_______________________________________________________________________________
_______________________________________________________________________________
Exhibit 2.2
Acquisition Agreement
by and among
United Asset Management Corporation,
Provident Investment Counsel
PIC Newco, Inc.
and the Stockholders of
Provident Investment Counsel
Dated as of
November 10, 1994
_______________________________________________________________________________
_______________________________________________________________________________
Acquisition Agreement
by and among
United Asset Management Corporation,
Provident Investment Counsel
PIC Newco, Inc.
and the Stockholders of
Provident Investment Counsel
Dated as of
November 10, 1994
TABLE OF CONTENTS
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PAGE
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ARTICLE I. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Adjustment in Purchase Price . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Contingent Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 Obligations Assumed by Newco . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II. THE CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PIC AND THE
STOCKHOLDERS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 PIC's Organization and Corporate Authority . . . . . . . . . . . . . . .10
3.2 Charter, By-Laws and Minutes . . . . . . . . . . . . . . . . . . . . . .10
3.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.4 The Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.6 No Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.9 Interests of Officers. . . . . . . . . . . . . . . . . . . . . . . . . .13
3.10 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.11 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.13 Names, Franchises, Permits, Etc . . . . . . . . . . . . . . . . . . . .15
3.14 Investment Advisory Contracts . . . . . . . . . . . . . . . . . . . . .15
3.15 Other Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.16 Certain Salaried Employees. . . . . . . . . . . . . . . . . . . . . . .16
3.17 Bank Accounts and Money Market Funds. . . . . . . . . . . . . . . . . .16
3.18 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.19 Finder's Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.20 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . .17
3.21 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
3.22 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
3.23 PIC's Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
3.24 Stockholders' Authority . . . . . . . . . . . . . . . . . . . . . . . .20
3.25 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . .20
3.26 Code of Ethics. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
3.27 No Practices in Violation of Law. . . . . . . . . . . . . . . . . . . .21
3.28 Employees' Health . . . . . . . . . . . . . . . . . . . . . . . . . . .21
3.29 Fee Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
3.30 Investment Representations. . . . . . . . . . . . . . . . . . . . . . .22
ARTICLE IV. REPRESENTATIONS OF UAM AND NEWCO.. . . . . . . . . . . . . . . . .23
4.1 Organization of UAM and Newco and Corporate Authority. . . . . . . . . .23
4.2 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.3 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.4 Charter, By-laws and Resolutions . . . . . . . . . . . . . . . . . . . .24
4.5 Financial Statements of UAM. . . . . . . . . . . . . . . . . . . . . . .24
4.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.7 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.8 UAM's and Newco's Authority. . . . . . . . . . . . . . . . . . . . . . .25
4.9 Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
4.10 Capitalization of UAM and Newco . . . . . . . . . . . . . . . . . . . .25
4.11 Authorization of Note and Warrant . . . . . . . . . . . . . . . . . . .25
4.12 Reservations of Common Stock. . . . . . . . . . . . . . . . . . . . . .26
4.13 Authorization of Common Stock . . . . . . . . . . . . . . . . . . . . .26
4.14 No Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . .26
4.15 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE V. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . . . .26
5.1 Indemnification by the Stockholders and PIC. . . . . . . . . . . . . . .26
5.2 Indemnification by UAM . . . . . . . . . . . . . . . . . . . . . . . . .27
5.3 Survival of Representations and Warranties . . . . . . . . . . . . . . .27
5.4 Limitation on Liabilities of PIC Stockholders. . . . . . . . . . . . . .28
5.5 Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.6 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.7 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
ii
ARTICLE VI. TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
6.1 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
6.2 Taxes on Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.3 Allocation of Purchase Price Among Assets. . . . . . . . . . . . . . . .30
ARTICLE VII. PRE-CLOSING COVENANTS.. . . . . . . . . . . . . . . . . . . . . .30
7.1 Procedure for Obtaining Clients' Consents. . . . . . . . . . . . . . . .30
7.2 Non-Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.3 Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.4 Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . .32
7.5 Return of Confidential Information . . . . . . . . . . . . . . . . . . .32
7.6 Agreement Relating to Mutual Funds . . . . . . . . . . . . . . . . . . .32
7.7 Registration of UAM Stock. . . . . . . . . . . . . . . . . . . . . . . .33
(a) Registration Procedures and Expenses . . . . . . . . . . . . . . . . .33
(b) Allocation of Expenses . . . . . . . . . . . . . . . . . . . . . . . .34
(c) Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
ARTICLE VIII. CONDUCT OF PIC'S BUSINESS PRIOR TO THE CLOSING DATE. . . . . . .35
ARTICLE IX. CONDITIONS PRECEDENT TO UAM'S AND NEWCO'S OBLIGATIONS. . . . . . .37
9.1 Delivery of Documents of Transfer. . . . . . . . . . . . . . . . . . . .37
9.2 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . .37
9.3 Representations and Warranties True at the Closing Date. . . . . . . . .38
9.4 PIC's and Stockholders' Certificate. . . . . . . . . . . . . . . . . . .38
9.5 Clients' Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.6 Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.7 Opinion of Counsel for PIC and the Stockholders. . . . . . . . . . . . .39
9.8 PIC's and the Stockholders' Performance. . . . . . . . . . . . . . . . .41
9.9 Payments Made. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.10 Conduct of PIC's Business Prior to the Closing Date . . . . . . . . . .42
9.11 Certificate Relating to Real Property Interests . . . . . . . . . . . .42
9.12 Approval of Documentation . . . . . . . . . . . . . . . . . . . . . . .42
9.13 Examination of Books And Records. . . . . . . . . . . . . . . . . . . .42
9.14 Advisers Act Registration . . . . . . . . . . . . . . . . . . . . . . .42
9.15 Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.16 Health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
9.17 Life Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
9.18 Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
9.19 Hart-Scott-Rodino Filing. . . . . . . . . . . . . . . . . . . . . . . .43
9.20 Exchange Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . .43
iii
ARTICLE X. CONDITIONS PRECEDENT TO PIC'S AND THE STOCKHOLDERS' OBLIGATIONS.. .43
10.1 Opinion of UAM's and Newco's Counsel. . . . . . . . . . . . . . . . . .45
10.2 Representations and Warranties True at the Closing Date . . . . . . . .45
10.3 Performance of UAM and Newco. . . . . . . . . . . . . . . . . . . . . .45
10.4 Authority of UAM and Newco. . . . . . . . . . . . . . . . . . . . . . .45
10.5 Approval of Documentation . . . . . . . . . . . . . . . . . . . . . . .45
10.6 Revenue Sharing Agreement . . . . . . . . . . . . . . . . . . . . . . .46
10.7 Adjustment Percentage . . . . . . . . . . . . . . . . . . . . . . . . .46
10.8 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . .46
10.9 Advisers' Act Registration. . . . . . . . . . . . . . . . . . . . . . .46
10.10 Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . .46
10.11 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
10.12 Incentive Stock Options. . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE XI. POST-CLOSING COVENANTS.. . . . . . . . . . . . . . . . . . . . . .46
11.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
11.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
11.3 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . .49
11.4 Amendment to Registrations and Filing of Form 8-K . . . . . . . . . . .49
11.5 Compliance with Hart-Scott-Rodino Act . . . . . . . . . . . . . . . . .49
11.6 Additional Covenants. . . . . . . . . . . . . . . . . . . . . . . . . .49
11.7 Use of Name "Provident Investment Counsel, Inc. . . . . . . . . . . . .47
11.8 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
11.9 Statutory Compliance . . . . . . . . . . . . . . . . . . . . . . . . .50
11.10 Extension Bonus Payment. . . . . . . . . . . . . . . . . . . . . . . .50
11.11 UAM Capital Contribution . . . . . . . . . . . . . . . . . . . . . . .50
11.12 Employees; Employee Benefits.. . . . . . . . . . . . . . . . . . . . .51
ARTICLE XII. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
12.1 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . .52
12.2 Equitable Relief; Binding Effect. . . . . . . . . . . . . . . . . . . .52
12.3 Separate Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .53
12.4 Consistent Accounting . . . . . . . . . . . . . . . . . . . . . . . . .53
12.5 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . .53
12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
12.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
12.8 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
12.9 Due Inquiry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
12.10 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
12.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
12.12 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . .55
iv
Exhibits
A Form of UAM Non-Negotiable Subordinated
Note (Section 1.2)
B Form of Subordination Agreement (Section 1.2)
C Form of Warrant Agreement (Section 1.2)
D Form of Warrant Certificate (Section 1.2)
E-1 Form of Employment Agreement (Kommerstad) (Section 9.2)
E-2 Form of Employment Agreement (Miller, Handtmann, Tashijan) (Section 9.2)
E-3 Form of Employment Agreement (Condon) (Section 9.2)
E-4 Form of Employment Agreement (1% Stockholders) (Section 9.2)
E-5 Employment Agreements effective upon Closing (Non-Stockholders)
(Section 9.2)
F Form of Revenue Sharing Agreement (Section 10.6)
G PIC Audited Financials (Section 3.5)
H PIC Unaudited Financials (Section 3.5)
I UAM Audited Financials (Section 4.5)
J UAM Unaudited Financials (Section 4.5)
K Form of Client's Consent (Art. VII)
L Stockholders' Closing Certificate as to
Representations, etc. (Section 9.3)
M Stockholders' Certificate as to By-Laws, etc. (Section 9.4)
N Stockholders' Certificate as to Clients' Consents (Section 9.5)
O Stockholders' Certificate Relating to Payments
Made (Section 9.9)
P Stockholders' Certificate Relating to Real Property
Interests (Section 9.11)
Q UAM Certificate as to Representations, etc. (Section 10.2)
v
Schedules
1 Stockholders of PIC
1.3A PIC's Client List
1.3B Example of Calculation of Adjustment
1.4 Example of Calculation of Contingent Payment
3.5 Liabilities
3.9 Interests of Officers
3.10A Property and Leases
3.10B Securities
3.11 Accounts Receivable
3.12 Insurance Policies
3.13 Names, Franchises, Permits, Etc.
3.15 Other Contracts
3.16 Employees
3.17 Bank Accounts and Money Market Funds
3.20 Employee Benefit Plans
3.25 Mutual Funds
3.26 Code of Ethics
3.28 Physician's Letters
8. Conduct of PIC's Business Prior to the Closing Date
9.17 Persons to be Insured by UAM
vi
ACQUISITION AGREEMENT
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AGREEMENT made as of the 10th day of November, 1994, by and among United
Asset Management Corporation, a Delaware corporation having its principal place
of business at One International Place, Boston, Massachusetts 02110 ("UAM"), PIC
Newco, Inc., a Massachusetts corporation and an indirect wholly-owned subsidiary
of UAM ("Newco"), Provident Investment Counsel, a California corporation having
its principal place of business at Corporate Center, 300 North Lake Avenue,
Pasedena, California 91101 ("PIC"), and the persons listed on Schedule 1 hereto
(collectively, "Stockholders," and each individually, "Stockholder") who are the
holders in the aggregate of all of the issued and outstanding capital stock of
PIC (the "PIC Stock").
W I T N E S S E T H:
WHEREAS, based upon the representations, covenants, agreements and
warranties herein made by PIC and the Stockholders and subject to the terms and
conditions contained in this Agreement, UAM wishes to acquire the assets and
business of PIC and immediately to contribute such assets and business to Newco,
which will continue to conduct the business of PIC; and
WHEREAS, based upon the representations, agreements and warranties herein
made by UAM and Newco and subject to the terms and conditions contained in this
Agreement, PIC and the Stockholders wish to transfer and sell the assets and
business of PIC to UAM and to have Newco continue the business of PIC; and
WHEREAS, the Stockholders, as owners of PIC, will benefit from the sale of
assets hereunder and will become key employees of Newco after such sale;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto, intending to be legally bound, do hereby agree as follows:
Article I. PURCHASE AND SALE.
1.1 SALE OF ASSETS. Subject to the terms and conditions set forth
herein, as of the Closing Date (as defined in Article II) UAM shall purchase
from PIC and PIC shall convey, transfer, set over, assign and deliver to UAM,
free and clear of all liens, attachments, charges, lis pendens, and encumbrances
of any nature (except as may otherwise expressly be permitted by this
Agreement), all of the assets of PIC, except such assets to be retained or
distributed by PIC as set forth on Schedule 8 hereto ("Excluded Assets"),
consisting of the assets and business of PIC of every kind and description,
tangible and intangible, real, personal or mixed and wherever located and all
proprietary and associated rights relating thereto, including without limitation
all assets shown or reflected in PIC's balance sheet as of September 30, 1994,
the Investment Advisory Contracts (as hereinafter defined), customer lists,
prospects lists, books, records, and all of PIC's goodwill and the exclusive
right to use the name of PIC as all or part of a trade or corporate name (the
"Assets"). UAM shall then transfer all of the Assets to Newco.
1.2 PURCHASE PRICE. Subject to adjustment as provided in Section 1.3,
below, UAM shall pay PIC in consideration of the purchase and sale of the Assets
(the "Purchase Price"):
(a) Two hundred sixty-two million, eight hundred four thousand
five hundred fifty dollars ($262,804,550) in cash to be paid at the Closing by
wire transfer in same day funds; and
(b) Twenty million, eight hundred fourteen thousand, seven
hundred seventy-six dollars ($20,814,776) principal amount of UAM Non-Negotiable
Seven-Year 6 1/2% Subordinated Note (the "Note"), to be delivered at the Closing
in the form of Exhibit A hereto and subordinated in accordance with the form of
Subordination Agreement attached hereto as Exhibit B (the "Subordination
Agreement"); and
(c) A Warrant Agreement in the form of Exhibit C attached hereto
(the "Warrant Agreement"), and a Warrant Certificate in the form of Exhibit D
attached hereto to be delivered at the Closing evidencing the right to purchase
459,385 shares ($20,814,776 principal amount of the Note divided by the Warrant
exercise price of $45.31 per share of UAM's Common Stock, $.01 par value (the
"Warrant"), and exercisable in accordance with the Warrant Agreement at forty-
five dollars and thirty-one cents ($45.31) per share, subject to adjustment as
stated in the Warrant Agreement; and
(d) an aggregate of sixty seven million, three hundred seventy
thousand, and seventy-four dollars ($67,370,074) of UAM Common Stock, $.01 par
value, valued in accordance with provisions set forth below (the "UAM Stock");
and
2
(e) the Contingent Payment provided for in Section 1.4 below (in
an aggregate amount which shall not exceed $125,000,000 reduced by the amount of
any Extension Bonus Payment payable by UAM pursuant to Section 11.10 below).
The per share price of UAM Stock to be used in calculating the number of
shares of UAM Stock to be delivered pursuant to section (d) above (the "UAM
Stock Price") shall be the average of the closing price of UAM's Common Stock
for the twenty (20) successive trading days ending on the tenth trading day
preceding the Closing Date as reported by the New York Stock Exchange, subject
to the following. If the average price calculated pursuant to the preceding
sentence is equal to or greater than $43.50 per share, the UAM Stock Price shall
be $43.50 per share. If the average price calculated pursuant to the preceding
sentence is equal to or less than $29.00 per share, the UAM Stock Price shall be
$29.00 per share.
Notwithstanding any other provision of this Agreement, no fractional shares
of UAM Stock and no certificates or scrip therefor, or other evidence of
ownership thereof, will be issued. The number of shares of UAM Stock to be
delivered to PIC pursuant hereto shall be rounded to the nearest whole share.
1.3 ADJUSTMENT IN PURCHASE PRICE. If any adjustment is required by the
provisions of the following subparagraphs, the portion of the Purchase Price
payable by UAM to PIC at the Closing will be reduced or increased, as the case
may be, PRO RATA with respect to the cash portion, the Note and the Warrant
portion, and the UAM Stock portion, by a percentage calculated in the following
manner:
(a) PIC shall have prepared and delivered to UAM on or prior to
the date hereof, a list (Schedule 1.3A) of investment advisory clients of PIC as
of September 30, 1994, showing for each client and as of that date, the client's
name, address, fee arrangements, assets under management, and pro forma annual
billings calculated by multiplying the assets under management by the annual
percentage fee applicable to such client under its Investment Advisory Contract
with PIC (the "Original Schedule"). The Original Schedule shall separately
identify each client which is a Fund (as hereinafter defined) as such. The
Original Schedule shall separately identify each client that is a financial
services firm and for which PIC provides advisory services for assets placed
with such firm pursuant to an agreement under which PIC serves as an investment
manager or submanager for broker-sponsored asset management programs ("Wrap
Accounts"). Each financial services firm for which PIC provides advisory
services for assets placed with such firm in Wrap Accounts shall be referred to
herein as a "Wrap Sponsor" and such firms shall be referred to collectively as
the "Wrap Sponsors". The Original Schedule and Revised Schedule (as hereinafter
defined) shall identify thereon the Wrap Sponsors as clients, but not the
underlying Wrap Account holders. Only assets under management which are
accruing fees shall be included on the Original Schedule or the Revised Schedule
prepared pursuant to subsection (c) below. Attached to the Original Schedule is
a description of each performance fee arrangement in place with any client
listed thereon.
3
(b) Based on negotiations as to the Purchase Price leading to
the execution of this Agreement, "Base Annual Billings" of PIC for purposes of
this calculation are $86,034,000.
(c) At the Closing, PIC will deliver to UAM a revised Schedule
1.3A (the "Revised Schedule") as of the close of business on the last business
day before the Closing prepared as follows:
(i) All clients that have terminated their investment advisory
relationship with PIC or that have notified PIC (orally or in
writing) of their intention to terminate that relationship since the
date of the Original Schedule shall be deleted from the Revised
Schedule.
(ii) Clients that have engaged PIC since the date of the Original
Schedule shall be added to the Revised Schedule with their assets
under management by PIC included in the Revised Schedule at the
value of those assets on the date PIC's management of those assets
commenced.
(iii) For clients that have withdrawn assets from management by PIC since
the date of the Original Schedule, assets under management for such
clients shall be reduced from the Original Schedule by the same
percentage as is calculated by dividing (A) the value of the assets
withdrawn as of the date of withdrawal, by (B) the aggregate value
of assets managed by PIC for such client immediately prior to the
withdrawal. If as of the Closing Date PIC has knowledge of any
prospective withdrawal of assets under management for any client,
assets under management for such client on the Revised Schedule
shall be reduced by the same percentage as is calculated by dividing
(A) the value of the assets proposed to be withdrawn by (B) the
aggregate value of assets managed by PIC for such client as of the
last business day before the Closing.
(iv) For clients that have added to assets under management since the
date of the Original Schedule, assets under management for such
clients shall be increased from the Original Schedule by the value
of those added assets on the date PIC's management of the assets
commenced.
(v) Pro forma annual billings for each client shall be calculated in the
same manner as in the Original Schedule, after giving effect to the
adjustments made to assets under management pursuant to
subparagraphs (i) to (iv) above and to any reductions in fees.
(vi) The Revised Schedule shall not reflect fluctuations in the market
value of assets under management since the date of the Original
Schedule (except as
4
expressly provided in subparagraphs (ii), (iii) and (iv) above) or
increases (if any) in PIC's fee schedule subsequent to that date.
Pro forma annual billings shown on this Revised Schedule are referred to as
"Assigned Annual Billings." The advisory agreements between PIC and the clients
listed on the Original and Revised Schedules are referred to herein as
"Investment Advisory Contracts."
(d) Assigned Annual Billings shall then be divided by Base
Annual Billings, and the resulting percentage shall be determined to the nearest
one-hundredth of a percent (the "Adjustment Percentage").
(e) CALCULATION OF REVALUATION PERCENTAGE.
(i) If the Adjustment Percentage is 95% to 105% , there shall be no
reduction or increase in the Purchase Price payable at the Closing.
(ii) If the Adjustment Percentage is 70% or more, up to 95%, then the
Purchase Price payable at the Closing shall be reduced in accordance
with the following table, with interpolation as necessary between
percentages rounded to the nearest one-hundredth of a percent:
Percent by which Purchase
Adjustment Percentage Price shall be Reduced
--------------------- ----------------------
95% 0%
94 1
93 2
92 3
91 4
90 5
* * * * * *
89% 5 1/2%
88 6
87 6 1/2
86 7
85 7 1/2
[and so forth
down to]
75% 12 1/2%
74 13
5
73 13 1/2
72 14
71 14 1/2
70 15
(iii) If the Adjustment Percentage is less than 70%, UAM may elect not to
proceed under this Agreement in accordance with Section 9.5 and PIC
may elect not to proceed under this Agreement in accordance with
Section 10.7.
(iv) If the Adjustment Percentage is greater than 105%, the portion of
the Purchase Price payable at the Closing shall be increased in
accordance with the following table, with interpolation as
necessary between percentages rounded to the nearest one-hundredth
of a percent, subject to the provisions of paragraph (v) below:
Percent by which Purchase
Adjustment Percentage Price shall be Increased
--------------------- ------------------------
105% 0%
106 1
107 2
108 3
109 4
110 5
111 5 1/2%
112 6
113 6 1/2
114 7
115 7 1/2
116 8%
117 8 1/2
118 9
119 9 1/2
120 10
121 10 1/2%
122 11
123 11 1/2
124 12
125 12 1/2
6
126 13 %
127 13 1/2
128 14
129 14 1/2
130 or above 15
(v) Notwithstanding any of the foregoing provisions of Section 1.3 to
the contrary, if the Closing occurs after January 27, 1995, the
amount of any increase in the portion of the Purchase Price payable
at the Closing by UAM shall be the lesser of such amount calculated
as of January 27, 1995, (using a revised Schedule 1.3A prepared as
of January 27, 1995, and such amount calculated as of the Closing,
and for purposes of such calculations revised Schedules 1.3A shall
be prepared both as of January 27, 1995, and as of the close of
business on the last business day prior to the day the Closing is
actually held.
The percentage by which the Purchase Price shall be decreased or increased
(i.e., the percentage determined from the right-hand column in the tables above)
is referred to herein as the "Revaluation Percentage".
(f) An example of the operation of this Section 1.3 is set forth
on Schedule 1.3B hereto.
1.4 CONTINGENT PAYMENT. One contingent payment (the "Contingent
Payment") in an aggregate amount that shall not exceed $125,000,000 reduced by
the amount of any Extension Bonus Payment payable by UAM pursuant to Section
11.10 below (the "Overall Limitation") shall be paid to PIC in the amount, in
the manner and on the date indicated below:
(a) Based on negotiations as to the Purchase Price leading to
the execution of this Agreement, the term "UAM's Base Share of Revenues" shall
mean $43,017,000, provided that if an increase or a reduction in the portion of
the Purchase Price payable at the Closing is made in accordance with Section 1.3
because the Adjustment Percentage is less than 95% or greater than 105%, the
term "UAM's Base Share of Revenues" shall mean $43,017,000 increased or reduced,
as the case may be, by the same percent by which the portion of the Purchase
Price payable at the Closing was increased or reduced pursuant to Section 1.3.
(b) To the extent that UAM's Share of Revenues, as that term is
used in the Revenue Sharing Agreement (as hereinafter defined) and adjusted to
normalize performance fees in accordance with the normalization of performance
fees as reflected in Schedule 1.3A, for the year ending December 31, 1997
exceeds UAM's Base Share of Revenues, the latter shall be deducted from the
former, the difference shall be multiplied by seven, and the
7
product shall be reduced by the amount of any Extension Bonus Payment payable by
UAM pursuant to Section 11.10 below to determine the amount of the Contingent
Payment, if any, due; subject to the Overall Limitation.
(c) The Contingent Payment, if any, shall be paid by UAM to PIC,
or PIC's successors in interest on or before March 1, 1998 (the "Contingent
Closing Date"), and shall be paid in cash by wire transfer in same day funds,
principal amount of UAM's Note (the "Contingent Note") and Warrant Agreement and
Certificate evidencing the right to purchase a number of shares of UAM Common
Stock equal to the number produced by dividing the principal amount of the
Contingent Note by $45.31 (subject to adjustment in accordance with Section 5 of
the Warrant Agreement) (the "Contingent Warrant") and UAM Common Stock (the
"Contingent Stock") in pro rata amount based on the relative amounts of such
consideration paid at Closing; provided, however, that (i) no Contingent Payment
shall be paid unless all provisions in the Revenue Sharing Agreement requiring
certain amounts to be distributed to UAM have been complied with in all
material respects (ii) at PIC's option and upon notice to UAM at least thirty
days prior to the Contingent Closing Date, the portion of the Contingent Payment
that shall be paid in cash may be decreased and the portion of the Contingent
Payment that shall be paid in Contingent Note and Contingent Warrant may be
correspondingly increased up to a maximum amount of $10,000,000; and (iii) any
Extension Bonus Payment payable by UAM pursuant to Section 11.10 below shall be
charged against the cash portion of the Contingent Payment.
(d) The per share price of Contingent Stock to be used in
calculating the number of shares of Contingent Stock to be delivered pursuant to
this section (the "Contingent Stock Price") shall be the average of the closing
price of UAM's Common Stock for the twenty (20) successive trading days ending
on the tenth trading day preceding the Contingent Closing Date (the "Pricing
Date") as reported by the New York Stock Exchange (or other exchange or market
on which such stock is quoted), subject to the following. The amount of the
Contingent Payment, if any, to be paid in Contingent Stock pursuant to this
section may be paid by UAM in cash by wire transfer in same day funds, at UAM's
option, if the Contingent Stock Price is less than the Contingent Stock Price
Lower Limit as defined in the following sentence. For purposes of this section,
the "Contingent Stock Price Lower Limit" shall be the higher of (i) $29.00 per
share; and (ii) 80% of the average of the closing price of UAM's Common Stock
for the last trading day of each of the fifty-two (52) successive weeks ending
with the week immediately preceding the Pricing Date as reported by the New York
Stock Exchange (or other exchange or market on which such stock is quoted).
(e) The Contingent Note shall have the same terms and shall be
in the same form as the Note (Exhibit A), except that it shall be due seven
years from the date of the Contingent Closing. An additional Subordination
Agreement substantially in the form of Exhibit B shall be executed at the time
of issuance of the Contingent Note.
8
(f) The Contingent Warrant shall have the same terms as provided
in Section 1.2 above, including the exercise price as therein provided; shall be
in the same form as the Warrant (Exhibit D); subject to the terms of the Warrant
Agreement (Exhibit C), except that it shall be exercisable at any time up to or
on the seventh anniversary date of the Contingent Closing. An additional
Warrant Agreement in the form of Exhibit D shall be executed at the time of
issuance of the Contingent Warrant.
(g) An example of Contingent Payment calculations is provided in
Schedule 1.4 hereto.
1.5 OBLIGATIONS ASSUMED BY NEWCO. As further consideration for the sale
of the Assets by PIC to UAM and subject to the provisions of Article VIII and
Section 9.15 hereof, Newco agrees, upon the terms and subject to the conditions
set forth herein, to assume at the Closing all obligations of PIC to perform or
provide services after the Closing Date under the Investment Advisory Contracts
and the contracts and other agreements listed on Schedules 3.10A, 3.12 and 3.15,
to the extent the same shall exist on the Closing Date (the "Assumed
Obligations"). Nothing in this Agreement or any Related Agreement (as defined
herein) shall require UAM or Newco to assume, and UAM and Newco do not assume,
any other liabilities or obligations of PIC to any person or entity.
Article II. THE CLOSING.
The closing of the transactions contemplated hereby (the "Closing") will
take place at 10:00 a.m. at the offices of PIC on January 27, 1995, or at such
other later time and other place as the parties hereto may mutually agree upon
(the "Closing Date"). Notwithstanding the foregoing, if as of such date one or
more of the meetings of the shareholders of the Funds contemplated by Section
7.6 below has or have not been held, then PIC shall have the right to defer the
Closing to a later reasonable date and time, but in no event shall such date be
later than March 15, 1995.
Article III. REPRESENTATIONS AND WARRANTIES OF PIC AND THE STOCKHOLDERS.
As a material inducement to UAM and Newco to enter into and perform this
Agreement, PIC and the Stockholders jointly and severally represent, warrant,
covenant and agree that:
3.1 PIC'S ORGANIZATION AND CORPORATE AUTHORITY. PIC is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, with full power and authority to own or lease and use its
properties and assets, to carry on its business as such business is now
conducted, to execute and deliver this Agreement, and to
9
consummate the transactions contemplated hereby. PIC is duly qualified to do
business as a foreign corporation under the laws of each jurisdiction in which
the conduct of its business requires such qualification or license, except for
jurisdictions where failure to so qualify or be licensed would not have a
material adverse effect on PIC's business.
3.2 CHARTER, BY-LAWS AND MINUTES. The copies of the Articles of
Organization of PIC as certified by the Secretary of State of California; the
By-laws of PIC as certified by its Secretary; and the minutes of meetings of its
Board of Directors and stockholders (or consents in lieu thereof) furnished to
UAM by PIC, are true, correct and complete and conform to the originals thereof.
3.3 NO VIOLATION. Neither the execution and delivery by PIC or the
Stockholders of this Agreement or of any other agreement or instruments required
by the provisions of this Agreement (collectively, the "Related Agreements") to
which PIC or the Stockholders may be parties, nor consummation of the
transactions herein or therein contemplated, nor compliance with the terms,
conditions and provisions hereof or thereof will conflict with or violate any
provision of law or the Articles of Incorporation or By-laws of PIC, or result
in a violation or default in any provision of any regulation, order, writ,
injunction or decree of any court or governmental agency or authority or of any
agreement or instrument to which PIC or a Stockholder is a party or by which PIC
or a Stockholder is bound or to which PIC or a Stockholder is subject, or
constitute a default thereunder or result in the imposition of any lien, charge,
encumbrance or security interest of any nature whatsoever upon any of PIC's
property pursuant to the terms of any such agreement or instrument (except as
contemplated by this Agreement), assuming that all of the consents contemplated
by Section 7.1 have been received and provided that the actions contemplated by
Article VII are taken and the provisions of 15 U.S.C. Section 18(a) and (b) (the
"Hart-Scott-Rodino Act") shall have been complied with pursuant to Section 9.19
hereof. The parties recognize that consummation of the transaction contemplated
herein will result in the automatic termination of PIC's investment advisory
agreements relating to the Funds described in Section 3.25 and that new
agreements may be entered into by Newco in accordance with the procedures
established by the Investment Company Act of 1940 and the regulations
promulgated thereunder.
3.4 THE STOCKHOLDERS. Except as set forth in Schedule 1, the
Stockholders own all of the issued and outstanding shares of PIC's capital stock
listed next to their respective names in Schedule 1 hereto, free and clear of
all agreements, charges, options, liens, security interests, pledges, claims,
restrictions and encumbrances of any nature whatsoever. PIC has authorized
capital stock consisting of 1,000,000 shares of common stock, $1.00 par value,
of which 166,020 shares are validly issued and outstanding, fully paid, non-
assessable and entitled to vote. There are outstanding no rights to purchase of
any kind affecting any shares of the capital stock of PIC, whether or not
outstanding.
3.5 FINANCIAL STATEMENTS. The Stockholders and PIC have delivered to
UAM audited balance sheets of PIC as at the close of its fiscal years ended
December 31, 1991
10
through December 31, 1993, together with related audited statements of income,
stockholders' equity and cash flow for the respective years then ended,
certified by or accompanied by a report of independent public accountants, all
of which balance sheets and financial statements (including the notes thereto)
for such three-year period are collectively called the "Audited Financials" and
are attached hereto as Exhibit G.
The Stockholders and PIC have also delivered to UAM an unaudited balance
sheet as of September 30, 1994, together with related statements of income,
stockholders' equity and cash flow for the [9]-month period then ended and will
deliver to UAM prior to the Closing an unaudited balance sheet as of the end of
the second month next preceding the month in which the Closing Date occurs,
together with unaudited statements of income, stockholders' equity and cash flow
of PIC for the post-December 31, 1994, period then ended, certified by the
principal financial and accounting officer of PIC, all of which balance sheets
and financial statements (including the notes thereto) are referred to
collectively as the "Unaudited Financials" and are or prior to the Closing will
be attached hereto as Exhibit H. The Audited Financials and the Unaudited
Financials are hereinafter sometimes collectively referred to as the "Financial
Statements."
The Financial Statements, when delivered in accordance with this Section,
will fairly present the financial position and results of operations of PIC on
the dates and for the fiscal periods then ended, in accordance with generally
accepted accounting principles which, except as may otherwise be noted in the
footnotes thereto, have been applied on a basis consistent with prior periods.
The Financial Statements reflect or provide for all claims against and all debts
and liabilities of PIC, absolute, accrued, contingent or otherwise, as at the
dates thereof in accordance with generally accepted accounting principles,
except for certain year-end accruals reflected on or omitted from the Unaudited
Financials which are not individually or in the aggregate material.
Schedule 3.5 hereto lists and will list (as modified as of the Closing
Date) all material claims against and all material debts and material
liabilities of PIC, absolute, accrued, contingent or otherwise, including all
material bonuses payable, or paid since the date of the latest Financial
Statements, and taxes due as at the date hereof, and as of the Closing Date.
PIC has no liability of any nature, contingent or otherwise, which is not
fully reflected or reserved against in the Audited Financials for the year ended
December 31, 1993, or in the Unaudited Financials or listed in Schedule 3.5.
Attached to Schedule 3.5 is a projected statement of cash flow for the
twelve-month period immediately following the Closing Date. Such statement was
prepared on a basis consistent with the Financial Statements and was prepared in
good faith based on assumption which PIC and the Stockholders consider to be
reasonable.
11
3.6 NO ADVERSE CHANGE. Since September 30, 1994, (a) there has been no
material adverse change in the financial condition, results of operations,
assets, liabilities or business of PIC; (b) there have been no dividends or
other distributions with respect to PIC's capital stock paid or declared by PIC
except as disclosed to UAM in Schedule 8 hereto; (c) PIC has not issued or sold
any shares of its capital stock; and (d) the physical properties owned or leased
by PIC have not suffered any destruction or damage, regardless of whether or not
the loss suffered was insured, that would materially adversely affect PIC's
business.
3.7 SUBSIDIARIES. PIC has no subsidiaries. PIC does not own, directly
or indirectly, other than for investment purposes, any of the capital stock of
any corporation, association, trust or similar entity, any interest in the
equity of any partnership or similar entity, any share in any joint venture, or
any other equity or proprietary interest in any entity or enterprise, however
organized and however such interest may be denominated or evidenced.
3.8 TAXES. PIC has filed all federal, state, local and other tax
returns which are required to be filed by it and which were due prior to the
date of this Agreement and has paid all taxes shown thereon, including without
limitation all taxes on properties, income, business and occupation, licenses,
sales and payrolls. All federal, state, local and other taxes accruable since
the end of the respective periods covered by such returns and up to the date
hereof and the Closing Date have or will have been paid or accrued on the books
of PIC (other than taxes on so-called built-in gain which will be calculated and
paid in accordance with Section 6.2 hereof). The tax returns of PIC for the
last five fiscal years up to December 31, 1993 heretofore delivered to UAM are
true, accurate and complete in all material respects, and fairly present the
information purported to be shown therein, and reflect all material tax
liabilities of PIC for the periods covered thereby. The Financial Statements
include adequate reserves or liabilities for all accrued and unpaid federal,
state and local taxes of PIC, whether or not disputed, for the fiscal year ended
December 31, 1993, and the post-December 31, 1993 periods covered thereby and
for all fiscal periods prior thereto or arising out of transactions entered into
or any state of facts existing on or prior to the dates thereof.
On March 13, 1989, PIC filed a valid election under Section 1362 of the
Internal Revenue Code ("Code") to be an S corporation governed by the provisions
of Subchapter S of the Code effective January 1, 1989. Such election has not
been revoked. PIC, at the time of the filing of the election, and since such
filing, has met all of the requirements of Subchapter S of the Code to be
eligible for treatment as an S corporation under the Code.
No federal income tax returns of PIC filed for any period beginning after
December 31, 1987, have been audited by the Internal Revenue Service, and PIC
has granted no power of attorney to any person to represent it before the
Internal Revenue Service. No federal or state tax liabilities have been
assessed or proposed which remain unpaid. Neither PIC nor any of the
Stockholders is aware of any basis upon which any liability for a material
amount
12
of additional taxes could be incurred. No state excise or business and
occupation tax returns of PIC filed for any period beginning after December 31,
1987, have been audited, and no state tax liabilities have been assessed or
proposed which remain unpaid.
Present taxes which PIC is required by law to withhold or collect have been
withheld or collected and have been paid over to the proper governmental
authorities or are properly held by PIC for such payment, and all withholdings,
collections or other payments payable in connection therewith as of the dates of
the Unaudited Financials, are fully reflected or disclosed in the balance sheets
included as a part of the Unaudited Financials as at such dates and for the
periods then ended. All such taxes are and will be so withheld, collected, paid
over or held for payment as of the date of this Agreement and the Closing. No
waivers of statutes of limitations with respect to any tax returns of PIC nor
extensions of time for the assessment of any tax have been given which are now
in effect.
Neither PIC nor the Stockholders have taken or will take any action other
than in the ordinary course of business and other than the transactions to occur
pursuant to this Agreement which would create a tax liability of PIC that would
become such on or after the Closing Date.
3.9 INTERESTS OF OFFICERS. Except for normal advances for business
expenses incurred in the ordinary course of business, no officer, director, or
stockholder of PIC nor any affiliate of any of the foregoing parties has any
loan or other obligation outstanding to or from PIC or for which PIC is or may
be liable under guaranty or otherwise, or has any material interest in any firm,
person or entity with which PIC has entered into any contract or lease, or with
which PIC does business and which would influence that person in doing business
with PIC, other than as disclosed in Schedule 3.9.
3.10 PROPERTY. PIC's assets which consist of real estate or leasehold
interests in or options on real estate are listed on Schedule 3.10A, together
with all "Encumbrances" (as hereinafter defined) thereon. PIC has good and
marketable title to all real property owned by it, free of all encumbrances
other than those identified on Schedule 3.10A.
Also set forth on Schedule 3.10A is a list of personal property (including
without limitation machinery, equipment, furniture and computer software) owned,
leased by or under option to PIC with an individual net book value at September
30, 1994 in excess of $10,000 for owned property or with individual annual lease
payments in excess of $10,000 for leased property, together with all
"Encumbrances" thereon. Prior to the Closing, PIC should deliver to UAM a
complete Fixed Asset listing for financial reporting purposes. The term
"Encumbrances" shall mean all claims, liens, pledges, mortgages, security
interests, encumbrances, charges, options, defaults, equities or restrictions or
other matters, if any, affecting PIC's title to, ownership of, or lease interest
in any of the scheduled property.
13
Schedule 3.10A includes a description of the terms of the aforesaid leases
and options or, in lieu thereof, copies of such leases and options. All leases
listed on Schedule 3.10A are in good standing and are valid and effective in
accordance with their respective terms, and there is not under any such lease
any existing default of PIC or event which with notice or lapse of time or both
would become a default of PIC. The assignment of such leases pursuant hereto
will not constitute a default or event of default of PIC thereunder; provided,
however, that the parties acknowledge that the consent of PIC's landlord under
its lease of primary office space [is] required. The Encumbrances set forth in
Schedule 3.10A do not singly or in the aggregate materially affect the value of
such real or personal property or impair the use thereof in PIC's business as
now conducted. All personal property of PIC has been properly maintained and is
in good order and repair, ordinary wear and tear excepted and is operable and
fit to be used for its intended purposes.
PIC owns free and clear of all Encumbrances the bonds, debentures, notes,
stock and other securities listed on Schedule 3.10B hereto, and none other.
3.11 ACCOUNTS RECEIVABLE. The accounts receivable reflected in the
Unaudited Financials of September 30, 1994 arose in the ordinary course of
business and have been collected in full or are fully collectible or, if not
fully collectible, have been written off or have had adequate reserves
established therefor. Set forth on Schedule 3.11 hereto is a list of all
accounts receivable of PIC which were billed as of September 30, 1994, showing
the name of each debtor and the amount due on each account, and indicating any
amount past-due on each account and any write-off or reserve against each such
account. Such accounts receivable are likewise fully collectible, unless
otherwise indicated. Schedule 3.11 shall be supplemented at the Closing to
reflect accounts receivable as of the Closing Date. Except as disclosed on
Schedule 3.11 hereto, no agreements have been in effect since January 1, 1994 or
are now proposed which would require any delay in payment of any fees payable
under the Investment Advisory Contracts.
3.12 INSURANCE. Each insurance policy which is maintained by PIC with
respect to its business or properties or upon the life of any person employed by
PIC is set forth on Schedule 3.12 hereto showing the amount of coverage under
each such policy, other than life insurance policies owned by employees for
which PIC pays the premiums. The listed policies are reasonably adequate to
protect the insured properties against the insured risks, at current replacement
values, subject to reasonable deductibles, and the risks insured against are
normal for the industry. All such policies are assignable, except as set forth
on Schedule 3.12.
3.13 NAMES, FRANCHISES, PERMITS, ETC. To its best knowledge, PIC has the
right to use its name in every state in which it now does business. Except as
noted on Schedule 3.13 hereto, PIC has no franchises, permits, licenses,
trademarks, trade names, patents, patent applications, copyrights, trade
secrets, computer software, formula, designs or inventions and none of the same
are necessary to conduct its business as now operated without infringing on
14
the rights of any other person. To the best knowledge of the Stockholders and
PIC, PIC has not infringed or violated in any way any trademark, trade name,
copyright, trade secret rights or contractual relationships of others, and has
not received any notice, claim or protest respecting any such violations or
infringement. PIC has not given any indemnification to any person for any such
violations or infringements.
3.14 INVESTMENT ADVISORY CONTRACTS. The Original Schedule 1.3A is true,
complete and accurate and has been prepared as described in Section 1.3(a)
above. As of the Closing Date, the Revised Schedule 1.3A shall be true,
complete and accurate and prepared in accordance with Section 1.3(c) above.
Each client listed on the Original and Revised Schedule 1.3A is being or will be
as of the date thereof served by PIC in accordance with the information in such
Schedule, and PIC has no knowledge of any prospective termination by any such
client of its Investment Advisory Contract or withdrawal of assets from
management by PIC except as set forth therein. True, correct and complete
copies of all Investment Advisory Contracts have been provided or made available
to UAM. Schedule 1.3A separately identifies each Investment Advisory Contract
which in any material respect by its terms provides any client with the most
favorable provisions offered to any other client of PIC (any "most favored
nation provisions") or which provides for any contingently returnable fees.
Each of the Investment Advisory Contracts to which PIC is a party is a legal,
valid and binding obligation of PIC and, to the knowledge of PIC, each of the
other parties thereto enforceable in accordance with its terms, subject to
(i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and transfer and other similar laws of general application,
heretofore or hereafter enacted or in effect, affecting the rights and remedies
of creditors generally, and (ii) the exercise of judicial or administrative
discretion in accordance with general equitable principles, particularly as to
the availability of the remedy of specific performance or other injunctive
relief (the "Remedies Exception"). PIC is not in breach, violation or default
under any such agreement. PIC has no arrangements or understandings relating to
PIC's rendering of investment advisory services to anyone which are not
disclosed on the Original and Revised Schedule 1.3A.
PIC has heretofore delivered to UAM a listing as of September 30, 1994 of
all persons holding Wrap Accounts with Wrap Sponsors and managed by PIC
identifying each such person's assets under management by PIC, and the nature of
the advisory services provided by PIC. At the Closing, PIC shall deliver a
revised listing of all such information prepared as of the third to last
business day before the Closing
3.15 OTHER CONTRACTS. All contracts (other than Investment Advisory
Contracts) to which PIC is a party or by which PIC is bound and which are
material to PIC's business and are not identified on any other Schedule hereto,
and all confidentiality agreements obtained from parties other than UAM are
listed on Schedule 3.15 hereto. PIC is not obligated under any contract or
agreement which materially and adversely affects its business, properties,
prospects, assets or condition, financial or otherwise.
15
Except as listed on Schedule 3.15, PIC is not a party to any loan agreement
or bank credit agreement.
PIC has given no power of attorney to any person or entity which is
presently outstanding or in force for any purpose whatsoever except as listed on
Schedule 3.15.
PIC is not in default under (nor is PIC or any of the Stockholders aware of
any fact or event which with the lapse of time or the giving of notice or both
would constitute a default under) any contract made or obligation owed by it
which would result in a liability that would materially adversely affect the
business of PIC.
3.16 CERTAIN SALARIED EMPLOYEES. Set forth on Schedule 3.16 attached
hereto is a list of all present employees of PIC who each were paid in fiscal
year 1993 or are currently being paid on an annualized basis a salary equal to
or greater than $60,000. Also set forth on Schedule 3.16 with respect to each
such employee is the following information: (a) the aggregate amount paid as
salary in fiscal year 1993; (b) the amount of salary currently being paid on an
annualized basis; (c) the nature (e.g., cash bonus) and amount of all aggregate
direct and indirect remuneration other than salary paid during fiscal year 1993;
(d) the nature and amount of all aggregate direct remuneration proposed to be
paid during fiscal year 1994; and (e) a list of any employment agreements
between PIC and such employee. True, correct and complete copies of all
employment agreements listed on Schedule 3.16 have been provided to UAM.
3.17 BANK ACCOUNTS AND MONEY MARKET FUNDS. Set forth on Schedule 3.17
hereto is the name and location of each bank and money market fund in which PIC
has an account or accounts or safe deposit boxes, the name and number of each
account or box, the names of persons authorized to draw thereon or having access
thereto, and the balance of each account and the contents of each box as of the
date indicated thereon. Such Schedule shall be up-dated as of the Closing Date.
3.18 LITIGATION. There are no actions, suits, proceedings or
investigations of any kind pending, or, to the knowledge of PIC or any of the
Stockholders, threatened before any court, commission, agency or other
administrative authority against PIC or any of its stockholders or directors, or
its businesses or properties, and PIC is not the subject of any order or decree.
3.19 FINDER'S FEE. Neither PIC nor any Stockholder has incurred any
obligation of any kind whatsoever to any party for a finder's fee in connection
with the transactions contemplated by this Agreement other than an obligation to
Goldman Sachs & Co. for which PIC will be solely liable.
3.20 EMPLOYEE BENEFIT PLANS. Schedule 3.20 attached hereto lists all
deferred compensation, pension, profit sharing and retirement plans, and all
material bonus and other
16
employee benefit or fringe benefit plans maintained by PIC or with respect to
which contributions are made by PIC (including health, life insurance and other
benefit plans maintained for retirees). Said plans, including but not limited
to all plans or programs that constitute "employee benefit plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), are sometimes collectively referred to in this section as "Benefit
Plans." True and complete copies of all Benefit Plans, including any insurance
contracts under which benefits are provided, as currently in effect have been
provided to UAM. UAM has also been provided with a true and complete copy of
the summary plan description, if any was required by ERISA to be prepared and
distributed to participants, for each Benefit Plan. Except as set forth in
Schedule 3.20:
(a) PIC has fulfilled its obligations to the extent applicable
under the minimum funding requirements of Section 302 of ERISA and Section 412
of the Internal Revenue Code of 1986, as amended (the "Code"), with respect to
each Benefit Plan. PIC has made all payments to all Benefit Plans as required
by the terms of each such plan and any applicable collective bargaining
agreements and in accordance, if applicable, with the actuarial and funding
assumptions in effect as for the most recent actuarial valuation of such plans
and the quarterly contribution requirements of Section 302(e) of ERISA and
Section 412(m) of the Code. No lien exists on any of PIC's assets pursuant to
Section 302(f) of ERISA or Section 412(n) of the Code. A copy of the most
recent actuarial valuation and report for each defined benefit pension plan has
been provided to UAM. Except as disclosed on Schedule 3.20, PIC has funded or
will fund each Benefit Plan in accordance with its terms through the Closing,
including the payment of applicable premiums on any insurance contract funding a
Benefit Plan for coverage provided through the Closing.
(b) Each Benefit Plan is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, including but
not limited to the satisfaction of all applicable reporting and disclosure
requirements under ERISA and the Code. PIC has filed or caused to be filed with
the Internal Revenue Service annual reports on Form 5500 or 5500C and 5500R, if
applicable, for each Benefit Plan for all years and periods for which such
reports were required, and such reports for the past five years have been
provided to UAM.
(c) No "prohibited transaction," as defined in Section 406 of
ERISA and Section 4975 of the Code, has occurred in respect of any Benefit Plan
which could give rise to any liability or tax under ERISA or the Code on the
part of PIC, and no civil or criminal action brought pursuant to part 5 of Title
I of ERISA is pending or is threatened in writing or orally against any
fiduciary of any such plan, other than claims for benefits in the normal course.
(d) The Internal Revenue Service has issued a letter for each
employee pension benefit plan (as defined in Section 3(2) of ERISA) determining
that such plan is a qualified plan under Section 401(a) of the Code and is
exempt from Federal income tax
17
under Section 501(a) of the Code, and, to the best knowledge of PIC, there has
been no occurrence since the date of any such determination letter which has
adversely affected such qualification.
(e) The assets of each Benefit Plan that is subject to Title IV
of ERISA will, as of the Closing, be sufficient to pay all "benefit liabilities"
as defined in Section 4001(a)(16) of ERISA. There shall not be as of the
Closing any outstanding unpaid minimum funding waiver within the meaning of
Section 412(d) of the Code.
(f) There has not been any (1) termination or partial
termination of any employee pension benefit plan (as defined in Section 3(2) of
ERISA) maintained by PIC (or by any person, firm or corporation which is or was
under common control within the meaning of Section 4001(c) of ERISA, with PIC
(hereinafter called "an Affiliate") during the period of such common control, at
a time when Section 4021 of ERISA applied to such plan), (2) commencement of any
proceeding to terminate any such plan pursuant to ERISA, or otherwise, or (3)
written notice given to PIC or any Affiliate of the intention to commence or
seek the commencement of any such proceeding, which (under (1)) resulted or
(under (2) or (3)) would result in any insufficiency of plan assets necessary to
satisfy benefits guaranteed under Section 4022 of ERISA or benefits vested under
the plan. Any termination of any employee pension benefit plan has been
disclosed in Schedule 3.20 attached hereto and was accomplished in accordance
with the requirements of ERISA (including ERISA Section 4041, if applicable) and
the Code and all applicable regulations in effect under ERISA and the Code in
effect at the time the termination occurred. No "Reportable Event" as defined
in Section 4043 of ERISA (excluding "Reportable Events" for which the 30-day
notice requirement is waived) has occurred with respect to any pension benefit
plan and neither PIC nor any of its Affiliates has any liability to the Pension
Benefit Guaranty Corporation with respect to or arising from the maintenance of
any such plan.
(g) Except as disclosed on Schedule 3.20, neither PIC nor any of
its Affiliates is a party to any pension plan that is a "multi-employer plan"
within the meaning of Section 4001(a)(3) of ERISA. Neither PIC nor any of its
Affiliates currently has any liability to make any withdrawal liability payment
to any multi-employer plan. Neither PIC nor any of its Affiliates is delinquent
in making any contributions required to be paid to any multi-employer plan.
There is no pending dispute between PIC or any of its Affiliates and any multi-
employer plan concerning payment of contributions or payment of withdrawal
liability payments.
(h) Each Benefit Plan that provides medical benefits has been
operated in compliance with all requirements of Sections 601 through 609 of
ERISA and Section 4980B of the Code and regulations thereunder, relating to the
continuation of coverage under certain circumstances in which coverage would
otherwise cease.
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(i) Schedule 3.20 discloses, and separately indicates, each
plan, fund or program maintained by PIC that provides post retirement medical
benefits, post retirement death benefits or other post retirement welfare
benefits. A copy of any written description of post retirement welfare benefits
that has been provided to employees has been furnished to UAM. A copy of each
plan document, insurance contract or other written instrument providing for post
retirement welfare benefits has been provided to UAM, together with a
description of any advance funding arrangement that has been established to fund
post retirement welfare benefits.
3.21 DISCLOSURE. The representations and warranties made by PIC and each
of the Stockholders in this Agreement and any of their respective statements
made in any of the Exhibits or Schedules hereto do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make any such representation, warranty or statement, in the light of the
circumstances under which it was made, not misleading. There is no fact or
condition particularly related to the business of PIC which is known to PIC and
no Stockholder is aware of any fact or condition particularly related to the
business of PIC which any of them reasonably believes might materially adversely
affect the business, property, condition (financial or otherwise), or results of
operations of PIC and which has not been set forth in this Agreement or in an
Exhibit or Schedule hereto, except general economic and securities market
conditions.
3.22 APPROVALS. No approval, authorization, order, license or consent of
or registration, qualification or filing with any governmental authority and no
approval or consent by any other person or entity is required in connection with
the execution, delivery or performance by PIC and the Stockholders of this
Agreement and the Related Agreements, other than as contemplated by Article VII
and Sections 3.25 and 9.19 hereof.
3.23 PIC'S AUTHORITY. PIC has full right, power and authority to
execute, deliver and perform this Agreement and the Related Agreements to which
it is a party, all proper corporate actions of PIC's Board of Directors and
Stockholders authorizing the execution, delivery and performance hereof and
thereof having been taken. This Agreement has been duly executed and delivered
by PIC and constitutes, and the Related Agreements to which it will be a party
when executed and delivered, will be duly executed and delivered and will
constitute, valid and legally binding obligations of PIC enforceable in
accordance with their respective terms, subject to the Remedies Exception.
There are pending no proceedings or actions to dissolve PIC.
3.24 STOCKHOLDERS' AUTHORITY. The Stockholders have full right, power
and authority to execute, deliver and perform this Agreement and each Related
Agreement to which they are parties. This Agreement has been duly executed and
delivered by the Stockholders and constitutes, and each Related Agreement to
which they will be parties when executed and delivered will be duly executed and
delivered and,, will constitute, the valid and
19
legally binding obligation of each of them, enforceable in accordance with their
respective terms, subject to the Remedies Exception.
3.25 GOVERNMENT REGULATION. PIC is and has been since 1976 duly
registered as an investment adviser under the Investment Advisers Act of 1940.
PIC is registered as an investment adviser in the states referenced in item 7,
Part I of its current Form ADV, and is in compliance with all state laws
requiring registration, licensing or qualification as an investment adviser.
Each such federal and state registration is in full force and effect. PIC has
delivered to UAM a true and complete copy of its Form ADV, as amended to date,
filed by PIC with the Securities and Exchange Commission; copies of all state
registration forms, likewise as amended to date; and copies of all current
reports required to be kept by PIC pursuant to the Investment Advisers Act of
1940 and rules promulgated thereunder, and required pursuant to applicable state
statutes. The information contained in such forms and reports was true and
complete at the time of filing in all material respects. PIC has filed all
amendments required to be filed to its Form ADV and state registration forms
under federal and state law. Except as set forth on Schedule 3.25, PIC has
filed all reports required to be filed by it under the Securities Exchange Act
of 1934 (including Sections 13(d), (g) and (f) thereof) and rules promulgated
thereunder. Schedule 3.25 identifies the examination and/or certification
qualifications of each of PIC's adviser representatives.
PIC is not an "investment company," within the meaning of the Investment
Company Act of 1940, which is required to be registered under that Act in order
to engage in the transactions described in Section 7 of that Act. PIC is not a
"broker" or "dealer" within the meaning of the Securities Exchange Act of 1934.
Copies of all inspection reports or similar documents furnished to PIC by the
Securities and Exchange Commission or state regulatory authorities since January
1, 1989 are listed on Schedule 3.25 and have been provided to UAM. PIC is not
required to disclose any information to clients under SEC Rule 206(4)-4
promulgated under the Investment Advisers Act of 1940.
Except with respect to the entities listed on Schedule 3.25 hereto (each a
"Fund" and collectively the "Funds"), PIC does not act as investment adviser or
subadviser to any "investment company," as defined in the Investment Company Act
of 1940, which is registered under such Act. PIC has a written investment
advisory agreement with each Fund pursuant to which PIC serves as investment
adviser to each Fund, and has delivered to UAM true and complete copies of such
agreements. Each of such agreements is in full force and effect, PIC is not in
default thereunder and, to the best knowledge of PIC, no Fund that is a party
thereto is in default thereunder. The investment advisory agreement relating
to each Fund will terminate upon the consummation of the transaction
contemplated by this Agreement, and new agreements may be entered into by Newco
in accordance with the procedures established by the Investment Company Act of
1940 and the regulations promulgated thereunder.
20
Neither PIC nor any Stockholder nor any other "interested person" of PIC,
as such term is defined in the Investment Company Act of 1940, receives or is
entitled to receive any compensation directly or indirectly (i) from any person
in connection with the purchase or sale of securities or other property to, from
or on behalf of any of the Funds, other than bona fide ordinary compensation as
principal underwriter for the Funds or (ii) from the Funds or its security
holders for other than bona fide investment advisory services, or other
services.
3.26 CODE OF ETHICS. PIC has adopted a formal code of ethics, a true,
complete and accurate copy of which has been provided to UAM. Its policies with
respect to avoiding conflicts of interest are as set forth in its Form ADV, as
amended, which has been delivered to UAM. There have been no instances of non-
compliance with such policies since November 1, 1992, except as listed on
Schedule 3.26.
3.27 NO PRACTICES IN VIOLATION OF LAW. Neither PIC nor any Stockholder
has engaged in or is now engaging in any act, conspiracy or course of conduct in
violation of any applicable federal or state law which would result in a
materially adverse change in the financial condition, results of operation,
assets, liabilities or business of PIC, and has not received any notice, claim
or protest that it is now or has heretofore been so engaged.
3.28 EMPLOYEES' HEALTH. Each employee of PIC listed on Schedule 3.28 is
in good health. Prior to the execution of this Agreement, each such employee
has delivered to UAM a letter from a licensed physician familiar with such
person's health indicating that such person is in good health, which letters are
included in Schedule 3.28.
3.29 FEE SCHEDULE. PIC's fee schedules in effect as of September 30, 1994
are in full force and effect, and have not been unilateraly amended by PIC
since January 1, 1990.
3.30 INVESTMENT REPRESENTATIONS. PIC and the Stockholders understand
that as of the date when the Note and Warrant are issued to PIC, such securities
will not have been registered under the Securities Act of 1933, and the rules
and regulations thereunder (the "Securities Act"), or qualified under any
applicable state securities laws, on the ground that the transfer of such
securities to PIC is exempt from the registration and prospectus delivery
requirements of the Securities Act and from qualification under any applicable
state securities laws, and that such exemptions are based in part on the
representations and warranties made herein.
PIC is acquiring the Note and Warrant for its own account and not for that
of any other persons, and without a view to or in connection with any
distribution thereof which is proscribed by the Securities Act or any rule or
regulation thereunder or in violation of any applicable state securities laws.
PIC and the Stockholders shall not offer, sell or otherwise dispose of the
Note and Warrant except to the Stockholders upon the liquidation of PIC or in
conformity with Rule
21
144 of the Securities and Exchange Commission or pursuant to a registration
statement under the Securities Act and qualification under applicable state
securities laws or pursuant to an opinion of counsel reasonably satisfactory to
UAM that such registration and qualification is not required. PIC and the
Stockholders acknowledge and agree that the Note and Warrant shall be endorsed
with the legends set forth in Exhibits A and D hereto.
UAM may require as a condition precedent to any proposed offer, sale,
transfer, pledge, hypothecation or other disposition of the Note and Warrant by
PIC other than in conformity with Rule 144 of the Securities and Exchange
Commission or pursuant to a registration statement under the Securities Act that
the proposed transferee first sign, seal and deliver to UAM an investment
agreement with respect to the securities to be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of containing substantially the
agreements, representations and Warranties set forth in this Section 3.30.
PIC and the Stockholders acknowledge receipt from UAM of its Annual Report
to Stockholders for the fiscal year ended December 31, 1993; its proxy statement
in connection with its annual meeting of May 19, 1994; and its Quarterly Reports
on Form 10-Q for the fiscal quarters ended March 31, 1994 and June 30, 1994.
PIC and the Stockholders represent to UAM (i) that they have reviewed such
reports and statements; (ii) that they have been afforded the opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of the Note and Warrant hereby and to obtain any additional information
that UAM possesses or can acquire without unreasonable effort or expense that is
necessary to verify any of the information contained in any such reports and
statements; and (iii) that they have such knowledge and experience in financial
and business matters that they are capable of evaluating the merits and risks of
an investment in UAM.
Article IV. REPRESENTATIONS OF UAM AND NEWCO.
As a material inducement to PIC and the Stockholders to enter into and
perform this Agreement, UAM and Newco represent, warrant, covenant and agree,
that:
4.1 ORGANIZATION OF UAM AND NEWCO AND CORPORATE AUTHORITY. UAM is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full power and authority to own or lease and use
its properties and assets, to carry on its business as such business is now
conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. Newco is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts with full power and authority to own or lease and use its
properties and assets, to carry on its business as such business is now
conducted, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Newco has been formed for the purpose of the
transaction described herein and prior to the Closing will not engage in
business as an investment adviser, or any other business other than in
22
contemplation of the transactions set forth herein. Newco is duly qualified to
do business as a foreign corporation under the laws of each jurisdiction in
which the conduct of its business requires such qualification or license, except
for jurisdictions where failure to so qualify or be licensed would not have a
material adverse effect on the business to be conducted by it pursuant hereto
subsequent to the Closing Date.
4.2 NO VIOLATION. Neither the execution and delivery by UAM or Newco of
this Agreement or of any of the Related Agreements to which UAM or Newco may be
parties, nor consummation of the transactions herein or therein contemplated,
nor compliance with the terms, conditions and provisions hereof or thereof will
conflict with or violate any provision of law or the Certificate or Articles of
Incorporation or By-laws of UAM or Newco, or result in a violation or default in
any provision of any regulation, order, writ, injunction or decree of any court
or governmental agency or authority or of any agreement or instrument to which
UAM or Newco is a party or by which UAM or Newco is bound or to which UAM or
Newco is subject, or constitute a default thereunder or result in the imposition
of any lien, charge, encumbrance or security interest of any nature whatsoever
upon any of UAM's or Newco's assets pursuant to the terms of any such agreement
or instrument (except for a security interest of UAM's lending banks in the
stock of Newco), provided that the actions contemplated by Article VII hereof
are taken and the consents and approvals described in Section 4.9 are obtained.
4.3 FINDER'S FEE. Neither UAM or Newco has incurred any obligation of
any kind whatsoever to any party for a finder's fee in connection with the
transactions contemplated by this Agreement.
4.4 CHARTER, BY-LAWS AND RESOLUTIONS. The copies of the respective
Certificate or Articles of Incorporation of UAM and Newco certified by the
respective Secretaries of State; of the By-laws of UAM and Newco as certified by
their respective Secretaries; and of resolutions of UAM's and Newco's respective
Boards of Directors relating to the transactions contemplated by this Agreement,
furnished by UAM and Newco to PIC and the Stockholders, are true, correct and
complete copies thereof.
4.5 FINANCIAL STATEMENTS OF UAM. UAM has delivered to the Stockholders
an audited, consolidated balance sheet of UAM as at December 31, 1993, together
with a related audited, consolidated statement of income, stockholders' equity
and cash flow for the year then ended, certified by, or accompanied by a report
of, independent public accountants, which balance sheet and financial statements
(including the notes thereto) for such period are collectively called the "UAM
Audited Financials" and are attached hereto as Exhibit I.
UAM has also delivered to the Stockholders an unaudited, condensed,
consolidated balance sheet as of September 30, 1994, together with an unaudited,
condensed, consolidated statement of income and cash flow for the six-month
period then ended, which balance sheet and financial statements (including the
notes thereto) are referred to collectively as the
23
"UAM Unaudited Financials " and are attached hereto as Exhibit J. The UAM
Audited Financials and the UAM Unaudited Financials are hereinafter sometimes
collectively referred to as the "UAM Financial Statements."
The UAM Financial Statements fairly present the financial position and
results of operations of UAM on the dates and for the fiscal periods then ended,
in accordance with generally accepted accounting principles which, except as may
otherwise be noted in the footnotes thereto, have been applied on a basis
consistent with prior periods.
4.6 LITIGATION. Except as may be disclosed in the UAM reports and
statements referred to in Section 3.30 above, there are no material actions,
suits, proceedings or investigations of any kind pending or, to the knowledge of
its responsible officers, threatened against UAM before any court, commission,
agency or administrative authority.
4.7 DISCLOSURE. The representations and warranties made by UAM and
Newco in this Agreement and any statements made by them in any of the Exhibits
or Schedules hereto do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make such representation,
warranty or statement, in light of the circumstances under which they were made,
not misleading. There is no fact or condition particularly related to the
business of UAM which is known to UAM and which UAM reasonably believes might
adversely affect in a material fashion the business, property, condition
(financial or otherwise) or results of operations of UAM and which has not been
set forth in this Agreement or an Exhibit or Schedule hereto or disclosed in the
UAM reports or statements referred to in Section 3.30 above.
4.8 UAM'S AND NEWCO'S AUTHORITY. UAM and Newco have full right, power
and authority to execute, deliver and perform this Agreement and the Related
Agreements to which they may be parties, all proper corporate actions
authorizing the execution, delivery and performance hereof and thereof having
been taken. This Agreement has been duly executed and delivered by UAM and
Newco and constitutes, and the Related Agreements to which they may be parties
will be duly executed and delivered and, when executed and delivered, will
constitute, valid and legally binding obligations of UAM and Newco, enforceable
in accordance with their respective terms, subject to the Remedies Exception.
4.9 APPROVALS. No approval, authorization, order, license or consent of
or registration, qualification or filing with any governmental authority and no
approval or consent by any other person or entity is required in connection with
the execution, delivery or performance by UAM and Newco of this Agreement and
the Related Agreements, other than as contemplated by Article VII and
Sections 9.19 and 9.20 hereof.
4.10 CAPITALIZATION OF UAM AND NEWCO. UAM has duly authorized 50,000,000
shares of Common Stock, $.01 par value, of which 28,283,082 shares were issued
and outstanding and 11,808,146 shares were reserved for issuance on exercise of
outstanding
24
warrants or options or upon conversion of outstanding convertible notes, or
otherwise, as of November 1, 1994. UAM also has authorized 5,000,000 shares of
Preferred Stock, $1.00 par value, none of which is outstanding. All of the
presently outstanding shares of capital stock of UAM are validly issued, fully
paid and nonassessable. Newco has authorized 100 shares of Common Stock, no par
value, of which 100 shares are outstanding and are owned of record by United
Asset Management Holdings, Inc., a wholly owned subsidiary of UAM.
4.11 AUTHORIZATION OF NOTE AND WARRANT. The Note and the Warrant and the
Contingent Note and the Contingent Warrant have been duly authorized by all
necessary corporate action of UAM and, when issued, sold and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligations of UAM enforceable in accordance with their respective terms,
subject to the Remedies Exception.
4.12 RESERVATIONS OF COMMON STOCK. The shares of UAM Common Stock
issuable upon exercise of the Warrant and the Contingent Warrant have been duly
reserved for issuance upon such exercise and, when issued, will be validly
authorized, issued and outstanding, fully paid and nonassessable.
4.13 AUTHORIZATION OF COMMON STOCK. The issuance of shares of UAM Common
Stock under the terms hereof has been duly authorized by all necessary corporate
action and, when issued as contemplated by this Agreement and the Warrant
Agreement, such shares, will be validly issued, fully paid and nonassessable.
4.14 NO ADVERSE CHANGE. Since September 30, 1994, (a) there has been no
material adverse change in the financial condition, results of operations,
assets, liabilities or business of UAM and (b) there have been no dividends or
other distributions with respect to UAM's capital stock paid or declared by UAM,
except for UAM's normal quarterly dividend.
4.15 SEC REPORTS. UAM has previously furnished PIC with true and
complete copies of each registration statement and proxy statement filed since
January 1, 1994 by UAM with the Securities and Exchange Commission (the
"Commission"), and the following reports filed by UAM with the Commission:
UAM's Annual Reports on Form 10-K for each of the years ended December 31, 1993,
1992, 1991 and 1990 and all Quarterly Reports on Form 10-Q and all Current
Reports on Form 8-K filed after December 31, 1993. The financial statements and
schedules of UAM contained in said reports (or incorporated therein by
reference) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as noted therein, and fairly
present the information purported to be shown therein. Each registration
statement, proxy statement, and Annual Report on Form 10-K filed subsequent to
December 31, 1990 and Quarterly Reports on Form 10-Q and all Current Reports on
Form 8-K filed subsequent to December 31, 1993 did not, on the date of
effectiveness in the case of such registration statements, on the date of
mailing in the case of such proxy statements, and on the date of filing in the
case of such reports, contain any untrue statement of a material fact or omit to
state a material fact required to be
25
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No subsidiary of UAM
has issued a class of securities which is required to be registered under the
Securities Exchange Act of 1934.
Article V. INDEMNIFICATION.
5.1 INDEMNIFICATION BY THE STOCKHOLDERS AND PIC. Subject to all of the
limitations and provisions of this Article V, the Stockholders and PIC jointly
and severally agree to indemnify defend with counsel reasonably satisfactory to
UAM, and save and hold UAM and Newco harmless from and against, and compensate
them for, any and all demands, claims, actions, causes of action, assessments,
damages, liabilities, losses, diminution in value, expenses, fees, judgments or
deficiencies of any nature whatsoever (including, without limitation, any unpaid
taxes due from PIC and reasonable attorneys' fees and other costs and expenses
incident to any suit, action or proceeding including those incurred in
connection with the enforcement of this Agreement or any Related Agreement)
received, incurred or sustained by them, which shall arise out of or result
from: any breach of any representation, warranty or covenant of PIC or the
Stockholders (including without limitation those set forth in Article III
hereof) hereunder or under any Schedule, Exhibit or Related Agreement; any
violation of the bulk sales law of the State of California; any non-fulfillment
of any covenant or obligation of PIC or the Stockholders under this Agreement or
any Schedule or Exhibit hereto or any failure by PIC to pay or perform when due
any liability or obligation of PIC not expressly assumed by Newco pursuant
hereto.
5.2 INDEMNIFICATION BY UAM. Subject to all of the limitations and
provisions of this Article V, UAM agrees to indemnify, defend with counsel
reasonably satisfactory to the Stockholders and PIC, and save and hold the
Stockholders and PIC harmless from and against, and compensate them for, any and
all demands, claims, actions, causes of action, assessments, damages,
liabilities, losses, diminution in value, expenses, fees, judgments or
deficiencies of any nature whatsoever (including, without limitation, any
reasonable attorneys' fees and other costs and expenses incident to any suit,
action or proceeding including those incurred in connection with the enforcement
of this Agreement or any Related Agreement) received, incurred or sustained by
them, which shall arise out of or result from: any breach of any
representation, warranty or covenant of UAM or Newco (including without
limitation those set forth in Article IV hereof) hereunder or under any
Schedule, Exhibit or Related Agreement; or any non-fulfillment of any covenant
or obligation of UAM or Newco under this Agreement or any Schedule or Exhibit
hereto.
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in this Agreement and referred to in Sections 5.1 and 5.2
above shall survive the Closing for two years (except that the representations
and warranties of the Stockholders set forth in Sections 3.8 (TAXES), 3.20
(EMPLOYEE BENEFIT PLANS), 4.11 (AUTHORIZATION OF NOTE AND WARRANT), 4.12
(RESERVATIONS OF COMMON STOCK), and 4.13 (AUTHORIZATION OF COMMON STOCK) of this
Agreement shall survive the Closing for [seven]
26
years) notwithstanding the establishment of a shorter period by any applicable
statute of limitations, the provisions of which are hereby waived, provided that
liability with respect to any representation or warranty as to which a claim is
made within such two-year and seven-year periods, as applicable, shall continue
until finally determined and paid.
Each claim for indemnification pursuant to this Article V shall be made in
writing and shall set forth specifically the facts claimed to give rise to
indemnification and the representations, warranties, covenants or agreements
claimed to be false or to have not been fulfilled, and the damages claimed as a
result thereof.
5.4 LIMITATION ON LIABILITIES OF PIC AND THE STOCKHOLDERS. The
following limitations shall apply to any claim against PIC, a Stockholder or
Stockholders which shall arise out of or result from any breach of any
representation or warranty (including without limitation those set forth in
Article III hereof) hereunder:
(a) any claim for a breach of representation or warranty under Sections
3.4, 3.24 or 3.28 hereof shall be the sole responsibility of the Stockholder
responsible for such breach;
(b) any other claim for a breach of representation or warranty under any
Section other than Sections 3.4, 3.24 or 3.28 hereof shall be a claim against
all the Stockholders as a group, but each Stockholder's liability therefore
shall be limited to a pro rata portion of the total liability, based on his or
her percentage ownership of PIC shares at this date;
(c) a Stockholder's aggregate liability for a breach of representations
or warranties hereunder shall in no event exceed such Stockholder's pro rata
portion of the Purchase Price based on his percentage ownership of PIC shares at
this date;
(d) PIC and the Stockholders shall not be required to indemnify UAM or
Newco hereunder with respect to any claims for a breach of representation or
warranty under any Section hereof until the amount of such claims exceed
$500,000, in which event UAM and Newco shall be entitled to indemnification with
respect to the full amount of such claims above such limitation.
5.5 THIRD-PARTY CLAIMS. Should any claim be made or suit or proceeding
be instituted against a party entitled to indemnification hereunder (an
"Indemnified Party") which, if valid or prosecuted successfully, would be a
matter for which they are entitled to be defended, saved harmless or indemnified
under this Agreement (a "Third-Party Claim"), the Indemnified Party shall notify
parties responsible for such indemnification hereunder (the "Indemnifying
Parties") in writing concerning the same promptly after the assertion or
commencement thereof.
The Indemnifying Parties shall control the defense of any Third-Party Claim
against the Indemnified Parties and the Indemnifying Parties shall use their
best efforts to defeat or
27
minimize any loss resulting from such Third-Party Claim. The Indemnifying
Parties shall provide the Indemnified Parties with such information and
opportunity for consultation as may reasonably be requested by the Indemnified
Parties, and either the Indemnified Parties or any of them shall be entitled to
participate in the defense of a Third-Party Claim and to engage counsel at their
own expense for such purpose. The Indemnifying Parties shall have the right to
settle Third-Party Claims against the Indemnified Parties on terms which are
judged reasonable by the Indemnifying Parties and such settlements shall be
binding upon the Indemnified Parties and the Indemnifying Parties for purposes
of indemnification under this Agreement, provided that the Indemnified Parties
have been held harmless against or indemnified for amounts agreed to be paid or
amounts paid in such settlement. The Indemnified Parties shall in any event
render all such assistance as the Indemnifying Parties shall reasonably request
in the defense of any Third-Party Claim. All costs and expenses incurred by the
Indemnifying Parties and the Indemnified Parties in connection with the defense
of a Third-Party Claim shall upon demand be paid by the Indemnifying Parties.
5.6 SET-OFF. Any amount or amounts owing from the Stockholders or PIC
to the Indemnified Parties under this Article V, other than as a result of a
Third-Party Claim or other loss requiring the payment of money, shall be paid to
UAM by set-off against any amounts owing to the Stockholders or PIC under the
Note, to the extent such amounts are sufficient, and the balance of such amounts
owing and any other amount or amounts owing from the Stockholders or PIC to the
Indemnified Parties under this Article V may be paid to UAM, at UAM's option, by
set-off against any amounts owing to the Stockholders or PIC under this
Agreement and the Related Agreements, to the extent such amounts are sufficient,
in all cases without prejudice to UAM's or Newco's right to pursue any other
remedies at law or in equity in the event such amounts are insufficient, and
without prejudice to the rights of any such Stockholder to contribution from or
indemnification by any other Stockholder.
5.7 EXCLUSIVITY. The parties hereto agree that, following the Closing,
with respect to any breach of any representation or warranty (including without
limitation those set forth in Articles III and IV hereof) hereunder, the only
relief and remedy available to UAM or Newco or the Stockholders of PIC, as the
case may be, in respect of said breach shall be (a) damages, but only to the
extent properly claimable hereunder and as limited pursuant to this Article V or
otherwise hereunder; (b) specific performance if a court of competent
jurisdiction in its discretion grants the same; or (c) injunctive or declaratory
relief if a court of competent jurisdiction in its discretion grants the same.
Article VI. TAX MATTERS.
The parties agree that from and after the date hereof:
6.1 TAX RETURNS. The parties hereto shall cooperate with one another to
prepare and file all requisite federal, state and local tax returns disclosing
the consummation of the transactions contemplated hereunder in a consistent
manner and as a taxable transaction
28
under the Code. PIC shall prepare and file, on or before the due date or any
extension thereof, all required federal, state, and local tax returns with
respect to PIC's operations for the taxable year in which the Closing occurs and
with respect to the sale of the Assets (and the Stockholders shall properly
report on their personal tax returns their share of income or loss attributable
to them from the operations of PIC).
6.2 TAXES ON SALE. All transfer, excise, income or other taxes payable
by PIC or the Stockholders by reason of the purchase and sale of the Assets
hereunder (including without limitation any taxes on so-called built-in gain)
shall be paid by PIC or the Stockholders.
6.3 ALLOCATION OF PURCHASE PRICE AMONG ASSETS. The Purchase Price shall
be allocated by UAM in consultation with PIC among the assets of PIC acquired
hereunder in accordance with the relative fair market values and pursuant to
Section 1060 of the Code and the regulations thereunder. For purposes of such
allocation, the fair market values of the such assets, including the Investment
Advisory Contracts, shall be determined by UAM in consultation with PIC, using
an independent appraiser selected by UAM as and to the extent deemed necessary
by UAM, at UAM's sole expense, beginning as soon as practicable after the date
hereof. PIC shall cooperate fully with such appraisal. The parties hereto
shall furnish such information to the Internal Revenue Service with respect to
allocation of the Purchase Price payable hereunder as may be required by Section
1060 of the Code and regulations promulgated thereunder. UAM and PIC shall
furnish each other with a copy of the information it proposes to submit to the
Internal Revenue Service at least 30 days prior to the due date for filing such
material and the parties shall furnish information consistent therewith to the
Internal Revenue Service in connection with the filing of their 1995 federal
income tax return.
Article VII. PRE-CLOSING COVENANTS.
7.1 PROCEDURE FOR OBTAINING CLIENTS' CONSENTS. Following the execution
and delivery of this Agreement and prior to the Closing, and thereafter as
necessary, the parties hereto shall cooperate with one another to obtain the
execution of a Client's Consent substantially in the form of Exhibit K, relating
to the consent of the advisees (other than the Wrap Accounts and the Funds
described in Section 3.25) under all of PIC's Investment Advisory Contracts to
the assignment of such contracts pursuant hereto. In connection with the
obtaining of such Clients' Consents, the parties shall cooperate with one
another to make full and complete disclosure of all facts material to the giving
of such Consents.
Subject to the provisions of Section 7.2, below, within five business days
after the date hereof, PIC shall notify all of its clients as of such date of
the transaction contemplated by this Agreement, shall send all of such clients
Clients' Consents, and shall contact personally (by telephone or face-to-face)
at least one of the "Managers", as hereafter defined, of each of such clients
for the purpose of procuring the execution by such clients of Clients'
29
Consents. PIC shall use its best efforts to procure such execution in due
course. The term "Managers" as used herein shall mean persons who have or share
the power to decide on behalf of a client whether to execute a Client's Consent,
such as trustees of a trust which is a client, or appropriate officers or
directors of a corporation which is a client. At least two weeks prior to the
Closing, PIC shall contact personally (by telephone or face-to-face) a "Manager"
(as defined above) of each client which has not yet returned an executed
Client's Consent to inquire as to such client's intentions. PIC shall deliver
to UAM prior to the Closing copies of all executed Client's Consents and make
available for inspection the originals of such Consents at or prior to the
Closing.
Promptly following the execution and delivery of this Agreement, PIC shall
contact each Wrap Sponsor and establish, subject to UAM's approval, appropriate
procedures to notify persons holding Wrap Accounts managed by PIC and their
brokers of the transaction contemplated hereby and to obtain appropriate
consents from such account holders. The initial notifications to such brokers
and account holders and the related consent requests shall be sent no later than
five weeks prior to the Closing. PIC shall obtain copies of all written
responses to such notifications and a written report describing all oral
responses to such notifications, all of which shall be made available to UAM.
7.2 NON-DISCLOSURE. PIC and the Stockholders agree that no disclosure
of the negotiation or execution of this Agreement or the transactions
contemplated hereby shall be made to clients of PIC or to other persons not
employed by PIC or its attorneys and accountants in advance of the joint
publication by UAM and PIC of a press release on such matters, except in
accordance with procedures established by UAM in order to comply with federal
securities laws and the rules of the New York Stock Exchange. PIC shall consult
with UAM in this regard and both parties shall have joint approval as to the
timing and content of any such press release, subject to UAM's obligations under
such laws and rules.
7.3 FILINGS. Prior to or on the Closing Date, the parties shall
cooperate to prepare and to file all documents and forms and amendments to
forms, including, without limitation, PIC's Form ADV-W filed with the Securities
and Exchange Commission and corresponding state forms, Form ADV and
corresponding state forms for Newco, a Form 8-K, a New York Stock Exchange
listing application covering UAM Common Stock issuable upon exercise of the
Warrant and the Contingent Warrant to be issued hereunder, applications for
state and local tax lien waivers, forms required by the Hart-Scott-Rodino Act
(as defined in Section 9.22 below) and all other documents which are or will be
required to be filed or delivered under UAM's New York Stock Exchange listing
agreement and the Exchange's rules and under applicable federal and state laws
and regulations promulgated thereunder, including without limitation the
Investment Advisers Act of 1940 and applicable state advisers acts, as a result
of the consummation of the transaction contemplated by this Agreement. The
parties agree that any filing fees payable in connection with compliance with
the requirements of the Hart-Scott-Rodino Act shall be paid by the parties
making the applicable filing.
30
7.4 CLOSING CONDITIONS. PIC and the Stockholders shall use their best
efforts to cause the satisfaction of all conditions precedent to UAM's and
Newco's obligations hereunder set forth in Article IX. UAM and Newco shall use
their best efforts to cause the satisfaction of all conditions precedent to
PIC's and the Stockholders' obligations hereunder set forth in Article X.
7.5 RETURN OF CONFIDENTIAL INFORMATION. As soon as practicable after
the execution hereof, PIC and its agents and representatives shall exercise
their rights under all confidentiality agreements with parties other than UAM to
obtain the return or destruction of all confidential information concerning PIC
delivered thereunder.
7.6 AGREEMENT RELATING TO MUTUAL FUNDS. PIC and the Stockholders agree
to use their best efforts to cause to be prepared and filed with the Securities
and Exchange Commission proxy materials for meetings of the shareholders of the
Funds and to use their reasonable best efforts to cause proxy solicitation to be
undertaken in order that such meetings be held prior to the Closing, at which
the approval of the shareholders of the Funds will be sought for new investment
advisory agreements with Newco (the "New Fund Agreements") with respect to the
Funds to be effective at the Closing, and for such other matters as may be
required by the Investment Company Act of 1940, as amended, including
specifically Section 15(f) thereof relating to the sale of investment advisers.
PIC and the Stockholders agree to seek the approval of the New Fund Agreements
by the Funds' boards of directors (or the equivalent) acting in accordance with
Section 15(c) of the Investment Company Act of 1940.
For purposes of preparing a revised Schedule 1.3A as of the Closing Date,
any Fund which has approved a New Fund Agreement prior to the Closing shall not
be deemed to have terminated its investment advisory relationship with PIC; and
any Fund which has not done so shall be deemed to have terminated its investment
advisory relationship with PIC. The New Fund Agreement with any Fund which is
listed on the Revised Schedule as of the Closing shall have been approved by the
board of directors (or the equivalent) and the shareholders of such Fund in
conformity with the Investment Company Act of 1940, including, without
limitation, Sections 15(a) and (c) thereof, and the regulations promulgated
thereunder and with any applicable state statutes and regulations, and as of the
Closing shall be in full force and effect. As of the Closing, at least 75% of
the members of the board of directors of each Fund which is listed on the
Original Schedule or the Revised Schedule as of the Closing shall not be
"interested persons" (as such term is defined in the Investment Company Act of
1940) of PIC, UAM, or Newco and shall have been selected, proposed for election,
and elected in accordance with Section 16(b) of that Act; and the composition of
the board of directors of each Fund which is listed on the Revised Schedule as
of the Closing shall comply with Section 10 of that Act.
Newco and PIC shall each use their best efforts to ensure that none of the
transactions contemplated by this Agreement will cause the imposition of an
"unfair burden" (as such
31
term is defined in Section 15(f) of the Investment Company Act of 1940) on any
of the Funds listed on Schedule 1.3A.
.
7.7 REGISTRATION OF UAM STOCK.
(a) REGISTRATION PROCEDURES AND EXPENSES. UAM shall use its
reasonable best efforts to effect the registration under the Securities Act of
the UAM Stock for sale as of the Closing and the Contingent Stock as of the
Contingent Closing by performing the following:
(i) UAM shall prepare and file with the Securities and Exchange
Commission (the "Commission") registration statements with respect
to the UAM Stock and the Contingent Stock and use its reasonable
best efforts to cause such registration statement to become and
remain effective for a period of three years from the Closing Date
and the Contingent Closing Date, respectively, and shall comply with
all applicable state securities laws with respect hereto. The
Stockholders' plan of distribution with respect to the UAM Stock and
the Contingent Stock shall be as follows: (a) sale of shares from
time to time by the Selling Stockholders or by pledgees, donees,
transferees or other successors in interest, (b) a block trade in
which the broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction, (c) purchases by a
broker or dealer as principal and resale by such broker or dealer
for its own account, (d) regular brokerage transactions executed on
the New York Stock Exchange, (e) negotiated transactions effected at
such prices as may be obtainable and as may be satisfactory to the
Selling Shareholder, or (f) other means. If the Securities Act
and/or the rules and regulations promulgated by the Securities and
Exchange Commission thereunder require that such Registration
Statement or the Prospectus forming a part thereof be amended or
supplemented in order to properly reflect the Stockholders' plan of
distribution, the Stockholders will promptly notify UAM of such
matters and cooperate with UAM in effecting such amendment or
supplement.
(ii) UAM shall prepare and file with the Commission such amendments and
supplements to such registration statements and the prospectuses
used in connection therewith as may be necessary to update and keep
such registration statements effective and to comply with the
provisions of the Securities Act with respect to the sale of all
securities covered by such registration statements. Notwithstanding
anything else to the contrary contained herein, UAM shall not be
required to disclose any confidential information concerning pending
acquisitions not otherwise required to be disclosed.
32
(iii) UAM shall furnish to each Stockholder such number of copies of the
final prospectus as such Stockholder may reasonably request in order
to facilitate the sale of the UAM Stock owned by such Stockholder.
The Stockholders shall comply with all prospectus delivery
requirements under the Securities Act.
All expenses incurred by UAM in complying with this subsection (a), including,
without limitation, all registration and filing fees (both federal and state),
printing expenses, and fees and disbursements of counsel for UAM, are herein
called Registration Expenses. All selling commissions applicable to the sales
of UAM Stock and all fees and disbursements of counsel for any Stockholder are
herein called Selling Expenses.
(b) ALLOCATION OF EXPENSES. UAM will pay all Registration
Expenses in connection with registration pursuant to this Section 7.7. All
Selling Expenses in connection with such registration shall be borne by the
Stockholders.
(c) INDEMNIFICATION. In connection with the registration of UAM
Stock and Contingent Stock under the Securities Act pursuant to this Section
7.7, UAM will indemnify and hold harmless the seller of such UAM Stock and
Contingent Stock, each underwriter of such UAM Stock and Contingent Stock and
each other person, if any, who controls such seller or underwriter within the
meaning of Section 15 of the Securities Act, against any losses, claims,
damages, liabilities or expenses, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement of a material fact contained in any registration statement under which
such UAM Stock and Contingent Stock was registered under the Securities Act
pursuant to this Section 7.7, or any post-effective amendment thereof, or the
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement of a material fact contained in any final prospectus
(as amended or supplemented, if UAM shall have filed with the Commission any
amendment thereof or supplement thereto), or the omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and will reimburse such
seller, underwriter and each such controlling person for any legal or other
expenses reasonably incurred by such seller, underwriter or such controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or expense, PROVIDED, HOWEVER, that UAM will not be liable in
any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon any untrue statement or omission (or
alleged omission) of a material fact made in said registration statement, said
preliminary prospectus, or said prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished to UAM
through an instrument duly executed by such seller or underwriter specifically
for use in the preparation thereof.
33
In connection with the registration of the UAM Stock and Contingent Stock
under the Securities Act pursuant to this Section 7.7, each seller of such UAM
Stock and Contingent Stock severally and not jointly, will indemnify and hold
harmless UAM, each person, if any, who controls UAM within the meaning of
Section 15 of the Securities Act, each officer of UAM who signs the registration
statement, each director of UAM, each underwriter, and each person who controls
any underwriter within the meaning of Section 15 of the Securities Act, against
any losses, claims, damages, liabilities or expenses, joint or several, to which
UAM or such officer, director, underwriter or controlling person may become
subject under the Securities Act or otherwise, and will reimburse UAM or such
officer, director, underwriter or controlling person for any legal or other
expenses reasonably incurred by UAM or such officer, director, underwriter or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or expense, but only insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) arise out of or
are based upon any untrue statement or omission (or alleged omission) of a
material fact referred to in clause (i) or (ii) of the preceding paragraph of
this subsection (c), and provided, however, that this paragraph shall apply if
and only if such statement or omission (or alleged omission) was made in
reliance upon and in conformity with information furnished in writing to UAM by
or on behalf of such seller specifically for use in such registration statement
or prospectus.
It shall be a condition of UAM's obligations to effect registration of the
UAM Stock and Contingent Stock that the sellers participating in such
registration provide UAM and the underwriters, if any, with all material facts,
including, without limitation, furnishing such certificates, questionnaires and
legal opinions as may be required by UAM or such underwriters, concerning such
participating sellers and the UAM Stock and Contingent Stock to be registered
which are reasonably required to be stated in the registration statement or in
the prospectus or are otherwise required in connection with the offering.
Article VIII. CONDUCT OF PIC'S BUSINESS PRIOR TO THE CLOSING DATE.
PIC and the Stockholders agree that, from the date hereof to the Closing
Date, except as set forth on Schedule 8 or as otherwise consented to or approved
by UAM in writing or required by this Agreement:
(a) No change shall be made in the Articles of Incorporation or
the By-laws of PIC.
(b) No change shall be made in the number of shares of
authorized or issued capital stock of PIC, nor shall any option, warrant, call,
commitment, right or agreement of any character be granted or made by PIC
relating to its authorized or issued capital stock. No transfers in the
ownership of shares of PIC owned by the Stockholders shall occur, other than by
operation of law or pursuant to the laws of descent and distribution.
34
(c) No dividend shall be declared or paid or other distribution
or payment declared, made or paid in respect of the capital stock of PIC either
in cash or property.
(d) Except for increases in the compensation set forth on
Schedule 8(d), and subject to the requirements of Section 9.15 on working
capital, no increase shall be made in the rate of compensation payable or to
become payable by PIC to any director, officer, employee or agent, and no bonus
shall be paid to such persons; no person shall be elected an officer of PIC and
no change shall be made in the office of any officer of PIC or the
responsibility of any such officer except as occasioned by the death,
resignation or disablement of any officer; and no collective bargaining
agreement, bonus, stock option, profit-sharing, compensation, pension, welfare,
retirement or other similar arrangement, or employment contract shall be entered
into or materially changed by PIC, other than as may be required by law.
(e) No funds shall be borrowed or loaned by PIC, except in the
ordinary course of business and not exceeding $100,000 in the aggregate up to
the Closing.
(f) No capital expenditure (other than for ordinary repairs and
maintenance) shall be incurred or contracted for and no litigation shall be
settled by PIC without prior consultation with UAM, and no such capital
expenditure or settlement in excess of $100,000 shall be made without UAM's
consent.
(g) PIC shall conduct its business in the ordinary course. It
shall meet all of its obligations as they become due, and shall use its best
efforts to continue to solicit new clients and to offer investment advisory
services in the ordinary course of business, to maintain its corporate records,
to keep its accounts receivable current, to preserve the business organization
and properties of PIC intact, to keep available the services of PIC's employees,
and to preserve the goodwill of PIC's clients, suppliers, and others with whom
business relationships exist. PIC shall not unilaterally change its fee
schedule which was in effect on September 30, 1994.
(h) PIC and the Stockholders shall afford to UAM and its
representatives reasonable access to the properties and records of PIC during
customary business hours in order that UAM may have full opportunity to make
such investigation as it shall desire of PIC's affairs for purposes consistent
with this Agreement. UAM will cause all information so obtained which is not in
the public domain to be held confidential, and will cause all documents obtained
during such investigation to be returned promptly to PIC in the event of the
termination of this Agreement, provided, however, that prior to the Closing UAM
may require that the proxy statements furnished to the shareholders of the Funds
pursuant to Section 7.4 include all information which UAM determines to be
required or appropriate under applicable law.
35
(i) PIC shall pay or fund all expenses and liabilities incurred
by it with respect to all periods prior to the Closing, including without
limitation all salaries and rents, and, without limiting the foregoing, shall
pay or fund all tax liabilities relating to periods ending on or before the
Closing, regardless of when such expenses and liabilities would ordinarily be
payable, except for taxes on so-called built-in gain which shall be funded with
the consideration received hereunder. PIC shall pay or fund any liabilities or
amounts due to its employees as bonuses, profit-sharing or pensions, calculated
in accordance with PIC's past practices, with respect to the fiscal year ending
December 31, 1994 and subject to the provisions of Section 9.15 (Working
Capital) below and the Revenue Sharing Agreement, with respect to the period
from that date up to the Closing.
(j) All fees received by PIC up to the Closing Date for services
to be rendered after the Closing Date shall be retained by Newco. Fees to be
received by Newco after the Closing Date for services rendered prior to the
Closing shall be taken into account in determining Working Capital in
Section 9.15.
(k) PIC shall remain an S corporation at all times prior to the
Closing.
Article IX. CONDITIONS PRECEDENT TO UAM'S AND NEWCO'S OBLIGATIONS.
All obligations of UAM and Newco under this Agreement are subject to the
fulfillment and satisfaction, prior to or at the Closing, of each of the
following conditions, any one or more of which may be waived by UAM:
9.1 DELIVERY OF DOCUMENTS OF TRANSFER. PIC shall have delivered to UAM
all such documents of transfer, assignment or assumption as UAM or its counsel
may reasonably require in order to consummate the purchase and sale of Assets
hereunder.
9.2 EMPLOYMENT AGREEMENTS. Robert M. Kommerstad shall have executed an
Employment Agreement in the form attached hereto as Exhibit E-1, each
Stockholder listed on the Addendum to Exhibit E-2 shall have executed an
Employment Agreement in the form attached hereto as Exhibit E-2 duly completed
in accordance with the addendum thereto, Thomas J. Condon shall have executed an
Employment Agreement in the form attached hereto as Exhibit E-3, and each
Stockholder listed on the Addendum to Exhibit E-4 shall have executed an
Employment Agreement in the form attached hereto as Exhibit E-4 duly completed
in accordance with the addendum thereto (the "Employment Agreements"). Each of
the Employment Agreements shall have been executed and delivered as between each
of such signatories and Newco, with copies to UAM. All of the employment
agreements executed on the date hereof and effective as of the Closing attached
hereto as Exhibit E-5 shall be in full force and effect. There shall be no
material breach by the respective employees of any of such employment agreements
at the Closing Date.
36
9.3 REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE. The
representations and warranties of PIC and the Stockholders contained in this
Agreement shall be true in all material respects at and as of the Closing Date
as though newly made at and as of that time. PIC and the Stockholders shall
have delivered to UAM a certificate in the form of Exhibit L hereto, dated as of
the Closing Date and signed by a duly authorized officer of PIC and the
Stockholders, certifying as to the truth and accuracy of the representations and
warranties and the performance of the obligations required to be performed by
PIC and the Stockholders, or any of them, under this Agreement.
9.4 PIC'S AND STOCKHOLDERS' CERTIFICATE. PIC and the Stockholders shall
have delivered a certificate, dated as of the date of the Closing, in the form
of Exhibit M hereto, certifying that since the delivery of PIC's Articles of
Organization and By-laws pursuant to Section 3.2 above, there have been no
amendments or other modifications thereof; that true, complete and accurate
copies of the minutes of meetings of the Board of Directors and Stockholders (or
consents in lieu thereof) have been delivered to UAM; that attached to the
certificate are true and complete copies of a resolution of PIC's Board of
Directors and Stockholders authorizing the transactions contemplated hereby; and
that the officers of PIC are those persons named in the certificate.
9.5 CLIENTS' CONSENTS. The Adjustment Percentage, as defined in
Section 1.3, above, shall be at least 70%; and PIC shall have complied with the
notification procedures set forth in Section 7.1, above. In addition, PIC shall
have obtained executed Clients' Consents in the form of Exhibit K hereto signed
by advisory clients who are listed on Schedule 1.3A prepared as of September 30,
1994, and whose pro forma quarterly billings as of such date represent at least
70% of all pro forma quarterly billings shown on such Schedule 1.3A as of such
date.
At the Closing, PIC and the Stockholders shall deliver a certificate in the
form of Exhibit N as to the matters set forth in the foregoing paragraph and
stating the amount of the Adjustment Percentage. Such certificate shall, in
addition, set forth the response of all clients which have not executed Clients'
Consents, and whether such clients have stated to PIC, either orally or in
writing, their intention of remaining as advisory clients of PIC, or their
intention of terminating their investment advisory relationship with PIC. Such
certificate shall also certify that no clients who have executed Clients'
Consents have revoked such Consents or disclosed to PIC an intention to do so or
to terminate their investment advisory relationship with PIC or materially to
reduce their assets under management by PIC.
9.6 APPROVALS. Any consent, approval, authorization or order of any
court, governmental agency, administrative body or other person or entity
(including without limitation consents of lessors of any property leased by PIC)
required for the consummation of the transactions contemplated by this Agreement
shall have been obtained and shall be in effect on the Closing Date.
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9.7 OPINION OF COUNSEL FOR PIC AND THE STOCKHOLDERS. PIC and the
Stockholders shall have delivered to UAM opinions from Proskauer Rose Goetz &
Mendelsohn of Los Angeles, California, and/or Heller, Ehrman, White & McAuliffe
of San Francisco, California, counsel for PIC and the Stockholders, that:
(i) PIC is a corporation validly existing and in good standing under
the laws of the State of California, with full corporate power and
authority to own its properties and assets and to conduct its
business as it is now conducted. PIC has duly authorized 1,000,000
shares of common stock ($1.00 par value) with voting power, of which
166,020 shares are validly issued, fully paid, nonassessable,
outstanding, entitled to vote, and, except as set forth on Schedule
1, owned of record and, to the knowledge of such counsel,
beneficially by the Stockholders. There are no other shares of
stock of any description authorized or outstanding of record, and,
in the corporate minute books of PIC made available to such counsel
there is no evidence of the existence of any options, warrants, or
rights to purchase of any kind affecting the stock of PIC which may
require PIC to issue additional stock, nor does such counsel have
actual knowledge of the existence of any such options, warrants or
rights.
(ii) Except as disclosed in the Agreement or any Exhibit or Schedule
annexed hereto, the execution and delivery by PIC and the
Stockholders of the Agreement and the Related Agreements to which
they are parties and the consummation by the Stockholders and PIC of
the transactions contemplated therein do not conflict with and do
not violate any provision of the State of California or federal law
or of the Articles of Incorporation or By-laws of PIC or result in a
violation or default in any provision of any regulation, order,
writ, injunction or decree known to such counsel of any court or
governmental agency or authority, or, to the best of such counsel's
knowledge after due inquiry (and assuming all consents contemplated
by Section 7 have been received), any provision of any agreement
listed on the Schedules attached hereto, to which PIC or any of the
Stockholders is a party or by which PIC or any of the Stockholders
is bound or to which PIC or any of the Stockholders or any of their
shares of PIC Stock is subject, or to the best of such counsel's
knowledge after due inquiry, result in the creation or imposition of
any lien, charge, encumbrance or security interest upon any of the
properties owned by PIC.
(iii) The Stockholders have duly executed and delivered the Agreement and
the Related Agreements to which they are parties. The Agreement and
such Related Agreements are the valid and binding obligations of the
Stockholders, enforceable in accordance with their respective terms,
subject to the Remedies Exception.
38
(iv) To such counsel's knowledge, there is no claim, litigation,
proceeding or governmental investigation pending or threatened
against PIC or any of its directors, officers, employees or
Stockholders affecting the transaction contemplated by the Agreement
or affecting the property or assets of PIC.
(v) No authorization, approval, order, license, permit, franchise or
consent of or registration, declaration or filing with any
California or United States governmental authority is required in
connection with the execution, delivery or performance of the
Agreement which has not been obtained, other than a withdrawal of
PIC's Form ADV and corresponding state forms, if such have not been
filed with the Securities and Exchange Commission and the
appropriate states prior to the Closing.
(vi) The execution, delivery and performance by PIC of this Agreement has
been duly authorized and approved by all requisite action of PIC's
Board of Directors and Stockholders. This Agreement has been duly
executed and delivered by PIC and constitutes the legal, valid and
binding obligations of PIC, enforceable in accordance with its
terms, subject to the Remedies Exception.
(vii) To counsel's knowledge, PIC is duly registered as an investment
adviser under the Investment Advisers Act of 1940, registered as an
investment adviser in the states referenced in item 7, Part I of its
current Form ADV, and in material compliance with all state laws
requiring registration, licensing or qualification as an investment
adviser; and each such federal and state registration is in full
force and effect, in each case such that no materially adverse
change in the financial condition or business of PIC would result.
PIC is not an "investment company" (within the meaning of the
Investment Company Act of 1940), which is required to be registered
under that Act in order to engage in the transactions described in
Section 7 of that Act, is not a "broker" or "dealer" within the
meaning of the Securities Exchange Act of 1934, and does not act as
an investment adviser or subadviser to any "investment company" (as
defined in the Investment Company Act of 1940), which is registered
under such Act other than the Funds. To counsel's knowledge after
due inquiry, there is not pending or under way any inspection of PIC
or its records by the Securities and Exchange Commission or any
state regulatory authority, and counsel does not have knowledge of
any inspection reports or similar documents furnished to PIC by the
Securities and Exchange Commission or state regulatory authorities
since January 1, 1989, that have not been listed on Schedule 3.25.
(viii) To the best of such counsel's knowledge after due inquiry, (x) PIC
has timely filed an election to be treated as an S Corproation
governed by the provisions
39
of Subchapter S of the Code for the taxable year beginning January
1, 1989, and ending December 31, 1989, and (y) since such filing all
of the following have remained true through the Closing:
(I) PIC has not had more than 35 shareholders;
(II) PIC has not had as a shareholder any non-resident alien;
(III) PIC has not had as a shareholder a person (other than a
trust described in Section 1361(c)(2) of the Code) who is not an
individual; and
(IV) PIC's Articles and By-laws, as amended, and its other
governing provisions known to such counsel, do not provide for or
purport to create more than one class of stock.
In rendering the foregoing opinions, such counsel may assume that the relevant
substantive and procedural law of the State of Massachusetts is identical to the
law of the State of California, and further, such counsel need express no
opinion with respect to (i) any indemnification obligation to the extent it may
be contrary to public policy, (ii) any non-competition or confidentiality
obligation, or (iii) any choice of law or jurisdiction provision. Proskauer
Rose Goetz & Mendelsohn shall not be required to opine as to matters relating to
the federal or state regulation of investment advisors or investment companies,
including but not limited to the Investment Advisers Act of 1940, as amended, or
the Investment Company Act of 1940, as amended.
9.8 PIC'S AND THE STOCKHOLDERS' PERFORMANCE. Each of the obligations of
PIC and/or the Stockholders to be performed on or before the Closing Date
pursuant to the terms of this Agreement shall have been duly performed on or
before the Closing Date.
9.9 PAYMENTS MADE. All payments required by paragraph (i) of Article
VIII of this Agreement shall have been made or adequately funded and UAM shall
have received a certificate to that effect, dated as of the Closing Date and
signed by PIC and the Stockholders, in the form of Exhibit O hereto.
9.10 CONDUCT OF PIC'S BUSINESS PRIOR TO THE CLOSING DATE. PIC's business
shall have been conducted in accordance with the provisions of Article VIII and
Schedule 8 hereto.
9.11 CERTIFICATE RELATING TO REAL PROPERTY INTERESTS. The Stockholders
shall have executed a certificate in the form of Exhibit P hereto relating to
foreign ownership of real estate interests in the United States.
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9.12 APPROVAL OF DOCUMENTATION. The form and substance of all opinions,
certificates, and other documents shall be reasonably satisfactory in all
respects to UAM and its counsel.
9.13 EXAMINATION OF BOOKS AND RECORDS. For purposes of compliance with
and performance of this Agreement, UAM, acting through its own management and
personnel or through counsel, accountants, or other representatives designated
by it, shall have been afforded full and complete opportunity to examine and
investigate all aspects of PIC's business and affairs and assets and
liabilities, including without limitation, its minute books and stock transfer
records, financial books and records, the workpapers of PIC's independent public
accountants, the Investment Advisory Contracts, titles and leases to properties,
loan and other agreements, the condition of its facilities and equipment, and
the collectibility of accounts receivable. UAM shall also have been afforded
the opportunity to confer with PIC's advisory clients in the presence of a
representative of PIC (in such manner, at such times, and with such frequency,
as may be reasonably required by UAM).
9.14 ADVISERS ACT REGISTRATION. Registration of Newco as an investment
adviser and withdrawal of the registration of PIC as an investment adviser under
the Investment Advisers Act of 1940 and under applicable state investment
advisory statutes shall have been filed and become effective as contemplated by
Article VII, if so requested by UAM.
9.15 WORKING CAPITAL. At the Closing Date, PIC's cash, liquid marketable
securities, and accounts receivable which are collectible or realizable within a
normal billing cycle for PIC ("Working Capital") and which will be transferred
to Newco will be sufficient to fund: (1) accounts payable and accrued expenses,
including income, excise and business and occupation taxes and bonuses which
would be accrued in accordance with generally accepted accounting principles as
of the Closing Date and which are to be paid by Newco; (2) any deferred revenues
which will have been billed in advance by the Closing Date but not yet earned;
(3) normal compensation and other operating expenses, including all accrued
employee compensation and other accrued items; and (4) an amount equal to a pro
rata share of projected bonuses and other incentive compensation under the
Revenue Sharing Agreement, which would be incurred between the Closing Date and
the point in time that the next full cycle of fee billings are collected and all
accrued "Stock Pickers Bonuses", so that after the Closing, Newco is
sufficiently capitalized with liquid current assets to operate on a freestanding
basis without investment of cash in Newco by UAM for the reasonably foreseeable
future. Fees earned by Newco following the Closing will be realizable in cash
so that all future operating expenses of Newco can be met without investment of
cash in Newco by UAM and UAM's Share of Revenues can be paid to UAM promptly
after the collection of fees by Newco.
9.16 HEALTH. Each person listed on Schedule 3.28 shall be in good
physical health.
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9.17 LIFE INSURANCE. Life insurance policies on the lives of the
Stockholders listed in Schedule 9.17 shall have been obtained by UAM or Newco,
as UAM shall require, at UAM's sole expense.
9.18 FORM 8-K. PIC and the Stockholders shall have provided such
records, including without limitation the work papers of its bookkeepers and
accountants, as may be required by UAM in connection with UAM's obligation, if
any, to file a report of its acquisition of the business and assets of PIC
hereunder with the Securities and Exchange Commission on Form 8-K and, in the
sole judgment of UAM, UAM shall be in a position timely to file such report.
9.19 HART-SCOTT-RODINO FILING. The provisions of the "Hart-Scott-Rodino
Act" shall have been complied with to the satisfaction of UAM or, in UAM's
judgment, an exemption from the requirements of such section shall be available
for the transactions contemplated by this Agreement.
9.20 EXCHANGE LISTING. The New York Stock Exchange shall have notified
UAM that the Exchange has approved UAM's application to list upon official
notice of issuance the shares of UAM Common Stock issuable in connection with
this Agreement.
Article X. CONDITIONS PRECEDENT TO PIC'S AND THE STOCKHOLDERS' OBLIGATIONS.
All obligations of PIC and the Stockholders under this Agreement are
subject to the fulfillment and satisfaction, prior to or on the Closing Date, of
each of the following conditions, any one or more of which may be waived by PIC
and the Stockholders:
10.1 OPINION OF UAM'S AND NEWCO'S COUNSEL. UAM shall have furnished to
the Stockholders an opinion dated as of the Closing Date of Hill & Barlow, of
Boston, Massachusetts, counsel to UAM and Newco, that:
(i) UAM is a corporation validly existing and in good standing under the
laws of the State of Delaware. UAM has duly authorized 50,000,000
shares of Common Stock, $.01 par value, of which 28,283,082 shares
were validly issued and outstanding and 11,808,146 shares were
reserved for issuance on exercise of outstanding warrants or options
or upon conversion of outstanding convertible notes, or otherwise,
as of November 1, 1994. UAM also has authorized 5,000,000 shares of
Preferred Stock, $1.00 par value, none of which is outstanding.
Newco is a corporation validly existing and in good standing under
the laws of the Commonwealth of Massachusetts. Newco has authorized
100 shares of Common Stock, no par value, of which 100 shares are
validly issued, fully paid and nonassessable and are owned of record
by United Asset Management Holdings, Inc.
42
(ii) This Agreement and the Related Agreements to which UAM and Newco are
parties have been duly authorized, executed and delivered by UAM and
Newco and constitute the valid and binding obligations of UAM and
Newco, enforceable in accordance with their respective terms,
subject to the Remedies Exception.
(iii) The execution and delivery by UAM and Newco of this Agreement and
the Related Agreements to which they are parties and the
consummation of the transactions contemplated hereby and thereby do
not conflict with or violate any provision of law or of the
respective Certificate or Articles of Incorporation or By-laws of
UAM or Newco or result in a violation or default in any provision of
any regulation, order, writ, injunction or decree of any court or
governmental agency or authority, or any provision of any agreement
known to such counsel after due inquiry, to which UAM or Newco is a
party or by which UAM or Newco is bound or to which UAM or Newco is
subject, or result in the creation or imposition of any lien,
charge, encumbrance or security interest upon any of the properties
owned by UAM or Newco pursuant to the terms of any such agreement
(other than a security interest of UAM's lending banks in the stock
of Newco).
(iv) UAM has reserved by all necessary corporate action the required
number of shares of its Common Stock for issuance upon exercise of
the Warrant and the Contingent Warrant. The Common Stock issuable
upon exercise of the Warrant and the Contingent Warrant has been
duly authorized by all necessary corporate action and when issued in
accordance with the Warrant Agreement and delivered by UAM, will be
validly issued and outstanding, fully paid and non-assessable.
(v) The issuance of shares of UAM Common Stock pursuant to the terms
hereof have been duly authorized by all necessary corporate action
and, when issued as contemplated by this Agreement, will be validly
issued, fully paid and nonassessable.
(vi) The registration of Newco as an investment adviser under the
Investment Advisers Act of 1940 has been filed and become effective
as contemplated by Article VII.
10.2 REPRESENTATIONS AND WARRANTIES TRUE AT THE CLOSING DATE. Except as
expressly contemplated by this Agreement, the representations and warranties of
UAM and Newco contained in this Agreement shall be true in all material respects
at and as of the Closing Date as though newly made at and as of that time. UAM
and Newco shall have delivered to PIC and the Stockholders a certificate in the
form of Exhibit Q hereto, dated as of the Closing
43
Date and signed by a duly authorized officer of UAM and Newco, certifying as to
the truth and accuracy of the representations and warranties and the performance
of all of the obligations required to be performed by UAM and Newco, or either
of them, under this Agreement.
10.3 PERFORMANCE OF UAM AND NEWCO. Each of the obligations of UAM or
Newco to be performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed in all material respects at the
Closing Date.
10.4 AUTHORITY OF UAM AND NEWCO. All corporate action required to be
taken by or on the part of UAM or Newco to authorize the execution, delivery and
performance of this Agreement by UAM and Newco and the consummation of the
transactions contemplated hereunder shall have been duly and validly taken.
10.5 APPROVAL OF DOCUMENTATION. The form and substance of all opinions,
certificates and other documents hereunder shall be reasonably satisfactory in
all respects to PIC and the Stockholders and their counsel.
10.6 REVENUE SHARING AGREEMENT. UAM and Newco shall have executed and
delivered to the Stockholders the Revenue Sharing Agreement attached hereto as
Exhibit F.
10.7 ADJUSTMENT PERCENTAGE. The Adjustment Percentage, as defined in
Section 1.3 above, shall be 70% or greater.
10.8 EMPLOYMENT AGREEMENTS. Newco shall have executed and delivered to
the Stockholders the Employment Agreements attached hereto as Exhibits E-1, E-2,
E-3 and E-4. There shall be no material breach by Newco of any of the
Employment Agreements at the Closing Date.
10.9 ADVISERS ACT REGISTRATION. Registration of Newco as an investment
adviser and withdrawal of the registration of PIC as an investment adviser under
the Investment Advisers Act of 1940 and under applicable state investment
advisory statutes shall have been filed and become effective as contemplated by
Article VII, if so requested by UAM.
10.10 ASSUMPTION AGREEMENT. UAM and Newco shall have executed and
delivered to PIC and the Stockholders an Assumption Agreement in a form
reasonably satisfactory to PIC's counsel.
10.11 NYSE LISTING. UAM shall have delivered to PIC and the Stockholders
a copy of an approval by the New York Stock Exchange of a listing application
covering the UAM Stock and the Contingent Stock.
44
10.12 INCENTIVE STOCK OPTIONS. The Compensation Committee of UAM's Board
of Directors shall have approved the issuance (upon the Closing) of incentive
stock options (within the meaning of Section 422(b) of the Code) under UAM's
1994 Stock Option Plan with respect to an aggregate of 150,000 shares of UAM's
Common Stock (but subject to the limitation imposed on incentive stock options
under Section 422(d) of the Code) to be awarded to employees of Newco as soon as
practicable following the Closing Date with an exercise price equal to the
market value of UAM's Common Stock on the date of grant.
Article XI. POST-CLOSING COVENANTS.
11.1 NON-COMPETITION. (a) Robert M. Kommerstad covenants that during
the longer of five years following the date hereof or while he is employed by
Newco or UAM, each Stockholder listed on the Addendum to Exhibit E-2 covenants
that during the longer of ten years following the date hereof or while such
Stockholder is employed by Newco or UAM, Thomas J. Condon covenants that during
the longer of seven years following the date hereof or while he is employed by
Newco or UAM, and each Stockholder listed on the Addendum to Exhibit E-4
covenants that during the longer of seven years following the date hereof or
while such Stockholder is employed by Newco or UAM, whether under a written
employment agreement or as an at will employee, such Stockholder shall not,
except in the course of such Stockholder's employment with Newco or UAM,
directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an officer,
director, employee, partner, stockholder, consultant, adviser,
subsidiary, affiliate, independent contractor or otherwise,
investment advisory services to any person or entity;
(ii) Interfere with Newco's relations with any person or entity who at
any time during such period was a Client (which means Past, Present
and Potential Client); or
(iii) Induce or attempt to induce directly or indirectly any employee of
UAM or Newco to terminate his or her employment, or hire or attempt
to hire, directly or indirectly, any such person.
(b) Each Stockholder covenants that for a period of the longer
of five years following the Term of such Stockholder's Employment Agreement or
five years following the termination of such Stockholder's employment, if any,
with Newco or UAM such Stockholder shall not, directly or indirectly:
(i) Provide or offer or attempt to provide, whether as an officer,
director, employee, partner, independent contractor or otherwise,
investment advisory services to any person or entity who as of the
date of the termination or
45
expiration of the Stockholder's employment with Newco or UAM was or
had been a Client (which means Past, Present, and Potential Client);
(ii) Interfere with Newco's relations with any person or entity who as of
the date of the termination or expiration of the Stockholder's
employment with Newco was a Client (which means Past, Present, and
Potential Client); or
(iii) Induce or attempt to induce directly or indirectly any employee of
Newco to terminate his or her employment, or hire or attempt to
hire, directly or indirectly, any such person.
(c) The term "Past Client" shall mean at any particular time any
person or entity who at any point prior to such time has been but at such time
is not an advisee, investment advisory customer, or client of PIC or Newco. The
term "Present Client" shall mean at any particular time any person or entity who
is at such time an advisee, an investment advisory customer, or client of PIC or
Newco. The term "Potential Client" shall mean at any particular time any person
or entity to whom PIC or Newco, through any of its officers or employees, has
within five years prior to such time offered (by means of a personal meeting,
telephone call, or a letter or a written proposal specifically directed to the
particular person or entity) to serve as investment advisor but who is not at
such time an advisee or investment advisory customer or client of Newco. The
preceding sentence is meant to exclude form letters and blanket mailings. The
term "Client" when used herein shall include all past, present and potential
clients as heretofore defined. The term "Client," when used in this Section
11.1 with respect to Wrap Accounts, shall mean the Wrap Sponsors and the brokers
employed by such Wrap Sponsors but not the underlying Wrap Account holders.
(d) Notwithstanding the provisions of Subsections 11.1(a)(i) and
11.1(b)(i), a Stockholder may render investment advisory services without
compensation to any Stockholder, any member of the immediate family of any of
the Stockholders and any trust or account which is comprised entirely of assets
held for the benefit of any Stockholder and/or members of such Stockholder's
immediate family.
(e) Each Stockholder agrees that the periods of time and the
unlimited geographic area applicable to the covenants of this Section 11 are
reasonable, in view of the payment of the Purchase Price hereunder, the
geographic scope and nature of the business in which PIC is engaged and Newco
will be engaged, the Stockholder's knowledge of PIC's and Newco's business, and
each Stockholder's relationship with PIC's and Newco's clients. However, if
such period or such area should be adjudged unreasonable in any judicial
proceeding, then the period of time shall be reduced by such number of months or
such area shall be reduced by elimination of such portion of such area, or both,
as are deemed unreasonable, so that this covenant may be enforced in such area
and during such period of time as are adjudged to be reasonable.
46
11.2 CONFIDENTIALITY. Except in performance of services for Newco or as
permitted in Section 11.1(d), the Stockholders shall not, either during the
period of their employment with Newco or thereafter, use for his own benefit or
disclose to or use for the benefit of any person outside Newco, any information
not already lawfully available to the public or to any person outside Newco
(provided that such person is not bound by a confidentiality agreement or other
legal or fiduciary obligation of secrecy with respect to such information)
concerning any Intellectual Property (as defined below), including client lists,
whether such Stockholder has such information in his memory or embodied in
writing or other tangible form. All such Intellectual Property and such
information concerning Intellectual Property, and all originals and copies of
any Intellectual Property, and any other written material relating to the
business of Newco, shall be the sole property of Newco. Upon the termination of
any Stockholder's employment by Newco in any manner or for any reason, such
terminated Stockholder shall promptly surrender to Newco all originals and
copies of any Intellectual Property, and he shall not thereafter use any
Intellectual Property. For purposes hereof, the term Intellectual Property
shall mean all research, information, client lists, and all other investment
advisory, technical and research data made, conceived, developed and/or acquired
by a Stockholder solely or jointly with others during the period of employment
by PIC or Newco, which related to investment advice as it was or is now rendered
or as it may, from time to time, hereafter be rendered or proposed to be
rendered, but excluding such individual's ideas and thought processes which are
not embodied in written or machine readable form.
11.3 FURTHER ASSURANCES. From time to time after the Closing at the
request of UAM and without further consideration, the Stockholders and/or PIC
shall execute and deliver any further instruments and take such other action as
UAM may reasonably require to consummate the transactions contemplated hereby.
To the extent that the transactions contemplated hereby require the consent of
any person in order to avoid a breach of the terms of any lease, contract or
commitment to which PIC is a party or by which PIC is bound, or in order to vest
PIC's rights in Newco, and such consent is not obtained satisfactorily prior to
the Closing, the Stockholders shall use their best efforts to assure Newco of
the benefits of such leases, contracts, commitments and rights. Nothing in this
section shall be deemed a waiver by UAM or Newco of their rights under Article
IX of this Agreement.
11.4 AMENDMENT TO REGISTRATIONS AND FILING OF FORM 8-K. PIC and the
Stockholders shall cooperate with UAM and Newco to file Form 8-K with the
Securities and Exchange Commission relating to the transactions contemplated
hereby. UAM shall reimburse PIC and/or the Stockholders, as the case may be,
for 50% of the amount of any out-of-pocket fees and expenses paid by such
parties in order to comply with the requirements of the preceding sentence. PIC
and the Stockholders shall cooperate with UAM and Newco to file, if not filed
prior to the Closing Date, all registrations and amendments to registration or
withdrawals of registration under federal and state laws requiring registration
of investment advisers on behalf of Newco and/or PIC and documents relating to
the qualification of Newco to do business in states other than Delaware.
47
11.5 COMPLIANCE WITH HART-SCOTT-RODINO ACT. PIC and each Stockholder
covenant that from and after the Closing each shall comply with any applicable
provisions of the Hart-Scott-Rodino Act in connection with the transactions
contemplated hereby.
11.6 ADDITIONAL COVENANTS. PIC, the Stockholders and Newco shall
maintain in good condition all presently existing files, books, records and
documents of PIC, and shall make the same available to each other or their
designees upon request, for the periods of time and in the locations required by
the Investment Advisers Act of 1940 and the regulations promulgated thereunder,
including without limitation regulation Section 275.204-2.
After the Closing, the parties shall cooperate to comply with Sections
15(f) and 16(b) of the Investment Company Act of 1940 as they apply to the Funds
listed on Schedule 1.3A as of the Closing and generally to comply with the
Investment Company Act of 1940 and the Investment Advisers Act of 1940 as they
apply to Newco, PIC, UAM and the clients of PIC.
11.7 USE OF NAME "PROVIDENT INVESTMENT COUNSEL" The parties hereto shall
cooperate to change PIC's name to a name not confusingly similar to "Provident
Investment Counsel " and to change Newco's name to "Provident Investment
Counsel, Inc." effective as of the Closing Date. PIC and the Stockholders
acknowledge and agree that UAM is acquiring the exclusive use of the name
"Provident Investment Counsel" for which the Stockholders will receive full and
adequate compensation, and that none of the Stockholders will use that name or
any similar name subsequent to the Closing except in connection with activities
performed for Newco.
11.8 OPTIONS. UAM shall recommend to the Compensation Committee of its
Board of Directors that options be issued under UAM's Incentive Stock Option
Plan with respect to an aggregate of 150,000 shares of UAM's Common Stock to be
awarded to employees of Newco as soon as practicable following the Closing Date
with an exercise price equal to the market value of UAM's Common Stock on the
date of grant.
11.9 STATUTORY COMPLIANCE. For a period of three years following the
Closing Date, Newco and PIC agree that they will each use their best efforts to
ensure that (i) at least 75% of the members of the Board of Directors of each
Fund which (either prior or subsequent to the Closing) has entered into a New
Fund Agreement will not be "interested persons" (as such term is defined in the
Investment Company Act of 1940) of UAM, Newco or PIC and (ii) nothing within
their reasonable control will cause the imposition of an "unfair burden" (as
such term is defined in Section 15(f) of the Investment Company Act of 1940) on
any of the Funds listed on the Original Schedule or the Revised Schedule.
11.10 EXTENSION BONUS PAYMENT. Under the terms of Schedule 2 to the
Employment Agreements attached hereto as Exhibits E-4 and E-5, Newco is
obligated to make bonus payments out of the Pool referred to therein. To the
extent that such Pool exceeds the
48
Operating Income Cap (as defined therein), UAM shall contribute such excess in
cash to Newco as a capital contribution at such time as the relevant bonus
payments are due to such employees.
11.11 UAM CAPITAL CONTRIBUTION. Immediately following the Closing, UAM
shall contribute cash to Newco in the amount of $1,750,000 for the purpose of
funding the payments due on the Closing Date to the employees under the
Employment Agreements attached hereto as Exhibit E-5.
11.12 EMPLOYEES; EMPLOYEE BENEFITS.
(a) Newco shall offer employment to all employees of PIC
identified on Schedule 3.16 . To the extent permitted under applicable law,
Newco's offer of employment shall include employee benefits at least
substantially equivalent to those applicable to each such employee immediately
before the Closing Date based on those Benefit Plans described on Schedule 3.20
hereto; provided, however, that Newco shall have no obligation with respect to
retirement benefits other than to become a participating employer in the United
Asset Management Corporation Profit Sharing and 401(k) Plan (the "UAM 401(k)
Plan"). Effective as of the Closing Date, all such employees will become
employees of Newco ("Hired Employees").
(b) In any termination or layoff by Newco of any Hired Employee
after the Closing, Newco will comply fully, if applicable, with the Worker
Adjustment and Retraining Notification Act of 1988 ("WARN") and all other
applicable Federal, state and local laws, including those prohibiting
discrimination and requiring notice.
(c) On the Closing Date, PIC shall transfer and Newco shall
assume and will have responsibility for PIC's 401(k) Plan, and Newco will be
deemed a successor employer to PIC with respect to such plan. Assets held in
trust for such plan shall be transferred to any relevant plan adopted or
maintained by Newco.
(d) As of the Closing Date, and without any waiting period,
Newco will provide all Hired Employees (and their dependents) with medical
benefit coverage under plans maintained or established by Newco, to the extent
reasonably available on a basis comparable to the existing coverage and
consistent with Newco's obligations under this Section 11.12. As to any Hired
Employee (or a dependent thereof) who was covered by PIC's medical plans as of
the Closing, to the extent permitted under the coverage provided pursuant to the
preceding sentence, Newco will waive any pre-existing condition exclusions
contained in the applicable medical plans and consider any monies paid under
PIC's medical and dental plans by Hired Employees (or their dependents) prior to
the Closing Date toward any deductibles, co-pays or other maximums under Newco's
medical and dental plan for the first plan year after the Closing Date. Newco
will be responsible for satisfying its obligations under Section 601 et seq. of
ERISA and Section 4980B of the Internal Revenue Code of
49
1986, as amended (the "Code"), to provide continuation coverage ("COBRA") to any
Hired Employee in accordance with law.
(e) As of the Closing Date, Newco will assume all obligations of
PIC to Hired Employees for any vacation entitlement and vacation pay
entitlement, regardless of whether such obligations have been accrued on the
books of the business. Newco shall provide vacation benefits (including,
without limitation, vacation entitlement and vacation pay entitlement) to Hired
Employees in accordance herewith.
(f) Newco will provide each Hired Employee with full credit for
such Hired Employee's service with PIC prior to the Closing for purposes of any
participation or eligibility requirement and for purposes of vesting under the
UAM 401(k) Plan,, and for purposes of any eligibility, participation, vesting or
similar requirement for retirees medical (including, without limitation,
dental), life insurance, medial, severance pay, incentive compensation and
vacation benefits, if any. Newco shall fully vest all participants in the PIC
401(k) plan no later than thirty (30) days after the Closing Date.
(g) Any liabilities, costs or expenses incurred by PIC or Newco
associated with the termination by Newco of any Hired Employees, shall be the
responsibility of Newco. Any liabilities, costs or expenses incurred by PIC or
Newco associated with the termination by PIC of any PIC employees shall be the
responsibility of PIC.
(h) Neither Newco nor PIC intend this Section 11.12 to create
any rights or interest, except as between Newco and PIC, and no present or
future employees of either party (or any dependents of such employees) will be
treated as third party beneficiaries in or under this Agreement.
(i) All costs and expenses incurred by Newco in complying with
the terms of this Section 11.12 shall be paid out of Newco's Share of Revenues
under the Revenue Sharing Agreement.
Article XII. GENERAL.
12.1 ENTIRE AGREEMENT. All Exhibits and Schedules hereto shall be deemed
to be incorporated into and made part of this Agreement. This Agreement,
together with the Exhibits and Schedules hereto, contains the entire agreement
among the parties and there are no agreements, representations, or warranties by
any of the parties hereto which are not set forth herein. This Agreement may
not be amended or revised except by a writing signed by all parties hereto.
12.2 EQUITABLE RELIEF; BINDING EFFECT. The Stockholders recognize and
agree that Newco's and UAM's remedy at law for any breach of the provisions of
Sections 11.1 and 11.2 hereof would be inadequate and that for breach of such
provisions Newco and UAM
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shall, in addition to such other remedies as may be available to them at law or
in equity or as provided in this Agreement, be entitled to injunctive relief by
an action for specific performance to the extent permitted by law. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, this Agreement
and all rights hereunder may not be assigned by PIC or the Stockholders except
by prior written consent of UAM or assigned by UAM or Newco except by prior
written consent of PIC and the Stockholders.
12.3 SEPARATE COUNTERPARTS. This Agreement may be executed in several
identical counterparts, all of which when taken together shall constitute but
one instrument, and it shall not be necessary in any court of law to introduce
more than one fully executed counterpart in proving this Agreement.
12.4 CONSISTENT ACCOUNTING. The parties to this Agreement shall consult
with each other for the purpose of arriving at consistent accounting, tax and
reporting treatment, whether public or private, of the transaction contemplated
hereby.
12.5 TRANSACTION COSTS. Except as may be otherwise expressly set forth
herein, each party to this Agreement shall be responsible for his, her or its
own legal, accounting and other expenses, if any, attendant to the negotiation
and drafting of this Agreement and to the transactions contemplated by this
Agreement. Without limiting the foregoing, UAM shall be responsible for Newco's
organizational and qualification costs incurred prior to the Closing.
12.6 NOTICES. All notices hereunder shall be in writing and shall be
delivered or mailed by registered or certified mail, postage and fees prepaid,
to the party to be notified at the party's address shown below. Notices which
are hand delivered shall be effective on delivery. Notices which are mailed
shall be effective on the third day after mailing.
(i) If to UAM or Newco:
United Asset Management Corporation
One International Place
Boston, Massachusetts 02110
Attn.: Norton H. Reamer
with a copy to:
John C. Vincent, Jr., Esq.
Hill & Barlow
One International Place
Boston, Massachusetts 02110
(ii) If to PIC or to all of the Stockholders:
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Provident Investment Counsel, Inc.
300 North Lake Avenue
Pasadena, California 91101
Attn: Robert M. Kommerstad
with a copy to:
Mitchell M. Gaswirth, Esq.
Proskauer Rose Goetz & Mendelsohn
Suite 2700
2121 Avenue of the Stars
Los Angeles, CA 90067
(iii) If to a particular Stockholder, at such Stockholder's address as
shown on Schedule I, hereto, with a copy to Mitchell Gaswirth as
stated above;
unless and until notice of another or different address shall be given as
provided herein.
12.7 SEVERABILITY. The provisions of this Agreement are severable and
the invalidity of any provision shall not affect the validity of any other
provision.
12.8 CAPTIONS. The captions herein have been inserted solely for
convenience of reference and in no way define, limit or describe the scope or
substance of any provision of this Agreement.
12.9 DUE INQUIRY. The term "due inquiry" as used throughout this
agreement shall be deemed to mean, in the case of such inquiry by PIC's or the
Stockholder's counsel, inquiry of appropriate officers and/or employees of PIC
and the Stockholders only, and in the case of such inquiry by UAM's, or Newco's
counsel, inquiry of appropriate officers and/or employees of UAM only.
12.10 GENDER. All pronouns used herein shall include the masculine,
feminine and neuter gender, as the context requires.
12.11 GOVERNING LAW. The execution, interpretation, and performance of
this Agreement shall be governed by the laws of The Commonwealth of
Massachusetts which apply to contracts executed and performed solely in
Massachusetts. The parties hereto hereby consent to the jurisdiction of any
state or federal court located within Suffolk County, Massachusetts, waive
personal service of process, and assent that service of process may be made by
registered mail to the parties' respective addresses as provided in
Section 12.6,
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above, and shall be effective in the same manner as notices are effective under
such Section 12.6.
12.12 NO THIRD-PARTY BENEFICIARIES. The parties hereto have entered into
this Agreement for their own benefit and do not intend to benefit any other
person or entity thereby.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
a document under seal as of the date first above written.
UNITED ASSET MANAGEMENT
CORPORATION
By: /S/ NORTON H. REAMER, PRESIDENT
Norton H. Reamer, President
PIC NEWCO, INC.
By: /S/ FRANKLIN H. KETTLE, PRESIDENT
Franklin H. Kettle, President
PROVIDENT INVESTMENT COUNSEL
By: /S/ ROBERT M. KOMMERSTAD
Robert M. Kommerstad
Chairman/President
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STOCKHOLDERS:
/S/ ROBERT M. KOMMERSTAD
Robert M. Kommerstad
/S/ JEFFREY J. MILLER
Jeffrey J. Miller
/S/ THOMAS J. CONDON
Thomas J. Condon
/S/ GEORGE E. HANDTMANN, III
George E. Handtmann, III
/S/ LARRY D. TASHJIAN
Larry D. Tashjian
/S/ LAURO F. GUERRA
Lauro F. Guerra
/S/ F. BROWN WINDLE
F. Brown Windle
/S/ THOMAS M. MITCHELL
Thomas M. Mitchell
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
a document under seal as of the date first above written.
UNITED ASSET MANAGEMENT
CORPORATION
By: ____________________________
Norton H. Reamer, President
PIC NEWCO, INC.
By: _____________________________
Franklin H. Kettle, President
PROVIDENT INVESTMENT COUNSEL
By: ______________________________
Robert M. Kommerstad
Chairman/President
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STOCKHOLDERS:
_____________________________
Robert M. Kommerstad
_____________________________
Jeffrey J. Miller
_____________________________
Thomas J. Condon
_____________________________
George E. Handtmann, III
_____________________________
Larry D. Tashjian
_____________________________
Lauro F. Guerra
_____________________________
F. Brown Windle
_____________________________
Thomas M. Mitchell
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