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EXHIBIT 2
OPERATING AGREEMENT
This Operating Agreement (this "Agreement") is entered into as of
November 30, 1997 by and between Xxxxxxxxxxx Capital, L.P., a Delaware limited
partnership ("Opcap"), and PIMCO Advisors L.P., a Delaware limited partnership
("PIMCO Advisors"). Capitalized terms not otherwise defined herein are defined
in the Amended and Restated Agreement of Limited Partnership of PIMCO Advisors
(the "PIMCO Advisors Partnership Agreement").
RECITALS
1. On the date of this Agreement, the general partner of PIMCO
Advisors admitted Opcap as an additional general partner of PIMCO Advisors.
2. Upon the closing of the transactions (the "Merger") contemplated
by that certain Agreement and Plan of Merger dated as of November 4, 1997
between PIMCO Advisors, Value Advisors Transitory L.P., a Delaware limited
partnership, and Xxxxxxxxxxx Capital, a Delaware general partnership
("Xxxxxxxxxxx Capital"), Opcap will be issued 24,981,285 Class A GP Units in
exchange for (i) its interest in Xxxxxxxxxxx Capital and (ii) cash in the amount
of approximately $32,200,000.
3. Following the Merger, the general partners of PIMCO Advisors will
effect a restructuring (the "Restructuring") pursuant to which all Class A LP
Units held by Public Unitholders will be exchanged for units of limited partner
interest in Opcap (each, an "Opcap Unit").
4. Immediately following the Restructuring, the trading of the Class
A LP Units on the New York Stock Exchange will cease, and Opcap will be the sole
publicly traded company through which Partnership Interests in PIMCO Advisors
are held.
5. The parties wish to confirm their mutual understanding with
regard to their relationship following the Restructuring.
AGREEMENT
Section 1. Definitions.
Exchange is defined in Section 5(a).
Exchange Right is defined in Section 3.
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Exchanging Unitholder is defined in Section 5(b).
Merger is defined in the Recitals to this Agreement.
Opcap Unit is defined in the Recitals to this Agreement.
Xxxxxxxxxxx Capital is defined in the Recitals to this Agreement.
PIMCO Advisors Partnership Agreement is defined in the Recitals to
this Agreement.
PIMCO Advisors Unit means a Class A or Class B GP or LP Unit.
Private Unit means a PIMCO Advisors Unit (i) designated as a Private
Unit in a written certificate executed by PIMCO Advisors and not subsequently
revoked, (ii) issued pursuant to a Unit Incentive Plan covering PIMCO Advisors
Units, or (iii) held by the noteholders pursuant to that certain Amended and
Restated Note Agreement, dated as of September 26, 1997, as amended, between
such noteholders and PIMCO Partners G.P., a California general partnership.
Private Unitholder is defined in Section 5(a).
Registration Statement is defined in Section 5(a).
Restructuring is defined in the Recitals to this Agreement.
Unit Incentive Plan means a plan (including without limitation a
deferred compensation plan) providing for the issuance of Equity Securities,
options or rights to acquire Equity Securities, or rights based upon the value
of Equity Securities or otherwise relating to Equity Securities, to or for the
benefit of individuals providing services to the Persons specified therein.
1994 Registration Rights Agreement is defined in Section 3.
Section 2. Unit Parity.
(a) Opcap shall take such actions as shall be required from
time to time so as to ensure that the number of outstanding Opcap Units is at
all times equal to the number of PIMCO Advisors Units held by Opcap and its
Subsidiaries which are allocable to the limited partner interests in Opcap.
(b) Upon any issuance of Opcap Units, Opcap shall immediately
contribute the consideration, if any, received by Opcap for such Opcap Units to
PIMCO Advisors in exchange for Class A GP Units equal in number to the number of
such Opcap Units.
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Section 3. Assumption of Certain Obligations of PIMCO Advisors.
Opcap hereby assumes and agrees to perform the obligations of PIMCO
Advisors under:
(i) the 1993 Unit Option Plan, 1994 Class B LP Unit Option
Plan and 1996 Unit Incentive Plan of PIMCO Advisors, but with regard to options
outstanding immediately after giving effect to the Restructuring, only to the
extent such options are exercisable to purchase Opcap Units;
(ii) that certain Exchange Right issued by PIMCO Advisors on
November 4, 1997 (the "Exchange Right");
(iii) that certain Registration Rights Agreement made
effective as of November 15, 1994 between PIMCO Advisors and certain holders of
PIMCO Advisors Units (the "1994 Registration Rights Agreement"); and
(iv) that certain Registration Rights Agreement made effective
as of November 4, 1997 between PIMCO Advisors and certain holders of PIMCO
Advisors Units.
Section 4. Unit Incentive Plans.
Opcap shall, at the request of PIMCO Advisors from time to time,
adopt and maintain one or more Unit Incentive Plans covering Opcap Units or
PIMCO Advisors Units for the benefit of individuals providing services to Opcap,
PIMCO Advisors and their respective Subsidiaries. Awards under the Unit
Incentive Plans to individuals providing services to PIMCO Advisors and its
Subsidiaries shall be determined by the Unit Incentive Committee of the Equity
Board of PIMCO Advisors or its successor.
Section 5. Right to Exchange Private Units for Opcap Units.
(a) Twice each year, as soon as practicable after financial
statements for the preceding year, or for the first six months of the fiscal
year, as the case may be, are available, Opcap shall file, or take down from the
shelf, a registration statement under the Securities Act covering Opcap Units to
be issued in exchange for Private Units (a "Registration Statement"). The
Registration Statement shall cover resales by Affiliates of Opcap. Upon the
effectiveness of the Registration Statement, Opcap shall make an offer to the
holders of Private Units (each, a "Private Unitholder") to acquire some or all
of the Private Units held by them in exchange for Opcap Units (an "Exchange").
(b) The offer shall provide that any Private Unitholder which
accepts the offer (each, an "Exchanging Unitholder") shall receive one Opcap
Unit for each Private Unit tendered for Exchange. The other terms and conditions
of the offer shall be determined by
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agreement between Opcap and PIMCO Advisors. Opcap shall provide to the Private
Unitholders reasonable notice of the offer, and a reasonable opportunity to
tender their Private Units in the Exchange.
(c) As promptly as practicable after the surrender of Private
Units for Exchange, Opcap shall assign, transfer and deliver to the Exchanging
Unitholder at the principal office of Opcap, or if requested, by mail to the
Exchanging Unitholder at its address noted on the notice of exchange, a
certificate for the number of Opcap Units to be delivered in the Exchange.
(d) Opcap Units issued and delivered in an Exchange shall be duly
authorized, validly issued, fully paid and nonassessable and, if applicable,
free of any lien, encumbrance or other adverse claim.
(e) An Exchanging Unitholder will become the holder of record of
the Opcap Units issued to it in the Exchange as of the close of business on the
day its PIMCO Advisors Units are surrendered for exchange, accompanied by a duly
completed and executed notice of exchange and such other duly and completed
documents and instruments in such form as shall be specified in the notice of
the offer of exchange.
(f) A Private Unitholder shall have the right, at its option, to
tender any or all of the Private Units held by it to Opcap for exchange into
Opcap Units, for the purpose of offering the Opcap Units received in the
exchange pursuant to a Registration Statement which is filed or becomes
effective under the 1994 Registration Rights Agreement, at the rate of one Opcap
Unit for each Private Unit tendered for exchange. In order to exercise this
right, such Private Unitholder shall surrender the certificates evidencing the
Private Units to be exchanged, duly endorsed to the order of Opcap, at the
principal office of Opcap, accompanied by a duly completed and executed notice
of exchange and such other duly completed and executed documents and instruments
in such form as shall be reasonably prescribed from time to time by Opcap. The
provisions of Section 5(c), (d) and (e) shall apply to such exchange as though
such Private Unitholder were an Exchanging Unitholder and such exchange were an
Exchange.
(g) The rights given to Private Unitholders by this Section 5 are
subject to, and shall be limited by, any transfer restriction that may be
imposed on the Private Unitholders from time to time by PIMCO Advisors pursuant
to the terms of the PIMCO Advisors Partnership Agreement or a duly adopted
Written Action of the general partners of PIMCO Advisors.
Section 6. Negative Covenants.
Without the prior written consent of PIMCO Advisors, Opcap shall
not, and shall not permit any of its Subsidiaries to:
(i) carry on any business except in connection with or
incidental to (i) the performance of its duties as a general partner under the
PIMCO Advisors Partnership
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Agreement, (ii) the direct or indirect acquisition, ownership or disposition of
PIMCO Advisors Units, and (iii) its governance and existence;
(ii) merge or consolidate with or into any other Person, or
sell or otherwise dispose of all or substantially all of its assets, or effect a
Recapitalization with respect to the Opcap Units, or issue or agree to issue any
Equity Securities other than Opcap Units; or
(iii) create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
any Indebtedness.
Section 7. Miscellaneous.
(a) This Agreement may not be amended, modified or waived except
by written instrument executed by the parties hereto.
(b) This Agreement constitutes the entire agreement of the
parties hereto, and supersedes all prior agreements and understandings, written
and oral, among the parties with respect to the subject matter hereof.
(c) When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
(d) All notices and other communications hereunder shall be in
writing and shall be deemed given (a) when delivered in person, (b) when
transmitted by telecopy (with written confirmation), (c) on the third Business
Day following the mailing thereof by certified or registered mail (return
receipt requested) or (d) when delivered by an express courier (with written
confirmation) to the parties at their respective principal offices.
(e) This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement is intended or shall be construed to confer upon any
Person other than the parties hereto 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 party
hereto without the prior written consent of the other party hereto.
(f) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same agreement, it being understood that all of the
parties need not sign the same counterpart.
(g) This Agreement, the legal relations between the parties and
the adjudication and the enforcement thereof, shall be governed by and
interpreted and construed in
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accordance with the substantive laws of the state of Delaware, without regard to
choice of law principles.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first above written.
XXXXXXXXXXX CAPITAL, L.P.
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Executive Vice President
PIMCO ADVISORS L.P.
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
Executive Vice President
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