================================================================================
ASSET
CONTRIBUTION AGREEMENT
DATED AS OF
MARCH 2, 2004
AMONG
OAKTREE ASSET MANAGEMENT, LLC, AS PURCHASER,
FIDUCIARY COUNSEL, INC., AS SELLER,
AND
UNIFIED FINANCIAL SERVICES, INC.,
AS THE SHAREHOLDER OF SELLER
================================================================================
THIS ASSET CONTRIBUTION AGREEMENT is made and entered into effective as of
March 2, 2004 by and among: (i) OAKTREE ASSET MANAGEMENT, LLC, a Delaware
limited liability company (the "Purchaser"); (ii) FIDUCIARY COUNSEL, INC., a
---------
__________________ corporation ("Fiduciary" or "Company"); and (iii) UNIFIED
--------- -------
FINANCIAL SERVICES, INC., a Delaware corporation ("Unified").
-------
R E C I T A L S :
-----------------
A. Fiduciary is engaged in the business of providing investment
management and advisory services (the "Business").
--------
B. Unified owns all of the outstanding common shares of Fiduciary.
C. Fiduciary has agreed to sell and contribute, and Purchaser has
agreed to purchase and accept the Assets and Assumed Liabilities, all on the
terms and subject to the conditions set forth in this Agreement.
A G R E E M E N T S :
---------------------
IN CONSIDERATION OF the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, Purchaser, Fiduciary and
Unified, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Defined Terms. The terms used in this Agreement with their initial
-------------
letters capitalized shall, unless the context otherwise requires or unless
otherwise expressly provided herein, have the meanings specified in this Article
1 or elsewhere in this Agreement. As used in this Agreement and the Schedules
and Exhibits attached hereto, the following terms have the following meanings
unless the context otherwise requires:
"Act" means the Securities Act of 1933, as amended.
---
"Action or Proceeding" means any action, suit, proceeding or
--------------------
arbitration by any Person or any investigation or audit by any Governmental or
Regulatory Agency.
"Adjustment Date" means the date that is 180 days after the Closing
---------------
Date.
"Affidavit" means an affidavit made by the Company representing and
---------
warranting that a verbal consent was given in respect of one of the Transferred
Clients set forth on Schedule 5.3.
"Affiliate" with respect to any Person, means any other Person
---------
controlling, controlled by or under common control with such Person.
-1-
"Agreement" means this Asset Purchase and Contribution Agreement.
---------
"Annualized Gross Revenues" means (A) the aggregate investment advisory
-------------------------
fees from the Transferred Clients for the calendar quarter ending on the last
day of the month immediately preceding the month in which the applicable
measurement date occurs as determined on the accrual basis in accordance with
GAAP, (B) multiplied by four (4).
----------
"Best Knowledge," "Knowledge" or words to that effect shall mean, as to
-------------- ---------
any Person, to the best knowledge of such Person after due inquiry and
investigation.
"Books and Records" of any Person means all files, documents,
-----------------
instruments, papers, books and records relating to the business, operations,
conditions of (financial or other), results of operations and assets and
properties of such Person, including without limitation financial statements and
related work papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, contracts and other agreements, licenses,
customer lists, lists of prospective customers, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
"Business Day" means any day on which commercial banks are authorized
------------
or required by law to close in New York, New York.
"Client" means any person, including without limitation any Fund, for
------
which the Company or, after Closing, the Purchaser acts as an investment adviser
(whether directly or as a sub-adviser), or for whom the Company or, after
Closing, the Purchaser manages any investment or trading account, or provides
administrative or other services.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"CPR Institute" means the CPR Institute for Dispute Resolution, Inc.,
-------------
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
"DNB Acquisition Corp." means DNB Acquisition Corp., a New York
---------------------
corporation.
"DNB Purchase Agreement" means the Asset Purchase and Contribution
----------------------
Agreement dated of even date herewith among the Purchaser, Oaktree, Pin Oak and
DNB Acquisition Corp.
"Document or Other Papers" means any document, agreement, instrument,
------------------------
certificate, notice, consent, affidavit, letter, telegram, telex, statement,
schedule (including any Schedule to this Agreement) or exhibit (including any
Exhibit to this Agreement).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Financial Assets Corp." means Financial Assets Corp., a Florida
----------------------
corporation and wholly owned subsidiary of DNB Acquisition Corp.
"Fund" means any investment company as defined under the Investment
----
Company Act and any company excluded from the definition thereof by virtue of
Section 3(c)(1) or 3(c)(7) of the Investment Company Act and any other pooled
investment vehicle similar to any such investment company, and shall include any
series thereof.
-2-
"GAAP" means generally accepted accounting principles.
----
"Governmental or Regulatory Agency" means any court, tribunal,
---------------------------------
arbitrator or government or political subdivision thereof, whether federal,
state, county, local or foreign, or any agency, authority, official or
instrumentality of any such government or political subdivision.
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
-----------------------
amended.
"Investment Advisory Contract" means each contract or agreement under
----------------------------
which the Company acts as an investment adviser (whether directly or as a
sub-adviser) to, or manages any investment or trading account of, or provides
administrative or other services to, any Client.
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended.
"IRS" means the Internal Revenue Service.
---
"LLC Shares" means the common shares created under the Purchaser's
----------
Operating Agreement representing membership interests in the Purchaser.
"Law" means any law, statute, rule, regulation, ordinance and other
---
pronouncement having the effect of law of the United States, any foreign country
or any domestic or foreign state, county, city or other political subdivision or
of any Governmental or Regulatory Agency.
"Lien" means any lien, pledge, hypothecation, mortgage, security
----
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever (including any
lien for failure or alleged failure to pay Taxes).
"Material Adverse Effect" means, in the case of any Person, any change
-----------------------
or changes or effect or effects that individually or in the aggregate are or may
reasonably be expected to be materially adverse to (i) the assets, properties,
business, operations, income or condition (financial or otherwise) of such
Person or the transactions described in this Agreement or (ii) the ability of
such Person to perform its obligations under this Agreement.
"Net Worth" means the difference between (i) the Company's assets
---------
(excluding intangibles), minus (ii) its liabilities (including without
-----
limitation funded indebtedness), all as determined in accordance with GAAP
applied on a consistent basis and measured as of the last day of the month
immediately preceding the month in which the Closing Date occurs.
"Oaktree" means Oaktree Asset Management, Inc., a Florida corporation
-------
and wholly owned subsidiary of DNB Acquisition Corp.
"Operating Agreement" means the Purchaser's Limited Liability Company
-------------------
Operating Agreement, substantially in the form of Exhibit A.
---------
-3-
"Order" means any writ, judgment, decree, injunction or similar order
-----
of any Governmental or Regulatory Agency, in each case whether preliminary or
final.
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent
--------------
or being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent, and (iii) any minor imperfection of
title or similar Lien which individually or in the aggregate with other such
Liens does not materially impair the value of the asset subject to such Lien or
the use of such asset.
"Permitted Transferee" means Unified or any Affiliate of Unified.
--------------------
"Person" means any individual, corporation, limited liability company,
------
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental or Regulatory Agency or other entity.
"Pin Oak" means Pin Oak Capital, Inc., a Missouri corporation and
-------
wholly owned subsidiary of DNB Acquisition Corp.
"Tax Return" means any return, report, information return, or other
----------
document (including any related or supporting information) filed or required to
be filed with any federal, state, local, or foreign governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax (whether or not such Tax is imposed on the Company) or the administration of
any laws, regulations or administrative requirements relating to any Tax.
"Tax" and "Taxes" means all taxes, charges, fees, levies or other
--- -----
assessments imposed by any federal, state, local or foreign taxing authority,
whether disputed or not, including, without limitation, income, capital,
estimated, excise, property, sales, transfer, withholding, employment, payroll,
and franchise taxes and such terms shall include any interest, penalties or
additions attributable to or imposed on or with respect to such assessments.
1.2 Certain Other Terms. The terms "herein", "hereof", "hereto",
-------------------
"hereby", "hereunder" and the like refer to this Agreement as a whole and not to
any particular Articles, Sections, subsections or clauses of this Agreement.
References in this Agreement to Articles, Sections, Schedules or Exhibits are
references to the Articles, Sections, Schedules or Exhibits of or attached to
this Agreement.
ARTICLE 2
CONTRIBUTION OF ASSETS; ASSUMPTION OF ASSUMED LIABILITIES; AND
--------------------------------------------------------------
PURCHASE PRICE
--------------
2.1 Contribution of Assets. On the Closing Date and on the terms and
----------------------
subject to the conditions set forth in this Agreement, the Company agrees to
sell, transfer, assign, contribute, convey and deliver to Purchaser, as a
contribution to Purchaser's capital, and Purchaser agrees to purchase, acquire,
accept and assume from the Company, all of the Company's right, title and
interest as of the Closing Date in and to all of the Company's assets,
properties and rights (other than the Excluded Assets described in Section 2.2)
used or useful in the Business, wherever located and whether or not reflected on
the Books and Records of the Company, in each case free and clear of any Liens
other than Permitted Liens (collectively, the "Assets"), including without
------
limitation the following:
-4-
(a) All of the Company's active Clients as of the
Closing Date and the Investment Advisory Contracts related to such Clients,
except those Clients and their related Investment Advisory Contracts (i) listed
on Schedule 2.1(a), or (ii) listed on Schedule 5.3 and for which Confirming
--------------- ------------
Consents have not been obtained by the Adjustment Date (collectively, the
"Transferred Clients");
-------------------
(b) The Company's lists of current, prior, active or
inactive Clients or prospective Clients (a list of the Company's active clients
as of the hereof is attached as Schedule 2.1(b));
---------------
(c) All furniture, fixtures and equipment located in the
Company's offices in New York, New York or, if not located in such offices, as
necessary for the operations of its Business (the "FF&E);
----
(d) All Books and Records relating to the Business or
any of the Assets;
(e) All rights of the Company under or pursuant to any
warranties, representations or guarantees made by any Person or affecting or
otherwise relating to any of the Assets; (f) All rights of the Company and
Unified to the name "Fiduciary Counsel" and all derivations thereof (as more
specifically provided in the Assignment described in Section 6.1(h));
(g) All goodwill of the Company;
(h) All notes or accounts receivable of the Company;
(i) Any cash, cash on hand or in banks, cash
equivalents, marketable securities and other investments;
(j) Any of Company's bank and security accounts, safe
deposit boxes and vaults, wherever maintained;
(k) Any of Company's deposits, prepaid expenses,
refunds, rights to refunds or reserves for any Taxes, claims or liabilities
incurred or accrued prior to the Closing Date;
(l) All Intellectual Property Assets used or held for
use in the conduct of the Business (including the Company's goodwill therein)
and all rights, privileges, claims, causes of action and options held by the
Company or Unified relating or pertaining to the Assets (the "Intangible
----------
Property"); and
--------
-5-
(m) Any other assets, properties or rights of Company
reflected on the Interim Balance Sheet or acquired or arising after the Interim
Balance Sheet Date.
2.2 Excluded Assets. Notwithstanding anything in this Agreement that may
---------------
be construed to the contrary, the Assets shall not include, and the Purchaser
shall not purchase or accept, the following assets (collectively, the "Excluded
--------
Assets"):
------
(a) Rights to use the name "Unified Financial" or any
-----------------
derivative;
(b) Company's minute books, stock transfer books,
corporate seals and Tax Returns, as well as any Books and Records required to be
retained under any Law or Order applicable to the Company or any of its
Affiliates;
(c) All rights of the Company under this Agreement; and
(d) Without limiting the foregoing, those assets,
properties and rights set forth on Schedule 2.2.
------------
2.3 Assumed Liabilities. On the Closing Date and on the terms and
-------------------
subject to the conditions set forth herein, Purchaser shall assume and
thereafter pay, perform or discharge when due the following debts, liabilities
and obligations of the Company from and after the Closing Date (collectively,
the "Assumed Liabilities"):
-------------------
(a) The Transferred Clients' Investment Advisory
Contracts;
(b) The employment agreements set forth on Schedule
--------
3.15;
----
(c) Any debts, liabilities or obligations (i) reflected
on the Interim Balance Sheet, (ii) that are incurred in the ordinary course of
business consistent with past practices and remain unpaid after the Interim
Balance Sheet Date and before the Closing Date, or (iii) are otherwise referred
to in this Agreement or on any Schedule hereto; and
(d) Any debts, liabilities or obligations set forth on
Schedule 2.3.
------------
In the event of any claim against Purchaser with respect to any of the
Assumed Liabilities, Purchaser shall have, and the Company hereby assigns to
Purchaser, any defense, counterclaim or right of setoff which would have been
available to the Company if such claim had been asserted against the Company.
2.4 Excluded Liabilities. Except as expressly set forth in Section
--------------------
2.3, Purchaser shall not assume, pay, perform or be responsible for any other
debts, liabilities or obligations of the Company or Unified (the "Excluded
--------
Liabilities").
-----------
2.5 Condition of Purchased Assets. Except as otherwise stated in this
-----------------------------
Agreement, the Purchaser is taking the Assets and Assumed Liabilities "AS IS,
WHERE IS," without any express or implied representations or warranties of any
kind whatsoever, and ALL OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PURPOSE,
ARE HEREBY DISCLAIMED.
-6-
2.6 Purchase Price.
--------------
(a) Subject to Section 2.9, the purchase price (the
"Purchase Price") for the Assets to be purchased by Purchaser from the Company
--------------
hereunder and contributed to the Purchaser by the Company shall be an aggregate
amount equal to the sum as of the Closing Date of: (i) [(A) the Company's
Annualized Gross Revenues, plus (B) the Company's Net Worth, plus, any cash
---- ----
contributed by Unified to the Company subsequent to the last day of the month
preceding the Closing Date (such sum is referred to as the "Closing Payment")],
---------------
plus (ii) the assumption by Purchaser of the Assumed Liabilities. Provided,
----
however, that for purposes of this Section 2.6(a), the exceptions in Section 2.1
(a)(i) and (ii) shall be ignored in determining the Transferred Clients and all
of the Company's Clients shall be assumed to be Transferred Clients on the
Closing Date and subject to adjustment as provided in Section 2.9.
(b) The Closing Payment shall be paid to the Company by
Purchaser on the Closing Date by issuance of LLC Shares to the Company (valued
at $1,000 per LLC Share), which LLC Shares shall be reflected on Schedule A of
the Operating Agreement.
2.7 Transfer Taxes. The Purchaser agrees to pay any sales, use,
--------------
transfer, recording, gains, and other similar taxes and fees ("Transfer Taxes")
--------------
arising out of or in connection with the transactions described in this
Agreement, and shall indemnify, defend and hold harmless the Company and Unified
with respect to such Transfer Taxes. The parties shall cooperate and shall file
all necessary documentation and Tax Returns with respect to such Transfer Taxes.
2.8 Closing.
-------
(a) The closing (the "Closing") will take place at the
-------
offices of DNB Acquisition Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 or
at such other place as Purchaser and the Company may agree, at 10:00 a.m. on (i)
the fifth (5th) Business Day after the day on which the last of the consents,
approvals, actions, filings, notices or waiting periods described in or related
to the filings described in Sections 6.1(c), 6.1(d), 6.2(c) and 6.2(d) have been
obtained, made or given or has expired, as applicable, or (ii) such other date
as Purchaser and the Company may agree (such date is hereafter referred to as
the "Closing Date").
(b) At the Closing, subject to the terms and conditions
hereof, the Company shall execute and deliver to the Purchaser an Assignment and
Assumption Agreement in a mutually acceptable form (the "Assignment and
--------------
Assumption Agreement"), a Xxxx of Sale in a mutually acceptable form (the "Xxxx
-------------------- ----
of Sale"), such further instruments and documents as may be described in this
-------
Agreement or necessary or reasonably requested by Purchaser to convey the Assets
to Purchaser, free and clear of all Liens, other than Permitted Liens and the
Operating Agreement.
(c) At the Closing, subject to the terms and conditions
hereof, Purchaser shall deliver to the Company the Closing Payment described in
Section 2.6 and execute and deliver to the Company the Assignment and Assumption
Agreement and such further instruments and documents as may be described in this
Agreement.
-7-
2.9 Adjustment to Purchase Price.
----------------------------
(a) If as of the Adjustment Date the Annualized Gross
Revenues from the Transferred Clients is less than the Annualized Gross Revenues
as determined in accordance with Section 2.6(a) (any such difference being
referred to as the "Shortfall Amount"), the Purchase Price shall be reduced by
----------------
the Shortfall Amount and the Purchaser shall cancel, and amend Schedule A of the
Operating Agreement to reflect the cancellation of, that number of LLC Shares
issued to the Company or its Permitted Transferee pursuant to Section 2.6 of
this Agreement that, when valued at $1,000 per LLC Share, equal the Shortfall
Amount; provided, however, that the Company or its Permitted Transferee may,
-------- -------
within ten (10) Business Days after final determination of a Shortfall Amount as
provided in Section 2.9(b), contribute to Purchaser cash in any amount up to,
but not exceeding, the Shortfall Amount. If the Company or its Permitted
Transferee so contribute cash to Purchaser, then the Shortfall Amount shall be
reduced by the amount of cash contributed and the number of LLC Shares to be
cancelled shall be reduced by the result of the amount of cash contributed
divided by $1,000.
----------
(b) Within thirty (30) days after the Adjustment Date,
the Purchaser shall deliver to the Company or, if applicable, its Permitted
Transferee, the calculation of the Shortfall Amount. For the purpose of
confirming the accuracy of such calculation, the Company or its Permitted
Transferee and their accountants shall have access, at all reasonable times and
in a manner not disruptive of the ongoing operations of Purchaser or its
Affiliates, to the Books and Records of Purchaser relating to such calculation.
The Company or its Permitted Transferee and their accountants shall have the
right to review the work papers of Purchaser utilized in preparing such
calculations. If the Company or its Permitted Transferee disagrees with the
Purchaser's calculations, the Company or its Permitted Transferee shall notify
the Purchaser in writing within thirty (30) days of delivery of the Purchaser's
calculations, and the two parties shall attempt in good faith to resolve the
dispute as expeditiously as possible. If the dispute cannot be resolved by the
Purchaser and the Company or its Permitted Transferee within thirty (30) days of
receipt by the Purchaser of written notice of the dispute, such dispute shall
be submitted for resolution to a firm of accountants mutually agreed by the
parties, which firm shall not be the accountants for any of the Purchaser,
Company, Unified, DNB Acquisition Corp. or any of their Affiliates (the
"Independent Accountants"). If the parties are unable to agree on Independent
-----------------------
Accountants within ten (10) days of receipt by the Purchaser of written notice
of the dispute, then on the request of any party a CPR Institute neutral (who
shall be mutually acceptable to the parties) shall appoint the Independent
Accountants. The decision of the Independent Accountants (which shall be made
solely on the basis of the presentations of Purchaser and the Company or its
Permitted Transferee and not on the basis of any independent review) shall be
binding on the parties, absent manifest error, and may be enforced by any court
having jurisdiction. No party shall have any ex parte contacts or communications
-- -----
with the Independent Accountants. The cost of the Independent Accountants shall
be borne equally by Purchaser and the Company or its Permitted Transferee,
unless the Independent Accountants accept without modification (x) the
calculation of the Shortfall Amount of the Company or its Permitted Transferee,
or (y) the Purchaser's calculation of the Shortfall Amount. In the case of
clause (x) above, the Purchaser shall pay the full cost of the Independent
Accountants and in the case of clause (y) above, the Company or its Permitted
Transferee shall pay the full cost of the Independent Accountants.
-8-
(c) Any cancellations of LLC Shares shall be made no
earlier than eleven (11) and no later than twenty (20) Business Days after (i)
the Company's or its Permitted Transferee's acceptance of the calculation (and
any failure of the Company or its Permitted Transferee to deliver a notice of
dispute within the time specified in this Section 2.9(b) shall be deemed an
acceptance), or (ii) in the event of a dispute, resolution of the dispute as
provided in this Section 2.9.
(d) The parties shall treat any cancellations or
payments made pursuant to this Section 2.9 as an adjustment to Purchase Price
for all purposes.
(e) Notwithstanding anything herein that may be
construed to the contrary, if a "Shortfall Amount" as defined in the DNB
Purchase Agreement shall also exist as of the Adjustment Date, then for purposes
of the additional cash capital contribution described in this Section 2.9: (i)
the Shortfall Amounts under this Agreement and the DNB Purchase Agreement shall
be netted against one another; (ii) only the party or parties having the greater
Shortfall Amount may make additional cash contributions; and (iii) such party or
parties may only make additional cash contributions in an amount not to exceed
in the aggregate the difference between the two Shortfall Amounts.
2.10 Legends. The certificates representing the LLC Shares issued to the
-------
Company or its Permitted Transferee may bear legends to the effect that such LLC
Shares (i) have not been registered under the Act and may only be sold or
transferred if registered under the Act or in a transaction which is exempt from
the registration requirements of the Act, (ii) are subject to adjustment or
redemption/cancellation in accordance with Section 2.9, and (iii) are subject to
rights of first refusal and options to purchase described in the Operating
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND UNIFIED
---------------------------------------------------------
The Company and Unified, jointly and severally, represent and warrant
to Purchaser as follows:
3.1 Organization and Qualification. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to (i) own, lease and operate its properties and assets as they are
now owned leased and operated and (ii) carry on its business as presently
conducted and as proposed to be conducted. The Company is duly qualified to do
business in each jurisdiction in which the nature of its business or properties
makes such qualification necessary, except where the failure to do so would not
have a Material Adverse Effect on the Company.
3.2 Ownership of Company. All of the issued and outstanding shares of
--------------------
capital stock of the Company are owned, directly or indirectly, beneficially and
of record by Unified, free and clear of all Liens.
-9-
3.3 Validity and Execution of Agreement. Each of the Company and Unified
-----------------------------------
has full legal right, power, authority and capacity to execute and deliver this
Agreement and each of the other agreements to be entered into by the Company and
Unified in connection herewith (the "Related Agreements") and to perform fully
------------------
its obligations hereunder and thereunder. Unified and the board of directors of
the Company have approved the transactions described in this Agreement and each
of the Related Agreements. This Agreement has and, on or prior to the Closing
each of the Related Agreements shall have, been duly executed and delivered by
each of Unified and the Company and assuming if applicable the due
authorization, execution and delivery of this Agreement and each Related
Agreement by Purchaser, constitutes or on Closing shall constitute, as the case
may be, the valid and binding obligation of each of Unified and the Company,
enforceable against them in accordance with its terms, subject to the
qualifications that enforcement of the rights and remedies created hereby or
thereby are subject to (i) bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting the rights and remedies of
creditors and (ii) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
3.4 No Conflict. Except as set forth on Schedule 3.4, neither the
----------- ------------
execution, delivery or performance by the Company or Unified (as the case may
be) of this Agreement or of any document to be delivered in accordance with this
Agreement nor the consummation of the transactions described in this Agreement
or by any Related Agreement will (i) violate, (ii) result in a breach of,
constitute a default under, or constitute an event which, with notice or lapse
of time, will constitute a default under (assuming that the consents referred to
in Sections 5.3 and 5.4 are obtained), (iii) permit any party to terminate or
otherwise alter its obligations under (assuming that the consents referred to in
Sections 5.3 and 5.4 are obtained), or (iv) subject any Assets to a lien (other
than Permitted Liens) under (A) any agreement, license, permit, authorization or
instrument to which the Company or Unified is a party or by which they or any of
their assets are bound, (B) the organizational documents of the Company, or (C)
any Law or Order applicable to the Company, Unified or any of their assets
except, with respect to clauses (A) and (C) only, for such violations,
conflicts, breaches, defaults, terminations, accelerations or Liens which would
not, individually or in aggregate, have a Material Adverse Effect on the
Company. Except as set forth in Schedule 3.4, neither the execution, delivery or
------------
performance of this Agreement or of any Related Agreement by the Company or
Unified nor the consummation of the transactions contemplated by this Agreement
or any Related Agreement will require any consent, approval, waiver or other
action by any Person (other than consents and approvals required under the
Investment Company Act or the terms of the agreements with Clients or the
Investment Advisers Act with respect to Investment Advisory Contracts) which has
not been obtained.
3.5 Regulatory Filings and Correspondence.
-------------------------------------
(a) Except as set forth on Schedule 3.5(a), as of the
---------------
date hereof, the Company has no obligation to file any disclosure documents
relating to its ownership or the ownership of any account managed or advised by
it of securities other than Form 13-F.
(b) Schedule 3.5(b) is a true and complete list of all
---------------
exemptive orders, no-action requests, prohibited transactions exemptions and
private letter rulings obtained or pending by or on behalf of the Company.
-10-
(c) Attached as Schedule 3.5(c) is a true and complete
---------------
list of all correspondence from January 1, 1999 to the date hereof between the
Company or Unified and any Governmental or Regulatory Agency relating to any
audit or examination of the Company.
3.6 Books and Records. Each of the Books and Records of the Company
-----------------
supplied to the Purchaser is true, correct and complete in all material
respects.
3.7 Litigation. Except as set forth on Schedule 3.7, there are no
---------- ------------
outstanding Orders by which the Company, its Business, any Assets or any Client
account or Investment Advisory Contract, is bound. Except as set forth on
Schedule 3.7, there is no Action or Proceeding pending or, to the Knowledge of
------------
the Company or Unified, threatened (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) against or affecting
the Company, Unified, any Assets, any Client account or any Investment Advisory
Contract.
3.8 FF&E. Schedule 3.8 sets forth a true, complete and correct list of
---- ------------
the FF&E. The FF&E is in good, useful and operating condition, ordinary wear and
tear excepted, and constitutes all of the furniture, fixtures or equipment
reasonably necessary to the operation of the Business.
3.9 Intellectual Property. The term "Intellectual Property Assets" means
--------------------- ----------------------------
all intellectual property owned, licensed (as licensor or licensee) or utilized
by Company or in which Company has a proprietary interest, including, without
limitation:
(i) all assumed and fictional business names,
trade names, registered and unregistered trademarks, service marks and
applications (collectively, "Marks");
(ii) all patents, patent applications and
inventions and discoveries that may be patentable (collectively, "Patents");
(iii) all registered and unregistered copyrights
in both published works and unpublished works (collectively, "Copyrights");
(iv) all rights in mask works;
(v) all know-how, trade secrets, confidential or
proprietary information, customer lists, software, technical information, data,
process technology, plans, drawings and blue prints (collectively, "Trade
Secrets"); and
(vi) all rights in internet web sites and
internet domain names used by Company (collectively, "Net Names").
(b) Schedule 3.9 contains a complete and accurate list
------------
and summary description, including royalties paid or received by Company, and
Company has delivered to Purchaser accurate and complete copies, of all Company
contracts relating to its Intellectual Property Assets, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs under which Company is a licensee. There are no
outstanding and, to the Knowledge of Company and Unified, no threatened disputes
or disagreements with respect to any such contract.
-11-
(c) The Intellectual Property Assets are all those
reasonably necessary for the operation of the Business as it is currently
conducted. Company is the owner or licensee of all right, title and interest in
and to each of the Intellectual Property Assets, free and clear of all Liens
except Permitted Liens, and except as otherwise provided in Schedule 3.9 has the
------------
right to use without payment to another Person, all of the Intellectual Property
Assets.
(d) Schedule 3.9 contains a complete and accurate list
------------
and summary description of all Patents. All of the issued Patents are currently
in compliance with all applicable Laws (including payment of filing, examination
and maintenance fees and proofs of working or use), are valid and enforceable,
and are not subject to any maintenance fees or taxes or actions falling due
within ninety (90) days after the Closing Date.
(e) Schedule 3.9 contains a complete and accurate list
------------
and summary description of all Marks. Except as otherwise provided on Schedule
--------
3.9, all Marks have been registered with the United States Patent and Trademark
---
Office, are currently in compliance with all applicable Laws (including the
timely post-registration filing of affidavits of use and incontestability and
renewal applications) are valid and enforceable and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after
the Closing Date.
(f) Schedule 3.9 contains a complete and accurate list
------------
and summary description of all Copyrights. All registered Copyrights are
currently in compliance with all applicable Laws.
(g) Schedule 3.9 contains a complete and accurate list
------------
and summary description of all Net Names. All Net Names have been registered in
the name of Company and are currently in compliance with all applicable Laws.
(h) There are no pending or, to the Knowledge of Company
or Unified, threatened proceedings or litigation or other adverse claims
affecting or with respect to any of the Intellectual Property Assets. There is,
to the Knowledge of Company and Unified, no reasonable basis upon which a claim
may be asserted against Company for infringement of any Intellectual Property
Assets of any other Person. To the Knowledge of Company and Unified, no Person
is infringing the Intellectual Property Assets.
3.10 Investment Advisory Contracts.
-----------------------------
(a) Set forth on Schedule 3.10(a) is a list of the
----------------
Company's Investment Advisory Contracts as of the date hereof.
(b) Except as set forth in Schedule 3.10(b), each of the
----------------
Investment Advisory Contracts is in full force and effect and is valid and
enforceable in accordance with its terms. Except as set forth in Schedule
--------
3.10(b):
-------
(i) The Company is in material compliance with
all applicable terms and requirements of each Investment Advisory Contract;
(ii) Each other Person that has or had any
obligation or liability under any Investment Advisory Contract is in material
compliance with all applicable terms and requirements of such Investment
Advisory Contract;
-12-
(iii) To the Knowledge of Company and Unified,
no event has occurred or circumstance exists that (with or without notice or
lapse of time or both) may contravene, conflict with, or result in a violation
or breach of, or give the Company or any other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Investment Advisory
Contract;
(iv) The Company has not given to or received
from any other Person any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Investment Advisory Contract;
(v) There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under any Investment Advisory Contract, and no such
Person has made written demand for such renegotiation; and
(vi) The Investment Advisory Contracts have been
entered into in the ordinary course of business and have been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in violation
of any Law or Order.
3.11 Investment Advisory Matters.
---------------------------
(a) The Company is duly registered as an investment
adviser under the Investment Advisers Act and all applicable state and non-U.S.
laws.
(b) Without limiting the generality of Section 3.11(a),
except as set forth on Schedule 3.11, the Company and each of the Company's
-------------
officers and employees who is required to be registered as an investment
adviser, an investment adviser's agent or representative, a principal or an
associated person of an investment adviser or in any other similarly designated
position, with the SEC, the securities commission of any state or any self-
regulatory organization is duly registered as required and each such
registration is in full force and effect.
(c) The accounts of each Client subject to ERISA have
been managed by the Company in compliance with the applicable requirements or
ERISA, and consummation of the transactions described herein will not result in
a violation of such ERISA requirements.
(d) Neither the Company nor, to the Best Knowledge of
the Company or Unified, any "person associated with an investment adviser" (as
that term is defined in the Investment Advisers Act) with regard to the Company
has, during the period of not less than ten (10) years prior to the date hereof,
been convicted of any crime or is or has been subject to any disqualification
that would be a basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Investment Advisers Act or Rule
206(4)-4(b) thereunder or for disqualification as an investment adviser for any
investment company pursuant to Section 9 of the Investment Company Act, and to
the Best Knowledge of the Company or Unified, there is no basis for, or
proceeding or investigation that is reasonably likely to become a basis for, any
such disqualification, denial, suspension or revocation.
-13-
3.12 Financial Statements. The Company has previously furnished to
--------------------
Purchaser, and attached hereto as Schedule 3.12 are, the audited balance sheet
-------------
of the Company (the "Balance Sheet") as at December 31, 2003 (the "Balance Sheet
Date"), the related income statement for the fiscal year then ended. Except as
set forth on Schedule 3.12, all such financial statements (the "Financial
-------------
Statements") were prepared from the Books and Records of the Company in
accordance with GAAP, consistently applied. The Financial Statements fairly
present the Company's financial position and results of operations and changes
in shareholders' equity and cash flows, as of the respective dates of and for
the periods referred to in such Financial Statements, all in accordance with
GAAP.
3.13 Absence of Certain Changes and Events. Since the Balance Sheet
-------------------------------------
Date, except as set forth on Schedule 3.13, the Company has not (i) except in
-------------
the ordinary course of business consistent with past practices, incurred any
material liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise), or guaranteed or agreed to guarantee any obligations
of others, (ii) canceled any indebtedness owing to it or any claims that it
might have possessed, waived any material rights of substantial value or sold,
leased, encumbered, transferred or otherwise disposed of, or agreed to sell,
lease, encumber, or otherwise dispose of its assets or permitted any of its
assets to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, (iii) made any material capital
expenditure or commitment therefor, (iv) paid any bonuses, salaries or other
compensation to any shareholder, director, officer or employee, other than in
the ordinary course of business consistent with past practices, (v) entered into
any employment, severance or similar contract with any director, officer,
shareholder or employee; (vi) declared or paid any dividend or made any
distribution on any shares of its capital stock, or redeemed, purchased or
otherwise acquired any shares of its capital stock or any option, warrant or
other right to purchase or acquire any such shares, (vii) borrowed or agreed to
borrow any funds, made any loan to any Person or guaranteed or agreed to
guarantee any obligations of any other Person, (viii) written off as
uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, (ix) made any
material change in any method of accounting or auditing practice, (x) lost,
terminated, modified in any material respect, waived any fees under, or
accelerated or accepted prepayment of any fees under, any Investment Advisory
Contract, (xi) otherwise conducted the Business or entered into any transaction
other than in the ordinary course consistent with past practices, or (xii)
agreed, whether or not in writing, to do any of the foregoing.
3.14 Absence of Undisclosed Liabilities. Except (i) as and to the extent
----------------------------------
of the amounts reflected or reserved against in the Balance Sheet, (ii)
liabilities or obligations incurred since the Balance Sheet Date in the ordinary
course of business consistent with past practices, and (iii) liabilities listed
on Schedule 3.14, the Company has no liabilities or obligations of any nature
-------------
whether absolute, accrued, contingent or otherwise and neither the Company nor
Unified has any Knowledge of any basis for the assertion against the Company of
any liability or obligation other than as set forth in this Section 3.14.
3.15 Employment and Labor Matters.
----------------------------
-14-
(a) Schedule 3.15 lists each officer, employee,
-------------
consultant and independent contractor of the Company as of the date hereof,
along with the amount of the current annual salaries and total compensation paid
or due for services to each officer, employee, consultant or independent
contractor for the most recent fiscal year end and the year through the most
recent month end, and a full and complete description of any commitments to such
officers, employees, consultants and independent contractors with respect to
compensation payable thereafter and any employment agreements with such persons.
To the Knowledge of the Company and Unified, no key employee or group of
employees has any plans to terminate employment with the Company.
(b) Except as set forth on Schedule 3.15: The Company is
-------------
not a party to or bound by any collective bargaining agreement with any labor
organization, group or association covering any of its employees, and to the
Knowledge of the Company and Unified there has been no attempt to organize
Company's employees by any Person, unit or group seeking to act as their
bargaining agent. There are no pending or, to the Knowledge of the Company and
Unified, threatened charges (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of any
other wrongful action with respect to any aspect of employment of any person
employed or formerly employed by the Company. The Company has received no
written notice of the scheduling by any governmental agency or authority, of any
union representation election relating to the employees of the Company or any
organizational effort with respect to any of such employees, or any
investigation of the Company's employment policies or practices by any
governmental agency or authority. The Company is not currently, nor has it been,
involved in labor negotiations with any unit or group seeking to become the
bargaining unit for any employees of the Company. The Company has not
experienced any material work stoppages, and to the Knowledge of the Company and
Unified, no work stoppage is planned.
(c) The Company has complied in all material respects
with all laws and regulations relating to the employment of labor, including,
without limitation, any provisions thereof relating to wages, hours, benefits,
worker's compensation, employment practices, terms and conditions of employment,
immigration, collective bargaining, equal opportunity or similar laws and the
payment of social security and similar taxes, and is not liable for any arrears
of wages or any taxes or penalties for failure to comply with any of the
foregoing.
3.16 Real Property. The Company owns no real property.
-------------
3.17 Powers of Attorney; Absence of Limitations on Competition;
----------------------------------------------------------
Guarantees. (i) No power of attorney or similar authorization given by the
----------
Company presently is in effect or outstanding; (ii) except as set forth on
Schedule 3.17, no contract or agreement to which Company is a party or is bound
-------------
or to which Company's properties or assets are subject limits the freedom of
Company to compete in any line of business or with any Person; and (iii) Company
is not a party to or bound by any guarantee of any debt or obligation of any
other Person.
3.18 Governmental Approvals. Except as set forth on Schedule 3.18, no
---------------------- -------------
registration or filing with, or consent or approval of or other action by, any
Governmental or Regulatory Agency is or will be necessary for the valid
execution, delivery and performance by the Company or Unified of this Agreement
or any of the Related Agreements.
-15-
3.19 Compliance with Law; Licenses and Permits. The Company is in
-----------------------------------------
compliance with all Laws and Orders applicable to it or its Business, the
noncompliance with which would have a Material Adverse Effect. Company has not
received any notice or other communication (whether oral or written) from any
Governmental or Regulatory Agency or any other Person regarding (i) any actual,
alleged, possible or potential violation of, or failure to comply with any Law
or Order, or (ii) any actual, alleged, possible or potential obligation on the
part of the Company to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature. The Company possesses all franchises,
permits, licenses, certificates and consents required from any Governmental or
Regulatory Agency in order for Company to carry on the Business as currently
conducted and to own and operate its properties and assets as now owned and
operated, and the lack of which would have a Material Adverse Effect.
3.20 Employee Benefits.
-----------------
(a) Set forth on Schedule 3.20 is a list of all pension,
-------------
profit sharing, retirement, deferred compensation, stock purchase, stock option,
stock appreciation right, employee stock ownership, incentive, bonus, vacation,
severance, change-in-control, disability, hospitalization, medical insurance,
life insurance, fringe benefit, welfare and other employee benefit plans,
programs, policies or arrangements pursuant to which Company or its ERISA
Affiliates provides or has provided (directly or indirectly, individually or
jointly through others) benefits or compensation to or on behalf of employees,
directors or independent contractors or former employees or former directors or
former independent contractors of Company or its ERISA Affiliates, whether
formal or informal, whether or not written ("Employee Plan"). Company shall
-------------
furnish to Purchaser true, complete and accurate copies of each written Employee
Plan and related trust agreement, a complete and accurate description of each
unwritten Employee Plan, a current copy of each summary plan description, all
insurance contracts relating to Employee Plans, and all annual reports filed
with respect to each Employee Plan for the last four years. the Company shall
maintain the Employee Plans listed on Schedule 3.20 in full force and effect
-------------
until the Closing Date. Except as set forth on Schedule 3.20, Purchaser shall
-------------
not have any obligation or liability of any kind or nature for any compensation
or benefits of any kind or nature to the employees or consultants of the Company
for services rendered prior to the Closing Date.
(b) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the Knowledge of the Company or
Unified, threatened against or with respect to any Employee Plan or the assets
of any Employee Plan. There are no taxes, fees, penalties, interest or other
amounts due as a result of the loss of tax-qualification of any Employee Plan
(or the correction of any qualification issue under any such plan, whether made
pursuant to any IRS program or policy or otherwise).
(c) Each Employee Plan (and the related trust or funding
vehicle, if any) has been administered and maintained in accordance with its
terms and with all applicable law. Except as set forth on Schedule 3.20, each
-------------
Employee Plan which is intended to be qualified under Section 401 of the Code
and each amendment to such plan is subject to a favorable determination letter
from the IRS and each such plan has at all times been maintained, by its terms
and in operation, in accordance with Section 401 of the Code. The form of all
Employee Plans is in compliance with the applicable terms of ERISA, the Code,
and any other applicable Laws. All reports and disclosures required with respect
to each Employee Plan have been properly and timely made. The assets of each
Employee Plan which is not funded through the general assets of the Company are
at least equal to the liabilities under such Employee Plan, and all assets of
each Employee Plan are shown on the books and records of such Employee Plan at
fair market value. No Employee Plan has unfunded liabilities that as of the
Closing Date are not accurately and fully reflected on Company's Balance Sheet.
-16-
(d) Neither Company nor any of its ERISA Affiliates is
or has been a participant in, or is or has been obligated to maintain or to make
contributions to, a multi-employer plan (within the meaning of ERISA Section 3
(37) and ERISA Section 4001(a)(3)) or an Employee Plan which is subject to Title
IV of ERISA. Neither Company nor any ERISA Affiliate has sponsored, contributed
to or been obligated under Title I or IV of ERISA to contribute to a "defined
benefit plan" (as defined in ERISA Section 3(35)). The Company is not obligated
to provide post-retirement medical benefits or any other unfunded post-
retirement welfare benefits to or on behalf of any persons whatsoever (except
the benefits pursuant to the continuation health coverage requirements under
Section 4980B of the Code, ERISA Section 601, or applicable state law). Except
for the continuation coverage requirements of COBRA, Company has no obligations
or potential liability for benefits to employees, former employees or their
respective dependents following termination of employment or retirement under
any Employee Plans providing medical, dental, life or disability benefits. No
written or oral representations have been made to any employee or former
employee of Company promising or guaranteeing any employee payment or funding
for the continuation of medical, dental, life, or disability coverage for any
period of time beyond the end of the current plan year (except to the extent of
coverage required under COBRA).
(e) Neither Company nor its ERISA Affiliates is subject
to and, to the Knowledge of the Company and Unified, no facts exist which could
subject Company or any of its ERISA Affiliates to, any liability whatsoever
which is directly or indirectly related to any Employee Plan, including, but not
limited to, liability for benefit payments or related claims, any liability for
any tax or related penalty under the Code, or liability for any damages or
penalties arising under Title I or Title IV of ERISA. No reportable event under
Section 4043 of ERISA has occurred or, to the Knowledge of the Company and
Unified, will occur with respect to such Employee Plan.
(f) Termination of or withdrawal from any Employee Plan
immediately prior to or following the Closing Date will not subject Purchaser or
Company to any liability, tax or penalty whatsoever.
(g) The execution or performance of the transactions
contemplated by this Agreement will not create, vest, accelerate or increase any
obligations under the Employee Plans, including any obligation to make any
payment which would not be deductible as an excess golden parachute payment
under Section 280G of the Code.
(h) All contributions to or under each Employee Plan and
all expenses of each Employee Plan are fully deductible for income tax purposes
for the taxable year for which such contributions are made or such expenses are
paid. All contributions to or under each Employee Plan have been made when due
under the terms of such Employee Plan in accordance with all applicable Laws.
-17-
(i) Each Employee Plan covering any present or former
employee of any of Company which is subject to the continuation health coverage
requirements of Section 4980B of the Code or Section 601-608 of ERISA or any
applicable state law has been maintained by Company in compliance with all such
requirements for continuation coverage. Each Employee Plan subject to the
portability, access and renewability provisions of Section K, Chapter 100 of the
Code and Section 701 et seq. of ERISA is in compliance with such provisions.
(j) Neither Company nor any fiduciary of an Employee
Plan has violated the requirements of Section 404 of ERISA. Neither Company nor
any fiduciary of an Employee Plan has engaged in a transaction with respect to
any Employee Plan that could subject the Company or Purchaser to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(l) of ERISA or
a violation of Section 406 of ERISA.
(k) For purposes of this Section 3.20, the term "ERISA
Affiliate" shall mean each trade or business (whether or not incorporated) which
together with Company is treated as a single employer under Section 414(b), (c),
(m), (o) or (t) of the Code.
3.21 Outstanding Leases. Schedule 3.21 sets forth a list of each
------------------ -------------
agreement by which the Company leases each parcel of real property used in
connection with the Business (collectively, the "Leases"). Company has delivered
or made available to Purchaser true, correct and complete copies of all of the
Leases specified on Schedule 3.21. Except as disclosed on Schedule 3.21, all
------------- -------------
rents due under the Leases have been paid. All of the Leases are, to the
Knowledge of the Company and Unified, in full force and effect and enforceable
in accordance with their terms. Except as set forth on Schedule 3.21: Company,
-------------
and to the Knowledge of Company and Unified, each other party thereto has
performed all the obligations required to be performed by it, has received no
notice of default and is not in default (with due notice or lapse of time or
both) under any of the Leases. Neither Company nor Unified has any Knowledge of
any breach or anticipated breach by the other party to any of the Leases. No
written notice of termination of, or any threat to terminate, any of the Leases
has been given or received by Company, except that prior to the Closing the
Company will terminate its Lease for 00 Xxxx 00xx, Xxxxx 0000, Xxx Xxxx, Xxx
Xxxx 00000.
3.22 No Material Adverse Change. Except as set forth on Schedule 3.22,
-------------------------- -------------
since the Balance Sheet Date, there has not been any material adverse change in
the Business, operations, prospects, assets, results of operations or condition
(financial or otherwise) of the Company, and no event has occurred or
circumstance exists that may (with or without the passage of time, the giving of
notice or both) result in such a material adverse change.
3.23 Title; Liens. The Company owns outright and has good and marketable
------------
title and, at the Closing, the Company will convey to Purchaser, subject to
Section 5.3, good and marketable title to all of the Assets, in each case free
and clear of any Liens other than Permitted Liens.
-18-
3.24 Taxes. The Company has filed all Tax Returns required to be filed
-----
by it and has paid all Taxes shown on those Tax Returns to be due. Except as
disclosed on Schedule 3.24, all such Tax Returns were correct and complete in
-------------
all material respects and accurately reflected the Taxes required to have been
paid by the Company.
3.25 Boycotts and Foreign Corrupt Practices. Neither the Company nor
--------------------------------------
Unified has (i) participated in or cooperated with an international boycott as
that term is used in Section 999 of the Code or failed to make any required
report of a request that it do so, or (ii) engaged in any activity which
violated the Foreign Corrupt Practices Act of 1977, as amended, or would have
violated that Law if the Company was an issuer subject to the provision of the
Law which relate solely to issuers.
3.26 Lobbying. Neither the Company nor Unified, nor any officer,
--------
director, employee, agent or consultant of either of them, has engaged in the
solicitation of "municipal securities business" as defined in MSRB Rule G-387
and has not used any consultants as defined in Rule G-38 in connection
therewith. The Company, Unified and each officer, director, employee, agent or
consultant of either of them, engaged on behalf of the Company or Unified in the
solicitation or lobbying of any Federal, state or local governmental body,
agency or fund, is registered in accordance with all applicable laws, rules and
regulations. All political contributions made by the Company or by Unified
(either directly or indirectly through any employee of the Company or otherwise)
have been made in accordance with all applicable laws. All expenses (including,
without limitation, all campaign and political contributions) of the Company or
Unified incurred in connection with the lobbying or solicitation of any Federal,
state or local governmental body, agency or fund on behalf of the Company are
fully and properly reflected on the Books and Records of the Company. Any
expenditures made by or on behalf of the Company for the benefit of any
governmental official including meals and entertainment have been made in
accordance with all applicable laws and without an intent to improperly
influence such person.
3.27 Fidelity and ERISA Bonds. Schedule 3.27 sets forth a list of all
------------------------ -------------
fidelity and ERISA bonds held by or on behalf of the Company and brief
description thereof, including the insurer, the policy number or covering note
number with respect to binders, the amount of any deductible and the policy or
bond coverage limits. Also set forth on Schedule 3.27 is a list of any pending
-------------
claims. The Company has not received any notice from any of its insurance
carriers that any insurance premiums will be materially increased in the future
or that any fidelity or ERISA bond coverage listed on Schedule 3.27 will not be
-------------
available in the future on substantially the same terms as now in effect. None
of the bonds disclosed on Schedule 3.27 provides that premiums paid in respect
-------------
of periods may be adjusted or recomputed based on claims-paying experience of
such bonds or otherwise.
3.28 Changes in Pricing Policy. The Company's most recent form ADV, a
-------------------------
true and complete copy of which has been provided to Purchaser and is attached
to Schedule 3.28, contains a complete and accurate description of the Company's
-------------
pricing policy and practices and a schedule of the fees charged. Except as set
forth on Schedule 3.28, since the date of such ADV, there has not been any
-------------
change in pricing policy with respect to the provision of services to any Client
or prospective Client.
-19-
3.29 Proprietary Information of Third Parties. No third party has
----------------------------------------
notified Company or, to the Knowledge of Company or Unified, has reason to claim
that any Person employed by or consulting with Company ("Related Person") has
--------------
(i) violated or may be violating any of the terms or conditions of such Related
Person's employment, non-competition or non-disclosure agreement with such third
party, (ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party, or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees.
3.30 Transactions With Affiliates. Except as set forth on Schedule 3.30,
---------------------------- -------------
to the Knowledge of Company and Unified, no director, officer or shareholder of
Company or member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or any member of
the family of any such person, has a beneficial interest greater than 5% or is
an officer, director, trustee, partner or holder of any equity interest greater
than 5%, is a party to any transaction with the Company, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments or involving other obligations to any such person or firm.
3.31 Environmental Matters. Except as set forth on Schedule 3.31:
--------------------- -------------
(a) The operations of the Company are in compliance with
all applicable Environmental Laws, except where any non-compliance would not
reasonably be expected to have a Material Adverse Effect.
(b) The Company has obtained and is in compliance with
all necessary permits or authorizations that are required under Environmental
Laws to operate its Business and the Assets, except where any non-compliance
would not reasonably be expected to have a Material Adverse Effect.
(c) The term "Environmental Laws" means the
------------------
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
------
42 U.S.C. 9601 et seq., as amended; the Resource Conservation and Recovery Act
-- ---
("RCRA"), 42 U.S.C. 6901 et seq., as amended; the Clean Air Act ("CAA"),
---- -- --- ---
42 U.S.C. 7401 et seq., as amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251
-- --- ---
et seq., as amended; and any other applicable federal, state, local or municipal
-- ---
laws, statutes, regulations, rules or ordinances imposing liability or
establishing standards of conduct for protection of the environment; each as in
effect as of the Closing Date.
3.32 Notes and Accounts Receivable. The notes and accounts receivable
-----------------------------
and other debts due or recorded in the Books and Records of the Company as being
due to the Company as of the Interim Balance Sheet Date are set forth on
Schedule 3.32. The notes and accounts receivable set forth on Schedule 3.32 and
------------- -------------
those arising between the Interim Balance Sheet Date and the Closing Date
represent or will represent, except to the extent paid, valid obligations
arising from sales actually made or services actually performed by the Company
in the ordinary course of business. All of such notes and accounts receivable
are or will, except to the extent paid, be current and collectible in full, net
of reserves shown on the Interim Balance Sheet, within ninety (90) days after
the Closing Date without resort to litigation and without offset or
counterclaim. To Knowledge of the Company and Unified, there is and will be no
contest, claim, defense or right to setoff by any account debtor relating to the
amount or validity of any unpaid note or account receivable listed on Schedule
--------
3.32 or arising between the Interim Balance Sheet Date and the Closing Date.
----
-20-
3.33 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by the Company and
Unified directly with Purchaser without the intervention of any Person on behalf
of the Company and Unified in such manner as to give rise to any valid claim by
any Person against Purchaser for a finder's fee, brokerage commission or similar
payment.
3.34 Securities Laws Matters. The Company and Unified each acknowledge
-----------------------
that the LLC Shares to be delivered in connection with this Agreement have not
been registered under the Act or any state securities laws, that the LLC Shares
may be appropriately legended to reflect such fact, and that the offering
thereof contemplated hereby is to be effected pursuant to an exemption from the
registration requirements imposed by such Laws. In that regard, the Company is
acquiring the LLC Shares for its own account and not with a view to, or for sale
in connection with, any distribution thereof in violation of the Act and such
state securities laws. Each of the Company and Unified agree not to offer, sell
or otherwise dispose of the LLC Shares acquired hereunder except pursuant to a
registration statement under the Act and qualification under applicable state
securities laws or pursuant to an exemption from registration under the Act and
such state securities laws. Each of the Company and Unified is an "accredited
investor" (as defined in Regulation D under the Act), has sufficient knowledge
and experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the LLC Shares, and is
capable of bearing the economic risks of such investment.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
4.1 Organization and Capitalization. Purchaser is a limited liability
-------------------------------
company duly organized and validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and lawful
authority to (a) own, lease and operate its properties and assets as they are
now owned, leased and operated and (b) carry on its business as now conducted
and presently proposed to be conducted.
4.2 Validity and Execution of Agreement. Purchaser has full legal right,
-----------------------------------
power and authority to execute and deliver this Agreement and each of the
Related Agreements in connection herewith and to perform fully its obligations
hereunder and thereunder. This Agreement is and, at or prior to the Closing each
of the Related Agreements will be, duly authorized, executed and delivered by
Purchaser and, assuming if applicable the due authorization, execution and
delivery of this Agreement and each Related Agreement by the Company and
Unified, constitutes or will constitute, as the case may be, the valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, subject to the qualifications that enforcement of the rights and
remedies created hereby is subject to (a) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
-21-
4.3 No Conflict. Except as set forth on Schedule 4.3, neither the
----------- ------------
execution, delivery or performance of this Agreement or of any document to be
delivered in accordance with this Agreement nor the consummation of the
transactions described in this Agreement or by any Related Agreement will (i)
violate, (ii) result in a breach of, constitute a default under, or an event
which, with notice or lapse of time, will constitute a default under, (iii)
permit any party to terminate or otherwise alter its obligations under, or (iv)
subject any assets of the Purchaser to a lien (other than Permitted Liens) under
(A) any agreement, license, permit, authorization or instrument to which the
Purchaser is a party or by which it or any of its assets is bound, (B) the
organizational documents of the Purchaser, or (C) any Law or Order applicable to
the Purchaser or any of its assets except, with respect to clauses (A) and (C)
only, for such violations, conflicts, breaches, defaults, terminations,
accelerations, or Liens that would not, individually or in the aggregate, have a
Material Adverse Effect on the Purchaser. Except as set forth in Schedule 4.3,
------------
neither the execution, delivery or performance of this Agreement or of any
agreement to be delivered in accordance with this Agreement by the Purchaser nor
the consummation of the transactions described in this Agreement or any Related
Agreement will require any consent, approval, waiver or other action by any
Person.
4.4 Legal Proceedings. Except as set forth on Schedule 4.4, there are no
----------------- ------------
(i) outstanding Orders by which the Purchaser, its employees, operations,
assets, properties or business is bound or (ii) Actions or Proceedings pending
or, to the Knowledge of Purchaser, threatened against, Purchaser, its assets,
properties or business, which could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or which, if adversely decided, would have a Material Adverse Effect
on Purchaser.
4.5 Compliance with Laws. Except as set forth on Schedule 4.5, the
-------------------- ------------
Purchaser is in compliance with all, and not in violation of any, and has not
received any claim or notice that it is not in compliance with any, or that it
is in violation of, any Law or Order to which the Purchaser or any of its
operations, assets or properties or its business is subject which failure would
have a Material Adverse Effect on Purchaser.
4.6 Investment Advisory Matters.
---------------------------
(a) The Purchaser is, or before the Closing will be,
duly registered as an investment adviser under the Investment Advisers Act and
all other applicable Laws.
(b) Without limiting the generality of Section 4.6(a),
except as set forth on Schedule 4.6, the Purchaser and each of the Purchaser's
------------
officers and employees who is required to be registered as an investment
adviser, an investment adviser's agent or representative, a principal or an
associated person of an investment adviser or in any other similarly designated
position, with the SEC, the securities commission of any state or any self-
regulatory organization is or by the Closing will be, duly registered as
required and each such registration is or will be in full force and effect.
(c) The accounts of each Client subject to ERISA have
been managed by the Purchaser in compliance with the applicable requirements of
ERISA, and consummation of the transactions described herein will not result in
a violation of such ERISA requirements.
-22-
(d) Neither the Purchaser nor, to the Best Knowledge of
Purchaser, any "person associated with an investment adviser" (as that term is
defined in the Investment Advisers Act) with regard to the Purchaser has, during
the period of not less than ten (10) years prior to the date hereof, been
convicted of any crime or is or has been subject to any disqualification that
would be a basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Investment Advisers Act or Rule
206(4)-4(b) thereunder or for disqualification as an investment adviser for any
investment company pursuant to Section 9 of the Investment Company Act, and to
the Best Knowledge of Purchaser, there is no basis for, or proceeding or
investigation that is reasonably likely to become a basis for, any such
disqualification, denial, suspension or revocation.
4.7 LLC Shares. When issued as contemplated under Section 2.6, the LLC
----------
Shares required to be issued by Purchaser under such Section 2.6 will be validly
issued and fully paid and, except as otherwise provided in the Operating
Agreement of Purchaser or the Delaware Limited Liability Company Act,
non-assessable.
4.8 Capitalization of the Purchaser. The information regarding the
-------------------------------
capitalization of the Purchaser set forth on Schedule 4.8 is true, accurate and
------------
correct in all material respects. The Purchaser is a newly formed entity and has
been formed solely for the purpose of consummating the transactions described
herein and in the DNB Purchase Agreement. As of the Closing, the only assets,
liabilities and operations of the Purchaser shall consist of nominal initial
cash contributions and the assets, liabilities and operations acquired or
assumed pursuant to or in connection with this Agreement and the DNB Purchase
Agreement.
4.9 Financial Statements. Attached hereto as Exhibit B is a true and
-------------------- ---------
correct copy of the unaudited consolidated balance sheet of DNB Acquisition
Corp. as of December 31, 2003, and the related unaudited consolidated statements
of income, changes in stockholders equity and cash flows for the period then
ended, including the footnotes thereto. Such financial statements have been
prepared in accordance with GAAP and present fairly in all material respects the
financial position and results of operations of DNB Acquistion Corp. as at such
date and for the period then ended.
4.10 Boycotts and Foreign Corrupt Practices. The Purchaser has not (i)
--------------------------------------
participated in or cooperated with an international boycott as that term is used
in Section 999 of the Code or failed to make any required report of a request
that it do so, or (ii) engaged in any activity which violated the Foreign
Corrupt Practices Act of 1977, as amended, or would have violated that Law if
the Purchaser was an issuer subject to the provision of the Law which relate
solely to issuers.
4.11 Lobbying. Neither the Purchaser, nor any officer, director,
--------
employee, agent or consultant of the Purchaser, has engaged in the solicitation
of "municipal securities business" as defined in MSRB Rule G-37 and has not used
any consultants as defined in Rule G-38 in connection therewith. The Purchaser
and each officer, director, employee, agent or consultant of the Purchaser,
engaged on behalf of the Purchaser in the solicitation or lobbying of any
Federal, state or local governmental body, agency or fund, is registered in
accordance with all applicable laws, rules and regulations. All political
contributions made by the Purchaser (either directly or indirectly through any
employee of the Purchaser or otherwise) have been made in accordance with all
applicable laws. All expenses (including, without limitation, all campaign and
political contributions) of the Purchaser incurred in connection with the
lobbying or solicitation of any Federal, state or local governmental body,
agency or fund on behalf of the Purchaser are fully and properly reflected on
the Books and Records of the Purchaser. Any expenditures made by or on behalf of
the Purchaser for the benefit of any governmental official including meals and
entertainment have been made in accordance with all applicable laws and without
an intent to improperly influence such person.
-23-
4.12 Brokers. All negotiations relative to this Agreement and the
-------
transactions described herein have been carried out by Purchaser directly with
the Company and Unified without the intervention of any Person on behalf of
Purchaser in such manner as to give rise to any valid claim by any Person
against the Company or Unified for a finder's fee, brokerage commission or
similar payment.
ARTICLE 5
PRE-CLOSING COVENANTS
---------------------
5.1 Corporate Examinations and Investigations. Subject to the provisions
-----------------------------------------
of Article 9 and Section 10.7, at or prior to the Closing Date, the parties to
this Agreement, through their respective employees and representatives, shall be
entitled to make such reasonable investigations after reasonable notice of the
assets, properties, business and operations of the Company or the Purchaser, as
the case may be, and such examination of the books, records, Tax Returns,
financial condition and operations of such Person. Any such investigation and
examination shall be conducted at reasonable times, after reasonable notice and
under reasonable circumstances. In order that the parties to this Agreement may
have a reasonable opportunity to make such a business, accounting and legal
review, examination or investigation of the business and affairs of the Company
or the Purchaser, as the case may be, the parties to this Agreement shall,
subject to the provisions of Article 9 and Section 10.7, furnish the
representatives of the other party during such period with such information and
copies of such documents concerning its affairs as such representatives may
reasonably request and cause its officers, employees, consultants, agents,
accountants and attorneys to cooperate fully with such representatives in
connection with such review and examination and to make full disclosure to the
other party of all material facts affecting the financial condition and business
operations of such Person. The Company shall afford DNB Acquisition Corp. the
same rights as the Purchaser under this Section 5.1.
5.2 Conduct of Business. From the date hereof through the Closing Date:
-------------------
(a) The Company shall:
(i) except as described in Sections 5.3 and 5.4,
conduct its business in the ordinary course consistent with past practices;
(ii) take all commercially reasonable steps
available to it to, at its expense, maintain the FF&E and other tangible Assets
in good repair and condition, except to the extent of reasonable wear and use
and insured damage by fire or other unavoidable casualty;
(iii) maintain the Books and Records of the
Company in the usual manner, in accordance with GAAP applied on a consistent
basis;
-24-
(iv) comply in all material respects with all
applicable Laws and Orders, including, but not limited to, the Act, ERISA and
the Investment Advisers Act and the rules issued under each;
(v) use its reasonable efforts to preserve
intact its Business and the Assets; and
(vi) use its reasonable efforts to maintain its
present Clients and preserve its goodwill.
(b) Without the prior written consent of Purchaser, the
Company shall not:
(i) sell, dispose of or encumber any of the
Assets;
(ii) engage in any activities with regard to any
Assets or its Business except in the ordinary course of business consistent with
past practices; or
(iii) change any pricing policy with respect to
the provision of services to any current Client or prospective Client.
5.3 Client Consents. Schedule 5.3 lists each Investment Advisory
--------------- ------------
Contract for which the Client party thereto must affirmatively consent to the
transfer or assignment thereof as contemplated by this Agreement. As promptly as
practicable after the Purchaser executes and delivers this Agreement, the
Company and Unified shall cause all Clients of the Company (other than those
listed on Schedule 2.1(a)) which are party to any Investment Advisory Contract
--------------
to be informed of the transactions described in this Agreement and shall request
the written consent of such Clients to the transaction in the form attached
hereto as Exhibit C. Any consent obtained in compliance with this Section 5.3
---------
shall be considered a "Confirming Consent." Prior to the Closing Date, Purchaser
------------------
shall not contact, in writing or otherwise, any Client or any other Person who
acts as an advisor to or "gatekeeper" for any Client without the prior approval
of the Company (such approval not to be unreasonably withheld).
5.4 Other Actions. The parties to the Agreement agree to use
-------------
commercially reasonable efforts to take, or cause to be taken, all reasonable
actions and to do, or cause to be done, all things reasonably necessary, proper
or advisable to obtain all necessary waivers, consents and approvals, including,
but not limited to, effecting all necessary registrations and filings with and
submitting all information requested by any Governmental or Regulatory Agency
and any other Persons, required to be obtained by them for the consummation of
the Closing and the continuance in full force and effect of the Transferred
Clients' Investment Advisory Contracts.
5.5 Notice of Events. Each party shall promptly notify the others of (a)
----------------
any event, condition or circumstance occurring from the date hereof through the
Closing Date that would constitute a violation or breach of this Agreement and
(b) any event, occurrence, transaction or other item which would have been
required to have been disclosed on any Schedule or statement delivered hereunder
had such event, occurrence, transaction or item existed on the date hereof,
other than items arising in the ordinary course of business or which would not
render any representation or warranty of the Company or Unified materially
misleading. The Company and Unified shall promptly notify Purchaser of any known
event that occurs or has occurred, and of any known condition or circumstance
that exists, in either case that, alone or with the passage of time, could
reasonably be expected to materially detract from the value to Purchaser of any
Asset.
-25-
5.6 Securities Holdings. Not more than five (5) nor less than two (2)
-------------------
Business Days prior to the Closing, the Company shall deliver to the Purchaser a
true, correct and complete list of all securities held by the Company or held in
any account managed or advised by the Company.
5.7 Fulfillment of Conditions.
-------------------------
(a) The Company and Unified will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Purchaser contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
(b) Purchaser will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each other condition to the obligations of the Company and Unified contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
5.8 Lease Termination. On or prior to the Closing Date, the Company
-----------------
shall terminate its Lease for the premises at 00 Xxxx 00xx, Xxxxx 0000, Xxx
Xxxx, Xxx Xxxx 00000, without any liability or obligation to, or claims against,
Purchaser.
5.9 Delivery of Schedules. No later than 5:00 p.m. eastern time on
---------------------
Friday, March 19, 2004, Company and Purchaser shall deliver to each other their
respective disclosure Schedules as described in this Agreement. In addition, the
Company and Purchaser shall supplement their Schedules as necessary or
appropriate prior to the Closing. If the Company, on the one hand, or the
Purchaser, on the other hand, fails to deliver its Schedules before the
foregoing deadline, then the other party may terminate this Agreement upon
written notice to the other party or parties hereto and no party shall have any
further obligations or liability hereunder.
ARTICLE 6
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
6.1 Conditions Precedent to the Obligations of Purchaser to Complete the
--------------------------------------------------------------------
Closing. The obligations of Purchaser to enter into and complete the Closing are
-------
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by Purchaser in its sole
discretion:
-26-
(a) Representations and Warranties. The representations
------------------------------
and warranties of the Company and Unified contained in this Agreement shall be
true, complete and correct in all material respects (as provided in the
following sentence) on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date (other than representations and
warranties expressly made as of an earlier date, which shall have been true and
correct as of such earlier date). For purposes of determining the satisfaction
of the condition contained in this Section 6.1(a), no effect shall be given to
any exception in such representations and warranties relating to Knowledge,
materiality, or a Material Adverse Effect and such representations and
warranties shall be deemed to be true and correct in all material respects only
if the failure or failures of such representations and warranties to be so true
and correct without regard to Knowledge, materiality and Material Adverse Effect
exceptions do not represent in the aggregate a Material Adverse Effect with
respect to the Company.
(b) Covenants. The Company and Unified shall have
---------
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by them
on or prior to the Closing Date.
(c) Consents and Approvals. The Company and Unified
----------------------
shall have made or obtained, as the case may be, all regulatory and contractual
notifications and consents required of them.
(d) Investment Advisory Contract Consents. The number of
-------------------------------------
Clients and the Annualized Gross Revenues of Clients for which Confirming
Consents have been obtained by the Closing Date shall be at least 95% of each of
the total number of the Company's Clients and Annualized Gross Revenues
determined in accordance with Section 2.6(a), respectively.
(e) Orders and Laws. There shall not be in effect on the
---------------
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions described in this
Agreement or any of the Related Agreements or which could reasonably be expected
to otherwise result in a material diminution of the benefits of the transactions
contemplated by this Agreement or any of the Related Agreements to Purchaser,
and there shall not be pending or threatened on the Closing Date any Action or
Proceeding or any other action in, before or by any Governmental or Regulatory
Agency which could reasonably be expected to result in the issuance of any such
Order or the enactment, promulgation or deemed applicability to Purchaser, the
Company or Unified or the transactions described in this Agreement or any of the
Related Agreements of any such Law.
(f) Closing Certificates of the Company and Unified. The
-----------------------------------------------
Company and Unified shall have delivered to Purchaser certificates signed by a
duly authorized executive officer of the Company and by Unified, dated the
Closing Date, confirming the satisfaction of the conditions set forth in
Sections 6.1(a), (b), and (d).
(g) Employment Agreement, Non-Solicitation Agreements.
-------------------------------------------------
Xxxx Xxxxx and Xxxxxx Xxxxxx shall each have executed and delivered to the
Purchaser a mutually acceptable employment agreement (the "Employment
----------
Agreement"). Each of the persons listed on Schedule 6.1(g) and who shall be
--------- ---------------
employed by Purchaser following the Closing shall have executed and delivered a
non-solicitation agreement in a form mutually acceptable to Sellers and
Purchaser.
-27-
(h) Use of Name. The Company and Unified shall have
-----------
executed and delivered to Purchaser a mutually acceptable assignment, by which
(i) each of the Company and Unified assigns to Purchaser all their rights to use
the name "Fiduciary Counsel" or any names similar to or derived from that name,
(ii) each of the Company and Unified agrees that Purchaser may use the name
"Fiduciary Counsel" and (iii) each of the Company and Unified agrees not to use
the name "Fiduciary Counsel" or any name similar to it in connection with
investment management or any other type of financial services (including, but
not limited to, advertising and promotional materials) except in their
capacities as employees of or consultants to Purchaser. The Company and Unified
shall have delivered to Purchaser evidence that the Company has changed its name
to remove the words "Fiduciary Counsel".
(i) Operating Agreement. The Company or its Permitted
-------------------
Transferee shall have executed and delivered a counterpart signature page to
Purchaser's Operating Agreement and such other documents and instruments as
Purchaser may reasonably request to admit the Company or its Permitted
Transferee as a member of Purchaser.
(j) DNB Purchase Agreement. The Purchaser, DNB
----------------------
Acquisition Corp., Oaktree, Pin Oak and Financial Assets Corp. shall have
executed and delivered the DNB Purchase Agreement in form and substance
satisfactory to Purchaser, the DNB Purchase Agreement shall be in full force and
effect and not terminated, and the "First Closing" (as defined in the DNB
Purchase Agreement) shall occur simultaneously with, and shall be effective at
the same time as, the Closing under this Agreement. Each of the conditions to
the Purchaser's obligation to close described in Section 6.1 of the DNB Purchase
Agreement shall be satisfied or waived by Purchaser as of the Closing Date.
(k) No Material Adverse Change. There shall be no
--------------------------
change, loss or diminution in value of the Assets, Business, or Investment
Advisory Contracts that has or would have after the Closing a Material Adverse
Effect.
(l) No Injunction. There shall be no Law or Order that
-------------
prohibits or enjoins any of the transactions described in this Agreement or the
DNB Purchase Agreement.
(m) No Proceeding. There shall be no pending or
-------------
threatened Actions or Proceedings against the Purchaser, Company, Unified, any
party to the DNB Purchase Agreement or any of their Affiliates (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
transactions described in this Agreement or the DNB Purchase Agreement, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the transactions described in this Agreement or the DNB
Purchase Agreement.
(n) No Prohibition. Neither the consummation nor the
--------------
performance of any of the transactions described in this Agreement or the DNB
Purchase Agreement will, directly or indirectly (with or without notice, lapse
of time or both), materially contravene, or conflict with, or result in a
material violation of, or cause the Purchaser, Company, Unified or any of their
Affiliates to suffer any material adverse consequences under: (a) any applicable
Law or Order, or (b) any Law or Order that has been published, introduced, or
otherwise proposed by or before any Governmental or Regulatory Agency.
-28-
(o) Client List. The Company shall have delivered to
-----------
Purchaser a list of the Company's active Clients as of the Closing Date.
(p) Company's Schedules. The Company's disclosure
-------------------
Schedules shall be satisfactory in form and substance to Purchaser and no such
Schedule shall disclose any event, condition, fact or liability with respect to
the Company that is unacceptable to Purchaser.
6.2 Conditions Precedent to the Obligations of the Company and Unified
------------------------------------------------------------------
to Complete the Closing. The obligations of each of the Company and Unified to
-----------------------
enter into and compete the Closing are subject to the fulfillment on or prior to
the Closing Date, of the following conditions, any one or more of which may be
waived by the Company or Unified in their sole discretion.
(a) Representations and Warranties. The representations,
------------------------------
warranties and covenants of Purchaser shall be true, complete and correct in all
material respects (as provided in the following sentence) as of the Closing Date
with the same force and effect as though made on and as of the Closing Date
(other than representations and warranties expressly made as of an earlier date,
which shall have been true and correct as of such earlier date). For purposes of
determining the satisfaction of the condition contained in this Section 6.2(a),
no effect shall be given to any exception in such representations and warranties
relating to Knowledge, materially or a Material Adverse Effect and such
representations and warranties shall be deemed to be true and correct in all
material respects only if the failure or failures of such representations and
warrants to be so true and correct without regard to Knowledge, materiality and
Material Adverse Effect exceptions do not represent in the aggregate a Material
Adverse Effect with respect to Purchaser.
(b) Covenants. The Purchaser shall have performed and
---------
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by Purchaser on or prior to the
Closing Date.
(c) Consents and Approvals. The Purchaser shall have
----------------------
made or obtained, as the case may be, all regulatory and contractual
notifications and consents required of it.
(d) Investment Advisory Contract Consents. The number of
-------------------------------------
Clients and the Annualized Gross Revenues of Clients for which Confirming
Consents have been obtained by the Closing Date shall be at least 95% of each of
the total number of the Company's Clients and Annualized Gross Revenues
determined in accordance with Section 2.6(a) respectively.
(e) Orders and Laws. There shall not be in effect on the
---------------
Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Related Agreements or which could reasonably be expected
to otherwise result in a material diminution of the benefits of the transactions
described in this Agreement or any of the Related Agreements to the Company and
Unified, and there shall not be pending or threatened on the Closing Date any
Action or Proceeding or any other action in, before or by any Governmental or
Regulatory Agency which could reasonably be expected to result in the issuance
of any such Order or the enactment, promulgation or deemed applicability to
Purchaser, the Company or Unified or the transactions described in this
Agreement or any of the Related Agreements of any such Law.
-29-
(f) Operating Agreement. The Operating Agreement shall
-------------------
have been executed and delivered by the parties thereto.
(g) Closing Certificates of Purchaser. Purchaser shall
---------------------------------
have delivered to the Company and Unified a certificate signed by a duly
authorized executive officer of Purchaser, dated the Closing Date, confirming
the satisfaction of the conditions set forth in Section 6.2(a) and (b) and (d)
and warranting the satisfaction of the conditions set forth in Section 6.2(j),
which certificate shall be in form and substance satisfactory to the Company and
Unified.
(h) Admission as Member. The Company or its Permitted
-------------------
Transferee shall have been admitted as a member of Purchaser in accordance with
the Purchaser's Operating Agreement, and shall have been issued to him reflected
on Schedule A thereto, as contemplated under this Agreement.
(i) Employment Agreement. Purchaser shall have executed
--------------------
and delivered an Employment Agreement to Xxxx Xxxxx and Xxxxxx Xxxxxx.
(j) Conversion of Xxxxx Xxxxxxx Indebtedness. Xxxxx
----------------------------------------
Bottoms shall have converted a $200,000 note issued to him by DNB Acquisition
Corp. into capital of DNB Acquisition Corp.
(k) DNB Purchase Agreement. The Purchaser, DNB
----------------------
Acquisition Corp., Oaktree, Pin Oak and Financial Assets Corp. shall have
executed and delivered the DNB Purchase Agreement in form and substance
satisfactory to the Company and Unified, the DNB Purchase Agreement shall be in
full force and effect and not terminated, and the "First Closing" (as defined in
the DNB Purchase Agreement) shall occur simultaneously with, and shall be
effective at the same time as, the Closing under this Agreement. Each of the
conditions to the Purchaser's obligation to close described in Section 6.1 of
the DNB Purchase Agreement shall be satisfied or waived by Purchaser as of the
Closing Date.
(l) No Material Adverse Change. There shall be no
--------------------------
change, loss or diminution in value of the Assets, Business, or Investment
Advisory Contracts that has or would have after the Closing a Material Adverse
Effect.
(m) No Injunction. There shall be no Law or Order that
-------------
prohibits or enjoins any of the transactions described in this Agreement or the
DNB Purchase Agreement.
(n) No Proceeding. There shall be no pending or
-------------
threatened Actions or Proceedings against the Purchaser, Company, Unified, any
party to the DNB Purchase Agreement or any of their Affiliates (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
transactions described in this Agreement or the DNB Purchase Agreement, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the transactions described in this Agreement or the DNB
Purchase Agreement.
-30-
(o) No Prohibition. Neither the consummation nor the
--------------
performance of any of the transactions described in this Agreement or the DNB
Purchase Agreement will, directly or indirectly (with or without notice, lapse
of time or both), materially contravene, or conflict with, or result in a
material violation of, or cause the Purchaser, Company, Unified or any of their
Affiliates to suffer any material adverse consequences under: (a) any applicable
Law or Order, or (b) any Law or Order that has been published, introduced, or
otherwise proposed by or before any Governmental or Regulatory Agency.
(p) Purchaser's Schedules. The Purchaser's disclosure
---------------------
Schedules shall be satisfactory in form and substance to the Company and Unified
and no such Schedule shall disclose any event, condition, fact or liability with
respect to the Purchaser that is unacceptable to the Company or Unified.
ARTICLE 7
POST-CLOSING COVENANTS
----------------------
The parties covenant to take the following actions after the Closing
Date:
7.1 Further Information. Following the Closing, each party will afford
-------------------
to the other party, its counsel and its accountants, during normal business
hours, reasonable access to the Books and Records and other data of the Company
relating to the Assets and Assumed Liabilities with respect to periods prior to
the Closing and the right to make copies and extracts therefrom, to the extent
that such access may be reasonably required by the requesting party (a) to
facilitate the investigation, litigation and final disposition of any claims
which may have been or may be made against any party or it Affiliates and (b)
for any other reasonable business purpose.
7.2 Record Retention. Each party agrees that for a period of not less
----------------
than five (5) years following the Closing Date, it shall not destroy or
otherwise dispose of any of the Books and Records relating to the Assets in its
possession with respect to periods prior to the Closing. Each party shall have
the right to destroy all or part of such Books and Records after the fifth
anniversary of the Closing Date or, at an earlier time by giving each other
party hereto thirty (30) days prior written notice of such intended disposition
and offering to deliver to one or more of the other parties, at such other
party's or parties' expense, custody of such Books and Records as such party may
intend to destroy if such other parties affirmatively indicate they want such
Books and Records.
7.3 Post-Closing Assistance. The Company, on the one hand, and
-----------------------
Purchaser, on the other hand, will provide each other with such assistance as
may reasonably be requested in connection with the preparation of any Tax
Return, any audit or other examination by any taxing authority, or any judicial
or administrative proceedings relating to liability for Taxes, and each will
retain and provide the requesting party with any records or information that may
be reasonably relevant to such return, audits or examination, proceedings or
determination. The party requesting assistance shall reimburse the other party
for reasonable out-of-pocket expenses (other than salaries or wages of any
employees of the parties) incurred in providing such assistance.
-31-
7.4 Post-Closing Consents. The Company and Unified shall (a) keep
---------------------
Purchaser informed of the status of obtaining additional Confirming Consents
between the Closing Date and the Adjustment Date; (b) facilitate Purchaser's
communication with Clients regarding such Confirming Consents; and (c) deliver
to Purchaser prior to the Adjustment Date copies of all executed Confirming
Consents and Affidavits, if any, received between the Closing Date and the
Adjustment Date and make available for inspection the originals of any such
executed consents prior to the Adjustment Date.
7.5 Employee Matters.
----------------
(a) Offers of Employment. The parties agree that
--------------------
Purchaser shall offer, as of the Closing, employment at will to each employee of
the Company listed on Schedule 6.1(g); provided, however, that nothing herein
--------------- -------- -------
shall require the continuation of any employment after the Closing and nothing
herein shall cause an employee to be employed other than on an at will basis.
The parties do not intend for any such employees to be third party beneficiaries
of this Agreement, except as may otherwise be provided in Article 8. The Company
and Unified shall be responsible for complying with the notice requirements of
the Workers Adjustment and Retraining Notification Act with respect to any event
or condition on or prior to the Closing. Notwithstanding any other provision of
this Agreement, Purchaser shall not have any responsibilities for any legally
mandated continuation of health care coverage with respect to those employees
who do not accept employment with Purchaser, or for compliance with any related
requirements for employees who do not accept employment with Purchaser or their
dependents or beneficiaries who incur a loss of health care coverage due to a
qualifying event occurring before or through the Closing.
(b) Non-Transferred Employees. Nothing in this Section
-------------------------
7.5 shall be deemed to impose upon Purchaser any liabilities or responsibilities
regarding individuals who do not become employees of Purchaser pursuant to
offers of employment made under Section 7.5(a) (including, without limitation,
individuals to whom offers are not required to be made under Section 7.5(a)),
including, without limitation, liabilities or responsibilities for (i) pension,
retirement, profit-sharing, savings, medical, dental, disability income, life
insurance or accidental death benefits, whether insured or self-insured, whether
funded or unfunded, (ii) workers' compensation (both long term and short term)
benefits, whether insured or self-insured, whether or not accruing or based upon
exposure to conditions prior to the date of this Agreement or for claims
incurred or for disabilities commencing prior to the Closing Date, or (iii)
severance benefits.
(c) Severance Expressly Excluded. Without limiting the
----------------------------
generality of any other responsibilities of the Company and Unified, the Company
and Unified shall be (prior to and after the date hereof) solely responsible for
any severance pay obligations arising prior to or through the Closing Date.
-32-
(d) Employment Tax Reporting. Following the Closing,
------------------------
Purchaser, Company and Unified shall abide by the alternate procedure for
employment tax reporting set forth in Section 5 of IRS Revenue Procedure 96-60
with respect to the filing of all applicable Form W-2s, 941s or other related
employment tax filings for 2004.
7.6 Non-Compete.
-----------
(a) Covenants Against Competition. The Company and
-----------------------------
Unified acknowledge that Purchaser would not purchase the Assets but for the
agreements and covenants of the Company and Unified contained in this Section
7.6. Accordingly, the Company and Unified covenant and agree that:
(i) The Company and Unified shall not in the
United States of America, directly or indirectly, for a period commencing on the
Closing Date and terminating on the date five (5) years following the Closing
Date (the "Restricted Period"): (1) engage in the Business for the Company's or
-----------------
Unified's own account; (2) render any services to any Person engaged in the
Business; or (3) become interested in any such Person (other than Purchaser) as
a partner, shareholder, principal, agent, trustee, consultant or in any other
similar relationship or capacity; provided, however, that notwithstanding the
-------- -------
foregoing: Unified may engage in the Business through its trust company
Affiliates; and, provided, further, that the Company or Unified may own,
-------- -------
directly or indirectly, solely as an investment, securities of any Person
directly or indirectly engaged in the Business if such securities are traded on
any national securities exchange or NASDAQ (or any equivalent non- U.S.
securities markets) if the Company or Unified (A) is not a controlling Person
or, or a member of a group which controls such Person and (B) does not, directly
or indirectly, own 5% or more of any class of securities of such Person, and may
invest without limit in securities of Persons who are not engaged directly or
indirectly in the Business.
(ii) During and after the Restricted Period, the
Company and Unified shall keep secret and retain in strictest confidence, and
shall not use for their own benefit or the benefit of others, all confidential
information with respect to the Assets or learned by the Company and Unified
heretofore or hereafter directly or indirectly from the Purchaser, including,
without limitation, information with respect to (A) prospective clients, (B)
fees, (C) profit margins and (D) Client lists (collectively, the "Confidential
------------
Company Information"), and shall not disclose such Confidential Company
-------------------
Information to anyone outside of Purchaser and its Affiliates except with
Purchaser's express written consent and except for Confidential Company
Information which (x) is at the time of receipt or thereafter becomes publicly
known through no wrongful act of either of the Company or Unified or (y) is
received from a third party not under an obligation to keep such information
confidential and without breach of this Agreement.
(iii) During the Restricted Period, the Company
and Unified shall not, directly or indirectly, knowingly (A) solicit or
encourage to leave the employment of Purchaser, any employee of Purchaser or
hire any employee who has left the employment of Purchaser after the date of
this Agreement within two (2) years of the termination of such employee's
employment with Purchaser, (B) solicit any Client of the Purchaser to use the
services of any other Person to render advice regarding investment, to invest
assets in any fund or product not managed by the Purchaser or to reduce the
amount of assets being managed by the Purchaser.
-33-
(b) Rights and Remedies Upon Breach. If the Company or
-------------------------------
Unified breaches, or threatens to commit a breach of, any of the provisions of
Section 7.6 (the "Restrictive Covenants"), Purchaser shall have the following
---------------------
rights and remedies (upon compliance with any necessary prerequisites imposed by
law upon the availability of such remedies), each of which rights and remedies
shall be independent of the other and severally enforceable, and all of which
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to Purchaser under law or in equity:
(i) The right and remedy to have the Restrictive
Covenants specifically enforced (without posting any bond) by any court having
equity jurisdiction, including, without limitation, the right to an entry
against the Company or Unified of restraining orders and injunctions
(preliminary, mandatory, temporary and permanent) against violations, threatened
or actual, and whether or not then continuing, of such covenants, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to Purchaser and that money damages will not provide adequate
remedy to Purchaser.
(ii) Subject to Section 10.10, the right and
remedy to require the Company or Unified to account for and pay over to
Purchaser all compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by such Person as the
--------
result of any transactions constituting a breach of any of the Restrictive
Covenants, and such Person shall account for and pay over such Benefits to
Purchaser.
(c) Severability of Covenants. If any court or
-------------------------
arbitrator determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full effect, without regard to
the invalid portions. In addition, if any court or arbitrator of any one or more
of jurisdictions holds the Restrictive Covenants wholly or partially
unenforceable, it is the intention of Purchaser and the Company and Unified that
such determination not bar or in any way affect Purchaser's right to the relief
provided above in the courts of or before an arbitrator in any other
jurisdiction as to breaches of such Restrictive Covenants in such other
jurisdictions.
7.7 Transfer of Payments Received by the Company. Notwithstanding
--------------------------------------------
anything contained in this Agreement that may be construed to the contrary, the
Company may assign, transfer or distribute any LLC Shares, payments or other
consideration it receives or has the right to receive pursuant to this Agreement
to any Permitted Transferee, provided that such Permitted Transferee shall
--------
become liable for the Company's obligations under this Agreement (other than its
indemnification obligation pursuant to Section 8.2), and provided, further, that
-------- -------
no assignment or transfer shall relieve the Company of its obligations under
this Agreement.
7.8 Payments Received After Closing. If , after the Closing, the Company
-------------------------------
receives any fees, payments or revenues from any Transferred Clients on account
of services rendered before or after the Closing, the Company shall promptly
(and in any event within ten (10) Business Days) remit such fees, payments or
revenues to the Purchaser (less any costs, fees or commissions necessarily
payable to other Persons by the Company on account thereof).
-34-
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
8.1 Survival of Representations, Warranties, Covenants and Agreements.
-----------------------------------------------------------------
Except to the extent otherwise set forth herein, the representations,
warranties, covenants and agreements of the Company, Unified and the Purchaser
will survive the Closing (a) for a period of one (1) year with respect to the
matters covered by the representations and warranties set forth in Articles 3, 4
and 5, (b) until sixty (60) days after the expiration of the applicable statue
of limitations (including all periods of extension, whether automatic or
permissive) with respect to the covenants and agreements related to the Excluded
Liabilities or (c) with respect to each other covenant or agreement contained in
this Agreement, in accordance with its terms; provided however, that subject to
-------- -------
Section 8.7, no party shall be precluded from pursuing a recovery in respect of
any representation, warranty, covenant or agreement that would otherwise
terminate in accordance with clause (a) or (b) above if a Claim Notice shall
have been given under this Article 8 or Notice of a Dispute shall have been
provided to the other party on or prior to such termination date, until the
related claim for indemnification or, in the case of the Company or Unified,
other recovery, has been satisfied or otherwise resolved as provided in this
Article 8 and/or Section 10.10.
8.2 Indemnification of Purchaser. Subject to the limitations contained
----------------------------
in this Article 8, the Company and Unified, jointly and severally, shall
indemnify, defend and hold harmless Purchaser and each of its members and
Affiliates and their respective directors, officers, partners, employees,
agents, successors and assigns from and against any and all losses, liabilities
(including punitive or exemplary damages to third parties and fines or penalties
and any interest thereon), expenses (including reasonable fees and disbursements
of counsel and expenses of investigation and defense), claims, liens or other
obligations of any nature whatsoever (hereinafter individually, a "Loss" and
----
collectively, "Losses") which, directly or indirectly, arise out of, result from
------
or relate to (a) an inaccuracy in or any breach of any then surviving
representation or warranty of the Company or Unified contained in this
Agreement, or (b) any Excluded Liability; provided, however, that to the extent
-------- -------
any Losses result in a Shortfall Amount, under Section 2.9, such Losses, to the
extent of such Shortfall Amount, shall not be subject to or covered by this
Section 8.2.
8.3 Indemnification of Company and Unified. Subject to the limitations
--------------------------------------
contained in this Article 8, the Purchaser shall indemnify, defend and hold
harmless the Company, Unified and each of their members and Affiliates and their
respective directors, officers, partners, employees, agents, successors and
assigns from and against any and all Losses, which, directly or indirectly,
arise out of, result from or relate to (a) an inaccuracy in or any breach of any
surviving representation or warranty of Purchaser contained in this Agreement,
or (b) any Assumed Liability.
8.4 Method of Asserting Claims. The party making a claim under this
--------------------------
Article 8 is referred to as the "Indemnified Party" and the party against whom
-----------------
such claims are asserted under this Article 8 is referred to as the
"Indemnifying Party". All claims by an Indemnified Party under this Article 8
------------------
shall be asserted and resolved as follows:
-35-
(a) In the event that any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party hereunder is asserted
or sought to be collected from such Indemnified Party by a third party, such
Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent
determinable (which estimate shall not be conclusive of the final amount of such
claim or demand) (such notice is referred to as the "Claim Notice"); provided,
------------ --------
however, that any failure to give such Claim Notice will not be deemed a waiver
-------
of any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Parties are actually prejudiced by such failure. The Indemnifying
Party, upon request of the Indemnified party, shall retain counsel (who shall be
reasonably acceptable to the Indemnified Party) to represent the Indemnified
Party and shall pay the reasonable fees and disbursements of such counsel with
regard thereto; provided, however, that any Indemnified Party is hereby
-------- -------
authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose fees and
expenses shall be at the expense of the Indemnifying Party, to file any motion,
answer or other pleading and take such other action which such Indemnified Party
shall deem necessary to protect its interests or those of the Indemnifying Party
until the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Party
unless (x) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (y) the named parties of any
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not, in connection with any proceedings or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one such firm for the Indemnified Party (except to the
extent the Indemnified Party retained counsel to protect its (or the
Indemnifying Party's) rights prior to the selection of counsel by the
Indemnifying Party). If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any claim or demand which the Indemnifying Party defends. A claim or
demand may not be settled by the Indemnifying Party without the prior written
consent of the Indemnified Party (which consent will not be unreasonably
withheld) unless, as part of such settlement, the Indemnified Party shall
receive a full and unconditional release satisfactory to the Indemnified Party.
(b) In the event any Indemnified Party shall have a claim
against any Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party.
(c) After delivery of a Claim Notice, so long as any right to
indemnification exists pursuant to this Article 8, the affected parties each
agreed to retain all Books and Records related to such Claim Notice. In each
instance pertaining to a claim by a third party, the Indemnified Party shall
have the right to be kept fully informed by the Indemnifying Party and its legal
counsel with respect to any legal proceedings. Any information or documents made
available to any party hereunder and designated as confidential by the party
providing such information or documents and which is not otherwise generally
available to the public and not already within the knowledge of the party to
whom the information is provided (unless otherwise covered by the
confidentiality provisions of any other agreement among the parties hereto, or
any of them), and except as may be required be required by applicable law, shall
not be disclosed to any third Person (except for the representatives of the
party being provided with the information, in which event the party being
provided with the information shall request its representatives not to disclose
any such information which it otherwise required hereunder to be kept
confidential).
-36-
(d) An Indemnified Party shall first seek
indemnification from the Company pursuant to this Article 8, but shall send
Unified copies of all correspondence sent to the Company pursuant to Section
8.4. To the extent that the Company does not fulfill its indemnification
obligation for any reason with thirty (30) daysof its receipt of Purchaser's
demand for payment (or, if such demand is contested pursuant to Section 10.10 of
this Agreement, within fifteen (15) days of the resolution of such contest), the
Purchaser may seek indemnification from Unified, subject to the limitations set
forth in Section 8.5.
8.5 Limitations on Indemnification. Notwithstanding anything to the
------------------------------
contrary contained in this Agreement, neither the Company nor Unified shall have
any liability or be subject to any claim under Section 8.2: (a) unless and until
the amount of any Losses subject to Section 8.2 exceeds $25,000 in the
aggregate, and then only to the extent of such excess, (b) in an amount that
exceeds the Purchase Price (as adjusted pursuant to Section 2.9) in the
aggregate, minus any amount previously paid by the Company or Unified pursuant
to this Article 8, or (c) if the Losses or claim arise out of an inaccuracy in
or breach of any representation or warranty of the Company or Unified and the
Claim Notice was not delivered within one (1) year after the Closing Date.
8.6 Set-Off Rights. If amounts become payable by the Company or Unified
--------------
to Purchaser pursuant to Section 8.2, the Purchaser, Company or Unified may
elect, in lieu of accepting or paying cash, to deliver to Purchaser LLC Shares
(valued at $1,000 per LLC Share if the time of delivery is on or prior to
December 31, 2004 and at Fair Value if thereafter) having a value equal to the
amount payable to the Purchaser. Any election by the Purchaser, Company or
Unified to exercise their rights under this Section 8.6 shall be made by written
notice given to the other within ten (10) days after any demand for payment by
Purchaser has been made pursuant to Section 8.2 following resolution of such
claim, if contested. Payment shall be due within five (5) Business Days
thereafter. Failure to give such notice or make such payment shall be deemed an
irrevocable election not to exercise the rights granted to the Purchaser,
Company and Unified pursuant to this Section 8.6. For purposes of this Section
8.6, "Fair Value" means the fair value per LLC Share as mutually agreed by the
----------
Purchaser and the Company within ten (10) Business Days of the date the
Purchaser, Company or Unified notifies the other in writing that it will pay any
amounts under this Article 8 with LLC Shares. If the Purchaser and Company
cannot agree on the fair value within such period, then the Purchaser and
Company shall mutually select an appraiser who shall appraise the fair value per
LLC Share using the same principles used to determine the Purchase Price and
taking into account, if appropriate, the Losses giving rise to the claim under
this Article 8. The fees of the appraiser shall be paid one-half (1/2) each by
the Purchaser and the Company.
-37-
8.7 Sole Remedy. The indemnification in Section 8.2 hereof shall be the
-----------
sole and exclusive remedy of the Purchaser for any Loss arising out of the
failure of any representation or warranty contained in Article 3 not being true
or arising in respect of an Excluded Liability.
ARTICLE 9
TERMINATION OF AGREEMENT
------------------------
9.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing as follows:
(a) by Purchaser, on the one hand, or by the Company and
Unified, on the other hand, by written notice to the other parties hereto, in
the event that the Closing shall not have occurred on or prior to the close of
business on June 30, 2004 (unless the failure of the Closing to occur has been
caused by a breach of this Agreement by the party seeking such termination);
(b) at any time on or prior to the Closing Date, by
mutual written agreement of Purchaser, the Company and Unified;
(c) at any time before the Closing, by Purchaser, on the
one hand, or the Company and Unified, on the other hand, in the event (i) of a
material breach hereof by the non-terminating party if such non-terminating
party fails to cure such breach within ten (10) Business Days following
notification thereof by the terminating party or (ii) upon notification of the
non-terminating party by the terminating party that the satisfaction of any
condition to the terminating party's obligations to close under this Agreement
becomes impossible or impracticable with the use of commercially reasonable
efforts if the failure of such condition to be satisfied is not caused by a
breach hereof by the terminating party; and
(d) by the Purchaser, on the one hand, or the Company
and Unified, on the other hand, if Purchaser fails to obtain any required
Governmental or Regulatory Agency Order, registration or approval to conduct the
Business.
9.2 Survival. In the event this Agreement is terminated pursuant to
--------
Section 9.1: (a) this Agreement shall become null and void and of no further
force and effect, except for the provisions of Section 10.2 as to expenses and
of Section 10.7 relating to the obligation to keep confidential certain
information and this Section 9.2 and (b) there shall be no liability on the part
of the Company, Unified or Purchaser, their Affiliates or their respective
members, partners, officers, directors, employees or agents; provided, however,
-------- -------
that if such termination shall result from the willful or bad faith breach by a
party of the provisions contained in this Agreement, such party shall be fully
liable for any and all damages, costs and expenses sustained or incurred as a
result of such breach by the other parties hereto; provided further, that such
-------- -------
damages shall not include punitive or exemplary damages or foregone profits,
damages arising from alleged diminution of the value of a Person's business
(including losses calculated on multiples of earnings or book value) or any
other consequential damages.
ARTICLE 10
MISCELLANEOUS
-------------
-38-
10.1 Effect of Disclosure on Schedules. Any item disclosed on any
---------------------------------
Schedule to this Agreement shall only be deemed to be disclosed in connection
with (a) the specific representation and warranty to which such Schedule is
expressly referenced, (b) any specific representation and warranty which
expressly cross-references such Schedule, and (c) any specific representation
and warranty to which any other Schedule to this Agreement expressly cross-
references such Schedule. Nothing in a Schedule shall be deemed adequate
disclosure of an exception to a representation or warranty herein unless the
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representative or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself).
10.2 Expenses. Each of the parties hereto shall pay its own expenses
--------
(including, without limitation, attorney's and accountants' fees and out-of-
pocket expenses) incident to this Agreement and the transactions contemplated
hereby.
10.3 Further Assurances. At any time and from time to time after the
------------------
Closing Date at the request of Purchaser, and without further consideration, the
Company and Unified will execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such other action as
Purchaser may reasonably deem necessary or desirable in order to transfer,
convey and assign more effectively to Purchaser the Assets, to put Purchaser in
actual possession and operating control of the Assets and to provide reasonable
assistance to Purchaser in exercising all rights with respect thereto.
10.4 Notices. All notices, requests, demands and other communications
-------
required or permitted to be given hereunder shall be in writing and shall be
given personally or sent by prepaid express courier or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed to have been
given (a) when received, if delivered in person or sent by prepaid air courier
or express mail or (b) three (3) Business Days following the mailing thereof, if
mailed by certified or registered mail, in any such case as follows (or to such
other address or addresses as a party may have advised the other in the manner
provided in this Section 10.4):
If to the Company:
Fiduciary Counsel, Inc.
00 Xxxx 00xx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx
With a copy, which shall not constitute notice, to:
Xxxxxxx X. Xxxxx
Xxxxxx & Xxxxxxxx, PLLC
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
-39-
If to Unified:
Unified Financial Services, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxx
With a copy, which shall not constitute notice, to:
Xxxxxxx X. Xxxxx
Xxxxxx & Xxxxxxxx, PLLC
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
If to the Purchaser:
DNB Acquisition Corp.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Fiduciary Counsel, Inc.
00 Xxxx 00xx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx
Unified Financial Services, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxx
10.5 Publicity. No publicity release or announcement concerning this
---------
Agreement or the transactions described herein shall be made without advance
approval thereof by Purchaser and the Company.
10.6 Entire Agreement. This Agreement (including the Exhibits and
----------------
Schedules), the Related Agreements, and the agreements, certificates and other
documents delivered pursuant to this Agreement contain the entire agreement
among the parties with respect to the transactions described herein, and
supersede all prior agreements, written or oral, with respect thereto.
-40-
10.7 Confidentiality. Each party hereto will hold, and will use its best
---------------
efforts to cause its Affiliates, and their respective representatives to hold,
in strict confidence from any Person (other than any such Affiliate or
representative), unless (a) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Agencies) or by other requirements of Law or (b)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (i) previously known by
the party receiving such documents or information, (ii) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (iii) later acquired by
the receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Closing the
--------
foregoing restrictions will not apply to Purchaser's use of documents and
information concerning the Business furnished by the Company and Unified
hereunder. In the event the transactions contemplated hereby are not
consummated, upon the request of the other party, each party hereto will, and
will cause its Affiliates and their respective representatives to, promptly
redeliver or cause to be redelivered all copies of documents and information
furnished by the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such documents and information
or its representatives.
10.8 Waivers and Amendments. This Agreement may be amended, superseded,
----------------------
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof. The
rights and remedies of any parties based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties as to which there is no
inaccuracy or breach).
10.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
10.10 Dispute Resolution.
------------------
(a) The parties desire to resolve disputes arising out
of this Agreement without litigation. Accordingly, except for actions to seek
temporary restraining orders or injunctions related to the purposes of this
Agreement, or suit to compel compliance with the dispute resolution provision,
the parties agree to use the following alternative dispute procedure as their
sole remedy with respect to any controversy or claim arising out of or relating
to this Agreement or its breach.
-41-
(b) At the written request of a party, each party shall
appoint a knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any dispute arising under this Agreement. The parties
intend that these negotiations be conducted by non-lawyer, business
representatives. The location, format, frequency, duration and conclusion of
these discussions shall be left to the discretion of the representatives.
(c) Upon agreement between the parties, the
representatives may utilize other alternative dispute resolution procedures such
as mediation to assist in the negotiations. Discussions and correspondence among
the representatives for the purposes of these negotiations shall be treated as
confidential information developed for the purposes of settlement, exempt from
discovery and production, which shall not be admissible in the arbitration
described below or in any lawsuit without the concurrence of both parties.
Documents identified in or provided with such communications, which are not
prepared for purposes of the negotiations, are not so exempted and may if
otherwise admissible, be admitted in the evidence in the arbitration or lawsuit.
(d) If the negotiations do not resolve the dispute
within sixty (60) days after the initial written request, the dispute shall be
submitted to binding arbitration by a single arbitrator pursuant to the CPR
Institute Rules for Non-Administered Arbitration. A party may demand such
arbitration in accordance with procedures set out in those rules. Discovery
shall be controlled by the arbitrator and shall be permitted to the extent set
out in this Section. Each party may submit in writing to a party, and that party
shall respond, to a maximum of any combination of thirty-five (35) (none of
which may have subparagraphs) of the following: interrogatories, demands to
produce documents, and requests for admission. Each party is also entitled to
take the oral deposition of two individuals of the other party. Additional
discovery may be permitted upon mutual agreement of the parties.
(e) The parties shall contract with the arbitrator to
commence the arbitration hearing within sixty (60) days of the demand for
arbitration. The arbitration shall be held in New York, New York (or other
mutually acceptable site). The arbitrator shall control the scheduling so as to
process the matter expeditiously. The parties may submit written briefs. The
parties may require the arbitrator to rule on the dispute by issuing a written
opinion within thirty (30) days after the close of the hearings. The times
specified in this Section may be extended upon showing of a good cause. Judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction.
(f) Each party shall bear its own cost of these
procedures. The parties shall equally split the fees of the mediation. If
arbitrated, the arbitrator shall be given the authority to award fees and costs
to the prevailing party.
10.11 Binding Effect; No Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement is not assignable by any party hereto without
the prior written consent of the other parties hereto except by operation of law
and any other purported assignment shall be null and void.
-42-
10.12 Variations in Pronouns. All pronouns and any variations thereof
----------------------
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
10.13 Counterparts. This Agreement may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all the parties hereto.
10.14 Exhibits and Schedules. The Exhibit and Schedules are incorporated
----------------------
into and a part of this Agreement as if fully set forth herein.
10.15 Headings. The headings in this Agreement are for reference only,
--------
and shall not affect the interpretation of this Agreement.
10.16 Invalid Provisions. If any provision of this Agreement is held to
------------------
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as part of this Agreement, a legal,
valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-43-
S I G N A T U R E S :
---------------------
The parties have executed this Agreement as of the date set forth in
the caption.
OAKTREE ASSET MANAGEMENT, LLC
By: /s/Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
----------------------
Title: Manager
----------------------
FIDUCIARY COUNSEL, INC.
By: /s/Xxxx X. Xxxx
---------------------------
Name: Xxxx X. Xxxx
-----------------------
Title: Director
----------------------
UNIFIED FINANCIAL SERVICES, INC.
By: /s/Xxxx X. Xxxx
---------------------------
Name: Xxxx X. Xxxx
-----------------------
Title: President and CEO
-----------------------
-44-
================================================================================
ASSET
CONTRIBUTION AGREEMENT
DATED AS OF
MARCH 2, 2004
AMONG
OAKTREE ASSET MANAGEMENT, LLC, AS PURCHASER,
OAKTREE ASSET MANAGEMENT, INC.,
PIN OAK CAPITAL, INC, AND
FINANCIAL ASSETS CORP., AS SELLERS,
AND
DNB ACQUISITION CORP.,
AS THE SHAREHOLDER OF SELLERS
================================================================================
THIS ASSET CONTRIBUTION AGREEMENT is made and entered into effective as
of March 2, 2004 by and among: (i) OAKTREE ASSET MANAGEMENT, LLC, a Delaware
limited liability company (the "Purchaser"); (ii) OAKTREE ASSET MANAGEMENT,
---------
INC., a Florida corporation ("Oaktree"); (iii) PIN OAK CAPITAL, INC., a Missouri
-------
corporation ("Pin Oak"); (iv) FINANCIAL ASSETS CORP., a Florida corporation
-------
("Financial"); and (v) DNB ACQUISITION CORP., a New York corporation ("DNB").
--------- ---
(Oaktree, Pin Oak and Financial are sometimes referred to separately as a
"Seller" or collectively as the "Sellers".)
------ -------
R E C I T A L S :
-----------------
A. Oaktree and Pin Oak are engaged in the business of providing
investment management and advisory services. Financial is engaged in the
business of providing securities broker-dealer services. (The businesses of
Oaktree, Pin Oak and Financial are collectively referred to as the
"Businesses".)
----------
B. DNB owns all of the outstanding common shares of Oaktree, Pin
Oak and Financial.
C. The Sellers have agreed to sell and contribute, and Purchaser
has agreed to purchase and accept the Assets and Assumed Liabilities, all on the
terms and subject to the conditions set forth in this Agreement.
A G R E E M E N T S :
---------------------
IN CONSIDERATION OF the recitals, the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, Purchaser, Sellers and DNB,
intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Defined Terms. The terms used in this Agreement with their
-------------
initial letters capitalized shall, unless the context otherwise requires or
unless otherwise expressly provided herein, have the meanings specified in this
Article 1 or elsewhere in this Agreement. As used in this Agreement and the
Schedules and Exhibits attached hereto, the following terms have the following
meanings unless the context otherwise requires:
"Act" means the Securities Act of 1933, as amended.
---
"Action or Proceeding" means any action, suit, proceeding or
--------------------
arbitration by any Person or any investigation or audit by any Governmental or
Regulatory Agency.
"Adjustment Date" means (i) the date that is 180 days after the First
---------------
Closing Date or (ii) with respect to Financial only (A) if the Second Closing
did not occur at least 30 days prior to 180 days after the First Closing Date
but does occur on or before September 30, 2004, then the date that is 60 days
after the Second Closing Date, or (B) if the Second Closing does not occur on or
before September 30, 2004, then October 1, 2004.
-1-
"Affidavit" means an affidavit made by any of the Sellers representing
---------
and warranting that a verbal consent was given in respect of one of the
Transferred Clients set forth on Schedule 5.3.
------------
"Affiliate" with respect to any Person, means any other Person
---------
controlling, controlled by or under common control with such Person.
"Agreement" means this Asset Purchase and Contribution Agreement.
---------
"Annualized Gross Revenues" means (A) the aggregate investment advisory
-------------------------
and broker-dealer fees from the Transferred Clients for the calendar quarter
ending on the last day of the month immediately preceding the month in which the
applicable measurement date occurs as determined on the accrual basis in
accordance with GAAP, (B) multiplied by four (4).
----------
"Best Knowledge," "Knowledge" or words to that effect shall mean, as to
-------------- ---------
any Person, to the best knowledge of such Person after due inquiry and
investigation.
"Books and Records" of any Person means all files, documents,
-----------------
instruments, papers, books and records relating to the business, operations,
conditions of (financial or other), results of operations and assets and
properties of such Person, including without limitation financial statements and
related work papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, contracts and other agreements, licenses,
customer lists, lists of prospective customers, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
"Business Day" means any day on which commercial banks are authorized
------------
or required by law to close in New York, New York.
"Client" means any person, including without limitation any Fund, for
------
which any of the Sellers or, after Closing, the Purchaser acts as an investment
adviser (whether directly or as a sub-adviser) or broker-dealer, or for whom any
of the Sellers or, after Closing, the Purchaser manages any investment or
trading account, or provides administrative or other services.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"CPR Institute" means the CPR Institute for Dispute Resolution, Inc.,
-------------
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
"Document or Other Papers" means any document, agreement, instrument,
------------------------
certificate, notice, consent, affidavit, letter, telegram, telex, statement,
schedule (including any Schedule to this Agreement) or exhibit (including any
Exhibit to this Agreement).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
-2-
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Fiduciary" means Fiduciary Counsel, Inc., a Delaware corporation and
---------
wholly owned subsidiary of Unified.
"Fiduciary Purchase Agreement" means the Asset Purchase and
----------------------------
Contribution Agreement dated of even date herewith among the Purchaser,
Fiduciary and Unified.
"Fund" means any investment company as defined under the Investment
----
Company Act and any company excluded from the definition thereof by virtue of
Section 3(c)(1) or 3(c)(7) of the Investment Company Act and any other pooled
investment vehicle similar to any such investment company, and shall include any
series thereof.
"GAAP" means generally accepted accounting principles.
----
"Governmental or Regulatory Agency" means any court, tribunal,
---------------------------------
arbitrator or government or political subdivision thereof, whether federal,
state, county, local or foreign, or any agency, authority, official or
instrumentality of any such government or political subdivision.
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
-----------------------
amended.
"Investment Advisory or Broker-Dealer Contract" means each contract or
---------------------------------------------
agreement under which any of the Sellers acts as a broker-dealer or investment
adviser (whether directly or as a sub-adviser) to, or manages any investment or
trading account of, or provides administrative or other services to, any Client.
"Investment Company Act" means the Investment Company Act of 1940, as
----------------------
amended.
"IRS" means the Internal Revenue Service.
---
"LLC Shares" means the common shares created under the Purchaser's
----------
Operating Agreement representing membership interests in the Purchaser.
"Law" means any law, statute, rule, regulation, ordinance and other
---
pronouncement having the effect of law of the United States, any foreign country
or any domestic or foreign state, county, city or other political subdivision or
of any Governmental or Regulatory Agency.
"Lien" means any lien, pledge, hypothecation, mortgage, security
----
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever (including any
lien for failure or alleged failure to pay Taxes).
"Material Adverse Effect" means, in the case of any Person, any change
-----------------------
or changes or effect or effects that individually or in the aggregate are or may
reasonably be expected to be materially adverse to (i) the assets, properties,
business, operations, income or condition (financial or otherwise) of such
Person or the transactions described in this Agreement or (ii) the ability of
such Person to perform its obligations under this Agreement.
-3-
"Net Worth" means the difference between (i) the Sellers' assets
---------
(excluding intangibles), minus (ii) their liabilities (including without
-----limitation funded indebtedness), all as determined
in accordance with GAAP applied on a consistent basis and measured as of the
last day of the month immediately preceding the month in which the First Closing
Date occurs.
"Operating Agreement" means the Purchaser's Limited Liability Company
-------------------
Operating Agreement, substantially in the form of Exhibit A.
---------
"Order" means any writ, judgment, decree, injunction or similar order
-----
of any Governmental or Regulatory Agency, in each case whether preliminary or
final.
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent
--------------
or being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of Law with respect to a
Liability that is not yet due or delinquent, and (iii) any minor imperfection of
title or similar Lien which individually or in the aggregate with other such
Liens does not materially impair the value of the asset subject to such Lien or
the use of such asset.
"Permitted Transferee" means DNB or any Affiliate of DNB.
--------------------
"Person" means any individual, corporation, limited liability company,
------
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental or Regulatory Agency or other entity.
"Tax Return" means any return, report, information return, or other
----------
document (including any related or supporting information) filed or required to
be filed with any federal, state, local, or foreign governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax (whether or not such Tax is imposed on any Seller) or the administration of
any laws, regulations or administrative requirements relating to any Tax.
"Tax" and "Taxes" means all taxes, charges, fees, levies or other
--- -----
assessments imposed by any federal, state, local or foreign taxing authority,
whether disputed or not, including, without limitation, income, capital,
estimated, excise, property, sales, transfer, withholding, employment, payroll,
and franchise taxes and such terms shall include any interest, penalties or
additions attributable to or imposed on or with respect to such assessments.
1.2 Certain Other Terms. The terms "herein", "hereof", "hereto",
-------------------
"hereby", "hereunder" and the like refer to this Agreement as a whole and not to
any particular Articles, Sections, subsections or clauses of this Agreement.
References in this Agreement to Articles, Sections, Schedules or Exhibits are
references to the Articles, Sections, Schedules or Exhibits of or attached to
this Agreement.
ARTICLE 2
CONTRIBUTION OF ASSETS; ASSUMPTION OF ASSUMED LIABILITIES; AND
--------------------------------------------------------------
PURCHASE PRICE
--------------
-4-
2.1 Contribution of Assets. On the Applicable Closing Date and on
----------------------
the terms and subject to the conditions set forth in this Agreement, the Sellers
agree to sell, transfer, assign, contribute, convey and deliver to Purchaser, as
a contribution to Purchaser's capital, and Purchaser agrees to purchase,
acquire, accept and assume from the Sellers, all of the Sellers' right, title
and interest as of the Applicable Closing Date in and to all of their assets,
properties and rights (other than the Excluded Assets described in Section 2.2)
used or useful in their Businesses, wherever located and whether or not
reflected on the Books and Records of the Sellers, in each case free and clear
of any Liens other than Permitted Liens (collectively, the "Assets"), including
------
without any limitation the following:
(a) All of the Sellers' active Clients as of the
Applicable Closing Date and any Investment Advisory or Broker-Dealer Contracts
related to such Clients, except those Clients and any related Investment
Advisory or Broker-Dealer Contracts (i) listed on Schedule 2.1(a), or (ii)
---------------
listed on Schedule 5.3 and for which Confirming Consents have not been obtained
------------
by the Adjustment Date (collectively, the "Transferred Clients");
-------------------
(b) The Sellers' lists of current, prior, active or
inactive Clients or prospective Clients (lists of the Sellers' active Clients as
of the date hereof are attached as Schedule 2.1(b));
---------------
(c) All furniture, fixtures and equipment located
in the Sellers' offices in New York, New York or, if not located in such
offices, as necessary for the operations of their Businesses (the "FF&E") ;
----
(d) All Books and Records relating to the
Businesses or any of the Assets;
(e) All rights of the Sellers under or pursuant to
any warranties, representations or guarantees made by any Person or affecting or
otherwise relating to any of the Assets;
(f) All rights of the Sellers and DNB to the names
"Oaktree Asset Management", "Pin Oak Capital" and "Financial Assets" and all
derivations thereof (as more specifically provided in the Assignment described
in Section 6.1(h));
(g) All goodwill of the Sellers;
(h) All notes or accounts receivable of the
Sellers;
(i) Any cash, cash on hand or in banks, cash
equivalents, marketable securities and other investments;
(j) Any of Sellers' bank and security accounts,
safe deposit boxes and vaults, wherever maintained;
(k) Any of Sellers' deposits, prepaid expenses,
refunds, rights to refunds or reserves for any Taxes, claims or liabilities
incurred or accrued prior to the Applicable Closing Date;
-5-
(l) All Intellectual Property Assets used or held
for use in the conduct of the Businesses (including the Sellers' goodwill
therein) and all rights, privileges, claims, causes of action and options held
by the Sellers or DNB relating or pertaining to the Assets (the "Intangible
----------
Property"); and
--------
(m) Any other assets, properties or rights of the
Sellers reflected on the Interim Balance Sheet or acquired or arising after the
Interim Balance Sheet Date.
2.2 Excluded Assets. Notwithstanding anything in this Agreement
---------------
that may be construed to the contrary, the Assets shall not include, and the
Purchaser shall not purchase or accept, the following assets (collectively, the
"Excluded Assets"):
---------------
(a) Rights to use the name "DNB Acquisition Corp."
or any derivative thereof;
(b) Sellers' minute books, stock transfer books,
corporate seals and Tax Returns, as well as any Books and Records required to be
retained under any Law or Order applicable to the Sellers or any of their
Affiliates;
(c) All rights of the Sellers under this Agreement;
and
(d) Without limiting the foregoing, those assets,
properties and rights set forth on Schedule 2.2.
------------
2.3 Assumed Liabilities. On the Applicable Closing Date and on the
-------------------
terms and subject to the conditions set forth herein, Purchaser shall assume and
thereafter pay, perform or discharge when due the following debts, liabilities
and obligations of the Sellers from and after the Applicable Closing Date
(collectively, the "Assumed Liabilities"):
-------------------
(a) The Transferred Clients' Investment Advisory
and Broker-Dealer Contracts;
(b) The employment agreements set forth on Schedule
--------
3.15;
----
(c) Any debts, liabilities or obligations of
Sellers (i) reflected on the Interim Balance Sheet, (ii) that are incurred in
the ordinary course of business consistent with past practices and remain unpaid
after the Interim Balance Sheet Date and before the Applicable Closing Date, or
(iii) are otherwise referred to in this Agreement or on any Schedule hereto; and
(d) Any debts, liabilities or obligations set forth
on Schedule 2.3.
------------
In the event of any claim against Purchaser with respect to any of the
Assumed Liabilities, Purchaser shall have, and the Sellers hereby assign to
Purchaser, any defense, counterclaim or right of setoff which would have been
available to the Sellers if such claim had been asserted against the Sellers.
2.4 Excluded Liabilities. Except as expressly set forth in Section
--------------------
2.3, Purchaser shall not assume, pay, perform or be responsible for any other
debts, liabilities or obligations of the Sellers or DNB (the "Excluded
--------
Liabilities").
-----------
-6-
2.5 Condition of Purchased Assets. Except as otherwise stated in
-----------------------------
this Agreement, the Purchaser is taking the Assets and Assumed Liabilities "AS
IS, WHERE IS," without any express or implied representations or warranties of
any kind whatsoever, and ALL OTHER EXPRESS OR IMPLIED WARRANTIES, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PURPOSE, ARE HEREBY DISCLAIMED.
2.6 Purchase Price.
--------------
(a) Subject to Section 2.9, the purchase price (the
"Purchase Price") for the Assets to be purchased by Purchaser from the Sellers
--------------
hereunder and contributed to the Purchaser by the Sellers shall be an aggregate
amount equal to the sum as of the First Closing Date of: (i) [(A) the Sellers'
Annualized Gross Revenues, plus (B) the Sellers' Net Worth, plus (c) any cash
---- ----
contributed by DNB to any of the Sellers subsequent to the last day of the month
preceding the Applicable Closing Date (such sum is referred to as the "Closing
-------
Payment")], plus (ii) the assumption by Purchaser of the Assumed Liabilities.
------- ----
Provided, however, that for purposes of this Section 2.6(a), the exceptions in
Section 2.1(a)(i) and (ii) shall be ignored in determining the Transferred
Clients and all of the Sellers' Clients shall be assumed to be Transferred
Clients on the Applicable Closing Date and subject to adjustment as provided in
Section 2.9; and provided further that Financial's Transferred Clients shall be
included in the number of Transferred Clients on the First Closing Date.
(b) The Closing Payment shall be paid to the
Sellers by Purchaser on the First Closing Date (including Financial
notwithstanding that Financial will transfer its Assets and Assumed Liabilities
to the Purchaser on the Second Closing Date) by issuance of LLC Shares to each
of the Sellers (valued at $1,000 per LLC Share), which LLC Shares shall be
reflected on Schedule A of the Operating Agreement. The number of LLC Shares to
be issued to each Seller shall be based upon each Seller's respective share of
the Closing Payment.
2.7 Transfer Taxes. The Purchaser agrees to pay any sales, use,
--------------
transfer, recording, gains, and other similar taxes and fees ("Transfer Taxes")
--------------
arising out of or in connection with the transactions described in this
Agreement, and shall indemnify, defend and hold harmless the Sellers and DNB
with respect to such Transfer Taxes. The parties shall cooperate and shall file
all necessary documentation and Tax Returns with respect to such Transfer
Taxes.
2.8 Closings.
--------
(a) The closing (the "First Closing") of the transaction described herein
-------------
between Oaktree, Pin Oak, DNB and Purchaser will take place at the offices of
DNB Acquisition Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000 or at such
other place as Purchaser, Oaktree and Pin Oak may agree, at 10:00 a.m. on (i)
the fifth (5th) Business Day after the day on which the last of the consents,
approvals, actions, filings, notices or waiting periods described in or related
to the filings described in Sections 6.1(c), 6.1(d), 6.2(c) and 6.2(d) for the
transactions between Oaktree, Pin Oak, DNB and Purchaser have been obtained,
made or given or has expired, as applicable, or (ii) such other date as
Purchaser, Oaktree and Pin Oak may agree (such date is hereafter referred to as
the "First Closing Date").
------------------
-7-
(b) The closing (the "Second Closing") of the
--------------
transaction described herein between Financial, DNB and Purchaser will take
place at the offices of DNB Acquisition Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, 00000 or at such other place as Purchaser and Financial may agree, at
10:00 a.m. on (i) the fifth (5th) Business Day after the day on which the last
of the consents, approvals, actions, filings, notices or waiting periods
described in or related to the filings described in Sections 6.1(c), 6.1(d),
6.2(c) and 6.2(d) for the transaction between Financial, DNB and Purchaser have
been obtained, made or given or has expired, as applicable, or (ii) such other
date as Purchaser and Financial may agree (such date is hereafter referred to as
the "Second Closing Date"), but in any event no later than September 30, 2004.
-------------------
(The First Closing or Second Closing, as applicable or relevant, are sometimes
referred to as the "Applicable Closing" and the dates thereof as the "Applicable
------------------ ----------
Closing Dates".)
-------------
(c) At the Applicable Closing, subject to the terms
and conditions hereof, the Sellers, as appropriate, shall execute and deliver to
the Purchaser an Assignment and Assumption Agreement in a mutually acceptable
form (the "Assignment and Assumption Agreement"), a Xxxx of Sale in a mutually
-----------------------------------
acceptable form (the "Xxxx of Sale"), such further instruments and documents as
------------
may be described in this Agreement or necessary or reasonably requested by
Purchaser to convey the Assets to Purchaser, free and clear of all Liens other
than Permitted Liens, and the Operating Agreement.
(d) At the Applicable Closing, subject to the terms
and conditions hereof, Purchaser shall deliver to the Sellers, as appropriate,
the Closing Payment described in Section 2.6 and execute and deliver to the
Sellers, as appropriate, the Assignment and Assumption Agreement and such
further instruments and documents as may be described in this Agreement.
2.9 Adjustment to Purchase Price.
----------------------------
(a) If as of the Adjustment Date the Annualized
Gross Revenues from the Transferred Clients is less than the aggregate
Annualized Gross Revenues as determined in accordance with Section 2.6(a) (any
such difference being referred to as the "Shortfall Amount"), the Purchase Price
----------------
shall be reduced by the Shortfall Amount and the Purchaser shall cancel, and
amend Schedule A of the Operating Agreement to reflect the cancellation of, that
number of LLC Shares issued to the Sellers or their Permitted Transferees
pursuant to Section 2.6 of this Agreement that, when valued at $1,000 per LLC
Share, equal the Shortfall Amount; provided, however, that the Sellers or their
-------- -------
Permitted Transferees may, within ten (10) Business Days after final
determination of a Shortfall Amount as provided in Section 2.9(b), contribute to
Purchaser cash in any amount up to, but not exceeding, the Shortfall Amount. If
the Sellers or their Permitted Transferees so contribute cash to Purchaser, then
the Shortfall Amount shall be reduced by the amount of cash contributed and the
number of LLC Shares to be cancelled shall be reduced by the result of the
amount of cash contributed divided by $1,000. Any Shortfall Amount shall be
----------
allocated among the Sellers in accordance with their respective contributions to
it.
-8-
(b) Within thirty (30) days after the Adjustment
Date, the Purchaser shall deliver to the Sellers or, if applicable, their
Permitted Transferees, the calculation of the Shortfall Amount. For the purpose
of confirming the accuracy of such calculation, the Sellers or their Permitted
Transferees and their accountants shall have access, at all reasonable times and
in a manner not disruptive of the ongoing operations of Purchaser or its
Affiliates, to the Books and Records of Purchaser relating to such calculation.
The Sellers or their Permitted Transferees and their accountants shall have the
right to review the work papers of Purchaser utilized in preparing such
calculations. If the Sellers or their Permitted Transferees disagree with the
Purchaser's calculations, the Sellers or their Permitted Transferees shall
notify the Purchaser in writing within thirty (30) days of delivery of the
Purchaser's calculations, and the two parties shall attempt in good faith to
resolve the dispute as expeditiously as possible. If the dispute cannot be
resolved by the Purchaser and the Sellers or their Permitted Transferees within
thirty (30) days of receipt by the Purchaser of written notice of the dispute,
such dispute shall be submitted for resolution to a firm of accountants mutually
agreed by the parties, which firm shall not be the accountants for any of the
Purchaser, Sellers, DNB, Unified or any of their Affiliates (the "Independent
-----------
Accountants"). If the parties are unable to agree on Independent Accountants
-----------
within ten (10) days of receipt by the Purchaser of written notice of the
dispute, then on the request of any party a CPR Institute neutral (who shall be
mutually acceptable to the parties) shall appoint the Independent Accountants.
The decision of the Independent Accountants (which shall be made solely on the
basis of the presentations of Purchaser and the Sellers or their Permitted
Transferees and not on the basis of any independent review) shall be binding on
the parties, absent manifest error, and may be enforced by any court having
jurisdiction. No party shall have any ex parte contacts or communications with
-- -----
the Independent Accountants. The cost of the Independent Accountants shall be
borne equally by Purchaser and the Sellers or their Permitted Transferees,
unless the Independent Accountants accept without modification (x) the
calculation of the Shortfall Amount of the Sellers or their Permitted
Transferees, or (y) the Purchaser's calculation of the Shortfall Amount. In the
case of clause (x) above, the Purchaser shall pay the full cost of the
Independent Accountants and in the case of clause (y) above, the Sellers or
their Permitted Transferees shall pay the full cost of the Independent
Accountants.
(c) Any cancellations of LLC Shares shall be made
no earlier than eleven (11) and no later than twenty (20) Business Days after
(i) the Sellers' or their Permitted Transferees' acceptance of the calculation
(and any failure of the Sellers or their Permitted Transferees to deliver a
notice of dispute within the time specified in this Section 2.9(b) shall be
deemed an acceptance), or (ii) in the event of a dispute, resolution of the
dispute as provided in this Section 2.9.
(d) The parties shall treat any cancellations or
payments made pursuant to this Section 2.9 as an adjustment to Purchase Price
for all purposes.
(e) Notwithstanding anything herein that may be
construed to the contrary, if a "Shortfall Amount" as defined in the Fiduciary
Purchase Agreement shall also exist as of the Adjustment Date, then for purposes
of the additional cash capital contribution described in this Section 2.9: (i)
the Shortfall Amounts under this Agreement and the Fiduciary Purchase Agreement
shall be netted against one another; (ii) only the party or parties having the
greater Shortfall Amount may make additional cash contributions; and (iii) such
party or parties may only make additional cash contributions in an amount not to
exceed in the aggregate the difference between the two Shortfall Amounts.
-9-
2.10 Legends. The certificates representing the LLC Shares issued
-------
to the Sellers or their Permitted Transferees may bear legends to the effect
that such LLC Shares (i) have not been registered under the Act and may only be
sold or transferred if registered under the Act or in a transaction which is
exempt from the registration requirements of the Act, (ii) are subject to
adjustment or redemption/cancellation in accordance with Section 2.9, and (iii)
are subject to rights of first refusal and options to purchase described in the
Operating Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND DNB
-----------------------------------------------------
The Sellers and DNB, jointly and severally, represent and warrant to
Purchaser as follows:
3.1 Organization and Qualification. Except as set forth on
------------------------------
Schedule 3.1, each of the Sellers is a corporation duly organized, validly
------------
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to (i) own,
lease and operate its properties and assets as they are now owned leased and
operated and (ii) carry on its business as presently conducted and as proposed
to be conducted. Each of the Sellers is duly qualified to do business in each
jurisdiction in which the nature of its business or properties makes such
qualification necessary, except where the failure to do so would not have a
Material Adverse Effect on any of the Sellers.
3.2 Ownership of Sellers. All of the issued and outstanding shares
--------------------
of capital stock of the Sellers are owned, directly or indirectly, beneficially
and of record by DNB, free and clear of all Liens.
3.3 Validity and Execution of Agreement. Each of the Sellers and
-----------------------------------
DNB has full legal right, power, authority and capacity to execute and deliver
this Agreement and each of the other agreements to be entered into by the
Sellers and DNB in connection herewith (the "Related Agreements") and to perform
------------------
fully its obligations hereunder and thereunder. DNB and the board of directors
of each of the Sellers have approved the transactions described in this
Agreement and each of the Related Agreements. This Agreement has and, on or
prior to the Applicable Closing each of the Related Agreements shall have, been
duly executed and delivered by each of Sellers and DNB and assuming if
applicable the due authorization, execution and delivery of this Agreement and
each Related Agreement by Purchaser, constitutes or on the Applicable Closing
shall constitute, as the case may be, the valid and binding obligation of each
of Sellers and DNB, enforceable against them in accordance with its terms,
subject to the qualifications that enforcement of the rights and remedies
created hereby or thereby are subject to (i) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
-10-
3.4 No Conflict. Except as set forth on Schedule 3.4, neither the
----------- ------------
execution, delivery or performance by the Sellers or DNB (as the case may be) of
this Agreement or of any document to be delivered in accordance with this
Agreement nor the consummation of the transactions described in this Agreement
or by any Related Agreement will (i) violate, (ii) result in a breach of,
constitute a default under, or constitute an event which, with notice or lapse
of time, will constitute a default under (assuming that the consents referred to
in Sections 5.3 and 5.4 are obtained), (iii) permit any party to terminate or
otherwise alter its obligations under (assuming that the consents referred to in
Sections 5.3 and 5.4 are obtained), or (iv) subject any Assets to a lien (other
than Permitted Liens) under (A) any agreement, license, permit, authorization or
instrument to which any of the Sellers or DNB is a party or by which they or any
of their assets are bound, (B) the organizational documents of the Sellers, or
(C) any Law or Order applicable to the Sellers, DNB or any of their assets
except, with respect to clauses (A) and (C) only, for such violations,
conflicts, breaches, defaults, terminations, accelerations or Liens which would
not, individually or in aggregate, have a Material Adverse Effect on the
Sellers. Except as set forth in Schedule 3.4, neither the execution, delivery
------------
or performance of this Agreement or of any Related Agreement by the Sellers or
DNB nor the consummation of the transactions contemplated by this Agreement or
any Related Agreement will require any consent, approval, waiver or other action
by any Person (other than consents and approvals required under the Investment
Company Act or the terms of the agreements with Clients or the Investment
Advisers Act with respect to Investment Advisory or Broker-Dealer Contracts)
which has not been obtained.
3.5 Regulatory Filings and Correspondence.
-------------------------------------
(a) Except as set forth on Schedule 3.5(a), as of
---------------
the date hereof, none of the Sellers has any obligation to file any disclosure
documents relating to its ownership or the ownership of any account managed or
advised by it of securities other than Form 13-F.
(b) Schedule 3.5(b) is a true and complete list of
---------------
all exemptive orders, no-action requests, prohibited transactions exemptions and
private letter rulings obtained or pending by or on behalf of the Sellers.
(c) Attached as Schedule 3.5(c) is a true and
---------------
complete list of all correspondence from January 1, 1999 to the date hereof
between the Sellers or DNB and any Governmental or Regulatory Agency relating to
any audit or examination of the Sellers.
3.6 Books and Records. Each of the Books and Records of the
-----------------
Sellers supplied to the Purchaser is true, correct and complete in all material
respects.
3.7 Litigation. Except as set forth on Schedule 3.7, there are no
---------- ------------
outstanding Orders by which any of the Sellers, their Businesses, any Assets or
any Client account or Investment Advisory or Broker-Dealer Contract, is bound.
Except as set forth on Schedule 3.7, there is no Action or Proceeding pending
------------
or, to the Knowledge of the Sellers or DNB, threatened (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
against or affecting any of the Sellers or DNB or any Assets, any Client account
or any Investment Advisory or Broker-Dealer Contract.
3.8 FF&E. Schedule 3.8 sets forth a true, complete and correct
---- ------------
list of the FF&E. The FF&E is in good, useful and operating condition, ordinary
wear and tear excepted, and constitutes all of the furniture, fixtures or
equipment reasonably necessary to the operation of the Businesses.
-11-
3.9 Intellectual Property. The term "Intellectual Property Assets"
--------------------- ----------------------------
means all intellectual property owned, licensed (as licensor or licensee) or
utilized by the Sellers or in which the Sellers have a proprietary interest,
including, without limitation:
(i) all assumed and fictional business
names, trade names, registered and unregistered trademarks, service marks and
applications (collectively, "Marks");
(ii) all patents, patent applications and
inventions and discoveries that may be patentable (collectively, "Patents");
(iii) all registered and unregistered
copyrights in both published works and unpublished works (collectively,
"Copyrights");
(iv) all rights in mask works;
(v) all know-how, trade secrets,
confidential or proprietary information, customer lists, software, technical
information, data, process technology, plans, drawings and blue prints
(collectively, "Trade Secrets"); and
(vi) all rights in internet web sites and
internet domain names used by the Sellers (collectively, "Net Names").
(b) Schedule 3.9 contains a complete and accurate
------------
list and summary description, including royalties paid or received by Sellers,
and Sellers have delivered to Purchaser accurate and complete copies, of all
Sellers' contracts relating to their Intellectual Property Assets, except for
any license implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs under which Sellers is a licensee. There
are no outstanding and, to the Knowledge of Sellers and DNB, no threatened
disputes or disagreements with respect to any such contract.
(c) The Intellectual Property Assets are all those
reasonably necessary for the operation of the Businesses as it is currently
conducted. Sellers are the owner or licensee of all right, title and interest
in and to each of the Intellectual Property Assets, free and clear of all Liens
except Permitted Liens, and except as otherwise provided in Schedule 3.9 have
------------
the right to use without payment to another Person, all of the Intellectual
Property Assets.
(d) Schedule 3.9 contains a complete and accurate
------------
list and summary description of all Patents. All of the issued Patents are
currently in compliance with all applicable Laws (including payment of filing,
examination and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety (90) days after the Applicable Closing Date.
(e) Schedule 3.9 contains a complete and accurate
------------
list and summary description of all Marks. Except as otherwise provided on
Schedule 3.9, all Marks have been registered with the United States Patent and
------------
Trademark Office, are currently in compliance with all applicable Laws
(including the timely post-registration filing of affidavits of use and
incontestability and renewal applications) are valid and enforceable and are not
subject to any maintenance fees or taxes or actions falling due within ninety
(90) days after the Applicable Closing Date.
-12-
(f) Schedule 3.9 contains a complete and accurate
------------
list and summary description of all Copyrights. All registered Copyrights are
currently in compliance with all applicable Laws.
(g) Schedule 3.9 contains a complete and accurate
------------
list and summary description of all Net Names. All Net Names have been
registered in the name of Sellers and are currently in compliance with all
applicable Laws.
(h) There are no pending or, to the Knowledge of
Sellers or DNB, threatened proceedings or litigation or other adverse claims
affecting or with respect to any of the Intellectual Property Assets. There is,
to the Knowledge of Sellers and DNB, no reasonable basis upon which a claim may
be asserted against Sellers for infringement of any Intellectual Property Assets
of any other Person. To the Knowledge of Sellers and DNB, no Person is
infringing the Intellectual Property Assets.
3.10 Investment Advisory and Broker-Dealer Contracts.
-----------------------------------------------
(a) Set forth on Schedule 3.10(a) is a list of the
----------------
Sellers' Investment Advisory or Broker-Dealer Contracts as of the date hereof.
(b) Except as set forth in Schedule 3.10(b), each
----------------
of the Investment Advisory or Broker-Dealer Contracts is in full force and
effect and is valid and enforceable in accordance with its terms. Except as set
forth in Schedule 3.10(b):
----------------
(i) Each of the Sellers is in material
compliance with all applicable terms and requirements of each Investment
Advisory or Broker-Dealer Contract to which it is a party;
(ii) Each other Person that has or had any
obligation or liability under any Investment Advisory or Broker-Dealer Contract
is in material compliance with all applicable terms and requirements of such
Investment Advisory or Broker-Dealer Contract;
(iii) To the Knowledge of Sellers and DNB, no
event has occurred or circumstance exists that (with or without notice or lapse
of time or both) may contravene, conflict with, or result in a violation or
breach of, or give the Sellers or any other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Investment Advisory or
Broker-Dealer Contract;
(iv) None of the Sellers have given to or
received from any other Person any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or potential violation or
breach of, or default under, any Investment Advisory or Broker-Dealer Contract;
(v) There are no renegotiations of,
attempts to renegotiate, or outstanding rights to renegotiate any material
amounts paid or payable to the Sellers under any Investment Advisory or
Broker-Dealer Contract, and no such Person has made written demand for such
renegotiation; and
-13-
(vi) The Investment Advisory or
Broker-Dealer Contracts have been entered into in the ordinary course of
business and have been entered into without the commission of any act alone or
in concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Law or Order.
3.11 Investment Advisory and Broker-Dealer Matters.
---------------------------------------------
(a) Each of Oaktree and Pin Oak is duly registered
as an investment adviser under the Investment Advisers Act and all other
applicable Laws. Financial is duly registered as a broker-dealer under the
Exchange Act and all other applicable Laws and is a duly qualified and acting
member of NASD.
(b) Without limiting the generality of Section
3.11(a), except as set forth on Schedule 3.11, the Sellers and each of the
-------------
Sellers' officers and employees who is required to be registered as an
investment adviser, a broker-dealer, an investment adviser's or broker-dealer's
agent or representative, a principal or an associated person of an investment
adviser or broker-dealer, or in any other similarly designated position, with
the SEC, the securities commission of any state or any self-regulatory
organization, is duly registered as required and each such registration is in
full force and effect.
(c) The accounts of each Client subject to ERISA
have been managed by the Sellers in compliance with the applicable requirements
or ERISA, and consummation of the transactions described herein will not result
in a violation of such ERISA requirements.
(d) Neither Oaktree or Pin Oak nor, to the Best
Knowledge of the Sellers or DNB, any "person associated with an investment
adviser" (as that term is defined in the Investment Advisers Act) with regard to
Oaktree or Pin Oak has, during the period of not less than ten (10) years prior
to the date hereof, been convicted of any crime or is or has been subject to any
disqualification that would be a basis for denial, suspension or revocation of
registration of an investment adviser under the Investment Advisers Act or the
rules thereunder, for disqualification as an investment adviser for any
investment company pursuant to Section 9 of the Investment Company Act, and to
the Best Knowledge of the Sellers or DNB, there is no basis for, or proceeding
or investigation that is reasonably likely to become a basis for, any such
disqualification, denial, suspension or revocation.
(e) Neither Financial nor, to the Best Knowledge of
the Sellers or DNB, any "person associated with a broker or dealer" (as that
term is defined in the Exchange Act) with regard to Financial has, during the
period of not less than five years prior to the date hereof, been convicted of
any crime or is or has been subject to any disqualification that would be a
basis for denial, suspension or revocation of registration of broker or dealer
under the Exchange Act or the rules thereunder, for disqualification as broker
or dealer for any investment company pursuant to the Investment Company Act, and
to the Best Knowledge of the Sellers or DNB, there is no basis for, or
proceeding or investigation that is reasonably likely to become a basis for, any
such disqualification, denial, suspension or revocation.
-14-
3.12 Financial Statements. The Sellers have previously furnished to
--------------------
Purchaser, and attached hereto as Schedule 3.12 are, the unaudited balance
-------------
sheets of the Sellers (the "Balance Sheets") as at December 31, 2003 (the
"Balance Sheet Date"), the related income statements for the fiscal year then
ended. Except as set forth on Schedule 3.12, all such financial statements (the
-------------
"Financial Statements") were prepared from the Books and Records of the Sellers
in accordance with GAAP, consistently applied. The Financial Statements fairly
present each Seller's respective financial position and results of operations
and changes in shareholders' equity and cash flows, as of the respective dates
of and for the periods referred to in such Financial Statements, all in
accordance with GAAP.
3.13 Absence of Certain Changes and Events. Since the Balance Sheet
-------------------------------------
Date, except as set forth on Schedule 3.13, none of the Sellers has (i) except
-------------in the ordinary course of business
consistent with past practices, incurred any material liability or obligation of
any nature (whether accrued, absolute, contingent or otherwise), or guaranteed
or agreed to guarantee any obligations of others, (ii) canceled any indebtedness
owing to it or any claims that it might have possessed, waived any material
rights of substantial value or sold, leased, encumbered, transferred or
otherwise disposed of, or agreed to sell, lease, encumber, or otherwise dispose
of its assets or permitted any of its assets to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any kind,
(iii) made any material capital expenditure or commitment therefor, (iv) paid
any bonuses, salaries or other compensation to any shareholder, director,
officer or employee, other than in the ordinary course of business consistent
with past practices, (v) entered into any employment, severance or similar
contract with any director, officer, shareholder or employee; (vi) declared or
paid any dividend or made any distribution on any shares of its capital stock,
or redeemed, purchased or otherwise acquired any shares of its capital stock or
any option, warrant or other right to purchase or acquire any such shares, (vii)
borrowed or agreed to borrow any funds, made any loan to any Person or
guaranteed or agreed to guarantee any obligations of any other Person, (viii)
written off as uncollectible any notes or accounts receivable, except write-offs
in the ordinary course of business charged to applicable reserves, (ix) made any
material change in any method of accounting or auditing practice, (x) lost,
terminated, modified in any material respect, waived any fees under,
or accelerated or accepted prepayment of any fees under, any Investment Advisory
or Broker-Dealer Contract, (xi) otherwise conducted its Business or entered into
any transaction other than in the ordinary course consistent with past
practices, or (xii) agreed, whether or not in writing, to do any of the
foregoing.
3.14 Absence of Undisclosed Liabilities. Except (i) as and to the
----------------------------------
extent of the amounts reflected or reserved against in the Balance Sheets, (ii)
liabilities or obligations incurred since the Balance Sheet Date in the ordinary
course of business consistent with past practices, and (iii) liabilities listed
on Schedule 3.14, none of the Sellers has any liabilities or obligations of any
-------------
nature whether absolute, accrued, contingent or otherwise and neither the
Sellers nor DNB has any Knowledge of any basis for the assertion against the
Sellers of any liability or obligation other than as set forth in this
Section 3.14.
3.15 Employment and Labor Matters.
----------------------------
-15-
(a) Schedule 3.15 lists each officer, employee,
-------------
consultant and independent contractor of the Sellers as of the date hereof,
along with the amount of the current annual salaries and total compensation paid
or due for services to each officer, employee, consultant or independent
contractor for the most recent fiscal year end and the year through the most
recent month end, and a full and complete description of any commitments to such
officers, employees, consultants and independent contractors with respect to
compensation payable thereafter and any employment agreements with such persons.
To the Knowledge of the Sellers and DNB, no key employee or group of employees
has any plans to terminate employment with the Sellers.
(b) Except as set forth on Schedule 3.15: None of
-------------
the Sellers is a party to or bound by any collective bargaining agreement with
any labor organization, group or association covering any of its employees, and
to the Knowledge of the Sellers and DNB there has been no attempt to organize
Sellers' employees by any Person, unit or group seeking to act as their
bargaining agent. There are no pending or, to the Knowledge of the Sellers and
DNB, threatened charges (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of any
other wrongful action with respect to any aspect of employment of any person
employed or formerly employed by the Sellers. The Sellers have received no
written notice of the scheduling by any governmental agency or authority, of any
union representation election relating to the employees of the Sellers or any
organizational effort with respect to any of such employees, or any
investigation of the Sellers' employment policies or practices by any
governmental agency or authority. The Sellers are not currently, nor have they
been, involved in labor negotiations with any unit or group seeking to become
the bargaining unit for any employees of the Sellers. The Sellers have not
experienced any material work stoppages, and to the Knowledge of the Sellers and
DNB, no work stoppage is planned.
(c) The Sellers have complied in all material
respects with all laws and regulations relating to the employment of labor,
including, without limitation, any provisions thereof relating to wages, hours,
benefits, worker's compensation, employment practices, terms and conditions of
employment, immigration, collective bargaining, equal opportunity or similar
laws and the payment of social security and similar taxes, and is not liable for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing.
3.16 Real Property. The Sellers own no real property.
-------------
3.17 Powers of Attorney; Absence of Limitations on Competition;
----------------------------------------------------------
Guarantees. (i) No power of attorney or similar authorization given by the
----------
Sellers presently is in effect or outstanding; (ii) except as set forth on
Schedule 3.17, no contract or agreement to which any of the Sellers is a party
-------------
or is bound or to which any Seller's properties or assets are subject limits the
freedom of the Sellers to compete in any line of business or with any Person;
and (iii) Sellers are not a party to or bound by any guarantee of any debt or
obligation of any other Person.
3.18 Governmental Approvals. Except as set forth on Schedule 3.18,
---------------------- -------------
no registration or filing with, or consent or approval of or other action by,
any Governmental or Regulatory Agency is or will be necessary for the valid
execution, delivery and performance by the Sellers or DNB of this Agreement or
any of the Related Agreements.
-16-
3.19 Compliance with Law; Licenses and Permits. Each of the Sellers
-----------------------------------------
is in compliance with all Laws and Orders applicable to it or its Business, the
noncompliance with which would have a Material Adverse Effect. No Seller has
received any notice or other communication (whether oral or written) from any
Governmental or Regulatory Agency or any other Person regarding (i) any actual,
alleged, possible or potential violation of, or failure to comply with any Law
or Order, or (ii) any actual, alleged, possible or potential obligation on the
part of the Sellers to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature. Each of the Sellers possesses all
franchises, permits, licenses, certificates and consents required from any
Governmental or Regulatory Agency in order for the Seller to carry on its
Business as currently conducted and to own and operate its properties and assets
as now owned and operated, and the lack of which would have a Material Adverse
Effect.
3.20 Employee Benefits.
-----------------
(a) Set forth on Schedule 3.20 is a list of all
-------------
pension, profit sharing, retirement, deferred compensation, stock purchase,
stock option, stock appreciation right, employee stock ownership, incentive,
bonus, vacation, severance, change-in-control, disability, hospitalization,
medical insurance, life insurance, fringe benefit, welfare and other employee
benefit plans, programs, policies or arrangements pursuant to which the Sellers
or their ERISA Affiliates provides or has provided (directly or indirectly,
individually or jointly through others) benefits or compensation to or on behalf
of employees, directors or independent contractors or former employees or former
directors or former independent contractors of Sellers or their ERISA
Affiliates, whether formal or informal, whether or not written ("Employee
--------
Plan"). The Sellers shall furnish to Purchaser true, complete and accurate
----
copies of each written Employee Plan and related trust agreement, a complete and
accurate description of each unwritten Employee Plan, a current copy of each
summary plan description, all insurance contracts relating to Employee Plans,
and all annual reports filed with respect to each Employee Plan for the last
four years. The Sellers shall maintain the Employee Plans listed on
Schedule 3.20 in full force and effect until the Applicable Closing Date.
-------------
Except as set forth on Schedule 3.20, Purchaser shall not have any obligation or
-------------
liability of any kind or nature for any compensation or benefits of any kind or
nature to the employees or consultants of the Sellers for services rendered
prior to the Applicable Closing Date.
(b) There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the Knowledge of the Sellers or
DNB, threatened against or with respect to any Employee Plan or the assets of
any Employee Plan. There are no taxes, fees, penalties, interest or other
amounts due as a result of the loss of tax-qualification of any Employee Plan
(or the correction of any qualification issue under any such plan, whether made
pursuant to any IRS program or policy or otherwise).
(c) Each Employee Plan (and the related trust or
funding vehicle, if any) has been administered and maintained in accordance with
its terms and with all applicable law. Except as set forth on Schedule 3.20,
-------------
each Employee Plan which is intended to be qualified under Section 401 of the
Code and each amendment to such plan is subject to a favorable determination
letter from the IRS and each such plan has at all times been maintained, by its
terms and in operation, in accordance with Section 401 of the Code. The form of
all Employee Plans is in compliance with the applicable terms of ERISA, the
Code, and any other applicable Laws. All reports and disclosures required with
respect to each Employee Plan have been properly and timely made. The assets of
each Employee Plan which is not funded through the general assets of the Sellers
are at least equal to the liabilities under such Employee Plan, and all assets
of each Employee Plan are shown on the books and records of such Employee Plan
at fair market value. No Employee Plan has unfunded liabilities that as of the
Applicable Closing Date are not accurately and fully reflected on Sellers'
Balance Sheets.
-17-
(d) Neither Sellers nor any of their ERISA
Affiliates is or has been a participant in, or is or has been obligated to
maintain or to make contributions to, a multi-employer plan (within the meaning
of ERISA Section 3(37) and ERISA Section 4001(a)(3)) or an Employee Plan which
is subject to Title IV of ERISA. Neither Sellers nor any ERISA Affiliate has
sponsored, contributed to or been obligated under Title I or IV of ERISA to
contribute to a "defined benefit plan" (as defined in ERISA Section 3(35)). The
Sellers are not obligated to provide post-retirement medical benefits or any
other unfunded post-retirement welfare benefits to or on behalf of any persons
whatsoever (except the benefits pursuant to the continuation health coverage
requirements under Section 4980B of the Code, ERISA Section 601, or applicable
state law). Except for the continuation coverage requirements of COBRA, no
Seller has any obligations or potential liability for benefits to employees,
former employees or their respective dependents following termination of
employment or retirement under any Employee Plans providing medical, dental,
life or disability benefits. No written or oral representations have been made
to any employee or former employee of Sellers promising or guaranteeing any
employee payment or funding for the continuation of medical, dental, life, or
disability coverage for any period of time beyond the end of the current plan
year (except to the extent of coverage required under COBRA).
(e) Neither Sellers nor their ERISA Affiliates is
subject to and, to the Knowledge of the Sellers and DNB, no facts exist which
could subject any of the Sellers or any of their ERISA Affiliates to, any
liability whatsoever which is directly or indirectly related to any Employee
Plan, including, but not limited to, liability for benefit payments or related
claims, any liability for any tax or related penalty under the Code, or
liability for any damages or penalties arising under Title I or Title IV of
ERISA. No reportable event under Section 4043 of ERISA has occurred or, to the
Knowledge of the Sellers and DNB, will occur with respect to such Employee Plan.
(f) Termination of or withdrawal from any Employee
Plan immediately prior to or following the Applicable Closing Date will not
subject Purchaser or any Seller to any liability, tax or penalty whatsoever.
(g) The execution or performance of the
transactions contemplated by this Agreement will not create, vest, accelerate or
increase any obligations under the Employee Plans, including any obligation to
make any payment which would not be deductible as an excess golden parachute
payment under Section 280G of the Code.
(h) All contributions to or under each Employee
Plan and all expenses of each Employee Plan are fully deductible for income tax
purposes for the taxable year for which such contributions are made or such
expenses are paid. All contributions to or under each Employee Plan have been
made when due under the terms of such Employee Plan in accordance with all
applicable Laws.
-18-
(i) Each Employee Plan covering any present or
former employee of any of the Sellers which is subject to the continuation
health coverage requirements of Section 4980B of the Code or Section 601-608 of
ERISA or any applicable state law has been maintained by Sellers in compliance
with all such requirements for continuation coverage. Each Employee Plan
subject to the portability, access and renewability provisions of Section K,
Chapter 100 of the Code and Section 701 et seq. of ERISA is in compliance with
such provisions.
(j) Neither Sellers nor any fiduciary of an
Employee Plan has violated the requirements of Section 404 of ERISA. Neither
Sellers nor any fiduciary of an Employee Plan has engaged in a transaction with
respect to any Employee Plan that could subject the Sellers or Purchaser to a
tax or penalty imposed by either Section 4975 of the Code or Section 502(l) of
ERISA or a violation of Section 406 of ERISA.
(k) For purposes of this Section 3.20, the term
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with any of the Sellers is treated as a single
employer under Section 414(b), (c), (m), (o) or (t) of the Code.
3.21 Outstanding Leases. Schedule 3.21 sets forth a list of each
------------------ -------------
agreement by which any of the Sellers leases any parcel of real property used in
connection with the Businesses (collectively, the "Leases"). Sellers have
delivered or made available to Purchaser true, correct and complete copies of
all of the Leases specified on Schedule 3.21. Except as disclosed on
-------------
Schedule 3.21, all rents due under the Leases have been paid. All of the Leases
-------------
are, to the Knowledge of the Sellers and DNB, in full force and effect and
enforceable in accordance with their terms. Except as set forth on
Schedule 3.21: Sellers, and to the Knowledge of Sellers and DNB, each other
-------------
party thereto has performed all the obligations required to be performed by it,
has received no notice of default and is not in default (with due notice or
lapse of time or both) under any of the Leases. Neither Sellers nor DNB has any
Knowledge of any breach or anticipated breach by the other party to any of the
Leases. No written notice of termination of, or any threat to terminate, any of
the Leases has been given or received by the Sellers.
3.22 No Material Adverse Change. Except as set forth on
--------------------------
Schedule 3.22, since the Balance Sheet Date, there has not been any material
-------------
adverse change in the Business, operations, prospects, assets, results of
operations or condition (financial or otherwise) of any of the Sellers, and no
event has occurred or circumstance exists that may (with or without the passage
of time, the giving of notice or both) result in such a material adverse change.
3.23 Title; Liens. Each of the Sellers owns outright and has good
------------
and marketable title and, at the Applicable Closing, each of the Sellers will
convey to Purchaser, subject to Section 5.3, good and marketable title to all of
such Seller's Assets, in each case free and clear of any Liens other than
Permitted Liens.
3.24 Taxes. The Sellers have filed all Tax Returns required to be
-----
filed by them and have paid all Taxes shown on those Tax Returns to be due. All
such Tax Returns were correct and complete in all material respects and
accurately reflected the Taxes required to have been paid by the Sellers.
-19-
3.25 Boycotts and Foreign Corrupt Practices. Neither the Sellers
--------------------------------------
nor DNB has (i) participated in or cooperated with an international boycott as
that term is used in Section 999 of the Code or failed to make any required
report of a request that it do so, or (ii) engaged in any activity which
violated the Foreign Corrupt Practices Act of 1977, as amended, or would have
violated that Law if any of the Sellers was an issuer subject to the provision
of the Law which relate solely to issuers.
3.26 Lobbying. Neither the Sellers nor DNB, nor any officer,
--------
director, employee, agent or consultant of either of them, has engaged in the
solicitation of "municipal securities business" as defined in MSRB Rule G-387
and has not used any consultants as defined in Rule G-38 in connection
therewith. The Sellers, DNB and each officer, director, employee, agent or
consultant of either of them, engaged on behalf of the Sellers or DNB in the
solicitation or lobbying of any Federal, state or local governmental body,
agency or fund, is registered in accordance with all applicable laws, rules and
regulations. All political contributions made by the Sellers or by DNB (either
directly or indirectly through any employee of the Sellers or otherwise) have
been made in accordance with all applicable laws. All expenses (including,
without limitation, all campaign and political contributions) of the Sellers or
DNB incurred in connection with the lobbying or solicitation of any Federal,
state or local governmental body, agency or fund on behalf of the Sellers are
fully and properly reflected on the Books and Records of the Sellers. Any
expenditures made by or on behalf of the Sellers for the benefit of any
governmental official including meals and entertainment have been made in
accordance with all applicable laws and without an intent to improperly
influence such person.
3.27 Fidelity and ERISA Bonds. Schedule 3.27 sets forth a list of
------------------------ -------------
all fidelity and ERISA bonds held by or on behalf of the Sellers and brief
description thereof, including the insurer, the policy number or covering note
number with respect to binders, the amount of any deductible and the policy or
bond coverage limits. Also set forth on Schedule 3.27 is a list of any pending
-------------
claims. The Sellers have not received any notice from any of their insurance
carriers that any insurance premiums will be materially increased in the future
or that any fidelity or ERISA bond coverage listed on Schedule 3.27 will not be
-------------
available in the future on substantially the same terms as now in effect. None
of the bonds disclosed on Schedule 3.27 provides that premiums paid in respect
-------------
of periods may be adjusted or recomputed based on claims-paying experience of
such bonds or otherwise.
3.28 Changes in Pricing Policy. The Sellers' most recent forms ADV
-------------------------
or BD, as applicable, true and complete copies of which has been provided to
Purchaser and are attached to Schedule 3.28, contain complete and accurate
-------------
descriptions of the Sellers' pricing policies and practices and a schedule of
the fees charged. Except as set forth on Schedule 3.28, since the date of such
-------------
forms ADV or BD, there has not been any change in respective pricing policies
with respect to the provision of services to any Client or prospective Client.
3.29 Proprietary Information of Third Parties. No third party has
----------------------------------------
notified Sellers or, to the Knowledge of Sellers or DNB, has reason to claim
that any Person employed by or consulting with Sellers ("Related Person") has
--------------
(i) violated or may be violating any of the terms or conditions of such Related
Person's employment, non-competition or non-disclosure agreement with such third
party, (ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party, or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees.
-20-
3.30 Transactions With Affiliates. Except as set forth on
----------------------------
Schedule 3.30, to the Knowledge of Sellers and DNB, no director, officer or
-------------
shareholder of Sellers or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a beneficial interest greater than
5% or is an officer, director, trustee, partner or holder of any equity interest
greater than 5%, is a party to any transaction with any of the Sellers,
including any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
from, or otherwise requiring payments or involving other obligations to any such
person or firm.
3.31 Environmental Matters. Except as set forth on Schedule 3.31:
--------------------- -------------
(a) The operations of the Sellers are in compliance
with all applicable Environmental Laws, except where any non-compliance would
not reasonably be expected to have a Material Adverse Effect.
(b) The Sellers have obtained and are in compliance
with all necessary permits or authorizations that are required under
Environmental Laws to operate their Businesses and the Assets, except where any
non-compliance would not reasonably be expected to have a Material Adverse
Effect.
(c) The term "Environmental Laws" means the
------------------
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
------
42 U.S.C. 9601 et seq., as amended; the Resource Conservation and Recovery Act
-- ---
("RCRA"), 42 U.S.C. 6901 et seq., as amended; the Clean Air Act ("CAA"), 42
---- -- --- ---
U.S.C. 7401 et seq., as amended; the Clean Water Act ("CWA"), 33 U.S.C. 1251
-- --- ---
et seq., as amended; and any other applicable federal, state, local or municipal
-- ---
laws, statutes, regulations, rules or ordinances imposing liability or
establishing standards of conduct for protection of the environment; each as in
effect as of the Applicable Closing Date.
3.32 Notes and Accounts Receivable. The notes and accounts
-----------------------------
receivable and other debts due or recorded in the Books and Records of the
Sellers as being due to the Sellers as of the Interim Balance Sheet Date are set
forth on Schedule 3.32. The notes and accounts receivable set forth on
-------------
Schedule 3.32 and those arising between the Interim Balance Sheet Date and the
-------------
Applicable Closing Date represent or will represent, except to the extent paid,
valid obligations arising from sales actually made or services actually
performed by the Sellers in the ordinary course of business. All of such notes
and accounts receivable are or will, except to the extent paid, be current and
collectible in full, net of reserves shown on the Interim Balance Sheet, within
ninety (90) days after the Applicable Closing Date without resort to litigation
and without offset or counterclaim. To Knowledge of the Sellers and DNB, there
is and will be no contest, claim, defense or right to setoff by any account
debtor relating to the amount or validity of any unpaid note or account
receivable listed on Schedule 3.32 or arising between the Interim Balance Sheet
-------------
Date and the Applicable Closing Date.
-21-
3.33 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by the Sellers and DNB
directly with Purchaser without the intervention of any Person on behalf of the
Sellers and DNB in such manner as to give rise to any valid claim by any Person
against Purchaser for a finder's fee, brokerage commission or similar payment.
3.34 Securities Laws Matters. The Sellers and DNB each acknowledge
-----------------------
that the LLC Shares to be delivered in connection with this Agreement have not
been registered under the Act or any state securities laws, that the LLC
Shares may be appropriately legended to reflect such fact, and that the offering
thereof contemplated hereby is to be effected pursuant to an exemption from the
registration requirements imposed by such Laws. In that regard, each of the
Sellers is acquiring its LLC Shares for its own account and not with a view to,
or for sale in connection with, any distribution thereof in violation of the Act
and such state securities laws. Each of the Sellers and DNB agree not to offer,
sell or otherwise dispose of the LLC Shares acquired hereunder except pursuant
to a registration statement under the Act and qualification under applicable
state securities laws or pursuant to an exemption from registration under the
Act and such state securities laws. Each of the Sellers and DNB is an
"accredited investor" (as defined in Regulation D under the Act), has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the merits and risks of its investment in the LLC Shares, and is
capable of bearing the economic risks of such investment.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
4.1 Organization and Capitalization. Purchaser is a limited
-------------------------------
liability company duly organized and validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
lawful authority to (a) own, lease and operate its properties and assets as they
are now owned, leased and operated and (b) carry on its business as now
conducted and presently proposed to be conducted.
4.2 Validity and Execution of Agreement. Purchaser has full legal
-----------------------------------
right, power and authority to execute and deliver this Agreement and each of the
Related Agreements in connection herewith and to perform fully its obligations
hereunder and thereunder. This Agreement is and, at or prior to the Applicable
Closing each of the Related Agreements will be, duly authorized, executed and
delivered by Purchaser and, assuming if applicable the due authorization,
execution and delivery of this Agreement and each Related Agreement by the
Sellers and DNB, constitutes or will constitute, as the case may be, the valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, subject to the qualifications that enforcement of the
rights and remedies created hereby is subject to (a) bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
-22-
4.3 No Conflict. Except as set forth on Schedule 4.3, neither the
----------- ------------
execution, delivery or performance of this Agreement or of any document to be
delivered in accordance with this Agreement nor the consummation of the
transactions described in this Agreement or by any Related Agreement will (i)
violate, (ii) result in a breach of, constitute a default under, or an event
which, with notice or lapse of time, will constitute a default under, (iii)
permit any party to terminate or otherwise alter its obligations under, or (iv)
subject any assets of the Purchaser to a lien (other than Permitted Liens) under
(A) any agreement, license, permit, authorization or instrument to which the
Purchaser is a party or by which it or any of its assets is bound, (B) the
organizational documents of the Purchaser, or (C) any Law or Order applicable to
the Purchaser or any of its assets except, with respect to clauses (A) and (C)
only, for such violations, conflicts, breaches, defaults, terminations,
accelerations, or Liens that would not, individually or in the aggregate, have a
Material Adverse Effect on the Purchaser. Except as set forth in Schedule 4.3,
------------
neither the execution, delivery or performance of this Agreement or of any
agreement to be delivered in accordance with this Agreement by the Purchaser nor
the consummation of the transactions described in this Agreement or any Related
Agreement will require any consent, approval, waiver or other action by any
Person.
4.4 Legal Proceedings. Except as set forth on Schedule 4.4, there
----------------- ------------
are no (i) outstanding Orders by which the Purchaser, its employees, operations,
assets, properties or business is bound or (ii) Actions or Proceedings pending
or, to the Knowledge of Purchaser, threatened against, Purchaser, its assets,
properties or business, which could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or which, if adversely decided, would have a Material Adverse Effect
on Purchaser.
4.5 Compliance with Laws. Except as set forth on Schedule 4.5, the
-------------------- ------------
Purchaser is in compliance with all, and not in violation of any, and has not
received any claim or notice that it is not in compliance with any, or that
it is in violation of, any Law or Order to which the Purchaser or any of its
operations, assets or properties or its business is subject which failure would
have a Material Adverse Effect on Purchaser.
4.6 Investment Advisory Matters.
---------------------------
(a) The Purchaser is, or before the First Closing
will be, duly registered as an investment adviser under the Investment Advisers
Act and all other applicable laws. The Purchaser is, or before the Second
Closing will be, duly registered as a broker-dealer under the Exchange Act and
all other applicable laws.
(b) Without limiting the generality of Section
4.6(a), except as set forth on Schedule 4.6, the Purchaser and each of the
------------
Purchaser's officers and employees who is required to be registered as an
investment adviser, a broker-dealer, an investment adviser's or broker-dealer's
agent or representative, a principal or an associated person of an investment
adviser or broker-dealer or in any other similarly designated position, with the
SEC, the securities commission of any state or any self-regulatory organization
is or by the First Closing will be duly registered as required and each such
registration is or will be in full force and effect.
(c) The accounts of each Client subject to ERISA
have been managed by the Purchaser in compliance with the applicable
requirements of ERISA, and consummation of the transactions described herein
will not result in a violation of such ERISA requirements.
-23-
(d) Neither the Purchaser nor, to the Best
Knowledge of Purchaser, any "person associated with an investment adviser' (as
that term is defined in the Investment Advisers Act) with regard to the
Purchaser has, during the period of not less than ten (10) years prior to the
date hereof, been convicted of any crime or is or has been subject to any
disqualification that would be a basis for denial, suspension or revocation of
registration of an investment adviser under Section 203(e) of the Investment
Advisers Act or Rule 206(4)-4(b) thereunder or for disqualification as an
investment adviser for any investment company pursuant to Section 9 of the
Investment Company Act, and to the Best Knowledge of Purchaser, there is no
basis for, or proceeding or investigation that is reasonably likely to become a
basis for, any such disqualification, denial, suspension or revocation.
(e) Neither the Purchaser nor, to the Best
Knowledge of Purchaser, any "person associated with broker or dealer" (as that
term is defined in the Exchange Act) with regard to the Purchaser has, during
the period of not less than five years prior to the date hereof, been convicted
of any crime or is or has been subject to any disqualification that would be a
basis for denial, suspension or revocation of registration of a broker or dealer
under the Exchange Act or rules thereunder or for disqualification as broker or
dealer for any investment company pursuant to the Investment Company Act, and to
the Best Knowledge of Purchaser, there is no basis for, or proceeding or
investigation that is reasonably likely to become a basis for, any such
disqualification, denial, suspension or revocation.
4.7 LLC Shares. When issued as contemplated under Section 2.6, the
----------
LLC Shares required to be issued by Purchaser under such Section 2.6 will be
validly issued and fully paid and, except as otherwise provided in the Operating
Agreement of Purchaser or the Delaware Limited Liability Company Act,
non-assessable.
4.8 Capitalization of the Purchaser. The information regarding the
-------------------------------
capitalization of the Purchaser set forth on Schedule 4.8 is true, accurate and
------------
correct in all material respects. The Purchaser is a newly formed entity and
has been formed solely for the purpose of consummating the transactions
described herein and in the Fiduciary Purchase Agreement. As of the First
Closing and Second Closing, the only assets, liabilities and operations of the
Purchaser shall consist of nominal initial cash contributions, the assets,
liabilities and operations acquired or assumed pursuant to or in connection with
this Agreement and the Fiduciary Purchase Agreement, and those acquired or
assumed subsequent to the First Closing in the ordinary course of business.
4.9 Financial Statements. Attached hereto as Exhibit B is a true
-------------------- ---------
and correct copy of the audited balance sheet of Fiduciary as of December 31,
2003, and the related audited statements of income, changes in stockholders
equity and cash flows for the period then ended, including the footnotes
thereto. Such financial statements have been prepared in accordance with GAAP
and present fairly in all material respects the financial position and results
of operations of Fiduciary as at such date and for the period then ended.
4.10 Boycotts and Foreign Corrupt Practices. The Purchaser has not
--------------------------------------
(i) participated in or cooperated with an international boycott as that term is
used in Section 999 of the Code or failed to make any required report of a
request that it do so, or (ii) engaged in any activity which violated the
Foreign Corrupt Practices Act of 1977, as amended, or would have violated that
Law if the Purchaser was an issuer subject to the provision of the Law which
relate solely to issuers.
-24-
4.11 Lobbying. Neither the Purchaser, nor any officer, director,
--------
employee, agent or consultant of the Purchaser, has engaged in the solicitation
of "municipal securities business" as defined in MSRB Rule G-37 and has not used
any consultants as defined in Rule G-38 in connection therewith. The Purchaser
and each officer, director, employee, agent or consultant of the Purchaser,
engaged on behalf of the Purchaser in the solicitation or lobbying of any
Federal, state or local governmental body, agency or fund, is registered in
accordance with all applicable laws, rules and regulations. All political
contributions made by the Purchaser (either directly or indirectly through any
employee of the Purchaser or otherwise) have been made in accordance with all
applicable laws. All expenses (including, without limitation, all campaign and
political contributions) of the Purchaser incurred in connection with the
lobbying or solicitation of any Federal, state or local governmental body,
agency or fund on behalf of the Purchaser are fully and properly reflected on
the Books and Records of the Purchaser. Any expenditures made by or on behalf
of the Purchaser for the benefit of any governmental official including meals
and entertainment have been made in accordance with all applicable laws and
without an intent to improperly influence such person.
4.12 Brokers. All negotiations relative to this Agreement and the
-------
transactions described herein have been carried out by Purchaser directly with
the Sellers and DNB without the intervention of any Person on behalf of
Purchaser in such manner as to give rise to any valid claim by any Person
against the Sellers or DNB for a finder's fee, brokerage commission or similar
payment.
ARTICLE 5
PRE-CLOSING COVENANTS
---------------------
5.1 Corporate Examinations and Investigations. Subject to the
-----------------------------------------
provisions of Article 9 and Section 10.7, at or prior to the Applicable Closing
Date, the parties to this Agreement, through their respective employees and
representatives, shall be entitled to make such reasonable investigations after
reasonable notice of the assets, properties, business and operations of the
Sellers, DNB or the Purchaser, as the case may be, and such examination of the
books, records, Tax Returns, financial condition and operations of such Person.
Any such investigation and examination shall be conducted at reasonable times,
after reasonable notice and under reasonable circumstances. In order that the
parties to this Agreement may have a reasonable opportunity to make such a
business, accounting and legal review, examination or investigation of the
business and affairs of the Sellers, DNB or the Purchaser, as the case may be,
the parties to this Agreement shall, subject to the provisions of Article 9 and
Section 10.7, furnish the representatives of the other party during such period
with such information and copies of such documents concerning its affairs as
such representatives may reasonably request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with such
representatives in connection with such review and examination and to make full
disclosure to the other party of all material facts affecting the financial
condition and business operations of such Person. The Sellers shall afford
Fiduciary Counsel the same rights as the Purchaser under this Section 5.1.
-25-
5.2 Conduct of Business. From the date hereof through the
-------------------
Applicable Closing Date:
(a) Each of the Sellers shall:
(i) except as described in Sections 5.3 and
5.4, conduct its business in the ordinary course consistent with past practices;
(ii) take all commercially reasonable steps
available to it to, at its expense, maintain its FF&E and other tangible Assets
in good repair and condition, except to the extent of reasonable wear and use
and insured damage by fire or other unavoidable casualty;
(iii) maintain its Books and Records in the
usual manner, in accordance with GAAP applied on a consistent basis;
(iv) comply in all material respects with
all applicable Laws and Orders, including, but not limited to, the Act, ERISA,
Investment Advisers Act and Exchange Act and the rules issued under each;
(v) use its reasonable efforts to preserve
intact its Business and Assets; and
(vi) use its reasonable efforts to maintain
its present Clients and preserve its goodwill.
(b) Without the prior written consent of Purchaser,
no Seller shall:
(i) sell, dispose of or encumber any of its
Assets;
(ii) engage in any activities with regard to
its Assets or its Business except in the ordinary course of business consistent
with past practices; or
(iii) change any pricing policy with respect
to the provision of services to any current Client or prospective Client.
5.3 Client Consents. Schedule 5.3 lists each Investment Advisory
--------------- ------------
or Broker-Dealer Contract for which the Client party thereto must affirmatively
consent to the transfer or assignment thereof as contemplated by this Agreement.
As promptly as practicable after the Purchaser executes and delivers this
Agreement, the Sellers and DNB shall cause all Clients of the Sellers (other
than those listed on Schedule 2.1(a)) which are party to any Investment Advisory
---------------
or Broker-Dealer Contract to be informed of the transactions described in this
Agreement and shall request the written consent of such Clients to the
transaction in the form attached hereto as Exhibit C. Any consent obtained in
---------
compliance with this Section 5.3 shall be considered a "Confirming Consent."
------------------
Prior to the Applicable Closing Date, Purchaser shall not contact, in writing or
otherwise, any Client or any other Person who acts as an advisor to or
"gatekeeper" for any Client without the prior approval of the Sellers (such
approval not to be unreasonably withheld).
-26-
5.4 Other Actions. The parties to the Agreement agree to use
-------------
commercially reasonable efforts to take, or cause to be taken, all reasonable
actions and to do, or cause to be done, all things reasonably necessary, proper
or advisable to obtain all necessary waivers, consents and approvals, including,
but not limited to, effecting all necessary registrations and filings with and
submitting all information requested by any Governmental or Regulatory Agency
and any other Persons, required to be obtained by them for the consummation of
the Applicable Closing and the continuance in full force and effect of the
Transferred Clients' Investment Advisory or Broker-Dealer Contracts.
5.5 Notice of Events. Each party shall promptly notify the others
----------------
of (a) any event, condition or circumstance occurring from the date hereof
through the Applicable Closing Date that would constitute a violation or breach
of this Agreement and (b) any event, occurrence, transaction or other item which
would have been required to have been disclosed on any Schedule or statement
delivered hereunder had such event, occurrence, transaction or item existed on
the date hereof, other than items arising in the ordinary course of business or
which would not render any representation or warranty of the Sellers or DNB
materially misleading. The Sellers and DNB shall promptly notify Purchaser of
any known event that occurs or has occurred, and of any known condition or
circumstance that exists, in either case that, alone or with the passage of
time, could reasonably be expected to materially detract from the value to
Purchaser of any Asset.
5.6 Securities Holdings. Not more than five (5) nor less than two
-------------------
(2) Business Days prior to the Applicable Closing, the Sellers shall deliver to
the Purchaser a true, correct and complete list of all securities held by the
Sellers or held in any account managed or advised by the Sellers.
5.7 Fulfillment of Conditions.
-------------------------
(a) The Sellers and DNB will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Purchaser contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
(b) Purchaser will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good faith to satisfy
each other condition to the obligations of the Sellers and DNB contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
5.8 Delivery of Schedules. No later than 5:00 p.m. eastern time on
---------------------
Friday, March 19, 2004, the Sellers and Purchasers shall deliver to each other
their respective disclosure Schedules as described in this Agreement. In
addition, Sellers and Purchaser shall supplement their Schedules as necessary or
appropriate prior to the Applicable Closing. If any of the Sellers, on the one
hand, or the Purchaser, on the other hand, fails to deliver its Schedules before
the foregoing deadline, then the other party may terminate this Agreement upon
written notice to the other party or parties hereto and no party shall have any
further obligations or liability hereunder.
ARTICLE 6
-27-
CONDITIONS PRECEDENT TO THE CLOSING
-----------------------------------
6.1 Conditions Precedent to the Obligations of Purchaser to
-------------------------------------------------------
Complete the Closings. The obligations of Purchaser to enter into and complete
---------------------
the Closings are subject to the fulfillment on or prior to the Applicable
Closing Date of the following conditions, any one or more of which may be waived
by Purchaser in its sole discretion:
(a) Representations and Warranties. The
------------------------------
representations and warranties of the Sellers and DNB contained in this
Agreement shall be true, complete and correct in all material respects (as
provided in the following sentence) on and as of the Applicable Closing Date
with the same force and effect as though made on and as of the Applicable
Closing Date (other than representations and warranties expressly made as of an
earlier date, which shall have been true and correct as of such earlier date).
For purposes of determining the satisfaction of the condition contained in this
Section 6.1(a), no effect shall be given to any exception in such
representations and warranties relating to Knowledge, materiality, or a Material
Adverse Effect and such representations and warranties shall be deemed to be
true and correct in all material respects only if the failure or failures of
such representations and warranties to be so true and correct without regard to
Knowledge, materiality and Material Adverse Effect exceptions do not represent
in the aggregate a Material Adverse Effect with respect to any of the Sellers.
(b) Covenants. The Sellers and DNB shall have
---------
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by them
on or prior to the Applicable Closing Date.
(c) Consents and Approvals. The Sellers and DNB
----------------------
shall have made or obtained, as the case may be, all regulatory and contractual
notifications and consents required of them.
(d) Investment Advisory or Broker-Dealer Contract
---------------------------------------------
Consents. The number of Clients and the Annualized Gross Revenues of Clients
--------
for which Confirming Consents have been obtained by the First Closing Date shall
be at least 95% of each of the total number of the Sellers' Clients and
Annualized Gross Revenues determined in accordance with Section 2.6(a),
respectively.
(e) Orders and Laws. There shall not be in effect
---------------
on the Applicable Closing Date any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions described in this Agreement or any of the Related Agreements or
which could reasonably be expected to otherwise result in a material diminution
of the benefits of the transactions contemplated by this Agreement or any of the
Related Agreements to Purchaser, and there shall not be pending or threatened on
the Applicable Closing Date any Action or Proceeding or any other action in,
before or by any Governmental or Regulatory Agency which could reasonably be
expected to result in the issuance of any such Order or the enactment,
promulgation or deemed applicability to Purchaser, the Sellers or DNB or the
transactions described in this Agreement or any of the Related Agreements of any
such Law.
-28-
(f) Closing Certificates of the Sellers and DNB.
-------------------------------------------
The Sellers and DNB shall have delivered to Purchaser certificates signed by a
duly authorized executive officer of the Sellers and by DNB, dated the
Applicable Closing Date, confirming the satisfaction of the conditions set forth
in Sections 6.1(a), (b), and (d).
(g) Employment Agreement, Non-Solicitation
--------------------------------------
Agreements. Xxxxx X. Xxxxxxx and Xxxx Xxxxxxx shall each have executed and
----------
delivered to the Purchaser a mutually acceptable employment agreement (the
"Employment Agreement"). Each of the persons listed on Schedule 6.1(g) and who
-------------------- ---------------
shall be employed by Purchaser following the Applicable Closing shall have
executed and delivered a non-solicitation agreement in a form mutually
acceptable to Sellers and Purchaser.
(h) Use of Names. The Sellers and DNB shall have
------------
executed and delivered to Purchaser a mutually acceptable assignment, by which
(i) each of the Sellers and DNB assigns to Purchaser all their rights to use the
names "Oaktree Asset Management," "Pin Oak Capital" and "Financial Assets" or
any names similar to or derived from those names, (ii) each of the Sellers and
DNB agrees that Purchaser may use the names "Oaktree Asset Management," "Pin
Oak Capital" and "Financial Assets" and (iii) each of the Sellers and DNB agree
not to use the names "Oaktree Asset Management," "Pin Oak Capital" and
"Financial Assets" or any name similar to them in connection with investment
management, broker-dealer or any other type of financial services (including,
but not limited to, advertising and promotional materials) except in their
capacities as employees of or consultants to Purchaser. The Sellers and DNB
shall have delivered to Purchaser evidence that the Sellers have changed their
names to remove the foregoing words.
(i) Operating Agreement. The Sellers or their
-------------------
Permitted Transferees shall have executed and delivered a counterpart signature
page to Purchaser's Operating Agreement and such other documents and instruments
as Purchaser may reasonably request to admit the Sellers or their Permitted
Transferees as members of Purchaser.
(j) Fiduciary Purchase Agreement. The Purchaser,
----------------------------
Fiduciary and Unified shall have executed and delivered the Fiduciary Purchase
Agreement in form and substance satisfactory to Purchaser, the Fiduciary
Purchase Agreement shall be in full force and effect and not terminated, and
the "Closing" (as defined in the Fiduciary Purchase Agreement) shall occur
simultaneously with, and shall be effective at the same time as, the First
Closing under this Agreement. Each of the conditions to the Purchaser's
obligation to close described in Section 6.1 of the Fiduciary Purchase Agreement
shall be satisfied or waived by Purchaser as of the First Closing Date.
(k) No Material Adverse Change. There shall be no
--------------------------
change, loss or diminution in value of the Assets, Business, or Investment
Advisory or Broker-Dealer Contracts that has or would have after the Closing a
Material Adverse Effect on Purchaser, any Seller or DNB.
(l) No Injunction. There shall be no Law or Order
-------------
that prohibits or enjoins any of the transactions described in this Agreement or
the Fiduciary Purchase Agreement.
-29-
(m) No Proceeding. There shall be no pending or
-------------
threatened Actions or Proceedings against the Purchaser, any Seller, DNB, any
party to the Fiduciary Purchase Agreement or any of their Affiliates (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the transactions described in this Agreement or the Fiduciary
Purchase Agreement, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with any of the transactions described
in this Agreement or the Fiduciary Purchase Agreement.
(n) No Prohibition. Neither the consummation nor
--------------
the performance of any of the transactions described in this Agreement or the
Fiduciary Purchase Agreement will, directly or indirectly (with or without
notice, lapse of time or both), materially contravene, or conflict with, or
result in a material violation of, or cause the Purchaser, Sellers, DNB or any
of their Affiliates to suffer any material adverse consequences under: (a) any
applicable Law or Order, or (b) any Law or Order that has been published,
introduced, or otherwise proposed by or before any Governmental or Regulatory
Agency.
(o) Client Lists. The Sellers shall have delivered
------------
to Purchaser lists of Sellers' active Clients as of the Closing Date.
(p) Sellers' Schedules. The Sellers' disclosure
------------------
Schedules shall be satisfactory in form and substance to Purchaser and no such
Schedule shall disclose any event, condition, fact or liability with respect to
any of the Sellers that is unacceptable to Purchaser.
6.2 Conditions Precedent to the Obligations of the Sellers and DNB
--------------------------------------------------------------
to Complete the Closings. The obligations of each of the Sellers and DNB to
------------------------
enter into and compete the Applicable Closing are subject to the fulfillment on
or prior to the Applicable Closing Date, of the following conditions, any one or
more of which may be waived by the Sellers or DNB in their sole discretion:
(a) Representations and Warranties. The
------------------------------
representations, warranties and covenants of Purchaser shall be true, complete
and correct in all material respects (as provided in the following sentence) as
of the Applicable Closing Date with the same force and effect as though made on
and as of the Applicable Closing Date (other than representations and warranties
expressly made as of an earlier date, which shall have been true and correct as
of such earlier date). For purposes of determining the satisfaction of the
condition contained in this Section 6.2(a), no effect shall be given to any
exception in such representations and warranties relating to Knowledge,
materially or a Material Adverse Effect and such representations and warranties
shall be deemed to be true and correct in all material respects only if the
failure or failures of such representations and warrants to be so true and
correct without regard to Knowledge, materiality and Material Adverse Effect
exceptions do not represent in the aggregate a Material Adverse Effect with
respect to Purchaser.
(b) Covenants. The Purchaser shall have performed
---------
and complied in all material respects with all covenants and agreements required
by this Agreement to be performed or complied with by Purchaser on or prior to
the Applicable Closing Date.
-30-
(c) Consents and Approvals. The Purchaser shall
----------------------
have made or obtained, as the case may be, all regulatory and contractual
notifications and consents required of it.
(d) Investment Advisory or Broker-Dealer Contract
---------------------------------------------
Consents. The number of Clients and the Annualized Gross Revenues of Clients
--------
for which Confirming Consents have been obtained by the First Closing Date shall
be at least 95% of each of the total number of the Sellers' Clients and
Annualized Gross Revenues determined in accordance with Section 2.6(a),
respectively.
(e) Orders and Laws. There shall not be in effect
---------------
on the Applicable Closing Date any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Related Agreements or
which could reasonably be expected to otherwise result in a material diminution
of the benefits of the transactions described in this Agreement or any of the
Related Agreements to the Sellers and DNB, and there shall not be pending or
threatened on the Applicable Closing Date any Action or Proceeding or any other
action in, before or by any Governmental or Regulatory Agency which could
reasonably be expected to result in the issuance of any such Order or the
enactment, promulgation or deemed applicability to Purchaser, the Sellers or DNB
or the transactions described in this Agreement or any of the Related Agreements
of any such Law.
(f) Operating Agreement. The Operating Agreement
-------------------
shall have been executed and delivered by the parties thereto.
(g) Closing Certificates of Purchaser. Purchaser
---------------------------------
shall have delivered to the Sellers and DNB a certificate signed by a duly
authorized executive officer of Purchaser, dated the Applicable Closing Date,
confirming the satisfaction of the conditions set forth in Section 6.2(a), (b)
and (d), which certificate shall be in form and substance satisfactory to the
Sellers and DNB.
(h) Admission as Member. The Sellers or their
-------------------
Permitted Transferees shall have been admitted as members of Purchaser in
accordance with the Purchaser's Operating Agreement, and the LLC Shares shall
have been issued to them and reflected on Schedule A thereto, as described in
this Agreement.
(i) Employment Agreement. Purchaser shall have
--------------------
executed and delivered an Employment Agreement to each of Xxxxx X. Xxxxxxx and
Xxxx Xxxxxxx.
(j) Fiduciary Purchase Agreement. The Purchaser,
----------------------------
Fiduciary and Unified shall have executed and delivered the Fiduciary Purchase
Agreement in form and substance satisfactory to the Sellers and DNB, the
Fiduciary Purchase Agreement shall be in full force and effect and not
terminated, and the "Closing" (as defined in the Fiduciary Purchase Agreement)
shall occur simultaneously with, and shall be effective at the same time as, the
First Closing under this Agreement. Each of the conditions to the Purchaser's
obligation to close described in Section 6.1 of the Fiduciary Purchase Agreement
shall be satisfied or waived by Purchaser as of the First Closing Date.
-31-
(k) No Material Adverse Change. There shall be no
--------------------------
change, loss or diminution in value of the Assets, Business, or Investment
Advisory or Broker-Dealer Contracts that has or would have after the Applicable
Closing a Material Adverse Effect on Purchaser, Sellers or DNB.
(l) No Injunction. There shall be no Law or Order
-------------
that prohibits or enjoins any of the transactions described in this Agreement or
the Fiduciary Purchase Agreement.
(m) No Proceeding. There shall be no pending or
-------------
threatened Actions or Proceedings against the Purchaser, Sellers, DNB, any party
to the Fiduciary Purchase Agreement or any of their Affiliates (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
transactions described in this Agreement or the Fiduciary Purchase Agreement, or
(b) that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the transactions described in this Agreement
or the Fiduciary Purchase Agreement.
(n) No Prohibition. Neither the consummation nor
--------------
the performance of any of the transactions described in this Agreement or the
Fiduciary Purchase Agreement will, directly or indirectly (with or without
notice, lapse of time or both), materially contravene, or conflict with, or
result in a material violation of, or cause the Purchaser, Sellers, DNB or any
of their Affiliates to suffer any material adverse consequences under: (a) any
applicable Law or Order, or (b) any Law or Order that has been published,
introduced, or otherwise proposed by or before any Governmental or Regulatory
Agency.
(o) Purchaser's Schedules. The Purchaser's
---------------------
disclosure Schedules shall be satisfactory in form and substance to the Sellers
and no such Schedule shall disclose any event, condition, fact or liability with
respect to the Purchaser that is unacceptable to the Sellers.
ARTICLE 7
POST-CLOSING COVENANTS
----------------------
The parties covenant to take the following actions after the
Applicable Closing Date:
7.1 Further Information. Following the Applicable Closing, each
-------------------
party will afford to the other party, its counsel and its accountants, during
normal business hours, reasonable access to the Books and Records and other data
of the Sellers relating to the Assets and Assumed Liabilities with respect to
periods prior to the Applicable Closing and the right to make copies and
extracts therefrom, to the extent that such access may be reasonably required
by the requesting party (a) to facilitate the investigation, litigation and
final disposition of any claims which may have been or may be made against any
party or it Affiliates and (b) for any other reasonable business purpose.
7.2 Record Retention. Each party agrees that for a period of not
----------------less than five (5) years following the
Applicable Closing Date, it shall not destroy or otherwise dispose of any of the
Books and Records relating to the Assets in its possession with respect to
periods prior to the Applicable Closing. Each party shall have the
right to destroy all or part of such Books and Records after the fifth
anniversary of the Applicable Closing Date or, at an earlier time by giving each
other party hereto thirty (30) days prior written notice of such intended
disposition and offering to deliver to one or more of the other parties, at such
other party's or parties' expense, custody of such Books and Records as such
party may intend to destroy if such other parties affirmatively indicate they
want such Books and Records.
-32-
7.3 Post-Closing Assistance. The Sellers, on the one hand, and
-----------------------
Purchaser, on the other hand, will provide each other with such assistance as
may reasonably be requested in connection with the preparation of any Tax
Return, any audit or other examination by any taxing authority, or any judicial
or administrative proceedings relating to liability for Taxes, and each will
retain and provide the requesting party with any records or information that may
be reasonably relevant to such return, audits or examination, proceedings or
determination. The party requesting assistance shall reimburse the other party
for reasonable out-of-pocket expenses (other than salaries or wages of any
employees of the parties) incurred in providing such assistance.
7.4 Post-Closing Consents. The Sellers and DNB shall (a) keep
---------------------
Purchaser informed of the status of obtaining additional Confirming Consents
between the Applicable Closing Date and the Adjustment Date; (b) facilitate
Purchaser's communication with Clients regarding such Confirming Consents; and
(c) deliver to Purchaser prior to the Adjustment Date copies of all executed
Confirming Consents and Affidavits, if any, received between the Applicable
Closing Date and the Adjustment Date and make available for inspection the
originals of any such executed consents prior to the Adjustment Date.
7.5 Employee Matters.
----------------
(a) Offers of Employment. The parties agree that
--------------------
Purchaser shall offer, as of the Applicable Closing, employment at will to each
employee of the Sellers listed on Schedule 6.1(g); provided, however, that
--------------- -------- -------
nothing herein shall require the continuation of any employment after the
Applicable Closing and nothing herein shall cause an employee to be employed
other than on an at will basis. The parties do not intend for any such
employees to be third party beneficiaries of this Agreement, except as may
otherwise be provided in Article 8. The Sellers and DNB shall be responsible for
complying with the notice requirements of the Workers Adjustment and Retraining
Notification Act with respect to any event or condition on or prior to the
Applicable Closing. Notwithstanding any other provision of this Agreement,
Purchaser shall not have any responsibilities for any legally mandated
continuation of health care coverage with respect to those employees who do not
accept employment with Purchaser, or for compliance with any related
requirements for employees who do not accept employment with Purchaser or their
dependents or beneficiaries who incur a loss of health care coverage due to a
qualifying event occurring before or through the Applicable Closing.
(b) Non-Transferred Employees. Nothing in this
-------------------------
Section 7.5 shall be deemed to impose upon Purchaser any liabilities or
responsibilities regarding individuals who do not become employees of Purchaser
pursuant to offers of employment made under Section 7.5(a) (including, without
limitation, individuals to whom offers are not required to be made under Section
7.5(a)), including, without limitation, liabilities or responsibilities for (i)
pension, retirement, profit-sharing, savings, medical, dental, disability
income, life insurance or accidental death benefits, whether insured or self-
insured, whether funded or unfunded, (ii) workers' compensation (both
long term and short term) benefits, whether insured or self-insured, whether or
not accruing or based upon exposure to conditions prior to the date of this
Agreement or for claims incurred or for disabilities commencing prior to the
Applicable Closing Date, or (iii) severance benefits.
-33-
(c) Severance Expressly Excluded. Without limiting
----------------------------
the generality of any other responsibilities of the Sellers and DNB, the Sellers
and DNB shall be (prior to and after the date hereof) solely responsible for any
severance pay obligations arising prior to or through the Applicable Closing
Date.
(d) Employment Tax Reporting. Following the
------------------------
Applicable Closing, Purchaser, Sellers and DNB shall abide by the alternate
procedure for employment tax reporting set forth in Section 5 of IRS Revenue
Procedure 96-60 with respect to the filing of all applicable Form W-2s, 941s or
other related employment tax filings for 2004.
7.6 Non-Compete.
-----------
(a) Covenants Against Competition. The Sellers and
-----------------------------
DNB acknowledge that Purchaser would not purchase the Assets but for the
agreements and covenants of the Sellers and DNB contained in this Section 7.6.
Accordingly, the Sellers and DNB covenant and agree that:
(i) The Sellers and DNB shall not in the
United States of America, directly or indirectly, for a period commencing on the
Applicable Closing Date and terminating on the date five (5) years following the
Applicable Closing Date (the "Restricted Period"): (1) engage in the Businesses
-----------------
for the Seller's or DNB's own account; (2) render any services to any Person
engaged in the Businesses; or (3) become interested in any such Person (other
than Purchaser) as a partner, shareholder, principal, agent, trustee, consultant
or in any other similar relationship or capacity; provided, however, that
-------- -------
notwithstanding the foregoing: (i) DNB and its Affiliates may engage in the
Business as a trustee, including as a trustee for the Clients listed on
Schedule 7.6(a); (ii) DNB and its Affiliates may engage in the Business in
---------------
connection with the Bottoms Up Value Fund; and (iii) DNB and its Affiliates may
engage in the present business of Fiduciary Administration Services, Inc.; and
provided, further, that the Sellers or DNB may own, directly or indirectly,
-------- -------
solely as an investment, securities of any Person directly or indirectly engaged
in the Businesses if such securities are traded on any national securities
exchange or NASDAQ (or any equivalent non- U.S. securities markets) if the
Sellers or DNB (A) is not a controlling Person or, or a member of a group which
controls such Person and (B) does not, directly or indirectly, own 5% or more of
any class of securities of such Person, and may invest without limit in
securities of Persons who are not engaged directly or indirectly in the
Businesses.
(ii) During and after the Restricted Period,
the Sellers and DNB shall keep secret and retain in strictest confidence, and
shall not use for their own benefit or the benefit of others, all confidential
information with respect to the Assets or learned by the Sellers and DNB
heretofore or hereafter directly or indirectly from the Purchaser, including,
without limitation, information with respect to (A) prospective clients, (B)
fees, (C) profit margins and (D) Client lists (collectively, the "Confidential
------------
Company Information"), and shall not disclose such Confidential Company
-------------------
Information to anyone outside of Purchaser and its Affiliates except with
Purchaser's express written consent and except for Confidential Company
Information which (x) is at the time of receipt or thereafter becomes publicly
known through no wrongful act of either of the Sellers or DNB or (y) is received
from a third party not under an obligation to keep such information confidential
and without breach of this Agreement.
-34-
(iii) During the Restricted Period, the
Sellers and DNB shall not, directly or indirectly, knowingly (A) solicit or
encourage to leave the employment of Purchaser, any employee of Purchaser or
hire any employee who has left the employment of Purchaser after the date of
this Agreement within two (2) years of the termination of such employee's
employment with Purchaser, (B) solicit any Client of the Purchaser to use the
services of any other Person to render advice or services regarding investment
or securities transactions, to invest assets in any fund or product not managed
by the Purchaser, or to reduce the amount of assets being managed by the
Purchaser or the amount of services being provided by the Purchaser.
(b) Rights and Remedies Upon Breach. If the
-------------------------------
Sellers or DNB breaches, or threatens to commit a breach of, any of the
provisions of Section 7.6 (the "Restrictive Covenants"), Purchaser shall have
---------------------
the following rights and remedies (upon compliance with any necessary
prerequisites imposed by law upon the availability of such remedies), each of
which rights and remedies shall be independent of the other and severally
enforceable, and all of which rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to Purchaser under law
or in equity:
(i) The right and remedy to have the
Restrictive Covenants specifically enforced (without posting any bond) by any
court having equity jurisdiction, including, without limitation, the right to an
entry against the Sellers or DNB of restraining orders and injunctions
(preliminary, mandatory, temporary and permanent) against violations, threatened
or actual, and whether or not then continuing, of such covenants, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to Purchaser and that money damages will not provide adequate
remedy to Purchaser.
(ii) Subject to Section 10.10, the right and
remedy to require the Sellers or DNB to account for and pay over to Purchaser
all compensation, profits, monies, accruals, increments or other benefits
(collectively, "Benefits") derived or received by such Person as the result of
--------
any transactions constituting a breach of any of the Restrictive Covenants, and
such Person shall account for and pay over such Benefits to Purchaser.
(c) Severability of Covenants. If any court or
-------------------------
arbitrator determines that any of the Restrictive Covenants, or any part
thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full effect, without regard to
the invalid portions. In addition, if any court or arbitrator of any one or
more of jurisdictions holds the Restrictive Covenants wholly or partially
unenforceable, it is the intention of Purchaser and the Sellers and DNB that
such determination not bar or in any way affect Purchaser's right to the relief
provided above in the courts of or before an arbitrator in any other
jurisdiction as to breaches of such Restrictive Covenants in such other
jurisdictions.
-35-
7.7 Transfer of Payments Received by the Sellers. Notwithstanding
--------------------------------------------
anything contained in this Agreement that may be construed to the contrary, the
Sellers may assign, transfer or distribute any LLC Shares, payments or other
consideration it receives or has the right to receive pursuant to this Agreement
to any Permitted Transferee, provided that such Permitted Transferee shall
--------
become liable for the Sellers' obligations under this Agreement (other than its
indemnification obligation pursuant to Section 8.2), and provided, further, that
-------- -------
no assignment or transfer shall relieve the Sellers of its obligations under
this Agreement.
7.8 Payments Received After Applicable Closing. If , after the
------------------------------------------
Applicable Closing, any of the Sellers receives any fees, payments or revenues
from any Transferred Clients on account of services rendered before or after the
Applicable Closing, the Sellers shall promptly (and in any event within ten (10)
Business Days) remit such fees, payments or revenues to the Purchaser (less any
costs, fees or commissions necessarily payable to other Persons by the Sellers
on account thereof).
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
8.1 Survival of Representations, Warranties, Covenants and
------------------------------------------------------
Agreements. Except to the extent otherwise set forth herein, the
----------
representations, warranties, covenants and agreements of the Sellers, DNB and
the Purchaser will survive the Applicable Closing (a) for a period of one (1)
year with respect to the matters covered by the representations and warranties
set forth in Articles 3 and 4, (b) until sixty (60) days after the expiration of
the applicable statue of limitations (including all periods of extension,
whether automatic or permissive) with respect to the covenants and agreements
related to the Excluded Liabilities or (c) with respect to each other covenant
or agreement contained in this Agreement, in accordance with its terms; provided
--------
however, that subject to Section 8.7, no party shall be precluded from pursuing
-------
a recovery in respect of any representation, warranty, covenant or agreement
that would otherwise terminate in accordance with clause (a) or (b) above if a
Claim Notice shall have been given under this Article 8 or Notice of a Dispute
shall have been provided to the other party on or prior to such termination
date, until the related claim for indemnification or, in the case of the Sellers
or DNB, other recovery, has been satisfied or otherwise resolved as provided in
this Article 8 and/or Section 10.10.
8.2 Indemnification of Purchaser. Subject to the limitations
----------------------------
contained in this Article 8, the Sellers and DNB, jointly and severally, shall
indemnify, defend and hold harmless Purchaser and each of its members and
Affiliates and their respective directors, officers, partners, employees,
agents, successors and assigns from and against any and all losses, liabilities
(including punitive or exemplary damages to third parties and fines or penalties
and any interest thereon), expenses (including reasonable fees and disbursements
of counsel and expenses of investigation and defense), claims, liens or other
obligations of any nature whatsoever (hereinafter individually, a "Loss" and
----
collectively, "Losses") which, directly or indirectly, arise out of, result from
------
or relate to (a) an inaccuracy in or any breach of any then surviving
representation or warranty of the Sellers or DNB contained in this Agreement, or
(b) any Excluded Liability; provided, however, that to the extent any Losses
-------- -------
result in a Shortfall Amount under Section 2.9, such Losses, to the extent of
such Shortfall Amount, shall not be subject to or covered by this Section 8.2.
-36-
8.3 Indemnification of Sellers and DNB. Subject to the limitations
----------------------------------
contained in this Article 8, the Purchaser shall indemnify, defend and hold
harmless the Sellers, DNB and each of their members and Affiliates and their
respective directors, officers, partners, employees, agents, successors and
assigns from and against any and all Losses, which, directly or indirectly,
arise out of, result from or relate to (a) an inaccuracy in or any breach of any
surviving representation or warranty of Purchaser contained in this Agreement,
or (b) any Assumed Liability.
8.4 Method of Asserting Claims. The party making a claim under
--------------------------
this Article 8 is referred to as the "Indemnified Party" and the party against
-----------------
whom such claims are asserted under this Article 8 is referred to as the
"Indemnifying Party". All claims by an Indemnified Party under this Article 8
------------------
shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which
an Indemnifying Party would be liable to an Indemnified Party hereunder is
asserted or sought to be collected from such Indemnified Party by a third party,
such Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent
determinable (which estimate shall not be conclusive of the final amount of such
claim or demand) (such notice is referred to as the "Claim Notice"); provided,
------------ --------
however, that any failure to give such Claim Notice will not be deemed a waiver
-------
of any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Parties are actually prejudiced by such failure. The Indemnifying
Party, upon request of the Indemnified Party, shall retain counsel (who shall be
reasonably acceptable to the Indemnified Party) to represent the Indemnified
Party and shall pay the reasonable fees and disbursements of such counsel with
regard thereto; provided, however, that any Indemnified Party is hereby
-------- -------
authorized prior to the date on which it receives written notice from the
Indemnifying Party designating such counsel, to retain counsel, whose fees and
expenses shall be at the expense of the Indemnifying Party, to file any motion,
answer or other pleading and take such other action which such Indemnified Party
shall deem necessary to protect its interests or those of the Indemnifying Party
until the date on which the Indemnified Party receives such notice from the
Indemnifying Party. After the Indemnifying Party shall retain such counsel, the
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Party
unless (x) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (y) the named parties of any
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not, in connection with any proceedings or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one such firm for the Indemnified Party (except to the
extent the Indemnified party retained counsel to protect its (or the
Indemnifying Party's) rights prior to the selection of counsel by the
Indemnifying Party). If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any claim or demand which the Indemnifying Party defends. A claim or
demand may not be settled by the Indemnifying Party without the prior written
consent of the Indemnified Party (which consent will not be unreasonably
withheld) unless, as part of such settlement, the Indemnified Party shall
receive a full and unconditional release satisfactory to the Indemnified Party.
-37-
(b) In the event any Indemnified Party shall have a
claim against any Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party.
(c) After delivery of a Claim Notice, so long as
any right to indemnification exists pursuant to this Article 8, the affected
parties each agreed to retain all Books and Records related to such Claim
Notice. In each instance pertaining to a claim by a third party, the
Indemnified Party shall have the right to be kept fully informed by the
Indemnifying Party and its legal counsel with respect to any legal proceedings.
Any information or documents made available to any party hereunder and
designated as confidential by the party providing such information or documents
and which is not otherwise generally available to the public and not already
within the knowledge of the party to whom the information is provided (unless
otherwise covered by the confidentiality provisions of any other agreement among
the parties hereto, or any of them), and except as may be required be required
by applicable law, shall not be disclosed to any third Person (except for the
representatives of the party being provided with the information, in which event
the party being provided with the information shall request its representatives
not to disclose any such information which it otherwise required hereunder to be
kept confidential).
(d) An Indemnified Party shall first seek
indemnification from the Sellers pursuant to this Article 8, but shall send DNB
copies of all correspondence sent to the Sellers pursuant to Section 8.4. To
the extent that the Sellers do not fulfill their indemnification obligation for
any reason with thirty (30) days of its receipt of Purchaser's demand for
payment (or, if such demand is contested pursuant to Section 10.10 of this
Agreement, within fifteen (15) days of the resolution of such contest), the
Purchaser may seek indemnification from DNB, subject to the limitations set
forth in Section 8.5.
8.5 Limitations on Indemnification. Notwithstanding anything to
------------------------------
the contrary contained in this Agreement, neither the Sellers nor DNB shall have
any liability or be subject to any claim under Section 8.2: (a) unless and until
the amount of any Losses subject to Section 8.2 exceeds $25,000 in the
aggregate, and then only to the extent of such excess, (b) in an amount that
exceeds the Purchase Price (as adjusted pursuant to Section 2.9) in the
aggregate, minus any amount previously paid by the Sellers or DNB pursuant to
this Article 8, or (c) if the Losses or claim arise out of an inaccuracy in or
breach of any representation or warranty of the Sellers or DNB and the Claim
Notice was not delivered within one (1) year after the Closing Date.
8.6 Set-Off Rights. If amounts become payable by the Sellers or
--------------
DNB to Purchaser pursuant to Section 8.2, the Purchaser, Sellers or DNB may
elect, in lieu of paying or accepting cash, to deliver to Purchaser LLC Shares
(valued at $1,000 per LLC Share if the time of delivery is on or prior to
December 31, 2004 and at Fair Value if thereafter) having a value equal to the
amount payable to the Purchaser. Any election by the Purchaser, Sellers or DNB
to exercise their rights under this Section 8.6 shall be made by written notice
given to the other within ten (10) days after any demand for payment by
Purchaser has been made pursuant to Section 8.2 following resolution of such
claim, if contested. Payment shall be due within five (5) Business Days
thereafter. Failure to give such notice or make such payment shall be deemed an
irrevocable election not to exercise the rights granted to the Purchaser,
Sellers and DNB pursuant to this Section 8.6. For purposes of this Section 8.6,
"Fair Value" means the fair value per LLC Share as mutually agreed by the
----------
Purchaser and the Sellers within ten (10) Business Days of the date the
Purchaser or Sellers notify the other in writing that they will pay any amounts
under this Article 8 with LLC Shares. If the Purchaser and Sellers cannot agree
on the fair value within such period, then the Purchaser and Sellers shall
mutually select an appraiser who shall appraise the fair value per LLC Share
using the same principles used to determine the Purchase Price and taking into
account, if appropriate, the Losses giving rise to the claim under this Article
8. The fees of the appraiser shall be paid one-half (1/2) each by the Purchaser
and the Sellers.
-38-
8.7 Sole Remedy. The indemnification in Section 8.2 hereof shall
-----------
be the sole and exclusive remedy of the Purchaser for any Loss arising out of
the failure of any representation or warranty contained in Article 3 not being
true or arising in respect of an Excluded Liability.
ARTICLE 9
TERMINATION OF AGREEMENT
------------------------
9.1 Termination. This Agreement may be terminated at any time
-----------
prior to the First Closing as follows:
(a) by Purchaser, on the one hand, or by the
Sellers and DNB, on the other hand, by written notice to the other parties
hereto, in the event that the First Closing shall not have occurred on or prior
to the close of business on June 30, 2004 (unless the failure of the First
Closing to occur has been caused by a breach of this Agreement by the party
seeking such termination);
(b) at any time on or prior to the First Closing
Date, by mutual written agreement of Purchaser, the Sellers and DNB;
(c) at any time before the First Closing, by
Purchaser, on the one hand, or the Sellers and DNB, on the other hand, in the
event (i) of a material breach hereof by the non-terminating party if such
non-terminating party fails to cure such breach within ten (10) Business Days
following notification thereof by the terminating party or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations to close
under this Agreement becomes impossible or impracticable with the use of
commercially reasonable efforts if the failure of such condition to be satisfied
is not caused by a breach hereof by the terminating party; and
(d) by the Purchaser, on the one hand, or the
Sellers and DNB, on the other hand, if Purchaser fails to obtain any required
Governmental or Regulatory Agency Order, registration or approval to conduct
investment advisory business.
9.2 Survival. In the event this Agreement is terminated pursuant
--------
to Section 9.1: (a) this Agreement shall become null and void and of no further
force and effect, except for the provisions of Section 10.2 as to expenses and
of Section 10.7 relating to the obligation to keep confidential certain
information and this Section 9.2 and (b) there shall be no liability on the part
of the Sellers, DNB or Purchaser, their Affiliates or their respective members,
partners, officers, directors, employees or agents; provided, however, that if
-------- -------
such termination shall result from the willful or bad faith breach by a party of
the provisions contained in this Agreement, such party shall be fully liable for
any and all damages, costs and expenses sustained or incurred as a result of
such breach by the other parties hereto; provided further, that such damages
-------- -------
shall not include punitive or exemplary damages or foregone profits, damages
arising from alleged diminution of the value of a Person's business (including
losses calculated on multiples of earnings or book value) or any other
consequential damages.
-39-
ARTICLE 10
MISCELLANEOUS
-------------
10.1 Effect of Disclosure on Schedules. Any item disclosed on any
---------------------------------
Schedule to this Agreement shall only be deemed to be disclosed in connection
with (a) the specific representation and warranty to which such Schedule is
expressly referenced, (b) any specific representation and warranty which
expressly cross-references such Schedule, and (c) any specific representation
and warranty to which any other Schedule to this Agreement expressly
cross-references such Schedule. Nothing in a Schedule shall be deemed adequate
disclosure of an exception to a representation or warranty herein unless the
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representative or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself).
10.2 Expenses. Each of the parties hereto shall pay its own
--------
expenses (including, without limitation, attorney's and accountants' fees and
out-of-pocket expenses) incident to this Agreement and the transactions
contemplated hereby.
10.3 Further Assurances. At any time and from time to time after
------------------
the Closing Date at the request of Purchaser, and without further consideration,
the Sellers and DNB will execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such other action as
Purchaser may reasonably deem necessary or desirable in order to transfer,
convey and assign more effectively to Purchaser the Assets, to put Purchaser in
actual possession and operating control of the Assets and to provide reasonable
assistance to Purchaser in exercising all rights with respect thereto.
10.4 Notices. All notices, requests, demands and other
-------communications required or permitted to be given
hereunder shall be in writing and shall be given personally or sent by prepaid
express courier or certified, registered or express mail, postage prepaid. Any
such notice shall be deemed to have been given (a) when received, if delivered
in person or sent by prepaid air courier or express mail or (b) three (3)
Business Days following the mailing thereof, if mailed by certified or
registered mail, in any such case as follows (or to such other address or
addresses as a party may have advised the other in the manner provided in this
Section 10.4):
If to the Sellers:
-00-
x/x Xxxxx X. Xxxxxxx
Xxxxxxx Asset Management, Inc.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
With a copy, which shall not constitute notice, to:
Xxxx X. Xxxxxxxxx, Esq.
XxXxxxxxxx & Xxxxx, LLP
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to DNB:
x/x Xxxxx X. Xxxxxxx
Xxxxxxx Xxxxx Management, Inc.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
With a copy, which shall not constitute notice, to:
Xxxx X. Xxxxxxxxx, Esq.
XxXxxxxxxx & Xxxxx, LLP
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the Purchaser:
DNB Acquisition Corp.
00 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Fiduciary Counsel, Inc.
00 Xxxx 00xx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxx
Unified Financial Services, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxx
-41-
10.5 Publicity. No publicity release or announcement concerning
---------
this Agreement or the transactions described herein shall be made without
advance approval thereof by Purchaser and the Sellers.
10.6 Entire Agreement. This Agreement (including the Exhibits and
----------------
Schedules), the Related Agreements, and the agreements, certificates and other
documents delivered pursuant to this Agreement contain the entire agreement
among the parties with respect to the transactions described herein, and
supersede all prior agreements, written or oral, with respect thereto.
10.7 Confidentiality. Each party hereto will hold, and will use its
---------------
best efforts to cause its Affiliates, and their respective representatives to
hold, in strict confidence from any Person (other than any such Affiliate or
representative), unless (a) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Agencies) or by other requirements of Law or (b)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (i) previously known by
the party receiving such documents or information, (ii) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (iii) later acquired by
the receiving party from another source if the receiving party is not aware that
such source is under an obligation to another party hereto to keep such
documents and information confidential; provided that following the Applicable
--------
Closing the foregoing restrictions will not apply to Purchaser's use of
documents and information concerning the Businesses furnished by the Sellers and
DNB hereunder. In the event the First Closing is not consummated, upon the
request of the other party, each party hereto will, and will cause its
Affiliates and their respective representatives to, promptly redeliver or cause
to be redelivered all copies of documents and information furnished by the other
party in connection with this Agreement or the transactions contemplated hereby
and destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by the
party furnished such documents and information or its representatives.
10.8 Waivers and Amendments. This Agreement may be amended,
----------------------
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. The rights and remedies of any parties based upon, arising out of
or otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in this Agreement shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
upon which any claim of any such inaccuracy or breach is based may also be the
subject matter of any other representation, warranty, covenant or agreement
contained in this Agreement (or in any other agreement between the parties as to
which there is no inaccuracy or breach).
-42-
10.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
10.10 Dispute Resolution.
------------------
(a) The parties desire to resolve disputes arising
out of this Agreement without litigation. Accordingly, except for actions to
seek temporary restraining orders or injunctions related to the purposes of this
Agreement, or suit to compel compliance with the dispute resolution provision,
the parties agree to use the following alternative dispute procedure as their
sole remedy with respect to any controversy or claim arising out of or relating
to this Agreement or its breach.
(b) At the written request of a party, each party
shall appoint a knowledgeable, responsible representative to meet and negotiate
in good faith to resolve any dispute arising under this Agreement. The parties
intend that these negotiations be conducted by non-lawyer, business
representatives. The location, format, frequency, duration and conclusion of
these discussions shall be left to the discretion of the representatives.
(c) Upon agreement between the parties, the
representatives may utilize other alternative dispute resolution procedures such
as mediation to assist in the negotiations. Discussions and correspondence
among the representatives for the purposes of these negotiations shall be
treated as confidential information developed for the purposes of settlement,
exempt from discovery and production, which shall not be admissible in the
arbitration described below or in any lawsuit without the concurrence of both
parties. Documents identified in or provided with such communications, which
are not prepared for purposes of the negotiations, are not so exempted and may
if otherwise admissible, be admitted in the evidence in the arbitration or
lawsuit.
(d) If the negotiations do not resolve the dispute
within sixty (60) days after the initial written request, the dispute shall be
submitted to binding arbitration by a single arbitrator pursuant to the CPR
Institute Rules for Non-Administered Arbitration. A party may demand such
arbitration in accordance with procedures set out in those rules. Discovery
shall be controlled by the arbitrator and shall be permitted to the extent set
out in this Section. Each party may submit in writing to a party, and that
party shall respond, to a maximum of any combination of thirty-five (35) (none
of which may have subparagraphs) of the following: interrogatories, demands to
produce documents, and requests for admission. Each party is also entitled to
take the oral deposition of two individuals of the other party. Additional
discovery may be permitted upon mutual agreement of the parties.
(e) The parties shall contract with the arbitrator
to commence the arbitration hearing within sixty (60) days of the demand for
arbitration. The arbitration shall be held in New York, New York (or other
mutually acceptable site). The arbitrator shall control the scheduling so as to
process the matter expeditiously. The parties may submit written briefs. The
parties may require the arbitrator to rule on the dispute by issuing a written
opinion within thirty (30) days after the close of the hearings. The times
specified in this Section may be extended upon showing of a good cause.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
-43-
(f) Each party shall bear its own cost of these
procedures. The parties shall equally split the fees of the mediation. If
arbitrated, the arbitrator shall be given the authority to award fees and costs
to the prevailing party.
10.11 Binding Effect; No Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement is not assignable by any party hereto without
the prior written consent of the other parties hereto except by operation of law
and any other purported assignment shall be null and void.
10.12 Variations in Pronouns. All pronouns and any variations
----------------------
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
10.13 Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all the parties
hereto.
10.14 Exhibits and Schedules. The Exhibit and Schedules are
----------------------
incorporated into and a part of this Agreement as if fully set forth herein.
10.15 Headings. The headings in this Agreement are for reference
--------
only, and shall not affect the interpretation of this Agreement.
10.16 Invalid Provisions. If any provision of this Agreement is held
------------------
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as part of this Agreement, a legal,
valid and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-44-
S I G N A T U R E S :
---------------------
The parties have executed this Agreement as of the date set forth in
the caption.
OAKTREE ASSET MANAGEMENT, LLC
By: /s/Xxxx X. Xxxx
----------------------------
Name: Xxxx X. Xxxx
-----------------------
Title: Manager
-----------------------
OAKTREE ASSET MANAGEMENT, INC.
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------
Title: President
-----------------------
PIN OAK CAPITAL, INC.
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
-----------------------
Title: President
-----------------------
FINANCIAL ASSETS CORP.
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
------------------------
Title: President
------------------------
DNB ACQUISITION CORP.
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
------------------------
Title: President
------------------------
-45-
================================================================================
LIMITED LIABILITY COMPANY AGREEMENT
OF
OAKTREE ASSET MANAGEMENT, LLC
DATED EFFECTIVE AS OF
MARCH 2, 2004
THE INTERESTS DESCRIBED AND REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS, REGULATIONS AND RULES (COLLECTIVELY, "SECURITIES LAWS") AND MAY BE
RESTRICTED SECURITIES AS THAT TERM IS DEFINED UNDER THE SECURITIES LAWS. TO
THE EXTENT THAT THE INTERESTS CONSTITUTE SECURITIES, THEY MAY NOT BE OFFERED
FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR QUALIFICATION UNDER THE SECURITIES LAWS OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES LAWS, THE AVAILABILITY
OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
================================================================================
LIMITED LIABILITY COMPANY
AGREEMENT OF
OAKTREE ASSET MANAGEMENT, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") is made and
entered into effective as of March 2, 2004 by and among OAKTREE ASSET
MANAGEMENT, LLC, a Delaware limited liability company (the "Company"), FIDUCIARY
COUNSEL, INC., a Delaware corporation ("Fiduciary"), OAKTREE ASSET MANAGEMENT,
INC., a Florida corporation ("Oaktree"), PIN OAK CAPITAL, INC., a Missouri
corporation ("Pin Oak"), FINANCIAL ASSETS CORP., a New York corporation
("Financial"), and any Additional or Substitute Unitholders admitted to this
Company from time to time.
ARTICLE 1
---------
FORMATION; PURPOSES; DEFINITIONS
--------------------------------
1.1 Formation of Company. Xxxxx Record acted as organizer to form
--------------------
a limited liability company under the laws of the State of Delaware by filing a
Certificate of Formation (the "Certificate of Formation") for Oaktree Asset
Management, LLC pursuant to the Delaware Limited Liability Company Act. This
Agreement is subject to, and governed by, the Delaware Limited Liability Company
Act and the Certificate of Formation. In the event of a direct conflict between
the provisions of this Agreement and the mandatory provisions of the Act or the
provisions of the Certificate of Formation, such provisions of the Act or the
Certificate of Formation shall be controlling.
1.2 Purposes. The purposes of the Company shall be to (i) engage
--------
in the business of providing investment management and advisory services and
securities broker-deal services, (ii) carry on any lawful business, purpose or
activity permitted by the Act, and (iii) do all things necessary or convenient
to transact its businesses, purposes or activities.
1.3 Defined Terms. The terms used in this Agreement with their
-------------
initial letters capitalized shall, unless the context otherwise requires or
unless otherwise expressly provided herein, have the meanings specified in this
Section 1.3 or elsewhere in this Agreement. When used in this Agreement, the
following terms shall have the meanings set forth below:
(a) "Act" means the Delaware Limited Liability Company Act,
Title 6 Delaware Code, Section 18-101 et seq., as it may be amended from time to
------
time.
(b) "Additional Unitholder" means any Person admitted as a
Unitholder pursuant to Section 3.3 of this Agreement.
-1-
(c) "Affiliate" means (i) in the case of a natural person,
the spouse, lineal ancestor or descendant (by birth or adoption), spouse of a
lineal ancestor or descendant, sibling, spouse of a sibling, or lineal
descendant of a sibling, of that natural person, or a trust or other entity
formed by the natural person for his or her benefit or the benefit of his or her
spouse or lineal descendants (by birth or adoption) and in which day-to-day
voting control is directly or indirectly held by the natural person, and (ii) in
the case of a Person other than a natural person (A) any Person directly or
indirectly controlling, controlled by, or under common control with such Person,
(B) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (C) any officer, director, or
general partner of such Person, or (D) any Person who is an officer, director,
general partner, trustee or holder of ten percent (10%) or more of the voting
interests of any Person described in clauses (A) through (C) of this sentence.
For purposes of this definition, the term "controls," "is controlled by," or "is
under common control with" shall mean the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
(d) "Agreement" means this Limited Liability Company
Agreement, as originally executed and as amended from time to time.
(e) "Available Cash" of the Company means all cash funds of
the Company on hand from time to time (other than cash funds obtained as Capital
Contributions by the Unitholders and cash funds obtained as loans to the
Company) after (i) payment of all operating expenses of the Company as of such
time, (ii) provision for payment of all outstanding and unpaid current
obligations of the Company as of such time, and (iii) provision for reasonable
reserves in accordance with this Agreement.
(f) "Capital Account" means the individual accounts
established and maintained pursuant to Section 3.4 of this Agreement.
(g) "Capital Contribution" means the total value of cash
and agreed fair market value of property contributed and agreed to be
contributed to the Company by each Unitholder, as shown in Exhibit A, as the
---------
same may be amended from time to time. Any reference in this Agreement to the
Capital Contribution of a then Unitholder shall include a Capital Contribution
previously made by any prior Unitholder for the Interest of such then
Unitholder, reduced by any distribution to such Unitholder in return of its
Capital Contribution.
(h) "Code" means the Internal Revenue Code of 1986, as
amended. All references herein to sections of the Code shall include any
corresponding provision or provisions of succeeding law.
(i) "Company" means Oaktree Asset Management, LLC, a
Delaware limited liability company.
(j) "DNB Purchase Agreement" means the Asset Purchase and
Contribution Agreement dated March 2, 2004 among the Company, Oaktree, Pin Oak,
Financial and DNB Acquisition Corp.
(k) "Fiduciary Purchase Agreement" means the Asset Purchase
and Contribution Agreement dated March 2, 2004 among the Company, Fiduciary and
Unified Financial Services, Inc.
-2-
(l) "Interest" means the entire limited liability company
interest (as such term is defined in the Act) of a Unitholder in the Company at
any particular time, including but not limited to the Unitholder's rights in its
Capital Account, to allocations of net profits, net losses and capital gains, to
distributions of Available Cash and net assets, to participate in the management
and affairs of the Company, to vote on, consent to or otherwise participate in
any decision or action of the Unitholders, and any other benefits to which a
Unitholder may be entitled under this Agreement or the Act.
(m) "Manager" or "Managers" means the Company's managing
directors designated in this Agreement or elected by the Members from time to
time under Section 4.1. The managing directors shall be the Company's
"managers" within the meaning of the Act.
(n) "Person" means any natural person, association,
corporation, general partnership, limited partnership, limited liability
company, limited liability partnership, joint stock association, joint venture,
firm, trust, business trust, cooperative or other entity, domestic or foreign.
(o) "Substitute Unitholder" means any Person who is
admitted as a Unitholder of the Company pursuant to Section 10.8 of this
Agreement.
(p) "Unitholders" means the Unitholders of the Company from
time to time, including the initial Unitholders and any Additional or Substitute
Unitholders that may be admitted to the Company in accordance with the terms of
this Agreement. The Unitholders shall be the Company's "members" within the
meaning of the Act.
(q) "Units of Participation" or "Units" shall mean the
units of Interest in the Company described in Article 3. Distributions made in
proportion to or in accordance with the Units of Participation shall be based
upon relative Units of Participation as of the record date for distributions and
in accordance with IRC 706(c) and (d).
ARTICLE 2
---------
MANAGEMENT AND CONTROL OF THE COMPANY
-------------------------------------
2.1 Management Vested in the Managers. Except for cases in which
---------------------------------
the vote, consent or approval of the Unitholders is expressly required by this
Agreement or nonwaivable provisions of the Act and subject to Section 4.1 (d),
management of the Company shall be exclusively vested in the Manager or
Managers, who shall have the authority to direct, manage and control the
business and affairs of the Company in accordance with the terms of this
Agreement and the Act.
-3-
2.2 Major Decisions. Notwithstanding anything contained in this
---------------
Agreement which may be construed to the contrary, the vote, consent or approval
of Unitholders holding at least a majority of the then outstanding Units
entitled to vote shall be required to take any of the following actions: (i) to
authorize a merger, consolidation or reorganization involving the Company,
whether or not the Company is the surviving entity, (ii) to authorize the sale
of all or substantially all of the assets of the Company, (iii) to authorize or
approve a change in the amount or character of the Unitholder's Capital
Contributions, (iv) to authorize any Manager or Unitholder to do any act on
behalf of the Company that contravenes this Agreement, (v) to amend the
Company's Certificate of Formation or this Agreement, if the amendment would:
(1) change the management of the Company from the Managers to Unitholders or
from Unitholders to Managers; (2) increase or decrease the aggregate number of
authorized Units; (3) effect an exchange or reclassification of all or part of
the Units; (4) change the designation, rights, preferences, or limitations of
all or part of the Units; (5) change all or part of the Units into a different
number of units or other ownership interests of the same class; (6) create a new
class of units having rights or preferences with respect to distribution or to
dissolution that are prior, superior, or substantially equal to the Units; (7)
increase the rights, preferences, or number of authorized units of any class
that, after giving effect to the amendment, have rights or preferences with
respect to distributions or to dissolution that are prior, superior, or
substantially equal to the Units; (8) create any preemptive rights for the
benefit of Unitholder; (9) cancel or otherwise affect rights to distributions or
dividends that have accumulated but not yet been declared on all or part of the
Units; (10) change the manner of electing Managers described in Section 4.1(b);
(11) change the provisions of Section 4.1(d) in any way; or (12) limit or deny
the appraisal rights of the Unitholders described in Section 3.23.
ARTICLE 3
---------
UNITHOLDERS AND OWNERSHIP OF UNITS
----------------------------------
3.1 Authorization. The Company is authorized to issue Ten Thousand
-------------
(10,000) Units of Participation, all of which shall be of a single class and
shall have the voting and other rights, powers, privileges and authority
described in this Agreement or given to members of a manager-managed limited
liability company under mandatory provisions of the Act or permissive provisions
of the Act not overridden by this Agreement.
3.2 Names, Addresses and Capital Contributions of Unitholders. The
---------------------------------------------------------
Unitholders, their respective addresses, their initial Capital Contributions to
the Company, and their respective Units of Participation in the Company are set
forth on Exhibit A attached hereto. Exhibit A shall be updated and amended from
--------- ---------
time to time by the Company's President or Secretary as Additional or Substitute
Unitholders are admitted to the Company or other information thereon changes.
3.3 Issuance of Additional Units of Participation and Admission of
--------------------------------------------------------------
Additional Unitholders.
----------------------
(a) Subject to any vote of the Unitholders required by this
Agreement, the Managers shall have the discretion to issue Units of
Participation, so long as the Company receives adequate consideration in the
form of cash, other property or services for such Units or such other
consideration as may be permitted by the Act. Subject to any vote of the
existing Unitholders required by this Agreement, the Managers may issue Units
with economic or voting preferences. If preferred Units are issued, then the
President will provide each Unitholder with a description of the Company's
capitalization after such issuance, including the relative rights and
preferences of each class of the Company's Units. The provisions of this
Agreement addressing distributions and allocations are subject to modification
through the issuance of preferred Units. In connection with the issuance of
additional Units of Participation, Managers will have the right to admit
additional Persons as Unitholders. A prerequisite to admission to ownership of
Units in this Company shall be the written agreement by the additional
Unitholder to be bound by the terms of this Agreement. Additional Unitholders
shall be allocated gain, loss, income or expense by such method as may be
specified in this Agreement, and if no method is specified herein, then as may
be permitted by Section 706(d) of the Code.
-4-
(b) Unitholders shall not have any preemptive rights to
acquire any additional Units or Interests of any class or series that may be
issued or become subject to issuance from time to time or to make any additional
Capital Contributions, except as expressly provided by the Managers in
connection with the issuance of such additional Units or Interests or the making
of additional Capital Contributions.
3.4 Capital Accounts.
----------------
(a) An individual capital account (the "Capital Account")
shall be established and maintained on behalf of each Unitholder, including any
Additional or Substitute Unitholder who shall hereafter receive an Interest in
the Company. The Capital Account of each Unitholder shall consist of (i) the
amount of cash such Unitholder has contributed to the Company, plus (ii) the
agreed fair market value of any property or services such Unitholder has
contributed or agreed to contribute to the Company, net of any liabilities
assumed by the Company or to which such property is subject, plus (iii) the
amount of profits or income (including tax-exempt income) allocated to such
Unitholder, less (iv) the amount of losses and deductions allocated to such
Unitholder, less (v) the amount of all cash distributed to such Unitholder, less
(vi) the fair market value of any property distributed to such Unitholder, net
of any liability assumed by such Unitholder or to which such property is
subject, less (vii) such Unitholder's share of any other expenditures which are
not deductible by the Company for federal income tax purposes or which are not
allowable as additions to the basis of Company property, and (viii) subject to
such other adjustments as may be required under the Code. The Capital Account
of a Unitholder shall not be affected by any adjustments to basis made pursuant
to Section 743 of the Code but shall be adjusted with respect to adjustments to
basis made pursuant to Section 734 of the Code. The manner in which the Capital
Accounts are to be maintained pursuant to this Section is intended to comply
with Code Section 704(b) and the Treasury Regulations promulgated thereunder.
(b) No Unitholder shall have the right to withdraw such
Unitholder's Capital Contribution or to demand and receive property of the
Company or any distribution in return for his Capital Contribution, except as
may be specifically provided in this Agreement or required by law or as may be
approved by action of the Managers. No Unitholder shall receive out of Company
property any part of such Unitholder's Capital Contribution until (i) all
liabilities of the Company, except liabilities to Unitholders on account of
their Capital Accounts, have been paid or there remains property of the Company
sufficient to pay such liabilities, and (ii) the approval by action of the
Managers is obtained, unless the return of the Capital Contribution may be
otherwise rightfully demanded under this Agreement or the Act.
(c) No Unitholder shall have any liability or obligation to
restore a negative or deficit balance in such Unitholder's Capital Account.
-5-
3.5 Additional Contributions. Unitholders may make any additional
------------------------
Capital Contributions as described in the Fiduciary Purchase Agreement and
Financial Purchase Agreement. No Unitholder will be required to make an
additional Capital Contributions without such Unitholder's consent.
3.6 Unitholder Loans or Services. Loans or services by any
----------------------------
Unitholder to the Company shall not be considered Capital Contributions to the
Company.
3.7 Certificates for Unitholder Interests. The Unitholders'
-------------------------------------
Interests in the Company may be represented by "Unit Certificates." The exact
contents of Unit Certificates shall be determined by the Managers.
3.8 Annual Meeting. The Company shall hold an annual meeting of
--------------
Unitholders on the first Monday in May of each year, beginning with the year
2005, at the hour of 10:00 a.m., local time, or on such other date and at such
other time as may be designated from time to time by the Managers. If the day
fixed for the annual meeting is a legal holiday, the meeting shall be held on
the next business day. At the annual meeting, the Unitholders shall elect
Managers and transact such other business as may properly come before the
meeting. If the election of Managers is not held on the day designated for an
annual meeting, or at any adjournment thereof, the Managers shall cause the
election to be held at a special meeting of the Unitholders or by written
consent of Unitholders as soon thereafter as may be convenient. The failure to
hold an annual meeting at the time stated in or fixed in accordance with this
Agreement shall not affect the validity of any Company action.
3.9 Special Meetings. Special meetings of the Unitholders may be
----------------
called by the President or the Managers for any purpose or purposes, and shall
be called by the President at the written request of the holders of at least 25%
of all the votes entitled to be cast on any issue proposed to be considered at
the special meeting.
3.10 Place of Meeting. The Managers may designate any place, either
----------------
within or without the State of New York, as the place of meeting for any annual
meeting. The Managers or President may designate any place, either within or
without the State of New York, as the place of meeting for any special meeting
called by them. A waiver of notice signed by all Unitholders entitled to vote
at a meeting may designate any place, either within or without the State of New
York, as the place for the holding of such meeting. If no designation is made,
or if a special meeting is held by Unitholder demand, the place of meeting shall
be the principal office of the Company.
3.11 Notice of Meeting. The Company shall notify Unitholders of the
-----------------
date, time, and place of each annual and special Unitholders' meeting no fewer
than 10 nor more than 60 days before the meeting date; provided, however, that
-------- -------
unless otherwise required by law or the Certificate of Formation, the Company
shall not be required to give notice to Unitholders not entitled to vote at the
meeting.
(a) Notice of a special meeting shall state the purpose or
purposes for which the meeting is called. Unless otherwise required by law or
the Certificate of Formation, notice of an annual meeting shall not be required
to state the purpose or purposes of the meeting.
-6-
(b) Notice of annual and special meetings shall be in
writing unless oral notice is reasonable under the circumstances. Notice may be
communicated in person, by telephone, telegraph, teletype, other form of wire or
wireless communication, United States mail, private carrier, or any other means
permitted by law.
3.12 Waiver of Notice.
----------------
(a) A Unitholder may waive any notice required by law, the
Certificate of Formation, or this Agreement before or after the time stated in
the notice by delivering a signed waiver to the Secretary of the Company.
(b) A Unitholder's attendance at a meeting shall waive: (i)
objection to lack of notice or defective notice of the meeting, unless the
Unitholder at the beginning of the meeting objects to holding the meeting or
transacting business at it; and (ii) objection to consideration of a matter at
the meeting that is not within the purpose or purposes stated in the notice of
the meeting, unless the Unitholder objects to considering the matter when it is
presented.
3.13 Fixing of Record Date.
---------------------
For the purpose of determining Unitholders of any voting group
entitled to notice of or to vote at any meeting of Unitholders, or Unitholders
entitled to receive payment of any distribution or dividend, or in order to make
a determination of Unitholders for any other proper purpose, the Managers may
fix in advance a date as the record date. Such record date shall not be more
than 70 days prior to the date on which the particular action requiring such
determination of Unitholders is to be taken. If no record date is so fixed by
the board for the determination of Unitholders entitled to notice of, or to vote
at a meeting of Unitholders, or Unitholders entitled to receive a Unit dividend
or distribution, the record date for determination of such Unitholders shall be
at the close of business on:
(a) With respect to an annual Unitholder meeting or any
special Unitholder meeting called by the Managers or any person specifically
authorized by the Managers or this Agreement to call a meeting, the day before
the first notice is delivered to Unitholders;
(b) With respect to a special Unitholder's meeting demanded
by the Unitholders, the date the first Unitholder signs the demand;
(c) With respect to the payment of a Unit dividend, the
date the Managers authorize the Unit dividend;
(d) With respect to actions taken in writing without a
meeting (pursuant to Section 3.19), the date the first Unitholder signs a
consent;
(e) And with respect to a distribution to Unitholders
(other than one involving a repurchase or reacquisition of Units), the date the
Managers authorizes the distribution.
When a determination of Unitholders entitled to vote at any meeting of
Unitholders has been made as provided in this section, such determination shall
apply to any adjournment thereof unless the Managers fix a new record date which
they must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting.
-7-
3.14 Unitholders' List for Meeting.
-----------------------------
(a) After fixing a record date for a meeting, the Company's
officers or agents having charge of its Unitholder records shall prepare a list
of the names of all Unitholders who are entitled to notice of the meeting. The
list shall be arranged by voting group and show the address of and number of
Units held by each Unitholder.
(b) The Unitholders' list shall be available for inspection
by any Unitholder beginning at least five business days before the meeting and
continuing through the meeting. The list may be inspected during the period
available at the Company's principal office or at any place in the city where
the meeting will be held and identified for such purpose in the notice of the
meting. The list may also be inspected during the meeting and any adjournment
of it.
3.15 Quorum.
------
(a) Unitholders may take action on a matter (other than
adjournment) at a meeting only if a quorum of Units entitled to vote on the
matter exists. A majority of the Units entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of Unitholders.
(b) Once a Unit is represented for any purpose at a
meeting, it shall be deemed present for quorum purposes for the remainder of the
meeting and any adjournment of it, unless a new record date is or must be set
for the adjourned meeting.
(c) If a quorum does not exist at a meeting, a majority of
the Units present and entitled to vote may adjourn the meeting up to 120 days
without further notice other than announcement at the meeting of the date, time
and place of the adjourned meeting. If a quorum exists at such an adjournment,
any business may be transacted which might have been transacted at the original
meeting. If a new record date must be fixed because the adjournment is for more
than 120 days, or is fixed for any other reason, then notice of the adjourned
meeting shall be given to Unitholders as of the new record date.
3.16 Voting.
------
(a) Except as expressly provided otherwise in this
Agreement or by the Certificate of Formation or law, each outstanding Unit,
regardless of class, is entitled to one vote on each matter voted on at a
Unitholders' meeting.
(b) If a quorum exists, action on a matter (other than the
election of Managers) is approved if the votes cast by the Unitholders entitled
to vote in favor of the action exceed those opposing the action, unless a
greater number of affirmative votes is required by the Certificate of Formation
or applicable law. If the Certificate of Formation or applicable law provides
for voting by a single voting group on a matter, action on that matter is taken
when voted upon by that voting group as provided in this Section or by law. If
the Articles of Organization or applicable law provides for voting by two or
more voting groups on a matter, action on that matter is taken only when voted
upon by each of those voting groups counted separately as provided in this
Section or by law.
-8-
3.17 Proxies.
-------
(a) A Unitholder may vote his, her or its Units in person
or by proxy.
(b) A Unitholder may appoint a proxy to vote or otherwise
act for him, her or its by signing an appointment form, either personally or by
his, her or its attorney-in-fact. An appointment of a proxy is effective when
received by the Secretary or other officer or agent authorized to tabulate
votes. An appointment is valid for 11 months unless a longer period is
expressly provided in the appointment form. An appointment of a proxy is
revocable by the Unitholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest. An
irrevocable appointment is revocable when the interest with which it
is coupled is extinguished, but the revocation shall not be effective until the
Secretary has received written notice of the revocation.
(c) The death or incapacity of the Unitholder appointing a
proxy does not affect the right of the Company to accept the proxy's authority
unless notice of the death or incapacity is received by the Secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his or
her authority under the appointment.
(d) Subject to any express limitation on the proxy's
authority appearing on the face of the appointment form and other limitations
provided by law, the Company is entitled to accept the proxy's vote or other
action as that of the Unitholder making the appointment.
3.18 Voting of Units by Certain Holders.
----------------------------------
(a) Units standing in the name of a corporation may be
voted either by the president of such corporation or by proxy appointed by him
or her, unless the board of directors of such corporation authorizes another
person to vote such Units. Any person authorized to vote Units of another
corporation shall not be required to produce a copy of the resolution of the
board of directors of such corporation authorizing him or her to vote such Units
unless requested to do so by the Secretary or agent of this Company responsible
for tabulating votes.
(b) Units held by an administrator, executor, guardian, or
conservator may be voted by him or her, either in person or by proxy, without a
transfer of such Units into his or her name. Units standing in the name of a
trustee may be voted by him or her, either in person or by proxy, but only upon
a transfer of such Units into his or her name.
(c) Units held jointly by three or more fiduciaries shall
be voted in the manner determined by the majority of the fiduciaries, unless the
instrument or order appointing the fiduciaries or applicable law otherwise
directs.
(d) Units standing in the name of a receiver may be voted
by the receiver, and Units held by or under the control of a receiver may be
voted by the receiver, without the transfer of them into his or her name if
authority to do so is contained in an appropriate order of the court by which
the receiver was appointed.
-9-
(e) A Unitholder whose Units are pledged shall be entitled
to vote such Units until the Units have been transferred into the name of the
pledgee, at which time the pledgee shall be entitled to vote the Units so
transferred.
3.19 Action by Unitholders Without a Meeting.
---------------------------------------
(a) Except as provided in the Certificate of Formation, any
action required or permitted to be taken at a meeting of the Unitholders may be
taken without a meeting if one or more written consents describing the action
taken are signed by Unitholders entitled to vote on the action and holding at
least the minimum number of Units required to take the action, and such consents
are delivered to the Company for filing in the Company records. Action taken
without a meeting in this manner shall be effective when consents representing
the votes necessary to take the action are delivered to the Company, unless a
different date is specified in the consent.
(b) Any Unitholder giving a consent may revoke it in a
writing received by the Company prior to the time consents representing votes
sufficient to take the action have been delivered to the Company.
(c) Prompt notice of the taking of any action by Unitholder
without a meeting by less than unanimous consent shall be given to those
Unitholders entitled to vote who did not deliver a written consent.
(d) If this Agreement or applicable law requires the giving
of notice of proposed action to nonvoting Unitholders and the action will be
taken by consent without a meeting, the Company shall give nonvoting Unitholders
and voting Unitholders whose consent is not solicited at least ten(10) days
notice before the action is taken. The notice shall contain or be accompanied
by the same material that this Agreement or applicable law would have required
to be sent to nonvoting Unitholders in a notice of a meeting at which the
proposed action would have been submitted to Unitholders.
3.20 Meetings by Telephone. Unitholders may participate in a
---------------------
regular or special meeting by any means of communication by which all
Unitholders participating may simultaneously hear each other during the meeting.
A Unitholder participating in a meeting by this means shall be deemed to be
present in person at the meeting.
3.21 Unitholder's Rights to Inspect Company Records.
----------------------------------------------
(a) The Company shall keep as permanent records minutes of
all meetings of its Unitholders and Managers, a record of all actions taken by
the Unitholders or Managers without a meeting, and a record of all actions taken
by a committee of the Managers in place of the Managers on behalf of the
Company. The Company shall maintain appropriate accounting records.
(b) If a Unitholder gives the Company a written demand at
least five business days before the date on which it wishes to inspect and copy,
such Unitholder (or its agent or attorney) has the right to inspect and copy,
during regular business hours, any of the following records, all of which the
Company shall keep at its principal office:
-10-
(i) its Certificate of Formation and all amendments
currently in effect;
(ii) its Limited Liability Company Agreement and all
amendments currently in effect;
(iii) resolutions adopted by its Managers creating
one or more classes or series of Units, and fixing their
relative rights, preferences, and limitations, if Units issued
pursuant to those resolutions are outstanding;
(iv) the minutes of all Unitholders' meetings and
records of all action taken by Unitholders without a meeting,
for the past three years;
(v) all written communications to Unitholders
generally within the past three years, including the financial
statement furnished for the past three years to the Unitholders;
(vi) a list of the names and business addresses of
its current Managers and officers; and
(vii) its most recent annual report delivered to the
Delaware Secretary of State.
(c) In addition, if a Unitholder gives the Company a
written demand, made in good faith and for a proper purpose reasonably related
to the Unitholder's interest as a Unitholder, at least five business days before
the date on which such Unitholder wishes to inspect and copy, describes with
reasonable particularity the purpose and the records it wishes to inspect, and
the records are directly connected with its purpose, a Unitholder of the
Company (or its agent or attorney) is entitled to inspect and copy, during
regular business hours at a reasonable location specified by the Company, any of
the following records of the Company:
(i) excerpts from minutes of any meeting of the
Managers, records of any action of a committee of the Managers
on behalf of the Company, minutes of any meeting of the
Unitholders, and records of action taken by the Unitholders or
Managers without a meeting, to the extent not subject to
inspection under subsection (b) of this Section;
(ii) accounting records of the Company;
(iii) the record of Unitholders (compiled no earlier
than the date of the Unitholder's demand);
(iv) promptly after becoming available, copies of
the Company's federal, state and local income tax returns for
each year;
(v) true and full information regarding the amount
of cash and a description and statement of the agreed value of
any other property or services contributed by each Unitholder
and which each Unitholder has agreed to contribute in the
future, and the date on which each Unitholder became a
Unitholder; and
-11-
(vi) any other information regarding the business
and affairs of the Company as is just and reasonable.
(d) The right to copy records includes, if reasonable, the
right to receive copies made by photographic, xerographic, or other means. The
Company may impose a reasonable charge, covering the costs of labor and
material, for copies of any documents provided to the Unitholder. The charge
may not exceed the estimated cost of production or reproduction of the records.
(e) For purposes of this Section 3.21, the term
"Unitholder" shall include a beneficial owner whose Units are held in a voting
trust or by a nominee on his, her or its behalf.
(f) Notwithstanding anything herein to the contrary, the
Managers shall have the right to keep confidential from the Unitholders for such
period of time as the Managers deem reasonable, any information which the
Managers reasonably believe to be in the nature of trade secrets or other
information the disclosure of which the Managers in good faith believe is not in
the best interest of the Company or could damage the Company or its business or
which the Company is required by law or by agreement with a third party to keep
confidential.
3.22 Financial Statements Shall be Furnished to the Unitholders.
----------------------------------------------------------
(a) The Company shall furnish its Unitholders annual
audited financial statements, which may be consolidated or combined statements
of the Company and one or more of its subsidiaries, as appropriate, that include
a balance sheet as of the end of the fiscal year, an income statement for that
year, and a statement of changes in Unitholders' equity for the year unless that
information appears elsewhere in the financial statements.
(b) The annual financial statements shall be reported upon
by a certified public accountant selected by Fiduciary or its permitted
transferee and such person's report must accompany them.
(c) The Company shall mail the annual financial statements
to each Unitholder within 120 days after the close of each fiscal year.
Thereafter, on written request from a Unitholder who was not mailed the
statements, the Company shall mail such Unitholder the latest financial
statements.
3.23 Appraisal Rights. Each Unitholder shall have the right to
----------------
dissent from and to obtain payment for its Units when so authorized by the Act,
the Certificate of Formation, this Agreement, or in a resolution of the
Managers. For purposes of this Agreement, the Unitholders shall be deemed to
have the same appraisal rights as the shareholders of a corporation organized
under the Delaware General Corporation Law, and the appraisal rights provisions
of the Delaware General Corporation Law, as amended or in effect from time to
time, shall be deemed to be incorporated into this Agreement the same as if set
forth at length herein.
-12-
3.24 No Authority to Bind Company. No Unitholders shall have the
----------------------------
power or authority to bind the Company unless the Unitholder has been authorized
in writing by an authorized officer of the Company to act as agent of the
Company.
3.25 Limitation on Liability. No Unitholder, Manager, officer,
-----------------------
employee or agent of the Company shall be personally liable by reason of being a
Unitholder, Manager, officer, employee or agent of the Company under a judgment,
decree or order of a court, agency or tribunal of any type, or in any other
manner, or on any other basis, for a debt, obligation or liability of the
Company, whether arising in contract, tort or otherwise, except as specifically
set forth in the Act. The status of a Person as a Unitholder, Manager, officer,
employee or agent of the Company shall not subject the person to personal
liability for the acts or omissions, including without limitation any
negligence, wrongful act or actionable misconduct, of any other Unitholder,
Manager, officer, employee or agent of the Company. No Unitholder shall be
required to loan any funds to the Company. No Unitholder shall be required to
make any Capital Contribution to the Company by reason of any negative balance
in such Unitholder's Capital Account, nor shall any negative balance in a
Unitholder's Capital Account create any liability on the part of the Unitholder
to any third party.
-13-
ARTICLE 4
---------
MANAGERS
4.1 Number, Election and Tenure.
---------------------------
(a) The number of Managers of the Company shall be three
(3), but may be increased or decreased from time to time by amendment to this
Section 4.1, but in no instance shall there be less than one Manager. No
decrease in the number of Managers shall have the effect of shortening the term
of any incumbent Manager.
(b) The initial DNB Manager shall be Xxxxx X. Xxxxxxx and
the initial Unified Managers shall be Xxxx Xxxxx and Xxxx X. Xxxx. The initial
Managers shall serve until the first annual meeting of Unitholders or until
their successors have been elected and qualified, subject to their earlier
resignation or removal.
(c) Other than the initial Managers, the Managers of the
Company shall be elected as follows:
(i) The Managers shall be divided into two (2)
classes. One such class shall be designated as the "Unified
Managers"; and the other such class shall be designated as the
"DNB Manager."
(ii) The number of Unified Mangers shall be two (2).
The number of DNB Managers shall be one (1).
(iii) The Unified Managers shall be elected by
plurality vote, consent or approval of Fiduciary or its
permitted transferees. The DNB Managers shall be elected by
plurality vote of Oaktree, Pin Oak and Financial or their
permitted transferees.
(iv) Managers shall be elected for a term of one (1)
year and until their successors are elected and qualified,
subject to their earlier resignation or removal.
(d) (i) The Unified Managers shall each have one (1)
vote on any matter submitted to the vote, consent or approval of
the Managers. The DNB Manager shall have two (2) votes on any
matter submitted to the vote, consent or approval of the
Managers. A Manager may vote in person or by proxy.
(ii) Except as provided in this Section 4.1(d)
(ii), the Managers shall vote, consent and act as a single
voting group and no class of Managers shall be entitled to vote,
consent or act as a separate voting group on any matter
submitted to the Managers for their vote, consent, approval or
action. Notwithstanding anything in this Agreement to the
contrary: (i) the Unified Managers shall not vote, consent or
act, and shall abstain, with respect to any decision,
determination, action, inaction, claim, notice or other matter
under, arising out of or related to the Fiduciary Purchase
Agreement; and (ii) the DNB Managers shall not vote, consent or
act, and shall abstain, with respect to any decision,
determination, action, inaction, claim, notice or other matter
under, arising out of or related to the DNB Purchase Agreement.
-14-
4.2 Regular Meetings. A regular meeting of the Managers shall be
----------------
held without other notice than this Section 4.2, immediately after, and at the
same place as, the annual meeting of Unitholders. The Managers may provide, by
resolution, the time and place, either within or without the State of New York,
for the holding of additional regular meetings without other notice than such
resolution.
4.3 Special Meetings. Special meetings of the Managers may be
----------------
called by or at the request of the President or any of the Managers. The person
or persons authorized to call special meetings of the Managers may fix any
place, either within or without State of New York, as the place for holding any
special meeting of the Managers called by them.
4.4 Notice.
------
(a) Notice of the date, time and place (but not necessarily
the purpose) of any special meeting shall be given at least two days prior to
the meeting. Notice of a special meeting shall be in writing, unless oral
notice is reasonable under the circumstances. Notice may be communicated in any
manner allowed by law.
(b) Any Manager may waive notice of any meeting before or
after the time stated in the notice. Except as provided below or by law, a
waiver shall be in writing, signed by the Manager, and filed with the minutes of
the meeting or in the Company records. A Manager's attendance at or
participation in a meeting shall constitute a waiver of notice of such meeting,
unless the Manager at the beginning of the meeting or promptly upon his or her
arrival objects to holding the meeting or to the transaction of any business at
the meeting and does not thereafter vote for or assent to action taken at the
meeting.
(c) Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Manager need be specified in
the notice or waiver of notice of the meeting.
4.5 Quorum. A majority of the Managers fixed by Section 4.1 shall
------
constitute a quorum for the transaction of business at any meeting of the
Managers, but if less than a quorum is present at a meeting, a majority of the
Managers present may adjourn the meting from time to time without further
notice.
4.6 Manner of Acting. A majority of the votes entitled to be cast
----------------
by Managers present at a meeting at which a quorum is present shall be the act
of the Managers.
4.7 Meetings by Telephone. The Managers may permit any or all
---------------------
Managers to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all Managers
participating may simultaneously hear each other during the meeting. A Manager
participating in a meeting by this means shall be deemed to be present in person
at the meeting.
-15-
4.8 Presumption of Assent. A Manager who is present at a meeting
---------------------
of the Managers when Company action is taken is deemed to have assented to the
action taken unless (i) he or she objects at the beginning of the meeting, or
promptly upon his or her arrival, to holding it or transacting business at the
meeting, (ii) his or her dissent or abstention from the action taken is entered
in the minutes of the meeting, or (iii) he or she delivered written notice of
his or her dissent or abstention to the presiding officer of the meeting before
its adjournment or to the Company immediately after adjournment of the meeting.
The right of dissent or abstention shall not be available to a Manager who votes
in favor of the action taken.
4.9 Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the Managers, or by a committee thereof, at a meeting may be taken
without a meeting if one or more written consents describing the action shall be
signed by all of the Managers or by all of the members of the committee, as the
case may be. Such consent shall be effective when the last Manager signs it,
unless a different effective date is specified in the consent, and shall have
the same effect as a unanimous vote at a meeting. Such consent shall be filed
with the records of the Company.
4.10 Vacancies. Any vacancy occurring in the number of Managers may
---------
be filled only by those Unitholders entitled to elect the Manager creating the
vacancy as set forth in Section 4.1. A Manager elected to fill a vacancy shall
be elected for the unexpired term of his or her predecessor in office. Any
vacancy in the number of Managers to be filled by reason of an increase in the
number of Managers may be filled by the Managers, but the term of office of the
new Manager shall continue only until the next election of Managers by the
Unitholders. A vacancy that will occur at a specific later date (such as by
resignation) may be filled before the vacancy occurs but the new Manager may not
take office until the vacancy occurs.
4.11 Manager Compensation. The initial Managers named in this
--------------------
Agreement shall not be compensated for their services as Managers. The Managers
may fix the compensation of any other Managers. Each Manager may be paid the
expenses, if any, of attendance at each meeting of the Managers or any committee
of the Managers. No such payment shall preclude any Manager from serving the
Company in any other capacity and receiving compensation for doing so.
4.12 Manager Committees. The Managers, by resolution adopted by a
------------------
majority of the Managers, may create one or more committees and appoint Managers
to serve on them. Each committee shall have two or more members, who shall
serve at the pleasure of the Managers. To the extent specified by the Managers,
each committee may exercise the authority of the Managers, but no committee
shall: authorize distributions; approve or propose to Unitholders action
required by law to be approved by Unitholders; fill vacancies on the Managers or
on any committee; amend the Certificate of Formation; adopt, amend or repeal
revisions or additions to this Agreement; approve a plan of merger not requiring
Unitholder approval; authorize or approve reacquisition of Units of
Participation (except according to a formula or method prescribed by the
Managers); authorize or approve the issuance, sale or contract for sale of Units
of Participation ; or determine the designation and relative rights,
preferences, and limitations of a class or series of Units of Participation
(except as authorized to do so within limits specifically prescribed by the
Managers).
-16-
4.13 Resignation and Removal of Managers. A Manager may resign at
-----------------------------------
any time by delivering written notice to the other Managers or the Company. A
resignation is effective when the notice is delivered unless the notice
specifies a later effective date. The Unitholders may remove one or more
Managers with or without cause. If a Manager is elected by a voting group of
Unitholders, only the Unitholders of that voting group may participate in the
vote to remove him or her. A Manager shall be removed by the Unitholders only
at a meeting called for the purpose of removing him or her and the meeting
notice shall state that the purpose of the meeting is the removal of a Manager.
4.14 Manager Standards of Conduct.
----------------------------
(a) A Manager shall discharge his or her duties as Manager,
including his or her duties as a member of a committee:
(i) In good faith;
(ii) On an informed basis; and
(iii) In a manner he or she honestly believes to be
in the best interests of the Company.
(b) A Manager shall be considered to discharge his or her
duties on an informed basis if he or she makes, with the care an ordinarily
prudent person in a like position would exercise under similar circumstances,
inquiry into the business and affairs of the Company, or into a particular
action to be taken or decision to be made.
(c) In discharging his or her duties, a Manager shall be
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, if prepared or presented by:
(i) One or more officers or employees of the
Company whom the Manager honestly believes to be reliable and
competent in the matters presented;
(ii) Legal counsel, public accountants, or other
persons as to matters the Manager honestly believes are within
the person's professional or expert competence; or
(iii) A committee of the Managers of which he or she
is not a member, if the director honestly believes the committee
merits confidence.
(d) A Manager shall not be considered to be acting in good
faith if he or she has knowledge concerning the matter in question that makes
reliance otherwise permitted by this Section unwarranted.
-17-
(e) No Manager shall be personally liable to the Company or
its Unitholders for monetary damages for breach of his or her duties as a
Manager except for:
(i) Any transaction in which the Manager's personal
financial interest is in conflict with the financial interests
of the Company;
(ii) Acts or omissions not in good faith or which
involve intentional misconduct or are known to the Manager to be
a violation of law;
(iii) Any vote or asset to an unlawful distribution
to the Unitholders prohibited by the Act; or
(iv) Any transaction from which the Manager derived
an improper personal benefit.
4.15 Conflict of Interest Transactions.
---------------------------------
(a) A conflict of interest transaction shall be a
transaction with the Company in which a Manager of the Company has a direct or
indirect interest (as defined below). A conflict of interest transaction shall
not be voidable by the Company solely because of the Manager's interest in the
transaction if any one of the following is true:
(i) The material facts of the transaction and the
Manager's interest were disclosed or known to the Managers or a
committee of the Managers and the Managers or committee
authorized, approved or ratified the transaction;
(ii) The material facts of the transaction and the
Manager's interest were disclosed or known to the Unitholders
entitled to vote and they authorized, approved or ratified the
transaction; or
(iii) The transaction was fair to the Company.
(b) For purposes of this Section, a Manager of the Company
shall have an indirect interest in a transaction if an Affiliate of the Manager
is a party to the transaction.
(c) For purposes of this Section, a conflict of interest
transaction shall be considered authorized, approved, or ratified if it receives
the affirmative vote of a majority of the Managers (or on the committee) who
have no direct or indirect interest in the transaction. If a majority of the
Managers who have no direct or indirect interest in the transaction vote to
authorize, approve or ratify the transaction, a quorum shall be present for the
purpose of taking action under this Section. The presence of, or a vote cast
by, a Manager with a direct or indirect interest in the transaction shall not
affect the validity of any action taken under this Section if the transaction is
otherwise authorized approved, or ratified as provided in Section.
(d) For purposes of this Section, a conflict of interest
transaction shall be considered authorized, approved or ratified if it receives
the vote of Unitholders holding a majority of the Units of Participation. Units
owned by or voted under the control of a Manager who has a direct or indirect
interest in the transaction, and Units owned by or voted under the control of an
Affiliate of a Manager who has a direct or indirect interest in a transaction,
may not be counted in a vote of the Unitholders to determine whether to
authorize, approve or ratify a conflict of interest transaction under this
Section. The vote, consent or approval of Unitholders holding a majority of the
Units of Participation that are entitled to be counted in a vote under this
Section shall constitute a quorum for the purpose of taking action under this
Section.
-18-
ARTICLE 5
---------
OFFICERS
5.1 Required Officers. The Company shall have a President,
-----------------
Secretary and Treasurer and such other officers as may be appointed by the
Managers, including, if desired, a Chairman, Chief Executive Officer, and one or
more Vice Presidents or Assistant Secretaries, who shall perform the duties
prescribed by the Managers or by direction of an officer authorized by the
Managers to prescribe the duties of such other officers.
5.2 Election and Term of Office. Each officer of the Company shall
---------------------------
be elected by the Managers and shall serve at the pleasure of the Managers and
until his or her successor shall have been chosen and qualified, or until his or
her earlier death, resignation or removal. The same individual may
simultaneously hold more than one office. Election or appointment of an officer
shall not of itself create any contractual or employment rights.
5.3 Resignation and Removal of Officers. An officer may resign at
-----------------------------------
any time by delivering notice to the Company. A resignation is effective when
the notice is delivered, unless the notice specifies a later effective date. If
a resignation is made effective at a later date and the Company accepts the
future effective date, the Managers may fill the pending vacancy before the
effective date if the successor does not take office until the effective date.
The Managers may remove any officer at any time with or without cause and any
officer or assistant officer, if appointed by another officer, may likewise be
removed by such officer.
5.4 Duties and Powers.
-----------------
(a) Chairman - The Chairman shall be subject to the control
--------
of the Managers. Unless otherwise provided by the Managers, the Chairman shall
preside at all meetings of the Unitholders of the Company. He or she shall have
and exercise such other and further authority as the Managers may from time to
time specifically delegate to him or her. The office of Chairman may be held
only by a Manager of the Company.
(b) Chief Executive Officer - The Chief Executive Officer
-----------------------
shall be subject to the control of the Managers and, in the absence of the
Chairman, shall have the same duties as the Chairman, unless otherwise
specified. In the absence of the Chairman, the Chief Executive Officer shall
preside at all meetings of the Managers of the Company. The Chief Executive
Officer shall have the responsibility for the general management and supervision
of the activities of the Company, for ensuring that all orders and resolutions
of the Managers and Unitholders are carried into effect, and for performing all
other duties that are incidental to the office of Chief Executive Officer, and
for performing such other duties as the Managers may from time to time
prescribe. The Chief Executive Officer shall have authority to enter into
contracts on behalf of the Company and shall preside at all
meetings of the Unitholders of the Company.
-19-
(c) President - The President shall be subject to the
---------
control of the Managers. In the absence of the Chairman and the Chief Executive
Officer, the President shall preside at all meetings of the Managers and
Unitholders.
(d) Vice President - The Vice President (or if there is
--------------
more than one, the Vice Presidents in the order determined by the Managers, or
if not so determined, in the order of their election) shall have the
responsibility for performing the duties and exercising the powers of the
President in the absence or disability of the President, and shall have the
responsibility for performing such other duties and shall have such other powers
as the Managers or the President may from time to time prescribe.
(e) Secretary - The Secretary shall: (1) keep the minutes
---------
of the proceedings of the Unitholders and of the Managers in one or more books
provided for that purpose; (2) see that all notices are duly given in accordance
with the provisions of this Agreement or as required by law; (3) be custodian of
the Company's records and of any seal of the Company and if there is a seal of
the Company, see that it is affixed to all documents the execution of which on
behalf of the Company under its seal is required; (4) when requested or
required, authenticate any records of the Company; (5) keep a register of the
post office address of each Unitholder which shall be
furnished to the Secretary by such Unitholder; (6) sign with the president, or a
vice-president, certificates for Units of Participation of the Company, the
issuance of which shall have been authorized by resolution of the Managers; (7)
have general charge of the unit transfer books of the Company; and (8) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him or her by the President or by
Managers.
(f) Treasurer - The Treasurer shall: (1) have charge and
---------
custody of and be responsible for all funds of the Company; (2) receive and give
receipts for moneys due and payable to the Company from any source whatsoever,
and deposit all such moneys in the name of the Company in such banks, trust
companies, or other depositaries as shall be selected by the Managers; and (3)
in general perform all of the duties incident to the office of the treasurer
and such other duties as from time to time may be assigned to him or her by the
President or by the Managers. If required by the Managers, the treasurer shall
give a bond for the faithful discharge of his or her duties in such sum and with
such surety or sureties as the Managers shall determine.
(g) Assistant Secretaries and Assistant Treasurers - The
----------------------------------------------
Assistant Secretaries, when authorized by the Managers, may sign with the
President or a Vice-President Unit Certificates of the Company the issuance of
which shall have been authorized by a resolution of the Managers. The Assistant
Treasurers, if required by the Managers, shall give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Managers
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties as shall be assigned to them by the Secretary
or Treasurer, respectively, or by the President or the Managers.
5.5 Compensation of Officers. The Managers shall fix the
------------------------
compensation of officers, and may provide for reimbursement of their business
expenses.
-20-
ARTICLE 6
---------
INDEMNIFICATION.
6.1 Indemnification. The Company shall, to the fullest extent
---------------
permitted by applicable law, indemnify any Unitholder or Manager of the Company
from and against any and all reasonable costs and expenses (including, but not
limited to, attorneys' fees) and any liabilities (including, but not limited to,
judgments, fines, penalties and reasonable settlements) paid by or on behalf of,
or imposed against, such person in connection with any threatened, pending or
completed claim, action, suit or proceeding, whether civil, criminal,
administrative, investigative or other (including any appeal relating thereto),
whether formal or informal, and whether made or brought by or in the right of
the Company or otherwise, in which such person is, was or at any time becomes a
party or witness, or is threatened to be made a party or witness, or otherwise,
by reason of the fact that such person is, was or at any time becomes a
Unitholder or Manager of the Company or, at the Company's request, a manager,
member, director, officer, partner, trustee, employee or agent of another
corporation, limited liability company, partnership, joint venture, trust,
employee benefit plan or other enterprise; provided, however, that this Article
-------- -------
6 shall not apply to any claims for indemnity or otherwise under the Fiduciary
Purchase Agreement or the DNB Purchase Agreement.
6.2 Not Exclusive. The indemnification authorized by this Article
-------------
6 shall not be exclusive of any other right of indemnification which any such
person may have or hereafter acquire under any provision of this Agreement, vote
of disinterested Unitholders or disinterested Managers or otherwise. The
Company may take such steps as may be deemed appropriate by the Managers to
provide and secure indemnification to any such person, including, without
limitation, the execution of agreements for indemnification between the Company
and individual Unitholders, Managers, officers, employees or agents which may
provide rights to indemnification which are broader or otherwise different than
the rights authorized by this Article 6.
6.3 Indemnification of Officers, Employees and Agents.
-------------------------------------------------
(a) An officer of the Company who is not a Manager shall be
entitled to mandatory indemnification to the same extent as an officer of a
corporation under the Delaware General Corporation Act.
(b) The Company may indemnify and advance expenses to an
officer, employee, or agent of the Company who is not a Manger to the same
extent as to a Manager.
(c) The Company may also indemnify and advance expenses to
an officer, employee, or agent who is not a Manager to the extent, consistent
with public policy, that may be provided in this Agreement, general or specific
action of the Managers, or contract.
6.4 Insurance.
---------
-21-
The Company may purchase and maintain insurance on behalf of any Person
who is or was a Unitholder, Manager, officer, employee or agent of the Company,
or who, while a Unitholder, Manager, officer, employee or agent of the Company,
is or was serving at the request of the Company as a director, manager, member,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
against liability asserted against or incurred by him or her in that capacity or
arising from his or her status as a director, manager, member, officer, employee
or agent, whether or not the Company would have power to indemnify him or her
against the same liability.
6.5 Application and Notice.
----------------------
(a) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Agreement shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any other agreement, vote of the
Unitholders or disinterested Managers, or otherwise, both as to action in his or
her official capacity and as to action in another capacity while holding such
office.
(b) This Article 6 shall not limit the Company's power to
pay or reimburse expenses incurred by a Manager in connection with his or her
appearance as a witness at a proceeding at a time when he or she has not been
made a named defendant or responded to the proceeding.
(c) If the Company indemnifies or advances expenses to a
Manager under this Agreement in connection with a proceeding by or in the right
of the Company, the Company shall report the indemnification or advance in
writing to the Unitholders with or before the notice of the next Unitholders'
meeting.
ARTICLE 7
---------
CONFIDENTIALITY
7.1 Confidential Information. Each Unitholder acknowledges that as
------------------------
a consequence of its relationship with the Company, trade secrets and
information of a proprietary or confidential nature relating to the business of
the Company will be disclosed to and developed by such Unitholder, including but
not necessarily limited to information about products, services, costs,
techniques, protocols, plans for future development, market analysis,
information regarding the Company's financial status, customers, profits,
profit margins, pricing information, costs, and any other information that may
not be known generally or publicly outside the Company (collectively referred to
as "Confidential Information").
7.2 Acknowledgment. Each Unitholder acknowledges that such
--------------
Confidential Information is generally not known in the trade, and is of
considerable importance to the Company and agrees that such Unitholder's
relationship to the Company with respect to such information shall be fiduciary
in nature. It is expressly agreed between the Company and each Unitholder that
it will hold in confidence and not disclose and not make use of, during the
period such Unitholder is a Unitholder in the Company plus ten (10) years after
such Unitholder ceases for any reason to be a Unitholder of the Company, any
such Confidential Information, except as required in the course of its
relationship with the Company.
-22-
ARTICLE 8
---------
ACCOUNTING AND RECORDS
8.1 Records and Accounting. The President shall keep books and
----------------------
records of the Company and the financial position and the results of its
operations. The books and records of the Company shall reflect all Company
transactions and shall be appropriate and adequate for the Company's business.
The fiscal year of the Company for financial reporting and for federal income
tax purposes shall be the calendar year.
8.2 Annual and Tax Information. The Manager shall use reasonable
--------------------------
efforts to cause the Company to deliver to the Unitholders within 60 days after
the end of each fiscal year all information necessary for the preparation of
the Unitholders' federal income tax returns.
8.3 Accounting Decisions. All decisions as to accounting matters,
--------------------
except as otherwise specifically set forth herein, shall be made by the
Managers. The Managers may rely upon the advice of the Company's accountants
as to whether such decisions are in accordance with accounting methods followed
for federal income tax purposes.
8.4 Federal Income Tax Elections. The Company shall elect to be
----------------------------
taxed as partnership for federal income tax purposes. The Managers may make all
other elections for federal income tax purposes, including, but not limited to,
the following:
(a) To the extent permitted by applicable law and
regulations, elect to use an accelerated depreciation method on any depreciable
unit of the assets of the Company; and
(b) In case of a transfer of all or part of the Interest of
any Unitholder, the Company may elect, pursuant to Section 734, 743, and 754 of
the Code, as amended (or corresponding provisions of future law) to adjust the
basis of the assets of the Company.
8.5 Tax Matters Partner. The Unitholders shall designate one of
-------------------
the Unitholders as the "tax matters partner" of the Company pursuant to Section
6231(a)(7) of the Code. Any Unitholder designated as tax matters partner shall
take such action as may be necessary to cause each other Unitholder to become a
"notice partner" within the meaning of Section 6223 of the Code. Any Unitholder
who is designated tax matter partner may not take any action contemplated by
Sections 6222 through 6232 of the Code without the action of the Unitholders
holding at least a majority of the Units.
ARTICLE 9
---------
ALLOCATIONS AND DISTRIBUTIONS
9.1 Allocation of Net Income, Net Loss or Capital Gains. Except as
---------------------------------------------------
may be expressly provided otherwise in this Article 9, and subject to the
provisions of Section 704(c) of the Code and applicable regulations thereunder,
the net income, net loss or capital gains of the Company for each fiscal year of
the Company shall be allocated to the Unitholders, pro rata in accordance with
their Units.
-23-
9.2 Special Allocations to Capital Accounts. No allocations of
---------------------------------------
loss, deduction, or expenditures described in Code Section 705(a)(2)(B) shall be
charged to the Capital Account of any Unitholder if such allocation would cause
such Unitholder to have a Deficit Capital Account. The amount of the loss,
deduction, or Code Section 705(a)(2)(B) expenditure which would have caused a
Unitholder to have a Deficit Capital Account shall instead be charged to the
Capital Account of any Unitholders who would not have a Deficit Capital Account
as a result of the allocation, in proportion to their respective Capital
Contributions, or, if no such Unitholders exist, then to the Unitholders in
accordance with their interests in Company profits pursuant to Section 9.1
above.
(a) If any Unitholder unexpectedly receives any
adjustments, allocations or distributions described in Treas. Reg. 1.704-1(b)(2)
(ii)(d)(4), (5), or (6), which create or increase a Deficit Capital Account of
the Unitholder, then items of Company income and gain (consisting of a pro rata
portion of each item of Company income, including gross income, and gain for
such year and, if necessary, for subsequent years) shall be specially credited
to the Capital Account of the Unitholder in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Deficit
Capital Account so created as quickly as possible. It is the intent that this
9.2(a) be interpreted to comply with the alternate test for economic effect set
forth in Treas. Reg. 1.704-1(b)(2)(ii)(d).
(b) If any Unitholder would have a Deficit Capital Account
at the end of any Company taxable year which is in excess of the sum of any
amount that the Unitholder is obligated to restore to the Company under Treas.
Reg. 1.704-1 (b) (2) (ii) (c) and the Unitholder's share of minimum gain as
defined in Treas. Reg. 1.704-2(g)(1) (which is also treated as an obligation to
restore in accordance with Treas. Reg. 1.704-1(b)(2)(ii)(d)), the Capital
Account of the Unitholder shall be specially credited with items of income
(including gross income) and gain in the amount of the excess as quickly as
possible.
(c) Notwithstanding any other provision of this 9.2, if
there is a net decrease in the Company's minimum gain as defined in Treas. Reg.
1.704-2(d) during a taxable year of the Company, the Capital Accounts of each
Unitholder shall be allocated items of income (including gross income) and gain
for such year (and if necessary for subsequent years) equal to that Unitholder's
share of the net decrease in Company minimum gain. This 9.2 is intended to
comply with the minimum gain chargeback requirement of Treas. Reg. 1.704-2 and
shall be interpreted consistently therewith. If in any taxable year that the
Company has a net decrease in the Company's minimum gain, if the minimum gain
chargeback requirement would cause a distortion in the economic arrangement
among the Unitholders and it is not expected that the Company will have
sufficient other income to correct that distortion, the Unitholders may in their
discretion (and shall, if requested to do so by a Unitholder) seek to have the
IRS waive the minimum gain chargeback requirement in accordance with Treas. Reg.
1.704-2(f)(4).
(d) Items of Company loss, deduction, and expenditures
described in Code Section 705(a)(2)(B) which are attributable to any non-
recourse debt of the Company and are characterized as partner (Unitholder) non-
recourse deductions under Treas. Reg. 1.704-2(i) shall be allocated to the
Unitholders' Capital Accounts in accordance with said Treas. Reg. 1.704-2(i).
-24-
(e) Beginning in the first taxable year in which there are
allocations of "non-recourse deductions" (as described in Treas. Reg. 1.704-2
(b)) those deductions shall be allocated to the Unitholders in accordance with,
and as a part of, the allocations of Company profit or loss for that period.
(f) In accordance with Code Section 704(c)(1)(A) and Treas.
Reg. 1.704-1(b)(2)(i) through (iv), if a Unitholder contributes property with a
fair market value that differs from its adjusted basis at the time of
contribution, income, gain, loss, and deductions for the property shall, solely
for federal income tax purposes, be allocated among the Unitholders so as to
take account of any variation between the adjusted basis of the property to the
Company and its fair market value at the time of contribution.
(g) Pursuant to Code Section 704(c)(1)(B), if any
contributed property is distributed by the Company other than to the
contributing Unitholder within seven years of being contributed, then, except as
provided in Code Section 704(c)(2), the contributing Unitholder shall be treated
as recognizing gain or loss from the sale of the property in an amount equal to
the gain or loss that would have been allocated to the Unitholder under Code
Section 704(c)(1)(A) if the property had been sold at its fair market value at
the time of the distribution.
9.3 Distribution of Available Cash.
------------------------------
(a) Upon the vote, consent or approval of the Managers, the
Company shall periodically distribute Available Cash to the Unitholders, pro
rata in accordance with their Units. Available Cash of the Company shall not be
distributed to the extent that such cash is required for a reasonable reserves
for the Company, the amount of such reserves to be determined by the Managers.
(b) The Managers may cause the Company to make tax
distributions to the Unitholders at any time or from time to time; provided,
--------
however, the Managers shall cause the Company to make tax distributions to the
-------
Unitholders in amounts equal to the product of (x) the maximum marginal federal,
state and local ordinary income tax rates applicable to any of the Unitholders
or their equityholders, as applicable, and (y) the profits less the losses
---
allocated to the Unitholders for the applicable tax period for which the tax
distribution is made. Such tax distributions shall be made no less often than
quarterly to the Unitholders at least two (2) business days prior to the date
the Unitholders are required to submit quarterly federal tax payments.
9.4 Allocation of Income and Loss and Distributions in Respect of
-------------------------------------------------------------
Interests Transferred.
---------------------
(a) If any Interest in the Company is transferred, or is increased
or decreased by reason of the admission of an Additional Unitholder or
otherwise, during any fiscal year of the Company, each item of income, gain,
loss, deduction, or credit of the Company for such fiscal year shall be assigned
pro rata to each day in the particular period of such fiscal year to which such
item is attributable (i.e., the day on or during which it is accrued or
otherwise incurred) and the amount of each such item so assigned to any such day
shall be allocated to the Unitholders based upon their Units at the close of
such day. For the purpose of accounting convenience and simplicity, the Company
may treat a transfer of, or an increase or decrease in, an Interest in the
Company which occurs at any time during a semi-monthly period (commencing with
the semi-monthly period including the date hereof) as having been consummated on
the first day of such semi-monthly period, regardless of when during such semi-
monthly period such transfer, increase, or decrease actually occurs (i.e., sales
and dispositions made during the first 15 days or any month will be deemed to
have been made on the 16th day of the month).
-25-
(b) Distributions of Company assets in respect of Interests in the
Company shall be made only to the Unitholders who, according to the books and
records of the Company, are the holders of record of the Interests in respect of
which such distributions are made on the actual date of distribution. Neither
the Company nor any Unitholder shall incur any liability for making
distributions in accordance with the provisions of the preceding sentence,
whether or not the Company or the Unitholder has knowledge or notice of any
transfer or purported transfer of an Interest in violation of this Agreement.
Notwithstanding any provision above to the contrary, gain or loss of the Company
realized in connection with a sale or other disposition of any of the assets of
the Company shall be allocated solely to the parties owning Interests in the
Company as of the date such sale or other disposition occurs.
ARTICLE 10
----------
CESSATION OF MEMBERSHIP; PURCHASE OF UNITS
10.1 Cessation of Membership.
-----------------------
(a) A Person shall cease to be a member, Interest holder or
Unitholder of the Company upon the occurrence of any of the following events:
(i) On application by the Company, or another
Unitholder, the Unitholder's expulsion by judicial determination
because the Unitholder: (A) engaged in illegal or wrongful
conduct that adversely and materially affected the Company's
business; (B) willfully or persistently committed a material
breach of this Agreement or of a duty owed to the Company or
other Unitholders under this Agreement or the Act; or (C)
committed an act or omission which makes it reasonably
impossible or impractical to carry on the Company's business
with the Unitholder.
(ii) The bankruptcy (as defined in the Act) of a
Unitholder.
(iii) In the case of a Unitholder who is a natural
person: (A) the Unitholder's death or (B) the entry of an order
by a court of competent jurisdiction adjudicating the Unitholder
incompetent to manage his or her person or estate.
(iv) In the case of a Unitholder who: (i) is a trust
or is acting as a Unitholder by virtue of being a trustee of a
trust, the termination of the trust (but not merely the
substitution of a new trustee); (ii) is a limited liability
company, the dissolution and commencement of winding up of such
company; (iii) is a corporation, the filing of articles of
dissolution or the equivalent for the corporation or its
administrative dissolution or the equivalent without
reinstatement within ninety (90) days thereafter; or (iv) is an
estate, the distribution by the fiduciary of the estate's entire
Interest in the Company.
-26-
(Items (i) through (iv) above are referred to hereinafter as
"Cessation Events.")
(v) The Unitholder transfers or assigns all of its
Units.
(Item (v) above shall not be a "Cessation Event" as such term is
used in this Agreement, but shall nonetheless result in cessation of a
Unitholder's membership and ownership of Units in the Company.)
(b) Except as expressly provided in this Agreement, no
Unitholder may resign or withdraw from the Company and no Cessation Event,
resignation or withdrawal of a Unitholder shall cause the Company to be
dissolved.
10.2 Restriction Against Transfers of Units.
--------------------------------------
(a) No Unitholder shall sell, transfer, assign (as such
term is used or defined in the Act or otherwise), pledge, grant a security
interest in, encumber, alienate, or otherwise dispose of any of its Units,
whether now owned or hereafter acquired, or any legal or beneficial interest
therein, whether voluntarily or involuntarily, for value or by gift, will,
bequest, devise, operation of law, divorce decree, marital separation agreement,
levy, attachment, execution, lien, court order, or otherwise, or as a result of
or in connection with any Cessation Event, without the prior consent or approval
of the Managers, except through a transfer permitted by, or which satisfies all
of the requirements of, this Agreement.
(b) Any purported transfer in violation of any provision of
this Agreement shall be null, void and ineffective, and shall not operate to
transfer any interest or title to the purported transferee. In the event of a
transfer not in compliance with this Agreement, the Company shall not be
required to recognize the purported transferee as the legal or beneficial owner
of any interest in the purportedly transferred Units for any purpose.
(c) The Unitholders acknowledge and agree that the
restrictions on transfers of the Units contained in this Agreement are for
valid, mutually beneficial and reasonable purposes and are reasonable to
accomplish those purposes.
(d) The provisions of this Article 10 are applicable in the
event of any voluntary or involuntary sale, assignment, transfer, pledge, grant
of a security interest in, encumbrance, alienation or other disposition of Units
or any legal or beneficial interest therein, including but not limited to a
transfer or encumbrance for value or by gift, operation of law, levy,
attachment, execution, lien, divorce decree, marital separation agreement,
assignment (as such term used or defined in the Act or otherwise), or the like,
or as a result of or in connection with any Cessation Event (all of the
foregoing being collectively referred to in this Article 10 as a "transfer"),
but excluding a transfer to the Company or other Unitholders pursuant to Section
10.3, a transfer to a Unitholder's Affiliate pursuant to Section 10.7(b), or a
transfer or exchange of Units pursuant to a sale, merger, exchange,
reorganization or similar transaction involving the Company which has been
approved by action of the Unitholders holding at least a majority of the Units
or such higher percentage as may be required by applicable law or this
Agreement.
-27-
10.3 Purchase Options in the Event of a Cessation Event or Transfer.
--------------------------------------------------------------
(a) If the Managers do not approve a transfer under Section
10.2(a), then the Company shall have, in accordance with the terms and
conditions set forth in this Section 10.3, the first option and right of first
refusal, but not the obligation, to purchase any Units subject to the proposed
transfer or held by any Unitholder whose membership in the Company has ceased
due to the occurrence of a Cessation Event, except a transfer to other
Unitholders pursuant to this Section 10.3, a transfer to a Unitholder's
Affiliate pursuant to Section 10.8(b), or a transfer pursuant to a sale, merger,
exchange, reorganization or similar transaction involving the Company and
approved by the Unitholders as required by applicable law or this Agreement.
(b) In the event of a Cessation Event or proposed transfer
of all or any portion of a Unitholder's Units covered by Section 10.3(a) above
(the "Offered Units"), or any legal or beneficial interest therein, the
Unitholder who owns the Offered Units (referred to as a "Former Unitholder") or
its personal representative shall deliver written notice of the Cessation Event
or proposed transfer to the Company and the other Unitholders. The notice shall
specify the Former Unitholder's name and current address and, as the case may
be, the nature of the Cessation Event or the identity of the proposed
transferee(s), the amount of Offered Units, the purchase price and other
material terms and conditions of the proposed transfer.
(c) If the Company elects to purchase the Offered Units
pursuant to its right of first refusal, it shall deliver notice of its intention
to do so to the Former Unitholder within 30 days after receipt of the Former
Unitholder's notice of the proposed transfer.
(d) If the Company elects to exercise its right of
purchase, the purchase price for the Offered Units shall equal (i) in the case
of a proposed transfer to a third party without a Cessation Event, the purchase
price applicable to the proposed transaction with the third party; or, (ii) in
the case of a Cessation Event, the fair value of the Offered Units, as
determined by agreement between the Former Unitholder (or, if applicable, the
representatives of the Former Unitholder) and the Company within 30 days of the
applicable Cessation Event, or in case of failure to agree within such time
period, as determined by an appraiser mutually acceptable to the Company and the
Former Unitholder (or its representatives). The fair value of the Former
Unitholder's Units shall equal a percentage of Company's fair value equal to a
fraction, the numerator of which is the number of the Former Unitholder's Units
and the denominator of which is the total number of the Company's Units then
outstanding. The appraiser shall not apply any discounts for minority interests
or lack of liquidity. The fees of the appraiser shall be paid one-half by the
Company and one-half by the Former Unitholder or its successors.
-28-
(e) The Company may pay the purchase price in any of the
following ways as it may choose in its sole discretion: (i) in the case of a
proposed transfer to a third party without a Cessation Event, on the same terms
and conditions of payment of the proposed transaction with the third party; or
(ii) either: (i) ten percent (10%) down at the time of closing with the balance
due in 60 equal monthly installments of principal together with interest on the
unpaid balance, commencing to accrue from the date of closing, at the then
current Mid-Term Applicable Federal Rate (the "AFR") under Section 1274(d) of
the Code for the month in which the closing occurs (or a rate per annum equal to
what the AFR would be for such month under Section 1274(d) of the Code if the
AFR is no longer published) to fully amortize such balance over the 60 payments,
with the first payment being due and payable on the first day of the month
following the month of the closing and the subsequent payments due and
payable on the first day of each and every month thereafter until paid in full,
or (ii) in full, without interest, at the closing of the purchase.
(f) If the Company does not elect to exercise its first
option and right to purchase all of the Offered Units of a Former Unitholder in
the event of a Cessation Event or proposed transfer, then the other Unitholders
shall have a second option and right, but not the obligation, to purchase any of
the Offered Units of the Former Unitholder not purchased by the Company on the
same terms and conditions applicable to the Company described in this Section
10.3; provided, however, that (i) the other Unitholders' right to purchase shall
-------- -------
commence on the date the Company's right to purchase expires and shall continue
for 30 days and (ii) the other Unitholders shall have the right to purchase the
Offered Units on a pro rata basis in accordance with the percentages that the
Units owned by each such other Unitholder bear to the total Units then owned by
all of the other Unitholders, or in such other percentages as they shall agree.
In the event that less than all of the other Unitholders elect to exercise such
option, then the electing Unitholders shall have the right to purchase the
Offered Units on a pro rata basis in accordance with the percentages which the
Units owned by each of them bear to the total number of Units then owned by all
of the electing Unitholders, or in such other percentages as they shall agree.
(g) If the Company and the other Unitholders do not
exercise their rights to purchase all of the Offered Units, the Former
Unitholder shall thereafter be free to transfer any remaining Offered Units,
but only on the terms and conditions set forth in the notice of the Cessation
Event or proposed transfer. If the transfer is not consummated within 90 days
after the election not to purchase by the Company and the other Unitholders, or
the terms of such transfer change in any material respect, the Offered Units
must again be offered to the Company and other Unitholders pursuant to this
Agreement. If the transfer is not consummated for any reason, the Former
Unitholder and the Offered Units shall remain bound by this Agreement.
(h) The Company's right to purchase shall commence on the
date it first receives notice of any such Cessation Event or transfer if it
occurred without the Former Unitholder giving written notice as described in
Section 10.3(b). If, contrary to the provisions of this Agreement, any Unit is
voluntarily, involuntarily or by operation of law transferred without compliance
with this Section 10.3, the options referred to herein shall be to purchase the
Units from the transferee.
10.4 Co-Sale Rights.
--------------
(a) Subject to the rights of first refusal contained in
Section 10.3 of this Agreement, which shall be prior and superior to the co-sale
rights contained in this Section 10.4, the Former Unitholder's notice described
in Section 10.3 of this Agreement shall also be deemed an offer by the Former
Unitholder to cause to be included with the Offered Units (to the extent not
purchased under the rights of first refusal in Section 10.3), on an equal basis
and on the same terms and conditions, the Units held by the other Unitholders.
-29-
(b) If the other Unitholders have not accepted the Former
Unitholder's co-sale offer in writing within ten (10) days from the date the
rights of first refusal in Section 10.3 terminate, then the Former Unitholder
shall thereafter be free for a period of ninety (90) days to sell the Offered
Units, at a price no greater than the price set forth in such notice and on
otherwise no more favorable terms to the Former Unitholder than as set forth in
such notice, without any further obligation to the other Unitholders in
connection with such sale. In the event that the Former Unitholder fails to
consummate the sale within such 90 day period, the Units specified in the notice
shall continue to be subject to this Section 10.4.
(c) If the other Unitholders accept the co-sale offer in
writing within the ten (10) day period described above, such acceptance shall be
irrevocable unless the Former Unitholder shall be unable to cause to be included
in such sale the Units held by the other Unitholders subject to the written
acceptance. In that event, the Former Unitholder and the other Unitholders
shall participate in the sale on a pro rata basis in accordance with the
percentages that the Units offered for sale by each such selling Unitholder bear
to the total number of Units offered for sale by all of the selling Unitholders
or in such other percentages as they shall agree.
10.5 Deadlock Offer. Subject to the rights of first refusal
--------------
contained in Section 10.3 of this Agreement, which shall be prior and superior
to the offer rights contained in this Section 10.5:
(a) If at any time after December 31, 2005 the Managers
shall become deadlocked with respect to a vote, consent or approval on any
matter, the deadlock makes it reasonably impractical to carry on the Company's
business in conformity with this Agreement, and the Unitholders are unable to
break the deadlock by a vote of Unitholders, then any Unitholder (hereinafter
referred to as an "Offering Unitholder") may deliver a written notice (an
"Offer Notice") to the other Unitholders making an offer to sell all of the
Offering Unitholder's Units to the other Unitholders or to buy all of the other
Unitholder's Units, in either case at the price set forth in the Offer Notice,
and giving the other Unitholders the right to choose whether to sell their Units
or to buy the Offering Unitholder's Units at that price.
(b) Delivery of an Offer Notice shall constitute a binding
offer by the Offering Unitholder to either sell its Units or to buy the other
Unitholder's Units at the price set forth in the Offer Notice and at the
election of the other Unitholders. The offer shall be irrevocable for a period
of ninety (90) days after the date the Offer Notice is delivered to the other
Unitholders.
(c) Within ninety (90) days after delivery of an Offer Notice, the
other Unitholders may deliver a written notice (an "Acceptance Notice") to the
Offering Unitholder stating whether the other Unitholders elect to sell their
Units or to buy the Offering Unitholder's Units under the Offer Notice. If the
other Unitholders do not deliver an Acceptance Notice within such 90 day period,
then the Offering Unitholder may, within ten (10) days after expiration of such
90 day period, deliver a written notice (an "Offering Unitholder's Acceptance
Notice") to the other Unitholders stating that the Offering Unitholder will
either sell its Units to the other Unitholders or buy the other Unitholders'
Units in accordance with the Offer Notice. Upon delivery of an Acceptance
Notice or Offering Unitholders' Acceptance Notice, as the case may be, a binding
and enforceable contract shall exist between the Offering Unitholder and the
other Unitholders under the Offer Notice and Acceptance Notice or Offering
Unitholder's Acceptance Notice, as the case may be, and the Offering Unitholder
and other Unitholders shall be obligated to buy or sell Units in accordance with
the Offer Notice and Acceptance Notice or Offering Unitholder's' Acceptance
Notice, as the case may be, and this Agreement. If neither an Acceptance Notice
or Offering Unitholder's Acceptance Notice is delivered within the required time
periods, then the offer contained in the Offer Notice shall be deemed rejected
and terminated.
-30-
(d) The determination by the other Unitholders whether to
buy or sell in response to an Offer Notice shall be made by the vote, consent or
approval of the other Unitholders holding at least a majority of Units of the
other Unitholders entitled to vote (and specifically excluding for such purposes
the Units of the Offering Unitholder); provided, however, that in the event of a
-------- -------
deadlock of the other Unitholders, then the Offering Unitholder shall have the
right to notify the other Unitholders as to whether the Offering Unitholder will
buy or sell. The determination of other Unitholders holding at least a majority
of the Units entitled to vote shall be conclusive and binding on all of the
other Unitholders, except as otherwise provided in Section 10.5(e) below.
(e) If the other Unitholders elect to buy the Offering
Unitholder's Units, then the other Unitholders shall purchase the Offering
Unitholder's Units on a pro rata basis in accordance with the percentages that
the Units owned by each such other Unitholder bears to the total Units owned by
all of the other Unitholders, or in such other percentages as they shall agree.
(f) Notwithstanding anything in this Agreement to the
contrary:
(i) No Unitholder may deliver an Offer Notice
during the period after another Unitholder has delivered an
Offer Notice and before the first to occur of the closing of the
sale or purchase under the prior Offer Notice or the expiration
of the time periods to deliver an Acceptance Notice or Offering
Unitholder's Acceptance Notice.
(ii) Any Offer Notice must apply to all of the Units
of the Offering Unitholder and the other Unitholders, and no
Offer Notice to buy or sell less than all of the Offering
Unitholder's Units or other Unitholder's Units shall be valid or
enforceable.
(iii) Any Offer Notice must state the price in terms
of a total price for each Unit to be bought or sold. No Offer
Notice may state different prices for Units depending on their
sale or purchase.
(iv) The provisions of this Section 10.5 shall be
binding on any transferee or assignee of a Unit.
(g) The purchase price in a purchase under this Section
10.5 shall be paid by the Offering Unitholder or other Unitholders, as the case
may be, at the closing by delivery of a cashier's check or wire transfer of
immediately available funds for the full amount of the purchase price.
-31-
(h) Except as otherwise mutually agreed by the parties, the
closing of a purchase under this Section 10.5 shall take place within 30 days
following the delivery of an Acceptance Notice or Offering Unitholder's
Acceptance Notice, as the case may be. The date, time and place (not outside
New York, New York) of the closing shall be as specified in the Acceptance
Notice or Offering Unitholder's Acceptance Notice, as the case may be. At the
closing, the buyers shall deliver the purchase price in accordance with this
Section 10.5, and any Unit Certificates of the selling Unitholders, duly
endorsed, shall be delivered by the selling Unitholders (or their
representatives).
10.6 Cooperation. Upon exercise by the Company or the Unitholders
-----------
of their rights to purchase as described above, the Former Unitholder or its
heirs, executors, administrators, estate, legal representatives, successors or
assigns, as the case may be, shall be obligated to sell the Units on the terms
and conditions set forth in this Agreement and to take such actions and to
deliver such documents as the Company or other Unitholders may reasonably
request to consummate the sale of the Units.
10.7 Further Restrictions on Transfer. No Unitholder shall
--------------------------------
transfer, all or any part of such Unitholder's Interest in the Company: (a)
without registration under federal and state securities laws, if applicable, or
unless such Unitholder delivers an opinion of counsel satisfactory to the
Company that registration under such laws is not required; or (b) if the
Interest to be transferred, when added to the total of all other Interests
transferred in the preceding twelve (12) consecutive months prior thereto, would
result in the termination of the Company under Section 708 of the Code.
10.8 Substitute Unitholders.
----------------------
(a) Subject to Section 10.8(b), a transferee of an Interest
shall have the right to become a Substitute Unitholder only if (i) the
requirements of this Article 10 are met; (ii) at least a majority of the
Managers consent to admission of the transferee as a Substitute Unitholder;
(iii) such Person executes an instrument satisfactory to the Company and the
Managers accepting and adopting the terms and provisions of this Agreement;
(iv) such Person satisfies the requirements of any investment adviser, broker-
dealer or other law or registration requirement applicable to the Company; and
(v) such Person pays any reasonable expenses in connection with his or her
admission as a Substitute Unitholder.
(b) Notwithstanding anything contained herein that may be
construed to the contrary, a Unitholder may, subject to Section 10.7, freely
transfer any Units to an Affiliate of the Unitholder and such Affiliate
transferee shall be admitted as a Substitute Member by complying solely with the
provisions of Section 10.8(a)(iii), (iv) and (v).
10.9 Effect of Transfer.
------------------
(a) Any permitted transfer of all or any portion of a
Unitholder's Units in the Company will take effect on the first day of the month
following receipt by the Company of written notice of transfer. Any transferee
of Units shall take subject to the restrictions on transfer imposed by this
Agreement.
-32-
(b) Upon (i) any transfer of Units in violation of this
Agreement or (ii) any transfer of Units in compliance with this Agreement to a
transferee who is not an existing Unitholder and who has not become a Substitute
Unitholder pursuant to Section 10.8, the transferee shall have no right to
participate in the management of the business and affairs of the Company, to
vote, consent or approve with respect to any matter submitted to the vote,
consent or approval of Unitholders, to elect Managers or participate in the
election of Managers, to exercise any rights of a Unitholder, or to become a
Unitholder, but such transferee shall only be entitled to receive the
distributions and return of Capital Contributions to which the transferor of
such Interest would otherwise be entitled.
(c) A transfer of Units shall not by itself dissolve the
Company. Unless otherwise agreed by the Managers, a Former Unitholder shall
cease to be a Unitholder of the Company effective upon the occurrence of a
transfer (or, if the transfer occurs without notice to the Company, upon the
Company's receipt of notice of the transfer) of all of the Former Unitholder's
Units, regardless of whether or not the transferee is admitted as a Substitute
Unitholder, and such Former Unitholder shall have no right or power to exercise
any rights of a Unitholder.
10.10 Except as permitted in Sections 7.6(a)(i) of the DNB Purchase
Agreement and Fiduciary Purchase Agreement, as applicable, with respect to the
initial Members and their Affiliates (including without limitation, their
Affiliates to whom their Units may be transferred), for a period of five (5)
years after the purchase of a Unitholder's Units under this Article 10, the
selling Unitholder shall not, without the prior written consent of Company,
directly or indirectly:
(i) Acting alone or as a member of a joint venture
or partnership, or as a member, manager, director, officer,
employee, agent, consultant or representative of any person,
consult with, advise, or engage in any business which competes
with the Company in North America in the Company's business;
(ii) Finance, extend credit to, or act as surety or
guarantor for (for value or by gift) or own, hold or acquire a
direct, indirect or beneficial interest in, any person who
competes with the Company in North America in the Company's
business (except a Unitholder may invest in competitive,
publicly traded business enterprises if its investment
represents 2% or less of the enterprise's ownership interests);
or
(iii) Solicit, divert, take away or interfere with
any of the customers, trade, business, patronage, employees or
agents of the Company.
ARTICLE 11
----------
DISSOLUTION
11.1 Dissolution of the Company.
--------------------------
-33-
(a) The Company shall be dissolved, its assets disposed of,
and its affairs wound up upon the happening of the first to occur of the
following:
(i) A vote or consent by Unitholders holding a
majority of the Units entitled to vote that the Company should
be dissolved.
(ii) The stated date for dissolution of the Company,
if any, set forth in the Certificate of Formation.
(iii) The occurrence of a Cessation Event if at the
time the Company has only one Unitholder, except as otherwise
provided in the Act.
(iv) A dissolution event as may be provided by
applicable law, to the extent not overridden by this Agreement.
(b) Except as otherwise expressly provided in this
Agreement, the occurrence of a Cessation Event or the resignation or withdrawal
of a Unitholder shall not cause the Company to be dissolved.
(c) Upon dissolution, the Company shall continue its
existence but shall not carry on any business except that appropriate to wind up
and liquidate its business and affairs, including without limitation collecting
its assets, disposing of its properties not to be distributed in kind to its
Unitholders, discharging or making provision for discharging its liabilities,
distributing its remaining property among its Unitholders according to their
interests, and doing any other act necessary to wind up and liquidate its
business and affairs.
11.2 Winding Up, Liquidation and Distribution of Assets. Upon
--------------------------------------------------
dissolution, an accounting shall be made of the accounts of the Company and of
the Company's assets, liabilities, and operations. The Managers shall
immediately proceed to wind up the affairs of the Company. If the Company is
dissolved and its affairs are to be wound up, the Managers shall:
(a) Collect, sell or otherwise liquidate all of the
Company's assets as promptly as practicable (except to the extent the Managers
may determine to distribute any assets to the Unitholders in kind).
(b) Allocate any net profit or net loss resulting from
such sales to the Unitholders in accordance with Article 5 above.
(c) Discharge or make provision for the discharge of all
liabilities of the Company, including liabilities to Unitholders who are
creditors, to the extent permitted by law, other than liabilities to
Unitholders for distributions, and establish such reserves as may be reasonably
necessary to provide for contingencies or liabilities of the Company (for
purposes of determining the Capital Accounts of the Unitholders, the amounts of
such reserves shall be deemed to be an expense of the Company).
(d) Distribute the remaining assets in the following order:
-34-
(i) If any assets of the Company are to be
distributed in kind, the net fair market value of those assets
as of the date of termination shall be determined by independent
appraisal or by agreement of the Unitholders. Those assets
shall be deemed to have been sold as of the date of dissolution
for their fair market value, and the Capital Accounts of the
Unitholders shall be adjusted pursuant to the provisions of this
Agreement to reflect such deemed sale.
(ii) The positive balance (if any) of each
Unitholder's Capital Account (as determined after taking into
account all Capital Account adjustments for the Company's
taxable year during which the liquidation occurs) shall be
distributed to the Unitholders, either in cash or in kind, with
any assets distributed in kind being valued for this purpose at
their fair market value as determined pursuant to this Section.
Any such distributions to the Unitholders in respect of their
Capital Accounts shall be made in accordance with the time
requirements set forth in Treas. Reg. 1.704-1(b)(2)(ii)(b)(2).
(e) Do every other act or thing necessary or appropriate to
wind up and liquidate the Company's business and affairs.
11.3 Deficit Capital Accounts upon Liquidation. Notwithstanding
-----------------------------------------
anything to the contrary in this Agreement, upon a liquidation within the
meaning of Treas. Reg. 1.704-1(b)(2)(ii)(g), if any Unitholder has a deficit in
its Capital Account (after giving effect to all contributions, distributions,
allocations, and other Capital Account adjustments for all taxable years,
including the year during which such liquidation occurs), the Unitholder shall
have no obligation to make any Capital Contribution, and the negative balance of
the Unitholder's Capital Account shall not be considered a debt owed by the
Unitholder to the Company or to any other person for any purpose whatsoever.
11.4 Final Dissolution. Upon completion of the winding up,
-----------------
liquidation and distribution of the business affairs, assets and liabilities of
the Company, it shall be deemed finally dissolved.
11.5 Certificate of Dissolution. After the dissolution of the
--------------------------
Company, a certificate of dissolution shall be executed and delivered to the
Delaware Secretary of State for filing in accordance with the Act. The Managers
or other appropriate party shall have authority to distribute any Company
property discovered after dissolution, to convey real estate, and to take such
other action as may be necessary on behalf of and in the name of the Company.
11.6 Return of Contribution Nonrecourse to Other Unitholders.
-------------------------------------------------------
Except as provided by law or as expressly provided in this Agreement, upon
dissolution, each Unitholder shall look solely to the assets of the Company for
the return of its Capital Contribution. If the Company property remaining after
the payment, discharge or provision for the discharge of the debts and
liabilities of the Company is insufficient to return the Capital Contribution of
one or more Unitholders, the Unitholders shall have no recourse against any
other Unitholder.
-35-
ARTICLE 12
----------
INVESTMENT REPRESENTATIONS
Each Unitholder hereby represents, warrants and agrees that:
(1) the Interests evidenced by this Agreement have not been registered under the
Securities Act of 1933 or any state securities laws (the "Securities Acts")
because the Company is issuing these Interests in reliance upon exemptions from
the registration requirements of the Securities Acts providing for issuance of
securities not involving a public offering, (2) the Company has relied upon the
fact that the Interests are to be held by each Unitholder for investment, and
(3) exemption from registrations under the Securities Acts would not be
available if the Interests were acquired by a Unitholder with a view to
distribution or resale.
Each Unitholder further acknowledges, covenants and agrees: (i)
the Unitholder is acquiring the Interests for its own account, for investment
and not with a view to the resale or distribution thereof; (ii) not to transfer,
sell or offer for sale any portion of the Interests unless there is an effective
registration or other qualification relating thereto under the Securities Act or
unless the holder of Interests delivers to the Company an opinion of counsel,
satisfactory to the Company, that such registration or other qualification under
the Securities Acts is not required in connection with such transfer, offer or
sale; (iii) the Company is under no obligation to register the Interests or to
assist such Unitholder in complying with any exemption from registration under
the Securities Acts if such Unitholder should at a later date wish to dispose of
its Interest; and (iv) the Interests are unlikely to qualify for disposition
under Rule 144 of the Securities and Exchange Commission unless such Unitholder
is not an "affiliate" of the Company and the Interest has been beneficially
owned and fully paid for by such Unitholder for at least three years.
The Unitholder, prior to acquiring an Interest, has made an
investigation of the Company and its business, and the Company has made
available to the Unitholder all information with respect to the Company which
the Unitholder needs to make an informed decision to acquire the Interest. The
Unitholder considers itself to be a person possessing experience and
sophistication as an investor that are adequate for the evaluation of the merits
and risks of such Unitholder's investment in the Company.
ARTICLE 13
----------
MISCELLANEOUS
13.1 Complete Agreement. This Agreement and the Certificate of
------------------
Formation constitute the complete and exclusive agreement among the Unitholders
with respect to the subject matter hereof. This Agreement and the Certificate
of Formation supersede all prior written and oral statements, and no
representation, statement, or condition or warranty not contained in this
Agreement or the Certificate of Formation will be binding on the Unitholders or
have any force or effect whatsoever, with respect to the subject matter hereof.
-36-
13.2 Governing Law. This Agreement and the rights of the parties
-------------
hereunder will be governed by, interpreted and enforced in accordance with the
laws of the State of Delaware.
13.3 Binding Effect. Subject to the provisions of this Agreement
--------------
relating to transfers of Units, this Agreement will be binding upon and inure
to the benefit of the Unitholders, Mangers and their respective heirs, estates,
personal representatives, successors and assigns.
13.4 Terms. Common nouns and pronouns refer to the masculine,
-----
feminine, neuter, singular and plural, as the identity of the Person may in the
context require. Any reference to the Act, Code or other statutes or laws
include all amendments, modifications, or replacements of the specific sections
and provisions concerned.
13.5 Headings. All headings herein are inserted only for
--------convenience and ease of reference and are not to be
considered in the construction or interpretation of any provision of this
Agreement.
13.6 Severability. If any provision of this Agreement is held to be
------------
illegal, invalid, or unenforceable under the present or future laws effective
during the term of this Agreement, such provision will be fully severable; this
Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid, or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision, there will be added automatically as a part
of this Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and enforceable.
13.7 Multiple Counterparts. This Agreement may be executed in
---------------------
several counterparts, each of which will be deemed an original but all of which
will constitute one and the same instrument. However, in making proof hereof
it will be necessary to produce only one copy hereof signed by the party to be
charged.
13.8 Additional Documents and Acts. Each Unitholder agrees to
-----------------------------
execute and deliver such additional documents and instruments and to perform
such additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions, and conditions of this Agreement and
the transactions contemplated hereby.
13.9 No Third Party Beneficiary. This Agreement is made solely and
--------------------------
specifically among and for the benefit of the parties hereto and their
respective successors and assigns, subject to the express provisions hereof
relating to successors and assigns, and no other person will have any rights,
interests, or claims hereunder or be entitled to any benefits under or on
account of this Agreement as a third party beneficiary or otherwise.
13.10 References to this Agreement. Numbered or lettered articles,
----------------------------
sections and subsections used in this Agreement refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated. The terms
"herein," "hereof," "hereunder," "hereby," and the like refer to this Agreement
as a whole and not to particular Articles, Sections, subsections or provisions
of this Agreement.
-37-
13.11 Notices. Any notice to be given or to be served upon the
-------
Company or any party hereto in connection with this Agreement must be in writing
and will be deemed to have been given and received when delivered to the address
specified by the party to receive the notice. Such notices will be given to a
Unitholder at its address specified in Exhibit A hereto. Any Unitholder or the
Company may designate any other address in substitution of the foregoing address
to which such notice will be given.
13.12 Amendments. This Agreement may be amended by vote of the
----------
Unitholders holding at least a majority of the Units; provided, however, that
-------- -------
any amendments adjusting the Capital Contributions of a Unitholder, creating any
liability for a Unitholder, removing any limitation on liability for a
Unitholder, changing the manner of electing Managers, or modifying Section 4.1
(d), shall not be effective against any Unitholder who does not vote for such
amendment.
13.13 Title to Company Property. Legal title to all property of the
-------------------------
Company will be held and conveyed in the name of the Company.
13.14 Reliance on Authority of Person Signing Agreement. In the
-------------------------------------------------
event that a Unitholder is not a natural person, neither the Company nor any
Unitholder will (a) be required to determine the authority of the individual
signing this Agreement or to make any commitment or undertaking on behalf of
such Person or to determine any fact or circumstance bearing upon the existence
of the authority of such individual or (b) be required to see to the application
or distribution of proceeds paid or credited to individuals signing this
Agreement on behalf of such Person.
13.15 Specific Performance. The provisions of this Agreement shall
--------------------
be specifically enforceable by the Company and Unitholders.
-38-
S I G N A T U R E S :
- - - - - - - - - -
The undersigned have executed this Agreement on the dates set forth
beneath their signatures, but effective as of the date set forth in the caption.
OAKTREE ASSET MANAGEMENT, LLC
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Printed Name: Xxxxx X. Xxxxxxx
------------------
Title: Manager
-----------------------
Date: March 2, 2004
--------------------------
By: /s/Xxxx X. Xxxx
----------------------------
Printed Name: Xxxx X. Xxxx
------------------
Title: Manager
------------------------
Date: March 2, 2004
--------------------------
FIDUCIARY COUNSEL, INC.
By: /s/Xxxx X. Xxxx
----------------------------
Printed Name: Xxxx X. Xxxx
------------------
Title: Director
-------------------------
Date: March 2, 2004
--------------------------
-39-
OAKTREE ASSET MANAGEMENT, INC.
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Printed Name: Xxxxx X. Xxxxxxx
------------------
Title: President
-------------------------
Date: March 2, 2004
--------------------------
PIN OAK CAPITAL, INC.
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Printed Name: Xxxxx X. Xxxxxxx
------------------
Title: President
-------------------------
Date: March 2, 2004
--------------------------
FINANCIAL ASSETS CORP.
By: /s/Xxxxx X. Xxxxxxx
----------------------------
Printed Name: Xxxxx X. Xxxxxxx
------------------
Title: President
-------------------------
Date: March 2, 2004
--------------------------
-40-
EXHIBIT A
UNITHOLDERS
-----------
NO. OF
NAMES OF UNITHOLDERS ADDRESSES INITIAL CAPITAL CONTRIBUTIONS UNITS
-------------------- --------- ----------------------------- ------
Fiduciary Counsel, Inc. c/o Xxxx X. Xxxx The "Purchased Assets" defined
0000 Xxxxxxxxxx Xxxxx and described in the Fiduciary _____
Xxxxxxxxx, Xxxxxxxx 00000 Purchase Agreement, subject to
the "Assumed Liabilities"
defined and described therein.
Oaktree Asset Management, Inc. 00 Xxxx Xxxxxx The "Purchased Assets" of
Suite 1203 Oaktree defined and described _____
Xxx Xxxx, XX, 00000 in the DNB Purchase Agreement,
subject to the "Assumed
Liabilities" of Oaktree defined
and described therein.
Pin Oak Capital, Inc. 00 Xxxx Xxxxxx The "Purchased Assets" of Pin
Suite 1203 Oak defined and described in _____
Xxx Xxxx, XX, 00000 the DNB Purchase Agreement,
subject to the "Assumed
Liabilities" of Pin Oak defined
and described therein.
Financial Assets Corp. 00 Xxxx Xxxxxx The "Purchased Assets" of
Suite 1203 Financial defined and described _____
Xxx Xxxx, XX, 00000 in the DNB Purchase Agreement,
subject to the "Assumed
Liabilities" of Financial
defined and described therein.
-41-
