Execution Copy
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ASSET PURCHASE AGREEMENT
by and among
CAM INVESTMENT MANAGEMENT, L.P.,
THE CONTINENTAL CORPORATION
and
CONTINENTAL ASSET MANAGEMENT CORP.
relating to
CONTINENTAL ASSET MANAGEMENT CORP.
____________________________
Dated as of October 13, 1994
____________________________
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TABLE OF CONTENTS
Page
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1. Transfer of Assets and Liabilities . . . . . . . . 2
1.1 Assets to be Sold . . . . . . . . . . . . . 2
1.2 Excluded Assets . . . . . . . . . . . . . . 4
1.3 Liabilities to be Assumed . . . . . . . . . 5
1.4 Excluded Liabilities . . . . . . . . . . . 6
2. Sale and Purchase of Purchased Assets . . . . . . 8
2.1 Purchased Assets to be Sold . . . . . . . . 8
2.2 Assumption of Liabilities . . . . . . . . . 8
2.3 Purchase Price . . . . . . . . . . . . . . 8
2.4 Payment of the Purchase Price . . . . . . . 10
3. Closing; Closing Date . . . . . . . . . . . . . . 10
4. Representations and Warranties of the Seller and
Continental . . . . . . . . . . . . . . . . . . . 11
4.1 Due Incorporation and Qualification . . . . 11
4.2 Title to Assets; Adequacy of Purchased
Assets . . . . . . . . . . . . . . . . . . 12
4.3 Authority to Execute and Perform
Agreements; Enforceability . . . . . . . . 13
4.4 Subsidiaries, Affiliates and Other Persons 13
4.5 Certificates of Incorporation and By-laws . 14
4.6 Financial Statements; Investment
Performance Reports . . . . . . . . . . . . 14
4.7 No Material Adverse Change . . . . . . . . 17
4.8 Tax Matters . . . . . . . . . . . . . . . . 17
4.9 Compliance with Laws . . . . . . . . . . . 19
4.10 No Breach . . . . . . . . . . . . . . . . . 23
4.11 Claims and Proceedings . . . . . . . . . . 25
4.12 Contracts . . . . . . . . . . . . . . . . . 26
4.13 Real Estate . . . . . . . . . . . . . . . . 29
4.14 Accounts Receivable . . . . . . . . . . . . 29
4.15 Tangible Property . . . . . . . . . . . . . 29
4.16 Intellectual Property . . . . . . . . . . . 31
4.17 Liabilities . . . . . . . . . . . . . . . . 32
4.18 Clients . . . . . . . . . . . . . . . . . . 33
4.19 Employee Benefits . . . . . . . . . . . . . 35
4.20 Employee Relations . . . . . . . . . . . . 38
4.21 Insurance . . . . . . . . . . . . . . . . . 38
4.22 Business; Policies and Procedures . . . . . 40
4.23 Officers, Directors and Employees . . . . . 41
4.24 Operations of the Business . . . . . . . . 42
4.25 Potential Conflicts of Interest . . . . . . 46
4.26 Transactions with Continental and its
Affiliates . . . . . . . . . . . . . . . . 47
4.27 Derivatives . . . . . . . . . . . . . . . . 48
4.28 Securities Portfolio . . . . . . . . . . . 48
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4.29 Banks, Brokers and Proxies . . . . . . . . 48
4.30 Full Disclosure . . . . . . . . . . . . . . 49
5. Representations and Warranties of the Buyer . . . 49
5.1 Due Organization . . . . . . . . . . . . . 49
5.2 Authority to Execute and Perform
Agreements . . . . . . . . . . . . . . . . 50
5.3 Buyer's Business . . . . . . . . . . . . . 51
5.4 Litigation . . . . . . . . . . . . . . . . 52
5.5 Capitalization of the Buyer . . . . . . . . 52
5.6 Financing . . . . . . . . . . . . . . . . . 52
5.7 Qualification as Investment Adviser . . . . 52
6. Covenants and Agreements . . . . . . . . . . . . . 53
6.1 Conduct of Business . . . . . . . . . . . . 53
6.2 Insurance . . . . . . . . . . . . . . . . . 53
6.3 Litigation . . . . . . . . . . . . . . . . 54
6.4 Corporate Examinations and Investigations . 54
6.5 Consent to Jurisdiction and Service of
Process . . . . . . . . . . . . . . . . . . 57
6.6 Expenses . . . . . . . . . . . . . . . . . 58
6.7 Indemnification of Brokerage . . . . . . . 60
6.8 Further Assurance . . . . . . . . . . . . . 61
6.9 Sublease; Services Agreement . . . . . . . 62
6.10 Consents . . . . . . . . . . . . . . . . . 63
6.11 Form ADV . . . . . . . . . . . . . . . . . 66
6.12 Non-Competition Agreement . . . . . . . . . 67
6.13 Option Agreement . . . . . . . . . . . . . 67
6.14 Management of Continental's Investment
Assets . . . . . . . . . . . . . . . . . . 68
6.15 Certain Tax Matters . . . . . . . . . . . . 71
6.16 Employees and Benefit Plans . . . . . . . . 75
6.17 Definitive Capitalization of the Buyer . . 79
6.18 Bulk Sales Compliance . . . . . . . . . . . 80
6.19 Limited Use of Logo . . . . . . . . . . . . 80
6.20 Change and Use of the Seller's Name . . . . 81
6.21 Certified Copies of Organizational
Documents of the Buyer . . . . . . . . . . 81
6.22 Certified Copies of Certain Contracts . . . 82
6.23 Dividends . . . . . . . . . . . . . . . . . 82
6.24 Soft Dollar Contracts . . . . . . . . . . . 82
6.25 September Balance Sheet . . . . . . . . . . 82
6.26 Certain Payments to Continental . . . . . . 83
6.27 Verified Investment Performance Reports . . 83
7. Purchase Price and Other Adjustments . . . . . . . 84
7.1 Reduction of Note A . . . . . . . . . . . . 84
7.2 Adjustments . . . . . . . . . . . . . . . . 85
7.3 Arbitration . . . . . . . . . . . . . . . . 89
ii
Page
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8. Conditions Precedent to the Obligation of the
Buyer to Close . . . . . . . . . . . . . . . . . . 91
8.1 Representations and Covenants . . . . . . . 92
8.2 Consents and Approvals . . . . . . . . . . 92
8.3 Opinion of Counsel to Continental and the
Seller . . . . . . . . . . . . . . . . . . 94
8.4 Resignations . . . . . . . . . . . . . . . 94
8.5 Litigation . . . . . . . . . . . . . . . . 94
8.6 Hart-Scott-Rodino . . . . . . . . . . . . . 94
8.7 Financing . . . . . . . . . . . . . . . . . 95
8.8 Related Transactions . . . . . . . . . . . 95
8.9 No Material Adverse Change . . . . . . . . 95
8.10 New Sublease . . . . . . . . . . . . . . . 95
8.11 Services Agreement . . . . . . . . . . . . 96
8.12 Non-Competition Agreement . . . . . . . . . 96
8.13 Bill of Sale and Instrument of Assignment
and Other Conveyance Documents . . . . . . 96
8.14 Registration as Investment Adviser . . . . 96
9. Conditions Precedent to the Obligation of the
Seller to Close . . . . . . . . . . . . . . . . . 96
9.1 Representations and Covenants . . . . . . . 97
9.2 Opinion of Counsel to the Buyer . . . . . . 97
9.3 Litigation . . . . . . . . . . . . . . . . 97
9.4 Hart-Scott-Rodino . . . . . . . . . . . . . 98
9.5 Related Transactions . . . . . . . . . . . 98
9.6 Consents and Approvals . . . . . . . . . . 98
9.7 Instrument of Assumption . . . . . . . . . 98
9.8 Registration as Investment Advisor . . . . 98
10. Survival of Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . . . . . . 99
11. Indemnification . . . . . . . . . . . . . . . . . 100
11.1 Obligation of Continental and the Seller to
Indemnify . . . . . . . . . . . . . . . . . 100
11.2 Obligation of the Buyer to Indemnify . . . 101
11.3 Notice to Indemnifying Party . . . . . . . 101
11.4 Limitations of Indemnification . . . . . . 104
11.5 Note B . . . . . . . . . . . . . . . . . . 105
12. Termination of Agreement . . . . . . . . . . . . . 106
12.1 Termination . . . . . . . . . . . . . . . . 106
12.2 Survival . . . . . . . . . . . . . . . . . 106
13. Miscellaneous . . . . . . . . . . . . . . . . . . 107
13.1 Certain Definitions . . . . . . . . . . . . 107
13.2 Glossary . . . . . . . . . . . . . . . . . 110
13.3 Publicity . . . . . . . . . . . . . . . . . 114
13.4 Notices . . . . . . . . . . . . . . . . . . 114
13.5 Entire Agreement . . . . . . . . . . . . . 115
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Page
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13.6 Waivers and Amendments; Non-Contractual
Remedies; Preservation of Remedies . . . . 116
13.7 Governing Law . . . . . . . . . . . . . . . 117
13.8 Binding Effect; No Assignment . . . . . . . 117
13.9 Variations in Pronouns . . . . . . . . . . 117
13.10 Counterparts . . . . . . . . . . . . . . . 117
13.11 Exhibits . . . . . . . . . . . . . . . . . 118
13.12 Headings . . . . . . . . . . . . . . . . . 118
13.13 Interpretation . . . . . . . . . . . . . . 118
13.14 Severability of Provisions . . . . . . . . 118
13.15 No Third Party Beneficiaries . . . . . . . 119
iv
Exhibits
A: Form of Bill of Sale and Instrument
of Assignment
B: Form of Assumption of Liabilities
C: Form of Note A
D: Form of Note B
E: New Sublease Term Sheet
F: Services Agreement Term Sheet
G: Form of Non-Competition Agreement
H: Option Term Sheet
v
ASSET PURCHASE AGREEMENT
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AGREEMENT dated as of October 13, 1994, among CAM
INVESTMENT MANAGEMENT, L.P., a Delaware limited partnership
(the "Buyer"), THE CONTINENTAL CORPORATION, a New York
corporation ("Continental"), and CONTINENTAL ASSET
MANAGEMENT CORP., a New York corporation and a wholly-owned
indirect subsidiary of Continental (the "Seller").
The Seller and Continental Asset Management
(Bermuda) Ltd., a Bermuda company and a wholly-owned
subsidiary of the Seller (the "Subsidiary"), are engaged in
the business of financial asset management, and, more
specifically, the design of investment programs and the
management and supervision of investments in equity, debt
and other financial securities and instruments for property
and casualty insurance companies, pension funds,
corporations and other financial institutions (collectively,
the "Business"). The Seller wishes to sell, and the Buyer
wishes to purchase, the Business and all of the Purchased
Assets (as defined below) and the Buyer will assume all of
the Assumed Liabilities (as defined below), all upon the
terms and subject to the conditions of this Agreement.
The respective locations in this Agreement of the
definitions of the capitalized terms used in this Agreement
are set forth in Section 13.2.
2
Accordingly, the parties agree as follows:
1. Transfer of Assets and Liabilities.
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1.1 Assets to be Sold. Except as otherwise
-----------------
provided in Section 1.2, at the Closing provided for in
Section 3, the Seller shall sell, assign, transfer and
convey to the Buyer all of the Seller's right, title and
interest in and to all of the Seller's assets, properties
and rights of every type and description, whether real,
personal or mixed, tangible or intangible, known or unknown,
fixed or unfixed, accrued, absolute, contingent or other-
wise, wherever located and whether or not reflected on the
books and records of the Seller or specifically referred to
in this Agreement (other than the Excluded Assets),
including, without limitation, all of the Seller's right,
title and interest in and to the following (all of such
assets, properties and rights being sometimes collectively
referred to herein as the "Purchased Assets"):
(a) all Contracts (including all
deposits underlying such Contracts) related to the Business
or the Purchased Assets;
(b) all Tangible Property and Tangible
Property Agreements utilized by the Seller in the Business;
(c) all Intellectual Property relating
to or used in connection with the Business (other than,
except to the extent provided in Section 6.19, the Logo),
including, without limitation, all Intellectual Property
listed in Section 4.16 of the Disclosure Statement other
3
than in Part II of such Section 4.16 of the Disclosure
Statement and, subject to Section 6.19, all advertising,
sales and promotional materials, fee schedules, lists of
Clients and catalogues;
(d) any cash, cash equivalents and
other short-term investments on hand or in bank, brokerage,
custodial or other depository accounts of the Seller on the
Closing Date;
(e) all accounts receivable of the
Seller accrued as of the Closing Date, including, but not
limited to, any contractual rights which the Seller shall
have accrued, or shall have been entitled to accrue under
GAAP as a receivable, whether in cash or in kind, or by way
of set off or otherwise, as of such date;
(f) all prepaid expenses of the Seller
arising from the operations of the Business;
(g) all of the Seller's files and
records, to the extent relating to the operations of the
Business, including, without limitation, accounting records,
correspondence with Governmental Bodies, personnel and
payroll records and such other books and records relating to
the internal organization or operation of the Business;
(h) all of the outstanding capital
stock of the Subsidiary and the corporate minute books and
stock ledgers of the Subsidiary;
(i) all of the Seller's right, title
and interest in assets held under, or in connection with,
4
any Benefit Plan, but only to the extent provided in Sec-
tion 6.16(b) hereof;
(j) all of the Seller's right, title
and interest in or to any Claim, demand, action, or cause of
action, contingent or otherwise, known or unknown, against
any third party, including without limitation, insurance
companies, relating to any of the Purchased Assets or the
operations of the Business (other than any such claim,
demand, action or cause of action relating to any Excluded
Asset); and
(k) to the extent not otherwise
specifically listed above, all of the assets of the Seller
on the Closing Date, including, without limitation, any
goodwill connected therewith or appertaining thereto.
Notwithstanding the foregoing, in the event that any of the
Tangible Property currently utilized by the Seller in the
Business is not owned by the Seller, but is owned by
Continental or any Affiliate of Continental, Continental
shall, and shall cause each such Affiliate to, transfer any
such Tangible Property to the Buyer at the Closing Date, at
no additional expense to the Buyer (such assets shall
hereinafter be referred to as the "Other Assets").
1.2 Excluded Assets. Anything in Section
---------------
1.1 to the contrary notwithstanding, there shall be excluded
from the Purchased Assets the following assets of the Seller
(collectively, the "Excluded Assets") which shall not be
sold and transferred to the Buyer on the Closing Date:
5
(a) all of the capital stock, corporate
minute books and stock ledgers of the Seller;
(b) subject to Section 6.19 hereof, all
of the Seller's right, title and interest in and to the logo
associated with the name "Continental" and used by the
Seller (the "Logo");
(c) all of the Seller's right, title
and interest in assets held under, or in connection with,
any Benefit Plan, except as otherwise provided in
Section 6.16(b);
(d) all refunds of any Taxes that are
Excluded Liabilities;
(e) any and all current or deferred Tax
assets or reserves or accruals for Taxes;
(f) deposits of the Seller with the
Internal Revenue Service or any other Taxing authority
(including, without limitation, Tax deposits, prepayments
and estimated payments and all rights in such deposits and
all interest upon such deposits) relating to Taxes; and
(g) the Tax Allocation Agreement, dated
October 22, 1981, between the Seller and Continental.
1.3 Liabilities to be Assumed. Subject to
-------------------------
the terms and conditions of this Agreement and except as
otherwise provided in Section 1.4, in partial consideration
of the transfer, conveyance and assignment to the Buyer of
the Purchased Assets, the Buyer shall assume, as of the
Closing Date, all Liabilities of the Seller subject to the
6
Buyer's right of indemnification as set forth in Sec-
tion 11.1, including without limitation all of the following
(collectively, the "Assumed Liabilities"):
(a) Liabilities reflected or included
on or reserved against on the Audited Balance Sheet, or
incurred or accrued between the Balance Sheet Date and the
Closing Date;
(b) the performance of, and the
Liabilities arising out of, each of the Contracts that is
assigned to the Buyer as of the Closing Date as contemplated
hereunder; and
(c) Liabilities arising under, or
relating to, Benefit Plans, but only to the extent provided
in Section 6.16(b) hereof.
1.4 Excluded Liabilities. Anything in this
--------------------
Agreement to the contrary notwithstanding, the Buyer shall
not assume, or in any way be liable or responsible for, and
the Seller shall retain and be responsible for the payment,
performance and discharge of the following Liabilities of
the Seller (collectively, the "Excluded Liabilities"):
(a) all Liabilities with respect to the
Excluded Assets, whether outstanding and unpaid on the
Closing Date or accruing during the period subsequent to the
Closing Date;
(b) all Liabilities and expenses of any
kind or nature relating to Taxes (including, without limita-
tion, any Liabilities and expenses pursuant to any Tax
7
sharing agreement, Tax indemnification or similar
arrangement);
(c) all Liabilities related to
compensation payable in respect of service with the Seller
on or prior to the Closing Date (other than compensation
accrued on the last balance sheet of the Seller prepared
prior to the Closing Date and any Liabilities in connection
with the termination of any Transferred Employee by the
Buyer after the Closing Date) and all Liabilities arising
under, or related to, any Benefit Plan except to the extent
provided in Section 6.16(b) hereof;
(d) Liabilities in connection with, arising
out of, or otherwise relating to, the matters and
circumstances underlying the litigation entitled ADS
---
Associates, Inc. v. The Continental Insurance Company and
---------------------------------------------------------
Continental Asset Management Corp. (N.Y. Sup. Ct., New York
----------------------------------
Co.), including, without limitation, any Liabilities for
settlement amounts or expenses arising out of, or otherwise
relating to, settlement negotiations, mediation or
alternative dispute resolution mechanisms; and
(e) Liabilities in connection with, arising
out of, or otherwise relating to, the matters and
circumstances underlying the proceeding pending in the New
York State Division of Human Rights entitled Alice Kennedy
-------------
v. Continental Asset Management Corp., SDHR No. 1A-E-O-94-
-------------------------------------
9000640-E, including, without limitation, any Liabilities
relating to, or arising out of, (i) any subsequent
8
proceeding brought by the complainant with respect to such
matters or circumstances or otherwise relating to her
employment with the Seller, and (ii) any settlement amounts
or expenses arising out of, or otherwise relating to,
settlement negotiations, mediation or alternative dispute
resolution mechanisms.
2. Sale and Purchase of Purchased Assets.
-------------------------------------
2.1 Purchased Assets to be Sold. At the
---------------------------
Closing and upon the terms and subject to the conditions set
forth in this Agreement, the Seller shall, and Continental
shall cause the Seller to, sell, assign, transfer, grant,
convey and deliver to the Buyer, and the Buyer shall
purchase, all of the Purchased Assets. In confirmation of
the foregoing sale, assignment and transfer, the Seller
shall execute and deliver to the Buyer at the Closing, a
Bill of Sale and the Instrument of Assignment in the form of
Exhibit A (the "Bill of Sale and the Instrument of
Assignment").
2.2 Assumption of Liabilities. At the
-------------------------
Closing, the Buyer shall assume and agree to discharge in a
prompt and timely manner, on or prior to their respective
due dates, if any, the Assumed Liabilities. In confirmation
of the foregoing assumption, the Buyer shall execute and
deliver to the Seller at the Closing, an Assumption of
Liabilities in the form of Exhibit B (the "Assumption of
Liabilities").
9
2.3 Purchase Price. The aggregate purchase
--------------
price (the "Purchase Price") for the Purchased Assets
and the Non-Competition Agreement shall consist of the
following:
(i) The issuance of a promissory note
("Note A") in an aggregate principal amount of $25,000,000,
subject to downward adjustment pursuant to Section 7.1 (the
principal amount thereof as so adjusted, the "Closing Prin-
cipal Amount"), substantially in the form of Exhibit C
hereto. Note A shall, at the election of the Seller within
thirty (30) days after the date hereof, (i) have a maturity
of six months and bear interest at a rate per annum equal to
six month LIBOR plus 0.5% or (ii) have a maturity of one
year and bear interest at a rate per annum equal to one year
LIBOR plus 1%. Interest shall be payable semi-annually as
set forth in Note A.
(ii) The issuance of a subordinated
promissory note ("Note B"), in an aggregate principal amount
of $10,000,000 and substantially in the form of Exhibit D
hereto (provided, that (a) the subordination provisions
--------
thereof shall be modified, if necessary, so that they are
reasonably satisfactory to the bank providing the senior
debt financing referred to in Section 8.7 (taking into
account the type and nature of the transactions contemplated
hereunder (the "Contemplated Transactions")) and (b) the
Seller will agree to other changes to Note B reasonably
requested by such bank so long as such changes do not
10
(x) alter the principal amount, the maturity or the interest
rate, in each case as set forth in Note B or (y) result in
terms that diminish the economic value of Note B.
(iii) The assumption by the Buyer of the
Assumed Liabilities hereunder.
2.4 Payment of the Purchase Price. At the
-----------------------------
Closing, the Purchase Price shall be paid by the Buyer in
accordance with paragraphs (i) and (ii) below.
(i) The Buyer shall issue, execute and
deliver to the Seller Note A, dated the Closing Date,
in the amount of the Closing Principal Amount, together
with a standby letter of credit (the "Letter of
Credit") issued by a bank or other financial
institution for the benefit of the Seller in an amount
not to exceed the Closing Principal Amount (plus
interest thereon) which shall entitle the Seller to
draw under such Letter of Credit in the event that the
Buyer shall fail to pay, when due, the principal of and
accrued but unpaid interest on Note A and such Letter
of Credit shall contain other terms and conditions
mutually satisfactory to the Buyer and the Seller. Any
fees related to the Letter of Credit shall be borne by
the Buyer.
(ii) The Buyer shall issue, execute and
deliver to the Seller Note B, dated the Closing Date,
in the aggregate principal amount of $10,000,000.
11
3. Closing; Closing Date. The Closing of the
---------------------
sale and purchase of the Purchased Assets contemplated
hereby shall take place at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, 1285 Avenue of the Americas,
New York, New York 10019, at 10:00 a.m. local time, on the
fifth business day following the first date on which the
conditions to closing set forth in Section 8 (Conditions
Precedent to the Obligations of the Buyer to Close) have
first been satisfied or waived, or at such other time or
date as the Buyer and the Seller may agree in writing. The
time and date upon which the Closing occurs is herein called
the "Closing Date."
4. Representations and Warranties of the Seller
--------------------------------------------
and Continental. The Seller and Continental, jointly and
---------------
severally, represent and warrant to the Buyer as follows:
4.1 Due Incorporation and Qualification.
-----------------------------------
Each of the Seller and Continental is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and
operate its assets, properties and business and to carry on
its business as now being conducted. The Seller is duly
qualified or otherwise authorized as a foreign corporation
to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its
ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or
12
in good standing as would not individually or in the
aggregate with all such other failures have a Material
Adverse Effect.
4.2 Title to Assets; Adequacy of Purchased
--------------------------------------
Assets.
------
(a) The Seller is the owner of the
Purchased Assets, has good title to all the Purchased
Assets, including those acquired after the Balance Sheet
Date, in each case free and clear of any Lien, except for
(i) Liens securing Taxes, assessments, governmental charges
or levies, or the claims of materialmen, carriers, landlords
and like Persons, all of which are not yet due and payable
or are being contested in good faith by appropriate
proceedings and which have been accrued or reserved against
as Liabilities in accordance with GAAP, (ii) minor Liens of
a character that do not, individually or in the aggregate,
have a Material Adverse Effect, and (iii) Liens set forth in
Section 4.2(a) of the Disclosure Statement (the Liens
referred to in clauses (i), (ii) and (iii) above are
hereinafter collectively referred to as "Permitted Liens").
(b) On the Closing Date, the Seller
shall own and have good title to all of the Purchased
Assets, in each case free and clear of any Liens other than
Permitted Liens, and shall convey the Purchased Assets to
the Buyer free and clear of all Liens and subject only to
the Assumed Liabilities, except for Permitted Liens and
Liens, if any, created by or through the Buyer.
13
(c) The Purchased Assets, together with
the Excluded Assets and the Other Assets, include all of the
rights, properties and other assets currently utilized by
the Seller in the conduct of the Business.
4.3 Authority to Execute and Perform
--------------------------------
Agreements; Enforceability. Each of the Seller and
--------------------------
Continental has the full corporate power and authority and
approval required to execute and deliver this Agreement and
each other Transaction Document to which it is a party, and
to perform fully its obligations hereunder and thereunder.
This Agreement has been duly executed and delivered by the
Seller and Continental and is the valid and binding
obligation of each of the Seller and Continental enforceable
against each of them in accordance with its terms, and each
Transaction Document to which either the Seller or
Continental will be a party, upon execution and delivery by
such party will be duly executed and delivered by such
party, and will be a valid and binding obligation of such
party enforceable against such party in accordance with
their respective terms.
4.4 Subsidiaries, Affiliates and Other
----------------------------------
Persons. Section 4.4 of the Disclosure Statement sets forth
-------
(i) the date of incorporation and the percentage and number
of outstanding shares owned by the Seller of the Subsidiary
and (ii) the name of each partnership or joint venture or
other Person (other than the Subsidiary) in which the Seller
is the beneficial owner of an ownership interest, and the
14
nature of such interest. The Subsidiary is a corporation
duly organized, validly existing and in good standing under
the laws of Bermuda and has all requisite corporate power
and authority to own, lease and operate its assets,
properties and business and to carry on its business as now
conducted. The Subsidiary is a newly organized Bermuda
corporation organized exclusively for the purpose of
conducting the Business solely in Bermuda. The Subsidiary
has, and on the Closing Date will have, no other assets
other than assets used in the operation of the Business.
The Subsidiary does not have, and on the Closing Date will
not have, any material Liabilities of any nature.
4.5 Certificates of Incorporation and By-
-------------------------------------
laws. The Seller has heretofore delivered to the Buyer true
----
and complete copies of the Certificates of Incorporation
(certified by the Secretary of State or other appropriate
officials of their respective jurisdictions of incorpora-
tion) and By-laws or comparable instruments (certified by
the Secretaries thereof) of the Seller and the Subsidiary as
in effect on the date hereof.
4.6 Financial Statements; Investment
--------------------------------
Performance Reports.
-------------------
4.6.1 Financial Statements.
--------------------
4.6.1.1 The audited balance sheets
of the Seller as at December 31, 1993, December 31, 1992 and
December 31, 1991, including the footnotes thereto,
certified by KPMG Peat Marwick, independent certified public
15
accountants ("Peat Marwick"), all of which have been
delivered to the Buyer, fairly present the financial
condition of the Seller as at such dates in accordance with
generally accepted accounting principles ("GAAP")
consistently applied throughout the periods covered thereby.
The foregoing audited balance sheet of the Seller as at
December 31, 1993 is sometimes hereinafter referred to as
the "Audited Balance Sheet" and December 31, 1993 is
sometimes hereinafter referred to as the "Balance Sheet
Date."
4.6.1.2 The unaudited statements
of income, cash flow and shareholders' equity for the years
ended December 31, 1993 and December 31, 1992, certified by
the Controller of the Seller, all of which have been
delivered to the Buyer, fairly present the results of
operations of the Seller for such respective periods in
accordance with GAAP consistently applied throughout the
periods covered thereby (except as otherwise stated in the
footnotes thereto). The foregoing unaudited financial
statements of the Seller are sometimes hereinafter referred
to as the "Unaudited Financials."
4.6.1.3 The unaudited balance
sheet of the Seller as at June 30, 1994 and the related
statements of income, cash flow and shareholders' equity for
the six months then ended, certified by the Controller of
the Seller, all of which have been delivered to the Buyer,
fairly present the financial condition and results of
16
operations of the Seller as at June 30, 1994 and for the six
months then ended (subject to year-end adjustments
consisting only of normal recurring accruals) in accordance
with GAAP (except as otherwise stated in the footnotes
thereto) applied on a basis consistent with, (x) in the case
of the unaudited balance sheet of the Seller as at June 30,
1994, that of the Audited Balance Sheet and (y) in the case
of such related statements of income, cash flow and
shareholders' equity for the periods covered thereby, that
of the Unaudited Financials. The foregoing unaudited
balance sheet of the Seller as at June 30, 1994 is sometimes
hereinafter referred to as the "Interim Balance Sheet" and
June 30, 1994 is sometimes hereinafter referred to as the
"Interim Balance Sheet Date."
4.6.1.4 The unaudited balanced
sheet of the Company as at September 30, 1994, including the
footnotes thereto, certified by the Controller of the Seller
(the "September Balance Sheet"), which will be delivered to
the Buyer in accordance with Section 6.25, will fairly
present the financial condition of the Seller as at such
date in accordance with GAAP consistently applied throughout
the period covered thereby.
4.6.2 Investment Performance Reports.
------------------------------
The investment performance reports of the Seller for each of
(i) The Pooling Company Portfolio and (ii) American Nuclear
Insurers as at December 31, 1993, December 31, 1992,
December 31, 1991, December 31, 1990 and December 31, 1989,
17
reviewed and verified (Level II) by Deloitte & Touche, all
of which will be delivered to the Buyer in accordance with
Section 6.27, will fairly present the investment performance
of each Client's account for the respective periods covered
thereby in accordance with standards promulgated by the
Association for Investment Management and Research. The
foregoing investment performance reports are sometimes
hereinafter referred to as the "Verified Investment
Performance Reports." The investment performance reports of
the Seller for each Client as at June 30, 1994, which have
been delivered to the Buyer, fairly present the investment
performance of each Client's account for the six month
period ended June 30, 1994 in accordance with standards
promulgated by the Association for Investment Management and
Research.
4.7 No Material Adverse Change. Since the
--------------------------
Balance Sheet Date and except as set forth on Section 4.7 of
the Disclosure Statement, there has been no event, circum-
stance or change which, individually or in the aggregate,
has had or could reasonably be expected to have a material
adverse effect on the results of operations, prospects,
professional staff or condition (financial or otherwise) of
the Business or the Purchased Assets (a "Material Adverse
Effect").
4.8 Tax Matters.
-----------
(a) All federal, state, local, foreign
and other taxes, including, without limitation, income
18
taxes, estimated taxes, excise taxes, sales taxes, use
taxes, gross receipts taxes, franchise taxes, employment and
payroll related taxes, property taxes and import duties,
whether or not measured in whole or in part by net income
and withholding taxes required to be withheld by the Seller,
the Subsidiary or any other Affiliate of the Seller, or any
other tax of any sort including interest, penalties and
additions to tax thereon and obligations under any tax
sharing, tax allocation or similar agreement to which the
Seller is a party (hereinafter, "Taxes" or, individually, a
"Tax") attributable to any period ending on or before the
Closing Date or any portion through and including the
Closing Date of any period that includes the Closing Date
that either (i) relate to the Seller's or the Subsidiary's
income, assets and operations, including the Business and
the Purchased Assets or (ii) may be chargeable as a Lien
against the Purchased Assets have either been paid or
appropriate reserves have been established therefor on the
appropriate books of the Seller or its Affiliate.
(b) The Seller has timely filed (or has
had filed on its behalf) or will cause to be timely filed
all material returns for Taxes relating to the Business or
the Purchased Assets required to be filed by the Seller (or
on its behalf) on or before the Closing Date. Except as set
forth on Schedule 4.8(b), there is no pending or threatened
Tax audit of any returns for Taxes relating to the Business
or the Purchased Assets filed by or on behalf of the Seller.
19
Except as set forth in Section 4.8(b) of the Disclosure
Statement, no extensions of time with respect to any date on
which any return for Taxes relating to the Business or the
Purchased Assets was or is to be filed by the Seller is in
force, and no waiver or agreement by the Seller is in force
for the extension of time for the assessment or payment of
any such Tax.
4.9 Compliance with Laws.
--------------------
4.9.1 General. (i) Neither the Seller
-------
nor the Subsidiary is in violation of any applicable order,
judgment, injunction, award, decree or writ (collectively,
"Orders"), or any applicable law, statute, code, ordinance,
regulation or other requirement (collectively, "Laws")
(other than any securities or commodities Laws (including,
without limitation, the Advisers Act) or securities-related
or commodities-related Orders, as to which clause (ii) below
shall apply), of any government or political subdivision
thereof, whether federal, state, local or foreign, or any
agency or instrumentality of any such government or
political subdivision, or any self regulatory organization,
court or arbitrator (other than any Taxing authorities)
(collectively, "Governmental Bodies"), including, without
limitation, Laws relating to the pollution or protection of
the environment, employment, equal opportunity, nondiscrimi-
nation, immigration, wages, hours, benefits, and
occupational safety and health, in each case applicable to
the Seller, the Subsidiary, the Business or the Purchased
20
Assets, except for any violations that, individually or in
the aggregate, have not had or could not reasonably be
expected to have a Material Adverse Effect, (ii) neither the
Seller nor the Subsidiary is in violation of any securities-
related or commodities-related Order applicable to the
Seller, the Subsidiary, the Business or the Purchased Assets
or any securities or commodities Laws of any Governmental
Body applicable to the Seller, the Subsidiary, the Business
or the Purchased Assets, including, without limitation, the
Advisers Act (including, without limitation, Section 206
thereunder) and (iii) neither Continental nor the Seller has
received written notice that any such violation is being or
may be alleged. Each of the Seller and the Subsidiary has
filed all material reports, documents or other information
required to be filed under all Laws applicable to it or to
the Business, and has not received any written notification
from any Governmental Body that it has not made any such
filing.
4.9.2 Governmental Registrations and
------------------------------
Permits. Section 4.9.2 of the Disclosure Statement sets
-------
forth each of the registrations, licenses, permits, orders
or approvals of any Governmental Body (collectively,
"Permits") that are material to the conduct of the Business.
The Permits described in Section 4.9.2 of the Disclosure
Statement have been duly obtained by the Seller, the
Subsidiary or their respective employees, as the case may
be, and such Permits are in full force and effect. No
21
written notice of any violations have been received by
Continental, the Seller or the Subsidiary in respect of any
such Permit; no application in respect of such Permit nor
any amendment to any such application contains a "yes"
response to any question affirming on the part of the holder
thereof a past or current failure to comply with Laws or
that such holder is the subject of any Order; and no
proceeding is pending or, to the knowledge of the Seller,
threatened to revoke or limit, or that could have the effect
of revoking or limiting, any such Permit. Except as set
forth in Section 4.9.2 of the Disclosure Statement, no
action by Continental, the Seller, the Subsidiary or the
Buyer is required in order that all such Permits will remain
in full force and effect following the consummation of the
Contemplated Transactions.
4.9.3 No Practices in Violation of Law.
--------------------------------
To the knowledge of Continental and the Seller, no advisory
affiliate (as defined in Item 11 of Part I of Form ADV) of
the Seller or the Subsidiary has engaged in or is now
engaging in any act, conspiracy or course of conduct in
violation of any applicable Law or in violation of any
applicable standards promulgated by the Association for
Investment Management and Research, in each case, that would
require the Seller to respond "yes" to any question in
Parts A-G of Item 11 of Part I of Form ADV, and neither the
Seller nor, to its knowledge, any of its advisory affiliates
22
has received written notice that it is now or has heretofore
been so engaged.
4.9.4 Investment Advisers Act. The
-----------------------
Seller is and has been since November 30, 1981 duly
registered as an investment adviser under the Advisers Act.
The Seller (i) is duly registered, licensed or qualified as
an investment adviser in each jurisdiction where the conduct
of its business requires such registration, licensing or
qualification and (ii) is in compliance with all Laws
requiring any such registration, licensing or qualification.
The Seller is not prohibited from acting as an investment
adviser or carrying on the Business as now conducted by any
applicable Orders, Laws, By-Laws or similar requirements.
Section 4.9.4 of the Disclosure Statement sets forth copies
of the Seller's initial Form ADV and current Forms ADV and
ADV-S as filed with the Securities and Exchange Commission
(the "Commission") under the Advisers Act and applicable
state forms, as filed under any similar state Law. Copies
of all current reports required to be maintained by the
Seller pursuant to the Advisers Act and such applicable
state Laws have been made available to the Buyer. The
information contained in such current forms and reports, as
amended or supplemented, is true and correct in all material
respects. All amendments and supplements to such forms and
reports required to be filed have been duly filed by the
Seller. None of the Seller or, to the knowledge of the
Seller, any of its "Associated Persons" (as such term is
23
defined under Section 202(a)(17) of the Advisers Act) is
subject to any disqualification which would pursuant to
Section 203(e) of the Advisers Act be a basis for denial,
suspension or revocation of registration under the Advisers
Act of the Seller as an investment adviser. The Seller
represents to the Buyer the accuracy of the statement
contained in its current Form ADV as to the non-existence of
any "soft dollar" arrangements involving any Unaffiliated
Client.
4.9.5 Investment Company Act.
----------------------
(a) The Seller is not an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company
Act"). The Seller is not a "broker" or "dealer" within the
meaning of the Securities Exchange Act of 1934, as amended.
(b) No Client of the Seller is, to
the knowledge of the Seller, an "investment company" within
the meaning of the Investment Company Act.
4.10 No Breach. The execution and delivery
---------
by the Seller and Continental of this Agreement and any
other Transaction Document to which the Seller or
Continental is a party, the consummation of the Contemplated
Transactions (including, without limitation, the sale,
transfer and assignment of each of the Purchased Assets to
the Buyer on the Closing Date), the performance by the
Seller and Continental of this Agreement and any Transaction
Document to which it is a party in accordance with their
24
respective terms and conditions, and the continuation (by
assignment, novation or otherwise) in full force and effect
of the Contracts comprising the Purchased Assets following
the consummation of the Contemplated Transactions will not
(i) violate any provision of the Certificate of Incorpora-
tion or By-laws (or comparable governing or organizational
documents) of the Seller, the Subsidiary or Continental;
(ii) require the Seller, the Subsidiary or Continental to
obtain any consent, approval or action of, or make any
filing with or give any notice to, any Governmental Body or
any other Person, except as set forth in Section 4.10 of the
Disclosure Statement (the "Required Consents"); (iii) if the
Required Consents are obtained, (A) violate, conflict with
or result in the breach of any of the terms of, result in a
material modification of the effect of, otherwise give any
other contracting party the right to terminate, or consti-
tute (or with notice or lapse of time or both constitute) a
default under any Contract to which the Seller, the
Subsidiary or Continental is a party or by or to which any
of them or any of their properties (including the Purchased
Assets) may be bound or subject; (B) violate any Order of
any Governmental Body against, or binding upon, the Seller,
the Subsidiary, Continental, the Business or upon any of
their properties (including the Purchased Assets);
(C) violate or result in the revocation, suspension, non-
renewal or limitation of any Permit; (D) violate any Law;
(E) result in any Person having the right to require any
25
successor to the Business to make any payment to such Person
other than in respect of any Assumed Liability, or
(iv) result in the creation of any Lien on any of the
Purchased Assets.
4.11 Claims and Proceedings. There are no
----------------------
outstanding Orders of any Governmental Body against or
involving the Business, any of the Purchased Assets or, to
the Seller's knowledge, any of the directors, officers or
professional employees of the Seller or the Subsidiary.
Except as set forth in Section 4.11 of the Disclosure
Statement, there are no actions, suits or claims or legal,
administrative or arbitral proceedings or investigations
(collectively, "Claims") (whether or not the defense thereof
or Liabilities in respect thereof are covered by insurance)
pending or, to the knowledge of Continental or the Seller,
threatened against or involving the Business, the Purchased
Assets or, to the Seller's knowledge, any of the directors,
officers or professional employees of the Seller or the
Subsidiary. None of the Claims set forth in Section 4.11 of
the Disclosure Statement, individually or together with any
other, will have a Material Adverse Effect. Except as set
forth in Section 4.11 of the Disclosure Statement, the
Seller has not received any written notice of investigation
or inquiry, including without limitation, any informal
request for information, from the Commission with respect to
the operations of the Business.
26
4.12 Contracts.
---------
(a) Section 4.12(a) of the Disclosure
Statement sets forth all of the following Contracts relating
to the Business or any of the Purchased Assets to which the
Seller or the Subsidiary is a party (or to which the Seller
has any rights as transferee, assignee or successor in
interest) or by or to which any portion of the Business or
any of the Purchased Assets are bound or subject:
(i) investment management Contracts, investment advisory
Contracts and sub-advisory Contracts, including all memo-
randa referred to therein; (ii) Contracts with any current
or former officer, director, employee, solicitor,
consultant, agent or other representative other than
Contracts (x) terminable on 90 days' notice or less without
liability to the Seller or (y) with respect to which the
aggregate amount reasonably expected to be paid (including
bonus compensation) by the Seller in any 12-month period in
the future is less than $200,000; (iii) Contracts with any
labor union or association representing any employee;
(iv) Contracts for the purchase or sale of materials,
supplies, equipment, merchandise or services (including
management Contracts) that contain an escalation,
renegotiation or redetermination clause other than Contracts
(x) terminable on 90 days' notice or less without liability
to the Seller or (y) with respect to which the aggregate
amount reasonably expected to be paid by the Seller in any
12-month period in the future is less than $25,000; (v) Con
27
tracts for the sale of any portion of the Business or any of
the Purchased Assets (other than in the ordinary course of
business) or for the grant to any Person of any preferential
rights to purchase any portion of the Business or any of the
Purchased Assets; (vi) partnership or joint venture Con-
tracts; (vii) Contracts under which it agrees to indemnify
any party or to share any Tax liability of any party;
(viii) Contracts with Clients or agents for the sharing of
fees, the rebating of charges or other similar arrangements;
(ix) Contracts containing covenants of the Seller not to
compete in any line of business or with any Person in any
geographical area or covenants of any other Person not to
compete with the Seller in any line of business or in any
geographical area; (x) Contracts relating to the acquisition
by the Seller of any operating business or, other than on
behalf of any Clients, the capital stock of any other
Person; (xi) options for the purchase of any asset, tangible
or intangible, for an aggregate purchase price of more than
$25,000; (xii) Contracts (other than with Affiliates)
relating to the borrowing of money; (xiii) Contracts
(whether or not the Seller is a party) relating to "soft
dollar" arrangements derived from commissions generated by
the Seller or directed brokerage; or (xiv) any other
Contract whether or not made in the ordinary course of
business pursuant to which the Seller or the Subsidiary is
obligated to make, or entitled to receive, payments in
excess of $100,000 in any 12-month period or $250,000 in the
28
aggregate (other than any Contract terminable on 90 days'
notice or less without liability to the Seller or reflected
in Sections 4.15, 4.16 and 4.19 of the Disclosure
Statement).
(b) There have been delivered to the
Buyer true, correct and complete copies of all of the
Contracts (including all memoranda referred to therein) set
forth in clause (i) of Section 4.12(a) of the Disclosure
Statement, and there have been made available to the Buyer
true, correct and complete copies of all of the Contracts
set forth in Section 4.12(a) (other than clause (i) thereof)
of the Disclosure Statement. All of such Contracts are
legal, valid, subsisting, in full force and effect and
binding upon and enforceable against the parties thereto, or
upon the Seller or the Subsidiary, as the case may be, as a
transferee, assignee or successor in interest, in each case,
in accordance with their terms, and the Seller is not in
default in any material respect under any of them, nor does
any condition exist that with notice or lapse of time or
both would constitute a material default thereunder. To the
knowledge of the Seller and Continental, no other party to
any such Contract is in default thereunder in any material
respect nor does any condition exist that with notice or
lapse of time or both would constitute a material default
thereunder and no such other party has given written notice
to the Seller or Continental of termination or cancellation
of any such Contract.
29
(c) To the knowledge of the Seller and
Continental, (i) each sub-advisor party to any investment
management or advisory Contract or sub-advisory Contract
with the Seller and any Client (each, a "Sub-Advisor") has
duly and timely delivered complete and accurate written
investment reports and account statements to the Client in
accordance with the terms and conditions of any such
Contract and (ii) no Sub-Advisor is in violation of any
applicable Order or any applicable Law, including without
limitation, the Advisers Act, of any Governmental Body, and
the Seller has not received written notice that any such
violation is being or may be alleged.
4.13 Real Estate. Neither the Seller nor the
-----------
Subsidiary owns any real property. Section 4.13 of the
Disclosure Statement sets forth true, correct and complete
copies of all leases or subleases, under which the Seller or
the Subsidiary uses or occupies or has the right to use or
occupy, now or in the future, any real property.
4.14 Accounts Receivable. All items which
-------------------
are required by GAAP to be reflected as accounts receivable
on the Audited Balance Sheet and on the books of the Seller
are so reflected and any reserve accounts relating thereto
have been established in accordance with GAAP applied in a
manner consistent with the Seller's past practice.
4.15 Tangible Property. Section 4.15 of the
-----------------
Disclosure Statement sets forth as of the respective dates
referred to therein, all interests owned by the Seller or
30
the Subsidiary, as the case may be (including, without
limitation, options), in or to the plant, computer hardware
and software, machinery, equipment, furniture, leasehold
improvements, fixtures, vehicles, structures, any related
capitalized items and other tangible property material to
the Business, taken as a whole, and treated by the Seller as
depreciable or amortizable property (such property listed on
Section 4.15 of the Disclosure Statement and similar
property which has been fully depreciated is hereinafter
collectively referred to as "Tangible Property"). All
material leases, conditional sale contracts, franchises or
licenses pursuant to which the Seller or the Subsidiary may
hold or use any interest owned or claimed by the Seller or
the Subsidiary, respectively, (including, without limita-
tion, options) in or to Tangible Property (collectively,
"Tangible Property Agreements") have been delivered to the
Buyer. All of such Tangible Property Agreements are valid,
subsisting, in full force and effect and binding upon the
parties thereto in accordance with the terms thereof and,
with respect to the performance of the Seller or the
Subsidiary, as the case may be, there is no material default
nor does any condition exist that with notice or lapse of
time or both would constitute a material default thereunder.
The Tangible Property of the Seller and the Subsidiary is
sufficient to meet the operating needs of the Business and
is in good operating condition and repair, normal wear and
tear excepted. There has not been any material interruption
31
of the operations of the Business due to inadequate
maintenance of the Tangible Property.
4.16 Intellectual Property. Section 4.16 of
---------------------
the Disclosure Statement sets forth all copyrights, trade-
marks, service marks, trade names, business names, logos,
franchises, trade secrets and databases, computer software
(other than commercially available software) and other
proprietary interests in intellectual property similar to
the foregoing, all applications for any of the foregoing,
and all Permits, consents, grants and licenses or other
rights or authorizations running to or from the Seller or
the Subsidiary relating to any of the foregoing that are
material to, or used in the conduct of, the Business (the
"Intellectual Property"). The Seller has all requisite
rights to use the name "Continental Asset Management" in
connection with the conduct of the Business. Except as set
forth in Section 4.16 of the Disclosure Statement, the
rights of the Seller and the Subsidiary in the property set
forth in Section 4.16 of the Disclosure Statement are in all
material respects in full force and effect and free and
clear of any Liens. Neither the Seller nor Continental has
knowledge that the use of the Intellectual Property by the
Seller or the Subsidiary, as the case may be, infringes any
copyright, trademark, service mark, trade name or other
proprietary interest of any other Person or has received
written notice of any claim of any such infringement, and
neither the Seller nor Continental knows of any basis for
32
any such charge or claim. None of the items listed in
Section 4.16 of the Disclosure Statement is the subject of
any claim made by or on behalf of the Seller or the
Subsidiary, as the case may be, for infringement. The
Intellectual Property is sufficient for the operational
needs of the Business. All software programs owned or
leased by the Seller or the Subsidiary, as the case may be,
that are used in the operation of the Business are in good
working order and have the capacity to process the current
operations of the Business.
4.17 Liabilities. Except as set forth in
-----------
the Disclosure Statement, the Seller did not have any direct
or indirect indebtedness, liability, claim, loss, damage,
deficiency, obligation or responsibility, known or unknown,
fixed or unfixed, choate or inchoate, liquidated or unliqui-
dated, secured or unsecured, accrued, absolute, contingent
or otherwise, including, without limitation, liabilities on
account of Taxes, other governmental charges or lawsuits
brought, whether or not of a kind required by generally
accepted accounting principles to be set forth on a
financial statement or in the notes thereto ("Liabilities"),
other than (i) Liabilities adequately reflected or reserved
against in accordance with GAAP on the Audited Balance Sheet
and the Interim Balance Sheet or disclosed in the footnotes
to such balance sheets, (ii) Liabilities incurred since the
Interim Balance Sheet Date in the ordinary course of
33
business and (iii) Liabilities that, in the aggregate, do
not exceed $100,000.
4.18 Clients.
-------
(a) Section 4.18(a) of the Disclosure
Statement sets forth (i) the name of each Client (each
separately identified as (x) an Affiliated Client, (y) an
Unaffiliated Client or (z) a Client as to which the Seller
receives no fees (incentive or otherwise) under its
respective investment advisory or management Contract (such
Clients shall hereinafter be referred to as "Non-Fee Paying
Clients")) as at the Balance Sheet Date and June 30, 1994;
(ii) as to each Client's investment advisory or management
Contract with the Seller, as at the Balance Sheet Date and
June 30, 1994, the fee schedule thereunder (including, any
incentive fee arrangements), if any, and the dollar amount
of the assets managed thereunder; (iii) the percentage
attributable to each Client (separately identified) of the
gross revenues of the Seller for the (A) six-month period
ended June 30, 1994 as set forth in the line item entitled
"Total Revenues" set forth on the unaudited statement of
income of the Seller for the six months ended June 30, 1994
and (B) year ended December 31, 1993 as set forth in the
line item entitled "Total Revenues" set forth on the
unaudited statement of income of the Seller for the year
ended December 31, 1993; and (iv) the percentage attribut-
able to each Unaffiliated Client of (X) the Unaffiliated
34
June 30, 1994 Revenue and (Y) the Unaffiliated December 31,
1993 Revenue.
(b) Except as set forth in Sec-
tion 4.18(b) of the Disclosure Statement, no Client has, at
any time during the five (5) years prior to the date hereof,
cancelled or otherwise terminated, or threatened in writing
to cancel or otherwise indicated in writing to the Seller or
the Subsidiary its intention to terminate, its relationship
with the Seller or the Subsidiary, as the case may be, or
decreased materially, or threatened in writing to the Seller
to decrease materially, the amount of assets managed by the
Seller or the Subsidiary, as the case may be. Except as
heretofore communicated to the Buyer, neither the Seller nor
Continental has any knowledge that any Client intends to
cancel or to decrease materially its relationship with the
Seller or the Subsidiary, as the case may be.
(c) Each of the Seller and the
Subsidiary has fulfilled all of its obligations under its
investment advisory and management Contracts in accordance
with the terms and provisions of such Contracts and
applicable Law, including, without limitation, the Advisers
Act. During the prior five years, the Seller has timely
delivered accurate written investment reports and account
statements to its Clients in accordance with the terms and
conditions of each investment management or advisory
Contract to which it is a party. In the Seller's reports to
its Clients, the Seller marked to market assets under
35
management under its investment advisory and management
Contracts in accordance with industry practice. All
marketing and sales materials, requests for proposals and
any other Documents used by the Seller and the Subsidiary to
solicit prospective and current Clients comply, to the
extent applicable, with Section 206 of the Advisers Act.
(d) Set forth in Section 4.18(d) of the
Disclosure Statement are true, correct and complete copies
of any notices delivered by the Seller to any Client
pursuant to the specific notice requirements of Section 206
of the Advisers Act.
4.19 Employee Benefits. Except for the
-----------------
plans and arrangements (the "Benefit Plans") set forth in
Section 4.19 of the Disclosure Statement, there are no
employee benefit plans or arrangements of any type
(including, without limitation, plans described in
section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder
("ERISA")), under which the Seller or the Subsidiary has or
in the future could have directly, or indirectly through an
entity (a "Commonly Controlled Entity") affiliated with the
Seller under section 414(b), (c), (m) or (o) of the Code,
any liability with respect to any current or former employee
of the Seller, the Subsidiary or any Commonly Controlled
Entity.
With respect to each Benefit Plan that covers
former or current employees of the Seller or the Subsidiary
36
(where applicable): the Seller or Continental has delivered
to the Buyer complete and accurate copies of (i) all plan
texts and agreements and (ii) all material employee
communications (including summary plan descriptions).
With respect to the Continental Savings Plan, the
Seller or Continental has delivered complete and accurate
copies of (i) the most recent annual report); (ii) the most
recent annual and periodic accounting of plan assets;
(iii) the most recent determination letter received from the
Internal Revenue Service; and (iv) the most recent actuarial
valuation.
With respect to the Continental Savings Plan,
except as disclosed in Section 4.19 of the Disclosure
Statement: (i) it qualifies under section 401(a) of the
Code and its related trust is exempt from taxation under
section 501(a) of the Code; (ii) the Continental Savings
Plan has been maintained and administered at all times in
material compliance with its terms and applicable Law and
regulation; (iii) no event has occurred and there exists no
circumstance under which the Seller or the Subsidiary could
directly, or indirectly through a Commonly Controlled
Entity, incur Liability under ERISA, the Code or otherwise
(other than routine claims for benefits and other
Liabilities arising in the ordinary course pursuant to the
terms of the Continental Savings Plan); (iv) there are no
actions, suits or claims (other than routine claims for
benefits) pending or, to the knowledge of the Seller and
37
Continental, threatened, with respect to the Continental
Savings Plan or against the assets of the Continental
Savings Plan; (v) no "accumulated funding deficiency" (as
defined in section 302 of ERISA) has occurred; (vi) neither
the Seller nor the Subsidiary has engaged in a non-exempt
"prohibited transaction" (as defined in section 406 of ERISA
or in section 4975 of the Code); (vii) all contributions and
premiums due have been made or paid on a timely basis; and
(ix) all contributions made meet the requirements for
deductibility under the Code, and all contributions that
have not been made have been properly recorded on the books
of the Seller or a Commonly Controlled Entity thereof in
accordance with GAAP.
With respect to each Benefit Plan that is subject
to Title IV of ERISA, except as disclosed in Section 4.19 of
the Disclosure Statement: neither the Seller nor the
Subsidiary has incurred, or is expected to incur, directly,
or indirectly through a Commonly Controlled Entity, any
Liability arising from the termination of such a Benefit
Plan.
With respect to each Benefit Plan that is a
"welfare plan" (as defined in section 3(1) of ERISA), except
as disclosed in Section 4.19 of the Disclosure Statement,
the Seller, the Subsidiary and each Commonly Controlled
Entity have complied with the requirements of section 4980B
of the Code.
38
4.20 Employee Relations. The Seller has
------------------
approximately 75 employees. The Subsidiary has no
employees. Neither the Seller nor the Subsidiary is a party
to any collective bargaining agreement or other contractual
commitment or obligation with any labor organization and, to
the knowledge of Continental and the Seller, no union
organizing efforts have been conducted within the last five
years and no such activity is now being conducted. The
Seller has not at any time during the last five years had,
nor, to the knowledge of the Seller and Continental, is
there now threatened, a strike, picket, work stoppage, work
slowdown, or other similar occurrence that could reasonably
be expected to have a Material Adverse Effect. Except as
set forth in Section 4.20 of the Disclosure Statement, there
are no material controversies pending, or to the knowledge
of the Seller and Continental, threatened between the Seller
and the Subsidiary, on the one hand, and any of their
respective employees, on the other hand.
4.21 Insurance. Section 4.21 of the
---------
Disclosure Statement sets forth a list (specifying the
insurer and the policy number or covering note number with
respect to binders, describing each pending claim of the
Seller thereunder of more than $100,000 and setting forth
the aggregate amounts paid out to or on behalf of the Seller
under each such policy since January 1, 1992 through the
date hereof) of all policies or binders of fire, liability,
fidelity, errors and omissions, product liability, workmen's
39
compensation, vehicular and other insurance held by or on
behalf of the Seller for its own account to insure against
its own liability and property loss that relate to the
Business or any of the Purchased Assets. Such policies and
binders are in all material respects valid and enforceable
in accordance with their terms, are in full force and
effect, and insure against risks and liabilities to the
extent and in the manner deemed appropriate and sufficient
by the Seller. The Seller is not in default in any material
respect with respect to any provision contained in any such
policy or binder and has not failed to give any notice or
present any material claim under any such policy or binder
in due and timely fashion. Except for claims set forth in
Section 4.21 of the Disclosure Statement, there are no
outstanding unpaid claims of the Seller under any such
policy or binder. Neither the Seller nor Continental has
received any notice of cancellation or non-renewal of any
such policy or binder. Neither the Seller nor Continental
has any knowledge of any inaccuracy in any application for
such policies or binders, any failure to pay premiums when
due or any similar state of facts that could reasonably form
the basis for termination of any such insurance. Neither
the Seller nor Continental has received any written notice
from any of their insurance carriers that any insurance
premiums or other amounts due under any such policy or
binder (or replacement coverage, including renewals) will or
may be materially increased in the future or that any
40
insurance coverage listed in Section 4.21 of the Disclosure
Statement will or may not be available to Continental or the
Seller, as the case may be, in the future on reasonable
commercial terms.
4.22 Business; Policies and Procedures.
---------------------------------
(a) Neither the Seller nor the
Subsidiary conducts any business other than the Business and
that which is incidental thereto.
(b) Section 4.22(b) of the Disclosure
Statements lists all Documents setting forth all material
policies, procedures, codes of ethics and guidelines for
employees of the Seller and the Subsidiary (including any
Documents of Continental which apply to employees of the
Seller), true, correct and complete copies of which have
been heretofore provided to the Buyer. To the knowledge of
the Seller, the employees of the Seller have observed all
procedures with respect to "insider trading", purchases and
sales of securities, treatment of confidential and proprie-
tary information and conflicts of interest in accordance
with the applicable procedures set forth in the Documents
listed on Schedule 4.22(b) of the Disclosure Statement.
Senior management of the Seller supervises its employees
with respect to compliance with all applicable Laws,
including without limitation, the Advisers Act, and the
applicable policies, procedures, codes of ethics and
guidelines of Continental and the Seller.
41
4.23 Officers, Directors and Employees.
---------------------------------
Section 4.23 of the Disclosure Statement sets forth (i) the
name and total annual compensation (including bonuses and
commissions) of each officer and director of the Seller and
the Subsidiary and of each other employee, consultant, agent
or other representative of the Seller whose current or
committed annual rate of compensation (including bonuses and
commissions) exceeds $200,000, (ii) all wage or salary
increases, bonuses and increases in any other direct or
indirect compensation received by such Persons since the
Balance Sheet Date, (iii) any payments or commitments to pay
any severance or termination pay to any such Persons,
(iv) any accrual for, or any commitment or agreement by the
Seller or the Subsidiary to pay, such increases, bonuses or
severance pay and (v) any commitments, agreements or
understandings to increase or to otherwise modify the terms
or conditions of employment of any such Persons. Except as
set forth on Section 4.23 of the Disclosure Statement, none
of such Persons has given written notice to the Seller or
the Subsidiary that he or she will cancel or otherwise
terminate such Person's relationship with the Seller or the
Subsidiary, as the case may be, by reason of the Contem-
plated Transactions or otherwise. Except as set forth on
Section 4.23 of the Disclosure Statement, no employee of the
Seller whose committed annual rate of compensation
(including bonuses and commissions) exceeded $100,000 has,
42
at any time within the last five years, terminated his or
her relationship with the Seller.
4.24 Operations of the Business. Except as
--------------------------
set forth on Section 4.24 of the Disclosure Statement, since
the Interim Balance Sheet Date neither the Seller nor the
Subsidiary has:
(i) amended, or agreed to amend its
Certificate of Incorporation or By-laws (or comparable
instruments), or merged with or into or consolidated
with, or agreed to merge with or into or consolidate
with, any other Person, subdivided or in any way
reclassified any shares of its capital stock, or
changed or agreed to change in any manner the rights of
its outstanding capital stock;
(ii) issued or sold or purchased, or
issued options or rights (including without limitation,
any stock appreciation right, phantom stock or similar
right or instrument) to subscribe to, or entered into
any Contracts to issue or sell or purchase, any shares
of its capital stock or rights (including without
limitation, any stock appreciation right, phantom stock
or similar right or instrument) to acquire such capital
stock;
(iii) hired, or agreed to hire, any
Person for a current annual compensation (including
bonuses and commissions) in excess of $100,000, or
entered into or amended (so as to increase the annual
43
compensation, including bonuses and commissions,
payable thereunder), or agreed to enter into or so
amend, any employment or consulting Contract which
provides for annual compensation (including bonuses and
commissions) in excess of $200,000; or entered into or
amended, or agreed to enter into or amend, any Benefit
Plan, made any material change in the actuarial methods
or assumptions used in funding any Benefit Plan, or
made any material change in the assumptions or factors
used in determining benefit equivalencies thereunder;
(iv) incurred any indebtedness for
borrowed money or guaranteed the indebtedness of other
Persons;
(v) declared or paid any dividends or
declared or made any other distributions of any kind to
its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition
of any shares of its capital stock or other securities
or options, warrants or other rights to acquire capital
stock;
(vi) reduced its cash or short term
investments or their equivalent, other than to meet
cash needs arising in the ordinary course of business,
consistent with past practices;
(vii) waived, or agreed to waive, any
right of material value to the Business;
44
(viii) made, or agreed to make, any
material change in its accounting methods or practices
for Tax or accounting purposes or made, or agreed to
make, any material change in depreciation or
amortization policies or rates adopted by it for Tax or
accounting purposes;
(ix) materially changed, or agreed to
materially change, any of its business policies or
practices that relate to the Business, including,
without limitation, fee structure, interest rate
management, security selection, sales and marketing,
personnel, budget or product development policies;
(x) made any loan or advance to any of
its shareholders, officers, directors, employees,
consultants, agents or other representatives (other
than travel advances made in the ordinary course of
business), or made any other loan or advance otherwise
than in the ordinary course of business;
(xi) entered into, or agreed to enter
into, any lease (as lessor or lessee) concerning real
property of the Business; sold, abandoned or made any
other disposition of any of the material assets or
properties of the Business, except in the ordinary
course of business; granted or suffered, or agreed to
grant or suffer, any Lien (other than Permitted Liens)
on any of the Purchased Assets; entered into or
amended, or agreed to enter into or amend, any Contract
45
pursuant to which the Purchased Assets or the Business
are bound or subject, pursuant to which it agrees to
indemnify any party on behalf of the Business or
pursuant to which it agrees to refrain from competing
with any party with respect to the Business;
(xii) except in the ordinary course of
business or in amounts less than $100,000 in each case,
incurred or assumed, or agreed to incur or assume, any
Liability (whether or not currently due and payable)
relating to the Business or any of the Purchased
Assets;
(xiii) except for equipment, materials and
supplies acquired in the ordinary course of business,
made any acquisition, other than on behalf of a Client,
of all or any part of the assets, properties, capital
stock or business of any other Person having a value in
excess of $10,000;
(xiv) paid, directly or indirectly, any
of its material Liabilities relating to the Business or
any of the Purchased Assets before the same became due
in accordance with its terms or otherwise than in the
ordinary course of business;
(xv) made any material change in its
overall investment strategy or mix of products;
(xvi) terminated, or agreed to terminate,
or to the knowledge of the Seller, failed to renew, or
received any written threat (that was not subsequently
46
withdrawn) to terminate or fail to renew any Contract
with respect to any of the Purchased Assets or the
Business other than any such termination or failure to
renew that, individually or in the aggregate, has not
had or could not be reasonably expected to have a
Material Adverse Effect;
(xvii) entered into, or agreed to enter
into, any Contract with Continental or any of its
Affiliates; or
(xviii) except in the ordinary course of
business consistent with past practice, entered into or
amended, or agreed to enter into or amend, any other
material Contract or other material transaction
relating to the Business or the Purchased Assets.
4.25 Potential Conflicts of Interest.
-------------------------------
Except as set forth in Section 4.25 of the Disclosure
Statement, to the knowledge of Continental and the Seller,
no officer or director of the Seller or any entity
controlled by any such officer or director (i) owns,
directly or indirectly, any interest in (excepting not more
than 1% stock holdings for investment purposes in securities
of publicly held and traded companies), or is an officer,
director, employee or consultant of, any Person which is, or
is engaged in business as, a competitor, lessor, lessee,
Client or supplier of the Seller; (ii) owns, directly or
indirectly, in whole or in part, any Intellectual Property
which the Seller uses or the use of which is necessary for
47
the Business; or (iii) has any cause of action or other
claim whatsoever against, or owes any amount to, the Seller
except for claims in the ordinary course of business, such
as for accrued vacation pay, accrued benefits under Benefit
Plans, and similar matters and agreements existing on the
date hereof.
4.26 Transactions with Continental and its
-------------------------------------
Affiliates. Section 4.26 of the Disclosure Statement
----------
(i) lists all Contracts (other than with respect to
arrangements or relationships that have no ongoing or
outstanding Liabilities) between the Seller or the
Subsidiary, on the one hand, and Continental and its
Affiliates, on the other hand, true, correct and complete
copies or, in the case of oral arrangements, descriptions of
which have heretofore been provided to the Buyer; (ii) lists
all investment management or investment advisory Contracts,
pursuant to which any financial assets of Continental or any
of its subsidiaries or Affiliates are managed by any
investment adviser other than the Seller, true, correct and
complete copies or, in the case of oral arrangements,
descriptions of which have heretofore been provided to the
Buyer; (iii) the fee arrangements and the assets under
management under any of the items listed pursuant to
clause (i) or (ii) above; and (iv) describes all material
services (including, without limitation, accounting,
insurance, human resources, legal and systems management)
48
provided at any time during the last twelve (12) months by
Continental or any of its Affiliates to the Seller or the
Subsidiary in connection with the conduct of the Business.
4.27 Derivatives. The description of any
-----------
options, interest rate or currency SWAPs, futures or forward
Contracts or any other derivative instruments or hedging
devices used by the Seller as set forth in the "Derivative
Exposure Report for the Continental Corporation" prepared by
the Seller, heretofore provided to the Buyer, is accurate in
all material respects as of the date of its preparation and
the use of such derivative instruments or hedging devices by
the Seller in the operation of the Business has not changed
in any manner since the date of preparation of such report
which has had, or could reasonably be expected to have, a
Material Adverse Effect.
4.28 Securities Portfolio. Section 4.28 of
--------------------
the Disclosure Statement sets forth a true, correct and
complete list, as of September 30, 1994, the 12 largest
positions, on an aggregate basis, invested by the Seller on
behalf of Clients in (x) equity securities and (y) non-
investment grade debt securities.
4.29 Banks, Brokers and Proxies. Sec-
--------------------------
tion 4.29 of the Disclosure Statement sets forth (i) the
name of each bank, trust company, securities or other broker
or other financial institution with which the Seller or the
Subsidiary has an account, credit line or safe deposit box
or vault; (ii) the name of each Person authorized by the
49
Seller to draw thereon or to have access to any safe deposit
box or vault; (iii) the purpose of each such account, safe
deposit box or vault; and (iv) the names of all Persons
authorized by proxies, powers of attorney or other
instruments to act on behalf of the Seller or the Subsidiary
in matters concerning its business or affairs.
4.30 Full Disclosure. This Agreement and
---------------
the Transaction Documents taken as a whole do not contain an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements made, in the context in which made, not
materially false or misleading.
5. Representations and Warranties of the Buyer.
-------------------------------------------
The Buyer represents and warrants to the Seller and
Continental as follows:
5.1 Due Organization.
----------------
(a) The Buyer is a limited partnership
duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite
power and authority to own, lease and operate its assets,
properties and business and to carry on its business as now
being conducted. The Buyer is duly qualified or otherwise
authorized as a foreign limited partnership to transact
business and is in good standing in such jurisdiction set
forth in Section 5.1(a) of the Disclosure Statement, which
are the only jurisdictions in which such qualification or
authorization is required by Law.
50
(b) The Buyer has heretofore delivered
to the Seller and Continental a true and complete copy of
the Certificate of Limited Partnership of the Buyer (certi-
fied by the Secretary of State of the State of Delaware) as
in effect on the date hereof. The copies of the Certificate
of Limited Partnership (certified by the Secretary of State
of the State of Delaware) of the Buyer and the Agreement of
Limited Partnership of the Buyer (certified by the General
Partner of the Buyer), which will be delivered to
Continental pursuant to Section 6.21, will be true and
complete copies of such documents, in each case as in effect
on the Closing Date.
5.2 Authority to Execute and Perform
--------------------------------
Agreements. The Buyer has the full power and authority and
----------
approvals required to execute and deliver this Agreement and
each other Transaction Document to which it is a party, and
to perform fully its obligations hereunder and thereunder,
and this Agreement has been duly executed and delivered by
the Buyer, and is a valid and binding obligation of the
Buyer enforceable in accordance with its terms, and each
Transaction Document, upon execution and delivery by the
Buyer, will be duly executed and delivered by the Buyer and
will be a valid and binding obligation of the Buyer enforce-
able against the Buyer in accordance with their respective
terms. Except as set forth in Section 5.2 of the Disclosure
Statement, the execution and delivery by the Buyer of this
Agreement, the consummation of the Contemplated Transactions
51
and the performance by the Buyer of this Agreement and each
Transaction Document to which it is a party will not
(i) require any consent, approval or action of, or any
filing with, or notice to, any Governmental Body or any
other Person; (ii) conflict with or result in any breach or
violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both
constitute) a default under its organizational documents,
any Law or Order of any Governmental Body applicable to the
Buyer, or any Contract to which the Buyer is a party or by
or to which the Buyer or any of its assets or properties is
bound or subject; or (iii) result in the creation of any
Lien on any of the assets or properties of the Buyer.
5.3 Buyer's Business. The Buyer is a newly
----------------
organized Delaware limited partnership organized exclusively
for the purpose of purchasing the Purchased Assets and
consummating the Contemplated Transactions. The Buyer has,
and immediately following the Closing, will have, no other
business or purpose other than the ownership of the
Purchased Assets and the conduct of the Business. The Buyer
does not have any material Liabilities of any nature, other
than under this Agreement and, when executed and delivered,
the Transaction Documents to which it is party, and under
any bank credit agreement relating to the bank financing
contemplated by Section 8.7.
52
5.4 Litigation. There are no claims pending
----------
or, to the knowledge of the Buyer, threatened against the
Buyer with respect to any of its properties or assets.
5.5 Capitalization of the Buyer. It is the
---------------------------
present intention of the Buyer to capitalize the Buyer with
approximately $500,000 of equity; $4.5 million of junior
subordinated debt (or preferred partnership interests);
$10 million of subordinated debt; and $22 million of senior
bank debt (subject to the Letter of Credit facility). The
definitive capitalization of the Buyer as of the Closing
Date, which will be delivered to Continental pursuant to
Section 6.17, will be true and complete.
5.6 Financing. Each of Insurance Partners,
---------
L.P. and Oak Hill Partners, Inc. and each other Affiliate of
the Buyer whose consent is necessary to consummate the Con-
templated Transactions has the full legal right and power
and all partnership authority and approvals required to make
the equity investments required to capitalize the Buyer in
the manner described in Section 5.5 hereof.
5.7 Qualification as Investment Adviser.
-----------------------------------
Neither the Buyer nor, to the knowledge of the Buyer, any
"person associated with" the Buyer (as such term is defined
under Section 202(a)(17) of the Advisers Act) is subject to
any disqualification which would pursuant to Section 203(e)
of the Advisers Act be a basis for denial, suspension or
revocation of registration under the Advisers Act of the
Buyer as an investment adviser, and, to the knowledge of the
53
Buyer, no other basis exists for the denial by the
Commission pursuant to Section 203(c) of the Advisers Act by
the Commission of the registration of the Buyer under the
Advisers Act as an investment adviser.
6. Covenants and Agreements. The parties hereto
------------------------
covenant and agree as follows:
6.1 Conduct of Business. From the date
-------------------
hereof through the Closing Date, the Seller agrees to
conduct the Business in the ordinary course and, without the
prior written consent of the Buyer (unless specifically
contemplated by this Agreement), not to undertake any of the
actions specified in Section 4.24 and the Seller shall
conduct the Business in such a manner so that the
representations and warranties contained in Section 4 shall
continue to be true and correct on and as of the Closing
Date as if made on and as of the Closing Date. The Seller
or Continental shall give the Buyer prompt notice of any
event, condition or circumstance occurring from the date
hereof through the Closing Date that would constitute a
violation or breach in any material respect of any represen-
tation or warranty contained in this Agreement, whether made
as of the date hereof or as of the Closing Date, or that
would constitute a violation or breach in any material
respect of any covenant of the Seller or Continental
contained in this Agreement.
6.2 Insurance. From the date hereof through
---------
the Closing Date, Continental shall, and where appropriate
54
cause the Seller to, maintain in force (including necessary
renewals thereof) the insurance policies relating to the
Business or any of the Purchased Assets listed in the
Disclosure Statement, except to the extent that they may be
replaced with equivalent policies appropriate to insure the
assets, properties, business and operations of the Business
or any of the Purchased Assets to the same extent as
currently insured.
6.3 Litigation. From the date hereof
----------
through the Closing Date, Continental and the Seller shall
notify promptly the Buyer of (i) any Claims that are, to the
knowledge of the Seller, threatened or commenced against the
Seller or the Subsidiary or against any officer, director or
professional employee of the Seller or the Subsidiary
arising out of or relating to the affairs or conduct of the
Business or relating to any of the Purchased Assets and
(ii) any requests for additional information or documentary
materials by any Governmental Body pursuant to the HSR Act
and the rules and regulations promulgated thereunder.
6.4 Corporate Examinations and Investiga-
-------------------------------------
tions.
-----
(a) Prior to the Closing Date, the
Seller and Continental agree that the Buyer shall be
entitled, through its employees and representatives,
including, without limitation, Paul, Weiss, Rifkind,
Wharton & Garrison, Schulte Roth & Zabel, Putnam Lovell and
Arthur Andersen LLP, to make such investigation of the
55
assets, properties, business and operations of the Business
and any of the Purchased Assets (and of Continental and its
Affiliates insofar as they relate to the operations of the
Business or any of the Purchased Assets), and such examina-
tion of the books, records and financial condition of the
Business (and of Continental and its Affiliates insofar as
they relate to the operations of the Business or any of the
Purchased Assets) as the Buyer may reasonably request. Any
such investigation and examination shall be conducted during
normal business hours, upon reasonable notice and under
reasonable circumstances and the Seller and Continental
shall cooperate reasonably therein. Prior to the Closing,
the Seller and Continental shall furnish promptly or make
available to the Buyer and its representatives all informa-
tion concerning the affairs of the Business or any of the
Assets (and of Continental or its Affiliates insofar as they
relate to the operations of the Business or the Purchased
Assets) as the Buyer or its representatives may reasonably
request, provided that any review will be conducted in a way
--------
that will not interfere unreasonably with the conduct of the
Business. No investigation by the Buyer shall affect or be
deemed to modify any of the representations, warranties,
covenants or agreements of the Seller and Continental con-
tained in this Agreement. The Buyer will keep, and will
cause its employees and Affiliates to keep, all information
and documents obtained pursuant to this Section 6.4(a)
confidential except as required by Law and except to the
56
extent that the Buyer becomes the owner of such information
and documents as a result of the transfer thereof to the
Buyer pursuant to this Agreement. If disclosure is required
by Law, the party required to make such disclosure shall
give notice to the other party so that it may seek a protec-
tive order. Prior to the Closing Date, the Seller and
Continental shall use reasonable efforts to facilitate the
Buyer's introduction to the Clients and shall provide the
Buyer and its representatives with an opportunity to meet
with representatives of the Clients. Any such meetings
shall be conducted at reasonable times and under reasonable
circumstances and Continental and the Seller shall cooperate
reasonably therein.
(b) From and after the Closing Date,
the parties hereto shall reasonably cooperate with each
other with respect to actions required or requested to be
undertaken with respect to administrative or regulatory
actions or proceedings and litigations which may occur after
the Closing Date with respect to the conduct of the Business
on or prior to the Closing Date, and make available to each
other such corporate, accounting and other records as may be
reasonably requested in connection with such matters. Each
party will allow representatives of any other party access
to such records upon reasonable notice, during normal
business hours and under reasonable circumstances in such a
way that will not interfere unreasonably with the conduct of
the business of the party providing access, provided that
--------
57
all information and documents obtained pursuant to this Sec-
tion 6.4(b) will be kept confidential except as required by
Law. If disclosure is required by Law, the party required
to make such disclosure shall give notice to the other party
so that it may seek a protective order. From and after the
Closing Date, each of the Seller and Continental agree that
it shall provide, upon reasonable notice, the Buyer and its
representatives such accounting information with respect to
allocations made through the Closing Date between the Seller
and the Subsidiary, on the one hand, and Continental, on the
other hand as may be reasonably requested. The parties
agree to retain, for a period of seven years after the
Closing Date, any and all books and records related to the
Purchased Assets, Liabilities and operations of the Business
for all periods through the Closing Date.
(c) From and after the date hereof, the
Seller and Continental shall keep, and will cause its
employees and Affiliates to keep, all information relating
to the Business (other than Excluded Liabilities) and the
Purchased Assets confidential except as required by Law or
regulatory reporting requirements or the defense of any
Claim against the Seller or Continental.
6.5 Consent to Jurisdiction and Service of
--------------------------------------
Process. Any legal action, suit or proceeding arising out
-------
of or relating to this Agreement or the Contemplated
Transactions may be instituted in any court of the State of
New York in New York County or the United States District
58
Court for the Southern District of New York, and each party
agrees not to assert, by way of motion, as a defense, or
otherwise, in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of
such court, that its property is exempt or immune from
attachment or execution, that the action, suit or proceeding
is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced
in or by such court. Each party further irrevocably submits
to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any
other notice in any such action, suit or proceeding shall be
effective against any party if given personally or by
registered or certified mail, return receipt requested, or
by any other means of mail that requires a signed receipt,
postage prepaid, mailed to such party as herein provided.
Nothing herein contained shall be deemed to affect the right
of any party to serve process in any manner permitted by law
or to commence legal proceedings or otherwise proceed
against any other party in any other jurisdiction.
6.6 Expenses. Whether or not this Agreement
--------
is terminated or the Contemplated Transactions are
consummated, Continental agrees to bear and pay all of the
Transaction Expenses (as defined below) incurred by or on
behalf of Continental and its Affiliates and all of the
Transaction Expenses incurred by or on behalf of the Buyer
59
and its Affiliates; provided, however, that if this
-------- -------
Agreement is terminated pursuant to Section 12.1(i) by the
Seller, then Continental shall only be obligated to reim-
burse the Buyer and its Affiliates for Transaction Expenses
incurred by or on behalf of the Buyer and its Affiliates in
the manner provided in Section 6.10 of the Securities
Purchase Agreement; and provided further, that if the Buyer
-------- -------
fails to close the Contemplated Transactions upon the satis-
faction of the closing conditions set forth in Section 8, or
the Seller terminates this Agreement pursuant to Sec-
tion 12.1(iii), then Continental shall not be obligated to
reimburse the Buyer and its Affiliates for Transaction
Expenses incurred by or on behalf of the Buyer and its
Affiliates. Notwithstanding the foregoing, Continental will
not be required to pay any Transaction Expenses with respect
to any advisor of the Buyer or its Affiliates engaged
thereby after the date hereof unless Continental has con-
sented to such engagement (which consent shall not be
unreasonably withheld). "Transaction Expenses" shall mean,
with respect to any Person, the expenses of such Person
(whether or not incurred prior to the date hereof),
including, without limitation, the fees, disbursements and
other expenses of lawyers, accountants, actuaries,
investment bankers, risk management consultants, money
management consultants and any other advisors, arising out
of, relating to, or incidental to, the discussion,
evaluation, negotiation, documentation and Closing or poten-
60
tial Closing of the Contemplated Transactions, including,
without limitation, this Agreement, and shall mean and
include with respect to fees of professionals based on
hourly rates, such fees to the extent they are based on
standard hourly rates of such professionals.
6.7 Indemnification of Brokerage. The Buyer
----------------------------
represents and warrants to the Seller and Continental that
except for Putnam Lovell, Inc. ("Putnam Lovell"), who have
acted as financial consultants to the Buyer and its
Affiliates in connection with the Contemplated Transactions,
no broker, finder, agent or similar intermediary (a
"Broker") has acted on behalf of the Buyer in connection
with this Agreement or the Contemplated Transactions, and
that, except for the fees and expenses of Putnam Lovell that
are payable by the Seller and Continental to the Buyer
pursuant to Section 6.6, there are no brokerage commissions,
finders' fees or similar fees or commissions payable in
connection therewith based on any agreement, arrangement or
understanding with the Buyer or any action taken by the
Buyer. Except for the fees and expenses of Putnam Lovell
that are payable by the Seller and Continental pursuant to
Section 6.6, the Buyer agrees to indemnify and save the
Seller, Continental and their Affiliates harmless from any
claim or demand for commission or other compensation by any
Broker claiming to have been employed by or on behalf of the
Buyer, and to bear the cost of legal expenses incurred in
defending against any such claim. Continental and the
61
Seller, jointly and severally, represent and warrant to the
Buyer that except for Goldman Sachs & Co., who has acted as
financial advisor to Continental and the Seller and their
respective Affiliates in connection with the Contemplated
Transactions, no Broker has acted on behalf of Continental
or the Seller in connection with this Agreement or the
Contemplated Transactions, and that, except for any fees and
expenses payable to Goldman Sachs & Co. (the "Seller's
Fee"), there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith
based on any agreement, arrangement or understanding with
Continental or the Seller, or any action taken by
Continental or the Seller. The Seller and Continental agree
to pay the Seller's Fee and, jointly and severally, agree to
indemnify and save the Buyer and its Affiliates harmless
from any claim or demand for commission or other
compensation by any Broker claiming to have been employed by
or on behalf of Continental or the Seller, and to bear the
cost of legal expenses incurred in defending against any
such claim.
6.8 Further Assurance. Each of the parties
-----------------
shall execute such documents and other papers and take such
further actions as may be reasonably requested to carry out
the provisions hereof and the Contemplated Transactions
(including, without limitation, the furnishing of
information and Documents as may be required by the
Commission or any state agency with respect to the Advisers
62
Act or by the Department of Justice (the "DOJ") or the
Federal Trade Commission (the "FTC") under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), in a timely manner to obtain the requisite
regulatory approvals in order to consummate the Contemplated
Transactions). Subject to the terms and conditions set
forth herein, each of the parties hereto agrees to use its
reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary
or advisable to consummate the Contemplated Transactions and
to effect any transfer and assignment of this Agreement made
pursuant to Section 6.14(vi).
6.9 Sublease; Services Agreement.
----------------------------
(i) From and after the Closing Date,
Continental shall provide the Buyer with the use and
enjoyment of the premises heretofore used and occupied by
the Seller in connection with the Business (and access to
all building amenities heretofore and hereinafter available
to employees of the Seller or other tenants of the building)
located at 180 Maiden Lane, New York, New York pursuant to a
Sublease (the "New Sublease") to be executed and delivered
by the Buyer and Continental on the Closing Date containing
the terms and conditions set forth on Exhibit E hereto and
other customary provisions satisfactory to the parties
thereto.
(ii) From and after the Closing Date,
Continental shall provide the Buyer with certain adminis-
63
trative services as are required by the Buyer pursuant to a
services agreement (the "Services Agreement") to be executed
and delivered by the Buyer and Continental on the Closing
Date containing the terms and conditions set forth on
Exhibit F hereto and other customary provisions satisfactory
to the parties thereto.
6.10 Consents.
--------
(i) From and after the date hereof, the
Seller or Continental, as the case may be, shall consult
with the Buyer prior to obtaining any of the consents and
approvals described in Section 6.10(v) and, in connection
therewith, neither the Seller nor Continental shall take any
action to obtain such consents or approvals without the
prior consent of the Buyer as to the form and substance of
such consent or approval, which consent of the Buyer shall
not be unreasonably withheld.
(ii) Prior to the Closing Date, the
Seller and Continental shall use their reasonable efforts to
obtain all Required Consents from (x) parties to any of the
Seller's Contracts (other than any investment advisory or
management Contracts, as to which clause (v) below shall
apply) that relate to the Business or any of the Purchased
Assets as to the assignment of such Contracts to the Buyer
on the Closing Date and (y) Governmental Bodies that are
required in connection with the performance by the Seller of
its obligations under this Agreement, provided that neither
--------
the Seller nor Continental shall be required to pay or
64
commit to pay any amount to (or incur any obligation in
favor of) any Person from whom any such Required Consent
shall be required. All such Required Consents shall be in
writing and executed counterparts thereof shall be delivered
to the Buyer at or prior to the Closing. The Seller shall
not consent to any modification of any Contract in the
course of obtaining any such Required Consent, without the
prior written approval of the Buyer.
(iii) To the extent that the approval,
consent or permission of any Governmental Body or other
Person is necessary or desirable for the Buyer to obtain in
connection with the conduct of the Business after the
Closing, including the issuance of such new Permits as may
be required for the Buyer to conduct said Business, the
Seller shall, at the Buyer's request, reasonably cooperate
with the Buyer in obtaining all such approvals, consents or
permissions; provided, that neither the Seller nor
--------
Continental shall be required to pay or commit to pay any
amount to (or incur any obligation in favor of) any Person
to whom any such approval, consent or permission may be
required.
(iv) In the event that the consent of
any Person (other than a Governmental Body) to the assign-
ment to the Buyer of any Contract (other than an investment
advisory or management Contract, as to which clause (v)
below shall apply) that is contemplated hereunder to consti-
tute a Purchased Asset is required but not obtained at or
65
prior to the Closing (each, a "Non-Consented Contract"),
Continental and the Seller agree to reasonably cooperate
with the Buyer prior to the Closing and for a period of
12 months thereafter in subsequently seeking such consent
and, until and unless such consent is obtained, in any
reasonable arrangements designed to provide to the Buyer
after the Closing the benefits under any such Non-Consented
Contract, including by consenting to the enforcement (at the
Buyer's expense) by the Buyer, in the name of the Seller, of
any and all rights of the Seller against each other party
thereto, provided that neither the Seller nor Continental
--------
shall be required to pay or commit to pay any amount to (or
incur any obligation in favor of) any Person from whom any
such consent shall be required. To the extent that the
Buyer is provided the benefits, pursuant to this Sec-
tion 6.10(iv), of any such Non-Consented Contract, the Buyer
shall pay, honor and discharge when due all Liabilities of
the Seller thereunder or in connection therewith.
(v) The Seller and Continental shall
use their reasonable efforts to obtain the written consents
and approvals of all Clients with respect to the assignment
(as defined under the Advisers Act) of all investment
advisory and management Contracts in effect as of the
Closing Date, provided that neither the Seller nor
--------
Continental shall be required to pay any amount to (or incur
any obligation in favor of) any Person from whom any such
consent or approval shall be required. In connection there
66
with, prior to the Closing, Continental or the Seller shall
deliver notices approved by the Buyer and its counsel (which
approval shall not be unreasonably withheld) of the proposed
"change of control" resulting from the Contemplated Transac-
tions to each of the Clients. Subject to Section 6.10(i)
above, the Seller and Continental shall take all reasonable
action to obtain such Clients' consent to the assignment (as
defined under the Advisers Act) of the Seller's investment
advisory or management Contracts (provided, that neither the
--------
Seller nor Continental shall be required to pay or commit to
pay any amount to (or incur any obligation in favor of) any
Person from whom any such consent shall be required) as
contemplated hereby, and the Seller shall provide written
notice to each such Client in a form approved by the Buyer
and its counsel (which approval shall not be unreasonably
withheld) notifying such Client (x) of the Contemplated
Transactions and the anticipated Closing Date, (y) that
control of its investment adviser will change at the Closing
Date and (z) requesting the consent of such Client to the
assignment (as defined under the Advisers Act) to the Buyer
of its investment advisory or management Contract upon the
consummation of the Contemplated Transactions.
6.11 Form ADV. Prior to the Closing, the
--------
parties hereto shall cooperate and consult with each other
in the preparation and filing of all forms and amendments to
forms, including, without limitation, Form ADV and other
forms required to be filed with Governmental Bodies,
67
including, without limitation, the Commission, and self-
regulatory organizations and state securities commissions,
and all other documents required to be filed or delivered
under any applicable Laws, including, without limitation,
the Advisers Act and applicable related state acts and
insurance Laws, as a result of the consummation of the
Contemplated Transactions. The Buyer will make its Form ADV
available to the Seller in connection with obtaining
consents under Section 6.10(v) above.
6.12 Non-Competition Agreement. On the
-------------------------
Closing Date, Continental and the Buyer shall execute and
deliver a Non-Competition Agreement with a term of seven
years, substantially in the form of Exhibit G hereto (the
"Non-Competition Agreement").
6.13 Option Agreement.
----------------
(i) On the Closing Date, Continental
and partners of the Buyer shall execute and deliver an
Option Agreement (the "Option Agreement") containing the
terms and conditions set forth on Exhibit H hereto and other
provisions satisfactory to the parties thereto.
(ii) In the event that Continental
exercises the option granted to it pursuant to the Option
Agreement, Continental shall have the right, commencing at
the time of such exercise, to designate such number of
representatives to the Board of Directors (or similar
supervisory body) of the General Partner of the Buyer as is
equal to the product of (x) the total number of representa-
68
tives constituting the Board of Directors (or similar super-
visory body) of the General Partner of the Buyer and
(y) 19.9% (subject to adjustment as provided in the Option
Agreement and rounding upward to another representative if
such product is not a whole number and includes a fraction
of one-half or greater).
6.14 Management of Continental's Investment
--------------------------------------
Assets.
------
(i) It is the current intention of
Continental that the Buyer will manage, consistent with past
practice, the investment assets of Continental, its
subsidiaries and each of its Affiliates where Continental
controls investment decisions (Continental together with
such subsidiaries and Affiliates shall hereinafter be
referred to as the "Continental Parties"); provided,
--------
however, that the Board of Directors of Continental (or its
-------
specifically authorized designee) may elect otherwise at any
time.
(ii) Continental shall, and shall cause
each of the other Continental Parties that are a party to an
investment advisory or management Contract with the Seller
to, consent to the "assignment" (as defined under the
Advisers Act) of their respective Contracts to the Buyer
upon the consummation of the Contemplated Transactions.
Such parties are listed on Section 6.14(ii) of the
Disclosure Statement. During the Designated Period, the
Buyer will maintain the ability to manage asset classes of
69
the type listed on Section 6.14(ii) of the Disclosure
Statement (collectively, the "Designated Asset Classes") in
addition to any other asset classes that it may so elect.
The Buyer will continue to provide consulting with respect
to the asset classes listed on Section 6.14(ii)(b) of the
Disclosure Statement.
(iii) During the period from and after
the Closing Date and for a period of seven years thereafter
(the "Designated Period"), the Board of Directors of
Continental (or its specifically authorized designee) may
request the Buyer or its Affiliates to manage asset classes
other than the Designated Asset Classes (such asset classes
shall hereinafter be referred to as "Non-Designated Asset
Classes"). Management by the Buyer of Non-Designated Asset
Classes of the Continental Parties shall be subject to
investment advisory or management Contracts providing for
terms satisfactory to the parties thereto.
(iv) During the Designated Period, the
Board of Directors of Continental (or its specifically
authorized designee) shall have the right to select an
investment advisor other than the Buyer to manage
Continental's Non-Designated Asset Classes and, in
connection therewith, the Buyer shall have the obligation,
at the request of the Board of Directors of Continental (or
its specifically authorized designee), (x) to consult with
the Board of Directors of Continental (or its specifically
authorized designee) to discuss the selection of such
70
advisor and the proposed investment advisory arrangements
and (y) after the selection of such Person by the Board of
Directors of Continental (or its specifically authorized
designee), to act as a non-exclusive financial advisor in
negotiating arrangements for and monitoring the performance
of such Person's investment advisory services for
Continental.
(v) Prior to the Closing Date, the
investment advisory and management Contracts of the
Continental Parties shall be amended to provide (a) mutually
agreeable fee schedules, subject to mutual review quarterly,
and (b) for any modifications required to comply with and to
respond to any comments of the Staff of the Commission as a
result of its most recent compliance report. In no event
shall the aggregate quarterly fees paid in any quarter to
the Buyer by the Continental Parties for the management of
assets in the Designated Asset Classes exceed $3.85 million.
(vi) The Buyer agrees that it will not
assign this Agreement (including any of the Buyer's rights
and remedies hereunder) through the second anniversary of
the Closing Date without the consent of Continental. After
the second anniversary of the Closing Date, the Buyer may
assign this Agreement (including all of the Buyer's rights
and remedies hereunder) with the consent of Continental,
which consent shall not be unreasonably withheld, but only
if (a) such Person manages in excess of $7.5 billion in
fixed income assets before such transfer and (b) such Person
71
has, or will have after giving effect to the relevant
transaction, the capacity to manage and service the
investment assets of the Continental Parties in a manner and
at a level substantially similar to that of the Buyer at the
time of the transaction.
(vii) On or prior to the fifth
anniversary of the Closing Date, Continental shall give the
Buyer a non-binding written indication of its request, if
any, to extend the Designated Period.
6.15 Certain Tax Matters.
-------------------
(a) Allocations. No later than the
-----------
later of (i) 90 days following the Closing Date and
(ii) 90 days before the due date for the filing of any Tax
return or report by the Seller (or any of its Affiliates) or
the Buyer reflecting the Contemplated Transactions (the "Due
Date"), the Buyer shall provide to the Seller a proposed
allocation of the Purchase Price and the Assumed Liabilities
among the Purchased Assets. The Seller shall advise the
Buyer at or before the Closing Date of the Due Date
(determined solely with respect to the Seller). The Seller
and the Buyer shall thereafter consult in good faith in
determining a final allocation of such purchase price, which
shall be the Buyer's proposed allocation to the extent that
there is a reasonable basis for such proposed allocation
under applicable Law (the "Final Allocation"). The parties
agree to file all tax reports, returns and claims and other
statements consistent with the Final Allocation (and in
72
particular to report the information required by sec-
tion 1060(b) of the Code) and shall not without the consent
of the other party make any inconsistent written statement
or take any inconsistent position on any returns, in any
refund claim, during the course of any Internal Revenue
Service or other tax audit, for any financial or regulatory
purpose, so long as there exists a reasonable basis in law
to maintain such position; provided that no party hereto
--------
shall be required to commence any judicial proceeding with
respect to any such allocation. Each party shall notify the
other party if it receives notice that the Internal Revenue
Service proposes any allocation different from Buyer's
allocation.
(b) Prorations. All personal property
----------
Taxes and all rents, utilities and other charges against, or
payable by the owner of, any of the Purchased Assets
relating to a time period beginning prior to, and ending
after, the Closing shall be prorated (based on the most
recent available tax statement, latest tax valuation and
latest bills) as of the Closing Date. If the Closing Date
occurs before the tax rate is fixed for the then current
fiscal or calendar year, whichever is applicable, the
proration of the corresponding Taxes shall be on the basis
of the tax rate for the last preceding year applied to the
latest assessed valuation.
(c) The Seller and the Buyer shall
(i) provide the other with such assistance as may be reason
73
ably requested by either of them in connection with the
preparation of any Tax return, audit or examination by any
taxing authority or judicial or administrative proceeding
relating to liability for Taxes and (ii) retain (or deliver
to the other party) any material records or information
which may be relevant to such Tax return, audit or examina-
tion, proceeding or determination until the applicable
statute of limitations (including any extensions) has
expired for all Tax periods ending before or including the
Closing Date.
(d) Each of the Buyer and the Seller
shall give to the other party written notice of any proposed
adjustment made by any Taxing authority that could give rise
to an indemnification obligation under this Agreement on the
part of such other party (including any threatened audit or
other governmental proceedings) within 10 days after becom-
ing aware of any such proposed adjustment or threatened
audit or other governmental proceedings. The Seller shall
conduct and control any such audit or other governmental
proceedings to the extent it relates to Taxes that are
Excluded Liabilities and the Buyer shall in good faith
cooperate with the Seller in the conduct of such audit or
other governmental proceedings; provided that notwithstand-
--------
ing such control, the Seller shall not settle, compromise or
accept any assessment or adjustment in connection with any
such audit or other governmental proceedings that would
purport to bind or is otherwise likely to affect the Buyer
74
without the prior written consent of the Buyer (which
consent shall not be unreasonably withheld).
(e) If either party receives a refund
of or credit for any Tax for which the other is required to
indemnify it hereunder (whether a Tax that is an Excluded
Liability or otherwise), such recipient shall pay to the
other party such refund or an amount equal to such credit,
together with any interest allocable to such refund received
from or allowed as credit against any liability by such
taxing authority, promptly after receipt of such refund or
interest from such taxing authority or realization of the
benefit of such credit by filing the relevant Tax return or
otherwise.
(f) The Buyer shall, at its expense,
prepare and file all Tax returns and documentation in
connection with all sales, use, transfer, stamp and similar
Taxes, and all recording, filing or registration fees,
notarial fees and other similar charges arising from or in
connection with the purchase, sale and transfer of the
Purchased Assets hereunder, the assumption of the Assumed
Liabilities, this Agreement or the Contemplated Transactions
and shall pay all such Taxes, fees and charges.
6.16 Employees and Benefit Plans.
---------------------------
(a) Employees.
---------
(i) On the Closing Date, except as
otherwise agreed by the Buyer and the Seller and as set
forth in Section 6.16(a) of the Disclosure Statement (the
75
"Excluded Employees"), the Buyer shall offer to employ all
Employees in comparable positions after the Closing. For
purposes of this Agreement, the term "Employees" shall mean
those employees of the Seller who, on the Closing Date, are
actively employed by the Seller, including those employees
who are absent from employment due to illness, injury,
military service, or other authorized absence and including
those employees who are "disabled" (within the meaning of
the short-term disability plans currently applicable to the
Seller, but excluding employees who are "disabled" (within
the meaning of the long-term disability plans applicable to
the Seller), former employees, retired employees, Excluded
Employees and employees otherwise not actively employed by
the Seller. Each Employee who accepts such offer of
employment with the Buyer shall be referred to herein as a
"Transferred Employee."
(ii) Notwithstanding any provision
of this Agreement to the contrary, no provision shall be
construed to prohibit the Buyer or any Affiliate thereof
from having the right to terminate the employment of any
Transferred Employee, with or without cause, or to amend or
to terminate any employee benefit plan, established,
maintained or contributed to by the Buyer or an Affiliate
thereof after the Closing.
(iii) Solely for purposes of
eligibility to participate and vesting, service by any
Transferred Employee with the Seller, Continental or any of
76
their Affiliates prior to the Closing shall be recognized
under any benefit plan or arrangement established,
maintained or contributed to by the Buyer or any of their
Affiliates after the Closing for the benefit of any such
Transferred Employee.
(b) Defined Contribution Plan.
-------------------------
(i) The Incentive Savings Plan of
The Continental Corporation (the "Continental Savings Plan")
covers current and former employees of Continental and
certain of its Affiliates, including the Seller. Effective
as of the Closing Date, Continental shall take such action
as is necessary to cease all accruals of benefits in respect
of the Transferred Employees. Within ninety (90) days after
the Closing Date, the Buyer shall establish a plan (the
"Buyer Savings Plan") and submit such plan to the IRS with a
request for a favorable determination with respect to its
qualified status.
(ii) As soon as practicable
following the Closing Date, Continental shall cause to be
transferred from the Continental Savings Plan to the Buyer
Savings Plan, and the Buyer shall cause to be assumed by the
Buyer Savings Plan, all liabilities for the accrued benefits
relating to the Transferred Employees (the "Account
Balances"), determined as of and as soon as practicable
after the valuation date (the "Valuation Date") under the
Continental Savings Plan next succeeding the earlier of:
(i) the date the Buyer Savings Plan receives a favorable
77
determination letter from the IRS, and (ii) the date
Continental has received an opinion of counsel for the
Buyer, in form and substance satisfactory to Continental,
that the form of the Buyer Savings Plan meets, in all
material respects, the requirements of Section 401(a) of the
Code.
(iii) As soon as practicable
following the Valuation Date, Continental shall cause the
trustee under the Continental Savings Plan to transfer to
the trustee under the Continental Savings Plan cash, or if
Continental shall so determine, such other assets as shall
be acceptable to the Buyer, in the amount agreed upon in
this Section 6.16(b) equal to the Account Balances;
provided, however, that the assets transferred shall include
-------- -------
any Transferred Employee's plan loan and any allocable
portion of any guaranteed investment contract or similar
investment vehicle reasonably acceptable to the Buyer.
(iv) The Buyer and Continental
agree that for the period from the Closing Date to the date
(the "Savings Transfer Date") of the actual transfer of
assets provided for under this Section 6.16(b), the
Continental Savings Plan shall be liable for any distribu-
tion that becomes due to a Transferred Employee under such
plan, and that after the transfer of assets provided for
under this Section 6.16(b), the Buyer Savings Plan shall be
liable for any distribution that becomes due to any
Transferred Employee. In the event that benefit payments
78
are made when they become due from the Continental Savings
Plan to a Transferred Employee under this Section 6.16(b),
the amount of assets to be transferred from such plan shall
be reduced by an amount equal to such distribution. Upon
the transfer of cash or such other assets provided
hereunder, Continental shall have no further liability to
the applicable Transferred Employees or to the Buyer in
connection with the Account Balances.
(c) Welfare Plans. Transferred
-------------
Employees shall cease active participation in the Benefit
Plans maintained by the Seller, Continental, or any of their
Affiliates applicable to Transferred Employees prior to the
Closing that are "welfare plans" (as defined in Section 3(l)
of ERISA) as of the Closing Date ("Seller's Welfare Plans");
provided, however, that at the request of the Buyer made at
-------- -------
least thirty days prior to the Closing Date, the Seller will
use its reasonable best efforts to make available continued
coverage of the Transferred Employees under any or all of
the Seller's Welfare Plans pursuant to the Services
Agreement specified in such request for the period
commencing on the Closing Date and ending on the first
anniversary thereof. If the Buyer makes such request, and
such request is granted, the Buyer shall reimburse the
Seller on a monthly basis, within 10 business days of
notification by the Seller of the amount of such costs, for
the monthly costs incurred in providing such coverage. The
costs of coverage shall be determined by the Seller, subject
79
to review by the Buyer's actuarial consultant, in accordance
with the same methods and procedures such costs of coverage
were determined immediately prior to the Closing Date;
provided, however, that such costs shall not include any
-------- -------
indirect cost component.
(d) Retiree Medical and Life.
------------------------
Continental covenants and agrees to provide retiree medical
and life insurance coverage to each Transferred Employee
(i) who meets the requirements for coverage (other than
actual retirement) under any Benefit Plan providing such
coverage on the Closing Date or (ii) who, on the later of
thirty days following the Closing Date and January 31, 1995,
would, with service credited with the Buyer or any Affiliate
thereof after the Closing, subsequently meet the require-
ments for such coverage (other than actual retirement) under
any such Benefit Plan.
6.17 Definitive Capitalization of the Buyer.
--------------------------------------
The Buyer shall, as soon as practicable after the date
hereof but in no event later than five (5) days prior to the
Closing, deliver to Continental a true and complete descrip-
tion of the definitive capitalization of the Buyer on the
Closing Date.
6.18 Bulk Sales Compliance. The Buyer
---------------------
hereby waives compliance with the provisions of any bulk
transfer Laws applicable to the Contemplated Transactions.
6.19 Limited Use of Logo. The parties
-------------------
acknowledge and agree that (a) a portion of the Purchased
80
Assets (including, without limitation, letterhead and other
stationery, sales literature and investment reports) bear
the Logo (collectively, "Marked Materials") and (b) the Logo
constitutes an Excluded Asset and no rights therein are
acquired by the Buyer hereunder except as provided in this
Section 6.19. The Buyer may continue to use any Marked
Materials for a period of six months after the Closing Date
or, if earlier, until such Marked Materials are depleted,
provided that the Buyer will use such Marked Materials only
--------
in a manner consistent with prior practice and at the end of
such six-month period destroy any unused Marked Materials.
Notwithstanding anything to the contrary in this Sec-
tion 6.19, the Buyer shall be entitled to retain and use
solely for archival and records purposes (including as
necessary and consistent with such use, making copies
thereof) any Marked Materials which are in the files,
records and archives of the Seller that have been acquired
by the Buyer pursuant hereto. Notwithstanding the fore-
going, in the event that the Buyer is using any Marked
Materials in a manner reasonably deemed inappropriate by
Continental, the Buyer shall cease using such Marked
Materials in such manner.
6.20 Change and Use of the Seller's Name.
-----------------------------------
On or before the Closing Date, the Seller shall take or
cause to be taken such action as may be required to change
the corporate name of the Seller and the Subsidiary to a
name that is not the same as the Seller's or the
81
Subsidiary's current corporate name, and promptly thereafter
the Seller shall deliver to the Buyer evidence that whatever
filings are necessary in those jurisdictions, if any, in
which the Seller or the Subsidiary is licensed or qualified
to do business to effect such name change have been made.
The Seller hereby agrees to permit the Buyer, directly or
through its Affiliates, to (a) change their respective
corporate or partnership names to include the name
"Continental Asset Management" and (b) do business under the
name "Continental Asset Management," and the Seller agrees
to execute such documents as may be necessary or otherwise
reasonably requested by the Buyer to enable the Buyer or any
of its Affiliates to take any such action.
6.21 Certified Copies of Organizational
----------------------------------
Documents of the Buyer. The Buyer shall, on the date
----------------------
hereof, deliver to Continental a true and complete copy of
the Certificate of Limited Partnership of the Buyer and, no
later than five (5) days prior to the Closing, the defini-
tive Agreement of Limited Partnership (certified by the
General Partner of the Buyer) as in effect on the Closing
Date.
6.22 Certified Copies of Certain Contracts.
-------------------------------------
On the Closing Date, the Buyer shall receive a certificate,
dated the Closing Date and executed by the President and the
Secretary of the Seller, attaching a true and complete copy
of each investment advisory or management Contract to which
82
the Seller is a party as of the close of business on the day
immediately preceding the Closing Date.
6.23 Dividends. From the date hereof
---------
through the Closing Date, the Seller shall have the right to
declare and pay dividends in respect of its capital stock to
its stockholder in an aggregate amount not to exceed
$2,500,000.
6.24 Soft Dollar Contracts. On the Closing
---------------------
Date or as soon as practicable thereafter, the Seller shall
transfer to the Buyer all of its right to control "soft
dollar" arrangements related in any manner to the Business;
provided, however, that all such "soft dollar" arrangements
-------- -------
shall be consistent with the rules and regulations of the
Commission and shall materially comply with the safe harbor
provisions of Section 28(e) of the Advisers Act.
Continental shall have the right to review (on a
confidential basis) on a quarterly basis, with reasonable
notice, such "soft dollar" arrangements.
6.25 September Balance Sheet. The Seller
-----------------------
shall deliver the September Balance Sheet to the Buyer as
soon as practicable after the date hereof but in no event
later than 30 days after the date hereof.
6.26 Certain Payments to Continental. From
-------------------------------
the date hereof through the Closing Date, the Seller shall
not make, directly or indirectly, (x) any payment to
Continental or any of its Affiliates in respect of any
services provided by Continental or such Affiliate to the
83
Seller or the Subsidiary or (y) any loan or advance to or
other investment in Continental or any of its Affiliates,
without the prior written consent of the Buyer; provided,
--------
however, that the Seller may pay all amounts due to
-------
Continental and its Affiliates accrued in an aggregate
amount not to exceed $1,500,000 for any one month period in
the ordinary course of business in accordance with past
practice for payroll and similar goods and services provided
to the Seller which would otherwise be a direct expense or
part of corporate overhead of the Seller consistent with
past practice. Such payments shall be reviewed semi-monthly
with the Buyer. The Buyer shall reimburse Continental or
any of its Affiliates for any expenses incurred by the
Seller prior to the Closing Date and paid prior to the
Closing Date through the twentieth day after the Closing
Date by Continental or any such Affiliate on behalf of the
Seller to any third party.
6.27 Verified Investment Performance Reports.
---------------------------------------
The Seller shall deliver the Verified Investment Performance
Reports to the Buyer as soon as practicable after the date
hereof but in no event later than 80 days after the date
hereof.
7. Purchase Price and Other Adjustments.
------------------------------------
7.1 Reduction of Note A. The principal
-------------------
amount of Note A shall be subject to downward adjustment in
accordance with the provisions set forth in this Sec-
tion 7.1.
84
(a) Continental shall deliver to the
Buyer, two days prior to the Closing Date, a schedule, certi-
fied by the Chief Financial Officer of Continental, setting
forth as of such date, (i) a list of each Designated Unaffil-
iated Client and the respective amount of Designated Revenue
attributable to each such Designated Unaffiliated Client (the
"Designated Revenue Loss"), (ii) a list of each Non-Consenting
Unaffiliated Client (other than the Designated Unaffiliated
Clients) and the respective amount of Designated Revenue
attributable to each such Non-Consenting Unaffiliated
Client, and (iii) a list of each Consenting Unaffiliated
Client and the respective amount of Designated Revenue
attributable to each such Consenting Unaffiliated Client.
(b) The principal amount of Note A
shall be reduced by an amount equal to the product of
(x) the aggregate amount of Designated Revenue Losses and
(y) 2.5; provided, however, that the amount of such reduc-
-------- -------
tion shall not exceed $3,500,000.
(c) The capitalized terms set forth
below shall have the following meanings:
"Consenting Unaffiliated Client"
shall mean each Unaffiliated Client that has provided
written notice to the Seller or Continental setting forth
its consent to the "assignment (as defined in the Advisers
Act) to the Buyer of its investment advisory or management
Contract with the Seller upon the consummation of the Con-
85
templated Transactions without any amendment, modification
or other alteration of the terms or provisions thereof.
"Designated Revenue" shall mean, as
to any Client, the amount invoiced by the Seller for the
management of assets under the investment advisory or
management Contracts for such Client for the 12-month period
ended September 30, 1994.
"Designated Unaffiliated Client"
shall mean any of (a) Cologne Reinsurance Company of
America, (b) Cologne Life Reinsurance Company, (c) Cologne
Reinsurance (Barbados), Ltd. or (d) Underwriters Reinsurance
Company to the extent that such Person has not consented to
the assignment of its investment advisory or management
Contract in connection with the Contemplated Transactions.
"Non-Consenting Unaffiliated
Client" shall mean any Unaffiliated Client that has not
consented to the assignment of its investment advisory or
management Contract in connection with the Contemplated
Transactions.
7.2 Adjustments.
-----------
(a) As soon as practicable after
the submission of bills to the Continental Parties for each
calendar quarter, the Buyer shall deliver to Continental a
certificate, certified by the Chief Financial Officer of the
Buyer (the "Revenue Statement"), setting forth an amount, if
any (the "Shortfall Amount"), equal to the difference
between $3.85 million (the "Specified Amount") and the
86
amount payable to the Buyer for the management of assets in
the Designated Asset Classes for such calendar quarter.
Promptly following its receipt of each Revenue Statement
setting forth a Shortfall Amount, Continental shall pay in
cash to the Buyer an adjustment equal to such Shortfall
Amount.
(b) Buyer, Continental and the
other Continental Parties will, prior to the Closing Date,
develop a more detailed mechanism for billing and prompt
payment procedures, and for adjustments of any overpayment
or underpayment, to implement this understanding.
(c) On the Closing Date, the Buyer
and Continental shall establish the Designated Fund.
(d) As soon as practicable
following each Anniversary Date, the Buyer shall deliver a
certificate to Continental, certified by the Chief Financial
Officer of the Buyer (a "Performance Certificate"), setting
forth (i) the Benchmark Index for the twelve-month period
ending on such Anniversary Date and (ii) the Performance
Return of the Designated Fund for such twelve-month period.
(e) If the average of the
Performance Returns set forth on the Performance Certifi-
cates delivered with respect to 12-month periods ending on
any three consecutive Anniversary Dates is less than the
lower of (i) 92% of the average of the Benchmark Indices
applicable to each of such 12-month periods covered by such
Performance Certificates and (ii) the average of the
87
Benchmark Indices applicable to each of such 12-month
periods covered by such Performance Certificates minus 60
basis points, then the Specified Amount under Section 7.2(a)
shall be reduced to $2.8875 million.
(f) If the average of the Perform-
ance Returns set forth on the Performance Certificates
delivered with respect to 12-month periods ending on either
(x) the two Anniversary Dates immediately following the
Closing Date or (y) any three consecutive Anniversary Dates
is less than the lower of (i) 90% of the average of the
Benchmark Indices applicable to each of such 12-month
periods covered by such Performance Certificates and
(ii) the average of the Benchmark Indices applicable to each
of such 12-month periods covered by such Performance
Certificates minus 75 basis points, then the provisions of
Section 7.2(a) shall no longer be given any force or effect.
(g) In the event that at any time
prior to the termination of the Designated Period, the Buyer
engages in (x) gross negligence or willful misconduct in the
management of the investment assets of the Continental
Parties or (y) the Buyer fails to execute in all material
respects the investment instructions set forth in the
written memorandum (which shall be attached as an exhibit to
such investment advisory or management Contract) delivered
in connection with such Contract and the Buyer's failure to
remedy such failure with new adequate procedures after
88
written notice thereof, then Section 7.2(a) shall no longer
be given any force or effect.
(h) It is the intention of the
parties hereto that (i) the adjustments provided for in
Sections 7.2(e) and 7.2(f)(y) shall be based upon three year
rolling periods and (ii) there shall be no adjustment
pursuant to Sections 7.2(e) and 7.2(f) for the period ending
on the first Anniversary Date.
(i) The terms set forth below
shall have the following meanings for purposes of this Sec-
tion 7.2:
"Anniversary Date" shall mean the first anniver-
sary of the last day of the calendar quarter ending after
the Closing Date and each anniversary of such date
thereafter until the sixth anniversary thereof.
"Benchmark Index" shall mean, as to any twelve-
month period, the Lehman Brothers Aggregate Index, or such
other index as may mutually agreed upon by the Buyer and
Continental.
"Designated Fund" shall mean a "total return
account" (as such term is commonly understood in the asset
management industry) comprised of assets of the Continental
"pooled insurance companies" having at any time an aggregate
value of not less than two hundred million dollars to be
managed by the Buyer in domestic fixed income securities
pursuant to investment advisory or management Contracts with
the Buyer. The Designated Fund shall be a discretionary
89
account and there shall be no constraints on the management
of the Designated Fund. The Designated Fund may be subject
to investment guidelines consistent with past practice for
similar accounts but in no event shall the guidelines be so
restrictive that the Buyer is unable to invest in securities
similar (of type and duration and other terms) to those
contained in the Benchmark Index.
"Performance Return" shall mean, as to any twelve-
month period, the aggregate rate of return earned with
respect to the Designated Fund.
7.3 Arbitration. Upon request made during
-----------
the ten day period following Continental's receipt of any of
(i) the Revenue Statement delivered pursuant to Sec-
tion 7.2(b) or (ii) the Performance Certificate delivered
pursuant to Section 7.2(d) (either of (i) or (ii), a
"Certified Buyer Statement"), Continental and its
representatives shall be permitted, until such time as such
Certified Buyer Statement shall become final during normal
business hours, to review the working papers of the Buyer
relevant to such Certified Buyer Statement. The Certified
Buyer Statement shall become final and binding upon the
parties upon the 30th day following receipt thereof by
Continental unless Continental gives written notice of its
disagreement (a "Notice of Disagreement") to the Buyer prior
to such date. Any Notice of Disagreement shall specify in
detail the nature of any disagreement so asserted and shall
be certified by the Chief Financial Officer of Continental.
90
If a Notice of Disagreement is received by the Buyer in a
timely manner, then the Certified Buyer Statement (as
revised in accordance with clause (x) or (y) below) shall
become final and binding upon the parties on the earlier of
(x) the date the parties hereto resolve in writing any
differences they have with respect to any matter specified
in the Notice of Disagreement or (y) the date any disputed
matters are finally resolved in writing by the Arbitrator
(as defined below). During the twenty day period following
the delivery of a Notice of Disagreement, the Buyer and
Continental shall seek in good faith to resolve in writing
any differences which they may have with respect to any
matter specified in the Notice of Disagreement. If, at the
end of such twenty day period, the Buyer and Continental
have not reached agreement on such matters, the matters
which remain in dispute shall be submitted to an arbitrator
for review and resolution in accordance with the following
procedures. Within ten days after the expiration of the
twenty-day period, Continental shall (a) together with the
Buyer contact Coopers & Lybrand (or any other nationally
recognized independent public accounting firm agreed upon by
the Buyer and Continental) to arrange for the appointment of
a single arbitrator (the "Arbitrator") who shall be a senior
partner of the firm with no prior direct contact with either
party, and (b) serve upon the Buyer (and the Arbitrator as
soon as he or she is appointed) a Statement of Claim setting
forth in detail the matters in dispute including the
91
evidentiary basis therefor. Within ten business days
thereafter, the Buyer shall serve upon Continental and the
Arbitrator a Response to the Statement of Claim setting
forth in detail the arguments in favor of the Buyer's
position and the evidentiary basis therefor. The Arbitrator
shall thereafter conduct such further proceedings as he or
she deems appropriate, including a hearing unless waived by
both parties, and shall render a final, binding and non-
appealable written decision within thirty days of the date
upon which the Buyer's Response is served upon Continental.
Any other matter relating to a disagreement with respect to
the payment of any sum pursuant to Section 7.1 or
Section 7.2 (other than Section 7.2(g)) shall also be
subject to arbitration by the Arbitrator in accordance with
the procedures set forth above. The fees of the Arbitrator
shall be borne 50% by each Party; provided, that the
--------
Arbitrator may apportion such fees and other costs of the
arbitration (including attorneys' fees) in his or her
discretion.
8. Conditions Precedent to the Obligation of the
---------------------------------------------
Buyer to Close. The obligation of the Buyer to enter into
--------------
and complete the Closing is subject, at its option, to the
fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which (other than Sec-
tion 8.6) may be waived by the Buyer in its sole discretion:
8.1 Representations and Covenants. The
-----------------------------
representations and warranties of the Seller and Continental
92
contained in this Agreement shall be true in all material
respects on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date.
Each of the Seller and Continental shall have performed and
complied in all material respects with all covenants and
agreements required by this Agreement to be performed or
complied with by the Seller or Continental on or prior to
the Closing Date. Each of the Seller and Continental shall
have executed and delivered to the Buyer a certificate,
dated the Closing Date, to the foregoing effect and stating
that all conditions to the Buyer's obligations hereunder
have been satisfied.
8.2 Consents and Approvals.
----------------------
8.2.1 General. All Required Consents
-------
(other than with respect to any investment advisory or
management Contracts, as to which Section 8.2.2 shall
apply), Permits from any Governmental Body or other Person
required for the lawful consummation of the Closing and
requisite approvals for the consummation of the Contemplated
Transactions from any Person (including, the Commission or
any other Governmental Body having jurisdiction over the
Business) shall have been obtained and be in full force and
effect (except that this condition shall be deemed satisfied
as to any Contract for which an arrangement of the type
described in Section 6.10(iv) is entered into). No such
Required Consents shall impose upon the Buyer or the
Business any conditions or other requirements imposing
93
substantial additional costs or materially interfering with
the continued operation of the Business, and the Buyer shall
have been furnished with evidence reasonably satisfactory to
it of the granting of such consents and approvals (or of the
arrangements of the type described in Section 6.10(iv)).
8.2.2 Advisory Agreements.
-------------------
(a) The Seller and Continental
shall have obtained written notices from Unaffiliated
Clients (other than Cologne Reinsurance Company of America,
Cologne Life Reinsurance Company, Cologne Reinsurance
(Barbados), Ltd. and Underwriters Reinsurance Company) that
represented (as a result of investment advisory fees earned
by the Seller) in the aggregate no less than 90% of the
Unaffiliated Annualized Revenue (but excluding Unaffiliated
Annualized Revenue attributable to Cologne Reinsurance
Company of America, Cologne Life Reinsurance Company,
Cologne Reinsurance (Barbados), Ltd. and Underwriters
Reinsurance Company), which notices shall set forth such
Unaffiliated Clients' consents to the "assignment" (as
defined in the Advisers Act) to the Buyer of their
investment advisory Contracts, as in effect on the Closing
Date, upon the consummation of the Contemplated
Transactions.
(b) The Seller shall have obtained
written consents from Continental and each of the other
Continental Parties that are parties to any investment
advisory or management Contract with the Seller to the
94
assignment (as defined in the Advisers Act) of their
respective Contracts as contemplated hereunder.
8.3 Opinion of Counsel to Continental and
-------------------------------------
the Seller. The Buyer shall have received the opinion of
----------
Debevoise & Plimpton, counsel to Continental and the Seller,
dated the Closing Date, addressed to the Buyer and in form
and substance satisfactory to the Buyer.
8.4 Resignations. All resignations of
------------
directors of the Subsidiary that have been previously
requested in writing by the Buyer shall have been delivered
to the Buyer.
8.5 Litigation. No action, suit or proceed-
----------
ing shall have been instituted before any court or
Governmental Body, or instituted or threatened by any
Governmental Body that presents a substantial risk of
restraining or preventing the consummation of the
Contemplated Transactions.
8.6 Hart-Scott-Rodino. Each Person required
-----------------
in connection with the Contemplated Transactions to file a
notification and report form with the FTC and the DOJ in
accordance with the HSR Act, and the rules and regulations
promulgated thereunder, shall have filed a complete and
accurate form, and the applicable waiting period with
respect to each such form (including any extension thereof
by reason of a request for additional information) shall
have expired or been terminated.
95
8.7 Financing. The Buyer shall have
---------
obtained (x) no less than $22,000,000 in bank debt financing
to finance a portion of the Contemplated Transactions on
terms and conditions satisfactory to the Buyer in its sole
discretion and (y) the Letter of Credit facility on terms
and conditions satisfactory to the Buyer and the Seller.
8.8 Related Transactions. Continental shall
--------------------
have consummated on or prior to the Closing Date the
transactions contemplated under the Securities Purchase
Agreement in accordance with the terms thereof.
8.9 No Material Adverse Change. Since the
--------------------------
Balance Sheet Date, (i) there has been no event, circum-
stance or change which, individually or in the aggregate,
has had or could reasonably be expected to have a Material
Adverse Effect and (ii) neither the Seller nor Continental
knows of any such event, circumstance or change which is
threatened which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
Since the date hereof, the market value of the assets under
management under the investment advisory and management
Contracts of the Seller shall have not declined by more than
10% as a result of market conditions or otherwise.
8.10 New Sublease. Continental and the
------------
Buyer shall have executed and delivered the New Sublease
containing the terms and conditions set forth on Exhibit E
hereto and other customary provisions satisfactory to the
parties thereto.
96
8.11 Services Agreement. Continental and
------------------
the Buyer shall have executed and delivered the Services
Agreement containing the terms and conditions set forth on
Exhibit F hereto and other customary provisions satisfactory
to the parties thereto.
8.12 Non-Competition Agreement. Continental
-------------------------
and the Buyer shall have executed and delivered the Non-
Competition Agreement.
8.13 Bill of Sale and Instrument of
------------------------------
Assignment and Other Conveyance Documents. The Seller shall
-----------------------------------------
have executed and delivered to the Buyer the Bill of Sale
and Instrument of Assignment in form of Exhibit A and such
further instruments of sale, transfer, conveyance and
assignment with respect to the Purchased Assets or any
portion thereof as the Buyer may reasonably require to
assure the full and effective sale, transfer, conveyance and
assignment to it of the Purchased Assets.
8.14 Registration as Investment Adviser.
----------------------------------
The Commission shall have issued an order pursuant to
Section 203(c) of the Advisers Act granting registration of
the Buyer under the Advisers Act as an investment adviser
and such order shall be in full force and effect.
9. Conditions Precedent to the Obligation of the
---------------------------------------------
Seller to Close. The obligation of the Seller to enter into
---------------
and complete the Closing is subject, at the option of the
Seller acting in accordance with the provisions of this
Agreement with respect to termination hereof, to the
97
fulfillment of the following conditions, any one or more of
which (other than Section 9.4) may be waived by the Seller
in its sole discretion:
9.1 Representations and Covenants. The
-----------------------------
representations and warranties of the Buyer contained in
this Agreement shall be true in all material respects on and
as of the Closing Date with the same force and effect as
though made on and as of the Closing Date. The Buyer shall
have performed and complied in all material respects with
all covenants and agreements required by this Agreement to
be performed or complied with by it on or prior to the
Closing Date. The Buyer shall have delivered to Continental
and the Seller a certificate, dated the Closing Date and
signed by an officer of the Buyer, to the foregoing effect
and stating that all conditions to the Sellers' obligations
hereunder have been satisfied.
9.2 Opinion of Counsel to the Buyer. The
-------------------------------
Seller shall have received the opinion of Paul, Weiss,
Rifkind, Wharton & Garrison, counsel to the Buyer, dated the
Closing Date, addressed to the Seller and in form and
substance satisfactory to the Seller.
9.3 Litigation. No action, suit or
----------
proceeding shall have been instituted before any court or
Governmental Body, or instituted or threatened by any
Governmental Body, that presents a substantial risk of
restraining or preventing the consummation of the
Contemplated Transactions.
98
9.4 Hart-Scott-Rodino. Each Person required
-----------------
in connection with the Contemplated Transactions to file a
notification and report form with the FTC and the DOJ in
accordance with the HSR Act, and the rules and regulations
promulgated thereunder, shall have filed a complete and
accurate form, and the applicable waiting period with
respect to each such form (including any extension thereof
by reason of a request for additional information) shall
have expired or been terminated.
9.5 Related Transactions. Continental shall
--------------------
have consummated on or prior to the Closing the transactions
contemplated under the Securities Purchase Agreement in
accordance with the terms thereof.
9.6 Consents and Approvals. All Required
----------------------
Consents from any Governmental Body shall have been obtained
and be in full force and effect.
9.7 Instrument of Assumption. The Buyer
------------------------
shall have executed and delivered to the Seller the
Assumption of Liabilities in the form of Exhibit B.
9.8 Registration as Investment Advisor. The
----------------------------------
Commission shall have issued an order pursuant to Sec-
tion 203(c) of the Advisers Act granting registration of the
Buyer under the Advisers Act as an investment adviser and
such order shall be in full force and effect.
10. Survival of Representations and Warranties of
---------------------------------------------
the Seller. Notwithstanding any right of the Buyer fully to
----------
investigate the affairs of the Seller, the Business and the
99
Purchased Assets and notwithstanding any knowledge of facts
determined or determinable by the Buyer pursuant to such
investigation or right of investigation, the Buyer has the
right to rely fully upon the representations, warranties,
covenants and agreements of the Seller and Continental
contained in this Agreement or in any Transaction Documents.
All such representations, warranties, covenants and agree-
ments shall survive the execution and delivery hereof and
the Closing hereunder. Except as otherwise specifically
provided in this Agreement and except for the represen-
tations and warranties set forth in Section 4.3 (Authority
to Execute and Perform Agreements; Enforceability) and 4.8
(Tax Matters), all representations and warranties of the
Seller and Continental set forth in Section 4 and of the
Buyer set forth in Section 5 shall thereafter terminate and
expire (i) on June 30, 1997, with respect to any General
Claim (as defined below) based upon, arising out of or
otherwise in respect of any fact, circumstance, action or
proceeding of which the Buyer shall not have given notice on
or prior to such date to the Seller and Continental, and
(ii) with respect to any Tax Claim (as defined below), on
the later of (a) the date upon which the liability to which
any such Tax Claim may relate is barred by all applicable
statutes of limitations and (b) the date upon which any
claim for refund or credit related to such Tax Claim is
barred by all applicable statutes of limitations. As used
100
in this Agreement, the following terms have the following
meanings:
(i) "General Claim" means any claim
-------------
(other than a Tax Claim) based upon, arising out of or
otherwise in respect of, any inaccuracy in or any
breach of any representation or warranty of the Seller
or Continental contained in this Agreement or in any
Transaction Document.
(ii) "Tax Claim" means any claim based
---------
upon, arising out of or otherwise in respect of, any
inaccuracy in or any breach of any representation or
warranty of the Seller or Continental contained in
Section 4.8 (Tax Matters).
11. Indemnification.
---------------
11.1 Obligation of Continental and the
---------------------------------
Seller to Indemnify. Subject to the limitations contained
-------------------
in Section 10 and Section 11.4, the Seller and Continental
jointly and severally agree to indemnify, defend and hold
harmless the Buyer (and its directors, representatives,
partners, officers, employees, Affiliates, successors and
assigns) from and against all losses, liabilities, damages,
deficiencies, demands, claims, actions, judgments or causes
of action, assessments, costs or expenses (including
interest, penalties and reasonable attorneys' fees (as
incurred), disbursements and other charges) (collectively,
"Losses") based upon, arising out of, or otherwise in
respect of, (i) any inaccuracy in or any breach of any
101
representation, warranty, covenant or agreement of the
Seller and Continental contained in this Agreement or in any
Transaction Document and (ii) any Excluded Liability.
11.2 Obligation of the Buyer to Indemnify.
------------------------------------
The Buyer agrees to indemnify, defend and hold harmless the
Seller and Continental (and their respective directors,
officers, employees, Affiliates, successors and assigns)
from and against any Losses based upon, arising out of, or
otherwise in respect of, (i) any inaccuracy in or breach of
any representation, warranty, covenant or agreement of the
Buyer contained in this Agreement or in any Transaction
Document and (ii) any Assumed Liability.
11.3 Notice to Indemnifying Party. If any
----------------------------
party hereto (the "Indemnitee") receives written notice of
any third party claim or potential claim or the commencement
of any action or proceeding that could give rise to an
obligation on the part of any other party hereto to provide
indemnification (the "Indemnifying Party") pursuant to
Section 11.1 or 11.2, the Indemnitee shall promptly give the
Indemnifying Party notice thereof (the "Indemnification
Notice"); provided, however, that the failure to give the
-------- -------
Indemnification Notice promptly shall not impair the
Indemnitee's right to indemnification in respect of such
claim, action or proceeding unless, and only to the extent
that, the lack of prompt notice adversely affects the
ability of the Indemnifying Party to defend against or
diminish the Losses arising out of such claim, action or
102
proceeding. The Indemnification Notice shall contain
factual information (to the extent known to the Indemnitee)
describing the asserted claim in reasonable detail and shall
include copies of any notice or other Document received from
any third party in respect of any such asserted claim. The
Indemnifying Party shall have the right to assume the
defense of a third party claim or suit described in this
Section 11.3 at its own cost and expense and with counsel of
its own choosing; provided, however, that the Indemnifying
-------- -------
Party acknowledges in writing (at the time it elects to
assume the defense of such claim or suit, which shall be not
later than 30 days after the date of the Indemnification
Notice) its obligation in accordance with this Section 11.3
to indemnify the Indemnitee with respect to such claim or
suit; such counsel is reasonably satisfactory to the
Indemnitee; the Indemnitee is kept fully informed of all
developments and is furnished copies of all papers; the
Indemnitee is given the opportunity, at its option and at
its own cost and expense and with counsel of its own
choosing (which shall be reasonably satisfactory to the
Indemnifying Party) to participate in (but not control) the
defense of such claim or suit. No settlement of any such
third party claim or suit shall be made by the Indemnifying
Party without the prior written consent of the Indemnitee
(which shall not be unreasonably withheld or delayed). No
settlement of any such third party claim or suit shall be
made by the Indemnitee if the Indemnifying Party shall have
103
assumed the defense thereof and shall be in compliance with
its obligations with respect thereto as set forth above in
this Section 11.3. If the Indemnifying Party chooses to
defend any claim, the Indemnitee shall make available to the
Indemnifying Party, any books, records or other documents
within its control that are necessary or appropriate for
such defense. Notwithstanding the foregoing, the Indemnitee
shall have the right to employ separate counsel at the
Indemnifying Party's expense and to control its own defense
of such asserted liability if in the reasonable opinion of
counsel to such Indemnitee (i) there are or may be legal
defenses available to such Indemnitee or to other Indemni-
tees that are different from or additional to those
available to the Indemnifying Party or (ii) a conflict or
potential conflict exists between the Indemnifying Party and
such Indemnitee that would make such separate representation
advisable; provided that (a) any such separate counsel
--------
employed by the Indemnitee at the Indemnifying Party's
expense shall be reasonably satisfactory to the Indemnifying
Party, (b) the Indemnitee shall not settle such claim or
litigation without the written consent of the Indemnifying
Party, such consent not to be unreasonably withheld and
(c) the Indemnifying Party shall only be responsible for the
reasonable fees and expenses of one counsel (in addition to
local counsel) for all Indemnitees. The Seller and
Continental agree that they shall have an obligation to
manage any such Claim or litigation in consultation with the
104
Buyer and cooperate to minimize to the extent practicable
any adverse effect upon the reputation of the Buyer as an
investment adviser and money manager. Notwithstanding the
foregoing, the provisions of Section 6.15 shall apply to any
Claim that is a Tax Claim or any Excluded Liability that is
a Tax and the provisions of this Section 11.3 shall not
apply to any such Claim.
11.4 Limitations of Indemnification. The
------------------------------
indemnification provided for in section 11.1 shall be
subject to the following limitations:
(i) The Seller and Continental shall
not be obligated to pay any amounts for indemnification
under Section 11.1(i), except those based upon, arising out
of, or otherwise in respect of, Sections 4.3 (Authority to
Execute and Perform Agreements; Enforceability), 4.8 (Tax
Matters), 6.6 (Expenses), 6.7 (Indemnification of Broker-
age), 6.15 (Certain Tax Matters) and 6.16 (Employees and
Benefit Plans) (collectively, the "Basket Exclusions"),
until the aggregate amounts for indemnification, exclusive
of those based on the Basket Exclusions, equals $500,000
(the "Basket Amount"), whereupon the Seller and Continental
shall be obligated to pay in full all such amounts for
indemnification, in excess of the Basket Amount.
(ii) The Seller and Continental shall
not be obligated to pay any amounts for indemnification
under Section 11.1(i) in excess of $15,000,000, except for
Losses based upon, arising out of, or otherwise in respect
105
of, Sections 4.3 (Authority to Execute and Perform Agree-
ments; Enforceability) and 4.8 (Tax Matters), it being
understood that such limitation shall not in any way apply
to adjustments provided in Section 7 hereof; provided,
--------
however, that the first $12,500,000 of such indemnification
-------
payments shall be paid in cash by the Seller and Continental
to the Buyer and the balance thereof shall be applied as a
reduction in the principal amount of Note B.
(iii) Any claim for indemnification under
this Section 11 that is a Tax Claim must be asserted within
180 days of the expiration of all applicable statutes of
limitations (including any extensions thereof) of the Tax to
which such claim relates.
11.5 Note B. The obligations of the Seller
------
or Continental under Section 11.1 shall be satisfied in
cash, except that (a) in accordance with and subject to the
proviso to Section 11.4(ii) hereof, up to $2,500,000 of the
indemnification payments payable under Section 11.1(i) shall
be satisfied by set-off against Note B in accordance with
the provisions of Note B applicable thereto and (b) in the
event that the Seller or Continental shall be unable to
satisfy in cash any of the indemnification payments payable
under Section 11.1, such payments (including, without
limitation those payments referred to in clause (a) above)
may, at the Buyer's election, be satisfied by set-off
against Note B in accordance with the provisions of Note B
applicable thereto.
106
12. Termination of Agreement.
------------------------
12.1 Termination. This Agreement may be
-----------
terminated as follows:
(i) at the election of the Buyer or the
Seller, if a Control Transaction (as defined in the
Securities Purchase Agreement) shall have been
consummated;
(ii) at the election of the Buyer, if
the Seller or Continental has committed a material
breach of this Agreement, which breach cannot be or is
not cured on or prior to the Closing Date;
(iii) at the election of the Seller, if
the Buyer has committed a material breach of this
Agreement, which breach cannot be or is not cured on or
prior to the Closing Date; or
(iv) at any time on or prior to the
Closing Date, by mutual written consent of the Seller,
Continental and the Buyer.
If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided
in Section 12.2.
12.2 Survival. If this Agreement is termi-
--------
nated in accordance with Section 12.1 and the Contemplated
Transactions are not consummated, this Agreement shall
become void and of no further force and effect, except for
the provisions of Sections 6.5 (Consent to Jurisdiction and
Service of Process), 6.6 (Expenses), 6.7 (Indemnification of
107
Brokerage), this Section 12.2 and 13.3 (Publicity);
provided, however, that none of the parties hereto shall
-------- -------
have any liability in respect of a termination of this
Agreement except to the extent that failure to satisfy the
conditions of Sections 8 or 9, as the case may be, results
from the intentional or willful violation of, or willful
misstatement contained in, the representations, warranties,
covenants or agreements of such party under this Agreement.
13. Miscellaneous.
-------------
13.1 Certain Definitions. As used in this
-------------------
Agreement, the following terms have the following meanings
unless the context otherwise requires:
"Advisers Act" means the Investment Advisers
------------
Act of 1940, as amended.
"Affiliate" with respect to any Person, means
---------
any other Person controlling, controlled by or under common
control with such Person and "control" means the possession,
-------
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person,
whether through the ownership of voting securities, by
contract or otherwise.
"Affiliated Client" shall mean any Client
-----------------
that is controlled (as used in the definition of "Affiliate"
above) by Continental.
"Client" shall mean any Person party to a
------
Contract with the Seller or the Subsidiary pursuant to which
the Seller or the Subsidiary, as the case may be, shall
108
provide investment management or advisory services to such
Person.
"Code" means the Internal Revenue Code of
----
1986, as amended.
"Contracts" means all contracts, agreements,
---------
understandings, indentures, notes, bonds, loans,
instruments, leases, mortgages, franchises, licenses,
commitments or other binding arrangements, express or
implied, oral or written.
"knowledge" means (a) with respect to
---------
Continental, knowledge (after due inquiry) of any of the
officers or directors of Continental and (b) with respect to
the Seller, knowledge (after due inquiry) of any of
(i) Walter J. Blassberg, (ii) Joseph Giasi, Jr., (iii) Brian
E. Hirsch, Esq., (iv) Michael R. Matarazzo, (v) Terence
Biggs or (vi) Catherine L. Waterworth.
"Lien" means any lien, pledge, mortgage,
----
security interest, claim, lease, charge, option, right of
first refusal, easement, servitude, transfer restriction
under any shareholder or similar agreement or other
encumbrance.
"Person" means any individual, corporation,
------
partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"property" means real, personal or mixed
--------
property, tangible or intangible.
109
"Securities Purchase Agreement" means the
-----------------------------
Securities Purchase Agreement, dated as of the date hereof,
between Continental and the party named therein.
"Transaction Documents" means (i) Note A,
---------------------
(ii) Note B, (iii) the Non-Competition Agreement, (iv) the
Services Agreement, (v) the New Sublease, (vi) the Option
Agreement, (vii) any investment advisory or management
Contract between any Continental Party and the Buyer,
(viii) the Bill of Sale and (ix) the Assumption of
Liability.
"Unaffiliated Annualized Revenue" means the
-------------------------------
amount equal to the product of (x) Unaffiliated June 30,
1994 Revenue and (y) two.
"Unaffiliated Client" means any Client that
-------------------
is not an Affiliated Client.
"Unaffiliated December 31, 1993 Revenue"
--------------------------------------
means the amount equal to (x) the gross revenues of the
Seller for the year ended December 31, 1993 as set forth in
the line item entitled "Total Revenues" set forth on the
unaudited statement of income of the Seller for the year
ended December 31, 1993 minus (y) the sum of (i) the amount
-----
set forth in the line item entitled "Investment Advisory
fees - Affiliates" plus (ii) the amount set forth in the
line item entitled "Interest Income," each of (i) and (ii)
as set forth on the unaudited statement of income of the
Seller for the year ended December 31, 1993.
110
"Unaffiliated June 30, 1994 Revenue" means
----------------------------------
the amount equal to (x) the gross revenues of the Seller for
the six-month period ended June 30, 1994 as set forth in the
line item entitled "Total Revenues" set forth on the
unaudited statement of income of the Seller for the six
months ended June 30, 1994 minus (y) the sum of (i) the
-----
amount set forth in the line item entitled "Investment
Advisory fees - Affiliates" plus (ii) the amount set forth
in the line item entitled "Interest Income," each of (i) and
(ii) as set forth on the unaudited statement of income of
the Seller for the six months ended June 30, 1994.
13.2 Glossary. The following capitalized
--------
terms are defined in the following Sections of this
Agreement:
Term Section
---- -------
Account Balances 6.16(b)(ii)
Advisers Act 13.1
Affiliate 13.1
Affiliated Client 13.1
Anniversary Date 7.2(i)
Arbitrator 7.3
Associated Persons 4.9.4
Assumed Liabilities 1.3
Assumption of Liabilities 2.2
Audited Balance Sheet 4.6.1.1
Balance Sheet Date 4.6.1.1
Basket Amount 11.4(i)
Basket Exclusions 11.4(i)
Benchmark Index 7.2(i)
Benefit Plans 4.19
111
Term Section
---- -------
Bill of Sale 2.1
Broker 6.7
Business Preamble
Buyer Preamble
Buyer Savings Plan 6.16(b)(i)
Cash Purchase Price 2.3
Certified Buyer Statement 7.3
Claims 4.11
Client 13.1
Closing Date 3
Closing Principal Amount 2.3(i)
Code 13.1
Commission 4.9.4
Commonly Controlled Entity 4.19
Consenting Unaffiliated Client 7.1(c)
Contemplated Transactions 2.3
Continental Preamble
Continental Parties 6.14(i)
Continental Savings Plan 6.16(b)(i)
Contracts 13.1
Designated Asset Classes 6.14(ii)
Designated Fund 7.2(i)
Designated Period 6.14(iii)
Designated Revenue 7.1(c)
Designated Revenue Loss 7.1(a)
Designated Unaffiliated Client 7.1(c)
DOJ 6.8
Due Date 6.15(a)
ERISA 4.19
Excluded Assets 1.2
Excluded Employees 6.16(a)(i)
Excluded Liabilities 1.4
Final Allocation 6.15(a)
112
Term Section
---- -------
FTC 6.8
GAAP 4.6.1.1
General Claim 10(i)
Governmental Bodies 4.9.1
HSR Act 6.8
Indemnification Notice 11.3
Indemnifying Party 11.3
Indemnitee 11.3
Intellectual Property 4.16
Interim Balance Sheet 4.6.1.3
Interim Balance Sheet Date 4.6.1.3
Investment Company Act 4.9.5(a)
knowledge 13.1
Laws 4.9.1
Letter of Credit 2.4(i)
Liabilities 4.17
Lien 13.1
Logo 1.2(b)
Losses 11.1
Marked Materials 6.19
Material Adverse Effect 4.7
New Sublease 6.9(i)
Non-Competition Agreement 6.12
Non-Consented Contract 6.10(iv)
Non-Consenting Unaffiliated Client 7.1(c)
Non-Designated Asset Classes 6.14(iii)
Non-Fee Paying Clients 4.18(a)
Note A 2.3(i)
Note B 2.3(ii)
Notice of Disagreement 7.3
Option Agreement 6.13(i)
Orders 4.9.1
Other Assets 1.4
113
Term Section
---- -------
Peat Marwick 4.6.1.1
Performance Certificate 7.2(d)
Performance Return 7.2(i)
Permits 4.9.2
Permitted Liens 4.2(a)
Person 13.1
property 13.1
Purchase Price 2.3
Purchased Assets 1.1
Putnam Lovell 6.7
Required Consents 4.10
Revenue Statement 7.2(a)
Savings Transfer Date 6.16(b)(iv)
Securities Purchase Agreement 13.1
Seller Preamble
Seller's Fee 6.7
Seller's Welfare Plans 6.16(c)
September Balance Sheet 4.6.1.4
Services Agreement 6.9(ii)
Shortfall Amount 7.2(a)
Specified Amount 7.2(a)
Sub-Advisor 4.12(c)
Subsidiary Preamble
Tangible Property 4.15
Tangible Property Agreements 4.15
Tax 4.8(a)
Tax Claim 10(ii)
Transaction Documents 13.1
Transaction Expenses 6.6
Transferred Employee 6.16(a)(i)
Unaffiliated Annualized Revenue 13.1
Unaffiliated Client 13.1
Unaffiliated December 31, 1993 Revenue 13.1
114
Term Section
---- -------
Unaffiliated June 30, 1994 Revenue 13.1
Unaudited Financials 4.6.1.2
Valuation Date 6.16(b)(ii)
Verified Investment Performance Reports 4.6.2
13.3 Publicity. Except as required by Law,
---------
regulation or stock exchange requirements, none of the
parties hereto shall, without the consent of the other
parties, make any public announcement or issue any press
release with respect to the Contemplated Transactions. In
no event will any party hereto make any public announcement
or issue any press release without consulting with the other
parties to the extent possible, as to the content of such
public announcement or press release, and in no event will
any party make any public announcement or issue any press
release concerning the identity of the other parties to the
Contemplated Transactions without the prior agreement of the
other parties. Any public announcement or press release
associated with the execution of this Agreement shall be
agreed by the parties prior to being made or released.
13.4 Notices. Any notice or other communi-
-------
cation required or permitted hereunder shall be in writing
and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such
notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or,
115
if mailed, five days after the date of deposit in the United
States mails, as follows:
(a) if to the Buyer, to:
CAM Investment Management, L.P.
c/o Oak Hill Partners, Inc.
65 East 55th Street
New York, New York 10022
Attention: Glenn R. August
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telecopier: (212) 757-3990
(b) if to the Seller or Continental, to:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Attention: President
Telecopier: (212) 440-3857
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: George E.B. Maguire, Esq.
Telecopier: (212) 909-6836
Any party may by notice given in accordance with this
Section 13.4 to the other parties designate another address
or Person for receipt of notices hereunder.
13.5 Entire Agreement. This Agreement
----------------
(including the Exhibits and the Disclosure Statement) and
the Documents executed in connection with the consummation
of the Contemplated Transactions contain the entire
116
agreement among the parties with respect to the purchase of
the Shares, and supersedes all prior agreements, written or
oral, with respect thereto.
13.6 Waivers and Amendments; Non-Contractual
---------------------------------------
Remedies; Preservation of Remedies. This Agreement may be
----------------------------------
amended, superseded, cancelled, renewed or extended, and the
terms hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder
shall act as a waiver thereof. Nor shall any waiver on the
part of any party of any such right, power or privilege, nor
any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. The
rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies
of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representa-
tion, warranty, covenant or agreement contained in this
Agreement or in any document or other paper delivered
pursuant to this Agreement shall in no way be limited by the
fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach
is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in
117
this Agreement or in any document or other paper delivered
pursuant to this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or
breach.
13.7 Governing Law. This Agreement shall be
-------------
governed and construed in accordance with the laws of the
State of New York applicable to agreements made and to be
performed entirely within such State.
13.8 Binding Effect; No Assignment. This
-----------------------------
Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal
representatives. Subject to Section 6.14(vi) hereof, this
Agreement is not assignable by the Seller or Continental
without the consent of the Buyer or by the Buyer without the
consent of the Seller and Continental. In the event that
any provision of this Agreement is held invalid, the parties
shall equitably adjust the economic terms hereof in a manner
such that each party receives the benefit of this Agreement
for which it bargained.
13.9 Variations in Pronouns. All pronouns
----------------------
and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
13.10 Counterparts. This Agreement may be
------------
executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an
original, but all such counterparts shall together consti-
tute one and the same instrument. Each counterpart may
118
consist of a number of copies hereof each signed by less
than all, but together signed by all of the parties hereto.
13.11 Exhibits. The Exhibits and the
---------
Disclosure Statement shall be deemed a part of this Agree-
ment as if fully set forth herein. All references herein to
Sections and Exhibits shall be deemed references to such
parts of this Agreement or the Disclosure Statement, as the
case may be, unless the context shall otherwise require.
13.12 Headings. All headings and section
--------
titles contained in this Agreement or in any Exhibit or the
Disclosure Statement are for reference only, and shall not
affect the interpretation of this Agreement.
13.13 Interpretation. The parties
--------------
acknowledge and agree that: (i) each party and its counsel
reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision; (ii) the
rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in
the interpretation of this Agreement; and (iii) the terms
and provisions of this Agreement shall be construed fairly
as to all parties hereto, regardless of which party was
generally responsible for the preparation of this Agreement.
13.14 Severability of Provisions. If any
--------------------------
provision or any portion of any provision of this Agreement,
or the application of any such provision or any portion
thereof to any Person or circumstance, shall be held invalid
or unenforceable, the remaining portion of such provision
119
and the remaining provisions of this Agreement, and the
application of such provision or portion of such provision
as is held invalid or unenforceable to Persons or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected hereby.
120
13.15 No Third Party Beneficiaries. This
----------------------------
Agreement does not create, and shall not be construed to
create, any rights enforceable by any Person not a party to
this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
BUYER:
CAM INVESTMENT MANAGEMENT, L.P.
By: CAM GP, INC.,
Its General Partner
By: /s/ Glenn R. August
--------------------------------
Name:
Title:
SELLER:
CONTINENTAL ASSET MANAGEMENT CORP.
By: /s/ Walter J.Blasberg
--------------------------------
Name:
Title:
THE CONTINENTAL CORPORATION
By: /s/ John P. Mascotte
--------------------------------
Name:
Title:
EXHIBIT A
---------
FORM OF
BILL OF SALE AND INSTRUMENT OF ASSIGNMENT
-----------------------------------------
THIS BILL OF SALE AND INSTRUMENT OF ASSIGNMENT,
made, executed and delivered this ____ day of _________,
1994 by CONTINENTAL ASSET MANAGEMENT CORP., a New York
corporation (the "Seller"), in favor of CAM INVESTMENT
MANAGEMENT, L.P., a Delaware limited partnership (the
"Buyer").
The Seller and the Buyer are parties to the Asset
Purchase Agreement, dated as of October 13, 1994 (the
"Purchase Agreement"), providing for, among other things,
the sale, assignment, transfer and delivery to the Buyer of
the Purchased Assets, as more fully described in the
Purchase Agreement, for consideration in the amount and on
the terms and conditions provided in the Purchase Agreement.
Capitalized terms used and not defined herein shall have the
same meaning as in the Purchase Agreement.
The parties now desire to carry out the intent and
purpose of the Purchase Agreement by the Seller's execution
and delivery to the Buyer of this instrument evidencing the
vesting in the Buyer of all Rights in and to all of the
Purchased Assets and Assumed Liabilities herein described.
NOW, THEREFORE, in consideration of the promises
and of other valuable consideration to the Seller in hand
paid by the Buyer, at or before the execution and delivery
hereof, the receipt and sufficiency of which by the Seller
is hereby acknowledged, the Seller has, effective from and
2
after the date hereof and subject to Section 1.2 of the
Purchase Agreement, sold, assigned, transferred, conveyed,
granted, set-over, delivered and confirmed, and by this Bill
of Sale and Instrument of Assignment does, effective from
and after the date hereof, sell, assign, transfer, convey,
grant, set-over, deliver and confirm unto the Buyer, its
successors and assigns, all of the Seller's right, title and
interest in and to the following (other than any Excluded
Assets) (all of such assets, properties and rights being
sometimes collectively referred to herein as the "Purchased
Assets" as more particularly described in the Purchase
Agreement):
(a) all Contracts (including all
deposits underlying such Contracts) related to the Business
or the Purchased Assets;
(b) all Tangible Property and Tangible
Property Agreements utilized by the Seller in the Business;
(c) all Intellectual Property relating
to or used in connection with the Business (other than,
except to the extent provided in Section 6.19 of the
Purchase Agreement, the Logo), including, without
limitation, all Intellectual Property listed in Section 4.16
of the Disclosure Statement other than in Part II of such
Section 4.16 of the Disclosure Statement and, subject to
Section 6.19 of the Purchase Agreement, all advertising,
sales and promotional materials, fee schedules, lists of
Clients and catalogues;
3
(d) any cash, cash equivalents and
other short-term investments on hand or in bank, brokerage,
custodial or other depository accounts of the Seller on the
Closing Date;
(e) all accounts receivable of the
Seller accrued as of the Closing Date, including, but not
limited to, any contractual rights which the Seller shall
have accrued, or shall have been entitled to accrue under
GAAP as a receivable, whether in cash or in kind, or by way
of set off or otherwise, as of such date;
(f) all prepaid expenses of the Seller
arising from the operations of the Business;
(g) all of the Seller's files and
records, to the extent relating to the operations of the
Business, including, without limitation, accounting records,
correspondence with Governmental Bodies, personnel and
payroll records and such other books and records relating to
the internal organization or operation of the Business;
(h) all of the outstanding capital
stock of the Subsidiary and the corporate minute books and
stock ledgers of the Subsidiary;
(i) all of the Seller's right, title
and interest in assets held under, or in connection with,
any Benefit Plan, but only to the extent provided in Sec-
tion 6.16(b) of the Purchase Agreement;
(j) all of the Seller's right, title
and interest in or to any Claim, demand, action, or cause of
4
action, contingent or otherwise, known or unknown, against
any third party, including without limitation, insurance
companies, relating to any of the Purchased Assets or the
operations of the Business (other than any such claim,
demand, action or cause of action relating to any Excluded
Asset); and
(k) to the extent not otherwise
specifically listed above, all of the assets of the Seller
on the Closing Date, including, without limitation, any
goodwill connected therewith or appertaining thereto.
Notwithstanding the foregoing, the following shall
be excluded from the Purchased Assets (collectively, the
"Excluded Assets"):
(i) all of the capital stock, corporate
minute books and stock ledgers of the Seller;
(ii) subject to Section 6.19 of the
Purchase Agreement, all of the Seller's right, title and
interest in and to the logo associated with the name
"Continental" and used by the Seller (the "Logo");
(iii) all of the Seller's right, title
and interest in assets held under, or in connection with,
any Benefit Plan, except as otherwise provided in
Section 6.16(b) of the Purchase Agreement;
(iv) all refunds of any Taxes that are
Excluded Liabilities;
(v) any and all current or deferred Tax
assets or reserves or accruals for Taxes;
5
(vi) deposits of the Seller with the
Internal Revenue Service or any other Taxing authority
(including, without limitation, Tax deposits, prepayments
and estimated payments and all rights in such deposits and
all interest upon such deposits) relating to Taxes; and
(vii) the Tax Allocation Agreement,
dated October 22, 1981, between the Seller and Continental.
TO HAVE AND TO HOLD all of the Purchased Assets
unto the Buyer, its successors and assigns to its and their
own use forever.
This Bill of Sale and Instrument of Assignment
shall be governed and construed in accordance with the laws
of the State of New York applicable to agreements made and
to be performed entirely within such State.
This instrument shall be binding upon the Seller
and the Buyer, their respective successors, assigns and
legal representatives, for the uses and purposes set forth
and referred to, effective immediately upon its delivery to
6
the Buyer, and shall inure to the benefits of the Buyer, its
successors, assigns and legal representatives.
IN WITNESS WHEREOF, the Seller has caused this
Bill of Sale and Instrument of Assignment to be duly
executed as of the date first above written.
CONTINENTAL ASSET MANAGEMENT CORP.
By________________________
Name:
Title:
_____________________
(Corporate Seal)
EXHIBIT B
---------
FORM OF
ASSUMPTION OF LIABILITIES
-------------------------
ASSUMPTION OF LIABILITIES made, executed and
delivered this ____ day of _______, 1994 by CAM INVESTMENT
MANAGEMENT, L.P., a Delaware limited partnership (the
"Buyer") in favor of CONTINENTAL ASSET MANAGEMENT CORP., a
New York corporation (the "Seller").
The Seller and the Buyer are parties to the Asset
Purchase Agreement, dated as of October 13, 1994 (the
"Purchase Agreement"), providing for, among other things,
the sale, assignment, transfer and delivery to the Buyer of
the Purchased Assets and the assumption by the Buyer of the
Assumed Liabilities, in each case, as more fully described
in the Purchase Agreement and upon the terms and conditions
set forth in the Purchase Agreement. Capitalized terms used
and not defined herein shall have the same meaning as in the
Purchase Agreement.
Concurrently herewith, the Seller has executed the
Bill of Sale, dated the date hereof, pursuant to which the
Seller shall have vested in the Buyer all of its right,
title and interest in and to the Purchased Assets described
therein.
The parties now desire to carry out the intent and
purpose of the Purchase Agreement by the Buyer's execution
and delivery to the Seller of this instrument evidencing the
2
Buyer's assumption of the Assumed Liabilities herein
described.
Accordingly, the parties agree as follows:
Subject to the terms and conditions of the
Purchase Agreement and except as otherwise provided in
Section 1.4 thereof, in partial consideration of the
transfer, conveyance and assignment to the Buyer of the
Purchased Assets, the Buyer shall assume, as of the Closing
Date, all Liabilities of the Seller subject to the Buyer's
right of indemnification as set forth in Section 11.1 of the
Purchase Agreement, including without limitation all of the
following (collectively, the "Assumed Liabilities"):
(i) Liabilities reflected or included
on or reserved against on the Audited Balance Sheet, or
incurred or accrued between the Balance Sheet Date and the
Closing Date;
(ii) the performance of, and the
Liabilities arising out of, each of the Contracts that is
assigned to the Buyer as of the Closing Date as contemplated
by the Purchase Agreement; and
(iii) Liabilities arising under, or
relating to, Benefit Plans, but only to the extent provided
in Section 6.16(b) of the Purchase Agreement.
Notwithstanding the foregoing, the following shall
==================================================
be excluded from Assumed Liabilities:
=====================================
(a) all Liabilities with respect to the
============================================================
Excluded Assets, whether outstanding and unpaid on the
=======================================================
3
Closing Date or accruing during the period subsequent to the
============================================================
Closing Date;
=============
(b) all Liabilities and expenses of any
============================================================
kind or nature relating to Taxes (including, without limita-
============================================================
tion, any Liabilities and expenses pursuant to any Tax
======================================================
sharing agreement, Tax indemnification or similar
=================================================
arrangement);
=============
(c) all Liabilities related to
===================================================
compensation payable in respect of service with the Seller
==========================================================
on or prior to the Closing Date (other than compensation
========================================================
accrued on the last balance sheet of the Seller prepared
========================================================
prior to the Closing Date and any Liabilities in connection
===========================================================
with the termination of any Transferred Employee by the
=======================================================
Buyer after the Closing Date) and all Liabilities arising
=========================================================
under, or related to, any Benefit Plan except to the extent
===========================================================
provided in Section 6.16(b) of the Purchase Agreement;
======================================================
(d) Liabilities in connection with,
========================================================
arising out of, or otherwise relating to, the matters and
=========================================================
circumstances underlying the litigation entitled ADS
---
====================================================
Associates, Inc. v. The Continental Insurance Company and
---------------------------------------------------------
=========================================================
Continental Asset Management Corp. (N.Y. Sup. Ct., New York
----------------------------------
===========================================================
Co.), including, without limitation, any Liabilities for
========================================================
settlement amounts or expenses arising out of, or otherwise
===========================================================
relating to, settlement negotiations, mediation or
==================================================
alternative dispute resolution mechanisms; and
==============================================
(e) Liabilities in connection with,
========================================================
arising out of, or otherwise relating to, the matters and
==========================================================
4
circumstances underlying the proceeding pending in the New
==========================================================
York State Division of Human Rights entitled Alice Kennedy
-------------
==========================================================
v. Continental Asset Management Corp., SDHR No. 1A-E-O-94-
-------------------------------------
==========================================================
9000640-E, including, without limitation, any Liabilities
=========================================================
relating to, or arising out of, (i) any subsequent
==================================================
proceeding brought by the complainant with respect to such
==========================================================
matters or circumstances or otherwise relating to her
=====================================================
employment with the Seller, and (ii) any settlement amounts
===========================================================
or expenses arising out of, or otherwise relating to,
=====================================================
settlement negotiations, mediation or alternative dispute
=========================================================
resolution mechanisms.
======================
5
The Buyer agrees that it will execute and deliver
any and all further instruments, documents or agreements as
may reasonably be necessary or desirable to complete and
assure the assumption by the Buyer of the obligations and
liabilities assumed hereby.
This Assumption of Liabilities shall be governed
and construed in accordance with the laws of the State of
New York applicable to agreements made and to be performed
entirely within such State.
This instrument shall inure to the benefits of,
and be binding upon, the Seller and the Buyer, their
respective successors, assigns and legal representatives,
for the uses and purposes set forth and referred to,
effective immediately upon its delivery to the Seller.
IN WITNESS WHEREOF, the Buyer has caused this
Assumption of Liabilities to be duly executed as of the date
first above written.
CAM INVESTMENT MANAGEMENT, L.P.
By: CAM GP, Inc.
Its General Partner
By:____________________________
Name:
Title:
_____________________
(Corporate Seal)
EXHIBIT C
---------
FORM OF NOTE A
--------------
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH DISPOSITION IS IN ACCORDANCE WITH
THE TERMS HEREOF, AND (A) SUCH DISPOSITION IS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE
HOLDER HEREOF SHALL HAVE DELIVERED TO THE MAKER AN OPINION
OF COUNSEL, WHICH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO THE MAKER, TO THE EFFECT THAT SUCH
DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT.
$[25,000,000*] [CLOSING DATE]
New York, New York
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, CAM INVEST-
MENT MANAGEMENT, L.P., a limited partnership organized under
the laws of the State of Delaware (together with its succes-
sors and permitted assigns, "Maker"), hereby promises to pay
to the order of CONTINENTAL ASSET MANAGEMENT CORP., a New
York corporation (together with its successors and permitted
assigns, "Payee"), the principal sum of [TWENTY FIVE MILLION
Dollars ($25,000,000)*], together with interest on the
unpaid principal amount hereof from time to time outstanding
from the date hereof until such principal amount is paid in
full, in such currency of the United States of America as at
the time of payment shall be legal tender therein for the
payment of public and private debts, upon the terms and
subject to the conditions set forth herein.
--------------------
[* Subject to downward adjustment in accordance with
Section 7.1 of the Agreement.]
2
Section 1. Payment Terms
-------------
1.1 Principal. On [date**] (the "Maturity
---------
Date"), the Maker shall pay to the Payee the entire unpaid
principal amount of this Note then outstanding together with
all accrued and unpaid interest thereon.
1.2 Interest. The unpaid principal amount
--------
of this Note shall bear interest at a rate per annum equal
to [rate***] computed on the basis of a 365-day year and
paid for the actual number of days elapsed. Such interest
shall be payable semi-annually, in arrears, commencing on
the date which is six months after the Closing Date, until
payment of this Note in full.
Section 2. Manner of Payment. Principal payments
-----------------
and interest payments on this Note shall be made in lawful
money of the United States of America by wire transfer of
immediately available funds to an account designated in
writing to Maker, so as to be received by Payee on the due
date of each such payment. If the date on which any such
payment is required to be made pursuant to the provisions of
this Note is not a Business Day (as defined below), such
payment shall be due and payable on the immediately succeed-
ing Business Day following such date. For purposes of this
--------------------
[** At the Seller's election, pursuant to Section 2.3(i) of
the Agreement, six months or one year after the Closing
Date.]
[*** If maturity is six months, six month LIBOR plus 0.5%;
if maturity is one year, one year LIBOR plus 1%.]
3
Note, "Business Day" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks in
New York are authorized to close.
Section 3. No Prepayments. This Note may not be
--------------
prepaid.
Section 4. Events of Default
-----------------
4.1 If any of the following events shall
occur, it shall constitute an "Event of Default":
(a) a default by Maker in the payment
of (i) principal of this Note when the same becomes due and
payable at its stated maturity, acceleration or otherwise or
(ii) interest on this Note within ten (10) days of when the
same becomes due and payable; or
(b) if Maker (i) makes a general
assignment for the benefit of its creditors, (ii) commences
any case, proceeding or other action under any existing or
future law of any jurisdiction, domestic or foreign, relat-
ing to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with
respect to it; or seeking to adjudicate it bankrupt or
insolvent; or seeking reorganization, arrangement, adjust-
ment, winding-up, liquidation, dissolution, composition or
other such relief with respect to it or its debts; or
seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial
part of its assets (a "Bankruptcy Action"); (iii) becomes
4
the debtor named in any Bankruptcy Action which results in
the entry of an order for relief or any such adjudication or
appointment remains undismissed, undischarged or unbonded
for a period of ninety (90) days; or (iv) consents to take
any action in furtherance of, or indicates its consent to,
approval of, or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
If an Event of Default specified in Section 4.1(a)
occurs and is continuing, Payee may, without limiting any
other rights it may have at law or in equity, by written
notice to Maker declare the unpaid principal of and accrued
interest on this Note due and payable, whereupon the same
shall be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which
Maker hereby expressly waives and Payee may proceed to
enforce payment of such amount or part thereof in such
manner as it may elect and exercise any rights under this
Note. If an Event of Default specified in Section 4.1(b)
occurs, the unpaid principal of and interest on this Note
shall become immediately due and payable without present-
ment, demand, protest or notice of any kind, all of which
are hereby expressly waived by Maker. Payee's notice to
Maker may rescind an acceleration and its consequences if
the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that
has become due solely because of acceleration.
5
Section 5. Miscellaneous.
-------------
5.1 This Note, and the beneficial ownership
thereof, is freely assignable (i) to an Affiliate of the
Payee and (ii) subject to the following two sentences, to
any other Person. The Payee shall give the Maker prior
written notice (the "Transfer Notice") of its intention to
transfer or assign this Note to any Person other than an
Affiliate of the Payee. The Maker may elect to purchase
this Note from the Payee at the outstanding principal amount
thereof plus accrued interest through the date of purchase,
which election shall be evidenced by written notice
delivered to the Payee (the "Purchase Election Notice") on
or prior to the expiration of two full Business Days
following the Maker's receipt of the Transfer Notice;
provided, however, that if the Maker intends to finance the
-------- -------
purchase of this Note, the Purchase Election Notice shall
set forth that the Maker's proposed purchase is subject to
the Maker obtaining financing acceptable to the Maker in its
sole discretion. If (x) the Maker does not timely deliver
the Purchase Election Notice or (y) the purchase of this
Note by the Maker is not consummated prior to the expiration
of twenty business days following the Payee's receipt of the
Purchase Election Notice, the Payee shall have the right to
transfer or assign this Note to any other Person. In addi-
tion, this Note may be pledged to any Person. This Note may
be assigned or transferred by Maker in connection with any
assignment or transfer by Maker (referred to as the Buyer
6
under the Asset Purchase Agreement) of the Asset Purchase
Agreement in accordance with Section 6.14(vi) of the Asset
purchase Agreement. All of the provisions of this Note
shall bind and inure to the benefit of Maker, Payee and
their respective successors and permitted assigns.
5.2 The observance of any provision of this
Note may be waived (either generally or in a particular
instance) only with the written consent of the party waiving
compliance. No failure on the part of the Holder to
exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Note shall
operate as a waiver thereof; nor shall any single or partial
exercise by the Holder of any right under this Note preclude
any other or further exercise thereof or the exercise of any
other right. The rights granted to the Holder in this Note
are cumulative and are not exclusive of any other remedies
provided by law. Any term of this Note may be amended only
with the written consent of Maker and Payee.
5.3 Each of Maker and Payee intend that the
obligations evidenced by this Note conform strictly to all
applicable laws from time to time in effect. All agreements
between Maker and Payee, whether now existing or hereafter
created and whether oral or written, are hereby expressly
limited so that in no contingency or event whatsoever,
whether by acceleration of maturity hereof or otherwise,
shall the amount paid or agreed to be paid to Payee, or
collected by Payee, by or on behalf of Maker for the use,
7
forbearance or detention of the money to be loaned to Maker
hereunder or otherwise, or for the payment or performance of
any covenant or obligation contained herein of Maker to
Payee, or in any other document evidencing, securing or
pertaining to such indebtedness evidenced hereby, exceed the
maximum amount permissible under applicable law. If, under
any circumstances whatsoever, fulfillment of any provision
hereof or of any other document, at the time performance of
such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the
---- -----
obligation to be fulfilled shall be reduced to the limit of
such validity; and if under any circumstances Payee ever
shall receive from or on behalf of Maker an amount deemed
interest, by applicable law, which would exceed the highest
lawful rate, such amount that would be excessive interest
under applicable law shall be applied to the reduction of
Maker's principal amount owing hereunder and not to the
payment of interest, or if such excessive interest exceeds
the unpaid balance of principal and such other indebtedness,
the excess shall be deemed to have been an inadvertent pay-
ment and shall be refunded to Maker or to any other Person
making such payment on Maker's behalf.
5.4 Any notice or other communication
required or permitted hereunder shall be in writing and
shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be
8
deemed given when so delivered personally, telegraphed,
telexed or sent by facsimile transmission or, if mailed,
five days after the date of deposit in the U.S. mails, as
follows:
(a) if to Maker, to:
CAM Investment Management, L.P.
c/o Oak Hill Partners, Inc.
55 East 65th Street
New York, New York 10022
Attention: Glenn R. August
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telecopier: (212) 757-3990
(b) if to Payee, to:
Continental Asset Management Corp.
c/o The Continental Corporation
180 Maiden Lane
New York, New York 10038
Attention: President
Telecopier: (212) 440-3857
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: George E.B. Maguire, Esq.
Telecopier: (212) 909-6836
Payee or Maker may by notice given in accordance with this
Section 5.4 to the other parties designate another address
or Person for receipt of notices hereunder.
9
5.5 The Note shall be governed by and
construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed
entirely within such State.
CAM INVESTMENT MANAGEMENT, L.P.
By: CAM GP, INC.,
Its General Partner
By:
-------------------------------------
Name:
Title:
EXHIBIT D
---------
FORM OF NOTE B
--------------
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH DISPOSITION IS IN ACCORDANCE WITH
THE TERMS HEREOF, AND (A) SUCH DISPOSITION IS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE
HOLDER HEREOF SHALL HAVE DELIVERED TO THE MAKER AN OPINION
OF COUNSEL, WHICH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO THE MAKER, TO THE EFFECT THAT SUCH
DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT.
$10,000,000 [CLOSING DATE]
New York, New York
SUBORDINATED PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, CAM INVEST-
MENT MANAGEMENT, L.P., a limited partnership organized under
the laws of the State of Delaware (together with its succes-
sors and permitted assigns, "Maker"), hereby promises to pay
to the order of CONTINENTAL ASSET MANAGEMENT CORP., a New
York corporation (together with its successors and permitted
assigns, "Payee"), the principal sum of TEN MILLION Dollars
($10,000,000), together with interest on the unpaid
principal amount hereof from time to time outstanding from
the date hereof until such principal amount is paid in full,
in such currency of the United States of America as at the
time of payment shall be legal tender therein for the
payment of public and private debts, upon the terms and
subject to the conditions set forth herein.
2
Section 1. Payment Terms
-------------
1.1 Principal. On ________, [2004] [ten
---------
years from Closing Date] (the "Maturity Date"), the Maker
shall pay to the Payee the entire unpaid principal amount of
this Note then outstanding together with all accrued and
unpaid interest thereon.
1.2 Interest. The unpaid principal amount
--------
of this Note shall bear interest at a rate per annum equal
to __% [which shall be equal to the lesser of (x) twelve
percent (12%) and (y) the applicable federal rate in effect
on date of issuance as calculated in accordance with
Section 1274(d) of the Internal Revenue Code of 1986, as
amended] computed on the basis of a 365-day year and paid
for the actual number of days elapsed. Such interest shall
be payable semi-annually, in arrears, on the last day of
each June and December (each such date shall hereinafter be
referred to as an "Interest Payment Date"), commencing on
June 30, 1995 until payment of this Note in full. On each
Interest Payment Date from and including June 30, 1995
through and including December 31, 1999, the Maker may
elect, in its sole discretion, to pay any interest due on
such Interest Payment Date by the issuance to the Payee of a
new subordinated note (each, an "Interest Note"), in lieu of
any payment in cash, any such Interest Note shall mature on
the Maturity Date unless otherwise provided therein and any
such Interest Note shall be identical in all respects to
this Note except (i) the principal amount thereof shall be
3
an amount equal to such interest that was not paid in cash
and (ii) such Interest Note shall be dated the date of
issuance thereof.
Section 2. Manner of Payment. Principal payments
-----------------
and cash interest payments on this Note shall be made in
lawful money of the United States of America by wire
transfer of immediately available funds to an account desig-
nated in writing to Maker, so as to be received by Payee on
the due date of each such payment. If the date on which any
such payment is required to be made pursuant to the provi-
sions of this Note is not a Business Day (as defined below),
such payment shall be due and payable on the immediately
succeeding Business Day following such date. If interest on
this Note shall be paid by the issuance of an Interest Note,
Maker shall issue such Interest Note and deliver such
Interest Note to Payee at the address specified in Sec-
tion 10.4. For purposes of this Note, "Business Day" shall
mean any day other than a Saturday, Sunday or other day on
which commercial banks in New York are authorized to close.
Section 3. Prepayments.
-----------
3.1 Prepayments. From and after the third
-----------
anniversary of the date hereof, Maker may, at its option,
prepay without penalty or premium, all or a portion of the
then outstanding principal amount of this Note upon one
Business Day's prior written notice stating the date of
prepayment and the principal amount to be prepaid on such
4
date. After such notice of prepayment has been given, the
aggregate principal amount specified in such notice,
together with all accrued interest thereon as of the
prepayment date specified in such notice, shall become due
and payable on such date.
3.2 Notation of Prepayment. Upon the
----------------------
prepayment of any portion of this Note pursuant to Sec-
tion 3.1, Payee shall annotate this Note to indicate the
amount and date of such prepayment and provide a copy of
this Note so annotated to Maker at the address specified in
Section 10.4.
Section 4. Right of Offset. Reference is made to
---------------
the Asset Purchase Agreement dated as of October 13, 1994
among Maker, Payee and The Continental Corporation, a New
York corporation ("Continental") (as amended in accordance
with the terms thereof, the "Purchase Agreement"). Payee
acknowledges and agrees that, in accordance with and subject
to the proviso in the second paragraph of Section 11.4 of
the Purchase Agreement, up to $2,500,000 of the indemnifica-
tion payments payable by Payee and Continental pursuant to
Section 11.1(i) of the Purchase Agreement, may be effected,
enforced, satisfied and discharged by set off against this
Note in accordance with the following sentence and such
amount so set off shall discharge Maker's obligations under
this Note with respect to such amount so set off. Any such
set off shall be applied first against the principal amount
5
of this Note, next against the principal amount of any out-
standing Interest Notes, next against accrued and unpaid
interest on this Note and finally against accrued and unpaid
interest on any outstanding Interest Notes. In the event
that Payee and Continental shall be unable to pay in cash
any other indemnification payment required pursuant to
Section 11.1 of the Purchase Agreement, such payment may, at
Maker's option, be effected, enforced, satisfied and
discharged by set off against this Note in accordance with
the immediately preceding sentence and such amount so set
off shall discharge Maker's obligations under this Note with
respect to such amount so set off.
Section 5. Covenants of Maker. Maker covenants
------------------
with Payee that until the entire principal of and interest
on this Note shall have been paid in full as provided
herein, Maker shall:
(a) deliver to Payee such financial data and
other information describing the financial condition of
Maker for quarterly and annual periods as it is required to
deliver to holders of the Senior Debt (as defined below)
pursuant to agreements then in effect with such holders, as
such agreements with respect to Senior Debt may be modified
from time to time;
(b) whether or not required pursuant to the
agreements between Maker and the holders of the Senior Debt,
deliver to Payee:
6
(i) as soon as available, but not later
than 105 days after the close of each fiscal year of
Maker, audited financial statements of Maker for and as
at the end of such year, certified by independent
certified public accountants of recognized national
standing selected by Maker; and
(ii) as soon as available, but not later
than 45 days after the close of each fiscal quarter of
Maker commencing with the quarter beginning March 31,
1995, unaudited financial statements of Maker, certi-
fied by Maker's chief financial officer as prepared in
accordance with generally accepted accounting prin-
ciples and fairly presenting the financial position and
results of operations of Maker for such quarter;
(c) upon the occurrence of any Event of
Default (as defined below) or any act, event or occurrence
which, with the passage of time or notice or both, would be
an Event of Default, notify Payee forthwith in writing
thereof describing such Event of Default or such act, event
or occurrence in reasonable detail and what action, if any,
Maker is taking or proposing to take with respect thereto;
(d) provide to Payee contemporaneous copies
of all notices required to be sent by Maker to the holders
of the Senior Debt pursuant to the terms of the agreements
between Maker and the holders of the Senior Debt of any
actual or alleged event of default or any act, event or
occurrence which, with the passage of time or notice or
7
both, would be such an event of default under the Senior
Debt;
(e) not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all
of its assets to, any Person (as defined below), unless:
(i) the resulting, surviving or trans-
feree Person (if not Maker) shall be organized and
existing under the laws of the United Sates of America,
any State thereof or the District of Columbia and such
person shall expressly assume in a writing executed and
delivered to Payee, all the obligations of Maker under
this Note;
(ii) immediately after giving effect to
such transaction (and treating any Debt which becomes
an obligation of the resulting, surviving or transferee
Person as a result of such transaction as having been
incurred by such Person at the time of such trans-
action), no Event of Default shall have occurred and be
continuing; and
(iii) Maker shall have delivered to Payee
a certificate of its chief financial officer and an
opinion of counsel, each stating that such consolida-
tion, merger or transfer complies with the terms and
provisions of this Note.
Section 6. Confidentiality. By accepting this
---------------
Note, Payee agrees that all information and documents
8
provided to Payee by Maker pursuant to this Note shall be
considered confidential and shall not be used for any
purpose by Payee or any of its Affiliates or any of their
respective employees, officers, directors, advisors or
representatives other than with respect to payment of
Maker's obligations hereunder. Payee shall not disclose or
provide such information or documents (or any portion
thereof) to any Person other than any of its Affiliates,
employees, officers, directors, advisors or representatives
who reasonably requires such information to advise Payee in
respect of matters pertaining to this Note, without notify-
ing Maker thereof in writing prior to so doing. Payee
shall, at the reasonable request of Maker, return all such
information and documents, and reproductions thereof, upon
payment in full of all of Maker's obligations hereunder.
Section 7. Events of Default
-----------------
7.1 If any of the following events shall
occur, it shall constitute an "Event of Default":
(a) a default by Maker in the payment
of (i) principal of this Note when the same becomes due and
payable at its stated maturity, acceleration or otherwise or
(ii) interest on this Note within ten (10) days of when the
same becomes due and payable;
(b) a default by Maker in the perform-
ance of or compliance with any covenant contained in this
Note which default continues unremedied for a period of 60
9
days after written notice by Payee (which notice shall
specify the default, demand that it be remedied and state
that such notice is a "Notice of Default"); or
(c) if Maker (i) makes a general
assignment for the benefit of its creditors, (ii) commences
any case, proceeding or other action under any existing or
future law of any jurisdiction, domestic or foreign, relat-
ing to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with
respect to it; or seeking to adjudicate it bankrupt or
insolvent; or seeking reorganization, arrangement, adjust-
ment, winding-up, liquidation, dissolution, composition or
other such relief with respect to it or its debts; or
seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial
part of its assets (a "Bankruptcy Action"); (iii) becomes
the debtor named in any Bankruptcy Action which results in
the entry of an order for relief or any such adjudication or
appointment remains undismissed, undischarged or unbonded
for a period of ninety (90) days; or (iv) consents to take
any action in furtherance of, or indicates its consent to,
approval of, or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
If an Event of Default (other than an Event of
Default specified in Section 7.1(c)) occurs and is continu-
ing, subject to the provisions of Section 8 (Subordination),
Payee may, without limiting any other rights it may have at
10
law or in equity, by written notice to Maker declare the
unpaid principal of and accrued interest on this Note due
and payable, whereupon the same shall be immediately due and
payable without presentment, demand, protest or other notice
of any kind, all of which Maker hereby expressly waives and
Payee may proceed to enforce payment of such amount or part
thereof in such manner as it may elect and exercise any
rights under this Note; provided that, in the case of an
--------
Event of Default specified in Section 7.1(c), the unpaid
principal of and interest on this Note shall become immedi-
ately due and payable without presentment, demand, protest
or notice of any kind, all of which are hereby expressly
waived by Maker. Payee's notice to Maker may rescind an
acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpay-
ment of principal or interest that has become due solely
because of acceleration. All of the foregoing rights of
Payee are subject to the limitations set forth in Section 8
below.
Section 8. Subordination.
-------------
(a) Maker agrees, and Payee by accepting
this Note agrees, that the indebtedness evidenced by this
Note is subordinated and junior in right of payment, to the
extent and in the manner provided in this Section 8, to the
prior payment in full of all Senior Debt (as defined below)
11
and that the provisions of this Section 8 are made for the
benefit of all present and future holders of Senior Debt and
shall be enforceable by them directly against the Holder.
(b) Upon any payment or distribution of the
assets of Maker to creditors upon a total or partial liqui-
dation or dissolution of Maker or in any Bankruptcy Action
relating to Maker or its property:
(i) holders of Senior Debt shall be
entitled to receive payment in full of all Senior Debt
before Payee shall be entitled to receive any payment
of principal of or interest on this Note; and
(ii) until all Senior Debt is paid in
full, any distribution to which Payee would be entitled
but for this Section 8 shall be made to holders of
Senior Debt as their interest may appear, except that
Payee may receive ownership interests of Maker and any
debt securities of Maker that are subordinated to
Senior Debt to at least the same extent as this Note.
(c) If a distribution is made to Payee in
respect of this Note that because of this Section 8 should
not have been made to Payee, Payee shall hold it in trust
for the holders of Senior Debt and pay it over to them as
their interests may appear.
(d) After all Senior Debt is paid in full
and until this Note is paid in full, Payee shall be subro-
gated to the rights of holders of the Senior Debt to receive
payments or distributions of assets of the Maker applicable
12
to Senior Debt. A distribution made under this Section 8 to
holders of Senior Debt which otherwise would have been made
to Payee is not, as between Maker and Payee, a payment by
Maker on Senior Debt.
(e) No right of any holder of Senior Debt to
enforce the subordination of the indebtedness evidenced by
this Note shall be impaired by any act or failure to act by
Maker or by its failure to comply with this Note.
(f) Payee by accepting this Note acknow-
ledges and agrees that the foregoing subordination provi-
sions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the
issuance of this Note, to acquire and continue to hold, or
to continue to hold, such Senior Debt and such holder of
Senior Debt shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Debt.
(g) Prior to the payment in full of all
Senior Debt, and so long as any event of default under any
Senior Debt is continuing Payee shall not, without the prior
written consent of the holders of the Senior Debt, take any
action (including, without limitation, the acceleration of
the maturity of all or any part of this Note) toward the
collection of this Note or enforcement of any rights, powers
or remedies hereunder, or under other agreements entered
into pursuant to this Note or under applicable law, or file,
13
join in or facilitate any petition or proceeding seeking the
involuntary bankruptcy of Maker upon the occurrence of any
Event of Default hereunder or any event, which with the
passage of time, or giving of notice, or both, would
constitute an Event of Default hereunder or on any other
basis or for any other reason.
Section 9. Certain Definitions.
-------------------
"Debt" means, with respect to any Person,
(i) any liability, contingent or otherwise,
(A) for borrowed money and (B) evidenced by a note, deben-
ture, bond, letter of credit or similar instrument for the
payment of which such Person is responsible or liable;
(ii) all capital lease obligations of such
Person;
(iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any
title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business);
(iv) all monetary obligations of such Person
issued or contracted for as payment in consideration of the
purchase by such Person of the stock or substantially all of
the assets of other Persons or a merger or consolidation to
which such Person was a party;
(v) all obligations of such Person for the
reimbursement of any obligor on any letter of credit,
14
banker's acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing
obligations (other than obligations described in (i), (ii),
(iii) and (iv) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit
are not drawn upon or, if and to the extent such letters of
credit are drawn upon such drawing is reimbursed no later
than the third business day following receipt by such person
of a demand for reimbursement following payment on the
letter of credit);
(vi) all obligations of the type referred to
in clauses (i) through (v) of other Persons for the payment
of which, in either case, such Person is responsible or
liable as obligor, guarantor or otherwise; and
(vii) all obligations of the type referred to
in clauses (i) through (vi) of other Persons secured by any
lien on any property or asset of such Person (whether or not
such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value
of such property or assets or the amount of the obligation
so secured.
"Person" means any individual, corporation,
partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, unincorporated
organization or other entity.
"Senior Debt" means (i) the principal of, and
interest on, all future and existing Debt to banks, other
15
financial institutions, trade creditors or otherwise, and
(ii) all fees, costs and expenses and other obligations on
or arising with respect to Senior Debt as defined in clause
(i) above accrued to the date of payment.
Section 10. Miscellaneous.
-------------
10.1 This Note, and the beneficial ownership
thereof, is freely assignable (i) to an Affiliate of the
Payee and (ii) subject to the following two sentences, to
any other Person. The Payee shall give the Maker prior
written notice (the "Transfer Notice") of its intention to
transfer or assign this Note to any Person other than an
Affiliate of the Payee. The Maker may elect to purchase
this Note from the Payee at the outstanding principal amount
thereof plus accrued interest through the date of purchase,
which election shall be evidenced by written notice
delivered to the Payee (the "Purchase Election Notice") on
or prior to the expiration of two full Business Days
following the Maker's receipt of the Transfer Notice;
provided, however, that if the Maker intends to finance the
-------- -------
purchase of this Note, the Purchase Election Notice shall
set forth that the Maker's proposed purchase is subject to
the Maker obtaining financing acceptable to the Maker in its
sole discretion. If (x) the Maker does not timely deliver
the Purchase Election Notice or (y) the purchase of this
Note by the Maker is not consummated prior to the expiration
of twenty business days following the Payee's receipt of the
16
Purchase Election Notice, the Payee shall have the right to
transfer or assign this Note to any other Person. In addi-
tion, this Note may be pledged to any Person. This Note may
be assigned or transferred by Maker in connection with any
assignment or transfer by Maker (referred to as the Buyer
under the Asset Purchase Agreement) of the Asset Purchase
Agreement in accordance with Section 6.14(vi) of the Asset
purchase Agreement. All of the provisions of this Note
shall bind and inure to the benefit of Maker, Payee and
their respective successors and permitted assigns.
10.2 The observance of any provision of this
Note may be waived (either generally or in a particular
instance) only with the written consent of the party waiving
compliance. No failure on the part of the Holder to
exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Note shall
operate as a waiver thereof; nor shall any single or partial
exercise by the Holder of any right under this Note preclude
any other or further exercise thereof or the exercise of any
other right. The rights granted to the Holder in this Note
are cumulative and are not exclusive of any other remedies
provided by law. Any term of this Note may be amended only
with the written consent of Maker, Payee and the holders of
the Senior Debt.
10.3 Each of Maker and Payee intend that the
obligations evidenced by this Note conform strictly to all
applicable laws from time to time in effect. All agreements
17
between Maker and Payee, whether now existing or hereafter
created and whether oral or written, are hereby expressly
limited so that in no contingency or event whatsoever,
whether by acceleration of maturity hereof or otherwise,
shall the amount paid or agreed to be paid to Payee, or
collected by Payee, by or on behalf of Maker for the use,
forbearance or detention of the money to be loaned to Maker
hereunder or otherwise, or for the payment or performance of
any covenant or obligation contained herein of Maker to
Payee, or in any other document evidencing, securing or
pertaining to such indebtedness evidenced hereby, exceed the
maximum amount permissible under applicable law. If, under
any circumstances whatsoever, fulfillment of any provision
hereof or of any other document, at the time performance of
such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the
---- -----
obligation to be fulfilled shall be reduced to the limit of
such validity; and if under any circumstances Payee ever
shall receive from or on behalf of Maker an amount deemed
interest, by applicable law, which would exceed the highest
lawful rate, such amount that would be excessive interest
under applicable law shall be applied to the reduction of
Maker's principal amount owing hereunder and not to the
payment of interest, or if such excessive interest exceeds
the unpaid balance of principal and such other indebtedness,
the excess shall be deemed to have been an inadvertent pay-
18
ment and shall be refunded to Maker or to any other Person
making such payment on Maker's behalf.
10.4 Any notice or other communication
required or permitted hereunder shall be in writing and
shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally, telegraphed,
telexed or sent by facsimile transmission or, if mailed,
five days after the date of deposit in the U.S. mails, as
follows:
(a) if to Maker, to:
CAM Investment Management, L.P.
c/o Oak Hill Partners, Inc.
55 East 65th Street
New York, New York 10022
Attention: Glenn R. August
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telecopier: (212) 757-3990
(b) if to Payee, to:
Continental Asset Management Corp.
c/o The Continental Corporation
180 Maiden Lane
New York, New York 10038
Attention: President
Telecopier: (212) 440-3857
19
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: George E.B. Maguire, Esq.
Telecopier: (212) 909-6836
Payee or Maker may by notice given in accordance with this
Section 10.4 to the other parties designate another address
or Person for receipt of notices hereunder.
10.5 The Note shall be governed by and
construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed
entirely within such State.
CAM INVESTMENT MANAGEMENT, L.P.
By: CAM GP, INC.,
Its General Partner
By:
-------------------------------------
Name:
Title:
EXHIBIT E
---------
NEW SUBLEASE TERM SHEET
-----------------------
Space: Current space (entire 10th floor at 180
Maiden Lane, New York, NY)
Term: One year from Closing Date; option to
renew for one additional one-year term
Rent: 1st year: $690,0001/
-
2nd year (if applicable): same
Other: - Access to all amenities of the
building currently or hereafter
available to employees of the Seller
or other tenants of the building
- Buyer shall receive all services
currently or hereafter provided to
the Seller as a tenant of the
building
- Buyer to abide by all terms and
conditions of main lease
- Rent payable monthly in advance
- No assignment or sublease except
together with assignment of Asset
Purchase Agreement (as permitted
thereunder)
- Existing sublease to be cancelled on
the Closing Date
--------------------
1/ Rent to include all real property and similar such
-
taxes, and all building operating expenses, utilities
and electricity, common or public area maintenance
charges, so-called escalation charges, and all
additional rent or similar such rents or charges due
under the main lease.
EXHIBIT F
---------
SERVICES AGREEMENT TERM SHEET
-----------------------------
I. Investment Accounting and Systems
---------------------------------
A. Description Investment accounting for current and
of future Unaffiliated Clients and systems
Services: used to service investment accounting
functions and portfolio management and
evaluation functions, in each case of
the type and in the manner provided to
the Seller prior to the Closing
B. Term: One year from Closing Date; options to
renew for two additional one-year terms
C. Fee: 1st year: $610,000
2nd year (if applicable): $671,000
- Buyer to pay for its own "front end"
systems
- Continental to pay for all PAM
systems and provide use of New York/
Cranberry data communication link
D. Other: - Option to assume Seller's arrangement
with Continental with respect to
maintenance of personal computers,
including previously existing payment
schedules and amounts
- Buyer to pay provider only for actual
services rendered to Buyer
II. Human Resources
---------------
A. Description Human resources services and related
of functions (excluding payroll processing)
Services: of the type and in the manner provided
to the Seller prior to the Closing
B. Term: Six months from Closing; option to renew
for an additional six months (such
option to be exercised within three
months after Closing); option to renew
for one additional one-year term
following initial six-month renewal
period
2
C. Fee: 1st 6 months: $100,000
2nd 6 months (if applicable): $150,000
2nd year (if applicable): $275,000
D. Other: At Buyer's election, (i) Continental
will provide set-up (at Continental's
expense) and payroll processing for the
Buyer (such processing at an additional
charge equal to Continental's cost) or
(ii) Continental will pay the set-up
costs, not to exceed $12,000, of outside
party (or parties) to provide payroll
processing for the Buyer
III. Legal
-----
A. Description Legal services of the type and in the
of manner provided to the Seller prior to
Services: the Closing.
B. Term: Six months; option to renew for an
additional six months (such option to be
exercised within three months after
Closing); option to renew for one
additional one-year term following
initial six-month renewal period
C. Fee: 1st 6 months: $100,000
2nd 6 months (if applicable): $150,000
2nd year (if applicable): $275,000
IV. Insurance and
-------------
Benefits
--------
A. Description At Buyer's option, Continental will
of provide standard commercial "premises"
Services: package covering the business and assets
of the Seller (excluding directors and
officers insurance, fidelity, workers
compensation and other such insurance)
B. Term: One year from Closing Date; option to
renew for one additional one-year term;
Buyer option to terminate upon three
months prior written notice
C. Fee: Buyer to purchase at Continental's costs
(commercial rate less commission)
3
V. Benefits
--------
A. Description Continental to use reasonable best
of efforts to obtain extension of existing
Services: welfare plans to Transferred Employees.
If this can not be done, Continental
will assist in design/establishment of
the Buyer's own plan
B. Term: One year from Closing Date; option to
renew for one additional one-year term;
Buyer option to terminate upon three
months prior written notice
C. Fee: No fee for efforts and assistance to
Buyer. Buyer to pay cost of product
obtained, if any
EXHIBIT G
---------
FORM OF
INDUCEMENT AND NON-COMPETITION AGREEMENT
----------------------------------------
AGREEMENT dated as of __________ __, 1994, among
CAM INVESTMENT MANAGEMENT, L.P., a Delaware limited
partnership (the "Buyer"), THE CONTINENTAL CORPORATION, a
New York corporation ("Continental"), and CONTINENTAL ASSET
MANAGEMENT CORP., a New York corporation and an indirect
wholly-owned subsidiary of Continental (the "Seller").
In accordance with an Asset Purchase Agreement,
dated as of October 13, 1994, among the Buyer, the Seller
and Continental (the "Purchase Agreement"), the Seller
wishes to sell, and the Buyer wishes to purchase, the
Business (as defined below) and the Purchased Assets upon
the terms and subject to the conditions of the Purchase
Agreement.
As a condition to the closing (the "Closing") of
such sale (the "Transaction"), which is occurring on the
date hereof, the Buyer requires that the Seller and
Continental enter into an agreement pursuant to which the
Seller and Continental agree not to engage in the Business
for a period of time.
Capitalized terms used and not defined herein
shall have the same meaning as in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing,
and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, on the
2
terms and subject to the conditions set forth herein, the
parties hereto agree as follows:
1. Covenants of Continental and the Seller.
---------------------------------------
1.1 Covenants Against Competition.
-----------------------------
Continental (for itself and the Seller) acknowledges that
(i) through the Closing, the Seller has been engaged in the
Business for property and casualty insurance companies,
pension funds, corporations and other financial institutions
throughout the United States; (ii) the agreements and
covenants contained in this Agreement are essential to
protect the business and goodwill purchased by the Buyer;
and (iii) the Buyer would not consummate the Transaction but
for such agreements and covenants. The "Business" is the
business of financial asset management, and, more
specifically, the design of investment programs and the
management and supervision of investments in equity, debt
and other financial securities and instruments for insurance
companies, pension funds, corporations and other
institutions. Accordingly, Continental covenants and agrees
on behalf of itself, its direct and indirect subsidiaries,
including, without limitation, the Seller, and other
Affiliates, as follows:
1.1.1 Non-Competition. For a period of
---------------
seven (7) years following the Closing (the "Restricted
Period"), Continental shall not, and shall cause its
subsidiaries and other Affiliates not to, directly or
3
indirectly, (i) engage in the Business for clients other
than the Continental Parties; (ii) acquire ownership of any
shares of capital stock, partnership or other equity
interest in any Person (other than the Buyer or any of its
partners or any of their respective Affiliates that control
the Buyer or any of its partners) engaged in the Business
for clients other than the Continental parties; provided,
however, Continental, its subsidiaries and other Affiliates
may own, directly or indirectly, solely as an investment,
securities of any Person engaged in the Business if neither
Continental nor any of its subsidiaries or other Affiliates
is a controlling person of, or a member of a group which
controls, such person and does not, directly or indirectly,
own 5% or more of any class of securities of such person.
Subject to the Purchase Agreement and any investment
advisory or management Contracts, agreements or other
arrangements between Continental and the Buyer, nothing
herein shall limit the right of Continental to manage its
own financial assets and those of its subsidiaries and other
Affiliates.
1.1.2 Employees of the Buyer. During
----------------------
the Restricted Period, Continental and its subsidiaries and
other Affiliates shall not, without the prior written
consent of the Buyer, directly or indirectly, hire or
solicit any employee of the Buyer or its Affiliates or
encourage any such employee to leave such employment, except
4
any such employee who has been involuntarily terminated by
the Buyer.
1.2 Rights and Remedies Upon Breach. If
-------------------------------
either Continental or the Seller breaches, or threatens to
commit a breach of, any of the provisions of Section 1.1
(the "Restrictive Covenants"), the Buyer shall have the
following rights and remedies, each of which rights and
remedies shall be independent of the others and severally
enforceable, and each of which is in addition to, and not in
lieu of, any other rights and remedies available to the
Buyer under law or in equity:
1.2.1 Specific Performance. The
--------------------
right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent
jurisdiction, it being agreed that any breach of the
Restrictive Covenants would cause irreparable injury to the
Buyer and that money damages would not provide an adequate
remedy to the Buyer.
1.2.2 Accounting. The right and remedy
----------
to require Continental to account for and pay over to the
Buyer, all compensation, profits, monies, accruals,
increments or other benefits derived or received by
Continental and their respective affiliates as the result of
any transactions constituting a breach of the Restrictive
Covenants.
1.3 Blue-Pencilling. If any court
---------------
determines that any of the Restrictive Covenants, or any
5
part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have
the power to reduce the duration or scope of such provision,
as the case may be, and, in its reduced form, such provision
shall then be enforceable.
1.4 Enforceability in Jurisdictions. The
-------------------------------
Buyer and Continental intend to and hereby confer
jurisdiction to enforce the Restrictive Covenants upon the
courts of any jurisdiction within the geographical scope of
such Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable
by reason of the breadth of such scope or otherwise, it is
the intention of the Buyer and Continental that such
determination not bar or in any way affect the Buyer's right
to the relief provided above in the courts of any other
jurisdiction within the geographical scope of such
Covenants, as to breaches of such Covenants in such other
respective jurisdictions, such Covenants as they relate to
each jurisdiction being, for this purpose, severable into
diverse and independent covenants.
2. Miscellaneous.
-------------
2.1 Notices. Any notice or other
-------
communication required or permitted hereunder shall be in
writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid. Any
such notice shall be deemed given when so delivered
6
personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of
deposit in the United States mails, as follows:
(a) if to the Buyer, to:
CAM Investment Management, L.P.
c/o Oak Hill Partners, Inc.
65 East 55th Street
New York, New York 10022
Attention: Glenn R. August
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telecopier: (212) 757-3990
(b) if to the Seller or Continental, to:
The Continental Corporation
180 Maiden Lane
New York, New York 10038
Attention: President
Telecopier: (212) 440-3857
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: George E.B. Maguire, Esq.
Telecopier: (212) 909-6836
Any party may by notice given in accordance with this
Section 2.1 to the other parties designate another address
or Person for receipt of notices hereunder.
2.2 Entire Agreement. This Agreement
----------------
contains the entire agreement among the parties with respect
7
to the subject matter herein, and supersedes all prior
agreements, written or oral, with respect thereto.
2.3 Waivers and Amendments; Non-Contractual
---------------------------------------
Remedies; Preservation of Remedies. This Agreement may be
----------------------------------
amended, superseded, cancelled, renewed or extended, and the
terms hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder
shall act as a waiver thereof. Nor shall any waiver on the
part of any party of any such right, power or privilege, nor
any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. The
rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may
otherwise have at law or in equity. The rights and remedies
of any party based upon, arising out of or otherwise in
respect of any inaccuracy in or breach of any representa-
tion, warranty, covenant or agreement contained in this
Agreement or in any document or other paper delivered
pursuant to this Agreement shall in no way be limited by the
fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach
is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in
this Agreement or in any document or other paper delivered
8
pursuant to this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or
breach. In the event that Continental or any of its
subsidiaries or Affiliates breaches any of its obligations
under this Agreement, Continental shall bear all of the
Buyer's costs in connection with its enforcement of this
Agreement.
2.4 Governing Law. This Agreement shall be
-------------
governed and construed in accordance with the laws of the
State of New York applicable to agreements made and to be
performed entirely within such State.
2.5 Binding Effect; No Assignment. This
-----------------------------
Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal
representatives. This Agreement is not assignable except by
operation of law, except that the Buyer may assign its
rights hereunder to any of its successors, subsidiaries or
Affiliates.
2.6 Variations in Pronouns. All pronouns
----------------------
and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
2.7 Counterparts. This Agreement may be
------------
executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an
original, but all such counterparts shall together consti-
tute one and the same instrument. Each counterpart may
9
consist of a number of copies hereof each signed by less
than all, but together signed by all of the parties hereto.
2.8 Headings. The headings in this
--------
Agreement are for reference only, and shall not affect the
interpretation of this Agreement.
2.9 Interpretation. The parties acknowledge
--------------
and agree that: (i) each party and its counsel reviewed and
negotiated the terms and provisions of this Agreement and
have contributed to its revision; (ii) the rule of
construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the
interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to
all parties hereto, regardless of which party was generally
responsible for the preparation of this Agreement.
2.10 Severability of Provisions.
--------------------------
Continental, on behalf of itself, its subsidiaries and its
other Affiliates (including, without limitation, the
Seller), and the Buyer, on behalf of itself, its
subsidiaries and its other Affiliates, acknowledge and agree
that the Restrictive Covenants are reasonable and valid in
geographical and temporal scope and in all other respects.
If any provision or any portion of any provision of this
Agreement (including, but not limited to, any Restrictive
Covenant or any portion of any Restrictive Covenant), or the
application of any such provision or any portion thereof to
any Person or circumstance, shall be held invalid or
10
unenforceable, the remaining portion of such provision and
the remaining provisions of this Agreement, and the
application of such provision or portion of such provision
as is held invalid or unenforceable to Persons or
circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected hereby. In
the event that any provision of this Agreement is held
invalid, the parties shall equitably adjust the terms hereof
in a manner such that each party receives the economic
benefit of this Agreement for which it bargained.
2.11 Third Party Beneficiaries. This
-------------------------
Agreement does not create, and shall not be construed to
create, any rights enforceable by any Person not a party to
this Agreement.
11
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
BUYER:
CAM INVESTMENT MANAGEMENT, L.P.
By: CAM GP, INC.
Its General Partner
By:
--------------------------------
Name:
Title:
SELLER:
CONTINENTAL ASSET MANAGEMENT CORP.
By:
--------------------------------
Name:
Title:
THE CONTINENTAL CORPORATION
By:
--------------------------------
Name:
Title:
EXHIBIT H
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OPTION AGREEMENT TERM SHEET
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I. OPTION FEATURES
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PARTIES: Continental and each of the
partners of the Buyer.
OPTION: (i) 19.9% of (x) limited
partnership common equity interests
and (y) $4.5 million of 13% PIK
junior subordinated debt (or PIK
senior preferred partnership
interest with a preferred return
accruing at a rate of 13%)
calculated as if Continental
exercised on the Closing Date. The
initial common equity of the
limited partnership will be
$500,000.
TERM: 7 years, beginning on Closing Date.
EXERCISE PRICE: $100,000 plus $900,000 accreting at
a semi-annual compounded rate of
13.0%.
DILUTION: The Option will be diluted by (i)
any dilution incurred by the
original investor group on a pro
rata basis including, but not
limited to, the issuance of
management options and management
equity and (ii) any dilution as a
result of the issuance of equity
for fair market value. The Option
will be entitled to anti-dilution
protection for equity splits and
other similar actions.
II. LIMITED PARTNERSHIP FEATURES1/
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RIGHTS OF FIRST OFFER
AND FIRST REFUSAL: (i) If a partner wishes to
transfer, sell or otherwise dispose
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1/ Notwithstanding any provision set forth in this Term
-
Sheet, any transfer of a partnership interest shall
require the consent, in its sole discretion, of the
General Partner of the Buyer.
2
of all or part of its limited
partnership interest in the Buyer
to any Person (other than an
Affiliate of such Person), such
selling partner shall offer such
interest first, to the General
-----
Partner of the Buyer, and second,
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to each of the other partners on a
pro rata basis.
(ii) If a partner receives a bona
fide offer from a third party to
purchase all or part of its limited
partnership interests in the Buyer,
the General Partner of the Buyer
shall have the right to match such
offer. If the General Partner of
the Buyer does not exercise this
right, the other partners shall, on
a pro rata basis, have the right to
match such offer, so long as all of
the offered partnership interests
are acquired.
DRAG-ALONG RIGHTS: In the event that the General
Partner of the Buyer wishes to
accept a bona fide offer from a
third party offeror for the
purchase of the all of the
partnership interests of the Buyer,
or all or substantially all of the
assets comprising the Business, the
General Partner of the Buyer shall
have the right to require the other
partners of the Buyer to sell their
interests to such offeror at the
same price.
TAG-ALONG RIGHTS: In the event of a sale by any
partner or group of partners of 51%
or more of the partnership
interests (other than to
Affiliates), the other partners,
including Continental, shall have
the right to participate on a pro
rata basis in such sale.
OTHER RIGHTS: If the Buyer is converted from a
limited partnership into a
corporation, the above provisions
will be embodied in a shareholders'
agreement.