EXHIBIT 2.7
AGREEMENT AND PLAN OF REORGANIZATION
by and among
AFFILIATED MANAGERS GROUP, INC.
as "AMG"
CONSTITUTION MERGER SUB, INC.
as "Merger Sub"
ESSEX INVESTMENT MANAGEMENT COMPANY, INC.
as the "Company"
and
The Majority Stockholders of the Company Named Herein
Dated as of January 15, 1998
AGREEMENT AND PLAN OF REORGANIZATION
INDEX
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SECTION 1. THE MERGER..................................................2
1.1 The Merger..................................................2
1.2 Effective Time..............................................2
1.3 Effects of the Merger.......................................2
1.4 Articles of Organization....................................2
1.5 By-Laws.....................................................3
1.6 Directors and Officers......................................3
1.7 Conversion of Securities of the Company.....................3
1.8 Additional Consideration....................................4
1.9 Time and Place of Closing...................................4
1.10 Further Assurances..........................................4
1.11 Transfer Taxes..............................................5
1.12 Supplemental Purchase Agreement.............................5
1.13 Redemption Agreement........................................5
SECTION 2. CONTRIBUTION OF ASSETS AND RESTATEMENT OF LLC
AGREEMENT...................................................5
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND MAJORITY STOCKHOLDERS...................................6
3.1 Making of Representations and Warranties....................6
3.2 Organization and Qualification of the Company and the LLC...6
3.3 Capital Stock of the Company; Beneficial Ownership..........7
3.4 Subsidiaries................................................7
3.5 Authority of the Company....................................8
3.6 Real and Personal Property.................................10
3.7 Assets Under Management....................................11
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..................................................18
3.16 Litigation.................................................19
3.17 Compliance with Laws.......................................20
3.18 Business; Registrations....................................20
3.19 Insurance..................................................22
(i)
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3.20 Powers of Attorney.........................................22
3.21 Finder's Fee...............................................22
3.22 Corporate Records; Copies of Documents.....................22
3.23 Transactions with Interested Persons.......................22
3.24 Employee Benefit Programs..................................23
3.25 Directors, Officers and Employees..........................25
3.26 Non-Foreign Status.........................................26
3.27 Transfer of Shares.........................................26
3.28 Stock Repurchase...........................................26
3.29 Code of Ethics.............................................26
3.30 Certain Representations and Warranties as to Collective
Investment Vehicles........................................26
SECTION 4. SEVERAL REPRESENTATIONS AND WARRANTIES OF
MAJORITY STOCKHOLDERS......................................29
4.1 Company Shares.............................................29
4.2 Authority..................................................29
4.3 Ownership of LLC Interests.................................30
4.4 Finder's Fee...............................................30
4.5 Investment Advisory Representation.........................30
4.6 Agreements.................................................30
4.7 Employment Data............................................31
4.8 Good Health................................................31
SECTION 5. COVENANTS OF THE COMPANY AND THE MAJORITY
STOCKHOLDERS...............................................31
5.1 Making of Covenants and Agreements.........................31
5.2 Client Consents............................................31
5.3 Authorizations.............................................32
5.4 Authorization from Others..................................32
5.5 Status.....................................................32
5.6 Conduct of Business........................................33
5.7 Financial Statements.......................................34
5.8 Preservation of Business and Assets........................35
5.9 Observer Rights and Access.................................35
5.10 Notice of Default..........................................35
5.11 Consummation of Agreement..................................35
5.12 Cooperation of the Company and Stockholders................36
5.13 No Solicitation of Other Offers............................36
5.14 Confidentiality............................................36
5.15 Tax Returns................................................37
5.16 Policies and Procedures....................................37
5.17 No Violation of LLC Agreement..............................37
(ii)
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5.18 Subsidiaries; Investments in Other Persons.................37
5.19 LLC Interests..............................................37
5.20 Employee Programs..........................................38
5.21 Foreign Qualifications.....................................38
5.22 Liens......................................................38
SECTION 5A. COVENANTS OF THE COMPANY, THE MAJORITY
STOCKHOLDERS AND AMG WITH RESPECT TO CERTAIN TAX
MATTERS....................................................38
5A.1 Section 338(h)(10) Election................................38
5A.2. Tax Periods Ending on or Before the Closing Date...........39
5A.3. Cooperation on Tax Matters.................................40
5A.4 Tax Status.................................................40
SECTION 6. REPRESENTATIONS AND WARRANTIES OF AMG......................40
6.1 Making of Representations and Warranties...................40
6.2 Organization of AMG........................................41
6.3 Authority of AMG...........................................41
6.4 Capitalization.............................................41
6.5 Litigation.................................................42
6.6 Acquisition of Shares for Investment.......................42
6.7 Finder's Fee...............................................43
6.8 Merger Sub.................................................43
6.9 Financial Statements.......................................43
6.10 Absence of Changes.........................................43
SECTION 7. COVENANTS OF AMG...........................................44
7.1 Making of Covenants and Agreement..........................44
7.2 Confidentiality............................................44
7.3 Cooperation of AMG.........................................44
7.4 HSR Act....................................................44
7.5 Notice of Default..........................................44
7.6 Consummation of Agreement..................................45
7.7 Contribution to LLC........................................45
7.8 Transactions in AMG Shares.................................45
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF AMG.......................45
8.1 Litigation; No Opposition..................................45
8.2 Representations, Warranties and Covenants..................46
8.3 Client Consents............................................47
8.4 Transfer...................................................48
8.5 Registration as an Investment Adviser......................48
(iii)
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8.6 Other Approvals............................................48
8.7 HSR Act....................................................48
8.8 Restated LLC Agreement.....................................48
8.9 Employment Agreements......................................48
8.10 Non Solicitation/Non Disclosure Agreements.................49
8.11 Capitalization, Net Worth and Working Capital of the
Company and the LLC........................................49
8.12 Delivery...................................................49
8.13 Material Adverse Effect....................................51
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
MAJORITY STOCKHOLDERS......................................51
9.1 No Litigation; No Opposition...............................51
9.2 Representations, Warranties and Covenants..................52
9.3 Client Consent.............................................52
9.5 Registration as an Investment Adviser......................53
9.6 HSR Act....................................................53
SECTION 10. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED....................54
10.1 Termination................................................54
10.2 Effect of Termination......................................54
10.3 Right to Proceed...........................................54
SECTION 11. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING...................55
11.1 Survival of Representations, Warranties and Covenants......55
11.2 Regulatory Filings.........................................55
SECTION 12. INDEMNIFICATION................................................56
12.1 Indemnification by the Majority Stockholders...............56
12.2 Limitations on Indemnification by the Majority Stockholders56
12.3 Indemnification by AMG.....................................57
12.4 Limitation on Indemnification by AMG.......................58
12.5 Notice; Defense of Claims..................................58
12.6 Satisfaction of Indemnification Obligations................59
12.7 Procedure..................................................60
12.8 Exclusive Remedy...........................................60
SECTION 13. DEFINITIONS....................................................60
13.1 Definitions................................................60
SECTION 14. MISCELLANEOUS..................................................65
14.1 Fees and Expenses..........................................65
14.2 Dispute Resolution.........................................66
(iv)
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14.3 Waivers....................................................66
14.4 Governing Law..............................................67
14.5 Notices....................................................67
14.6 Entire Agreement; Severability.............................68
14.7 Assignability; Binding Effect..............................68
14.8 Captions and Gender........................................69
14.9 Execution in Counterparts..................................69
14.10 Amendments.................................................69
14.11 Publicity and Disclosures..................................69
14.12 Consent to Jurisdiction....................................69
14.13 Guarantee..................................................69
(v)
EXHIBITS
Exhibit 1.2 - Form of Articles of Merger
Exhibit 1.7A - Certificate of Designations
Exhibit 1.7B - Escrow Agreement
Exhibit 1.12 - Form of Supplemental Purchase Agreement (including
exhibits)
Exhibit 1.13 - Form of Redemption Agreement (including exhibits)
Exhibit 2.1A - Form of Initial LLC Contribution Agreement
Exhibit 2.1B - Form of Final LLC Contribution Agreement
Exhibit 2.2 - Form of Restated LLC Agreement
Exhibits 5.2A, 5.2B,
5.2C and 5.2D - Forms of Client Consent Letters
Exhibit 6.9 - Financials of AMG
Exhibit 8.9 - Form of Employment Agreement
Exhibit 8.10 - Form of Non Solicitation Agreement
Exhibit 8.12(i) - Form of Opinion of Counsel to the Company, the LLC
and the Stockholders
Exhibit 8.12(j) - Form of Release of Company and LLC from certain
liabilities
Exhibit 8.12(k) - Form of Representation Certificate
Exhibit 8.12(l) - Form of Consent Certificate
Exhibit 8.12(m) - Form of Capitalization, Net Worth and Working
Capital Certificate
Exhibit 8.12(o) - Form of Supplemental Indemnification Agreement
Exhibit 8.12(p) - Form of Bermuda counsel opinion
Exhibit 8.13 - Form of Material Adverse Effect Certificate
Exhibit 9.4(f) - Form of Opinion of Counsel to AMG
SCHEDULES
Schedule 1.7 - Stockholders and Shares; Consideration
Schedule 1.13 - Redeeming Stockholders
Schedule 3.2(b) - Foreign Qualification (LLC)
Schedule 3.3 - Capital Stock; Voting Agreements
Schedule 3.4(a) - Subsidiaries
Schedule 3.4(b)(i) - LLC Capitalization pre-Closing
Schedule 3.4(b)(ii) - LLC Capitalization post-Closing and LLC Contribution
Schedule 3.5 - Approvals; Waivers
Schedule 3.6(a) - Real Property
Schedule 3.6(b) - Assets
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
(vi)
Schedule 3.13 - Banking Relations
Schedule 3.14 - Intellectual Property
Schedule 3.15 - Contracts; Commitments
Schedule 3.18(a) - Clients
Schedule 3.18(b) - Investment Adviser Qualification
Schedule 3.19 - Insurance
Schedule 3.24 - Employee Program
Schedule 3.25(a) - Directors and Officers; Certain Employees
Schedule 3.25(b) - Employment Arrangements
Schedule 3.27 - Share Transfers
Schedule 3.28 - Repurchases
Schedule 4.5 - Charitable Organizations
Schedule 4.7 - Employment Data
Schedule 4.8 - Good Health
Schedule 6.3 - Consents
Schedule 6.4 - AMG's Capitalization
Schedule 6.10 - Adverse Changes
Schedule 12.2(a) - Stockholder Indemnification Amounts
(vii)
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT entered into as of January 15, 1998, by and among Affiliated
Managers Group, Inc., a Delaware corporation ("AMG"), Constitution Merger Sub,
Inc., a Massachusetts corporation and a wholly owned subsidiary of AMG ("Merger
Sub"), Essex Investment Management Company, Inc., a Massachusetts corporation
(the "Company"), and the holders of the Company's capital stock party hereto
collectively referred to as the "Majority Stockholders" and, each individually
as a "Majority Stockholder").
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 private accounts of certain institutional
and individual investors;
WHEREAS, the Stockholders (as this and other capitalized terms are defined
in Section 13.1) own of record and beneficially all of the issued and
outstanding capital stock of the Company, consisting of thirty-one thousand five
hundred fifty (31,550) shares of the Company's Common Stock, par value $1 per
share (the "Common Stock") and fourteen thousand nine hundred fifty (14,950)
shares of the Company's Class A Non-Voting Common Stock, par value $1 per share
(the "Class A Stock") (said shares of Common Stock and Class A Stock being
referred to herein collectively as the "Company Shares");
WHEREAS, the Company and the Majority Stockholders and certain other
Persons have formed Essex Investment Management Company, LLC;
WHEREAS, the parties hereto desire, and the Boards of Directors of AMG and
the Company have each determined that it is in the best interests of their
respective stockholders, and the Majority Stockholders of the Company have
determined, to enter into this agreement and the Supplemental Purchase Agreement
providing for the acquisition by AMG, of the Company, by means of a merger of
Merger Sub with and into the Company, and further desire that, in connection
therewith, the LLC's Existing Limited Liability Company Agreement be amended and
restated into the Restated LLC Agreement;
WHEREAS, the parties hereto desire and intend that, immediately following
the Closing (as such term is defined in Section 1.8), the Company will
contribute all or substantially all of its assets to Essex Investment Management
Company, LLC, a Delaware limited liability company (the "LLC"); and
WHEREAS, to induce the parties hereto to enter into this Agreement, and to
receive the benefits that will accrue to them if Merger Sub merges with and into
the Company as contemplated hereby, the Company and the parties hereto have
agreed to make certain representations, warranties and covenants as set forth
herein.
NOW, THEREFORE, in order to consummate said merger 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. THE MERGER
1.1 The Merger. Subject to the terms, provisions and conditions contained
in this Agreement, and on the basis of the representations, warranties and
covenants herein set forth, at the Effective Time (as such term is defined in
Section 1.2), in accordance with this Agreement and the provisions of the
Business Corporation Law of the Commonwealth of Massachusetts, Merger Sub hereby
agrees to and AMG hereby agrees to cause the Merger Sub to merge with and into
the Company (the "Merger"). The Company shall be the surviving corporation
(sometimes referred to herein as the "Surviving Corporation") of the Merger and
shall continue its corporate existence under the laws of the Commonwealth of
Massachusetts as a subsidiary of AMG. Upon consummation of the Merger, the
separate corporate existence of Merger Sub shall terminate.
1.2 Effective Time. The Merger shall become effective at the time the
Secretary of State of the Commonwealth of Massachusetts endorses his approval on
the articles of merger in the form attached hereto as Exhibit 1.2 (the "Articles
of Merger"), which shall be filed (accompanied by the applicable fee) with the
Secretary of State of the Commonwealth of Massachusetts on the date of the
Closing. The "Effective Time" shall be the date and time when the Merger becomes
effective. The parties hereto agree to execute, act on, make and amend (as AMG
or the Company deems necessary or appropriate) all filings or other recordings
required in connection with the Merger.
1.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects provided herein and set forth in the applicable
provisions of the Business Corporation Law of the Commonwealth of Massachusetts.
Without limiting the generality of the foregoing and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation (it being
understood that (i) the Majority Stockholders shall be liable for certain
liabilities set forth in Section 12 of this Agreement and (ii) all liabilities
of the Company will be transferred to the LLC pursuant to the LLC Contribution).
1.4 Articles of Organization. The Articles of Organization of the
Surviving Corporation shall be the Articles of Organization of Merger Sub
immediately prior to the Effective Time, until thereafter amended in accordance
with applicable law and such Articles of Organization.
2
1.5 By-Laws. Unless otherwise determined by AMG prior to the Effective
Time, the By-laws of the Surviving Corporation shall be the By-laws of Merger
Sub immediately prior to the Effective Time, until thereafter amended in
accordance with applicable law, the Articles of Organization of the Surviving
Corporation and such By-laws.
1.6 Directors and Officers. Unless otherwise determined by AMG prior to
the Effective Time, the initial directors and officers of the Surviving
Corporation shall be the directors and officers of Merger Sub immediately prior
to the Effective Time, each to hold office in accordance with the Articles of
Organization and By-laws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
1.7 Conversion of Securities of the Company.
(a) At the Effective Time, all of the shares of Company Common Stock
and all of the shares of Company Class A Stock issued and outstanding
immediately prior to the Effective Time and all rights attached thereto, shall,
by virtue of this Agreement and without any action on the part of the holder
thereof, be converted into the right to receive, subject to adjustment as
provided in this Section 1.7: (i) cash in the aggregate amount of sixty-nine
million six hundred thousand dollars ($69,600,000) and (ii) one million seven
hundred fifty thousand nine hundred forty two (1,750,942) shares of AMG's Series
C Non-Voting Convertible Stock, $.01 par value per share (the "AMG Shares" and,
together with such cash, the "Merger Consideration"), established and designated
under the Certificate of Designations of AMG attached hereto as Exhibit 1.7A
(the "Certificate of Designations"). At the Effective Time, the Merger
Consideration shall be allocated among the Stockholders and to the escrow agent
under the Escrow Agreement and shall be paid to the Stockholders and, in the
case of the cash portion of the Merger Consideration, to the escrow agent on
behalf of the holders of Company Shares named in, and pursuant to the terms and
conditions of, the Escrow Agreement in substance materially consistent with that
attached hereto as Exhibit 1.7B (the "Escrow Agreement") as set forth in
Schedule 1.7. In addition, pursuant to the terms of the Escrow Agreement, AMG
will, from time to time and as additional Merger Consideration, deliver to such
escrow agent the number of additional AMG Shares set forth in Schedule 1.7.
(b) If, as of the Closing, the Company shall have received Consents
from clients whose investment advisory agreements provide for the payment (based
on the Contract Value of each such investment advisory agreement) of fees
constituting less than ninety-five percent (95%) of the Base Fees, then the
Merger Consideration delivered to each Stockholder pursuant to Section 1.7(a)
shall be subject to further adjustment, as set forth in Schedule 1.7.
(c) All of the shares of Common Stock converted into the right to
receive the Merger Consideration pursuant to this Section 1.7 shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate previously representing any such shares of Common Stock shall
thereafter represent only the right to receive the portion of the Merger
Consideration into which the shares of Common Stock represented by such
certificate have been converted pursuant to this Section 1.7. Certificates
previously
3
representing shares of Common Stock and Class A Stock shall be surrendered at
the Closing and shall be exchanged for Merger Consideration paid in
consideration therefor, without any interest thereon.
1.8 Additional Consideration.
(a) In the event that any Client which (a) has a contract that
neither prohibits assignment by its terms nor terminates by its terms upon
consummation of the transactions contemplated hereby does not Consent at or
prior to the Closing (and AMG in its sole discretion does not elect to treat
such client as having Consented at the Closing), then (a) such Client shall be
treated, for purposes of calculating the Merger Consideration hereunder, as
having withdrawn its assets, but the Company or the LLC may continue to provide
services to such Client and (b) in the event that, as of the date that is sixty
(60) days after the date of the Closing, the Company or the LLC is able to
obtain the Consent of such Client, then the Company shall make an additional
payment to the escrow agent under the Escrow Agreement, in accordance with
Schedule 1.7, unless AMG and the Majority Stockholders agree otherwise.
(b) In the event that any Client which has a contract that prohibits
assignment by its terms or terminates by its terms upon consummation of the
transactions contemplated hereby does not Consent at or prior to the Closing
(and AMG in its sole discretion does not elect to treat such client as having
Consented at Closing), then (a) such Client shall be treated, for purposes of
calculating the Merger Consideration hereunder, as having withdrawn its assets,
but the Company or the LLC may continue to provide services to such Client and
(b) in the event that, as of or prior to the date that is sixty (60) days after
the date of the Closing, the LLC is able to enter into a contract with such
Client with substantially identical terms, then the Company shall make an
additional payment to the escrow agent under the Escrow Agreement, in accordance
with Schedule 1.7, unless AMG and the Majority Stockholders otherwise agree.
1.9 Time and Place of Closing. The closing of the Merger and the related
transactions 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 date of the Closing, which shall
be five (5) business days after the fulfillment or waiver of each of the
conditions set forth in Sections 8 (other than Section 8.12) and 9 (other than
Section 9.4) hereof (or following the extension period as contemplated by
Section 8.1 and Section 9.1) or at such other place, or an earlier or later date
or time as may be mutually agreed upon by AMG and the Company.
1.10 Further Assurances. The Majority Stockholders shall (in their
respective capacities as individuals and as officers of the Company), from time
to time after the Closing, at the request of AMG and without further
consideration, execute and deliver further instruments of transfer and
assignment and take such other action as AMG may reasonably require to fully
implement the provisions of this Agreement.
4
1.11 Transfer Taxes. All transfer taxes, fees and duties under applicable
law incurred in connection with the Merger will be borne and paid fifty percent
(50%) by the Stockholders (pro rata in accordance with the Merger Consideration
received by them hereunder) and fifty percent (50%) by AMG, and the parties
shall promptly reimburse each other in accordance with such allocation for any
such tax, fee or duty which any of them is required to pay under applicable law.
1.12 Supplemental Purchase Agreement. Each Stockholder (including each
Majority Stockholder but excluding those Stockholders listed on Schedule 1.13)
who is not a Majority Stockholder has executed and delivered a Supplemental
Purchase Agreement.
1.13 Redemption Agreement. Each Stockholder listed on Schedule 1.13 has
executed and delivered a Redemption Agreement in the form attached as Exhibit
1.13 hereto (the "Redemption Agreement"), including the exhibits and attachments
thereto.
SECTION 2. CONTRIBUTION OF ASSETS AND RESTATEMENT OF LLC
AGREEMENT.
2.1 LLC Contribution. Prior to the Closing, the Company shall transfer
certain liabilities and obligations to the escrow agent under the Escrow
Agreement in accordance with the terms thereof. Promptly following the close of
business on the day of the Closing (and in any event prior to the end of such
day), the Surviving Corporation and the LLC shall, and the Surviving Corporation
shall cause the LLC to: (i) enter into the LLC Contribution Agreement in the
form attached hereto as Exhibit 2.1A (the "Initial LLC Contribution Agreement"),
as well as each of the other agreements, documents and instruments contemplated
thereby, and (ii) perform each of the transactions contemplated by the LLC
Contribution Agreement as well as each of the other agreements, documents and
instruments contemplated thereby. On the business day first following the day of
the Closing (but in any event prior to the commencement of business on such
first following day), the Surviving Corporation and the LLC shall, and the
Surviving Corporation shall cause the LLC to: (i) enter into the LLC
Contribution Agreement in the form attached hereto as Exhibit 2.1B (the "Final
LLC Contribution Agreement" and together with the Initial LLC Contribution
Agreement, the "LLC Contribution Agreement"), as well as each of the other
agreements, documents and instruments contemplated thereby, and (ii) perform
each of the transactions contemplated by the Final LLC Contribution Agreement as
well as each of the other agreements, documents and instruments contemplated
thereby. (Together, such transactions are referred to herein as the "LLC
Contribution.")
2.2 LLC Agreement. Immediately following the Closing, the Surviving
Corporation and each of the Stockholders as indicated on Schedule 3.4(b)(ii)
shall amend and restate the Existing LLC Agreement into the Limited Liability
Company Agreement in the form attached hereto as Exhibit 2.2 (the "Restated LLC
Agreement").
5
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
MAJORITY STOCKHOLDERS.
3.1 Making of Representations and Warranties. As a material inducement to
AMG and Merger Sub to enter into this Agreement and consummate the transactions
contemplated hereby, the Company and each of the Majority Stockholders jointly
and severally hereby makes to AMG and Merger Sub the representations and
warranties contained in this Section 3; provided, however, that each of the
Stockholders severally and not jointly, makes the representations set forth in
Section 3.3(b) hereof on his own behalf. After the Closing, no Stockholder shall
have any right of indemnity or contribution from Merger Sub or the LLC (or any
other right against Merger Sub or the LLC) with respect to any breach of a
representation or warranty of the Majority Stockholders or the Company
hereunder.
3.2 Organization and Qualification of the Company and the LLC.
(a) The Company 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 currently conducted. The copies of the Company's
Articles of Organization, as amended to date (the "Articles of Organization"),
certified by the Secretary of State of the Commonwealth of Massachusetts, and of
the Company's By-laws, as amended to date, certified by the Company's Clerk, and
heretofore delivered to AMG, are complete and correct, and no amendments thereto
are pending. The Company is not in violation of any term of its Articles of
Organization 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.
(b) The LLC is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware with full
power and authority under the Delaware Limited Liability Company Act, 6 Del. C.
ss.18-101, et seq., as amended from time to time (the "Delaware Act") and the
Existing LLC Agreement (and, after the effectiveness of the Restated LLC
Agreement, the Restated LLC Agreement) 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 or proposed to be
conducted (and, after giving effect to the Closing and the LLC Contribution, the
business currently conducted by the Company). The copies of the LLC's Existing
LLC Agreement (as such term is defined in Section 13.1), certified by the Clerk
of the Company in its capacity as Manager Member of the LLC, and of the LLC's
Certificate of Formation, as amended to date (the "Existing Certificate of
Formation"), certified by the Secretary of State of the State of Delaware, each
as heretofore delivered to AMG, are complete and correct, and no amendments
thereto are pending. The LLC is not in violation of any term of the Existing LLC
Agreement. The LLC is duly qualified to do business as a foreign limited
liability company under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties
6
requires such qualification. As of the Closing, the LLC shall be duly qualified
to do business as a foreign limited liability company under the laws of each
jurisdiction in which the nature of the business it will conduct after giving
effect to the LLC Contribution, or the ownership or leasing of the properties it
will receive in the LLC Contribution, requires such qualification, and such
jurisdictions are listed on Schedule 3.2(b).
3.3 Capital Stock of the Company; Beneficial Ownership.
(a) The authorized capital stock of the Company consists only of (i)
two hundred fifty thousand (250,000) shares of Common Stock, $1.00 par value per
share, of which thirty-one thousand five hundred fifty (31,550) shares are duly
and validly authorized, issued, outstanding, fully paid and non-assessable and
of which two hundred eighteen thousand four hundred fifty (218,450) shares are
authorized but unissued, and (ii) twenty five thousand (25,000) shares of Class
A Non-Voting Common Stock, $1.00 par value per share, of which fourteen thousand
nine hundred fifty (14,950) shares are duly and validly authorized, issued,
outstanding, fully paid and non-assessable and of which ten thousand fifty
(10,050) shares are authorized but unissued. Except as set forth in Schedule
3.3, 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 or redeemed
in violation of any federal or state law. Except as set forth in Schedule 3.3,
there are no voting trusts, voting agreements, proxies or other agreements,
instruments or undertakings with respect to the voting of the Company Shares to
which the Company or any of the Stockholders is a party. No Stockholder has any
dissenter's rights or rights of appraisal in the Merger with respect to the
Company's capital stock.
(b) Each Stockholder who is not a Majority Stockholder owns of
record, and to the knowledge of the Company and the Majority Stockholders,
beneficially, the Company Shares set forth opposite such Stockholder's name on
Schedule 1.7. Such Company Shares are, to the knowledge of the Company and the
Majority Stockholders, free and clear of any Claims, except as reflected on
Schedule 3.3. The shares of capital stock shown on Schedule 1.7 opposite each
such Stockholder's name are, to the knowledge of the Company and the Majority
Stockholders, the only shares of capital stock of the Company held by such
Stockholder or with respect to which such Stockholder has any rights, to the
knowledge of the Company and the Majority Stockholders, except as referenced on
Schedule 3.3.
3.4 Subsidiaries.
(a) Other than the Company's interest in the LLC, and as otherwise
set forth on Schedule 3.4(a), the Company has no, nor has it ever had any,
subsidiaries or investments in any other Person. The LLC has no subsidiaries or
investments in any other Person.
(b) The Company, the Stockholders and the other Persons listed on
Schedule 3.4(b)(i) hereto are all of the members of the LLC, and the
capitalization of the LLC (with
7
respect to capital accounts and interests in profits) is as set forth in
Schedule 3.4(b)(i), with all such interests owned of record and, to the
knowledge of the Company and the Majority Stockholders, beneficially by the
entities and in the amounts indicated on said Schedule 3.4(b)(i), in each case,
free and clear of any Claims other than the restrictions imposed pursuant to
this Agreement. After giving effect to the Closing and the effectiveness of the
Restated LLC Agreement, the capitalization of the LLC shall be as set forth in
Schedule 3.4(b)(ii), with all such interests owned of record and, to the
knowledge of the Company and the Majority Stockholders, beneficially by the
entities and in the amounts indicated in Schedule 3.4(b)(ii), in each case, free
and clear of any Claims other than restrictions imposed pursuant to the Restated
LLC Agreement. All outstanding interests in the LLC have been duly authorized
and issued under the Existing LLC Agreement and, after giving effect to the
effectiveness of the Restated LLC Agreement, the Restated LLC Agreement. After
giving effect to the Closing and the restatement of the Existing LLC Agreement
into the Restated LLC Agreement, the Company will be the sole Manager Member (as
such term is defined in the Restated LLC Agreement) and manager (as such term is
defined in the Delaware Act) of the LLC, and the Company will have good title to
its interest in the LLC, as shown in Schedule 3.4(b)(ii). Except as set forth in
this Agreement or in the Restated LLC Agreement, there are no rights,
commitments, agreements or understandings obligating or which might obligate the
LLC or any of its members (including, without limitation, the Company) to issue,
transfer, sell or redeem any securities or interests in the LLC.
3.5 Authority of the Company.
(a) The Company has full right, authority and power to enter into
this Agreement, the Restated LLC Agreement and each agreement, document and
instrument to be executed and delivered by the Company pursuant to, or as
contemplated by, this Agreement or the Restated LLC 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 corporate
action of the Company and all necessary action of the Stockholders and no other
action on the part of the Company or the Stockholders is required in connection
therewith.
This Agreement, the Restated LLC Agreement and each agreement, document
and instrument executed and delivered by the Company pursuant to, or as
contemplated by, this Agreement or the Restated LLC Agreement constitutes, or
when executed and delivered will constitute, valid and binding obligation of the
Company enforceable in accordance with its 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
by the Company of this Agreement, the Restated LLC Agreement and each such other
agreement, document and instrument:
(i) does not and will not violate any provision of the
Articles of Organization or by-laws of the Company, each as amended to
date;
8
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction 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 in Schedule
3.5, which approvals, consents and waivers identified in such Schedule (as
indicated with an asterisk therein) shall have been received or made prior
to the Closing or, at any earlier time required hereunder or under
applicable laws, rules and regulations or the provisions of any agreement,
contract or instrument; and
(iii) except as reflected in Schedule 3.5, 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 Claim on any of the Company's assets (or the assets of
the LLC) or any Person's interest in the Company (including, without
limitation, the Company Shares);
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 a party to such agreement is contemplated by
Section 5.2.
(b) The LLC has all requisite power and authority under the Existing
LLC Agreement and the Delaware Act (and, after the effectiveness of the Restated
LLC Agreement, under the Restated LLC Agreement and the Delaware Act) to enter
into each agreement, document and instrument to be executed and delivered by the
LLC 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 LLC of each such agreement, document and instrument have been
duly authorized by all necessary action of the LLC and the Company (in its
capacity as Manager Member of the LLC) and no other action on the part of the
LLC, the Company, any of the Stockholders or any other member is required in
connection therewith.
Each agreement, document and instrument executed and delivered by the LLC
pursuant to, or as contemplated by, this Agreement constitutes, or when executed
and delivered will constitute, valid and binding obligations of the LLC
enforceable in accordance with their terms. The execution, delivery and
performance by the LLC of each such agreement, document and instrument:
(i) does not and will not violate any provision of the
Existing LLC Agreement or the Restated LLC Agreement;
(ii) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to the LLC or
require the LLC to obtain any
9
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 in Schedule 3.5; 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 LLC is a party or by which
the property of the LLC 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 LLC's assets or of any Person's
interests in the LLC.
3.6 Real and Personal Property.
(a) Neither the Company nor the LLC owns any real property. All of
the real property leased by the Company or the LLC is identified in Schedule
3.6(a) (herein referred to as the "Leased Real Property"). All leases of Leased
Real Property by the Company or the LLC are identified in Schedule 3.6(a), and
true and complete copies thereof have been delivered to AMG. Each of said leases
has been duly authorized by the Company and the LLC, as applicable, and is in
full force and effect. Neither the Company nor the LLC is in material default
under any of said leases, nor has any event occurred which, with the giving of
notice or the passage of time, or both, would give rise to such a material
default. To the Company'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 the giving of notice or the passage of time, or both, would give rise to
such a material default. After giving effect to the Closing and the LLC
Contribution, each lease identified in Schedule 3.6(a) will be valid and
effective in accordance with its terms, with the LLC having succeeded to all the
rights and obligations of the Company thereunder.
(b) Attached hereto as Schedule 3.6(b) is a list of the categories
of assets of the Company and the tax basis of each such asset (or category of
assets). Except as set forth in Schedule 3.6(b) hereto, as of the date hereof,
the Company owns all its assets free and clear of any Claims. All the assets
listed in Schedules to the LLC Contribution Agreement included in Exhibit 2.1
hereto are being transferred to the LLC and, after giving effect to such
transfers, the LLC will own all such assets free and clear of any Claims except
those set forth in Schedule 3.6(b). The assets listed in Schedule 3.6(b) hereto
include all the material assets used in, and all the assets necessary for the
conduct of the business of the Company as currently conducted and all the
material assets which the LLC can reasonably be expected to require for the
conduct of such business immediately following the Closing and the LLC
Contribution, and are suitable and in an appropriate condition for such purpose.
10
3.7 Assets Under Management.
(a) The aggregate assets under management by the Company as of June
30, 1997 and September 30, 1997 and December 31, 1997, are accurately set forth
in Schedule 3.7. In addition, set forth in Schedule 3.7 is a list as of June 30,
1997 and September 30, 1997 and December 31, 1997, 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 each such contract,
the Contract Value, and any material fee adjustments or material withdrawals
from or additions to the assets under management (it being understood and agreed
that withdrawals from or additions to assets under management greater than
$500,000 are material) implemented since October 31, 1997 or, to the knowledge
of the Company or the Majority Stockholders, presently proposed to be
instituted, the consent required for the assignment by the Company 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 resident. 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, no client of the Company has
expressed, to the knowledge of the Company and the Majority Stockholders, an
intention to terminate or reduce its investment relationship with the Company,
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 LLC Contribution,
the fee to the LLC).
(b) Set forth in Schedule 3.7 is a list of each client with which as
of December 31, 1997 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) of any client,
together with a 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 "plan 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 AMG the following financial
statements, copies of which are attached hereto as Schedule 3.8: audited balance
sheets of the Company at November 30, 1994, November 30, 1995 and November 30,
1996, and audited statements of
11
income, stockholders' equity and cash flows for each of the three (3) years then
ended. The audited balance sheet of the Company at November 30, 1996 (including
the notes thereto) is referred to hereinafter as the "Base Balance Sheet."
Said financial statements have been prepared in accordance with GAAP,
applied consistently during the periods covered thereby, and present fairly in
all material respects 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 AMG hereunder as of the date hereof.
(c) As of the date hereof (including, with respect to the giving of
this representation pursuant to Section 8.2 hereof, after giving effect to the
LLC Contribution), neither the Company nor the LLC has 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 LLC or the conduct of
their businesses 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 AMG hereunder on the date hereof (including, without limitation, on
the audited balance sheet of the Company at November 30, 1996, included as part
of Schedule 3.8), or (iii) immaterial liabilities incurred after the date of the
audited balance sheet of the Company at November 30, 1996 (a copy of which is
attached hereto as part of Schedule 3.8) in the ordinary course of business of
the Company or the LLC which are, in the case of liabilities incurred after the
date of this Agreement, consistent with the terms of this Agreement).
3.9 Taxes.
(a) The Company and the LLC have each paid or caused to be paid all
federal, state, local, foreign, and other taxes, government fees or the like,
including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, franchise taxes, capital stock taxes, sales taxes, use taxes, ad
valorem or value added 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
12
owed by it (collectively, "Taxes" and, each individually, a "Tax"), required to
be paid by it through the date hereof, whether disputed or not. The unpaid taxes
of the Company and the LLC (i) did not, as of November 30, 1996, exceed the
reserve for tax liability (rather than the reserve for deferred Taxes
established to reflect timing differences between book and tax income) set forth
in the audited balance sheet of the Company at November 30, 1996 (a copy of
which is attached hereto as part of Schedule 3.8) (rather than in any notes
thereto) and (ii) do not exceed that reserve as adjusted (including to reflect
any additional current Tax accrued in accordance with the normal operation of
the Company's business, consistent with past practices) 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 and the LLC in filing their respective Tax
Returns. All Taxes required to be withheld by the Company and the LLC including,
but not limited to, Taxes arising as a result of payments to foreign persons or
to employees of the Company or the LLC, have been collected and withheld, and
have either been paid to the respective governmental agencies, set aside in
accounts for such purpose, or accrued, reserved against, and entered on the
books and records of the Company or the LLC, as applicable.
(b) Each of the Company and the LLC has, in accordance with
applicable law, filed all federal, state, local and foreign tax returns required
to be filed by it, and all such returns are accurate and complete in all
material respects. 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, 1991, is set forth in Schedule 3.9, 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, 1991, the
Company has delivered to AMG 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) Neither the IRS nor any other governmental authority responsible
for the imposition or collection of any Tax (a "Taxing Authority") is now
asserting or, to the knowledge of the Company or any Stockholder, threatening to
assert against the Company or the LLC any deficiency or claim for additional
Taxes. No claim has ever been made by a Taxing Authority in a jurisdiction where
the Company or the LLC does not file reports and returns that the Company or the
LLC is or may be subject to taxation by that jurisdiction. There are no security
interests on any of the assets of the Company or the LLC that arose in
connection with any failure (or alleged failure) to pay any Taxes. Neither the
Company nor the LLC has ever entered into a closing agreement pursuant to
Section 7121 of the Code.
(d) Except as set forth on Schedule 3.9, 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 Taxing Authority that any such audit is
contemplated or pending. No extension of time with respect to any date on which
a tax return was or is to be filed by the Company or the LLC is in force, and no
waiver or agreement by the Company or the LLC is in force for the extension of
time for the assessment or payment of any Taxes.
13
(e) Neither the Company nor the LLC has ever been (or has ever had
any liability for unpaid Taxes because it once was) a member of an "affiliated
group" (as defined in Section 1504(a) of the Code). Neither the Company nor the
LLC has ever filed, or has ever been required to file, a consolidated, combined
or unitary tax return with any other entity. Neither the Company nor the LLC is
a party to any tax sharing agreement.
(f) The Company (and any predecessor of the Company) has been a
validly electing S corporation within the meaning of Sections 1361 and 1362 of
the Code at all times since December 1, 1984, and the Company will be an S
corporation up to and including the date of the Closing.
(g) None of the Company's or the LLC'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 Commonwealth of
Massachusetts, and neither the Company nor the LLC has any non-business income
that is allocated, apportioned or otherwise sourced to any state, commonwealth
or other jurisdiction than the Commonwealth of Massachusetts.
(h) The Company will not be liable for any Tax under Section 1374 of
the Code in connection with the deemed sale of the Company's assets caused by
the Section 338(h)(10) Election. The Company has not since January 1, 1988 (i)
acquired assets from another corporation in a transaction in which the Company's
tax basis for the acquired assets was determined, in whole or in part, by
reference to the tax basis of the acquired assets (or any other property) in the
hands of the transferor or (ii) acquired the stock of any corporation which is a
qualified subchapter S subsidiary.
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 November
30, 1996, or existing at the date hereof (less the reserve for bad debts set
forth on such balance sheet, as adjusted since such date as set forth in
Schedule 3.10) are valid and enforceable claims, fully collectible and subject
to no setoff or counterclaim. Neither the Company nor the LLC has 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 or employee of the
Company except as disclosed in Schedule 3.10.
3.11 Absence of Certain Changes. Except as disclosed in Schedule 3.11,
since the date of the Base Balance Sheet there has not been any:
(a) event that by itself or in conjunction with all other such
events, could reasonably be expected to have a Material Adverse Effect on the
Company, the LLC or AMG;
(b) (i) amendment which has had a Material Adverse Effect or (ii)
termination or, (iii) to the knowledge of the Company and each of the Majority
Stockholders,
14
proposed or threatened amendment or termination, whether written or oral, of
any agreement listed in Schedule 3.7 hereto;
(c) material 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,
(ii) contingent or potential liabilities relating to services provided by the
Company or the conduct of the business of the Company regardless of whether
Claims in respect thereof have been asserted, or (iii) contingent liabilities
incurred by the Company or the LLC as guarantor or otherwise with respect to the
obligations of the Company or the LLC or others), incurred by the Company or the
LLC 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) material Claim placed on any of the properties or assets of the
Company or the LLC;
(e) cancellation of any material debt or Claim owing to, or waiver
of any material right of, the Company or the LLC;
(f) purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the material
properties or assets of the Company or the LLC other than pursuant to the LLC
Contribution or in the ordinary course of business consistent with past
practices;
(g) damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company or the LLC;
(h) declaration, setting aside or payment of any dividend or
distribution by the Company or the LLC, or the making of any other distribution
in respect of the capital stock of the Company or interests in the LLC, or any
direct or indirect redemption, purchase or other acquisition by the Company or
the LLC of its own capital stock or interests, respectively, other than
distributions and dividends made in the ordinary course and consistent with past
practices and subject to satisfaction of the conditions set forth in Section
8.10;
(i) change in the compensation payable or to become payable by the
Company or the LLC to any of its officers, employees, agents or independent
contractors except (x) normal merit increases in accordance with its usual
practices, or (y) any non-recurring bonus payment or arrangement made to or with
any of such officers, employees, agents or independent contractors;
(j) change in the identities, offices or duties of the officers or
management of the Company or the LLC or any obligation or liability incurred by
the Company or the LLC
15
to any of its officers, directors, stockholders, members or employees, or any
loans or advances made by the Company or the LLC to any of its officers,
directors, stockholders, members or employees, except normal compensation and
expense allowances payable to officers or employees in the ordinary course of
business consistent with past practices;
(k) payment or discharge of a material lien or liability of the
Company or the LLC other than in the ordinary course of business consistent with
the past practices of the Company;
(l) change in accounting methods or practices, or billing or
collection policies used by the Company or the LLC;
(m) other transaction entered into by the Company or the LLC other
than transactions in the ordinary course of business consistent with past
practices; or
(n) agreement or understanding, whether in writing or otherwise, for
the Company or the LLC to take any of the actions specified in paragraphs (a)
through (m) above.
3.12 Ordinary Course. Except as otherwise specifically contemplated by
this Agreement, since the date of the Base Balance Sheet, the Company has
conducted its business only in the ordinary course and consistently with its
prior practices. Since its formation, the LLC has only conducted those
operations necessary for the performance of its obligations hereunder and
activities necessary in connection herewith and therewith.
3.13 Banking Relations. All of the arrangements which the Company or the
LLC has with any banking institution are, in all material respects, accurately
described in Schedule 3.13, 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 and, after
giving effect to the Closing and the LLC Contribution, the LLC, has exclusive
ownership of, or exclusive license to use, all patent, copyright, trade secret,
trademark, trade name, service ▇▇▇▇, formulas, designs, inventions or other
proprietary rights (including, without limitation, all rights in and to the name
"Essex Investment Management Company") (collectively, "Intellectual Property")
used in the business of the Company as presently conducted. Except as set forth
in Schedule 3.14, all of the rights of the Company in such Intellectual Property
are freely transferable. There are no claims or demands of any other person or
entity pertaining to any of such Intellectual Property and no proceedings have
been instituted, or are pending or, to the knowledge of the Company and the
Majority Stockholders, threatened, which challenge the rights of the Company or
the LLC in respect thereof. The Company and, after giving effect to the Closing
and the LLC Contribution, the LLC, has the right to use, free and clear of
16
any claims or rights of other persons, all customer lists (subject to applicable
confidentiality restrictions), investment or other processes, computer software
(other than rights of other Persons in computer software that is generally
available to the public in the retail marketplace), systems, data compilations,
research results and other information required for or incident to its services
or its business as presently conducted.
(b) The Company has no, nor does it license or use any patents,
patent applications, trademarks, trademark applications and registrations and
registered copyrights. All other items of Intellectual Property which are
material to the business or operations of the Company and, after giving effect
to the Closing and the LLC Contribution, the LLC, 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 and, after giving effect to the Closing
and the LLC Contribution, the LLC, 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 in Schedule 3.14, all of
the rights of the Company thereunder are freely assignable. To the knowledge of
the Company and the Majority Stockholders, 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
AMG.
(d) The Company has not granted rights to others in Intellectual
Property owned or licensed by the Company.
(e) The Company has not made any valuable proprietary or non-public
information of the Company 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 business, activities and products of the Company,
and, after giving effect to the LLC Contribution and the Closing, the LLC 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 the knowledge of the Company and the
Majority Stockholders, 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 the knowledge of the Company and the Majority Stockholders, 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
17
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 described in Schedule 3.3, Schedule 3.6(a), Schedule 3.7, Schedule
3.14, Schedule 3.15 or Schedule 3.24 (true and complete copies of which have
been made available or delivered to AMG), neither the Company nor the LLC is a
party to or subject to any:
(a) investment management or investment advisory or sub-advisory
contract or agreement or any other contract or agreement for the provision of
investment management or other similar services;
(b) plan, contract or agreement providing for bonuses, pensions,
options, stock (or other beneficial interest) purchases (or other securities or
phantom equity purchases), deferred compensation, retirement payments, profit
sharing or the like;
(c) employment contract or agreement or contract or agreement for
services which is not terminable at will by the Company (and, after giving
effect to the Closing and the LLC Contribution, the LLC) without liability for
any penalty or severance payment;
(d) contract or agreement for the purchase of any assets, material
or equipment except purchase orders in the ordinary course for less than $50,000
each, such contract, agreements and orders not exceeding $250,000 in the
aggregate;
(e) other contract or agreement creating any obligations of the
Company or the LLC of more than $100,000 (in the aggregate) not specifically
disclosed elsewhere under this Agreement;
(f) 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
LLC Contribution Agreement and the agreements contemplated thereby;
(g) contract or agreement with any investment or research
consultant, solicitor or sales agent;
(h) contract or agreement containing covenants limiting the freedom
of the Company or the LLC (or their respective Affiliates) to compete in any
line of business or with any person or entity;
(i) license contract or agreement (as licensor or licensee);
18
(j) contract or agreement providing for the borrowing or lending of
money, and neither the Company nor the LLC has 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 GAAP, appear on the balance sheet of the lessee
as a liability, (v) secured by a Claim, (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) other material contract or agreement to which the Company or the
LLC is a party or by which either of them is bound.
Each of the contracts or agreements described in Schedule 3.3, Schedule
3.6(a), Schedule 3.7, Schedule 3.14, Schedule 3.15 or Schedule 3.24 is valid and
effective in accordance with its respective terms, and there is not, under any
such contract or agreement, an existing material breach or event 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 fund or other collective
investment vehicle or governing documents for any client. In the event the
consents set forth in Schedule 3.5, Schedule 3.6(a), and Schedule 3.7 are
obtained, and after giving effect to the LLC Contribution and the Closing, each
such contract will remain valid and effective in accordance with its respective
terms, and the LLC will be entitled to all rights and remedies thereunder to
which the Company is entitled on the date hereof, or such contract or agreement
will have been replaced by a new contract or agreement with the same party or
parties on terms at least as favorable to the LLC as the terms of the present
contract or agreement are to the Company. Neither the Company nor the LLC is
bound by any agreement, contract or arrangement which could reasonably be
expected to have a Material Adverse Effect on the Company, the LLC or AMG.
3.16 Litigation. There is no litigation or legal (or other) action, suit,
proceeding or investigation 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 pending or, to
the knowledge of the Majority Stockholders, threatened, against the Company or
any action, suit, proceeding or investigation under any federal or state
securities law, rule or regulation), in which the Company or the LLC or any
Stockholder or officer, director, stockholder, member or employee thereof is
engaged, or with which any of them is threatened, in connection with the
business, affairs, properties or assets of the Company or the LLC, 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 or would reasonably be expected to have a Material Adverse Effect on the
Company. There are no proceedings pending, or to the knowledge of the Company or
any of the Majority Stockholders, threatened, relating to the
19
termination of, or limitation of, the rights of the Company (and, after giving
effect to the Closing and the LLC Contribution, the LLC) under its registration
under 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. Each of the Company and the LLC 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 and
the LLC (collectively "Investment Laws and Regulations"). None of the Company,
the LLC or any Majority Stockholder or any officer, director, member, employee
or stockholder of the Company or the LLC, 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 the business or affairs of the
Company, the LLC or the transactions contemplated 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 or the LLC. None of the Company or the LLC, nor any
officer, director, member, employee or stockholder of the Company or the LLC,
has been or is charged with or, to the knowledge of the Company or any of the
Majority Stockholders, 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, relating to the
business or affairs of the Company, the LLC or the transactions contemplated
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 or the LLC.
3.18 Business; Registrations.
(a) 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 Mutual Funds and the Foreign Funds and the clients listed in Schedule
3.18(a), (ii) any issuer 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, other than the
Private Funds (as such term is defined in Section 13.1 hereof), or (iii) any
issuer other than the Mutual Funds and the Foreign Funds and the clients listed
in Schedule 3.18(a) that is or is required to be registered under the laws of
the appropriate securities regulatory authority in the jurisdiction in which the
20
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 its inception, 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 or the LLC. 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 3.18(b). The Company has delivered to AMG, 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
to make under any applicable laws. Neither the Company nor, to the knowledge of
the Company and the Majority Stockholders, 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 the knowledge of the Company and the Majority Stockholders,
there is no proceeding or investigation that is reasonably likely to become the
basis for any such disqualification, denial, suspension or revocation. The
Company and each of its investment adviser representatives (as such term is
defined in Rule 203A-3(a) under the Advisers Act) has, and after giving effect
to the Closing and the LLC Contribution, the LLC and each of such
representatives will have, all permits, registrations, licenses, franchises,
certifications and other approvals (collectively, the "Licenses") required from
foreign, federal, state or local authorities in order for it to conduct the
businesses presently conducted by the Company in the manner presently conducted
by the Company. Neither the Company nor the LLC is 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, the LLC or AMG. 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 on 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.
21
(c) The Company has no 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 Boston,
Massachusetts.
3.19 Insurance. The Company has in full force and effect such insurance as
is customarily maintained by companies of similar size in the same or a similar
business, 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, all as
listed in Schedule 3.19. The Company is not in material default under any such
insurance policy. After giving effect to the Closing and the LLC Contribution,
each such insurance policy or equivalent policies will be in full force and
effect, with the LLC as the sole owner and beneficiary of each such policy.
3.20 Powers of Attorney. Except as set forth on Schedule 3.3, none of the
Company, the LLC or any Majority Stockholder or, to the knowledge of the Company
and the Majority Stockholders, any other Stockholder has any outstanding power
of attorney relating to the business or affairs or capital stock of the Company.
3.21 Finder's Fee. Except for fees to ▇▇▇▇▇▇▇▇▇ & Co. (which fees have
been disclosed to AMG and will be paid by from the escrow established under the
Escrow Agreement), none of the Company, the LLC or any Stockholder 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.
3.22 Corporate Records; Copies of Documents. The record books of the
Company accurately record all corporate action taken by its respective
stockholders and board of directors and committees and true and complete copies
of the originals of such documents have been made available to AMG for review.
The Company has made available for inspection and copying by AMG and its counsel
true and correct copies of all documents referred to in this Agreement or in the
Schedules delivered to AMG in connection herewith.
3.23 Transactions with Interested Persons. Neither the Company, the LLC,
nor any Stockholder, member, officer, supervisory employee or director of the
Company or the LLC or, to the knowledge of the Company or any of the
Stockholders, any of their respective spouses or family members, is a party to
any material transaction or material contract or arrangement with the Company or
the LLC, or owns 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 five percent
(5%) of the outstanding shares of comparable interest in such entity) 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
22
contract or arrangement with the Company or the LLC (in each case, other than as
expressly contemplated hereby).
3.24 Employee Benefit Programs. [Assumes no Defined Benefit Plans]
(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 in any material respect 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 Merger Sub, the Company, the LLC or AMG. 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) Except as set forth on Schedule 3.24, 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 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 AMG: (i) all documents embodying or governing such Employee
Program, and any funding medium for the Employee Program (including, without
limitation, trust agreements) as they may have been amended; (ii) the most
recent IRS determination or approval letter with respect to such
23
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 AMG to perform any of its responsibilities with respect to any
Employee Program subsequent to the Closing (including, without limitation,
health care continuation requirements).
(f) Each Employee Program listed on Schedule 3.24 may be amended,
terminated, modified or otherwise revised by the Company, including the
elimination of any and all future benefit accruals under any Employee Program.
(g) 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.
24
3.25 Directors, Officers and Employees.
(a) Schedule 3.25(a) contains a true and complete list of all
current directors and officers of the Company. In addition, Schedule 3.25(a)
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 and/or the LLC for the fiscal year ending November
30, 1997, in excess of $75,000. In each case such Schedule includes the current
job title and AMG has been separately provided with the aggregate annual
compensation of each such individual. To the knowledge of the Company and the
Majority Stockholders, each employee listed in Schedule 3.25(a) hereto is in
good health.
(b) The Company and, after giving effect to the LLC Contribution,
the LLC, employs less than sixty (60) full-time employees and five (5) part-time
employees and generally enjoys good employer-employee relationships. Except as
set forth in Schedule 3.25(b) (or Schedule 3.24), neither the Company nor the
LLC has any obligation, contingent or otherwise, under (a) any employment,
collective bargaining or other similar 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 LLC
Contribution (or the transactions contemplated hereby or thereby) result in any
such default, including, without limitation, after the giving of notice, lapse
of time or both. Neither the Company nor the LLC is 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. Upon termination of the
employment of any of said employees, none of the Company, Merger Sub, the LLC or
AMG could, by reason of the transactions contemplated by 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 except as set forth in the
Restated LLC Agreement. Neither the Company nor the LLC has made any payments,
is obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate the Company, Merger Sub, the LLC or AMG to
make any payments that would be "parachute payments" within the meaning of the
Code or would not be deductible under Section 280G of the Code. Except as
described in Schedule 3.25(b), 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. Each of the Company and the LLC
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 charges of employment discrimination or unfair labor practices
against or involving the Company. There are no grievances, complaints or charges
that could have an adverse effect on the Company, Merger Sub, the LLC or AMG
25
or the conduct of their respective businesses and that have actually been filed
against the Company under any dispute resolution procedure, and there is no
arbitration or similar proceeding pending and no claim therefor has been
asserted. The Company has in place all employee policies required by applicable
laws, rules and regulations (except to the extent failure to have such policy
would not reasonably be expected to have a Material Adverse Effect on the
Company), and there have been no material violations or alleged violations of
any of such policies. The Company has not received any notice indicating that
any of its employment policies or practices is currently being audited or
investigated by any foreign, federal, state or local government agency. Each of
the Company and the LLC is, and at all times since November 6, 1986 has been, in
compliance with the requirements of the Immigration Reform Control Act of 1986,
as amended.
3.26 Non-Foreign Status. No Stockholder is a "foreign person" within the
meaning of Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
3.27 Transfer of Shares. Except as described in Schedule 3.27, no holder
of stock of the Company has at any time transferred any of such stock to any
employee of the Company, which transfer constituted or could be viewed as
compensation for services rendered to the Company by said employee.
3.28 Stock Repurchase. Except as described in Schedule 3.28, neither the
Company nor the LLC has redeemed or repurchased any of its capital stock or
interests since the date of the Base Balance Sheet.
3.29 Code of Ethics. The Company has adopted a written policy regarding
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, a Code of Ethics which complies with all applicable provisions
of Section 204A of the Advisers Act and a personal trading policy which complies
with all applicable provisions of Rule 17j-1 under the Investment Company Act,
copies of which have been delivered to AMG 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, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ policy and personal
trading 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. There have been no material violations or
allegations of material violations of such Code of Ethics, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
policy, conflicts policy or personal trading policy.
3.30 Certain Representations and Warranties as to Collective
Investment Vehicles.
(a) True, correct and complete copies of all of the current
investment advisory agreements and distribution or underwriting contracts,
administrative services and other services agreements, if any, and
organizational and offering documents, pertaining to each of the Private Funds
and the Foreign Funds: (i) have been provided to AMG prior to the date hereof
and (ii) are in full force and effect. Such offering materials as of the dates
as of which they were prepared and distributed did not contain an untrue
statement of a material fact
26
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) Each of the Private Funds and the Foreign Funds is duly
organized, validly existing and in good standing in the jurisdiction in which it
is organized and has all requisite power and authority to conduct its business
in the manner and in the places where such business is currently conducted. Each
Private Fund and each Foreign Fund is and has, since its inception, been engaged
solely in the business of an investment company. Each Private Fund and each
Foreign Fund is and has, since its inception, been in compliance with all
foreign, federal and state laws requiring registration, licensing or
qualification as an investment company and all Investment Laws and Regulations.
(c) AMG has been furnished true, correct and complete copies of the
audited financial statements, prepared in accordance with GAAP applied
consistently during the periods covered thereby, of each Private Fund and each
Foreign Fund for the past three fiscal years (or such shorter period as such
Private Fund or Foreign Fund shall have been in existence), and unaudited
financial statements, prepared in accordance with GAAP applied consistently
during the periods covered thereby, of each Private Fund and each Foreign Fund
for the first nine months of its most recent fiscal year. Each Private Fund's
and Foreign Fund's fiscal year end and/or nine-month period financial statements
is hereinafter referred to as a "Fund Financial Statement." Each of the Fund
Financial Statements is consistent with the books and records of the applicable
Private Fund or Foreign Fund, and presents fairly in all material respects the
consolidated financial condition of such Private Fund or Foreign Fund in
accordance with GAAP applied consistently during the periods covered thereby
(except that the financial statements for the period need not include footnote
disclosure or related statements of cash flows and stockholders' equity) at the
respective date of such Fund Financial Statement and the results of operations
and cash flows for the respective periods indicated, except in the case of the
interim financial statements which are subject to normal year-end adjustments
which in the aggregate are not material. The Fund Financial Statements reflect
and disclose all material changes in accounting principles and practices adopted
by each of the Private Funds and the Foreign Funds during the periods covered by
each Fund Financial Statement. The books of account of each of the Private Funds
and the Foreign Funds fairly reflect their respective transactions. None of the
Private Funds has any direct or indirect liabilities other than: (i) liabilities
fully and adequately reflected on the balance sheets contained in the Fund
Financial Statements, and (ii) liabilities incurred since the date of the Fund
Financial Statements and incurred in the ordinary course of business consistent
with past practices.
(d) There are no restrictions imposed pursuant to any Investment
Laws and Regulations, consent judgments or orders of the SEC or any other
regulatory body on or with regard to any of the Private Funds or the Foreign
Funds. Since inception, each of the Private Funds has been excluded from the
definition of an investment company under the Investment Company Act by virtue
of Section 3(c)(1) thereof or Section 3(c)(7) thereof and none of the Foreign
Funds has been in violation of Section 7(d) under the Investment Company Act.
Since its inception, each Private Fund and Foreign Fund has been duly registered
or licensed and in
27
good standing under the laws of each jurisdiction in which such qualification is
necessary, except where the failure to be duly registered and in compliance
could not reasonably be expected to have a Material Adverse Effect on the
respective Private Fund (or Foreign Fund, as applicable) or the Company.
(e) All interests of each of the Private Funds and the Foreign Funds
were sold pursuant to a valid and effective exemption from registration under
the Securities Act and have been duly authorized and are validly issued. Each of
the investments of the Private Funds and the Foreign Funds has been made in
accordance with the respective investment policies and restrictions in effect at
the time the investments were made and at all times when the investments were
held.
(f) All consent solicitation materials to be prepared for use by the
Private Funds in connection with the transactions contemplated by this Agreement
at the time such information is provided or used, as then amended or
supplemented, and any information disseminated in respect of the transactions
contemplated hereby at the time such information is disseminated, in each case,
will be accurate and complete and will not contain any untrue statement of a
material fact, or omit to state any material fact (i) required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (ii) necessary to
correct any statement in any earlier communication that has become false or
misleading.
(g) There is no litigation or legal (or other) action, suit,
proceeding or investigation at law or in equity pending or, to the knowledge of
the Company and the Majority Stockholders, threatened in any court or before or
by any governmental agency or instrumentality, department, commission, board,
bureau or agency, or before any arbitrator, by or against any of the Private
Funds or the Foreign Funds, or any officer or director thereof. There are no
judgements, injunctions, orders or other judicial or administrative mandates
outstanding against or affecting any of the Private Funds or the Foreign Funds
or any officer or director thereof.
(h) Each of the Private Funds and the Foreign Funds has timely filed
all Tax returns and reports (including information returns, declarations and
reports) (collectively, "returns") required to be filed by it with any Taxing
Authorities for taxable periods ending after December 31, 1990 and has paid, or
withheld and paid over, all Taxes which were shown to be due on the such
returns. The information contained in such returns is true, correct and
complete. Each of the Private Funds has, since its inception, been classified as
a partnership for state and federal income tax purposes. None of the Foreign
Funds is engaged in the conduct of a trade or business (within the meaning of
the Code). Each Foreign Fund is a passive foreign investment company (within the
meaning of the Code) and is not a controlled foreign corporation (within the
meaning of the Code). Each of the Foreign Funds has in effect a QEF election.
28
SECTION 4. SEVERAL REPRESENTATIONS AND WARRANTIES OF MAJORITY
STOCKHOLDERS.
As a material inducement to AMG and Merger Sub to enter into this
Agreement and consummate the transactions contemplated hereby, each Majority
Stockholder hereby severally makes to AMG each of the representations and
warranties set forth in this Section 4 with respect to such Stockholder. After
the Closing, no Stockholder shall have any right of indemnity or contribution
from Merger Sub, the Company or the LLC (or any other right against the Company
or the LLC) with respect to the breach of any representation or warranty by the
Company or the Majority Stockholders hereunder.
4.1 Company Shares. Such Majority Stockholder owns of record and
beneficially the number of the Company Shares set forth opposite such Majority
Stockholder's name in Schedule 1.7. Such Company Shares are duly authorized,
validly issued, fully paid, non-assessable and free and clear of any and all
Claims (including, without limitation, claims under Article 8 of the
Massachusetts Uniform Commercial Code). The Company Shares set forth opposite
such Majority Stockholder's name in Schedule 1.7 are, except as reflected in
Schedule 3.3, the only shares of capital stock held by such Majority Stockholder
or with respect to which such Majority Stockholder has any rights in the
Company.
4.2 Authority. Such Majority 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 Majority
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 Majority
Stockholder pursuant to this Agreement constitutes, or when executed and
delivered will constitute, a valid and binding obligation of such Majority
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. Such Majority Stockholder has
full power and authority to transfer, sell and deliver the Company Shares to AMG
pursuant to this Agreement. 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 Majority
Stockholder, or require such Majority 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 Majority Stockholder is a
party or by which the property of such Majority Stockholder
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is bound or affected, or result in the creation or imposition of any Claim
on any assets of the Company or the LLC or on Company Shares owned by such
Majority Stockholder.
4.3 Ownership of LLC Interests. The LLC Interests shown as owned by each
Majority Stockholder in the records set forth in Schedule 3.4(b)(i) and, as of
the Closing, Schedule 3.4(b)(ii), constitute all the interests in the LLC or
rights to purchase interests in LLC which are held by such Person, directly or
indirectly.
4.4 Finder's Fee. Except as set forth in Section 3.21, such Majority
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 Majority 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 (and, after giving effect to the Closing and the LLC Contribution,
the LLC), pursuant to an investment advisory agreement between the Company (and,
after giving effect to the Closing and the LLC Contribution, the LLC) and a
client thereof.
4.6 Agreements.
(a) Such Majority Stockholder is not a party to any employment,
non-competition, trade secret or confidentiality agreement, arrangement or
understanding with any party other than the Company or the LLC. There are no
agreements or arrangements not contained herein or disclosed in a Schedule
hereto, to which such Majority Stockholder is a party relating to the business
of the Company or the LLC or to such Majority Stockholder's rights and
obligations as a stockholder, member, director, officer or employee of the
Company or the LLC.
(b) Such Majority 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 five percent (5%) 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 the LLC or
which could be considered a competitor of the Company or the LLC. 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 or the LLC to which such
Majority Stockholder is a party.
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4.7 Employment Data. Such Majority 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. Each of the Majority Stockholders represents that he is
in good health and has provided AMG with a letter from his doctor to such
effect. Each of the Stockholders listed on Schedule 4.8 has provided
representatives of AMG's insurance broker with true and complete responses to
all questions or inquiries of such representatives.
SECTION 5. COVENANTS OF THE COMPANY AND THE MAJORITY
STOCKHOLDERS.
5.1 Making of Covenants and Agreements. The Company and the Majority
Stockholders jointly and severally hereby make the covenants and agreements set
forth in this Section 5 and the Majority Stockholders agree to cause the Company
and the LLC to comply with such agreements and covenants. After the Closing, no
Stockholder shall have any right of indemnity or contribution from Merger Sub,
the Company or the LLC (or any other right against Merger Sub, the Company or
the LLC) with respect to the breach of any covenant or agreement of the Company
or the Majority Stockholders hereunder.
5.2 Client Consents.
(a) As soon as reasonably practicable after the date hereof, but in
any event on or prior to January 22, 1998, the Company shall notify each of its
clients of the transactions contemplated hereby and by the other agreements,
documents and instruments contemplated hereby. Such notice shall be in the form
of Exhibit 5.2A with respect to those clients whose contracts require
affirmative written consent (by their terms or under applicable law) for their
assignment, in the form of Exhibit 5.2B with respect to those clients whose
contracts do not require affirmative written consent (by their terms or under
applicable law) for their assignment, but in the form of Exhibit 5.2C with
respect to those clients whose contracts terminate (by their terms or under
applicable law) upon their assignment (in each case, with such changes thereto
as may be agreed to by AMG in writing.
(b) On or prior to February 22, 1998, 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 5.2B, countersigned indicating approval of the transactions
contemplated hereby, a second notice in the form of Exhibit 5.2D.
(c) With respect to the Private Funds, the Company and the Majority
Stockholders shall use all commercially reasonable efforts to obtain such
consents as may be necessary or appropriate and satisfactory to AMG to permit
consummation of the transactions contemplated hereby.
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(d) With respect to the Foreign Fund, the Company and the Majority
Stockholders shall use all commercially reasonable efforts to obtain such
Consents from regulatory authorities or investors as may be necessary or
appropriate and satisfactory to AMG to permit consummation of the transactions
contemplated hereby.
(e) With respect to the Mutual Fund, the Company and the Majority
Stockholders shall use all commercially reasonable efforts to cause the Board of
Trustees of each of the Mutual Funds to approve the investment advisory
agreement with the LLC to be in effect at and after the Closing and to provide
such information in connection therewith to the Shareholders of the Mutual Funds
as may be required under any applicable order or regulation of the SEC or any
federal or state securities laws.
(f) The Company and the Stockholders shall use commercially
reasonable efforts to, and the Stockholders shall use commercially reasonable
efforts to cause the Company to, obtain Consents from their clients (or, in the
case of clients whose contracts terminate upon their assignment, new contracts
on substantially equivalent terms) in the manner contemplated by this Section
5.2 and Exhibit 5.2A, Exhibit 5.2B, Exhibit 5.2C and Exhibit 5.2D.
5.3 Authorizations.
(a) The LLC shall, and the Company and each of the Stockholders
shall cause the LLC to, (i) file, as soon as practicable after the Closing, and
in any event within three (3) business days of the Closing, with the SEC, a
Uniform Application for Investment Adviser Registration on Form ADV to register
the LLC as an investment adviser under the Advisers Act, and (ii) make
appropriate additional filings with respect to its investment advisory status as
soon as practicable after the Closing with the Commonwealth of Massachusetts and
in each other jurisdiction listed on Schedule 3.18(b).
(b) The LLC will, and the Company and each of the Stockholders will
use commercially reasonable efforts to cause the LLC and each of its employees
to, obtain all authorizations, consents, orders, approvals and Licenses of
federal, state and local regulatory bodies and officials that may be or become
necessary for their respective execution and delivery of, and the performance of
their respective obligations pursuant to, this Agreement and the other
agreements, documents and instruments contemplated hereby, and for the LLC to
conduct the business presently being conducted by the Company.
5.4 Authorization from Others. The Majority Stockholders, the Company and
the LLC will use commercially reasonable efforts to obtain all authorizations,
consents, approvals, permits and Licenses of others required to permit the
consummation by the Majority Stockholders, the Company and the LLC of the
transactions contemplated by this Agreement.
5.5 Status. The Company shall acquire all Company Shares held by the
Persons listed on Schedule 1.13 prior to the Effective Time.
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5.6 Conduct of Business. Between the date of this Agreement and the
Closing, except as contemplated by Schedule 3.11, without the prior written
consent of AMG:
(a) the Company will conduct its business only in the ordinary
course of business, and consistent with past practices, and the LLC will only
conduct those operations necessary for the performance of its obligations
hereunder and activities necessary in connection therewith, except that the
Company may make dividend distributions and bonus payments prior to the Closing
subject to the Company's ability to comply with the conditions to Closing set
forth in Section 8.10;
(b) neither the Company nor the LLC will (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 the LLC Contribution Agreement, or in
the ordinary course of business consistent with past practices, or (ii) subject
to any Claim any of its properties or assets (including, without limitation,
with respect to the Company, its interest in the LLC), nor permit any of the
foregoing to exist;
(c) neither the Company nor the LLC will change its banking
arrangements or 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 past
practices, except that the Company may incur indebtedness on terms and
conditions (as to both form and substance) reasonably acceptable to AMG in an
amount not to exceed $5,300,000 to pay certain tax liabilities and expenses
arising in connection with the transactions contemplated hereby subject to the
Company's ability to comply with the conditions to Closing set forth in Section
8.12;
(d) the Company will not make or incur any obligation to make a
change in its Articles of Organization, By-laws or authorized or issued capital
stock (except as contemplated by Section 3.3 hereof), and the LLC will not make
or incur any obligation to make any change in the Existing LLC Agreement (other
than the restatement into the Restated LLC Agreement as contemplated by Section
2.2 hereof);
(e) neither the Company nor the LLC will 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 interests or make (or incur an
obligation to make) any direct or indirect redemption, purchase or other
acquisition of its stock or interests, except that the Company may make dividend
distributions and bonus payments prior to the Closing subject to the Company's
ability to comply with the conditions to Closing set forth in Section 8.12;
(f) neither the Company not the LLC will make any change in the
compensation payable or to become payable to any of the Company's officers,
employees, agents or independent contractors, or enter into any collective
bargaining agreement, bonus,
33
equity, option, profit sharing, compensation, welfare, retirement, or other
similar arrangement, or any employment contract;
(g) the Company will not prepay any loans (if any) from its
stockholders, officers or directors;
(h) the Company will use commercially reasonable efforts to prevent
any change with respect to its management and supervisory personnel;
(i) the Company will have in effect and maintain at all times all
insurance of the kind (including, without limitation, covering liabilities of
directors and officers), in the amount and with the insurers set forth in
Schedule 3.19 or equivalent insurance with any substitute insurers approved in
writing by AMG, and prior to the Closing, the LLC will obtain and have in effect
and thereafter maintain at all times all insurance of the kind (including,
without limitation covering liabilities of directors and officers), in the
amount and with the insurers set forth in Schedule 3.19 or equivalent insurance
with any substitute insurers approved in writing by AMG; and
(j) neither the Company nor the LLC will settle any material
litigation.
5.7 Financial Statements. Until the Closing, the Company will furnish AMG
with unaudited monthly balance sheets and statements of income of the Company
within fifteen (15) business days after each month end for each month ending
more than fifteen (15) business days prior to the Closing, which financial
statements shall be prepared in accordance with GAAP applied consistently
(except that they need not include footnotes and related statements of cash
flows and stockholders' equity and except that the statements with respect to
the month of January, 1998, need not be prepared on an accrual basis), shall
present fairly in all material respects the financial condition of the Company
and the LLC at the dates of said statements and the results of their operations
for the periods covered thereby and, beginning with the first full month
following the date hereof shall be prepared using the accrual method of
accounting. Notwithstanding the foregoing, by February 15, 1998, the Company
will furnish AMG with an audited balance sheet of the Company at November 30,
1997 and audited statements of income, cash flows and stockholders' equity for
the year ended November 30, 1997 and an unaudited balance sheet of the Company
at December 31, 1997 and unaudited statements of income cash flows and
stockholders' equity for the month ended December 31, 1997, which financial
statements shall be prepared in accordance with GAAP applied consistently using
the accrual method of accounting (except that they need not include footnotes)
and shall present fairly in all material respects the financial condition of the
Company at the dates of said statements an the results of operations for the
periods covered thereby. The Company will furnish AMG with financial statements
of each Private Fund and Foreign Fund for the year ended December 31, 1997 as
soon as reasonably practicable after such financial statements are available.
34
5.8 Preservation of Business and Assets. Until the Closing, each of the
Company, the LLC and each of the Majority Stockholders shall use commercially
reasonable 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, and investment adviser representative, registrations). In addition,
except as expressly contemplated by this Agreement, none of the Majority
Stockholders shall take or permit to be taken any material action not in the
ordinary course of business relating to the Company or which could reasonably be
expected to have a material effect on the transactions contemplated hereby,
without the prior consent of AMG.
5.9 Observer Rights and Access. Until the Closing: (a) within three (3)
business days after any meetings of the Company's stockholders or directors (or
a committee thereof) and in any event at or prior to the Closing, the Company
shall provide AMG with copies of detailed minutes of such meetings, including
all action taken thereof, (b) AMG shall be entitled to receive all notices and
information furnished by the Company to its stockholders and directors (or a
committee thereof), as well as copies of the minutes of any meetings of the
Company's stockholders and directors (or a committee thereof), and (c) the
Company's stockholders or directors (or a committee thereof) shall not take any
action by written consent in lieu of a meeting unless AMG shall have been given
prior written notice which includes a copy of such written consent by which such
action is proposed to be taken. The Company and the LLC shall afford to AMG and
its representatives and agents reasonable access, during normal business hours
and with reasonable notice, to the properties and records of the Company and the
LLC in order that AMG may have full opportunity to make such investigation as it
shall desire for purposes consistent with this Agreement.
5.10 Notice of Default. Promptly upon the occurrence of, or promptly upon
the Company or a Majority Stockholder 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 Company or such Majority Stockholder prior to the date hereof,
of any of the representations, warranties or covenants of the Company or the
Majority Stockholders contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, the Company and such Majority
Stockholder shall give a written description consisting of notice thereof to
AMG, and the Company and the Stockholders shall use commercially reasonable
efforts to prevent or promptly remedy the same.
5.11 Consummation of Agreement. The Company and each of the Majority
Stockholders shall use commercially reasonable 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.
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5.12 Cooperation of the Company and Stockholders.
(a) The Company and each of the Majority Stockholders shall
cooperate with all reasonable requests of AMG in connection with the
consummation of the transactions contemplated hereby and the making of any
filings required in connection therewith, including, without limitation, filings
under the HSR Act. In addition, the Majority Stockholders shall, and shall cause
the Company and the LLC to, cooperate fully, as and to the extent requested by
AMG, in connection with the filing of tax returns and any audit, litigation or
other proceedings, whether with respect to taxes or otherwise.
(b) The Company and each of the Majority Stockholders shall for all
purposes treat the value of the AMG Shares on a basis consistent with the
Valuation and shall pay when due fifty percent (50%) of any expenses incurred in
connection with the preparation of the Valuation Report.
(c) The Company and the Majority Stockholders shall send to each
Person who is a former holder of capital stock of the Company and is entitled to
receive Merger Consideration as reflected on Schedule 1.7 (a "Former
Shareholder"), and, in the case of Former Shareholder, an Investment
Representations Letter and a Release in the form attached to the Escrow
Agreement and shall use commercially reasonable efforts to obtain executed
copies of such documents.
(d) The Company and the Majority Stockholders shall send to each
Person who is a Stockholder a Release in the form attached to the Supplemental
Purchase Agreement and shall use commercially reasonable efforts to obtain
executed copies of such document.
5.13 No Solicitation of Other Offers. Until a date which is three (3)
months after a termination of this Agreement pursuant to Section 10.1 hereof for
any reason other than a material breach by AMG of its representations,
warranties or covenants set forth herein, neither the Company, the LLC, the
Majority Stockholders, nor 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 AMG, relating to the possible
acquisition of the Company Shares, the Company, the LLC or any of their
respective assets, except for the sale of assets by the Company in the ordinary
course of business consistent with past practices and the terms of this
Agreement or transfers of the Company Shares among the Stockholders, redemptions
of Company Shares and issuances of Company Shares to new employees, in each
case, consistent with past practices.
5.14 Confidentiality. The Company and the Majority Stockholders agree
that, unless and until the Closing has been consummated, each of the Company,
the LLC, the Majority Stockholders and their officers, directors, members,
agents and representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from AMG with respect
to its business or financial condition except for the purpose of
36
evaluating, negotiating and completing the transaction contemplated hereby.
Information generally known in AMG's industry or which has been disclosed to the
Company, the LLC or the Majority Stockholders 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 Company, the LLC and the Majority Stockholders will
return, and cause their respective stockholders, officers, directors, members,
agents and representatives to return, to AMG (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 AMG to the Company, the LLC or the Majority
Stockholders (and their stockholders, officers, directors, members, agents and
representatives) in connection with the transaction.
5.15 Tax Returns. The Company and the Stockholders shall cooperate with
AMG to permit the Company, in accordance with applicable law, to promptly
prepare and file on or before the due date or any extension thereof all federal,
state and local tax returns required to be filed by the Company with respect to
taxable periods ending on or before the Closing.
5.16 Policies and Procedures. The Company, the LLC and the Majority
Stockholders shall, and 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 and at the expense of AMG.
5.17 No Violation of LLC Agreement. Except as otherwise expressly
permitted or contemplated by this Agreement, between the date of this Agreement
and the Closing, none of the Majority Stockholders, the Company nor the LLC will
take any action that is in violation of any term or provision of the Existing
LLC Agreement or would be in violation of any term or provision of the Restated
LLC Agreement if such Restated LLC Agreement were then in effect.
5.18 Subsidiaries; Investments in Other Persons. Between the date of this
Agreement and the Closing, none of the Majority Stockholders, the Company nor
the LLC will take any action to acquire, form or otherwise establish any
subsidiary of the Company or the LLC or cause the Company or the LLC to make any
investment in any other Person, except that the Company may form and invest in
new Private Funds consistent with past practices and on substantially the same
terms and conditions as currently in effect for the Private Funds existing as of
the date of this Agreement.
5.19 LLC Interests. Between the date of this Agreement and the Closing,
(a) the Company and the Stockholders will not permit the LLC to take any action
to issue any rights or interests in addition to or different from the interests
in the LLC shown in the records set forth on Schedule 3.4(b)(i), (b) the Company
and the Stockholder will not permit the LLC to take any action that will cause
the interests in the LLC set forth on Schedule 3.4(b)(i) to be revoked,
repurchased, rescinded, terminated, liquidated, transferred, amended or modified
in
37
any manner and (c) neither the Company nor any Stockholder will sell, assign,
pledge, subject to a Claim or otherwise transfer or restrict such Person's
interests in the LLC without the prior written consent of AMG. At the Closing,
the LLC shall issue the interests and rights therein set forth in the Restated
LLC Agreement to the Members (as defined in the Restated LLC Agreement).
5.20 Employee Programs. Between the date of this Agreement and the
Closing, the LLC will not maintain any Employee Program other than the Employee
Programs listed on Schedule 3.24.
5.21 Foreign Qualifications. The LLC shall qualify to do business as a
foreign limited liability company under the laws of each jurisdiction listed on
Schedule 3.2(a). Such states constitute all of the jurisdictions in which the
nature of the business it will conduct after giving effect to the LLC
Contribution, or the ownership or leasing of the properties it will receive in
the LLC Contribution, requires such qualification, except for those
jurisdictions where the failure to so qualify, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the LLC.
5.22 Liens. Between the date of this Agreement and the Closing, the LLC
shall not cause or permit any of the assets listed in Schedule 3.6(b) to be or
become subject to any Claim.
SECTION 5A. COVENANTS OF THE COMPANY, THE MAJORITY STOCKHOLDERS AND AMG
WITH RESPECT TO CERTAIN TAX MATTERS.
5A.1 Section 338(h)(10) Election.
(a) The Company and each of the Majority Stockholders will join with
AMG in making an election under Section 338(h)(10) of the Code (and any
corresponding election under state, local and foreign tax law) with respect to
the purchase and sale of the stock of the Company hereunder through the Merger
(the "Elections"). Each Majority Stockholder will include his or her
proportionate share of any income, gain, loss, deduction or other tax item
resulting from the Elections on his or her tax returns to the extent permitted
by applicable law. Each Majority Stockholder shall also pay his or her share of
any Tax imposed on the Company or the LLC or other successors in interest of the
Company attributable to the making of the Elections, including, but not limited
to, (i) any Tax imposed under section 1374 of the Code, (ii) any Tax imposed
under Treasury Regulations Section ss.1.338(h)(10)-1(e)5, or (iii) any state,
local or foreign Tax imposed on the Company's gain.
(b) The Majority Stockholders, jointly and severally, shall
indemnify and hold harmless the AMG Indemnified Parties from and against (i)
liabilities and obligations for any Taxes (other than income taxes) in excess of
twenty five thousand dollars ($25,000) incurred by the Company with respect to
any period ending on or before the date of the
38
Closing (ii) the failure of any Stockholder to pay his or her share of any Tax
attributable to the making of the Elections (iii) the breach by any Stockholder
of any provision of the Supplemental Purchase Agreement relating to or involving
Tax matters and (iv) the Company against any adverse consequences or losses
arising out of or relating to any failure to pay any such Taxes or resulting
from any such breach. Such indemnification shall be governed by the procedures
set forth in Section 12.5.
(c) The Majority Stockholders and AMG agree that MADSP (as such term
is used in Treasury Regulations Section 1.338(h)(10)-1(f)) for AMG's purchase of
the Company shall be allocated among the assets of the Company in accordance
with the provisions of that Section. A preliminary estimate of such allocation
shall be agreed by AMG and the Majority Stockholders as soon as practicable
after the date hereof. The final allocation as of the Closing Date (the "Asset
Allocation") shall be agreed to by the Majority Stockholders and AMG as soon as
practicable after the Closing Date. If the Majority Stockholders and AMG are
unable to agree on the Asset Allocation, such allocation shall be determined on
the basis of an appraisal prepared by the Accounting Firm (as defined below).
AMG shall prepare IRS Form 8023 (and any required attachments) and any similar
state, local or foreign tax forms (and any required attachments) required to
make the Elections (collectively, the "Election Forms" and each singularly, the
"Election Form") and shall submit the Election Forms to the Majority
Stockholders no later than seventy-five (75) days following the Closing Date. In
the event of any dispute with regard to the content of any Election Form
(including any dispute concerning the Asset Allocation), the parties shall
diligently attempt to resolve such dispute. If they have not done so by the
thirtieth (30th) day prior to the date the Election Form in question is required
to be filed, the dispute shall be resolved by Coopers & ▇▇▇▇▇▇▇ LLP or, a
nationally recognized form of independent auditors acceptable to both the
Majority Stockholders and AMG (the "Accounting Firm"), at least ten (10) days
prior to the time the Election Form is required to be filed. Each Majority
Stockholder shall promptly execute the applicable Election Forms and shall
return such Election Forms to AMG promptly and in any event not less than five
(5) days after the date on which the Election Form is submitted to such Majority
Stockholder (following the final resolution of any issues pursuant to the
foregoing sentence). AMG shall file the Election Forms in accordance with
applicable tax laws.
5A.2. Tax Periods Ending on or Before the Closing Date. The Majority
Stockholders shall prepare or cause to be prepared and file or cause to be filed
all income Tax returns for the Company and the LLC for all periods ending on or
prior to the Closing Date which are filed after the Closing Date. The Majority
Stockholders shall permit AMG to review and comment on each such Tax Return
described in the preceding sentence prior to filing. To the extent permitted by
applicable law, the Majority Stockholders shall include any income, gain, loss,
deduction or other tax items for such periods on their Tax returns in a manner
consistent with the Schedule K-1s furnished by the Company to the Majority
Stockholders for such periods.
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5A.3. Cooperation on Tax Matters.
(d) The Stockholders and AMG shall report all transactions pursuant
to this Agreement in a manner that is consistent with the Elections and shall
take no position contrary thereto unless required to do so pursuant to a
"determination" within the meaning of Section 1313 of the Code or an analogous
provision under state, local or foreign tax law.
(e) AMG, the Company and the Majority Stockholders shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the filing of Tax Returns pursuant to this section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and its Majority Stockholders agree (A)
to retain all books and records with respect to Tax matters pertinent to the
Company and the LLC relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by AMG or the Majority Stockholders, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any Taxing Authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests, the Company or the
Majority Stockholders, as the case may be, shall allow the other party to take
possession of such books and records. AMG and the Majority Stockholders further
agree, upon request, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
5A.4 Tax Status. Between the date of this Agreement and the Closing, the
Company and the Majority Stockholders shall keep in effect and not revoke the
Company's election to be taxed as an S corporation within the meaning of
Sections 1361 and 1362 of the Code. Neither the Company nor any of the Majority
Stockholders shall take or permit any action (other than the Merger) that would
result in the termination of the Company's status as a validly existing S
corporation within the meaning of Sections 1361 and 1362 of the Code.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF AMG.
6.1 Making of Representations and Warranties. As a material inducement to
the Company and the Majority Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, AMG hereby makes the
representations and warranties contained in this Section 6, to the Company and
the Majority Stockholders.
40
6.2 Organization of AMG. AMG is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with full
corporate power and authority to own or lease its assets and other properties
and to conduct its business in the manner and in the places where such assets
and other properties are owned or leased or such business is conducted by it.
AMG is not in violation of any term of its Certificate of Incorporation or
By-laws, each as amended and restated to the date of this Agreement.
6.3 Authority of AMG. AMG has full right, authority and power to enter
into this Agreement and each agreement, document and instrument to be executed
and delivered by AMG pursuant to or as contemplated by, this Agreement, the
Restated LLC Agreement and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance by AMG of this Agreement, the
Restated LLC Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary corporate action of AMG and no other
action on the part of AMG is required in connection therewith, except that as of
the date of this Agreement AMG has not yet filed with the Secretary of State of
the State of Delaware the Certificate of Designations. This Agreement, the
Restated LLC Agreement and each other agreement, document and instrument
executed and delivered by AMG pursuant to this Agreement constitute, or when
executed and delivered will constitute, valid and binding obligations of AMG
enforceable in accordance with their 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 by AMG of
this Agreement, the Restated LLC Agreement and each such agreement, document and
instrument:
(i) does not and will not violate any provision of the
Certificate of Incorporation or By-laws of AMG, each as amended and
restated to the date hereof;
(ii) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to AMG or
require AMG to obtain any approval, consent or waiver of, or make any
filing with, any Person that has not been obtained or made, except as
specifically identified in Schedule 6.3; and
(iii) assuming that the consents or approvals set forth on
Schedule 6.3 have been obtained, 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 AMG is a
party or by which any of its property is bound or affected, or result in
the creation or imposition of any Claim on any of AMG's assets which would
reasonably be expected to have a Material Adverse Effect on AMG and its
Affiliates on a consolidated basis.
6.4 Capitalization. As of the date of this Agreement, the duly authorized
capital stock of AMG consists of those classes, series and numbers of shares as
are set forth in Schedule 6.4. In addition, set forth in Schedule 6.4 are the
numbers of shares of each such
41
class and series which are issued and outstanding or with respect to which
options have been granted as of the date of this Agreement or which have been
reserved for issuance in connection with the conversion of the Series C
Non-Voting Convertible Stock of AMG. All the outstanding shares of capital stock
of AMG have been duly authorized and validly issued and are fully paid and
nonassessable. All of the AMG Shares issuable pursuant to this Agreement in
exchange for Company Shares at the Effective Time and all shares of Common
Stock, par value $.01 per share, of AMG issuable upon conversion of the Series C
Non-Voting Convertible Stock of AMG in accordance with the Certificate of
Designations and the Amended and Restated Certificate of Incorporation of AMG,
will be, when so issued and paid for, duly authorized, validly issued, fully
paid and nonassessable. Based upon and subject to the accuracy of the
representations in the Subscription Agreement, and assuming each Person who
receives such AMG Shares pursuant to this Agreement has duly executed and
delivered and is bound by a Subscription Agreement, and subject to receipt of
consideration therefor, upon issuance pursuant to this Agreement of the AMG
Shares, such AMG Shares shall be issued in compliance with the federal
securities laws and the state securities laws of the Commonwealth of
Massachusetts.
6.5 Litigation. There is no litigation or legal or other action, suit or
proceeding pending or, to its knowledge, threatened against AMG or, to AMG'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 Federal or state securities law,
rule or regulation), in which AMG or any officer, director, stockholder or
employee thereof is engaged or with which any of them is threatened, which would
prevent or hinder the consummation of the transactions contemplated by this
Agreement or would reasonably be expected to have a Material Adverse Effect on
AMG and its Affiliates on a consolidated basis.
6.6 Acquisition of Shares for Investment. AMG has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its purchase of the shares of Company Shares. AMG
confirms that the Stockholders and the Company have made available to AMG the
opportunity to ask questions of the officers and management employees of the
Company and to acquire additional information about the business and financial
condition of the Company and the LLC. AMG is acquiring the Company Shares for
investment and not with a view toward or for sale in connection with any
distribution thereof in violation of any federal or state securities or "blue
sky" law, or with any present intention of distributing or selling such shares
in violation or any federal or state securities or "blue sky" law. AMG
understands and agrees that the Company Shares may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act, except pursuant to an exemption from such
registration available under such Act, and without compliance with state, local
and foreign securities laws, in each case, to the extent applicable.
42
6.7 Finder's Fee. AMG 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.
6.8 Merger Sub. Merger Sub is a newly formed wholly-owned subsidiary of
AMG that contains no assets or liabilities other than those incident to its
formation and the consummation of the transactions contemplated hereby.
6.9 Financial Statements.
(a) Attached hereto as Exhibit 6.9 are audited balance sheets of AMG
at December 31, 1995 and December 31, 1996, and audited statements of income,
cash flows and stockholders' equity for the years then ended, as well as an
unaudited balance sheet of AMG at September 30, 1997 and unaudited statements of
income, cash flow and stockholders equity for the nine months then ended.
(b) Said financial statements have been prepared in accordance with
generally accepted accounting principles using the accrual method of accounting,
present fairly the financial condition of AMG at the date of said statements and
the results of its operations for the period covered thereby (except that AMG's
unaudited financial statements do not include footnote disclosure or year-end
adjustments).
6.10 Absence of Changes. Except as disclosed in Schedule 6.10, since
September 30, 1997 there has not been any (a) event which either individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on AMG and its Affiliates on a consolidated basis, or (b) declaration, setting
aside or payment of any dividend or other distribution in respect of the capital
stock of AMG. Notwithstanding the foregoing clause (a), no representation is
given herein with respect to (i) the terms or conditions on which AMG is
negotiating, or may have negotiated, debt and/or equity financings, or (ii) the
terms or conditions on which AMG is negotiating or may have negotiated
investments in investment management companies, which investments have not
closed, or (iii) any impact on the condition (financial or otherwise)
properties, assets, liabilities, operations, business or prospects relating to
any investment of AMG, which investment may not have closed.
6.11 Compliance with Laws. AMG (with respect to AMG only, and not its
Affiliates) is, and at all times has been, in material compliance with all
Investment Laws and Regulations applicable to it, except to the extent that
noncompliance would not reasonably be expected to have a Material Adverse Effect
on AMG and its Affiliates on a consolidated basis. Neither AMG nor any officer,
director or employee thereof is in default with respect to any judgment, order,
writ, injunction, decree, demand or assessment relating to any aspect of the
business or affairs or properties or assets of AMG and issued by any court or
any federal, state, municipal or other governmental agency, board, commission,
bureau, instrumentality or department, domestic or foreign, or by any
self-regulatory authority. Neither AMG nor any officer, director or employee of
AMG, is charged or, to the knowledge of AMG, under
43
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, relating to any aspect of the business or affairs or properties or
assets of AMG or the transactions contemplated hereby.
SECTION 7. COVENANTS OF AMG.
7.1 Making of Covenants and Agreement. AMG hereby makes the covenants and
agreements set forth in this Section 7.
7.2 Confidentiality. AMG agrees that, unless and until the Closing has
been consummated, each of AMG, Merger Sub and their respective officers,
directors, agents and representatives will hold in strict confidence, and will
not use, any confidential or proprietary data or information obtained from the
Company or the Stockholders 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 the Company's industry or
which has been disclosed to AMG 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, AMG 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 AMG (and its officers, directors, agents and representatives) in
connection with the transaction.
7.3 Cooperation of AMG.
(a) AMG shall cooperate (and shall cause Merger Sub to 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.
(b) AMG shall for all purposes report (and shall cause Merger Sub to
report) the value of the AMG Shares on a basis consistent with the Valuation and
shall pay when due fifty percent (50%) of any expenses incurred in connection
with the preparation of the Valuation Report.
7.4 HSR Act. AMG will use commercially reasonable efforts to obtain the
termination of the applicable waiting period under the HSR Act (including any
extensions thereof).
7.5 Notice of Default. Promptly upon the occurrence of, or promptly upon
AMG becoming aware of the impending or 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
44
event occurred or been known to AMG prior to the date hereof, of any of the
representations, warranties or covenants of AMG contained in or referred to in
this Agreement or in any Schedule or Exhibit referred to in this Agreement, AMG
shall give written notice thereof to the Company.
7.6 Consummation of Agreement. AMG shall use commercially reasonable
efforts to perform and fulfill all conditions and obligations to be fulfilled by
it under this Agreement, to the end that the transactions contemplated by this
Agreement shall be fully carried out.
7.7 Contribution to LLC. On or promptly following the Closing, AMG shall
cause Merger Sub to make an additional contribution to the capital of the LLC as
contemplated in Section 4.1 of the Restated LLC Agreement to fund contributions
by the LLC to the Private Funds as contemplated thereby, provided that such
amount shall not exceed $150,000.
7.8 Transactions in AMG Shares. In the event that AMG issues any
additional shares of its Series C Non-Voting Convertible Stock to any
Stockholder as a result of a dividend, distribution, subdivision, combination or
reclassification of shares of capital stock, it will not, from the effective
time of such issuance through the date on which such shares of Series C
Non-Voting Convertible Stock automatically convert into shares of Common Stock,
par value $.01 per share of AMG in accordance with the Certificate of
Designations, issue any additional shares of Series C Non-Voting Convertible
Stock as a result of an additional dividend, distribution, subdivision,
combination or reclassification of its shares of capital stock.
SECTION 8. CONDITIONS TO THE OBLIGATIONS OF AMG.
The obligation of AMG and Merger Sub to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment (or waiver by
AMG), 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 AMG, the Company, Merger Sub, the LLC or any of
the Stockholders 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 a Material Adverse Effect on the Company, the LLC (with such
materiality determined as if the LLC Contribution had previously occurred) or
AMG; provided however that any threatened suit, action or proceeding for damages
or injunctive relief or any suit, action or proceeding only for damages by
Former Shareholders
45
that may arise under or relate to the Amended and Restated Shareholders
Agreement dated as of August 10, 1994, a true and complete copy of which has
been provided to AMG (the "Shareholders Agreement") but not any pending suit,
action or proceeding which includes, in addition to any other relief sought, a
prayer for preliminary injunctive relief or a temporary restraining order
(collectively a "Preliminary Injunction Motion") against the Company, the
Majority Stockholders, Merger Sub, the LLC or AMG) shall be disregarded solely
for purposes of determining satisfaction of the conditions contained in this
Section 8.1 and not for determining liability under Section 12 hereof. In the
event that a Preliminary Injunction Motion is pending at any time prior to the
Closing, the parties shall cooperate and use their commercially reasonable
efforts to cause such Preliminary Injunction Motion to be denied or dismissed.
In the event that such Preliminary Injunction Motion remains pending at the time
when the Closing would otherwise occur, the Closing shall be delayed fifteen
(15) days and in the event that such Preliminary Injunction Motion remains
pending at such date that is fifteen (15) days after the originally scheduled
Closing date, the Closing shall be delayed an additional fifteen (15) days,
provided, that the Closing shall occur on the second business day following
denial or dismissal of any Preliminary Injunction Motion (or such other date as
may be agreed by the parties) and, in any event, the date set forth in Section
10.1 shall be extended through the end of any extension period contemplated
hereby.
8.2 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of the Company and
each of the Stockholders 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 that solely for the
purposes of determining satisfaction of the condition contained in this Section
8.2(a) and not for determining liability under Section 12 hereof,
representations and warranties that are qualified by their terms as to
materiality, shall be true in all respects as so qualified and except to the
extent contemplated in Section 8.11 with respect to damages or claims arising
out of the Shareholders Agreement) as of the date of this Agreement and at and
as of 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.
(b) Each and all of the agreements to be performed by the Company
and each of the Stockholders 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. Each and all of the conditions to be
performed or satisfied by the Company and each of the Stockholders pursuant to
this Agreement and the other agreements, documents and instruments contemplated
hereby shall have been duly performed or satisfied.
46
(c) The Company, the LLC and each of the Majority Stockholders shall
have furnished AMG with a certificate or certificates dated as of the date of
the Closing with respect
to each of the foregoing.
8.3 Client Consents. Clients of the Company whose advisory agreements
provide for the payment (based on the Contract Value of each such advisory
agreement) of annual fees constituting at least eighty-five percent (85%) of the
Base Fees shall have Consented to the transactions contemplated hereby, and
advisory agreements which (based on their Contract Values) represent eighty-five
percent (85%) of the Base Fees shall survive the Closing and the LLC
Contribution and then be in full force and effect. For purposes of this Section
8.3:
(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 December 31, 1997;
(ii) "Consent" shall mean (A) with respect to a client whose
contract by its terms or under applicable law terminates upon the
consummation of the transactions contemplated hereby, that the LLC shall
have entered into a new contract on substantially equivalent terms which
contract is effective after giving effect to the Closing and the LLC
Contribution, (B) with respect to a client whose contract (by its terms or
under applicable law) requires written consent from a party or parties
thereto for it to survive the transactions contemplated hereby and by the
LLC Contribution Agreement, that the Company shall have obtained all such
written consents as may be required under such contract or under
applicable law, and (C) with respect to a client whose contract does not
require written consent (by its terms or under applicable law) from any
party thereto for it to survive the transactions contemplated hereby, that
the Company 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 and
the LLC Contribution, the LLC) 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 LLC from that client or contract, from that payable to the
Company on December 31, 1997 or the date hereof.
(iii) "Contract Value" shall mean, (A) with respect to an
advisory contract which was in effect on December 31, 1997, the annual
advisory fees (other than incentive or performance fees) payable to the
Company based on the fee schedule and assets under management set forth in
the relevant agreement as of December 31, 1997 (adjusted for any additions
and/or withdrawals since December 31, 1997 (other than withdrawals from
the Private Funds by the Company to redeem its general partner
47
interests) and for any amendments to the fee schedule since such date),
and (B) with respect to an advisory contract which is entered into by the
Company after December 31, 1997, the annual advisory fees (excluding for
these purposes incentive or performance fees) payable to the Company based
on the fee schedule and assets under management set forth in the relevant
agreement on the date of such agreement (adjusted for any additions or
withdrawals since that date and for any amendments to the fee schedule
since such date).
At the Closing, the Company shall deliver a certificate certifying as to
compliance with the foregoing, which certificate includes the calculation of
compliance, including a list in the form of subsection (a) of Schedule 3.7 of
all investment management or advisory contracts as of the date of calculation,
including all the categories of information set forth in subsection (a) of
Schedule 3.7.
8.4 Transfer. The Company shall have established the escrow fund to fund
certain claims, liabilities and obligations under the Escrow Agreement in
accordance with Section 1.7 and Section 2.1 hereof.
8.5 Registration as an Investment Adviser. The LLC shall be registered as
an investment adviser under the Advisers Act and the rules and regulations
promulgated thereunder and shall be entitled to rely upon the succesor
provisions of Section 203(g) under the Adviser's Act, and made appropriate
filings under the laws of each state listed on Schedule 3.18(b).
8.6 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 and the LLC Contribution, the LLC
shall be able to carry on the business presently being conducted by the Company,
in the manner now conducted by the Company, shall have been taken, made or
obtained, and any and all other material permits, approvals, consents, Licenses
or other actions necessary to consummate the transactions hereunder shall have
been received or taken, and none of such permits, approvals, consents or
Licenses shall contain any provisions not currently in effect which are unduly
burdensome.
8.7 HSR Act. Any applicable waiting period under the HSR Act (including
any extensions thereof) shall have expired or been terminated.
8.8 Restated LLC Agreement. Each Majority Stockholder and other Persons as
described in Schedule 3.4(b)(ii) shall have executed and delivered the Restated
LLC Agreement and such Restated LLC Agreement shall be in full force and effect.
8.9 Employment Agreements. Each Majority Stockholder shall have entered
into an Employment Agreement with the LLC and Merger Sub in the form attached
hereto as Exhibit
48
8.9 (the "Employment Agreements"), and each such Employment Agreement shall be
in full force and effect.
8.10 Non Solicitation/Non Disclosure Agreements. Each Person included as a
Non-Manager Member in the Restated LLC Agreement attached hereto as Exhibit 2.2
(other than those who entered into Employment Agreements) shall have entered
into a Non Solicitation/Non Disclosure Agreement with the LLC and the Company
(each a "Non Solicitation Agreement") in the form attached hereto as Exhibit
8.10, and each such Non Solicitation Agreement shall be in full force and
effect.
8.11 Capitalization, Net Worth and Working Capital of the Company and the
LLC. The Company's capitalization including ownership of capital stock and
options to purchase shares of capital stock shall be as set forth on Schedule
1.7 and Schedule 3.3. The LLC's capitalization, including capital and profits
interests and other rights to purchase interests in the LLC shall be as set
forth in Schedule 3.4(b)(ii). At the Closing, and after giving effect to the LLC
Contribution and taking into account all transaction costs of the Company and
the LLC, the LLC shall have a tangible net worth (determined in accordance with
GAAP of at least four million dollars ($4,000,000), working capital (defined as
current assets less current liabilities) of at least four million dollars
($4,000,000), which shall be not less than the amount necessary for the
operation of the business of the LLC, consistent with past practices of the
Company, and cash on hand of at least four million dollars ($4,000,000). AMG
shall be provided with a certificate from the President of the Company at the
Closing representing that the foregoing is true and correct.
8.12 Delivery. Each of the Company and the Stockholders shall have
executed (where applicable) and delivered to AMG (or shall have caused to be
executed and delivered to AMG by the appropriate person including, without
limitation, the LLC) the following:
(a) the LLC Contribution Agreement (including all agreements and
documents which are schedules thereto) and all such other documents of transfer
and assignment as AMG may reasonably require in connection therewith;
(b) certified copies of resolutions of the board of directors and
stockholders 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 (and which the Company executes on behalf of the LLC);
(c) a copy of the Articles of Organization and By-laws of the
Company 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;
(d) a copy of the Certificate of Formation of the LLC certified as
of a recent date by the Secretary of State of the State of Delaware;
49
(e) a copy of the Limited Liability Company Agreement of the LLC as
in effect immediately prior to the restatement into the Restated LLC Agreement;
(f) a certificate issued by the appropriate Secretary of State of
each state set forth in Schedule 8.12(f) and Schedule 3.2(b) certifying that
each of the Company and the LLC, as applicable, are in good standing in such
state as of the most recent practicable date;
(g) true and correct copies of each of the agreements, documents and
instruments contemplated hereby (including, without limitation, the Restated LLC
Agreement), and all agreements, documents, instruments and certificates
delivered or to be delivered in connection therewith;
(h) a certificate of the Clerk of the Company both on behalf of the
Company and for the Company as the Manager of the LLC, certifying that the
resolutions, Articles of Organization, limited liability company agreement and
By-laws in paragraphs (b), (c) and (e) above are in full force and effect and
have not been amended or modified, and that the officers of such corporation or
limited liability company are those persons named in the certificate;
(i) opinions from counsel to the Company and the Stockholders, in
substantially the forms of Exhibit 8.12(i), together with a favorable opinion
(which may be a "reasoned" opinion) reasonably acceptable in form and substance
to AMG from special counsel to the Company and the Stockholders (which counsel
shall be reasonably acceptable to AMG) with respect to the enforceability of the
non-competition and non-solicitation provisions of the Employment Agreement and
the Non-Solicitation Agreement;
(j) a release of the Company and the LLC from all liabilities other
than those arising out of the transactions or agreements contemplated hereby,
from each of the Stockholders indicated on Schedule 1.7 in the form attached
hereto as Exhibit 8.12(j).
(k) a Representation Certificate executed by the Company and each of
the Majority Stockholders in substantially the form attached hereto as Exhibit
8.12(k);
(l) a Consent Certificate executed by the Company and each of the
Majority Stockholders in substantially the form attached hereto as Exhibit
8.12(l);
(m) a Capitalization, Net Worth and Working Capital Certificate
executed by the Company and each of the Majority Stockholders in substantially
the form attached hereto as Exhibit 8.12(m);
(n) an Escrow Agreement in substantially the form attached
hereto as Exhibit 1.7;
(o) a Supplemental Indemnification Agreement in substantially the
form attached hereto as Exhibit 8.12(o) (the "Supplemental Indemnification
Agreement");
50
(p) an opinion of Bermuda counsel to the Company and each of the
Majority Stockholders in substantially the form of Exhibit 8.12(p); and
(q) all corporate record books of the Company, including minutes of
all meetings of stockholders, directors and committees of the Board of
Directors, if any, and the stock records of the Company (including all original
stock certificates surrendered by the Stockholders); provided, however, that the
Company, the LLC and the Majority Stockholder and their respective
representatives and agents shall be permitted reasonable access to such books
and records during regular business hours upon their prior written request.
8.13 Material Adverse Effect. Since the date of this Agreement, there
shall have been no event which, either individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect on the Company
or the LLC, and AMG shall be provided with a certificate from the President of
the Company to that effect at the Closing.
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
MAJORITY STOCKHOLDERS.
The obligation of the Company and the Majority Stockholders to consummate
this Agreement and the transactions contemplated hereby is 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 AMG, the Company, the LLC, the Merger Sub or any
of the Stockholders 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 on the date of Closing
before or by any court or governmental body seeking to restrain or prohibit the
execution and delivery of this Agreement or any of the agreements, documents or
instruments contemplated hereby or, the consummation of the transactions
contemplated hereby or thereby or which could reasonably be expected to have a
Material Adverse Effect on the Company, the LLC (which such materiality
determined as if the LLC Contribution shall have previously occurred) or AMG;
provided, however, that any threatened suit, action, or proceeding for damages
or injunctive relief or suit, action or proceeding only for damages by Former
Shareholders that may arise under or relate to the Shareholders Agreement buy
not any pending suit, action or proceeding which includes, in addition to any
other relief sought, any Preliminary Injunction Motion against the Company, the
Majority Stockholders, Merger Sub, the LLC or AMG) shall be disregarded solely
for purposes of determining satisfaction of the conditions contained in this
Section 8.1 and not for determining liability under Section 12 hereof. In the
event that a Preliminary Injunction Motion is pending at any time prior to the
Closing, the parties shall cooperate and use their commercially reasonable
efforts to cause such Preliminary Injunction Motion to be denied or dismissed.
In the event that such Preliminary Injunction Motion remains pending at the time
when the
51
Closing would otherwise occur, the Closing shall be delayed fifteen (15) days
and in the event that such Preliminary Injunction Motion remains pending at such
date that is fifteen (15) days after the originally scheduled Closing date, the
Closing shall be delayed an additional fifteen (15) days, provided, that the
Closing shall occur on the second business day following denial or dismissal of
any Preliminary Injunction Motion (or such other date as may be agreed by the
parties) and, in any event, the date set forth in Section 10.1 shall be extended
through the end of any extension period contemplated hereby.
9.2 Representations, Warranties and Covenants.
(a) Each of the representations and warranties of AMG 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 AMG or by any person authorized by AMG 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 or warranties as so qualified
shall be true in all respects and except to the extent contemplated in Section
8.1 with respect to damages or claims arising out of the Shareholders Agreement)
at and as of the Closing as though newly made at such time.
(b) Each and all of the agreements to be performed by AMG 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.
Each and all of the conditions to be performed or satisfied by AMG at or prior
to the Closing pursuant to this Agreement and the other agreements, documents
and instruments contemplated hereby shall have been duly performed or satisfied.
(c) AMG shall have furnished the Majority Stockholders with a
certificate dated as of the date of the Closing to the foregoing effect.
9.3 Client Consent. The conditions set forth in Section 8.3 shall
have been met.
9.4 Delivery. AMG shall have executed and delivered to the Company, the
following:
(a) certified copies of resolutions of the board of directors of AMG
and of Merger Sub authorizing the execution of this Agreement and each of the
other agreements, documents or instruments contemplated hereby to which AMG or
Merger Sub, as applicable, is a party;
(b) a copy of the Amended and Restated Certificate of Incorporation
and by-laws of AMG and of the Articles of Organization and By-laws of Merger Sub
which, in the case of each of the Amended and Restated Certificate of
Incorporation and the Articles of
52
Organization, is certified as of a recent date by the Secretary of State of the
State of Delaware or the Secretary of State of the Commonwealth of Massachusetts
as applicable;
(c) certificates issued by the Secretary of State of the State of
Delaware and the Commonwealth of Massachusetts, respectively, certifying that
each of AMG and Merger Sub is validly existing and in good standing in the State
of Delaware and the Commonwealth of Massachusetts, respectively, as of the most
recent practicable date;
(d) true and correct copies of each of the agreements, documents and
instruments contemplated hereby (including, without limitation, the Restated LLC
Agreement) to which AMG is a party, and all agreements, documents, instruments
and certificates delivered or to be delivered in connection therewith by AMG;
(e) a certificate of the Secretary of AMG and of Merger Sub
certifying that the resolutions, Amended and Restated Certificate of
Incorporation, Certificate of Incorporation, 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 AMG and Merger Sub, as applicable are those persons
named in the certificate; and
(f) an opinion from ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP in substantially the
form of Exhibit 9.4(f).
9.5 Registration as an Investment Adviser. The LLC shall have become
registered as an investment adviser under the Advisers Act and the rules and
regulations promulgated thereunder, and made appropriate filings under the laws
of each state where such filings may be necessary (in the reasonable opinion of
the Company, which shall not include any states in which the Company is not
registered on the date of this Agreement) to enable the LLC, after giving effect
to the LLC Contribution Agreement and the Closing, to conduct the business
presently conducted by the Company.
9.6 HSR Act. Any applicable waiting period under the HSR Act (including
any extensions thereof) shall have expired or been terminated.
9.7 Material Adverse Change. There shall have been no event which either
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect on AMG and its Affiliates taken as a whole on a consolidated
basis and the Company shall be provided with a certificate from the President,
Executive Vice President or any Senior Vice President of AMG to that effect at
the Closing. Notwithstanding the foregoing, this Section 9.7 shall not apply to
entrance into any letter of intent, commitment letter, contract or other
agreement with respect to, or the incurrence of any debt, claim or obligation
arising from, (i) debt and/or equity financings which AMG is negotiating, or may
have negotiated, or (ii) investments in investment management companies which
AMG is negotiating or may have negotiated, which investments have not closed, or
(iii) the properties, assets, liabilities,
53
operations, business or prospects relating to any investment of AMG, which
investment may not have closed.
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 AMG and the Company;
(b) by AMG, pursuant to written notice by AMG to the Company and the
Stockholders, if any of the conditions set forth in Section 8 of this Agreement
have not been satisfied at or prior to June 30, 1998, (as extended pursuant to
Section 8.1 and Section 9.1) or if it has become reasonably and objectively
certain that any of such conditions, will not be satisfied at or prior to June
30, 1998, such written notice to set forth such conditions which have not been
or will not be so satisfied; and
(c) by the Company, pursuant to written notice by the Company to
AMG, if any of the conditions set forth in Section 9 of this Agreement have not
been satisfied at or prior to June 30, 1998 (as extended pursuant to Section 8.1
and Section 9.1), or if it has become reasonably and objectively certain that
any of such conditions, will not be satisfied at or prior to June 30, 1998 (as
extended pursuant to Section 8.1 and Section 9.1), such written notice to set
forth such conditions which have not been or will not be so satisfied.
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 5.13, 5.14, 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.
(a) Anything in this Agreement to the contrary notwithstanding, if
any of the conditions specified in Section 8 hereof have not been satisfied, AMG
shall have the right to proceed with the transactions contemplated hereby;
provided, however, that if AMG proceeds with the transactions contemplated
hereby notwithstanding the fact that the Company and the
54
Majority Stockholders have provided written notice to AMG in a Schedule or
certificate provided pursuant to this Agreement which describes the nature,
scope and extent of the failure of one or more of the conditions specified in
Section 8 hereof to be satisfied, AMG shall, by proceeding, be deemed to have
waived its rights hereunder to the extent of any such disclosure except to the
extent that such matter or claim may give rise to an indemnification right under
the Supplemental Indemnification Agreement.
(b) Anything in this Agreement to the contrary notwithstanding, if
any of the conditions specified in Section 9 hereof have not been satisfied, the
Company and the Majority Stockholders shall have the right to proceed with the
transactions contemplated hereby; provided, however, that if the Company and the
Majority Stockholders proceed with the transactions contemplated hereby
notwithstanding the fact AMG has provided written notice in a Schedule or
certificate provided pursuant to this Agreement or by written notice to the
Company and the Majority Stockholders which describes the nature, scope and
extent of the failure of one or more of the conditions specified in Section 9
hereof to be satisfied, the Company and the Majority Stockholders shall, by
proceeding, be deemed to have waived their rights hereunder to the extent of any
such disclosure.
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 eighteen month anniversary of the date of the Closing, except for the
representations and warranties made (a) in Sections 3.9 and 3.24, (b) in Section
5A and (c) in any way affecting or relating to the Shareholders Agreement, 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 in reasonable detail 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.
11.2 Regulatory Filings. Each of the Stockholders will cooperate with AMG
and Merger Sub to enable AMG and Merger Sub to make any and all regulatory
filings required by them with respect to the Company, Merger Sub, the LLC or the
transactions contemplated hereby (including, by way of example and not of
limitation, the filing of tax returns and the withdrawal of the Company as an
investment adviser).
55
SECTION 12. INDEMNIFICATION.
12.1 Indemnification by the Majority Stockholders. From and after the
Closing the Majority Stockholders agree, jointly and severally, to indemnify and
hold AMG, Merger Sub and their respective subsidiaries and affiliates
(including, from and after the Closing, the Company and, to the extent the loss
is suffered by the LLC, the LLC) and persons serving as officers, directors,
partners, members, stockholders or employees thereof (individually an "AMG
Indemnified Party" and collectively the "AMG 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 and expenses 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) (collectively, "Losses") (provided, however, that the measure of Loss
shall not include the diminution in trading value of the Common Stock, par value
$.01 per share, of AMG), net, in the case of each AMG Indemnified Party, of any
insurance proceeds actually received by that AMG Indemnified Party on account of
insurance policies the premiums on which were paid by the Company prior to the
LLC Contribution or by the LLC, less the aggregate premiums paid by the LLC for
such insurance, 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 the Company or any Stockholder 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 the
Company or any Stockholder 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 or
the LLC prior to the Closing, or arising out of facts, events or circumstances
regarding the Company or the LLC existing prior to the Closing (including,
without limitation, whether or not disclosure of such facts, events or
circumstances was made herein or on the Schedules hereto) other than executory
obligations to be performed after the Closing that arise pursuant to the
obligations expressly assumed by the LLC pursuant to the LLC Contribution.
12.2 Limitations on Indemnification by the Majority Stockholders.
Notwithstanding any other provision of this Agreement to the contrary, the right
of AMG Indemnified Parties to indemnification under Section 12.1 shall be
subject to the following provisions:
(a) No indemnification shall be payable to any AMG Indemnified Party
pursuant to Subsection 12.1(b) or 12.1(c) unless the total of all claims for
indemnification
56
pursuant to Section 12.1 shall exceed five hundred thousand dollars ($500,000)
in the aggregate, whereupon only amounts of such claims in excess of such amount
shall be recoverable in accordance with the terms hereof provided, however, that
this limitation shall not apply to claims for indemnification (i) pursuant to
Section 5A, except to the extent that indemnification for Tax matters do not
exceed twenty five thousand dollars ($25,000), (ii) in connection with claims
arising out of the Escrow Agreement or which had been contemplated to be
transferred to the escrow agent pursuant to the Escrow Agreement and Section 2.1
hereof or (iii) subject to the Supplemental Indemnification Agreement;
(b) No indemnification shall be payable to any AMG Indemnified Party
by any individual Majority Stockholder under Section 12.1(b) or 12.1(c)
(exclusive of any claims for indemnification for Taxes or based upon or related
to breach of any representation, warranty or covenant with respect to Taxes or
Tax matters or pursuant to Section 5A hereof or any representation, warranty or
covenant with respect to Employee Programs or matters related to Employee
Programs) after the payments made by such Majority Stockholder to AMG
Indemnified Parties under this Section 12 equals or exceeds the amount set forth
opposite such Majority Stockholder's name on Schedule 12.2(a) (it being
understood that amounts payable with respect to indemnification for Taxes or
based upon or related to breach of any representation, warranty or covenant with
respect to Taxes or Tax matters or pursuant to Section 5A hereof or any
representation, warranty or covenant with respect to Employee Programs or
matters related to Employee Programs or under the Supplemental Indemnification
Agreement shall not be subject to this limitation or considered for purposes of
this calculation); and
(c) No indemnification shall be payable to an AMG Indemnified Party
with respect to claims asserted pursuant to Subsection 12.1(b) or 12.1(c) after
the eighteen month anniversary of the date of the Closing (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 claims for
indemnification for Taxes or based upon or related to a breach of any
representation, warranty or covenant with respect to Taxes or pursuant to
Section 5A hereof or Employee Programs or Tax matters or matters related to
Employee Programs or under Supplemental Indemnification Agreement shall continue
until the expiration of all applicable statutes of limitation with respect
thereto.
12.3 Indemnification by AMG. AMG agrees to indemnify and hold the Majority
Stockholders (individually a "Stockholder Indemnified Party" and collectively
the "Stockholder Indemnified Parties") harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs and expenses (including,
without limitation, reasonable fees and expenses 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 breach of any representation, warranty or covenant made by AMG in
this Agreement or in any agreement, document or instrument contemplated hereby,
or in any certificate, schedule or
57
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 AMG. Notwithstanding the foregoing,
the right of Stockholder Indemnified Parties 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 Stockholder Indemnified Parties, unless the total of all claims for
indemnification pursuant to Section 12.3 shall exceed five hundred thousand
dollars ($500,000) in the aggregate, whereupon only amounts of such claims in
excess of such amount shall be recoverable in accordance with the terms hereof;
and
(b) No indemnification pursuant to Section 12.3 shall be payable to
a Stockholder Indemnified Party after the payments made by AMG to Stockholder
Indemnified parties under this Section 12 equal or exceed forty million dollars
($40,000,000); and
(c) No indemnification shall be payable to the Stockholders 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 the period in which indemnification claims can be made hereunder.
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 reasonable summary of the
bases for the claim for indemnification and any claim or liability being
asserted by a third party. Within thirty (30) 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.
If the indemnifying party fails to give notice that it disputes an
indemnification claim within thirty (30) days after receipt of notice thereof,
it shall be deemed to have accepted and agreed to the claim, which shall become
immediately done and payable. 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 each indemnified party, which consent shall not be
unreasonably withheld) as long as the indemnifying party is conducting a good
faith and diligent defense. Each 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 either both the indemnifying
party
58
and/or one or more indemnified parties and an indemnified party is advised that
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, an 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, after three (3)
business days notice to the indemnifying party of its intent to do so, 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 Indemnification Obligations.
(a) In order to satisfy the indemnification obligations of the
Majority Stockholders pursuant to Section 12.1 above, an AMG Indemnified Party
shall have the right (in addition to collecting directly from the Majority
Stockholders) to set off its indemnification claims against (i) any and all
amounts of interest and principal under any promissory note issued to such
Stockholder pursuant to the provisions of Section 3.11 of the Restated LLC
Agreement (whether or not then due and payable) in accordance with the terms of
such note, and/or (ii) any and all amounts to be distributed to such Majority
Stockholder by the LLC, whether or not such right of set-off is specifically
provided for in the Restated LLC Agreement and/or (iii) any and all amounts owed
or which become owed to such Majority Stockholder or any Permitted Transferee
(as such term is defined in the Restated LLC Agreement) of such Majority
Stockholder by AMG, the Company or the LLC pursuant to the provisions of
Sections 3.11 or 7.1 of the Restated LLC Agreement.
(b) In connection with indemnification obligations of the Majority
Stockholders pursuant to Section 12.1 above, on the date on which any amount is
payable by a Majority Stockholder to an AMG Indemnified Party pursuant to this
Section 12, such Majority Stockholder shall pay such amount to such AMG
Indemnified Party as follows:
(i) such Majority Stockholder shall pay such AMG Indemnified
Party an amount in cash (by wire transfer of immediately available funds)
equal to the amount payable by such Majority Stockholder to such AMG
Indemnified Party on such date, multiplied by sixty percent (60%); and
(ii) such Majority Stockholder shall pay such AMG Indemnified
Party a number of AMG Shares or shares of Common Stock, $.01 par value per
share, of AMG ("AMG Common Stock"), the value of which is equal to the
amount payable by such Majority Stockholder to such AMG Indemnified Party
on such date, multiplied
59
by forty percent (40%), with each such AMG Share or share of Common Stock
being free of any Claims. For purposes of the preceding sentence, each AMG
Share and each share of AMG Common Stock shall be considered to have a
value of twenty-six dollars and fifty cents ($26.50) per share (as
appropriately adjusted for stock splits, stock dividends and the like). If
a Majority Stockholder fails to deliver the number of AMG Shares or shares
of AMG Common Stock on the date and in the manner set forth in clause (ii)
above (including, without limitation, being free of any Claims) then such
Majority Stockholder shall be required to fulfill the payment obligation
in cash together with an additional payment of ten percent (10%) of such
payment obligation (which payments shall immediately be made by wire
transfer of immediately available funds) and, thereafter, such Majority
Stockholder shall be required to fulfill all payment obligations under
this Section 12 in full, in cash (by wire transfer of immediately
available funds).
12.7 Procedure. In the event that AMG makes any claim for indemnification
pursuant to this Section 12, AMG shall use commercially reasonable efforts to
pursue such claim against each of the Majority Stockholders in a single action.
The foregoing shall have no effect on the joint and several indemnification
obligations of the Majority Stockholders hereunder.
12.8 Exclusive Remedy. Except in the case of claims arising out of, based
upon or related to fraud of the Company or any Majority Stockholder, the
indemnification in this Section 12 shall be the exclusive remedy available to
any indemnified party against any indemnifying party for any Losses arising out
of or based upon the matters set forth in Section 12.1 and 12.3 of this
Agreement, provided, however, that nothing herein shall (i) limit the
non-monetary equitable remedies of any party hereto in respect of any breach of
any covenant or other agreement of any party required to be performed after the
Closing, (ii) limit the right or remedies of any party hereto under Section 5A
hereof, or (iii) limit the rights or remedies of any party hereto under the
Supplemental Indemnification Agreement. Any and all disputes between the parties
(except to the extent non-monetary equitable remedies are sought) shall be
resolved as contemplated in Section 14.2.
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
"Adjustment Fractions" shall have the meaning specified in Section
1.7(b) 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.
60
"Affiliate" shall mean with respect to any person or entity (herein the
"first party"), any other person or entity that directly or indirectly controls,
or is controlled by, or is under common control with, such first party. The term
"control" as used herein (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to (a)
vote twenty-five percent (25%) or more of the outstanding voting securities of
such person or entity, or (b) otherwise direct the management or policies of
such person or entity by contract or otherwise.
"AMG" shall mean Affiliated Managers Group, Inc., a Delaware corporation,
or any of its permitted assigns hereunder.
"AMG Indemnified Party" shall have the meaning specified in Section 12.1
hereof.
"AMG Shares" shall have the meaning specified in Section 1.7 hereof.
"Articles of Organization" shall mean the Company's Articles of
Organization, as amended to the date of this Agreement.
"Base Balance Sheet" shall mean the audited balance sheet of the Company
of November 30, 1996.
"Base Fees" shall have the meaning specified in Section 8.3 hereof.
"Certificate of Designations" shall have the meaning specified in
Section 1.7(a) hereof.
"Claims" shall mean any restrictions, liens, claims, charges, security
interests, assignments, mortgages, deposit arrangements, pledges or encumbrances
of any kind or nature whatsoever.
"Class A Stock" shall mean the Company's Class A Non-Voting Common Stock,
par value $1.00 per share.
"Closing" shall have the meaning specified in Section 1.8 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.
"Common Stock" shall mean the Company's Common Stock, $.01 par value per
share.
"Company" shall mean Essex Investment Management Company, Inc., a
Massachusetts corporation.
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"Company Shares" shall have the meaning set forth in the preamble hereto,
provided that such number shall be reduced to the extent any Company Shares are
redeemed prior to the Closing pursuant to Section 5.5.
"Consent" shall have the meaning specified in Section 8.3 hereof.
"Contract Value" shall have the meaning specified in Section 8.3 hereof.
"Delaware Act" shall mean the Delaware Limited Liability Company Act, 6
Del. C. ss.18-101, et. seq., as amended from time to time, and any successor to
such act.
"Election Forms" shall have the meaning specified in Section 5A.1.
"Elections" shall have the meaning specified in Section 5A.1.
"Employment Agreement" shall have the meaning specified in Section 8.8
hereof.
"Employment Arrangement" shall have the meaning specified in Section
3.25(c) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor to such act.
"ERISA Client" shall have the meaning specified in Section 3.7(b) hereof.
"Escrow Agreement" shall have the meaning specified in Section 1.7 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and any successor to such act.
"Existing Certificate of Formation" shall mean the Certificate of
Formation of the LLC, as amended to the date of this Agreement.
"Existing LLC Agreement" shall mean the Limited Liability Company
Agreement of the LLC dated as of January 12, 1998, which is the Limited
Liability Company Agreement of the LLC on the date of this Agreement and
immediately prior to its amendment and restatement into the Restated LLC
Agreement.
"Foreign Fund" shall mean Essex High Technology Fund (Bermuda), L.P.
"Former Shareholders" shall have the meaning set forth in Section 5.12(c)
hereof.
"GAAP" shall mean United States generally accepted accounting principles
as in effect from time to time.
▇▇
"▇▇▇ ▇▇▇" 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.
"Intellectual Property" shall have the meaning set forth in Section
3.14(a) hereof.
"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.
"Knowledge" with respect to the Majority Stockholders and the Company
shall mean, in the case of the "knowledge" of the Company, the actual knowledge
of each employee of the Company, and, in the case of the knowledge of any
Majority Stockholder, the actual knowledge of each of the Stockholders, whether
or not they are a party to this Agreement.
"Leased Real Property" shall have the meaning specified in Section 3.6(a)
hereof.
"Licenses" shall have the meaning specified in Section 3.18(b) hereof.
"LLC" shall mean Essex Investment Management Company, LLC, a Delaware
limited liability company.
"LLC Contribution" shall have the meaning specified in Section 2.1 hereof.
"LLC Contribution Agreement" shall have the meaning specified in Section
2.1 hereof.
"Loss or Losses" shall have the meaning specified in Section 12.1 hereof.
"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.
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"Merger" shall have the meaning specified in Section 1.1 hereof.
"Merger Consideration" shall have the meaning specified in Section 1.7
hereof.
"Merger Sub" shall have the meaning specified in the preamble hereof.
"Mutual Funds" shall mean Capital Appreciation Fund, a series of the
Managers Funds, a Massachusetts business trust, which to the knowledge of the
Company and the Majority Stockholders is duly registered under the Investment
Company Act.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Non Solicitation Agreement" shall mean a Non Solicitation/Non Disclosure
Agreement substantially in the form attached hereto as Exhibit 8.9.
"Owned Real Property" shall have the meaning specified in Section 3.6(a)
hereof.
"Person" shall mean 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.
"Preliminary Injunction Motion" shall have the meaning specified in
Section 8.1 hereof.
"Private Funds" shall mean Essex Flexport Fund, Limited Partnership (Small
Cap Pool, Mid Cap Pool, Large Cap Pool), Corn Hill Series Fund, Limited
Partnership (High Performance, Growth) Essex Safe Harbor Fund, Limited
Partnership, Essex Performance Fund, Limited Partnership, Essex Special Growth
Opportunities Fund, L.P., Essex High Technology Fund, L.P., Spruce Investment
Partners, L.P. and The New Discovery Fund Limited.
"Real Property" shall have the meaning specified in Section 3.6(a) hereof.
"Redemption Agreement" shall have the meaning specified in Section 1.3
hereof.
"Restated LLC Agreement" shall mean the Amended and Restated Limited
Liability Company Agreement of the LLC in substantially the form attached hereto
as Exhibit 2.2, as the same may be amended from time to time in accordance with
its terms.
"SEC" shall mean the Securities and Exchange Commission, or any successor
agency thereto.
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"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.
"Shareholders Agreement" shall have the meaning specified in Section 8.1
hereof.
"Stockholder" shall mean a holder of the Company's capital stock listed on
Schedule 1.7 hereto.
"Stockholder Indemnified Party" shall have the meaning specified in
Section 12.3 hereof.
"Supplemental Purchase Agreement" shall mean the Purchase Agreement in the
form of Exhibit 1.12 by and between the parties hereto and each Stockholder.
"Supplemental Indemnification Agreement" shall have the meaning set forth
in Section 8.12(o) hereof.
"Surviving Corporation" shall have the meaning set forth in Section 1.1
hereof.
"Taxes" shall have the meaning specified in Section 3.9(a) hereof.
"Taxing Authority" shall have the meaning specified in Section 3.9(c)
hereof.
"Valuation" shall mean the value of the AMG Shares determined by an
independent party retained by AMG and the Company to calculate the value of the
AMG Shares for federal income tax and other purposes.
"Valuation Report" shall mean the report prepared by the independent party
pursuant to the Valuation.
SECTION 14. MISCELLANEOUS.
14.1 Fees and Expenses. The rights and obligations of the parties hereto
with respect to fees and expenses, except to the extent expressly set forth
herein, are as follows:
(a) AMG 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 Stockholders and
the Company shall pay their own expenses and the expenses of the Company and the
LLC incident to the negotiation and consummation of the transactions
contemplated by this Agreement and the agreements, instruments and documents
contemplated hereby; provided, however, that AMG shall pay (i) the
organizational costs of the LLC including the filing fees of the LLC the
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various states to the extent the LLC has presented AMG with an invoice therefor
at or prior to the Closing, and (ii) fifty percent (50%) any filing fees
required under the HSR Act. In addition, the Company shall pay fifty percent
(50%) of any filing fees required under the HSR Act.
(b) The Stockholders will pay all costs incurred, whether at or
subsequent to the Closing, in connection with the transfer of the Company Shares
to AMG as contemplated by this Agreement, 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.
14.2 Dispute Resolution. The parties agree that from and after the
Closing, any and all disputes, claims, or controversies between them arising out
of or relating to this Agreement including the Exhibits hereto (except to the
extent otherwise set forth therein) and the transactions contemplated hereby
that are not resolved by their mutual agreement shall be resolved by binding
arbitration in accordance with the applicable rules of the American Arbitration
Association. The arbitration shall be held in Massachusetts before a single
arbitrator selected in accordance with Section 12 of the American Arbitration
Association Commercial Arbitration Rules (and, if practicable shall have
experience in the investment advisory industry) and shall otherwise be conducted
in accordance with the American Arbitration Association Commercial Arbitration
Rules. The parties covenant that they will participate in the arbitration in
good faith and that they will share equally its costs except as otherwise
provided herein. This clause applies equally to requests for temporary,
preliminary or permanent injunctive relief, except that in the case of temporary
or preliminary injunctive relief any party may proceed in court without prior
arbitration, if they first obtain a decision from the arbitrator to so proceed.
The provisions of this Section 14.2 shall be enforceable in any court of
competent jurisdiction, and the parties shall bear their own costs in the event
of any proceeding to enforce this Agreement except as otherwise provided herein.
The arbitrator may in his or her discretion assess costs and expenses (including
the reasonable legal fees and expenses of the prevailing party) against any
party to a proceeding. Any party unsuccessfully refusing to comply with an order
of the arbitrators shall be liable for costs and expenses, including attorneys'
fees, incurred by the other party in enforcing the award. The provisions of this
Section 14.2 shall not apply from the date of this Agreement through the date of
the Closing.
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
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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 AMG: Affiliated Managers Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Fries
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
TO MERGER SUB: c/o Affiliated Managers Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Senior Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Fries
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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TO COMPANY: Essex Investment Management Company Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
TO ANY STOCKHOLDER: To that Stockholder at the address set
forth under such Stockholder's name as Schedule
1.7.
In each case, with a copy to: Dechert Price & ▇▇▇▇▇▇
4000 ▇▇▇▇ Atlantic Tower
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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; Severability. 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. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
14.7 Assignability; Binding Effect. This Agreement or any of the
obligations or rights hereunder (a) may not be assigned by AMG or Merger Sub,
without the prior written consent of the Company, other than to an entity under
the control of AMG, and (b) may not be
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assigned by any of the Majority Stockholders or the Company without the prior
written consent of AMG. 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.
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 (a) be executed 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) executed 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 AMG and the Company and the Majority
Stockholders, 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 AMG 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 HSR Act, 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 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.
14.13 Guarantee. AMG shall cause Merger Sub to perform and carry out its
obligations under, and the transactions contemplated by, this Agreement.
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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.
AMG:
AFFILIATED MANAGERS GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Executive
Officer
MERGER SUB:
CONSTITUTION MERGER SUB, INC..
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
COMPANY:
ESSEX INVESTMENT MANAGEMENT
COMPANY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
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STOCKHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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