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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 4, 1997
BY AND AMONG
OPPENHEIMER GROUP, INC.
OPPENHEIMER FINANCIAL CORP.
PIMCO ADVISORS L.P.
PIMCO ADVISORS TRANSITORY MERGER LLC
THE INDEMNITY TRUST
AND
THE SELLER TRUST
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TABLE OF CONTENTS
ARTICLE I. DEFINITIONS......................................................................1
Section 1.1. Definitions.............................................................1
ARTICLE II. THE REDEMPTION AND MERGER......................................................12
Section 2.1. The Redemption.........................................................12
Section 2.2. The Merger.............................................................14
Section 2.3. Consideration to Be Delivered in the Merger............................14
Section 2.4. Effect of Merger on Opgroup Shareholders...............................15
Section 2.5. No Fractional Shares...................................................15
Section 2.6. Tax Characterization of the Merger.....................................15
ARTICLE III. CLOSING.......................................................................15
Section 3.1. Closing................................................................15
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF OPGROUP AND THE TRUSTS......................16
Representations and Warranties of Opgroup...........................................16
Section 4.1. Organization and Related Matters.......................................16
Section 4.2. Authority: No Violation................................................16
Section 4.3. Consents and Approvals.................................................17
Section 4.4. Regulatory Documents...................................................17
Section 4.5. Capitalization.........................................................17
Section 4.6. Financial Statements...................................................19
Section 4.7. Ineligible Persons.....................................................20
Section 4.8. Material Contracts.....................................................20
Section 4.9. Legal Proceedings......................................................21
Section 4.10. Permits and Applicable Law............................................21
Section 4.11. Insurance.............................................................21
Section 4.12. Labor and Employment Matters..........................................22
Section 4.13. Employee Benefit Plans, ERISA.........................................22
Section 4.14. Intellectual Property.................................................23
Section 4.15. Taxes.................................................................23
Section 4.16. Investment Companies, Managed Account Clients, Distributors, Etc......24
Section 4.17. No Material Adverse Effect............................................26
Section 4.18. Bringdown.............................................................26
Section 4.19. Brokers...............................................................28
Section 4.20. Additional Fund Representations.......................................28
Section 4.21. Regarding Equities....................................................28
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Section 4.22. Non-Investment Company Advisory Agreement Consents....................28
Section 4.23. Section 15 of the Investment Company Act--Opgroup and Opfin...........29
Representations and Warranties of the Indemnity Trust...............................29
Section 4.24. Organization and Related Matters......................................29
Section 4.25. Authority, No Violation...............................................29
Section 4.26. Consents and Approvals................................................30
Representations and Warranties of the Seller Trust..................................30
Section 4.27. Organization and Related Matters......................................30
Section 4.28. Authority; No Violation...............................................30
Section 4.29. Consents and Approvals................................................31
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PATM..........................................31
Section 5.1. Organization and Related Matters.......................................31
Section 5.2. Authority; No Violation................................................32
Section 5.3. Consents and Approvals.................................................32
Section 5.4. Capitalization.........................................................33
Section 5.5. Financial Condition and Subsidiaries...................................33
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF PIMCO ADVISORS...............................33
Section 6.1. Organization...........................................................33
Section 6.2. Authority, No Violation................................................34
Section 6.3. Consents and Approvals.................................................34
Section 6.4. Regulatory Documents...................................................34
Section 6.5. Capitalization.........................................................35
Section 6.6. Financial Statements...................................................35
Section 6.7. Ineligible Persons.....................................................36
Section 6.8. Material Contracts.....................................................36
Section 6.9. No Broker..............................................................37
Section 6.10. Legal Proceedings.....................................................37
Section 6.11. Permits and Applicable Law............................................37
Section 6.12. Insurance.............................................................38
Section 6.13. Labor and Employment Matters..........................................38
Section 6.14. Employment Benefit Plans; ERISA.......................................38
Section 6.15. Intellectual Property.................................................39
Section 6.16. Taxes.................................................................39
Section 6.17. Investment Companies. Managed Account Clients, Distributors, Etc......40
Section 6.18. Section 15 of the Investment Company Act..............................41
Section 6.19. No Material Adverse Effect............................................41
ARTICLE VII. [OMITTED].....................................................................41
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ARTICLE VIII. CLOSING DELIVERIES...........................................................41
Section 8.1. Deliveries by Opgroup, Opfin and the Trusts............................41
Section 8.2. Deliveries by PIMCO Advisors and PATM..................................43
Section 8.3. Other Deliveries.......................................................43
Section 8.4. Execution of Certain Documents.........................................44
ARTICLE IX. ACTIONS SUBSEQUENT TO THE MERGER...............................................44
Section 9.1. Contribution...........................................................44
Section 9.2. Additional Fund Related Covenants......................................44
Section 9.3. Insurance..............................................................44
Section 9.4. Closing Date Balance Sheets............................................45
Section 9.5. Section 15 of the Investment Company Act; PIMCO Advisors...............46
Section 9.6. Further Assurances.....................................................47
Section 9.7. Expenses...............................................................47
Section 9.8. Disposition of OGI Stock...............................................47
ARTICLE X. INDEMNIFICATION.................................................................48
Section 10.1. Indemnification by PIMCO Advisors and the Surviving Corporation.......48
Section 10.2. Indemnification by the Indemnity Trust................................48
Section 10.3. Monetary Limitation...................................................49
Section 10.4. Nature and Survival; Time Limits......................................50
Section 10.5. Limitation on Remedies................................................50
Section 10.6. General Provisions....................................................50
ARTICLE XI. TERMINATION AND SURVIVAL.......................................................52
Section 11.1. Omitted...............................................................52
ARTICLE XII. MISCELLANEOUS.................................................................52
Section 12.1. Limitation on Liability...............................................52
Section 12.2. No Right of Set Off...................................................53
Section 12.3. Amendments, Waiver....................................................53
Section 12.4. Entire Agreement......................................................53
Section 12.5. Interpretation........................................................53
Section 12.6. Severability..........................................................53
Section 12.7. Notices...............................................................54
Section 12.8. Binding Effect; No Third Party Beneficiaries; No Assignment...........55
Section 12.9. Counterparts..........................................................55
Section 12.10. Governing Law........................................................56
Section 12.11. Waiver of Jury Trial.................................................57
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 4, 1997, by
and among Oppenheimer Group, Inc., a Delaware corporation ("Opgroup"),
Oppenheimer Financial Corp., a Delaware corporation ("Opfin"), PIMCO Advisors
L.P., a Delaware limited partnership ("PIMCO Advisors"), PIMCO Advisors
Transitory Merger LLC, a Delaware limited liability company ("PATM"), the
Indemnity Trust, under Declaration of Trust dated July 22, 1997, as amended (the
"Indemnity Trust") and the Seller Trust, under Declaration of Trust dated July
22, 1997, as amended (the "Seller Trust").
RECITALS
WHEREAS, Opgroup, Opfin, PIMCO Advisors, the Indemnity Trust, the
Seller Trust and certain other parties were parties to that certain Amended and
Restated Agreement and Plan of Merger dated July 22, 1997 (the "Original
Agreement"), and the parties to the Original Agreement, concurrently with the
execution hereof, have terminated such agreement;
WHEREAS, on July 22, 1997, CIBC Wood Gundy Securities Corp.
("CIBC"), Opgroup, and Oppenheimer Equities, Inc. ("Equities") entered into that
certain Stock Acquisition Agreement (as amended November 3, 1997, the "CIBC
Agreement") pursuant to which, among other things, Equities agreed to sell to
CIBC (the "CIBC Transaction") all of the capital stock of Oppenheimer Holdings,
Inc., a Delaware corporation ("Holdings");
WHEREAS, PATM is a wholly owned limited liability company
subsidiary of PIMCO Advisors;
WHEREAS, the parties hereto desire that, following the
consummation of the transactions contemplated under the CIBC Agreement, PIMCO
Advisors acquire Opgroup by way of a merger of PATM with and into Opgroup, with
the stockholders of Opgroup receiving, among other things, securities of PIMCO
Advisors in respect of their equity interests in Opgroup;
NOW THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be bound hereby, the parties hereby agree as
follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions.
For all purposes of this Agreement, the following terms shall
have the respective meanings set forth in this Section 1.1 (such definitions to
be equally applicable to both the singular and plural forms of the terms herein
defined):
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"Accounting Firm" has the meaning set forth in Section 9.4(b).
"Advantage Advisers" shall mean Advantage Advisers, Inc., a
Delaware corporation.
"Advantage Advisers Balance Sheets" has the meaning set forth in
Section 4.6(b).
"Advisers Act" shall mean the Investment Advisers Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
"Advisory Agreement" shall mean any agreement with respect to the
provision of investment advisory services as provided in the Advisers Act.
"Affiliate" shall mean any Person that, directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Person specified.
"Agreement" shall mean this Amended and Restated Agreement and
Plan of Merger, as it may hereafter be amended.
"Applicable Law" with respect to a Person, shall mean any
domestic or foreign federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree, policy, guideline or other requirement applicable to such
Person or any of its Affiliates, or to its or their properties or assets.
"Available Cash" shall mean an amount in cash estimated in good
faith to be equal at the close of business on the Business Day next preceding
the Closing Date to the lesser of (i) cash on hand of Opgroup, Opfin and Value
Advisors, or (ii) net current assets of Opgroup, Opfin and Value Advisors on a
combined basis, or (iii) net assets of Opgroup, Opfin and Value Advisors on a
combined basis, in each case without consolidation of any Excluded Affiliate,
Opcap LP, Opcap or any of their Subsidiaries, without attribution of any value
to the Interests, stock of the Excluded Affiliates, rights to receive the Buyer
Adjustment Payment or amounts released from the Tax Payment Account or the
Holdback Amount, or the management contracts for the Value Advisors Funds, and
without taking into account principal of the Opgroup Equities Note.
"Brokerage Business" shall mean the businesses, including without
limitation the securities, brokerage, investment banking and asset management
businesses, conducted by Holdings and its controlled Affiliates, but excluding
the Value Advisors Business.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banks in the State of New York are permitted or required to be
closed for regular banking business.
"Buyer Adjustment Payment" shall have the meaning set forth in
the CIBC Agreement.
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"Certificate" means that certain Certificate of Long Term
Indemnity Indebtedness dated November 4, 1997.
"CIBC" has the meaning set forth in the Recitals to this
Agreement.
"CIBC Agreement" has the meaning set forth in the Recitals to
this Agreement.
"CIBC Transaction" has the meaning set forth in the Recitals to
this Agreement.
"Class A Units" has the meaning set forth in Section 2.3.
"Class B Units" shall mean the Class B units of limited partner
interest of PIMCO Advisors.
"Class C Units" shall mean the Class C units of limited partner
interest of PIMCO Advisors.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Closing Date Balance Sheets" has the meaning set forth in
Section 9.4(a).
"Closing Valuation Date" shall mean October 31, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
or any successor statute.
"Combined Balance Sheet" has the meaning set forth in Section
9.4(a).
"Contribution Agreement" has the meaning set forth in Section
8.4(b).
"D&O Insurance" has the meaning set forth in Section 9.3.
"DGCL" has the meaning set forth in Section 2.2.
"DLLCA" has the meaning set forth in Section 2.2.
"Effective Time" shall mean the time at which the certificate of
merger of the Merger is duly filed with the Secretary of State of the State of
Delaware (or such other time as may be specified in such certificate of merger).
"Encumbrance" shall mean any lien, pledge, security interest,
claim, charge, easement, limitation, commitment, encroachment, restriction or
encumbrance of any kind or nature whatsoever.
"Equities" has the meaning set forth in the Recitals to this
Agreement.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations and class exemptions of the Department of
Labor thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Right" has the meaning set forth in Section 2.3.
"Excluded Affiliates" has the meaning set forth in the CIBC
Agreement.
"GAAP" shall mean generally accepted accounting principles as
used in the United States of America, as in effect at the time any applicable
financial statements were prepared.
"Governmental Authority" shall mean any government (domestic or
foreign), any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, the
SEC, the Commodity Futures Trading Commission or any other government authority,
agency, department, board, commission or instrumentality of the United States,
any State of the United States or any political subdivision thereof, and any
court, tribunal or arbitrator(s) of competent jurisdiction, and any governmental
or non-governmental self-regulatory organization, agency or authority (including
the New York Stock Exchange and the National Association of Securities Dealers,
Inc.).
"GP Unit" has the meaning set forth in Section 6.5.
"Holdback Amount" shall have the meaning set forth in the CIBC
Agreement.
"Holdings" has the meaning set forth in the Recitals to this
Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Identified Funds" shall mean, collectively: (i) the Value
Advisors Funds, (ii) OCC Cash Reserves, Inc. and (iii) OCC Accumulation Trust.
"Indemnified Claim" has the meaning set forth in Section 10.6(a).
"Indemnified Party" has the meaning set forth in Section 10.6(a).
"Indemnifying Party" has the meaning set forth in Section
10.6(a).
"Indemnity Declaration" has the meaning set forth in Section
4.23(a).
"Indemnity Trust" has the meaning set forth in the first
paragraph of this Agreement.
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"Indemnity Trustees" shall mean the managing trustees from time
to time under the Indemnity Trust.
"Independent Director" has the meaning set forth in Section
4.23(b).
"Interests" shall mean each of the general partner interests in
Opcap LP, Opcap, Opcap Advisors, OCC Distributors and 225 Liberty Street
Advisers, L.P. owned by Opfin.
"Investment Company" shall have the meaning provided in the
Investment Company Act.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, and the rules and regulations of the SEC thereunder.
"IRS" shall mean the Internal Revenue Service.
"License Agreement" shall mean that certain License Agreement
dated as of July 22, 1997 between Holdings and Opcap.
"Losses" has the meaning set forth in Section 10.6(g).
"Maximum Premium" has the meaning set forth in Section 9.3.
"Merger" has the meaning set forth in Section 2.2.
"Money Management Business" shall mean the (i) the business
operated by Opcap LP, Opcap and their respective Subsidiaries, (ii) the business
operated by Opfin, but only to the extent of its acting as general partner of
Opcap, Opcap LP, Opcap Advisors, OCC Distributors and 225 Liberty Street
Advisers, L.P. and (iii) the Value Advisors Business.
"Objections" has the meaning set forth in Section 9.4(b).
"OCC Distributors" shall mean OCC Distributors, a Delaware
general partnership (formerly Quest For Value Distributors).
"Offshore Investment Company" shall mean an Investment Company
organized under the laws of a jurisdiction other than the United States or any
political subdivision thereof.
"OFI" shall mean Oppenheimer Funds, Inc. (formerly Oppenheimer
Management Corporation).
"OGI Notes" has the meaning set forth in Section 2.1(a).
"Opcap" shall mean Oppenheimer Capital, a Delaware general
partnership.
"Opcap Advisors" shall mean Opcap Advisors, a Delaware general
partnership.
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"Opcap Balance Sheets" has the meaning set forth in Section
4.6(a).
"Opcap Interest" shall mean the partnership interest in Opcap
owned by Opfin.
"Opcap LP" shall mean Oppenheimer Capital, L.P., a Delaware
limited partnership.
"Opcap LP Interest" shall mean the partnership interest in Opcap
LP owned by Opfin.
"Opcap Portion" has the meaning set forth in Section 2.1(c).
"Opcap LP Portion" has the meaning set forth in Section 2.1(c).
"Opcap Run Rate Revenues" at a particular date shall mean
revenues calculated by multiplying the assets under management of Opcap and each
of its subsidiaries at such date by the applicable management fee rates
(reflective of any discounts and excluding any performance fees) then in effect
for such assets. For purposes of calculating any decline in Opcap Run-Rate
Revenues, the first $3 million of any such decline attributable to the
termination and sale of the Dual Purpose Fund shall be disregarded.
"Opcap Portion" has the meaning set forth in Section 2.1(c).
"Opco" shall mean Oppenheimer & Co., Inc., a Delaware
corporation.
"Opco LP" shall mean Oppenheimer & Co., L.P., a Delaware limited
partnership.
"Opco Share" shall mean the shares of Opgroup Class C Common
Stock and Opgroup Class D Common Stock held of record and beneficially by Opco
LP and not reserved for unexercised warrants.
"Opfin" has the meaning set forth in the first paragraph of this
Agreement.
"Opgroup" has the meaning set forth in the first paragraph of
this Agreement.
"Opgroup Benefit Plan" has the meaning set forth in Section
4.13(a).
"Opgroup Business" shall mean the business conducted by Opgroup
and its Subsidiaries prior to the Effective Time.
"Opgroup Class A Common Stock" shall mean the Class A Common
Stock, $.01 par value, of Opgroup.
"Opgroup Class B Common Stock" shall mean the Class B Common
Stock, $.01 par value, of Opgroup.
"Opgroup Class C Common Stock" has the meaning set forth in
Section 2.1.
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"Opgroup Class D Common Stock" has the meaning set forth in
Section 2.1.
"Opgroup Common Stock" shall mean Opgroup Class A Common Stock,
Opgroup Class B Common Stock, Opgroup Class C Common Stock and Opgroup Class D
Common Stock.
"Opgroup Distribution Contract" has the meaning set forth in
Section 4.16(g).
"Opgroup Equities Note" shall mean the 10% note due 2012, in the
current principal amount of $32,193,000, issued by Equities to Opcap LP.
"Opgroup Indemnitees" has the meaning set forth in Section
10.1(a).
"Opgroup Intellectual Property" has the meaning set forth in
Section 4.14.
"Opgroup Investment Company Client" shall mean any Opgroup Public
Investment Company Client, Opgroup Private Investment Company Client or Opgroup
Offshore Investment Company Client.
"Opgroup's Knowledge" or "to the Knowledge of Opgroup" shall mean
only the knowledge after due inquiry of Roger W. Einiger, Nathan Gantcher,
Stephen Robert, Joseph M. La Motta, George Long, Kenneth Mortensen, Sheldon
Siegel and Thomas Duggan.
"Opgroup Managed Account Client" shall mean any Person, other
than an Investment Company, for or in respect of which any Opgroup Subsidiary
provides investment advisory or similar services (including, without limitation,
investment sub-advisory services).
"Opgroup Material Adverse Effect" shall mean any matter or
matters affecting Opgroup or any Opgroup Subsidiary that has or reasonably could
be expected to have a material adverse effect on the business, assets, financial
condition or results of operations of Opgroup (after taking into account the
Opgroup Restructuring) and the Opgroup Subsidiaries, taken as a whole, or on the
ability of Opgroup to complete the Closing; provided, however, that a claim or
action by OFI arising under that certain Agreement Not to Compete dated as of
November 22, 1995 or that certain License Agreement dated November 25, 1995
shall not be considered an Opgroup Material Adverse Effect; and provided
further, that a decline in Opcap Run-Rate Revenues for any reason between
February 13, 1997 and the Closing Valuation Date of less than or equal to 20%
shall not be considered in determining whether there has been an Opgroup
Material Adverse Effect (it being agreed that this exclusion shall not be
considered in any determination of whether any event or events other than a
decline in Opcap Run-Rate Revenues (or a related market downturn) constitutes an
Opgroup Material Adverse Effect).
"Opgroup Material Contract" has the meaning set forth in Section
4.8.
"Opgroup Offshore Investment Company Client" shall mean each
Offshore Investment Company for or in respect of which any Opgroup Subsidiary
provides investment advisory or similar services (including, without limitation,
subinvestment advisory services).
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"Opgroup Private Investment Company Client" shall mean each
Private Investment Company for or in respect of which any Opgroup Subsidiary
provides investment advisory or similar services (including, without limitation,
sub-investment advisory services).
"Opgroup Public Investment Company Client" shall mean each Public
Investment Company for or in respect of which any Opgroup Subsidiary provides
investment advisory or similar services (including, without limitation,
sub-investment advisory services); provided, that for purposes of Sections
4.23(a) and 9.5, the Persons listed on Schedule 1.1(b) shall be deemed not to be
Opgroup Public Investment Company Clients; and provided further, that for all
purposes of this Agreement, none of the Persons listed on Schedule 1.1(c) shall
be deemed to be an Opgroup Public Investment Company Client.
"Opgroup Restructuring" shall mean that series of transactions
described in Annex A.
"Opgroup Shareholders" shall mean the holders of Opgroup Common
Stock immediately prior to the Effective Time.
"Opgroup Subgroup" shall mean Opgroup, Opfin, Equities and Value
Advisors.
"Opgroup Subsidiary" shall mean each of Opfin, Equities,
Advantage Advisers (but only with respect to the Value Advisors Business prior
to the Closing Date), Value Advisors, Opcap LP, Opcap, Opcap Advisors, OCC
Distributors, Oppenheimer Capital Limited, Oppenheimer Capital Trust Company,
225 Liberty Street Advisers, L.P., Oppenheimer Capital Luxembourg Funds, Paragon
Management Group, OCC Partners, L.P., Oppenheimer Capital Equity Partners, L.P.
and Bank Street Partners, L.P.
"PATM" has the meaning set forth in the first paragraph of this
Agreement.
"Permits" shall mean licenses, franchises, permits, registrations
and authorizations of any Governmental Authority.
"Person" shall mean any individual, corporation, partnership
(limited or general), limited liability company, joint venture, association,
trust or other entity.
"PIMCO Advisors" has the meaning set forth in the first paragraph
of this Agreement.
"PIMCO Advisors Balance Sheets" has the meaning set forth in
Section 6.6.
"PIMCO Advisors Benefit Plan" has the meaning set forth in
Section 6.14(a).
"PIMCO Advisors Distribution Contract" has the meaning set forth
in Section 6.17(g).
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"PIMCO Advisors Investment Company Client" shall mean any PIMCO
Advisors Public Investment Company Client, PIMCO Advisors Private Investment
Company Client or PIMCO Advisors Offshore Investment Company Client.
"PIMCO Advisors' Knowledge" or "to the Knowledge of PIMCO
Advisors" shall mean only the knowledge after due inquiry of William Cvengros,
William Thompson, Robert Fitzgerald, Kenneth Poovey and Richard Weil.
"PIMCO Advisors Managed Account Client" shall mean any Person,
other than an Investment Company, for or in respect of which PIMCO Advisors and
any PIMCO Advisors Subsidiary provides investment advisory or similar services
(including, without limitation, sub-investment advisory services).
"PIMCO Advisors Material Adverse Effect" shall mean any matter or
matters affecting PIMCO Advisors or any PIMCO Advisors Subsidiary that has or
have or could reasonably be expected to have a material adverse effect on the
business, assets, financial condition or results of operations of PIMCO Advisors
and PIMCO Advisors' investment management partnerships taken as a whole or on
the ability of PIMCO Advisors to complete the Closing.
"PIMCO Advisors Material Client" has the meaning set forth in
Section 6.17(a).
"PIMCO Advisors Material Contract" has the meaning set forth in
Section 6.8.
"PIMCO Advisors Offshore Investment Company Client" shall mean
each Offshore Investment Company for or in respect of which PIMCO Advisors or
any PIMCO Advisors Subsidiary provides investment advisory or similar services
(including, without limitation, sub-investment advisory services).
"PIMCO Advisors Private Investment Company Client" shall mean
each Private Investment Company for, or in respect of which, PIMCO Advisors or
any PIMCO Advisors Subsidiary provides investment advisory or similar services
(including, without limitation, sub-investment advisory services).
"PIMCO Advisors Public Investment Company Client" shall mean each
Public Investment Company for or in respect of which PIMCO Advisors or any PIMCO
Advisors Subsidiary provides investment advisory or similar services (including,
without limitation, sub-investment advisory services).
"PIMCO Advisors Subsidiary" shall mean each of Pacific Investment
Management Company, Parametric Portfolio Associates, Cadence Capital Management,
NFJ Investment Group, Blairlogie Capital Management, Columbus Circle Investors
and PIMCO Funds Distribution Company.
"PIMCO Indemnitees" has the meaning set forth in Section 10.2(a).
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"PIMCO Partners" shall mean PIMCO Partners, G.P., a California
general partnership.
"Present Value Benefit" shall mean the present value (based on a
discount rate equal to the short-term applicable federal rate as determined
under Section 1274(d) of the Code at the time of determination, and assuming
that the Indemnified Party will be liable for Taxes at all relevant times at the
maximum marginal rates) of any income tax benefit; provided, however, that the
tax rates applicable to a partnership shall be deemed to be those applicable to
a Subchapter C corporation.
"Private Investment Company" shall mean an Investment Company,
other than an Offshore Investment Company, that would be an investment company,
as defined in the Investment Company Act, but for the exception contained in
Section 3(c)(1) or Section 3(c)(7) of that Act.
"Proportionate Share" shall mean a fraction equal to one divided
by all shares of Opgroup Common Stock outstanding after the Redemption.
"Public Investment Company" shall mean an Investment Company,
other than a Private Investment Company or an Offshore Investment Company.
"Put Right" shall have the meaning set forth in Section 8.4(c).
"Redeemed Shares" shall mean all shares of Opgroup Class C Common
Stock and Opgroup Class D Common Stock outstanding immediately prior to the
Redemption.
"Redemption" has the meaning set forth in Section 2.1.
"Registration Rights Agreement" has the meaning set forth in
Section 8.4(c).
"Regulatory Documents" shall mean all (i) Forms ADV (and
amendments thereto), (ii) Forms BD (and amendments thereto), (iii) forms filed
under the Exchange Act (other than Forms 3, 4, and 5 or Schedules 13D, 13F or
13G) and (iv), with respect to an Opgroup Public Investment Company Client,
Registration Statements on Form N-IA under the Investment Company Act.
"Related Agreement" shall mean any agreement delivered hereunder
or contemplated hereby, including but not limited to the Contribution Agreement,
the Irrevocable Proxy dated July 22, 1997 given by the Indemnity Trust to
Kenneth M. Poovey and Richard M. Weil, the Irrevocable Proxy dated July 22, 1997
given by Opco LP to Kenneth M. Poovey and Richard M. Weil, the License
Agreement, the Registration Rights Agreement, the Release and Indemnity
Agreement, the Tax Indemnity Agreement, the Transition Agreement, the Exchange
Rights and the Put Agreements.
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"Release and Indemnity Agreement" shall mean the Amended and
Restated Release and Indemnity Agreement dated November 3, 1997 among Opgroup,
CIBC and PIMCO Advisors.
"Relevant Entities" has the meaning set forth in Section 9.5.
"SBAM Funds" has the meaning set forth in Section 4.23(b).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder.
"Securities Laws" shall mean the Securities Act, the Exchange
Act; the Investment Company Act, the Advisers Act, the Commodity Exchange Act
and the rules under such Acts, and state securities and commodities laws; and,
with respect to the issuance of interests of any Offshore Investment Company,
the securities laws of any jurisdiction in which interests of such company are
offered or sold.
"Seller Declaration" has the meaning set forth in Section
4.26(a).
"Seller Trust" has the meaning set forth in the first paragraph
of this Agreement.
"Seller Trustees" shall mean the managing trustees from time to
time under the Seller Trust.
"Straddle Quarter" has the meaning set forth in Section 2.1(c).
"Stand-Alone Balance Sheets" has the meaning set forth in Section
9.4(a).
"Subsidiary" has the meaning set forth in Regulation S-X
promulgated under the Securities Act.
"Surviving Corporation" has the meaning set forth in Section 2.2.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
gross receipts, capital, sales, use, gains, ad valorem, value added, transfer,
franchise, profits, inventory, goods and services, capital stock, license,
withholding, payroll, employment, social security, unemployment, disability,
excise, severance, stamp, documentary stamp, occupation, property, mortgage
recording and estimated taxes, together with any interest, penalties, or
additions thereto imposed by any governmental taxing authority (domestic or
foreign).
"Tax Indemnity Agreement" shall mean the Amended and Restated Tax
Indemnity Agreement dated November 3, 1997 among Opgroup, CIBC and PIMCO
Advisors.
"Tax Payment Account" shall have the meaning set forth in the
CIBC Agreement.
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"Tax Return" shall mean any return, report, information
statement, schedule or other document (including any related or supporting
information) with respect to Taxes required to be provided to any Governmental
Authority, and any amendments thereof.
"Taxable Year" shall mean, with respect to any Tax of any
taxpayer, the period, for applicable federal, state, local or foreign Tax
purposes, for which such Tax is computed.
"Transition Agreement" shall mean that certain Transition
Agreement dated as of July 22, 1997 between CIBC, Opco and PIMCO Advisors.
"Trusts" shall mean the Indemnity Trust and the Seller Trust.
"Trustees" shall mean the Indemnity Trustees and the Seller
Trustees.
"Unconsolidated Subsidiaries" with respect to any Person, shall
mean any other Person which is (i) a controlled Affiliate of such Person and
(ii) which is not included in the affiliated group of which such Person is a
member within the meaning of Section 1504(a) of the Code.
"Value Advisors" shall mean the newly-formed limited liability
company referred to in Annex A.
"Value Advisors Business" shall mean the business of sponsoring,
managing and advising for compensation the Value Advisors Funds.
"Value Advisors Funds" shall mean the funds set forth on Schedule
1.1(a).
ARTICLE II.
THE REDEMPTION AND MERGER
Section 2.1. The Redemption.
Immediately before the Effective Time, Opgroup shall redeem the
Redeemed Shares, pro rata from the Opgroup Shareholders according to the number
of shares of Class C Common Stock, $.01 par value, of Opgroup ("Opgroup Class C
Common Stock") and Class D Common Stock $.01 par value, of Opgroup ("Opgroup
Class D Common Stock") owned by each of them, paying in consideration for such
redemption the following amounts per share redeemed (the "Redemption"):
(a) To each Opgroup Shareholder, notes issued by Opgroup having
the form of Annex B hereto (the "OGI Notes"), in principal amount equal to the
quotient of (i) $150 million divided by (ii) the number of Redeemed Shares,
subject to adjustment as follows: If there is a decline in Opcap Run-Rate
Revenues from February 13, 1997 through the Closing Valuation Date of more than
10%, then the principal amount of OGI Notes for which each share of Opgroup
Common Stock shall be redeemed pursuant to this clause (a) shall be reduced by a
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percentage equal to 1.15 multiplied by the whole or fractional number of
percentage points of the decline in excess of 10%, up to a maximum reduction of
11.5%. For example, if there were a decline in Opcap Run-Rate Revenues between
such dates of 15%, then the principal amount of OGI Notes for which a share of
Opgroup Common Stock would be redeemed pursuant to this clause (a) would be
reduced by 5.75% (that is, 1.15(15% - 10%));
(b) To the Indemnity Trust, on behalf of each Opgroup
Shareholder, a pro rata portion of the Certificate of Long-Term Indemnity
Indebtedness in the form of Annex C hereto, in the face amount of $80 million;
and
(c) To the Seller Trust on behalf of each Opgroup Shareholder:
(i) If such share is not an Opco Share, an amount in cash
equal to (A) Available Cash divided by the number of Redeemed Shares plus (B) an
amount equal to (1) $30 million divided by (2) the number of Redeemed Shares
multiplied by 0.29219079.
(ii) If such share is an Opco Share, an amount in cash
equal to (A) Available Cash divided by the number of Redeemed Shares minus (B)
an amount equal to (1) $30 million divided by (2) the number of Redeemed Shares
multiplied by 0.70780921.
(iii) The right to receive a fraction equal to (x) one
divided by (y) the number of Redeemed Shares, of each of the following amounts
of cash, to the extent actually received by Opgroup, Opfin, PIMCO Advisors or
any of its Affiliates, not later than three Business Days after the date of
receipt:
(A) In the event that the Closing Date occurs after
the end of an Opcap fiscal quarter but before the distribution for such quarter
has been paid by Opcap, an amount in cash equal to the distribution in respect
of the Opcap Interest for such quarter.
(B) In the event that the Closing Date occurs after
the end of an Opcap LP fiscal quarter but before any distribution for such
quarter has been paid by Opcap LP, an amount in cash equal to the distribution
in respect of the Opcap LP Interest for such quarter. (C) With respect to any
fiscal quarter of Opcap or Opcap LP that begins before and ends after the
Closing Date (a "Straddle Quarter"):
(1) an amount in cash equal to the
distribution in respect of the Opcap Interest for such Straddle Quarter
multiplied by a fraction equal to (w) the Opcap Portion divided by (x) the net
income of Opcap allocated to the Opcap Interest for the Straddle Quarter. The
"Opcap Portion" is equal to the sum of the net income of Opcap allocated to the
Opcap Interest for each full month in the Straddle Quarter prior to the Closing
Date plus a pro rata portion of the net income of Opcap allocated to the Opcap
Interest for the month in which the Closing Date occurs, based on the ratio of
(y) the number of days in such month elapsed prior to the Closing Date to (z)
the total number of days in such month.
(2) an amount equal to the distribution in
respect of the Opcap LP Interest for such Straddle Quarter multiplied by a
fraction equal to (w) the Opcap LP
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Portion divided by (x) the net income of Opcap LP allocated to the Opcap LP
Interest for the Straddle Quarter. The "Opcap LP Portion" is equal to the sum of
the net income of Opcap LP allocated to the Opcap LP Interest for each full
month in the Straddle Quarter prior to the Closing Date plus a pro rata portion
of the net income of Opcap allocated to the Opcap LP Interest for the month in
which the Closing Date occurs, based on the ratio of (y) the number of days in
such month elapsed prior to the Closing Date to (z) the total number of days in
such month.
(iv) The right to receive a fraction of (x) one divided by
(y) the number of Redeemed Shares of the Buyer Adjustment Payment, if any, any
amounts released from the Tax Payment Account and the Holdback Amount, and a
call on the stock of the Excluded Affiliates.
Section 2.2. The Merger.
At the Effective Time, PATM shall be merged with and into Opgroup
in accordance with this Agreement and the separate corporate existence of PATM
shall thereupon cease, and Opgroup shall be the surviving entity of the Merger
(the "Surviving Corporation") in accordance with Section 18-209 of the Delaware
Limited Liability Company Act ("DLLCA") and Section 264 of the Delaware General
Corporation Law (the "DGCL") (the "Merger"). The Surviving Corporation shall
cause to be filed at the Effective Time a Certificate of Merger in the form
attached as Annex D. The certificate of incorporation of the Surviving
Corporation shall be amended and restated in the form of the Amended and
Restated Certificate of Incorporation of Oppenheimer Group, Inc. attached as
Annex E.
Section 2.3. Consideration to Be Delivered in the Merger.
At the Effective Time:
(a) Each share of Opgroup Common Stock issued and outstanding
immediately prior to the Effective Time (after giving effect to the Redemption)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into a Proportionate Share of an aggregate of 2,119,608
Class A units of limited partner interest in PIMCO Advisors ("Class A Units").
(b) The certificates for such Class A Units shall bear the
following legend: "The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Securities Act").
Such securities may not be sold or transferred unless such sale or transfer is
(i) registered under the Securities Act or (ii) exempt from registration under
the Securities Act and the Partnership is presented with an opinion of counsel,
reasonably satisfactory in form and substance to the Partnership, that an
exemption from registration under the Securities Act is available."
(c) The member interests in PATM shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into one
hundred shares of common stock of the Surviving Corporation.
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(d) PIMCO Advisors agrees to cooperate with the Opgroup
Shareholders in connection with any reissuance of such Class A Units to the
beneficial owners of the entities which are Opgroup Shareholders and to cause
the Surviving Corporation to cooperate in any such reissuances with respect to
the OGI Notes.
Section 2.4. Effect of Merger on Opgroup Shareholders.
At the Effective Time, all shares of Opgroup Common Stock shall
cease to be outstanding and shall be canceled and retired and cease to exist,
and each holder of shares of Opgroup Common Stock shall thereafter cease to have
any rights with respect to such shares, except the right to receive the
securities, cash and rights to receive cash described in this Article II upon
surrender to the Surviving Corporation of a certificate which represented shares
of Opgroup Common Stock immediately prior to the Effective Time.
Section 2.5. No Fractional Shares.
No fractional Class A Units shall be issued pursuant to this
Article II. In lieu of the issuance of any fractional Class A Unit (i) any
Person who, but for this Section 2.5, would have been entitled to receive a
fractional Class A Unit representing one-half or more of a Class A Unit, shall
receive instead one whole Class A Unit, and (ii) any Person who, but for this
Section 2.5, would have been entitled to receive a fractional Class A Unit
representing less than one-half of a Class A Unit, shall receive nothing in lieu
of such fractional share.
Section 2.6. Tax Characterization of the Merger.
The parties hereto intend that the Merger shall be treated for
income tax purposes as an exchange, by each holder of Opgroup Common Stock
issued and outstanding immediately prior to the Effective Time (after giving
effect to the Redemption) with PIMCO Advisors, of such Opgroup Common Stock for
Class A Units which qualifies for tax-free exchange treatment under Section 721
of the Code (and under applicable similar provisions of state and local law).
ARTICLE III.
CLOSING
Section 3.1. Closing.
Subject to the terms and conditions of this Agreement, the
closing of the transactions provided for in this Agreement (the "Closing") shall
be at 10:00 A.M. New York City Time at the offices of Weil, Gotshal & Manges
LLP, 767 Fifth Avenue, New York, New York 10153 (or at such other location as
may be agreed by PIMCO Advisors and Opgroup) on November 4, 1997 (the "Closing
Date").
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF OPGROUP
AND THE TRUSTS
REPRESENTATIONS AND WARRANTIES OF OPGROUP
Opgroup represents and warrants to PIMCO Advisors and PATM at
February 13, 1997 and at the Closing Date, as follows:
Section 4.1. Organization and Related Matters.
Each of Opgroup and the Opgroup Subsidiaries that is a
corporation or a limited partnership is validly existing and in good standing
under the laws of the jurisdiction of its organization. Each of the Opgroup
Subsidiaries that is a general partnership is validly existing under the laws of
the jurisdiction of its organization. Each of Opgroup and the Opgroup
Subsidiaries has the corporate or partnership, as applicable, power and
authority to carry on its business as it is now being conducted and to own,
lease and operate all of its properties and assets, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such qualification or licensing
necessary. Copies of the certificate of incorporation, by-laws or partnership
agreement of Opgroup and the Opgroup Subsidiaries, as applicable, heretofore
delivered to PIMCO Advisors, are complete and correct copies of such instruments
as currently in effect.
Section 4.2. Authority: No Violation.
(a) Opgroup and Opfin have full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Except as set forth on Schedule 4.2(a), the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by all requisite corporate action,
and no other corporate or partnership proceedings on the part of Opgroup, any
Opgroup Subsidiary or any of their shareholders or interest holders, as
applicable, is necessary to approve this Agreement and to authorize and
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Opgroup and Opfin, and (assuming the due
authorization, execution and delivery of this Agreement by PIMCO Advisors and
PATM) constitutes a valid and binding obligation of Opgroup and Opfin,
enforceable against Opgroup and Opfin in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency, moratorium and
similar laws affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by
Opgroup or Opfin, nor the consummation by Opgroup and the Opgroup Subsidiaries
of the transactions contemplated hereby or the Opgroup Restructuring, nor
compliance by Opgroup or Opfin with any of the terms or provisions hereof, will
(i) violate any provision of the articles of
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incorporation or bylaws or, as applicable, partnership agreement, of Opgroup or
any of the Opgroup Subsidiaries or (ii) except as set forth in Schedule 4.2(b),
and assuming the accuracy of Section 4.23 and compliance with Section 9.5, (x)
violate any Applicable Law or (y) violate, conflict with, result in a breach of
any provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
material Encumbrance upon, any of Opgroup's, Opfin's or any Opgroup Subsidiary's
properties or assets, or any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Opgroup or
any Opgroup Subsidiary, is a party, or by which any of their respective
properties or assets may be bound.
Section 4.3. Consents and Approvals.
As of the Closing Date, except for such consents, approvals and
notices as are set forth in Schedule 4.3, no consents or approvals of or filings
or registrations with any Governmental Authority or third party are necessary in
connection with (A) the execution and delivery by Opgroup and Opfin of this
Agreement and (B) the consummation by Opgroup and the Opgroup Subsidiaries of
the transactions contemplated by this Agreement.
Section 4.4. Regulatory Documents.
(a) Since April 30, 1993, Opgroup, the Opgroup Subsidiaries and
the Identified Funds (other than the SBAM Funds) and, to the Knowledge of
Opgroup, the SBAM Funds, have filed all Regulatory Documents, together with any
amendments required to be made with respect thereto, that were required to be
filed by them with any Governmental Authority, including the SEC, with respect
to the Money Management Business.
(b) As of their respective dates, the Regulatory Documents filed
with respect to the Money Management Business, including those with respect to
the Identified Funds (other than the SBAM Funds) and, to Opgroup's Knowledge,
the Regulatory Documents filed with respect to the SBAM Funds, complied in all
material respects with the requirements of the Securities Laws, and the rules
and regulations of the SEC promulgated thereunder applicable to such Regulatory
Documents, and none of such Regulatory Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Where legally required to maintain such Regulatory Documents
current, none of such Regulatory Documents contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 4.5. Capitalization.
(a) At the Closing Date, and immediately prior to the Redemption,
the authorized capital stock of Opgroup will consist of (i) 500,000 shares of
Class A Common Stock,
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of which 65,800 shares will be issued and outstanding and owned of record and
beneficially by Opco LP, (ii) 500,000 shares of Class B Common Stock, of which
61,880 shares will be issued and outstanding and owned of record and, to
Opgroup's Knowledge, beneficially by Opco LP and the other stockholders listed
on Schedule 4.5(a) in the respective amounts set forth opposite their names,
(iii) 500,000 shares of Class C Common Stock, of which 404,200 will be issued
and outstanding and owned of record and beneficially by Opco LP, (iv) 500,000
shares of Class D Common Stock, of which 380,120 will be issued and outstanding
and owned of record and, to Opgroup's Knowledge, beneficially by Opco LP and the
other stockholders listed on Schedule 4.5(a) in the respective amounts set forth
opposite their names, and (v) 10,000 shares of preferred stock, par value $.01
per share, none of which will be issued and outstanding. All of the outstanding
shares of Opgroup Common Stock (x) will be duly and validly authorized and
issued, fully paid and nonassessable and (y) will not have been issued in
violation of any preemptive right. Following the Redemption, no shares of
Opgroup Class C Common Stock or Opgroup Class D Common Stock will be issued or
outstanding. Except as set forth in Schedule 4.5(a) there are no outstanding
options, warrants, calls, rights, commitments or agreements of any kind to which
Opgroup is party or by which it is bound obligating it to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of any class or series of, or other equity interests in, Opgroup, or any
securities convertible or exchangeable into or evidencing the right to purchase
any shares of capital stock of any class or series of, or other equity interests
in, Opgroup, or obligating Opgroup to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. There are no outstanding
contractual obligations of Opgroup to repurchase, redeem or otherwise acquire
any shares of capital stock of Opgroup. There are no outstanding bonds,
debentures, notes or other securities or instruments of Opgroup (other than the
Opgroup Common Stock) having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matter on which
stockholders of Opgroup may vote.
(b) At the Closing Date, all of the member interests in Value
Advisors will be owned legally and beneficially owned by Opfin. All of such
member interests will be duly and validly authorized and issued, fully paid and
nonassessable and will not have been issued in violation of any preemptive
right.
(c) Omitted.
(d) Schedule 4.5(d) sets forth the equity ownership of each
Opgroup Subsidiary and of each other Person in which Opgroup directly or
indirectly owns any equity interest (other than Holdings and its direct and
indirect subsidiaries). Except as set forth in Schedule 4.5(d), (i) 100% of the
equity interests in each Opgroup Subsidiary is, and will at the Closing be,
owned directly or indirectly by Opgroup, in each case free and clear of any
Encumbrances (other than statutory liens for Taxes not yet due and restrictions
on transferability under the Securities Laws) and (ii) there are no outstanding
options, warrants, calls, rights, commitments or agreements of any kind to which
any Opgroup Subsidiary is party or by which any of them is bound obligating it
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of any class or series of, or other equity interests
in, any Opgroup Subsidiary, or any securities convertible or exchangeable into
or evidencing the right to purchase any shares of capital stock of any class or
series of, or other equity interests in,
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any Opgroup Subsidiary, or obligating any Opgroup Subsidiary to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement. There
are no outstanding contractual obligations of any Opgroup Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of any
Opgroup Subsidiary.
(e) Upon effectiveness of the amendment and restatement of the
Opgroup certificate of incorporation pursuant to Section 2.2, (i) the common
stock to be issued in the Merger will be duly authorized for issuance and, upon
issuance in the manner and for the consideration set forth in this Agreement,
will be validly issued, fully paid and non-assessable and will not be issued in
violation of any preemptive rights and (ii) common stock to be issued in the
Merger will, when issued, be free and clear of all Encumbrances (other than
restrictions on transferability under the Securities Laws).
Section 4.6. Financial Statements.
(a) Opgroup has previously delivered to PIMCO Advisors copies of
(a) the audited consolidated balance sheets of Opcap LP and Opcap as of and for
the fiscal years ended April 30, 1994, 1995 and 1996 (collectively, the "Opcap
Balance Sheets") and the related audited statements of income, changes in
stockholders' equity and cash flows, in each case accompanied by the audit
report of Price Waterhouse LLP, independent public accountants with respect to
each such entity, and (b) the unaudited consolidated interim balance sheets and
related statements of income, changes in stockholders' equity and cash flows of
both such entities at or for the periods ended July 31, 1996 and October 31,
1996. Each of the balance sheets referred to in the previous sentence (including
the related notes, where applicable) present fairly, in all material respects,
the financial position of each of Opcap LP and Opcap as of the dates thereof,
and the other financial statements referred to in the preceding sentence present
fairly (subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount) the results of each of Opcap LP's and
Opcap's operations and their respective cash flows for the respective periods
therein set forth. Each of such financial statements (including the related
notes, where applicable) has been prepared in accordance with GAAP consistently
applied during the periods involved and are consistent with the books and
records of the entity presented.
(b) Opgroup has previously delivered to PIMCO Advisors copies of
the unaudited balance sheets of Advantage Advisers as of and for the fiscal
years ended April 30, 1994, 1995 and 1996 and unaudited balance sheets as of and
for the periods ended July 31, 1996 and October 31, 1996 (collectively, the
"Advantage Advisers Balance Sheets") and the related unaudited statements of
income. Each of the Advantage Advisers Balance Sheets (including the related
notes, where applicable) present fairly, in all material respects, the financial
position of Advantage Advisers as of the dates thereof, and the other financial
statements referred to in the preceding sentence present fairly (subject to
recurring audit adjustments normal in nature and amount) the results of
Advantage Advisers' operations for the respective periods therein set forth.
Each of such financial statements (including the related notes, where
applicable) has been prepared in accordance with GAAP consistently applied
during the periods involved and are consistent with the books and records of
Advantage Advisers.
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Section 4.7. Ineligible Persons.
Neither Opgroup nor any "affiliated person" (as defined in the
Investment Company Act) thereof is ineligible pursuant to Section 9(a) or 9(b)
of the Investment Company Act to serve as an investment adviser (or in any other
capacity contemplated by the Investment Company Act) to a registered investment
company. Neither Opgroup nor any "associated person" (as defined in the Advisers
Act) thereof is ineligible pursuant to Section 203 of the Advisers Act to serve
as an investment adviser or as an associated person to a registered investment
adviser. Neither Opgroup nor any "associated person" (as defined in the Exchange
Act) thereof is ineligible pursuant to Section 15(b) of the Exchange Act to
serve as a broker-dealer or as an associated person to a registered
broker-dealer.
Section 4.8. Material Contracts.
PIMCO Advisors has been provided true and correct copies of each
of the following agreements as currently in effect, including all amendments and
modifications thereto, to which Opgroup or any Opgroup Subsidiary will be a
party at the Closing Date or by which any of them will be, or their assets will
be, bound at the Closing Date and after giving effect to the Opgroup
Restructuring: (a) any lease (whether of real or personal property) providing
for annual rentals of $250,000 or more; (b) any agreement for the purchase of
materials, supplies, goods, services, equipment or other assets providing for
annual payments of $250,000 or more; (c) any sales, distribution or similar
agreement providing for the sale by Opgroup or any Opgroup Subsidiary of
materials, supplies, goods, services, equipment or other assets providing for
annual payments of $250,000 or more (except for agreements made in the ordinary
course of business and involving investment banking, brokerage, or investment
management services); (d) any joint venture or strategic alliance agreement
providing for annual payments of $250,000 or more or involving an investment by
Opgroup or any Opgroup Subsidiary of $750,000 or more; (e) any agreement
relating to the disposition or sale of any business (whether by merger, sale of
stock, sale of assets or otherwise); (f) any agreement relating to indebtedness
or the deferred purchase price of property involving an aggregate principal
amount of $250,000 or more; (g) any license, franchise or similar agreement
providing for annual payments of $250,000 or more; (h) any agency, dealer, sales
representative, marketing or other similar agreement, providing for annual
payments of $250,000 or more, (i) any severance or similar arrangement in
respect of any personnel of Opgroup and any Opgroup Subsidiary that will result
in any obligation (whether absolute or contingent) of Opgroup, any Opgroup
Subsidiary or any other Person to make any payment to such personnel following
termination of employment or consummation of the transactions contemplated by
this Agreement; (j) any contract or agreement in which rights (including rights
to receive cash or other consideration) are granted, made exercisable or
accelerated due to the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby; and (k) any other
agreement which involves annual payments in excess of $250,000 or is not
terminable without penalty by Opgroup or any Opgroup Subsidiary within six
months (each such contract, an "Opgroup Material Contract") and a complete and
correct list of all such Opgroup Material Contracts is set forth in Schedule
4.8. To Opgroup's Knowledge, (i) each Opgroup Material Contract is in full force
and effect, and (ii) no
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event has occurred which would (with or without the passage of time, notice or
both) constitute a breach or default of any material obligations of any party to
such Opgroup Material Contract.
Section 4.9. Legal Proceedings.
Except as set forth on Schedule 4.9, there are no legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature that are pending or, to Opgroup's
Knowledge, have been threatened against Opgroup or any Opgroup Subsidiary with
respect to the Money Management Business or any of their respective properties
or assets or that challenge the validity or propriety of the transactions
contemplated by this Agreement.
Section 4.10. Permits and Applicable Law.
(a) Except as disclosed in Schedule 4.10(a), as of the Closing
Date, Opgroup and the Opgroup Subsidiaries will hold all Permits that are
required to conduct the Money Management Business as it is currently being
conducted. As of such date, all Permits shall be valid and in good standing and
shall not be the subject of any suspension, modification or revocation or
proceedings related thereto.
(b) Except as disclosed in Schedule 4.10(b), since April 30, 1993
and except for normal examinations conducted by any Governmental Authority in
the regular course of the Money Management Business, no Governmental Authority
has initiated any administrative proceeding or, to Opgroup's Knowledge,
investigation into the Money Management Business (including, without limitation,
the Identified Funds). A copy of all material correspondence with Governmental
Authorities with respect to the Money Management Business during the last year
has been made available to PIMCO Advisors.
(c) All proxy statements to be prepared for use by the Opgroup
Public Investment Company Clients in connection with the transactions
contemplated by this Agreement (other than any information provided or to be
provided by PIMCO Advisors relating to themselves and their Affiliates expressly
for use in the proxy statements) will not contain, at the times such proxy
statements are furnished to the shareholders, or at the time of the meetings
thereof, any untrue statement of a material fact, or omit to state any material
fact required to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Section 4.11. Insurance.
All of Opgroup's and the Opgroup Subsidiaries' material insurance
policies and bonds with respect to the Money Management Business are listed in
Schedule 4.11. To Opgroup's Knowledge, each such insurance policy or bond is in
full force and effect, and neither Opgroup nor any Opgroup Subsidiary has
received written notice or any other indication from any insurer or agent of any
proposed cancellation of any such insurance policy or bond.
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Section 4.12. Labor and Employment Matters.
Except as set forth in Schedule 4.12, (a) no collective
bargaining arrangement or agreement or similar arrangement or agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association, exists which is binding on Opgroup or any
Opgroup Subsidiary, (b) there are no unfair labor practice complaints pending
against Opgroup or any Opgroup Subsidiary before the National Labor Relations
Board and (c) there are no strikes, slowdowns, work stoppages, lockouts, or to
Opgroup's Knowledge threats thereof, by or with respect to any employees of
Opgroup or any Opgroup Subsidiary.
Section 4.13. Employee Benefit Plans, ERISA.
(a) For purposes of this Agreement "Opgroup Benefit Plan" means
all "employee benefit plans," as defined in Section 3(3) of ERISA, and any bonus
or other incentive compensation, profit sharing, compensation, termination,
stock option, stock appreciation right, restricted unit, restricted option,
performance unit, retirement, deferred compensation, employment, severance,
termination pay, retiree medical or retiree life insurance plan, agreement or
other arrangement in effect for the benefit of any current or former employee or
director of Opgroup or any Opgroup Subsidiary, and any trust or other funding
arrangement relating thereto. Schedule 4.13(a) contains a true and complete list
or description of all Opgroup Benefit Plans other than those to be terminated or
assumed by Holdings or Opco in the Opgroup Restructuring. With respect to each
Opgroup Benefit Plan listed on Schedule 4.13(a), there has been delivered or
made available to PIMCO Advisors copies of any: (i) plans and related trust
documents and amendments thereto; (ii) the most recent summary plan descriptions
and the most recent annual report (including Schedule B); (iii) all other
material employee communications; (iv) the most recent actuarial valuation; and
(v) the most recent determination letter received from the IRS.
(b) Except as set forth in Schedule 4.13(b), with respect to each
Opgroup Benefit Plan, (i) such plan is in compliance in all material respects
with all applicable laws, including ERISA and the Code; (ii) no condition exists
that is reasonably expected to subject Opgroup or any Opgroup Subsidiary to a
civil penalty under Section 502(i) of ERISA, liability under Section 4069 of
ERISA or Sections 4971 through 4980E of the Code, the loss of a federal tax
deduction under Section 404 of the Code, or any penalties or tax liability
arising from the loss of qualification under Section 401(a) of the Code that is
not reflected on the Opgroup Balance Sheets; (iii) each Opgroup Benefit Plan
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS with respect to such qualification, and its
related trust has been determined to be exempt from taxation under Section
501(a) of the Code; and, to Opgroup's Knowledge, nothing has occurred since the
date of such letter that would adversely affect such qualification or exemption;
(iv) there are no claims or legal actions or proceedings (other than routine
claims for benefits) pending or, to Opgroup's Knowledge, threatened, with
respect to any Opgroup Benefit Plan or against the assets of any Opgroup Benefit
Plan; (v) none of Opgroup or any Opgroup Subsidiary or Opco LP has engaged in,
or is a successor corporation to an entity that has engaged in, a transaction
described in Section 4069 of ERISA; and (vi) no event has occurred under
Sections 4041, 4043, 4062, 4063 and 4064 of ERISA during the current or any of
the preceding five plan years that could subject Opgroup, any Opgroup
Subsidiary, any Opgroup Benefit Plan to any liability. Any Opgroup
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Benefit Plan which constitutes a "multiemployer plan" as defined in Section
3(37) of ERISA would not subject PIMCO Advisors to any liability. All
contributions prescribed by law or required under the Opgroup Benefit Plans have
been made or accrued on the Opgroup Balance Sheets to the extent required by
GAAP.
Section 4.14. Intellectual Property.
Schedule 4.14 sets forth a complete and accurate list of all
trademark, service mark and copyright registrations, and patents and pending
applications therefor, in which Opgroup or any Opgroup Subsidiary has any right,
title or interest and which relate to the Money Management Business ("Opgroup
Intellectual Property"), the jurisdictions in which the Opgroup Intellectual
Property has been registered or patented or in which an application for such
registration or patent has been filed, and any licenses, sublicenses and other
agreements in which Opgroup or any Opgroup Subsidiary grants a license to any
other Person to use such Opgroup Intellectual Property. Except as set forth in
Schedule 4.14, no written notice has been received by Opgroup or its
Subsidiaries that the use by Opgroup or any of the Opgroup Subsidiaries of
Opgroup Intellectual Property in which they have any right, title or interest
infringes on any rights of any other Person nor, to Opgroup's Knowledge, has any
other Person infringed on a continuing basis any rights that Opgroup or any of
the Opgroup Subsidiaries have in the Opgroup Intellectual Property.
Section 4.15. Taxes.
(a) Each of Opgroup and the Opgroup Subsidiaries has duly and
timely filed (or there has been duly and timely filed on its behalf) with the
appropriate Governmental Authorities all Tax Returns in respect of Taxes
required to be filed through the date as of which this representation is made
(taking into account extensions). The information filed on behalf of Opgroup and
the Opgroup Subsidiaries was complete and correct in all material respects.
Except as set forth on Schedule 4.15(a), neither Opgroup nor any of the Opgroup
Subsidiaries has requested any extension of time within which to file Tax
Returns in respect of any Taxes, which Tax Returns have not been filed.
(b) All material Taxes of Opgroup and the Opgroup Subsidiaries
due to be paid on or prior to the Closing Date (taking into account extensions)
have been paid or will be paid prior to the Closing Date or an adequate reserve
has been (or, with respect to periods for which financial reports have not yet
been prepared, will be) established therefor in accordance with GAAP. Opgroup
and the Opgroup Subsidiaries do not have any liability for Taxes in excess of
such amounts so paid or reserves so established.
(c) Except as set forth on Schedule 4.15(c), no material
deficiencies for Taxes have been claimed, proposed or assessed by any
Governmental Authority against Opgroup or the Opgroup Subsidiaries for any
taxable year ended subsequent to December 31, 1990. Except as set forth on
Schedule 4.15(c), there are no pending or, to Opgroup's Knowledge, threatened
audits, investigations or claims for or relating to any material additional
liability in respect of Taxes against Opgroup or the Opgroup Subsidiaries, and
there are no matters under discussion with any Governmental Authorities with
respect to Taxes that in the reasonable judgment of
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Opgroup, the Opgroup Subsidiaries is likely to result in a material additional
liability for Taxes for any of such companies. Except as set forth on Schedule
4.15(c), none of Opgroup or the Opgroup Subsidiaries has been notified that any
Governmental Authority intends to audit a Tax Return for any other period.
Except as set forth on Schedule 4.15(c), no extension of a statute of
limitations relating to Taxes is in effect with respect to Opgroup or the
Opgroup Subsidiaries.
(d) There are no Encumbrances upon the assets of Opgroup or any
Opgroup Subsidiary for or arising from Taxes (except for statutory liens for
Taxes not yet due and payable).
(e) All material elections with respect to Taxes affecting
Opgroup and the Opgroup Subsidiaries as of February 13, 1997 are set forth on
Schedule 4.15(e). Opgroup shall notify PIMCO Advisors of new elections with
respect to Taxes, or changes in current elections with respect to Taxes,
affecting Opgroup or the Opgroup Subsidiaries that are made prior to the
Closing, and shall make no such election that would be adverse to PIMCO Advisors
without the prior written consent of PIMCO Advisors. None of Opgroup or the
Opgroup Subsidiaries (i) has made or will make a deemed dividend election under
Treasury Regulation Section 1.1502-32(f)(2) or a consent dividend election under
Section 565 of the Code; (ii) has consented at any time under Section 341 (f)(1)
of the Code to have the provisions of Section 341(f)(2) of the Code apply to any
disposition of any of Opgroup's or the Opgroup Subsidiaries' assets; (iii) has
agreed, or is required, to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise; (iv) has made an
election, or is required, to treat any asset of Opgroup or the Opgroup
Subsidiaries as owned by another Person pursuant to the provisions of former
Section 168(f)(8) of the Code or as "tax-exempt use property" within the meaning
of Section 168 of the Code; or (v) has made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
income Tax provision.
(f) All tax-sharing agreements or similar arrangements with
respect to or involving Opgroup and the Opgroup Subsidiaries are identified on
Schedule 4.15(f).
(g) Opgroup is not a U.S. real property holding corporation as
defined in Section 897 of the Code.
(h) Neither Opgroup nor any of the Opgroup Subsidiaries has made
or will, as a result of any event connected with the Merger, the CIBC
Transaction or any other transaction contemplated by this Agreement, make or
become obligated to make, any "excess parachute payment" as defined in Section
280G of the Code.
(i) Neither Opgroup nor any of the Opgroup Subsidiaries has
participated in or will participate in an international boycott within the
meaning of Section 999 of the Code.
Section 4.16. Investment Companies, Managed Account Clients,
Distributors, Etc.
(a) Schedule 4.16(a) sets forth a complete and accurate list of
(i) each Opgroup Public Investment Company Client, (ii) each Opgroup Private
Investment Company Client, (iii) each Opgroup Offshore Investment Company Client
and (iv) each Opgroup Managed Account Client, and indicates the Run-Rate
Revenues with respect to such clients as of
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October 31, 1996. Each Opgroup Public Investment Company Client sponsored by
Opgroup or its Affiliates is duly registered with the SEC as an investment
company under the Investment Company Act. Except as set forth in Schedule
4.16(a), no Opgroup Investment Company Client or Opgroup Managed Account Client
in respect of which any Opgroup Subsidiary has accrued asset management or
similar fees in excess of $100,000 during the twelve months ended October 31,
1996, has, between such date and February 13, 1997, to Opgroup's Knowledge,
indicated in writing any intent to terminate any Advisory Agreement with any of
the Opgroup Subsidiaries. Opgroup provides no investment advice for compensation
and is not a party to any contracts or agreements in which Opgroup agrees to act
as an investment advisor, subadvisor, manager or act in a similar capacity.
(b) True and correct copies of each Advisory Agreement pursuant
to which any of the Opgroup Subsidiaries acts as investment adviser to the
Opgroup Investment Company Clients have been made available to PIMCO Advisors.
Each such Advisory Agreement is in full force and effect with respect to the
Opgroup Investment Company Client and Opgroup and the Opgroup Subsidiaries which
are parties thereto.
(c) Shares of each Opgroup Public Investment Company Client
sponsored by any Opgroup Subsidiary have been duly registered under the
Securities Act and applicable state securities laws, and the related
registration statements were effective under the Securities Act and applicable
state securities laws at all times when such effectiveness was required and no
stop order suspending the effectiveness of any such registration statement has
been issued.
(d) No shares or other equity interests of any Opgroup Private
Investment Company Client sponsored by any Opgroup Subsidiary which have been
offered or sold have been registered or qualified, as the case may be under the
Securities Act or any other Securities Laws and no such registration or
qualification was or is required.
(e) Shares or other equity interests of each Opgroup Offshore
Investment Company Client sponsored by any Opgroup Subsidiary have been duly
registered, or qualified, as the case may be, to the extent required under
applicable Securities Laws.
(f) Each Opgroup Investment Company Client sponsored by an
Opgroup Subsidiary is duly organized and validly existing and in good standing
under the laws of the jurisdiction of its organization and has the requisite
corporate power and authority to own all its properties and assets and to carry
on its business as it is now being conducted.
(g) True and correct copies of each agreement pursuant to which
any of the Opgroup Subsidiaries provides distribution services to any Opgroup
Investment Company Client ("Opgroup Distribution Contract") have been made
available to PIMCO Advisors. Schedule 4.16(g) sets forth a list of each such
Opgroup Distribution Contract. Each Opgroup Distribution Contract is in full
force and effect with respect to the Opgroup Subsidiaries which are parties
thereto.
(h) Each Identified Fund (other than the SBAM Funds) and, to the
Knowledge of Opgroup, each SBAM Fund, is in compliance in all material respects
with all applicable
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federal and state securities laws. Each Opgroup Public Investment Company Client
is in compliance in all material respects with applicable investment policies
and restrictions. Each Opgroup Public Investment Company Client has been managed
in a manner consistent with the qualification of such Opgroup Public Investment
Company Client's as a "regulated investment company" under Subchapter M of the
Code.
Section 4.17. No Material Adverse Effect.
From October 31, 1996 through the Closing Date, except as
otherwise disclosed in writing to PIMCO Advisors with specific reference to this
Section 4.17, to Opgroup's Knowledge, there has occurred no event which could
reasonably be expected to have an Opgroup Material Adverse Effect.
Section 4.18. Bringdown.
(a) From October 31, 1996 through the Closing Date, to Opgroup's
Knowledge, except as expressly contemplated or permitted by this Agreement or
with the prior written consent of PIMCO Advisors, Opgroup and the Opgroup
Subsidiaries has (1) carried on the Money Management Business in the ordinary
course; (2) used commercially reasonable efforts to preserve their present
business organization and relationships with respect to the Money Management
Business; (3) used commercially reasonable efforts to keep available the present
services of their employees related to the Money Management Business (which
efforts need not include materially increasing such employee's compensation
except with respect to restricted unit rights as may be agreed by the parties);
and (4) used commercially reasonable efforts to preserve their rights,
franchises, goodwill and relations with clients and others with whom they
conduct the Money Management Business. Without limiting the generality of the
foregoing, except as expressly contemplated or permitted by this Agreement and
Annex A or with the prior written consent of PIMCO Advisors, Opgroup and the
Opgroup Subsidiaries have not:
(i) created, renewed, amended, terminated or canceled, or
taken any other action that may result in the creation, renewal, amendment,
termination or cancellation of, any Opgroup Material Contract except in the
ordinary course of business;
(ii) adopted, amended, renewed or terminated any Opgroup
Benefit Plan or any other employee program, agreement, arrangement or policy
between Opgroup, any Opgroup Subsidiary and one or more of their employees,
other than in the ordinary course of business;
(iii) committed any act or omission which constitutes a
breach or default under any contract or license to which it is a party or by
which it or any of its properties is bound the effect of which could reasonably
be expected to cause an Opgroup Material Adverse Effect;
(iv) waived any right or modified or amended any
commitment other than in the ordinary course of business, or incurred any
material obligation;
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(v) incurred, assumed, or guaranteed any indebtedness or
liability for or in respect of borrowed money;
(vi) made any material change to the total compensation of
any employee of Opgroup or the Opgroup Subsidiaries;
(vii) declared or paid any dividends or made any other
distribution in cash or property in respect of its capital stock or partnership
interests, other than normal and customary dividends or distributions (including
special dividends or distributions customarily paid from time to time);
(viii) voluntarily divested itself of the management of
any mutual fund or other assets currently under management;
(ix) acquired or agreed to acquire in any manner,
including by way of merger, consolidation, purchase of an equity interest or
assets, any business or any corporation, partnership, association or other
business organization or division thereof;
(x) entered into any joint venture or partnership except
as set forth on Schedule 4.23(a);
(xi) created or permitted the creation or attachment of
any Encumbrances except in the ordinary course of business;
(xii) sold, assigned, conveyed or transferred any assets
other than in the ordinary course and for fair value, provided, however, that no
consent shall be required for such sales, assignments, conveyances or transfers
in the ordinary course for fair value and not in excess of $5 million in the
aggregate, or for ordinary course investment activity involving assets under
management;
(xiii) entered into any new line of business; or
(xiv) assumed or otherwise become liable for any
obligation, indebtedness, commitment or other liability of any direct or
indirect Subsidiary of Equities or any entity in which Equities has a direct or
indirect interest.
(b) From July 22, 1997 through the Closing Date, Opgroup has used
commercially reasonable efforts, and has caused the Opgroup Subsidiaries to use
commercially reasonable efforts, to maintain in effect until the Closing Date
all material casualty and public liability policies maintained by Opgroup and
the Opgroup Subsidiaries on the February 13, 1997 relating to the Opgroup
Business, or has procured comparable replacement policies (to the extent
commercially reasonable) and maintained such replacement policies in effect
through the Closing Date.
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(c) Each of Holdings, Opco and Advantage Advisers did, prior to
the closing of the CIBC Transaction, adopt and have in effect a plan of
liquidation pursuant to Section 332 of the Code.
Section 4.19. Brokers.
Other than Goldman Sachs & Co., no broker, finder or similar
intermediary has acted for or on behalf of, or is entitled to any broker's,
finder's or similar fee or other commission from, Opgroup or its Affiliates.
Opgroup has paid, or caused to be paid, any broker's, finder's or similar fee or
other commission owed by Opgroup or any Opgroup Subsidiary in connection with
this Agreement or the Merger, including but not limited to that, owed to
Goldman, Sachs & Co.
Section 4.20. Additional Fund Representations.
(a) To the Knowledge of Opgroup, there is no beneficial owner
(within the meaning of the Exchange Act) of 5% of the outstanding voting
securities of any closed-end Identified Fund.
(b) To the Knowledge of Opgroup, no action has been taken, or is
pending or proposed, to convert any closed-end Identified Fund into an open-end
investment company.
Section 4.21. Regarding Equities.
The sole business and operations of Equities has from its
inception been (i) as a holding company, owning 100% of the stock of Holdings,
(ii) as obligor under the Opgroup Equities Note and (iii) as obligee under a
note from Opgroup in the principal amount of $69.7 million.
Section 4.22. Non-Investment Company Advisory Agreement Consents.
Opgroup and the Opgroup Subsidiaries have informed their
respective investment advisory clients (other than the Opgroup Public Investment
Company Clients) of the transactions contemplated by this Agreement. Opgroup has
caused the Opgroup Subsidiaries, in compliance with the Advisers Act, to request
written consent of each such client to the assignment to PIMCO Advisors or its
Affiliate of its Advisory Agreement and used commercially reasonable efforts to
obtain such consent, or in the case of agreements which prohibit assignment or
state by their terms that they terminate upon assignment, used commercially
reasonable efforts to enter into new agreements with PIMCO Advisors or its
Affiliate effective upon Closing. For purposes of this representation, except in
the case of such Advisory Agreements which prohibit assignment or state by their
terms that they terminate upon assignment or which, by their terms, require
written consent of the client, Opgroup and the Opgroup Subsidiaries may have
obtained consent by requesting written consent and informing such client: (i) of
Opgroup's intention to assign such Advisory Agreement to PIMCO Advisors; (ii) of
PIMCO Advisors' intention to continue the advisory services, pursuant to the
existing Advisory Agreement with such client after the Closing if such client
does not terminate such agreement prior to the Closing; and (iii) that the
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consent of such client will be implied if such client continues to accept such
advisory services for at least 30 days after receipt of such notice without
termination.
Section 4.23. Section 15 of the Investment Company Act--Opgroup and
Opfin.
(a) Opgroup and Opfin have obtained the approval of the Board of
Directors or trustees, as applicable, and shareholders of each Opgroup Public
Investment Company Client, pursuant to the provisions of Section 15 of the
Investment Company Act, of a new Advisory Agreement with PIMCO Advisors or its
Affiliate or of the assignment of its respective Advisory Agreement, as
applicable.
(b) Opgroup and Opfin have taken such actions as necessary to
satisfy or obtain exemption from the conditions set forth in Section 15(f) of
the Investment Company Act with respect to each Opgroup Public Investment
Company Client, including the receipt of exemptive relief from the SEC with
respect to the status of the directors of each Opgroup Public Investment Company
Client as "interested persons" of the entities referred to in Section
15(f)(1)(A), with respect to the transactions contemplated by this Agreement.
REPRESENTATIONS AND WARRANTIES OF THE INDEMNITY TRUST
The Indemnity Trust represents and warrants to PIMCO Advisors at
July 22, 1997 and at the Closing Date, as follows:
Section 4.24. Organization and Related Matters.
The Indemnity Trust is properly formed, validly existing and in
good standing under the laws of the jurisdiction of its formation, and has not
been established, revoked, modified, or amended in any manner which would cause
the representations and warranties contained herein to be incorrect or to cause
this Agreement to be unenforceable against it.
Section 4.25. Authority, No Violation.
(a) Each Indemnity Trustee has accepted appointment as "Managing
Trustee" under the Declaration of Trust of the Indemnity Trust, as amended (the
"Indemnity Declaration"), by the terms of such trust is qualified and possesses
the necessary trust powers to act, and does act as managing trustee pursuant to
the Indemnity Declaration. The Indemnity Trustees possess the full power and
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby, and in doing so are properly acting in exercising their
powers under the Indemnity Declaration such that this Agreement (assuming the
due authorization, execution and delivery of this Agreement by each other party
hereto) constitutes a valid and binding obligation of the Indemnity Trust,
enforceable against such trust in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency, moratorium and
similar laws affecting creditors' rights and remedies generally.
(b) The Indemnity Trustees constitute all of the currently acting
managing trustees of the Indemnity Trust. The signature authority of the
Indemnity Trustees is all that is
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required for the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby; and no other signature, or other
proceedings on the part of the Indemnity Trust, or any of its beneficiaries is
necessary to approve this Agreement and to authorize the performance of the
terms hereof.
(c) Neither the execution and delivery of this Agreement by the
Indemnity Trustees, nor the performance of the terms and conditions hereof by
the Indemnity Trustees, will (i) violate any provision of the Indemnity
Declaration, or (ii) (A) violate any federal, state or local statue, law,
ordinance, rule, administrative interpretation, regulation, order, writ,
injunction, directive, judgment, decree, policy, guideline or other requirement
applicable to the Indemnity Trust or the Indemnity Trustees or (B) violate,
conflict with, result in a breach of any provision of or the loss of any benefit
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any material Encumbrance upon, any of the properties
or assets of the Indemnity Trust, as applicable, or any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which such trust or a Indemnity Trustee is a party, or by which
any of their respective properties or assets may be bound.
Section 4.26. Consents and Approvals.
No consents or approvals of or filings or registrations with any
Governmental Authority or third party are necessary in connection with (i) the
execution and delivery by the Indemnity Trustees, on behalf of the Indemnity
Trust, of this Agreement and (ii) the performance by the Indemnity Trustees, on
behalf of the Indemnity Trust, of the terms and provisions of this Agreement.
REPRESENTATIONS AND WARRANTIES OF THE SELLER TRUST
The Seller Trust represents and warrants to PIMCO Advisors at
July 22, 1997 and at the Closing Date, as follows:
Section 4.27. Organization and Related Matters.
The Seller Trust is properly formed, validly existing and in good
standing under the laws of the jurisdiction of its formation, and has not been
established, revoked, modified, or amended in any manner which would cause the
representations and warranties contained herein to be incorrect or to cause this
Agreement to be unenforceable against it.
Section 4.28. Authority; No Violation.
(a) Each Seller Trustee has accepted appointment as "Managing
Trustee" under the Declaration of Trust of the Seller Trust, as amended (the
"Seller Declaration"), by the terms of such trust is qualified and possesses the
necessary trust powers to act, and does act as managing trustee pursuant to the
Seller Declaration. The Seller Trustees possess the full power and authority to
execute and deliver this Agreement and consummate the transactions contemplated
hereby, and in doing so are properly acting in exercising their powers under the
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Seller Declaration such that this Agreement (assuming the due authorization,
execution and delivery of this Agreement by each other party hereto) constitutes
a valid and binding obligation of the Seller Trust, enforceable against such
trust in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights and remedies generally.
(b) The Seller Trustees constitute all of the currently acting
managing trustees of the Seller Trust. The signature authority of the Seller
Trustees is all that is required for the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby; and no
other signature, or other proceedings on the part of the Seller Trust, or any of
its beneficiaries is necessary to approve this Agreement and to authorize the
performance of the terms hereof.
(c) Neither the execution and delivery of this Agreement by the
Seller Trustees, nor the performance of the terms and conditions hereof by the
Seller Trustees, will (i) violate any provision of the Seller Declaration, or
(ii) (A) violate any federal, state or local statue, law, ordinance, rule,
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree, policy, guideline or other requirement applicable to the
Seller Trust or the Seller Trustees or (B) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any material Encumbrance upon, any of the properties
or assets of the Seller Trust, as applicable, or any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which such trust or a Seller Trustee is a party, or by which any
of their respective properties or assets may be bound.
Section 4.29. Consents and Approvals.
No consents or approvals of or filings or registrations with any
Governmental Authority or third party are necessary in connection with (i) the
execution and delivery by the Seller Trustees, on behalf of the Seller Trust, of
this Agreement and (ii) the performance by the Seller Trustees, on behalf of the
Seller Trust, of the terms and provisions of this Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PATM
PATM represents and warrants to each of Opgroup and Opfin at the
Closing Date as follows:
Section 5.1. Organization and Related Matters.
PATM is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. PATM has
the limited liability company power
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and authority to carry on its business as it is proposed to be conducted and to
own, lease and operate all of the properties and assets proposed to be owned,
leased and operated by it, and will be duly licensed or qualified to do business
in each jurisdiction in which the nature of the business proposed to be
conducted by it or the character or location of the properties and assets
proposed to be owned, leased or operated by it makes such qualification or
licensing necessary. The copies of the organizational documents of PATM
heretofore delivered to Opgroup are complete and correct copies of such
instruments as currently in effect.
Section 5.2. Authority; No Violation.
(a) PATM has full limited liability company power and authority
to execute and deliver this Agreement and take all actions necessary or
appropriate to be taken by it to consummate the transactions contemplated
hereby. Except as set forth on Schedule 5.2(a), the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by all requisite limited liability company action
on the part of PATM and its members, and no other limited liability company
proceedings on the part of PATM are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by PATM and (assuming the due authorization,
execution and delivery of this Agreement by Opgroup and Opfin) constitutes a
valid and binding obligation of PATM, enforceable against it in accordance with
its terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights and remedies
generally.
(b) Neither the execution and delivery of this Agreement by PATM,
nor the consummation of the Merger, nor compliance by PATM with any of the other
terms or provisions hereof, will (i) violate any provision of the limited
liability company agreement of PATM or (ii) except as set forth in Schedule
5.2(b), and assuming the accuracy of Section 4.23 and compliance with Section
9.5, (x) violate any Applicable Law, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any material Encumbrance upon any assets of PATM or
any note, bond, mortgage, indenture, deed of trust, license, lease agreement or
other instrument or obligation to which PATM is a party, or by which PATM or any
of its respective properties or assets may be bound.
Section 5.3. Consents and Approvals.
As of the Closing Date, except for consents, approvals and
notices as are set forth in Schedule 5.3, no consents or approvals of or filings
or registrations with any Governmental Authority or any third party are
necessary in connection with (w) the execution and delivery by PATM of this
Agreement and (x) the consummation by PATM of the transactions contemplated
hereby.
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Section 5.4. Capitalization.
PATM has a single member, PIMCO Advisors, which owns all member
interests in PATM. The outstanding member interests (x) are duly and validly
authorized and issued, fully paid and nonassessable and (y) have not been issued
in violation of any preemptive right. Except as contemplated by this Agreement,
(i) there are no outstanding options, warrants, calls, rights, commitments or
agreements of any kind to which PATM is party or by which it is bound obligating
it to issue, deliver or sell, or cause to be issued, delivered or sold,
additional member interests in PATM or any securities convertible or
exchangeable into or evidencing the right to purchase any such interests in
PATM, or obligating PATM to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement; (ii) there are no outstanding
contractual obligations of PATM to repurchase, redeem or otherwise acquire any
equity interests in PATM; and (iii) there are no outstanding bonds, debentures,
notes or other securities or instruments of PATM having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matter on which members of PATM may vote.
Section 5.5. Financial Condition and Subsidiaries.
PATM is a newly-formed limited liability company and has no
assets or liabilities of any kind or description other than $100 in cash
representing the proceeds of issuance of the outstanding member interest in PATM
and its obligations under this Agreement.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PIMCO ADVISORS
PIMCO Advisors represents and warrants to each of Opgroup and
Opfin at February 13, 1997 and at the Closing Date, as follows:
Section 6.1. Organization.
PIMCO Advisors is a limited partnership, validly existing and in
good standing under the laws of the State of Delaware. Each PIMCO Advisors
Subsidiary that is a corporation or a partnership is validly existing and in
good standing under the jurisdiction of its organization. Each of PIMCO Advisors
and the PIMCO Advisors Subsidiaries has the partnership or corporate power and
authority, as the case may be, to carry on its business as it is now being
conducted and to own, lease and operate all of its properties and assets, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned, leased or operated by it makes such qualification
or licensing necessary. A complete and correct copy of the PIMCO Advisors
partnership agreement and of the certificate of incorporation, by-laws or
partnership agreement of each PIMCO Advisors Subsidiary have been made available
to Opgroup.
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Section 6.2. Authority, No Violation.
(a) PIMCO Advisors has full partnership power and authority to
execute and deliver this Agreement and take all actions necessary or appropriate
to be taken by it to consummate the transactions contemplated hereby. Except as
set forth on Schedule 6.2(a), the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly approved by all requisite partnership action on the part of PIMCO
Advisors and its unitholders, and no other partnership proceedings on the part
of PIMCO Advisors or its unitholders or any PIMCO Advisors Subsidiary or their
unitholders, or shareholders, as the case may be, are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by PIMCO Advisors, and
(assuming the due authorization, execution and delivery of this Agreement by
Opgroup and Opfin) constitutes a valid and binding obligation of PIMCO Advisors,
enforceable against it in accordance with its terms, except as enforcement may
be limited by general principles of equity whether applied in a court of law or
a court of equity and by bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights and remedies generally.
(b) Neither the execution and delivery of this Agreement by PIMCO
Advisors, nor the consummation by PIMCO Advisors of the transactions
contemplated hereby, nor compliance by PIMCO Advisors with any of the terms or
provisions hereof, will (i) violate any provision of any partnership agreement,
certificate or incorporation or bylaws of PIMCO Advisors or any of the PIMCO
Advisors Subsidiaries or (ii) except as set forth in Schedule 6.2(b), and
assuming the accuracy of Section 4.23 and compliance with Section 9.5, (x)
violate any Applicable Law, or (y) violate, conflict with, result in a breach of
any provision of or the loss of any benefit under, constitute a default (or an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation of any
material Encumbrance upon any of PIMCO Advisors' or any PIMCO Advisors
Subsidiary's properties or assets, or any note, bond, mortgage, indenture, deed
of trust, license, lease agreement or other instrument or obligation to which
PIMCO Advisors or any of the PIMCO Advisors Subsidiaries is a party, or by which
PIMCO Advisors or any of the PIMCO Advisors Subsidiaries or any of their
properties or assets, may be bound.
Section 6.3. Consents and Approvals.
As of the Closing Date, except for such consents, approvals and
notices as are set forth in Schedule 6.3, no consents or approvals of or filings
or registrations with any Governmental Authority or any third party are
necessary in connection with the execution and delivery by PIMCO Advisors of
this Agreement and the consummation by PIMCO Advisors of the transactions
contemplated hereby.
Section 6.4. Regulatory Documents.
(a) Since November 15, 1994, PIMCO Advisors and each PIMCO
Advisors Subsidiary has timely filed all Regulatory Documents, together with any
amendments required
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to be made with respect thereto, that were required to be filed by them with any
Governmental Authority, including the SEC.
(b) At their respective dates, the Regulatory Documents of PIMCO
Advisors and each PIMCO Advisors Subsidiary complied in all material respects
with the requirements of the Securities Laws, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such Regulatory
Documents, and none of such Regulatory Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Where legally required to maintain such Regulatory Documents
current, none of such Regulatory Documents contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 6.5. Capitalization.
At February 13, 1997, PIMCO Advisors had issued and outstanding
800,000 units of general partner interest ("GP Units") and 40,146,155 Class A
Units and 32,964,759 Class B Units. All of PIMCO Advisors' outstanding units of
partnership interest have been duly issued pursuant to its partnership
agreement, are fully paid and nonassessable (except as provided in Section
17-607 or former Section 17-608 of the Delaware Revised Uniform Limited
Partnership Act) and have not been issued in violation of any preemptive right.
Except as contemplated by this Agreement and the Annexes hereto and as set forth
on Schedule 6.5, (i) there are no outstanding options, warrants, calls, rights,
commitments or agreements of any kind to which PIMCO Advisors or any PIMCO
Advisors Subsidiary is party or by which any of them is bound obligating it to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
units of the partnership interest of any class or series of, or other equity
interests in, PIMCO Advisors or any PIMCO Advisors Subsidiary, or any securities
convertible or exchangeable into or evidencing the right to purchase any units
of partnership interest of any class or series of, or other equity interests in,
PIMCO Advisors or any PIMCO Advisors Subsidiary, or obligating PIMCO Advisors or
any PIMCO Advisors Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement; (ii) there are no outstanding
contractual obligations of PIMCO Advisors or any PIMCO Advisors Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of PIMCO
Advisors or any PIMCO Advisors Subsidiary; and (iii) there are no outstanding
bonds, debentures, notes or other securities or instruments of PIMCO Advisors or
any PIMCO Advisors Subsidiary having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matter on which
unitholders or shareholders, as the case may be, of PIMCO Advisors or any PIMCO
Advisors Subsidiary may vote.
Section 6.6. Financial Statements.
PIMCO Advisors has previously delivered to Opgroup copies of (i)
the audited consolidated statements of financial condition of PIMCO Advisors as
of December 31, 1994 and 1995 (collectively, the "PIMCO Advisors Balance
Sheets") and the related audited statements of
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operations, changes in owners' equity and cash flows for the years then ended,
in each case accompanied by the audit report of Deloitte & Touche LLP,
independent public accountants with respect to PIMCO Advisors and (ii) the
unaudited interim statements of financial condition and related statements of
operations, changes in owners' equity and cash flows of PIMCO Advisors at or for
the periods ended March 31, June 30 and September 30, 1996. Each of the PIMCO
Advisors Balance Sheets (including the related notes, where applicable) present
fairly the consolidated financial position of PIMCO Advisors as of the dates
thereof, and the other financial statements referred to in the previous sentence
present fairly (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount) the consolidated results of
operations, cash flows and changes in unitholders' equity of PIMCO Advisors, for
the respective fiscal periods therein set forth; each of such statements
(including the related notes, where applicable) has been prepared in accordance
with GAAP consistently applied during the periods involved and are consistent
with the books and records of PIMCO Advisors.
Section 6.7. Ineligible Persons.
Neither PIMCO Advisors nor any "affiliated person" (as defined in
the Investment Company Act) thereof is ineligible pursuant to Section 9(a) or
9(b) of the Investment Company Act to serve as an investment adviser (or in any
other capacity contemplated by the Investment Company Act) to a registered
investment company. Neither PIMCO Advisors nor any "associated person" (as
defined in the Advisers Act) of PIMCO Advisors, is ineligible pursuant to
Section 203 of the Advisers Act to serve as an investment adviser or as an
associated person to a registered investment adviser. Neither PIMCO Advisors nor
any "associated person" (as defined in the Exchange Act) thereof, is ineligible
pursuant to Section 15(b) of the Exchange Act to serve as a broker-dealer or as
an associated person to a registered broker-dealer.
Section 6.8. Material Contracts.
There have been made available to Opgroup copies of each of the
following agreements to which PIMCO Advisors or any PIMCO Advisors Subsidiary is
a party or by which any of them is bound: (a) any lease (whether of real or
personal property) providing for annual rentals of $1 million or more; (b) any
agreement for the purchase of materials, supplies, goods, services, equipment or
other assets providing for annual payments of $1 million or more; (c) any sales,
distribution or similar agreement providing for the sale by PIMCO Advisors or
any PIMCO Advisors Subsidiary of materials, supplies, goods, services, equipment
or other assets providing for annual payments of $1 million or more (except for
agreements made in the ordinary course of business and involving investment
banking, brokerage, or investment management services); (d) any joint venture or
strategic alliance agreement providing for annual payments of $1 million or more
or involving an investment by PIMCO Advisors or any PIMCO Advisors Subsidiary of
$1.5 million or more; (e) any agreement relating to the disposition or sale of
any business (whether by merger, sale of stock, sale of assets or otherwise);
(f) any agreement relating to indebtedness or the deferred purchase price of
property involving an aggregate principal amount of $1 million or more; (g) any
license, franchise or similar agreement providing for annual payments of $1
million or more; (h) any agency, dealer, sales representative, marketing or
other similar agreement, providing for annual payments of $1 million or more and
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(i) any other agreement which involves annual payments in excess of $1 million
or is not terminable without penalty by PIMCO Advisors or any PIMCO Advisors
Subsidiary within six months (each such contract, a "PIMCO Advisors Material
Contract") and a complete and correct list of all such PIMCO Advisors Material
Contracts is set forth in Schedule 6.8. To PIMCO Advisors' Knowledge, (i) each
PIMCO Advisors Material Contract is in full force and effect, and (ii) no event
has occurred which would (with or without the passage of time, notice or both)
constitute a breach or default of any material obligations of any other party to
such PIMCO Advisors Material Contract.
Section 6.9. No Broker.
No broker, finder or similar intermediary has acted for or on
behalf of, or is entitled to any broker's, finder's or similar fee or other
commission from PIMCO Advisors or any of its Affiliates in connection with this
Agreement or the Merger.
Section 6.10. Legal Proceedings.
Except as set forth on Schedule 6.10, there are no legal,
administrative, arbitral or other proceedings, claims, actions or governmental
or regulatory investigations of any nature that are pending or, to PIMCO
Advisors' Knowledge, have been threatened against PIMCO Advisors or PATM, any
PIMCO Advisors Subsidiary or their respective properties or assets or that
challenge the validity or propriety of the transactions contemplated by this
Agreement.
Section 6.11. Permits and Applicable Law.
(a) Except as disclosed in Schedule 6.11(a), PIMCO Advisors and
each PIMCO Advisors Subsidiary holds all Permits that are material to the lawful
ownership and use of its properties and assets and the conduct of its business.
All such Permits are valid and in good standing and are not subject to any
suspension, modification or revocation or proceedings related thereto.
(b) Except as disclosed in Schedule 6.11(b), since November 15,
1994 and except for normal examinations conducted by any Governmental Authority
in the regular course of the business of PIMCO Advisors or any PIMCO Advisors
Subsidiary, no Governmental Authority has initiated any administrative
proceeding or, to the best of such PIMCO Advisors' Knowledge, investigation into
the business or operations of PIMCO Advisors or the PIMCO Advisors Subsidiaries.
A copy of all material correspondence with Governmental Authorities during the
last year with respect to PIMCO Advisors or any PIMCO Advisors Subsidiary has
been made available to Opgroup.
(c) The information provided or to be provided in writing by
PIMCO Advisors relating to it and its Affiliates expressly for use in the proxy
statements to be furnished to shareholders of the Opgroup Public Investment
Company Clients in connection with the transactions contemplated by this
Agreement will not contain, at the times such proxy statements are furnished to
the shareholders or at the times of the meetings thereof, any untrue statement
of a material fact, or omit to state any material fact required to be stated
therein or necessary in
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order to make the statements made therein, in light of the circumstances under
which they are made, not misleading.
Section 6.12. Insurance.
All of PIMCO Advisors' and PIMCO Advisors Subsidiaries' material
insurance policies and bonds are listed in Schedule 6.12. To the Knowledge of
PIMCO Advisors, each such insurance policy or bond is in full force and effect,
and neither PIMCO Advisors nor any PIMCO Advisors Subsidiary has received
written notice or any other indication from any insurer or agent of any proposed
cancellation of any such insurance policy or bond.
Section 6.13. Labor and Employment Matters.
Except as set forth in Schedule 6.13, (i) no collective
bargaining arrangement or agreement or similar arrangement or agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association, exists which is binding on PIMCO Advisors
or any PIMCO Advisors Subsidiary, (ii) there are no unfair labor practice
complaints pending against PIMCO Advisors or any PIMCO Advisors Subsidiary
before the National Labor Relations Board and (iii) there are no strikes,
slowdowns, work stoppages, lockouts, or to the knowledge of PIMCO Advisors
threats thereof, by or with respect to any employees of PIMCO Advisors or any
PIMCO Advisors Subsidiary.
Section 6.14. Employment Benefit Plans; ERISA.
(a) Schedule 6.14(a) contains a true and complete list or
description of all "employee benefit plans" as defined in Section 3(3) of ERISA,
and any bonus or other incentive compensation, profit sharing, compensation,
termination, stock option, stock appreciation right, restricted unit, restricted
option, performance unit, retirement, deferred compensation, employment,
severance, termination pay, retiree medical or retiree life insurance plan,
agreement, fund or other arrangement in effect for the benefit of any current or
former employee or director of PIMCO Advisors or any PIMCO Advisors Subsidiary,
and any trust or other funding arrangement relating thereto (each a "PIMCO
Advisors Benefit Plan"). With respect to each of such PIMCO Advisors Benefit
Plan, there has been delivered or made available to Opgroup, as applicable,
copies of any: (i) plans and related trust documents and amendments thereto;
(ii) the most recent summary plan descriptions and the most recent annual report
(including Schedule B); (iii) all other material employee communications; (iv)
the most recent actuarial valuation; and (v) the most recent determination
letter received from the IRS.
(b) Except as set forth on Schedule 6.14(b), with respect to each
PIMCO Advisors Benefit Plan, (i) such plan is in compliance in all material
respects with all applicable laws, including ERISA and the Code; (ii) no
condition exists that is reasonably expected to subject PIMCO Advisors or any
PIMCO Advisors Subsidiary to a civil penalty under Section 502(i) of ERISA,
liability under Sections 4971 through 4980E of the Code, the loss of a federal
tax deduction under Section 404 of the Code, or any penalties or tax liability
arising from the loss of qualification under Section 401(a) of the Code that is
not reflected on the PIMCO Advisors Balance Sheets; (iii) each PIMCO Advisors
Benefit Plan intended to qualify under
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Section 401(a) of the Code has received a favorable determination letter from
the IRS with respect to such qualification, and its related trust has been
determined to be exempt from taxation under Section 501(a) of the Code; and, to
PIMCO Advisors Knowledge, nothing has occurred since the date of such letter
that would adversely affect such qualification or exemption; (iv) there are no
claims or legal actions or proceedings (other than routine claims for benefits)
pending or, to PIMCO Advisors' Knowledge, threatened, with respect to any PIMCO
Advisors Benefit Plan or against the assets of any PIMCO Advisors Benefit Plan;
(v) neither PIMCO Advisors nor any PIMCO Advisors Subsidiary has engaged in, or
is a successor or parent corporation to an entity that has engaged in, a
transaction described in Section 4069 of ERISA; and (vi) no event has occurred
under Sections 4041, 4043, 4062, 4063 and 4064 of ERISA during the current or
any of the preceding five plan years that could subject PIMCO Advisors, any
PIMCO Advisors Subsidiary, any PIMCO Advisors Benefit Plan or any officer or
director of any of PIMCO Advisors or any PIMCO Advisors Subsidiary to any
liability. Any PIMCO Advisors Benefit Plan which constitutes a "multiemployer
plan" as defined in Section 3(37) of ERISA would not subject Opgroup or Opgroup
to any material liability. All contributions prescribed by law or required under
the PIMCO Advisors Benefit Plans have been made or accrued on the PIMCO Advisors
Balance Sheets to the extent required by GAAP.
Section 6.15. Intellectual Property.
Schedule 6.15 sets forth a complete and accurate list of all
material trademark, service mark and copyright registrations, and patents and
pending applications therefor, in which PIMCO Advisors or any PIMCO Advisors
Subsidiary has any right, title or interest, the jurisdictions in which such
intellectual property has been registered or patented or in which an application
for such registration or patent has been filed, and any licenses, sublicenses
and other agreements in which PIMCO Advisors or any PIMCO Advisors Subsidiary
grants a license to any other Person to use such intellectual property. Except
as set forth in Schedule 6.15, to the Knowledge of PIMCO Advisors, no written
notice has been received by PIMCO Advisors or any PIMCO Advisors Subsidiary that
the use by PIMCO Advisors or any PIMCO Advisors Subsidiary of such intellectual
property in which they have any right, title or interest infringes on any rights
of any other Person nor, to the Knowledge of PIMCO Advisors, has any other
Person infringed on a continuing basis any rights that PIMCO Advisors or any
PIMCO Advisors Subsidiary have in such intellectual property.
Section 6.16. Taxes.
(a) Except as disclosed on Schedule 6.16, PIMCO Advisors and each
PIMCO Advisors Subsidiary has (i) properly prepared and timely filed (or there
has been filed on its behalf) with the appropriate Governmental Authorities all
Tax Returns required to be filed through the date as of which this
representation is made, and all such Tax Returns were true and correct in all
material respects, and (ii) duly paid in full or will pay in full prior to the
Closing or has made provision in accordance with GAAP (or there has been paid or
provision has been made on their behalf) for the payment of, all material Taxes
due to be paid on or prior to the Closing Date (taking into account extensions).
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(b) There are no Encumbrances upon the assets of PIMCO Advisors
or any PIMCO Advisors Subsidiary for or arising from Taxes except for statutory
liens for Taxes not yet due.
(c) PIMCO Advisors is not a "foreign person" within the meaning
of Section 1445 of the Code.
Section 6.17. Investment Companies. Managed Account Clients,
Distributors, Etc.
(a) Schedule 6.17(a) sets forth a complete and accurate list of
(i) each PIMCO Advisors Public Investment Company Client, (ii) each PIMCO
Advisors Private Investment Company Client, (iii) each PIMCO Advisors Offshore
Investment Company Client and (iv) each PIMCO Advisors Managed Account Client,
in each case who is a PIMCO Advisors Material Client. For purposes of this
Section, a "PIMCO Advisors Material Client" is any Person in respect of which
PIMCO Advisors or any PIMCO Advisors Subsidiary have accrued asset management or
similar fees in excess of $375,000 during the nine months ended September 30,
1996. Each PIMCO Advisors Public Investment Company Client sponsored by PIMCO,
Advisors or its Affiliates is duly registered with the SEC as an investment
company under the Investment Company Act. Except as set forth in Schedule
6.17(a), no PIMCO Advisors Investment Company Client or PIMCO Advisors Managed
Account Client that is a PIMCO Material Client has, prior to February 13, 1997,
to PIMCO Advisors' Knowledge, indicated in writing any intent to terminate any
Advisory Agreement with PIMCO Advisors or any of the PIMCO Advisors
Subsidiaries.
(b) True and correct copies of each Advisory Agreement pursuant
to which PIMCO Advisors or any of the PIMCO Advisors Subsidiaries acts as
investment adviser to the PIMCO Advisors Investment Company Clients have been
made available to Opgroup. Each such Advisory Agreement is in full force and
effect with respect to the PIMCO Advisors Investment Company Client and PIMCO
Advisors and the PIMCO Advisors Subsidiaries which are parties thereto.
(c) Shares of each PIMCO Advisors Public Investment Company
Client sponsored by PIMCO Advisors or its Affiliates have been duly registered
under the Securities Act and applicable state securities laws, and the related
registration statements were effective under the Securities Act and applicable
state securities laws at all times when such effectiveness was required and no
stop order suspending the effectiveness of any such registration statement has
been issued.
(d) No shares or other equity interests of any PIMCO Advisors
Private Investment Company Client sponsored by PIMCO Advisors or its Affiliates
which have been offered or sold have been registered or qualified, as the case
may be under the Securities Act or any other Securities Laws and no such
registration or qualification was or is required.
(e) Shares or other equity interests of each PIMCO Advisors
Offshore Investment Company Client sponsored by PIMCO Advisors or its Affiliates
have been duly
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registered, or qualified, as the case may be, to the extent required under
applicable Securities Laws.
(f) Each PIMCO Advisors Investment Company Client sponsored by
PIMCO Advisors or its Affiliates is duly organized and validly existing and in
good standing under the laws of the jurisdiction of its organization and has the
requisite corporate power and authority to own all its properties and assets and
to carry on its business as it is now being conducted.
(g) True and correct copies of each agreement pursuant to which
PIMCO Advisors or any of the PIMCO Advisors Subsidiaries provides distribution
services to any PIMCO Advisors Investment Company Client ("PIMCO Advisors
Distribution Contract") have been made available to Opgroup. Schedule 6.17(g)
sets forth a list of each such PIMCO Advisors Distribution Contract. Each PIMCO
Advisors Distribution Contract is in full force and effect with respect to PIMCO
Advisors and the PIMCO Advisors Subsidiaries which are parties thereto.
Section 6.18. Section 15 of the Investment Company Act.
Neither PIMCO Advisors nor any of its Affiliates has any express
or implied understanding or arrangement which would impose an unfair burden on
any of the Opgroup Public Investment Company Clients or would in any way violate
Section 15(f) of the Investment Company Act as a result of the Merger.
Section 6.19. No Material Adverse Effect.
From September 30, 1996 through the Closing Date, except as
otherwise disclosed in writing to Opgroup with specific reference to this
Section 6.19, to the Knowledge of PIMCO Advisors, there has occurred no event
which could reasonably be expected to have a PIMCO Advisors Material Adverse
Effect.
ARTICLE VII.
[OMITTED]
ARTICLE VIII.
CLOSING DELIVERIES
Section 8.1. Deliveries by Opgroup, Opfin and the Trusts.
At the Closing:
(a) Opgroup shall deliver to PIMCO Advisors and PATM a
certificate, dated the Closing Date, signed on its behalf by its Chief Executive
Officer and Chief Financial Officer confirming that: (i) the representations and
warranties of Opgroup and the Trusts contained in
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this Agreement are true and correct as of the Closing Date, except for changes
or inaccuracies therein that do not individually or in the aggregate reflect an
Opgroup Material Adverse Effect; and (ii) Opgroup and Opfin have performed and
complied in all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or complied with by
them at or prior to the Closing Date;
(b) Counsel to Opgroup and Opfin shall deliver their opinion,
dated the Closing Date, substantially in the form of Annex F;
(c) Opgroup shall deliver a certificate stating that the
approvals set forth in Section 4.23(a) have been obtained, all of the conditions
described in Section 4.23(b) have been satisfied and consents from clients
representing at least 92.5% of the Opcap Run Rate Revenues generated by all
clients (on an annualized basis as of February 13, 1997) have been obtained; and
(d) Opgroup shall deliver a certificate confirming that,
effective as of the Closing:
(i) Each of Alan H. Rappaport, Mark C. Biderman and Robert
I. Kleinberg has resigned from the board of directors of each Advantage Adviser
Fund of which he is a member, and one replacement on each such board selected by
PIMCO Advisors has been elected to the board, such replacement selected by PIMCO
Advisors having the longest available term if the Identified Fund has a
staggered board of directors, with Joseph M. La Motta to serve initially as
PIMCO Advisors' nominee for the boards of directors on which he already serves
as a director;
(ii) A majority of the Board of Directors of each
Identified Fund has approved, and a majority of the outstanding voting
securities (as defined in the Investment Company Act) of each Identified Fund
has approved, an investment advisory agreement to come into effect at the
Effective Time with the Affiliate of Opcap that is an investment advisor to such
fund, each such agreement being substantially in the form of the current
agreement between the Identified Fund and a current Opcap Affiliate and, in the
case of the Value Advisors Funds, to have an initial term of two years;
(iii) The Board of Directors of each SBAM Fund has elected
that Person designated by PIMCO Advisors to hold such titles as are currently
held by any Persons affiliated with Oppenheimer & Co., Inc. and also has
appointed one additional designee of PIMCO Advisors to the office of Vice
President of each such fund; and the Board of Directors of each other Identified
Fund has elected those Persons designated by PIMCO Advisors to hold such titles
as officers of the Identified Fund as were determined by PIMCO Advisors; and
(iv) A majority of the board of directors of The Czech
Republic Fund, Inc. has approved an administration agreement with Value Advisors
which is substantially in the form of the current agreement between such fund
and Oppenheimer & Co., Inc.
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Section 8.2. Deliveries by PIMCO Advisors and PATM.
At the Closing:
(a) PIMCO Advisors and PATM shall each deliver to Opgroup a
separate certificate, dated the Closing Date, signed on its behalf by its Chief
Executive Officer and Chief Financial Officer confirming that (i) the
representations and warranties of PIMCO Advisors and PATM contained in this
Agreement are true and correct, except for changes or inaccuracies therein that
do not individually or in the aggregate reflect a PIMCO Advisors Material
Adverse Effect; and (ii) PIMCO Advisors and PATM each have performed and
complied in all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or complied with by it
at or prior to the Closing Date; and
(b) Counsel to PIMCO Advisors and PATM shall deliver their
opinion, dated the Closing Date, substantially in the form of Annex G.
Section 8.3. Other Deliveries.
At the Closing:
(a) Oppenheimer Capital shall deliver to the parties a
certificate confirming that, effective as of the Closing, the Board of Directors
or trustees, as applicable, and shareholders of each Opgroup Public Investment
Company Client have approved a new Advisory Agreement with PIMCO Advisors or its
Affiliate, or the assignment of its Advisory Agreement, as applicable, pursuant
to the provisions of Section 4.23(a);
(b) The parties shall receive an opinion of Delaware counsel in
the form of Annex H.
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Section 8.4. Execution of Certain Documents.
At the Closing:
(a) PIMCO Advisors shall execute the Exchange Right;
(b) PIMCO Advisors shall execute and deliver a registration
rights agreement substantially in the form of Annex I (the "Registration Rights
Agreement"); and
(c) PIMCO Advisors shall execute and deliver an agreement (each a
"Put Right") substantially in the form of Annex J in favor of each Opgroup
Shareholder providing for the repurchase by PIMCO Advisors under certain
circumstances of the Class A Units issued pursuant to Section 2.3 or issuable
pursuant to the Exchange Rights granted pursuant to Section 2.3.
(d) PIMCO Advisors shall execute and deliver an agreement (the
"Exchange Right") in the form of Annex K hereto, to exchange the OGI Notes for
Class A Units.
Immediately following the completion of the actions specified in
Sections 8.1, 8.2 and 8.3 and in this Section 8.4, PIMCO Advisors, Value
Advisors, Opgroup and Opfin shall execute a contribution agreement substantially
in the form of Annex L (the "Contribution Agreement").
ARTICLE IX.
ACTIONS SUBSEQUENT TO THE MERGER
Section 9.1. Contribution.
In connection with the Closing, the Surviving Corporation will,
pursuant to the Contribution Agreement, cause Opfin to contribute the Interests
and the member interest in Value Advisors to PIMCO Advisors as provided in the
Contribution Agreement.
Section 9.2. Additional Fund Related Covenants.
Holdings shall cause Alan H. Rappaport and Mark C. Biderman for a
period of one year from the Closing Date, at Advantage Advisers' request and at
a reasonable fee rate to be designated by Value Advisors, to act as consultants
to Value Advisors with respect to the Value Advisors Funds and/or attend Board
meetings of the Value Advisors Funds.
Section 9.3. Insurance.
The Surviving Corporation will cause to be maintained, for a
period of not less than six years from the Closing Date, policies of directors'
and officers, general partner and investment advisor insurance covering
Opgroup's and the Opgroup Subsidiaries' current
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directors and officers, as well as other contractual arrangements, i.e.,
partnership agreements and indemnification agreements, as applicable, to the
extent that they provide coverage for events occurring prior to and including
the Closing (the "D&O Insurance") for all present and past directors and
officers of Opgroup and the Opgroup Subsidiaries, so long as the annual premium
therefor would not be in excess of 200% of the last annual premium paid prior to
February 13, 1997 (the "Maximum Premium"). If the existing D&O Insurance
expires, is terminated or canceled during such six-year period, the Surviving
Corporation will use commercially reasonable efforts to cause to be obtained as
much D&O Insurance as can be obtained for the remainder of such period for an
annualized premium not in excess of the Maximum Premium, on terms and conditions
no less advantageous in the aggregate to the insured directors and officers than
the D&O Insurance as in effect on February 13, 1997.
Section 9.4. Closing Date Balance Sheets.
(a) Promptly following the Closing Date, the Seller Trust will
cause to be prepared in accordance with GAAP pro forma balance sheets for each
of Opgroup, Opfin and Value Advisors setting forth the financial position of
each such corporation as of the close of business on the Closing Date (the
"Stand-Alone Balance Sheets"), and a combined balance sheet of Opgroup, Opfin
and Value Advisors derived from the Stand-Alone Balance Sheets (the "Combined
Balance Sheet", and together with the Stand-Alone Balance Sheets, the "Closing
Date Balance Sheets"), and shall deliver the same to the Surviving Corporation.
The Stand-Alone Balance Sheets shall be prepared on a stand-alone basis (i) as
though the Merger had not been effected, (ii) without attribution of any value
to the Interests, stock of the Excluded Affiliates, rights to receive the Buyer
Adjustment Payment or amounts released from the Tax Payment Account or the
Holdback Amount, or the management contracts for the Value Advisors Funds, and
(iii) without taking into account any liabilities which are not attributable to
the Money Management Business, including without limitation the principal of
(but not the interest on) the Opgroup Equities Note. The Combined Balance Sheet
shall reflect a current account payable equal in amount to the amount of cash
delivered to the Seller Trust pursuant to Section 2.1.
(b) Representatives of the Seller Trust will be entitled to
reasonable access during normal business hours to the relevant books, records
and working papers of Opgroup, Opfin and Value Advisors, and the Surviving
Corporation's accountants, if applicable, to aid in their preparation of the
Closing Date Balance Sheets. The Closing Date Balance Sheets shall be deemed to
be accepted by the Surviving Corporation and shall be final and binding for all
purposes of this Agreement unless the Surviving Corporation, within sixty days
after the date on which the Closing Date Balance Sheets are delivered to the
Surviving Corporation, gives notice to the Seller Trust stating each and every
item as to which the Surviving Corporation takes exception ("Objections"),
specifying in detail the nature and extent of any such Objection. If an
Objection is disputed by the Seller Trust, then the Seller Trust and the
Surviving Corporation shall negotiate in good faith to resolve such dispute. If,
after a period of thirty days following the date on which the Surviving
Corporation gave notice of Objections, any Objection still remains disputed,
then the Surviving Corporation's accountants and the Seller Trust's accountants
shall together choose an independent firm of public accountants of nationally
recognized standing (the "Accounting Firm") to resolve such remaining
Objections. The Accounting Firm shall act as an
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arbitrator and shall have the power and authority to determine, based solely on
presentations by the Surviving Corporation and the Seller Trust, and not by
independent review, only those issues still in dispute. The determination of the
Accounting Firm shall be final and binding. The fees and expenses of the
Accounting Firm, if any, shall be paid equally by the Surviving Corporation and
the Seller Trust; provided, however, that, if the Accounting Firm determines
that either party's position is completely correct, then the other party shall
pay the fees charged by the Accounting Firm in connection with any such
determination.
(c) If either the net current assets or the net assets set forth
on the Combined Balance Sheet as finally determined are negative, the Seller
Trust shall promptly pay to the Surviving Corporation cash in an amount equal to
the greater of the deficit in net current assets or the deficit in net assets.
If both the net current assets and the net assets set forth on the Combined
Balance Sheet are positive, the Surviving Corporation shall promptly pay to the
Seller Trust cash in an amount equal to the lesser of the surplus in net current
assets or the surplus in net assets. Any such payment shall be deemed to
constitute an adjustment in the Merger consideration for all purposes of this
Agreement.
Section 9.5. Section 15 of the Investment Company Act; PIMCO Advisors.
PIMCO Advisors and, the Surviving Corporation agree to use their
commercially reasonable efforts to enable the following to be true regarding
Section 15(f) of the Investment Company Act with respect to the Opgroup Public
Investment Company Clients: (a) for a period of not less than three years after
the Closing Date, no more than 25% of the members of the Board of Directors of
any Opgroup Public Investment Company Client shall be "interested persons" (for
purposes of Section 15(f)(1)(A) of the Investment Company Act, as it may be
modified by an exemptive order referred to in Section 4.23(b) of this Agreement)
of PIMCO Advisors (or such other entity which acts as adviser or subadvisor to
the Opgroup Public Investment Company Clients), or of the predecessor investment
adviser of the Opgroup Public Investment Company Clients (including "interested
persons" of Opgroup or its Affiliates) (collectively, the "Relevant Entities"),
other than with respect to any Opgroup Public Investment Company Client not
meeting such requirement as of the Closing; and (b) for a period of not less
than two years after the Closing Date, neither PIMCO Advisors nor any Affiliate
of PIMCO Advisors (or any entity which will act as adviser to the Opgroup Public
Investment Company Clients) has or shall have any express or implied
understanding, arrangement or intention to impose an unfair burden on any of the
Opgroup Public Investment Company Clients as a result of the transactions
contemplated herein. For purposes of paragraph (a) of this Section 9.5,
"commercially reasonable efforts" shall mean PIMCO Advisors and, after the
Closing Date, the Surviving Corporation, (i) causing to be distributed to the
directors of each Opgroup Public Investment Client (A) on at least an annual
basis, a questionnaire containing questions reasonably designed to elicit
information pertaining to the status of such directors as "interested persons"
of the Relevant Entities, and (B) on at least an annual basis, a legal
memorandum describing to the directors the requirements of Section 15(f) of the
Investment Company Act and the relevance of their status thereunder, (ii) at
such time as they learn of a change in the board composition of an Opgroup
Public Investment Company Client or the disinterested status of a director
thereof that would cause more than 25% of the members of such Board of Directors
to be interested persons of Relevant Entities, taking reasonable steps to
correct such situation as
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promptly as practicable, (iii) obtaining the agreement of any transferee of all
or a portion of the business of the Surviving Corporation and/or PIMCO Advisors
to comply with provisions substantially identical to the provisions of this
Section 9.5 for a period of not less than three years after the Closing Date and
(iv) taking such additional steps (which shall not require the incurrence of any
out-of-pocket expenses by PIMCO Advisors or its Affiliates) as the Indemnity
Trust may from time to time reasonably request in writing in connection with
compliance with Section 15(f) of the Investment Company Act.
Section 9.6. Further Assurances.
Each party to this Agreement shall execute such documents and
other papers and perform such further acts as may be reasonably required to
carry out the provisions hereof and the transactions contemplated hereby.
Section 9.7. Expenses.
The parties agree that the expenses incurred in soliciting
proxies from shareholders of the Opgroup Public Investment Companies (including
reasonable fees and expenses of legal counsel to such Investment Companies and
legal counsel to their trustees or directors, if applicable) shall be borne
two-thirds by PIMCO Advisors and one-third by Opgroup (including for purposes of
Section 9.4); provided, however, that any such expenses incurred without the
consent of PIMCO Advisors, which consent may not unreasonably be withheld or
delayed, shall be borne by Opgroup. Except as provided in the preceding
sentence, each party shall be solely responsible for all direct and indirect
expenses incurred by it in connection with the negotiation and preparation of
this Agreement and the consummation of the transactions contemplated hereby.
Section 9.8. Disposition of OGI Stock.
PIMCO Advisors agrees that (i) so long as any Opgroup Shareholder
(including the beneficial owners of the entities which are Opgroup Shareholders
and transferees of such Opgroup Shareholders and/or beneficial owners whose
basis for tax purposes is based upon that of the transferors) continues to hold
the Class A Units he received at the Closing or upon exchange of OGI Notes,
PIMCO Advisors shall not sell, assign or otherwise transfer the capital stock of
Opgroup or the OGI Notes received in exchange for the Class A Units in such a
way as to cause the Opgroup Shareholders (including such beneficial owners and
transferees) to recognize taxable gain and (ii) so long as all of the OGI Notes
are not owned by PIMCO Advisors or its Affiliates, PIMCO Advisors will not sell,
assign or otherwise transfer the capital stock of Opgroup and will continue to
hold all of the equity interests of Opgroup.
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ARTICLE X.
INDEMNIFICATION
Section 10.1. Indemnification by PIMCO Advisors and the Surviving
Corporation.
(a) Subject to the limitations and conditions set forth in this
Article X, PIMCO Advisors and the Surviving Corporation shall, jointly and
severally, indemnify and hold harmless, to the fullest extent permitted by law,
the Opgroup Shareholders and each of their respective officers, directors,
employees, agents and Affiliates (collectively, the "Opgroup Indemnitees") from
and against any and all Losses which they or an of them may suffer or incur, to
the extent arising from:
(i) any breach or default in performance by PIMCO Advisors
or PATM of any covenant or agreement of PIMCO Advisors or PATM contained in this
Agreement; or
(ii) any breach of any representation or warranty made by
PIMCO Advisors or PATM in this Agreement, or any certificate or instrument
delivered by or on behalf of PIMCO Advisors or PATM pursuant to this Agreement
(but excluding any Related Agreement).
(b) Indemnification under this Section 10.1 shall be available
regardless of any investigation made at any time before the Closing Date by or
on behalf of Opgroup or after the Closing Date by on behalf of the Indemnity
Trust or the Indemnity Trustees or any of their Affiliates or of any information
any such party may have in respect thereof; provided, however, that no such
indemnification shall be available for a breach of a particular representation
or warranty if written notice has been given to Opgroup prior to the Closing
Date, specifying in reasonable detail the information or circumstances making
such representation or warranty untrue, and such state of affairs, taking into
account all matters which have occurred, would have resulted in a PIMCO Advisors
Material Adverse Effect.
Section 10.2. Indemnification by the Indemnity Trust.
(a) Subject to the limitations and conditions set forth in this
Article X, the Indemnity Trust on behalf of the Opgroup Shareholders, shall
indemnify and hold harmless, to the fullest extent permitted by law, PIMCO
Advisors, the Surviving Corporation and each of their officers, directors,
limited liability company members and managers, employees, agents and Affiliates
(collectively, the "PIMCO Indemnitees") from and against any and all Losses
which they or any of them may suffer or incur, to the extent arising from:
(i) any breach or default in performance of any covenant
or agreement of or regarding Opgroup or any Opgroup Subsidiary contained in this
Agreement; or
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(ii) any breach of any representation or warranty made by
Opgroup in this Agreement, or any certificate or instrument delivered by or on
behalf of Opgroup in connection with this Agreement (but excluding any Related
Agreement); or
(iii) any liabilities and obligations (whether known or
unknown, direct or indirect and including, without limitation, accrued and
contingent liabilities) attributable to the Opgroup Business other than (A)
liabilities attributable to the Money Management Business (other than any such
liabilities and obligations arising from, in connection with or constituting any
breach or default described in clause (i) or clause (ii) above), (B) liabilities
attributable to the Brokerage Business, (C) liabilities under the Opgroup
Equities Note and (D) other liabilities which are fully funded at the Closing
Date, in each case other than liabilities for Taxes; or
(iv) without duplication, (A) liabilities for Taxes of any
member of the Opgroup Subgroup and any of its Unconsolidated Subsidiaries for or
with respect to (1) all taxable periods or portions thereof that end on or prior
to the Closing Date; and (2) the CIBC Transaction, regardless of the taxable
period or periods in which recognized, (B) Opfin's allocable share of
liabilities for Taxes of Opcap for or with respect to all taxable periods or
portions thereof that end on or prior to the Closing Date, based upon Opfin's
direct and indirect partnership interest in Opcap as of each date any such
liability for Taxes was incurred; (C) one half of all liabilities for Taxes of
any member of the Opgroup Subgroup attributable to gain recognized on and at the
time of the contribution of property by Opfin to PIMCO Advisors pursuant to the
Contribution Agreement by reason of PIMCO Advisors' ownership of common stock of
the Surviving Corporation; and (D) any costs and expenses related to the
foregoing (including, without limitation, reasonable attorneys' fees and
expenses); provided, however, that to the extent that the PIMCO Indemnitees are
indemnified for any such liabilities pursuant to Section 4(a) of the Tax
Indemnity Agreement, they shall not be indemnified under this clause (iv).
(b) Indemnification under this Section 10.2 shall be available
regardless of any investigation made at any time before or after the Closing
Date by or on behalf of PIMCO Advisors or of any of their Affiliates or of any
information any such party may have in respect thereof; provided, however, that
no such indemnification shall be available for a breach of a particular
representation or warranty if notice has been given to PIMCO Advisors prior to
the Closing Date, specifying in reasonable detail the information or
circumstances making such representation or warranty untrue, and such state of
affairs, taking into account all matters which have occurred, would have
resulted in an Opgroup Material Adverse Effect.
Section 10.3. Monetary Limitation.
(a) Neither the Indemnity Trust on the one hand, nor PIMCO
Advisors or the Surviving Corporation, on the other hand, shall have any
obligation to indemnify any Opgroup Indemnitee or PIMCO Indemnitee,
respectively, pursuant to Section 10.1(a)(ii) or 10.2(a)(ii), respectively,
unless and until the aggregate of all Losses suffered or incurred by all PIMCO
Indemnitees or Opgroup Indemnitees, as applicable, by reason of the breaches
described in such clauses exceeds $2,000,000, and then only for the excess over
$2,000,000; provided, however, that such limitation shall not apply with respect
to any obligation to indemnify (i) a PIMCO
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Indemnitee which arises under both Section 10.2(a)(ii) and one or more of
Sections 10.2(a)(i), 10.2(a)(iii) or 10.2(a)(iv), or (ii) an Opgroup Indemnitee
which arises under both Sections 10.1(a)(ii) and 10.1(a)(i). The aggregate
amount of Losses that may be recovered by the Opgroup Indemnitees under Section
10.1 or by the PIMCO Indemnitees under Section 10.2 shall not exceed $80
million.
(b) Whenever any breach, default, or other event which triggers a
party's indemnification obligations under Section 10.1(a)(ii) or 10.2(a)(ii)
contains a materiality standard, the dollar amount of the Loss which causes such
breach, default, or other event to meet or exceed such materiality standard
shall be counted from dollar one in determining whether or not the $2,000,000
threshold set forth in Section 10.3(a) has been met. For example, if the
materiality standard for a breach were $400,000 and the Losses from a breach
were $500,000, the total Losses of $500,000 would be counted against the
$2,000,000 threshold.
Section 10.4. Nature and Survival; Time Limits.
(a) The representations and warranties of the parties made herein
or pursuant hereto or in connection with the transactions contemplated hereby
shall survive the Closing and continue in effect until the end of the 12th month
following the month in which the Closing Date occurs unless specifically
provided otherwise herein (unless the conditions set forth in 10.1(b) or
10.2(b), as applicable, regarding notice and waiver are satisfied); provided
however, the representations and warranties set forth in Sections 4.15 and 6.16
shall survive until the end of the applicable statute of limitations; and
provided, further, that any such time limit shall not apply to bar any claim
based on a party's fraud or intentional misrepresentation.
(b) The covenants and agreements of the parties set forth in this
Agreement shall survive indefinitely until performed; provided, however, that
any claim for indemnification brought pursuant to Section 10.2(a)(iii) must be
made within 36 months following the month in which the Closing Date occurs.
Section 10.5. Limitation on Remedies.
(a) The remedies provided in this Article X, subject to the
limitations set forth in this Agreement, shall be the exclusive remedies
available to a party to this Agreement for any breach or violation of this
Agreement (but not any Related Agreement) by another party hereto.
(b) No Indemnified Party shall seek or be entitled to, or accept
payment of any award or judgment for, punitive damages from an Indemnifying
Party.
Section 10.6. General Provisions.
In the case of any claim for indemnification brought pursuant to
this Article X:
(a) The party entitled to indemnification (the "Indemnified
Party") shall promptly notify the party obligated to provide indemnification
(the "Indemnifying Party") of any claim for which indemnification is sought
pursuant to this Article X ("Indemnified Claim"), in writing and in reasonable
detail and accompanied by reasonable supporting documentation, and
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within any applicable time limits specified in this Agreement; provided,
however, that the failure of an Indemnified Party to give such notice shall not
affect such Indemnified Party's rights to indemnification under this Article X,
except and only to the extent that the Indemnifying Party actually incurred an
incremental out of pocket expense (in which case recovery shall be reduced by
such expense) or was materially prejudiced by such failure.
(b) The Indemnified Party shall use all reasonable efforts to
mitigate any Losses.
(c) The Indemnifying Party will be entitled to participate in the
prosecution or defense of an Indemnified Claim and, at its option, jointly with
any other Indemnifying Party which so elects, elect to assume control of such
Indemnified Claim, including without limitation the filing and prosecution, or
defense, of any action in connection with such Indemnified Claim. Subsequent to
such assumption of control, (i) the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with such Indemnified Claim; and (ii) the
Indemnifying Party shall control such Indemnified Claim; provided, however, that
the Indemnified Party shall have the right to participate in the prosecution or
defense of such Indemnified Claim and to be represented, solely at its expense,
by counsel selected by it.
(d) The Indemnified Party will, at the expense of the
Indemnifying Party, cooperate with the Indemnifying Party in the investigation,
preparation, prosecution or defense of an Indemnified Claim and shall furnish
any documents and endeavor to make available any employees under its control.
(e) The Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge, any Indemnified Claim without
the prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed; provided, however, that if the defense of any
proceeding in respect of an Indemnified Claim has been assumed by an
Indemnifying Party, the Indemnified Party shall consent to any settlement,
compromise or discharge of such Indemnified Claim which the Indemnifying Party
may recommend, so long as such settlement, compromise or discharge by its terms
obligates the Indemnifying Party to pay all of the Losses of such Indemnified
Party arising from such Indemnified Claim, releases such Indemnified Party from
any and all liabilities and obligations it may have in connection with such
Indemnified Claim, and does not otherwise adversely affect such Indemnified
Party.
(f) All payments by the Indemnity Trust under this Article X
shall be made through the reduction of the face amount of the Certificate.
(g) For purposes of this Agreement, "Losses" shall mean any and
all losses, damages and liabilities, joint or several, and expenses (including,
without limitation, attorney fees and other costs of litigation, arbitration and
settlement) suffered or incurred by an Indemnified Party in respect of an
Indemnified Claim, (i) reduced by the Present Value Benefit realized or
realizable by the Indemnified Party in connection with or as a result of the
incurrence of such losses, claims, damages, liabilities and expenses and (ii)
reduced by any applicable
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insurance proceeds actually received by the Indemnified Party. If any such
reduction is determined after payment by the Indemnifying Party of any amount
otherwise required to be paid pursuant to this Article X, the Indemnified Party
shall repay to the Indemnifying Party, promptly after such determination, any
amount that the Indemnifying Party would not have had to pay pursuant to this
Article X had such determination been made at the time of such payment. Losses
shall include (i) punitive damages awarded to a third party and (ii)
consequential damages (but only if the Closing has occurred.
(h) With respect to any claim for indemnification under Section
10.2(a)(iv), the Indemnifying Parties and Indemnified Parties shall follow the
procedures set forth in Sections 2(b), 2(c)(2), 2(d)(2), 4(c), 7, 8 and 9 of the
Tax Indemnity Agreement.
ARTICLE XI.
TERMINATION AND SURVIVAL
Section 11.1. Omitted.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Limitation on Liability.
(a) Anything contained herein to the contrary notwithstanding, no
recourse under or upon any obligation, covenant or agreement of Opgroup or its
Affiliates or the Trusts in this Agreement or any Related Agreement shall be had
against any general partner, officer, director, shareholder, trustee or
controlling person, whether past, present or future, of Opgroup or its
Affiliates or the Trusts or of any successor corporation, partnership or trust,
either directly or through any successor corporation, partnership or trust,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived as a condition of,
and as a consideration for, the execution and performance of this Agreement, and
that this limitation on recourse is made expressly for the benefit of any
general partner of Opco LP, any officer or director of Opgroup and their
respective Affiliates and any trustee of the Trusts, and may be enforced by any
of them; provided, however, that this limitation on recourse shall not limit
recourse against or otherwise modify any obligation, covenant or agreement of
any party to this Agreement or any Related Agreement.
(b) Anything contained herein to the contrary notwithstanding, no
recourse under or upon any obligation, covenant or agreement of PIMCO Advisors
or PATM or their respective Affiliates in this Agreement or any Related
Agreement shall be had against any general partner, officer, director, board
member, shareholder, controlling person, whether past, present or future, of
PIMCO Advisors or PATM or their respective Affiliates or of any successor
corporation or partnership,
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either directly or through any successor corporation or partnership, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived as a condition of, and as a consideration
for, the execution and performance of this Agreement, and that this limitation
on recourse is made expressly for the benefit of any general partner of PIMCO
Advisors or PATM and their respective Affiliates and may be enforced by any of
them; provided, however, that this limitation on recourse shall not limit
recourse against or otherwise modify any obligation, covenant or agreement of
any party to this Agreement or any Related Agreement.
Section 12.2. No Right of Set Off.
(a) Each of PIMCO Advisors and PATM agrees for itself, and its
successors and assigns, that it shall have no right to set off any amounts that
may be owed to it by any Trust or Trustee under this Agreement or any Related
Agreement against any amounts payable by it to Opgroup, Opfin, any Trust or any
Trustee.
(b) The Trustees, on behalf of the Trusts, agree that the Trusts
shall have no right to set off any amounts that may be owed by them to PIMCO
Advisors, PATM or the Surviving Corporation under this Agreement or any Related
Agreement against any amounts payable by them to PIMCO Advisors, PATM or the
Surviving Corporation.
Section 12.3. Amendments, Waiver.
This Agreement may not be amended, modified or waived except by
written instrument executed by the parties hereto.
Section 12.4. Entire Agreement.
This Agreement (including Annexes, Schedules, certificates and
lists referred to herein, and any documents executed by the parties
simultaneously herewith or pursuant hereto) constitutes the entire agreement of
the parties hereto, except as provided herein, and supersedes all prior
agreements and understandings, written and oral, among the parties with respect
to the subject matter hereof.
Section 12.5. Interpretation.
When a reference is made in this Agreement to Sections, Annexes
or Schedules, such reference shall be to a Section of or Annex or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 12.6. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or
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unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section 12.7. Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed given (i) when delivered in person, (ii) when
transmitted by telecopy (with written confirmation), (iii) on the third Business
Day following the mailing thereof by certified or registered mail (return
receipt requested) or (iv) when delivered by an express courier (with written
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to the Indemnity Trust:
The Indemnity Trust
Oppenheimer Tower
World Financial Center
200 Liberty Street
New York, New York 10281
Attention: Roger W. Einiger and Robert I. Kleinberg, Esq.
Telephone: (212) 667-7300
Telecopy: (212) 667-2369
With a copy to:
Oppenheimer & Co., L.P.
Oppenheimer Tower
World Financial Center
200 Liberty Street
New York, New York 10281
Attention: Roger W. Einiger and Robert I. Kleinberg, Esq.
Telephone: (212) 667-7300
Telecopy: (212) 945-2369
And, in each case, with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Robert Todd Lang, Esq.
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
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If to PATM or the Surviving Corporation:
c/o PIMCO Advisors L.P.
800 Newport Center Drive, Suite 100
Newport Beach, California 92660
Attention: General Counsel
Telephone: (714) 717-7022
Telecopy: (714) 717-7076
If to PIMCO Advisors:
PIMCO Advisors L.P.
800 Newport Center Drive, Suite 100
Newport Beach, California 92660
Attention: General Counsel
Telephone: (714) 717-7022
Telecopy: (714) 717-7076
And in each case, with a copy to:
Latham & Watkins
650 Town Center Drive
Costa Mesa, California 92626
Attention: David C. Flattum
Telephone: (714) 540-1235
Telecopy: (714) 755-8290
Section 12.8. Binding Effect; No Third Party Beneficiaries; No
Assignment.
This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement is intended or shall be construed to confer upon any
Person other than the parties hereto and their respective successors and
permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties hereto.
Section 12.9. Counterparts.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same agreement, it being understood that all of the
parties need not sign the same counterpart.
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Section 12.10.Governing Law.
THIS AGREEMENT, THE LEGAL RELATIONS BETWEEN THE PARTIES AND THE
ADJUDICATION AND THE ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED
AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS THEREOF.
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Section 12.11. Waiver of Jury Trial.
AFTER THE CLOSING DATE, THE PARTIES TO THIS AGREEMENT AGREE TO
WAIVE ANY RIGHT TO A JURY TRIAL AS TO ALL DISPUTES.
OPPENHEIMER GROUP, INC. PIMCO ADVISORS L.P.
By: /s/ ROGER W. EINIGER By: /s/ WILLIAM D. CVENGROS
--------------------------- ---------------------------
Name: Roger W. Einiger Name: William D. Cvengros
Title: Executive Vice President Title: Chief Executive Officer
OPPENHEIMER FINANCIAL CORP. PIMCO ADVISORS TRANSITORY MERGER LLC
By: /s/ ROGER W. EINIGER By: /s/ WILLIAM D. CVENGROS
--------------------------- ---------------------------
Name: Roger W. Einiger Name: William D. Cvengros
Title: Executive Vice President Title: Chief Executive Officer
THE INDEMNITY TRUST
By: /s/ NATHAN GANTCHER
---------------------------
Nathan Gantcher
By: /s/ STEPHEN ROBERT
---------------------------
Stephen Robert
Its Managing Trustees
THE SELLER TRUST
By: /s/ NATHAN GANTCHER
---------------------------
Nathan Gantcher
By: /s/ STEPHEN ROBERT
---------------------------
Stephen Robert
Its Managing Trustees
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