STOCK PURCHASE AGREEMENT
by and among
XXXX XXXXX, INC.,
ROYCE & ASSOCIATES, INC.
THE SHAREHOLDERS OF ROYCE & ASSOCIATES, INC.
and
ROYCE MANAGEMENT COMPANY
Dated as of July 16, 2001
2
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. PURCHASE OF R&A SHARES; PURCHASE OF RMC ASSETS 2
1.1 General 2
1.2 Asset Purchase; Closing Purchase Price; Delivery of R&A Shares 2
1.3 Release of Applicable Cost Overruns Escrow; Additional Payments 3
1.4 Time and Place of Closing 6
1.5 Further Assurances 6
1.6 Transfer Taxes 6
1.7 Contingent Payments 6
1.8 Stock Consideration 11
SECTION 2. REPRESENTATIONS AND WARRANTIES OF R&A 13
2.1 Making of Representations and Warranties 13
2.2 Organization and Qualification of R&A, RFS and RMC 14
2.3 Capital Stock of R&A; Partnership Interests of RMC 14
2.4 Subsidiaries; Investments 15
2.5 Authority of the Royce Companies. 15
2.6 Real Property 16
2.7 Investment Advisory Activities 16
2.8 Financial Statements 18
2.9 Taxes 20
2.10 Absence of Certain Changes 21
2.11 Intellectual Property 21
2.12 Contracts 21
2.13 Litigation 22
2.14 Compliance with Laws 23
2.15 Finder's Fee 23
2.16 Employee Benefit Programs 23
2.17 Directors, Officers and Employees 25
2.18 Title to Personal Property and Related Matters 26
2.19 Related Party Transactions. 26
2.20 Insurance 26
2.21 Certain Regulatory Matters 26
2.22 Securities Act Matters 27
SECTION 3. COVENANTS OF R&A 27
3.1 Making of Covenants and Agreements 27
3.2 Consents from Clients other than Fund Clients 27
3.3 Fund Client Approvals. 28
3.4 Authorization from Others 29
3.5 Conduct of Business 29
3.6 Financial Statements 31
3.7 Access 31
3
3.8 Consummation of Agreement 32
3.9 Cooperation of R&A 32
3.10 Updated Representations and Warranties 32
3.11 Closing Bonus Payments 32
3.12 Restricted Activities of CMR 32
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER 35
4.1 Making of Representations and Warranties 35
4.2 Organization of the Acquirer 35
4.3 Authority of the Acquirer 35
4.4 Capitalization 36
4.5 Litigation 37
4.6 Consent Solicitation Materials 37
4.7 SEC Reports 37
4.8 Finder's Fee 37
4.9 Absence of Certain Changes 37
SECTION 5. COVENANTS OF THE ACQUIRER 37
5.1 Making of Covenants and Agreements 37
5.2 Employee Benefits 37
5.3 Section 15 of the Investment Company Act 39
5.4 Authorization from Others 39
5.5 Consummation of Agreement 39
5.6 Cooperation of the Acquirer 39
5.7 Indemnification and Insurance. 39
5.8 Structural Covenants Related to Contingent Payments 40
5.9 Updated Representations and Warranties 41
5.10 Excluded RMC Funds 41
5.11 Location of Offices 41
5.12 Acquirer Right to Substitute Wholly-Owned Subsidiaries 42
SECTION 6. CONDITIONS TO THE OBLIGATIONS OF THE ACQUIRER 42
6.1 Illegality; Injunction 42
6.2 Representations, Warranties and Covenants. 42
6.3 Advisory Contract Consents 43
6.4 Other Approvals 44
6.5 Legal Opinion 45
6.6 Other Transaction Documents 45
6.7 Working Capital 45
6.8 Section 15 Compliance 45
6.9 Asset Purchase 45
SECTION 7. CONDITIONS TO OBLIGATIONS OF R&A, THE R&A SHAREHOLDERS
AND RMC 45
7.1 Illegality; Injunction 45
7.2 Representations, Warranties and Covenants. 45
4
7.3 Other Approvals 46
7.4 Section 15 Compliance 46
7.5 Legal Opinion 46
7.6 Other Transaction Documents 46
7.7 Asset Purchase 46
SECTION 8. TERMINATION OF AGREEMENT; EFFECT OF THE CLOSING 46
8.1 Termination 47
8.2 Effect of Termination 47
8.3 Effect of Closing 47
SECTION 9. TAX MATTERS 47
9.1 Section 338(h)(10) Election 47
9.2 Tax Returns and Payments. 48
9.3 Tax Cooperation and Exchange of Information 49
9.4 Allocation of Taxable Income 50
SECTION 10. SURVIVAL; INDEMNIFICATION 50
10.1 Survival of Representations, Warranties and Covenants 50
10.2 Indemnification by the R&A Shareholders 50
10.3 Limitations on Indemnification by the R&A Shareholders 51
10.4 Indemnification by the Acquirer 51
10.5 Limitation on Indemnification by the Acquirer 52
10.6 Notice; Defense of Claims 52
10.7 No Right of Setoff; Insurance, Tax and Other Benefits. 53
10.8 Indemnification Payments 54
SECTION 11. DEFINITIONS 54
SECTION 12. MISCELLANEOUS 65
12.1 Fees and Expenses 66
12.2 Dispute Resolution 66
12.3 Waivers 66
12.4 Governing Law 67
12.5 Notices 67
12.6 Entire Agreement 68
12.7 Assignability; Binding Effect 68
12.8 No Third Party Beneficiaries 68
12.9 Captions and Gender 68
12.10 Execution in Counterparts 68
12.11 Amendments 69
12.12 Publicity and Disclosures 69
12.13 Consent to Jurisdiction 69
5
SCHEDULES
Schedule 1.2 - Allocation of Closing Purchase Price
Schedule 2.2 - Jurisdictions of Qualification
Schedule 2.3 - Capitalization
Schedule 2.4 - Subsidiaries; Investments; Profit Sharing Agreements
Schedule 2.5 - Approvals
Schedule 2.6 - Real Property
Schedule 2.7 - Assets Under Management
Schedule 2.8 - Financial Statements
Schedule 2.9 - Taxes
Schedule 2.10 - Adverse Changes
Schedule 2.11 - Intellectual Property
Schedule 2.12 - Contracts
Schedule 2.13 - Litigation
Schedule 2.14 - Compliance with Laws
Schedule 2.15 - Finder's Fee
Schedule 2.16 - Employee Benefits
Schedule 2.17 - Directors, Officers and Employees
Schedule 2.18 - Title to Personal Property
Schedule 2.19 - Related Party Transactions
Schedule 2.20 - Insurance
Schedule 3.5 - Conduct of Business
Schedule 4.7 - SEC Reports
Schedule 6.5 - Legal Opinion of R&A
Schedule 6.6 - Employment Agreements
Schedule 7.5 - Legal Opinion of the Acquirer
Schedule 9.1(b) - Purchase Price Allocation
EXHIBITS
Exhibit A Revenue Sharing Agreement
Exhibit B Employment Agreements
Exhibit C Closing Bonus Agreements
1
STOCK PURCHASE AGREEMENT (the "Agreement"), entered into as of July
16, 2001, by and among Xxxx Xxxxx, Inc., a Maryland corporation
(the "Acquirer"), Royce & Associates, Inc., a New York corporation ("R&A"),
the shareholders of R&A identified on Schedule 2.3 (the "R&A Shareholders")
and Royce Management Company, a Connecticut general partnership
("RMC" and, collectively with R&A, the "Royce Companies").
W I T N E S S E T H
WHEREAS, R&A and RMC are engaged in the business of providing asset
management and related client services (the "Royce Business");
WHEREAS, as of the date hereof (i) Xxxxxxx X. Xxxxx ("CMR") owns of
record and beneficially all of the issued and outstanding shares of voting
capital stock of R&A (the "R&A Voting Shares") and (ii) those R&A
Shareholders so identified on Schedule 2.3 own of record and beneficially
all of the issued and outstanding shares of non-voting capital stock of
R&A (the "R&A Non-Voting Shares" and, collectively with the R&A Voting
Shares, the "R&A Shares");
WHEREAS, on the terms and subject to the conditions set forth herein,
(i) the Acquirer has agreed to purchase from the R&A Shareholders, and the
R&A Shareholders have agreed to sell to the Acquirer, at the Closing all
of the R&A Shares, and (ii) R&A has agreed to form a limited liability
company under the laws of the State of Delaware ("New RMC"), and to
cause New RMC to purchase from RMC, and RMC has agreed to sell to New RMC,
as of immediately prior to the Closing, substantially all of the assets
and liabilities of RMC;
WHEREAS, in connection with the transactions contemplated hereby, R&A
and the Acquirer have entered into a Revenue Sharing Agreement of even date
herewith that is attached hereto as Exhibit A (the "Revenue Sharing
Agreement"), such Revenue Sharing Agreement to become effective as of
(and subject to) the Closing; and
WHEREAS, in connection with the transactions contemplated hereby,
(i) each of CMR, W. Xxxxxxx Xxxxxx, Xxxxxxxx X. Xxxxx, Xxxx X. Xxxxxxxxx,
Xxxx X. Xxxxxxx, Xx., Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx has entered
into an Employment Agreement with R&A of even date herewith that is attached
hereto as Exhibit B (collectively, the "Employment Agreements"),the
employment term provided for therein to become effective as of (and subject
to) the Closing, and (ii) each of W. Xxxxxxx Xxxxxx, Xxxxxxxx X. Xxxxx,
Xxxx X. Xxxxxxxxx, Xxxx X. Xxxxxxx, Xx., Xxxxxx X. Xxxxxxx and Xxxxxx X.
Xxxxxxx has entered into a Closing Bonus Agreement with R&A of even date
herewith that is attached hereto as Exhibit C (collectively, the "Closing
Bonus Agreements"), each such Closing Bonus Agreement to become effective
as of (and subject to) the Closing; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
provided for herein.
NOW, THEREFORE, in order to consummate the transactions contemplated
hereby, and in consideration of the mutual agreements set forth herein
2
and other valuable consideration, the receipt and adequacy whereof are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. PURCHASE OF R&A SHARES; PURCHASE OF RMC ASSETS
1.1 General. Upon the terms and subject to the conditions
contained in this Agreement, (i) R&A hereby agrees to cause New RMC (A)
to purchase from RMC, and RMC hereby agrees to sell to New RMC, effective
as of immediately prior to the Closing, all of the RMC Assets (other than
RMC Excluded Assets) and (B) to assume from RMC, effective as of
immediately prior to the Closing, all of the Assumed RMC Obligations
(collectively, the "Asset Purchase"), and (ii) the Acquirer hereby agrees
to purchase from each R&A Shareholder, and each R&A Shareholder hereby
agrees to sell to the Acquirer, at the Closing all of the R&A Shares owned
by such R&A Shareholder, free and clear of any Claims (other than any Claims
created by the Acquirer or by the Transaction Documents) (collectively,
the "Stock Purchase").
1.2 Asset Purchase; Closing Purchase Price; Delivery of R&A
Shares.
(a) (i) Upon the terms and subject to the conditions
contained in this Agreement, effective as of immediately prior to the
Closing, RMC hereby contributes, assigns and transfers to New RMC all of
RMC's right, title and interest in and to all of the RMC Assets
(other than the RMC Excluded Assets); (ii) in consideration of the
transfer of the RMC Assets (other than the RMC Excluded Assets) made
pursuant to Section 1.2(a)(i), (A) RMC hereby assigns and transfers to
New RMC, effective as of immediately prior to the Closing, all of the
Assumed RMC Obligations, and New RMC hereby assumes from RMC, effective
as of immediately prior to the Closing, all of the Assumed RMC
Obligations and agrees to pay, discharge and perform, in the ordinary
course and otherwise, all of the Assumed RMC Obligations from and after
the Closing (provided that such assumption of obligations shall not
enlarge or enhance the rights of any third party), and (B) New RMC
shall deliver to RMC (by wire transfer of immediately available funds)
an amount equal to the aggregate capital account balances of RMC in the
Private Fund Clients of RMC (other than any portion thereof constituting
Excluded RMC Assets); (iii) from and after the Closing, New RMC shall
indemnify and hold harmless RMC, the RMC Partners and the officers and
employees of RMC from and against any and all damages, liabilities,
losses, costs and expenses which may be sustained or suffered by any of
them to the extent arising out of, resulting from or relating to any of the
Assumed RMC Obligations (including without limitation New RMC's failure to
perform its obligations under Section 1.2(a)(ii) hereof); prior to the
Closing, R&A shall cause New RMC to become a party to this Agreement
solely for purposes of expressly assuming its obligations under
this Section 1.2(a) (and the parties hereto hereby consent to New RMC so
becoming a party hereto).
(b) Upon the terms and subject to the conditions contained
in this Agreement, at the Closing the Acquirer shall deliver by wire
transfer of immediately available funds (i) to the R&A Shareholders, at
bank accounts to be designated in writing by R&A to the Acquirer at least
three (3) Business Days prior to the Closing Date, an aggregate amount
equal to the Closing Purchase Price (subject to reduction as provided in
3
Section 1.8 below to the extent Acquirer Shares are delivered in partial
payment of the Closing Purchase Price) minus ten million dollars
($10,000,000), and (ii) to an escrow account established for the benefit
of the R&A Shareholders pursuant to the Applicable Cost Overruns Escrow
Agreement, an amount equal to ten million dollars ($10,000,000)
(the "Applicable Cost Overruns Escrow Account Deposit"), collectively in
partial consideration for the sale of the R&A Shares to the Acquirer; that
portion of the Closing Purchase Price delivered to the R&A Shareholders in
immediately available funds as of the Closing shall be paid to the
individual R&A Shareholders in the specific percentages set forth in
Schedule 1.2 hereto.
(c) At the Closing, upon the terms and subject to the
conditions contained in this Agreement, each R&A Shareholder shall
deliver to the Acquirer all of the certificates representing such R&A
Shareholder's R&A Shares, duly endorsed for transfer to the Acquirer or
accompanied by duly executed stock powers, with all requisite state and
federal transfer stamps affixed thereto.
1.3 Release of Applicable Cost Overruns Escrow; Additional
Payments.
(a) The Applicable Cost Overruns Escrow Account Deposit
will be invested while held in escrow by the CMR Representative (or its
designee) in accordance with the provisions relating thereto set forth in
the Applicable Cost Overruns Escrow Agreement, and shall be distributed at
the end of each Applicable Year as follows (until such time as no further
funds remain in escrow pursuant to the Applicable Cost Overruns Escrow
Agreement):
(i) In the case of each Applicable Year, in the event
that the Applicable Cost Overruns for such Applicable Year were greater
than zero dollars ($0), an amount equal to the Applicable Cost Overruns
for such Applicable Year shall be distributed to the Acquirer (up to
the entire remaining Applicable Cost Overruns Escrow Account Deposit,
including the earnings resulting from the investment thereof) promptly
following the determination of the amount of such distribution pursuant
to Section 1.3(c) hereof; provided, however, that the amount of the
distribution to the Acquirer from the Applicable Cost Overruns Escrow
Account Deposit in respect of any Applicable Year shall in no event
(together with any payments required to be made by the R&A Shareholders
to the Acquirer pursuant to Section 1.3(b) hereof) exceed the aggregate
"Special Bonus Payments" required to be made by R&A during such
Applicable Year pursuant to Section 3.1(d) of those Employment
Agreements containing provisions relating to "Special Bonus Payments";
(ii) In the case of each Applicable Year, following the
making of any distribution required to be made to the Acquirer pursuant
to Section 1.3(a)(i) in respect of such Applicable Year, an amount
equal to the excess (if any) of (A) the remaining Applicable Cost
Overruns Escrow Account Deposit (including the earnings resulting
from the investment thereof) over (B) ten million dollars ($10,000,000)
(in the case of each of the first two Applicable Years following the
Closing), or five million dollars ($5,000,000) (in the case of each
Applicable Year thereafter), shall be distributed to the R&A
Shareholders promptly following the determination of the amount of such
distribution pursuant to Section 1.3(c) hereof (with such distribution
to be made in the same respective percentages that the Closing Purchase
Price was paid to them; and
4
(iii) In the case of the sixth (6th) Applicable Year
following the Closing, any remaining portion of the Applicable Cost
Overruns Escrow Account Deposit (including the earnings resulting from
the investment thereof) which remains in escrow as of the end of such
sixth (6th) Applicable Year (following the making of any distribution
required to be made to the Acquirer pursuant to Section 1.3(a)(i) in
respect of such Applicable Year) promptly shall be distributed to the
R&A Shareholders (with such distribution to be made in the same respective
percentages that the Closing Purchase Price was paid to them).
Each distribution required to be made to the R&A Shareholders
from the Applicable Cost Overruns Escrow Account Deposit pursuant to this
Section 1.3(a) shall be so distributed by wire transfer of immediately
available funds to bank accounts designated in writing by the CMR
Representative to the escrow agent under the Applicable Cost Overruns
Escrow Agreement at least three (3) Business Days prior to the date of
any such distribution (or, in the absence of such a written designation
by the CMR Representative, to the same bank accounts used for the payment
of the cash portion of the Closing Purchase Price).
(b) To the extent that the Applicable Cost Overruns
for any Applicable Year exceed the remaining Applicable Cost Overruns
Escrow Account Deposit (including the earnings resulting from the
investment thereof) available to be distributed to the Acquirer pursuant to
Section 1.3(a) hereof, the R&A Shareholders shall pay the amount of such
shortfall to the Acquirer (promptly following the determination of the
amount of any such payment pursuant to Section 1.3(c) hereof) by transfer
of immediately available funds to a bank account designated in writing by
the Acquirer to the CMR Representative at least three (3) Business Days
prior to the date of such payment (with any such payment to be made by the
individual R&A Shareholders in the same respective percentages that the
Closing Purchase Price was paid to them); provided, however, that the
amount of the aggregate payment required to be made by the R&A Shareholders
to the Acquirer pursuant to this Section 1.3(b) in respect of any
Applicable Year shall in no event (together with any distribution
required to be made to the Acquirer from the Applicable Cost Overruns
Escrow Account Deposit pursuant to Section 1.3(a) hereof) exceed the
aggregate "Special Bonus Payments" required to be made by R&A during
such Applicable Year pursuant to Section 3.1(d) of those Employment
Agreements containing provisions relating to "Special Bonus Payments".
(c) As promptly as practicable following the end of
each Applicable Year (and in any event not later than ten (10) Business
Days following the finalization of the relevant dollar amounts under the
Revenue Sharing Agreement relating to such calculations), the Acquirer
shall cause to be prepared and delivered to the CMR Representative a
written statement setting forth the amounts of any Applicable Cost
Overruns for such Applicable Year and the distributions and any
additional payments required to be made pursuant to Sections 1.3(a),
1.3(b) and 1.3(d) hereof (including a calculation of the components
thereof in reasonable detail) (each, an "Applicable Cost Overruns
Statement").
The CMR Representative (and its agents and advisors)
shall have the right to review (and copy) the work papers, schedules,
memoranda and other documents and information prepared or reviewed by
or for the Acquirer in connection with the preparation of the Applicable
Cost Overruns Statement and to communicate with those persons who
conducted such preparation and review, and the Acquirer shall (and
shall cause its Affiliates, accountants and other outside service
5
providers to) cooperate in good faith with the CMR Representative and its
agents and advisors, and provide them with reasonable access to the books
and records of the Acquirer and such other information as they may
reasonably request, in each case in connection with their review of
each Applicable Cost Overruns Statement.
Within ten (10) Business Days after the CMR Representative's
receipt of an Applicable Cost Overruns Statement, the CMR Representative
shall notify the Acquirer in writing of any objection to such Applicable
Cost Overruns Statement, specifying in reasonable detail any such
objections (and if the CMR Representative fails to notify the Acquirer of
any objections within such period, the CMR Representative shall be deemed
to have agreed to the Applicable Cost Overruns Statement as prepared by
the Acquirer). If the CMR Representative does not so object, or if the
CMR Representative and the Acquirer agree on the resolution of all
such objections, the written statement shall be final and binding on all
parties hereto. The Acquirer and the CMR Representative shall negotiate
in good faith to attempt to resolve any such objections, provided that
each of the Acquirer and the CMR Representative shall have the right at
any time after at least two (2) Business Days of negotiation to
unilaterally terminate in writing such negotiations. Not later than
five (5) Business Days after either the Acquirer or the CMR Representative
shall have terminated such negotiations, all such disputed items shall be
submitted for resolution to the Accounting Firm, and each of the Acquirer
and the CMR Representative shall include in such submission their
calculations, work papers, schedules, memoranda and other documents and
information used in connection with the preparation and review of the
Applicable Cost Overruns Statement, and shall cooperate with the Accounting
Firm in good faith to resolve such disputed items (including by providing
the Accounting Firm with the access described in the immediately preceding
paragraph). The Acquirer and the CMR Representative shall use their
reasonable best efforts to cause a written report of the Accounting
Firm resolving the disputed items to be rendered within ten (10) Business
Days of its appointment. The fees and expenses of the Accounting Firm
shall be borne fifty percent (50%) by the Acquirer and fifty percent (50%)
by the R&A Shareholders (such fees and expenses to be borne ratably by
the R&A Shareholders in proportion to their respective shares of the
consideration received at the Closing hereunder, and promptly reimbursed
to the CMR Representative upon its request), and the written report of
the Accounting Firm resolving such disputed items shall be final and
binding on all parties hereto.
(d) To the extent that the investment of the Applicable
Cost Overruns Escrow Account Deposit during any Applicable Year has
resulted in net investment losses with respect to such Applicable Cost
Overruns Escrow Account Deposit (taken at fair market value), prior to
the making of any distributions from the Applicable Cost Overruns Escrow
Account Deposit pursuant to Section 1.3(a) with respect to such Applicable
Year, the R&A Shareholders shall deposit additional funds into the
Applicable Cost Overruns Escrow Account Deposit (with any such deposit to
be made by the individual R&A Shareholders in the same respective
percentages that the Closing Purchase Price was paid to them) in an
amount equal to the lesser of (i) the amount of the net investment
losses resulting during such Applicable Year from the investment
of the Applicable Cost Overruns Escrow Account Deposit or (ii) the amount
necessary to cause the Applicable Cost Overrun Escrow Account Deposit to
equal (A) ten million dollars ($10,000,000) (in the case of each of the
first two Applicable Years following the Closing) or (B) five million
dollars ($5,000,000) (in the case of each Applicable Year thereafter).
6
(e) Promptly following the receipt by the Acquirer of
any distribution or other payment (whether received from the Applicable
Cost Overruns Escrow Account Deposit or directly from the R&A Shareholders)
pursuant to the preceding provisions of this Section 1.3, the
Acquirer shall make a cash contribution to the capital of R&A in an amount
equal to the amount of such distribution or other payment received by the
Acquirer pursuant to the preceding provisions of this Section 1.3, and
the gross amount of such capital contribution shall be utilized
by R&A in the manner contemplated by the second sentence of Section
1(c)(i) of the Revenue Sharing Agreement to pay the expenses and
expenditures of R&A and its subsidiaries giving rise to the Applicable
Cost Overruns that resulted in such distribution or other payment
being made to the Acquirer under this Section 1.3.
1.4 Time and Place of Closing. The closing of the
Stock Purchase (the "Closing") shall be held at the offices of Xxxxxxx
Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m.
local time on the date of the Closing (the "Closing Date"), which shall
be (subject to the proviso contained in Section 1.8(a) hereof) (i)
October 1, 2001, in the event that each of the conditions set forth in
Sections 6 (other than Section 6.5) and 7 (other than Section 7.5) were
fulfilled or waived as of three (3) Business Days prior to October 1, 2001,
or (ii) the first Business Day of the first calendar month following
October 2001 with respect to which each of the conditions set forth in
Sections 6 (other than Section 6.5) and 7 (other than Section 7.5) were
fulfilled or waived as of three (3) Business Days prior to such first
Business Day of such calendar month, in the event that each of the
conditions set forth in Sections 6 (other than Section 6.5) and 7 (other
than Section 7.5) were not fulfilled or waived as of three (3)
Business Days prior to October 1, 2001, or at such other place or time
as may be mutually agreed upon in writing by the Acquirer and R&A.
1.5 Further Assurances. The R&A Shareholders shall,
from time to time after the Closing, at the request of the Acquirer,
execute and deliver such further customary instruments of transfer and
assignment as the Acquirer may reasonably request to fully
implement the Stock Purchase and the Asset Purchase.
1.6 Transfer Taxes. Any transfer taxes, fees and
duties under applicable law incurred in connection with the Stock Purchase
or the Asset Purchase will be borne and paid fifty percent (50%) by the
R&A Shareholders (in the aggregate, with such amount to be borne pro rata
among the R&A Shareholders in accordance with their respective receipt of
the Closing Purchase Price) and fifty percent (50%) by the Acquirer, and
the R&A Shareholders and the Acquirer shall promptly reimburse each other
for any such tax, fee or duty which any of them is required to pay under
applicable law in excess of such specified amount to be borne by each of
them; provided, however, that the R&A Shareholders shall bear one hundred
percent (100%) of any transfer taxes, fees and duties incurred in
connection with the conveyances of real property from R&A prior to the
Closing as contemplated by Section 3.5(b) hereof.
1.7 Contingent Payments.
(a) In further consideration for the sale of the R&A
Shares to the Acquirer at the Closing, from and after the Closing at the
times specified in Section 1.7(b) below, the Acquirer shall make the
following additional payments (each such payment, a "Contingent Payment")
to the R&A Shareholders (with each such Contingent Payment to be paid to
7
the individual R&A Shareholders in the respective percentages set forth on
Schedule 1.2 hereto), subject to the escrow provisions set forth in
Section 1.7(c) below; provided, however, that the aggregate amount of
Contingent Payments received by the R&A Shareholders pursuant to this
Section 1.7 (which, for the avoidance of doubt, shall not include any
Contingent Payment Escrow Account Deposits that are returned to the
Acquirer pursuant to Section 1.7(c) hereof, and shall not include earnings
on amounts deposited in escrow hereunder) shall not exceed one
hundred million dollars ($100,000,000):
(i) A payment (but in no event less than zero dollars
($0)) (the "Year 3 Contingent Payment") equal to (A) the product of (I)
Applicable Revenues for the twelve (12) months ending on (and including)
the third anniversary of the Closing Date multiplied by (II) 2.5, minus
(B) the Closing Purchase Price;
(ii) A further payment (but in no event less than zero
dollars ($0)) (the "Year 4 Contingent Payment") equal to (A) the product
of (I) Applicable Revenues for the twelve (12) months ending on (and
including) the fourth anniversary of the Closing Date multiplied by (II)
2.4, minus (B) the sum of (I) the Closing Purchase Price, plus (II) the
Year 3 Contingent Payment; and
(iii) A further payment (but in no event less than zero
dollars ($0)) (the "Year 5 Contingent Payment") equal to (A) the product
of (I) Applicable Revenues for the twelve (12) months ending on (and
including) the fifth anniversary of the Closing Date multiplied by (II)
2.3, minus (B) the sum of (I) the Closing Purchase Price, plus (II) the
Year 3 Contingent Payment, plus (III) the Year 4 Contingent Payment.
(b) As promptly as practicable (and in any event within
twenty (20) Business Days) following each of the third, fourth, fifth and
sixth anniversaries of the Closing Date, the Acquirer shall cause to be
prepared and delivered to the CMR Representative a written statement
(each, a "Contingent Payment Statement") setting forth (i) the amount of
the Contingent Payment payable pursuant to Section 1.7(a) with respect to
the applicable preceding period (if any) and (ii) any distributions of
Contingent Payment Escrow Account Deposits required to be
made pursuant to Section 1.7(c) hereof (including a calculation of the
components thereof in reasonable detail).
The CMR Representative (and its agents and advisors) shall
have the right to review (and copy) the work papers, schedules, memoranda
and other documents and information prepared or reviewed by or for the
Acquirer in connection with the preparation of each Contingent Payment
Statement and to communicate with those persons who conducted such
preparation and review, and the Acquirer shall (and shall cause its
Affiliates, accountants and other outside service providers to) cooperate
in good faith with the CMR Representative and its agents and advisors,
and provide them with reasonable access to the books and records of the
Acquirer and such other information as they may reasonable request, in
each case in connection with their review of each Contingent Payment
Statement.
Within ten (10) Business Days after the CMR
Representative's receipt of a Contingent Payment Statement, the CMR
Representative shall notify the Acquirer in writing of
8
any objection to such Contingent Payment Statement, specifying in reasonable
detail any such objections (and if the CMR Representative fails to notify
the Acquirer of any objections within such period, the CMR Representative
shall be deemed to have agreed to the Contingent Payment Statement as
prepared by the Acquirer). If the CMR Representative does not so object,
or if the CMR Representative and the Acquirer agree on the resolution of
all such objections, the Contingent Payment Statement shall be final and
binding on all parties hereto. The Acquirer and the CMR Representative
shall negotiate in good faith to attempt to resolve any such objections,
provided that each of the Acquirer and the CMR Representative shall have
the right at any time after at least two (2) Business Days of negotiation
to unilaterally terminate in writing such negotiations. Not later than
five (5) Business Days after either the Acquirer or the CMR Representative
shall have terminated such negotiations, all such disputed items shall be
submitted for resolution to the Accounting Firm, and each of the Acquirer
and the CMR Representative shall include in such submission their
calculations, work papers, schedules, memoranda and other documents and
information used in connection with the preparation and review of the
Contingent Payment Statement, and shall cooperate with the Accounting Firm
in good faith to resolve such disputed items (including by providing the
Accounting Firm with the access described in the immediately preceding
paragraph). The Acquirer and the CMR Representative shall use their
reasonable best efforts to cause a written report of the Accounting
Firm resolving the disputed items to be rendered within ten (10) Business
Days of its appointment. The fees and expenses of the Accounting Firm
shall be borne fifty percent (50%) by the Acquirer and fifty percent (50%)
by the R&A Shareholders (such fees and expenses to be borne ratably by
the R&A Shareholders in proportion to their respective shares of the
consideration received at the Closing hereunder, and promptly reimbursed
to the CMR Representative upon its request), and the written report of the
Accounting Firm resolving such disputed items shall be final and binding
on all parties hereto.
(c) Concurrent with the payment of (X) the Year 3
Contingent Payment, (Y) the Year 4 Contingent Payment, and (Z) the Year 5
Contingent Payment, solely in the event that such Year 5 Contingent
Payment both (I) exceeds thirty million dollars ($30,000,000) and (II) is
greater than double the larger of the Year 3 Contingent Payment or the
Year 4 Contingent Payment received by the R&A Shareholders (not including
any portion of such prior Contingent Payments returned (or to be returned)
to the Acquirer from Contingent Payment Escrow Account Deposits), the
Acquirer shall deposit fifteen percent (15%) of such Contingent Payment
(by wire transfer of immediately available funds) into an escrow account
(a "Contingent Payment Escrow Account Deposit") established for the benefit
of the R&A Shareholders pursuant to a Contingent Payment Escrow Agreement
for a one-year escrow period (the "Escrow Account Period") (with
each such Contingent Payment Escrow Account Deposit to reduce the R&A
Shareholders' respective receipt of the related Contingent Payment pursuant
to Section 1.7(a) hereof in the same respective percentages as their
respective receipt of the Closing Purchase Price hereunder).
Each Contingent Payment Escrow Account Deposit will be invested during
its respective Escrow Account Period in accordance with the provisions
relating thereto set forth in the Contingent Payment Escrow Agreement,
and shall be distributed at the end of the applicable Escrow Account
Period as follows:
(i) In the case of a Contingent Payment Escrow Account
Deposit made with respect to a Year 3 Contingent Payment:
9
(A) If (I) the Applicable Revenues for the twelve (12)
months ending on (and including) the fourth anniversary of
the Closing Date exceed (II) the Applicable Revenues for the
twelve (12) months ending on (and including) the third
anniversary of the Closing Date, then one hundred percent
(100%) of such Contingent Payment Escrow Account Deposit
(and the earnings resulting from the investment thereof)
shall be distributed to the R&A Shareholders (in the same
respective percentages that the balance of such Contingent
Payment was paid to them); or
(B) If (I) the Applicable Revenues for the twelve (12)
months ending on (and including) the third anniversary of the
Closing Date exceed (II) the Applicable Revenues for the
twelve (12) months ending on (and including) the fourth
anniversary of the Closing Date (the amount of any such
excess, the "Year 4 Revenue Shortfall"), then (x) the Acquirer
shall receive that portion of the Contingent Payment Escrow
Account Deposit (and a pro rata portion of the earnings
resulting from the investment thereof) that is equal to the
product of the Year 4 Revenue Shortfall multiplied by 2.4,
and (y) the balance of such Contingent Payment Escrow Account
Deposit (and the remaining earnings resulting from the
investment thereof) will be distributed to the R&A Shareholders
10
(in the same respective percentages that the balance of such
Contingent Payment was paid to them);
(ii) In the case of a Contingent Payment Escrow Account
Deposit made with respect to a Year 4 Contingent Payment:
(A) If (I) the Applicable Revenues for the twelve (12)
months ending on (and including) the fifth anniversary of the
Closing Date exceed (II) the Applicable Revenues for the twelve
(12) months ending on (and including) the fourth anniversary of
the Closing Date, then one hundred percent (100%) of such
Contingent Payment Escrow Account Deposit (and the earnings
resulting from the investment thereof) will be distributed to
the R&A Shareholders (in the same respective percentages that
the balance of such Contingent Payment was paid to them); or
(B) If (I) the Applicable Revenues for the twelve (12)
months ending on (and including) the fourth anniversary of the
Closing Date exceed (II) the Applicable Revenues for the
twelve (12) months ending on (and including) the fifth
anniversary of the Closing Date (the amount of any such
excess, the "Year 5 Revenue Shortfall"), then (x) the
Acquirer shall receive that portion of the Contingent Payment
Escrow Account Deposit (and a pro rata portion of the earnings
resulting from the investment thereof) that is equal to the
product of the Year 5 Revenue Shortfall multiplied by 2.3,
and (y) the balance of such Contingent Payment Escrow Account
Deposit (and the remaining earnings resulting from the
investment thereof) will be distributed to the R&A
Shareholders (in the same respective percentages that the
balance of such Contingent Payment was paid to them); and
(iii) In the case of a Contingent Payment Escrow Account
Deposit (if any) made with respect to a Year 5 Contingent Payment:
(A) If (I) the Applicable Revenues for the twelve
(12) months ending on (and including) the sixth anniversary
of the Closing Date exceed (II) the Applicable Revenues for
the twelve (12) months ending on (and including) the fifth
anniversary of the Closing Date, then one hundred percent
(100%) of such Contingent Payment Escrow Account Deposit
(and the earnings resulting from the investment thereof) will
be distributed to the R&A Shareholders (in the same respective
percentages that the balance of such Contingent Payment was
paid to them); or
(B) If (I) the Applicable Revenues for the twelve
(12) months ending on (and including) the fifth anniversary of
the Closing Date exceed (II) the Applicable Revenues for the
twelve (12) months ending on (and including) the sixth
anniversary of the Closing Date (the amount of any such
excess, the "Year 6 Revenue Shortfall"), then (x) the
Acquirer shall receive that portion of the Contingent Payment
Escrow Account Deposit (and a pro rata portion of the
earnings resulting from the investment thereof) that is
equal to the product of the Year 6 Revenue Shortfall
multiplied by 2.3, and (y) the balance of such Contingent
Payment Escrow Account Deposit (and the remaining earnings
resulting from the investment thereof) will be distributed
11
to the R&A Shareholders (in the same respective percentages
that the balance of such Contingent Payment was paid to them).
(d) Each Contingent Payment shall be paid by the Acquirer
to the R&A Shareholders (and each distribution of a Contingent Payment
Escrow Account Deposit to be distributed to the R&A Shareholders shall be
so distributed) by wire transfer of immediately available funds (subject,
in the case of Contingent Payments, to reduction as provided in Section
1.8 below to the extent Acquirer Shares are delivered in partial payment of
a Contingent Payment) to bank accounts designated in writing by the CMR
Representative to the Acquirer at least three (3) Business Days prior to
the date of any such payment (or, in the absence of such a written
designation by the CMR Representative, to the same bank accounts used for
the payment of the cash portion of the Closing Purchase Price). Any
payments to be made by the Acquirer pursuant to this Section 1.7 which
have not been paid within thirty (30) Business Days following the third
anniversary of the Closing Date (in the case of a Year 3 Contingent
Payment), the fourth anniversary of the Closing Date (in the case of a
Year 4 Contingent Payment) or the fifth anniversary of the Closing Date
(in the case of a Year 5 Contingent Payment) shall be made together with
interest at the Agreed Interest Rate calculated from the date of such
anniversary of the Closing Date to the date such Contingent Payment is paid.
12
(e) At all times during the Earnout Period, the Acquirer
shall (and shall cause its Affiliates, including R&A and its subsidiaries,
to) have in place all necessary accounting and other systems and records
to enable the parties to accurately determine the amount of each
Contingent Payment required to be made under this Section 1.7. The
Acquirer and each of the R&A Shareholders agrees to enter into a Contingent
Payment Escrow Agreement reasonably in advance of the first Contingent
Payment Escrow Account Deposit required to be made pursuant to Section
1.7(c) hereof.
1.8 Stock Consideration.
(a) If the Acquirer so elects by delivery of an
irrevocable written notice (an "Acquirer Stock Notice") to R&A not less
than fifteen (15) "trading days" (as such term is used in the definition
of Acquirer Stock Price set forth below) prior to (A) the Closing, in the
case of the payment of the Closing Purchase Price, or (B) the date a
Contingent Payment is required to be made by the Acquirer pursuant to
Section 1.7 of this Agreement, in the case of the payment of such Contingent
Payment (such payment date described in the immediately preceding clause (A)
or (B) (as applicable), the "Applicable Payment Date"), the Acquirer shall
be permitted to pay up to fifty percent (50%) of the Closing Purchase
Price or such Contingent Payment (as applicable) (with the Acquirer Stock
Notice specifying the percentage of the Closing Purchase Price or such
Contingent Payment (as applicable) to be so paid (the dollar amount
resulting from the product of such specified percentage multiplied by the
total amount of the Closing Purchase Price or Contingent Payment
(as applicable), the "Stock Component")) in the form of duly and validly
authorized, duly and validly issued, fully paid and non-assessable shares
of Acquirer Common Stock ("Acquirer Shares") delivered to the R&A
Shareholders on the Applicable Payment Date (with such Acquirer Shares
to be delivered to the R&A Shareholders in such respective
proportions as are notified by R&A to the Acquirer in writing not less
than two (2) "trading days" (as such term is used in the definition of
Acquirer Stock Price set forth below) prior to the making of such payment),
and that portion of the Closing Purchase Price or such Contingent
Payment (as applicable) otherwise payable to each R&A Shareholder in the
form of immediately available funds pursuant to Section 1.2(b) hereof or
Section 1.7 hereof (as applicable) shall be reduced by the amount of the
Closing Purchase Price or such Contingent Payment (as applicable)
paid to such R&A Shareholder in the form of Acquirer Shares pursuant to
this Section 1.8; provided, however, that if (i) the Acquirer Registration
Statement (as defined below) relating to an Applicable Payment Date (X) is
not effective on or before the second (2nd) trading day immediately
preceding the Applicable Payment Date or (Y) having become so effective on
or before the second (2nd) trading day immediately preceding the Applicable
Payment Date, does not remain effective as of the Applicable Payment Date,
and/or (ii) the Acquirer Shares do not remain listed on The New York Stock
Exchange as of the Applicable Payment Date (with the Acquirer Shares to be
delivered hereunder having been approved for listing thereon), and/or (iii)
in the case of a delivery of Acquirer Shares in connection with the making
of a Contingent Payment, (X) since March 31, 2001 the Acquirer has undergone
a "change of control" (which shall mean, solely for purposes of this Section
1.8, that fifty percent (50%) or more of the voting capital stock of the
Acquirer is then owned by a single Person or "group" (as used in Section
13(d) of the Exchange Act and the regulations thereunder), or that the
Acquirer and/or its subsidiaries have transferred fifty percent (50%) or
more of their consolidated assets to another Person or group (in a single
transaction or a series of related transactions), in each case
regardless of how structured) and/or (Y) since the end of the most recently
13
completed fiscal year of the Acquirer which ended not less than one month
prior to the Applicable Payment Date, there has been any circumstance,
event or occurrence that has had or, individually or in the aggregate,
would reasonably be expected to have, a Material Adverse Effect on the
Acquirer (and the Acquirer shall represent and warrant in writing to the
R&A Shareholders as a condition to the delivery of Acquirer Shares in
connection with the making of a Contingent Payment that neither of the
events described in this clause (iii) has so occurred), then in any such
event (or combination of events) the Acquirer shall be required on the
Applicable Payment Date to pay the entire Closing Purchase Price or
Contingent Payment (as applicable) in the form of immediately available
funds pursuant to Section 1.2(b) hereof or Section 1.7 hereof
(as applicable) (in lieu of the delivery of any Acquirer Shares pursuant
to this Section 1.8); and provided, further, that, notwithstanding clause
(i)(X) of the immediately preceding proviso, solely in the event that an
Acquirer Registration Statement relating to the Stock Component (if any)
of the Closing Purchase Price is not effective on or before the second
(2nd) trading day immediately preceding the Closing, then in such event
(and provided that none of the other events described in clauses
(i) and (ii) of the immediately preceding proviso have occurred, and that
the Acquirer has complied with its covenants under Section 1.8(b) below),
the Acquirer shall be permitted to pay twenty-five percent (25%) of the
Closing Purchase Price (or such lower percentage as was specified in the
Acquirer Stock Notice) in the form of Acquirer Shares delivered to the R&A
Shareholders at the Closing (with such Acquirer Shares to be delivered to
the R&A Shareholders in such respective proportions as are notified by
R&A to the Acquirer in writing not less than two (2) trading days prior
to the making of such payment), provided that the Acquirer thereafter
shall be obligated to use its reasonable best efforts to have such Acquirer
Registration Statement become effective as promptly as possible
(and to otherwise comply with the Registration Rights Agreement.
(b) Not later than forty-five (45) days prior to the
Closing Date, the Acquirer and the R&A Shareholders shall enter into a
Registration Rights Agreement. Not later than forty-five (45) days prior
to each of (i) the Closing Date and (ii) each other Applicable Payment
Date thereafter (other than an Applicable Payment Date with respect to
which the Acquirer in its sole discretion has irrevocably elected, by
written notice delivered to the CMR Representative not later than
forty-five (45) days prior to such Applicable Payment Date, not to deliver
any Stock Component with respect to such Applicable Payment Date), the
Acquirer shall file a shelf registration statement with the SEC (each,
an "Acquirer Registration Statement") to permit the unrestricted resale
by the R&A Shareholders (and up to a total of five (5) of their transferees
in any transfer other than a public offering, provided that no independent
diligence access or comfort letters shall be required to be provided by
the Acquiror to any such transferee) as of such Applicable Payment Date
(and thereafter for the period provided for in the Registration Rights
Agreement) of those Acquirer Shares to be delivered to them in partial
payment of the Closing Purchase Price or the applicable Contingent Payment
hereunder (as applicable), and the Acquirer shall use its reasonable best
efforts to have such registration statement declared effective by the
SEC as promptly as practicable (and in any event not later than the second
(2nd) trading day immediately preceding the Applicable Payment Date) and
to remain effective through the Applicable Payment Date (and thereafter
for two years, subject to those exceptions provided for in the Registration
Rights Agreement).
14
(c) In the event that a portion of the Closing Purchase
Price or any Contingent Payment is to be paid in the form of Acquirer
Shares pursuant to Section 1.8(a) hereof, the aggregate number of Acquirer
Shares required to be delivered by the Acquirer to the R&A Shareholders
shall be equal to the quotient (rounded up to the next highest whole number
of Acquirer Shares) obtained by dividing (i) the Stock Component by (ii)
the Average Acquirer Stock Price, where:
(A) The "Average Acquirer Stock Price" is defined to mean
the average (arithmetic mean) Acquirer Stock Price during the ten
consecutive trading days ending on (and including) the second (2nd)
trading day immediately preceding the Applicable Payment Date; and
(B) The "Acquirer Stock Price" is defined to mean, for
any trading day, the closing price for one share of Acquirer Common
Stock, which shall be the last sale price or, in the case no such
sale takes place on such trading day, the average of the closing bid
and asked prices, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed on The New York Stock Exchange.
In the event that there is a stock split (or reverse stock split), stock
dividend or other similar event during the relevant measuring period under
the foregoing calculations (or thereafter and prior to the delivery of
Acquirer Shares to the R&A Shareholders pursuant hereto), equitable and
appropriate adjustments shall be made in the application of the foregoing
calculations of the Average Acquirer Stock Price to take account of such
event.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF R&A
2.1 Making of Representations and Warranties. On or
prior to the date of this Agreement, R&A has delivered to the Acquirer
schedules (the "Schedules") setting forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an
express disclosure requirement contained in a provision hereof or as an
exception to one or more representations, warranties or covenants of R&A
contained in this Agreement; references in this Agreement to a particular
Schedule are to the applicable section of the Schedules, provided that
disclosure of a fact, event or circumstance in or pursuant to any section
of the Schedules shall constitute disclosure of such fact, event or
circumstance for purposes of each other representation, warranty or
covenant contained in this Agreement with respect to which the
applicability of such disclosure is reasonably apparent on the face of
such disclosure. The inclusion of an item in the Schedules as an exception
to a representation or warranty shall not be deemed an admission by R&A
that such item represents a material exception or fact, event or
circumstance or that such item is, individually or in the aggregate with
any other included items, reasonably likely to result in a Material
Adverse Effect on the Royce Companies. For the avoidance of doubt,
references in this Section 2 to changes occurring after the date of this
Agreement shall not be deemed to constitute a waiver of any other sections
of this Agreement which may prohibit such changes or require the
Acquirer's consent thereto.
Subject to the foregoing, R&A hereby makes to
the Acquirer the representations and warranties contained in this Section
15
2 (provided, however, that, from and after the Closing, none of the R&A
Shareholders shall have any right of indemnity or contribution from R&A
with respect to breaches of representations and warranties contained in
this Section 2).
2.2 Organization and Qualification of R&A, RFS and RMC.
R&A is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of New York and has all requisite
power and authority to enter into this Agreement and to perform its
obligations hereunder. Royce Fund Services, Inc. ("RFS") is a corporation
duly incorporated, validly existing and in good standing under the laws
of the State of New York. RMC is a general partnership duly formed and
validly existing under the laws of the State of Connecticut and has all
requisite power and authority to enter into this Agreement and to perform
its obligations hereunder. True, complete and correct copies of the
Restated Certificate of Incorporation and By-Laws of R&A, the Certificate
of Incorporation and By-Laws of RFS and the Amended and Restated
Partnership Agreement of RMC, each as in effect on the date hereof
(including all amendments thereto), have heretofore been delivered or
made available to the Acquirer, and any amendments thereto from the date
hereof through the Closing which are permitted by the terms of this
Agreement will be so delivered or made available at least one Business Day
prior to the Closing. Each of R&A, RFS and RMC is duly qualified or
licensed to conduct business in each jurisdiction where the nature of its
business or assets requires such qualification (which jurisdictions are
identified on Schedule 2.2 hereto), except for any failures which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Royce Companies. Each of R&A, RFS and RMC has full
power and authority and all licenses, permits and authorizations necessary
to own and operate its properties and to carry on its business as now
conducted, and none of R&A, RFS or RMC is in default under or in violation
of any provision of its Constituent Documents, in each case except for any
failures which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Royce Companies.
2.3 Capital Stock of R&A; Partnership Interests of RMC.
(a) The authorized capital stock of R&A consists of 10,000
R&A Voting Shares and 10,000 R&A Non-Voting Shares. Subject to any changes
occurring after the date of this Agreement which are permitted by the terms
of this Agreement, there are 5,000 outstanding R&A Voting Shares, all of
which are owned of record and beneficially by CMR, and there are 5,000
outstanding R&A Non-Voting Shares, which are owned of record and
beneficially by the R&A Shareholders in the respective amounts set forth in
Schedule 2.3. All of the issued and outstanding R&A Shares are duly
authorized, validly issued, fully paid and nonassessable, and are not
subject to, nor were they issued in violation of, any preemptive rights or
rights of first refusal. The partners of RMC as of the date of this
Agreement (the "RMC Partners") are as set forth on Schedule 2.3. Subject
to any changes occurring after the date of this Agreement which
are permitted by the terms of this Agreement, the outstanding partnership
interests of RMC (the "RMC Partnership Interests") are owned exclusively by
the RMC Partners in the respective amounts (with respect to capital account
balances and percentage profits interests, respectively) set forth on
Schedule 2.3, and there are no other outstanding membership or other equity
interests of RMC. Subject to any changes occurring after the date of this
Agreement which are permitted by the terms of this Agreement, except as set
forth in Schedule 2.3 there are no outstanding options, warrants, rights,
commitments, preemptive rights or other agreements for the issuance or sale
of, or outstanding securities convertible into, any additional shares of
capital stock of R&A or RFS, or any partnership interests of RMC. There
16
are no outstanding stock appreciation rights, phantom stock or similar
rights with respect to R&A. R&A is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
R&A Shares.
(b) None of the shares of capital stock of R&A or RFS has
been issued in violation of any Laws and Regulations. Subject to any
changes occurring after the date of this Agreement which are permitted by
the terms of this Agreement, except as set forth in Schedule 2.3 there are
no voting trusts, voting agreements, proxies or other agreements,
instruments or undertakings with respect to the voting of the R&A Shares
(other than the Transaction Documents).
2.4 Subsidiaries; Investments. Except as specified in
Schedule 2.4, and except for RFS (which is a New York corporation that is
a wholly-owned subsidiary of R&A), and subject to any changes occurring
after the date of this Agreement which are permitted by the terms of this
Agreement (including without limitation the formation of New RMC as a
wholly-owned subsidiary of R&A), neither Royce Company nor RFS (a) owns
for its own account, directly or indirectly, any of the capital stock of,
or other equity or proprietary interest in, or any rights to acquire any
such stock or other interest in, any corporation, or any such interest in
any association, trust, partnership, joint venture or similar entity, or in
any other entity or enterprise (other than interests in the Private Fund
Clients), (b) is an Affiliate of any other Person (other than a Royce
Company, RFS and/or any of the R&A Shareholders) or (c) is a party to any
joint venture, profit-sharing or similar agreement regarding the
profitability or financial results of either Royce Company or any of its
Affiliates or the division of revenues or profits of either Royce Company
or any of its Affiliates or any other enterprise, other than the Transaction
Documents, the Constituent Documents of the Royce Companies and RFS and
such other written contracts and arrangements as are identified in
Schedule 2.4 hereto.
2.5 Authority of the Royce Companies.
(a) Subject to the receipt of consents, authorizations
and approvals identified in Section 2.5(b) and elsewhere in this Agreement,
each of the Royce Companies and the R&A Shareholders has full right,
authority and power to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to carry out the
transactions contemplated hereby and thereby, and no other action on the
part of either Royce Company, any of the R&A Shareholders or any of the
RMC Partners is required in connection therewith (except for any such
actions which have been taken on or prior to the date of this Agreement).
(b) This Agreement and each of the other Transaction
Documents to which such Person is a party has been duly executed and
delivered by the Royce Companies and each of the R&A Shareholders, and this
Agreement constitutes a valid and binding obligation of each of the Royce
Companies and the R&A Shareholders that is a party thereto, enforceable
against each of them in accordance with its terms, subject to bankruptcy,
insolvency and other applicable Laws and Regulations affecting creditors'
rights generally, and to general principles of equity. The Employment
Agreement to which CMR is a party constitutes a valid and binding obligation
of CMR, enforceable against CMR in accordance with its terms, subject to
bankruptcy, insolvency and other applicable Laws and Regulations affecting
17
creditors' rights generally, and to general principles of equity. The
execution, delivery and performance by each of the Royce Companies and the
R&A Shareholders that is a party to this Agreement and/or each of the other
Transaction Documents (in each case including without limitation the
consummation of the transactions contemplated hereby or thereby, as
applicable):
(i) does not and will not violate any provision of the
Constituent Documents or board of directors resolutions of either of the
Royce Companies, RFS or any of the R&A Shareholders that is not a natural
person;
(ii) does not and will not violate any material Laws and
Regulations applicable to either of the Royce Companies, RFS or any of the
R&A Shareholders, or require either of the Royce Companies, RFS, any of the
R&A Shareholders or any of the RMC Partners to obtain any material approval,
consent or waiver of, or make any material filing with, any person or
entity (governmental or otherwise) that has not been obtained or made,
except for approvals, consents and waivers that are expressly addressed by
other sections of this Agreement or are identified on Schedule 2.5, which
approvals, consents and waivers shall have been received or made prior to
the Closing to the extent required hereunder as a condition to the Closing
(or at any earlier time required hereunder or under applicable Laws and
Regulations or the provisions of any applicable agreement, contract or
instrument); and
(iii) assuming the consents, waivers, approvals and filings
described in the preceding clause (ii) are obtained or made (as applicable),
and except as identified in Schedule 2.5, does not and will not result in
a breach of, constitute a default under, accelerate any obligation under,
or give rise to a right of termination of, any agreement, contract, permit,
authorization, order, judgment or injunction to which either Royce
Company, RFS, any R&A Shareholder or any RMC Partner is a party or by
which the property of either Royce Company, any R&A Shareholder or any
RMC Partner is bound, or result in the creation or imposition of any Claim
on either of the Royce Companies, RFS or any of their assets, or on any
R&A Shareholder's ownership interest in R&A or any RMC Partner's ownership
interest in RMC (other than pursuant to the Transaction Documents and
such other agreements and arrangements as are identified in Schedule 2.5
hereto), in each case other than any of the foregoing which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Royce Companies.
2.6 Real Property. As of the Closing, neither of the
Royce Companies nor RFS will own any real property. Schedule 2.6 identifies
all real property owned by the Royce Companies or RFS, or owned by any
Proprietary Fund Client and used in the Business, in each case on the date
hereof or within the preceding five years. All of the real property leased
by either of the Royce Companies, RFS or any Proprietary Fund Client as of
the date hereof is identified in Schedule 2.6 (herein referred to as the
"Leased Real Property").
2.7 Investment Advisory Activities.
(a) The aggregate assets under management by the Royce
Companies as of April 30, 2001 are accurately set forth on Schedule 2.7.
18
Set forth on Schedule 2.7 is a list as of April 30, 2001 of each Advisory
Contract, in each case setting forth as of such date with respect to such
Advisory Contract:
(i) The name of the client under such contract;
(ii) the amount of assets under management pursuant to
such contract; and
(iii) the fee schedule in effect under such contract.
(b) As of the date of this Agreement, R&A has made
available to the Acquirer true and correct copies of each Advisory Contract
and the Constituent Documents of each Proprietary Fund Client and each
Private Fund Client.
(c) Subject to any changes occurring after the date of
this Agreement which are permitted by the terms of this Agreement,
Schedule 2.7 identifies each client for which either Royce Company provides
Asset Management Services that is registered as an investment company under
the Investment Company Act (in each case including an indication as to
whether such client is an open-end or closed-end investment company or
series thereof), and identifies (i) such clients which are investment
companies (or series thereof) sponsored by R&A (the "Proprietary Fund
Clients") and (ii) such clients (or series thereof) having a sponsor other
than R&A (collectively with the Proprietary Fund Clients, the "Registered
Fund Clients"). At all times prior to the date of this Agreement, each
Advisory Contract between R&A and a Proprietary Fund Client has been
approved in material compliance with Section 15 of the Investment Company
Act and all other applicable Laws and Regulations. Subject to any changes
occurring after the date of this Agreement which are permitted by the terms
of this Agreement, Schedule 2.7 identifies each client for which either
Royce Company provides Asset Management Services that is a Private Fund
Client.
(d) Except as referred to on Schedule 2.7(c), as of the
date of this Agreement neither of the Royce Companies has received any
written notice from any client indicating its intention to terminate one or
more of its Advisory Contracts or to reduce its assets under management,
including upon or after consummation of the transactions contemplated by
this Agreement.
(e) Except for any failures of the following to be true
and correct which would not reasonably be expected to have a Material
Adverse Effect on the Royce Companies: (i) Each Proprietary Fund Client
that is eligible to elect to be treated as a "regulated investment
company" under Subchapter M of Chapter 1 of Subtitle A of the Code has so
elected, (ii) each Proprietary Fund Client has, except for any taxable
year of such Proprietary Fund Client that has been closed and for which
the statute of limitations for assessments has expired, qualified as a
"regulated investment company", (iii) each Proprietary Fund Client has
materially complied with all applicable provisions of Laws and Regulations
necessary to preserve and retain such Proprietary Fund Client's election
and status as a regulated investment company, (iv) each Proprietary Fund
Client has timely filed (taking into account all extensions of due dates)
all material federal, state, local and foreign income and other Tax Returns
and reports that such Proprietary Fund Client is required to file, and has
timely paid, or reserved for, the taxes shown on such returns as due and
owing, (v) no Proprietary Fund Client has at any time been required
19
to pay any material excise tax pursuant to Section 4982 of the Code, (vi)
each Private Fund Client is and has been a partnership for U.S. federal and
state income tax purposes at all times since its formation and (vii) no
Person has filed any election for any Private Fund Client to be treated as
an association for federal income tax purposes under Treasury Regulations
Section 301.7701-3.
(f) Prohibited Transaction Class Exemption 84-14 issued
by the U.S. Department of Labor (the "QPAM Exemption") is not unavailable
with respect to transactions negotiated by or under the authority and
general direction of R&A as a "qualified professional asset manager"
(as defined in the QPAM Exemption) by virtue of (i) the application of
Section I(e) of the QPAM Exemption or (ii) the application of Section I(g)
of the QPAM Exemption. The Royce Companies do not serve as custodian for
any Individual Retirement Accounts. R&A is not unable to serve in a
capacity described in Section 411(a)(1), (2) or (3) of ERISA by virtue
of Section 411 of ERISA.
(g) Each of the Proprietary Fund Clients and the Private
Fund Clients is an entity duly organized, validly existing and in good
standing or subsisting, as applicable, in the jurisdiction of its
organization and is duly qualified to do business under all applicable Laws
and Regulations and to own, operate and lease its properties and to carry
on its business in the places and in the manner as now conducted, in each
case other than failures which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Royce
Companies.
(h) R&A has made available to the Acquirer a copy of each
distribution plan adopted by the board of directors or trustees (as
applicable) of any Proprietary Fund Client under 12b-1 under the Investment
Company Act. Except for any failures of the following to be true
and correct which would not reasonably be expected to have a Material
Adverse Effect on the Royce Companies, all payments due since December 31,
2000 and prior to the most recently ended payment period under each
distribution plan described in the immediately preceding sentence have
been made in compliance with such distribution plan.
(i) The proxy solicitation materials to be distributed to
the shareholders of each Proprietary Fund Client in connection with obtaining
its Fund Shareholder Approval will not contain (either at the time such
materials are distributed to shareholders or at the time of the relevant
shareholders meeting) any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading (provided that no representation or warranty is made hereby with
respect to any information contained therein which has been provided by or
on behalf of the Acquirer for use in connection with such proxy
solicitation).
2.8 Financial Statements.
(a) The following financial statements have been
delivered or made available to the Acquirer with respect to the Royce
Companies, each Proprietary Fund Client and each Private Fund Client
(as applicable), copies of which are attached to the Schedules as Schedule
2.8 in the case of financial statements of the Royce Companies:
20
(i) In the case of R&A, (A) audited consolidated balance
sheets of R&A and RFS at December 31, 2000 (including the notes
thereto, the "Base Balance Sheet") and December 31, 1999, an
audited balance sheet of R&A at December 31, 1998, and the related
audited statements of income, changes in shareholders' equity and
cash flows for each of the years then ended, and (B) an unaudited
consolidated balance sheet of R&A and RFS at March 31, 2001 and the
related unaudited statements of income, retained earnings and cash
flows for the three-month period then ended;
(ii) In the case of RMC, (A) audited balance sheets of
RMC at December 31, 1998, December 31, 1999 and December 31, 2000,
and the related unaudited income statements for each of the years
then ended, and (B) an unaudited balance sheets of RMC at March 31,
2001 and the related unaudited income statements for the three-month
period then ended; and
(iii) For the years ended December 31, 1998, December 31,
1999 and December 31, 2000: (A) In the case of each Proprietary Fund
Client for which financial statements were prepared for such years
(to the extent so prepared), audited statements of assets and
liabilities of such Proprietary Fund Client as of the close of each
of the years then ended and the related statements of operations and
of changes in net assets for each of such years, and the financial
highlights of such Proprietary Fund Client; and (B) in the case of
each Private Fund Client for which entity-level financial statements
were prepared for such years (to the extent so prepared), audited
statements of assets and liabilities of such Private Fund Clients
as of the close of each of the years then ended and the related
audited statements of income, changes in partners' capital or net
assets (as applicable) and cash flows for each of such years.
Said financial statements have been prepared in all material
respects in accordance with GAAP using the accrual method of accounting,
applied consistently during the periods covered thereby, and present fairly
in all material respects the consolidated financial condition of R&A and
RFS, or the financial condition of RMC, the applicable Proprietary Fund
Client or the applicable Private Fund Client, at the dates of said
statements, and the results of their respective operations for the periods
covered thereby, as applicable (in each case with respect to unaudited
financials statements, except for the absence of footnote disclosure thereto
which would be required to be included in audited financial statements),
except for any failures of the foregoing to be true and correct in the case
of the financial statements of Proprietary Fund Clients and Private Fund
Clients that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Royce Companies. Since
the date of its most recent financial statements attached as Schedule 2.8,
there have been no material changes in the accounting policies of any of
the foregoing Persons (in each case subject to any changes occurring after
the date of this Agreement which are permitted by the terms of this
Agreement).
(b) Neither R&A nor RFS has any liabilities of any nature
(whether accrued, absolute, contingent or otherwise) which are required by
GAAP to be shown on a balance sheet or reflected in the notes thereto,
except (i) liabilities stated or adequately reserved against on the
Base Balance Sheet or described in the notes thereto, (ii) liabilities
identified in the Schedules and (iii) liabilities incurred after the date
of the Base Balance Sheet in the ordinary course of business of R&A or RFS,
as applicable.
21
2.9 Taxes. Except as disclosed on Schedule 2.9:
(a) Each of R&A and RFS has timely filed (taking into
account all extensions of due dates) all Tax Returns that it was required
to file, and has paid all taxes shown thereon as owing by it, except for
any failures that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Royce Companies;
(b) For each taxable period of R&A and RFS ended on or
after December 31, 1995, R&A has delivered or made available to the Acquirer
correct and complete copies of all income Tax Returns, examination reports
and statements of deficiencies assessed against or agreed to by R&A or RFS;
(c) No Taxing Authority is now asserting against R&A or
RFS any material deficiency or claim for additional Taxes;
(d) Neither R&A nor RFS has been notified in writing by
any Taxing Authority that any audit of a Tax Return filed by R&A or RFS is
contemplated or pending. Neither R&A nor RFS has waived any statute of
limitations or agreed to any extension of time with respect to a Tax
assessment or deficiency (subject to any changes occurring after the date of
this Agreement which are permitted by the terms of this Agreement);
(e) Neither R&A nor RFS is a party to any Tax allocation
or sharing agreement (subject to any changes occurring after the date of
this Agreement which are permitted by the terms of this Agreement);
(f) R&A has been a validly electing S corporation within
the meaning of Code sections 1361 and 1362, and has had in effect a valid
comparable election for New York State franchise tax purposes, at all times
since February 1, 1985;
(g) RFS has been a "qualified subchapter S subsidiary"
within the meaning of Code section 1361(b)(3)(B), and has qualified for
comparable New York State franchise tax status, at all times since
January 1, 1999, and prior thereto was a validly electing S corporation
within the meaning of Code sections 1361 and 1362, and has had in effect a
valid comparable election for New York State franchise tax purposes, at all
times since January 1, 1995;
(h) No assets of R&A or RFS are subject to, or to the
Knowledge of the Royce Companies will become subject to, any Claim for
Taxes (other than for Taxes not yet due and payable) arising by virtue of
the operation of such assets by R&A or RFS (as applicable) during any period
that precedes or ends on the Closing, except for any liens which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Royce Companies;
(i) All Tax Returns referred to in Section 2.9(a) hereof
are true, correct and complete in all material respects;
(j) Neither R&A nor RFS has been included in any
consolidated return with any other corporation pursuant to Section 1501 of
the Code or any combined or consolidated state or local tax return
(except for a consolidated group of which R&A was the common parent);
22
(k) No power of attorney that is currently in force has
been granted with respect to any matter relating to Taxes by either of the
Royce Companies, any of the R&A Shareholders or any of the RMC Partners that
could affect R&A or RFS; and
(l) No provision similar to Section 280G and Section 4999
of the Code will apply for local corporate income tax purposes as a result
of the transactions contemplated by this Agreement; and
(m) The Elections (as defined in Section 9.1(a) below) can
validly be made with respect to R&A and RFS for federal income tax and New
York State franchise tax purposes without triggering such federal tax at the
corporate level for R&A or RFS.
2.10 Absence of Certain Changes. Except as disclosed in
Schedule 2.10, since the date of the Base Balance Sheet there has not been
any:
(a) Circumstance, event or occurrence that has had or,
individually or in the aggregate, would reasonably be expected to have, a
Material Adverse Effect on the Royce Companies; or
(b) action taken by either Royce Company or RFS, which,
had it occurred after the date hereof and prior to the Closing, would have
required the Acquirer's consent under Section 3.5 hereof.
2.11 Intellectual Property. Except as disclosed in
Schedule 2.11, each of the Royce Companies and RFS has ownership of, or the
right to use, those trademarks and service marks (and any material trade
dress associated therewith) set forth in Schedule 2.11. Schedule 2.11
identifies all trademarks, trade names, patents, copyrights, service marks
and applications for trademarks and for service marks that are material to
the operation of the business of the Royce Companies. To the Knowledge of
the Royce Companies, except as set forth in Schedule 2.11, (i) all
registrations for such trademarks, service marks and trade dress as have
been registered by the Royce Companies are valid and subsisting, (ii) there
are no pending or threatened actions or proceedings by third parties with
regard to the use of such trademarks, service marks and trade dress which
challenge the rights of either Royce Company or RFS in respect thereof,
and (iii) the present business activities and products of the Royce
Companies and RFS do not infringe or violate any rights of third parties in
intellectual property.
2.12 Contracts. (a) Except for contracts and agreements
identified in Schedule 2.3, Schedule 2.5, Schedule 2.6, Schedule 2.7,
Schedule 2.11, Schedule 2.12, Schedule 2.15, Schedule 2.16, Schedule 2.19
or Schedule 2.20, neither of the Royce Companies nor RFS is a
party or otherwise subject to any oral or written (subject to any of the
following entered into after the date of this Agreement which are permitted
by the terms of this Agreement):
(i) contract or agreement (or series of related contracts
or agreements) which involves annual expenditures or receipts by
either Royce Company or RFS in an amount in excess of fifty thousand
dollars ($50,000) or aggregate expenditures or receipts by either
Royce Company or RFS in excess of one hundred thousand dollars
($100,000), excluding the Advisory Contracts;
23
(ii) promissory note, indenture, credit facility, mortgage,
security agreement or other contract or agreement relating to or
evidencing indebtedness for borrowed money or a security interest or
mortgage in the property or assets of either Royce Company or RFS;
(iii) guaranty issued by either Royce Company or RFS or any
other arrangement under which any of such entities assumes any
liability or obligation (including indebtedness) of any other Person;
(iv) material power of attorney granting any person or
entity authority to execute agreements or otherwise act on behalf of
a Royce Company or RFS;
(v) contract or agreement granting to any Person the right
to use any material property or property right of either Royce
Company or RFS;
(vi) contract or agreement restricting either Royce
Company's or RFS' right to engage in any business activity or
compete with any business;
(vii) contract or agreement not made in the ordinary course
of business; or
(viii) outstanding commitment or obligation to enter into
any contract or arrangement of the nature described in any of the
items (i) through (vii) of this Section 2.12(a).
(b) R&A has made available to the Acquirer complete and
correct copies (or, in the case of oral contracts, a complete and correct
description) of each contract (and any amendments or supplements thereto)
listed on Schedule 2.3, 2.5, 2.6, 2.7, 2.11, 2.12, 2.15, 2.16,
2.19 and 2.20. Except to the extent identified on Schedule 2.12, 2.3, 2.6,
2.7, 2.11, 2.13, 2.15, 2.16, 2.19 or 2.20, (i) each contract listed on such
Schedules is in full force and effect, (ii) neither the Royce Companies,
RFS nor (to the Knowledge of the Royce Companies) any other party
thereto is in default under any such contract, and no event has occurred
which constitutes, or with the lapse of time, the giving of notice, or both
would constitute, a default by the Royce Companies or RFS or (to the
Knowledge of the Royce Companies) a default by any other party under such
contract, and (iii) there are no material disputes between the Royce
Companies or RFS and any other party to any such contract with respect to
the Royce Companies' or RFS'compliance with such contract, except for any
failures of the foregoing to be true and correct which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Royce Companies.
2.13 Litigation. Except as set forth in Schedule 2.13,
there is no litigation, legal action, suit, proceeding or, to the Knowledge
of the Royce Companies, investigation, examination or audit, pending by or
before any Governmental Authority in which either of the Royce Companies,
RFS, any Proprietary Fund Client or any Private Fund Client is a party or, to
the Knowledge of the Royce Companies, with which any of them has been
threatened, other than any of the foregoing which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect on the Royce Companies. To the Knowledge of the Royce Companies,
there are no facts or circumstances which would reasonably be expected to
24
give rise to claims for indemnification against R&A, RFS, RMC or any
Proprietary Fund Client of the type contemplated by Section 5.7(a) hereof.
2.14 Compliance with Laws. Each of the Royce Companies
and RFS is in compliance with all constitutions, laws, statutes, ordinances,
regulations, codes, rules or other regulatory restrictions of any
governmental authority applicable to it and its business, including without
limitation the Advisers Act, the Investment Company Act, the Securities Act,
the Exchange Act and the regulations promulgated under each of them; the
rules and regulations of self-regulatory organizations (including without
limitation the NASD) and all other laws and regulations applicable to its
business (collectively "Laws and Regulations"), except for any failures to
be in compliance which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Royce
Companies. Neither of the Royce Companies or RFS is in default with respect
to any judgment, order, writ, injunction or decree issued by any court,
other governmental authority or self-regulatory organization, except for
any defaults which would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Royce Companies.
The Royce Companies have provided or made available to the Acquirer true
and correct copies of the Forms ADV of R&A and RMC and the Form BD of RFS,
in each case as in effect on the date of this Agreement. The information
contained in such Forms ADV and Form BD was true and correct in all material
respects as of the time of filing and, except as indicated on a subsequent
form or report filed before the Closing, continues to be true and correct
in all material respects. Except as set forth on Schedule 2.14, within the
past five years, none of the Royce Companies or RFS has received any written
notice from any governmental authority alleging any violation of any Laws
and Regulations by the Royce Companies, RFS or any of their employees, nor
have any of the Royce Companies or RFS received written notice from a
governmental authority that any suit, proceeding, hearing, investigation,
complaint, demand, claim, or inquiry has been filed or commenced against it
relating thereto, in each case other than any failures of the foregoing to
be true and correct which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Royce
Companies. Except for any failures of the following to be true and correct
which would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Royce Companies, (i) each
Proprietary Fund Client and each Private Fund Client is in compliance in
all material respects with all Laws and Regulations applicable to such
Proprietary Fund Client and (ii) no Proprietary Fund Client or Private Fund
Client is in material default with respect to any judgment, order, writ,
injunction or decree issued by any court, other governmental authority or
self-regulatory organization.
2.15 Finder's Fee. Except as identified on Schedule 2.15,
neither of the Royce Companies, RFS, nor any of the R&A Shareholders or
RMC Partners has incurred or become liable for any investment banking fee,
broker's commission or finder's fee in connection with the transactions
contemplated by this Agreement for which either of the Royce Companies,
RFS or the Acquirer would be liable.
2.16 Employee Benefit Programs.
(a) Schedule 2.16(a) contains a list of (i) each employee
benefit plan within the meaning of Section 3(3) of ERISA, as well as each
other executive compensation plan, equity simulation plan, deferred
25
compensation plan or agreement, vacation pay or severance pay plan or
policy, sickness, disability or death benefit plan, employee stock option,
stock purchase or stock ownership plan, or other employee benefit plan,
program or arrangement (whether funded or unfunded, whether written or oral,
and whether provided through the purchase of insurance or otherwise) that
is sponsored or maintained by either of the Royce Companies, RFS or any
Proprietary Fund Client (or with respect to which either of the Royce
Companies, RFS or any Proprietary Fund Client otherwise has any obligation
or liability) for the benefit of any of their employees or former employees,
or the dependents, survivors or beneficiaries of such employees or former
employees and (ii) any contracts, arrangements or understandings between
the Royce Companies, RFS or any Proprietary Fund Client and any employee
of the Royce Companies, RFS or any Proprietary Fund Client (including
without limitation any contracts, arrangements or understandings relating
to a sale of the Royce Companies, RFS or any Proprietary Fund Client)
(other than the Employment Agreements and the Closing Bonus
Agreements). All such plans, programs or arrangements listed on
Schedule 2.16(a) are referred to collectively as the "Plans".
(b) The Royce Companies have delivered or made available
to the Acquirer: (i) true and correct copies of all documents comprising
each Plan; (ii) accurate and complete summaries of all unwritten Plans;
(iii) the most recent summary plan description (if any) with respect to
each Plan; (iv) the most recent Internal Revenue Service (the "IRS")
determination letter received with respect to each Plan that is intended to
be a tax-qualified plan described in Section 401(a) of the Code (each such
Plan a "Qualified Plan") and the application for such determination letter;
(v) the documentation relating to each trust established in connection with
any Qualified Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code; and (vi) the Form 5500 filed
with respect to each Plan for which such a filing is required, with all
schedules and attachments, for the most recent plan year.
(c) Each Qualified Plan is in material compliance with
the requirements of Section 401(a) of the Code; (ii) the trust (if any)
forming part of the Qualified Plan is tax exempt under Section 501(a) of
the Code; and (iii) to the Knowledge of the Royce Companies, nothing has
occurred since the date of the most recent IRS determination letter that
would adversely affect the qualification of the Qualified Plan or the
exempt status of any such trust.
(d) With respect to each Plan, there are no actions, suits,
claims (other than routine claims for benefits in the ordinary course)
pending or, to the Knowledge of the Royce Companies, threatened with respect
to any Plan, and (ii) to the Knowledge of the Royce Companies, there are no
existing facts that would reasonably be expected to give rise to any such
actions described in clause (i) of this sentence.
(e) Except as set forth on Schedule 2.16(e), no Plan is
subject to the minimum funding requirement of Section 412 of the Code or to
Title IV of ERISA.
(f) Except as set forth on Schedule 2.16(f): (i) The Royce
Companies, RFS and/or each Proprietary Fund Client, as applicable, have made
all required contributions under the Plans including the payment of any
premiums payable to the Pension Benefit Guaranty Corporation ("PBGC") and
other insurance premiums on a timely basis, and (ii) no Plan has
incurred an accumulated funding deficiency, whether or not waived, under
Section 302 of ERISA or Section 412 of the Code.
26
(g) None of the Royce Companies, RFS or any Proprietary
Fund Client is a party to any collective bargaining agreement with any
labor organization, group or association relating to any employee or former
employee of either of the Royce Companies, RFS or any Proprietary Fund
Client, and none of the Royce Companies, RFS or any Proprietary Fund Client
have participated in or had any liability under Title IV of ERISA with
respect to a multiemployer plan within the meaning of Section 3(37), or
with respect to a single employer or pension plan within the meaning of
Section 3(41) of ERISA, and to the Knowledge of the Royce Companies, there
are no existing facts which would reasonably be expected to give rise to any
liability under Title IV of ERISA. Solely for purposes of this Section
2.16(g), the term "Royce Companies" shall include any corporation that is
a member of any controlled group of corporations (as defined in Section
414(b) of the Code) that includes either of the Royce Companies, any
subsidiary, any trade or business (whether or not incorporated) that is
under common control (as defined in Section 414(c) of the Code) with
either of the Royce Companies or any subsidiary, any organization (whether
or not incorporated) that is a member of an affiliated service group (as
defined in Section 414(m) of the Code) that includes either of the Royce
Companies or any subsidiary and any other entity required to be aggregated
with the Royce Companies pursuant to the regulations issued under Section
414(o) of the Code.
(h) Except as set forth on Schedule 2.16(h), none of the
Royce Companies, RFS or any Proprietary Fund Client has any obligation to
provide medical or other benefits to former employees or their survivors,
dependents or beneficiaries, except pursuant to coverage provided in
accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, or applicable state medical benefits continuation law.
(i) Except as set forth on Schedule 2.16(i): (i) There
have been no nonexempt "prohibited transactions" within the meaning of
Section 4975 of the Code or Part 4 of Subtitle B of Title I of ERISA with
respect to any Plan or for which the Royce Companies, RFS or any Proprietary
Fund Client, or any officer, employee or other person entitled to an
indemnity from the Royce Companies, RFS or any Proprietary Fund Client,
is or has been subject to an excise tax or civil penalty under the Code or
ERISA, and (ii) each Plan has been administered in accordance with all
applicable Laws and Regulations and with the documents, contracts and
agreements governing the Plan.
(j) Except as set forth on Schedule 2.16(j), none of the
Royce Companies, RFS or any Proprietary Fund Client has any employment
agreement with any of its employees (other than the Employment Agreements
and the Closing Bonus Agreements).
(k) Except as set forth on Schedule 2.16(k), none of the
Plans provides for the payment of separation, severance, termination,
transaction bonus or similar-type benefits to any person or obligates the
Royce Companies, RFS or any Proprietary Fund Client to pay separation,
severance, termination, transaction bonus or similar-type benefits solely
or partially as a result of any transaction contemplated by this Agreement
or as a result of a "change in control," within the meaning of such term
under Section 280G of the Code. Each of the Plans is subject only to
the laws of the United States.
2.17 Directors, Officers and Employees. Schedule 2.17 sets
forth a true and complete list of all current directors, officers and
27
employees of the Royce Companies, RFS and the Proprietary Fund Clients as
of the date of this Agreement, in each case including the current
job title of such individual.
2.18 Title to Personal Property and Related Matters.
Except as set forth on Schedule 2.18 or as expressly identified in the other
sections of this Agreement or on the Schedules, the Royce Companies and RFS
have good and valid title to their assets, free and clear of any Claims,
other than any failures of the foregoing to be true and correct which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Royce Companies. Except as set forth on
Schedule 2.18(a), included among the assets of the Royce Companies and RFS
are all of the material assets and rights currently used by the Royce
Companies and RFS in the conduct of their business.
2.19 Related Party Transactions. Except as set forth on
Schedule 2.19, no present or former officer, director, shareholder or
partner of the Royce Companies, no Affiliates, spouses or children of any
of such Persons, no trust of which any of such Persons is a grantor or
beneficiary, and no employee of any Proprietary Fund Client, is currently
a party to any material agreement with either of the Royce Companies,
including without limitation any agreement providing for the employment of,
furnishing of services by, rental of assets from or to, or otherwise
requiring payments to any such Persons.
2.20 Insurance. The Royce Companies and RFS have in effect
as of the date of this Agreement the insurance policies identified on
Schedule 2.20.
2.21 Certain Regulatory Matters.
(a) The Royce Companies have adopted a formal code of
ethics and a written policy regarding xxxxxxx xxxxxxx. Such code of
ethics complies in all material respects with Section 17(j) of the
Investment Company Act, Rule 17j-1 thereunder, and Section 204A of the
Advisers Act, respectively. The policies of the Royce Companies with
respect to avoiding conflicts of interest, or the conflicts of interest
that exist, as the case may be, are described in the most recent Forms ADV
thereof (or incorporated by reference therein), as amended. As of the
date of this Agreement and during the prior five years, to the Knowledge
of the Royce Companies there have been no material violations of such
policies.
(b) None of the R&A Shareholders, the RMC Partners, the
Royce Companies or, to the Knowledge of the Royce Companies, any other
Person "associated" (as defined under the Advisers Act) with the Royce
Companies (including without limitation any employees of a Proprietary
Fund Client who are engaged in the Royce Business), has been convicted of
any crime or is or has been subject to any disqualification that would be
a basis for denial, suspension or revocation of registration of an
investment adviser under Section 203(e) of the Advisers Act or must be
disclosed to clients pursuant to Rule 206(4)-4(b) thereunder and has not
been so disclosed, or for disqualification as an investment adviser for an
investment company under Section 9(a) of the Investment Company Act, and to
the Knowledge of the Royce Companies there is no basis for any such
disqualification, denial, suspension or revocation.
(c) None of the Royce Companies, RFS, the R&A
Shareholders, the RMC Partners or, to the Knowledge of the Royce Companies,
28
any of the other directors, officers or employees of the Royce Companies,
RFS or the Proprietary Funds, is subject to any cease and desist, censure
or other disciplinary or similar order issued by, or is a party to any
written agreement, consent agreement, memorandum of understanding or
disciplinary agreement with, or is a party to any commitment letter or
similar undertaking to, or subject to any order or directive by, or a
recipient of any supervisory letter from, any governmental authority with
respect to the business of the Royce Companies, other than any of the
foregoing which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Royce Companies.
(d) R&A has made available to the Acquirer true and
correct copies of the current prospectus (which term, as used in this
Agreement, shall include any related statement of additional information
and any private placement memorandum), as amended or supplemented to
the date of this Agreement, relating to each Proprietary Fund Client or
Private Fund Client, and all material written supplemental advertising and
marketing materials relating to each Proprietary Fund Client or Private
Fund Client in use as of the date of this Agreement. Except for any
failures of the following to be true and correct which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Royce Companies, all of the prospectuses and
marketing materials described in the immediately preceding sentence complied
at the time of their use with the Securities Act, the rules and regulations
thereunder and the rules and regulations of the NASD, as applicable.
2.22 Securities Act Matters. In the event that the
Acquirer elects pursuant to Section 1 to pay a portion of the Closing
Purchase Price or a Contingent Payment in the form of Acquirer Common Stock,
each R&A Shareholder receiving such stock (i) is acquiring such stock for
investment and not with a view toward or for sale in connection with any
distribution thereof in violation of any securities or "blue sky" law, or
with any present intention of distributing or selling such shares in
violation of any securities or "blue sky" law, (ii) understands and agrees
that its receipt of such stock has not been registered under
the Securities Act or any state or local securities laws, and such stock
may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without compliance with such laws, in each case to
the extent applicable, and (iii) is an "accredited investor" as
defined in Rule 501 under the Securities Act, has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment in such stock, is able to
bear the economic risk of such investment, and has been provided by the
Acquirer with the opportunity to obtain information regarding, and ask
questions of, the Acquirer with respect to its business.
SECTION 3. COVENANTS OF R&A
3.1 Making of Covenants and Agreements. R&A hereby
makes to the Acquirer the covenants and agreements set forth in this
Section 3.
3.2 Consents from Clients other than Fund Clients.
As promptly as reasonably practicable following the date hereof, R&A shall
inform each of its clients who is a party to an Advisory Contract as of the
29
date hereof (other than the Registered Fund Clients and Private Fund Clients)
of the transactions contemplated hereby, and shall request the written
consent of each such client to the deemed assignment resulting from the
transactions contemplated hereby. R&A shall use its reasonable efforts to
acquire such written consents from each of its clients (other than the
Registered Fund Clients and Private Fund Clients), including by contacting
telephonically or in person prior to the Closing any such client who has not
executed a written consent to inquire as to such client's intentions.
The Acquirer shall be provided a reasonable opportunity to review the form
of consent materials to be used by R&A in connection with obtaining such
client consents.
3.3 Fund Client Approvals.
(a) For each Registered Fund Client, R&A shall use
its reasonable efforts to obtain in accordance with Section 15 of the
Investment Company Act, the due consideration and approval by the board of
directors or trustees (as applicable) of the Registered Fund Client
("Fund Board Approval") of (i) a new advisory agreement on terms
substantially identical to the terms of R&A's existing Advisory Contract
with such Registered Fund Client and (ii) the addition of a sufficient
number of disinterested directors or trustees (as applicable) to the board
of directors or trustees (as applicable) of such Registered Fund Client to
cause no more than twenty-five percent (25%) of the members of the board to
be "interested persons" (as defined in the Investment Company Act) of the
Acquirer, either Royce Company, any R&A Shareholder or any of their
respective Affiliates.
To the extent the Fund Board Approval is obtained for a
Registered Fund Client, R&A shall use its reasonable efforts to obtain the
approval of shareholders of such Registered Fund Client ("Fund Shareholder
Approval") of such new advisory agreement and disinterested directors or
trustees (as applicable), including by causing (or, in the case of any
Registered Fund Client that is not a Proprietary Fund Client, requesting
the sponsor of such Registered Fund Client to cause) the preparation and
mailing to such shareholders of a proxy statement describing the
transactions contemplated hereby and the new advisory agreement and
disinterested directors or trustees (as applicable), and by holding
(or, in the case of any Registered Fund Client that is not a Proprietary
Fund Client, requesting the sponsor of such Registered Fund Client to hold)
the shareholder meeting as promptly as practicable (provided that the
requirements of this sentence shall not be applicable with respect to any
Registered Fund Client that is not a Proprietary Fund Client and which has
obtained exemptive relief from the SEC permitting its new advisory
agreement to be entered into with R&A without shareholder approval).
Each such proxy statement relating to a Proprietary Fund Client shall be
in form and substance reasonably satisfactory to the Acquirer (provided
that each such proxy statement shall be conclusively deemed reasonably
satisfactory to the Acquirer if the Acquirer does not communicate to R&A an
objection thereto within five (5) Business Days following its receipt of a
draft of such proxy statement from R&A). The Acquirer shall cooperate and
assist R&A in all commercially reasonable respects in connection with such
proxy solicitations and the Fund Board Approvals (including, without
limitation, by providing to R&A all information relating to the Acquirer and
its Affiliates necessary in connection with the foregoing, which information
the Acquirer agrees shall be accurate and complete in all material respects
at the time it is provided and at the time it is used in connection with the
foregoing).
30
(b) As promptly as reasonably practicable following the
date hereof, R&A shall (i) cause each of the Private Fund Clients of RMC to
provide written notice to its limited partners or members (as applicable)
as of the date hereof of the transactions contemplated hereby, and (ii)
request that Chase Manhattan of Wyoming provide written notice to each of
the Private Fund Clients of R&A of the transactions contemplated hereby and
cause each such Private Fund Client to provide written notice to its members
as of the date hereof. The written consent of each such limited partner or
member (as applicable) for purposes of the transactions contemplated hereby
shall be solicited pursuant to such notices, and any limited partner or
member (as applicable) declining to give such written consent shall be
given the opportunity pursuant to such notice to withdraw its investment
from the applicable Private Fund Client prior to the Closing. The parties
hereto agree that the requisite consent of each Private Fund Client for
purposes of the transactions contemplated hereby shall be deemed to have
been obtained upon the receipt of the written consent of such portion in
interest of the limited partners or members (as applicable) of such Private
Fund Client as is required under the Constituent Documents of
such Private Fund Client, as reasonably determined by R&A or RMC (as
applicable) (with respect to each such Private Fund Client, its "Private
Fund Consent"). The Acquirer shall be provided a reasonable opportunity to
review the form of notice and consent materials to be used in connection
with such consent solicitation.
3.4 Authorization from Others. R&A will use its
reasonable best efforts (except to the extent another standard is provided
in this Agreement with respect to any particular authorizations, consents
or approvals) to obtain all authorizations, consents and approvals of other
Persons required to be obtained by it (including any such authorizations,
consents or approvals required to be obtained by RFS) to permit the
consummation by R&A of the transactions contemplated by this Agreement.
R&A shall file or cause to be filed with the Federal Trade Commission and
the United States Department of Justice, as promptly as possible
following the date of this Agreement, any notifications required to be
filed by the "ultimate parent entity" of R&A under the HSR Act with respect
to the transactions contemplated hereby. R&A will use its reasonable best
efforts to assist the Acquirer in responding to any requests for additional
information made by either of such agencies in connection with the
transactions contemplated hereby, to assist the Acquirer in causing the
waiting periods under the HSR Act to terminate or expire at the earliest
possible date, and to assist the Acquirer in resisting vigorously any
assertion that the transactions contemplated hereby constitute a violation
of the antitrust laws, all to the end of expediting consummation of the
transactions contemplated hereby.
3.5 Conduct of Business. Between the date of this
Agreement and the Closing, except as described in Schedule 3.5, or in
connection with the removal from RMC of RMC Excluded Assets, or as otherwise
expressly required by the terms of this Agreement, without the consent of
the Acquirer (such consent not to be unreasonably withheld or delayed by the
Acquirer):
(a) Each Royce Company and RFS will conduct its business
in the ordinary course of business, and will use reasonable efforts to
preserve its business (including the goodwill associated therewith);
(b) Neither Royce Company nor RFS will (i) make (or
incur any obligation to make) any purchase or sale of any asset or property
31
(including any equity interests in another Persons), other than purchases
and sales made in the ordinary course of business, in each case in
an aggregate amount not to exceed two hundred and fifty thousand dollars
($250,000) per quarter, or (ii) distribute to its shareholders any items of
tangible property; prior to the Closing, R&A, the R&A Shareholders and the
Acquirer shall effect those transactions with respect to real property in
the manner described on Schedule 3.5(b) hereto (with the documentation
relating to such transactions to be in form and substance reasonably
satisfactory to each such Person who is a party thereto and to the
Acquirer); the R&A Shareholders shall reimburse R&A on an after-tax basis
for any transfer taxes, fees and duties and any corporate income taxes
imposed on R&A resulting from the conveyances of real property contemplated
by this Section 3.5(b);
(c) Neither R&A nor RFS will incur any indebtedness
(as defined under GAAP), including without limitation any liability
(contingent or fixed) as a guarantor or otherwise with respect to the debt
obligations of others, except gross debt for borrowed money to the extent
it replaces existing outstanding indebtedness for borrowed money and is
incurred in the ordinary course of business;
(d) R&A will not make, or incur any obligation to make,
a change in its Constituent Documents;
(e) Neither R&A nor RFS will issue any shares of its
capital stock or any options, warrants or rights of any kind to acquire any
such shares of capital stock, or any securities convertible into or
exchangeable for any such shares of capital stock;
(f) Neither R&A nor RFS will make (and R&A will use its
reasonable best efforts to prevent any Proprietary Fund Client from making)
any material increase in the compensation or fringe benefits payable to any
of their respective officers or employees except in the ordinary course of
business, or will enter into any new or materially amended bonus plan,
profit sharing plan, retirement plan, deferred income plan, employment
agreement or other similar arrangement, except for any of the foregoing
(i) required by law or contracts in effect as of the date hereof or (ii)
which is not with a director or officer of R&A or RFS and is terminable
at will by R&A or RFS (as applicable);
(g) Neither Royce Company nor RFS will settle any
material litigation except in the ordinary course of business;
(h) Neither Royce Company nor RFS will terminate its
existence or voluntarily file for or otherwise commence proceedings with
respect to bankruptcy, reorganization, receivership or similar status;
(i) Except with respect to R&A's election to be taxed as
an S corporation (which is addressed in Section 9.1(c) hereof), neither R&A
nor RFS will make or change any tax election, waive or extend the statute of
limitations in respect of taxes, amend any tax return in any material
respect, enter into any closing agreement with respect to any material tax
or settle any material tax claim or assessment (in each case except to the
extent required by law), or materially change any method or principle of
accounting in a manner inconsistent with past practice (except to the extent
required by GAAP);
32
(j) Neither Royce Company nor RFS will enter into or
terminate any material contract or agreement or make any material amendment
to any of its material contracts, in either case other than in the ordinary
course of business consistent with past practice;
(k) Neither Royce Company nor RFS will enter into any
transaction with any R&A Shareholder or any of their respective Affiliates
other than in the ordinary course of business consistent with past practice
and on terms no less favorable than could be negotiated on an arms' length
basis, and R&A will not voluntarily terminate the employment of any employee
who is a party to an Employment Agreement;
(l) Neither Royce Company nor RFS will acquire for its
own account control or ownership of, or any other equity or other ownership
interest in, any other corporation, association, joint venture, partnership,
business trust or other business entity, or acquire for its own account
control or ownership of all or a substantial portion of the assets of any of
the foregoing, or merge, consolidate or otherwise combine with any other
corporation or enter into any agreement providing for any of the foregoing;
(m) Neither Royce Company nor RFS will permit any
insurance policy covering the Royce Companies or RFS or naming them as a
beneficiary or a loss payable payee to be cancelled or terminated or any of
the coverage thereunder to lapse, in each case unless simultaneously with
such termination or cancellation, replacement policies, obtained by such
Person in its name or otherwise providing such Person with substantially
the same coverage, are in full force and effect, except for any failures of
the foregoing which would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Royce Companies; and
(n) Neither Royce Company nor RFS will agree in writing
or otherwise to take any action in violation of the foregoing.
3.6 Financial Statements. R&A shall furnish the
Acquirer with (i) unaudited quarterly balance sheets and statements of
income and cash flows for R&A and RFS, (ii) unaudited quarterly balance
sheets and income statements for RMC, (iii) unaudited monthly balance sheets
and statements of income for R&A and RFS, and (iv) information regarding the
levels of aggregate assets under management by R&A and RMC, in each case
within twenty (20) days after each quarter- or month-end (as applicable)
for each quarter or month (as applicable) ending more than twenty (20) days
prior to the Closing, which financial statements shall be prepared in
accordance with GAAP (except that they need not include footnotes).
3.7 Access. Until the Closing, each Royce Company
shall afford to the Acquirer and its representatives reasonable access,
during normal business hours and with reasonable notice, to the properties
and records of such Royce Company (including without limitation, in the
case of R&A, those of RFS) and to the professional advisers to the Royce
Companies, in each case in order that the Acquirer may have the opportunity
to make such reasonable investigation as it shall desire for purposes
consistent with this Agreement. No investigation by the Acquirer,
R&A or any R&A Shareholder heretofore or hereafter made shall affect the
representations and warranties of the parties under this Agreement, and
each such representation and warranty shall survive any such investigation
in accordance with the terms of this Agreement.
33
3.8 Consummation of Agreement. Each Royce Company
shall use its reasonable best efforts (except to the extent another standard
is provided for in this Agreement with respect to particular actions to be
taken by such Royce Company) to perform and fulfill all conditions and
obligations to be performed and fulfilled by it under this Agreement, to
the end that the transactions contemplated by this Agreement shall be fully
carried out.
3.9 Cooperation of R&A. R&A shall (and shall cause
RMC to) cooperate with all reasonable requests of the Acquirer in
connection with the consummation of the transactions contemplated hereby and
the making of any filings required to be made by the Acquirer in
connection therewith (including without limitation filings required to be
made under the HSR Act).
3.10 Updated Representations and Warranties. From the
ate of this Agreement to the Closing, R&A shall promptly inform the Acquirer
in writing if it shall have discovered any information (whether existing as
of the date of this Agreement or arising after the date hereof) which would
cause the condition set forth in Section 6.2(a) hereof not to be satisfied
if the Closing were scheduled to occur as of the date of R&A's discovery of
such information; provided, however, that no such disclosures shall be deemed
to modify, amend or supplement the representations and warranties of R&A
for purposes of any provision of this Agreement except
to the extent provided in Section 8.3 hereof.
3.11 Closing Bonus Payments. All payments required to
be made to employees of R&A pursuant to the Closing Bonus Agreements shall
be paid to such employees in cash prior to the end of business on the Closing
Date, and the R&A Shareholders shall in the aggregate contribute to the
capital of R&A in cash such portion of the Closing Purchase Price as is
required to enable R&A to make such cash payments to employees pursuant to
the Closing Bonus Agreements while remaining in compliance with the closing
condition set forth in Section 6.7 hereof (with the capital contribution
required to be made by each R&A Shareholder being in proportion to such R&A
Shareholder's respective portion of the aggregate Closing Purchase
Price paid to the R&A Shareholders at the Closing). All payments made to
employees of R&A pursuant to the Closing Bonus Agreements shall, for all
purposes (including without limitation the filing of all Tax Returns), be
deemed by the parties hereto (and the Acquirer so covenants and agrees) as
having been paid to such employees as of immediately prior to the Closing
and in respect of past services provided to R&A by such employees, and the
parties hereto agree to treat such payments in all respects as having been
so made in respect of past services and as having been made while R&A was
an S corporation (and the R&A Shareholders therefore shall be entitled to
any deductions arising in connection with such payments). Prior to making
the payments required to be made pursuant to the Closing Bonus Agreement,
R&A shall provide the Acquirer with reasonable notice with respect to the
amounts intended to be withheld by R&A from the gross amount of such
payments pursuant to applicable Tax laws, and shall reflect the reasonable
comments of the Acquirer with respect to the amounts actually withheld in
connection with the making of such payments.
3.12 Restricted Activities of CMR . As an inducement
to the Acquirer to enter into this Agreement, in consideration of the
benefits to be derived by CMR under this Agreement, and to preserve the
34
goodwill associated with the business of R&A, CMR hereby agrees to the
following restrictions on CMR's business activities that are not on behalf
of R&A and its Affiliates:
(a) As a separate and independent covenant, CMR agrees
that, during the Restricted Period (as defined below), CMR shall not
directly or indirectly, whether for his own account or for the account of
any other person, firm, corporation, or other business organization,
(i) provide Investment Advisory Services (as defined below) to any Client
(as defined below), (ii) make any statements or take any actions that would
reasonably be expected to materially interfere with R&A's or an Affiliate's
business relationships with any Client; (iii) contact (either
directly or indirectly) any Client for the purposes of inducing the client
to, or otherwise induce or attempt to induce any Client to, enter into any
investment management relationship or place any funds or securities under
management with any person or firm other than R&A or an Affiliate
relating to investments of any type, (iv) endeavor to entice away from R&A
any person who is, or was at any time during the one year prior to such
attempt, employed by R&A or an Affiliate, as an officer, portfolio manager,
trader, analyst or salesperson or (v) take any actions that would reasonably
be expected to materially interfere with R&A's property rights in lists of
Clients or otherwise materially diminish the value of such lists to R&A;
provided, however, that this Section 3.12(a) shall not prohibit any firm,
corporation or other business organization of which CMR is an employee
(or otherwise associated) from engaging in such activities, so long as CMR
did not cause or induce such activities, has no participation in such
activities and did not facilitate such activities through the provision of
information or otherwise; and provided, further, that this Section 3.12(a)
is not intended to restrict (i) general solicitations made to the public or
advertisements placed in publications of general circulation or (ii) "cold
calls," "form letters" or similar types of untargeted solicitations.
The term "Restricted Period" shall mean the period
beginning on the Closing Date and ending the later of (i) the fifth
anniversary of the Closing Date and (ii) two (2) years after the termination
of CMR's employment with R&A; provided, however, that if CMR's employment
with R&A is terminated by R&A without "Cause" (as such term is defined in
his Employment Agreement), or is terminated by CMR for "Good Reason"
(as such term is defined in his Employment Agreement), the Restricted Period
shall end on the fifth anniversary of the Closing
Date.
The term "Investment Advisory Services" shall mean
investment consulting, the rendering of investment advice to institutional
or individual clients, the management of publicly traded securities for
institutional or individual accounts, asset management and all other
services which are customarily provided by persons or entities registered
as investment advisers under the Advisers Act; provided, however, that such
term shall not include "Permitted Activities" (as such term is defined in
CMR's Employment Agreement).
The term "Client" shall mean (i) all persons or entities,
who are or were recipients of Investment Advisory Service s from R&A, RMC or
RFS or any of their subsidiaries at the date of termination of CMR's
employment with R&A or at any time during the one (1) year preceding the
date of such termination of employment, including without limitation (A) all
such clients who are investment companies or other collective investment
vehicles (other than an Excluded RMC Fund, if any), (B) all partners and
other investors during such period in any such client that is a collective
investment vehicle that is not a registered investment company (other
than partners or other investors in any Excluded RMC Fund), and (C) any
person or entity who is a shareholder during such period of any such client
35
that is a registered investment company who held shares having a market
value of at least $1 million (but such term shall exclude any other
shareholder of a registered investment company), (ii) any persons or
entities who have been identified and specifically contacted by an employee
of R&A, RMC, or RFS with an offer to provide Investment Advisory Services
at any time during the one (1) year preceding the date of termination of
CMR's employment with R&A and who are either named on a list given to CMR
within ten (10) days after his termination of employment or otherwise known
by CMR to have been so contacted, and (iii) any persons or entities known
by CMR to be Affiliates of such current, former or prospective clients.
The term "Client" shall not include (i) any member of CMR's immediate
family, as defined under Rule 16a-1 of the Exchange Act or (ii) any trust of
which CMR or any member of his immediate family is a grantor or beneficiary
(as defined in Rule 16a-1 under the Exchange Act) (or similar types of
related persons or entities).
(b) As a separate and independent covenant, CMR agrees
that, during the Restricted Period, CMR shall not, either for CMR's own
account or on behalf of any person or entity with which CMR is associated
or affiliated, without prior written approval from the Board
of R&A, directly or indirectly, own, share in the earnings of, or invest in
the stock, bonds, or other securities of any person, firm or business
organization which does or attempts to do any of the activities described
in Section 3.12(a), except in accordance with the "Employee Investment
Criteria" set forth below; provided, however, that this Section 3.12(b)
shall not be applicable to (i) Permitted Activities, (ii) continued
ownership by CMR of those investments set forth on Schedule C to his
Employment Agreement, and any other investments acquired by CMR with
the prior written approval of the Board of R&A, (iii) investments in the
securities of open- or closed-end registered investment companies, (iv)
passive investments made in the securities of any collective investment
vehicle that is not registered as an investment company; provided that
CMR's investment in any such private fund does not exceed 10% of the
aggregate investments made therein, or (v) owning any of the foregoing
interests in any collective investment vehicle sponsored or managed by CMR
to the extent such activities are not otherwise prohibited by the
first sentence of Section 3.12(c). For purposes hereof, "Employee
Investment Criteria" shall mean an investment in stocks, bonds or other
securities which meets both of the following criteria: (a) such stock,
bonds or other securities are listed on any national, regional, or foreign
securities exchange or have been registered under Section 12(g) of the
Exchange Act; and (b) such investment does not equal or exceed, in the case
of any class of the capital stock of any one issuer, two and a half percent
(2.5%) of the issued and outstanding shares, or, in the case of bonds or
other securities, two and a half percent (2.5%) of the aggregate principal
amount thereof issued and outstanding.
(c) As a separate and independent covenant, CMR
covenants and agrees that during any portion of the Restricted Period that
follows the termination of CMR's employment with R&A, CMR shall not directly
or indirectly, whether for his own account or for the account of any other
person, firm, corporation, or other business organization, engage in the
business of providing or soliciting to provide Investment Advisory Services
of any type to any person or entity located in the United States.
In addition, CMR covenants and agrees that, during the period specified in
this Section 3.12(c), CMR shall not, either for CMR's own account or on
behalf of any person or entity with which CMR is associated or affiliated,
without the prior written approval of the Board of R&A, directly or
36
indirectly be employed by, provide consulting services to, own, share in
the earnings of, or invest in the stock, bonds, or other securities of any
person, firm or business organization which does or attempts to do any of
the activities described above in this Section 3.12(c), except in accordance
with the Employee Investment Criteria set forth in Section 3.12(b). To the
extent that the provisions contained in this Section 3.12(c) are
more restrictive than the covenants contained in Section 3.12(a) or
Section 3.12(b), the parties intend that this Section 3.12(c) shall control
and shall be enforced to the maximum extent permitted by law.
Notwithstanding the foregoing, this Section 3.12(c) shall not be applicable
to (i) Permitted Activities, (ii) continued ownership by CMR of those
investments set forth on Schedule C to his Employment Agreement, and any
other investments acquired by CMR with the prior written approval of the
Board of R&A, (iii) investments in the securities of open- or closed-end
registered investment companies, (iv) passive investments made in the
securities of any collective investment vehicle that is not registered as
an investment company; provided that CMR's investment in any such private
fund does not exceed 10% of the aggregate investments made therein, (v)
owning any of the foregoing interests in any collective investment vehicle
sponsored or managed by CMR to the extent such activities are not otherwise
prohibited by the first sentence of this Section 3.12(c), or (vi) engaging
in the sponsoring and/or managing of any Excluded RMC Fund (provided that
no such Excluded RMC Fund shall accept investments from new investors
therein to the extent its net assets exceed $50 million at any time prior
to the end of the Restricted Period).
(d) CMR and R&A agree that the periods of time and
the scope applicable to the covenants of Sections 3.12(a), 3.12(b) and
3.12(c) are reasonable and necessary to protect the legitimate business
interests of R&A without unduly limiting CMR's ability to obtain employment
or otherwise earn a living at the same general level of economic benefit as
anticipated by his Employment Agreement. However, if such period or scope
should be adjudged unreasonable in any judicial or other dispute resolution
proceeding, then the period of time or scope shall be reduced by the extent
deemed unreasonable, so that these covenants may be enforced during such
period and for such scope as are adjudged to be reasonable.
(e) It is understood by and between CMR and R&A that
the covenants by CMR set forth in this Section 3.12 are an essential element
of this Agreement and that, but for the agreement of CMR to comply with such
covenants, R&A would not have entered into CMR's Employment Agreement and
the Acquirer and the R&A Shareholders would not have entered into this
Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER
4.1 Making of Representations and Warranties. The
Acquirer hereby makes to R&A and each of the R&A Shareholders the
representations and warranties contained in this Section 4.
4.2 Organization of the Acquirer. The Acquirer is a
corporation duly formed, validly existing and in good standing under the
laws of the State of Maryland and has all requisite power and authority
to own, lease and operate its properties and assets and to conduct its
business as currently conducted.
4.3 Authority of the Acquirer. The Acquirer has full
right, authority and power to enter into this Agreement and each of the
37
other Transaction Documents to which it is a party and to carry out the
transactions contemplated hereby and thereby. The execution, delivery
and performance by the Acquirer of this Agreement and each of the other
Transaction Documents to which it is a party have been duly authorized
by all necessary corporate action of the Acquirer, and no other action
on the part of the Acquirer is required in connection therewith. This
Agreement and each of the other Transaction Documents to which the
Acquirer is a party has been duly executed and delivered by the
Acquirer and constitutes a valid and binding obligation of the
Acquirer, enforceable against the Acquirer in accordance with its
terms, subject to bankruptcy, insolvency and other applicable Laws and
Regulations affecting creditors' rights generally, and to general
principles of equity. Assuming the accuracy of the representations and
warranties of R&A set forth in Section 2.5(b) hereof with respect to the
execution and delivery of such agreements by R&A, and assuming that such
agreements remained in full force and effect as of immediately prior to
the Closing, as of the Closing the Revenue Sharing Agreement and each of
the Employment Agreements will constitute a valid and binding obligation
of R&A,enforceable against R&A in accordance with its terms, subject to
bankruptcy, insolvency and other applicable Laws and Regulations
affecting creditors' rights generally, and to general principles of
equity. The execution, delivery and performance by the Acquirer of this
Agreement and each of the other Transaction Documents to which it is a
party (in each case including without limitation the consummation of the
transactions contemplated hereby and thereby, as applicable):
(i) does not and will not violate any provision of the
Constituent Documents or board of directors resolutions of the Acquirer;
(ii) does not and will not violate any Laws and
Regulations applicable to the Acquirer, or require the Acquirer to
obtain any approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) that has not been obtained
or made, except for approvals, consents and waivers that are expressly
addressed by other sections of this Agreement, which approvals, consents
and waivers shall have been received or made prior to the Closing (or at
any earlier time required
hereunder or under applicable Laws and Regulations or the provisions of
any applicable agreement, contract or instrument) (including without
limitation the receipt of the approval of The New York Stock Exchange
for the listing of any Acquirer Shares to be delivered at the Closing
pursuant to this Agreement); and
(iii) assuming the consents, waivers, approvals and
filings described in the preceding clause (ii) are obtained or made (as
applicable), does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a
right of termination of any agreement, contract, permit, authorization,
order, judgment or injunction to which the Acquirer is a party or by
which the property of the Acquirer is bound, or result in the creation
or imposition of any Claim on the Acquirer.
4.4 Capitalization. The capitalization of the Acquirer
consists solely of (i)250,000,000 shares of authorized common stock, $.10
par value each ("Acquirer Common Stock"), of which 66,201,930 shares
(including 2,721,886 exchangeable shares of a Canadian subsidiary of the
Acquirer) were outstanding as of July 6, 2001, and (ii) 4,000,000 shares
of preferred stock, $10.00 par value each, of which 1 share was
outstanding as of the date of this
Agreement. Any Acquirer Shares delivered to the R&A Shareholders
pursuant to Section 1.8 hereof will be, when so delivered, duly and
38
validly authorized, duly and validly issued, fully paid and non-
assessable and not subject to any pre-emptive or other similar rights.
4.5 Litigation. There is no litigation, legal action,
suit, proceeding or, to the knowledge of the Acquirer, investigation,
examination or audit, by or before any Governmental Authority in which
the Acquirer or any of its Affiliates is a party, or to the knowledge of
the Acquirer, with which any of them has been threatened in writing,
other than any of the foregoing which would not, individually or in the
aggregate, reasonably be expected to have (i) a Material Adverse Effect
on the Acquirer or (ii) a Material Adverse Effect on the Royce Companies
following the Closing.
4.6 Consent Solicitation Materials. All information
provided in writing by or on behalf of the Acquirer for use in the
consent solicitation materials distributed by the Royce Companies to
their clients, and for use by the Private Fund Clients and the
Registered Fund Clients, in each case in connection with the
transactions contemplated by this Agreement at the
time such information is provided and at the time such information is
used will be accurate and complete and will not contain 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 the light of the circumstances under which they were made,
not misleading (including without limitation to the extent revised
information is necessary to correct any statement in any earlier
communication that has become false or misleading).
4.7 SEC Reports. Since January 1, 1999, the Acquirer
has made all filings with the SEC that it has been required to make
under the Securities Act and the Exchange Act (the "Acquirer Filings").
Except as disclosed in Schedule 4.7 hereto, at the time of its filing,
each
such Acquirer Filing complied as to form with the requirements of the
Securities Act or the Exchange Act, as applicable, in all material
respects, and no such Acquirer Filing, as of the date of filing,
contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.8 Finder's Fee. None of the Acquirer or its
Affiliates has incurred or become liable for any investment banking fee,
broker's commission or finder's fee in connection with the transactions
contemplated by this Agreement for which either of the Royce Companies,
RFS or any R&A Shareholder would be liable.
4.9 Absence of Certain Changes. Since March 31,
2001, there has not been any circumstance, event or occurrence that has
had or, individually or in the aggregate, would reasonably be expected
to have, a Material Adverse Effect on the Acquirer.
SECTION 5. COVENANTS OF THE ACQUIRER
5.1 Making of Covenants and Agreements. The
Acquirer hereby makes to R&A and the R&A Shareholders the covenants and
agreements set forth in this Section 5.
5.2 Employee Benefits:
39
(a) During the Revenue Sharing Period, the Acquirer
shall at all times cause Board Approval of the following (and shall not
otherwise affirmatively prevent the following from occurring):
(i) R&A shall maintain the Royce & Associates, Inc.
Deferred Compensation Plan and the Royce & Associates, Inc.
Incentive Deferred Compensation Plan (collectively, the "Deferred
Compensation Plans") and discharge the obligations of R&A under
the Deferred Compensation Plans existing as of immediately prior
to the Closing (provided that any new post-Closing grants
thereunder shall be made only in the discretion of the Board of
R&A); provided, however, that each of the Deferred Compensation
Plans shall be amended prior to the Closing to reflect that the
obligations of R&A thereunder are to be funded solely out of
Retained Operating Revenues following the Closing, with such
amendments to become effective as of (and subject to)
the Closing (and R&A shall use its reasonable best efforts to
obtain any necessary consents of participants in the Deferred
Compensation Plans to the extent necessary under the terms of such
plans to effect such amendments); and
(ii) R&A meeting its contractual obligations under
each of the Employment Agreements.
(b) To the extent that any employee of either of the
Royce Companies, RFS or any of the Proprietary Fund Clients as of
immediately prior to the Closing (the "Affected Employees") participates
in employee benefit plans or arrangements maintained by the Acquirer
or any of its subsidiaries (including without limitation R&A), the
Acquirer (to the extent permitted under the terms of such employee
benefit plans or arrangements, in the case of any such plans or
arrangements other than those maintained by R&A) shall (or in the case
of any such plan or arrangement maintained by R&A, the Acquirer shall
cause Board Approval of any recommendation by the Management Committee
to):
(i) Give such Affected Employee full credit
for purposes of eligibility and vesting and benefit accrual
(except for benefit accruals under any defined benefit pension
plan) under such employee benefit plans or arrangements maintained
by the Acquirer or any of its subsidiaries in which such Affected
Employee participates for such Affected Employee's aggregate
service with either of the Royce Companies or RFS or any of the
Proprietary Fund Clients to the same extent recognized by the Royce
Companies or RFS immediately prior to the Closing;
(ii) waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to such
Affected Employee under any welfare benefit plans in which such
Affected Employee is eligible to participate after the Closing;
and
40
(iii) provide such Affected Employee with credit
for any co-payments and deductibles paid prior to the Closing in
satisfying any applicable deductible or out-of-pocket requirements
under any welfare plans that such Affected Employee is eligible to
participate in after the Closing Date.
5.3 Section 15 of the Investment Company Act.
The Acquirer agrees to use its reasonable best efforts to cause the
following to be true regarding Section 15(f) of the Investment Company
Act with respect to each Proprietary Fund Client: (a) For a period of
not less than three years following the Closing, no more than twenty-
five percent (25%) of the members of the board of directors or trustees
(as applicable) of such Proprietary Fund Client shall be "interested
persons" (as defined in the Investment Company Act) of the Acquirer,
R&A, any R&A Shareholder or any of their respective Affiliates; and (b)
for a period of not less than two years following the Closing, neither
the Acquirer nor any Affiliate of the Acquirer which acts as an adviser
to such Proprietary Fund Client shall have any express or implied
understanding, arrangement or intention to impose an "unfair burden"
(within the meaning of Section 15(f) of the Investment Company Act) on
such Proprietary Fund Client as a result of the transactions
contemplated herein or shall impose such an unfair burden; provided,
however, that the Acquirer shall not be deemed responsible hereunder
with respect to a failure of any of the foregoing to be true to the
extent that such failure resulted from (i) modifications to existing
contractual arrangements (or the imposition of new contractual
arrangements) between R&A or RFS and any such Proprietary Fund Client
following the date of this Agreement and prior to the Closing (other
than the contractual arrangements contemplated by this Agreement) or
(ii)the unilateral actions of CMR following the Closing taken without
Board Approval.
5.4 Authorization from Others. The Acquirer
will use its reasonable best efforts to obtain all authorizations,
consents and approvals of other Persons required to be obtained by it to
permit the consummation by the Acquirer of the transactions contemplated
by this Agreement. The Acquirer shall file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice,
as promptly as practicable following the date of this Agreement, the
notifications required to be filed by the "ultimate parent entity" of
the Acquirer under the HSR Act with respect to the transactions
contemplated hereby. The Acquire will use its reasonable best efforts to
respond to any requests for additional information made by either of such
agencies, to cause the waiting periods under the HSR Act to terminate or
expire at the earliest possible date, and to resist vigorously any
assertion that the transactions contemplated hereby constitute a violation
of the antitrust laws, all to the end of expediting consummation of the
transactions contemplated hereby.
5.5 Consummation of Agreement. The Acquirer
shall use its reasonable best efforts (except to the extent another
standard is provided for in this Agreement with respect to particular
actions to be taken by the Acquirer) to perform and fulfill all
conditions and obligations to be performed and fulfilled by it under
this Agreement, to the end that the transactions contemplated by this
Agreement shall be fully carried out.
5.6 Cooperation of the Acquirer. The
Acquirer shall cooperate (and shall cause its Affiliates to cooperate)
with all reasonable requests of R&A in connection with the consummation
of the transactions contemplated hereby and the making of any filings
required to be made by the Royce Companies, RFS or any of the R&A
Shareholders in connection therewith (including without limitation
filings required to be made under the HSR Act).
5.7 Indemnification and Insurance. During the
Earnout Period:
41
(a) The Acquirer shall not take any action
that would cause any rights of indemnification existing in favor of the
R&A Shareholders and the directors, officers, partners and employees of
the Royce Companies, RFS and the Proprietary Fund Clients, in each case
as in effect on the date hereof, as against R&A and RFS, and shall not
take any action that would cause any such rights of indemnification
existing in favor of such Persons as against the Proprietary Fund
Clients and the Private Fund Clients (in each case including without
limitation in any such Persons' capacity as a director, trustee,
officer, employee, agent or other representative of any Proprietary Fund
Client or Private Fund Client), to not survive the Closing
and continue in full force and effect against R&A, RFS or the applicable
Proprietary Fund Client or Private Fund Client, as applicable, in
accordance with the terms of such rights as in effect on the date hereof
with respect to matters occurring on or prior to the date of the Closing
(including without limitation matters relating to the consideration,
negotiation, approval and execution of the transactions contemplated
hereby), and the Acquirer shall at all times during the Earnout Period
cause the Constituent Documents of R&A and RFS to reflect the matters
set forth in this Section 5.7(a) (to the extent currently so reflected
in such Constituent Documents); provided, however, that, for the
avoidance of doubt, no R&A Shareholder shall be entitled to
indemnification under any of the foregoing rights of indemnification in
respect of indemnification payments made by such R&A Shareholder to
Acquirer Indemnified Parties pursuant to Section 10 of this Agreement;
and
(b) R&A, RFS and New RMC shall provide
(with the costs thereof to be funded solely out of Retained Operating
Revenues), and R&A shall use its commercially reasonable efforts to
cause the Proprietary Fund Clients to provide, (in each case except to
the extent that the CMR Representative and the Acquirer shall otherwise
mutually agree in writing) that portion of directors/trustees and
officers, errors and omissions and any similar existing liability
insurance that serves to reimburse the R&A Shareholders, R&A, RMC, RFS
and/or the partners, directors, officers and employees of R&A, RFS, RMC
and the Proprietary Fund Clients (including without limitation in any
such Persons' capacity as a director, trustee, officer, employee, agent
or other representative of any Proprietary Fund Client) with respect to
claims against such Persons arising from facts or events which occurred
on or before the date of the Closing, which insurance shall contain at
least the same coverage and amounts, and otherwise contain terms and
conditions not less advantageous in the aggregate, as that coverage
provided by R&A, RFS, RMC and the Proprietary Fund Clients (as
applicable) for such Persons as of the date of this Agreement.
5.8 Structural Covenants Related to
Contingent Payments. During the Earnout Period (except to the extent
otherwise agreed to in writing by the Acquirer and the CMR
Representative), the Acquirer shall, on a reasonable basis consistent
with the practices of the Acquirer and its Affiliates (other than R&A
and its subsidiaries), (i) oversee the operation of the business of R&A
and its subsidiaries in good faith with the objective of (A) building
and maintaining a successful investment management business and (B)
subject to the exercise by the Board of Directors of R&A in good faith
of its rights under Section 2(d) of the Revenue Sharing Agreement,
supporting R&A's and the R&A Shareholders' efforts to achieve the
Contingent Payments provided for in Section 1.7 hereof consistent with
R&A's and its subsidiaries' efforts to pursue and develop small- and
micro-cap equity asset management products and services, (ii) not
compromise the structural integrity of R&A and its subsidiaries
(including without limitation their reporting relationships, for so long
as CMR is the President of R&A) in a manner that could reasonably be
42
expected to interfere with the achievement of the Contingent Payments
provided for in Section 1.7 hereof, and (iii) in the event that a
revenue-producing product or service nonetheless is to be removed from
the consolidated revenues of R&A, ensure that R&A is given revenue
credit (based upon the trailing twelve (12) months' revenues produced by
such product or service at the time of transfer) for future periods for
purposes of the calculation of Contingent
Payments hereunder.
5.9 Updated Representations and
Warranties. From the date of this Agreement to the Closing, the
Acquirer shall promptly inform R&A in writing if it shall have
discovered any information (whether existing as of the date of this
Agreement or arising after the date hereof) which would cause the
condition set forth in Section 7.2(a) hereof not to be satisfied
if the Closing were scheduled to occur as of the date of the Acquirer's
discovery of such information; provided, however, that no such
disclosures shall be deemed to modify, amend or supplement the
representations and warranties of the Acquirer for purposes of any
provision of this Agreement except to the extent provided in Section 8.3
hereof.
5.10 Excluded RMC Funds. Promptly
following the fifth anniversary of the Closing Date, with respect to
each Excluded RMC Fund the Acquirer shall cause R&A and New RMC to use
their respective reasonable best efforts to obtain such consents of the
investors in such Excluded RMC Fund as are legally required to permit
the transfer to such Person as is designated by the CMR Representative
to the Acquirer in writing (or, in the absence of such a designation, to
the CMR Representative) of the sole general partnership interest (and
any other similar controlling interests) in such Excluded RMC Fund (and
consent to the related transactions provided for in this Section 5.10).
Promptly following the receipt of any legally required investor consents
described in the preceding sentence, the Acquirer shall cause the
business of acting as the general partner of such Excluded RMC Fund
(including without limitation all of the goodwill and other intangible
property associated therewith, but excluding any rights to receive
payments of fees and expense reimbursements from such Excluded RMC Fund
with respect to periods preceding the fifth anniversary of the Closing
Date and excluding that portion of the capital account of New RMC in
such Excluded RMC Fund that is in excess of one percent (1.0%) of the
aggregate capital account balances of the partners in such Excluded RMC
Fund) to be transferred by R&A and New RMC to such transferee as was
designated by the CMR Representative (or to the CMR Representative, in
the absence of such a designation), and the sole consideration payable
by such transferee in respect of such transfer shall be an assumption by
such transferee of liabilities relating to the operation of such
Excluded RMC Fund arising under its Constituent Documents on or after
the date of the transfer to such transferee. The written consent of
each investor in an Excluded RMC Fund for purposes of the transactions
described in this Section 5.10 shall be solicited pursuant to written
notice sent to such investor, and any investor declining to give such
written consent shall be given the opportunity pursuant to such notice
to withdraw its investment from the applicable Excluded RMC Fund. The
CMR Representative shall be provided a reasonable opportunity to review
the form of notice and consent materials to be used in connection with
such consent solicitation.
5.11 Location of Offices. During the
Earnout Period (except to the extent otherwise agreed to in writing by
the Acquirer and the CMR Representative), the Acquirer shall cause the
principal business offices of R&A and its subsidiaries to remain in
Manhattan, New York and (for so long as CMR remains an employee of R&A
or any of its subsidiaries) Greenwich, Connecticut.
43
5.12 Acquirer Right to Substitute Wholly-
Owned Subsidiaries. By written notice delivered by the Acquirer to R&A
not later than ten (10) Business Days prior to the Closing, the Acquirer
shall have the right (subject to Section 5.8(ii) hereof) to substitute
in its place any one or more wholly-owned subsidiaries of the Acquirer
solely for purposes of (a) effecting the delivery of the payments
required to be delivered by the Acquirer pursuant to Section 1.2(b) at
the Closing and pursuant to Section 1.7 in connection with Contingent
Payments and (b) acquiring and holding the shares of capital stock of
R&A following the Closing (provided that, for the avoidance of doubt,
any such substitution shall not change the definition of "Acquirer
Shares" hereunder, which shall continue to be shares of capital stock of
Xxxx Xxxxx, Inc. notwithstanding any such substitution); provided,
however, that the Acquirer shall be required, as a condition to any such
substitution, to make written representations and warranties to R&A and
the R&A Shareholders with respect to each such wholly-owned subsidiary
of the Acquirer in substance equivalent to the representations and
warranties of the Acquirer set forth in Section 4 hereof (other than
those set forth in Section 4.7 hereof), and such representations and
warranties shall be deemed to be representations and warranties made by
the Acquirer under this Agreement for all purposes of this Agreement
(including without limitation the closing conditions set forth in
Section 7.2 hereof); and provided, further, that, notwithstanding any
such substitution of wholly-owned subsidiaries of the Acquirer pursuant
to this Section 5.12, all of the representations, warranties, covenants
and agreements of the Acquirer under this Agreement shall remain joint
and several obligations of the Acquirer from and after any such
substitution notwithstanding such substitution (and the Acquirer shall
be obligated to discharge any and all such obligations to the extent not
discharged by such subsidiaries of the Acquirer in accordance with the
terms of this Agreement). Any promissory notes and other documentation
between R&A and the Acquiror (or any of its other Affiliates) relating
to debt incurred in connection with the transactions contemplated hereby
shall be in form and substance reasonably acceptable to the Acquiror and
the CMR Representative.
SECTION 6. CONDITIONS TO THE OBLIGATIONS OF THE ACQUIRER
The obligation of the Acquirer to consummate the
transactions contemplated by this Agreement is subject to the
fulfillment (or waiver by the Acquirer), prior to or at the Closing, of
the following conditions precedent:
6.1 Illegality; Injunction. No judgment, injunction,
order or decree enjoining or prohibiting the Acquirer, R&A, RMC or any
R&A Shareholder from consummating the transactions contemplated by this
Agreement shall have been entered and remain in effect, and no legal
action or other legal proceeding shall have been brought by any Person
and remain pending which seeks to enjoin or prohibit the consummation of
the transactions contemplated hereby.
6.2 Representations, Warranties and Covenants.
(a) (i) The representations and warranties of R&A
contained in this Agreement (other than in Section 2.3(a) hereof) shall
be true and correct as of the Closing as though newly made at such time
(disregarding for such purpose any limitations contained therein with
44
respect to "materiality" or a "Material Adverse Effect"), other than
any failures to be true and correct which, individually or in the
aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on the Royce Companies or the Acquirer, and (ii)
the representations and warranties of R&A contained in Section 2.3(a) of
this Agreement shall be true and correct in all material respects as of
the Closing as though newly made at such time;
(b) The covenants and agreements to be performed or
complied with by R&A hereunder at or prior to the Closing shall have
been duly performed or complied with (as applicable) in all material
respects; and
(c) R&A shall have furnished the Acquirer with a
certificate dated as of the date of the Closing with respect to each of
the foregoing.
6.3 Advisory Contract Consents.
(a) (i) Clients of R&A whose Advisory Contracts in the
aggregate provide for the management of at least $4,077,221,928 of
Assets Under Management shall have Consented to the transactions
contemplated hereby, and (ii) Clients (other than Proprietary Fund
Clients) whose Advisory Contracts in the aggregate provide for the
management of at least $591,489,669 of Assets Under Management shall
have Consented to the transactions contemplated hereby.
For purposes of this Section 6.3(a), "Consent" shall mean:
(A) With respect to a Registered Fund Client of R&A as
of the date of this Agreement, that R&A shall have (i) entered
into a new Advisory Contract with such Registered Fund Client on
substantially equivalent terms as the Advisory Contract between
R&A and such Registered Fund Client as of the date of this
Agreement, (ii)obtained the Fund Board Approval with respect to
such new advisory contract, and (iii) in the case of a Proprietary
Fund Client (or any other Registered Fund Client where shareholder
approval is required for such new advisory contract by applicable
Laws and Regulations), obtained the Fund Shareholder Approval with
respect to such new contract;
(B) With respect to a Private Fund Client of R&A as of
the date of this Agreement, that R&A shall have obtained the
Private Fund Consent relating thereto;
(C) With respect to a client of R&A as of the date of
this Agreement who is not described in clause (A) or (B) of this
sentence, that R&A shall have obtained the written consent of such
client to the deemed assignment of its Advisory Contract resulting
from the transactions contemplated hereby in the manner provided
for in Section 3.2 hereof (or shall have entered into a new
Advisory Contract with such client on substantially equivalent
terms as the contract in effect with such client on the date
hereof and obtained the written consent of such client to the
deemed assignment resulting from the transactions contemplated
hereby at the time such Advisory Contract was entered into); and
(D) With respect to any Advisory Contract entered into
on or after the date of this Agreement with a new client of R&A,
45
by R&A having obtained the written consent of such client to the
deemed assignment resulting from the transactions contemplated
hereby at the time such Advisory Contract was entered into;
provided, however, that Consent for purposes of clause (B), (C) or (D)
of this sentence shall not be deemed to have been obtained if the
client under the applicable Advisory Contract (who shall be deemed to
be the Private Fund Client, in the case of an Advisory Contract with a
Private Fund Client, and not any investor therein) has expressed to R&A
(and not subsequently withdrawn) an intention to terminate its
investment relationship with R&A (or materially reduce the fee rates
payable to R&A under such Advisory Contract) or has otherwise objected
in writing (and not subsequently withdrawn such objection) to the
consummation of the transactions contemplated hereby.
For purposes of this Section 6.3(a), "Assets Under
Management" shall mean (A) with respect to assets managed pursuant to an
Advisory Contract which was in effect on April 30, 2001 (or pursuant to
an Advisory Contract which was in effect at such date and which is to be
replaced by a new Advisory Contract in connection with the transactions
contemplated hereby), the assets under management pursuant to such
Advisory Contract as of April 30, 2001 (adjusted for any additions
and/or withdrawals of assets by the client (in the case of an Advisory
Contract with a client other than a Registered Fund Client or a Private
Fund Client), or by investors in the client (in the case of an Advisory
Contract with a Registered Fund Client or a Private Fund Client) from
April 30, 2001 to the Business Day immediately prior to the Closing),
and (B) with respect to assets managed pursuant to an Advisory Contract
which is entered into after April 30, 2001 (other than a replacement
contract described in clause (A) of this sentence), the assets under
management on the date such Advisory Contract was entered into (adjusted
for any additions and/or withdrawals of assets by the client (in the
case of an Advisory Contract with a client other than a Registered Fund
Client or a Private Fund Client), or by investors in the client (in the
case of an Advisory Contract with a Registered Fund Client or a Private
Fund Client) from that date to the Business Day immediately prior to the
Closing).
(b)(i) With respect to each Proprietary Fund Client,
its Fund Board Approval shall have been obtained with respect to the
approval of a new Advisory Contract and shall remain in full force and
effect, and (ii) with respect to each Proprietary Fund Client other than
a Minor Proprietary Fund Client, its Fund Shareholder Approval shall
have been obtained with respect to the approval of a new Advisory
Contract and shall remain in full force and effect
(c) At the Closing, R&A shall deliver a certificate
certifying as to compliance with the conditions set forth in this
Section 6.3 (which certificate includes the calculation of
compliance in reasonable detail).
6.4 Other Approvals. Except to the extent
otherwise expressly provided for in this Agreement, all consents,
authorizations and approvals of governmental authorities required to
permit the consummation of the transactions contemplated hereby
(including without limitation the expiration of any applicable waiting
periods under the HSR Act (including any extensions thereof)) shall have
been obtained and shall remain in effect, except where, individually or
in the aggregate, the failure to obtain any such consents,
authorizations or approvals have not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Royce Companies or
the Acquirer following the Closing (provided, however, that the
46
expiration of any applicable waiting periods under the HSR Act shall be
deemed necessary to avoid such a Material Adverse Effect).
6.5 Legal Opinion. The Acquirer shall have
received a legal opinion, dated as of the date of the Closing, of Xxxxxx
X. Xxxxxxx, general counsel of the Royce Companies, with respect to such
matters (and in such form) as is customary for transactions of the type
contemplated hereby.
6.6 Other Transaction Documents.
(a) The Revenue Sharing Agreement shall remain in
full force and effect; and
(b) The Employment Agreement with each of
CMR,Xxxxxxx Xxxxxx and Xxxxxxxx X. Xxxxx shall remain in full force and
effect and the employee party thereto shall be actively employed by R&A.
6.7 Working Capital. As of the Closing (and taking
into account all transaction costs to be borne by R&A, including without
limitation all payments required to be made by R&A pursuant to the
Closing Bonus Agreements), R&A shall have working capital (defined as
current assets less current liabilities) of at least two million four
hundred thousand dollars ($2,400,000), and R&A shall have furnished the
Acquirer with a certificate dated as of the date of the Closing
certifying as to compliance with such requirement.
6.8 Section 15 Compliance. No more than twenty-
five percent (25%) of the members of the board of directors or trustees
(as applicable) of any Proprietary Fund Client shall be "interested
persons" (as defined in the Investment Company Act) of the Acquirer,
R&A, any R&A Shareholder or any of their respective Affiliates.
6.9 Asset Purchase. The Asset Purchase shall have
been consummated.
SECTION 7. CONDITIONS TO OBLIGATIONS OF R&A, THE R&A SHAREHOLDERS
AND RMC
The obligation of R&A and each R&A Shareholder to
consummate the transactions contemplated by this Agreement is subject to
the fulfillment (or waiver by R&A, which shall be authorized to waive
such conditions on its own behalf and on behalf of each of the R&A
Shareholders), prior to or at the Closing, of the following conditions
precedent:
7.1 Illegality; Injunction. No judgment,
injunction, order or decree enjoining or prohibiting the Acquirer, R&A,
RMC or any R&A Shareholder from consummating the transactions
contemplated by this Agreement shall have been entered and remain in
effect, and no legal action or other legal proceeding shall have been
brought by any Person and remain pending which seeks to enjoin or
prohibit the consummation of the transactions contemplated hereby.
7.2 Representations, Warranties and Covenants.
47
(a) (i) The representations and warranties of the
Acquirer contained in this Agreement (other than in Section 4.4 hereof)
shall be true and correct as of the Closing as though newly made at such
time (disregarding for such purpose any limitations contained therein
with respect to "materiality" or a "Material Adverse Effect"), other
than any failures to be true and correct which, individually or in the
aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect on the Acquirer or R&A, and (ii) the
representations and warranties of the Acquirer contained in Section 4.4
of this Agreement shall be true and correct in all material respects as
of the Closing as though newly made at such time;
(b) The covenants and agreements to be performed
or complied with by the Acquirer hereunder at or prior to the Closing
shall have been duly performed or complied with (as applicable) in all
material respects; and
(c) The Acquirer shall have furnished R&A and the
R&A Shareholders with a certificate dated as of the date of the Closing
with respect to each of the foregoing.
7.3 Other Approvals. Except to the extent
otherwise expressly provided for in this Agreement, all consents,
authorizations and approvals of governmental authorities required to
permit the consummation of the transactions contemplated hereby
(including without limitation the expiration of any applicable waiting
periods under the HSR Act (including any extensions thereof)) shall have
been obtained and shall remain in effect, except where, individually or
in the aggregate, the failure to obtain any such consents,authorizations
or approvals have not had, and would not reasonably be expected to have,
a Material Adverse Effect on the Royce Companies or on the Acquirer
following the Closing (provided, however, that the expiration of any
applicable waiting periods under the HSR Act shall be deemed necessary
to avoid such a Material Adverse Effect).
7.4 Section 15 Compliance. No more than twenty-
five percent (25%) of the members of the board of directors or trustees
(as applicable) of any Proprietary Fund Client shall be "interested
persons" (as defined in the Investment Company Act) of the Acquirer,
R&A, any R&A Shareholder or any of their respective Affiliates.
7.5 Legal Opinion. The R&A Shareholders shall
have received a legal opinion, dated as of the date of the Closing, of
internal legal counsel to the Acquirer with respect to such matters (and
in such form) as is customary for transactions of the type contemplated
hereby.
7.6 Other Transaction Documents. The Revenue
Sharing Agreement shall remain in full force and effect.
7.7 Asset Purchase. The Asset Purchase shall
have been consummated.
48
SECTION 8. TERMINATION OF AGREEMENT; EFFECT OF THE CLOSING
8.1 Termination. At any time prior to the
Closing, this Agreement may be terminated as follows:
(a) by the mutual written consent of the Acquirer
and R&A (which shall be authorized pursuant to this Section 8.1 to
terminate this Agreement on its own behalf and on behalf of each of the
R&A Shareholders and RMC); or
(b) by the Acquirer or R&A pursuant to written
notice to the other if the Closing has not occurred on or prior to
February 2, 2002; provided, however, that a party shall not be entitled
to terminate this Agreement pursuant to this subsection (b) if such
party or its Affiliates are in breach of this Agreement and such breach
has contributed materially to the failure of the Closing to have
occurred by such date.
8.2 Effect of Termination. All obligations and
liabilities of the parties hereunder shall cease upon any termination of
this Agreement pursuant to Section 8.1; provided, however, that (a) the
provisions of this Section 8 and Section 12 hereof shall survive any
termination of this Agreement, and (b) nothing herein shall relieve any
party from liability for any willful breach of a representation,
warranty, covenant or agreement of such party contained herein occurring
prior to such termination.
8.3 Effect of Closing. Anything in this
Agreement to the contrary notwithstanding, from and after the Closing
(a) the Acquirer shall not have any liability to any Royce Indemnified
Parties for any breach of a representation, warranty, covenant or
agreement of the Acquirer contained herein to the extent that (i) such
breach occurred prior to or as of the Closing, (ii) such breach was
identified by the Acquirer to R&A in writing prior to the Closing and
(iii) such breach caused one or more of the conditions set forth in
Section 7 hereof to not be satisfied as of the Closing, and (b) the R&A
Shareholders shall not have any liability to any Acquirer Indemnified
Parties for any breach of a representation, warranty, covenant or
agreement contained herein to the extent that (i) such breach occurred
prior to or as of the Closing, (ii) such breach was identified by R&A to
the Acquirer in writing prior to the Closing and (iii) such breach
caused one or more of the conditions set forth in Section 6 hereof to
not be satisfied as of the Closing.
SECTION 9. TAX MATTERS
9.1 Section 338(h)(10) Election.
(a) R&A and the R&A Shareholders will join with
the Acquirer in making an election under Section 338(h)(10) of the Code
(and any corresponding election under state and local Tax law) with
respect to the Stock Purchase hereunder (the "Elections"). The Acquirer
shall prepare any and all forms necessary to effectuate the Elections
(including, without limitation, IRS Form 8023 and similar forms under
state and local Tax law) (the "Election Forms") and, to the extent
possible, the R&A Shareholders and the Acquirer shall execute, as of the
Closing Date, the Election Forms. In the event, however, any Election
49
Forms are not executed by the Closing Date, the R&A Shareholders and the
Acquirer shall complete each such Election Form no later than 15 days
prior to the date such Election Form is required to be filed. Each of
the R&A Shareholders shall execute the Election Forms and the Acquirer
shall execute and shall duly and timely file the Election Forms in
accordance with applicable Tax Laws and Regulations and the terms of
this Agreement. The R&A Shareholders will include any income, gain,
loss, deduction or other Tax items resulting from the Elections on their
Tax Returns to the extent permitted by applicable Laws and Regulations.
The R&A Shareholders and the Acquirer shall report all transactions
pursuant to this Agreement in a manner that is consistent with the
Elections and shall take no position contrary thereto unless required to
do so pursuant to a final "determination" within the meaning of Section
1313 of the Code or an analogous provision of state, local or foreign
law.
(b) The Acquirer and the R&A Shareholders have
jointly allocated the Closing Purchase Price (the "Purchase Price
Allocation") among the assets of R&A in accordance with Treas. Reg.
Section 1.338(h)(10)-1(d), and such Purchase Price Allocation is set
forth in Schedule 9.1(b). Any subsequent adjustments to the Closing
Purchase Price and the payment of any Contingent Payments shall be
reflected in the Purchase Price Allocation as revised hereunder in a
manner consistent with Treas. Reg. Section 1.338(h)(10)-1(d) and as
agreed to by the Acquirer and the R&A Shareholders at the time of the
payment thereof (such agreement not to be unreasonably withheld). The
Acquirer and the R&A Shareholders agree to (i) be bound by the Purchase
Price Allocation, (ii) act in accordance with the Purchase Price
Allocation in the preparation of financial statements and filing of all
Tax Returns (including filing Form 8594 with its Federal income tax
return for the taxable year that includes the Closing Date) and in the
course of any Tax audit or Tax litigation relating thereto and (iii)
take no position inconsistent with the Purchase Price Allocation for all
tax purposes, except, in each case, to the extent that there has been a
determination (within the meaning of Section 1313 of the Code) contrary
to such position. Prior to the Closing, the Acquiror shall provide the
CMR Representative with a reasonable opportunity to review the
allocations of purchase price for accounting purposes to tangible items
of property, and reflect reasonable comments thereon.
(c) R&A and the R&A Shareholders shall not revoke
R&A's election to be taxed as an S corporation within the meaning of
Sections 1361 and 1362 of the Code, or the comparable elections or status
for New York State franchise tax purposes, and shall not take steps
resulting in the termination of RFS' status as a "qualified subchapter S
subsidiary" within the meaning of Code section 1361(b)(3)(B), or of RFS'
comparable status for New York State franchise tax purposes, prior to the
Closing, and will use their reasonable best efforts to prevent from being
taken any action (other than the sale of the R&A stock pursuant to this
Agreement) that would result in the termination of R&A's status as a validly
electing S corporation within the meaning of Sections 1361
and 1362 of the Code, or RFS' status as a "qualified subchapter S
subsidiary" within the meaning of Code section 1361(b)(3)(B), or of RFS'
comparable status for New York State franchise tax purposes, prior to the
Closing.
9.2 Tax Returns and Payments.
(a) Tax Periods Ending on or Before the Closing
Date. The CMR Representative shall prepare or cause to be prepared and
file or cause to be filed in a timely manner all Tax Returns for R&A and
RFS for all periods ending on or prior to the Closing Date ("Pre-Closing
Tax Periods"). Tax Returns of R&A and RFS not yet filed for any Pre-
50
Closing Tax Period shall be prepared, and each item thereon treated, in
a manner consistent with past practices employed with respect to R&A and
RFS (except to the extent counsel for the CMR Representative or the
Acquirer determines that there is no reasonable basis in law therefore
or determines that a Tax Return cannot be so prepared and filed or an
item so reported without being subject to penalties).
(b) Tax Periods Beginning Before and Ending
After the Closing Date. The Acquirer shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for R&A and RFS
for all periods beginning before and ending after the Closing Date
("Straddle Periods") which are filed after the Closing Date. The
Acquirer shall permit the CMR Representative to review and comment on
each such Tax Return described in the preceding sentence prior to filing
and shall incorporate any such reasonable comments from the CMR
Representative.
(c) Refunds. The Acquirer shall promptly pay
to the R&A Shareholders (in proportion to their respective receipt of
the Closing Purchase Price) any unaccrued refund or credit of Taxes
(including any interest paid or credited with respect thereto) received
by the Acquirer, R&A or RFS relating to any Pre-Closing Tax Period or
pre-Closing portion of any Straddle Period. The Acquirer shall, if the
CMR Representative reasonably so requests, cause R&A or RFS (or any
other relevant entity) to file for any refund or credit to which the R&A
Shareholders believe they are entitled.
(d) Payments. (i) The R&A Shareholders shall
pay or cause to be paid when due and payable (with any such payment to
be made by the individual R&A Shareholders in the same respective
percentages that the Closing Purchase Price was paid to them) all
unreserved Taxes with respect to R&A and RFS for any Pre-Closing Tax
Period and any pre-Closing portion of a Straddle Period; and (ii) the
Acquirer shall so pay or cause to be paid Taxes for any Tax periods
commencing on or after the Closing Date and any post-Closing portion of
a Straddle
Period.
9.3 Tax Cooperation and Exchange of
Information. The Acquirer and the R&A Shareholders agree to furnish or
cause to be furnished to each other, upon request, as promptly as
practicable, such information and assistance relating to R&A or RFS
(including, without limitation, access to books and records, employees,
contractors and representatives) as is reasonably necessary for the
filing of all Tax Returns, amended Tax Returns or claim for refund, the
making of any election related to Taxes, the preparation for and conduct
of any audit by any taxing authority, and the prosecution or defense of
any claim, suit or proceeding relating to any Tax Return. Such
cooperation and information shall include providing copies of relevant
Tax Returns or portions thereof, together with accompanying schedules,
related work papers and documents relating to rulings or other
determinations by Tax authorities at the sole cost of the requesting
party. If reasonably requested by the Acquirer and at the Acquirer's
sole expense, the CMR Representative shall make himself available on a
basis mutually convenient to both parties to provide explanations of any
documents or information provided hereunder. The Acquirer and the R&A
Shareholders shall retain all books and records with respect to Taxes
pertaining to R&A or RFS in their respective possession (which shall
include, in the case of the Acquirer, books and records in the
possession of R&A or RFS) until the later of (i) the expiration of the
statute of limitations of the Taxable periods to which such Tax Returns
51
and other documents relate, without regard to extensions except to the
extent notified by the other party in writing of such extensions for the
respective Tax periods prior to such expiration, or (ii) six years
following the due date (without extension) for such Tax Returns. At the
end of such period, each party shall provide the others with at least 10
days prior written notice before destroying any such books and records,
during which period the parties receiving such notice can elect to take
possession, at their own expense, of such books and records. The
Acquirer and the R&A Shareholders shall cooperate with each other in the
conduct of any audit or other proceeding related to Taxes involving R&A
or RFS. Any information provided or obtained under this Section 9.3
shall be kept confidential except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in
conducting an audit or other proceeding.
9.4 Allocation of Taxable Income. As a result
of the Stock Purchase, R&A and RFS shall be treated as having two short
years for tax purposes during the calendar year in which the Closing
occurs pursuant to Section 1362(e)(1) of the Code: (i) a period from
January 1 of the calendar year in which the Closing occurs through the
end of the day prior to the Closing Date, and (ii) a period from the
beginning of the Closing Date through December 31 of the calendar year
in which the Closing occurs.
SECTION 10. SURVIVAL; INDEMNIFICATION
10.1 Survival of Representations, Warranties and
Covenants. Each of the representations and warranties contained in this
Agreement shall survive the Closing until the second anniversary of the
date of the Closing, except for the representations and warranties
contained in Section 2.9, which shall survive until the expiration of
the applicable statute of limitations relating to the subject matter
thereof, and except for the representations and warranties contained in
Section 2.3(a), Section 2.5(a), the first sentence of Section 4.3, and
Section 4.4, which shall survive indefinitely. Each of the covenants
and agreements contained in this Agreement (and the rights of the
parties to seek indemnification under Section 10.2 or 10.4, as
applicable, for a breach of any such covenants or agreements) which by
its terms is to be performed following the Closing shall survive until
fully performed in accordance with its terms.
10.2 Indemnification by the R&A Shareholders.
From and after the Closing, each of the R&A Shareholders agrees, jointly
and severally with the other R&A Shareholders (subject to the
limitations set forth in Section 10.3 hereof), with respect to any
breach by R&A occurring as of or prior to the Closing of a
representation, warranty, covenant or agreement of R&A contained in this
Agreement, to indemnify, defend and hold the Acquirer, its Affiliates
and their respective directors, officers and employees (individually a
"Acquirer Indemnified Party" and, collectively, the "Acquirer
Indemnified Parties") harmless from and against any damages,
liabilities, losses, costs and expenses (including, without limitation,
reasonable fees and expenses of counsel) which may be sustained or
suffered by any of them to the extent arising out of or resulting from
such breach by R&A of such representation, warranty, covenant or
agreement contained in this Agreement occurring as of or prior to the
Closing.
52
10.3 Limitations on Indemnification by the R&A
Shareholders. Notwithstanding any other provision of this Agreement to
the contrary, the right of the Acquirer Indemnified Parties to
indemnification under Section 10.2 shall be subject to the following
limitations:
(a) No indemnification shall be payable by the
R&A Shareholders pursuant to Section 10.2 unless the total of all
indemnification payments to be made by the R&A Shareholders pursuant to
Section 10.2 shall exceed two million dollars ($2,000,000) in the
aggregate, whereupon only amounts in excess of such two million dollar
($2,000,000) threshold shall be recoverable as indemnification payments
hereunder;
(b) The aggregate indemnification payable by
the R&A Shareholders pursuant to Section 10.2 shall be limited to a
maximum of seventy-five million dollars ($75,000,000);
(c) The indemnification payable by any one R&A
Shareholder pursuant to Section 10.2 with respect to any claim shall be
limited to the percentage of the aggregate indemnification liability of
all R&A Shareholders with respect to such claim that equals the
percentage of the Closing Purchase Price received by such R&A
Shareholder; each R&A Shareholder that is a trust covenants to the
Acquirer that, until the second anniversary of the Closing Date (or such
later time as any indemnification claims that have been made by the
Acquirer against such R&A Shareholder as of the second anniversary of
the Closing Date have been finally resolved), such R&A Shareholder will
not distribute any assets to its beneficiaries if such distribution
would result in such R&A Shareholder retaining (as of immediately
following such distribution) assets having a then-current market value
less than that portion of the Closing Purchase Price received by such
R&A Shareholder at the Closing; and
(d) No indemnification shall be payable by the
R&A Shareholders pursuant to Section 10.2 after the expiration of the
applicable survival period set forth in Section 10.1 with respect to the
representation, warranty, covenant or agreement giving rise to such
indemnification obligation (the "Indemnification Cut-Off Date");
provided that such expiration shall not affect any claim for
indemnification with respect to which notice was given in the manner
contemplated by Section 10.6 hereof prior to the applicable
Indemnification Cut-Off Date.
10.4 Indemnification by the Acquirer. From and
after the Closing, the Acquirer agrees (subject to the limitations set
forth in Section 10.5 hereof) to indemnify, defend and hold RMC, each
R&A Shareholder, their respective Affiliates and their respective
directors, officers and employees (individually a "Royce Indemnified
Party" and, collectively, the "Royce Indemnified Parties") harmless from
and against any damages, liabilities, losses, costs and expenses
(including, without limitation, reasonable fees and expenses of counsel)
which may be sustained or suffered by any of them to the extent arising
out of or resulting from a breach by the Acquirer occurring as of or
prior to the Closing of any representation, warranty, covenant or
agreement of the Acquirer contained in this Agreement.
53
10.5 Limitation on Indemnification by the
Acquirer. Notwithstanding any other provision of this Agreement to the
contrary, the right of the Royce Indemnified Parties to indemnification
under Section 10.4 shall be subject to the following limitations:
(a) No indemnification shall be payable by the
Acquirer pursuant to Section 10.4 unless the total of all
indemnification payments to be made by the Acquirer pursuant to Section
10.4 shall exceed two million dollars ($2,000,000) in the aggregate,
whereupon only amounts in excess of such two million dollar ($2,000,000)
threshold shall be recoverable as
indemnification payments hereunder;
(b) The aggregate indemnification payable by
the Acquirer pursuant to Section 10.4 shall be limited to a maximum of
seventy-five million dollars ($75,000,000); and
(c) No indemnification shall be payable by the
Acquirer pursuant to Section 10.4 after the expiration of the applicable
Indemnification Cut-Off Date; provided, that such expiration shall not
affect any claim for indemnification with respect to which notice was
given in the manner contemplated by Section 10.6 hereof prior to the
applicable Indemnification Cut-Off Date.
10.6 Notice; Defense of Claims. An Acquirer
Indemnified Party shall make any claim for indemnification hereunder by
giving written notice thereof to the CMR Representative, with a copy to
the Acquirer, within the period in which indemnification claims can be
made hereunder, and a Royce Indemnified Party shall make any claim for
indemnification hereunder by giving written notice thereof to the
Acquirer, with a copy to the CMR Representative, within the period in
which indemnification claims can be made hereunder. If indemnification
is sought for a claim or liability asserted by a third party, the
indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or
liability being asserted, but the failure to do so shall not relieve the
indemnifying party from any liability except to the extent that it is
prejudiced by the failure or delay in giving such notice. Any such
notice shall summarize in reasonable detail the bases for the claim for
indemnification and any claim or liability being asserted by a third
party.
Within twenty (20) Business Days after receiving
such notice, the Acquirer or the CMR Representative (as applicable)
shall give written notice to the other stating whether it disputes the
claim for indemnification (which each of the Acquirer and the CMR
Representative shall be exclusively authorized to do on behalf of all of
their respective indemnified parties for purposes of indemnification
under this Agreement) and whether it will defend against any third party
claim or liability at its own cost and expense (such costs and expenses
to be borne ratably by the R&A Shareholders in proportion to their
respective shares of the consideration received at the Closing
hereunder, and promptly reimbursed to the CMR Representative upon his
request). If the Acquirer or the CMR Representative (as applicable)
fails to give notice that it disputes an indemnification claim within
twenty (20) Business Days after receipt of such written notice thereof,
it shall be deemed to have accepted and agreed (on behalf of all of the
applicable indemnifying parties) to the claim, which shall become
immediately due and payable.
In the case of a claim by an Acquirer
Indemnified Party, the CMR Representative, and in the case of a claim by
54
a Royce Indemnified Party, the Acquirer, shall be entitled to direct the
defense against a third party claim or liability for which
indemnification is sought hereunder, with counsel selected by it and
reasonably acceptable to the other, as long as the Acquirer or the CMR
Representative (as applicable) is conducting a good faith defense. Each
indemnified party shall at all times have the right to participate in
the defense of a third party claim or liability in reasonable respects
and at its own expense directly or through counsel; provided that if the
named parties to the action or proceeding include both the indemnifying
party and one or more indemnified parties and an indemnified party is
advised by counsel in writing that representation of both parties by the
same counsel would be inappropriate under applicable standards of
professional conduct, the indemnified parties may engage one separate
counsel to represent them at the expense of the indemnifying parties.
If no such notice of intent to dispute and defend a third party claim or
liability is given by the Acquirer or the CMR Representative (whichever
is authorized to act on behalf of the indemnifying parties), or if such
good faith defense is not being, or ceases to be, conducted by the
Acquirer or the CMR Representative (as applicable), the other shall have
the right, on behalf of the indemnified parties and at the expense of
the indemnifying parties, to undertake the defense of such claim or
liability (with counsel selected by it and reasonable acceptable to the
indemnifying parties) and to compromise or settle it, exercising
reasonable business judgment (and subject to receipt of a release of the
indemnified parties and the indemnifying parties not becoming subject to
non-monetary penalties, obligations or restrictions as a result
thereof). If the third party claim or liability is one that by its
nature cannot be defended solely by the indemnifying parties, then the
indemnified parties shall make available such information and assistance
as the indemnifying parties may reasonably request and shall cooperate
with the indemnifying parties in such defense (at the expense of the
indemnifying parties).
10.7 No Right of Setoff; Insurance, Tax and
Other Benefits. In no event shall any party hereto be entitled to
offset any indemnification claim or alleged indemnification claim that
such party may have against another party hereto against any amounts
such indemnified party otherwise is obligated to pay to such potential
indemnitor pursuant to this Agreement or otherwise.
(b) The amount of any indemnification payment
to be made by any indemnifying party under this Agreement shall be
reduced to take into account (in assessing the damages, liabilities,
losses, costs and expenses suffered by the indemnified party) any
related tax benefits, insurance recoveries and similar related benefits,
recoveries or payments that such indemnified party has received as a
result of the circumstance, event or occurrence giving rise to such
underlying indemnification claim, and any such related benefits,
recoveries or payments received by an indemnified party hereunder
following its receipt of indemnification payments hereunder shall be
reimbursed to the indemnifying parties to the extent failure to do so
would result in a recovery by the indemnified parties of more than 100%.
In no event shall any party hereto be entitled to collect punitive
damages as part of any indemnification recovery under this
Agreement.
(c) Each party hereto agrees to use its
commercially reasonable efforts to maximize its insurance recoveries and
other similar recoveries versus third parties with respect to any
circumstance, event or occurrence which may give rise to indemnification
obligations of other parties hereto, to the extent that such
commercially reasonable efforts could reasonably be expected to result
in a reduction in the indemnification obligations of such other parties
hereto.
55
10.8 Indemnification Payments. The parties
hereto agree that (i) any indemnification payment made under this
Section 10, (ii) any distribution of funds to the Acquirer from amounts
deposited in escrow under the terms of this Agreement (to the extent
such escrowed amounts were treated as Purchase Price by the parties
hereto prior to such distribution to the Acquirer), and (iii) any
additional payments required to be made to the Acquirer under Section
1.3(b) hereof, will be treated by all parties hereto on their (and their
relevant Affiliates') Tax Returns as an adjustment to the Purchase Price
paid hereunder. From and after the Closing, the indemnification
provided for under this Section 10 shall be the exclusive remedy for
monetary damages with respect to breaches of representations,
warranties, covenants and agreements contained in this Agreement
occurring as of or prior to the Closing, and in lieu of any other
remedies for monetary damages for such breaches occurring as of or prior
to the Closing that may be available to the Acquirer Indemnified Parties
and the Royce Indemnified Parties pursuant to any Laws and Regulations;
provided, however, that nothing contained in this Agreement shall be
deemed to limit any party's right to seek monetary recovery under any
applicable Laws and Regulations in the case of fraud by any other party
hereto occurring as of or prior to the Closing; and provided, further,
that nothing contained in this Agreement shall be deemed to limit any
party's right to seek injunctive relief; and provided, further, that
nothing contained in this Agreement shall be deemed to limit any R&A
Shareholder's rights as a shareholder of the Acquirer, or under
applicable securities Laws and Regulations with respect to such R&A
Shareholder's receipt of Acquirer Common Stock, in the event that the
Acquirer elects to pay a portion of the Purchase Price in Acquirer
Common Stock; and provided, further, that, for the avoidance of doubt,
nothing contained in this Agreement shall be deemed to limit any party's
remedies (for monetary damages or otherwise) with respect to breaches of
this Agreement or any of the other Transaction Documents occurring after
the Closing. For purposes of measuring the amount of any damages which
may be sustained or suffered by any indemnified party hereunder arising
out of or resulting from a breach of a representation or warranty
hereunder by another party hereto (but in no event for purposes of
determining whether such representation or warranty was in fact
breached), any limitations contained in the applicable representation or
warranty with respect to "materiality" or a "Material Adverse Effect"
shall be disregarded.
SECTION 11. DEFINITIONS
For purposes of this Agreement (including the
Exhibits and Schedules referenced herein), the following terms shall
have the respective meanings:
"Accounting Firm" shall mean KPMG Peat Marwick, or
such other accounting firm mutually agreed to in writing by the Acquirer
and the CMR Representative.
"Acquirer" shall have the meaning specified in the
preamble hereto.
"Acquirer Common Stock" shall have the meaning specified
in Section 4.4 hereof.
"Acquirer Filings" shall have the meaning specified
in Section 4.7 hereof.
56
"Acquirer Indemnified Party" shall have the meaning
specified in Section 10.2 hereof.
"Acquirer Registration Statement" shall have the
meaning specified in Section 1.8 hereof.
"Acquirer Shares" shall have the meaning specified
in Section 1.8 hereof.
"Acquirer Stock Notice" shall have the meaning
specified in Section 1.8 hereof.
"Acquirer Stock Price" shall have the meaning
specified in Section 1.8 hereof.
"Advisers Act" shall mean the Investment Advisers
Act of 1940, as the same may be amended from time to time, and any
successor to such act.
"Advisory Contract" shall mean any investment
management, advisory or sub-advisory contract with either Royce Company
or RFS (including without limitation any contract providing for the
provision of Asset Management Services to a Private Fund Client).
"Affected Employees" shall have the meaning
specified in Section 5.2(b) hereof.
"Affiliate" shall mean with respect to any person or
entity (herein the "first party"), any other person or entity that
directly or indirectly controls, or is controlled by, or is under common
control with, such first party. The term "control" as used herein
(including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to (a) vote
twenty-five percent (25%) or more of the outstanding voting securities
of such person or entity, or (b) otherwise direct the management and
policies of such person or entity by contract or otherwise.
"Agreed Interest Rate" shall mean a rate per annum
equal to the prime lending rate then in effect as reported by The Chase
Manhattan Bank.
"Agreement" shall have the meaning specified in the
preamble hereto.
"Applicable Cost Overruns" shall mean, with respect
to any Applicable Year, the amount (if any) by which (i) the aggregate
Company Expenditures with respect to such Applicable Year that are
required by Section 1(c) of the Revenue Sharing Agreement (as in
effect on the Closing Date, subject to any subsequent amendments or
other modifications thereto agreed to in writing by the Acquirer and the
CMR Representative) to be paid or provided for in such Applicable Year
out of Retained Operating Revenues exceed (ii) the sum of (A) the
Retained Operating Revenues for such Applicable Year plus (B) the amount
of any remaining Retained Operating Revenues from prior periods which
have not been used to pay for Company Expenditures; provided, however,
that any Company Expenditures that were committed to or otherwise
incurred by R&A or any subsidiary thereof on or after the Closing Date
notwithstanding the written good faith substantially contemporaneous
objection of the CMR Representative to the commitment or incurrence of
57
such Company Expenditure (any such objection by the CMR Representative
to be deemed to have been made in good faith if based upon a good faith
belief on the part of the CMR Representative that the commitment or
incurrence of such Company Expenditure could reasonably be expected to
cause the expenses and expenditures of R&A and its subsidiaries to
exceed in current or future periods the Retained Operating Revenues for
such current or future periods, in light of previously existing
commitments or expenses of R&A and its subsidiaries or otherwise, and
any such objection to be deemed to be substantially contemporaneous if
made within a reasonable period of time following the CMR Representative
having become aware of such Company Expenditure) shall be excluded from
the Company Expenditures described in clause (i) of this definition
(notwithstanding the fact that they may be included in the definition of
"Company Expenditures" under the Revenue Sharing Agreement), provided
that the CMR Representative shall not be permitted pursuant to this
proviso (X) to object to involuntary Company Expenditures (i.e., fines,
settlements, judgments and substantially similar expenditures), or (Y)
for so long as CMR is the President of R&A, to object to a Company
Expenditure made by an employee of R&A who directly or indirectly
reports to the President unless (I) such Company Expenditure was made
contrary to the affirmative instructions of the President to such
employee and (II) the President substantially contemporaneously informed
the Board of R&A in writing that such Company Expenditure was being made
over his contrary instructions, and provided, further, that, following
such time as CMR is no longer an employee of R&A or any of its
subsidiaries, if the Acquirer or R&A provide monthly financial
statements to the CMR Representative setting forth the relevant
information reasonably necessary for the CMR Representative to become
aware of the amount of the Retained Operating Revenues and Company
Expenditures for the preceding monthly period, the CMR Representative
shall be deemed to have become aware of the information set forth
therein within a reasonable period of time following his or her receipt
thereof, and provided, further, that, following such time as CMR is no
longer an employee of R&A or any of its subsidiaries, the CMR
Representative shall not be permitted to object to aggregate Company
Expenditures (excluding the Incentive Pool) with respect to any
Applicable Year (other than the first Applicable Year following the
Closing Date) if (W) the percentage of the Retained Operating Revenues
for such Applicable Year represented by the aggregate Company
Expenditures (excluding the Incentive Pool) for such Applicable Year is
no greater than (X) the percentage of the Retained Operating Revenues
for the immediately preceding Applicable Year that was represented by
the aggregate Company Expenditures (excluding the Incentive Pool) for
such immediately preceding Applicable Year; and provided, further, that,
in the event that following the Closing Date the Acquirer exercises its
right under Section 1(g) of the Revenue Sharing Agreement to restructure
the revenue allocation arrangements provided for in the Revenue Sharing
Agreement as of the Closing Date (e.g., by modifying the 65%/35% revenue
sharing percentages) or otherwise amends or modifies such revenue
sharing arrangements, the calculation of Applicable Cost Overruns
hereunder thereafter shall nonetheless continue to be performed as if
such restructuring, amendment or other modification to the revenue
allocation arrangements as in effect on the Closing Date had not
occurred.
"Applicable Cost Overruns Escrow Account Deposit"
shall have the meaning specified in Section 1.2(b) hereof.
"Applicable Cost Overruns Escrow Agreement" shall
mean an escrow agreement, reflecting the terms set forth in Section
1.2(b)(ii) and Section 1.3 hereof and otherwise in such form as is
customary for transactions of the type contemplated hereby (including
without limitation that it shall provide for a sharing of the out-of-
pocket expenses of such escrow arrangement one-half by the Acquirer and
one-half by the R&A Shareholders in the aggregate), entered into among
58
the Acquirer, each of the R&A Shareholders and The Chase Manhattan Bank
(or such other banking institution as has been mutually agreed to in
writing by the Acquirer and the CMR Representative).
"Applicable Cost Overruns Statement" shall have the
meaning specified in Section 1.3(c) hereof.
"Applicable Payment Date" shall have the meaning
specified in Section 1.8 hereof.
"Applicable Payment Period" shall have the meaning
specified in the definition of Applicable Year below.
"Applicable Revenues" shall mean, for any period, (i)
the Total Revenues for such period, minus (ii) fifty percent (50%) of
any Excess Performance Fees for such period.
"Applicable Year" shall mean each of the six
consecutive twelve-month fiscal years of R&A commencing on or after
March 31, 2002 (such seventy-two (72) month period, the "Applicable
Payment Period").
"Asset Management Services" shall mean any services
which involve acting as an "investment adviser" within the meaning of
the Advisers Act, and performing activities related or incidental
thereto.
"Asset Purchase" shall have the meaning specified in
Section 1.1 hereof.
"Assets Under Management" shall have the meaning
specified in Section 6.3 hereof.
"Assumed RMC Obligations" shall mean, collectively,
(i) liabilities and obligations of RMC stated or adequately reserved
against on the most recent balance sheet of RMC attached to the
Schedules as Schedule 2.8, (ii) liabilities and obligations of RMC
incurred after the date of the balance sheet of RMC described in clause
(i) of this definition in the ordinary course of business of RMC and
(iii) liabilities and obligations of RMC arising on or
after the Closing Date under the contracts and other agreements of RMC
included in the RMC Assets.
"Average Acquirer Stock Price" shall have the meaning
specified in Section 1.8 hereof.
"Base Balance Sheet" shall have the meaning specified
in Section 2.8(a)(i) hereof.
"Board Approval" shall mean the affirmative approval
of the Board of R&A (including without limitation to the extent any such
approval is required for a particular action under the terms of the
Revenue Sharing Agreement).
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York City are
authorized or required by law to close.
59
"Claims" shall mean any liens, claims, security
interests, mortgages, pledges or encumbrances.
"Client" shall have the meaning specified in Section
3.12(a) hereof.
"Closing" shall have the meaning specified in Section
1.4 hereof.
"Closing Bonus Agreements" shall have the meaning
specified in the recitals hereto.
"Closing Date" shall have the meaning specified in
Section 1.4 hereof.
"Closing Purchase Price" shall mean an amount equal to
one hundred and fifteen million dollars ($115,000,000).
"CMR" shall have the meaning specified in the recitals
hereto.
"CMR Representative" shall mean CMR, or such designee
of CMR as has been notified to the Acquirer by CMR or his legal
representatives in writing (upon which event such successor shall become
the CMR Representative hereunder), and CMR or any such other designated
CMR Representative is hereby authorized by each of the R&A Shareholders
to take any action on their behalf which is required or permitted to be
taken by the CMR Representative hereunder; provided, however, that,
following such time as CMR is no longer an employee of R&A or any of its
subsidiaries, the designation of any Person (other than CMR) as a CMR
Representative shall be subject (at the time of such designation) to the
consent of the Acquirer with respect to the identity of the Person so
designated (such consent not to be unreasonably withheld or delayed, and
to be deemed to have been granted if the Acquirer has not objected in
writing to the identity of such Person within five (5) Business Days of
being notified in writing thereof by CMR or his legal representative).
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor code thereto.
"Company Expenditures" shall have the meaning
specified in the Revenue Sharing Agreement.
"Confidentiality Agreement" shall have the meaning
specified in Section 12.6 hereof.
"Consent" shall have the meaning specified in Section
6.3 hereof.
"Constituent Documents" shall mean the charter and
by-laws of a corporation, the partnership agreement of a partnership,
the trust agreement of a trust and the comparable documents of other
entities.
"Contingent Payment Escrow Account Deposit" shall
have the meaning specified in Section 1.7(c) hereof.
60
"Contingent Payment Escrow Agreement" shall mean an
escrow agreement, reflecting the terms set forth in Section 1.7 hereof
and otherwise in such form as is customary for transactions of the type
contemplated hereby (including without limitation that it shall provide
for a sharing of the out-of-pocket expenses of such escrow arrangement
one-half by the Acquirer and one-half by the R&A Shareholders in the
aggregate), entered into among the Acquirer, each of the R&A
Shareholders and The Chase Manhattan Bank (or such other banking
institution as has been mutually agreed to in writing by the Acquirer
and the CMR Representative).
"Contingent Payments" shall have the meaning
specified in Section 1.7 hereof.
"Contingent Payment Statement" shall have the meaning
specified in Section 1.7(b) hereof.
"Deferred Compensation Plans" shall have the meaning
specified in Section 5.2(a) hereof.
"Earnout Period" shall mean the period commencing on
(and including) the Closing Date and ending on (and including) the sixth
anniversary of the Closing Date; provided, however, that, in the event
that no Contingent Payment Escrow Account Deposit is made pursuant to
Section 1.7 hereof with respect to the Year 5 Contingent Payment, the
Earnout Period shall end on (and include) the fifth anniversary of the
Closing Date.
"Election Forms" shall have the meaning specified in
Section 9.1(a) hereof.
"Elections" shall have the meaning specified in
Section 9.1(a) hereof.
"Employment Agreements" shall have the meaning
specified in the recitals hereto.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any successor to such
act.
"Escrow Account Deposit" shall mean, collectively,
the Applicable Cost Overruns Escrow Account Deposit (together with any
additional payments required to be made by the R&A Shareholders to the
Acquirer pursuant to Section 1.3(b) hereof) and the Contingent Payment
Escrow Account Deposits.
"Escrow Account Period" shall have the meaning
specified in Section 1.7(c) hereof.
"Excess Performance Fees" shall mean the amount by
which the Performance Fees for a particular period exceed ten percent
(10%) of the Total Revenues for such period.
"Excluded RMC Fund" shall mean any Initial RMC Fund
that has less than fifty million dollars ($50,000,000) of net assets
(taken at fair market value) as of the fifth anniversary of the Closing
Date; provided, however, that, upon written notice from the CMR
Representative to the Acquirer at any time on or prior to five (5)
Business Days following the fifth anniversary of the Closing Date, an
Initial RMC Fund may be irrevocably designated by the CMR Representative
61
as not constituting an Excluded RMC Fund (regardless of whether such
Initial RMC Fund in fact has less than fifty million dollars
($50,000,000) of net assets as of the fifth anniversary of the Closing
Date); and provided, further, that, upon written notice from the
Acquirer to the CMR Representative delivered within five (5) Business
Days following the receipt by the Acquirer of a written notice from the
CMR Representative pursuant to the immediately preceding proviso with
respect to a particular Initial RMC Fund, such Initial RMC Fund may be
irrevocably redesignated by the Acquirer as constituting an Excluded RMC
Fund (notwithstanding the written notice delivered by the CMR
Representative pursuant to the immediately preceding proviso), provided
that the Acquirer shall be required to cause any such Initial RMC Fund
to be wound up and liquidated promptly following the Acquirer's delivery
of a written notice with respect to such Initial RMC Fund pursuant to
this proviso.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time, and any successor to such act.
"Fund Board Approval" shall have the meaning specified
in Section 3.3(a) hereof.
"Fund Shareholder Approval" shall have the meaning
specified in Section 3.3(a)
hereof.
"GAAP" shall mean United States generally accepted
accounting principles as in effect from time to time.
"Governmental Authority" shall mean any federal,
state, local or foreign governmental or administrative authority, agency
or commission, or any court, tribunal or other judicial or arbitral
body.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"Indemnification Cut-Off Date" shall have the
meaning specified in Section 10.3(d) hereof.
"Initial RMC Fund" shall have the meaning specified
in the definition of Performance Fees below.
"Investment Advisory Services" shall have the meaning
specified in Section 3.12(a) hereof.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as the same may be amended from time to time, and
any successor to such act.
"Knowledge of the Royce Companies" shall mean the
actual knowledge of CMR, Xxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxx or W.
Xxxxxxx Xxxxxx.
"Laws and Regulations" shall have the meaning
specified in Section 2.14 hereof.
"Leased Real Property" shall have the meaning
specified in Section 2.6 hereof.
62
"Management Committee" shall have the meaning
specified in the Revenue Sharing Agreement.
"Material Adverse Effect" shall mean, with respect to
any Person, a material adverse effect on (i) the business, properties,
financial condition, operations, assets, liabilities or results of
operations of the applicable Person and its subsidiaries taken as a
whole (which, for purposes of a Material Adverse Effect on the Royce
Companies, shall include R&A, RMC, New RMC and RFS, taken as a whole),
other than to the extent any such effect has resulted from (a) the
announcement of the transactions contemplated by this Agreement, (b)
changes in the legal or regulatory conditions that generally affect the
businesses in which such Person and its subsidiaries are engaged, (c)
changes in the financial services industry in general or (d) with
respect to either of the Royce Companies, any terminations or reductions
in investment management relationships occurring prior to the Closing
(whether or not resulting in the failure of the condition contained in
Section 6.3 of this Agreement to be satisfied), other than any failure
of a Minor Proprietary Fund Client to obtain its Fund Shareholder
Approval (which shall be included in any determination as to whether a
Material Adverse Effect has occurred), or (ii) such Person's ability to
consummate the transactions contemplated hereby.
"Minor Proprietary Fund Client" shall mean any
Proprietary Fund Client having net assets of less than ten million
dollars ($10,000,000) as of the date of this Agreement.
"NASD" shall mean the National Association of
Securities Dealers, Inc.
"New RMC" shall have the meaning specified in the
recitals hereto.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Performance Fees" shall mean, for any period, all
"carried interests" and other performance-related fees (other than
allocations which are made pro rata based on contributed capital) that
constitute consolidated gross revenues of R&A and any subsidiaries
thereof during such period, determined on an accrual basis in accordance
with generally accepted accounting principles consistently applied;
provided, however, that in the case of any investment advisory,sub-
advisory or management contract or other arrangement that provides for a
fee calculation consisting in part of a "base fee" rate (or similar fee
rate) and in part of a separate performance-related component, none of
the gross revenues actually derived in a particular period from the
application of such base fee rate shall constitute "Performance Fees"
hereunder; and provided,further, that for purposes of calculating the
amount of the Year 3 Contingent Payment and the Year 4 Contingent
Payment under Section 1.7 hereof (and the related calculations required
under Section 1.7 in determining the distribution of Contingent Payment
Escrow Account Deposits made in respect of such Contingent Payments),
all "carried interests" and other performance-related fees that
constitute gross revenues of New RMC derived from Private Fund Clients
that were clients of New RMC as of the Closing Date (collectively, the
"Initial RMC Funds") shall be excluded from Performance Fees (but, for
the avoidance of doubt, any other such gross revenues of New RMC shall
be included); and provided, further, that for purposes of calculating
the amount of the Year 5 Contingent Payment under Section 1.7 hereof
(and the related calculations required under Section 1.7 in determining
the distribution of any Contingent Payment Escrow Account Deposit made
in respect of such Contingent Payment), the average (arithmetic mean)
63
annual gross revenues of New RMC consisting of "carried interests" and
other performance-related fees (other than allocations which are made
pro rata based on contributed capital) derived from Initial RMC Funds
during the three-year period commencing on the second anniversary of
the Closing Date and ending on the fifth anniversary of the Closing Date
(other than any such revenues derived from Excluded RMC Funds, which
revenues shall not be included in Performance Fees for purposes of
calculating the amount of the Year 5 Contingent Payment) shall be
included in Performance Fees (in lieu of including in Performance Fees
solely the gross revenues of New RMC consisting of "carried interests"
and other performance-related fees derived from such Initial RMC Funds
during the twelve-month period immediately preceding
such fifth anniversary).
"Person" shall mean any individual, partnership
(general or limited), corporation, limited liability company, limited
liability partnership, association, trust, joint venture,unincorporated
organization, and any government, governmental department or agency or
political subdivision thereof.
"Plans" shall have the meaning specified in Section
2.16(a) hereof.
"Pre-Closing Tax Period" shall have the meaning
specified in Section 9.2(a) hereof.
"Private Fund Clients" shall mean, collectively, each
of the collective investment vehicles organized as a limited liability
company or a limited partnership whose assets are managed by R&A or RMC
as of the date of this Agreement that is not registered as an investment
company under the Investment Company Act.
"Private Fund Consent" shall have the meaning
specified in Section 3.3(b) hereof.
"Proprietary Fund Clients" shall have the meaning
specified in Section 2.7(c) hereof.
"Purchase Price" shall mean (i) the sum of (A) the
Closing Purchase Price plus (B) the aggregate amount of any Contingent
Payments received by the R&A Shareholders pursuant to Section 1.7 hereof
(which, for the avoidance of doubt, shall not include any portion of a
Contingent Payment Escrow Account Deposit or Applicable Cost Overruns
Escrow Account Deposit that remains in escrow or has been distributed
back to the Acquirer, and shall not include earnings on amounts
deposited in escrow hereunder).
"Purchase Price Allocation" shall have the meaning
specified in Section 9.1(b) hereof.
"QPAM Exemption" shall have the meaning specified in
Section 2.7(f) hereof.
"Qualified Plan" shall have the meaning specified in
Section 2.16(b) hereof.
"Registered Fund Clients" shall have the meaning
specified in Section 2.7(c) hereof.
64
"Registration Rights Agreement" shall mean a
registration rights agreement, reflecting the terms set forth in Section
1.8 hereof and otherwise in such form as is customary for transactions
of the type contemplated hereby, entered into among the Acquirer and
each of the R&A Shareholders.
"Retained Operating Revenues" shall have the meaning
specified in the Revenue Sharing Agreement.
"Restricted Period" shall have the meaning specified
in Section 3.12(a) hereof.
"Revenue Sharing Agreement" shall have the meaning
specified in the recitals hereto.
"Revenue Sharing Period" shall mean the term of the
Revenue Sharing Agreement, as the same may be terminated or continued
pursuant to Section 4 thereof.
"RFS" shall have the meaning specified in Section 2.2
hereof.
"RMC" shall have the meaning specified in the recitals
hereto.
"RMC Assets" shall mean all of the tangible and
intangible assets of RMC used in the conduct of the business of RMC as
of immediately prior to the Closing.
"RMC Excluded Assets" shall mean, collectively, (i)
that portion of the capital account of RMC in each Private Fund Client
of RMC that is in excess of one percent (1.0%) of the aggregate capital
account balances of the partners in such Private Fund Client as of
immediately prior to the Closing, and (ii) all rights to receive
payments of fees (including without limitation management fees and
payments of carried interest) and expense reimbursements from Private
Fund Clients of RMC with respect to periods preceding the Closing
Date.
"RMC Partners" shall have the meaning specified in
Section 2.3(a) hereof.
"RMC Partnership Interests" shall have the meaning
specified in Section 2.3(a) hereof.
"Royce Business" shall have the meaning specified in
the recitals hereto.
"Royce Companies" shall have the meaning specified in
the recitals hereto.
"Royce Indemnified Party" shall have the meaning
specified in Section 10.4 hereof.
"Rule 12b-1 Fees" shall have the meaning specified in
the definition of Total Revenues below.
"R&A" shall have the meaning specified in the preamble
hereto.
"R&A Non-Voting Shares" shall have the meaning
specified in the recitals hereto.
65
"R&A Shareholders" shall have the meaning specified
in the preamble hereto.
"R&A Shares" shall have the meaning specified in the
recitals hereto.
"R&A Voting Shares" shall have the meaning specified
in the recitals hereto.
"Sales Charges" shall have the meaning specified in
the definition of Total Revenues below.
"Schedules" shall have the meaning specified in
Section 2.1 hereof.
"SEC" shall mean the United States Securities and
Exchange Commission, or any successor agency thereto.
"Securities Act" shall mean the Securities Act of
1933, as the same may be amended from time to time, and any successor to
such act.
"Stock Component" shall have the meaning specified in
Section 1.8 hereof.
"Stock Purchase" shall have the meaning specified in
Section 1.1 hereof.
"Straddle Period" shall have the meaning specified in
Section 9.2(b) hereof.
"Tax Authority" shall mean the Internal Revenue
Service and any similar state, local or foreign authority having
jurisdiction over Taxes
"Tax Return" shall mean any return, claim for refund,
declaration, report, information return, statement or other document
(including any related or supporting information) filed or required to
be filed with any Tax Authority with respect to Taxes.
"Taxes" shall mean all federal, state, local,
foreign, and other taxes, including, without limitation, income taxes,
estimated taxes, alternative or add-on minimum taxes, franchise taxes,
capital stock taxes, sales taxes, use taxes, ad valorem or value added
taxes, employment and payroll-related taxes, withholding taxes, real
estate taxes, stamp taxes, gift taxes
and transfer taxes.
"Total Revenues" shall mean, for any period, the
consolidated gross revenues of R&A and its subsidiaries (less any
portion thereof attributable to any minority equity interest in a
subsidiary held by a third party other than an employee of R&A or any of
its subsidiaries) from whatever source derived, calculated on an accrual
basis in accordance with GAAP consistently applied; provided, however,
that Total Revenues also shall have added to it any revenue "credits"
contemplated by Section 5.8(iii) of this Agreement (but shall not
otherwise include any gains realized by R&A or any of its subsidiaries
from any sale of assets of R&A or any of its subsidiaries); and
provided, further, that Total Revenues shall not include (i) any fees or
reimbursements paid pursuant to a plan established under Rule 12b-1
under the Investment Company Act of 1940 ("Rule 12b-1 Fees"), or any
front-end, level or back-end sales loads or other similar sales charges
("Sales Charges"), in either such case received by R&A or any of its
66
subsidiaries from any registered investment company or its shareholders,
to the extent that such 12b-1 Fees or Sales Charges are offset by
payments to third parties in respect of distribution and/or shareholder
servicing, or (ii) interest or dividend income received by R&A or any of
its subsidiaries on non-operating investments made for their own account
(for the avoidance of doubt, other than investments made by R&A or any
of its subsidiaries in subsidiaries of R&A); and provided, further, that
for purposes of calculating the amount of the Year 3 Contingent Payment
and the Year 4 Contingent Payment under Section 1.7 hereof (and the
related calculations required under Section 1.7 in determining the
distribution of Contingent Payment Escrow Account Deposits made in
respect of such Contingent Payments), all gross revenues of New RMC
derived from Initial RMC Funds shall be excluded from Total Revenues
(but, for the avoidance of doubt, any other gross revenues of New RMC
shall be included); and provided, further, that for purposes of
calculating the amount of the Year 5 Contingent Payment under Section
1.7 hereof (and the related calculations required under Section 1.7 in
determining the distribution of any Contingent Payment Escrow Account
Deposit made in respect of such Contingent Payment), the average
(arithmetic mean) annual gross revenues of New RMC derived from Initial
RMC Funds during the three-year period commencing on the second
anniversary of the Closing Date and ending on the fifth anniversary of
the Closing Date (other than any such revenues derived from Excluded RMC
Funds, which revenues shall not be included in Total Revenues for
purposes of calculating the amount of the Year 5 Contingent
Payment) shall be included in Total Revenues (in lieu of including in
Total Revenues solely the gross revenues of New RMC derived from such
Initial RMC Funds during the twelve-month period immediately preceding
such fifth anniversary).
"Transaction Documents" shall mean, collectively, this
Agreement, the Revenue Sharing Agreement, the Employment Agreements, the
Closing Bonus Agreements, the Contingent Payment Escrow Agreement, the
Applicable Cost Overruns Escrow Agreement and the Registration Rights
Agreement.
"Year 5 Contingent Payment" shall have the meaning specified in
Section 1.7(a) hereof.
"Year 5 Revenue Shortfall" shall have the meaning specified in
Section 1.7(c) hereof.
"Year 4 Contingent Payment" shall have the meaning specified in
Section 1.7(a) hereof.
"Year 4 Revenue Shortfall" shall have the meaning specified in
Section 1.7(c) hereof.
"Year 6 Revenue Shortfall" shall have the meaning specified in
Section 1.7(c) hereof.
"Year 3 Contingent Payment" shall have the meaning specified in
Section 1.7(a) hereof.
67
SECTION 12. MISCELLANEOUS
12.1 Fees and Expenses. The rights and obligations
of the parties hereto with respect to fees and expenses are as follows:
(a) Except to the extent otherwise provided in
paragraph (b) below, the Acquirer shall pay its own expenses incurred
in connection with the negotiation and consummation of the transactions
contemplated by this Agreement (including without limitation all filing
fees payable under the HSR Act in connection therewith), and R&A shall
pay its own expenses and the expenses of each R&A Shareholder
(including without limitation the fees set forth in Schedule 2.15, all
costs related to acquiring any necessary consents to the transactions
contemplated hereby of investors in Private Fund Clients, and all costs
described in Section 12.1(b) below in the event that the Closing does
not occur) incurred in connection with the negotiation and consummation
of the transactions contemplated by this Agreement; and
(b) In the event that the Closing occurs, each of
the Acquirer, on the one hand, and R&A, on the other hand, shall pay
fifty percent (50%) of the costs and expenses incurred by the Registered
Fund Clients in connection with the transactions contemplated hereby,
including without limitation costs and expenses with respect to document
preparation (including reasonable attorneys' fees), printing and mailing
of proxy statements, proxy solicitation and the holding of board and
shareholder meetings in connection therewith (and said funds shall be
reimbursed for such costs and expenses, to the extent borne by them).
12.2 Dispute Resolution. All disputes arising in
connection with this Agreement (including without limitation disputes
with respect to claims for indemnification under Section 10 hereof)
shall be resolved by binding arbitration in accordance with the
applicable rules of the American Arbitration Association. The
arbitration shall be held in New York City, New York before three
arbitrators, one of which shall be selected by the CMR Representative,
one of which shall be selected by the Acquirer, and one of which shall
be selected in accordance with Section 12 of the American Arbitration
Association Commercial Arbitration Rules, each of whom shall have
substantial business experience in the investment management industry,
and shall otherwise be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules. The parties
hereto agree that they will participate in any such arbitration in good
faith and that they will share equally its costs except as otherwise
provided herein. The provisions of this Section 12.2 shall be
enforceable in any court of competent jurisdiction, and the parties
shall bear their own costs in the event of any proceeding to enforce
this Agreement except as otherwise provided herein. The costs and
expenses of the prevailing party (including without limitation the
reasonable legal fees and expenses of the prevailing party, and
any costs and expenses incurred by the prevailing party in connection
with compelling arbitration) shall be paid by the unsuccessful party to
the proceeding. The arbitrator may provide for injunctive relief
and/or damages, but in no event shall punitive or consequential damages
be awarded. Any party unsuccessfully refusing to comply with an order
of the arbitrators shall be liable for the costs and expenses, including
attorneys' fees, incurred by the other party in enforcing the award in
court.
12.3 Waivers. Any waiver of any terms or
conditions or of the breach of any covenant, representation or warranty
contained in this Agreement in any one instance shall not operate as or
be deemed to be or construed as a further or continuing waiver of any
other breach of such term, condition, covenant, representation or
68
warranty or any other term, condition, covenant, representation or
warranty, nor shall any failure or delay at any time or times by a party
to enforce or require performance of any provision hereof operate as a
waiver of or affect in any manner such party's right at a later time to
enforce or require performance of such provision or of any provision
hereof; provided that no such waiver, unless it, by its own terms,
explicitly provides to the contrary, shall be construed to effect a
continuing waiver of the provision being waived, and no such waiver in
any instance shall constitute a waiver in any other instance or for any
other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require
full compliance.
12.4 Governing Law. This Agreement shall be
construed under and governed by the laws of the State of New York.
12.5 Notices. Any notice, request, demand or
other communication required or permitted hereunder shall be in writing,
shall be delivered by facsimile, overnight courier or by hand in person,
and shall be deemed to have been given upon receipt by the recipient.
All notices to a party will be sent to the addresses set forth below or
to such other address or person as the Acquirer or the CMR
Representative, as applicable, shall notify in writing to the other:
TO THE ACQUIRER: Xxxx Xxxxx, Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
With copies to:
TO R&A OR ANY R&A CMR, c/o Royce & Associates, Inc.
SHAREHOLDER: 0 Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
With copies to:
Xxxxxx X. Xxxxxxx, c/o Xxxxx & Associates, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No. : (000) 000-0000
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
69
Any notice given hereunder may be given on behalf of any party by its
counsel or other authorized representatives.
12.6 Entire Agreement. This Agreement and the
other Transaction Documents (together with any other documentation
entered into among any of the parties hereto concurrently with the
transactions contemplated hereby) are complete, reflect the entire
agreement of the parties with respect to their subject matter, and
supersede all previous written or oral negotiations, commitments and
writings (other than the Confidentiality Agreement, amongst certain of
the parties hereto, which shall survive the execution and delivery of
this Agreement and remain in full force and effect in accordance with
its terms until the Closing). No promises, representations,
understandings, warranties and agreements have been made by any
of the parties hereto except as referred to herein or in the other
Transaction Documents, and all inducements to the making of this
Agreement and the other Transaction Documents, and the transactions
contemplated hereby and thereby, which were relied upon by any party
hereto have been expressed herein or in such other Transaction
Documents.
12.7 Assignability; Binding Effect. This Agreement
may not be assigned by any party hereto without the prior written
consent of the Acquirer, on the one hand, and prior to the Closing, R&A,
or following the Closing, the CMR Representative, on the other hand.
Any transfer by Xxxx Xxxxx, Inc. of a majority of the outstanding voting
capital stock of R&A (whether structured as a sale of stock, a merger or
otherwise) or of any direct or indirect parent of R&A, (other than Xxxx
Xxxxx, Inc.) shall be deemed an assignment by Xxxx Xxxxx in violation of
the terms of this Section 12.7, unless the ultimate parent of the
purchaser (or other successor entity) shall have agreed in writing to
perform all of the covenants and agreements of Xxxx Xxxxx, Inc. arising
under this Agreement from and after the date of such transaction
(provided that such written agreement shall not be deemed to release
Xxxx Xxxxx, Inc. from such covenants and agreements under this Agreement
to the extent not so performed by such ultimate parent of such successor
entity). This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, personal representatives,
successors and permitted assigns.
12.8 No Third Party Beneficiaries. Except (i)
with respect to Affected Employees under Section 5.2, (ii) with respect
to the Persons referred to in Section 5.7 (to the extent of the
insurance and indemnification matters provided for therein), and (iii)
with respect to Acquirer Indemnified Parties and Royce Indemnified
Parties under Section 10, (each of which is intended to be for the
benefit of the Persons identified therein, and may be enforced by such
Persons), nothing in this Agreement, express or implied, is intended to
or shall confer upon any Person other than the parties hereto any
rights, benefits or remedies of any nature whatsoever under or by reason
of this Agreement.
12.9 Captions and Gender. The captions in this
Agreement are for convenience only and shall not affect the construction
or interpretation of any term or provision hereof. The use in this
Agreement of the masculine pronoun in reference to a party hereto shall
be deemed to include the feminine or neuter, as the context may require.
12.10 Execution in Counterparts. For the
convenience of the parties and to facilitate execution, this Agreement
may be (i) executed in two or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
document, and (ii) executed by facsimile.
70
12.11 Amendments. Except to the extent otherwise
expressly set forth herein, this Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth
herein be waived, except by a writing duly and validly executed by the
Acquirer, on the one hand, and prior to the Closing, R&A (which shall be
authorized to amend this Agreement or waive provisions hereof on its own
behalf and on behalf of each of the R&A Shareholders), or following the
Closing, the CMR Representative, on the other hand; provided that, any
such amendment that adversely affects any of the R&A Shareholders other
than CMR (or his estate, if applicable) in a manner different from the
effect of such amendment on CMR (or his estate, if applicable) also
shall require the written consent of such adversely affected R&A
Shareholder.
12.12 Publicity and Disclosures. On each of the
dates of the execution of this Agreement and the Closing, the Acquirer
and R&A shall issue joint press releases (the wording of which shall be
mutually agreed upon by R&A and the Acquirer) announcing the execution
of this Agreement and the consummation of the transactions contemplated
by this Agreement, respectively. In addition, officers of the Acquirer
may make presentations to and engage in discussions, as the Acquirer
deems appropriate, with securities analysts concerning the matters
covered by this Agreement after the execution and delivery of this
Agreement by the parties hereto, including presentations or discussions
that are made available to the public; provided, however, that CMR shall
be permitted to attend any such presentations and discussions of the
Acquirer. Except as provided in this Section 12.12, none of the Royce
Companies, the R&A Shareholders, the RMC Partners or the Acquirer,
without the consent (oral or written) of both the Acquirer and the CMR
Representative (which consent shall not be unreasonably withheld), shall
make any announcement, issue any press release or make any disclosure to
any third party, except to its respective counsel, accountants and other
experts, concerning this Agreement or the transactions contemplated
hereby, except as may be required by applicable Laws and Regulations
(and then only after providing each of the Acquirer and the CMR
Representative with a reasonable opportunity to comment on the content
of any such required disclosure, and reflecting any reasonable comments
of either such Person with respect to the content of such
disclosure).
12.13 Consent to Jurisdiction. Subject to the
provisions of Section 12.2 hereof, each of the parties hereto hereby
consents to personal jurisdiction, service of process and venue in the
federal or state courts of the County, City and State of New York for
any claim, suit or proceeding arising under this Agreement, or in the
case of a third party claim subject to indemnification hereunder, in
the court where such claim is brought, and hereby irrevocably agrees
that all claims in respect of such action or proceeding shall be heard
and determined in such state court or, to the extent permitted by law,
in such federal court. Each of the parties hereby irrevocably consents
to the service of process in any such action or proceeding by the
mailing by certified mail of copies of any service or copies of the
summons and complaint and any other process to such party at the
address specified in Section 12.5 hereof. The parties agree that a
71
final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit or in any other manner
permitted by law, and nothing contained in this Section 12.13 shall
affect the right of a party to serve legal process or to bring any
action or proceeding in the courts of other jurisdictions (subject to
the provisions of Section 12.2 hereof).
72
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date set forth above by their
duly authorized representatives.
XXXX XXXXX, INC.
By:
Name:
Title:
ROYCE & ASSOCIATES, INC.
By:
Name:
Title:
ROYCE MANAGEMENT COMPANY
By:
Name:
Title:
XXXXXXX X. XXXXX
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX 1999 4-YEAR TRUST
By: /s/Xxxxx Free Xxxxx
Xxxxx Free Xxxxx
Trustee
73
XXXXXXX X. XXXXX 1999 2-YEAR TRUST
By: /s/Xxxxx Free Xxxxx
Xxxxx Free Xxxxx
Trustee
J-A-C 1999 TRUST
By: /s/Xxxxx Free Xxxxx
Xxxxx Free Xxxxx
Trustee
W-C-R 1999 TRUST
By: /s/Xxxxx Free Xxxxx
Xxxxx Free Xxxxx
Trustee
