SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report : July 1, 1997
Date of Earliest Event Reported: June 9, 1997
Commission file number 1-10994
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PHOENIX DUFF & PHELPS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4191764
(State of Incorporation) (I.R.S. Employer Identification No.)
56 Prospect St., Hartford, Connecticut 06115-0480 (860)403-5000
(Address of principal executive offices) (Registrant's telephone number)
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Item 5. Other Events
Agreement and Plan of Merger - Pasadena Capital Corporation
On June 9, 1997, Phoenix Duff & Phelps Corporation ("Phoenix Duff & Phelps")
signed an agreement and plan of merger ("Merger Agreement") with Pasadena
Capital Corporation ("Pasadena"), the parent company to Roger Engemann &
Associates, Inc. The agreement values Pasadena at $180 million, subject to
adjustment based on the rate of annualized revenues at the time of closing, and
provides for additional payment for net tangible assets. All consideration is
payable in cash. The agreement further provides for an "earn out", based on
growth in revenues over the next five years, of up to an additional $66 million.
Pasadena, which operates in southern California, manages over $5.5 billion in
assets, primarily individual accounts but also including The Pasadena Funds, a
family of six equity mutual funds.
Pursuant to the Merger Agreement, the merger with Pasadena will be effected
through the merger of Phoenix Apollo Corporation, a newly formed subsidiary of
Phoenix Duff & Phelps, into Pasadena. Pasadena will be the surviving corporation
in the merger and will become a wholly owned subsidiary of Phoenix Duff &
Phelps.
As a condition to the execution and delivery of the Merger
Agreement, Phoenix Duff & Phelps and Pasadena entered into
long-term employment and noncompete agreements with J. Roger
Engemann and other principals of Pasadena.
The merger is subject to the satisfaction of customary
conditions, including approval of the shareholders of Pasadena
and of the three largest Pasadena Funds. Mr. J. Roger Engemann,
the owner of a majority of the shares of Pasadena, has agreed to
vote all of his shares in favor of the merger.
Purchase Agreement - GMG/Seneca Capital Management LLC
On June 18, 1997, Phoenix Duff & Phelps signed a definitive agreement ("Purchase
Agreement") to acquire GMG/Seneca Capital Management LLC ("GMG/Seneca"), a San
Francisco based investment advisor. The purchase price will be paid in cash and
short term notes. Under the terms of the transaction, Phoenix Duff & Phelps will
acquire a majority interest in GMG/Seneca, which will be renamed Seneca Capital
Management. The remaining interests will continue to be held by GMG/Seneca
senior management. The agreement values the entire equity of GMG/Seneca at $54
million. GMG/Seneca, founded by Gail Seneca in 1989, currently manages over $4
billion in assets, primarily institutional accounts.
At closing, an amended Operating Agreement will be executed providing, in part,
for the continuation of current management's control over investment management
and day-to-day operations. Gail Seneca and all other members of senior
management will enter into long-term employment and noncompete agreements. Those
management members continuing to hold equity interests will enter into
agreements with Phoenix Duff & Phelps by which the members may "put" their
interests to Phoenix Duff & Phelps and Phoenix Duff & Phelps, alternatively, can
"call" those interests. The exercise prices of both puts and calls will be based
on the rate of annual revenues of GMG/Seneca at the time of each such exercise.
Subject to acceleration under certain circumstances, the put and call rights
will be exercisable only in stages between three and five years after closing.
The closing of the purchase is subject to satisfaction of customary conditions
and to completion of certain client consent procedures required under the
Investment Advisers Act.
Financing
It is contemplated that Phoenix Duff & Phelps will finance the acquisitions of
Pasadena and GMG/Seneca in part through existing resources and in part through
borrowings under a new $200 million bank credit facility for which it has
received a commitment. Borrowings under this facility will be unsecured, will
mature in five years and will bear interest at a variable rate. The financing is
subject to execution of a definitive credit agreement.
Phoenix Duff & Phelps is a leading money management firm offering comprehensive
products, including open and closed-end mutual funds, variable annuities and
institutional accounts. At March 31, 1997, Phoenix Duff & Phelps managed $33
billion in
assets.
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Item 7. Financial Statements and Other Exhibits.
Exhibit No. Description
2(d) Agreement and Plan of Merger between
the Registrant, Phoenix Apollo Corp. and
Pasadena Capital Corporation dated as of June 9,
1997.
2(e) Purchase Agreement between the
Registrant and the persons
signatory thereto dated as of June 18, 1997.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Phoenix Duff & Phelps Corporation
July 1, 1997 /s/ William R.
Moyer
William R. Moyer, Chief Financial
Officer
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8K - EXHIBIT 2(d)
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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PHOENIX DUFF & PHELPS CORPORATION,
PHOENIX APOLLO CORP.
AND
PASADENA CAPITAL CORPORATION
DATED AS OF JUNE 9, 1997
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6_24_97.8K5
ARTICLE 1 - DEFINITIONS..........................................1
1.1. DEFINED TERMS.......................................1
1.2. OTHER DEFINED TERMS.................................7
ARTICLE 2 - THE MERGER...........................................8
2.1. THE MERGER..........................................8
2.2. EFFECTIVE TIME; CLOSING.............................9
2.3. ARTICLES OF INCORPORATION; BY-LAWS..................9
ARTICLE 3 - CONVERSION OR CANCELLATION OF SECURITIES OF THE
CONSTITUENT CORPORATIONS..................................10
3.1. EFFECT ON CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS.......................................10
3.2. SURRENDER OF CERTIFICATES..........................11
3.3. TERMINATION OF OWNERSHIP RIGHTS IN PASADENA
COMMON STOCK EQUIVALENTS...........................12
3.4. ESCROW.............................................12
3.5. DETERMINATION OF CLOSING MERGER PAYMENT AMOUNT.....12
3.6. DETERMINATION OF POST-CLOSING MERGER PAYMENT
AMOUNT.............................................12
3.7. CONTINGENT MERGER PAYMENTS.........................13
3.8. MECHANICS OF EARN-OUT AMOUNT.......................14
3.9. PDP TO FUND PAYMENTS...............................16
3.10. RESTRICTED PAYMENTS................................16
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF PASADENA..........17
4.1. ORGANIZATION, STANDING AND AUTHORITY...............17
4.2. SUBSIDIARIES.......................................18
4.3. AUTHORIZATION......................................18
4.4. ORGANIZATIONAL DOCUMENTS...........................18
4.5. NO VIOLATION.......................................18
4.6. GOVERNMENTAL AUTHORIZATION.........................19
4.7. CAPITAL STOCK......................................19
4.8. FINANCIAL STATEMENTS...............................19
4.9. ABSENCE OF UNDISCLOSED LIABILITIES.................19
4.10. ABSENCE OF CERTAIN CHANGES.........................20
4.11. LITIGATION.........................................20
4.12. TITLE TO ASSETS....................................21
4.13. INTELLECTUAL PROPERTY..............................21
4.14. CONTRACTS..........................................21
4.15. NO DEFAULT UNDER CONTRACTS OR AGREEMENTS...........22
4.16. COMPLIANCE WITH LAWS...............................22
4.17. TAXES..............................................23
4.18. EMPLOYEE BENEFIT PLANS.............................24
4.19. INVESTMENT CONTRACTS AND CLIENTS...................26
4.20. CERTAIN REPRESENTATIONS AND WARRANTIES AS TO
THE PASADENA FUNDS.................................27
4.21. NO BROKERS.........................................29
4.22. ACCURACY OF DOCUMENTS AND INFORMATION..............30
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF PDP AND
ACQUISITION SUB...........................................30
5.1. ORGANIZATION AND STANDING..........................30
5.2. AUTHORITY..........................................30
5.3. GOVERNMENTAL AUTHORIZATION.........................30
5.4. NO VIOLATION.......................................31
5.5. NO BROKERS.........................................31
ARTICLE 6 - CONDUCT OF BUSINESS PRIOR TO THE CLOSING............31
6.1. CONDUCT PRIOR TO CLOSING...........................31
6.2. CONSENTS AND APPROVALS.............................33
6.3. SHAREHOLDERS MEETING...............................34
6.4. DIRECTION STATEMENT TO ESOP PARTICIPANTS...........34
ARTICLE 7 - ADDITIONAL AGREEMENTS...............................34
7.1. CURRENT INFORMATION; NOTIFICATION OF CERTAIN
MATTERS............................................34
7.2. ACCESS; CONFIDENTIAL INFORMATION...................35
7.3. NO MERGERS, CONSOLIDATIONS, SALE OF INTERESTS
ETC................................................35
7.4. PUBLICITY..........................................36
7.5. SATISFACTION OF CONDITIONS IN SECTION 15(F) OF
THE INVESTMENT COMPANY ACT.........................36
7.6. EMPLOYEE BENEFITS AND PLANS........................36
7.7. BOARD OF DIRECTORS OF THE SURVIVING CORPORATION....36
7.8. TAX STATEMENTS.....................................37
7.9. TAX RETURNS........................................37
7.10. TRANSFER TAXES.....................................37
7.11. PDP STOCK OPTIONS..................................37
7.12. MARKETING AND DISTRIBUTION ARRANGEMENTS............37
7.13. NAME CHANGE FOR PASADENA FUNDS.....................37
7.14. NAMES OF PASADENA AND PASADENA SUBSIDIARIES AND
LOCATION OF OFFICES................................37
7.15. OPERATION OF PASADENA AS A SEPARATE ENTITY........38
7.16. CHANGES IN INVESTMENT MANAGEMENT FEES..............38
7.17. PHL GUARANTEE......................................38
7.18. SHAREHOLDER INDEBTEDNESS..........................38
7.19. FURTHER ASSURANCES.................................38
ARTICLE 8 - CONDITIONS..........................................38
8.1. CONDITIONS TO OBLIGATIONS OF PASADENA..............38
8.2. CONDITIONS TO OBLIGATIONS OF PDP...................39
ARTICLE 9 - TERMINATION.........................................41
9.1. TERMINATION........................................41
9.2. EFFECT OF TERMINATION AND ABANDONMENT..............42
ARTICLE 10 - MISCELLANEOUS......................................42
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........42
10.2. INDEMNIFICATION....................................42
10.3. EXPENSES...........................................44
10.4. NOTICES............................................44
10.5. COUNTERPARTS.......................................46
10.6. GOVERNING LAW......................................46
10.7. WAIVER; AMENDMENT..................................46
10.8. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES;
ETC................................................46
10.9. CONSENT TO JURISDICTION............................46
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4
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AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of the 9th
day of June, 1997, by and among PHOENIX DUFF & PHELPS CORPORATION, a Delaware
corporation ("PDP"), PHOENIX APOLLO CORP., a California corporation
("Acquisition Sub"), and PASADENA CAPITAL CORPORATION, a California corporation
("Pasadena").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Pasadena has determined that the
merger of Acquisition Sub with and into Pasadena, upon the terms and subject to
the conditions set forth in this Agreement (the "Merger"), is in the best
interests of Pasadena and its shareholders; and
WHEREAS, the Boards of Directors of PDP and Acquisition Sub have
determined that the Merger is in the best interests of PDP and Acquisition Sub
and their respective stockholders.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound thereby, the
parties hereto hereby agree as follows:
ARTICLE 1ARTICLE1-DEFINITIONS""1"
DEFINITIONS
1.1. Defined Terms1.1.DefinedTerms""2". As used
herein, the terms below shall have the following meanings:
"Acquisition Sub" has the meaning given such term in
the recitals.
"Action" means any claim, action, suit, proceeding, investigation,
inspection, examination or audit, whether at law or in equity, or by or before
any court, arbitrator, arbitration panel or Governmental Entity.
"Adjusted Assets" means, as of the applicable date, the aggregate
amount of all consolidated balance sheet assets of Pasadena, including, but not
limited to, (i) deferred dealer commissions at the book value thereof, (ii)
equity notes receivable at book value, (iii) the aggregate exercise price of all
unexercised stock options which are exercisable and (iv) the aggregate Unit Base
Amount of all Share-Linked Units, but excluding (x) intangibles net of
amortization and (y) property and equipment net of amortization.
"Adjusted Liabilities" means the sum of (i) the aggregate of all
consolidated balance sheet liabilities of Pasadena as of the applicable date,
including, but not limited to, (x) any payments due on Closing to Putnam, Lovell
& Thornton Inc. or Michael Hermann as brokers and (y) any signing bonuses due on
Closing under the Employment Agreements, and (ii) $2.0 million.
"Advisers Act" means the Investment Advisers Act of
1940, as amended.
"Affiliate" means, when used with respect to a specified Person,
another Person that, either directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified. As used herein, the term "control" means the power through
the ownership of voting securities or other equity interests, contract or
otherwise to direct the affairs of another Person.
"Agreement" has the meaning given such term in the
recitals.
"Audited Balance Sheets" means the audited consolidated balance
sheets of Pasadena and the Pasadena Subsidiaries as of December 31, 1996, 1995
and 1994, together in each case with the related notes thereto and the related
unqualified reports of the Pasadena Accountants.
"Audited Financial Statements" means the Audited Balance Sheets and
the audited consolidated statements of operations, changes in stockholders'
equity and cash flows of Pasadena and the Pasadena Subsidiaries for the years
ended December 31, 1996, 1995 and 1994, together in each case with the related
notes thereto and the related unqualified reports of the Pasadena Accountants.
"CGCL" means the California General Corporation Law.
"Client" means any client to which Pasadena provides investment
management, investment advisory, including sub-advisory, underwriting,
distribution or administrative services on the date of this Agreement.
"Closing" and "Closing Date" have the meanings
specified in Section 2.2 hereof.
"Closing Balance Sheet" has the meaning specified in
Section 3.6(a) hereof.
"Closing Merger Payment Amount" has the meaning
specified in Section 3.5(c) hereof.
"Closing Run Rate Percentage" means the quotient (expressed as a
decimal rounded to two decimal places) obtained by dividing the Closing Run Rate
Revenues by the Reference Run Rate Revenues.
"Closing Run Rate Revenues" means, as of the Determination Date, an
amount equal to the sum of (i) for each account under management by Pasadena or
a Pasadena Subsidiary as of the Determination Date (other than the Pasadena
Funds), the product of (x) the total amount of assets in such account on
December 31, 1996 (or, in the case of an account established after December 31,
1996, the initial investment in such account on the date of its establishment),
plus the total amount of asset additions to such account from January 1, 1997
(or, in the case of new accounts, from the date of establishment) to the
Determination Date, minus the total amount of asset withdrawals from such
account for such period, multiplied by (y) the per annum management fee rate for
such account in effect on the Determination Date and (ii) for each of the
Pasadena Funds, the product of (x) the assets invested in such Pasadena Fund as
of December 31, 1996 plus the total amount of asset additions to such Pasadena
Fund from January 1, 1997 to the Determination Date minus the total amount of
asset withdrawals from such Pasadena Fund for such period multiplied by (y) the
Mutual Fund Fee Percentage for such Pasadena Fund in effect on the Determination
Date. Notwithstanding the foregoing, there shall be excluded from the
calculation of Closing Run Rate Revenues the aggregate amount, if any, of the
assets in all accounts under management with assets in excess of $500,000 as to
which Pasadena or a Pasadena Subsidiary has been informed prior to the Closing
Date of the intention of the Clients owning such accounts to terminate their
Investment Contracts or to withdraw all or the substantial portion of the assets
in such accounts within six months after such date.
"Code" means the Internal Revenue Code of 1986, as such may be
amended from time to time.
"Common Stock Equivalents" means, collectively, (i) all shares of
Pasadena Common Stock issued and outstanding immediately prior to the Effective
Time, and (ii) without duplication of the shares specified in clause (i), all
shares of Pasadena Common Stock issuable upon exercise of any Options
outstanding immediately prior to the Effective Time, including all Share-Linked
Units immediately prior to the Effective Time.
"Common Stock Equivalent Number" means the total number of Common
Stock Equivalents as of the Effective Time.
"Compensation Allocation Agreement" means the
Compensation Allocation Agreement among PDP, Pasadena, J. Roger
Engemann, James E. Mair and John S. Tilson in the form attached
hereto as Exhibit A.
"Consolidated Net Income" means, for any period, the aggregate of the
net income (loss) of the Surviving Corporation and its subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP, provided
that there shall be excluded from the calculation of Consolidated Net Income
both (i) any corporate office allocation expense of PDP and (ii) amortization
expense of intangible assets of PDP (or of the Surviving Corporation through the
application of "push-down" accounting principles) arising from the consummation
of the Merger.
"Contingent Merger Payment" has the meaning specified
in Section 3.7(a) hereof.
"Contingent Merger Payment Time" has the meaning
specified in Section 3.7(g) hereof.
"Damages" means costs, losses (including, without limitation,
diminution in value and losses from suspensions of operations), liabilities,
damages, lawsuits, deficiencies, claims, Taxes and expenses (whether or not
arising out of third-party claims or governmental examinations, inspections or
audits), including, without limitation, interest, penalties, reasonable
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing, provided that any Damages shall be calculated net of the
amount of any tax benefits (including, without limitation, in the case of
Damages specified in Section 10.2(b) hereof, any tax benefit realized as a
result of shifting a tax item from one taxable period to another) or recovery,
settlement or otherwise under any insurance coverage or third-party claim
resulting from or related to the matter giving rise to such Damages. The term
"Damages" as used herein is not limited to matters asserted by third parties
against any of the PDP Indemnitees, but includes Damages incurred or sustained
by the PDP Indemnitees in the absence of third party claims.
"Determination Date" means the fifth business day
preceding the Closing Date.
"Disclosure Schedule" means a schedule executed and delivered by
Pasadena to PDP concurrently herewith which sets forth the exceptions to the
representations and warranties contained in Article 4 hereof and certain other
information called for by Article 4 hereof and other provisions of this
Agreement. If a document or matter is disclosed in the Disclosure Schedule in
connection with any representation or warranty made in this Agreement, such
document or matter shall not be deemed to be disclosed in the Disclosure
Schedule in connection with any other representation or warranty except where
specific repetition or cross-reference is made.
"Earn-Out Amount" has the meaning specified in Section
3.7(b) hereof.
"Earn-Out Statement" has the meaning specified in
Section 3.8(a) hereof.
"Effective Time" has the meaning specified in Section
2.2 hereof.
"Election Notice" has the meaning specified in Section
3.7(b) hereof.
"Employment Agreements" has the meaning specified in
Section 8.2(j) hereof.
"Estimated Closing Run Rate Percentage" means the quotient (expressed
as a decimal rounded to two decimal places) obtained by dividing the Estimated
Closing Run Rate Revenues by the Reference Run Rate Revenues.
"Estimated Closing Run Rate Revenues" has the meaning specified in
Section 3.5 hereof.
"Excess Capital Amount" means the excess, if any, of (i) Adjusted
Assets over (ii) Adjusted Liabilities, as of the Settlement Time.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Fifth Anniversary Measurement Date" has the meaning
specified in Section 3.7(f) hereof.
"Fourth Anniversary Earn-Out Maximum" has the meaning
specified in Section 3.7(e) hereof.
"Fourth Anniversary Measurement Date" has the meaning
specified in Section 3.7(e) hereof.
"Fund Services" means Pasadena Fund Services, Inc., a California
corporation, and a Pasadena Subsidiary.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Governmental Entity" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and whether
domestic or foreign.
"Historical Financial Statements" means the Audited
Financial Statements and the Unaudited Financial Statements,
collectively.
"HSR Act" means The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnification Threshold" means $500,000.
"Investment Company Act" means the Investment Company
Act of 1940, as amended.
"Investment Contract" means a contract or agreement in effect on the
date hereof, together with any such contract or agreement entered into after the
date hereof, relating to Pasadena's or any Pasadena Subsidiary's rendering of
investment management or investment advisory services, including sub-advisory
services, underwriting or distribution services or any administrative or other
services to any Person.
"IRS" means the United States Internal Revenue Service.
"Lien" means any lien, pledge, claim, option, charge, easement,
security interest, right-of-way, encumbrance or other right of any third party.
"Measurement Date" means the third, fourth and fifth
anniversaries of the Closing Date.
"Merger" has the meaning given such term in the
recitals.
"Mutual Fund Fee Percentage" means for each Pasadena Fund the annual
management fee rate, expressed as a decimal, charged by Pasadena and the
Pasadena Subsidiaries to such Pasadena Fund, as in effect on the date in
question.
"1989 Stock Plan" means the Pasadena Capital Corporation 1989 Stock
Plan, as amended.
"Noncompetition/Nonsolicitation Agreements" has the
meaning specified in Section 8.2(k) hereof.
"Notice of Dispute" has the meaning specified in
Section 3.8 hereof.
"OCC" means the Office of the Comptroller of the
Currency.
"Old Certificates" has the meaning specified in Section
3.2 hereof.
"Organizational Documents" means the respective certificates of
incorporation, articles of incorporation and by-laws, as the case may be, of
Pasadena and each Pasadena Subsidiary, as in effect on the date of this
Agreement.
"Option" means any security, right, warrant, option, Share-Linked
Unit or other contractual right that gives any Person the right to (i) purchase
or otherwise receive or be issued any shares of capital stock of Pasadena or any
security of any kind convertible into or exchangeable or exercisable for any
shares of capital stock of Pasadena or (ii) receive any benefits or rights
similar to any rights enjoyed by or accruing to the holders of shares of capital
stock of Pasadena, including, without limitation, any rights to participate in
the equity, income or election of directors or officers of Pasadena.
"Pasadena" has the meaning given such term in the
recitals.
"Pasadena Accountants" means Coopers & Lybrand L.L.P.
or any future certified public accountants to Pasadena.
"Pasadena Common Stock" means the common stock, no par
value, of Pasadena.
"Pasadena Fund" means a registered investment company, as defined in
the Investment Company Act, or any foreign equivalent, for which Pasadena or any
Pasadena Subsidiary provides investment advisory or sub-advisory services,
underwriting or distribution services or administrative or other services. Each
Pasadena Fund is identified in the Disclosure Schedule.
"Pasadena Material Adverse Effect" means a material adverse effect on
the business, operations, assets, condition (financial or otherwise) or results
of operations of Pasadena and the Pasadena Subsidiaries, taken as a whole, or
Pasadena's ability to consummate the transactions contemplated by this
Agreement.
"Pasadena Subsidiary" means any corporation, partnership or other
Person of which Pasadena directly or indirectly owns a majority of the voting
stock or other equity interests or which is required to be consolidated with
Pasadena under GAAP.
"PDP" has the meaning given such term in the recitals.
"PDP Indemnitees" has the meaning specified in Section
10.2(a) hereof.
"PDP Material Adverse Effect" means a material adverse effect on the
business, operations, assets, condition (financial or otherwise) or results of
operations of PDP and its subsidiaries, taken as a whole, or PDP's ability to
consummate the transactions contemplated by this Agreement.
"PDP Stock Option Plan" means the Phoenix Duff & Phelps
Corporation 1992 Long-Term Stock Incentive Plan.
"PEPCO" means Phoenix Equity Planning Corporation, a Connecticut
corporation and a wholly-owned subsidiary of PDP.
"Person" means an individual, firm, trust, association, corporation,
partnership, limited liability company, Governmental Entity or other entity.
"PIC" means Phoenix Investment Counsel, Inc., a Massachusetts
corporation and an indirect, wholly-owned subsidiary of PDP.
"Plans" means the Pasadena Capital Corporation 1995 Equity Incentive
Plan, the 1989 Stock Plan, the Pasadena Capital Corporation Employee Stock
Ownership Plan, as amended, the Pasadena Capital Corporation Employee Stock
Ownership Trust and the Pasadena Capital Corporation 401(k) Plan and Trust,
collectively.
"Post-Closing Merger Payment" means any payment made pursuant to
Section 3.6 hereof.
"Post-Closing Merger Payment Amount" means the applicable amount
determined in accordance with the provisions of Section 3.6 hereof.
"Post-Closing Merger Payment Time" has the meaning
specified in Section 3.4 hereof.
"Post-Closing Statement" has the meaning specified in
Section 3.4 hereof.
"Reference Run Rate Revenues" means $39,100,000.
"Related Agreements" means the Employment Agreements,
the Noncompetition/Nonsolicitation Agreements, the
Indemnification Escrow Agreement and the Compensation Allocation
Agreement.
"Representative" means any officer, director, principal, attorney,
agent, employee or other representative.
"Restricted Payments" has the meaning specified in
Section 3.10(a) hereof.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Settlement Auditor" has the meaning specified in
Section 3.8 hereof.
"Settlement Time" means the close of business on the business day
immediately preceding the day on which the Effective Time occurs.
"Shareholder Representative" means J. Roger Engemann or in the event
of his unwillingness or inability to continue serving as Shareholder
Representative, such person as is designated in writing by those members of the
Board of Directors of the Surviving Corporation other than the members
designated by PDP, who acknowledges acceptance of such designation in a writing
delivered to PDP.
"Shareholders" means the shareholders of Pasadena and, where
appropriate, shall include the holders of Options, in each case, immediately
prior to the Effective Time.
"Share-Linked Units" has the meaning specified in the
Share-Linked Unit Agreements.
"Share-Linked Unit Agreements" means the Share-Linked Unit Agreements
dated as of the date of this Agreement between Pasadena and the recipients
thereof.
"Stockholder Indemnification Agreement" has the meaning
specified in Section 8.2(m) hereof.
"Strike Date" means a Measurement Date specified by the Shareholder
Representative in accordance with Section 3.7 hereof.
"Surviving Corporation" has the meaning specified in
Section 2.1 hereof.
"Tax" or "Taxes" means (i) all forms of taxation, charges, levies or
other assessments, whether direct or indirect and whether levied by reference to
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding (whether with
respect to receipts or payments), payroll, privilege, employment, including
benefits or cost of benefits provided or deemed by applicable law to be provided
to employees, excise, severance, capital gains, transfer gains, stamp,
occupation, premium or similar tax measured by insurance premiums, real and
personal property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
and any interest or any penalty, addition to tax or additional amount, imposed
by any Taxing Authority, (ii) liability, whether to a Taxing Authority or
pursuant to an agreement with or legal obligation to any person or entity, for
the payment of any amounts of the type described in clause (i) of this
definition as a result of being a member of an affiliated, consolidated,
combined or unitary group for any taxable period and (iii) liability for the
payment of any amounts of the type described in clause (i) or (ii) of this
definition as a result of an express or implied obligation to indemnify any
other Person.
"Taxing Authority" means a Governmental Entity
responsible for the imposition of Taxes.
"Third Anniversary Earn-Out Maximum" has the meaning
specified in Section 3.7(d) hereof.
"Third Anniversary Measurement Date" has the meaning
specified in Section 3.7(d) hereof.
"Total Run Rate Payment Amount" has the meaning specified in Section
3.6(b) hereof.
"Trust Company" means Pasadena National Trust Company, a national
banking association.
"Unaudited Financial Statements" means the unaudited consolidated
balance sheet of Pasadena and the Pasadena Subsidiaries at March 31, 1997 and
the related unaudited consolidated statement of operations of Pasadena and the
Pasadena Subsidiaries for the three months ended March 31, 1997.
"Unit Base Amount" has the meaning specified in the
Share-Linked Unit Agreements.
1.2. Other Defined Terms1.2.OtherDefinedTerms""2". The
following terms shall have the meanings defined for such terms in
the Sections set forth below:
Term Section
Benefit Arrangement 4.19
Benefit Plans 4.19
Client Consents 6.2(b)
Confidentiality Agreement 7.2(b)
Direction Statement 6.4
Effective Time 2.2
ERISA 4.19
ERISA Affiliates 4.19
ERISA Pension Plan 4.19
ERISA Welfare Plan 4.19
Escrow Agent 3.4
Escrow Amount 3.4
ESOP 3.8 (f)
ESOP Committee 3.8(f)
ESOP Trust 3.8(f)
ESOP Trustee 3.8(f)
Fund Financial Statement 4.21(i)
Fund Tax Returns 4.21(g)
Indemnification Escrow Agreement 3.4
Indemnified Party 10.2(f)
Indemnifying Party 10.2(f)
Information 7.2(b)
Multiemployer Plan 4.19
Neutral Accountants 3.6(a)
Pasadena Fund Agreements 4.21(a)
PDP Credit Facility 7.17
PDP Indemnitees 10.2(a)
PHL 7.17
PHL Guarantee 7.17
Principals 8.2(j)
Restricted Period 3.10(a)
Rights 4.2
Shareholders Meeting 6.3
Successor Plan 3.8(e)
Tax Returns 4.18(a)
ARTICLE 2ARTICLE2-THEMERGER""1"
THE MERGER
2.1. The Merger2.1.TheMerger""2". Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, Acquisition Sub shall be
merged with and into Pasadena in accordance with the provisions of Section 1103
of the CGCL and the separate existence of Acquisition Sub shall thereupon cease.
Pasadena shall be the surviving corporation in the Merger (hereinafter sometimes
referred to as the "Surviving Corporation") and shall continue to be governed
under the laws of the State of California and the name of the Surviving
Corporation shall remain "Pasadena Capital Corporation." Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time of the
Merger (a) the Surviving Corporation shall thereupon and thereafter possess all
of the estate, property, rights, privileges, powers and franchises of each of
the constituent corporations; and all property, real, personal and mixed, and
all debts due on whatever account to any of them, as well as all stock
subscription and other choses in action belonging to each of the constituent
corporations, shall be transferred to and vested in the Surviving Corporation
without further act or deed; and all claims, demands, property and other
interests shall be the property of the Surviving Corporation and the title to
any real estate or any interest therein, vested in any of such constituent
corporations, shall not revert or be in any way impaired by reason of the
Merger, but shall be vested in the Surviving Corporation as provided by the laws
of the State of California and (b) the Surviving Corporation shall thenceforth
be responsible and liable for all of the liabilities, obligations and penalties
of each of the corporations so merged, as if the Merger had not taken place.
2.2. Effective Time; Closing2.2.EffectiveTime;Closing""2". The
consummation of the Merger (the "Closing") shall take place (i) at the offices
of Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038 at
10:00 a.m., New York City time, on such date as PDP shall notify Pasadena in
writing not less than five days prior thereto, which date shall not be more than
10 days after the last of the conditions set forth in Article 8 hereof shall be
satisfied or waived in accordance with this Agreement or (ii) at such other
place, time and date as the parties hereto shall agree (such date being the
"Closing Date"). Prior to the Closing, Acquisition Sub and Pasadena shall
execute and deliver to the Secretary of State of the State of California a
Certificate of Merger in proper form for filing under the CGCL. The Merger shall
become effective at such time (the "Effective Time") as the Certificate of
Merger is filed with the Secretary of State of the State of California.
2.3. Articles of Incorporation;
By-Laws2.3.ArticlesofIncorporation;By-Laws""2". At the Effective Time, (i) the
Articles of Incorporation of Acquisition Sub, as in effect immediately prior to
the Effective Time, the form of which is attached hereto as Exhibit B, shall be
the Articles of Incorporation of the Surviving Corporation after the Effective
Time, and (ii) the By-Laws of Acquisition Sub, as in effect immediately prior to
the Effective Time, the form of which is attached hereto as Exhibit C, shall be
the By-Laws of the Surviving Corporation after the Effective Time, in each case
until duly amended in accordance with their respective terms and applicable law.
2.4. Directors and Officers. At the Effective Time, the persons named
on Exhibit D shall become the directors of the Surviving Corporation, and the
officers of Pasadena immediately prior to the Effective Time shall become the
officers of the Surviving Corporation, each such director and officer to hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified or until their earlier death, resignation or
removal in the manner provided in the Articles of Incorporation and By-Laws of
the Surviving Corporation and applicable law.
<PAGE>
2.5. Further Action. If at any time after the Effective Time, PDP
shall consider that any further deeds, assignments, conveyances, agreements,
documents, instruments or assurances in law or any other things are necessary or
desirable to vest, perfect, confirm or record in the Surviving Corporation the
title to any property, rights, privileges, powers and franchises of Pasadena to
be acquired by the Surviving Corporation by reason of, or as a result of, the
Merger, or otherwise to carry out the provisions of this Agreement, the Board of
Directors and officers of Pasadena last in office shall, to the extent then
permitted so to do by applicable law, execute and deliver upon PDP's reasonable
request, any and all deeds, assignments, conveyances, agreements, documents,
instruments or assurances in law, and do all other things necessary or proper to
vest, perfect, confirm or record title to such property, rights, privileges,
powers and franchises in the Surviving Corporation, and otherwise carry out
provisions of this Agreement.
ARTICLE3-CONVERSIONORCANCELLATIONOFSECURITIESOFTHECONSTITUENTCORPORATIONS""1"
CONVERSION OR CANCELLATION OF SECURITIES
OF THE CONSTITUENT CORPORATIONS; MERGER PAYMENTS
3.1. Effect on Capital Stock of the Constituent
Corporations3.1.EffectonCapitalStockoftheConstituentCorporations""2". At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder of any shares of capital stock or any other Person:
(a) Capital Stock of Acquisition Sub. Each share of the capital stock
of Acquisition Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and nonassessable share
of Common Stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Pasadena Common Stock Held in Treasury. All
shares of Pasadena Common Stock, if any, that are owned directly or indirectly
by Pasadena as treasury stock shall be canceled, and no consideration shall be
delivered in exchange for such shares.
(c) Conversion of Outstanding Pasadena Common Stock. Each share of
Pasadena Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive from the Surviving Corporation
(i) at the Effective Time, subject to Sections 3.1(e) and (f) hereof, an amount
in cash equal to the quotient obtained by dividing (x) the Closing Merger
Payment Amount by (y) the Common Stock Equivalent Number, (ii) at the
Post-Closing Merger Payment Time, an amount in cash equal to the quotient
obtained by dividing (x) the Post-Closing Merger Payment Amount, if any, by (y)
the Common Stock Equivalent Number, and (iii) at each Contingent Merger Payment
Time, an amount in cash equal to the quotient obtained by dividing (x) the
Contingent Merger Payment, if any, by (y) the Common Stock Equivalent Number.
With respect to the amount described in clause (i) of the immediately preceding
sentence, at the Effective Time a portion of such amount corresponding to the
ratio (rounded to two decimal places) of the Escrow Amount to the Closing Merger
Payment Amount shall be delivered to the Escrow Agent pursuant to Section 3.4
hereof and the balance of such amount shall be paid, subject to Section 3.2
hereof, to the Person entitled thereto.
<PAGE>
(d) Exercise or Cancellation of Options. Each Option outstanding
immediately prior to the Effective Time which is then exercisable (or in the
case of Share-Linked Units, eligible for realization) in accordance with its
terms shall be converted into the right to receive from the Surviving
Corporation (i) at the Effective Time, subject to Section 3.1(f) hereof, an
amount in cash equal to the difference between (x) the product of (A) the
quotient obtained by dividing (1) the Closing Merger Payment Amount by (2) the
Common Stock Equivalent Number, multiplied by (B) the number of shares of
Pasadena Common Stock for which such Option was exercisable immediately prior to
the Effective Time, and (y) the aggregate unpaid exercise price of such Option
(or, in the case of Share-Linked Units, the aggregate Unit Base Amount of such
Share-Linked Units), (ii) at the Post-Closing Merger Payment Time, an amount in
cash equal to the product of (x) the quotient obtained by dividing (1) the
Post-Closing Merger Payment, if any, by (2) the Common Stock Equivalent Number,
multiplied by (y) the number of shares of Pasadena Common Stock for which such
Option was exercisable (or, in the case of Share-Linked Units, the number of
Share-Linked Units) immediately prior to the Effective Time, and (iii) at each
Contingent Merger Payment Time, an amount in cash equal to the product of (x)
the quotient obtained by dividing (1) the Contingent Merger Payment, if any, by
(2) the Common Stock Equivalent Number, multiplied by (y) the number of shares
of Pasadena Common Stock for which such Option was exercisable (or, in the case
of Share-Linked Units, the number of Share-Linked Units) immediately prior to
the Effective Time. With respect to the amount described in clause (i) of the
immediately preceding sentence, at the Effective Time a portion of such amount
corresponding to the ratio (rounded to two decimal places) of the Escrow Amount
to the Closing Merger Payment Amount shall be delivered to the Escrow Agent
pursuant to Section 3.4 hereof and the balance of such amount shall be paid,
subject to Section 3.2 hereof, to the Person entitled thereto. Each Option
outstanding immediately prior to the Effective Time which is not then
exercisable in accordance with its terms shall be canceled and no consideration
shall be delivered therefor.
(e) Right of Offset for Certain Indebtedness. In the case of any
holder of Pasadena Common Stock or other Pasadena Common Stock Equivalents who
is indebted to Pasadena as of the Closing Date, the Surviving Corporation shall
be authorized to deduct the amount of such unpaid indebtedness from the amount
payable to such holder pursuant to clause (i) of Section 3.1(c) hereof or clause
(i) of Section 3.1(d) hereof, as the case may be.
(f) Dissenting Shares. Each share of Pasadena Common Stock the holder
of record of which has exercised and perfected appraisal rights under the CGCL
shall be converted into the right to receive payment from the Surviving
Corporation with respect thereto in accordance with the provisions of the CGCL.
(g) Cash Payments. All cash payments to be made under this Agreement
shall be made, to the extent practicable, by wire transfer in immediately
available funds in accordance with written instructions furnished to Acquisition
Sub or to the Surviving Corporation, as applicable, by the Person entitled
thereto.
3.2. Surrender of Certificates3.2.SurrenderofCertificates""2". At the
Effective Time, each Person who is a holder of Common Stock Equivalents shall be
vested with the right to receive from the Surviving Corporation the amounts set
forth in Section 3.1 above at the respective times set forth therein, in
exchange for the surrender by such Person of all certificates held of record by
such Person, or such Person's legal successor, heir or administrator, that prior
to the Effective Time represented outstanding shares of Pasadena Common Stock or
other Pasadena Common Stock Equivalents (the "Old Certificates"), accompanied by
such other documents of transfer as the Surviving Corporation reasonably may
require, or an executed affidavit of lost certificate and indemnity agreement in
form and substance reasonably acceptable to PDP. Following surrender, each Old
Certificate shall be retired.
<PAGE>
3.3. Termination of Ownership Rights in Pasadena Common Stock
Equivalents3.3.TerminationofOwnershipRightsinPasadenaCommonStockEquivalents""2".
Subject to the terms of this Agreement, the Closing Merger Payment shall be
deemed to have been paid in full satisfaction of all rights pertaining to all
shares of Pasadena Common Stock and all Options then outstanding (other than any
shares the holders of record of which have exercised and perfected appraisal
rights under the CGCL). At the Effective Time, the stock transfer books of
Pasadena shall be closed and no transfer of shares of Pasadena Common Stock
shall thereafter be made.
3.4. Escrow3.4.Escrow""2". On the Closing Date, as part of the
Closing Merger Payment Amount, PDP shall deliver to a mutually acceptable bank
acting as escrow agent (the "Escrow Agent"), $10.0 million in cash (the "Escrow
Amount"). The Escrow Amount shall be held pursuant to the terms of the
Indemnification Escrow Agreement to be dated as of the Closing Date among PDP,
Acquisition Sub, Pasadena and the Escrow Agent substantially in the form
attached hereto as Exhibit E (the "Indemnification Escrow Agreement"). The
Indemnification Escrow Agreement shall provide for the Escrow Amount to be set
aside and held by the Escrow Agent, subject to the terms and conditions set
forth in the Indemnification Escrow Agreement. The Escrow Amount shall be
distributed to PDP or the holders of Common Stock Equivalents as of the
Effective Time at the times and upon the terms and conditions set forth in the
Indemnification Escrow Agreement.
3.5. Determination of Closing Merger Payment
Amount3.5.DeterminationofClosingMergerPaymentAmount""2".
(a) At least five business days prior to the Closing Date, Pasadena
shall advise PDP in writing of Pasadena's good faith estimate of the Closing Run
Rate Revenues and shall provide PDP with evidence reasonably acceptable to PDP
to support the reasonableness of such estimate. The amount so estimated is
hereinafter referred to as the "Estimated Closing Run Rate Revenues."
(b) In the event that the Estimated Closing Run Rate Percentage is
less than .80 or greater than 1.20, the parties hereto shall negotiate in good
faith to reach agreement on the Closing Merger Payment Amount.
(c) In the event that the Estimated Closing Run Rate Percentage is
greater than or equal to .80 and less than or equal to 1.20, then the aggregate
amount payable by PDP pursuant to Sections 3.1(c)(i) and 3.1(d)(i) hereof on the
Closing Date (the "Closing Merger Payment Amount") shall be the amount set forth
on Exhibit F hereto.
3.6. Determination of Post-Closing Merger Payment
Amount3.6.DeterminationofPost-ClosingMergerPaymentAmount""2".
(a) Within 60 days after the Closing Date, the Surviving Corporation
shall (i) cause the Pasadena Accountants to prepare and deliver to PDP and the
Shareholder Representative an audited consolidated balance sheet of Pasadena and
the Pasadena Subsidiaries as of the Settlement Time (the "Closing Balance
Sheet") prepared in a manner consistent with the Audited Balance Sheets,
together with the accountants report thereon, and (ii) prepare and deliver a
statement (the "Post-Closing Statement"), reviewed by the Pasadena Accountants,
setting forth (x) the Closing Run Rate Revenues and the Closing Run Rate
Percentage and (y) the Excess Capital Amount. PDP and the Shareholder
Representative shall have a period of 30 days after delivery of the Closing
Balance Sheet and the Post-Closing Statement to present in writing to each other
and the Pasadena Accountants any objections to the Closing Balance Sheet and the
Post-Closing Statement, which objections shall be set forth in reasonable
detail; provided, however, that if the Shareholder Representative and PDP
mutually agree in writing that they have no objections, then the 30-day period
shall terminate as of the date of such mutual agreement. If no objections are
raised within such 30-day period, the Closing Balance Sheet and the Post-Closing
Statement shall be deemed accepted and approved by PDP and the Shareholder
Representative and shall be final, binding and conclusive upon PDP, the
Surviving Corporation, the Shareholder Representative and the Shareholders. If
PDP or the Shareholder Representative shall object in any respect as to the
Closing Balance Sheet and the Post-Closing Statement within the 30-day period
described above, PDP, the Shareholder Representative and the Surviving
Corporation shall seek in good faith to resolve in writing the matter or matters
in disagreement. If PDP, the Shareholder Representative and the Surviving
Corporation resolve the matter or matters in disagreement, PDP, the Shareholder
Representative and the Surviving Corporation shall either confirm or revise the
Closing Balance Sheet and the Post-Closing Statement as prepared by the Pasadena
Accountants in writing and such calculations shall be final, binding and
conclusive upon PDP, the Surviving Corporation, the Shareholder Representative
and the Shareholders. If PDP, the Shareholder Representative and the Surviving
Corporation are unable to resolve the matter or matters in disagreement within
10 days following receipt of written notice of objection, then the items in
dispute shall be submitted to a mutually agreed upon "big six" accounting firm
(the "Neutral Accountants") for resolution, provided that if PDP, the
Shareholder Representative and the Surviving Corporation fail to appoint such
firm within 10 days after the end of such ten day period, any party may request
the American Arbitration Association in Los Angeles, California to appoint an
independent firm of certified public accountants of recognized national standing
to act as the Neutral Accountants. Each party shall furnish to the Neutral
Accountants such workpapers and other documents and information relating to the
disputed issues as the Neutral Accountants may request and are available to that
party (or its independent public accountants), and each party shall be afforded
the opportunity to present to the Neutral Accountants any material relating to
the determination and to discuss the determination with the Neutral Accountants.
The Neutral Accountants shall be directed to furnish written notice to PDP, the
Shareholder Representative and the Surviving Corporation of their resolution of
any disputed issues referred to them as soon as practicable but in no event
later than 20 days following the referral of such disputed issues to the Neutral
Accountants. The determination by the Neutral Accountants, as set forth in such
notice, shall be final, binding and conclusive upon PDP, the Surviving
Corporation, the Shareholder Representative and the Shareholders. The fees and
expenses of the Pasadena Accountants relating to the preparation of the Closing
Balance Sheet and the Post-Closing Statement and of the Neutral Accountants, if
any, shall be paid by PDP with 50% of such amounts being treated as accrued
liabilities as of the Settlement Time for purposes of determining the Excess
Capital Amount.
(b) The "Total Run Rate Payment Amount" shall be determined based on
the Closing Run Rate Percentage as set forth on Exhibit G hereto.
(c) The "Post-Closing Merger Payment Amount" to be paid in cash by
the Surviving Corporation shall be equal to the sum of (i) the Excess Capital
Amount, if any, (ii) the difference, if any, between the Total Run Rate Payment
Amount and the Closing Merger Payment Amount and (iii) interest at the rate of
6.0% per annum on the amounts referred to in clauses (i) and (ii) of this
Section 3.6(c) from the Closing Date to the Post-Closing Merger Payment Time.
(d) The Post-Closing Merger Payment Amount shall be paid within five
business days after the amount thereof is finally determined in accordance with
Section 3.6(a) hereof. The date on which the Post-Closing Merger Payment Amount
is paid is referred to herein as the "Post Closing Merger Payment Time."
3.7. Contingent Merger
Payments3.7.ContingentMergerPayments""2".
(a) The Surviving Corporation shall pay in cash to the holders of
Common Stock Equivalents as of the Effective Time, to be divided among such
holders as provided in Section 3.1 hereof, additional amounts (each, a
"Contingent Merger Payment"), determined in accordance with this Section 3.7,
following any Measurement Date specified by the Shareholder Representative to be
a Strike Date as provided in paragraph (b) below.
(b) The Shareholder Representative may elect that any Measurement
Date shall be a Strike Date by giving written notice of such election (an
"Election Notice") to the Surviving Corporation within 10 days after the
Surviving Corporation furnishes to the Shareholder Representative the Earn-Out
Statement for such Measurement Date.
(c) For each Measurement Date, an amount (each, an "Earn-Out Amount")
will be computed as an amount equal to the product of (i) 4.5 multiplied by (ii)
the sum of (x) for each account under management by Pasadena or a Pasadena
Subsidiary as of such Measurement Date (other than the Pasadena Funds), the
product of (1) the average daily assets in such account for the period of twenty
business days immediately preceding such Measurement Date multiplied by (2) the
per annum management fee rate for such account as in effect on such Measurement
Date and (y) for each of the Pasadena Funds, the greater of (1) the product of
(A) the Mutual Fund Fee Percentage for such Pasadena Fund as in effect on the
Closing Date multiplied by (B) the assets invested in such Pasadena Fund as of
the Closing Date, and (2) the product of (A) .50 multiplied by (B) the Mutual
Fund Fee Percentage for such Pasadena Fund, as in effect on such Measurement
Date, multiplied by (C) the assets invested in such Pasadena Fund as of such
Measurement Date.
(d) In the event that the Measurement Date occurring on the third
anniversary of the Closing Date (such date, the "Third Anniversary Measurement
Date") is specified as a Strike Date, then the Contingent Merger Payment for
such date shall be equal to the lesser of (i) the excess, if any, of (x) the
Earn-Out Amount for the Third Anniversary Measurement Date over (y) the Total
Run Rate Payment Amount, and (ii) $50.0 million increased by the amount, if any,
by which the Total Run Rate Payment Amount is less than $180.0 million or
decreased by the amount, if any, by which the Total Run Rate Payment Amount
exceeds $180.0 million (such amount as defined under clause (ii) herein is
hereinafter referred to as the "Third Anniversary Earn Out Maximum").
(e) In the event that the Measurement Date occurring on the fourth
anniversary of the Closing Date (such date, the "Fourth Anniversary Measurement
Date") is specified as a Strike Date, then the Contingent Merger Payment for
such date shall be equal to the lesser of (i) the excess, if any, of (x) the
Earn-Out Amount for the Fourth Anniversary Measurement Date over (y) the sum of
(1) the Total Run Rate Payment Amount and (2) the amount of the previous
Contingent Merger Payment, if any, and (ii) the product of (x) 1.15 multiplied
by (y) the excess, if any, of (1) the Third Anniversary Earn Out Maximum over
(2) the amount of the previous Contingent Merger Payment, if any (such amount as
defined under clause (ii) herein is hereinafter referred to as the "Fourth
Anniversary Earn Out Maximum").
(f) In the event that the Measurement Date occurring on the fifth
anniversary of the Closing Date (such date, the "Fifth Anniversary Measurement
Date") is specified as a Strike Date, then the Contingent Merger Payment for
such date shall be equal to the lesser of (i) the excess, if any, of (x) the
Earn-Out Amount for the Fifth Anniversary Measurement Date over (y) the sum of
(1) the Total Run Rate Payment Amount and (2) the aggregate amount of all
previous Contingent Merger Payments, if any, and (ii) the product of (x) 1.15
multiplied by (y) the excess, if any, of (1) the Fourth Anniversary Earn Out
Maximum over (2) the amount of the Contingent Merger Payment, if any, relating
to the Fourth Anniversary Measurement Date.
(g) Each Contingent Merger Payment shall be paid by the Surviving
Corporation within 15 days after the date on which the Earn-Out Statement
becomes final and binding as provided in Section 3.8 below (the date on which
such payment is made is referred to herein as the "Contingent Merger Payment
Time"); provided, however, that in the event of any dispute relating to the
Earn-Out Statement for any Strike Date, any portion of the Contingent Merger
Payment payable based on figures in such Earn-Out Statement that are not in
dispute shall be paid by the Surviving Corporation as aforesaid and the balance,
if any, of the Contingent Merger Payment, plus interest accrued thereon at the
rate of 6.0% per annum, shall be paid by the Surviving Corporation to the
Holders of Common Stock Equivalents within seven days after the final resolution
of all disputes relating to such Earn-Out Statement.
3.8. Mechanics of Earn-Out
Amount3.8.MechanicsofEarn-OutAmount""2".
(a) Subject to paragraph (d) of this Section 3.8, as soon as
practicable after each Measurement Date, the Surviving Corporation shall deliver
to the Shareholder Representative a statement of determination of the Earn-Out
Amount (each, an "Earn-Out Statement") as of such Measurement Date. Each
Earn-Out Statement shall be prepared by the Surviving Corporation in accordance
with the terms of this Agreement.
(b) If the Shareholder Representative delivers an Election Notice
with respect to any such Earn-Out Statement, then the Surviving Corporation
shall permit the Shareholder Representative, and its accountants and other
authorized representatives, to inspect the financial books and records of the
Surviving Corporation during normal business hours within the 30 days following
such Election Notice. Any documents delivered to or reviewed by the Shareholder
Representative or his representatives pursuant to this paragraph shall be
subject to the confidentiality provisions set forth in Section 7.2 hereof.
(c) The Earn-Out Statement shall become final and binding on the
earlier of (i) the date on which the Shareholder Representative notifies the
Surviving Corporation in writing that he concurs with the Earn-Out Statement or
(ii) the 40th day following receipt of the Earn-Out Statement by the Shareholder
Representative, unless the Shareholder Representative gives written notice that
he disputes the Earn-Out Statement (a "Notice of Dispute") to the Surviving
Corporation prior to such 40th day. The Shareholder Representative shall not be
entitled to deliver a Notice of Dispute with respect to any Earn-Out Statement
unless the Shareholder Representative has previously delivered an Election
Notice to the Surviving Corporation with respect to the Measurement Date to
which such Earn-Out Statement relates. Any Notice of Dispute shall specify in
reasonable detail the nature of each dispute so asserted and, to the extent then
determinable, the specific dollar amount and basis thereof. If a Notice of
Dispute is received by the Surviving Corporation on or prior to such 40th day,
then the Earn-Out Statement (as revised in accordance with the remaining
provisions of this paragraph) shall become final and binding on the earlier of
(x) the date on which the Surviving Corporation and the Shareholder
Representative resolve in writing any differences they have with respect to the
matters specified in the Notice of Dispute or (y) the date on which the
Settlement Auditor delivers a report to the Surviving Corporation and the
Shareholder Representative setting forth its resolution of the disputed matters.
During the 15-day period following delivery of a Notice of Dispute, the
Surviving Corporation and the Shareholder Representative shall seek in good
faith to resolve in writing any differences which they may have with respect to
any matter in the Notice of Dispute. If, at the end of such 15-day period, the
Shareholder Representative and the Surviving Corporation have been unable to
reach agreement on all such matters, the Shareholder Representative and the
Surviving Corporation shall jointly designate a "big six" accounting firm (the
"Settlement Auditor") to resolve each item disputed by the Shareholder
Representative; provided that if the Shareholder Representative and the
Surviving Corporation fail to appoint such firm within 10 days after the end of
such 15-day period, either party may request the American Arbitration
Association in Los Angeles, California to appoint an independent firm of
certified public accountants of recognized national standing to act as
Settlement Auditor. The Settlement Auditor shall resolve all remaining disputed
items and its resolution shall be final and binding on the parties and
enforceable in a court of law. The fees and expenses of the Settlement Auditor,
if required under this Section 3.8(c), shall be apportioned between the
Surviving Corporation and the holders of Common Stock Equivalents as of the
Effective Time to reflect the relative differences between the position asserted
by each party with respect to each disputed item referred to the Settlement
Auditor and the resolution reached by the Settlement Auditor, with the party
that is further from such resolution bearing a proportionately greater share of
such fees and expenses. If there is more than one such item, the fees and
expenses of the Settlement Auditor under this Section 3.8(c) shall be allocated
in proportion to their respective amounts.
(d) Notwithstanding the provisions of paragraph (a) above, the
Surviving Corporation shall not be required to deliver an Earn-Out Statement to
the Shareholder Representative if the Surviving Corporation has previously made
a Contingent Merger Payment the amount of which was limited by the Third
Anniversary Earn-Out Maximum or the Fourth Anniversary Earn-Out Maximum.
(e) On or before the Closing Date, Pasadena shall adopt amendments to
the Pasadena Capital Corporation Employee Stock Ownership Plan and Trust (the
"ESOP" and the "ESOP Trust," respectively) in connection with the transactions
contemplated by this Agreement, and Pasadena and the Surviving Corporation shall
submit such amendments to the IRS in order to request a favorable determination
letter in connection therewith. The Surviving Corporation also shall adopt any
conforming amendments which may be requested or required by the IRS as a
condition to issuing such favorable determination letter. Following the
Effective Time, a committee (the "ESOP Committee") shall be appointed by the
Surviving Corporation for the purposes of assisting the Surviving Corporation
with the preparation and submission of any such amendments to the ESOP, for
purposes of handling discussions with the IRS in connection therewith, and for
purposes of administering the ESOP during the period beginning immediately after
the Effective Time and continuing until all assets have been distributed or
transferred from the ESOP. Immediately following the Effective Time, the sole
member of the ESOP Committee shall be Paul LeCompte. Distributions of the ESOP's
share of the Closing Merger Payment Amount and the Post-Closing Merger Payment
shall be made in accordance with the ESOP and the ESOP Trust documents as soon
as reasonably practicable following the Closing Date and the Post-Closing Merger
Payment Time, as the case may be, but in no event prior to the receipt by the
Surviving Corporation of the favorable determination letter from the IRS as
described above. PDP hereby agrees to maintain or cause the Surviving
Corporation to maintain the ESOP and the ESOP Trust as a frozen retirement plan
and trust qualified under Sections 401(a) and 501(a) of the Code for such period
of time following the Effective Time as may be necessary in order for the ESOP
Trust to receive any Contingent Merger Payments to which it may be entitled
pursuant to Sections 3.7 and 3.8 hereof and any payments from the Escrow
Account. Alternatively, upon the recommendation of the ESOP Committee and with
the approval of PDP, PDP shall terminate or cause the Surviving Corporation to
terminate the ESOP and transfer the right to receive any Contingent Merger
Payments to another qualified retirement plan (the "Successor Plan") to be
established by the Surviving Corporation or Pasadena solely for the benefit of
the individuals who are participants in the ESOP as of the Effective Time. Any
Contingent Merger Payments received by the ESOP Trust or the Successor Plan, as
the case may be, following the Closing Date shall be allocated and distributed
to the participants in the ESOP (or to their beneficiaries) as described in such
plan and trust documents. When the ESOP Trust, or if the Successor Plan is
established, the Successor Plan, shall no longer be entitled to receive any
Contingent Merger Payments in accordance with Sections 3.7 and 3.8 hereof and
the Indemnification Escrow Agreement, PDP agrees to terminate or to cause the
Surviving Corporation to terminate such plan(s) and trust(s) and to arrange for
the distribution to the participants thereof (or to their beneficiaries) of any
and all assets remaining therein, if any, all in accordance with the applicable
plan and trust documents. In connection with the termination of the ESOP or the
Successor Plan, as the case may be, and at the direction of the ESOP Committee,
PDP shall take or cause the Surviving Corporation to take such action, if any,
deemed necessary in order to receive a favorable determination letter from the
IRS in connection with the applicable plan's termination, including, without
limitation, the filing of Form 5310 with the IRS, the giving of appropriate
notices to the plan participants, the adoption of any amendments to the
applicable plan which may be required by the IRS and such other actions as may
be deemed reasonably necessary in order to terminate such plan(s) and trust(s).
Except to the extent PDP or the Surviving Corporation shall determine in good
faith that ERISA or applicable law otherwise requires, PDP shall retain or shall
cause the Surviving Corporation to retain, for the period described herein, a
trustee for the ESOP and, if applicable, the Successor Plan (the "ESOP
Trustee"), and the members of the ESOP Committee, and shall name no new members
to the ESOP Committee nor select an ESOP Trustee without the express written
consent of the Shareholder Representative.
3.9. PDP to Fund Payments3.9.PDPtoFundPayments""2". PDP agrees to
contribute funds to the Surviving Corporation to the extent necessary to enable
the Surviving Corporation to make the Closing Merger Payment, any Post-Closing
Merger Payment and any Contingent Merger Payment, in each case as and when
required hereunder.
3.10.Restricted Payments3.10.RestrictedPayments""2".
(a) PDP agrees that until such time as all Contingent Merger Payments
are paid in full, without the prior approval of the Shareholder Representative,
it will not cause or permit the Surviving Corporation to (i) declare or pay any
dividend, or make any distribution, of any kind or character (whether in cash,
property or securities) in respect of its capital stock or (ii) purchase, redeem
or otherwise acquire any capital stock of the Surviving Corporation or (iii)
make any loan, advance or other investment in PDP or any of its subsidiaries
(other than subsidiaries of the Surviving Corporation) (the transactions
described in clauses (i), (ii) and (iii) being referred to herein as "Restricted
Payments"), if at the time thereof, upon giving effect to such Restricted
Payment, the aggregate of all Restricted Payments from the Closing Date exceeds
the sum of:
(i) an amount equal to (A) 50% of cumulative Consolidated Net Income
of the Surviving Corporation (or, in the case Consolidated Net Income of
the Surviving Corporation shall be negative, less 100% of such deficit)
since the Closing Date through the last day of the month immediately
preceding such Restricted Payment for which financial statements of the
Surviving Corporation are available (such period, the "Restricted Period")
less (B) the sum of (1) cumulative capital expenditures incurred on
leasehold improvements (net of depreciation thereof) during the Restricted
Period, plus (2) amounts paid during the Restricted Period more than one
year from the Closing Date with respect to the liabilities accrued on the
Closing Balance Sheet payable to Todd Parrott, Michael Mork and any Taxing
Authorities; plus
(ii) the aggregate net proceeds received by the Surviving Corporation
after the Closing Date from the issuance of shares of its capital stock
and/or capital contributions to the Surviving Corporation; plus
(iii)an amount equal to (A) the sum of (1) the cash and cash
equivalents, (2) short-term investments and (3) the investments available
for sale of Pasadena and the Pasadena Subsidiaries, in each case as shown
on the Closing Balance Sheet, less (B) the sum of (1) the liability to
Putnam, Lovell & Thornton Inc., (2) the liability to Michael E. Herman,
(3) the liability for retention payments under the Employment Agreements
and (4) the liabilities to Todd Parrott, Michael Mork and any Taxing
Authorities payable within one year of the Closing Date, in each case as
shown on the Closing Balance Sheet, plus $2.0 million.
(b) Subject to the provisions of Section 3.10(a), it is the intention
of the parties hereto that Restricted Payments shall be authorized and paid or
otherwise consummated by action of the Board of Directors of the Surviving
Corporation upon the recommendation of those directors who are nominees of PDP.
ARTICLE 4ARTICLE4-REPRESENTATIONSANDWARRANTIESOFPASADENA""1"
REPRESENTATIONS AND WARRANTIES OF PASADENA
Except as set forth on the Disclosure Schedule, Pasadena hereby
represents and warrants to PDP and Acquisition Sub, unless limited to a specific
date, as of the date of this Agreement and as of the Closing Date, as follows:
4.1. Organization, Standing and
Authority4.1.Organization,StandingandAuthority""2". Each of Pasadena and the
Pasadena Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and is duly
qualified to do business and in good standing in each jurisdiction where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified, except for such jurisdictions in which the failure to be duly
qualified does not have and would not reasonably be expected to have, either
individually or in the aggregate, a Pasadena Material Adverse Effect. Each of
Pasadena and the Pasadena Subsidiaries has all necessary corporate power and
authority to carry on its business as now conducted, and to own, lease and
operate its assets, properties and business. Each of Pasadena and the Pasadena
Subsidiaries has all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now conducted, the absence of which does not have
and would not reasonably be expected to have, either individually or in the
aggregate, a Pasadena Material Adverse Effect. Each of Roger Engemann &
Associates Inc. and Roger Engemann Management Co., Inc. is a California
corporation, is duly registered as an investment adviser under the Advisers Act
and is duly registered, licensed or qualified as an investment adviser in all
jurisdictions where such registration, licensing or qualification is required in
order to conduct its business, except for any failure to be so registered,
licensed or qualified that does not have and would not reasonably be expected to
have, either individually or in the aggregate, a Pasadena Material Adverse
Effect. Fund Services is duly registered as a "broker" and a "dealer" in all
jurisdictions where such registration is required in order to conduct its
business, except for failures to be so authorized that, either individually or
in the aggregate, do not have and would not reasonably be expected to have a
Pasadena Material Adverse Effect. All personnel acting on behalf of Fund
Services are duly licensed to so act in all jurisdictions where such licensing
is required, except for failures to be so licensed that, either individually or
in the aggregate, do not have and would not reasonably be expected to have a
Pasadena Material Adverse Effect.
4.2. Subsidiaries4.2.Subsidiaries""2". The Disclosure Schedule lists
all of the Pasadena Subsidiaries and the ownership of each Pasadena Subsidiary.
Pasadena owns directly or indirectly all equity securities of the Pasadena
Subsidiaries (other than the approximately 6 1/2% minority interest in Roger
Engemann Management Co., Inc., which will be eliminated prior to the Closing
Date in accordance with Section 8.2(p) hereof). No equity securities of any
Pasadena Subsidiary are or may become required to be issued (other than to
Pasadena) by reason of any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire, or
any options, calls, obligations or commitments relating to any such equity
securities (collectively, "Rights"), and there are no contracts, commitments,
understandings or arrangements by which any Pasadena Subsidiary is bound to
issue or sell shares of its capital stock or Rights. Except as set forth on the
Disclosure Schedule, all of the shares of capital stock of each Pasadena
Subsidiary held by Pasadena or a Pasadena Subsidiary (i) are fully paid and
nonassessable, and (ii) are owned free and clear of any Lien and are not subject
to any Rights and there are no contracts, commitments, understandings or
arrangements with respect to any of the foregoing.
4.3. Authorization4.3.Authorization""2". Pasadena has full corporate
power and authority to execute and deliver this Agreement and each of the
Related Agreements, and, subject to receiving approval of the Shareholders, to
consummate the transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. Subject to such Shareholder approval, this
Agreement has been, and each Related Agreement will be, duly and validly
approved by all necessary corporate action of Pasadena, and this Agreement is,
and each Related Agreement will be, a legal, valid and binding obligation of
Pasadena enforceable against Pasadena in accordance with its terms, except, in
each case, as limited by the effect of bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto and by the availability of equitable
remedies.
4.4. Organizational
Documents4.4.OrganizationalDocuments""2". The copies of the Organizational
Documents furnished by Pasadena to PDP are true, correct and complete copies
thereof and there will have been no subsequent amendments or other modifications
of such documents before the Closing, except as otherwise contemplated herein.
4.5. No Violation4.5.NoViolation""2".
(a) Neither the execution and delivery of this Agreement or any of
the Related Agreements nor the consummation of the transactions contemplated
hereby or thereby will (i) conflict with or violate any provision of law,
domestic or foreign, or any Organizational Document, (ii) violate any provision
of any regulation, order, writ, injunction or decree of any court or
Governmental Entity or (iii) violate, conflict with, result in a breach of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination, cancellation or
acceleration of, any lease, license, contract, agreement, commitment or
instrument to which Pasadena or any Pasadena Subsidiary is a party or by which
Pasadena or any Pasadena Subsidiary or any of their respective assets or
properties is bound or subject, or result in the creation or imposition of any
Lien upon the capital stock of Pasadena or any Pasadena Subsidiary or upon the
assets of any such entity pursuant to the terms of any such agreement or
instrument, with such exceptions with respect to the matters referred to in
clauses (i), (ii) and (iii) above as do not have and would not reasonably be
expected to have, either individually or in the aggregate, a Pasadena Material
Adverse Effect or reasonably be expected to prevent consummation of the
transactions contemplated hereby, assuming that (w) the Client Consents referred
to in Section 6.2(b) hereof are duly obtained, (x) all approvals contemplated by
Article 8 shall have been duly obtained, (y) the consent of the OCC has been
obtained for the sale of capital stock of the Trust Company and (z) the
provisions of the HSR Act have been complied with and the waiting period
thereunder shall have expired or terminated.
(b) Neither the execution and delivery of the Share-Linked Unit
Agreements nor the consummation of the transactions contemplated thereby
conflict with or violate the provisions of the ESOP and the ESOP Trust.
4.6. Governmental
Authorization4.6.GovernmentalAuthorization""2". No consent, approval or
authorization of, or declaration or filing with, or notice to, any Governmental
Entity is required to be made or obtained by Pasadena in connection with the
execution, delivery and performance of this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby, other
than (a) the filing of the Certificate of Merger in accordance with the CGCL and
appropriate documents reflecting the occurrence of the Merger with the relevant
authorities of other states in which Pasadena is qualified to do business, (b)
compliance with any applicable requirements of the HSR Act; (c) compliance with
any applicable requirements of the Exchange Act , the Securities Act, the
Investment Company Act and the Advisers Act; (d) the filing of amendments or
applications relating to Forms BD and ADV filed or to be filed by Pasadena and
the Pasadena Subsidiaries, as applicable; (e) compliance with any applicable
requirements for the sale of the capital stock of the Trust Company to PDP; and
(f) such other actions, filings, approvals and consents, the failure to make or
obtain which does not have and would not reasonably be expected to have, either
individually or in the aggregate, a Pasadena Material Adverse Effect.
4.7. Capital Stock4.7.CapitalStock""2".
(a) The authorized capital stock of Pasadena consists of 10,000,000
shares of Pasadena Common Stock. There are 1,433,600 shares of Pasadena Common
Stock issued and outstanding, an aggregate of 31,250 shares of Pasadena Common
Stock reserved for issuance upon exercise of outstanding Options pursuant to the
Plans and 6,000 shares of Pasadena Common Stock relating to outstanding
Share-Linked Units. The Disclosure Schedule sets forth the names of all
individuals holding Options, the number of shares of Pasadena Common Stock
subject to such Options and the exercise prices therefor.
(b) All outstanding shares of Pasadena Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as set forth on the Disclosure Schedule, there are no
outstanding options, warrants, rights (including preemptive rights),
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of the
capital stock of the Company, other than as contemplated by this Agreement.
4.8. Financial Statements4.8.FinancialStatements""2". Pasadena has
heretofore delivered to PDP the Historical Financial Statements. The Audited
Financial Statements (i) have been prepared in accordance with GAAP, (ii) have
been prepared consistent with the books and records of Pasadena and the Pasadena
Subsidiaries and (iii) present fairly, in all material respects, the
consolidated financial position of Pasadena and the Pasadena Subsidiaries and
the consolidated results of their operations and their cash flows indicated
thereby at the dates, and for the periods, stated therein. The Unaudited
Financial Statements (i) have been prepared on a basis consistent with the
Audited Balance Sheet and the audited consolidated statement of operations of
Pasadena and the Pasadena Subsidiaries as of and for the year ended December 31,
1996, (ii) have been prepared consistent with the books and records of Pasadena
and the Pasadena Subsidiaries and (iii) present fairly, in all material
respects, the consolidated financial position of Pasadena and the Pasadena
Subsidiaries and the consolidated results of their operations indicated thereby
at the dates, and for the periods, stated therein, subject to normal year-end
adjustments and the absence of notes.
4.9. Absence of Undisclosed
Liabilities4.9.AbsenceofUndisclosedLiabilities""2". Except as set forth on the
Disclosure Schedule, neither Pasadena nor any Pasadena Subsidiary has any
liability or obligation of any nature (whether known or unknown and whether
absolute, accrued, contingent or otherwise) which is required in accordance with
GAAP to be reflected on the Audited Balance Sheet dated December 31, 1996 which
was not accrued or disclosed thereon other than liabilities incurred in the
ordinary course of business since December 31, 1996.
4.10.Absence of Certain Changes4.10.AbsenceofCertainChanges""2".
Since December 31, 1996, Pasadena and the Pasadena Subsidiaries have conducted
their business in the ordinary course in accordance with their customary
practices, and, except as contemplated by this Agreement and the Related
Agreements, there has not been:
(a) any event or events or occurrence or occurrences which has had or
would reasonably be expected to have, either individually or in the aggregate, a
Pasadena Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any capital stock of Pasadena, or any
repurchase, redemption or other acquisition by Pasadena or any Pasadena
Subsidiary of any outstanding shares of capital stock or other securities of, or
other ownership interests in, Pasadena;
(c) any incurrence, assumption or guarantee by Pasadena or any of the
Pasadena Subsidiaries of any outstanding amount of indebtedness for borrowed
money other than in the ordinary course of business in accordance with their
customary practices;
(d) any transaction or commitment made, or any contract or agreement
entered into, by Pasadena or any of the Pasadena Subsidiaries relating to their
respective assets or business (including the acquisition or disposition of any
assets) or any loss or relinquishment by Pasadena or any of the Pasadena
Subsidiaries of any material contract or other material right, other than
transactions and commitments in the ordinary course of business in accordance
with their customary practices;
(e) any material modifications or amendments to any
Investment Contracts or any other material agreements with
respect to any Affiliates of Pasadena;
(f) any material change in any method of accounting or
accounting practice or policy or application thereof by Pasadena
or any of the Pasadena Subsidiaries;
(g) any increase in (or commitment, oral or written, to increase) the
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of compensation payable or to become payable by Pasadena or any
of the Pasadena Subsidiaries to their directors, officers, employees or
consultants (except increases occurring in the ordinary course of business in
accordance with their customary practices), or any new employment agreements or
commitments (oral or written) with any of such Persons;
(h) any increase in (or commitment, oral or written, to increase) the
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of any bonus, severance, insurance, pension or other employee
benefit plan or contract, payment or arrangement made to, for or with any
director, officer, employee or consultant of Pasadena or any of the Pasadena
Subsidiaries (except increases occurring in the ordinary course of business in
accordance with their customary practices), or any new bonus, severance or
employee benefit plan, contracts, payments or arrangements with any of such
Persons; or
(i) any suspension of any license or permit issued to
Pasadena or any of the Pasadena Subsidiaries or any impairment of
their right to conduct business.
4.11.Litigation4.11.Litigation""2". There is no Action pending or, to
the best knowledge of Pasadena, threatened or anticipated (i) against Pasadena
or any of the Pasadena Subsidiaries or any of their respective businesses,
activities, properties or assets or (ii) relating to or affecting the
transactions contemplated by this Agreement or any of the Related Agreements,
except as set forth on the Disclosure Schedule. Neither Pasadena nor any
Pasadena Subsidiary is in violation of any judgment, order, writ, injunction or
decree of any court or Governmental Entity, and there are no unsatisfied
judgments against Pasadena or any Pasadena Subsidiary or the business,
activities, properties or assets of Pasadena or any Pasadena Subsidiary. There
is not a reasonable likelihood of an adverse determination of any pending
Actions which would, individually or in the aggregate, be reasonably expected to
have a Pasadena Material Adverse Effect.
4.12.Title to Assets4.12.TitletoAssets""2". Each of Pasadena and the
Pasadena Subsidiaries has good, valid and marketable title to, or valid
leasehold interests in, all assets and properties purported to be owned,
operated, leased or occupied by it, or used in the operation of its business,
free and clear of all Liens, except for minor Liens which in the aggregate are
not substantial in amount, do not detract from the value of the property or
assets subject thereto or interfere with the present or anticipated use thereof
and have not arisen other than in the ordinary course of its business. The
Disclosure Schedule lists all such material assets and properties and all
agreements, leases, instruments, licenses or other arrangements relating
thereto. Pasadena has made available for review by PDP true, correct and
complete copies of all such agreements, leases, instruments, licenses or other
arrangements. Pasadena and each Pasadena Subsidiary has performed all the
obligations required to be performed by it with respect to all assets leased by
it through the date hereof, except where the failure to perform would not have a
Pasadena Material Adverse Effect. The assets owned or leased by Pasadena and the
Pasadena Subsidiaries include all assets that are used in the conduct of their
respective businesses. Neither Pasadena nor any Pasadena Subsidiary owns any
real property.
4.13.Intellectual
Property4.13.IntellectualProperty""2". Pasadena or a Pasadena Subsidiary is the
owner of or has sufficient rights to use trademarks and service marks (whether
or not registered), trade names, brand names, patents and copyrights, which
individually or in the aggregate are material to the business of Pasadena and
the Pasadena Subsidiary as currently conducted, taken as a whole. The Disclosure
Schedule lists all such items of intellectual property and all licenses and
other agreements relating thereto, including all computer software or other
computer systems owned, developed or licensed by Pasadena or any Pasadena
Subsidiary. Pasadena has made available to review by PDP true, correct and
complete copies of all such licenses and other agreements. There are no claims
pending or, to the best knowledge of Pasadena, threatened, that Pasadena or any
Pasadena Subsidiary is in violation of any intellectual property rights of any
third party.
4.14.Contracts4.14.Contracts"0"2". The Disclosure Schedule sets forth
as of the date hereof a list of (i) all leases for real property, all material
leases for personal property and all material agreements, contracts, licenses,
commitments and instruments and (ii) summaries of all material oral agreements
and contracts to which Pasadena is a party or by which Pasadena or any of its
assets or properties is bound or subject. Each such agreement, contract, lease,
license, commitment and instrument is in full force and effect and constitutes
the legal, valid and binding obligation of Pasadena enforceable in accordance
with its terms, except as limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto and by the
availability of equitable remedies. True, correct and complete copies of all
such agreements, contracts, leases, licenses, commitments and instruments (or,
in the case of material oral agreements and contracts, a description of the
material terms thereof) have been previously made available by Pasadena for
review by PDP. Except for leases, contracts, agreements, licenses, commitments
or instruments listed on the Disclosure Schedule, neither Pasadena nor any
Pasadena Subsidiary is on the date hereof a party to or is or may be bound and
none of its respective assets or properties is or may be subject to:
(a) any contract or agreement not fully performed for the purchase
for its own account of any commodity, material, services or equipment,
including, without limitation, fixed assets, for a price in excess of
$100,000;
(b) any contract containing covenants limiting the
freedom of Pasadena or any Pasadena Subsidiary to compete in
any line of business or with any Person;
(c) any agreement, oral or written, or understanding
(i) for cash payments for client solicitations, (ii) in
respect of the sale or distribution of shares of the
Pasadena Funds or (iii) of the type referred to in Rule
2830(l) of the National Association of Securities Dealers,
Inc. Conduct Rules;
(d) any license agreement (as licensor or licensee) providing for
future payments in excess of $100,000 which by its terms does not
terminate or is not terminable without penalty by Pasadena or any Pasadena
Subsidiary upon notice of 60 days or less;
(e) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money, by
Pasadena or a Pasadena Subsidiary in excess of $100,000; or
(f) any other contract or agreement which creates future payment
obligations of Pasadena or a Pasadena Subsidiary in excess of $100,000 and
which by its terms does not terminate or is not terminable without penalty
by Pasadena or such Pasadena Subsidiary upon notice of 60 days or less.
4.15.No Default under Contracts or
Agreements4.15.NoDefaultunderContractsorAgreements""2". Neither Pasadena nor any
Pasadena Subsidiary is in breach or violation of, or in default under (with or
without the giving of notice or the passage of time), any term or provision of
any lease, license, contract, agreement, commitment or instrument to which it is
a party or by which it is or may be bound or to which any of its respective
properties or assets is or may be subject, the effect of which breach, violation
or default, either individually or in the aggregate, will have or would
reasonably be expected to have a Pasadena Material Adverse Effect. To the best
knowledge of Pasadena, no other party is in material default of any such lease,
license, contract, agreement, commitment or instrument.
4.16.Compliance with Laws4.16.CompliancewithLaws""2". Each of
Pasadena and the Pasadena Subsidiaries has all permits, licenses, certificates
of authority, orders and approvals of, and have made all filings, applications
and registrations with, Governmental Entities that are required in order to
permit it to carry on its business as presently conducted and the absence of
which would, individually or in the aggregate, have a Pasadena Material Adverse
Effect; to the best knowledge of Pasadena, such permits, licenses, certificates
of authority, registrations, orders and approvals are in full force and effect.
All such permits, licenses, certificates and approvals are identified on the
Disclosure Schedule. Except as set forth on the Disclosure Schedule, neither
Pasadena nor any Pasadena Subsidiary nor any of their respective Affiliates is
in violation of, nor the manner in which any of them conducts its business
infringes upon, any law, statute, rule, regulation, judgment, injunction, order
or decree, domestic or foreign, binding upon or applicable to Pasadena, the
Pasadena Subsidiaries or their respective Affiliates or of any arbitrator,
court, regulatory body, administrative agency or any other Governmental Entity,
domestic or foreign, having jurisdiction over Pasadena, the Pasadena
Subsidiaries or their respective Affiliates or any of their respective
properties or assets and the effect of which violation or infringement, either
individually or in the aggregate, will have or would reasonably be expected to
have a Pasadena Material Adverse Effect. Pasadena has made available for review
by PDP copies of all material correspondence and communications received from
any Governmental Entity since January 1, 1996 (including any no-action letters
and exemptive orders).
<PAGE>
4.17.Taxes4.17.Taxes""2".
(a) (i) All Tax returns and reports (including information returns,
declarations and reports) and amended or substituted returns and reports
required to be filed with any Taxing Authority by or on behalf of Pasadena or
any Pasadena Subsidiary (collectively, the "Tax Returns" and singularly, a "Tax
Return"), have been timely filed when due in accordance with all applicable laws
(including any extensions of such due date); (ii) the Tax Returns correctly
reflected the income (or other measure of Tax) and any other information
required to be shown therein; (iii) all Taxes shown as due and payable on the
Tax Returns have been timely paid or withheld or adequate provision has been
made therefor; (iv) Pasadena and the Pasadena Subsidiaries have made or will
have made all required estimated Tax payments due on or before the Effective
Time; (v) the charges, accruals and reserves for deferred and contingent Taxes
reflected on the Historical Financial Statements are adequate to cover all Taxes
which are or may become payable with respect to all periods covered by such
financial statements, and the books and records of Pasadena and the Pasadena
Subsidiaries will contain accruals and reserves adequate to cover all Taxes for
all periods ending on or prior to the Effective Time and not covered by such
financial statements; (vi) neither Pasadena nor any of the Pasadena Subsidiaries
is delinquent in the payment of any Tax or has requested any extension of time
within which to file any Tax Return, which Tax Return either has not since been
filed or with respect to which such extended period has not yet expired; (vii)
neither Pasadena nor any of the Pasadena Subsidiaries has granted any extension
or waiver of the limitations period applicable to any Tax Returns other than a
waiver which by its term has expired; (viii) to the best knowledge of Pasadena,
there are no pending or threatened audits, investigations, claims,
administrative or judicial proceedings, or collection actions against or with
respect to Pasadena or any of the Pasadena Subsidiaries in respect of any Tax or
assessment; (ix) there are no Liens for Taxes upon the assets of Pasadena or any
of the Pasadena Subsidiaries except Liens for current Taxes not yet due; (x)
neither Pasadena nor any Pasadena Subsidiary has filed any United States Federal
Forms 8275 or Forms 8275-R (or any similar foreign, state or local tax form or
filing); (xi) neither Pasadena nor any Pasadena Subsidiary is a party to any
tax-sharing, tax allocation, or similar agreement; (xii) neither Pasadena nor
any Pasadena Subsidiary has ever been included in a consolidated, combined or
unitary group for any taxable period, except for such a group of which Pasadena
is the common parent; (xiii) neither Pasadena nor any Pasadena Subsidiary has or
is required to file Tax returns in any foreign jurisdiction; (xiv) neither
Pasadena nor any Pasadena Subsidiary is a member of a partnership, joint venture
or any other arrangement which is taxable as a partnership for United States
Federal income tax purposes; (xv) Pasadena does not have an excess loss account
within the meaning of Treasury Regulations Section 1.1502-32 with respect to the
stock of any Pasadena Subsidiary; (xvi) neither Pasadena nor any Pasadena
Subsidiary has any deferred intercompany gains or losses as defined in
applicable federal consolidated return regulations or any similar state law
regulations; (xvii) neither Pasadena nor any Pasadena Subsidiary has made a
disclosure on a Tax Return pursuant to Section 6662(d)(2)(B)(ii) of the Code and
the Treasury Regulations thereunder; and (xviii) the Disclosure Schedule sets
forth the taxable years of Pasadena and the Pasadena Subsidiaries as to which
statutes of limitations have not expired and, with respect to such taxable
years, sets forth those years for which examinations have been completed, those
years which are currently under examination, those years for which examinations
have not been initiated, and those years for which required Tax Returns have not
yet been filed.
(b) Any amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer or director of Pasadena or any of its
Affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Benefit Plan in
effect as of the date of the Agreement would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
(c) The disallowance of a deduction under Section 162(m) of the Code
for employee remuneration will not apply to any amount paid or payable by
Pasadena or any Pasadena Subsidiary under any contract, Benefit Plan, program,
arrangement or understanding in effect as of the date hereof.
(d) Pasadena's payroll, property or receipts, or other factors used
in a particular states apportionment or allocation formula, does not result in
an apportionment or allocation of business income to any state other than the
State of California, and Pasadena does not have nonbusiness income that is
allocated, apportioned or otherwise sourced to any state other than the State of
California.
4.18.Employee Benefit
Plans4.18.EmployeeBenefitPlans""2".
(a) Definitions. The following terms, when used in this Section 4.18,
shall have the following meanings. Any of these terms may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference. For purposes of this Section 4.18, the term Pasadena shall also be
deemed to refer to any Pasadena Subsidiary.
(i) "Benefit Arrangement" shall mean any employment or
consulting policy, practice or plan providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, severance, retirement benefits, life, health, disability or
accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the
Code providing for the same or other benefits) or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation
rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not an
ERISA Welfare Plan, ERISA Pension Plan or Multiemployer Plan, (B) is
maintained, contributed to or required to be contributed to, as the case
may be, by Pasadena or an ERISA Affiliate and (C) covers or covered any
individual while retained or employed by Pasadena or any ERISA Affiliate.
(ii) "Benefit Plans" shall mean all Benefit
Arrangements, Multiemployer Plans, ERISA Pension Plans and
ERISA Welfare Plans.
(iii)"ERISA Affiliate" shall mean any entity (whether or not
incorporated) which is (or at any relevant time was) a member of a
"controlled group of corporations" with or under "common control" with
Pasadena (as such terms are defined in Section 4001 of ERISA or Sections
414(b) or (c) of the Code).
(iv) "ERISA Pension Plan" shall mean any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) (A) which Pasadena or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or has ever
maintained, administered, contributed to or been required to contribute
to, and (B) which covers or covered any individual while retained or
employed by Pasadena or any ERISA Affiliate.
(v) "ERISA Welfare Plan" shall mean any "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, (A) which Pasadena or
any ERISA Affiliate maintains, administers, contributes to or is required
to contribute to, or has ever maintained, administered, contributed to or
been required to contribute to, and (B) which covers or covered any
individual while retained or employed by Pasadena or any ERISA Affiliate.
(vi) "Multiemployer Plan" shall mean any "multiemployer plan,"
as defined in Section 4001(a)(3) of ERISA, (A) which Pasadena or any ERISA
Affiliate maintains, administers, contributes to or is required to
contribute to (directly or indirectly), or after September 25, 1980,
maintained, administered, contributed to or was required to contribute to
and (B) which covers or covered any individual while retained or employed
by Pasadena or any ERISA Affiliate.
(vii)"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(b) Disclosure; Delivery of Copies of Relevant Documents and Other
Information. The Disclosure Schedule contains a complete list of Benefit Plans
and complete copies of each of the following documents have been made available
by Pasadena for review by PDP: (i) with respect to each Benefit Plan maintained
on or after January 1, 1991, the most recent document (and, if applicable,
related trust agreements) and all amendments thereto, all written
interpretations thereof and the most recent written description thereof which
has been distributed to employees of Pasadena or any ERISA Affiliate, a complete
description of any Benefit Plan which is not in writing, and all annuity
contracts or other funding instruments; (ii) the most recent determination
letter issued by the Internal Revenue Service, with respect to each ERISA
Pension Plan which is intended to be qualified and tax-exempt under the
provisions of Sections 401(a) and 501(a) of the Code and any pending or the most
recent application for such a determination letter with respect to each such
ERISA Pension Plan; (iii) Annual Reports on Form 5500 Series (including all
applicable schedules thereto) required to be filed with any Governmental Entity
for each Benefit Plan and Tax Returns, if any (including all applicable
schedules thereto) for each trust related thereto for the most recent plan year
(the five most recent plan years in the case of an ERISA Pension Plan); (iv) all
financial statements and accountant's opinions relating to each ERISA Pension
Plan and ERISA Welfare Plan for the five most recent plan years; (v) any
correspondence or notifications received from any Governmental Entity during the
five most recent plan years relating to Benefit Plans other than routine
correspondence relative to Annual Reports on Form 5500 Series; (vi) all
administrative forms and related documents used in connection with the
administration of the ERISA Pension Plans and ERISA Welfare Plans; (vii) each
valuation of the liabilities associated with post-employment benefits provided
under any Benefit Plan, consistent with Statement of Financial Accounting
Standards 112; (viii) a report of the claims experience under any self-funded
ERISA Welfare Plan for the five most recent plan years; (ix) worksheets
demonstrating each ERISA Pension Plan's compliance for the five most recent plan
years with the following, if applicable: the coverage requirements of Section
410(b) of the Code; the actual deferral percentage and actual contribution
percentage tests of Sections 401(k) and 401(m) of the Code; the maximum
contribution limitations of Section 415 of the Code; and the top-heavy
requirements of Section 416 of the Code; and (x) all other contracts,
agreements, insurance policies and fidelity bonds relating to the Benefit Plans.
(c) Compliance. Each ERISA Pension Plan, ERISA Welfare Plan, Benefit
Arrangement, related trust agreement, annuity contract and other funding
instrument complies, and has been maintained in compliance, in all material
respects, with its terms and, both as to form and operation, in all material
respects, with all applicable requirements, including all reporting and
disclosure requirements, prescribed by any and all statutes, orders, rules and
regulations, including, but not limited to, ERISA and the Code.
(d) Multiemployer Plans. Neither Pasadena nor any
ERISA Affiliate has, at any time, directly or indirectly
contributed to or had an obligation to contribute to a
Multiemployer Plan.
(e) ERISA Welfare Plans.
(i) No condition exists which would prevent Pasadena from
amending or terminating any ERISA Welfare Plan.
(ii) Neither Pasadena nor any ERISA Affiliate or any ERISA
Welfare Plan has any present or future obligation to make any payment to
or under any ERISA Welfare Plan which provides benefits to retirees other
than for COBRA benefits under Part 6 of Title I of ERISA and Section 4980B
of the Code.
(iii)Each ERISA Welfare Plan which is a "group health plan," as
defined in Section 607(1) of ERISA, has been operated in material
compliance with the provisions of Part 6 of Title I of ERISA and Section
4980B of the Code at all times.
(iv) There are no contributions or benefit claims with respect
to any ERISA Welfare Plan which are or will be 30 days past due.
(f) ERISA Pension Plans.
(i) Except for the Roger Engemann & Associates, Inc. Defined
Benefit Pension Plan, the Roger Engemann & Associates, Inc. Employees'
Money Purchase Pension Plan and Trust and the Pasadena Capital Corporation
Employee Stock Ownership Plan as it existed from January 1, 1989 until
January 1, 1992, no ERISA Pension Plan is or has been subject to the
minimum funding requirements of ERISA or Section 412 of the Code, or to
Title IV of ERISA. Except as set forth on the Disclosure Schedule, neither
Pasadena nor any ERISA Affiliate has any liability for unpaid
contributions with respect to any ERISA Pension Plan.
(ii) Except as set forth on the Disclosure Schedule, each ERISA
Pension Plan (and each related trust agreement, annuity contract or other
funding instrument), during such time as it has been or was in effect
(including as a "Frozen Plan"), which is or was intended to be qualified
and tax-exempt under the provisions of Sections 401(a) and 501(a) of the
Code received a determination letter that it is so qualified and no event
has occurred nor does any condition exist which would cause it not to
continue to be so qualified.
(g) Unrelated Business Taxable Income. No Benefit
Plan (or trust or other funding vehicle pursuant thereto) is
subject to any Tax under Section 511 of the Code.
(h) Deductibility of Payments. There is no contract, agreement, plan
or arrangement covering any employee or former employee of Pasadena that,
individually or collectively, provides for the payment by Pasadena of any amount
that is not deductible under Sections 162 or 404 of the Code.
(i) Fiduciary Duties and Prohibited Transactions. Neither Pasadena
nor any plan fiduciary of any ERISA Welfare Plan or ERISA Pension Plan has
engaged in any transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the Code, for
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code.
(j) Litigation. There are no pending or, to the best knowledge of
Pasadena, threatened Actions (other than claims for benefits in the normal
course), asserted or instituted against (i) any ERISA Welfare Plan or its
assets, (ii) any ERISA Pension Plan or its assets, (iii) any fiduciary with
respect to any ERISA Pension Plan or ERISA Welfare Plan or (iv) Pasadena nor any
ERISA Affiliate with respect to any Benefit Plan.
(k) No Amendments. Neither Pasadena nor any ERISA Affiliate has any
announced plan or legally binding commitment to create any additional Benefit
Plans or to amend or modify any existing Benefit Plan except as may be required
by law or as contemplated by this Agreement.
(l) No Other Liability. No event has occurred in connection with
which Pasadena or any ERISA Affiliate or any Benefit Plan, directly or
indirectly, could be subject to any material liability (i) under any statute,
regulation or governmental order relating to any Benefit Plans or (ii) pursuant
to any obligation of Pasadena to indemnify any person against liability incurred
under any such statute, regulation or order as they relate to the Benefit Plans.
4.19.Investment Contracts and
Clients4.19.InvestmentContractsandClients""2". The Disclosure Schedule sets
forth a list of (i) all Clients with assets under management in excess of
$500,000 as of the date hereof, (ii) all Investment Contracts with assets under
management in excess of $500,000 as of the date hereof and (iii) the net assets
in each such Client account as of April 30, 1997. Pasadena and each Pasadena
Subsidiary is in compliance in all material respects with the terms of each
Investment Contract and is not in default or breach under (with or without the
giving of notice or the passage of time) any of the terms of any Investment
Contract. Each Investment Contract is in full force and effect and constitutes a
legal, valid and binding obligation of Pasadena or a Pasadena Subsidiary,
enforceable in accordance with its terms, except as limited by the effect of
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors' rights generally and court decisions with respect
thereto and by the availability of equitable remedies. True, correct and
complete copies of each Investment Contract, including a current fee schedule,
have been made available for review by PDP. Neither Pasadena nor any Pasadena
Subsidiary has been notified of the intention of any Client with assets under
management in excess of $500,000 to terminate its Investment Contract or to
withdraw all or the substantial portion of such assets within six months after
the Closing Date.
4.20.Certain Representations and Warranties as to the
Pasadena
Funds4.20.CertainRepresentationsandWarrantiesastothePasadenaFunds""2".
(a) True, correct and complete copies of all of the current
investment advisory agreements and distribution or underwriting contracts, plans
adopted pursuant to Rule 12b-1 under the Investment Company Act or arrangements
for the payment of service fees (as such term is defined in Rule 2830 of the
National Association of Securities Dealers, Inc. Conduct Rules), and all
administrative services and other services agreements, if any (collectively, the
"Pasadena Fund Agreements"), pertaining to each of the Pasadena Funds (i) have
been made available for review by PDP prior to the date hereof and (ii) are in
full force and effect. As to each Pasadena Fund, there has been in full force
and effect an investment advisory, sub-advisory, distribution or underwriting
agreement (as applicable) at all times since the inception of such Pasadena Fund
and Pasadena or the Pasadena Subsidiaries received compensation respecting their
activities in connection with each of the Pasadena Funds only as provided by the
Pasadena Fund Agreements and as permitted by the Investment Company Act and
other applicable law. Pasadena or a Pasadena Subsidiary has all requisite
corporate power and authority to perform its obligations under the Pasadena Fund
Agreements to which it is a party with each of the Pasadena Funds and all
Pasadena Fund Agreements were duly approved in accordance with the applicable
provisions of the Investment Company Act.
(b) There are no special restrictions, consent judgments or SEC
orders on or with regard to any of the Pasadena Funds currently in effect that
have a material adverse effect on the business or operations of any Pasadena
Fund as presently conducted. No orders of exemption issued to any of the
Pasadena Funds material to the conduct of the business of any Pasadena Fund
under the Investment Company Act or the Advisers Act have been revoked, no
proceeding to revoke any such order has been commenced and, to the best
knowledge of Pasadena, no such proceeding is contemplated by the SEC. To the
best knowledge of Pasadena, no such order or exemption will by its terms be
revoked or become inapplicable as a result of the consummation of the
transactions contemplated by this Agreement. Copies of all exemptive orders and
SEC no-action letters relating to the Pasadena Funds have been made available
for review by PDP.
(c) Since inception, each of the Pasadena Funds has been a duly
registered investment company in material compliance with the Investment Company
Act and the rules and regulations promulgated thereunder and duly registered or
licensed and in good standing under the laws of each jurisdiction in which such
qualification is necessary, except where the failure to be duly registered and
in compliance will not and would not reasonably be expected to have a Pasadena
Material Adverse Effect. Since their issuance, shares of each of the Pasadena
Funds have been duly qualified for sale under the securities laws of each
jurisdiction in which they have been sold or offered for sale at such time or
times during which such qualification was required, and, if not so qualified,
the failure to so qualify would not have a material adverse effect on any of the
Pasadena Funds or have a Pasadena Material Adverse Effect. As promptly as
practicable, Pasadena shall deliver to PDP a list of such jurisdictions where
qualified separately for each of the Pasadena Funds. Shares of each of the
Pasadena Funds have been duly registered under the Securities Act during such
period or periods for which such registration is required, the related
registration statements have become effective under the Securities Act, no stop
order suspending the effectiveness of any such registration statement has been
issued and no proceedings for that purpose have been instituted or, to the best
knowledge of Pasadena, are contemplated. Each of the Pasadena Fund's
registration statements under the Investment Company Act and/or the Securities
Act have, at all times when such registration statements were effective,
complied as to form in all material respects with the requirements of the
Investment Company Act and the Securities Act then in effect and such
registration statements did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. Copies of the current registration statements of each
of the Pasadena Funds under the Investment Company Act and/or the Securities Act
have been made available for review by PDP. All shares of each of the Pasadena
Funds were sold pursuant to an effective registration statement and have been
duly authorized and are validly issued, fully-paid and non-assessable. Each of
the Pasadena Fund's investments have been made in accordance with its investment
policies and restrictions set forth in its registration statement in effect at
the time the investments were made and at all times when the investments were
held, except for such investments which do not and would not reasonably be
expected to have a material adverse effect on any of the Pasadena Funds or have
a Pasadena Material Adverse Effect.
(d) Neither Pasadena, any of the Pasadena Subsidiaries nor any of
their Affiliated Persons (as defined in the Investment Company Act) is subject
to any of the restrictions set forth in Section 9(a) of the Investment Company
Act.
(e) Each of the Pasadena Funds has made a valid election to be a
regulated investment company and each of the Pasadena Funds has satisfied the
relevant requirements of the Code for all taxable years, or parts thereof, of
such Pasadena Fund ending prior to the Closing as to its status as a regulated
investment company as defined in Sections 851-855 of the Code. Neither Pasadena,
any of the Pasadena Subsidiaries nor any of the Pasadena Funds has received any
notice or other communication relating to or affecting any Pasadena Fund's
compliance with any of these relevant requirements.
(f) Each of the Pasadena Funds has timely filed all Tax returns and
reports (including information returns, declarations and reports) (the "Fund Tax
Returns") required to be filed by it with any Taxing Authorities and has paid,
or withheld and paid over, all Taxes which were shown to be due on the Fund Tax
Returns. To the best knowledge of Pasadena, the information contained in such
Fund Tax Returns is true and complete. With respect to each Pasadena Fund, there
are no liabilities for Taxes which have not been paid in prior periods or for
which an adequate reserve for such liability does not exist. All liabilities for
which reserves have been established as of the respective fiscal year ends of
the Pasadena Funds in 1996 and as of a date reasonably close to the date of
execution of this Agreement are set forth in the Disclosure Schedule. With
respect to each Pasadena Fund, no Tax Liens have been filed and no claims have
been or are being asserted by any Taxing Authorities with respect to any Taxes
and, to the best knowledge of Pasadena, there are no threatened claims for
Taxes.
(g) None of Pasadena, the Pasadena Subsidiaries any Affiliated Person
(as defined in the Investment Company Act) or any other "interested person" of
Pasadena or the Pasadena Subsidiaries as such term is defined in the Investment
Company Act, receives or is entitled to receive any compensation directly or
indirectly (i) from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of any of the Pasadena Funds,
other than bona fide ordinary compensation as principal underwriter for any of
the Pasadena Funds or as broker in connection with the purchase or sale of
securities in compliance with Section 17(e) of the Investment Company Act, or
(ii) from any of the Pasadena Funds or its security holders for other than bona
fide investment advisory, administrative or other services. Accurate and
complete disclosure of all such compensation arrangements has been made in the
Pasadena Funds' registration statements filed under the federal securities laws.
(h) PDP has had the opportunity to review true and complete copies of
the audited financial statements, prepared in accordance with GAAP, of each of
the Pasadena Funds for the past three fiscal years (or such shorter period as
such Pasadena Fund shall have been in existence), and unaudited financial
statements, prepared in accordance with GAAP, of each of the Pasadena Funds for
the first six-months of its most recent fiscal year if the date of this
Agreement is eight months after the beginning of a Pasadena Fund's fiscal year.
Each Pasadena Fund's fiscal year-end and six-month period financial statements
are hereinafter referred to as a "Fund Financial Statement." Each of the Fund
Financial Statements is consistent with the books and records of each of the
Pasadena Funds, and presents fairly the financial position of each of the
Pasadena Funds in accordance with GAAP applied on a consistent basis (except as
otherwise noted therein) at the respective dates of such Fund Financial
Statements and the results of operations and changes in net assets for the
respective periods indicated, except in the case of the interim financial
statements which are subject to normal year-end adjustments which in the
aggregate are not material. The Fund Financial Statements reflect and disclose
all material changes in accounting principles and practices adopted by each of
the Pasadena Funds during the periods covered by each Fund Financial Statement.
The books and records of each of the Pasadena Funds fairly reflect their
respective transactions. None of the Pasadena Funds has any material direct or
indirect liabilities other than (i) liabilities fully and adequately reflected
or reserved against on the balance sheets contained in the Fund Financial
Statements, and (ii) liabilities incurred since the date of the Fund Financial
Statements and incurred in the ordinary course of business.
(i) There are no Actions pending or, to the best knowledge of
Pasadena, threatened in any court or before or by any governmental agency or
instrumentality, department, commission, board, bureau or agency, or before any
arbitrator, by or against any of the Pasadena Funds, or any officer or director
thereof. There are no judgments, injunctions, orders or other judicial or
administrative mandates outstanding against or affecting any of the Pasadena
Funds or any officer or director thereof.
(j) Each Pasadena Fund complies, and has been maintained in
compliance, with all applicable requirements, including all reporting and
disclosure requirements, prescribed by any and all applicable statutes, orders,
rules and regulations, except for such noncompliance which does not and would
not reasonably be expected to have, either individually or in the aggregate, a
material adverse effect on any of the Pasadena Funds or have a Pasadena Material
Adverse Effect.
(k) The Disclosure Schedule contains a true, complete and correct
list, as of the date hereof, of all agreements and contracts of the following
types, written or oral, to which any Pasadena Fund is a party or by which any
Pasadena Fund or any of their respective properties is bound as of the date
hereof: (i) mortgages, indentures, security agreements, loan, financing and
credit agreements and other agreements, guarantees and instruments relating to
the borrowing of money by any Pasadena Fund; (ii) any lease for real property,
material lease for personal or intangible property (whether as lessee or
lessor), and material license, service and processing agreement; (iii) any
agreement with respect to Tax allocation as to the Taxes paid for credit for a
Tax loss on a Tax Return or report; and (iv) any other material agreement,
contract and commitment. True and complete copies of all such contracts,
agreements and commitments (or, in the case of material oral contracts, a
description of the material terms thereof) have been previously made available
for review by PDP, and such contracts, agreements and commitments contain
substantially the entire understanding between any Pasadena Fund and the other
party or parties thereto with respect to the subject matter thereof.
(l) The advertising and sales literature used by the Pasadena Funds
in connection with the public offering and sale of the Pasadena Funds (including
any advertising or sales literature used pursuant to Rule 482 under the
Securities Act and filed by Pasadena or the Pasadena Funds with the National
Association of Securities Dealers, Inc. for review in accordance with 497(i)
under the Securities Act) complies in all material respects with the Investment
Company Act, the Securities Act and the Exchange Act and the rules and
regulations thereunder and, to the best knowledge of Pasadena, does not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
4.21.No Brokers4.21.NoBrokers""2". Except for Putnam, Lovell &
Thornton Inc., Houlihan Lokey Howard & Zukin and Michael Herman, whose fees and
expenses will be paid by Pasadena, neither Pasadena nor any Pasadena Subsidiary
nor any Affiliate of any of them has entered into or will enter into any
contract, agreement, arrangement or understanding with any Person or firm which
will result in the obligation of Pasadena, any Pasadena Subsidiary or PDP to pay
any finder's fee or financial advisory fee, brokerage fee or commission or
similar payment in connection with the transactions contemplated hereby.
4.22.Accuracy of Documents and
Information4.22.AccuracyofDocumentsandInformation""2". No representations or
warranties made by Pasadena in this Agreement, the Disclosure Statement or the
Related Agreements or in any document, exhibit, certificate, opinion or schedule
furnished to PDP pursuant hereto or thereto, or in connection with the
transactions contemplated hereby or thereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading.
ARTICLE
5ARTICLE5-REPRESENTATIONSANDWARRANTIESOFPDPANDACQUISITIONSUB""1"
REPRESENTATIONS AND WARRANTIES OF
PDP AND ACQUISITION SUB
PDP and Acquisition Sub, jointly and not severally, hereby represent
and warrant to Pasadena, unless limited to a specific date, as of the date of
this Agreement and as of the Closing Date, as follows:
5.1. Organization and Standing5.1.OrganizationandStanding""2". Each
of PDP and Acquisition Sub is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation and is duly
qualified to do business and in good standing in each jurisdiction where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified, except for such jurisdictions in which the failure to be duly
qualified will not and would not reasonably be expected to, either individually
or in the aggregate, have a PDP Material Adverse Effect. Each of PDP and
Acquisition Sub has all necessary corporate power and authority to carry on its
business as now conducted, and to own, lease and operate its assets, properties
and business. PIC is duly registered as an investment adviser under the Advisers
Act and is duly licensed, registered or qualified in all jurisdictions where
such registration, licensing or qualification is required in order to conduct
its business, except for any failures to be so registered, licensed or qualified
that do not have and would not reasonably be expected to have, either
individually or in the aggregate, a PDP Material Adverse Effect. PEPCO is duly
registered as a "broker" and a "dealer" in all jurisdictions where such
registration is required in order to conduct its business, except for any
failures to be so registered that do not have and would not reasonably be
expected to have, either individually or in the aggregate, a PDP Material
Adverse Effect. All personnel acting on behalf of PEPCO are duly licensed to so
act in all jurisdictions where such licensing is required, except for any
failures to be so licensed that do not have and would not reasonably be expected
to have, either individually or in the aggregate, a PDP Material Adverse Effect.
5.2. Authority5.2.Authority""2". Each of PDP and Acquisition Sub has
full corporate power and authority to execute and deliver this Agreement and the
Related Agreements to which it is a party, to consummate the transactions
contemplated hereunder and thereunder and to perform its obligations hereunder
and thereunder, subject to the conditions set forth in Article 8. This Agreement
and the Related Agreements to which they are a party have been duly and validly
approved by all necessary corporate action of PDP and Acquisition Sub, as
applicable, and is the legal, valid and binding obligation of each of them,
enforceable against it in accordance with its terms except as limited by the
effect of bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto and by the availability of equitable remedies.
5.3. Governmental
Authorization5.3.GovernmentalAuthorization""2". The execution, delivery and
performance by each of PDP and Acquisition Sub of this Agreement and the
consummation by PDP and Acquisition Sub of the transactions contemplated hereby
require no consent, approval or authorization of, or declaration or filing with,
or notice to, any governmental body, agency, official or authority, domestic or
foreign, other than (a) compliance with any applicable requirements of the HSR
Act; (b) compliance with any applicable requirements of the Exchange Act and the
Securities Act; and (c) such other actions, filings, approvals and consents, the
failure to make or obtain which will not and would not reasonably be expected
to, either individually or in the aggregate, have a PDP Material Adverse Effect.
5.4. No Violation5.4.NoViolation""2". Neither the execution and
delivery of this Agreement by PDP and Acquisition Sub or any of the Related
Agreements to which either of them is a party nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with or violate
any provision of law, domestic or foreign, or the certificate or articles of
incorporation or by-laws of PDP or Acquisition Sub, (ii) violate any provision
of any regulation, order, writ, injunction or decree of any court or
Governmental Entity or (iii) violate, conflict with, result in a breach of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination, cancellation or
acceleration of, any lease, license, contract, agreement, commitment or
instrument to which PDP or Acquisition Sub is a party or by which PDP or
Acquisition Sub or any of their respective assets or properties is bound or
subject, or result in the creation or imposition of any Lien upon the capital
stock of Acquisition Sub or upon the assets of any such entity pursuant to the
terms of any such agreement or instrument, with such exceptions with respect to
the matters referred to in clauses (i), (ii) and (iii) above as do not have and
would not reasonably be expected to have, either individually or in the
aggregate, a PDP Material Adverse Effect or reasonably be expected to prevent
consummation of the transactions contemplated hereby, assuming that (a) all
approvals contemplated by Article 8 shall have been duly obtained, (b) the
consent of the OCC has been obtained for the sale of capital stock of the Trust
Company and (c) the provisions of the HSR Act have been complied with and the
waiting period thereunder shall have expired or terminated.
5.5. No Brokers5.5.NoBrokers""2". Except for Roberto de Guardiola
Company LLC, whose fees and expenses will be paid by PDP, none of PDP,
Acquisition Sub nor any Affiliate of PDP or Acquisition Sub has entered into or
will enter into any contract, agreement, arrangement or understanding with any
Person or firm which will result in the obligation of Pasadena to pay any
finder's fee or financial advisory fee, brokerage fee or commission or similar
payment in connection with the transactions contemplated hereby.
ARTICLE 6ARTICLE6-CONDUCTOFBUSINESSPRIORTOTHECLOSING""1"
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
6.1. Conduct Prior to Closing6.1.ConductPriortoClosing""2". Pasadena
hereby covenants and agrees with PDP and Acquisition Sub that during the period
from the date hereof through the Effective Time, each of Pasadena and the
Pasadena Subsidiaries shall continue to operate its business only in the usual,
regular and ordinary course and substantially in accordance with past practice,
and to use its best efforts to preserve intact its business organization and
assets and maintain its rights, franchises and business and customer, officer
and employee relations necessary to conduct its business as currently conducted
in all material respects. Without in any way limiting the foregoing, during the
period from the date hereof through the Closing Date, Pasadena agrees not to do,
or cause or permit any Pasadena Subsidiary to do, any of the following without
the prior written consent of PDP:
(a) except as specifically contemplated by this Agreement, declare,
set aside, make or pay any dividend or other distribution (whether in cash,
equity interests or property or any combination thereof) in respect of its
capital stock or other equity interests or otherwise purchase or redeem,
directly or indirectly, any capital stock or other equity interests, except
dividends payable by any Pasadena Subsidiary to Pasadena or any other Pasadena
Subsidiary;
(b) except for shares of Pasadena Common Stock issuable upon exercise
of Options outstanding as of the date hereof issue or sell any shares of its
capital stock or any Rights;
(c) incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any other Person, or
make any loans or advances to any Person, except in the ordinary course of
business consistent with past practice or issue or sell any debt securities;
(d) mortgage, pledge or otherwise encumber any of its properties or
assets, tangible or intangible, or otherwise dispose of any of its assets or
properties or cancel, release or assign any indebtedness owed to it or any
claims held by it, except in the ordinary course of business consistent with
past practice;
(e) except where required in the exercise of its fiduciary
obligations, in the case of any Pasadena Fund, request that any action be taken
by the Board of Trustees (or any equivalent body) of any Pasadena Fund, other
than in connection with obtaining the approvals referred to in Section 6.2(c)
hereof and routine actions that would not reasonably be expected to have a
Pasadena Material Adverse Effect;
(f) amend or otherwise modify in any material respect the terms of
any of the Investment Contracts, including, but not limited to, reductions in
the amount of fees owing to Pasadena or a Pasadena Subsidiary under such
Investment Contracts;
(g) split, combine, subdivide or reclassify any of its
shares of capital stock;
(h) except as required by law or as specifically contemplated by this
Agreement or the Related Agreements, (i) grant or make any change in control,
severance or termination payments to any officer, employee or consultant of
Pasadena or any Pasadena Subsidiary except pursuant to plans or agreements in
existence on the date hereof, (ii) enter into any option, employment, deferred
compensation or other similar agreement with any person (or enter into any
amendment to any such existing agreement with any officer, director, employee or
consultant of Pasadena or any Pasadena Subsidiary), (iii) increase benefits
payable under any existing severance or termination pay policies or agreements,
(iv) adopt, amend in any material respect or terminate any employment, bonus,
profit-sharing, compensation, stock option, pension, deferred compensation or
other plan, agreement, trust, fund or arrangement for the benefit of officers,
directors, employees or consultants, or (v) pay, or provide for, any increase in
compensation, bonus or other benefits payable to officers, directors, employees
or consultants of Pasadena or any Pasadena Subsidiary, except (A) for normal
merit and cost of living increases, (B) for awards made consistent with past
practice pursuant to the Plans, (C) as required by the terms of contracts or
agreements in effect on the date hereof, and (D) as specifically contemplated by
this Agreement;
(i) amend or propose any change in any Organizational
Document, except as required by law or this Agreement;
(j) change in any material respect its accounting
practices or principles, except as required by law or GAAP;
(k) enter into or recommend that any Pasadena Fund enter into any
type of business materially different from that conducted by Pasadena or any of
the Pasadena Subsidiaries or such Pasadena Fund as of the date of this Agreement
or enter into or participate in any additional joint ventures or partnerships,
except for new Pasadena Funds created in the ordinary course of business;
(l) other than in the ordinary course of business, acquire direct or
indirect control over any Person or make any acquisition of all or a substantial
part of the business or operations of any Person or dispose of any business or
operations;
(m) pay, discharge, settle or satisfy any claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise) other than in
the ordinary course of business consistent with past practice; or
(n) agree or commit to do any of the foregoing.
6.2. Consents and Approvals6.2.ConsentsandApprovals""2".
(a) Each of the parties hereto agrees to cooperate with the other and
use its best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, as soon as practicable, all things necessary, proper or
advisable to consummate the transactions contemplated by this Agreement and the
Related Agreements as promptly as practicable, including, without limitation,
all filings under the HSR Act, the Securities Act, the Exchange Act, the
Investment Company Act, the Advisers Act and applicable state insurance and
securities laws and all other applicable federal, state, local and foreign laws
and regulations. The parties hereto covenant and agree to take no action (i)
which would render any of their representations and warranties contained herein
untrue in any material respect at and as of the Closing or (ii) which would
materially and adversely affect the ability of any of them to satisfy any of the
conditions set forth in Article 8.
(b) Without limiting the foregoing, Pasadena shall, as promptly as
practicable, use its, and shall cause the Pasadena Subsidiaries to use their,
best efforts to obtain, or cause to be obtained, all consents necessary to be
obtained in order to consummate the transactions contemplated hereby. To the
extent that the rights of Pasadena under any agreement, including any Investment
Contract, may not be assigned without the consent of or approval of a new
Investment Contract by another party thereto, and/or, in the case of the
Pasadena Funds, the shareholders and independent trustees thereof, Pasadena
shall use its, and shall cause the Pasadena Subsidiaries to use their, best
efforts to obtain any such consent or approval prior to the Closing
(collectively, the "Client Consents").
(c) (i) Pasadena shall use its, and shall cause the Pasadena
Subsidiaries to use their, best efforts to cause the Boards of Trustees (or
equivalent bodies) of all of the Pasadena Funds to (x) approve new underwriting
or distribution agreements for such funds with PEPCO, and (y) approve, and to
solicit their respective shareholders as promptly as practicable with regard to
the approval of, new investment advisory agreements with PIC, and new
sub-advisory agreements with Pasadena or the appropriate Pasadena Subsidiary, in
each case to be effective on the Closing Date, pursuant to the provisions of
Section 15 of the Investment Company Act and consistent with all requirements of
the Investment Company Act applicable thereto or any other applicable foreign
securities laws, provided that such agreements referenced in clauses (x) and (y)
above are identical in all material respects to the existing agreements other
than the term of the agreement. Pasadena shall, in consultation with PDP, retain
a proxy solicitor reasonably acceptable to PDP to assist in the solicitation of
proxies to obtain the requisite approval from the shareholders of such Pasadena
Funds. Pasadena and the Pasadena Subsidiaries also shall take any similar action
required under the Investment Company Act to continue any underwriting or
distribution agreements of the Pasadena Funds.
(ii) All proxy statements to be prepared for use by the Pasadena
Funds in connection with the transactions contemplated by this Agreement, any
written information provided by Pasadena or any Pasadena Subsidiary to each
Board of Trustees (or equivalent bodies) in connection with this Agreement or
the transactions contemplated hereby at the time such information is provided
and, in the case of a proxy statement, the date of the shareholder vote for
which such proxy statement will be used, as then amended or supplemented, and
any information disseminated to any Clients in respect of the transactions
contemplated hereby at the time such information is disseminated, in each case,
will be accurate and complete and will not contain any untrue statement of a
material fact, or omit to state any material fact (x) required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (y) necessary to
correct any statement in any earlier communication that has become false or
misleading.
(d) As promptly as practicable, Pasadena shall provide written notice
to the non-investment company advisory Clients of Pasadena and the Pasadena
Subsidiaries, stating that such Clients' consents are required for continued
performance under their advisory contracts following consummation of the
transactions contemplated by this Agreement, that such Clients' consents are
being solicited and that, if any such Clients so desire, such Clients shall have
20 days to terminate their advisory contracts. For Clients who have not
terminated their advisory contracts within such 20-day period or who have
affirmatively consented to continued performance under the investment advisory
contracts, Pasadena shall, promptly after the Closing, provide such Clients with
an additional written notice stating that the transactions contemplated by this
Agreement have occurred, that Pasadena or the appropriate Pasadena Subsidiary
intends to continue providing advisory services pursuant to the existing
contracts with such Clients, subject to such Clients' right to terminate such
contracts within 45 days from the date of such second notice, and that each such
Client's consent will be implied if it continues to accept the services without
rejection during the specified 45-day period.
(e) All such notices and any forms of consents referred to in this
Section 6.2 shall be in form and substance reasonably satisfactory to PDP.
6.3 Shareholders Meeting6.3.ShareholdersMeeting""2". As promptly as
practicable following the execution of this Agreement, the Board of Directors of
Pasadena shall, in accordance with the provisions of the CGCL and the Articles
of Incorporation and By-laws of Pasadena, duly call, give notice of, and hold a
meeting of the Shareholders for the purpose of considering and approving this
Agreement and the appointment of the Shareholder Representative (the
"Shareholders Meeting"). The notice of the Shareholders Meeting shall include
the recommendation of the Board of Directors that the Shareholders vote in favor
of the approval and adoption of this Agreement and the appointment of the
Shareholder Representative. Pasadena shall use all diligent efforts to obtain
Shareholder approval of this Agreement and the appointment of the Shareholder
Representative.
6.4 Direction Statement to ESOP
Participants6.4.DirectionStatementtoESOPParticipants""2". Shares of Pasadena
Common Stock held by the ESOP shall be voted at the Shareholders Meeting in
accordance with the provisions of the ESOP and the ESOP Trust documents and
applicable law. None of the information to be provided by PDP, Acquisition Sub
or Pasadena for inclusion in any Direction Statement contemplated by such
documents shall, at the time of mailing or delivery, or on the date of the
Shareholders Meeting, be false or misleading with respect to any material fact,
nor shall such information omit to state any material fact necessary in order to
make such information, in the light of the circumstances under which it was
provided, not misleading. In addition, each of PDP, Acquisition Sub and Pasadena
agrees to correct any information provided by it for use in the Direction
Statement that shall become false or misleading in any material respect. For
purposes of this Section 6.4, the term "Direction Statement" means a direction
statement prepared by the ESOP Committee and/or the ESOP Trustee and mailed to
each participant in the ESOP who has shares of Pasadena Common Stock allocated
to his or her account in the ESOP as of the record date of the Shareholders
Meeting.
ARTICLE 7ARTICLE7-ADDITIONALAGREEMENTS""1"
ADDITIONAL AGREEMENTS
7.1. Current Information; Notification of Certain
Matters7.1.CurrentInformation;NotificationofCertainMatters""2".
(a) During the period from the date of this Agreement through the
Closing Date, Pasadena will cause one or more of its Representatives to confer
on a regular and frequent basis with Representatives of PDP with respect to the
status of Pasadena's and the Pasadena Subsidiaries' ongoing operations and those
of the Pasadena Funds. Pasadena will also furnish to PDP copies of monthly
financial statements or other reports of the results of operations prepared by
the management of Pasadena and each Pasadena Subsidiary for each month of 1997
as soon as the same become available. During the period from the date of this
Agreement through the Closing Date, Pasadena shall promptly notify PDP of any
material change in the normal course of Pasadena's or the Pasadena Subsidiaries'
businesses or those of the Pasadena Funds or of any complaints from a
governmental or regulatory authority or a self-regulatory body, investigations
or hearings (or communications indicating that the same may be contemplated), or
the institution or the threat of any litigation that comes to its attention,
which would, in any manner, challenge, prevent, alter or materially delay any of
the transactions contemplated hereby and Pasadena shall use its best efforts to
keep PDP informed with respect to such events. Pasadena and PDP will notify each
other of the status of regulatory applications and third party consents related
to the transactions contemplated hereby. Pasadena will also advise PDP promptly
of any notices of governmental examinations, inspections or audits and as to the
results thereof.
(b) Pasadena shall give prompt notice to PDP of (i) any notice of, or
other communication relating to, a material default or event that, with notice
or lapse of time or both, would become a material default, under any material
contract, (ii) any event, act or omission which results or is reasonably
expected to result in a Pasadena Material Adverse Effect of which they have
knowledge, (iii) any failure to obtain any Client Consents required pursuant to
Section 8.2(f) hereof, and (iv) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with any of the transactions contemplated by this Agreement. Each
party shall use all reasonable efforts to remedy any failure on its part to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
7.2. Access; Confidential
Information7.2.Access;ConfidentialInformation""2".
(a) Pasadena shall afford PDP, its accountants, counsel, financial
advisers and other Representatives such access during normal business hours, and
without material business interruption, to its and the Pasadena Subsidiaries'
books, records (including, without limitation, Tax Returns and, to the extent
possible, appropriate work papers of independent auditors under normal
professional courtesy) and properties, and to such other information as such
party may reasonably request.
(b) All non-public records, books, contracts, instruments, computer
data and other data and information (collectively, the "Information") concerning
Pasadena, the Pasadena Subsidiaries or the Pasadena Funds furnished to PDP or
its Representatives pursuant to this Agreement shall be treated as confidential
unless (i) the party providing the Information has made such information
available to the public generally, or (ii) such information is required to be
disclosed by applicable laws or regulations or by court order or decree. No
Information furnished to PDP or its Representatives shall be used by such person
or disclosed to any other person for any purpose other than with respect to the
transactions contemplated by this Agreement. In the event of the termination of
this Agreement pursuant to Article 9 hereof, this paragraph (b) and the
Confidentiality Agreement dated September 13, 1996 between PDP and Putnam,
Lovell & Thornton Inc. (the "Confidentiality Agreement") shall survive and PDP
shall promptly return or destroy (with such destruction certified by an officer
of PDP) all Information furnished to it and its Representatives hereunder and
all analyses, compilations, data, studies and other documents prepared by PDP or
its Representatives containing or based in whole or in part on any such
Information.
7.3. No Mergers, Consolidations, Sale of Interests
Etc.7.3.NoMergers,Consolidations,SaleofInterestsEtc.""2". Pasadena agrees that
during the period from the date hereof through the Closing Date, neither
Pasadena nor any of its officers, directors, employees, agents or other
Representatives (including, without limitation, any investment banker, attorney
or accountant retained by any of them) shall, directly or indirectly, solicit
any inquiries or proposals or enter into or continue any discussions,
negotiations or agreements relating to the sale or exchange of any of its
capital stock or the merger, consolidation or other reorganization of Pasadena
or any Pasadena Subsidiary with, or any direct or indirect disposition of a
significant amount of Pasadena's or a Pasadena Subsidiary's assets or business
to, or the assignment of any substantial portion of any investment advisory,
sub-advisory, administrative, or distribution agreement with, any person other
than PDP or its Affiliates, or provide any assistance or any information to or
otherwise cooperate with any person in connection with any such inquiry,
proposal or transaction. In the event that any such Person receives an
unsolicited offer for such a transaction or obtains information that such a
proposal is likely to be made, such Person will provide PDP with notice thereof
as soon as practicable after receipt, including the identity of the prospective
purchaser or soliciting party.
7.4. Publicity7.4.Publicity""2". The parties hereto will consult with
each other as to the form, substance and timing of any press release or other
public disclosure of matters related to this Agreement or any of the
transactions contemplated hereby, and no such release or other public disclosure
shall be made without the consent of the other party, which shall not be
unreasonably withheld or delayed; provided, however, that the parties may make
such disclosures as are required by law after making reasonable efforts in the
circumstances to consult in advance with the other parties.
7.5. Satisfaction of Conditions in Section 15(f) of the Investment
Company
Act.7.5.SatisfactionofConditionsinSection15(f)oftheInvestmentCompanyAct""2"
Pasadena and PDP each agree to use its best efforts to assure compliance with
the conditions of Section 15(f) of the Investment Company Act. Pasadena and PDP
each agree as follows:
(a) For a period of not less than three years after the Closing Date,
PDP shall assure that no more than 25% of the members of the Board of Trustees
(or equivalent bodies) of any Pasadena Fund shall be "interested persons" (as
defined in the Investment Company Act) of Pasadena, any Pasadena Subsidiary, PDP
or any Affiliate of PDP, or of the predecessor investment adviser of such
Pasadena Fund;
(b) For a period of not less than two years after the Closing Date,
PDP shall not impose an unfair burden on any of the Pasadena Funds as a result
of the transactions contemplated hereby; and
(c) PDP agrees not to amend or modify the indemnification provisions
or any exculpation provisions of any of the advisory or underwriting agreements
with any of the Pasadena Funds in a manner designed to benefit the adviser or
the underwriter to the detriment of the Pasadena Funds.
7.6. Employee Benefits and Plans7.6.EmployeeBenefitsandPlans""2". In
the event that PDP or the Surviving Corporation terminates any Pension Plan,
Welfare Plan or Employee Benefit Plan (other than the ESOP) in which employees
or former employees of Pasadena or a Pasadena Subsidiary participated at the
Effective Time, then such employees or former employees, as the case may be,
shall immediately become participants in a comparable employee benefit plan or
program available to PDP's or the Surviving Corporation's employees (and their
spouses, dependents and beneficiaries) upon terms and conditions which are no
less favorable than those afforded PDP's or the Surviving Corporation's
employees. Such employees shall receive credit for their service with Pasadena
or a Pasadena Subsidiary (including service with any predecessor company which
was credited under the plan which was terminated by PDP or the Surviving
Corporation) for purposes of determining their eligibility to participate,
vesting and eligibility for benefits under such employee benefit plans and
programs, except to the extent that the crediting of such service would not
comply with Treasury Regulations 1.401(a)(4)-11(d). Furthermore, with respect to
any health and dental plans in which Pasadena's employees or former employees
may have become entitled to participate, PDP agrees, to the extent permitted by
the applicable plan, that such individuals shall be entitled to participate
without regard to any applicable waiting periods and any limitation on
pre-existing conditions.
7.7. Board of Directors of the Surviving
Corporation7.7.BoardofDirectorsoftheSurvivingCorporation""2". The parties agree
that until such time as all Contingent Merger Payments, if any, have been made
pursuant to Section 3.7 hereof, the Board of Directors of the Surviving
Corporation shall be comprised of nine members, with six members to be elected
from the nominees of the Shareholder Representative and three members to be
elected from the nominees of PDP; provided, however, that PDP shall have the
right at any time to elect the members of the Board of Directors of the
Surviving Corporation if in good faith PDP determines that such action is
necessary to protect its investment in the Surviving Corporation or if the Board
of Directors of the Surviving Corporation fails to authorize any Restricted
Payments recommended by those directors who are nominees of PDP in accordance
with Section 3.10(b) hereof. The parties further agree that J. Roger Engemann
shall continue to serve as a member and Chairman of the Board of Directors of
the Surviving Corporation during at least the term of his Employment Agreement.
7.8. Tax Statements7.8.TaxStatements""2". Neither Pasadena nor PDP
(nor any Affiliate of PDP) shall claim a compensation deduction with respect to
payments made hereunder to holders of Pasadena Common Stock purchased pursuant
to the 1989 Stock Plan. In addition, to the extent required by law, Pasadena and
PDP shall provide holders of Pasadena Common Stock with the statement required
under Treasury Regulations 1.83-5(b)(2).
7.9. Tax Returns7.9.TaxReturns""2". All Tax Returns required to be
filed after the Effective Time with respect to Pasadena or any Pasadena
Subsidiary shall be prepared and filed by PDP or its designee. To the extent
that an inconsistent position would result in a detriment to the Shareholders
and in the absence of a controlling change in law or circumstances, all such Tax
Returns (only to the extent they relate to taxable periods that precede, or
include portions preceding, the Effective Time) shall be prepared on a basis
consistent with the elections, accounting practices, conventions and principles
of taxation (including, without limitation, the principles used to determine the
taxable period in which a particular item of income, gain, deduction, loss or
credit shall be recognized) used for the most recent taxable periods for which
tax returns involving similar tax items have been filed with respect to Pasadena
or any Pasadena Subsidiary.
7.10.Transfer Taxes7.10.TransferTaxes""2". PDP shall pay (a) any and
all stock transfer and stamp taxes or similar charges required (or which may, in
the future, be required) by federal, state or local authorities upon, or by
virtue of, the consummation of the Merger and (b) any and all real or personal
property transfer or sales taxes, gains taxes or similar charges required (or
which may, in the future, be required) by federal, state or local authorities
upon, or by virtue of, the consummation of the Merger. PDP shall timely prepare
and file all returns and reports with respect to such taxes or charges.
7.11.PDP Stock Options7.11.PDPStockOptions""2". PDP agrees that it
will recommend to the stock option committee of the Board of Directors of PDP
that (i) 300,000 shares of the common stock, par value $.01 per share, of PDP
shall be made available for initial option grants under the PDP Stock Option
Plan at the Closing, or promptly thereafter, to key employees of Pasadena and
(ii) such stock option grants be awarded to such key employees based on the
mutual recommendation of PDP and the Shareholder Representative.
7.12.Marketing and Distribution
Arrangements7.12.MarketingandDistributionArrangements""2".
(a) PDP shall cause PEPCO to aggressively promote the Pasadena Funds,
including, but not limited to, including the Pasadena Funds on its "priority
product list" and including the broker/dealer firms which represent Pasadena's
main channels of mutual fund share sales on its "priority customer list" until
such time as all Contingent Merger Payments, if any, have been made in
accordance with Section 3.7 hereof.
(b) The parties agree that the Surviving Corporation shall have the
option to maintain a wrap product sales force with PDP responsible for payment
of all costs and expenses related to such wrap sales force at rates
substantially consistent with industry standards for such services.
7.13.Name Change for Pasadena
Funds7.13.NameChangeforPasadenaFunds""2". The parties agree to
cooperate and take all actions necessary to change the names of
the Pasadena Funds to the "Phoenix Engemann" funds as soon as
practicable after the Effective Time.
7.14.Names of Pasadena and Pasadena Subsidiaries and Location of
Offices7.14.NamesofPasadenaandPasadenaSubsidiariesandLocationofOffices""2".
Until the later of (i) the payment of the last Contingent Merger Payment in
accordance with Section 3.7 hereof or (ii) termination of the employment of J.
Roger Engemann pursuant to the Employment Agreement of J. Roger Engemann, PDP
agrees (a) that it shall not change, nor cause to be changed the names of
Pasadena, Roger Engemann & Associates, Inc. or Roger Engemann Management Co.,
Inc. or (b) not to move, or cause to be moved, the location of the chief
executive offices of Pasadena and the Pasadena Subsidiaries from Pasadena,
California, in each case without the prior written consent of the Shareholder
Representative.
7.15.Operation of Pasadena as a Separate
Entity7.15.OperationofPasadenaasaSeparateEntity""2". For so long as the
Compensation Allocation Agreement shall be in effect, PDP agrees to operate
Pasadena and the Pasadena Subsidiaries as a separate business entity which shall
conduct their businesses so that any investment management fees arising out of
the businesses of Pasadena and the Pasadena Subsidiaries are separated from
other fees earned by PDP and its Affiliates; provided, however, that this
Section 7.15 shall not restrict PDP from integrating its corporate accounting,
fund accounting, regulatory compliance, administrative and shareholder services
with the businesses of Pasadena and the Pasadena Subsidiaries.
7.16.Changes in Investment Management
Fees7.16.ChangesinInvestmentManagementFees""2". For so long as the Compensation
Allocation Agreement shall be in effect, the parties agree that any
recommendation with respect to any change in the investment management fees
charged by Pasadena or any Pasadena Subsidiary shall be made by mutual agreement
of the Shareholder Representative and PDP.
7.17.PHL Guarantee7.17.PHLGuarantee""2". PDP agrees to use its best
efforts to cause Phoenix Home Life Mutual Insurance Company ("PHL") to guarantee
(the "PHL Guarantee") borrowings outstanding under PDP's bank credit facility to
be entered into by PDP prior to the Closing Date (the "PDP Credit Facility") or
any refinancing or replacement thereof prior to payment in full of any
Contingent Merger Payments.
7.18.Shareholder
Indebtedness7.18.ShareholderIndebtedness""2". Pasadena agrees to provide PDP,
not later than two business days prior to the Closing Date, with a schedule
listing all holders of Pasadena Common Stock or other Pasadena Common Stock
Equivalents who are indebted to Pasadena and specifying for each such holder the
amount of such indebtedness as of the Closing Date.
7.19.Further Assurances7.19.FurtherAssurances""2". Prior to the
Closing Date, PDP and Pasadena shall cooperate in good faith with each other and
shall take all appropriate action and execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder.
ARTICLE 8ARTICLE8-CONDITIONS""1"
CONDITIONS
8.1. Conditions to Obligations of
Pasadena8.1.ConditionstoObligationsofPasadena""2". The
obligations of Pasadena to consummate the transactions
contemplated by this Agreement shall be subject to the
satisfaction or waiver on or prior to the Closing Date of each of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of PDP and Acquisition Sub set forth in Article 5 that are qualified
as to materiality shall be true and correct in accordance with their terms, and
the representations and warranties of PDP set forth in Article 5 that are not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing as though made on and as of the
Closing Date (except to the extent such representations and warranties speak as
of an earlier date, in which case such representations and warranties shall be
true and correct as of such date, and except for transactions explicitly
permitted by this Agreement). The representations and warranties of PDP set
forth in Article 5 shall also be true and correct, in the aggregate, as of the
date of this Agreement and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except to the extent breaches of all the
representations and warranties, if any (excluding, for this purpose, any
qualifications as to materiality therein), do not have a PDP Material Adverse
Effect.
(b) Performance of Obligations of PDP. PDP shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing.
(c) Certificate. Pasadena shall have received a certificate dated as
of the Closing Date and signed on behalf of PDP by its Chief Executive Officer
and Chief Financial Officer, to the effect that the conditions to PDP's
obligations set forth in Sections 8.1(a) and (b) hereof have been satisfied.
(d) Pasadena Shareholder Approval. The Shareholders
shall have approved the Merger at the Shareholders Meeting as
required by the CGCL.
(e) No Governmental Proceedings or Litigation. No Action by any
Governmental Entity shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to materially damage Pasadena or PDP if the transactions
contemplated hereunder are consummated.
(f) Opinion of Counsel. PDP shall have delivered to Pasadena an
opinion of Stroock & Stroock & Lavan LLP, counsel to PDP, dated as of the
Closing Date, with respect to the transactions contemplated hereby in form and
substance reasonably acceptable to Pasadena.
(g) Required Consents and/or Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods thereof, including, but not limited to, the applicable waiting period
and any extensions thereof under the HSR Act, shall have expired or terminated.
(h) Compensation Allocation Agreement. PDP shall have
executed and delivered the Compensation Allocation Agreement.
(i) Indemnification Escrow Agreement. PDP,
Acquisition Sub and the Escrow Agent shall have executed and
delivered the Indemnification Escrow Agreement.
(j) Approvals Relating to Certain of the Pasadena
Funds.
(i) The Boards of Trustees (or equivalent bodies) of each of the
Pasadena Funds shall have approved in connection with the transactions
contemplated hereby the respective new investment advisory or sub-advisory
agreements, underwriting and distribution agreements and administrative services
agreements as PDP directs between Pasadena or the appropriate Pasadena
Subsidiary and the appropriate fund as provided in Section 6.2(c) hereof, as
required by the Advisers Act, the Investment Company Act and/or their terms; and
(ii) The shareholders of the Pasadena Growth Fund, the Pasadena
Nifty Fifty Fund and the Pasadena Balanced Return Fund shall have approved the
respective new investment advisory or sub-advisory agreements referred to in
clause (i) above as required by the Advisers Act, the Investment Company Act
and/or by their terms.
(k) PDP Option Grants. The stock option committee of the Board of
Directors of PDP shall have approved the initial option grants referred to in
Section 7.11 hereof.
(l) PHL Guarantee. Pasadena shall have received a certificate dated
as of the Closing Date and signed on behalf of PDP by its Chief Financial
Officer, to the effect that (i) PHL has entered into the PHL Guarantee and (ii)
the failure to pay any Contingent Merger Payment would constitute an event of
default under the PDP Credit Facility.
8.2 Conditions to Obligations of
PDP8.2.ConditionstoObligationsofPDP""2". The obligations of PDP to consummate
the transactions contemplated by this Agreement to be consummated on the Closing
Date shall be subject to the satisfaction or waiver at or prior to the Closing
Date of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Pasadena set forth in Article 4 that are qualified as to
materiality shall be true and correct in accordance with their terms, and the
representations and warranties of Pasadena set forth in Article 4 that are not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing as though made on and as of
the Closing Date (except to the extent such representations and warranties speak
as of an earlier date, in which case such representations and warranties shall
be true and correct as of such date, and except for transactions explicitly
permitted by this Agreement). The representations and warranties of Pasadena set
forth in Article 4 shall also be true and correct, in the aggregate, as of the
date of this Agreement and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except to the extent breaches of all the
representations and warranties, if any (excluding, for this purpose, any
qualifications as to materiality therein or in the Disclosure Schedule), do not
have a Pasadena Material Adverse Effect.
(b) Performance of Obligations of Pasadena. Pasadena shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing.
(c) Certificate. PDP shall have received a certificate dated as of
the Closing Date and signed on behalf of Pasadena by its Chief Executive Officer
and Chief Financial Officer, to the effect that the conditions to PDP's
obligations set forth in Sections 8.2(a) and (b) hereof have been satisfied.
(d) Pasadena Shareholder Approval. The Shareholders
shall have approved the Merger at the Shareholders Meeting as
required by the CGCL.
(e) No Governmental Proceedings or Litigation. No Action by any
Governmental Entity shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to materially damage PDP or Pasadena if the transactions
contemplated hereunder are consummated.
(f) Approvals Relating to Certain of the Pasadena
Funds.
(i) The Boards of Trustees (or equivalent bodies) of each of the
Pasadena Funds shall have approved in connection with the transactions
contemplated hereby the respective new investment advisory or sub-advisory
agreements, underwriting and distribution agreements and administrative services
agreements as PDP directs between Pasadena or the appropriate Pasadena
Subsidiary and the appropriate fund as provided in Section 6.2(c) hereof, as
required by the Advisers Act, the Investment Company Act and/or their terms; and
(ii) The shareholders of the Pasadena Growth Fund, the Pasadena
Nifty Fifty Fund and the Pasadena Balanced Return Fund shall have approved the
respective new investment advisory or sub-advisory agreements referred to in
clause (i) above as required by the Advisers Act, the Investment Company Act
and/or by their terms.
(g) Boards of Pasadena Funds. The composition of the
Boards of Directors (or equivalent bodies) of the Pasadena Funds
as of the Closing Date shall be acceptable to PDP.
(h) Opinions of Counsel. Pasadena shall have delivered to PDP an
opinion of Shook, Hardy & Bacon L.L.P., counsel to Pasadena, and, if necessary,
an opinion of California counsel reasonably acceptable to PDP as to matters of
California law, each dated as of the Closing Date, with respect to the
transactions contemplated hereby in form and substance reasonably acceptable to
PDP.
(i) No Material Adverse Change. There shall not have occurred any one
or more events with respect to Pasadena or any Pasadena Subsidiary between
December 31, 1996 and the Closing Date which, individually or in the aggregate,
had, or may be reasonably expected to have, a Pasadena Material Adverse Effect.
(j) Employment Agreements. Pasadena shall have entered into
employment agreements (collectively, the "Employment Agreements") with (i) each
of J. Roger Engemann, John S. Tilson and James E. Mair (collectively, the
"Principals") substantially in the forms of Exhibits H-1 through H-3 hereto, as
applicable, and (ii) such other employees of Pasadena as are mutually agreed
between the Principals and PDP, substantially in the form of Exhibit H-4 hereto.
(k) Noncompetition/Nonsolicitation Agreements. Pasadena shall have
entered into noncompetition/nonsolicitation agreements (collectively, the
"Noncompetition/Nonsolicitation Agreements") with (i) each of the Principals
substantially in the forms of Exhibits I-1 through I-3 hereto, as applicable,
and (ii) such other employees of Pasadena who shall have entered into an
Employment Agreement, substantially in the form of Exhibit I-4 hereto.
(l) Indemnification Escrow Agreement. Pasadena, the
Shareholder Representative and the Escrow Agent shall have
executed and delivered the Indemnification Escrow Agreement.
(m) Stockholder Indemnification Agreement. The Stockholder
Indemnification Agreement dated the date of this Agreement in the form of
Exhibit J hereto among J. Roger Engemann, PDP and Acquisition Sub (the
"Stockholder Indemnification Agreement") shall be in full force and effect.
(n) Good Standing Certificates. There shall have been delivered to
PDP good standing and tax certificates (or analogous documents), dated no more
than ten days prior to the Closing Date, from the appropriate authorities in the
states of organization and in each jurisdiction in which Pasadena and each
Pasadena Subsidiary is qualified to do business, showing Pasadena or such
Pasadena Subsidiary to be in good standing and to have paid all Taxes due in the
applicable jurisdiction.
(o) Required Consents and/or Approvals. All regulatory approvals
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all statutory waiting
periods thereof, including, but not limited to, the applicable waiting period
and any extensions thereof under the HSR Act, shall have expired or terminated.
(p) Elimination of Minority Interest. The approximately 6 1/2%
minority interest in Roger Engemann Management Co., Inc. shall have been
eliminated by the exchange of such minority interest for shares of Pasadena
Common Stock in accordance with the stock purchase agreement dated the date of
this Agreement between Pasadena and The Stolper Family Limited Partnership, the
holder of such minority interest.
ARTICLE 9ARTICLE9-TERMINATION""1"
TERMINATION
9.1 Termination9.1.Termination""2". This Agreement
may, by written notice, be terminated at any time prior to the
Closing:
(a) by mutual consent of PDP and Pasadena;
(b) by either Pasadena or PDP, at any time after
October 31, 1997, if the Merger shall not theretofore have
occurred;
(c) by either Pasadena or PDP, if the shareholders of the Pasadena
Growth Fund, the Pasadena Nifty Fifty Fund or the Pasadena Balanced Return Fund
shall have failed to approve the respective new investment advisory or
sub-advisory agreements referred to in clause (i) of Section 8.2(f) hereof as
required by the Advisers Act and the Investment Company Act;
(d) by Pasadena, if any of the conditions specified in Section 8.1
hereof has not been met or waived by Pasadena on or prior to the Closing Date or
at such time as such condition can no longer be satisfied; or
(e) by PDP, if any of the conditions specified in Section 8.2 hereof
has not been met or waived by PDP on or prior to the Closing Date or at such
time as such condition can no longer be satisfied.
9.2. Effect of Termination and
Abandonment9.2.EffectofTerminationandAbandonment""2". In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby pursuant to Section 9.1 hereof, except as otherwise specifically provided
herein, no party hereto (or any of its directors, officers, employees or other
Representatives) shall have any liability or further obligation to any other
party to this Agreement, except (i) for the liability of a party for expenses
pursuant to Section 10.3 hereof and (ii) that nothing herein will relieve any
party from liability for any willful breach of any representation, warranty,
agreement or covenant in this Agreement.
ARTICLE 10ARTICLE10-MISCELLANEOUS""1"
MISCELLANEOUS
10.1.Survival of Representations and Warranties
10.1.SurvivalofRepresentationsandWarranties""2". The representations and
warranties contained herein and in any document, instrument, certificate or
other writing delivered pursuant hereto shall survive the Effective Time for a
period of eighteen months from the Effective Date, except for the
representations and warranties contained in (i) Section 4.7 hereof which shall
survive indefinitely and (ii) Sections 4.17 and 4.18 hereof which shall survive
until the expiration of the applicable statute of limitations with respect to
the matters contained therein. Any matters for which PDP may be entitled to
indemnification pursuant to Sections 10.2(a)(iii) and (iv) hereof shall survive
indefinitely. All statements contained in the Disclosure Schedule or in any
certificate delivered at the Closing pursuant to the transactions contemplated
hereby shall be deemed to be representations and warranties of the applicable
party hereto contained herein. Notwithstanding anything in the Agreement to the
contrary, any representation or warranty made in this Agreement as to which a
notice of breach giving rise to a right of indemnification under the
Indemnification Escrow Agreement has been given in writing prior to the
expiration of the applicable period set forth above in this Section 10.1 shall
survive until payment or other final resolution of such right of
indemnification. Nothing contained in this Section 10.1 shall affect any
covenant or agreement contained in this Agreement or the Related Agreements or
in any instrument delivered pursuant to this Agreement or the Related Agreements
or pursuant to any agreement or transactions contemplated hereby, which by its
terms contemplates performance after the Effective Time or the termination of
this Agreement.
10.2.Indemnification10.2.Indemnification""2".
(a) Except for indemnification obligations related to Taxes which are
governed by Section 10.2(b) below, PDP, Acquisition Sub and the Surviving
Corporation (collectively, the "PDP Indemnitees"), may seek indemnification to
the fullest extent provided by law from the Escrow Amount and pursuant to the
Stockholder Indemnification Agreement for any and all Damages incurred in
connection with or arising out of or resulting from (i) any inaccuracy or breach
of any representation or warranty made by Pasadena in or pursuant to this
Agreement, including the Exhibits hereto and the Disclosure Schedule, or the
Related Agreements; (ii) any breach, non-compliance or nonfulfillment by
Pasadena of any covenant, agreement or undertaking to be complied with or
performed by it contained in or made pursuant to this Agreement or the Related
Agreements; (iii) the claim described as Item A on Annex 1 to this Agreement;
and (iv) the legal proceeding described as Item B on Annex 1 to this Agreement.
(b) In addition to the indemnifications provided for in Section
10.2(a) above, the PDP Indemnitees may seek indemnification to the fullest
extent permitted by law from the Escrow Amount and pursuant to the Stockholder
Indemnification Agreement for any and all Taxes imposed on Pasadena, any
Pasadena Subsidiary or any Pasadena Fund relating to taxable periods ending on
or prior to the Effective Time or periods which include the Effective Time to
the extent attributable to the income, assets, operations or reporting
requirements of Pasadena, any Pasadena Subsidiary or any Pasadena Fund prior to
the Effective Time (including, without limitation, all Taxes referred to in the
Disclosure Schedule as possible of assessment for taxable periods prior to the
Effective Time) to the extent such Taxes are not accrued or reserved for as a
liability on the Closing Balance Sheet and the Post-Closing Statement. If a Tax
audit is commenced or any Tax is claimed for any period of Pasadena, any
Pasadena Subsidiary or any Pasadena Fund prior to the Effective Time, such Tax
audit or claim shall be treated as a lawsuit or enforcement action by a third
party for purposes of Section 10.2(f) hereof. For purposes of this Section
10.2(b), in the case of any Taxes that are payable for a taxable period that
includes (but does not end on) the Effective Time, the portion of such Taxes
which are attributable to the portion of such taxable period ending before the
Effective Time shall be deemed equal to the amount which would be payable if the
relevant taxable period ended on the Effective Time. The PDP Indemnitees shall
not be entitled to make a claim under this Section 10.2(b) with respect to the
claim described as Item A on Annex 1 to this Agreement.
(c) PDP hereby covenants and agrees to indemnify, defend and hold
harmless the Shareholders from and against any and all Damages incurred in
connection with or arising out of or resulting from (i) any inaccuracy or breach
of any representation or warranty made by PDP or the Acquisition Sub in or
pursuant to this Agreement, including the Exhibits thereto, or the Related
Agreements or (ii) any breach, non-compliance or nonfulfillment by PDP or
Acquisition Sub of any covenant, agreement or undertaking to be complied with or
performed by them contained in or made pursuant to this Agreement or the Related
Agreements.
(d) Notwithstanding any of the provisions of this Agreement, the PDP
Indemnitees shall not be entitled to make claims for money Damages under
Sections 10.2(a)(i) and (ii) and Section 10.2(b) hereof unless and until the
aggregate of such claims exceeds the Indemnification Threshold and then only to
the extent of such excess; provided, however, that the Indemnification Threshold
shall not be applicable to claims by the PDP Indemnitees for Damages arising
from a breach by Pasadena of any provisions of Sections 4.1, 4.3, 4.4, 4.7 and
4.21 hereof and any claim arising from a breach of any provisions of any such
Sections shall not be taken into account for purposes of determining when the
Indemnification Threshold has been met. Notwithstanding any of the provisions of
this Agreement, the Shareholders shall not be entitled to make claims for money
Damages under Section 10.2(c) hereof unless and until the aggregate of such
claims exceeds the Indemnification Threshold and then only to the extent of such
excess; provided, however, that the Indemnification Threshold shall not be
applicable to claims by the Shareholders for Damages arising from a breach by
PDP or Acquisition Sub of any provisions of Sections 5.1, 5.2 and 5.4 hereof and
any claim arising from a breach of any provisions of any such Sections shall not
be taken into account for purposes of determining when the Indemnification
Threshold has been met. Notwithstanding any of the provisions of this Agreement,
in no event shall the aggregate indemnification obligations of PDP exceed the
sum of the Closing Merger Payment Amount, the Post-Closing Merger Payment and
the Contingent Merger Payments.
(e) Claims by a PDP Indemnitee shall be made in the manner set forth
in the Indemnification Escrow Agreement.
(f) If a PDP Indemnitee or a Shareholder (each, an "Indemnified
Party") has incurred or suffered Damages relating to third parties for which it
is or may be entitled to indemnification pursuant to this Section 10.2, such
Indemnified Party shall, within the survival period pursuant to Section 10.1
hereof, if applicable, give written notice to the Shareholder Representative or
PDP, as the case may be (each, an "Indemnifying Party"), as soon as practicable
after such Indemnified Party becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification may be sought under this
Agreement. If any lawsuit or enforcement action is filed against any Indemnified
Party, written notice thereof shall be given to the Indemnifying Party as
promptly as practicable (and in any event within 15 days after the service of
the citation or summons); provided, that the failure of any Indemnified Party to
give timely notice shall not affect rights to indemnification hereunder except
to the extent that the Indemnifying Party demonstrates actual damage caused by
such failure. After such notice, if the Indemnifying Party shall acknowledge in
writing to the Indemnified Party that the Indemnified Party shall be entitled to
indemnification hereunder in connection with such lawsuit or action, then the
Indemnifying Party shall be entitled, if it so elects, to take control of the
defense and investigation of such lawsuit or action and to employ and engage
attorneys of its own choice to handle and defend the same, at the Indemnifying
Party's cost, risk and expense provided that the Indemnifying Party and its
counsel shall proceed with diligence and in good faith with respect thereto. The
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and such attorneys in the investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom; provided, however, that
the Indemnified Party may, subject to the Indemnifying Party's control of the
defense and investigation of such lawsuit or action, at its own cost,
participate in the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom; provided, further, however, if there is a
reasonable probability that the lawsuit or action may materially and adversely
affect an Indemnified Party other than as a result of money damages or other
money payment, the Indemnified Party shall have the right, at the cost and
expense of the Indemnifying Party, to control the defense of, and with the
consent of the Indemnifying Party, which will not be unreasonably withheld, to
compromise or settle, such lawsuit or action. The Indemnifying Party shall not
be permitted to consent to the entry of judgment or compromise or settle any
such lawsuit or action without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld; provided, however, that
no such consent shall be required in the case of a judgment, compromise or
settlement which (i) involves solely the payment of monetary damages and (ii)
constitutes a complete and unconditional discharge and release of all parties
indemnified hereunder.
(g) In the event that at any time subsequent to an indemnification
payment hereunder the Damages to the Indemnified Party are reduced by tax
benefits (including, without limitation, in the case of Damages specified in
Section 10.2(b) above, any tax benefit realized as a result of shifting a tax
item from one taxable period to another) or recovery, settlement or otherwise
under any insurance coverage or third party claim, the amount of such reduction
(less any cost, expense, premium or tax paid) will be promptly repaid to the
Indemnifying Party.
10.3.Expenses10.3.Expenses""2". All expenses incurred by PDP in
connection with the transactions contemplated by this Agreement (including,
without limitation, the fees, expenses and commissions referred to in the last
sentence of Section 3.6(a) hereof) shall be paid by PDP. All expenses incurred
by Pasadena in connection with the transactions contemplated by this Agreement
(including, without limitation, the fees, expenses and commissions referred to
in the last sentence of Section 3.6(a) hereof and in Section 4.21 hereof) shall
be paid by Pasadena and, if not paid prior to the Settlement Time, shall be
treated as accrued liabilities as of the Settlement Time for purposes of
determining the Excess Capital Amount, except that PDP shall be responsible for
payment of, and shall reimburse Pasadena for, 50% of the costs of soliciting
Client Consents pursuant to Sections 6.2(c) hereof.
10.4.Notices10.4.Notices""2". Unless otherwise provided herein, any
notice, request, instruction or other document or communication to be given
hereunder by any party to any other party shall be in writing and shall be
deemed to have been given (a) if mailed, on the date received if mailed by
registered or certified mail (return receipt requested), (b) if sent by
facsimile transmission, when so sent and receipt acknowledged by an appropriate
telephone or facsimile receipt or (c) if sent by other means, when actually
received by the party to which such notice has been directed, in each case at
the respective addresses or numbers set forth below or such other address or
number as such party may have fixed by notice:
If to PDP:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Chief Executive Officer
Telephone: (860) 403-5365
Facsimile: (860) 403-5545
With copies to:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Thomas N. Steenburg, Esq.
Vice President and General Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
and
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: David L. Finkelman, Esq.
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
If to Pasadena:
Pasadena Capital Corporation
600 North Rosemond Boulevard
Pasadena, California 91107-2133
Attention: Chief Executive Officer
Telephone: (800) 882-2855
Facsimile: (818) 351-1174
With a copy to:
Shook, Hardy & Bacon L.L.P.
1200 Main Street, Suite 3100
Kansas City, Missouri 64105-2118
Attention: Jennings J. Newcom, Esq.
Telephone: (816) 474-6550
Facsimile: (816) 421-5547
10.5.Counterparts10.5.Counterparts""2". This Agreement may be
executed in counterparts (including executed counterparts delivered and
exchanged by facsimile transmission) each of which shall be deemed to constitute
one and the same instrument.
10.6.Governing Law10.6.GoverningLaw""2". This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of
California, regardless of the laws that might otherwise govern under principles
of conflicts of laws applicable thereto.
10.7 Waiver; Amendment10.7.Waiver;Amendment""2".
(a) Any provision of this Agreement may be amended or waived if, and
only if, (i) such amendment or waiver is in writing and, in the case of an
amendment, signed by PDP, Acquisition Sub (if the Merger has not yet been
consummated) and Pasadena (provided that no amendment may be made after the
Closing Date without the consent of the Shareholder Representative) and (ii) in
the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
10.8.Entire Agreement; No Third-Party Beneficiaries;
Etc.10.8.EntireAgreement;NoThird-PartyBeneficiaries;Etc.""2". This Agreement,
the Related Agreements and the Confidentiality Agreement represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties thereto.
10.9.Consent to
Jurisdiction10.9.ConsenttoJurisdiction""2". Each party hereto hereby irrevocably
submits to the non-exclusive jurisdiction of any state or federal court sitting
in the State of California in any action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such state court or, to the extent
permitted by law, in such federal court. Each of the parties hereby irrevocably
consents to the service of process in any such action or proceeding by the
mailing by certified mail of copies of any service or copies of the summons and
complaint and any other process to such party at the address specified in
Section 10.4 hereof. The parties agree that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Section 10.9 shall affect the right of a party to serve legal process in any
other manner permitted by law or affect the right of a party to bring any action
or proceeding in the courts of other jurisdictions.
IN WITNESS WHEREOF, the parties have duly executed this Agreement,
all as of the date first written above.
PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Philip R.
McLoughlin
Name: Philip R. McLoughlin
Title: Chairman of the Board
and
Chief Executive Officer
PHOENIX APOLLO CORP.
By: /s/ Philip R. McLoughlin
Name: Philip R. McLoughlin
Title: President
PASADENA CAPITAL CORPORATION
By: /s/ J. Roger Engemann
Name: J. Roger Engemann
Title: President
<PAGE>
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EXHIBIT A
COMPENSATION ALLOCATION AGREEMENT
THIS COMPENSATION ALLOCATION AGREEMENT (the "Agreement") is made as
of June 9, 1997 by and among PHOENIX DUFF & PHELPS CORPORATION ("Phoenix"), a
Delaware corporation; PASADENA CAPITAL CORPORATION ("PCC"), a California
corporation and a wholly owned subsidiary of Phoenix; and J. ROGER ENGEMANN,
JOHN TILSON and JAMES MAIR (collectively, the "Principals").
Background
Pursuant to an Agreement and Plan of Merger dated as of June 9, 1997
(the "Merger Agreement") by and among Phoenix, Phoenix Apollo Corp., a
California corporation ("Apollo"), and PCC, Apollo merged with and into PCC. As
a result of such merger, PCC is a wholly owned subsidiary of Phoenix. Pursuant
to Employment Agreements dated contemporaneously with the Merger Agreement and
effective contemporaneously herewith, the Principals have agreed to be employed
by PCC as the surviving corporation in such merger.
The purpose of this Compensation Allocation Agreement is to provide
for PCC to retain a specified portion of its revenues to pay employment and
employment-related expenses of PCC and its subsidiaries, and to establish a
procedure for allocation of such amounts. This Agreement is intended to allow
the Principals, using the procedures herein set forth, to make employee
compensation and related operating decisions in their sole discretion within the
limits of the "PCC Compensation Pool" as such term is defined below.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto, intending to be legally bound, agree as follows:
1. Definitions. For purposes of this
Agreement, the following terms shall have the meanings shown:
(a) "Compensation" shall mean an amount
comprised of all elements of fixed and variable gross compensation earned by
employees of PCC and its subsidiaries other than Excluded Employees in the
normal course of performing their assigned tasks as deemed appropriate by the
PCC Compensation Committee operating in accordance herewith having regard for
individual performance, performance of PCC, and prevailing industry standards;
such Compensation to include, but not necessarily be limited to: base
compensation, the revenue share of the Principals, amounts earned under any
analyst variable compensation plan, any annual year-end bonuses for all
employees, all other incentive compensation payments, retirement and profit
sharing contributions, medical insurance premiums, payments under all other
employee benefit plans and programs, and all payroll taxes; provided, however,
that (i) severance payments (other than payments of compensation accrued to the
date of termination of employment) required under employment agreements binding
on PCC or pursuant to any severance plan from time to time in effect and (ii)
all payments out of the Residual Compensation Pool, shall not be deemed to be
Compensation for purposes of this Agreement.
(b) "Excluded Employees" shall mean all
employees of PCC who are part of either (i) the PCC Mutual Fund sales force,
including related administrative staff or (ii) the PCC wrap product sales force
or (iii) the custodial services staff.
(c) "Management Fees" shall mean all income
derived by PCC from its investment management and investment advisory
activities, including with respect to sub-advisory activities.
(d) "PCC Mutual Funds" shall mean all
investment companies registered under the Investment Company Act of 1940, as
amended, that receive investment advisory services, directly or indirectly, from
PCC or a PCC Subsidiary.
(e) "PCC Subsidiary" shall mean each entity
controlled by PCC.
(f) "PCC Compensation Pool" shall mean for
each calculation period an amount equal to thirty percent (30%) of the sum of
(i) all Management Fees earned for such period from sources other than PCC
Mutual Funds and (ii) 50% of all Management Fees receivable for such period from
PCC Mutual Funds.
(g) "Residual Compensation Pool" shall mean
the amount of the PCC Compensation Pool for the calculation period less the
amount of all Compensation for that period.
2. Use of PCC Compensation Pool. For each calendar year during
the term of this Agreement, and for the portion of each partial calendar year
during which this Agreement is in effect, PCC shall calculate the PCC
Compensation Pool and the Residual Compensation Pool. All Compensation to
employees of PCC and its subsidiaries other than Excluded Employees shall be
paid from the PCC Compensation Pool. The Residual Compensation Pool, if any,
shall be available for additional incentive payments to employees of PCC and its
subsidiaries other than Excluded Employees as determined by the PCC Compensation
Committee.
3. Compensation Committee. The PCC Compensation Pool and the
Residual Compensation Pool shall be allocated for expenditure under the guidance
of a committee (the "PCC Compensation Committee") composed of three members. The
Chief Executive Officer of PCC always shall be a member of the PCC Compensation
Committee. The members of the PCC Compensation Committee initially shall be the
three Principals. All decisions of the PCC Compensation Committee shall be made
as follows: Recommendations to the PCC Compensation Committee for expenditures
from the PCC Compensation Pool and the Residual Compensation Pool shall be made
by the Principals, after which the entire membership of the PCC Compensation
Committee shall fully discuss such recommendations. Following such discussions,
the Chief Executive Officer of PCC shall make the final decision with respect to
all such allocations and expenditures.
If a Principal ceases to be an employee of PCC or a PCC
Subsidiary, then such Principal contemporaneously shall cease to be (i) a member
of the Compensation Committee and (ii) a Principal under this Agreement.
Vacancies occurring in the membership of the PCC Compensation Committee shall be
filled by designees of J. Roger Engemann so long as he is employed by PCC, and
thereafter by the person who is named Chief Executive Officer of PCC to succeed
him.
4. Further Assurances. The parties hereto agree to take or cause
to be taken all corporate action necessary or appropriate to insure the
effectuation of this Agreement, and will endeavor in good faith to establish
such additional procedures as shall be needed to properly administer the PCC
Compensation Pool and the Residual Compensation Pool in accordance herewith.
5. Term. This Agreement shall remain in full
force and effect until the earlier of (a) the tenth anniversary
of the date of this Agreement and (b) the date on which no
Principal remains in the employ of PCC or its affiliates.
6. Corporate Action. Neither Phoenix nor PCC
shall, directly or indirectly, take any action during the term of
this Agreement with the purpose of or which results in
frustrating the purpose and operation of this Agreement.
7. Governing Law. This Agreement and any
disputes or claims arising hereunder shall be governed by
California law, and the parties hereto consent to the
jurisdiction of the courts of Los Angeles County in connection
herewith.
8. Amendments. This Agreement may be amended
only in writing, signed by (a) Phoenix, (b) PCC and (c) each
person who is a Principal at the time of such amendment.
9. Binding Effect; Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties
hereto, and shall be binding upon and inure to the benefit of the
respective successors and assigns of PCC and Phoenix and the
heirs and personal representatives of the Principals.
10. Effectiveness. This Agreement shall become
effective on the Effective Date under the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
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PHOENIX DUFF AND PHELPS
CORPORATION
By: /s/ Philip R. McLoughlin
Name: Philip R. McLoughlin
Title: Chairman of the Board
and Chief Executive
Officer
PASADENA CAPITAL
CORPORATION
By: /s/ J. Roger Engemann
Name: J. Roger Engemann
Title: Chairman of the Board,
President and Chief Executive
Officer
PRINCIPALS:
/s/ J. Roger Engemann
J. Roger Engemann
/s/ John S. Tilson
John Tilson
/s/ James E. Mair
James Mair
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EXHIBIT B
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ARTICLES OF INCORPORATION
OF
PASADENA APOLLO CORP.
ARTICLE XI.
The name of this corporation is Pasadena Apollo
Corp. (hereinafter referred to as the "Corporation").
ARTICLE XII.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE XIII.
The name of the Corporation's initial agent for service of process is:
=========================
____________, California
ARTICLE XIV.
The liability of the directors of the Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
ARTICLE XV.
The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to the Corporation and its shareholders through bylaw provisions, agreements
with the agents, vote of shareholders or disinterested directors, or otherwise,
in excess of the indemnification otherwise permitted by Section 317 of the
California Corporations Code, subject only to the limits of such excess
indemnification set forth in Section 204 of the California Corporations Code.
ARTICLE XVI.
The Corporation is authorized to issue only one class of shares of stock,
which shall be designated "Common Stock." The total authorized number of such
shares which may be issued is One Hundred (100), one cent ($.01) par value per
share.
Dated: June __, 1997
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30227834
30227834
EXHIBIT C
BYLAWS
for the regulation, except as
otherwise provided by statute or
the Articles of Incorporation, of
PHOENIX APOLLO CORP.,
a California corporation
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1
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30227834
TABLE OF CONTENTS
Page
ARTICLE I. OFFICES............................................. 1
1.1 Principal Executive Office........................... 1
1.2 Other Offices........................................ 1
ARTICLE II. MEETINGS OF SHAREHOLDERS........................... 1
2.1 Place of Meetings.................................... 1
2.2 Annual Meeting....................................... 2
2.3 Special Meetings..................................... 3
2.4 Quorum............................................... 3
2.5 Adjourned Meeting and Notice Thereof................. 4
2.6 Record Date.......................................... 4
2.7 Voting............................................... 4
2.8 Validation of Defectively Called or Noticed
Meetings............................................. 5
2.9 Action Without Meeting: Written Consent............. 5
2.10 Proxies.............................................. 6
2.11 Inspectors of Election............................... 7
ARTICLE III. DIRECTORS......................................... 8
3.1 Powers............................................... 8
3.2 Committees of the Board.............................. 8
3.3 Number and Qualification of Directors................ 9
3.4 Election and Term of Office.......................... 9
3.5 Vacancies............................................ 9
3.6 Removal.............................................. 10
3.7 Place of Meetings and Meetings by Telephone.......... 10
3.8 Annual Meeting....................................... 11
3.9 Other Regular Meetings............................... 11
3.10 Special Meetings..................................... 11
3.11 Action Without Meeting............................... 12
3.12 Action at a Meeting: Quorum and Required Vote....... 12
3.13 Validation of Defectively Called or Noticed
Meetings............................................. 12
3.14 Adjournment.......................................... 12
3.15 Notice of Adjournment................................ 13
3.16 Fees and Compensation................................ 13
3.17 Indemnification of Directors, Officers, Employees;
and Other Agents..................................... 13
ARTICLE IV. OFFICERS............................................ 16
4.1 Officers............................................. 16
4.2 Election............................................. 16
4.3 Subordinate Officers................................. 16
4.4 Removal and Resignation.............................. 16
4.5 Vacancies............................................ 17
4.6 Chairman of the Board................................ 17
4.7 President............................................ 17
4.8 Vice President....................................... 17
4.9 Secretary............................................ 17
4.10 Chief Financial Officer.............................. 18
ARTICLE V. RECORDS AND REPORTS................................ 18
5.1 Maintenance and Inspection of Share Register......... 18
5.2 Maintenance and Inspection of Bylaws................. 19
5.3 Maintenance and Inspection of Other Corporate
Records.............................................. 19
5.4 Inspection by Directors.............................. 20
5.5 Annual Report to Shareholders........................ 20
5.6 Financial Statements................................. 20
ARTICLE VI. GENERAL CORPORATE MATTERS........................... 21
6.1 Record Date.......................................... 21
6.2 Checks, Drafts, etc.................................. 22
6.3 Corporate Contracts and Instruments; How
Executed............................................. 22
6.4 Certificate for Shares............................... 22
6.5 Representation of Shares of Other
Corporations......................................... 23
6.6 Construction and Definitions......................... 23
ARTICLE VII. AMENDMENTS........................................ 23
7.1 Power of Shareholders................................ 23
7.2 Power of Directors................................... 24
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BYLAWS
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30227834
OF
PHOENIX APOLLO CORP.,
a California corporation
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ARTICLE I. OFFICES
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Section 1.1 Principal Executive Office
The board of directors is hereby granted full power and authority to fix
and locate and to change the principal executive office of the corporation from
one location to another within or outside the State of California. If the
principal executive office is located outside this state, and the corporation
has one or more business offices in this state, the board of directors shall fix
and designate a principal business office in the State of California, the
location of which principal business office may be changed from time to time by
the board of directors. The initial principal executive office, principal
business office, if any, and any change in the principal executive office or
principal business office shall be noted on the bylaws by the secretary opposite
this section, or this section may be amended to state the location.
Section 1.2 Other Offices
Other business offices may at any time be established by the board of
directors at any place or places within or outside the State of California.
ARTICLE II. MEETINGS OF SHAREHOLDERS
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Section 2.1 Place of Meetings
All annual or other meetings of shareholders shall be held at the
principal executive office of the corporation, or at any other place within or
without the State of California which may be designated either by the board of
directors or by the written consent of all persons entitled to vote thereat and
not present at the meeting, given either before or after the meeting, and filed
with the secretary of the corporation.
Section 2.2 Annual Meeting
The annual meeting of shareholders shall be held at such date and/or time
as shall be designated by the board of directors; provided, however, that should
said day fall upon a legal holiday, then the annual meeting of shareholders
shall be held at the same time and place on the next day which is a full
business day. At such meeting, directors shall be elected, reports of the
affairs of the corporation shall be considered, and any other business may be
transacted which is within the powers of the shareholders.
Written notice of each annual meeting shall be given to each shareholder
entitled to vote, either personally or by mail or other means of written
communication, charges prepaid, addressed to such shareholder at his address
appearing on the books of the corporation or given by him to the corporation for
the purpose of notice. If any notice or report addressed to the shareholder at
the address of such shareholder appearing on the books of the corporation is
returned to the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
or report to the shareholder at such address, all future notices or reports
shall be deemed to have been duly given without further mailing if the same
shall be available for the shareholder upon written demand of the shareholder at
the principal executive office of the corporation for a period of one year from
the date of the giving of the notice or report to all other shareholders. If a
shareholder gives no address, notice shall be deemed to have been given to him
if sent by mail or other means of written communication addressed to the place
where the principal executive office of the corporation is situated, or if
published at least once in some newspaper of general circulation in the county
in which said principal executive office is located.
All such notices shall be given to each shareholder entitled thereto not
less than ten days nor more than sixty days before each annual meeting. Any such
notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by other means of written communication. An
affidavit of mailing of any such notice in accordance with the foregoing
provisions, executed by the secretary, assistant secretary or any transfer agent
of the corporation shall be prima facie evidence of the giving of the notice.
Such notices shall specify:
(a) the place, date and hour of such meeting;
(b) those matters which the board, at the time of the
giving of the notice, intends to present for action by the
shareholders;
(c) if directors are to be elected, the names of nominees
intended at the time of the notice to be presented by management
for election;
(d) the general nature of a proposal, if any, to take action with respect
to approval of (i) a contract or other transaction with an interested director,
(ii) amendment of the articles of incorporation, (iii) a reorganization of the
corporation as defined in Section 181 of the General Corporation Law of the
State of California (the "General Corporation Law"), (iv) voluntary dissolution
of the corporation, or (v) a distribution in dissolution other than in
accordance with the liquidation rights of outstanding preferred shares, if any;
and
(e) such other matters, if any, as may be expressly
required by statute.
Section 2.3 Special Meetings
Special meetings of the shareholders, for the purpose of taking any action
permitted by the shareholders under the General Corporation Law and the articles
of incorporation of this corporation, may be called at any time by the chairman
of the board or the president, the board of directors or one or more
shareholders holding not less than ten percent of the votes at that meeting.
Upon request in writing that a special meeting of shareholders be called for any
proper purpose, directed to the chairman of the board, president, vice president
or secretary by any person (other than the board) entitled to call a special
meeting of shareholders, the officer shall cause notice to be given to
shareholders entitled to vote that a meeting will be held at a time requested by
the person calling the meeting, not less than thirty-five nor more than sixty
days after receipt of the request. Except in special cases where other express
provision is made by statute, notice of such special meetings shall be given in
the same manner and shall specify the same information as for annual meetings of
shareholders. In addition to the matters required by items (a) and, if
applicable, (c) of the preceding Section, notice of any special meeting shall
specify the general nature of the business to be transacted, and no other
business may be transacted at such meeting.
Section 2.4 Quorum
The presence in person or by proxy of the persons entitled to vote a
majority of the voting shares at any meeting shall constitute a quorum for the
transaction of business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
Section 2.5 Adjourned Meeting and Notice Thereof
Any meeting of shareholders, whether or not a quorum is present, may be
adjourned from time to time by the vote of a majority of the shares, the holders
of which are either present in person or represented by proxy, but in the
absence of a quorum no other business may be transacted at such meeting, except
as provided in Section 2.4 of this Article II.
When any meeting of shareholders is adjourned for forty-five days or more,
or if after adjournment a new record date is fixed for the adjourned meeting,
notice of the adjourned meeting shall be given as in the case of an original
meeting. Except as provided above, it shall not be necessary to give any notice
of the time and place of the adjourned meeting or of the business to be
transacted thereat, other than by announcement of the time and place thereof at
the meeting at which such adjournment is taken.
Section 2.6 Record Date
Unless a record date for voting purposes is fixed by the board of
directors as provided in Section 6.1 of Article VI of these bylaws, only persons
in whose names shares entitled to vote stand on the stock records of the
corporation at the close of business on the business day next preceding the day
on which notice is given or, if notice is waived, at the close of business on
the business day next preceding the day on which the meeting of shareholders is
held, shall be entitled to vote at such meeting, and such day shall be the
record date for such meeting. Section 2.7 Voting2.7
Voting at meetings of shareholders may be by voice or by ballot; provided,
however, that all election for directors must be by ballot upon demand made by a
shareholder at any election before the voting begins. If a quorum is present,
except with respect to election of directors, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote on any
matter shall be the act of the shareholders, unless the vote of a greater number
or voting by classes is required by the General Corporation Law or the articles
of incorporation. Subject to the requirements of the next sentence, every
shareholder entitled to vote at any election for directors shall have the right
to cumulate his votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which his
shares are entitled, or to distribute his votes on the same principle among as
many candidates as he shall think fit. No shareholder shall be entitled to
cumulative votes unless the name of the candidate or candidates for whom such
votes would be cast has been placed in nomination prior to the voting and any
such shareholder has given notice at the meeting, prior to the voting, of such
shareholder's intention to cumulate his votes. The candidates receiving the
highest number of votes of shares entitled to be voted for them, up to the
number of directors to be elected, shall be elected.
Section 2.8 Validation of Defectively Called or Noticed
Meetings
The transactions of any meeting of shareholders, either annual or special,
however called and noticed and wherever held, shall be as valid as though
undertaken at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, or who, though present, has at the beginning of the meeting properly
objected to the transaction of any business because the meeting was not lawfully
called or convened, or properly objected to particular matters of business
legally required to be included in the notice, but not so included, signs a
written waiver of notice, a consent to the holding of such meeting or an
approval of the minutes thereof.
The waiver of notice or consent need not specify either the business to be
transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in (d) of the fourth paragraph of Section 2.2 of this
Article II, the waiver of notice or consent shall state the general nature of
the proposal. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 2.9 Action Without Meeting: Written Consent
Directors may be elected without a meeting by a consent in writing,
setting forth the action so taken, signed by all of the persons who would be
entitled to vote for the election of directors; provided that, without notice, a
director may be elected at any time to fill a vacancy on the board of directors
not created by the removal of the director that has not been filled by the
directors by the written consent of persons holding a majority of the
outstanding shares entitled to vote for the election of directors.
Any other action which, under any provision of the General Corporation
Law, may be taken at a meeting of the shareholders may be taken without a
meeting, and without notice except as hereinafter set forth, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
When the approval of shareholders is given without a meeting by less than
unanimous written consent, unless the consents of all shareholders entitled to
vote have been solicited in writing, the secretary shall give prompt notice of
the corporate action approved by the shareholders without a meeting. In the case
of any proposed shareholder approval of (i) a contract or other transaction with
an interested director, (ii) indemnification of an agent of the corporation as
authorized by Section 3.17 of Article III of these bylaws, (iii) a
reorganization of the corporation as defined in Section 181 of the General
Corporation Law, or (iv) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, if any, the notice shall be
given at least ten days before the consummation of any action authorized by that
approval. Such notice shall be given in the same manner as notice of a meeting
of shareholders.
Unless, as provided in Section 6.1 of Article VI of these bylaws, the
board of directors has fixed a record date for the determination of shareholders
entitled to notice of and to give such written consent, the record date for such
determination shall be the day on which the first written consent is given. All
such written consents shall be filed with the secretary of the corporation.
Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary of the corporation.
Section 2.10 Proxies
Every person entitled to vote or execute consents shall have the right to
do so either in person or by one or more agents authorized by a written proxy
executed by such person or his duly authorized agent and filed with the
secretary of the corporation. Any proxy duly executed is not revoked, and
continues in full force and effect, until (i) an instrument revoking it or a
duly executed proxy bearing a later date is filed with the secretary of the
corporation prior to the vote pursuant thereto, (ii) the person executing the
proxy attends the meeting and votes in person or (iii) written notice of the
death or incapacity of the maker of such proxy is received by the corporation
before the vote pursuant thereto is counted; provided that no such proxy shall
be valid after the expiration of eleven months from the date of its execution,
unless the proxy specifies a longer length of time for which such proxy is to
continue in force.
Section 2.11 Inspectors of Election11
In advance of any meeting of shareholders, the board of directors may
appoint any persons other than nominees for office as inspectors of election to
act at such meeting or any adjournment thereof. If inspectors of election be not
so appointed, the chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the meeting. The number
of inspectors shall be either one or three. If appointed at the meeting on the
request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one or three
inspectors are to be appointed. In case any person appointed as inspector fails
to appear or fails or refuses to act, the vacancy may, and on the request of any
shareholder or a shareholder's proxy shall, be filled by appointment by the
board of directors in advance of the meeting, or at the meeting by the chairman
of the meeting.
The duties of such inspectors shall be as prescribed by Section 707 of the
General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining when the polls shall close;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all shareholders. In the determination of the validity
and effect of proxies the dates contained on the forms of proxy shall
presumptively determine the order of execution of the proxies, regardless of the
postmark dates of the envelopes in which they are mailed.
The inspectors of election shall perform their duties impartially, in good
faith, to the best of their ability and as expeditiously as is practical. If
there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act of certificate of
all. Any report or certificate made by the inspectors of election is prima facie
evidence of the facts stated therein.
ARTICLE III. DIRECTORSTICLE III. DIRECTORSIII
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Section 3.1 Powers
Subject to limitations in the articles of incorporation and to the
provisions of the General Corporation Law as to action to be authorized or
approved by the shareholders, all corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
controlled by, the board of directors. The board may delegate the management of
the day-to-day operations of the business of the corporation to a management
company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the board.
Section 3.2 Committees of the Board
By resolution adopted by at least three-fourths of the authorized number
of directors, the board may designate an executive and other committees, each
consisting of two or more directors, to serve at the pleasure of the board, and
prescribe the manner in which proceedings of such committee shall be conducted.
Unless the board of directors shall otherwise prescribe the manner of
proceedings of any such committee, meetings of such committee may be regularly
scheduled in advance and may be called at any time by any two members thereof;
otherwise, the provisions of these bylaws with respect to notice and conduct of
meetings of the board shall govern. Any such committee, to the extent provided
in a resolution of the board, shall have all of the authority of the board,
except with respect to:
(a) the approval of any action for which the General
Corporation Law or the articles of incorporation also require
shareholder approval;
(b) the filling of vacancies on the board or in any
committee;
(c) the fixing of compensation of the directors for serving
on the board or in any committee;
(d) the adoption, amendment or repeal of bylaws;
(e) the amendment or repeal of any resolution of the board;
(f) any distribution to the shareholders, except at a rate
or in a periodic amount or within a price range determined by the
board; and
(g) the appointment of other committees of the board or
members thereof.
Section 3.3 Number and Qualification of Directors
The number of directors of the corporation shall initially be one and
shall thereafter be increased to nine immediately prior to the Effective Time
(as defined in the Agreement and Plan of Merger (the "Merger Agreement"), by and
among Phoenix Duff & Phelps Corporation, Phoenix Apollo Corp., and Pasadena
Capital Corporation).
Section 3.4 Election and Term of Office
The directors shall be elected at each annual meeting of shareholders but,
if any such annual meeting is not held or the directors are not elected thereat,
the directors may be elected at any special meeting of shareholders held for
that purpose. Each director, including a director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor is elected, subject to the General Corporation Law and the provisions
of these bylaws with respect to vacancies on the board.
Section 3.5 Vacancies
A vacancy in the board of directors shall be deemed to exist in case of
the death, resignation or removal of any director, if a director has been
declared of unsound mind by order of court or convicted of a felony, if the
authorized number of directors be increased, or if the shareholders fail, at any
annual or special meeting of shareholders at which any director or directors are
elected, to elect the full authorized number of directors to be voted for at
that meeting.
Until such time as all Contingent Merger Payments (as defined in the
Merger Agreement), if any, have been made in accordance with the Merger
Agreement, vacancies in the board of directors may be filled (i) in the case of
a nominee of the Shareholder Representative (as defined in the Merger
Agreement), by a vote of the remaining director or directors who were nominated
by the Shareholder Representative and (ii) in the case of a nominee of Phoenix
Duff & Phelps Corporation, by a vote of the remaining director or directors who
were nominated by Phoenix Duff & Phelps Corporation.
Thereafter, vacancies in the board of directors, except for a vacancy
created by the removal of a director, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director,
and each director so elected shall hold office until his successor is elected at
an annual or a special meeting of the shareholders. A vacancy in the board of
directors created by the removal of a director may only be filled by the vote of
a majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the number of
shareholders otherwise required for action by written consent.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors. Any such election by written
consent shall require the consent of holders of the number of shares otherwise
required for action by written consent.
Any director may resign effective upon giving written notice to the
chairman of the board, the president, the secretary or the board of directors of
the corporation, unless the notice specifies a later time for the effectiveness
of such resignation. If the board of directors accepts the resignation of a
director tendered to take effect at a future time, the board or the shareholders
shall have the power to elect a successor to take office when the resignation is
to become effective.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of his term of office.
Section 3.6 Removal
Any or all of the directors may be removed without cause if such removal
is approved by the vote of the outstanding shares entitled to vote, except that
no director may be removed (unless the entire board is removed) when the votes
cast against removal, or not consenting in writing to such removal, would be
sufficient to elect such director if voted cumulatively at an election at which
the same total number of votes were cast (or, if such action is taken by written
consent, all shares entitled to vote were voted) and the entire number of
directors authorized at the time of the director's most recent election were
then being elected.
Section 3.7 Place of Meetings and Meetings by Telephone
Regular meetings of the board of directors shall be held at any place
within or without the State of California which has been designated from time to
time by resolution of the board or by written consent of all members of the
board. In the absence of such designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board may
be held either at a place so designated or at the principal executive office.
Any meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in the meeting
can hear one another and all such directors shall be deemed to be present at the
meeting.
Section 3.8 Annual Meeting
Immediately following each annual meeting of shareholders the board of
directors shall hold a regular meeting at the place of said annual meeting or at
such other place as shall be fixed by the board of directors for the purpose of
organization, election of officers, and the transaction of other business. Call
and notice of such meetings are hereby dispensed with.
Section 3.9 Other Regular Meetings
Other regular meetings of the board of directors shall be held without
call at such time as shall from time to time be fixed by the board of directors.
Such regular meetings may be held without notice.
Section 3.10 Special Meetings
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or by any two directors.
Written notice of the time and place of special meetings shall be
delivered personally to each director or communicated to each director by
telephone, or by telegraph, facsimile, overnight courier or mail, charges
prepaid, addressed to him at his address as it is shown upon the records of the
corporation or, if it is not so shown on such records or is not readily
ascertainable, at the place at which the meetings of the directors are regularly
held. In case such notice is mailed it shall be deposited in the United States
mail at least four days prior to the time of the holding of the meeting. In case
such notice is telegraphed or delivered, personally, by facsimile overnight
courier or by telephone, it shall be delivered to the telegraph company or so
delivered at least forty-eight hours prior to the time of the holding of the
meeting. Such mailing, telegraphing or delivery, personally, by facsimile,
overnight courier or by telephone, as above provided, shall be due, legal and
personal notice to such director.
Any notice shall state the date, place and hour of the meeting and the
general nature of the business to be transacted, and no other business may be
transacted at the meeting.
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Section 3.11 Action Without Meeting
Any action required or permitted to be taken by the board of directors may
be taken without a meeting if all the members of the board shall individually or
collectively consent in writing to such action. Such written consent or consents
shall be filed with the minutes of the proceedings of the board and shall have
the same force and effect as a unanimous vote of such directors.
Section 3.12 Action at a Meeting: Quorum and Required Vote
Presence of three-fourths of the authorized number of directors at a
meeting of the board of directors constitutes a quorum for the transaction of
business, except as hereinafter provided or modified by the articles of
incorporation. Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the board of directors, unless a greater number, or the same number
after disqualifying one or more directors from voting, is required by law, by
the articles of incorporation or by these bylaws. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of a director, provided that any action taken is approved by at least
a majority of the required quorum for such meeting.
Section 3.13 Validation of Defectively Called or Noticed
Meetings
The transactions of any meeting of the board of directors, however called
and noticed and wherever held, shall be as valid Bas though undertaken at a
meeting duly held after regular call and notice, if a quorum is present and if,
either before or after the meeting, each of the directors not present or who,
though present, has prior to the meeting or at its commencement, protested the
lack of proper notice to him, signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 3.14 Adjournment
A quorum of the directors may adjourn any directors' meeting to meet again
at a stated day and hour; provided, however, that in the absence of a quorum a
majority of the directors present at any directors' meeting, either regular or
special, may adjourn from time to time until the time fixed for the next regular
meeting of the board.
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Section 3.15 Notice of Adjournment
If the meeting is adjourned for more than 24 hours, notice of any
adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the directors who were not present at the time of
adjournment. Otherwise notice of the time and place of holding an adjourned
meeting need not be given to absent directors if the time and place be fixed at
the meeting adjourned.
Section 3.16 Fees and Compensation
Directors and members of committees may receive such compensation, if any,
for their services, and such reimbursement for expenses, as may be fixed or
determined by resolution of the board. This Section 3.16 shall not be construed
to preclude any director from serving the Corporation in any other capacity as
an officer, agent, employee or otherwise and receiving compensation for those
services.
Section 3.17 Indemnification of Directors, Officers, Employees;
(a) The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law, indemnify each of its directors
against expenses (as defined in Section 317(a) of the General Corporation Law),
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
General Corporation Law), arising by reason of the fact that such person is or
was a director of the corporation. For purposes of this Section 3.17, a
"director" of the corporation includes any person (i) who is or was a director
of the corporation, (ii) who is or was serving at the request of the corporation
as a director of another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director of a corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
(b) The corporation shall have the power, to the extent and in the
manner permitted by the General Corporation Law, to indemnify each of its
employees, officers and agents (other than directors) against expenses (as
defined in Section 317(a) of the General Corporation Law), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the General Corporation
Law) arising by reason of the fact that such person is or was an employee,
officer or agent of the corporation. For purposes of this Section 3.17, an
"employee" or "officer" or "agent" of the corporation (other than a director)
includes any person (i) who is or was an employee, officer or agent of the
corporation, (ii) who is or was serving at the request of the corporation as a
employee, officer or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or (iii) who as an
employee, officer or agent of a corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of such predecessor
corporation.
(c) Expenses and attorneys' fees incurred in defending any civil or
criminal action or proceeding for which indemnification is required pursuant to
this Section 3.17, or if otherwise authorized by the board of directors, shall
be paid by the corporation in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of the indemnified
party to repay such amount if it shall ultimately be determined that the
indemnified party is not entitled to be indemnified as authorized in this
Section 3.17.
(d) The indemnification provided by this Section 3.17 shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any bylaw, agreement, vote of shareholders or directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office. The rights to indemnity hereunder shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of the person.
(e) The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation against any liability asserted against or incurred by
such person in such capacity or arising out of that person's status as such,
whether or not the corporation would have the power to indemnify that person
against such liability under the provisions of this Section 3.17.
(f) No indemnification or advance shall be made under this Section
3.17, except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:
(i) That it would be inconsistent with a provision of the
articles of incorporation, these bylaws, a resolution of the shareholders or an
agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(ii) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(g) If a claim under this Section 3.17 is not paid in full by the
corporation within 90 days after a written claim has been received by the
corporation (either because the claim is denied or because no determination is
made), the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim. The corporation shall be entitled to raise as a defense
to any such action that the claimant has not met the standards of conduct that
make it permissible under the General Corporation Law for the corporation to
indemnify the claimant for the claim. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstance
because he or she has met the applicable standard of conduct, if any, nor an
actual determination by the corporation (including its board of directors,
independent legal counsel, or its shareholders) that the claimant has not met
the applicable standard of conduct, shall be a defense to such action or create
a presumption for the purposes of such action that the claimant has not met the
applicable standard of conduct.
(h) The board of directors is authorized to enter into a contract
with any director, officer, employee or agent of the corporation, or any person
who is or was serving at the request of the corporation, or any person who is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, or any person who was a director,
officer, employee or agent of a corporation which was a predecessor corporation,
providing for indemnification rights equivalent to or, if the board of directors
so determines and to the extent permitted by applicable law, greater than, those
provided for in this Article III.
(i) Any amendment, repeal or modification of any provision of this
Section 3.17 shall not adversely affect any right or protection of a director or
agent of the corporation existing at the time of such amendment, repeal or
modification.
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ARTICLE IV. OFFICERS
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Section 4.1 Officers
The officers of the corporation shall consist of a chairman of the board,
a president, a secretary and a treasurer. The corporation may also have, at the
discretion of the board of directors, one or more vice presidents, one or more
assistant secretaries, one or more assistant treasurers, and such additional
officers as may be appointed in accordance with Section 4.3 of this Article IV.
Any number of offices may be held by the same person.
Section 4.2 Election
The officers of the corporation, except such officers as may be appointed
in accordance with Section 4.3 or Section 4.5 of this Article, shall be chosen
annually by the board of directors, and each such officer shall hold office
until he shall resign, be removed or otherwise disqualified to serve, or until
his successor shall be elected and qualified.
4.3tioSubordinate Officerse Officers
The board of directors may appoint, and may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in the bylaws or as the board of directors may from
time to time determine.
Section 4.4 Removal and Resignation
Any officer may be removed, either with or without cause, by the board of
directors, at any regular or special meeting thereof, or, except in case of an
officer chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors (subject, in each case, to
the rights, if any, of an officer under any contract of employment).
Any officer may resign at any time by giving written notice to the board
of directors, the president or the secretary of the corporation, without
prejudice, however, to the rights, if any, of the corporation under any contract
to which such officer is a party. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
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Section 4.5 Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
the bylaws for regular appointment to such office.
Section 4.6 Chairman of the Board4.6
The chairman of the board shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and affairs of the
corporation. If present, the chairman of the board shall preside at all meetings
of the board of directors and exercise and perform such other powers and duties
as may be from time to time assigned to him by the board of directors or
prescribed by the bylaws. He shall be ex officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the board of directors.
Section 4.7 President
The president shall be the chief operating officer of the corporation. In
the absence of the chairman of the board or if there be none, he shall preside
at all meetings of the shareholders and at all meetings of the board of
directors.
Section 4.8 Vice President
In the absence or disability of the president, the most senior vice
president, if any, in order of rank as fixed by the board of directors or, if
not ranked, the vice president designated by the board of directors, shall
perform all the duties of the president, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the powers of the
president. The vice presidents shall also perform such other duties as from time
to time may be prescribed for them respectively by the board of directors.
Section 4.9 Secretary
The secretary shall record or cause to be recorded, and shall keep or
cause to be kept, at the principal executive office and such other place as the
board of directors may order minutes of actions taken at all meetings of
directors and shareholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the names
of those present at directors' meetings, the number of shares present or
represented at shareholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent, a share register or
a duplicate share register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required by the bylaws or by law
to be given, and he shall keep the seal of the corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors.
Section 4.10 Chief Financial Officer
The chief financial officer, who in the absence of a named treasurer shall
also be deemed to be the treasurer when a treasurer may be required and shall be
authorized and empowered to sign as treasurer, shall keep and maintain, or cause
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors, shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request, an account of all of his
transactions as treasurer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors.
ARTICLE V. RECORDS AND REPORTS
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Section 5.1 Maintenance and Inspection of Share Register
The corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed, a record of
its shareholders, giving the names and addresses of all shareholders and the
number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent in the aggregate of the outstanding voting shares of the corporation may
(i) inspect and copy the record of shareholders' names and addresses and
shareholdings during usual business hours on five days prior written demand on
the corporation, and (ii) obtain from the transfer agent of the corporation, on
written demand and on the tender of such transfer agent's usual charges for such
list, a list of the shareholders' names and addresses, who are entitled to vote
for the election of directors, and their shareholdings, as of the most recent
record date for which that list has been compiled or as of a date specified by
the shareholder after the date of demand. This list shall be made available to
any such shareholder by the transfer agent on or before the later of five
business days after the demand is received or the date specified in the demand
as the date as of which the list is to be compiled.
The record of shareholders shall also be open to inspection and copying on
the written demand of any shareholder or holder of a voting trust certificate,
at any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. Any inspection and copying under this Section 5.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
Section 5.2 Maintenance and Inspection of Bylaws
The corporation shall keep at its principal executive office, or if its
principal executive office is not in the State of California, at its principal
business office in this state, the original or a copy of the bylaws as amended
to date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the corporation
is outside the State of California and the corporation has no principal business
office in this state, the Secretary shall, upon the written request of any
shareholder, furnish to that shareholder a copy of the bylaws as amended to
date.
Section 5.3 Maintenance and Inspection of Other Corporate
The accounting books and records and minutes of proceedings of the
shareholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. These rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 5.4 Inspection by Directors
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
Section 5.5 Annual Report to Shareholders
The board of directors of the corporation shall not be required to cause
an annual report to be sent to the shareholders pursuant to Section 1501 of the
General Corporation Law so long as there are less than 100 holders of record of
its shares (determined as provided in Section 605 of the General Corporation
Law). If there are at least 100 holders of record of the corporation's shares
(determined as provided in Section 605 of the General Corporation Law) or if the
board of directors so resolves by a vote of a majority of the directors, the
board of directors shall cause an annual report to be sent to the shareholders
not later than 120 days after the close of the fiscal year and at least 15 days
(or if sent by third-class mail, 35 days) prior to the annual meeting of
shareholders to be held during the next fiscal year. Such report shall contain a
balance sheet as of the end of such fiscal year and an income statement and
statement of changes in financial position for such fiscal year, accompanied by
any report thereon of independent accountants or, if there is no such report,
the certificate of an authorized officer of the corporation that such statements
were prepared without audit from the books and records of the corporation.
Nothing herein shall be interpreted as prohibiting the board of directors from
issuing other periodic reports to the shareholders of the corporation as the
board of directors considers appropriate.
Section 5.6 Financial Statements
A copy of any annual financial statement and any income statement of the
corporation for each quarterly period of each fiscal year, and any accompanying
balance sheet of the corporation as of the end of each such period, that has
been prepared by the corporation shall be kept on file in the principal
executive office of the corporation for twelve months and each such statement
shall be exhibited at all reasonable times to any shareholder demanding an
examination of any such statement or a copy shall be mailed to any such
shareholder.
If a shareholder or shareholders holding at least five percent of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty days before the date of the request, and a balance sheet
of the corporation as of the end of that period, the chief financial officer
shall cause that statement to be prepared, if not already prepared, and shall
deliver personally or mail that statement or statements to the person making the
request within thirty days after the receipt of the request. If the corporation
has not sent to the shareholders its annual report for the last fiscal year,
this report shall likewise be delivered or mailed to the shareholder or
shareholders within thirty days after the request.
The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
ARTICLE VI. GENERAL CORPORATE MATTERSVI
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Section 6.1 Record Date
The board of directors may fix a time in the future as a record date for
the determination of the shareholders entitled to notice of and to vote at any
meeting of shareholders or entitled to give consent to corporate action in
writing without a meeting, to receive any report, to receive any dividend or
distribution, or any allotment of rights, or to exercise rights in respect to
any change, conversion, or exchange of shares. The record date so fixed shall be
not more than sixty days nor less than ten days prior to the date of any meeting
or any other event for the purposes of which it is fixed. When a record date is
so fixed, only shareholders of record on that date are entitled to notice of and
to vote at any such meeting, to give consent without a meeting, to receive any
report, to receive a dividend, distribution, or allotment of rights, or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date, except as
otherwise provided in the articles of incorporation or bylaws.
Section 6.2 Checks, Drafts, etc
All checks, drafts or other orders for payment of money, or notes or other
evidences of indebtedness, issued in the name of or payable to the corporation,
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the board of directors.
Section 6.3 Corporate Contracts and Instruments; How Executed
The board of directors, except as otherwise provided in the bylaws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances; and, unless so
authorized by the board of directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or to any amount.
Section 6.4 Certificate for Shares
Every holder of shares in the corporation shall be entitled to have a
certificate signed in the name of the corporation by the chairman or vice
chairman of the board or the president or a vice president and by the chief
financial officer or an assistant treasurer or the secretary or any assistant
secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.
Any such certificate shall also contain such legend or other statement as
may be required by Section 418 of the General Corporation Law, the Corporate
Securities Law of 1968, the federal securities laws, and any agreement between
the
corporation and the issue thereof.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the board of directors or the bylaws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state on the face thereof the amount remaining unpaid and the
terms of payment thereof.
No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and canceled at the same time;
provided, however, that a new certificate will be issued without the surrender
and cancellation of the old certificate if (1) the old certificate is lost,
apparently destroyed or wrongfully taken; (2) the request for the issuance of
the new certificate is made within a reasonable time after the owner of the old
certificate has notice of its loss, destruction, or theft; (3) the request for
the issuance of a new certificate is made prior to the receipt of notice by the
corporation that the old certificate has been acquired by a bona fide purchaser;
(4) the owner of the old certificate files a sufficient indemnity bond with or
provides other adequate security to the corporation; and (5) the owner satisfies
any other reasonable requirements imposed by the corporation.
Section 6.5 Representation of Shares of Other
The president or any vice president and the secretary or any assistant
secretary of this corporation are authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of this
corporation any and all shares held by this corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
said officers.
Section 6.6 Construction and Definitions
Unless the context otherwise requires, the general provisions, rules of
construction and definitions contained in the General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
number includes the plural and the plural number includes the singular, and the
term "person" includes a corporation as well as a natural person.
ARTICLE VII. AMENDMENTS
Section 7.1 Power of Shareholders
New bylaws may be adopted or these bylaws may be amended or repealed by
the affirmative vote of a majority of the outstanding shares entitled to vote,
or by the written consent of the shareholders entitled to vote such shares,
except as otherwise provided by law or by the articles of incorporation;
provided, however, that if the articles of incorporation set forth the number of
authorized directors of the corporation, then the authorized number of directors
may be changed only by an amendment of the articles of incorporation.
Section 7.2 Power of Directors
Subject to the right of shareholders as provided in Section 7.1 of this
Article VII to adopt, amend or repeal bylaws, other than a bylaw or amendment
thereof changing the authorized number of directors or the number of directors
constituting a quorum for the transaction of business, may be adopted, amended
or repealed by a vote of three-fourths of the authorized number of directors.
<PAGE>
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1
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517596v4
517596v4
EXHIBIT D
Directors of the Surviving Corporation
PDP Nominees
Philip R. McLoughlin
William R. Moyer
David R. Pepin
Shareholder Representative Nominees
J. Roger Engemann
James E. Mair
John S. Tilson
Michael Stolper
Malcolm Axon
Paul LeCompte
<PAGE>
EXHIBIT E
INDEMNIFICATION ESCROW AGREEMENT
INDEMNIFICATION ESCROW AGREEMENT, dated as of ___________, 1997 (this
"Escrow Agreement"), by and among PASADENA CAPITAL CORPORATION, a California
corporation ("Pasadena"), J. ROGER ENGEMANN, as shareholder representative (the
"Shareholder Representative"), PHOENIX DUFF & PHELPS CORPORATION, a Delaware
corporation ("PDP"), PHOENIX APOLLO CORP., a California corporation
("Acquisition Sub"), and ___________________, as escrow agent (the "Escrow
Agent").
W I T N E S S E T H:
WHEREAS, Pasadena, PDP and Acquisition Sub are parties to that
certain Agreement and Plan of Merger dated as of June 9, 1997 (hereinafter,
including any amendments thereto, the "Merger Agreement"), pursuant to which
Acquisition Sub will merge with and into Pasadena, which shall be the surviving
corporation (the "Surviving Corporation") of such merger and become a
wholly-owned subsidiary of PDP; and
WHEREAS, pursuant to Section 3.4 of the Merger Agreement, the parties
thereto have agreed that PDP shall cause to be deposited at the Closing, in
escrow with the Escrow Agent, to be held by the Escrow Agent pursuant to the
terms hereof in order to provide funds to secure the payment of claims with
respect to which PDP and the Surviving Corporation have a right to
indemnification under the Merger Agreement, Ten Million Dollars ($10,000,000) in
cash (the "Escrow Amount"); and
WHEREAS, pursuant to the Merger Agreement, the Shareholder
Representative has been designated as the representative of the holders of
Common Stock Equivalents of Pasadena as of the Effective Time of the merger
whose names and addresses are set forth on Schedule 1 hereto and has been
authorized as such representative to enter into this Escrow Agreement in such
capacity; and
WHEREAS, the parties hereto desire to set forth the terms and
conditions under which the Escrow Amount shall be held by the Escrow Agent and
released by the Escrow Agent to PDP or the Surviving Corporation, on the one
hand, and/or the holders of Common Stock Equivalents as of the Effective Time,
on the other hand, as the case may be; and
WHEREAS, the parties desire that the Escrow Agent be appointed as
escrow agent to act in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and of the promises
contained herein, the parties, intending legally to be bound, agree as follows:
1. Definitions. Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed thereto in
the Merger Agreement.
2. Appointment and Agreement of Escrow Agent. PDP,
Acquisition Sub, Pasadena and the Shareholder Representative
hereby appoint the Escrow Agent to serve hereunder and the Escrow
Agent hereby accepts such appointment and agrees to perform all
duties which are expressly set forth in this Escrow Agreement to
be performed by it.
3. Deposit of the Escrow Amount. Promptly following the Effective
Time on the date of this Agreement, PDP shall cause to be deposited with the
Escrow Agent, the Escrow Amount. The Escrow Amount shall be held by the Escrow
Agent in a separate account maintained with the Escrow Agent for the purposes of
this Escrow Agreement (the "Escrow Account"). The Escrow Amount shall be held
and distributed by the Escrow Agent pursuant to the terms of this Escrow
Agreement.
4. Receipt. The Escrow Agent agrees to hold and
disburse the Escrow Amount and all earnings it receives thereon
in accordance with the terms and conditions of this Escrow
Agreement. By its execution hereof, the Escrow Agent
acknowledges receipt of the Escrow Amount.
5. Investment. The Escrow Agent shall, pending the disbursement of
the Escrow Amount pursuant to this Escrow Agreement, invest such amounts in
accordance with the written instructions of PDP and the Shareholder
Representative in (a) direct obligations of, or obligations fully guaranteed by,
the United States of America or any agency thereof, or any state or municipality
or any agency thereof which are rated "Aaa" by Moody's Investors Service, Inc.
or a similar grade by another nationally recognized statistical rating service,
(b) certificates of deposit issued by commercial banks having a combined capital
surplus and undivided profits of not less than One Billion Dollars
($1,000,000,000), (c) money market funds investing solely in any of the above,
(d) other debt secu0rities having a maturity of not longer than one year which
are rated "Aaa" by Moody's Investors Service, Inc. or a similar grade by another
nationally recognized statistical rating service, or (e) other investments
jointly approved in writing by PDP and the Shareholder Representative. Absent
such written instructions, the Escrow Agent may, in its sole discretion, invest
the Escrow Amount in any of the instruments or accounts listed in clauses (a),
(b), (c) or (d) of the preceding sentence.
6. Earnings on the Escrow Amount. All interest, dividends,
distributions, gains or other income in respect of the Escrow Amount shall
constitute part of the Escrow Amount and shall be deposited in the Escrow
Account for distribution in accordance with the terms of this Escrow Agreement.
7. Claims Procedure. (c) PDP or, at PDP's election, the Surviving
Corporation (collectively, the "PDP Indemnitees") shall be entitled to make a
claim (a "Claim") against the Escrow Amount on deposit in the Escrow Account if
such PDP Indemnitee shall make any Claim for indemnification pursuant to
Sections 10.2(a) or (b) of the Merger Agreement in accordance with the following
provisions and the provisions of the Merger Agreement.
(b) A PDP Indemnitee shall not be entitled to receive any of the
Escrow Amount unless it has delivered a notice (a "Claims Notice") to (i) the
Escrow Agent and (ii) the Shareholder Representative stating that such PDP
Indemnitee has a Claim or Claims for all or part of the Escrow Amount and
summarizing the nature and basis of the Claim or Claims and, to the extent
reasonably ascertainable, specifying the estimated amount thereof.
With respect to any Claim against any of the Escrow Amount delivered
pursuant to this Section 7(b), the Shareholder Representative shall have 10
business days from receipt of a Claims Notice to serve on the Escrow Agent, with
a copy to the PDP Indemnitee, a notice (an "Objecting Notice") that the
Shareholder Representative objects to all or part of such Claim against the
Escrow Amount; provided that if the Shareholder Representative shall fail to
deliver an Objecting Notice to the Escrow Agent and the PDP Indemnitee within
such 10 business day period, then such Claim shall automatically, without
further notice or action of any party hereto, be deemed to be valid and
undisputed and the Escrow Agent shall promptly remit to the PDP Indemnitee the
portion of the Escrow Amount which the PDP Indemnitee claimed in the Claims
Notice in respect of which no Objecting Notice has been received. The Objecting
Notice shall specify in reasonable detail the reasons for objecting to all or
part, as the case may be, of such Claim. If an Objecting Notice containing the
reasons for objection shall be delivered, the PDP Indemnitee, on the one hand,
and the Shareholder Representative, on the other hand, shall, during the period
of 15 days following such delivery, use reasonable efforts to reach agreement as
to the disputed part of such Claim. If the PDP Indemnitee and the Shareholder
Representative agree at or prior to the expiration of such 15-day period (or any
mutually agreed upon extension thereof) to the validity and the amount of such
Claim, the PDP Indemnitee and the Shareholder Representative shall promptly give
the Escrow Agent joint instructions in writing to promptly remit to, or as
directed by, the PDP Indemnitee an amount from the Escrow Account equal to such
agreed upon amount. If the PDP Indemnitee and the Shareholder Representative do
not so agree within said period (or any mutually agreed upon extension thereof),
the PDP Indemnitee, on the one hand, or the Shareholder Representative, on the
other hand, shall have the right to commence legal proceedings in the
appropriate court in Los Angeles, California for the purpose of having a dispute
regarding a Claim by the PDP Indemnitee adjudicated. The Escrow Agent shall,
except as otherwise provided in Section 7(c) hereof, continue to hold the Escrow
Amount until it receives a final and nonappealable court order or joint
instructions of the PDP Indemnitee and the Shareholder Representative regarding
the disposition of the Escrow Amount.
(c) Notwithstanding the provisions of Section 7(b), if a PDP
Indemnitee shall make any Claim for indemnification pursuant to either Section
10.2(a)(iii) or (iv) of the Merger Agreement and shall deliver to the Escrow
Agent (i) in the case of a Claim pursuant to Section 10.2(a)(iii) of the Merger
Agreement with respect to the matter described as Item A on Annex 1 to the
Merger Agreement, either (x) a fully executed closing agreement in accordance
with Section 7121 of the Code or (y) a final and nonappealable court order from
the applicable court, or (ii) in the case of a Claim pursuant to Section
10.2(a)(iv) of the Merger Agreement with respect to the legal proceeding
described as Item B on Annex 1 to the Merger Agreement, either (x) a fully
executed settlement agreement or (y) a final and nonappealable decision of
arbitrators or order of a court of competent jurisdiction, as applicable, the
Escrow Agent shall, upon written instruction of the PDP Indemnitee, promptly
remit funds from the Escrow Account in accordance with the terms of the
applicable closing agreement, settlement agreement, arbitrators' decision or
court order, as the case may be.
8. Release of the Escrow Amount.
(a) On the latest of (i) eighteen months from the date hereof, (ii)
60 days after the earlier of (A) the entering into of a closing agreement in
accordance with Section 7121 of the Code with respect to the matter described as
Item A on Annex 1 to the Merger Agreement or (B) a final and nonappealable
decision from the applicable court of the matter described as Item A on Annex 1
to the Merger Agreement, and (iii) 60 days after the earlier of (X) a settlement
or a nonappealable dismissal by arbitrators or a court of competent jurisdiction
of the legal proceeding described as Item B on Annex 1 to the Merger Agreement
or (Y) a final and nonappealable decision of arbitrators or order of a court of
competent jurisdiction in such legal proceeding (such date, the "Escrow Amount
Release Date"), the Escrow Agent shall remit to the holders of Common Stock
Equivalents as of the Effective Time, in accordance with Section 8(b) below, an
amount equal to the excess, if any, of the balance in the Escrow Account over
the aggregate amount of pending Claims. Any of the Escrow Amount not released on
the Escrow Amount Release Date pursuant to this Section 8(a) shall be retained
by the Escrow Agent as part of the Escrow Account and shall be distributed upon
resolution of such pending Claim or Claims in accordance with Section 7 hereof.
(b) Any distributions by the Escrow Agent to the holders of Common
Stock Equivalents as of the Effective Time pursuant to this Section 8 shall be
pro rata based on the percentages set forth opposite each such holder's name on
Schedule 1 hereto. Distributions shall be made at the election of each holder of
Common Stock Equivalents by either (i) checks drawn on the Escrow Account which
shall be mailed by first class mail by the Escrow Agent to such holders of
Common Stock Equivalents at their respective addresses set forth on Schedule 1
hereto or to any changed address as may have been fixed by a holder in writing
to the Escrow Agent or (ii) wire transfer to the account specified for such
holder on Schedule 1 hereto.
9. Dispute Resolution. In the event of any disagreement between any
of the parties to this Escrow Agreement, or between them or any of them and any
other party, resulting in adverse claims or demands being made in connection
with the subject matter of the escrow, or in the event that the Escrow Agent,
reasonably and in good faith, shall be in doubt as to what action it should take
hereunder, the Escrow Agent may, at its option, refuse to comply with any claims
or demands on it, or refuse to take any action hereunder so long as such
disagreement continues or such doubt exists, and in any such event, the Escrow
Agent shall not be liable in any way or to any Person for its failure or refusal
to act, and the Escrow Agent shall be entitled to continue so to refrain from
acting until (a) the rights of all parties shall have been fully and finally
adjudicated by a court of competent jurisdiction, or (b) all differences and all
doubt shall have been resolved by agreement among all of the interested Persons,
and the Escrow Agent shall have been notified thereof in writing signed by all
such Persons; provided, however, that the Escrow Agent shall be under no
obligation to commence or defend such proceedings. The rights of the Escrow
Agent under this Section are cumulative of all other rights it may have by law
or otherwise.
10. Compensation. The Escrow Agent shall be entitled to compensation
for its services hereunder in accordance with Schedule 2 annexed hereto.
Compensation of the Escrow Agent as set forth on Schedule 2 hereto and all
reasonable expenses of the Escrow Agent in connection with the performance of
its services hereunder shall be borne one-half by PDP and one half from the
Escrow Account. The Escrow Agent shall promptly notify the Shareholder
Representative of any Escrow Amount used to pay fees under this Section 10.
11. Liability of Escrow Agent. The Escrow Agent assumes no
responsibility or liability to PDP, Acquisition Sub, Pasadena or any other
Persons, other than to deal with the Escrow Amount held and received by it
pursuant to the terms of this Escrow Agreement. The Escrow Agent shall not be
held liable for anything which it may do or refrain from doing in connection
herewith, except for actions or omissions to act that constitute gross
negligence or willful misconduct. The Escrow Agent shall be held harmless from
any and all third party claims, losses, judgments or costs (including reasonable
attorneys' fees) regardless of their nature, arising out of or because of this
Escrow Agreement, except for actions or omissions to act that constitute gross
negligence or willful misconduct. Any such expense in the preceding sentence
shall be borne one-half by PDP and one-half from the Escrow Account. The Escrow
Agent shall promptly notify the Shareholder Representative of any Escrow Amount
used to pay expenses under this Section 11.
12. Resignation of Escrow Agent. The Escrow Agent may resign at any
time upon giving the parties hereto thirty (30) days' prior written notice. The
Escrow Agent shall continue to serve until its successor, appointed by joint
notice of PDP and the Shareholder Representative, accepts appointment as
successor escrow agent and receives the Escrow Amount. If a successor escrow
agent has not been appointed or has not accepted such appointment sixty (60)
days after such notice of a resignation has been given, the Escrow Agent may
apply, but shall have no obligation to do so, to a court of competent
jurisdiction for the appointment of a successor escrow agent or for other
appropriate relief. The terms and conditions of this Escrow Agreement will
remain unimpaired by resignation of the Escrow Agent or the appointment of a
successor escrow agent. Following the appointment of a successor escrow agent,
such person shall for all intents and purposes of this Escrow Agreement be the
"Escrow Agent" hereunder. The Escrow Agent's resignation shall take effect upon
delivery of the Escrow Account to a successor escrow agent and the Escrow Agent
shall thereupon have no further duties or responsibilities in connection
herewith. In the event that the Escrow Agent submits a notice of resignation,
its only duty, until a successor escrow agent shall have been appointed and
shall have accepted such appointment, shall be to hold, invest and dispose of
the Escrow Amount in accordance with this Escrow Agreement, but without regard
to any notices, requests, instructions, demands or the like received by it from
the other parties hereto after such notice shall have been given, unless the
same is a direction that the Escrow Amount be paid or delivered in its entirety
out of the Escrow Account.
13. Responsibilities and Rights of the Escrow Agent.
(a) The Escrow Agent undertakes to perform only such duties as
are expressly set forth herein. No implied duties or obligations
shall be read into this Escrow Agreement against the Escrow Agent.
(b) The Escrow Agent shall not incur any liability with respect to
(i) any action taken or omitted in good faith upon the advice of its legal
counsel given with respect to any question relating to the duties and
responsibilities of the Escrow Agent under this Escrow Agreement, or (ii) any
action taken or omitted in reliance upon any instrument which the Escrow Agent
shall in good faith believe to be genuine (including the execution of such
instrument, the identity or authority of any person executing such instrument,
its validity and effectiveness, and the truth and accuracy of any information
contained therein), to have been signed by a proper person or persons and to
conform to the provisions of this Escrow Agreement.
14. Collateral Agreements. This Escrow Agreement and the Merger
Agreement shall be controlling with respect to indemnification claims as between
PDP and the Surviving Corporation, on the one hand, and the Shareholder
Representative, on the other hand. The Escrow Agent shall not be bound in any
way by the Merger Agreement. Notwithstanding anything contained in this Escrow
Agreement to the contrary, in the event of any conflict between the terms of
this Escrow Agreement and the terms of the Merger Agreement, as between PDP and
the Surviving Corporation, on the one hand, and the Shareholder Representative,
on the other hand, the terms of the Merger Agreement shall control and any
language to the contrary in this Escrow Agreement shall not be deemed an
amendment of the terms of the Merger Agreement.
15. Termination. This Escrow Agreement shall terminate (a) upon
disbursement or release of the entire Escrow Amount and all dividends, other
income and earnings thereon by the Escrow Agent in accordance with this Escrow
Agreement or (b) by written mutual consent signed by all parties hereto. This
Escrow Agreement shall not be otherwise terminated.
16. Notices. Unless otherwise provided herein, any notice, request,
instruction or other document or communication to be given hereunder by any
party to any other party shall be in writing and shall be deemed to have been
given (a) if mailed, on the date received if mailed by registered or certified
mail (return receipt requested), (b) if sent by facsimile transmission, when so
sent and receipt acknowledged by an appropriate telephone or facsimile receipt
or (c) if sent by other means, when actually received by the party to which such
notice has been directed, in each case at the respective addresses or numbers
set forth below or such other address or number as such party may have fixed by
notice:
To PDP or Acquisition Sub:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Chief Executive Officer
Telephone: (860) 403-5365
Facsimile: (860) 403-5545
With copies to:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Thomas N. Steenburg, Esq.
Vice President and General Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
and
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: David L. Finkelman, Esq.
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
If to Pasadena or the Shareholder Representative:
J. Roger Engemann
Pasadena Capital Corporation
600 North Rosemond Boulevard
Pasadena, California 91107-2133
Telephone: (800) 882-2855
Facsimile: (818) 351-1174
With a copy to:
Shook, Hardy & Bacon L.L.P.
1200 Main Street, Suite 3100
Kansas City, Missouri 64105-2118
Attention: Jennings J. Newcom, Esq.
Telephone: (816) 474-6550
Facsimile: (816) 421-5547
To the Escrow Agent:
==============================
------------------------------
Attention: ______________________
Telephone:_____________________
Facsimile:______________________
17. Benefit and Assignment: This Escrow Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Escrow Agreement may not be assigned or
delegated by any party hereto without the prior written consent of the other
parties hereto.
18. Entire Agreement; Amendment. This Escrow Agreement, the Merger
Agreement and the Stockholder Indemnification Agreement contain all the terms
agreed upon by the parties with respect to the subject matter hereof and
supersede any prior agreements with respect to the subject matter hereof. This
Escrow Agreement may be amended only by a written instrument signed by the
parties against which enforcement of any waiver, change, modification, extension
or discharge is sought.
19. Headings. The headings of the sections and
subsections of this Escrow Agreement are for ease of reference
only and do not evidence the intentions of the parties.
20. Governing Law. This Escrow Agreement shall be
governed by, and interpreted in accordance with, the laws of the
State of California, regardless of the laws that might otherwise
govern under principles of conflicts of laws applicable thereto.
21. Counterparts. This Escrow Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Escrow Agreement to
be executed and delivered as of the day and year first written above.
PASADENA CAPITAL CORPORATION
By:
Name:J. Roger Engemann
Title: President
J. Roger Engemann,
as Shareholder Representative
PHOENIX DUFF & PHELPS CORPORATION
By:
Name:
Title:
PHOENIX APOLLO CORP.
By:
Name:
Title:
,
as Escrow Agent
By:
Name:
Title:
<PAGE>
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<PAGE>
EXHIBIT F
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Closing Merger Payment Amount
Estimated Closing Closing Merger
Run Rate Percentage Payment Amount
.80 $141,750,000
.81 144,000,000
.82 146,195,000
.83 148,337,000
.84 150,429,000
.85 152,471,000
.86 154,465,000
.87 156,414,000
.88 158,318,000
.89 160,180,000
.90 162,000,000
.91 162,000,000
.92 162,000,000
.93 162,000,000
.94 162,000,000
.95 through 1.20, 180,000,000
inclusive
<PAGE>
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<PAGE>
EXHIBIT G
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Total Run Rate Payment Amount
Closing Run Total Run Rate
Rate Percentage Payment Amount
.80 $157,500,000
.81 160,000,000
.82 162,439,000
.83 164,819,000
.84 167,143,000
.85 169,412,000
.86 171,628,000
.87 173,793,000
.88 175,909,000
.89 177,978,000
.90 through 1.10, 180,000,000
inclusive
1.11 182,022,000
1.12 184,091,000
1.13 186,207,000
1.14 188,372,000
1.15 190,588,000
1.16 192,857,000
1.17 195,181,000
1.18 197,561,000
1.19 200,000,000
1.20 202,500,000
<PAGE>
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1
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517596v4
<PAGE>
EXHIBIT H-1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 9th day of June, 1997 by and among PASADENA CAPITAL CORPORATION, a
California corporation (the "Company"), PHOENIX DUFF & PHELPS CORPORATION, a
Delaware corporation ("PDP"), and J. ROGER ENGEMANN (the "Executive"). This
Agreement is binding upon the parties hereto; provided, however, that the
employment relationship hereinafter established shall become effective (the
"Effective Date") only upon and contemporaneously with the closing of the merger
(the "Merger") contemplated pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated the date hereof by and among the Company, PDP, and
Phoenix Apollo Corp., a California corporation. All capitalized terms used but
not otherwise defined herein shall have the meanings ascribed to such terms in
the Compensation Allocation Agreement dated as of June 9, 1997 (the
"Compensation Allocation Agreement") by and among PDP, the Company and certain
individuals, a copy of which is attached hereto as Exhibit A and incorporated
herein by reference.
I. Position and Responsibilities.
A. The Executive shall serve in an executive capacity as Chairman of
the Board, President, Chief Executive Officer and Chief Investment Officer of
the Company, and a Director of the Company, member of the Compensation Committee
(the "Compensation Committee") of the Board of Directors of the Company and
shall perform such functions and undertake such responsibilities as are
customarily associated with such capacities. The Executive shall also hold those
other directorships and offices in the Company and any of its affiliates to
which, from time to time, he may be elected or appointed during the term of this
Agreement.
B. The Executive shall devote his full working time and skill to the
business and affairs of the Company and its affiliates and to the promotion of
its and their interests; provided, however, that the Executive may be involved
in such civic and charitable activities as he shall desire so long as such
activities do not materially interfere with his duties on behalf of the Company.
C. All securities investments made by the Executive are subject to
the Company's Statement of Policy on Personal Trading as from time to time
hereafter amended, which is specifically incorporated by this reference into
this Agreement.
II. Term of Employment.
A. The term of the Executive's employment hereunder shall commence on
the Effective Date and terminate on the day prior to the fifth anniversary date
of the Effective Date (the "Expiration Date"), unless sooner terminated as
provided in this Agreement.
B. Notwithstanding anything to the contrary set
forth in this Agreement, the Executive's employment may also be
terminated pursuant to Sections 4, 9 or 10 hereof.
III. Compensation and Benefits.
A. The Company shall pay to the Executive, out of the PCC
Compensation Pool established under the Compensation Allocation Agreement, for
the services to be rendered by the Executive hereunder a base salary (the "Base
Salary") at the rate of $625,000 per annum, which salary shall be eligible for
increases at the discretion of the Board of Directors of the Company as then
constituted. The Base Salary shall not be reduced during the term of this
Agreement. The Base Salary shall be payable, in accordance with the Company's
customary payroll practices.
B. During the term of his employment hereunder and subject to the
terms of this Agreement, the Company shall pay to the Executive, out of the PCC
Compensation Pool established under the Compensation Allocation Agreement (i) an
annual bonus (the "Annual Bonus"), payable monthly based upon the Company's good
faith estimates of the amount of the Annual Bonus, with a final correcting
adjustment for the preceding months made in the first month of each calendar
year or the last month of the term of this Agreement with respect to the final
partial calendar year of the term hereof, in an aggregate annual amount equal to
one percent (1%) of the sum of (a) one hundred percent (100%) of all Management
Fees for such year earned from sources other than PCC Mutual Funds and (b) fifty
percent (50%) of all Management Fees for such year receivable from PCC Mutual
Funds and (ii) annually for the preceding year within ninety (90) days after
December 31 of the succeeding year, an amount equal to not less than 20% nor
greater than 30%, including in each case all required Company payroll taxes and
Company retirement benefit expenses applicable thereto (the "Residual Pool
Bonus") of the Residual Compensation Pool; provided, however, that for purposes
of clause (i) of this sentence, for any given year in which Management Fees
exceed an amount equal to two hundred percent (200%) of the Management Fees for
fiscal year 1997 (the "Base Management Fees"), the portion of the Annual Bonus
amount payable to the Executive based on Management Fees for such fiscal year in
excess of the Base Management Fees shall be equal to one-half of one percent
(0.5%). Changes permitted hereunder in the Annual Bonus or the Residual Pool
Bonus shall be made at the discretion of the Board of Directors of the Company.
In addition to the Annual Bonus and the Residual Pool Bonus,
the Executive shall be eligible to receive such additional incentive
compensation payments, if any, as may be determined by the Board of Directors of
the Company.
C. During the term of this Agreement, the Executive shall be entitled
to participate in, and receive benefits from, such insurance, medical,
disability, or other employee benefit plans of the Company as may be in effect
at any time during the term of his employment by the Company.
D. The Company agrees to reimburse the Executive for all reasonable
and necessary business expenses reasonably incurred by him on behalf of the
Company in the course of his duties hereunder upon the presentation by the
Executive of appropriate expense statements or vouchers therefor or such other
supporting information as the Company may reasonably request.
E. The Executive shall be entitled each year of this
Agreement to paid vacation in accordance with the Company's usual
practices.
F. All payments required to be made by the Company to the Executive
under this Agreement shall be subject to (a) the limitations of the Compensation
Allocation Agreement and (b) the withholding of such amount relating to taxes
and other governmental assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
IV. Death; Incapacity.
A. If, during the period of the Executive's employment hereunder,
because of any physical or mental disability or incapacity (a "Disability"), the
Executive shall fail for a period of 180 consecutive days, or for shorter
periods aggregating 180 days during any twelve month period, to render the
services contemplated hereunder, then the Company may terminate the Executive's
employment hereunder by notice from the Company to the Executive, effective on
the giving of such notice. Each month during any period of Disability of the
Executive during the term of this Agreement, the Company shall continue to pay
to the Executive, an amount equal to (a) the sum of (i) the Base Salary to which
the Executive is entitled pursuant to Section 3.1 hereof at the rate in effect
immediately prior to the occurrence of the Disability plus (ii) the Annual Bonus
paid to Executive for the calendar year prior to such Disability plus (iii) One
Million Dollars ($1,000,000), divided by (b) twelve (12).
B. In the event of the death of the Executive during the term of this
Agreement, the Executive's employment hereunder shall terminate on the date of
death of the Executive, and thereupon the Company shall have no further
obligation to Executive.
C. The Company shall have the right to obtain for its benefit an
appropriate life insurance policy on the life of the Executive, naming the
Company as the beneficiary. If requested by the Company, the Executive agrees to
cooperate with the Company in obtaining such insurance policy.
V. Other Activities During Employment.
A. The Executive shall not during the period of the Executive's
employment with the Company undertake or engage in any other employment,
occupation or business enterprise. Notwithstanding the foregoing, this Section
5.1 shall not be deemed to (a) prohibit the Executive from serving as a director
of another entity, with the prior approval of PDP, or (b) prevent the Executive
from engaging in reasonable activities not in competition with the Company with
respect to personal investments of the Executive to the extent consistent with
Executive's obligations to the Company under this Agreement.
B. The Executive shall not at any time during the period of the
Executive's employment with the Company or after the termination thereof
directly or indirectly divulge, furnish, use, publish or make accessible to any
person or entity any Confidential Information (as hereinafter defined) except in
connection with the performance of his duties hereunder. Any records of
Confidential Information prepared by the Executive or which come into the
Executive's possession during the term of this Agreement are and remain the
property of the Company or its affiliates, as the case may be, and upon
termination of the Executive's employment all such records and copies thereof
shall be either left with or returned to such entity.
C. The term "Confidential Information" includes, but is not limited
to, the following items, whether existing now or created in the future and
whether or not subject to trade secret or other statutory protection: (a) all
knowledge or information concerning the business, operations and assets of the
Company and its affiliates which is not readily available to the public, such
as: internal operating procedures; investment strategies; sales data and client
lists; financial plans, projections and reports; and investment company
programs, plans and products; (b) all property owned, licensed and/or developed
for the Company and/or its affiliates or any of their respective clients and not
readily available to the public, such as computer systems, programs and software
devices, including information about the design, methodology and documentation
therefor; (c) information about or personal to the Company's and/or its
affiliates' clients; (d) information, materials, products or other tangible or
intangible assets in the Company's and/or its affiliates' possession or under
any of their control which is proprietary to, or confidential to or about, any
other person or entity; and (e) records and repositories of all of the
foregoing, in whatever form maintained.
The foregoing notwithstanding, the following shall not be
considered Confidential Information: (aa) general skills and experience gained
by providing service to the Company; (bb) information publicly available or
generally known within the Company's trade or industry; (cc) information
independently developed by the Executive other than in the course of the
performance of his duties hereunder; and (dd) information which becomes
available to the Executive on a non-confidential basis from sources other than
the Company or its affiliates, provided the Executive does not know or have
reason to know that such sources are prohibited by contractual, legal or
fiduciary obligation from transmitting the information. Failure to mark any
material or information "confidential" shall not affect the confidential nature
thereof.
D. The rights and obligations created by this Section 5 are
independent of, and are in addition to, the rights, obligations and liabilities
created by the Uniform Secrets Act, California Civil Code section 3426 et seq.
VI. Corporate Opportunities.
A. If the Executive, during his employment, shall become aware of any
business opportunity related to the business of the Company, the Executive shall
not appropriate for himself or for any other person other than the Company or
any Affiliate (as defined below) of the Company any such opportunity unless, as
to any particular opportunity, the Company waives its rights to such opportunity
after receiving written notice thereof from the Executive. If the Company fails
to act within ninety (90) days following receipt written notice from the
Executive of such opportunity, the Company shall conclusively be deemed to have
waived its rights thereto. The Executive's duty to refrain from appropriating
all such opportunities shall neither be limited by nor shall such duty limit the
application of the general law of California relating to the fiduciary duties of
an agent or employee.
B. If the Executive fails to notify in writing the Company of or so
appropriates any such opportunity without the Company's approval or waiver as
provided above, the Executive shall be deemed to have violated the provisions of
this Section 6 notwithstanding the following:
1. the capacity in which the Executive shall have
acquired such opportunity; or
2. the inability for any reason of the Company to
utilize the opportunity; or
3. the probable success of the Company in exploiting
such opportunity.
VII. Covenant Not To Compete. The Executive agrees
that during the term of employment under this Agreement, he shall
not do any of the following:
(a) Directly or indirectly engage or invest in, own, manage, operate,
control or participate in the ownership, management, operation or control of, be
employed by, become a consultant to, be associated or in any manner connected
with, or render services or advice (with or without compensation) to, any
Competing Business (as defined below); provided, however, that the Executive may
acquire and own not more than one percent (1%) of the issued and outstanding
shares of the capital stock of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any United States national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended.
(b) Directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor (whether
paid or unpaid), stockholder, partner, member or in any other individual or
representative capacity whatsoever, either for his own benefit or for the
benefit of any other person or entity, solicit, divert or take away as a
customer or client any person who or which is a customer or client of the
Company, is then being solicited as such a customer or client, or was such a
customer or client at any time during the preceding three years.
(c) Directly or indirectly, employ or seek to employ (other than on
behalf of the Company or one or more of its Affiliates) any employee of the
Company or of any Affiliate of the Company, or any person who was such an
employee at any time during the preceding two years, nor seek to persuade any
such employee or former employee to become employed by any direct or indirect
competitor of the Company or of any Affiliate of the Company.
(d) As used herein, (i) "Competing Business" shall mean any
individual, business, firm, company, partnership, joint venture, limited
liability company, organization or other entity which manages, advises or
consults with respect to the investment, appreciation and preservation of
capital of clients, customers or investors, performs any services which involve
(x) the management of an investment account or fund (or portions thereof or a
group of investments accounts or funds) or (y) the giving of advice for
compensation, with respect to the investment and/or reinvestment of assets or
funds (or any group of assets or funds), serves as an investment advisor or
otherwise engages in the business commonly referred to as capital management,
(ii) "Affiliate" shall mean, when used with respect to a specified person or
entity, another person or entity that, either directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person or entity specified and (iii) "control" means the power
through the ownership of voting securities or other equity interests, contract
or otherwise to direct the affairs of another person or entity.
VIII. Right to Specific Enforcement. The Executive hereby
acknowledges that, in the event the Confidential Information is disclosed or is
threatened to be disclosed contrary to the provisions of this Agreement, or in
the event that the Executive otherwise violates or threatens to violate any of
his obligations under this Agreement (including, but not limited to, the
provisions of Sections 5, 6 or 7), the remedies available to the Company at law
will be insufficient and the Company and/or PDP shall be entitled to equitable
remedies, including, without limitation, specific enforcement of this Agreement
and injunctive relief against the Executive, as well as remedies at law. The
Executive hereby acknowledges that the restrictions set forth in Sections 5, 6,
7 and 8 are reasonable and necessary, regardless of the reason for the
termination of employment, to protect the Company's legitimate business interest
and do not unreasonably restrict the Executive's ability to earn a livelihood or
impose any undue hardships.
IX. Termination by the Company for Cause.
A. The Executive's employment hereunder may be terminated by the
Company at any time with or without "Cause". For purposes of this Agreement, a
termination of employment is for "Cause" if the termination is evidenced by a
resolution adopted in good faith by a majority of the members of the Board of
Directors of the Company (not including the Executive) finding that the
Executive (a) committed an act of embezzlement or fraud or other dishonesty
against the Company or any of its affiliates, (b) neglected his assigned duties
with the Company (other than neglect resulting from the Executive's incapacity
due to physical or mental illness or from the assignment of duties to the
Executive that would constitute Good Reason (as hereinafter defined)), which
neglect continued for a period of at least thirty (30) days after a written
notice of such neglect was delivered to the Executive specifying the claimed
neglect, (c) was enjoined by the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc. or any other industry
regulatory authority from working in the investment advisory or securities
industry, (d) engaged in conduct demonstrably and materially injurious to the
Company or his fellow employees, (e) inadequately or improperly performed his
duties as an employee of the Company to the detriment of the Company's business,
(f) has been convicted by a court of competent jurisdiction of, or has pleaded
guilty or nolo contendere to, any felony or misdemeanor involving an investment
or investment-related business or (g) is engaged in a continuing violation of a
material provision of this Agreement.
B. In the event the employment of the Executive is terminated for
Cause pursuant to this Section 9, the Executive shall be entitled to receive,
his Base Salary through the termination date and any unpaid Annual Bonus
(pro-rated for the portion of the year the Executive was employed by the
Company) plus all other amounts to which the Executive is entitled through such
date under any employee benefit plan of the Company, at the time such payments
would otherwise be due, and thereupon the Company shall have no further
obligations under this Agreement, but the Executive shall continue to be bound
by Sections 5 and 8 hereof.
X. Termination by the Executive.
A. The Executive shall have the right, exercisable in his sole
discretion, to terminate his employment hereunder for any reason or for Good
Reason. Such election by the Executive to terminate his employment hereunder
shall be made by the Executive by notice in writing to the Company given not
less than sixty (60) days in advance of the date the Executive's employment is
to be terminated pursuant to this Section 10.
B. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the events or conditions
described in subsections (a) through (f) hereof:
1. an imposed change in the Executive's authority
which represents a material reduction in the authority
contemplated under this Agreement, unless agreed to by the
Executive prior to such change;
2. a failure to timely pay the Executive any compensation or benefits
to which he is entitled hereunder, which failure has not been remedied within
five (5) days after delivery to the Company by the Executive of written notice
of such failure;
3. the Company requiring the Executive to be based
at any place outside of Pasadena, California, except for required
travel on the Company's business;
4. the failure of PDP to grant to Executive on the Effective Date
options under the PDP 1992 Long-Term Stock Incentive Plan to purchase 100,000
shares of the common stock of PDP.
5. any material breach by PDP or the Company of any material
provision of this Agreement or the Compensation Allocation Agreement, including,
without limitation, any change in the formula for calculating the PCC
Compensation Pool (as defined in the Compensation Allocation Agreement), which
breach has not been remedied within thirty (30) days after delivery to PDP and
the Company by the Executive of written notice of the facts constituting the
breach, which notice shall reference the possibility of termination for "Good
Reason"; or
6. the failure of the Executive to be appointed as a
member of the Board of Directors or the Compensation Committee of
the Board of Directors of the Company.
C. If the Executive terminates his employment hereunder for any
reason other than Good Reason, the Executive shall be entitled to receive, his
Base Salary through the termination date and any unpaid Annual Bonus (pro-rated
for the portion of the year the Executive was employed by the Company) plus all
other amounts to which the Executive is entitled through such date under any
employee benefit plan of the Company, at the time such payments would otherwise
be due and thereupon, the Company shall have no further obligation under this
Agreement, but the Executive shall continue to be bound by Sections 5 and 8
hereof.
XI. Severance Payments.
A. If the Executive's employment with the Company is terminated (i)
by the Company other than pursuant to Sections 4 and 9 hereof or (ii) by the
Executive for Good Reason pursuant to Section 10 hereof, then, subject to the
provisions of Section 11.2 hereof, the Executive shall be entitled to the
benefits provided below;
1. the Company shall pay to the Executive the Executive's unpaid Base
Salary through the date of termination at the rate then in effect plus any
unpaid Annual Bonus and Residual Pool Bonus for such year through the date of
termination, plus all other amounts to which the Executive is entitled as of
such date under any employee benefit plan of the Company, at the time such
payments would otherwise be due;
2. the Company shall pay the Executive, in addition to the payments
under Section 11.1(a) above, as severance pay and in lieu of any further
compensation for periods subsequent to the date of termination of his
employment, in a single payment, an amount equal to (i) the sum of the Base
Salary then in effect plus (ii) the Annual Bonus paid to the Executive for the
calendar year prior to termination of the Executive's employment plus (iii) One
Million Dollars ($1,000,000), multiplied by the number of full years remaining
under this Agreement to the Expiration Date.
3. for the period from such termination through the earlier of (i)
twelve (12) months thereafter or (ii) the Expiration Date, the Company shall at
its expense continue, on behalf of the Executive and his dependents and
beneficiaries, life insurance, disability, medical, dental and hospitalization
benefits substantially similar to those which the Executive was receiving
immediately prior to his termination. Benefits otherwise receivable by the
Executive pursuant to this paragraph (c) shall be reduced to the extent
comparable benefits are actually received by the Executive during such period
following the Executive's termination, and any such benefits actually received
by the Executive shall be reported to the Company; and
4. one-third of all unvested stock options and stock appreciation
rights held by the Executive on the date of termination of his employment with
the Company shall vest and become immediately exercisable, one-third will vest
on the first anniversary of the date of termination of his employment with the
Company and one-third will vest and become exercisable on the second anniversary
of the date of termination of his employment with the Company.
B. The Executive shall not be required to mitigate the amount of any
payment provided for in Section 11.1 hereof by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent employment,
except as provided in paragraph (c) of Section 11.1 hereof.
C. Any severance payment payable to Executive under this Section 11
shall be paid no sooner than seven (7) calendar days after Executive executes a
Company severance agreement which contains, among other provisions, a waiver of
rights under California Civil Code ss.1542, and the following release of all
claims:
J. Roger Engemann hereby forever releases and discharges Pasadena Capital
Corporation, its past and present directors, managers, officers, shareholders,
employees, agents, attorneys, servants, subsidiaries, divisions, parent
corporations, affiliates, successors and assigns from any and all claims,
charges, complaints, liens, demands, causes of action, obligations, damages and
liabilities, known or unknown, that he had, now has, or may hereafter claim to
have, including, but not limited to, any claims in any manner arising out of or
relating to employee's hiring by, employment with, or termination of employment
with Pasadena Capital Corporation, or to any and all claims, rights, demands and
causes of action including, but not limited to, breach of any employment
contract or agreement, oral or written, whether express or implied in fact or
law, wrongful termination in violation of public policy, breach of the covenant
of good faith and fair dealing, intentional or negligent infliction of emotional
distress, fraud, defamation, violation of privacy, interference with prospective
economic advantage, failure to pay wages due or other monies owed, failure to
pay pension benefits, discrimination in violation of ERISA, discrimination on
the basis of sex, race, religion, age, national origin, sexual orientation,
pregnancy, medical condition, physical disability, mental disability, marital
status, or any other terms of employment arising under statutory or common law.
XII. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company and PDP and their respective successors and assigns, and upon the
Executive and his heirs, executors, administrators and legal representatives.
This Agreement shall not be assignable by the Executive.
XIII. Headings.
The headings of the sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning thereof.
XIV. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company and PDP and their respective successors and assigns, and upon the
Executive and his heirs, executors, administrators and legal representatives.
This Agreement shall not be assignable by the Executive.
XV. Headings.
The headings of the sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning thereof.
XVI. Interpretation.
In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had never been contained
herein. If, moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
activity or subject, it shall be construed by limiting and reducing it, so as to
be enforceable to the extent compatible with the applicable law as it shall then
appear.
XVII. Notices.
All notices under this Agreement shall be in writing and shall be
deemed to have been given at the time when mailed by registered or certified
mail, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Company: Pasadena Capital
Corporation
600 North Rosemead Boulevard
Pasadena, California
91107-2133
Attention: President (or
Chief Financial Officer,
if the Executive hereunder
is the President).
and
Phoenix Duff & Phelps
Corporation
56 Prospect Street
Hartford, Connecticut
06115-0480
Attention: Thomas N.
Steenberg, Esq.
Vice President and General
Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
To PDP: Phoenix Duff & Phelps
Corporation
56 Prospect Street
Hartford, Connecticut
06115-0480
Attention: Chief Executive
Officer
Telephone: (860) 403-5365
Facsimile: (860) 403-5545
and
Phoenix Duff & Phelps
Corporation
56 Prospect Street
Hartford, Connecticut
06115-0480
Attention: Thomas N.
Steenberg, Esq.
Vice President and
General Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
To the Executive: J. Roger Engemann
731 South Madre Street
Pasadena, California 91107
provided, however, that any notice of change of address shall be
effective only upon receipt.
XVIII. Waivers.
No waiver of any breach of any provision of this Agreement shall be
effective unless made by a written instrument signed by the parties so waiving
such breach. If either party should so waive any breach of any provision of this
Agreement, he or it shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.
XIX. Complete Agreement; Amendments.
The foregoing is the entire agreement of the parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral and written, between the parties as to the subject matter
hereof, and may not be amended, supplemented, canceled or discharged except by
written instrument executed by all parties hereto. The parties acknowledge that
they are also parties to a certain Noncompetition/Nonsolicitation Agreement,
dated as of the date of this Agreement, which deals with separate matters.
XX. Governing Law.
This Agreement is to be governed by and construed in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of law.
XXI. Counterparts.
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the same
counterpart.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date
first above written.
PASADENA CAPITAL CORPORATION
By: /s/ James E. Mair /s/
J. Roger Engemann
Name: James E.
Mair J. ROGER ENGEMANN
Title: Executive Vice President
PHOENIX DUFF & PHELPS
CORPORATION
By: /s/ John S. Tilson
Name: John S. Tilson By: /s/ Philip R.
McLoughlin
Title: Executive Vice
President Name: Philip R. McLoughlin
Title: Chairman of the
Board and
Chief
Executive Officer
<PAGE>
EXHIBIT H-2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 9th day of June, 1997 by and between PASADENA CAPITAL CORPORATION, a
California corporation (the "Company"), and JOHN S. TILSON (the "Executive").
This Agreement is binding upon the parties hereto; provided, however, that the
employment relationship hereinafter established shall become effective (the
"Effective Date") only upon and contemporaneously with the closing of the merger
(the "Merger") contemplated pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated as of the date hereof by and among the Company,
Phoenix Duff & Phelps Corporation, a Delaware corporation ("PDP"), and Phoenix
Apollo Corp., a California corporation. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Compensation Allocation Agreement dated as of June 9, 1997 (the "Compensation
Allocation Agreement") by and among PDP, the Company and certain individuals, a
copy of which is attached hereto as Exhibit A and incorporated herein by
reference.
I. Position and Responsibilities.
A. The Executive shall serve in an executive
capacity as Executive Vice President
of the Company and Director of the Company, a member of the Compensation
Committee of the Board of Directors of the Company, and shall perform such
functions and undertake such responsibilities as are customarily associated with
such capacities. The Executive shall also hold those other directorships and
offices in the Company and any of its affiliates to which, from time to time, he
may be elected or appointed during the term of this Agreement.
B. The Executive shall devote his full working time and skill to the
business and affairs of the Company and its affiliates and to the promotion of
its and their interests; provided, however, that the Executive may be involved
in such civic and charitable activities as he shall desire so long as such
activities do not materially interfere with his duties on behalf of the Company.
In any event, the Executive shall devote such time to the affairs of the Company
and its affiliates as shall be necessary to properly and adequately carry out
his duties hereunder.
C. All securities investments made by the Executive are subject to
the Company's Statement of Policy on Personal Trading as from time to time
hereafter amended, which is specifically incorporated by this reference into
this Agreement.
II. Term of Employment.
A. The term of the Executive's employment hereunder shall commence on
the Effective Date and terminate on the tenth anniversary date of the Effective
Date (the "Expiration Date"), unless sooner terminated as provided in this
Agreement.
B. Notwithstanding anything to the contrary set
forth in this Agreement, the Executive's employment may also be
terminated pursuant to Sections 4, 9 or 10 hereof.
III. Compensation and Benefits.
A. To incentivize the Executive to enter this Agreement and to remain
in the employ of the Company for the full term of this Agreement, at the
Settlement Time (as defined in the Merger Agreement) the Company shall pay the
Executive a one-time payment (the "Retention Payment") in the amount of Two
Million Three Hundred Thousand Dollars ($2,300,000)
B. The Company shall pay to the Executive, out of the PCC
Compensation Pool established under the Compensation Allocation Agreement, for
the services to be rendered by the Executive hereunder a base salary (the "Base
Salary") at the rate of $500,000 per annum, which salary shall be eligible for
increases at the discretion of the chief executive officer of the Company. The
Base Salary as of the Effective Date shall not be reduced during the term of
this Agreement. The Base Salary shall be payable in accordance with the
Company's customary payroll practices.
C. During the term of his employment hereunder and subject to the
terms of this Agreement, the Company shall pay to the Executive out of the PCC
Compensation Pool established under the Compensation Allocation Agreement (i) an
annual bonus (the "Annual Bonus"), payable monthly based upon the Company's good
faith estimates of the amount of the Annual Bonus, with a final correcting
adjustment in the first month of each calendar year or the last month of the
term of this Agreement with respect to the final partial calendar year of the
term hereof, in an aggregate annual amount equal to one percent (1%) of the sum
of (a) one hundred percent (100%) of all Management Fees for such year earned
from sources other than PCC Mutual Funds and (b) fifty percent (50%) of all
Management Fees for such year receivable from PCC Mutual Funds and (ii) annually
for the preceding year within ninety (90) days after December 31 of the
succeeding year, an amount equal to not less than 15% nor greater than 25%,
including in each case all required Company payroll taxes and Company retirement
benefit expenses applicable thereto (the "Residual Pool Bonus") of the Residual
Compensation Pool; provided, however, that for purposes of clause (i) of this
sentence, for any given year in which Management Fees exceed an amount equal to
two hundred percent (200%) of the Management Fees for fiscal year 1997 (the
"Base Management Fees"), the portion of the Annual Bonus amount payable to the
Executive based on Management Fees for such fiscal year in excess of the Base
Management Fees shall be equal to one-half of one percent (0.5%). Changes
permitted hereunder in the Residual Pool Bonus within the 15% to 25% range noted
above shall be at the discretion of the chief executive officer of the Company.
In addition to the Annual Bonus and the Residual Pool Bonus,
the Executive shall be eligible to receive such additional incentive
compensation payments, if any, as may be determined by the chief executive
officer of the Company.
D. During the term of this Agreement, the Executive shall be entitled
to participate in, and receive benefits from, such insurance, medical,
disability, or other employee benefit plans of the Company as may be in effect
at any time during the term of his employment by the Company.
E. The Company agrees to reimburse the Executive for all reasonable
and necessary business expenses reasonably incurred by him on behalf of the
Company in the course of his duties hereunder upon the presentation by the
Executive of appropriate expense statements or vouchers therefor or such other
supporting information as the Company may reasonably request.
F. The Executive shall be entitled each year of this
Agreement to paid vacation in accordance with the Company's usual
practices.
G. All payments required to be made by the Company to the Executive
under this Agreement shall be subject to (a) the limitations of the Compensation
Allocation Agreement and (b) the withholding of such amount relating to taxes
and other governmental assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
IV. Death; Incapacity.
A. If, during the period of the Executive's employment hereunder,
because of any physical or mental disability or incapacity (a "Disability"), the
Executive shall fail for a period of 180 consecutive days, or for shorter
periods aggregating 180 days during any twelve month period, to render the
services contemplated hereunder, then the Company may terminate the Executive's
employment hereunder by notice from the Company to the Executive, effective on
the giving of such notice. Each month during any period of Disability of the
Executive during the term of this Agreement, the Company shall continue to pay
to the Executive an amount equal to (a) the sum of (i) the Base Salary to which
the Executive is entitled pursuant to Section 3.2 hereof at the rate in effect
immediately prior to the occurrence of the Disability plus (ii) the Annual Bonus
paid to Executive for the calendar year prior to such Disability divided by (b)
twelve (12).
B. In the event of the death of the Executive during the term of this
Agreement, the Executive's employment hereunder shall terminate on the date of
death of the Executive, and thereupon the Company shall have no further
obligation to Executive.
C. The Company shall have the right to obtain for its benefit an
appropriate life insurance policy on the life of the Executive, naming the
Company as the beneficiary. If requested by the Company, the Executive agrees to
cooperate with the Company in obtaining such insurance policy.
V. Other Activities During Employment.
A. The Executive shall not during the period of the Executive's
employment with the Company undertake or engage in any other employment,
occupation or business enterprise. Notwithstanding the foregoing, this Section
5.1 shall not be deemed to (a) prohibit the Executive from serving as a director
of another entity, with the prior approval of the chief executive officer of the
Company, or (b) prevent the Executive from engaging in reasonable activities not
in competition with the Company with respect to personal investments of the
Executive to the extent consistent with Executive's obligations to the Company
under this Agreement.
B. The Executive shall not at any time during the period of the
Executive's employment with the Company or after the termination thereof
directly or indirectly divulge, furnish, use, publish or make accessible to any
person or entity any Confidential Information (as hereinafter defined) except in
connection with the performance of his duties hereunder. Any records of
Confidential Information prepared by the Executive or which come into the
Executive's possession during the term of this Agreement are and remain the
property of the Company or its affiliates, as the case may be, and upon
termination of the Executive's employment all such records and copies thereof
shall be either left with or returned to such entity.
C. The term "Confidential Information" includes, but is not limited
to, the following items, whether existing now or created in the future and
whether or not subject to trade secret or other statutory protection: (a) all
knowledge or information concerning the business, operations and assets of the
Company and its affiliates which is not readily available to the public, such
as: internal operating procedures; investment strategies; sales data and client
lists; financial plans, projections and reports; and investment company
programs, plans and products; (b) all property owned, licensed and/or developed
for the Company and/or its affiliates or any of their respective clients and not
readily available to the public, such as computer systems, programs and software
devices, including information about the design, methodology and documentation
therefor; (c) information about or personal to the Company's and/or its
affiliates' clients; (d) information, materials, products or other tangible or
intangible assets in the Company's and/or its affiliates' possession or under
any of their control which is proprietary to, or confidential to or about, any
other person or entity; and (e) records and repositories of all of the
foregoing, in whatever form maintained.
The foregoing notwithstanding, the following shall not be
considered Confidential Information: (aa) general skills and experience gained
by providing service to the Company; (bb) information publicly available or
generally known within the Company's trade or industry; (cc) information
independently developed by the Executive other than in the course of the
performance of his duties hereunder; and (dd) information which becomes
available to the Executive on a non-confidential basis from sources other than
the Company or its affiliates, provided the Executive does not know or have
reason to know that such sources are prohibited by contractual, legal or
fiduciary obligation from transmitting the information. Failure to mark any
material or information "confidential" shall not affect the confidential nature
thereof.
D. The rights and obligations created by this Section 5 are
independent of, and are in addition to, the rights, obligations and liabilities
created by the Uniform Secrets Act, California Civil Code section 3426 et seq.
VI. Corporate Opportunities.
A. If the Executive, during his employment, shall become aware of any
business opportunity related to the business of the Company, the Executive shall
not appropriate for himself or for any other person other than the Company or
any Affiliate (as defined below) of the Company any such opportunity unless, as
to any particular opportunity, the Company waives its rights to such opportunity
after receiving written notice thereof from the Executive. If the Company fails
to act within ninety (90) days following receipt written notice from the
Executive of such opportunity, the Company shall conclusively be deemed to have
waived its rights thereto. The Executive's duty to refrain from appropriating
all such opportunities shall neither be limited by nor shall such duty limit the
application of the general law of California relating to the fiduciary duties of
an agent or employee.
B. If the Executive fails to notify in writing the Company of or so
appropriates any such opportunity without the Company's approval or waiver as
provided above, the Executive shall be deemed to have violated the provisions of
this Section 6 notwithstanding the following:
1. the capacity in which the Executive shall have
acquired such opportunity; or
2. the inability for any reason of the Company to
utilize the opportunity; or
3. the probable success of the Company in exploiting
such opportunity.
VII. Covenant Not To Compete. The Executive agrees
that during the term of employment under this Agreement, he shall
not do any of the following:
(a) Directly or indirectly engage or invest in, own, manage, operate,
control or participate in the ownership, management, operation or control of, be
employed by, become a consultant to, be associated or in any manner connected
with, or render services or advice (with or without compensation) to, any
Competing Business (as defined below); provided, however, that the Executive may
acquire and own not more than one percent (1%) of the issued and outstanding
shares of the capital stock of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any United States national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended.
(b) Directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor (whether
paid or unpaid), stockholder, partner, member or in any other individual or
representative capacity whatsoever, either for his own benefit or for the
benefit of any other person or entity, solicit, divert or take away as a
customer or client any person who or which is a customer or client of the
Company, is then being solicited as such a customer or client, or was such a
customer or client at any time during the preceding three years.
(c) Directly or indirectly, employ or seek to employ (other than on
behalf of the Company or one or more of its Affiliates) any employee of the
Company or of any Affiliate of the Company, or any person who was such an
employee at any time during the preceding two years, nor seek to persuade any
such employee or former employee to become employed by any direct or indirect
competitor of the Company or of any Affiliate of the Company.
(d) As used herein, (i) "Competing Business" shall mean any
individual, business, firm, company, partnership, joint venture, limited
liability company, organization or other entity which manages, advises or
consults with respect to the investment, appreciation and preservation of
capital of clients, customers or investors, performs any services which involve
(x) the management of an investment account or fund (or portions thereof or a
group of investments accounts or funds) or (y) the giving of advice for
compensation, with respect to the investment and/or reinvestment of assets or
funds (or any group of assets or funds), serves as an investment advisor or
otherwise engages in the business commonly referred to as capital management,
(ii) "Affiliate" shall mean, when used with respect to a specified person or
entity, another person or entity that, either directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person or entity specified and (iii) "control" means the power
through the ownership of voting securities or other equity interests, contract
or otherwise to direct the affairs of another person or entity.
VIII. Right to Specific Enforcement. The Executive hereby
acknowledges that, in the event the Confidential Information is disclosed or is
threatened to be disclosed contrary to the provisions of this Agreement, or in
the event that the Executive otherwise violates or threatens to violate any of
his obligations under this Agreement (including, but not limited to, the
provisions of Sections 5, 6 or 7), the remedies available to the Company at law
will be insufficient and the Company and/or PDP shall be entitled to equitable
remedies, including, without limitation, specific enforcement of this Agreement
and injunctive relief against the Executive, as well as remedies at law. The
Executive hereby acknowledges that the restrictions set forth in Sections 5, 6,
7 and 8 are reasonable and necessary, regardless of the reason for the
termination of employment, to protect the Company's legitimate business interest
and do not unreasonably restrict the Executive's ability to earn a livelihood or
impose any undue hardships.
IX. Termination by the Company for Cause.
A. The Executive's employment hereunder may be terminated by the
Company at any time for "Cause". For purposes of this Agreement, a termination
of employment is for "Cause" if the termination is evidenced by a resolution
adopted in good faith by a majority of the members of the Board of Directors of
the Company (not including the vote of the Executive) finding that the Executive
(a) committed an act of embezzlement or fraud or other act of dishonesty against
the Company or any of its affiliates, (b) neglected his assigned duties with the
Company (other than neglect resulting from the Executive's incapacity due to
physical or mental illness), which neglect continued for a period of at least
thirty (30) days after a written notice of such neglect was delivered to the
Executive specifying the claimed neglect, (c) was enjoined by the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc. or any
other industry regulatory authority from working in the investment advisory or
securities industry, (d) engaged in conduct demonstrably and materially
injurious to the Company or his fellow employees, (e) inadequately or improperly
performed his duties as an employee of the Company to the detriment of the
Company's business, (f) has been convicted by a court of competent jurisdiction
of, or has pleaded guilty or nolo contendere to, any felony or misdemeanor
involving an investment or investment-related business or (g) is engaged in a
continuing violation of a material provision of this Agreement.
B. In the event the employment of the Executive is terminated for
Cause pursuant to this Section 9, the Executive shall be entitled to receive his
unpaid Base Salary through the termination date and any unpaid Annual Bonus
(pro-rated for the portion of the year the Executive was employed by the
Company) plus all other amounts to which the Executive is entitled through such
date under any employee benefit plan of the Company, at the time such payments
would otherwise be due, and thereupon the Company shall have no further
obligations under this Agreement, but the Executive shall continue to be bound
by Sections 5 and 8 hereof.
C. Notwithstanding anything in this Agreement to the contrary, if the
employment of the Executive hereunder is terminated by the Company for Cause
prior to the day which is the fifth anniversary of the Effective Date (the
"Fifth Anniversary Date"), then the obligations of the Company to the Executive
hereunder (other than those under Section 9.2) shall cease immediately and the
Executive shall repay to the Company a pro-rated amount of the Retention Payment
paid by the Company to the Executive pursuant to Section 3.1 of this Agreement,
such repaid amount to be equal to $2.3 million multiplied by a fraction, the
numerator of which is the number of days from the termination of employment to
the Fifth Anniversary Date and the denominator of which is 1,825 (less any taxes
paid by Executive with respect to the amount to be repaid, and taking into
account the impact of Section 1341 of the Internal Revenue Code).
X. Termination by the Executive.
A. If the Executive terminates his employment hereunder for any
reason, the Executive shall be entitled to receive his unpaid Base Salary
through the termination date and any unpaid Annual Bonus (pro-rated for the
portion of the year the Executive was employed by the Company), plus all other
amounts to which the Executive is entitled through such date under any employee
benefit plan of the Company, at the time such payments would otherwise be due,
and thereupon the Company shall have no further obligations under this
Agreement, but the Executive shall continue to be bound by Sections 5 and 8
hereof.
B. Notwithstanding anything in this Agreement to the contrary, if the
Executive terminates his employment hereunder for any reason prior to the Fifth
Anniversary Date, then the obligations of the Company to the Executive hereunder
shall cease immediately and the Executive shall repay to the Company a pro-rated
amount of the Retention Payment paid by the Company to the Executive pursuant to
Section 3.1 of this Agreement, such repaid amount to be equal to $2.3 million
multiplied by a fraction, the numerator of which is the number of days from the
termination of employment to the Fifth Anniversary Date and the denominator of
which is 1,825 (less any taxes paid by Executive with respect to the amount to
be repaid, and taking into account the impact of Section 1341 of the Internal
Revenue Code).
XI. Stock Options.
If the Executive fails to receive, on the Effective Date,
options under the PDP 1992 Long-Term Stock Incentive Plan to purchase 50,000
shares of the common stock of PDP, then this employment of Executive hereunder
shall be deemed to have been terminated without Cause.
XII. Right of Offset.
The Company may offset any amount due it from Executive against any
amounts due to Executive under Sections 3, 4 or 7 of this Agreement.
XIII. Severance
Any severance payment payable to Executive under this Agreement
shall be paid no sooner than seven (7) calendar days after Executive executes a
Company severance agreement which contains, among other provisions, a waiver of
rights under California Civil Code ss.1542, and the following release of all
claims:
John S. Tilson hereby forever releases and
discharges Pasadena Capital Corporation, its past and present directors,
managers, officers, shareholders, employees, agents, attorneys, servants,
subsidiaries, divisions, parent corporations, affiliates, successors and assigns
from any and all claims, charges, complaints, liens, demands, causes of action,
obligations, damages and liabilities, known or unknown, that he had, now has, or
may hereafter claim to have, including, but not limited to, any claims in any
manner arising out of or relating to employee's hiring by, employment with, or
termination of employment with Pasadena Capital Corporation, or to any and all
claims, rights, demands and causes of action including, but not limited to,
breach of any employment contract or agreement, oral or written, whether express
or implied in fact or law, wrongful termination in violation of public policy,
breach of the covenant of good faith and fair dealing, intentional or negligent
infliction of emotional distress, fraud, defamation, violation of privacy,
interference with prospective economic advantage, failure to pay wages due or
other monies owed, failure to pay pension benefits, discrimination in violation
of ERISA, discrimination on the basis of sex, race, religion, age, national
origin, sexual orientation, pregnancy, medical condition, physical disability,
mental disability, marital status, or any other terms of employment arising
under statutory or common law.
XIV. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, and upon the Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by the Executive.
XV. Headings.
The headings of the sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning thereof.
XVI. Interpretation.
In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had never been contained
herein. If, moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
activity or subject, it shall be construed by limiting and reducing it, so as to
be enforceable to the extent compatible with the applicable law as it shall then
appear.
XVII. Notices.
All notices under this Agreement shall be in writing and shall be
deemed to have been given at the time when mailed by registered or certified
mail, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Company: Pasadena Capital
Corporation
600 North Rosemead Boulevard
Pasadena, California
91107-2133
Attention: President (or
Chief Financial Officer,
if the Executive hereunder
is the President).
and
Phoenix Duff & Phelps
Corporation
56 Prospect Street
Hartford, Connecticut
06115-0480
Attention: Thomas N.
Steenberg, Esq.
Vice President and General
Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
To the Executive: John S. Tilson
4157 Banyan Avenue
Seal Beach, California 90740
provided, however, that any notice of change of address shall be
effective only upon receipt.
XVIII. Waivers.
No waiver of any breach of any provision of this Agreement shall be
effective unless made by a written instrument signed by the parties so waiving
such breach. If either party should so waive any breach of any provision of this
Agreement, he or it shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.
XIX. Complete Agreement; Amendments.
The foregoing is the entire agreement of the parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral and written, between the parties as to the subject matter
hereof, and may not be amended, supplemented, canceled or discharged except by
written instrument executed by both parties hereto. The parties acknowledge that
they are also parties to a certain Noncompetition/Nonsolicitation Agreement,
dated as of the date of this Agreement, which deals with separate matters.
XX. Governing Law.
This Agreement is to be governed by and construed in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of law.
XXI. Counterparts.
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the same
counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date
first above written.
PASADENA CAPITAL CORPORATION
By: /s/ J. Roger
Engemann
Name: J. Roger
Engemann
Title: Chairman of
the Board, President
and Chief
Executive Officer
/s/ John S.
Tilson
JOHN S. TILSON
<PAGE>
EXHIBIT H-3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 9th day of June, 1997 by and between PASADENA CAPITAL CORPORATION, a
California corporation (the "Company"), and JAMES E. MAIR (the "Executive").
This Agreement is binding upon the parties hereto; provided, however, that the
employment relationship hereinafter established shall become effective (the
"Effective Date") only upon and contemporaneously with the closing of the merger
(the "Merger") contemplated pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated as of the date hereof by and among the Company,
Phoenix Duff & Phelps Corporation, a Delaware corporation ("PDP"), and Phoenix
Apollo Corp., a California corporation. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Compensation Allocation Agreement dated as of June 9, 1997 (the "Compensation
Allocation Agreement") by and among PDP, the Company and certain individuals, a
copy of which is attached hereto as Exhibit A and incorporated herein by
reference.
I. Position and Responsibilities.
A. The Executive shall serve in an executive
capacity as Executive Vice President
of the Company and Director of the Company, a member of the Compensation
Committee of the Board of Directors of the Company, and shall perform such
functions and undertake such responsibilities as are customarily associated with
such capacities. The Executive shall also hold those other directorships and
offices in the Company and any of its affiliates to which, from time to time, he
may be elected or appointed during the term of this Agreement.
B. The Executive shall devote his full working time and skill to the
business and affairs of the Company and its affiliates and to the promotion of
its and their interests; provided, however, that the Executive may be involved
in such civic and charitable activities as he shall desire so long as such
activities do not materially interfere with his duties on behalf of the Company.
In any event, the Executive shall devote such time to the affairs of the Company
and its affiliates as shall be necessary to properly and adequately carry out
his duties hereunder.
C. All securities investments made by the Executive are subject to
the Company's Statement of Policy on Personal Trading as from time to time
hereafter amended, which is specifically incorporated by this reference into
this Agreement.
II. Term of Employment.
A. The term of the Executive's employment hereunder shall commence on
the Effective Date and terminate on the tenth anniversary date of the Effective
Date (the "Expiration Date"), unless sooner terminated as provided in this
Agreement.
B. Notwithstanding anything to the contrary set
forth in this Agreement, the Executive's employment may also be
terminated pursuant to Sections 4, 9 or 10 hereof.
III. Compensation and Benefits.
A. To incentivize the Executive to enter this Agreement and to remain
in the employ of the Company for the full term of this Agreement, at the
Settlement Time (as defined in the Merger Agreement) the Company shall pay the
Executive a one-time payment (the "Retention Payment") in the amount of Two
Million Three Hundred Thousand Dollars ($2,300,000)
B. The Company shall pay to the Executive, out of the PCC
Compensation Pool established under the Compensation Allocation Agreement, for
the services to be rendered by the Executive hereunder a base salary (the "Base
Salary") at the rate of $500,000 per annum, which salary shall be eligible for
increases at the discretion of the chief executive officer of the Company. The
Base Salary as of the Effective Date shall not be reduced during the term of
this Agreement. The Base Salary shall be payable in accordance with the
Company's customary payroll practices.
C. During the term of his employment hereunder and subject to the
terms of this Agreement, the Company shall pay to the Executive out of the PCC
Compensation Pool established under the Compensation Allocation Agreement (i) an
annual bonus (the "Annual Bonus"), payable monthly based upon the Company's good
faith estimates of the amount of the Annual Bonus, with a final correcting
adjustment in the first month of each calendar year or the last month of the
term of this Agreement with respect to the final partial calendar year of the
term hereof, in an aggregate annual amount equal to one percent (1%) of the sum
of (a) one hundred percent (100%) of all Management Fees for such year earned
from sources other than PCC Mutual Funds and (b) fifty percent (50%) of all
Management Fees for such year receivable from PCC Mutual Funds and (ii) annually
for the preceding year within ninety (90) days after December 31 of the
succeeding year, an amount equal to not less than 15% nor greater than 25%,
including in each case all required Company payroll taxes and Company retirement
benefit expenses applicable thereto (the "Residual Pool Bonus") of the Residual
Compensation Pool; provided, however, that for purposes of clause (i) of this
sentence, for any given year in which Management Fees exceed an amount equal to
two hundred percent (200%) of the Management Fees for fiscal year 1997 (the
"Base Management Fees"), the portion of the Annual Bonus amount payable to the
Executive based on Management Fees for such fiscal year in excess of the Base
Management Fees shall be equal to one-half of one percent (0.5%). Changes
permitted hereunder in the Residual Pool Bonus within the 15% to 25% range noted
above shall be at the discretion of the chief executive officer of the Company.
In addition to the Annual Bonus and the Residual Pool Bonus,
the Executive shall be eligible to receive such additional incentive
compensation payments, if any, as may be determined by the chief executive
officer of the Company.
D. During the term of this Agreement, the Executive shall be entitled
to participate in, and receive benefits from, such insurance, medical,
disability, or other employee benefit plans of the Company as may be in effect
at any time during the term of his employment by the Company.
E. The Company agrees to reimburse the Executive for all reasonable
and necessary business expenses reasonably incurred by him on behalf of the
Company in the course of his duties hereunder upon the presentation by the
Executive of appropriate expense statements or vouchers therefor or such other
supporting information as the Company may reasonably request.
F. The Executive shall be entitled each year of this
Agreement to paid vacation in accordance with the Company's usual
practices.
G. All payments required to be made by the Company to the Executive
under this Agreement shall be subject to (a) the limitations of the Compensation
Allocation Agreement and (b) the withholding of such amount relating to taxes
and other governmental assessments as the Company may reasonably determine it
should withhold pursuant to any applicable law, rule or regulation.
IV. Death; Incapacity.
A. If, during the period of the Executive's employment hereunder,
because of any physical or mental disability or incapacity (a "Disability"), the
Executive shall fail for a period of 180 consecutive days, or for shorter
periods aggregating 180 days during any twelve month period, to render the
services contemplated hereunder, then the Company may terminate the Executive's
employment hereunder by notice from the Company to the Executive, effective on
the giving of such notice. Each month during any period of Disability of the
Executive during the term of this Agreement, the Company shall continue to pay
to the Executive an amount equal to (a) the sum of (i) the Base Salary to which
the Executive is entitled pursuant to Section 3.2 hereof at the rate in effect
immediately prior to the occurrence of the Disability plus (ii) the Annual Bonus
paid to Executive for the calendar year prior to such Disability plus (iii) One
Million Dollars ($1,000,000), divided by (b) twelve (12).
B. In the event of the death of the Executive during the term of this
Agreement, the Executive's employment hereunder shall terminate on the date of
death of the Executive, and thereupon the Company shall have no further
obligation to Executive.
C. The Company shall have the right to obtain for its benefit an
appropriate life insurance policy on the life of the Executive, naming the
Company as the beneficiary. If requested by the Company, the Executive agrees to
cooperate with the Company in obtaining such insurance policy.
V. Other Activities During Employment.
A. The Executive shall not during the period of the Executive's
employment with the Company undertake or engage in any other employment,
occupation or business enterprise. Notwithstanding the foregoing, this Section
5.1 shall not be deemed to (a) prohibit the Executive from serving as a director
of another entity, with the prior approval of the chief executive officer of the
Company, or (b) prevent the Executive from engaging in reasonable activities not
in competition with the Company with respect to personal investments of the
Executive to the extent consistent with Executive's obligations to the Company
under this Agreement.
B. The Executive shall not at any time during the period of the
Executive's employment with the Company or after the termination thereof
directly or indirectly divulge, furnish, use, publish or make accessible to any
person or entity any Confidential Information (as hereinafter defined) except in
connection with the performance of his duties hereunder. Any records of
Confidential Information prepared by the Executive or which come into the
Executive's possession during the term of this Agreement are and remain the
property of the Company or its affiliates, as the case may be, and upon
termination of the Executive's employment all such records and copies thereof
shall be either left with or returned to such entity.
C. The term "Confidential Information" includes, but is not limited
to, the following items, whether existing now or created in the future and
whether or not subject to trade secret or other statutory protection: (a) all
knowledge or information concerning the business, operations and assets of the
Company and its affiliates which is not readily available to the public, such
as: internal operating procedures; investment strategies; sales data and client
lists; financial plans, projections and reports; and investment company
programs, plans and products; (b) all property owned, licensed and/or developed
for the Company and/or its affiliates or any of their respective clients and not
readily available to the public, such as computer systems, programs and software
devices, including information about the design, methodology and documentation
therefor; (c) information about or personal to the Company's and/or its
affiliates' clients; (d) information, materials, products or other tangible or
intangible assets in the Company's and/or its affiliates' possession or under
any of their control which is proprietary to, or confidential to or about, any
other person or entity; and (e) records and repositories of all of the
foregoing, in whatever form maintained.
The foregoing notwithstanding, the following shall not be
considered Confidential Information: (aa) general skills and experience gained
by providing service to the Company; (bb) information publicly available or
generally known within the Company's trade or industry; (cc) information
independently developed by the Executive other than in the course of the
performance of his duties hereunder; and (dd) information which becomes
available to the Executive on a non-confidential basis from sources other than
the Company or its affiliates, provided the Executive does not know or have
reason to know that such sources are prohibited by contractual, legal or
fiduciary obligation from transmitting the information. Failure to mark any
material or information "confidential" shall not affect the confidential nature
thereof.
D. The rights and obligations created by this Section 5 are
independent of, and are in addition to, the rights, obligations and liabilities
created by the Uniform Secrets Act, California Civil Code section 3426 et seq.
VI. Corporate Opportunities.
A. If the Executive, during his employment, shall become aware of any
business opportunity related to the business of the Company, the Executive shall
not appropriate for himself or for any other person other than the Company or
any Affiliate (as defined below) of the Company any such opportunity unless, as
to any particular opportunity, the Company waives its rights to such opportunity
after receiving written notice thereof from the Executive. If the Company fails
to act within ninety (90) days following receipt written notice from the
Executive of such opportunity, the Company shall conclusively be deemed to have
waived its rights thereto. The Executive's duty to refrain from appropriating
all such opportunities shall neither be limited by nor shall such duty limit the
application of the general law of California relating to the fiduciary duties of
an agent or employee.
B. If the Executive fails to notify in writing PDP of or so
appropriates any such opportunity without the Company's approval or waiver as
provided above, the Executive shall be deemed to have violated the provisions of
this Section 6 notwithstanding the following:
1. the capacity in which the Executive shall have
acquired such opportunity; or
2. the inability for any reason of the Company to
utilize the opportunity; or
3. the probable success of the Company in exploiting
such opportunity.
VII. Covenant Not To Compete. The Executive agrees
that during the term of employment under this Agreement, he shall
not do any of the following:
(a) Directly or indirectly engage or invest in, own, manage, operate,
control or participate in the ownership, management, operation or control of, be
employed by, become a consultant to, be associated or in any manner connected
with, or render services or advice (with or without compensation) to, any
Competing Business (as defined below); provided, however, that the Executive may
acquire and own not more than one percent (1%) of the issued and outstanding
shares of the capital stock of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on any United States national or regional securities exchange or have
been registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended.
(b) Directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor (whether
paid or unpaid), stockholder, partner, member or in any other individual or
representative capacity whatsoever, either for his own benefit or for the
benefit of any other person or entity, solicit, divert or take away as a
customer or client any person who or which is a customer or client of the
Company, is then being solicited as such a customer or client, or was such a
customer or client at any time during the preceding three years.
(c) Directly or indirectly, employ or seek to employ (other than on
behalf of the Company or one or more of its Affiliates) any employee of the
Company or of any Affiliate of the Company, or any person who was such an
employee at any time during the preceding two years, nor seek to persuade any
such employee or former employee to become employed by any direct or indirect
competitor of the Company or of any Affiliate of the Company.
(d) As used herein, (i) "Competing Business" shall mean any
individual, business, firm, company, partnership, joint venture, limited
liability company, organization or other entity which manages, advises or
consults with respect to the investment, appreciation and preservation of
capital of clients, customers or investors, performs any services which involve
(x) the management of an investment account or fund (or portions thereof or a
group of investments accounts or funds) or (y) the giving of advice for
compensation, with respect to the investment and/or reinvestment of assets or
funds (or any group of assets or funds), serves as an investment advisor or
otherwise engages in the business commonly referred to as capital management,
(ii) "Affiliate" shall mean, when used with respect to a specified person or
entity, another person or entity that, either directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person or entity specified and (iii) "control" means the power
through the ownership of voting securities or other equity interests, contract
or otherwise to direct the affairs of another person or entity.
VIII. Right to Specific Enforcement. The Executive hereby
acknowledges that, in the event the Confidential Information is disclosed or is
threatened to be disclosed contrary to the provisions of this Agreement, or in
the event that the Executive otherwise violates or threatens to violate any of
his obligations under this Agreement (including, but not limited to, the
provisions of Sections 5, 6 or 7), the remedies available to the Company at law
will be insufficient and the Company and/or PDP shall be entitled to equitable
remedies, including, without limitation, specific enforcement of this Agreement
and injunctive relief against the Executive, as well as remedies at law. The
Executive hereby acknowledges that the restrictions set forth in Sections 5, 6,
7 and 8 are reasonable and necessary, regardless of the reason for the
termination of employment, to protect the Company's legitimate business interest
and do not unreasonably restrict the Executive's ability to earn a livelihood or
impose any undue hardships.
IX. Termination by the Company for Cause.
A. The Executive's employment hereunder may be terminated by the
Company at any time with "Cause". For purposes of this Agreement, a termination
of employment is for "Cause" if the termination is evidenced by a resolution
adopted in good faith by a majority of the members of the Board of Directors of
the Company (not including the vote of the Executive) finding that the Executive
(a) committed an act of embezzlement or fraud or other act of dishonesty against
the Company or any of its affiliates, (b) neglected his assigned duties with the
Company (other than neglect resulting from the Executive's incapacity due to
physical or mental illness), which neglect continued for a period of at least
thirty (30) days after a written notice of such neglect was delivered to the
Executive specifying the claimed neglect, (c) was enjoined by the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc. or any
other industry regulatory authority from working in the investment advisory or
securities industry, (d) engaged in conduct demonstrably and materially
injurious to the Company or his fellow employees, (e) inadequately or improperly
performed his duties as an employee of the Company to the detriment of the
Company's business, (f) has been convicted by a court of competent jurisdiction
of, or has pleaded guilty or nolo contendere to, any felony or misdemeanor
involving an investment or investment-related business or (g) is engaged in a
continuing violation of a material provision of this Agreement.
B. In the event the employment of the Executive is terminated for
Cause pursuant to this Section 9, the Executive shall be entitled to receive his
unpaid Base Salary through the termination date and any unpaid Annual Bonus
(pro-rated for the portion of the year the Executive was employed by the
Company) plus all other amounts to which the Executive is entitled through such
date under any employee benefit plan of the Company, at the time such payments
would otherwise be due, and thereupon the Company shall have no further
obligations under this Agreement, but the Executive shall continue to be bound
by Sections 5 and 8 hereof.
C. Notwithstanding anything in this Agreement to the contrary, if the
employment of the Executive hereunder is terminated by the Company for Cause
prior to the day which is the fifth anniversary of the Effective Date (the
"Fifth Anniversary Date"), then the obligations of the Company to the Executive
hereunder (other than those under Section 9.2) shall cease immediately and the
Executive shall repay to the Company a pro-rated amount of the Retention Payment
paid by the Company to the Executive pursuant to Section 3.1 of this Agreement,
such repaid amount to be equal to $2.3 million multiplied by a fraction, the
numerator of which is the number of days from the termination of employment to
the Fifth Anniversary Date and the denominator of which is 1,825 (less any taxes
paid by Executive with respect to the amount to be repaid, and taking into
account the impact of Section 1341 of the Internal Revenue Code).
X. Termination by the Executive.
A. If the Executive terminates his employment hereunder for any
reason, the Executive shall be entitled to receive his unpaid Base Salary
through the termination date and any unpaid Annual Bonus (pro-rated for the
portion of the year the Executive was employed by the Company), plus all other
amounts to which the Executive is entitled through such date under any employee
benefit plan of the Company, at the time such payments would otherwise be due,
and thereupon the Company shall have no further obligations under this
Agreement, but the Executive shall continue to be bound by Sections 5 and 8
hereof.
B. Notwithstanding anything in this Agreement to the contrary, if the
Executive terminates his employment hereunder for any reason prior to the Fifth
Anniversary Date, then the obligations of the Company to the Executive hereunder
shall cease immediately and the Executive shall repay to the Company a pro-rated
amount of the Retention Payment paid by the Company to the Executive pursuant to
Section 3.1 of this Agreement, such repaid amount to be equal to $2.3 million
multiplied by a fraction, the numerator of which is the number of days from the
termination of employment to the Fifth Anniversary Date and the denominator of
which is 1,825 (less any taxes paid by Executive with respect to the amount to
be repaid, and taking into account the impact of Section 1341 of the Internal
Revenue Code).
XI. Stock Options.
If the Executive fails to receive, on the Effective Date,
options under the PDP 1992 Long-Term Stock Incentive Plan to purchase 50,000
shares of the common stock of PDP, then the employment of Executive hereunder
shall be deemed to have been terminated without Cause.
XII. Right of Offset.
The Company may offset any amount due it from Executive against any
amounts due to Executive under Sections 3, 4 or 7 of this Agreement.
XIII. Severance
Any severance payment payable to Executive under this Agreement
shall be paid no sooner than seven (7) calendar days after Executive executes a
Company severance agreement which contains, among other provisions, a waiver of
rights under California Civil Code ss.1542, and the following release of all
claims:
James E. Mair hereby forever releases and
discharges Pasadena Capital Corporation, its past and present directors,
managers, officers, shareholders, employees, agents, attorneys, servants,
subsidiaries, divisions, parent corporations, affiliates, successors and assigns
from any and all claims, charges, complaints, liens, demands, causes of action,
obligations, damages and liabilities, known or unknown, that he had, now has, or
may hereafter claim to have, including, but not limited to, any claims in any
manner arising out of or relating to employee's hiring by, employment with, or
termination of employment with Pasadena Capital Corporation, or to any and all
claims, rights, demands and causes of action including, but not limited to,
breach of any employment contract or agreement, oral or written, whether express
or implied in fact or law, wrongful termination in violation of public policy,
breach of the covenant of good faith and fair dealing, intentional or negligent
infliction of emotional distress, fraud, defamation, violation of privacy,
interference with prospective economic advantage, failure to pay wages due or
other monies owed, failure to pay pension benefits, discrimination in violation
of ERISA, discrimination on the basis of sex, race, religion, age, national
origin, sexual orientation, pregnancy, medical condition, physical disability,
mental disability, marital status, or any other terms of employment arising
under statutory or common law.
XIV. Assignment
This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, and upon the Executive and his heirs,
executors, administrators and legal representatives. This Agreement shall not be
assignable by the Executive.
XV. Headings.
The headings of the sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning thereof.
XVI. Interpretation.
In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had never been contained
herein. If, moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
activity or subject, it shall be construed by limiting and reducing it, so as to
be enforceable to the extent compatible with the applicable law as it shall then
appear.
XVII. Notices.
All notices under this Agreement shall be in writing and shall be
deemed to have been given at the time when mailed by registered or certified
mail, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Company: Pasadena Capital
Corporation
600 North Rosemead Boulevard
Pasadena, California
91107-2133
Attention: President (or
Chief Financial Officer,
if the Executive hereunder
is the President).
and
Phoenix Duff & Phelps
Corporation
56 Prospect Street
Hartford, Connecticut
06115-0480
Attention: Thomas N.
Steenberg, Esq.
Vice President and General
Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
To the Executive: James E. Mair
935 Fallen Leaf Road
Arcadia, California 91006
provided, however, that any notice of change of address shall be
effective only upon receipt.
XVIII. Waivers.
No waiver of any breach of any provision of this Agreement shall be
effective unless made by a written instrument signed by the parties so waiving
such breach. If either party should so waive any breach of any provision of this
Agreement, he or it shall not thereby be deemed to have waived any preceding or
succeeding breach of the same or any other provision of this Agreement.
XIX. Complete Agreement; Amendments.
The foregoing is the entire agreement of the parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral and written, between the parties as to the subject matter
hereof, and may not be amended, supplemented, canceled or discharged except by
written instrument executed by both parties hereto. The parties acknowledge that
they are also parties to a certain Noncompetition/Nonsolicitation Agreement,
dated as of the date of this Agreement, which deals with separate matters.
XX. Governing Law.
This Agreement is to be governed by and construed in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of law.
XXI. Counterparts.
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the same
counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date
first above written.
PASADENA CAPITAL CORPORATION
By: /s/ J. Roger
Engemann
Name: J. Roger
Engemann
Title: Chairman of
the Board, President
and Chief
Executive Officer
/s/ James E.
Mair
JAMES E. MAIR
<PAGE>
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<PAGE>
===================================================================
<PAGE>
===================================================================
Exhibit I-1
===================================================================
[J. Roger Engemann]
NONCOMPETITION/NONSOLICITATION AGREEMENT
THIS NONCOMPETITION/NONSOLICITATION AGREEMENT dated as of June 9,
1997 by and among PHOENIX DUFF & PHELPS CORPORATION, a Delaware corporation
("Phoenix Duff & Phelps"), PASADENA CAPITAL CORPORATION, a California
corporation (the "Company"), and J. ROGER ENGEMANN, a resident of California
(the "Executive").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of June
9, 1997 (the "Merger Agreement"), Phoenix Apollo Corp., a California corporation
and a wholly-owned subsidiary of Phoenix Duff & Phelps, is merging with and into
the Company with the Company remaining as the surviving corporation; and
WHEREAS, the Executive is a stockholder of the Company and, as such,
will become entitled to receive substantial payments in respect of his shares of
Common Stock of the Company upon consummation of the merger under the Merger
Agreement;
WHEREAS, pursuant to the terms of an employment agreement dated as of
the date hereof (the "Employment Agreement"), the Executive will be continuing
his employment as an officer of the Company; and
WHEREAS, Phoenix Duff & Phelps requires that, as a condition to the
Closing under the Merger Agreement, the Executive shall have entered into this
Agreement with the Company and Phoenix Duff & Phelps;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the
Employment Agreement.
Covenant. The Executive agrees that if the Company is not in default with
respect to its payment obligations to the Executive in its capacity as a former
stockholder of the Company under Article 3 of the Merger Agreement on the
effective date of the termination for any reason of the Executive's employment
with the Company, then for a period of one (1) year from the effective date of
the termination for any reason of the Executive's employment with the Company,
the Executive shall not do any of the following anywhere in the United States of
America or in Canada; provided, however, that if during such one (1) year period
the Company defaults on any such payment obligation, the restrictions on the
Executive set forth in this Agreement shall terminate permanently: Ownership Or
Investment. Directly or indirectly engage or invest in, own, manage, operate,
control or participate in the ownership, management, operation or control of, be
employed by, become a consultant to, be associated or in any manner connected
with, or render services or advice (with or without compensation) to, any
Competing Business; provided, however, that the Executive may acquire and own
not more than one percent (1%) of the issued and outstanding shares of the
capital stock of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any United
States national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended. Solicitation
of Clientele. Directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor (whether
paid or unpaid), stockholder, partner, member or in any other individual or
representative capacity whatsoever, either for the Executive's own benefit or
for the benefit of any other person or entity, solicit, divert or take away as a
customer or client any person who or which is a customer or client of the
Company as of the date of termination, is then being solicited as such a
customer or client, or was such a customer or client at any time during the
three years preceding the date of termination. Solicitation Of Employees Or
Others. Directly or indirectly, employ or seek to employ (other than on behalf
of the Company or one or more of its Affiliates) any employee of the Company or
of any Affiliate of the Company, or any person who was such an employee at any
time during the two years preceding the effective date of termination of the
Executive's employment with the Company, nor seek to persuade any such employee
or former employee to become employed by any direct or indirect competitor of
the Company or of any Affiliate of the Company. Notwithstanding the foregoing,
upon the termination of the Executive's employment with the Company or its
affiliates, the Executive may offer employment to and may hire Carolyn Adams
and/or Barbara Parsons. Enforcement. The Executive acknowledges that the
restrictions set forth in Section 2 are reasonable and necessary, regardless of
the reason for the termination of employment, to protect the Company's
legitimate business interests and do not unreasonably restrict her ability to
earn a livelihood or impose any undue hardships. The Executive also hereby
acknowledges that a breach of Section 2 shall irreparably damage the Company,
for which there shall be no adequate remedy at law. Accordingly, if the
Executive breaches or threatens to breach any of the provisions in Section 2,
the Company and/or Phoenix Duff & Phelps shall be entitled to a preliminary or
permanent injunction to prevent the continuation of this harm and such other
appropriate relief, including damages, available at law. Judicial Modification.
The Executive agrees that if a court of competent jurisdiction determines that
the length of time, the geographical scope or any other restriction or portion
thereof set forth in this Agreement is overly restrictive and on that ground
unenforceable, such restrictions shall be interpreted and applied to include as
much of the duration, geographic scope and other restrictions as will render the
covenants in this Agreement valid and enforceable to the fullest extent
permitted by applicable law, and as so interpreted and applied such covenants
shall remain in full force and effect. The Executive further agrees that if a
court of competent jurisdiction determines that any provision of this Agreement
is invalid or against public policy, the remaining provisions of this Agreement
shall not be affected thereby, and shall remain in full force and effect.
Miscellaneous. Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties with respect to the subject matters
herein, and supersedes, and replaces any prior agreements and understandings,
whether oral or written, between them with respect to such matters. Successors
And Assigns. All covenants and agreements herein shall bind and inure to the
benefit of the respective heirs, executors, administrators, successors and
assigns of the parties hereto. Headings. The headings used herein are
descriptive only and for the convenience of identifying provisions, and are not
determinative of the meaning or effect of any such provisions. Applicable Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts between California residents
entered into and to be performed entirely within the State of California.
Attorneys' Fees; Costs. In the event of any litigation or proceeding or other
dispute arising as a result of this Agreement, the prevailing party shall be
entitled, in addition to any other damages accessed, to its reasonable
attorneys' fees and all other costs and expenses incurred in connection with
settling or resolving such dispute. The attorneys' fees which the prevailing
party shall be entitled to recover shall include any fees for prosecuting or
defending any appeal and supplemental proceedings until the final judgment is
satisfied in full, and for any post-judgment proceedings to collect or enforce
the judgment. Waivers. The failure of either party at any time to require
performance by the other party of any provision hereof shall not affect in any
way the right to require such performance at any time thereafter, nor shall the
waiver by either party of a breach of any provision hereof be taken or held to
be a waiver of any subsequent breach of the same provision or any other
provisions. The provisions of this Agreement may be waived, altered, amended or
repealed in whole or in part only upon the written consent of both parties to
this Agreement, and not by any course of dealing, oral understandings,
detrimental reliance or any act or failure to act on the part of any party or
parties.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Noncompetition/Nonsolicitation Agreement, effective as of the date first written
above.
PASADENA CAPITAL CORPORATION
By:___________________________________
Name:
Title:
PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Philip R. McLoughlin
Name: Philip R. McLoughlin
Title: Chairman of the
Board and
Chief Executive
Officer
/s/ J. Roger Engemann
J. Roger Engemann
<PAGE>
Exhibit I-2
[John S. Tilson]
NONCOMPETITION/NONSOLICITATION AGREEMENT
THIS NONCOMPETITION/NONSOLICITATION AGREEMENT dated as of June 9,
1997 by and among PHOENIX DUFF & PHELPS CORPORATION, a Delaware corporation
("Phoenix Duff & Phelps"), PASADENA CAPITAL CORPORATION, a California
corporation (the "Company"), and JOHN S. TILSON, a resident of California (the
"Executive").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of June
9, 1997 (the "Merger Agreement"), Phoenix Apollo Corp., a California corporation
and a wholly-owned subsidiary of Phoenix Duff & Phelps, is merging with and into
the Company with the Company remaining as the surviving corporation; and
WHEREAS, the Executive is a stockholder of the Company and, as such,
will become entitled to receive substantial payments in respect of his shares of
Common Stock of the Company upon consummation of the merger under the Merger
Agreement;
WHEREAS, pursuant to the terms of an employment agreement dated as of
the date hereof (the "Employment Agreement"), the Executive will be continuing
his employment as an officer of the Company; and
WHEREAS, Phoenix Duff & Phelps requires that, as a condition to the
Closing under the Merger Agreement, the Executive shall have entered into this
Agreement with the Company and Phoenix Duff & Phelps;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the
Employment Agreement.
Covenant. The Executive agrees that if the Company is not in default with
respect to its payment obligations to the Executive in its capacity as a former
stockholder of the Company under Article 3 of the Merger Agreement on the
effective date of the termination for any reason of the Executive's employment
with the Company, then for a period of one (1) year from the effective date of
the termination for any reason of the Executive's employment with the Company,
the Executive shall not do any of the following anywhere in the United States of
America or in Canada; provided, however, that if during such one (1) year period
the Company defaults on any such payment obligation, the restrictions on the
Executive set forth in this Agreement shall terminate permanently: Ownership Or
Investment. Directly or indirectly engage or invest in, own, manage, operate,
control or participate in the ownership, management, operation or control of, be
employed by, become a consultant to, be associated or in any manner connected
with, or render services or advice (with or without compensation) to, any
Competing Business; provided, however, that the Executive may acquire and own
not more than one percent (1%) of the issued and outstanding shares of the
capital stock of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any United
States national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended. Solicitation
of Clientele. Directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor (whether
paid or unpaid), stockholder, partner, member or in any other individual or
representative capacity whatsoever, either for the Executive's own benefit or
for the benefit of any other person or entity, solicit, divert or take away as a
customer or client any person who or which is a customer or client of the
Company as of the date of termination, is then being solicited as such a
customer or client, or was such a customer or client at any time during the
three years preceding the date of termination. Solicitation Of Employees Or
Others. Directly or indirectly, employ or seek to employ (other than on behalf
of the Company or one or more of its Affiliates) any employee of the Company or
of any Affiliate of the Company, or any person who was such an employee at any
time during the two years preceding the effective date of termination of the
Executive's employment with the Company, nor seek to persuade any such employee
or former employee to become employed by any direct or indirect competitor of
the Company or of any Affiliate of the Company. Enforcement. The Executive
acknowledges that the restrictions set forth in Section 2 are reasonable and
necessary, regardless of the reason for the termination of employment, to
protect the Company's legitimate business interests and do not unreasonably
restrict her ability to earn a livelihood or impose any undue hardships. The
Executive also hereby acknowledges that a breach of Section 2 shall irreparably
damage the Company, for which there shall be no adequate remedy at law.
Accordingly, if the Executive breaches or threatens to breach any of the
provisions in Section 2, the Company and/or Phoenix Duff & Phelps shall be
entitled to a preliminary or permanent injunction to prevent the continuation of
this harm and such other appropriate relief, including damages, available at
law. Judicial Modification. The Executive agrees that if a court of competent
jurisdiction determines that the length of time, the geographical scope or any
other restriction or portion thereof set forth in this Agreement is overly
restrictive and on that ground unenforceable, such restrictions shall be
interpreted and applied to include as much of the duration, geographic scope and
other restrictions as will render the covenants in this Agreement valid and
enforceable to the fullest extent permitted by applicable law, and as so
interpreted and applied such covenants shall remain in full force and effect.
The Executive further agrees that if a court of competent jurisdiction
determines that any provision of this Agreement is invalid or against public
policy, the remaining provisions of this Agreement shall not be affected
thereby, and shall remain in full force and effect. Miscellaneous. Entire
Agreement. This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matters herein, and supersedes,
and replaces any prior agreements and understandings, whether oral or written,
between them with respect to such matters. Successors And Assigns. All covenants
and agreements herein shall bind and inure to the benefit of the respective
heirs, executors, administrators, successors and assigns of the parties hereto.
Headings. The headings used herein are descriptive only and for the convenience
of identifying provisions, and are not determinative of the meaning or effect of
any such provisions. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts between California residents entered into and to be performed entirely
within the State of California. Attorneys' Fees; Costs. In the event of any
litigation or proceeding or other dispute arising as a result of this Agreement,
the prevailing party shall be entitled, in addition to any other damages
accessed, to its reasonable attorneys' fees and all other costs and expenses
incurred in connection with settling or resolving such dispute. The attorneys'
fees which the prevailing party shall be entitled to recover shall include any
fees for prosecuting or defending any appeal and supplemental proceedings until
the final judgment is satisfied in full, and for any post-judgment proceedings
to collect or enforce the judgment. Waivers. The failure of either party at any
time to require performance by the other party of any provision hereof shall not
affect in any way the right to require such performance at any time thereafter,
nor shall the waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of any subsequent breach of the same provision or
any other provisions. The provisions of this Agreement may be waived, altered,
amended or repealed in whole or in part only upon the written consent of both
parties to this Agreement, and not by any course of dealing, oral
understandings, detrimental reliance or any act or failure to act on the part of
any party or parties.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Noncompetition/Nonsolicitation Agreement, effective as of the date first written
above.
PASADENA CAPITAL CORPORATION
By: /s/ J. Roger Engemann
Name: J. Roger Engemann
Title: President
PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Philip R. McLoughlin
Name: Philip R. McLoughlin
Title: Chairman of the
Board and
Chief Executive
Officer
/s/ John S. Tilson
John S. Tilson
<PAGE>
Exhibit I-3
[James E. Mair]
NONCOMPETITION/NONSOLICITATION AGREEMENT
THIS NONCOMPETITION/NONSOLICITATION AGREEMENT dated as of June 9,
1997 by and among PHOENIX DUFF & PHELPS CORPORATION, a Delaware corporation
("Phoenix Duff & Phelps"), PASADENA CAPITAL CORPORATION, a California
corporation (the "Company"), and JAMES E. MAIR, a resident of California (the
"Executive").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of June
9, 1997 (the "Merger Agreement"), Phoenix Apollo Corp., a California corporation
and a wholly-owned subsidiary of Phoenix Duff & Phelps, is merging with and into
the Company with the Company remaining as the surviving corporation; and
WHEREAS, the Executive is a stockholder of the Company and, as such,
will become entitled to receive substantial payments in respect of his shares of
Common Stock of the Company upon consummation of the merger under the Merger
Agreement;
WHEREAS, pursuant to the terms of an employment agreement dated as of
the date hereof (the "Employment Agreement"), the Executive will be continuing
his employment as an officer of the Company; and
WHEREAS, Phoenix Duff & Phelps requires that, as a condition to the
Closing under the Merger Agreement, the Executive shall have entered into this
Agreement with the Company and Phoenix Duff & Phelps;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the
Employment Agreement.
Covenant. The Executive agrees that if the Company is not in default with
respect to its payment obligations to the Executive in its capacity as a former
stockholder of the Company under Article 3 of the Merger Agreement on the
effective date of the termination for any reason of the Executive's employment
with the Company, then for a period of one (1) year from the effective date of
the termination for any reason of the Executive's employment with the Company,
the Executive shall not do any of the following anywhere in the United States of
America or in Canada; provided, however, that if during such one (1) year period
the Company defaults on any such payment obligation, the restrictions on the
Executive set forth in this Agreement shall terminate permanently: Ownership Or
Investment. Directly or indirectly engage or invest in, own, manage, operate,
control or participate in the ownership, management, operation or control of, be
employed by, become a consultant to, be associated or in any manner connected
with, or render services or advice (with or without compensation) to, any
Competing Business; provided, however, that the Executive may acquire and own
not more than one percent (1%) of the issued and outstanding shares of the
capital stock of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any United
States national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended. Solicitation
of Clientele. Directly or indirectly, either as principal, agent, independent
contractor, consultant, director, officer, employee, employer, advisor (whether
paid or unpaid), stockholder, partner, member or in any other individual or
representative capacity whatsoever, either for the Executive's own benefit or
for the benefit of any other person or entity, solicit, divert or take away as a
customer or client any person who or which is a customer or client of the
Company as of the date of termination, is then being solicited as such a
customer or client, or was such a customer or client at any time during the
three years preceding the date of termination. Solicitation Of Employees Or
Others. Directly or indirectly, employ or seek to employ (other than on behalf
of the Company or one or more of its Affiliates) any employee of the Company or
of any Affiliate of the Company, or any person who was such an employee at any
time during the two years preceding the effective date of termination of the
Executive's employment with the Company, nor seek to persuade any such employee
or former employee to become employed by any direct or indirect competitor of
the Company or of any Affiliate of the Company. Enforcement. The Executive
acknowledges that the restrictions set forth in Section 2 are reasonable and
necessary, regardless of the reason for the termination of employment, to
protect the Company's legitimate business interests and do not unreasonably
restrict her ability to earn a livelihood or impose any undue hardships. The
Executive also hereby acknowledges that a breach of Section 2 shall irreparably
damage the Company, for which there shall be no adequate remedy at law.
Accordingly, if the Executive breaches or threatens to breach any of the
provisions in Section 2, the Company and/or Phoenix Duff & Phelps shall be
entitled to a preliminary or permanent injunction to prevent the continuation of
this harm and such other appropriate relief, including damages, available at
law. Judicial Modification. The Executive agrees that if a court of competent
jurisdiction determines that the length of time, the geographical scope or any
other restriction or portion thereof set forth in this Agreement is overly
restrictive and on that ground unenforceable, such restrictions shall be
interpreted and applied to include as much of the duration, geographic scope and
other restrictions as will render the covenants in this Agreement valid and
enforceable to the fullest extent permitted by applicable law, and as so
interpreted and applied such covenants shall remain in full force and effect.
The Executive further agrees that if a court of competent jurisdiction
determines that any provision of this Agreement is invalid or against public
policy, the remaining provisions of this Agreement shall not be affected
thereby, and shall remain in full force and effect. Miscellaneous. Entire
Agreement. This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matters herein, and supersedes,
and replaces any prior agreements and understandings, whether oral or written,
between them with respect to such matters. Successors And Assigns. All covenants
and agreements herein shall bind and inure to the benefit of the respective
heirs, executors, administrators, successors and assigns of the parties hereto.
Headings. The headings used herein are descriptive only and for the convenience
of identifying provisions, and are not determinative of the meaning or effect of
any such provisions. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts between California residents entered into and to be performed entirely
within the State of California. Attorneys' Fees; Costs. In the event of any
litigation or proceeding or other dispute arising as a result of this Agreement,
the prevailing party shall be entitled, in addition to any other damages
accessed, to its reasonable attorneys' fees and all other costs and expenses
incurred in connection with settling or resolving such dispute. The attorneys'
fees which the prevailing party shall be entitled to recover shall include any
fees for prosecuting or defending any appeal and supplemental proceedings until
the final judgment is satisfied in full, and for any post-judgment proceedings
to collect or enforce the judgment. Waivers. The failure of either party at any
time to require performance by the other party of any provision hereof shall not
affect in any way the right to require such performance at any time thereafter,
nor shall the waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of any subsequent breach of the same provision or
any other provisions. The provisions of this Agreement may be waived, altered,
amended or repealed in whole or in part only upon the written consent of both
parties to this Agreement, and not by any course of dealing, oral
understandings, detrimental reliance or any act or failure to act on the part of
any party or parties.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Noncompetition/Nonsolicitation Agreement, effective as of the date first written
above.
PASADENA CAPITAL CORPORATION
By: /s/ J. Roger Engemann
Name: J. Roger Engemann
Title: President
PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Philip R. McLoughlin
Name: Philip R. McLoughlin
Title: Chairman of the
Board and
Chief Executive
Officer
/s/ James E. Mair
James E. Mair
<PAGE>
EXHIBIT I-4
[Employee]
NONCOMPETITION/NONSOLICITATION AGREEMENT
THIS NONCOMPETITION/NONSOLICITATION AGREEMENT dated as of
____________________, 1997 by and among PHOENIX DUFF & PHELPS CORPORATION, a
Delaware corporation ("Phoenix Duff & Phelps"), PASADENA CAPITAL CORPORATION, a
California corporation (the "Company"), and ___________________, a resident of
California (the "Employee").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of June
9, 1997 (the "Merger Agreement"), Phoenix Apollo Corp., a California corporation
and a wholly-owned subsidiary of Phoenix Duff & Phelps, is merging with and into
the Company with the Company remaining as the surviving corporation; and
WHEREAS, the Employee is a stockholder of the Company and, as such,
will become entitled to receive payments in respect of his shares of Common
Stock of the Company upon consummation of the merger under the Merger Agreement;
WHEREAS, pursuant to the terms of an employment agreement dated as of
the date hereof (the "Employment Agreement"), the Employee will be continuing
his employment as an officer of the Company; and
WHEREAS, Phoenix Duff & Phelps requires that, as a condition to the
Closing under the Merger Agreement, the Employee shall have entered into this
Agreement with the Company and Phoenix Duff & Phelps;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties agree as follows:
Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to such terms in the
Employment Agreement.
Covenant. The Employee agrees that if the Company is not in default with respect
to its payment obligations to the Employee in its capacity as a former
stockholder of the Company under Article 3 of the Merger Agreement on the
effective date of the termination for any reason of the Employee's employment
with the Company, then for a period of one (1) year from the effective date of
the termination for any reason of the Employee's employment with the Company,
the Employee shall not do any of the following anywhere in the United States of
America or in Canada; provided, however, that if during such one (1) year period
the Company defaults on any such payment obligation, the restrictions on the
Employee set forth in this Agreement shall terminate permanently: Ownership Or
Investment. Directly or indirectly engage or invest in, own, manage, operate,
control or participate in the ownership, management, operation or control of, be
employed by, become a consultant to, be associated or in any manner connected
with, or render services or advice (with or without compensation) to, any
Competing Business; provided, however, that the Employee may acquire and own not
more than one percent (1%) of the issued and outstanding shares of the capital
stock of any enterprise (but without otherwise participating in the activities
of such enterprise) if such securities are listed on any United States national
or regional securities exchange or have been registered under Section 12(g) of
the Securities Exchange Act of 1934, as amended. Solicitation of Clientele.
Directly or indirectly, either as principal, agent, independent contractor,
consultant, director, officer, employee, employer, advisor (whether paid or
unpaid), stockholder, partner, member or in any other individual or
representative capacity whatsoever, either for the Employee's own benefit or for
the benefit of any other person or entity, solicit, divert or take away as a
customer or client any person who or which is a customer or client of the
Company as of the date of termination, is then being solicited as such a
customer or client, or was such a customer or client at any time during the
three years preceding the date of termination. Solicitation Of Employees Or
Others. Directly or indirectly, employ or seek to employ (other than on behalf
of the Company or one or more of its Affiliates) any employee of the Company or
of any Affiliate of the Company, or any person who was such an employee at any
time during the two years preceding the effective date of termination of the
Employee's employment with the Company, nor seek to persuade any such employee
or former employee to become employed by any direct or indirect competitor of
the Company or of any Affiliate of the Company. Enforcement. The Employee
acknowledges that the restrictions set forth in Section 2 are reasonable and
necessary, regardless of the reason for the termination of employment, to
protect the Company's legitimate business interests and do not unreasonably
restrict her ability to earn a livelihood or impose any undue hardships. The
Employee also hereby acknowledges that a breach of Section 2 shall irreparably
damage the Company, for which there shall be no adequate remedy at law.
Accordingly, if the Employee breaches or threatens to breach any of the
provisions in Section 2, the Company and/or Phoenix Duff & Phelps shall be
entitled to a preliminary or permanent injunction to prevent the continuation of
this harm and such other appropriate relief, including damages, available at
law. Judicial Modification. The Employee agrees that if a court of competent
jurisdiction determines that the length of time, the geographical scope or any
other restriction or portion thereof set forth in this Agreement is overly
restrictive and on that ground unenforceable, such restrictions shall be
interpreted and applied to include as much of the duration, geographic scope and
other restrictions as will render the covenants in this Agreement valid and
enforceable to the fullest extent permitted by applicable law, and as so
interpreted and applied such covenants shall remain in full force and effect.
The Employee further agrees that if a court of competent jurisdiction determines
that any provision of this Agreement is invalid or against public policy, the
remaining provisions of this Agreement shall not be affected thereby, and shall
remain in full force and effect. Miscellaneous. Entire Agreement. This Agreement
constitutes the entire agreement and understanding between the parties with
respect to the subject matters herein, and supersedes, and replaces any prior
agreements and understandings, whether oral or written, between them with
respect to such matters. Successors And Assigns. All covenants and agreements
herein shall bind and inure to the benefit of the respective heirs, executors,
administrators, successors and assigns of the parties hereto. Headings. The
headings used herein are descriptive only and for the convenience of identifying
provisions, and are not determinative of the meaning or effect of any such
provisions. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California. Attorneys' Fees; Costs. In the event of any litigation
or proceeding or other dispute arising as a result of this Agreement, the
prevailing party shall be entitled, in addition to any other damages accessed,
to its reasonable attorneys' fees and all other costs and expenses incurred in
connection with settling or resolving such dispute. The attorneys' fees which
the prevailing party shall be entitled to recover shall include any fees for
prosecuting or defending any appeal and supplemental proceedings until the final
judgment is satisfied in full, and for any post-judgment proceedings to collect
or enforce the judgment. Waivers. The failure of either party at any time to
require performance by the other party of any provision hereof shall not affect
in any way the right to require such performance at any time thereafter, nor
shall the waiver by either party of a breach of any provision hereof be taken or
held to be a waiver of any subsequent breach of the same provision or any other
provisions. The provisions of this Agreement may be waived, altered, amended or
repealed in whole or in part only upon the written consent of both parties to
this Agreement, and not by any course of dealing, oral understandings,
detrimental reliance or any act or failure to act on the part of any party or
parties.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Noncompetition/Nonsolicitation Agreement, effective as of the date first written
above.
PASADENA CAPITAL CORPORATION
By:___________________________________
Name: J. Roger Engemann
Title: President
PHOENIX DUFF & PHELPS CORPORATION
By:___________________________________
Name: Philip R. McLoughlin
Title: Chairman of the
Board and
Chief Executive
Officer
Signature of the Employee:
------------------------------
Name of the Employee:
------------------------------
Timothy L. Buchmiller, Incorporator
<PAGE>
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<PAGE>
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EXHIBIT J
===================================================================
EXECUTION COPY
STOCKHOLDER INDEMNIFICATION AGREEMENT
STOCKHOLDER INDEMNIFICATION AGREEMENT, dated as of the 9th day of
June, 1997, by and among PHOENIX DUFF & PHELPS CORPORATION, a Delaware
corporation ("PDP"), PHOENIX APOLLO CORP., a California corporation and a
wholly-owned subsidiary of PDP ("Acquisition Sub"), and J. ROGER ENGEMANN, a
California resident (the "Stockholder").
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement") dated the date hereof by and among PDP, Acquisition Sub and
Pasadena Capital Corporation, a California corporation ("Pasadena"), Acquisition
Sub will merge with and into Pasadena (the "Merger"), with Pasadena being the
surviving corporation and a wholly-owned subsidiary of PDP; and
WHEREAS, the Stockholder is the beneficial owner of a
majority of the outstanding shares of capital stock of Pasadena;
and
WHEREAS, pursuant to Section 8.2(l) of the Merger Agreement, it is a
condition to the obligations of PDP to consummate the Merger that this Agreement
shall be in full force and effect in accordance with its terms at the Effective
Time; and
WHEREAS, in order to induce PDP and Acquisition Sub to enter into the
Merger Agreement, the Stockholder is executing and delivering this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein
but not otherwise defined herein shall have the meanings ascribed
to them in the Merger Agreement.
2. Indemnification by Stockholder. The Stockholder hereby covenants
and agrees to indemnify, defend and hold harmless PDP, the Acquisition Sub and
the Surviving Corporation (collectively, the "PDP Indemnitees") from and against
all Damages and Taxes pursuant to, and subject to the terms and conditions of,
Section 10.1 and Section 10.2 of the Merger Agreement; provided, however, that
the PDP Indemnitees shall not be entitled to obtain any payment from the
Stockholder pursuant to this Agreement unless and until the PDP Indemnitees
shall have first received payment of the entire Escrow Amount available for
payment to the PDP Indemnitees under the Indemnification Escrow Agreement.
3. Entire Understanding; Amendment and Waiver. This Agreement, the
Merger Agreement and the Indemnification Escrow Agreement constitute the entire
understanding among the parties as to the subject matter hereof and no waiver,
modification or amendment of the terms hereof shall be valid unless in writing
signed by PDP and the Stockholder and only to the extent therein set forth. No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
4. Notices. Unless otherwise provided herein, any notice, request,
instruction or other document or communication to be given hereunder by any
party to any other party shall be in writing and shall be deemed to have been
given (a) if mailed, on the date received if mailed by registered or certified
mail (return receipt requested), (b) if sent by facsimile transmission, when so
sent and receipt acknowledged by an appropriate telephone or facsimile receipt
or (c) if sent by other means, when actually received by the party to which such
notice has been directed, in each case at the respective addresses or numbers
set forth below or such other address or number as such party may have fixed by
notice:
If to PDP or Acquisition Sub:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Chief Executive Officer
Telephone: (860) 453-5365
Facsimile: (860) 403-5455
With copies to:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Thomas N. Steenburg, Esq.
Vice President and General Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
and
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: David L. Finkelman, Esq.
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
If to the Stockholder:
J. Roger Engemann
c/o Pasadena Capital Corporation
600 North Rosemond Boulevard
Pasadena, California 91107-2133
Telephone: (800) 882-2855
Facsimile: (818) 351-1174
With a copy to:
Shook, Hardy & Bacon L.L.P.
1200 Main Street, Suite 3100
Kansas City, Missouri 64105-2118
Attention: Jennings J. Newcom, Esq.
Telephone: (816) 474-6550
Facsimile: (816) 421-5547
5. Counterparts. This Agreement may be executed in
counterparts (including executed counterparts delivered and
exchanged by facsimile transmission) each of which shall be
deemed to constitute one and the same instrument.
6. Governing Law. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of
California, regardless of the laws that might otherwise govern
under principles of conflicts of laws applicable thereto.
7. Binding Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties hereto,
their respective heirs, administrators, executors, successors and
permitted assigns.
8. Consent to Jurisdiction. Each party hereto hereby irrevocably
submits to the non-exclusive jurisdiction of any state or federal court sitting
in the City of New York in any action or proceeding arising out of or relating
to this Agreement and hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such state court or, to
the extent permitted by law, in such federal court. Each of the parties hereby
irrevocably consents to the service of process in any such action or proceeding
by the mailing by certified mail of copies of any service or copies of the
summons and complaint and any other process to such party at the address
specified in Section 4 hereof. The parties agree that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Section 8 shall affect the right of a party to serve legal
process in any other manner permitted by law or affect the right of a party to
bring any action or proceeding in the courts of other jurisdictions.
9. Effective Date. The obligations of the
Stockholder under this Agreement shall become effective only at
the Effective Time of the Merger under the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement,
all as of the date first written above.
PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Philip R. McLoughlin
Name:Philip R. McLoughlin
Title: Chairman of the Board and
Chief Executive Officer
PHOENIX APOLLO CORP.
By: /s/ Philip R. McLoughlin
Name: Philip R. McLoughlin
Title: President
/s/ J. Roger Engemann
J. Roger Engemann
<PAGE>
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-iii-
6_24_97.8K5
6_24_97.8K5
8K - EXHIBIT 2(E)
=========================================================
PURCHASE AGREEMENT
BY AND AMONG
PHOENIX DUFF & PHELPS CORPORATION
AND
THE PERSONS SIGNATORY HERETO
DATED AS OF JUNE 18, 1997
=========================================================
<PAGE>
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TABLE OF CONTENTS
PAGE
-i-
6_24_97.8K5
ARTICLE 1 - DEFINITIONS..........................................4
1.1. DEFINED TERMS........................................4
1.2. OTHER DEFINED TERMS..................................8
ARTICLE 2 - PURCHASE AND SALE OF MEMBERSHIP INTERESTS AND
PARTNERSHIP INTERESTS......................................9
2.1. PURCHASE AND SALE....................................9
2.2. PURCHASE PRICE.......................................9
2.3. ADDITIONAL CONSIDERATION.............................9
2.4. CLOSING BALANCE SHEET...............................11
ARTICLE 3 - CLOSINGS............................................12
3.1. CLOSINGS............................................12
3.2. EMPLOYMENT AGREEMENTS...............................12
3.3. PUT/CALL AGREEMENTS.................................12
3.4. LLC ORGANIZATIONAL DOCUMENTS........................12
3.5. AFFILIATE AGREEMENTS................................12
3.6. NONCOMPETITION/NONSOLICITATION AGREEMENTS...........12
3.7. OTHER DELIVERIES AT THE LLC CLOSING.................12
3.8. OTHER DELIVERIES AT THE LP CLOSING..................13
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF THE
NON-MANAGEMENT SELLERS....................................13
4.1. AUTHORIZATION.......................................13
4.2. NO VIOLATION........................................13
4.3. OWNERSHIP OF MEMBERSHIP INTERESTS AND
PARTNERSHIP INTERESTS..............................13
4.4. NO OTHER AGREEMENTS TO SELL.........................13
4.5. NO KNOWLEDGE........................................14
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE
MANAGEMENT SELLERS........................................14
5.1. ORGANIZATION, STANDING AND AUTHORITY................14
5.2. SUBSIDIARIES........................................14
5.3. AUTHORIZATION.......................................14
5.4. ORGANIZATIONAL DOCUMENTS............................14
5.5. NO VIOLATION........................................14
5.6. GOVERNMENTAL AUTHORIZATION..........................15
5.7. OWNERSHIP OF MEMBERSHIP INTERESTS AND
PARTNERSHIP INTERESTS..............................15
5.8. FINANCIAL STATEMENTS................................15
5.9. ABSENCE OF UNDISCLOSED LIABILITIES..................16
5.10. ABSENCE OF CERTAIN CHANGES.........................16
5.11. LITIGATION.........................................16
5.12. TITLE TO ASSETS....................................17
5.13. INTELLECTUAL PROPERTY..............................17
5.14. CONTRACTS..........................................17
5.15. NO DEFAULT UNDER CONTRACTS OR AGREEMENTS...........18
5.16. COMPLIANCE WITH LAWS...............................18
5.17. ACTIVITIES.........................................18
5.18. TAXES..............................................18
5.19. EMPLOYEE BENEFIT PLANS.............................19
5.20. INVESTMENT CONTRACTS AND CLIENTS...................22
5.21. CERTAIN REPRESENTATIONS AND WARRANTIES AS TO
THE SENECA FUNDS...................................22
5.22. NO OTHER AGREEMENTS TO SELL........................25
5.23. NO BROKERS.........................................25
5.24. ACCURACY OF DOCUMENTS AND INFORMATION..............25
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF THE BUYER.........25
6.1. ORGANIZATION AND STANDING...........................25
6.2. AUTHORITY...........................................25
6.3. GOVERNMENTAL AUTHORIZATION..........................25
6.4. NO BROKERS..........................................26
6.5. CERTAIN INFORMATION.................................26
ARTICLE 7 - CONDUCT OF BUSINESS PRIOR TO THE CLOSINGS...........26
7.1. CONDUCT PRIOR TO CLOSINGS...........................26
7.2. SENECA FUNDS........................................28
7.3. CONSENTS AND APPROVALS..............................28
7.4. SECTION 754 ELECTIONS...............................29
7.5. ACTIONS OF NON-MANAGEMENT SELLERS...................29
ARTICLE 8 - ADDITIONAL AGREEMENTS...............................29
8.1. CURRENT INFORMATION; NOTIFICATION OF CERTAIN
MATTERS............................................29
8.2. ACCESS; CONFIDENTIAL INFORMATION....................30
8.3. NO MERGERS, CONSOLIDATIONS, SALE OF INTERESTS ETC...30
8.4. NON-SOLICITATION....................................30
8.5. PUBLICITY...........................................31
8.6. SATISFACTION OF CONDITIONS IN SECTION 15(F) OF
THE INVESTMENT COMPANY ACT.........................31
8.7. CONTRIBUTIONS OF PARTNERSHIP INTERESTS..............31
8.8. FURTHER ASSURANCES..................................32
8.9. DISTRIBUTIONS TO MEMBERS AND PARTNERS...............32
8.10. OPTIONS TO PURCHASE CAPITAL STOCK OF BUYER.........32
ARTICLE 9 - CONDITIONS..........................................32
9.1. CONDITIONS TO OBLIGATIONS OF THE SELLERS ON THE
LLC CLOSING DATE...................................32
9.2. CONDITIONS TO OBLIGATIONS OF THE BUYER ON THE
LLC CLOSING DATE...................................33
9.3. CONDITIONS TO OBLIGATIONS OF THE BUYER ON THE LP
CLOSING DATE.......................................34
9.4. CONDITIONS TO OBLIGATIONS OF THE SELLERS ON THE
LP CLOSING DATE....................................35
ARTICLE 10 - TERMINATION........................................35
10.1. TERMINATION........................................35
10.2. EFFECT OF TERMINATION AND ABANDONMENT..............36
ARTICLE 11 - INDEMNIFICATION....................................36
11.1. INDEMNIFICATION....................................36
ARTICLE 12 - MISCELLANEOUS......................................38
12.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........38
12.2. EXPENSES; TRANSFER TAXES...........................38
12.3. SET-OFF............................................38
12.4. NOTICES............................................38
12.5. COUNTERPARTS.......................................40
12.6. GOVERNING LAW......................................40
12.7. WAIVER; AMENDMENT..................................40
12.8. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES;
ETC................................................40
12.9. CONSENT TO JURISDICTION............................40
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45
.....THIS PURCHASE AGREEMENT, dated as of the 18th day of June, 1997, by
and among Phoenix Duff & Phelps Corporation, a Delaware corporation (the
"Buyer"), and each of the persons who are signatories hereto (hereinafter
referred to individually as a "Seller" and collectively as the "Sellers").
W I T N E S S E T H:
.....WHEREAS, the Sellers collectively own the percentage set forth on
Schedule A hereto of (i) the membership interests outstanding as of the date
hereof (the "Membership Interests") of GMG/Seneca Capital Management LLC, a
California limited liability company ("Seneca LLC"), which is duly registered as
an investment adviser under the Investment Advisers Act of 1940, as amended
(together with the rules and regulations thereunder, the "Advisers Act"), and
(ii) the general and limited partnership interests outstanding as of the date
hereof (the "Partnership Interests") of GMG/Seneca Capital Management L.P., a
California limited partnership ("Seneca LP"), which is duly registered as an
investment adviser under the Advisers Act; and
.....WHEREAS, the Buyer desires to acquire, and each Seller desires to
sell, the portion of the respective Membership Interests and Partnership
Interests owned by such Seller as specified opposite such Seller's name on
Schedule A hereto as being sold hereunder subject to the terms and conditions of
this Agreement.
.....NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound thereby, the
parties hereto hereby agree as follows:
ARTICLE 1ARTICLE1-DEFINITIONS""1"
DEFINITIONS
.....1.1. Defined Terms1.1.DefinedTerms""2". As used herein,
the terms below shall have the following meanings:
....."Action" means any claim, action, suit, proceeding, investigation,
inspection, examination or audit, whether at law or in equity, or by or before
any court, arbitrator, arbitration panel or Governmental Entity.
....."Advisers Act" has the meaning given such term in the
-------------
recitals.
....."Affiliate" means, when used with respect to a specified Person,
another Person that, either directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Person specified. As used herein, the term "control" means the power through
the ownership of voting securities or other equity interests, contract or
otherwise to direct the affairs of another Person.
....."Affiliated Accounts" means those accounts of Seneca LLC and Seneca
LP listed on Schedule B hereto.
....."Audited Balance Sheets" means the audited balance sheets of (i)
Seneca LLC as of December 31, 1996 and (ii) Seneca LP as of December 31, 1996,
1995 and 1994, together in each case with the related notes thereon and the
related unqualified reports of Lallman, Feltman, Shelton & Peterson, P.A.
....."Audited Financial Statements" means the Audited Balance Sheets and
the audited statements of income, changes in members' or partners' capital, and
cash flows of (i) Seneca LLC for the year ended December 31, 1996 and (ii)
Seneca LP for the years ended December 31, 1996, 1995 and 1994, together in each
case with the related notes thereon and the related unqualified reports of
Lallman, Feltman, Shelton & Peterson, P.A.
....."Buyer" has the meaning given such term in the recitals.
....."Buyer Material Adverse Effect" means a material adverse effect on
the business, operations, assets, condition (financial or otherwise), or results
of operations of the Buyer and its subsidiaries, taken as a whole. "Buyer
Material Adverse Effect" shall not include any material adverse effect resulting
from changes in the financial markets in the United States of America.
....."Buyer Stock Option Plan" means the Phoenix Duff & Phelps
Corporation 1992 Long-Term Stock Incentive Plan.
....."Client" means any client to which Seneca LLC or Seneca LP provides
investment management, investment advisory, including sub-advisory services,
underwriting, distribution or administrative services on the date of this
Agreement.
....."Code" means the Internal Revenue Code of 1986, as such may be
amended from time to time.
....."Damages" means costs, losses (including, without limitation,
diminution in value and losses from suspensions of operations), liabilities,
damages, lawsuits, deficiencies, claims, Taxes and expenses (whether or not
arising out of third-party claims or governmental examinations, inspections or
audits), including, without limitation, interest, penalties, reasonable
attorneys' fees and all amounts paid in investigation, defense or settlement of
any of the foregoing. The term "Damages" is not limited to matters asserted by
third parties against either the Sellers or against the Buyer or its Affiliates
or Seneca LLC, Seneca LP or any Seneca Fund, but includes Damages incurred or
sustained by the Sellers or by the Buyer or its Affiliates or by Seneca LLC,
Seneca LP or any Seneca Fund in the absence of third party claims.
....."Disclosure Schedule" means a schedule executed and delivered by the
Sellers to the Buyer concurrently herewith which sets forth the exceptions to
the representations and warranties contained in Articles 4 and 5 hereof and
certain other information called for by Articles 4 and 5 hereof and other
provisions of this Agreement including, without limitation, Schedules A, B, 1.1,
3.3, 3.4 and 9.2(m). If a document or matter is disclosed in the Disclosure
Schedule in connection with any representation or warranty made in this
Agreement, such document or matter shall not be deemed to be disclosed in the
Disclosure Schedule in connection with any other representation or warranty
except where specific repetition or cross-reference is made.
....."Exchange Act" means the Securities Exchange Act of 1934,
------------
as amended.
....."Expenses" means all reasonable out-of-pocket expenses (including,
without limitation, fees and expenses of counsel, accountants, investment
bankers, experts and consultants, commitment fees and other financing fees and
expenses, printing costs and expenses, publishing fees, filing fees and mailing
costs) incurred by the Sellers or the Buyer or on behalf of any such party in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the Related Agreements and all
other matters related to the consummation of the transactions contemplated
hereby and thereby.
....."GAAP" means United States generally accepted accounting principles
consistently applied.
....."GCM" means Genesis Capital Management L.P., a California limited
partnership, which is an Affiliate of Seneca LLC and Seneca LP.
....."GCM Client" means any client to which GCM provides investment
management, investment advisory, including sub-advisory services, underwriting,
distribution or administrative services on the date of this Agreement.
....."Governmental Entity" means any governmental or regulatory entity,
department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
....."Historical Financial Statements" means the Audited
Financial Statements and the Unaudited Financial Statements.
....."HSR Act" means The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
....."Indemnification Threshold" means $100,000.
....."Investment Company Act" means the Investment Company Act
of 1940, as amended.
....."Investment Contract" means a contract or agreement in effect on the
date hereof, together with any such contract or agreement entered into after the
date hereof, relating to Seneca LLC's or Seneca LP's rendering of investment
management or investment advisory services, including sub-advisory services,
underwriting or distribution services or any administrative services to any
Person.
....."Lien" means any lien, pledge, claim, option, charge, easement,
security interest, right-of-way, encumbrance or other right of any third party.
....."LLC Closing" means the consummation of the transactions involving
the sale of Membership Interests as contemplated by this Agreement, as more
particularly described in Article 3.
....."LLC Closing Date" means the fifth business day after the
satisfaction or waiver in accordance with this Agreement of all conditions
precedent set forth in Sections 9.1 and 9.2 hereof or such other date as the
Buyer and the Sellers' Representative may agree in writing.
....."LLC Organizational Documents" means the Amended and Restated
Operating Agreement of Seneca LLC effective as of July 1, 1996 and the Articles
of Organization of Seneca LLC filed on December 29, 1995, each as amended
through the date hereof.
....."LLC Purchase Price" means $36,217,972 for all of the Membership
Interests in Seneca LLC being sold by the Sellers pursuant hereto payable in
accordance with Section 2.2 hereof.
....."LP Closing" means the consummation of the transactions involving the
sale of Partnership Interests as contemplated by this Agreement, as more
particularly described in Article 3.
....."LP Closing Date" means the fifth business day after the satisfaction
or waiver in accordance with this Agreement of all conditions precedent set
forth in Sections 9.3 and 9.4 hereof or such other date as the Buyer and the
Sellers' Representative may agree in writing.
....."LP Organizational Documents" means the Amended and Restated
Agreement of Limited Partnership of Seneca LP effective as of December 31, 1995
and the Certificate of Limited Partnership of Seneca LP filed on September 7,
1989, each as amended through the date hereof.
....."LP Purchase Price" means $728,028 for all of the Partnership
Interests in Seneca LP being sold by the Sellers pursuant hereto payable in
accordance with Section 2.2 hereof.
....."Management Sellers" means the Sellers designated as Management
Sellers on Schedule A hereto.
....."Membership Interests" has the meaning given such term in
---------------------
the recitals.
....."Non-Management Sellers" means the Sellers designated as
Non-Management Sellers on Schedule A hereto.
....."Partnership Interests" has the meaning given such term
in the recitals.
....."PEPCO" means Phoenix Equity Planning Corporation, a Connecticut
corporation and a wholly-owned subsidiary of the Buyer.
....."Person" means an individual, firm, trust, association, corporation,
partnership, limited liability company, Governmental Entity or other entity.
....."Phantom Profits Bonus Agreements" means the Phantom Profits Bonus
Agreements between Seneca LLC and certain employees thereof as of the date
hereof.
....."PIC" means Phoenix Investment Counsel, Inc., a Massachusetts
corporation, and a wholly-owned subsidiary of the Buyer.
....."Related Agreements" means the Put/Call Agreements, the
Employment Agreements, the Noncompetition/Nonsolicitation
Agreements and the Affiliate Agreements.
....."Representative" means any officer, director, principal, attorney,
agent, employee or other representative.
....."SEC" means the United States Securities and Exchange
Commission.
....."Securities Act" means the Securities Act of 1933, as
amended.
....."Seller" or "Sellers" have the meanings given such terms
------ -------
in the recitals.
....."Sellers' Representative" means Seneca or any successor designee of
the Sellers who shall be named in a writing signed by all of the Sellers and
delivered to the Buyer.
....."Sellers' Holdback Representatives" means Mark Blank and Glen Miller
or any successor designees of the Sellers who shall be named in a writing signed
by all of the Non-Management Sellers and delivered to the Buyer. Each such
Person must act jointly with the others and may not act independently.
....."Seneca" means Gail P. Seneca.
....."Seneca Fund" means a registered investment company, as defined in
the Investment Company Act, for which Seneca LLC or Seneca LP provides
investment advisory or sub-advisory services, underwriting or distribution
services or administrative services. Each Seneca Fund is identified in the
Disclosure Schedule.
....."Seneca LLC" has the meaning given such term in the
-----------
recitals.
....."Seneca LP" has the meaning given such term in the
----------
recitals.
....."Seneca Material Adverse Effect" means a material adverse effect on
the business, operations, assets, condition (financial or otherwise), or results
of operations of Seneca LLC and Seneca LP, taken together. "Seneca Material
Adverse Effect" shall not include any material adverse effect resulting from
changes in the financial markets in the United States of America.
....."Seneca Sponsored Fund" means a Seneca Fund with respect
to which Seneca LLC is the sponsor. Each Seneca Sponsored Fund is
identified in the Disclosure Schedule.
....."Subsidiary" means any corporation, partnership or other Person of
which Seneca LLC or Seneca LP directly or indirectly owns a majority of the
capital stock or other equity interests or which is required to be consolidated
with Seneca LLC or Seneca LP, as applicable, under GAAP.
....."Tax" or "Taxes" means (i) all forms of taxation, charges, levies or
other assessments, whether direct or indirect and whether levied by reference to
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding (whether with
respect to receipts or payments), payroll, privilege, employment, including
benefits or cost of benefits provided or deemed by applicable law to be provided
to employees, excise, severance, capital gains, transfer gains, stamp,
occupation, premium or similar tax measured by insurance premiums, real and
personal property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
and any interest or any penalty, addition to tax or additional amount, imposed
by any Taxing Authority, (ii) liability, whether to a Taxing Authority or
pursuant to an agreement with or legal obligation to any Person, for the payment
of any amounts of the type described in clause (i) of this definition as a
result of being a member of an affiliated, consolidated, combined or unitary
group for any taxable period and (iii) liability for the payment of any amounts
of the type described in clause (i) or (ii) of this definition as a result of an
obligation to indemnify any other Person.
....."Taxing Authority" means a Governmental Entity responsible for and
having requisite jurisdiction with respect to the imposition of Taxes.
....."Unaudited Financial Statements" means the unaudited combined balance
sheets of Seneca LLC and Seneca LP at March 31, 1997 and the unaudited combined
statements of operations of the Company for the three months ended March 31,
1997, together in each case with the related notes thereon.
.....1.2. Other Defined Terms1.2.OtherDefinedTerms""2". The
following terms shall have the meanings defined for such terms in
the Sections set forth below:
Term Section
Additional Purchase Price 2.3(a)
Affiliate Agreements 3.5
Annualized Holdback Period Revenues 2.3(b)
Allocable Share 11.1(a)
Benefit Arrangement 5.19
Benefit Plans 5.19
Client Consents 7.3(b)
Closing Balance Sheet 2.4(a)
Company's Accountant 2.3(c)
Competitive Services 8.4(a)
Confidentiality Agreement 8.2(b)
Employment Agreements 3.2
ERISA 5.19
ERISA Affiliate 5.19
ERISA Pension Plan 5.19
ERISA Welfare Plan 5.19
Fund Financial Statement 5.21(i)
Fund Tax Returns 5.21(g)
Holdback Period 2.3(b)
Holdback Period Revenue Loss Adjustment 2.3(b)
Holdback Period Revenues 2.3(b)
Information 8.2(b)
Multiemployer Plan 5.19
Neutral Accountants 2.3(c)
Noncompetion/Nonsolicitiation Agreements 3.6
Non-Solicitation Period 8.4(a)
Principals 3.2
Put/Call Agreements 3.3
Seneca Distributors 5.2
Seneca Fund Agreements 5.21(a)
Support Agreements 9.2(m)
Tax Returns 5.18(a)
ARTICLE
2ARTICLE2-PURCHASEANDSALEOFMEMBERSHIPINTERESTSANDPARTNERSHIPINTERESTS""1"
PURCHASE AND SALE OF MEMBERSHIP INTERESTS
AND PARTNERSHIP INTERESTS
2.1. Purchase and Sale2.1.PurchaseandSale""2". Each Seller hereby
agrees to sell, assign, convey, transfer and deliver to the Buyer, and the Buyer
hereby agrees to purchase and acquire from such Seller, (a) on the LLC Closing
Date, all right, title and interest of such Seller, legal or equitable, in and
to the Membership Interests specified opposite such Seller's name on Schedule A
hereto as being sold hereunder and (b) on the LP Closing Date, all right, title
and interest of such Seller, legal or equitable, in and to the Partnership
Interests specified opposite such Seller's name on Schedule A hereto as being
sold hereunder. In addition, each Seller who is selling AP interests hereunder
(as specified on Schedule A hereto) is also forfeiting and surrendering that
portion of his, her or its rights under the respective Phantom Profits Bonus
Agreement which is equal to the portion of AP interests of such Seller being
sold hereunder.
2.2. Purchase Price2.2.PurchasePrice""2". On the LLC Closing Date,
the Buyer shall deliver the LLC Purchase Price to the Sellers (in the respective
amounts set forth on Schedule A hereto), in consideration of the sale,
assignment, conveyance, transfer and delivery of their Membership Interests
being sold hereunder. The LLC Purchase Price shall be paid as specified on
Schedule A. Payments specified on Schedule A as "cash" shall be made by wire
transfer of immediately available funds (in accordance with wire instructions
timely furnished in writing by each Seller to the Buyer). Payments specified on
Schedule A as "notes" shall be made by delivery of negotiable promissory notes
of the Buyer, dated the LLC Closing Date, each payable to the order of the
Seller designated on Schedule A as receiving a note and bearing simple interest
(payable quarterly in arrears) at a rate of 6.125% per annum less all fees and
costs payable by the Buyer under the Buyer's credit facility as in effect on the
LLC Closing Date associated with the letter of credit referred to in the next
succeeding sentence, and maturing no later than January 2, 2000. Each such
promissory note shall be supported by an irrevocable, nontransferable standby
letter of credit obtained by the Buyer at its expense, issued by the bank party
to the Buyer's credit facility and expiring no earlier than 30 days following
the maturity of the promissory note. On the LP Closing Date, the Buyer shall
deliver to the Sellers (in the respective amounts set forth on Schedule A
hereto), in consideration of the sale, assignment, conveyance, transfer and
delivery of their Partnership Interests being sold hereunder, the LP Purchase
Price by wire transfer of immediately available funds (in accordance with wire
instructions timely furnished in writing by each Seller to the Buyer). All
payments made pursuant to this Section 2.2 shall be made without any set-off or
counterclaim whatsoever.
2.3. Additional
Consideration2.3.AdditionalConsideration""2".
(a) At the time following the Holdback Period determined in
accordance with Section 2.3(d) hereof, the Buyer shall pay to the accounts of
the respective Sellers (in such proportions and in accordance with wire
instructions timely furnished in written instructions to the Buyer from the
Sellers' Holdback Representatives) as additional consideration for the purchase
of the Membership Interests being purchased pursuant to this Agreement an amount
in cash (the "Additional Purchase Price") equal to (i) $3,500,000 less the
Holdback Period Revenue Loss Adjustment, if any, plus (ii) interest on such
amount from the LLC Closing Date to the date of the payment of the Additional
Purchase Price at a rate of 6.125% per annum.
(b) For purposes of calculating the Additional Purchase Price,
the following terms shall have the following meanings:
(i) "Annualized Holdback Period
Revenues" means the product obtained by multiplying (A) the Holdback Period
Revenues by (B) a fraction the numerator of which is 365 and the denominator of
which is the actual number of days in the Holdback Period.
(ii) "Holdback Period" means the period
commencing on the LLC Closing Date and ending on December
31, 1998.
(iii)"Holdback Period Revenues" means
all investment management fees of Seneca LLC or Seneca LP (or any successor
entity or entities (including, without limitation, the newly established company
referred to in Section 7.2 hereof) through which all or any portion of the
investment management business of Seneca LLC or Seneca LP may hereafter be
conducted) under Investment Contracts, calculated pursuant to the accrual method
of accounting, including, but not limited to, standard performance fees and any
subadvisory fees, but excluding any incentive fees received from GMG/Little
Partners, L.P., GMG/Little (Bermuda) Partners, L.P. and South Ferry Building
Company, L.P. for the Holdback Period, provided that if during the Holdback
Period the annual percentage fee applicable to any Affiliated Account should be
increased above the fee applicable to such Affiliated Account as of the date of
this Agreement as shown on Schedule B, and the holder of such Affiliated Account
should withdraw all or any portion of the funds in such Affiliated Account
citing the increase in fees as the sole or primary reason for such withdrawal,
then for purposes of computing the Holdback Period Revenues, the amount so
withdrawn shall be deemed to have remained invested in such Affiliated Account
throughout the entire Holdback Period and to have generated Holdback Period
Revenues at the fee rate applicable to such Affiliated Account prior to such
increase.
(iv) "Holdback Period Revenue Loss
Adjustment" means the amount obtained by multiplying (A) the excess, if any, of
(1) $15.3 million over (2) the Annualized Holdback Period Revenues, if any, by
(B) 3.5.
(c) Within 30 days after the end of the Holdback Period, the
Buyer and the Sellers shall cause the independent public accounting firm
regularly employed by Seneca LLC (the "Company's Accountant") to prepare and
deliver to the Buyer, the Sellers' Holdback Representatives and Seneca its
calculation of the Additional Purchase Price, together with supporting
documentation in reasonable detail. The Buyer, the Sellers' Holdback
Representatives and Seneca shall have a period of 30 days after delivery of such
calculations to present in writing to each other and the Company's Accountant
any objections to such calculations of the Additional Purchase Price, which
objections shall be set forth in reasonable detail. If no objections are raised
within such 30-day period, the calculations of the Additional Purchase Price
shall be deemed accepted and approved by the Buyer and the Sellers' Holdback
Representatives and shall be final, binding and conclusive upon the Buyer and
the Sellers. If the Buyer, the Sellers' Holdback Representatives or Seneca shall
object in any respect as to the calculation of the Additional Purchase Price
within the 30-day period described above, the Buyer, the Sellers' Holdback
Representatives and Seneca shall use their best efforts promptly to resolve the
matter or matters in disagreement. If the Buyer, the Sellers' Holdback
Representatives and Seneca resolve the matter or matters in disagreement, the
Buyer, the Sellers' Holdback Representatives and Seneca shall either confirm or
revise the Company's Accountant's calculation of the Additional Purchase Price
in writing and such calculations shall be final, binding and conclusive upon the
Buyer and the Sellers. If the Buyer, the Sellers' Holdback Representatives and
Seneca are unable to resolve the matter or matters in disagreement within 10
days following receipt of written notice of objection, then the items in dispute
shall be submitted to a mutually agreed upon "big six" accounting firm (the
"Neutral Accountants") for resolution. Each party shall furnish to the Neutral
Accountants such workpapers and other documents and information relating to the
disputed issues as the Neutral Accountants may request and are available to that
party (or its independent public accountants), and each party shall be afforded
the opportunity to present to the Neutral Accountants any material relating to
the determination and to discuss the determination with the Neutral Accountants.
The Neutral Accountants shall be directed to furnish written notice to the
Buyer, the Sellers' Holdback Representatives and Seneca of their resolution of
any disputed issues referred to them as soon as practicable but in no event
later than 20 days following the referral of such disputed issues to the Neutral
Accountants. The determination by the Neutral Accountants, as set forth in such
notice, shall be final, binding and conclusive upon the Buyer and the Sellers.
The fees and expenses of the Neutral Accountants shall be borne equally by the
Buyer and the Sellers.
(d) Payment of the Additional Purchase Price shall be made by
wire transfer of immediately available funds by the Buyer to the accounts of the
respective Sellers (in accordance with wire instructions timely furnished in
written instructions to the Buyer from the Sellers' Holdback Representatives)
when the amount thereof is finally determined; provided, however, in the event
of a dispute which is not resolved by the parties within the 10-day period
provided in Section 2.3(c) hereof, payment of the portion of the Additional
Purchase Price not in dispute shall be made (in accordance with wire
instructions timely furnished in written instructions to the Buyer from the
Sellers' Holdback Representatives) at the time the items in dispute are
submitted to the Neutral Accountants.
(e) Payment of the Additional Purchase Price shall be made
without set-off or counterclaim, except that the Buyer may set-off against the
portion of the Additional Purchase Price payable to any Seller any amount
payable by such Seller to the Buyer which is liquidated in amount and either
acknowledged in writing (as to both liability and amount) by such Seller or
provided in a judgment of a court of applicable jurisdiction; provided that if
such judgment is not yet final and subject to no further appeal, then the Buyer
shall segregate the amount set-off until such time as the judgment becomes final
and nonappealable or the litigation is otherwise finally terminated, at which
time the Buyer shall retain the amount finally determined to be due to it and
pay over to the applicable Seller any excess together with interest thereon at a
rate of 6.125% per annum.
2.4. Closing Balance Sheet2.4.ClosingBalanceSheet""2".
(a) Within 30 days after the LLC Closing Date, Seneca LLC shall
cause the Company's Accountant to prepare and deliver to the Buyer, the Sellers'
Holdback Representatives and Seneca an audited balance sheet of Seneca LLC as of
the LLC Closing Date (the "Closing Balance Sheet") prepared in a manner
consistent with the Audited Balance Sheets, together with the accountants report
thereon. The Sellers' Holdback Representatives and their accountants shall be
given reasonable access during normal business hours to the books and records of
Seneca LLC and the Company's Accountant solely for the purpose of verifying the
Closing Balance Sheet, and the Buyer, the Sellers' Holdback Representatives and
Seneca shall have a period of 30 days after delivery of the Closing Balance
Sheet to present in writing to each other and the Company's Accountant any
objections to the Closing Balance Sheet, which objections shall be set forth in
reasonable detail. If no objections are raised within such 30-day period, the
Closing Balance Sheet shall be deemed accepted and approved by the Buyer and the
Sellers' Holdback Representatives and shall be final, binding and conclusive
upon the Buyer and the Sellers. If the Buyer, the Sellers' Holdback
Representatives or Seneca shall object in any respect as to the Closing Balance
Sheet within the 30-day period described above, the Buyer, the Sellers' Holdback
Representatives and Seneca shall use their best efforts promptly to resolve the
matter or matters in disagreement. If the Buyer, the Sellers' Holdback
Representatives and Seneca resolve the matter or matters in disagreement, the
Buyer, the Sellers' Representative and Seneca shall either confirm or revise the
Closing Balance Sheet as prepared by the Company's Accountant in writing and
such calculations shall be final, binding and conclusive upon the Buyer and the
Sellers. If the Buyer, the Sellers' Holdback Representatives and Seneca are
unable to resolve the matter or matters in disagreement within 10 days following
receipt of written notice of objection, then the items in dispute shall be
submitted to the Neutral Accountants. Each party shall furnish to the Neutral
Accountants such workpapers and other documents and information relating to the
disputed issues as the Neutral Accountants may request and are available to that
party (or its independent public accountants), and each party shall be afforded
the opportunity to present to the Neutral Accountants any material relating to
the determination and to discuss the determination with the Neutral Accountants.
The Neutral Accountants shall be directed to furnish written notice to the
Buyer, the Sellers' Holdback Representatives and Seneca of their resolution of
any disputed issues referred to them as soon as practicable but in no event
later than 20 days following the referral of such disputed issues to the Neutral
Accountants. The determination by the Neutral Accountants, as set forth in such
notice, shall be final, binding and conclusive upon the Buyer and the Sellers.
The fees and expenses of the Neutral Accountants shall be borne equally by the
Buyer and the Sellers.
(b) If the working capital (i.e., current assets less current
liabilities in accordance with GAAP) of Seneca LLC as of the LLC Closing Date as
reflected on the Closing Balance Sheet (i) is less than $100,000, the Sellers
shall promptly pay to the Buyer as an adjustment to the LLC Purchase Price the
amount by which working capital as of the LLC Closing Date as reflected on the
Closing Balance Sheet was less than $100,000, or (ii) is greater than $100,000,
the Buyer shall promptly repay to the Sellers as an adjustment to the LLC
Purchase Price the amount equal to (A) the amount by which working capital as of
the LLC Closing Date as reflected on the Closing Balance Sheet was greater than
$100,000 less (B) the amount, if any, payable by the Sellers to the Buyer
pursuant to Section 2.4(c) hereof.
(c) If the sum of (i) the cash balance of Seneca LLC as of the
LLC Closing Date as shown on the Closing Balance Sheet and (ii) the amount, if
any, payable by the Sellers to the Buyer pursuant to clause (i) of Section
2.4(b) hereof is less than $100,000, the Sellers shall promptly pay to the Buyer
as an adjustment to the LLC Purchase Price the amount by which $100,000 exceeds
such sum.
ARTICLE 3ARTICLE3-CLOSINGS""1"
CLOSINGS
3.1. Closings3.1.Closings""2". Each of the LLC Closing and the LP
Closing shall take place at the offices of Stroock & Stroock & Lavan LLP, 180
Maiden Lane, New York, New York 10038-4982, at 10:00 a.m., New York City time,
on the LLC Closing Date and the LP Closing Date, respectively, unless the
parties hereto otherwise agree. All transactions at each of the Closings shall
be deemed to take place simultaneously.
3.2. Employment Agreements3.2.EmploymentAgreements""2".
At the LLC Closing, Seneca LLC shall enter into five-year
employment agreements with each of Seneca, Richard D. Little, Ron
K. Jacks, Charles B. Dicke, Laura Pantaleo, Janice Diamond and
Sandra J. Westhoff (collectively, the "Principals") substantially
in the forms of Exhibits A-1 through A-3 hereto as applicable
(collectively, the "Employment Agreements").
3.3. Put/Call Agreements3.3.Put/CallAgreements""2". At the LLC
Closing, each of the Persons listed on Schedule 3.3 hereto shall enter into
put/call agreements with the Buyer in the form of Exhibit B hereto (the
"Put/Call Agreements").
3.4. LLC Organizational Documents3.4.LLCOrganizationalDocuments""2".
At or prior to the LLC Closing, the LLC Organizational Documents shall have been
restated and amended in the forms of Exhibits C-1 and C-2 hereto; the Second
Amended and Restated Operating Agreement of Seneca LLC in the form of Exhibit
C-1 hereto shall have been duly executed by all of the Persons whose names are
listed on Schedule 3.4 hereto and the Buyer; and the Second Amended and Restated
Articles of Organization of Seneca LLC in the form of Exhibit C-2 hereto shall
have been duly filed with the Secretary of State of the State of California.
3.5. Affiliate Agreements3.5.AffiliateAgreements""2". At the LLC
Closing, either Seneca LLC and/or the Buyer, as mutually determined by the Buyer
and the Sellers' Representative, shall enter into agreements with each of GCM,
GMG/Little Partners, L.P., a California limited partnership, GMG/Little
(Bermuda) Partners, L.P., a Bermuda limited partnership, South Ferry Building
Company, L.P., a New York limited partnership, Genesis Merchant Group Limited
Partnership, an Illinois limited partnership, and Genesis Merchant Group
Securities LLC, a California limited liability company, in the form of Exhibits
D-1 through D-3 hereto (collectively, the "Affiliate Agreements").
3.6. Noncompetition/Nonsolicitation
Agreements3.6.Noncompetition/NonsolicitationAgreements""2". At the LLC Closing,
each of the Principals shall enter into nonsolicitation/noncompetition
agreements with Seneca LLC substantially in the forms of Exhibits E-1 and E-2
hereto as applicable (collectively, the "Noncompetition/Nonsolicitation
Agreements").
3.7. Other Deliveries at the LLC
Closing3.7.OtherDeliveriesattheLLCClosing""2". In addition to the
foregoing matters, at the LLC Closing:
(a) The Buyer shall deliver to the Sellers the LLC
Purchase Price, as provided in Section 2.2 hereof; and
(b) The Buyer and the Sellers shall deliver the
documents described in Article 9.
3.8. Other Deliveries at the LP
Closing3.8.OtherDeliveriesattheLPClosing""2". In addition to the
foregoing matters, at the LP Closing:
(a) The Buyer shall deliver to the Sellers the LP
Purchase Price, as provided in Section 2.2 hereof; and
(b) The Buyer and the Sellers shall deliver the
documents described in Article 9.
ARTICLE
4ARTICLE4-REPRESENTATIONSANDWARRANTIESOFTHENON-MANAGEMENTSELLERS""1"
REPRESENTATIONS AND WARRANTIES OF THE NON-MANAGEMENT SELLERS
Except as set forth on the Disclosure Schedule, each Non-Management
Seller, severally and not jointly, hereby represents and warrants to the Buyer
as set forth in Sections 4.1 through 4.4 below:
4.1. Authorization4.1.Authorization""2". Such Non-Management Seller
has the legal right, power, authority and capacity to enter into and deliver
this Agreement and each of the Affiliate Agreements to which it is a party, if
any, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. This Agreement has been, and
each Affiliate Agreement will be, duly executed and delivered by such
Non-Management Seller, and this Agreement is, and each Affiliate Agreement will
be, legal, valid and binding obligations of such Non-Management Seller
enforceable against such Non-Management Seller in accordance with its terms,
except, in each case, as limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto.
4.2. No Violation4.2.NoViolation""2". Neither the execution and
delivery of this Agreement or any of the Affiliate Agreements to which such
Non-Management Seller is a party nor the consummation by such Non-Management
Seller of the transactions contemplated hereby or thereby will (i) conflict with
or violate any provision of law, domestic or foreign, applicable to or binding
upon such Non-Management Seller, (ii) violate any provision of any regulation,
order, writ, injunction or decree of any court or Governmental Entity,
applicable to or binding upon such Non-Management Seller, or (iii) violate,
conflict with, result in a breach of, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination, cancellation or acceleration of, any lease, license,
contract, agreement, commitment or instrument to which such Non-Management
Seller is a party or by which any of its assets or properties is bound or
subject, or result in the creation or imposition of any Lien upon its Membership
Interests or its Partnership Interests.
4.3. Ownership of Membership Interests and Partnership
Interests4.3.OwnershipofMembershipInterestsandPartnershipInterests""2". Such
Non-Management Seller has, and at the applicable Closing Date will have, good,
valid and marketable title to its Membership Interests and Partnership
Interests, free and clear of all Liens, and the absolute right, power and
capacity to sell, assign, convey, transfer and deliver the same as contemplated
by this Agreement, free and clear of all Liens, except to the extent provided in
the LLC Organizational Documents or the LP Organizational Documents and except,
as of the date hereof only, for the claim of a Non-Management Seller's spouse to
a community property interest in such Non-Management Seller's Membership
Interests and Partnership Interests under California law, which claim shall have
been waived prior to the applicable Closing Date.
4.4. No Other Agreements to
Sell4.4.NoOtherAgreementstoSell""2". Such Non-Management Seller has
no legal obligation, absolute or contingent, to any person or
entity other than the Buyer to sell its Membership Interests or
Partnership Interests, to effect any merger, consolidation or other
reorganization of either Seneca LLC or Seneca LP or to enter into
any agreement with respect thereto.
4.5. No Knowledge4.5.NoKnowledge""2". Philip C. Stapleton, a
Non-Management Seller, hereby represents and warrants to the Buyer that he is
not aware of any facts which would render any of the representations and
warranties of the Management Sellers set forth in Article 5 untrue or incorrect.
ARTICLE
5ARTICLE5-REPRESENTATIONSANDWARRANTIESOFTHEMANAGEMENTSELLERS""1"
REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT SELLERS
Except as set forth on the Disclosure Schedule, each of the
Management Sellers, severally and not jointly, hereby represents and warrants to
the Buyer as follows:
5.1. Organization, Standing and
Authority5.1.Organization,StandingandAuthority""2". Seneca LLC is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of California, and Seneca LP is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
California. Each of Seneca LLC and Seneca LP is duly qualified to do business
and in good standing in each jurisdiction where its ownership or leasing of
property or the conduct of its business requires it to be so qualified, except
for such jurisdictions in which the failure to be duly qualified does not have,
and would not reasonably be expected to have, either individually or in the
aggregate, a Seneca Material Adverse Effect. Each of Seneca LLC and Seneca LP
has all necessary organizational power and authority to carry on its business as
now conducted and to own, lease and operate its assets, properties and business.
Each of Seneca LLC and Seneca LP has all federal, state, local and foreign
governmental authorizations necessary for it to own or lease its properties and
assets and to carry on its business as it is now conducted, the absence of which
has, either individually or in the aggregate, a Seneca Material Adverse Effect.
Each of Seneca LLC and Seneca LP is duly registered as an investment adviser
under the Advisers Act and is duly registered, licensed or qualified as an
investment adviser in all jurisdictions where such registration, licensing or
qualification is required in order to conduct its business, except for failures
to be so registered, licensed or qualified that do not have, either individually
or in the aggregate, a Seneca Material Adverse Effect.
5.2. Subsidiaries5.2.Subsidiaries""2". Except for Seneca Distributors
LLC, a Subsidiary of Seneca LLC ("Seneca Distributors"), which as of the date
hereof has not conducted any business, neither Seneca LLC nor Seneca LP has any
Subsidiaries. The capital stock of Seneca Distributors is owned by Seneca LLC
and others as set forth in the Disclosure Schedule.
5.3. Authorization5.3.Authorization""2". Such Management Seller has
the legal right, power, authority and capacity to enter into and deliver this
Agreement and each of the Related Agreements to which it is a party and, subject
to and in accordance with the terms hereof and thereof, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. This Agreement has been, and each Related Agreement to
which such Management Seller is a party will be, duly executed and delivered by
such Management Seller, and this Agreement is, and each such Related Agreement
will be, a legal, valid and binding obligation of such Management Seller
enforceable against such Management Seller in accordance with its terms, except,
in each case, as limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto.
5.4. Organizational Documents5.4.OrganizationalDocuments""2". The
copies of the LLC Organizational Documents furnished by the Management Sellers
to the Buyer are true, correct and complete copies thereof, and there will have
been no subsequent amendments or other modifications of such documents before
the Closing, except as otherwise contemplated herein. The copies of the LP
Organizational Documents furnished by the Management Sellers to the Buyer are
true, correct and complete copies thereof, and there will have been no
subsequent amendments or other modifications of such documents before the
Closing, except as otherwise contemplated herein. Such LLC Organizational
Documents, LP Organizational Documents and the Phantom Profits Bonus Agreements
are the only documents which govern operations, management and sharing of
profits and losses and distributions of Seneca LLC and Seneca LP.
5.5. No Violation5.5.NoViolation""2". Neither the execution and
delivery of this Agreement or any of the Related Agreements nor the consummation
of the transactions contemplated hereby or thereby will (i) conflict with or
violate any provision of any LLC Organizational Document or LP Organizational
Document, as the case may be, (ii) conflict with or violate any provision of
law, domestic or foreign, applicable to or binding upon Seneca LLC, Seneca LP or
such Management Seller, (iii) violate any provision of any regulation, order,
writ, injunction or decree of any court or Governmental Entity applicable to or
binding upon Seneca LLC, Seneca LP or such Management Seller or (iv) violate,
conflict with, result in a breach of, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination, cancellation or acceleration of, any lease, license,
contract, agreement, commitment or instrument (other than Investment Contracts)
to which Seneca LLC, Seneca LP or such Management Seller is a party or by which
Seneca LLC, Seneca LP or such Management Seller or any of their respective
assets or properties is bound or subject, or result in the creation or
imposition of any Lien upon the Membership Interests or the Partnership
Interests or upon the assets of any such entity pursuant to the terms of any
such agreement or instrument, with such exceptions with respect to the matters
referred to in clauses (ii), (iii) and (iv) above that do not have, and would
not reasonably be expected to have, either individually or in the aggregate, a
Seneca Material Adverse Effect or reasonably be expected to prevent consummation
of the transactions contemplated hereby.
5.6. Governmental
Authorization5.6.GovernmentalAuthorization""2". No consent, approval or
authorization of, or declaration or filing with, or notice to, any Governmental
Entity (except to the extent such consent is a Client Consent) is required to be
made or obtained by any of Seneca LLC or Seneca LP in connection with the
execution, delivery and performance of this Agreement and the Related Agreements
and the consummation of the transactions contemplated hereby and thereby, other
than (a) compliance with any applicable requirements of the HSR Act; (b)
compliance with any applicable requirements of the Exchange Act, the Securities
Act, the Investment Company Act, the Advisers Act and state "blue sky" laws; (c)
the filing of amendments to the Forms ADV filed by Seneca LLC and Seneca LP (as
applicable); and (d) such other actions, filings, approvals and consents, the
failure of which to make or obtain does not have, and would not reasonably be
expected to have, either individually or in the aggregate, a Seneca Material
Adverse Effect.
5.7. Ownership of Membership Interests and Partnership
Interests5.7.OwnershipofMembershipInterestsandPartnershipInterests""2". Such
Management Seller has, and at the applicable Closing Date will have, good, valid
and marketable title to its Membership Interests and Partnership Interests, free
and clear of all Liens, and the absolute right, power and capacity to sell,
assign, convey, transfer and deliver the same as contemplated by this Agreement,
free and clear of all Liens, except to the extent provided in the LLC
Organizational Documents or the LP Organizational Documents and except, as of
the date hereof only, for the claim of such Management Seller's spouse to a
community property interest in such Management Seller's Membership Interests and
Partnership Interests under California law, which claim shall have been waived
prior to the applicable Closing Date. The Disclosure Schedule sets forth a true,
correct and complete list of the present members of Seneca LLC and the present
partners of Seneca LP, showing the interests in Seneca LLC and Seneca LP, as the
case may be, held by such member or partner and the balance of the capital
accounts for each such member or partner as of April 30, 1997. In addition, the
Disclosure Schedule sets forth a true, correct and complete list of (i) all
Persons having a Phantom Profits Percentage (as defined in the Phantom Profits
Bonus Agreements) and the amount of such Phantom Profits Percentages and (ii)
any agreements or arrangements requiring payments by Seneca LLC and/or Seneca LP
as a result of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth on the Disclosure Schedule, neither
Seneca LLC nor Seneca LP has outstanding any security convertible or
exchangeable for any interests in Seneca LLC or Seneca LP, or any warrants,
options or other rights or commitments to purchase or acquire, any interest in
Seneca LLC or Seneca LP, nor is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any interest in either
Seneca LLC or Seneca LP. Except as set forth in the LLC Organizational Documents
and the LP Organizational Documents and as set forth on the Disclosure Schedule,
(i) there are no restrictions on the transferability of Membership Interests or
Partnership Interests imposed by any agreement to which either Seneca LLC or
Seneca LP is a party and (ii) no Person has any preemptive or other purchase
rights with respect to the issue or sale of any Membership Interests or
Partnership Interests.
5.8. Financial Statements5.8.FinancialStatements""2". The Management
Sellers have heretofore delivered to the Buyer the Historical Financial
Statements. The Historical Financial Statements (i) have been prepared in
accordance with GAAP, (ii) are in accordance with the books and records of
Seneca LLC or Seneca LP, as the case may be, and (iii) present fairly the
assets, liabilities and financial condition, results of operations and cash
flows indicated thereby at the dates, and for the periods, stated therein.
5.9. Absence of Undisclosed
Liabilities5.9.AbsenceofUndisclosedLiabilities""2". Except as set forth on the
Disclosure Schedule, neither Seneca LLC nor Seneca LP has any liability or
obligation of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) that was required in accordance with GAAP to
be reflected on the Audited Balance Sheets as of December 31, 1996, which was
not shown or provided for thereon, other than liabilities incurred in the
ordinary course of business since December 31, 1996.
5.10. Absence of Certain Changes5.10.AbsenceofCertainChanges""2".
Since December 31, 1996, Seneca LLC and Seneca LP have conducted their
businesses in the ordinary course in accordance with their customary practices,
and except as contemplated by this Agreement, the Related Agreements or the
Disclosure Schedule there has not been:
(a) any event or events or occurrence or occurrences which has
had or would reasonably be expected to have, either individually or in the
aggregate, a Seneca Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any Membership Interests or Partnership
Interests, or any repurchase, redemption or other acquisition by Seneca LLC or
Seneca LP of any outstanding Membership Interests or Partnership Interests or
other securities of, or other ownership interests in, Seneca LLC or Seneca LP;
(c) any incurrence, assumption or guarantee by Seneca LLC or
Seneca LP of any outstanding amount of indebtedness for borrowed money other
than in the ordinary course of business in accordance with their customary
practices;
(d) any transaction or commitment made, or any contract or
agreement entered into, by Seneca LLC or Seneca LP relating to their respective
assets or businesses (including the acquisition or disposition of any assets) or
any loss or relinquishment by Seneca LLC or Seneca LP of any material contract
or other material right, other than transactions and commitments in the ordinary
course of business in accordance with their customary practices;
(e) any material modifications or amendments to any Investment
Contracts or other agreements, in each case with respect to any Affiliated
Accounts or any Affiliates of Seneca LLC or Seneca LP;
(f) any material change in any method of accounting
or accounting practice or policy or application thereof by Seneca
LLC or Seneca LP;
(g) any increase in (or commitment, oral or written, to
increase) the rate or terms (including, without limitation, any acceleration of
the right to receive payment) of compensation payable or to become payable by
Seneca LLC or Seneca LP to their directors, officers, employees or consultants,
except increases occurring in the ordinary course of business in accordance with
their customary practices, or any new written employment agreements with any of
such Persons or any new commitments (oral or written) with any director or
officer of Seneca LLC or Seneca LP or with any of the Sellers; or
(h) any increase in (or commitment, oral or written, to
increase) the rate or terms (including, without limitation, any acceleration of
the right to receive payment) of any bonus, severance, insurance, pension or
other employee benefit plan or contract, payment or arrangement made to, for or
with any director, officer, employee or consultant of Seneca LLC or Seneca LP,
except increases occurring in the ordinary course or any new bonus, severance or
employee benefit plan, contracts, payments or arrangements with any of such
Persons.
5.11. Litigation5.11.Litigation""2". There is no Action pending or,
to the knowledge of such Management Seller, threatened or anticipated (i)
against any of Seneca LLC, Seneca LP, Seneca Distributors or GCM or their
respective businesses, activities, properties or assets or (ii) relating to or
affecting the transactions contemplated by this Agreement or any of the Related
Agreements, except as set forth on the Disclosure Schedule. None of Seneca LLC,
Seneca LP, Seneca Distributors or GCM is in default with respect to any
judgment, order, writ, injunction or decree of any court or Governmental Entity,
and there are no unsatisfied judgments against any of Seneca LLC, Seneca LP,
Seneca Distributors or GCM or the business, activities, properties or assets of
Seneca LLC, Seneca LP, Seneca Distributors or GCM. There is not a reasonable
likelihood of an adverse determination of any such pending Actions which would,
individually or in the aggregate, have a Seneca Material Adverse Effect.
5.12. Title to Assets5.12.TitletoAssets""2". Each of Seneca LLC and
Seneca LP has good, valid and marketable title to, valid leasehold interests in,
or unrestricted rights to use, all assets and properties purported to be owned,
operated, leased or occupied by it, or used in the operation of its business,
free and clear of all Liens, except for minor Liens which in the aggregate are
not substantial in amount, do not materially detract from the value of the
property or assets subject thereto or interfere with the present or anticipated
use thereof and have not arisen other than in the ordinary course of Seneca
LLC's or Seneca LP's business. Each of Seneca LLC and Seneca LP has performed
all the obligations required to be performed by it with respect to all assets
leased by it through the date hereof, except where the failure to perform does
not have, or would not reasonably be expected to have, individually or in the
aggregate, a Seneca Material Adverse Effect. Other than the assets owned or
leased by Seneca LLC and Seneca LP, there are no assets (i) the use of which is
reasonably necessary for the conduct of Seneca LLC's or Seneca LP's business as
now being conducted or (ii) the absence of which, either individually or in the
aggregate, has, or would reasonably be expected to have, a Seneca Material
Adverse Effect. Neither Seneca LLC nor Seneca LP owns any real property.
5.13. Intellectual Property5.13.IntellectualProperty""2". Seneca LLC
or Seneca LP is the owner of or has sufficient rights to use all items of
intangible property, including, without limitation, trademarks and service marks
(whether or not registered), trade names, brand names, patents and copyrights,
which individually or in the aggregate are material to the business of Seneca
LLC or Seneca LP as currently conducted, taken together. The Disclosure Schedule
lists all such items of intellectual property and all licenses, agreements,
instruments or other arrangements relating thereto, including all computer
software or other systems owned, developed or licensed by Seneca LLC or Seneca
LP (but excluding any standard licenses with respect to computer software or
systems that are generally available in the marketplace). The Management Sellers
have furnished to the Buyer true, correct and complete copies of all such
licenses, agreements, instruments or other arrangements. There are no claims
pending or, to the knowledge of such Management Seller, threatened, that Seneca
LLC, Seneca LP, Seneca Distributors or GCM is in violation of any such
intangible property rights of any third party.
5.14. Contracts5.14.Contracts""2". The Disclosure Schedule sets forth
as of the date hereof a list of all leases for real property, all material
leases for personal property and all material agreements, contracts, licenses,
commitments and instruments to which Seneca LLC or Seneca LP is a party or by
which Seneca LLC or Seneca LP or any of their respective assets or properties is
bound or subject. Each such agreement, contract, lease, license, commitment and
instrument (excluding for these purposes, Investment Contracts) is in full force
and effect and constitutes the legal, valid and binding obligation of Seneca LLC
or Seneca LP, as applicable, enforceable in accordance with its terms, except,
in each case, as limited by the effects of bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and court decisions with respect thereto. True, correct and
complete copies of all such agreements, contracts, leases, licenses, commitments
and instruments (or, in the case of material oral agreements and contracts, a
description of the material terms thereof) have been previously delivered by the
Management Sellers to the Buyer. Except for Investment Contracts and other
leases, contracts, agreements, licenses, commitments or instruments listed on
the Disclosure Schedule, neither Seneca LLC nor Seneca LP is on the date hereof
a party to or is or may be bound by and none of their respective assets or
properties is or may be subject to:
(a) any contract or agreement not fully performed for the purchase
for its own account of any commodity, material, services or equipment,
including, without limitation, fixed assets, for a price in excess of
$100,000;
(b) any contract containing covenants limiting the freedom of Seneca
LLC or Seneca LP to compete in any line of business or with any Person;
(c) any agreement, oral or written, or understanding (i)
for cash payments for client solicitations, (ii) in respect of
the sale or distribution of shares of the Seneca Funds or
(iii) of the type referred to in Rule 2830(l) of the National
Association of Securities Dealers, Inc. Conduct Rules;
(d) any license agreement (as licensor or licensee) providing for
future payments in excess of $100,000 which by its terms does not
terminate or is not terminable without penalty by Seneca LLC or Seneca LP
upon notice of 60 days or less;
(e) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money, by
Seneca LLC or Seneca LP in excess of $100,000; or
(f) any other contract or agreement which creates future payment
obligations of Seneca LLC or Seneca LP in excess of $100,000 and which by
its terms does not terminate or is not terminable without penalty by
Seneca LLC or Seneca LP upon notice of 60 days or less.
5.15. No Default under Contracts or
Agreements5.15.NoDefaultunderContractsorAgreements""2". Except with respect to
Investment Contracts, neither Seneca LLC nor Seneca LP (or the manner in which
either of them conducts its business) is in breach or violation of, or in
default under (with or without the giving of notice or the passage of time), any
term or provision of any lease, license, contract, agreement, commitment or
instrument to which it is a party or by which it is or may be bound or to which
any of its properties or assets is or may be subject, the effect of which
breach, violation or default, either individually or in the aggregate, has or
would reasonably be expected to have a Seneca Material Adverse Effect. To the
knowledge of such Management Seller, no other party is in material default of
any such lease, license, contract, agreement, commitment or instrument.
5.16. Compliance with Laws5.16.CompliancewithLaws""2". Seneca LLC and
Seneca LP have all permits, licenses, certificates of authority, orders and
approvals of, and have made all filings, applications and registrations with,
Governmental Entities that are required in order to permit them to carry on
their businesses as presently conducted and the absence of which would,
individually or in the aggregate, have a Seneca Material Adverse Effect; such
material permits, licenses, certificates of authority, registrations, orders and
approvals are in full force and effect. Except as set forth on the Disclosure
Schedule and except to the extent violation or infringement, either individually
or in the aggregate, does not have, or would not reasonably be expected to have,
a Seneca Material Adverse Effect, neither Seneca LLC nor Seneca LP is in
violation of any law, statute, rule, regulation, judgment, injunction, order or
decree, domestic or foreign, binding upon or applicable to Seneca LLC or Seneca
LP or of any arbitrator, court, regulatory body, administrative agency or any
other Governmental Entity, domestic or foreign, having jurisdiction over Seneca
LLC or Seneca LP or any of their respective properties or assets.
5.17. Activities5.17.Activities""2". Seneca LLC and Seneca LP have
not engaged in any business or activity of any kind, other than the business and
activities contemplated and permitted by the LLC Organizational Documents and
the LP Organizational Documents, as applicable.
5.18. Taxes5.18.Taxes""2".
(a) (i) All Tax returns and reports (including information
returns, declarations and reports) and amended or substituted returns and
reports required to be filed with any Taxing Authority by or on behalf of Seneca
LLC or Seneca LP (collectively, the "Tax Returns" and singularly, a "Tax
Return"), have been or will be duly and timely filed when due in accordance with
all applicable laws (including any extensions of such due date), except to the
extent any failure to so file, individually or in the aggregate, does not have a
Seneca Material Adverse Effect; (ii) as of the time of filing, the Tax Returns
correctly reflected (and, as to any Tax Returns not filed as of the date hereof,
will correctly reflect) in all material respects the income or other measure of
Tax and any other information required to be shown therein; (iii) all Taxes
shown as due and payable on the Tax Returns have been timely paid or withheld or
adequate provision has been made therefor; (iv) the charges, accruals and
reserves for deferred and contingent Taxes reflected on the financial statements
of Seneca LLC and Seneca LP described in Section 5.8 hereof are adequate to
cover all Taxes which are or may become payable by Seneca LLC or Seneca LP with
respect to all periods covered by such financial statements, and the books and
records of Seneca LLC and Seneca LP will contain accruals and reserves adequate
to cover all Taxes for all periods ending on or prior to the applicable Closing
Date and not covered by such financial statements, except to the extent any such
failure, individually or in the aggregate, does not have a Seneca Material
Adverse Effect; (v) neither Seneca LLC nor Seneca LP is delinquent in the
payment of any Tax or has requested any extension of time within which to file
any Tax Return, which Tax Return either has not since been filed or with respect
to which such extended period has not yet expired; (vi) there are no pending or,
to the knowledge of such Management Seller, threatened audits, investigations,
claims, administrative or judicial proceedings, or collection actions against or
with respect to Seneca LLC or Seneca LP (or such Management Member arising out
of his or her ownership of membership or partnership interests in Seneca LLC or
Seneca LP) in respect of any Tax or assessment; (vii) there are no Liens for
Taxes upon the assets of Seneca LLC or Seneca LP except Liens for current Taxes
not yet due; (viii) neither Seneca LLC nor Seneca LP has or is required to file
Tax returns in any jurisdiction outside of the United States of America; and
(ix) the Disclosure Schedule sets forth the taxable years of Seneca LLC and
Seneca LP as to which audits have been completed, those years which are
currently under audit, those years for which audits have not been initiated, and
those years for which required Tax Returns have not yet been filed.
(b) All Taxes required to be withheld by Seneca LLC and Seneca
LP arising as a result of payments to (or amounts allocable to) foreign members,
foreign partners or other foreign Persons have been collected and withheld, and
have been paid to the appropriate Taxing Authority.
(c) Seneca LLC qualifies (and has qualified since the date of
its formation) to be treated as a partnership for Federal, state and local
income tax purposes, except to the extent any such failure to qualify,
individually or in the aggregate, does not have and would not reasonably be
expected to have a Seneca Material Adverse Effect, and neither Seneca LLC nor,
to the knowledge of such Management Seller, any Person owning a Membership
Interest prior to the LLC Closing Date has taken or will take a position
inconsistent with such treatment.
(d) Seneca LP qualifies (and has qualified since the date of its
formation) to be treated as a partnership for Federal, state and local income
tax purposes, except to the extent any such failure to qualify, individually or
in the aggregate, does not have and is not reasonably expected to have a Seneca
Material Adverse Effect, and neither Seneca LP nor, to the knowledge of such
Management Seller, any Person owning a Partnership Interest prior to the LP
Closing Date has taken or will take a position inconsistent with such treatment.
(e) Neither Seneca LLC's or Seneca LP's payroll, property or
receipts, or other factors used in a particular states apportionment or
allocation formula, results in an apportionment or allocation of business income
to any state other than the State of California or the State of Connecticut, and
neither Seneca LLC nor Seneca LP has nonbusiness income that is allocated,
apportioned or otherwise sourced to any state other than the State of California
or the State of Connecticut.
5.19. Employee Benefit
Plans5.19.EmployeeBenefitPlans""2".
(a) Definitions. The following terms, when used in this Section
5.19, shall have the following meanings. Any of these terms may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference.
(i) "Benefit Arrangement" shall mean any employment or
consulting policy, practice or plan providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, severance, retirement benefits, life, health, disability or
accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the
Code providing for the same or other benefits) or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation
rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not an
ERISA Welfare Plan, ERISA Pension Plan or Multiemployer Plan, (B) is
maintained, contributed to or required to be contributed to, as the case
may be, by either Seneca LLC or Seneca LP and (C) covers or covered any
individual while retained or employed by Seneca LLC or Seneca LP.
(ii) "Benefit Plans" shall mean all Benefit
Arrangements, Multiemployer Plans, ERISA Pension Plans and
ERISA Welfare Plans.
(iii)"ERISA Affiliate" shall mean any entity (whether or not
incorporated) which is (or at any relevant time was) a member of a
"controlled group of corporations" with or under "common control" with
Seneca LLC or Seneca LP (as such terms are defined in Section 4001 of
ERISA or Sections 414(b) or (c) of the Code).
(iv) "ERISA Pension Plan" shall mean any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) (A) which Seneca LLC or Seneca LP maintains,
administers, contributes to or is required to contribute to, or has ever
maintained, administered, contributed to or been required to contribute
to, and (B) which covers or covered any individual while retained or
employed by Seneca LLC or Seneca LP.
(v) "ERISA Welfare Plan" shall mean any "employee welfare
benefit plan" as defined in Section 3(1) of ERISA, (A) which Seneca LLC or
Seneca LP maintains, administers, contributes to or is required to
contribute to, or has ever maintained, administered, contributed to or
been required to contribute to, and (B) which covers or covered any
individual while retained or employed by Seneca LLC or Seneca LP.
(vi) "Multiemployer Plan" shall mean any
"multiemployer plan," as defined in Section 4001(a)(3) of
ERISA.
(vii)"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(b) Disclosure; Delivery of Copies of Relevant Documents and
Other Information. The Disclosure Schedule contains a complete list of Benefit
Plans and complete copies of each of the following documents have been delivered
by the Management Sellers to the Buyer with respect to each Benefit Plan
maintained on or after January 1, 1993 (to the extend such documents are
relevant to or have been prepared with respect to such Benefit Plan): (i) the
most recent document (and, if applicable, related trust agreements) and all
amendments thereto and the most recent written description thereof which has
been distributed to employees of Seneca LLC or Seneca LP, a complete description
of any Benefit Plan which is not in writing, and all annuity contracts or other
funding instruments; (ii) with respect to any Benefit Plan (including any
Benefit Plan maintained prior to 1993) which is or was an ERISA Pension Plan
intended to be qualified under Section 401(a) of the Code, the most recent
determination letter issued by the Internal Revenue Service and any pending
application for such a determination letter; (iii) Annual Reports on Form 5500
Series (including all applicable schedules thereto) required to be filed with
any Governmental Entity for each Benefit Plan and Tax Returns, if any (including
all applicable schedules thereto) for each trust related thereto for the most
recent plan year (or the three most recent plan years in the case of each such
Benefit Plan that is an ERISA Pension Plan); (iv) all financial statements and
accountant's opinions relating to each such Benefit Plan that is an ERISA
Pension Plan or an ERISA Welfare Plan for the three most recent plan years; (v)
any correspondence or notifications received from any Governmental Entity during
the three most recent plan years relating to Benefit Plans other than routine
correspondence relative to Annual Reports on Form 5500 Series; (vi) specimen
copies of all administrative forms used in connection with the administration of
each such Benefit Plan that is an ERISA Pension Plan or ERISA Welfare Plan;
(vii) each valuation of the liabilities associated with post-employment benefits
provided under any such Benefit Plan, consistent with Statement of Financial
Accounting Standards 112; (viii) a report of the claims experience under each
such Benefit Plan that is a self-funded ERISA Welfare Plan for the three most
recent plan years; and (ix) all other contracts, agreements, insurance policies
and fidelity bonds relating to the Benefit Plans.
(c) Compliance. Each ERISA Pension Plan, ERISA Welfare Plan,
Benefit Arrangement, related trust agreement, annuity contract and other funding
instrument complies, and has been maintained in compliance in all material
respects, with its terms and, both as to form and operation, with all applicable
requirements, including all reporting and disclosure requirements, prescribed by
any and all statutes, orders, rules and regulations, including, but not limited
to, ERISA and the Code.
(d) Multiemployer Plans. None of Seneca LLC,
Seneca LP or any ERISA Affiliate has, at any time, directly or
indirectly contributed to or had an obligation to contribute to a
Multiemployer Plan.
(e) ERISA Welfare Plans.
(i) No condition exists which would prevent Seneca LLC or Seneca
LP, as applicable, from amending or terminating any ERISA Welfare Plan.
(ii) Neither Seneca LLC nor Seneca LP has any present or future
obligation to make any payment to or under any ERISA Welfare Plan which
provides benefits to retirees other than for COBRA benefits under Part 6
of Subtitle B of Title I of ERISA and Section 4980B of the Code.
(iii)Each ERISA Welfare Plan (and each plan of any ERISA
Affiliate) which is a "group health plan," as defined in Section 607(1) of
ERISA, has been operated in material compliance with the provisions of
Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code at
all times.
(iv) To the knowledge of such Management Seller, there are no
contributions or payments of benefit claims with respect to any ERISA
Welfare Plan which are, as of the applicable Closing, 30 days past due.
(f) ERISA Pension Plans.
(i) No ERISA Pension Plan (or plan of an ERISA Affiliate) is or
has been subject to the minimum funding requirements of ERISA or Section
412 of the Code, or to Title IV of ERISA. Neither Seneca LLC nor Seneca LP
has any liability for unpaid contributions with respect to any ERISA
Pension Plan, other than current liabilities which are not required to be
paid as of the applicable Closing Date.
(ii) Each ERISA Pension Plan (and each related trust agreement,
annuity contract or other funding instrument) which is intended to be
qualified and tax-exempt under the provisions of Sections 401(a) and
501(a) of the Code has received a determination letter that it is so
qualified and no event has occurred nor does any condition exist which
would cause it not to continue to be so qualified, other than changes in
the qualification requirements with respect to which the deadline for
adoption of retroactive amendments has not expired.
(g) Unrelated Business Taxable Income. No Benefit
Plan (or trust or other funding vehicle pursuant thereto) is
subject to any Tax under Section 511 of the Code.
(h) Deductibility of Payments. There is no contract, agreement,
plan or arrangement covering any employee or former employee of Seneca LLC or
Seneca LP that, individually or collectively, provides for the payment by Seneca
LLC or Seneca LP of any amount that is not deductible under Sections 162 or 404
of the Code.
(i) Fiduciary Duties and Prohibited Transactions. Neither Seneca
LLC nor Seneca LP has engaged in any transaction with respect to an ERISA
Welfare Plan or an ERISA Pension Plan in violation of Sections 404 or 406 of
ERISA or any "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975(c)(1) of the Code, for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the Code, other than such transactions
which do not have, and are not reasonably expected to have, either individually
or in the aggregate, a Seneca Material Adverse Effect.
(j) Litigation. There are no pending or, to the knowledge of
such Management Seller, threatened Actions (other than claims for benefits in
the normal course), asserted or instituted against (i) any ERISA Welfare Plan or
its assets, (ii) any ERISA Pension Plan or its assets, (iii) any fiduciary with
respect to any ERISA Pension Plan or ERISA Welfare Plan or (iv) Seneca LLC,
Seneca LP or any ERISA Affiliate with respect to any Benefit Plan.
(k) No Amendments. Neither Seneca LLC nor Seneca LP has
announced any plan or made any legally binding commitment to create any
additional Benefit Plans or to amend or modify materially any existing Benefit
Plan except as may be required by law or for compliance with the applicable
qualification provisions of the Code. No ERISA Affiliate has announced any plan
or made any legally binding commitment (i) to establish or contribute to any
plan subject to Section 302 of ERISA or Section 412 of the Code or to Title IV
of ERISA or (ii) to begin contributing to or otherwise participating in any
Multiemployer Plan.
(l) No Other Liability. No event has occurred in connection with
which Seneca LLC or Seneca LP or any Benefit Plan, directly or indirectly, would
be subject to any material liability (i) under any statute, regulation or
governmental order relating to any Benefit Plans or (ii) pursuant to any
obligation of Seneca LLC or Seneca LP to indemnify any person against liability
incurred under any such statute, regulation or order as they relate to the
Benefit Plans.
5.20. Investment Contracts and
Clients5.20.InvestmentContractsandClients""2". The Disclosure Schedule sets
forth a list of (i) all Clients and GCM Clients as of the date hereof and (ii)
the net assets in each Client and GCM Client account as of April 30, 1997. Each
of such Clients and GCM Clients is a party to an Investment Contract with Seneca
LLC, Seneca LP or GCM, as applicable. Seneca LLC, Seneca LP or GCM, as
applicable, is in compliance with the terms of each Investment Contract and is
not in default or breach under (with or without the giving of notice or the
passage of time) any of the terms of any Investment Contract, except where such
non-compliance, breach or default does not have, and is not reasonably expected
to have, individually or in the aggregate, a Seneca Material Adverse Effect.
Each Investment Contract is in full force and effect with respect to Seneca LLC,
Seneca LP or GCM, as applicable, and constitutes a legal, valid and binding
obligation of such party thereto, enforceable against such party in accordance
with its terms. Each Investment Contract represents the entire understanding of
the parties thereto with reference to the transactions contemplated thereby.
True, correct and complete copies of each Investment Contract, including a
current fee schedule, have been made available to the Buyer. Except as set forth
on the Disclosure Schedule, none of the Management Sellers has received notice
that any Client or GCM Client intends to terminate its Investment Contract.
5.21. Certain Representations and Warranties as to the
Seneca
Funds5.21.CertainRepresentationsandWarrantiesastotheSenecaFunds""2".
(a) True, correct and complete copies of all of the current
investment advisory agreements and distribution or underwriting contracts, plans
adopted pursuant to Rule 12b-1 under the Investment Company Act or arrangements
for the payment of service fees (as such term is defined in Rule 2830 of the
National Association of Securities Dealers, Inc. Conduct Rules), and all
administrative services and other services agreements, if any, pertaining to
each of the Seneca Sponsored Funds and true, correct and complete copies of all
of the current investment subadvisory agreements with respect to all other
Seneca Funds (collectively, the "Seneca Fund Agreements") (i) have been
delivered to the Buyer prior to the date hereof and (ii) are in full force and
effect. As to each Seneca Sponsored Fund, there is and has been in full force
and effect an investment advisory, sub-advisory, distribution or underwriting
agreement (as applicable) at all times since the inception of such Seneca
Sponsored Fund, and Seneca LLC or Seneca LP, as applicable, received
compensation respecting their activities in connection with each of the Seneca
Sponsored Funds only as provided by the respective Seneca Fund Agreement and as
permitted by the Investment Company Act and other applicable law. Seneca LLC or
Seneca LP, as the case may be, has all requisite power and authority to perform
its obligations under the Seneca Fund Agreements to which it is a party with
each of the Seneca Funds, and all Seneca Fund Agreements with respect to the
Seneca Sponsored Funds were duly approved in accordance with the applicable
provisions of the Investment Company Act.
(b) There are no special restrictions, consent judgments or SEC
orders on or with regard to any of the Seneca Sponsored Funds currently in
effect that have a material adverse effect on the business or operations of any
Seneca Sponsored Fund as presently conducted. No orders of exemption issued to
any of the Seneca Sponsored Funds material to the conduct of the business of any
Seneca Sponsored Fund under the Investment Company Act or the Advisers Act have
been revoked, no proceeding to revoke any such order has been commenced and, to
the knowledge of such Management Seller, no such proceeding is contemplated by
the SEC. No such order or exemption will by its terms be revoked or become
inapplicable as a result of the consummation of the transactions contemplated by
this Agreement. Copies of all exemptive orders and SEC no-action letters
relating to the Seneca Sponsored Funds have been provided to the Buyer.
(c) Since inception, each of the Seneca Sponsored Funds has been
a duly registered investment company in material compliance with the Investment
Company Act and the rules and regulations promulgated thereunder and duly
registered or licensed and in good standing under the laws of each jurisdiction
in which such qualification is necessary, except where the failure to be duly
registered and in compliance, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Seneca Material Adverse Effect.
Since their issuance, shares of each of the Seneca Sponsored Funds have been
duly qualified for sale under the securities laws of each jurisdiction in which
they have been sold or offered for sale at such time or times during which such
qualification was required, and, if not so qualified, the failure to so qualify
does not have, or would not reasonably expected to have, individually or in the
aggregate, a material adverse effect on any of the Seneca Sponsored Funds or a
Seneca Material Adverse Effect. As promptly as practicable, Seneca LLC or Seneca
LP shall deliver to the Buyer a list of such jurisdictions separately for each
of the Seneca Sponsored Funds. Shares of each of the Seneca Sponsored Funds have
been duly registered under the Securities Act during such period or periods for
which such registration is required, the related registration statements have
become effective under the Securities Act, no stop order suspending the
effectiveness of any such registration statement has been issued and no
proceedings for that purpose have been instituted or, to the knowledge of such
Management Seller, are contemplated. Each of the Seneca Sponsored Fund's
registration statements under the Investment Company Act and/or the Securities
Act have, at all times when such registration statements were effective,
complied in all material respects with the requirements of the Investment
Company Act and the Securities Act then in effect, and such registration
statements did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Copies of the current registration statements of each of
the Seneca Sponsored Funds under the Investment Company Act and/or the
Securities Act have been delivered to the Buyer. All shares of each of the
Seneca Sponsored Funds were sold pursuant to an effective registration statement
and have been duly authorized and are validly issued, fully-paid and
non-assessable. Each of the investments of the Seneca Sponsored Funds made by
Seneca LLC or Seneca LP as investment advisor have been made in accordance with
the investment policies and restrictions set forth in the applicable
registration statement in effect at the time the investments were made, except
for such failures the effect of which, either individually or in the aggregate,
does not have, or would not reasonably be expected to have, a Seneca Material
Adverse Effect.
(d) All proxy statements to be prepared for use by the Seneca
Funds in connection with the transactions contemplated by this Agreement, any
written information provided by Seneca LLC or Seneca LP to each Board of
Directors (or equivalent bodies) in connection with this Agreement or the
transactions contemplated hereby at the time such information is provided and,
in the case of a proxy statement, the date of the shareholder vote for which
such proxy statement will be used, as then amended or supplemented, and any
information disseminated to any Clients in respect of the transactions
contemplated hereby at the time such information is disseminated, in each case,
will, insofar as it contains or consists of information supplied by Seneca LLC
or Seneca LP, be accurate and complete and will not contain any untrue statement
of a material fact, or omit to state any material fact (x) required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (y) necessary to
correct any statement in any earlier communication that has become false or
misleading.
(e) None of Seneca LLC, Seneca LP or, to the knowledge of such
Management Seller, any of their "affiliated persons" (as defined in the
Investment Company Act) is subject to any of the restrictions set forth in
Section 9(a) of the Investment Company Act.
(f) Each of the Seneca Sponsored Funds has satisfied the
relevant requirements of the Code for all taxable years, or parts thereof, of
such Seneca Sponsored Fund ending prior to the Closing as to its status as a
regulated investment company as defined in Sections 851-855 of the Code. None of
Seneca LLC, Seneca LP nor, to the knowledge of such Management Seller, any of
the Seneca Sponsored Funds has received any notice or other communication from
any Governmental Entity relating to or affecting any such Seneca Sponsored
Fund's compliance with any of these relevant requirements.
(g) Each of the Seneca Sponsored Funds has timely filed all Tax
returns and reports (including information returns, declarations and reports)
(the "Fund Tax Returns") required to be filed by it with any Taxing Authorities
and has paid, or withheld and paid over, all Taxes which were shown to be due on
the Fund Tax Returns. The information contained in such Fund Tax Returns is
true, correct and complete, and with respect to each Seneca Sponsored Fund,
there are no liabilities for Taxes which have not been paid in prior periods or
for which an adequate reserve for such liability does not exist, except to the
extent such failure does not have a Seneca Material Adverse Effect. All
liabilities for which reserves have been established as of the respective fiscal
year ends of the Seneca Sponsored Funds in 1996 and as of a date reasonably
close to the date of execution of this Agreement are set forth in the Disclosure
Schedule. With respect to each Seneca Sponsored Fund, no Tax Liens have been
filed and no claims are being asserted by any Taxing Authorities with respect to
any Taxes and, to the knowledge of such Management Seller, there are no
threatened claims for Taxes.
(h) None of Seneca LLC or Seneca LP, or, to the knowledge of
such Management Seller, any "affiliated person" (as defined in the Investment
Company Act) or any other "interested person" of Seneca LLC or Seneca LP (as
such term is defined in the Investment Company Act), receives or is entitled to
receive any compensation directly or indirectly (i) from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of any of the Seneca Sponsored Funds, other than bona fide ordinary
compensation as principal underwriter for any of the Seneca Sponsored Funds or
as broker in connection with the purchase or sale of securities in compliance
with Section 17(e) of the Investment Company Act, or (ii) from any of the Seneca
Sponsored Funds or its security holders for other than bona fide investment
advisory, administrative or other services. Accurate and complete disclosure of
all such compensation arrangements has been made in the Seneca Sponsored Funds'
registration statements filed under the federal securities laws.
(i) The Buyer has been furnished true, correct and complete
copies of the audited financial statements, prepared in accordance with GAAP, of
each of the Seneca Sponsored Funds for the past three fiscal years (or such
shorter period as such Seneca Sponsored Fund shall have been in existence). Each
Seneca Sponsored Fund's fiscal year end financial statements are hereinafter
referred to as a "Fund Financial Statement." Each of the Fund Financial
Statements is consistent with the books and records of the applicable Seneca
Sponsored Fund, and presents fairly the consolidated financial position of such
Seneca Sponsored Fund in accordance with GAAP applied on a consistent basis
(except as otherwise noted therein) at the respective dates of such Fund
Financial Statements and the results of operations and cash flows for the
respective periods indicated, except in the case of the interim financial
statements which are subject to normal year-end adjustments which in the
aggregate are not material. The Fund Financial Statements reflect and disclose
all material changes in accounting principles and practices adopted by the
applicable Seneca Sponsored Fund during the periods covered by each Fund
Financial Statement. None of the Seneca Sponsored Funds has any direct or
indirect liabilities other than (i) liabilities fully and adequately reflected
or reserved against on the balance sheets contained in the Fund Financial
Statements, and (ii) liabilities incurred since the date of the Fund Financial
Statements and incurred in the ordinary course of business.
(j) There are no Actions pending or, to the knowledge of such
Management Seller, threatened in any court or before or by any governmental
agency or instrumentality, department, commission, board, bureau or agency, or
before any arbitrator, by or against any of the Seneca Sponsored Funds, or any
officer or director thereof. There are no judgments, injunctions, orders or
other judicial or administrative mandates outstanding against or affecting any
of the Seneca Sponsored Funds or, to the knowledge of such Management Seller,
any officer or director thereof.
(k) Each Seneca Sponsored Fund complies, and has been maintained
in compliance, in all respects, with all applicable requirements, including all
reporting and disclosure requirements, prescribed by any and all statutes,
orders, rules and regulations, except for such non-compliance the effect of
which, either individually or in the aggregate, does not have, or is not
reasonably expected to have, a Seneca Material Adverse Effect.
(l) The Disclosure Schedule contains a true, complete and
correct list, as of the date hereof, of all agreements and contracts of the
following types, written or oral, to which any Seneca Sponsored Fund is a party
or by which any Seneca Sponsored Fund or any of their respective properties is
bound as of the date hereof: (i) mortgages, indentures, security agreements,
loan, financing and credit agreements and other agreements, guarantees and
instruments relating to the borrowing of money by any Seneca Sponsored Fund;
(ii) any lease for real property, material lease for personal or intangible
property (whether as lessee or lessor), and material license, service and
processing agreement; (iii) any agreement with respect to Tax allocation as to
the Taxes paid for credit for a Tax loss on a Tax Return or report; and (iv) any
other material agreement, contract and commitment. True, correct and complete
copies of all such contracts, agreements and commitments (or, in the case of
material oral contracts, a description of the material terms thereof) have been
previously delivered by the Management Sellers to the Buyer, and such contracts,
agreements and commitments contain substantially the entire understanding
between any Seneca Sponsored Fund and the other party or parties thereto with
respect to the subject matter thereof.
5.22. No Other Agreements to Sell5.22.NoOtherAgreementstoSell""2".
Such Management Seller has no legal obligation, absolute or contingent, to any
person or entity other than the Buyer to sell its Membership Interests or
Partnership Interests, to effect any merger, consolidation or other
reorganization of either Seneca LLC or Seneca LP or to enter into any agreement
with respect thereto. Except as set forth in the Disclosure Schedule, none of
Seneca LLC, Seneca LP or such Management Seller has made a commitment or entered
into negotiations, to sell or transfer any part of the assets of either Seneca
LLC or Seneca LP other than in the ordinary course of its business.
5.23. No Brokers5.23.NoBrokers""2". Except for fees and expenses to
be paid by or on behalf of the Sellers as set forth in the Disclosure Schedule,
none of Seneca LLC, nor Seneca LP, nor, to the knowledge of such Management
Seller, any other Seller, nor any Affiliate of any Seller, of Seneca LLC or of
Seneca LP has entered into any contract, agreement, arrangement or understanding
with any Person or firm which will result in the obligation of any Seller,
Seneca LLC, Seneca LP or the Buyer to pay any finder's fee or financial advisory
fee, brokerage fee or commission or similar payment in connection with the
transactions contemplated hereby.
5.24. Accuracy of Documents and
Information5.24.AccuracyofDocumentsandInformation""2". No representations or
warranties made by the Management Sellers in this Agreement, the Disclosure
Statement or the Related Agreements or in any exhibit, certificate, opinion or
schedule furnished to the Buyer pursuant hereto or thereto, contains or will
contain any untrue statement of a material fact. The copies of all documents
furnished to the Buyer hereunder are true, correct and complete copies of the
originals thereof.
ARTICLE 6ARTICLE6-REPRESENTATIONSANDWARRANTIESOFTHEBUYER""1"
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers as follows:
6.1. Organization and Standing6.1.OrganizationandStanding""2". Each
of the Buyer, PIC and PEPCO is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation and is
duly qualified to do business and in good standing in each jurisdiction where
its ownership or leasing of property or the conduct of its business requires it
to be so qualified, except for such jurisdictions in which the failure to be
duly qualified does not have and would not reasonably be expected to have,
either individually or in the aggregate, a Buyer Material Adverse Effect. Each
of the Buyer, PIC and PEPCO has all necessary corporate power and authority to
carry on its business as now conducted, and to own, lease and operate its
assets, properties and business and to consummate the transactions contemplated
hereby and by the Related Agreements to which the Buyer, PIC or PEPCO, as
applicable, is a party.
6.2. Authority6.2.Authority""2". The Buyer has full corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder, subject to the conditions set forth in Article 9. Each of
the Buyer, PIC and PEPCO has full corporate power and authority to execute and
deliver each of the Related Agreements to which it is a party and to perform its
obligations thereunder, subject to the conditions set forth in Article 9. This
Agreement has been duly and validly approved by all necessary corporate action
of the Buyer and is the legal, valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms except as limited by
the effect of bankruptcy, insolvency, reorganization, moratorium and similar
laws relating to or affecting creditors' rights generally and court decisions
with respect thereto.
6.3. Governmental
Authorization6.3.GovernmentalAuthorization""2". The execution, delivery and
performance by the Buyer of this Agreement and each of the Related Agreements to
which the Buyer is a party and the consummation by the Buyer, PIC and PEPCO of
the transactions contemplated hereby and thereby require no consent, approval or
authorization of, or declaration or filing with, or notice to, any Governmental
Entity other than (a) compliance with any applicable requirements of the HSR
Act; (b) compliance with any applicable requirements of the Exchange Act, the
Securities Act and state "blue sky" laws; and (c) such other actions, filings,
approvals and consents, the failure of which to make or obtain does not have,
and would not reasonably be expected to have, either individually or in the
aggregate, a Buyer Material Adverse Effect.
6.4. No Brokers6.4.NoBrokers""2". Except for Roberto de Guardiola
Company LLC, whose fees and expenses will be paid by the Buyer, neither the
Buyer nor any Affiliate of the Buyer has entered into any contract, agreement,
arrangement or understanding with any Person or firm which will result in the
obligation of any Seller, Seneca LLC, Seneca LP or the Buyer or any Affiliate
thereof to pay any finder's fee or financial advisory fee, brokerage fee or
commission or similar payment in connection with the transactions contemplated
hereby.
6.5. Certain Information.6.5.CertainInformation""2"
(a) All proxy statements to be prepared for use by the Seneca
Funds in connection with the transactions contemplated by this Agreement, any
written information provided by the Buyer or any of its Affiliates to each Board
of Directors (or equivalent bodies) in connection with this Agreement or the
transactions contemplated hereby at the time such information is provided and,
in the case of a proxy statement, the date of the shareholder vote for which
such proxy statement will be used, as then amended or supplemented, and any
information disseminated to any Clients in respect of the transactions
contemplated hereby at the time such information is disseminated, in each case,
will, insofar as it contains or consists of information supplied by the Buyer or
any of its Affiliates, be accurate and complete and will not contain any untrue
statement of a material fact, or omit to state any material fact (x) required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading or (y) necessary to
correct any statement in any earlier communication that has become false or
misleading.
(b) Neither the Buyer nor, to the knowledge of the Buyer, any of
its "affiliated persons" (as defined in the Investment Company Act) is subject
to any of the restrictions set forth in Section 9(a) of the Investment Company
Act.
ARTICLE 7ARTICLE7-CONDUCTOFBUSINESSPRIORTOTHECLOSINGS""1"
CONDUCT OF BUSINESS PRIOR TO THE CLOSINGS
7.1. Conduct Prior to Closings7.1.ConductPriortoClosings""2". During
the period from the date hereof through the applicable Closing Date, the
Management Sellers shall cause each of Seneca LLC and Seneca LP to operate its
business only in the usual, regular and ordinary course and substantially in
accordance with past practice, and to use its best efforts to preserve intact
its business organization and assets and maintain its rights, franchises and
business and customer, officer and employee relations necessary to conduct its
business as currently conducted in all material respects. Without in any way
limiting the foregoing, during the period from the date hereof through the
applicable Closing Date, the Management Sellers shall not permit Seneca LLC or
Seneca LP to do any of the following without the prior written consent of the
Buyer:
(a) purchase or redeem, directly or indirectly, any Membership
Interests or Partnership Interests, as applicable, or other equity interests,
but nothing herein shall prevent Seneca LLC or Seneca LP from making cash
dividends or distributions to its members or partners, as applicable, to the
extent permitted by Section 8.9 hereof;
(b) issue or sell any Membership Interests or
Partnership Interests;
(c) incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise become responsible for obligations of any other
Person, or make any loans or advances to any Person, except in the ordinary
course of business consistent with past practice or issue or sell any debt
securities;
(d) mortgage, pledge or otherwise encumber any of its properties
or assets, tangible or intangible, or otherwise dispose of any of its assets or
properties or cancel, release or assign any indebtedness owed to it or any
claims held by it, except in the ordinary course of business consistent with
past practice;
(e) except where required in the exercise of its fiduciary
obligations, in the case of any Seneca Fund, request that any action be taken by
the Board of Directors (or any equivalent body) of any Seneca Fund, other than
in connection with obtaining the approvals referred to in Section 7.3(c) hereof
and routine actions that would not reasonably be expected to have a Seneca
Material Adverse Effect;
(f) amend or otherwise modify in any material respect the terms
of any of the Investment Contracts, including, but not limited to, reductions in
the amount of fees owing to Seneca LLC or Seneca LP, as applicable, under such
Investment Contracts, except, in the case of Investment Contracts with
non-Affiliated Accounts, in the ordinary course of business consistent with past
practice;
(g) split, combine, subdivide or reclassify any
Membership Interests or Partnership Interests, as applicable;
(h) except as required by law, (i) grant or make any change in
control, severance or termination payments to any officer, employee or
consultant of Seneca LLC or Seneca LP except pursuant to plans or agreements in
existence on the date hereof, (ii) enter into any option, employment, deferred
compensation or other similar agreement (other than an agreement for employment
"at will") with any person (or enter into any amendment to any such existing
agreement with any officer, director, employee or consultant of Seneca LLC or
Seneca LP), (iii) increase benefits payable under any existing severance or
termination pay policies or agreements, (iv) adopt, amend in any material
respect or terminate any employment, bonus, profit-sharing, compensation, stock
option, pension, deferred compensation or other plan, agreement, trust, fund or
arrangement for the benefit of officers, directors, employees or consultants, or
(v) pay, or provide for, any increase in compensation, bonus or other benefits
payable to officers, directors, employees or consultants of Seneca LLC or Seneca
LP, except (A) for normal merit and cost of living increases, (B) for awards
made consistent with past practice pursuant to the Plans, (C) as required by the
terms of contracts or agreements in effect on the date hereof, and (D) as
specifically contemplated by this Agreement;
(i) amend or propose any change in any LLC
Organizational Document or LP Organizational Document, except as
required by law or this Agreement;
(j) change in any material respect its accounting
practices or principles, except as required by law or GAAP;
(k) enter into or recommend that any Seneca Sponsored Fund enter
into any type of business materially different from that conducted by Seneca LLC
or Seneca LP or such Seneca Sponsored Fund as of the date of this Agreement or
enter into or participate in any additional joint ventures or partnerships,
except for new Seneca Funds created in the ordinary course of business;
(l) other than in the ordinary course of business, acquire
direct or indirect control over any Person or make any acquisition of all or a
substantial part of the business or operations of any Person or dispose of any
business or operations;
(m) pay, discharge, settle or satisfy any claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise) other than in
the ordinary course of business consistent with past practice;
(n) grant to any Person any right, title or
interest in or to the name "Seneca;" or
(o) agree or commit to do any of the foregoing.
7.2. Seneca Funds7.2.SenecaFunds""2". As soon as practicable after
the date hereof, the Management Sellers shall cause the Seneca Funds for which
Seneca LLC currently serves as investment adviser or sub-adviser (other than
Life of Virginia Series Fund) to retain either Seneca LP or a newly established
company with equity ownership and management identical to Seneca LLC's ownership
and management as of the date hereof to serve as investment adviser or
sub-adviser to such Seneca Funds upon the same terms as Seneca LLC currently
serves as investment adviser or sub-adviser to such Seneca Funds and, upon such
retention, the Management Sellers shall cause Seneca LLC to resign as investment
adviser or sub-adviser to such Seneca Funds.
7.3. Consents and Approvals7.3.ConsentsandApprovals""2".
(a) The Buyer and the Management Sellers agree to cooperate with
the other and use commercially reasonable efforts to take, or cause to be taken,
all action, and to do, or cause to be done, as soon as practicable, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement and the Related Agreements as promptly as practicable, including,
without limitation, all filings under the HSR Act, the Securities Act, the
Exchange Act, the Investment Company Act, the Advisers Act and applicable state
insurance and securities laws and all other applicable federal, state, local and
foreign laws and regulations. The parties hereto covenant and agree to take no
action which would render any of them unable to satisfy any of the conditions
applicable to them set forth in Article 9.
(b) Without limiting the foregoing, the Management Sellers
shall, as promptly as practicable, cause each of Seneca LLC and Seneca LP to use
commercially reasonable efforts to seek consents required pursuant to Section
7.3(d) hereof in accordance with the procedures set forth therein (collectively,
the "Client Consents").
(c) The Management Sellers shall cause Seneca LP (or the newly
established company referred to in Section 7.2 hereof) to use its commercially
reasonable efforts to cause the Boards of Directors (or equivalent bodies) of
all of the Seneca Funds to approve, and to solicit their respective shareholders
as promptly as practicable with regard to the approval of, new investment
advisory agreements with PIC, in the case of the Seneca Sponsored Funds, and new
sub-advisory agreements with Seneca LLC, in the case of the remaining Seneca
Funds, in each case acting as investment adviser or sub-adviser, as applicable,
for such Seneca Funds, in each case to be effective on the LP Closing Date,
pursuant to the provisions of Section 15 of the Investment Company Act and
consistent with all requirements of the Investment Company Act applicable
thereto or any other applicable foreign securities laws, provided that such
agreements are identical in all material respects to the existing agreements
other than the term of such agreements. The Management Sellers shall cause
Seneca LP (or the newly established company referred to in Section 7.2 hereof),
in consultation with the Buyer, to retain a proxy solicitor acceptable to the
Buyer to assist in the solicitation of proxies to obtain the requisite approval
from the shareholders of such Seneca Funds. The Management Sellers also shall
cause Seneca LP (or the newly established company referred to in Section 7.2
hereof), in the case of the Seneca Sponsored Funds, to approve new underwriting
or distribution agreements for such Seneca Sponsored Funds with PEPCO.
(d) As promptly as practicable, the Sellers shall cause each of
Seneca LLC and Seneca LP to provide written notice to the non-investment company
advisory Clients of Seneca LLC and Seneca LP of the transactions contemplated by
this Agreement, stating that such Clients' consents are required for the
continued performance under their advisory contracts following consummation of
the transactions contemplated by this Agreement, that such Clients' consents are
being solicited and that, if any such Clients so desire, such Clients shall have
20 days to terminate their advisory contracts. For Clients who have not
terminated their advisory contracts within such 20-day period, Seneca LLC and
Seneca LP shall, promptly after the applicable Closing, provide such Clients
with an additional written notice stating that the transactions contemplated by
this Agreement have occurred, that Seneca LLC or Seneca LP, as applicable,
intends to continue providing advisory services pursuant to the existing
contracts with such Clients, subject to such Clients' right to terminate such
contracts within 45 days from the date of such second notice, and that each such
Client's consent will be implied if it continues to accept the services without
rejection during the specified 45-day period. The Sellers shall cause Seneca LLC
to use all commercially reasonable efforts to cause Life of Virginia Series Fund
to (i) call a meeting of its Board of Trustees and (ii) call a meeting of its
shareholders, in each case, to consider the transactions contemplated hereby and
to cause Life of Virginia Series Fund to solicit the shareholders of its Real
Estate Securities Fund with regard to the transactions contemplated hereby.
(e) All such notices and any forms of consents referred to in
this Section 7.3 shall be in form and substance reasonably satisfactory to the
Buyer.
7.4. Section 754 Elections7.4.Section754Elections""2". Each
Management Seller agrees to cooperate with and assist Seneca LLC and Seneca LP
in making an election under Section 754 of the Code which elections shall be
filed with the respective Tax Returns for Seneca LLC and Seneca LP (i) for the
taxable period during which the transactions contemplated by this Agreement
occur or (ii) for any previous taxable period if the Tax Returns for such
previous taxable period have not been previously filed.
7.5. Actions of Non-Management
Sellers7.5.ActionsofNon-ManagementSellers""2". Each Non-Management Seller hereby
covenants and agrees that it shall refrain from knowingly taking any action
which will materially and directly prevent or hinder (i) the performance by the
Management Sellers of their obligations under this Agreement, including, without
limitation, this Article 7, or any of the Related Agreements or (ii) the
consummation of the transactions contemplated by this Agreement or any of the
Related Agreements.
ARTICLE 8ARTICLE8-ADDITIONALAGREEMENTS""1"
ADDITIONAL AGREEMENTS
8.1. Current Information; Notification of Certain
Matters8.1.CurrentInformation;NotificationofCertainMatters""2".
(a) During the period from the date of this Agreement through
the applicable Closing Date, the Management Sellers will cause Seneca to confer
on a regular and frequent basis with Representatives of the Buyer with respect
to the status of Seneca LLC's and Seneca LP's ongoing operations and those of
the Seneca Funds. The Management Sellers will also cause to be furnished to the
Buyer copies of monthly financial statements or other reports of the results of
operations, if any, prepared by the management of Seneca LLC and Seneca LP for
each month of 1997 as soon as the same become available. During the period from
the date of this Agreement through the applicable Closing Date, the Management
Sellers shall promptly notify the Buyer of any material change in the normal
course of Seneca LLC's or Seneca LP's business or the businesses of the Seneca
Funds or of any complaints from a governmental or regulatory authority or a
self-regulatory body, investigations or hearings (or communications indicating
that the same may be contemplated), or the institution or the threat of any
litigation that comes to its attention, which would, in any manner, challenge,
prevent, alter or materially delay any of the transactions contemplated hereby,
and the Management Sellers shall keep the Buyer informed with respect to such
events. The Management Sellers and the Buyer will notify each other of the
status of regulatory applications and third party consents related to the
transactions contemplated hereby. The Management Sellers will also cause Seneca
LLC and Seneca LP to advise the Buyer promptly of any notices of governmental
examinations, inspections or audits and as to the results thereof.
(b) Each Management Seller shall give prompt notice to the Buyer
of any event, act or omission of which they have knowledge which results or is
reasonably expected to result in a Seneca Material Adverse Effect. Each Seller
shall give prompt notice to the Buyer of (i) any event or act of which they have
knowledge which materially and adversely affects the ability of such Seller to
consummate the transactions contemplated hereby or the ability of Seneca LLC or
Seneca LP to consummate the transactions contemplated by this Agreement or any
Related Agreement and (ii) any notice or other communication from any third
party of which such Seller has knowledge alleging that the consent of such third
party is or may be required in connection with any of the transactions
contemplated by this Agreement. Each party shall use commercially reasonable
efforts to remedy any failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
8.2. Access; Confidential
Information8.2.Access;ConfidentialInformation""2".
(a) The Management Sellers shall cause each of Seneca LLC and
Seneca LP to allow the Buyer, its accountants, counsel, financial advisers and
other Representatives such access during normal business hours, and without
material business interruption, to its books, records (including, without
limitation, Tax Returns and appropriate work papers of independent auditors
under normal professional courtesy) and properties, and to such other
information as such party may reasonably request in connection with the
transactions contemplated hereby.
(b) All non-public records, books, contracts, instruments,
computer data and other data and information (collectively, the "Information")
concerning Seneca LLC or Seneca LP or the Seneca Funds furnished to the Buyer or
its Representatives pursuant to this Agreement shall be treated as confidential
unless (i) the party providing the Information has made such information
available to the public generally, or (ii) such information is required to be
disclosed by applicable laws or regulations or by court order or decree and
advance notice of such disclosure has been provided to Seneca LLC or Seneca LP.
No Information furnished to the Buyer or its Representatives shall be used by
such person or disclosed to any other person for any purpose other than with
respect to the transactions contemplated by this Agreement. In the event of the
termination of this Agreement pursuant to Article 10 hereof, this Section 8.2(b)
and the Confidentiality Agreement dated November 14, 1996 between the Buyer and
Putnam, Lovell & Thornton Inc. (the "Confidentiality Agreement") shall survive,
and the Buyer shall promptly return or destroy all Information furnished to it
and its Representatives hereunder and all analyses, compilations, data, studies
and other documents prepared by the Buyer or its Representatives containing or
based in whole or in part on any such Information.
8.3. No Mergers, Consolidations, Sale of Interests
Etc8.3.NoMergers,Consolidations,SaleofInterestsEtc""2". During the period from
the date hereof through the applicable Closing Date or the date on which this
Agreement is terminated pursuant to Section 10.1 hereof, the Sellers shall not,
directly or indirectly, solicit any inquiries or proposals or enter into or
continue any discussions, negotiations or agreements relating to the sale or
exchange of any Membership Interests or the merger, consolidation or other
reorganization of either Seneca LLC or Seneca LP with, or any direct or indirect
disposition of a significant amount of either Seneca LLC's or Seneca LP's assets
or business to, any person other than the Buyer or its Affiliates or provide any
assistance or any information to or otherwise cooperate with any person in
connection with any such inquiry, proposal or transaction. In the event that any
Seller receives an unsolicited offer for such a transaction or obtains
information that such an offer is likely to be made, such Seller will provide
the Buyer with notice thereof as soon as practicable after receipt, including
the identity of the prospective purchaser or soliciting party.
8.4. Non-Solicitation8.4.Non-Solicitation""2".
(a) Each Non-Management Seller hereby agrees that, for the
period commencing on the date hereof and ending on December 31, 1998 (the
"Non-Solicitation Period"), such Non-Management Seller shall not, nor shall such
Non-Management Seller cause any of such Person's Affiliates to, (i) solicit,
raid, entice or take any action that would reasonably be expected to induce any
Person listed on the Disclosure Schedule (other than the Affiliated Accounts
listed on Schedule B) as an actual, recent or prospective client of Seneca LLC,
Seneca LP or GCM to withdraw funds from Seneca LLC, Seneca LP or GCM in order to
invest such funds with any other Person for services the same as, or competitive
with, those services provided by any of Seneca LLC, Seneca LP or GCM as of the
LLC Closing Date ("Competitive Services"), or (ii) approach any such Person for
such purpose or authorize the taking of such actions by any other Person or
intentionally assist or participate with any such Person in taking such action
for such purpose. Nothing herein shall be deemed to prevent (x) any
Non-Management Seller or any of such Person's Affiliates (1) who are fiduciaries
or managers with respect to funds from providing impartial investment advice or
otherwise exercising their fiduciary responsibilities with respect to such funds
or (2) from providing investment views in response to unsolicited inquiries or
requests for advice if such views are not provided with a view to causing funds
(other than from the Affiliated Accounts listed on Schedule B) to be withdrawn
from Seneca LLC, Seneca LP or GCM in order to be invested with another Person
for Competitive Services or (y) Will K. Weinstein or his Affiliates from
soliciting any Person listed on Schedule C for investments in hedge funds,
investment partnerships and offshore funds organized by him or for which he
acts, directly or indirectly, as an investment manager, general partner,
managing member or in a similar capacity.
(b) Each such Non-Management Seller hereby acknowledges and
agrees that any breach of this Section 8.4 is likely to result in irreparable
injury to the Buyer, that monetary damages will be an inadequate remedy of such
breach and that, accordingly, in addition to any other remedy that the Buyer may
have, the Buyer shall be entitled to enforce the specific performance of this
Section 8.4 and to seek both permanent and temporary relief in the event of any
breach hereof.
(c) The Non-Management Sellers and the Buyer acknowledge that
the time, scope and other provisions of this Section 8.4 have been specifically
negotiated by sophisticated commercial parties and agree that all such
provisions are reasonable under the circumstances of the transactions
contemplated by this Agreement. If any portion of this Section 8.4 shall be
determined to be invalid and unenforceable as written, each such portion shall
be enforced to the extent reasonable under the circumstances and such
determination shall not affect the validity or enforceability of the balance
hereof, and such balance shall remain in full force and effect. It is understood
that the Non-Management Sellers are entering into this non-solicitation
agreement in order to induce the Buyer to enter into this Agreement.
(d) As used in this Section 8.4, the term "Non-Management
Seller" shall not include FWH Associates, a California limited partnership.
8.5. Publicity8.5.Publicity""2". The parties hereto will consult with
each other as to the form, substance and timing of any press release or other
public disclosure of this Agreement or any of the transactions contemplated
hereby, and no such release or other public disclosure shall be made without the
consent of the other party, which shall not be unreasonably withheld or delayed;
provided, however, that the parties may make such disclosures as are required by
law after making reasonable efforts in the circumstances to consult in advance
with the other parties; provided, further, however, that written communications
by Seneca LLC or Seneca LP (or by officers thereof) to Clients that are
otherwise within the scope of this Section 8.5 may be made after advance
consultation with the Buyer. Oral communications with Clients shall not be
subject to this Section 8.5.
8.6. Satisfaction of Conditions in Section 15(f) of the Investment
Company
Act.8.6.SatisfactionofConditionsinSection15(f)oftheInvestmentCompanyAct""2" The
Sellers and the Buyer each agree to use commercially reasonable efforts to
assure compliance with the conditions of Section 15(f) of the Investment Company
Act. The Sellers and the Buyer each agree as follows:
(a) For a period of not less than three years after the LP
Closing Date, the Buyer shall use commercially reasonable efforts to assure that
no more than 25% of the members of the Board of Directors (or equivalent bodies)
of any Seneca Fund shall be "interested persons" (as defined in the Investment
Company Act) of Seneca LLC or Seneca LP, or of the predecessor investment
adviser of such Seneca Fund;
(b) Each of the Sellers and the Buyer represents and warrants
that it has no express or implied understanding, arrangement or intention to
impose an unfair burden on any of the Seneca Funds as a result of the
transactions contemplated hereby;
(c) The Buyer agrees not to amend or modify the indemnification
provisions or any exculpation provisions of any of the advisory or underwriting
agreements with any of the Seneca Funds in a manner designed to benefit the
adviser or the underwriter to the detriment of the Seneca Funds; and
(d) For a period of not less than three years after the LP
Closing Date, the Buyer shall hold the Sellers harmless with respect to any
failure to meet the conditions of Section 15(f) of the Investment Company Act
other than a failure caused by any of the Sellers.
8.7. Contributions of Partnership
Interests8.7.ContributionsofPartnershipInterests""2".
(a) Immediately after consummation of the LP Closing, the Buyer
shall contribute, without additional consideration, to Seneca LLC all of the
Partnership Interests purchased by the Buyer at the LP Closing and shall
thereafter take all necessary actions to dissolve and liquidate Seneca LP and to
release the general partners thereof from all liabilities and obligations
incurred by them in their capacities as general partners of Seneca LP, it being
understood that such release shall not relieve the general partners of Seneca LP
from any of their respective liabilities and obligations under this Agreement
and the Related Agreements to which they are parties.
(b) Each Management Seller hereby agrees that at the LP Closing,
such Management Seller shall contribute, without consideration, to Seneca LLC
all Partnership Interests owned directly or indirectly by such Management Seller
(other than those Partnership Interests being sold by such Management Seller to
the Buyer hereunder) and, upon dissolution and liquidation of Seneca LP as
contemplated herein, shall release the general partners of Seneca LP from all
liabilities and obligations incurred by them in their capacities as general
partners of Seneca LP.
8.8. Further Assurances8.8.FurtherAssurances""2". Both before and
after the Closing Dates, the Buyer and the Sellers shall cooperate in good faith
with each other and shall take all appropriate action and execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder.
8.9. Distributions to Members and
Partners8.9.DistributionstoMembersandPartners""2". On or before the LLC Closing
Date or the LP Closing Date, as applicable, Seneca LLC and Seneca LP may
distribute to or for the benefit of their respective members and partners all
cash other than, in the case of Seneca LLC, cash required to be retained by it
in order to satisfy the condition to the Buyer's obligations hereunder set forth
in Section 9.2(g) hereof.
8.10. Options to Purchase Capital Stock of
Buyer8.10.OptionstoPurchaseCapitalStockofBuyer""2". The Buyer agrees that prior
to the LLC Closing Date it will recommend to the stock option committee of the
Board of Directors of the Buyer that (i) 200,000 shares of fully paid and
nonassessable common stock, par value $.01 per share, of the Buyer (subject to
equitable adjustment to reflect stock splits, stock dividends and the like) at a
price equal to the fair market value per share at the date of grant will be made
available for option grants under the Buyer Stock Option Plan at the LLC Closing
to the Management Members (as defined in the Operating Agreement attached as
Exhibit C-1 hereto) and (ii) such stock option grants be awarded to individual
Management Members based on the recommendation of Seneca. Such stock options
shall be in a form consistent with past practice and the terms of the Buyer
Stock Option Plan as in effect on the date hereof.
ARTICLE 9ARTICLE9-CONDITIONS""1"
CONDITIONS
9.1. Conditions to Obligations of the Sellers on the LLC Closing
Date9.1.ConditionstoObligationsoftheSellersontheLLCClosingDate""2". The
obligations of the Sellers to consummate the transactions contemplated by this
Agreement to be consummated on the LLC Closing Date shall be subject to the
satisfaction or waiver on or prior to the LLC Closing Date of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in Article 6 that are qualified as to
materiality shall be true and correct in accordance with their terms, and the
representations and warranties of the Buyer set forth in Article 6 that are not
so qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the LLC Closing as though made on and as
of the LLC Closing Date, except to the extent such representations and
warranties speak as of an earlier date or except for transactions explicitly
permitted by this Agreement.
(b) Performance of Obligations of the Buyer on the LLC Closing
Date. The Buyer shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the LLC
Closing Date.
(c) Certificate. The Sellers shall have received a certificate
dated as of the LLC Closing Date and signed on behalf of the Buyer by its Chief
Executive Officer and Chief Financial Officer, to the effect that the conditions
to the Sellers' obligations set forth in Sections 9.1(a) and (b) hereof have
been satisfied.
(d) No Governmental Proceedings or Litigation. No Action by any
Governmental Entity shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage any Seller, Seneca LLC or Seneca LP if the
transactions contemplated hereunder are consummated.
(e) Employment Agreements. Seneca LLC shall have
entered into the Employment Agreements with the Principals.
(f) Put/Call Agreements. The Buyer shall have
entered into the Put/Call Agreements.
(g) Organizational Documents. The LLC
Organizational Documents as amended and restated in the form of
Exhibit C hereto shall have been duly executed by the Buyer.
(h) Opinion of Counsel. The Buyer shall have delivered to the
Sellers an opinion of Stroock & Stroock & Lavan LLP, counsel to the Buyer, dated
as of the LLC Closing Date, with respect to the transactions contemplated hereby
in the form of Exhibit F hereto.
9.2. Conditions to Obligations of the Buyer on the LLC Closing
Date9.2.ConditionstoObligationsoftheBuyerontheLLCClosingDate""2". The
obligations of the Buyer to consummate the transactions contemplated by this
Agreement to be consummated on the LLC Closing Date shall be subject to the
satisfaction or waiver at or prior to the LLC Closing Date of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Sellers set forth in Articles 4 and 5 that are qualified as to
materiality shall be true and correct in accordance with their terms, and the
representations and warranties of the Sellers set forth in Articles 4 and 5 that
are not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the LLC Closing as though made
on and as of the LLC Closing Date, except to the extent such representations and
warranties speak as of an earlier date or except for transactions explicitly
permitted by this Agreement. The representations and warranties of the Sellers
set forth in Articles 4 and 5 shall also be true and correct as of the date of
this Agreement and as of the LLC Closing Date with the same effect as though
made on and as of the LLC Closing Date, except to the extent the breaches of all
the representations and warranties, if any (excluding, for this purpose, any
qualifications as to materiality therein or in the Disclosure Schedule), in the
aggregate, do not have a Seneca Material Adverse Effect.
(b) Performance of Obligations of the Sellers. The Sellers shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the LLC Closing.
(c) Certificate. The Buyer shall have received a certificate
dated as of the LLC Closing Date and signed by the Sellers' Representative on
behalf of each of the Sellers, to the effect that the conditions to the Buyer's
obligations set forth in Sections 9.2(a) and (b) hereof have been satisfied.
(d) No Governmental Proceedings or Litigation. No Action by any
Governmental Entity shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to affect the right or ability of the Buyer to own
Membership Interests after the LLC Closing, Partnership Interests after the LP
Closing or to damage the Buyer, Seneca LLC or Seneca LP if the transactions
contemplated hereunder are consummated.
(e) Opinions of Counsel. The Sellers shall have delivered to the
Buyer (i) an opinion of Goodwin, Procter & Hoar LLP, counsel to the Sellers and
to Seneca LLC, dated as of the LLC Closing Date, with respect to the
transactions contemplated hereby in the form of Exhibit G hereto, and (ii) an
opinion of California counsel reasonably acceptable to the Buyer as to matters
of California law, dated the LLC Closing Date, in form and substance reasonably
acceptable to the Buyer.
(f) Assets Under Management. The aggregate amount of assets
under management of Seneca LLC on the LLC Closing Date shall be not less than $3
billion, and the Buyer shall have received a certificate signed on behalf of
Seneca LLC by the Chief Financial Officer of Seneca LLC to such effect.
(g) Working Capital. Seneca LLC shall have working capital in an
amount not less than $100,000 and a cash balance of at least $100,000, in each
case, as of the LLC Closing Date, and the Buyer shall have received a
certificate signed on behalf of Seneca LLC by the Chief Financial Officer of
Seneca LLC to such effect.
(h) No Material Adverse Change. There shall not have occurred
any one or more events with respect to Seneca LLC or Seneca LP between the date
of this Agreement and the LLC Closing Date which, individually or in the
aggregate, had, or is reasonably expected to have, a Seneca Material Adverse
Effect.
(i) Put/Call Agreements. Each of the Persons listed on Schedule
3.3 shall have entered into the applicable Put/Call Agreement.
(j) Employment Agreements. The Principals shall
have entered into the Employment Agreements with Seneca LLC.
(k) Noncompetition/Nonsolicitiation Agreements.
The Principals shall have entered into the
Noncompetition/Nonsolicitiation Agreements with Seneca LLC.
(l) Affiliate Agreements. The Affiliate Agreements
shall have been executed and delivered by the parties thereto other
than the Buyer and its Affiliates.
(m) Support Agreements. The Support Agreements in the form of
Exhibit H hereto executed by the Persons listed on Schedule 9.2(m) on the date
of this Agreement (the "Support Agreements") shall be in full force and effect.
(n) Clients' Consents. Seneca LLC or Seneca LP shall have
followed the procedures to obtain Client Consents pursuant to Section 7.3(d)
hereof and shall have received notice of termination of, or intent to terminate,
Investment Contracts from Clients whose accounts represent not more than 20% of
the aggregate of the annual rate of investment management revenues of Seneca
LLC, Seneca LP and GCM based on the net asset values of all Clients' accounts as
at December 31, 1996 and the respective annual fee rates applicable to such
accounts.
(o) Organizational Documents. The LLC
Organizational Documents as amended and restated in the form of
Exhibit C hereto shall have been duly executed by each of the
Persons listed on Schedule 3.4.
(p) Spousal Consents. Each Seller and each of the other Persons
listed on Schedule 3.3 hereto who is an individual whose spouse has a community
property interest in such Person's Membership Interests and/or Partnership
Interests under California law shall have obtained, and delivered to the Buyer,
a waiver from his or her spouse of such community property interest evidenced in
a writing in form and substance reasonably satisfactory to the Buyer.
(q) Good Standing Certificates. There shall have been delivered
to the Buyer good standing certificates (or analogous documents), dated no more
than ten days prior to the LLC Closing Date, from the appropriate authorities in
the State of California and in each jurisdiction in which Seneca LLC is
qualified to do business, showing Seneca LLC to be in good standing in the
applicable jurisdiction.
9.3. Conditions to Obligations of the Buyer on the LP Closing
Date9.3.ConditionstoObligationsoftheBuyerontheLPClosingDate""2". If the LLC
Closing shall have occurred, the Buyer shall proceed to consummate the
transactions contemplated by this Agreement to be consummated on the LP Closing
Date, subject only to the satisfaction or waiver at or prior to the LP Closing
Date of each of the following conditions:
(a) Approvals Relating to the Seneca Funds.
(i) The Boards of Directors (or equivalent
bodies) of each of the Seneca Funds shall have approved in connection with the
transactions contemplated hereby the respective new investment advisory
agreements with PIC, in the case of the Seneca Sponsored Funds, and new
sub-advisory agreements with Seneca LLC, in the case of the remaining Seneca
Funds, in each case acting as investment adviser or sub-adviser, as applicable,
for all of the Seneca Funds as provided in Section 7.3(c) hereof, as required by
the Advisers Act, the Investment Company Act and/or their terms; and
(ii) The shareholders of each of the Seneca
Funds shall have approved the respective new investment advisory or sub-advisory
agreements referred to in clause (i) above as required by the Advisers Act, the
Investment Company Act and/or by their terms.
(b) Boards of Seneca Funds. The composition of the Boards of
Directors (or equivalent bodies) of the Seneca Funds as of the LP Closing Date
shall be mutually acceptable to the Buyer and the Sellers' Representative.
(c) Support Agreements. The contributions of
Partnership Interests to Seneca LLC and the other transactions
contemplated by the Support Agreements shall have been made or
consummated.
9.4. Conditions to Obligations of the Sellers on the LP Closing
Date9.4.ConditionstoObligationsoftheSellersontheLPClosingDate""2". If the LLC
Closing shall have occurred, the Sellers shall proceed to consummate the
transactions contemplated by this Agreement to be consummated on the LP Closing
Date, subject only to the satisfaction or waiver on or prior to the LP Closing
Date of the following condition:
(a) Approvals Relating to the Seneca Funds.
(i) The Boards of Directors (or equivalent
bodies) of each of the Seneca Funds shall have approved in connection with the
transactions contemplated hereby the respective new investment advisory
agreements with PIC, in the case of the Seneca Sponsored Funds, and new
sub-advisory agreements with Seneca LLC, in the case of the remaining Seneca
Funds, in each case acting as investment adviser or sub-adviser, as applicable,
for all of the Seneca Funds as provided in Section 7.3(c) hereof, as required by
the Advisers Act, the Investment Company Act and/or their terms; and
(ii) The shareholders of each of the Seneca
Funds shall have approved the respective new investment advisory or sub-advisory
agreements referred to in clause (i) above as required by the Advisers Act, the
Investment Company Act and/or by their terms.
ARTICLE 10ARTICLE10-TERMINATION""1"
TERMINATION
10.1. Termination10.1.Termination""2". This Agreement
may, by written notice, be terminated at any time prior to the LLC
Closing Date:
(a) by mutual consent of the Sellers and the Buyer;
(b) by either the Sellers or the Buyer, at any time after July
31, 1997, if the LLC Closing shall not theretofore have occurred;
(c) by the Sellers, if any of the conditions specified in
Section 9.1 hereof has not been met or waived by the Sellers on or prior to the
LLC Closing Date or at such time as such condition can no longer be satisfied;
or
(d) by the Buyer, if any of the conditions specified in Section
9.2 hereof has not been met or waived by the Buyer on or prior to the LLC
Closing Date or at such time as such condition can no longer be satisfied.
10.2. Effect of Termination and
Abandonment10.2.EffectofTerminationandAbandonment""2". In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby pursuant to Section 10.1 hereof, except as otherwise specifically
provided herein, no party hereto (or any of its directors, officers, employees
or other Representatives) shall have any liability or further obligation to any
other party to this Agreement, except (i) for the liability of a party for
Expenses pursuant to Section 12.2 hereof and (ii) that nothing herein will
relieve any party from liability for any breach of any representation or
warranty which the party making such representation or warranty knew was untrue
or inaccurate at the time made or willful breach of any agreement or covenant in
this Agreement.
ARTICLE 11ARTICLE11-INDEMNIFICATION""1"
INDEMNIFICATION
11.1. Indemnification11.1.Indemnification""2".
(a) From and after the LLC Closing Date, each of the Sellers,
severally and not jointly, hereby covenants and agrees to indemnify, defend and
hold harmless the Buyer from and against such Seller's Allocable Share (as
defined in this Section 11.1(a)) of any and all Damages incurred in connection
with or arising out of or resulting from (i) any inaccuracy or breach of any
representation or warranty made by the Sellers in or pursuant to this Agreement,
the Disclosure Schedule or the Related Agreements, including, without
limitation, the representations and warranties made by the Management Sellers in
Article 5 hereof, or (ii) any breach, non-compliance or nonfulfillment by the
Sellers of any covenant, agreement or undertaking to be complied with or
performed by them contained in or pursuant to this Agreement. Each Seller
acknowledges that the Buyer has entered into this Agreement in reliance upon,
among other things, the indemnification provisions contained in this Section
11.1(a), and the Sellers agree that such provisions constitute reasonable and
necessary protection for the Buyer in the context of the transactions provided
for herein. As used herein, the "Allocable Share" of any Seller of the Damages
payable by the Sellers pursuant to this Article 11 of this Agreement shall be
the percentage of the total Membership Interests being sold pursuant to this
Agreement as specified opposite such Seller's name on Schedule A hereto.
Notwithstanding the foregoing, the representations and warranties contained in
Article 4 and the covenants and agreements of the Non-Management Sellers
contained in Sections 7.5, 8.1(b) and 8.4 hereof are made severally by each
Non-Management Seller as to such Non-Management Seller only, and the
representations and warranties contained in Sections 5.3, 5.7 and 5.22 hereof
are made severally by each Management Seller as to such Management Seller only,
and any Seller who has breached any such representation, warranty or covenant as
to himself, herself or itself (but only such Seller) shall be liable for Damages
arising from the breach thereof up to the full amount of the portion of the LLC
Purchase Price and the LP Purchase Price actually received by such Seller with
respect to the Membership Interests and/or Partnership Interests with respect to
which such breach arises. All Damages payable by Sellers pursuant to this
Article 11 (including, without limitation, Section 11.1(b)) shall be paid to the
Buyer unless otherwise directed by the Buyer and, subject to the limitations set
forth in Section 11.1(e) hereof, shall be in an amount equal to 100% of the
Damages incurred by the Buyer based on its purchase of 74.9% of the total
outstanding Membership Interests and Partnership Interests in Seneca LLC and
Seneca LP, respectively, pursuant to this Agreement.
(b) In addition to the indemnifications provided for in Section
11.1(a) above, the Sellers shall be responsible for, and shall, severally and
not jointly, indemnify, defend and hold harmless the Buyer against, their
Allocable Share of all Taxes imposed on Seneca LLC, Seneca LP or any Seneca
Sponsored Fund with respect to taxable periods ending on or prior to the
applicable Closing Date or periods which include the applicable Closing Date to
the extent attributable to the income, assets, operations or reporting
requirements of Seneca LLC, Seneca LP or any Seneca Sponsored Fund prior to the
applicable Closing Date (including, without limitation, all Taxes referred to in
the Disclosure Schedule as possible of assessment for taxable periods prior to
the applicable Closing Date) to the extent such Taxes imposed on Seneca LLC or
Seneca LP or their respective liabilities with respect to such Taxes imposed on
any Seneca Sponsored Fund were not reserved for as a current liability on the
Closing Balance Sheet or paid prior to the applicable Closing. If a Tax audit is
commenced or any Tax is claimed for any period of Seneca LLC, Seneca LP or any
Seneca Sponsored Fund prior to the applicable Closing Date, such Tax audit or
claim shall be treated as a lawsuit or enforcement action for purposes of
Section 11.1(d) hereof; provided, that the Sellers shall be solely responsible
for their Allocable Share of all liabilities and expenses arising therefrom
(including, without limitation, Taxes, interest and penalties).
(c) The Buyer shall indemnify, defend and hold harmless the
Sellers, their Affiliates and their respective Representatives from and against
any and all Damages incurred in connection with or arising out of or resulting
from any breach or inaccuracy of any representation or warranty, or any breach,
non-compliance or nonfulfillment by the Buyer of any covenant, agreement or
undertaking to be complied with or performed by it contained in or made pursuant
to this Agreement.
(d) If a claim for Damages is to be made by a party entitled to
indemnification hereunder against the indemnifying party, the party entitled to
such indemnification shall give written notice to the indemnifying party as soon
as practicable after the party entitled to indemnification becomes aware of any
fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 11.1(d). If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within 15 days after the
service of the citation or summons); provided, that the failure of any
indemnified party to give timely notice shall not affect rights to
indemnification hereunder except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys of
its own choice to handle and defend the same, at the indemnifying party's cost,
risk and expense provided that the indemnifying party and its counsel shall
proceed with diligence and in good faith with respect thereto; provided, that in
the event the indemnifying party is the Sellers collectively (or includes any
Non-Management Seller), the indemnifying party may act only upon the vote or
written consent of the holders of a majority of the Membership Interests
outstanding immediately prior to the LLC Closing. The indemnified party shall
cooperate in all reasonable respects with the indemnifying party and such
attorneys in the investigation, trial and defense of such lawsuit or action and
any appeal arising therefrom; provided, however, that the indemnified party may,
subject to the indemnifying party's control of the defense and investigation of
such lawsuit or action, at its own cost, participate in the investigation, trial
and defense of such lawsuit or action and any appeal arising therefrom. No
indemnifying party shall be permitted to settle any such lawsuit or action
without the prior written consent of the indemnified party, which consent shall
not be unreasonably withheld; provided, however, that no such consent shall be
required in the case of a settlement involving solely the payment of monetary
damages.
(e) Notwithstanding any of the provisions of this Section 11.1,
the Buyer agrees not to make claims for money Damages hereunder unless and until
the aggregate of all such claims as against the Sellers individually and/or
collectively exceeds the Indemnification Threshold and then only to the extent
of such excess. Notwithstanding any of the provisions of this Section 11.1, in
no event shall the aggregate indemnification obligations of any Seller exceed
such Seller's pro rata share of the sum of the LLC Purchase Price, the LP
Purchase Price and the Additional Purchase Price. Notwithstanding any of the
provisions of this Section 11.1, the Sellers agree not to make claims for money
Damages hereunder unless and until the aggregate of such claims exceeds the
Indemnification Threshold and then only to the extent of such excess.
Notwithstanding any of the provisions of this Section 11.1, in no event shall
the aggregate indemnification obligations of the Sellers or the indemnification
obligations of the Buyer exceed the sum of the LLC Purchase Price, the LP
Purchase Price and the Additional Purchase Price. In the event that any time
subsequent to an indemnification payment hereunder the Damages to the
indemnified party are reduced by tax benefits or recovery, settlement or
otherwise under any insurance coverage or third party claim, the amount of such
reduction (less any cost, expense, premium or tax paid) will be promptly repaid
to the indemnifying party.
(f) Notwithstanding any other provisions of this Agreement, if
any party hereto has disclosed in this Agreement or in the Disclosure Schedule
or a certificate delivered to the other parties at the LLC Closing hereunder, an
exception to the accuracy of a representation or warranty made herein, then the
party entitled to the benefit of the representation or warranty shall be deemed
to have waived all rights to indemnification under this Article 11 for breach of
such representation or warranty to the extent of such exception.
ARTICLE 12ARTICLE12-MISCELLANEOUS""1"
MISCELLANEOUS
12.1. Survival of Representations and
Warranties12.1.SurvivalofRepresentationsandWarranties""2". The representations
and warranties contained herein and in any document, instrument, certificate or
other writing delivered pursuant hereto shall survive the Closings for a period
of two years from the LLC Closing Date, except for the representations and
warranties contained in (i) Sections 4.3 and 5.7 hereof which shall survive
indefinitely and (ii) Sections 5.18 and 5.19 hereof which shall survive for a
period of six years from the LLC Closing Date. All statements contained in the
Disclosure Schedule or in any certificate delivered at the Closings pursuant to
the transactions contemplated hereby shall be deemed to be representations and
warranties of the applicable party hereto contained herein. Notwithstanding
anything in the Agreement to the contrary, any Damages as to which a notice of
claim has been given in writing prior to the expiration of the applicable period
set forth above in this Section 12.1 shall survive until payment or other final
resolution of such claim. Nothing contained in this Section 12.1 shall affect
any covenant contained in this Agreement or in any instrument delivered pursuant
to this Agreement or pursuant to any agreement or transactions contemplated
hereby which covenant is to be performed after the Closing Dates.
12.2. Expenses; Transfer Taxes12.2.Expenses;TransferTaxes""2". All
Expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such Expenses, except that the
Buyer shall pay the reasonable legal, printing, mailing and other expenses
incurred in connection with the Seneca Funds' shareholders' meetings
contemplated by Sections 7.3(c) and 7.3(d) hereof. The Sellers' Representative
shall consult with the Buyer in advance before incurring or committing to
payment of such expenses to be borne by the Buyer. Each of the Sellers,
respectively, shall be responsible for any Taxes imposed on such Seller by
reason of the transfer of the Membership Interests and Partnership Interests
provided hereunder and any deficiency, interest or penalty asserted with respect
thereto.
12.3. Set-Off12.3.Set-Off""2". Without limiting any other rights that
the Buyer may have pursuant to this Agreement or the Related Agreements, the
Buyer shall be entitled to set off against any amount payable by it to any
Seller pursuant to this Agreement (other than amounts payable pursuant to
Section 2.2 hereof) or the Related Agreements any amount owed by such Seller to
the Buyer pursuant to this Agreement and/or the amount of any Damages against
which the Buyer is then entitled to be indemnified by such Seller pursuant to
this Agreement; provided, that the amount owed by such Seller, or the amount of
Damages for which such Seller is liable, is (i) liquidated in amount and (ii)
either acknowledged in writing (as to both liability and amount) by such Seller
or provided in a judgment of a court of applicable jurisdiction; provided
further, that if such judgment is not yet final and subject to no further
appeal, then the Buyer shall segregate the amount set-off until such time as the
judgment becomes final and nonappealable or the litigation is otherwise finally
terminated, at which time the Buyer shall retain the amount finally determined
to be due to it and pay over to the applicable Seller any excess together with
interest thereon at a rate of 6.125% per annum.
12.4. Notices12.4.Notices""2". Unless otherwise provided herein, any
notice, request, instruction or other document or communication to be given
hereunder by any party to any other party shall be in writing and shall be
deemed to have been given (a) if mailed, on the date received if mailed by
registered or certified mail (return receipt requested), (b) if sent by
facsimile transmission, when so sent and receipt acknowledged by an appropriate
telephone or facsimile receipt or (c) if sent by other means, when actually
received by the party to which such notice has been directed, in each case at
the respective addresses or numbers set forth below or such other address or
number as such party may have fixed by notice:
If to the Buyer:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Chief Executive Officer
Telephone: (860) 403-5365
Facsimile: (860) 403-5545
With copies to:
Phoenix Duff & Phelps Corporation
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Thomas N. Steenburg, Esq.
Vice President and General
Counsel
Telephone: (860) 403-5261
Facsimile: (860) 403-7600
-and-
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: David L. Finkelman, Esq.
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
If to any Seller, addressed to the Sellers' Representative and Sellers'
Holdback Representatives:
Gail P. Seneca, as Sellers' Representative
c/o Seneca Capital Management LLC
909 Montgomery Street
Suite 600
San Francisco, California 94133
Telephone: (415) 677-1550
Facsimile: (415) 677-1629
-and-
Glen Miller, as a Sellers'
Holdback Representative
c/o Pritzker & Pritzker
200 West Madison Street
Suite 3800
Chicago, Illinois 60606
Telephone: (312) 750-8465
Facsimile: (312) 920-2436
-and-
Mark Blank, as a Sellers'
Holdback Representative
c/o National Brands, Inc.
9350 South Dixie Highway
Suite 900
Miami, Florida 33156
Telephone: (305) 670-2277
Facsimile: (305) 670-2220
With copies to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attention: Richard E. Floor, P.C.
Telephone: (617) 570-1000
Facsimile: (617) 523-1231
-and-
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, New York 10017-2590
Attention: Roger E. Berg, Esq.
Telephone: (212) 687-7000
Facsimile: (212) 682-5729
12.5. Counterparts12.5.Counterparts""2". This Agreement may be
executed in counterparts (including executed counterparts delivered and
exchanged by facsimile transmission) each of which shall be deemed to constitute
one and the same instrument.
12.6. Governing Law12.6.GoverningLaw""2". This
Agreement shall be governed by, and interpreted in accordance with,
the laws of the State of New York, regardless of the laws that
might otherwise govern under principles of conflicts of laws
applicable thereto.
12.7. Waiver; Amendment12.7.Waiver;Amendment""2".
(a) Any provision of this Agreement may be amended or waived
prior to the LP Closing Date if, and only if, (i) such amendment or waiver is in
writing and, in the case of an amendment, signed by the Buyer and the Sellers'
Representative and (ii) in the case of a waiver, by the party against whom the
waiver is to be effective or, in the event of an amendment to Article 2, Article
4, Section 7.5, Section 8.4, Article 11 or Article 12 hereof, signed by the
Buyer, the Sellers' Representative and the Sellers' Holdback Representatives.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
12.8. Entire Agreement; No Third-Party Beneficiaries;
Etc12.8.EntireAgreement;NoThird-PartyBeneficiaries;Etc""2". This Agreement, the
Related Agreements and the Confidentiality Agreement represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
heretofore made. All terms and provisions of this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties thereto.
12.9. Consent to Jurisdiction12.9.ConsenttoJurisdiction""2". Each
party hereto hereby irrevocably submits to the non-exclusive jurisdiction of any
state or federal court sitting in the City of New York in any action or
proceeding arising out of or relating to this Agreement or any of the
transactions contemplated hereby and hereby irrevocably agrees that all claims
in respect of such action or proceeding may be heard and determined in such
state court or, to the extent permitted by law, in such federal court. Each of
the parties hereby irrevocably consents to the service of process in any such
action or proceeding by the mailing by certified mail of copies of any service
or copies of the summons and complaint and any other process to such party at
the address specified in Section 12.4 hereof. The parties agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 12.9 shall affect the right of a party
to serve legal process in any other manner permitted by law or affect the right
of a party to bring any action or proceeding in the courts of other
jurisdictions.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement,
all as of the date first written above.
PHOENIX DUFF & PHELPS CORPORATION
By: /s/ Philip R. McLoughlin
Name: Philip R. McLoughlin
Title: Chairman of the
Board and
Chief Executive
Officer
/s/ Gail P. Seneca
Gail P. Seneca
/s/ Richard D. Little
Richard D. Little
/s/ Will K. Weinstein
Will K. Weinstein
/s/ Philip C. Stapleton
Philip C. Stapleton
FWH ASSOCIATES
By:
- ------------------------------------
Name:
Title:
N.F.P. QSST TRUST NO. 1
N.F.P. TRUST NO. 2
N.F.P. QSST TRUST NO. 3
N.F.P. TRUST NO. 4
N.F.P. QSST TRUST NO. 5
N.F.P. TRUST NO. 6
N.F.P. QSST TRUST NO. 7
N.F.P. TRUST NO. 8
N.F.P. QSST TRUST NO. 9
N.F.P. TRUST NO. 10
N.F.P. QSST TRUST NO. 11
N.F.P. TRUST NO. 12
N.F.P. QSST TRUST NO. 13
N.F.P. TRUST NO. 14
N.F.P. QSST TRUST NO. 15
N.F.P. TRUST NO. 16
N.F.P. QSST TRUST NO. 17
N.F.P. TRUST NO. 18
N.F.P. QSST TRUST NO. 19
N.F.P. TRUST NO. 20
N.F.P. QSST TRUST NO. 21
N.F.P. TRUST NO. 22
By: /s/ Robert A. Pritzker
Name: Robert A. Pritzker
Title: Co-Trustee
By: /s/ Jay Pritzker
Name: Jay A. Pritzker
Title: Co-Trustee
<PAGE>
STELLAR CAPITAL MANAGEMENT, INC.
By:
- ------------------------------------
Name:
Title:
JB CAPITAL MANAGEMENT, INC.
By:
- ------------------------------------
Name:
Title:
SZRL INVESTMENTS
By: Samuel Zell Revocable Trust
under Trust Agreement dated
1/19/90, as General Partner
By: /s/ Samuel Zell
Name: Samuel Zell
Title: Trustee
<PAGE>
