<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ----------------------------
Commission File No. 1-9818
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ALLIANCE CAPITAL MANAGEMENT L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3434400
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1345 Avenue of the Americas, New York, NY 10105
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(212) 969-1000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of Units representing assignments of beneficial ownership of Limited
Partnership Interests outstanding as of March 31, 1997 was 83,550,543 Units.
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Index to Form 10-Q
Part I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS Page
-----
Condensed Consolidated Statements of Financial Condition 2
Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Changes in
Partners' Capital 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8-12
Part II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 13
Item 2. CHANGES IN SECURITIES 13
Item 3. DEFAULTS UPON SENIOR SECURITIES 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF 13
SECURITY HOLDERS
Item 5. OTHER INFORMATION 13
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 13
<PAGE>
Part I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Financial Condition
(in thousands)
<TABLE>
<CAPTION>
ASSETS 3/31/97 12/31/96
------- --------
(unaudited)
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . $ 69,568 $ 57,441
Fees receivable:
Alliance mutual funds. . . . . . . . . . . . . . . . . . . . . . . . . 47,992 46,483
Separately managed accounts:
Affiliated clients . . . . . . . . . . . . . . . . . . . . . . . . . 5,163 4,479
Third party clients. . . . . . . . . . . . . . . . . . . . . . . . . 61,512 58,339
Receivable from brokers and dealers for sale
of shares of Alliance mutual funds . . . . . . . . . . . . . . . . . . 53,913 30,976
Investments, available-for-sale. . . . . . . . . . . . . . . . . . . . . . 23,829 35,966
Furniture, equipment and leasehold improvements, net . . . . . . . . . . . 67,074 57,483
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,634 116,721
Contracts of businesses acquired, net. . . . . . . . . . . . . . . . . . . 116,148 117,683
Deferred sales commissions, net. . . . . . . . . . . . . . . . . . . . . . 190,978 175,172
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,159 25,154
--------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $777,970 $725,897
--------- --------
--------- --------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . $110,623 $103,427
Payable to Alliance mutual funds for share purchases . . . . . . . . . 80,122 55,468
Accrued expenses under employee benefit plans. . . . . . . . . . . . . 69,942 51,633
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,271 24,658
Minority interests in consolidated subsidiaries. . . . . . . . . . . . 14,711 14,691
--------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 294,669 249,877
Partners' capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483,301 476,020
--------- --------
Total liabilities and partners' capital. . . . . . . . . . . . . . . . $777,970 $725,897
--------- --------
--------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Income
(unaudited)
(in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
3/31/97 3/31/96
------- -------
<S> <C> <C>
Revenues:
Investment advisory and services fees:
Alliance mutual funds. . . . . . . . . . . . . . . . . . . . . . . . . $85,994 $67,824
Separately managed accounts:
Affiliated clients . . . . . . . . . . . . . . . . . . . . . . . . . 12,554 10,098
Third party clients. . . . . . . . . . . . . . . . . . . . . . . . . 58,462 51,121
Distribution plan fees from Alliance mutual funds... . . . . . . . . . . 47,247 38,483
Shareholder servicing and administration fees. . . . . . . . . . . . . . 12,765 11,466
Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,229 2,624
------- -------
219,251 181,616
------- -------
Expenses:
Employee compensation and benefits . . . . . . . . . . . . . . . . . . . 60,502 49,414
Promotion and servicing:
Distribution plan payments to financial intermediaries:
Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,085 6,991
Third party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,714 26,762
Amortization of deferred sales commissions . . . . . . . . . . . . . . 15,738 12,518
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,805 11,130
General and administrative.. . . . . . . . . . . . . . . . . . . . . . . 25,746 23,440
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 242
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . 2,622 2,913
------- -------
161,885 133,410
------- -------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . 57,366 48,206
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,017 3,139
------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,349 $45,067
------- -------
------- -------
Net income per Unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.62 $ 0.54
------- -------
------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of
Changes in Partners' Capital
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
3/31/97 3/31/96
------- --------
<S> <C> <C>
Partners' capital - beginning of period. . . . . . . . . . . . . . . $476,020 $406,709
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,349 45,067
Capital contribution received from Alliance Capital
Management Corporation . . . . . . . . . . . . . . . . . . . . . 898 893
Cash distributions to partners . . . . . . . . . . . . . . . . . . (50,013) (41,001)
Issuance of Units for acquisition of Cursitor. . . . . . . . . . . -- 42,394
Proceeds from Unit options exercised . . . . . . . . . . . . . . . 3,065 708
Unrealized (loss) gain on investments. . . . . . . . . . . . . . . (18) 129
Foreign currency translation adjustment. . . . . . . . . . . . . . -- (283)
-------- ---------
Partners' capital - end of period. . . . . . . . . . . . . . . . . . $483,301 $454,616
-------- ---------
-------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
3/31/97 3/31/96
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,349 $45,067
Adjustments to reconcile net income to net cash provided
from operating activities:
Amortization and depreciation . . . . . . . . . . . . . . . . . . . . . . . 21,031 17,465
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,522 2,168
Changes in assets and liabilities:
(Increase) in fees receivable from Alliance
mutual funds, affiliated clients and third party clients . . . . . . . . (5,366) (1,305)
(Increase) in receivable from brokers and dealers for sale
of shares of Alliance mutual funds . . . . . . . . . . . . . . . . . . . (22,937) (10,013)
(Increase) in deferred sales commissions . . . . . . . . . . . . . . . . . (31,544) (20,397)
(Increase) decrease in other assets. . . . . . . . . . . . . . . . . . . . (966) 5,668
Increase in accounts payable and accrued expenses. . . . . . . . . . . . . 7,196 11,520
Increase in payable to Alliance mutual funds for share
purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,654 12,557
Increase in accrued expenses under employee benefit
plans, less deferred compensation. . . . . . . . . . . . . . . . . . . . 17,544 8,672
------- -------
Net cash provided from operating activities. . . . . . . . . . . . . . 64,483 71,402
------- -------
Cash flows from investing activities:
Purchase of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,907) (1,209)
Proceeds from sale of investments . . . . . . . . . . . . . . . . . . . . . . 58,027 23,522
Acquisitions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (85,330)
Additions to furniture, equipment and leasehold
improvements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,289) (2,275)
------- -------
Net cash used in investing activities. . . . . . . . . . . . . . . . . (169) (65,292)
------- -------
Cash flows from financing activities:
Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,387) (15)
Distributions to partners . . . . . . . . . . . . . . . . . . . . . . . . . . (50,013) (41,001)
Capital contribution received from Alliance Capital Management
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 143
Unit options exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,065 708
------- -------
Net cash used in financing activities. . . . . . . . . . . . . . . . (52,187) (40,165)
------- -------
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . -- (274)
------- -------
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . 12,127 (34,329)
Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . . . 57,441 124,256
------- -------
Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . . . . $69,568 $89,927
------- -------
------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Notes to Condensed Consolidated Financial Statements
March 31, 1997
(unaudited)
1. BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of
Alliance Capital Management L.P. (the "Partnership") included herein have
been prepared in accordance with the instructions to Form 10-Q pursuant to
the rules and regulations of the Securities and Exchange Commission. In
the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of (a) financial
position at March 31, 1997, (b) results of operations for the three months
ended March 31, 1997 and 1996 and (c) cash flows for the three months ended
March 31, 1997 and 1996, have been made.
2. RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to the
current period presentation.
3. DEFERRED SALES COMMISSIONS
Sales commissions paid to financial intermediaries in connection with the
sale of shares of open-end mutual funds managed by the Partnership sold
without a front-end sales charge are capitalized and amortized over periods
not exceeding five and one-half years, the periods of time estimated by
management of the Partnership during which deferred sales commissions are
expected to be recovered from distribution plan payments received from
these funds and contingent deferred sales charges received from
shareholders of those funds upon the redemption of their shares.
Contingent deferred sales charges reduce unamortized deferred sales
commissions when received.
4. CONTINGENCIES
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") was filed against the Alliance North American Government
Income Trust, Inc. (the "Fund"), the Partnership and certain other
defendants affiliated with the Partnership alleging violations of federal
securities laws, fraud and breach of fiduciary duty in connection with the
Fund's investments in Mexican and Argentine securities. The Complaint
which sought certification of a plaintiff class of persons who purchased or
owned Class A, B or C shares of the Fund from March 27, 1992 through
December 23, 1994 seeks an unspecified amount of damages, costs, attorneys'
fees and punitive damages. The principal allegations are that the Fund
purchased debt securities issued by the Mexican and Argentine governments
in amounts that were not permitted by the Fund's investment objective, and
that there was no shareholder vote to change the investment objective to
permit purchases in such amounts. The Complaint further alleges that the
decline in the value of the Mexican and Argentine securities held by the
Fund caused the Fund's net asset value to decline to the detriment of the
Fund's shareholders.
On September 26, 1996, the United States District Court for the Southern
District of New York granted the defendants' motion to dismiss all counts
of the Complaint. On October 11, 1996, plantiffs filed a motion for
reconsideration of the Court's decision granting defendants' motion to
dismiss the Complaint. On November 25, 1996, the Court denied plantiffs'
motion for reconsideration. On October 29, 1996, plaintiffs filed a motion
for leave to file an amended complaint, which is still pending. The
principal allegations of the proposed amended complaint are that the Fund
did not
<PAGE>
properly disclose that it planned to invest in mortgage-backed derivative
securities and that two advertisements used by the Fund misrepresented the
risks of investing in the Fund. Plantiffs also reiterated allegations in
the Complaint that the Fund failed to hedge against the risks of investing
in foreign securities despite representations that it would do so. While
the ultimate outcome of this matter cannot be determined at this time,
management of the Partnership does not expect that it will have a material
adverse effect on the Partnership's results of operations or financial
condition.
5. INCOME TAXES
The Partnership is a publicly traded partnership for Federal income tax
purposes and, accordingly, is not currently subject to Federal and state
corporate income taxes but is subject to the New York City unincorporated
business tax. Current law generally provides that certain publicly traded
partnerships, including the Partnership, will be taxable as corporations
beginning in 1998.
Domestic corporate subsidiaries of the Partnership, which are subject to
Federal, state and local income taxes, file a consolidated Federal income
tax return and separate state and local income tax returns. Foreign
corporate subsidiaries are generally subject to taxes in the foreign
jurisdictions where they are located.
6. NET INCOME PER UNIT
Net income per Unit is derived by reducing net income for each period by 1%
for the general partnership interest held by the General Partner and
dividing the remaining 99% by the weighted average number of Units
outstanding, Unit equivalents and Units issuable upon conversion of the
Class A Limited Partnership Interest during each period. The aggregate
weighted average number of Units outstanding used in computing net income
per Unit was 85,505,000 and 83,098,000 for the three months ended March 31,
1997 and 1996, respectively.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest and income taxes were as follows (in thousands):
Three Months Ended
March 31,
--------------------
1997 1996
----- -----
Interest . . . . . . . . $ 165 $ 167
Income taxes . . . . . . 2,654 2,623
8. SUBSEQUENT EVENT
On April 30, 1997, the Finance Committee of the Board of Directors of the
General Partner declared a distribution of $50,971,000 or $0.60 per Unit
representing the Available Cash Flow (as defined in the Partnership
Agreement) of the Partnership for the three months ended March 31, 1997.
The distribution is payable on May 20, 1997 to holders of record on
May 13, 1997.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Alliance Capital Management L.P. (the "Partnership") derives substantially all
of its revenues and net income (a) from fees for investment advisory,
distribution and related services provided to the Alliance mutual funds, and (b)
from fees for investment advisory services provided to affiliated clients
including The Equitable Life Assurance Society of the United States ("ELAS"), a
wholly-owned subsidiary of The Equitable Companies Incorporated ("Equitable"),
and certain other ELAS affiliates and to unaffiliated separately managed
accounts for institutional investors and high net-worth individuals ("third
party clients"). The Alliance mutual funds consist of a broad range of open-end
load and closed-end mutual funds ("mutual funds"), variable products including
The Hudson River Trust ("HRT"), and cash management products, including money
market funds and deposit accounts. The Partnership offers a broad range of
investment management products and services to meet the varied needs and
objectives of individual and institutional investors.
On February 29, 1996, the Partnership acquired substantially all of the assets
and liabilities of Cursitor Holdings, L.P. ("CHLP") and all of the outstanding
shares of Cursitor Holdings Limited, currently Cursitor Alliance Holdings
Limited, (collectively, "Cursitor"). The acquisition was accounted for under
the purchase method with the results of Cursitor from the date of acquisition
included in the Partnership's condensed consolidated financial statements.
Cursitor specializes in providing global asset allocation services to U.S. and
non-U.S. institutional investors. Cursitor's investment results were poor in
1995 and 1996. Despite a modest improvement in investment results during the
three months ended March 31, 1997, Cursitor continued to experience significant
client account terminations and asset outflows. Cursitor's assets under
management at March 31, 1997 and April 30, 1997 were approximately $6.0 billion
and $5.4 billion, respectively.
The Partnership evaluates the potential impairment of its intangible assets by
comparing the undiscounted cash flows expected to be realized from those
intangible assets to their recorded values pursuant to Statement of Financial
Accounting Standards No. 121 (SFAS 121) "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". Management of
the Partnership currently estimates that despite a significant decline in the
profitability of Cursitor, the undiscounted cash flows from Cursitor will be
sufficient for the Partnership to recover its investment. However, should the
profitability of Cursitor continue to decline, management's estimate may change
and the Partnership's investment in Cursitor might be considered impaired. In
such event the Partnership would be required to reduce the recorded value of
Cursitor goodwill and contracts acquired to fair market value, which is
significantly below their recorded value.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
(Dollars & Units in millions, Three months ended
except per Unit amounts) 3/31/97 3/31/96 % Change
- --------------------------------------------------------------------------------
Net income $53.3 $45.1 18.2%
Net income per Unit $0.62 $0.54 14.8
Weighted average number of Units and
Unit equivalents outstanding 85.5 83.1 2.9
Operating margin 26.2% 26.5% -
- --------------------------------------------------------------------------------
<PAGE>
ASSETS UNDER MANAGEMENT
<TABLE>
<CAPTION>
(Dollars in billions) 3/31/97 3/31/96 $ Change % Change
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance mutual funds:
Mutual funds $ 28.4 $ 23.8 $ 4.6 19.3%
Cash management products 19.9 15.7 4.2 26.8
Variable products 17.4 13.6 3.8 27.9
- -------------------------------------------------------------------------------------------
65.7 53.1 12.6 23.7
- -------------------------------------------------------------------------------------------
Seperately managed accounts:
Active equity & balanced 52.5 48.6 3.9 8.0
Active fixed 38.7 34.1 4.6 13.5
Index 18.9 16.9 2.0 11.8
Asset allocation 6.2 10.3 (4.1) (39.8)
- -------------------------------------------------------------------------------------------
116.3 109.9 6.4 5.8
- -------------------------------------------------------------------------------------------
Total $182.0 $163.0 $19.0 11.7%
- -------------------------------------------------------------------------------------------
AVERAGE ASSETS UNDER MANAGEMENT
Three months ended
(Dollars in billions) 3/31/97 3/31/96 % Change
- -------------------------------------------------------------------------------------------
Alliance mutual funds $ 65.3 $ 51.6 26.6%
Separately managed accounts:
Affiliated clients 26.7 23.3 14.6
Third party clients 92.9 80.3 15.7
- -------------------------------------------------------------------------------------------
Total $184.9 $155.2 19.1%
- -------------------------------------------------------------------------------------------
</TABLE>
Assets under management at March 31, 1997 were $182.0 billion, an increase of
$19.0 billion or 11.7% from March 31, 1996 and a decrease of $0.8 billion or
0.4% from December 31, 1996. Alliance mutual fund assets under management at
March 31, 1997 were $65.7 billion, an increase of $12.6 billion or 23.7% from
March 31, 1996, due principally to net sales of Alliance mutual funds of $8.4
billion and market appreciation of $4.2 billion. Seperately managed account
assets under management at March 31, 1997 were $116.3 billion, an increase of
$6.4 billion or 5.8% from March 31, 1996. This increase was primarily due to
market appreciation of $8.8 billion and net asset additions to affiliated client
accounts of $3.0 billion, offset partially by net third party client account
asset withdrawals of $5.3 billion, primarily attributable to Cursitor accounts.
<TABLE>
<CAPTION>
REVENUES
Three months ended
(Dollars in millions) 3/31/97 3/31/96 % Change
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment advisory and services fees:
Alliance mutual funds $86.0 $67.8 26.8 %
Separately managed accounts:
Affiliated clients 12.6 10.1 24.8
Third party clients 58.5 51.1 14.5
Distribution plan fees from Alliance mutual funds 47.2 38.5 22.6
Shareholder servicing and administration fees 12.8 11.4 12.3
Other revenues 2.2 2.7 (18.5)
- -------------------------------------------------------------------------------------------
Total revenues $219.3 $181.6 20.8%
- -------------------------------------------------------------------------------------------
</TABLE>
Investment advisory and services fees were $157.1 million for the three months
ended March 31, 1997, an increase of $28.1 million or 21.8% over the prior year
period. In general, the Partnership's investment advisory and services fees are
based on the market value of assets under management and vary with the type of
account managed. Investment advisory agreements for certain accounts provide
for performance fees in addition to a base fee. Performance fees are earned when
investment performance exceeds a contractually agreed upon benchmark and,
accordingly, may increase the volatility of both the Partnership's revenues and
earnings.
<PAGE>
Investment advisory fees from Alliance mutual funds increased $18.2 million or
26.8% primarily as a result of a 26.6% increase in average assets under
management.
Investment advisory fees from affiliated clients, primarily the General Accounts
of ELAS, increased $2.5 million or 24.8% due principally to higher average
assets under management of 14.6%. An increase in performance fees of $1.2
million also contributed to the increase in affiliated client advisory fees.
Investment advisory and services fees from third party clients increased $7.4
million or 14.5% due principally to an increase in average assets under
management of 15.7%. The increase in third party clients average assets under
management is primarily a result of market appreciation during 1996 and the
acquisition of Cursitor in February 1996.
Distribution plan fees increased primarily due to higher average equity mutual
fund and cash management assets under management. The increase in distribution
plan fees for equity mutual funds is principally due to market appreciation and
net sales of Class B Shares of these funds under the Partnership's mutual fund
distribution system described under "Capital Resources and Liquidity".
The increase in shareholder servicing and administration fees was primarily due
to an increase in the number of mutual fund shareholder accounts serviced by the
Partnership's subsidiaries from March 31, 1996. At March 31, 1997, the
Partnership's subsidiaries serviced approximately 2.9 million shareholder
accounts.
EXPENSES
Three months ended
(Dollars in millions) 3/31/97 3/31/96 % Change
- --------------------------------------------------------------------------------
Employee compensation and benefits $ 60.5 $ 49.4 22.5 %
Promotion and servicing 72.4 57.4 26.1
General and administrative 25.7 23.4 9.8
Interest 0.7 0.3 133.3
Amortization of intangible assets 2.6 2.9 (10.3)
- --------------------------------------------------------------------------------
Total expenses $161.9 $133.4 21.4 %
- --------------------------------------------------------------------------------
Employee compensation and benefits increased primarily as a result of higher
incentive compensation attributable to increased operating earnings and
increased base compensation principally due to an increase in the number of
employees resulting from the expansion of the Partnership's mutual fund
operations and the acquisition of Cursitor and salary increases.
Promotion and servicing expenses include distribution plan payments to financial
intermediaries for distribution of the Partnership's sponsored mutual funds and
cash management services' products and amortization of deferred sales
commissions paid to financial intermediaries under the System. Also included in
this expense category are travel and entertainment, advertising, promotional
materials and investment meetings and seminars for financial intermediaries that
distribute the Partnership's mutual fund products. Promotion and servicing
expenses increased primarily due to increased distribution plan payments
resulting from higher average cash management and equity mutual fund assets
under management. Higher cash management promotional and servicing costs and
increased mutual fund advertising also contributed to the increase in promotion
and servicing.
The increase in general and administrative expenses was due principally to
higher occupancy costs incurred in connection with the Partnership's expansion
of its international operations and expenses incurred in connection with joint
ventures.
<PAGE>
The Partnership generally is not subject to Federal, state and local income
taxes, with the exception of the New York City unincorporated business tax,
which is currently imposed at a rate of 4%. Domestic subsidiaries of the
Partnership are subject to Federal, state and local income taxes. Subsidiaries
organized and operating outside the United States are generally subject to taxes
in the foreign jurisdications where they are located. The provision for income
taxes increased for the three months primarily as a result of the increase in
taxable income of the Partnership and certain of its corporate subsidiaries.
The tax exemption for certain publicly traded limited partnerships, including
the Partnership, will expire on December 31, 1997. As a consequence, if the
Partnership retains its current structure, it will be taxed as a corporation as
of January 1, 1998. In response to this pending loss of its partnership tax
status, management of the Partnership is presently reviewing alternatives and
the Partnership expects to announce its plans during the second quarter of 1997.
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's cash and cash equivalents increased by $12.1 million for the
three months ended March 31, 1997. Cash inflows included $64.5 million from
operations, $12.1 million of proceeds from net sales of investments in Alliance
mutual funds and $3.1 million in proceeds from options exercised under the
Partnership's Unit Option Plans. Cash outflows included cash distributions to
Unitholders of $50.0 million, capital expenditures of $12.3 million and a $5.4
million principal repayment of the notes issued in connection with the Cursitor
acquisition.
The Partnership acquired Cursitor on February 29, 1996 for approximately
$159.0 million. The purchase price consisted of cash payments of $94.3
million, 1,764,115 Units with an aggregate value of $43.2 million, and notes
in the aggregate principal amount of $21.5 million ("Notes"). The Notes bear
interest at 6% per annum and are payable ratably over the next four years.
Acquisition costs of $4.0 million were also incurred. Due to the decline in
Cursitor's global asset allocation business, certain agreements relating to
Cursitor were amended in the second quarter of 1997. Under certain
circumstances, through February 28, 2006, the Partnership has an option to
purchase CHLP's minority interest in Cursitor Alliance LLC ("Cursitor
Alliance"), a newly formed subsidiary, and CHLP has an option to sell its
minority interest to the Partnership for a price ("Buyout Price") in cash,
Units, or a combination thereof of not less than $10.0 million or more than
$37.0 million. The Buyout Price will be determined based on the amount of
global asset allocation investment advisory revenues earned by Cursitor
Alliance. If either option is exercised, the payment of the Buyout Price
will be accounted for as an increase in the Cursitor purchase price.
The Partnership's mutual fund distribution system (the "System") includes four
distribution options. The System permits the Partnership's open-end mutual
funds to offer investors the option of purchasing shares (a) subject to a
conventional front-end sales charge ("Class A Shares"), (b) without a front-end
sales charge but subject to a contingent deferred sales charge payable by
shareholders ("CDSC") and higher distribution fees payable by the funds ("Class
B Shares"), (c) without a front-end sales charge and, if the shares are held for
at least one year, CDSC combined with higher distribution fees payable by the
funds ("Class C Shares") or (d) without a front-end sales charge, CDSC or
ongoing distribution fees payable by the funds ("Advisor Class Shares"). During
the three months ended March 31, 1997, payments made to financial intermediaries
in connection with the sale of Class B and C Shares under the System, net of
CDSC received, totaled approximately $31.5 million.
<PAGE>
As of March 31, 1997, the Partnership had not issued any commercial paper under
its $100 million commercial paper program and there were no borrowings
outstanding under the Partnership's $250 million five year revolving credit
facility. The revolving credit facility contains covenants which require the
Partnership, among other things, to meet certain financial ratios.
The Partnership's substantial equity base and access to public and private debt,
at competitive interest rates and other terms should provide adequate liquidity
for its general business needs. Management of the Partnership believes that cash
flow from operations and the issuance of debt and Units will provide the
Partnership with the financial resources to take advantage of strategic growth
opportunities, to finance capital requirements for mutual fund sales and to meet
the Partnership's other capital requirements.
CHANGES IN ACCOUNTING PRINCIPLES
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128) "EARNINGS PER SHARE" which
will be effective commencing with the Partnership's financial statements for the
year ended December 31, 1997. Upon adoption of the standard, the Partnership
will present "basic" earnings per Unit and "diluted" earnings per Unit. Basic
earnings per Unit excludes dilution and is computed by dividing income available
to Unitholders by the weighted average number of Units outstanding for the
period. The computation of diluted earnings per Unit, as required under the new
standard, gives effect to all dilutive potential Units that were outstanding
during the period. The adoption of this standard would not have a material
effect on the Partnership's earnings per Unit since diluted earnings per Unit is
computed in a manner similar to the Partnership's current computation of
earnings per Unit.
CASH DISTRIBUTIONS
The Partnership is required to distribute all of its Available Cash Flow, as
defined in the Partnership Agreement, to the General Partner and Unitholders
(including the holder of the Class A Limited Partnership Interest based on Units
issuable upon conversion of the Class A Limited Partnership Interest). The
Partnership's Available Cash Flow and Distributions per Unit were as follows (in
thousands, except per Unit information):
Three months ended
3/31/97 3/31/96
- --------------------------------------------------------------------------------
Available Cash Flow (in thousands) $50,971 $43,243
Distributions Per Unit $ 0.60 $ 0.52
- --------------------------------------------------------------------------------
<PAGE>
Part II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There have been no material developments in the legal proceeding
reported in the Alliance Capital Management L.P. ("Partnership") Form
10-K for the year ended December 31, 1996.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
1. Amendment to the Transaction Agreement dated as of
December 28, 1995 among the Partnership, The Shareholders
of Record of Cursitor Holdings Limited, Cursitor Holdings,
L.P. ("CHLP") and the Persons listed on Schedule 1.2 to
the Transaction Agreement.
2. Amendment Number One to the Amended and Restated Limited
Liability Company Agreement of Cursitor Alliance LLC dated
as of February 29, 1996 among the Partnership, Alliance
Capital Management Corporation of Delaware and CHLP.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURE
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.
ALLIANCE CAPITAL MANAGEMENT L.P.
Dated: May 15, 1997 By: Alliance Capital Management
Corporation, its General
Partner
By: /s/ ROBERT H. JOSEPH, JR.
-------------------------
Robert H. Joseph, Jr.
Senior Vice President &
Chief Financial Officer
<PAGE>
AMENDMENT TO THE TRANSACTION AGREEMENT
This Amendment to the Transaction Agreement (this "Amendment") is made
effective as of January 1, 1997, by and among (1) Alliance Capital Management
L.P. ("Alliance," referred to in the Agreement as "Buyer"), (2) the Shareholders
of Record of Cursitor Holdings Limited ("the Shareholders"), (3) Cursitor
Holdings, L.P. ("Cursitor") and (4) certain additional parties ("Additional
Parties"), and is made with reference to that certain Agreement dated as of
February 28, 1996 (the "Agreement") by and among Alliance, the Shareholders,
Cursitor and Additional Parties.
RECITALS
WHEREAS, the parties hereto have previously entered into the Agreement,
which among other things provides for certain benefits, including incentive
compensation, to be provided to employees of Cursitor Alliance LLC, a Delaware
limited liability company ("Cursitor Alliance," referred to in the Agreement as
"Newco"); and
WHEREAS, it has been agreed among the parties to make certain modifications
to the terms under which incentive and deferred compensation will be awarded and
paid to employees of Cursitor Alliance;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. INCENTIVE COMPENSATION POOLS. Section 9.2 of the Agreement is
hereby amended and restated in its entirety as follows:
"9.2 INCENTIVE COMPENSATION POOL. (a) During the period commencing
on the Closing Date and ending on the fifth anniversary thereof, Buyer shall
establish and maintain an incentive compensation pool (the "Cursitor Alliance
Pool") for the benefit of the employees of Newco and its Subsidiaries which,
except as otherwise provided herein, shall be calculated in the same manner used
to fund the same benefit and compensation plans and have the same rules for
eligibility as the incentive compensation pools maintained by Buyer for its
other operating subsidiaries and divisions, and shall be paid by or charged to
Cursitor Alliance. For purposes of calculating the Cursitor Alliance Pool the
administrative and technology expenses of Buyer allocable to the former business
of the Companies and their Subsidiaries will be phased in and allocated to the
Cursitor Alliance Pool over four years with 25% of the amount allocated during
the first
<PAGE>
12-month period following the Closing, 50% of the amount allocated during the
second 12-month period following the Closing, 75% of the amount allocated during
the third 12-month period following the Closing and 100% of the amount allocated
during the fourth twelve-month period following the Closing.
(b) For each year during the period commencing with calendar 1997 and
ending with calendar 2000, Buyer shall award from the Cursitor Alliance Pool
annual cash bonuses with aggregate value of at least $500,000 to employees in
each of the following two groups: (i) employees providing services in respect of
the former business of Draycott ("Draycott Employees"); and (ii) the group
consisting of professional employees of Newco, other than Draycott Employees and
Messrs. Eaton, Auboyneau, Gave and Ricciardi. Each such aggregate amount of
awards shall be allocated among the employees in the relevant group by the
Chairman of Newco, subject to the approval of Buyer's Management Compensation
Committee. None of Messrs. Eaton, Auboyneau, Gave and Ricciardi shall receive
annual cash bonuses with respect to the period commencing with calendar 1997 and
ending with calendar 2000.
(c) Buyer shall adopt two deferred compensation plans in the forms
attached as Exhibits 5 and 6 for the benefit of, respectively, Draycott
Employees and the group consisting of Messrs. Eaton, Auboyneau, Gave and
Ricciardi. Awards granted under such plans shall be treated as awarded from,
and shall count against, the Cursitor Alliance Pool described in Section 9.2(a).
Such awards shall not, however, count against the required minimum annual cash
bonuses described in Section 9.2(b)."
SECTION 2. PARTICIPATION IN OPTION PLAN. Section 9.3 of the Agreement is
hereby amended to delete the last two sentences thereof.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers on April 28, 1997,
effective as of the day and year first above written.
ALLIANCE CAPITAL
MANAGEMENT L.P.
By Alliance Capital Management
Corporation, as General
Partner
By: /s/ David R. Brewer, Jr.
-----------------------------
Title: Senior Vice President,
General Counsel & Secretary
CURSITOR HOLDINGS, L.P.
By HMESLP, Inc. as General Partner
By: /s/ Hugh M. Eaton, III
-----------------------------
Title: President
MANAGEMENT HOLDINGS LLC
Successor in interest to Cursitor
Holdings, L.P.
By: /s/ Hugh M. Eaton, III
-----------------------------
Title: Chairman
/s/ Eric Auboyneau
--------------------------------
ERIC AUBOYNEAU
/s/ Hugh M. Eaton III
--------------------------------
HUGH M. EATON III
3
<PAGE>
/s/ Charles J.H. Gave
--------------------------------
CHARLES J.H. GAVE
/s/ Ian Lloyd
--------------------------------
IAN LLOYD
/s/ Richard I. Morris, Jr.
--------------------------------
RICHARD I. MORRIS, JR.
/s/ Viplava Patel
--------------------------------
VIPLAVA PATEL
/s/ John S. Ricciardi
--------------------------------
JOHN S. RICCIARDI
/s/ J. Christian Sorensen
--------------------------------
J. CHRISTIAN SORENSEN
4
<PAGE>
AMENDMENT NUMBER ONE TO THE CURSITOR
ALLIANCE LLC AGREEMENT
This Amendment (this "Amendment") is made as of April 28, 1997, by and
among (1) Alliance Capital Management L.P. ("Alliance"), (2) Alliance Capital
Management Corporation of Delaware ("Alliance Delaware"), (3) Cursitor Holdings,
L.P. ("Holdings L.P."), and (4) Cursitor Alliance LLC (the "Company"), and is
made with reference to the Amended and Restated Limited Liability Company
Agreement of Cursitor Alliance LLC dated as of February 29, 1996 (the
"Agreement") by and among Alliance, Alliance Delaware and Holdings L.P.
RECITALS
WHEREAS, the parties have agreed to transfer the International Shares from
the Company to Alliance Delaware in redemption of Alliance Delaware's interest
in the Company whereupon Alliance Delaware shall cease to be a Member and its
capital account and Percentage Interest shall be reduced to zero;
WHEREAS, pursuant to the Third Services Agreement dated as of January 1,
1997 between Alliance and the Company (the "Third Services Agreement"), Alliance
and the Company have agreed to terminate the First Services Agreement and the
Second Services Agreement and in lieu thereof Alliance will be the exclusive
provider to the Company and its subsidiaries of all of their requirements for
back-office and support services, including without limitation, accounting, tax,
trading, legal, compliance, treasury, office administration, systems, data
processing, human resources and facilities services;
WHEREAS, pursuant to the Termination and Consulting Agreement dated the
date hereof, Richard I. Morris, Jr. has voluntarily resigned as President and
Chief Executive Officer of the Company and in lieu thereof has agreed to serve
as a consultant to the Company and to provide the Company and Alliance with the
services described in that Agreement;
WHEREAS, pursuant to various Amendments to Employment Agreements executed
on the date hereof, the Company and each other Principal have agreed to amend
the related Employment Agreements;
WHEREAS, pursuant to the Cursitor Alliance Principals' and Draycott
Compensation Plans and Amendment No. 1 to the Transaction Agreement dated the
date hereof, the Company has created new incentive compensation and deferred
compensation arrangements for certain employees of the Company;
<PAGE>
WHEREAS, the Members have agreed to restructure the put/call options in the
Agreement and to make certain other changes to the provisions of the Agreement
as more fully described herein; and
WHEREAS, the Members desire to amend the Agreement in the manner set forth
below;
NOW, THEREFORE, in consideration of the foregoing and the agreements
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. (a) All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings given them in the
Agreement, and each reference in the Agreement to "this Agreement", "hereof",
"herein", "hereunder" or "hereby" and each other similar reference shall be
deemed to refer to the Agreement as amended hereby. All references to the
Agreement in any other agreement between or among any of the parties hereto
relating to the transactions contemplated by the Agreement shall be deemed to
refer to the Agreement as amended hereby.
(b) Section 1.01(c) is hereby amended by adding the following terms and
their corresponding section references: "Aggregate Residual Reference
Percentage, section 9.03(a)"; "Cursitor Alliance Revenues, section 9.03(a)";
"Base Price, section 9.03(a)"; "Section 9.01(c) Buyout Price, section 9.03(b)";
and "Section 9.01(c) Put, section 9.01(c)"; and by deleting the following terms
and their corresponding section references: "First Offer Business, section
6.13"; "Section 9.01(c)(i) Buyout Price, section 9.03(b)"; "Section 9.01(c)(i)
Put, section 9.01(c)"; "Section 9.01(c)(ii) Buyout Price, section 9.03(b)"; and
"Section 9.01(c)(ii) Put, section 9.01(c)".
SECTION 2. REDEMPTION OF ALLIANCE DELAWARE. (a) Subject to
satisfaction or waiver of the conditions set forth in subsection (b), as soon as
is practicable after such conditions are satisfied, the Company agrees to (i)
transfer to Alliance Delaware, free and clear of all Liens, all of its right,
title and interest in, to and under the International Shares and (ii) pay to
Alliance Delaware (or in the case of any deficit, Alliance Delaware agrees to
pay to the Company), in cash, the excess (or deficit, if applicable) of Alliance
Delaware's Capital Account (after giving effect to all allocations and
distributions through December 31, 1996) over the initial balance thereof as
adjusted pursuant to the Transaction Agreement. The date on which such transfer
occurs shall be referred to as the "Redemption Date." Alliance agrees to offer
employment on the Redemption Date to all employees of the Company and its
subsidiaries (other than those employees whose employment
2
<PAGE>
is terminated by the Company or who voluntarily terminate employment between the
date hereof and the Redemption Date) except those employees listed on Schedule
2A hereto.
(b) The obligation of the parties to consummate the transactions
contemplated by subsection (a) is subject to the parties having made all
requisite notifications and filings and received all consents, authorizations or
approvals (or the expiration of applicable waiting periods) from the applicable
governmental body, agency or official, in each case in form and substance
reasonably satisfactory to the parties, and no such notification, filing,
consent, authorization or approval shall have been revoked including, without
limitation, (i) notification and clearance by IMRO of the changes of control in
Cursitor Alliance Management Limited (formerly known as Alliance Capital
Limited) and Dimensional Asset Management Limited contemplated by this Agreement
in accordance with Chapter IV of the IMRO Rules and Part VII of the Investment
Services Regulations 1995, if applicable; (ii) any necessary filings with The
Monetary Authority of Singapore; and (iii) any necessary filings with the
Ministry of Finance of Japan.
(c) Upon consummation of the transactions contemplated by subsection (a),
Alliance Delaware shall cease to be a member of the Company (without prejudice
to any vested rights as of such date) and its Capital Account shall be reduced
to zero. Thereafter, the definitions of "Member" and "Alliance Members" shall
not include Alliance Delaware. Notwithstanding the foregoing, the Company shall
not be dissolved by reason of the foregoing and the Other Members agree that the
business of the Company shall continue in accordance with the terms of the
Agreement as amended hereby.
SECTION 3. UNANIMOUS VOTE. The Agreement is hereby amended by deleting
Section 6.04 in its entirety.
SECTION 4. OFFICERS. Section 6.10(a) of the Agreement is hereby
amended and restated in its entirety as follows:
"6.10. OFFICERS. (a) The officers of the Company (the "OFFICERS") shall
be selected by the Members and shall consist of a Chairman, a Vice Chairman, a
Chief Executive Officer and such other officers, if any, as are contemplated
herein or as the Members may determine are necessary or appropriate. Subject to
Section 6.01 and subject to the matters which are to be the exclusive
responsibility of Alliance under the Third Services Agreement, the day-to-day
conduct, ordinary-course decisions and operations of the business of the Company
and its subsidiaries shall generally be managed by the Officers, and the
Chairman shall have such powers as are usually exercised by comparably
designated officers of a Delaware corporation, including power and authority
with respect to such matters as the development,
3
<PAGE>
maintenance and change of investment management policies and fee structures, the
hiring, promotion, firing and compensation (excluding incentive compensation) of
staff, management and executive personnel, new product development, sales and
marketing policies and implementation and decisions to accept, reject, amend,
maintain or terminate client relationships; PROVIDED that, (i) decisions not in
the ordinary course, including without limitation matters involving incentive
compensation, non-cash benefit programs and budgets shall require the approval
of the Members; (ii) the powers and authorities listed above shall be exercised
by the Chairman and other Officers within the constraints of the then applicable
Annual Operating Plan approved by the Members; (iii) the Chairman and the other
Officers shall execute their duties and responsibilities with due regard for the
fact that the Company is a subsidiary of Alliance and accordingly all of the
Officers and employees of the Company are to report, directly or indirectly, to
senior management of Alliance and are to operate as part of the Alliance group;
and (iv) the Chairman shall report to the Chief Executive Officer of Alliance.
The Officers may be appointed and removed by a majority vote of the Members
with or without cause and the duties and responsibilities of the Officers as set
forth in this Section may be changed from time to time by the Members."
SECTION 5. RIGHT OF FIRST OFFER. The Agreement is hereby amended by
deleting Section 6.13 in its entirety.
SECTION 6. PUT/CALL OPTIONS. Section 9.01(c) of the Agreement is
hereby amended and restated in its entirety as follows:
"(c) In the event that at any time commencing with the Closing Date and
prior to the fifth anniversary of the Closing Date (i) the employment by the
Company of Mr. Hugh M. Eaton III is terminated by the Company without Cause (as
such term is defined in Mr. Eaton's Employment Agreement), as a result of action
by Alliance without the written consent of Holdings L.P., and (ii) any Principal
other than Mr. Eaton elects to terminate his employment pursuant to Section
5(e)(c) of the applicable Employment Agreement, then Holdings L.P. may cause
Alliance to purchase, and Alliance agrees to purchase (the "SECTION 9.01(c)
PUT", and together with the Section 9.01(b) Put, the "PUTS"), that percentage of
Holdings L.P.'s Interest which is set forth in Schedule 9.01(c) next to the name
of such Principal (with respect to each such Principal, the "REFERENCE
PERCENTAGE") whose employment by the Company is terminated as described above,
and Holdings L.P. shall provide written notice to the other Members to the
effect that it is electing to exercise its Section 9.01(c) Put within 30 days of
the occurrence of such event.
4
<PAGE>
SECTION 7. BUYOUT DATE. Section 9.02 of the Agreement is hereby amended
and restated in its entirety as follows:
"9.02. BUYOUT DATE. The Section 9.01(b) Put, or the Section 9.01(b) Call,
as the case may be, shall close, subject to any applicable waiting period in
respect of any applicable regulatory requirements, on the first business day
which is at least 30 days after the receipt by Alliance, in the case of the Put,
or Holdings L.P., in the case of the Call, of the calculation by Holdings L.P.
or Alliance, as the case may be, of the Buyout Price or such earlier closing
date as is agreed to in writing by Alliance and Holdings L.P. unless the
non-exercising Member shall deliver a notice of dispute pursuant to Section 9.06
hereof in which case the Section 9.01(b) Put or the Section 9.01(b) Call shall
close on the first business day which is at least 30 days after final resolution
of such dispute by the Accounting Referee. Subject to any applicable waiting
period in respect of any applicable regulatory requirements, the Section 9.01(c)
Put and the Section 9.01(d) Call shall close on such date as is agreed to in
writing by Alliance and Holdings L.P. but in no event later than 60 days after
the receipt by Holdings L.P. (in the case of a Call) or Alliance (in the case of
a Put) of written notice of such election. The date of Closing of the Puts or
the Calls is referred to herein as the "BUYOUT DATE". Each Member shall
cooperate in good faith with respect to any applicable regulatory requirements
and shall use its best efforts to make all applicable regulatory filings within
30 days after receipt of written notice of such election.
SECTION 8. BUYOUT PRICE. Section 9.03 of the Agreement is hereby
amended and restated in its entirety as follows:
"9.03 BUYOUT PRICE. (a) The purchase price for the Section 9.01(b)
Put and the Section 9.01(b) Call (the "SECTION 9.01(b) BUYOUT PRICE") shall be
determined in accordance with the following formula:
Section 9.01(b) = Base Price x Aggregate Residual Reference Percentage
Buyout Price
"Base Price" shall equal the figure in Schedule 9.03 corresponding to the
Cursitor Alliance Revenues. "Cursitor Alliance Revenues" shall mean the sum of
(i) the aggregate revenues (excluding performance fees) of the Company with
respect to calendar year 2000 from the provision of investment advisory services
to clients of the Company (other than those clients that as of the Buyout Date
have terminated their investment advisory relationship with the Company or that
have notified the Company (orally or in writing) of their intention to terminate
that relationship) determined on an accrual basis in accordance with generally
accepted accounting principles consistent with past practices (but excluding any
such accrued revenues which are not paid prior to the date notice of exercise of
the
5
<PAGE>
Section 9.01(b) Put or Section 9.01(b) Call is given as provided in Section
9.01(b)); and (ii) the aggregate performance fees with respect to the four
calendar years 1997, 1998, 1999 and 2000 divided by four, calculated on a cash
basis but otherwise in accordance with generally accepted accounting principles
consistent with past practices; PROVIDED that, Cursitor Alliance Revenues shall
not include fees or subadvisory fees (or any portion thereof) which ultimately
inure to the benefit of Trust Company of the West or any other third party.
"Aggregate Residual Reference Percentage" shall mean the difference between
100% and the sum of the Reference Percentages under all prior Section 9.01(c)
Puts, if any.
(b) The purchase price for a Section 9.01(c) Put (the "SECTION
9.01(c) BUYOUT PRICE") shall be determined in accordance with the following
formula:
n
Section 9.01(c) = $37,000,000 DIVIDED BY (1.10) x Reference Percentage
Buyout Price
Where "n" = the number of twelve-month periods (including any fraction
thereof) from the date on which the applicable Put is exercised to the fifth
anniversary of the Closing Date.
(c) The purchase price for the Section 9.01(d) Call (the "SECTION
9.01(d) BUYOUT PRICE" and together with the Section 9.01(b) Buyout Price and the
Section 9.01(c) Buyout Price, the "BUYOUT PRICE") shall be determined in
accordance with the following formula:
Section 9.01(d) = $37,000,000 x Aggregate Residual Reference Percentage
Buyout Price DIVIDED BY (1.10)nth power
Where "n" = the number of twelve-month periods (including any fraction
thereof) from the date on which the Section 9.01(d) Call is exercised to the
fifth anniversary of the Closing Date."
6
<PAGE>
SECTION 9. SCHEDULE 2.10. Effective as of January 1, 1997, Schedule
2.01 of the Agreement is hereby amended and restated in its entirety as follows:
Schedule 2.01
Members
------
Percentage
Name and Address Interest
- ---------------- ----------
Alliance Capital Management L.P. 93.00
1345 Avenue of the Americas
New York, New York 10105
Telephone: 212-969-1000
Cursitor Holdings, L.P. 7.00
38 Newbury Street
Boston, Massachusetts
02116-3210 ------
TOTAL 100%
SECTION 10. SCHEDULE 6.10. Schedule 6.10 of the Agreement is hereby
amended and restated in its entirety as follows:
Schedule 6.10
Initial Officers Position
---------------- --------
Hugh M. Eaton III Chairman and Chief
Executive Officer
SECTION 11. SCHEDULE 9.01(c). Schedule 9.01(c) of the Agreement is
hereby amended and restated in its entirety as follows:
Reference
Principal Percentage
--------- ----------
Eaton 27.597
Gave 24.242
Ricciardi 24.243
Auboyneau 23.918
7
<PAGE>
SECTION 12. SCHEDULE 9.03. Schedule 9.03 of the Agreement is hereby
amended and restated in its entirety as follows:
Schedule 9.03
BUY-OUT PRICE
Cursitor Alliance Revenues Base Price
-------------------------- ----------
$ 0 - $34,190,774 $10,000,000
34,190,775 - 35,123,199 11,000,000
35,123,200 - 36,072,424 12,000,000
36,072,425 - 37,038,599 13,000,000
37,038,600 - 38,021,874 14,000,000
38,021,875 - 39,022,399 15,000,000
39,022,400 - 40,040,324 16,000,000
40,040,325 - 41,075,799 17,000,000
41,075,800 - 42,128,994 18,000,000
42,128,995 - 43,199,999 19,000,000
43,200,000 - 44,289,024 20,000,000
44,289,025 - 45,396,199 21,000,000
45,396,200 - 46,521,674 22,000,000
46,521,675 - 47,665,599 23,000,000
47,665,600 - 48,828,124 24,000,000
48,828,125 - 50,009,399 25,000,000
50,009,400 - 51,209,574 26,000,000
51,209,575 - 52,428,799 27,000,000
52,428,800 - 53,667,224 28,000,000
53,667,225 - 54,924,999 29,000,000
54,925,000 - 56,202,274 30,000,000
56,202,275 - 57,499,199 31,000,000
57,499,200 - 58,815,924 32,000,000
58,815,925 - 60,152,599 33,000,000
60,152,600 - 61,509,374 34,000,000
61,509,375 - 62,886,399 35,000,000
62,886,400 - 64,283,824 36,000,000
64,283,825 - or greater 37,000,000
SECTION 13. GOVERNING LAW. This Amendment shall be construed in
accordance with and governed by the law of the State of Delaware without giving
effect to the principles of conflicts of laws thereof.
8
<PAGE>
SECTION 14. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in
any number of counterparts, each of which shall be deemed an original. This
Amendment shall become effective when each party shall have received a
counterpart thereof signed by each of the other parties.
SECTION 15. SURVIVAL OF AGREEMENT. Except as amended hereby, the terms of
the Agreement shall remain in full force and effect and the business of the
Company shall be continued.
9
<PAGE>
IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be duly executed and delivered by their duly authorized officers or
representatives as of the day and year first written above.
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management Corporation,
its General Partner
By: /s/ David R. Brewer, Jr.
------------------------------------------
Name: David R. Brewer, Jr.
Title: Senior Vice President, General
Counsel & Secretary
ALLIANCE CAPITAL MANAGEMENT
CORPORATION OF DELAWARE
By: /s/ Robert H. Joseph, Jr.
------------------------------------------
Name: Robert H. Joseph, Jr.
Title: Director
CURSITOR HOLDINGS, L.P.
By: HMESLP, Inc. as
General Partner
By: /s/ Hugh M. Eaton, III
------------------------------------------
Name: Hugh M. Eaton, III
Title: President
MANAGEMENT HOLDINGS LLC
Successor in interest to Cursitor Holdings, L.P.
By: /s/ Hugh M. Eaton, III
------------------------------------------
Manager: Hugh M. Eaton, III
CURSITOR ALLIANCE LLC
By: /s/ Richard I. Morris, Jr.
------------------------------------------
Name: Richard I. Morris, Jr.
10
<PAGE>
Title: Vice Chairman
11
<PAGE>
Schedule 2A
ALLIANCE CAPITAL MANAGEMENT L.P.
CURSITOR EMPLOYEES
Nicholas P. Carn
Charles Gave
John S. Ricciardi
Francois Brunault
David Cooke
Linda Fonseca
Susi Kennedy
Paritosh Patel
Onder Tanik
Louise Vandyck
Alison Whittock
Eric Auboyneau
Francoise Le Garreres
Francine Loustalan
Claude Lureau
Eric Pages
Marc De Scitivaux
Marc Barbara
Anne E. Bullinger
J. Christian Sorensen
Barbara A. Brown
Hugh M. Eaton
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 69,568
<SECURITIES> 23,829
<RECEIVABLES> 168,580
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 261,977
<PP&E> 67,074
<DEPRECIATION> 0
<TOTAL-ASSETS> 777,970
<CURRENT-LIABILITIES> 275,398
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 483,301
<TOTAL-LIABILITY-AND-EQUITY> 777,970
<SALES> 219,251
<TOTAL-REVENUES> 219,251
<CGS> 0
<TOTAL-COSTS> 158,590
<OTHER-EXPENSES> 2,622
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 673
<INCOME-PRETAX> 57,366
<INCOME-TAX> 4,017
<INCOME-CONTINUING> 53,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,349
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
