PURCHASE AND SALE AGREEMENT by and among LINCOLN NATIONAL CORPORATION, LINCOLN NATIONAL INVESTMENT COMPANIES, INC. and MACQUARIE BANK LIMITED dated as of August 18, 2009
Exhibit
2.1
by and
among
LINCOLN
NATIONAL CORPORATION,
LINCOLN
NATIONAL INVESTMENT COMPANIES, INC.
and
MACQUARIE
BANK LIMITED
dated as
of August 18, 2009
TABLE OF
CONTENTS
Page
ARTICLE I
PURCHASE AND SALE
Section
1.1
|
Purchase
and Sale of the Shares
|
1
|
Section
1.2
|
Closing
Deliverables
|
1
|
Section
1.3
|
Closing
|
2
|
Section
1.4
|
Net
Assets Adjustment
|
3
|
Section
1.5
|
Certain
Post-Closing Client True-Up Payments
|
5
|
Section
1.6
|
Performance
Fee Payments
|
6
|
Section
1.7
|
Post-Closing
Purchase Price Adjustment
|
7
|
Section
1.8
|
Certain
Post-Closing Payments
|
7
|
ARTICLE
II REPRESENTATIONS AND WARRANTIES OF SELLER
Section
2.1
|
Organization
|
7
|
Section
2.2
|
Authority
|
8
|
Section
2.3
|
No
Violation
|
8
|
Section
2.4
|
Consents
and Approvals
|
9
|
Section
2.5
|
Title;
Capital Structure
|
9
|
Section
2.6
|
Subsidiaries
|
10
|
Section
2.7
|
Company
Financial Statements; No Undisclosed Liabilities
|
11
|
Section
2.8
|
Absence
of Certain Changes
|
11
|
Section
2.9
|
Material
Contracts
|
12
|
Section
2.10
|
Base
Revenue Run-Rate Schedule
|
13
|
Section
2.11
|
Public
Funds
|
13
|
Section
2.12
|
Compliance
with Applicable Law
|
15
|
Section
2.13
|
Regulatory
Documents; Registrations
|
17
|
Section
2.14
|
Ineligible
Persons
|
20
|
Section
2.15
|
Legal
Proceedings, etc
|
21
|
Section
2.16
|
Employee
Benefit Plans; Employee Matters
|
21
|
Section
2.17
|
Intellectual
Property
|
25
|
Section
2.18
|
Insurance
|
27
|
Section
2.19
|
Real
Estate
|
27
|
Section
2.20
|
Affiliate
Transactions
|
27
|
Section
2.21
|
Brokers
and Finders
|
28
|
i
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF BUYER
Section
3.1
|
Organization
|
28
|
Section
3.2
|
Authority
|
28
|
Section
3.3
|
No
Violations
|
28
|
Section
3.4
|
Consents
and Approvals
|
29
|
Section
3.5
|
Ineligible
Persons
|
29
|
Section
3.6
|
Legal
Proceedings
|
29
|
Section
3.7
|
Investment
Representations
|
30
|
Section
3.8
|
Sufficient
Funds
|
30
|
Section
3.9
|
Brokers
and Finders
|
30
|
ARTICLE
IV COVENANTS
Section
4.1
|
Pre-Closing
Conduct of Business by the Company Group
|
30
|
Section
4.2
|
Client
Consents
|
34
|
Section
4.3
|
Pre-Closing
Access
|
38
|
Section
4.4
|
Post-Closing
Access; Post-Closing Retention of Records; Etc.
|
39
|
Section
4.5
|
Confidentiality;
Announcements
|
41
|
Section
4.6
|
Regulatory
Matters; Third Party Consents
|
42
|
Section
4.7
|
Expenses
|
43
|
Section
4.8
|
Financial
Information
|
43
|
Section
4.9
|
Efforts
of Parties to Close
|
43
|
Section
4.10
|
Further
Assurances
|
43
|
Section
4.11
|
No
Solicitation
|
44
|
Section
4.12
|
Employee
Benefits
|
44
|
Section
4.13
|
Delivery
of Closing Revenue Run-Rate Schedule
|
48
|
Section
4.14
|
Section
15(f)
|
48
|
Section
4.15
|
Certain
Pre-Closing Matters
|
49
|
Section
4.16
|
Notifications
|
51
|
Section
4.17
|
Affiliate
Agreements
|
51
|
Section
4.18
|
IT
Separation Plan; Transition Services; Real Estate and Related
Assets
|
51
|
Section
4.19
|
Names
of Members of the Company Group; Transitional Use of Certain
Trademarks
|
54
|
Section
4.20
|
Company
Group Website
|
55
|
Section
4.21
|
Use
of Trade Performance Information
|
55
|
Section
4.22
|
Non-Solicitation
of Company Group Employees
|
55
|
Section
4.23
|
APRA
Regulatory Actions
|
56
|
Section
4.24
|
Certain
Trademarks
|
56
|
ARTICLE V
CONDITIONS TO THE CONSUMMATION OF THE TRANSACTION
Section
5.1
|
Mutual
Conditions
|
56
|
Section
5.2
|
Conditions
to the Obligation of Buyer
|
56
|
Section
5.3
|
Conditions
to the Obligation of Seller Parent and Seller
|
58
|
Section
5.4
|
Frustration
of Closing Conditions
|
58
|
ii
ARTICLE
VI TERMINATION
Section
6.1
|
Termination
|
59
|
Section
6.2
|
Survival
after Termination
|
60
|
ARTICLE
VII TAX MATTERS
Section
7.1
|
Tax
Representations
|
60
|
Section
7.2
|
Preparation
of Tax Returns and Payment of Taxes
|
62
|
Section
7.3
|
Tax
Refunds
|
63
|
Section
7.4
|
Tax
Indemnification
|
64
|
Section
7.5
|
Tax
Proceedings
|
66
|
Section
7.6
|
Coordination;
Survival
|
67
|
Section
7.7
|
Transfer
Taxes
|
67
|
Section
7.8
|
Section
338 Election
|
67
|
Section
7.9
|
Cooperation
and Retention of Records
|
67
|
Section
7.10
|
Purchase
Price Adjustment
|
68
|
Section
7.11
|
Termination
of Tax Sharing Agreements
|
68
|
ARTICLE
VIII INDEMNIFICATION
Section
8.1
|
Survival
of Representations, Warranties and Covenants
|
68
|
Section
8.2
|
Indemnification
|
69
|
Section
8.3
|
Indemnification
Procedure
|
71
|
Section
8.4
|
Limitation
of Liability
|
72
|
Section
8.5
|
Effect
on Purchase Price
|
73
|
Section
8.6
|
Calculation
of Losses
|
74
|
Section
8.7
|
No
Duplication
|
74
|
Section
8.8
|
No
Set-Off
|
75
|
Section
8.9
|
Exclusive
Remedy
|
75
|
Section
8.10
|
Assignment
of Claims
|
75
|
ARTICLE
IX MISCELLANEOUS
Section
9.1
|
Amendments;
Waiver
|
75
|
Section
9.2
|
Entire
Agreement, etc
|
75
|
Section
9.3
|
Interpretation
|
76
|
Section
9.4
|
Disclosure
Schedules
|
77
|
Section
9.5
|
Severability
|
77
|
Section
9.6
|
Notices
|
77
|
Section
9.7
|
Binding
Effect; Persons Benefiting; No Assignment
|
78
|
Section
9.8
|
Specific
Performance
|
78
|
Section
9.9
|
Counterparts
|
78
|
Section
9.10
|
Governing
Law; Venue
|
79
|
Section
9.11
|
WAIVER
OF JURY TRIAL
|
79
|
iii
Annexes
Annex A
– Definitions
Exhibits
Exhibit A
– Illustrative
Closing Balance Sheet
Exhibit B
– Transition
Services Agreement Term Sheet
Exhibit C
– Form
of the General Account Advisory Agreements
Exhibit D
– Certain
Terms of Subleases
Exhibit E
– Purchase
Price Adjustment Payment Amounts
Exhibit F
– Certain
Company Group Investment Professionals
Exhibit G
– Outline
of IT Separation Plan
iv
This
PURCHASE AND SALE AGREEMENT, dated as of August 18, 2009 (this “Agreement”), is by
and among Macquarie Bank Limited, an Australian corporation (“Buyer”), Lincoln
National Corporation, an Indiana corporation (“Seller Parent”) and
Lincoln National Investment Companies, Inc., an Indiana corporation and an
indirect wholly-owned Subsidiary of Seller Parent (“Seller”). For
all purposes of this Agreement, capitalized terms shall have the respective
meanings set forth in Annex A hereto.
W I T N E S S E T H
:
WHEREAS,
Seller owns all of the issued and outstanding shares (the “Shares”) of common
stock, par value $0.01 per share, of Delaware Management Holdings, Inc. (the
“Company”);
and
WHEREAS,
Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, all
of the Shares, all upon the terms and subject to the conditions set forth in
this Agreement.
NOW,
THEREFORE, in consideration of the foregoing and subject to the terms and
conditions set forth herein, and intending to be legally bound, the parties
hereby agree as follows:
ARTICLE
I
PURCHASE
AND SALE
Section
1.1 Purchase and Sale of the
Shares. Subject to the terms and conditions of this Agreement,
at the Closing, (i) Buyer shall purchase from Seller, and Seller shall sell,
transfer and deliver to Buyer, all of the Shares free and clear of any
Encumbrances, and (ii) Buyer shall pay by Wire Transfer to Seller an amount in
cash equal to (A) $320,000,000 (such amount, the “Base Purchase
Price”), plus
(B) the Estimated Net Assets and less (C) the Revenue Run-Rate
Adjustment Amount, if any (the Base Purchase Price as adjusted pursuant to the
foregoing clauses (B) and (C), the “Closing Purchase
Price,” and as so further adjusted pursuant to Sections 1.4, 1.5, 1.6 and
1.7 following the Closing, the “Purchase
Price”).
Section
1.2 Closing
Deliverables.
(a) At the
Closing, Seller shall deliver or cause to be delivered:
(i) the
executed officer’s certificate required pursuant to Section 5.2(c) in form and
substance reasonably satisfactory to Buyer;
(ii) one or
more certificates representing all of the Shares, duly endorsed in blank or
accompanied by stock powers or other instruments of transfer duly executed in
blank;
(iii) a duly
executed and acknowledged certificate of Seller of non-foreign status meeting
the requirements of Treasury Regulation Section 1.1445-2(b)(2), dated as of the
Closing Date;
(iv) each of
the General Account Advisory Agreements, duly executed by the RIA and the
applicable Affiliate of Seller Parent;
(v) the
Transition Services Agreement, duly executed by Seller Parent or one of its
Affiliates.
(b) At the
Closing, Buyer shall deliver or cause to be delivered:
(i) the
executed officer’s certificate required pursuant to Section 5.3(c) in form and
substance reasonably satisfactory to Seller;
(ii) by Wire
Transfer to the account of Seller designated pursuant to Section 1.2(c), an
amount in cash equal to the Closing Purchase Price;
(iii) the
Transition Services Agreement, duly executed by Buyer and/or one of its
Affiliates.
(c) Not less
than two Business Days prior to the Closing Date, Seller shall deliver to Buyer
Wire Transfer instructions designating the account to which the Closing Purchase
Price due to Seller shall be paid by Buyer at the Closing.
Section
1.3 Closing. The
consummation of the purchase and sale of the Shares (the “Closing”) shall take
place at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Four Times
Square, New York, New York, at 10:00 a.m., local time, on (a) the first Business
Day of the calendar month immediately following the calendar month in which all
of the conditions set forth in Article V hereof (other than conditions which
relate to actions to be taken at the Closing, but subject to the satisfaction or
waiver thereof at the Closing) have been satisfied or waived by the parties
entitled to the benefits thereto; provided that,
notwithstanding that all of the conditions set forth in Article V hereof (other
than conditions which relate to actions to be taken at the Closing, but subject
to the satisfaction or waiver thereof at the Closing) may have been satisfied,
at the option of Seller, if Seller has complied with its covenant in Section
4.2(a)(iv), the Closing may be delayed until the first Business Day of the
calendar month occurring immediately after the calendar month during which
Closing would otherwise occur if the Closing Revenue Run-Rate is less than 90%
of the Base Revenue Run-Rate, provided, further, that such
option may only be exercised one
2
time, or (b) at such other date, time and place as Buyer and
Seller shall mutually agree in writing (the date on which the Closing takes
place being referred to herein as the “Closing Date”).
Section
1.4 Net Assets
Adjustment.
(a) Seller
shall prepare (or cause to be prepared) an estimated unaudited consolidated
balance sheet of the Company Group as of the close of business on the Business
Day immediately prior to the Closing Date, which balance sheet shall be prepared
in accordance with the Closing Balance Sheet Principles (the “Estimated Closing Balance
Sheet”). Seller shall provide Buyer with a draft of the
Estimated Closing Balance Sheet no later than ten Business Days prior to the
Closing. Seller and Buyer will in good faith discuss the Estimated
Closing Balance Sheet delivered to Buyer and Seller will consider Buyer’s
comments on such draft to the extent consistent with the Closing Balance Sheet
Principles, provided that such comments are delivered in writing to Seller
within three Business Days of Buyer’s receipt of the draft Estimated Closing
Balance Sheet. The final version of the Estimated Closing Balance
Sheet shall be delivered to Buyer at least two Business Days prior to the
Closing Date.
(b) As soon
as reasonably practicable following the Closing Date, and in no event more than
60 days thereafter, Buyer shall prepare and deliver to Seller an unaudited
consolidated balance sheet of the Company Group as of the close of business on
the Business Day immediately prior to the Closing Date, which balance sheet
shall be prepared in accordance with the Closing Balance Sheet Principles (the
“Final Closing Balance
Sheet”).
(c) Within 60
days after delivery to Seller of the Final Closing Balance Sheet (during which
period Buyer shall provide access to such working papers and information of it
and its Affiliates and their accountants relating to the preparation of the
Final Closing Balance Sheet as may be reasonably requested by Seller and its
Affiliates and their respective representatives), Seller may dispute all or a
portion of such Final Closing Balance Sheet by giving written notice (a “Notice of
Disagreement”) to Buyer setting forth in reasonable detail the basis for
any such dispute (any such dispute being hereinafter called a “Disagreement”). The
parties shall promptly commence good faith negotiations with a view to resolving
all such Disagreements. If Seller does not provide a Notice of a
Disagreement to Buyer within the 60-day period set forth in this subsection (c),
Seller shall be deemed to have irrevocably accepted the Final Closing Balance
Sheet in the form delivered to it by Buyer.
(d) If Seller
delivers a Notice of Disagreement and Buyer does not dispute all or any portion
of such Notice of Disagreement by giving written notice to Seller setting forth
in reasonable detail the basis for such dispute within 45 days following the
delivery of such Notice of
3
Disagreement (during which period Seller shall provide access to
such working papers and information of it and its Affiliates and their
accountants relating to the preparation of the Notice of Disagreement as may be
reasonably requested by Buyer and its representatives), Buyer shall be deemed to
have irrevocably accepted the Final Closing Balance Sheet as modified by Seller
in the manner set forth in the Notice of Disagreement.
(e) If Buyer
shall dispute a Notice of Disagreement by delivery of written notice to Seller
within the 45-day period set forth in the preceding subsection (d), and within
the 20 days following the delivery to Seller of the notice of such dispute, the
parties do not resolve the Disagreement in writing, such Disagreement shall
thereafter be referred to the Independent Accounting Firm for a resolution of
such Disagreement in accordance with the terms of this Agreement. If
any remaining issues in dispute are submitted to the Independent Accounting Firm
for resolution, each of Buyer and Seller will be afforded an opportunity to
present to the Independent Accounting Firm any material relating to the
determination of the matters in dispute and to discuss such matters with the
Independent Accounting Firm as the Independent Accounting Firm may request or
permit. The Independent Accounting Firm shall act as an expert and
not as an arbitrator to calculate the Final Closing Balance Sheet and shall be
instructed that its calculation must be made in accordance with the standards
and definitions in this Agreement (including the Closing Balance Sheet
Principles). Buyer and Seller shall instruct the Independent
Accounting Firm that the determinations of such firm with respect to any
Disagreement shall be rendered within 30 days after referral of the Disagreement
to such firm or as soon thereafter as reasonably possible. The
Independent Accounting Firm shall make a determination with respect to any
unresolved Disagreement only in a manner consistent with this Section 1.4, and
in no event shall the Independent Accounting Firm’s determination of the
unresolved Disagreements be for an amount that is outside the range of Buyer’s
and Seller’s proposals with respect to each individual
Disagreement. Such determinations shall be final and binding upon the
parties, and the amount so determined shall be used to complete the Final
Closing Balance Sheet. Each of Buyer and Seller shall use its
reasonable best efforts to cause the Independent Accounting Firm to render its
determination within the 30-day period described in the fourth sentence of this
subsection (e), and each shall cooperate with such firm and provide such firm
with access to the books, records, personnel and representatives of it and such
other information as such firm may require in order to render its
determination. The fees and expenses of the Independent Accounting
Firm shall be borne by the party whose proposed Final Net Asset amount as
reflected in such party’s submission to the Independent Accounting Firm differs
the most from the Final Net Asset amount finally determined by the Independent
Accounting Firm (or, if such differences of the parties are equal, equally by
Buyer and Seller).
(f) Promptly
after the Final Closing Balance Sheet has been finally determined in accordance
with this Section 1.4 (including by means of a deemed acceptance of such
documents by Buyer or Seller as provided in subsections (c) and (d) of this
Section 1.4), but in no event later than five Business Days following such final
determination, (i) if Final Net Assets is greater than the Estimated Net Assets,
Buyer shall pay to Seller an amount in cash
4
equal in the aggregate to such difference by Wire Transfer as set
forth in written instructions from Seller and (ii) if the Final Net Assets is
less than the Estimated Net Assets, Seller shall pay to Buyer an amount in cash
equal to such difference by Wire Transfer as set forth in written instructions
from Buyer. In any case, the foregoing amount payable shall be
accompanied by interest thereon calculated from the Closing Date until the date
of payment at the Applicable Rate.
(g) The
provisions of Section 1.4(e) relating to resolutions of disputes by the
Independent Accounting Firm are not intended to and shall not be interpreted to
require that the parties refer to such a firm (i) any dispute arising out of a
breach by one of the parties of its obligations under this Agreement or (ii) any
dispute the resolution of which requires the construction of this Agreement
(apart from the mathematical calculation of Final Net Assets and the accounting
treatment of components thereof as such treatment affects the calculation of
Final Net Assets).
(h) The
adjustments contemplated by this Section 1.4 shall be the exclusive remedy of
the parties with respect to the subject matter hereof and no party shall have
any right of recovery under Article VIII with respect thereto.
(i) Any
payment under this Section 1.4 and under Section 1.5 or Section 1.6 shall be
treated as an adjustment to the Purchase Price for any Tax purposes, except as
otherwise required by Applicable Law.
Section
1.5 Certain Post-Closing Client
True-Up Payments.
(a) In the
event that there is a reduction of the Base Purchase Price as a result of the
Revenue Run-Rate Adjustment Amount, if (x) any Client who is a party to an
Advisory Agreement described in Section 4.2(c)(ii)(A) that requires the
“written” consent of such Client to the deemed assignment or continuation of
such Advisory Agreement does not provide its written consent on or prior to the
Closing Date and such Client continues to accept advisory services provided by
the Company Group (or another Affiliate of Buyer) on the date that is 120 days
following the Closing Date (such 120 day period, the “True-Up Period”) or
(y) any Client communicates an intention to withdraw assets from an account or
terminate its Advisory Agreement prior to the Closing but does not actually
withdraw all of such assets or terminate its Advisory Agreement prior to the end
of the True-Up Period, and, in either case, prior to the end of the True-Up
Period such Client does not notify the Company in writing that it has terminated
its Advisory Agreement or that it will withdraw such assets from its account or
otherwise has not taken affirmative steps to terminate its Advisory Agreement
(such steps, if any, to be documented by the Company in reasonable detail), then
to the extent that Adjusted Assets Under Management under the applicable
Advisory Agreement were not included in the calculation of the Closing Revenue
Run-Rate Buyer shall make a payment by Wire Transfer to Seller within five
Business Days following the end of the True-Up Period in an amount equal to the
additional amount that would have been paid to Seller at the Closing if each
such
5
Client had given its written consent on or prior to the Closing
Date and all of the Adjusted Assets Under Management under each such Advisory
Agreement as of the Closing Revenue Run-Rate calculation date had been included
in the calculation of the Closing Revenue Run-Rate.
(b) In the
event that there is a reduction in the Base Purchase Price as a result of the
Revenue Run-Rate Adjustment Amount, if any U.S. Public Fund that is a party to
an Advisory Agreement described in Section 4.2(a)(iv) has approved an interim
Advisory Agreement in conformity with Rule 15a-4 under the Investment Company
Act, to be effective immediately following the Closing Date, but has not
obtained shareholder approval as required by Section 4.2(a) in connection with a
new Advisory Agreement on or prior to the Closing Date but the shareholders of
such U.S. Public Fund approve such new Advisory Agreement prior to the end of
the True-Up Period and the amounts placed in escrow pursuant to Rule 15a-4 are
released to the RIA, then if the Adjusted Assets Under Management under such
Advisory Agreement were not included in the calculation of the Closing Revenue
Run-Rate Buyer shall make a payment by Wire Transfer to Seller within five
Business Days following the end of the True-Up Period in an amount equal to the
additional amount that would have been paid to Seller at the Closing if each
such shareholder approval had been obtained on or prior to the Closing Date and
the Adjusted Assets Under Management under each such Advisory Agreement as of
the Closing Revenue Run-Rate calculation date had been included in the
calculation of the Closing Revenue Run-Rate.
Section
1.6 Performance Fee
Payments. No later than twenty Business Days following the
date on which the Company Group (or Buyer or its Affiliates on their behalf)
receives any of the Performance Fees in respect of any period beginning prior to
the Closing (each, a “Performance Fee Calculation
Period”), Buyer shall make (or cause to be made) a payment by Wire
Transfer to Seller in an amount equal to (a) the total amount of any such
Performance Fees for the applicable Performance Fee Calculation Period (net of
any Taxes, if any, due with respect to the portion of such fees paid for the
period ending on the Closing Date) multiplied by (b) a fraction, the numerator
of which is the number of days from (and including) the first day of the
applicable Performance Fee Calculation Period until (and including) the Closing
Date and the denominator of which is the total number of days in the applicable
Performance Fee Calculation Period, and shall provide a calculation of such
amount in reasonable detail to Seller together with such payment. Any
such payments in respect of the same Performance Fee Calculation Period may be
aggregated so that a single payment is made to
Seller. Notwithstanding the foregoing, the amount of any such payment
shall be reduced to the extent that the applicable Performance Fees in respect
of performance periods ending on or prior to the Closing Date are accrued on the
Final Closing Balance Sheet (and, in the event of a Disagreement as to the
amount of any such accrual, the portion of such payment that relates to such
Disagreement shall be made no later than five Business Days following the final
termination date determined under Section 1.4(f)). Buyer acknowledges
and agrees that, prior to the Closing, with the prior written consent of Buyer
(such
6
consent not to be unreasonably withheld), Seller may cause the
Company Group to assign to Seller or one of its Affiliates the right of the
Company Group to any such payment; provided, that, such
assignment does not result in any adverse financial or other consequences to
Buyer. In the event that such assignment is not possible or otherwise
as may be reasonably requested by Seller, Buyer and Seller agree to cooperate in
good faith to structure the payments contemplated by this Section 1.6 in a
manner that is mutually tax efficient.
Section
1.7 Post-Closing Purchase Price
Adjustment. No later than 10 Business Days following the
occurrence of a Purchase Price Adjustment Event, Seller shall pay by Wire
Transfer to Buyer an amount in cash equal to the Purchase Price Adjustment
Payment Amount in respect of the applicable Purchase Price Adjustment
Event.
Section
1.8 Certain Post-Closing
Payments. No later than 30 days following the end of a
Measurement Period, to the extent a payment is otherwise due, Seller Parent or
Buyer (as applicable) shall pay to the other Person by Wire Transfer an amount
in cash equal to the Buyer Measurement Period Payment (in the case of a payment
by Seller Parent) or the Seller Parent Measurement Period Payment (in the case
of a payment by Buyer) for the Measurement Period in question; provided that this
Section 1.8 shall be void and of no further force or effect and all payment
obligations hereunder shall cease at such time as (a) a Client (as defined in
the applicable General Account Advisory Agreement) terminates its General
Account Advisory Agreement where such termination does not trigger the payment
of a Purchase Price Adjustment Payment Amount or (b) the Adviser (as defined in
the applicable General Account Advisory Agreement) terminates any General
Account Advisory Agreement.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLER
Except as
set forth in a correspondingly labeled section of the written disclosure
schedule delivered by Seller to Buyer on or prior to the date of this Agreement
(the “Seller
Disclosure Schedule”) (it being agreed that any matter disclosed in any
section or subsection of the Seller Disclosure Schedule shall be deemed
disclosed in any other section or subsection to the extent that such information
is reasonably apparent to be so applicable to such other section or subsection),
Seller Parent and Seller hereby jointly and severally represent and warrant to
Buyer as follows:
Section
2.1 Organization. Each
of Seller Parent and Seller is a corporation duly organized and validly existing
under the laws of the State of Indiana. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has the requisite corporate power and
authority necessary to carry on its business as it is now being conducted and to
own, lease and operate all of its properties and
assets.
7
The Company is duly licensed or qualified to do business and in
good standing 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 or licensing necessary under Applicable
Law, except where the failure to be so licensed, qualified or in good standing
would not, individually or in the aggregate, reasonably be expected to be
material to the Company Group, taken as a whole. Seller has provided
or made available to Buyer prior to the date hereof in the on-line and/or
physical data-rooms established by Seller in connection with the transactions
contemplated by this Agreement (collectively, the “Data Rooms”) true and
complete copies of the Organizational Documents of each member of the Company
Group, all as in effect on the date hereof.
Section
2.2 Authority. Each
of Seller Parent and Seller has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which it is
(or will be) a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by Seller Parent and Seller of this
Agreement and each Ancillary Agreement to which it is a party has been, and the
consummation by it of the transactions contemplated hereby and thereby has been,
duly and validly authorized and approved by all required actions on the part of
Seller Parent and Seller. This Agreement and each Ancillary Agreement
to which Seller Parent or Seller is a party has been (or, in the case of any
such Ancillary Agreement to be executed and delivered after the date hereof,
will be) duly and validly executed and delivered by it and (assuming due
authorization, execution and delivery by Buyer) this Agreement and each
Ancillary Agreement to which Seller Parent or Seller is a party constitutes (or,
in the case of any such Ancillary Agreement to be executed and delivered after
the date hereof, will constitute) legal, valid and binding obligations of Seller
Parent and/or Seller (as applicable), enforceable against Seller Parent and/or
Seller (as applicable) in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and except as the
availability of equitable remedies may be limited by equitable principles of
general applicability.
Section
2.3 No
Violation. Except as set forth in Schedule 2.3 of the Seller
Disclosure Schedule or Section 2.4 hereof, neither the execution, delivery or
performance of this Agreement or the Ancillary Agreements to which it is a
party, nor the consummation by Seller Parent and Seller of the transactions
contemplated hereby or thereby, will, with or without the giving of notice, the
termination of any grace period or both: (i) violate, conflict with,
or result in a breach or default under any provision of the Organizational
Documents of Seller Parent, Seller or any member of Company Group; (ii) violate
any Applicable Law; (iii) result in a violation or breach by Seller Parent,
Seller or any member of the Company Group of, conflict with or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination,
8
cancellation, payment, acceleration or guaranteed rights or
entitlements) under any Contract to which Seller Parent, Seller or any member of
the Company Group is a party or by which Seller Parent, Seller or any member of
the Company Group or any of its properties or assets are bound, or (iv) result
in the creation of any Encumbrances (other than Permitted Encumbrances) upon any
of the Shares or on any properties or assets of any member of the Company Group,
except for, in the case of clauses (ii), (iii) and (iv) of this Section 2.3, any
violation, breach, conflict, default or right of termination, cancellation,
payment, acceleration, guaranteed rights or entitlements or creation of any
Encumbrances that, individually and in the aggregate, would not reasonably be
expected to impair or materially delay the ability of Seller Parent or Seller to
perform its obligations hereunder or thereunder or have a Company Material
Adverse Effect.
Section
2.4 Consents and
Approvals. Except (a) as required under the HSR Act, (b) as
set forth in Schedule 2.3 of the Seller Disclosure Schedule, (c) for the Client
consents described in Section 4.2 and (d) for those consents, approvals, filings
and registrations the failure to obtain or make would not be material to the
Company Group, taken as a whole, none of Seller Parent, Seller or any member of
the Company Group is required to obtain any consent, waiver or approval of, or
make any filing, notification or registration with, any Governmental Authority
or any third party in connection with the execution and delivery of this
Agreement or any Ancillary Agreement to which Seller Parent or Seller is a party
or the consummation of the transactions contemplated hereby or
thereby.
Section
2.5 Title; Capital
Structure.
(a) The
authorized capital stock of the Company consists of 1,500,000 shares of
voting common stock, par value $0.01 per share (the “Company Capital
Stock”), and 300,000 shares of preferred stock, par
value $0.01 per share, of which only the Shares are issued and
outstanding. Seller is the sole record and beneficial owner of the
Shares free and clear of any Encumbrances. All of the Shares have
been duly authorized and validly issued and are fully paid and non-assessable
and were not issued in violation of any Equity Rights.
(b) There are
no authorized, issued or outstanding securities, options, warrants, calls,
conversion rights, preemptive or other outstanding rights, rights of first
refusal, stock appreciation rights, redemption rights, repurchase rights,
“tag-along” or “drag-along” or other similar rights, agreements, arrangements,
undertakings or commitments of any kind (“Equity Rights”) (i)
obligating Seller Parent, Seller or any member of the Company Group to issue,
deliver, redeem, purchase or sell, or cause to be issued, delivered, redeemed,
purchased or sold any Company Capital Stock or any other ownership interests in
any member of the Company Group or any securities or obligations convertible,
exercisable or exchangeable into or exercisable for any Company Capital Stock or
any other ownership interests in any member of the Company Group, (ii) giving
9
any Person a right to subscribe for or acquire any Company Capital
Stock or any other ownership interests in any member of the Company Group or
(iii) obligating Seller Parent, Seller or any member of the Company Group to
issue, grant, adopt or enter into any such Equity Right. There are no
bonds, debentures, notes or other Indebtedness of Seller Parent, Seller or any
member of the Company Group that grants to a third party the right to vote or
consent (or, convertible into, or exchangeable for, securities having the right
to vote or consent) on any matters related to the transactions contemplated
hereby. There are no voting trusts, irrevocable proxies or other
Contracts to which Seller Parent, Seller or any member of the Company Group is a
party or is bound with respect to the voting or consent of any shares of Company
Capital Stock or the equity interests of any member of the Company Group.
Section
2.6 Subsidiaries. Each
Subsidiary of the Company is listed in Schedule 2.6 of the Seller Disclosure
Schedule, along with its form and jurisdiction of organization, the
jurisdictions, if any, in which it is qualified to do business, the number of
shares of its authorized capital stock, the number and class of shares thereof
duly issued and outstanding and (other than in the case of Delaware Investments
U.S., Inc. (“DIUS”), for which the
following information shall be set forth in the Letter Agreement) the names of
all stockholders or other equity owners and the number of shares of stock owned
by each stockholder or the amount of equity owned by each equity owner (subject,
in the case of DIUS, to changes resulting from issuances described in Schedule
4.1 of the Seller Disclosure Schedule and repurchases, forfeitures and other
transfers contemplated by the DIUS Incentive Compensation Plans set forth in
Schedule 2.16(a) of the Seller Disclosure Schedule and/or DIUS’s constituent
documents). Each such Subsidiary is duly organized and validly
existing and in good standing under the laws of its jurisdiction of
organization. Each such Subsidiary has the requisite company,
partnership or corporate (as applicable) power and authority to carry on its
business in the manner as it is now being conducted and to own, lease and
operate all of its properties and assets, except where the failure to have such
power and authority, individually or in the aggregate, would not reasonably be
expected to be material to the Company Group, taken as a whole. Each
such Subsidiary is duly licensed or qualified to do business and is in good
standing 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 or licensing necessary under Applicable
Law, except where the failure to be so licensed, qualified or in good standing
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. The Company owns, directly or
indirectly, all of the issued and outstanding company, partnership or corporate
interests, as applicable, in its Subsidiaries (other than DIUS), free and clear
of any Encumbrances. All of the issued and outstanding shares of
capital stock of DIUS are owned by the Persons, and in the amounts, set forth in
the Letter Agreement (subject to changes resulting from issuances described in
Schedule 4.1 of the Seller Disclosure Schedule and repurchases, forfeitures and
other transfers contemplated by the DIUS Incentive Compensation Plans set forth
in Schedule 2.16(a) of the Seller
10
Disclosure Schedule and/or DIUS’s constituent documents), in the
case of such shares owned by DMH Corp., free and clear of any
Encumbrances. All of the issued and outstanding interests in such
Subsidiaries are duly authorized, validly issued fully paid and
non-assessable.
Section
2.7 Company Financial
Statements; No Undisclosed Liabilities.
(a) Attached
to the Letter Agreement are true and complete copies of (i) the audited
consolidated balance sheets of the Company Group as of December 31, 2008 (the
“Company Balance
Sheet”), December 31, 2007 and December 31, 2006 and the related audited
consolidated statements of income, changes in shareholders’ equity and cash
flows for the fiscal years ended December 31, 2008, December 31, 2007 and
December 31, 2006 and (ii) an unaudited consolidated balance sheet of the
Company Group as of June 30, 2009 (the “Unaudited Company Balance
Sheet”) and related unaudited consolidated statement of income for the
six month period ended June 30, 2009 (the financial statements referred to in
clauses (i) and (ii), collectively, the “Company Financial
Statements”). The balance sheets referred to in the previous
sentence present fairly in all material respects the financial position of the
Company Group as of the dates thereof, and the other financial statements
referred to in this Section 2.7 present fairly in all material respects the
results of the operations and cash flows of the Company Group for the respective
fiscal periods therein set forth, in each case in accordance with GAAP
consistently applied (except as expressly indicated in the related notes
thereto), subject, in the case of the unaudited financial statements, to normal
recurring year-end adjustments and the absence of notes.
(b) There are
no material liabilities or material obligations of the Company Group of any kind
whatsoever, whether known or unknown, accrued, contingent, absolute, determined,
determinable or otherwise other than (i) obligations and liabilities expressly
contemplated by or in connection with this Agreement or the transactions
contemplated hereby or set forth in the Seller Disclosure Schedule, (ii) as and
to the extent disclosed or reserved against in the Unaudited Company Balance
Sheet or referred to in the notes thereto, or (iii) obligations or liabilities
incurred since June 30, 2009 in the ordinary course of business consistent with
past practice that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect.
Section
2.8 Absence of Certain
Changes. (a) Since the date of the Company Balance Sheet and through the
date hereof, (i) each member of the Company Group has conducted its business in
the ordinary course consistent with past practice in all material respects, (ii)
there has not been any event, change, occurrence or circumstance that,
individually or in the aggregate with any such events, changes, occurrences or
circumstances, has had or would reasonably be expected to have a Company
Material Adverse Effect and (b) since the date of the Unaudited Company Balance
Sheet and through the date hereof, neither Seller or
11
Seller Parent (solely in respect of the Company Group) nor any
member of the Company Group has taken any action that if proposed to be taken
after the date hereof, would be prohibited under Section 4.1.
Section
2.9 Material
Contracts.
(a) Schedule
2.9(a) of the Seller Disclosure Schedule contains a true and complete list of
all Material Contracts (other than Affiliate Agreements and Leases) in existence
on the date hereof. The Company has made available or provided to
Buyer prior to the date hereof in the Data Rooms true and complete copies of all
written Material Contracts (other than the redaction of the Client name and fee
rate information from Advisory Agreements, solicitor agreement and Xxxxx Circle
Agreements), including all amendments, modifications and supplements thereto as
in effect as of the date of this Agreement. There are no oral
Material
Contracts.
(b) Each
Material Contract is in full force and effect and is the legal, valid and
binding obligation of the Company Group member that is a party thereto and, to
the Knowledge of Seller, of each other party thereto, enforceable in accordance
with its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and except as the availability of equitable remedies may be limited by equitable
principles of general applicability. No member of the Company Group
is in material default under any Material Contract, nor, to the Knowledge of
Seller, is any other party to any Material Contract in material breach of or
material default thereunder. No condition or event exists which with
the giving of notice or the passage of time, or both would constitute a material
violation of or material default under a Material Contract by the Company Group
member that is a party thereto or, to the Knowledge of Seller, any other party
thereto. Prior to the date hereof, no party to any Material Contract
has delivered to any member of the Company Group a written notice of termination
with respect thereto, and no party has given written notice to any member of the
Company Group of any significant dispute with respect to any Material
Contract.
(c) The
material rights and obligations of the Broker-Dealer under each selling
agreements listed on Schedule 2.9(a) of the Seller Disclosure Schedule do not
differ from the material rights and obligations of the Broker-Dealer contained
in the form of selling agreement made available in the Data Rooms, other than
such differences that, individually or in the aggregate, would not reasonably be
expected to be material to the Company Group, taken as a whole. The
material rights and obligations of the Company Group under each of the Dual Wrap
Account Advisory Agreements listed on Schedule 2.9(a) of the Seller Disclosure
Schedule (with each of the counterparties listed on Annex N of the Letter
Agreement) do not differ from the material rights and obligations of the Company
Group contained in the form of Dual Wrap Account Advisory Agreement made
available in the Data Rooms, other than such differences that, individually or
in the aggregate, would not reasonably be expected to be material
12
to the Company Group, taken as a whole. The material
rights and obligations of the Company Group under each of the “soft dollar”
Contracts listed as items F, N, S, T and R under item 289 on Schedule 2.9(a) of
the Seller Disclosure Schedule do not differ from the material rights and
obligations of the Company Group contained in the other “soft dollar” Contract
listed under item 289 on Schedule 2.9(a) of the Seller Disclosure Schedule,
other than such differences that, individually or in the aggregate, would not
reasonably be expected to be material to the Company Group, taken as a
whole.
Section
2.10 Base Revenue Run-Rate
Schedule. Schedule 2.10(a) of the Seller Disclosure Schedule sets forth:
(a) a true and complete list, as of the Base Date, of the name of each Client
(other than any Excluded Client); (b) the Adjusted Assets Under Management for
each such Client as of 4:00 p.m. New York time on the Base Date; (c) the
investment advisory, investment management or subadvisory fee payable to the
Company Group by each such Client (or, if different, each account of each such
Client) (the “Monthly
Fees”) for the calendar month in which the Base Date falls; (d) a
calculation of the Revenue Run-Rate for all accounts of all such Clients as of
the Base Date (the "Base Revenue
Run-Rate"); (e) a calculation of the effective gross revenue run rate
(the “Fee
Rate”) derived from the Monthly Fees described in clause (c); and (f) the
amount deducted, waived or reimbursed directly by or on behalf of a Client from
the fee otherwise payable by such Client to a member of the Company Group for
the month of the Base Date, including any Revenue Sharing Arrangement, fee or
expense waiver, rebate or cap or reimbursement obligation.
Section
2.11 Public
Funds.
(a) Schedule
2.10(a) of the Seller Disclosure Schedule notes each Client therein that is a
U.S. Public Fund or UCIT. Each U.S. Sponsored Fund is, and all times
required under Applicable Law has been, duly registered with the SEC as an
investment company under the Investment Company Act. As of the date
hereof, members of the Company Group do not provide any advisory services
pursuant to Advisory Agreements to any Clients with aggregated net assets
exceeding $50,000,000 that are excepted from the definition of investment
company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act
(which Clients, for the avoidance of doubt, shall not include any Client that is
a UCIT).
(b) Each
Advisory Agreement with a Public Fund has been duly approved, continued and at
all times has been in compliance in all material respects with Applicable
Law. Each such Advisory Agreement has been performed in all material
respects by the applicable member of the Company in accordance with its terms
and Applicable Law. To the Knowledge of Seller, there is no
Proceeding pending or threatened against any Public Fund that would reasonably
be expected to have a Fund Material Adverse Effect.
(c) Each
Public Fund that is a juridical entity is duly organized,
13
validly existing and, with respect to entities in jurisdictions
that recognize the concept of “good standing,” in good standing under the laws
of the jurisdiction of its organization and has the requisite corporate, trust,
company or partnership power and authority to own its properties and to carry on
its business as currently conducted, and is qualified to do business in each
jurisdiction where it is required to be so qualified under Applicable Law,
except where any failure to be so duly organized, validly existing, in good
standing, licensed or qualified or to have such power would not, individually or
in the aggregate, reasonably be expected to have a Fund Material Adverse
Effect.
(d) Each
Public Fund is, and has since January 1, 2006, operated in compliance (i)
with Applicable Law and (ii) with its respective investment objectives, policies
and restrictions, as set forth in the applicable prospectus and registration
statement for such Fund, except where any failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to have a Fund Material
Adverse Effect. Since January 1, 2006, each Public Fund has filed all
material Regulatory Documents in compliance with Applicable Law in all material
respects. Since January 1, 2006, no applicable prospectus and
registration statement of any Public Fund contained, as of its filing date or
effective date, any untrue statement of material fact or omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances in which such statements were made, not
misleading. No such prospectus or registration statement is currently
subject to any stop order or similar order restricting its use.
(e) The
shares or units of each Public Fund (i) have been issued and sold in compliance
with Applicable Law and (ii) are qualified for public offering and sale in each
jurisdiction where offers are made to the extent required under Applicable Law,
except where any failure to be in compliance or qualified would not,
individually or in the aggregate, reasonably be expected to have a Fund Material
Adverse Effect.
(f) The
audited balance sheet of each Public Fund as of each such Public Fund’s most
recently completed fiscal year and the related other financial statements for
such most recently completed fiscal year (i) have been prepared in accordance
with GAAP (or, in the case of a UCIT, such other applicable generally accepted
accounting principles), and (ii) present fairly in all material respects the
financial position and other financial results of such Public Fund at the dates
and for the periods stated therein. There are no material liabilities
or material obligations of any Public Fund of any kind whatsoever, whether known
or unknown, accrued, contingent, absolute, determined, determinable or otherwise
other than (i) liabilities or obligations to the extent reserved against in the
balance sheet of such Public Fund or referred to in the notes thereto contained
in the most recent annual or semi-annual report filed by the Public Fund prior
to the date hereof with the SEC, or (ii) liabilities or obligations incurred in
the ordinary course of business consistent with past practice since the date of
the Public Fund’s applicable report referenced in clause
14
(i) above that have not had and would not reasonably be expected
to have a Fund Material Adverse Effect.
(g) For all
taxable years since its inception, each U.S. Sponsored Fund has elected to be
treated as, and has qualified to be classified as, a regulated investment
company taxable under Subchapter M of Chapter 1 of the Code. Each
Public Fund has timely filed all Tax Returns required to be filed by it with any
Taxing Authority and all such Tax Returns are true, correct and complete in all
material respects. Each Public Fund has timely paid, and withheld and
remitted or paid over to the appropriate Taxing Authority, all Taxes required to
be paid by it, or withheld and paid over, whether or not shown on such Tax
Returns. In all taxable years since its inception, each U.S.
Sponsored Fund has distributed all of its investment company taxable income and
net capital gains, within the meaning of Section 852 of the Code. No
U.S. Sponsored Fund is or was during the past three years subject to a material
liability for the payment of the excise tax imposed under Section 4982 of the
Code. No Public Fund has received a written notice from a
Governmental Authority proposing an audit of such Tax Return, no assessment of
Taxes has been asserted in writing with respect to such Tax Returns, and no
requests for waivers of the time to make any such assessment are
pending.
(h) Neither a
member of the Company Group nor any U.S. Sponsored Fund has been the recipient
of any exemptive order or no-action letter upon which a Public Fund currently
relies for the operation of its business.
(i) Each U.S.
Sponsored Fund has written policies and procedures adopted pursuant to Rule
38a-1 of the Investment Company Act that are reasonably designed to prevent
material violations of the Federal Securities Laws (as such term is defined in
Rule 38a-1(e)(1) under the Investment Company Act). Since January 1,
2006, there have been no Material Compliance Matters (as such term is defined in
Rule 38a-1(e)(2) under the Investment Company Act) for any U.S. Sponsored Fund
other than those which (x) have been reported to the applicable Public Fund
Board or (y) will be reported to the applicable Public Fund Board at the next
scheduled Board meeting in the ordinary course of business by the U.S. Sponsored
Fund’s chief compliance officer, and in both cases, to the extent necessary,
satisfactorily remedied or are in the process of being remedied.
(j) Since
January 1, 2006, the board of directors or trustees of each U.S. Sponsored Fund
has been constituted in compliance with Section 10 of the Investment Company Act
and any election of a board’s member to fill any vacancy has been performed in
accordance with Section 16 of the Investment Company Act.
Section
2.12 Compliance with Applicable
Law.
(a) Since
January 1, 2006, each member of the Company Group has complied with all
Applicable Law, except for violations that would not,
15
individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. Since January 1, 2006, no member of
the Company Group has received any written notice or other written communication
asserting any material violation by any member of the Company Group of any
Applicable Law. To the Knowledge of Seller, no member of the Company
Group is under investigation with respect to any material violation of any
Applicable Law.
(b) Each
member of the Company Group holds, and at all times since January 1, 2006 has
held, all material Permits necessary for the conduct of its businesses under and
pursuant to Applicable Law. Schedule 2.12(b) of the Seller Disclosure
Schedule contains a list of all Permits which are required for the operation of
the business of the Company Group as of the date hereof, other than those the
failure of which to possess is not material to the Company Group, taken as a
whole. All Permits of the Company Group are in full force and effect
and are not subject to any suspension, cancellation, modification or revocation
or any Proceedings related thereto, and, to the Knowledge of Seller, no such
suspension, cancellation, modification or revocation or Proceeding is
threatened, except for any failure to be in full force and effect or suspension,
cancellation, modification or revocation or Proceedings that, individually or in
the aggregate, in each case, would not reasonably be expected to have a Company
Material Adverse Effect. Subject to the filing of the notices set
forth in Schedule 2.4 of the Seller Disclosure Schedule, no Permit set forth in
Schedule 2.12(b) of Seller Disclosure Schedule will terminate as a result of the
consummation of the transactions contemplated herein.
(c) Except
for routine examinations conducted by any Governmental Authority in the regular
course of the business of any member of the Company Group, since January 1,
2006, no Governmental Authority has, to the Knowledge of Seller, initiated, and
no Governmental Authority has provided written notice to any member of the
Company Group of, any investigation into the business or operations of any
member of the Company Group or the Public Funds. To the Knowledge of
Seller, there is no material deficiency, violation or exception claimed or
asserted in writing since January 1, 2006 by any Governmental Authority with
respect to any examination of any member of the Company Group or any Public Fund
that has not been resolved in all material respects.
(d) To the
Knowledge of Seller, since January 1, 2006, no member of the Company Group, or
any director, officer, employee or, at the direction of any of them, agent
thereof, has, in violation of Applicable Law in any material respect, offered or
given anything of value to any official of a Governmental Authority, any
political party or official thereof, or any candidate for political office (i)
with the intent of inducing such Person to use such Person’s influence with any
Governmental Authority to affect or influence any act or decision of such
Governmental Authority or to assist the obtaining or retaining of business for,
or with, or the directing of business to, any member of the Company Group or
(ii) constituting an illegal bribe or kickback to assist any member of the
Company Group in obtaining or retaining business for or with any Governmental
Authority.
16
(e) Neither
Seller Parent, Seller, any member of the Company Group nor any of their
respective “affiliated persons” (as that term is defined under applicable
provisions of the Investment Company Act as interpreted by the SEC or its
equivalent under any applicable state or foreign law) has any express or implied
understanding or arrangement that would reasonably be expected to impose an
unfair burden (as that term is defined under Section 15(f) of the Investment
Company Act) on any of the U.S. Sponsored Funds as a result of the transactions
contemplated by this Agreement.
(f) Since
January 1, 2006, all material interest rate swaps, caps, floors, option
agreements, futures and forward Contracts and other similar risk management
arrangements and derivative financial instruments entered into for the account
of any member of the Company Group, or for the account of one or more of the
Clients, were entered into (i) in accordance in all material respects with
applicable Client guidelines, prospectuses or offering memoranda to the extent
entered into for Clients, (ii) in accordance in all material respects with all
Applicable Law and (iii) with counterparties as directed by the applicable
Client (where the Client so directs), in all cases except where failure to do so
would not, individually or in the aggregate, reasonably be expected to be
material to the members of the Company Group, taken as a whole. None
of Seller, its Affiliates or, to the Knowledge of Seller, any other party
thereto is in material breach of any of its obligations under any such material
Contract.
(g) Delaware
Management Business Trust (the “RIA”) has implemented
one or more formal codes of ethics, xxxxxxx xxxxxxx policies, personal trading
policies and other material policies as required by Applicable Law (including
Rule 204A-1 and Rule 206(4)-7 under the Investment Advisers Act), true and
complete copies of which have been provided or made available to Buyer prior to
the date hereof in the Data Rooms. Attached to the Letter Agreement
are copies of all such codes of ethics, xxxxxxx xxxxxxx policies, personal
trading policies and other material compliance policies in effect on the date
hereof. Such codes of ethics, xxxxxxx xxxxxxx polices, personal
trading policies and other material policies comply in all material respects
with Applicable Law.
Section
2.13 Regulatory Documents;
Registrations.
(a) Since
January 1, 2006, each member of the Company Group has timely filed all
Regulatory Documents that were required to be filed with any Governmental
Authority, other than such failures to timely file that would not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. As of their respective dates, the Regulatory Documents of the
Company Group have complied in all material respects with Applicable Law as in
effect at the time the Regulatory Documents were filed.
(b) The RIA
at all times required by the Investment Advisers
17
Act has been duly registered as an investment adviser under the
Investment Advisers Act. The RIA is, and at all times required by
Applicable Law (other than the Investment Advisers Act) during the past five
years has been, duly registered, licensed or qualified as an investment adviser,
or has made required notice filings, in each state or any other jurisdiction
where the conduct of its business required such registration, licensing,
qualification or notice filing, except where the failure to be so registered,
licensed or qualified would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. No member of the
Company Group other than the RIA is required to be registered, licensed or
qualified as an investment adviser under the Investment Advisers Act or any
other Applicable Law. Attached to the Letter Agreement is a true and
complete copy of the Form ADV Parts I and II (and any applicable brochure in
lieu of Part II) of the RIA as in effect on the date of this Agreement.
(c) After the
Closing Date, the members of the Company Group will have the right to use the
Trade Performance Information to the extent permitted by Applicable
Law. All Trade Performance Information provided, presented or made
available by the members of the Company Group to Clients or potential Clients
has complied in all material respects with Applicable Law. The
members of the Company Group maintain (or have access to) all documentation
necessary to form the basis for, demonstrate or recreate the calculation of the
Trade Performance Information (including the rate of return of all accounts that
are included in a composite (current and historical performance results) as
required by Applicable Law. Any investment performance earned by any
Person at a firm other than one of the members of the Company Group and
presented by a member of the Company Group as its investment performance has
complied in all material respects with Applicable Law and any interpretations
thereof by any applicable Governmental Authority. Since January 1,
2006, for each account of any Client maintained by a member of the Company Group
or any Public Fund, and in both cases only where a member of the Company Group
is responsible for pricing, there has existed no unremedied pricing
error. The RIA has adopted and implemented procedures or practices
for the allocation of securities purchased for its Clients that comply in all
material respects with Applicable Law.
(d) Delaware
Distributors, L.P. (the “Broker-Dealer”) is,
and at all times required by the Exchange Act during the past five years has
been, duly registered as a broker-dealer under the Exchange Act. The
Broker-Dealer, at all times required by Applicable Law (other than the Exchange
Act) during the past five years has been, duly registered, licensed or qualified
as a broker-dealer in each state or any other jurisdiction where the conduct of
its business required such registration, licensing or qualification, except
where the failure to be so registered, licensed or qualified would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. No member of the Company Group other than
the Broker-Dealer is required to be registered, licensed or qualified as a
“broker” or “dealer” under the Exchange Act or any other Applicable
Law. Attached to the Letter Agreement is a true and complete copy of
the Form BD of the Broker-Dealer as in effect on the date of this
18
Agreement. The Form BD of the Broker-Dealer is in
compliance in all material respects with the applicable requirements of the
Exchange Act.
(e) The
Broker-Dealer is in compliance in all material respects with Applicable Law,
including the applicable provisions of the Exchange Act, and the net capital
requirements and customer protection requirements thereof. The
Broker-Dealer is duly registered as a member of FINRA.
(f) The
Broker-Dealer has implemented any material written policies and procedures as
required by Applicable Law (including, but not limited to, NASD Conduct Rules
3010-3012 and FINRA Rule 3130), complete and correct copies of which (including
all material reports or material filings under such policies and procedures
since January 1, 2006 relating to compliance by the Broker-Dealer and their
employees subject thereto) have been made available to Buyer prior to the date
hereof in the Data Rooms and, except as otherwise noted in any such reports or
filings, the Broker-Dealer has been in compliance in all material respects with
such policies and procedures.
(g) Neither
the Broker-Dealer nor any “associated person” thereof is subject to a “statutory
disqualification” (as such terms are defined in the Exchange
Act). There is no investigation pending or, to the Knowledge of
Seller threatened, whether formal or informal, that is reasonably expected to
result in such a statutory disqualification.
(h) Delaware
Service Company, Inc. (the “Transfer Agent”) is,
and at all times required by the Exchange Act during the past five years has
been, duly registered as a transfer agent under the Exchange Act. The
Transfer Agent, at all times required by Applicable Law (other than the Exchange
Act) during the past five years has been, duly registered, licensed or qualified
as a transfer agent in each state or any other jurisdiction where the conduct of
its business required such registration, licensing or qualification, except
where the failure to be so registered, licensed or qualified would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. No member of the Company Group other than
the Transfer Agent is required to be registered, licensed or qualified as a
“transfer agent” under the Exchange Act or any other Applicable
Law. Attached to the Letter Agreement is a true and complete copy of
the Form TA-1 as in effect on the date of this Agreement.
(i) Delaware
Management Trust Company (the “Trust Company”) is,
and at all times required by the Pennsylvania Department of Banking during the
past five years has been, duly registered as a trust company with the
Pennsylvania Department of Banking. No member of the Company Group
other than the Trust Company is required to be registered, licensed or qualified
as a “trust company” with the Pennsylvania Department of Banking or any other
state banking authority.
(j) Each
employee of a member of the Company Group and
19
each individual identified in Schedule 4.15(b) of the Seller
Disclosure Schedule who is required to be registered as a registered
representative or a sales person 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 would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(k) Each U.S.
Sponsored Fund (or member of the Company Group that is the operator thereof) is
exempt from registration as a commodity pool operator under the Commodity
Exchange Act, and each U.S. Sponsored Fund (or the operator thereof) (x) has
filed all applicable documentation with the National Futures Association except
to the extent that the failure to file such documentation would not,
individually or in the aggregate, be reasonably expected to materially impair
the Fund’s ability to conduct its business and (y) has conducted its business in
compliance in all material respects with such exclusion or
exemption. Each member of the Company Group that falls within the
definition of commodity trading advisor (“CTA”) as defined in
the Commodity Exchange Act has either filed an appropriate claim of exemption or
has registered as a CTA and has filed all applicable documentation.
(l) To the
extent any member of the Company Group has acted as a fiduciary (within the
meaning of ERISA) with respect to the assets of any Client that is (i) an
“employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to
Title I of ERISA, (ii) a Person acting on behalf of such a plan or (iii) any
Person whose assets are “plan assets” within the meaning of Department of Labor
Regulation Section 2510.3-101, such member of the Company Group has acted in
compliance with the applicable requirements of ERISA, except for any failure to
act in compliance as would not, individually or in the aggregate, reasonably be
expected to be material to the members of the Company Group, taken as a whole.
To the extent any such member of the Company Group has relied upon any statutory
or administrative exemption from the prohibited transaction rules of Section 406
of ERISA and Section 4975 of the Code, such member of a Company Group is
eligible to rely on such exemption and has satisfied the requirements of such
exemption, except for any failure to be so eligible or to so satisfy as would
not, individually or in the aggregate, reasonably be expected to be material to
the members of the Company Group, taken as a whole.
Section
2.14 Ineligible
Persons. Neither any member of the Company Group nor any of
their directors, officers or employees is ineligible pursuant to Section 9(a) or
9(b) of the Investment Company Act to serve as an investment adviser (or in any
other capacity contemplated by the Investment Company Act) to a registered
investment company nor is there any Proceeding pending or, to the Knowledge of
Seller, threatened by any Governmental Authority, that would result in the
ineligibility of any member of the Company Group or any of its directors,
officers or
20
employees to serve in any such capacities. Neither any
member of the Company Group nor any of its directors, officers or employees is
ineligible pursuant to Section 203 of the Investment Advisers Act to serve as a
registered investment adviser or as an associated person of a registered
investment adviser, nor is there any Proceeding pending or, to the Knowledge of
Seller, threatened by any Governmental Authority that would result in the
ineligibility of any member of the Company Group or such persons. No
member of the Company Group or any of their directors, officers or employees or
any individual identified in Schedule 4.15(b) is ineligible pursuant to Section
15(b) of the Exchange Act to serve as a broker-dealer or as an “associated
person” (as defined in the Exchange Act) of a registered broker-dealer, as
applicable, and there is no Proceeding pending or, to the Knowledge of Seller,
threatened by any Governmental Authority that would result in the ineligibility
of any member of the Company Group or such persons.
Section
2.15 Legal Proceedings,
etc.
(a) There are
no claims, actions, suits, complaints, demands, litigations, arbitrations,
prosecutions, contests, hearings, inquiries, investigations, inquests, audits or
other proceedings of any nature, civil, criminal, regulatory or otherwise, in
law or in equity, by or before any Government Authority (collectively, “Proceedings”) that
(i) are pending or, to the Knowledge of Seller, threatened against Seller
Parent, Seller or any member of the Company Group that would, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect,
(ii) that individually or in the aggregate, would reasonably be expected to have
a material adverse effect on the ability of Seller Parent or Seller to
consummate the transactions contemplated by this Agreement or the Ancillary
Agreements or to comply with its obligations hereunder or thereunder in a timely
manner, or (iii) as of the date hereof, challenge the validity of the
transactions contemplated by this Agreement or the Ancillary
Agreements. Schedule 2.15(a) of the Seller Disclosure Schedule
contains a complete and correct list of all material Proceedings that are
pending or, to the Knowledge of Seller, threatened in writing as of the date
hereof that involve the Company Group in which Seller Parent, Seller or any
member of the Company Group is a complainant or defendant (solely in respect of
the Company Group). As of the date hereof, to the Knowledge of
Seller, neither Seller nor any of its Affiliates (other than a member of the
Company Group) has any disputes with, or claims against, the Company Group
relating to any Contract to which a member of the Company Group is a party,
breach of any such Contract or violation of Applicable Law (other than for
accrued and unpaid obligations under any Affiliate Agreement).
(b) Neither
Seller Parent, Seller or any member of the Company Group is subject to any Order
of any Governmental Authority that materially and adversely impacts the Company
Group.
Section
2.16 Employee Benefit Plans;
Employee Matters.
(a) Schedule
2.16(a) of the Seller Disclosure Schedule lists (i)
21
all employee benefit plans (as defined in Section 3(3) of ERISA),
(ii) all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance, vacation, tax gross up, salary continuation, flexible
benefit or other material benefit plans, programs or arrangements, and (iii) all
employment, termination or other material individual contracts or agreements, in
each case that is sponsored or maintained by any member of the Company Group for
the benefit of any current or former employee, officer or director of any member
of the Company Group (the “Company Benefit
Plans”). Schedule 2.16(a) of the Seller Disclosure Schedule
separately lists all employee benefit plans (as defined in Section 3(3) of
ERISA) and all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance, vacation, tax gross up, salary continuation, flexible
benefit or other material benefit plans, programs or arrangements maintained by
Seller Parent or any Affiliate, in each case that is for the benefit of any
current or former employee, officer or director of any member of the Company
Group, excluding Company Benefit Plans (each, a “Seller Plan”).
(b) Seller
has provided to Buyer prior to the date hereof in the Data Rooms a complete and
correct copy of each Company Benefit Plan, together with a copy of the following
documents, if applicable: (i) the most recent summary plan
description, (ii) the most recent Form 5500, together with all schedules
thereto, (iii) the applicable trust or custodial agreement, or (iv) the most
recent actuarial valuation.
(c) Each
Company Benefit Plan (i) is, and has been for the prior three years, operated in
accordance with all provisions of ERISA, the Code, and all other Applicable Law
in all material respects and (ii) is, and has been for the prior three years,
administered, operated and managed in accordance with its governing documents in
all material respects.
(d) No
Company Benefit Plan is subject to Title IV of ERISA or Section 302 of ERISA or
Section 412 or 4971 of the Code. No member of the Company Group has
now or at any time during the last six years, contributed to, sponsored, or
maintained (i) a multiemployer plan (within the meaning of Section 3(37) or
4001(a)(3) of ERISA) (a “Multiemployer Plan”)
or (ii) a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which a member of the Company Group has any liability
under Section 4063 or 4064 of ERISA (a “Multiple Employer
Plan”).
(e) With
respect to each Company Benefit Plan that is intended to be a “qualified plan”
within the meaning of Section 401(a) of the Code (“Qualified Plans”),
the IRS has issued a favorable determination letter that has not been revoked,
or the remedial amendment period under Section 401(b) of the Code and IRS
Revenue Procedure 2005-66 has not expired. To the Knowledge of
Seller, each trust created under any Qualified Plan is exempt from taxation
under Section 501(a) of the Code.
22
(f) No
Company Benefit Plan provides for life, health, medical or other welfare
benefits coverage to former employees or beneficiaries or dependents thereof,
except for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA.
(g) There are
no pending or, to the Knowledge of Seller, threatened claims (other than claims
for benefits in the ordinary course), lawsuits or arbitrations which have been
asserted in writing or instituted against a Company Benefit Plan or any
fiduciaries thereof with respect to their duties to a Company Benefit Plan,
which if adversely determined would reasonably be expected to result in a
material liability to the Company Group.
(h) To the
Knowledge of Seller, no labor union, labor organization or group of employees of
any member of the Company Group has made a pending demand for recognition or
certification, there are no representation or certification proceedings or
petitions seeking a representation proceeding with respect to such employees
presently pending or, to the Knowledge of Seller, threatened to be brought or
filed, with the National Labor Relations Board or any other labor relations
tribunal or authority and there have been no such actions, events or disputes
since January 1, 2006. There are no strikes, organized work
stoppages, organized slowdowns, lockouts or other material labor disputes
pending or, to the Knowledge of Seller, threatened against or involving any
member of the Company Group. No member of the Company Group is a
party to, bound by, or in the process of negotiating a collective bargaining
agreement or other agreement with a labor union or labor
organization. No trade union, council of trade unions, employee
bargaining agency or affiliated bargaining agent holds bargaining rights with
respect to any employees of the Company Group by way of certification, interim
certification, voluntary recognition, designation or successor
rights.
(i) Since
January 1, 2006, the Company Group has complied with Applicable Law regarding
employment and termination of employment, except for violations that would not,
individually or in the aggregate, reasonably be expected to be material to the
Company Group, taken as a whole. There is no claim with respect to
payment of wages, salary or overtime pay that has been asserted or is now
pending or, to the Knowledge of Seller, threatened before any Governmental
Authority with respect to any persons currently or formerly employed by any
member of the Company Group. There is no charge of discrimination in
employment or employment practices, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category,
pending or, to the Knowledge of Seller, threatened before the United States
Equal Employment Opportunity Commission or otherwise with respect to any member
of the Company Group.
(j) During
the 12 months prior to the date hereof, no employees of the Company Group have
been transferred from employment with the Company Group to Seller Parent or any
other Affiliate of Seller Parent or
23
from Seller Parent or any other Affiliate of Seller Parent to a
member of the Company Group.
(k) There are
no pending or, to the Knowledge of Seller, threatened proceedings before any
board, tribunal, arbitrator of claims with respect to employment and labor laws,
including, but not limited to, employment and labor standards, unfair labor
practices, employment discrimination, occupational health and safety, employment
equity, pay equity, workers’ compensation, human rights and labor
relations. No statutory or common law claims, demands or actions have
been initiated or threatened in writing, or investigations commenced by any
competent authority, by or involving or related to any current or former
employee or independent contractor of the Company Group in any way connected
with their employment with the Company Group, in any jurisdiction in which the
Company Group or its related entities conduct business, in each case that would,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(l) Attached
to the Letter Agreement is a list of all employees of the Company Group as of
the date hereof, setting forth, as to each, such employee’s position, date of
hire, employment status, location of employment, base salary and severance plan
participation.
(m)
(i) Except as
would not reasonably be expected to result in material liability to the Company
Group, all employees and former employees of the Company Group have been, or
will have been on or before the Closing Date, paid (or amounts in respect
thereof shall have been accrued) for wages, salaries, commissions, bonuses,
vacation pay, severance and termination pay, sick pay, and other compensation
for all services performed by them or that was accrued by them up to the Closing
Date, in accordance with the obligations of the Company Group under any
employment or labor practices and policies or any collective bargaining
agreement or individual agreement to which a member of the Company Group is a
party, or by which a member of the Company Group may be bound, except for, in
the case of severance and termination pay, statutory and common law requirements
for payment in lieu of reasonable notice of termination.
(ii) No member
of the Company Group will be required to pay any bonus, fee or any other cash
compensation to any employee of the Company Group (other than salaries, wages or
bonuses paid or payable to employees in the ordinary course of business in
accordance with current compensation levels and practices) as a result of the
transactions contemplated herein.
24
(n) Each
employee of the Company Group holds all current work visas or similar work
licenses or qualifications required under Applicable Law to perform his or her
ordinary duties.
(o) There are
no employees who are in the recruitment process of any member of the Company
Group (including but not limited to employees who have been offered positions
with the Company Group) as of the date of this Agreement, other than in the
ordinary course consistent with past practice.
(p) No member
of the Company Group has entered into any Contract, sub-contract or service
agreement with any party that may give rise to obligations under any state or
Federal affirmative action laws in the US including but not limited to the
provisions of the Vietnam Era
Veterans Readjustment Act and Executive Order 11246 and related
legislation, or any state or city ordinance.
Section
2.17 Intellectual
Property.
(a) All
Company Group Intellectual Property that (i) is registered with any Governmental
Authority by any member of the Company Group, (ii) is subject to an application
for registration with any Governmental Authority submitted by the Company Group,
((i) and (ii) collectively the “Registered IP”),
(iii) is material to the business of the Company Group whether or not registered
with any Governmental Authority, or (iv) is a domain name used or registered by
the Company Group, on the date hereof is listed in Schedule 2.17(a) of the
Seller Disclosure Schedule. For Registered IP, Schedule 2.17(a) also
sets forth a list of all jurisdictions in which such Registered IP is registered
or registrations have been applied for and all registration and application
numbers. All Registered IP owned by any member of the Company Group
has been duly registered in, filed in or issued by the appropriate Governmental
Authority where such registration, filing or issuance is necessary for the
conduct of the business of the Company Group as currently conducted, except for
any failure to be so registered, filed or issued that would not, individually or
in the aggregate, reasonably be expected to be material to the Company Group,
taken as a whole.
(b) The
members of the Company Group own, license or otherwise have the right to use all
material Intellectual Property necessary for the conduct of the business of the
Company Group as currently conducted and the consummation of the transactions
contemplated hereby will not cause a termination or material impairment of such
rights. Other than the Seller Trademarks, there is no Intellectual
Property used in the business of the Company Group as currently conducted which
is owned or (other than the rights of Seller Parent and its Affiliates (other
than the Company Group) and funds sponsored by them in the Trade Performance
Information) held for use by any Affiliate of the Company that is not a member
of the Company Group.
(c) Neither
the Company Group’s use of the owned Company Group Intellectual Property, nor
the conduct of its business as currently conducted,
25
infringes or otherwise violates in any material respect the rights
of any Person, and to the Knowledge of Seller, no Person is infringing or
otherwise violating in any material respect the rights of the Company Group in
any material Company Group Intellectual Property. No claims have been
asserted in writing by any Person against any member of the Company Group
alleging that any member of the Company Group’s use of any Company Group
Intellectual Property or the conduct of the business of the Company Group or the
products or services thereof infringes or otherwise violates the rights of such
Person, and no claims have been asserted in writing by any member of the Company
Group alleging that any Person infringes or otherwise violates the rights of the
Company Group in any Company Group Intellectual Property.
(d) The
members of the Company Group own or license all material computer software
currently used by the Company Group that is material to the conduct of its
business as currently conducted (“Computer Software”)
and have the right to use such software without infringing or otherwise
violating the Intellectual Property rights of any Person. No member
of the Company Group has received written notice of any claim respecting any
violation or infringement of such Computer Software by any member of the Company
Group.
(e) To the
Knowledge of Seller, all of the rights in and to the material Company Group
Intellectual Property are valid and enforceable.
(f) The
Company Group has taken reasonable measures to protect the confidentiality of
all trade secrets owned by the Company Group that are material to the conduct of
its business as currently conducted. To the Knowledge of Seller, no
employee, consultant or independent contractor of the Company Group is, as a
result of or in the course of such employee’s, consultant’s or independent
contractor’s engagement by the Company Group, in default or breach of any
material term of any non-disclosure agreement or assignment of invention
agreement.
(g) No member
of the Company Group has granted or agreed to grant any exclusive license of or
exclusive right to use or granted joint ownership of any owned Company Group
Intellectual Property to any other Person.
(h) No open
source or public library software, including any version of any software
licensed pursuant to any GNU public license, was used in the development or
modification of any proprietary software owned by the Company Group that is
incorporated into or utilized by any products of the Company Group where, as a
result of the use of such open source or public library software, the Company
Group is obligated to make available to third parties the source code for any
proprietary software owned by the Company Group that is incorporated into such
products.
(i) The
material Information Technology Systems of the
26
Company Group have not malfunctioned in any material respect
within the past two years. A copy of the disaster recovery plan of
the Company Group in effect on the date hereof has been made available to Buyer
prior to the date hereof in the Data Rooms, which plan has been tested at least
annually for the prior two years.
(j) The
Company Group is in compliance in all material respects with Applicable Law
relating to personally identifiable information. No member of the
Company Group as of the date hereof has received, within the past 24 months, any
written claim pending against it alleging any material breach, violation, misuse
or unauthorized disclosure of any personally identifiable
information.
Section
2.18 Insurance. Each
insurance policy and bond covering the Company Group or any of its assets or
properties is set forth in Schedule 2.18 of the Seller Disclosure Schedule and
is in full force and effect and no member of the Company Group is in violation
thereof, and in the 12 months prior to the date hereof, no member of the Company
Group has received written notice or other written communication from any
insurer or agent of any intent to cancel any such insurance policy or
bond. There is no material claim by any member of the Company Group
pending under any of such policies or bonds as to which coverage has been denied
or disputed by the underwriters of such policies or bonds.
Section
2.19 Real
Estate. No member of the Company Group owns any real
property. Schedule 2.19 of the Seller Disclosure Schedule identifies
all of the real estate leases, subleases, real estate licenses or occupancy
agreements to which any member of the Company Group is a party on the date
hereof, together with all amendments, modifications or supplements, if any,
thereto (collectively, the “Leases”). True
and complete copies of the Leases have been provided or made available to Buyer
prior to the date hereof in the Data Rooms, together with any amendments,
modifications or supplements thereto. No member of the Company Group
has received any written notice or any other written communication from the
landlord or lessor under any of the Leases claiming that any member of the
Company Group is in breach in any material respect of its obligations under the
respective Leases. Each member of the Company Group, as applicable,
has a valid, binding and enforceable leasehold interest under each of the Leases
under which it is a lessee, free and clear of all Encumbrances other than
Permitted Encumbrances. No member of the Company Group subleases,
licenses or otherwise grants to any Person any interest in any
Lease.
Section
2.20 Affiliate
Transactions. Neither Seller nor its Affiliates (other than
the Company Group) (i) is a party to any Contract with any member of the Company
Group (any such Contract, an “Affiliate
Agreement”), in each case other than any Plan and this Agreement and the
Ancillary Agreements or (ii) has any loan outstanding from, or has any loan
outstanding to, any member of the Company Group.
27
Section
2.21 Brokers and
Finders. 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, any member of the Company Group in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF BUYER
Except as
set forth in a correspondingly labeled section of the written disclosure
schedule delivered to Seller by Buyer on or prior to the execution and delivery
of this Agreement (the “Buyer Disclosure
Schedule”) (it being agreed that any matter disclosed in any section or
subsection of the Buyer Disclosure Schedule shall be deemed disclosed in any
other section or subsection to the extent that such information is reasonably
apparent to be so applicable to such other section or subsection), Buyer
represents and warrants to Seller Parent and Seller as follows:
Section
3.1 Organization. Buyer
is an Australian corporation, duly formed and validly existing under the laws of
the Commonwealth of Australia. Buyer has the requisite organizational
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.
Section
3.2 Authority. Buyer
has all requisite power, authority and legal capacity to execute and deliver
this Agreement and the Ancillary Agreements to which it is (or will be) a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery
and performance by Buyer of this Agreement and each Ancillary Agreement to which
it is a party has been, and the consummation by it of the transactions
contemplated hereby and thereby has been, duly and validly authorized and
approved by all required actions on the part of Buyer. This Agreement
and each Ancillary Agreement to which Buyer is a party has been (or, in the case
of any such Ancillary Agreement to be executed and delivered after the date
hereof, will be) duly and validly executed and delivered by it and (assuming due
authorization, execution and delivery by Seller Parent and Seller) this
Agreement and each Ancillary Agreement to which Buyer is a party constitutes
(or, in the case of any such Ancillary Agreement to be executed and delivered
after the date hereof, will constitute) legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally and except as
the availability of equitable remedies may be limited by equitable principles of
general applicability.
Section
3.3 No
Violations. Except as set forth in Section 3.4 hereof, neither
the execution, delivery or performance of this Agreement and the
28
Ancillary Agreement to which it is a party, nor the consummation
by Buyer of the transactions contemplated hereby or thereby, will, with or
without the giving of notice, the termination of any grace period or
both: (i) violate, conflict with, or result in a breach or default
under any provision of the Organizational Documents of Buyer; (ii) violate any
Applicable Law; or (iii) result in a violation or breach by Buyer of, conflict
with, constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, payment, acceleration
or guaranteed rights or entitlements) under any Contract to which it is a party,
or by which it or any of its properties or assets are bound, except for, in the
case of clauses (ii) and (iii) of this Section 3.3, any violation, breach,
conflict, default or right of termination, cancellation, payment, acceleration,
guaranteed right or entitlement that, individually and in the aggregate, would
not reasonably be expected to impair or materially delay the ability of Buyer to
consummate the transactions contemplated hereby or by the Ancillary Agreements
or to comply with its obligations hereunder or thereunder in a timely
manner.
Section
3.4 Consents and
Approvals. Except as required under the HSR Act and as set
forth in Schedule 3.4 of the Buyer Disclosure Schedule, no consents or approvals
of or filings, declarations or registrations with any Governmental Authority or
any third party are necessary in connection with the execution and delivery by
Buyer of this Agreement or any Ancillary Agreement or the consummation by Buyer
of the transactions contemplated hereby or thereby.
Section
3.5 Ineligible
Persons. Neither Buyer nor any “affiliated person” (as defined
under the Investment Company Act) with Buyer is ineligible pursuant to Section
9(a) or 9(b) of the Investment Company Act to serve as an investment adviser (or
in any other capacity contemplated by the Investment Company Act) to a
registered investment company nor is there any Proceeding pending or, to the
Knowledge of Buyer, threatened by any Governmental Authority, that would result
in the ineligibility of Buyer or such persons to serve in any such
capacities. Neither Buyer nor any person “associated” (as defined
under the Investment Advisers Act) with Buyer is ineligible pursuant to Section
203 of the Investment Advisers Act to serve as a registered investment adviser
or as an associated person of a registered investment adviser, nor is there any
Proceeding pending or, to the Knowledge of Buyer, threatened by any Governmental
Authority that would result in the ineligibility of Buyer or such
persons. Neither Buyer nor any person “associated” with Buyer is
ineligible pursuant to Section 15(b) of the Exchange Act to serve as a
broker-dealer or as an “associated person” (as defined in the Exchange Act) of a
registered broker-dealer, as applicable, and there is no Proceeding pending or,
to the Knowledge of Buyer, threatened by any Governmental Authority that would
result in the ineligibility of Buyer or such persons.
Section
3.6 Legal
Proceedings.
(a) There are
no Proceedings that are pending or, to the Knowledge of Buyer, threatened
against or relating to Buyer or any of its
29
Affiliates that (i) individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the ability of Buyer
to consummate the transactions contemplated by this Agreement or the Ancillary
Agreements or to comply with its obligations hereunder or thereunder in a timely
manner, or (ii) challenge the validity of the transactions contemplated by this
Agreement or the Ancillary Agreements.
(b) There is
no Order imposed upon Buyer or any of its Affiliates that would reasonably be
expected to have a material adverse effect on the ability of Buyer to consummate
the transactions contemplated by this Agreement or the Ancillary Agreements or
to comply with its obligations hereunder or thereunder in a timely
manner.
Section
3.7 Investment
Representations. Buyer is an “accredited investor,” as such
term is defined in Rule 501 promulgated by the SEC under the Securities
Act. Buyer is purchasing the Shares for its own account, for
investment purposes only, and not for, with a view to, or in connection with the
resale or other distribution thereof, in whole or in part. Buyer
understands that the Shares may not be sold, transferred or otherwise disposed
of without registration under the Securities Act, except pursuant to an
exemption from such registration available under the Securities
Act. Buyer (either alone or together with its advisors) has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Shares
and is capable of bearing the economic risks of such
investment. Buyer has had an opportunity to ask questions of and
receive answers from Seller and the Company Group regarding the business of the
Company Group.
Section
3.8 Sufficient
Funds. Buyer has on the date hereof, and shall have on the
Closing Date, sufficient funds to enable Buyer to consummate the transactions
contemplated hereby, including the payments contemplated under Article
I. Buyer’s obligations under this Agreement are not subject to any
conditions regarding Buyer’s, its Affiliates’, or any other Person’s ability to
obtain financing for the consummation of the transactions contemplated
hereby.
Section
3.9 Brokers and
Finders. No Person has acted, directly or indirectly, as a
broker, finder or financial advisor for Buyer or any of its Affiliates in
connection with the transactions contemplated by this Agreement, other than any
broker, finder or financial advisor the fees and expenses of which are due only
from Buyer.
ARTICLE
IV
COVENANTS
Section
4.1 Pre-Closing Conduct of
Business by the Company
30
Group. During
the period from the date of this Agreement and continuing through the Closing
Date, except as (A) contemplated by this Agreement or any Ancillary Agreement,
(B) set forth in Schedule 4.1 of the Seller Disclosure Schedule or (C) with
the prior written consent of Buyer, Seller Parent and Seller shall cause each
member of the Company Group to (i) conduct its business in all material respects
in the ordinary course consistent with past practice and (ii) use commercially
reasonable efforts to preserve intact its business organization (including
officers and employees, goodwill and clients of the Company Group) in all
material respects (provided that any
changes in Clients, assets under management or Client revenues shall not be a
breach of this sentence, with such matters governed exclusively by Sections 1.1
(in respect of the Revenue Run-Rate Adjustment Amount), 4.2 and
5.2(d)). Without limiting the generality of the foregoing, except (A)
as expressly contemplated by this Agreement or any Ancillary Agreement, (B) as
set forth in Schedule 4.1 of the Seller Disclosure Schedule or (C) as
consented to in writing by Buyer (which consent, in the case of clauses (q) and
(r)(D)(x) of this Section 4.1, shall not be unreasonably withheld or delayed),
Seller shall cause each member of the Company Group not to:
(a) amend its
Organizational Documents;
(b) enter
into or agree to enter into any merger or consolidation with any other Person or
liquidate or dissolve;
(c) make any
distribution or declare, pay or set aside any dividend with respect to, or
issue, split, combine, redeem, reclassify, purchase or otherwise acquire, any
Company Capital Stock or other equity interest in any member of the Company
Group, other than cash dividends from any member of the Company Group to Seller
or one of its Affiliates (provided that in the
case of issuances of equity interests in DIUS to new hires after the date hereof
consistent with past practice and not material to DIUS, the consent of Buyer
will not be unreasonably withheld);
(d) transfer,
issue, sell, pledge, encumber or dispose of any shares of capital stock or other
securities of, or other ownership interests in, any member of the Company Group
or grant options, warrants, calls or other rights to purchase or otherwise
acquire shares of the capital stock or other securities of, or other ownership
interests in, any member of the Company Group;
(e) effect
any recapitalization, reclassification, stock split, combination or like change
in the capitalization of the Company Group, or amend the terms of any
outstanding securities of any member of the Company Group;
(f) to the
extent within its control and subject to its fiduciary duties to the U.S.
Sponsored Funds, take any action that (i) would prevent any Public Fund from
qualifying as a “regulated investment company” under Section 851 of the Code, or
(ii) would result in the merger, consolidation or other reorganization of any
Public Fund;
31
(g) issue,
create, incur, assume, guarantee, endorse or otherwise become liable or
responsible with respect to (whether directly, contingently or otherwise) any
Indebtedness, (ii) except in the ordinary course of business, pay, repay,
discharge, purchase, repurchase or satisfy any Indebtedness of any member of the
Company Group or (iii) modify the terms of any such Indebtedness;
(h) sell,
license, transfer, convey, lease or otherwise dispose of any of the material
properties or assets of any member of the Company Group, other than in the
ordinary course of business;
(i) subject
to any Encumbrance (other than Permitted Encumbrances), any of the material
properties or assets (whether tangible or intangible) of the Company
Group;
(j) subject
to Section 4.4(c), settle or compromise any pending or threatened Proceeding
that results in restrictions upon any of its operations or results in the
imposition of any fines or penalties that will not fully be paid by Closing;
provided, that
if the aggregate amount of such fines and penalties paid after the date hereof
and prior to Closing exceeds $10,000,000, Seller shall consult with Buyer prior
to the making of any further payments;
(k) make any
change to its accounting polices, annual accounting period or accounting method,
other than as required by GAAP or Applicable Law;
(l) make,
change or revoke any material Tax election; file any amended material Tax
Return; enter into any material closing agreement; settle and/or compromise any
material Tax liability; incur any material liability for Taxes other than in the
ordinary course of business; consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment, in each case if
such election, adoption, change, amendment agreement or other action would
reasonably be expected to have any adverse effect on any member of the Company
Group after the Closing Date;
(m) enter
into, terminate or modify in any material respect (including by way of waiver)
any Material Contract, other than in the ordinary course of
business;
(n) (i) other
than as may be required as a result of changes in Applicable Law or in
connection with Seller Parent’s participation in the U.S. Treasury’s Troubled
Asset Relief Program or other government program, enter into or materially amend
or terminate any Company Benefit Plan or (ii) take any action to accelerate any
rights or benefits under any Company Benefit Plan;
(o) enter
into any lease of real property;
(p) acquire
any business or Person or any material properties or
32
assets, by merger, consolidation or otherwise, in a single
transaction or a series of related transactions (other than permitted
commitments for capital expenditure which shall be governed exclusively by
Section 4.1(q);
(q) make,
incur or enter into any financial commitment for capital expenditure requiring
payments in excess of $500,000 for an individual commitment and $2,000,000 for
all commitments in the aggregate;
(r) except as
required by any Applicable Law, existing Company Benefit Plan or Contract
disclosed on Schedule 2.16(a) of the Seller Disclosure Schedule or as consented
to by Buyer (which consent shall not be unreasonably withheld) (A) subject to
Section 4.12(g), increase the salary or other compensation of any director,
officer, or employee of the Company Group whose annual cash compensation exceeds
$200,000; provided, however, that
increases of salary and compensation to those other than executives, directors
and employees whose annual cash compensation exceeds $200,000 may be made in the
ordinary course of business consistent with past practices and not exceeding 5%
(in the aggregate) of the person’s cash compensation immediately prior to such
change, (B) grant any promotion to any officer or employee of the Company Group,
(C) grant any unusual or extraordinary bonus, benefit or other direct or
indirect compensation to any director, officer, employee or individual
consultant of the Company Group, (D) increase the coverage or material benefits
available under any (or create any new) severance pay, termination pay, vacation
pay, company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance, pension or other
employee benefit plan or arrangement made to, for, or with any of the directors,
officers, employees, agents or representatives of the Company Group or otherwise
materially modify or materially amend or terminate any such plan or arrangement;
provided, however, that changes
may be made to such plans covering employees of Parent and its Subsidiaries so
long as any such change is made on a non-discriminatory basis and covers all
participants in such plan, or (E) enter into any employment, deferred
compensation, severance, special pay, individual consulting, non-competition or
similar agreement or arrangement with any directors or officers of the Company
Group (or materially amend any such agreement to which a member of the Company
Group is a party), other than, after consultation with Buyer, any employment
agreement or arrangement entered into with any director, officer or employee of
the Company Group who is hired after the date hereof to replace a terminated
employee in the ordinary course of business consistent with past practice
(provided that such agreement or arrangement shall provide for employment
at-will and will not trigger severance or other payments if such director,
officer or employee is terminated after the Closing, other than any payment
provided for in an existing Company Benefit Plan disclosed on Schedule 2.16(a)
of the Seller Disclosure Schedule);
(s) except as
consented to by Buyer (which consent shall not be unreasonably withheld),
transfer employees from employment with the Company Group to Seller Parent or
any other Affiliate of Seller Parent or from
33
Seller Parent or any other Affiliate of Seller Parent to a
member of the Company Group;
(t) enter
into, modify or terminate any labor or collective bargaining agreement of the
Company Group, through negotiation or otherwise, make any commitment or incur
any liability to any labor organization with respect to the Company Group;
or
(u) enter
into or agree to enter into any agreement, resolution or commitment to do any of
the foregoing.
Section
4.2 Client
Consents.
(a) U.S. Public
Funds. Seller shall cause the Company Group to use its
commercially reasonable efforts to obtain, as promptly as practicable following
the date of this Agreement, the approval of the applicable Public Fund Board
(or, solely in the case of clause (y) below, the Public Fund Board of the U.S.
Sponsored Funds) and, except in the case of an Exempt Sub-Advised Fund with
respect to clause (x) below, the shareholders of the applicable U.S. Public
Fund, pursuant to the provisions of Section 15 of the Investment Company Act
applicable thereto, of (x) a new Advisory Agreement for such U.S. Public Fund to
be effective as of the Closing with such agreement containing terms (including
the fee rate), taken as a whole, that are substantially similar to the terms of
the existing Advisory Agreement between such U.S. Public Fund and the RIA, with
the exception of (i) its effective and termination dates and (ii) the changes
reflected in the form of Advisory Agreement attached to the Letter Agreement and
(y) solely in the case of the U.S. Sponsored Funds, the reelection of the
current members of the board of directors or trustees (as applicable) of such
funds. Without limiting the foregoing, subject in each case to the
requirements of Applicable Law and the fiduciary duties of the Company Group and
each applicable Public Fund Board:
(i) With
respect to each U.S. Public Fund (other than an Exempt Sub-Advised Fund in the
case of clauses (B), (C) and (D)) and the Public Fund Board thereof, Seller
shall cause the Company Group to use its commercially reasonable efforts, (A) to
request, as promptly as practical following the date of this Agreement, such
Public Fund Board to approve (and to recommend that the shareholders of such
U.S. Public Fund approve) a new Advisory Agreement and, if applicable, the
reelection of the current members of the board of directors or trustees (as
applicable) as described in the first sentence of Section 4.2(a); (B) to
request, as promptly as practical following receipt of the approval and
recommendation described in clause (A) above, such Public Fund Board to call a
meeting of the shareholders of such Public Fund to be held as promptly as
reasonably practical for the purpose of voting upon a proposal to approve (in
the requisite manner) such new Advisory Agreement and, if
34
applicable, the reelection of the current members of the board of
directors or trustees (as applicable); (C) to prepare and to file (or to cause
to be prepared and filed) with the SEC and all other applicable Governmental
Authorities, as promptly as practical following receipt of the approval and
recommendation described in clause (A) above, all proxy solicitation materials
required to be distributed to the shareholders of such U.S. Public Fund with
respect to the actions recommended for shareholder approval by such Public Fund
Board and to mail (or to cause to be mailed) such proxy solicitation materials
as promptly as practical after clearance thereof by the SEC (if applicable); and
(D) to request such Public Fund Board to submit, as promptly as practical
following the mailing of the proxy materials, to the shareholders of such U.S.
Public Fund for a vote at a shareholders meeting the proposal described in
clause (B) above.
(ii) The
parties hereto agree that a U.S. Public Fund shall be deemed to have consented
for all purposes under this Agreement to the transactions contemplated hereby
and the continued management of such U.S. Public Fund by the RIA following the
Closing if a new Advisory Agreement has been approved by the Public Fund Board
thereof and, except in the case of an Exempt Sub-Advised Fund, shareholders of
such U.S. Public Fund in the manner contemplated by clause (i) of this
subsection (a), unless at any time prior to the Closing the respective Public
Fund Board (or, in the case of a U.S. Public Fund sub-advised by the RIA, the
investment adviser to such sub-advised U.S. Public Fund) notifies the Company,
whether in writing or orally, that such U.S. Public Fund has terminated or
intends to terminate its Advisory Agreement prior to or following the Closing
(and such notice is not withdrawn).
(iii) Seller
agrees that the information that is contained in the proxy materials to be
furnished to the shareholders of any U.S. Public Fund (other than information
that is or will be provided by or on behalf of Buyer or its Affiliates or any
other third party specifically for inclusion in such proxy materials) will not
contain, at the time the proxy materials are first mailed to the shareholders of
any U.S. Public Fund or at the time of the meeting thereof, any untrue statement
of a material fact, or omit to state any 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. Buyer
agrees that the information by it or its Affiliates (or on their behalf) in
writing for inclusion in the proxy materials to be furnished to the shareholders
of any U.S. Public Fund will not contain, at the time the proxy materials are
first mailed to the shareholders of any U.S. Public Fund or at the time of the
meeting thereof, any untrue statement of a material fact, or omit to state any
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.
35
Each of Seller and Buyer shall have the right to review in advance
and to approve (such approval not to be unreasonably withheld) all the
information relating to it and any of its Affiliates proposed to appear in any
registration statement or proxy statement or any amendment or supplement thereto
submitted to the SEC or such other applicable Governmental Authority in
connection with the approvals contemplated by this subsection (a).
(iv) In the
event that the approval by the shareholders of a U.S. Public Fund (other than an
Exempt Sub-Advised Fund) of the applicable new Advisory Agreement described in
this subsection (a) is not reasonably expected to be obtained prior to the
Closing, as soon as practicable after the parties so determine such shareholder
approval is not reasonably expected to be obtained by the Closing, the Company
Group shall request the Public Fund Board of each such U.S. Public Fund to
approve, in conformity with Rule 15a-4 under the Investment Company Act, an
interim Advisory Agreement, to be effective immediately following the Closing,
for each such U.S. Public Fund with the RIA containing substantially similar
terms as the existing applicable Advisory Agreement with each such U.S. Public
Fund (except for changes thereto to the extent necessary to comply with Rule
15a-4). In the event that an interim Advisory Agreement under Rule
15a-4 becomes effective prior to Closing, Seller and Buyer shall use
commercially reasonable efforts to obtain the required U.S. Public Fund
shareholder approval as promptly as practicable following the Closing Date (and
in any event prior to the expiration of such interim contracts).
(b) UCITs. Seller
shall cause the Company Group to use its commercially reasonable efforts to
obtain, as promptly as practicable following the date of this Agreement, the
approval of the Financial Regulator of Ireland to the continued management of
each Public Fund that is a UCIT by the RIA following the Closing. The
parties hereto agree that each such Public Fund shall be deemed to have
consented for all purposes under this Agreement to the transactions contemplated
hereby and the continued management of such Public Fund by the RIA following the
Closing if continued management of such Public Fund by the RIA following the
Closing has been approved in accordance with the immediately preceding sentence,
unless at any time prior to the Closing such Public Fund notifies the RIA in
writing that such Public Fund has terminated its Advisory Agreement prior to or
following the Closing (and such notice is not withdrawn).
(c) Non-Public Fund
Clients.
(i) If
consent is required by Applicable Law or by the Advisory Agreement of any Client
(other than a Public Fund) for the
36
deemed assignment or continuation of the Advisory Agreement with
such Client as a result of the consummation of the transactions contemplated by
this Agreement, as promptly as practicable following the date of this Agreement,
Seller shall cause the Company Group to send a notice (“Transaction Notice”)
informing such Client of the transactions contemplated by this Agreement and
requesting the written consent of such Client to such deemed assignment or
continuation.
(ii) The
parties hereto agree that any consent required for the deemed assignment or
continuation of any Advisory Agreement with a Client (other than a Public Fund)
shall be deemed given for all purposes under this Agreement (A) if written
consent is expressly required under the respective Advisory Agreement, upon
receipt of the written consent requested in the Transaction Notice or (B) if
consent other than written consent is permitted under Applicable Law and the
respective Advisory Agreement, (x) upon receipt of a written consent requested
in the Transaction Notice or (y) if no such written consent is received, if 60
days shall have passed since the sending of written notice (“Negative Consent
Notice”) to such Client (which Negative Consent Notice shall be included
in the Transaction Notice) informing such Client: (I) of the
intention to complete the transactions contemplated by this Agreement, which
will result in a deemed assignment of such Client’s Advisory Agreement; (II) of
the intention of the RIA to continue to provide the advisory services pursuant
to the existing Advisory Agreement with such Client after the Closing if such
Client does not terminate such agreement prior to the Closing; and (III) that
the consent of such Client will be deemed to have been granted if such Client
continues to accept such advisory services for a period of at least 60 days
after the sending of the Negative Consent Notice without termination; provided that, in any
case under clause (A) or (B), no consent shall be deemed to have been given for
any purpose under this Agreement if at any time prior to the Closing such Client
notifies the Company, whether in writing or orally, that such Client has not so
consented or has terminated or intends to terminate its Advisory Agreement (and
such notice is not withdrawn or superseded). For the avoidance of
doubt, the parties hereto agree that Seller shall, or shall cause the applicable
member of the Company Group to, include in each Negative Consent Notice a
request for written consent, even if written consent to an assignment is not
required by the applicable Advisory Agreement.
(d) The
Seller shall cause each member of the Company Group, as applicable, to use its
commercially reasonable efforts to obtain all consents, waivers and approvals
from, and provide all notices to, all Persons (including, as applicable,
noteholders, rating agencies, trustees and shareholders) required in order to
ensure that that the transactions contemplated hereby will not cause the
termination of any Collateral Management Agreement. Executed
counterparts of
37
such consents, waivers and approvals shall be delivered to Buyer
promptly after receipt thereof, and copies of such notices shall be delivered to
Buyer promptly after the making thereof.
(e) In
connection with obtaining the Client consents under this Section 4.2, at all
times prior to the Closing, Seller shall take reasonable steps to keep Buyer
informed of the status of obtaining such Client consents and, upon Buyer’s
request, make available to Buyer copies of all such executed Client
consents. Seller and Buyer agree that they shall coordinate and
consult in good faith with each other with respect to all matters relating to
rating agency relations and investor relations in regard to the collateral debt
obligation transactions set forth in Schedule 4.2(e) of the Seller Disclosure
Schedule (each, a “CDO”) and the
transactions contemplated hereby.
(f) Seller
shall deliver (or cause to be delivered) drafts of all consent materials
(including proxy solicitation materials) prepared by Seller or its Affiliates to
Buyer a reasonable time prior to the mailing or distribution of such documents
to any Client (and in the case of proxy solicitation materials, prior to the
filing of such materials with the SEC) in order to afford Buyer an opportunity
to fully review and comment on such documents and Buyer shall have the right to
so review and comment on such documents. Any reasonable comments
provided by Buyer on such documents shall be considered in good faith by
Seller. Buyer shall reasonably cooperate with Seller and its
Affiliates in connection with the obtaining of Client consents under this
Section 4.2.
(g) Prior to
Closing, without the prior written consent of Seller, none of Buyer or its
Affiliates or their respective employees, directors, officers or agents shall,
directly or indirectly, contact or communicate with any Client or any Affiliate
thereof (including any member of any Public Fund Board and any consultant,
“gatekeeper” or similar Person) regarding the transactions contemplated by this
Agreement. Consent of the Seller shall not be required in connection
with any responses or communications by Buyer in connection with any requests
directed to Buyer relating to the approval by an applicable Public Fund Board of
any agreements pursuant to the provisions of Section 15 of the Investment
Company Act.
Section
4.3 Pre-Closing
Access.
(a) Between
the date of this Agreement and the Closing, subject to the other provisions of
this Section 4.3, Seller shall cause the Company Group to provide such
access to Buyer and its accountants, counsel, financial advisors and other
representatives to such information and data relating to the Company Group,
including the books, compliance records, financial information (including
working papers and data in the possession of the Company’s independent public
accountants (subject to execution by Buyer of a hold harmless or similar
agreement if requested by the accountants), internal audit reports, and
“management letters” from such accountants with respect to the Company
38
Group’s systems of internal control) and records (including Tax
records, but only to the extent such records relate solely to the Company Group)
and employees of the Company Group and such other information, Contracts and
properties of or relating to the Company Group, as is reasonably requested in
connection with this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby. Such review shall occur only during
normal business hours upon reasonable advance notice by Buyer to Seller, under
the supervision of Seller’s personnel and shall be conducted in a manner that
does not unreasonably interfere with the operations of the Company
Group. Notwithstanding the obligations contained in this
Section 4.3, the Company Group shall not be required by this Section 4.3 to
provide access to or to disclose information where such access or disclosure
would (x) jeopardize the attorney-client privilege of it or its Affiliates
(based on the advice of counsel) or contravene any Applicable Law or fiduciary
duty or breach a binding agreement or (y) cause material competitive harm
to the Company Group if the transactions contemplated hereby are not
consummated. All information provided or accessed under this Section
4.3(a) shall be subject to the terms of the Confidentiality
Agreement. No information provided to or obtained by Buyer pursuant
to this Section 4.3 shall limit or otherwise affect the remedies available
hereunder to Buyer (including Buyer’s right to seek indemnification pursuant to
Article VIII), or the representations or warranties of, or the conditions to the
obligations of, the parties hereto.
(b) Prior to
the Closing, none of Buyer or its Affiliates or their respective employees,
directors, officers or agents shall contact or communicate with the customers,
suppliers and licensors of the Company Group in connection with the transactions
contemplated hereby without the prior written consent of Seller.
Section
4.4 Post-Closing Access;
Post-Closing Retention of Records; Etc.
(a) Following
the Closing, Buyer shall, and shall cause its Affiliates to, upon reasonable
notice by Seller or its Affiliates to Buyer:
(i) (A)
provide to Seller and its Affiliates and their respective representatives
reasonable access to their properties, information, data, books, records,
employees and auditors to the extent relating to the business and operations of
the Company Group with respect to any pre-Closing period or matter occurring
prior to the Closing (including in connection with any Proceeding arising out of
any business or operations of the Company Group in which Seller or any of its
Affiliates may from time to time be involved (including the Retained Disputes),
other than with respect to proceedings involving disputes between Buyer, on the
one hand, and Seller and/or Seller Parent, on the other hand, and the
preparation and audit of any financial statements or Tax Returns) and (B) permit
Seller and its Affiliates and their respective
39
representatives to make such copies and inspections of any such
information, data, books and records as any of them may reasonably request;
and
(ii) (A) make
available at the Company offices to Seller and its Affiliates and their
respective representatives, the officers, employees and representatives of the
Company Group to provide reasonable assistance and co-operation in the review of
information described in Section 4.4(a) and (B) reasonably cooperate with Seller
and its Affiliates and their respective representatives, including by furnishing
such records, information and testimony, and attend such conferences,
mediations, discovery proceedings, hearings, trials or appeals and making
available their respective employees as witnesses, to the extent reasonably
necessary or appropriate in connection with any Proceeding arising out of any
business or operations of the Company Group in which Seller or any of its
Affiliates are or may from time to time be involved (including the Retained
Disputes), other than with respect to proceedings involving disputes between
Buyer, on the one hand, and Seller and/or Seller Parent, on the other
hand;
provided that (w) any
access or cooperation pursuant to this Section 4.4(a) shall not unreasonably
interfere with the conduct of the business of the Company Group and (x) such
access or review shall occur only during normal business hours upon reasonable
advance notice by Seller to Buyer, under the supervision of Company or Buyer
personnel, (y) such access or review shall occur only after Seller and/or Seller
Parent shall have (i) entered into a customary and reasonable non-disclosure
agreement with the Company on terms with respect to confidentiality of
information no more restrictive than the relevant terms of the Confidentiality
Agreement and (ii) identified, in reasonable detail, its purpose in seeking
access or cooperation pursuant to this Section 4.4(a) and (z) Seller shall be
responsible for any out-of-pocket costs and expenses incurred by Buyer and its
Affiliates in connection with its compliance with this Section
4.4(a). Notwithstanding the obligations contained in this Section
4.4, the Company Group shall not be required to provide access or information or
to disclose information where such access or disclosure would jeopardize the
attorney-client privilege of it or its Affiliates (based on the advice of
counsel) or contravene any Applicable Law or fiduciary duty or breach a binding
agreement in effect at Closing.
(b) Following
the Closing, Buyer shall, and shall cause its Affiliates to, (i) retain true and
complete originals or copies of the books and records and other information and
data, including personnel records, of the Company Group and its business and
operations with respect pre-Closing periods in accordance with the document
retention policies of Buyer and its Affiliates, but in no event for less than
six years, (ii) comply with the terms of the applicable
40
hold order distributed by Seller Parent to the Company Group
regarding the Retained Disputes (including the hold order, dated April 6, 2005,
regarding TransAmerica (a copy of which is attached to the Letter Agreement))
and (iii) prior to destroying or disposing of any such books and records,
information or data, provide not less than 30 days’ prior notice to Seller,
specifying the information and records proposed to be destroyed or disposed of,
and, if Seller shall request in writing prior to the scheduled date for such
destruction or disposal that any of the information and records proposed to be
destroyed or disposed of be delivered to Seller, to promptly arrange for the
delivery of such of the information to Seller as was requested at Seller’s cost,
provided, that
prior to any such delivery Seller shall be required to enter into a customary
and reasonable non-disclosure agreement with the Company on terms with respect
to confidentiality of information no more restrictive than the relevant terms of
the Confidentiality Agreement.
(c) Without
limitation of the foregoing provisions of this Section 4.4, following the
Closing, the parties agree that Seller and its Affiliates shall exclusively
control, manage and be responsible for the defense, handling and disposition of
the matters described in Schedule 4.4(c) of the Seller Disclosure Schedule (the
“Retained
Disputes”). As of the Closing, Seller Parent and Buyer agree
that the Company Group shall cease to have any obligation to pay, or reimburse
Seller Parent for, any costs of the Retained Disputes (including costs of
counsel). Seller shall keep Buyer apprised in a timely manner of the
status of the Retained Disputes and shall provide Buyer with reasonable access
to any documents, information or other materials prepared by, or provided to
Seller or its Affiliates, in connection with the Retained Disputes, except to
the extent such access would jeopardize the attorney-client privilege (based on
the advice of counsel). Seller shall consult with Buyer prior to the
entry into any settlement in connection with any Retained Dispute and consider
Buyer’s views in good faith and any such settlement shall not contain any
restriction on the business of the Company Group or any admission or finding of
wrongdoing on behalf of the Company Group or any of its officers or
employees. Any such settlement with respect to a particular defendant
that does not provide for a full release of such defendant with respect to the
claim(s) being settled shall require the consent of Buyer, such consent not to
be unreasonably withheld or delayed. Any settlement that applies to
all claims against all defendants in connection with a Retained Dispute shall
contain a full and complete release of the Company Group and its officers from
all liability related thereto.
Section
4.5 Confidentiality;
Announcements.
(a) The
parties 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, and further agree that the Confidentiality Agreement shall
terminate upon the Closing.
(b) Seller
and Buyer shall, and shall cause their respective
41
Affiliates to, consult with each other as to the form, substance
and timing of any press release or other public disclosure related to this
Agreement and the Ancillary Agreements or the transactions contemplated hereby
and thereby, and no such press release or other public disclosure shall be made
without the consent of each of parties hereto, which consent shall not be
unreasonably withheld or delayed; provided, however, that any
party may make such disclosure to the extent required by Applicable Law or the
rules of any applicable stock exchange; provided, further, that in the
event this Agreement is terminated pursuant to Section 6.1(i), the parties shall
mutually agree on the form, substance and timing of any press release or other
public disclosure related to such termination.
Section
4.6 Regulatory Matters; Third
Party Consents.
(a) The
parties to this Agreement shall, and shall cause their respective Affiliates to,
cooperate with each other and use their reasonable best efforts to as promptly
as practicable after the date hereof prepare and file, or cause to be prepared
and filed, all necessary documentation to effect all applications, notices,
petitions and filings with, and to obtain as promptly as practicable after the
date hereof all permits, consents, approvals, waivers and authorizations of, all
third parties and Governmental Authorities that are necessary or advisable to
timely consummate the transactions contemplated by this Agreement and the
Ancillary Agreements. The parties hereto agree to take all reasonable
steps necessary to satisfy any conditions or requirements imposed by any
Governmental Authority in connection with the consummation of the transactions
contemplated by this Agreement. Notwithstanding anything to the
contrary in this Agreement, neither Buyer nor any of its Affiliates (which for
purposes of this sentence shall include the Company Group) shall be required, in
connection with the matters covered by this Section 4.6, (i) to pay any amounts
(other than the payment of filing fees and expenses and fees of counsel), (ii)
to commence or defend any litigation, (iii) to hold separate (including by trust
or otherwise) or divest any of their respective businesses, product lines or
assets, (iv) to agree to any limitation on the operation or conduct of their or
the Company’s or any member of the Company Group’s respective businesses or (v)
to waive any of the conditions set forth in Article V of this
Agreement. The parties hereto will have the right to review in
advance, and will consult with the other parties on, all the information
relating to Seller, Buyer, the Company Group or any of their Affiliates, as the
case may be, that appears 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. The parties hereto
agree that they will keep the other parties apprised in a timely manner of the
status of matters relating to completion of the transactions contemplated
herein. Each of the parties hereto agrees that none of the
information regarding it or any of its Affiliates supplied or to be supplied by
it or to be supplied on its behalf specifically for inclusion in any documents
to be filed with any Governmental Authority in connection with the transactions
contemplated hereby will, at the respective times such documents are filed with
any Governmental Authority, contain any untrue statement of a material fact
42
or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. This Section 4.6(a)
shall not apply to the obtaining of Client consents, which shall be governed
exclusively by Section 4.2.
(b) Each of
the parties to this Agreement shall promptly advise the other parties upon
receiving any communication relating to the transactions contemplated by this
Agreement or the Ancillary Agreements or otherwise materially affecting its
ability to timely consummate the transactions contemplated hereby or thereby
from any Governmental Authority.
Section
4.7 Expenses. Seller
shall bear the fees, costs and expenses of it and its Affiliates (including the
Company and its Subsidiaries), incurred in connection with the negotiation and
preparation of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby (including legal, accounting
and financial advisors). Buyer shall bear the fees, costs and
expenses of it and its Affiliates incurred in connection with the negotiation
and preparation of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby (including
legal, accounting and financial advisors). Notwithstanding the
foregoing, the aggregate costs and expenses relating to obtaining the consents
contemplated by Section 4.2(a) (including the costs and expenses of proxy
solicitation, printing and mailing and legal counsel for the funds and
independent trustees counsel) and obtaining the approval of any Governmental
Authority pursuant to Section 4.6 shall be borne 50% by Seller and 50% by Buyer,
and each of them shall promptly reimburse the other upon request with respect to
such costs and expenses to be borne by them.
Section
4.8 Financial
Information. Between the date hereof and the Closing Date,
Seller shall provide (or cause to be provided) to Buyer as promptly as
practicable after the same are available to Seller, but in any event within 20
Business Days following the end of each calendar month, or, if later, copies of
any regularly prepared monthly financial information of the Company
Group.
Section
4.9 Efforts of Parties to
Close. During the period from the date of this Agreement
through the Closing, each party hereto agrees to use reasonable best efforts to
fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the transactions contemplated by this Agreement and each
Ancillary Agreement as promptly as reasonably practicable following the date of
this Agreement, including the execution and delivery of any documents,
certificates, instruments or other papers that are reasonably required for the
consummation of such transactions.
Section
4.10 Further
Assurances. Each party to this Agreement shall, and shall
cause its Affiliates to, at the request of any other party, at any time and from
time to time following the Closing, execute and deliver to the requesting
43
party such further customary instruments and take such other
actions as may be reasonably necessary or appropriate in order to confirm or
carry out the provisions of this Agreement and the Ancillary
Agreements. Seller Parent agrees to cause Seller to comply with its
obligations under this Agreement.
Section
4.11 No
Solicitation. During the period from the date hereof
continuing through the Closing, Seller Parent shall not, and shall cause its
respective Affiliates not to, solicit or engage in discussions or negotiations
with any Person (other than Buyer and its Affiliates and their respective
representatives) concerning any acquisition by such Person of any member of the
Company Group or any of their respective material assets.
Section
4.12 Employee
Benefits.
(a) During
the one-year period following the Closing, Buyer shall, or shall cause the
applicable member of the Company Group, subject to the discretion of its Board
Remuneration Committee, to provide to each employee of the Company Group as of
Closing (the “Company
Group Employees” or “employees of the Company Group”) during their
employment , with a base salary at the same rate as in effect at June 30, 2009
for such employee (which, during such period, shall not be reduced except on a
case-by-case basis consistent with past practices or where the Company’s Chief
Executive recommends such reduction). In addition, Buyer shall, or shall cause
the applicable member of the Company Group, subject to the discretion of its
Board Remuneration Committee, to provide aggregate base salaries and employee
benefits to Company Group Employees in the aggregate that are intended to have
an approximate value midway between (i) the aggregate value of such employees’
total base salaries and employee benefits immediately before the Closing and
(ii) the aggregate value of the sum of such employees’ base salaries immediately
before the Closing and employee benefits provided under the Buyer’s employee
benefit plans for similarly situated employees, as reasonably determined by
Buyer and the Company’s Chief Executive. Notwithstanding the
foregoing, no provision of this Agreement shall be construed (i) as a guarantee
of continued employment of any employee of the Company Group, (ii) to prohibit
Buyer or any member of the Company Group from having the right to terminate the
employment of any employee of the Company Group, (iii) to prevent the amendment,
modification or termination of any Company Benefit Plan or other employee
benefit plan, program or arrangement sponsored, maintained or contributed to by
Buyer, any member of the Company Group or any of their respective Affiliates
after the Closing (the “Buyer Plans”) or (iv)
to prevent the Buyer’s Board Remuneration Committee making any compensation
structure changes that it feels may be necessary given economic events affecting
the Company Group. Following the Closing, Buyer, the Company Group
and their respective Affiliates (as applicable) shall be responsible for all
cash severance obligations with respect to any termination of employment of any
employee of the Company Group.
(b) As of the
Closing, the employees of the Company Group
44
shall cease active coverage or active participation under all
Seller Plans; provided, however, that Seller
shall remain responsible for claims incurred under a Seller Plan up to the
Closing. Seller shall retain (and Buyer shall not assume) any
obligation under any Seller Plan that is a retiree medical plan for such
employees or former employees who are eligible or would be eligible if they
terminated employment on the Closing Date and such coverage shall commence
following the later of their termination of employment with the Seller or the
Company Group; provided that such
employees satisfy all conditions of coverage of any Seller Plan including
without limitation the requirements that the employees remain covered by a group
medical plan through commencement of retiree medical benefits; and provided, further that nothing
herein shall obligate Seller Parent to continue to maintain any retiree medical
plan or amend any retiree medical plan from time to time. Each
Company Group Employee and former employee of the Company Group shall be
credited with his or her years of service with the Company Group (and any
predecessor entities thereof) before the Closing under any Buyer Plan providing
benefits similar to those provided under any Seller Plan for purposes of
eligibility to participate and vesting but not for purposes of benefit
accrual. Buyer shall, or shall cause the Company Group to,
immediately following the Closing, credit each employee of the Company Group
with paid time off in an amount equal to the amount of paid time off that each
such employee had accrued with Seller Parent or its Affiliates, but had not used
or been paid for, as of the Closing Date.
(c) From and
after Closing until the date that is 12 months following the date hereof, Buyer
shall, or shall cause the Company Group to provide each employee of the Company
Group whose employment is terminated without “cause” (as such term or any
similar term is defined in the applicable severance plan but excluding any
terminations of employment by reason of resignation, death, or disability) with
severance compensation in accordance with the applicable Seller Plan existing on
the date hereof and set forth in Schedule 2.16(a), provided that (i) any
reference to the term “Established Compensation” in the applicable Seller Plan
shall be as defined in such plan as of the date hereof and shall be determined
based on Established Compensation as of the date of such employee’s termination
of employment (but excluding any salary adjustment by reason of TARP compliance
or compliance with the employee benefit covenant in Section 4.12(a) hereof) or
(ii) if the Buyer’s severance plan applicable to such employee provides more
generous severance compensation, the Buyer’s severance plan shall apply in lieu
of the otherwise applicable Seller Plan (and for purposes of calculating
severance compensation under the Buyer’s severance plan, any salary adjustment
by reason of TARP compliance or compliance with the employee benefit covenant in
Section 4.12(a) shall be excluded). Each employee of the Company
Group shall be credited with his or her years of service with the Company Group
(and any predecessor entities thereof) before the Closing for purposes of this
Section 4.12(c).
(d) Buyer
shall, or shall cause the Company Group, to cause each employee of the Company
Group to be given credit under each Buyer Plan
45
providing welfare benefits for amounts paid under the
corresponding Seller Plan (if any) providing welfare benefits for purposes of
applying deductibles, co-payments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of such Buyer
Plan. Buyer shall, and shall cause its Affiliates and any Buyer Plans
to, waive all limitations as to pre-existing conditions, exclusions, waiting
periods and evidence of insurability requirements with respect to participation
and coverage of employees of the Company Group and their eligible dependents in
any Buyer Plan that is a welfare plan.
(e) If,
subsequent to a review of benefits schemes pursuant to 4.12 (a), the Buyer and
the Company's Chief Executive so request, Seller shall cause the Company to
terminate its 401(k) plan (“Company 401(k) Plan”)
immediately prior and subject to the Closing. The Company shall be
solely liable for all costs, expenses and Losses (including reasonable
attorneys’ fees) incurred in the termination of the Company 401(k) Plan, and the
Buyer shall, or shall cause the Company to, reimburse Seller for all such costs,
expenses and Losses (including reasonable attorneys’ fees) reasonably incurred
by Seller for acts or omissions taken or not taken at the discretion of the
Buyer and the Company’s Chief Executive. Further, Buyer shall take
all action necessary or appropriate to cause a defined contribution plan to be
adopted or maintained by Buyer or any Affiliate of Buyer (the “Buyer 401(k) Plan”).
Seller Parent shall permit, and Buyer shall cause the Buyer 401(k) Plan to
accept, a “rollover” of any account balances of employees of the Company Group
under the defined contribution retirement plan of Seller Parent and its
Affiliates (the “Seller 401(k) Plan”)
to the Buyer 401(k) Plan. In connection with any such rollover
elected by any employee of the Company Group, Buyer shall allow any such
employee's outstanding loan and related promissory note under the Seller 401(k)
Plan to be rolled over into the Buyer 401(k) Plan.
(f) Seller
Parent or one of its Affiliates will be responsible for any obligations under
its plans, policies or programs related to Company Group Employees or former
employees of the Company Group and, to the extent applicable, their qualified
beneficiaries currently eligible to receive benefits under COBRA or long-term
disability policies, plans or programs as of the Closing; provided that any
employees of the Company Group covered under any such long-term disability
policies, plans or programs as of the Closing shall become employees of Buyer or
one of its Affiliates effective as of the date such employee is ready to return
to active employment. By way of clarification and not in limitation
of the immediately preceding sentence, Seller Parent or one of its Affiliates
shall be responsible for providing COBRA coverage with respect to any employee
of the Company Group terminated on or prior to the Closing and any qualified
beneficiary entitled to coverage on or prior to the Closing.
(g)
46
(i) Prior to
the Closing, Seller Parent shall cause the Company Group to establish a deferred
compensation plan (such plan, the “Company Group Deferred
Compensation Plan”) that complies with Section 409A of the Code for the
benefit of any Company Group Employee who participates in the Seller Parent’s
Deferred Compensation and Supplemental/Excess Retirement Plan (the “Seller Parent Deferred
Compensation Plan”) (each, a “Participant”), to
which shall be credited all deferred compensation account balances held under
the Seller Parent Deferred Compensation Plan in respect of Participants at the
time of establishment of the Company Group Deferred Compensation Plan (or, with
respect to the Participants who are identified on Schedule 4.15(b) of the Seller
Disclosure Schedule, all deferred compensation balances transferred to the
Company Group Deferred Compensation Plan subsequent to the establishment of such
plan but prior to Closing). The Company Group Deferred Compensation
Plan shall be identical in all respects to the Seller Parent Deferred
Compensation Plan as it relates to the Participants; provided that, (i)
unless otherwise determined by Buyer, Buyer shall have no obligation to permit
deferrals by the Participants for any future calendar years under the Company
Group Deferred Compensation Plan, and (ii) the plan document shall provide that
all deferred compensation may be paid in full upon any termination of the plan
in a manner consistent with the requirements of Section 409A of the
Code. For the calendar year in which the Closing occurs, subject to
the terms of the plan (including the right to terminate the plan), Buyer shall
honor (or cause to be honored) any deferral election made by a Participant under
the Seller Parent Deferred Compensation Plan for such calendar
year. The parties agree that Buyer shall be solely responsible for
all liabilities and obligations relating to the Participants under the Company
Group Deferred Compensation Plan (including all payments to the Participants of
their respective balances thereunder), that any amounts owed to employees of the
Company Group under the Company Group Deferred Compensation Plan were for
services rendered for the Company Group, and neither the Seller nor the Company
Group, prior to the Closing, shall claim a deduction relating to the deferred
compensation account balances credited to the Participants under the Seller
Parent Deferred Compensation Plan or the Company Group Deferred Compensation
Plan.
(ii) The
aggregate account balances as of the Closing Date of the Participants under the
Company Group Deferred Compensation Plan shall be accrued as a liability on the
Estimated Closing Balance Sheet and the Final Closing Balance Sheet to the
extent and in the manner provided for in the Closing Balance Sheet
Principles.
(h) Seller
shall retain exclusive responsibility and liability for all workers’
compensation injuries and claims incurred on or prior to the Closing by Company
Group Employees or former employees of the Company Group.
47
(i) With
respect to annual bonus and other cash incentive compensation for the period of
employment through the Closing Date of employees of the Company Group, Seller
shall accrue such amount on Estimated Closing Balance Sheet and the Final
Closing Balance Sheet to the extent and in the manner provided for in the
Closing Balance Sheet Principles, in which event Buyer shall pay such amount
accrued with respect to such period to applicable employees.
(j) Seller
Parent shall make certain changes to the compensation arrangements of certain
employees of the Company Group as described in the Letter
Agreement. Each such employee shall acknowledge in writing to the
Company or Buyer that (i) such changes shall cease to be in effect prior to or
immediately following the Closing and (ii) Buyer shall have no obligation to
continue any such employee’s compensation arrangements in effect immediately
prior to the Closing.
(k) Except
where prohibited for any Company Group Employee by reason of the Seller Parent’s
participation in the U.S. Treasury’s Troubled Asset Relief Program or similar
government program, Seller shall cause a portion of each outstanding
equity award held by a Company Group Employee under any Seller
Plan that does not otherwise vest pro-rata by reason of consummation of
this Agreement to vest, and such portion shall be equal to the amount of
such award that would have vested on the vesting date on or after the Closing
Date (the “Post
Closing Vesting Date”), multiplied by a fraction, the numerator of which
is the number of days from the date of grant of such equity award (the
"Grant Date")
through the Closing Date, and the denominator of which is the number of days
from the Grant Date through the Post Closing Vesting Date. Such
vested equity awards shall be paid in accordance with the requirements of
Section 409A of the Code.
Section
4.13 Delivery of Closing Revenue
Run-Rate Schedule. Seller shall deliver (or cause to be
delivered) to Buyer, (i) not later than the tenth Business Day prior to the
Closing Date, a schedule setting forth in reasonable detail the estimated
calculation of the Closing Revenue Run-Rate based upon information as then
available, and (ii) not later than the third Business Day prior to the Closing
Date, an update of such schedule. On the Closing Date Seller shall
deliver (or cause to be delivered) to Buyer an updated schedule setting forth in
reasonable detail the calculation of the Closing Revenue Run-Rate Rate if
necessary to reflect consents that have been obtained, and written notices of
termination that have been received, from Clients from and after the date on
which such schedule was initially delivered to Buyer through the Closing
Date.
Section
4.14 Section
15(f).
(a) Buyer
acknowledges that each of Seller Parent and Seller is entering into this
Agreement and the Ancillary Agreements in reliance upon the benefits and
protections provided by Section 15(f) of the Investment Company
48
Act. From and after the Closing Date, to the extent
within its control, Buyer shall not take, and shall cause its Affiliates not to
take, any action that 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 the transactions contemplated by this
Agreement and the Ancillary Agreements, and to the extent within its control,
shall not fail to take, and, after the Closing, shall cause its Affiliates not
to 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 the transactions contemplated by this Agreement and the Ancillary
Agreements. In that regard, from and after the Closing Date and to the extent
within its control, Buyer shall conduct its business and shall cause each of its
Affiliates to conduct its business so as to assure that:
(i) for a
period of not less than three years after the Closing, at least 75% of the
members of the boards of directors or trustees of each Public Fund are not (A)
“interested persons” (within the meaning of Section 15(f) of the Investment
Company Act) of the investment adviser of such Fund after the Closing or (B)
“interested persons” (within the meaning of Section 15(f) of the Investment
Company Act) of the investment adviser of such Fund immediately prior to the
Closing; and
(ii) for a
period of not less than two years after the Closing, there shall not be imposed
on any Public Fund an “unfair burden” (for purposes of Section 15(f) of the
Investment Company Act) as a result of the transactions contemplated by this
Agreement and the Ancillary Agreements, or any terms, conditions or
understandings applicable thereto.
(b) For a
period of three years from the Closing, Buyer shall not engage, and shall cause
its Affiliates not to engage, in any transaction that would constitute an
“assignment” (as defined in the Investment Company Act) to a third party of any
Advisory Agreement between Buyer or any of its Affiliates and any U.S. Public
Fund managed or advised by any member of the Company Group as of the Closing
without first obtaining a covenant in all material respects the same as that
contained in this Section 4.14; provided that the
foregoing shall not apply in the event that Section 15(f) of the Investment
Company Act no longer applies to the transactions contemplated by this Agreement
or the Ancillary Agreements. Notwithstanding anything to the contrary
contained herein, the covenants of the parties hereto contained in this Section
are intended only for the benefit of such parties and for no other
Person.
Section
4.15 Certain Pre-Closing
Matters.
(a) Prior to
the Closing Seller shall cause the Company Group to transfer the employees of
the Company Group identified in Schedule 4.15(a) of the Seller Disclosure
Schedule and the computers, furniture, office equipment and other office assets
used by such employees to Seller or one of its Affiliates.
49
(b) Prior to
the Closing Seller shall, and shall cause the Company Group to, take such
actions as are necessary so that the individuals identified in Schedule 4.15(b)
of the Seller Disclosure Schedule are employed by the Broker-Dealer at the
Closing (other than any such individual who ceases to be employed by Seller or
one of its Affiliates prior to Closing). In connection therewith,
Seller and Buyer shall cooperate, and take such actions as are reasonably
necessary, so that each such individual is a registered representative of the
Broker-Dealer no later than the Closing.
(c) Buyer
acknowledges and agrees that, prior to the Closing, Seller shall cause the
Company Group to assign to Seller or one of its Affiliates all right, title and
interest of the Company Group under the Contract set forth in Schedule 4.15(c)
of the Seller Disclosure Schedule to any payment to be made to any member of the
Company Group thereunder to the extent that any such payment is not reflected as
an asset on the Final Closing Balance Sheet.
(d) At or
prior to the Closing, Seller shall cause the Company Group to repay any
long-term Indebtedness outstanding as of Closing Date (other than (a) any such
Indebtedness to the extent between members of the Company Group) and (b) any
long-term Indebtedness that the parties agree shall be deducted from the
Purchase Price).
(e) Buyer
acknowledges and agrees that, prior to the Closing, Seller shall, and shall
cause the Company Group to, take such actions as are necessary so that the
assets and liabilities related to the Seller Parent pension plan as identified
in Exhibit A (but, for the avoidance of doubt, shall be determined as of the
date of transfer for purposes of this Section 4.15(e)) will be transferred to
Seller Parent or one of its Affiliates (other than the Company
Group).
(f) Buyer
acknowledges and agrees that, prior to the Closing, Seller shall, and shall
cause the Company Group to, take such actions as are necessary so that the three
life insurance policies on employees and former employees will be transferred to
Seller Parent or one of its Affiliates (other than the Company
Group).
(g) Prior to
the Closing, Seller shall notify Buyer of any new products that any member of
the Company Group is planning to launch prior to the Closing, including but not
limited to, launching any new Public Fund and/or any pooled investment vehicle
that is excepted from the definition of investment company under Section 3(c)(1)
or Section 3(c)(7) of the Investment Company Act.
(h) Prior to
the Closing, Seller Parent will, or will cause its Affiliates to, amend the Fund
Accounting and Financial Administration Oversight Agreement between DSC and the
Lincoln VIP Trust and the Fund Accounting and Financial Administration Oversight
Agreement between DSC and The Lincoln National Life Insurance Company to provide
that each of these agreements will be terminable by each party thereto upon not
less than six months
50
notice without penalty and to update the schedules thereto to
reflect the actual services being provided by DSC thereunder and the list of
funds and accounts receiving such services.
Section
4.16 Notifications. Until
the Closing, each party hereto shall promptly notify the other party in writing
of any fact, change, condition, circumstance or occurrence or nonoccurrence of
any event of which it is has knowledge that will or would reasonably be expected
to result in any of the conditions set forth in Article V of this Agreement
becoming incapable of being satisfied.
Section
4.17 Affiliate
Agreements. Except as set forth in Schedule 4.17 of the Seller
Disclosure Schedule, effective at the Closing, all Affiliate Agreements shall be
terminated pursuant to written termination agreements and without any further
right, obligation or liability of any Person thereunder.
Section
4.18 IT Separation Plan;
Transition Services; Real Estate and Related Assets.
(a) From the
date hereof through the Closing, Seller Parent and Buyer shall, and shall cause
their respective Affiliates to, negotiate in good faith and use their
commercially reasonable efforts to prepare a mutually agreed written plan (such
agreement not to be unreasonably withheld or delayed) setting forth, in
reasonable detail, the separation of the Information Technology Systems and
related software that are currently being used by the Company Group and, to the
extent related to the business of the Company Group attributable to the
employees being transferred to the Company Group pursuant to Section 4.15(b),
Lincoln Financial Distributors (“LFD”) from the
Information Technology Systems and software of the Seller Parent and its
Affiliates (other than the Company Group) (the “IT Separation
Plan”). The IT Separation Plan shall include the functions
listed in Exhibit G. Seller Parent, after giving reasonable notice to
and consulting in good faith with Buyer, may commence such separation prior to
the IT Separation Plan being mutually agreed. The IT Separation Plan
shall provide that (i) Seller Parent and Buyer shall cooperate and use their
respective commercially reasonable efforts to implement the IT Separation Plan
as soon as commercially practicable following the Closing and (ii) Seller Parent
shall be responsible for all costs and expenses incurred by Seller Parent and
its Affiliates (the “IT Separation Costs”)
to implement the IT Separation Plan through the date on which the IT Separation
Plan (or any identified subcomponent thereof) is implemented (such
implementation date to be mutually agreed by Seller Parent and Buyer, such
agreement not to be unreasonably withheld). For the avoidance of
doubt, the IT Separation Costs shall not include any costs or expenses related
to (x) the integration of the Company Group into Buyer (including the
integration of the Information Technology Systems of the Company Group into the
Information Technology Systems of Buyer) unless, and only to the extent, as part
of the IT Separation Plan, Seller Parent and Buyer
51
mutually agree that integration of such systems into Buyer’s
systems would be a preferable alternative to separating such systems to a
stand-alone system (and such alternative results in no additional cost or
expense to Seller Parent), (y) the upgrade or improvement of any Information
Technology Systems or software (including the Information Technology Systems and
software that are being segregated under the IT Separation Plan) except insofar
as upgrading or improving those Information Technology Systems or software is
necessary so that the Information Technology Systems of the Company Group after
the implementation of the IT Separation Plan function in a substantially similar
manner to the manner in which such Information Technology Systems have
functioned in the ordinary course of business prior to the Closing; or (z) any
costs or expenses incurred by Buyer or its Affiliates (including, for the
avoidance of doubt, the Company Group following the Closing), unless such costs
or expenses are undertaken by Buyer or its Affiliates by mutual written
agreement of Buyer and Seller Parent prior to such expenditure, which agreement
expressly provides that such costs or expenses are to be borne by Seller
Parent.
(b) From the
date hereof through the Closing, Seller Parent and Buyer shall, and shall cause
their respective Affiliates to, negotiate in good faith and use their
commercially reasonable efforts to enter into a definitive transition services
agreement (the “Transition Services
Agreement”), to be effective as of the Closing, which shall reflect the
terms set forth on Exhibit B hereto and customary additional terms and
conditions as may be mutually agreed to by the parties. The
Transition Services Agreement shall provide that Buyer shall not be required to
pay for any of the costs of any Information Technology Systems and related
software services provided by Seller Parent and its Affiliates to Buyer and its
Affiliates until the IT Separation Plan (or an identified related subcomponent
thereof) is implemented (provided that the costs and expenses of any information
technology transition services provided after the time that the IT Separation
Plan (or an identified related subcomponent thereof) has been implemented shall
be subject to the terms of the Transition Services Agreement).
(c) No later
than the Closing, Seller Parent shall cause, at its cost, all of the employees
of Seller Parent and its Affiliates (other than the Company Group) who occupy
the 9th and
39th
floors at One Commerce Square and floor P1 at Two Commerce Square to vacate such
floors. No later than the Closing, Seller shall, and shall cause the
Company Group, to take such actions as are necessary so that the copier leases
for the copiers located on such floors are assigned to or otherwise assumed by
the Company Group.
(d) Buyer and
Seller Parent shall cooperate and negotiate in good faith to, and to cause the
landlord of One Commerce Square and Two Commerce Square to, enter into or
consent to (as applicable) one or more subleases, to be effective at the
Closing, between Seller Parent (or one of its creditworthy Affiliates), a member
of the Company Group and such landlord prior to the Closing with respect to the
5th
floor, as determined pursuant to Section 4.18(f), the 30th
floor or 36th
floor (as applicable) and the 34th
floor at One
00
Xxxxxxxx Xxxxxx and a portion of the 2nd
floor at Two Commerce Square (as applicable) on the terms set forth in Exhibit D hereto and
such other terms as are customary for a sublease, reasonably requested by the
applicable landlord or otherwise mutually agreed by Seller Parent and
Buyer. In the event that the landlord will not enter into or consent
to (as applicable) a sublease, Buyer and Seller Parent shall cooperate in good
faith to enter into an alternative arrangement to provide Seller Parent (or its
Affiliates) with the benefit of the occupancy of the applicable space to the
greatest extent practicable and to ensure, to the greatest extent practicable,
that Seller shall be responsible for all obligations of the Company Group of
such locations (including payment of all applicable costs and expenses) as
though an assignment of the leases associated with such locations had been
implemented.
(e) Buyer
acknowledges and agrees that, prior to the Closing, Seller Parent shall, or
shall cause its Affiliates to transfer the following assets to Seller Parent or
one of its Affiliates (other than the Company Group):
(i) All
computers, equipment and other office assets (but not furnishings or leasehold
improvements) located on floor P1 at Two Commerce Square other than any
computers, equipment or other assets leased by the Company Group;
(ii) All
computers, equipment, furnishings and other office assets located on the 5th
floor and the 34th
floor at One Commerce Square;
(iii) All
computers, equipment and other office assets (but not furnishings or leasehold
improvements) located on the 9th
floor and the 00xx
xxxxx xx Xxx Xxxxxxxx Xxxxxx that are used by employees of Seller Parent and its
Affiliates (other than the Company Group); and
(iv) All
computers, equipment, furnishings and other office assets located on the 2nd
floor at Two Commerce Square that are primarily for the benefit of Seller Parent
and its Affiliates (other than the Company Group).
(f) If
requested by Buyer prior to Closing, Seller Parent shall cause all of the
employees of Seller Parent and its Affiliates (other than the Company Group) who
occupy the 30th
floor at One Commerce Square to vacate such floor in exchange for right of
Seller Parent to occupy an equivalent portion of the 36th
floor at One Commerce Square (and the Company Group shall vacate the 36th
floor), such vacatement to be effected as soon as practicable following such
request (and if such request is made at least 30 days prior to Closing, by the
Closing); provided that Seller
Parent shall not be required to pay rent and other costs and expenses for the
occupancy of the 36th floor in excess of the amount of rent and other costs and
expenses currently incurred by Seller Parent for the occupancy of the 30th
floor. Neither Seller Parent nor Buyer shall be required to
53
bear any cost or expense incurred by the other (or, in the case of
Seller Parent, the Company Group) to alter the configuration of either floor or
to move employees or computers, equipment and other office assets to or from
either floor.
(g) Buyer
agrees that in the event that Buyer determines that neither it nor any of its
Affiliates will elect to give back space when permitted under the lease for One
Commerce Square, Buyer shall give written notice to Seller Parent of each such
determination no later than 90 days prior to the date on which any such election
must be made to the landlord and shall instead permit Seller Parent to give back
space that it or one of its Affiliates is subleasing at One Commerce
Square. If Seller Parent elects to give back space that it is
subleasing at One Commerce Square, Buyer shall, and shall cause it Affiliates
to, cooperate with any reasonable request of Seller Parent in connection
therewith, including providing any necessary notices to the
landlord.
Section
4.19 Names of Members of the
Company Group; Transitional Use of Certain Trademarks.
(a) Buyer
acknowledges and agrees that all right, title and interest in and to the Seller
Trademarks are owned exclusively by Seller Parent or its
Affiliates. Except as provided in Section 4.19(b), from and after the
Closing, Buyer shall not use, and shall cause the Company Group not to use, the
names “Lincoln,” “Lincoln National,” or “Lincoln Financial” or any other names,
trademarks, service marks, trade names, business names, corporate names, domain
names, logos, trade dress or other source indicators (“Trademarks”) that
contain or comprise any Trademark owned or used by Seller Parent or any of its
Affiliates prior to the Closing (“Seller Trademarks”)
(other than those Trademarks set forth in Schedule 2.17(a) of the Seller
Disclosure Schedule that are owned by the Company Group) or any Trademark
confusingly similar thereto. In furtherance of the foregoing,
promptly following the Closing, Buyer shall, and shall cause the Company Group
to, remove, strike over or otherwise obliterate all Seller Trademarks from all
assets and other materials owned by the Company Group, including, without
limitation, any business cards, schedules, stationery, packaging materials,
displays, signs, sales, marketing and promotional materials, manuals, forms,
websites, email, computer software and other materials and
systems. Notwithstanding the forgoing, nothing in this Section
4.19(a) shall preclude the Company Group from making any reference to the Seller
Trademarks in internal historical, tax, employment or similar records or for
purposes of prospectus and similar disclosures describing the historical
relationship of the Company Group and the Funds with Seller Parent and its
Affiliates.
(b) To the
extent the Seller Trademarks are used by the Company Group on stationery,
signage, invoices, receipts, forms, packaging, advertising and promotional
materials, product, training and service literature and materials, software or
like materials (“Marked Materials”),
the Company Group may use such Marked Materials after the Closing without
altering or modifying
54
such Marked Materials for a transitional period not to exceed six
months; provided that (i) no
member of the Company Group shall use such trademarks, service marks, brand
names or trade, corporate or business names in any other manner during the time
thereafter and (ii) no member of the Company Group shall reorder any Marked
Materials after the Closing Date. The foregoing permitted use is
subject to (A) compliance by the Company Group with the quality control
requirements and guidelines in effect for the Seller Trademarks as of the
Closing Date and (B) to the extent reasonably practicable, the placement of a
mutually agreed upon disclaimer on such materials used by the Company Group
identifying in a readily observable manner that the Company Group is no longer
an Affiliate of Seller Parent. Buyer shall indemnify and hold Seller
Parent and its Affiliates harmless from and against any liabilities,
obligations, losses or damages arising from the use of such Marked Materials
after the Closing Date.
Section
4.20 Company Group
Website. For nine months following the Closing, Seller Parent
shall enable visitors to its home page to access the Company Group’s new home
page after such visitors acknowledge that the Company Group is no longer an
Affiliate of Seller Parent and they wish to continue to the Company Group’s new
home page.
Section
4.21 Use of Trade Performance
Information.
(a) Unless
otherwise permitted under a written agreement between Seller Parent or one of
its Affiliates (other than the Company Group) and the Company Group entered into
after the Closing, Seller Parent agrees that it will not, and will cause its
controlled Affiliates not to, use the Trade Performance Information to the
extent attributable to accounts managed by the Company Group (other than any
such accounts that are accounts of Seller Parent or its Affiliates (other than
the Company Group) or an insurance, annuity, retirement or similar product or
fund created, sponsored, advised or administered by Seller Parent or its
Affiliates (other than the Company Group) (such Trade Performance Information ,
the “Covered Trade
Performance Information”)); provided that the
foregoing shall not restrict the use of the Covered Trade Performance
Information by Seller Parent or its controlled Affiliates in connection with the
marketing, management or administration of any insurance, annuity, retirement or
similar product or fund to which any portion of the Trade Performance
Information relates to the extent permitted by Applicable Law.
(b) Following
the Closing, Seller Parent shall, and shall cause its Affiliates to, upon
reasonable notice by Buyer or its Affiliates to Seller Parent, provide such
access to the members of the Company Group to all documentation relating to any
Trade Performance Information maintained by Seller or Seller
Parent.
Section
4.22 Non-Solicitation of Company
Group Employees. During the period beginning immediately
following the Closing and ending on the second anniversary of the Closing Date,
Seller Parent shall not, and shall cause
55
each of its Affiliates not to, directly or indirectly, cause,
solicit, induce, encourage or hire for employment or otherwise engage any
individual who, at the Closing, is an employee of the Company Group; provided
that nothing herein shall prohibit Seller and its Affiliates from (i) conducting
a general solicitation of prospective employees in the ordinary course of
business consistent with past practice and that are not specifically directed at
any employee of the Company Group or (ii) soliciting or hiring any individual
whose employment with the Company Group is terminated.
Section
4.23 APRA Regulatory
Actions. Prior to the Closing, the Seller Parent shall cause
the Company Group to use its commercially reasonable efforts to take the actions
described in Schedule 4.23 (which to the extent such action requires the
consent, approval or other action of a Sub-Advised Fund or other third party
shall be to the extent within the control of the Company Group).
Section
4.24 Certain
Trademarks. At or prior to Closing, Seller shall cause the
Company Group to use its commercially reasonable efforts to (i) secure the
release of any security interests granted against U.S. Trademark No. 1,310,369
for DELAWARE TAX-FREE MONEY FUND and 1,332,508 for DELAWARE CASH RESERVE, both
in favor of Chemical Bank, as collateral agent (which security interests may be
evidenced by a document recorded at reel/frame 1134/0044 at the United States
Patent and Trademark Office ("USPTO")), (ii) file all documents with the USPTO
necessary to either record the releases if such security interests had
previously been granted or to remove the incorrect recordation if no security
interests had in fact been granted; and (iii) provide copies of all such filings
together with filing receipts to Buyer.
ARTICLE
V
CONDITIONS
TO THE CONSUMMATION OF THE TRANSACTION
Section
5.1 Mutual
Conditions. The obligation of each party to this Agreement to
consummate the transactions contemplated hereby shall be subject to the
satisfaction of each of the following conditions:
(a) (i) No
Order preventing the consummation shall be in effect and (ii) no statute, rule,
regulation or Order shall have been enacted by any Governmental Authority that
prohibits or makes illegal the consummation of the transactions contemplated
hereby; and
(b) Any
applicable waiting period under the HSR Act with respect to the transactions
contemplated hereby shall have expired or been terminated.
Section
5.2 Conditions to the Obligation
of Buyer. The obligation of Buyer to consummate the
transactions contemplated hereby shall be
56
subject to the satisfaction of each of the following conditions,
any of which may be waived in writing by Buyer:
(a) Each of
the representations and warranties of Seller set forth in Section 2.5 shall be
true and correct in all respects as of the Closing as if made on the Closing
(except with respect to Section 2.5(b), any immaterial inaccuracies thereof for
DIUS). Each of the representations and warranties of Seller set forth
in Section 2.1 (Organization) (first, second and third sentences only), Section
2.2 (Authority), Section 2.6 (Subsidiaries) (first, second, third, fifth and
sixth sentences only) and Section 2.21 (Brokers and Finders), shall be true and
correct in all material respects as of the Closing as if made on the Closing
(except for any representation or warranty made with respect to a specific date,
which shall be so true and correct only with respect to such specific
date). The other representations and warranties of Seller Parent and
Seller set forth in Article II and Section 7.1 of this Agreement shall be true
and correct in all respects (determined without regard to any qualifications as
to materiality or Company Material Adverse Effect or Fund Material Adverse
Effect) as of the Closing Date as though made at and as of such time (except for
any representation or warranty made with respect to a specific date, which shall
be so true and correct only with respect to such specific date), except for any
failure(s) to be so true and correct that, individually or in the aggregate, has
not had and would not be reasonably expected to have a Company Material Adverse
Effect or a Fund Material Adverse Effect;
(b) Seller
Parent and Seller shall have performed and complied in all material respects
with its covenants and agreements required by this Agreement to be performed or
complied with by them at or prior to the Closing;
(c) An
appropriate senior officer of Seller Parent shall deliver to Buyer a certificate
dated as of the Closing Date signed by him on behalf of Seller Parent confirming
the satisfaction of the conditions contained in paragraphs (a) and (b) of this
Section 5.2;
(d) The
Closing Revenue Run-Rate shall not be less than 75% of the Base Revenue
Run-Rate;
(e) Since the
date hereof, no event, change, occurrence or circumstance shall have occurred
which, individually or in the aggregate, has had, or would reasonably be
expected to have, a Company Material Adverse Effect;
(f) APRA
shall not have provided notice to Buyer of (i) its objection to the consummation
of the purchase by Buyer of the Shares or (ii) the imposition of any burdensome
and material financial restriction on Buyer in order for APRA not to have
provided Buyer notice of such objection; provided, that (A)
any objection by APRA on the grounds that the requirements of APRA Prudential
Standard APS 120 (Securitisation) have not been complied with shall not
constitute a notice or imposition for the purposes of clauses (i) or (ii) and
(B) in
57
the event that such notice is not provided by APRA in writing, (x)
Buyer will request that APRA provide such notice in writing and (y) if APRA does
not provide such written notice, Buyer shall deliver to Seller a certificate of
a senior executive officer of Buyer providing a summary, in reasonable detail,
of the oral notice received from APRA and certifying that, based on such oral
notice, the condition set forth in this Section 5.2(f) has not been satisfied;
and
(g) Seller
and the appropriate member of the Company Group (or appropriate Affiliates
thereof) shall have executed and delivered to Buyer all of the Ancillary
Agreements to which they are parties.
Section
5.3 Conditions to the Obligation
of Seller Parent and Seller. The obligation of Seller Parent
and Seller to consummate the transactions contemplated hereby shall be subject
to satisfaction of each of the following conditions, which may be waived in
writing by Seller:
(a) Each of
the representations and warranties of Buyer set forth in Section 3.1
(Organization), Section 3.2 (Authority), and Section 3.9 (Brokers and Finders),
shall be true and correct in all material respects as of the Closing as if made
on the Closing (except for any representation or warranty made with respect to a
specific date, which shall be so true and correct only with respect to such
specific date). The other representations and warranties of Buyer set
forth in Article III of this Agreement shall be true and correct in all respects
(determined without regard to any qualifications or limitations as to
materiality or material adverse effect) as of the Closing Date (except for any
representation or warranty made with respect to a specific date, which shall be
so true and correct only with respect to such specific date), except for any
failure(s) to be so true and correct that, individually and in the aggregate,
has not had and would not be reasonably expected to have a material adverse
effect on the ability of Buyer to consummate the transactions contemplated
hereby or to comply with its obligations hereunder in a timely
manner;
(b) Buyer
shall have performed and complied in all material respects with its covenants
and agreements required by this Agreement to be performed or complied with by it
at or prior to the Closing;
(c) Buyer
shall each have delivered to Seller a certificate, dated as of the Closing Date,
signed on its behalf by an appropriate senior officer thereof confirming the
satisfaction of the conditions contained in paragraphs (a) and (b) of this
Section 5.3; and
(d) Buyer
shall have executed and delivered to Seller all of the Ancillary
Agreements.
Section
5.4 Frustration of Closing
Conditions. Neither Seller Parent or Seller, on the one hand,
nor Buyer, on the other hand, may rely on the
58
failure of any condition set forth in this Article V to be
satisfied if such failure was caused by its breach of this Agreement.
ARTICLE
VI
TERMINATION
Section
6.1 Termination.
(a) This
Agreement may be terminated prior to the Closing as follows:
(i) by
written consent of each party hereto;
(ii) by any
party hereto, if any Order of any Governmental Authority permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby shall have become final and
non-appealable;
(iii) by Seller
Parent (on behalf of itself and Seller), if there shall be a breach by Buyer of
any representation or warranty or any covenant or agreement contained in this
Agreement that would result in a failure of a condition set forth in Section 5.1
or 5.3 and which breach cannot be cured or has not been cured (to the extent
necessary to avoid a failure of such a condition) prior to the Termination
Date;
(iv) by Buyer,
if there shall be a breach by Seller Parent or Seller of any representation or
warranty or any covenant or agreement contained in this Agreement that would
result in a failure of a condition set forth in Section 5.1 or 5.2 and which
breach cannot be cured or has not been cured (to the extent necessary to avoid a
failure of such a condition) prior to the Termination Date; or
(v) by Seller
Parent (on behalf of itself and Seller) or Buyer if the Closing does not occur
by the close of business on the nine-month anniversary of the date hereof (the
“Termination
Date”); provided, that
notwithstanding the foregoing, no party hereto may terminate this Agreement
pursuant to this clause (v) if it is in breach of any of its representations or
warranties, or has failed to perform any covenant or agreement contained in this
Agreement on the Termination Date and such breach shall have been the cause (in
whole or in part) of, or shall have resulted in, the failure of the Closing to
occur by the Termination Date.
(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
6.2.
59
Section
6.2 Survival after
Termination. If this Agreement is terminated in accordance
with Section 6.1 hereof and the transactions contemplated hereby are not
consummated, this Agreement shall become void and of no further force and
effect, without any liability on the part of any party hereto, except for the
provisions of Sections 4.5(b) (final proviso only), 4.7, this Section 6.2 and
Article IX, and except that the Confidentiality Agreement shall remain in effect
in accordance with its terms. Notwithstanding the foregoing, nothing
in this Section 6.2 shall relieve any party to this Agreement of liability for
any willful breach of this Agreement.
ARTICLE
VII
TAX
MATTERS
Section
7.1 Tax
Representations. Except as set forth in a correspondingly
labeled section of the Seller Disclosure Schedule, Seller Parent and Seller
hereby jointly and severally represent and warrant to Buyer as
follows:
(a) Each
member of the Company Group, or Seller Parent or its Affiliate on behalf of such
member of the Company Group, has (i) duly and timely filed all income Tax
Returns and all other material Tax Returns required to be filed in all
jurisdictions in which such Tax Returns are required to be filed (taking into
account applicable extensions) and all such Tax Returns were true, correct and
complete in all material respects when filed and (ii) paid all material amounts
of Taxes required to be paid whether or not shown on such Tax Returns other than
such Taxes that are being contested in good faith by appropriate proceedings and
for which adequate provisions have been made therefor on the Company Financial
Statements, in accordance with GAAP.
(b) No member
of the Company Group is the subject of any audit for any material amount of
Taxes. There are no other assessments, reassessments, actions,
objections, appeals outstanding relating to Taxes of any Company Group member,
or any other audits or investigations by any Taxing Authority in progress, nor
has Seller, Seller Parent or any Company Group member received any written or,
to the actual knowledge of the chief financial officer or Chief Tax Officer of
either Seller or Seller Parent, any oral, notice from any Taxing Authority that
it intends to conduct such an audit or investigation.
(c) There are
no outstanding written agreements or waivers extending the statutory period of
limitations applicable to any Tax Returns of any member of the Company
Group.
(d) Each
member of the Company Group, or Seller Parent or its Affiliate on behalf of such
member of the Company Group, has complied in all material respects with all
Applicable Laws relating to the payment and withholding of Taxes, and has duly
and timely withheld and remitted or paid over to the appropriate Taxing
Authority all material amounts required to be so
60
withheld and paid under such Applicable Laws.
(e) There are
no Encumbrances for Taxes upon the assets or properties of any member of the
Company Group except for Permitted Encumbrances.
(f) Seller
has delivered (or caused to be delivered) to Buyer correct and complete copies
of all federal, state, local, and foreign income Tax Returns (or, where
consolidated returns were filed, such portions thereof that relate to any member
of the Company Group), examination reports, and statements of deficiency
assessed against or agreed to by, or on behalf of, the Company or any member of
the Company Group (but only to the extent that such reports and/or statements
relate to the Company or a member of the Company Group) filed or received since
December 31, 2005.
(g) Neither
the Company nor any member of the Company Group will be required to include any
material item of income in, or exclude any material item of deduction from,
taxable income for any taxable period (or portion thereof) ending after the
Closing Date as a result of any: (A) change in method of accounting for a
taxable period ending on or prior to the Closing Date; (B) “closing agreement”
as described in Code §7121 (or any corresponding or similar provision of state,
local, or foreign income Tax law) executed on or prior to the Closing Date; or
(C) intercompany transaction or excess loss account within the meaning of Code
Section 1502 and the regulation promulgated thereunder (or any corresponding or
similar provision of state, local, or foreign income Tax law).
(h) Neither
the Company nor any member of the Company Group has constituted either a
“distributing corporation” or a “controlled corporation” (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (A) in the two years prior to
the date of this Agreement or (B) in a distribution which could otherwise
constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions
contemplated by this Agreement.
(i) No member
of the Company Group was ever a member of any consolidated, combined, unitary,
affiliated or similar group filing (or required to file) a consolidated,
combined or unitary income Tax Return other than the group of which Seller
Parent is the common parent for any taxable year for which the assessment of
Taxes has not expired pursuant to the relevant statutes of
limitations. No member of the Company Group has any liability for any
Taxes of any Person other than a member of the Company Group (A) as a transferee
or successor, (B) by contract, or (C) otherwise.
(j) No member
of the Company Group is a party to any Tax indemnity, Tax sharing, allocation or
similar agreement (whether or not written) with any Person other than
obligations in customary agreements with third parties
61
entered into in the ordinary course of business.
(k) There is
no contract, agreement, plan or arrangement covering any person that,
individually or collectively, would give rise to the payment of any amount that
would not be deductible by the Company or any member of the Company Group by
reason of Section 162(m) .
(l) No Claim
has been made by a Taxing Authority in a jurisdiction where any member of the
Company Group does not file Tax Returns such that it is or may be subject to
taxation by that jurisdiction.
(m) No member
of the Company Group has participated in a “reportable transaction” within the
meaning of Treasury Regulation Section 1.6011-4(b).
Section
7.2 Preparation of Tax Returns
and Payment of Taxes.
(a) Seller
Parent shall prepare and file (or cause to be prepared and filed) all Tax
Returns of the members of the Company Group required to be filed for all
Pre-Closing Tax Periods. Unless otherwise required by a change in
Applicable Law, such Tax Returns shall be prepared in a manner consistent with
past practice. In the case of any such Tax Return that requires the
signature of any officer or employee of any member of the Company Group, Seller
Parent shall deliver (or cause to be delivered) such Tax Returns (together with
all supporting documents) to Buyer for its review and comment not later than 30
days prior to the due date of such Tax Returns. Seller Parent shall
incorporate all reasonable changes requested by Buyer, at least 20 days prior to
the due date of such Tax Returns, and Buyer shall cause an appropriate officer
or employee to sign such Tax Return. Subject to Section 7.2(d) below,
Buyer shall return such Tax Return to Seller Parent no later than 2 Business
Days after receipt thereof. To the extent permitted by Applicable Law
and consistent with past practice, Seller Parent shall include the members of
the Company Group in the consolidated, combined, unitary or similar Tax Returns
filed by Seller Parent or its Affiliates for such Pre-Closing Tax
Periods. Seller Parent shall be liable for and shall timely pay or
cause to be paid to the applicable Taxing Authority all Taxes shown to be due on
such Tax Returns, provided, however, that no
later than five days after the due date (including extensions) of such Tax
Returns, Buyer shall reimburse Seller Parent for any amounts shown on the Final
Closing Balance Sheet as a liability for Taxes with respect to such Pre-Closing
Tax Periods.
(b) Buyer
shall prepare and file (or cause to be prepared and filed) all Tax Returns of
the members of the Company Group required to be filed for all Straddle Periods,
and shall timely pay or cause to be paid to the applicable Taxing Authority all
Taxes shown to be due on such Tax Returns. Buyer shall provide such
Tax Returns to Seller Parent for its review and comment at least 30 days prior
to the filing date of such Tax Returns. Buyer shall incorporate all
reasonable changes requested by Seller Parent at least 20 days prior to the due
62
date of such Tax Returns.
(c) Buyer
shall be free to file any Tax Return and to seek a ruling, guidance or similar
action from any Taxing Authority for any Post-Closing Tax Period in the manner
and with respect to the issues that Buyer chooses. Notwithstanding
the foregoing, if Buyer determines to cause or permit Delaware Management
Business Trust-Delaware Management Company Series, solely with respect to its
own operations, to seek a ruling or request formal guidance from any Taxing
Authority for any Post-Closing Tax Period, Buyer shall or shall cause Delaware
Management Business Trust-Delaware Management Company Series to (i) notify
Seller that it intends to take such action; (ii) provide Seller with a draft of
any proposed submission at least 30 days prior to the date of intended
submission; and (iii) consult with Seller and consider Seller's views and
comments in good faith with respect to the submission, which views and comments
shall be provided to Buyer within 10 days of receipt by Seller of such
submission, it being understood that Buyer shall not be required to amend its
submission to reflect Seller's views and comments.
(d) In
the event of a dispute with respect to Tax Returns relating to Straddle Periods
or any Tax Return required to be signed by any officer or employee of the
Company Group pursuant to this Section 7.2, Buyer and Seller Parent shall
negotiate in good faith, for a period of no more than 5 days (or such shorter
period as is practicable under the circumstances in order to permit timely
filing of the applicable Tax Return) to resolve such dispute, and in the event
Buyer and Seller Parent are unable to fully resolve such dispute within such
period, they shall refer their remaining differences to the Independent
Accounting Firm, and shall request that the Independent Accounting Firm resolve
any such differences at least 5 days prior to the due date for the filing
(including extensions) of the applicable Tax Return, in order that such Tax
Return may be timely filed. If the Independent Accounting Firm does
not reach a determination with respect to such dispute at least two days prior
to the due date of such Tax Return, such Tax Return shall be filed in the manner
which the party responsible for preparing such Tax Return deems
correct. Following the Independent Accounting Firm’s determination,
if needed, such party shall file an amended Tax Return. Seller Parent
shall pay Buyer its allocable share, as determined pursuant to Section 7.4(c),
of Taxes shown to be due on any Tax Return for any Straddle Period no later than
two days prior to the due date (including extensions) of such Tax Returns, but
only to the extent that the amount of such Taxes exceeds any liability for Taxes
attributable to such Straddle Periods included in the Final Closing Balance
Sheet (or the worksheets thereto).
Section
7.3 Tax
Refunds.
(a) Except
as provided in Section 7.3(b), if Buyer determines that any member of the
Company Group has received a refund, credit or offset of Taxes attributable to
any Pre-Closing Tax Period or the portion of any Straddle Period that ends on
the Closing Date, such refund shall be for the account of Seller
Parent.
63
Buyer shall pay over to Seller Parent any such refund (after
taking into account any Taxes and out-of-pocket expenses associated with such
refund) within 10 days after Buyer or any of its Affiliates receives such refund
(or after the relevant Tax Return is filed in which the credit or offset is
applied against Buyer’s or any of its Affiliates’ liability for Taxes); provided, however, that Seller
Parent, upon the request of Buyer, shall repay such refund (plus penalties,
interest, or other charges) to Buyer or the appropriate member of the Company
Group within five days of such request, in the event that Buyer or such member
of the Company Group is required to repay such refund to the Taxing
Authority. Provided that doing so could not reasonably be expected to
have any adverse effect on Buyer or any of its Affiliates, Buyer shall, upon the
reasonable request of Seller Parent and at Seller Parent’s sole expense, file,
or cause the relevant member of the Company Group to file, any amended Tax
Returns or claims for refunds, credits or offsets attributable to any
Pre-Closing Tax Period or the portion of any Straddle Period that ends on the
Closing Date.
(b) To
the extent permissible under Applicable Law, Buyer shall cause the members of
the Company Group to elect not to carry back any losses realized in Post-Closing
Tax Periods to Pre-Closing Tax Periods. Where such an election is not
possible, Seller Parent shall, upon the request of Buyer and at Buyer’s sole
expense, agree to permit the relevant member of the Company Group to file an
amended Tax Return or claim for refund for a Pre-Closing Tax Period solely for
the purpose of carrying back a loss or other Tax attribute generated in a
Post-Closing Tax Period to a Pre-Closing Tax Period. Any refund,
credit or offset received pursuant to the previous sentence shall be for the
account of Buyer; provided, however, that Buyer,
upon the request of Seller Parent, shall repay such refund (plus penalties,
interest, or other charges) to Seller Parent within five days of such request,
in the event that Seller Parent or such member of the Company Group is required
to repay such refund to the Taxing Authority. Seller Parent shall pay
over to Buyer the amount of any such refund, credit or offset (after taking into
account any Taxes and out-of-pocket expenses associated with such refund) within
10 days after Seller Parent or any of its Affiliates receives such refund (or
after the relevant Tax Return is filed in which the credit or offset is applied
against Seller Parent’s or any of its Affiliates’ liability for
Taxes).
Section
7.4 Tax
Indemnification.
(a) Following
the Closing Date, and subject to the other terms of this Article VII, Seller
Parent shall indemnify, defend and hold harmless Buyer Indemnified Parties,
without duplication, from and against, and pay to the applicable Buyer
Indemnified Party the amount of, any and all Losses arising out of, resulting
from or attributable to any and all (i) Taxes of Seller Parent or its
Subsidiaries (other than members of the Company Group), including Taxes imposed
on any member of the Company Group for any taxable period ending before or
including the Closing Date solely by reason of Treasury Regulation 1.1502-6 (or
any corresponding or similar provision of state, local, or foreign Tax
64
law); (ii) Taxes of any member of the Company Group (or any
predecessor thereof) for (A) any Pre-Closing Tax Periods, and (B) the portion of
any Straddle Period ending at the close of business on the Closing Date
(determined as provided in Section 7.4(c)); (iii) subject to Section 8.1, 8.4(a)
and 8.6, the failure of any of the representations and warranties contained in
Section 7.1 to be true and correct in all respects (determined without regard to
any qualification related to materiality contained therein); (iv) the failure to
perform any covenant contained in this Agreement with respect to Taxes; and (v)
Transfer Taxes for which Seller is responsible pursuant to Section 7.7, provided, however, that Seller
Parent shall not be required to indemnify Buyer pursuant to this Section 7.4(a)
for Losses in respect of Taxes (x) except to the extent that such Taxes exceed,
in the aggregate, the total amount of Taxes shown as a liability on the Final
Closing Balance Sheet, or (y) that are Excluded Taxes.
(b) Following
the Closing Date, and subject to the other terms of this Article VII, Buyer
shall indemnify, defend and hold harmless Seller Indemnified Parties, without
duplication, from and against, and pay to the applicable Seller Indemnified
Party the amount of, any and all Losses arising out of, resulting from or
attributable to (i) [Intentionally deleted]; (ii) notwithstanding anything to
the contrary in Section 7.4(a)(ii), Taxes imposed on Delaware Management
Business Trust-Delaware Management Company Series for Pre-Closing Tax Periods
commencing with calendar year 2003 by reason of Buyer having taken or caused or
permitted Delaware Management Business Trust-Delaware Management Company Series
to take the actions described in the second sentence of Section 7.2(c) of this
Agreement; (iii) Excluded Taxes; (iv) failures to perform any covenant contained
in this Agreement with respect to Taxes except for the covenant set forth in the
second sentence of Section 7.2(c); and (v) Transfer Taxes for which Buyer is
responsible pursuant to Section 7.7, provided, however, that in the
cases of Losses described in clause (ii) of this Section 7.4(b), Buyer shall be
required to indemnify Seller Indemnified Parties for only thirty percent (30%)
of such Losses.
(c) Straddle
Periods.
(i) In the
case of Taxes that are payable with respect to any Straddle Period, the portion
of any such Tax that is allocable to the portion of the period ending on the
Closing Date, shall be: (i) in the case of Taxes imposed on a periodic basis
(such as real or personal property Taxes), the amount of such Taxes for the
entire period (or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period) multiplied by a
fraction, the numerator of which is the number of calendar days in the Straddle
Period ending on and including the Closing Date and the denominator of which is
the number of calendar days in the entire relevant Straddle Period and (ii) in
the case of Taxes not described in (i) above (such as franchise Taxes, Taxes
that are based upon or related to income or receipts, based upon
65
occupancy or imposed in connection with any sale or other transfer
or assignment of property (real or personal, tangible or intangible)), the
amount of any such Taxes shall be determined as if such taxable period ended as
of the close of business on the Closing Date (based on the closing of the books
method).
(ii) The
parties shall, to the extent permitted or required under Applicable Law, take
all actions necessary to treat the Closing Date as the last day of the taxable
year or period of each member of the Company Group for all Tax
purposes. The parties shall cause such members of the Company Group
to file all Tax Returns for the period including the Closing Date on the basis
that the relevant taxable period ended as of the close of business on the
Closing Date, unless the relevant Taxing Authority will not accept a Tax Return
filed on that basis.
Section
7.5 Tax
Proceedings.
(a) Buyer
shall control, manage and be responsible for any audit, contest, claim,
proceeding or inquiry in respect of Taxes (each, a “Tax Proceeding”) with
respect to any member of the Company Group for any Post-Closing Tax Period and
shall have the right to settle or contest any such Tax Proceeding.
(b) Buyer and
Seller Parent shall jointly control, manage and be responsible for any Tax
Proceeding with respect to any member of the Company Group for any Straddle
Period, provided, that such
Tax Proceeding shall not be settled without the mutual written consent of Seller
Parent and Buyer, which consent shall not be unreasonably withheld, delayed or
conditioned.
(c) Seller
Parent shall control, manage and be responsible for any Tax Proceeding with
respect to any member of the Company Group for any Pre-Closing Tax Period and
shall have the right to settle or contest any such Tax Proceeding, provided, however, that Buyer
shall be entitled to participate at its own expense in any such Tax Proceeding
the resolution of which could increase the Taxes of or otherwise adversely
affect any member of the Company Group for any Post-Closing Tax Period, provided, further, that such
Tax Proceeding shall not be settled without the written consent Buyer, which
consent shall not be unreasonably withheld, delayed or conditioned.
(d) Each
party shall promptly notify the other party in writing of the commencement of
any Tax Proceeding of which such party, any member of the Company Group or any
of their respective Affiliates has been informed in writing by any Taxing
Authority relating to Tax Returns of the Company Group for any Pre-Closing Tax
Period or Straddle Period. Such notice shall describe the asserted
Tax Proceeding in reasonable detail and shall include copies of any notices and
other documents received from any Taxing Authority in respect
66
thereof; provided, however, that the
failure of the notified party to give the other party notice as provided herein
shall not relieve such other party of its obligations under this Article VII,
except to the extent that such other party is actually and materially prejudiced
thereby.
Section
7.6 Coordination;
Survival. Except as provided in Sections 8.1, 8.2(d), 8.4(a)
and 8.6 with respect to any claim for indemnification pursuant to Section
7.4(a)(iii), claims for indemnification with respect to Taxes shall be governed
by this Article VII. For the avoidance of doubt, if any claim for
indemnification with respect to Taxes could be governed by both Section
7.4(a)(iii) and any other clause of Section 7.4(a), the indemnity claim and
payment shall be governed by and treated as being made solely pursuant to such
other clause of Section 7.4(a). Any such claim made pursuant to this
Article VII must be made within the period that is 30 days after the expiration
(giving effect to any valid extensions, waivers and tolling periods) of the
applicable statutes of limitations relating to the Taxes at issue.
Section
7.7 Transfer
Taxes. Any fees, duties, sales, use, transfer, documentary,
recording, registration, stamp or similar Taxes (all including penalties,
interest and other charges with respect thereto, “Transfer Taxes”) arising as a
result of the transactions contemplated by this Agreement shall be borne equally
by Seller, on the one hand, and Buyer, on the other hand, and each of Seller and
Buyer shall cooperate with respect to the preparation and filing of any Tax
Returns with respect to Transfer Taxes.
Section
7.8 Section 338
Election. Neither Buyer nor Seller Parent or any of their
respective Affiliates shall make or cause or permit to be made any election
under Section 338 of the Code in connection with the transactions contemplated
by this Agreement.
Section
7.9 Cooperation and Retention of
Records.
(a) Buyer and
Seller Parent shall provide each other and shall cause their respective
Affiliates, officers, employees, agents, auditors and representatives to provide
each other with such cooperation and information relating to the Company Group
as any of them reasonably may request in connection with any Tax matter governed
by this Agreement, including, without limitation, (i) the preparation and filing
of any Tax Return or form (including any pro forma Tax Return), amended Tax
Return or claim for refund; (ii) resolution of disputes and audits; (iii)
contest or compromise of any Tax claim; (iv) determination of any Tax liability
or right to a refund of Taxes; (v) participation in or conduct of any Tax
Proceeding; and (vi) furnishing each other with copies of all correspondence
received from any Taxing Authority in connection with any audit or information
request. Notwithstanding the foregoing, neither party nor any of its
Affiliates shall be entitled to any information regarding or a copy of any
consolidated, combined, affiliated or unitary Tax Return which includes Seller
or Buyer (provided, however, that to the
extent that such Tax Return would be
67
required to be delivered but for this sentence, the person that
would be required to deliver such Tax Return shall instead deliver the portion
of such Tax Return applicable solely to the Company Group or appropriate member
thereof or, to the extent this is not reasonably practicable, a pro forma Tax
Return relating solely to the Company Group or appropriate member
thereof). Each such party shall make employees available on a
mutually convenient basis to provide explanations of any documents or
information provided hereunder. Notwithstanding the obligations
contained in this Section 7.9, no party shall be required to provide access or
information or to disclose information where such access or disclosure would
jeopardize any attorney-client privilege of it or its Affiliates or contravene
any Applicable Law, fiduciary duty or material binding agreement.
(b) Each of
Seller Parent and Buyer shall retain all books and records in its possession
with respect to Tax matters pertinent to the parties hereto and any member of
the Company Group relating to Pre-Closing Tax Period or Straddle Period until
the expiration of the statute of limitations (and, to the extent notified by
Seller or Buyer, any extensions thereof) of the respective taxable
periods.
Section
7.10 Purchase Price
Adjustment. All payments made with respect to this Article VII
shall be treated as adjustments to the Purchase Price for Tax purposes, except
as otherwise required pursuant to Applicable Law.
Section
7.11 Termination of Tax Sharing
Agreements. On or before the Closing Date, Seller Parent shall
terminate (or cause to be terminated) all Tax sharing, allocation or similar
agreements or arrangements, if any, to which any member of the Company Group, on
the one hand, and Seller Parent or any Affiliate (other than a member of the
Company Group), on the other hand, are parties, and neither Seller Parent nor
any Affiliate of Seller Parent, on the one hand, or any member of the Company
Group, on the other hand, will have any liability thereunder to each other on or
after the Closing Date, nor shall any such liabilities be included in the
Estimated Closing Balance Sheet or the Final Closing Balance Sheet.
ARTICLE
VIII
INDEMNIFICATION
Section
8.1 Survival of Representations,
Warranties and Covenants. All representations and warranties
in this Agreement or in any certificate executed and delivered in fulfillment of
the requirements of this Agreement shall survive the Closing until and including
the date that is two years following the Closing Date; provided, however, that the
representations and warranties set forth in Sections 2.1 (first, second and
third sentences only), 2.2, 2.5, 2.6 (first, second, third, fifth and sixth
sentences only), 2.21, 3.1, 3.2 and 3.9 shall survive indefinitely and provided, further, that the
representations and
68
warranties set forth in Sections 2.16 (solely to the extent such
representations and warranties relate to Seller Plans) and 7.1 shall survive
until 30 days after the expiration (giving effect to any valid extensions,
waivers and tolling periods) of the applicable statute of
limitations. If written notice of a claim has been given in the
manner required by Article VII or Article VIII prior to the expiration of the
applicable representations and warranties by the party seeking indemnification
for such claim, then the relevant representations and warranties of the other
party shall survive as to such claim until such claim has been finally resolved
pursuant to such Article. All covenants and other agreements the
performance of which is specified to occur on or prior to the Closing, shall
survive the Closing until the date that is two years following the Closing Date,
and all covenants and other agreements that by their terms are to be performed
after the Closing Date, shall survive the Closing in accordance with their
terms.
Section
8.2 Indemnification.
(a) Following
the Closing, and subject to the other terms of this Article VIII, Seller Parent
shall indemnify, defend and hold harmless, Buyer and its Affiliates (including
the Company Group) and each of their respective directors, officers, employees,
stockholders, representatives and agents (each a “Buyer Indemnified
Party” and collectively, the “Buyer Indemnified
Parties”) from and against, and pay to the applicable Buyer Indemnified
Parties, the amount of any and all claims, interest, fines, penalties,
assessments, costs, expenses, losses, damages, liabilities, awards, judgments,
costs and expenses (including reasonable attorneys’ consultant, and other
professionals’ fees and expenses) actually incurred by any of them whether or
not involving a third party claim (collectively, “Losses” and
individually, a “Loss”), arising out
of, resulting from or attributable to (i) any failure of any representation or
warranty made by Seller Parent or Seller in this Agreement to be true and
correct in all respects (excluding any failure of any representation or warranty
made with respect to Taxes, which shall be governed exclusively by Article VII),
it being understood that such representations and warranties shall be
interpreted without giving effect to any limitations or qualifications as to
materiality including Company Material Adverse Effect or Fund Material Adverse
Effect set forth therein (other than the defined term “Material Contracts” as
used therein and the representations and warranties in Section 2.7(a), Section
2.8(a)(ii), Section 2.11(d) (third sentence), clause (ii) of Section 2.11(f) and
Section 2.11(i) (second sentence), for which such limitations or qualifications
shall be given full effect), (ii) any breach of any covenant or agreement of
Seller Parent or Seller under this Agreement (excluding any breach of any
covenant or agreement relating to Taxes set forth in Article VII, which shall be
governed exclusively by Article VII), (iii) the Retained Disputes or (iv) any
breach of the Xxxxx Circle Agreements occurring prior to the
Closing.
(b) Following
the Closing, and subject to the other terms of this Article VIII, Buyer shall
indemnify, defend and hold harmless Seller Parent and its Affiliates and each of
their respective directors, officers, employees, stockholders, representatives
and agents (each a “Seller Indemnified
Party” and
69
collectively, the “Seller Indemnified
Parties”) from and against, and pay to the applicable Seller Indemnified
Parties, any and all Losses arising out of, resulting from or attributable to
(i) any failure of any representation or warranty made by Buyer in this
Agreement to be true and correct in all respects, it being understood that such
representations and warranties shall be interpreted without giving effect to any
limitations or qualifications as to materiality including material adverse
effect set forth therein, (ii) any breach of any covenant or agreement of Buyer
under this Agreement, or (iii) any Losses incurred by the Seller Indemnified
Parties as a result of claims by or on behalf of participants and their
beneficiaries in the Company 401(k) Plan against the Seller for following the
Buyer's directions to terminate the Company 401(k) Plan (other than Losses
resulting from Seller's willful misconduct or gross negligence) in accordance
with Section 4.12(e) or as a result of the actions of the Buyer or the Company
Group to effectuate such termination.
(c) Notwithstanding
any other provision of this Agreement to the contrary, no party shall have any
liability hereunder or otherwise for any special, consequential, exemplary or
punitive damages or lost business opportunity; provided, that the
foregoing shall not limit the right of any Indemnified Party to indemnification
in accordance with this Agreement with respect to any component of any claim,
settlement, award or judgment against such party by any unaffiliated third
party.
(d) The right
to indemnification will not be affected by any investigation conducted at any
time with respect to, or any knowledge acquired (or capable of being acquired)
at any time, with respect to the accuracy or inaccuracy of or compliance with,
any representations, warranties, covenants or obligations. The waiver
of any condition based on the accuracy of any such representation or warranty,
or on the performance of, or compliance with, any such covenant or agreement,
will not affect the right to indemnification or any other remedy based on such
representations, warranties, covenants and agreements.
(e) Seller
Parent and Seller release the Company Group of any and all claims of Seller
Parent or one of its Affiliate (other than the Company Group) against the
Company Group of which Seller Parent has any actual knowledge, including any and
all claims based in indemnification or contribution, in respect of any covenant,
agreement or obligation to be performed by the Company Group prior to the
Closing Date,
70
other than any claim (x) pursuant to this Agreement or (y) for
accrued and unpaid obligations under any Affiliate Agreement. Buyer
releases Seller Parent and its Affiliates of any and all claims of any member of
the Company Group against Seller Parent or on one of its Affiliates (other than
the Company Group) of which any member of the Company Group has any actual
knowledge, including any and all claims based in indemnification or
contribution, in respect of any covenant, agreement or obligation to be
performed by Seller Parent or Seller prior to the Closing Date, other than any
claim (x) pursuant to this Agreement or (y) for accrued and unpaid obligations
under any Affiliate Agreement. For the avoidance of doubt, the
parties agree that the foregoing releases shall not affect any rights under the
Ancillary Agreements.
Section
8.3 Indemnification
Procedure.
(a) Promptly
after the Person seeking indemnification (the “Indemnified Party”)
has knowledge of any event or circumstance, including any written claim by a
third party, that, in the reasonable judgment of the Indemnified Party, would
reasonably be expected to give rise to indemnification under this Agreement (but
in any event not later than 10 Business Days prior to the time any response to
the asserted claim is required), the Indemnified Party shall deliver to the
Person from which indemnification is sought (the “Indemnifying Party”)
a notice (a “Claim
Notice”) setting forth in reasonable detail a description of the matter
giving rise to indemnification hereunder, including, if known, the anticipated
Losses; provided, however, that any
failure or delay by the Indemnified Party in delivering a Claim Notice to the
Indemnifying Party shall not affect the Indemnified Party’s right to
indemnification under this Agreement, except to the extent the Indemnifying
Party has been materially prejudiced by such failure or delay.
(b) In case
the Indemnifying Party shall object to the indemnification of an Indemnified
Party in respect of any claim or in any Claim Notice not involving a third party
claim, the Indemnifying Party shall, as soon as practicable after receipt by the
Indemnifying Party of such Claim Notice, deliver to the Indemnified Party a
written notice to such effect and the Indemnifying Party and the Indemnified
Party shall, within the 30-day period beginning on the date of receipt by the
Indemnified Party of such written objection, shall attempt in good faith to
agree upon the rights of the respective parties with respect to each of such
claims to which the Indemnifying Party shall have so objected, and any agreement
reached regarding their respective rights with respect to any of such claims
shall be set forth in a written agreement signed by the parties. If
the Indemnified Party and the Indemnifying Party are unable to agree as to any
particular item or items or amount or amounts, then either the Indemnified Party
or the Indemnifying Party may submit such dispute to a court of competent
jurisdiction.
(c) Promptly
after receipt by the Indemnifying Party of a Claim Notice of a third-party claim
delivered in accordance with Section 8.3(a) to the Indemnifying Party, such
Indemnifying Party may, at its option, assume the defense of the Indemnified
Party against such claim (including the retention of counsel of the Indemnifying
Party’s choosing); provided, that, the
Indemnified Party shall give its prior consent to the retention of such counsel
(such consent not to be unreasonably withheld or delayed). If the
Indemnifying Party elects not to so defend any third party claim, the
Indemnified Party may, but is not obligated to, defend such third party claim on
behalf of and for the account and risk of the
71
Indemnifying Party, and if such Indemnified Party is entitled to
indemnification under this Article VIII, all reasonable legal and other expenses
reasonably incurred by the Indemnified Party shall be borne by the Indemnifying
Party. The Indemnified Party shall cooperate in the compromise of, or
defense against, such claim. Notwithstanding anything herein in this
Section 8.3 to the contrary, neither the Indemnifying Party nor the Indemnified
Party shall, without the written consent of the other party (such consent not to
be unreasonably withheld or delayed), settle or compromise any third party claim
or permit a default or consent to an entry of any judgment unless such
settlement or compromise (x) relates solely to monetary damages and (y)
provides for a full release of the Company Group defendant with respect to the
claim(s) being settled (or, in the case of a settlement or compromise that
applies to all claims against all Company Group defendants, provides
for full and complete release of all such defendants for all such
claims); provided, that such
settlement or compromise shall not contain any admission or finding of
wrongdoing on behalf of the Company Group or any of its officers or
employees. Any Indemnified Party shall have the right to employ
separate counsel in any such action or claim and to participate in the defense
thereof at the Indemnifying Party’s cost and expense if (i) the employment of
such counsel has been specifically authorized in writing by the Indemnifying
Party or (ii) in the reasonable opinion of counsel to the Indemnified Party, a
conflict or potential conflict exists between the Indemnified Party and the
Indemnifying Party that would make such separate representation
advisable. After any such claim has been filed or initiated, each
party shall provide reasonable access to the other parties and their attorneys
and accountants all pertinent information under its control relating to such
claim, and the parties agree to render to each other such assistance as they may
reasonably require of each other in order to facilitate the proper and adequate
defense of any such claim. The foregoing control provisions shall not
apply to claims for indemnity arising under Article VII, the procedures for
which are set forth therein.
Section
8.4 Limitation of
Liability.
(a) Notwithstanding
any provision of this Agreement to the contrary, Seller Parent shall not be
liable in respect of any indemnification obligation for Losses under Section
8.2(a)(i) and Section 7.4(a)(iii) (i) with respect to any claim or series of
related claims unless such claim or series of related claims involves Losses in
excess of $50,000 (the “De Minimis
Threshold”) (and, for the avoidance of doubt, any such claim or series of
related claims that do not meet or exceed the De Minimis Threshold shall not be
applied to or considered for purposes of calculating the aggregate amount of the
Losses for purposes of the Indemnity Deductible under Section 8.4(a)(ii)), (ii)
unless and until the aggregate cumulative amount of such Losses for which
indemnification would be available but for this Section 8.4(a) and Section
7.4(a)(iii) exceeds $3 million (such amount, the “Indemnity
Deductible”), in which case Seller Parent shall be liable for such Losses
in excess of the Indemnity Deductible, or (iii) in excess of 25% of the Purchase
Price (such amount, the “Indemnity Cap”) in
the aggregate for all such Losses; provided that (A) the
De Minimis Threshold,
72
Indemnity Deductible and Indemnity Cap shall not apply to Losses
to the extent related to the failure to be true and correct of any of the
representations and warranties set forth in Sections 2.1 (first, second and
third sentences only), 2.2, 2.5, 2.6 (first, second, third, fifth and sixth
sentences only), 2.16 (solely to the extent that any Loss results from a
violation of ERISA in respect of a Seller Plan) or 2.21 and (B) the De Minimis
Threshold, Indemnity Cap and Indemnity Deductible shall not apply to Losses to
the extent related to fraud. Notwithstanding any provision of this
Agreement to the contrary, Seller Parent shall not be liable in respect of any
indemnification obligation under Section 8.2(a)(i) for aggregate Losses in
excess of the Purchase Price.
(b) Notwithstanding
any provision of this Agreement to the contrary, Buyer shall not be liable in
respect of any indemnification obligation for Losses under Section 8.2(b)(i) (i)
with respect to any claim or series of related claims unless such claim or
series of related claims involves Losses in excess of the De Minimis Threshold)
(and, for the avoidance of doubt, any such claim or series of related claims
that do not meet or exceed the De Minimis Threshold shall not be applied to or
considered for purposes of calculating the aggregate amount of the Losses for
purposes of the Indemnity Deductible under Section 8.4(b)(ii)), (ii) unless and
until the aggregate cumulative amount of such Losses for which indemnification
would be available but for this Section 8.4(b) exceeds the Indemnity Deductible,
in which case Buyer shall be liable for such Losses in excess of the Indemnity
Deductible, or (ii) in excess of the Indemnity Cap in the aggregate for all such
Losses; provided that the De
Minimis Threshold, Indemnity Deductible and Indemnity Cap shall not apply to
Losses (A) related to the failure to be true and correct of any of the
representations and warranties set forth in Sections 3.1, 3.2 or 3.9 and (B) to
the extent related to fraud. Notwithstanding any provision of this
Agreement to the contrary, Buyer shall not be liable in respect of any
indemnification obligation for Losses under Section 8.2(b)(i) in excess of the
Purchase Price
(c) All
claims for indemnification pursuant to Section 8.2(a) and 8.2(b) must be
asserted by the party seeking indemnification, in writing in accordance with
this Article VIII, not later than the date on which the applicable
representation, warranty, covenant or agreement ceases to survive pursuant to
Section 8.1; provided, however, that if
written notice of a claim specifying the indemnification claim in reasonable
specificity (including the representations, warranties, covenants and/or
agreements alleged to have been breached) has been given in accordance with this
Article VIII prior to such date, such claim (and the relevant representations,
warranties, covenants and/or agreements of the other party) shall survive as to
such claim until such claim has been finally resolved pursuant to this Article
VIII.
Section
8.5 Effect on Purchase
Price. All payments made with respect to the rights of
indemnity under this Article VIII shall be treated as adjustments to the
Purchase Price for Tax purposes, except as otherwise required pursuant to
Applicable Law.
73
Section
8.6 Calculation of
Losses. In calculating any amount due hereunder in respect of
Losses, Losses shall be reduced by (a) any amounts recovered by the Indemnified
Party under applicable insurance policies, under any indemnification or similar
agreements, or from any other Person alleged to be responsible for any Losses or
other rights of recovery with respect to such Losses, net of any deductible or
any other reasonable and necessary out-of-pocket expense incurred by the
Indemnified Party in obtaining such recovery and (b) any Tax benefit, saving or
reduction in Taxes actually realized by the Indemnified Party or its Affiliates,
attributable to the accrual, incurrence or payment of any such
Losses. If an Indemnified Party or its Affiliates receives or
actually realizes, as applicable, any such recovery or Tax benefit, saving or
reduction in Taxes after an indemnification payment by the Indemnifying Party
has been made, then such Indemnified Party or its Affiliates shall promptly
reimburse the Indemnifying Party for any payment made up to the amount received
or actually realized by the Indemnified Party or its Affiliates; provided, however,
that such reimbursement shall be required only to the extent that such Tax
benefit, saving or reduction in Taxes results in a cash Tax savings both (i) to
the Company Group on a stand-alone basis and (ii) to any affiliated,
consolidated, combined, unitary or similar group in which the members of the
Company Group are included. In the event of the occurrence of any
Losses, an Indemnified Party shall use commercially reasonable efforts to seek
recovery under any and all available third party insurance policies or third
party indemnification obligations or other rights of recovery with respect to
such Losses; provided, that, if an
Indemnified Party is denied recovery under any third party insurance policy, the
rights of such Indemnified Party to seek indemnification under this Agreement
shall not be affected; provided, further, that (i) if
an Indemnified Party reasonably determines that it will incur material
out-of-pocket costs or expenses in connection with seeking any such recovery,
such Indemnified Party shall be required to pursue such recovery only if the
Indemnifying Party agrees to bear such costs and expenses, (ii) an Indemnified
Party shall be required to commence or defend a Proceeding in connection with
seeking any such recovery if the Indemnifying Party agrees to bear the
out-of-pocket costs and expenses incurred by the Indemnified Party (including
all fees and expenses of counsel) in connection with such Proceeding and (iii)
if elected by the Indemnifying Party and to the extent permitted under the
applicable policy, agreement or right, the Indemnified Party shall assign the
rights to recovery under such policy, agreement or right to the Indemnifying
Party, in which case the Indemnifying Party may pursue recovery under such
policy, agreement or right at its cost and expense.
Section
8.7 No
Duplication. Any liability for any Loss shall be determined
without duplication of recovery by reason of the state of facts giving rise to
such Loss constituting a breach of more than one representation, warranty,
covenant or agreement of this Agreement. No Person shall be entitled
to any recovery under this Agreement in respect of any Loss to the extent that
(i) such recovery would constitute a duplicative payment of amounts recovered as
a purchase price adjustment pursuant to Sections 1.1 and 1.4, (ii) such Loss was
74
reflected as a liability on the Final Closing Balance Sheet or
(iii) such Loss was the subject of a dispute resolved as contemplated by Section
1.4.
Section
8.8 No
Set-Off. Neither Buyer nor Seller Parent shall have any right
to off-set or set-off any payment due pursuant to this Article VIII against any
other payment to be made pursuant to this Agreement, any Ancillary Agreement or
otherwise.
Section
8.9 Exclusive
Remedy. Following the Closing, Article VII and Article VIII
shall provide the sole and exclusive remedy for any and all claims under this
Agreement. In furtherance of the foregoing, except as otherwise
provided in Article VII and Article VIII, the parties hereby waive, and release
each other from, to the fullest extent permitted by Applicable Law, any and all
other rights, defenses, claims and causes of action (including rights of
contributions, if any) known or unknown, foreseen or unforeseen, which exist or
may arise in the future, that it may have against Seller Parent or any of its
Affiliates or Buyer or any of its Affiliates, as the case may be, arising under
or based upon any Applicable Law (including any such law arising under or based
upon any securities law, common law or otherwise).
Section
8.10 Assignment of
Claims. The Indemnifying Party shall be subrogated to, and the
Indemnified Party shall assign, any right of action (whether pursuant to
contract, arising under Applicable Law or otherwise) which the Indemnified Party
may have against any other Person with respect to any matter giving rise to a
claim for indemnification hereunder.
ARTICLE
IX
MISCELLANEOUS
Section
9.1 Amendments;
Waiver. This Agreement may not be amended, altered or
modified, and no provision hereof may be waived, except by written instrument
executed by Seller, Seller Parent and Buyer. No waiver shall
constitute a waiver of, or estoppel with respect to, any subsequent or other
inaccuracy, breach or failure to strictly comply with the provisions of this
Agreement.
Section
9.2 Entire Agreement,
etc.
(a) This
Agreement (including the Seller Disclosure Schedule, the Buyer Disclosure
Schedule, the Letter Agreement, the Ancillary Agreements, the Confidentiality
Agreement and any other schedules, certificates, lists and documents referred to
herein, and any documents executed by any of the parties simultaneously herewith
or pursuant thereto), constitutes the entire agreement of the parties hereto,
except as expressly provided herein, and supersedes all prior agreements and
understandings, discussions, negotiations and communications, written and oral,
among the parties with respect to the subject matter hereof.
75
(b) The
parties hereto acknowledge and agree that neither party nor any of its
Affiliates, representatives or agents is making any representation or warranty
whatsoever, oral or written, express or implied, other than those set forth in
Articles II and III (as applicable), and no party is relying on any statement,
representation or warranty, oral or written, express or implied, made by any
other party or such other party’s Affiliates, representatives or agents
(including with respect to (i) any projections, estimates or budgets for the
Company Group or its businesses, (ii) any materials, documents or information
relating to the Company Group or its businesses made available to Buyer or its
counsel, accountants or advisors in the Data Rooms or otherwise or (iii) the
information contained in any confidential information memorandum provided to
Buyer in connection with the transactions contemplated hereby), except for the
representations and warranties set forth in such Articles. EXCEPT AS
OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE PARTIES EXPRESSLY
DISCLAIM ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY
OR SUITABILITY AS TO ANY OF THE ASSETS OF THE COMPANY GROUP. In
furtherance of the foregoing, Buyer acknowledges and agrees that (i) it is an
informed and sophisticated purchaser, and has engaged expert advisors,
experienced in the evaluation and purchase of companies such as the Company
Group as contemplated hereunder and (ii) it has undertaken such investigation
and has been provided with and has evaluated such documents and information as
it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement.
Section
9.3 Interpretation. When
a reference is made in this Agreement to Articles, Sections, Schedules or
Exhibits, such reference shall be to an Article of, Section of, Schedule to or
Exhibit 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.” All pronouns and any variations thereof refer
to the masculine, feminine or neuter, single or plural, as the context may
require. All capitalized terms defined in Annex A shall be equally
applicable to the singular and plural forms thereof. All references
to any period of days shall be deemed to be to the relevant number of calendar
days unless otherwise specified. “Knowledge of the Seller” shall mean
those facts that are actually known on the date hereof by Xxxxxxxxx X. Xxxxxxxx
or Xxxx XxXxxxxx, including those facts that are actually known by him or her on
the date hereof after inquiry of the individuals identified in Schedule 9.3 of
the Seller Disclosure Schedule. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the
event any ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by all parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provision of this
Agreement. References to any Person include the successors and
assigns of that Person.
76
Section
9.4 Disclosure
Schedules. The disclosure of any item or matter in the Seller
Disclosure Schedule or the Buyer Disclosure Schedule shall not be construed as
an admission, representation or indication that such item or other matter is
“material” or would have a Company Material Adverse Effect or that such item or
other matter is required to be referred to or disclosed in the Seller Disclosure
Schedule or the Buyer Disclosure Schedule (as applicable), nor shall such
disclosure establish a standard of materiality for any purpose
whatsoever. The disclosure of any item or matter relating to any
possible breach or violation of any law or contract shall not be construed as an
admission or indication that any such breach or violation exists or has actually
occurred.
Section
9.5 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.
Section
9.6 Notices. Unless
otherwise provided herein, all notices and other communications hereunder shall
be in writing and shall be deemed given and received (a) if delivered in person,
on the date delivered, (b) if transmitted by telecopy (provided receipt is
confirmed by telephone), on the date sent or (c) if delivered by an express
courier, on the second Business Day after mailing, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to
Seller Parent or Seller:
Lincoln National
Corporation
000 Xxxxx Xxxxxx Xxxxxxx
Xxxx
Xxxxxx, XX 00000
Telecopy: (000)
000-0000
Attention: General
Counsel
with a
copy (which shall not constitute notice) to:
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
0 Xxxxx
Xxxxxx
Xxx Xxxx,
XX 00000
Telecopy: (000)
000-0000
Attention: Xxxxx
Xxxx
77
If to
Buyer:
Macquarie
Bank Limited
c/- Xxxxx
0
Xx. 0
Xxxxxx Xxxxx
Xxxxxx
XXX 0000
Xxxxxxxxx
Telecopy: x00
0 0000 0000
Attention: Company
Secretary
with a
copy (which shall not constitute notice) to:
Weil,
Gotshal & Xxxxxx LLP
000 Xxxxx
Xxxxxx
Xxx Xxxx,
XX 00000
Telecopy: (000)
000-0000
Attention: Xxxxxxxxx
Xxxxx and Xxxxxxx Xxxxxxxx
Section
9.7 Binding Effect; Persons
Benefiting; No Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective successors and
assigns and any transferee of all or substantially all of the assets of such
party. No provision of this Agreement (other than the provisions of
Article VII and VIII relating to Indemnified Parties) is intended or shall be
construed to confer upon any entity or Person other than the parties and their
respective successors and permitted assigns any right, remedy or claim under or
by reason of this Agreement or any part hereof. This Agreement may
not be assigned by any of the parties without the prior written consent of
Buyer, in the case of any assignment by Seller, or Seller, in the case of any
assignment by Buyer; provided, that, prior to the Closing, Buyer may assign this
Agreement to a direct or indirect majority-owned subsidiary of Macquarie Group
Limited, but no such assignment shall relieve Buyer of any of its obligations
hereunder and provided further that Buyer or any other creditworthy entity
reasonably acceptable to Seller shall unconditionally guarantee the obligations
of such Subsidiary hereunder.
Section
9.8 Specific
Performance. The parties agree that if any of the provisions
of this Agreement were not performed by the parties hereto in accordance with
their specific terms or were otherwise breached thereby at or prior to the
Closing, irreparable damage would occur, no adequate remedy at law would exist
and damages would be difficult to determine, and that each party hereto will be
entitled to specific performance at or prior to the Closing to prevent such
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, in addition to any other remedy to which it may be
entitled at law or in equity.
Section
9.9 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of
78
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
9.10 Governing Law;
Venue. 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 laws of the State New York
applicable to agreements made and to be performed entirely within the State of
New York, without regard to the conflict of law provisions thereof that would
result in the application of the laws of any other jurisdiction. The
parties hereto irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the Supreme Court of the State of New York, New York
County and of the federal court located in New York, New York for any actions,
suits or proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby (and the parties agree not to commence any
action, suit or proceeding relating thereto except in such courts, and further
agree that service of any process, summons, notice or document by U.S.
registered mail to the applicable address set forth in Section 9.6 above shall
be effective service of process for any action, suit or proceeding brought
against in any such court). The parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the Supreme Court of the State of New York, New York County and the
federal court located in New York, New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum. The parties agree that a final judgment in any
such action, suit or proceeding brought in any such court shall be conclusive
and binding and may be enforced in any other courts to whose jurisdiction the
parties are or may be subject, by suit upon such judgment.
Section
9.11 WAIVER OF JURY
TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signature
Page Follows]
79
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the
date first above written.
LINCOLN
NATIONAL CORPORATION
By: /s/ Xxxxxx X.
Xxxxx
Name: Xxxxxx
X. Xxxxx
Title: President and
CEO
LINCOLN
NATIONAL INVESTMENT COMPANIES, INC.
By: /s/ Xxxxxxx
Xxxxx
Name: Xxxxxxx
Xxxxx
Title: President
MACQUARIE
BANK LIMITED
By: /s/ S.
Wikrananayce
Name: Siemara
Wikrananayce
Title: Executive
Director
By: /s/ Xxx
Xxxxx
Name: Xxx
Xxxxx
Title: Executive
Director
Annex A -
Definitions
“Adjusted Assets Under
Management” shall mean, with respect to each account of each Client, as
of a specified date, the amount of assets under management by the Company Group
in such account as of the Base Date, as adjusted, in the case of any
determination of Adjusted Assets Under Management after the Base Date, to
reflect additions and withdrawals of funds, new accounts and terminated accounts
during the period after the Base Date through and including such specified
date. For the avoidance of doubt, (i) the calculation of Adjusted
Assets Under Management shall not take into account any distributions of
interest, dividends, income or capital gains from any account (or reinvestments
of such distributions) or any increase or decrease in assets under management
due to market appreciation or depreciation and any currency fluctuations after
the Base Date, (ii) additions and contributions shall be taken into account only
when actually funded and withdrawals shall be taken into account when they are
actually funded only out of such account or, if earlier, the date on which the
Company Group receives notice communicating an intention to withdraw any assets
from an existing account (unless such notice has been revoked prior to the
applicable date), (iii) any assets under management for any account for which
members of the Company Group act as investment adviser and subadviser shall be
counted only once, and (iv) any assets under management for any set of accounts
one of which invests in the other shall be counted only once if members of the
Company Group act as an investment adviser to both, except to the extent that an
investment management fee is payable to one or more members of the Company Group
in respect of both accounts.
“Advisory Agreement”
shall mean any Contract entered into by a member of the Company Group for the
purpose of providing investment advisory or investment management services,
including any sub-advisory services, to a Person.
“Affiliate” shall mean
any individual, partnership, corporation, entity or other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, the Person specified, but such term shall not
include any Public Fund. For purposes of this definition, “control”
(including, with correlative meaning, the terms “controlling” and “controlled”)
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through ownership of voting securities, by contract or otherwise. For
the avoidance of doubt, each member of the Company Group shall be an Affiliate
of Seller Parent prior to the Closing and an Affiliate of Buyer following the
Closing.
“Affiliate Agreement”
shall have the meaning set forth in Section 2.20.
“Agreement” shall have
the meaning set forth in the preamble hereto.
“Ancillary Agreements”
shall mean each of the General Account Advisory Agreements and the Transition
Services Agreement.
A-1
“Applicable Law” shall
mean any domestic or foreign federal, state or local statute, law (whether
statutory or common law), ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree, policy,
guideline or other requirement (including those of FINRA or any other
self-regulatory organization) applicable to and legally binding on the Company,
any Fund, Buyer, Seller Parent or Seller or any of their respective Affiliates,
equity holders, properties, assets, officers, directors, employees or agents, as
the case may be.
“Applicable Rate”
shall mean, with respect to any post-Closing payment, the applicable interest
rate per annum on the Closing Date payable on United States Treasury obligations
with a maturity date most closely corresponding to the period from the Closing
Date up to but not including the date of such payment.
“APRA” shall mean the
Australian Prudential Regulation Authority.
“Base Date” shall mean
April 30, 2009.
“Base Purchase Price” shall
have the meaning set forth in Section 1.1.
“Base Revenue
Run-Rate” shall have the meaning set forth in Section 2.10.
“Broker-Dealer” shall
have the meaning set forth in Section 2.13(d).
“Business Day” shall
mean any day that the NYSE is normally open for trading and that is not a
Saturday, a Sunday or a day on which banks in the city of New York or Sydney,
Australia are authorized or required to close for regular banking
business.
“Buyer” shall have the
meaning set forth in the preamble hereto.
“Buyer Disclosure
Schedule” shall have the meaning set forth in the introduction to Article
II.
“Buyer Indemnified
Parties” shall have the meaning set forth in Section 8.2(a).
“Buyer Measurement
Event” shall mean, with respect to a particular Measurement Period, where
the Measurement Period Revenues for such Measurement Period are less than 75% of
the Seller Parent Closing Revenue Run-Rate.
“Buyer Measurement Period
Payment” shall mean, with respect to a particular Measurement Period in
respect of which a Buyer Measurement Event has occurred, an amount equal to the
product of (a) 33% and (b) the excess of (i) 75% (or, if the Closing occurs in
2010 other than on January 1, 2010, in 2010 only, a percentage equal to (x) 75%
times (y) a fraction, the numerator of which is the number of calendar days
remaining in 2010 from and after the Closing Date, and the denominator of which
is equal to 365) times the Seller Parent Closing Revenue Run-Rate over (ii) the
Measurement Period Revenues for such Measurement Period.
A-2
“Buyer Plans” shall
have the meaning set forth in Section 4.12(a).
“CDO” shall have the
meaning set forth in Section 4.2(e).
“Claim Notice” shall
have the meaning set forth in Section 8.3(a).
“Client” shall mean
any Person who is party to an Advisory Agreement pursuant to which the Company
Group provides investment management or investment advisory services, including
any sub-advisory services, to such Person.
“Closing” shall have
the meaning set forth in Section 1.3.
“Closing Balance Sheet
Principles” means (i) the accounting principles, procedures, policies and
methods used to prepare the illustrative consolidated balance sheet of the
Company Group attached hereto as Exhibit A and (ii) to the extent not addressed
in such balance sheet, GAAP consistent with the accounting principles and
practices applied in preparation of the Company Balance Sheet, with any
inconsistency between the principles reflected in the Company Balance Sheet and
the principles reflected in Exhibit A to be resolved in favor of Exhibit
A.
“Closing Date” shall
have the meaning set forth in Section 1.3.
“Closing Purchase
Price” shall have the meaning set forth in Section 1.1.
“Closing Revenue
Run-Rate” shall mean the aggregate Revenue Run-Rate for each account of
each Client (other than any account (a) for which a consent has not been
obtained in accordance with Section 4.2(a), (b) or (c) (as applicable), or which
consent is not in effect as of the Closing Date or (b) of any Excluded Client)
as of the fifth Business Day prior to the last Business Day of the calendar
month ending immediately prior to the Closing Date.
“Collateral Management
Agreement” means each collateral management agreement or similar
investment advisory agreement related to each CDO whereby the RIA has agreed to
manage assets or provide advice with respect to management of collateral, assets
or synthetic assets (e.g., a notional basket of instruments) of a
CDO.
“COBRA” shall mean the
Consolidated Omnibus Budget Reconciliation Act, as amended.
“Code” shall mean the
Internal Revenue Code of 1986, as amended.
“Commodity Exchange
Act” means the United States Commodity Exchange Act of 1936, as amended,
and the rules and regulations thereunder.
“Company” shall have
the meaning set forth in the recitals hereto.
“Company Balance
Sheet” shall have the meaning set forth in Section 2.7(a).
A-3
“Company Benefit
Plans” shall have the meaning set forth in Section 2.16(a).
“Company Capital
Stock” shall have the meaning set forth in Section 2.5(a).
“Company Financial
Statements” shall have the meaning set forth in Section
2.7(a).
“Company Group” shall
mean the Company and its Subsidiaries.
“Company Group Deferred
Compensation Plan” shall have the meaning set forth in Section
4.12(g)(i).
“Company Group Intellectual
Property” shall mean all Intellectual Property owned by the Company Group
or licensed to the Company Group for use in the Company Group’s
business.
“Company Material Adverse
Effect” shall mean a material adverse effect on the combined business,
assets or financial condition of the Company Group, taken together as a whole,
provided that
any such effect resulting from or arising in connection with the following shall
not constitute a Company Material Adverse Effect and shall be excluded from any
determination as to whether a Company Material Adverse Effect has occurred or
exists or would reasonably be expected to occur or exist: (i) the entering into
of this Agreement and the Ancillary Agreements or public announcement or
consummation of the transactions contemplated hereby and thereby (including any
losses of Company Group employees), (ii) any change or condition generally
affecting the investment management industry, (iii) any change in economic,
financial market, regulatory or political conditions generally (including,
without limitation, any change in interest rates), (iv) any outbreak or
substantial worsening of war or hostilities in which the United States is
involved, or terrorist act, calamity, natural disaster or crisis within, or
involving, the United States or its properties or citizens, (v) any change in
Applicable Law or accounting principles or official binding interpretations
thereof, (vi) any termination of Client accounts or reduction in assets under
management or the Revenue Run-Rate of any Client account or (vii) any action
taken by Buyer or its Affiliates, except in the case of clauses (ii) through
(v), to the extent such circumstance, change in or effect has had a
disproportionate impact on the Company Group as compared to similarly situated
Persons in the investment management industry.
“Computer Software”
shall have the meaning set forth in Section 2.17(d).
“Confidentiality
Agreement” shall mean that certain letter agreement, dated as of March 3,
2009, between Macquarie Investment Management Limited and Seller
Parent.
“Contracts” shall mean
any contract, agreement, indenture, note, bond, loan, letter of credit, pledge,
instrument, lease, mortgage, license, commitment or other arrangement,
understanding, undertaking, obligation or agreement (whether written or
A-4
oral) to which the applicable Person is a party or by which the
applicable Person or any of its properties or assets is bound.
“Covered Trade Performance
Information” shall have the meaning set forth in Section
4.21.
“CTA” shall have the
meaning set forth in Section 2.13(k).
“Data Rooms” shall
have the meaning set forth in Section 2.1.
“De Minimis Threshold”
shall have the meaning set forth in Section 8.4(a).
“Disagreement” shall
have the meaning set forth in Section 1.4(c).
“Distribution
Agreement” shall mean any Contract for the distribution or sale of shares
or units of a Public Fund.
“DIUS” shall have the
meaning set forth in Section 2.6.
“DSC” means Delaware
Service Company, Inc.
“Encumbrance” shall
mean any lien, pledge, mortgage, deed of trust, security interest, claim, lease,
charge, option, right of first refusal, easement, servitude, transfer
restriction under any shareholder or similar agreement or other encumbrance of
any kind.
“Equity Rights” shall
have the meaning set forth in Section 2.5(b).
“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.
“Estimated Closing Balance
Sheet” shall have the meaning set forth in Section 1.4(a).
“Estimated Net Assets”
shall mean the net assets of the Company Group as determined in accordance with
GAAP, including allowances for doubtful receivables, valuations for any
investments, and accruals for all liabilities, including any retention payments,
determined pursuant thereto, all as reflected on the Estimated Closing Balance
Sheet.
“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the SEC thereunder.
“Excluded Client”
shall mean any Client that is set forth in Schedule 2.10(b) of the Seller
Disclosure Schedule.
“Excluded Taxes” shall
mean Taxes for any Pre-Closing Tax Period and for any portion of a Straddle
Period that ends on the Closing Date which Taxes are
A-5
attributable to any (i) transaction or action caused or taken or
permitted to be taken by Buyer or any of its Affiliates (other than the
transactions or actions contemplated hereunder) on the Closing Date, but after
the Closing, other than such transaction or action taken in the ordinary course
of business consistent with the past practice of Seller Parent and the Company
Group or (ii) except to the extent permitted by Section 7.3(b) or required by
any Taxing Authority pursuant to a final determination agreed to by Seller or
the Seller Parent on behalf of the relevant member of the Company Group pursuant
to this Agreement, the filing of an amended Tax Return by Buyer or any of its
Affiliates with respect to or including any member of the Company Group for any
Pre-Closing Tax Period or Straddle Period.
“Exempt Sub-Advised
Fund” shall mean a U.S. Public Fund that has obtained (or whose
investment adviser has obtained) exemptive relief from the SEC that renders
shareholder approval of a new Advisory Agreement for such U.S. Public Fund
unnecessary.
“Fee Rate” shall have
the meaning set forth in Section 2.10.
“Final Closing Balance
Sheet” shall have the meaning set forth in Section 1.4(b).
“Final Net Assets”
shall mean the net assets of the Company Group determined in accordance with
GAAP, including allowances for doubtful receivables, valuations for any
investments, and accruals for all liabilities, including any retention payments,
determined pursuant thereto, all as reflected on the Final Closing Balance
Sheet.
“FINRA” shall mean the
Financial Industry Regulatory Authority, Inc.
“Fund Material Adverse
Effect” shall mean a material adverse effect on the business, assets or
financial condition of a Public Fund, provided that any
such effect resulting from or arising in connection with the following shall not
constitute a Fund Material Adverse Effect and shall be excluded from any
determination as to whether a Fund Material Adverse Effect has occurred or
exists or would reasonably be expected to occur or exist: (i) the entering into
of this Agreement and the Ancillary Agreements or public announcement or
consummation of the transactions contemplated hereby and thereby (including any
losses of Public Fund employees), (ii) any change or condition generally
affecting the investment management industry, (iii) any change in economic,
financial market, regulatory or political conditions generally (including,
without limitation, any change in interest rates), except, in the case of
clauses (ii) and (iii), to the extent having a disproportionate impact on a
Public Fund as compared to similarly situated Persons in the investment
management industry, (iv) any outbreak or substantial worsening of war or
hostilities in which the United States is involved, or terrorist act, calamity,
natural disaster or crisis within, or involving, the United States or its
properties or citizens, (v) any change in Applicable Law or accounting
principles or official binding interpretations thereof, (vi) any termination of
Client accounts or reduction in assets
A-6
under management or the Revenue Run-Rate of any Client account or
(vii) any action taken by Buyer or its Affiliates.
“Fund Services
Agreements” shall mean all material custody, transfer agent, shareholder
servicing, administrative, accounting and other similar agreements to which a
Public Fund is a party, other than any Advisory Agreement or Distribution
Agreement.
“GAAP” shall mean
generally accepted accounting principles as used in the United States as in
effect at the time any applicable financial statements were or are
prepared.
“General Account Advisory
Agreement” shall mean each Advisory Agreement, to be effective as of the
Closing, in the form attached hereto as Exhibit C with the Persons set forth in
Exhibit E, as may be amended from time to time after the Closing pursuant to the
terms thereof.
“Governmental
Authority” shall mean any United States or foreign 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 authority, agency, department,
board, commission or instrumentality of the United States, any state of the
United States or any political subdivision thereof, including any municipality
or other local governmental authority, or any foreign jurisdiction, and any
court, tribunal or arbitrator(s) of competent jurisdiction, and any United
States or foreign governmental or non-governmental self-regulatory organization,
agency or authority.
“Grant Date” shall
have the meaning set forth in Section 4.12(k).
“HSR Act” shall mean
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act, of 1976, as amended, and the
rules and regulations promulgated thereunder.
“Indebtedness” of any
Person means, without duplication, (i) the principal, accreted value, accrued
and unpaid interest, unpaid fees or expenses and other monetary obligations in
respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding trade accounts
payable and other accrued current liabilities arising in the ordinary course of
business (other than the current liability portion of any indebtedness for
borrowed money)); (iii) all obligations of such Person under leases required to
be capitalized in accordance with GAAP; (iv) all obligations of such Person for
the reimbursement of any obligor on any letter of credit, banker’s acceptance or
similar credit transaction; (v) all obligations of such Person under interest
rate or currency swap transactions (valued at the termination value thereof);
(vi) the liquidation value, accrued and unpaid dividends; unpaid fees or
expenses and other monetary
A-7
obligations in respect of any redeemable preferred stock of such
Person; (vii) all obligations of the type referred to in clauses (i) through
(vi) of any Persons for the payment of which such Person is responsible or
liable, directly or indirectly, as obligor, guarantor, surety or otherwise,
including guarantees of such obligations; and (viii) all obligations of the type
referred to in clauses (i) through (vii) of other Persons secured by (or for
which the holder of such obligations has an existing right, contingent or
otherwise, to be secured by) any lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person).
“Indemnified Party”
shall have the meaning set forth in Section 8.3(a).
“Indemnifying Party”
shall have the meaning set forth in Section 8.3(a).
“Indemnity Cap” shall
have the meaning set forth in Section 8.4(a).
“Indemnity Deductible”
shall have the meaning set forth in Section 8.4(a).
"Independent Accounting
Firm" shall mean such nationally recognized independent public accounting
firm mutually agreed to by Seller and Buyer; provided that if
Buyer and Seller do not appoint an Independent Accounting Firm within 30 days
after written notice by one party to the other proposing such a firm, either
party may request the American Arbitration Association to appoint as the
Independent Accounting Firm a nationally recognized independent public
accounting firm that has not had a material relationship with Seller and its
Affiliates or Buyer and its Affiliates within the preceding two years, and such
appointment shall be final, binding and conclusive.
“Information
Technology Systems” means electronic data processing, information,
record keeping, telecommunications and computer systems.
“Intellectual
Property” shall mean, in any jurisdiction (i) any and all patents and
patent applications (including without limitation reissues, reexaminations,
continuations, divisions, continuations-in-part, extensions, revisions and
counterparts thereof in any jurisdiction), (ii) any and all trademarks, service
marks, logos, trade dress, trade names, corporate names and domain names
(whether registered or unregistered), and including all goodwill associated
therewith and all applications and registrations therefor, (iii) any and all
copyrights (whether registered or unregistered) and all copyright registrations
and applications for registration of copyrights, including computer programs and
software (including source code, object code, data, databases and documentation
therefor) and (iv) any and all rights in non-public information, trade secrets
and proprietary or confidential information (including ideas, research and
development, know-how, formulas, compositions, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals).
“Investment Advisers
Act” shall mean the Investment Advisers Act of 1940, as amended, and the
rules and regulations of the SEC thereunder.
A-8
“Investment Company
Act” shall mean the Investment Company Act of 1940, as amended, and the
rules and regulations of the SEC thereunder.
“IRS” shall mean the
Internal Revenue Service, and any successor thereto.
“IT Separation Costs”
shall have the meaning set forth in Section 4.18(a).
“IT Separation Plan”
shall have the meaning set forth in Section 4.18(a).
“Leases” shall have
the meaning set forth in Section 2.19.
“Letter Agreement”
shall mean the Letter Agreement, dated as of the date hereof, between Buyer,
Seller Parent and Seller.
“LFD” shall have the
meaning set forth in Section 4.18(a).
“License Agreements”
shall mean all Contracts with respect to any Intellectual Property that is
licensed by or to the Company Group.
“Xxxxx Circle
Agreements” shall mean the Contracts set forth under the heading “Xxxxx
Circle Agreements” in Schedule 2.9(a) of the Seller Disclosure
Schedule.
“Losses” shall have
the meaning set forth in Section 8.2(c).
“Marked Materials”
shall have the meaning set forth in Section 4.19(b).
“Material Contract”
shall mean any Contract to which any member of the Company Group is a party or
by which it or any of its properties or assets is bound of the type listed
below:
(a) any
Advisory Agreement;
(b) any
Distribution Agreement;
(c) any Fund
Services Agreement;
(d) any
License Agreement or Contract pertaining to the licensing of Information
Technology Systems used in the ordinary course of the business of any member of
the Company Group, other than (i) off-the-shelf software licenses entered into
on standard terms involving commercially available software and (ii) License
Agreements and such other Contracts involving fees and payments of less than
$50,000;
(e) any
Lease;
(f) any
Contract relating to the incurrence, assumption or guarantee of any Indebtedness
or imposing an Encumbrance (other than a Permitted Encumbrance) on any of the
material assets of the Company Group;
(g) any
Contract that is not cancelable without penalty on 30 days’ or
A-9
less notice involving annual payments in excess of $250,000;
(h) any
Contract for joint ventures, strategic alliances, partnerships or sharing of
profits or proprietary information;
(i) any
Contract relating to the acquisition (by merger, purchase of stock or assets or
otherwise) by any member of the Company Group of any operating business or
material assets or the capital stock of any other Person entered into in the
last three years or otherwise under which there remains unperformed
obligations;
(j) any
Contract for the sale of any of the assets of the Company Group other than in
the ordinary course of business or for the grant to any Person of any
preferential rights to purchase any of its assets;
(k) any
Contract involving annual payments in excess of $250,000 providing for the
acceleration or vesting of payments that are conditioned, in whole or in part,
on a change in control of any member of the Company Group;
(l) other
than any Company Benefit Plan or Seller Plan, any Contract with any current or
former officer, director, stockholder or Affiliate of any member of the Company
Group or any “key person” or, to the Knowledge of Seller, any family member of
any of the foregoing;
(m) any
Contract with any labor union or association representing any employee of any
member of the Company Group;
(n) other
than any Company Benefit Plan or Seller Plan, any Contract under which a member
of the Company Group has made advances or loans to any other
Person;
(o) other
than any Company Benefit Plan or Seller Plan, any Contract providing for
severance, retention, change in control or other similar payments;
(p) any
Contract that prohibits or restricts the ability of any member of the Company
Group to conduct its business, to engage in any business or operate in any
geographical area or to compete with any Person or (other than customary
non-solicits in vendor Contracts not applicable to investment professionals) to
solicit or hire any person with respect to employment;
(q) other
than any Company Benefit Plan or Seller Plan, any Contract to pay any consulting
fee where the total guaranteed compensation for the consultant would exceed
$200,000 in the
aggregate per annum;
(r) any
Contract requiring any member of the Company Group to co-invest with any other
Person, to provide seed capital or similar investment or to invest in any
investment product;
(s) any
Contract that provides for earn-outs or other similar contingent
A-10
obligations;
(t) any
Contract that includes a “most favored nation” provision; and
(u) any “soft
dollar” Contract relating to the provision or use of market data and other
research-related products and services under which payments made in the form of
brokerage commissions (or the value of the services received in connection with
such payments) would exceed $50,000 in the aggregate per annum regardless of
whether such payments are made by a member of the Company Group or a third party
on behalf of the Company Group.
“Material Variance”
shall mean, with respect to any rolling two year period, a negative variance of
more than 5% per annum of the annual rate of return of the Accounts measured
against the Risk Management Benchmark for that same period. The
parties agree that (a) for purposes of calculating the annual rate of return for
the one year period ending as of the calendar quarter ending immediately prior
to the Closing, such annual rate of return shall be deemed to equal the Risk
Management Benchmark for such period, (b) for the purposes of determining the
annual rate of return for the Accounts and the Risk Management Benchmark, the
annual rate of return and Risk Management Benchmark shall not include any
portion thereof attributable to (i) Excluded Assets, (ii) any portion of an
Account comprised of limited partnerships or (iii) any action taken or not taken
as a result of instructions by, or restrictions and practices of, the Client;
provided, that,
for the purpose of this sub-paragraph (iii), the rate of return applicable to
the class of asset to which any such instruction, restriction or practice
applies shall be deemed to equal the Risk Management Benchmark for the duration
of such exclusion.
“Measurement Client”
shall mean (a) Seller Parent or any Affiliate thereof and (b) any Seller Parent
product set forth on Schedule 1.8 of the Seller Disclosure Schedule invested in
a Company Group product set forth therein or any other investment product, fund
or account created, sponsored, advised or administered by Seller Parent or its
Affiliates.
“Measurement Period”
shall mean each of each of calendar year 2010, 2011 and 2012.
“Measurement Period
Revenues” shall mean, with respect to a particular Measurement Period,
the aggregate investment advisory, investment management and subadvisory
revenues (other than for the avoidance of doubt, revenues from securities,
capital market or investments banking services) earned, directly or indirectly,
by Buyer and its Affiliates (including the Company Group) in respect of such
Measurement Period from all accounts of all Measurement Clients; provided that
Measurement Period Revenues shall not include any revenues earned from (i) any
account for which Seller Parent or one of Affiliates acts as an ERISA fiduciary
or (ii) any account that is subject to a General Account Advisory Agreement
after the time that such General Account Advisory Agreement is terminated for
any reason by either party thereto.
“Monthly Fees” shall
have the meaning set forth in Section 2.10.
A-11
“Multiemployer Plan”
shall have the meaning set forth in Section 2.16(d).
“Multiple Employer
Plan” shall have the meaning set forth in Section 2.16(d).
“Negative Consent
Notice” shall have the meaning set forth in Section
4.2(c)(ii).
“Notice of
Disagreement” shall have the meaning set forth in Section
1.5(c).
“NYSE” shall mean The
New York Stock Exchange, Inc.
“One Commerce Square”
shall mean the property located at Xxx Xxxxxxxx Xxxxxx, Xxxxxxxxxxxx,
XX.
“Order” shall mean any
order, injunction, judgment, doctrine, decree, ruling or writ of a Governmental
Authority.
“Organizational
Documents” shall mean, with respect to any Person that is a corporation,
its articles or certificate of incorporation or memorandum and articles of
association, as the case may be, and bylaws; with respect to any Person that is
a partnership, its certificate of partnership and partnership agreement; with
respect to any Person that is a limited liability company, its certificate of
formation and limited liability company or operating agreement; with respect to
any Person that is a trust or other entity, its declaration or agreement of
trust or other constituent document; and with respect to any other Person, its
comparable organizational documents; in each case, as has been amended or
restated and as in effect on the date hereof.
“Participant” shall
have the meaning set forth in Section 4.12(g)(i).
“Performance Fee”
shall mean any performance fee or incentive fee payable under any Advisory
Agreement.
“Performance Fee Calculation
Period” shall have the meaning set forth in Section 1.6.
“Permits” shall mean
all municipal, state and federal and other governmental permits, licenses,
registrations, agreements, waivers and authorizations held or used by the
applicable Person in connection with its business and operations.
“Permitted
Encumbrances” shall mean (i) zoning, entitlement and other land use and
environmental regulations by any Governmental Authority, provided that such
regulations have not been violated; (ii) statutory liens for current Taxes not
yet delinquent or which are being actively contested in good faith by
appropriate proceedings; (iii) mechanics’, carriers’, workmen’s and repairmen’s
Encumbrances arising or incurred in the ordinary course of business that are not
material to the business, operations and financial condition of the property of
the Company so encumbered and that are not
A-12
resulting from a breach, default or violation by the Company or
any member of the Company Group of any Contract or Applicable Law or (iv)
Encumbrances disclosed in policies of title insurance which have been delivered
to Buyer.
“Person” shall mean
any individual, corporation, company, partnership (limited or general), limited
liability company, joint venture, association, trust, joint stock company,
unincorporated organization, Governmental Authority or other
entity.
“Plan” shall mean each
Company Benefit Plan and each Seller Plan, as applicable.
“Post-Closing Tax
Period” shall mean any taxable year or period that begins after the
Closing Date.
“Post Closing Vesting
Date” shall have the meaning set forth in Section 4.12(k).
“Pre-Closing Tax
Period” shall mean any taxable year or period that ends on or before the
Closing Date.
“Proceedings” shall
have the meaning set forth in Section 2.15.
“Public Fund” shall
mean each U.S. Sponsored Fund and UCIT.
“Public Fund Board”
shall mean the board of directors or trustees (as applicable) of the applicable
U.S. Public Fund.
“Purchase Price” shall
have the meaning set forth in Section 1.1(a).
“Purchase Price Adjustment
Event” shall mean the termination of a General Account Advisory Agreement
by an Affiliate of Seller Parent other than any such termination following the
occurrence of any of the following events:
(a)
|
(i)
the gross negligence or willful misconduct of the Adviser (for purposes of
this definition, as defined in the applicable General Account Agreement)
in managing any Account (for purposes of this definition, as defined in
the applicable General Account Agreement), (ii) a material violation of
law by the Adviser with respect to the management of any Account or (iii)
the imposition of any material sanction, restriction or penalty imposed by
a Regulatory Authority on the Adviser that the Client (for purposes of
this definition, as defined in the applicable General Account Agreement)
determines could reasonably be expected to have a material and adverse
effect on the Adviser’s ability to manage the
Accounts;
|
(b)
|
for
a period of 90 consecutive days, the number of Approved Managers managing
the Accounts is less than a majority of the total number of Approved
Managers set forth in Exhibit F; provided that
the Client may not terminate this Agreement pursuant to this clause (b) if
the Client has approved pursuant to Section 2.11(a) of the applicable
General Account Agreement a sufficient number of new Approved Managers
(for purposes of this definition, as defined in the applicable General
Account Agreement) so that the number of Approved Managers is a majority
of the total number of Approved Managers set forth in Exhibit
F;
|
A-13
(c)
|
(c)
(i) if, for any calendar quarter ending on or after the one year
anniversary of the Closing Date, there is a Material Variance of the
Accounts for any rolling two year period ending at the end of any such
calendar quarter (any such calendar quarter at the end of which there is a
Material Variance, a “Measurement
Quarter”) and (ii) there remains a Material Variance for each two
year rolling period ending at the end of each of the next four calendar
quarters following the Measurement Quarter, a decision by the Client’s
board of directors in the good faith exercise of its fiduciary duties to
terminate the Agreement because the Client’s interests are better served
with another investment adviser; or
|
(d)
|
the
Adviser’s material breach of this Agreement (other than breaches of
Section 2.7 which shall be subject to the standard set forth in clause (a)
above) that (if curable) has not been cured by the Adviser within 30 days
of the Client providing written notice, unless the Client agrees in
writing to extend such cure period.
|
“Purchase Price Adjustment
Payment Amount” shall mean, with respect to a particular Purchase Price
Adjustment Event, a portion of the Purchase Price equal to the product of (i) a
fraction, the numerator of which is equal to the number of full months remaining
in the period measured from the Closing Date through the ten year anniversary
thereof after such Purchase Price Adjustment Event, and the denominator of which
is equal to 120 and (ii) the amount set forth on Exhibit E hereto
opposite the name of the applicable Affiliate of Seller Parent.
“Qualified Plans”
shall have the meaning set forth in Section 2.16(e).
“Registered IP” shall
have the meaning set forth in Section 2.17(a).
“Regulatory Documents”
shall mean, with respect to a Person, all forms, reports, registration
statements, schedules and other documents filed, or required to be filed, by
such Person pursuant to applicable Securities Laws or the applicable rules and
regulations of any United States or foreign governmental or non-governmental
self-regulatory organization, agency or authority.
“Retained Disputes”
shall have the meaning set forth in Section 4.4(c).
A-14
“Revenue Run-Rate”
shall mean, with respect to any account of any Client, as of a specified date,
the aggregate annualized investment advisory, investment management and
subadvisory fees for such account payable to the Company Group as of such
specified date, determined by multiplying (a) the Adjusted Assets Under
Management for such account as of such specified date by (b) the applicable Fee
Rate (or, in the case of any U.S. Sponsored Fund, 80% of the Fee Rate) for such
account derived from the Monthly Fees for the calendar month immediately prior
to the calendar month in which the Closing Date falls (not including any
performance-based or incentive fees, and net of any subadvisory fees paid to a
Person not a member of the Company Group). The calculation of the
applicable annual fee rates used in the Closing Revenue Run-Rate shall be made
in a manner consistent with the methodologies used for the calculation of the
applicable annual fee rates used in the Base Revenue Run-Rate.
“Revenue Run-Rate Adjustment
Amount” means the product of (a) the Base Purchase Price multiplied by
(b) the excess, if any, of (i) 90% over (ii) a fraction (expressed as a
percentage) the numerator of which is the Closing Revenue Run-Rate and the
denominator of which is the Base Revenue Run-Rate (provided that the
resulting excess percentage calculated pursuant to this clause (b) shall not
exceed 15%).
“Revenue Sharing
Arrangement” means any agreement pursuant to which a member of the
Company Group is obligated to make a payment to a third party for services
rendered by such third party out of the advisory fee otherwise payable to a
member of the Company Group based on the assets under management attributable to
such third party.
“RIA” has the meaning
set forth in Section 2.12(g).
“Risk Management
Benchmark” shall mean the risk management benchmark utilized in the
Lincoln Financial Group Investment Review process for the Accounts as quarterly
re-weighted and which shall be consistent with the past practice of the Client
as of the date hereof, with any variance from such risk management benchmark
determined in accordance with the methodology employed in the Lincoln Financial
Group Investment Review process as of the date hereof, excluding the variance,
if any, attributable to the Accounts’ Investment Policies (for purposes of this
definition, as defined in the applicable General Account
Agreement).
“SEC” shall mean the
Securities and Exchange Commission and any successor thereto.
“Securities Act” shall
mean the Securities Act of 1933, as amended, and the rules and regulations
promulgated by the SEC thereunder.
“Securities Laws”
shall mean the Securities Act, the Exchange Act, the Investment Company Act, the
Investment Advisers Act, state “blue sky,” securities and investment advisory
laws, all applicable foreign securities laws, and the rules and regulations
promulgated thereunder.
“Seller” shall have
the meaning set forth in the preamble hereto.
A-15
“Seller Disclosure
Schedule” shall have the meaning set forth in the introduction to Article
II.
“Seller Indemnified
Party” shall have the meaning set forth in Section 8.2(b).
“Seller Parent” shall
have the meaning set forth in the preamble hereto.
“Seller Parent Closing
Revenue Run-Rate” shall mean the aggregate Revenue Run-Rate calculated as
of the fifth Business Day prior to the last Business Day of the calendar month
ending immediately prior to the Closing Date for all accounts of any Client that
is (a) an account that is the subject of a General Account Advisory Agreement
and (b) any Seller Parent product set forth on Schedule 1.8 of the Seller
Disclosure Schedule invested in a Company Group product set forth therein; provided that the
Seller Parent Closing Revenue Run-Rate shall not include any Revenue Run-Rate
attributable to (a) any account for which Seller Parent or one of Affiliates
acts as an ERISA fiduciary or (ii) any account that is subject to a General
Account Advisory Agreement after the time that such General Account Advisory
Agreement is terminated for any reason by either party thereto.
“Seller Parent Deferred
Compensation Plan” shall have the meaning set forth in Section
4.12(g)(i).
“Seller Parent Measurement
Event” shall mean, with respect to a particular Measurement Period, where
the Measurement Period Revenues for such Measurement Period are greater than
125% of the Seller Parent Closing Revenue Run-Rate.
“Seller Parent Measurement
Period Payment” shall mean, with respect to a particular Measurement
Period in respect of which a Seller Parent Measurement Event has occurred, an
amount equal to the product of (a) 20% and (b) the excess of (A) the Measurement
Period Revenues for such Measurement Period over (B) 125% (or, if the Closing
occurs in 2010 other than on January 1, 2010, in 2010 only, a percentage equal
to (x) 125% times (y) a fraction, the numerator of which is the number of
calendar days remaining in 2010 from and after the Closing Date, and the
denominator of which is equal to 365) times the Seller Parent Closing Revenue
Run-Rate.
“Seller Plans” shall
have the meaning set forth in Section 2.16(a).
“Seller Trademarks”
shall have the meaning set forth in Section 4.19(a).
“Shares” shall have
the meaning set forth in the recitals.
“Straddle Period”
shall mean any taxable period that begins before the Closing Date and ends after
the Closing Date.
“Subsidiary” of a
Person shall mean any other Person with respect to which the first Person (i)
has the right to elect a majority of the board of directors or other
A-16
Persons performing similar functions or (ii) beneficially owns 50%
or more of the voting stock (or of any other form of other voting or controlling
equity interest in the case of a Person that is not a corporation) in each case,
directly or indirectly through one or more other Persons; provided that no
Public Fund shall be a Subsidiary of Seller or any member of the Company
Group.
“Taxes” shall mean all
federal, state, local, foreign or other taxes, imposts, rates, levies,
assessments and other charges imposed by any Taxing Authority (and all interest
and penalties thereon and additions thereto), including, without limitation, all
income, excise, franchise, gains, capital, real property, goods and services,
transfer, value added, gross receipts, occupation, premium, customs duties,
alternative, windfall profits, severance, ad valorem, personal property,
production, sales, use, license, stamp, documentary stamp, mortgage recording,
employment, payroll, social security, unemployment, disability, estimated and
withholding taxes, fees and charges with respect to taxes of any kind
whatsoever.
“Taxing Authority”
shall mean any Governmental Authority having jurisdiction over the assessment,
determination, collection or other imposition of any Tax.
“Tax Proceeding” shall
have the meaning set forth in Section 7.5(a).
“Tax Return” shall
mean all returns, declarations, reports, statements, estimates, estimated tax
returns or forms, information returns, information statements and other
statements, forms and documents and amended returns (including all schedules,
exhibits, and other attachments thereto) filed or required to be filed with any
Taxing Authority in connection with the calculation, determination, assessment
or collection of, any Taxes and including, where permitted or required, such
portions of combined, consolidated or unitary returns that includes any member
of the Company Group.
“Termination Date”
shall have the meaning set forth in Section 6.1(a)(v).
“Trade Performance
Information” shall mean the investment performance record and related
historical performance data of the Company Group (or any member thereof) for any
period in question.
“Trademarks” shall
have the meaning set forth in Section 4.19(a).
“Transaction Notice”
shall have the meaning set forth in Section 4.2(c)(i).
“Transfer Agent” shall
have the meaning set forth in Section 2.13(h).
“Transfer Taxes” shall
have the meaning set forth in Section 7.7.
“Transition Services
Agreement” shall have the meaning set forth in Section
4.18(b).
“True-Up Period” shall
have the meaning set forth in Section 1.5(a).
A-17
“Trust Company” shall
have the meaning set forth in Section 2.13(i).
“Two Commerce Square”
shall mean the property located at Two Commerce Square, Philadelphia,
PA.
“UCIT” shall mean a
collective investment scheme governed by the Irish regulations on Undertakings
for the Collective Investment of Transferable Securities.
“Unaudited Company Balance
Sheet” shall have the meaning set forth in Section 2.7(a).
“U.S. Public Fund” shall
mean an investment company (or series thereof) registered under the Investment
Company Act for which a member of the Company Group provides advisory or
subadvisory services pursuant to an Advisory Agreement.
“U.S. Sponsored Fund”
means each of the U.S. Public Funds listed in Schedule 2.11(a) of the Seller
Disclosure Schedule.
“USPTO” shall have
the meaning set forth in Section 4.24.
“Wire Transfer” shall
mean a payment in immediately available funds by wire transfer in lawful money
of the United States to such account or to a number of accounts as shall have
been designated by written notice from the receiving party to the paying
party.
A-18