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EXHIBIT 4.28
MERGER AGREEMENT
AMONG
NATIONAL ASSET MANAGEMENT CORPORATION,
THE SELLERS,
THE OPTION HOLDER,
AND
AMVESCAP PLC
AND
AVZ, INC.
DATED AS OF FEBRUARY 28, 2001
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions..................................................2
ARTICLE II
THE MERGER
Section 2.1 The Merger...................................................2
Section 2.2 Effective Date and Effective Time............................2
Section 2.3 Merger Consideration.........................................3
Section 2.4 Rights as Shareholders; Stock Transfers......................4
Section 2.5 Exchange Procedures..........................................4
Section 2.6 Client Look-Backs............................................5
Section 2.7 Additional Consideration.....................................6
Section 2.8 Closing......................................................9
Section 2.9 Estimated Closing Balance Sheet.............................10
Section 2.10 Deliveries at the Closing...................................11
Section 2.11 Legending of Securities.....................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS AND THE COMPANY
Section 3.1 Organization and Related Matters............................13
Section 3.2 Capital Structure...........................................13
Section 3.3 Title.......................................................14
Section 3.4 Authority; No Violation.....................................14
Section 3.5 Consents and Approvals......................................15
Section 3.6 Government Regulation.......................................16
Section 3.7 Properties..................................................21
Section 3.8 Financial Statements........................................22
Section 3.9 Absence of Changes..........................................23
Section 3.10 Contracts...................................................25
Section 3.11 No Other Brokers............................................27
Section 3.12 Legal Proceedings...........................................27
Section 3.13 Compliance with Applicable Law..............................27
Section 3.14 Insurance...................................................28
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Section 3.15 Employee Benefit Plans; ERISA...............................28
Section 3.16 Technology and Intellectual Property........................30
Section 3.17 Taxes.......................................................32
Section 3.18 Assets Under Management.....................................35
Section 3.19 Affiliate Transactions......................................35
Section 3.20 Labor Matters, etc..........................................35
Section 3.21 Derivative Products.........................................35
Section 3.22 Books and Records...........................................36
Section 3.23 Environmental Matters.......................................36
Section 3.24 Disclosure..................................................37
Section 3.25 Investment..................................................37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BUYER AND BUYER PARENT
Section 4.1 Organization and Related Matters............................38
Section 4.2 Authority; No Violation.....................................39
Section 4.3 Consents and Approvals......................................39
Section 4.4 Buyer Financing.............................................40
Section 4.5 No Other Broker.............................................40
Section 4.6 Legal Proceedings...........................................40
Section 4.7 Capitalization..............................................40
Section 4.8 Buyer Parent Reports........................................41
Section 4.9 Taxes.......................................................41
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business by the Company..........................41
Section 5.2 No Solicitation, etc........................................43
Section 5.3 Consents....................................................43
Section 5.4 Investment Company Matters..................................46
Section 5.5 Insurance...................................................47
Section 5.6 Further Assurances..........................................47
Section 5.7 Efforts of Parties to Close.................................47
Section 5.8 Confidentiality and Announcements...........................48
Section 5.9 Access, Certain Communications..............................48
Section 5.10 Regulatory Matters; Third Party Consents....................49
Section 5.11 Expenses....................................................50
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Section 5.12 Non-Foreign Person Affidavit................................50
Section 5.13 Releases....................................................50
Section 5.14 Retention Bonus Plan........................................51
Section 5.15 Option Holders..............................................51
Section 5.16 Termination of Employee Benefit Plans.......................51
Section 5.17 Shareholder Approval of Certain Matters.....................52
Section 5.18 Seller Representative Approval..............................52
Section 5.19 Payment of Preferred Dividend Amount........................52
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Buyer's and Buyer Parent's Obligations........53
Section 6.2 Conditions to the Company and the Sellers' Obligations......54
Section 6.3 Mutual Conditions...........................................55
ARTICLE VII
INDEMNIFICATION
Section 7.1 Survival of Representations, Warranties and Covenants.......55
Section 7.2 Obligations of the Common Sellers...........................56
Section 7.3 Obligations of the Preferred Seller.........................57
Section 7.4 Obligations of Buyer and Buyer Parent.......................58
Section 7.5 Procedure...................................................59
Section 7.6 Survival of Indemnity.......................................61
Section 7.7 Minimum Losses..............................................61
Section 7.8 Maximum Indemnification.....................................61
Section 7.9 Subrogation.................................................62
Section 7.10 Adjustments to Indemnification Obligations..................62
Section 7.11 Exclusive Remedy............................................62
Section 7.12 Right of Off-Set/Set-Off....................................62
Section 7.13 Adjustment..................................................63
Section 7.14 Seller Representative.......................................63
ARTICLE VIII
TAX MATTERS
Section 8.1 Tax Matters.................................................64
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ARTICLE IX
TERMINATION
Section 9.1 Termination.................................................66
Section 9.2 Survival After Termination..................................67
ARTICLE X
MISCELLANEOUS
Section 10.1 Amendments; Extension; Waiver...............................68
Section 10.2 Entire Agreement............................................68
Section 10.3 Interpretation..............................................68
Section 10.4 Severability................................................68
Section 10.5 Notices.....................................................69
Section 10.6 Binding Effect; Persons Benefiting; Assignment..............70
Section 10.7 Counterparts................................................70
Section 10.8 Governing Law...............................................70
Section 10.9 Specific Performance........................................71
Section 10.10 Waiver of Jury Trial and Punitive Damages...................71
Section 10.11 Seller Representative.......................................71
Annex A: Definitions................................................A-1
Annex B: Retention Plan.............................................B-1
Annex C: Employment Agreement.......................................C-1
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MERGER AGREEMENT
MERGER AGREEMENT, dated as of February 28, 2001, by and among AMVESCAP
PLC, a company incorporated under the laws of England ("Buyer Parent"), AVZ,
Inc., a Delaware corporation and a direct wholly owned subsidiary of Buyer
Parent ("Buyer", and together with Buyer Parent, the "Buyers"), National Asset
Management Corporation, the Persons set forth under the heading "Common Sellers"
on the signature pages (each a "Common Seller"), the Person set forth under the
heading "Preferred Seller" on the signature pages (the "Preferred Seller", and
together with the Common Sellers, the "Sellers") and the Person set forth under
the heading "Option Holder" on the signature pages.
RECITALS
WHEREAS, the Common Sellers and the Preferred Seller are the owners of
all of the shares of Common Stock and Preferred Stock, respectively, of the
Company;
WHEREAS, Buyer Parent and its wholly owned subsidiary, Buyer, desire to
acquire the Company by means of a merger of the Company with and into Buyer on
the terms and conditions set forth herein, with Buyer being the surviving
corporation of such merger;
WHEREAS, in order to induce Buyer Parent and Buyer to consummate such
merger, the Sellers have agreed to make certain representations and warranties
to the Buyers with respect to the business, affairs and condition of the
Company, and the Sellers desire to make certain other agreements in connection
with and to facilitate such merger, including the agreement of each Seller to
approve such merger; and
WHEREAS, certain employees of the Company have entered into Employment
Agreements with the Buyer concurrently with the execution of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be bound hereby, the parties hereby agree as
follows:
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement,
capitalized terms used herein without definitions shall have their respective
meanings as set forth in Annex A hereto.
ARTICLE II
THE MERGER
Section 2.1 The Merger.
(a) At the Effective Time, the Company shall merge with and into Buyer
(the "Merger"), the separate corporate existence of the Company shall cease and
Buyer shall survive and continue to exist as a Delaware corporation (the
"Surviving Corporation").
(b) Subject to the satisfaction or waiver of the conditions set forth
in Article VI, the Merger shall become effective upon the occurrence of the
filing in the office of the Secretary of State of the State of Delaware of a
certificate of merger in accordance with Section 251 of the DGCL and the filing
in the office of the Secretary of State of the State of Kentucky of articles of
merger in accordance with Section 271B.11-050 of the KBCA, or such later date
and time as may be set forth in such certificate or articles. The Merger shall
have the effects prescribed in the DGCL and the KBCA.
(c) Articles of Incorporation and By-Laws. The certificate of
incorporation and by-laws of the Surviving Corporation immediately after the
Merger shall be those of Buyer as in effect immediately prior to the Effective
Time.
(d) Directors and Officers of Surviving Corporation. The directors and
officers of the Surviving Corporation immediately after the Merger shall be the
directors and officers of Buyer immediately prior to the Effective Time, until
such time as their successors shall be duly elected and qualified.
Section 2.2 Effective Date and Effective Time. Subject to the
satisfaction or waiver of the conditions set forth in Article VI, the parties
shall cause the effective date of the Merger (the "Effective Date") to occur (i)
as soon as practical following the Closing but in no event later than the close
of business on the Closing Date, or (ii) such other date to which the parties
may agree in writing. The time on the
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Effective Date when the Merger shall become effective is referred to as the
"Effective Time."
Section 2.3 Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(a) subject to subsection (c) below, the one share of Preferred Stock
issued and outstanding immediately prior to the Effective Time shall become and
be converted into solely the right to receive (i) cash in the amount of (A) 50%
of the Cash Merger Consideration less (B) $1,000,000 (such result, the
"Preferred Stock Cash Consideration"), (ii) 50% of the Equity Merger
Consideration (the "Preferred Stock Equity Consideration"), and (iii) the
Aggregate Preferred Contingent Consideration, if any, as provided in Section 2.7
below; and
(b) subject to subsection (c) below, each share of Common Stock issued
and outstanding immediately prior to the Effective Time shall become and be
converted into solely the right to receive (i) cash in an amount equal to (A)
the Cash Merger Consideration minus (B) the Preferred Stock Cash Consideration
(such result, the "Adjusted Common Stock Cash Consideration"), with the result
of such subtraction being divided by (C) the number of shares of Common Stock
issued and outstanding immediately prior to the Effective Time (the result of
the foregoing computation being the "Per Share Cash Consideration") and (ii)
that number of Parent Shares equal to (X) the Equity Merger Consideration minus
(Y) the Preferred Stock Equity Consideration, with the result of such
subtraction being divided by (Z) the number of shares of Common Stock
outstanding immediately prior to the Effective Time (the result of the foregoing
computation being the "Per Share Equity Consideration"), and (iii) the quotient
of the Aggregate Common Contingent Consideration, if any, payable with respect
to a share of Common Stock as provided in Section 2.7 below, divided by the
number of shares of Common Stock issued and outstanding immediately prior to the
Effective Time.
(c) Notwithstanding any other provision of this Agreement, the amount
of Preferred Stock Cash Consideration and Adjusted Common Stock Cash
Consideration shall be increased and/or decreased, as the case may be, to give
effect to the proposition that the Preferred Seller will receive an amount of
Preferred Stock Cash Consideration under subsection (a) that such Preferred
Seller would have received if there was no increase or decrease, as the case may
be, to the Adjusted Merger Consideration as a result of a Net Capital Excess or
Net Capital Shortfall, respectively.
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(d) Outstanding Buyer Stock. Each share of the capital stock of Buyer
issued and outstanding immediately prior to the Effective Time shall remain
issued and outstanding and unaffected by the Merger.
Section 2.4 Rights as Shareholders; Stock Transfers. At the Effective
Time, holders of the Preferred Stock and the Common Stock shall cease to be, and
shall have no rights as, shareholders of the Company, except to receive the
consideration payable in respect of such stock as provided in this Article II.
Upon and after the Effective Time, the Company's stock transfer books will be
closed and no transfers of shares of Preferred Stock or Common Stock will be
made.
Section 2.5 Exchange Procedures.
(a) At the Effective Time, the Surviving Corporation or Buyer Parent
shall:
(i) pay the Preferred Stock Cash Consideration by Wire
Transfer to the holder of the Preferred Stock, against delivery to the
Surviving Corporation by or on behalf of such holder of the
certificate, endorsed by such holder for surrender and cancellation,
representing the share of Preferred Stock issued and outstanding
immediately prior to the Effective Time and owned by such holder;
(ii) pay by Wire Transfer to each holder of Common Stock,
against delivery to the Surviving Corporation by or on behalf of such
holder of the certificate or certificates, endorsed by such holder for
surrender and cancellation, representing the shares of Common Stock
issued and outstanding immediately prior to the Effective Time and
respectively owned by such holder, the Per Share Cash Consideration
payable in respect of such shares; and
(iii) issue and deliver to (A) the holder of the Preferred
Stock, against delivery of the certificate representing the shares of
Preferred Stock issued and outstanding immediately prior to the
Effective Time and owned by such holder immediately prior to the
Effective Time, a certificate representing the whole number of shares
of Parent Stock constituting the Preferred Stock Equity Consideration,
and (B) each holder of Common Stock, against delivery of certificates
representing shares of Common Stock issued and outstanding immediately
prior to the Effective Time and respectively owned by such holder, a
certificate representing Per Share Equity Consideration issuable in
respect of the shares of Common Stock so delivered, in each case
disregarding any fractional shares resulting from the computation of
the
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number of shares of Parent Stock issuable to such holder in respect of
shares of Preferred Stock or Common Stock respectively owned by such
holder immediately prior to the Closing.
(b) The Surviving Corporation shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Preferred Stock or Common Stock, such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any applicable provision of state, local or foreign tax law; provided,
however, that if a Seller provides the affidavit referred to in Section 5.12, no
deduction may be made under Section 1445 of the Code in respect of any amounts
payable to such Seller. To the extent that amounts are withheld by the Surviving
Corporation, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Preferred Stock or Common
Stock, as the case may be, in respect of which such deduction and withholding
was made by the Surviving Corporation.
Section 2.6 Client Look-Backs. Solely for purposes of calculating the
Closing Revenue Run-Rate and the amount of the Adjusted Merger Consideration:
(a) To the extent that Buyer Parent and the Seller Representative are
unable to agree that there exists for any Client a notification or
communication, whether written or oral, that would reasonably be construed as
equivalent to a statement that such Client will terminate or intends to
terminate its Investment Management Agreement with the Company within sixty (60)
days following the Closing Date under Section 5.3, such Clients will not be
deemed to have given their Consent at the Closing Date, but if, and to the
extent, that any such Client has not terminated, or advised the company, either
orally or in writing, of its intention to terminate, its Investment Management
Agreement during the sixty (60) day period following the Closing Date, such
Consent shall then be deemed to have been given as of the last day of the
calendar month ending prior to the Closing Date and Buyer Parent shall make a
payment to the Sellers promptly following the end of such sixty (60) day period
pro rata to each Seller (based on each Sellers' share of the aggregate Merger
Consideration paid to the Sellers under Article II) in an aggregate amount equal
to the amount that would have been paid to the Sellers in respect of all such
Clients had such Clients given such Consent on or prior to the last day of the
calendar month ending prior to the Closing Date.
(b) To the extent that any Person enters into an Investment Management
Agreement with the Company on or prior to the Closing Date but does not deposit
any funds with the Company in respect of such Investment Management Agreement on
or prior to the Closing Date, if, and to the extent, that such Person thereafter
deposits any funds in respect of such Investment Management Agreement during the
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sixty (60) day period following the Closing Date, such funds shall be deemed to
be included in Adjusted Closing Assets Under Management as if such funds had
been contributed as of the last day of the calendar month ending prior to the
Closing Date and Buyer Parent shall make a payment to the Sellers promptly
following the end of such sixty (60) day period pro rata to each Seller (based
on each Sellers' share of the aggregate Merger Consideration paid to the Sellers
under Article II) in an amount that would have been paid to the Sellers had such
funds been deposited on or prior to the last day of the calendar month ending
prior to the Closing Date.
(c) Shares of Parent Stock that are issuable pursuant to subparagraphs
(a) and (b) of this Section 2.6 shall be determined in the same manner as the
number of shares of Parent Stock comprising the Preferred Stock Equity
Consideration and the Per Share Equity Consideration is determined, and all
fractional shares resulting from such determination as to any Seller shall be
disregarded.
Section 2.7 Additional Consideration.
(a) As additional merger consideration, the Surviving Corporation
agrees to pay to the Preferred Seller and each Common Seller the Contingent
Consideration, if any, as follows:
(i) For the first Yearly Period, an amount equal to (A) if the
Yearly Period CAGR is equal to or less than 15%, 0, or (B) if the
Yearly Period CAGR is equal to or greater than 40%, 100% of the Annual
Contingent Cash Consideration and 100% of the Annual Contingent Equity
Consideration, or (C) if the Yearly Period CAGR is greater than 15% but
less than 40%, an amount equal to the sum of (i) the product of (A)
100% of the Annual Contingent Cash Consideration and (B) the Contingent
Percentage and (ii) the product of (A) 100% of the Annual Contingent
Equity Consideration and (B) the Contingent Percentage.
(ii) For the second Yearly Period, an amount equal to (A) if
the Yearly Period CAGR is equal to or less than 15%, 0, or (B) if the
Yearly Period CAGR is equal to or greater than 40%, 200% of the Annual
Contingent Cash Consideration and 200% of the Annual Contingent Equity
Consideration less the amount, if any, of Contingent Cash Consideration
and Contingent Equity Consideration, respectively, paid pursuant to
Section 2.7(a)(i), or (C) if the Yearly Period CAGR is greater than 15%
but less than 40%, an amount equal to the sum of (i) the product of (A)
200% of the Annual Contingent Cash Consideration and (B) the Contingent
Percentage for such Yearly Period and (ii) the product of (A) 200% of
the Annual Contingent Equity Consideration and (B) the Contingent
Percentage for such
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Yearly Period less (iii) the amount, if any, of Contingent Cash
Consideration and Contingent Equity Consideration, respectively, paid
pursuant to Section 2.7(a)(i); provided that in no case shall such
payment be less than 0.
(iii) For the third Yearly Period, an amount equal to (A) if
the Yearly Period CAGR is equal to or less than 15%, 0, or (B) if the
Yearly Period CAGR is equal to or greater than 40%, 300% of the Annual
Contingent Cash Consideration and 300% of the Annual Contingent Equity
Consideration less the amount, if any, of Contingent Cash Consideration
and Contingent Equity Consideration, respectively, paid pursuant to
Section 2.7(a)(i) and (ii), or (C) if the Yearly Period CAGR is greater
than 15% but less than 40%, an amount equal to the sum of (i) the
product of (A) 300% of the Annual Contingent Cash Consideration and (B)
the Contingent Percentage for such Yearly Period and (ii) the product
of (A) 300% of the Annual Contingent Equity Consideration and (B) the
Contingent Percentage for such Yearly Period less (iii) the amount, if
any, of Contingent Cash Consideration and Contingent Equity
Consideration, respectively, paid pursuant to Section 2.7(a)(i) and
(ii); provided that in no case shall such payment be less than 0.
(b) At the later of (x) sixty (60) days following the end of the Yearly
Period with respect to which any Annual Contingent Payment is payable or (y)
five (5) Business Days following the determination of the amount of Annual
Contingent Consideration for a Yearly Period pursuant to subsection (c)(iii)
below, the Surviving Corporation or Buyer Parent shall pay such Annual
Contingent Consideration to the Preferred Seller and each Common Seller as
follows:
(i) With respect to the Preferred Seller, (A) Wire Transfer to
the Preferred Seller an amount in cash equal to the product of (1) the
Annual Cash Contingent Payment in respect of such Yearly Period and (2)
the Preferred Participation Percentage (the "Annual Preferred
Contingent Cash Consideration") and (B) issue and deliver to the
Preferred Seller certificates representing a number of shares of Parent
Stock equal to the product of (1) the Annual Equity Contingent Payment
in respect of such Yearly Period and (2) the Preferred Participation
Percentage, rounded down to the nearest whole number (the "Annual
Preferred Contingent Equity Consideration") (the sum of each such
amounts, if any, for all Yearly Periods, the "Aggregate Preferred
Contingent Consideration"); and
(ii) With respect to each Common Seller, (A) Wire Transfer to
each Common Seller an amount in cash equal to the product of (1) Common
Seller Participation Percentage and (2) (x) the Annual Cash Contingent
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Payment in respect of such Yearly Period less (y) the Annual Preferred
Contingent Cash Consideration and (B) issue and deliver to each Common
Seller certificates representing a number of shares of Parent Stock
equal to the product of (1) Common Seller Participation Percentage and
(2) (x) the Annual Equity Contingent Payment in respect of such Yearly
Period less (y) the Annual Preferred Contingent Equity Consideration in
respect of such Yearly Period, rounded down to the nearest whole number
(the sum of each such amounts, if any, for all Yearly Periods, the
"Aggregate Common Contingent Consideration").
(c) As promptly as practicable, but in no event later than forty-five
(45) days after the end of each Yearly Period, the Surviving Corporation shall
cause to be prepared and delivered to the Seller Representative and the
Preferred Seller a statement setting forth the amount, if any, of the Annual
Contingent Payment in respect of such Yearly Period payable pursuant to this
Section 2.7 (the "Contingent Payment Statement").
(i) The Seller Representative and the Preferred Seller and
their representatives shall have the right to review the workpapers,
schedules and other documents and information prepared or reviewed by
the Surviving Corporation in connection with each Annual Contingent
Payment. The Surviving Corporation shall provide the Seller
Representative and the Preferred Seller and their representatives
reasonable access to the officers, employees, contracts, books and
records of the Surviving Corporation as the Seller Representative
and/or the Preferred Seller or their representatives may reasonably
request in order to verify the amount of any Annual Contingent Payment.
(ii) Within fifteen (15) days after the delivery of the
Contingent Payment Statement, the Seller Representative shall notify
the Surviving Corporation in writing of any objection thereto,
specifying in reasonable detail any such objection. If the Seller
Representative does not object in writing to the Contingent Payment
Statement within fifteen (15) days from receipt thereof or the
Surviving Corporation and the Seller Representative agree on the
resolution of all objections prior to the lapse of sixty (60) days
following the end of the Yearly Period to which such Contingent Payment
Statement relates, the Contingent Payment Statement (including any
changes as mutually agreed) shall be final and binding on all parties.
The Seller Representative and the Surviving Corporation agree to
negotiate in good faith to attempt to resolve any objection made under
this subsection; provided that if either party, in its sole discretion,
terminates such negotiations, then not later than ten (10) days after
such termination the dispute shall be submitted
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for resolution by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Such
arbitration shall be by a panel of three arbitrators, each of which
shall be experienced in the matters at issue. One such arbitrator shall
be selected by each of the Buyer Parent and the Seller Representative,
and the two arbitrators so selected shall select the third arbitrator.
The arbitration shall be held at such place in Louisville, Kentucky as
may be specified by the arbitrators. The decision of the arbitrators
shall be final and binding as to all matters submitted to arbitration
pursuant to this Agreement. Each of Buyer Parent and the Seller
Representative shall bear its own costs and expenses incurred in
connection with any such arbitration proceeding (including reasonable
attorney's fees), and the fees and expenses of the arbitrators shall be
paid by the party against which the decision is rendered, or if no
decision is rendered, such fees and expenses shall be borne equally
between the Buyer Parent and the Seller Representative. If the
arbitrators' decision is a compromise, the determination of which party
or parties bears the fees and expenses of the arbitrators shall be made
by the arbitrators on the basis of the arbitrators' assessment of the
relative merits of the parties' positions.
(d) The Surviving Corporation shall pay interest to the Sellers pro
rata (based on each Seller's share of the aggregate Merger Consideration paid
under Article II) in respect of the amount of any Annual Contingent
Consideration due in respect of a Yearly Period from the date that is sixty (60)
days after the end of such Yearly Period up to and including the date such
payment is actually made under this Section 2.7 at an annual rate of LIBOR plus
two percent (2%).
(e) The Buyers and Sellers agree to treat as interest the cash portion
of any Contingent Consideration to be received by the Sellers to the extent that
any portion of such Contingent Consideration is treated as interest under
Section 483 of the Code.
Section 2.8 Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall be at 10:00 A.M. at
the offices of Xxxxxx & Bird LLP, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or
at such other location as may be mutually agreed to by Buyer Parent and the
Seller Representative three (3) Business Days after the later of (a) April 30,
2001 or (b) the date on which all of the conditions in Article VI have been
satisfied or waived, or on such other date as may be mutually agreed to by Buyer
Parent and the Seller Representative (the "Closing Date").
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Section 2.9 Estimated Closing Balance Sheet.
(a) Not later than five (5) Business Days prior to the Closing Date,
the Common Sellers shall cause the Company to deliver to the Buyers a pro forma
estimated balance sheet of the Company as of the Closing Date, reflecting the
good faith best estimate of the Common Sellers as to the value of the tangible
assets and the amount of the liabilities of the Company as of the Closing Date
and prepared in accordance with GAAP applied consistently with the preparation
of the unaudited balance sheets of the Company included in the Financial
Statements (and after giving effect to the payment of the Preferred Divided
Amount); provided, however, that, whether or not in accordance with GAAP or
consistent with past practices, such pro forma estimated balance sheet shall
include (i) an accrual for all bonuses payable, whether before or after the
Closing Date, with respect to or for services provided by employees of the
Company prior to the Closing Date, (ii) adequate accruals for all Tax
liabilities of the Company other than for deferred Tax liabilities that reflect
timing differences between book and Tax income (including, without limitation,
deferred Tax liabilities and deferred payments due after the Closing Date
pursuant to the settlement of Tax liabilities for periods occurring prior to the
Closing Date) relating to any tax periods ended on or prior to the Closing Date,
(iii) adequate accruals, if any, for all obligations of the Company to pay any
deferred compensation with respect to or for services provided by employees of
the Company prior to the Closing Date and (iv) an accrual for all expenses
(without related tax benefits) incurred by the Company in connection with the
transactions contemplated by this Agreement (including, without limitation, the
investment banking and legal fees described in Section 3.11(a)). Such pro forma
estimated balance sheet is herein referred to as the "Estimated Closing Balance
Sheet". The Estimated Closing Balance Sheet, when so delivered, shall be
accompanied by a Schedule (the "Closing Schedule") prepared by the chief
financial officer of the Company, showing the Net Capital as of the Closing Date
as reflected on the Estimated Closing Balance Sheet.
(b) As soon as practicable after the Closing Date, but in no case later
than sixty (60) days thereafter, Buyer Parent shall deliver to the Seller
Representative a statement setting forth the final calculation of Net Capital
(the "Final Statement") and Buyer Parent or the Common Sellers, as the case may
be, shall pay such other party the amount by which the amount of Net Capital set
forth therein is greater than or less than the amount of such Net Capital set
forth in the Estimated Closing Balance Sheet no later than the earlier of (i)
fifteen (15) days after the receipt of such Final Statement or (ii) if the
Seller Representative has any objection to such Final Statement, five (5)
Business Days following the determination by the arbitrators as described below
of the amount of the payment due under this Section 2.9(b). Within (15) days
after the delivery of the Final Statement, the Seller Representative shall
notify Buyer Parent in writing of any objection thereto, specifying in
reasonable
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detail any such objection. If the Seller Representative does not object in
writing to the statement within fifteen (15) days from receipt thereof, the
statement shall be final and binding on the Buyers and Common Sellers, and Buyer
Parent or the Common Sellers (pro rata in proportion to the aggregate amount of
Merger Consideration received by each such Common Seller under Article II), as
the case may be, shall pay such other party the amount by which the amount of
Net Capital set forth in the Final Statement is greater than or less than the
amount of such Net Capital set forth in the Estimated Closing Balance Sheet. The
Seller Representative and Buyer Parent agree to negotiate in good faith to
attempt to resolve any objection made under this subsection; provided that if
any party, in its sole discretion, terminates such negotiations, then not later
than ten (10) days after such termination, the dispute shall be submitted to a
nationally recognized accounting firm agreed to between the Buyers and Common
Sellers for resolution. The Seller Representative and Surviving Corporation
shall use reasonable efforts to cause such accounting firm to render its report
within ninety (90) days of appointment and such determination as to the amount
of Net Capital shall be final and binding on all of the Buyers and Common
Sellers. If such determination is not made prior to the lapse of ninety (90)
days following the Closing Date, the date specified in this subsection (b) on
which any payment in respect of the amount of the excess or deficit Net Capital,
as the case may be, is to be paid shall be extended to that date that is five
(5) Business Days after the date on which such determination is made. The fees
and expenses of the accounting firm incurred under this Section 2.9(b) shall be
shared equally among the Seller Representative and the Surviving Corporation.
Section 2.10 Deliveries at the Closing.
(a) Not less than three (3) Business Days prior to the Closing Date,
the Seller Representative and the Preferred Seller shall deliver Wire Transfer
instructions to the Buyer for the Common Sellers and the Preferred Seller,
respectively.
(b) At the Closing, each Common Seller and the Preferred Seller shall
deliver, or shall cause to be delivered, to Buyer any documents required to be
delivered by the Sellers pursuant to Section 5.12.
(c) At the Closing, the Company shall deliver, or shall cause to be
delivered, to Buyer the following:
(i) certificate of the Secretary of State of the State of
Kentucky as to the good standing of the Company dated as of a date not
earlier than five Business Days prior to the Closing Date; and
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(ii) a true copy of the Amended Articles of Incorporation of
the Company certified as being true and correct by the Secretary of
State of the State of Kentucky as of a date not earlier than five (5)
Business Days prior to the Closing;
(iii) a copy of the bylaws, and all amendments thereto, of the
Company as in effect at the time of the Closing certified as true and
correct by the Secretary of the Company;
(iv) documents required to be delivered by the Company
pursuant to Section 5.17; and
(v) documents required to be delivered by the Company pursuant
to Section 6.1.
(d) At the Closing, Buyer Parent and Buyer shall deliver, or shall
cause to be delivered the documents required to be delivered pursuant to Section
6.2.
Section 2.11 Legending of Securities. The shares of Parent Stock to be
issued in connection with this Agreement will be issued in a transaction exempt
from registration under the Securities Act by reason of Section 4(2) thereof or
Regulation D promulgated thereunder. Buyer Parent is relying on the
representations of the Company and the Sellers with respect to such exemption.
Stop transfer instructions will be given to Buyer Parent's transfer agent that
shall only be applicable to a sale or other transfer within the United States
with respect to the shares of Parent Stock received by each Seller pursuant to
the Merger contemplated hereby and there will be placed on the certificates for
such shares, or shares issued in substitution thereof, a legend stating in
substance:
"The securities evidenced by this certificate have been issued and sold
without registration under the United States Securities Act of 1933, as
amended (the "Securities Act"), or the securities laws of any state of
the United States (a "State Act") in reliance upon certain exemptions
from registration under said Acts. The securities evidenced by this
certificate cannot be sold, assigned or otherwise transferred within
the United States unless such sale, assignment or other transfer is (1)
made pursuant to an effective registration statement under the
Securities Act and in accordance with each applicable State Act or (2)
exempt from, or not subject to, the Securities Act and each applicable
State Act. If the proposed sale, assignment or other transfer within
the United States will be made pursuant to clause (2) above, the holder
must, prior to such sale, assignment or other transfer, furnish to the
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issuer such certifications, legal opinions and other information as the
issuer may reasonably require to determine that such sale, assignment
or other transfer is being made in accordance with such clause."
The foregoing legend will also be placed on any certificate representing
securities issued subsequent to the original issuance of the Parent Stock
pursuant to the Merger as a result of any transfer of such shares or any stock
dividend, stock split, or other recapitalization as long as the Parent Stock
issued pursuant to the Merger has not been transferred in such manner to justify
the removal of the legend therefrom.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE COMPANY
Each Common Seller severally as to the representations and warranties
relating to such Common Seller in Sections 3.3 and 3.4, and jointly and
severally as to all other representations and warranties contained in this
Article III, represents and warrants to Buyer and Buyer Parent and the Preferred
Seller severally as to the representations and warranties in Sections 3.3, 3.4,
3.5, 3.11(b), 3.24 and 3.25 solely as such matters therein are applicable to the
Preferred Seller, represents and warrants to Buyer and Buyer Parent, as follows:
Section 3.1 Organization and Related Matters. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Kentucky and has the requisite legal power and authority to
carry on its Business as now being conducted and to own, lease and operate all
of its properties and assets, and is duly qualified to do business in each
jurisdiction shown in Section 3.1 of the Company Disclosure Memorandum in which
the nature of the Business conducted by it or the character or location of the
properties and assets owned, leased or operated by it makes such registration,
qualification or licensing necessary, except where the failure to be so
qualified would not have a Company Material Adverse Effect.
Section 3.2 Capital Structure.
(a) The authorized Capital Stock of the Company consists of (i) 2,000
shares of Common Stock, of which 101 shares as of the date hereof are issued and
outstanding and (ii) 1 share of Preferred Stock, which is issued and
outstanding. All of the outstanding shares of Capital Stock have been duly
authorized and validly issued and are fully paid and nonassessable and are owned
beneficially and of record by the Sellers in the respective amounts specified on
Section 3.2(a) of the Company
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Disclosure Memorandum, and none of such shares were issued in violation of any
preemptive rights or Applicable Law. Except as set forth in Section 3.2(a) of
the Company Disclosure Memorandum, there are no outstanding options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings to which
the Company is a party or by which the Company is bound obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of Capital Stock or obligating the Company to issue, grant or enter into
any such option, warrant, call, right, commitment, agreement, arrangement or
undertaking. Except as set forth in Section 3.2(a) of the Company Disclosure
Memorandum, there are no outstanding contractual obligations or arrangements of
the Company or any shareholder of the Company to repurchase, redeem or otherwise
acquire any shares of Capital Stock of the Company.
(b) Subsidiaries. The Company does not have any subsidiaries and does
not own beneficially, directly or indirectly, any securities, rights or
interests of any Person, or any interest in a partnership or joint venture of
any kind, except for such securities, rights or interests beneficially owned on
behalf of an Investment Company or Client.
Section 3.3 Title. Each Common Seller and the Preferred Seller owns,
and will own at the time of Closing, in each case beneficially and of record,
the shares of Common Stock and Preferred Stock, respectively, of the Company set
forth in Section 3.2(a) of the Company Disclosure Memorandum, free and clear of
any Encumbrances other than any Encumbrance created by or attributed to the
Buyers.
Section 3.4 Authority; No Violation.
(a) The Company, the Preferred Seller and each Common Seller that is
not a natural person have full legal power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Management Committee of the Company which has unanimously recommended that the
Company's shareholders approve this Agreement and the transactions contemplated
herein. After full disclosure of this Agreement and the transactions
contemplated herein (including all employment, compensation and other
arrangements with any officer, director or shareholder of the Company) by the
directors and officers of the Company to all of the Company's shareholders, all
holders of the capital stock of the Company having the right to vote upon the
Merger (including by all holders of capital stock of the Company having the
right to vote upon the Merger separately as a class) have duly and validly
approved this Agreement and the transactions contemplated hereby, and no other
proceedings on the part of the Company or any
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shareholder or class of shareholders of the Company are necessary to approve
this Agreement or to consummate the transactions contemplated hereby. Each
Common Seller that is a natural person has full capacity to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company, each Common Seller and the Preferred
Seller and (assuming the due authorization, execution and delivery of this
Agreement by Buyers) constitutes a valid and binding obligation of the Company,
each Common Seller and the Preferred Seller, enforceable against the Company,
each such Common Seller and the Preferred Seller in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or court of equity and by bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by the
Company, any Common Seller or the Preferred Seller, nor the consummation by the
Company, any such Common Seller or the Preferred Seller, of the transactions
contemplated hereby to be performed by them, nor compliance by the Company, any
such Common Seller or the Preferred Seller with any of the terms or provisions
hereof, will (i) violate any provision of the Organizational Documents of the
Company or the Preferred Seller, or (ii) assuming the Consents set forth in
Section 3.5 of the Company Disclosure Memorandum hereof are duly obtained (A)
violate any Applicable Law applicable to the Company, any Common Seller or the
Preferred Seller, or to any of their properties, Contracts or assets, or (B)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any material Encumbrance upon, any of
the assets of the Company, any Common Seller or the Preferred Seller, or any
Contract, Lease, Indebtedness, note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which the
Company, any Common Seller or the Preferred Seller is a party, or by which the
Company, any such Common Seller or the Preferred Seller, or any of their
properties or assets, may be bound or affected, except, in the case of this
clause (ii), any Permitted Encumbrance or such violation, conflict, breach,
losses, default, termination, cancellation or Encumbrance which is not a
Permitted Encumbrance and which would not individually or in the aggregate have
a Company Material Adverse Effect.
Section 3.5 Consents and Approvals. Except for (a) such Consents and
notices as are set forth in Section 3.5 of the Company Disclosure Memorandum,
(b) the applicable filings under the HSR Act, and (c) such other Consents the
failure of
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which to be made or obtained are not reasonably expected to have a Company
Material Adverse Effect, no Consents with any Governmental Authority or third
party are necessary in connection with (i) the execution and delivery by the
Company, each Common Seller and the Preferred Seller of this Agreement and (ii)
the consummation by the Company, each such Common Seller and the Preferred
Seller of the transactions contemplated hereby. Neither any Common Seller nor
the Preferred Seller is aware of any reason that would cause the Consents of any
Governmental Authority or third party to this Agreement and the transactions
provided for herein as such Consents relate to such Common Seller or the
Preferred Seller, as the case may be, to not be received without undue delay,
and without the imposition thereon of conditions, restrictions or requirements
that, individually or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect or a material adverse effect on the Surviving
Corporation.
Section 3.6 Government Regulation.
(a) Filings. The Company is duly registered or licensed in the
capacities shown in Section 3.6(a) of the Company Disclosure Memorandum, and has
filed, and each Investment Company for which the Company is an investment
advisor, sub-advisor, underwriter or sponsor and, to the knowledge of the Common
Sellers, each Investment Company for which the Company serves as a subadviser,
has filed, all material registrations, reports, statements, notices and other
material filings required under Applicable Law to be filed with the SEC and any
other Governmental Authority (other than a Taxing Authority) by the Company, to
the extent applicable, including all material amendments or supplements to any
of the above (the "Filings") for the past five years. The Filings complied in
all material respects, where applicable, with the requirements of the Exchange
Act, the Advisers Act, the Investment Company Act and all other Applicable Laws
and did not contain any untrue statement of material fact or omit to state a
material fact required to be stated therein, or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. The Company has made or will make available to the Buyers complete
and correct copies of (i) all Filings made within the past five (5) years
(including, but not limited to all filings on Form ADV), (ii) all audit or
inspection reports received by the Company from the SEC or any other
Governmental Authority (other than a Taxing Authority) and all written responses
thereto made by the Company during the past five (5) years, (iii) copies of all
inspection reports provided to the Company by the SEC or any other Governmental
Authority (other than a Taxing Authority) during the past five years, and (iv)
all correspondence relating to any investigation provided to the Company by the
SEC or any other Governmental Authority (other than a Taxing Authority) during
the past two years. Except as set forth in Section 3.6(a) of the Company
Disclosure Memorandum, as of the date of this Agreement, there is no material
unresolved
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violation, criticism, or exception by any Governmental Authority (other than a
Taxing Authority) with respect to any report or statement relating to any
examinations or inspections of the Company or any Investment Company where the
Company serves as investment adviser, or as a sponsor or underwriter. The
Company has not received, since December 31, 1999, any notification or
communication from any Governmental Authority (other than a Taxing Authority)
(i) asserting that the Company is not in compliance with any of the Applicable
Laws which such Governmental Authority enforces or (ii) threatening to revoke,
limit or suspend any Permit or Consent.
(b) Advisers Act.
(i) Except for the Company, no Affiliate of the Company has
been during the past five years an "investment adviser" required to be
registered, licensed or qualified as an investment adviser under the
Advisers Act or other Applicable Law or subject to any material
liability or disability by reason of any failure to be so registered,
licensed or qualified, except for any such failure to be so registered,
licensed or qualified that are not, individually or in the aggregate,
reasonably expected to have a Company Material Adverse Effect.
(ii) The Company is, and at all times required by the Advisers
Act during the past five years has been, duly registered as an
investment adviser under the Advisers Act. The Company is, and at all
times required by Applicable Law (other than the Advisers Act) during
the past five years has been, duly registered, licensed or qualified as
an investment adviser in each state or any other domestic or foreign
jurisdiction where the conduct of its Business required such
registration, licensing or qualification, except for any such failure
to be so registered, licensed or qualified that, individually or in the
aggregate, is not reasonably expected to have a Company Material
Adverse Effect. Each such United States federal and state registration,
license or qualification, as of the date hereof, is listed in Section
3.6(b) of the Company Disclosure Memorandum and is in full force and
effect.
(iii) Neither the Company nor any "affiliated person" (as
defined in the Investment Company Act) thereof, is ineligible pursuant
to Section 9(a) or (b) of the Investment Company Act to serve as an
investment advisor (or in any other capacity contemplated by the
Investment Company Act) to an Investment Company registered under the
Investment Company Act; and, to the knowledge of the Common Sellers,
neither the Company nor any "associated person" (as defined in the
Advisers Act) thereof, is ineligible pursuant to Section 203 of the
Advisers Act to serve as an investment adviser or as an associated
person to a registered investment adviser.
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(iv) The Company's advertising and solicitation of business
has complied and will comply in all material respects with all
Applicable Laws, including Section 206 of the Advisers Act, SEC Rules
204-2(a)(16) and 206(4)-1 under the Advisers Act, and the Association
for Investment Management and Research ("AIMR") Performance
Presentations Standards.
(c) Investment Company Act.
(i) Section 3.6(c) of the Company Disclosure Memorandum sets
forth a true, complete and correct list, as of the date hereof, of each
Registered Fund. Other than with respect to the Registered Funds listed
in Section 3.6(c) of the Company Disclosure Memorandum, the Company
does not serve as an adviser or subadviser with respect to any
Investment Company whether or not required to be registered under the
Investment Company Act. Each Registered Fund for which the Company
serves as an adviser, and to the knowledge of the Common Sellers, each
Registered Fund for which the Company acts as a subadviser, that is an
entity is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has the requisite
power and authority to own its properties and to carry on its Business
as it is now conducted, and is qualified to do business in each
jurisdiction where it is required to do so under Applicable Law, except
where the failure to have such power, authority or qualification is not
reasonably expected to have a Company Material Adverse Effect. Each
Registered Fund for which the Company serves as an adviser, and to the
knowledge of the Common Sellers, each Registered Fund for which the
Company acts as a subadviser, that is an entity is, and at all times as
required under Applicable Law has been, duly registered with the SEC as
an investment company under the Investment Company Act.
(ii) With respect to each Registered Fund for which the
Company serves as an adviser, and to the knowledge of the Common
Sellers, each Registered Fund for which the Company acts as a
subadviser, the outstanding shares or other equity interests of each
Registered Fund listed in Section 3.6(c) of the Company Disclosure
Memorandum have been duly and validly issued and are fully paid and
nonassessable and the shares of each Registered Fund are qualified for
public offering and sale in each jurisdiction where offers or sales
have been made or are being made to the extent required under
Applicable Law.
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(iii) Each Registered Fund for which the Company serves as an
adviser, and to the knowledge of the Common Sellers, each Registered
Fund for which the Company acts as a subadviser, of the Company
Disclosure Memorandum has at all times been operated and is currently
operating in compliance in all material respects with Applicable Law,
except for such instances of non-compliance which, individually or in
the aggregate, are not reasonably expected to have a Company Material
Adverse Effect. Each current prospectus or offering document (including
any related statement of additional information), as amended or
supplemented, relating to each Registered Fund for which the Company
serves as an adviser, and to the knowledge of the Common Sellers, each
Registered Fund for which the Company acts as a subadviser, of the
Company Disclosure Memorandum, is in substantial compliance with the
requirements of the Securities Act and the Investment Company Act, and
other Applicable Laws. None of such prospectuses or offering documents,
amendments or supplements, as of their respective dates, includes or
included an untrue statement of a material fact or omits or omitted to
state a material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading.
(iv) Each Registered Fund for which the Company serves as an
adviser, and to the knowledge of the Common Sellers, each Registered
Fund for which the Company acts as a subadviser, is duly registered
with the SEC as an Investment Company under the Investment Company Act
and each is governed by an Investment Company Board consisting of at
least 50% of directors who are not "interested persons" (as defined in
the Investment Company Act) of the Investment Company or the Company.
Each such Registered Investment Company operates in all material
respects in conformity with the requirements and restrictions of
Sections 10 and 16 of the Investment Company Act, to the extent
applicable.
(v) The Company has made available to the Buyer Parent copies
of the audited financial statements (including the notes thereto) of
each Registered Fund for which the Company serves as an adviser as of
and for each of the three most recent fiscal years, the related audited
statements of operations and changes in net assets for the two most
recent fiscal years (or such shorter period as any Registered Fund has
been in operation), and the related schedules of portfolio investments
for the two most recent fiscal years. The Company has also made
available to the Buyer Parent copies of the unaudited statement of
assets and liabilities of each such Registered Fund as of the most
recent semi-annual period, and the related unaudited statements of
operations and changes in net assets for such semi-annual period and
the related schedules of portfolio investments for the two most recent
fiscal years.
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With respect to each Registered Fund for which the Company serves as an
adviser, the audited and unaudited financial statements of each such
Registered Fund referred to above have been prepared in accordance with
GAAP and present fairly, in all material respects, the financial
condition (including asset valuations) as of such dates and the results
of operations for such periods of such Registered Fund subject, in the
case of the unaudited financial statements, to normal, recurring
year-end adjustments and the lack of footnotes and other presentation
items.
(vi) To the knowledge of the Common Sellers, each such
Registered Fund has been operated or managed in compliance in all
material respects with its respective objectives, policies and
restrictions, including those set forth in the prospectus and statement
of additional information or other offering materials for each such
Registered Fund.
(vii) There are no legal or governmental actions or
proceedings pending or, to the knowledge of the Common Sellers,
threatened against any of the Registered Funds for which the Company
serves as adviser; nor, to the knowledge of the Common Sellers, are
there any legal or governmental investigations pending or threatened
against any of such Registered Funds; nor is there any Order (or, to
the knowledge of the Common Sellers, any investigation) of any
Governmental Authority (other than a Taxing Authority) outstanding
against any of such Registered Funds. With respect to each Registered
Fund for which the Company serves as an adviser, and to the knowledge
of the Common Sellers, each Registered Fund for which the Company acts
as a subadviser, neither the SEC, the NASD, nor any other Governmental
Authority, has identified any material issue by means of any deficiency
letter or other similar written inquiry relating to any such Registered
Fund or its operations that has not been resolved.
(viii) All material Contracts, including all advisory and
sub-advisory agreements, all Services Agreements and all Distribution
Agreements to which any Registered Fund for which the Company serves as
adviser is a party or by which such Registered Fund or its property is
bound (other than Contracts for an individual purchase or sale of
portfolio securities) have been previously disclosed to Buyers. Each
such Contract for a Registered Fund for which the Company serves as an
adviser, and to the knowledge of the Common Sellers, for a Registered
Fund for which the Company acts as a subadviser, that is subject to
Section 15 of the Investment Company Act (i) has been duly approved,
executed, delivered and renewed in compliance in all material respects
with Section 15 of the Investment Company Act and, if applicable, SEC
Rule 12b-1 under the Investment Company Act, and (ii) is
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currently in full force and effect and has been performed by the
relevant entity in accordance with the Investment Company Act. To the
knowledge of the Common Sellers, neither such Registered Fund nor one
of the other parties to such Contracts is in material default under,
and, to the knowledge of Common Sellers, no event has occurred which,
with the passage of time or giving of notice or both, would result in
such Registered Fund or any of the other parties to such Contracts
being in material default under, any of the terms of such Contracts.
Any Service Agreements between the Company and any Registered Fund for
which the Company serves as an adviser, and to the knowledge of the
Common Sellers, for a Registered Fund for which the Company acts as a
subadviser, are valid and enforceable, and the amounts paid to the
Company under such Service Agreements have been properly determined in
accordance with the terms thereof.
(ix) Each Registered Fund for which the Company serves as
adviser has in full force and effect such insurance as is required by
the Investment Company Act and has directors' and officers' and errors
and omissions insurance policies issued in amounts reasonably believed
to be adequate and appropriate by its Investment Company Board of
Directors. No such Registered Fund is in default under any such
insurance policy. All premiums that are due and payable under such
policies have been paid.
(x) Neither the Company nor any of its respective officers,
directors or employees has any express or implied understanding or
arrangement that would impose an unfair burden on any Registered Fund
for which the Company serves as adviser or that would in any way
violate Section 15(f) of the 1940 Act as a result of this transaction.
(d) Other Registrations. Each Common Seller or other employee of the
Company who is required to be registered as a registered representative,
investment adviser representative or a sales person with the SEC or an
equivalent person with the securities commission of any other Governmental
Authority is duly registered as such and such registration is in full force and
effect, except where the failure to be so registered or to have such
registration in full force and effect could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 3.7 Properties. Section 3.7 of the Company Disclosure
Memorandum sets forth a complete and correct list, as of the date hereof, of (i)
all Leases of real property and the location of the applicable property, and
(ii) all Leases of personal property providing for annual rentals of more than
$50,000 or aggregate rentals of more than $100,000. The Company has heretofore
provided or made
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available to Buyer a true, correct and complete copy of each Lease, together
with all amendments, modifications, alterations, and other changes thereto. The
Company does not own any real property. The Company has valid title to all
personal property owned by it, and valid leasehold interests in all real and
personal property leased by it, in each case free and clear of all Encumbrances
other than Permitted Encumbrances. Except as set forth in Section 3.7 of the
Company Disclosure Memorandum, (i) each Lease is in full force and effect in all
material respects, and (ii) there does not exist under any Lease any material
event of default, or any event or condition that, after notice or lapse of time
or both, would constitute a material event of default, on the part of the
Company or, to the knowledge of the Common Sellers, on the part of any other
party to any material Contract.
Section 3.8 Financial Statements. The Company has previously
delivered or made available to Buyer Parent, copies of its audited financial
statements for the period commencing on March 1, 1998 and ending December 31,
1998 and for the twelve month periods ending December 31, 1999 and December 31,
2000, including balance sheets as of December 31, 1998, 1999 and 2000, and
statements of income and retained earnings and statements of cash flows for the
above described periods, and its unaudited balance sheet as of the end of the
latest calendar month for which such balance sheet is available and statement of
income for the period from January 1, 2001 through and including the latest
calendar month for which such statement of income is available (collectively,
such statements being referred to as the "Financial Statements"). The balance
sheets referred to in this Section 3.8 present fairly, in all material respects,
the financial position of the Company as of the dates thereof, and the other
Financial Statements referred to in this Section 3.8 present fairly, in all
material respects, the results of the Company's operations and cash flows for
the periods therein set forth subject to, in the case of the unaudited Financial
Statements, recurring audit adjustments normal in nature and amount. The
Financial Statements comply in all material respects with applicable accounting
requirements with respect thereto; and each of such statements (including the
related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved (except, in the case of such
unaudited Financial Statements, for the absence of footnotes and recurring year
end audit adjustments normal in nature and amount).
(a) Except as set forth in Section 3.8(b) of the Company Disclosure
Memorandum, the Company is not subject to any obligation or liability of any
nature, whether absolute, accrued, contingent or otherwise and whether due or to
become due, and, to the knowledge of the Common Sellers, there is no existing
condition, situation or set of circumstances which are reasonably expected to
result in such an obligation or liability, other than (i) obligations and
liabilities contemplated by or in connection with this Agreement or the
transactions contemplated hereby, (ii) as and
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to the extent disclosed or fully reserved against in the audited consolidated
balance sheet as at December 31, 2000 included in Financial Statements, (iii)
obligations and liabilities incurred since December 31, 2000 in the ordinary
course of business consistent with past practices and not prohibited by this
Agreement, or (iv) obligations and liabilities that could not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
Section 3.9 Absence of Changes. Since December 31, 2000, except (i) as
set forth in Section 3.9 of the Company Disclosure Memorandum, (ii) as
specifically reflected or reserved against in the Financial Statements, or (iii)
as contemplated by or in connection with this Agreement or the transactions
contemplated hereby, the business of the Company has been conducted in the
ordinary course consistent with past practices and the Company has not:
(a) undergone any change in its business, financial condition, results
of operations or properties (other than changes resulting solely from general
economic or political conditions, including but not limited to changes in the
net asset value of any Registered Fund for which the Company serves as adviser
resulting from fluctuations in market price) that, individually or in the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect;
(b) In the case of the Company or any Registered Fund for which the
Company serves as adviser, declared, set aside, made or paid any dividend or
other distribution in respect of its capital stock or repurchased, redeemed or
otherwise acquired any shares of its capital stock, except, (i) any dividends
declared, set aside or paid on the Preferred Stock in accordance with the terms
set forth in the Organizational Documents of the Company and (ii) in the case of
any Registered Fund for which the Company serves as adviser, in the ordinary
course of business consistent with past practices and Applicable Law;
(c) issued, sold, granted or awarded any shares of its capital stock of
any class or any Rights of any kind to purchase any such shares or any
securities convertible into or exchangeable for any such shares;
(d) incurred, assumed, guaranteed (including by way of any agreement to
"keep well" or of any similar arrangement) or prepaid any Indebtedness or
amended the terms relating to any Indebtedness, or issued or sold any debt
securities, except for any such incurrence, assumption, guarantee or prepayment
of such Indebtedness or amendments of the terms of such Indebtedness in the
ordinary course of business consistent with past practices in an aggregate
amount not exceeding $50,000;
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(e) sold, transferred, assigned, conveyed, mortgaged, pledged or
otherwise subjected to any Encumbrances any of its properties or assets,
tangible or intangible, except for Permitted Encumbrances or in the ordinary
course of business consistent with past practices;
(f) entered into (i) any agreement or commitment involving more than
$50,000 that, pursuant to its terms, is not cancelable without penalty or charge
on thirty (30) days' notice or less or (ii) any other agreement, commitment or
other transaction, other than (A) any agreement, commitment or other transaction
involving an expenditure of not more than $50,000 or (B) Investment Management
Agreements, entered into in the ordinary course of business consistent with past
practices;
(g) paid (or committed to pay) any bonus or other incentive
compensation to any director, partner, officer, other employee or sales
representative or granted (or committed to grant) to any director, partner,
officer, employee or sales representative any other increase in compensation,
except for (i) bonuses or incentive compensation payable pursuant to a plan set
forth in Section 3.15 of the Company Disclosure Memorandum, base salary or wage
increases, in each case in the ordinary course of business consistent with past
practices or pursuant to the terms of any written agreement or commitment
existing at December 31, 2000, and (ii) severance or termination payments not to
exceed, in the aggregate, $50,000;
(h) entered into, adopted or amended (or committed to enter into, adopt
or amend) in any material respect any employment, retention, change in control,
collective bargaining, deferred compensation, severance, retirement, bonus,
profit-sharing, stock option or other equity, pension or welfare plan or
agreement maintained for the benefit of any director, partner, officer, other
employee or sales representative;
(i) suffered any strike or other labor dispute that has had or could
reasonably be expected to have a Company Material Adverse Effect;
(j) suffered any loss of employees or investment advisory clients that
has had or is reasonably expected to have a Company Material Adverse Effect;
(k) amended its articles of incorporation or bylaws or any other
Organizational Documents;
(l) granted any rights or licenses under any of its trademarks or trade
names or other Intellectual Property or entered into any licensing or similar
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agreements or arrangements, in each case other than in the ordinary course of
business consistent with past practices;
(m) made any material changes in its general policies or practices
relating to selling practices, discounts or other material terms of sale or
accounting therefor, including any changes in loads, 12b-1 or advisory or other
fees with respect to any Registered Fund for which the Company serves as
adviser;
(n) in the case of any Registered Fund for which the Company serves as
adviser, had any action taken by the Investment Company Board of such Registered
Fund other than actions in the ordinary course of business consistent with past
practices, actions customarily taken by similarly situated Investment Company
Board of Investment Companies or actions contemplated by or in connection with
this Agreement;
(o) changed in any material respect its accounting practices, policies
or principles, other than any such changes as may be required under GAAP;
(p) amended or agreed to amend its general fee schedule;
(q) suffered any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting its properties or assets which, individually
or in the aggregate, is reasonably expected to have a Company Material Adverse
Effect; or
(r) taken any action or omitted to take any action that would result in
the occurrence of any of the foregoing.
Section 3.10 Contracts.
(a) Section 3.10(a) of the Company Disclosure Memorandum sets forth a
correct and complete list, as of the date hereof, of all Contracts the annual
revenue or cost to the Company of which exceeds $50,000. The Company has
delivered to Buyer for inspection complete and correct copies of all such
Contracts, including fee schedules, where applicable.
(b) Except as set forth in Section 3.10(b) of the Company Disclosure
Memorandum, and excluding any failure to obtain Consents with respect to the
Contracts with those Clients listed in Section 3.10(c) of the Company Disclosure
Memorandum (i) each Contract is in full force and effect in all material
respects, and (ii) there does not exist under any Contract any event of default,
or any event or condition that, after notice or lapse of time or both, would
constitute an event of default, on the part of the Company or, to the knowledge
of the Common Sellers, on
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the part of any other party to any Contract, where any such default could
reasonably be expected to have a Company Material Adverse Effect. Except as
disclosed in Section 3.10(b) of the Company Disclosure Memorandum, the Company
is not subject to any contract, agreement, license or commitment materially
restricting or limiting the type or scope of business or operations that it may
conduct now or immediately after the Closing Date.
(c) Except as set forth in Section 3.10(c) of the Company Disclosure
Memorandum, as of the date hereof the Company has not received written notice
from any Client of, and, to the knowledge of the Common Sellers, no such Client
has stated orally, its intention to terminate its Investment Management
Agreement with the Company.
(d) As of the date hereof, the Company has not received written notice
from any selling agent that is a party to any Distribution Agreement of, and, to
the knowledge of the Common Sellers, no such selling agent has stated orally,
its intention to terminate its Distribution Agreement (other than terminations
initiated by any the Company due to a breach by such selling agent).
(e) Each Contract for investment advisory services has been duly
authorized, executed and delivered by the Company and, to the knowledge of the
Common Sellers, each other party thereto and, to the extent applicable, has been
adopted in compliance with Section 15 of the Investment Company Act and Section
205 of the Advisers Act and complies with Applicable Law and is a valid and
binding agreement of each such party, enforceable in accordance with its terms
(subject to bankruptcy, insolvency, moratorium, fraudulent transfer and similar
laws affecting creditors, rights generally and to general equity principles) and
(ii) the Company and, to the knowledge of the Common Sellers, the other party
thereto is in compliance in all material respects with the terms of each such
Contract, and no event has occurred or condition exists that constitutes or with
notice or the passage of time could constitute a material default by the Company
thereunder.
(f) Section 3.10(f) of the Company Disclosure Memorandum includes a
listing of all wrap account agreements, the sellers of such wrap accounts, and
the selling or sponsoring broker-dealer organizations and a schedule of fees for
each sponsoring broker-dealer organization. To the knowledge of the Common
Sellers, all wrap accounts are offered and sold in compliance with all
Applicable Laws, including the requirements for delivery of the Company's Form
ADV, Part II and the requirements of Rule 3a-4 under the Investment Company Act,
and are exempt from registration or qualification under Applicable Laws,
including federal, state, local and foreign securities laws.
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Section 3.11 No Other Brokers.
(a) Other than Xxxxxx Xxxxxx Securities Inc., the fees and expenses of
which will be paid by the Company, no broker, finder or similar intermediary has
acted for or on behalf of or is entitled to any broker's, finder's or similar
fee or other commission from the Company or the Common Seller in connection with
this Agreement or the transactions contemplated hereby. The Preferred Seller has
no obligation to pay any investment banking or similar fees or legal fees to
either Xxxxxx Xxxxxx Securities Inc. or Skadden, Arps, Slate, Xxxxxxx & Xxxx
LLP, counsel to the Company, in connection with this Agreement or the
transactions contemplated hereby.
(b) The Preferred Seller has not retained or otherwise used any broker,
finder or similar intermediary to act on its behalf nor is any Person entitled
to any broker's, finder's or similar fee or other commission from the Preferred
Seller in connection with this Agreement or the transactions contemplated
hereby.
Section 3.12 Legal Proceedings. There are no legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature that are pending or, to the knowledge of the Common
Sellers, have been threatened in writing, against the Company or any of its
properties or assets which (a) individually or in the aggregate, are reasonably
expected to have a Company Material Adverse Effect or (b) challenge the validity
of the transactions contemplated by this Agreement, and there is no injunction,
order, judgment, decree, or regulatory restriction imposed upon the Company or
any of its properties or assets which, individually or in the aggregate, is
reasonably expected to have a Company Material Adverse Effect.
Section 3.13 Compliance with Applicable Law.
(a) The Company holds, and has at all times during the past five (5)
years held, all material Permits necessary for the lawful ownership and use of
its properties and assets and the conduct of its Business under and pursuant to,
and has complied in all material respects with, and is not in violation in any
material respect of, any Applicable Law relating to the Company or any of its
assets, properties or operations (including, without limitation, the Securities
Act, Advisers Act, the Investment Company Act and the Exchange Act and similar
state and foreign laws). To the knowledge of the Common Sellers, the Company is
not in violation or any Applicable Law relating to it, except any such
violations which, individually or in the aggregate, would not have a Company
Material Adverse Effect. All Permits are in full force and effect and are not
subject to any suspension, modification or revocation or proceedings related
thereto.
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(b) Except for normal examinations or inspections conducted by any
Governmental Authority in the regular course of the Business of the Company and
any Registered Fund for which the Company serves as adviser and, to the
knowledge of the Common Sellers, any Registered Fund for which the Company
serves as subadviser, and which examinations are described in Section 3.13(b) of
the Company Disclosure Memorandum, since December 31, 1999, (i) no Governmental
Authority has initiated any administrative proceeding or, to the knowledge of
the Common Sellers, investigation into the Business or operations of the Company
or such Registered Fund and (ii) the Company has not received any written notice
of any unresolved violation or exception by any Governmental Authority with
respect to any report or statement by any Governmental Authority relating to any
examination or inspection of the Company. Copies of all reports or letters with
respect to any such examinations or investigations have been provided to Buyer
Parent.
Section 3.14 Insurance. The Company maintains with reputable insurers,
insurance and indemnity bonds providing reasonably adequate coverage for the
Company against risks normally insured or bonded against by companies in similar
lines of business. All such insurance policies and bonds are listed in Section
3.14 of the Company Disclosure Memorandum. Each such insurance policy or bond is
in full force and effect, and the Company has not received written notice or any
other indication from any insurer or agent of any intent to cancel any such
insurance policy or bond. All premiums due on the insurance have been paid, and
the Company will maintain such insurance policies from the date of this
Agreement through the Closing Date. Renewals and replacements of insurance
coverage over the past year by the Company has been at rates that are not
materially higher than during the preceding year.
Section 3.15 Employee Benefit Plans; ERISA.
(a) Section 3.15(a) of the Company Disclosure Memorandum sets forth a
true and complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, option, employment, consulting, severance or
termination pay, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension or retirement plan,
program, agreement or arrangement, and each other fringe benefit plan, including
each "employee benefit plan" (within the meaning of Section 3(3) of ERISA),
whether formal or informal, written or oral and whether legally binding or not,
that is maintained or contributed to or was maintained or contributed to at any
time by the Company or any ERISA Affiliate for the benefit of any employee,
former employee, spouse, dependent, director, independent contractor or
consultant of the Company as to which the Company or any ERISA Affiliate has any
liability (each, a "Plan").
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(b) With respect to each Plan, the Company has made available to Buyer
true and complete copies of each of the following documents:
(i) a copy of the Plan (including all amendments thereto);
(ii) a copy of any annual return required under ERISA or other
applicable law with respect to each such Plan for the three most
recently completed plan years;
(iii) a copy of any actuarial report required under ERISA or
other applicable law with respect to each such Plan for the three most
recently completed plan years;
(iv) a copy of the most recent summary plan description and
any summaries of material modifications thereto;
(v) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the most recent financial
statement related thereto;
(vi) all contracts relating to any Plan with respect to which
the Company has any material liability; and
(vii) except as set forth in Section 3.15(b) of the Company
Disclosure Memorandum, the most recent determination letter received
from the IRS with respect to each Plan that is intended to be qualified
under Section 401 of the Code.
(c) (i) No Plan is or has ever been a "multiemployer plan," as such
term is defined in Section 3(37) of ERISA and no Plan is subject to Title IV of
ERISA; (ii) each Plan has been operated in all material respects in accordance
with the requirements of all Applicable Law; (iii) each Plan that is intended to
be qualified under Code Section 401(a) has received an individual favorable IRS
determination letter; (iv) to the knowledge of the Common Sellers, each of the
Plans intended to be "qualified" within the meaning of Section 401(a) of the
Code is so qualified and no Plan has an accumulated or waived funding deficiency
within the meaning of Section 412 of the Code; and (v) neither of the Company
nor any ERISA Affiliate has incurred, directly or indirectly, any liability
(including any material contingent liability) pursuant to Title IV of ERISA that
has not been satisfied in full, and neither the Company nor any ERISA Affiliate
made, or was required to make, contributions to any plan subject to Title IV of
ERISA (a "Title IV Plan") during the six year
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period ending on the last day of the most recent Title IV Plan year ended prior
to the Closing Date.
(d) No Plan provides welfare benefits (as defined in Section 3(1) of
ERISA) for periods extending beyond termination of service other than (i)
coverage required to be provided under Applicable Law or (ii) as described in
the Plan.
(e) There are no pending or anticipated claims (other than routine
claims for benefits) involving any Plan.
(f) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or director of the Company
to severance pay, unemployment compensation or any other similar payment, except
as expressly provided in this Agreement or (ii) accelerate the time of payment
or vesting or increase the amount of compensation or benefits due any such
person.
(g) Since the date of the most recent valuation, there has been no
material change in the financial position of any Plan and no material increase
in benefits under any Plan as a result of plan amendments. To the knowledge of
the Common Sellers, no "party in interest" (as defined in Section 3(14) of
ERISA) or "disqualified person" (as defined in Section 4975(e)(2) of the Code)
with respect to any Plan has engaged in any nonexempt "prohibited transaction"
(described in Section 4975(c) of the Code or Section 406 of ERISA). The Common
Sellers have, or have reserved, the right to amend or terminate any Plan subject
to ERISA at any time prior to the Closing Date. No material tax under Code
Sections 4980B or 5000 has been incurred with respect to any Plan and, to the
knowledge of the Common Sellers, no circumstances exist which could give rise to
such taxes.
(h) The Company has made appropriate entries in its financial records
and statements for all Plan obligations that have accrued but that are not yet
due. The value of all accrued deferred compensation entitlements (including
entitlements under any executive compensation, supplemental retirement, or
employment agreement) of employees and former employees of the Company and their
respective beneficiaries have been fully reflected on the Company's financial
statements. The Company has made all required contributions and payments under
each Plan.
Section 3.16 Technology and Intellectual Property.
(a) Section 3.16(a) of the Company Disclosure Memorandum contains a
true and complete list and description of each of the electronic data
processing, communications, information, telecommunications and computer systems
which are
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material to the Business of the Company (collectively, the "Technology
Systems"), including a description of any Software (other than readily available
off-the-shelf software) and any material computer hardware systems owned, leased
or used by any of them that is used in the operation of the Technology Systems
and list of any material Contracts pursuant to which it is granted rights which
are used in the operation of the Technology Systems, including soft dollar
arrangements, Software licenses and similar agreements, as set forth in Section
3.10(a) of the Company Disclosure Memorandum.
(b) Each of the Technology Systems is adequate for the conduct of the
Business of the Company as currently operated. There has not been any material
malfunction with respect to any of the Technology Systems currently in use.
(c) Section 3.16(c) of the Company Disclosure Memorandum contains a
true and complete list and description of all material Intellectual Property,
including all patents and all registered trademarks, registered service marks
and registered copyrights and applications therefor, owned by, or used in the
Business or operations of, the Company (the "Company Intellectual Property"),
and all material licenses, service marks or agreements pursuant to which the
Company has granted or has been granted rights with respect to Intellectual
Property not owned and used exclusively by it.
(d) The Company has the right to use the Software and Company
Intellectual Property in accordance with the terms of the relevant Contracts
governing such use, free and clear of any claims by any Person (other than
Permitted Encumbrances and the claims of any licensor under licensing or similar
agreements), and the consummation of the transactions contemplated by this
Agreement will not alter or impair the right of Buyer to use the Software or the
Company Intellectual Property in connection with the Business of the Company as
currently conducted by the Company to the same extent and on the same terms as
the Company was entitled to use such Software and such Company Intellectual
Property as of the date hereof, free and clear of any claims by any Person
(other than Permitted Encumbrances and the claims of any licensor under
licensing or similar agreements). No claim has been asserted, or to the
knowledge of the Common Sellers threatened, by any Person to the effect that the
use by the Company of any Company Intellectual Property violates or infringes
upon the asserted rights of others, or that challenges or questions the validity
or effectiveness of any license or similar agreement with respect to any Company
Intellectual Property that is leased or licensed by the Company or the ownership
by the Company of any Company Intellectual Property that the Company purports to
own. As of the date hereof, none of the Software or the Company Intellectual
Property is subject to any outstanding
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order, judgment, decree, stipulation or agreement restricting the use thereof by
the Company.
Section 3.17 Taxes.
(a) The Company has duly and timely filed all material Tax Returns
required to be filed on or before the Closing Date and all such Tax Returns were
correct and complete as filed. All Taxes that are or may become payable by the
Company as of the Closing Date or chargeable as a lien upon its assets (whether
or not shown on any Tax Return) with respect to any Tax period or portion
thereof ending on or before the Closing Date have been either duly and timely
paid or adequate provision has been made therefor on the Estimated Closing
Balance Sheet. The aggregate of the reserves for Taxes contained on the
Estimated Closing Balance Sheet will be adequate for all such Taxes payable or
asserted to be payable by the Company for all relevant taxable periods or
portions thereof through the Closing Date. The Company has made available to the
Buyers complete and correct copies of all material Tax Returns filed by the
Company.
(b) Except as set forth on Schedule 3.17(b) of the Company Disclosure
Memorandum, the Company has duly and timely withheld all employment and
withholding Taxes required to be withheld, and such withheld taxes have been
duly and timely paid to the proper Governmental Authorities or, if not yet due,
properly set aside in accounts for such purpose. The Company is in compliance
with all applicable information reporting and Tax withholding requirements under
federal, state, and local Tax laws.
(c) To the knowledge of the Company, no claim for taxes has been
asserted, raised, or threatened in writing by a Governmental Authority against
the Company in a jurisdiction in which the Company does not file Tax Returns.
(d) Except as set forth on Section 3.17(d) of the Company Disclosure
Memorandum, no Tax Return filed by the Company is currently under audit by any
Governmental Authority. To the knowledge of the Company, no Taxes of the Company
that may become payable following the Closing Date for periods ending on or
prior to the Closing Date have been asserted in writing by any Governmental
Authority to be due, and no report or assessment for any Taxes of the Company
that may be payable following the Closing Date for periods ending on or prior to
the Closing Date has been issued by any Governmental Authority in the course of
any audit. To the knowledge of the Company, except as set forth on Section
3.17(d) of the Company Disclosure Memorandum, no Governmental Authority has
asserted, raised or threatened against the Company any deficiency or claim for
additional Taxes or any adjustment of Taxes. There is no other deficiency, claim
or adjustment with respect to any Taxes of the Company, including Taxes of other
persons for
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which the Company may be liable under Section 1-1502-6 of the Treasury
Regulations or any similar provision of Applicable Law, that may be payable
following the Closing Date for periods ending on or prior to the Closing Date,
or other pending audit of any Tax Return pertaining to the Company.
(e) Except as set forth on Section 3.17(e) of the Company Disclosure
Memorandum, the Company has not (x) waived any statute of limitations, (y)
agreed to any extension of the period for assessment or collection of any Taxes,
or (z) executed or filed any power of attorney with respect to any Taxes, which
waiver, agreement or power of attorney is currently in force.
(f) The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations.
(g) Except as set forth in Section 3.17(g) of the Company Disclosure
Memorandum, the Company is not a party to, is not bound by and does not have any
obligation under any Tax allocation, sharing, indemnity or similar agreement or
arrangement. Except as set forth in Section 3.17(g) of the Company Disclosure
Memorandum, the Company is not, nor at any time has it been, a member of any
Affiliated Group nor does it have any liability for the Taxes of any person
under Section 1.1502-6 of the United States Treasury Regulations, or any similar
provision of state, local or foreign law, or as a transferee, successor,
indemnitor or guarantor, by contract or otherwise.
(h) The Buyers will not be required to deduct and withhold any amount
pursuant to Sections 1445(a) or 3406 of the Code, or any other provision of law,
upon the payment of the Merger Consideration pursuant to this Agreement.
(i) The Company is not obligated to make any payments and is not a
party to any agreement that could reasonably be expected to obligate it to make
any payments that will not be deductible under Section 162(m) of the Code.
(j) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(k) Except as set forth in Section 3.17(k) of the Company Disclosure
Memorandum, there is no ruling received from, or closing agreement executed
with, any Governmental Authority that will be binding upon the Company after the
Closing Date with respect to Taxes.
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(l) The Company has not had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country. The Company is not subject to Tax in any
country other than the United States.
(m) There has not been an ownership change, as defined in Section 382
of the Code, of the Company, that occurred during or after any period in which
the Company incurred a net operating loss that carries over to any period ending
after the Closing Date.
(n) In the Merger, the Company will transfer to Buyer assets
representing, at least ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market value of the gross
assets held by the Company immediately prior to the Merger. For purposes of this
representation, Company assets used to pay its reorganization expenses and all
redemptions of stock and distributions with respect to stock (except for
regular, normal dividends) made by the Company immediately preceding the
transfer, will be included as assets of the Company immediately prior to the
Merger. Except as set forth in this Agreement and the Company Disclosure
Memorandum, the Company will pay no cash or other property to shareholders in
connection with the Merger. In addition, assets disposed of by the Company in
contemplation of the Merger will be considered assets held by the Company
immediately prior to the Merger.
(o) Other than cash paid to the Preferred Seller and the Common Sellers
that have dissented from the Merger and perfected their rights of appraisal,
during the preceding two years, neither the Company nor any Company Related
Party has redeemed or acquired any Company Stock.
(p) Except as set forth in this Agreement and the Company Disclosure
Memorandum, neither the Company nor any Company Related Party has made any
distribution with respect to the outstanding Capital Stock during the preceding
two years other than periodic dividends consistent with the Company's historic
dividend practice.
(q) The liabilities of the Company assumed by Buyer and the liabilities
to which the transferred assets of the Company are subject were incurred by the
Company in the ordinary course of its business.
(r) To the knowledge of the Company, the Company and the Sellers will
pay their respective expenses, if any, incurred in connection with the
transaction.
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(s) The fair market value of the assets of the Company to be
transferred to the Buyer will equal or exceed the sum of the liabilities assumed
by Buyer or by Buyer Parent, plus the amount of the liabilities, if any, to
which the transferred assets are subject.
Section 3.18 Assets Under Management. As of the close of business on
January 31, 2001 the aggregate amount of assets under management (i.e., assets
as to which the Company is entitled to receive Asset Management Fees) (i) for
the Registered Funds listed on Section 3.6(c) of the Company Disclosure
Memorandum was approximately $645,801,217, (ii) for the Separate Accounts was
approximately $15,256,192,937, and (iii) for the wrap accounts of the Company's
Managed Accounts Group was approximately $1,554,561,375.
Section 3.19 Affiliate Transactions. Section 3.19 of the Company
Disclosure Memorandum sets forth a correct and complete list of all agreements,
arrangements or other commitments in effect as of the date hereof (other than
employment agreements listed in Section 3.10(a) of the Company Disclosure
Memorandum) between the Company, on the one hand, and any officer, director or
shareholder of the Company, on the other hand. A true and correct copy of each
such agreement, arrangement or commitment (or if the same is oral, a true,
correct and complete written description thereof) has heretofore been provided
to the Buyers.
Section 3.20 Labor Matters, etc. The Company is not a party to or bound
by any collective bargaining or other labor agreement. The Company is currently
in compliance with and for the past five (5) years has materially complied with
all applicable provisions of Applicable Laws pertaining to the employment or
termination of employment of its employees, except for any failures to comply
that, individually or in the aggregate, could not reasonably be expected to have
a Company Material Adverse Effect.
Section 3.21 Derivative Products. All interest rate swaps, caps,
floors, option agreements, futures and forward Contracts and other similar risk
management arrangements, whether entered into for the Company's own account (all
of which are listed on Section 3.21 of the Company Disclosure Memorandum), or
for the account of one or more of the Company's Clients, were entered into (i)
in accordance with prudent business practices to the extent entered into for the
Company's own account, (ii) in accordance with Client guidelines to the extent
entered into for Clients, (iii) in accordance with all Applicable Laws and (iv)
to the knowledge of the Common Sellers, with counterparties that were
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms (subject only to the bankruptcy, insolvency, moratorium, fraudulent
transfer and similar laws affecting creditors' rights generally
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and to general equity principles), and are in full force and effect. Neither the
Company nor to the Company's knowledge any other party thereto, is in breach of
any of its obligations under any such agreement or arrangement.
Section 3.22 Books and Records. The books and records of the Company
and its Subsidiaries and each Investment Company, Client and Account have been
fully, properly and accurately maintained in all material respects, in
compliance and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein, and they fairly present in all material respects
the financial position of the Company, and the assets and performance of each
Investment Company, Client and Account. The valuations of the assets and
liabilities of each Investment Company, Client and Account have been supplied by
sources that the Company believes are reasonably reliable and accurate, and, to
the Common Sellers' knowledge, accurately reflect the fair market values of such
assets and liabilities as of the dates thereof.
Section 3.23 Environmental Matters. Except as set forth in Section 3.23
of the Company Disclosure Memorandum, and except for those matters which could
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect:
(a) The Company and the Company Facilities are and have been in
compliance with all Environmental Laws;
(b) No events, facts or conditions will prevent, hinder or limit
continued compliance by the Company and the Company Facilities with applicable
Environmental Laws, and no material expenditures or commitments by the Company
are planned or necessary to maintain continued compliance by the Company and the
Company Facilities with applicable Environmental Laws as of the date of this
Agreement or beyond the Effective Date;
(c) The Company has obtained all Permits required pursuant to
applicable Environmental Laws to carry on its business as now conducted; all
such permits are in full force and effect and are not subject to any appeals or
to any unsatisfied conditions which are required to be satisfied by the Closing
Date; and no such permits are subject to any pending or threatened modification,
suspension, revocation, rescission or cancellation;
(d) The Company is not liable under any applicable Environmental Law
with respect to the release, threatened release, or presence of any Hazardous
Substance;
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(e) No Hazardous Material which may require response or corrective
action or remediation under any Environmental Law is present at, threatening, or
emanating from any property presently owned or operated by the Company, or was
present at or emanating from any other property when previously owned or
operated by the Company;
(f) The Company is not subject to any pending or threatened claim, or
is obliged to comply with any judgment, order, ruling, settlement, or agreement
arising under any Environmental Law;
(g) The Company has not received any notice that it is a potentially
liable party, that it is required to provide information, or that it or any of
the Company Facilities is subject to an investigation in connection with any
applicable Environmental Law; and
(h) The Company has not entered into any negotiations or agreements
either relating to any response or corrective action or remediation relating to
liabilities or potential liabilities arising under any Environmental Law or
providing any indemnification or renouncing indemnification claims for any
liabilities arising under any Environmental Law.
Section 3.24 Disclosure. The respective representations and warranties
of the Common Sellers and the Preferred Seller contained herein do not contain
any untrue statements of material fact or omit to state a material fact
necessary to be stated or disclosed in order to make the statements contained in
the representations and warranties, in light of the circumstances under which
they were made, not misleading.
Section 3.25 Investment. Each Seller hereby represents and warrants
that the Parent Stock it will acquire pursuant to the Merger, and the Parent
Stock it may acquire pursuant to the terms of Article II, are being, or will be,
acquired by such Seller for its own account, not as a nominee or agent, and not
with a view to, or for sale in connection with, any distribution thereof. Each
Seller understands that the Parent Stock issuable pursuant to the Merger hereof,
and the Parent Stock that may be issued pursuant to Article II hereof, have not
been registered under the Securities Act, or any state securities laws, by
reason of specific exemptions from the registration provisions of the Securities
Act and such laws that may depend upon, among other things, the bona fide nature
of the Sellers' investment intent as expressed herein. Each Common Seller that
is a natural person and the Preferred Seller represents and warrants that he,
she or it, as the case may be, is an "accredited investor" within the meaning of
Regulation D promulgated by the SEC under the Securities Act. Each Seller has
had an opportunity to ask questions and receive
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answers concerning the terms and conditions of the Merger and related
transactions, and to obtain any additional information that Buyer Parent
possesses or can acquire without unreasonable effort, and that such Seller has
received prior to the date hereof a copy of all Buyer Parent Reports that have
been filed with the SEC.
Each Seller further represents and warrants that it has such knowledge
and experience in financial and business matters as to enable it (a) to utilize
the information made available to it in connection with the transactions
contemplated by this Agreement, (b) to evaluate the merits and risks associated
with the acquisition of Parent Stock pursuant hereto, and (c) to make an
informed decision with respect thereto. Each Seller's business and financial
experience is such that the Buyers could reasonably assume such Seller has the
capacity to protect its interests in connection with the offer, sale and
issuance of the Parent Stock hereunder. Each Seller has reviewed with its tax
advisor the United States federal, state, local and foreign tax consequences of
an investment in Parent Stock and the transactions contemplated by this
Agreement and reviewed with its legal counsel the United States, federal, state
and foreign legal restrictions on transfers and resales of shares of Parent
Stock issued pursuant to the terms of this Agreement. Each Seller is relying
solely on such advisors with respect to such matters and not on any statements
or representations of the Buyers or any of their agents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
AND BUYER PARENT
The Buyers, jointly and severally, represent and warrant to the Company
and the Sellers as follows:
Section 4.1 Organization and Related Matters. Buyer Parent and Buyer
are corporations duly organized, validly existing and in good standing under the
laws of the England and Wales and the State of Delaware, respectively. Each of
Buyer and Buyer Parent has the power and authority to carry on its business as
it is now being conducted and to own, lease and operate all of its properties
and assets, and is duly qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned, leased or operated by it makes such qualification
necessary except where the failure to be so qualified would not have a Buyer
Material Adverse Effect.
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Section 4.2 Authority; No Violation.
(a) Each of Buyer and Buyer Parent has full power and authority to
execute and deliver this Agreement and take all actions necessary or appropriate
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly approved by all requisite action on the part of Buyer
and Buyer Parent, and no other proceedings on the part of Buyer or Buyer Parent
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Buyer and Buyer Parent and (assuming the due authorization,
execution and delivery of this Agreement by the Company and the Sellers)
constitute a valid and binding obligation of Buyer and Buyer Parent, enforceable
against Buyer and Buyer Parent in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency, moratorium and
similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by Buyer or
Buyer Parent, nor the consummation by Buyer or Buyer Parent of the transactions
contemplated hereby to be performed by them, nor compliance by Buyer or Buyer
Parent with any of the terms or provisions herein or therein, will (i) violate
any provision of the Organizational Documents of Buyer or Buyer Parent or (ii)
assuming that the Consents required of the Company in Section 5.3 hereof are
duly obtained, (A) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Buyer or Buyer Parent
or, any of their properties, contracts or assets or (B) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any material Encumbrance upon any assets of Buyer or
Buyer Parent or any Contract, Lease or Indebtedness to which Buyer or Buyer
Parent or any of their Affiliates is a party, or by which Buyer or Buyer Parent,
or any of their properties or assets, may be bound or affected, except, in the
case of this clause (ii), any such violation, conflict, breach, losses, default,
termination, cancellation or Encumbrance which would not individually or in the
aggregate have a Buyer Material Adverse Effect.
Section 4.3 Consents and Approvals. Except for (a) Consents and notices
as are set forth in Section 5.3, (b) the applicable filings under the HSR Act
and (c) such other Consents the failure of which to be made or obtained are not
reasonably expected to have a Buyer Material Adverse Effect, no Consents with
any Governmental Authority or any third party are necessary in connection with
(i) the execution and delivery by Buyer and Buyer Parent of this Agreement and
(ii) the
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consummation by Buyer and Buyer Parent of the transactions as contemplated
hereby. The Buyers are not aware of any reason that would cause the Consents of
any Governmental Authority or third party to this Agreement and the transactions
provided for herein to not be received without undue delay or without the
imposition thereon of conditions, restrictions or requirements that,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect or a material adverse effect on the Surviving
Corporation.
Section 4.4 Buyer Financing. Buyer Parent and Buyer have, or prior to
Closing will have, sufficient funds to enable them to pay the consideration
required to be paid by Buyer pursuant to Article II and to perform their
obligations hereunder.
Section 4.5 No Other Broker. Other than DeGuardiola Advisors, Inc., the
fees and expenses of which will be paid by Buyer and/or Buyer Parent, no broker,
finder or similar intermediary has acted for or on behalf of or is entitled to
any broker's, finder's or similar fee or other commission from Buyer or Buyer
Parent or any of their Affiliates in connection with this Agreement or the
transactions contemplated hereby.
Section 4.6 Legal Proceedings. There are no legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature that are pending or, to Buyer's or Buyer Parent's
knowledge, have been threatened in writing against Buyer or Buyer Parent or any
of their Affiliates or their respective properties which (a) individually or in
the aggregate, are reasonably expected to have a Buyer Material Adverse Effect
or (b) challenge the validity of the transactions contemplated by this
Agreement, and there is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Buyer or Buyer Parent or any of their Affiliates or
their properties or assets which, individually or in the aggregate, is
reasonably expected to have a Buyer Material Adverse Effect.
Section 4.7 Capitalization. The authorized number of shares of Parent
Stock as of December 31, 2000 was 1,049,999,999 Ordinary Shares. At December 31,
2000, the issued number of shares of Parent Stock was 771,037,502 Ordinary
Shares. All the issued Ordinary Shares have been duly authorized and validly
issued and are fully paid and non-assessable. When Ordinary Shares are issued
pursuant to the terms of this Agreement, they will be (a) duly authorized and
validly and newly issued, (b) non-assessable, (c) freely tradeable on the LSE,
(d) free of any pre-emptive rights and (d) free of any transfer restrictions
imposed by Buyer Parent or under Applicable Law (other than restrictions set
forth in Section 2.11 hereof and, with respect to a Common Seller for so long as
such Common Seller is an employee of Buyer Parent or one of its Affiliates,
restrictions generally applicable to employees of Buyer Parent or its
Affiliates). The only authorized capital stock of Buyer is 1,000
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shares of common stock, par value $.01 per share, of which 160 shares are issued
and outstanding and owned by Buyer Parent.
Section 4.8 Buyer Parent Reports. Since January 1, 2000, Buyer Parent
has filed all material registrations, reports, statements, notices and other
material filings required to be filed with the SEC, the LSE, the Investment
Management Regulatory Organisation Limited ("IMRO"), and any other Governmental
Authority by Buyer Parent, to the extent applicable, including all required
amendments or supplements to any of the above (the foregoing, excluding reports
on Form 6-K filed with the SEC that relate to transactions by directors or
officers of Buyer Parent or its affiliates in shares of Buyer Parent, the "Buyer
Parent Reports"). The Buyer Parent Reports complied in all material respects,
where applicable, with the requirements of the Securities Act, the Exchange Act,
the Advisers Acts, the Investment Company Act, the Companies Act and the rules
and regulations of IMRO and any other Governmental Authority. As of their
respective dates, each of the Buyer Parent Reports constituting prospectuses,
listing particulars (to the extent their contents relate to the Buyer Parent and
its Affiliates), statements of additional information, Part II of Form ADVs,
annual reports on Form 20-F and proxy statements did not contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 4.9 Taxes. There are no U.K. stamp or transfer Taxes due in
respect of the issuance of any shares of Parent Stock under this Agreement.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business by the Company. During the period from
the date of this Agreement and continuing through the Effective Time, except as
expressly contemplated or permitted by this Agreement or with the prior written
consent of Buyer Parent, the Company shall (a) carry on its business in the
ordinary course consistent with past practices; (b) use all reasonable efforts
to preserve its present business organization, relationships and Clients; (c)
use all reasonable efforts to keep available the present services of its
employees; (d) use all reasonable efforts to xxxx and collect investment
advisory fees consistent with past practices; and (e) use all reasonable efforts
to preserve its rights, franchises, goodwill and relations with its Clients and
others with whom it conducts Business. Without limiting the generality of the
foregoing, except as expressly permitted by this Agreement, as set forth in
Section 5.1 of the Company Disclosure Memorandum, or consented to in writing by
Buyer Parent, the Company shall not:
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(i) issue any securities or borrow money or acquire any of its
shares of Capital Stock;
(ii) pay (or commit to pay) any bonus to any director,
partner, officer, other employee or sales representative, except such
bonuses calculated consistent with the past practices of the Company;
(iii) create, renew, amend, terminate or cancel, or take any
other action that may result in the creation, renewal, amendment,
termination or cancellation of, any Contract except in the ordinary
course of business;
(iv) take any action impairing its rights in any Contract or
its assets other than in the ordinary course of business;
(v) purchase or lease any assets from, or sell or lease any
assets to, any of its Affiliates;
(vi) adopt, amend, renew or terminate any Plan or any other
employee program, agreement, arrangement or policy between the Company
and one or more of its employees, other than in the ordinary course of
business;
(vii) take or fail to take any action which action or omission
constitutes a breach or default under any material Contract or material
license to which the Company is a party or by which it or any of its
properties is bound the effect of which could reasonably be expected to
cause a Company Material Adverse Effect;
(viii) amend its Organizational Documents;
(ix) terminate senior employees of the Company without having
consulted with Buyer Parent;
(x) enter into any new line of business unrelated to the
Business as currently conducted;
(xi) acquire or sell in any manner, including by way of
merger, consolidation or purchase or sale of an equity interest or
assets, any business or any corporation, partnership, association or
other business organization or division thereof, or
(xii) agree to do any of the foregoing.
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Section 5.2 No Solicitation, etc. Prior to the Closing, neither the
Company, any Common Seller nor the Preferred Seller shall (i) solicit or
encourage any inquiries or proposals for, or enter into any discussions with
respect to, the acquisition of any of the Capital Stock of the Company or the
Business or all, or substantially all, of the assets of the Company or (ii)
furnish or cause to be furnished any non-public information concerning the
Business and operations of the Company to any Person (other than Buyer and its
Affiliates and their agents or representatives or the Sellers and their agents
or representatives) other than in the ordinary course of business or pursuant to
Applicable Law. Except as otherwise permitted by this Agreement, prior to the
Closing, the Company shall not issue, sell, transfer or otherwise dispose of,
grant any option to any Person with respect to, create any Encumbrance upon, or
transfer any shares of Capital Stock of the Company and each Common Seller and
the Preferred Seller shall not sell, transfer or otherwise dispose of, grant any
option to any Person with respect to, create any Encumbrance upon, or transfer,
such shares of Capital Stock of the Company.
Section 5.3 Consents.
(a) Registered Funds. The Company, as promptly as practicable, shall
(i) use its reasonable best efforts to cause the Investment Company Board of
each Registered Fund to call a special meeting of the shareholders of such
Registered Fund to be held as promptly as reasonably practicable for the purpose
of obtaining the approval of such shareholders of a new Investment Management
Agreement containing terms (other than fee rates) that are not materially less
favorable to the Company than the terms contained in the Investment Management
Agreement with such Registered Fund existing on the date hereof, (ii) use, and
use its reasonable best efforts to cause each Registered Fund to use, its
reasonable best efforts to obtain, or cause to be obtained, the approval of the
Investment Company Boards and the shareholders of such Registered Fund, pursuant
to the provisions of Section 15 of the Investment Company Act applicable
thereto, of such Investment Management Agreement for such Registered Fund with
the Company, (iii) use its reasonable best efforts to cause each Registered Fund
to prepare, file with and cause to be cleared by the SEC and all other
Governmental Authorities having jurisdiction there over, as promptly as
practicable after the date hereof, all proxy solicitation materials required to
be distributed to shareholders of each such Registered Fund with respect to the
actions recommended for shareholder approval by the Investment Company Boards,
(iv) use its reasonable best efforts to cause each Registered Fund to mail such
proxy solicitation materials to such shareholders promptly after clearance by
the SEC and cause to be submitted to a meeting of shareholders of such
Registered Fund as soon as practicable after such mailing the proposals
described in clause (ii) above, and (v) use its reasonable best efforts to cause
the Investment Company Board of each
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Registered Fund to approve, pursuant to and in conformity with Section 15(a)(4)
of the Investment Company Act and SEC Rule 15a-4 thereunder, of an interim
Investment Management Agreement for such Registered Fund with the Company (A)
providing for the Company to continue as the adviser of such Registered Fund
with the same advisory fees as are in effect under the existing Investment
Management Agreement for such Registered Fund with the Company on the date
hereof, (B) becoming effective at the time of the Closing for any Registered
Fund whose shareholders have not, prior to the Closing, approved a new
Investment Management Agreement with the Company, and (C) satisfying all
requirements of SEC Rule 15a-4(b)(2)(iv)-(vi) (each an "Interim Advisory
Contract").
(b) Other Client Consents. If Consent to the assignment or deemed
assignment of an Investment Management Agreement with Clients of the Company
(other than Clients that are Registered Funds) as a result of the transactions
contemplated by this Agreement is required by Applicable Law or by such Client's
Investment Management Agreement, as soon as reasonably practicable following the
date hereof, the Company shall send a notice in form and substance acceptable to
Buyer (the "Notice") informing such Clients of the transactions contemplated by
this Agreement, requesting written Consent to the assignment of such Client's
Investment Management Agreement and informing such Client (i) of the intention
to complete the transactions contemplated by this Agreement, which will result
in a deemed assignment of such Investment Management Agreement; (ii) of the
intention of the Surviving Corporation to cause a subsidiary of the Surviving
Corporation which is a registered investment adviser to continue to provide the
advisory services pursuant to the existing Investment Management Agreement with
such Client after the Effective Time; and (iii) that the Consent of such Client
will be deemed to have been granted if such Client continues to accept such
advisory services through April 30, 2001 without termination of such Client's
Investment Management Agreement with the Company or without advising the
Company, either orally or in writing, of its intention to terminate such
Investment Management Agreement. Buyer Parent and Buyer each agrees that Consent
for any Investment Management Agreement with a Client (other than Clients that
are Registered Funds) to the assignment or deemed assignment resulting from the
transactions contemplated by this Agreement shall be deemed given for all
purposes hereunder (A) if no Consent is required under Applicable Law or the
respective Investment Management Agreement (provided that there is no
notification or communication, either written or oral, that would reasonably be
construed as equivalent to a statement that such Client will terminate or
intends to terminate its Investment Management Agreement with the Company within
sixty (60) days following the Effective Time), (B) if Consent is required under
Applicable Law or the respective Investment Management Agreement, upon receipt
of the written Consent requested in the Notice (provided that, after the date of
receipt of such written Consent, there is no notification or communication,
either written or
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oral, that would reasonably be construed as equivalent to a statement that such
Client will terminate or intends to terminate its Investment Management
Agreement with the Company within sixty (60) days following the Effective Time)
or (C) if such Consent is required under Applicable Law or the respective
Investment Management Agreement, and if the written Consent requested in any
Notice is not received on or prior to April 30, 2001, to the extent such Client
continues to accept the investment advisory services provided by the Company
under such Investment Management Agreement for the period ending on April 30,
2001, unless (1) such Client has at any time on or prior to April 30, 2001
terminated, or advised the Company, either orally or in writing, of its
intention to terminate such Investment Management Agreement or (2) there exists
any notice or communication, either written or oral, that would reasonably be
construed as equivalent to a statement that such Client will terminate or
intends to terminate its Investment Management Agreement with the Company within
sixty (60) days following the Effective Time. The Buyers shall be provided a
reasonable opportunity to review all such Consent materials to be used by the
Company prior to distribution. The Company shall promptly upon their receipt
make available to the Buyers copies of any and all substantive correspondence
between it and Clients or representatives or counsel of such Clients relating to
the Consent solicitation provided for in this Section 5.3 (a) and (b). Prior to
the Closing Date, no Buyer shall contact, in writing or otherwise, any Client or
any other Person who acts as an adviser to or "gatekeeper" for any Client with
respect to this Agreement or the transactions contemplated hereby or the Consent
without the prior approval of the Seller Representative, which approval shall
not be unreasonably withheld or delayed.
(c) Client Procedures. In connection with obtaining the Client Consents
required by subsections (a) and (b), the Company shall take reasonable steps to
keep the Buyers informed of the status of obtaining such Client Consents and, to
the extent applicable, deliver to the Buyers prior to the Closing copies of all
such executed Client Consents and make available for inspection the originals of
such Consents prior to the Closing.
(d) The Registered Funds' Proxy Statements. In connection with the
preparation and filing of the proxy solicitation materials referred to in the
subsection (a) above, the Company and the Buyers will cooperate with each other
and with the Investment Company Board of each Registered Fund, including
providing such information as may be reasonably requested for inclusion in such
proxy statements. Each of the Company, the Buyer and Buyer Parent agrees that
none of such information provided by it for inclusion in such proxy solicitation
materials will contain any untrue statement of a material fact, or omit to state
any material fact required to make the statements therein, in light of the
circumstances in which they were made, not misleading.
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(e) The Registered Funds' Registration Statements. Prior to the earlier
of the Closing Date or the termination of this Agreement, the Company and the
Buyers will cooperate with each other and each will endeavor in good faith to
cause each Registered Fund to file supplements or post-effective amendments to
that Registered Fund's registration statement on Form N-1A, which supplements or
amendments shall reflect changes as necessary in that Registered Fund's affairs
as a consequence of the transactions contemplated by this Agreement, and shall
cooperate with one another in causing each Registered Fund to make any other
filing necessary under Applicable Law to satisfy disclosure requirements to
enable the public distribution of the shares of beneficial interest of that
Registered Fund to continue.
(f) Continued Qualification. Prior to the earlier of the Closing Date
or the termination of this Agreement, the Company shall use commercially
reasonable efforts to ensure that no Registered Fund takes any action that (a)
would prevent any Registered Fund from qualifying as a "regulated investment
company" under Section 851 of the Code, or (b) would be inconsistent with each
Registered Fund's prospectuses and other offering, advertising and marketing
materials, as amended or supplemented.
Section 5.4 Investment Company Matters.
(a) Each of the Common Sellers and Buyers agree that neither it nor any
of its Affiliates has any express or implied understanding or agreement that
would impose an "unfair burden" on any Registered Fund or would in any way
interfere with any Registered Fund's reliance on Section 15(f) of the Investment
Company Act as a result of the transactions contemplated by this Agreement. The
Common Sellers and Buyers agree to comply and to use their respective
commercially reasonable efforts to cause the respective boards of directors of
the Investment Company to comply with the provisions of Section 15(f) of the
1940 Act prior to the Effective Time. Following the Effective Time, the Buyers
shall not fail to take, and shall use reasonable best efforts to cause each
Affiliate of the Buyer Parent to not fail to take, any action if the failure to
take such action would have the effect, directly or indirectly, of causing the
requirements of any of the provisions of Section 15(f) of the Investment Company
Act not to be met in respect of this Agreement and the transactions contemplated
hereby. In that regard, each of Buyer Parent and the Buyer shall conduct its
business and shall, subject to the applicable fiduciary duties to the Registered
Funds, use its reasonable best efforts to cause each of its Affiliates to
conduct its business so as to assure that, insofar as within the control of
Buyer Parent, the Buyer or their respective Affiliates:
(i) for a period of three years after the Closing, at least
75% of the members of the Investment Company Boards of each Registered
Fund or their
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successors are not (A) "interested persons" of the investment adviser
of such Registered Fund after the Closing, or (B) "interested persons"
of the present or successor investment manager of such Registered Fund;
and
(ii) for a period of two years after the Closing, there shall
not be imposed on any Registered Fund an "unfair burden" as a result of
the transactions contemplated under this Agreement, or any express or
implied terms, conditions or understandings applicable thereto.
(b) For a period of three years from the Closing, neither Buyer Parent
nor Buyer shall, and Buyer Parent and Buyer shall use reasonable best efforts to
cause their respective Affiliates not to, voluntarily engage in any transaction
that would constitute an "assignment" of any Investment Management Agreement
with any Registered Fund currently managed by the Company to which Buyer Parent,
the Buyer or any such Affiliate is a party, without first obtaining a covenant
in all material respects the same as that contained in Section 5.4(a).
(c) The terms used in quotations in this Section 5.4 shall have the
meanings set forth in Sections 2(a)(4), 2(a)(19) and 15(f) of the Investment
Company Act.
Section 5.5 Insurance. During the period from the date hereof to the
Effective Time, the Company will maintain in effect until superseded by policies
of Buyer or its Affiliates all casualty and public liability policies maintained
by the Company on the date hereof relating to its Business, or will procure
comparable replacement policies and maintain such replacement policies in effect
until such time.
Section 5.6 Further Assurances. Each party to this Agreement shall
execute such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. For a reasonable period of time after the Closing Date upon
the reasonable request of any party (or parties), the other parties shall
promptly execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as may
be requested to effectuate the purposes of this Agreement and the transactions,
plans and arrangements contemplated hereby.
Section 5.7 Efforts of Parties to Close. During the period from the
date of this Agreement through the Closing Date each party hereto shall use all
reasonable efforts to fulfill or obtain the fulfillment of the conditions
precedent to the
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consummation of the transactions contemplated hereby, including the execution
and delivery of any documents, certificates, instruments or other papers that
are reasonably required for the consummation of the transactions contemplated
hereby. During the period from the date of this Agreement and continuing through
the Closing, except as required by Applicable Law or with the prior written
Consent of the other parties to this Agreement, no party to this Agreement shall
take any action which, or fail to take any action the failure of which to be
taken, would, or could reasonably be expected to, (a) result in any of the
representations and warranties set forth in this Agreement on the part of the
party taking or failing to take such action being or becoming untrue in any
respect that would cause Section 6.1(a) or Section 6.2(a) not to be satisfied;
(b) result in any conditions to the Closing set forth in Article VI not being
satisfied; (c) result in a material violation of any provision of this
Agreement; or (d) adversely affect or materially delay the receipt of any of the
requisite regulatory approvals. Buyer Parent shall cause Buyer to take all
actions necessary to perform and comply with all agreements, covenants and
obligations of Buyer hereunder.
Section 5.8 Confidentiality and Announcements.
(a) Buyer and Buyer Parent agree to be bound by and comply with the
provisions set forth in the Confidentiality Agreement, the provisions of which
are hereby incorporated herein by reference.
(b) Neither the Company, the Sellers, Buyer nor Buyer Parent shall, and
each of the foregoing shall cause each of its Affiliates, employees, directors,
partners and agents, including accountants, lenders, counsel and investment
bankers not to, disclose to any Person (other than its Affiliates, employees,
partners and agents) any of the contents hereof other than as required by law
upon prior notice to the other parties.
(c) Subject to Section 5.9, the parties to this Agreement shall consult
each other as to the form and substance of any public disclosures and shall use
all reasonable efforts to agree with each other as to the form and substance of
any press release related to this Agreement or the transactions contemplated
hereby.
Section 5.9 Access, Certain Communications. Between the date of this
Agreement and the Closing Date, subject to any Applicable Laws relating to the
exchange of information, the Company shall afford to Buyer and Buyer Parent and
their authorized agents and representatives reasonable access, upon reasonable
notice and during normal business hours, to all contracts, documents and
information of or relating to the assets, liabilities, business, operations,
personnel and other aspects of
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the Business; provided, however, that any such investigation shall be conducted
in a manner which does not unreasonably interfere with the Company's normal
operations and employee relations.
Section 5.10 Regulatory Matters; Third Party Consents.
(a) The parties to this Agreement shall cooperate with each other and
use all reasonable efforts promptly to prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, Consents, approvals, waivers
and authorizations of all third parties and Governmental Authorities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (it being understood that the Company and the Sellers shall be
responsible only for using all reasonable efforts to obtain all such approvals,
waivers and Consents from such parties with whom the Company is in contractual
privity (including all Clients) and that such efforts shall not require action
that in the Company's judgment could have an adverse impact on client
relationships. If any required Consent of or waiver by any third party
(excluding any Governmental Authority) is not obtained prior to the Closing, the
parties hereto, each without cost, expense or liability to the other (except as
provided in Article VII hereof), shall cooperate in good faith to seek, if
possible, an alternative arrangement to achieve the economic results intended.
The parties to this Agreement will have the right to review in advance, and will
consult with the other on, in each case subject to Applicable Laws relating to
the exchange of information, all of the information relating to Buyer, Buyer
Parent, the Company or the Sellers, as the case may be, which appear in any
filing made with, or written materials submitted to, any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement, provided, however, that nothing contained herein shall be deemed to
provide any party to this Agreement with a right to review any information
provided to any Governmental Authority on a confidential basis in connection
with the transactions contemplated hereby. The parties to this Agreement agree
that they will consult with each other with respect to the obtaining of all
permits, Consents, approvals and authorizations of all third parties and
Governmental Authority necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the others apprised of
the status of matters relating to completion of the transactions contemplated
herein. The party responsible for a filing as set forth above shall promptly
deliver or make available to the other parties hereto evidence of the filing of
all applications, filings, registrations and notifications relating thereto
(except for any confidential portions thereof), and any supplement, amendment or
item of additional information in connection therewith (except for any
confidential portions thereof). The party responsible for a filing shall also
promptly deliver or make available to the other
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parties hereto a copy of each material notice, order, opinion and other item of
correspondence received by such filing party from any Governmental Authority in
respect of any such application (except for any confidential portions thereof).
In exercising the foregoing rights and obligations, Buyer, Buyer Parent, the
Company and the Sellers shall each act reasonably and as promptly as
practicable.
(b) The parties to this Agreement shall promptly advise each other upon
receiving any communication from any Governmental Authority whose Consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any requisite regulatory approval will not be obtained or that
the receipt of any such approval will be materially delayed.
Section 5.11 Expenses. Except as otherwise expressly provided herein,
Buyer and Buyer Parent on the one hand, and the Sellers and the Company on the
other hand, shall each bear their respective direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation of the transactions contemplated hereby, including all
direct and indirect expenses incurred in connection with the Consents required
to be obtained pursuant to Section 5.3.
Section 5.12 Non-Foreign Person Affidavit. Each of the Sellers shall,
on or prior to the Closing Date, furnish to the Buyer a non-foreign person
affidavit that complies with the requirements of Section 1445 of the Code;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the failure of any or all of the Sellers to provide such
affidavit shall not release Buyers from their obligation to consummate the
transactions contemplated hereby.
Section 5.13 Releases.
(a) If the transactions contemplated by this Agreement shall be
consummated, effective at the Effective Time, each Common Seller hereby agrees
to the termination of Section 14 of the Prior Purchase Agreement and the
Shareholders Agreement and hereby releases and discharges the Company, Buyer and
Buyer Parent, the Preferred Seller and their respective Affiliates and their
respective past, present and future officers, directors, agents and employees,
of, from, against and in respect of any action, cause of action, damage, claim,
or liability based upon, arising out of, or relating to the ownership by such
Common Seller of shares of the Common Stock of the Company (including, without
limitation, any claim for payment of any dividends accrued and unpaid, whether
or not declared, or declared but unpaid) at any time or for any period ending
on, prior to or after the Effective Time, other than
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any claim based upon rights of such Common Seller under this Agreement
(including the right to receive the merger consideration payable to such Common
Seller as provided in Article II hereof).
(b) If the transaction contemplated by this Agreement shall be
consummated, effective at the Effective Time, the Preferred Seller hereby agrees
to the termination of Section 14 of the Prior Purchase Agreement and hereby
releases and discharges the Company, Buyer and Buyer Parent, the Common Sellers
and their respective Affiliates and their respective past, present and future
officers, directors, agents and employees, of, from, against and in respect of
any action, cause of action, damage, claim or liability based upon or arising
out of, or relating to, the ownership by the Preferred Seller of shares of the
Capital Stock of the Company (including, without limitation, any claim for
payment of any accrued and unpaid dividends, whether or not declared, in respect
of the Preferred Stock) and any claim for payment of any amounts in respect of
the Preferred Stock, whether characterized as a payment in redemption of the
Preferred Stock or otherwise and whether based on the terms of the designation
of the Preferred Stock contained in the Amended Articles of Incorporation of the
Company or otherwise) at any time or for any period ending on, prior to or after
the Effective Time, other than any other claim based upon rights of the
Preferred Seller under this Agreement (including the right to receive the Merger
Consideration payable to the Preferred Stock as provided in Article II hereof).
Section 5.14 Retention Bonus Plan. Prior to the Effective Time, the
Surviving Corporation (or its successor or assignee) shall have adopted and
approved a Retention Bonus Plan in substantially the form attached as Annex B
(the "Retention Plan) and following its adoption such Retention Plan shall not
be rescinded or modified without the written consent of the Seller
Representative.
Section 5.15 Option Holders. Prior to the Closing Date, the Company
shall accelerate the vesting of any unvested portion of the outstanding options
to acquire Common Stock owned by each of Xxxx X. Xxxxxx and Xxxxxxx X. Xxxxx on
the date hereof (each an "Option"), and each of Xxxx X. Xxxxxx and Xxxxxxx X.
Xxxxx shall exercise in full their respective Options. Xxxx X. Xxxxxx further
agrees that at such time as he exercises any such Option he shall become a
Common Seller under this Agreement and shall have all of the rights, duties and
obligations thereof.
Section 5.16 Termination of Employee Benefit Plans. The Common Sellers
covenant and agree that, if requested in writing by Buyer Parent prior to the
Closing Date, the Common Sellers will use best efforts in accordance with
Applicable Law to cause the Company to terminate, effective as of immediately
prior to the Closing Date, any Plan including, but not limited to, providing any
required notices, adopting
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any required amendments or resolutions effective before the Closing Date, and
fulfilling all of their obligations to contribute to and to administer such
Plans in accordance with their terms.
Section 5.17 Shareholder Approval of Certain Matters. Prior to the
Closing Date, the Company shall take all actions to obtain, and shall obtain,
the requisite approval of the Sellers, as described in Section 280G(b)(5) of the
Code and Regulations Section 1.280G-1 thereunder, with respect to payments which
may be made to any person who, with respect to the Company, is a "disqualified
individual" (as such term is defined for purposes of Section 280G of the Code)
if such payment could reasonably be expected to result in the imposition of any
excise tax imposed under Section 4999 of the Code. The Company shall provide to
Buyer Parent at the Closing evidence of such approval.
Section 5.18 Seller Representative Approval. Each of Buyer Parent and
the Seller Representative agree that, for the period beginning on the day
following the last day of the calendar month ending immediately prior to the
Closing Date and ending on the last day of the third Yearly Period, no employee
of the Company shall be transferred to, or reassigned to perform duties for,
Buyer Parent or any of its Affiliates (other than the Company) without the prior
written consent of the Seller Representative.
Section 5.19 Payment of Preferred Dividend Amount.
(a) The Common Sellers shall cause the Company to, and the Company
shall, prepare and deliver a statement to the Preferred Seller setting forth the
calculation in reasonable detail of the Preferred Dividend Amount at least 15
days prior to the Closing Date, with such statement being subject to prompt
review by Preferred Seller, such review to be consistent with past practice.
(b) Prior to the Closing Date, the Common Sellers shall cause the
Management Committee of the Company to declare and the Company to pay the
Preferred Dividend Amount in full together with any unpaid portion of the
dividend payable on the Preferred Stock on February 15, 2001.
(c) The Common Sellers shall cause the Company to, and the Company
shall, pay the Preferred Dividend Amount to the Preferred Seller at least two
(2) Business Days prior to the Closing Date.
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ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Buyer's and Buyer Parent's Obligations. The
obligations of Buyer and Buyer Parent to effect the Closing and consummate the
Merger shall be subject to the following conditions, any of which may be waived
in writing by Buyer Parent:
(a) The representations and warranties of the Sellers set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date; provided, however, that 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 Company 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 Company Material Adverse Effect exceptions do not represent in the aggregate
a Company Material Adverse Effect;
(b) Each Common Seller and the Preferred Seller shall have performed
and complied in all material respects with the agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by it at or prior to the Closing Date;
(c) The Buyer shall have received a certificate, dated as of the
Closing Date, signed by the Seller Representative on behalf of the Common
Sellers and by a duly authorized officer of the Preferred Seller as to matters
contained in paragraphs (a) and (b) of this Section 6.1;
(d) The Company shall have received the affirmative written Consents of
Clients (other than Clients that are Registered Funds) comprising at least
seventy percent (70%) of the Base Revenue Run-Rate.
(e) Each of (i) Xxxx X. Xxxxxx, Xxxx X. Xxxxxxx, Xxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxx and (ii) any four (4) of the following employees: Xxxxx X.
Chick, Xxxxxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxx, Xxxx X. Xxxxx, Xxxxxxx X. Xxxxx
and Xxxx X. Xxxxxx, shall have entered into Employment Agreements substantially
in the form set forth in Annex C hereto, and neither any Person listed in clause
(i) in this
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subsection (e) nor any three (3) of the Persons listed in clause (ii) in this
subsection (e) shall have terminated his or her employment with the Company
under his or her respective Employment Agreement prior to the Effective Time.
Section 6.2 Conditions to the Company and the Sellers' Obligations. (i)
The obligations of the Sellers with respect to subsections (a), (b), (c) and (d)
of this Section 6.2 to effect the Closing and consummate the merger shall be
subject to the conditions set forth therein, which may be waived in writing by
the Seller Representative and the Preferred Seller, (ii) the obligations of the
Common Sellers with respect to subsection (e) of this Section 6.2 to effect the
Closing and consummate the merger shall be subject to the condition set forth
therein, which may be waived in writing by the Seller Representative and (iii)
the obligation of the Preferred Seller with respect to subsection (f) of this
Section 6.2 to effect the Closing and consummate the merger shall be subject to
the condition set forth therein, which may be waived in writing by the Preferred
Seller:
(a) the representations and warranties of Buyer and Buyer Parent
contained in this Agreement shall be true in all material respects as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date; provided, however, that 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, materiality or a Buyer Material Adverse Effect, and such
representations and warranties shall be deemed to be true and accurate 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 Buyer Material Adverse Effect exceptions do not represent in the aggregate a
Buyer Material Adverse Effect;
(b) Buyer and Buyer Parent shall have performed and complied in all
material respects with the agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by them at or prior
to the Closing Date;
(c) Buyer shall have delivered to the Seller Representative and the
Preferred Seller a certificate, dated as of the Closing Date, signed on behalf
of Buyer by one of its executive officers confirming the satisfaction of the
conditions contained in paragraphs (a) and (b) of this Section 6.2;
(d) Buyer Parent shall have delivered to the Seller Representative and
the Preferred Seller a certificate, dated as of the Closing Date, signed on
behalf of Buyer
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Parent by one of its executive officers confirming the satisfaction of the
conditions contained in paragraphs (a) and (b) of this Section 6.2;
(e) The Surviving Corporation (or its successor or assignee) shall have
adopted and approved the Retention Plan in substantially the form attached as
Annex B and such approval shall not have been rescinded or modified by the
Surviving Corporation (or its successor or assignee) prior to the Effective
Time; and
(f) The Company shall have declared and paid to the Preferred Seller
the dividend in an amount equal to the Preferred Dividend Amount (such amount in
addition to, and not including, the dividend payable on February 15, 2001).
Section 6.3 Mutual Conditions. The obligations of each party to this
Agreement to effect the Closing shall be subject to the following conditions,
any of which may be waived in writing by the Company, the Seller Representative,
the Preferred Seller and Buyer Parent:
(a) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement shall be in
effect. No proceeding initiated by any Governmental Authority seeking an
injunction shall be pending. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits, restricts or makes illegal consummation
of the transactions contemplated hereby; and
(b) In respect of the notifications of the parties hereto pursuant to
the HSR Act, the applicable waiting period and any extensions thereof shall have
expired or terminated; and
(c) The Closing Revenue Run-Rate shall not be less than 85% of the Base
Revenue Run-Rate.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Survival of Representations, Warranties and Covenants. All
representations and warranties of the Sellers contained in this Agreement,
including the Company Disclosure Memorandum made a part hereof, (other than the
representations and warranties contained in Sections 3.3 and 3.17), and all
covenants
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or other agreements of the Sellers which are specified to occur on or prior to
Closing, shall survive until March 31, 2003. The representations and warranties
of each Seller in Section 3.3 made by such Seller in respect of such Seller or
Capital Stock owned by such Seller shall survive forever. The representations
and warranties of the Common Sellers contained in Section 3.17 shall survive
until the expiration of the applicable statutory periods of limitation. Any
covenant or other agreement herein of any party any portion of the performance
of which may or is specified to occur after the Closing shall survive the
Closing hereunder indefinitely or for such lesser period of time as may be
specified therein. The representations and warranties of the Buyers contained in
this Agreement, and all covenants or other agreements of the Buyers which are
specified to occur on or prior to Closing, shall survive until March 31, 2003.
Section 7.2 Obligations of the Common Sellers.
(a) Subject to the other provisions of this Article VII, from and after
the Closing, each Common Seller shall indemnify, defend and hold harmless Buyer
and Buyer Parent and their respective employees, officers, partners and
Affiliates from and against any and all Losses which any of them may suffer,
incur or sustain arising out of, attributable to, or resulting from:
(i) any inaccuracy in or breach of any of the representations
and warranties of such Common Seller made in this Agreement; or
(ii) any breach or nonperformance of any of the covenants or
other agreements made and to be performed by the Common Sellers prior
to, at or after the Closing, in each case in or pursuant to this
Agreement.
(b) For purposes of Section 7.2(a)(i), the existence of an inaccuracy
or breach of any representation or warranty of any Common Seller made in this
Agreement shall be determined without giving effect to any exception in such
representation or warranty relating to materiality or a Company Material Adverse
Effect.
(c) No Common Seller shall be obligated individually to provide
indemnification exceeding, in the aggregate, its pro rata share (based on such
Common Seller's share of the aggregate Merger Consideration paid to the Common
Sellers under Article II) of any Loss indemnifiable under Section 7.2(a),
provided that (i) each Common Seller shall be obligated to provide
indemnification for one hundred percent (100%) of any Loss to the extent
attributable to an inaccuracy in or breach of (A) the representation and
warranty contained in Sections 3.3 or 3.4 made
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by such Common Seller in respect of such Common Seller or Common Stock owned by
such Common Seller and (B) the covenant contained in Section 5.15 made by such
Common Seller in respect of such Common Seller, without regard to the
limitations set forth in Section 7.7(a) or Section 7.8(a) and (ii) no other
Common Seller or the Preferred Seller shall be obligated to provide any
indemnification with respect to such Loss. The Buyers shall seek payment for
indemnification under this Article VII for any Loss from the Common Sellers
(other than a Loss in respect of an inaccuracy in or breach of the
representations and warranties in Sections 3.3 and 3.4 or a breach or
nonperformance of the covenant in Section 5.15) on a pro rata basis (based on
such Common Seller's share of the aggregate Merger Consideration paid to the
Common Sellers under Article II).
(d) Notwithstanding any other provision of this Article VII other than
Section 7.2(e), each of the Common Sellers agrees to indemnify the Buyer from
and against the entirety of any Loss the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any liability of the
Company (x) for any Taxes of the Company with respect to any Tax year or portion
thereof ending on or before the Closing Date (or for any Tax to the extent
allocable (determined in a manner consistent with Section 8.1(b) of this
Agreement) to the portion of such period beginning before and ending on the
Closing Date), to the extent such Taxes are not reflected in the reserve for Tax
liabilities (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the face of the
Estimated Closing Balance Sheet (rather than in any notes thereto), and (y) for
the unpaid Taxes of any Person (other than the Company) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(e) Notwithstanding anything to the contrary in this Agreement, in no
event shall any Common Seller be required to indemnify the Buyers in respect of
any Tax liability of the Company arising from the failure of the transactions
contemplated by this Agreement to qualify as a reorganization pursuant to
Section 368(a) of the Code.
(f) Notwithstanding anything to the contrary in this Agreement, the
Buyers shall not be entitled to recover for the same liability under Section
7.2(a) and Section 7.2(d).
Section 7.3 Obligations of the Preferred Seller.
(a) Subject to the other provisions of this Article VII, from and after
the Closing, the Preferred Seller shall indemnify, defend and hold harmless
Buyer and
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Buyer Parent and their respective employees, officers, partners and Affiliates
from and against any and all Losses which any of them may suffer, incur or
sustain arising out of, attributable to, or resulting from:
(i) any inaccuracy in or breach of any of the representations
and warranties of the Preferred Seller made in this Agreement; or
(ii) any breach or nonperformance of any of the covenants or
other agreements made and to be performed by the Preferred Seller under
Sections 5.2, 5.6, 5.7, 5.8(b) and (c), 5.10, 5.11, 5.12, 5.13 or 5.17
prior to, at or after the Closing, in each case in or pursuant to this
Agreement.
(b) For purposes of Section 7.3(a)(i), the existence of an inaccuracy
or breach of any representation or warranty of the Preferred Seller made in this
Agreement shall be determined without giving effect to any exception in such
representation or warranty relating to materiality or a Company Material Adverse
Effect.
Section 7.4 Obligations of Buyer and Buyer Parent.
(a) Subject to the other provisions of this Article VII, from and after
the Closing, each of Buyer and Buyer Parent hereby agree, jointly and severally,
to indemnify, defend and hold harmless the Sellers and their respective agents
or representatives from and against any and all Losses which any of them may
suffer, incur, or sustain to the extent arising out of, attributable to, or
resulting from:
(i) any inaccuracy in or breach of any of the representations
and warranties of Buyer or Buyer Parent made in this Agreement; or
(ii) any breach or nonperformance of any of the covenants or
other agreements made and to be performed by Buyer or Buyer Parent in
or pursuant to this Agreement.
(b) For purposes of Section 7.4(a)(i), the existence of an inaccuracy
or breach of any representation or warranty of Buyer Parent or Buyer made in
this Agreement shall be determined without giving effect to any exception in
such representation or warranty relating to materiality or a Buyer Material
Adverse Effect.
(c) Notwithstanding anything to the contrary in this Agreement, in no
event shall the Buyers be required to indemnify any of the Sellers in respect of
any Tax liability of such Sellers arising from the failure of the transactions
contemplated
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by this Agreement to qualify as a reorganization pursuant to Section 368(a) of
the Code.
Section 7.5 Procedure.
(a) Notice of Claims. Any Indemnified Party seeking indemnification for
any Loss or potential Loss shall give written notice to the applicable
Indemnifying Party from whom indemnification hereunder is being sought, and if
the Indemnified Party is a Common Seller or the Preferred Seller, then to the
other Common Sellers and the Preferred Seller, specifying in detail (i) the
representation and warranty or covenant or other agreement that is alleged to
have been inaccurate or to have been breached, (ii) the basis for such
allegation, including the provision of supporting documentation and (iii) if
known, the aggregate amount of the Losses for which a claim is being made under
this Article VII or, to the extent that such Losses are not known or have not
been incurred at the time such claim is made, an estimate, to be prepared in
good faith and accompanied by supporting documentation, of the aggregate
potential amount of such Losses. Written notice to such Indemnifying Party of
the existence of a Claim shall be given by the Indemnified Party promptly after
the Indemnified Party first receives notice of the potential claim; provided,
however, that the Indemnified Party shall not be foreclosed from seeking
indemnification pursuant to this Article VII by any failure to provide such
prompt notice of the existence of a Claim to the applicable Indemnifying Party
except and only to the extent that such Indemnifying Party actually incurs an
incremental out-of-pocket expense or otherwise has been materially damaged or
prejudiced as a result of such delay.
(b) Defense. Except as otherwise provided herein, in the case of any
claim asserted by a Person that is not a party to this Agreement (a "Third Party
Claim"), an Indemnifying Party may elect to compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel
(which counsel shall be reasonably satisfactory to the Indemnified Party), any
Third Party Claim. If an Indemnifying Party elects to compromise or defend such
Third Party Claim, it shall promptly notify the Indemnified Party and any other
Indemnifying Parties of its intent to do so, and the Indemnified Party shall
cooperate, at the expense of the applicable Indemnifying Party or Indemnifying
Parties, in the compromise of, or defense against, such Third Party Claim. For
so long as no Indemnifying Party elects to compromise or defend against the
Third Party Claim, fails to notify the Indemnified Party of its election to do
so, or otherwise abandons the defense of such Third Party Claim, (i) the
Indemnified Party may pay (without prejudice of any of its rights as against any
applicable Indemnifying Party), compromise or defend such Third Party Claim
(until such defense is assumed by an
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applicable Indemnifying Party) and (ii) the costs and expenses of the
Indemnified Party incurred in connection therewith shall be indemnifiable by the
applicable Indemnifying Party or Indemnifying Parties pursuant to the terms of
this Agreement. Notwithstanding anything to the contrary contained herein, in
connection with any Third Party Claim in which the Indemnified Party shall
reasonably conclude, based upon the written advice of its counsel, that (iii)
there is a conflict of interest between an applicable Indemnifying Party and the
Indemnified Party in the conduct of the defense of such Third Party Claim or
(iv) there are specific defenses available to the Indemnified Party which are
different from or additional to those available to an applicable Indemnifying
Party and which could be materially adverse to such Indemnifying Party, then the
Indemnified Party shall have the right to assume and direct the defense of such
Third Party Claim. In such an event, the applicable Indemnifying Party or
Indemnifying Parties shall pay the reasonable fees and disbursements of their
own counsel and one counsel to all the Indemnified Parties. Notwithstanding the
foregoing, neither any Indemnifying Party nor the applicable Indemnified Party
may settle or compromise any claim over the objection of any other Indemnifying
Party that has any liability with respect to such claim or any other Indemnified
Party that is a party to such claim; provided, however, that consent to
settlement or compromise shall not be unreasonably withheld by any Person. In
any event, except as otherwise provided herein, any applicable Indemnified Party
and any Indemnifying Party that has any liability with respect to such claim may
each participate, at its own expense, in the defense of such Third Party Claim
without, in the case of such Indemnified Party, any right to control such
defense. If an Indemnifying Party chooses to defend any claim, the Indemnified
Party shall make available to such Indemnifying Party any personnel or any
books, records or other documents within its control that are reasonably
necessary or appropriate for such defense, subject to the receipt of appropriate
confidentiality agreements.
(c) Settlement. If a settlement offer solely for money damages is made
by a third party claimant, and an applicable Indemnifying Party notifies the
applicable Indemnified Party in writing of such Indemnifying Party's willingness
to accept the settlement offer and pay the amount called for by such offer, and
the Indemnified Party declines to accept such offer, the Indemnified Party may
continue to contest such claim, free of any participation by the Indemnifying
Party, and the amount of any ultimate liability with respect to such
Indemnifiable Claim that the applicable Indemnifying Party or Indemnifying
Parties has an obligation to pay hereunder shall be limited to the lesser of (i)
the amount of the settlement offer that the Indemnified Party declined to accept
plus the costs and expenses of the Indemnified Party prior to the date the
Indemnifying Party notifies the Indemnified Party of the Indemnifying Party's
willingness to settle or compromise such Third Party Claim and (ii) the
aggregate Losses of the Indemnified Party with respect to such claim.
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Section 7.6 Survival of Indemnity. Notwithstanding anything to the
contrary in this Article VII, no Indemnified Party shall have any right to
indemnification with respect to any matter as to which formal notice satisfying
the requirements of Section 7.5(a) shall not have been provided by the
Indemnified Party to the applicable Indemnifying Party prior to the last day of
the period specified in Section 7.1 for the survival of the representation,
warranty, covenant or agreement the inaccuracy or breach or nonperformance of
which is the basis for the Indemnifiable Claim. Any matter as to which a claim
has been asserted by formal notice satisfying the requirements of Section 7.5(a)
and within the time limitation applicable by reason of the immediately preceding
sentence that is pending or unresolved at the end of any applicable limitation
period under this Article VII or the statute of limitations applicable to such
claim shall continue to be covered by this Article VII notwithstanding any
applicable statute of limitations (which the parties hereby waive solely with
respect to such circumstances) or the expiration date described in the
immediately preceding sentence of this Section 7.6 until such matter is finally
terminated or otherwise resolved by the parties under this Agreement or by a
court of competent jurisdiction and any amounts payable hereunder are finally
determined and paid.
Section 7.7 Minimum Losses.
(a) Except as provided in Section 7.2(d) and the proviso to Section
7.2(c), no Indemnified Party under Section 7.2 shall have any right to
indemnification under this Article VII until aggregate Losses incurred by the
Indemnified Parties under Section 7.2 exceed $2,500,000 after which time only
the Losses in excess of such amount shall be recoverable in accordance with the
terms hereof.
(b) No Indemnified Party under Section 7.4 shall have any right to
indemnification under this Article VII until aggregate Losses incurred by the
Indemnified Parties under Section 7.4 exceed $2,500,000 after which time only
the Losses in excess of such amount shall be recoverable in accordance with the
terms hereof.
Section 7.8 Maximum Indemnification.
(a) Except as provided in the proviso to Section 7.2(c), in no event
shall a Common Seller be obligated to provide indemnification exceeding, in the
aggregate, more than 50% of the amount of the Merger Consideration (valued as of
the time of receipt by such Common Seller) received by such Common Seller
hereunder.
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(b) In no event shall the Buyers be obligated to provide
indemnification following the Closing exceeding, in the aggregate, ten percent
(10%) of the Merger Consideration (valued as of the time of payment).
Section 7.9 Subrogation. The rights of any Indemnifying Party shall be
subrogated to any right of action which the Indemnified Party may have against
any other person with respect to any matter giving rise to a claim for
indemnification hereunder.
Section 7.10 Adjustments to Indemnification Obligations. The amount
which any Indemnifying Party is or may be required to pay any Indemnified Party
pursuant to Section 7.2, 7.3 or 7.4 hereof shall be reduced (including without
limitation, retroactively) by any insurance proceeds or other amounts actually
recovered by or on behalf of such Indemnified Party in reduction of the related
Loss. If an Indemnified Party shall have received the payment required by this
Agreement from an Indemnifying Party in respect of a Loss and shall subsequently
actually receive insurance proceeds or other amounts in respect of such Loss,
then such Indemnified Party shall pay to such Indemnifying Party a sum equal to
the amount of such insurance proceeds or other amounts actually received (net of
any expenses, other than the cost of carrying such insurance, in obtaining the
same).
Section 7.11 Exclusive Remedy. To the extent not prohibited by law,
this Article VII shall provide the sole and exclusive remedy for any and all
Losses in the event the Closing occurs, including, without limitation, those
asserted by any party, federal, state, local or foreign governmental entity,
third party, or former or present employee, sustained or incurred by the parties
hereto and relating to this Agreement; provided that this Article VII shall not
restrict the ability of any party to seek specific performance of this Agreement
or any provision hereof or any other form of equitable relief against any breach
by any other party hereto to the extent provided by Section 10.9.
Section 7.12 Right of Off-Set/Set-Off. Buyers shall have the right to
off-set or set-off any indemnification payment from a Common Seller or the
Preferred Seller to which either of them is entitled pursuant to this Article
VII against any other payment to be made by Buyer or Buyer Parent any of their
Affiliates to such Common Seller or the Preferred Seller, whether pursuant to
this Agreement or, in the case of the Common Sellers, otherwise, provided,
however, that (a) such right of off-set or set-off shall only be exercisable by
Buyer Parent, Buyer or any of their Affiliates only to the extent that either
(i) the Preferred Seller, the Seller Representative, Buyer Parent and Buyer have
agreed to such off-set or set-off, or (ii) if no such agreement has been made,
to the extent that a court of competent
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jurisdiction has issued a final judgment, from which no appeal can be or is
timely taken, as to the liability under this Article VII of the Common Seller or
the Preferred Seller against which such off-set or set-off is to be made in
respect of the Claim which gave rise to the indemnification payment from such
Common Seller or the Preferred Seller and (b) Buyer Parent or such Affiliate
shall off-set or set-off such indemnification payment on a pro rata basis as to
each Common Seller to the greatest extent practicable. To the extent that Buyer
Parent or Buyer is entitled to recover all or a portion of any Loss with respect
to any Claim that is finally adjudicated under subsection (ii) of the
immediately preceding sentence, Buyer Parent or Buyer shall be entitled to
accrued interest from the Common Sellers in respect of such Loss accruing from
the date that Buyer Parent or Buyer gave written notice of the claim to which
such Loss relates to the Seller Representative at an interest rate equal to
LIBOR plus 2%. No exercise by Buyers, or either of them, of such right of
off-set or set-off shall constitute a default in the payment of any amount
against which such off-set or set-off is made.
Section 7.13 Adjustment. Any payment made by a party hereto pursuant to
this Article VII shall be deemed an adjustment to the Aggregate Purchase Price
for Tax purposes. The Buyers shall not be entitled to indemnification under this
Article VII in respect of any Loss for which an adjustment has previously been
made pursuant to Article II.
Section 7.14 Seller Representative. Except in respect of a claim
against a Common Seller for any Loss attributable to an inaccuracy in a breach
of the representations and warranties contained in Sections 3.3 and 3.4 made by
such Common Seller in respect of such Seller or Capital Stock owned by such
Common Seller, but notwithstanding any other provision in this Agreement to the
contrary, all rights of the Common Sellers as Indemnifying Parties or as
Indemnified Parties under Article VII shall be exercised exclusively by the
Seller Representative, and the Buyer and Buyer Parent shall be entitled to deal
exclusively with the Seller Representative in respect of all such rights.
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ARTICLE VIII
TAX MATTERS
Section 8.1 Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Common Sellers for certain tax
matters following the Closing Date:
(a) Tax Periods Beginning Before the Closing Date. Buyers shall prepare
or cause to be prepared and file or cause to be filed all Tax Returns for the
Tax liabilities of the Company for all periods ending on or prior to the Closing
Date which are filed after the Closing Date and for all periods beginning prior
to and ending after the Closing Date, which Tax Returns shall be prepared
consistent with past practice. Buyers shall provide copies of each such Tax
Return to the Seller Representative for its review no later than sixty (60) days
prior to the date on which such Tax Return is required to be filed. If, within
15 days after the provision of any such Tax Return to the Seller Representative,
the Seller Representative objects to any item on such Tax Return, the Buyers and
the Seller Representative shall negotiate in good faith to resolve such dispute,
and, if they are unable to do so, shall submit such dispute to an accounting
firm reasonably agreeable to both of them, which accounting firm's resolution
shall be binding. The fees and expenses of such accounting firm shall be borne
by the Buyers and the Common Sellers in proportion to which the matter in
dispute is resolved against each of them.
(b) Other Taxes Accruing Before the Closing Date. The Common Sellers
shall pay to Buyer within fifteen (15) days after the date on which Taxes are
paid with respect to any periods prior to the Closing Date an amount equal to
the portion of such Taxes not reflected in the reserve for Tax liabilities
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Estimated
Closing Balance Sheet (rather than in any notes thereto). For purposes of this
Section, in the case of any Taxes that are imposed on a periodic basis and are
payable for a Taxable period that begins prior to the Closing Date (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such Taxable period ending on the Closing Date shall (x) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating to a
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Taxable period that begins before and ends after the Closing Date shall be taken
into account as though the relevant Taxable period ended on the Closing Date.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with prior practice of the Company.
(c) Cooperation on Tax Matters
(i) Buyers and the Common Sellers shall cooperate fully, as
and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. The Buyer and the Common Sellers agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by Buyer or the Common Sellers, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the
other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so
requests, the Buyers or the Common Sellers, as the case may be, shall
allow the other party to take possession of such books and records.
(ii) Buyer and the Common Sellers further agree, upon request,
to use their best efforts to obtain any certificate or other document
from any Governmental Authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Buyer and the Common Sellers further agree, upon
request, to provide the other party with all information that either
party may be required to report pursuant to Section 6043 of the Code
and all Treasury Department Regulations promulgated thereunder.
(d) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
State Gains
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Tax, New York City Transfer Tax and any similar tax imposed in other states or
subdivisions), shall be paid by the Common Sellers and/or Preferred Seller, as
the case may be, when due, and the Common Sellers and/or Preferred Seller will,
at their own expense, file all necessary Tax Returns and other documentation
with respect to all such transfer, documentary, sales, use, stamp, registration
and other Taxes and fees, and, if required by applicable law, Buyer will, and
will cause its affiliates to, join in the execution of any such Tax Returns and
other documentation.
(e) The Buyers shall not amend any Tax Returns of the Company in
respect of which any Common Seller bears any liability under this Agreement
without the prior written consent of the Seller Representative.
ARTICLE IX
TERMINATION
Section 9.1 Termination.
(a) This Agreement may be terminated on or prior to the Closing Date as
follows:
(i) by written consent of the Company, the Seller
Representative and Buyer Parent;
(ii) by the Company, Seller Representative or Buyer Parent if
a condition to its respective obligation to close set forth in Section
6.3 (or 6.1 or 6.2, as the case may be) cannot be satisfied at or prior
to the date set forth in Section 9.1(a)(v) below unless the failure of
such condition to be satisfied is as a result of the breach or
non-performance of the condition by the party seeking to terminate this
Agreement;
(iii) by the Company or the Seller Representative if there has
been a material breach of any representation, warranty, covenant or
agreement contained in this Agreement on the part of Buyer or Buyer
Parent and such breach has not been cured within 20 Business Days after
written notice to Buyer or Buyer Parent (provided that no cure period
shall be required for a breach which by its nature cannot be cured)
such that the conditions set forth in Section 6.2 or 6.3 cannot be
satisfied at or prior to the date set forth in Section 9.1(a)(v) below;
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(iv) by Buyer or Buyer Parent if there has been a material
breach of any representation, warranty, covenant or agreement contained
in this Agreement on the part of any Common Seller or the Preferred
Seller and such breach has not been cured within 20 Business Days after
written notice to the Seller Representative and the Preferred Seller
(provided that no cure period shall be required for a breach which by
its nature cannot be cured) such that the conditions set forth in
Section 6.1 or 6.3 cannot be satisfied at or prior to the date set
forth in Section 9.1(a)(v) below; and
(v) by Buyer Parent, the Company, the Seller Representative or
the Preferred Seller if the Closing has not occurred on or before June
30, 2001.
Notwithstanding Section 9.1(a)(ii)-(v) hereof, a party who is or an
Affiliate of whom is in material breach of any of its obligations or
representations and warranties hereunder such that the conditions set forth in
Section 6.1, 6.2 or 6.3, as the case may be, cannot be satisfied at or prior to
the date set forth in Section 9.1(a)(v) above, shall not have the right to
terminate this Agreement pursuant to Section 9.1(a)(ii)-(v).
(b) The termination of this Agreement shall be effectuated by the
delivery by the party terminating this Agreement to each other party of a
written notice of such termination. If this Agreement so terminates, it shall
become null and void and have no further force or effect, except as provided in
Section 9.2.
Section 9.2 Survival After Termination. If this Agreement is terminated
in accordance with Section 9.1 hereof and the transactions contemplated hereby
are not consummated, this Agreement shall become void and of no further force
and effect, except for the provisions of 5.8, 5.11 and this Section 9.2. None of
the parties hereto shall have any liability in the event of a termination of
this Agreement, except to the extent that such termination results from the
breach, non-performance or violation by such party of any of its obligations
under this Agreement or the failure of such party to use best efforts to fulfill
such obligations, in which case such party shall remain liable to the other
parties hereunder for any Loss suffered or incurred by such other parties as a
result of or arising from such breach, non-performance or violation or the
termination of this Agreement.
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ARTICLE X
MISCELLANEOUS
Section 10.1 Amendments; Extension; Waiver. This Agreement may not be
amended, altered or modified except by written instrument executed by each of
the parties. The failure by any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
such provision nor in any way to affect the validity of this Agreement or any
part hereof or the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of or non-compliance with this Agreement
shall be held to be a waiver of any other or subsequent breach or
non-compliance. Any waiver made by the Company in connection with this Agreement
shall not be valid unless agreed to in writing by the Seller Representative and
the Preferred Seller.
Section 10.2 Entire Agreement. This Agreement (including the Company
Disclosure Memorandum, certificates and lists referred to herein, and any
documents executed by the parties simultaneously herewith or pursuant thereto)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, except as provided herein, and supersedes all prior
agreements and understandings, written and oral, among the parties with respect
to the subject matter hereof. Each of the parties hereto agrees that it has not
entered into any agreement or understanding written or oral with respect to the
purchase and sale of shares of Capital Stock, except for this Agreement and
written agreements which have been provided to each of the parties hereto on or
prior to the date hereof.
Section 10.3 Interpretation. When a reference is made in this Agreement
to Sections, Exhibits or Annexes, such reference shall be to a Section of or
Exhibit or Annex to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the first paragraph of this Agreement.
Section 10.4 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
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Section 10.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered in person, by
telecopy (with written confirmation), by certified or registered mail (return
receipt requested) or by an express courier (with written confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to the Company, the Common Sellers or the Seller Representative:
National Asset Management Corporation
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx
If to the Preferred Seller:
National City Corporation
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: General Counsel
With copies to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxx, Esq.
If to Buyer or Buyer Parent:
AMVESCAP PLC
00 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0 X0XX
Xxxxxx Xxxxxxx
Attention: Company Secretary
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With copies to:
AMVESCAP
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxx 000 Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxxxx, Esq.
Xxxxxx & Bird LLP
0000 X. Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Section 10.6 Binding Effect; Persons Benefiting; Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this Agreement
is intended or shall be construed to confer upon any entity or person other than
the parties hereto and their respective successors and permitted assigns any
right, remedy or claim under or by reason of their Agreement or any part hereof.
No party to this Agreement may assign its rights and obligations hereunder
without the consent of any other party; provided, however that without the
consent of any Person, Buyer may assign its rights and obligations to a wholly
owned subsidiary of Buyer Parent. No assignment of this Agreement or any rights
herein by any party shall relieve such party of his, her or its obligations
hereunder, including particularly, but without limitation, such party's
obligations under Article VII hereof.
Section 10.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same agreement, it being understood
that all of the parties need not sign the same counterpart.
Section 10.8 Governing Law. THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN
THE PARTIES AND THE ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED
BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO APPLICABLE CONFLICT OF LAW PROVISIONS
THEREOF.
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Section 10.9 Specific Performance. The Company, the Sellers, Buyer and
Buyer Parent each acknowledge that, in view of the uniqueness of the Business
and the transactions contemplated by this Agreement, each party would not have
an adequate remedy at law for money damages in the event that the covenants to
be performed after the Effective Time have not been performed in accordance with
their terms, and therefore agree that the other parties shall be entitled to
specific enforcement of the terms hereof and any other equitable remedy to which
such parties may be entitled.
Section 10.10 Waiver of Jury Trial and Punitive Damages. The parties to
this Agreement agree to waive any right to a jury trial as to all disputes and
any right to seek punitive damages in each case as related to the enforcement of
this Agreement.
Section 10.11 Seller Representative.
(a) Each Common Seller, for himself and his respective heirs,
executors, administrator, successors and assigns, hereby irrevocably appoints
Xxxx X. Xxxxxx (the "Seller Representative") as such Common Seller's agent and
attorney-in-fact, authorizing him to act on behalf of such Common Seller to
supervise the Closing on behalf of Common Seller, to execute and deliver any
instruments of transfer or other documents required of such Common Seller and
receive documents required of Buyers at the Closing, to take any other action on
the part of such Common Seller permitted or required by this Agreement, and to
administer on behalf of such Common Seller all other matters related hereto, as
contemplated by this Agreement; provided that the Seller Representative may be
removed or replaced by Common Sellers owning more than 50% of the total number
of shares of Common Stock issued and outstanding immediately prior to the
Closing. Each such Common Seller acknowledges that the appointment of the Seller
Representative herein made is coupled with an interest and may not be revoked.
The Seller Representative accepts his appointment and authorization to act as
attorney-in-fact and agent of the Common Sellers.
(b) In furtherance of this appointment herein made, each Common Seller,
fully and without restriction: (i) agrees to be bound by all notices received
and agreements and determinations made by and documents executed and delivered
by the Seller Representative under this Agreement; (ii) authorizes the Seller
Representative to (A) dispute or refrain from disputing any Claim made by either
Buyer under this Agreement; (B) negotiate and compromise any dispute relating to
such Common Seller which may arise under this Agreement, (C) exercise or refrain
from exercising any remedies available to the Common Seller under this
Agreement;
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(D) sign any releases or other documents on behalf of such Common Seller with
respect to any such dispute or remedy; (E) waive any condition contained in this
Agreement; (F) give such instructions and do such other things and refrain from
doing such other things as the Seller Representative in his sole discretion
deems necessary or appropriate to carry out the provisions of this Agreement;
and (G) retain such counsel, accountants and other professional advisors as the
Seller Representative reasonably deems necessary to assist him in the
performance of his duties hereunder and pay the fees, costs and expenses thereof
out of funds coming into the hands of the Seller Representative. Each of the
Common Sellers agrees that it will contribute pro rata (based on each Common
Seller's share of the aggregate Merger Consideration paid to such Common Seller
under Article II) such amounts as are requested by the Seller Representative as
necessary for the Seller Representative to perform its duties under this
Agreement as soon as practicable following such request (but in no case later
than fifteen (15) days thereafter).
(c) In the event of the death, incapacity or resignation of the Seller
Representative, within fifteen (15) days of such death, incapacity or
resignation, Common Sellers owning more than 50% of the total number of shares
of Common Stock issued and outstanding immediately prior to the Closing (with
such total number of shares reduced by any shares owned by the Seller
Representative) shall elect a successor from among the Common Sellers and who
shall agree in writing to accept such appointment. The decisions and actions of
any successor Seller Representative shall be, for all purposes, those of a
Seller Representative as if originally named herein.
(d) The death or incapacity of any Common Seller shall not terminate
the authority and agency of the Seller Representative.
(e) Buyer and Buyer Parent shall be entitled to rely exclusively upon
any communication given or other action taken by the Seller Representative
pursuant hereto and shall not be liable for any action taken or not taken in
reliance upon the Seller Representative. Buyer and Buyer Parent shall not be
obligated to inquire as to the authority of the Seller Representative with
respect to the taking of any action that the Seller Representative takes or
purports to take on behalf of any Common Seller.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
NATIONAL ASSET MANAGEMENT
CORPORATION
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
AMVESCAP PLC
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
AVZ, INC.
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
COMMON SELLERS:
----------------------------------------------
Xxxx X. Xxxxxx
----------------------------------------------
Xxxx X. Xxxxxxx
----------------------------------------------
Xxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxxxx
[Merger Agreement]
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----------------------------------------------
Xxxxxxx X. Xxxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxx X. Xxxxxx
----------------------------------------------
Xxxxxxx X. Xxxxxx
----------------------------------------------
Xxxxx X. Chick
----------------------------------------------
Xxxxxxxxx X. Xxxxxxxxx
----------------------------------------------
Xxxx X. Xxxxx
----------------------------------------------
Xxxxx X. Xxxx
----------------------------------------------
Xxxxxxx X. Xxxxx
Xxxxxxx One LLC
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Xxxxxx One LLC
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
[Merger Agreement]
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Hafele One LLC
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Xxxxxx One LLC
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
PREFERRED SELLER:
NATIONAL CITY CORPORATION
By:
-------------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
OPTION HOLDER:
----------------------------------------------
Xxxx X. Xxxxxx
[Merger Agreement]
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ANNEX A
Definitions
"Adjusted Closing Assets Under Management" shall mean, for any Client
included in the Closing Revenue Run-Rate, the amount of assets under management
by the Company for such Client as of the Base Date, as adjusted, (a) to reflect
net cash flows (additions, withdrawals and reinvestment of distributions), new
accounts and terminated accounts for the period beginning immediately after the
Base Date and ending on the last day of the calendar month ending immediately
prior to the Closing Date and (b) to exclude all assets of the Preferred Seller
held in Separate Accounts and any Registered Funds sponsored by the Preferred
Seller to which the Company acts as adviser or subadviser.
"Adjusted Closing Revenue Run-Rate" shall equal the sum of (a) Forty
Four Million Eight Hundred Fifty Thousand Dollars ($44,850,000) less (b) the
annualized revenues, as of the Base Date, attributable to any fixed income
assets managed by the Company (other than the equity portion of any balanced
account managed by the Company), plus (c) the amount by which the Closing
Revenue Run-Rate is greater than Forty Eight Million Three Hundred Thousand
Dollars ($48,300,000) and less (d) the amount by which the Closing Revenue
Run-Rate is less than Forty Three Million Seven Hundred Thousand Dollars
($43,700,000).
"Adjusted Common Stock Cash Consideration" has the meaning set forth in
Section 2.3(a).
"Adjusted Earn-Out Assets Under Management" shall mean, for any Client
included in the Earn-Out Revenue Run-Rate, the amount of assets under management
by the Company for such Client on the last day of any Yearly Period, as
adjusted:
(a) to include (i) any assets under management of the Company
attributable to client mandates that are established or expanded after
the date of this Agreement that have been sourced, developed or
obtained through the efforts of USIG, (ii) any assets under management
attributable to client mandates of Buyer Parent or one of its
Affiliates that are existing as of the date of this Agreement that are
transferred in whole or in part to the Company and (iii) any assets
under management of the Company attributable to client mandates that
are established or expanded after the date of this
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Agreement that have been sourced, developed or obtained through the efforts of
a business unit of Buyer Parent other than USIG;
(b) to exclude all fixed income assets managed by the Company (but
including the equity portion of any balanced account);
(c) to include any assets subject to new investment management,
advisory or sub-advisory agreements that are sold by USIG after the Effective
Time, whether or not such assets are managed by the Company or any employees of
the Company and whether or not such assets are in a separate account, pooled
investment vehicle or wrap account, where such assets are to be managed in a
U.S. growth equity or U.S. core equity style which is substantially similar to
the management style presently employed by the Company; and
(d) to include only those assets of the Preferred Seller held in
Registered Funds sponsored by the Preferred Seller.
"Adjusted Merger Consideration" means (i) Two Hundred Million
($200,000,000) Dollars, less (ii) an amount equal to five (5) times the amount
by which the Closing Revenue-Run Rate is less than Forty Three Million Seven
Hundred Thousand ($43,700,000) Dollars, or plus (iii) an amount equal to five
(5) times the amount by which the Closing Revenue Run Rate is greater than Forty
Eight Million Three Hundred Thousand ($48,300,000) Dollars, and less (iv) the
amount by which Net Capital as shown on the Estimated Closing Balance Sheet and
the Closing Schedule is less than $5,335,000 (a "Net Capital Shortfall") or plus
(v) the amount by which Net Capital as shown on the Estimated Closing Balance
Sheet and the Closing Schedule is greater than $5,335,000 (a "Net Capital
Excess").
"Advisers Act" shall mean the Investment Advisers Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
"Affiliate" shall mean any Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified.
"Affiliated Group" means any combined, consolidated or unitary tax
group within the meaning of Code Section 1504(a) or any similar provision of
state, local or foreign laws applicable to Taxes.
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"Aggregate Common Contingent Consideration" shall mean the Contingent
Consideration less the Aggregate Preferred Contingent Consideration.
"Aggregate Preferred Contingent Consideration" has the meaning set
forth in Section 2.7(b)(i).
"Agreement" shall mean this Agreement (including the Company Disclosure
Memorandum or any annex or exhibit hereto) among the Sellers, the Company and
the Buyers, as such may hereafter be amended.
"Annual Cash Contingent Payment" shall mean, with respect to any Yearly
period, the amount of the Annual Contingent Cash Consideration payable pursuant
to Section 2.7(a).
"Annual Contingent Cash Consideration" shall mean $15,000,000 in cash.
"Annual Contingent Equity Consideration" shall mean a number of shares
of Parent Stock equal to the quotient of (i) $10,000,000 divided by (ii) the
Contingent Consideration Stock Price.
"Annual Contingent Payment" shall mean the sum of the Annual Cash
Contingent Payment and the Annual Equity Contingent Payment.
"Annual Equity Contingent Payment" shall mean, with respect to any
Yearly Period, the amount of the Annual Contingent Equity Consideration payable
pursuant to Section 2.7(a).
"Annual Preferred Contingent Cash Consideration" has the meaning set
forth in Section 2.7(b)(i).
"Annual Preferred Contingent Equity Consideration" has the meaning set
forth in Section 2.7(b)(i).
"Applicable Law" shall mean any domestic or foreign federal, state or
local statute, law, ordinance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, judgment or decree applicable to the
Sellers, the Company, Buyer, Buyer Parent or any of their respective Affiliates,
properties, assets, officers, directors or employees, as the case may be.
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"Asset Management Fees" shall mean all revenues of the Company derived
from its investment management and advisory activities including (a) base
management fees based solely on the amount of assets under management and (b)
fixed fee arrangements but excluding, in the case of (a) and (b), any consulting
fee, performance fee, incentive fee or carried interest or similar fee or
arrangement to the extent dependent upon the performance of assets under
management.
"Base Date" shall mean December 31, 2000.
"Base Revenue Run-Rate" shall be equal to $43,700,000.
"Base Shares" shall be equal to the number of shares of Parent Stock
determined by dividing fifty percent (50%) of the Adjusted Merger Consideration
(a) plus fifty percent (50%) of the amount of a Net Capital Shortfall, if any,
or (b) less fifty percent (50%) of the amount of a Net Capital Excess, if any,
by the Signing Stock Price.
"Business" shall mean the business of the Company in rendering
investment advisory, investment management, consulting, administrative, and
related services for compensation.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in the State of New York or the City of London are generally
closed for regular banking business.
"Buyer" has the meaning set forth in the preamble to this Agreement and
includes any permitted direct or indirect successor or assign.
"Buyer Material Adverse Effect" shall mean any matter or matters
affecting Buyer, Buyer Parent or any of their Affiliates that has or have a
material adverse effect on the business, assets, financial condition or results
of operations of such entities taken as a whole or on the ability of the Buyers
to complete the Closing; provided that a decline in the value of assets under
management by such entities resulting from currency fluctuations or a general
decline in securities prices and any consequences thereof will be excluded from
any determination as to the occurrence of a Buyer Material Adverse Effect.
"Buyer Parent" has the meaning set forth in the preamble to this
Agreement and includes any permitted direct or indirect successor or assign.
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"Buyer Parent Report" has the meaning set forth in Section 4.8.
"Capital Stock" shall mean the Preferred Stock and Common Stock.
"Cash Merger Consideration" shall mean fifty percent (50%) of the
Adjusted Merger Consideration (a) less fifty percent (50%) of the amount of a
Net Capital Shortfall, if any or (b) plus fifty percent (50%) of the amount of a
Net Capital Excess, if any.
"Client" shall mean any client to which the Company provides investment
advisory, investment management, consulting, administrative and related services
as of a particular date, including, without limitation, any Registered Fund.
"Closing" has the meaning set forth in Section 2.8.
"Closing Date" has the meaning set forth in Section 2.8.
"Closing Revenue Run-Rate" shall mean the aggregate annualized fees
payable to the Company for investment advisory services under Investment
Management Agreements for all Clients of the Company in effect on the last day
of the calendar month ending immediately prior to the Closing Date (excluding
any portion thereof attributable to the accounts of Clients of the Company on
the Base Date who do not Consent in accordance with Section 5.3 hereof to the
assignment or deemed assignment of their respective Investment Management
Agreements resulting from the transactions contemplated hereby), calculated by
multiplying the Adjusted Closing Assets Under Management by the applicable
annual fee rate for each Account included in Adjusted Closing Assets Under
Management. The calculation of the Closing Revenue Run-Rate shall exclude from
revenue any performance-based fees and shall include only net revenues to the
Company giving effect to, and taking into account, any fee waivers, caps or
expense limitations, or expense reimbursement, and any unreimbursed payments by
the Company to any brokers, dealers or other Persons with respect to the
distribution of shares of the Registered Fund Clients or services provided to
Registered Fund Client shareholders pursuant to any distribution or shareholder
services agreements, and any such revenues shall be servicing fees payable by
the Company.
"Closing Schedule" has the meaning set forth in Section 2.9.
"Closing Shares" shall be equal to the number of shares of Parent Stock
determined by dividing fifty percent (50%) of the Adjusted Merger Consideration
(a)
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plus fifty percent (50%) of the amount of a Net Capital Shortfall, if any, or
(b) less fifty percent (50%) of the amount of such a Net Capital Excess, if any,
by the Closing Stock Price.
"Closing Stock Price" shall mean, in respect of a share of Parent
Stock, the quotient obtained by dividing (a) the aggregate of the Daily Value of
Trades for each day during the period of 10 consecutive trading days immediately
preceding the Closing Date by (b) the aggregate volume of shares of Parent Stock
used to calculate such Daily Value of Trades.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Seller" has the meaning set forth in the preamble to this
Agreement.
"Common Seller Participation Percentage" shall mean, with respect to
any Common Seller, the quotient, expressed as a percentage, of (a) the number of
shares of Common Stock owned by such Common Seller at the Effective Time and (b)
the total number of shares of Common Stock issued and outstanding immediately
prior to the Effective Time.
"Common Stock" shall mean the common stock, no par value, of the
Company.
"Common Stock Cash Consideration" shall mean the amount equal to the
Per Share Cash Consideration multiplied by the number of shares of Common Stock
issued and outstanding immediately prior to the Closing.
"Common Stock Equity Consideration" shall mean the number of shares of
Parent Stock equal to the Per Share Equity Consideration multiplied by the
number of shares of Common Stock issued and outstanding immediately prior to the
Closing.
"Companies Act" shall mean the Companies Xxx 0000, as amended, and all
rules, regulations and statutory instruments thereunder.
"Company" shall mean, prior to the Effective Time, National Asset
Management Corporation, and thereafter, the Surviving Corporation and any
Affiliate of the Surviving Corporation to which substantially all of the assets
and liabilities of the Company may be transferred or assigned after the
Effective Time.
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"Company Disclosure Memorandum" shall mean the memorandum prepared by
the Company and delivered to the Buyers contemporaneously with the execution and
delivery of this Agreement and setting forth items the disclosure of which is
necessary or appropriate either in response to an express disclosure requirement
contained in, or as an exception to, a representation and warranty by any
Sellers herein.
"Company Facility" means any improved real property owned or leased by
the Company and on which the business of the Company is or has been conducted.
"Company Intellectual Property" has the meaning set forth in Section
3.16(c).
"Company Material Adverse Effect" shall mean any matter or matters
affecting the Company that has or have a material adverse effect on the
business, assets, financial condition or results of operations of the Company
taken as a whole or on the ability of the Company to complete the Closing;
provided that (a) a decline in the value of assets under management by the
Company resulting from currency fluctuations or a general decline in securities
prices and any consequences thereof will be excluded from any determination as
to the occurrence of a Company Material Adverse Effect and (b) a reduction in
the Revenue Run-Rate between the Base Date and the Closing Date in and of
itself, shall not constitute a Company Material Adverse Effect.
"Company Related Party" means any corporation in which at least fifty
percent (50%) of the total combined voting power of all classes of stock
entitled to vote or at least fifty percent (50%) of the value of all classes of
stock is or was owned directly or indirectly by the Company.
"Confidentiality Agreement" shall mean that certain letter agreement
dated as of November 3, 2000 relating to confidential information provided by
the Company to Buyer and its Affiliates.
"Consent" shall mean any and all filings, consents or approvals
(including negative consents), whether from a regulatory authority or other
third party, that are necessary in connection with (i) the execution and
delivery by the Company, the Sellers and the Buyers of this Agreement and (ii)
the consummation by the Company, the Sellers and the Buyers of the transactions
contemplated hereby.
"Contingent Cash Consideration" shall mean the aggregate amounts
payable in cash as provided in Section 2.7(a).
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"Contingent Consideration" shall mean the sum of the Contingent Cash
Consideration and the Contingent Equity Consideration.
"Contingent Consideration Stock Price" shall mean, in respect of a
share of Parent Stock, the quotient obtained by dividing (a) the aggregate of
the Daily Value of Trades for each day during the period of 20 consecutive
trading days immediately preceding the date of this Agreement; by (b) the
aggregate volume of shares of Parent Stock used to calculate such Daily Value of
Trades.
"Contingent Equity Consideration" shall mean the aggregate number of
shares of Parent Stock issuable as provided in Section 2.7(a).
"Contingent Payment Statement" has the meaning set forth in Section
2.7(c)(i).
"Contingent Percentage" shall mean, with respect a Yearly Period, (a)
the Yearly Period CAGR for such Yearly Period less 15%, divided by (b) 25%.
"Contract" means, with respect to any Person, any agreement, indenture,
undertaking, debt instrument, contract, guarantee, loan, note, mortgage,
arrangement, license, lease or other commitment, whether written or oral, to
which such Person or any of its Subsidiaries is a party or by which any of them
is bound or to which any of their assets or properties is subject.
"Daily Value of Trades" shall mean, in respect of the shares of Parent
Stock on any trading day, the United States Dollar Equivalent of the product of
(a) the volume weighted average price of shares of Parent Stock on the LSE (or,
if the shares of Parent Stock are not then listed on the LSE, on such other
stock exchange or automated quotation system on which the shares of Parent Stock
are listed or quoted, as the case may be, as may be selected by the board of
directors of Buyer Parent for such purpose) on such date, as determined by
Bloomberg L.P. or other reputable, third party information source selected by
the board of directors of Buyer Parent and (b) the aggregate volume of shares of
Parent Stock traded on such date on the LSE or such other stock exchange or
automated quotation system and used to calculate such volume weighted average
price; provided that any such selections by the board of directors of Buyer
Parent shall be conclusive and binding.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
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"Distribution Agreements" shall mean all agreements or arrangements for
the sale or distribution of shares of any Registered Fund pursuant to Rule 12b-1
of the Investment Company Act.
"Earn-Out Revenue Run-Rate" shall mean, with respect to any Yearly
Period, the aggregate annualized fees payable to the Company for investment
advisory and subadvisory services under Investment Management Agreements for all
Clients of the Company in effect on the last day of such Yearly Period,
calculated by multiplying the Adjusted Earn-Out Assets Under Management for that
Yearly Period by the applicable annual fee rate for each account included in
Adjusted Earn-Out Assets Under Management; provided, that, for purposes of the
Earn-Out Revenue Run-Rate, the aggregate annualized fees for the assets under
management described in clauses (a)(ii) and (iii) of the definition of "Adjusted
Earn-Out Assets Under Management" shall be equal to 40% of the amount of such
annualized fees for such Yearly Period. The calculation of the Earn-Out Revenue
Run-Rate shall exclude from revenue any performance-based fees and shall include
only net revenues to the Company giving effect to, and taking into account, any
fee waivers, caps or expense limitations, or expense reimbursement, and any
unreimbursed payments by the Company to any brokers, dealers or other Persons
with respect to the distribution of shares of the Registered Fund Clients or
services provided to Registered Fund Client shareholders pursuant to any
distribution or shareholder services agreements, and any such revenues shall be
servicing fees payable by the Company.
"Effective Time" and "Effective Date" shall have the meanings set forth
in Section 2.2.
"Employment Agreement" shall mean that certain employment agreement to
be entered into between each of the Common Sellers that is a natural person and
the Buyer concurrently with the execution of this Agreement
"Encumbrance" shall mean any mortgage, pledge, hypothecation, rights of
others, claim, security interest, encumbrance, title defect, title retention
agreement, voting trust agreement, interest, equity, option, lien, charge,
easement encroachments or other conditions, commitments, restrictions or
limitations of any nature whatsoever.
"Environmental Laws" shall mean all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental
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Response, Compensation and Liability act, the Clean Water Act, the Federal Clean
Air Act, and the Occupational Safety and Health act, each as amended.
"Equity Merger Consideration" shall equal the Closing Shares; provided
that if the Closing Shares are more than 110% of the Base Shares, the Equity
Merger Consideration shall be 110% of the Base Shares, and if the Closing Shares
are less than 90% of the Base Shares, the Equity Merger Consideration shall be
90% of the Base Shares.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules, regulations and class exemptions of the Department of
Labor thereunder.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, which together with the Company would be deemed a single employer
within the meaning of ERISA.
"Estimated Closing Balance Sheet" has the meaning set forth in Section
2.9.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Filings" has the meaning set forth in Section 3.6.
"Final Statement" has the meaning set forth in Section 2.9(b).
"Financial Statements" has the meaning set forth in Section 3.8.
"GAAP" shall mean generally accepted accounting principles as used in
the United States of America as in effect at the time any applicable financial
statements were prepared or any act requiring the application of GAAP was
performed.
"Governmental Authority" shall mean any government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including the SEC or any other government authority, agency, department, board,
commission or instrumentality of the United States, any State of the United
States or any political subdivision thereof, and any court, tribunal or
arbitrator(s) of competent jurisdiction, and any governmental or
non-governmental self-regulatory organization, agency or authority.
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"Hazardous Material" means (i) any hazardous substance, hazardous
material, hazardous waste, regulated or toxic substance (as those terms are
defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil, and also any
asbestos requiring abatement, removal, or encapsulation pursuant to the
requirements of Governmental Authorities and any polychlorinated biphenyls.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"IMRO" has the meaning set forth in Section 4.8.
"Indebtedness", as applied to any Person, shall mean obligations
relating to capital leases, payments in respect of the deferred purchase price
of property, letters of credit, and amounts from time to time outstanding under
loan agreements and other agreements relating to the borrowing of money or
extension of credit.
"Indemnifiable Claim" shall mean any Loss for which a Person is
entitled to indemnification under this Agreement.
"Indemnified Party" shall mean the Person entitled to the benefits of
indemnification hereunder.
"Indemnifying Party" shall mean the Person obligated to provide
indemnification hereunder.
"Intellectual Property" shall mean all domestic and foreign letters
patent, software, know-how, trade names, common law and other trademarks and
service marks, copyrights, and all registrations or applications for
registration of any of the foregoing, and all inventions, processes, designs,
formulae, trade secrets, know-how, confidential information, data and
documentation, and all similar intellectual property rights, used in or
pertaining to the business of the Company.
"Interim Advisory Contract" has the meaning set forth in Section
5.3(a).
"Investment Company" means an investment company, as such term is
defined in the Investment Company Act, and any entity that, but for the
provision of Section 3(c) of such Act, would be an investment company under such
Act.
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"Investment Company Act" shall mean the Investment Company Act of 1940,
as amended, and the rules and regulations of the SEC thereunder.
"Investment Company Board" means the board of directors or trustees (or
Persons performing similar functions) of an Investment Company.
"Investment Management Agreements" shall mean all agreements and
arrangements for the performance of investment advisory or investment management
services for Clients or on behalf of third parties.
"IRS" shall mean the United States Internal Revenue Service.
"KBCA" shall mean the Kentucky Business Corporation Act.
"Lease" shall mean any agreement, whether written or oral, pursuant to
which the Company enjoys the right, as a lessee or sublessee, to use or occupy
any real or tangible personal property in the conduct of the business of the
Company.
"Leasehold Improvements" shall mean all improvements to the leased
properties installed or constructed by or on behalf of the Company and used in
connection with the operation or maintenance of its offices.
"LIBOR" means, with respect to any date of determination, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to such date for a term of one month. If for any reason such rate is
not available, the term "LIBOR" shall mean, with respect to any date of
determination, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to such date for a term of one month; provided, however,
if more than one rate is specified on Reuters Screen LIBO Page, the applicable
rate shall be the arithmetic mean of all such rates.
"Loss" shall mean any and all direct out-of-pocket losses, liabilities,
damages, judgments, awards, expenses for penalties, fines, costs and expenses
(including reasonable attorneys', accountants', experts' and consultants' fees
and expenses and court costs) that are imposed upon or otherwise incurred,
suffered or sustained by a Person; provided that Losses shall not include
foregone profits, damages arising from
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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.
"LSE" means the London Stock Exchange.
"Merger Consideration" shall mean the sum of the Preferred Stock Cash
Consideration, the Preferred Stock Equity Consideration, the Common Stock Cash
Consideration, and the Common Stock Equity Consideration.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Net Capital" shall mean as at any date the value of all tangible
assets existing on that date, less the amount of all liabilities existing on
that date calculated in the same manner as provided in Section 2.9 and as
reflected on the Estimated Closing Balance Sheet or the Final Statement, as the
case may be.
"Net Capital Excess" has the meaning set forth in the defined term
"Adjusted Merger Consideration" in this Annex A.
"Net Capital Shortfall" has the meaning set forth in the defined term
"Adjusted Merger Consideration" in this Annex A.
"Notice" has the meaning set forth in Section 5.3(b).
"Option" has the meaning set forth in Section 5.15.
"Organizational Documents" shall mean the By-laws, Articles of
Incorporation and similar organizational documents of the Company, as amended
from time to time.
"Parent Stock" shall mean the ordinary shares of AMVESCAP PLC with a
nominal value of 25 xxxxx per share.
"Per Share Cash Consideration" has the meaning set forth in Section
2.3(a)(ii).
"Per Share Equity Consideration" has the meaning set forth in Section
2.3(a)(ii).
"Permit" shall mean any approval, authorization, certificate, consent,
easement, filing, franchise, license, notice, permit, registration or right of
any Governmental Authority or any other Person to which any Person is a party or
that is
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or may be binding upon or inure to the benefit of any Person or its securities,
assets or business.
"Permitted Encumbrances" shall mean all Encumbrances which are:
(1) for Taxes or assessments that are not yet due and payable
or which are being contested in good faith and by appropriate
proceedings if reserves and/or deferred tax valuation allowances in
amounts required by GAAP are maintained on the Company's books;
(2) Encumbrances or pledges to secure payments of workmen's
compensation and other payments, unemployment and other insurance,
old-age pensions or other social security obligations, or the
performance of bids, tenders, leases, contracts, public or statutory
obligations, surety, stay or appeal bonds, or other similar obligations
arising in the ordinary course of business;
(3) workmen's, repairmen's, warehousemen's, vendors' or
carriers' Encumbrances or other similar Encumbrances arising in the
ordinary course of business and securing sums which are not past due,
or deposits or pledges to obtain the release of any such Encumbrances;
(4) statutory landlords' Encumbrances under leases to which
the Company is a party;
(5) any Encumbrance constituting a renewal, extension or
replacement of an Encumbrance constituting a Permitted Encumbrance;
(6) leases or subleases granted to other Persons not
materially interfering with the conduct of the Business;
(7) zoning restrictions, easements, rights of way, licenses
and restrictions on the use of Real Property or minor irregularities in
title thereto, which do not materially impair the use of such property
in the normal operation of the Business or the value of such property
for the purpose of such Business;
(8) statutory or common law Encumbrances (such as rights of
set-off) on deposit accounts of the Company;
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(9) Encumbrances set forth, described in or established by any
agreement pursuant to which the Company has leased, licensed or
obtained any other right to use any property of another Person;
(10) Encumbrances which do not materially impair the use,
operation, value or marketability of the asset or property to which it
relates; and
(11) Encumbrances disclosed in the Schedules hereto delivered
in connection with the execution and delivery hereof or in the text
accompanying the Financial Statements.
"Person" shall mean any individual, corporation, company, partnership
(limited or general), joint venture, association, trust or other entity.
"Plan" has the meaning set forth in Section 3.15.
"Preferred Dividend Amount" shall equal (a) the amount of the unpaid
dividend due and payable with respect to the Preferred Stock pursuant to the
terms of such Preferred Stock in the Organizational Documents assuming, solely
for purposes of this calculation, that such Preferred Stock is being redeemed on
March 31, 2001 in accordance with its terms as set forth in such Organizational
Documents less (b) the amount of any dividends paid by the Company to the
Preferred Seller after the dividend due and payable on February 15, 2001.
"Preferred Participation Percentage" shall mean 25%.
"Preferred Seller" has the meaning set forth in the preamble to this
Agreement.
"Preferred Stock" shall mean the Class A preferred stock, no par value,
of the Company.
"Preferred Stock Cash Consideration" has the meaning set forth in
Section 2.3(a)(i).
"Preferred Stock Equity Consideration" has the meaning set forth in
Section 2.3(a)(ii).
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"Prior Purchase Agreement" shall mean the Agreement for Purchase and
Sale of Common Stock, dated March 6, 1998, among the Preferred Seller, the
Company and certain other individuals.
"Real Property" shall mean all real property, appurtenances thereto,
fixtures and improvements, rights in connection therewith, or any interest
therein, including, without limitation, leasehold estates.
"Registered Fund" means an Investment Company registered under the
Investment Company Act that is advised or subadvised by the Company.
"Rights" means, with respect to any Person, all arrangements,
commitments, agreements, securities or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, or any options, calls or commitments relating to, directly or
indirectly, capital and/or voting securities of such Person, or any stock
appreciation right or other instrument the value of which is determined in whole
or in part by reference to the market price or value of, shares of capital stock
of such Person or other.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sellers" has the meaning set forth in the preamble to this Agreement.
"Seller Representative" has the meaning set forth in Section 10.11.
"Separate Accounts" shall mean all Clients other than the Registered
Funds and wrap accounts of the Company's Managed Accounts Group.
"Services Agreements" shall mean all agreements and arrangements for
the performance of administrative services, custodial services, transfer agency
services, portfolio accounting services and shareholder services for a
Registered Fund.
"Signing Stock Price" shall mean, in respect of a share of Parent
Stock, the quotient obtained by dividing (a) the aggregate of the Daily Value of
Trades for each day during the period of 10 consecutive trading days immediately
preceding the date of this Agreement by (b) the aggregate volume of shares of
Parent Stock used to calculate such Daily Value of Trades.
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"Software" shall mean all of the rights of the Company in any and all
computer programs consisting of sets of statements or instructions to be used
directly or indirectly in a computer, including all source code and object code
therefor, whether recorded on paper, magnetic media or other electronic or
non-electronic device, and all documentation, including, without limitation,
user manuals and training materials, relating to any of the foregoing.
"Subsidiary" shall mean any corporation, partnership (general or
limited), limited liability corporation or other form of business entity of
which more than one-half of either the voting power or economic is owned,
directly or indirectly, by the Company.
"Surviving Corporation" shall have the meaning set forth in section
2.1(a).
"Tax" or "Taxes" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposes or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a Governmental Authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes the Company and any amendments thereof.
"Taxing Authority" shall mean the IRS and any other domestic or foreign
Governmental Authority responsible for the administration of any Taxes.
"Technology Systems" has the meaning set forth in Section 3.16(a).
"Third Party Claim" has the meaning set forth in Section 7.5(b).
"Title IV Plan" has the meaning set forth in Section 3.14(c).
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"12b-1 Plan" has the meaning set forth in Section 3.6(c)
"United States Dollar Equivalent" means in respect of an amount
expressed in the currency other than United States dollars (the "Foreign
Currency Amount") at any date the product obtained by multiplying: (a) the
Foreign Currency Amount by (b) the noon spot exchange rate on such date for such
foreign currency expressed in United States dollars as reported by Citibank or,
in the event such spot exchange rate is not available, such spot exchange rate
on such date for such foreign currency expressed in United States dollars as may
be deemed by the board of directors of Buyer Parent to be appropriate for such
purpose.
"USIG" shall mean the U.S. institutional group business unit of Buyer
Parent and any other business unit of Buyer Parent which succeeds, in whole or
in part, to the business of such U.S. institutional group business unit.
"Wire Transfer" shall mean a payment in immediately available funds by
wire transfer in lawful money of the United States of America to such account or
accounts as shall have been designated by notice to the paying party.
"Yearly Period" shall mean the twelve-month period beginning on the day
immediately following the last day of the calendar month ending immediately
prior to the Closing Date and each of the next two succeeding twelve-month
periods.
"Yearly Period CAGR" shall mean, with respect to a Yearly Period, the
annual compounded growth rate in the Earn-Out Revenue Run-Rate over the Adjusted
Closing Revenue Run-Rate. For purposes of calculating the Yearly Period CAGR,
the following formula shall be utilized: ([Nth root of (Earn-Out Revenue
Run-Rate for year N/Adjusted Closing Revenue Run-Rate)] - 1), whereby N shall
equal the respective Yearly Period and shall be either 1, 2 or 3.
A-18
