Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
BOSTON PRIVATE FINANCIAL HOLDINGS, INC.
AS "BUYER"
SAND HILL ADVISORS, INC.
THE "COMPANY"
AND
THE STOCKHOLDERS OF THE COMPANY IDENTIFIED HEREIN
DATED AS OF JUNE 9, 2000
ASSET PURCHASE AGREEMENT
INDEX
PAGE
SECTION 1. SALE OF THE COMPANY'S ASSETS AND OBLIGATIONS.............................................2
1.2 Purchase Price Due at Closing............................................................3
1.3 Contingent Purchase Price................................................................3
1.4 Time and Place of Closing................................................................7
1.5 Further Assurances.......................................................................7
1.6 Transfer Taxes...........................................................................7
1.7 Price Allocations........................................................................7
SECTION 2. POST-CLOSING TRANSACTIONS................................................................7
2.1 Post-Closing Transactions................................................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE COMPANY................8
3.1 Making of Representations and Warranties.................................................8
3.2 Organization and Qualification of the Company............................................8
3.3 Capitalization; Beneficial Ownership.....................................................8
3.4 Subsidiaries.............................................................................9
3.5 Authority of the Company.................................................................9
3.6 Real and Personal Property..............................................................10
3.7 Assets Under Management.................................................................10
3.8 Financial Statements....................................................................11
3.9 Taxes...................................................................................12
3.10 Collectibility of Accounts Receivable...................................................14
3.11 Absence of Certain Changes..............................................................14
3.12 Ordinary Course.........................................................................16
3.13 Banking Relations.......................................................................16
3.14 Intellectual Property...................................................................16
3.15 Contracts...............................................................................17
3.16 Litigation..............................................................................19
3.17 Compliance with Laws....................................................................19
3.18 Insurance...............................................................................20
3.19 Powers of Attorney......................................................................20
3.20 Finder's Fee............................................................................20
3.21 Business; Registrations.................................................................20
3.22 Corporate Records; Copies of Documents..................................................21
3.23 Transactions with Interested Persons....................................................21
3.24 Employee Benefit Programs...............................................................22
3.25 List of Directors, Officers and Employees...............................................24
3.26 Non-Foreign Status......................................................................25
3.27 Transfer of Shares or Interests.........................................................25
(i)
PAGE
3.28 Stock Repurchase........................................................................25
3.29 Code of Ethics..........................................................................25
3.30 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Representation........................................................25
SECTION 4. SEVERAL REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS..................................25
4.1 Company Shares..........................................................................25
4.2 Authority...............................................................................26
4.3 Ownership of Company Interests..........................................................26
4.4 Finder's Fee............................................................................26
4.5 Investment Advisory Representation......................................................26
4.6 Agreements..............................................................................27
4.7 Employment Data.........................................................................27
4.8 Good Health.............................................................................27
SECTION 5. COVENANTS OF THE SELLERS................................................................27
5.1 Making of Covenants and Agreements......................................................27
5.2 Client Consents.........................................................................27
5.3 Authorizations..........................................................................28
5.4 Authorization from Others...............................................................28
5.5 Conduct of Business.....................................................................28
5.6 Financial Statements....................................................................29
5.7 Preservation of Business and Assets.....................................................29
5.8 Observer Rights and Access..............................................................30
5.9 Notice of Default.......................................................................30
5.10 Consummation of Agreement...............................................................30
5.11 Cooperation of the Sellers..............................................................30
5.12 No Solicitation of Other Offers.........................................................30
5.13 Confidentiality.........................................................................31
5.14 Tax Returns.............................................................................31
5.15 Policies and Procedures.................................................................31
5.16 Subsidiaries; Investments in Other Persons..............................................31
5.17 Company's Capital Stock.................................................................31
5.18 Employee Programs.......................................................................32
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.................................................32
6.1 Making of Representations and Warranties................................................32
6.2 Organization of Buyer...................................................................32
6.3 Authority of Buyer......................................................................32
6.4 Litigation..............................................................................33
6.5 Finder's Fee............................................................................33
6.6 Exchange Act Filings....................................................................33
6.7 Compliance with Laws....................................................................33
(ii)
PAGE
SECTION 7. COVENANTS OF BUYER......................................................................33
7.1 Making of Covenants and Agreement.......................................................33
7.2 Confidentiality.........................................................................33
7.3 Cooperation of Buyer....................................................................34
7.4 Authorizations..........................................................................34
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF BUYER..................................................34
8.1 Litigation; No Opposition...............................................................34
8.2 Representations, Warranties and Covenants...............................................34
8.3 Advisory Contract Consents..............................................................35
8.4 Registration as an Investment Adviser...................................................36
8.5 Other Approvals.........................................................................36
8.6 Employment Agreements...................................................................36
8.7 Non-Competition/Non-Solicitation Agreements.............................................36
8.8 Working Capital and Cash................................................................36
8.9 Delivery................................................................................37
8.10 Material Adverse Change.................................................................38
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE SELLERS................................................38
9.1 No Litigation; No Opposition............................................................38
9.2 Representations, Warranties and Covenants...............................................38
9.3 Advisory Client Consent.................................................................38
9.4 Registration Rights Agreement...........................................................39
9.5 Delivery................................................................................39
SECTION 10. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.............................................39
10.1 Termination.............................................................................39
10.2 Effect of Termination...................................................................40
10.3 Right to Proceed........................................................................40
SECTION 11. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING............................................40
11.1 Survival of Representations, Warranties and Covenants...................................40
11.2 Regulatory Filings......................................................................41
SECTION 12. INDEMNIFICATION.........................................................................41
12.1 Indemnification by the Sellers..........................................................41
12.2 Limitations on Indemnification by the Sellers...........................................41
12.3 Indemnification by the Buyer............................................................42
12.4 Limitation on Indemnification by the Buyer..............................................42
12.5 Notice; Defense of Claims...............................................................42
12.6 Satisfaction of the Sellers' Indemnification Obligations................................43
(iii)
PAGE
SECTION 13. DEFINITIONS.............................................................................44
13.1 Definitions.............................................................................44
SECTION 14. MISCELLANEOUS...........................................................................49
14.1 Fees and Expenses.......................................................................49
14.2 Dispute Resolution......................................................................50
14.3 Waivers.................................................................................50
14.4 Governing Law...........................................................................50
14.5 Notices.................................................................................50
14.6 Entire Agreement........................................................................51
14.7 Assignability; Binding Effect...........................................................51
14.8 Captions and Gender.....................................................................52
14.9 Execution in Counterparts...............................................................52
14.10 Amendments..............................................................................52
14.11 Publicity and Disclosures...............................................................52
14.12 Consent to Jurisdiction.................................................................52
(iv)
EXHIBITS
Exhibit 1.3 -- Sample Payment Calculation
Exhibit 5.2 -- Form of Client Consent
Exhibit 8.6 -- Form of Employment Agreement
Exhibit 8.7 -- Form of Non-Competition/Non-Solicitation Agreement
Exhibit 8.9(f) -- Form of Opinion of Counsel to the Sellers
Exhibit 8.9(g) -- Transferor's Certificate of Non-Foreign Status
Exhibit 9.4 -- Form of Registration Rights Agreement
Exhibit 9.5(f) -- Form of Opinion of Counsel to the Buyer
SCHEDULES
Schedule 1.1(a) -- Transferred Assets
Schedule 1.1(b) -- Assumed Obligations
Schedule 1.1(c) -- Excluded Assets and Excluded Obligations
Schedule 1.7 -- Purchase Price Allocation
Schedule 3.3(a) -- Options; Rights to Purchase
Schedule 3.3(b) -- Company Capitalization; Voting Agreements
Schedule 3.4 -- Subsidiaries
Schedule 3.5 -- Approvals; Waivers
Schedule 3.6(a) -- Real Property
Schedule 3.6(b) -- Personal Property
Schedule 3.7 -- Advisory Contracts; Assets Under Management
Schedule 3.8 -- Financial Statements
Schedule 3.9 -- Taxes
Schedule 3.10 -- Accounts Receivable
Schedule 3.11 -- Adverse Changes
Schedule 3.13 -- Banking Relations
Schedule 3.14 -- Intellectual Property
Schedule 3.15 -- Contracts; Commitments
Schedule 3.18 -- Insurance
Schedule 3.21(a) -- Clients
Schedule 3.21(b) -- Investment Adviser Qualification
Schedule 3.23 -- Related Party Transactions
Schedule 3.24 -- Employee Benefits
Schedule 3.25(a) -- Directors and Officers; Certain Employees
Schedule 3.25(b) -- Employment Agreements
Schedule 3.27 -- Share Transfers
Schedule 3.28 -- Repurchases
Schedule 3.29 -- Trading Violations
Schedule 4.5 -- Charitable Organizations
Schedule 4.7 -- Employment Data
Schedule 5.5 -- Conduct of Business; Exceptions
Schedule 6.3 -- Buyer Approvals; Waivers
(v)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
June 9, 2000, by and among Boston Private Financial Holdings, Inc., a
Massachusetts corporation (the "Buyer"), Sand Hill Advisors, Inc., a California
corporation (the "Company"), and the stockholders of the Company listed on the
signature pages hereto (the "Stockholders" and each individually, a
"Stockholder"). The Company and the Stockholders shall collectively be known as
the "Sellers," and each individually, as a "Seller." All capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in
Section 13.1 hereof.
W I T N E S S E T H
WHEREAS, the Company is engaged in the business of providing investment
management and advisory services to accounts of certain institutional and
individual investors;
WHEREAS, the Stockholders own of record and beneficially all of the
issued and outstanding capital stock of the Company, consisting of One Hundred
Seventy-Four Thousand Two Hundred Thirty (174,230) shares of the Company's
Common Stock;
WHEREAS, the Buyer is seeking to build a financial services business
focused on high net worth individuals and selected institutions in select
regions of the country and believes that the acquisition of the business
conducted by the Company would further its business plan in this regard and
would provide synergies which would benefit both parties to this transaction;
WHEREAS, the parties hereto desire to enter into this agreement
providing for the purchase by the Buyer of the assets and liabilities of the
Company;
WHEREAS, in order to induce the Buyer to enter into this Agreement, and
in order to receive the benefits that will accrue to them if the Buyer purchases
the assets and liabilities described above, the Sellers have agreed to make
certain representations, warranties and covenants as set forth herein; and
WHEREAS, Buyer intends to contribute the assets and liabilities
acquired hereunder to a wholly-owned subsidiary of the Buyer which would
continue the investment management business of the Company.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein and other valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. SALE OF THE COMPANY'S ASSETS AND OBLIGATIONS.
1.1 SALE, TRANSFER AND ASSUMPTION OF ASSETS AND OBLIGATIONS. Effective
upon the satisfaction or waiver of the conditions set forth in Section 8 and 9
hereof and completion of the other actions required pursuant to Section 2.1
hereof:
(a) TRANSFER OF ASSETS. The Company shall sell, assign and
transfer to the Buyer at the Closing in exchange for the consideration described
in Sections 1.2 and 1.3 hereof and the Buyer's assumption of the Assumed
Obligations all of the Company's right, title and interest in and to all of the
Transferred Assets, free and clear of all liens and encumbrances, except as set
forth in Schedule 3.6(b) hereto and minor imperfections of title or
insignificant liens which do not, in the aggregate, detract from the value of
the Transferred Assets, taken as a whole, or interfere with the present or
proposed uses thereof or the business of the Company or, after giving effect to
the Closing, the Buyer.
(b) ASSUMPTION OF OBLIGATIONS. In partial consideration of the
transfer of the Transferred Assets made pursuant to Section 1.1(a), the Buyer
hereby assumes from the Company, and the Company hereby assigns and transfers to
the Buyer, all the Assumed Obligations. The Buyer shall, from and after the
effectiveness of such assignment and assumption, pay, discharge or perform when
due in the ordinary course, all the Assumed Obligations. The parties hereto
shall execute and deliver acceptances and assumptions by the Buyer reasonably
required in connection with all assignments of contracts, agreements,
obligations and leases hereunder.
(c) EXCLUSIONS. Notwithstanding anything herein to the
contrary, this Agreement shall not effect any sale, transfer, assignment, or
assumption of any of the Excluded Assets or Excluded Obligations, each of which
shall remain the rights or obligations, as the case may be, of the Company.
(d) TAX MATTERS. All transfer taxes, fees and duties under
applicable law, if any, incurred in connection with the transfer of assets under
this Agreement shall be borne and paid by the Company, and the Company shall
promptly reimburse the Buyer for any such tax, fee or duty which the Buyer is
required to pay under applicable law.
(e) EXECUTION AND DELIVERY OF OTHER DOCUMENTS. Upon either
party's request, the other party shall execute and deliver any and all
additional documents which may be necessary, appropriate or desirable to further
effectuate or to evidence or perfect the transfer and assignment to the Buyer of
the Transferred Assets and Assumed Obligations.
(f) DOCUMENTATION. At the Closing, the Company shall deliver
to the Buyer all books, records, documents, drawings, papers, tapes, discs and
other tangible media which reflect, embody or otherwise relate to the
Transferred Assets and Assumed Obligations.
2
1.2 PURCHASE PRICE DUE AT CLOSING. The aggregate purchase price for
the Transferred Assets payable at Closing shall be equal to (i) the Initial
Valuation multiplied by (ii) seventy percent (70%) (the "Initial Purchase
Price"). Seventy percent (70%) of the Initial Purchase Price shall be payable
to the Company at Closing in cash and thirty percent (30%) (the "Aggregate
Stock Consideration") of the Initial Purchase Price shall be payable to the
Company at Closing in shares of the Buyer's Common Stock, par value $.01 per
share (the "Common Stock"). The number of shares of Common Stock to be
delivered at Closing (the "Buyer Shares") shall be calculated by dividing the
Aggregate Stock Consideration by the weighted average trading price of the
Common Stock for the thirty (30) trading days immediately prior to (but not
including) the Closing Date (the "Average Trading Price"); provided, however,
that in the event the Average Trading Price is less than $8.50, the Average
Trading Price shall be equal to $8.50, and in the event the Average Trading
Price is greater than $11.50, the Average Trading Price shall be equal to
$11.50; provided, further, that in the event the foregoing calculation
results in any fractional share of Common Stock being payable to the Company
hereunder, the Buyer shall be entitled to pay to the Company cash in lieu of
such fractional share in an amount equal to such fractional share multiplied
by the Average Trading Price. Cash due at the Closing to the Company pursuant
to this Section 1.2(a) shall be payable by wire transfer to an account
specified in writing to the Buyer not less than two (2) days prior to the
Closing and stock certificates representing the Buyer Shares shall be
delivered to the Company at the Closing or as soon thereafter as practicable.
1.3 CONTINGENT PURCHASE PRICE. In addition to the Initial Purchase
Price, the Buyer shall make the contingent purchase price payments (each, a
"Contingent Payment") to the Company specified in this Section 1.3 in the
amounts and at the times set forth below subject in each case to the achievement
of the performance criteria set forth below. Seventy percent (70%) of each
Contingent Payment shall be payable to the Company in cash and thirty percent
(30%) (the "Contingent Stock Consideration") of each Contingent Payment shall be
payable to the Company in shares of Common Stock. The number of shares of Common
Stock (the "Contingent Shares") to be delivered at the time a Contingent Payment
is due (each, a "Contingent Payment Closing Date") shall be calculated by
dividing the Contingent Stock Consideration then due by the weighted average
trading price of the Common Stock for the thirty (30) trading days immediately
prior to (but not including) the Contingent Payment Closing Date (each, a
"Contingent Payment Average Trading Price"); provided, however, that in the
event the foregoing calculation results in any fractional share of Common Stock
being payable to the Company hereunder, the Buyer shall pay to the Company cash
in lieu of such fractional share in an amount equal to such fractional share
multiplied by the respective Contingent Payment Average Trading Price. Cash due
at the Closing to the Company pursuant to this Section 1.3 shall be payable by
wire transfer to an account specified in writing to the Buyer not less than two
(2) days prior to the applicable Contingent Payment Closing Date and stock
certificates representing the Contingent Shares shall be delivered to the
Company on the applicable Contingent Payment Closing Date or as soon thereafter
as practicable. A sample calculation made in accordance with this Section 1.3 is
set forth in EXHIBIT 1.3.
3
(a) On the FIRST anniversary of the Closing, the Buyer
shall pay to the Company on such anniversary a Contingent Payment equal to
seven and one-half percent (7.5%) multiplied by the sum of (i) fifty percent
(50%) of the Revenue Valuation and (ii) fifty percent (50%) of the Pre-Tax
Valuation.
(b) On the SECOND anniversary of the Closing, the Buyer shall
pay to the Company on such anniversary a Contingent Payment equal to seven and
one-half percent (7.5%) multiplied by the sum of (i) fifty percent (50%) of the
Revenue Valuation and (ii) fifty percent (50%) of the Pre-Tax Valuation.
(c) On the THIRD anniversary of the Closing, the Buyer shall
pay to the Company on such anniversary a Contingent Payment equal to seven and
one-half percent (7.5%) multiplied by the sum of (i) fifty percent (50%) of the
Revenue Valuation and (ii) fifty percent (50%) of the Pre-Tax Valuation.
(d) On the FOURTH anniversary of the Closing, the Buyer shall
pay to the Company on such anniversary a Contingent Payment equal to seven and
one-half percent (7.5%) multiplied by the sum of (i) fifty percent (50%) of the
Revenue Valuation and (ii) fifty percent (50%) of the Pre-Tax Valuation.
(e) For purposes of this Section 1.3:
(i) "ACQUIRED BUSINESS" shall mean the business of
providing investment management and advisory services as conducted by
the Company on the date hereof and to be conducted by a subsidiary of
the Buyer after the Closing.
(ii) "ANNUAL PRE-TAX GROWTH RATE" shall mean the
percentage yielded by dividing (x) the Pre-Tax Income for the most
recently completed Measurement Period less the Pre-Tax Income for the
Measurement Period immediately preceding such Measurement Period, by
(y) the Pre-Tax Income for the Measurement Period immediately preceding
the most recently completed Measurement Period.
(iii) "BASE OPERATING EXPENSES" shall be equal to
$2,488,246.
(iv) "BASE REVENUE RUN RATE" shall be equal to the
Company's annualized total revenue run rate at June 30, 2000
(calculated using the total amounts which would be payable to the
Company over a one-year period based on the Company's assets under
management at the close of business on June 30, 2000 and the fee
schedules set forth in all investment management, advisory and
subadvisory agreements in effect at the close of business on June 30,
2000).
(v) "COMPOUNDED PRE-TAX GROWTH RATE" shall mean, with
respect to each Measurement Period, the compound annual growth rate at
which Pre-Tax Income has grown from June 30, 2000 through the end of
such Measurement Period (assuming that Pre-Tax Income at June 30, 2000
is equal to the Pre-Tax Run Rate).
4
(vi) "COMPOUNDED REVENUE GROWTH RATE" shall mean,
with respect to each Measurement Period, the compound annual growth
rate at which Revenue has grown from June 30, 2000 through the end of
such Measurement Period (assuming that Revenue at June 30, 2000 is
equal to the Base Revenue Run Rate).
(vii) "INITIAL VALUATION" shall be equal to eight (8)
times the Pre-Tax Run Rate at June 30, 2000; provided, however, that
if, as of the Closing, the Closing Date Fees constitute less than
ninety-five percent (95%) of the Base Fees, then the Initial Valuation
shall be equal to the product of (A) eight (8) times the Pre-Tax Run
Rate at June 30, 2000 multiplied by (B) the quotient determined by
dividing the Closing Date Fees by the Base Fees.
(viii) "MEASUREMENT PERIOD" shall mean, as of any
anniversary of the Closing, the one-year period commencing on July 1st
of the prior calendar year and ending on June 30th of the current
calendar year.
(ix) "OPERATING EXPENSES" shall, with respect to any
Measurement Period, mean the operating expenses of the Acquired
Business for such Measurement Period as determined in accordance with
GAAP; provided, however, that it shall exclude any expenses related to
the transactions to occur between the Buyer and the Company at Closing
(including, without limitation, goodwill amortization expense) and any
capital expenses authorized by the board of directors of the Acquired
Business and approved by Buyer's Chief Executive Officer as a capital
operating expense to be excluded for purposes of the calculation set
forth in this definition.
(x) "PRE-TAX INCOME" shall, with respect to any
Measurement Period, be equal to Revenue less (A) Operating Expenses and
(B) an amount equal to Reserved Percentage (as defined below)
multiplied by the positive difference between (x) Revenue and (y)
Operating Expenses; provided, however, that for the Measurement Period
preceding the Closing, "Pre-Tax Income" shall be equal to Pre-Tax Run
Rate. For purposes of the foregoing, the Reserved Percentage shall be
equal to (i) twenty percent (20%) in the event the Annual Pre-Tax
Growth Rate for such Measurement Period is less than 15%, (ii)
twenty-five percent (25%) in the event the Annual Pre-Tax Growth Rate
for such Measurement Period is greater than or equal to 15% and less
than 25% or (iii) thirty percent (30%) in the event the Annual Pre-Tax
Growth Rate for such Measurement Period is greater than or equal to
25%; provided, however, that the Reserved Percentage with respect to
any such Measurement Period may be reduced by the Board of Directors of
the New Subsidiary in its sole discretion.
(xi) "PRE-TAX RUN RATE" shall be equal to the Base
Revenue Run Rate less (A) the Base Operating Expenses and (B) an amount
equal to twenty percent (20%) multiplied by the positive difference
between (x) the Base Run Rate and (y) the Base Operating Expenses.
5
(xii) "PRE-TAX VALUATION" shall, for purposes of
calculating any Contingent Payment, be equal to:
(A) IF the Compounded Pre-Tax Growth
Rate for the most recently completed
Measurement Period was less than
10%, eight (8) times the Pre-Tax
Income for the most recently
completed Measurement Period;
(B) IF the Compounded Pre-Tax Growth
Rate for the most recently completed
Measurement Period was equal to or
greater than 10% and less than or
equal to 15%, nine (9) times the
Pre-Tax Income for the most recently
completed Measurement Period; or
(C) IF the Compounded Pre-Tax Growth
Rate for the most recently completed
Measurement Period was greater than
15%, ten (10) times the Pre-Tax
Income for the most recently
completed Measurement Period.
(xiii) "REVENUE" shall, with respect to any
Measurement Period, mean the total revenue of the Acquired Business for
such Measurement Period as determined in accordance with GAAP;
provided, however, that for the Measurement Period preceding the
Closing, "Revenue" shall be equal to Base Revenue Run Rate.
(xiv) "REVENUE VALUATION" shall, for purposes of
calculating any Contingent Payment, be equal to:
(A) IF the Compounded Revenue Growth
Rate for the most recently completed
Measurement Period was less than
10%, two and seven-tenths (2.7)
times the Revenue for the most
recently completed Measurement
Period;
(B) IF the Compounded Revenue Growth
Rate for the most recently completed
Measurement Period was equal to or
greater than 10% and less than or
equal to 15%, three (3) times the
Revenue for the most recently
completed Measurement Period; or
(C) IF the Compounded Revenue Growth
Rate for the most recently completed
Measurement Period was greater than
15%, three and thirty-two one
hundredths (3.32) times the Revenue
for the most recently completed
Measurement Period.
6
A sample calculation of the payments contemplated by Sections 1.2 and
1.3 is attached hereto as EXHIBIT 1.3.
1.4 TIME AND PLACE OF CLOSING. The closing of the purchase and sale
provided for in this Agreement (herein called the "Closing") shall be held at
the offices of ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP at Exchange Place, Boston,
Massachusetts at 10:00 a.m. local time on the closing date, which shall be the
later of (a) August 22, 2000, or (b) five (5) business days after the
fulfillment or waiver of each of the conditions set forth in Sections 8 (other
than Section 8.9) and 9 (other than Section 9.5) hereof or at such other place,
or an earlier or later date or time as may be mutually agreed upon by the Buyer
and the Company.
1.5 FURTHER ASSURANCES. The Buyer and the Company shall, and the
Stockholders shall use their best efforts to cause the Company to, from time to
time after the Closing, at the request of the other party and without further
consideration, execute and deliver further instruments of transfer, assignment
and assumption and take such other action as the other party may reasonably
require to more effectively transfer and assign to, and vest in, the Buyer the
Transferred Assets and the Assumed Obligations and all rights thereto and
obligations thereof, and to fully implement the provisions of this Agreement.
1.6 TRANSFER TAXES. All transfer taxes, fees and duties under
applicable law incurred in connection with the sale and transfer of the
Transferred Assets under this Agreement will be borne and paid by the Company,
and the Company shall promptly reimburse the Buyer for any such tax, fee or duty
which any of them is required to pay under applicable law.
1.7 PRICE ALLOCATIONS. The Initial Purchase Price and each Contingent
Payment shall be allocated among the classes of the Transferred Assets and the
covenants contained in the Employment Agreements and the
Non-Competition/Non-Solicitation Agreements in accordance with SCHEDULE 1.7
hereto. The Buyer and the Company shall cooperate with each other in their
preparation and filing of IRS Form 8594 in connection with such allocation. The
Buyer and the Company shall report such tax position, and cause their affiliates
to report such tax position (whether in audits, tax returns or otherwise)
consistently with such allocation.
SECTION 2. POST-CLOSING TRANSACTIONS.
2.1 POST-CLOSING TRANSACTIONS. In connection with or immediately
following the Closing, the Buyer shall transfer all of the Transferred Assets
and Assumed Obligations to a newly organized, wholly-owned corporate subsidiary
of the Buyer (the "New Subsidiary"). In connection therewith, the size of the
Board of Directors of the New Subsidiary shall be set at five (5) and Buyer's
Chief Executive Officer shall be appointed a director and elected chairman
thereof together with four (4) representatives of the management of the New
Subsidiary.
7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH
RESPECT TO THE COMPANY
3.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to the Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and each of the Stockholders jointly and
severally hereby make to the Buyer the representations and warranties contained
in this Section 3; provided, however, that the Company jointly with each of the
Stockholders, but each of the Stockholders severally and not jointly, makes the
representations set forth in Sections 3.3(b) and 3.27 hereof.
3.2 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California, with full corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is currently
conducted. The copies of the Company's Articles of Incorporation, as amended to
date (the "Articles of Incorporation"), certified by the Secretary of State of
the State of California, and of the Company's By-laws, as amended to date,
certified by the Company's Secretary, and heretofore delivered to Buyer's
counsel, are complete and correct, and no amendments thereto are pending. The
Company is not in violation of any term of its Articles of Incorporation or
By-laws. The Company is duly qualified to do business as a foreign corporation
under the laws of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such qualification except where
the failure to be so licensed or qualified could not reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
properties, assets, liabilities, business or operation of the Company or the
Buyer.
3.3 CAPITALIZATION; BENEFICIAL OWNERSHIP.
(a) The authorized capital stock of the Company consists only
of seven hundred fifty thousand (750,000) shares of Common Stock, of which one
hundred seventy-four thousand two hundred thirty (174,230) shares are duly and
validly authorized, issued, outstanding, fully paid and non-assessable and of
which five hundred seventy-five thousand seven hundred seventy (575,770) shares
are authorized but unissued. Except as set forth on SCHEDULE 3.3(a), there are
no outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of the
Company. None of the Company's capital stock has been issued in violation of any
federal or state law.
(b) Each of the Stockholders owns beneficially and of record
the shares of the Company's capital stock set forth opposite such Stockholder's
name on SCHEDULE 3.3(b) hereto, free and clear of any Claims. The Stockholders
are the only beneficial or record holders of the Company's capital stock, and
the capital stock shown on SCHEDULE 3.3(b) are the only shares of capital stock
of the Company held by each Stockholder or with respect to which such
Stockholder has any rights. Except as set forth in SCHEDULE 3.3(b) attached
hereto, there are no voting trusts, voting agreements, proxies or other
agreements, instruments or
8
undertakings with respect to the voting of the Company's capital stock to which
the Company or any of the Stockholders is a party.
3.4 SUBSIDIARIES. Except as set forth on SCHEDULE 3.4 hereto, the
Company does not have, nor has it ever had any, subsidiaries or investments in
any other Person.
3.5 AUTHORITY OF THE COMPANY. The Company has full right, authority and
power to enter into this Agreement and each agreement, document and instrument
to be executed and delivered by the Company pursuant to, or as contemplated by,
this Agreement and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance by the Company of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action of the Company and the Stockholders, and no
other action on the part of the Company or the Stockholders is required in
connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to, or as contemplated by, this Agreement
constitutes, or when executed and delivered will constitute, valid and binding
obligations of the Company enforceable in accordance with their terms. The
execution, delivery and performance by the Company of this Agreement and each
such other agreement, document and instrument:
(i) does not and will not violate any provision of
the Articles of Incorporation or By-laws of the Company, each as
amended to date;
(ii) does not and will not violate any laws of the
United States, or any state or other jurisdiction (domestic or foreign)
applicable to the Company or require the Company to obtain any
approval, consent or waiver of, or make any filing with, any person or
entity (governmental or otherwise) that has not been obtained or made,
except as specifically identified on SCHEDULE 3.5 hereto; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of, any agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Company is a party or by which the property of the Company is bound or
affected, or result in the creation or imposition of any mortgage,
pledge, lien, security interest or other charge or encumbrance on any
of the Company's assets or any Persons's interest in the Company;
provided, however, that the representations in clauses (ii) and (iii)
shall not apply to investment advisory agreements to the extent that
receipt of Consents from parties to such agreements are contemplated by
Section 5.2 hereof and that the representations in clause (iii) shall
not apply to any agreement listed on SCHEDULE 3.5 hereto.
9
3.6 REAL AND PERSONAL PROPERTY.
(a) REAL PROPERTY. All of the real property owned or leased by
the Company is identified on SCHEDULE 3.6(a) (herein referred to as the "Owned
Real Property" or the "Leased Real Property," as the case may be, or
collectively as the "Real Property").
(i) OWNED REAL PROPERTY. The Company does not own
any real property.
(ii) STATUS OF LEASES. All leases of Leased Real
Property by the Company are identified on SCHEDULE 3.6(a), and true and
complete copies thereof have been delivered to the Buyer. Each of said
leases has been duly authorized and executed by the parties thereto and
is in full force and effect. The Company is not in material default
under any of said leases, nor has any event occurred which, with notice
or the passage of time, or both, would give rise to such a material
default. To each Seller's knowledge, the other party to each of said
leases is not in material default under any of said leases and there is
no event which, with notice or the passage of time, or both, would give
rise to such a material default. Except as set forth on SCHEDULE
3.6(a), after giving effect to the Closing, each lease identified on
SCHEDULE 3.6(a) will be valid and effective in accordance with its
terms, with the Buyer having succeeded to all the rights and
obligations of the Company thereunder.
(b) PERSONAL PROPERTY. Attached hereto as SCHEDULE 3.6(b) is a
list of all the tangible assets of the Company (excluding each asset with a
value of less than $1,000) and Intellectual Property (as such term is defined in
Section 3.14 hereof) and including as part of such Schedule, the tax basis of
each such asset. Except as set forth on SCHEDULE 3.6(b) hereto, as of the date
hereof, the Company owns all its assets free and clear of any Claims except for
minor imperfections of title or insignificant liens which do not, in the
aggregate, detract from the value of such assets, taken as a whole, or interfere
with the present or proposed uses thereof or the business of the Company or,
after giving effect to the Closing, the Buyer. All the assets listed on SCHEDULE
1.1(a) hereto are being transferred to the Buyer and, after giving effect to
such transfer, the Buyer will own all such assets free and clear of any Claims
(other than those incurred by Buyer) except those set forth on SCHEDULE 3.6(b)
hereto and minor imperfections of title or insignificant liens which do not, in
the aggregate, detract from the value of such assets, taken as a whole, or
interfere with the present or proposed uses thereof. The assets listed on
SCHEDULE 3.6(b) hereto include all the material assets used in the conduct of
the business of the Company as currently conducted.
3.7 ASSETS UNDER MANAGEMENT.
(a) The aggregate assets under management by the Company as of
March 31, 2000, are accurately set forth in SCHEDULE 3.7 hereto. In addition,
set forth in SCHEDULE 3.7 is a list as of March 31, 2000, of all investment
management, advisory or sub-advisory contracts setting forth the name of the
client under each such contract, the amount of assets under management with
respect to each such contract, the fee schedule in effect with respect to
10
each such contract, the consent required for the assignment of each such
contract other than those that by their terms terminate upon assignment (which
are so identified), and the country, if other than the United States of America,
of which the client is a domiciliary. Except as set forth on SCHEDULE 3.7, there
have not been any material fee adjustments among such contracts in the aggregate
or material adjustments in the amount of assets under management in the
aggregate (excluding adjustments to reflect market movement) since March 31,
2000, and none are presently proposed to take place. Except as set forth in
SCHEDULE 3.7 and expressly described thereon, there are no contracts,
arrangements or understandings pursuant to which the Company has undertaken or
agreed to cap, waive or reimburse any or all fees or charges payable by any of
the clients set forth in SCHEDULE 3.7 or pursuant to any of the contracts set
forth in SCHEDULE 3.7. Except as is set forth in SCHEDULE 3.7 hereto, no client
of the Company has expressed an intention to terminate or reduce its investment
relationship with the Company (or, after giving effect to the Closing, the
Buyer), or adjust the fee schedule with respect to any contract in a manner
which would reduce the fee to the Company (or, after giving effect to the
Closing, the fee to the Buyer) and no fact is known to any Seller with respect
to any relationship with a client of the Company that adversely affects or would
adversely affect any of the contracts set forth in SCHEDULE 3.7.
(b) Set forth in SCHEDULE 3.7 is a list of each client with
which the Company has a fee based on performance or otherwise provides for
compensation on the basis of a share of capital gains upon or capital
appreciation of the funds (or any portion thereof) in an account of any client,
together with a complete description of such fee or compensation.
(c) Each account to which the Company provides Investment
Management Services that is (i) an employee benefit plan, as defined in Section
3(3) of ERISA that is subject to Title I of ERISA; (ii) a person acting on
behalf of such a plan; or (iii) an entity whose assets include the assets of
such a plan, within the meaning of ERISA and applicable regulations (hereinafter
referred to as an "ERISA Client"), have been managed by the Company such that
the Company in the exercise of such management is in compliance in all material
respects with the applicable requirements of ERISA. SCHEDULE 3.7 identifies each
Client that is an ERISA Client with an appropriate footnote.
3.8 FINANCIAL STATEMENTS.
(a) The Company has delivered to the Buyer the following
financial statements, copies of which are attached hereto as SCHEDULE 3.8:
(i) unaudited balance sheets of the Company at
December 31, 1997, December 31, 1998 and December 31, 1999, and
unaudited statements of income and stockholders' equity and cash flows
for each of the three (3) years then ended, in each case certified by
the Company's chief financial officer. The unaudited balance sheet of
the Company at December 31, 1999 (including the notes thereto) is
referred to hereinafter as the "Base Balance Sheet."
11
(ii) An unaudited balance sheet of the Company at
March 31, 2000, and statements of income and stockholders' equity and
cash flows for the quarter then ended, in each case certified by the
Company's chief financial officer.
Said financial statements have been prepared in accordance with GAAP
using the accrual method of accounting, applied consistently during the periods
covered thereby (except that the Company's unaudited financial statements do not
include footnote disclosure), are complete and correct and present fairly the
financial condition of the Company at the dates of said statements and the
results of its operations for the periods covered thereby.
(b) As of the date of the Base Balance Sheet, the Company did
not have any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, liabilities for taxes due or then accrued or to become due, or
contingent or potential liabilities relating to activities of the Company or the
conduct of its businesses prior to the date of the Base Balance Sheet regardless
of whether claims in respect thereof had been asserted as of such date), except
liabilities stated or adequately reserved against on the Base Balance Sheet, or
reflected in Schedules furnished to the Buyer hereunder as of the date hereof.
(c) As of the date hereof, the Company does not have and will
not have any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including, without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of the Company or the
conduct of its business prior to the date hereof or the Closing, as the case may
be, regardless of whether claims in respect thereof had been asserted as of such
date), except: (i) liabilities stated or adequately reserved against on the Base
Balance Sheet or the notes thereto, (ii) liabilities reflected in Schedules
furnished to the Buyer hereunder on the date hereof, (iii) immaterial
liabilities incurred after the date of the unaudited balance sheet of the
Company at March 31, 2000 (a copy of which is attached hereto as part of
SCHEDULE 3.8) in the ordinary course of business of the Company consistent with
the terms of this Agreement, or (iv) liabilities for Taxes (as such term is
defined in Section 3.9 hereof) incurred after the date of the unaudited balance
sheet of the Company at March 31, 2000 (a copy of which is attached hereto as
part of SCHEDULE 3.8) in the ordinary course of business of the Company.
3.9 TAXES.
(a) Except as set forth on SCHEDULE 3.9 hereto, the Company
has paid or caused to be paid all federal, material state, material local,
foreign, and other material taxes, including, without limitation, income taxes,
estimated taxes, alternative minimum taxes, franchise taxes, capital stock
taxes, employment and payroll-related taxes, withholding taxes, and transfer
taxes, whether or not measured in whole or in part by net income, and all
deficiencies, or other additions to tax, interest, fines and penalties owed by
it (collectively, "Taxes"), required to be paid by it, whether disputed or not
(except that disputed Taxes have
12
been paid only to the extent required pending resolution of that dispute, and
the remaining amount of the disputed Taxes has been reserved for in a bank
account of the Company and are not included in the Transferred Assets). Except
as set forth on SCHEDULE 3.9 hereto, as of the date of this Agreement, there are
no disputed Taxes. The unpaid taxes of the Company (i) did not, as of March 31,
2000, exceed the reserve for tax liability (as opposed to the reserve for
deferred Taxes established to reflect timing differences between book and tax
income) set forth in the unaudited balance sheet of the Company at March 31,
2000 (as opposed to in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the date hereof and the date of the
Closing in accordance with the past custom and practice of the Company in filing
their Tax Returns.
(b) The Company has, in accordance with applicable law, filed
all federal, material state, material local and foreign tax returns required to
be filed by it, and all such returns correctly and accurately set forth the
amount of any Taxes relating to the applicable period. A list of all federal,
state, local and foreign income tax returns filed with respect to the Company
for taxable periods ended on or after December 31, 1993, is set forth in
SCHEDULE 3.9 attached hereto, and said Schedule indicates those returns that
have been audited or currently are the subject of an audit. For each taxable
period of the Company ended on or after December 31, 1993, the Company has
delivered to the Buyer correct and complete copies of all federal, state, local
and foreign income tax returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company.
(c) Except as set forth on SCHEDULE 3.9 hereto, neither the
IRS nor any other governmental authority is now asserting or, to each Seller's
knowledge, threatening to assert against the Company any deficiency or claim for
additional Taxes. No claim has ever been made by an authority in a jurisdiction
where the Company does not file reports and returns that the Company is or may
be subject to taxation by that jurisdiction. There are no security interests on
any of the assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Taxes. The Company has not ever entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code of 1986,
as amended (the "Code").
(d) Except as set forth in SCHEDULE 3.9 attached hereto, there
has not been any audit of any tax return filed by the Company, no such audit is
in progress, and the Company has not been notified by any tax authority that any
such audit is contemplated or pending. Except as set forth in SCHEDULE 3.9, no
extension of time with respect to any date on which a tax return was or is to be
filed by the Company is in force, and no waiver or agreement by the Company is
in force for the extension of time for the assessment or payment of any Taxes.
(e) The Company has not ever been (or has ever had any
liability for unpaid Taxes because it once was) a partner of an "affiliated
group" (as defined in Section 1504(a) of the Code). Except as set forth in
SCHEDULE 3.9, the Company has not ever filed, or has ever been required to file,
a consolidated, combined or unitary tax return with any other entity. Except as
set forth in SCHEDULE 3.9 attached hereto, the Company is not is a party to any
tax sharing agreement.
13
(f) None of the Company's payroll, property, or receipts, or
other factors used in a particular state's apportionment or allocation formula
results in an apportionment or allocation of business income to any state,
commonwealth or other jurisdiction other than the State of California, and the
Company does not have any non-business income that is allocated, apportioned or
otherwise sourced to any state, commonwealth or other jurisdiction than the
State of California.
3.10 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the accounts
receivable of the Company shown or reflected on the Company's balance sheet as
of March 31, 2000, included as part of SCHEDULE 3.8, or existing at the date
this representation is given (less the reserve for bad debts set forth on the
Company's balance sheet as of March 31, 2000 included as part of SCHEDULE 3.8,
as adjusted since such date as set forth on SCHEDULE 3.10 hereof), are valid and
enforceable claims, fully collectible and subject to no set off or counterclaim.
The Company does not have any accounts or loans receivable from any person, firm
or corporation or other entity which is affiliated with the Company or from any
director, officer, stockholder or employee of the Company except as disclosed on
SCHEDULE 3.10 hereto.
3.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3.11
attached hereto or as expressly provided for herein, since the date of the Base
Balance Sheet there has not been:
(a) Any change in the condition (financial or otherwise),
properties, assets, liabilities, business, operations or prospects of the
Company, which change by itself or in conjunction with all other such changes,
whether or not arising in the ordinary course of business, could reasonably be
expected to have a material adverse effect on the Company;
(b) Any amendment or termination or, to each Seller's
knowledge, proposed amendment or termination, whether written or oral, of any
agreement listed in SCHEDULE 3.7 hereto;
(c) Any obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown (including, without limitation (i) liabilities for Taxes due or to
become due, or (ii) contingent or potential liabilities relating to services
provided by the Company or the conduct of the business of the Company since the
date of the Base Balance Sheet regardless of whether claims in respect thereof
have been asserted, or (iii) contingent liabilities incurred by the Company as
guarantor or otherwise with respect to the obligations of the Company or
others), incurred by the Company other than obligations and liabilities incurred
in the ordinary course of business consistent with the terms of this Agreement
(it being understood that liability claims in respect of services provided shall
not be deemed to be incurred in the ordinary course of business);
(d) Any mortgage, encumbrance, pledge or lien placed on any of
the properties or assets of the Company;
14
(e) Any cancellation of any material debt or claim owing to,
or waiver of any material right of, the Company;
(f) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business consistent with past practices;
(g) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company;
(h) Any declaration, setting aside or payment of any dividend
or distribution by the Company, or the making of any other distribution in
respect of the capital stock of the Company, or any direct or indirect
redemption, purchase or other acquisition by the Company of its own capital
stock, respectively;
(i) Any change in the compensation payable or to become
payable by the Company to any of its officers, employees, agents or independent
contractors other than normal increases in accordance with the Company's usual
practices, or any bonus payment or arrangement made to or with any of such
officers, employees, agents or independent contractors;
(j) Any change in the identities, officers or duties of the
officers or management of the Company;
(k) Any payment or discharge of a material lien or liability
of the Company other than in the ordinary course of business consistent with the
past practices of the Company;
(l) Any obligation or liability incurred by the Company to any
of its officers, directors, stockholders or employees, or any loans or advances
made by the Company to any of its officers, directors, stockholders or
employees, except normal compensation and expense allowances payable to officers
or employees in the ordinary course of business consistent with past practices;
(m) Any change in accounting methods or practices, or billing
or collection policies used by the Company;
(n) Any other transaction entered into by the Company other
than transactions in the ordinary course of business consistent with past
practices; or
(o) Any agreement or understanding, whether in writing or
otherwise, for the Company to take any of the actions specified in paragraphs
(a) through (n) above, except as specifically contemplated hereby.
15
3.12 ORDINARY COURSE. Except as specifically contemplated by this
Agreement, since the date of the Base Balance Sheet, other than with respect to
transactions specifically contemplated herein, the Company has conducted its
business only in the ordinary course and consistently in all material respects
with its prior practices.
3.13 BANKING RELATIONS. All of the arrangements which the Company has
with any banking institution are, in all material aspects, completely and
accurately summarized in SCHEDULE 3.13 attached hereto, indicating with respect
to each of such arrangements the type of arrangement maintained (such as
checking account, borrowing arrangements, etc.) and the person or persons
authorized in respect thereof.
3.14 INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 3.14, the Company has
exclusive ownership of, or exclusive license to use, all material patent,
copyright, trade secret, trademark, trade name, service ▇▇▇▇, formulas, designs,
inventions or other proprietary rights (collectively, "Intellectual Property")
used or to be used in the business of the Company as presently conducted. All of
the rights of the Company in such Intellectual Property are freely transferable.
There are no claims or demands of any other Person pertaining to any of such
Intellectual Property and no proceedings have been instituted, or are pending
or, to each Seller's knowledge, threatened, which challenge the rights of the
Company in respect thereof. The Company has the right to use, free and clear of
any claims or rights of other Person, all customer lists (subject to applicable
confidentiality restrictions), investment or other processes, computer software,
systems, data compilations, research results and other information required for
or incident to its services or its business as presently conducted.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or used or to be used by the Company in, and material
to, its businesses as presently conducted and all other items of Intellectual
Property which are material to the business or operations of the Company are
listed in SCHEDULE 3.14.
(c) All licenses or other agreements under which the Company
is granted rights in items of Intellectual Property which are material to the
business or operations of the Company are listed in SCHEDULE 3.14. All said
licenses or other agreements are in full force and effect, there is no material
default by any party thereto, and, except as set forth on SCHEDULE 3.14, all of
the rights of the Company thereunder are freely assignable. To each Seller's
knowledge, the licensors under said licenses and other agreements have and had
all requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided to the Buyer.
(d) The Company has not granted rights to others in
Intellectual Property owned or licensed by the Company.
16
(e) The Company has taken all steps required in accordance
with sound business practice to establish and preserve its ownership of all
Intellectual Property rights with respect to its services and rights in and to
other Intellectual Property. Except as set forth in SCHEDULE 3.14 hereto, the
Company has required all employees having access to valuable proprietary or
non-public information of the Company to execute agreements under which such
employees are required to maintain the confidentiality of all proprietary or
confidential information of the Company. The Company has not made any of such
information available to any person other than employees of the Company except
pursuant to written agreements requiring the recipients to maintain the
confidentiality of such information and appropriately restricting the use
thereof. The Company has no knowledge of any infringement by others of any
Intellectual Property rights of the Company.
(f) The present and contemplated business, activities and
products of the Company do not infringe any rights of any other person in
Intellectual Property. No proceeding charging the Company with infringement of
any Intellectual Property of any other person or entity has been filed or, to
each Seller's knowledge, is threatened to be filed. The Company is not making
unauthorized use of any confidential information or trade secrets of any person,
including without limitation, any former employer of any past or present
employee of the Company. Except as set forth in SCHEDULE 3.14, neither the
Company nor, to each Seller's knowledge, any of the Company's employees have any
agreements or arrangements with any persons other than the Company related to
confidential information or trade secrets of such persons or restricting any
such employee's ability to engage in business activities of any nature. The
activities of the Company's employees on behalf of the Company do not violate
any such agreements or arrangements known to the Company.
3.15 CONTRACTS. Except for contracts, commitments, plans, agreements
and licenses expressly contemplated hereby or described in SCHEDULE 3.6(A),
SCHEDULE 3.7, SCHEDULE 3.14, SCHEDULE 3.15 or SCHEDULE 3.24 attached hereto
(true and complete copies of which have been delivered to the Buyer), the
Company is not a party to or subject to:
(a) any investment management or investment advisory or
sub-advisory contract or any other contract for the provision of investment
management or other similar services;
(b) any plan or contract providing for bonuses, pensions,
options, stock (or beneficial interest) purchases (or other securities or
phantom equity purchases), deferred compensation, retirement payments, profit
sharing, or the like;
(c) any employment contract or contract for services which is
not terminable at will by the Company without liability for any penalty or
severance payment (except for regular payments in arrears for services rendered
under contracts which require payment for services rendered to the date of such
termination);
17
(d) any contract or agreement for the purchase of any assets,
material or equipment except purchase orders in the ordinary course for less
than $10,000 each, such orders not exceeding $50,000 in the aggregate;
(e) any other contracts or agreements creating any obligations
of the Company of $25,000 or more with respect to any such contract or agreement
not specifically disclosed elsewhere under this Agreement;
(f) any contract or agreement not made in the ordinary course
of business (including, without limitation, any contract for the sale of all or
any material portion of the assets of the Company or any contract for the
purchase of all or any material portion of the assets of any other entity (other
than the agreements contemplated by this Agreement));
(g) any contract with any solicitor or sales agent;
(h) any contract containing covenants limiting the freedom of
the Company (or its affiliates) to compete in any line of business or with any
person or entity;
(i) any license agreement (as licensor or licensee) other than
readily available, "off-the-shelf" software licenses;
(j) any agreement providing for the borrowing or lending of
money, and the Company does not have any obligations: (i) for borrowed money,
(ii) evidenced by bonds, debentures, notes or similar instruments, (iii) to pay
the deferred purchase price of property or services, (iv) under leases that
would, in accordance with generally accepted accounting principles, appear on
the balance sheet of the lessee as a liability, (v) secured by a lien, (vi) in
respect of letters of credit, or bankers acceptances, contingent or otherwise,
or (vii) in respect of any guaranty or endorsement or other obligations to be
liable for the debts of another person or entity; or
(k) any other material contract or agreement to which the
Company is a party or by which either of them is bound.
Each of the contracts described in SCHEDULE 3.6(a), SCHEDULE 3.7,
SCHEDULE 3.14, SCHEDULE 3.15 or SCHEDULE 3.24 attached hereto is valid and
effective in accordance with its respective terms, and there is not, under any
such contract, an existing material breach or event by the Company or, to each
Seller's knowledge, other parties thereto which, with the giving of notice or
the lapse of time or both, would become such a breach. The Company has complied
and is in compliance with the client's guidelines and restrictions set forth in
any contract described in SCHEDULE 3.7, including, without limitation, any
limitation set forth in the applicable prospectus, offering memorandum or
marketing material for a collective investment vehicle or governing documents
for any client. In the event the consents set forth on SCHEDULE 3.5 and SCHEDULE
3.7 are obtained, and after giving effect to the Closing, each such contract
will remain valid and effective in accordance with its respective terms, and the
Buyer will be entitled to all rights and remedies thereunder to which the
Company is entitled on the
18
date hereof, or such contract will have been replaced by a new contract with the
same party or parties on terms at least as favorable to the Buyer as the terms
of the present contract are to the Company. The Company is not bound by any
agreement, contract or arrangement which could reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of the Buyer or the
Company.
3.16 LITIGATION. There is no litigation or legal or other actions,
suits, proceedings or, to each Seller's knowledge, investigations, at law or in
equity, or before any federal, state, municipal or other governmental
department, commission, bureau, board, agency or instrumentality, domestic or
foreign (including, without limitation, any voluntary or involuntary proceedings
under the Bankruptcy Code or any action, suit, proceeding or investigation under
any foreign, federal or state securities law, rule or regulation), in which any
Seller or, to each Seller's knowledge, any officer, director, stockholder or
employee thereof is engaged, or, to each Seller's knowledge, with which any of
them is threatened, in connection with the business, affairs, properties or
assets of the Company, or which might call into question the validity or hinder
the enforceability or performance of this Agreement, or of the other agreements,
documents and instruments contemplated hereby and the transactions contemplated
hereby and thereby. There are no proceedings pending, or to each Seller's
knowledge, threatened, relating to the termination of, or limitation of, the
rights of the Company under its registration under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), as an investment adviser, or any
similar or related rights under any registrations or qualifications with various
states or other jurisdictions, or under any other Investment Laws and
Regulations.
3.17 COMPLIANCE WITH LAWS. The Company is, and at all times has been,
in material compliance with all laws and governmental rules and regulations,
domestic or foreign, including, without limitation, the Advisers Act, the
Commodity Exchange Act, ERISA, the Exchange Act, the Investment Company Act, and
the Securities Act and the regulations promulgated under each of them; the rules
and regulations of self-regulatory organizations including, without limitation,
the NASD and each applicable exchange (as defined under the Exchange Act); and
all other foreign, federal or state securities laws and regulations applicable
to the business or affairs or properties or assets of the Company (collectively
"Investment Laws and Regulations"). No Seller or, to each Seller's knowledge,
any officer, director, stockholder or employee thereof, is in default with
respect to any judgment, order, writ, injunction, decree, demand or assessment
issued by any court or any foreign, federal, state, municipal or other
governmental agency, board, commission, bureau, instrumentality or department,
domestic or foreign, or by any self-regulatory authority relating to any aspect
of the business or affairs or properties or assets of the Company or which could
give rise to an affirmative answer to any of the questions in Item 11, Part I of
the Form ADV of the Company. None of the Company or any officer, director,
stockholder or employee thereof, is charged or, to each Seller's knowledge,
threatened with, or under investigation with respect to, any violation of any
provision of foreign, federal, state, municipal or other law or any
administrative rule or regulation, domestic or foreign, including, without
limitation, any Investment Laws and Regulations, affecting the Company or the
transactions contemplated
19
hereby or which could give rise to an affirmative answer to any of the questions
in Item 11, Part I of the Form ADV of the Company.
3.18 INSURANCE. The Company has in full force and effect the insurance
with respect to its businesses, properties and assets (including, without
limitation, errors and omissions liability insurance), and all bonds required by
ERISA and by any contract to which the Company is a party, listed on SCHEDULE
3.18 hereto. The Company is not in material default under any such insurance
policy.
3.19 POWERS OF ATTORNEY. Except as is otherwise contemplated herein,
neither the Company nor any Stockholder has any outstanding power of attorney
with respect to any shares of the Company's capital stock.
3.20 FINDER'S FEE. Except for the Company's arrangement with
PaineWebber Incorporated which shall not be included in the Assumed Obligations
hereunder, no Seller has incurred or become liable for any broker's commission
or finder's fee relating to or in connection with the transactions contemplated
by this Agreement.
3.21 BUSINESS; REGISTRATIONS.
(a) Except as disclosed in SCHEDULE 3.21(a) hereto, the
Company is and has, since its inception, been engaged solely in the business of
providing Investment Management Services. The Company does not provide
Investment Management Services to (i) any issuer that is an investment company
(within the meaning of the Investment Company Act) other than the one investment
company listed in SCHEDULE 3.21(a), (ii) any issuer affiliated with any Seller
that would be an investment company (within the meaning of the Investment
Company Act) but for the exemptions contained in Section 3(c)(1), Section
3(c)(7), the final clause of Section 3(c)(3) or the third or fourth clauses of
Section 3(c)(11) of the Investment Company Act, or (iii) any issuer affiliated
with any Seller that is or is required to be registered under the laws of the
appropriate securities regulatory authority in the jurisdiction in which the
issuer is domiciled (other than the United States or the states thereof), which
is or holds itself out as engaged primarily in the business of investing,
reinvesting or trading in securities.
(b) The Company is and has, since September 3, 1982, been duly
registered as an investment adviser under the Advisers Act. The Company is duly
registered, licensed and qualified as an investment adviser in all jurisdictions
where such registration, licensing or qualification is required in order to
conduct its business and where the failure to be so registered, licensed or
qualified could reasonably be expected to have a Material Adverse Effect on the
Company. The Company is in compliance with all foreign, federal and state laws
requiring registration, licensing or qualification as an investment adviser and
has currently effective notice filings in each of the jurisdictions listed in
SCHEDULE 3.21(b). The Company has delivered to the Buyer, true and complete
copies of its most recent Form ADV, as amended to date, and has made available
copies of all foreign and state registration forms, likewise as amended to date.
The information contained in such forms was true and complete at the time of
filing and the Company has made all amendments to such forms as it is required
20
to make under any applicable laws. The information contained in the Company's
most recent Form ADV, as amended to date, is true and complete as of the date
hereof. Neither the Company nor, to each Seller's knowledge, any person
"associated" (as defined under the Advisers Act) with the Company, has been
convicted of any crime or is or has engaged in any conduct that would be a basis
for denial, suspension or revocation of registration of an investment adviser
under Section 203(e) of the Advisers Act or would need to be disclosed pursuant
to Rule 206(4)-4(b) thereunder, and to each Seller's knowledge, there is no
proceeding or investigation that is reasonably likely to become the basis for
any such disqualification, denial, suspension or revocation. The Company is not
subject to any limitation imposed in connection with one or more of the Licenses
which could reasonably be expected to have a Material Adverse Effect on the
Company or the Buyer. The Company is not a "broker" or "dealer" within the
meaning of the Exchange Act, or a "commodity pool operator" or "commodity
trading adviser" within the meaning of the Commodity Exchange Act. None of the
Company or its officers and employees is required to be registered as a broker
or dealer, a commodity trading adviser, a commodity pool operator, a futures
commission merchant, an introducing broker, a registered representative or
associated person, a counseling officer, an insurance agent, a sales person or
in any similar capacity with the SEC, the Commodity Futures Trading Commission,
the National Futures Association, the NASD or the securities commission of any
state or any self-regulatory body. Except as described in SCHEDULE 3.18(b), no
person other than a full-time employee of the Company renders Investment
Management Services to or on behalf of, or solicits clients with respect to, the
provision of Investment Management Services by, the Company.
(c) The Company does not have any investment adviser
representatives (as such term is defined in Rule 203A-3(a) under the Advisers
Act).
(d) The only place of business (within the meaning of Rule
203A-3(b) under the Advisers Act) of the Company is its principal office in
Menlo Park, California.
3.22 CORPORATE RECORDS; COPIES OF DOCUMENTS. The record books of the
Company accurately record all corporate action taken by its stockholders and
board of directors and committees, as applicable, and true and complete copies
of the originals of such documents have been made available to the Buyer for
review. The Company and the Stockholders have made available for inspection and
copying by the Buyer and its counsel true and correct copies of all documents
referred to in this Agreement or in the Schedules delivered to the Buyer in
connection herewith.
3.23 TRANSACTIONS WITH INTERESTED PERSONS. Except as disclosed on
SCHEDULE 3.23 hereto, neither the Company nor any stockholder, officer,
supervisory employee or director of the Company or, to any Seller's knowledge,
any of their respective spouses or family members, is a party to any material
transaction or material contract or arrangement with the Company, or owns
directly or indirectly in an individual or joint basis any interest (excluding
passive investments in the shares of any enterprise which are publicly traded
provided his or her holdings therein, together with any holdings of his or her
affiliates and family members, do not exceed one percent (1%) of the outstanding
shares of comparable interest in such entity)
21
in, or serves as an officer or director or in another similar capacity of, any
competitor or client of the Company , or any organization which has a material
contract or arrangement with the Company (in each case, other than as expressly
contemplated hereby).
3.24 EMPLOYEE BENEFIT PROGRAMS.
(a) SCHEDULE 3.24 hereto lists every Employee Program (as
defined below) that has been maintained (as defined below) by the Company at any
time during the three-year period ending on the date of the Closing.
(b) Each Employee Program which has ever been maintained by
the Company and which has at any time been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the IRS regarding its qualification under such section and
has, in fact, been qualified under the applicable section of the Code from the
effective date of such Employee Program through and including the Closing (or,
if earlier, the date that all of such Employee Program's assets were
distributed). No event or omission has occurred which would cause any such
Employee Program to lose its qualification under the applicable Code section.
(c) The Company does not know, and has no reason to know, of
any failure of any party to comply with any laws applicable to the Employee
Programs that have been maintained by the Company. With respect to any Employee
Program ever maintained by the Company, there has occurred no "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly, in any taxes, penalties or
other liability to the Company or the Buyer. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program.
(d) Neither the Company nor any ERISA Affiliate (as defined
below) (i) has ever maintained any Employee Program which has been subject to
title IV of ERISA (including, but not limited to, any Multiemployer Plan (as
defined below)) or (ii) has ever provided health care or any other non-pension
benefits to any employees after their employment is terminated (other than as
required by part 6 of subtitle B of title I of ERISA or by any similar provision
of state law) or has ever promised to provide such post-termination benefits.
(e) With respect to each Employee Program maintained by the
Company within the three (3) years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to the Buyer: (i) all documents embodying or governing
such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they
22
may have been amended; (ii) the most recent IRS determination or approval letter
with respect to such Employee Program under Code Sections 401 or 501(c)(9), and
any applications for determination or approval subsequently filed with the IRS;
(iii) the three (3) most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to such
Employee Program; (vi) any documents evidencing any loan to an Employee Program
that is a leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Buyer to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit
plans within the meaning of ERISA Section 3(3), including, but not
limited to, multiple employer welfare arrangements (within the meaning
of ERISA Section 3(4)), plans to which more than one unaffiliated
employer contributes and employee benefit plans (such as foreign or
excess benefit plans) which are not subject to ERISA; and (B) all stock
option plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of
an Employee Program funded through an organization described in Code
Section 501(c)(9), each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to
provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide
benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity, or
their spouses, dependents, or beneficiaries.
(iii) An entity is an "ERISA Affiliate" of the
Company if it would have ever been considered a single employer with
the Company under ERISA Section 4001(b) or part of the same "controlled
group" as the Company for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
23
3.25 LIST OF DIRECTORS, OFFICERS AND EMPLOYEES.
(a) SCHEDULE 3.25(a) hereto contains a true and complete list
of all current directors and officers of the Company. In addition, SCHEDULE
3.25(a) hereto contains a list of all managers and employees of, and consultants
to, the Company who, individually, have received or are scheduled to receive
compensation from the Company for the fiscal year ended December 31, 1999, in
excess of $75,000. In each case such Schedule includes the current job title and
aggregate annual compensation of each such individual.
(b) The Company employs thirteen full-time employees and one
part-time employee and generally enjoys good employer-employee relationships.
Except as set forth in SCHEDULE 3.25(b) hereto (or SCHEDULE 3.15 or SCHEDULE
3.24 hereto), the Company does not have any obligation, contingent or otherwise,
under (a) any employment, collective bargaining or other labor agreement, (b)
any written or oral agreement containing severance or termination pay
arrangements, (c) any deferred compensation agreement, retainer or consulting
arrangements, (d) any pension or retirement plan, any bonus or profit-sharing
plan, any stock option or stock purchase plan, or (e) any other employee
contract or non-terminable (whether with or without penalty) employment
arrangement (each an "Employment Arrangement"). The Company is not in default
with respect to any material term or condition of any Employment Arrangement nor
will the Closing (or the transactions contemplated hereby) result in any such
default, including, without limitation, after the giving of notice, lapse of
time or both. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth on SCHEDULE 3.25(b) hereto,
upon termination of the employment of any of said employees, the Company would
not, by reason of the transactions contemplated under this Agreement or anything
done prior to the Closing, be liable to any of said employees for so-called
"severance pay" or any other payments. The Company has not made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate the Company to make any payments that will
not be deductible under Section 280G of the Code. The Company does not have any
policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment. The
Company is in compliance in all material respects with all applicable laws and
regulations respecting labor, employment, fair employment practices, work place
safety and health, terms and conditions of employment, and wages and hours.
There are no and have never been any charges or, to each Seller's knowledge,
threatened charges of employment discrimination or unfair labor practices
against or involving the Company. There are no grievances, complaints or charges
that have been filed against the Company under any dispute resolution procedure
that might have an adverse effect on the Company or the Buyer or the conduct of
their respective businesses, and there is no arbitration or similar proceeding
pending and no claim therefor has been asserted. Except as set forth on SCHEDULE
3.25(b), the Company has in place all employee policies required by applicable
laws, rules and regulations, and there have been no material violations or
alleged violations of any of such policies. Neither the Company nor any
Stockholder has received any notice indicating that any of the Company's
employment policies or practices is currently being audited or investigated by
any federal, state or local government agency. The Company is, and at all
24
times since November 6, 1986 has been, in compliance with the requirements of
the Immigration Reform Control Act of 1986.
3.26 NON-FOREIGN STATUS. The Company is not a "foreign person" within
the meaning of Section 1445 of the Code and Treasury Regulations Section
1.1445-2.
3.27 TRANSFER OF SHARES OR INTERESTS. Except as set forth on SCHEDULE
3.27 hereto, no holder of stock of the Company has at any time transferred any
of such stock to any employee of the Company or other Person, which transfer
constituted or could be viewed as compensation for services rendered to the
Company by said employee.
3.28 STOCK REPURCHASE. Except as set forth on SCHEDULE 3.28, the
Company has not redeemed or repurchased any of its capital stock.
3.29 CODE OF ETHICS. The Company has a written policy regarding ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and a Code of Ethics which complies with all applicable provisions of
Rule 17j-1 promulgated under the Investment Company Act and Section 204A of the
Advisers Act , respectively, a copy of which has been delivered to the Buyer
prior to the date hereof. All employees of the Company have executed
acknowledgments that they are bound by the provisions of such Code of Ethics and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ policy. The policies of the Company with respect to avoiding
conflicts of interest are as set forth in the Company's most recent Form ADV or
incorporated by reference therein. Except as set forth on SCHEDULE 3.29 hereto,
there have been no material violations or allegations of material violations of
such Code of Ethics, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ policy or conflicts policy.
3.30 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ REPRESENTATION. Neither the Company nor any
Stockholder thereof is a person with annual net sales or total assets of $10
million or more, in each case as defined in the HSR Act.
SECTION 4. SEVERAL REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDERS.
As a material inducement to the Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, each Stockholder hereby
severally makes to the Buyer each of the representations and warranties set
forth in this Section 4 with respect to such Stockholder; provided, however,
that ▇▇. ▇▇▇▇▇▇ does not make the representation set forth in Section 4.8
hereto.
4.1 COMPANY SHARES. Such Stockholder owns of record and beneficially
the number of the shares of the Company's capital stock set forth opposite such
Stockholder's name in SCHEDULE 3.3(b) (the "Company Shares") and such Company
Shares are duly authorized, validly issued, fully paid, non-assessable and free
and clear of any and all Claims. The Company Shares set forth opposite such
Stockholder's name in SCHEDULE 3.3(b), if any,
25
are, except as reflected in SCHEDULE 3.3(b), the only shares of capital stock
held by such Stockholder or with respect to which such Stockholder has any
rights in the Company.
4.2 AUTHORITY. Such Stockholder has full right, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of such Stockholder
pursuant to, or as contemplated by, this Agreement and to carry out the
transactions contemplated hereby and thereby. This Agreement and each agreement,
document and instrument executed and delivered by such Stockholder pursuant to
this Agreement constitutes, or when executed and delivered will constitute, a
valid and binding obligation of such Stockholder, enforceable in accordance with
its respective terms, except as enforceability may be restricted, limited or
delayed by applicable bankruptcy or other laws affecting creditors' rights
generally. The execution, delivery and performance of this Agreement and each
such agreement, document and instrument:
(i) does not and will not violate any laws of the
United States or any state or other jurisdiction applicable to such
Stockholder, or require such Stockholder to obtain any approval,
consent or waiver from, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made; and
(ii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of, any agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which such
Stockholder is a party or by which the property of such Stockholder is
bound or affected, or result in the creation or imposition of any Claim
on any assets of the Company.
4.3 OWNERSHIP OF COMPANY INTERESTS. The interests in the Company shown
as owned by each Stockholder in the records set forth in SCHEDULE 3.3(b)
constitute all the interests in the Company or rights to purchase shares of the
capital stock of the Company which are held by such Person, directly or
indirectly.
4.4 FINDER'S FEE. Except as provided in Section 3.20, such Stockholder
has not incurred or become liable for any broker's commission or finder's fee
relating to or in connection with the transactions contemplated by this
Agreement.
4.5 INVESTMENT ADVISORY REPRESENTATION. Except for his own account and
advice given in a director or trustee capacity to a charitable organization
(which positions and organizations are set forth on SCHEDULE 4.5) or given to
such Stockholder's spouse, children, grandchildren, parents and siblings and
which such Stockholder is managing without a fee or any other remuneration, such
Stockholder does not provide investment advisory or investment management
services to any person or entity, other than on behalf of the Company pursuant
to an investment advisory agreement between the Company and a client thereof.
26
4.6 AGREEMENTS.
(a) Such Stockholder is not a party to any employment,
non-competition, trade secret or confidentiality agreement, arrangement,
understanding or obligation with or to any party other than the Company. There
are no agreements or arrangements not contained herein or disclosed in a
Schedule hereto, to which such Stockholder is a party relating to the business
of the Company or to such Stockholder's rights and obligations as a stockholder,
director, officer or employee of the Company.
(b) Such Stockholder does not own, directly or indirectly, on
an individual or joint basis, any interest (excluding passive investments in the
shares of any enterprise which are publicly traded, provided his or her holdings
therein, together with any holdings of his or her Affiliates and family members,
are less than one percent (1%) of the outstanding shares of comparable interest
in such entity) in, or serve as an officer or director of, any organization
which has a contract or arrangement with the Company or which could be
considered a competitor of the Company. The execution, delivery and performance
of this Agreement will not violate or result in a default or acceleration of any
obligation under any contract, agreement, indenture or other instrument
involving the Company to which such Stockholder is a party.
4.7 EMPLOYMENT DATA. Such Stockholder's (i) date of birth, and (ii)
date of commencement of employment with the Company are both accurately
reflected in SCHEDULE 4.7.
4.8 GOOD HEALTH. Such Stockholder represents that he or she is in good
health to his or her knowledge.
SECTION 5. COVENANTS OF THE SELLERS.
5.1 MAKING OF COVENANTS AND AGREEMENTS. The Sellers jointly and
severally hereby make the covenants and agreements set forth in this Section 5
and the Stockholders agree to cause the Company to comply with such agreements
and covenants.
5.2 CLIENT CONSENTS.
(a) As soon as reasonably practicable after the date hereof,
but in any event on or prior to June 16, 2000, the Company shall notify each of
its clients of the transactions contemplated hereby and by the other agreements,
documents and instruments contemplated hereby. Except with respect to the
investment company client listed in SCHEDULE 3.21(a), such notice shall be in
the form of EXHIBIT 5.2 hereto (with such changes thereto as may be agreed to by
Buyer in writing).
(b) On or prior to August 4, 2000, the Company shall send to
each client who was sent, but who has not by such date returned, a notice in the
form of EXHIBIT 5.2,
27
countersigned indicating consent to the assignment of such client's contract as
contemplated hereby, a second notice in form and substance reasonably acceptable
to Buyer.
(c) The Company shall use commercially reasonable best efforts
to, and the Stockholders shall use commercially reasonable best efforts to cause
the Company to, obtain consents from the Company's clients (or, in the case of
clients whose contracts terminate upon their assignment, new contracts with the
Buyer effective after giving effect to the Closing on substantially equivalent
terms) in the manner contemplated by this Section 5.2, including, without
limitation, a new contract effective after giving effect to the Closing, between
the Buyer and each of the Company's clients (including, without limitation,
pursuant to a subadvisory relationship) which is a registered investment
company.
5.3 AUTHORIZATIONS. The Company will, and the other Sellers will use
best efforts to cause the Company to, obtain all authorizations, consents,
orders and approvals of federal, state and local regulatory bodies and officials
that may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and the other
agreements, documents and instruments contemplated hereby, and for the Buyer to
conduct the businesses presently being conducted by the Company.
5.4 AUTHORIZATION FROM OTHERS. The Sellers will use their respective
best efforts to obtain all authorizations, consents, approvals and permits of
others required to permit the consummation by the Sellers of the transactions
contemplated by this Agreement.
5.5 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing, except as set forth in SCHEDULE 5.5 hereto, without the prior written
consent of Buyer:
(a) The Company will conduct its business only in the ordinary
course of business, and consistent with past practices;
(b) The Company will not (i) make (or incur any obligation to
make) any purchase, sale or disposition of any asset or property other than as
specifically provided for in this Agreement, or in the ordinary course of
business consistent with past practices, or (ii) subject to any Claim any of its
properties or assets, nor permit any of the foregoing to exist except for minor
imperfections of title or insignificant liens which do not, in the aggregate,
detract from the value of such assets, or interfere with the transactions
contemplated by this Agreement or the present or proposed uses of such
properties or assets or the business of the Company;
(c) The Company will not incur any contingent or fixed
obligations or liabilities including, without limitation, any liability
(contingent or fixed) as a guarantor or otherwise with respect to the
obligations of others except, with respect to the Company, in the ordinary
course of business consistent with the past practices of the Company;
(d) The Company will not make or incur any obligation to make
a change in its Articles of Incorporation, By-laws or authorized or issued
capital stock;
28
(e) The Company will not declare, set aside or pay any
dividend or distribution, make (or incur an obligation to make) any other
distribution in respect of its capital stock or make (or incur an obligation to
make) any direct or indirect redemption, purchase or other acquisition of its
stock;
(f) The Company will not make any change in the compensation
payable or to become payable to any of the Company's officers, employees, agents
or independent contractors, and the Company will not hire any directors,
officers, employees or agents (other than to fill vacant positions at the
Company), or enter into any collective bargaining agreement, bonus, equity,
option, profit sharing, compensation, welfare, retirement, or other similar
arrangement, or any employment contract;
(g) The Company will not make any change in its borrowing
arrangements;
(h) The Company will use best efforts to prevent any change
with respect to its management and supervisory personnel and banking
arrangements;
(i) The Company will have in effect and maintain at all times
all insurance of the kind, in the amount and with the insurers set forth in
SCHEDULE 3.18 hereto or substantially equivalent insurance with any substitute
insurers approved in writing by Buyer (which approvals will not be unreasonably
withheld); and
(j) The Company will not settle any material litigation
without the Buyer's consent.
5.6 FINANCIAL STATEMENTS. The Company will furnish the Buyer with
unaudited monthly balance sheets and statements of income and retained earnings
and cash flows of the Company on a consolidated and consolidating basis within
twenty-one (21) business days after each month end for each month ending more
than twenty-one (21) business days prior to the Closing, in each case certified
by the chief financial officer of the Company, which financial statements shall
be prepared in accordance with the Company's past practices, shall be complete
and correct in all material respects and shall present fairly in all material
respects the financial condition of the Company at the dates of said statements
and the results of their operations for the periods covered thereby (subject to
year end audit adjustments that individually and in the aggregate are not
material).
5.7 PRESERVATION OF BUSINESS AND ASSETS. Until the Closing, the Sellers
shall use reasonable commercial efforts to: (a) preserve the current business of
the Company, (b) maintain the present clients of the Company, in each case, on
terms that are at least as favorable as the terms of the agreement between the
Company and the relevant client as in effect on the date hereof, (c) preserve
the goodwill of the Company, and (d) preserve any Licenses required for, or
useful in connection with, the business of the Company (including without
limitation all investment adviser registrations). In addition, except as
expressly contemplated by this Agreement, the Stockholders shall not take any
material action not in the ordinary course of business relating to the Company
or which could reasonably be expected to
29
have a material adverse effect on the transactions contemplated hereby, without
the prior consent of Buyer.
5.8 OBSERVER RIGHTS AND ACCESS. Until the Closing, the Company shall
afford to the Buyer and its representatives and agents free access, during
normal business hours and with reasonable notice, to the properties and records
of the Company in order that the Buyer may have full opportunity to make such
investigation as they shall desire for purposes consistent with this Agreement
and in order that the Buyer, at its election and expense, may arrange for
outside auditors to perform an audit of the books and financial records of the
Company.
5.9 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly
upon any Seller becoming aware of the threatened occurrence of, any event which
would cause or constitute a breach or default, or would have caused or
constituted a breach or default had such event occurred or been known to the
Sellers prior to the date hereof, of any of the representations, warranties or
covenants of the Sellers contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, such Seller shall give
reasonably detailed written notice thereof to the Buyer and the other Sellers,
and the Sellers shall use their best efforts to prevent or promptly remedy the
same.
5.10 CONSUMMATION OF AGREEMENT. The Sellers shall use their respective
best efforts to perform and fulfill all conditions and obligations to be
performed and fulfilled by each of them under this Agreement, to the end that
the transactions contemplated by this Agreement shall be fully carried out.
5.11 COOPERATION OF THE SELLERS. The Sellers shall cooperate with all
reasonable requests of the Buyer and the Buyer's counsel in connection with the
consummation of the transactions contemplated hereby, including, without
limitation, providing the Buyer with all access or information necessary to
permit the Buyer to verify the amounts certified by the Company pursuant to
Section 8.8 hereof, and the making of any filings required in connection of the
transactions contemplated hereby.
5.12 NO SOLICITATION OF OTHER OFFERS. Until a date which is six (6)
months after a termination of this Agreement pursuant to Section 10.1 hereof for
any reason other than a material breach by the Buyer of its representations,
warranties or covenants set forth herein, none of the Sellers, or any of their
representatives will, directly or indirectly, solicit, encourage, assist,
initiate discussions or engage in negotiations with, provide any information to,
or enter into any agreement or transaction with, any person, other than the
Buyer, relating to the possible acquisition of the Company or any of its assets,
except for the sale of assets by the Company in the ordinary course of business
consistent with past practices of the Company and the terms of this Agreement;
provided, however, that this Section 5.12 shall be of no further force and
effect in the event that the Sellers reimburse the Buyer for all of its
out-of-pocket costs incurred in connection with the negotiation and execution of
this Agreement and pursuit of the transactions contemplated hereby (including
the reasonable fees and
30
disbursements of its legal counsel, accountants and other advisors) in an amount
not to exceed $200,000.
5.13 CONFIDENTIALITY. The Sellers agree that, unless and until the
Closing has been consummated, each of the Sellers and their officers, directors
agents and representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from the Buyer with
respect to its business or financial condition except for the purpose of
evaluating, negotiating and completing the transaction contemplated hereby.
Information generally known in Buyer's industry or which has been disclosed to
the Sellers by third parties which have a right to do so shall not be deemed
confidential or proprietary information for purposes of this Agreement. If the
transactions contemplated by this Agreement are not consummated, the Sellers
will return, and cause their respective officers, directors, agents and
representatives to return, to the Buyer (or certify that they have destroyed)
all copies of such data and information, including but not limited to financial
information, customer lists, business and corporate records, worksheets, test
reports, tax returns, lists, memoranda, and other documents prepared by or made
available by the Buyer to the Sellers (and their officers, directors, agents and
representatives) in connection with the transaction.
5.14 TAX RETURNS. The Sellers shall cooperate with the Buyer and cause
the Company to prepare and file, on or before the due date or any extension
thereof, all federal, state, local and foreign tax returns required to be filed
by the Company with respect to taxable periods ending on or before the Closing,
so that such returns are consistent with the provisions of this Agreement.
5.15 POLICIES AND PROCEDURES. The Sellers shall cause the employees of
the Company to cooperate with and assist in such compliance audits and
regulatory reviews as may reasonably be requested by the Buyer.
5.16 SUBSIDIARIES; INVESTMENTS IN OTHER PERSONS. Between the date of
this Agreement and the Closing, none of the Sellers will take any action to
acquire, form or otherwise establish any direct or indirect subsidiary of the
Company or cause the Company to make any investment in any other Person.
5.17 COMPANY'S CAPITAL STOCK. Between the date of this Agreement and
the Closing, (a) the Stockholders will not permit the Company to take any action
to issue any shares of its capital stock in addition to or different from the
holdings shown in the records set forth in SCHEDULE 3.3(b), (b) the Stockholders
will not permit the Company to take any action that will cause the shares set
forth in SCHEDULE 3.3(b) to be revoked, repurchased, rescinded, terminated,
liquidated, transferred, amended or modified in any manner and (c) no
Stockholder will sell, assign, pledge, subject to a Claim or otherwise transfer
or restrict such Person's direct or indirect interests in the Company without
the prior written consent of Buyer.
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5.18 EMPLOYEE PROGRAMS. Between the date of this Agreement and the
Closing, the Company will not maintain any Employee Program other than the
Employee Programs listed on SCHEDULE 3.24.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
6.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to the Sellers to enter into this Agreement and consummate the transactions
contemplated hereby, the Buyer hereby makes the representations and warranties
to the Sellers contained in this Section 6.
6.2 ORGANIZATION OF BUYER. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is conducted by it.
6.3 AUTHORITY OF BUYER. The Buyer has full right, authority and power
to enter into this Agreement and each agreement, document and instrument to be
executed and delivered by the Buyer pursuant to or as contemplated by, this
Agreement and to carry out the transactions contemplated hereby and thereby. The
execution, delivery and performance by the Buyer of this Agreement and each such
other agreement, document and instrument have been duly authorized by all
necessary corporate action of the Buyer and no other action on the part of the
Buyer is required in connection therewith. This Agreement and each other
agreement, document and instrument executed and delivered by the Buyer pursuant
to this Agreement constitute, or when executed and delivered will constitute,
valid and binding obligations of the Buyer enforceable in accordance with their
terms. The execution, delivery and performance by the Buyer of this Agreement
and each such agreement, document and instrument:
(i) does not and will not violate any provision of
the Articles of Organization or By-laws of the Buyer, each as amended
to date;
(ii) does not and will not violate any laws of the
United States or of any state or any other jurisdiction applicable to
the Buyer or require the Buyer to obtain any approval, consent or
waiver of, or make any filing with, any person or entity (governmental
or otherwise) which has not been obtained or made, except as set forth
on SCHEDULE 6.3 hereto; and
(iii) does not and will not result in a breach of,
constitute a default under, accelerate any obligation under, or give
rise to a right of termination of any indenture, loan or credit
agreement, or other agreement, mortgage, lease, permit, order, judgment
or decree to which the Buyer is a party and which would prevent or
hinder the consummation of the transactions contemplated by this
Agreement.
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6.4 LITIGATION. There is no litigation pending or, to its knowledge,
threatened against the Buyer which would prevent or hinder the consummation of
the transactions contemplated by this Agreement.
6.5 FINDER'S FEE. Other than the fee due to Berkshire Capital
Corporation upon the Closing, the Buyer has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
6.6 EXCHANGE ACT FILINGS. Each of Buyer's filings with the SEC under
the Exchange Act since December 31, 1999 (including the information incorporated
by reference therein) (collectively, the "SEC Filings") contained all of the
information required to be contained therein pursuant to the Exchange Act and
the rules and regulations promulgated thereunder.
6.7 COMPLIANCE WITH LAWS. Buyer is, and at all times has been, in
material compliance with all laws and governmental rules and regulations,
domestic or foreign, including, without limitation, all federal or state
securities laws relating to the business, affairs, properties or assets of
Buyer, except where non-compliance therewith, in any individual instance or any
series of related instances, would not have a Material Adverse Effect on the
Acquired Business after giving effect to the Closing or would not prevent Buyer
from consummating the transactions contemplated hereby. None of Buyer nor any
officer or director thereof, is charged or, to the knowledge of Buyer,
threatened with, or under investigation with respect to, any material violation
of any provision of federal, state, municipal or other law or any administrative
rule or regulation, domestic or foreign which could give rise to an affirmative
answer to any of the questions in Item 11, Part I of the ADV of the Acquired
Business.
6.8 NO ADVERSE CHANGE. Since March 31, 2000, there has been no material
adverse change in the business condition (financial or otherwise) or results of
operations of the Buyer.
SECTION 7. COVENANTS OF BUYER.
7.1 MAKING OF COVENANTS AND AGREEMENT. The Buyer hereby makes the
covenants and agreements set forth in this Section 7.
7.2 CONFIDENTIALITY. The Buyer agrees that, unless and until the
Closing has been consummated, each of the Buyer and its officers, directors,
agents and representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from the Sellers with
respect to its business or financial condition except for the purpose of
evaluating, negotiating and completing the transaction contemplated hereby and
unless (and only to the extent required) the Buyer is otherwise required to
disclose such data or information by law (including, without limitation,
pursuant to the Investment Laws). Information generally known in the Company's
industry or which has been disclosed to the
33
Buyer by third parties which have a right to do so shall not be deemed
confidential or proprietary information for purposes of this Agreement. If the
transactions contemplated by this Agreement are not consummated, the Buyer will
return, and will cause its officers, directors, agents and representatives to
return, to the Company (or certify that they have destroyed) all copies of such
data and information, including but not limited to financial information,
customer lists, business and corporate records, worksheets, test reports, tax
returns, lists, memoranda, and other documents prepared by or made available to
the Buyer (and its officers, directors, agents and representatives) in
connection with the transaction.
7.3 COOPERATION OF BUYER. The Buyer shall cooperate with all reasonable
requests of the Company in connection with the Company's compliance with its
covenants in Sections 5.2, 5.3 and 5.4 hereof.
7.4 AUTHORIZATIONS. The Buyer will obtain all authorizations, consents,
orders and approvals of federal, state and local regulatory bodies and officials
that may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and the other
agreements, documents and instruments contemplated hereby, and for the Buyer to
conduct the businesses presently being conducted by the Company.
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF BUYER.
The obligation of the Buyer to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment (or waiver by
the Buyer), prior to or at the Closing, of the following conditions precedent:
8.1 LITIGATION; NO OPPOSITION. No judgment, injunction, order or decree
enjoining or prohibiting any of the Buyer, the Sellers or other parties to this
Agreement or any of the agreements, documents and instruments contemplated
hereby, from consummating the transactions contemplated hereby or thereby, shall
have been entered and no suit, action or proceeding shall be pending or
threatened at any time prior to or on the date of the Closing before or by any
court or governmental body seeking to restrain or prohibit, or seeking damages
or other relief in connection with, the execution and delivery of this Agreement
or any of the agreements, documents and instruments contemplated hereby, or the
consummation of the transactions contemplated hereby or thereby or which could
reasonably be expected to have an Material Adverse Effect on the Company or the
Buyer.
8.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the
representations and warranties of the Sellers contained in this Agreement and in
any Schedule or Exhibit attached hereto and in each other agreement, document,
instrument or certificate contemplated hereby or otherwise made in writing by
any of them or made by any person authorized by them to make representations on
their behalf, shall be true and correct in all material respects (except for
such representations and warranties that are qualified by their terms as to
materiality, which representations and warranties as so qualified shall be true
in all respects) as of the date
34
of this Agreement and at, as of and after giving effect to the Closing as though
newly made at such time; except that the representations in Section 3.7 shall
also be made with respect to assets under management and advisory contracts as
of a date which is no more than ten (10) days prior to the Closing. Each and all
of the agreements and conditions to be performed or satisfied by the Sellers
hereunder and under the other agreements, documents and instruments contemplated
hereby at or prior to the Closing shall have been duly performed in all material
respects; and the Sellers shall have furnished the Buyer with a certificate or
certificates dated as of the date of the Closing with respect to each of the
foregoing.
8.3 ADVISORY CONTRACT CONSENTS. The Closing Date Fees shall constitute
at least eighty percent (80%) of the Base Fees. For purposes of this Agreement:
(i) "BASE FEES" shall mean the annual advisory fees
(other than incentive or performance fees) payable to the Company under
all its contracts calculated based on assets under management and the
fee schedules set forth in the relevant agreements as of June 30, 2000;
(ii) "CLOSING DATE FEES" shall mean the sum of (x)
the annual advisory fees (other than incentive or performance fees)
payable to the Buyer after giving effect to the transactions
contemplated hereby under all the investment management, advisory or
subadvisory contracts acquired by the Buyer from the Company at Closing
as and to the extent that Consent has been obtained as contemplated by
this Agreement, calculated based on assets under management by the
Company and the fee schedules set forth in the relevant agreements as
of June 30, 2000 (as adjusted with respect to any contract included
therein for the actual amount of any additions and/or withdrawals,
including actual or deemed withdrawals upon a failure to Consent, since
June 30, 2000 and for any amendments to the fee schedule since such
date, but excluding adjustments to reflect market movement), plus (y)
the annual advisory fees (other than incentive or performance fees)
payable to the Buyer after the Closing attributable to new client
accounts of the Company transferred to the Buyer at Closing which
funded after June 30, 2000 and prior to the Closing (as calculated as
of the date such accounts are funded and as adjusted for the actual
amount of any additions or withdrawals, including actual or deemed
withdrawals upon a failure to Consent, since that date and for any
amendments to the fee schedule since such date, but excluding
adjustments to reflect market movement); and
(iii) "CONSENT" shall mean (a) with respect to a
client whose contract by its terms terminates upon the consummation of
the transactions contemplated hereby, that the Buyer shall have entered
into a new contract on substantially equivalent terms which contract is
effective after giving effect to the Closing, (B) with respect to a
client whose contract requires written consent from a party or parties
thereto for it to survive the transactions contemplated hereby, that
the Company shall have obtained all such written consents as may be
required under such contract, and (C) with respect to a client whose
contract does not require written consent from any party thereto for it
to survive the transactions contemplated hereby, that the Company
35
shall have obtained such consents as may be required under such
contract (including, with respect to the requirement for contracts to
include provisions requiring consent to transfer set forth under the
Advisers Act, that the Company has complied with Section 5.2 hereof
with respect to such contract). Notwithstanding the foregoing, no
client of the Company shall be deemed to have given its Consent if such
client has expressed an intent to terminate or significantly reduce its
investment relationship with the Company (or after giving effect to the
Closing, the Buyer) or to adjust the fee schedule with respect to one
or more of its contracts in a manner that could materially reduce the
fee to the Buyer from that client or contract from that payable to the
Company on June 30, 2000 or the date hereof.
At the Closing, the Company shall deliver a certificate certifying as
to compliance with the foregoing, which certificate includes the calculation of
compliance.
8.4 REGISTRATION AS AN INVESTMENT ADVISER. The Company shall be
registered as an investment adviser under the Advisers Act and the rules and
regulations promulgated thereunder. Each employee of the Company required to be
registered as an investment adviser representative (as such term is defined in
Rule 203A-3(a) under the Advisers Act) shall be so registered.
8.5 OTHER APPROVALS. Except as otherwise specifically contemplated
hereby, all actions by or in respect of, or filings with, any governmental body,
agency, or official or authority required to permit the consummation of the
transactions contemplated hereby (so that after the Closing the Buyer shall be
able to carry on the Company's business in the manner now conducted) shall have
been taken, made or obtained (other than actions or filings required to be taken
or made by Buyer), and any and all other material permits, approvals, consents
or other actions necessary to consummate the transactions hereunder shall have
been received or taken, and none of such permits, approvals or consents shall
contain any provisions which, in the reasonable judgment of the Buyer, are
unduly burdensome.
8.6 EMPLOYMENT AGREEMENTS. Each of Messrs. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ and Msses.
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, shall have entered into an Employment Agreement with the
Buyer in the form attached hereto as EXHIBIT 8.6 (the "Employment Agreements"),
and each such Employment Agreement shall be in full force and effect.
8.7 NON-COMPETITION/NON-SOLICITATION AGREEMENTS. Each Person set forth
in Item 4 set forth on SCHEDULE 3.25(a) shall have entered into a
Non-Competition/Non-Solicitation Agreement with the Buyer (each a "Non
Solicitation Agreement") in the form attached hereto as EXHIBIT 8.7, and each
such Non Solicitation Agreement shall be in full force and effect.
8.8 WORKING CAPITAL AND CASH. At the Closing included in the
Transferred Assets shall be not less than $500,000 of Working Capital, of which
at least $250,000 shall be cash. The Buyer shall be provided with a certificate
from the chief financial officer of the Company at the Closing representing that
the foregoing is true and correct and also certifying as to the
36
true and correct amounts of the Company's cash on hand at the Closing, after
taking into account all transaction costs of the Sellers.
8.9 DELIVERY. Each Seller shall have executed (where applicable) and
delivered to the Buyer (or shall have caused to be executed and delivered to the
Buyer by the appropriate person) the following:
(a) certified copies of resolutions of the board of directors
(and, if necessary, the shareholders) of the Company authorizing the execution
of this Agreement and each of the agreements, documents and instruments
contemplated hereby to which the Company is a party;
(b) a copy of the charter and by-laws of the Company which, in
the case of the charter, is certified as of a recent date by the Secretary of
State of the relevant state of incorporation;
(c) certificates issued by the appropriate Secretary of State
of each state in which each of the Company does business certifying that each of
the Company is in good standing in such state as of the most recent practicable
date;
(d) true and correct copies of each of the agreements,
documents and instruments contemplated hereby and all agreements, documents,
instruments and certificates delivered or to be delivered in connection
therewith;
(e) a certificate of the Secretary of the Company, certifying
that the resolutions, charter and by-laws referenced in paragraphs (a) and (b)
above are in full force and effect and have not been amended or modified, and
that the officers of such corporation are those persons named in the
certificate;
(f) an opinion from counsel to the Sellers, in substantially
the form of EXHIBIT 8.9(f) hereto;
(g) from the Company a "transferor's certificate of
non-foreign status" as provided in the Treasury Regulations under Section 1445
of the Code outstanding in the form attached hereto as EXHIBIT 8.9(g) attached
hereto;
(h) such other Certificates and documents as are required
hereby or are reasonably requested by the Buyer; and
(i) from the Company (if not previously supplied pursuant to
Section 5.6 hereof), unaudited monthly balance sheets and statements of income
and retained earnings and cash flows of the Company for the period from March
31, 2000 through the Closing, certified by the chief financial officer of the
Company, which financial statements shall be prepared in accordance with past
practice using the accrual method of accounting, shall be complete and correct
in all material respects and shall present fairly in all material respects the
financial
37
condition of the Company at the dates of said statements and the results of its
operations for the periods covered thereby.
8.10 MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall have been no event or condition or events or conditions, which, either
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on the Company, and the Buyer shall be provided
with a certificate from the chief financial officer of the Company to that
effect at the Closing.
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment (or waiver by
the Company), prior to or at the Closing, of the following conditions precedent:
9.1 NO LITIGATION; NO OPPOSITION. No judgment, injunction, order or
decree enjoining or prohibiting any of the Buyer, the Sellers or other parties
to this Agreement or any of the agreements, documents and instruments
contemplated hereby, from consummating the transactions contemplated hereby or
thereby, shall have been entered and no suit, action or proceeding shall be
pending or threatened at any time prior to or on the date of the Closing before
or by any court or governmental body seeking to restrain or prohibit, or seeking
damages or other relief in connection with, the execution and delivery of this
Agreement or any of the agreements, documents and instruments contemplated
hereby, or the consummation of the transactions contemplated hereby or thereby
or which could reasonably be expected to have an Material Adverse Effect on the
Company or the Buyer.
9.2 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the
representations and warranties of the Buyer contained in this Agreement and in
any Schedule or Exhibit attached hereto and in the other agreements, documents
or instruments contemplated hereby or otherwise made in writing by the Buyer or
by any person authorized by the Buyer to make representations on its behalf
shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms as to
materiality, which representations and warranties as so qualified shall be true
in all respects) at and as of the Closing as though newly made at such time.
Each and all the agreements and conditions to be performed or satisfied by the
Buyer hereunder and under the other agreements, documents as instruments
contemplated hereby at or prior to the Closing shall have been duly performed in
all material respects; and the Buyer shall have furnished the Company with
certificates dated as of the date of the Closing to the foregoing effect.
9.3 ADVISORY CLIENT CONSENT. The condition set forth in Section 8.3
shall have been met.
38
9.4 REGISTRATION RIGHTS AGREEMENT. The Buyer shall have entered into
a Registration Rights Agreement with the Stockholders in the form attached
hereto as EXHIBIT 9.4 (the "Registration Rights Agreement"), and the
Registration Rights Agreement shall be in full force and effect.
9.5 DELIVERY. The Buyer shall have executed and delivered to the
Company, as applicable, the following:
(a) certified copies of votes of the board of directors of
Buyer authorizing the execution of this Agreement and each of the other
agreements, documents or instruments contemplated hereby to which Buyer is a
party;
(b) a copy of the Articles of Organization and By-laws of
Buyer which, in the case of the Articles of Organization, is certified as of a
recent date by the Secretary of State of the Commonwealth of Massachusetts;
(c) certificates issued by the Secretary of State of the
Commonwealth of Massachusetts certifying that the Buyer is validly existing and
in good standing in the Commonwealth of Massachusetts as of the most recent
practicable date;
(d) true and correct copies of each of the agreements,
documents and instruments contemplated hereby to which the Buyer is a party, and
all agreements, documents, instruments and certificates delivered or to be
delivered in connection therewith by the Buyer;
(e) a certificate of the Secretary of Buyer certifying that
the resolutions, Articles of Organization and By-laws in paragraphs (a) and (b)
above are in full force and effect and have not been amended or modified, and
that the officers of Buyer are those persons named in the certificate; and
(f) an opinion from ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP in
substantially the form of EXHIBIT 9.5(f) hereto.
SECTION 10. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
10.1 TERMINATION. At any time prior to the Closing, this Agreement may
be terminated as follows:
(a) by mutual written consent of Buyer and the Company;
(b) by Buyer, pursuant to written notice by Buyer to the
Sellers, if any of the conditions set forth in Section 8 of this Agreement have
not been satisfied on or prior to February 9, 2001, or if it has become
reasonably and objectively certain that any of such conditions, will not be
satisfied on or prior to February 9, 2001; and
39
(c) by the Company, pursuant to written notice by such party
to Buyer, if any of the conditions set forth in Section 9 of this Agreement have
not been satisfied on or prior to February 9, 2001, or if it has become
reasonably and objectively certain that any of such conditions, will not be
satisfied on or prior to February 9, 2001.
10.2 EFFECT OF TERMINATION. All obligations of the parties hereunder
shall cease upon any termination pursuant to Section 10.1; provided, however,
that (a) the provisions of this Section 10, Sections 5.12, 5.13, 7.2 and the
provisions of Section 14 hereof shall survive any termination of this Agreement;
(b) nothing herein shall relieve any party from any liability for (i) any
material breach of a representation or warranty contained herein (except for
such representations and warranties that are qualified by their terms as to
materiality, which shall be true in all respects), (ii) any failure to perform
and satisfy in all material respects all of the agreements and covenants to be
performed hereunder and under the agreements, documents and instruments
contemplated hereby at or prior to the Closing, (iii) any failure to perform and
satisfy the conditions contained in this Agreement and the other agreements,
documents and instruments contemplated hereby, and (c) any party may proceed as
further set forth in Section 10.3 below.
10.3 RIGHT TO PROCEED. If the Sellers jointly or the Buyer proceed with
the transactions contemplated hereby notwithstanding the fact that one or more
of the conditions specified in Section 8 or Section 9, respectively, have not
been satisfied, the party or parties waiving any such condition shall, by
proceeding, be deemed to have waived their rights with respect to any such
noncompliance with the conditions specified in Section 8 or Section 9, as the
case may be.
SECTION 11. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Each of the
representations, warranties, agreements, covenants and obligations herein or in
any schedule, exhibit or certificate delivered by any party to any other party
incident to the transactions contemplated hereby are material, shall be deemed
to have been relied upon by the other party and shall survive the Closing until
the first anniversary of the date on which the Buyer takes delivery of its first
set of consolidated audited annual financial statements which include the
financial condition and results of operation of Acquired Business (the "First
Audit Anniversary"), except for the representations and warranties made in
Sections 3.3, 3.9, 3.24, 4.1 or 4.3, which shall survive until the expiration of
the applicable statute of limitations, if any. The expiration of any
representation or warranty shall not affect any claim made prior to the date of
such expiration. All covenants herein not fully performed shall survive the
Closing and continue thereafter until fully performed. Any investigation, audit
or other examination that may have been made or may be made at any time by or on
behalf of the party to whom any such representation or warranty is made shall
not limit or diminish such representations and warranties, and the parties may
rely on the representations and warranties set forth in this Agreement
irrespective of any information obtained by them by any investigation, audit or
examination or otherwise.
40
11.2 REGULATORY FILINGS. Each of the Sellers will cooperate with the
Buyer to enable the Buyer and the Company to make any and all regulatory filings
required by them with respect to any of them or the transactions contemplated
hereby (including, by way of example and not of limitation, the filing of tax
returns).
SECTION 12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY THE SELLERS.
The Sellers jointly and severally agree to indemnify and hold the Buyer
and its respective subsidiaries and affiliates and persons serving as officers,
directors, stockholders or employees thereof (individually a "Buyer Indemnified
Party" and collectively the "Buyer Indemnified Parties") harmless from and
against any damages, liabilities, losses (including, without limitation,
diminution in value), taxes, fines, penalties, costs, and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) fraud, intentional misrepresentation or a deliberate or
wilful breach by any Seller of any of their representations, warranties or
covenants under this Agreement or any agreement, document or instrument
contemplated hereby or in any certificate, schedule or exhibit delivered
pursuant hereto or thereto;
(b) any breach of any representation, warranty or covenant of
any Seller under this Agreement or under any agreement, document or instrument
contemplated hereby, or in any certificate, schedule or exhibit delivered
pursuant hereto or thereto, or by reason of any claim, action or proceeding
asserted or instituted growing out of any matter or thing constituting such a
breach; and
(c) the activities, conduct, business or operation of the
Company prior to the Closing, or arising out of facts, events or circumstances
regarding the Company existing prior to the Closing.
12.2 LIMITATIONS ON INDEMNIFICATION BY THE SELLERS. Notwithstanding the
foregoing, the right of Buyer Indemnified Parties to indemnification under
Section 12.1 shall be subject to the following provisions:
(a) No indemnification shall be payable pursuant to Section
12.1(b) or 12.1(c) above to any Buyer Indemnified Party, unless the total of all
claims for indemnification pursuant to Section 12.1 shall exceed $100,000 in the
aggregate, whereupon the full amount of such claims shall be recoverable in
accordance with the terms hereof;
41
(b) No indemnification shall be payable to a Buyer Indemnified
Party with respect to claims asserted pursuant to Section 12.1(b) or 12.1(c)
(exclusive of any claims for indemnification for Taxes or based upon or related
to a breach of any representation, warranty or covenant with respect to Taxes or
tax related matters (whether or not the representation which is breached
specifically relates to Taxes) or any claims for indemnification related to the
representations and warranties set forth in Sections 3.3, 3.24, 4.1 or 4.3)
after the First Audit Anniversary (the "Indemnification Cut-Off Date");
provided, however, that such expiration shall not affect any claim with respect
to which notice was given in the manner contemplated by Section 12.5 hereof
prior to the Indemnification Cut-Off Date; and
(c) No indemnification shall be payable pursuant to Section
12.1(b) or 12.1(c) above to any Buyer Indemnified Party by any Stockholder in
excess of sixty percent (60) percent of such Stockholder's pro rata share of the
Initial Purchase Price (based upon such Stockholder's ownership interest in the
Company as set forth on SCHEDULE 3.3(b)).
12.3 INDEMNIFICATION BY THE BUYER. The Buyer agrees to indemnify and
hold the Sellers harmless from and against any damages, liabilities, losses and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by the Sellers arising out of or
based upon (a) fraud, intentional misrepresentation or a deliberate or wilful
breach by the Buyer of any of its representations, warranties or covenants under
this Agreement or any agreement, document or instrument contemplated hereby or
in any certificate, schedule or exhibit delivered pursuant hereto or thereto or
(b) any breach of any representation, warranty or covenant made by the Buyer in
this Agreement or in any agreement, document or instrument contemplated hereby,
or in any certificate, schedule or exhibit delivered pursuant hereto or thereto,
or by reason of any claim, action or proceeding asserted or instituted growing
out of any matter or thing constituting such a breach.
12.4 LIMITATION ON INDEMNIFICATION BY THE BUYER. Notwithstanding the
foregoing, the rights of the Sellers to indemnification under Section 12.3 shall
be subject to the following provisions:
(a) No indemnification pursuant to Section 12.3 shall be
payable to the Sellers, unless the total of all claims for indemnification
pursuant to Section 12.3 shall exceed $100,000 in the aggregate, whereupon the
full amount of such claims shall be recoverable in accordance with the terms
hereof; and
(b) No indemnification shall be payable to the Sellers with
respect to claims asserted pursuant to Section 12.3 above after the
Indemnification Cut-Off Date; provided, however, that such expiration shall not
affect any claim with respect to which notice was given in the manner
contemplated by Section 12.5 hereof prior to the Indemnification Cut-Off Date.
12.5 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims
for indemnification hereunder by giving written notice thereof to the
indemnifying party within
42
the period in which indemnification claims can be made hereunder, provided that
if the party seeking indemnification is a Buyer Indemnified Party it shall, at
its option, either (a) provide notice of such claim to all Sellers
contemporaneously or (b) provide notice of such claim to the Seller(s) from whom
it elects to seek indemnification, acknowledge that it has not provided notice
to all Sellers and acknowledge that the Seller(s) receiving such notice may
elect to provide notice to all Sellers. If indemnification is sought for a claim
or liability asserted by a third party, the indemnified party shall also give
written notice thereof to the indemnifying party promptly after it receives
notice of the claim or liability being asserted, but the failure to do so shall
not relieve the indemnifying party from any liability except to the extent that
it is prejudiced by the failure or delay in giving such notice. Such notice
shall include a copy of each material document asserting or relating to the
Claim and summarize the bases for the claim for indemnification and any claim or
liability being asserted by a third party. Within sixty (60) days after
receiving such notice the indemnifying party shall give written notice to the
indemnified party stating whether it disputes the claim for indemnification and
whether it will defend against any third party claim or liability at its own
cost and expense. The indemnifying party shall be entitled to direct the defense
against a third party claim or liability with counsel selected by it (subject to
the consent of the indemnified party, which consent shall not be unreasonably
withheld) as long as the indemnifying party is conducting a good faith and
diligent defense. The indemnified party shall at all times have the right to
fully participate in the defense of a third party claim or liability at its own
expense directly or through counsel; provided, however, that if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and the indemnified party is advised that representation of
both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the indemnified party may engage separate
counsel at the expense of the indemnifying party. If no such notice of intent to
dispute and defend a third party claim or liability is given by the indemnifying
party, or if such good faith and diligent defense is not being or ceases to be
conducted by the indemnifying party, the indemnified party shall have the right,
at the expense of the indemnifying party, to undertake the defense of such claim
or liability (with counsel selected by the indemnified party), and to compromise
or settle it, exercising reasonable business judgment. If the third party claim
or liability is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available such
information and assistance as the indemnifying party may reasonably request and
shall cooperate with the indemnifying party in such defense, at the expense of
the indemnifying party.
12.6 SATISFACTION OF THE SELLERS' INDEMNIFICATION OBLIGATIONS. In order
to satisfy the indemnification obligations of any Seller entitled directly or
indirectly to receive Contingent Payments pursuant to Section 1.3 hereof, a
Buyer Indemnified Party shall have the right (in addition to collecting directly
from any such Seller) to set off its indemnification claims against any and all
amounts due to such Seller (or other entity of which such Seller is a beneficial
owner directly or indirectly) pursuant to Section 1.3 hereof.
43
SECTION 13. DEFINITIONS.
13.1 DEFINITIONS. For purposes of this Agreement and the Exhibits and
Schedules hereto, the following terms shall have the respective meanings set
forth in this Section 13.1:
"ACQUIRED BUSINESS" shall have the meaning specified in Section 1.3
hereof.
"ADVISERS ACT" shall mean the Investment Advisers Act of 1940, as the
same may be amended from time to time, and any successor to such act.
"AGGREGATE STOCK CONSIDERATION" shall have the meaning specified in
Section 1.2 hereof.
"AGREEMENT" shall mean this Asset Purchase Agreement.
"ANNUAL PRE-TAX GROWTH RATE" shall have the meaning specified in
Section 1.3 hereof.
"ARTICLES OF INCORPORATION" shall have the meaning specified in Section
3.2 hereof.
"ASSETS" means all of the assets of the Company, including, without
limitation, all of the assets used in the conduct of the business of the
Company.
"ASSUMED OBLIGATIONS" means the Obligations listed on SCHEDULE 1.1(b)
hereto.
"AVERAGE TRADING PRICE" shall have the meaning specified in Section 1.2
hereof.
"BASE BALANCE SHEET" shall mean the unaudited balance sheet of the
Company at December 31, 2000 (including notes thereto).
"BASE FEES" shall have the meaning specified in Section 8.3 hereof.
"BASE OPERATING EXPENSES" shall have the meaning specified in Section
1.3 hereof.
"BASE REVENUE RUN RATE" shall have the meaning specified in Section 1.3
hereof.
"BUYER INDEMNIFIED PARTY" shall have the meaning specified in Section
12.1 hereof.
"BUYER" shall mean Boston Private Financial Holdings, Inc., a
Massachusetts corporation, or any of its permitted assigns hereunder.
"BUYER SHARES" shall have the meaning specified in Section 1.2 hereof.
"CLAIMS" shall mean any restrictions, liens, claims, charges, security
interests, assignments, mortgages, deposit arrangements, pledges or encumbrances
of any kind or nature whatsoever.
44
"CLOSING" shall have the meaning specified in Section 1.4 hereof.
"CLOSING DATE FEES" shall have the meaning specified in Section 8.3
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor code thereto. For purposes of this Agreement,
all references to Sections of the Code shall include any predecessor provisions
to such Sections and any similar provisions of federal, state, local or foreign
law.
"COMMODITY EXCHANGE ACT" shall mean the Commodity Exchange Act, 7
U.S.C. ss.1 et. seq., as the same may be amended from time to time, and any
successor to such act.
"COMMON STOCK" shall have the meaning specified in Section 1.2 hereof.
"COMPANY" shall mean Sand Hill Advisors, Inc., a California
corporation.
"COMPANY SHARES" shall have the meaning specified in Section 14.1
hereof.
"COMPOUNDED PRE-TAX GROWTH RATE" shall have the meaning specified in
Section 1.3 hereof.
"COMPOUNDED REVENUE GROWTH RATE" shall have the meaning specified in
Section 1.3 hereof.
"CONSENT" shall have the meaning specified in Section 8.3 hereof.
"CONTINGENT PAYMENT" shall have the meaning specified in Section 1.3
hereof.
"CONTINGENT PAYMENT AVERAGE TRADING PRICE" shall have the meaning
specified in Section 1.3 hereof.
"CONTINGENT PAYMENT CLOSING DATE" shall have the meaning specified in
Section 1.3 hereof.
"CONTINGENT SHARES" shall have the meaning specified in Section 1.3
hereof.
"CONTINGENT STOCK CONSIDERATION" shall have the meaning specified in
Section 1.3 hereof.
"COPYRIGHTS" means collectively all of the following: (i) all
copyrights, rights and interests in copyrights, works protectable by copyright,
copyright registrations and copyright applications now owned or hereafter
created or acquired by the Company relating to operations prior to the date
hereof; (ii) all renewals of any of the foregoing; (iii) all income, royalties,
damages and payments now or hereafter due and/or payable under any of the
foregoing, including, without limitation, damages or payments for past or future
infringements
45
of any of the foregoing; (iv) the right to ▇▇▇ for past, present and future
infringements of any of the foregoing; (v) all rights corresponding to any of
the foregoing throughout the world; and (vi) all goodwill associated with or
symbolized by any of the foregoing.
"EMPLOYEE PROGRAMS" shall have the meaning specified in Section 3.24(f)
hereof.
"EMPLOYMENT AGREEMENTS" shall have the meaning specified in Section 8.6
hereof.
"EMPLOYMENT ARRANGEMENT" shall have the meaning specified in Section
3.25(b) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor to such act.
"ERISA AFFILIATE" shall have the meaning specified in Section 3.24(f)
hereof.
"ERISA CLIENT" shall have the meaning specified in Section 3.7(c)
hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor to such act.
"EXCLUDED ASSETS" means the Assets listed on SCHEDULE 1.1(c) hereto.
"EXCLUDED OBLIGATIONS" means the Obligations other than the Assumed
Obligations, including, without limitation, those Obligations of the Company
listed on SCHEDULE 1.1(c) hereto.
"EXHIBITS" shall mean the exhibits attached to and made a part of this
Agreement.
"FIRST AUDIT ANNIVERSARY" shall have the meaning specified in Section
11.1 hereof.
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INDEMNIFICATION CUT-OFF DATE" shall have the meaning specified in
Section 12.2(b) hereof.
"INITIAL PURCHASE PRICE" shall have the meaning specified in Section
1.2 hereof.
"INITIAL VALUATION" shall have the meaning specified in Section 1.3
hereof.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
3.14(a).
46
"INVESTMENT COMPANY ACT" shall mean the Investment Company Act of 1940,
as the same may be amended from time to time, and any successor to such act.
"INVESTMENT LAWS AND REGULATIONS" shall have the meaning set forth in
Section 3.17 hereof.
"INVESTMENT MANAGEMENT SERVICES" shall mean any services which involve
(a) the management of an investment account or fund (or portions thereof or a
group of investment accounts or funds), or (b) the giving of advice with respect
to the investment and/or reinvestment of assets or funds (or any group of assets
or funds), and activities related or incidental thereto.
"IRS" shall mean the Internal Revenue Service.
"KNOW HOW" means trade secrets, confidential or proprietary
information, inventions, technical data, drawings, prints, plans,
specifications, methods, processes, systems, records, data and other information
or documentation, whether patentable or not, related to the Transferred
Intellectual Property and/or the business of the Company.
"LEASED REAL PROPERTY" shall have the meaning specified in Section
3.6(a) hereof.
"LICENSES" means permits, registrations, licenses, franchises,
certifications and other approvals.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to a Person, a
material adverse effect on the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of such Person.
"MEASUREMENT PERIOD" shall have the meaning specified in Section 1.3
hereof.
"MULTIEMPLOYER PLAN" shall have the meaning specified in Section
3.24(f) hereof.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NEW SUBSIDIARY" shall have the meaning specified in Section 2.1
hereof.
"NON SOLICITATION AGREEMENT" shall mean a
Non-Competition/Non-Solicitation Agreement substantially in the form attached
hereto as EXHIBIT 8.7.
"OBLIGATIONS" means all of the obligations of the Company whether or
not known, contingent or matured as of the date hereof.
"OPERATING EXPENSES" shall have the meaning specified in Section 1.3
hereof.
"OWNED REAL PROPERTY" shall have the meaning specified in Section
3.6(a) hereof.
47
"PATENTS" means collectively all of the following: (i) all patents and
patent applications now owned or hereafter created or acquired by the Company
(relating to operations prior to the date hereof) and patentable inventions;
(ii) the reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any of the foregoing; (iii) all income, royalties,
damages or payments now and hereafter due and/or payable under any of the
foregoing with respect to any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the foregoing;
(iv) the right to ▇▇▇ for past, present and future infringements of any of the
foregoing; (v) all rights corresponding to any of the foregoing throughout the
world; and (vi) all goodwill associated with any of the foregoing.
"PERSON" means any individual, partnership (general or limited),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision thereof.
"PRE-TAX INCOME" shall have the meaning specified in Section 1.3
hereof.
"PRE-TAX RUN RATE" shall have the meaning specified in Section 1.3
hereof.
"PRE-TAX VALUATION" shall have the meaning specified in Section 1.3
hereof.
"REAL PROPERTY" shall have the meaning specified in Section 3.6(a)
hereof.
"REGISTRATION RIGHTS AGREEMENT" shall mean a Registration Rights
Agreement substantially in the form attached hereto as EXHIBIT 9.4.
"REVENUE" shall have the meaning specified in Section 1.3 hereof.
"REVENUE VALUATION" shall have the meaning specified in Section 1.3
hereof.
"SCHEDULES" shall mean the schedules attached to and made a part of
this Agreement.
"SEC" shall mean the Securities and Exchange Commission, or any
successor agency thereto.
"SEC FILINGS" shall have the meaning specified in Section 6.6 hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as the same may
be amended from time to time, and any successor to such act.
"SELLERS" shall mean the Company and the Stockholders.
"STOCKHOLDERS" shall mean the stockholders of the Company.
"TAXES" shall have the meaning specified in Section 3.9(a) hereof.
48
"TAXING AUTHORITY" shall have the meaning specified in Section 3.9(c)
hereof.
"TRADEMARKS" means collectively all of the following owned as of the
date hereof by the Company: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, other business identifiers, prints and labels on which any of the
foregoing have appeared or appear, all registrations and recordings thereof, and
all applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof; (ii) all reissues, extensions or
renewals thereof; (iii) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with respect to any
of the foregoing, including, without limitation, damages or payments for past or
future infringements of any of the foregoing; (iv) the right to ▇▇▇ for past,
present and future infringements of any of the foregoing; (v) all rights
corresponding to any of the foregoing throughout the world; and (vi) all
goodwill associated with or symbolized by any of the foregoing.
"TRANSFERRED ASSETS" means the Assets other than the Excluded Assets,
which assets include all of the Assets used in the Company's investment
management business, including, without limitation, those Assets of the Company
listed on SCHEDULE 1.1(a) hereto.
"TRANSFERRED INTELLECTUAL PROPERTY" means the Intellectual Property set
forth on SCHEDULE 3.14 hereto. The Company represents and warrants that said
SCHEDULE 3.14 includes all the Patents, Copyrights, Trademarks, Know-How and
Licenses owned by the Company or other Persons and which are used in the conduct
of the Company's business.
"WORKING CAPITAL" shall mean the current assets included in the
Transferred Assets reduced by the current liabilities included in the Assumed
Obligations, as determined using the accrual based method of accounting in
accordance with GAAP, consistently applied.
SECTION 14. MISCELLANEOUS.
14.1 FEES AND EXPENSES.
(a) The Buyer shall pay its own expenses incident to the
negotiation and consummation of the transactions contemplated by this Agreement
and the agreements, instruments and documents contemplated hereby. The Sellers
shall pay their own expenses incident to the negotiation and consummation of the
transactions contemplated by this Agreement and the agreements, instruments and
documents contemplated hereby.
(b) The Sellers will pay all costs incurred by the Company,
whether at or subsequent to the Closing, including without limitation, all
transfer taxes and charges applicable to such transfer, and all costs of
obtaining permits, waivers, registrations or consents with respect to any
assets, rights or contracts of the Company transferred to the Buyer as
contemplated by this Agreement.
49
14.2 DISPUTE RESOLUTION. Except with respect to matters as to which
injunctive relief is being sought, any dispute arising out of or relating to
this Agreement that has not been settled within thirty (30) days by good faith
negotiation between the parties to this Agreement shall be submitted to JAMS for
final and binding arbitration pursuant to JAMS' Arbitration Rules. Any such
arbitration shall be conducted in Boston, Massachusetts or San Francisco,
California. Such proceedings shall be guided by the following agreed upon
procedures:
(a) mandatory exchange of all relevant documents, to be
accomplished within forty-five (45) days of the initiation of the procedure;
(b) no other discovery;
(c) hearings before the neutral arbitrator; and
(d) decision to be rendered not more than ten (10) days
following such hearings.
14.3 WAIVERS. Any waiver of any terms or conditions or of the breach of
any covenant, representation or warranty of this Agreement in any one instance,
shall not operate as or be deemed to be or construed as a further or continuing
waiver of any other breach of such term, condition, covenant, representation or
warranty or any other term, condition, covenant, representation or warranty, nor
shall any failure or delay at any time or times to enforce or require
performance of any provision hereof operate as a waiver of or affect in any
manner such party's right at a later time to enforce or require performance of
such provision or of any provision hereof; PROVIDED, HOWEVER, that no such
waiver, unless it, by its own terms, explicitly provides to the contrary, shall
be construed to effect a continuing waiver of the provision being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance.
14.4 GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws of The Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
14.5 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail, upon the sooner of the date on which
receipt is acknowledged or the expiration of three days after deposit in United
States post office facilities properly addressed with postage prepaid. All
notices to a party will be sent to the addresses set forth below or to such
other address or person as such party may designate by notice to each other
party hereunder:
TO THE BUYER: Boston Private Financial Holdings, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
50
with a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
TO THE SELLERS: Sand Hill Advisors, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
14.6 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or in such Schedules and Exhibits or in such
other writings; and all inducements to the making of this Agreement and the
transactions contemplated hereby which were relied upon by either party hereto
have been expressed herein or in such Schedules or Exhibits or in such other
writings.
14.7 ASSIGNABILITY; BINDING EFFECT. This Agreement or any of the
obligations or rights hereunder (i) may not be assigned by the Buyer without the
prior written consent of the Company other than to an entity under the direct or
indirect control of Boston Private Financial Holdings, Inc., and (ii) may not be
assigned by any of the Sellers without the prior written consent of the Buyer.
This Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors, heirs,
executors, administrators and permitted assigns.
51
14.8 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
14.9 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed (a) in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document, and (b) by facsimile.
14.10 AMENDMENTS. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by the Buyer and the Company, or in the
case of a waiver, the party waiving compliance.
14.11 PUBLICITY AND DISCLOSURES. No press releases or public
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior
knowledge and written consent of the Buyer and the Company, which consent shall
not be unreasonably withheld, except as is otherwise required by applicable
laws, rules and regulations (including, without limitation, the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder).
14.12 CONSENT TO JURISDICTION. Each of the parties hereby consents to
personal jurisdiction, service of process and venue in the federal or state
courts of the Commonwealth of Massachusetts or the State of California for any
claim, suit or proceeding arising under this Agreement, or in the case of a
third party claim subject to indemnification hereunder, in the court where such
claim is brought and hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such state court or, to
the extent permitted by law, in such federal court. Each of the parties hereby
irrevocably consents to the service of process in any such action or proceeding
by the mailing by certified mail of copies of any service or copies of the
summons and complaint and any other process to such party at the address
specified in Section 14.5 hereof. The parties agree that a final judgement in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit or in any other manner permitted by law and shall affect
the right of a party to service legal process or to bring any action or
proceeding in the carts of other jurisdictions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
52
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
BUYER: BOSTON PRIVATE FINANCIAL HOLDINGS,
INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief Executive Officer
COMPANY: SAND HILL ADVISORS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
STOCKHOLDERS: ▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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