLLC and PacPartners,
as the case may be, will not, without PAM's prior approval, be authorized to
cause PacPartners or PIMCO Advisors to take certain actions, including the
following:
. causing PacPartners to incur indebtedness that is recourse against PAM's
Advisors Class E Units or the distributions on the Advisors Class E
Units;
. terminating PacPartner's status as a general partner of PIMCO Advisors;
. generally taking any actions related to the nonrecourse indebtedness
contributed by PAM to PacPartners;
. prior to December 6, 2001, causing PacPartners to sell or otherwise
dispose of more than 50% of the Advisors Class A Units held by
PacPartners;
. amending certain provisions of the PIMCO Advisors partnership agreement
which could adversely affect the distributions with respect to Advisors
Class E Units;
. causing a sale or other disposition of all or substantially all of the
assets of Pacific Investment Management Company or all or substantially
all of PIMCO Advisors' interests in Pacific Investment Management
Company;
. effecting certain mergers of PIMCO Advisors with other business
entities; and
. causing any action which would make it impossible to carry on the
ordinary business of Pacific Investment Management Company.
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<PAGE>
In addition, in consideration of PAM agreeing to give up certain approval
rights PHLLC currently has with respect to significant actions taken by PIMCO
Advisors and Pacific Investment Management Company, Allianz AG has agreed to
compensate PAM if specified material business actions by PacPartners, PIMCO
Advisors or Pacific Investment Management Company authorized by Allianz AG or
any of its affiliates cause a decline in excess of $1 million per year in the
annual distributions on the Advisors Class E Units held by PacPartners. This
agreement was intended to provide PAM with a variable component of its
distributions that is based on PIMCO Advisors' historic fixed income asset
management business. These material business actions include:
. the incurrence of indebtedness by PacPartners or PIMCO Advisors;
. increases in bonuses payable under the Pacific Investment Management
Company profit sharing plan;
. any sale or other disposition of assets of Pacific Investment Management
Company;
. any sale or pledge by PIMCO Advisors of its capital or profits interests
in Pacific Investment Management Company (other than pursuant to the
Class B Unit Purchase Plan);
. the issuance of capital or profits interests in PIMCO Advisors or
Pacific Investment Management Company or the amendment of any previously
issued interests (other than pursuant to the Class B Unit Purchase
Plan);
. any material restructuring of the business, assets or operations of
Pacific Investment Management Company; and
. any other action which, prior to its implementation, is reasonably
specified in a notice by PAM to Allianz AG as one which is likely to
result in a material reduction of cash distributions with respect to
Advisors Class E Units.
Except in the case of a sale of the Advisors Class E Units pursuant to the
put/call agreement with Allianz of America, PAM has agreed not to permit a sale
or other transfer or disposition of any of the Advisors Class E Units held by
PacPartners and PacFin without the prior approval of PHLLC.
Discussions with Allianz. PMHC from time to time considers potential
business opportunities, including possible alignments and combinations with
business partners, in the ordinary course of its business planning. At times
during Allianz AG's negotiations of the transaction with the Partnership,
Allianz AG and PMHC started separate discussions regarding a possible
acquisition of PMHC by Allianz AG. The discussions between Allianz AG and PMHC
have occurred from time to time from April 1999 through the present, and have
involved meetings of executive officers of Allianz AG and PMHC as well as their
respective financial and legal advisors. Additionally, after execution of a
confidentiality agreement, Allianz AG and PMHC have made available to each
other requested information regarding their respective businesses. The
discussions have not resulted in any agreement between Allianz AG and PMHC
regarding a separate Allianz AG/PMHC transaction, nor can we assure you that an
agreement will be reached. Neither the Closing nor the treatment of PAM's
Advisors Class A Units in the transactions contemplated by the merger agreement
is in any way contingent on Allianz AG and PMHC reaching an agreement with
respect to a separate transaction.
Employment Termination Agreements. At the time of the Closing, PHLLC,
directly and through its interest in Partners GP, will own 17,402,107 Advisors
Class A Units and one PIMCO Advisors general partner unit. PHLLC is the obligor
under the 1994 Employment Termination Agreements, which were entered into in
1994 as part of the consolidation which created the PIMCO Advisors business
when the persons then serving as managing directors of Pacific Investment
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<PAGE>
Management Company ceased to be employees of an affiliate of the predecessor to
Pacific Life and became employees of Pacific Investment Management Company. In
connection with that termination of employment, the predecessor of PHLLC agreed
to make noncompete payments to the managing directors equal to the
distributions on, or sale proceeds of, certain of the PIMCO Advisors units
beneficially owned by PHLLC through its interest in Partners GP. The
predecessor to PAM, another subsidiary of Pacific Life, guaranteed performance
of PHLLC under the 1994 Employment Termination Agreements. Currently, these
payments are based on the distributions on, or sale proceeds of, 17,402,107
Advisors Class A Units, which at the Closing will be all of the Advisors Class
A Units beneficially owned by PHLLC.
Allianz GP Sub will purchase PHLLC for nominal consideration of $100, and
will then enter into amendments to the 1994 Employment Termination Agreements
with the eight members of Partners LLC who are parties to such contracts and
who are still acting as managing directors of Pacific Investment Management
Company and one former managing director of Pacific Investment Management
Company. The amendments will have the effect of releasing PAM from any further
liability under those 1994 Employment Termination Agreements which have been
amended. In addition, each of Allianz of America and certain managing directors
of Pacific Investment Management Company will agree to a reduction in certain
payments due to them to compensate PAM and its affiliates for one-third of any
future liabilities arising in connection with the one 1994 Employment
Termination Agreement which will not be amended at the Closing. See "--Partners
LLC--Employment Termination Agreements" for more information about the 1994
Employment Termination Agreements.
Indemnification and Insurance. In addition, PHLLC, PAM, Partners GP and each
of their respective officers, directors, members, partners or other controlling
persons will have the benefit of the indemnification and insurance previously
described under "--The Partnership--Indemnification and Insurance."
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<PAGE>
CERTAIN FINANCIAL PROJECTIONS
The Partnership does not as a matter of course publicly disclose internal
budgets, plans, estimates, forecasts or projections of future revenues,
earnings or other financial information. The projected financial data set forth
below were based upon a variety of estimates and assumptions, of which the
material items are set forth below. The estimates and assumptions underlying
the projections involved judgments with respect to, among other things, future
economic, competitive, and financial market conditions and future business
decisions which may not be realized and are inherently subject to significant
business, economic and competitive uncertainties, all of which are difficult to
predict and many of which are beyond the control of the Partnership. While the
Partnership believes these estimates and assumptions are reasonable, there can
be no assurance that the projections will be accurate, and actual results may
vary materially from those shown. In light of the uncertainties inherent in
forward looking information of any kind, the inclusion of these projections
herein should not be regarded as a representation by the Partnership, PIMCO
Advisors or any other person that the indicated results will be achieved, and
investors are cautioned not to place undue reliance on such information.
The Partnership does not intend to update or otherwise revise the
information set forth below to reflect circumstances existing after the date of
the most recent financial statements incorporated by reference in this proxy
statement or to reflect the occurrence of unanticipated events. The information
set forth below should be read together with the information contained in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1998,
the Partnership's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999, June 30, 1999 and September 30, 1999 and the other information
included or incorporated by reference in this proxy statement.
The projections set forth below are based on the following material
assumptions:
. Managed assets--a growth rate of 13.0% in PIMCO Advisors' aggregate assets
under management, including a growth rate of 15.8% for those assets under
management that are mutual fund assets. These growth rate assumptions
reflect higher historical growth rates adjusted downward for current market
conditions.
. Revenues--investment advisory fees would be .347% of assets under management
and distribution and servicing fees would be .115% of the mutual fund assets
under management, which reflect an approximation of these relationships.
. Operating profit available for distribution--OPAD margin, reflecting OPAD as
a percentage of revenues, of 33%, which approximates the historical
relationship of OPAD and revenues, exclusive of non-recurring items.
In addition, these projections do not reflect non-recurring charges, such as
the costs associated with the proposed transaction which are estimated to be in
the range of $20 to $25 million.
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<TABLE>
<CAPTION>
PIMCO Advisors L.P.
-------------------------------------------------------------------------------------------
Historical Actual Projected
---------------- ------- ------------------------------------------------------
LTM CAGR
1997 1998 9/99(a) 1999 2000 2001 2002 2003 2004 00-04
------ ------ ------- ------ -------- -------- -------- -------- -------- -----
(Amounts in millions, except per unit data and percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $516.7 $852.4 $944.2 $982.2 $1,079.9 $1,223.8 $1,387.0 $1,571.9 $1,781.4 $13.3%
------ ------ ------ ------ -------- -------- -------- -------- --------
Expenses
Compensation and
Benefits.............. 225.8 359.6 391.9 407.6 448.1 507.9 575.6 652.3 739.3 13.3
Commissions............ 46.7 77.8 88.6 90.0 102.7 119.1 138.1 159.9 185.1 15.9
General and
Administrative........ 27.4 43.7 55.6 58.0 65.6 74.1 83.7 94.6 106.9 13.0
Restricted Unit and
Option Plans.......... 8.2 25.8 23.2 24.9 24.9 24.9 24.9 10.0 10.0 (20.4)
Amortization of
Intangible Assets..... 43.5 55.1 55.1 55.1 55.1 55.1 55.1 55.1 55.1 0.0
Other Expenses......... 47.5 90.4 113.4 112.3 117.9 118.9 131.9 146.3 162.2 8.3
------ ------ ------ ------ -------- -------- -------- -------- --------
Total Expenses.......... 399.1 652.3 727.7 747.9 814.3 900.0 1,009.3 1,118.3 1,258.7 11.5
------ ------ ------ ------ -------- -------- -------- -------- --------
Operating Income........ 117.6 200.2 216.5 234.3 265.6 323.9 377.7 453.6 522.8 18.5%
Equity in Income (Loss)
of Partnerships........ (0.4) 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 NA
Other Income (net)...... 2.9 8.6 8.6 0.0 0.0 0.0 0.0 0.0 0.0 NA
------ ------ ------ ------ -------- -------- -------- -------- --------
Pre-Tax Income.......... 120.1 208.9 225.3 234.3 265.6 323.9 377.7 453.6 522.8 18.5%
Taxes................... 1.7 0.6 0.6 0.0 0.0 0.0 0.0 0.0 0.0 NA
------ ------ ------ ------ -------- -------- -------- -------- --------
Net Income.............. $118.3 $208.4 $224.8 $234.3 $ 265.6 $ 323.9 $ 377.7 $ 453.6 $ 522.8 18.5%
====== ====== ====== ====== ======== ======== ======== ======== ========
Number of Basic Units
(in millions).......... 76.9 108.5 111.5 111.8 112.2 112.6 113.0 113.4 113.8(b) 0.4%
Number of Diluted Units
(in millions).......... 81.6 113.9 116.2 116.7 117.4 118.0 118.7 119.3 120.0(b) 0.6
Basic Earnings per
Unit................... $ 1.54 $ 1.92 $ 2.02 $ 2.10 $ 2.37 $ 2.88 $ 3.34 $ 4.00 $ 4.59 18.0%
Diluted Earnings per
Unit................... 1.45 1.83 1.93 2.01 2.26 2.74 3.18 3.80 4.36 17.8
OPAD.................... $173.2 $289.2 $303.0 $314.3 $ 345.6 $ 403.9 $ 457.7 $ 518.7 $ 587.9 14.2%
OPAD per Basic Unit..... 2.10 2.66 2.72(d) 2.81(d) 3.08 3.59 4.05 4.57 5.17 13.8
Distributions Declared.. $167.0(c) $271.3 $300.9 $314.3 $ 345.6 $ 403.9 $ 457.7 $ 518.7 $ 587.9
Distributions Declared
Per Unit............... $ 2.17(c) $ 2.50 $ 2.70 $ 2.81 $ 3.08 $ 3.59 $ 4.05 $ 4.57 $ 5.17
</TABLE>
- ------
(a) Normalized to exclude the Partnership's share of non-recurring items.
(b) Gross Revenues refers to a proportionate share of PIMCO Advisors' gross
revenues.
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<PAGE>
<TABLE>
<CAPTION>
PIMCO Advisors L.P.
-------------------------------------------------------------------------------------------
Historical Actual Projected
---------------- ------- ------------------------------------------------------
LTM CAGR
1997 1998 9/99(a) 1999 2000 2001 2002 2003 2004 00-04
------ ------ ------- ------ -------- -------- -------- -------- -------- -----
(Amounts in millions, except per unit data and percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $516.7 $852.4 $944.2 $982.2 $1,079.9 $1,223.8 $1,387.0 $1,571.9 $1,781.4 $13.3%
------ ------ ------ ------ -------- -------- -------- -------- --------
Expenses
Compensation and
Benefits.............. 225.8 359.6 391.9 407.6 448.1 507.9 575.6 652.3 739.3 13.3
Commissions............ 46.7 77.8 88.6 90.0 102.7 119.1 138.1 159.9 185.1 15.9
General and
Administrative........ 27.4 43.7 55.6 58.0 65.6 74.1 83.7 94.6 106.9 13.0
Restricted Unit and
Option Plans.......... 8.2 25.8 23.2 24.9 24.9 24.9 24.9 10.0 10.0 (20.4)
Amortization of
Intangible Assets..... 43.5 55.1 55.1 55.1 55.1 55.1 55.1 55.1 55.1 0.0
Other Expenses......... 47.5 90.4 113.4 112.3 117.9 118.9 131.9 146.3 162.2 8.3
------ ------ ------ ------ -------- -------- -------- -------- --------
Total Expenses.......... 399.1 652.3 727.7 747.9 814.3 900.0 1,009.3 1,118.3 1,258.7 11.5
------ ------ ------ ------ -------- -------- -------- -------- --------
Operating Income........ 117.6 200.2 216.5 234.3 265.6 323.9 377.7 453.6 522.8 18.5%
Equity in Income (Loss)
of Partnerships........ (0.4) 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 NA
Other Income (net)...... 2.9 8.6 8.6 0.0 0.0 0.0 0.0 0.0 0.0 NA
------ ------ ------ ------ -------- -------- -------- -------- --------
Pre-Tax Income.......... 120.1 208.9 225.3 234.3 265.6 323.9 377.7 453.6 522.8 18.5%
Taxes................... 1.7 0.6 0.6 0.0 0.0 0.0 0.0 0.0 0.0 NA
------ ------ ------ ------ -------- -------- -------- -------- --------
Net Income.............. $118.3 $208.4 $224.8 $234.3 $ 265.6 $ 323.9 $ 377.7 $ 453.6 $ 522.8 18.5%
====== ====== ====== ====== ======== ======== ======== ======== ========
Number of Basic Units
(in millions).......... 76.9 108.5 111.5 111.8 112.2 112.6 113.0 113.4 113.8(b) 0.4%
Number of Diluted Units
(in millions).......... 81.6 113.9 116.2 116.7 117.4 118.0 118.7 119.3 120.0(b) 0.6
Basic Earnings per
Unit................... $ 1.54 $ 1.92 $ 2.02 $ 2.10 $ 2.37 $ 2.88 $ 3.34 $ 4.00 $ 4.59 18.0%
Diluted Earnings per
Unit................... 1.45 1.83 1.93 2.01 2.26 2.74 3.18 3.80 4.36 17.8
OPAD.................... $173.2 $289.2 $303.0 $314.3 $ 345.6 $ 403.9 $ 457.7 $ 518.7 $ 587.9 14.2%
OPAD per Basic Unit..... 2.10 2.66 2.72(d) 2.81(d) 3.08 3.59 4.05 4.57 5.17 13.8
Distributions Declared.. $167.0(c) $271.3 $300.9 $314.3 $ 345.6 $ 403.9 $ 457.7 $ 518.7 $ 587.9
Distributions Declared
Per Unit............... $ 2.17(c) $ 2.50 $ 2.70 $ 2.81 $ 3.08 $ 3.59 $ 4.05 $ 4.57 $ 5.17
</TABLE>
- ------
(a) Normalized for the LTM period ended September 30, 1999. Excludes non-
recurring charges of $15.7 million.
(b) Assumes full vesting of all units and options.
(c) Adjusted to reflect four quarters only. Form 10K dated 12/31/98 reflects
distributions declared for five quarters.
(d) Including non-recurring items, OPAD per unit was $2.67 and $2.77 for the
LTM period and 1999, respectively.
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REGULATORY APPROVALS
Under the laws of some foreign nations, PIMCO Advisors is required to notify
certain governmental agencies, entities or regulatory authorities of the
transactions contemplated by the merger agreement. In particular, under the
laws of each of the following countries, the designated agency has been or will
be notified of the merger and the related transactions:
. in England, the Investment Management Regulatory Organisation Limited;
. in Ireland, the Central Bank of Ireland;
. in Japan, the Kanto Local Finance Bureau;
. in Canada, the Ontario Securities Commission; and
. in Chile, the Chilean Risk Rating Commission.
Additionally, in some nations the merger and related transactions may not be
consummated unless certain approvals are obtained from these nations'
regulatory authorities. In particular, under the laws of Singapore, a filing
for pre-merger approval of a change in control has been or will be made to the
Monetary Authority of Singapore, and under the laws of England, a filing for
pre-merger approval of a change in control has been or will be made to
Investment Management Regulatory Organisation Limited. These filings are still
pending. We cannot predict whether we will obtain all the required regulatory
approvals within the time frame contemplated by the merger agreement or without
incurring burdensome conditions.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material United States federal income
tax consequences of the merger to holders of Partnership units and is for
general information only. This discussion is based on the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
Regulations promulgated thereunder, and judicial and administrative rulings and
decisions as of the date hereof, all of which are subject to change or
differing interpretations at any time, possibly with retroactive effect.
Furthermore, no rulings regarding the tax consequences of the merger have been
or will be sought from the Internal Revenue Service ("IRS"), and no one can be
sure that the IRS will not take a view that is contrary to that expressed
herein. The tax treatment of a holder of Partnership units may vary depending
upon his or her particular situation. Certain holders (including partnerships,
insurance companies, tax-exempt organizations, financial institutions, broker-
dealers, persons holding Partnership units as part of a "hedge," "straddle," or
"synthetic security transaction," and foreign holders) may be subject to
special rules not discussed below. This discussion does not consider the effect
of any state, local or foreign tax laws or any United States tax considerations
(e.g., estate or gift) other than United States federal income tax
considerations that may be relevant to particular holders. This discussion is
limited to holders who have held their Partnership units as "capital assets"
(generally property held for investment) within the meaning of Section 1221 of
the Code. EACH 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 MERGER AS THEY MAY RELATE TO HIS OR HER
TAX SITUATION.
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Conversion of Partnership Units into Cash
A holder who receives cash upon the conversion of Partnership units pursuant
to the merger will recognize gain or loss for United States federal income tax
purposes equal to the difference between (i) the sum of (A) the amount of cash
received and (B) the holder's share of the Partnership's liabilities, and (ii)
the holder's adjusted tax basis in such Partnership units so converted. Subject
to the rules described in the next paragraph, any such gain or loss will
generally constitute long-term capital gain or loss if the holder has held the
Partnership units for more than one year.
A holder of Partnership units will, however, be required to recognize
ordinary income rather than capital gain to the extent any cash received upon
the conversion of such Partnership units pursuant to the merger is attributable
to amortization deductions that have been allocated to such holder related to
(i) goodwill of the Partnership that is eligible for amortization pursuant to
Section 197 of the Code, and (ii) other unrealized receivables and inventory of
the Partnership within the meaning of Section 751 of the Code (which amount
attributable to such other unrealized receivables and inventory is not expected
to be material to a holder of Partnership units). Such ordinary income may
exceed net gain realized upon the conversion of the Partnership units and may
be recognized even if there is a net loss on the conversion of the Partnership
units.
Backup Withholding
The Partnership unitholders may be subject to backup withholding at the rate
of 31% with respect to the gross proceeds from the conversion of such
Partnership units pursuant to the merger unless such holder (i) is a
corporation or other exempt recipient and, when required, establishes this
exemption or (ii) provides his or her correct taxpayer identification number
(which, in the case of an individual, is his or her social security number),
certifies that he or she is not currently subject to backup withholding and
otherwise complies with applicable requirements of the backup withholding
rules. A unitholder who does not provide the Partnership with his or her
correct taxpayer identification number may be subject to penalties imposed by
the IRS. Any amount withheld under these rules will be creditable against the
holder's federal income tax liability, and if withholding results in an
overpayment of taxes, the holder may apply for a refund.
FINANCING FOR THE MERGER
The merger is not conditioned upon Allianz of America obtaining financing.
The obligations of Allianz of America and its affiliates under the merger
agreement, including their payment obligations, have been guaranteed by Allianz
AG. The total amount of funds required at the closing to consummate the merger
and the transactions contemplated by the merger agreement and to pay estimated
fees and expenses for which Allianz of America and its affiliates are
responsible is approximately $2.9 billion. The source of all or part of the
funds required may be the proceeds from the sale of debt securities by Allianz
AG and otherwise will be from working capital of Allianz AG and its
subsidiaries.
LITIGATION CHALLENGING THE MERGER
Following the announcement of the execution of the merger agreement, several
purported class actions were filed in the Court of Chancery of the State of
Delaware (the "Court of Chancery"). On November 19, 1999, the Court of Chancery
entered an Order consolidating all of the actions filed in the Court of
Chancery under the caption In re Pimco Advisors Holdings L.P. Shareholders
Litigation, CA No. 17511 (the "Delaware Action") In addition, a purported class
action was filed in the
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Superior Court of Orange County, California (the "Orange County Action"). The
complaints name William D. Cvengros, Kenneth M. Poovey, Robert M. Fitzgerald,
PIMCO Partners, G.P., PIMCO Advisors Holdings L.P., PMHC and Allianz AG as
defendants. The complaints allege, among other things, various breaches of
fiduciary duty, conflicts of interest and unfair dealing in connection with the
merger agreement and the transactions contemplated thereby. The alleged
wrongful acts by defendants include allegations that PMHC and the individual
defendants agreed to an unfair cash-out price because they suffered from
conflicts of interest, that because of their continuing participation in PIMCO
Advisors after the merger they had no motivation to ensure maximum value to the
public unitholders, that they did not comply with alleged fiduciary duties to
maximize unitholder value, and that Allianz AG knowingly aided and abetted the
alleged breaches of fiduciary duty committed by PMHC and the individual
defendants. The complaints seek compensatory and/or rescissionary money damages
or, alternatively, injunctive relief or rescission of the transaction.
The Orange County Action has been stayed pending the completion of the
Delaware Action. The time for defendants to respond to the complaint in the
Delaware Action has been extended to March 6, 2000.
During the period from November 1999 through February 23, 2000, counsel for
the respective parties engaged in discussions regarding the possible settlement
of the Delaware Action. On or about February 23, 2000, the parties entered into
a Memorandum of Understanding.
The Memorandum of Understanding provides for certification of a settlement
class defined to include all persons, except defendants and the immediate
families of individual defendants, who were record or beneficial owners of
Partnership units at any time during the period from October 31, 1999 to and
including the date of the filing of the certificate of merger for the
Partnership merger as well as their legal representatives, heirs, successors in
interest, transferees and assigns.
The Memorandum of Understanding provides that:
. the amount of the termination fee (described in "The Merger Agreement--
Termination Fee") shall be reduced from $180,000,000 to $120,000,000;
. the potential downward adjustment to the Unit Price (described in "The
Transaction--The Merger: The Acquisition of the Partnership--Adjustment
to Unit Price") will be modified so that, if PIMCO Advisors' revenue
base, expressed as a revenue run-rate, as of the calendar month-end
immediately prior to the Closing is less than 85% of the revenue run-
rate on September 30, 1999, the Unit Price will be reduced by 1.8%
(rather than 2% as originally provided in the merger agreement) for each
1% that the revenue run-rate falls below 85%, subject to a maximum
reduction of 18% (rather than 20%) (i) for all Partnership units and all
PIMCO Advisors units to be cancelled and exchanged for cash in the
Partnership and PIMCO Advisors mergers, and (ii) in the calculation of
amounts to be paid in respect of each outstanding unit option, deferred
unit, deferred compensation unit and vested deferred restricted unit in
the Deferred Compensation Plan and the principal amount of the note to
be received from Allianz of America in respect of the unvested
restricted units in the Deferred Compensation Plan; except that the Unit
Price to be paid (A) for PIMCO Advisors units held by any person who was
a member of Partners LLC on October 31, 1999 (the date the mergers were
approved), (B) for PIMCO Advisors units held by NFJ Partners L.P.,
Parametric Partners L.P. and Cadence Partners L.P., the beneficial
interest in which is held solely by the respective general partner in
each such partnership, (C) in satisfaction of each 1994 Employment
Termination Agreement between PHLLC and a present or former
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managing director of Pacific Investment Management Company that will be
amended in connection with the transactions, and (D) in respect of each
outstanding unit option, deferred unit, deferred compensation unit and
vested deferred restricted unit that is held by, or in which a
beneficial interest is held by, a member of Partners LLC, shall be
calculated without regard to this modification;
. five business days prior to the special meeting, PIMCO Advisors shall
issue a press release stating its revenue-run rate in relation to its
September 30, 1999 revenue run-rate as of the nearest month-end
preceding the date of the press release, provided that if such press
release would be required to be issued in the first five business days
after a calendar month-end, the revenue run-rate as of the immediately
preceding month-end shall be used; and
. the proxy statement will contain certain additional disclosure. (Such
additional disclosure is contained herein.)
In addition, pursuant to the Memorandum of Understanding, PIMCO Advisors
will pay such counsel fees of the settlement class as may be awarded by the
court in an amount not to exceed $1,250,000, plus expenses actually incurred in
an amount not to exceed $250,000. Payment of such fees and expenses is
contingent on the closing of the merger.
The Memorandum of Understanding provides for the dismissal of the Delaware
Action with prejudice. The Memorandum of Understanding also provides for the
release of all claims of members of the settlement class, whether known or
unknown, against the defendants in the Delaware Action and any of their
affiliates (as defined to include defendants' present or former officers,
directors, employees, agents, attorneys, advisors, insurers, accountants,
trustees, financial advisors, commercial bank lenders, persons who provided
opinions relating to the merger, investment bankers, associates,
representatives, affiliates, parents, subsidiaries, general partners, including
PHLLC and Partners LLC, limited partnership partners, partnerships, heirs,
executors, personal representatives, estates, administrators, successors and
assigns and including any directors, officers, agents, partners, members,
managers, or employees of any of the foregoing) arising out of or relating to,
among other things, the merger agreement, the merger and the other transactions
contemplated by the merger agreeement, the unitholders' meeting, the proxy
statement and any other disclosures with respect to the foregoing. The
settlement is contingent upon, among other things, court approval.
EFFECT OF THE MERGER ON THE PARTNERSHIP UNITS
The Partnership units are currently listed on the New York Stock Exchange.
Following the completion of the merger and the other transactions contemplated
by the merger agreement, the Partnership units will no longer be traded on the
New York Stock Exchange, price quotations will no longer be available for the
units and the registration of the Partnership units under the Exchange Act will
be terminated.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A and is incorporated by
reference in this proxy statement. The summary is qualified in its entirety by
reference to the merger agreement. We urge you to read the merger agreement in
its entirety for a more complete description of the terms and conditions of the
merger.
The Merger and Subsequent Transactions
The merger agreement provides for the acquisition of the Partnership by
Allianz of America through a merger of an indirect subsidiary of Allianz of
America with and into the Partnership. In the merger, all of the outstanding
limited partner and general partner units in the Partnership will be converted
into the right to receive cash in an amount per unit equal to $38.75, subject
to adjustment as described in "The Transaction" (the "Unit Price").
As a result of the merger, the Partnership will become an indirect wholly-
owned subsidiary of Allianz of America.
As a result of the merger, all of our equity interests will be indirectly
owned by Allianz of America. In addition, you will no longer have any interest
in, and will not be a unitholder of, the Partnership, and therefore will not
participate in our future earnings and growth. Instead, you will have the right
to receive the cash consideration described above for each unit held. In
addition, the Partnership units will no longer be traded on the New York Stock
Exchange, price quotations of the Partnership units will no longer be available
and the registration of the Partnership units under the Securities Exchange Act
of 1934 will be terminated.
Following the merger, subsidiaries of Allianz of America will, in a series
of transactions, acquire substantially all of the remaining interests in PIMCO
Advisors, other than those beneficially owned by Pacific Life. As a result of
the transactions, Allianz of America will control PIMCO Advisors, having
acquired approximately 70% of the outstanding partnership interests of PIMCO
Advisors.
On March 3, 2000 the parties entered into an amendment to the merger
agreement effecting certain of the agreements reached in the settlement of the
unitholder litigation described in "Litigation Challenging the Merger." The
amendment provides for modification of the potential downward adjustment to the
Unit Price effective upon satisfaction of all of the terms of the settlement,
reduction of the termination fee payable by PIMCO Advisors to Allianz of
America in certain circumstances effective upon court approval of the
settlement and allocation of certain legal expenses. In addition, the amendment
adds certain newly-formed entities described under "The Transaction" as parties
to the merger agreement and updates Annex A to the merger agreement.
See "The Transaction" for a description of the merger, possible adjustments
to the Unit Price, and the transactions following the merger.
Representations and Warranties
PIMCO Advisors, the Partnership, PAM, Partners GP, Partners LLC (to a
limited extent) and PHLLC have made representations and warranties in the
merger agreement relating to:
. their organization and the organization of their subsidiaries;
. the employment termination agreements and the parties thereto;
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. their capital structures and that of the subsidiaries and controlled
affiliates of PIMCO Advisors;
. the authorization, execution, delivery and enforceability of the merger
agreement and other documents relating to the merger agreement;
. regulatory filings and approvals;
. effect of execution on constituent documents and contracts;
. documents and financial statements filed with the SEC and the accuracy
of information contained therein, and financial statements and schedules
of certain subsidiaries;
. the absence of certain changes or events;
. litigation, properties and contracts;
. compliance with laws;
. brokers' and finders' fees;
. employees, labor relations and employee benefit plans;
. taxes and tax matters;
. internal accounting controls and books and records;
. derivative contracts;
. intellectual property;
. insurance;
. year 2000 compliance;
. advisory agreements and sponsored registered and non-registered
investment companies;
. environmental matters; and
. the revenue run-rate.
PAM's representations and warranties are limited generally to itself and
those subsidiaries directly relevant to the transactions and the business of
the Partnership.
Allianz of America has made representations and warranties in the merger
agreement as to itself, Allianz AG and their subsidiaries relating to:
. organization;
. the authorization, execution, delivery and enforceability of the merger
agreement and other documents relating to the merger agreement;
. required regulatory filings and approvals;
. effect of execution on constituent documents;
. the capital structure of Allianz AG;
. the financial statements of Allianz AG;
. qualification to serve as an investment advisor;
. certain matters relevant to compliance with the Investment Company Act
of 1940;
. the absence of certain changes; and
. certain matters relating to the Employee Retirement Income Security Act
of 1974, as amended.
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Covenants
Conduct of Parties Prior to Closing. Prior to the Closing, the Partnership,
PIMCO Advisors, Partners GP and PHLLC have agreed to conduct their businesses,
and those same entities, along with PAM and Partners LLC, have agreed to
conduct the businesses of their respective subsidiaries in the ordinary course
of business; to preserve their business organizations and assets intact; and to
maintain existing business relations and goodwill. They have also agreed to
take certain actions only after obtaining the prior written consent of Allianz
of America.
Acquisition Proposals. The Partnership, PIMCO Advisors, PAM, Partners GP,
Partners LLC and PHLLC have agreed to terminate any activities, discussions or
negotiations with any parties other than Allianz AG and Allianz of America
regarding an acquisition proposal, as described below. They have also agreed
that they will not, except as permitted in the following paragraph:
. initiate or solicit any inquiry or the making of an acquisition proposal
or otherwise facilitate any effort or attempt to make or implement an
acquisition proposal; or
. engage in any negotiations concerning, or provide any confidential
information to, or have any discussions with, any third party regarding
an acquisition proposal.
However, the Partnership, its management board and its representatives may
take any actions necessary to comply with Rule 14e-2 of the Exchange Act
relating to tender offers. In addition, if the managing member, general partner
or board of any of PIMCO Advisors, the Partnership, PAM, Partners GP, Partners
LLC or PHLLC determines in good faith, after consultation with its advisers,
that an acquisition proposal is reasonably capable of being consummated and
would, if consummated, result in a transaction more favorable to the
Partnership's unitholders than the merger with Allianz of America from a
financial point of view, then the entity may:
. provide information or engage in negotiations with a third party that
has made an unsolicited written bona fide acquisition proposal; and
. recommend a competing acquisition proposal to the members, partners or
unitholders, as applicable, and withdraw its prior recommendation of the
merger agreement with Allianz of America, subject to the termination
provisions described below under "Termination--Termination."
PIMCO Advisors, the Partnership, PAM, Partners GP, Partners LLC and PHLLC
have agreed to notify Allianz AG and Allianz of America within one day of
receipt if any acquisition proposal is received, if any request for non-public
information relating to an acquisition proposal is received or if discussions
or negotiations are sought to be initiated with respect to an acquisition
proposal. The notification must identify the party making the proposal or offer
and the material terms and conditions of the proposal or offer.
As used in the merger agreement and this proxy statement, the term
"acquisition proposal" means any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction involving,
or any purchase of all or any significant portion of the assets or equity
interests in, any of PIMCO Advisors, the Partnership, PAM, Partners GP,
Partners LLC and PHLLC or, with certain specific exceptions, any of their
subsidiaries.
Employment Benefits and Agreements; Changes at Pacific Investment Management
Company. The parties have agreed to establish:
. the PIMCO Advisors L.P. Transition and Retention Plan, for key employees
of PIMCO Advisors and its subsidiaries other than Pacific Investment
Management Company; and
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. the PIMCO Advisors Retention Plan for executives of Pacific Investment
Management Company.
In addition, the parties have agreed to a reorganization of Pacific
Investment Management Company into a limited liability company, with PIMCO
Advisors as the managing member. The structural management rights of the PIMCO
Managing Directors will be replaced by a revocable delegation by PIMCO Advisors
to the PIMCO Managing Directors of management rights similar to those they
currently enjoy. In addition, the PIMCO Profit Sharing Plan will be amended to
reduce the profit sharing pool from 45% to 30% of adjusted net profits over
five years, and to adopt a Class B Unit Purchase Plan giving executives of
Pacific Investment Management Company the right to buy over a five year period
interests in Pacific Investment Management Company bearing distributions equal
in aggregate to 15% of the adjusted net profits of Pacific Investment
Management Company. Also, the PIMCO Managing Directors and certain executive
officers of the Partnership will enter into new employment agreements in
connection with the Closing. More information about these matters can be found
in "Special Factors--Interests of Certain Persons in the Transaction--The
Partnership" and "--Partners GP--Partners LLC."
Filings, Other Actions, Notification. Each of the Partnership, PIMCO
Advisors, PAM, Partners GP, Partners LLC and PHLLC and Allianz of America has
agreed to cooperate with each other and to use their respective reasonable best
efforts to cause all actions to be taken to consummate the transactions
proposed by the merger agreement, including preparing and filing all
documentation necessary to obtain the approvals and authorizations of all third
parties and government entities as required to consummate the transactions in
the merger agreement.
Each of PIMCO Advisors, the Partnership, PAM, Partners GP, Partners LLC and
PHLLC has agreed to give Allianz of America and Allianz of America has agreed
to give each of PIMCO Advisors, the Partnership, PAM, Partners GP, Partners LLC
and PHLLC notice of any of the following:
. any event or condition that would cause any of such party's
representations and warranties to be inaccurate or incomplete in any
material respect;
. any failure of a party to comply with any material covenant or agreement
in the merger agreement;
. any material default or potential event of default under a key contract;
. any material written notice or communication from a third party alleging
that the third party's consent is required in connection with the merger
transactions; and
. any change that is reasonably likely to result in a material adverse
effect.
Finally, each of the Partnership, PIMCO Advisors, PAM, Partners GP, Partners
LLC and PHLLC have agreed to use their reasonable best efforts to obtain the
consents and approvals necessary to assign any agreements, including the
advisory agreements, affected by the merger.
Investment Company Matters. Each of the parties to the merger agreement has
agreed to use its reasonable best efforts, both before and after the Closing,
to ensure compliance with the Investment Company Act as it applies to the
change in control of PIMCO Advisors and certain subsidiaries that act as
investment advisers to registered investment companies. PIMCO Advisors and its
general partners have also agreed to use their reasonable best efforts to
ensure that the sponsored registered and non-registered investment companies
referred to in the merger agreement do not take actions that may have specified
adverse effects on those investment companies.
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Advisory Agreements. PIMCO Advisors has agreed to notify, and to cause each
of its subsidiaries that is a registered investment adviser to notify, their
respective clients of the transactions contemplated by the merger agreement and
to use its reasonable best efforts to obtain, prior to the Closing, the consent
of those clients to the assignment of its advisory agreement.
Taxation. Allianz of America has agreed to prepare and file all tax returns
for any partial period ending on or before the Closing for each of the
Partnership, PIMCO Advisors and its subsidiaries, Partners GP and PHLLC. PAM
and the representatives of the PIMCO Managing Directors will have the right to
review and approve these tax returns before they are filed.
Access; Information. The Partnership, PIMCO Advisors and Partners GP have
each agreed to allow Allianz AG and Allianz of America access to their and
their subsidiaries' books, records, offices, properties and personnel, and
access to information reasonably requested by Allianz AG or Allianz of America.
The parties have agreed that none of this information will be used for any
purpose unrelated to the consummation of the transactions contemplated by the
merger agreement and each party shall keep this information confidential.
Publicity. PAM, PIMCO Advisors, Partners LLC and Allianz of America have
agreed to consult with each other prior to issuing any press releases or making
any public announcements regarding the merger agreement and prior to making any
filings with any government authority or self-regulating organization with
respect to the merger agreement.
Effect of Investigation. The representations and warranties made by a party
will not be affected by and will survive any investigation by another party.
Takeover Statutes. If a takeover statute is, or becomes, applicable to any
of the merger transactions each of the Partnership, PIMCO Advisors, PAM,
Partners GP, Partners LLC and PHLLC and each of their respective boards,
general partners, managing members and managing boards has agreed to take the
actions necessary to eliminate or minimize the effects of the statute or
regulation on the merger transaction.
Reasonable Best Efforts. Each of the Partnership, PIMCO Advisors, PAM,
Partners GP, Partners LLC and PHLLC and Allianz of America have agreed to use
their reasonable best efforts to, and to cause each of their subsidiaries to,
take all actions necessary or desirable to fulfill the conditions and
obligations of the merger agreement.
Other Agreements. Each of the Partnership, PIMCO Advisors, PAM, Partners GP,
Partners LLC and PHLLC and Allianz of America have agreed to take the following
actions:
. cause the arrangements for the new Class B Units of PIMCO Advisors to be
finalized;
. cause PHLLC to enter into amendments to the 1994 Employment Termination
Agreements of eight of the PIMCO Managing Directors;
. cause Allianz of America and PAM to enter into the Continuing Investment
Agreement providing for the put and call rights on the Advisors Class E
Units;
. cause Allianz of America, PIMCO Advisors and PAM to enter into an
indemnification agreement regarding indemnified claims under the merger
agreement and certain other liabilities;
. cause PIMCO Advisors and Pacific Investment Management Company to enter
into a limited liability company agreement that will convert Pacific
Investment Management Company into a limited liability company; and
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. cause PIMCO Advisors to execute a written consent providing for, among
other things, the governance provisions applicable to Pacific Investment
Management Company.
Organization of PacPartners. Allianz GP Sub and PAM have agreed to organize
PacPartners LLC as a limited liability company with Allianz GP Sub and PAM as
managing members. They have agreed to make initial contributions to the new
company and to file the certificate of formation with the Secretary of State of
the State of Delaware.
Disposition of Subsidiaries. The Partnership, PIMCO Advisors, PAM, Partners
GP, Partners LLC and PHLLC have agreed to dispose of control and their equity
interest in Columbus Circle Trust Company and PIMCO Trust Company.
Restructurings. PIMCO Advisors, the Partnership, PAM, Partners GP, Partners
LLC and PHLLC have agreed to cooperate with Allianz of America in restructuring
NFJ Investment Group, Parametric Portfolio Associates and Cadence Capital
Management.
Conditions to Certain Payments. The payments to be made to the executive
officers and other employees of the corporate subsidiaries of PIMCO Advisors
pursuant to (i) the satisfaction of the 1994 Employment Termination Agreements,
(ii) the vesting and cash out of unit option awards and interests in deferred
compensation plans, (iii) employment agreements, and (iv) retention and
severance arrangements (including profit sharing plans) are subject to the
prior approval of Partners GP. It is expected that Partners GP will vote to
approve such payments.
Subsidiary Action. Whenever a party has an obligation to cause a subsidiary
to take action, if the party's ability to cause such action to be taken is
limited by the subsidiary's constituent documents, the party will undertake to
use its reasonable best efforts to cause the action to be taken.
Expenses. All parties have agreed to bear their own expenses incurred in
connection with the merger agreement; provided, however, that Allianz of
America will bear 50% of the costs associated with the solicitation of the
shareholders of the registered investment companies; and PAM and Allianz of
America will each bear 50% of the expenses incurred by the Partnership in
connection with this proxy statement and solicitation of the Partnership's
unitholders.
Proxy Statement and Partnership Unitholder Approval. PIMCO Advisors, PAM,
Partners GP, Partners LLC and PHLLC have agreed to cooperate with the
Partnership in preparing this proxy statement to be filed with the SEC, and to
hold a special meeting of the Partnership for unitholders of the Partnership to
consider and vote upon the merger. Allianz of America had the right to review
all information related to Allianz of America before it appeared in this proxy
statement.
Indemnification; Directors' and Officers' Insurance. Allianz of America has
agreed not to, and to cause its subsidiaries not to, for a period of six years
after the Closing, amend or modify any provisions of any partnership, limited
liability company or indemnification agreement pursuant to which any officer,
director, member, partner or other controlling person of PIMCO Advisors, the
Partnership, PAM, Partners GP, Partners LLC or PHLLC is or may be entitled to
exculpation or indemnification, and Allianz of America shall cause PIMCO
Advisors to honor any such provision for a period of six years following
Closing. Furthermore, Allianz of America has agreed not to take any affirmative
action which might cause the termination or cancellation of any extension of
directors' and officers' liability insurance for partners, members, managing
members, directors and officers of the Partnership, PIMCO Advisors, PAM,
Partners GP, Partners LLC and PHLLC, unless Allianz of America replaces such
insurance with comparable insurance coverage.
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Conditions to Obligations to Effect the Transactions
The respective obligations of each of the Partnership, PIMCO Advisors, PAM,
Partners GP, Partners LLC and PHLLC and Allianz of America to effect the
mergers and the transactions contemplated by the merger agreement are subject
to the satisfaction or waiver of several conditions, including:
. receipt of all material consents, registrations, approvals, permits and
authorizations required to be obtained from any governmental authority
and associated waiting periods shall have lapsed;
. approval of the merger agreement and the merger by the unitholders of
the Partnership; and
. the absence of any statute, law, ordinance, rule, regulation, judgment,
decree, injunction or other order that prohibits consummation of the
transactions.
Except as may be waived by Allianz of America, the obligations of Allianz of
America, AAM, Advisors LP Sub and Allianz GP Sub to effect the merger
transactions are subject to the satisfaction of the following conditions:
. subject to a materiality standard, the accuracy of the representations
and warranties of each of the Partnership, PIMCO Advisors, PAM, Partners
GP, Partners LLC and PHLLC in the merger agreement as of the date of the
merger agreement and the Closing;
. the performance in all material respects by each of the Partnership,
PIMCO Advisors, PAM, Partners GP, Partners LLC and PHLLC of all
obligations required to be performed by them prior to the Closing;
. the receipt by each of the Partnership, PIMCO Advisors, PAM, Partners
GP, Partners LLC and PHLLC of the consents or approvals required under
any contracts, except for the advisory agreements and any contracts for
which the failure to obtain consent is not reasonably likely to have a
material adverse effect;
. compliance with certain requirements of Section 15(f) of the Investment
Company Act;
. William S. Thompson, William H. Gross and sixty percent of the other
PIMCO Managing Directors must remain employed by PIMCO Advisors or its
affiliates or subsidiaries at the Closing, and Messrs. Thompson and
Gross must enter into new employment agreements;
. the revenue run-rate (calculated to exclude the effects of market
changes) as of the most recent calendar month-end prior to the Closing
shall not be less than 75% of the revenue run-rate as of September 30,
1999;
. each of the Class B Unit Purchase Plan and the PIMCO Profit Sharing Plan
shall have been established, and the PIMCO Advisors' delegation of
authority relating to Pacific Investment Management Company to the PIMCO
Managing Directors shall be in effect;
. PIMCO Advisors shall have adopted the Transition and Retention Plan;
. certain other agreements shall have been entered into by the designated
parties, including the amendments to the 1994 Employment Termination
Agreements, the Continuing Investment Agreement, the indemnification
agreement between Allianz of America and PAM, an option modification
agreement regarding cancellation of unit options at the Closing, the
Pacific Investment Management Company limited liability company
agreement and the PacPartners limited liability company agreement;
. PIMCO Advisors shall have complied with provisions relating to changes
of control and other matters in its existing loan agreements;
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. each of the Partnership, PIMCO Advisors, PAM, Partners GP, Partners LLC
and PHLLC and each of their subsidiaries shall have disposed of its
control and equity interest in Columbus Circle Trust Company and PIMCO
Trust Company;
. at the request of Allianz of America, each of the Partnership, PIMCO
Advisors, PAM, Partners GP, Partners LLC and PHLLC shall use its
reasonable best efforts to cause the managing directors to resign from
any management or executive committee or board of the Partnership, PIMCO
Advisors, Partners GP or PHLLC;
. PIMCO Advisors shall have either paid down, fully satisfied or obtained
a waiver of certain terms of PIMCO Advisors' long-term and short-term
credit agreements; and
. Allianz of America shall have received an opinion of Latham & Watkins as
to the partnership status of PIMCO Advisors and the Partnership.
Except as may be waived by PAM or Partners LLC, the obligations of PIMCO
Advisors, the Partnership, PAM, Partners GP, Partners LLC and PHLLC to effect
the merger are subject to the following conditions:
. the accuracy of the representations and warranties of Allianz of America
in the merger agreement as of the date of the merger agreement and the
Closing;
. the performance by Allianz of America in all material respects of all
obligations to be performed by it prior to the Closing; and
. the Allianz guarantee shall not have been terminated or withdrawn.
Termination
Termination. The merger agreement provides that prior to the Closing, the
merger agreement may be terminated:
. at any time by mutual written consent of Allianz of America, PAM and
Partners LLC; or
by Allianz of America or by the Partnership, PIMCO Advisors, PAM and Partners
LLC if:
. the transactions contemplated by the merger agreement have not been
consummated by September 30, 2000, so long as the terminating party did
not prevent consummation by materially failing to fulfill any of its
obligations under the merger agreement;
. the Partnership's unitholders do not vote to approve the merger
agreement and the merger; or
. any court or other governmental entity has issued an order, decree or
ruling which cannot be appealed and which makes the merger illegal or
prohibits the consummation of the merger; or
by Allianz of America if:
. Partners GP has failed to recommend, has withdrawn or has adversely
modified its approval or recommendation of the merger agreement,
Partners GP has failed to reconfirm its recommendation of the merger
agreement or the merger within five days of being requested by the
Partnership to do so, or Partners GP has recommended a superior proposal
to the Partnership's unitholders;
. any of the Partnership, PIMCO Advisors, PAM, Partners GP, Partners LLC
or PHLLC has breached a representation, warranty, covenant or agreement
in the merger agreement that would allow Allianz of America not to close
and the breach cannot be cured, or if curable, was not cured 30 days
after notice by Allianz of America; or
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<PAGE>
. the revenue run-rate (calculated to exclude market movements) at the end
of any two consecutive calendar months prior to the effective time of
the merger is less than 75% of the revenue run-rate as of September 30,
1999; or
by PAM and Partners LLC if:
. (a) the management board, general partner or managing member of the
Partnership, PIMCO Advisors, PAM, Partners GP, Partners LLC or PHLLC
authorizes that entity to recommend or enter into a binding agreement
concerning an acquisition proposal that PAM and Partners LLC determine,
in good faith, after consultation with their advisors, is an acquisition
proposal superior to that provided in the merger agreement; and
. (b) Allianz of America does not make an offer that is at least as
favorable as the superior proposal within five days of notice of the
superior proposal; and
. (c) PIMCO Advisors pays the required termination fee described below;
. or, if Allianz of America has breached a representation, warranty,
covenant or agreement in the merger agreement that would allow PAM and
Partners LLC not to close and the breach cannot be cured, or if curable,
was not cured 30 days after notice.
Termination Fee. PIMCO Advisors has agreed to pay Allianz of America a
termination fee of $180 million ($120 million if the unitholder litigation
settlement is approved) if either of the following events occur:
. the merger agreement is terminated by PAM and Partners LLC because of
the recommendation of or entry into an agreement regarding a superior
acquisition proposal, or
. the merger agreement is terminated by Allianz of America because (1)
Partners GP failed to recommend, withdrew or adversely modified its
approval or recommendation of the merger agreement, (2) Partners GP
failed to reconfirm its recommendation of the merger agreement or the
merger within five days of being requested by the Partnership to do so,
or (3) Partners GP has recommended a superior proposal to the
Partnership's unitholders, and, in any such case, within 12 months of
Allianz of America's termination, any of the Partnership, PIMCO
Advisors, PAM, Partners GP, Partners LLC or PHLLC enters into a binding
agreement with a third party to implement a different acquisition
proposal.
Each of the Partnership, PIMCO Advisors, PAM, Partners GP, Partners LLC and
PHLLC and Allianz of America believe that the termination fee is an integral
part of the transactions and have acknowledged that Allianz of America and its
related entities would not have entered into the merger agreement without the
establishment of the termination fee.
Amendment and Waiver
Prior to the Closing, any provision of the merger agreement may be:
. waived by the party that benefits from the provision;
. amended or modified by an agreement in writing among all parties to the
merger agreement; or
. amended or modified by an agreement in writing among Allianz of America,
PAM and Partners LLC.
However, Allianz of America, PAM and Partners LLC cannot amend or modify a term
of the merger agreement if the amendment or modification (1) occurs after the
Partnership's unitholders have approved the merger agreement and the amendment
or modification changes the amount or kind of
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<PAGE>
consideration to be received by the unitholders, (2) could reasonably be
expected to materially delay or impede the Closing, or (iii) would constitute a
waiver of any provision of the merger agreement other than a waiver by the
party benefited by the provision.
Assignment
Allianz of America may assign any or all of its rights and obligations or
the rights and obligations of any of its subsidiaries under the merger
agreement to another direct or indirect subsidiary of Allianz of America upon
written notice to PIMCO Advisors, if the guarantee of those obligations
continues in effect.
Indemnification and Benefit Plan Reductions
PAM has agreed to indemnify Allianz of America, AAM and Merger Sub for
certain covered losses arising out of a breach by PAM of any of its
representations and warranties or covenants and agreements in the merger
agreement. PAM will indemnify for losses greater than $5 million once those
qualifying losses in aggregate exceed $25 million, and then up to an aggregate
limit based on PAM's current percentage ownership interest in PIMCO Advisors.
The PIMCO Managing Directors have agreed to the reduction of amounts otherwise
payable under the PIMCO Retention Plan and the Class B Unit Purchase Plan in
the event of certain covered losses arising out of a the breach of any
representations and warranties or covenants and agreements made by the PIMCO
Managing Directors or Partners LLC in the merger agreement. Reductions will
occur upon losses greater than $5 million, once those qualifying losses in
aggregate exceed $25 million, and up to an aggregate reduction of approximately
$202 million. Allianz of America has agreed to indemnify PAM and its affiliates
for one-third of any covered losses arising in connection with the 1994
Employment Termination Agreement which will not be amended at the Closing. The
PIMCO Managing Directors have agreed to benefit plan reductions equal to one-
third of any such losses by PAM.
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<PAGE>
DIRECTORS AND MANAGEMENT
The Partnership
Information with respect to the management of the Partnership and PIMCO
Advisors is set forth in Part III of the Partnership's Annual Report on Form
10-K for the year ended December 31, 1998, which is incorporated by reference
into this proxy statement.
In addition, a description of the relationships between the Partnership,
PIMCO Advisors and its general partner, along with other contracts,
arrangements, understandings or relationships relating the Partnership and its
Partnership's units, including the transactions between Oppenheimer Capital,
L.P. and PIMCO Advisors in 1997 and the Operating Agreement between the
Partnership and PIMCO Advisors, is also set forth and described in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1998
and in the consolidated financial statements of PIMCO Advisors and Oppenheimer
Capital, and the related notes thereto, included in that report, all of which
are in incorporated into this proxy statement by reference.
Our general partner's reasons for approving the merger agreement, the merger
and the other transactions contemplated by the merger agreement are set forth
in the section entitled "Special Factors--Recommendation; Reasons for the
Merger." In coming to its decision to approve the transaction subject to the
Partnership's unitholders approval, the general partner did not have an
independent board or independent third party review or approve this
transaction.
As set forth in "Voting Securities and Principal Holders Thereof," the
Partnership's executive officers own, as of December 31, 1999, collectively
38,565 Partnership units, representing less than a 0.1% interest in the
Partnership. Each of them has indicated that he will vote his Partnership units
in favor of the merger, the merger agreement and the other transactions
contemplated the merger agreement. To the Partnership's knowledge, none of the
Partnership's executive officers or directors has made a recommendation in
support of or opposed to the transactions contemplated by the merger agreement,
other than the recommendation described in this proxy statement.
PAM
The names, positions and biographical information of each of the current
directors and executive officers of PAM and PMHC, Pacific LifeCorp ("PLCorp"),
and Pacific Life, the parent entities of PAM, are set forth below.
<TABLE>
<CAPTION>
Name Position
---- --------
<C> <S>
Frank A. Bruni Director of PLCorp
Richard M. Ferry Director of PMHC and PLCorp
Donald E. Guinn Director of PMHC and PLCorp
Charles A. Lynch Director of PMHC
Allen W. Mathies, Jr., M.D. Director of PMHC
Charles D. Miller Director of PMHC and PLCorp
Donn B. Miller Director of PMHC and PLCorp
Jacqueline C. Morby Director of PLCorp
J. Fernando Niebla Director of PLCorp
Susan Westerberg Prager Director of PMHC
Richard M. Rosenberg Director of PMHC and PLCorp
James R. Ukropina Director of PMHC and PLCorp
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name Position
---- --------
<C> <S>
Glenn S. Schafer Director and President of PMHC, PLCorp, Pacific Life and
PAM
Thomas C. Sutton Director, Chairman of the Board and Chief Executive
Officer of PMHC, PLCorp, Pacific Life and PAM
David R. Carmichael Director of Pacific Life; Senior Vice President and
General Counsel of PMHC, PLCorp and Pacific Life;
Assistant Secretary of PMHC, PLCorp and Pacific Life;
and Vice President of PAM
Khanh T. Tran Director of Pacific Life; Senior Vice President and Chief
Financial Officer of PMHC, PLCorp and Pacific Life; and
Chief Financial Officer of PAM
Audrey L. Milfs Director of Pacific Life; Vice President and Secretary of
PMHC, PLCorp and Pacific Life; and Secretary of PAM
Larry J. Card Executive Vice President, Securities Division of PMHC,
PLCorp and Pacific Life
Daryle G. Johnson Executive Vice President, Institutional Products Division
of Pacific Life
Lynn C. Miller Executive Vice President, Life Insurance Division of
Pacific Life
Michael S. Robb Executive Vice President, Real Estate Division of Pacific
Life
Gerald W. Robinson Executive Vice President, Annuities Division of Pacific
Life
</TABLE>
Directors' Biographical Information. Set forth below is a description of the
business positions during at least the past five years of the directors
(including those directors who are also executive officers) listed above.
Unless otherwise indicated, the principal business address for all of the
following individuals is 700 Newport Center Drive, Newport Beach, California
92660. "PMLIC" refers to Pacific Mutual Life Insurance Company, the
predecessor-in-interest to Pacific Life.
Frank A. Bruni. Previously Deputy Regional Managing Partner (Retired) of
Deloitte & Touche LLP (June 1960 to May 1997). Director of PLCorp since October
1997.
Richard M. Ferry. Director (since May 1980) and Chairman (since June 1991)
of Korn/Ferry International, an executive search agency, located at 1800
Century Park East, Suite 900, Los Angeles, CA. Previously served as President
of Korn/Ferry International (May 1980 to May 1995). Director of PMHC and PLCorp
since August 1997.
Donald E. Guinn. Chairman Emeritus of Pacific Telesis Group, a
communications firm, located at 130 Kearny Street, Room 3200, San Francisco,
California, since May 1988. Director of PMHC and PLCorp since August 1997.
Charles A. Lynch. Chairman of Fresh Choice, Inc., a restaurant chain,
located at 2901 Tasman Drive, Santa Clara, California, since March 1995, and
Chairman of Market Value Partners, Co., a management resource for existing and
emerging businesses, located at 333 Ravenwood Ave., Suite AG320, Menlo Park,
California, since June 1989. Director of PMHC since August 1997.
Allen W. Mathies, Jr. Director (since September 1978) and President Emeritus
(since January 1995) of Huntington Memorial Hospital located at 100 W.
California Blvd., Pasadena, California. Previously President (January 1994 to
January 1995) and Chief Executive Officer (July 1985 to January 1994) of
Huntington Memorial Hospital. Director of PMHC since August 1997.
Charles D. Miller. Chairman (since November 1983) and Chief Executive
Officer (from December 1977 to May 1998) of Avery Dennison Corporation, a
manufacturer of self-adhesive materials and related products, located at 150
North Orange Grove Boulevard, Pasadena, California. Director of PMHC and PLCorp
since August 1997.
Donn B. Miller. Director (since March 1969) and President and Chief
Executive Officer (since March 1990) of Pearson-Sibert Oil Company of Texas, in
the business of oil production, located at 136 El Camino Drive, Suite 216,
Beverly Hills, California. Director of PMHC and PLCorp since August 1997.
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<PAGE>
Jacqueline C. Morby. Managing Director of TA Associates, Inc., a private
equity firm, located at 125 High Street, High Street Towers, Suite 2500,
Boston, Massachusetts, since January 1994. Director of PLCorp since August
1997.
J. Fernando Niebla. Chairman (since June 1998) of Infotec Commercial
Systems, Inc., and President (since September 1998) of International Training
Partners, Inc., both in the business of information technology training,
located at 3100 South Harbor Blvd., Santa Ana, California, and 8390 NW 53rd
Street, Miami, Florida, respectively. Previously Chairman and CEO of Infotec
Development Inc. (January 1979 to June 1996), Vice Chairman of Pacer Infotec,
Inc. (June 1996 to January 1998), and Chairman and CEO Infotec Commercial
Systems, Inc. (January 1997 to June 1998). Director of PLCorp since August
1997.
Susan Westerberg Prager. Provost since February 1999 of Dartmouth College,
6004 Parkhurst Hall, Room 204, Hanover, New Hampshire. Previously Dean of UCLA
School of Law at the University of California at Los Angeles (July 1982 to June
1998). Director of PMHC since August 1997.
Richard M. Rosenberg. Chief Executive Officer (Retired) (since January 1996)
of BankAmerica Corporation, a financial and banking institution, located at 555
California Street, 11th Floor, San Francisco, California. Previously he served
as Chief Executive Officer of BankAmerica Corporation (May 1990 to January
1996). Director of PMHC and PLCorp since October 1997.
James R. Ukropina. Partner with the law firm of O'Melveny & Myers located at
400 South Hope Street, Los Angeles, California since May 1992. Director of PMHC
and PLCorp since August, 1997.
Glenn S. Schafer. President of PAM (since November 1994), of Pacific Life
(since January 1995) and of PMHC and PLCorp (since August 1997). Previously he
was Executive Vice President and Chief Financial Officer of PMLIC (April 1991
to January 1995). Director of PMHC and PLCorp since August 1997, and Director
of Pacific Life since November 1994.
Thomas C. Sutton. Chairman of the Board and Chief Executive Officer of
Pacific Life (since January 1990), of PAM (since November 1994), and of PMHC
and PLCorp (since August 1997). Director of Pacific Life since September 1987
and of PMHC and PLCorp since August 1997.
David R. Carmichael. Senior Vice President and General Counsel of PMHC and
PLCorp (since August 1997), and Senior Vice President (since April 1977) and
General Counsel (since April 1992) for Pacific Life. Director of Pacific Life
since August 1997.
Khanh T. Tran. Senior Vice President and Chief Financial Officer of Pacific
Life (since June 1996) and of PMHC and PLCorp (since August 1997). Chief
Financial Officer and Treasurer of PAM since May 1996. Previously, Vice
President (November 1991 to June 1996) and Treasurer of PMLIC (September 1990
to June 1996). Director of Pacific Life since August 1997.
Audrey L. Milfs. Vice President and Secretary of PMHC and PLCorp since
August 1997, and Vice President (since April 1991) and Secretary (since July
1983) of Pacific Life. Secretary of PAM since September 1998. Director of
Pacific Life since August 1997.
Officers' Biographical Information. Set forth below is a description of the
business positions held during at least the past five years by the executive
officers listed above who are not also directors. Unless otherwise indicated,
the principal business address for all of the following individuals is 700
Newport Center Drive, Newport Beach, California 92660.
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<PAGE>
Larry J. Card. Executive Vice President, Securities Divisions of PMHC,
PLCorp and Pacific Life since January 1995. Previously Senior Vice President of
Securities (April 1989 to January 1995).
Daryle G. Johnson. Executive Vice President, Institutional Products Division
of Pacific Life since January 1995. Previously Senior Vice President, Pension
Investments Division of PMLIC (March 1988 to January 1995).
Lynn C. Miller. Executive Vice President, Life Insurance Division of Pacific
Life since January 1995. Previously Senior Vice President, Individual Insurance
of PMLIC (March 1989 to January 1995).
Michael S. Robb. Executive Vice President, Real Estate Division of Pacific
Life since January, 1995. Previously Senior Vice President, Real Estate
Investments of PMLIC (April 1989 to January 1995).
Gerald W. Robinson. Executive Vice President, Annuities Division of Pacific
Life since April 1997. Previously Senior Vice President, Annuities (April 1996
to March 1997) and Vice President and Chief Marketing Officer (January 1994 to
April 1996), Variable Annuities of PMLIC.
The executive officers and directors of PMHC, PLCorp, Pacific Life and PAM
own collectively as of December 31, 1999 approximately 14,249 Partnership
units, representing less than a .1% interest in the Partnership. Each of them
has indicated that he or she will vote the Partnership units with respect to
which he or she has voting power in favor of the merger agreement, the merger
and the other transactions contemplated by the merger agreement. To the
Partnership's knowledge, none of the executive officers or directors of PMHC,
PLCorp, Pacific Life or PAM has made a recommendation in support of or opposed
to the transactions contemplated by the management, other than the
recommendation described in this proxy statement.
Partners LLC
Information with respect to each of Mr. Thompson, the Chief Executive
Officer of Partners LLC, and Mr. Gross, the Chief Investment Officer of Pacific
Investment Management Company and a member of Partners LLC, is set forth in
Part III of the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1998, which is incorporated by reference into this proxy
statement. As set forth in "Voting Securities and Principal Holders Thereof,"
Mr. Thompson owns, as of December 31, 1999, no Partnership units. To the
Partnership's knowledge, neither Mr. Thompson nor Mr. Gross has made a
recommendation in support of or opposed to the transactions contemplated by the
merger agreement, other than the recommendation described in this proxy
statement.
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<PAGE>
PRICE RANGE OF UNITS AND DISTRIBUTIONS
Partnership units are traded on the New York Stock Exchange under the symbol
"PA". The following table sets forth the high and low sales prices for
Partnership units for the periods indicated, as reported on the New York Stock
Exchange, and the quarterly cash distributions per unit declared, for the
periods indicated. On July 6, 1999, the day before the press first reported
discussions between the Partnership and Allianz AG, the units of limited
partnership interest in the Partnership closed at $29.56. On October 4, 1999,
the date prior to the announcement of those discussions by the Partnership, the
units of limited partnership interest closed at $30.50. On October 29, 1999,
the last trading day prior to the execution of the merger agreement, the units
of limited partnership interest closed at $34.69 per unit.
<TABLE>
<CAPTION>
Price Range of
units(2)
--------------- Distributions
High Low Paid(1)
------- ------- --------------
<S> <C> <C> <C>
Fiscal 1997 (ended April 30, 1997(1))
First Quarter................................ $17.875 $15.750 $.389
Second Quarter............................... 20.750 16.625 .449
Third Quarter................................ 22.375 19.375 .569
Fourth Quarter............................... 22.375 19.250 .689
Fiscal 1997 (partial year ended December 31,
1997(1))
First Quarter................................ $25.875 $21.500 $.569
Second Quarter............................... 34.625 26.750 .569
Third Quarter................................ 32.563 28.188 .904
Fiscal 1998 (ended December 31, 1998)
First Quarter................................ $35.938 $29.375 $.580
Second Quarter............................... 34.500 29.750 .530
Third Quarter................................ 35.375 25.438 .530
Fourth Quarter............................... 32.575 24.250 .550
Fiscal 1999 (ended December 31, 1999)
First Quarter................................ $32.563 $27.625 $.570
Second Quarter............................... 31.500 26.500 .580
Third Quarter................................ 38.000 29.125 .580
Fourth Quarter............................... 37.938 30.000 .600
</TABLE>
- --------
(1) On December 1, 1997, the Partnership changed its fiscal year end to
December 31. The information displayed in the chart through December 31,
1997 is based on a fiscal year end of April 30. Information after December
31, 1997 is based on a fiscal year end of December 31.
(2) The Partnership unit prices and distributions prior to December 1, 1997
have been restated to reflect the 1.67-for-one unit split effective as of
that date.
On February 29, 2000, the closing price of Partnership units was $38.06 per
unit and there were approximately 1,530 holders of record of Partnership units.
There is no known restriction on the Partnership's ability to make
distributions to its unitholders other than the availability of sufficient
funds and the terms of the Partnership's partnership agreement.
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<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of December 31, 1999, information
regarding beneficial ownership of Partnership units and PIMCO Advisors units by
each person who, to the Partnership's knowledge, is the beneficial owner of
more than 5% of Partnership units or PIMCO Advisors units and the Named
Executive Officers. The address of each person or entity listed below is 800
Newport Center Drive, Suite 100, Newport Beach, California 92660.
<TABLE>
<CAPTION>
Partnership Percentage of PIMCO Percentage of
Units Partnership Advisors Units Partnership
Beneficially Units Beneficially Units
Owned(1)(2) Outstanding Owned(1)(3) Outstanding(4)
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
Five Percent Holders
PIMCO Partners, G.P.
(5).................... 0 -- 39,415,420 34.56
Pacific Life Insurance
Company ("Pacific
Life")(6).............. 0 -- 56,071,170 49.07
Pacific Asset Management
LLC ("PAM") (6)........ 0 -- 56,071,170 49.07
PIMCO Holding LLC (7)... 0 -- 39,415,420 34.50
PIMCO Partners, LLC
(8).................... 0 -- 39,557,900 34.62
Pacific Financial
Products, Inc.
(formerly Thomson
Advisory Group, Inc. )
("PFP")................ 0 -- 14,380,217 12.59
William R. Benz, II
(9).................... 106,000 * 39,557,900 34.62
R. Wesley Burns......... 25,000 * 39,557,900 34.62
Christopher P. Dialynas
(9).................... 17,300 * 39,557,900 34.62
David Edington.......... -- -- 39,557,900 34.62
William H. Gross
(9)(10)................ 675,356 1.36 39,557,900 34.62
John L. Hague (9)....... 230,000 * 39,557,900 34.62
Brent R. Harris (9)..... 230,000 * 39,557,900 34.62
Margaret E. Isberg...... 101,600 * 39,557,900 34.56
Dean S. Meiling (9)..... 130,000 * 39,657,900 34.71
James F. Muzzy (9)...... 230,000 * 39,557,900 34.62
William F. Podlich, III
(9).................... 16,000 * 39,621,900 34.68
William C. Powers (9)... 134,810 * 39,557,900 34.62
Frank Rabinovitch....... -- -- 39,557,900 34.62
Lee R. Thomas (9)....... 66,565 * 39,557,900 34.62
William S. Thompson, Jr.
(9).................... 230,000 * 39,557,900 34.62
Benjamin L. Trosky (9).. 84,255 * 39,557,900 34.62
Named Executive Officers
Not Included Above
William D. Cvengros..... 215,000 * 360,000 *
Robert M. Fitzgerald.... 41,664 * 0 *
Kenneth M. Poovey....... 10,000 * 133,459 *
Stephen J. Treadway..... 66,797 * 5,000 *
James G. Ward........... 14,689 * 0 *
Richard M. Weil......... 37,300 * 0 *
Ernest L. Schmider...... 66,404 * 0 *
All directors and
executive officers as a
group (7 persons)...... 451,854 * 498,459 *
</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
units.
(2) Includes options exercisable within 60 days of December 31, 1999.
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<PAGE>
(3) Does not include units underlying options which may be exercised for either
units of limited partner interest in PIMCO Advisors or Partnership units
exercisable within sixty days of December 31, 1999, which are reflected in
the column titled "Partnership Units Beneficially Owned."
(4) Assumes exchange of all units of limited partner interest in PIMCO Advisors
for Partnership units.
(5) Includes 39,410,321 PIMCO Advisors Units held of record by Partners GP and
5,099 units of general partner interest in the Partnership.
(6) Includes 39,415,420 PIMCO Advisors units held of record by Partners GP,
which maybe deemed to be beneficially owned by Pacific Life and PAM,
because PHLLC is a general partner of Partners GP and is a wholly owned
subsidiary of PAM which is wholly owned subsidiary of Pacific Life. Also
includes an aggregate of 16,655,750 PIMCO Advisors units issued as follows:
Pacific Financial Products, Inc. (formerly Thomson Advisory Group Inc.)
(14,380,217 units), CCM LLC (508,258 units), NFJ LLC (306,204 units),
Cadence Partners L.P. (637,000 units), Parametric Partners L.P. (393,860
units), NFJ Partners L.P. (430,211 units) which may be deemed beneficially
owned by PAM because Pacific Financial Products, CCM LLC, NFJ LLC and PPA
LLC are wholly owned subsidiaries of PAM and CCM LLC, NFJ LLC and PPA LLC
are the general partners of Cadence Partners L.P., NFJ Partners L.P. and
Parametric Partners L.P., respectively. As general partners they have
shared investment and disposition powers with respect to the units held by
Cadence Partners L.P., NFJ Partners L.P. and Parametric Partners L.P.
(7) Includes 39,415,420 PIMCO Advisors units held of record by Partners GP,
which may be deemed to be owned by PHLLC because PHLLC is a general partner
of Partners GP.
(8) Includes (i) 142,480 PIMCO Advisors units held of record by Partners LLC
and (ii) 39,415,420 PIMCO Advisors units held of record by Partners GP and
which may be deemed to be beneficially owned by Partners LLC, which is a
general partner of Partners GP.
(9) Includes the following which may be deemed to be beneficially owned by the
individual as a member of Partners LLC: (i) 142,480 PIMCO Advisors units
held of record by Partners LLC, and (ii) 39,415,420 PIMCO Advisors units
held of record by Partners GP, and which may be deemed to be beneficially
owned by Partners LLC as a general partner of Partners GP.
(10) Includes units held by members of Mr. Gross' family and a family trust of
which Mr. Gross is a trustee, as to which he may be deemed to be the
beneficial owner.
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<PAGE>
INDEPENDENT ACCOUNTANTS
The financial statements of the Partnership as of December 31, 1998 and 1997
and for the year ended December 31, 1998, the eight-month period ended December
31, 1997 and for each of the two years in the period ended April 30, 1997 and
the consolidated financial statements of PIMCO Advisors as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998
have been audited by PricewaterhouseCoopers LLP, independent accountants, as
stated in their report appearing in the Partnership's Annual Report on Form 10-
K for the year ended December 31, 1998, which is incorporated herein by
reference.
Representatives of PricewaterhouseCoopers LLP will be present at the special
meeting and will have the opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The Partnership has made forward-looking statements in this document and the
documents incorporated by reference herein that are subject to risks and
uncertainties. These statements are based on management's beliefs and
assumptions, based on information currently available to management. Forward-
looking statements include the information concerning possible or assumed
future results of operations of the Partnership set forth (i) under "Summary,"
"Special Factors" and "The Transaction," (ii) under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Partnership's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q incorporated by reference into this document and (iii) in
this document and the documents incorporated herein by reference preceded by,
followed by or that include the words "believes," "expects," "anticipates,"
"intends," "plans," "estimates," "should" or similar expressions.
Some statements contained in this proxy statement may constitute "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements involve a number of risks, uncertainties
and other factors that could cause actual results to differ materially,
including the performance of financial markets, the investment performance of
PIMCO Advisors' sponsored investment products and separately managed accounts,
general economic conditions, future acquisitions, competitive conditions and
government regulations, including changes in tax laws. The Partnership cautions
you to carefully consider such factors. Further, such forward-looking
statements speak only as of the date on which such statements are made. The
Partnership undertakes no obligation to update any forward-looking statements
to reflect events or circumstances after the date of such statement even if new
information, future events or other circumstances have made them incorrect or
misleading. For those statements, the Partnership claims the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
Unitholders should understand that the following important factors, in
addition to those discussed elsewhere in the documents which are incorporated
by reference into this proxy statement, could affect the future results of the
Partnership and could cause results to differ materially from those expressed
in such forward-looking statements:
. competitive pressures among financial services companies may increase
significantly;
. general economic conditions, either internationally or nationally or in
the states in which the Partnership is doing business, may be less
favorable than expected;
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<PAGE>
. legislative or regulatory changes may adversely affect the business in
which the Partnership is engaged; and
. technological changes (including "Year 2000" data systems compliance
issues) may be more difficult or expensive than anticipated.
WHERE YOU CAN FIND MORE INFORMATION
The Partnership files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information we file at
the Securities and Exchange Commission's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Securities and Exchange
Commission's regional offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Our Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the website maintained by the Securities and Exchange
Commission at "http://www.sec.gov." You may inspect information that the
Partnership files with the New York Stock Exchange at the offices of the New
York Stock Exchange at 20 Broad Street, New York, New York 10005.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this proxy statement, which means that we can
disclose important information to you by referring you to another document
filed separately with the Securities and Exchange Commission. This proxy
statement incorporates by reference the documents set forth below that we have
previously filed with the Securities and Exchange Commission. These documents
contain important information about our company and its finances.
<TABLE>
<S> <C>
Partnership SEC Filings Period or Date Filed
- --------------------------------------------------------------------------------------
Annual Report on Form 10-K Year ended December 31, 1998.
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999.
Current Reports on Form 8-K or 8-K/A Filed on March 2, 1999 and November 1, 1999.
</TABLE>
We are also incorporating by reference additional documents that we may file
with the Securities and Exchange Commission pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 between the date of this
proxy statement and the date of the special meeting. The information
incorporated by reference is deemed to be part of this proxy statement. Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this proxy statement will be deemed modified, superseded or
replaced for purposes of this proxy statement to the extent that a statement
contained herein or in any subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies, supersedes or replaces
such statement. Any statement so modified, superseded or replaced will not be
deemed, except as so modified, superseded or replaced, to constitute a part of
this proxy statement. If you are a Partnership unitholder, we may have sent you
some of the documents incorporated by reference, but you can obtain any of them
through us or the Securities and Exchange Commission. Documents incorporated by
reference are available from us without charge, excluding all exhibits unless
we have specifically incorporated by reference an exhibit in this proxy
statement. Partnership unitholders may obtain documents
105
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incorporated by reference in this proxy statement by requesting them in writing
or by telephone from the appropriate party at the following addresses:
PIMCO Advisors Holdings, L.P.
800 Newport Center Drive
Newport Beach, California 92660
Attention: Investor Relations
Telephone: (877) 407-7699
In addition, copies of the reports and opinions of Salomon Smith Barney,
Lazard Freres, McLagan Partners and Goldman Sachs are available for inspection
and copying at the Partnership's executive offices, 800 Newport Center Drive,
Newport Beach, California 92660, during regular business hours by any holder of
Partnership units or a holder's representative designated in writing. Copies of
those reports and opinions will also be sent, at the holder's expense, to any
holder of Partnership units or the holder's representative designated in
writing.
If you would like to request documents from us, please do so by April 14,
2000 to receive them before the special meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement to vote on the merger. We have not authorized
anyone to provide you with information that is different from what is contained
in this proxy statement. This proxy statement is dated March 3, 2000. You
should not assume that the information contained in this proxy statement is
accurate as of any date other than March 3, 2000, and the mailing of the proxy
statement to unitholders shall not create any implication to the contrary.
Your vote is important. To vote your units, please complete, date, sign and
return the enclosed proxy card as soon as possible in the enclosed postage-
prepaid envelope or follow the instructions on your voting card to vote by
telephone or over the Internet. Please call our investor relations department
at (877) 407-7699 or our proxy solicitor, D.F. King & Co., Inc., toll-free at
(800) 207-2872 if you have questions or need assistance with the voting
procedures.
BY ORDER OF THE GENERAL PARTNER
/s/ William D. Cvengros
William D. Cvengros
Chief Executive Officer
PIMCO Advisors Holdings L.P.
Newport Beach, California
March 3, 2000
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APPENDIX A
IMPLEMENTATION AND MERGER AGREEMENT
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IMPLEMENTATION AND MERGER AGREEMENT
by and among
Allianz of America, Inc.,
Pacific Asset Management LLC,
PIMCO Advisors L.P.,
PIMCO Advisors Holdings L.P.,
PIMCO Partners LLC,
PIMCO Holding LLC,
PIMCO Partners G.P.,
and the Other Parties Named Herein
Dated as of October 31, 1999
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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RECITALS.................................................................. A-1
A. The Parties......................................................... A-1
B. The Transactions.................................................... A-2
C. PIMCO MD Agreement.................................................. A-2
D. Agreement of Merger................................................. A-2
ARTICLE I
Certain Definitions
1.01 Certain Definitions................................................. A-2
1.02 Terms Generally..................................................... A-13
ARTICLE II
The Transactions
2.01 The Holdings LP Merger.............................................. A-13
2.02 The Acquisitions, Distributions and Contributions................... A-16
2.03 The Advisors LP Merger.............................................. A-16
2.04 Treatment of Other Equity Interests................................. A-18
2.05 Closing............................................................. A-19
2.06 Organization of AZOA Subsidiaries................................... A-19
ARTICLE III
Representations and Warranties
3.01 Disclosure Schedules................................................ A-19
3.02 Standards........................................................... A-20
3.03 Representations and Warranties of the Sellers....................... A-20
3.04 Representations and Warranties of AZOA.............................. A-40
ARTICLE IV
Covenants
4.01 Conduct Prior to Closing............................................ A-43
4.02 Acquisition Proposals............................................... A-44
4.03 Retention and Bonus Programs........................................ A-44
4.04 Filings, Other Actions; Notification................................ A-45
4.05 Investment Company Matters.......................................... A-46
4.06 Advisory Agreements................................................. A-47
4.07 Taxation............................................................ A-47
4.08 Access; Information................................................. A-47
4.09 Publicity........................................................... A-48
4.10 Effect of Investigations............................................ A-48
4.11 Takeover Statutes................................................... A-48
4.12 Reasonable Best Efforts............................................. A-49
</TABLE>
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4.13 Other Agreements................................................... A-49
4.14 Organization of PacPartners........................................ A-49
4.15 Disposition of Subsidiaries........................................ A-50
4.16 Restructurings..................................................... A-50
4.17 Expenses........................................................... A-50
4.18 Subsidiary Action.................................................. A-50
4.19 Holdings LP Unitholder Approval.................................... A-50
4.20 Proxy Statement.................................................... A-50
4.21 Indemnification; Directors' and Officers' Insurance................ A-51
4.22 Further Assurances................................................. A-51
ARTICLE V
Conditions
5.01 Conditions to Each Party's Obligation to Effect the Transactions... A-52
5.02 Conditions to Obligations of AZOA.................................. A-52
5.03 Conditions to Obligations of the Sellers........................... A-54
ARTICLE VI
Termination
6.01 Termination by Mutual Consent...................................... A-55
6.02 Termination by Either AZOA or the Sellers.......................... A-55
6.03 Termination by AZOA................................................ A-55
6.04 Termination by the Sellers......................................... A-55
6.05 Effect of Termination and Abandonment.............................. A-56
6.06 Termination Fee.................................................... A-56
ARTICLE VII
Miscellaneous and General
7.01 Survival........................................................... A-57
7.02 Waiver; Amendment.................................................. A-57
7.03 Governing Law and Venue; Waiver of Jury Trial...................... A-57
7.04 Notices............................................................ A-58
7.05 Entire Understanding; No Third Party Beneficiaries................. A-59
7.06 Obligations of AZOA................................................ A-59
7.07 Transfer Taxes..................................................... A-59
7.08 Interpretation..................................................... A-59
7.09 Assignment......................................................... A-59
7.10 Counterparts....................................................... A-60
</TABLE>
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ANNEXES
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Annex A Acquisitions, Distributions and Contributions
Disclosure Document List: Financial Information and Assets
Annex B Under Management
Annex C Actions (Taxation)
EXHIBITS
Exhibit A Form of Amendment to Unit Incentive Plan
Exhibit B Form of Allianz Guarantee
Exhibit C Form of New Advisors LP Partnership Agreement
Exhibit D Form of Supplement
Exhibit E Terms of PIMCO Non-Qualified Profit Sharing Plan
Exhibit F Terms of PIMCO Advisors LP Transition and Retention Plan
Exhibit G Terms of PIMCO Advisors LP Retention Plan for Executives of
Pacific Investment Management Company
Exhibit H Terms of PIMCO Class B Unit Purchase Plan
Exhibit I Form of Kenneth Poovey Employment Agreement
Exhibit J Form of Other Advisors LP Executive Employment Agreements
Exhibit K Terms of New Class B Units
Exhibit L Form of Continuing Investment Agreement
Exhibit M Form of Indemnification Agreement
Exhibit N Form of PIMCO LLC Agreement
Exhibit O Terms of Written Consent of Advisors LP
Exhibit P Form of Employment Agreement
Exhibit Q Form of Amendment to Unit Option Agreements
Exhibit R Form of Opinion of Latham & Watkins
</TABLE>
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This IMPLEMENTATION AND MERGER AGREEMENT, dated as of October 31, 1999 (this
"Agreement"), by and among Allianz of America, Inc., a corporation organized
under the laws of Delaware, Pacific Asset Management LLC, a limited liability
company organized under the laws of Delaware, PIMCO Advisors L.P., a limited
partnership organized under the laws of Delaware, PIMCO Advisors Holdings L.P.,
a limited partnership organized under the laws of Delaware, PIMCO Partners
G.P., a general partnership organized under the laws of California, PIMCO
Partners LLC, a limited liability company organized under the laws of
California, PIMCO Holding LLC, a limited liability company organized under the
laws of Delaware, and all of the other parties listed in Recital A hereof
(each, a "Party" and collectively, the "Parties").
RECITALS
A. The Parties. The Parties to this Agreement are as follows:
Advisors LP Merger Sub LLC is a limited liability company to be
organized under the laws of Delaware and is referred to herein as "Advisors
LP Merger Sub".
Allianz Asset Management Incorporated is a corporation organized under
the laws of Delaware, is the sole member of Allianz GP Sub and is referred
to herein as "Allianz Asset Management".
Allianz GP Sub LLC is a limited liability company to be organized under
the laws of Delaware, is the sole member of Advisors LP Merger Sub and
Holdings LP General Partner is the sole limited partner of Holdings LP
Merger Sub and is referred to herein as "Allianz GP Sub".
Allianz of America, Inc. is a corporation organized under the laws of
Delaware, is the sole stockholder of Allianz Asset Management and is
referred to herein as "AZOA".
Holdings LP General Partner LLC is a limited liability company to be
organized under the laws of Delaware, is the sole general partner of
Holdings LP Merger Sub and is referred to herein as "Holdings LP General
Partner".
Holdings LP Merger Sub L.P. is a limited partnership to be organized
under the laws of Delaware and is referred to herein as "Holdings LP Merger
Sub".
Pacific-Allianz Partners LLC is a limited liability company to be
organized under the laws of Delaware and is referred to herein as
"PacPartners LLC".
Pacific Asset Management LLC is a limited liability company organized
under the laws of Delaware, is the managing and sole member of Holding LLC,
a limited partner of Advisors LP and the managing member of each of NFJ
LLC, PPA LLC and CCM LLC, and will be at the Closing the sole stockholder
of PacFin, and is referred to herein as "PacMan".
Pacific Investment Management Company is a general partnership organized
under the laws of Delaware and is a wholly-owned Subsidiary of Advisors LP
and is referred to herein as "PIMCO".
PIMCO Advisors Holdings L.P. is a limited partnership organized under
the laws of Delaware, is a general partner of Advisors LP and is referred
to herein as "Holdings LP".
PIMCO Advisors L.P. is a limited partnership organized under the laws of
Delaware, is a general partner of PIMCO and is referred to herein as
"Advisors LP".
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PIMCO Holding LLC is a limited liability company organized under the
laws of Delaware, is a general partner of Partners GP and is referred to
herein as "Holding LLC".
PIMCO Partners G.P. is a general partnership organized under the laws of
California, is a general partner and a limited partner of Advisors LP and
the sole general partner of Holdings LP and is referred to herein as
"Partners GP".
PIMCO Partners LLC is a limited liability company organized under the
laws of California, is the managing general partner of Partners GP and a
limited partner of Advisors LP and is referred to herein as "Partners LLC".
B. The Transactions. The Parties desire and intend to engage in a series of
transactions, which will include (i) a merger of Holdings LP Merger Sub with
and into Holdings LP, (ii) a merger of Advisors LP Merger Sub with and into
Advisors LP and (ii) certain other related transactions as more fully set forth
in Annex A, all on the terms and conditions set forth herein.
C. PIMCO MD Agreement. As a condition to and in furtherance of the
Transactions, each of the PIMCO MDs who is an ETA Holder has entered into the
PIMCO MD Agreement concurrently with the execution of this Agreement.
D. Agreement of Merger. This Agreement constitutes an agreement of merger
within the meaning of Section 17-211 of the DE Partnership Law with respect to
each of the Holdings LP Merger and the Advisors LP Merger and within the
meaning of Section 18-209 of DE LLC Law with respect to the Advisors LP Merger.
NOW, THEREFORE, in consideration of the premises, and of the covenants,
representations, warranties and agreements contained herein and in the other
Transaction Documents, the Parties agree as follows:
ARTICLE I
Certain Definitions
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
"1994 Profit Sharing Plan" means the 1994 Non-Qualified Profit Sharing
Plan, effective November 16, 1994, adopted by PIMCO.
"1998 Unit Incentive Plan" means the 1998 Unit Incentive Plan, effective
January 1, 1998, adopted by Holdings LP and Advisors LP.
"12b-1 Plan" has the meaning set forth in Section 3.03(aa).
"Acquired Entities" has the meaning set forth in Section 4.07(a).
"Acquisition Proposal" has the meaning set forth in Section 4.02.
"Acquisitions, Distributions and Contributions" means, collectively, the
transactions contemplated by Annex A.
"Adjusted Assets Under Management" has the meaning set forth in Section
2.01(d).
"Advisors GP Units" means the general partner units of Advisors LP.
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"Advisors LP" has the meaning set forth in Recital A.
"Advisors LP Certificate of Merger" has the meaning set forth in Section
2.03(b).
"Advisors LP Excluded Unit" has the meaning set forth in Section
2.03(d).
"Advisors LP Merger" has the meaning set forth in Section 2.03(a).
"Advisors LP Merger Sub" has the meaning set forth in Recital A.
"Advisors LP Surviving Partnership" has the meaning set forth in Section
2.03(a).
"Advisors LP Units" means, collectively, the Class A Units, the Class C
Units and the Class D Units.
"Advisory Agreement" means, with respect to any Person, each Contract
relating to its rendering of investment management, investment advisory,
management, administration or any other services to a Client, including any
sub-advisory or similar agreement.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling, controlled by or under common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of Equity Interests, by Contract or otherwise; and the terms
"controlling" and "controlled" have correlative meanings to the foregoing.
For purposes of the definition of "control", a general partner or managing
member of a Person shall always be considered to control such Person.
"Allianz" means Allianz AG, a German Aktiengesellschaft, the controlling
shareholder of AZOA.
"Allianz Asset Management" has the meaning set forth in Recital A.
"Allianz GP Sub" has the meaning set forth in Recital A.
"Allianz Guarantee" means the Guarantee entered into by AZOA and
Allianz, substantially in the form attached hereto as Exhibit B.
"Allianz Representatives" has the meaning set forth in Section 4.08(a).
"Allianz Share Recipients" means William H. Gross, John L. Hague, Brent
R. Harris, James F. Muzzy, William C. Powers and William S. Thompson.
"Allianz Shares" has the meaning specified in Annex A.
"Amendment to Unit Incentive Plan" means the Second Amendment to the
1998 Unit Incentive Plan, substantially in the form attached hereto as
Exhibit A, unless otherwise agreed by Advisors LP, Holdings LP and AZOA.
"Applicable Law" means any domestic or foreign federal or state statute,
law, ordinance, rule, administrative interpretation, regulation, order,
writ, injunction, directive, judgment, decree, policy, guideline or other
requirement (including those of any Self-Regulatory Organization)
applicable to any of the Parties or any of each of their respective
Subsidiaries, properties or assets, as the case may be.
"Audit Date" has the meaning set forth in Section 3.03(i).
"Authority" means any Governmental Authority or Self-Regulatory
Organization.
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"AZOA" has the meaning set forth in Recital A.
"AZOA Unvested Deferred Payment Note" has the meaning set forth in
Section 2.04(b).
"Bankruptcy and Equity Exception" has the meaning set forth in Section
3.03(b).
"Cadence Capital Management" means Cadence Capital Management, a general
partnership organized under the laws of Delaware.
"Cadence LP" means Cadence Partners L.P., a limited partnership
organized under the laws of California.
"Cadence Management" means Cadence Capital Management Inc., a
corporation organized under the laws of Delaware and a wholly-owned
subsidiary of Advisors LP.
"California Uniform Partnership Act" means the Uniform Partnership Act
of the State of California.
"CCM LLC" means CCM LLC, a limited liability company organized under the
laws of Delaware, the sole general partner of Cadence LP and a limited
partner of Advisors LP.
"Class A Units" means the Class A limited partner units of Advisors LP.
"Class C Units" means the Class C limited partner units of Advisors LP.
"Class D Units" means the Class D limited partner units of Advisors LP.
"Client" means, with respect to any Person, each Investment Company and
each other Person for which such Person or any of its Subsidiaries is a
Service Provider.
"Client Contracts" has the meaning set forth in Section 3.03(aa).
"Closing" has the meaning set forth in Section 2.05.
"Closing Date" has the meaning set forth in Section 2.05.
"Code" means the Internal Revenue Code of 1986, as amended.
"Columbus Circle Trust Company" means Columbus Circle Trust Company, a
Connecticut state-chartered trust company.
"Compensation and Benefit Plan" means, with respect to any Person, any
and all existing bonus, incentive, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock appreciation rights, stock purchase, restricted stock,
stock option, severance, welfare and fringe benefit plans, including but
not limited to "employee benefit plans" within the meaning of Section 3(3)
of ERISA, and employment or severance agreements and all similar practices,
policies and arrangements in which any employee, former employee,
consultant, former consultant, director or former director, member or
former member, stockholder or former stockholder, partner or former
partner, of such Person or any of its Subsidiaries participates or to which
any such employees, former employees, consultants, former consultants,
directors, former directors, members, former members, stockholders, former
stockholders, partners or former partners are parties or beneficiaries.
"Compensation Deferral Account" has the meaning set forth in the
Deferred Compensation Plan.
"Consents" has the meaning set forth in Section 5.01(a).
"Constituent Documents" means, with respect to any corporation, its
charter and by-laws; with respect to any partnership, its certificate of
partnership and partnership agreement; with
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respect to any limited liability company, its certificate of formation and
limited liability company or operating agreement; with respect to any
trust, its declaration or agreement of trust; and with respect to each
other Person, its comparable constitutional instruments or documents;
together in each case, with all material consents and other instruments
delegating authority pursuant to such Constituent Documents.
"Continuing Investment Agreement" has the meaning set forth in Section
4.13(b).
"Contract" means, with respect to any Person, any agreement, indenture,
undertaking, debt instrument, contract, guarantee, loan, note, mortgage,
arrangement, license, lease or other commitment, whether oral or written,
to which such Person or any of its Subsidiaries is a party or by which any
of them is bound or to which any of their assets or properties is subject.
"Controlled Affiliate" has the meaning set forth in Section 3.03(f).
"D&O Insurance" has the meaning set forth in Section 4.21(b).
"DE LLC Law" means the Delaware Limited Liability Company Act, 6 Del. C.
(S) 18-101, et seq., as amended from time to time.
"DE Partnership Law" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. (S) 17-101, et seq., as amended from time to
time.
"Deferred Compensation Plan" means the Executive Deferred Compensation
Plan of Holdings LP and Advisors LP, effective as of December 1, 1996, and
amended and restated as of January 1, 1998, adopted by Advisors LP.
"Deferred Compensation Unit" means, at any time of determination, any
Class A Unit held by the Trustee under the Deferred Compensation Plan and
credited to a Participant's Compensation Deferral Account with respect to
which such Participant has not forfeited and otherwise retains his or her
interest at such time.
"Deferred Restricted Unit" means, at any time of determination, any
Class A Unit held by the Trustee under the Deferred Compensation Plan and
credited to a Participant's Unit Award Deferral Account with respect to
which such Participant has not forfeited and otherwise retains his or her
interest at such time.
"Deferred Restricted Unit Agreement" means each Deferred Restricted Unit
Agreement entered into pursuant to the terms of the 1998 Unit Incentive
Plan.
"Deferred Unit" means a Deferred Unit Award within the meaning of the
1998 Unit Incentive Plan.
"Derivative Contract" means any exchange-traded, over-the-counter or
other swap, cap, floor, collar, option agreement, futures or forward
contract and each other similar arrangement or Contract.
"Determination Date" has the meaning set forth in Section 2.01(d).
"Disclosure Schedule" has the meaning set forth in Section 3.01.
"Effective Time" has the meaning set forth in Section 2.03(b).
"Employment Agreement" has the meaning set forth in Section 5.02(e).
"Encumbrance" means any lien, encumbrance, mortgage, restriction,
pledge, security interest, right of first refusal, claim or other
encumbrance.
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"Environmental Law" means any federal, state, local or foreign statute,
law, regulation, order, decree, permit, authorization, opinion, common law
or agency requirement relating to (a) the protection, investigation or
restoration of the environment, health, safety, or natural resources, (b)
the handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (c) noise, odor, indoor air, employee exposure,
wetlands, pollution, contamination or any injury or threat of injury to
persons or property relating to any Hazardous Substance.
"Equity Interest" means, with respect to any Person, any share of
capital stock of, general, limited or other partnership interest,
membership interest or similar ownership interest under the laws of a
jurisdiction outside the United States, in such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ETA" means each of those certain employment termination and non-
competition agreements Previously Disclosed.
"ETA Amendment" has the meaning set forth in Section 4.13(a).
"ETA Holder" means any natural person who is a party to an ETA as
Previously Disclosed.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Holdings LP Unit" has the meaning set forth in Section 2.04.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Fee Triggering Event" has the meaning set forth in Section 6.06(b).
"GAAP" means generally accepted accounting principles in the United
States of America as in effect at the time any applicable financial
statements were prepared.
"Governmental Authority" means any United States or foreign government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government, including the SEC, the securities commission
or other authority of any state or foreign jurisdiction, the Federal
Reserve or any other government authority, agency, department, board,
commission or instrumentality of any such government, state or political
subdivision thereof, and any court, tribunal or arbitrator(s) of competent
jurisdiction, and any governmental organization, agency or authority.
"Hazardous Substance" means any substance that is (a) listed, classified
or regulated pursuant to any Environmental Law; (b) any petroleum product
or by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive material or radon; and (c)
any other substance which may be the subject of regulatory action by any
Government Authority in connection with any Environmental Law.
"Holding LLC" has the meaning set forth in Recital A.
"Holding LLC ETA" means each ETA to which Holding LLC is a party.
"Holdings LP" has the meaning set forth in Recital A.
"Holdings LP Certificate of Merger" has the meaning set forth in Section
2.01(b).
"Holdings LP Effective Time" has the meaning set forth in Section
2.01(d)(i).
"Holdings LP General Partner" has the meaning set forth in Recital A.
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"Holdings LP GP Units" has the meaning set forth in Section 2.01(d).
"Holdings LP Merger" has the meaning set forth in Section 2.01(a).
"Holdings LP Merger Sub" has the meaning set forth in Recital A.
"Holdings LP Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of PIMCO Advisors Holdings L.P., dated
June 30, 1998.
"Holdings LP Surviving Partnership" has the meaning set forth in Section
2.01(a).
"Holdings LP Unit" has the meaning set forth in Section 2.01(d).
"Holdings LP Unitholders" has the meaning set forth in Section 2.01(a).
"Holdings LP Unitholders Meeting" has the meaning set forth in Section
4.19.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnification Agreement" has the meaning set forth in Section
4.13(d).
"Insurance Policies" has the meaning set forth in Section 3.03(y).
"Intellectual Property" means (a) all trademarks, service marks, logos
and trade names together with all adaptations, derivations, and
combinations thereof, and any applications, registrations, and renewals in
connection therewith, (b) all copyrights, and all applications,
registrations, and renewals in connection therewith; in each case, in
whatever form or medium.
"Intellectual Property Rights" has the meaning set forth in Section
3.03(w).
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
"Investment Company" means an investment company, as such term is
defined in the Investment Company Act (including any entity that, although
an investment company, is exempt from registration as an investment company
under such Act). When used herein without such a reference to a specified
Person, "Investment Company" refers to any Investment Company for which
Advisors LP or any Subsidiary of Advisors LP acts as a Service Provider.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
"Investment Company Advisory Agreement" means any Advisory Agreement to
which an Investment Company is a party.
"Investment Company Board" or "Board" means the board of directors or
trustees (or Persons performing similar functions) of an Investment
Company.
"IRS" means the Internal Revenue Service, and any successor thereto.
"Key Contracts" means, with respect to any Person, the following
Contracts of such Person or any Subsidiary, division or business of such
Person:
(A) any partnership, joint venture or other similar Contract other
than that of a Non-Registered Investment Company;
(B) any Contract relating to the acquisition or disposition of any
business or operations (whether by merger, sale of stock, sale of
assets, outsourcing or otherwise) of or by such Person since November
15, 1994;
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(C) any indenture, mortgage, promissory note, loan, guarantee or
other Contract for the borrowing of money or the deferred purchase
price of property in excess of $10,000,000 (in either case, whether
incurred, assumed, guaranteed or secured by any asset);
(D) any Contract that creates future payment or purchase obligations
of such Person for either (x) annual payments of $1,000,000 or more or
(y) future aggregate payment obligations in excess of $5,000,000;
(E) any Contract which constitutes a repurchase agreement, reverse
repurchase agreement, swap, hedge or Derivative Contract of any type
with respect to which such Person acts as a principal;
(F) any Contract with any former or current general partner,
managing member or managing director of such Person or any executive
officer or director of Advisors LP or Holdings LP or any holder of five
percent (5%) or more of the Equity Interests in such Person or, with
respect to any Seller, with any Person in which, to the knowledge of
such Seller, any of the foregoing Persons holds a controlling interest;
(G) any Contract establishing or evidencing a Profit Interest in
such Person;
(H) any license, franchise or similar Contract material to its
business and operations or any agreement relating to any Intellectual
Property that is material to its assets or business; and
(I) any Contract that limits the freedom of such Person or any of
its Affiliates to compete in any line of business or with any Person or
which involve any restriction of geographical area in which, or method
by which it may carry on its business or that would so limit their
freedom after the Closing Date;
excluding, in each case, (I) any agreement made with respect to
Sponsored Investment Companies in the retail division of PIMCO in the
ordinary course of business, (II) any Contract between Advisors LP and
its Subsidiaries or among such Subsidiaries which evidence inter-
company debt, advances or transfers, (III) any arrangement by which
commission or trail payments are made, (IV) Compensation and Benefit
Plans and (V) with respect to the Contracts listed in clauses (A)
through (H) only, any Constituent Documents and Advisory Agreements.
"knowledge" means, with respect to any Person or its Subsidiaries, the
actual knowledge of its Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, Chief Investment Officer or Chief Legal Officer
(as applicable), after, in the case of any Seller, conduct by such Person
of reasonable due inquiry of the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, Chief Investment Officer and Chief Legal
Officer (as applicable) of each of its Subsidiaries.
"Lease Agreements" has the meaning set forth in Section 3.03(m).
"Long-Term Credit Agreement" means the Long-Term Credit Agreement, dated
as of May 12, 1998, among Advisors LP, NationsBank N.A., Deutsche Bank AG,
New York Branch, Union Bank of California, N.A., Citibank, N.A. and the
Banks as such term is defined therein.
"Material Adverse Effect" means, with respect to any Person, any effect
that is material and adverse to the financial condition, assets,
properties, management, business or results of operations of Holdings LP
and its Subsidiaries taken as a whole or, with respect to AZOA, of AZOA and
its Subsidiaries, taken as a whole; provided, that (i) any such effect
which results
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from changes in securities markets shall be disregarded, and (ii) any such
effect which includes a reduction in the Revenue Run-Rate shall be
disregarded to the extent of such reduction as of the time of
determination.
"MD Representatives" means the members of the executive committee of
PIMCO.
"Merger Sub Class A Units" means the Class A limited partner units of
Advisors LP Merger Sub issued to Allianz GP Sub pursuant to Section
2.03(d).
"Merger Sub Class E Units" means the Class E limited partner units of
Advisors LP Merger Sub issued to PacMan pursuant to Section 2.03(d).
"Merger Sub GP Unit" has the meaning set forth in Section 2.03(d).
"NASD" means the National Association of Securities Dealers, Inc., and
any successor thereto.
"New Advisors LP Partnership Agreement" has the meaning set forth in
Section 2.03(c).
"New Class A Units" has the meaning set forth in Section 2.03(d).
"New Class B Units" has the meaning set forth in Section 2.03(d).
"New Class E Units" has the meaning set forth in Section 2.03(d).
"NFJ Investment Group" means NFJ Investment Group, a general partnership
organized under the laws of Delaware.
"NFJ LLC" means NFJ LLC, a limited liability company organized under the
laws of Delaware, the sole general partner of NFJ LP and a limited partner
of Advisors LP.
"NFJ LP" means NFJ Partners L.P., a limited partnership organized under
the laws of California and a limited partner of Advisors LP.
"NFJ Management" means NFJ Management Inc., a corporation organized
under the laws of Delaware and a wholly-owned subsidiary of Advisors LP.
"Non-Registered Investment Company" means an Investment Company that is
not registered under the Investment Company Act.
"Oppenheimer Capital" means Oppenheimer Capital, a general partnership
organized under the laws of Delaware.
"Option Modification Agreement" has the meaning set forth in Section
5.02(h).
"Order" has the meaning set forth in Section 5.01(c).
"Owned Real Property" has the meaning set forth in Section 3.03(m).
"PacFin" means Pacific Financial Products, Inc., a corporation organized
under the laws of Delaware, a wholly-owned subsidiary of PacMan and a
limited partner of Advisors LP.
"PacLife" means Pacific Life Insurance Company, a stock life insurance
company organized under the laws of California and the sole member of
PacMan.
"PacMan" has the meaning set forth in Recital A.
"PacPartners LLC" has the meaning set forth in Recital A.
"PacPartners LLC Agreement" has the meaning set forth in Section 4.14.
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"PacPartners LLC Class A Units" means the Class A Units of PacPartners
LLC.
"PacPartners LLC Class B Units" means the Class B Units of PacPartners
LLC.
"Parametric LP" means Parametric Partners L.P., a limited partnership
organized under the laws of California and a limited partner of Advisors
L.P.
"Parametric Management" means Parametric Management Inc., a corporation
organized under the laws of Delaware and a wholly-owned subsidiary of
Advisors LP.
"Parametric Portfolio Associates" means Parametric Portfolio Associates,
a general partnership organized under the laws of Delaware.
"Participant" means any Person who is a "Participant" in the Deferred
Compensation Plan within the meaning of the Deferred Compensation Plan.
"Partners GP" has the meaning set forth in Recital A.
"Partners LLC" has the meaning set forth in Recital A.
"Paying Agent" has the meaning set forth in Section 2.01(f).
"Pension Plan" means an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA.
"Person" means any individual, bank, corporation, company, partnership
(limited or general), limited liability company, association, joint
venture, trust, stock insurance company, unincorporated organization or
other entity or similar contractual arrangement or relationship.
"PIMCO" has the meaning set forth in Recital A.
"PIMCO Class B Unit Purchase Plan" has the meaning set forth in Section
4.03.
"PIMCO Equity Advisors" means PIMCO Equity Advisors, a division of
Advisors LP.
"PIMCO LLC Agreement" has the meaning set forth in Section 4.13(d).
"PIMCO Management" means PIMCO Management Inc., a corporation formed
under the laws of Delaware and a wholly-owned subsidiary of Advisors LP.
"PIMCO MD" means each of William R. Benz, Robert Wesley Burns, Chris P.
Dialynas, William H. Gross, John L. Hague, Brent R. Harris, Margaret E.
Isberg, Dean S. Meiling, James F. Muzzy, William F. Podlich, III, William
C. Powers, Lee R. Thomas, William S. Thompson and Benjamin L. Trosky.
"PIMCO MD Agreement" means the Managing Director Agreement entered into
as of the date hereof among all of the PIMCO MDs who are ETA Holders,
Allianz Asset Management, Advisors LP, PIMCO and AZOA.
"PIMCO Non-Qualified Profit Sharing Plan" has the meaning set forth in
Section 4.03.
"PIMCO Trust Company" means PIMCO Trust Company, a trust company formed
under the laws of New York.
"PIMCO Written Consent" has the meaning set forth in Section 4.13.
"PPA LLC" means PPA LLC, a limited liability company organized under the
laws of Delaware, is the sole general partner of Parametric LP.
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"PPGP Note Agreement" means the Amended and Restated Note Agreement,
dated as of September 26, 1997, between Partners GP and each of the
Noteholders as such term is defined therein, as amended as of October 31,
1997.
"Previously Disclosed" by a Party or Parties means information set forth
in its or their Disclosure Schedule.
"Profit Interest" means, with respect to any Person, any right (whether
represented by a security or other instrument or Contract) directly or
indirectly to participate in the revenues, profits or losses, realized or
unrealized gains or liquidation value of, such Person or any Subsidiary,
division or business of such Person, but excluding, in each case, any
Contract for trail payments, commissions, or fee-based compensation entered
into in the ordinary course of business of such Person or any Subsidiary,
division or business of such Person and any ETA, Equity Interest, or
Compensation and Benefit Plan.
"Proxy Statement" has the meaning set forth in Section 4.19.
"PTE 84-14" has the meaning set forth in Section 3.04(i).
"Registered Investment Company" means an Investment Company registered
under the Investment Company Act.
"Retention Plan" has the meaning set forth in Section 4.03.
"Revenue Run-Rate" has the meaning set forth in Section 2.01(d).
"SEC" means the Securities and Exchange Commission, and any successor
thereto.
"SEC Reports" has the meaning set forth in Section 3.03(i).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Laws" means the Securities Act, the Exchange Act, the
Investment Company Act, the Advisors Act and the state "blue sky" laws, and
the rules and regulations promulgated thereunder.
"Self-Regulatory Organization" means the NASD, the MSRB, the National
Futures Association, each national securities exchange in the United States
and each or other commission, board, agency or body, whether United States
or foreign, that is charged with the supervision or regulation of brokers,
dealers, securities underwriting or trading, stock exchanges, commodities
exchanges, insurance companies or agents, investment companies or
investment advisers, or to the jurisdiction of which it is otherwise
subject.
"Sellers" means, collectively, Advisors LP, Holdings LP, PacMan,
Partners GP, Partners LLC and Holding LLC.
"Service Provider" means any Person who acts as investment manager,
administrator, general partner, managing member or similar controlling
Person, investment advisor, subadviser or distributor or provider of other
services.
"Shortfall Ratio" has the meaning set forth in Section 2.03(d)(i).
"Short-Term Credit Agreement" means the Short-Term Credit Agreement,
dated as of May 12, 1998, as amended as of May 11, 1999, among Advisors LP,
NationsBank N.A., Deutsche Bank AG, New York Branch, Union Bank of
California, N.A., Citibank, N.A. and the Banks as such term is defined
therein.
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"Sponsored" means, with respect to any Investment Company, an Investment
Company which has a majority of its officers who are employees of Advisors
LP or any of its Subsidiaries or of which Advisors LP or any of its
Subsidiaries holds itself out as the "Sponsor".
"Subsidiary" of any Person (the "subject Person") means any Person,
whether incorporated or unincorporated, of which (i) at least fifty percent
(50%) of the securities or ownership interests having by their terms
ordinary voting power to elect a majority of the board of directors or
managers or other Persons performing similar functions, (ii) a general
partner interest or (iii) a managing membership interest, is directly or
indirectly owned or controlled by the subject Person or by one or more of
its respective Subsidiaries; provided, however, that the term Subsidiary
shall not apply to any Sponsored Non-Registered Investment Company.
"Superior Proposal" has the meaning set forth in Section 4.02.
"Supplement" has the meaning set forth in Section 2.06.
"Takeover Statute" means any "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation.
"Tax" and "Taxes" means any and all federal, state, local or foreign
taxes, charges, fees, levies or other assessments, however denominated,
including, without limitation, all net income, gross income, gross
receipts, gains, sales, use, ad valorem, goods and services, capital,
production, transfer, franchise, windfall profits, license, withholding,
payroll, employment, disability, employer health, excise, estimated,
severance, stamp, occupation, property, environmental, unemployment or
other taxes, custom duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority whether arising
before, on or after the Closing Date.
"Tax Returns" means any return, amended return or other report
(including, without limitations elections, declarations, disclosures,
schedules, estimates and information returns) required to be filed with
respect to any Tax.
"Termination Date" has the meaning set forth in Section 6.02.
"Termination Fee" has the meaning set forth in Section 6.06(a).
"Termination Notice" has the meaning set forth in Section 6.03(b).
"Terminating Sellers" has the meaning set forth in Section 6.04.
"Third-Party Intellectual Property Rights" has the meaning set forth in
Section 3.03(w).
"Transaction Documents" means this Agreement, the Continuing Investment
Agreement, the Indemnification Agreement, the Option Modification
Agreement, the ETA Amendments, each Supplement, the PIMCO MD Agreement, the
PIMCO LLC Agreement, the New Advisors LP Partnership Agreement, the
PacPartners LLC Agreement, the AZOA Unvested Deferred Payment Note, the
Deferred Compensation Plan Amendment, the Employment Agreements, the PIMCO
Non-Qualified Profit Sharing Plan, the PIMCO Class B Unit Purchase Plan,
the Transition Retention Plan, the Retention Plan, the Allianz Guarantee,
the Letter Agreement, dated October 31, 1999, from AZOA to PIMCO, relating
to the delegation to be effected by the PIMCO Written Consent and any other
Contract which Partners LLC, AZOA and PacMan may agree in writing shall be
a Transaction Document.
"Transactions" means, collectively, the Advisors LP Merger, the Holdings
LP Merger, the Acquisitions, Distributions and Contributions, and each
other transaction contemplated by Sections 4.13, 4.14 and 4.19 of this
Agreement.
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"Transition Retention Plan" has the meaning set forth in Section 4.03.
"Trustee" means US Trust, as Trustee under the rabbi trust established
by Advisors LP and the other Participating Employees under a trust dated as
of December 1, 1996 for purposes of the Deferred Compensation Plan.
"Unit Award Deferral Account" has the meaning set forth in the Deferred
Compensation Plan.
"Unit Option" means an option to purchase units awarded under the 1998
Unit Incentive Plan.
"Unit Option Agreement" has the meaning set forth in the 1998 Unit
Incentive Plan.
"Unit Price" has the meaning set forth in Section 2.01(d).
"Written Consent" means, with respect to a specified Person, the written
consent of the board of directors, members, managing members, general
partners, or other governing body or group of Persons given under authority
of such specified Person's Constituent Documents.
"Y2K Compliant" has the meaning set forth in Section 3.03(z).
1.02 Terms Generally. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Agreement include both the plural and the
singular;
(b) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
(c) the words "including" and "include" and other words of similar
import shall be deemed to be followed by the phrase "without limitation";
and
(d) the term "reasonable best efforts" of any Party with respect to any
specified action or result shall mean efforts that a reasonable Person
would make to take such action or accomplish such result in light of the
present intentions of such Party with respect to the Transactions and the
benefits to be obtained by such Party upon the consummation of the
transactions contemplated by the Transaction Documents.
ARTICLE II
The Transactions
2.01 The Holdings LP Merger.
(a) The Holdings LP Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Holdings LP Effective Time, Holdings LP
Merger Sub shall be merged with and into Holdings LP and the separate
partnership existence of Holdings LP Merger Sub shall thereupon cease (the
"Holdings LP Merger"). Holdings LP shall be the surviving entity in the
Holdings LP Merger (sometimes hereinafter referred to as the "Holdings LP
Surviving Partnership"), and the separate partnership existence of Holdings
LP, with all its rights, privileges, immunities, powers and franchises,
shall continue unaffected by the Holdings LP Merger, except as set forth in
Section 2.01(c). The Holdings LP Merger shall have the effects specified in
Section 17-211(h) of the DE Partnership Law.
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(b) Holdings LP Effective Time. On the Closing Date, immediately
following the satisfaction of all the conditions set forth in Article V,
Holdings LP and Holdings LP Merger Sub shall cause a Certificate of Merger
(the "Holdings LP Certificate of Merger") to be executed, acknowledged and
filed with the Secretary of State of Delaware as provided in Section 17-
211(c) of the DE Partnership Law. The Holdings LP Merger shall become
effective at the time specified in the Holdings LP Certificate of Merger
(the "Holdings LP Effective Time").
(c) The Holdings LP Surviving Partnership Agreement. Effective as of the
Holdings LP Effective Time, the Holdings LP Partnership Agreement shall be
amended and restated in its entirety and a new partnership agreement shall
be adopted which limited partnership agreement shall be in a form to be
determined by AZOA or Holdings LP General Partner prior to the Closing.
(d) Effect on Partnership Interests. At the Holdings LP Effective Time,
as a result of the Holdings LP Merger and without any action on the part of
the holders of any partnership interest in Holdings LP:
(i) Holdings LP Merger Consideration. Each unit of limited
partnership interest of Holdings LP issued and outstanding immediately
prior to the Holdings LP Effective Time (a "Holdings LP Unit"), shall
be converted into the right to receive, without interest, an amount in
cash equal to $38.75 (such amount, as it may be adjusted in accordance
with this Section 2.01(d)(i), the "Unit Price"), provided, that in the
event that the Revenue Run-Rate as of the most recent calendar
month-end prior to the Closing Date (the "Determination Date") is less
than 85% of the Revenue Run-Rate as of September 30, 1999
($780,837,226), then the Unit Price shall be reduced by an amount equal
to the Unit Price multiplied by the Shortfall Ratio; provided, further,
that the Unit Price as so adjusted shall not be less than $31.00. The
"Shortfall Ratio" shall be equal to:
Revenue Run - Rate as of the Determination Date
2x (.85 ----------------------------------------------- )
$780,837,226
All such Holdings LP Units, by virtue of the Holdings LP Merger and
without any action on the part of the holders thereof, shall no longer
be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Holdings
LP Units shall thereafter cease to have any rights with respect to such
Holdings LP Units, except the right to receive the Unit Price for each
Holdings LP Unit upon the surrender of such certificate in accordance
with Section 2.01(f).
"Revenue Run-Rate" shall mean, on any date, the aggregate annualized
investment advisory and subadvisory fees for all accounts managed by
Advisors LP and its Subsidiaries, determined by multiplying the
Adjusted Assets Under Management for each such account by the
applicable annual fee rate for such account at such date (excluding any
performance-based fees). The calculation of the Revenue Run-Rate as of
the Determination Date shall be made using substantially the same
methodology as the calculation of the Revenue Run-Rate as of
September 30, 1999, as Previously Disclosed.
"Adjusted Assets Under Management" shall mean for any account at a
particular date, the amount of assets under management by Advisors LP
or its Subsidiaries in that account at September 30, 1999, as adjusted
for net cash flows (additions, withdrawals and reinvestments), new
accounts and terminated accounts from and after September 30, 1999;
provided however, that assets shall be treated as withdrawn at the date
Advisors LP or any
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of its Subsidiaries receives a written notice communicating an
intention to withdraw such assets (unless such notice has been revoked)
or, in the case of a Registered Investment Company, the shareholders of
such Registered Investment Company shall have failed to approve the
transfer of an Advisory Agreement at such particular date.
(ii) Holdings LP GP Units. Each general partnership unit in Holdings
LP issued and outstanding immediately prior to the Holdings LP
Effective Time ("Holdings LP GP Units") shall be converted into the
right to receive the Unit Price.
(e) Holdings LP Merger Sub. At the Holdings LP Effective Time, each
limited partnership interest in Holdings LP Merger Sub issued and
outstanding immediately prior to the Holdings LP Effective Time shall be
converted into and become exchangeable for one Holdings LP Unit and each
general partner interest in Holdings LP Merger Sub issued and outstanding
immediately prior to the Holdings LP Effective Time shall be converted into
one general partner interest in Holdings LP Surviving Partnership.
(f) Payment for Holdings LP Units.
(i) Paying Agent. As of the Holdings LP Effective Time, Holdings LP
Surviving Partnership shall deposit, or shall cause to be deposited,
with a paying agent selected by Holdings LP with AZOA's prior approval,
which approval shall not be unreasonably withheld (the "Paying Agent"),
amounts sufficient in the aggregate to provide all funds necessary for
the Paying Agent to make payments pursuant to Section 2.01(d)(i) to
holders of Holdings LP Units issued and outstanding immediately prior
to the Holdings LP Effective Time ("Holdings LP Unitholders").
(ii) Payment Procedures. Promptly after the Holdings LP Effective
Time, Holdings LP Surviving Partnership shall cause to be mailed to
each Person who was, at the Holdings LP Effective Time, a holder of
record of issued and outstanding Holdings LP Units (i) a letter of
transmittal specifying that delivery shall be effected, and the risk of
loss and title to each certificate representing Holdings LP Units shall
pass, only upon delivery of such certificate (or affidavits of loss in
lieu thereof) to the Paying Agent, such letter of transmittal to be in
such form and have such other provisions as AZOA and Holdings LP may
reasonably agree, and (ii) instructions for use in effecting the
surrender of such certificates. Upon surrender to the Paying Agent of
any such certificate, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto,
Holdings LP Surviving Partnership shall promptly cause to be paid to
the Person(s) entitled thereto, by check, the amount to which such
Person(s) are entitled pursuant to Section 2.01(d)(i), after giving
effect to any required tax withholding. No interest will be paid or
will accrue on the amount payable upon the surrender of any such
certificate. If payment is to be made to a Person other than the
registered holder of a certificate surrendered, it shall be a condition
of such payment that the certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the Person
requesting such payment shall pay any transfer or other taxes required
by reason of the payment to a Person other than the registered holder
of the certificate surrendered or establish to the satisfaction of
Holdings LP Surviving Partnership or the Paying Agent that such tax has
been paid or is not applicable.
(iii) Transfers. After the Holdings LP Effective Time, there shall
be no transfers on the books and records of Holdings LP of the Holdings
LP Units that were outstanding immediately prior to the Holdings LP
Effective Time.
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(iv) Termination of Payment Fund. Three hundred and sixty five (365)
days following the Holdings LP Effective Time, Holdings LP Surviving
Partnership or its successor shall be entitled to cause the Paying
Agent to deliver to it any funds (including any interest received with
respect thereto) made available to the Paying Agent which have not been
disbursed to Holdings LP Unitholders at the Holdings LP Effective Time,
and thereafter such holders shall be entitled to look to Holdings LP
Surviving Partnership only as general creditors thereof with respect to
the cash payable upon due surrender of such certificates.
Notwithstanding the foregoing, neither the Paying Agent nor any party
hereto shall be liable to any holder of such certificates for any
amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. Holdings LP Surviving Partnership
shall pay all charges and expenses, including those of the Paying
Agent, in connection with the payment of cash in exchange for Holdings
LP Units.
(v) Lost, Stolen or Destroyed Holdings LP Certificates. In the event
any certificate representing Holdings LP Units shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such certificate to be lost, stolen or destroyed
and, if required by Holdings LP, the posting by such Person of a bond
in customary amount as indemnity against any claim that may be made
against it with respect to such certificate, the Paying Agent will pay
in exchange for such lost, stolen or destroyed certificate the merger
consideration due to such holder pursuant to Section 2.01(d)(i) upon
due surrender of the Holdings LP Units represented by such certificate.
(g) Dissenters' or Appraisal Rights. Holdings LP Unitholders shall not
be entitled to any dissenters' rights or rights of appraisal with respect
to such holders' Holdings LP Units.
(h) Adjustments to Prevent Dilution. In the event that Holdings LP
changes the number of Holdings LP Units or Holdings GP Units issued and
outstanding prior to the Holdings LP Effective Time, by means of a unit
split, recapitalization, unit consolidation or similar transaction, the
Unit Price shall be appropriately adjusted.
2.02 The Acquisitions, Distributions and Contributions. Upon the terms and
subject to the conditions of this Agreement, at the Closing, immediately prior
to the Effective Time, the Parties will take all actions required to consummate
the transactions contemplated in Annex A to this Agreement, in the order set
forth therein.
2.03 The Advisors LP Merger.
(a) The Advisors LP Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time, Advisors LP Merger Sub
shall be merged with and into Advisors LP and the separate limited
liability company existence of Advisors LP Merger Sub shall thereupon cease
(the "Advisors LP Merger"). Advisors LP shall be the surviving entity in
the Advisors LP Merger (sometimes hereinafter referred to as the "Advisors
LP Surviving Partnership"), and the separate partnership existence of
Advisors LP, with all its rights, privileges, immunities, powers and
franchises, shall continue unaffected by the Advisors LP Merger, except as
set forth in Section 2.02(c). The Advisors LP Merger shall have the effects
specified in Section 17-211(h) of the DE Partnership Law and Section 18-
209(g) of the DE LLC Law.
(b) Effective Time. Immediately following the consummation of all of the
transactions contemplated by Sections 2.01 and 2.02, Advisors LP and
Advisors LP Merger Sub will cause a Certificate of Merger (the "Advisors LP
Certificate of Merger") to be executed, acknowledged
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and filed with the Secretary of State of Delaware as provided in Section
17-211(c) of the DE Partnership Law and Section 18-209(c) of the DE LLC
Law. The Advisors LP Merger shall become effective at the time specified in
the Advisors LP Certificate of Merger (the "Effective Time"), provided,
however, that the Advisors LP Merger shall not become effective and the
provisions of this Section 2.03 shall have no effect unless the Holdings LP
Merger shall have become effective prior thereto.
(c) The Advisors LP Surviving Partnership Agreement. Effective as of the
Effective Time, the Advisors LP Limited Partnership Agreement shall be
amended and restated substantially in the form attached hereto as Exhibit
C, with such further amendments and modifications as PacMan and AZOA may
agree prior to the Effective Time (the "New Advisors LP Partnership
Agreement") and such New Advisors LP Partnership Agreement shall be the
partnership agreement of Advisors LP Surviving Partnership, until duly
amended as provided therein or by Applicable Law. Effective as of the
Effective Time, PacPartners shall be admitted as the general partner of the
Advisors LP Surviving Partnership.
(d) Effect on Partnership Interests. At the Effective Time, as a result
of the Advisors LP Merger and without any action on the part of the holders
of any partnership interest in Advisors LP or Advisors LP Merger Sub:
(i) Advisors LP Merger Consideration. (A) Class A Units. Each Class
A Unit (including each Advisors GP Unit) issued and outstanding
immediately prior to the Effective Time (other than each Class A Unit
held by Advisors LP Merger Sub or Partners GP, if any (an "Advisors LP
Excluded Unit"), shall be converted into the right to receive, without
interest, an amount in cash equal to the Unit Price.
(B) Class C Units and Class D Units. Each Class C Unit and Class
D Unit issued and outstanding immediately prior to the Effective
Time shall remain outstanding and unaffected by the Advisors LP
Merger.
(ii) Conversion of Advisors LP Merger Sub Units.
(A) Each Merger Sub Class A Unit issued and outstanding
immediately prior to the Effective Time shall be converted into and
become exchangeable for one new Class A Unit of Advisors LP ("New
Class A Unit").
(B) Each Merger Sub Class E Unit issued and outstanding
immediately prior to the Effective Time shall be converted into and
become exchangeable for one new Class E Unit of Advisors LP ("New
Class E Unit").
(C) Each general partner unit of Advisors LP Merger Sub ("Merger
Sub GP Unit") held by PacPartners immediately prior to the Effective
Time shall be converted into one new Advisors GP Unit.
(D) Excluded Units. Each Class A Unit issued and outstanding
immediately prior to the Effective Time and held of record by
Partners GP, if any, shall be converted into and become exchangeable
for one new Class B Unit of Advisors LP (a "New Class B Unit"). Each
Class A Unit issued and outstanding immediately prior to the
Effective Time and held by Advisors LP Merger Sub shall be
cancelled.
(e) Cancellation of Units. All Class A Units outstanding immediately
prior to the Advisors LP Merger (other than the Advisors LP Excluded
Units), by virtue of the Advisors LP Merger and without any action on the
part of the holders thereof, shall no longer be outstanding
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and shall be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such units shall thereafter cease to have
any rights with respect to such units, except the right to receive the Unit
Price provided in Section 2.03(d)(i) for each Class A Unit or Advisors GP
Unit, as the case may be, upon the surrender of such certificate in
accordance with Section 2.03(f).
(f) Payment and Exchange Procedures. Upon surrender of a certificate
formerly representing any Class A Units at the Closing, Advisors LP shall
pay to the holder of any such certificate formerly representing Class A
Units converted in accordance with Section 2.03(d)(ii) the cash that such
holder is entitled to receive in accordance with this Section 2.03, by wire
transfer of immediately available funds to an account to be designated by
each such holder by written notice to Advisors LP at least five business
days prior to the Effective Time, or, if no such notice is so delivered, by
check to be delivered by registered mail to the address shown on the books
and records of Advisors LP as the address of the record holder of such
Class A Units.
(g) Transfers. After the Effective Time, there shall be no transfers on
the books and records of Advisors LP of the Advisors LP Units or Advisors
GP Units that were outstanding immediately prior to the Effective Time.
(h) Dissenters'or Appraisal Rights. Holders of Advisors LP Units and
Advisors GP Units shall not be entitled to any dissenters' rights or rights
of appraisal with respect to such holders' Advisors LP Units or Advisors GP
Units, as the case may be.
(i) Adjustments to Prevent Dilution. In the event that Advisors LP
changes the number of any class of Advisors LP Units or Advisors GP Units,
as the case may be, issued and outstanding prior to the Effective Time, by
means of a unit split, recapitalization, unit consolidation or similar
transaction, the Unit Price shall be appropriately adjusted.
2.04 Treatment of Other Equity Interests.
(a) Unit Options and Deferred Units.
(i) Option Cancellation. In accordance with the provisions of the
Amended Unit Incentive Plan, at the Effective Time, each Unit Option
then outstanding shall, whether or not then exercisable, be canceled
and each Unit Option Agreement evidencing such Unit Option shall no
longer have any force or effect, and the holder of such Unit Option
shall have the right to receive the consideration therefor provided in
the Amendment to the Unit Incentive Plan.
(ii) Deferred Units. In accordance with the provisions of the
Amended Unit Incentive Plan, at the Effective Time, each Deferred Unit
shall thereafter represent the rights set forth in the Amendment to the
Unit Incentive Plan.
(b) Advisors LP Deferred Compensation Plan.
(i) Deferred Compensation Units and Vested Deferred Restricted
Units. At the Effective Time, the Deferred Compensation Units and the
Deferred Restricted Units then vested shall be converted into an amount
of cash, delivered by AZOA to the Trustee, equal to the Unit Price
multiplied by the number of Deferred Compensation Units and vested
Deferred Restricted Units in the Deferred Compensation Plan as of the
Effective Time. Such cash shall be invested by the Trustee in
accordance with the terms of the Deferred Compensation Plan, as
amended.
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(ii) Unvested Deferred Restricted Units. At the Effective Time, the
Deferred Restricted Units then unvested shall be converted into a
deferred payment note of AZOA, in a form agreed by AZOA, Advisors LP
and Partners LP (the "AZOA Unvested Deferred Payment Note"), delivered
by AZOA to the Trustee, in a principal amount equal to the Unit Price
multiplied by the number of such unvested Deferred Restricted Units in
the Deferred Compensation Plan as of the Advisors LP Effective Time.
Such AZOA Unvested Deferred Payment Note (i) shall be payable as and
when Deferred Restricted Units vest on the original vesting schedule
set forth in the relevant Deferred Restricted Unit Agreement,
(ii) shall continue to be subject to the forfeiture provisions of the
relevant Deferred Restricted Unit Agreement, and (iii) shall be subject
to the terms of the Deferred Compensation Plan, as amended.
2.05 Closing. The closing of the Transactions (the "Closing") shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York,
New York at 9:00 A.M. on the fifth business day after the first calendar month-
end on which the last to be fulfilled or waived of the conditions set forth in
Article V (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the fulfillment or waiver of those conditions)
shall have been satisfied or waived in accordance with this Agreement or (ii)
at such other place and time and/or on such other date as AZOA, Partners LLC,
Partners GP and PacMan may agree in writing (the "Closing Date").
Notwithstanding anything to the contrary contained in this Article II, the
consummation of each of the transactions set forth in Sections 2.01, 2.02 and
2.03 shall be contingent on the fulfillment of all conditions to the
consummation of each other transaction.
2.06 Organization of AZOA Subsidiaries. Prior to the Closing Date, AZOA will
or will cause Allianz Asset Management to (a) organize Holdings LP Merger Sub
as a Delaware limited partnership, (b) organize Allianz GP Sub, Holdings LP
General Partner and Advisors LP Merger Sub, each as a Delaware limited
liability company and (c) cause each of Holdings LP Merger Sub, Allianz GP Sub,
Holdings LP General Partner, Advisors LP Merger Sub and, after the organization
of PacPartners LLC in accordance with Section 4.14, PacPartners LLC, to become
a party to this Agreement, to be evidenced by the execution by each such Person
of a supplement to this Agreement, in substantially the form of Exhibit D (a
"Supplement"), and delivery of such Supplement to Advisors LP and PacLife.
ARTICLE III
Representations and Warranties
3.01 Disclosure Schedules. On or prior to the date hereof, (i) AZOA and (ii)
Partners LLC, PacMan, Holdings LP, Advisors LP and its Subsidiaries, has
delivered to Sellers, in the case of AZOA, and to AZOA, in the case of the
Parties listed in clause (ii), a disclosure schedule (with respect to each such
delivering Party or Parties, its "Disclosure Schedule") setting forth, among
other things, items the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or warranties made
pursuant to Section 3.03 or 3.04, as the case may be; provided that the mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a Party that
such item represents such an exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect with
respect to such Party.
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3.02 Standards. For purposes of the conditions set forth in Sections 5.02(a)
and 5.03(a), respectively, no representation or warranty contained in Section
3.03 (excluding paragraph (k)(D) thereof, in the case of each Seller, and
Section 3.04 (excluding paragraph (h) thereof), in the case of AZOA, shall be
deemed untrue or incorrect, and no Party shall be deemed to have breached such
a representation or warranty, as a consequence of the existence of any fact,
event or circumstance unless:
(a) in the case of each representation and warranty contained in
paragraphs (b), (c), (d), (e), (g), (h)(ii), (i), (j), (o)(iii) and (ix),
(t), (z), (bb) and (cc) of Section 3.03, and paragraphs (b), (c), (d), (f)
and (g) of Section 3.04, such fact, circumstance or event would cause any
such representation and warranty to fail to be true and correct in all
material respects; and
(b) in the case of each other representation and warranty contained in
Section 3.03 and Section 3.04 such fact, circumstance or event,
individually or taken together with all other facts, events or
circumstances inconsistent with such representation or warranty contained
in Section 3.03 or 3.04 (other than those set forth in Section 3.02(a)) has
had or is reasonably likely to have a Material Adverse Effect with respect
to such Party.
3.03 Representations and Warranties of the Sellers. Subject to Sections 3.01
and 3.02 and except as Previously Disclosed, each of the Sellers makes each of
the following representations and warranties; provided, however, that, unless
otherwise indicated, none of the representations and warranties shall be made
with respect to any of PacMan's Subsidiaries other than Holding LLC and each of
its Subsidiaries.
(a) Organization, Standing and Authority. Each of the Sellers hereby
represents and warrants that:
(i) it and each of its Subsidiaries is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, as Previously Disclosed, with full power and authority to
own, lease or operate its assets and to carry on its business as
currently conducted;
(ii) it and each of its Subsidiaries is duly qualified to do
business and is in good standing in each state of the United States and
any jurisdiction outside the United States where its ownership or
leasing of property or assets or the conduct of its business requires
it to be so qualified; and
(iii) prior to the date hereof, it has made available to AZOA a
complete and correct copy, as of the date hereof, of its Constituent
Documents and the Constituent Documents of each of its Subsidiaries, in
each case as amended to such date. As of the date hereof, each such
Constituent Document is in full force and effect.
(b) ETA Holders. Each of the Sellers hereby represents and warrants that
(i) Previously Disclosed is a complete and correct list of each ETA
(including all amendments thereto) in force and to which it or any of its
Subsidiaries is a party and there are no employment termination and non-
competition agreements to which it or any of its Subsidiaries is a party
other than the ETAs; each such ETA was duly authorized, executed and
delivered by such party and to such Seller's knowledge, by the other party
thereto, and, as of the date hereof, is a valid and binding agreement,
enforceable against such party, and, to such Seller's knowledge, the other
party thereto, in each case subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights, any restrictions
under Applicable Law on the enforceability of any covenant or restriction
regarding
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competition and to general equity principles (the "Bankruptcy and Equity
Exception") and (ii) neither such Party nor, to such Seller's knowledge,
the other party thereto is in default or in breach under the terms of any
such agreement and there has been no event which, with notice or lapse of
time or both, has resulted or would be reasonably likely to result in any
such breach, violation or event of default.
(c) Capitalization of Advisors LP; Equity Interests. Each of the Sellers
hereby represents and warrants that:
(i) as of October 31, 1999, there were 113,976,477 Class A Units, of
which 50,364,070 were Advisors GP Units, 6,000,000 Class C Units and 600
Class D Units issued and outstanding;
(ii) as of October 31, 1999, all of the outstanding Class A Units,
Class C Units and Class D Units were held of record by the Persons
Previously Disclosed, which sets forth the number of Class A Units
(including the Class A Units which are classified as Advisors GP Units),
Class C Units and Class D Units held by each such Person;
(iii) as of October 31, 1999, each of the outstanding Advisors LP
Units and Advisors GP Units was duly authorized and validly issued, is
fully paid, and, subject to Applicable Law, nonassessable, is not
subject to preemptive rights and was not issued in violation of any
preemptive rights;
(iv) Previously Disclosed is a list, as of October 31, 1999, of any
Equity Interests in Advisors LP or any of its Subsidiaries, businesses
or divisions to be received by any Person pursuant to any Contract or
Compensation and Benefit Plan, indicating the name of each such Person,
the Contract or Compensation and Benefit Plan pursuant to which it is
entitled or will be entitled to receive such Equity Interests, the type,
class and number of Equity Interests the Person is or will be entitled
to receive thereunder, the equivalent amount of Class A Units such
Equity Interests represent and the purchase price, if any, to be paid by
such Person in consideration for such Equity Interests;
(v) except as Previously Disclosed, as of October 31, 1999, there
were no outstanding rights, options, warrants, conversion rights,
redemption rights, repurchase rights, or agreements, arrangements or
commitments to issue or sell any Advisors LP Units, Advisors GP Units or
other Equity Interests or Profit Interests in Advisors LP or securities
of Advisors LP or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any such Advisors LP Units, Advisors GP Units
or other Equity Interests, Profit Interests or securities of Advisors LP
and no securities or obligations evidencing such rights are authorized,
issued or outstanding; and
(vi) except as Previously Disclosed, neither Advisors LP nor any of
its Subsidiaries has outstanding any bonds, debentures, notes or other
obligations for borrowed money the holders of which have the right to
vote or which are convertible into or exercisable for securities having
the right to vote, with the holders of Advisors LP Units or Advisors GP
Units on any matter.
(vii) as of the Closing Date, the Class A Units to be contributed to
PacPartners LLC by PacMan or any of its Subsidiaries will be owned by
such Person, free and clear of all Encumbrances.
(d) Holdings LP Capitalization. Each of the Sellers hereby represents
and warrants that:
(i) as of October 31, 1999, there were 49,558,972 Holdings LP Units
and 5,099 Holdings GP Units issued and outstanding;
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(ii) each Holdings GP Unit is held of record and beneficially by
Partners GP free and clear of all Encumbrances;
(iii) each of the outstanding Holdings LP Units and Holdings GP
Units was duly authorized and validly issued, is fully paid and,
subject to Applicable Law, nonassessable, is not subject to preemptive
rights, and was not issued in violation of any preemptive rights;
(iv) except as Previously Disclosed, as of October 31, 1999, there
were no outstanding rights, options, warrants, conversion rights,
redemption rights, repurchase rights, or agreements, arrangements or
commitments to issue or sell any Holdings LP Units, Holdings GP Units
or other Equity Interests or Profit Interests in Holdings LP or
securities of Holdings LP or any securities or obligations convertible
or exchangeable into or exercisable for, or giving any Person a right
to subscribe for or acquire, any such Holdings LP Units, Holdings GP
Units or other Equity Interests, Profit Interests or securities of
Holdings LP and no securities or obligations evidencing such rights are
authorized, issued or outstanding; and
(v) except as Previously Disclosed, neither Holdings LP nor any of
its Subsidiaries has outstanding any bonds, debentures, notes or other
obligations for borrowed money the holders of which have the right to
vote, or are convertible into or exercisable for securities having the
right to vote, with the holders of Holdings LP Units or Holdings GP
Units on any matter.
(e) Capitalization and Operations of Other Acquired Entities. PacMan
hereby represents and warrants as to Holding LLC and Partners GP; Holding
LLC hereby represents and warrants as to itself and Partners GP; Partners
LLC hereby represents and warrants as to Partners GP; and Partners GP
hereby represents and warrants as to itself that:
(i) Previously Disclosed is a complete and correct list of each
Equity Interest in such Person that was issued and outstanding or
authorized for issuance as of October 31, 1999, and the name of each
Person that owns any such Equity Interest, and each such Equity
Interest is held by such Person free and clear of all Encumbrances;
(ii) each of the outstanding Equity Interests in such Person was
duly authorized and validly issued, is fully paid, and, subject to
Applicable Law, nonassessable, and was not issued in violation of any
preemptive rights;
(iii) except as Previously Disclosed, as of October 31, 1999, there
were no preemptive or other outstanding rights, options, warrants,
conversion rights, redemption rights, repurchase rights, or agreements,
arrangements or commitments to issue or sell any Equity Interests or
Profit Interests or other securities of any such Person or any
securities or obligations convertible or exchangeable into or
exercisable for, or giving any Person a right to subscribe for or
acquire, any such Equity Interests or Profit Interests or other
securities, and no securities or obligations evidencing such rights are
authorized, issued or outstanding;
(iv) except as Previously Disclosed, no such Person has outstanding
any bonds, debentures, notes or other obligations for borrowed money
the holders of which have the right to vote (or which are convertible
into or exercisable for securities having the right to vote) with the
holders of any Equity Interests Previously Disclosed on any matter; and
(v) each such Person (A) does not own, beneficially or of record,
any Equity Interests in any Person other than any such ownership
Previously Disclosed; and (B) has conducted and conducts no business or
operations other than activities necessary to maintain its
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corporate, partnership or other legal existence or to comply with its
Constituent Documents and activities conducted in its role as limited
partner, general partner, or managing member, as the case may be, of
its direct Subsidiaries and activities conducted in connection with or
contemplated by this Agreement and the other Transaction Documents.
(f) Subsidiaries and Controlled Affiliates of Advisors LP. Each of the
Sellers hereby represents and warrants that:
(i) Previously Disclosed is a complete and correct list of all of
the Subsidiaries of Advisors LP and each Affiliate of Advisors LP
controlled by Advisors LP or any of its Subsidiaries (a "Controlled
Affiliate"), together with the jurisdiction of organization of each
such Subsidiary;
(ii) except as Previously Disclosed, Advisors LP owns, directly or
indirectly, all of the issued and outstanding Equity Interests in and
other securities of each of its Subsidiaries, free and clear of any
Encumbrances;
(iii) except as Previously Disclosed, each of the outstanding Equity
Interests in and each other security of each of its Subsidiaries was
duly authorized and validly issued, is fully paid and, subject to
Applicable Law, nonassessable, and was not issued in violation of any
preemptive rights;
(iv) except as Previously Disclosed, as of October 31, 1999, there
were no preemptive or other outstanding rights, options, warrants,
conversion rights, redemption rights, repurchase rights, or agreements,
arrangements or commitments to issue or sell any Equity Interests or
Profit Interests of any such Subsidiary or any securities or
obligations convertible or exchangeable into or exercisable for, or
giving any Person a right to subscribe for or acquire, any such Equity
Interests or Profit Interests, and no securities or obligations
evidencing such rights are authorized, issued or outstanding;
(v) except as Previously Disclosed, there are no Contracts by which
Advisors LP or any Subsidiary thereof is or may be bound to sell or
otherwise transfer any Equity Interest in such Subsidiary; and
(vi) except as Previously Disclosed, there are no Contracts relating
to the rights of Advisors LP or any Subsidiary thereof to vote or to
dispose of any such Equity Interests.
(g) Authority; Approval and Fairness.
(i) Each of the Sellers hereby represents and warrants as to itself
and each of its Subsidiaries that is a Party hereto that:
(A) each such Person has all requisite corporate, partnership or
limited liability company power and authority and has taken all
corporate, partnership or limited liability company action necessary
in order to execute, deliver and perform its obligations under each
of the Transaction Documents to which it is or will be a party and
to consummate, subject to the adoption of the Merger Agreement by
the Holdings LP Unitholders in accordance with the Holdings LP
Partnership Agreement and the DE Partnership Law and any other vote
or consent of stockholders, limited partners, members or other
owners of Equity Interests therein Previously Disclosed, the
transactions contemplated by such Transaction Documents;
(B) except as Previously Disclosed, no Person has any
dissenter's, appraisal or similar right with respect to the
consummation of the Transactions contemplated by this Agreement or
the other Transaction Documents by it or any of its Subsidiaries;
and
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(C) each Transaction Document to which such Person is a party is
or, when executed and delivered in accordance with the terms thereof
or of this Agreement and assuming the due authorization, execution
and delivery by each other Person who is a party thereto, will be a
valid and binding agreement of such Person, enforceable against such
Person in accordance with its respective terms, subject to the
Bankruptcy and Equity Exception.
(ii) Holdings LP and Advisors LP have previously delivered to AZOA
copies of the fairness opinion of Salomon Smith Barney received by
them.
(h) Regulatory Filings; No Defaults. Each of the Sellers hereby
represents and warrants as to itself and each of its Subsidiaries that:
(i) except as Previously Disclosed, no consents, registrations,
approvals, permits or authorizations of, or notices, reports,
registrations or other filings with, any Authority are required to be
made or obtained by any such Person in connection with the execution,
delivery or performance by it or any of its Subsidiaries of this
Agreement or any other Transaction Document to which it or any of its
Subsidiaries is a party, or to consummate the transactions hereunder or
thereunder except for filings to be made under the HSR Act and the
filings required pursuant to Sections 2.01(b) and 2.03(b); and
(ii) the execution and delivery by it and each of its Subsidiaries
that is a party to a Transaction Document of each of the Transaction
Documents to which such Person is a party does not, and, subject to the
satisfaction of Section 3.03(g)(i) and 3.03(h)(i) above, the
consummation of the transactions thereunder will not, constitute or
result in (A) a breach or violation of, or a default under, its
Constituent Documents or those of any of its Subsidiaries, (B) except
as Previously Disclosed, a breach or violation of, or a default under,
the acceleration of any obligations or the creation of an Encumbrance
on its assets or those of its Subsidiaries (with or without notice,
lapse of time or both) pursuant to any Key Contract or any Contract
that is or would be required to be filed as an exhibit to a periodic
report filed under the Exchange Act in accordance with Regulation S-K
thereunder binding upon it or any of its Subsidiaries or any Applicable
Law or any governmental permit or license held by it or any of its
Subsidiaries or to which any such Person is subject or (C) except as
Previously Disclosed, any change in the rights or obligations of any
party under any of such Contracts; and Previously Disclosed is a
complete and correct list of Contracts to which it or any of its
Subsidiaries is a party pursuant to which consents or waivers are or
may be required prior to or in connection with the consummation of the
Transactions.
(i) Holdings LP Financial Statements; SEC Reports. Each of the Sellers
hereby represents and warrants that:
(i) Holdings LP has made available to AZOA a copy of its Annual
Report on Form 10-K for the fiscal year ended December 31, 1998, and a
complete and correct list of all other reports, registration
statements, proxy statements or information statements filed with the
SEC by Holdings LP or any of its Subsidiaries since December 31, 1998
(the "Audit Date"), under the Securities Act, or under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act (collectively with any such
reports filed subsequent to the date hereof and as amended, the "SEC
Reports");
(ii) as of their respective dates (or, if amended, as of the date of
such amendment), the SEC Reports did not, and any SEC Reports filed
with the SEC subsequent to the date hereof
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will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances in which
they were made, not misleading;
(iii) each of the statements of financial condition of Holdings LP
and the consolidated statements of financial condition of Advisors LP
and Oppenheimer Capital included in or incorporated by reference into
the SEC Reports (including the related notes and schedules) fairly
presents, or will fairly present, the financial condition of Holdings
LP, Advisors LP and Oppenheimer Capital, respectively, as of its
respective date, and each of the statements of operations, cash flows
and changes in partners' capital of Holdings LP and each of the
consolidated statements of operations, cash flows and changes in
partners' capital of Advisors LP and Oppenheimer Capital included in or
incorporated by reference into the SEC Reports (including the related
notes, statements and schedules) fairly presents, or will fairly
present, the results of operations, cash flow or changes in partners'
capital, as the case may be, of Holdings LP, Advisors LP and Oppenheimer
Capital, respectively, for the periods set forth therein (subject, in
the case of unaudited statements, to the absence of notes and normal
year-end audit adjustments that will not be material in amount or
effect), in each case in accordance with GAAP consistently applied
during the periods involved, except as may be noted therein; and
(iv) except as disclosed in the SEC Reports or as Previously
Disclosed, since December 31, 1998, none of Holdings LP, Advisors LP,
Oppenheimer Capital or their respective Subsidiaries has incurred any
material liability (accrued, contingent or otherwise) other than (A) in
the ordinary course of business consistent with past practice or (B) as
contemplated by or in connection with the Transaction Documents.
(j) Other Financial Statements. Each of the Sellers hereby represents
and warrants, that:
(i) it has previously made available or caused to be made available
to AZOA complete and correct copies of audited financial statements for
the fiscal years ended December 31, 1996, 1997 and 1998 of PIMCO, OpCap
and PFD and each of such audited financial statements (including any
related notes, statements and schedules thereto) fairly presents results
of operations, changes in partners' capital, changes in members' equity
or changes in cash flows, as the case may be, of the Person to which
they relate and those of its Subsidiaries, if any, for the periods set
forth therein, in each case in accordance with GAAP consistently applied
during the periods involved, except as may be noted therein; and
(ii) Annex B to this Agreement sets forth two lists of supplementary
financial reports and other materials provided to AZOA by Advisors LP.
(A) The reports cited in items 2 and 5 through 11 of the
Financial Information and Document List in Annex B constitute
special reports prepared without review at the request of AZOA from
the internal financial records of Advisors LP and its Subsidiaries,
by the Chief Financial Officer of Advisors LP. The Sellers have no
reason to believe that such information is not correct in all
material respects.
(B) The reports cited on the Assets Under Management and Document
List in Annex B constitute true and correct copies of internal
management reports prepared in the ordinary course, and, to the
knowledge of the Sellers, such information is correct in all
material respects.
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(C) The report cited in item 4 of the Financial Information and
Document List in Annex B (1999 Budget Review) is a true and correct
copy of materials provided to the Management Board of Advisors LP.
(k) Absence of Certain Changes. Each of the Sellers hereby represents
and warrants that, except as disclosed in the SEC Reports filed prior to
the date hereof or as contemplated by the Transaction Documents, since the
Audit Date, Holdings LP and its Subsidiaries have conducted their
respective businesses in the ordinary course and (A) there has not been, as
of the date hereof, any declaration, setting aside or payment of any
dividend or other distribution in respect of its Equity Interests, except
for distributions on Holdings LP Units publicly announced prior to the date
hereof and, with respect to each other such Person except for ordinary
distributions not in excess of Operating Profit Available for Distributions
plus prior reserves; (B) there has not been any change by any such Persons
in accounting principles, practices or methods other than any change
required by a change in GAAP; (C) there has not been any increase in the
compensation payable by Holdings LP or any of its Subsidiaries to any
managing directors, officers or employees or any amendment of any of the
Compensation and Benefit Plans of any such Person other than increases in
compensation in the ordinary course of business or as contemplated under
the Transaction Documents; and (D) there has occurred no event which has
resulted in or could reasonably be expected to result in a Material Adverse
Effect.
(l) Litigation. Each of the Sellers hereby represents and warrants that,
except as Previously Disclosed, there are no civil, criminal or
administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of such Seller, threatened against
it or any of its Subsidiaries (other than PacMan or Partners LLC) except
for any such action, suit, claim, hearing, investigation or proceeding that
is not reasonably likely to give rise to damages or other losses in excess
of $5,000,000.
(m) Title to Properties. Each of the Sellers hereby represents and
warrants that:
(i) Previously Disclosed is a complete and correct list of (I) all
leases requiring annual payments in excess of $1,000,000 to which
Holdings LP or any of its Subsidiaries is a party as of the date hereof
(the "Lease Agreements"), setting forth in the case of any such lease
covering real property, the location of such real property, and (II)
all real properties owned by Holdings LP or any of its Subsidiaries as
of the date hereof (the "Owned Real Property"). Each of Holdings LP and
its Subsidiaries has good and valid and, in the case of its Owned Real
Property, insurable title to, or a valid and binding leasehold interest
in, all of the properties and assets owned or leased by it or any of
its Subsidiaries, free and clear of all Encumbrances, except for (x)
any Encumbrances for taxes, assessments and other governmental charges
not yet due and payable or due but not delinquent or due and being
contested in good faith by appropriate proceedings or (y) any
Encumbrances that do not materially impair the value of any such
property or asset for its current use;
(ii) each of the Lease Agreements was duly authorized and is valid,
binding and enforceable against each of Holdings LP or any of its
Subsidiaries which is a party thereto and, to such Seller's knowledge,
against each other party thereto, and is in full force and effect.
There exists no material breach, violation or event of default by
Holdings LP or any of its Subsidiaries under any such leases or, to the
knowledge of such Seller, by any third party thereto, nor, to the
knowledge of such Seller, any breach, violation or event which with
notice or lapse of time or both would reasonably be expected to result
in an event of default; and
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(iii) The reserves established by Advisors LP with respect to the
termination and abandonment of the leases with respect to properties at
One World Financial Center, Two World Financial Center and 33 Maiden
Lane, all in the Borough of Manhattan, New York, correctly reflect in
accordance with GAAP the liability of OpCap under those leases.
(n) Contracts. Each of the Sellers hereby represents and warrants that:
(i) Previously Disclosed is a list of each of the Key Contracts to
which such Seller (other than PacMan and Partners LLC) or any of its
Subsidiaries is a party, or by which any of them is bound as of
September 30, 1999;
(ii) it has made available to AZOA complete and correct copies of
each such Key Contract; each such Key Contract was duly authorized by
such Seller or such Subsidiaries, as applicable, which is a party
thereto, and is valid, binding and enforceable against such Seller or
such Subsidiary, as the case may be, and to such Seller's knowledge,
each other party thereto, subject in each case to the Bankruptcy and
Equity Exception, and neither such Seller nor any such Subsidiary, nor,
to the knowledge of such Seller, any other party thereto is in default
or in breach in any material respect under the terms of any such Key
Contract and, to such Seller's knowledge, there has been no event which,
with notice or lapse of time or both, would reasonably be expected to
result in any such breach or violation or an event of default under any
such Key Contract; and
(iii) as of the Closing Date, no Seller (other than PacMan and
Partners LLC) will have any Key Contracts other than as Previously
Disclosed and such other Key Contracts entered into after September 30,
1999 as would be permitted to be entered into in accordance with Section
4.01.
(o) Compliance with Applicable Laws; Permits. PacMan and Partners LLC as
to their respective Subsidiaries and each other Seller as to itself and its
Subsidiaries, hereby represents and warrants that:
(i) it and each of its Subsidiaries is in substantial compliance with
all Applicable Laws;
(ii) it and each of its Subsidiaries is in substantial compliance
with all requirements under Applicable Law for permits, licenses,
authorizations, orders and approvals of all Authorities that are
required in order to permit such Person to own or lease its properties
and assets and to conduct its business as presently conducted; and all
of such Person's material permits, licenses, certificates of authority,
orders and approvals are in full force and effect and are current and,
to such Seller's knowledge, no suspension or cancellation of any of them
is threatened or is reasonably likely;
(iii) (A) it and each of its Subsidiaries which is required to be,
registered as a broker/dealer, an investment adviser, a registered
representative, a commodity trading advisor, commodity pool operator,
futures commission merchant or transfer agent (or in a similar capacity)
with any Authority, is duly registered or, in the case of any officer or
employee, in the process of being duly registered as such, and each such
registration is in full force and effect; and (B) each of the officers,
employees and Affiliates of it and its Subsidiaries which is required to
be registered as a broker/dealer, an investment adviser, a registered
representative, a commodity trading advisor, commodity pool operator,
futures commission merchant, transfer agent or a sales person (or in a
similar capacity) with any Authority, is duly registered or, in the case
of any officer or employee, in the process of
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being duly registered as such, and each such registration is in full
force and effect; except, in the case of any officer or employee, for
any failure to be so registered that, individually or in the aggregate,
does not and would not be reasonably likely to, materially affect the
business conducted by Advisors LP and its Subsidiaries taken as a
whole;
(iv) neither it nor any of its Subsidiaries has received, since
January 1, 1998, any notification or communication in writing, from any
Authority (A) threatening to revoke or condition the continuation of
any material license, franchise, seat on any exchange, permit, or
governmental authorization or (B) restricting or disqualifying their
activities (except for restrictions generally imposed by rule,
regulation or administrative policy on similarly regulated Persons
generally);
(v) to its knowledge, there are no pending or threatened
investigations, examinations, audits, reviews or disciplinary
proceedings by any Authority, other than investigations, examinations,
audits and reviews conducted in the ordinary course of it, any of its
Subsidiaries or any director, managing director, officer or employee of
any Seller or any such Subsidiary;
(vi) Advisors LP and its Subsidiaries have adopted and implemented
and have in place as of the date hereof compliance procedures designed
to preclude it and its Affiliates from engaging in any "prohibited
transaction" within the meaning of Section 406 of ERISA or Section
4975(c) of the Code which would subject it to liability, penalty or
taxes under Sections 409 or 502(i) of ERISA or Section 4975 of the Code
in connection with any Compensation and Benefit Plan with respect to
which it or any of its Affiliates is a "party in interest" within the
meaning of Section 3(14) of ERISA;
(vii) Advisors LP and each of its Subsidiaries has administered all
accounts for which such Person acts as a fiduciary or agent, including
but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian or conservator, in
substantial compliance with the terms of the governing documents and
Applicable Law;
(viii) except as Previously Disclosed, neither any Seller nor any
Subsidiary thereof nor any of their respective directors, managing
directors or executive officers is subject to any cease and desist,
censure or other disciplinary or similar order issued by, or is a party
to any written agreement, consent agreement, memorandum of
understanding or disciplinary agreement with, or is a party to any
commitment letter or similar undertaking to, or subject to any order or
directive by, or a recipient of any supervisory letter from, any
Authority with respect to the business of such Person;
(ix) neither any Seller nor any Subsidiary thereof is registered as,
or is required to be registered as, an investment company under the
Investment Company Act; and
(x) each Form ADV filed by Advisors LP and each of its Subsidiaries
that is a registered investment adviser under the Investment Advisers
Act, in its most recent form filed with the SEC, including any
amendments thereto filed with the SEC, is complete and correct in all
significant respects and omits no material facts required to be stated
therein.
(p) Brokers and Finders. (i) PacMan hereby represents and warrants that
neither it, its Subsidiaries nor any of their respective general partners,
managing members, directors, managing directors, officers, or employees, if
any, has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with this
Agreement or any of the Transactions other than Goldman Sachs & Co.,
employed as a financial advisor to PacMan, the arrangements with which have
been disclosed to AZOA prior to the date hereof.
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(ii) Holdings LP hereby represents and warrants that neither it, its
Subsidiaries nor any of their respective general partners, managing
members, directors, managing directors, officers, or employees, if any,
has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders fees in connection with this
Agreement or any of the Transactions other than Lazard Freres & Co. LLC
and Salomon Smith Barney, in each case employed as a financial advisor
to Advisors LP, the arrangements with which have been disclosed to AZOA
prior to the date hereof.
(q) Employee Benefit Plans. Each of the Sellers hereby represents and
warrants that:
(i) Previously Disclosed is a complete and correct list of all
Compensation and Benefit Plans of Holdings LP or any Subsidiary thereof
excluding offer letters made in the ordinary course of business. A
complete and correct copy of each such Compensation and Benefit Plan
has been provided or made available to AZOA prior to the date hereof.
Except as Previously Disclosed, contemplated by the Transaction
Documents or as required under Applicable Law, neither Holdings LP nor
any of its Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to modify or change any existing
Compensation and Benefit Plan;
(ii) each such Compensation and Benefit Plan has been operated and
administered substantially in accordance with its terms and in
substantial compliance with Applicable Law, including, but not limited
to, ERISA and the Code, and any regulations or rules promulgated
thereunder, and all filings, disclosures and notices required by ERISA
and the Code, or any other Applicable Law have been timely made. Each
such Compensation and Benefit Plan which is a Pension Plan and which is
intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter from the IRS with respect to "TRA" (as
defined in Section 1 of Rev. Proc. 93-39), and it is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter from the IRS with respect to "TRA" (as defined in
Section 1 of Rev. Proc. 93-39). There is no pending or, to its
knowledge, threatened legal action, suit or claim relating to such
Compensation and Benefit Plans, other than routine claims for benefits.
Neither Advisors LP nor any of its Subsidiaries has engaged in a
transaction, or omitted to take any action, with respect to any such
Compensation and Benefit Plan that could reasonably be expected to
subject it or any of its Subsidiaries to a tax or penalty imposed by
either Section 4975 of the Code or Section 502 of ERISA, assuming for
purposes of Section 4975 of the Code that the taxable period of any
such transaction expired as of the date hereof;
(iii) neither Holdings LP nor any of its Subsidiaries has ever
maintained any Compensation and Benefit Plan subject to Title IV of
ERISA;
(iv) neither Holdings LP nor any of its Subsidiaries has any
obligation to provide retiree health and life insurance or other
retiree death benefits under any Compensation and Benefit Plan, other
than benefits mandated by Section 4980B of the Code or other Applicable
Law, and each such Compensation and Benefit Plan may be amended or
terminated in accordance with its terms without incurring liability
thereunder;
(v) except as Previously Disclosed, as provided under any
Compensation and Benefit Plan Previously Disclosed as in effect on the
date hereof or as contemplated by a Transaction Document, the
consummation of the Transactions would not, directly or indirectly
(including, without limitation, as a result of any termination of
employment prior to or following the Closing Date) (A) entitle any
present or former employee, consultant or director, member, stockholder
or partner to any payment (including severance pay or similar
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compensation) or any increase in compensation, (B) result in the
vesting or acceleration of any benefits under any such Compensation and
Benefit Plan or trigger any payment or funding (through a grantor trust
or otherwise) of compensation or benefits under any such Compensation
and Benefit Plan, (C) result in any increase in benefits payable under
any such Compensation and Benefit Plan, or (D) result in any breach or
violation of, or a default under, any such Compensation and Benefit
Plans.
(r) Labor Matters. Each of the Sellers hereby represents and warrants
that:
(i) neither Advisors LP nor any of its Subsidiaries is a party to or
is bound by any collective bargaining agreement or Contract (other than
Advisory Agreements) with a labor union or labor organization; and
(ii) as of the date hereof, neither Holdings LP nor any of its
Subsidiaries is or, to such Seller's knowledge, is threatened to be,
the subject of a proceeding seeking to compel Advisors LP or any of its
Subsidiaries to bargain with any labor union or labor organization nor
is there pending or, to its knowledge, threatened, nor has there been
for the past five years, any strike, walk-out, work stoppage, slow-
down, lockout or other labor dispute involving Advisors LP or any of
its Subsidiaries nor is Advisors LP aware of any activity involving its
or any of its Subsidiaries' employees seeking to certify a collective
bargaining unit or engaging in other organizational activity.
(s) Employees. (i) As of the date hereof, each of the Sellers hereby
represents and warrants that none of Advisors LP's, Holdings LP's, OpCap's
or PIMCO's employees or group of employees who is or are responsible for a
material business operation of either Advisors LP, Holdings LP, OpCap or
PIMCO has or have delivered any written notice of termination and
(ii) except as Previously Disclosed, each Seller hereby represents and
warrants that neither it nor any of its Subsidiaries, other than Holdings
LP and its Subsidiaries, has any employees other than the officers thereof.
(t) Tax Matters.
(i) Each Seller hereby represents and warrants that except as
Previously Disclosed:
(A) all material Tax Returns required to be filed or furnished to
any Person (including its owners) on or before the Closing Date by
Advisors LP and each of its Subsidiaries have been, or will be, duly
and timely filed or furnished, the information reflected on those
Tax Returns was, or when filed or furnished will be, accurate and
complete in all material respects, and Advisors LP and each of its
Subsidiaries have, or will have, timely paid all material Taxes for
which they are responsible that are due on or before the Closing
Date, and through the Closing Date will have maintained adequate
reserves on their books in accordance with their normal practices
for all Taxes payable by them that have accrued but are not yet due;
(B) no assessments, claims or deficiencies for any material Taxes
of Advisors LP or any of its Subsidiaries have been proposed,
asserted, assessed, or threatened in writing, and no Tax Authority
has stated in writing that any are forthcoming or threatened;
(C) there are no outstanding waivers or agreements extending the
applicable statute of limitations for any period with respect to any
material Taxes of Advisors LP or any of its Subsidiaries;
(D) to the Sellers' knowledge, neither Advisors LP nor any of its
Subsidiaries will be required, as a result of (A) a change in
accounting method for a Tax period
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beginning on or before the Closing Date, to include any adjustment
under Section 481(c) of the Code (or any similar provision of state,
local or foreign law) in taxable income for any Tax period beginning
on or after the Closing Date, or (B) any "closing agreement" as
described in Section 7121 of the Code (or any similar provision of
state, local or foreign law), to include any item of income in or
exclude any item of deduction from any Tax period beginning on or
after the Closing Date;
(E) to the Sellers' knowledge, no claim has ever been made by a
taxing authority in writing that Advisors LP or any of its
Subsidiaries may be subject to taxation or required to file a Tax
Return in a jurisdiction where it does not file Tax Returns and
neither Advisors LP nor any Subsidiary is aware of any jurisdiction
that could properly make such a claim;
(F) there are no Tax allocation, Tax sharing or Tax indemnity
agreements to which Advisors LP or any of its Subsidiaries is a
party as to which Advisors LP or any of its Subsidiaries would have
any liability after the Closing Date;
(G) none of Advisors LP's Subsidiaries is or has been a member of
an affiliated group within the meaning of Section 1504 of the Code
or similar provisions of state, local or foreign law;
(H) (1) Each of the Sponsored Registered Investment Companies has
elected to be treated as a "regulated investment company" under
Subchapter M of Chapter 1 of Subtitle A of the Code, and each of
such Investment Companies has, except for any taxable year of such
Investment Companies that has been closed and for which the statute
of limitations for assessments has expired, qualified as a
"regulated investment company" and each of such Investment Companies
has complied with all applicable provisions of law necessary to
preserve and retain such Investment Company's election and status as
a regulated investment company; (2) each Sponsored Investment
Company which is a Non-Registered Investment Company has elected to
be treated as a "partnership" for U.S. federal income tax purposes
(unless such partnership tax status is not contemplated for its
operations) and has, except for any taxable year of such Sponsored
Investment Company that has been closed and for which the statute of
limitations for assessments has expired, qualified as a
"partnership" and each of such Sponsored Investment Companies has
complied with all applicable provisions of law necessary to preserve
and retain its elections and status as a partnership for U.S.
federal income tax purposes; (3) each Sponsored Investment Company
has timely filed all federal, state, local and foreign income and
other Tax Returns and reports that it is required to file and all
such Tax Returns and reports are accurate and complete in all
material respects; and (4) each Sponsored Investment Company has
timely paid, or reserved for, Taxes that it is required to pay and
has paid or reserved for any deficiencies or other Tax assessments,
including but not limited to all estimated Taxes and interest or
penalties owed by it; (5) each Sponsored Investment Company has
complied with all required tax information reporting requirements to
which it is subject; and (6) such tax information reporting returns
and reports have been timely filed and are accurate and complete in
all material respects.
(I) each Sponsored Registered Investment Company with variable
insurance trust portfolios has complied with the diversification
requirements of Section 817 of the Code;
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(J) each Sponsored Registered Investment Company has for each
taxable year distributed at least ninety percent (90%) of its
taxable income and tax-exempt interest income;
(K) no Sponsored Registered Investment Company has been or is
subject to the excise tax imposed under Section 4982 of the Code;
(L) Advisors LP and each of its Subsidiaries that is treated as a
partnership for U.S. federal income tax purposes has made a valid
election under Section 754 of the Code and such election remains in
full effect, and will remain in full force and effect, through the
Closing Date; and
(M) it has delivered or caused to be delivered or has made
available to AZOA complete and accurate copies of all material Tax
Returns (including attachments thereto other than any Forms K-1
attached to such Advisors LP Tax Returns filed with respect to any
taxable year beginning prior to January 1, 1998) filed or furnished
to any person by Advisors LP and each of its Subsidiaries during or
with respect to the last three years, and complete and accurate
copies of all closing agreements, private letter rulings, technical
advice memoranda or similar agreements or rulings (if any) entered
into with or issued by any taxing authority, by or with respect to
Advisors LP or any of its Subsidiaries.
(ii) Each Seller hereby represents and warrants that except as
Previously Disclosed:
(A) all material Tax Returns required to be filed or furnished to
any person (including its partners) on or before the Closing Date by
Holdings LP have been, or will be, duly and timely filed or
furnished, the information reflected on those Tax Returns was, or
when filed or furnished will be, accurate and complete in all
material respects, and Holdings LP has, or will have, timely paid
all material Taxes for which it is responsible that are due on or
before the Closing Date, and through the Closing Date will have
maintained adequate reserves on their books in accordance with its
normal practices for all Taxes payable that have accrued but are not
yet due;
(B) no assessments, claims or deficiencies for any material Taxes
of Holdings LP have been proposed, asserted, assessed, or threatened
in writing, and no tax authority has stated in writing that any are
forthcoming or threatened;
(C) there are no outstanding waivers or agreements extending the
applicable statute of limitations for any period with respect to any
material Taxes of Holdings LP;
(D) to the Sellers' knowledge, no claim has ever been made by a
taxing authority in writing that Holdings LP may be subject to
taxation or required to file a Tax Return in a jurisdiction where it
does not file Tax Returns and Holdings LP is not aware of any
jurisdiction that could properly make such a claim;
(E) there are no Tax allocation, Tax sharing or Tax indemnity
agreements to which Holdings LP is a party as to which Holdings LP
would have liability after the Closing Date;
(F) Holdings LP has made a valid election pursuant to Section
7704(g) of the Code, and such election remains in full effect, and
will remain in full force and effect through the Closing Date;
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(G) Holdings LP has made a valid election under Section 754 of
the Code and such election remains in full effect, and will remain
in full effect, through the Closing Date; and
(H) it has delivered or caused to be delivered or made available
to AZOA complete and accurate copies of all material Tax Returns
(including attachments thereto other than any Forms K-1 attached
thereto) filed or furnished to any person by Holdings LP during or
with respect to the last three years, and complete and accurate
copies of all closing agreements, private letter rulings, technical
advice memoranda or similar agreements or rulings (if any) entered
into with or issued by any taxing authority, by or with respect to
Holdings LP.
(iii) PacMan hereby represents and warrants as to Holding LLC and
Partners GP; Partners LLC hereby represents and warrants as to itself
and Partners GP; Holding LLC hereby represents and warrants to itself
and Partners GP; that, except as Previously Disclosed:
(A) all material Tax Returns required to be filed or furnished to
any Person (including its owners) on or before the Closing Date by
it or any of its Subsidiaries have been, or will be, duly and timely
filed or furnished, the information reflected on those Tax Returns
was, or when filed or furnished will be, accurate and complete in
all material respects, and it or any of its Subsidiaries has, or
will have, timely paid all material Taxes for which they are
responsible that are due on or before the Closing Date, and through
the Closing Date will have maintained adequate reserves on their
books in accordance with their normal practices for all Taxes
payable by them that have accrued but are not yet due;
(B) no assessments, claims or deficiencies for any material Taxes
of it or any of its Subsidiaries have been proposed, asserted,
assessed, or threatened in writing, and no tax authority has stated
in writing that any are forthcoming or threatened;
(C) there are no outstanding waivers or agreements extending the
applicable statute of limitations for any period with respect to any
material Taxes of it or any of its Subsidiaries;
(D) to the knowledge of PacMan, Partners LLC and Holding LLC, no
claim has ever been made by a taxing authority in writing that it or
any of its Subsidiaries may be subject to taxation or required to
file a Tax Return in a jurisdiction where it does not file Tax
Returns and it or any of its Subsidiaries is not aware of any
jurisdiction that could properly make such a claim;
(E) there are no Tax allocation, Tax sharing or Tax indemnity
agreements to which it or any of its Subsidiaries is a party;
(F) for U.S. federal income tax purposes each of Partners GP and
Partners LLC, is, and through the Closing Date will be, treated as a
partnership;
(G) for U.S. federal income tax purposes, Holding LLC is treated
as a division of PacLife pursuant to Treasury Regulations
(S)301.7701-2(c)(2) and not as a separate taxable entity;
(H) each of Partners GP and Partners LLC has made a valid
election under Section 754 of the Code, and each such election
remains in full force and effect and will remain in full force and
effect through the Closing Date; and
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(I) it has delivered or caused to be delivered or made available
to AZOA complete and accurate copies of all material Tax Returns
(including attachments thereto) filed or furnished to any person by
or with respect to Partners GP and Partners LLC during or with
respect to the last three years, and complete and accurate copies of
all closing agreements, private letter rulings, technical advice
memoranda or similar agreements or rulings (if any) entered into
with or issued by any taxing authority, by or with respect to
Partners GP and Partners LLC.
(u) Internal Controls. Each of the Sellers hereby represents and
warrants as to Holdings LP, Advisors LP, PIMCO and Oppenheimer Capital that
each such Person has devised and maintained a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions
are executed in accordance with management's general or specific
authorizations, (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(v) Derivatives, Etc. Each of the Sellers hereby represents and warrants
that:
(i) all Derivative Contracts entered into for Advisors LP's own
account or for the account of any of its Subsidiaries were entered into
in substantial compliance with Applicable Law and with counterparties
reasonably believed to be financially responsible at the time; and each
of them constitutes the valid and legally binding obligation of it or
one of its Subsidiaries, enforceable in accordance with its terms
(except as enforceability may be limited by the Bankruptcy and Equity
Exception), and, to such Seller's knowledge, are in full force and
effect; and
(ii) neither Advisors LP nor any of its Subsidiaries, nor, to the
knowledge of Advisors LP or any of its Subsidiaries, as the case may
be, any other party thereto, is in breach in any material respect of
any of its obligations under any such Derivative Contract.
(w) Intellectual Property. Each of the Sellers for which Advisors LP is
a Subsidiary hereby represents and warrants that:
(i) Previously Disclosed is a complete and correct list of all
Intellectual Property used in and material to the business of Holdings
LP, Advisors LP, PIMCO or OpCap indicating (A) whether it is owned by
Holdings LP or any of its Subsidiaries (collectively, the "Intellectual
Property Rights") or used pursuant to a license, sublicense or other
agreement authorizing Holdings LP, Advisors LP or such Subsidiary, as
the case may be, to use such third-party Intellectual Property
(collectively, the "Third-Party Intellectual Property Rights") and (B)
which entity owns or is authorized to use such Intellectual Property
Right or Third-Party Intellectual Property Right, as the case may be.
(ii) Advisors LP and each of its Subsidiaries owns, or is licensed
or otherwise possesses the right to use all such Intellectual Property
Rights and, to the knowledge of Advisors LP or any of its Subsidiaries,
all Intellectual Property Rights of Advisors LP and/or its Subsidiaries
are valid and subsisting; and
(iii) except as Previously Disclosed:
(A) to such Seller's knowledge, neither Advisors LP nor any of
its Subsidiaries is, nor will be as a result of the execution and
delivery of any of the Transaction
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Documents to which such Person is a party or the performance of its
obligations hereunder and thereunder, in violation of any Third-
Party Intellectual Property Rights;
(B) no claims with respect to (1) the Intellectual Property
Rights or (2) Third-Party Intellectual Property Rights are currently
pending or, to the knowledge of Advisors LP or its Subsidiaries, are
threatened by any Person;
(C) to the knowledge of Advisors LP or its Subsidiaries, there
are no valid grounds for any bona fide claims (1) to the effect that
the distribution, licensing or use of any product as now used, sold
or licensed or proposed for use, sale or license by Advisors LP or
any of its Subsidiaries, infringes on any Intellectual Property of
any Person; (2) against the use by Advisors LP or any of its
Subsidiaries of any Intellectual Property Right or Third-Party
Intellectual Property Right; (3) challenging the ownership, validity
or enforceability of any of the Intellectual Property Rights; or
(4) challenging the license of or the right to use the Third-Party
Intellectual Property Rights.
(x) Books and Records. PacMan and Partners LLC as to their respective
Subsidiaries and each other Seller as to itself and its Subsidiaries hereby
represents and warrants that each its books and records have been
maintained, as required to permit each such Person to prepare and present
its financial statements in accordance with GAAP (or generally accepted
accounting principles applicable to such Person, where applicable).
(y) Insurance. PacMan and Partners LLC as to their respective
Subsidiaries and each other Seller as to itself and its Subsidiaries hereby
represents and warrants that:
(i) Previously Disclosed is a correct and complete list of all of
the insurance policies, binders or bonds maintained by it or its
Subsidiaries or under which it or any of its Subsidiaries pays the
premiums ("Insurance Policies");
(ii) it and its Subsidiaries are insured with reputable insurers
against such risks and in such amounts as its management reasonably has
determined to be prudent in accordance with industry practices; and
(iii) to its knowledge, all the Insurance Policies are in full force
and effect.
(z) Year 2000 Compliance. Except as Previously Disclosed, PacMan and
Partners LLC as to their respective Subsidiaries and each other Seller as
to itself and its Subsidiaries, hereby represents and warrants that, to its
knowledge:
(A) any and all software and hardware operated by Advisors LP or
its Subsidiaries is capable of providing uninterrupted functionality
to recognize, record, store, process and present calendar dates
falling on or after December 31, 1999 and date-dependent data in
substantially the same manner and with the same functionality as
such software and hardware recognizes, records, stores, processes
and presents calendar dates prior to December 31, 1999 and date-
dependent data ("Y2K Compliant") as of the date hereof; and
(B) other than any Clients, each supplier, vendor, financial
institution or other organization with which Advisors LP or any of
its Subsidiaries conducts business has remedied or will remedy on a
timely basis its own Year 2000 issues and will be Y2K Compliant.
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(aa) Investment Advisory Activities. Each of the Sellers hereby
represents and warrants that:
(i) Advisory Agreements, Investment Companies and Other Clients. (A)
Previously Disclosed in Advisors LP's Disclosure Schedule is a complete
and correct list, as of September 30, 1999, of (1) all of the Sponsored
Registered Investment Companies, (2) all Sponsored Non-Registered
Investment Companies, (3) to Seller's knowledge, all Registered
Investment Companies other than Sponsored Registered Investment
Companies which are a party to Advisory Agreements with Advisors LP or
its Subsidiaries and (4) other Clients, in each case (2), (3) AND (4)
having assets under management of $100 million or more with one of
Advisors LP or its Subsidiaries as of such date and in each case,
showing the aggregate amount of assets under management with Advisors
LP and its Subsidiaries as of such date;
(B) it has previously made available to AZOA complete and correct
copies of each Advisory Agreement with any of the Clients listed on
the Disclosure Schedule of Advisors LP with reference to Section
(aa)(i) (the "Client Contracts");
(C) each Client Contract and any subsequent renewal has been duly
authorized, executed and delivered by Advisors LP or the applicable
Subsidiary of Advisors LP and, to the knowledge of such Seller, each
other party thereto, and is a valid and legally binding agreement,
enforceable against Advisors LP or such Subsidiary and, to the
knowledge of such Seller, each other party thereto, subject to the
Bankruptcy and Equity Exception;
(D) each of Advisors LP and its Subsidiaries and, to the
knowledge of such Seller, each other party thereto, is in
substantial compliance with the terms of each Client Contract to
which it is a party, and is not currently in default under any of
the terms of any such Client Contract; there does not exist under
any Client Contract any event or condition that, after notice or
lapse of time or both, would constitute an event of default
thereunder on the part of Advisors LP or such Subsidiary, or, to the
knowledge of such Seller, any other party thereto;
(E) each commodity trading advisor disclosure document provided
by Advisors LP or any of its Subsidiaries to any Client did not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading;
(F) neither Advisors LP, any of its Subsidiaries, or to such
Seller's knowledge, any other person "associated" (as defined under
the Investment Advisers Act) with Advisors LP or any of its
Subsidiaries, has been convicted of any crime or has been subject to
any disqualification that would be a basis for denial, suspension,
or revocation of registration of an investment adviser under
Section 203(e) of the Investment Advisers Act or Rule 206(4) - 4(b)
thereunder or of a broker-dealer under Section 15 of the Exchange
Act during the five-year period immediately preceding the date
hereof; and, to the knowledge of such Seller, there is no basis for,
or proceeding or investigation that could reasonably be expected to
become the basis for, any such disqualification, denial, suspension
or revocation;
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(ii) Sponsored Non-Registered Investment Companies.
(A) (1) each Sponsored Non-Registered Investment Company that is
a juridical entity has been duly organized, and is validly existing
and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate partnership, limited
liability company, or similar power and authority, and possesses all
rights, licenses, authorizations and approvals necessary to entitle
it to use its name, to own, lease or otherwise hold its properties
and assets and to carry on its business as it is now conducted, and
is duly qualified, licensed or registered to do business in each
jurisdiction where it is required to do so under Applicable Law
(except where the failure to do so is not material to its business)
and (2) each Sponsored Non-Registered Investment Company is in
substantial compliance with the terms and conditions of its
Constituent Documents;
(B) (1) all outstanding shares or units of each Sponsored Non-
Registered Investment Company have been issued and sold in
substantial compliance with Applicable Law; and (2) each Sponsored
Non-Registered Investment Company, since inception of operations,
has been operated and is currently operating in substantial
compliance with its respective investment objectives and policies
and Applicable Law;
(C) it has delivered or made available to AZOA complete and
correct copies of the audited financial statements for each of the
Sponsored Non-Registered Investment Companies for each of their
respective fiscal years ending in 1997 and 1998, and will deliver to
AZOA complete and correct copies of any financial statements
(whether quarterly or annual) prepared in the ordinary course for
periods ending after the date hereof and before the Closing Date
promptly upon such financial statements becoming available (the
"Sponsored Non-Registered Investment Company Financial Statements").
None of such Sponsored Non-Registered Investment Companies has
incurred any obligation or liability (contingent or other) that,
individually or in the aggregate, is or would be, when accrued,
material to the financial condition or results of operations of such
Sponsored Non-Registered Investment Company, except as reflected in
the Sponsored Non-Registered Investment Company Financial Statements
or as may be incurred in the ordinary course of investment
operations, consistent with past practice, since the date of the
most recent Sponsored Non-Registered Investment Company Financial
Statement;
(D) each of the Sponsored Non-Registered Investment Companies has
timely filed any documents required to be filed with applicable
regulatory or other Governmental Authorities (except where the
failure to timely file would not have a material adverse effect on
its business or operations), and such documents have been prepared
in substantial compliance with Applicable Law;
(E) none of the Sponsored Non-Registered Investment Companies has
been enjoined, indicted, convicted or made the subject of
disciplinary proceedings, consent decrees or administrative orders
on account of any violation of the Securities Laws;
(F) each Investment Company Board of any Sponsored Non-Registered
Investment Company having such a Board operates in substantial
conformity with all requirements and restrictions applicable to such
Sponsored Non-Registered Investment Company under all Applicable
Laws to which such Sponsored Non-Registered Investment Company is
subject;
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(G) as of the Closing Date, the resolutions of each Board of a
Sponsored Non-Registered Investment Company, including approval of
new Advisory Agreements or transfer of existing Advisory Agreements,
were duly adopted by each such Board by the requisite affirmative
vote, and such resolutions remain in full force and effect;
(H) as of the Closing Date, no further action by the Board of any
Sponsored Non-Registered Investment Company or by the shareholders
of any such Sponsored Non-Registered Investment Company is required
in connection with the transactions contemplated by this Agreement
and the other Transaction Documents;
(iii) Sponsored Registered Investment Companies.
(A) each Sponsored Registered Investment Company is, and at all
times required under the Securities Laws has been, duly registered
with the SEC as an investment company under the Investment Company
Act; and each Sponsored Registered Investment Company is in
substantial compliance with the terms and conditions of its
Constituent Documents.
(B) Advisors LP has delivered or made available to AZOA complete
and correct copies of the audited financial statements for each of
the Sponsored Registered Investment Companies for each of their
respective fiscal years ending in 1997 and 1998, and will deliver or
make available to AZOA complete and correct copies of any interim
financial statements (whether quarterly or annual) prepared in the
ordinary course for periods ending after the date hereof and before
the Closing Date promptly upon such financial statements becoming
available (the "Sponsored Registered Investment Company Financial
Statements"). None of the Sponsored Registered Investment Companies
has incurred any obligation or liability (contingent or other) that,
individually or in the aggregate, is or when accrued, would be,
material to the financial condition or results of obligations of
such Sponsored Registered Investment Company, except as reflected in
its Investment Company Financial Statements or as may be incurred in
the ordinary course of its investment operations, since the date of
the most recent Sponsored Registered Investment Company Financial
Statement;
(C) (1) it has delivered or made available to AZOA complete and
correct copies of each Advisory Agreement in effect on the date
hereof between Advisors LP or any of its Subsidiaries and a
Sponsored Registered Investment Company or any other Registered
Investment Company; (2) each such Advisory Agreement and any
subsequent renewal has been duly authorized, executed and delivered
by Advisors LP or such Subsidiary, as the case may be, the
Registered Investment Company and, to the knowledge of such Seller,
as the case may be, each other party thereto, if any; and is a valid
and legally binding agreement, enforceable against Advisors LP or
such Subsidiary, as the case may be, and, to the knowledge of each
Seller, each other party thereto (subject to the Bankruptcy and
Equity Exception); and (3) in the case of each Advisory Agreement
with a Sponsored Registered Investment Company has been adopted in
compliance with Section 15 of the Investment Company Act, and if
applicable, Rule 12b-1 thereunder;
(D) each current prospectus (which term, as used in this
Agreement, shall include any related statement of additional
information), as amended or supplemented, relating to each Sponsored
Registered Investment Company has been supplied or made available to
AZOA; each such prospectus, as amended or supplemented, is in
substantial
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compliance with the requirements of the Securities Act and the
Investment Company Act, applicable state laws and, where applicable,
the rules of the NASD. None of such prospectuses, amendments or
supplements, as of their respective dates, includes or included an
untrue statement of a material fact or omits or omitted to state a
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading;
(E) none of the Advisory Agreements with a Sponsored Registered
Investment Company and Advisors LP or any Subsidiary of Advisors LP
contains any undertaking by such entity to cap fees or to reimburse
any or all fees thereunder, except as of the date hereof, (i) as may
be disclosed in the applicable Investment Company Financial
Statements or (ii) as has been Previously Disclosed, and except, as
of any other date on or prior to the Closing Date as may be agreed
from time to time with the Board of any Sponsored Registered
Investment Company on terms deemed to be in the best interests of
such Sponsored Registered Investment Company and its shareholders;
(F) a complete and correct copy of each distribution plan adopted
by the Board of a Sponsored Registered Investment Company under Rule
12b-1 under the Investment Company Act ("12b-1 Plan") (or form of
12b-1 Plan adopted by similar series or classes of shares offered by
more than one Investment Company) has been provided or made
available to AZOA; and all payments due since December 31, 1997
under each distribution or principal underwriting agreement to which
any Sponsored Registered Investment Company is a party have been
made in compliance with the related 12b-1 Plan; and the operation of
each such 12b-1 Plan currently complies with Rule 12b-1.
(G) each of the Sponsored Registered Investment Companies has
issued its shares, units or other interests and operated in
substantial compliance with its investment objectives and policies
and with Applicable Law, including Section 17 of the Investment
Company Act; and each Board of a Sponsored Registered Investment
Company has been established and operates in conformity with the
requirements and restrictions of Sections 10 and 16 of the
Investment Company Act;
(H) as of the Closing Date, each Board of a Sponsored Registered
Investment Company has taken such action required to be taken to
approve new Advisory Agreements and to constitute itself in each
case so as to comply with the provisions of Section 15 of the
Investment Company Act and Rule 12b-1 thereunder;
(I) except as contemplated by Section 4.04(e), no further action
of the Board of any Sponsored Registered Investment Company or of
the shareholders of any such Sponsored Registered Investment Company
is required in connection with the transactions contemplated by this
Agreement and the other Transaction Documents;
(J) each of (1) the proxy solicitation materials to be
distributed to the shareholders of each Sponsored Registered
Investment Company in connection with the approvals described in
Section 4.04(e) and (2) the materials provided to the Boards of the
Sponsored Registered Investment Companies in connection with the
approvals of the Board Resolutions have provided and will provide
all information necessary in order to make the disclosure of
information therein satisfy the requirements of Section 14 of the
Exchange Act, Sections 15 and 20 of the Investment Company Act and
the rules and regulations thereunder and such materials and
information (except to the extent supplied by AZOA or its
Affiliates) will be complete in all respects and will not contain
(at the
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time such materials or information are distributed, filed or
provided, as the case may be) any untrue statement of a material
fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under
which they were made, not misleading or necessary to correct any
statement or any earlier communication with respect to the
solicitation of a proxy for the same meeting or subject matter which
has become false or misleading;
(K) except as Previously Disclosed and made available to AZOA, as
of the date hereof, no exemptive orders have been obtained, nor are
any requests pending therefor, with respect to any Sponsored
Registered Investment Company under any of the Securities Laws;
(L) each of Advisors LP and any Subsidiary of Advisors LP that
acts as an investment adviser or distributor to a Registered
Investment Company has adopted a formal code of ethics and a written
policy regarding insider trading, a complete and accurate copy of
each of which has been provided or made available to AZOA and each
of which substantially complies with Applicable Law. The policies of
Advisors LP and each such Subsidiary with respect to avoiding
conflicts of interest are as set forth in the most recent Forms ADV
thereof, as amended, complete and correct copies of which have been
provided or made available to AZOA; and to such Seller's knowledge,
there have been no material violations or allegations of violations
of such policies that have occurred or been made that have not been
addressed in accordance with these procedures;
(M) neither Advisors LP nor any of its Subsidiaries or Affiliates
has any express or implied understanding or arrangement which would
impose an unfair burden on any of the Sponsored Registered
Investment Companies or would in any way violate Section 15(f) of
the Investment Company Act as a result of any of the Transactions;
(N) neither Advisors LP, any of its Subsidiaries, the Sponsored
Investment Companies or to the best of such Seller's knowledge, any
other person "associated" (as defined under the Investment Advisers
Act) with Advisors LP, any of its Subsidiaries or any of the
Sponsored Registered Investment Companies, has for a period not less
than five (5) years prior to the date hereof been convicted of any
crime or is or has been subject to any disqualification that would
be a basis for disqualification as an investment adviser to any
Investment Company pursuant to Section 9(a) of the Investment
Company Act, and to such Seller's knowledge there is no basis for,
or proceeding or investigation that could become the basis for, any
such disqualification.
(bb) Environmental Matters. PacMan and Partners LLC as to their
respective Subsidiaries and each other Seller as to itself and its
Subsidiaries hereby represents and warrants that (i) it and each of its
Subsidiaries is in substantial compliance with applicable Environmental
Laws; and (ii) neither it nor any of its Subsidiaries has received any
written claims or notices alleging liability under any Environmental Law.
(cc) Revenue Run-Rate. Each Seller hereby represents and warrants that
Previously Disclosed is a complete and accurate calculation of the Revenue
Run-Rate as of September 30, 1999.
3.04 Representations and Warranties of AZOA. Subject to Sections 3.01 and
3.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant
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paragraph in this Section 3.04, unless otherwise provided herein, AZOA makes
each of the following representations and warranties as to itself, Allianz,
Allianz GP Sub, Holdings LP Merger Sub and Advisors LP Merger Sub, provided,
however that no representation or warranty made pursuant to this Section 3.04
with respect or relating to either Holdings LP Merger Sub, Allianz GP Sub,
Holdings LP General Partner or Advisors LP Merger Sub, as the case may be, will
be deemed made until the date on which such Person executes and delivers to
Advisors LP the Supplement to this Agreement contemplated by Section 2.06:
(a) Organization, Standing and Authority.
(i) It is duly organized, validly existing and, if organized in a
jurisdiction recognizing the concept of good standing, in good standing
under the laws of its jurisdiction of organization, as Previously
Disclosed, with full power and authority to own, lease or operate its
assets and to carry on its business as currently conducted;
(ii) it is duly qualified to do business and is in good standing in
each state of the United States where its ownership or leasing of
property or assets or the conduct of its business requires it to be so
qualified; and
(iii) prior to the date hereof, AZOA has made available to Sellers a
complete and correct copy, as of the date hereof, of the Constituent
Documents of each such Person other than Allianz and, in the case of
Allianz, will make available promptly after the date hereof its
satzung, in each case as amended to such date. As of the date hereof,
each such Constituent Document and satzung is in full force and effect.
(b) Authority; Approval and Fairness.
(i) It has all requisite corporate, partnership or limited liability
company power and authority and has taken all corporate, partnership or
limited liability company action necessary in order to execute, deliver
and perform its obligations under each of the Transaction Documents to
which it is or will be a party and to consummate the transactions
contemplated thereby; and
(ii) each Transaction Document to which it is a party is or, when
executed and delivered in accordance with the terms thereof or of this
Agreement and assuming the due authorization, execution and delivery by
each other Person who is a party thereto, will be a valid and binding
agreement of it, enforceable against it in accordance with its
respective terms, subject to the Bankruptcy and Equity Exception.
(c) Regulatory Filings; No Defaults.
(i) Except as Previously Disclosed, no consents, registrations,
approvals, permits or authorizations of, or notices, reports,
registrations or other filings with, any Authority are required to be
made or obtained by it in connection with the execution, delivery or
performance by any such Person of this Agreement or any other
Transaction Document to which it is a party, or to consummate the
transactions hereunder or thereunder except for filings to be made
under the HSR Act and the filings required pursuant to Sections 2.01(b)
and 2.03(b); and
(ii) except as Previously Disclosed, the execution and delivery by
it of each of the Transaction Documents to which it is a party does
not, and, subject to the satisfaction of Section 3.04(c)(i) above, the
consummation of the transactions thereunder will not, constitute or
result in a breach or violation of, or a default under, the Constituent
Documents of any such Person.
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(d) Capitalization of Allianz.
(a) As of September 15, 1999, the capital stock of Allianz amounted
to (Euro)627,891,200, subdivided into 245,270,000 registered no-par-
value shares issued and outstanding which are only transferable with
the approval of Allianz;
(b) as of September 15, 1999, the authorized unissued capital and
the conditionally authorized capital of Allianz were as follows:
authorized unissued capital I of (Euro)135,492,348.52; authorized
unissued capital II of (Euro)30,677,512.87; authorized unissued capital
III of (Euro)51,129,188.12; authorized unissued capital IV of
(Euro)2,469,521.77; authorized unissued capital V of
(Euro)2,556,459.41; and conditionally increased capital of
(Euro)10,240,000; and
(c) each of the outstanding Allianz shares was duly authorized and
validly issued, and is fully paid, nonassessable and subject to no
preemptive rights and was not issued in violation of any preemptive
rights.
(e) Allianz Financial Statements. Each of the audited consolidated
financial statements of Allianz for the fiscal years ended December 31,
1996, 1997 and 1998 as reported in Allianz's Annual Report for 1996, 1997
and 1998, respectively, and the unaudited financial statement for the first
half year of 1999 has been made available to Advisors LP. Each of the
consolidated balance sheets included therein (including the related notes)
fairly presents the financial condition of Allianz, as of its date, and
each of the consolidated income statements and cash flow statements
included therein (including the related notes) fairly presents the results
of operations and cash flow, respectively, of Allianz, for the periods set
forth therein, in each case in accordance with the applicable German
accounting rules and, in the case of the audited consolidated financial
statements for the fiscal year ended December 31, 1998, also in accordance
with the standards set by the International Accounting Standards Committee
consistently applied during the periods involved, except as may be noted
therein.
(f) Qualifications. Neither it, nor, to its knowledge, any person
"associated" (as defined in the Investment Advisers Act) with it, is, as of
the date hereof, ineligible to serve as an investment adviser to any
Investment Company pursuant to Section 9(a) of the Investment Company Act
or is subject to potential disqualification to serve as an investment
adviser pursuant to Section 203 of the Investment Advisers Act or as an
associated person to a registered investment adviser, or under Rule 206(4)-
3 or is the subject of a rebuttable presumption under Rule 206(4)-4(b) of
the Investment Advisers Act.
(g) Investment Company Act. As of the date hereof, except as Previously
Disclosed, neither Allianz nor, to the knowledge of AZOA, any Subsidiary of
Allianz that is part of the Asset Management Division of Allianz has
entered into any Contract (disregarding for this purpose any of the
Transaction Documents) which would impose an "unfair burden" on any of the
Sponsored Investment Companies of Advisors LP after the Closing.
(h) Absence of Certain Changes. Since December 31, 1998, as of the date
hereof, no event which has resulted in or could reasonably be expected to
result in a Material Adverse Effect has occurred.
(i) ERISA. No person who is an "affiliate" of AZOA within the meaning of
Section V(c)(i) of Department of Labor Prohibited Transaction Exemption 84-
14 ("PTE 84-14") has been convicted of, or pleaded guilty to, a crime
described in Section I(g) of PTE 84-14.
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ARTICLE IV
Covenants
4.01 Conduct Prior to Closing. Each Seller other than PacMan and Partners
LLC as to themselves shall, and each Seller shall cause each of its
Subsidiaries to, conduct its business and each of their respective businesses,
as the case may be, in the ordinary and usual course and to preserve its
business organization and their respective business organizations and assets
intact and maintain existing relations and goodwill with customers, suppliers,
distributors, creditors, lessors, employees and business associates. Without
limiting the generality of the foregoing, from the date hereof until the
Effective Time, except as contemplated in any other Transaction Document or as
Previously Disclosed, each such Seller other than PacMan and Partners LLC as to
themselves, shall not, and each Seller shall cause each of its Subsidiaries (as
to PacMan, only including Holding LLC and its Subsidiaries) not to, do any of
the following without the prior written consent of AZOA, which shall not be
unreasonably withheld:
(a) issue, sell, pledge, grant, allocate, dispose of or encumber any
Equity Interests in it or any of its Subsidiaries or any options, warrants,
conversion or other rights or understandings of any kind, contingent or
otherwise, to purchase any such Equity Interests;
(b) admit any new partner or member;
(c) directly or indirectly, adjust, split, combine or reclassify any of
its Equity Interests;
(d) declare, set aside, make or pay any dividend or other distribution
in cash, stock or property in respect of its Equity Interests, or
repurchase, redeem or otherwise acquire, directly or indirectly, any of its
Equity Interests;
(e) other than in the ordinary course of its business transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of or encumber any of
its or their material property or assets, tangible or intangible, or incur
or modify any material indebtedness or other liability;
(f) make, authorize or commit for any capital expenditures other than in
the ordinary course of business or their respective businesses, as the case
may be, or, by any means, make any acquisition of, or investment in, assets
or stock of any other Person or entity, provided that the investment
restrictions contained in this clause (f) shall not apply to capital
expenditures or investments made in the ordinary course of business;
(g) subject to its fiduciary duties, propose that any action be taken by
the Board of a Sponsored Investment Company, other than actions in the
ordinary course of business that are not adverse to the interests of
Advisors LP or Subsidiaries;
(h) terminate, establish, adopt, enter into, make any new grants or
awards under, amend or otherwise modify any Compensation and Benefit Plan,
including any agreement entered into pursuant to any Compensation and
Benefit Plan;
(i) amend, supplement or restate its or any of its Subsidiaries,
Constituent Documents, as the case may be, or enter into any Written
Consents which in effect amend, supplement or restate such Constituent
Documents;
(j) implement or adopt any change in any respect of its accounting
practices, policies or principles other than as may be required by GAAP;
(k) make or revoke any Tax election;
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(l) enter into any Contract that would constitute a Key Contract with
any other Seller or any Affiliate or Subsidiary of any Seller, or make any
amendment or modification to any such agreement except in the ordinary
course of business; or
(m) authorize or enter into an agreement to do any of the foregoing.
4.02 Acquisition Proposals. Each of the Sellers agrees that it will not and
will cause each of its Subsidiaries, if any, and its and any such Subsidiaries'
respective executive officers and directors not to, and each such Seller agrees
to direct its and any such Subsidiaries' employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries not to initiate or solicit directly
or indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders, members or
unitholders) with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any Equity Interests in, any Seller or any
of its Subsidiaries (in the case of PacMan, only including Holding LLC and its
Subsidiaries) other than PIMCO Trust Company and Columbus Circle Trust Company
(each such Person being referred to in this Section 4.02(a) as a "subject
Person" and any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or directly or indirectly engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any Person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
provided, however, that nothing contained in this Section 4.02 shall prevent
any Seller or its managing member, general partner or management board from
(A) in the case of Holdings LP or its management board or representatives,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal or providing any other legally required disclosure to the
partners of Advisors LP and Holdings LP; (B) providing information to, or
engaging in any negotiations or discussions with, any Person who has made an
unsolicited bona fide written Acquisition Proposal; or (C) recommending such an
Acquisition Proposal to the members, partners or unitholders of such Seller and
withdrawing the prior recommendation of this Agreement, if and only to the
extent that, in each such case referred to in clause (B) or (C) above, such
managing member, general partner or board determines in good faith, after
consultation with its advisers, including its outside counsel, that such
Acquisition Proposal, if accepted, is reasonably capable of being consummated,
taking into account all legal, financial and regulatory aspects of the proposal
and would, if consummated, result in a transaction more favorable to such
Seller's members or unitholders, as the case may be, from a financial point of
view than the transactions contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal"). Each Seller agrees that it will notify Allianz and AZOA
promptly (within one business day of receipt) if any such inquiries, proposals
or offers are received by, any such information is requested from, or any such
discussions or negotiations are sought to be initiated or continued with, any
of its representatives indicating, in connection with such notice, the name of
such Person and the material terms and conditions of any proposals or offers
and thereafter shall keep Allianz and AZOA reasonably informed on the status
and terms of any such proposals or offers and the status of any such
discussions or negotiations. Each such Seller shall, and shall cause each
Subsidiary to, immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any parties other than Allianz and AZOA with respect to any of the foregoing
and shall use its reasonable best efforts to enforce any confidentiality or
similar agreement relating to an Acquisition Proposal.
4.03 Retention and Bonus Programs. In connection with the Closing, (a) PIMCO
shall establish the PIMCO Non-Qualified Profit Sharing Plan, amending the 1994
Profit Sharing Plan,
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substantially on the terms described in Exhibit E, or as otherwise agreed by
AZOA and Partners LLC (the "PIMCO Non-Qualified Profit Sharing Plan"; (b)
Advisors LP shall establish the PIMCO Advisors LP Transition and Retention Plan
and the PIMCO Advisors LP Retention Plan for Executives of Pacific Investment
Management Company, each substantially on the terms set forth in Exhibits F and
G, respectively, or as otherwise agreed by AZOA and Partners LLC (the
"Transition Retention Plan" and the "Retention Plan", respectively) (c) PIMCO
and Advisors LP shall establish the PIMCO Class B Unit Purchase Plan,
substantially on the terms described in Exhibit H hereto (the "PIMCO Class B
Unit Purchase Plan") and (d) Advisors LP shall enter into employment contracts
substantially in the form of Exhibit I with Mr. Poovey and Exhibit J with
Messrs. Weil, Fitzgerald, Ward and Treadway.
4.04 Filings, Other Actions; Notification. (a) Each of the Sellers and AZOA
shall cooperate with each other and shall cause their respective Subsidiaries
to use, their respective reasonable best efforts to, and propose to the
Sponsored Investment Companies that they, take or cause to be taken all
actions, and do or cause to be done all things necessary, proper or advisable
on its part under the Transaction Documents and Applicable Laws to consummate
and make effective the Transactions as soon as practicable, including preparing
and filing as promptly as practicable all documentation to effect all necessary
notices, reports and other filings and to obtain as promptly as practicable all
consents, registrations, approvals, permits and authorizations necessary or
advisable to be obtained from any third party and/or any Authority in order to
consummate the Transactions. Subject to Applicable Laws relating to the
exchange of information, AZOA, Advisors LP, Partners GP and PacLife shall, to
the extent practicable, consult the other on and obtain consent with respect to
all the information relating to AZOA or the Sellers, as the case may be, and
any of their respective Subsidiaries that appear in any filing made with, or
written materials submitted to, any Authority in connection with the
Transactions. In exercising the foregoing right, AZOA and the Sellers shall act
reasonably and as promptly as practicable.
(b) AZOA and each of the Sellers shall, upon request by another Party,
cooperate with and furnish to such Party all information concerning itself,
its Subsidiaries, general partners, members, directors, officers and
unitholders and such other matters as may be reasonably necessary or
advisable in connection with any statement, filing, notice or application
required to be made by or on behalf of any of Allianz, AZOA, the Sellers,
or any of their respective Subsidiaries to any Authority in connection with
the Transactions.
(c) AZOA and the Sellers shall keep the other apprised of the status of
matters relating to completion of the Transactions, including promptly
furnishing the other Party or Parties with copies of any material written
notices or other material communications received by AZOA, the Sellers or
any of their respective Subsidiaries, from any Authority with respect to
the Transactions.
(d) Each of the Sellers shall give prompt notice to AZOA and AZOA shall
give prompt notice to each of the Sellers of (a) any event or condition
that would cause any of the representations and warranties made by such
Person or any of its Subsidiaries party hereto contained herein no longer
to be complete and accurate in any material respect as of any date on or
before the Closing Date, (b) any failure on the part of such Person or such
Subsidiaries to comply with any of its material covenants or agreements
contained herein at any time on or before the Closing Date, (c) any notice
of, or other communication relating to, a material default or other event,
which with notice or the lapse of time or both would become a material
default, received by such Person or any of such Subsidiaries subsequent to
the date of this Agreement and prior to the Closing Date, under any Key
Contract of any of them, (d) any material written
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notice or other material communication from any third party alleging that
the consent of such third party is or may be required in connection with
the Transactions, and (e) any change that is reasonably likely to result in
a Material Adverse Effect.
(e) To the extent that the rights of any Seller, any Subsidiary thereof
or any Client under any agreement, including any Advisory Agreement, may
not be assigned by operation of law without the consent or approval of
another party thereto or terminates upon any assignment, each of the
Sellers shall use its reasonable best efforts to obtain, and to cause its
Subsidiaries, if any, to obtain, any such consent and its reasonable best
efforts to obtain such consents, in the aggregate, as are necessary to
satisfy the condition set forth in Section 5.02(c). Without limiting the
generality of the foregoing, Advisors LP and each of Partners GP and
Holdings LP, as general partners of Advisors LP as promptly as practicable
shall (a) use, and use its reasonable best efforts to cause each Sponsored
Investment Company to use, its reasonable best efforts to obtain, or cause
to be obtained, all consents necessary to be obtained by Advisors LP, any
of its Subsidiaries or any of the Sponsored Investment Companies in order
to consummate the Transactions (including, to the extent required by
Applicable Law or Contract, the approval of each Investment Company Board
and shareholders or unitholders of each of the Sponsored Investment
Companies), (b) use its reasonable best efforts to cause each Registered
Investment Company to prepare, file with and cause to be cleared by the SEC
and all other Authorities having jurisdiction thereover, as promptly as
practicable after the date hereof, all proxy solicitation materials
required to be distributed to shareholders of the Registered Investment
Companies with respect to the actions recommended for shareholder approval
by the Investment Company Boards and (c) use its reasonable best efforts to
cause each Registered Investment Company to mail such proxy solicitation
materials to such shareholders promptly after clearance by the SEC and
cause to be submitted to a meeting of shareholders of such Registered
Investment Company as soon as practicable after such mailing the proposals
described in clause (ii), above, all such consents and such proxy
solicitation, to be in form and substance reasonably satisfactory to AZOA
and in compliance with Section 3.03(aa).
4.05 Investment Company Matters.
(a) Prior to the Closing, each of the Parties shall use its reasonable
best efforts to ensure compliance with Section 15(f) of the Investment
Company Act, so that the transactions contemplated by this Agreement will
be in compliance at the Closing with such Section 15(f), including, to
assure that on the Closing Date at least 75% of the board of directors or
trustees of each Registered Investment Company are not "interested persons"
(as defined in the Investment Company Act) of Advisors LP or Allianz.
(b) Each of the Parties agrees following the Closing to use their
respective reasonable best efforts to assure compliance with the conditions
of Section 15(f) of the Investment Company Act as it applies to the
Transactions. Notwithstanding anything to the contrary contained herein,
the covenants of the Parties contained in this Section 4.05(b) are intended
only for the benefit of the Parties and holders of their respective Equity
Interests immediately prior to the Effective Time and for no other Person.
(c) Advisors LP and each of Partners GP and Holdings LP, as general
partners of Advisors LP, shall use, and shall cause Advisors LP's
Subsidiaries to use, subject to any fiduciary requirements to the Sponsored
Registered Investment Companies, their reasonable best efforts to ensure
that the Sponsored Registered Investment Companies take no action that
would (a) prevent any Sponsored Registered Investment Company from
qualifying as a "regulated
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investment company," within the meaning of Section 851 of the Code, (b)
with respect to the Sponsored Non-Registered Investment Companies that are
currently taxed as partnerships, take no action that would cause such a
Sponsored Non-Registered Investment Company to be subject to taxation on a
net income basis under the Code or (c) be inconsistent with any Sponsored
Registered Investment Company's prospectus or other offering document and
other offering, advertising and marketing materials.
4.06 Advisory Agreements. Unless otherwise previously agreed to by AZOA,
Advisors LP shall and shall cause each Subsidiary of Advisors LP that is a
registered investment adviser to notify each Client, subject to Section 4.04(e)
with respect to the Registered Investment Companies, of the Transactions and to
use its reasonable best efforts to obtain, prior to the Closing Date, the
consent of each such Client (whether by affirmative consent or negative
consent, as applicable) to the "assignment" (as such term is used in the
Investment Advisers Act) of its Advisory Agreement as a result of the
Transactions in accordance with the Investment Advisers Act. Each of the
Sellers shall cooperate and consult with AZOA regarding material written
communications with Clients concerning the obtaining of such consents.
4.07 Taxation.
(a) From and after the Closing Date, all Tax examinations, audits and
contests relating to periods or partial periods ending prior to or on the
Closing Date relating to Advisors LP or any of its Subsidiaries, Holdings
LP, Partners GP or Holding LLC (such entities, the "Acquired Entities"),
shall be controlled jointly by PacMan and the MD Representatives.
(b) AZOA will prepare and file, or cause to be prepared and filed, all
Tax Returns that include the business and operations of the Acquired
Entities for any period or partial period ending prior to or on the Closing
Date; provided, however, that (i) PacMan and the MD Representatives shall
have the right to review and approve such Tax Returns prior to filing and
(ii) all such Tax Returns shall, to the extent not prohibited by applicable
Tax law, be prepared and filed on a basis consistent in all material
respects with the Tax Returns of the applicable Acquired Entity as prepared
and filed in prior periods. Prior to filing such Tax Returns, AZOA will
make any changes to such Tax Returns as are reasonably requested by PacMan
or the MD Representatives, and for such purposes any such request shall be
deemed reasonable to the extent it requests conformity to prior Tax Return
positions as required under clause (ii) of the preceding sentence.
(c) Each of Advisors LP, any Subsidiary of Advisors LP that is treated
as a partnership for U.S. federal income tax purposes, Holdings LP,
Partners GP, Partners LLC, NFJ LP, Parametric LP and Cadence LP, shall make
an election, or continue in effect any election previously made, under
Section 754 of the Code and any comparable provision of any other Tax law
for the year in which the Closing occurs.
(d) None of the Acquired Entities will make any Tax election, or revoke
any Tax election previously made, without the prior written consent of
AZOA.
(e) Each Seller agrees to take all actions described in Annex C.
4.08 Access; Information.
(a) Each of Partners GP, Holdings LP, and Advisors LP agrees that upon
reasonable notice and subject to Applicable Laws relating to the exchange
of information, it shall afford or cause its Subsidiaries to afford
Allianz, AZOA and the officers, employees, counsel, financial advisors,
auditors, accountants and other authorized representatives of Allianz and
AZOA (collectively,
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the "Allianz Representatives"), such access throughout the period prior to
the Effective Time to the books, records (including, without limitation,
any Tax Returns and work papers of independent auditors), offices,
properties and personnel of such Person, its Subsidiaries and any Sponsored
Investment Company and to such other information as an Allianz
Representative may reasonably request and, during such period, it shall
furnish promptly to Allianz and AZOA and, at the request of Allianz or
AZOA, to any Allianz Representatives (i) a copy of each report, schedule
and other document filed by it, its Subsidiaries or any such Sponsored
Investment Company pursuant to the requirements of federal or state
securities laws, and (ii) all other financial and operating data and other
information concerning the business, properties, assets and personnel of
it, its Subsidiaries or any Sponsored Investment Company as an Allianz
Representative may reasonably request.
(b) Each of the Parties agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to this
Section 4.08 (as well as any other information obtained in connection with
its consideration or consummation of any of the transactions contemplated
by any of the Transaction Documents, including any information obtained
prior to the date hereof) for any purpose unrelated to the consummation of
the Transactions or the Transaction Documents. Subject to the requirements
of law, each Party shall keep confidential, and shall cause its
representatives to keep confidential, all information and documents
obtained pursuant to this Section 4.08 (as well as any other information
obtained in connection with its consideration or consummation of any of the
transactions contemplated by any of the Transaction Documents) unless such
information (1) was already known to such Party, (2) becomes available to
such Party from other sources not known by such Party to be bound by a
confidentiality obligation, (3) is disclosed with the prior written
approval of the Party to which such information pertains or (4) is or
becomes readily ascertainable from published information or trade sources.
In the event that this Agreement is terminated or the Transactions shall
otherwise fail to be consummated, each Party shall promptly cause all
copies of documents or extracts thereof containing information and data as
to any of the other Parties to be returned to the appropriate Party. No
investigation by any Party of the business and affairs of any of the
Parties and their respective Subsidiaries shall affect or be deemed to
modify or waive any representation, warranty, covenant or agreement in this
Agreement or any of the other Transaction Documents, or the conditions to
any Party's obligation to consummate any of the transactions contemplated
by any of the Transaction Documents.
4.09 Publicity. The initial press release announcing the execution of this
Agreement shall be a joint press release and thereafter PacMan, Advisors LP,
Partners LLC and AZOA shall consult with each other, to the extent practicable,
as applicable, prior to issuing any press releases or otherwise making public
announcements with respect to the Transactions or the Transaction Documents and
prior to making any filings with any Authority with respect thereto, except as
may be required by law or by obligations pursuant to any listing agreement with
or rules of any national securities exchange.
4.10 Effect of Investigations. No investigation by the Parties made
heretofore or hereafter, or the provision of any documents, whether pursuant to
this Agreement or otherwise (including without limitation, any action taken by
or information provided to AZOA pursuant to the provisions of Section 4.08)
shall affect or be deemed to modify any of the representations and warranties
of any of the Parties which are contained herein and each such representation
and warranty shall survive such investigation.
4.11 Takeover Statutes. If any Takeover Statute is or may become applicable
to any of the Transactions, each of the Sellers and their respective boards of
directors, general partners, managing
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members or managing boards, as applicable, shall grant such approvals and take
such actions as are necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by the Transaction Documents,
and otherwise act to eliminate or minimize the effects of such statute or
regulation on such Transactions.
4.12 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of the
Sellers shall, shall use its reasonable best efforts to cause each of its
Subsidiaries, if any, and shall use its reasonable best efforts to cause
each of the Sponsored Investment Companies, to take, and AZOA shall, and
shall use its reasonable best efforts to cause each of its Subsidiaries
that is a party hereto to, take, or cause to be taken, all actions, and
shall do, or cause to be done, all things necessary, proper or desirable,
or advisable under Applicable Laws, so as to fulfill all conditions and
obligations on its part to be performed or fulfilled under the Transaction
Documents, to permit consummation of the Transactions as promptly as
practicable and otherwise to enable consummation of the Transactions, and
shall cooperate fully with each of the other Parties to that end.
(b) To the extent that any consent, waiver or agreement of a Party is
necessary to permit or effect any transaction contemplated by this
Agreement and the other Transaction Documents, each Party hereby grants or
provides such consent, waiver or agreement.
4.13 Other Agreements. Prior to or in connection with the Closing each of
the Sellers and AZOA shall, and shall cause their respective Subsidiaries to,
take the following actions, to the extent applicable:
(a) Each Seller shall cooperate with the other Sellers and use its
reasonable best efforts to cause the arrangements for New Class B Units of
Advisors LP, substantially in the terms set forth on Exhibit K, to be
offered as provided therein and to cause such arrangements to be accepted;
and Holdings LLC (as of such time a Subsidiary of AZOA) shall enter into an
amendment to each ETA of Holdings LLC with each consenting PIMCO MD who is
an ETA Holder (each, an "ETA Amendment").
(b) AZOA and PacMan shall enter into the Continuing Investment Agreement
in the form of Exhibit L hereto or as otherwise agreed by AZOA and PacMan
(the "Continuing Investment Agreement");
(c) AZOA, Advisors LP and PacMan shall enter into the Indemnification
Agreement in the form of Exhibit M hereto or as otherwise agreed by AZOA,
Advisors LP and PacMan (the "Indemnification Agreement"); and
(d) (i) Advisors LP and PIMCO shall enter into a limited liability
company agreement of Pacific Investment Management Company in the form of
Exhibit N hereto or as otherwise agreed by AZOA and Advisors LP (the "PIMCO
LLC Agreement") in connection with the conversion of PIMCO into a Delaware
limited liability Company and Advisors LP and PIMCO Management shall obtain
all requisite consents to enter into the PIMCO LLC Agreement and
(ii) Advisors LP shall execute a written consent substantially on the terms
set forth in Exhibit O hereto, or as otherwise agreed by AZOA and PIMCO
(the "PIMCO Written Consent").
4.14 Organization of PacPartners. Prior to Closing, Allianz GP Sub, as
managing member, and PacMan shall (i) organize PacPartners LLC as a limited
liability company under the DE LLC Law, pursuant to an operating agreement that
shall be reasonably acceptable to PacMan (the "PacPartners LLC Agreement"), or
as otherwise agreed to by Allianz GP Sub and PacMan, pursuant
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to which each of Allianz GP Sub and PacMan shall be a founding managing member,
(ii) make an initial capital contribution of $100 in exchange for one Class A
LLC Unit to be issued to Allianz Advisors LP Sub and one Class B LLC Unit to be
issued to PacMan and (iii) shall file of cause to be filed with the Secretary
of State of Delaware a Certificate of Formation in accordance with Section 18-
201 of the DE LLC Law.
4.15 Disposition of Subsidiaries. The Sellers shall use their reasonable
best efforts to cause Advisors LP and each other Seller, and each of their
respective Subsidiaries, to dispose of control of, and control of all of its
Equity Interests in, each of Columbus Circle Trust Company and PIMCO Trust
Company as soon as practicable, on terms that are reasonable in light of the
circumstances of the sale. "Control" means control for applicable regulatory
purposes.
4.16 Restructurings. Each of the Sellers shall cooperate with AZOA to
restructure each of NFJ Investment Group, Parametric Portfolio Associates, and
Cadence Capital Management in a manner satisfactory to AZOA.
4.17 Expenses. Each Party will bear all expenses incurred by it in
connection with this Agreement and the Transactions; provided, however that (i)
AZOA shall bear 50% of the expenses incurred by Advisors LP in connection with
the solicitation of shareholders of Registered Investment Companies
contemplated by Section 4.01(e) and (ii) PacMan and AZOA shall each bear 50% of
the expenses incurred by Holdings LP in connection with the solicitation of
Holdings LP Unitholders.
4.18 Subsidiary Action. Whenever a Party has an obligation under this
Agreement to "cause" a Subsidiary of such Party or any of such Subsidiary's
managing directors, officers, directors or employees, to take any action, if
and to the extent that such Party's power and authority to cause such action to
be taken is limited by the terms of such Subsidiary's Constituent Documents,
such obligation of a Party shall be deemed an undertaking by such Party only to
use such Party's reasonable best efforts to cause such action to be taken. To
the extent that action on the part of a Subsidiary of a Party is necessary in
order for such Party to fulfill any of its obligations under this Agreement,
then each such obligation shall be deemed to include an undertaking on the part
of such Party to cause such Subsidiary to take such necessary action.
4.19 Holdings LP Unitholder Approval. Each of the Sellers shall take, in
accordance with Applicable Law and each of their and Holdings LP's Constituent
Documents, all action necessary to convene an appropriate meeting of Holdings
LP Unitholders to consider and vote upon the approval and adoption of this
Agreement and the Holdings LP Merger and any other matters required to be
approved by Holdings LP Unitholders for consummation of the Holdings LP Merger
(including any adjournment or postponement thereof, the "Holdings LP
Unitholders Meeting") as promptly as practicable after the Proxy Statement is
cleared by the SEC. Partners GP, as General Partner of Holdings LP, shall
recommend (subject only to its making a good faith recommendation in favor of a
Superior Proposal permitted under Section 4.02(C) and, in connection therewith,
withdrawing any prior recommendation in connection with the Holdings LP Merger)
and Holdings LP shall take all reasonable, lawful action to solicit, such
approval by Holdings LP Unitholders.
4.20 Proxy Statement. (a) Each of the Sellers shall cooperate with Holdings
LP to, and Holdings LP shall, prepare a proxy statement to be filed by Holdings
LP with the SEC in connection with the Holdings LP Merger (including all other
proxy solicitation materials of Holdings LP, the "Proxy Statement"). Each of
the Parties agrees to cooperate, and to cause its Subsidiaries to cooperate,
with the other, its counsel and its accountants, in preparation of the Proxy
Statement; and, promptly after clearance by the SEC, Holdings LP shall mail the
Proxy Statement to the Holdings LP Unitholders.
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(b) Each of the Parties agrees, as to itself and its Subsidiaries, that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in the Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to Holdings LP Unitholders
and at the time of the Holdings LP Unitholders Meeting, contain any
statement, which, at the time and in the light of the circumstances under
which it is made, is false or misleading with respect to any material fact,
or which omits to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to correct any
statement in any earlier statement in the Proxy Statement or any amendment
or supplement thereto. Each of the Parties further agrees that if it shall
become aware prior to the Effective Date of any information furnished by it
that would cause any of the statements in the Proxy Statement to be false
or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or
misleading, to promptly inform the other party thereof and to take the
necessary steps to amend or supplement the Proxy Statement.
(c) AZOA shall have the right to review in advance and to approve all
the information relating to AZOA and any of its Affiliates proposed to
appear in the Proxy Statement or any amendment or supplement thereto
submitted to, the SEC in connection with the Transactions contemplated by
this Agreement. In exercising the foregoing right, AZOA shall act
reasonably and as promptly as practicable.
4.21 Indemnification; Directors' and Officers' Insurance.
(a) AZOA agrees that from the Effective Time, and for a period of six
(6) years thereafter, AZOA shall not, and shall cause each of its
Subsidiaries not to, amend or modify any provision of any partnership,
limited liability company or indemnification agreement pursuant to which
any Seller or any of its directors, officers, members, partners or other
controlling persons is or may be entitled to exculpation or
indemnification; and AZOA shall cause Advisors LP to honor any such
provision and to pay any amounts to which such Seller or any of such
affiliates of such Seller would properly be entitled thereunder.
(b) AZOA acknowledges that Advisors LP intends to obtain an extension of
directors' and officers' liability insurance for partners, members,
managing members, directors and officers of Advisors LP , Partners LLC,
Holdings LLC, Holdings LP, PacMan and Partners GP prior to the Effective
Time (the "D&O Insurance") for a premium of not more than $150,000 per
annum and AZOA agrees that, for a period of six (6) years following the
Closing, AZOA shall not take any affirmative action which causes the
termination or cancellation of such extension policy unless AZOA shall
replace such policy with comparable insurance coverage.
4.22 Further Assurances. As of the Effective Time and following the Closing
Date, consistent with the terms and conditions hereof, AZOA shall, and each of
the Sellers shall and shall cause each of their respective Subsidiaries to, and
shall use reasonable best efforts to cause its Affiliates (including for this
purpose any Sponsored Investment Company) to, promptly execute, acknowledge and
deliver such instruments, certificates and other documents and take such other
action as a Party may reasonably require in order to carry out any of the
transactions contemplated by the Transaction Documents or for a Party to obtain
the benefits contemplated by any of the Transaction Documents. Following the
Closing Date, the Parties shall cooperate with one another to prepare and file
all documents and forms and amendments thereto as may be required by Applicable
Law with respect to the Transactions.
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ARTICLE V
Conditions
5.01 Conditions to Each Party's Obligation to Effect the Transactions. The
respective obligation of each Party to effect the Transactions is subject to
the satisfaction or waiver at or prior to the Closing Date of each of the
following conditions:
(a) Governmental and Regulatory Consents. The waiting period applicable
to the consummation of the Transactions under the HSR Act shall have
expired or been terminated and, other than the filings provided for in
Sections 2.03(b) and 2.04(b), all notices, reports, registrations and other
filings required to be made prior to the Effective Time by the Sellers or
Allianz or any of their respective Subsidiaries with, and all material
consents, registrations, approvals, permits and authorizations required to
be obtained prior to the Effective Time by the Sellers or Allianz or any of
their respective Subsidiaries from, any Governmental Authority
(collectively, "Consents") in connection with the execution and delivery of
this Agreement and the consummation of the Transactions by the Sellers and
AZOA shall have been made or obtained, and all associated waiting periods
shall have lapsed; and none of the foregoing shall contain any conditions,
restrictions or requirements which would, following the Effective Time,
have a Material Adverse Effect with respect to Advisors LP.
(b) Holdings LP Unitholder Approval. This Agreement shall have been duly
adopted by the affirmative vote of Holdings LP Unitholders required in
accordance with Section 17-211 of the DE Partnership Law, other Applicable
Laws and the Constituent Documents of Holdings LP.
(c) No Injunction. No court or other Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
law, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Transactions
(collectively, an "Order").
5.02 Conditions to Obligations of AZOA. The obligations of AZOA, Allianz
Asset Management, Allianz Advisors LP Sub and Allianz GP Sub to effect the
Transactions are also subject to the satisfaction or waiver by AZOA at or prior
to the Closing Date of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth in
Section 3.02, each of the representations and warranties of each of the
Sellers set forth in Section 3.03, shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except that representations and warranties that by their
terms speak as of the date of this Agreement or some other date shall be
true and correct as of such date) and AZOA shall have received a
certificate of an executive officer or manager of each of the Sellers to
such effect.
(b) Performance of Obligations of the Sellers. Each of the Sellers shall
have performed in all material respects all obligations required to be
performed by it under this Agreement and the Transaction Documents at or
prior to the Closing Date, and AZOA shall have received a certificate of an
executive officer or managing director of each of the Sellers to such
effect.
(c) Consents Under Agreements. The Sellers shall have obtained the
consent or approval of each Person whose consent or approval shall be
required under any Contract to which any of the Sellers or any of their
Subsidiaries is a party, except for (i) Advisory Agreements and
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(ii) such Contracts for which the failure to obtain such consent or
approval, individually or in the aggregate, is not reasonably likely to
have a Material Adverse Effect.
(d) Compliance with Section 15(f) of the Investment Company Act. At the
Effective Time: (i) at least seventy-five percent (75%) of the members of
the Investment Company Boards of each Sponsored Registered Investment
Company which has approved a new investment advisory contract shall not be
"interested persons" (as such term is defined in the Investment Company
Act) of that Subsidiary of Advisors LP that will act as investment adviser
to such Investment Companies following the Effective Time), of Advisors LP
or of any Affiliate of Advisors LP that was the investment adviser of any
such Investment Company immediately preceding the Effective Time; and (ii)
the requirements of Section 15(f)(1)(B) of the Investment Company Act shall
have been complied with in that no "unfair burden" shall have been imposed
on any of the Sponsored Registered Investment Companies as a result of this
Agreement, the transactions contemplated hereunder, new Investment Company
Advisory Agreements or otherwise.
(e) Continued Employment. At the Effective Time, (i) (A) William H.
Gross and William S. Thompson, and (B) at least 60% of the PIMCO MDs other
than William H. Gross and William S. Thompson shall be employees of
Advisors LP or its Affiliates or Subsidiaries, as the case may be, with
executive responsibilities, and (ii) PIMCO shall have entered into
Employment Agreements, substantially in the form attached hereto as Exhibit
P, with each of William H. Gross and William S. Thompson (each an
"Employment Agreement") and each such Employment Agreement shall be in full
force and effect and shall not have been amended or modified without the
prior written consent of AZOA.
(f) Revenue Run-Rate. As of the Determination Date, the Revenue Run-Rate
shall not be less than 75% of the Revenue Run-Rate at September 30, 1999.
(g) Employee Benefit Plans. (i) Each of the PIMCO Class B Unit Purchase
Plan and the PIMCO Non-Qualified Profit Sharing Plan shall have been
established by PIMCO, (ii) the Transition Retention Plan shall have been
established by Advisors LP; and (iii) the PIMCO Written Consent shall have
been executed by PIMCO.
(h) Other Agreements; Consents and Waivers.
(a) Each PIMCO MD who is an ETA Holder shall have entered into an
amendment to his ETA as contemplated by the MD Agreement and such
amendment shall not have been terminated;
(b) AZOA and PacMan shall have entered into the Continuing
Investment Agreement and such Continuing Investment Agreement shall not
have been terminated;
(c) PacMan and AZOA shall have entered into the Indemnification
Agreement and such Indemnification Agreement shall not have been
terminated;
(d) Advisors LP shall have entered into an Amendment to Unit Options
Agreements with all of the PIMCO MDs who hold Unit Options under the
Unit Incentive Plan, substantially in the form attached hereto as
Exhibit Q the ("Option Modification Agreement") and such Option
Modification Agreement shall not have been terminated;
(e) Advisors LP and PIMCO Management shall have entered into the
PIMCO LLC Agreement and Advisors LP and PIMCO Management shall have
obtained all requisite consents to enter into the PIMCO LLC Agreement
and eliminate the rights of third parties therein, and such PIMCO LLC
Agreement shall not have been terminated;
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(f) PacMan and Allianz GP Sub shall have entered into the
PacPartners LLC Agreement and PacMan and Allianz GP Sub shall have
obtained all requisite consents to enter into the PacPartners LLC
Agreement, and such PacPartners LLC Agreement shall not have been
terminated;
(g) Advisors LP shall have either paid down, fully satisfied or
obtained a waiver of the terms of Section 6.5(d) (Notice of Change of
Control), Section 7.1 (Disposition of Assets; Mergers and
Reorganizations), and Sections 10.1(c)(i) and (l) (Events of Default
and Acceleration) of, the Long-Term Credit Agreement; and
(h) Advisors LP shall have fully prepaid or refinanced its
obligations under, or obtained a waiver of the terms of Section 6.5(d)
(Notice of Change of Control), Section 7.1 (Disposition of Assets;
Mergers and Reorganizations), and Section 10.1(c)(i) and (l) (Events of
Default and Acceleration) of the Short-Term Credit Agreement.
(i) Disposition of Subsidiaries. Each of the Sellers and each of their
Subsidiaries shall have disposed of control of, and control of all of its
Equity Interests in, each of Columbus Circle Trust Company and PIMCO Trust
Company as set forth in Section 4.15. "Control" means control for
applicable regulatory purposes.
(j) Resignations. At the request of AZOA, each Seller shall use its
reasonable best efforts to cause each managing director to resign as member
of any management or executive committee or board of Advisors LP, Holdings
LP, Partners GP and Holding LLC, each resignation to be effective at or
prior to the Closing Date.
(k) Legal Opinion. AZOA shall have received an opinion of Latham &
Watkins, dated the Closing Date, in a form reasonably satisfactory to AZOA,
to the effect that (i) subject to the qualifications substantially similar
to those contained in the opinion of Latham & Watkins to Advisors LP dated
April 24, 1998 attached hereto as Exhibit R, Advisors LP is classified as a
partnership for U.S. federal income tax purposes, (ii) Advisors LP was, for
all relevant taxable periods prior to January 1, 1998, classified as an
"existing partnership" within the meaning of Section 10211(c) of the
Revenue Reconciliation Act of 1987 and Treasury Regulations Section 1.7704-
2(b) and (iii) Holdings LP is classified as an "electing 1987 partnership"
within the meaning of Section 7704(g)(2) of the Code. In rendering such
opinion, Latham & Watkins may rely on representations and warranties of
Advisors LP and Holdings LP.
5.03 Conditions to Obligations of the Sellers. The obligation of the Sellers
to effect the Transactions is also subject to the satisfaction or waiver by
both PacMan and Partners LLC at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of AZOA set forth in Section 3.04, subject to the standard set forth in
Section 3.02, shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date
(except that representations and warranties that by their terms speak as of
the date of this Agreement or some other date shall be true and correct as
of such date) and Advisors LP shall have received a certificate of an
executive officer of AZOA to such effect.
(b) Performance of Obligations of AZOA. AZOA shall have performed in all
material respects all obligations required to be performed by it under this
Agreement and the Transaction Documents at or prior to the Closing Date,
and an officer of the Sellers shall have received a certificate of an
executive officer to such effect.
(c) Support Agreements. Allianz shall have delivered the Allianz
Guarantee and the Allianz Guarantee shall not have been terminated or
withdrawn.
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ARTICLE VI
Termination
6.01 Termination by Mutual Consent. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time by mutual
written consent of AZOA, PacMan and Partners LLC.
6.02 Termination by Either AZOA or the Sellers. This Agreement may be
terminated and the Transactions may be abandoned at any time prior to the
Effective Time by (i) AZOA or by (ii) Advisors LP, Holdings LP, PacMan and
Partners LLC if (a) the Transactions shall not have been consummated by
September 30, 2000 (the "Termination Date"), whether such date is before or
after the date of approval by the Holdings LP Unitholders, (b) the approval of
the Holdings LP Unitholders required by Section 5.01(b) shall not have been
obtained at a meeting duly convened therefor or at any adjournment or
postponement thereof, or (c) any Order permanently restraining, enjoining or
otherwise prohibiting consummation of the Transaction shall become final and
non-appealable; provided that the right to terminate this Agreement pursuant to
clause (a) above shall not be available to any Party that has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately and substantially contributed to the occurrence of the failure
of the Transactions to be consummated.
6.03 Termination by AZOA. This Agreement may be terminated by AZOA and the
Transactions may be abandoned at any time prior to the Effective Time, whether
before or after the approval by the Holdings LP Unitholders referred to in
Section 5.01(b),
(a) if (i) Partners GP shall have failed to recommend or shall have
withdrawn or adversely modified its approval or recommendation of this
Agreement, failed to reconfirm its recommendation of this Agreement or the
Holdings LP Merger within five business days after a written request by
Holdings LP to do so, or recommended to Holdings LP Unitholders a Superior
Proposal or (ii) there has been a breach by any Seller of any
representation, warranty, covenant or agreement contained in this Agreement
that (x) would entitle AZOA to assert that the conditions to its
obligations hereunder set forth in Section 5.02(a) or (b) have not been
satisfied and (y) is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by AZOA to the Party
committing such breach; or
(b) if the Revenue Run-Rate is less than 75% of the Revenue Run-Rate as
of September 30, 1999 at the end of two consecutive calendar months,
provided, however, that if AZOA elects to exercise its termination right
pursuant to this clause (b), it shall give PacMan and Partners LLC prompt
written notice of its intention to terminate (the "Termination Notice"),
which termination shall be effective upon receipt of the Termination
Notice, provided, further, that if AZOA shall elect not to exercise its
termination right pursuant to this clause (b) this Agreement shall not
terminate and shall remain in full force and effect and the provisions of
Section 2.01(d)(i) shall be unaffected by such failure to exercise.
6.04 Termination by the Sellers. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Effective Time by the
written consent of PacMan and Partners LLC:
(a) if (i) the management board, general partner or managing member of
any Seller authorizes such Seller to consummate or enter into a binding
written agreement concerning, or to recommend, a transaction that PacMan
and Partners LLC determine in good faith, after
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consultation with their advisers, constitutes a Superior Proposal, and such
Seller notifies Allianz and AZOA in writing that it intends to enter into
such an agreement, attaching the most current version of such agreement to
such notice, (ii) AZOA does not make, within five business days of receipt
of such Seller's written notification of its intention, an offer that the
managing member, general partner or management board of such Seller
determines, in good faith after consultation with its advisors, is at least
as favorable, from a financial point of view, to the members, partners or
unitholders, as the case may be, as the Superior Proposal and
(iii) simultaneously with such termination such Seller pays or causes
Advisors LP to pay to AZOA in immediately available funds the Termination
Fee described in Section 6.06; or
(b) if there has been a breach by AZOA of any covenant, representation,
warranty or agreement contained in this Agreement that (x) would entitle
PacMan and Partners LLC to assert that the conditions to its obligations
hereunder set forth in Section 5.03(a) or (b) have not been satisfied and
(y) is not curable or, if curable, is not cured within thirty (30) days
after written notice of such breach is given by the PacMan and Partners
LLC.
6.05 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Transactions pursuant to this Article
VI, this Agreement (other than as set forth in Sections 6.06 and 7.01) shall
become void and of no effect with no liability on the part of any Party (or of
any of its directors, officers, employees, agents, legal and financial advisors
or other representatives); provided, however, except as otherwise provided
herein, no such termination shall relieve any Party of any liability or damages
resulting from any wilful breach of this Agreement.
6.06 Termination Fee.
(a) Upon the occurrence of a Fee Triggering Event, Advisors LP agrees
and each of the Sellers hereby agrees, jointly and severally, to pay or to
cause Advisors LP to pay AZOA, and AZOA shall be entitled to payment of, a
fee of $180,000,000 (the "Termination Fee"). Except as provided in
Section 6.04(a), such payment shall be made to AZOA in immediately
available funds within three business days after the occurrence of the Fee
Triggering Event.
(b) The term "Fee Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(1) this Agreement is terminated by the Sellers pursuant to Section
6.04(a); or
(2) this Agreement is terminated by AZOA pursuant to Section
6.03(a)(i) and, within 12 months after such termination, a Seller
enters into a binding agreement with any Person providing for a
transaction implementing an Acquisition Proposal.
(c) Each of PacMan and Partners LLC shall notify AZOA promptly in
writing of the occurrence of any Fee Triggering Event.
(d) The payment by any Seller of the Termination Fee provided by this
Section 6.06 shall constitute liquidated damages for any breach by any of
the Sellers of this Agreement although a breach is not necessary for any
payment to be required to be made under this Section 6.06.
(e) Each of the Sellers acknowledges that the agreements contained in
this Section 6.06 are an integral part of the Transactions and that,
without these agreements, neither AZOA nor any of its Subsidiaries would
have entered into this Agreement or any of the other Transaction Documents;
accordingly, if Advisors LP fails, and the Sellers fail to cause Advisors
LP, to promptly pay the amount due pursuant to this Section 6.06, and, in
order to obtain such payment, AZOA or any of its Subsidiaries commences a
suit which results in a judgment against
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the Sellers for the Termination Fee, the Sellers shall pay to AZOA its
costs and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the Termination Fee at the
prime rate of Citibank N.A. in effect on the date such payment was required
to be made.
ARTICLE VII
Miscellaneous and General
7.01 Survival. Each of the covenants of the Sellers and AZOA set forth in
Sections 4.05(b), 4.07, 4.17, 4.18 (but only with respect to actions to be
taken after Closing), 4.21 and 4.22 (but only with respect to actions to be
taken after Closing) shall survive the consummation of the Transactions until
the satisfaction of such covenants in accordance with each of their terms. Each
of the representations and warranties of the Sellers and AZOA set forth in
Sections 3.03 and 3.04, respectively, shall survive the earlier of March 31,
2001 and the publication of the first annual audited financial statements of
Advisors LP and its Subsidiaries following the Closing, provided that the
representations and warranties contained in Section 3.03(t) (Taxes) shall
survive until the expiration of the relevant statutory periods. Sections 7.01,
7.03, 7.04, 7.05, 7.08 and 7.10, Sections 4.08(b) (Access; Information), 4.17
(Expenses), 6.05 (Effect of Termination and Abandonment) and 6.06 (Termination
Fee) shall survive the termination of this Agreement. All other covenants and
agreements in this Agreement shall not survive the termination of this
Agreement.
7.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (i) waived by the Party benefitted by the provision, (ii)
amended or modified at any time, by an agreement in writing among the Parties
executed in the same manner as this Agreement or (iii) amended or modified by
an agreement in writing among AZOA, PacMan and Partners LLC executed in the
same manner as this Agreement, provided, that no such amendment or modification
pursuant to clause (iii) shall (A) in the case of any such amendment or
modification proposed after the Holdings LP Unitholders shall have approved
this Agreement and the Holdings LP Merger at the Holdings LP Unitholders
Meeting, alter or change the amount or kind of consideration to be received by
Holdings LP Unitholders and holders of Advisors LP Units pursuant to this
Agreement without such Party's consent, (B) reasonably be expected to
materially impede or delay the consummation of any of the Transactions or (C)
constitute a waiver of any provision of this Agreement other than in accordance
with clause (i) of this section 7.02.
7.03 Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all respects
shall be interpreted, construed and governed by and in accordance with the
law of the state of New York applicable to contracts made and to be
performed entirely within such state (except to the extent mandatory
provisions of federal law, the DE Partnership Law, the California Uniform
Partnership Act or the DE LLC Law are applicable).
(b) Each Party acknowledges and agrees that any controversy which may
arise under the Transaction Documents is likely to involve complicated and
difficult issues, and therefore each such Party hereby irrevocably and
unconditionally waives any right such Party may have to a trial by jury in
respect of any litigation directly or indirectly arising out of or relating
to the Transaction Documents, or the Transactions. Each Party certifies and
acknowledges that (i) no representative, agent or attorney of any other
Party has represented, expressly or otherwise, that
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such other Party would not, in the event of litigation, seek to enforce the
foregoing waiver, (ii) each Party understands and has considered the
implications of this waiver, (iii) each Party makes this waiver
voluntarily, and (iv) each Party has been induced to enter into the
Transaction Documents to which it is a Party by, among other things, the
mutual waivers and certifications in this Section 7.03.
7.04 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to AZOA:
Allianz of America, Inc.
55 Greens Farms Road - P.O. Box 5160 Westport, CT 06881Attention: David
P. MarksFacsimile: (203) 221-4933 with a copy to: Allianz AG Koniginstr.
2880802 Munchen Attention: Dr. Joachim Faber
with a copy to:
Mark J. Menting, Esq.,
Sullivan & Cromwell,
125 Broad Street, New York, NY 10004
Facsimile: (212) 558-3588
if to Advisors LP or Holdings LP:
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, California 92660
Attention: Kenneth M. Poovey
Facsimile: (949) 219-2245
with a copy to:
David C. Flattum, Esq.,
Latham & Watkins
650 Town Center Drive, Suite 2000,
Costa Mesa, California 92626
Facsimile: (714) 755-8290
if to PacMan, Partners GP or Holding LLC:
Pacific Asset Management, LLC
700 Newport Center Drive, Suite 500
Newport Beach, California 92660
Attention: Tom Sutton
Facsimile: (949) 219-5400
with a copy to:
Gerry L. Kenny, Esq.
Gibson Dunn & Crutcher LLP
4 Park Plaza
Irvine, California 92614
Facsimile: (949) 451-4220
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if to Partners LLC or Partners GP:
Pacific Investment Management Company
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
Attention: Ernest L. Schmider
Facsimile: (949) 720-1376
with a copy to:
John D. Hardy Jr., Esq.,
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Facsimile: (213) 430-6407
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
7.05 Entire Understanding; No Third Party Beneficiaries. This Agreement and
each of the other Transaction Documents represent the entire understanding of
the Parties with reference to the Transactions and supersede any and all other
oral or written agreements heretofore made. Nothing in this Agreement expressed
or implied, is intended to confer upon any person, other than the Parties or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
7.06 Obligations of AZOA. Whenever this Agreement requires a Subsidiary of
AZOA to take any action, such requirement shall be deemed to include an
undertaking on the part of AZOA to cause such Subsidiary to take such action.
7.07 Transfer Taxes. Any liability arising out of any real estate transfer
or gains tax, if applicable and due with respect to the Transactions shall be
borne by the appropriate Seller. All other transfer (including real estate
transfer), transfer gains, documentary, sales, use, stamp, registration and
other such Taxes and fees (including penalties and interest) incurred in
connection with the Transactions shall be paid by the appropriate Seller when
due.
7.08 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless
otherwise indicated.
7.09 Assignment. This Agreement shall not be assignable by operation of law
or otherwise; provided, however, that AZOA may designate, by written notice to
Advisors LP, another wholly-owned direct or indirect subsidiary in lieu of
Advisors LP Merger Sub, Holdings LP Merger Sub or Allianz GP Sub to be merged
with Advisors LP, to be merged with Holdings LP and to enter into the relevant
Acquisitions, Distributions and Contributions, respectively, in which event all
references herein to Advisors LP Merger Sub, Holdings LP Merger Sub or Allianz
GP Sub, as the case may be, shall be deemed references to such other
subsidiary, except that all representations and warranties made herein with
respect to Advisors LP Merger Sub, Holdings LP Merger Sub or Allianz GP Sub, as
the case may be, as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other subsidiary as of
the date of such designation and further, provided,
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however, that AZOA may assign, by written notice to Advisors LP, any or all of
its rights and obligations under this Agreement and any other Transaction
Document to another direct or indirect Subsidiary of Allianz, in which event
all references herein to AZOA shall be deemed to be references to such other
subsidiary, except that all representations and warranties made herein with
respect to AZOA as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Subsidiary as of
the date of such designation.
7.10 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of each of the Parties as of the date first
written above.
PIMCO PARTNERS, G.P.
By: PIMCO PARTNERS, LLC, a California
limited liability company, General
Partner
/s/ William S. Thompson
By: ____________________________________
William S. Thompson
Chief Executive Officer
By: PIMCO HOLDING LLC, a Delaware limited
liability company, General Partner
By: PACIFIC ASSET MANAGEMENT LLC, a
Delaware limited liability company,
Member
By: PACIFIC LIFE INSURANCE
COMPANY, a California life
insurance company, Member
/s/ Khanh T. Tran
By: ___________________________
Khanh T. Tran
Chief Financial Officer
/s/ Audrey Milfs
By: ___________________________
Audrey Milfs
Secretary
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By: PIMCO ADVISORS HOLDINGS L.P., a
Delaware limited partnership, General
Partner
By: PIMCO PARTNERS, G.P., a California
general partnership, General
Partner
By: PIMCO PARTNERS, LLC, a
California limited liability
company, General Partner
/s/ William S. Thompson
By: ___________________________
William S. Thompson
Chief Executive Officer
By: PIMCO HOLDING, LLC, a Delaware
limited liability company,
General Partner
By: PACIFIC ASSET MANAGEMENT
LLC, a Delaware limited
liability company, Member
By: PACIFIC LIFE INSURANCE
COMPANY, a California
life insurance
company, Member
/s/ Khanh T. Tran
By: ___________________
Khanh T. Tran
Chief Financial
Officer
/s/ Audrey Milfs
By: ___________________
Audrey Milfs
Secretary
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PIMCO ADVISORS HOLDINGS L.P.
By: PIMCO PARTNERS, G.P., a California
general partnership, General Partner
By: PIMCO PARTNERS, LLC, a California
limited liability company, General
Partner
/s/ William S. Thompson
By: _______________________________
William S. Thompson
Chief Executive Officer
By: PIMCO HOLDING, LLC, a Delaware
limited liability company, General
Partner
By: PACIFIC ASSET MANAGEMENT LLC,
a Delaware limited liability
company, Member
By: PACIFIC LIFE INSURANCE
COMPANY, a California life
insurance company, Member
/s/ Khanh T. Tran
By: _______________________
Khanh T. Tran
Chief Financial Officer
/s/ Audrey Milfs
By: _______________________
Audrey Milfs
Secretary
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PIMCO ADVISORS L.P.
By: PIMCO PARTNERS, G.P., a California
general partnership, General Partner
By: PIMCO PARTNERS, LLC, a California
limited liability company, General
Partner
/s/ William S. Thompson
By: _______________________________
William S. Thompson
Chief Executive Officer
By: PIMCO PARTNERS, LLC, a Delaware
limited liability company, General
Partner
By: PACIFIC ASSET MANAGEMENT LLC,
a Delaware limited liability
company, Member
By: PACIFIC LIFE INSURANCE
COMPANY, a California life
insurance company, Member
/s/ Khanh T. Tran
By: _______________________
Khanh T. Tran
Chief Financial Officer
/s/ Audrey Milfs
By: _______________________
Audrey Milfs
Secretary
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PACIFIC ASSET MANAGEMENT LLC
By: PACIFIC LIFE INSURANCE COMPANY, a
California life insurance company,
Member
/s/ Khanh T. Tran
By: ____________________________________
Khanh T. Tran
Chief Financial Officer
/s/ Audrey Milfs
By: ____________________________________
Audrey Milfs
Secretary
PACIFIC INVESTMENT MANAGEMENT COMPANY
/s/ William S. Thompson
By: ________________________________________
William S. Thompson
Chief Executive Officer
PIMCO PARTNERS LLC
/s/ William S. Thompson
By: ________________________________________
William S. Thompson
Chief Executive Officer
PIMCO HOLDING LLC
By: PACIFIC ASSET MANAGEMENT LLC, a
Delaware limited liability company,
Member
By: PACIFIC LIFE INSURANCE COMPANY, a
California life insurance company,
Member
/s/ Khanh T. Tran
By: _______________________________
Khanh T. Tran
Chief Financial Officer
/s/ Audrey Milfs
By: _______________________________
Audrey Milfs
Secretary
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ALLIANZ OF AMERICA, INC.
/s/ Dr. Henning Schulte-Noelle
By: ________________________________________
Dr. Henning Schulte-Noelle
President and Chief Executive Officer
/s/ Dr. Diethart Breipohl
By: ________________________________________
Dr. Diethart Breipohl
Authorized Agent
ALLIANZ ASSET MANAGEMENT INC.
/s/ Dr. Joachim Faber
By: ________________________________________
Dr. Joachim Faber
President and Chief Executive Officer
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ANNEX A
TRANSACTION STEPS
VERSION 23 (OCTOBER 31, 1999)
1. Allianz GP Sub forms (i) Advisors LP Merger Sub as a wholly-owned LLC
subsidiary and (ii) Holdings LP General Partner as a wholly-owned LLC
subsidiary. Allianz GP Sub and Holdings LP General Partner form Holdings LP
Merger Sub as a limited partnership, with Allianz GP Sub holding the sole
limited partner interest and Holdings LP General Partner holding the sole
general partner interest. AZOA contributes cash and Allianz Stock to Allianz
GP Sub (which, in turn, contributes cash to Advisors LP Merger Sub and
Holdings LP Merger Sub) in an aggregate amount sufficient to satisfy all of
Allianz GP Sub's, Advisors LP Merger Sub's and Holdings LP Merger Sub's
obligations as described below.
2. Holdings LP Merger Sub merges into Holdings LP, with (i) Holdings LP
surviving, (ii) Holdings LP partners (Partners GP (5,099 Holdings LP GP
Units) and the public holders (49,553,023 Holdings LP Units as of September
30, 1999)) receiving cash at the Unit Price in exchange for their Holdings
LP Units and Holdings LP GP Units, (iii) Allianz GP Sub's limited partner
interest in Holdings LP Merger Sub converting into a limited partner
interest in Holdings LP and (iv) Holdings LP General Partner's general
partner interest in Holdings LP Merger Sub converting into a general partner
interest in Holdings LP.
3. Allianz GP Sub acquires Partners LLC's (i) 142,480 Class A Units for an
amount of cash equal to the Unit Price multiplied by 142,480 and (ii)
general partner interest in Partners GP for $100. Immediately thereafter,
Partners LLC dissolves and distributes its cash to its members.
4. Partners GP converts all but one of its Advisors GP Units into 799,998 Class
A Units.
5. Partners GP distributes (i) 37,584,048 Class A Units (all of its Class A
Units other than 1,826,272 Class A Units relating to interests under the
Holding LLC ETAs not held by PIMCO MDs), (ii) its Advisors GP Unit and (iii)
the PPGP Note Agreement (if outstanding) to Holding LLC.
6. Holding LLC distributes (i) 22,008,213 Class A Units (all of its Class A
Units other than 15,575,835 Class A Units relating to interests under the
Holding LLC ETAs held by PIMCO MDs) and (ii) the PPGP Note Agreement (if
outstanding) to PacMan.
7. Allianz GP Sub acquires all member interests in Holding LLC from PacMan for
$100, becoming the sole member of Holding LLC.
8. Allianz GP Sub contributes cash and Allianz Shares to Holding LLC (now owned
100% by Allianz GP Sub) with a total value equal to the Unit Price
multiplied by 15,575,835 (the number of Class A Units relating to interests
under the Holding LLC ETAs held by PIMCO MDs). Cash constitutes 84% of the
total value and the Allianz Shares 16% of the total value, with the Allianz
Shares valued for this purpose at $273.99 per registered share. Allianz GP
Sub also contributes the 142,480 Class A Units acquired in Step 3 to Holding
LLC.
9. Subject to obtaining any required consents of the respective limited
partners of NFJ LP, Parametric LP and Cadence LP, each of such limited
partnerships as to which required consents are obtained or as to which such
consents are not required shall distribute to its general partners (NFJ LLC,
PPA LLC and CCM LLC, respectively) all but one of the Class A Units in such
limited partnerships relating to the general partner interests in such
limited partnerships.
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10. NFJ LLC distributes its 306,204 Class A Units (plus the Class A Units
distributed to it pursuant to Step 9, if any) to PacMan. PPA LLC
distributes the Class A Units distributed to it pursuant to Step 9, if any,
to PacMan. CCM LLC distributes its 508,258 Class A Units (plus the Class A
Units distributed to it pursuant to Step 9, if any) to PacMan.
11. Contributions to PacPartners LLC:
(a) PacMan contributes (i) 22,008,213 Class A Units (acquired in Step 6),
(ii) the Class A Units acquired in Step 10 (814,462 Class A Units plus
the Class A Units distributed pursuant to Step 9, if any) and (iii) the
PPGP Note Agreement (if outstanding) to PacPartners LLC in exchange for
PacPartners LLC Class B Units.
(b) Holding LLC contributes (i) the 15,575,835 Class A Units and Advisors
GP Unit (acquired in Step 5, and after giving effect to the
distribution to PacMan in Step 6) and (ii) the 142,480 Class A Units
(acquired in Step 8) to PacPartners LLC in exchange for PacPartners LLC
Class A Units.
12. PacFin contributes its 14,380,217 Class A Units to Advisors LP Merger Sub
in exchange for Merger Sub Class E Units. PacPartners LLC contributes its
Class A Units to Advisors LP Merger Sub in exchange for (i) Merger Sub
Class A Units (for those Class A Units owned indirectly by Allianz GP Sub)
and (ii) Merger Sub Class E Units (for those Class A Units owned indirectly
by PacMan). PacPartners LLC also contributes its Advisors GP Unit to
Advisors LP Merger Sub in exchange for a Merger Sub GP Unit.
13. Advisors LP Merger Sub merges into Advisors LP, with Advisors LP surviving
and with the following consequences to unitholders:
(a) Class A Units held by Partners GP (1,826,272 Class A Units--relating to
interests under the Holding LLC ETAs not held by PIMCO MDs) are
exchanged for New Class B Units.
(b) Class A Units held by NFJ LP (430,211 Class A Units less the Class A
Units distributed pursuant to Step 9, if any), Parametric LP (393,860
Class A Units less the Class A Units distributed pursuant to Step 9, if
any) and Cadence LP (637,000 Class A Units less the Class A Units
distributed pursuant to Step 9, if any) receive cash at the Unit Price.
(c) Class A Units and the Advisors GP Unit held by Advisors LP Merger Sub
are cancelled.
(d) Class A Units held by other holders (3,697,114 Class A Units as of
October 31, 1999) receive cash at the Unit Price.
(e) Merger Sub Class A Units held by PacPartners LLC (representing Class A
Units owned indirectly by Allianz GP Sub) are converted into New Class
A Units.
(f) Merger Sub Class E Units held by PacFin and PacPartners LLC
(representing Class A Units owned indirectly by PacMan) are converted
into New Class E Units.
(g) The Merger Sub GP Unit held by PacPartners LLC (representing the
Advisors GP Unit owned indirectly by Allianz GP Sub) is converted into
one Advisors GP Unit.
(h) 6,000,000 Class C Units held by Oppenheimer Group, Inc. remain in
place.
(i) 800 Class D Units held by PIMCO Equity Advisors' holders remain in
place.
14. Other Equity Interests receive the following:
(a) Options get cashed out at the Unit Price on the 16th day of the third
month following Closing.
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(b) Deferred Units are converted into Allianz Deferred Payment Notes.
(c) Deferred Compensation Units and vested Deferred Restricted Units are
converted into cash at the Unit Price which remains deferred in the
Deferred Compensation Plan and invested by the Trustee at the direction
of the holders.
(d) Unvested Deferred Restricted Units are converted into Allianz Deferred
Payment Notes.
15. The constituent parties shall make all necessary tax elections and
allocations so that the tax basis of the partnership units owned directly
or indirectly by or for a party shall reflect the purchase price paid
therefor.
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ANNEX B
DISCLOSURE DOCUMENT LIST
Financial Information and Document List:
1. Comparative Financial Data by Quarter 3/31/94-3/31/99
2. PIMCO Advisors LP Consolidating Results of Operations
a. Quarter ended March 31, 1999
b. Year ended March 31, 1998
c. Year ended March 31, 1997
d. Year ended March 1996
e. Year ended March 1995
f. Year ended March 1994
3. Options Outstanding as of 7/16/99
4. 1999 Budget and Review
5. Special Report - PIMCO Advisors L.P Consolidated Financial Statements -
1Q 1999 & Fiscal Years Ended 1995-1998
6. Special Report - Pacific Investment Management Company (Income Statement
Only) - 1Q 1999 & Fiscal Year Ended 1995-1998
7. Special Report - Oppenheimer Capital (Income Statement Only) - 1Q 1999 &
Fiscal Years Ended 1997-1998
8. Special Report - Columbus Circle Investors (Income Statement Only) - 1Q
1999 & Fiscal Years Ended 1995-1998
9. Special Report - Cadence Capital Management (Income Statement Only) - 1Q
1999 & Fiscal Years Ended 1995-1998
10. Special Report - Parametric Portfolio Associates (Income Statement
Only) - 1Q 1999 & Fiscal Years Ended 1995-1998
11. Special Report - PIMCO Fund Distributors LLC (Income Statement Only) -
1Q 1999 & Fiscal Years Ended 1995-1998
12. 1998 Financial Statements (Independent Audited Accounts)
a. Pacific Investment Management Company and subsidiary
b. Oppenheimer Capital
c. Columbus Circle Investors and subsidiaries
d. Cadence Capital Management
e. Parametric Portfolio Associates
f. NFJ Investment Group
g. Blairlogie Capital Management
h. PIMCO Funds Distribution Company
i. Columbus Circle Trust Company
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13. 1997 Financial Statements (Independent Audited Accounts)
a. PIMCO Advisors Holdings LP
b. PIMCO Advisors, LP and Subsidiaries
c. Pacific Investment Management Company and subsidiary
d. Oppenheimer Capital
e. Columbus Circle Investors and subsidiary
f. Cadence Capital Management
g. Parametric Portfolio Associates
h. NFJ Investment Group
i. Blairlogie Capital Management
j. PIMCO Funds Distribution Company
k. Columbus Circle Trust Company
14. Financial Statements for the Year ended December 31, 1996 and
Independent Auditors Reports
a. Pacific Investment Management Company and subsidiary
b. Columbus Circle Investors and subsidiary
c. Columbus Circle Trust Company
d. Cadence Capital Management
e. NFJ Investment Group
f. Parametric Portfolio Associates
g. PIMCO Funds Distribution Company
h. Blairlogie Capital Management
15. Financial Statements for the Year ended December 31, 1995 (Individual
Audited Accounts)
a. Pacific Investment Management Company and subsidiary
b. Columbus Circle Investors and subsidiary
c. Columbus Circle Trust Company
d. Cadence Capital Management
e. NFJ Investment Group
f. Parametric Portfolio Associates
g. PIMCO Funds Distribution Company
Assets Under Management Information and Document List:
1. Flash Update for Week Ended 7/2/99, PIMCO Funds: Multi-Manager Series
(AUM data for the Quarters ended 3/31/99 & 6/30/99 and Years Ended
12/31/92-12/31/98 and fee data)
2. Flash Update for Week Ended 7/2/99, PIMCO Funds: PIMS (AUM data for the
Quarters ended 3/31/99 & 6/30/99 and Years Ended 12/31/92-12/31/98 and
fee data)
3. Internal Performance Report Separate Accounts - Manager Composite -
Gross of Fees (By sub partnership, for 1 & 3 month periods and 1, 3 & 5
years ended 3/31/99)
4. Internal Performance Report Separate Accounts - Manager Composite - Net
of Fees (By sub partnership, for 1 & 3 month periods and 1, 3 & 5 years
ended 3/31/99)
5. Internal Performance Report Separate Accounts - Manager Composite -
Gross of Fees (By sub partnership, for 1 & 3 month periods and 1, 3 & 5
years ended 12/31/98)
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6. Internal Performance Report Separate Accounts - Manager Composite - Net
of Fees (By sub partnership, for 1 & 3 month periods and 1, 3 & 5 years
ended 12/31/98)
7. Internal Performance Report Separate Accounts - Manager Composite -
Gross of Fees (By sub partnership, for 1 & 3 month periods and 1, 3 & 5
years ended 12/31/97)
8. Internal Performance Report Separate Accounts - Manager Composite - Net
of Fees (By sub partnership, for 1 & 3 month periods and 1, 3 & 5 years
ended 12/31/97)
9. PIMCO Advisors L.P Quarterly Assets Under Management 3/31/99
10. PIMCO Advisors L.P Quarterly Assets Under Management 12/31/98
11. PIMCO Advisors L.P Quarterly Assets Under Management 12/31/97
12. PIMCO Advisors L.P Quarterly Assets Under Management 12/31/96
13. PIMCO Advisors L.P Quarterly Assets Under Management 12/31/95
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ANNEX C
TO SECTION 4.07(f) OF THE
IMPLEMENTATION AND MERGER AGREEMENT
(1) Disclosure to Partners GP and its partners, Holding LLC and Partners
LLC, of (a) the identity of each payment recipient (a "Payment Recipient") who
is an employee or independent contractor of any of the following corporations
and is, with respect to any such corporation, (i) a shareholder owning stock
(actually or constructively) having a fair market value exceeding the lesser
of $1,000,000 or one percent (1%) of the total fair market value of all
classes of the corporation's stock, (ii) an officer or (iii) a member of the
group consisting of the lesser of the highest paid one percent (1%) of the
corporation's employees or the highest paid 250 employees of the corporation
when ranked on the basis of compensation, and (b) the amount and description
of payments to be made to the Payment Recipients pursuant to the agreements
set forth in (2) below.
Cadence Capital Management Inc.
Columbus Circle Trust Company
NFJ Management Inc.
Oppenheimer Capital (Australia) Inc.
Oppenheimer Group Inc.
Parametric Management Inc.
PIMCO Funds Advertising Agency Co.
PIMCO Global Advisors (Resources) Limited
PIMCO Management Inc.
PIMCO Trust Company
StocksPLUS Management Inc.
(2) The approval by PGP in a separate vote of the payments to be made to
Payment Recipients pursuant to the following agreements:
(a) Pacific Investment Management Company Class B Unit Purchase Plan
(b) Amendment to Employment Termination and Non-Competition Agreement
-- A separate agreement for each consenting Pacific Investment
Management Company ETA Managing Director
(c) PIMCO Advisors L.P. Retention Plan for Executives of Pacific
Investment Management Company
(d) Pacific Investment Management Company Non-Qualified Profit Sharing
Plan
(e) Second Amendment to the 1998 Unit Incentive Plan of PIMCO Advisors
Holdings L.P. and PIMCO Advisors L.P.
(f) First Amendment to Executive Deferred Compensation Plan of PIMCO
Advisors Holdings L.P. and PIMCO Advisors L.P.
(g) Amendment to Unit Option Agreements (covering PIMCO Managing
Directors)
(h) Employment Agreement for William H. Gross
(i) Employment Agreement for William S. Thompson
(j) Employment Agreement for James F. Muzzy
(k) Employment Agreement for John L. Hague
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(l) Employment Agreement for Brent R. Harris
(m) Employment Agreement for William C. Powers
(n) Consulting Agreement for William F. Podlich
(o) Consulting Agreement for Dean S. Meiling
(p) Employment Agreements for other PIMCO Managing Directors (to be
determined prior to Closing)
(q) Severance Agreement for William D. Cvengros
(r) Employment Agreement for Kenneth M. Poovey
(s) Employment Agreement for Richard M. Weil
(t) Employment Agreement for Robert M. Fitzgerald
(u) Employment Agreement for James G. Ward
(v) Employment Agreement for Stephen J. Treadway
(w) PIMCO Advisors L.P. Transition and Retention Plan
(x) Severance/Retention Agreements for other employees of PIMCO
Advisors L.P. and its Subsidiaries (to be determined prior to
Closing)
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AMENDMENT NO. 1 TO
IMPLEMENTATION AND MERGER AGREEMENT
This AMENDMENT NO. 1 TO IMPLEMENTATION AND MERGER AGREEMENT, dated as of
March 3, 2000 (this "Amendment") is entered into by among Allianz of America,
Inc., a Delaware corporation, Pacific Asset Management LLC, a Delaware limited
liability company, PIMCO Advisors L.P., a Delaware limited partnership, PIMCO
Advisors Holdings L.P., a Delaware limited partnership, PIMCO Partners, G.P., a
California general partnership, PIMCO Partners, LLC, a California limited
liability company, and PIMCO Holding LLC, a Delaware limited liability company
(collectively, the "Initial Parties"), and Holdings LP Merger Sub L.P., a
Delaware limited partnership, Allianz GP Sub LLC, a Delaware limited liability
company, Holdings LP General Partner LLC, a Delaware limited liability company,
and Advisors LP Merger Sub LLC, a Delaware limited liability company
(collectively, the "Additional Parties"), (each of the Initial Parties and the
Additional Parties individually, a "Party" and collectively, the "Parties").
RECITALS
WHEREAS, the Initial Parties have entered into that certain Implementation
and Merger Agreement dated October 31, 1999 (the "Merger Agreement");
WHEREAS, pursuant to Section 2.06 of the Merger Agreement, AZOA has formed,
or has caused Allianz Asset Management to form, the Additional Parties, and the
Parties desire to amend the Merger Agreement to cause each of the Additional
Parties to become a party to the Merger Agreement and this Amendment;
WHEREAS, in connection with that certain Memorandum of Understanding, dated
February 23, 2000 (the "MOU") entered into with reference to those actions
filed and consolidated in the Court of Chancery of the State of Delaware in and
for New Castle County (the "Court") and encaptioned In Re PIMCO Advisors
Holdings L.P. Shareholders Litigation, Consolidated Civil Action No. 17511-NC,
the Parties desire to amend the Merger Agreement, in order to modify the
calculation of the Unit Price, to reduce, in certain circumstances, the
Termination Fee and to clarify responsibility for certain amounts to be paid
under the MOU; and
WHEREAS, capitalized terms used in this Amendment and not otherwise defined
herein shall have the meanings set forth in the Merger Agreement;
NOW, THEREFORE, in consideration of the premises, and of the covenants
contained herein, the Parties agree as follows:
ARTICLE I.
ADDITIONAL PARTIES
1.01 By its execution of this Amendment, as of the date hereof, each of the
Additional Parties adopts and becomes a party to the Merger Agreement, as
required by Section 2.06 thereof, and agrees to perform all of its obligations
and agreements as set forth therein.
1.02 Each of the Additional Parties agrees to perform all of its obligations
and agreements as set forth in this Amendment.
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ARTICLE II.
DEFINITIONS
2.01 The definition of "Adjusted Assets Under Management" as set forth in
Section 1.01 of the Merger Agreement is hereby amended to read in its entirety
as follows:
"'Adjusted Assets Under Management' shall mean for any account at a
particular date, the amount of assets under management by Advisors LP or
its Subsidiaries in that account at September 30, 1999, as adjusted for net
cash flows (additions, withdrawals and reinvestments), new accounts and
terminated accounts from and after September 30, 1999; provided however,
that assets shall be treated as withdrawn at the date Advisors LP or any of
its Subsidiaries receives a written notice communicating an intention to
withdraw such assets (unless such notice has been revoked) or, in the case
of a Registered Investment Company, the shareholders of such Registered
Investment Company shall have failed to approve the transfer of an Advisory
Agreement at such particular date."
2.02 The definition of "Determination Date" as set forth in Section 1.01 of
the Merger Agreement is hereby amended to read in its entirety as follows:
"'Determination Date' shall mean the most recent calendar month-end
prior to the Closing Date."
2.03 The definition of "Revenue Run-Rate" as set forth in Section 1.01 of
the Merger Agreement is hereby amended to read in its entirety as follows:
"'Revenue Run-Rate' shall mean, on any date, the aggregate annualized
investment advisory and subadvisory fees for all accounts managed by
Advisors LP and its Subsidiaries, determined by multiplying the Adjusted
Assets Under Management for each such account by the applicable annual fee
rate for such account at such date (excluding any performance-based fees).
The calculation of the Revenue Run-Rate as of the Determination Date shall
be made using substantially the same methodology as the calculation of the
Revenue Run-Rate as of September 30, 1999, as Previously Disclosed. "
The definition of "Unit Price" as set forth in Section 1.01 of the Merger
Agreement is hereby amended to read in its entirety as follows:
"'Unit Price' has the meaning set forth below:
(a) Except as provided in subparagraph (b) below, the Unit Price for all
purposes under this Agreement shall be $38.75, reduced in the event that
the Revenue Run-Rate as of the Determination Date is less than 85% of the
Revenue Run-Rate as of September 30, 1999 ($780,837,226) by an amount equal
to the Unit Price multiplied by the ratio set forth below; provided, that
the Unit Price as so adjusted shall not be less than $31.78:
Revenue Run - Rate as of the Determination Date
1.8 x (.85 -- ----------------------------------------------- )
$780,837,226
(b) The Unit Price (i) to be paid for the Class A Units held by Partners
LLC; (ii) to be paid for those Class A Units held by NFJ LP, Parametric LP,
and Cadence LP, the beneficial interest in which is held solely by the
respective general partner of each such partnership; (iii) to be applied in
calculation of the amounts to be paid in satisfaction of the ETAs to which
present or former PIMCO MDs are parties as contemplated by Section 5.02(h);
and (iv) to be applied in
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respect of any Unit Option, Deferred Unit, Deferred Compensation Unit and
Vested Deferred Restricted Unit which is held by, or in which a beneficial
interest is held by, any person who was a member of Partners LLC on October
31, 1999 shall be $38.75, reduced in the event that the Revenue Run-Rate as
of the Determination Date is less than 85% of the Revenue Run-Rate as of
September 30, 1999 ($780,837,226) by an amount equal to the Unit Price
multiplied by the ratio set forth below; provided, that the Unit Price as
so adjusted shall not be less than $31.00:
Revenue Run - Rate as of the Determination Date"
2.0 x (.85 -- ------------------------------------------------ )
$780,837,226
ARTICLE III.
OTHER PROVISIONS OF MERGER AGREEMENT
3.01 Holdings LP Merger Consideration. Section 2.01(d)(i) of the Merger
Agreement is hereby amended to read in its entirety as follows:
"(i) Holdings LP Merger Consideration. Each unit of limited partnership
interest of Holdings LP issued and outstanding immediately prior to the
Holdings LP Effective Time (a "Holdings LP Unit"), shall be converted into
the right to receive, without interest, an amount in cash equal to the Unit
Price.
All such Holdings LP Units, by virtue of the Holdings LP Merger and without
any action on the part of the holders thereof, shall no longer be outstanding
and shall be cancelled and retired and shall cease to exist, and each holder of
a certificate representing any such Holdings LP Units shall thereafter cease to
have any rights with respect to such Holdings LP Units, except the right to
receive the Unit Price for each Holdings LP Unit upon the surrender of such
certificate in accordance with Section 2.01(f)."
3.02 Termination Fee. Section 6.06(a) of the Merger Agreement is hereby
amended to read in its entirety as follows:
"(a) Upon the occurrence of a Fee Triggering Event, Advisors LP agrees
and each of the Sellers hereby agrees, jointly and severally, to pay or to
cause Advisors LP to pay AZOA, and AZOA shall be entitled to a payment of,
a fee of $120,000,000 (the "Termination Fee"). Except as provided in
Section 6.04(a), such payment shall be made to AZOA in immediately
available funds within three business days after the occurrence of the Fee
Triggering Event."
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ARTICLE IV.
OTHER MATTERS
4.01 The Parties agree that all amounts payable to the counsel for
plaintiffs as contemplated by Section 2(c) of the MOU shall be deemed to have
been paid following the Closing and the amount of such payments shall not
operate to diminish the amount of the operating profit available for
distribution of Holdings LP and Advisors LP prior to the Closing.
4.02 Annex A to the Merger Agreement is hereby amended and restated in its
entirety as set forth on Annex A hereto.
ARTICLE V.
MISCELLANEOUS
5.01 Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed to be an original
and all such counterparts shall together constitute but one and the same
instrument.
5.02 Ratification and Reaffirmation of the Merger Agreement. Except as
hereby expressly amended, the Merger Agreement shall remain in full force and
effect and is hereby ratified and confirmed.
5.03 Effectiveness of Amendment. The provisions of this Amendment shall be
effective immediately upon execution and delivery of this Amendment by all
parties hereto; provided, however, that, except for the provisions of
Section 3.02, the provisions of Articles II and III of this Amendment are
contingent upon, and shall not become effective until, satisfaction of all of
the conditions to the settlement described in the MOU, including approval of
the Court. In the event that the Closing occurs prior to the satisfaction of
such conditions, AZOA may in its discretion hold back an amount in cash
sufficient to pay the increased transaction consideration (if any) which would
be payable pursuant to this Amendment upon satisfaction of such conditions, and
pay the same when and if such conditions are satisfied.
5.04 Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such state (except to the extent mandatory
provisions of federal law, the DE Partnership Law, the California Uniform
Partnership Act or the DE LLC Law are applicable).
5.05 Interpretation. In the event of any conflict between the provisions of
the Merger Agreement and the provisions of this Amendment, the provisions of
this Amendment shall control.
5.06 Binding Effect. This Amendment shall inure to the benefit of and shall
be binding upon the Parties and their respective successors and assigns.
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IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed as of the day and year first written above.
PACIFIC LIFE INSURANCE COMPANY
/s/ Edward R. Byrd
By: ____________________________________
Name: Edward R. Byrd
Title: Vice President and
Controller
/s/ Audrey L. Milfs
By: ____________________________________
Name: Audrey L. Milfs
Title: Secretary
PACIFIC ASSET MANAGEMENT LLC
By: PACIFIC LIFE INSURANCE COMPANY, a
California life insurance company,
Member
/s/ Edward R. Byrd
By: ____________________________________
Name: Edward R. Byrd
Title: Vice President and
Controller
/s/ Audrey L. Milfs
By: ____________________________________
Name: Audrey L. Milfs
Title: Secretary
PIMCO HOLDING LLC
By: PACIFIC ASSET MANAGEMENT COMPANY LLC, a
Delaware limited liability company,
Member
By: PACIFIC LIFE INSURANCE COMPANY, a
California corporation, Member
/s/ Edward R. Byrd
By: ____________________________________
Name: Edward R. Byrd
Title: Vice President and
Controller
/s/ Audrey L. Milfs
By: ____________________________________
Name: Audrey L. Milfs
Title: Secretary
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PIMCO PARTNERS, LLC
By: PIMCO PARTNERS, LLC, a California
limited liability company, General
Partner
/s/ William S. Thompson
By: ____________________________________
Name:William S. Thompson
Title:Chief Executive Officer
By: PIMCO HOLDING LLC, a Delaware limited
liability company, General Partner
By: PACIFIC ASSET MANAGEMENT LLC, a
Delaware limited liability company,
Member
By: PACIFIC LIFE INSURANCE
COMPANY, a California
corporation, Member
/s/ Edward R. Byrd
By: ____________________________________
Name: Edward R. Byrd
Title: Vice President and
Controller
/s/ Audrey L. Milfs
By: ____________________________________
Name: Audrey L. Milfs
Title: Secretary
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PIMCO ADVISORS HOLDINGS L.P.
By: PIMCO PARTNERS, G.P., a California
general partnership, General
Partner
By: PIMCO HOLDING LLC, a Delaware
limited liability company,
General Partner
By: PACIFIC ASSET MANAGEMENT
COMPANY LLC, a Delaware
limited liability company,
Member
By: PACIFIC LIFE INSURANCE
COMPANY, a California
corporation, Member
/s/ Edward R.
Byrd
By: ___________________
Name: Edward R.
Byrd
Title: Vice
President and
Controller
/s/ Audrey L.
Milfs
By: ___________________
Name: Audrey L.
Milfs
Title: Secretary
By: PIMCO PARTNERS, LLC, a California
limited liability company, General
Partner
/s/ William S. Thompson
By: ____________________________________
Name:William S. Thompson
Title:Chief Executive Officer
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PIMCO ADVISORS L.P.
By: PIMCO PARTNERS, G.P., a California
general partnership, General Partner
By: PIMCO HOLDING LLC, a Delaware
limited liability company, General
Partner
By: PACIFIC ASSET MANAGEMENT
COMPANY LLC, a Delaware
limited liability company,
Member
By: PACIFIC LIFE INSURANCE
COMPANY, a California
corporation, Member
/s/ Edward R.
Byrd
By: _______________________
Name: Edward R. Byrd
Title: Vice President
and Controller
/s/ Audrey L.
Milfs
By: _______________________
Name: Audrey L. Milfs
Title: Secretary
By: PIMCO PARTNERS, LLC, a California
limited liability company, General
Partner
/s/ William S. Thompson
By: _______________________________
Name: William S. Thompson
Title: Chief Executive Officer
PACIFIC INVESTMENT MANAGEMENT COMPANY
/s/ William S. Thompson
By: ____________________________________
William S. Thompson
Chief Executive Officer
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ALLIANZ OF AMERICA, INC.
/s/ Dr. Joachim Faber
By: _______________________________
Dr. Joachim Faber
Attorney in Fact
ALLIANZ ASSET MANAGEMENT INC.
/s/ Dr. Joachim Faber
By: _______________________________
Dr. Joachim Faber
Attorney in Fact
ALLIANZ GP SUB LLC
By: ALLIANZ ASSET MANAGEMENT INC., a
Delaware corporation, Member
/s/ Dr. Joachim Faber
By: _______________________________
Dr. Joachim Faber
President and Chief Executive
Officer
HOLDINGS LP GENERAL PARTNER LLC
By: ALLIANZ GP SUB LLC, a Delaware limited
liability company, Member
By: ALLIANZ ASSET MANAGEMENT INC., a
Delaware corporation, Member
/s/ Dr. Joachim Faber
By: __________________________
Dr. Joachim Faber
President and Chief Executive
Officer
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HOLDINGS LP MERGER SUB L.P.
By: HOLDINGS LP GENERAL PARTNER LLC, a
Delaware limited liability company,
General Partner
By: ALLIANZ GP SUB LLC, a Delaware
limited liability company, Member
By: ALLIANZ ASSET MANAGEMENT INC.,
a Delaware corporation, Member
By: ___________________________
Dr. Joachim Faber
President and Chief
Executive Officer
ADVISORS LP MERGER SUB LLC
By: HOLDINGS LP GENERAL PARTNER LLC, a
Delaware limited liability company,
General Partner
By: ALLIANZ GP SUB LLC, a Delaware
limited liability company, Member
By: ALLIANZ ASSET MANAGEMENT INC.,
a Delaware corporation, Member
By: ___________________________
Dr. Joachim Faber
President and Chief
Executive Officer
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ANNEX A
TRANSACTION STEPS
VERSION 24 (MARCH 3, 2000)
1. Allianz GP Sub forms (i) Advisors LP Merger Sub as a wholly-owned LLC
subsidiary and (ii) Holdings LP General Partner as a wholly-owned LLC
subsidiary. Allianz GP Sub and Holdings LP General Partner form Holdings LP
Merger Sub as a limited partnership, with Allianz GP Sub holding the sole
limited partner interest and Holdings LP General Partner holding the sole
general partner interest. AZOA contributes cash and Allianz Stock to Allianz
GP Sub (which, in turn, contributes cash to Advisors LP Merger Sub and
Holdings LP Merger Sub) in an aggregate amount sufficient to satisfy all of
Allianz GP Sub's, Advisors LP Merger Sub's and Holdings LP Merger Sub's
obligations as described below.
2. Holdings LP Merger Sub merges into Holdings LP, with (i) Holdings LP
surviving, (ii) Holdings LP partners (Partners GP (5,099 Holdings LP GP
Units) and the public holders (49,558,972 Holdings LP Units as of October
31, 1999)) receiving cash at the Unit Price in exchange for their Holdings
LP Units and Holdings LP GP Units, (iii) Allianz GP Sub's limited partner
interest in Holdings LP Merger Sub converting into a limited partner
interest in Holdings LP and (iv) Holdings LP General Partner's general
partner interest in Holdings LP Merger Sub converting into a general partner
interest in Holdings LP.
3. Allianz GP Sub acquires Partners LLC's (i) 142,480 Class A Units for an
amount of cash equal to the Unit Price multiplied by 142,480 and (ii)
general partner interest in Partners GP for $100. Immediately thereafter,
Partners LLC dissolves and distributes its cash to its members.
4. Partners GP converts all but one of its Advisors GP Units into 799,998 Class
A Units.
5. Partners GP distributes (i) 37,584,048 Class A Units (all of its Class A
Units other than 1,826,272 Class A Units relating to interests under the
Holding LLC ETAs not held by PIMCO MDs), (ii) its Advisors GP Unit and (iii)
the PPGP Note Agreement (if outstanding) to Holding LLC.
6. Holding LLC distributes (i) 22,008,213 Class A Units (all of its Class A
Units other than 15,575,835 Class A Units relating to interests under the
Holding LLC ETAs held by PIMCO MDs) and (ii) the PPGP Note Agreement (if
outstanding) to PacMan.
7. Allianz GP Sub acquires all member interests in Holding LLC from PacMan for
$100, becoming the sole member of Holding LLC.
8. Allianz GP Sub contributes cash and Allianz Shares to Holding LLC (now owned
100% by Allianz GP Sub) with a total value equal to the Unit Price
multiplied by 15,575,835 (the number of Class A Units relating to interests
under the Holding LLC ETAs held by PIMCO MDs). Cash constitutes 84% of the
total value and the Allianz Shares 16% of the total value, with the Allianz
Shares valued for this purpose at $273.99 per registered share. Allianz GP
Sub also contributes the 142,480 Class A Units acquired in Step 3 to Holding
LLC.
9. Subject to obtaining any required consents of the respective limited
partners of NFJ LP, Parametric LP and Cadence LP, each of such limited
partnerships as to which required consents are obtained or as to which such
consents are not required shall distribute to its general partners (NFJ LLC,
PPA LLC and CCM LLC, respectively) all but one of the Class A Units in such
limited partnerships relating to the general partner interests in such
limited partnerships.
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10. NFJ LLC distributes its 306,204 Class A Units (plus the Class A Units
distributed to it pursuant to Step 9, if any) to PacMan. PPA LLC
distributes the Class A Units distributed to it pursuant to Step 9, if
any, to PacMan. CCM LLC distributes its 508,258 Class A Units (plus the
Class A Units distributed to it pursuant to Step 9, if any) to PacMan.
11. Contributions to PacPartners LLC:
(a) PacMan contributes (i) 22,008,213 Class A Units (acquired in Step
6), (ii) the Class A Units acquired in Step 10 (814,462 Class A Units
plus the Class A Units distributed pursuant to Step 9, if any) and
(iii) the PPGP Note Agreement (if outstanding) to PacPartners LLC in
exchange for PacPartners LLC Class B Units.
(b) Holding LLC contributes (i) the 15,575,835 Class A Units and
Advisors GP Unit (acquired in Step 5, and after giving effect to the
distribution to PacMan in Step 6) and (ii) the 142,480 Class A Units
(acquired in Step 8) to PacPartners LLC in exchange for PacPartners LLC
Class A Units.
12. Contributions to Advisors LP Merger Sub:
(a) PacFin contributes its 14,380,217 Class A Units to Advisors LP
Merger Sub in exchange for Merger Sub Class E Units.
(b) PacPartners LLC contributes its Class A Units to Advisors LP Merger
Sub in exchange for (i) Merger Sub Class A Units (for those Class A
Units owned indirectly by Allianz GP Sub) and (ii) Merger Sub Class E
Units (for those Class A Units owned indirectly by PacMan). PacPartners
LLC also contributes its Advisors GP Unit to Advisors LP Merger Sub in
exchange for a Merger Sub GP Unit.
(c) Holdings LP contributes its Advisors GP Units (49,564,071 as of
October 31, 1999) to Advisors LP Merger Sub in exchange for Merger Sub
Class A Units.
13. Advisors LP Merger Sub merges into Advisors LP, with Advisors LP surviving
and with the following consequences to unitholders:
(a) Class A Units held by Partners GP (1,826,272 Class A Units--
relating to interests under the Holding LLC ETAs not held by PIMCO MDs)
are exchanged for New Class B Units.
(b) Class A Units held by NFJ LP (430,211 Class A Units less the Class
A Units distributed pursuant to Step 9, if any), Parametric LP (393,860
Class A Units less the Class A Units distributed pursuant to Step 9, if
any) and Cadence LP (637,000 Class A Units less the Class A Units
distributed pursuant to Step 9, if any) receive cash at the Unit Price.
(c) Class A Units and the Advisors GP Unit held by Advisors LP Merger
Sub are cancelled.
(d) Class A Units held by other holders (3,697,114 Class A Units as of
October 31, 1999) receive cash at the Unit Price.
(e) Merger Sub Class A Units held by PacPartners LLC and Holdings LP
(representing Class A Units owned indirectly by Allianz GP Sub) are
converted into New Class A Units.
(f) Merger Sub Class E Units held by PacFin and PacPartners LLC
(representing Class A Units owned indirectly by PacMan) are converted
into New Class E Units.
(g) The Merger Sub GP Unit held by PacPartners LLC (representing the
Advisors GP Unit owned indirectly by Allianz GP Sub) is converted into
one new Advisors GP Unit.
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(h) 6,000,000 Class C Units held by Oppenheimer Group, Inc. remain in
place.
(i) 800 Class D Units held by PIMCO Equity Advisors' holders remain in
place.
14. Other Equity Interests receive the following:
(a) Options get cashed out at the Unit Price on the 16th day of the
third month following Closing.
(b) Deferred Units are converted into Allianz Deferred Payment Notes.
(c) Deferred Compensation Units and vested Deferred Restricted Units
are converted into cash at the Unit Price which remains deferred in the
Deferred Compensation Plan and invested by the Trustee at the direction
of the holders.
(d) Unvested Deferred Restricted Units are converted into Allianz
Deferred Payment Notes.
15. The constituent parties shall make all necessary tax elections and
allocations so that the tax basis of the partnership units owned directly
or indirectly by or for a party shall reflect the purchase price paid
therefor.
** To the extent that any Holding LLC ETA held by a person other than a PIMCO
MD is to be amended as contemplated with respect to the Holding LLC ETAs held
by the PIMCO MDs, the number of units to be distributed by Partners GP to
Holding LLC shall be appropriately modified, and the other related transaction
steps set forth herein shall be correspondingly modified.
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APPENDIX B
OPINION OF SALOMON SMITH BARNEY
[Salomon Smith Barney Letterhead]
October 29, 1999
General Partner
PIMCO Advisors Holdings L.P.
800 Newport Center Drive
Newport Beach, California 92260
General Partners
PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, California 92260
Dear General Partners:
PIMCO Advisors Holdings L.P. ("Holdings LP"), PIMCO Advisors L.P. ("Advisors
LP"), Pacific Asset Management LLC ("PacMan"), PIMCO Partners G.P. ("Partners
GP"), PIMCO Partners, LLC ("Partners LLC"), PIMCO Holding LLC ("Holding LLC"),
Allianz of America, Inc. ("AZOA") and the other parties named therein propose
to enter into the Implementation and Merger Agreement, to be dated as of
October 31, 1999 (the "Agreement"), pursuant to which, among other things:
(i) a newly formed limited partnership, indirectly wholly owned by
AZOA, will be merged with and into Holdings LP, with Holdings LP as the
surviving entity, in a transaction (the "Holdings LP Merger") in which each
outstanding unit of limited partnership interest in Holdings LP (the
"Holdings LP Units") will be converted into the right to receive, without
interest, an amount in cash equal to the Unit Price (as defined in the
Agreement) (the "Holdings LP Merger Consideration");
(ii) the Class A units of limited partnership interest in Advisors
LP ("Class A Advisors LP Units") held by PacMan or Pacific Financial
Products, Inc. immediately prior to the effective time of the Advisors LP
Merger (as defined below) (including certain Class A Advisors LP Units to
be distributed to PacMan by its affiliates prior thereto pursuant to the
Agreement), other than those burdened by employment termination and
noncompetition agreements with current or former employees, will be
exchanged for Class E units of membership interest in a newly formed
limited liability company owned directly or indirectly by AZOA ("Advisors
LP Merger Sub"), which in the Advisors LP Merger will be converted into new
Class E units of limited partnership interest in Advisors LP ("New Class E
Units"), which New Class E Units will be subject to certain purchase and
sale arrangements with AZOA pursuant to the Continuing Investment Agreement
to be entered into between AZOA and PacMan prior to the closing (the
"Closing") of the Advisors LP Merger (collectively, the "Pacific
Arrangements");
(iii) the Class A Advisors LP Units held by affiliates of PacMan
that are burdened by ETAs (as defined in the Agreement) with persons who
have agreed to an amendment of their ETAs extending their non-competition
obligations (an "ETA Amendment") will be acquired by an affiliate of AZOA
for cash and stock of Allianz A.G.;
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(iv) Advisors LP Merger Sub will be merged with and into Advisors
LP, with Advisors LP as the surviving entity, in a transaction (the
"Advisors LP Merger") in which (A) each Class A Advisors LP Unit
outstanding as of immediately prior to the effective time of the Advisors
LP Merger, other than (1) Class A Advisors LP Units exchanged or acquired
as described in clauses (ii) and (iii) above, (2) Class A Advisors LP Units
held by Advisors LP Merger Sub and (3) Class A Advisors LP Units converted
as described in clause (iv)(C) below, will be converted into the right to
receive, without interest, an amount in cash equal to the Unit Price (the
"Advisors LP Merger Consideration"), (B) each Class C unit and Class D unit
of limited partnership interest in Advisors LP outstanding as of
immediately prior to the effective time of the Advisors LP Merger will
remain outstanding and unaffected by the Advisors LP Merger, (C) the Class
A Advisors LP Units held by affiliates of PacMan that are burdened by ETAs
with persons who have not agreed to ETA Amendments will be converted into
new Class B units of limited partnership interest in Advisors LP, (D) the
Class A units of membership interest in Advisors LP Merger Sub will be
converted into new Class A units of limited partnership interest in
Advisors LP, and (E) the Class E units of membership interest in Advisors
LP Merger Sub will be converted into New Class E Units (as described in
clause (ii) above); and
(v) certain related transactions described in the Agreement with or
otherwise relating to key employees of Advisors LP and its subsidiaries
will be effected at or prior to the Closing, including without limitation
the entering into of certain severance arrangements and employment
agreements that will become effective as of the Closing, the establishment
of certain arrangements for payments to be made in cash and stock of
Allianz A.G. pursuant to the ETAs and the entering into of ETA Amendments
in connection therewith (as described in clause (iii) above), the
establishment of a five-year retention incentive bonus program and a seven-
year variable retention incentive bonus program, the grant of stock of
Allianz A.G. to certain key employees, and the equitization of a portion of
the existing Pacific Investment Management Company profit-sharing plan
(collectively, the "Management Arrangements"),
(the transactions described in clauses (i), (ii), (iii), (iv) and (v) of this
sentence or otherwise set forth in the Agreement, collectively, the
"Transaction"). The terms and conditions of the Transaction are set forth in
more detail in the Agreement.
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, of (i) the Holdings LP Merger Consideration to
the holders of Holdings LP Units, other than the Excluded Holders (as defined
below), (the "Holdings Covered Units"), and (ii) the Advisors LP Merger
Consideration to the holders of Class A Advisors LP Units, other than the
Excluded Holders, (the "Advisors Covered Units"). For purposes of this opinion,
"Excluded Holders" means Pacific Life Insurance Company and each of its
affiliates (including without limitation those entities holding the Class A
Advisors LP Units that are burdened by the ETAs), Partners LLC, Partners GP and
each of the managing directors of Pacific Management Investment Company
(including without limitation any units held for the benefit of such persons).
In connection with rendering our opinion, we have, among other things: (i)
reviewed the October 27, 1999 draft of the Agreement (including the exhibits
thereto) in the form provided to us, and have taken into account the terms of
the Transaction set forth therein, including without limitation the Pacific
Arrangements and the Management Arrangements; (ii) reviewed certain publicly
available business and financial information that we deemed relevant relating
to Holdings LP, Advisors LP and the industry in which they operate; (iii)
reviewed certain internal non-public financial and operating data and other
information provided to us by the management of Holdings LP
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and Advisors LP relating to Holdings LP's and Advisors LP's respective
businesses, including certain forecast and projection information as to the
future financial results of such businesses; (iv) reviewed certain publicly
available business and financial information with respect to certain other
companies that we believed to be relevant or comparable in certain respects to
Holdings LP and Advisors LP, and the trading markets for such other companies'
securities; (v) reviewed and analyzed certain publicly available and other
information concerning the trading of, and the trading market for, the Holdings
LP Units; (vi) reviewed the financial terms (including without limitation
arrangements with management and controlling persons to the extent publicly
available) of certain business combinations and acquisition transactions we
deem reasonably comparable to the Transaction and otherwise relevant to our
inquiry; (vii) discussed with members of senior management and other officers,
employees and representatives of Holdings LP and Advisors LP the foregoing,
including the past and current business operations, financial condition and
prospects of Holdings LP and Advisors LP; and (viii) considered such other
information, financial studies, analyses, investigations and financial,
economic, market and trading criteria as we deemed relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon, without assuming any responsibility for verification, the
accuracy and completeness of all of the financial and other information
provided to, discussed with, or reviewed by or for us, or publicly available.
We also have assumed that the final form of the Agreement (including the
exhibits thereto) will not vary in any respect that is material to our analysis
from the last draft reviewed by us. With respect to Holdings LP's and Advisors
LP's financial projections provided to, discussed with or reviewed for us by
the management of Holdings LP or Advisors LP, respectively, we have been
advised by management of Holdings LP and Advisors LP, respectively, and have
assumed, that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments on the part of management of
Holdings LP or Advisors LP, respectively, as to the future financial
performance of Holdings LP or Advisors LP, as applicable. We express no view as
to such projections or information or the assumptions on which they are based.
We have not assumed any responsibility for making or obtaining any independent
evaluations or appraisals of any of the assets or liabilities of Holdings LP or
Advisors LP, nor for conducting a physical inspection of the properties and
facilities of Holdings LP or Advisors LP, and we have not been furnished with
any such evaluation or appraisal. We have relied upon counsel to Holdings LP
and Advisors LP with respect to interpretations of the provisions contained in
the constituent documents and related agreements of Holdings LP and Advisors LP
and the application of applicable law to such documents and agreements. Our
opinion necessarily is based on market, economic and other conditions as they
exist and can be evaluated on the date hereof, and we assume no responsibility
to update or revise our opinion based upon circumstances or events occurring
after the date hereof. Our opinion does not address the underlying business
decision to effect the Transaction.
In connection with the preparation of this opinion, we have not been engaged
by Holdings LP or Advisors LP to solicit third-party indications of interest
for the acquisition of all or any part of Holdings LP or Advisors LP, and we
have not participated in the structuring of the Transaction or the negotiation
of the terms of the Agreement.
As you are aware, Salomon Smith Barney Inc. ("SSB") has acted as a financial
advisor to Holdings LP and Advisors LP in connection with the Transaction and
will receive a fee for such services, all of which fee will be received in
connection with the delivery of this opinion. In addition, Holdings LP and
Advisors LP have agreed to indemnify us for certain liabilities arising out of
our engagement. We, in the ordinary course of business, have from time to time
provided, and in the future may continue to provide, investment banking,
financial advisory and other related services to
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Holdings LP, Advisors LP, Allianz A.G. and/or their respective affiliates, as
the case may be, for which we have or will receive fees. In the ordinary course
of business, we or our affiliates may trade in the debt and equity securities
of Holdings LP, Allianz A.G. and/or their respective affiliates, as the case
may be, for our own accounts and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, we and our affiliates (including Citigroup Inc. and its
affiliates) may maintain business relationships with Holdings LP, Advisors LP,
Allianz A.G. and/or their respective affiliates.
This opinion is provided for the information of Advisors LP, Holdings LP,
Partners GP, Partners LLC and Holding LLC in the evaluation of the Transaction,
and this opinion is not intended to be and does not constitute a recommendation
to any equityholder of Holdings LP, Advisors LP or Partners LLC as to how such
equityholder should vote on any matters relating to the Transaction.
This opinion shall not be reproduced, disseminated, quoted, summarized or
referred to at any time, in any manner or for any purpose, nor shall any public
references to SSB or any of its affiliates be made by Holdings LP, Advisors LP,
Partners LLC or any of their respective affiliates, without the prior written
consent of SSB. Notwithstanding the foregoing, this opinion may be included in
its entirety or, with our prior review and consent, referred to in any proxy
statement sent to the equityholders of Holdings LP or Advisors LP with respect
to the Transaction.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, (i) the Holdings LP Merger Consideration is fair, from a
financial point of view, to the holders of Holdings Covered Units, and (ii) the
Advisors LP Merger Consideration is fair, from a financial point of view, to
the holders of Advisors Covered Units.
Very truly yours,
SALOMON SMITH BARNEY INC.
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APPENDIX C
OPINION OF MCLAGAN PARTNERS, INC.
[LETTERHEAD OF MCLAGAN PARTNERS]
October 29, 1999
PIMCO Partners LLC
PIMCO Advisors L.P.
c/o PIMCO Advisors L.P.
800 Newport Center Drive
Newport Beach, CA 92660
Gentleman:
PIMCO Advisors L.P. (PIMCO) has asked McLagan Partners to opine on the
suitability of specific retention incentive arrangements proposed in connection
with the acquisition of a controlling interest in PIMCO by an affiliate of
Allianz A.G. This letter responds to this request by:
. Providing background information about McLagan Partners.
. Confirming our understanding of the scope of the proposed request.
. Opining on the suitability of the proposed arrangements.
McLagan Partners' Qualifications
Founded in 1966, McLagan Partners specializes in providing compensation
consulting and related services to the financial services industry. We are a
global firm, with offices in Stamford, Chicago, London, Tokyo, and Hong Kong.
Our compensation-related services include:
. Annual and long-term incentive plan design.
. Retention plan design and evaluation in the context of mergers and
acquisitions.
. Surveys of pay levels and practices with the asset management, banking
and capital markets businesses.
Our clients include virtually every major global financial services firm,
including leading asset management companies, banks and investment banks,
securities firms, and insurance companies. Within the US asset management
industry, current clients include:
. Over 220 investment management organizations.
. 82% of the top 150 firms (as ranked by Pensions & Investments).
The Firm's Managing Directors are seasoned professionals, typically having
over 15 years of financial services industry experience.
Project Scope
PIMCO asked McLagan Partners to opine on the suitability of proposed
retention incentive arrangements and the payments provided for thereunder. Our
comments on the proposed retention incentive arrangements are based exclusively
on a review of:
. The PIMCO Advisors L.P. Retention Plan for Executives of Pacific
Investment Management Company (dated October 25, 1999).
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. Various analyses and proposed allocations prepared by management that
relate to the above Plan.
Our evaluation is based on the assumption that:
. The primary objectives of the proposed retention incentive arrangements
are to retain and motivate key executives and investment talent
subsequent to Allianz's acquisition of PIMCO.
. The loss of PIMCO's executives and senior investment talent would have a
materially adverse impact on PIMCO's business and investment results
and, in turn, the Firm's total enterprise value.
. The retention/incentive arrangements are not intended to act as
substitutes for ongoing base salary and bonus plans that are unrelated
to the proposed acquisition.
. A five-year retention period is required to integrate PIMCO's business
practices and processes, and the collective knowledge and expertise of
its staff into Allianz.
McLagan Partners' Opinion
We focused on the following in developing our Opinion on the Retention Plan
referred to above:
. External market practices associated with acquisition-related retention
incentive programs within the financial services industry.
. Internal historical compensation practices and expected current year pay
levels for investment talent within PIMCO.
. Extensive meetings with James G. Ward, Senior Vice President and
Director of Human Resources PIMCO Advisors.
. Project Apostle Executive Summary dated 27 October 1999.
. The Pacific Investment Management Company Non-Qualified Profit Sharing
Plan.
. Form of Employment Contracts for Pacific Investment Management Company
Managing Directors.
In terms of external market practices, we have observed the following
through our consulting work involving the design and evaluation of acquisition-
related retention plans within the financial services industry.
. Retention incentive program coverage is typically limited to officer-
level staff.
. Targeted retention incentive award values are greatest for incumbents
having the ability to most significantly impact future business and
investment results.
. Awards are often established as a multiple of annual cash compensation
within a tiered framework linked to organizational level. For example:
-- For staff below executive management, retention incentive multiples
often approximate one times annual compensation over a three-year
period.
-- For executive management (i.e., Managing Directors and above),
retention incentive multiples are higher.
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Award multiples for individual participants vary within this framework
based on a number of factors, including, but not limited to, relative business
impact and tenure.
. Retention incentive values and participation rates are generally higher
in acquisitions driven by strategic business concerns. Correspondingly,
such values and rates are generally lower when the acquiring firm's
objectives are strictly focused on near-term financial returns.
. The timing of retention incentive payouts generally coincides with the
anticipated time required to successfully integrate the acquired firm,
its business practices and investment processes. and its collective
knowledge and staff expertise
In terms of our understanding of PIMCO's internal pay practices and levels,
we observe that:
. PIMCO has covered its senior staff under several highly structured
incentive arrangements that are directly linked to PIMCO's profits.
. Based on past, current, and projected profits. PIMCO's incentive plans
have generated significant compensation, in aggregate and for selected
senior executives.
We are of the opinion that the proposed retention incentive arrangements
referenced herein are reasonable in light of competitive market practices and,
moreover, PIMCO's existing pay practices and levels. Further we are of the
opinion that the retention incentive arrangements referenced herein are
suitable to Allianz's presumed objectives of retaining and motivating PIMCO's
officers in the context of the contemplated acquisition by Allianz.
Cordially,
s/ Michael P. Curran
/s/ Adam B. Barnett
Michael P. Curran Adam B. Barnett
Managing Director Managing Director
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