<PAGE>
As filed with the Securities and Exchange Commission on May 11, 2000
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission File Number: 0-17089
BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
COMMONWEALTH OF MASSACHUSETTS 04-2976299
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
TEN POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 912-1900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of APRIL 30, 2000:
COMMON STOCK - PAR VALUE $1.00 11,702,513 SHARES
------------------------------ -----------------
(class) (outstanding)
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Cover Page ........................................................ 1
Index ............................................................. 2
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets ................................ 3
Consolidated Statements of Operations ...................... 4
Consolidated Statements of Changes in Stockholders' Equity . 5
Consolidated Statements of Cash Flows ...................... 6
Notes to Consolidated Financial Statements ................. 7 - 9
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... 10 - 16
Item 3 Quantitative and Qualitative Disclosures about Market Risk......... 17
PART II - OTHER INFORMATION
Item 1 Legal Proceedings ................................................. 17
Item 2 Changes in Securities and Use of Proceeds ......................... 17
Item 3 Defaults upon Senior Securities ................................... 17
Item 4 Submission of Matters to a Vote of Security Holders ............... 17
Item 5 Other Information ................................................. 17
Item 6 Exhibits and Reports on Form 8-K .................................. 17
Signature Page .................................................... 18
</TABLE>
2
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS:
Cash and due from banks ............................................... $ 25,244 $ 11,190
Federal funds sold .................................................... 29,000 --
Investment securities available for sale (amortized cost of $86,665
and $75,424, respectively) .......................................... 84,913 73,605
Mortgage-backed securities available for sale (amortized cost of $4,951
and $5,627, respectively) ........................................... 4,832 5,510
Loans receivable:
Commercial .......................................................... 194,604 190,817
Residential mortgage ................................................ 245,547 234,185
Home equity ......................................................... 23,815 25,039
Other ............................................................... 368 347
--------- ---------
Total loans....................................................... 464,334 450,388
Less allowance for loan losses ......................................... (5,666) (5,336)
--------- ---------
Net loans ........................................................ 458,668 445,052
Stock in the Federal Home Loan Bank of Boston ......................... 4,830 4,830
Premises and equipment, net ........................................... 5,085 4,739
Excess of cost over net assets acquired, net .......................... 2,944 3,015
Fees receivable ....................................................... 5,260 6,320
Accrued interest receivable ........................................... 3,520 3,597
Other assets .......................................................... 7,222 9,515
--------- ---------
Total assets ..................................................... $ 631,518 $ 567,373
========= =========
LIABILITIES:
Deposits .............................................................. $ 482,000 $ 420,535
Securities sold under agreements to repurchase ........................ 27,227 16,551
FHLB borrowings ....................................................... 74,613 80,672
Accrued interest payable .............................................. 1,261 1,281
Other liabilities ..................................................... 5,031 9,189
--------- ---------
Total liabilities ................................................ 590,132 528,228
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value per share;
authorized: 30,000,000 shares
issued: 11,693,813 shares in 2000 and 11,616,070 shares in 1999 .... 11,694 11,616
Additional paid-in capital ............................................ 12,864 12,341
Retained earnings ..................................................... 18,180 16,747
Stock subscriptions receivable ........................................ (154) (320)
Accumulated other comprehensive income (loss) ......................... (1,198) (1,239)
--------- ---------
Total stockholders' equity ....................................... 41,386 39,145
--------- ---------
Total liabilities and stockholders' equity .......................... $ 631,518 $ 567,373
========= =========
</TABLE>
3
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
2000 1999
--------------- ---------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Interest and dividend income:
Loans .................................................................... $ 8,869 $ 6,960
Taxable investment securities ............................................ 592 358
Non-taxable investment securities ........................................ 376 252
Mortgage-backed securities ............................................... 75 169
FHLB stock dividends ..................................................... 81 76
Federal funds sold ....................................................... 440 132
Deposits in banks ........................................................ 35 28
------------ ------------
Total interest and dividend income ................................... 10,468 7,975
------------ ------------
Interest expense:
Deposits ................................................................. 3,887 2,760
FHLB borrowings .......................................................... 1,174 1,072
Securities sold under agreements to repurchase ........................... 252 79
Federal funds purchased and other ........................................ 9 38
------------ ------------
Total interest expense ............................................... 5,322 3,949
------------ ------------
Net interest income .................................................. 5,146 4,026
Provision for loan losses ................................................ 300 238
------------ ------------
Net interest income after provision for loan losses .................. 4,846 3,788
------------ ------------
Fees and other income:
Investment management and trust .......................................... 5,736 4,207
Financial planning fees .................................................. 795 746
Equity in earnings (losses) of partnerships .............................. (174) 90
Deposit account service charges .......................................... 57 69
Gain on sale of loans .................................................... 6 44
Gain on sale of investment securities .................................... -- 46
Other .................................................................... 85 116
------------ ------------
Total fees and other income .......................................... 6,505 5,318
------------ ------------
Operating expense:
Salaries and employee benefits ........................................... 5,974 4,833
Occupancy and equipment .................................................. 1,082 656
Professional services .................................................... 319 372
Marketing and business development ....................................... 517 320
Contract services and processing ......................................... 322 253
Amortization of intangibles .............................................. 71 70
Other .................................................................... 491 437
------------ ------------
Total operating expense .............................................. 8,776 6,941
------------ ------------
Income before income taxes ........................................... 2,575 2,165
Income tax expense ....................................................... 794 676
------------ ------------
Income before cumulative effect of change in accounting principle .... 1,781 1,489
Cumulative effect of change in accounting principle ...................... -- 125
------------ ------------
Net income ........................................................ $ 1,781 $ 1,364
============ ============
Per share data:
Basic earnings per share:
Income before cumulative effect of change in accounting principle $ 0.15 $ 0.13
Cumulative effect of change in accounting principle ............. (0.00) (0.01)
------------ ------------
Net income ...................................................... $ 0.15 $ 0.12
============ ============
Diluted earnings per share:
Income before cumulative effect of change in accounting principle $ 0.15 $ 0.12
Cumulative effect of change in accounting principle ............. (0.00) (0.01)
============ ============
Net income ...................................................... $ 0.15 $ 0.11
============ ============
Average common shares outstanding ...................................... 11,674,426 11,543,615
============ ============
Average diluted shares outstanding ..................................... 12,025,502 11,883,695
============ ============
</TABLE>
4
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED STOCK COMPREHENSIVE
STOCK CAPITAL EARNINGS SUBSCRIPTIONS INCOME (LOSS) TOTAL
------------ ------------- -------------- ------------- ---------------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 ..... $ 11,513 $ 11,932 $ 9,551 $ (495) $ 112 $32,613
Net income ..................... -- -- 1,364 -- -- 1,364
Other comprehensive income, net:
Change in unrealized gain
(loss) on securities available
for sale ....................... -- -- -- -- (304) (304)
--------
Total other comprehensive income 1,060
Proceeds from issuance of
47,769 shares of common stock 48 328 -- -- -- 376
Stock options exercised ......... 18 36 -- -- -- 54
Stock subscription payments ..... -- -- -- 163 -- 163
======== ======== ======== ======== ======== ========
Balance at March 31, 1999 ......... $ 11,579 $ 12,296 $ 10,915 $ (332) $ (192) $ 34,266
======== ======== ======== ======== ======== ========
Balance at December 31, 1999 ...... $ 11,616 $ 12,341 $ 16,747 $ (320) $ (1,239) $ 39,145
Net income ...................... -- -- 1,781 -- -- 1,781
Other comprehensive income, net:
Change in unrealized gain (loss)
on securities available
for sale ...................... -- -- -- -- 41 41
--------
Total other comprehensive
income ........................ 1,822
Dividends paid to shareholders .. -- -- (348) -- -- (348)
Proceeds from issuance of
66,793 shares of common
stock ......................... 67 505 -- -- -- 572
Stock options exercised ......... 11 18 -- -- -- 29
Stock subscription payments ..... -- -- -- 166 -- 166
======== ======== ======== ======== ======== ========
Balance at March 31, 2000 ........ $ 11,694 $ 12,864 $ 18,180 $ (154) $ (1,198) $ 41,386
======== ======== ======== ======== ======== ========
</TABLE>
5
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................... $ 1,781 $ 1,364
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization ........................................ 414 439
Gain on sale of loans ................................................ (6) (44)
Gain on sale of investment securities ................................ -- (46)
Provision for loan losses ............................................ 300 238
Distributed (undistributed) earnings of partnership investments ...... 2,231 1,738
Loans originated for sale ............................................ (1,000) (5,487)
Proceeds from sale of loans .......................................... 1,006 5,531
(Increase) decrease in:
Accrued interest receivable ..................................... 77 (160)
Investment management fees receivable ........................... 1,060 (18)
Other assets .................................................... 38 (382)
Increase (decrease) in:
Accrued interest payable ........................................ (20) 527
Other liabilities ............................................... (4,158) (2,773)
-------- --------
Net cash provided (used) by operating activities ............ 1,723 927
-------- --------
Cash flows from investing activities:
Net decrease (increase) in fed funds sold ................................ (29,000) 4,000
Investment securities available for sale:
Purchases ............................................................ (14,016) (40,444)
Sales ................................................................ -- 27,105
Maturities ........................................................... 2,635 6,040
Mortgage-backed securities available for sale:
Sales ................................................................ -- 3,387
Principal payments ................................................... 669 895
Net decrease (increase) in loans ......................................... (13,880) (25,247)
Recoveries on loans previously charged off ............................... 36 24
Capital expenditures ..................................................... (614) (145)
-------- --------
Net cash provided (used) by investing activities ............ (54,170) (24,385)
-------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits ...................................... 61,465 28,834
Net increase (decrease) in repurchase agreements ......................... 10,676 3,785
FHLB advances:
Proceeds ............................................................. -- 3,629
Repayments ........................................................... (6,059) (8,636)
Proceeds from stock subscriptions receivable ............................. 166 163
Dividends paid to stockholders ........................................... (348) --
Proceeds from issuance of common stock ................................... 601 430
-------- --------
Net cash provided (used) by financing activities ............ 66,501 28,205
-------- --------
Net increase (decrease) in cash and due from banks ....................... 14,054 4,747
Cash and due from banks at beginning of year ............................. 11,190 12,949
-------- --------
Cash and due from banks at end of period ................................. $ 25,244 $ 17,696
======== ========
Supplementary disclosures of cash flow information:
Cash paid during the period for interest ................................. $ 5,345 $ 3,422
Cash paid during the period for income taxes ............................. 1,040 313
</TABLE>
6
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated financial statements of Boston Private Financial Holdings,
Inc. (the "Company") include the accounts of the Company and its wholly-owned
subsidiaries, Boston Private Bank & Trust Company (the "Bank"), Boston Private
Investment Management, Inc. ("BPIM"), and RINET Company ("RINET"). The Bank's
consolidated financial statements include the accounts of its wholly owned
subsidiaries, BPB Securities Corporation, Boston Private Asset Management
Corporation, and Boston Private Preferred Capital Corporation. BPIM's
consolidated financial statements include the accounts of its wholly owned
subsidiary, Westfield Capital Management Company ("Westfield"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ from these estimates. Material estimates
that are particularly susceptible to change relate to the determination of the
allowance for loan losses. In connection with the determination of the allowance
for loan losses, management obtains independent appraisals for significant
properties.
The unaudited interim consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles and
include all necessary adjustments of a normal recurring nature, which in the
opinion of management, are required for a fair presentation of the results and
financial condition of the Company. The interim results of consolidated
operations are not necessarily indicative of the results for the entire year.
The information in this report should be read in conjunction with the
consolidated financial statements and accompanying notes included in the
December 31, 1999 Annual Report to Shareholders. Certain fiscal 1999 information
has been reclassified to conform to the 2000 presentation.
(2) EARNINGS PER SHARE
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company. The earnings per share calculation
is based upon the weighted average number of common shares and common share
equivalents outstanding during the period. Stock options, when dilutive, are
included as common stock equivalents using the treasury stock method.
The following table is a reconciliation of the numerators and denominators
of basic and diluted earnings per share computations for the three months ended
March 31:
<TABLE>
<CAPTION>
2000 1999
------------------------------ -----------------------------
Per Per
Share Share
Income Shares Amount Income Shares Amount
----------------------------- -----------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net Income ..... $1,781 11,674 $0.15 $1,364 $11,544 $0.12
======= =======
EFFECT OF DILUTIVE SECURITIES
Stock Options .. -- 352 -- 340
-------------------- -------------------
DILUTED EPS
----------------------------- -----------------------------
Net Income ..... $1,781 $12,026 $0.15 $1,364 $11,884 $0.11
</TABLE>
7
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) BUSINESS SEGMENTS
MANAGEMENT REPORTING
The Company has three reportable segments, the Bank, Westfield, and RINET.
The financial performance of the Company is managed and evaluated by business
segment. The segments are managed separately because each business is a company
with different clients, employees, systems, risks, and marketing strategies.
DESCRIPTION OF BUSINESS SEGMENTS
The Bank pursues a "private banking" business strategy and is principally
engaged in providing banking, investment and fiduciary products to high net
worth individuals, their families and businesses in the greater Boston area and
New England and, to a lesser extent, Europe and Latin America. The Bank offers
its clients a broad range of basic deposit services, including checking and
savings accounts, with automated teller machine ("ATM") access, and cash
management services through sweep accounts and repurchase agreements. The Bank
also offers commercial, residential mortgage, home equity and consumer loans. In
addition, it provides investment advisory and asset management services,
securities custody and safekeeping services, trust and estate administration and
IRA and Keogh accounts. The Bank's investment management emphasis is on
large-cap equity and actively managed fixed income portfolios.
Westfield serves the investment management needs of high net worth
individuals and institutions with endowments or retirement plans in the greater
Boston area, New England, and other areas of the U.S. Westfield specializes in
growth equity portfolios, and also acts as the investment manager for five
limited partnerships. Its investment services include a particular focus on
identifying and managing small and mid cap equity positions as well as balanced
growth accounts.
RINET provides fee-only financial planning, tax planning and asset
allocation services to high net worth individuals and their families in the
greater Boston area, New England, and other areas of the U.S. Its capabilities
include tax planning and preparation, asset allocation, estate planning,
charitable planning, planning for employment benefits, including 401(k) plans,
and alternative investment analysis.
MEASUREMENT OF SEGMENT PROFIT AND ASSETS
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Revenues, expenses, and assets
are recorded by each segment, and management reviews separate financial
statements. In addition to direct expenses, each business segment is allocated a
share of holding company expenses based on the segment's percentage of
consolidated net income.
RECONCILIATION OF REPORTABLE SEGMENT ITEMS
The following tables are a reconciliation of the revenues, net income,
assets, and other significant items of reportable segments as of and for the
quarters ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
2000
--------------------------------------------------------------------------------
BANK WESTFIELD RINET OTHER INTERSEGMENT TOTAL
----------- ------------ ------------ ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues from External Customers:
Net Interest Income .......... $ 5,146 $ 13 $ -- $ -- $ (13) $ 5,146
Non-Interest Income .......... 2,399 3,310 796 -- -- 6,505
-------- -------- -------- ---------- -------- --------
Total Revenues .............. 7,545 3,323 796 -- (13) 11,651
Provision for Loan Losses ....... 300 -- -- -- -- 300
Non-Interest Expense ............ 5,776 2,379 621 -- -- 8,776
Income Taxes .................... 336 387 71 -- -- 794
======== ======== ======== ========== ======== ========
Segment Profit .................. $ 1,133 $ 557 $ 104 $ -- $ (13) $ 1,781
======== ======== ======== ========== ======== ========
BALANCE SHEET DATA:
Total Segment Assets ............ $625,061 $ 6,686 $ 996 $ 1,500 $ (2,725) $631,518
======== ======== ======== ========== ======== ========
</TABLE>
8
<PAGE>
BOSTON PRIVATE FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------------------------
BANK WESTFIELD RINET OTHER INTERSEGMENT TOTAL
----------- ------------ ------------ ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues from External Customers:
Net Interest Income .......... $ 4,026 $ 31 $ -- $ -- $ (31) $ 4,026
Non-Interest Income .......... 2,052 2,508 758 -- -- 5,318
--------- --------- --------- ---------- ---------- ---------
Total Revenues .............. 6,078 2,539 758 -- (31) 9,344
Provision for Loan Losses ....... 238 -- -- -- -- 238
Non-Interest Expense ............ 4,440 1,933 693 -- -- 7,066
Income Taxes .................... 401 248 27 -- -- 676
========= ========= ========= ========== ========== =========
Segment Profit .................. $ 999 $ 358 $ 38 $ -- $ (31) $ 1,364
========= ========= ========= ========== ========== =========
BALANCE SHEET DATA:
Total Segment Assets ............ $ 480,673 $ 3,821 $ 685 $ 1,805 $ (2,149) $ 484,935
========= ========= ========= ========== ========== =========
</TABLE>
(4) RECENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". This Statement establishes
accounting and reporting standards for derivative instruments and hedging
activities. It requires that entities recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge. Under this Statement, an entity that elects
to apply hedge accounting is required to establish at the inception of the hedge
the method it will use for assessing the effectiveness of the hedging derivative
and the measurement approach for determining the ineffective aspect of the
hedge. In June 1999, the FASB issued SFAS No.137 "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". The Statements are effective for fiscal years beginning
after June 15, 2000, and are not expected to have a material impact on the
Company's consolidated financial statements.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 2000
THIS QUARTERLY REPORT CONTAINS CERTAIN STATEMENTS THAT MAY BE CONSIDERED
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF, AMONG OTHER FACTORS,
CHANGES IN LOAN DEFAULTS AND CHARGE-OFF RATES, REDUCTION IN DEPOSIT LEVELS
NECESSITATING INCREASED BORROWING TO FUND LOANS AND INVESTMENTS, CHANGES IN
INTEREST RATES, FLUCTUATIONS IN ASSETS UNDER MANAGEMENT AND OTHER SOURCES OF FEE
INCOME, CHANGES IN ASSUMPTIONS USED IN MAKING SUCH FORWARD-LOOKING STATEMENTS,
AS WELL AS THE FACTORS LISTED UNDER "RISK FACTORS AND FACTORS AFFECTING FORWARD
LOOKING STATEMENTS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1999.
GENERAL
Boston Private Financial Holdings, Inc. (the "Company") is incorporated
under the laws of the Commonwealth of Massachusetts and is registered with the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
as a bank holding company under the Bank Holding Company Act of 1956, as amended
(the "BHCA"). On July 1, 1988, the Company became the parent holding company of
Boston Private Bank & Trust Company (the "Bank"), a trust company chartered by
the Commonwealth of Massachusetts and insured by the Federal Deposit Insurance
Corporation (the "FDIC"). Effective April 22, 1998, the Company changed its name
from Boston Private Bancorp, Inc. to Boston Private Financial Holdings, Inc.
On October 31, 1997, the Company acquired Westfield Capital Management
Company Inc. ("Westfield"), a Massachusetts corporation engaged in providing a
range of investment management services to individual and institutional clients,
in exchange for 3,918,367 newly issued shares of the Company's common stock. On
October 15, 1999, the Company acquired RINET, a Massachusetts corporation
engaged in providing financial planning and asset allocation services to high
net worth individuals and families, in exchange for 765,697 newly issued shares
of the Company's common stock. Each acquisition was accounted for as a "pooling
of interests." Accordingly, the results of operations of the Company reflect the
financial position and the results of operations including Westfield and RINET
on a consolidated basis for all periods presented.
The Company conducts substantially all of its business through its wholly
owned operating subsidiaries, the Bank, Westfield, and RINET. A description of
each subsidiary is provided in Note 3 to the Consolidated Financial Statements.
FINANCIAL CONDITION
TOTAL ASSETS. Total assets increased $64.1 million, or 11.3% from $567.4
million at December 31, 1999 to $631.5 million at March 31, 2000. This increase
is due to deposit growth, which was used to fund new loans and purchase
investment securities.
INVESTMENTS. Total investments (consisting of cash, federal funds sold,
investment securities, mortgage-backed securities, and stock in the FHLB of
Boston) were $148.8 million, or 23.6% of total assets, at March 31, 2000,
compared to $95.1 million, or 16.8% of total assets, at December 31, 1999. Of
the $53.7 million increase in investments during the first quarter of 2000,
$43.1 million was due to higher deposit balances, which resulted in an increase
in cash and federal funds sold at quarter end. The remaining $10.6 million
increase is due to funding of the investment portfolio. Management periodically
evaluates investment alternatives to properly manage the overall balance sheet.
The timing of sales and reinvestments is based on various factors, including
management's evaluation of interest rate trends and total bank liquidity.
10
<PAGE>
The following table is a summary of investment and mortgage-backed
securities available for sale as of March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
Amortized Unrealized Market
---------------------
Cost Gains Losses Value
------------ ---------- ---------- -------------
<S> <C> <C>
AT MARCH 31, 2000
U.S. Government and agencies ........ $ 42,169 $ 4 $ (1,305) $ 40,868
Municipal bonds ..................... 44,496 5 (456) 44,045
Mortgage-backed securities .......... 4,951 -- (119) 4,832
============ ========= =========== =============
Total investments ................ $ 91,616 $ 9 $ (1,880) $ 89,745
============ ========= =========== =============
AT DECEMBER 31, 1999
U.S. Government and agencies $ 36,174 $ -- $ (1,362) $ 34,812
Municipal bonds 39,250 2 (459) 38,793
Mortgage-backed securities 5,627 -- (117) 5,510
============ ========= =========== =============
Total investments $ 81,051 $ 2 $ (1,938) $ 79,115
============ ========= =========== =============
</TABLE>
LOANS. Total loans increased $13.9 million, or 3.1%, during the first
quarter of 2000 from $450.4 million, or 79.4% of total assets, at December 31,
1999, to $464.3 million, or 73.5% of total assets, at March 31, 2000. Both the
commercial and residential mortgage loan portfolios continued to experience
growth due to the strong local economy and demand for financing. Commercial
loans increased $3.8 million, or 2.0%, and residential mortgage loans increased
$11.4 million, or 4.9%, during the first quarter of 2000 as a result of net new
loan originations.
RISK ELEMENTS. The following table sets forth information regarding
non-performing loans, non-performing assets, and delinquent loans 30-89 days
past due as to interest or principal at the dates indicated.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Loans accounted for on a nonaccrual basis ........ $1,707 $1,317
Loans past due 90 days or more, but still accruing -- --
------ ------
Total non-performing loans ....................... 1,707 1,317
Other real estate owned .......................... -- --
====== ======
Total non-performing assets ...................... $1,707 $1,317
====== ======
Delinquent loans 30-89 days past due ............. $2,438 $2,042
====== ======
</TABLE>
The Company discontinues the accrual of interest on a loan when the
collectibility of principal or interest is in doubt. In certain instances, loans
that have become 90 days past due may remain on accrual status if the value of
the collateral securing the loan is sufficient to cover principal and interest
and the loan is in the process of collection.
Total non-performing assets increased by $390,000, or 29.6% during the
first quarter of 2000. However, the percentage of non-performing assets to total
assets remained fairly stable at 0.27% as of March 31, 2000, compared to 0.23%
as of December 31, 1999. The Company continues to evaluate the underlying
collateral and value of each of its non-performing assets and pursues the
collection of all amounts due.
At March 31, 2000, loans with an aggregate balance of $2.4 million, or
0.53% of total loans, were 30 to 89 days past due, an increase of $396,000, or
19.4%, from $2.0 million, or 0.45% of total loans, reported at December 31,
1999. Most of these loans are adequately secured and management's success in
keeping these borrowers current varies from month to month.
11
<PAGE>
ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is established
through a charge to operations. When management believes that the collectibility
of a loan's principal balance is unlikely, the principal amount is charged
against the allowance. Recoveries on loans which have been previously charged
off are credited to the allowance as received.
The allowance for loan losses is determined using a systematic analysis and
procedural discipline based on historical experience, product types, and
industry benchmarks. The allowance is segregated into three components:
"general", "specific" and "unallocated". The general component is determined by
applying coverage percentages to groups of loans based on risk ratings and
product types. Periodic loan reviews are performed to individually assess the
inherent risk and assign risk ratings to each loan. Coverage percentages applied
are determined based on industry practice and management's judgement. The
specific component is established by allocating a portion of the allowance for
loan losses to individual classified loans on the basis of specific
circumstances and assessments. The unallocated component supplements the first
two components based on management's judgement of the effect of current and
forecasted economic conditions on the borrowers' abilities to repay, an
evaluation of the allowance for loan losses in relation to the size of the
overall loan portfolio, and consideration of the relationship of the allowance
for loan losses to non-performing loans, net charge-off trends, and other
factors. While this evaluation process utilizes historical and other objective
information, the classification of loans and the establishment of the allowance
for loan losses rely to a great extent on the judgement and experience of
management.
While management evaluates currently available information in establishing
the allowance for loan losses, future adjustments to the allowance may be
necessary if economic conditions differ substantially from the assumptions used
in making the evaluations. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review a financial
institution's allowance for loan losses. Such agencies may require the financial
institution to recognize additions to the allowance based on their judgments
about information available to them at the time of their examination.
The following table is an analysis of the Bank's allowance for loan losses
for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Ending gross loans ........................... $ 464,334 $ 374,305
========= =========
Allowance for loan losses, beginning of period $ 5,336 $ 4,386
Provision for loan losses ................. 300 238
Charge-offs ............................... (6) (7)
Recoveries ................................ 36 24
========= =========
Allowance for loan losses, end of period ..... $ 5,666 $ 4,641
========= =========
</TABLE>
DEPOSITS AND BORROWINGS. The Company experienced an increase in total
deposits of $61.5 million, or 14.6%, during the first quarter of 2000, from
$420.5 million, or 74.1% of total assets, at December 31, 1999, to $482.0
million, or 76.3% of total assets, at March 31, 2000. This increase was due to
higher average balances in existing client accounts, as well as a significant
number of new accounts opened during the first quarter of 2000. Most of the
deposit increase was in demand deposits, NOW accounts, and money market
accounts.
12
<PAGE>
The following table shows the composition of the Company's deposits at
March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
--------------------- ---------------------
AS A % OF AS A % OF
BALANCE TOTAL BALANCE TOTAL
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Demand deposits ........................... $ 87,397 18.1% $ 53,058 12.6%
NOW ....................................... 52,482 10.9 40,875 9.7
Savings ................................... 4,169 0.9 4,607 1.1
Money Market .............................. 251,352 52.1 238,513 56.7
Certificates of deposit under $100,000 .... 20,968 4.4 22,394 5.3
Certificates of deposit $100,000 or greater 65,632 13.6 61,088 14.5
-------- ----- -------- -----
Total ................................... $482,000 100.1% $420,535 100.1%
======== ===== ======== =====
</TABLE>
Total borrowings (consisting of securities sold under agreements to
repurchase ("repurchase agreements"), federal funds purchased, and FHLB
borrowings) increased by $4.6 million or 4.7%, during the first three months of
2000. This increase was attributable to an increase in repurchase agreements
with cash management customers of the Bank, partially offset by paydowns of FHLB
borrowings. Management will from time to time take advantage of opportunities to
fund asset growth with borrowings, but on a long-term basis the Company intends
to replace a portion of its borrowings with core deposits.
LIQUIDITY. Liquidity is defined as the ability to meet current and future
financial obligations of a short-term nature. The Company further defines
liquidity as the ability to respond to the needs of depositors and borrowers as
well as to earnings enhancement opportunities in a changing marketplace. Primary
sources of liquidity consist of investment management fees, financial planning
fees, deposit inflows, loan repayments, borrowed funds, and maturity and sales
of investment securities. These sources fund the Company's lending and
investment activities.
Management is responsible for establishing and monitoring liquidity targets
as well as strategies to meet these targets. At March 31, 2000, cash, federal
funds sold and securities available for sale amounted to $144.0 million, or
22.8% of total assets of the Company. This compares to $90.3 million, or 15.9%
of total assets, at December 31, 1999.
In general, the Bank maintains a liquidity target of 10% to 20% of total
assets. The Bank is a member of the FHLB of Boston and as such has access to
both short and long-term borrowings of up to $195.3 million as of March 31,
2000. In addition, the Bank maintains short-term lines of credit at the Federal
Reserve Bank and other correspondent banks totaling $79.0 million, and has
established brokered certificate of deposit lines with several institutions
aggregating $120.0 million. Management believes that the Bank has adequate
liquidity to meet its commitments for the foreseeable future.
Westfield's primary source of liquidity consists of investment management
fees that are collected on a quarterly basis. At March 31, 2000 Westfield had
working capital of approximately $3.2 million. Management believes that
Westfield has adequate liquidity to meet its commitments for the foreseeable
future.
RINET's primary source of liquidity consists of financial planning fees
that are collected on a quarterly basis. At March 31, 2000 RINET had working
capital of approximately $300,000. Management believes that RINET has adequate
liquidity to meet its commitments for the foreseeable future.
The Company's primary sources of funds are dividends from its subsidiaries,
issuance of its Common Stock and borrowings. Management believes that the
Company has adequate liquidity to meet its commitments for the foreseeable
future.
13
<PAGE>
CAPITAL RESOURCES. Total stockholders' equity of the Company at March 31,
2000 was $41.4 million or 6.55% of total assets, compared to $39.1 million, or
6.90% of total assets at December 31, 1999. This increase was the result of the
Company's net income for the quarter of $1.8 million, combined with common stock
issued in connection with stock grants and proceeds from options exercised, less
dividends paid to shareholders and the change in accumulated other comprehensive
income.
The Company is subject to various regulatory capital requirements
administered by federal agencies. Failure to meet minimum capital requirements
can result in certain mandatory, and possibly additional discretionary actions
by regulators that, if undertaken, could have a material effect on the Company's
financial statements. For example, under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Similarly, the Company is also subject to capital
requirements administered by the Federal Reserve Bank with respect to certain
non-banking activities, including adjustments in connection with off-balance
sheet items.
The following table presents actual capital amounts and regulatory capital
requirements as of March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
TO BE WELL CAPITALIZED
FOR CAPITAL ADEQUACY UNDER PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------------------ -------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF MARCH 31, 2000:
Total risk-based capital
Company ............ $34,548 11.78% $23,462 >8.0% $29,328 >10.0
Bank ............... 38,277 10.53 29,078 8.0 36,347 10.0
Tier I risk-based
Company ............ 30,870 10.53 11,731 4.0 17,597 6.0
Bank ............... 33,720 9.28 14,539 4.0 21,808 6.0
Tier I leverage capital
Company ............ 30,870 6.60 18,706 4.0 23,383 5.0
Bank ............... 33,720 5.72 23,574 4.0 29,468 5.0
AS OF DECEMBER 31, 1999:
Total risk-based capital
Company ............ $41,792 11.84% $28,232 >8.0% $35,290 >10.0
Bank ............... 36,837 10.72 27,495 8.0 34,368 10.0
Tier I risk-based
Company ............ 37,369 10.59 14,116 4.0 21,174 6.0
Bank ............... 32,528 9.46 13,747 4.0 20,621 6.0
Tier I leverage capital
Company ............ 37,369 6.79 22,006 4.0 27,507 5.0
Bank ............... 32,528 5.99 21,720 4.0 27,150 5.0
</TABLE>
14
<PAGE>
RESULTS OF OPERATIONS
NET INCOME. The Company recorded net income of $1.8 million, or $0.15 per
diluted share, for the quarter ended March 31, 2000. This represents a 30.6%
increase over the net income of $1.4 million, or $0.11 per diluted share, for
the same period in 1999. During the quarter ended March 31, 1999, the Company
implemented an accounting change that resulted in a non-recurring charge of
$125,000. Excluding the impact of this non-recurring charge, net income would
have been $1.5 million, or $0.12 per diluted share for the first quarter of
1999.
NET INTEREST INCOME. For the quarter ended March 31, 2000, net interest
income was $5.1 million, an increase of $1.1 million, or 27.8%, over the same
period in 1999. This increase was primarily attributable to an increase of
$120.5 million, or 27.0%, in the average balance of earning assets. The
Company's net interest margin increased 6 basis points to 3.71% for the first
quarter of 2000, compared to 3.65% for the same period last year.
INTEREST INCOME. During the first three months of 2000, interest income was
$10.5 million, an increase of $2.5 million, or 31.3%, over the same period in
1999. Interest income on commercial loans increased 20.5% to $4.2 million for
the three months ended March 31, 2000, compared to $3.5 million for the same
period in 1999. Interest income from residential mortgage loans increased 33.9%
to $4.1 million compared to $3.1 million, and home equity and other loans
increased 39.2% to $526,000 compared to $379,000, for the same periods,
respectively. These increases were primarily due to an increase in both loan
volume and yield. The average balance of commercial loans increased 11.5% while
the average rate increased 8.1%, or 69 basis points to 9.20% for the quarter
ended March 31, 2000. The average balance of residential mortgage loans
increased 36.0%, while the average rate decreased 1.5%, or 10 basis points to
6.81% for the same period, and the average balance of home equity and other
loans increased 21.8%, while the average rate increased 14.2%, or 107 basis
points to 8.64%.
Total investment income increased $584,000, or 57.5%, to $1.6 million for
the quarter ended March 31, 2000, compared to $1.0 million for the same period
in 1999. This increase was due to a 40.0% increase in the average balance of
investments and an 11.7% increase in the average tax-equivalent yield to 6.09%
for the first quarter of 2000, compared to 5.45% for the same period in 1999.
INTEREST EXPENSE. Interest paid on deposits and borrowings increased $1.4
million, or 34.8%, to $5.3 million for the three months ended March 31, 2000,
from $3.9 million for the same period during 1999. This increase in the
Company's interest expense reflects an increase in the average balance of
interest-bearing liabilities of $103.9 million, or 26.9% between the two
periods, combined with a 5.6% increase in the average cost of interest-bearing
liabilities to 4.35% for the first quarter of 2000, compared to 4.12% for the
same period in 1999.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $300,000 for
the quarter ended March 31, 2000, compared to $238,000 for the same period in
1999. Management evaluates several factors including new loan originations,
estimated charge-offs, and risk characteristics of the loan portfolio when
determining the provision for loan losses. These factors include the level and
mix of loan growth, the level of non-accrual and delinquent loans, and the level
of charge-offs and recoveries. Also see discussion under "FINANCIAL CONDITION
ALLOWANCE FOR LOAN LOSSES." Net recoveries were $30,000 during the first quarter
of 2000, compared to $17,000 for the same period in 1999.
FEES AND OTHER INCOME. Fees and other income increased $1.2 million, or
22.3% to $6.5 million for the three-month period ending March 31, 2000, compared
to $5.3 million for the same period in 1999. The majority of fee income is
attributable to advisory fees earned on assets under management. These fees
increased $1.5 million, or 36.3% to $5.7 million for the first quarter of 2000
compared to $4.2 million for the same period in 1999. This increase is primarily
due to a 37.7% increase in assets under management from $2.9 billion on March
31, 1999 to $3.9 billion on March 31, 2000.
Financial planning fees have increased $49,000, or 6.6% to $795,000 for the
first quarter of 2000, compared to $746,000 for the same period in 1999. This
increase is due to due to a combination of new clients, increased services to
existing clients, and annual fee increases. Equity in earnings (losses) of
partnerships has decreased $264,000 to $(174,000) for the three months ended
March 31, 2000, compared to $90,000 for the same period in 1999. This decrease
is primarily due to a reduction in the value of Westfield's general partnership
interest in its hedge funds.
15
<PAGE>
Deposit account service fees have decreased $12,000, or 17.4%, to $57,000
for the first quarter of 2000 as a result of a lower level of overdraft charges
and other fees assessed based on client activity. Gain on sale of loans has
decreased $38,000 to $6,000 due to the fact that interest rates have increased,
reducing the demand for fixed rate mortgage loans that are typically sold in the
secondary market. Other fee income decreased $31,000 to $85,000 due to a lower
level of non-amortized commercial loan fees.
OPERATING EXPENSE. Total operating expense for the first quarter of 2000
increased $1.8 million, or 26.4% to $8.8 million compared to $6.9 million for
the same period in 1999. This increase in total operating expense was
attributable to the Company's continued growth and expansion. The Company has
experienced a 30.2% increase in total balance sheet assets, a 37.7% increase in
client assets under management, and an 11.7% increase in the number of employees
from March 31, 1999 to March 31, 2000. In addition, the Company has expanded its
facilities at its headquarters at Ten Post Office Square, Boston, Massachusetts
and began leasing space for a new banking office as of February 1, 2000.
Salaries and benefits, the largest component of operating expense,
increased $1.1 million, or 23.6%, to $6.0 million for the quarter ended March
31, 2000, from $4.8 million for the same period in 1999. This increase was due
to a higher level of employee incentive compensation, an 11.7% increase in the
number of employees, normal salary increases, and the related taxes thereon.
Occupancy and equipment expense increased $426,000, or 64.9%, to $1.1
million for the first quarter of 2000, from $656,000 for the same period last
year. This increase was primarily attributable to higher depreciation expense as
a result of the Company's continued investments in technology, and the increased
occupancy expenses related to expansion at Ten Post Office Square, Boston,
Massachusetts, and the new banking office in the Back Bay area of Boston,
Massachusetts.
Professional services include legal fees, consulting fees, and other
professional services such as audit and tax preparation. These expenses
decreased $53,000, or 14.2% due to the fact that the Company had one-time legal
and consulting expenses related to Year 2000 readiness during the first quarter
of 1999.
Marketing and business development increased $197,000, or 61.6%, to
$517,000 for the first quarter of 2000. Of this increase $153,000 was as a
result of increased image advertising designed to increase the visibility of the
Company and its products and services. The remaining increase of $43,000 was a
result of increased business development activity due to growth in sales staff.
Contract services and processing includes outsourced systems, data
processing and custody expense. These expenses increased $69,000, or 27.3% as a
result of increased service and volume related charges for data processing and
custody.
Other expenses include supplies, telephone, postage, publications and
subscriptions, and other miscellaneous business expenses. These expenses have
increased $54,000, or 12.4% to $491,000, primarily as a result of increased
business volume and an increase in the number of employees.
INCOME TAX EXPENSE. The Company recorded income tax expense of $794,000 for
the first quarter of 2000 as compared to $676,000 for the same period last year.
The effective tax rate was 30.8% and 31.2% for the two periods, respectively.
The decrease in the Company's effective tax rate is a result of a higher
percentage of non-taxable investment income, and an increase in the amount of
low income housing tax credits.
16
<PAGE>
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
For information related to this item, see the Company's December 31, 1999
Form 10-K, Item 6 - Interest Rate Sensitivity and Market Risk. No material
changes have occurred since that date.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information related to this item, see the Company's December 31, 1999
Form 10-K. No material changes have occurred since that date.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
No changes in security holders' rights have taken place.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No defaults upon senior securities have taken place.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
No matters submitted to a vote of security holders.
ITEM 5. OTHER INFORMATION
No information to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 10.1 Limited Liability Company Agreement of Westfield Partners,
L.L.C.
Exhibit 10.2 Fist Amendment to Limited Liability Company Agreement of
Westfield Partners, L.L.C.
Exhibit 10.3 Second Amendment to Limited Liability Company Agreement of
Westfield Partners, L.L.C.
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
Form 8-K filed on January 21, 2000.
Items reported: Fourth quarter 1999 results and dividend
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
(Registrant)
MAY 11, 2000 /S/ TIMOTHY L. VAILL
- ------------ -------------------------------------------------
Timothy L. Vaill
Chairman and Chief
Executive Officer
MAY 11, 2000 /S/ WALTER M. PRESSEY
- ------------ -------------------------------------------------
Walter M. Pressey
Executive Vice President and
Chief Financial Officer
18
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
of
WESTFIELD PARTNERS, L.L.C.
<PAGE>
<TABLE>
<S> <C>
1. DEFINITIONS..................................................................1
1.1. "Act"..........................................................1
1.2. "Affiliate"....................................................1
1.3. "Agreement"....................................................1
1.4. "Capital Account"..............................................1
1.5. "Capital Contribution".........................................1
1.6. "Code".........................................................1
1.7. "Company Property".............................................1
1.8. "Former Member"................................................1
1.9. "Fund".........................................................2
1.10. "Investment Income (Loss)".....................................2
1.11. "Manager"......................................................2
1.12. "Member".......................................................2
1.13. "Operating Income (Loss)"......................................2
1.14. "Person".......................................................2
1.15. "Profit Sharing Income"........................................2
1.16. "Term".........................................................2
1.17. "Termination"..................................................2
2. ORGANIZATION.................................................................2
2.1. PURPOSE........................................................2
2.2. COMPANY NAME...................................................3
2.3. OPERATING NAME.................................................3
2.4. PRINCIPAL PLACE OF BUSINESS....................................3
2.5. TERM...........................................................3
3. CAPITAL ACCOUNTS.............................................................3
3.1. CAPITAL ACCOUNTS...............................................3
4. CAPITAL CONTRIBUTIONS AND STATUS OF MEMBERS..................................3
4.1. CAPITAL CONTRIBUTIONS..........................................3
4.2. STATUS OF MEMBERS..............................................4
4.2.1. LIMITED LIABILITY........................................4
4.2.2. ROLE OF MEMBER...........................................4
4.2.3. DEATH OF MEMBER..........................................4
5. CHARGES AND EXPENSES OF COMPANY..............................................4
5.1. EXPENSES RELATING TO THIS AGREEMENT............................4
5.2. EXPENSES OF OPERATION..........................................4
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
6. ACCOUNTING FOR PROFITS AND LOSSES.............................................4
6.1. BOOKS AND RECORDS...............................................4
6.2. PROFIT SHARING INCOME...........................................4
6.3. INVESTMENT INCOME OR LOSS.......................................5
6.4. OPERATING INCOME OR LOSS........................................5
6.5. DISTRIBUTIONS TO NON-MEMBERS....................................5
6.6. NO RIGHT TO COMPANY'S PROFIT SHARING............................5
6.7. TAX ALLOCATIONS.................................................5
6.8. TAX MATTERS PARTNER.............................................6
7. DISTRIBUTIONS FROM CAPITAL ACCOUNTS...........................................6
7.1. MANDATORY DISTRIBUTIONS.........................................6
7.2. DISCRETIONARY REDEMPTIONS.......................................6
8. RIGHTS, POWERS AND OBLIGATIONS OF THE MANAGER.................................6
8.1. INDEPENDENT ACTIVITIES..........................................6
8.2. DUTIES..........................................................6
8.3. LIABILITY OF THE MANAGER........................................7
8.4. REMOVAL OR WITHDRAWAL OF THE MANAGER............................7
9. ADDITIONAL MEMBERS; REMOVAL OR WITHDRAWAL OF MEMBERS; TRANSFERS...............7
9.1. ADMISSION OF ADDITIONAL MEMBERS.................................7
9.2. REMOVAL OF MEMBERS..............................................7
9.3. WITHDRAWAL......................................................7
9.4. PAYMENTS TO FORMER MEMBERS......................................7
9.5. TRANSFER OF MEMBERSHIP INTEREST.................................8
10. DISSOLUTION AND WINDING UP OF THE COMPANY....................................8
10.1. DISSOLUTION OF THE COMPANY.......................................8
10.2. ADMISSION OF A SUBSTITUTE MANAGER................................8
10.3. RIGHT TO CONTINUE................................................9
10.4. WINDING UP OF THE COMPANY........................................9
11. POWER OF ATTORNEY............................................................9
11.1. POWER OF ATTORNEY FOR THE MANAGER................................9
11.2. IRREVOCABILITY; EXERCISE; SURVIVAL..............................10
12. INDEMNIFICATION OF THE MANAGER..............................................10
12.1. EXCLUSION OF LIABILITY FOR RETURN OF CAPITAL CONTRIBUTIONS......10
12.2. LIMITATION ON LIABILITY OF MANAGER; INDEMNIFICATION..,,,,,......10
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
13. MISCELLANEOUS...............................................................11
13.1. AMENDMENTS......................................................11
13.2. INTERESTED TRANSACTIONS.........................................11
13.3. VALUATION.......................................................12
13.4. ARBITRATION.....................................................12
13.5. SECTION CAPTIONS................................................12
13.6. SEVERABILITY....................................................12
13.7. MASSACHUSETTS LAW...............................................12
13.8. WAIVER OF ACTION FOR DISSOLUTION OR PARTITION...................12
13.9. COUNTERPART EXECUTION...........................................13
13.10. PARTIES IN INTEREST.............................................13
13.11. TIME............................................................13
13.12. GENDER..........................................................13
13.13. AGENT FOR SERVICE OF PROCESS....................................13
13.14. INTEGRATED AGREEMENT............................................13
</TABLE>
-iv-
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
of
WESTFIELD PARTNERS, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT dated as of July __, 1999 is
executed by and among WESTFIELD CAPITAL MANAGEMENT COMPANY, INC., a
Massachusetts corporation, as the Manager, and the Members set forth on Schedule
I as the initial Members. The Manager may, in its sole discretion, make changes
in the Company's books and records to reflect the admission, substitution, or
withdrawal of any Member.
1. DEFINITIONS. As used herein, the following terms shall have the following
meanings:
1.1. "Act" means the Massachusetts Limited Liability Company
Act, as such Act may be amended from time to time.
1.2. "Affiliate" means any Person (a) directly or indirectly
owning, controlling or holding with power to vote any of the
outstanding voting securities of another Person; (b) any of whose
outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by another Person; (c) directly
or indirectly controlling, controlled or under common control with
another Person or Persons; or (d) who is an officer, director, partner,
member, spouse, parent or child of another Person.
1.3. "Agreement" means this Limited Liability Company
Agreement, as amended from time to time.
1.4. "Book Capital Account" shall have the meaning assigned to
it in the agreement of limited partnership, limited liability company
agreement or similar governing agreement, as applicable, for each Fund
1.5. "Capital Account" means the account described in
Section 3.1.
1.6. "Capital Contribution" means the amount contributed from
time to time to the capital of the Company by the Manager or a Member.
1.7. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
<PAGE>
1.8. "Company" means the limited liability company formed by
this agreement.
1.9. "Company Property" means any interest in real or
personal property, tangible or intangible, acquired by the Company.
1.10. "Former Member" shall have the meaning set forth in
Section 9.4.
1.11. "Fund" means any limited partnership, limited liability
company, business trust or other investment vehicle, whether now
existing or hereinafter formed, in which the Company has a profit
sharing interest.
1.12. "Investment Income (Loss)" shall mean, with respect to
any period, all net income or loss (including unrealized income or
loss) attributable to the Company's investments in any Fund that is
exempt from the registration requirements of the Investment Company Act
of 1940, as amended, in reliance on Sections 3(c)(1) or 3(c)(7) under
such Act, other than Profit Sharing Income and income attributable to
such the Company's Profit and Loss Accounts.
1.13. "Manager" means Westfield Capital Management Company,
Inc., and any substitute, successor or additional Manager approved as
provided by this Agreement; the business address of the aforenamed
Manager is One Financial Center, Boston, Massachusetts 02111.
1.14. "Member" means each Person listed from time to time as a
Member in the Company's books and records.
1.15. "Operating Income (Loss)" shall mean, with respect to
any period, all net income or loss (including unrealized income or
loss) other than Profit Sharing Income, Investment Income or Loss, and
income allocated to a Profit and Loss Account.
1.16. "Person" means any individual, estate, trust,
partnership, corporation, limited liability company, association or
other legal entity.
1.17. "Profit and Loss Account" shall have the meaning
assigned to it in the agreement of limited partnership, limited
liability company agreement or similar governing agreement, as
applicable, for each Fund.
1.18. "Profit Sharing Income" shall mean, with respect to any
period, the net increase, if any, in the Company's "Performance
Account" in each of the
<PAGE>
Funds (as such term is defined in the agreement of limited
partnership, limited liability company agreement or similar governing
agreement, as applicable, for each Fund) which is reallocated to the
Book Capital Account of the Company, or any similar amount which is
reallocated to the Book Capital Account of the Company from a similar
profit sharing account the Company may have in the future in any Fund.
1.19. "Term" shall have the meaning set forth in Section 2.5.
1.20. "Termination" shall have the meaning set forth in
Section 9.4.
2. ORGANIZATION.
2.1. PURPOSE. The purpose for which the Company is formed is
to serve as a general partner, manager or in similar capacities of such
Funds as the Manager in its discretion may determine. The Company shall
also have as additional purposes all lawful activities related to or
incidental to such purpose, and such other lawful purposes as the
Manager may from time to time determine.
2.2. COMPANY NAME. The name of the Company shall be
Westfield Partners, L.L.C.
2.3. OPERATING NAME. The activities of the Company may be
conducted under any name chosen by the Manager and the Manager may, in
its sole discretion, from time to time change the name of the Company.
2.4. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall be at One Financial Center, Boston,
Massachusetts 02111, or at such other place as the Manager may from
time to time determine.
2.5. TERM. The term ("Term") of the Company commenced upon the
filing in the office of the Secretary of The Commonwealth of
Massachusetts of the Certificate of Organization of the Company, and
shall thereafter be perpetual, unless terminated sooner pursuant to
this Agreement.
3. CAPITAL ACCOUNTS.
3.1. CAPITAL ACCOUNTS. The interest of the Manager and each
Member in the Company shall be expressed in terms of a Capital Account.
The Capital Account of the Manager and each Member shall be increased
by Capital Contributions and Profit Sharing Income, if any, allocated
to the Manager or
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such Member pursuant to Section 6.2, Investment Income, if any,
allocated to the Manager or such Member pursuant to Section 6.3, and
Operating Income, if any, allocated to the Manager or such Member
pursuant to Section 6.4; and shall be decreased by Investment Loss, if
any, allocated to the Manager or such Member pursuant to Section 6.3,
Operating Loss, if any, allocated to the Manager or such Member
pursuant to Section 6.4, distributions to such Member pursuant to
Sections 7.1 and 7.2, and redemptions of such Member's interest in the
Company pursuant to Section 9.4.
3.2. PROFIT AND LOSS ACCOUNT DEFICITS. If, upon liquidation of
any Fund, the Company's Profit and Loss Account has a negative balance,
the Manager shall be obligated to make additional capital contributions
to the Company in cash equal to such negative balance.
4. CAPITAL CONTRIBUTIONS AND STATUS OF MEMBERS.
4.1. CAPITAL CONTRIBUTIONS. As of the date hereof, the Manager
and the Members have made the initial Capital Contributions (the
"Initial Capital Contribution") with respect to each Fund as set forth
on Schedule I hereto, as such schedule may be amended from time to
time. No Member shall be required to make any additional contributions
to the capital of the Company.
4.2. STATUS OF MEMBERS.
4.2.1. LIMITED LIABILITY. Except as provided in the
Act, a Member as such shall not be liable for the debts and
obligations of the Company. The creditors of the Company shall
have no recourse against any Member.
4.2.2. ROLE OF MEMBER. A Member as such shall not
take part in or interfere in any manner with the conduct or
control of the activities of the Company and shall have no
right or authority to act for or bind the Company.
4.2.3. DEATH OF MEMBER. Subject to Section 9.4
hereof, on the death of a Member, for the purpose of settling
his estate, his executor or administrator shall have all the
rights of a Member and such rights to assign or have redeemed
his interest as the Member had before his death.
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5. CHARGES AND EXPENSES OF COMPANY.
5.1. EXPENSES RELATING TO THIS AGREEMENT. The Company shall
reimburse the Manager for expenses borne, incurred or advanced by the
Manager on behalf of the Company on account of the preparation of this
Agreement, including attorneys' fees, accountants' fees, and other
expenses incident thereto. Such expenses which are not paid by the
Manager shall be paid as a debt of the Company.
5.2. EXPENSES OF OPERATION. The Company shall pay, or shall
reimburse the Manager for, such expenses incurred or advanced in the
operation or management of the Company as the Manager shall deem to be
reasonable and necessary.
6. ACCOUNTING FOR PROFITS AND LOSSES.
6.1. BOOKS AND RECORDS. Appropriate records and books of
account shall be kept according to generally accepted accounting
principles or such other basis of accounting as may be selected by the
Manager, at the principal place of business of the Company, and each
Member shall have access to all records and books of account and the
right to receive copies thereof. The Company shall use a fiscal year
ending on December 31 in reporting its income and expenses.
6.2. PROFIT SHARING INCOME.
6.2.1. As of the last business day of each fiscal
year for such fiscal year, the Manager shall allocate among
the Capital Accounts of the Members other than the Manager, in
the Manager's sole discretion, 65 percent of the Profit
Sharing Income attributable to each Fund (or such lesser
amount pursuant to Section 6.5). The amount of such
allocation, if any, to the Capital Account of any particular
Member is to be determined in the sole discretion of the
Manager.
6.2.2. As of the last business day of each fiscal
year for such fiscal year, the Manager shall allocate to the
Capital Account of the Manager 35 percent of the Profit
Sharing Income.
6.3. INVESTMENT INCOME OR LOSS. As of the last business day of
each fiscal year, Investment Income or Loss, if any, shall be allocated
to the Capital Accounts of the Manager and the Members in proportion to
each Manager and Member's Capital Account balances as of the last day
of such fiscal year (determined before any other allocations of profit
and loss) minus such Manager and Member's Initial Capital
Contributions. If new Members were
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admitted during a fiscal year, or if one or more Members withdraws
during a fiscal year, the Manager shall allocate amounts representing
Investment Income or Loss so as to take into account the varying
interests of the Manager and the Members in the Company during such
year.
6.4. OPERATING INCOME OR LOSS. As of the last business day of
each fiscal year, Operating Income or Loss, if any, shall be allocated
to the Capital Accounts of the Manager and the Members in proportion to
their Capital Account balances as of the last day of such fiscal year.
If new Members were admitted during a fiscal year, or if one or more
Members withdraws during a fiscal year, the Manager shall allocate
amounts representing Operating Income or Loss so as to take into
account the varying interests of the Manager and the Members in the
Company during such year.
6.5. DISTRIBUTIONS TO NON-MEMBERS. As of the last business
day of each fiscal year for such fiscal year, the Manager may
distribute, in the Manager's sole discretion, up to 65 percent of the
Profit Sharing Income attributable to each Fund to any Person or
Persons. The amount of Profit Sharing Income available for allocation
for such fiscal year pursuant to Section 6.2.1 hereof shall be reduced
by the amount of any distribution or distributions made pursuant to
this Section 6.5 for such fiscal year.
6.6. PROFIT AND LOSS ACCOUNT ALLOCATIONS.
6.6.1. As of the last business day of each fiscal
year, allocations of profit attributable to the Company's
Profit and Loss account in each Fund shall be made as follows:
(1) first, if there is a negative balance in such
Profit and Loss Account, 100 percent to the Manager's Capital
Account to the extent of the amount of profits necessary to
cause such Profit and Loss Account to be equal to zero;
(2) second, 35 percent to the Manager's Capital
Account and 65 percent to the Members' Capital Accounts in
proportion to their respective capital contributions credited
to such Profit and Loss Account until the amount of such
profits equals each Member's capital contribution credited to
such Profit and Loss Account; and
(3) third, 65 percent among the Capital Accounts of
the Members, allocated in the Manager's sole discretion (or
such lesser amount
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pursuant to Section 6.5), and 35 percent to the Capital
Account of the Manager.
6.6.2. As of the last business day of each fiscal
year, allocations of loss attributable to the Company's Profit
and Loss Account in each Fund shall be made as follows:
(1) first, 35 percent to the Manager's Capital
Account and 65 percent to the Members' Capital Accounts in
proportion to their respective capital contributions credited
to such Profit and Loss Account until the amount of such loss
equals each Member's capital contribution credited to such
Profit and Loss Account; and
(2) second, 100 percent to the Manager's Capital
Account.
6.7. NO RIGHT TO COMPANY'S PROFIT SHARING. No Member shall
have any right to any part of the Company's Profit Sharing Income for
any fiscal year, except by virtue of allocations pursuant to Section
6.2 hereof.
6.8. TAX ALLOCATIONS. The income, gains, losses, deductions
and credits of the Company shall be allocated for federal, state and
local income tax purposes among the Manager and the Members so as to
reflect, in the judgment of the Manager, the interests of the Members
in the Company set forth in this Agreement. The Manager, in
consultation with the Company's tax advisor, is authorized (i) to
select such tax allocation methods as may in the Manager's judgment be
appropriate to satisfy the requirements of section 704(c) of the Code;
(ii) to interpret and apply the allocation provisions hereof as
providing for a "qualified income offset", "minimum gain chargeback"
and such other allocation principles as may be required under section
704 of the Code and applicable regulations (provided that if such
principles are applied in making allocations hereunder, subsequent
allocations shall be made so as to reverse, to the extent possible in
the Manager's judgment, the effect of the application of such
principles); (iii) to make special allocations of income or loss to
the Manager and Members who redeem all or a portion of their Capital
Account balance; (iv) to determine the allocation of specific items of
income, gain, loss, deduction and credit of the Company; and (v) to
vary any and all of the foregoing allocation provisions to the extent
necessary in the judgment of the Manager to comply with section 704 of
the Code and applicable regulations. The Manager shall have the power
and authority to make all accounting, tax and financial reporting
determinations and decisions with respect to the Company.
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<PAGE>
6.9. TAX MATTERS PARTNER. The "tax matters partner" of the
Company shall be the Manager or such other Person as the Manager may
from time to time designate in writing.
7. DISTRIBUTIONS FROM CAPITAL ACCOUNTS.
7.1. MANDATORY DISTRIBUTIONS. The Company shall, upon any
Member's request, distribute Profit Sharing Income, if any, and
Investment Income, if any, allocated to such Member's Capital Account
for a fiscal period on the day such amounts are allocated to such
Account. Capital Accounts shall be reduced by amounts so distributed.
7.2. DISCRETIONARY REDEMPTIONS. Any Member may request that
the Company redeem all or any portion of such Member's Capital Account
as of the last business day of any fiscal month. Such redemptions shall
be made by the Company in the sole discretion of the Manager.
8. RIGHTS, POWERS AND OBLIGATIONS OF THE MANAGER.
8.1. INDEPENDENT ACTIVITIES. The Manager may, notwithstanding
the existence of this Agreement, engage in whatever activities it may
choose, whether or not such activities are competitive with the
activities of the Company, without having or incurring any obligation
to offer any interest in such activities to the Company or any party
hereto. The Manager may organize and participate as partner, manager,
shareholder and/or adviser in one or more partnerships, limited
liability companies or corporations which may engage in activities
substantially identical to the activities of the Company without any
liability therefor.
8.2. DUTIES. The Manager shall devote such time to the
activities of the Company as it determines is necessary for the
efficient carrying on thereof.
8.3. LIABILITY OF THE MANAGER. The Manager shall be generally
liable for the debts and obligations of the Company; provided, however,
that any such liability shall be satisfied first out of the assets of
the Company.
8.4. REMOVAL OR WITHDRAWAL OF THE MANAGER. A Manager shall
cease to be the Manager of the Company:
8.4.1. Upon the withdrawal by a Manager upon 30 days'
prior written notice to the Members;
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8.4.2. Immediately following the dissolution of a
Manager in corporate, partnership or limited liability company
form; or
8.4.3. If such Manager has: (i) made an assignment
for the benefit of creditors; (ii) filed a voluntary petition
in bankruptcy; (iii) been adjudicated a bankrupt or insolvent;
(iv) filed a petition or answer seeking for such Manager any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute,
law or regulation; (v) filed an answer or other pleading
admitting or failing to contest the material allegations of a
petition filed against such Manager in any proceeding of such
nature; or (vi) sought, consented to or acquiesced in the
appointment of a trustee, receiver or liquidator of such
Manager or of all or any substantial part of such Manager's
properties.
9. ADDITIONAL MEMBERS; REMOVAL OR WITHDRAWAL OF MEMBERS; TRANSFERS.
9.1. ADMISSION OF ADDITIONAL MEMBERS. The Manager shall have
the power to admit additional Members to the Company at any time in its
sole discretion.
9.2. REMOVAL OF MEMBERS. The Manager shall have the power to
remove any Member from the Company at any time in its sole discretion.
Such removed Member's interest in the Company shall be determined in
the same manner as in Section 9.4.
9.3. WITHDRAWAL. Any Member may withdraw from the Company upon
7 days' prior written notice to the Manager.
9.4. PAYMENTS TO FORMER MEMBERS. Upon the removal, withdrawal,
death or bankruptcy (each, a "Termination") of any Member (each, a
"Former Member"):
9.4.1. The Manager may, in its sole discretion,
allocate amounts to the Capital Account of the Former Member
pursuant to Section 6 hereof, the amount of such allocation,
if any, to be determined by the Manager in its sole
discretion. Such amounts, if any, shall be withdrawn by the
Former Member pursuant to Section 7.1 hereof as if such Former
Member were a Member.
9.4.2. The Former Member will be distributed an
amount equal to such Member's Capital Account balance, net of
reasonable
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reserves determined in the Manager's sole discretion, in
complete redemption of such Member's interest in the Company
on a date (following the date of Termination) to be
determined in the sole discretion of the Manager.
9.5. TRANSFER OF MEMBERSHIP INTEREST. No Member shall sell,
assign, transfer, pledge or otherwise encumber his or its interest in
the Company, in its assets or in the profits thereof, except with the
consent of the Manager, which may be withheld in the Manager's sole
discretion.
10. DISSOLUTION AND WINDING UP OF THE COMPANY.
10.1. DISSOLUTION OF THE COMPANY. The Company shall be
dissolved upon the first to occur of any of the following events:
10.1.1. The Manager ceases to be a Manager pursuant
to Section 8.4 unless within 90 days after the occurrence of
such event a majority in number of the Members agree in
writing to continue the business of the Company and to the
appointment, effective as of the date of such event, of a
substitute Manager to be admitted pursuant to Section 10.2;
10.1.2. The vote so to do of the Manager and a
majority in number of the Members; or
10.1.3. When required by the Act.
10.2. ADMISSION OF A SUBSTITUTE MANAGER. If the Manager
ceases to be the Manager and a substitute Manager is to be admitted
by the Members pursuant to Section 10.1.1 any Member may, promptly
after the agreement of the Members to continue as provided in
Section 10.1.1, nominate a Person for admission as a substitute
Manager. Such Person shall not become the Manager unless (i) such
Person is admitted by written consent of a majority in number of
the Members and (ii) such Person has consented in writing to be
bound by the terms of this Agreement and the Company's Certificate
of Organization. If such proposed Manager is not admitted, any Member
may as soon as practicable thereafter nominate another substitute
Manager until a substitute Manager is admitted or the Company has
been dissolved pursuant to Section 10.1.2 hereof.
10.3. RIGHT TO CONTINUE. The Company shall not be dissolved
upon the death, retirement, resignation, removal, expulsion, bankruptcy
or dissolution of
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any Member, or the occurrence of any other event that terminates the
continued membership of any Member in the Company.
10.4. WINDING UP OF THE COMPANY. Upon dissolution of the
Company, the books of the Company shall be closed and appropriate
debits and credits to the Capital Accounts of the Manager and the
Members shall be made to reflect the allocation of profits and loss
attributable to the liquidation of the Company's assets (including, in
the case of assets distributed in kind, the allocation of profit and
loss that would occur if such assets of the Company were sold at their
fair market value). The Manager, or if there is no Manager, a trustee
elected by a majority in number of the Members, shall take full account
of the Company's assets and liabilities and the assets shall be
liquidated as promptly as is consistent with obtaining the fair market
value thereof, and the proceeds therefrom to the extent sufficient
therefor (or any unsold assets which shall be valued at their fair
market value), shall be applied and distributed in the following order,
or as otherwise required to comply with the Act:
10.4.1. To creditors, including the Manager and
Members who are creditors, to the extent permitted by law, in
satisfaction of liabilities of the Company other than
liabilities for distributions to the Manager and Members in
their capacity as the Manager and Members, respectively;
10.4.2. To Members and Former Members in satisfaction
of liabilities for distributions provided for hereunder; and
10.4.3. To the Manager and Members in accordance with
their respective Capital Accounts at the time of the
dissolution.
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11. POWER OF ATTORNEY.
11.1. POWER OF ATTORNEY FOR THE MANAGER. Provided that the
action to be taken is in accordance with the terms of this Agreement,
each Member hereby makes, constitutes and appoints the Manager and
each Person who shall hereafter become a Manager, with full power of
substitution and resubstitution, his true and lawful attorney in his
name, place and stead and for his use and benefit to sign, execute,
certify, acknowledge, swear to, file and record this Agreement and the
Company's Certificate of Organization, and to sign, execute, certify,
acknowledge, swear to, file and record any and all instruments
amending this Agreement and the Company's Certificate of Organization,
as now or hereafter amended, that the Manager in its sole discretion
deems appropriate including, without limitation, agreements or other
instruments or documents (1) to reflect the exercise by the Manager of
any of the powers granted to it under this Agreement; (2) to reflect
any amendments made to this Agreement and the Company's Certificate of
Organization pursuant to this Agreement; (3) to reflect the withdrawal
of any Member, in the manner prescribed in this Agreement; and (4) to
reflect actions which may be required of the Company or the Members by
the laws of any jurisdiction. Each Member authorizes such
attorney-in-fact to take any further action which such
attorney-in-fact shall consider necessary or advisable in connection
with any of the foregoing, hereby giving such attorney-in-fact full
power and authority to do and perform each and every act or thing
whatsoever requisite or advisable to be done in and about the
foregoing as fully as such Member might or could do if personally
present, hereby ratifying and confirming all that such
attorney-in-fact shall lawfully do or cause to be done by virtue
hereof.
11.2. IRREVOCABILITY; EXERCISE; SURVIVAL. The power of
attorney granted pursuant to Section 11.1 hereof:
11.2.1. Is a special power of attorney coupled with
an interest and is irrevocable;
11.2.2. May be exercised by such attorney-in-fact by
listing all of the Members executing any agreement,
certificate, instrument or documents with the single signature
of such attorney-in-fact acting as attorney-in-fact for all of
them; and
11.2.3. Shall survive the delivery of an assignment
by a Member of the whole or a portion of his interest in the
Company, except that where the purchaser, transferee or
assignee thereof has the right to be, or with consent of the
Manager is admitted as, a substituted Member, the power of
attorney shall survive the delivery of such assignment for the
sole purpose of enabling such attorney-in-fact to execute,
acknowledge and file any such agreement, certificate,
instrument or document necessary to effect such substitution.
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12. INDEMNIFICATION OF THE MANAGER.
12.1. EXCLUSION OF LIABILITY FOR RETURN OF CAPITAL
CONTRIBUTIONS. Anything in this Agreement to the contrary
notwithstanding, neither the Manager nor any of its Affiliates, nor any
agent or other Person authorized to act for the Company, shall be
personally liable for the return of all or any portion of any Member's
Capital Contribution, it being expressly understood that any such
return shall be made solely from Company assets.
12.2. LIMITATION ON LIABILITY OF MANAGER; INDEMNIFICATION.
Anything in this Agreement to the contrary notwithstanding, the Manager
shall not in any event be liable, responsible or accountable in damages
or otherwise to any of the Members or to the Company for, and the
Company shall indemnify and save harmless the Manager from, any losses
or damages incurred by reason of any act or omission performed or
omitted to be performed by the Manager, if the Manager, in good faith,
determined that such act was in the best interest of the Company,
provided that the foregoing shall not relieve the Manager of liability
or indemnity and save the Manager harmless for the Manager's willful
misconduct or gross negligence. This limitation of liability, indemnity
and hold harmless is for the benefit of the Manager and its Affiliates,
and their respective directors, officers and employees. In particular,
and without limitation of the foregoing, the Manager shall be entitled
to indemnification by the Company against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred by the
Manager in connection with the defense of any suit or action to which
the Manager may be made a party by reason of having acted as a Manager,
to the fullest extent permitted by the Act. The Manager shall be
entitled to receive, upon application therefor, advances to cover the
costs of defending any claim or action against it; provided that such
advances shall be repaid to the Company, without interest, if the
Manager is found by a court of competent jurisdiction to have violated
the provisions of this Agreement in such a manner as to not entitle
such Manager to payment of such costs.
13. MISCELLANEOUS.
13.1. AMENDMENTS. The Manager may amend any provision of this
Agreement without the necessity of the consent of any of the Members;
PROVIDED, HOWEVER, that an amendment which would (i) result in the loss
of any Member's limited liability, (ii) require any Member to
contribute additional capital other
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than as specifically set forth herein, or (iii) alter the provisions
of this Section 13.1 shall not be adopted and effective unless it
receives the affirmative approval of all Members materially adversely
affected by such amendment.
13.2. INTERESTED TRANSACTIONS. Each of the parties to this
Agreement hereby (a) expressly acknowledges that certain transactions
contemplated by this Agreement and powers delegated to the Manager
hereunder, including, without limitation, the Manager's right to make
certain allocations under Section 6.2, may constitute interested or
self-dealing transactions between the Manager and one or more of its
Affiliates, (b) expressly acknowledges that the Manager may, and
specifically authorizes it (i) to allocate such amounts as it in its
sole discretion may determine, to the Capital Accounts of the Manager
and its Affiliates pursuant to Section 6.2 and (ii) to distribute such
amounts as it in its sole discretion may discretion may determine to
Persons who may be Affiliates of the Manager pursuant to Section 6.5;
and each of the parties to this Agreement hereby agrees that any such
allocations or distributions will not constitute a breach of fiduciary
duty by the Manager, and (c) waives, to the fullest extent permitted
by law, any rights or claims such party may have against the Manager
or its Affiliates arising in connection with the consummation of such
transactions or exercise of such powers and that are based on conflict
of interest, breach of fiduciary duty or any similar grounds;
PROVIDED, HOWEVER, that such waiver shall be effective only to the
extent that the Manager or its Affiliates have exercised reasonable
business judgment in the consummation of such transactions or exercise
of such powers.
13.3. VALUATION. Whenever for purposes of this Agreement it is
necessary to determine the value of the Company Property, such value
shall be determined by the Manager acting in good faith. Any such
determination by the Manager shall be conclusive and binding on all
Members.
13.4. ARBITRATION. The Members and the Manager hereby agree
to submit all controversies, claims and matters of difference to
arbitration in Boston, Massachusetts, according to the rules and
practices of the American Arbitration Association in force at the time
of submission. Such arbitration shall be before a panel of 3
arbitrators one of whom is to be selected by each party and a third
selected by the arbitrators chosen by the parties. This agreement to
arbitrate shall be specifically enforceable. Without limiting the
generality of the foregoing, all questions relating to the breach of
any obligation, warranty or condition hereunder, and all questions as
to whether the right to arbitrate exists shall be considered
controversies for the purposes of this section. The award rendered in
such proceedings shall be final and binding on all parties to the
extent permitted by Massachusetts law and may be
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entered as a judgment in any court of competent jurisdiction. This
paragraph shall not apply, however, to any cause of action which may
arise under federal or state securities laws.
13.5. SECTION CAPTIONS. Section and other captions contained
in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or
intent of this Agreement or any provision hereof.
13.6. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall
not affect the validity of the remainder of this Agreement.
13.7. MASSACHUSETTS LAW. This Agreement shall be governed,
construed and enforced in accordance with the laws of The Commonwealth
of Massachusetts, without giving effect to the choice of law principles
thereof.
13.8. WAIVER OF ACTION FOR DISSOLUTION OR PARTITION. Each
party hereto irrevocably waives during the Term of the Company any
right to apply for dissolution of the Company. Each party hereto also
irrevocably waives during the Term of the Company and during the period
of its liquidation following any dissolution, any right which such
party may have to maintain any action for partition with respect to any
of the Company Property.
13.9. COUNTERPART EXECUTION. This Agreement may be executed in
any number of counterparts with the same effect as if all the parties
hereto had signed the same document, each of which counterparts shall
be an original and all of which shall constitute but one and the same
Agreement. The Subscription Agreement of each Member shall, upon
acceptance of such Subscription Agreement by the Manager and admission
of the subscriber as a Member in the Company, be deemed part of this
Agreement, is hereby incorporated herein by reference and may be
attached with the Subscription Agreements of all other subscribers to a
master copy of this Agreement, which shall constitute the entire
executed Limited Liability Company Agreement.
13.10. PARTIES IN INTEREST. Each and every covenant, term,
provision and agreement herein contained shall be binding upon and
inure to the benefit of the heirs, successors, legal representatives
and assigns of the respective parties hereto.
13.11. TIME. Time is of the essence with respect to this
Agreement.
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13.12. GENDER. All references herein to one gender also
include, where appropriate, the other gender. Where appropriate, the
singular includes the plural and the plural includes the singular.
13.13. AGENT FOR SERVICE OF PROCESS. The Manager shall be the
Company's agent for service of process.
13.14. INTEGRATED AGREEMENT. This Agreement constitutes the
entire understanding and agreement among the parties.
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IN WITNESS WHEREOF, this Limited Liability Company Agreement of
Westfield Partners, L.L.C. has been executed as of the date first written above.
MANAGER
-------
Westfield Capital Management Company, Inc.
By:
---------------------------------
Name: Stephen C. Demirjian
Title: Senior Vice President
MEMBERS
-------
By: Westfield Capital Management Company,
Inc., as attorney-in-fact for each such
Member
By:
---------------------------------
Name: Stephen C. Demirjian
Title: Senior Vice President
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SCHEDULE I
INITIAL CAPITAL CONTRIBUTIONS
-----------------------------------------------------
Westfield Technology Fund Westfield Capital Growth
MEMBERS II Limited Partnership Fund II Limited Partnership
-------
Arthur J. Bauernfeind $698.75 $1,004.40
Stephen C. Demirjian $698.75 $1,004.40
C. Michael Hazard $698.75 $1,004.40
William A. Muggia $698.75 $1,004.40
B. Randall Watts $698.75 $1,004.40
MANAGER $1,881.25 $2,704.15
-------
<PAGE>
Exhibit 10.2
FIRST AMENDMENT TO
LIMITED LIABILITY COMPANY AGREEMENT OF
WESTFIELD PARTNERS, L.L.C.
This FIRST AMENDMENT to the LIMITED LIABILITY COMPANY AGREEMENT of
WESTFIELD PARTNERS, L.L.C. (the "Company") is dated as of December 1, 1999,
among WESTFIELD CAPITAL MANAGEMENT COMPANY, INC., a Massachusetts corporation,
as the Manager, and the undersigned Members, comprising all of the Members of
the Company, effective as of the date hereof.
WITNESSETH:
WHEREAS, the Manager and the Members entered into a Limited Liability
Company Agreement dated as of July 7, 1999, (the "Agreement");
WHEREAS, the Manager and the Members desire to revise the Agreement to
clarify the treatment of additional capital contributions to the Company by one
or more of the Manager and the Members;
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree and the
Agreement is hereby amended as follows:
1. DEFINITIONS. Terms used herein and not otherwise defined herein are
used herein as defined in the Agreement.
2. CAPITAL CONTRIBUTIONS. Section 4.1 is hereby amended in its entirety
to read as follows:
4.1 CAPITAL CONTRIBUTIONS. As of the date hereof, the Manager and the
Members have made the initial Capital Contributions with respect to
each Fund as set forth on Schedule I hereto. Neither the Manager nor
any Member shall be required to make any additional Capital
Contributions; provided, however, that the Manager shall amend Schedule
I hereto to reflect any voluntary additional Capital Contributions as
the Manager may accept in its sole discretion, and the Book Capital
Account of the Manager or any Member making such voluntary additional
Capital Contribution shall be adjusted accordingly pursuant to Section
3.1 hereof.
<PAGE>
3. INVESTMENT INCOME OR LOSS. Section 6.3 of the Agreement is hereby
amended by deleting the word "Initial" from the Section.
4. Except as otherwise modified hereby, all other provisions of the
Agreement are hereby ratified, confirmed and approved and remain in full force
and effect.
IN WITNESS WHEREOF, the undersigned, have executed this First Amendment
as of the date first written above.
MANAGER
Westfield Capital Management Company, Inc.
By: _____________________________________
Name: Stephen C. Demirjian
Title: Senior Vice President
MEMBERS
-------------------
C. Michael Hazard
-------------------
Arthur J. Bauernfeind
-------------------
Stephen C. Demirjian
-------------------
William A. Muggia
-------------------
B. Randall Watts
<PAGE>
SECOND AMENDMENT TO
LIMITED LIABILITY COMPANY AGREEMENT OF
WESTFIELD PARTNERS, L.L.C.
This SECOND AMENDMENT to the LIMITED LIABILITY COMPANY AGREEMENT of
WESTFIELD PARTNERS, L.L.C. (the "Company") is dated as of December 31, 1999,
among WESTFIELD CAPITAL MANAGEMENT COMPANY, INC., a Massachusetts corporation,
as the Manager, and the undersigned Members, comprising all of the Members of
the Company, effective as of the date hereof.
WITNESSETH:
WHEREAS, the Manager and the Members entered into a Limited Liability
Company Agreement dated as of July 7, 1999, as amended on December 1, 1999 (the
"Agreement");
WHEREAS, the Manager and the Members desire to revise the Agreement to
grant additional discretion to the Manager to allocate Profit Sharing Income
among the Manager and the Members;
NOW THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree and the
Agreement is hereby amended as follows:
1. DEFINITIONS. Terms used herein and not otherwise defined herein are
used herein as defined in the Agreement.
2. AMENDED PROVISIONS. Section 6.2 of the Agreement is hereby amended
in its entirety to read:
6.2 PROFIT SHARING INCOME. As of the last business day of each
fiscal year for such fiscal year, the Manager shall allocate
Profit Sharing Income as follows:
6.2.1 65 percent of the Profit Sharing Income attributable to each
Fund (or such lesser amount pursuant to Section 6.5) to the
Capital Accounts of the Members other than the Manager. The
amount of such allocation, if any, to the Capital Account of
any particular Member is to be determined in the sole
discretion of the Manager.
6.2.2 10 percent of the Profit Sharing Income attributable to each
Fund to the Capital Account of the Manager.
<PAGE>
6.2.3 25 percent of the Profit Sharing Income attributable to each
Fund to the Capital Accounts of the Members, including the
Capital Account of the Manager. The amount of such allocation,
if any, to the Capital Account of any particular Member or the
Manager is to be determined in the sole discretion of the
Manager.
3. Except as otherwise modified hereby, all other provisions of the
Agreement are hereby ratified, confirmed and approved and remain in full force
and effect.
IN WITNESS WHEREOF, the undersigned, have executed this Second
Amendment as of the date first written above.
MANAGER
Westfield Capital Management Company, Inc.
By: ___________________________________
Name: Stephen C. Demirjian
Title: Senior Vice President
MEMBERS
-------------------
C. Michael Hazard
-------------------
Arthur J. Bauernfeind
-------------------
Stephen C. Demirjian
-------------------
William A. Muggia
-------------------
B. Randall Watts
<TABLE> <S> <C>
<PAGE>
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<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
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