Exhbit 10.26
FORM OF XXXXXX
MAKE-WHOLE BONUS AGREEMENT
THIS MAKE-WHOLE BONUS AGREEMENT (this "Agreement") is entered
into as of August 28, 2001, by and among FA (WY) Acquisition Company, Inc., a
Delaware corporation (the "WY Manager Member"), FA (DE) Acquisition Company,
LLC, a Delaware limited liability company (the "DE Manager Member" and,
collectively with the WY Manager Member, the "Manager Members"), Xxxxxx
Associates, LLC, a Delaware limited liability company (the "WY LLC"), Xxxxxx
Associates of Delaware, LLC, a Delaware limited liability company (the "DE
LLC" and, collectively with the WY LLC, the "LLCs"), and (the
"Employee").
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement, dated as of August 28,
2001, by and among Affiliated Managers Group, Inc. ("AMG"), Xxxxxx Associates,
Inc., a Delaware corporation ("FAI"), the Employee, and the other parties named
therein, and the Management Owner Purchase Agreement, dated as of August 28,
2001, by and among AMG and the other parties named therein, AMG has agreed (on
the terms and subject to the conditions set forth therein) (i) to cause the DE
Manager Member to purchase at the "Closing" (as such term is defined in the
Purchase Agreement) (the "Closing") a majority interest in the DE LLC, and (ii)
to cause the WY Manager Member to purchase at the Closing a majority interest in
the WY LLC.
NOW THEREFORE, in consideration of the premises, the mutual
covenants and the agreements hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto covenant and agree as follows:
AGREEMENTS
SECTION 1. DEFINITIONS. Initially capitalized terms used and not
otherwise defined herein shall have their respective meanings as defined in the
Amended and Restated Limited Liability Company Agreement of the WY LLC (with
respect to payments provided for herein relating to purchases of WY LLC Points)
(the "WY LLC Agreement") or the Amended and Restated Limited Liability Company
Agreement of the DE LLC (with respect to payments provided for herein relating
to purchases of DE LLC Points) (the "DE LLC Agreement" and, collectively with
the WY LLC Agreement, the "LLC Agreements"). In the event that the Purchase
Agreement is terminated without the Closing having occurred, this Agreement
automatically shall terminate simultaneously.
SECTION 2. MAKE-WHOLE BONUS. If the Employee (or its related
Non-Manager Member or Permitted Transferees, as applicable) holds LLC Points in
the WY LLC or the DE LLC (as applicable) which are Purchase Program Points and
the Purchase Program Points FMV (at the time when the Employee becomes a Selling
Member under Section 3.11 of the applicable LLC Agreement, or at the time the
Employee sells such Purchase Program Points pursuant to a Put under Section 7.1
of the applicable LLC Agreement, as applicable) is less than the amount
calculated (assuming that the Employee's LLC Points in both LLCs were being sold
under such provision of the LLC Agreements) under Section 3.11(c)(i) of the
applicable LLC Agreement (in the case of Purchase Program Points which are
Series A LLC Points and sold pursuant to Section 3.11 of the applicable LLC
Agreement), Section 3.11(c)(ii) of the applicable LLC Agreement (in
2
the case of Purchase Program Points which are Series B-1 LLC Points and sold
pursuant to Section 3.11 of the applicable LLC Agreement), Section 3.11(c)(iii)
of the applicable LLC Agreement (in the case of Purchase Program Points which
are Series B-2 LLC Points and sold pursuant to Section 3.11 of the applicable
LLC Agreement), or Section 7.1(e)(i) of the applicable LLC Agreement (in the
case of Purchase Program Points which are sold pursuant to Section 7.1 of the
applicable LLC Agreement), then in any such case the Manager Members (or their
respective assigns) shall pay to the Employee a compensatory cash bonus (the
"Make-Whole Payment") equal to the positive difference, if any, between:
(i) The amount which would have been calculated (assuming that the
Employee's (or its related Non-Manager Member's and Permitted
Transferees', as applicable) LLC Points in both LLCs were being sold under
such provision of the LLC Agreements) with respect to such Purchase
Program Points under Section 3.11(c)(i) of the applicable LLC Agreement
(if such Purchase Program Points are Series A LLC Points being sold
pursuant to Section 3.11 of the applicable LLC Agreement), Section
3.11(c)(ii) of the applicable LLC Agreement (if such Purchase Program
Points are Series B-1 LLC Points being sold pursuant to Section 3.11 of
the applicable LLC Agreement), under Section 3.11(c)(iii) of the
applicable LLC Agreement (if such Purchase Program Points are Series B-2
LLC Points being sold pursuant to Section 3.11 of applicable the LLC
Agreement), or under Section 7.1(e)(i) of the applicable LLC Agreement (if
such Purchase Program Points are being sold pursuant to Section 7.1 of the
applicable LLC Agreement), as applicable, and
(ii) the Purchase Program Points FMV paid to the Employee (or its
related Non-Manager Member and Permitted Transferees, as applicable) with
respect to such Purchase Program Points pursuant to Section 3.11(c)(iv) or
Section 7.1(e)(ii) of the applicable LLC Agreement (as applicable);
PROVIDED, HOWEVER, that, if the Employee recognizes ordinary income on the
Make-Whole Payment made to the Employee hereunder, and the Employee (or its
related Non-Manager Member and Permitted Transferees, as applicable) recognizes
long-term capital gain on the Purchase Program Points FMV paid to the Employee
(or its related Non-Manager Member and Permitted Transferees, as applicable)
with respect to such Purchase Program Points pursuant to Section 3.11(c)(iv) or
Section 7.1(e)(ii) of the applicable LLC Agreement (as applicable), then the
Manager Members shall indemnify and hold the Employee harmless (any such further
payment, a "Tax Differential Payment") from any incremental taxes incurred as a
result of (i) the combined (i.e., federal, state and local) marginal tax rate on
ordinary income applicable to the Employee being higher than the combined (i.e.,
federal, state and local) marginal tax rate on long-term capital gain applicable
to the Employee (or its related Non-Manager Member and Permitted Transferees, as
applicable) and (ii) the receipt of any Tax Differential Payments; PROVIDED,
FURTHER, that the Tax Differential Payment contemplated by the foregoing proviso
initially shall be paid based upon the assumptions (absent available information
to the contrary, and the Employee shall represent in writing to the Manager
Members the absence of his knowledge of any such contrary information, provided
that if such contrary information is available, the Tax Differential Payment
shall be made based on such contrary information) that (i) the Employee will
recognize ordinary income on the Make-Whole Payment at the highest combined
federal, state and local marginal tax rate on ordinary income then applicable to
an individual resident of the city and state in which the Employee (or its
related Non-Manager Member and Permitted Transferees, as applicable) then
resides, and (ii) the Employee (or its
3
related Non-Manager Member and Permitted Transferees, as applicable) will
recognize long-term capital gains on the Purchase Program Points FMV paid to the
Employee (or its related Non-Manager Member and Permitted Transferees, as
applicable) with respect to such Purchase Program Points at the highest combined
federal, state and local marginal tax rate on long-term capital gain then
applicable to an individual resident of the city and state in which the Employee
(or its related Non-Manager Member and Permitted Transferees, as applicable)
then resides, PROVIDED that, in the event the Employee (or its related
Non-Manager Member and Permitted Transferees, as applicable) subsequently does
not in fact recognize ordinary income on the Make-Whole Payment and long-term
capital gain on the Purchase Program Points FMV at the rates contemplated by the
foregoing assumptions (whether by reason of reporting positions taken by them,
on audit or otherwise), the Employee promptly shall reimburse to the Manager
Members in cash the amount by which the Tax Differential Payment previously paid
by the Manager Members exceeded the Tax Differential Payment which would have
been payable in accordance with the preceding proviso based upon the tax
treatment actually realized by the Employee (or its related Non-Manager Member
and Permitted Transferees, as applicable) with respect to the Make-Whole Payment
and Purchase Program Points FMV (and the Employee shall certify in writing to
the Manager Members from time to time such information as may reasonably be
requested by the Manager Members in connection with the operation of this
paragraph, and provide reasonable access to the underlying tax documentation
relating thereto). Any Make-Whole Payment provided for in this Section 2
(including without limitation any Tax Differential Payment associated therewith)
shall be paid to the Employee at the same time that the Purchase Program Points
FMV is required to be paid to the Employee (or its related Non-Manager Member
and Permitted Transferees, as applicable) pursuant to the applicable LLC
Agreement.
SECTION 3. ACCELERATED PUT BONUS. If the Employee is a party to a
Put Option Agreement with the Manager Members dated as of the date hereof (the
"Put Option Agreement") and sells (or its related Non-Manager Member and
Permitted Transferees sell, as applicable) Vested LLC Points in the WY LLC to
the WY Manager Member and Vested LLC Points in the DE LLC to the DE Manager
Member (or its assigns) pursuant to an "Accelerated Put" thereunder, then the
Manager Members (or their respective assigns) shall pay to the Employee a
compensatory cash bonus (the "Accelerated Put Bonus Payment") equal to the
positive difference, if any, between:
(i) The "Accelerated Put Price" (as such term is defined in the Put
Option Agreement) which would have been calculated under Section 2(c) of
the Put Option Agreement in connection with such sale of Vested LLC Points
in the LLCs if the multiple set forth in Section 2(c) of the Put Option
Agreement had been seventeen (17.0) instead of seven (7.0), and
(ii) the "Accelerated Put Price" (as such term is defined in the Put
Option Agreement) (the "Accelerated Put Price") calculated under Section
2(c) of the Put Option Agreement in connection with such sale of Vested
LLC Points in the LLCs;
PROVIDED, HOWEVER, that, if the Employee recognizes ordinary income on the
Accelerated Put Bonus Payment made to the Employee hereunder, and the Employee
(or its related Non-Manager Member and Permitted Transferees, as applicable)
recognizes capital gain on the Accelerated Put Price paid to the Employee (or
its related Non-Manager Member and Permitted Transferees, as applicable) under
the Put Option Agreement with respect to such sale of Vested LLC Points in the
LLCs, then the Manager Members shall indemnify and hold the Employee harmless
(any
4
such further payment, a "Tax Differential Payment") from any incremental taxes
incurred as a result of (i) the combined (i.e., federal, state and local)
marginal tax rate on ordinary income applicable to the Employee being higher
than the combined (i.e., federal, state and local) marginal tax rate on
long-term capital gain applicable to the Employee (or its related Non-Manager
Member and Permitted Transferees, as applicable) and (ii) the receipt of any Tax
Differential Payments; PROVIDED, FURTHER, that the Tax Differential Payment
contemplated by the foregoing proviso initially shall be paid based upon the
assumptions (absent available information to the contrary, and the Employee
shall represent in writing to the Manager Members the absence of his knowledge
of any such contrary information, provided that if such contrary information is
available, the Tax Differential Payment shall be made based on such contrary
information) that (i) the Employee will recognize ordinary income on the
Accelerated Put Bonus Payment at the highest combined federal, state and local
marginal tax rate on ordinary income then applicable to an individual resident
of the city and state in which the Employee (or its related Non-Manager Member
and Permitted Transferees, as applicable) then resides, and (ii) the Employee
(or its related Non-Manager Member and Permitted Transferees, as applicable)
will recognize long-term capital gain on the Accelerated Put Price paid to the
Employee (or its related Non-Manager Member and Permitted Transferees, as
applicable) under the Put Option Agreement with respect to such sale of Vested
LLC Points in the LLCs at the highest combined federal, state and local marginal
tax rate on long-term capital gain then applicable to an individual resident of
the city and state in which the Employee (or its related non-Manager Member and
Permitted Transferees, as applicable) then resides, PROVIDED that, in the event
the Employee (or its related Non-Manager Member and Permitted Transferees, as
applicable) subsequently does not in fact recognize ordinary income on the
Accelerated Put Bonus Payment and long-term capital gain on the Accelerated Put
Price at the rates contemplated by the foregoing assumptions (whether by reason
of reporting positions taken by them, on audit or otherwise), the Employee
promptly shall reimburse to the Manager Members in cash the amount by which the
Tax Differential Payment previously paid by the Manager Members exceeded the Tax
Differential Payment which would have been payable in accordance with the
preceding proviso based upon the tax treatment actually realized by the Employee
(or its related Non-Manager Member and Permitted Transferees, as applicable)
with respect to the Accelerated Put Bonus Payment and the Accelerated Put Price
(and the Employee shall certify in writing to the Manager Members from time to
time such information as may reasonably be requested by the Manager Members in
connection with the operation of this paragraph, and provide reasonable access
to the underlying tax documentation relating thereto). Any Accelerated Put Bonus
Payment provided for in this Section 3 (including without limitation any Tax
Differential Payment associated therewith) shall be paid to the Employee at the
same time that the Accelerated Put Price is required to be paid to the Employee
(or its related Non-Manager Member and Permitted Transferees, as applicable)
pursuant to the Put Option Agreement.
SECTION 4. AMG GUARANTY. AMG hereby unconditionally guarantees to
the Employee the prompt performance by each of the Manager Members of their
obligations under Sections 2 and 3 of this Agreement; PROVIDED, HOWEVER, that
the guaranty set forth in this Section 4 may be terminated with the prior
written consent of the Management Committee, and PROVIDED, FURTHER, that such
guaranty with respect to obligations arising under Section 3 of this Agreement
may not be terminated if the Manager Members have exercised any of their rights
under Section 3.2(b)(v) of the LLC Agreements.
5
SECTION 5. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without applying the choice of law or conflicts of law provisions thereof.
SECTION 6. CONSENT TO JURISDICTION. The parties hereby consent to
the jurisdiction of the Chancery Court of the State of Delaware and the United
States District Court for the District of Delaware. Accordingly, with respect to
any such court action, the Employee (a) submits to the personal jurisdiction of
such courts; (b) consents to service of process at the address determined
pursuant to the provisions of Section 7 hereof; and (c) waives any other
requirement (whether imposed by statute, rule of court, or otherwise) with
respect to personal jurisdiction or service of process.
SECTION 7. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered as set forth in the LLC Agreements or to such other
address or facsimile, telex or telecopy number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if given by facsimile,
telex or telecopy, when such facsimile, telex or telecopy is transmitted to the
facsimile, telex or telecopy number as specified in the LLC Agreements and the
appropriate answer back is received, or (ii) if given by any other means, when
actually delivered at the address specified as set forth in the LLC Agreements.
SECTION 8. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes
all prior understandings and agreements among the parties relating to the
subject matter hereof.
SECTION 9. ASSIGNABILITY. This Agreement may be assigned by AMG
and/or either of the Manager Members without the consent of the Employee
(provided that any such assignment shall not relieve AMG or such Manager Member,
as applicable, of its obligations hereunder to the extent not fully performed by
any such assignee). Neither this Agreement nor any rights or obligations
hereunder shall be assignable by the Employee to any other Person without the
prior written consent of the Manager Members. This Agreement shall be binding
upon and inure to the benefit of AMG, the Manager Members, the Employee and
their successors and permitted assigns.
SECTION 10. WAIVERS. Neither this Agreement nor any term or
condition hereof, including without limitation the terms and conditions of this
Section 10, may be waived or modified in whole or in part as against either
party hereto except by written instrument executed by or on behalf of such party
expressly stating that it is intended to operate as a waiver or modification of
this Agreement or the applicable term or condition hereof.
SECTION 11. AMENDMENTS. This Agreement may not be amended, nor shall
any change, modification, consent, or discharge be effected except by written
instrument executed by or on behalf of each of the parties hereto.
SECTION 12. CAPTIONS. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof.
SECTION 13. GENDER. Whenever used herein, the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall include all genders.
6
SECTION 14. SEVERABILITY. If any provision of this Agreement shall
be held or deemed to be invalid, inoperative or unenforceable in any
jurisdiction or jurisdictions, because of conflicts with any constitution,
statute, rule or public policy or for any other reason, such circumstance shall
not have the effect of rendering the provision in question unenforceable in any
other jurisdiction or in any other case or circumstance or of rendering any
other provisions herein contained unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative, or
unenforceable provision had never been contained herein and such provision
reformed so that it would be enforceable to the maximum extent permitted in such
jurisdiction or in such case.
SECTION 15. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as a
sealed instrument as of the date first above written.
FA (WY) ACQUISITION COMPANY, INC
By:
----------------------------
Name:
Title:
FA (DE) ACQUISITION COMPANY, LLC
By: AFFILIATED MANAGERS GROUP, INC.,
its manager member
By:
----------------------------
Name:
Title:
AFFILIATED MANAGERS GROUP, INC., solely
with respect to its obligations under
Section 4 of this Agreement
By:
-------------------------------------
Name:
Title:
EMPLOYEE:
-------------------------------------
Name:
XXXXXX ASSOCIATES, LLC
By:
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXX ASSOCIATES OF DELAWARE, LLC
By:
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
[Make-Whole Bonus Agreement]
