EXHIBIT 99.1
Term Sheet
Halcyon Management Group LLC Operating Agreement
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Parties o Halcyon Management Group LLC ("Halcyon" or the
"Company"), Alternative Asset Management Acquisition
Corp., ("AAMAC"), Partner Vehicle, Employee Vehicle
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Form of Company o Delaware limited liability company
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Economics
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Classes of Interests o Halcyon shall have three classes of interests: Class
A Interests, Class B Interests and Class C Profits
Interests. Initially, Partner Vehicle shall hold
Class A Interests and Class B Interests, and Employee
Vehicle shall hold Class C Profits Interests. Class A
Interests and Class B Interests shall be unitized so
that each Class A Interest and Class B Interest has
equivalent economic value, other than as specified
herein. At Closing, Partner Vehicle will transfer its
Class A Interests to AAMAC in exchange for the
Aggregate Purchase Price (as defined in the Purchase
Agreement).
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Capital Accounts o Each holder of interests shall have a capital
account, which shall be subject to customary
adjustment, including increases by the amount of any
contributions or allocations of income or gain and
decreases by the amount of any distributions or
allocations of loss or deduction.
o Initial capital accounts for holders of Class A and
Class B interests shall be determined initially by
Halcyon implied by the purchase price for Class A
Interests paid by AAMAC pursuant to the Purchase
Agreement.
o The holder of the Class C Profits Interests shall
have an initial capital account of zero.
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Allocations o All items of gross income attributable to incentive
and other non-management fees and to carried interest
allocations (other than incentive fees on Required
Amounts (as defined in the Shareholders' Agreement))
generated by the Company or its wholly owned
subsidiaries shall be specially allocated to Class C
Profits Interests in an amount equal to the excess,
if any, of (a) 70% of such incentive and other
non-management fees and carried interest allocations
over (b) any salary or cash bonuses (other than as
specially approved by the AAMAC board to be excluded
from this clause (b)) allocated to and
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paid by the Company or its wholly owned subsidiaries
to employees of the Company or its wholly owned
subsidiaries (provided that if the amount specified
in clause (b) in any fiscal year is greater than that
in clause (a), the next year's allocations to Class C
Profits Interests will be reduced by the lesser of
(x) such deficit (or, in the case of the year in
which the Closing Date occurs, the excess, if any, of
such deficit over the Closing Bonus Accrual (as
defined in The Purchase Agreement)) and (y) the sum
of cash bonuses paid and Halcyon Employee Vehicle
profits distributions to ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ in such new year, it being
understood that such reduction shall be applied to
such executives pro rata based on their relative
ownership of the Employee Vehicle). No liabilities
or expenses other than those described herein shall
be allocated to or paid out of items of income
otherwise allocable to Class C Profits Interests.
o Remaining net income (or net loss) shall be allocated
to the holders of the Class A Interests and Class B
Interests, pro rata with respect to the number of
Class A Interests and the Class B Interests, subject
to any required regulatory and related curative
allocations. It is intended that any 197 deductions
allocable to AAMAC due to the Section 754 election
following its purchase of the Class A Interests will
not cause the capital accounts of AAMAC per unit to
be reduced relative to the Class B Interests, which
will not be entitled to such deductions for income
tax purposes.
o Allocations of taxable items of income will follow
book allocations of such items, subject to Section
704(c) of the Internal Revenue Code.
o In the event of any merger, acquisition,
reorganization, consolidation, or liquidation of the
Company involving a payment or distribution of cash,
securities or other assets to any member of the
Company, the consideration received by the Company or
by any direct or indirect holders of equity interests
in the Company (including AAMAC) in such transaction,
net of any bona fide expenses of the Company, shall
be allocated pro rata with respect to the number of
Class A Interests and the Class B Interests (as of
immediately prior to such transaction and subject to
the value of tax basis adjustments), and shall leave
the Class C Profits Interests outstanding without any
diminution of economic rights.
o Withholding and other taxes paid or payable by the
Company in respect of the income of or distributions
to a member shall be treated as a distribution to
that member or repaid to the
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Company.
o No distributions will be permitted to the extent they
would violate applicable law, result in default or
violation of any financing agreement or if there is
insufficient cash.
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Distributions o Distributions to holders of Class A Interests and
Class B Interests shall be made at the discretion of
the Board, and shall be pro rata with respect to the
number of Class A Interests and Class B Interests.
o All amounts allocable to Class C Profits Interests
shall be distributed on an annual basis, to the
extent of distributable cash, to the holders thereof
in cash or in kind.
o Halcyon will endeavor to make distributions to
holders of its Class A, B and C Interests in an
amount necessary to cover their tax obligations
(including quarterly estimated taxes) attributable to
their allocable share of Halcyon income, subject to
availability of free cash, debt service obligations,
and other legal restrictions. If other distributions
made with respect to such fiscal year are not at
least equal to such amount, Halcyon shall (to the
extent so permitted), make sufficient distributions
to provide holders of Class A Interests and Class B
Interests (and, in the case of holders which are
pass-through entities for tax purposes, their
members, partners or equity holders) with an amount
equal to taxes (including quarterly estimated taxes)
applicable to their respective allocable income at
the highest rate applicable to any individual
resident of New York City, and to provide holders of
Class C Interests (and, in the case of holders which
are look-through entities for tax purposes, their
members, partners or equity holders) with sufficient
funds to pay applicable taxes (including quarterly
estimated taxes), subject to availability of free
cash, debt service obligations, and other legal
restrictions. The necessity of a tax distribution
shall be based on cumulative distributions made by
Halcyon with respect to any fiscal year. Although the
amount of the tax distribution is based on the
highest rate applicable to any holder of a Class A or
B Interest (or its flow-through members or partners),
the same tax distribution per Unit shall be made to
all holders of Class A and B Units (and, with respect
to holder of Class C Profits Interests, a separate
determination shall be made applicable to all holders
of Class C Units).
o In the event of any merger, acquisition,
reorganization, consolidation, or liquidation of the
Company involving a
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payment or distribution of cash, securities or other
assets to any member of the Company, the
consideration received by the Company or by any
direct or indirect holders of equity interests in the
Company (including AAMAC) in such transaction, net of
bona fide expenses of the Company, shall be
distributed pro rata with respect to the number of
Class A Interests and the Class B interests (as of
immediately prior to such transaction).
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Advances o Members shall not be permitted to take advances from
the Company against their respective capital accounts
or future distributions, other than as necessary to
provide holders (and, in the case of holders which
are pass-through entities for tax purposes, their
members, partners or equityholders) with sufficient
funds to pay applicable taxes.
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Capital Contributions o No member of the Company shall be obligated to make
any contributions after the Closing Date (other than
contributions in respect of clawback arrangements
that may apply under fund agreements, pro rata with
respect to the previous distributions of the related
incentive fees).
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AAMAC Liabilities o AAMAC and the Company shall enter into appropriate
arrangements under which the Company will make whole
AAMAC for public company expenses and obligations
with respect to issuance of securities authorized by
the Board of Directors of AAMAC.
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Governance
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Board Composition o AAMAC shall have the right to appoint the Halcyon
Board, which shall initially consist of nine persons
and which shall have the same number of Halcyon
representatives as are on the AAMAC Board.
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Board Meetings o Meetings may be called by the CEO, the Chairman or by
a majority of the board.
o Customary provisions regarding the notice for and
conduct of board meetings will be included in the
definitive documentation.
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Officers o The CEO of the Company shall be the same as the CEO
of AAMAC. Other officers of the Company will be
appointed by the CEO.
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Voting o The Class A Interests shall possess all voting rights
in the Company.
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Exculpation and o Neither the Board, any officer, nor any member of the
Indemnification Company (nor the Board nor any officer of any
subsidiary of the Company) shall have any liability
to the Company or any member of the Company for any
actions taken or omitted to be taken with respect to
the Company, except where such person is judicially
determined in a final, nonappealable decision that
such person has acted in bad faith, has committed
fraud, or is guilty of a felony or a misdemeanor
involving theft, larceny, embezzlement,
misappropriation, or similar crimes.
o The Company shall indemnify and hold harmless each
member of the Board and each officer of the Company
(nor the Board nor any officer of any subsidiary of
the Company) to the fullest extent permitted by
applicable law against all losses, including
reasonable legal or investigative expenses, arising
out of such person's activities in connection with
the conduct of the business of the Company, except
where such person is judicially determined in a
final, nonappealable decision that such person has
acted in bad faith, has committed fraud, or is guilty
of a felony or a misdemeanor involving theft,
larceny, embezzlement, misappropriation or similar
crimes. Subject to a customary reimbursement
undertaking, the Company shall advance expenses to
any indemnified person, to be repaid on a final,
nonappealable judgment that such person is not
entitled to indemnification. Indemnification payments
shall be limited to the amount of Company assets.
o Customary procedures for making, disputing and paying
an indemnification claim and defending against,
settling, or compromising third party claims will be
included in the definitive documentation.
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Issuances and Withdrawals
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Issuances o The Company shall not issue any new interests of any
class, other than in accordance with the Exchange and
Support Agreement, without the consent of holders of
a majority of each class of interests outstanding. No
additional Class B Interests may be issued other than
in accordance with the Purchase Agreement or the
Exchange and Support Agreement.
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Withdrawals o No member shall be permitted to withdraw from the
Company without the consent of holders of a majority
of each class of interests outstanding.
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Removals o No member may be involuntarily removed as a member of
the Company.
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Other
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Performance Fees; o No fund managed by Halcyon or its subsidiaries shall
Management Fees agree to pay an incentive or performance fee or
carried interest that exceeds 20% of the returns of
the relevant fund or account, except (a) if such fund
or account has also agreed to pay to Halcyon or its
subsidiaries a management fee equal to or greater
than 2% of assets under management, gross of any
distribution commissions, (b) with the approval of
the independent directors of AAMAC; or (c) if the
investment amount to which such fee would be
applicable is, at the time of the investment, less
than or equal to $100,000,000 (and the aggregate of
all such investments, at their respective times of
investment, is less than $1,000,000,000).
o No fund managed by Halcyon or its subsidiaries shall
agree to charge a management fee of less than 2% of
assets under management (or such lower rate as may
then be applicable for specific clients or
distribution relationships (including successors and
affiliates thereof)), gross of any distribution
commissions. except (a) with the approval of the
independent directors of AAMAC; or (b) if the
investment amount to which such fee would be
applicable is, at the time of investment, less than
or equal to $100,000,000 (and the aggregate of all
such investments, at their respective times of
investment, is less than $1,000,000,000).
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Cooperation o Employee Vehicle will keep AAMAC reasonably informed
and provide AAMAC and its advisors with reasonable
access to its books, records and advisors, in each
case to the extent required for AAMAC to satisfy its
obligations under applicable laws. Employee Vehicle
will have reasonable access rights to the Company and
its subsidiaries, to the extent required for it to
audit the covenants contained in this Agreement.
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Amendments o This agreement may be amended by the holders of 2/3
of the Class A Interests and Class B Interests,
voting as a single class; provided that any amendment
which disproportionately
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and adversely impacts any member must be approved by
such member; provided, further, that any amendment
which disproportionately and adversely impacts any
class of Interests must be approved by the holders of
a majority of such class of Interests.
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Dispute Resolution o In the event of any dispute under this agreement, the
parties shall negotiate in good faith to resolve such
dispute. If no resolution is reached within 30 days,
the dispute shall be submitted to arbitration
administered by and under the rules of the AAA, with
costs of arbitration to be borne by the party or
parties against whom the dispute is decided.
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Specific Performance o Each party shall be entitled to injunctive relief to
enforce the provisions of this agreement.
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Governing Law o Delaware
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