SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND
AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
Alliance Capital Management L.P.
--------------------------------
(Name of Issuer)
Units of Limited Partnership Interest
-------------------------------------
(Title of Class of Securities)
Not applicable
----------------------
(CUSIP Number)
Jean Margo Reid
SCB Inc.
In care of Bernstein Investment Research and Management
767 Fifth Avenue
New York, New York 10153
(212) 486-5800
With copies to:
Donald C. Walkovik, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
-------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 2, 2000
---------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D,
and is filing this Schedule because of Rule 13d-1(e),
13d-1(f), or 13d-1(g), check the following box [__].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7 for other
parties to whom copies are to be sent.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
(Page 1 of 13 Pages)
Exhibit Index Appears on Page 13
CUSIP No. N/A 13D Page 2 of 13 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
SCB Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
40,800,000
(all of the foregoing indirectly through SCB
NUMBER OF Partners Inc.)
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON WITH 40,800,000
(all of the foregoing indirectly through SCB
Partners Inc.)
-----------------------------------------------------
10. SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
40,800,000 (all of the foregoing indirectly through SCB Partners Inc.)
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.6%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
HC, CO
- --------------------------------------------------------------------------------
CUSIP No. N/A 13D Page 3 of 13 Pages
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
SCB Partners Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 40,800,000
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON WITH 40,800,000
-----------------------------------------------------
10. SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
40,800,000
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.6%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
CUSIP No. N/A 13D Page 4 of 13 Pages
ITEM 1. SECURITY AND ISSUER.
This Statement relates to the Units of Limited Partnership Interest of
Alliance Capital Management L.P. (the "Units"), a Delaware limited partnership
(the "Issuer"), which has its principal executive offices at 1345 Avenue of the
Americas, New York, NY 10105.
ITEM 2. IDENTITY AND BACKGROUND.
(A-C).
This Statement is being filed by SCB Inc. ("SCB") and SCB Partners
Inc. ("Partners") (together, the "Reporting Persons"). Partners is a
wholly-owned subsidiary of SCB.
SCB is a Delaware corporation with its principal office and principal
place of business at 767 Fifth Avenue, New York, New York 10153.
Partners is a New York corporation with its principal office and
principal place of business at 767 Fifth Avenue, New York, New York 10153.
Prior to the consummation of the Acquisition (as defined in Item 4
below), SCB Inc. was the holding company of Sanford C. Bernstein & Co.,
Inc., a registered broker dealer and investment adviser, and certain other
subsidiaries of SCB. Currently SCB is the holding company of Partners.
Partners was created in connection with the Acquisition and directly owns
40.8 million Units.
The (i) name, (ii) business address and (iii) present principal
occupation or employment and the name, principal business and address of
any corporation or other organization in which such employment is conducted
for each director and executive officer of SCB and Partners is set forth in
Appendix A attached hereto.
(D) AND (E).
Neither SCB nor Partners, and to the best knowledge of each of SCB
and Partners, none of the persons listed in Appendix A hereto, has during
the last five years (i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and, as a result of such proceeding, was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
(F).
Unless otherwise noted, all of the persons listed in Appendix A hereto
are citizens of the United States of America. Mr. Fried is also a citizen
of Israel.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On October 2, 2000, Partners acquired 40.8 million Units as part of the
consideration paid in respect of consummation of the Acquisition (such Units,
the "Acquired Units").
CUSIP No. N/A 13D Page 5 of 13 Pages
ITEM 4. PURPOSE OF TRANSACTION.
The purpose of the acquisition of the Acquired Units was for investment
and to accomplish the sale of the assets and businesses of the subsidiaries of
SCB, as contemplated by the Amended and Restated Acquisition Agreement, dated as
of October 2, 2000 (the "Acquisition Agreement"), among SCB, Partners, Bernstein
Technologies Inc., Sanford C. Bernstein & Co., LLC, SCB LLC, the Issuer,
Alliance Capital Management LLC and Alliance Capital Management Holding L.P.
("Holding") (such sale, the "Acquisition").
Each of the Reporting Persons, however, expects to evaluate on an
ongoing basis the Issuer's and Holding's respective financial condition,
business, operations and prospects, the market price of units of limited
partnership of Holding, conditions in the securities markets generally, general
economic and industry conditions and other factors. The Reporting Persons may
purchase additional units of limited partnership interest of the Issuer or may
sell, transfer or exchange the Acquired Units (in accordance with the terms of
the agreements described in Item 6) from time to time (subject to any applicable
limitations imposed on the sale of any of their Acquired Units by the Securities
Act of 1933, as amended).
As a result of the consummation of the Acquisition, Partners directly,
and SCB indirectly, own 16.6% of the outstanding Units of the Issuer.
Except as discussed herein, neither SCB nor Partners, and to the best
knowledge of each of SCB and Partners none of the persons listed in Appendix A
hereto, has any present plans or intention which would result in or relate to
any of the transactions described in subparagraphs (a) through (j) of Item 4 of
Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(A) AND (B).
As of October 2, 2000, Partners owns directly 40.8 million Units. Based
on the Issuer's Quarterly Report on Form 10-Q for the quarter ended June 30,
2000, there were 246,373,518 Units outstanding as of October 2, 2000 (after
giving effect to the issuance to Partners of 40.8 million units). As a result of
the foregoing, Partners may be deemed to beneficially own 16.6% of the total
number of the outstanding Units.
Partners, a wholly-owned subsidiary of SCB, has the sole power to vote,
or direct the vote, and the sole power to dispose of, or to direct the
disposition of, the Acquired Units. SCB does not own beneficially any Units;
however, Partners is a wholly-owned subsidiary of SCB.
Except for the acquisition of Acquired Units described in Item 3,
neither SCB nor Partners, and to the best knowledge of each of SCB and Partners,
none of the persons listed in Appendix A hereto, owns any Units.
(C).
Except for the acquisition of Units described in Item 3, during the
last 60 days, no transactions in the Units were effected by SCB, Partners, or to
the best knowledge of each of SCB and Partners, by any of the persons listed in
Appendix A hereto.
CUSIP No. N/A 13D Page 6 of 13 Pages
(D).
No person other than Partners, a wholly-owned subsidiary of SCB, has
the right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, the Units beneficially owned by Partners.
(E).
Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
In connection with the Acquisition, SCB and Partners entered into the
following agreements with respect to securities of the Issuer, each of which is
described in greater detail below: (1) the Acquisition Agreement, (2) a
Registration Rights Agreement, dated as of October 2, 2000 (the "Registration
Rights Agreement"), among Holding, SCB and Partners, (3) a Purchase Agreement,
dated as of June 20, 2000 (the "Put Agreement"), among AXA Financial, Inc. ("AXA
Financial"), the Issuer and SCB, and (4) a letter agreement, dated as of June
20, 2000 (the "Letter Agreement") between AXA Financial and SCB. Except for the
matters described herein and in Item 4, SCB and Partners, and to the best
knowledge of each of SCB and Partners, the persons listed in Appendix A hereto,
have no other contract, arrangement, understanding or relationship with any
person with respect to any securities of the Issuer.
The Acquisition Agreement
-------------------------
Pursuant to the Acquisition Agreement, SCB and its subsidiaries,
including Partners, have the right to receive one unit representing assignment
of beneficial ownership of a limited partnership interest in Holding (each, a
"Holding Unit") in exchange for each Acquired Unit (or such other rate of
exchange of Holding Units for Units of Alliance as is applicable to all holders
of Units of Alliance), subject to certain conditions. These conditions include,
but are not limited to, (i) the Holding Units must be exempt from registration
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and
Holding must have received any necessary representations, opinions or other
documentation in connection with such issuance; (ii) the issuance of the Holding
Units must be permissible under the terms of the Amended and Restated Agreement
of Limited Partnership of Alliance Holding dated as of October 29, 1999 (the
"Alliance Holding Limited Partnership Agreement"); (iii) The Equitable Life
Assurance Society of the United States ("Equitable") must consent to the
transfer of the Acquired Units to Holding (which AXA Financial, Equitable's
indirect parent, has agreed to cause Equitable to do); and (iv) SCB must provide
an outside legal opinion stating that the exchange of Acquired Units for Holding
Units constitutes a "block transfer" under applicable United States Treasury
regulations.
The Acquisition Agreement also restricts how and when SCB and its
subsidiaries can transfer or dispose of the Acquired Units (or the Holding Units
if the Acquired Units have been exchanged as described above). Unless otherwise
permitted, SCB has agreed not to, directly or indirectly, offer, pledge, sell,
or otherwise transfer or dispose of, directly or indirectly, any of the Acquired
Units (or the Holding Units if the Acquired Units have been exchanged as
described above), or any interest therein, any security convertible,
exchangeable or exercisable for or repayable with any of the Acquired Units or
any security or other interest in any person owning any of such units. SCB also
has agreed that neither it nor any of its affiliates will enter into any swap,
hedging transaction or other similar arrangement that
CUSIP No. N/A 13D Page 7 of 13 Pages
transfers to another, in whole or in part, any of the economic consequences of
ownership (other than any permitted sale, assignment or pledge) of the Acquired
Units.
Notwithstanding the foregoing restrictions on transfer, SCB has the
right to sell or assign up to 2.8 million of the Acquired Units (or the Holding
Units if the Acquired Units have been exchanged as described above) at any time
after October 2, 2000 and, beginning on October 2, 2002, up to an additional
twenty percent of the Acquired Units per year. However, these transfers are
permissible only if they (i) do not violate Holding's and the Issuer's internal
written policies generally applicable to senior officers restricting sales of
Units, (ii) qualify as a "block transfer" under applicable United States
Treasury regulations and (iii) comply with all applicable provisions, conditions
and requirements of the Alliance Capital Limited Partnership Agreement, dated as
of October 29, 1999 (the "Alliance Capital Limited Partnership Agreement"), the
Alliance Holding Limited Partnership Agreement (or other governing document) and
the Acquisition Agreement. To the extent SCB does not transfer the maximum
twenty percent of the Acquired Units (or Holding Units as the case may be) in
any one year, SCB has the right to carry forward any balance to subsequent
years; however, transfers made pursuant to SCB's right to exchange Acquired
Units for Holding Units in accordance with the Acquisition Agreement are not
applied toward the twenty percent limitation.
Pursuant to the Acquisition Agreement, the Issuer agreed to appoint Mr.
Lewis A. Sanders and Mr. Roger Hertog to its Management Compensation Committee.
The Put Agreement
-----------------
Under the terms of the Put Agreement, the Issuer and AXA Financial have
agreed to provide SCB and its subsidiaries liquidity rights with respect to the
Acquired Units. Beginning October 2, 2002 and ending October 2, 2010, generally
SCB has the right to put up to twenty percent of such Units to AXA Financial
each year (less any Units SCB may have otherwise transferred that year). The
purchase price for the Acquired Units sold to AXA Financial pursuant to the Put
Agreement will be the average of the closing prices of a Holding Unit as quoted
on the NYSE Composite Transactions Tape or as otherwise quoted or reported for
the ten trading days ending on the fifth trading day following the date SCB
notifies AXA Financial and the Issuer that it will exercise its put rights. The
terms of the Put Agreement also include, but are not limited to, the following:
(i) SCB may exercise its put rights once per year; (ii) SCB may not deliver an
exercise notice regarding its put rights until at least nine months after it
delivers its immediately preceding exercise notice; (iii) the sale contemplated
by an exercise notice must qualify as a "block transfer" under applicable United
States Treasury regulations; and (iv) SCB may exercise its put rights only at
times permitted by, and otherwise in compliance with, Holding's and the Issuer's
then applicable internal written policies generally applicable to senior
officers restricting sales of Units.
Under the terms of the Put Agreement, AXA Financial has the right to
defer SCB's rights thereunder in certain specified circumstances for up to 120
days. In addition, in the event SCB chooses to transfer Acquired Units to a
third party, AXA Financial has a right of first refusal, subject to specified
conditions, to purchase such Acquired Units.
The Registration Rights Agreement
---------------------------------
Pursuant to the Registration Rights Agreement, SCB is entitled, subject
to certain exceptions and limitations stated therein, to demand that Holding
register under the Securities Act, Holding Units
CUSIP No. N/A 13D Page 8 of 13 Pages
acquired or to be acquired in exchange for the Acquired Units. These rights
commence October 2, 2002 and end October 2, 2010 and generally provide SCB with
one demand registration statement each consecutive 365 day period commencing
October 2, 2002 and 60 days during each such period, including not less than one
period of 30 consecutive days, when SCB will be permitted to offer or sell
Holding Units pursuant to such effective registration statement. The
Registration Rights Agreement also provides SCB with certain piggyback
registration rights and contains provisions regarding cutbacks, blackout
periods, indemnification and other terms traditionally addressed in such
agreements.
Letter Agreement
----------------
Pursuant to the Letter Agreement, AXA Financial has agreed to cause
Messrs. Lewis A. Sanders and Roger Hertog to be elected to the board of
directors of Alliance Capital Management Corporation, the general partner of
each of the Issuer and Holding. The Letter Agreement provides that Messrs.
Sanders and Hertog will each serve in this capacity for a term or successive
terms ending not earlier than October 2, 2003; provided, however, that Mr.
Sanders and/or Mr. Hertog may be removed if his employment with the Issuer is
terminated. In the event that either or both Mr. Sanders and Mr. Hertog are
removed from the board of Alliance Capital Management Corporation prior to
October 2, 2003, then AXA Financial shall select a replacement from a list of
names of persons previously agreed to by AXA Financial and SCB.
The foregoing descriptions of the Acquisition Agreement, the Put
Agreement, the Registration Rights Agreement and the Letter Agreement are
subject to, and qualified in their entirety by reference to, the full text of
such agreements, copies of which are filed as exhibits hereto and incorporated
by reference into this Item 6.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 - Amended and Restated Acquisition Agreement, dated
as of October 2, 2000, among Alliance Capital
Management L.P., Alliance Capital Management
Holding L.P., Alliance Capital Management LLC,
SCB Inc. (f.k.a. Sanford C. Bernstein Inc.),
Bernstein Technologies Inc., SCB Partners Inc.,
Sanford C. Bernstein & Co., LLC and SCB LLC.
Exhibit 2 - Registration Rights Agreement, dated as of
October 2, 2000, by and among Alliance Capital
Management Holding L.P., SCB Inc. (f.k.a. Sanford
C. Bernstein Inc.) and SCB Partners Inc.
Exhibit 3 - Purchase Agreement, dated as of June 20, 2000, by
and among Alliance Capital Management L.P., AXA
Financial, Inc. and SCB Inc. (f.k.a. Sanford C.
Bernstein Inc.) (incorporated by reference to
Exhibit 22 of the Schedule 13D (Amendment No. 8)
filed by Alliance Capital Management Holding L.P.
on June 30, 2000).
Exhibit 4 - Letter Agreement, dated as of June 20, 2000,
between SCB Inc. (f.k.a. Sanford C. Bernstein
Inc.) and AXA Financial, Inc. (incorporated by
reference to Exhibit 23 of the Schedule 13D
CUSIP No. N/A 13D Page 9 of 13 Pages
(Amendment No. 8) filed by Alliance Capital
Management Holding L.P. on June 30, 2000).
Exhibit 5 - Agreement of Joint Filing, dated as of October
12, 2000, between SCB Inc. and SCB Partners Inc.
CUSIP No. N/A 13D Page 10 of 13 Pages
APPENDIX A
TO SCHEDULE 13D
Set forth herein please find information concerning the Executive
Officers and Directors of SCB Inc. ("SCB") and SCB Partners Inc. ("Partners")
(each, a "Corporation"). Such information sets forth the name of the Executive
Officer or Director, his/her position at the respective Corporation and his/her
present principal occupation or employment, if other than that held at the
respective Corporation. Unless otherwise indicated, the principal business
address of each of the Executive Officers and Directors set forth below is 767
Fifth Avenue, New York, New York 10153.
Executive Officers and Directors of SCB Inc. and SCB Partners Inc.*
Principal Occupation/
Name Position at the Corporations Employment
---- ---------------------------- ----------
Lewis A. Sanders Chairman; Chief Executive Officer Director; Vice Chairman, Chief
Investment Officer**
Roger Hertog Director; President and Chief Vice Chairman**
Operating Officer
Andrew S. Adelson Director; Senior Vice President Executive Vice President; Chief
Investment Officer, International
Value Equities**
Kevin R. Brine Director; Senior Vice President Head of Non-U.S. Asset
Management Services**
Charles C. Cahn, Jr. Director; Senior Vice President Coordinator of Merger
Integration**
Marilyn Goldstein Fedak Director; Senior Vice President Executive Vice President; Chief
Investment Officer, U.S. Value
Equities**
Arthur W. Fried Director Executor, Estate of Zalman C.
Bernstein
- ----------
*The listed individuals hold identical positions for both SCB and Partners.
**Indicated director and officer positions are with Alliance Capital Management
Corporation, the general partner of each of Alliance and Holdings; employment
and other positions are with Alliance; the principal business address is 1345
Avenue of the Americas, New York, New York 10105.
/
CUSIP No. N/A 13D Page 11 of 13 Pages
Michael L. Goldstein Director; Senior Vice President Executive Vice President; Chief
Investment Strategist, Institutional
Services**
Thomas S. Hexner Director; Senior Vice President Head of Private Client
Services**
Gerald M. Lieberman Director; Senior Vice President; Executive Vice President, Finance
Treasurer and Operations**
Marc O. Mayer Director; Senior Vice President Chief Executive Officer of
Sanford C. Bernstein & Co. LLC
Jean Margo Reid Director; Senior Vice President; Counsel**
Secretary
Francis H. Trainer, Jr. Director; Senior Vice President Chief Investment Office, Fixed
Income-Bernstein Investment
Management Research Unit**
CUSIP No. N/A 13D Page 12 of 13 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in the statement is true, complete and
correct.
DATED: October 12, 2000
SCB INC.
By: /s/ Jean Margo Reid
--------------------------------
Name: Jean Margo Reid
Title: Senior Vice President
and Secretary
SCB PARTNERS INC.
By: /s/ Jean Margo Reid
--------------------------------
Name: Jean Margo Reid
Title: Senior Vice President
and Secretary
CUSIP No. N/A 13D Page 13 of 13 Pages
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
1 Amended and Restated Acquisition Agreement, dated as of
October 2, 2000, among Alliance Capital Management L.P.,
Alliance Capital Management Holding L.P., Alliance Capital
Management LLC, SCB Inc. (f.k.a. Sanford C. Bernstein Inc.),
Bernstein Technologies Inc., SCB Partners Inc., Sanford C.
Bernstein & Co., LLC and SCB LLC.
2 Registration Rights Agreement, dated as of October 2, 2000,
by and among Alliance Capital Management Holding L.P., SCB
Inc. (f.k.a. Sanford C. Bernstein Inc.) and SCB Partners
Inc.
3 Purchase Agreement, dated as of June 20, 2000, by and among
Alliance Capital Management L.P., AXA Financial, Inc. and
SCB Inc. (f.k.a. Sanford C. Bernstein Inc.) (incorporated by
reference to Exhibit 22 of the Schedule 13D (Amendment No.
8) filed by Alliance Capital Management Holding L.P., on
June 30, 2000).
4 Letter Agreement, dated as of June 20, 2000, between SCB
Inc. (f.k.a. Sanford C. Bernstein Inc.) and AXA Financial,
Inc. (incorporated by reference to Exhibit 23 of the
Schedule 13D (Amendment No. 8) filed by Alliance Capital
Management Holding L.P. on June 30, 2000).
5 Agreement of Joint Filing, dated as of October 12, 2000,
between SCB Inc. and SCB Partners Inc.
Exhibit 1
ACQUISITION AGREEMENT
dated as of
June 20, 2000
Amended and Restated as of
October 2, 2000
among
ALLIANCE CAPITAL MANAGEMENT L.P.,
ALLIANCE CAPITAL MANAGEMENT HOLDING L.P.,
ALLIANCE CAPITAL MANAGEMENT LLC,
SANFORD C. BERNSTEIN INC.,
BERNSTEIN TECHNOLOGIES INC.,
SCB PARTNERS INC.,
SANFORD C. BERNSTEIN & CO., LLC,
and
SCB LLC
TABLE OF CONTENTS
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PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................3
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Pre-closing Restructuring......................................16
SECTION 2.02. Purchase and Sale of BTI Assets; Assumption of BTI
Liabilities..........................................................17
SECTION 2.03. Purchase and Sale of ADV LLC...................................18
SECTION 2.04. Purchase and Sale of Equity and Purchased Investments..........19
SECTION 2.05. Purchase Price.................................................20
SECTION 2.06. Closing........................................................21
SECTION 2.07. Closing Balance Sheet; Closing Revenue Run Rate................24
SECTION 2.08. Balance Sheet Purchase Price Adjustments.......................26
SECTION 2.09. Revenue Run Rate Purchase Price Adjustment.....................28
SECTION 2.10. Payment of Purchase Price Adjustments..........................31
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
SECTION 3.01. Corporate Existence and Power..................................32
SECTION 3.02. Corporate Authorization........................................33
SECTION 3.03. Governmental Authorization.....................................34
SECTION 3.04. Noncontravention...............................................34
SECTION 3.05. Capitalization.................................................35
SECTION 3.06. Ownership of Equity............................................36
SECTION 3.07. Excluded Assets; Subsidiaries..................................36
SECTION 3.08. Financial Statements...........................................36
SECTION 3.09. Absence of Certain Changes.....................................37
SECTION 3.10. No Undisclosed Material Liabilities............................39
SECTION 3.11. Intercompany Accounts..........................................39
SECTION 3.12. Material Contracts.............................................40
SECTION 3.13. Litigation; Investigation......................................42
SECTION 3.14. Compliance with Laws and Court Orders..........................42
SECTION 3.15. Properties.....................................................42
SECTION 3.16. Intellectual Property..........................................43
PAGE
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SECTION 3.17. Insurance Coverage.............................................44
SECTION 3.18. Permits........................................................45
SECTION 3.19. Finders' Fees..................................................45
SECTION 3.20. Employees; Labor Matters.......................................45
SECTION 3.21. Employee Benefit Plans.........................................46
SECTION 3.22. Environmental Matters..........................................49
SECTION 3.23. Investment Management Activities...............................50
SECTION 3.24. Funds..........................................................52
SECTION 3.25. Non-Registered Funds...........................................54
SECTION 3.26. Non-Fund Clients...............................................54
SECTION 3.27. Regulatory Compliance..........................................55
SECTION 3.28. Broker-Dealer Activities.......................................56
SECTION 3.29. Futures Activities.............................................57
SECTION 3.30. ERISA Clients..................................................58
SECTION 3.31. Securities Laws Matters; Disclosures...........................58
SECTION 3.32. Registered Fund Tax Compliance.................................59
SECTION 3.33. Non-Registered Funds Tax Compliance............................59
SECTION 3.34. Opinion of Financial Advisor...................................60
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. Partnership Existence and Power................................60
SECTION 4.02. Partnership Authorization......................................61
SECTION 4.03. Governmental Authorization.....................................61
SECTION 4.04. Noncontravention...............................................62
SECTION 4.05. Financing......................................................63
SECTION 4.06. Acquired Units.................................................63
SECTION 4.07. SEC Filings....................................................63
SECTION 4.08. Financial Statements...........................................63
SECTION 4.09. Absence of Certain Changes.....................................64
SECTION 4.10. Purchase for Investment........................................64
SECTION 4.11. Litigation; Investigation......................................64
SECTION 4.12. Finders' Fees..................................................65
SECTION 4.13. Compliance with Laws and Court Orders..........................65
SECTION 4.14. Capitalization.................................................65
SECTION 4.15. Private Offering...............................................65
SECTION 4.16. Existing Registration Rights Agreement.........................66
SECTION 4.17. No Undisclosed Material Liabilities............................66
SECTION 4.18. Tax Treatment..................................................66
SECTION 4.19. Regulatory Compliance..........................................66
ii
PAGE
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ARTICLE 5
COVENANTS OF SELLER
SECTION 5.01. Conduct of the Companies.......................................67
SECTION 5.02. Access to Information; Confidentiality.........................68
SECTION 5.03. Company Stockholder Meeting....................................69
SECTION 5.04. No Solicitation................................................69
SECTION 5.05. Trademarks; Tradenames.........................................71
SECTION 5.06. Resignations...................................................71
SECTION 5.07. Fund Consents..................................................71
SECTION 5.08. Non-Registered Funds and Non-Fund Client Consents..............71
SECTION 5.09. ERISA Clients List.............................................72
SECTION 5.10. Restrictions on Dispositions of Acquired Units.................72
SECTION 5.11. Pro Forma Income Statement.....................................78
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. Access.........................................................79
SECTION 6.02. Extraordinary Distributions....................................79
SECTION 6.03. Seller Board and Committee Representation......................79
SECTION 6.04. Unitholder Meeting.............................................80
SECTION 6.05. Stock Exchange Listing.........................................80
SECTION 6.06. Seller's UK Lease Guarantee....................................80
SECTION 6.07. Constituent Documents; Unit Terms..............................81
ARTICLE 7
COVENANTS OF BUYER AND SELLER
SECTION 7.01. Best Efforts; Further Assurances...............................81
SECTION 7.02. Certain Filings................................................82
SECTION 7.03. Public Announcements...........................................82
SECTION 7.04. Notices of Certain Events......................................83
SECTION 7.05. Intercompany Accounts..........................................83
SECTION 7.06. Certain Post-Closing Fund Matters..............................83
iii
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ARTICLE 8
TAX MATTERS
SECTION 8.01. Tax Definitions................................................84
SECTION 8.02. Tax Representations............................................86
SECTION 8.03. Covenants......................................................91
SECTION 8.04. Tax Sharing....................................................92
SECTION 8.05. Cooperation on Tax Matters.....................................92
SECTION 8.06. Seller Tax Indemnification.....................................92
SECTION 8.07. Buyer Tax Indemnification......................................94
SECTION 8.08. Certain Disputes...............................................96
SECTION 8.09. Purchase Price Adjustment and Interest.........................96
SECTION 8.10. Survival.......................................................96
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. Year 2000 Compensation.........................................96
SECTION 9.02. Bonus Pools....................................................96
SECTION 9.03. Deferred Compensation..........................................97
SECTION 9.04. Benefit Plans..................................................97
SECTION 9.05. Employee Matters...............................................97
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. Conditions to Obligations of Buyer and Seller.................98
SECTION 10.02. Conditions to Obligation of Buyer.............................99
SECTION 10.03. Conditions to Obligation of Seller...........................101
ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. Survival.....................................................103
SECTION 11.02. Indemnification..............................................103
SECTION 11.03. Procedures Relating to Indemnification.......................104
SECTION 11.04. Calculation of Damages.......................................106
SECTION 11.05. Commercially Reasonable Efforts..............................106
SECTION 11.06. No Punitive Damages..........................................106
SECTION 11.07. Exclusive Remedy.............................................106
iv
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ARTICLE 12
TERMINATION
SECTION 12.01. Grounds for Termination......................................107
SECTION 12.02. Effect of Termination........................................108
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Notices......................................................109
SECTION 13.02. Amendments and Waivers.......................................110
SECTION 13.03. Expenses.....................................................110
SECTION 13.04. Successors and Assigns.......................................111
SECTION 13.05. Limited Liabilities for Alliance Holding.....................111
SECTION 13.06. Governing Law................................................112
SECTION 13.07. WAIVER OF JURY TRIAL.........................................112
SECTION 13.08. Counterparts; Third Party Beneficiaries......................112
SECTION 13.09. Entire Agreement.............................................112
SECTION 13.10. Captions.....................................................112
v
ACQUISITION AGREEMENT
AGREEMENT dated as of June 20, 2000 and amended and restated as of
October 2, 2000 among Alliance Capital Management L.P., a Delaware limited
partnership ("BUYER"), Alliance Capital Management Holding L.P., a Delaware
limited partnership ("ALLIANCE HOLDING"), Alliance Capital Management LLC
("ACM LLC"), a Delaware limited liability company, Sanford C. Bernstein Inc.,
a Delaware corporation ("SELLER"), Bernstein Technologies Inc., a California
corporation ("BTI"), SCB Partners Inc., a New York corporation ("SCB
PARTNERS"), Sanford C. Bernstein & Co., LLC, a Delaware limited liability
company ("BD LLC"), and SCB LLC, a Delaware limited liability company
("ADV LLC").
W I T N E S S E T H :
WHEREAS, Buyer, Alliance Holding, Seller and BTI are parties to an
Acquisition Agreement dated as of June 20, 2000 (the "ORIGINAL AGREEMENT");
WHEREAS, the parties desire to amend the Original Agreement for the
following purposes and do not intend to modify the terms of the Original
Agreement other than as necessary to achieve the following purposes: (1) to
include ACM LLC, SCB Partners, BD LLC and ADV LLC as parties, (2) to insure the
economic consequences contemplated by the Original Agreement and herein and (3)
to provide that Buyer will acquire SCB New York's investment advisory business
by purchasing the Equity of ADV LLC rather than by purchasing the assets and
assuming the liabilities associated with the investment advisory business of SCB
New York (as defined herein), as was contemplated by the Original Agreement;
WHEREAS, in order to set forth in one document, for the convenience of
the parties, the text of the Original Agreement as amended by the amendments to
be made upon the effectiveness hereof, the Original Agreement will, upon the
effectiveness hereof, be amended and restated to read in full as set forth
herein;
WHEREAS, the Companies (as herein defined) (other than ADV LLC) are
wholly owned direct Subsidiaries (as herein defined) of Seller, ADV LLC is a
wholly owned direct subsidiary of SCB New York, Seller is an S corporation
within the meaning of the Code, and SCB New York, BTI and SCB Partners are each
qualified subchapter S subsidiaries within the meaning of the Code;
WHEREAS, pursuant to the Original Agreement, (1) the Seller has
organized SCB Partners as a new New York corporation and a direct wholly owned
Subsidiary of Seller; (2) SCB Partners has organized BD LLC as a new Delaware
limited liability company and a direct wholly owned Subsidiary of SCB Partners;
(3) SCB New York has organized ADV LLC as a new Delaware limited liability
company and a direct wholly owned Subsidiary of SCB New York; and (4) the Buyer
has organized ACM LLC as a new wholly owned Delaware limited liability company;
WHEREAS, the Companies are engaged in the business of providing
investment advisory and broker dealer services to a variety of institutional and
individual clients;
WHEREAS, concurrently with the execution and delivery of the Original
Agreement, certain stockholders of Seller who own, in the aggregate, more than
80% of the outstanding voting securities of Seller entered into Voting
Agreements (as herein defined) with Buyer;
WHEREAS, concurrently with the execution and delivery of the Original
Agreement, AXA Financial (as herein defined), which owns ACMC (as herein
defined), the general partner of Buyer and Alliance Holding, entered into (i) a
Financing Agreement with Buyer pursuant to which AXA Financial agreed to finance
the Cash Purchase Price, (ii) a Purchase Agreement with Seller and Buyer
pursuant to which AXA Financial agreed to purchase the Acquired Units at such
times and on such terms and conditions as specified therein (the "PURCHASE
AGREEMENT") and (iii) a Letter Agreement with Seller pursuant to which AXA
Financial agreed to elect or cause the election of Messrs. Sanders and Hertog to
the Board of Directors of ACMC for a minimum of three years from the Closing
Date;
WHEREAS, concurrently with the execution and delivery of the Original
Agreement, Buyer entered into employment agreements with each of the
following individuals: Sanders, Hertog, Andrew S. Adelson, Marilyn G. Fedak
and Michael L. Goldstein;
WHEREAS, on the terms and subject to the conditions set forth herein,
Buyer and Seller desire to effect the following series of transactions: (1) the
transfer by Seller to SCB Partners of the Equity of each of SCB Australia, SCB
United Kingdom, SCB New York and the Purchased Investments (as defined below);
(2) the merger of SCB New York with and into BD LLC; (3) the transfer and
delivery by BD LLC to ADV LLC of the Designated ADV LLC Transferred Assets and
the assumption by ADV LLC of the Designated ADV LLC Assumed Liabilities; (4) the
sale by BD LLC, and the purchase by Buyer, of the Equity of
2
ADV LLC; (5) the instruction by BD LLC to Buyer to transfer the ADV Cash
Consideration and the ADV Units Consideration on BD LLC's behalf directly to SCB
Partners; (6) the sale by BTI, and the purchase by Buyer, of the BTI Purchased
Assets and the assumption by Buyer of the BTI Assumed Liabilities (in each case
as defined below) for cash; (7) the Dividend Distribution; and (8) after the
transactions contemplated in clauses (1) to (6), (A) the sale by SCB Partners,
and the purchase by Buyer, of the Equity of SCB United Kingdom and SCB Australia
and the Purchased Investments, in each case for cash and Buyer Units, (B) the
instruction by Buyer to Seller to cause SCB Partners to convey to Alliance
Delaware (as defined below) on Buyer's behalf the Equity of SCB Australia and
SCB United Kingdom that Buyer acquired pursuant to this Agreement; (C) the sale
by SCB Partners, and the purchase by Buyer, of the Buyer Interest (as defined
below) for Buyer Units, (D) the instruction by Buyer to Seller to cause SCB
Partners to convey to ACM LLC on Buyer's behalf the Buyer Interest that Buyer
acquired pursuant to this Agreement and (D) the sale by SCB Partners, and the
purchase by ACM LLC, of the Buyer LLC Interest (as defined below) for cash.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"ACMC" means Alliance Capital Management Corporation, a Delaware
corporation.
"ACQUIRED UNITS" means the Buyer Units that SCB Partners is acquiring
directly or indirectly pursuant to this Agreement, provided that, for purposes
of Section 5.10, "Acquired Units" shall also refer to any securities or other
interests of Buyer, Alliance Holding or any of their successors issued,
exchanged or otherwise received, directly or indirectly, in respect of any
Acquired Units.
"ACQUISITION PROPOSAL" means, other than the transactions contemplated
by this Agreement, any offer or proposal for, or any indication of interest in,
a merger, consolidation, share exchange, business combination, sale of a
significant portion of all the assets, reorganization, recapitalization,
liquidation, dissolution or other similar transaction involving the Seller or
any of the Companies or any proposal, offer or indication of interest to
acquire, directly or indirectly, any equity interest in, any voting securities
of, or a significant portion of the assets of,
3
Seller or any of the Companies, other than the transactions contemplated by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that none of the Companies shall be considered an
Affiliate of Seller.
"ALLIANCE DELAWARE" means Alliance Capital Management Corporation of
Delaware, a Delaware corporation and a wholly owned direct subsidiary of Buyer.
"ALLIANCE HOLDING LIMITED PARTNERSHIP AGREEMENT" means the Amended and
Restated Limited Partnership Agreement of Alliance Holding dated as of October
29, 1999.
"ANNIVERSARY PERIOD" means a twelve month period beginning on the
Closing Date or an annual anniversary thereof.
"APPRAISAL" means a determination by (1) BDO Seidman LLP of the value
(as of June 20, 2000) of (x) the BTI Purchased Assets together with the BTI
Assumed Liabilities, (y) the Designated ADV LLC Transferred Assets together with
the Designated ADV LLC Assumed Liabilities and (z) the Equity of SCB Australia,
the Equity of SCB United Kingdom, the Purchased Investments and, after the sale
and purchase of the BTI Purchased Assets, the transfer of the Designated ADV LLC
Transferred Assets, the assumption of the Designated ADV LLC Assumed Liabilities
and the Dividend Distribution, the Equity of BD LLC; (2) if within 30 days upon
receipt of such BDO Seidman LLP determination, KPMG LLP, at the request of
Buyer, delivers a notice to BDO Seidman LLP and Seller disagreeing with such
determination and offers its own determination of such value, such KPMG LLP
determination; and (3) if BDO Seidman LLP disagrees with such KPMG LLP
determination, such determination as made within 30 days of the KPMG LLP
determination (but in no event less than 5 days before the Closing Date) by an
independent appraiser to be mutually agreed upon by BDO Seidman LLP and KPMG
LLP. Any reference to the value of the Equity of ADV LLC as determined pursuant
to the Appraisal shall be a reference to the value determined pursuant to the
Appraisal of the Designated ADV LLC Transferred Assets net of the Designated ADV
LLC Assumed Liabilities.
"AXA FINANCIAL" means AXA Financial, Inc., a Delaware corporation.
"BUSINESS DAY" means a day, other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
4
"BUYER BALANCE SHEET DATE" means December 31, 1999.
"BUYER INTEREST RATE" means a rate per annum equal to the ACM
Institutional Reserves, Inc.-Prime Portfolio yield for October 1, 2000.
"BUYER LIMITED PARTNERSHIP AGREEMENT" means the Amended and Restated
Agreement of Limited Partnership of Buyer dated as of October 29, 1999.
"BUYER TRANSACTION AGREEMENTS" means the Transaction Agreements to
which the Buyer is a party.
"BUYER UNITS" means units representing limited partnership interests in
Buyer.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.
"CLIENT CONTRACT" means any agreement entered into by Seller or any of
the Companies for the provision of investment advice (as defined by the
Investment Advisers Act) to any Advisory Client.
"CLOSING DATE" means the date of the Closing.
"COMMON STOCK" means (i) with respect to Seller, its common stock, par
value $.01 per share; (ii) with respect to SCB New York, as of June 20, 2000,
its common stock par value $.01 per share; (iii) with respect to BTI, its common
stock, par value $.001 per share; (iv) with respect to SCB Australia, its share
capital, par value AUS$1.00 per share; and (v) with respect to SCB United
Kingdom, its share capital, par value (pound)1.00 per share.
"COMPANIES" means SCB New York, BTI, SCB United Kingdom, SCB Australia
and ADV LLC; and "COMPANY" means any one of the foregoing; provided, however,
that prior to the date of its formation ADV LLC is not included in the
Companies.
"CONFIDENTIALITY AGREEMENTS" means the two confidentiality agreements
between Buyer and Seller each dated May 11, 2000.
"DAMAGES" means any damage, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, suit or proceeding),
provided
5
that the term "Damages" does not include any such damages, losses, liabilities
and expenses which total in the aggregate less than $50,000 with respect to a
single Warranty Breach or any group of related Warranty Breaches arising out of
the same or similar facts or events.
"DEFERRED COMPENSATION PLAN" means the deferred compensation plan
adopted by Buyer as of the Closing Date, the terms of which shall be consistent
with the term sheet attached hereto as Exhibit A.
"DESIGNATED ADV LLC ASSUMED LIABILITIES" means the debts, obligations,
contracts and liabilities (including all Employee Plans other than the
Principals' Profit-Sharing Pool) of SCB New York and, following the Merger, BD
LLC as designated by Buyer by notice to Seller prior to Closing.
"DESIGNATED ADV LLC EXCLUDED ASSETS" means the assets, properties and
business of SCB New York and, following the Merger, BD LLC as designated by
Buyer by notice to Seller prior to Closing.
"DESIGNATED ADV LLC EXCLUDED LIABILITIES" means the debts, obligations,
contracts and liabilities (including the Principals' Profit-Sharing Pool) of SCB
New York and, following the Merger, BD LLC as designated by Buyer by notice to
Seller prior to Closing.
"DESIGNATED ADV LLC TRANSFERRED ASSETS" means the assets, properties
and business (including all assets set aside under any Employee Plans, other
than the Principals' Profit-Sharing Pool) (other than the Designated ADV LLC
Excluded Assets) of SCB New York and, following the Merger, BD LLC as designated
by Buyer by notice to Seller prior to Closing.
"DISCLOSURE LETTER" means the disclosure letter of Seller dated June
20, 2000 and delivered to Buyer in connection with the Original Agreement.
"DIVIDEND DISTRIBUTION" means the distribution to SCB Partners by BD
LLC of the cash and Buyer Units received by BD LLC from Buyer in exchange for
the Equity of ADV LLC.
"ELIGIBLE SELLER EMPLOYEES" means individuals employed by Buyer or its
Subsidiaries or any Affiliate of Buyer or its Subsidiaries on or after the
Closing Date who are stockholders of Seller or participants in the Principals'
Profit-Sharing Pool as of the Closing Date and their replacements.
6
"EMPLOYMENT AGREEMENTS" means the employment agreements dated
June 20, 2000 between Buyer and each of Sanders, Hertog, Andrew S. Adelson,
Marilyn G. Fedak and Michael L. Goldstein.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority,
whether now or hereafter in effect, relating to human health and safety as it
relates to Hazardous Substances, the environment or to pollutants, contaminants,
wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substances, wastes or materials.
"ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of any Company as currently conducted.
"EQUITY" means all outstanding shares of capital stock or other equity
interests, including limited liability company membership interests, of the
Companies (or, as the case may be, any applicable Company).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED BTI ASSETS" means (i) all Tax Assets of BTI, (ii) all
receivables arising from the licensing of any intangible property of BTI to any
licensee accrued as of the Closing and (iii) any indebtedness of Seller or any
of its Affiliates, other than an Acquired Company to BTI.
"EXECUTIVE COMMITTEE" means the Management Compensation Committee of
Buyer, to be renamed the Executive Committee in accordance with Section 6.03(b).
"FINANCIAL SERVICES ACT 1986" means the United Kingdom Financial
Services Act 1986.
"FINANCING AGREEMENT" means the financing agreement between AXA
Financial and Buyer dated as of June 20, 2000.
"GENERAL SELLER EMPLOYEES" means individuals employed by Buyer or its
Subsidiaries or any Affiliate of Buyer or its Subsidiaries on or after the
Closing
7
Date who are employees (but not stockholders or principals) of Seller or the
Companies as of the Closing Date and their replacements and additions, if any.
"GOING PRIVATE TRANSACTION" means a transaction or series of
transactions that has the effect of causing, either directly or indirectly, the
Public Units to be neither listed on any national securities exchange nor
authorized to be quoted on the inter-dealer quotation system of any registered
national securities association.
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substance, waste or material, or any substance, waste or material
having any constituent elements displaying any of the foregoing characteristics,
including, without limitation, petroleum, its derivatives, by-products and other
hydrocarbons, and any substance, waste or material regulated under any
Environmental Law.
"HERTOG" means Roger Hertog, an individual.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INTELLECTUAL PROPERTY RIGHTS" means (i) inventions, whether or not
patentable, reduced to practice or made the subject of one or more pending
patent applications, (ii) national and multinational statutory invention
registrations, patents and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations
thereof) registered or applied for in the United States and all other nations
throughout the world, all improvements to the inventions disclosed in each such
registration, patent or patent application, (iii) trademarks, service marks,
trade dress, logos, domain names, trade names and corporate names (whether or
not registered) in the United States and all other nations throughout the world,
including all variations, derivations, combinations, registrations and
applications for registration of the foregoing and all goodwill associated
therewith, (iv) copyrights (whether or not registered) and registrations and
applications for registration thereof in the United States and all other nations
throughout the world, including all derivative works, moral rights, renewals,
extensions, reversions or restorations associated with such copyrights, now or
hereafter provided by law, regardless of the medium of fixation or means of
expression, (v) computer software, (including source code, object code,
firmware, operating systems and specifications), (vi) trade secrets and, whether
or not confidential, business information (including pricing and cost
information, business and marketing plans and customer and supplier lists) and
know-how (including manufacturing and production processes and techniques and
8
research and development information), (vii) industrial designs (whether or not
registered), (viii) databases and data collections, (ix) copies and tangible
embodiments of any of the foregoing, in whatever form or medium, (x) all rights
to obtain and rights to apply for patents, and to register trademarks and
copyrights, (xi) all rights in all of the foregoing provided by treaties,
conventions and common law and (xii) all rights to sue or recover and retain
damages and costs and attorneys' fees for past, present and future infringement
or misappropriation of any of the foregoing.
"INTERNATIONAL PLAN" means each employment, severance, consulting or
similar contract, plan, arrangement or policy and each other plan or arrangement
providing for compensation, bonuses, profit-sharing, stock option or other
equity-related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage, health, medical or dental benefits,
employee assistance program disability benefits, workers' compensation,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits which is maintained primarily for the benefit of employees
of the Companies who are based outside the United States.
"INVESTMENT ADVISERS ACT" means the Investment Advisers Act of 1940, as
amended.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended.
"INVESTMENT CONTRACT" means each contract or agreement in effect to
which Seller or any of the Companies is a party pursuant to which Seller or any
of the Companies provides Investment Management Services to any Advisory Client.
"INVESTMENT MANAGEMENT SERVICES" means investment management,
investment advisory, investment sub-advisory, research, administrative or
related services.
"LICENSED INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights owned by a third party and licensed or sublicensed to any of the
Companies.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset and any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of any security). For the purposes of this Agreement, a Person shall be
deemed to own
9
subject to a Lien any property or asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such property or
asset.
"MATERIAL ADVERSE EFFECT" means (a) with respect to Seller and/or the
Companies, as the case may be, a material adverse effect on the financial
condition, business or results of operations of the Companies, taken as a whole
(in the case of the Companies) or the Seller and the Companies, taken as a whole
(in the case of Seller), provided, however, that any such effect primarily
attributable to any of the following shall be excluded from any determination as
to whether a Material Adverse Effect exists: (i) a decline in the securities
markets or in general economic conditions; (ii) a decline in any assets under
management with respect to which the Companies serve as investment adviser or
sub-adviser; or (iii) a change or development in the investment management
industry generally or the business of broker-dealers generally or any change in
law, rule or regulation affecting such industries; and (b) with respect to
Buyer, its Subsidiaries and Alliance Holding, a material adverse effect on the
financial condition, business or results of operations of Buyer, its
Subsidiaries and Alliance Holding, taken as a whole, provided, however, that any
such effect primarily attributable to any of the following shall be excluded
from any determination as to whether a Material Adverse Effect exists: (i) a
decline in the securities markets or in general economic conditions; (ii) a
decline in any assets under management with respect to which Buyer or its
Subsidiaries serves as investment adviser or sub-adviser; or (iii) a change or
development in the investment management industry generally or any change in
law, rule or regulation affecting such industry.
"1933 ACT" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"OVERALL CASH PERCENTAGE" means the ratio of (i) the Cash Purchase
Price to (ii) an amount equal to the sum of the Cash Purchase Price and the
value of the Units Purchase Price determined using the value assigned to the
Units in Section 2.05(f).
"OWNED INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights owned by any Company.
"PERMIT" means a governmental license, permit, certificate, approval,
registration, qualification or other similar authorization affecting, or
relating in any way to, the assets or business of the Companies.
10
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"PRINCIPALS' PROFIT-SHARING POOL" means the Principals' Profit-Sharing
Pool adopted by Seller for the benefit of certain employees of the Companies as
in effect on June 20, 2000, as it may be amended or restated from time to time
by Seller in its sole discretion without the consent of Buyer.
"PUBLIC UNITS" means units representing assignments of beneficial
interests in corresponding limited partnership interests in Alliance Holding, a
Delaware limited partnership.
"PURCHASED INVESTMENTS" means such portion of the securities,
contracts, assets and rights referred to in paragraph (b) of Section 3.07 of the
Disclosure Letter as is owned by Seller.
"SANDERS" means Lewis A. Sanders, an individual.
"SCB AUSTRALIA" means Sanford C. Bernstein & Co. Proprietary Limited,
an Australian proprietary company.
"SCB COMMITTEE REPLACEMENT LIST" means the list of individuals set
forth on Schedule 6.03(a) as such list may be supplemented from time to time by
the Board of Directors of Seller by notice to Buyer.
"SCB NEW YORK" means Sanford C. Bernstein & Co., Inc., a New York
corporation and, where appropriate, its successor, BD LLC, as contemplated by
Section 2.01.
"SCB UNITED KINGDOM" means Sanford C. Bernstein Limited, a private
company limited by shares organized under the laws of England and Wales.
"SEC" means the Securities and Exchange Commission.
"SELLER BALANCE SHEET" means the audited consolidated balance sheet of
the Seller and the Companies as of December 31, 1999.
"SELLER BALANCE SHEET DATE" means December 31, 1999.
"SELLER TRANSACTION AGREEMENTS" means the Transaction Agreements to
which Seller is a party.
11
"SUBSIDIARY" means any entity of which the securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by the Buyer, Seller or any of the Companies, as
the context may require.
"SUPERIOR PROPOSAL" means any bona fide, unsolicited written
Acquisition Proposal to acquire at least a majority of the outstanding Common
Stock of Seller, all or substantially all of the Equity or all or substantially
all of the assets of the Seller and the Companies, or any other transactions or
series of transactions which are substantially equivalent to the transactions
contemplated hereby, in each case on terms that the Board of Directors of the
Seller determines in good faith by a majority vote, after receiving the advice
of a financial advisor of nationally recognized reputation and taking into
account all the terms and conditions of the Acquisition Proposal, including any
break-up fees, expense reimbursement provisions and conditions to consummation,
is reasonably likely to result in a transaction providing greater value to all
of Seller's stockholders than as provided hereunder and for which financing, to
the extent required, is then fully committed or reasonably determined to be
available by the Board of Directors of Seller.
"TERMINATION DATE" means December 31, 2000 or such later date as is
determined pursuant to Section 12.01(b)(i).
"TRANSACTION AGREEMENTS" means this Agreement, the Purchase Agreement,
the Financing Agreement, the Employment Agreements, the Voting Agreements, the
Registration Rights Agreement dated as of the Closing Date between Seller and
Alliance Holding containing the terms set forth in Exhibit B hereto and the
Letter Agreement dated as of June 20, 2000 between Seller and AXA Financial.
"VOTING AGREEMENTS" means the Stockholder Agreements effective as of
June 20, 2000 between Buyer and certain shareholders of Seller; and "VOTING
AGREEMENT" means any one of the foregoing.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
---- -------
Accounting Referee 2.07
ACM LLC Preamble
Acquired Companies 8.01
Additional Units 2.09
12
TERM SECTION
---- -------
ADV Cash Consideration 2.05
ADV LLC Preamble
ADV Units Consideration 2.05
Advisory Clients 3.23
Adjusted Purchase Price 2.08
Adjusted Base Revenue Run Rate 2.09
Affirmative Consent 5.08
Alliance Holding Preamble
Antitrust Laws 7.01
Audited Financial Statements 3.08
Base Revenue Run Rate 2.09
Base Stockholder's Equity 2.08
BD Cash Consideration 2.05
BD LLC Preamble
BD Units Consideration 2.05
Board Materials 5.07
Bonus Pools 9.02
Broker 3.28
Broker Filings 3.28
BTI Preamble
BTI Assumed Liabilities 2.03
BTI Consideration 2.05
BTI Purchased Assets 2.03
Buyer Preamble
Buyer Difference 2.07
Buyer ERISA List 5.09
Buyer Indemnitee 8.01
Buyer Interest 2.04
Buyer LLC Interest 2.04
Buyer SEC Documents 4.07
Buyer Plans 9.04
Cash Purchase Price 2.05
Cash Revenue Run Rate Adjustment 2.09
Client 3.30
Client Contracts 3.23
Closing 2.06
Closing Balance Sheet 2.07
Closing Actual Net Regulatory Capital 2.07
Closing Assets Under Management 2.09
Closing Required Minimum Net Regulatory Capital 2.07
Closing Revenue Run Rate 2.09
13
TERM SECTION
---- -------
Closing Stockholder's Equity 2.07
Code 8.01
Combined Tax 8.01
Company Stockholder Meeting 5.03
Disputed Amount 2.07
Distribution 5.01
DOJ 7.01
Employee Plans 3.21
ERISA Affiliate 3.21
ERISA Client 3.30
Estimated Cash Purchase Price 2.06
Estimated Cash Revenue Run Rate Adjustment 2.06
Estimated Purchase Price Adjustment 2.06
Estimated Revenue Run Rate 2.06
Estimated Units Adjustment 2.06
Estimated Units Revenue Run Rate Adjustment 2.06
Excluded BTI Liabilities 2.02
Federal Tax 8.01
Final Actual Net Regulatory Capital 2.08
Final Determination 8.01
Final Required Minimum Net Regulatory Capital 2.08
Final Revenue Run Rate 2.09
Final Stockholder's Equity 2.08
Financial Regulator 3.28
First Request 5.08
FTC 7.01
Fund Approvals 5.07
Futures Filings 3.29
Futures Intermediary 3.29
Futures Regulator 3.29
House Pool 2.09
IC Bonus Pool 9.02
Indemnified Party 11.03
Indemnifying Party 11.03
Initial Seller Ownership 5.09
Institutional-Equity Pool 2.09
Institutional-Fixed Income Pool 2.09
Loss 8.06
Merger 2.01
Negative Consent 5.08
New Clients 5.08
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TERM SECTION
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Non-Fund Clients 3.23
Non-Registered Fund Financial Statements 3.25
Non-Registered Fund Returns 3.33
Non-Registered Funds 3.23
Original Agreement Preamble
Other Cash Consideration 2.05
Other Combined Tax 8.01
Other Units Consideration 2.05
Permitted Liens 3.15
Pool 2.09
Post-Closing Tax Period 8.01
Pre-Closing Tax Period 8.01
Private Clients Pool 2.09
Proxy Damages 5.07
Purchase Agreement Preamble
Registered Fund Financial Statements 3.24
Registered Fund Returns 3.21
Registered Funds 3.23
Returns 8.02
Returned Units 2.09
RIC 3.32
SCB Committee 4.18
SCB Partners Preamble
SCB Securities 3.05
Seller Preamble
Seller Difference 2.07
Seller Group 8.01
Seller Loss 8.08
Seller Trademarks and Tradenames 5.05
Services Agreement 3.24
Shareholder 8.02
Short Fall Multiplier 2.09
Stanley Bogen Pool 2.09
Tax 8.01
Tax Asset 8.01
Tax Indemnification Period 8.01
Taxing Authority 8.01
Tax Sharing Agreements 8.01
Termination Fee 13.03
Termination Pay 9.05
Transfer 5.10
15
TERM SECTION
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Third Party Claim 11.03
12b-1 Plan 3.24
Underwriting Agreement 3.24
Unitholder Meeting 6.04
Units Purchase Price 2.05
Units Revenue Run Rate Adjustment 2.09
Warranty Breach 11.02
Year 2000 Compensation 9.01
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Pre-closing Restructuring. (a) Prior to the Closing Date,
(i) Seller shall organize SCB Partners as a direct wholly owned corporate
Subsidiary of Seller, (ii) SCB Partners shall organize BD LLC as a new Delaware
limited liability company and a direct wholly owned Subsidiary of SCB Partners
and (iii) SCB New York shall (and Seller shall cause SCB New York to) organize
ADV LLC as a new Delaware limited liability company and a direct wholly owned
Subsidiary of SCB New York.
(b) Prior to the Closing Date, Buyer shall organize ACM LLC as a new
Delaware limited liability company and a direct wholly owned subsidiary of
Buyer.
(c) Prior to the Closing Date: (i) (A) Seller will amend the
Principals' Profit-Sharing Pool or take such other action such that, as of
September 30, 2000 SCB Partners (or Seller) will assume all liabilities, and
none of the Companies will have any liability, under the Principals'
Profit-Sharing Pool following the Closing Date; (B) Seller shall (or Seller
shall cause SCB Partners to) assume all Taxes of the Companies as of Closing;
(C) Seller shall (or Seller shall cause SCB Partners to) assume or satisfy any
liabilities of the Companies for wages, bonuses, incentive compensation or other
compensation as of September 30, 2000; and (D) Seller shall (or Seller shall
cause SCB Partners to) retain undistributed earnings of the Companies as of
September 30, 2000; and (ii) Seller and SCB Partners may retain assets in the
form of cash and cash equivalents equal to the sum of the foregoing.
16
(d) Each of SCB Partners, BD LLC, ADV LLC and ACM LLC agree to be bound
by their respective obligations under the Transaction Agreements.
(e) (i) On the Closing Date, effective prior to the Closing, Seller
shall transfer to SCB Partners all of the Equity of each of SCB New York, SCB
Australia and SCB United Kingdom and all of the Purchased Investments.
(ii) On or prior to the Closing Date, effective prior to the
Closing and prior to the transactions contemplated by Sections 2.03
and 2.04, SCB New York shall be merged (the "MERGER") with and into BD
LLC in accordance with New York and Delaware law, whereupon the
existence of SCB New York as a corporation shall cease and BD LLC
shall be the surviving entity.
(iii) On or prior to the Closing Date, effective prior to the Closing,
(A) BD LLC shall convey, transfer, assign and deliver to ADV LLC, free and clear
of all Liens other than Permitted Liens, all of BD LLC's right, title and
interest in, to and under the Designated ADV LLC Transferred Assets and (B) upon
the terms and subject to the conditions of this Agreement, ADV LLC shall assume
all of the Designated ADV LLC Assumed Liabilities; provided, however, that ADV
LLC will not assume any of the Designated ADV LLC Transferred Excluded
Liabilities or the Principals' Profit-Sharing Pool.
SECTION 2.02. Purchase and Sale of BTI Assets; Assumption of BTI
Liabilities. (a) Purchased Assets - BTI. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees to purchase from BTI and BTI agrees
to (and Seller agrees to cause BTI to) sell, convey, transfer, assign and
deliver to Buyer at the Closing, free and clear of all Liens, other than
Permitted Liens, all of BTI's right, title and interest in, to and under the
assets, contracts, properties and business, of every kind and description,
wherever located, real, personal or mixed, tangible or intangible owned by BTI
on the Closing Date, including all assets of BTI shown on the Seller Balance
Sheet and not disposed of in the ordinary course of business or as permitted by
this Agreement, all assets set aside under any Employee Plans and all assets of
BTI acquired by BTI after the Seller Balance Sheet Date, but excluding the
Excluded BTI Assets (the "BTI PURCHASED ASSETS").
(b) Assumed Liabilities - BTI. Upon the terms and subject to the
conditions of this Agreement, Buyer agrees, effective at the time of the
Closing, to assume all debts, obligations, contracts and liabilities (including
Employee Plans) of BTI (the "BTI ASSUMED LIABILITIES") excluding any liability
or obligation of BTI (A) relating to Taxes, (B) under the Principals'
Profit-Sharing Pool, (C) relating to wages, bonuses, incentive compensation or
other
17
compensation as of Closing and (D) to Seller or any shareholder or principal of
Seller (such exclusions collectively, the "EXCLUDED BTI LIABILITIES").
(c) Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign or assume any BTI
Purchased Asset or any claim or right or any benefit arising thereunder or
resulting therefrom if such assignment, without the consent of a third party
thereto, would constitute a breach or other contravention of such BTI Purchased
Asset or in any way adversely affect the rights of Buyer or BTI thereunder. BTI
and Buyer will use their reasonable best efforts to obtain the consent of the
other parties to any such BTI Purchased Asset or any claim or right or any
benefit arising thereunder for the assignment thereof to Buyer as Buyer may
request. If such consent is not obtained, or if an attempted assignment thereof
would be ineffective or would adversely affect the rights of BTI thereunder so
that Buyer would not in fact receive all such rights, BTI and Buyer will
cooperate in a mutually agreeable arrangement under which Buyer would obtain the
benefits and assume the obligations thereunder in accordance with this
Agreement, including sub-contracting, sub-licensing, or sub-leasing to Buyer, or
under which BTI would enforce for the benefit of Buyer, with Buyer assuming
BTI's obligations, any and all rights of BTI against a third party thereto. BTI
will promptly pay to Buyer when received all monies received by BTI under any
BTI Purchased Asset or any claim or right or any benefit arising thereunder.
SECTION 2.03. Purchase and Sale of ADV LLC. (a) Equity of ADV LLC. Upon
the terms and subject to the conditions of this Agreement, Buyer agrees to
purchase from BD LLC, and BD LLC agrees (and Seller and SCB Partners agree to
cause BD LLC) to sell to Buyer at the Closing, all of the Equity of ADV LLC,
free and clear of all Liens, other than Permitted Liens.
(b) Excluded Assets - ADV LLC. Buyer and Seller (on behalf of itself
and SCB Partners) expressly understand and agree that, at the time of the sale
of the Equity of ADV LLC to Buyer, the only assets of ADV LLC will be the
Designated ADV LLC Transferred Assets and that those assets will exclude the
Designated ADV LLC Excluded Assets, including the Principals' Profit-Sharing
Pool.
(c) Intentionally omitted.
(d) Excluded Liabilities - ADV LLC. Notwithstanding any provision in
this Agreement or any other writing to the contrary, Buyer and Seller (on behalf
of itself, SCB Partners and BD LLC) expressly understand and agree that, at the
time of the sale of the Equity of ADV LLC to Buyer, the only liabilities of ADV
LLC will be the Designated ADV LLC Assumed Liabilities and that those
18
liabilities will exclude the Designated ADV LLC Excluded Liabilities, it being
understood that, following the consummation of the sale of the Equity of ADV
LLC, the Designated ADV LLC Excluded Liabilities (other than the Principals'
Profit-Sharing Pool) will remain liabilities of BD LLC.
(e) Dividend Distribution. After the sale by BD LLC and purchase by
Buyer of all of the Equity of ADV LLC, and prior to the transactions
contemplated by Section 2.04, BD LLC shall make the Dividend Distribution to SCB
Partners.
(f) Assets; All Liabilities. Buyer expressly agrees that (i) the sum of
the Designated ADV LLC Transferred Assets and the Designated ADV LLC Excluded
Assets comprise all of the combined assets of SCB New York and ADV LLC as of the
Closing Date, and (ii) the sum of the Designated ADV LLC Assumed Liabilities and
the Designated ADV LLC Excluded Liabilities comprise all of the combined
liabilities of SCB New York and ADV LLC as of the Closing Date. Buyer shall hold
Seller harmless for all Designated ADV LLC Assumed Liabilities and all
Designated ADV LLC Excluded Liabilities, except for any such liabilities assumed
by Seller or SCB Partners under Section 2.01(c).
SECTION 2.04. Purchase and Sale of Equity and Purchased Investments.
Provided that the transactions described in Sections 2.01, 2.02 and 2.03 have
occurred and, immediately thereafter, each of the following transactions shall
occur in the following order and in immediate succession:
(a) BD LLC Interests - ACM LLC. Upon the terms and subject to the
conditions of this Agreement, SCB Partners agrees to (and Seller agrees to cause
SCB Partners to) sell to ACM LLC and ACM LLC agrees to (and Buyer agrees to
cause ACM LLC to) purchase from SCB Partners at the Closing an amount of Equity
in BD LLC equal to the Overall Cash Percentage of the Equity of BD LLC (the
"BUYER LLC INTEREST"), free and clear of all Liens.
(b) BD LLC Interests - Buyer. Upon the terms and subject to the
conditions of this Agreement, SCB Partners agrees to (and Seller agrees to cause
SCB Partners to) sell to Buyer and Buyer agrees to purchase from SCB Partners at
the Closing the Equity of BD LLC that is not sold and purchased in the
transaction described in Section 2.04(a) (the "BUYER INTEREST"), free and clear
of all Liens, and Buyer instructs Seller to cause SCB Partners on Buyer's behalf
to convey to ACM LLC the Equity in BD LLC Buyer is thus acquiring.
(c) SCB Australia, SCB United Kingdom and the Purchased Investments.
Upon the terms and subject to the conditions of this Agreement, SCB Partners
agrees to (and Seller agrees to cause SCB Partners to) sell to Buyer
19
and Buyer agrees to purchase from SCB Partners at the Closing all of the Equity
of each of SCB Australia and SCB United Kingdom and all of the Purchased
Investments, in each case free and clear of all Liens, and Buyer instructs
Seller to cause SCB Partners on Buyer's behalf to convey to Alliance Delaware as
of Closing the Equity in SCB Australia and SCB United Kingdom Buyer is thus
acquiring.
SECTION 2.05. Purchase Price. (a) Equity of BD LLC (ACM LLC). The
purchase price for the portion of the Equity of BD LLC purchased by ACM LLC
pursuant to Section 2.04(a) of this Agreement is equal to (i) the Overall Cash
Percentage times (ii) the value of BD LLC, as determined by the Appraisal,
payable entirely in cash (the "BD CASH CONSIDERATION").
(b) Equity of BD LLC (Buyer). The purchase price for the portion of the
Equity of BD LLC purchased by Buyer pursuant to Section 2.04(b) of this
Agreement is equal to (i) 1 minus the Overall Cash Percentage times (ii) the
value of BD LLC, as determined by the Appraisal, payable entirely in Buyer Units
determined using the value assigned to the Units in Section 2.05(f) (the "BD
UNITS CONSIDERATION").
(c) BTI Purchased Assets. The purchase price for the BTI Purchased
Assets purchased by Buyer pursuant to Section 2.02(a) of this Agreement is, in
addition to the assumption of the BTI Assumed Liabilities, the net value of the
BTI Purchased Assets, as determined by the Appraisal (but not less than $700
million or more than $900 million), subject to adjustment under Section 2.05(f)
(the "BTI CONSIDERATION") payable entirely in cash.
(d) Equity of ADV LLC. The purchase price for the Equity of ADV LLC
purchased by Buyer pursuant to Section 2.03(a) of this Agreement is equal to its
value, as determined by the Appraisal, and payable partially in cash (the "ADV
CASH CONSIDERATION") and partially in Buyer Units (the "ADV UNITS
CONSIDERATION"), in each case as determined under Section 2.05(f).
(e) Equity of SCB Australia and SCB United Kingdom and the Purchased
Investments. The aggregate of the purchase prices for the Equity of each of SCB
Australia and SCB United Kingdom and the Purchased Investments purchased by
Buyer pursuant to Section 2.04(c) of this Agreement is equal to the aggregate of
their values, as determined by the Appraisal, payable partially in cash (the
"OTHER CASH CONSIDERATION") and partially in Buyer Units (the "OTHER UNITS
CONSIDERATION"), in each case as determined in Section 2.05(f).
(f) Proration Adjustment. In the event that the sum of the BD Cash
Consideration and the BTI Consideration exceeds the Cash Purchase Price, the
20
BTI Consideration will be reduced by such amount. If the sum of the BD Cash
Consideration and the BTI Consideration (after such adjustment) equals the Cash
Purchase Price, the entire purchase price for each of the Equity of ADV LLC, SCB
Australia and of SCB United Kingdom and the Purchased Investments, respectively,
will be paid in Buyer Units. In such case, the Buyer Units remaining after the
determination of the BD Units Consideration shall be allocated among the
purchase prices of the Equity of ADV LLC, SCB Australia and SCB United Kingdom
and the Purchased Investments, respectively, in proportion to their relative
fair market values determined by the Appraisal. If the Cash Purchase Price
exceeds the sum of the BD Cash Consideration and BTI Consideration, such excess
cash shall be allocated among the purchase prices of the Equity of ADV LLC, SCB
Australia, SCB United Kingdom and the Purchased Investments, respectively, in
proportion to their relative fair market values determined by the Appraisal; and
the remainder of such purchase prices shall be paid with the Buyer Units
remaining after the payment of BD Units Consideration, in proportion to relative
fair market values determined by the Appraisal. Solely for purposes of Sections
2.05(b), 2.05(f) and 2.05(g), each Unit shall be assigned the value set forth in
Section 2.05(f) of the Disclosure Letter. If necessary, Buyer shall round the
number of Units contained in each purchase price up or down to the nearest whole
numbers, in such a manner that all Buyer Units received pursuant to Sections
2.05(b), 2.05(d) and 2.05(e) will equal the Units Purchase Price.
(g) Purchase Price. Notwithstanding Sections 2.05(a) through 2.05(f)
above, in addition to the assumption of the BTI Assumed Liabilities, the
purchase price for the BTI Purchased Assets, the Equity of ADV LLC, the Equity
of SCB United Kingdom, the Equity of SCB Australia, the Purchased Investments
and, after the sale and purchase of ADV LLC, the Dividend Distribution and the
Merger, the Equity of BD LLC is $1.4754 billion in cash (the "CASH PURCHASE
PRICE") and 40.8 million Buyer Units (the "UNITS PURCHASE PRICE"). The purchase
price shall be paid as provided in Section 2.06 and shall be subject to
adjustment as provided in Sections 2.08 through 2.10.
(h) Allocation of Adjustments. The Cash Revenue Run Rate Adjustment
shall be allocated among the ADV Cash Consideration, the BD Cash Consideration
and the Other Cash Consideration in proportion to their values determined by the
Appraisal, and the Units Revenue Run Rate Adjustment shall be allocated among
the ADV Units Consideration, the BD Units Consideration and the Other Units
Consideration in proportion to their values determined by the Appraisal.
(i) Seller and SCB Partners acknowledge that no distributions will be
declared or paid on the Acquired Units with respect to any fiscal quarter prior
to the fourth fiscal quarter of 2000.
21
SECTION 2.06. Closing. (a) The closing (the "CLOSING") of the sale and
purchase of the BTI Purchased Assets, the Purchased Investments and, after the
Merger, the Equity of ADV LLC, the Equity of SCB United Kingdom, Equity of SCB
Australia and, after the sale and purchase of ADV LLC and the Dividend
Distribution, the Equity of BD LLC, shall take place on, and only on, October 2,
2000 so long as the conditions set forth in Article 10 are satisfied on such
date at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York,
New York or at such other place as Buyer and Seller may agree. The parties
hereto agree that this Agreement shall become effective upon the Closing.
(b) At least five Business Days prior to the Closing Date, Seller shall
deliver to Buyer a good faith estimate, certified in writing by the Senior Vice
President, Finance and Administration of Seller, of (i) any adjustments to the
Cash Purchase Price under Section 2.08(a) (such estimate of any adjustment under
Section 2.08(a), the "ESTIMATED PURCHASE PRICE ADJUSTMENT"), (ii) the Closing
Revenue Run Rate (such estimate, the "ESTIMATED REVENUE RUN RATE"), (iii) the
Cash Revenue Run Rate Adjustment (such estimate, the "ESTIMATED CASH REVENUE RUN
RATE ADJUSTMENT") and (iv) the Units Revenue Run Rate Adjustment (such estimate,
the "ESTIMATED UNITS REVENUE RUN RATE ADJUSTMENT").
(c) At the Closing:
(i) Buyer shall pay to BTI by wire transfer to an account of
BTI designated by BTI, by notice to Buyer, not later than two
Business Days prior to the Closing Date (or if not so designated,
then by certified or official bank check payable in immediately
available funds to the order of BTI in such amount), immediately
available funds in an amount equal to the sum of (A) the BTI
Consideration, to the extent payable in cash plus (B) an amount
equal to one day's interest (calculated on the basis of a year of
365 days) on the BTI Consideration based on the Buyer Interest
Rate ;
(ii) Buyer and ACM LLC shall pay to SCB Partners by wire
transfer to an account of SCB Partners designated by Seller, by
notice to Buyer, not later than two Business Days prior to the
Closing Date (or if not so designated, then by certified or
official bank check payable in immediately available funds to the
order of Seller in such amount), immediately available funds in
an amount equal to the sum of (A) (the "ESTIMATED CASH PURCHASE
PRICE") (1) the Cash Purchase Price less the BTI Consideration
(2) plus or minus, as applicable, the Estimated Purchase Price
Adjustment and
22
(3) minus the Estimated Cash Revenue Run Rate Adjustment plus (B)
an amount equal to one day's interest (calculated on the basis of
a year of 365 days) on the Estimated Cash Purchase Price based on
the Buyer Interest Rate;
(iii) Buyer shall deliver to SCB Partners certificates
representing 40.8 million Buyer Units minus the Estimated Units
Revenue Run Rate Adjustment;
(iv) (A) Buyer and BTI shall enter into an Assignment and
Assumption Agreement in such form and substance as agreed between
Buyer and Seller, and Seller shall deliver to Buyer such
consents, assignments and other good and sufficient instruments
of conveyance and assignment as the parties and their respective
counsel shall reasonably deem necessary or appropriate to vest in
Buyer all right, title and interest in, to and under the BTI
Purchased Assets;
(B) SCB New York shall (and Seller and SCB Partners shall
cause SCB New York to) transfer to Buyer 100% of the membership
interests in ADV LLC and, to the extent required, cause Buyer to
be admitted as the sole member of ADV LLC;
(v) SCB Partners shall (and Seller shall cause SCB Partners
to) (A) in the case of SCB United Kingdom and SCB Australia
deliver to Buyer certificates for all of the Equity in respect of
such Companies, such certificates to be duly endorsed or
accompanied by stock powers duly endorsed in blank, with any
required transfer stamps affixed thereto, (B) in the case of the
Purchased Investments, transfer to Buyer all of the Purchased
Investments and (C) in the case of BD LLC, transfer to ACM LLC
100% of the membership interests in such Company (a portion of
which SCB Partners shall transfer to ACM LLC pursuant to Buyer's
direction set forth in Section 2.04(b)) and, to the extent
required, cause ACM LLC to be admitted as the sole member of such
Company; and
(vi) Each of Seller, BD LLC, BTI, and SCB Partners shall
deliver to Buyer a certification to the effect that Seller, BD
LLC, BTI, or SCB Partners, respectively, is not a "foreign
person" as defined in Section 1445 of the Code, substantially in
the form set forth in Treas. Reg. Sec.1.1445-2(b)(2) and signed
by a responsible officer as defined in Treas. Reg. Sec.
1.1445-2(b)(2).
23
(d) BD LLC shall (and Seller and SCB Partners shall cause BD LLC to)
instruct Buyer to transfer the ADV Cash Consideration and the ADV Units
Consideration on BD LLC's behalf directly to SCB Partners at the Closing and
Seller, SCB Partners and BD LLC understand that such amounts will be included in
the Estimated Cash Purchase Price and the Buyer Units that Buyer transfers to
SCB Partners pursuant to Sections 2.06(c)(ii) and 2.06(c)(iii). SCB Partners
agrees that receipt of the ADV Cash Consideration and the ADV Units
Consideration as part of the Estimated Cash Purchase Price and the Buyer Units
shall be in satisfaction of the Dividend Distribution declared by BD LLC.
SECTION 2.07. Closing Balance Sheet; Closing Revenue Run Rate. (a) As
promptly as practicable, but no later than 60 days, after the Closing Date,
Buyer will cause to be prepared and delivered to Seller (i) the Closing Balance
Sheet, together with a certificate setting forth Buyer's calculation of Closing
Stockholder's Equity, Closing Required Minimum Net Regulatory Capital and
Closing Actual Net Regulatory Capital and (ii) a certificate setting forth
Buyer's calculation of Closing Revenue Run Rate. The Closing Balance Sheet (the
"CLOSING BALANCE SHEET") shall (w) fairly present the combined financial
position of the Companies (and Seller's interest in the Purchased Investments)
as of 11:59 p.m. on September 30, 2000 in accordance with generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the Seller Balance Sheet, (x) include line items substantially
consistent with those in the Seller Balance Sheet, provided that Combined Taxes
currently payable and all other Taxes currently payable shall be set forth as
separate line items, (y) include a reserve for any liabilities of the Companies
for wages, bonuses, incentive compensation or other compensation to be paid in
respect of the year ended December 31, 2000 in an amount equal to the amount of
such wages, bonuses, incentive compensation or other compensation for which
Seller is responsible pursuant to Section 9.01 and (z) account for (as a
reduction in stockholders' equity) all Distributions declared but not yet paid
by any of the Companies as of 11:59 p.m. on September 30, 2000. "CLOSING
STOCKHOLDER'S EQUITY" means the combined stockholder's equity of the Companies
(and Seller's interest in the Purchased Investments) as shown on the Closing
Balance Sheet, excluding (A) all deferred income tax assets or liabilities, (B)
any Combined Tax or taxes refundable, (C) the effect of any adjustment to the
reserve for any Tax payable to any person or any Taxing Authority other than an
adjustment in respect of earnings derived and expenses incurred in the ordinary
course of business since the Seller Balance Sheet Date, (D) the Excluded BTI
Assets and the Excluded BTI Liabilities and (E) the effect of any transaction
required by Section 2.01(c), to the extent effected after the time as of which
the Closing Balance Sheet is created (it being understood that Closing
Stockholders Equity shall not be affected by any adjustments required under
generally accepted accounting principles or otherwise
24
for Buyer to account for the transactions contemplated hereby). "CLOSING
REQUIRED MINIMUM NET REGULATORY CAPITAL" means the minimum net capital required
to be maintained by SCB New York (as determined in accordance with Rule 15c3-1
of the 1934 Act) as of the close of business on the day prior to the Closing
Date as a registered broker-dealer. "CLOSING ACTUAL NET REGULATORY CAPITAL"
means the amount of net regulatory capital held by SCB New York in satisfaction
of its obligation to maintain as a registered broker-dealer a minimum level of
net capital (as determined in accordance with Rule 15c3-1 of the 1934 Act) as of
the close of business on the day prior to the Closing Date reflected in the
Closing Balance Sheet.
(b) Buyer agrees to provide reasonable access to such employees and
documents (including workpapers) as Seller reasonably believes is necessary or
desirable to calculate on its own the Closing Stockholder's Equity, Closing
Required Minimum Net Regulatory Capital, Closing Actual Net Regulatory Capital
and Closing Revenue Run Rate. If Seller disagrees with Buyer's calculation of
Closing Stockholder's Equity, Closing Required Minimum Net Regulatory Capital,
Closing Actual Net Regulatory Capital or Closing Revenue Run Rate delivered
pursuant to Section 2.07(a), Seller may, within 20 days after delivery of the
documents referred to in Section 2.07(a), deliver a notice to Buyer disagreeing
with such calculation and setting forth Seller's calculation of such amount
(each, a "DISPUTED AMOUNT"). Any such notice of disagreement shall identify
those items or amounts as to which Seller disagrees, and Seller shall be deemed
to have agreed with all other items and amounts contained in the Closing Balance
Sheet and the calculation of Closing Stockholder's Equity, Closing Required
Minimum Net Regulatory Capital, Closing Actual Net Regulatory Capital and
Closing Revenue Run Rate delivered pursuant to Section 2.07(a) to the extent not
affected by the items or amounts in dispute.
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 2.07(b), Buyer and Seller shall, during the 15 days following such
delivery, use their best efforts to reach agreement on the disputed items or
amounts in order to determine, as may be required, the amount of the Disputed
Amount, which amount shall not be less than the amount thereof shown in Buyer's
calculations delivered pursuant to Section 2.07(a) nor more than the amount
thereof shown in Seller's calculation delivered pursuant to Section 2.07(b). If,
during such period, Buyer and Seller are unable to reach such agreement, they
shall promptly thereafter cause independent accountants of nationally recognized
standing reasonably satisfactory to Buyer and Seller (who has not had and shall
not have any material relationship with Buyer or Seller) (the "ACCOUNTING
REFEREE"), promptly to review this Agreement and the disputed items or amounts
for the purpose of calculating the Disputed Amount. In making such calculation,
the Accounting Referee shall consider only those items or
25
amounts in the Closing Balance Sheet or Buyer's calculation of the Disputed
Amount, as to which Seller has disagreed and items and amounts affected thereby.
The Accounting Referee shall deliver to Buyer and Seller, as promptly as
practicable, a report setting forth such calculation. Such report shall be final
and binding upon Buyer and Seller. The cost of such review and report with
respect to Closing Stockholder's Equity, Closing Required Minimum Net Regulatory
Capital or Closing Actual Net Regulatory Capital shall be borne (i) by Buyer if
the sum of (m) the difference between Final Stockholder's Equity and Buyer's
calculation of Closing Stockholder's Equity delivered pursuant to Section
2.07(a), (n) the difference between Final Required Minimum Net Regulatory
Capital and Buyer's calculation of Closing Required Minimum Net Regulatory
Capital and (o) the difference between Final Actual Net Regulatory Capital and
Buyer's calculation of Closing Actual Net Regulatory Capital (the aggregate of
the amounts determined in (m), (n) and (o), the "BUYER DIFFERENCE") is greater
than the sum of (x) the difference between Final Stockholder's Equity and
Seller's calculation of Closing Stockholder's Equity delivered pursuant to
Section 2.07(b), (y) the difference between Final Required Minimum Net
Regulatory Capital and Seller's calculation of Closing Required Minimum Net
Regulatory Capital delivered pursuant to Section 2.07(b) and (z) the difference
between Final Actual Net Regulatory Capital and Seller's calculation of Closing
Actual Net Regulatory Capital delivered pursuant to Section 2.07(b) (the
aggregate of the amounts determined in (x), (y) and (z), the "SELLER
DIFFERENCE"), (ii) by Seller if the Seller Difference is greater than the Buyer
Difference and (iii) otherwise equally by Buyer and Seller. The cost of such
review and report with respect to Closing Revenue Run Rate shall be borne (i) by
Buyer if the difference between Final Revenue Run Rate and Buyer's calculation
of Closing Revenue Run Rate delivered pursuant to 2.07(a) is greater than the
difference between Final Revenue Run Rate and Seller's calculation of Closing
Revenue Run Rate delivered pursuant to 2.07(b), (ii) by Seller if the first such
difference is less than the second such difference and (iii) otherwise equally
by Buyer and Seller.
(d) Buyer and Seller agree that they will, and agree to cause their
respective independent accountants and each of the Companies to, cooperate and
assist in the preparation of the Closing Balance Sheet and the calculation of
Closing Stockholder's Equity, Closing Required Minimum Net Regulatory Capital,
Closing Actual Net Regulatory Capital or Closing Revenue Run Rate, as the case
may be, and in the conduct of the audits and reviews referred to in this Section
2.07, including without limitation, the making available to the extent necessary
of books, records, work papers and personnel.
SECTION 2.08. Balance Sheet Purchase Price Adjustments. (a) The Cash
Purchase Price shall be adjusted cumulatively as follows (such adjusted Cash
Purchase Price, the "ADJUSTED CASH PURCHASE PRICE"):
26
(i) If Final Required Minimum Net Regulatory Capital exceeds Final
Actual Net Regulatory Capital, the Cash Purchase Price shall be decreased
by the amount of such excess. "FINAL REQUIRED MINIMUM NET REGULATORY
CAPITAL" means the Closing Required Minimum Net Regulatory Capital (A) as
shown in Buyer's calculation delivered pursuant to Section 2.07(a), if no
notice of disagreement with respect thereto is duly delivered pursuant to
Section 2.07(b); or (B) if such a notice of disagreement is delivered, (1)
as agreed by Buyer and Seller pursuant to Section 2.07(c) or (2) in the
absence of such agreement, as shown in the Accounting Referee's calculation
delivered pursuant to Section 2.07(c); provided that in no event shall
Final Required Minimum Net Regulatory Capital be more than Buyer's
calculation of Closing Required Minimum Net Regulatory Capital delivered
pursuant to Section 2.07(a) or less than Seller's calculation of Closing
Required Minimum Net Regulatory Capital delivered pursuant to Section
2.07(b). "FINAL ACTUAL NET REGULATORY CAPITAL" means the Closing Actual Net
Regulatory Capital (A) as shown in Buyer's calculation delivered pursuant
to Section 2.07(a), if no notice of disagreement with respect thereto is
duly delivered pursuant to Section 2.07(b); or (B) if such a notice of
disagreement is delivered, (1) as agreed by Buyer and Seller pursuant to
Section 2.07(c) or (2) in the absence of such agreement, as shown in the
Accounting Referee's calculation delivered pursuant to Section 2.07(c);
provided that in no event shall Final Actual Net Regulatory Capital be less
than Buyer's calculation of Closing Actual Net Regulatory Capital delivered
pursuant to Section 2.07(a) or more than Seller's calculation of Closing
Actual Net Regulatory Capital delivered pursuant to Section 2.07(b).
(ii) If Base Stockholder's Equity exceeds Final Stockholder's Equity
by more than the amount of any adjustment in the Cash Purchase Price
pursuant to clause (i), the Cash Purchase Price shall be decreased by the
amount by which the difference between Base Stockholder's Equity and Final
Stockholder's Equity exceeds the adjustments in the Cash Purchase Price set
forth in clause (i). If Final Stockholder's Equity exceeds Base
Stockholder's Equity, the Cash Purchase Price shall be increased by the
amount of such excess. "BASE STOCKHOLDER'S EQUITY" means $160,144,384.
"FINAL STOCKHOLDER'S EQUITY" means the Closing Stockholder's Equity (A) as
shown in Buyer's calculation delivered pursuant to Section 2.07(a), if no
notice of disagreement with respect thereto is duly delivered pursuant to
Section 2.07(b); or (B) if such a notice of disagreement is delivered, (1)
as agreed by Buyer and Seller pursuant to Section 2.07(c) or (2) in the
absence of such agreement, as shown in the Accounting Referee's calculation
delivered pursuant to Section 2.07(c); provided that in no event shall
Final Stockholder's Equity
27
be less than Buyer's calculation of Closing Stockholder's Equity delivered
pursuant to Section 2.07(a) or more than Seller's calculation of Closing
Stockholder's Equity delivered pursuant to Section 2.07(b).
SECTION 2.09. Revenue Run Rate Purchase Price Adjustment. (a) If the
Final Revenue Run Rate is less than .90 times the Base Revenue Run Rate (the
"ADJUSTED BASE REVENUE RUN RATE"), then (i) the Cash Purchase Price shall be
reduced by an amount equal to the product of the Short Fall Multiplier times the
Cash Purchase Price (the "CASH REVENUE RUN RATE ADJUSTMENT") and (ii) the Units
Purchase Price shall be reduced by an amount equal to the product of the Short
Fall Multiplier times the Units Purchase Price, rounded to the next lowest whole
number (the "UNITS REVENUE RUN RATE ADJUSTMENT").
(b) For the purposes of this Agreement, the following terms have the
following meanings:
"BASE REVENUE RUN RATE" means the sum of the Theoretical Annual Revenue
for each of the Institutional-Equity Pool, Institutional-Fixed Income Pool,
House Pool, Private Clients Pool and Stanley Bogen Pool, as set forth in Section
3.23(e) of the Disclosure Letter.
"CLOSING ASSETS UNDER MANAGEMENT" means, with respect to the House
Pool, the Institutional-Equity Pool, the Institutional-Fixed Income Pool, the
Private Clients Pool or the Stanley Bogen Pool (each, a "POOL"), the fair market
value of assets under management by SCB New York with respect to such Pool as of
May 31, 2000, adjusted as follows:
(i) increased by the fair market value of cash and securities
deposited into any new or existing account in such Pool, such fair market
value to be determined as of the date of deposit,
(ii) decreased by (A) the fair market value of cash and securities
withdrawn (excluding cash withdrawn as a regular payment of income to
clients pursuant to written instructions) from any account in such Pool,
such fair market value to be determined as of the date of withdrawal; (B)
the fair market value as of May 31, 2000 of accounts in such Pool (plus the
fair market value of any assets deposited in such accounts since May 31,
2000 pursuant to clause (i) above) that close; provided that the fair
market value of withdrawals shall not exceed the May 31, 2000 assets under
management in such account plus any additions; provided further that no
reduction in respect of any account shall be made in respect of such
account pursuant to clause (A) if an adjustment in respect of such account
has been made pursuant to clause (B);
28
(iii) decreased by, without duplication, (A) the fair market value as
of May 31, 2000 of any account in such Pool (plus the fair market value of
any assets deposited in such accounts since May 31, 2000 pursuant to clause
(i) above) with respect to which SCB New York has received a written
refusal to consent to the transactions contemplated hereby, (B) the fair
market value of any assets under management in any account in such Pool
with respect to which SCB New York has received no later than the last
Business Day prior to the Closing Date a written notice of an intention to
withdraw such assets (which notice has not been withdrawn), such fair
market value to be determined as of the close of business on the last
Business Day prior to the Closing Date and (C) the fair market value as of
May 31, 2000 of any account in such Pool (plus the fair market value of any
assets deposited in such accounts since May 31, 2000 pursuant to clause (i)
above) with respect to which an Affirmative Consent has not been granted
(or has been received and revoked) as of the Closing Date, other than an
account with respect to which, as of the Closing Date, SCB New York (1) in
respect of which a Negative Consent is in effect, (2) has received payment
on the first bill sent following June 20, 2000 in respect of such account,
or, in the case of an account with respect to which SCB New York has
historically received late payments, payment on such bill has not been
delayed for a period of time that is longer than ordinary in light of
historical experience and (3) has not received an indication of an
intention to terminate any Investment Contract;
(iv) increased by the fair market value of any assets for management
with respect to which approval to deposit assets has been received from the
investment committee or a similar body of an institutional client or
prospective institutional client, which indication is verified by Buyer in
conjunction with Seller, and not withdrawn no later than the last Business
Day prior to the Closing Date; and
(v) increased and decreased, as applicable, by the fair market value
of any assets under management in any account in such Pool in order to give
effect to any written instructions to reallocate such assets as between
such Pools, such fair market value to be determined as of the close of
business on the last Business Day prior to the Closing Date,
determined, in the case of clauses (i) and (ii), by reference to the period from
May 31, 2000 through the close of business on the last Business Day prior to the
Closing Date; provided that no reduction shall be made pursuant to clause (iii)
if an equivalent adjustment has been made pursuant to clause (ii).
29
"CLOSING REVENUE RUN RATE" means the sum of (1) the Closing Assets
Under Management of the House Pool times the Second Quarter Base Fee Realization
rate for the House Pool, as set forth on Section 3.23(e) of the Disclosure
Letter, (2) the Closing Assets Under Management of the Institutional- Equity
Pool times the Second Quarter Base Fee Realization rate for the
Institutional-Equity Pool as set forth on Section 3.23(e) of the Disclosure
Letter, (3) the Closing Assets Under Management of the Institutional-Fixed
Income Pool times the Second Quarter Base Fee Realization rate for the
Institutional-Fixed Income Pool as set forth on Section 3.23(e) of the
Disclosure Letter, (4) the Closing Assets Under Management of the Stanley Bogen
Pool times the Second Quarter Base Fee Realization rate for the Stanley Bogen
Pool as set forth on Section 3.23(e) of the Disclosure Letter and (5) the
Closing Assets Under Management of the Private Clients Pool times the Second
Quarter Base Fee Realization rate for the Private Clients Pool as set forth on
Section 3.23(e) of the Disclosure Letter.
"FINAL REVENUE RUN RATE" means the Closing Revenue Run Rate (A) as
shown in Buyer's calculation delivered pursuant to 2.07(a) if no notice of
disagreement with respect thereto is duly delivered pursuant to Section 2.07(b);
or (B) if such a notice of disagreement is delivered, (1) as agreed by Buyer and
Seller pursuant to Section 2.07(c) or (2) in the absence of such agreement, as
shown in the independent accountant's calculation delivered pursuant to Section
2.07(c); provided that in no event shall Final Revenue Run Rate be less than
Buyer's calculation of Closing Revenue Run Rate delivered pursuant to Section
2.07(a) or more than Seller's calculation of Closing Revenue Run Rate delivered
pursuant to Section 2.07(b).
"HOUSE POOL" means the assets under management in managed accounts not
included in the Private Client Pool, Stanley Bogen Pool, Institutional-Equity
Pool and Institutional-Fixed Income Pool.
"INSTITUTIONAL-EQUITY POOL" means the assets under management in all
managed accounts serviced by an institutional asset adviser employed by the
Companies and subject to (with the exception of employee accounts of the
Companies) an equity, balanced or global balanced fee schedule.
"INSTITUTIONAL-FIXED INCOME POOL" means the assets under management in
all managed accounts serviced by an institutional asset adviser employed by the
Companies and subject to a fixed income fee schedule.
"PRIVATE CLIENTS POOL" means the assets under management in all managed
accounts serviced by a financial adviser employed by the Companies.
30
"SHORT FALL MULTIPLIER" means the product of .75 times a fraction the
numerator of which shall be the difference between the Adjusted Base Revenue Run
Rate and the Final Revenue Run Rate and the denominator of which shall be the
Base Revenue Run Rate, provided that if such product is greater than .15, then
the Short Fall Multiplier shall be deemed to be .15.
"STANLEY BOGEN POOL" means the assets under management in all managed
accounts serviced by Stanley Bogen.
SECTION 2.10. Payment of Purchase Price Adjustments.
(a) If (m) the Adjusted Cash Purchase Price minus the Cash Revenue Run
Rate Adjustment exceeds (n) the Estimated Cash Purchase Price, Buyer shall pay
to Seller, as an adjustment to the Cash Purchase Price, in the manner and with
interest as provided in Section 2.10(b), the amount of such excess plus one
day's interest (calculated on the basis of a year of 365 days) on the amount of
such excess based on the Buyer Interest Rate. If (x) the Estimated Cash Purchase
Price exceeds (y) the Adjusted Cash Purchase Price minus the Cash Revenue Run
Rate Adjustment, Seller shall pay to Buyer, as an adjustment to the Cash
Purchase Price, in the manner and with interest as provided in Section 2.10(b),
the amount of such excess plus one day's interest (calculated on the basis of a
year of 365 days) on the amount of such excess based on the Buyer Interest Rate.
(b) Any payment pursuant to Section 2.10(a) shall be made at a mutually
convenient time and place within 10 days after the Final Stockholder's Equity,
Final Required Minimum Net Regulatory Capital, Final Actual Net Regulatory
Capital and Final Revenue Run Rate have been determined, by delivery by Buyer or
Seller, as the case may be, of a certified or official bank check payable in
immediately available funds to the other party or by causing such payments to be
credited to such account of such other party as may be designated by such other
party. The amount of any payment to be made pursuant to Section 2.10(a) shall
bear interest from and including the Closing Date to, but excluding, the date of
payment at a rate per annum equal to the daily average of the federal funds rate
plus fifty basis points in effect from time to time during the period from the
Closing Date to the date of payment as reported in Federal Reserve Report H 15.
Such interest shall be payable at the same time as the payment to which it
relates and shall be calculated daily on the basis of a year of 365 days and the
actual number of days elapsed.
(c) At a mutually convenient time and place within 10 days after the
Final Revenue Run Rate has been determined,
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(i) if the Units Revenue Run Rate Adjustment exceeds the Estimated
Units Revenue Run Rate Adjustment, Seller shall deliver to Buyer (A)
certificates representing a number of Buyer Units equal to the amount of
such excess (the "RETURNED UNITS") and (B) payment, in the manner and with
interest as provided in Section 2.10(b), in an amount equal to the
aggregate amount of distributions received by Seller from Buyer in respect
of the Returned Units; and
(ii) if the Estimated Units Revenue Run Rate Adjustment exceeds the
Unit Revenue Run Rate Adjustment, Buyer shall deliver to Seller (A)
certificates representing a number of Buyer Units equal to the amount of
such excess (the "ADDITIONAL UNITS") and (B) payment, in the manner and
with interest as provided in Section 2.10(b), in an amount equal to the
aggregate amount of distributions that Seller would have received from
Buyer in respect of the Additional Units during the period from the Closing
Date to and including the date of delivery to the Seller of the Additional
Units had Seller received the Additional Units on the Closing Date. For all
Tax purposes, any such distributions shall be treated as an adjustment to
the Purchase Price, except to the extent required to be treated as interest
for Tax purposes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
SECTION 3.01. Corporate Existence and Power. (a) (i) As of June 20,
2000, Seller and each of the Companies is and (ii) as of the Closing Date, each
of Seller, BTI, SCB United Kingdom and SCB Australia will be a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and as of June 20, 2000 has, and as of the Closing
Date will have, all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as conducted on June 20, 2000 and the Closing Date, respectively,
except for any such licenses, authorizations, permits, consents and approvals
the absence of which does not have or does not have a significant risk of
having, individually or in the aggregate, a Material Adverse Effect on the
Seller and the Companies, taken as a whole.
(b) (i) As of June 20, 2000, each of the Companies is and (ii) as of
the Closing Date, each of BTI, SCB United Kingdom and SCB Australia will be duly
qualified, as of June 20, 2000 has, and as of the Closing Date will have, the
legal
32
right and full power to do business as a foreign corporation and as of June 20,
2000 is, and as of the Closing Date will be, in good standing in each
jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified does not have or does not have a
significant risk of having, individually or in the aggregate, a Material Adverse
Effect on the Seller and the Companies, taken as a whole.
(c) Seller has heretofore delivered to Buyer true and complete copies
of the certificate of incorporation, certificate of formation, bylaws, limited
liability company agreement, stockholders agreements, voting agreements (or
equivalent documents) of Seller and each of the Companies as currently in
effect.
(d) As of the Closing Date following the Merger, BD LLC will be (i) a
limited liability company duly organized under the Delaware Limited Liability
Company Act, as amended, validly existing and in good standing under the laws of
Delaware and will have all limited liability company powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business and the broker-dealer business of SCB New York as now conducted and
as will be conducted by BD LLC on the Closing Date, except for any such
governmental licenses, authorizations, permits, consents and approvals the
absence of which does not have or does not have a significant risk of having,
individually or in the aggregate, a Material Adverse Effect on the Seller and
the Companies, taken as a whole, and (ii) in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified does not have or does not have a significant risk of
having, individually or in the aggregate, a Material Adverse Effect on the
Seller and the Companies, taken as a whole.
(e) As of the Closing Date, ADV LLC will be (i) a limited liability
company duly organized under the Delaware Limited Liability Company Act, as
amended, validly existing and in good standing under the laws of Delaware and
will have all limited liability company powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business and the investment advisory business of SCB New York as now conducted
and as will be conducted by ADV LLC on the Closing Date, except for any such
governmental licenses, authorizations, permits, consents and approvals the
absence of which does not have or does not have a significant risk of having,
individually or in the aggregate, a Material Adverse Effect on the Seller and
the Companies, taken as a whole, and (ii) in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified does not have or does not have a significant risk of
having, individually or in the aggregate, a Material Adverse Effect on the
Seller and the Companies, taken as a whole.
33
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance by Seller of this Agreement and the other Seller Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby are within Seller's corporate powers and, except for any required
approval by Seller's stockholders, have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement constitutes, and each of
the other Seller Transaction Agreements when executed will constitute, a valid
and binding agreement of Seller.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement and the other Seller Transaction
Agreements, the consummation of the transactions contemplated hereby and thereby
and the continuance following the Closing Date of the businesses of the
Companies as conducted as of the Closing Date require (a) no action by or in
respect of, or filing with, any governmental body, agency or official or self-
regulatory organization other than compliance with any applicable requirements
of (i) the HSR Act and the Antitrust Laws of any applicable foreign jurisdiction
and the agencies and bodies responsible therefor; (ii) the Commodity Futures Act
of Canada; (iii) the Securities Act of Ontario, Canada; (iv) the Investment
Canada Act; (v) the Commodity Futures Act of Ontario, Canada; (vi) the
Securities Act Alberta, Canada; (vii) the Securities Act Manitoba, Canada;
(viii) the Securities Act of British Columbia, Canada; (ix) the Securities Act
of New Brunswick, Canada; (x) the Securities Act of Newfoundland, Canada; (xi)
the Licensing Act of Prince Edward Island; (xii) the Corporations Law of
Australia (Australian Securities and Investment Commission); (xiii) the
Australian Trade Practices Act 1974; (xiv) the United Kingdom's Financial
Services Act 1986; (xv) the U.S. Commodity Exchange Act; (xvi) the National
Association of Securities Dealers; (xvii) state securities regulations; (xviii)
the New York Stock Exchange; (xix) the American Stock Exchange; (xx) the Boston
Stock Exchange; (xxi) the Chicago Stock Exchange; (xxii) the Pacific Stock
Exchange; (xxiii) the National Futures Association; (xxiv) the Municipal
Securities Rule Making Board; (xxv) the Securities Investor Protection
Corporation; (xxvi) the National Securities Clearing Corporation; (xxvii) the
Depository Trust Company; (xxviii) the Options Clearing Corporation; (xxix) the
1934 Act; (xxx) the Commodity Futures Trading Commission; (xxxi) the Investment
Company Act; (xxxii) the Investment Advisers Act, (xxxiii) the New York Business
Corporations Law and any applicable filings thereunder; and the Delaware General
Corporation Law and any applicable filings thereunder; and (b) no other action
by or in respect of or filing with any other governmental body, agency or
official as to which the failure to take, make or obtain has or has a
significant risk of having, individually or in the aggregate, a Material Adverse
Effect on the Seller and the Companies, taken as a whole.
34
SECTION 3.04. Noncontravention. Except as set forth in Section 3.04 of
the Disclosure Letter, the execution, delivery and performance by Seller of this
Agreement and the other Seller Transaction Agreements and the consummation of
the transactions contemplated hereby and thereby do not and will not (i) violate
the certificate of incorporation, certificate of formation, bylaws or limited
liability company agreement of Seller or any of the Companies, (ii) assuming
compliance with the matters referred to in Section 3.03, violate any applicable
law, rule, regulation, judgment, injunction, order or decree, (iii) require any
consent or other action (except for any consents in respect of Client Contracts)
by any Person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Seller
or any of the Companies or to a loss of any benefit to which Seller or any of
the Companies is entitled under any provision of any agreement or other
instrument binding upon Seller or any of the Companies or by which any of the
BTI Purchased Assets is or may be bound or (iv) result in the creation or
imposition of any Lien on any asset of any of the Companies, other than
Permitted Liens, except, in the cases of clauses (ii), (iii) and (iv), for any
such violations, consents, actions, defaults, rights or losses that do not have
or do not have a significant risk of having, individually or in the aggregate, a
Material Adverse Effect on the Seller and the Companies, taken as a whole.
SECTION 3.05. Capitalization. (a) The authorized capital stock of
Seller consists of 500,000 shares of Common Stock. As of June 20, 2000, there
are outstanding 99,400 shares of Common Stock of Seller.
(b) The authorized share capital of SCB United Kingdom consists of
1,000 ordinary shares of Common Stock. As of June 20, 2000, there are
outstanding 10 ordinary shares of Common Stock of SCB United Kingdom.
(c) The authorized capital stock of SCB Australia consists of 1,000,000
shares of Common Stock. As of June 20, 2000, there are outstanding 100,003
shares of Common Stock of SCB Australia.
(d) The authorized capital stock of BTI consists of 1,000 shares of
Common Stock. As of June 20, 2000, there are outstanding 1,000 shares of Common
Stock of BTI.
(e) As of June 20, 2000, the authorized capital stock of SCB New York
consists of 500,000 shares of Common Stock and there are outstanding 99,350
shares of Common Stock of SCB New York.
(f) All outstanding shares of capital stock of Seller, BTI, SCB United
Kingdom, SCB Australia, and, as of June 20, 2000, SCB New York have been
35
duly authorized and validly issued and are fully paid and non-assessable. Except
as set forth in this Section 3.05, there are no outstanding (i) shares of
capital stock or voting securities of Seller, BTI, SCB United Kingdom, SCB
Australia or, as of June 20, 2000, SCB New York, (ii) securities of Seller, BTI,
SCB United Kingdom, SCB Australia or SCB New York convertible into or
exchangeable for shares of capital stock, voting securities or Equity of such
Seller or Company, as the case may be, and (iii) options or other rights to
acquire from Seller, BTI, SCB United Kingdom, SCB Australia or SCB New York, or
other obligation of Seller, BTI, SCB United Kingdom, SCB Australia or SCB New
York to issue, any capital stock, voting securities, Equity or securities
convertible into or exchangeable for capital stock, voting securities or Equity
of such Seller or Company, as the case may be (the items in clauses 3.05(f)(i),
3.05(f)(ii) and 3.05(f)(iii) being referred to collectively as the "SCB
SECURITIES"). Except as set forth in Seller's Shareholders' Agreement dated as
of November 23, 1998, there are no outstanding obligations of the Seller or any
of the Companies to repurchase, redeem or otherwise acquire any SCB Securities.
SECTION 3.06. Ownership of Equity. Seller is the record, legal and
beneficial owner of (a) the Equity and (b) the Purchased Investments, in each
case free and clear of any Lien. As of the Closing Date, Seller will be the
record, legal and beneficial owner of all of the outstanding capital stock of
SCB Partners, free and clear of any Lien.
SECTION 3.07. Excluded Assets; Subsidiaries. (a) The Seller does not
own any assets other than the Equity, the Purchased Investments and cash and
cash equivalents, has not carried on any other business or activities other than
acting as a holding company for the Companies and, on and following the date of
its organization, SCB Partners and has no employees.
(b) Except as set forth in Section 3.07(b) of the Disclosure Letter,
none of the Companies has any Subsidiaries or equity investments in other
Persons, other than investments in investment products of the Companies and cash
equivalents.
(c) As of Closing, SCB Partners does not own any assets other than the
Equity, the Purchased Investments and cash and cash equivalents, has not carried
on any other business or activities other than acting as a holding company for
the Companies and has no employees.
(d) As of Closing, ADV LLC does not own any assets other than the
Designated ADV LLC Transferred Assets, does not have any liabilities other than
the Designated ADV LLC Assumed Liabilities, and, prior to the Closing Date, has
not carried on any business or activities and has had no employees.
36
SECTION 3.08. Financial Statements. (a) The audited consolidated
balance sheets as of December 31, 1999, 1998 and 1997 and the related audited
consolidated statements of income and cash flows for each of the years ended
December 31, 1999 and 1997 and for the 10 months ended December 31, 1998 (the
"AUDITED FINANCIAL STATEMENTS") and the unaudited interim consolidated balance
sheet as of May 31, 2000 and the related unaudited interim consolidated
statements of income and cash flows for the five month period ended May 31, 2000
of the Seller and the Companies, set forth in Section 3.08(a) of the Disclosure
Letter, fairly present in all material respects, in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto, it being understood that the unaudited interim
financial statements do not contain footnotes), the consolidated financial
position of the Seller and the Companies as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements).
(b) (i) The unaudited consolidating balance sheets of Seller (including
Seller's interest in the Purchased Investments) and the Companies as of December
31, 1999 and 1998 and the related unaudited consolidating statements of income
and cash flows for the year ended December 31, 1999 and the 10 months ended
December 31, 1998 and the unaudited interim consolidating balance sheet as of
May 31, 2000 and the related interim consolidating statements of income and cash
flows for the five month period ended May 31, 2000, as set forth in Section
3.08(b)(i) of the Disclosure Letter, are prepared on a basis consistent with
that used in the preparation of the related Audited Financial Statements and
fairly present in all material respects (but without any footnote disclosures
required under generally accepted accounting principles) the financial position
of Seller (including Seller's interest in the Purchased Investments) and the
Seller and the Companies as of the dates thereof and their results of operations
and cash flows for such periods and (ii) the unaudited combined pro forma
balance sheet of the Companies (and Seller's interest in the Purchased
Investments) as of December 31, 1999 and the unaudited interim pro forma
combined balance sheet as of May 31, 2000, as set forth in Section 3.08(b)(ii)
of the Disclosure Letter, are prepared on a basis consistent with that used in
the preparation of the Audited Financial Statements and fairly present in all
material respects the combined financial position of the Companies (and Seller's
interest in the Purchased Investments) as of the dates thereof.
SECTION 3.09. Absence of Certain Changes. Except as set forth in
Section 3.09 of the Disclosure Letter, (i) since the Seller Balance Sheet Date,
the
37
business of the Companies has been conducted in the ordinary course consistent
with past practices) and (ii) there has not been:
(a) any event, occurrence, development or state of circumstances or
facts which, individually or in the aggregate, has had or has a significant risk
of having a Material Adverse Effect on the Companies, taken as a whole;
(b) except as provided in Section 2.01, any amendment of any material
term of any outstanding security or membership interest of any of the Companies;
(c) any incurrence, assumption or guarantee by any of the Companies of
any indebtedness for borrowed money other than indebtedness that can be prepaid
without penalty;
(d) any making of any loan, advance or capital contributions to or
investment in any Person, other than the Companies, margin indebtedness,
employee loans entered into in the ordinary course of business consistent with
past practices and investments in investment products of the Companies;
(e) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of any of the Companies
which, individually or in the aggregate, has had or has a significant risk of
having a Material Adverse Effect on the Companies, taken as a whole;
(f) any transaction or commitment made, or any contract or agreement
entered into, by any of the Companies relating to its assets or business
(including the acquisition or disposition of any assets) or any relinquishment
by any of the Companies of any contract or other right, in either case, material
to the Companies, taken as a whole, other than contracts, agreements,
relinquishments, transactions and commitments in the ordinary course of business
consistent with past practices and those contemplated by this Agreement or
entered into with the consent of Buyer, which consent shall not be unreasonably
withheld;
(g) any change in any method of accounting or accounting practice by
any of the Companies except for any such change after June 20, 2000 required by
reason of a concurrent change in generally accepted accounting principles;
(h) except with the consent of Buyer, which consent will not be
unreasonably withheld, (i) any employment (other than at-will employment
agreements), consulting, deferred compensation, incentive compensation, bonus,
commission, severance, retirement or other similar agreement (other than as such
agreements relate to at-will employment agreements), plan or written policy
entered into with or for the benefit of any director or officer or, other than
in the
38
ordinary course consistent with past practice, any employee of any of the
Companies (or any amendment to any such existing agreement), (ii) other than in
the ordinary course consistent with past practice, any grant of any severance or
termination pay to any director, officer or employee of any of the Companies, or
(iii) other than in the ordinary course of business consistent with past
practices, any change in compensation or other benefits payable to any director,
officer or employee of any of the Companies pursuant to any severance or
retirement plans or policies thereof;
(i) any change in pricing policy with respect to the provision of
services (including brokerage services) to the Registered Fund or any Non-Fund
Client or prospective Non-Fund Client (including any participant or prospective
participant in the Registered Fund); or
(j) in the case of the Registered Fund, any action taken by the Board
of Directors of the Registered Fund other than in the ordinary course of
business consistent with past practices or as contemplated by or in connection
with this Agreement.
SECTION 3.10. No Undisclosed Material Liabilities. There are no
liabilities of any of the Companies of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities provided for in the Seller Balance Sheet or disclosed
in the notes thereto;
(b) liabilities disclosed in Section 3.10 of the Disclosure Letter;
(c) liabilities to or on behalf of customers arising and continuing in
the ordinary course of business consistent with past practices; and
(d) other undisclosed liabilities which, individually or in the
aggregate, do not have or do not have a significant risk of having a Material
Adverse Effect on the Companies, taken as a whole.
SECTION 3.11. Intercompany Accounts. Section 3.11 of the Disclosure
Letter contains a complete statement of all intercompany balances as of the
Seller Balance Sheet Date between Seller and its Affiliates, on the one hand,
and the Companies, on the other hand, except for intercompany balances created
in the ordinary course of business consistent with past practices. Since the
Seller Balance Sheet Date there has not been any accrual of liability by any of
the
39
Companies, on the one hand, to Seller or any of its Affiliates, on the other
hand, or other transaction between any of the Companies, on the one hand, and
Seller and any of its Affiliates, on the other hand, except in the ordinary
course of business of the Companies consistent with past practice or as provided
in Section 3.11 of the Disclosure Letter.
SECTION 3.12. Material Contracts. (a) Except as disclosed in Section
3.12 of the Disclosure Letter or except as hereafter entered into with the
consent of the Buyer, which consent shall not be unreasonably withheld, none of
the Companies is a party to or bound by:
(i) any lease for real property;
(ii) any lease for personal property providing for annual rentals of
$100,000 or more;
(iii) any sales, distribution (other than in connection with the
Registered Fund), advisory, securities lending, syndicate, financial
planning or other similar agreement providing for the provision by any of
the Companies of Investment Management Services, advisory services,
securities lending transactions, financial planning services, distribution
services or brokerage or underwriting services, in each case, not entered
into in the ordinary course of business;
(iv) any partnership, joint venture or other similar agreement or
arrangement or any agreements related to the Purchased Investments, other
than those agreements pursuant to which any of the Companies is an
investment adviser;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) other than in relation to the stock lending business of the
Companies or customer margin indebtedness in the ordinary course consistent
with past practices, any agreement relating to indebtedness for borrowed
money or the deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset) requiring payments
by any of the Companies in excess of $1 million, except any such agreement
entered into subsequent to the date of this Agreement as permitted by
Section 3.09(c);
40
(vii) any option, license (other than intellectual property licenses
and inter-company licenses) or similar agreement providing for payments in
excess of $1 million;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement not entered into in the ordinary course of business;
(ix) any agreement that limits the freedom of any of the Companies to
compete in any line of business with any Person or in any area or which
would so limit the freedom of any of the Companies after the Closing Date;
(x) any agreement that will constitute an obligation of the Companies
following Closing and that is with (A) Seller or any of its Affiliates, (B)
any Person directly or indirectly owning, controlling or holding with power
to vote, 5% or more of the outstanding voting securities of Seller or any
of its Affiliates, (C) any Person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held, (other
than any Person whose voting securities are held in client accounts), with
power to vote by Seller or any of its Affiliates, other than Client
Contracts or (D) any director, partner, trustee or officer of Seller or any
of its Affiliates or any "associates" or members of the "immediate family"
of any such director, partner, trustee or officer of Seller or any of its
Affiliates (as such terms are respectively defined in Rule 12b-2 and Rule
16a-1 of the 1934 Act) of any such director or officer;
(xi) any agreement with any director or officer of any of the
Companies or with any "associate" or any member of the "immediate family"
(as such terms are respectively defined in Rules 12b-2 and 16a-1 of the
1934 Act) of any such director or officer; or
(xii) any other agreement, commitment, arrangement or plan not made in
the ordinary course of business that is material to the Companies, taken as
a whole.
(b) (i) Each agreement, contract, plan, lease, arrangement or
commitment disclosed in the Disclosure Letter to this Agreement or required to
be disclosed pursuant to this Section not terminable by either party on notice
of 90 days or less is a valid and binding agreement of such Company party to
such agreement, contract, plan, lease arrangement or commitment and is in full
force and effect, except for any agreements, contracts, plans, leases,
arrangements and commitments, the failure of which to be valid and binding does
not have or does
41
not have a significant risk of having, individually or in the aggregate, a
Material Adverse Effect on the Companies, taken as a whole, and (ii) none of the
Companies, or, to the knowledge of Seller, any other party thereto is in default
or breach in any respect under the terms of any such agreement, contract, plan,
lease, arrangement or commitment, and, no event or circumstance has occurred
that, with notice or lapse of time or both, would constitute any event of
default thereunder, except for any such default or breach which, individually or
in the aggregate, does not have or does not have a significant risk of having a
Material Adverse Effect on the Companies, taken as a whole. True and complete
copies of each such agreement, contract, plan, lease, arrangement or commitment
have been made available to Buyer.
SECTION 3.13. Litigation; Investigation. (a) As of June 20, 2000, there
is not now and there has not been since November 1, 1998 any action, suit,
investigation or proceeding (or, to the knowledge of Seller, any basis therefor)
pending against or, to the knowledge of Seller, threatened against or affecting,
Seller or any of the Companies or any of their respective properties before,
brought by, or threatened by, any court, arbitrator, governmental body, agency,
official or self-regulatory organization which, if determined or resolved
adversely in accordance with the plaintiff's demands, has or has a significant
risk of having, individually or in the aggregate, a Material Adverse Effect on
the Companies, taken as a whole.
(b) As of the Closing Date, there is not and there has not been since
November 1, 1998 any action, suit, investigation or proceeding (or, to the
knowledge of Seller, any basis therefor) pending against or, to the knowledge of
Seller, threatened against or affecting, Seller or any of the Companies or any
of their respective properties before, brought by, or threatened by, any court,
arbitrator, governmental body, agency, official or self-regulatory organization
which has or has a significant risk of having, individually or in the aggregate,
a Material Adverse Effect on the Companies, taken as a whole.
SECTION 3.14. Compliance with Laws and Court Orders. Except as
disclosed in Seller's Form ADV dated March 29, 2000, none of the Companies is in
violation of, and has not since January 1, 1998 violated, and is not under
investigation with respect to and has not been threatened to be charged with or
given notice of any violation of, any applicable law, rule, regulation,
judgment, injunction, order, decree or rule of any self-regulatory organization,
except for violations that, individually or in the aggregate, do not have or do
not have a significant risk of having a Material Adverse Effect on the
Companies, taken as a whole.
42
SECTION 3.15. Properties. (a) None of the Companies owns any real
property. The Companies have valid title to all of the property and assets
(whether personal, tangible or intangible) reflected on the Seller Balance Sheet
or acquired after the Seller Balance Sheet Date, except for properties and
assets sold since the Seller Balance Sheet Date in the ordinary course of
business consistent with past practices. None of such property or assets is
subject to any Lien, except:
(i) Liens disclosed on the Seller Balance Sheet or the footnotes
thereto;
(ii) Liens for taxes not yet due or being contested in good faith (and
for which adequate accruals or reserves have been established on the Seller
Balance Sheet); or
(iii) Liens which, individually or in the aggregate, do not have or do
not have a significant risk of having a Material Adverse Effect on the
Companies, taken as a whole (clauses (i)-(iii) of this Section are,
collectively, the "PERMITTED LIENS").
(b) The property and assets, including the BTI Purchased Assets and the
Designated ADV LLC Transferred Assets, owned or leased by the Companies, or
which the Companies otherwise have the right to use, constitute all of the
property and assets used or held for use in connection with the businesses of
any of the Companies and are adequate to conduct such businesses as currently
conducted and as planned by the Companies to be conducted.
(c) Upon consummation of the transactions contemplated hereby, Buyer
will have acquired valid title in and to, or a valid leasehold interest in, each
of the BTI Purchased Assets, free and clear of all Liens, except for Permitted
Liens.
SECTION 3.16. Intellectual Property. (a) Section 3.16(a) of the
Disclosure Letter contains a true and complete list of (i) each patent,
registered trademark or registered service mark owned by Seller or any of the
Companies and (ii) each Licensed Intellectual Property Right (excluding software
that may be purchased over-the-counter) pursuant to which either the Seller or
any of the Companies is required to make payments in excess of $500,000 per
year, specifying as to each such Intellectual Property Right, as applicable, (i)
the nature of such Intellectual Property Right, (ii) with respect to patents,
registered trademarks, and registered service marks comprising Owned
Intellectual Property Rights, the owner of such Intellectual Property Right,
(iii) with respect to patents, registered trademarks, and registered service
marks comprising Owned Intellectual Property Rights, the jurisdictions by or in
which such Intellectual Property Right (A) is recognized (without regard to
registration) or (B) has been issued or registered or in which an
43
application for such issuance or registration has been filed, (iv) with respect
to patents, registered trademarks, and registered service marks comprising Owned
Intellectual Property Rights, the registration or application numbers thereof,
and (v) all agreements related to Owned Intellectual Property Rights.
(b) The Companies own or license all Intellectual Property Rights
necessary to, or used or held for use in, the conduct of the business of the
Companies as currently conducted and as proposed by any of the Companies to be
conducted. There exist no restrictions on the disclosure, use or transfer of the
Owned Intellectual Property Rights. The consummation of the transactions
contemplated by this Agreement will not alter, impair or extinguish any Owned
Intellectual Property Right or, except as set forth in Section 3.16(b) of the
Disclosure Letter, any Licensed Intellectual Property Rights acquired at a cost
of $100,000 or more or that would cost more than $200,000 to replace.
(c) None of Seller or any of the Companies has given an indemnity in
connection with any Intellectual Property Right to any Person other than
customary indemnities in connection with any Licensed Intellectual Property
Right.
(d) None of the Companies has infringed, misappropriated or otherwise
violated any Intellectual Property Right of any third person, except for any
such infringements, misappropriations or other violations that do not have or do
not have a significant risk of having, individually or in the aggregate, a
Material Adverse Effect on the Companies, taken as a whole. There is no claim,
action, suit, investigation or proceeding pending against, or, to the knowledge
of Seller, threatened against or affecting, any of the Companies, any present or
former officer, director or employee of any of the Companies (i) based upon, or
challenging or seeking to deny or restrict, the rights of any of the Companies
in any of the Owned Intellectual Property Rights and the Licensed Intellectual
Property Rights, (ii) alleging that the use of the Owned Intellectual Property
Rights or the Licensed Intellectual Property Rights or any services provided by
any of the Companies do or may conflict with, misappropriate, infringe or
otherwise violate any Intellectual Property Right of any third party or (iii)
alleging that any of the Companies have infringed, misappropriated or otherwise
violated any Intellectual Property Right of any third party, except in the case
of clauses (i), (ii) or (iii) to the extent that such claims, actions, suits,
investigations or proceedings, individually or in the aggregate, do not have or
do not have a significant risk of having a Material Adverse Effect on the Seller
and the Companies, taken as a whole.
SECTION 3.17. Insurance Coverage. Seller has furnished to Buyer a list
of, and true and complete copies of, all insurance policies and fidelity bonds
44
relating to the assets, business, operations, employees, officers or directors
of the Seller or any Company requiring annual premium payments in excess of
$50,000. Except as set forth in Section 3.17 of the Disclosure Letter, there is
no claim by or on behalf of any of the Companies in excess of $500,000 pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds or in respect
of which such underwriters have reserved their rights. All premiums due and
payable under all such policies and bonds have been timely paid and the Seller
and the Companies have otherwise substantially complied with the terms and
conditions of all such policies and bonds in all respects, except where the
failure to so comply, individually or in the aggregate, does not have or does
not have a significant risk of having a Material Adverse Effect on the Seller
and the Companies, taken as a whole. Such policies of insurance and bonds (or
other policies and bonds providing substantially similar insurance coverage) are
in full force and effect. Since January 1, 1997, Sellers and the Companies have
maintained policies and bonds of the type and in amounts as are required by
applicable law and otherwise as management of the Seller reasonably believes is
prudent. Seller does not know of any threatened termination of, premium increase
with respect to, or alteration of coverage under, any of such policies or bonds,
except for such terminations, increases and alterations that, individually or in
the aggregate, do not have or do not have a significant risk of having a
Material Adverse Effect on the Seller and the Companies, taken as a whole.
Except as disclosed in Section 3.17 of the Disclosure Letter, the Companies
shall after the Closing continue to have coverage under all such policies and
bonds of Seller or any Company with respect to events occurring prior to the
Closing.
SECTION 3.18. Permits. (a) The Permits are valid and in full force and
effect, (b) none of the Companies is in default under, and no condition exists
that with notice or lapse of time or both would constitute a default under, the
Permits and (c) none of the Permits will be terminated or impaired or become
terminable, in whole or in part, as a result of the transactions contemplated
hereby, except for such Permits the failure of which to be valid, and except for
such defaults and such terminations or impairments, that do not have or do not
have a significant risk of having, individually or in the aggregate, a Material
Adverse Effect on the Companies, taken as a whole.
SECTION 3.19. Finders' Fees. Except for Merrill Lynch, Pierce, Fenner &
Smith Incorporated, whose fees will be paid by Seller, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Seller or any of the Companies who might be
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
45
SECTION 3.20. Employees; Labor Matters. (a) Section 3.20 of the
Disclosure Letter sets forth a true and complete list as of May 31, 2000 of the
names, titles and annual salaries of all officers of the Companies and all other
employees of the Companies whose annual base salary exceeds $200,000. Except as
set forth in Section 3.20(a) of the Disclosure Letter, to the knowledge of the
executive officers of Seller, as of June 20, 2000, no stockholder or principal
intends to resign or retire as a result of the transactions contemplated by this
Agreement or otherwise within one year after the Closing Date. Each employee,
officer or director of the Seller or any of the Companies is appropriately
registered as a broker-dealer, investment adviser, registered representative,
commodity trading adviser, commodity pool operator, futures commission merchant
or transfer agent (or in a similar capacity) with any governmental authority or
self-regulatory organization requiring such registration for the performance of
such functions, except for such registrations the absence of which does not have
or does not have a significant risk of having, individually or in the aggregate,
a Material Adverse Effect on the Companies, taken as a whole.
(b) The Companies are in compliance with all currently applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor
practice, except for such compliance the failure of which or such engagement
which does not have or does not have a significant risk of having, individually
or in the aggregate, a Material Adverse Effect on the Companies, taken as a
whole. As of June 20, 2000, there is no unfair labor practice complaint pending
or, to the knowledge of Seller, threatened against any of the Companies before
the National Labor Relations Board, and as of the Closing Date, there will be no
such complaints pending or threatened which individually or in the aggregate
have a significant risk of having a Material Adverse Effect.
SECTION 3.21. Employee Benefit Plans. (a) Section 3.21(a) of the
Disclosure Letter lists each "employee benefit plan", as defined in Section 3(3)
of ERISA, each employment, consulting, severance or similar contract, plan,
arrangement or policy and each other plan or arrangement (written or material
oral) providing for compensation, bonuses, profit-sharing, stock option or other
stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance (including any self-insured arrangements), health
or medical benefits, employee assistance program, disability or sick leave
benefits, workers' compensation, supplemental unemployment benefits, severance
benefits or post-employment or retirement benefits (including compensation,
pension, health, medical or life insurance benefits) which is maintained,
administered or contributed to by any of the Companies or any ERISA Affiliate
and covers any employee or former employee of any of the Companies, or with
respect to which any of the Companies has any liability. Copies of such plans
(and, if applicable,
46
related trust or funding agreements or insurance policies) and all amendments
thereto and material written interpretations thereof have been made available to
Buyer together with the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) prepared in connection with any such plan or
trust. Such plans are referred to collectively herein as the "EMPLOYEE PLANS".
For purposes of this Section, "ERISA AFFILIATE" of any Person means any other
Person which, together with such Person, would be treated as a single employer
under Section 414(b) or (c) of the Code.
(b) Except as set forth in Section 3.21(b) of the Disclosure Letter,
none of the Companies or any ERISA Affiliate nor any predecessor thereof
contributes to, or has in the past contributed to, any Employee Plan subject to
Title IV of ERISA.
(c) None of the Companies or any ERISA Affiliate nor any predecessor
thereof sponsors, maintains or contributes to, or has in the past sponsored,
maintained or contributed to, any "multiemployer plan," as defined in Section
3(37) of ERISA. None of the Companies has any liabilities, actual or contingent,
present or future, under any plan described in Section 4(b)(5) or 401(a)(1) of
ERISA which are more than de minimus in the aggregate.
(d) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter, or has pending
or has time remaining in which to file, an application for such determination
from the Internal Revenue Service. The Seller has made available to Buyer copies
of the most recent Internal Revenue Service determination letters with respect
to each such Plan. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Plan. No material events have occurred
with respect to any Employee Plan that, assuming the taxable period of such
event expired as of June 20, 2000, if applicable, would reasonably be expected
to result in payment or assessment by or against any of the Companies of any
material excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D,
4980E or 5000 of the Code.
(e) Except as set forth in Section 3.21(e) of the Disclosure Letter,
neither the consummation of the transactions contemplated by this Agreement nor
the commitment to or consummation of any other transaction constituting a change
in control of any entity will entitle any employee or independent contractor of
any of the Companies to severance pay or accelerate the time of payment or
vesting or trigger any payment or funding (through a grantor trust or otherwise)
of compensation or benefits under, increase the amount payable or trigger any
other
47
material obligation pursuant to, any Employee Plan which would not otherwise be
so paid, vested, funded, increased or otherwise triggered but for the
consummation of such transactions. There is no Employee Plan being assumed by
the Buyer that, individually or collectively, would give rise to the payment of
any amount that would not be deductible pursuant to the terms of Section 280G of
the Code if the transactions contemplated by this Agreement constituted a change
in the ownership or effective control of any entity or a change in the ownership
of a substantial portion of the assets of any entity within the meaning of
Section 280G(b)(2)(A)(1) of the Code.
(f) Except as set forth in Section 3.21(f) of the Disclosure Letter,
none of the Companies has any liability in respect of post-retirement health,
medical or life insurance benefits for retired, former or current employees of
any of the Companies (the liability for which is more than de minimus) except as
required to avoid excise tax under Section 4980B of the Code.
(g) Section 3.21(g) of the Disclosure Letter identifies each
International Plan. Seller has made available to Buyer copies of each
International Plan. Each International Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations (including any special
provisions relating to qualified plans where such Plan was intended to so
qualify) and has been maintained in good standing with applicable regulatory
authorities. There has been no amendment to, written interpretation of or
announcement (whether or not written) by Seller or any of its Affiliates or the
Companies relating to, or change in employee participation or coverage under,
any International Plan that would increase materially the expense of maintaining
such International Plan above the level of expense incurred in respect thereof
for the most recent fiscal year ended prior to June 20, 2000. According to the
actuarial assumptions and valuations most recently used for the purpose of
funding each International Plan (or, if no such assumptions have been used,
according to reasonable actuarial assumptions in the given context), as of June
20, 2000 the total amount or value of the funds available under such Plan to pay
benefits accrued thereunder or segregated in respect of such accrued benefits,
together with any reserve or accrual with respect thereto, exceeded the present
value of all benefits (actual or contingent) accrued as of such date of all
participants and past participants therein in respect of which the Companies
have or would have after the Closing of any obligation.
(h) Except as set forth in Section 3.21(h) of the Disclosure Letter,
there has been no amendment to, written interpretation or announcement by any of
the Companies or any of its Affiliates relating to, or change in employee
participation or coverage under, any Employee Plan being assumed by the Buyer,
or for which Buyer will otherwise be liable, which would increase materially the
expense of
48
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year.
(i) None of the Companies is a party to or subject to, or is currently
negotiating in connection with entering into, any collective bargaining
agreement or other contract or understanding with a labor union or labor
organization.
(j) All contributions required to be made under the terms of any
Employee Plan have been timely made or have been reflected on the Seller Balance
Sheet. None of the Companies have made commitments for the payment of any
bonuses, incentive compensation or commissions of any kind and in any form (the
liability for which is more than de minimus) to any employee or former employee
of the Companies with respect to any period following the Closing, other than
commitments retained or assumed by Seller or SCB Partners.
(k) There is no action, suit, investigation, audit or proceeding filed
against or involving or, to the knowledge of any of the Companies, threatened
against or involving, any Employee Plan before any court or arbitrator or any
state, federal or local governmental body, agency or official.
SECTION 3.22. Environmental Matters. (a) Except as to matters that,
individually or in the aggregate, do not have and do not have a significant risk
of having a Material Adverse Effect on the Seller and the Companies, taken as a
whole:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed,
no penalty has been assessed and no investigation, action, claim, suit,
proceeding or review is pending, or to Seller's knowledge, threatened by
any governmental entity or other Person with respect to any matters
relating to any of the Companies and relating to or arising out of any
Environmental Law;
(ii) there are no liabilities of or relating to any of the Companies
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, arising under or relating to any Environmental
Law;
(iii) except in compliance with Environmental Laws or in a manner that
does not have a significant risk of resulting in liability to any of the
Companies thereunder, no polychlorinated biphenyls, radioactive material,
lead, asbestos-containing material, incinerator, sump, surface impoundment,
lagoon, landfill, septic, wastewater treatment or other
49
disposal system or underground storage tank (active or inactive) is or has
been present at, on or under any property now or previously owned, leased
or operated by any of the Companies;
(iv) except in compliance with Environmental Laws or in a manner that
does not have a significant risk of resulting in liability to any of the
Companies thereunder, no Hazardous Substance has been discharged, disposed
of, dumped, injected, pumped, deposited, spilled, leaked, emitted or
released at, on or under any property now or previously owned, leased or
operated by any of the Companies;
(v) except in compliance with Environmental Laws or in a manner that
does not have a significant risk of resulting in liability to any of the
Companies thereunder, no property now or previously owned, leased or
operated by any of the Companies or any property to which any of the
Companies has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances is listed or, to Seller's
knowledge, proposed for listing, on the National Priorities List
promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any
similar federal, state or foreign list of sites requiring investigation or
clean-up; and
(vi) the Companies are in compliance with all Environmental Laws and
have obtained and are in compliance with all Environmental Permits; such
Environmental Permits are valid and in full force and effect.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which Seller has knowledge in relation to
any property or facility now or previously owned, leased or operated by any of
the Companies which has not been delivered to Buyer at least ten days prior to
June 20, 2000.
(c) None of the Companies owns, leases or operates or has owned, leased
or operated any property or has conducted any operations in New Jersey or
Connecticut.
(d) For purposes of this Section, the term "COMPANIES" shall include
any entity which is, in whole or in part, a predecessor of any of the Companies.
SECTION 3.23. Investment Management Activities. (a) Registered Fund
Client. The only investment company required to be registered under the
Investment Company Act for which the Seller or any of the Companies acts as
50
investment adviser that is sponsored by Seller or the Companies is the Sanford
C. Bernstein Fund, Inc. (the "REGISTERED FUND").
(b) Schedule of Clients. Section 3.23(b) of the Disclosure Letter
contains a list as of May 31, 2000 of the 50 largest institutional clients of
the Companies and all private clients of the Companies with assets under
management of $10 million or more and the assets under management for each. The
Companies also provide services to (i) pooled investment funds sponsored by any
of the Companies for which the Seller or any of the Companies acts as investment
adviser and which are not required to be registered under the Investment Company
Act ("NON-REGISTERED FUNDS") and (ii) investment advisory clients who are
neither the Registered Fund nor Non-Registered Funds and including clients for
whom the Companies act as sub-adviser, the "NON-FUND CLIENTS"). The Registered
Fund, the Non-Registered Funds and the Non-Fund Clients are referred to
collectively as the "ADVISORY CLIENTS".
(c) Client Contracts. (i) The Seller has previously made available to
the Buyer representative forms of investment advisory agreements entered into
with the Registered Fund, Non-Registered Funds and Non-Fund Clients.
(ii) Each Client Contract and any subsequent renewal has been duly
authorized, executed and delivered by one or more of the Companies and, in
the case of the Registered Fund, has been adopted in compliance with
Section 15 of the Investment Company Act, and is a valid and legally
binding agreement, enforceable against such Company.
(iii) Neither the Seller nor any of the Companies is currently in
default under any of the terms of any Client Contract other than defaults
which do not, individually or in the aggregate, have or have a significant
risk of having a Material Adverse Effect on the Seller and the Companies,
taken as a whole.
(iv) Section 3.23(c)(iv) of the Disclosure Letter contains a
description of any and all fee waivers, fee limitations and undertakings by
any of the Companies to cap fees or to reimburse any or all fees relating
to any Advisory Client, other than "most favored nation" provisions.
(d) Regulatory Qualification. The Seller and each of the Companies
acting in the capacity of an investment adviser (as used in the Investment
Advisers Act) to a Registered Fund, Non-Registered Fund or Non-Fund Client is
registered as an investment adviser under the Investment Advisers Act or is not
required to be so registered.
51
(e) Assets Under Management. Section 3.23(e) of the Disclosure Letter
contains a true and accurate statement of the fair market value of the assets
under management as of May 31, 2000 in each of the House Pool, the
Institutional-Equity Pool, the Institutional Fixed-Income Pool, the Private
Clients Pool and the Stanley Bogen Pool and the weighted average annualized base
fee realization rates with respect to each such Pool for the bills sent or
charged for the year 2000 second quarter.
SECTION 3.24. Funds. (a) Proper Registration. The Registered Fund is,
and at all time during the past five years has been, registered with the SEC as
an investment company under the Investment Company Act.
(b) Financial Statements. The Seller has made available to the Buyer
copies of the audited financial statements for the Registered Fund for each of
its fiscal years since January 1, 1997 (the "REGISTERED FUND FINANCIAL
STATEMENTS"). The Registered Fund Financial Statements have been prepared in
accordance with generally accepted accounting principles applied by the
Registered Fund on a consistent basis and fairly presents in all material
respects the financial positions and statement of net assets as of the date
thereof and the results of operations for the period then ended. The Registered
Fund has not incurred any obligation or liability (contingent or other) that,
individually or in the aggregate, is or when accrued, would be, material to the
financial condition or results of operations of the Registered Fund, except as
reflected in its Registered Fund Financial Statements.
(c) Registered Fund Contracts. Each Investment Contract, including each
administration agreement between the Registered Fund and Seller or any of the
Companies, each Underwriting Agreement (the "UNDERWRITING AGREEMENT") between
the Seller or any of the Companies, on the one hand, and the Registered Fund, on
the other hand, and each agreement (the "SERVICES AGREEMENT") between the Seller
or any of the Companies, on the one hand and the Registered Fund, on the other
hand, and any subsequent renewal of any such agreement, has been duly
authorized, executed and delivered by the Seller or the Registered Fund, as the
case may be, and is a valid and legally binding agreement.
(d) SEC Filings. The Registered Fund has filed with the SEC all
material contracts, including all agreements and arrangements for the
distribution of shares, to which the Registered Fund is a party or by which the
Registered Fund or its property is bound.
(e) Registered Fund Prospectuses. The current prospectus (which term,
as used in this Agreement, shall include any related statement of additional
information), as amended or supplemented, relating to the Registered Fund has
52
been supplied or made available to the Buyer, each such prospectus, as amended
or supplemented, is in substantial compliance with the requirements of the 1933
Act, the 1934 Act, including Rule 10b-5 thereunder, and the Investment Company
Act, and, where applicable, the rules of the NASD and the applicable U.S.
states, and does not contain any untrue statement of a material fact or omit to
state any 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.
(f) 12b-1 Plans. The Registered Fund has not entered into a
distribution plan pursuant to Rule 12b-1 under the Investment Company Act for
any series or class of shares offered by the Registered Fund.
(g) Proxy Solicitation Materials. The proxy solicitation materials to
be distributed to the shareholders of the Registered Fund in connection with the
approvals described in Section 5.07 will provide all information necessary in
order to make the disclosure of information therein satisfy the requirements of
Section 14 of the 1934 Act, Section 20 of the Investment Company Act and the
rules and regulations thereunder and such materials (except to the extent
supplied by Buyer or any of its officers) will be complete in all material
respects and will not contain (at the time such materials or information are
distributed, filed or provided, as the case may be and at the time of the
applicable shareholder vote or action, including any supplement thereto) any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading or necessary to correct any statement
or any earlier communication with respect to the solicitation of a proxy for the
same meeting or subject matter which has become false or misleading.
(h) Disciplinary Matters. The Registered Fund has not been enjoined,
indicted, convicted or made the subject of disciplinary proceedings, consent
decrees or administrative orders on account of any violation of the 1933 Act,
the 1934 Act, the Investment Company Act or any similar law of a non-U.S.
jurisdiction.
(i) Portfolio Management. Since January 1, 1997, the Registered Fund
has been operated in substantial compliance with its respective objectives,
policies and restrictions, including without limitation those set forth in the
governing instrument.
(j) Fees. There are no distribution-related fees payable to any Person
in connection with the distribution of the shares of the Registered Fund.
53
(k) Sales Load Reallowance Policies. There have been no material
changes in sales load reallowance policies with respect to sales of shares of
the Registered Fund.
SECTION 3.25. Non-Registered Funds. (a) Authorization. Each Non-
Registered Fund has been duly organized, and is validly existing and in good
standing under the laws of the jurisdiction of its organization.
(b) Registration Not Required. No Non-Registered Fund is required to be
registered as an investment company under the Investment Company Act.
(c) Financial Statements. The Companies have made available to Buyer
copies of the audited financial statements for each of the Non-Registered Funds
for each of their respective fiscal years since January 1, 1997 (the "NON-
REGISTERED FUND FINANCIAL STATEMENTS"). Each Non-Registered Fund Financial
Statement has been, in the case of domestic Non-Registered Funds, prepared in
accordance with generally accepted accounting principles and, in the case of
foreign Non-Registered Funds, prepared in accordance with generally accepted
accounting principles as disclosed in such Non-Registered Fund's financial
statements, in each case consistently applied by the applicable Non-Registered
Fund and fairly presents in all material respects the financial positions and
statement of net assets as of the date thereof and the results of operations for
the period then ended. None of the Non-Registered Funds has incurred any
obligation or liability (contingent or other) that, individually or in the
aggregate, is or when accrued, would be, material to the financial condition or
results of obligations of such Non-Registered Fund, except as reflected in its
Non-Registered Fund Financial Statements.
(d) Disciplinary Matters. None of the Non-Registered Funds has been
enjoined, indicted, convicted or made the subject of disciplinary proceedings,
consent decrees or administrative orders on account of any violation of the 1933
Act, the 1934 Act, the Investment Company Act or any similar law of a non-U.S.
jurisdiction.
(e) Portfolio Management. Since January 1, 1997, each Non-Registered
Fund has been operated in substantial compliance with its respective objectives,
policies and restrictions, including without limitation those set forth in the
applicable offering memorandum and governing instrument.
SECTION 3.26. Non-Fund Clients. Portfolio Management. Except as set
forth in Section 3.26 of the Disclosure Letter, since January 1, 1997, the
portfolio of each Non-Fund Client or in the case of any sub-advisory
relationship, the portion of the account that is managed by the Companies, has
been managed in
54
substantial compliance with its respective objectives, policies and
restrictions, including without limitation those set forth in the governing
instrument.
SECTION 3.27. Regulatory Compliance. (a) Personnel. Neither the Seller
nor any of the Companies or, to the knowledge of the Seller or any of the
Companies, other persons "associated" (as defined under the Investment Advisers
Act or 1934 Act) with the Seller or any of the Companies, has been convicted of
any crime or has been subject to any disqualification that would be a basis for
denial, suspension, or revocation of registration of an investment adviser under
Section 203(e) of the Investment Advisers Act or Rule 206(4) - 4(b) thereunder,
or of a broker-dealer under Section 15(b)(4) of the 1934 Act or for
disqualification as an investment adviser or a principal underwriter for any
Registered Fund pursuant to Section 9(a) of the Investment Company Act, during
the ten-year period immediately preceding June 20, 2000.
(b) Internal Policies and Procedures. Each of the Companies providing
investment advice to the Registered Fund, the Non-Registered Funds and Non-Fund
Clients or acting as a distributor for the Registered Fund, the Non-Registered
Funds and Non-Fund Clients has adopted a formal code of ethics and a written
policy regarding insider trading, a complete and accurate copy of each of which
has been made available to the Buyer. Such codes of ethics and insider trading
policies comply in all material respects with Section 17(j) of the Investment
Company Act, Rule 17j-1 thereunder, Section 204A of the Investment Advisers Act
and Section 15(f) of the 1934 Act. The policies of each of the Companies
providing investment advice as of June 20, 2000 with respect to avoiding
conflicts of interest are as set forth in the most recent Form ADV of the
respective Company, as amended, which has been made available to the Buyer.
There have been no violations of such codes of ethics or such insider trading
policies that, individually or in the aggregate, have or have a significant risk
of having a Material Adverse Effect on the Companies, taken as a whole.
(c) Registered Fund Procedures. The Registered Fund has duly adopted
procedures pursuant to Rules 17a-7, 17e-1 and 10f-3 under the Investment Company
Act, to the extent applicable. The Registered Fund has for the past two years
been operated and is currently operating in compliance in all material respects
with Rules 17a-7, 17e-1 and 10f-3 thereunder, to the extent applicable.
(d) Regulatory Correspondence. The Seller or any of the Companies has
made (or in the case of filings after June 20, 2000, will make) available to the
Buyer true and complete copies of (a) all filings made by Seller or any of the
Companies with the SEC within the past two years (including but not limited to
all filings on Form ADV, Form TA, Form NSAR, current Form BD and most recent
FOCUS Report), (b) all audit reports received by Seller or any of the
55
Companies from the SEC or any other governmental authority or self-regulatory
organization and all written responses thereto made by any such person during
the past two years, (c) copies of all inspection reports related to Seller or
any of the Companies provided to Seller or any of the Companies by the SEC or
any governmental authority or self-regulatory organization during the past two
years and (d) all correspondence relating to any inquiry or investigation
relating to Seller or any of the Companies provided to Seller or any of the
Companies.
(e) Account Performance. Seller has provided to Buyer 1998 audited
performance summaries and 1999 unaudited performance summaries as set forth in
Section 3.27(e) of the Disclosure Letter. The summaries have been prepared and
presented, in all material respects, in conformity with the methodology set
forth in the accompanying notes thereto.
SECTION 3.28. Broker-Dealer Activities. (a) Section 3.28 of the
Disclosure Letter contains a list, as of June 20, 2000, of each of the Companies
that acts or has acted as a broker or dealer in securities in the United States
or outside (each of such Companies, a "BROKER").
(b) Each Broker is and since January 1, 1997 has been appropriately
registered with any U.S. or Non-U.S. government or financial industry self-
regulatory organization having authority over such Broker (each, a "FINANCIAL
REGULATOR"), except for any registrations with Non-U.S. Financial Regulators the
absence of which does not have or does not have a significant risk of having,
individually or in the aggregate, a Material Adverse Effect on the Companies,
taken as a whole.
(c) Each Broker is in substantial compliance with the rules and
regulations of each Financial Regulator having authority over it, except to the
extent that a failure to comply does not have and does not have a significant
risk of having, individually or in the aggregate, a Material Adverse Effect on
the Companies, taken as a whole.
(d) Each Broker has filed with its appropriate Financial Regulator(s)
all reports, schedules, forms, statements and other documents (including
financial statements and documents) required by such Financial Regulators from
January 1, 1997 to June 20, 2000 (the "BROKER FILINGS"), except to the extent
the failure to file does not have or does not have a significant risk of having,
individually or in the aggregate, a Material Adverse Effect on the Companies,
taken as a whole. The Broker Filings were prepared in all material respects in
accordance with the applicable requirements of such Financial Regulator(s) and
did not at the time they were filed contain any untrue statement of material
fact or omit to make any
56
statement necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(e) The Broker has instituted procedures to comply with the
requirements of Section 11(a) of the 1934 Act and has followed such procedures
except to the extent that the failure to so comply, individually or in the
aggregate, does not have or does not have a significant risk of having a
Material Adverse Effect on the Companies, taken as a whole.
(f) The Broker has made available to Buyer its current compliance
manual, New York Stock Exchange Floor Brokerage Compliance and Supervisory
Manual, and Compliance and Supervisory Outline for Institutional Services Sales
Trading Department and Investment Management Domestic and International Equity
Trading Departments.
SECTION 3.29. Futures Activities. (a) Section 3.29 of the Disclosure
Letter contains a list, as of June 20, 2000, of each of the Companies that acts
or has acted as a commodity trading adviser, futures commission, merchant or
commodity pool operator in futures or commodity options in the United States or
outside (each of such Companies, a "FUTURES INTERMEDIARY").
(b) Each Futures Intermediary is and since January 1, 1997 has been
appropriately registered with any U.S. or Non-U.S. government or financial
industry regulatory authority having authority over such Futures Intermediary
(each, a "FUTURES REGULATOR"), except for any registrations with Non-U.S.
Futures Regulators the absence of which does not have or does not have a
significant risk of having, individually or in the aggregate, a Material Adverse
Effect on the Companies, taken as a whole.
(c) Each Futures Intermediary is in compliance with the rules and
regulations of each Futures Regulator having authority over it, except to the
extent that a failure to comply does not have or does not have a significant
risk of having, individually or in the aggregate, a Material Adverse Effect on
the Companies, taken as a whole.
(d) Each Futures Intermediary has filed with its appropriate Futures
Regulator(s) all reports, schedules, forms, statements and other documents
(including financial statements and documents) required by such Futures
Regulators from January 1, 1997 to June 20, 2000 (the "FUTURES FILINGS"), except
to the extent the failure to file does not have or does not have a significant
risk of having, individually or in the aggregate, a Material Adverse Effect on
the Companies, taken as a whole. The Futures Filings were prepared in all
material respects in accordance with the applicable requirements of such Futures
57
Regulator(s) and did not at the time they were filed contain any untrue
statement of material fact or omit to make any statement necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
SECTION 3.30. ERISA Clients. Each account through which any of the
Companies provides services to any client (a "CLIENT") that is (i) an employee
benefit plan, as defined in Section 3(3) of ERISA, that is subject to Title I of
ERISA; (ii) a person acting on behalf of such a plan; or (iii) an entity whose
assets include the assets of such a plan, within the meaning of ERISA and
applicable regulations (hereinafter referred to as an "ERISA CLIENT"), in each
case have been managed by the Companies such that each of the Companies in the
exercise of such management is in compliance in all respects with the applicable
requirements of ERISA, except to the extent the failure to comply does not have
or does not have a significant risk of having, individually or in the aggregate,
a Material Adverse Effect on the Companies, taken as a whole.
SECTION 3.31. Securities Laws Matters; Disclosures. (a) Seller (on
behalf of Seller and SCB Partners) acknowledges that the Acquired Units have not
been registered under the 1933 Act or any state securities laws, may not be
transferred in the absence of such registration or pursuant to an exemption from
the registration requirements of the 1933 Act, that the Acquired Units will be
appropriately legended to so reflect and that the offering of the Acquired Units
contemplated hereby is to be effected pursuant to an exemption from the
registration requirements imposed by such laws. In this regard, each of Seller,
SCB Partners and BTI is acquiring the Acquired Units for its own account and not
with a view to, or for sale in connection with, any public distribution thereof.
Each of the Seller, SCB Partners and BTI agrees not to offer, sell or otherwise
dispose of the Acquired Units except in compliance with the 1933 Act and
applicable state securities laws. Each of the Seller, SCB Partners and BTI is an
"accredited investor" (as defined in Regulation D under the 1933 Act), has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Acquired
Units and is capable of bearing the economic risks of such investment.
(b) The Seller confirms that as of Closing, SCB Partners will be
incorporated in New York and have its headquarters in New York and a registered
agent in New York.
(c) None of the information provided by the Seller or any of the
Companies for inclusion in the proxy statement(s) to be mailed to the limited
partners and unitholders of Buyer and/or the unitholders of Alliance Holding or
any amendment or supplement thereto, at the time of the filing thereof, at the
time such proxy statement or any amendment or supplement thereto becomes
effective,
58
at the time of the distribution and dissemination thereof and at the time of the
consummation of the transactions contemplated by this Agreement will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading.
SECTION 3.32. Registered Fund Tax Compliance. (a) (i) The Registered
Fund made or will make the election set forth in Section 851(b) of the Code for
its first taxable year for which it represented to its shareholders that it was
a regulated investment company; (ii) except for its current taxable year, the
Registered Fund has qualified as a regulated investment company as defined in
Section 851 of the Code (a "RIC") for such first taxable year and for each
succeeding taxable year; (iii) except for failure to comply with the provisions
of Section 852(a)(1) of the Code, the Registered Fund would qualify as a RIC for
its current taxable year if the last day of its most recent fiscal quarter ended
on or prior to the date of this Agreement were treated as the last date of such
taxable year and for the taxable year in which the Closing occurs if the last
day of its most recent fiscal quarter ended on or prior to the Closing Date were
treated as the last date of such taxable year; and (iv) the Registered Fund has
no earnings and profits accumulated in any taxable year in which it did not
qualify as a RIC.
(b) All material tax returns, reports, declarations, forms or
information statements relating to taxes required to be filed by the Registered
Fund with any tax authority, or provided by the Registered Fund to any other
person, on or before the Closing Date (the "REGISTERED FUND RETURNS") have been
duly filed, or provided to the appropriate person, by or on behalf of the
Registered Fund in accordance with all applicable laws. As of the time each
Registered Fund Return was filed or provided to the relevant person, such
Registered Fund Return was accurate and complete in all material respects. All
material taxes due and payable by or on behalf of the Registered Fund on or
before June 20, 2000 have been timely paid, or withheld and remitted, to the
appropriate tax authority. There is no judicial or administrative claim, audit,
action, suit, proceeding or investigation now pending or to the knowledge of the
Seller, threatened against the Registered Fund in respect of any Tax.
(c) The representations and warranties contained in this Section 3.32
shall be deemed to apply separately to each such class or series of the
Registered Fund if such class or series is treated as a separate entity for
purposes of Section 851 of the Code.
SECTION 3.33. Non-Registered Funds Tax Compliance. (a) Each of the
Non-Registered Funds (as defined in Section 3.23(b)) that is created or
organized in the United States or any political subdivision thereof is not and
has not been at
59
any time since its inception an association taxable as a corporation for U.S.
federal income tax purposes and all portions of each such Non-Registered Fund
are and have been since their inception either (A) subject to subpart E of part
I of subchapter J of chapter 1 of subtitle A of the Code or (B) treated as
partnerships within the meaning of the Code.
(b) All material tax returns, reports, declarations, forms or
information statements relating to taxes required to be filed by any
Non-Registered Fund with any tax authority, or provided by any Non-Registered
Fund to any other person, on or before the Closing Date (the "NON-REGISTERED
FUND RETURNS") have been duly filed, or provided to the appropriate person, by
or on behalf of such Non-Registered Fund in accordance with all applicable
laws. As of the time each Non-Registered Fund Return was filed or provided to
the relevant person, such Non-Registered Fund Return was accurate and complete
in all material respects. All material taxes due and payable by or on behalf of
any Non-Registered Fund on or before June 20, 2000 have been timely paid, or
withheld and remitted, to the appropriate tax authority. There is no judicial or
administrative claim, audit, action, suit, proceeding or investigation now
pending or to the knowledge of the Seller, threatened against or with respect to
any Non-Registered Fund in respect of any Tax.
SECTION 3.34. Opinion of Financial Advisor. Seller has received the
opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, financial advisor
to Seller, to the effect that, as of June 20, 2000, the consideration to be
received in the aggregate by Seller and BTI hereunder is fair to Seller from a
financial point of view.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
SECTION 4.01. Partnership Existence and Power. (a) (i) As of June 20,
2000, each of Buyer and Alliance Holding is and (ii) as of the Closing Date,
each of Buyer and Alliance Holding will be a limited partnership duly organized,
validly existing and in good standing under the laws of Delaware and as of June
20, 2000 has, and as of the Closing Date will have, all powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as conducted on June 20, 2000 and the Closing Date,
respectively, except for any such licenses, authorizations, permits, consents
and approvals the absence of which does not have or does not have a significant
risk of having, individually or in the aggregate, a Material Adverse Effect on
Buyer, its Subsidiaries and Alliance Holding, taken as a whole.
60
(b) Buyer and Alliance Holding have heretofore delivered or made
available to Seller true and complete copies of their respective constituent
documents, as in effect on June 20, 2000. Except as permitted by Section 6.07,
Buyer and Alliance Holding have made no amendment or modification to their
respective constituent documents since June 20, 2000.
SECTION 4.02. Partnership Authorization. Subject to the receipt of the
opinions referred to in Section 10.02(e), the execution, delivery and
performance by Buyer of this Agreement and the other Buyer Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby, and the execution, delivery and performance by Alliance Holding of this
Agreement and the consummation of the transactions contemplated hereby, are
within the respective powers, rights and authority of Buyer and Alliance Holding
and, except for any required approval by Buyer's limited partners and/or
Alliance Holding's unitholders and limited partners, have been duly authorized
by all necessary action on the part of Buyer and Alliance Holding, respectively.
This Agreement constitutes, and each of the other Buyer Transaction Agreements
when executed will constitute, a valid and binding agreement of Buyer. This
Agreement constitutes a valid and binding agreement of Alliance Holding.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement and the other Buyer Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby, and the execution, delivery and performance by Alliance Holding of this
Agreement and the consummation of the transactions contemplated hereby, require
(a) no material action by or in respect of, or material filing with, any
governmental body, agency or official other than compliance with any applicable
requirements of (i) the HSR Act and the Antitrust Laws of any applicable foreign
jurisdiction and the agencies and bodies responsible therefor; (ii) the
Commodity Futures Act of Canada; (iii) the Securities Act of Ontario, Canada;
(iv) the Investment Canada Act; (v) the Commodity Futures Act of Ontario,
Canada; (vi) the Securities Act Alberta, Canada; (vii) the Securities Act
Manitoba, Canada; (viii) the Securities Act of British Columbia, Canada; (ix)
the Securities Act of New Brunswick, Canada; (x) the Securities Act of
Newfoundland, Canada; (xi) the Licensing Act of Prince Edward Island; (xii) the
Corporations Law of Australia (Australian Securities and Investment Commission);
(xiii) the Australian Trade Practices Act 1974; (xiv) the United Kingdom's
Financial Services Act 1986; (xv) the U.S. Commodity Exchange Act; (xvi) the
National Association of Securities Dealers; (xvii) state securities regulations;
(xviii) the New York Stock Exchange; (xix) the American Stock Exchange; (xx) the
Boston Stock Exchange; (xxi) the Chicago Stock Exchange; (xxii) the Pacific
Stock Exchange; (xxiii) the National Futures Association; (xxiv) the Municipal
Securities Rule Making Board; (xxv) the Securities Investor Protection
61
Corporation; (xxvi) the National Securities Clearing Corporation; (xxvii) the
Depository Trust Company; (xxviii) The Options Clearing Corporation; (xxix) the
1933 Act and any applicable state blue sky laws; (xxx) the 1934 Act; (xxxi) the
Commodity Futures Trading Commission; (xxxii) the Investment Company Act;
(xxxiii) the Investment Advisers Act, (xxxiv) the New York Business Corporations
Law and any applicable filings thereunder; and the Delaware General Corporation
Law and any applicable filings thereunder; and (b) no other action by or in
respect of or filing with any other governmental body, agency or official as to
which the failure to take, make or obtain has or has a significant risk of
having, individually or in the aggregate, a Material Adverse Effect on Buyer,
its subsidiaries and Alliance Holding, taken as a whole.
SECTION 4.04. Noncontravention. (a) The execution, delivery and
performance by Buyer of this Agreement and the other Buyer Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby do not and will not, upon the approval of Buyer's limited partners
and/or Alliance Holding's unitholders and limited partners of the transactions
contemplated by this Agreement, if required, and receipt of the opinions
referred to in Section 10.02(e) (i) violate the constituent documents of Buyer,
(ii) assuming compliance with the matters referred to in Section 4.03, violate
any applicable law, rule, regulation, judgment, injunction, order or decree,
(iii) require any consent or other action by any Person under, constitute a
default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Buyer or any of its Subsidiaries to a
loss of any benefit to which Buyer or any of its Subsidiaries is entitled under
any provision of any agreement or other instrument binding upon Buyer or any of
its Subsidiaries or by which any of the properties of Buyer or any of its
Subsidiaries is bound or (iv) result in the creation or imposition of any Lien
on any asset of Buyer or any of its Subsidiaries, except, in the cases of
clauses (ii), (iii) and (iv), for any such violations, consents, actions,
defaults, rights, losses or Liens that do not have or do not have a significant
risk of having, individually or in the aggregate, a Material Adverse Effect on
Buyer and its Subsidiaries, taken as a whole.
(b) The execution, delivery and performance by Alliance Holding of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not, upon the approval of Buyer's limited partners and/or Alliance
Holding's unitholders and limited partners of the transactions contemplated by
this Agreement, if required, (i) violate the constituent documents of Alliance
Holding, (ii) assuming compliance with the matters referred to in Section 4.03,
violate any applicable law, rule, regulation, judgment, injunction, order or
decree, (iii) require any consent or other action by any Person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Alliance Holding or
to a loss of any benefit to which
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Alliance Holding is entitled under any provision of any agreement or other
instrument binding upon Alliance Holding or by which any of the properties of
Alliance Holding is bound or (iv) result in the creation or imposition of any
Lien on any asset of Alliance Holding, except, in the cases of clauses (ii),
(iii) and (iv), for any such violations, consents, actions, defaults, rights,
losses or Liens that do not have or do not have a significant risk of having,
individually or in the aggregate, a Material Adverse Effect on Alliance Holding.
SECTION 4.05. Financing. Buyer will have on the Closing Date,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it and its Subsidiaries to make payment of the Cash
Purchase Price and any other amounts to be paid by it hereunder.
SECTION 4.06. Acquired Units. When issued and delivered in accordance
with the terms of this Agreement, the Acquired Units will have been duly and
validly authorized and issued and the issuance thereof is not subject to any
preemptive or other similar right.
SECTION 4.07. SEC Filings. (a) Each of Buyer and Alliance Holding has
filed with the SEC (i) its annual report on Form 10-K for the fiscal year ended
December 31, 1999, (ii) its quarterly report on Form 10-Q for the fiscal quarter
ended March 31, 2000, and (iii) all other reports, statements, schedules and
registration statements required to be filed with the SEC since December 31,
1999 (the documents referred to in this Section, collectively, the "BUYER SEC
DOCUMENTS").
(b) As of its filing date, each Buyer SEC Document complied as to form
in all respects with the applicable requirements of the 1933 Act and 1934 Act,
as the case may be, except where such failure to comply does not have or does
not have a significant risk of having, individually or in the aggregate, a
Material Adverse Effect on Buyer, its Subsidiaries and Alliance Holding, taken
as a whole.
(c) As of its filing date, each Buyer SEC Document filed pursuant to
the 1934 Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each Buyer SEC Document that is a registration statement, as
amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of
the date such registration statement or amendment became effective, did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
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SECTION 4.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Buyer
included in the Buyer SEC Filings fairly present in all material respects, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto, it being understood that
the unaudited interim financial statements do not contain footnotes), the
consolidated financial position of Buyer and its consolidated Subsidiaries as of
the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject to normal year-end adjustments in the case
of any unaudited interim financial statements).
SECTION 4.09. Absence of Certain Changes. Since the Buyer Balance Sheet
Date, except as described in the Buyer SEC Documents filed prior to June 20,
2000, the business of Buyer and its Subsidiaries has been conducted in the
ordinary course consistent with past practice and there has not been any event,
occurrence, development or state of circumstances or facts that, individually or
in the aggregate, has had or has a significant risk of having a Material Adverse
Effect on Buyer and its Subsidiaries, taken as a whole.
SECTION 4.10. Purchase for Investment. Buyer is purchasing the Equity
of ADV LLC for investment for its own account and not with a view to, or for
sale in connection with, any public distribution thereof. Subsequent to the
occurrence of the foregoing events and the Dividend Distribution, Buyer is
purchasing the Purchased Investments and the Equity of SCB United Kingdom and
SCB Australia, the Purchased Investments and the Buyer Interest, and ACM LLC is
purchasing the Buyer LLC Interest, in each case for investment for its own
account and not with a view to, or for sale in connection with, any public
distribution thereof.
SECTION 4.11. Litigation; Investigation. (a) Except as disclosed in the
Buyer SEC Documents filed prior to June 20, 2000 and Buyer's Form ADV for the
period ending December 31, 1999, as of June 20, 2000, there is not now and there
has not been since November 1, 1998 any action, suit, investigation or
proceeding (or, to the knowledge of Buyer, any basis therefor) pending against,
or, to the knowledge of Buyer, threatened against or affecting, Alliance Holding
or Buyer or any of its Subsidiaries or properties before, brought by, or
threatened by, any court, arbitrator, governmental body, agency, official or
self-regulatory organization which, if determined or resolved adversely in
accordance with the plaintiff's demands, has or has a significant risk of
having, individually or in the aggregate, a Material Adverse Effect on Buyer,
its Subsidiaries and Alliance Holding, taken as a whole.
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(b) Except as disclosed in the Buyer SEC Documents filed prior to June
20, 2000 and Buyer's Form ADV for the period ending December 31, 1999, as of the
Closing Date, there is not and there has not been since November 1, 1998 any
action, suit, investigation or proceeding (or, to the knowledge of Buyer, any
basis therefor) pending against, or, to the knowledge of Buyer, threatened
against or affecting, Alliance Holding or Buyer or any of its Subsidiaries or
any of their respective properties before, brought by, or threatened by, any
court, arbitrator, governmental body, agency, official or self-regulatory
organization which has or has a significant risk of having, individually or in
the aggregate, a Material Adverse Effect on Buyer, its Subsidiaries and Alliance
Holding, taken as a whole.
SECTION 4.12. Finders' Fees. Except for The Blackstone Group and
Salomon Smith Barney Inc., whose fees will be paid by Buyer, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Buyer who might be entitled to any fee
or commission from Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
SECTION 4.13. Compliance with Laws and Court Orders. Except as
disclosed in the Buyer SEC Documents filed prior to June 20, 2000 and Buyer's
Form ADV for the period ending December 31, 1999, none of Buyer and Buyer's
Subsidiaries is in violation of, and has not since January 1, 1998 violated, and
to the knowledge of Buyer is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order, decree or rule of
any self-regulatory organization, except for violations that, individually or in
the aggregate, do not have or do not have a significant risk of having a
Material Adverse Effect on Buyer and its Subsidiaries, taken as a whole.
SECTION 4.14. Capitalization. (a) As of May 31, 2000, there were
outstanding 172,906,576 Buyer Units. Between May 31, 2000 and June 20, 2000,
Buyer has not issued any Buyer Units other than pursuant to its employee benefit
plans.
(b) As of June 20, 2000, all of the outstanding securities of Buyer
have been duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth in this Section 4.14 and except as pursuant
to the Financing Agreement, as of June 20, 2000, there are no outstanding (i)
Buyer Units, (ii) securities of Buyer convertible into or exchangeable for Buyer
Units and (iii) options or other rights to acquire from Buyer, or other
obligation of Buyer to issue, any Buyer Units or securities convertible into or
exchangeable for Buyer Units, other than pursuant to its employee stock option
plans.
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SECTION 4.15. Private Offering. Assuming the accuracy of Seller's
representations as set forth in Section 3.31, the offer, issuance and delivery
to Seller and SCB Partners pursuant to the terms of this Agreement of the
Acquired Units is exempt from registration under the 1933 Act.
SECTION 4.16. Existing Registration Rights Agreement. Buyer and
Alliance Holding have made available to Seller copies of all agreements existing
as of June 20, 2000 pursuant to which Buyer or Alliance Holding may be required
to file a registration statement under the 1933 Act on behalf of any unitholders
and/or limited partners, as applicable, of Buyer or Alliance Holding.
SECTION 4.17. No Undisclosed Material Liabilities. Except as disclosed
in the Buyer SEC Documents filed prior to June 20, 2000 and Buyer's Form ADV for
the period ending December 31, 1999, there are no liabilities of Buyer or any of
its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than:
(a) liabilities provided for in the audited consolidated balance sheet
of Buyer and its Subsidiaries as of December 31, 1999 and the footnotes thereto
set forth in Buyer's annual report on Form 10-K for the fiscal year ended
December 31, 1999;
(b) liabilities incurred in the ordinary course of business consistent
with past practice since the Buyer Balance Sheet Date; and
(c) other undisclosed liabilities which, individually or in the
aggregate, do not have or do not have a significant risk of having a Material
Adverse Effect on Buyer and its Subsidiaries, taken as a whole.
SECTION 4.18. Tax Treatment. Buyer is not treated as a corporation for
U.S. federal income tax purposes. Alliance Holding has in effect a valid
election to apply Section 7704(g) of the Code.
SECTION 4.19. Regulatory Compliance. Neither Buyer or, to the knowledge
of Buyer, other persons "associated" (as defined under the Investment Advisers
Act or 1934 Act) with Buyer, has been convicted of any crime or has been subject
to any disqualification that would be a basis for denial, suspension, or
revocation of registration of an investment adviser under Section 203(e) of the
Investment Advisers Act or Rule 206(4)-4(b) thereunder, or of a broker-dealer
under Section 15(b)(4) of the 1934 Act or for disqualification as an investment
adviser or a principal underwriter for any investment company pursuant to
Section
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9(a) of the Investment Company Act, during the ten-year period immediately
preceding June 20, 2000.
ARTICLE 5
COVENANTS OF SELLER
Seller agrees that:
SECTION 5.01. Conduct of the Companies. From June 20, 2000 until the
Closing Date, Seller shall cause each of the Companies to conduct its business
in the ordinary course consistent with past practice and to use all commercially
reasonable efforts to preserve intact its business organizations and
relationships with clients, customers, employees, regulatory authorities and
other third parties and to keep available the services of its present officers
and employees. Without limiting the generality of the foregoing, from June 20,
2000 until the Closing Date, Seller will not, without the prior written consent
of Buyer (which shall not be unreasonably withheld) and except to the extent
necessary to consummate the transactions contemplated by Article 2 of this
Agreement, and will not permit any of the Companies to:
(a) merge or consolidate with any other Person or acquire an amount of
assets material to the Companies from any other Person;
(b) issue, deliver, sell, pledge or otherwise encumber the Equity or
the Common Stock of Seller or repurchase Equity or the Common Stock of
Seller from any stockholder of Seller who is bound by a Voting Agreement;
(c) other than as permitted in Article 2 hereof, between 11:59 p.m. on
September 30, 2000 and the Closing, make any cash, in-kind or other
distribution or engage in any transaction with any of the Companies or SCB
Partners (in the case of Seller) or the Seller, SCB Partners or any of the
other Companies (in the case of a Company) (any such transaction during
such period, a "DISTRIBUTION"); provided that Seller or any of the
Companies may pay any such Distribution if such Distribution is payable in
cash or marketable securities, was declared prior to 11:59 p.m. on
September 30, 2000 and will be reflected on the Closing Balance Sheet in
accordance with Section 2.07(a);
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(d) other than in the ordinary course of business consistent with past
practices, sell, lease, license or otherwise dispose of any assets or
property;
(e) enter into any type of business that is materially different from
the business of the Companies as conducted on June 20, 2000;
(f) make any capital expenditures that in the aggregate exceed the
aggregate amount of expenditures set forth in the Capital Budget 2000 and
Project Summary 2000 attached as Section 5.01(f) of the Disclosure Letter;
or
(g) agree or commit to do any of the foregoing.
SECTION 5.02. Access to Information; Confidentiality. (a) From June 20,
2000 hereof until the Closing Date, Seller will (i) give, and will cause each of
the Companies to give, Buyer, its counsel, financial advisors, auditors and
other authorized representatives full access, subject to explicit third party
contractual provisions relating to confidentiality and attorney-client
privilege, during normal business hours to the offices, properties, books and
records of the Companies and to the books and records of Seller relating to the
Companies, provided that any such access by Buyer shall not unreasonably
interfere with the conduct of the business by Seller and the Companies, (ii)
furnish, and will cause each of the Companies to furnish, to Buyer, its counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information relating to any of the Companies as
such Persons may reasonably request and (iii) instruct the employees, counsel
and financial advisors of Seller or any of the Companies to cooperate with Buyer
in its investigation of the Companies. No investigation by Buyer or other
information received by Buyer shall operate as a waiver or otherwise affect any
representation, warranty or agreement given or made by Seller hereunder.
(b) After the Closing, Seller and its Affiliates will hold, and will
use their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Companies, except to the extent that such information can be shown to have been
in the public domain through no fault of Seller or its Affiliates. The
obligation of Seller and its Affiliates to hold any such information in
confidence shall be satisfied if they exercise the same care with respect to
such information as they would take to preserve the confidentiality of their own
similar information.
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(c) On and after the Closing Date, Seller will afford promptly to Buyer
and its agents reasonable access to its books of account, financial and other
records (including, without limitation, accountant's work papers), information,
employees and auditors to the extent necessary or useful for Buyer in connection
with any audit, investigation, dispute or litigation or any other reasonable
business purpose relating to any of the Companies.
SECTION 5.03. Company Stockholder Meeting. Seller shall cause a meeting
of its stockholders (the "COMPANY STOCKHOLDER MEETING") to be duly called and
held no later than 30 days after June 20, 2000 (or if Seller gives notice to
Buyer pursuant to Section 5.04(c)(iv) within five Business Days prior to the
expiration of such 30-day period, on the Business Day following the expiration
of such five Business Day period) for the purpose of voting on the approval and
adoption of this Agreement and the transactions contemplated hereby. The Board
of Directors of Seller has determined to recommend approval and adoption of this
Agreement and the transactions contemplated hereby by the Seller's stockholders,
and will use its best efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby
consistent with its fiduciary obligations under Delaware law. In connection with
such meeting, Seller will otherwise comply with all legal requirements
applicable to such meeting.
SECTION 5.04. No Solicitation. (a) From June 20, 2000 until the
termination hereof, neither Seller nor any of the Companies shall, nor shall
Seller or any of the Companies authorize or permit any of its or their officers,
directors, employees, investment bankers, attorneys, accountants, consultants or
other agents or advisors to, directly or indirectly, (i) take any action to
solicit, initiate, facilitate or encourage the submission of any Acquisition
Proposal, (ii) enter into or participate in any discussions or negotiations
with, furnish any information relating to Seller or any of the Companies or
afford access to the business, properties, assets, books or records of the
Seller or any of the Companies to, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any effort by any
Person that is seeking to make, or has made, an Acquisition Proposal or (iii)
grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of Seller or any of the Companies.
Seller shall notify Buyer promptly (but in no event later than 24 hours) after
receipt by Seller (or any of its officers, directors, employees, investment
bankers, attorneys, accountants, consultants or other agents or advisors) of any
Acquisition Proposal, any indication that a Person is seriously considering
making an Acquisition Proposal or of any request for information relating to
Seller or any of the Companies or for access to the business, properties,
assets, books or records of Seller or any of the Companies by any Person that
may be considering making, or has made, an Acquisition Proposal. Seller shall
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provide such notice orally and in writing and shall identify the Person making,
and the terms and conditions of, any such Acquisition Proposal, indication or
request. Seller shall keep Buyer fully informed, on a current basis, of the
status and details of any such Acquisition Proposal, indication or request.
Seller and each of the Companies shall, and shall cause its and their officers,
directors, employees, investment bankers, attorneys, accountants, consultants or
other agents or advisors to, cease immediately and cause to be terminated any
and all existing activities, discussions or negotiations, if any, with any
Person conducted prior to June 20, 2000 with respect to any Acquisition Proposal
and shall use its reasonable best efforts to cause any such Person (or any of
its officers, directors, employees, investment bankers, attorneys, accountants,
consultants or other agents or advisors) in possession of confidential
information about Seller or any of the Companies that was furnished by or on
behalf of Seller to return or destroy all such information.
(b) Notwithstanding the foregoing, if (i) Seller and each of the
Companies has complied with Section 5.04(a), including, without limitation, the
requirement in Section 5.04(a) that Seller notifies Buyer promptly after its
receipt of any Acquisition Proposal, (ii) the Board of Directors of the Seller
determines in good faith by a majority vote, after consultation with its outside
financial and legal advisors, that it is required to take the actions described
in clauses (A) or (B) in order to comply with its fiduciary duties under
applicable law, and (iii) Seller shall have delivered to Buyer prior written
notice advising Buyer that it intends to take such action, then Seller, directly
or indirectly through its advisors, agents or other intermediaries, may (A)
furnish non-public or any other information relating to Seller or to any of the
Companies and afford access to the business, properties, assets, books or
records of the Seller or any of the Companies in response to a request therefor
by a Person who has made an Acquisition Proposal that the Board of Directors of
Seller determines in good faith could reasonably be expected to result in a
Superior Proposal if such Person executes a confidentiality agreement with terms
no less favorable to the Seller or any of the Companies than those contained in
the Confidentiality Agreement dated as of May 11, 2000 between Seller and Buyer
(a copy of which shall be provided for informational purposes only to Buyer) and
(B) enter into or participate in any discussions or negotiations with any Person
that has made a Superior Proposal; provided that, in no circumstances shall
Seller, the Companies or any of their officers, directors, employees, investment
bankers, attorneys, accountants, consultants or other agents or advisors
disclose this Agreement or any other Transaction Agreement or any of the terms
hereof or thereof to any other Person without the prior written consent of Buyer
except to the extent Buyer has made any such disclosure (it being understood
that the foregoing is not intended to restrict Seller or its advisors and agents
from discussing structural and other issues that may be relevant to the other
deal even though they may also be terms of this deal).
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(c) Seller shall be permitted to terminate this Agreement, but only if
(i) the Seller and the Companies have complied with the terms of this Section
5.04, (ii) a Superior Proposal is pending at the time Seller determines to take
any such action, (iii) the Board of Directors of Seller determines in good faith
by a majority vote, after consultation with its outside financial and legal
advisors, that it is required to take such action to comply with its fiduciary
duties under applicable law, (iv) Seller shall have delivered to Buyer, at least
five Business Days prior to terminating this Agreement, written notice advising
Buyer that it intends to take such action and providing Buyer with a copy of
such Superior Proposal, (v) Buyer does not make, within such five Business Day
period, an offer that the Board of Directors of Seller determines in good faith
by a majority vote after consultation with its outside financial and legal
advisors, to provide at least equal value to Seller's stockholders as such
Superior Proposal and (vi) Seller pays to Buyer in immediately available funds,
not later than the date of such termination, the fees required to be paid
pursuant to Section 13.03.
SECTION 5.05. Trademarks; Tradenames. (a) After the Closing, none of
Seller, SCB Partners or BTI nor any Subsidiary of any of them shall use any of
the marks or names set forth on Section 3.16(a) of the Disclosure Letter (the
"SELLER TRADEMARKS AND TRADENAMES").
(b) Effective as of the Closing Date, Seller and BTI will change their
respective corporate name so as not to include any Seller Trademarks and
Tradenames and surrenders all of its rights, title and interests in each of the
Seller Trademarks and Tradenames.
SECTION 5.06. Resignations. Upon Buyer's request, Seller will deliver
to Buyer no later than 10 Business Days prior to the Closing Date the
resignations of any or all directors of SCB United Kingdom, SCB Australia and,
after the Merger, the purchase and sale of the BTI Purchased Assets and the
assumption of the Assumed BTI Liabilities, the purchase of the Equity of ADV LLC
and the Dividend Distribution, of BD LLC, such resignations to be effective as
of the Closing Date.
SECTION 5.07. Fund Consents. Buyer and Seller recognize that the
transactions contemplated by this Agreement shall constitute an assignment and
termination of the Client Contracts under the terms thereof and the Investment
Company Act. Buyer and Seller agree to use their reasonable best efforts and
cooperate in obtaining such authorizations and approvals of the Board of
Directors of the Registered Fund (including any separate approvals of
disinterested directors) and/or the shareholders thereof, as may be reasonably
required by the Investment Company Act for new contracts (the "FUND
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APPROVALS"). Buyer agrees to provide such information, for provision to the
Board of Directors of the Registered Fund ("BOARD MATERIALS") or for inclusion
in a proxy statement to the shareholders thereof, as may be reasonably required.
SECTION 5.08. Non-Registered Funds and Non-Fund Client Consents. As
promptly as practicable after execution of this Agreement, (a) Seller and the
Companies shall cause all Non-Registered Funds and all Non-Fund Clients, and any
Non-Registered Funds and Non-Fund Clients in respect of all Client Contracts
entered into by Seller or any of the Companies between the date of this
Agreement and the Closing Date ("NEW CLIENTS"), to be informed of the
transactions contemplated by this Agreement, and (b) Seller and the Companies
shall request (the "FIRST REQUEST") from all Non-Registered Funds and all Non-
Fund Clients, including all existing clients and New Clients, a signed written
consent to the transactions contemplated by this Agreement in such form as may
be reasonably satisfactory to Buyer ("AFFIRMATIVE CONSENT"). Seller and the
Companies shall also seek the consent of Non-Registered Funds and Non-Fund
Clients in the form of an implied consent not requiring an affirmative consent
(a "NEGATIVE CONSENT") by sending a notice and request-for-consent letter to
each client who has not delivered an Affirmative Consent between 30 and 45 days
after the First Request has been mailed but in no event within 30 days prior to
the Closing Date, in such form as may be reasonably satisfactory to
Buyer. Seller and the Companies shall (a) keep Buyer informed of the status of
obtaining Affirmative Consents and Negative Consents and (b) promptly deliver to
Buyer prior to the Closing copies of all executed Affirmative Consents and make
available for inspection the originals of such Affirmative Consents prior to the
Closing.
SECTION 5.09. ERISA Clients List. Within 30 days following June 20,
2000, Buyer shall deliver to Seller a written list of the entities that are
affiliated with or related to Buyer (the "BUYER ERISA LIST"). As soon as
practicable after the date the Buyer ERISA List is delivered to Seller, but in
no event later than 30 days before the Closing Date, Seller shall deliver to
Buyer a written statement which identifies each Client that is an ERISA Client
and lists each contract or agreement, if any, and all amendments thereto, in
effect on June 20, 2000, entered into by the Companies with respect to or on
behalf of any such ERISA Client, pursuant to which any of the entities
identified in the Buyer ERISA List has agreed to (i) execute securities
transactions; (ii) provide any other goods or services; or (iii) purchase, sell,
exchange or swap securities or any other economic interest therein or derivative
thereof, including but not limited to rights to receive or obligations to pay
interest or principal under any debt obligation, or rights to receive or
obligations to pay interest or principal denominated in a particular currency.
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SECTION 5.10. Restrictions on Dispositions of Acquired Units.
(a) Prohibited Transfers. Except in accordance with the provisions of
this Section, Seller, SCB Partners, BTI or any of their Subsidiaries shall not,
directly or indirectly, offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any of the Acquired Units (or any interest therein), any
security convertible, exchangeable or exercisable for or repayable with any of
the Acquired Units or any security or other interest in any Person owning any of
the Acquired Units (each such transaction, a "TRANSFER"). Under no circumstances
shall Seller or any of its Affiliates enter into any swap, hedging transaction
or other similar arrangement that transfers to another, in whole or in part, any
of the economic consequences of ownership (other than any sale, assignment or
pledge permitted by subsection (b)) of the Acquired Units, whether any such
transaction is to be settled by delivery of Acquired Units, in cash or
otherwise. SCB Partners shall be permitted to pledge the Acquired Units to BTI
to secure a loan from BTI to SCB Partners of all or any portion of the BTI
Consideration.
(b) Ownership of Seller. Prior to the tenth anniversary of the Closing,
for so long as Seller or any of its Subsidiaries owns, directly or indirectly,
any Acquired Units, Seller shall use its best efforts to ensure that its shares
of capital stock are owned only by shareholders or principals of Seller as of
June 20, 2000, any bona fide estate planning vehicles of such shareholders or
principals of Seller and any transferees thereof in connection with the death of
any such shareholder or principals of Seller. The shareholders of Seller shall
be permitted to pledge their shares of Seller in connection with any bona fide
loan. Buyer shall cooperate with Seller and its Affiliates in connection with
bona fide estate and state tax planning transactions.
(c) Ownership Interest. (i) During each of the first two Anniversary
Periods following the Closing Date, Seller and its wholly owned Subsidiaries
shall at all times be the record owner and beneficial owner of a number of
Acquired Units equal to or greater than 38 million minus the Units Revenue Run
Rate Adjustment (the "INITIAL SELLER OWNERSHIP").
(ii) During the third Anniversary Period following Closing, Seller and
its wholly-owned Subsidiaries shall at all times be the record owner and
beneficial owner of the number of Acquired Units equal to or greater than
the product of Initial Seller Ownership times .80.
(iii) During the fourth Anniversary Period following Closing, Seller
and its wholly-owned Subsidiaries shall at all times be the record
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owner and beneficial owner of the number of Acquired Units equal to or
greater than the product of Initial Seller Ownership times .60.
(iv) During the fifth Anniversary Period following Closing, Seller and
its wholly-owned Subsidiaries shall at all times be the record owner and
beneficial owner of the number of Acquired Units equal to or greater than
the product of Initial Seller Ownership times .40.
(v) During the sixth Anniversary Period following Closing, Seller and
its wholly-owned Subsidiaries shall at all times be the record owner and
beneficial owner of the number of Acquired Units equal to or greater than
the product of Initial Seller Ownership times .20.
(vi) This subsection (c) shall cease to apply after the sixth
Anniversary Period.
(d) Permitted Transfers. Notwithstanding the first sentence of
subsection (a) but subject to compliance with the other provisions of this
Section, Seller, SCB Partners, BTI or any of their Subsidiaries may sell or
assign (i) in the aggregate up to 2.8 million Acquired Units at any time, (ii)
any Acquired Units to Seller or any of its wholly owned Subsidiaries at any time
and (iii) in any Anniversary Period following the second annual anniversary of
the Closing Date, (in addition to any Transfers made pursuant to clause (i) or
(ii)) up to a number of Acquired Units equal to the product of the Initial
Seller Ownership times .20, provided that
(A) a Transfer pursuant to clause (i) or (iii) may occur only if
permitted by, and otherwise in compliance with, the then applicable
internal written policies of Buyer and Alliance Holding restricting
sales of Acquired Units generally applicable to senior officers (for
such purpose treating the transferor as bound by such policies);
(B) except for Transfers of Public Units, a Transfer pursuant to
clause (i), (ii) or (iii) may occur only if such Transfer qualifies as
a private transfer pursuant to Treas. Reg. Sec.1.7704- 1(e)(1)(vi)
(relating to block transfers) or pursuant to comparable provisions of
any amendment to such regulation;
(C) Transfers of Acquired Units pursuant to the "Purchase
Obligation" as such term is defined in the Purchase Agreement shall
not be applied toward the numerical limitation on Transfers imposed by
clause (iii);
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(D) Transfers of Buyer Units in exchange for Public Units
pursuant to subsection (f) of this Section shall not be applied toward
the numerical limitations on Transfers imposed by clause (iii) (it
being understood that any subsequent Transfer of such Public Units
shall be subject to such numerical limitation and the other provisions
of this Section 5.10); and
(E) a Transfer pursuant to clause (ii) may only be made to a
wholly-owned Subsidiary of Seller if such Subsidiary agrees in writing
with Buyer and Alliance Holding to be bound by the provisions of this
Section 5.10 and a copy of such agreement is delivered to Buyer and
Alliance Holding prior to such Transfer.
Buyer shall (and shall cause its general partner to) consent to any
sale or assignment by Seller, SCB Partners or any of their Subsidiaries made in
compliance with this subsection (d), which shall constitute consent under the
Buyer Limited Partnership Agreement
(e) Securities Laws Compliance. Except for Transfers of Acquired Units
pursuant to the "Purchase Obligation" as such term is defined in the Purchase
Agreement, Transfers of Public Units in a Going Private Transaction or the
exchange of Public Units for Private Units pursuant to subsection (f), Seller,
SCB Partners or any of their Subsidiaries or transferees shall not Transfer any
Acquired Units or any other units or limited partnership interests of Buyer or
Alliance Holding unless such Transfer:
(i) is made pursuant to an effective registration statement under the
1933 Act and in compliance with applicable state blue sky laws; or
(ii) may be effected without registration under the 1933 Act (and in
compliance with any applicable state blue sky laws) and such Person shall
have delivered to Buyer at least 10 Business Days (or in the case of
Transfers pursuant to Rule 144, 2 Business Days) prior to the day the
proposed Transfer is to be consummated (A) an opinion of counsel, in form
and substance reasonably acceptable to Buyer or Alliance Holding, as the
case may be, to the effect that the proposed Transfer may be effected
without registration under the 1933 Act, or (B) a "no action" letter, in
form and substance reasonably acceptable to Buyer or Alliance Holding, as
the case may be, from the SEC to the effect that such Transfer without
registration will not result in a recommendation by the staff of the SEC
that action be taken with respect thereto; provided that an opinion of
counsel or "no action" letter shall not be required (x) for a Transfer
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pursuant to Rule 144(k) of the 1933 Act or (y) for the removal of the
portion of the legend set forth below which relates to 1933 Act
restrictions based upon the termination of restrictions on sales of such
Acquired Units pursuant to Rule 144(k) of the 1933 Act if the Person
proposing to make such Transfer shall deliver to Buyer, in its stead, at
least 2 Business Days before the proposed Transfer is to occur, a
certificate in form and substance satisfactory to Buyer or Alliance
Holding, as the case may be, representing that such shares are eligible for
sale pursuant to Rule 144(k) and that such sale will be made in accordance
with such Rule together with a summary of the bases for such
representations, unless after receipt of such a certificate Buyer or
Alliance Holding, as the case may be, shall reasonably determine in good
faith that an opinion of counsel is required to ensure compliance with the
1933 Act and shall so notify such Person.
Except for any sale pursuant to an effective registration statement or
pursuant to Rule 144 prior to any Transfer of Acquired Units or any other units
or limited partnership interests of Buyer or Alliance Holding, the transferor
shall cause the transferee to agree with Buyer or Alliance Holding, as the case
may be, to be bound by the provisions of this subsection (e).
(f) Partnership Agreements; Exchange into Public Units. Seller, SCB
Partners or any of their Subsidiaries or transferees may not Transfer any
Acquired Units unless such Transfer complies with all applicable provisions,
conditions and requirements of the Buyer Limited Partnership Agreement, the
Alliance Holding Limited Partnership Agreement (or other governing document) and
the Purchase Agreement. Alliance Holding agrees to issue Public Units to Seller
and its wholly owned Subsidiaries in exchange for an equal number of Buyer Units
(or in such other ratio as the general partner of Buyer or Alliance Holding may
determine in accordance with Section 6.01 of the Buyer Limited Partnership
Agreement or the Alliance Holding Limited Partnership Agreement, as the case may
be and such exchange ratio is applicable to all holders of limited partnership
interests of Buyer), so long as:
(i) the issuance of such Public Units shall be exempt from
registration pursuant to the 1933 Act (and in compliance with any
applicable state blue sky laws) and Alliance Holding shall have received
such representations, opinions and other documentation as it may reasonably
require in connection therewith;
(ii) the issuance of such Public Units shall be permitted under the
terms of the Alliance Holding Limited Partnership Agreement;
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(iii) The Equitable Life Assurance Society of the United States shall
have granted its consent pursuant to Section 12.03(c) of the Buyer Limited
Partnership Agreement to the Transfer of such Acquired Units to Alliance
Holding; and
(iv) Seller provides to Buyer an opinion of outside legal counsel
recognized as expert in U.S. federal income tax matters reasonably
satisfactory to Buyer that such exchange constitutes a "block transfer"
under Treas. Reg. Sec. 1.7704-1(e)(1)(vi) or any successor provision.
Notwithstanding anything contained herein or in the Buyer Limited
Partnership Agreement, Buyer or its general partner shall not be required to
consent to any Transfer of any Acquired Units (except for Transfers of Public
Units) unless Buyer is satisfied that (A) it will not cause or create any
material risk of Buyer being classified as a publicly traded partnership under
Section 7704 of the Code and (B) such Transfer will constitute a "block
transfer" under Treas. Reg. Sec. 1.7704-1(e)(1)(vi) or any successor provision.
(g) Restrictive Legend. Each certificate for units or limited
partnership interests of Buyer or Alliance Holding issued to Seller, SCB
Partners, BTI or any of their Subsidiaries or transferees shall (unless
otherwise permitted by the provisions of this Section) include a legend in
substantially the following form together with any blue sky or other appropriate
legend to ensure compliance with the Transaction Agreements and applicable laws:
THE [UNITS/LIMITED PARTNERSHIP INTERESTS] REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE HOLDER OF THIS CERTIFICATE MAY NOT TRANSFER (AS
DEFINED IN THE AMENDED AND RESTATED ACQUISITION AGREEMENT DATED
AS OF OCTOBER 2, 2000 PURSUANT TO WHICH THE TRANSFER OF SUCH
[UNITS/LIMITED PARTNERSHIP INTERESTS] ARE SUBJECT (THE
"ACQUISITION AGREEMENT")) SUCH [UNITS/LIMITED PARTNERSHIP
INTERESTS] IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND THE RULES AND REGULATIONS
THEREUNDER. BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THIS
CERTIFICATE AGREES TO COMPLY IN ALL RESPECTS WITH SECTION 5.10 OF
THE ACQUISITION AGREEMENT AND ARTICLE III OF THE PURCHASE
AGREEMENT DATED AS OF JUNE 20, 2000, COPIES OF WHICH MAY BE
OBTAINED AT NO COST BY
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WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF THIS PARTNERSHIP AT ITS PRINCIPAL EXECUTIVE
OFFICES.
(h) Acquired Units. The number of Acquired Units that any Person may
sell or assign pursuant to subsection (d) of this Section and the number of
Acquired Units that Seller and its wholly owned Subsidiaries is required to be
the record owner and beneficial owner of pursuant to subsection (c) of this
Section shall be increased or decreased, as appropriate, in the event that
subsequent to June 20, 2000 Buyer (i) issues or delivers any additional limited
partnership interests or units as a result of the declaration or payment of a
distribution to the holders of limited partnership interests or units, (ii)
subdivides its outstanding limited partnership interests or units into a larger
number of units, (iii) combines its outstanding limited partnership interests or
units into a smaller number of limited partnership interests or units, (iv)
becomes a party to any transaction (including without limitation a merger,
consolidation or conversion) in which the previously outstanding units shall be
changed into or exchanged for different interests of Buyer or changed into or
exchanged for common stock, interests or other securities of another Person or
(v) with respect to any Public Units included in the Acquired Units, the general
partner of Alliance Holding adjusts the exchange ratio of Public Units for Buyer
Units pursuant to Section 6.01 of the Alliance Holding Limited Partnership
Agreement and such exchange ratio is applicable to all holders of limited
partnership interests of Buyer.
(i) Going Private Transaction. Notwithstanding any provision to the
contrary in this Agreement, Seller and each of its wholly-owned Subsidiaries
shall be entitled to dispose of in a Going Private Transaction such number of
Acquired Units as the person or persons effecting such Going Private Transaction
shall offer to acquire pursuant to such Going Private Transaction so long as
Seller and each of its wholly-owned Subsidiaries offer such person or persons on
the terms set forth in such Going Private Transaction all of the Acquired Units
that Seller and its wholly-owned Subsidiaries own either of record or
beneficially.
SECTION 5.11. Pro Forma Income Statement. Seller will, and will cause
each of the Companies to, cooperate with Buyer in preparing (i) the unaudited
combined pro forma statement of income of the Companies for the year ended
December 31, 1999 relating to the unaudited combined pro forma balance sheet of
the Companies as of December 31, 1999 and (ii) the unaudited interim combined
pro forma statement of income of the Companies for the six month period ending
June 30, 2000 relating to the unaudited interim combined pro forma balance sheet
of the Companies as of June 30, 2000, in each case to be used in the preparation
of Buyer's or Alliance Holding's proxy statements related to the transactions
contemplated hereby, if required.
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ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. Access. Buyer will cause each of the Companies, on and
after the Closing Date, to afford promptly to Seller and its agents reasonable
access to their offices, properties, books, records, employees and auditors to
the extent necessary to permit Seller to determine any matter relating to its
rights and obligations hereunder or to any period ending on or before the
Closing Date; provided that any such access by Seller shall not unreasonably
interfere with the conduct of the business of Buyer. Seller will hold, and will
use its best efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning any
of the Companies provided to it pursuant to this Section 6.01.
SECTION 6.02. Extraordinary Distributions. (a) From June 20, 2000
through and including the Closing Date, Buyer will not repurchase, redeem or
otherwise acquire any outstanding Buyer Units or other securities of, or other
ownership interests in, Buyer at a premium above the market price of Public
Units (other than pursuant to Buyer's employee plans).
(b) In the event that prior to the Closing there is any distribution
(other than a cash distribution in the ordinary course of business consistent
with past practice), reclassification, stock split (including a reverse split),
or other similar transaction, the number of Buyer Units in the Units Purchase
Price shall be adjusted equitably to reflect such event; provided that in the
case of a distribution of a new class or series of Buyer Units to holders of
such units, a spin-off or a reclassification of Buyer Units, in addition to the
Units Purchase Price, Seller will receive the same consideration as Seller would
have received had it been the record owner of the Units Purchase Price less the
Units Revenue Run Rate Adjustment on the record date of such distribution,
spin-off or reclassification.
SECTION 6.03. Seller Board and Committee Representation. (a) On the
Closing Date, (i) Sanders and Hertog will be appointed to Buyer's Management
Compensation Committee, (ii) the name of Buyer's Management Compensation
Committee will be changed to the Executive Committee and (iii) a committee
comprised of Sanders, Hertog and any other individuals to be selected from time
to time by Sanders and Hertog in their sole discretion from the SCB Committee
Replacement List (the "SCB COMMITTEE") will be established.
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(b) The SCB Committee will continue to exist at least through the date
that is three years after the Closing Date. Prior to such date, if either
Sanders or Hertog terminates his employment for any reason, Sanders or Hertog,
as the case may be, shall immediately cease to be a member of the SCB Committee
and the Executive Committee. In such event, a replacement will be appointed to
the SCB Committee by Sanders or Hertog or, if neither of them is available, by
Seller, and in the case of the Executive Committee, such replacement to be
selected by Buyer in its sole discretion from the SCB Committee Replacement
List.
SECTION 6.04. Unitholder Meeting. If any transaction contemplated by
this Agreement requires approval by the New York Stock Exchange, the listing
rules of the New York Stock Exchange or any listing requirement between Alliance
Holding and the New York Stock Exchange, Buyer or Alliance Holding, as
applicable, shall each cause a meeting of its limited partners and, as
applicable, unitholders (each, a "UNITHOLDER MEETING") to be duly called and
held as promptly as is reasonably practicable after June 20, 2000 for the
purpose of voting on the approval and adoption of this Agreement and the
transactions contemplated hereby; provided that, each of Alliance Holding and
Buyer shall convene its Unitholder Meeting no later than 45 days after the date
on which its respective proxy statement has received approval from the SEC and
has been promptly printed for mailing. Subject to the exercise of fiduciary
obligations as required under Delaware law, (i) the Board of Directors of ACMC
shall recommend approval and adoption of this Agreement and the transactions
contemplated hereby by the limited partners of Buyer or the limited partners and
unitholders of Alliance Holding, as applicable, and (ii) Buyer or Alliance
Holding will use its or their best efforts to obtain the necessary approvals by
its or their limited partners and, as applicable, unitholders of this Agreement
and the transactions contemplated hereby. In connection with such meeting, Buyer
or Alliance Holding, as applicable, as the case may be, will otherwise comply
with all legal requirements applicable to such meeting.
SECTION 6.05. Stock Exchange Listing. So long as Public Units are
listed on the New York Stock Exchange, Alliance Holding shall use its best
efforts to cause any Public Units that may be issued to Seller or SCB Partners
in exchange for Buyer Units, to be listed on the New York Stock Exchange,
subject to official notice of issuance.
SECTION 6.06. Seller's UK Lease Guarantee. Buyer shall assume Seller's
obligations in connection with SCB United Kingdom's lease and shall indemnify
and hold Seller harmless thereon.
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SECTION 6.07. Constituent Documents; Unit Terms. Except as otherwise
set forth in this Agreement, from and after June 20, 2000 through the Closing
Date, Buyer shall not:
(i) make any amendment to Buyer's constituent documents or the terms
of the Buyer Units, in each case, that would have an adverse effect on the
rights of Seller or SCB Partners under the terms of the Acquired Units as
if Seller or SCB Partners were the beneficial owner of the Acquired Units
as of the effective date of such amendment, that is different from the
effect such amendment would have on the rights of the limited partners of
Buyer as of the effective date of such amendment; or
(ii) agree or commit to do any of the foregoing.
ARTICLE 7
COVENANTS OF BUYER AND SELLER
Buyer and Seller agree that:
SECTION 7.01. Best Efforts; Further Assurances. (a) Subject to the
terms and conditions of this Agreement and the other Transaction Documents,
Buyer and Seller will use their reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement and the other Transaction Documents. In
furtherance and not in limitation of the foregoing, each of Buyer and Seller
agrees to make appropriate filings pursuant to applicable Antitrust Laws,
including a Notification and Report Form pursuant to the HSR Act and any
applicable filings in Australia, Canada, the United Kingdom and the European
Union with respect to the transactions contemplated hereby as promptly as
practicable after June 20, 2000 and to supply as promptly as practicable any
additional information and documentary material that may be requested pursuant
to the HSR Act and to take all other actions necessary to cause the expiration
or termination of the applicable waiting periods under the HSR Act as soon as
practicable; provided that, neither Buyer nor Seller (or any of their
Affiliates) shall be required to divest any material assets or business, accept
any material restrictions on its assets or business or any assets or business to
be acquired hereunder or to consent to any consent decree with the FTC, DOJ or
any other governmental authority.
(b) In connection with the efforts referenced in Section 7.01(a) to
obtain all requisite approvals and authorizations for the transactions
contemplated by this
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Agreement under the HSR Act or any other Antitrust Law, each of Buyer and Seller
shall use its reasonable best efforts to cooperate in all respects with each
other in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, keep the other party informed in all material respects of any material
communication received by such party from, or given by such party to, the
Federal Trade Commission (the "FTC"), the Antitrust Division of the Department
of Justice (the "DOJ") or any other governmental authority and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the transactions contemplated by this
Agreement and permit the other party to review any material communication given
by it to, and consult with each other in advance of and be permitted to attend
any meeting or conference with, the FTC, the DOJ or any such other governmental
authority or, in connection with any proceeding by a private party, with any
other Person. For purposes of this Agreement, "ANTITRUST LAWS" means the Sherman
Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, and all other federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition through merger or acquisition.
(c) Seller and Buyer agree, and Seller, prior to the Closing, and
Buyer, after the Closing, agree to cause each of the Companies, to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable in order to consummate
or implement expeditiously the transactions contemplated by this Agreement.
SECTION 7.02. Certain Filings. Seller and Buyer shall cooperate with
one another (i) in determining whether any action by or in respect of, or filing
with, any governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
SECTION 7.03. Public Announcements. The parties shall agree on the
terms of the press release that announces the transactions contemplated hereby
and thereafter agree to consult with each other before issuing any press release
or making any public statement with respect to this Agreement or the
transactions contemplated hereby, including any press releases the making of
which may be
82
required by applicable law or any listing agreement with any national securities
exchange.
SECTION 7.04. Notices of Certain Events. Seller and Buyer shall each
promptly notify the other of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(c) in the case of Seller, any actions, suits, claims, investigations
or proceedings commenced or, to its knowledge threatened against, relating
to or involving or otherwise affecting Seller or any of the Companies that,
if pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.13 or that relate to the consummation
of the transactions contemplated by this Agreement; and
(d) in the case of Buyer, any actions, suits, claims, investigations
or proceedings commenced or, to its knowledge threatened against, relating
to or involving or otherwise affecting Buyer that, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant
to Section 4.03 or that relate to the consummation of the transactions
contemplated by this Agreement or any of the other Transaction Agreements.
SECTION 7.05. Intercompany Accounts. Except with respect to amounts
relating to employee loans, employee margin indebtedness, investment management
contracts and employee compensation, all receivables, payables and other
obligations between Seller or its Affiliates, on the one hand, and any of the
Acquired Companies, on the other hand, shall be settled (irrespective of the
terms of payment of such intercompany accounts) prior to the Closing; provided
that Seller shall and shall cause the Companies to estimate the amount of any
royalties due to BTI as of the Closing and to pay such estimated amount to BTI
prior to the Closing.
SECTION 7.06. Certain Post-Closing Fund Matters. Buyer and Seller
acknowledge that the transactions contemplated by this Agreement are intended to
qualify for the treatment described in Section 15(f) of the Investment Company
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Act. In this regard, the Buyer and Seller shall, and from and after the Closing
shall cause the Buyer to, (i) use all reasonable efforts to assure that, for a
period of three years after the Closing Date, at least 75% of the Board of
Directors of each Registered Fund or any permitted successor thereto are not
"interested persons" of the Buyer, Seller or the Companies, as that term is
defined under applicable provisions of the Investment Company Act and
interpreted by the SEC; and (ii) refrain from imposing or seeking to impose, for
a period of two years after the Closing Date, any "unfair burden" on any
Registered Fund, within the meaning of the Investment Company Act.
ARTICLE 8
TAX MATTERS
SECTION 8.01. Tax Definitions. The following terms, as used herein,
have the following meanings:
"ACQUIRED COMPANIES" means BD LLC and its predecessor SCB New York, ADV
LLC, SCB United Kingdom and SCB Australia.
"BUYER INDEMNITEE" means Buyer, ACM LLC, any of their Affiliates and,
effective upon the Closing, any of the Acquired Companies.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED TAX" means any income or franchise Tax payable to any state,
local or foreign taxing jurisdiction in which any of the Acquired Companies has
filed or will file a Return with Seller on an affiliated, consolidated, combined
or unitary basis with respect to such Tax.
"FINAL DETERMINATION" shall mean (i) any final determination of
liability in respect of a Tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise
(including the expiration of a statute of limitations or a period for the filing
of claims for refunds, amended returns or appeals from adverse determinations),
including a "determination" as defined in Section 1313(a) of the Code or
execution of an Internal Revenue Service Form 870AD or (ii) the payment of Tax
by Buyer, Seller or any of their Affiliates, whichever is responsible for
payment of such Tax under applicable law, with respect to any item disallowed or
adjusted by a Taxing Authority, provided that such responsible party determines
that no action should be taken to recoup such payment and the other party
agrees.
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"POST-CLOSING TAX PERIOD" means any Tax period beginning after the
Closing Date; and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period beginning after
the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or before the
Closing Date; and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period ending on the
Closing Date.
"TAX" means (i) any tax of any kind whatsoever (including, but not
limited to, taxes collected by withholding from amounts paid to or by any
Person), together with any interest, penalty, addition to tax or additional
amount imposed by any governmental authority (a "TAXING AUTHORITY") responsible
for the imposition of any such tax (domestic or foreign), and any liability for
any of the foregoing as transferee, (ii) in the case of any of the Acquired
Companies, liability for the payment of any amount of the type described in
clause (i) as a result of being or having been before the Closing Date a member
of an affiliated, consolidated, combined or unitary group, or a party to any
agreement or arrangement, as a result of which liability of any of the Acquired
Companies to a Taxing Authority is determined or taken into account with
reference to the activities of any other Person, (iii) liability for the payment
of any amount of the type described in clause (i) as a result of having such
Acquired Company's income or assets included in the taxable income of another
person before the Closing Date, and (iv) liability of any of the Acquired
Companies for the payment of any amount as a result of being party to any Tax
Sharing Agreement or with respect to the payment of any amount imposed on any
person of the type described in (i) or (ii) as a result of any existing express
or implied agreement or arrangement (including, but not limited to, an
indemnification agreement or arrangement but excluding this Agreement and any
Transaction Agreement), in each case entered into by such Company prior to
Closing.
"TAX ASSET" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other credit or tax
attribute that could be carried forward or back to reduce Taxes (including
without limitation deductions and credits related to alternative minimum Taxes).
"TAX SHARING AGREEMENTS" means all existing agreements or arrangements
(whether or not written) binding Seller or any of the Companies that provide for
the allocation, apportionment, sharing or assignment of any Tax liability or
benefit, or the transfer or assignment of income, revenues, receipts, or gains
for the purpose of determining any person's Tax liability (including without
limitation the understanding or arrangement between BTI and SCB New York
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with respect to California income tax and excluding any indemnification
agreement or arrangement pertaining to the sale or lease of assets or
subsidiaries).
SECTION 8.02. Tax Representations. Seller represents and warrants to
Buyer as of June 20, 2000 and as of the Closing Date that:
(a) Filing and Payment. Except as set forth in Section 8.02(a) of the
Disclosure Letter, (i) all material Tax returns, statements, reports and forms
(including estimated tax or information returns and reports) ("RETURNS")
required to be filed with any Taxing Authority with respect to any Pre-Closing
Tax Period by or on behalf of Seller or any of the Companies, have, to the
extent required to be filed on or before June 20, 2000, been filed when due in
accordance with all applicable laws; (ii) as of the time of filing, such Returns
were true and complete in all material respects; and (iii) all Taxes shown as
due and payable on such Returns that have been filed have been timely paid, or
withheld and remitted to the appropriate Taxing Authority.
(b) Procedure and Compliance. Except as set forth in Section 8.02(b) of
the Disclosure Letter, (i) all Returns filed with respect to Tax years of Seller
and each of the Companies through the Tax year ended December 31, 1998 have been
examined and closed or are Returns with respect to which the applicable period
for assessment under applicable law, after giving effect to extensions or
waivers, has expired; (ii) neither Seller nor any of the Companies is delinquent
in the payment of any Tax or has requested any extension of time within which to
file any Return and has not yet filed such Return; (iii) neither Seller nor any
of Companies (and no member of any affiliated, consolidated, combined or unitary
group of which Seller or any of the Companies is or has been a member) has
granted any extension or waiver of the statute of limitations period applicable
to any Return, which period (after giving effect to such extension or waiver)
has not yet expired; (iv) there is no claim, audit, action, suit, proceeding, or
investigation now pending or threatened against or with respect to Seller or any
of the Companies in respect of any Tax or Tax Asset; (v) no adjustment that
would increase the Tax liability, or reduce any Tax Asset, of any of the
Companies has been made, proposed or threatened by a Taxing Authority during any
audit of a Pre-Closing Tax Period which could reasonably be expected to have a
material effect on a Post-Closing Tax Period; (vi) there are no requests for
rulings or determinations in respect of any Tax or Tax Asset pending between any
of the Companies and any Taxing Authority; and (vii) neither Seller nor any of
the Companies has received a tax opinion with respect to any transaction not in
the ordinary course of business relating to any of the Companies or Seller, to
the extent such transaction could reasonably be expected to have a material
adverse tax effect on any Acquired Company with respect to a Post-Closing Tax
Period.
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(c) Taxing Jurisdictions. Section 8.02(c) of the Disclosure Letter
contains a list of all jurisdictions (whether foreign or domestic) to which any
material Tax is properly payable by Seller or any of the Companies.
(d) Tax Sharing, Consolidation and Similar Arrangements. Except as set
forth in Section 8.02(d) of the Disclosure Letter, (i) neither Seller nor any of
the Companies has been a member of an affiliated, consolidated, combined or
unitary group other than one of which Seller was the common parent, or made any
election or participated in any arrangement whereby any Tax liability or any Tax
Asset of any of the Acquired Companies was determined or taken into account for
Tax purposes with reference to or in conjunction with any Tax liability or any
Tax Asset of any other person; (ii) neither Seller nor any of the Companies is
party to any Tax Sharing Agreement or to any other agreement or arrangement
referred to in clause (ii) or (iii) of the definition of "Tax"; (iii) no amount
of the type described in clause (ii) or (iii) of the definition of "Tax" is
currently payable by Seller or any of the Companies, regardless of whether such
Tax is imposed on that Person; and (iv) neither Seller nor any of the Companies
has entered into any agreement or arrangement with any Taxing Authority with
regard to the Tax liability of Seller or any of the Companies affecting any Tax
period for which the applicable statute of limitations, after giving effect to
extensions or waivers, has not expired.
(e) Certain Agreements and Arrangements. Except as set forth in Section
8.02(e) of the Disclosure Letter, (i) neither Seller nor any of the Companies is
a direct or indirect beneficiary of a guarantee of tax benefits or any other
arrangement that has the same economic effect (including an indemnity from a
seller or lessee of property, or other insurance) with respect to any
transaction or tax opinion relating to the investment advisory and broker-dealer
businesses of the Seller or any of the Companies; (ii) neither Seller nor any of
the Companies is a party to any transaction entered into in connection with such
businesses which is described in, or substantially similar to the transactions
listed in, Internal Revenue Service Notice 2000-15; (iii) during the five-year
period ending on June 20, 2000, neither Seller nor any of the Companies was a
distributing corporation or a controlled corporation in a transaction intended
to be governed by Section 355 of the Code, and (iv) neither Seller nor any of
the Companies has participated in or cooperated with an international boycott
within the meaning of Section 999 of the Code or has been requested to do so in
connection with any transaction or proposed transaction.
(f) Post-Closing Attributes. Except as set forth in Section 8.02(f) of
the Disclosure Letter, (i) none of the Acquired Companies will be required to
include any adjustment in taxable income for any Post-Closing Tax Period under
Section 481(c) of the Code (or any similar provision of the Tax laws of any
jurisdiction)
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as a result of a change in method of accounting for a Pre-Closing Tax Period and
(ii) none of the Acquired Companies will be required to include for a
Post-Closing Tax Period taxable income attributable to income economically
realized in a Pre-Closing Tax Period as a result of the installment method or
the look-back method (as defined in Section 460(b) of the Code).
(g) Property and Leases. Except as set forth in Section 8.02(g) of the
Disclosure Letter, (i) neither Seller nor any of the Companies owns an interest
in real property in any jurisdiction in which a Tax is imposed, or the value of
the interest is reassessed, on the transfer of an interest in real property and
which treats the transfer of an interest in an entity that owns an interest in
real property as a transfer of the interest in real property; (ii) none of the
property owned or used by Seller or any of the Companies is subject to a tax
benefit transfer lease executed in accordance with Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended; (iii) none of the Acquired Companies
and no Affiliate of an Acquired Company is party to a lease of tangible
property, other than a lease that is, for U.S. federal income tax purposes, a
"true" lease under which such Acquired Company or Affiliate owns or uses the
property subject to the lease; (iv) none of the Acquired Companies and no
Affiliate of any of the Acquired Companies is party to a lease arrangement
involving a defeasance of rent, interest or principal; and (v) none of the
property owned by any of the Acquired Companies is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(h) Certain Elections. Except as set forth in Section 8.02(h) of the
Disclosure Letter, (i) no election has been made under Treas. Reg. Sec.
301.7701-3 or any similar provision of Tax law to treat any of the Acquired
Companies or any Affiliate of any of the Acquired Companies as an association,
corporation or partnership; (ii) each of the Acquired Companies is or once
formed will be disregarded as an entity for U.S. federal Tax purposes (including
pursuant to an election under Section 1361(b)(3)(B)(ii) of the Code); (iii) a
protective carryover election has been filed in connection with each transaction
consummated by any of the Companies prior to January 20, 1994 that constituted a
"qualified stock purchase" within the meaning of Section 338 of the Code; (iv)
none of Seller, any of the Companies and any other person on behalf of any of
the Companies has entered into any agreement or consent pursuant to Section
341(f) of the Code and (v) SCB Partners will be at all times up to and including
the Closing a qualified subchapter S subsidiary within the meaning of Section
1361(b)(3)(B) of the Code.
(i) S Corporation Status. On the date set forth in paragraphs (i) or
(ii), as the case may be, of Section 8.02(i) of the Disclosure Letter, each of
the entities identified below made an election as described herein.
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(i) Seller made a valid election under Subchapter S of the Code to
which all Persons who were shareholders on the date of such election gave
their (and if necessary each shareholder's spouse gave his or her) consent.
Since such election was made, Seller's status as an S corporation has not
terminated pursuant to Section 1362(d) of the Code.
(ii) SCB New York made a valid election under Subchapter S of the Code
to which all Persons who were shareholders on the date of such election
gave their (and if necessary each shareholder's spouse gave his or her)
consent. During the period such election was in force, SCB New York's
status as an S corporation was not terminated pursuant to Section 1362(d)
of the Code.
(iii) On and following the respective dates on which Seller or SCB New
York, as applicable, became an S corporation and through June 20, 2000 (in
the case of Seller) or the date set forth in Section 8.02(i)(iv) of the
Disclosure Letter (in the case of SCB New York), (A) the only authorized
and outstanding shares of capital stock of Seller or SCB New York have been
the shares of Common Stock, (B) no Person other than an individual, a trust
described in Section 1361(c)(2) or (d)(3) of the Code or an estate has been
the record or beneficial owner of any shares of such Common Stock (or any
interest therein), (C) solely individuals, trusts or estates, numbering not
more than the maximum number of shareholders permitted under, and as
determined for purposes of, Section 1361(b)(1) of the Code (as in effect
from time to time during the relevant period), have been the record or
beneficial owners of such Common Stock (or any interest therein) at any
time, (D) no Person who has been the record or beneficial owner of any such
Common Stock (or any interest therein), or such Person's spouse, has been a
nonresident alien within the meaning of Section 1361(b)(1)(C) of the Code
or a dual resident taxpayer within the meaning of Treas. Reg. Sec.
301.7701(b)-7(a)(1), (E) neither Seller nor SCB New York has been an
"ineligible corporation" within the meaning of Section 1361(b)(2) of the
Code, (F) neither Seller nor SCB New York has issued or entered into any
indebtedness other than indebtedness which constitutes "straight debt"
within the meaning of Section 1361(c)(5) of the Code and Treas. Reg. Sec.
1.1361-1(l)(5), (G) none of Seller, SCB New York and any Person who has
been the record or beneficial owner of any such Common Stock (or any
interest therein) has entered into any binding agreements relating to
rights to distributions and liquidation proceeds in respect of such Common
Stock, or any other agreement with respect to such Common Stock, including,
but not limited to, buy-sell agreements, agreements restricting the
transferability of such Common Stock, or redemption agreements (other than
the Shareholders' Agreement), (H)
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neither Seller nor SCB New York has acquired the assets of any other
corporation in a transaction described in Section 381(a) of the Code, and
(I) neither Seller nor SCB New York has owned 50% or more in vote or value
of the stock (including any instrument or interest that constitutes stock
for U.S. federal income tax purposes) of any corporation or has entered
into any partnership, joint venture, marketing or other similar contract or
arrangement with any Person, excluding in each case the Companies and
Sanford C. Bernstein & Co. Advanced Value Fund L.P.
(iv) SCB New York and BTI are, and have been since the date set forth
in Section 8.02(i)(iv) of the Disclosure Letter, qualified subchapter S
subsidiaries, within the meaning of Section 1361(b)(3)(B). On and following
the respective dates on which SCB New York or BTI, as applicable, became a
qualified subchapter S subsidiary and through June 20, 2000, (A) the only
authorized and outstanding shares of capital stock of SCB New York or BTI
have been the shares of Common Stock, (B) neither SCB New York nor BTI has
issued or entered into any indebtedness other than indebtedness which
constitutes "straight debt" within the meaning of Section 1361(c)(5) of the
Code and Treas. Reg. Sec. 1.1361-1(l)(5), (C) none of Seller, SCB New York,
BTI and any Person who has been the record or beneficial owner of any such
Common Stock (or any interest therein) has entered into any binding
agreements relating to rights to distributions and liquidation proceeds in
respect of such Common Stock, or any other agreement with respect to such
Common Stock, including, but not limited to, buy-sell agreements,
agreements restricting the transferability of such Common Stock, or
redemption agreements other than the Shareholders' Agreement, (D) neither
SCB New York nor BTI has acquired the assets of any other corporation in a
transaction described in Section 381(a) of the Code, and (E) neither SCB
New York nor BTI has owned 50% or more in vote or value of the stock
(including any instrument or interest that constitutes stock for U.S.
federal income tax purposes) of any corporation or has entered into any
partnership, joint venture, marketing or other similar contract or
arrangement with any Person, excluding in each case the Companies and
Sanford C. Bernstein & Co. Advanced Value Fund L.P.
(v) The Principals' Profit-Sharing Pool complies and has complied at
all times with the requirements of the Treas. Reg. Sec. 1.1361-1(b)(4).
None of Seller, SCB New York and BTI has issued or entered into any
restricted stock, deferred compensation or profit-sharing plans, call
options, warrants or similar instruments with respect to its stock, stock
appreciation rights, convertible debt instruments, stock-based employee
incentive plans, or other similar instruments, obligations or arrangements
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other than the Principals' Profit-Sharing Pool that could be treated as a
second class of stock under Section 1361 of the Code and Reg. Sec.
1.1361-1.
SECTION 8.03. Covenants. (a) Without the prior written consent of Buyer
(which shall not be unreasonably withheld), neither Seller nor any of the
Companies shall, to the extent it may affect or relate to any of the Acquired
Companies, make or change any Tax election, change any annual Tax accounting
period, adopt or change any method of Tax accounting, file any amended Return,
enter into any closing agreement, settle any Tax claim or assessment, surrender
any right to claim a Tax refund, offset or other reduction in Tax liability,
consent to any extension or waiver of the limitations period applicable to any
Tax claim or assessment or take or omit to take any other action, if any such
action or omission would have the effect of increasing the Tax liability or
reducing any Tax Asset of any of the Acquired Companies, Buyer or any Affiliate
of Buyer.
(b) All Returns required to be filed by Seller or any of the Companies
on or after the Closing Date with respect to any period beginning prior to the
Closing (i) will be filed when due in accordance with all applicable laws and
(ii) as of the time of filing, will be true and complete in all material
respects.
(c) Seller shall include the relevant Acquired Companies in any
Combined Tax Return through the close of business on the Closing Date.
(d) Prior to the Closing, none of the Acquired Companies shall make any
payment of, or in respect of, any Tax to any person or any Taxing Authority,
except to the extent such payment is in respect of a Tax that is due or payable
or has been properly estimated in accordance with applicable law as applied in a
manner consistent with past practice of Seller.
(e) Fifty percent (50%) of all transfer, documentary, sales, use,
stamp, registration, value added and other such Taxes and fees (including any
penalties and interest) incurred in connection with transactions contemplated by
this Agreement (including any real property transfer tax and any similar Tax)
shall be paid by each of Buyer and Seller when due. Each of Buyer and Seller
will, at its own expense, file all necessary Tax returns and other documentation
with respect to all such Taxes and fees, and, to the extent required by
applicable law, each of Seller and Buyer will, and will cause its Affiliates to,
join in the execution of any such Tax returns and other documentation.
(f) Seller and Buyer agree to treat the transactions described in
Sections 2.02 through 2.04 as occurring as of the close of business on the
Closing Date in the order described in Article 2 for all tax purposes.
Accordingly, Seller will
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include in its taxable income all amounts earned by Seller or any of the
Companies prior to or on the Closing Date.
SECTION 8.04. Tax Sharing. Any and all existing Tax Sharing Agreements
to which an Acquired Company is a party shall be terminated as of the Closing
Date. After the Closing Date, none of the Acquired Companies shall have any
further rights or liabilities thereunder. Seller shall compensate Buyer for and
hold the Acquired Companies harmless against any Tax resulting from such
termination.
SECTION 8.05. Cooperation on Tax Matters. (a) Buyer and Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the preparation and filing of any Return, 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. Buyer and Seller agree (i) to retain all books and
records with respect to Tax matters pertinent to the Companies relating to any
Pre-Closing Tax Period, and to abide by all record retention agreements entered
into with any Taxing Authority, and (ii) to give the other party reasonable
written notice prior to destroying or discarding any such books and records and,
if the other party so requests, Buyer or Seller, as the case may be, shall allow
the other party to take possession of such books and records.
(b) Buyer and Seller further agree, upon request, to use all reasonable
efforts to obtain any certificate or other document from any governmental
authority or customer of any of the Acquired Companies 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).
SECTION 8.06. Seller Tax Indemnification. (a) Seller hereby indemnifies
each Buyer Indemnitee against and agrees to hold each Buyer Indemnitee harmless
from any (w) liability of any Buyer Indemnitee with respect to Tax of Seller or
any of the Acquired Companies described in clause (i) of the definition of Tax
imposed with respect to any Pre-Closing Tax Period including by reason of (1)
the Seller's (or any predecessor's) failure to qualify as an S corporation
within the meaning of Section 1361 of the Code or (2) SCB New York's (or any
predecessor's) failure to qualify as a qualified subchapter S subsidiary within
the meaning of Section 1361 of the Code, (x) any other liability for Tax
described in clause (ii), (iii) or (iv) of the definition of Tax, (y) Tax
(including any increase in
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Tax due to the loss of amortization deductions or other similar items) of any of
the Acquired Companies resulting directly from a breach of the provisions of
Section 8.02 or Section 8.03, but not from any adjustment to the Cash Purchase
Price or Units Purchase Price resulting from such breach and (z) liabilities,
costs, expenses (including, without limitation, reasonable expenses of
investigation and attorneys' fees and expenses), losses, damages, assessments,
settlements or judgments arising out of or incident to the imposition,
assessment or assertion of any Tax described in (v), (w), (x) or (y), (the sum
of (w), (x), (y), and (z) being referred to herein as a "LOSS"); provided that
Seller shall have no liability for the payment of any Loss attributable to or
resulting from an election made by Buyer under Section 338 of the Code or any
comparable provision of applicable law and the Seller shall not be liable for
Losses arising in connection with its indemnification obligation under this
Section 8.06(a) until (and only to the extent) the amount of such Losses exceeds
$10,000 in the aggregate.
(b) For purposes of this Section and Section 8.07, in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax related
to the portion of such Tax period ending on and including the Closing Date shall
(x) in the case of any Taxes other than gross receipts, sales or use Taxes and
Taxes based upon or related to income, be deemed to be the amount of such Tax
for the entire Tax period multiplied by a fraction the numerator of which is the
number of days in the Tax period ending on and including the Closing Date and
the denominator of which is the number of days in the entire Tax period, and (y)
in the case of any Tax based upon or related to income and any gross receipts,
sales or use Tax, be deemed equal to the amount which would be payable if the
relevant Tax period ended on and included the Closing Date. All determinations
necessary to give effect to the allocation set forth in the foregoing clause (y)
shall be made in a manner consistent with prior practice of the relevant
Acquired Company.
(c) Not later than 30 days after receipt by Seller of written notice
from Buyer stating that any Loss has been incurred by a Buyer Indemnitee and the
amount thereof and of the indemnity payment requested, Seller shall discharge
its obligation to indemnify the Buyer Indemnitee against such Loss by paying to
Buyer an amount equal to the amount of such Loss promptly after the conclusion
of any contest with a Taxing Authority respect thereto. Notwithstanding the
foregoing, if Buyer provides Seller with written notice of a Loss at least 30
days prior to the date on which the relevant Loss is required to be paid by any
Buyer Indemnitee, within that 30-day period Seller shall discharge its
obligation to indemnify the Buyer Indemnitee against such Loss by making
payments to the relevant Taxing Authority or Buyer, as directed by Buyer, in an
aggregate amount equal to the amount of such Loss. The payment by a Buyer
Indemnitee of any Loss shall not relieve Seller of its obligation under this
Section 8.06.
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(d) Buyer agrees to give prompt notice to Seller of any Loss or the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought hereunder which Buyer deems to be
within the ambit of this Section 8.06 (specifying with reasonable particularity
the basis therefor) and will give Seller such information with respect thereto
as Seller may reasonably request. Seller may, at its own expense, (i)
participate in and (ii) upon notice to Buyer, assume the defense of any such
suit, action or proceeding (including any Tax audit); provided that (A) Seller's
counsel is reasonably satisfactory to Buyer, (B) Seller shall thereafter consult
with Buyer upon Buyer's reasonable request for such consultation from time to
time with respect to such suit, action or proceeding (including any Tax audit)
and (C) Seller shall not, without Buyer's consent, agree to any settlement with
respect to any Tax if such settlement could adversely affect the Tax liability
of Buyer, any of its Affiliates or, upon the Closing, any of the Acquired
Companies. If Seller assumes such defense, (1) Buyer shall have the right (but
not the duty) to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by Seller and (2) Seller
shall not assert that the Loss, or any portion thereof, with respect to which
Buyer seeks indemnification is not within the ambit of this Section 8.06. If
Seller elects not to assume such defense, Buyer may pay, compromise or contest
the Tax at issue at its sole discretion. Whether or not Seller chooses to defend
or prosecute any claim, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
(e) Seller shall not be liable under this Section 8.06 with respect to
any Tax resulting from a claim or demand the defense of which Seller was not
offered the opportunity to assume as provided under Section 8.06(d). No
investigation by Buyer or any of its Affiliates at or prior to the Closing Date
shall relieve Seller of any liability hereunder.
(f) Any claim of any Buyer Indemnitee (other than Buyer) under this
Section may be made and enforced by Buyer on behalf of such Buyer Indemnitee.
SECTION 8.07. Buyer Tax Indemnification. (a) Buyer hereby indemnifies
Seller against and agrees to hold Seller harmless from any (w) liability of
Seller with respect to Tax of any of the Acquired Companies described in clause
(i) of the definition of Tax related to a Post-Closing Tax Period, (x) any other
liability for Tax described in clause (ii), (iii) or (iv) of the definition of
Tax, after replacing, in each such clause, the phrase "before the Closing" with
the phrase "after the Closing", (y) Tax resulting from any breach of Section
8.07(e) and (z) liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and attorneys' fees and expenses), losses,
damages, assessments, settlements or judgments arising out of or incident to the
imposition, assessment
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or assertion of any Tax described in (w), (the sum of (w), (x), (y) and (z)
being referred to herein as a "SELLER LOSS"); provided, that the Buyer shall not
be liable for Seller Losses arising in connection with its indemnification
obligation under this Section 8.07 hereof until (and only to the extent) the
amount of such Seller Losses exceeds $10,000 in the aggregate.
(b) Not later than 30 days after receipt by Buyer of written notice
from Seller stating that any Seller Loss has been incurred and the amount
thereof and of the indemnity payment requested, Buyer shall discharge its
obligation to indemnify the Seller against such Seller Loss by paying to Seller
an amount equal to the amount of such Seller Loss. Notwithstanding the
foregoing, if Seller provides Buyer with written notice of a Seller Loss at
least 30 days prior to the date on which the relevant Seller Loss is required to
be paid by Seller, within that 30-day period Buyer shall discharge its
obligation to indemnify the Seller against such Seller Loss by making payments
to the relevant Taxing Authority or Seller, as directed by Seller, in an
aggregate amount equal to the amount of such Seller Loss.
(c) Seller agrees to give prompt notice to Buyer of any Seller Loss or
the assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought hereunder which Seller
deems to be within the ambit of this Section 8.07 (specifying with reasonable
particularity the basis therefor) and will give Buyer such information with
respect thereto as Buyer may reasonably request. Buyer may, at its own expense
and upon notice to Seller, assume the defense of any such suit, action or
proceeding (including any Tax audit); provided that (A) Buyer's counsel is
reasonably satisfactory to Seller, and (B) Buyer shall thereafter consult with
Seller upon Seller's reasonable request for such consultation from time to time
with respect to such suit, action or proceeding (including any Tax audit). If
Buyer assumes such defense, (1) Seller shall have the right (but not the duty)
to participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by Buyer and (2) Buyer shall not assert that
the Seller Loss, or any portion thereof, with respect to which Seller seeks
indemnification is not within the ambit of this Section 8. If Buyer elects not
to assume such defense, Seller may pay, compromise or contest the Tax at issue
at its sole discretion. Whether or not Buyer chooses to defend or prosecute any
claim, all of the parties hereto shall cooperate in the defense or prosecution
thereof.
(d) Buyer shall not be liable under this Section 8.07 with respect to
any Tax resulting from a claim or demand the defense of which Buyer was not
offered the opportunity to assume as provided under Section 8.07(c).
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(e) Neither Buyer nor any of its Affiliates shall amend any Return
filed by any Acquired Company with respect to any Pre-Closing Tax Period without
Seller's prior written consent, which shall not be unreasonably withheld.
SECTION 8.08. Certain Disputes. Disputes arising under this Article 8
and not resolved by mutual agreement as stated therein shall be resolved by the
Accounting Referee. The Accounting Referee shall resolve any disputed items
within 30 days of having the item referred to it pursuant to such procedures as
it may require. The costs, fees and expenses of the Accounting Referee shall be
borne equally by Buyer and Seller.
SECTION 8.09. Purchase Price Adjustment and Interest. Any amount paid
in cash by Seller or Buyer under Article 8 or any of the provisions of this
Agreement will be treated as an adjustment to the Cash Purchase Price, and any
amount paid in Buyer Units by Seller or Buyer under Section 2.10(c) shall be
treated as an adjustment to the Units Purchase Price, for all Tax purposes
except to the extent a Final Determination causes any such amount not to
constitute an adjustment to the Cash Purchase Price or Units Purchase Price,
respectively, for Tax purposes. Any payment required to be made by Buyer or
Seller under Article 8 that is not made when due shall bear interest at Prime
for each day until paid.
SECTION 8.10. Survival. Notwithstanding anything in this Agreement to
the contrary, the provisions of this Article 8 shall survive for the full period
of all applicable statutes of limitations (giving effect to any waiver,
mitigation or extension thereof).
ARTICLE 9
EMPLOYEE BENEFITS
SECTION 9.01. Year 2000 Compensation. Seller shall determine and be
responsible for all amounts of base salary, incentive compensation, commissions
and bonuses (the "YEAR 2000 COMPENSATION") due to its employees for all periods
prior to and including the Closing Date.
SECTION 9.02. Bonus Pools. (a) For each of the first three Anniversary
Periods following the Closing Date, Buyer shall establish a $15 million
incentive compensation bonus pool for the exclusive benefit of Eligible Seller
Employees who were participants in the Principals' Profit-Sharing Pool as of the
Closing Date (the "IC BONUS POOL"). Any IC Bonus Pool amounts that have not been
awarded as of the conclusion of the first or second Anniversary Period following
the Closing Date shall be added to the Bonus Pool with respect to the subsequent
96
Anniversary Period; provided that as of the conclusion of the third Anniversary
Period following the Closing Date, any amount remaining in the IC Bonus Pool
(including any carry-over amounts) shall be allocated to Eligible Seller
Employees who were participants in the Principals' Profit-Sharing Pool as of the
Closing Date.
(b) The Executive Committee, subject to approval by Buyer's Board of
Directors and/or its Board Compensation Committee, will have the discretion to
establish a commissions bonus pool and a general bonus pool for General Seller
Employees.
(c) Upon the conclusion of the third Anniversary Period following the
Closing Date, all Eligible Seller Employees and any General Seller Employee
deemed eligible by the Executive Committee (subject to approval by Buyer's Board
of Directors and/or its Board Compensation Committee) shall be eligible to
participate in Buyer's incentive compensation programs.
(d) The Executive Committee shall be responsible for making all awards
from (i) the bonus pools referred to in this Section and (ii) Buyer's incentive
compensation program, in each case as provided in this Section and subject to
approval by Buyer's Board of Directors and/or its Board Compensation Committee.
SECTION 9.03. Deferred Compensation. On or before the Closing Date,
Buyer shall adopt the Deferred Compensation Plan. Buyer shall maintain an
effective registration statement under the Securities Act of 1933, as amended on
Form S-8 (or any successor form) with respect to each registerable offering
under the Deferred Compensation Plan to the same extent that such similar
offerings are registered under the Amended and Restated Alliance Partners
Deferred Compensation Plan or any successor thereto.
SECTION 9.04. Benefit Plans. For the period beginning on the Closing
Date, Buyer shall maintain employee benefit plans, programs, policies and
arrangements for the Eligible Seller Employees that are no less favorable in the
aggregate to those provided under the Employee Plans as in effect on the Closing
Date. The Hive Executive Committee will decide when, if and how such employee
benefits policies, plans and programs should be changed and funded.
SECTION 9.05. Employee Matters. (a) The aggregate base cash
compensation for all Eligible Seller Employees who were shareholders of Seller
as of the Closing Date shall be $24.55 million for each of the first three
Anniversary Periods from the Closing Date (the "CORE COMPENSATION POOL"). Any
amounts (other than compensation paid under the Deferred Compensation
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Plan as in effect as of the Closing Date) paid pursuant to an employment
agreement referred to in the recitals to this Agreement shall be deducted from
the Core Compensation Pool.
(b) Compensation to be paid to Eligible Seller Employees or General
Seller Employees who are terminated for any reason following the Closing Date
but before the third anniversary of the Closing Date ("TERMINATION PAY") shall
be determined at the sole discretion of the SCB Committee, which Termination Pay
may include a portion of deferred, incentive or base compensation not awarded or
paid at the time of such employee's termination of employment, provided that the
aggregate amount of such Termination Pay shall be deducted from the applicable
bonus and compensation pools.
ARTICLE 10
CONDITIONS TO CLOSING
SECTION 10.01. Conditions to Obligations of Buyer and Seller. The
obligations of Buyer and Seller to consummate the Closing are subject to the
satisfaction of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote or consent of the
stockholders of the Seller required by the General Corporation Law of the
State of Delaware and the Certificate of Incorporation of the Seller.
(b) Any Public Units that may be issued in exchange for Buyer Units
pursuant to this Agreement and the Purchase Agreement, shall have been
approved for listing on the New York Stock Exchange, subject to official
notice of issuance, to the extent required by the NYSE, the listing rules
of the NYSE or any listing agreement between Alliance Holding and the NYSE.
(c) This Agreement and the agreements referred to in the recitals to
this Agreement and the transactions contemplated hereby and thereby shall
have been approved and adopted by the requisite vote or consent of the
limited partners of Buyer and/or the limited partners and unitholders of
Alliance Holding to the extent required by the NYSE, the listing rules of
the NYSE or any listing agreement between Alliance Holding and the NYSE.
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(d) Any applicable waiting period, clearance, approval or filing under
the HSR Act or any other Antitrust Law or regulation relating to the
transactions contemplated hereby shall have expired or been terminated or
shall have been obtained or made.
(e) No provision of any applicable law or regulation and no judgment,
injunction, order or decree of any court or administrative body of
competent jurisdiction shall prohibit the consummation of the Closing.
(f) All notifications and filings shall have been made and all
consents, authorizations or approvals from the governmental agencies
referred to in Sections 3.03 and 4.03 shall have been received, in each
case in form and substance reasonably satisfactory to Buyer (in the case of
those matters set forth in Section 3.03) and Seller (in the case of those
matters set forth in Section 4.03), as the case may be, and no such
consent, authorization or approval shall have been revoked.
(g) Seller and Alliance Holding shall have entered into a registration
rights agreement containing the terms set forth in Exhibit B hereto and in
form and substance reasonably satisfactory to Seller and Buyer.
(h) A Deferred Compensation Plan containing the terms set forth in
Exhibit A hereto and in form and substance reasonably satisfactory to
Seller and Buyer shall have been adopted by Buyer.
SECTION 10.02. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Seller shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing Date, (ii) the representations and warranties of Seller contained
in this Agreement and in any certificate or other writing delivered by
Seller pursuant hereto (A) that are qualified by materiality or Material
Adverse Effect shall be true at and as of the Closing Date as if made at
and as of such date (except that representations and warranties that by
their terms speak as of the date of this Agreement or some other date need
be true only as of such specified date), and (B) that are not qualified by
materiality or Material Adverse Effect shall be true in all material
respects at and as of the Closing Date as if made at and as of such time
(except that representations and warranties that by their terms speak as of
the date of this Agreement or some other date need be true only as of such
specified
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date) and (iii) Buyer shall have received a certificate signed by the
Senior Vice President, Finance and Administration of Seller to the
foregoing effect.
(b) There shall not be instituted and pending any action or proceeding
by any governmental authority or agency, domestic or foreign, in any court
(i) seeking to restrain, prohibit or otherwise materially interfere with
the ownership or operation by Buyer or any of its Affiliates of all or any
material portion of the BTI Purchased Assets or the business or assets of
any of the Companies or of Buyer or any of their Affiliates or to compel
Buyer or any of its Affiliates to dispose of all or any material portion of
the BTI Purchased Assets or business or assets of any of the Companies or
of Buyer or any of their Affiliates, (ii) seeking to impose or confirm
limitations on the ability of Buyer or any of its Affiliates effectively to
exercise full rights of ownership of the Equity of BD LLC or ADV LLC
acquired or owned by Seller or any of its Affiliates on all matters
properly presented to the members thereof, (iii) seeking to require
divestiture by Buyer or any of its Affiliates of any Equity of BD LLC or
ADV LLC or (iv) in any manner challenging or seeking to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement.
(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the purchase of the BTI
Purchased Assets or the Equity of BD LLC or ADV LLC, by any court,
government or governmental authority or agency, domestic or foreign, other
than the application of the waiting period provisions of the HSR Act or any
other Antitrust Law to the purchase of the BTI Purchased Assets or the
Equity of BD LLC or ADV LLC, that, in the reasonable judgment of Buyer is
reasonably likely to, directly or indirectly, result in any of the
consequences referred to in clauses 10.02(b)(i) through 10.02(b)(iii)
above.
(d) Buyer shall have received opinions dated the Closing Date of
Sullivan & Cromwell, counsel to Seller, Jean Margo Reid, General Counsel,
and such other appropriate counsel, in form and substance reasonably
satisfactory to Buyer, with respect to the matters specified in Sections
3.01, 3.02, 3.03, 3.04, 3.05, 3.13, 3.23(a) and (d), 3.24(a), 3.28(b) and
3.29(b).
(e) Buyer shall have received an Assignment Determination, a Limited
Liability Determination and a Tax Determination pursuant to the Buyer
Limited Partnership Agreement with respect to this Agreement, the
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Financing Agreement and the transactions contemplated hereby and thereby.
(f) Buyer shall have received all documents it may reasonably request
relating to the existence of Seller and the Companies and the authority of
Seller, BTI, SCB Partners, BD LLC and ADV LLC for this Agreement, all in
form and substance reasonably satisfactory to Buyer.
(g) Each of Seller, BD LLC, BTI, and SCB Partners shall have delivered
to Buyer a certification to the effect that Seller, BD LLC, BTI, or SCB
Partners, respectively, is not a "foreign person" as defined in Section
1445 of the Code, substantially in the form set forth in Treas. Reg. Sec.
1.1445-2(b)(2) and signed by a responsible officer as defined in Treas.
Reg. Sec. 1.1445-2(b)(2).
(h) Buyer shall be reasonably satisfied that the Closing Revenue Run
Rate is at least equal to the product of Base Revenue Run Rate times 0.75.
(i) The Fund Approvals shall have been obtained.
SECTION 10.03. Conditions to Obligation of Seller. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer contained in
this Agreement and in any certificate or other writing delivered by Buyer
pursuant hereto (A) that are qualified by materiality or Material Adverse
Effect shall be true at and as of the Closing Date as if made at and as of
such date (except that representations and warranties that by their terms
speak as of the date of this Agreement or some other date need be true only
as of such specified date), and (B) that are not qualified by materiality
or Material Adverse Effect shall be true in all material respects at and as
of the Closing Date as if made at and as of such time (except that
representations and warranties that by their terms speak as of the date of
this Agreement or some other date need be true only as of such specified
date) and (iii) Seller shall have received a certificate signed by the
Senior Vice President and Chief Financial Officer of Buyer to the foregoing
effect.
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(b) Seller shall have received opinions dated the Closing Date of
Davis Polk & Wardwell, counsel to Buyer, David R. Brewer, Jr., General
Counsel, and such other appropriate counsel, in form and substance
reasonably satisfactory to Seller, with respect to the matters specified in
Sections 4.01, 4.02, 4.03, 4.04 and 4.06.
(c) Sullivan & Cromwell, Seller's outside counsel, shall not have
advised Seller that Sullivan & Cromwell is unable to reissue, as of the
Closing Date, such firm's tax opinion to Seller dated as of June 20, 2000
(a copy of which has been provided to Buyer) due solely to (i) (A) a change
in the Code, (B) the promulgation of any regulation (excluding any proposed
regulation) under the Code which is in effect as of the Closing Date or (C)
any decision of the federal court of appeals or Supreme Court, in each case
that is subsequent to June 20, 2000 and applicable to the transactions
contemplated hereby, or (ii) Buyer having, without the consent of Seller,
transferred or assigned, in whole or from time to time in part, to one of
more of its Subsidiaries, the right to purchase all or a portion of the
Equity or the BTI Purchased Assets pursuant to Section 13.04 (other than
assignments or cause to be directed transfers, in each case to ACM LLC or
Alliance Delaware, as contemplated by this Agreement and the other
Transaction Agreements) and, in the case of either clause (i) or (ii), such
events having a material adverse effect on the federal income tax
consequences to Seller and its shareholders, in the aggregate.
(d) Buyer shall have adopted the Deferred Compensation Plan.
(e) Seller shall have received all documents it may reasonably request
relating to the existence of Buyer and the authority of Buyer and Alliance
Holding for this Agreement, all in form and substance reasonably
satisfactory to Seller.
(f) each party (other than Seller or the Companies or any Affiliate of
the Seller or the Companies) to a Seller Transaction Agreement shall have
executed and delivered such document.
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ARTICLE 11
SURVIVAL; INDEMNIFICATION
SECTION 11.01. Survival. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until December 31, 2001; provided that (i) the covenants and agreements
(other than covenants and agreements, if any, contained in Articles 3 and 4)
shall survive indefinitely and (ii) representations and warranties contained in
Sections 3.21 and 4.18 and the covenants, agreements, representations and
warranties contained in Articles 8 and 9 shall survive until expiration of the
statute of limitations applicable to the matters covered thereby (giving effect
to any waiver, mitigation or extension thereof), if later. Notwithstanding the
preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity (stating in reasonable detail the basis for such right) shall have
been given to the party against whom such indemnity may be sought prior to such
time.
SECTION 11.02. Indemnification. (a) If a Closing occurs, Seller will
indemnify Buyer and its Affiliates and each of the Companies against and agrees
to hold each of them harmless from any and all Damages incurred or suffered by
Buyer, any Affiliate of Buyer or any of the Companies arising out of (A) any
misrepresentation or breach of warranty of Seller (other than pursuant to
Article 8), any failure of any representation or warranty to be true at and as
of the Closing Date as if made at and as of such date (except that
representations and warranties that by their terms speak as of the date of this
Agreement or some other date need be true only as of such specified date) and a
breach of Section 5.09, in each case determined without regard to any
materiality or Material Adverse Effect qualification contained in any
representation or warranty (other than, in the case of Seller, Sections 3.09(a)
and 3.14, and in the case of Buyer, Sections 4.09 or 4.13) (each such
misrepresentation and breach of warranty, or such failure of any representation
or warranty to be true, a "WARRANTY BREACH"), (B) any breach of covenant or
agreement (other than covenants and agreements, if any, contained in Articles 3
and 4) made or to be performed by Seller pursuant to this Agreement (other than
pursuant to Article 8), (C) any liability or obligation of Seller (including,
without limitation, all liabilities or obligations of Seller and the Companies
under (x) the Principals' Profit-Sharing Pool and (y) wages, bonuses, incentive
compensation or other compensation pursuant to Section 9.01 through the Closing
Date), (D) any Excluded BTI Asset or Excluded BTI Liability and (E) any
shortfall between (x) performance fees accrued on the Closing Balance Sheet and
(y) performance fees actually received by Buyer post-Closing (where such
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performance fees actually received by Buyer are in respect of the performance
fees accrued on the Closing Balance Sheet); provided that with respect to
indemnification by Seller for any Warranty Breach of Seller pursuant to this
Section, (i) Seller shall not be liable unless the aggregate amount of Damages
with respect to such Seller Warranty Breaches exceeds $25 million and then only
to the extent of such excess and (ii) Seller's maximum liability shall not
exceed $500 million.
(b) If a Closing occurs, Buyer will indemnify Seller and its Affiliates
against and agrees to hold each of them harmless from any and all Damages
incurred or suffered by Seller or any of its Affiliates arising out of (A) any
Warranty Breach of Buyer, (B) any breach of covenant or agreement (other than
covenants and agreements, if any, contained in Articles 3 and 4) made or to be
performed by Buyer or Alliance Holding pursuant to this Agreement (other than
pursuant to Article 8), (C) any BTI Assumed Liabilities and (D) any Seller
liabilities in respect of Seller's guaranty of the U.K. lease; provided that
with respect to indemnification by Buyer for any Warranty Breach pursuant to
this Section, (i) Buyer shall not be liable unless the aggregate amount of
Damages with respect to such Buyer Warranty Breaches exceeds $25 million and
then only to the extent of such excess and (ii) Buyer's maximum liability shall
not exceed $500 million.
SECTION 11.03. Procedures Relating to Indemnification. (a) In order for
a party (the "INDEMNIFIED PARTY") to be entitled to any indemnification from
another party (the "INDEMNIFYING PARTY") pursuant to Section 8.06, 8.07 or this
Article 11 in respect of, arising out of or involving a claim or demand made by
any person other than a party hereto against the Indemnified Party (a "THIRD
PARTY CLAIM"), such Indemnified Party must notify the Indemnifying Party in
writing and in reasonable detail of the Third Party Claim promptly, and in any
event within 20 Business Days, after receipt by such Indemnified Party of notice
of the Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided under this Agreement
except to the extent the Indemnifying Party shall have been prejudiced as a
result of such failure. Thereafter, the Indemnified Party shall deliver to the
Indemnifying Party promptly copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the Third Party Claim;
provided, however, that failure to make such delivery shall not affect the
indemnification provided under this Agreement except to the extent the
Indemnifying Party shall have been prejudiced as a result of such failure.
(b) If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses and acknowledges its obligation to fully indemnify the
Indemnified
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Party therefor, to assume and control the defense thereof with counsel selected
by the Indemnifying Party and reasonably acceptable to the Indemnified Party.
Should the Indemnifying Party so elect to assume the defense of a Third Party
Claim, the Indemnifying Party shall not be liable to the Indemnified Party for
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof. If the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right to participate in the defense thereof and
to employ at its own expense counsel not reasonably objected to by the
Indemnifying Party separate from the counsel employed by the Indemnifying Party,
it being understood that the Indemnifying Party shall control such defense,
subject to the remaining terms of this Section 11.03(b). The Indemnifying Party
shall be liable for the reasonable fees and expenses of counsel employed by the
Indemnified Party for any period during which the Indemnifying Party has not
assumed the defense thereof after receiving notice thereof. If the Indemnifying
Party chooses to defend or prosecute any Third Party Claim, all the parties
hereto shall cooperate and shall cause their Affiliates to cooperate in the
defense or prosecution thereof. Such cooperation shall include the retention and
(upon the Indemnifying Party's request) the provision to the Indemnifying Party
of records and information that are reasonably relevant to such Third Party
Claim, and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder or
otherwise with respect to such Third Party Claim. If the Indemnifying Party
assumes the defense of a Third Party Claim, the Indemnified Party shall not
admit any liability with respect to, or settle, compromise or discharge such
Third Party Claim without the Indemnifying Party's prior written consent (which
consent shall not be unreasonably withheld). Notwithstanding the foregoing, the
Indemnifying Party shall not be entitled to assume the defense of any Third
Party Claim (and shall be liable for the fees and expenses of counsel incurred
by the Indemnified Party in defending such Third Party Claim) if the Third Party
Claim seeks an order, injunction or other equitable relief or relief for other
than money damages against the Indemnified Party that the Indemnified Party
reasonably determines, after conferring with its outside counsel, cannot be
separated from any related claim for money damages; provided that if the
Indemnifying Party acknowledges its obligation to fully indemnify the
Indemnified Party therefor, the Indemnified Party shall not settle or compromise
such Third Party Claim in whole or in part for monetary payment without the
Indemnifying Party's prior written consent to that part of the settlement or
compromise which involves monetary payment (which consent shall not be
unreasonably withheld or delayed). If such equitable relief or other relief
portion of the Third Party Claim can be so separated from that for money
damages, the Indemnifying Party shall be entitled to assume the defense of the
portion relating to money damages.
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(c) In the event any Indemnified Party should have any indemnification
claim against any Indemnifying Party under the Agreements that does not involve
a Third Party Claim being asserted against or sought to be collected from such
Indemnified Party, the Indemnified Party shall promptly deliver notice of such
claim to the Indemnifying Party in writing and in reasonable detail. The failure
by any Indemnified Party so to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability that it may have to such Indemnified
Party, except to the extent that the Indemnifying Party has been actually and
materially prejudiced by such failure.
SECTION 11.04. Calculation of Damages. The amount of any Damages
payable under Section 11.02(a) by Seller shall be net of any amounts actually
recovered by Buyer under any insurance or indemnity policy maintained prior to
the Closing Date that covers Seller or any of the Companies.
SECTION 11.05. Commercially Reasonable Efforts. Each party shall use
its commercially reasonable efforts to mitigate any and all Damages suffered,
incurred or sustained by such party arising out of, attributable to or resulting
from any Warranty Breach or covenant or agreement of the other party hereto,
upon such party's discovery of such inaccuracy or breach by the other party.
SECTION 11.06. No Punitive Damages. Notwithstanding any other
provision in the Agreement, Damages shall not include, and no party shall be
entitled to be indemnified for, any punitive damages.
SECTION 11.07. Exclusive Remedy. Buyer and Seller acknowledge and agree
that, should the Closing occur, their respective sole and exclusive remedy with
respect to any and all claims relating to this Agreement and the transactions
contemplated hereby shall be pursuant to the indemnification provisions set
forth in this Article 11. In furtherance of the foregoing, Buyer and Seller each
hereby waive, from and after the Closing, to the fullest extent permitted under
applicable law, any and all rights, claims and causes of action each may have
against the other arising under or based upon any federal, state, local or
foreign statute, law, ordinance, rule or regulation or otherwise (except
pursuant to the indemnification provisions set forth in this Article 11).
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ARTICLE 12
TERMINATION
SECTION 12.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of Seller and Buyer;
(b) by either Seller or Buyer if:
(i) the Closing shall not have been consummated on or before the
Termination Date; provided that in the event that either Buyer or
Seller shall reasonably determine that the Closing cannot be
consummated on or before the Termination Date due solely to the fact
that Buyer or Seller will not have received by such date any required
consents, authorizations or approvals from any (A) domestic or
Canadian governmental agency or (B) foreign governmental agency (other
than any Canadian governmental agency), then,
(1) in the case of a determination pursuant to clause (A),
if Buyer or Seller, as the case may be, reasonably believes that
such required consents, authorizations or approvals can be
obtained by March 1, 2001, then Buyer or Seller, as the case may
be, may, upon notice to the other party prior to the termination
of this Agreement, extend the Termination Date to no later than
March 1, 2001; and
(2) in the case of a determination pursuant to clause (B),
Buyer and Seller shall negotiate in good faith separate closings
for the acquisition by Buyer of (x) Seller's United States and
Canadian operations and (y) all other operations of Seller and if
Buyer and Seller are unable to reach agreement on such separate
closings, prior to the Termination Date then either Buyer or
Seller may, upon notice to the other party prior to any
termination of this Agreement, extend the Termination Date to
March 31, 2001;
(ii) if there shall be any law or regulation that makes
consummation of the transactions contemplated hereby illegal or
otherwise prohibited or if consummation of the transactions
contemplated
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hereby would violate any nonappealable final order, decree or judgment
of any court or governmental body having competent jurisdiction; or
(iii) the limited partners of Buyer or the limited partners and
unitholders of Alliance Holding fail to approve this Agreement and the
transactions contemplated hereby at a Unitholder Meeting of Buyer
and/or Alliance Holding, as applicable, if such approval is required;
(c) by Buyer if Seller, any of the Companies or any parties to a
Voting Agreement shall have breached any of its obligations under Sections
5.03 or 5.04 of this Agreement or Sections 1.01 or 4.02 of such Voting
Agreement or if the shareholders of Seller fail to approve this Agreement
and the transactions contemplated hereby at the Company Stockholder
Meeting; or
(d) by Seller (i) as provided in Section 5.04(c) or (ii) if the
Unitholder Meeting of Alliance Holding is not convened within the 45-day
period referred to in Section 6.04.
The party desiring to terminate this Agreement pursuant to this Section
12.01 (other than pursuant to Section 12.01(a)) shall give notice of such
termination to the other party.
SECTION 12.02. Effect of Termination. If this Agreement is terminated
as permitted by Section 12.01, such termination shall be without liability of
either party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other party to this Agreement; provided
that if such termination shall result from the willful (i) failure of any party
to fulfill a condition to the performance of the obligations of the other party,
(ii) failure to perform a covenant of this Agreement or (iii) breach by any
party hereto of any representation or warranty or agreement contained herein,
such party shall be fully liable for any and all Damages incurred or suffered by
the other party as a result of such failure or breach; provided that where Buyer
has received the Termination Fee, no further remedy will be available to any
party for breach of any representation, warranty, covenant or agreement by any
other party or any stockholder of Seller. The provisions of this Section 12.02,
Article 13 and the Confidentiality Agreements shall survive any termination
hereof pursuant to Section 12.01.
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ARTICLE 13
MISCELLANEOUS
SECTION 13.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmission)
and shall be given,
if to Buyer, Alliance Holding or ACM LLC or, following Closing, to BD
LLC or ADV LLC to:
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Attention: David R. Brewer
Fax: (212) 969-1334
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Phillip R. Mills
Fax: (212) 450-4800
if to Seller or, prior to Closing, BD LLC or ADV LLC, to:
Sanford C. Bernstein Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Lewis A. Sanders
Jean Margo Reid
Fax: (212) 756-4164
if to BTI, to:
SCB Technologies Inc.
c/o Sanford C. Bernstein Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Lewis A. Sanders
Jean Margo Reid
Fax: (212) 756-4164
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if to SCB Partners, to:
SCB Partners Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Lewis A. Sanders
Jean Margo Reid
Fax: (212) 756-4164
with a copy, in all cases, to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Donald C. Walkovik
James C. Morphy
Fax: (212) 558-1600
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 13.02. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 13.03. Expenses. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.
(b) Seller shall pay to Buyer a fee of $125 million (the "TERMINATION
FEE"), by wire transfer of immediately available funds (not later than the date
of termination of the Agreement) if:
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(i) Buyer shall terminate this Agreement pursuant to Section 12.01(c);
or
(ii) Seller shall terminate this agreement pursuant to Section 5.04(c)
or 12.01(d)(i).
(c) In the event any of the events referred to in Section 13.03(b)(i)
or (ii) occur, Seller shall also reimburse Buyer and its Affiliates (by wire
transfer of immediately available funds), no later than two Business Days after
submission of reasonable documentation thereof for all fees and expenses
(including reasonable fees and expenses of their counsel and other advisors) up
to and including $15 million actually incurred by any of them in connection with
this Agreement and the transactions contemplated hereby.
(d) Seller acknowledges that the agreements contained in this Section
13.03 are an integral part of the transactions contemplated by this Agreement
and that, without these agreements, Buyer would not enter into this Agreement.
Accordingly, if Seller fails promptly to pay any amount due to Buyer pursuant to
this Section 13.03, it shall also pay any costs and expenses incurred by Buyer
in connection with a legal action to enforce this Agreement.
SECTION 13.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Buyer may transfer
or assign, in whole or from time to time in part to one or more of its
Subsidiaries, the right to purchase all or a portion of the Equity or the BTI
Purchased Assets so long as neither Seller nor any of its shareholders will be
subject to a material adverse effect on the federal income tax consequences of
the transactions contemplated hereby as a result of such transfer or assignment
(which shall be conclusively presumed if Seller does not object within 20
Business Days after notice from Buyer), but no such transfer or assignment will
relieve Buyer of its obligations hereunder.
SECTION 13.05. Limited Liabilities for Alliance Holding. Seller
acknowledges that Alliance Holding is a party to this Agreement solely due to
the obligations set forth in Section 6.04 to this Agreement that it has agreed
to incur. Seller acknowledges that Alliance Holding has no other liabilities
whatsoever in connection with this Agreement and the transactions contemplated
hereby.
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SECTION 13.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
SECTION 13.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 13.08. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
SECTION 13.09. Entire Agreement. This Agreement, the Deferred
Compensation Plan, the Confidentiality Agreements, the Voting Agreements and the
other agreements referred to in the recitals to this Agreement constitute the
entire agreement between the parties with respect to the subject matter hereof
and thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect hereto and thereto.
SECTION 13.10. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
112
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ALLIANCE CAPITAL MANAGEMENT L.P.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its General Partner
By: /s/ Bruce W. Calvert
------------------------------------
Name: Bruce W. Calvert
Title: Vice Chairman and
Chief Executive Officer
ALLIANCE CAPITAL MANAGEMENT
HOLDING L.P.
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its General Partner
By: /s/ Bruce W. Calvert
------------------------------------
Name: Bruce W. Calvert
Title: Vice Chairman and
Chief Executive Officer
ALLIANCE CAPITAL MANAGEMENT
LLC
By: ALLIANCE CAPITAL MANAGEMENT
L.P., its sole member
By: ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its General Partner
By: /s/ Bruce W. Calvert
------------------------------------
Name: Bruce W. Calvert
Title: Vice Chairman and
Chief Executive Officer
SANFORD C. BERNSTEIN INC.
By: /s/ Gerald M. Lieberman
------------------------------------
Name: Gerald M. Lieberman
Title: Senior Vice President of
Finance and Administration
BERNSTEIN TECHNOLOGIES INC.
By: /s/ Leonard H. Hersh
------------------------------------
Name: Leonard H. Hersh
Title: Secretary and Treasurer
SCB PARTNERS INC.
By: /s/ Gerald M. Lieberman
------------------------------------
Name: Gerald M. Lieberman
Title: Treasurer
SANFORD C. BERNSTEIN & CO., LLC
By: /s/ Jean Margo Reid
------------------------------------
Name: Jean Margo Reid
Title: Secretary
SCB LLC
By: Sanford C. Bernstein & Co., Inc.
By: /s/ Jean Margo Reid
------------------------------------
Name: Jean Margo Reid
Title: Secretary
Exhibit 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
October 2, 2000, is entered into by and among Alliance Capital Management
Holding L.P., a Delaware limited partnership ("Holding"), Sanford C. Bernstein
Inc., a Delaware corporation ("Bernstein"), and SCB Partners Inc., a New York
Corporation ("SCB Partners").
PRELIMINARY STATEMENTS
WHEREAS, in connection with the consummation of the transactions
contemplated by the Amended and Restated Acquisition Agreement, dated as of
October 2, 2000 (the "Acquisition Agreement"), among Holding, Alliance Capital
Management L.P., a Delaware limited partnership ("Capital"), Alliance Capital
Management LLC, Bernstein, Bernstein Technologies Inc., SCB LLC, SCB Partners
and Sanford C. Bernstein & Co., LLC, SCB Partners and Sanford C. Bernstein &
Co., LLC have acquired units representing limited partnership interests of
Capital ("Capital Units").
WHEREAS, the Acquisition Agreement contemplates that Bernstein and SCB
Partners will enter into this Agreement to provide for certain registration
rights with respect to units representing limited partnership interests of
Holding ("Holding Units") issuable in exchange for Capital Units acquired as of
the date hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement and covenants hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Certain Definitions.
1.1 Terms Defined in this Section. For purposes of this Agreement,
the following terms have the following meanings:
"Business Day" means any day other than a Saturday, Sunday, or
other day on which commercial banking institutions in New York, New York are
required or authorized by law to remain closed.
"Demand Period" means each successive 365-day period beginning two
years from the date hereof.
"Equitable" means The Equitable Life Assurance Society of the
United States, a New York stock life insurance corporation.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor federal statute, and the rules and regulations of the SEC promulgated
thereunder, in each case as amended from time to time.
"Holding Indemnified Parties" means Holding, its officers,
directors, employees and agents, and each Person, if any, who controls Holding
within the meaning of either the Securities Act or the Exchange Act, and the
officers and directors of the foregoing parties.
"Indemnified Party" means a Person claiming a right to
indemnification pursuant to Article 6 of this Agreement.
"Indemnifying Party" means a Person required to provide
indemnification pursuant to Article 6 of this Agreement.
"Losses" means any losses, claims, damages, or liabilities, and
any related legal or other fees and expenses.
"Permitted Transferee" shall mean any entity in which Bernstein
beneficially owns, directly or indirectly, 100% of the equity interests.
"Person" means any individual, corporation, partnership, limited
partnership, limited liability partnership, limited liability company, trust,
association, organization, or other entity.
"Prospectus" means the prospectus included in a Registration
Statement as of the date it becomes effective under the Securities Act and, in
the case of references to the Prospectus as of a date subsequent to the
effective date of the Registration Statement, as amended or supplemented as of
such date, including all documents incorporated by reference therein, each as
amended, and each applicable prospectus supplement relating to the offering and
sale of any of the Registrable Securities pursuant to such Registration
Statement.
"Registrable Securities" means:
(i) the Holding Units issued or issuable in exchange for
Capital Units acquired pursuant to the Acquisition Agreement, and
(ii) any securities of Holding or its successors issued or
issuable with respect to any units referred to in paragraph (i) whether by way
of conversion, exchange, dividend, or stock split, other distribution or
otherwise or in connection with a combination of shares, recapitalization,
merger, consolidation, or other reorganization or otherwise.
Securities that are Registrable Securities will cease to be Registrable
Securities:
(i) when a registration statement with respect to the sale of
such securities has become effective under the Securities Act and such
securities have been disposed of in accordance with such registration statement,
(ii) when such securities shall have been sold pursuant to
Rule 144 or Rule 145 (or any successor provisions) under the Securities Act or
in any other transaction in which the applicable purchaser does not receive
"restricted securities" (as that term is defined for purposes of Rule 144 under
the Securities Act),
(iii) on the first date on which such securities can be sold
without regard to the volume and manner of sale limitations set forth in Rule
144 (or any successor provision),
(iv) when such securities cease to be outstanding,
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(v) when such securities have been transferred to a
transferee who has not agreed in writing to be bound by the terms and conditions
of this Agreement,
(vi) when such securities cease to be of a class of
securities that is listed and traded on a national securities exchange or the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation System, or
(vii) ten years from the date hereof except for securities
covered by a Demand Registration prior to the expiration of such ten year period
with respect to which such securities shall cease to be Registrable Securities
ten years and 90 days from the date hereof.
"Registration Statement" means a registration statement (including
the related Prospectus) of Holding under the Securities Act on Form S-3 or any
successor thereto or if Holding is not eligible to use such form, then Form S-1
or any successor thereto. The term "Registration Statement" shall also include
all exhibits, financial statements, and schedules and all documents incorporated
by reference in such Registration Statement when it becomes effective under the
Securities Act, and in the case of the references to the Registration Statement
as of a date subsequent to the effective date, as amended or supplemented as of
such date.
"SEC" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act or the Exchange Act.
"Securities Act" means the Securities Act of 1933, or any
successor federal statute, and the rules and regulations of the SEC promulgated
thereunder, in each case as amended from time to time.
"Selling Unitholder" means any Unitholder whose Registrable
Securities are included at the request of such Unitholder in any Registration
Statement pursuant to Article 2 or Article 3.
"Third-Party Demand Unitholder" means any Person having the right
to require that Holding effect a registration under the Securities Act of
securities owned by such Person, other than pursuant to this Agreement, and any
other Person exercising incidental rights of registration pursuant to the
agreement under which such first Person has the right to require registration.
"Unitholder" means Bernstein and any Permitted Transferee:
(i) to whom any Registrable Securities or any rights to
acquire any Registrable Securities are transferred by any Person that was,
immediately prior to such transfer, a Unitholder,
(ii) who continues to hold such Registrable Securities or the
right to acquire such Registrable Securities,
(iii) to whom the transferring Unitholder has assigned any of
its rights under this Agreement, in whole or in part, in accordance with the
provisions of Section 7.6 of this Agreement with respect to such Registrable
Securities, and
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(iv) who has executed a counterpart hereof in connection with
the transfer of such Registrable Securities.
"Unitholder Representative" means Bernstein.
"Unitholder Indemnified Parties" means each Selling Unitholder,
its officers, directors, members and partners, each Person (if any) who controls
such Selling Unitholder within the meaning of either the Securities Act or the
Exchange Act, and the officers, directors, members and partners of the foregoing
parties.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of
this Agreement, the following terms have the meanings set forth in the sections
indicated:
Term Section
- ---- -------
Capital Units Preamble
Delaying Event Section 2.5(a)
Demand Registration Section 2.1
Demand Request Section 2.2(a)
Demanding Unitholders Section 2.2(a)
Incidental Registration Section 3.1(a)
Minimum Condition Section 2.2(c)
Proposed Sale Notice Section 4.6
Registration Expenses Section 5.1
Sale Period Section 2.5(b)
1.3 Terms Generally. The definitions in this Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context requires, any pronoun includes the corresponding masculine, feminine,
and neuter forms. The words "include," "includes," and "including" are not
limiting. Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
2. Demand Registration.
2.1 Demand Registration. At any time on or after two (2) years
after the date hereof but not later than ten (10) years after the date hereof,
the Unitholders (through the Unitholder Representative, as described below)
shall have the right to require that Holding register under the Securities Act
the offer or sale of all or a portion of the Registrable Securities held by the
Unitholders on the terms and subject to the conditions and limitations set forth
herein. The registration of Registrable Securities under the Securities Act in
accordance with this Article 2 is referred to in this Agreement as a "Demand
Registration." The number of Demand Registrations to which the Unitholders
collectively shall be entitled shall not exceed one (1) per Demand Period.
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2.2 Procedure for Unitholder Representative; Procedures for Demand
Registrations.
(a) The Unitholder Representative may initiate a Demand
Registration pursuant to this Section 2.2(a) by furnishing Holding and each
Unitholder with a written notice ("Demand Request") specifying (i) the number of
Registrable Securities the Unitholders desire to have registered, which must be
an amount at least equal to the Minimum Condition, (ii) the Unitholders
intending to register their Registrable Securities, (iii) the respective amount
of Registrable Securities intended to be registered by each such Unitholder, and
(iv) the intended method or methods of distribution of all such Registrable
Securities by such Unitholders. The Unitholders whose Registrable Securities are
included in the Demand Request are referred to as the "Demanding Unitholders."
(b) If the number of Registrable Securities that the
Unitholder Representative desires to have registered, as specified in the Demand
Request, does not satisfy the Minimum Condition, then Holding will have no
obligation to effect a Demand Registration in response to such Demand Request.
(c) The "Minimum Condition" means that the number of
Registrable Securities that the Unitholder Representative desires to have
registered, as specified in the Demand Request, of not less than 1,000,000
Holding Units (such number to be adjusted equitably to account for any stock
dividend, stock split (including a reverse stock split) or similar transaction)
or, if less, all of the Registrable Securities.
(d) Following the effectiveness of a Registration Statement
filed in connection with a Demand Registration, Holding will not be required to
file a Registration Statement for a subsequent Demand Registration within twelve
months after the date on which it received the Demand Request pursuant to
Section 2.2(a) for the immediately preceding Demand Registration.
(e) As soon as reasonably practicable after receipt of a
Demand Request (which satisfies the Minimum Condition), and, in the case of a
Registration Statement on Form S-3, as soon as reasonably practicable but not
later than 45 days after receipt of a Demand Request (which satisfies the
Minimum Condition), subject to Section 2.5, Holding will file with the SEC and
use its reasonable best efforts to cause to become effective as promptly as
practicable a Registration Statement that covers the Registrable Securities
requested to be registered in the Demand Request; provided that Holding's
obligations with respect to any such Registration Statement shall terminate if
the securities requested to be registered in the Demand Request cease to be
Registrable Securities. Subject to the provisions of Section 2.4 below, each
Registration Statement may also include securities to be sold for the account of
Holding, for Unitholders who do not participate as Demanding Unitholders but who
exercise their rights under Article 3 below, or for any other unitholder of
Holding. If at the time of receipt of a Demand Request Holding is subject to the
periodic reporting obligations of the Exchange Act, then Holdings shall, if
requested by the Unitholder Representative, use its reasonable best efforts to
cause any Registration Statement filed pursuant to this Article 2 to be a shelf
registration statement.
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2.3 Underwriters.
(a) The Unitholder Representative shall have the right to
select the lead book running managing underwriter for any underwritten public
offering in connection with a Demand Registration, which lead managing
underwriter shall be reasonably acceptable to Holding. Holding hereby agrees
that as of the date hereof Merrill Lynch & Co. is reasonably acceptable to
Holding.
(b) Each Demanding Unitholder electing to participate in a
Demand Registration involving an underwritten public offering shall, as a
condition to participation in such underwritten offering, enter into and perform
its obligations under an underwriting agreement or other similar arrangement in
customary form with the lead underwriter of such offering.
(c) The maximum number of marketed underwritten offerings
during any Demand Period shall be one (1) and the maximum number of underwritten
"block" offerings during any Demand Period shall be one (1).
2.4 Limitation on Inclusion of Registrable Securities.
(a) If the book running managing underwriter of any
underwritten public offering, including a "block" offering by Unitholders, in
connection with a Demand Registration determines in good faith that the
aggregate number of Registrable Securities to be offered exceeds the number of
shares that could be sold without having an adverse effect on such offering
(including the price at which the Registrable Securities may be sold), then the
number of Registrable Securities to be offered for the accounts of the Demanding
Unitholders in such offering shall be reduced or limited on a pro rata basis,
based on the respective numbers of Registrable Securities requested to be
included in such offering by the Demanding Unitholders, to the extent necessary
to reduce the total number of shares to be included in such offering to the
amount recommended by the book running managing underwriter; provided, however,
that if such registration includes securities other than Registrable Securities
of the Demanding Unitholders (whether for the account of Holding or for any
unitholder of Holding not exercising rights under Section 2.2), such reduction
or limitation shall be made:
(i) first, from securities held by Persons who are not
Unitholders, Holding or affiliates of Holding,
(ii) second, from securities being offered for the
account of Holding or its affiliates, allocated between Holding and such other
Persons as Holding may determine; and
(iii) third, from the number of Registrable Securities
requested to be included in such offering by the Demanding Unitholders, on a pro
rata basis, based on the number of Registrable Securities requested to be
included in the registration by each Demanding Unitholder.
(b) The Unitholder Representative may elect not to proceed
with the registration if less than 75% of the Registrable Securities requested
to be registered by each of
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the Demanding Unitholders are included in such registration. If the Unitholder
Representative elects not to proceed with the registration pursuant to this
Section 2.4(b), the Registration Statement for such registration shall be
promptly withdrawn, and if the Unitholder Representative so elects and the
Demanding Unitholders pay all reasonable out-of-pocket Registration Expenses
incurred by Holding in connection with such Registration Statement, a Demand
Registration shall not be deemed to have been effected for purposes of this
Agreement (including the limitations on the number of Demand Registrations set
forth in Section 2.1 above). If the Unitholder Representative elects not to
proceed with the registration pursuant to this Section 2.4(b) and the Demanding
Unitholders do not pay all reasonable out-of-pocket Registration Expenses
incurred by Holding in connection with such Registration Statement, a Demand
Registration shall be deemed to have been effected for purposes of this
Agreement (including the limitations on the number of Demand Registrations set
forth in Section 2.1 above).
2.5 Delay of Filing or Sales.
(a) Holding shall have the right, exercisable by giving
written notice signed by an executive officer of Holding of the exercise of such
right to the Unitholder Representative, subject to Section 2.5(b), at any time
and from time to time and specifying that it is pursuant to this Section 2.5, to
delay filing or the declaration of effectiveness of a Registration Statement or
to require the applicable Selling Unitholders not to sell any Registrable
Securities pursuant to an effective Registration Statement for up to two periods
of sixty days per Demand Period, which may be consecutive, each beginning on the
date on which such notice is given, or such shorter period of time as may be
specified in such notice or in a subsequent notice delivered by Holding to such
effect if Holding shall determine, in its good faith judgment, that it is not in
the best interest of Holding (1) to proceed with such filing or request for
effectiveness or to allow such sale at such time, or (2) to permit offerings
given priority pursuant to Section 2.8 (any such notice, a "Delaying Event"). In
order for the exercise of the right pursuant to clause (1) set forth in the
immediately preceding sentence to be valid, Holding shall prohibit sales of
Capital Units and Holding Units by its directors and executive officers and any
other holders of registration rights with respect to such securities for so long
as sales of Units by Unitholders are prohibited by this Section 2.5.
(b) Holding covenants and agrees that notwithstanding any
other provision of this Agreement during each Demand Period Unitholders will be
provided at least 60 days, including not less than one period of 30 consecutive
days, during which Unitholders will be permitted to offer or sell Registrable
Securities pursuant to an effective Registration Statement under Article 2
hereof (each such 60-day period, a "Sale Period"). The parties hereto agree that
it shall not be a violation of this Agreement if during a Demand Period the
Unitholders do not have 60 days (including one period of 30 consecutive days)
during which they can offer or sell Registrable Securities if the reason
therefor is the failure of the Unitholders to timely deliver a Proposed Sale
Notice, Demand Request or Resumption Notice, but such 60 day requirement will
only be shortened by the number of days by which the related Proposed Sale
Notice, Demand Request or Resumption Notice, as the case may be, was not timely.
Unless it has given a notice pursuant to Section 2.5(a), Holding will not be
deemed to have exercised its rights pursuant to Section 2.5(a) with respect to
any day on which no Registration Statement relating to Registrable Securities is
effective. The Unitholders may not offer or sell any
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Registrable Securities registered pursuant to this Agreement on more than 60
days during any Demand Period.
(c) If Holding postpones its obligations under this Agreement
by reason of a Delaying Event as described in Section 2.5(a), any Selling
Unitholder will have the right to withdraw its Registrable Securities from the
applicable Demand Registration or Incidental Registration, by giving notice to
Holding at any time following delivery of Holding's notice pursuant to Section
2.5(a) and if Selling Unitholders withdraw their Registrable Securities
following delivery of such notice, a Demand Registration shall not be deemed to
have been effected for purposes of this Agreement.
(d) The Unitholder Representative may not deliver a Demand
Request pursuant to the first sentence of Section 2.2(a) during the period of
any postponement pursuant to Section 2.5(a) until Holding notifies the
Unitholder Representative of the end of such Delaying Event or the expiration of
the period described in Section 2.5(a).
(e) Holding shall have the right, exercisable by giving
notice of the exercise of such right to the applicable Selling Unitholders, to
delay filing or the declaration of effectiveness of a Registration Statement
during any period in which, as a result of Holding's failure to satisfy the
conditions in Rule 3-01(c) of Regulation S-X, Holding is required to include in
the Registration Statement audited financial statements of Holding prior to the
date on which such audited financial statements would normally have been
prepared in accordance with Holding's past practices and the SEC's periodic
reporting requirements.
(f) The Unitholder Representative may, from time to time,
deliver to Holding a notice that the Unitholders have elected to suspend offers
or sales (such notice, a "Suspension Notice") pursuant to an effective
Registration Statement. Upon delivery of such Notice, the Unitholders shall
suspend making offers or sales under such Registration Statement until such time
as the Unitholder Representative has delivered a notice to Holding that the
Unitholders have elected to resume making offers or sales (a "Resumption
Notice"), which Resumption Notice shall in no event be delivered earlier than 6
Business Days prior to the commencement of the Demand Period immediately
following the Demand Period in which such Suspension Notice was delivered and
which shall be delivered not less than 6 Business Days nor more than 30 Business
Days prior to the resumption of offers or sales under an effective Registration
Statement. The parties agree that the delivery of a Suspension Notice shall toll
the running of the Sale Period until the earlier of (i) the resumption of offers
or sales under an effective Registration Statement or (ii) the effectiveness of
a new Registration Statement following a Demand Request.
2.6 Withdrawal.
(a) If (i) a Registration Statement filed pursuant to this
Article 2 does not remain effective under the Securities Act for the period
specified in Section 2.7(a) due to a stop order, injunction, or other order of
the SEC or other governmental agency, (ii) the Demanding Unitholders have not
sold at least 75% of their Registrable Securities registered under such
Registration Statement and (iii) such Registration Statement was not filed with
the SEC as an offering to be made on a delayed or continuous basis pursuant to
Rule 415 under the
-8-
Securities Act, then the Demanding Unitholders may elect to withdraw such
Registration Statement by written notice to Holding; and, in such an event, such
registration shall not be deemed to have been a Demand Registration for purposes
of the limitations on the number of Demand Registrations contained in Section
2.1, and Holding shall bear the Registration Expenses incurred in connection
with such registration unless a Unitholder is reasonably determined to have
caused the issuance of such stop order, injunction or other order of the SEC.
(b) Each Selling Unitholder may, no less than five Business
Days before any Registration Statement becomes effective, withdraw some or all
of its Registrable Securities from inclusion in the Registration Statement. If
such withdrawals result in the Minimum Condition not being satisfied, then
Holding may withdraw such Registration Statement unless the remaining Demanding
Unitholders agree to include additional Registrable Securities in the
registration such that the Minimum Condition would be satisfied. If Holding
withdraws a Registration Statement pursuant to this Section 2.6(b), the
Demanding Unitholders shall bear the Registration Expenses incurred by Holding
in connection with such registration.
(c) If Holding withdraws a Registration Statement pursuant to
Section 2.6(b), then the requested registration shall be deemed to have been a
Demand Registration for purposes of the limitations on the number of Demand
Registrations contained in Section 2.1 unless
(i) at the time of a Unitholder's withdrawal of
Registrable Securities pursuant to Section 2.6(b), there has been a material
adverse change in the operating results, financial condition, or business of
Holding that was not publicly known at the time that the Minimum Condition was
originally satisfied; or
(ii) Holding has postponed its obligations under this
Agreement by reason of a Delaying Event as described in Section 2.5(a).
2.7 Effectiveness of Registration Statement.
(a) In connection with any Demand Registration pursuant to
Section 2.2, subject to Section 2.5, Holding will use its best efforts to
prepare and file with the SEC any amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith, and to take any other
actions, that may be necessary to keep the Registration Statement and the
Prospectus effective, current, and in compliance with the provisions of the
Securities Act, until the earlier of (1) the date that is ten years plus 90 days
from the date hereof and (2) (A) in the case of a Registration Statement on Form
S-1 (or any equivalent successor thereto), the sooner of (i) the sale of all of
the Registrable Securities covered by such Registration Statement in accordance
with the intended methods of distribution thereof or (ii) the 180th day
following the effective date of such Registration Statement and (B) in the case
of a Registration Statement on Form S-3, the sale of all Registrable Securities
covered by such Registration Statement in accordance with the intended methods
of distribution thereof.
(b) A Demand Registration shall not be deemed to have been
effected for purposes of this Agreement (including the limitations on the number
of Demand Registrations set forth in Section 2.1 above) until the earlier of (i)
the Registration Statement
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therefor being declared effective under the Securities Act by the SEC and having
remained effective for a Sale Period or (ii) the receipt by Holding of a
Suspension Notice.
2.8 Priority of Holding and Employees, Officers and Directors of
Capital. An offering of Holding Units by Holding and sales of Holding Units by
the employees, officers and directors of Capital shall have priority over any
public offering of Registrable Securities by the Unitholders pursuant to Article
2 hereof.
3. Incidental Registration.
3.1 Notice of Incidental Registration.
(a) Subject to Section 3.1(b), if Holding at any time after
the date hereof proposes to register under the Securities Act any securities of
the same class as any of the Registrable Securities (whether in an underwritten
public offering or otherwise and whether or not for the account of Holding or
for any unitholder of Holding, including Selling Unitholders registering
Registrable Securities in a Demand Registration pursuant to Section 2.2), in a
manner that would permit the registration under the Securities Act of
Registrable Securities for sale to the public, Holding will give written notice
to the Unitholder Representative of its intention to do so not later than ten
days prior to the anticipated filing date of the applicable Registration
Statement. If the proposed registration is intended to be a Demand Registration,
Holding shall give the notice described in the preceding sentence only to those
Unitholders that did not previously elect to become Demanding Unitholders
pursuant to Section 2.2 with respect to such registration. Any Unitholder may
elect to participate in such registration on the same basis as the planned
method of distribution contemplated by the proposed registration by delivering
written notice of its election to Holding within five days after its receipt of
Holding's notice pursuant to this Section 3.1(a). A Unitholder's election
pursuant to this Section 3.1(a) must (i) specify the amount of Registrable
Securities desired to be included in such registration by such Unitholder and
(ii) include any other information that Holding reasonably requests be included
in such registration statement. Upon its receipt of a Unitholder's election
pursuant to this Section 3.1(a), Holding will, subject to Section 3.2, use its
reasonable best efforts to include in such registration all Registrable
Securities requested to be included. Any registration of Registrable Securities
pursuant to this Article 3 is referred to as an "Incidental Registration."
(b) Holding shall have no obligation under this Article 3
with respect to any registration effected pursuant to a registration statement
on Form S-4 (or any other registration statement registering units issued in a
merger, consolidation, acquisition, or similar transaction) or Form S-8 or any
successor or comparable forms, or a registration statement filed in connection
with an exchange offer or any offering of securities solely to Holding existing
unitholders or otherwise pursuant to a dividend reinvestment plan, stock
purchase plan, or other employee benefit plan.
3.2 Limitation on Inclusion of Registrable Securities; Priorities.
If the proposed method of distribution in connection with an Incidental
Registration is an underwritten public offering and the lead managing
underwriter thereof determines in good faith that the amount of securities to be
included in such offering would adversely affect such offering (including an
adverse effect on the price at which the securities proposed to be registered
may be sold), the
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amount of securities to be offered may be reduced or limited to the extent
necessary to reduce the total number of securities to be included in such
offering to the amount recommended by the lead managing underwriter as follows:
(a) in connection with an offering initiated by Holding, if
securities are being offered for the account of other Persons (including any
Unitholders) such reduction shall be made:
(i) first, from the securities intended to be offered by
such other Persons (including any Unitholders), on a pro rata basis, based on
the number of Registrable Securities and other securities that are requested to
be included in such offering; and
(ii) last, from the number of securities to be offered
for the account of Holding;
(b) in connection with an offering initiated by a Third-Party
Demand Unitholder, such reduction shall be made:
(i) first, from securities held by Persons who are not
Unitholders, Third-Party Demand Unitholders, or other unitholders entitled under
any agreements between them and Holding to participate pari passu with the
Selling Unitholders in such Incidental Registration;
(ii) second, from the number of Registrable Securities
requested to be included in such offering by the Selling Unitholders and any
other unitholders entitled under any agreements between them and Holding to
participate pari passu with the Selling Unitholders in such Incidental
Registration, on a pro rata basis, based on the number of Registrable Securities
and other securities which are requested to be included in the registration; and
(iii) last, from securities being offered by the
Third-Party Demand Unitholders.
(c) For purposes of Section 3.2(b), the rights of the
Unitholders shall rank pari passu with the incidental rights of Equitable and
any of its affiliates (except to the extent that such other unitholders,
including Equitable or any of its affiliates, are Third-Party Demand
Unitholders).
3.3 Delay or Withdrawal of Registration. Holding may, without the
consent of any Unitholder, delay, suspend, abandon, or withdraw any proposed
registration in which any Unitholder has requested inclusion of Unitholder's
Registrable Securities pursuant to this Article 3.
3.4 Withdrawal by Selling Unitholder. Each Selling Unitholder may,
no less than five Business Days before the anticipated commencement of the
applicable road show, withdraw some or all of its Registrable Securities from
inclusion in the Registration Statement. No such withdrawal shall relieve any
withdrawing Selling Unitholder of its obligation to pay expenses incurred solely
with respect to such withdrawn Registrable Securities.
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3.5 Underwriters; Underwriting Agreement. In connection with any
Incidental Registration involving an underwritten public offering of securities
for the account of Holding or a Third-Party Demand Unitholder, (a) the managing
and lead underwriters shall be selected by Holding, unless otherwise provided in
any agreement between Holding and any Third-Party Demand Unitholder, and (b)
each Selling Unitholder electing to participate in the Incidental Registration
shall, as a condition to Holding's obligation under this Article 3 to include
such Selling Unitholder's Registrable Securities in such Incidental
Registration, enter into and perform its obligations under an underwriting
agreement or other similar arrangement in customary form with the managing
underwriter of such offering.
4. Obligations with Respect to Registration.
4.1 Obligations of Holding. Whenever Holding is obligated by the
provisions of this Agreement to effect the registration of any Registrable
Securities under the Securities Act, subject to Section 2.5, Holding shall:
(a) Subject to the provisions of Section 4.2, use its
reasonable best efforts to cause the applicable Registration Statement to become
effective as promptly as practicable, and to prepare and file with the SEC any
amendments and supplements to the Registration Statement and to the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement and the Prospectus effective, current, and in compliance with the
provisions of the Securities Act, during the periods when Holding is required by
this Agreement to keep the Registration Statement effective and current.
(b) Within a reasonable time not to exceed four Business Days
prior to filing a Registration Statement or Prospectus or any amendment or
supplement thereto (other than any amendment or supplement in the form of a
filing that Holding makes pursuant to the Exchange Act), furnish to the
Unitholder Representative and each underwriter, if any, of the Registrable
Securities covered by such Registration Statement copies of such Registration
Statement or Prospectus as proposed to be filed, which documents will be subject
to the reasonable review and comments of the Selling Unitholders (and their
respective counsel) during such period, and Holding will not file any
Registration Statement or any Prospectus or any amendment or supplement thereto
if such Selling Unitholder reasonably objects in writing on a timely basis (such
objection shall be given within four Business Days from the date the Unitholder
Representative receives such Registration Statement, amendment, Prospectus or
supplement), unless Holding is advised in writing by its outside counsel that
such Registration Statement or amendment thereto or any Prospectus or supplement
thereto is required to be filed by applicable law. Thereafter, Holding will
furnish to each Selling Unitholder and each underwriter, if any, upon request
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including, if requested in writing, all
exhibits thereto and any documents incorporated by reference), the Prospectus
included in such Registration Statement (including each preliminary Prospectus),
and such other documents as such Selling Unitholder or underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Unitholder.
(c) After the filing of the Registration Statement, promptly
notify the Unitholder Representative of the effectiveness thereof and of any
stop order issued or threatened
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by the SEC and take all reasonable actions required to prevent the entry of such
stop order or to remove it at the earliest possible moment if entered and
promptly notify the Unitholder Representative of the lifting or withdrawal of
any such order, and, in the case of a Demand Registration, notify the Unitholder
Representative of any comments by the SEC with respect to such Registration
Statement or any document incorporated by reference therein, if any.
(d) Promptly notify each Selling Unitholder holding
Registrable Securities covered by the applicable Registration Statement at any
time when a Prospectus relating thereto is required to be delivered under the
Securities Act, of (i) the determination that a Delaying Event exists or (ii)
the occurrence of an event requiring the preparation of a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading (provided that the timely
filing of a report under the Exchange Act which is incorporated by reference in
the Registration Statement and related Prospectus that amends or supplements the
related Prospectus so that as thereafter delivered to purchasers of such
Registrable Securities, such Prospectus will not contain an untrue statement of
a material fact or omit to state any material fact 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, shall constitute effective notice
under clause (ii) above; and provided further, that such notice may be the same
notice delivered pursuant to Section 2.5(a); and provided further that notice of
an event of the type referred to in clause (ii) above (without notice of the
nature or details of such event) shall constitute effective notice under clause
(ii) above. In the event of an occurrence described in clause (ii) above,
Holding shall, subject to the provisions of this Agreement regarding the
existence of a Delaying Event, promptly prepare and furnish to such Selling
Unitholder such supplement to or an amendment of such Prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading.
(e) Enter into customary agreements (including an
underwriting agreement in customary form including customary representations and
warranties and indemnification provisions) and perform its obligations under any
such agreements and shall take such other actions as are reasonably required in
order to expedite or facilitate the disposition of such Registrable Securities.
(f) In connection with the registration or offering of
Registrable Securities, make available for inspection by the Unitholder
Representative on behalf of any Selling Unitholder covered by such Registration
Statement, the lead book running managing underwriter selected by the Unitholder
Representative pursuant to Section 2.3 participating in any disposition pursuant
to such Registration Statement, and any attorney, accountant, or other
professional retained by any such Selling Unitholder or underwriter, all
financial and other records, pertinent corporate documents, and properties of
Holding as shall be reasonably necessary to enable them to exercise their due
diligence responsibility in connection therewith, and cause Holding's officers,
directors, and employees to make reasonably available for inspection all
information reasonably requested by any of such Persons in connection with such
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Registration Statement; provided, however, that such Persons shall first agree
in writing with Holding that any information that is reasonably and in good
faith determined by Holding to be confidential shall be kept confidential by
such persons and shall be used solely for the purposes of exercising rights
under this Agreement, unless (i) disclosure of such information is required by
court or administrative order or is necessary to respond to inquiries of
regulatory authorities or, (ii) such information becomes generally available to
the public other than as a result of a disclosure or failure to safeguard by any
such Person and provided, further, that Holding shall not be required to
disclose any information subject to the attorney-client or attorney work product
privilege if and to the extent such disclosure would constitute a waiver of such
privilege unless such disclosure is necessary to avoid or correct a material
misstatement or omission in any Registration Statement, subject to Section
2.5(a).
(g) Furnish, in the case of an underwritten public offering,
to each underwriter a signed counterpart of (i) an opinion or opinions of
in-house counsel or outside counsel, as are customarily requested by lead
underwriters, to Holding addressed to such underwriters (on which opinion each
such underwriter shall be entitled to rely), (ii) a comfort letter or comfort
letters from Holding's independent public accountants, each in customary form
and covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the managing underwriter therefor reasonably
requests, and (iii) deliver such documents or certificates as may be reasonably
requested by the lead underwriter to evidence the satisfaction of any customary
conditions contained in the underwriting agreement.
(h) Use reasonable best efforts to register or qualify the
Registrable Securities covered by a Registration Statement under the securities
or blue sky laws of such United States jurisdictions as the Unitholder
Representative shall reasonably request, and do any and all other acts and
things which may be necessary to enable each Selling Unitholder to consummate
the disposition in such jurisdictions of such Registrable Securities in
accordance with the method of distribution described in such Registration
Statement; provided, however, that Holding shall not be required (i) to qualify
to do business as a foreign corporation in any jurisdiction where it is not
otherwise required to be so qualified, (ii) to conform its capitalization or the
composition of its assets at the time to the securities or blue sky laws of such
jurisdiction, (iii) to take any action that would subject it to service of
process under the laws of any jurisdiction other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction where
it is not now so subject, (iv) to subject itself to taxation in any jurisdiction
where it has not theretofore done so, or (v) to register or qualify the
Registrable Securities under such securities or blue sky laws prior to the
effective date of any such Registration Statement unless an earlier registration
or qualification is required by such securities or blue sky laws.
(i) Use its reasonable best efforts to (i) cause such
Registrable Securities covered by a Registration Statement to be listed on the
principal exchange or exchanges or qualified for trading on the principal
over-the-counter market or listed on the automated quotation market on which
securities of the same class and series as the Registrable Securities are then
listed, traded, or quoted upon the sale of such Registrable Securities pursuant
to such Registration Statement and (ii) provide a transfer agent and registrar
for such Registrable Securities covered by such Registration Statement not later
than the effective date of such Registration Statement.
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(j) (i) In connection with a transfer of Registrable
Securities make information available to the Unitholders and their respective
transferees information relating to Holding so as to satisfy the requirements of
Rule 144 under the Securities Act (or any successor or corresponding rule) and
(ii) file with the SEC all reports and other documents required of Holding under
the Securities Act and the Exchange Act in a timely manner.
(k) Make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act (provided that
Holding shall not be deemed in violation of this paragraph so long as it files
customary quarterly reports with the SEC for such period).
(l) Subject to the exceptions covered in clauses (i) through
(v) of subsection (h) hereof, use its reasonable best efforts to cause such
Registrable Securities covered by such Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the holder or holders thereof to consummate the disposition
of such Registrable Securities.
(m) Use its reasonable best efforts, subject to the other
duties and responsibilities of Holding's senior executive officers, to make
available one or more senior executive officers of Holding (the selection of
whom shall be in Holding's sole discretion) to participate with the Selling
Unitholders and any underwriters in any "road show" (which shall not involve
presentations at more than two cities) that may be reasonably requested by the
Unitholders' Representative in connection with the distribution of Registrable
Securities, pursuant to a Demand Registration; provided, however, the number of
"road shows" that the Unitholders shall collectively be entitled to require
Holding to participate in pursuant to such requests shall be one per Demand
Period.
(n) If requested by the managing underwriter or any Selling
Unitholder named in a Registration Statement, promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or such Selling Unitholder reasonably requests to be
included therein as is required by applicable law or as is necessary so that the
Registration Statement does not include an untrue statement of a material fact
or omit to state a material fact with respect to such holder or such holder's
planned method of distribution, including, without limitation, with respect to
the number of Registrable Securities being sold by such Selling Unitholder to
such underwriter, the purchase price being paid therefor by such underwriter and
with respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable after
being notified of the matters incorporated in such prospectus supplement or
post-effective amendment.
(o) Cooperate with the Selling Unitholder and the managing
underwriter to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing securities to be sold under
the Registration Statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or such
Selling Unitholder may request.
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(p) Cooperate with each Selling Unitholder and each
underwriter participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be made with
the NASD.
4.2 Selling Unitholders' Obligations. Holding's obligations under
this Agreement to a Selling Unitholder shall be conditioned upon such Selling
Unitholder's compliance with the following:
(a) Such Selling Unitholder shall cooperate with Holding in
connection with the preparation of the Registration Statement, and for so long
as Holding is obligated to keep the Registration Statement effective, such
Selling Unitholder will provide to Holding, in writing, for use in the
Registration Statement, all information regarding such Selling Unitholder, its
intended method of disposition of the applicable Registrable Securities, and
such other information as Holding may reasonably request. Subject to Holding
providing the Unitholder Representative with a copy of any Registration
Statement or prospectus or amendment or supplement thereto in the form in which
it is proposed to be filed not less than four Business Days prior to such
filing, and so long as such Registration Statement or prospectus or amendment or
supplement thereto does not contain any statement or omission with respect to
which the Unitholder Representative has objected in writing prior to the
applicable filing, any sale of any Registrable Securities by a Selling
Unitholder shall constitute a representation and warranty by such Selling
Unitholder that the information relating to such Selling Unitholder and its plan
of distribution is as set forth in the Prospectus delivered by such Selling
Unitholder in connection with such disposition, that such Prospectus does not as
of the time of such sale contain any untrue statement of a material fact
relating to or provided by such Selling Unitholder or its plan of distribution
and that such Prospectus does not as of the time of such sale omit to state any
material fact relating to or provided by such Selling Unitholder or its plan of
distribution necessary to make the statements in such Prospectus provided by
such Selling Unitholder, in the light of the circumstances under which they were
made, not misleading.
(b) Such Selling Unitholder agrees that, upon receipt of any
notice from Holding of the happening of any event of the kind described in
Section 4.1(d), such Selling Unitholder will discontinue its offering and sale
of Registrable Securities pursuant to the applicable Registration Statement
until such Selling Unitholder's receipt of either (i) notice from Holding that a
Delaying Event no longer exists (but for no longer than the end of the 60 or
120-day period described in Section 2.5) or (ii) the copies of the supplemented
or amended Prospectus contemplated by Section 4.1(d), and, in either case, if so
directed by Holding, such Unitholder will deliver to Holding all copies in its
possession of the most recent Prospectus covering such Registrable Securities at
the time of receipt of such notice. In the event Holding shall give any such
notice, the periods mentioned in Section 2.7(a) shall be extended by the number
of days during the period from and including the date of the giving of such
notice pursuant to Section 4.1(d) to and including the date when Holding shall
make readily available to each holder of Registrable Securities covered by such
Registration Statement a copy of the supplemented or amended prospectus
contemplated by Section 4.1(d).
4.3 Underwriting Agreement. Neither Holding nor any other Person
may participate in any underwritten public offering in connection with a Demand
Registration or an Incidental Registration unless such Person (i) agrees to sell
its securities on the basis provided in
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any underwriting arrangements approved by the Person or Persons selecting the
lead managing underwriters for such offering and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements and this Agreement.
4.4 Holdback by Holding. Holding agrees not to engage in any
public or private sale or distribution by it of any securities of the same class
or series as the Registrable Securities or securities convertible into, or
exchangeable or exercisable for, or the value of which relates to or is based
upon, such securities (other than issuances of Capital Units to Equitable or any
of its affiliates) during the ten days prior to, and during the 45-day period
beginning on, the effective date of any Registration Statement (or, in the case
of an offering pursuant to Rule 415 under the Securities Act, the commencement
of such offering to the public of such Registrable Securities) filed with
respect to any underwritten public offering of Registrable Securities pursuant
to a Demand Registration to the extent the lead book running managing
underwriter for such offering advises Holding in writing that a public sale or
distribution during such 45-day period (including a sale pursuant to Rule 144
under the Securities Act) of Registrable Securities by Holding other than
pursuant to the public offering contemplated by such Registration Statement
would materially adversely impact such underwritten public offering), except as
part of such registration; provided, however, that the limitation set forth in
this Section 4.4 shall not apply: (a) to registrations by Holding on Form S-4 or
any other registration of shares issued in a merger, consolidation, acquisition,
or similar transaction or on Form S-8, or any successor or comparable forms, or
a registration statement filed in connection with an exchange offer of
securities of Holding made solely to Holding's existing unitholders or otherwise
pursuant to a dividend reinvestment plan, stock purchase plan, or other employee
benefit plan; (b) to sales by Holding upon exercise or exchange, by the holder
thereof, of options, warrants or convertible securities; (c) to any employee
benefit plan (if necessary to allow such plan to fulfill its funding obligations
in the ordinary course); or (d) to any registration effected as a shelf
registration under Rule 415 of the Securities Act. This Section 4.4 shall not
limit any public sale or distribution of any securities of Holding by any
Third-Party Demand Unitholder or any Person having the right to require that
Holding include its securities in any registration initiated by any Third-Party
Demand Unitholder.
4.5 Holdback by Unitholders. Except pursuant to Article 3 hereof,
or as otherwise permitted by Holding, and subject to Section 2.5(b), Unitholders
shall not be permitted to engage in any public or private sale or distribution
of Registrable Securities during the 15-day period prior to and during the
90-day period beginning on the closing date of an underwritten offering of units
of Holding pursuant to any registration by Holding during a Demand Period (such
period, a "Unitholder Holdback Period").
4.6 Notice to Holding of Proposed Sale. A Unitholder shall provide
written notice to Holding of not less than six Business Days nor more than
thirty Business Days of its intention to consummate a sale under this Agreement
(such notice, a "Proposed Sale Notice").
5. Expenses of Registration.
5.1 Registration Expenses. For purposes of this Agreement, the
term "Registration Expenses" means all expenses incurred by Holding in
connection with the
-17-
registration of the Registrable Securities pursuant to this Agreement other than
those expenses referred in section 5.3 including, without limitation, the
following:
(a) registration, application, filing, listing, transfer
(including transfer agent), and registrar fees,
(b) NASD fees and fees and expenses of registration or
qualification of Registrable Securities under state securities or blue sky laws,
(c) printing expenses (or comparable duplication expenses),
delivery charges, and escrow fees,
(d) fees and disbursements of counsel for Holding,
(e) fees and expenses for independent certified public
accountants retained by Holding (including the expenses of any comfort letters
or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters),
(f) fees and expenses of any special experts retained by
Holding in connection with such registration;
(g) fees and disbursements of underwriters and broker-dealers
customarily paid by issuers or holders of securities, and
(h) fees and expenses of listing the Registrable Securities
on a securities exchange or over-the-counter market.
5.2 Selling Unitholder Expenses. Each Selling Unitholder shall pay
all of its expenses incurred in connection with any Demand Registration or
Incidental Registration, including, without limitation, all stock transfer fees
or expenses (including the cost of all transfer tax stamps), if any, all
underwriting or brokerage discounts and commissions and all fees and
disbursements of counsel for Selling Unitholder attributable to the distribution
of the Registrable Securities of such Selling Unitholder included in such
registration.
5.3 Internal Expenses of Holding. Notwithstanding any other
provision of this Agreement, Holding shall be obligated to bear all internal
expenses of Holding in connection with any Demand Registration or Incidental
Registration (including all salaries and expenses of its officers and employees
performing accounting and legal functions and related expenses).
5.4 Reimbursement of Holding Expenses. Except as otherwise
provided by Section 2.4(b) and Section 2.6(b), subject to Section 5.3, in
connection with any Demand Registration pursuant to Article 2 hereof, the
Selling Unitholders shall reimburse Holding for the following expenses incurred
in connection therewith, pro rata based on the aggregate number of units of such
Selling Unitholders included in such Demand Registration in relation to the
aggregate number of units of all unitholders included in such Demand
Registration (a) 100% of SEC filing fees and; (b) 50% of all reasonable
Registration Expenses and 50% of all other reasonable out-of-pocket costs paid
by Holding. All other Registration Expenses shall be borne by Holding.
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6. Indemnification.
6.1 By Holding. Holding agrees to indemnify and hold harmless each
Unitholder Indemnified Party from and against any Losses to which such
Unitholder Indemnified Party may become subject under the Securities Act, the
Exchange Act, state securities or blue sky laws, common law or otherwise,
insofar as such Losses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the applicable Registration Statement or Prospectus, or any
omission or alleged omission to state therein a material fact 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, and, subject to
Section 6.3, Holding will reimburse each such Unitholder Indemnified Party for
any reasonable fees and expenses of outside legal counsel for such Unitholder
Indemnified Parties, or other expenses reasonably incurred by them, as incurred,
in connection with investigating or defending any such claims; provided,
however, that Holding will not indemnify or hold harmless any Unitholder
Indemnified Party from or against any Losses (including any related expenses) to
the extent such Losses (including any related expenses) arise out of or are
based upon an untrue statement, omission or allegation thereof from such
Registration Statement or Prospectus which was made in reliance upon and in
conformity with written information provided by or on behalf of any Selling
Unitholder expressly for use or inclusion in the applicable Registration
Statement or Prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Unitholder
Indemnified Parties and shall survive the transfer of such securities by the
Selling Unitholders.
6.2 By Selling Unitholders. Each Selling Unitholder, severally and
not jointly, agrees to indemnify and hold harmless each Holding Indemnified
Party from and against any Losses, to which such Holding Indemnified Party may
become subject, insofar as such Losses (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the applicable Registration Statement or the
Prospectus, or any omission or alleged omission to state therein a material fact
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, if
such untrue statement, omission or allegation thereof was made in reliance upon
and in conformity with written information provided by or on behalf of such
Selling Unitholder or any Person who controls such Selling Unitholder expressly
for use or inclusion in the applicable Registration Statement or Prospectus;
provided, however, that with respect to the plan of distribution information
provided by or on behalf of a Selling Unitholder, the parties hereto agree that
a Selling Stockholder will only be responsible hereunder for the plan of
distribution information provided by or on behalf of such Selling Unitholder or
any Person who controls such Selling Unitholder expressly for use or inclusion
in the applicable Registration Statement or Prospectus. Such indemnity shall
remain in full force and effect regardless of any investigation by or on behalf
of the Holding Indemnified Parties, and shall survive the transfer of such
securities by the Selling Unitholder.
6.3 Procedures. Each Indemnified Party shall give notice to each
Indemnifying Party promptly after such Indemnified Party has actual knowledge of
any claim as to which indemnity may be sought, and the Indemnifying Party may
participate at its own expense in the defense, or if it so elects, assume the
defense of any such claim and any action or proceeding resulting therefrom,
including the employment of counsel and the payment of all expenses;
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provided that such counsel shall be reasonably satisfactory to the Indemnified
Party. The failure of any Indemnified Party to give notice as provided in this
Section 6.3 shall not relieve the Indemnifying Party from its obligations to
indemnify such Indemnified Party, except to the extent the Indemnified Party's
failure to so notify does not materially prejudice the Indemnifying Party's
ability to defend against such claim, action, or proceeding. If the Indemnifying
Party elects to assume the defense in any action or proceeding, the Indemnified
Party shall have the right to employ separate counsel in such action or
proceeding and to participate in the defense thereof, but such Indemnified Party
shall pay the fees and expenses of such separate counsel unless (a) the
Indemnifying Party has agreed to pay such fees and expenses, (b) the named
parties to any such action or proceeding (including any impleaded parties)
include such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that representation of both parties by
the same counsel would create an actual or potential conflict of interest
between such Indemnified Party and the Indemnifying Party in the conduct of the
defense of such action (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not assume the
defense of such action or proceeding on such Indemnified Party's behalf) or (c)
the Indemnifying Party shall not have employed counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party within a reasonable
time after notice of the institution of such claim. It is understood that the
Indemnifying Party shall not, in respect of the legal expenses of any
Indemnified Party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified Parties and
that all such fees and expenses shall be reimbursed as they are incurred. Such
separate firm shall be designated in writing by, in the case of parties
indemnified pursuant to Section 6.1, the Selling Unitholders holding a majority
of the Registrable Securities covered by the applicable Registration Statement
and, in the case of parties indemnified pursuant to Section 6.2, Holding. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Party agrees to
indemnify the Indemnified Party from and against any losses by reason of such
settlement or judgment. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of the Indemnified Party (which
consent will not be unreasonably withheld), consent to entry of any judgment, or
enter into any settlement of any pending or threatened claim or litigation
unless such consent to the entry of judgment or settlement (i) includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability on claims that are the subject
matter of such proceeding and (ii) does not include a statement as to an
admission of fault, culpability or a failure to act by or on behalf of the
Indemnified Party.
6.4 Contribution. To the extent the indemnification provided for
under this Article 6 is unavailable to an Indemnified Party hereunder or
insufficient to hold the Indemnified Party harmless under Section 6.1 or Section
6.2 above in respect of any Losses referred to therein for any reason other than
as specified therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other, in connection with the
statements or omissions that resulted in such Losses. The relative fault of the
Indemnifying Party or Indemnified Party, as the case may be, shall be determined
by
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reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
has been made by, or relates to information supplied by (or that was failed to
be supplied by), such Indemnifying Party or Indemnified Party, such party's
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The amount paid or payable by an Indemnified Party
as a result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, for purposes of this Section 6.4, subject to
the limitations set forth in Section 6.3, any legal or other fees or expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any claim or proceeding. The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 6.4 were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in this
paragraph.
If indemnification is available under this Section 6, the Indemnifying
Party shall indemnify each Indemnified Party to the full extent provided in
Sections 6.1 and 6.2 without regard to the relative fault of said Indemnifying
Party or Indemnified Party or any other equitable consideration provided for in
this Section 6.4.
6.5 Other Indemnification. Indemnification similar to that
specified in the preceding provisions of Section 6.1 (mutatis mutandis) shall be
given by Holding and each holder of Registrable Securities to the applicable
Indemnified Parties with respect to any required registration or other
qualification of securities under any federal or state law or regulation or
governmental authority other than the Securities Act.
7. Miscellaneous.
7.1 Notices.
(a) Subject to Section 7.1(b), all notices, requests,
demands, waivers, and other communications under this Agreement shall be in
writing by hand delivery, by registered or certified first-class mail, postage
prepaid, return receipt requested, sent by reliable overnight courier, or
facsimile transmission, in each case to the address or facsimile number
specified for the applicable party on Schedule A attached to this Agreement, or
to such other Person, address, or facsimile number as any party shall specify by
notice in writing to the other parties.
(b) Any notice or other communication to a party in
accordance with the provisions of this Agreement shall be deemed to have been
received (i) three Business Days after it is sent by certified or registered
mail, postage prepaid, return receipt requested, (ii) upon receipt when
delivered by hand or transmitted by facsimile (confirmation received), (iii) one
Business Day after it is sent by a reliable overnight courier service, with
acknowledgment of receipt requested or (iv) when receipt is acknowledged,
whether telecopied or otherwise (which acknowledgment may be via electronic
transmission, such as telecopier confirmation, e-mail receipt or otherwise), in
each case if received prior to 5 p.m. in the place of receipt and such day is a
Business Day in the place of receipt; otherwise, any such notice or other
communication
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shall be deemed not to have been received until the next succeeding Business Day
in the place of receipt. Notwithstanding the preceding sentence, notice of
change of address shall be effective only upon actual receipt thereof.
(c) All such notices and communications given in accordance
with Section 7.1 shall be deemed to have been duly given even if the last
address or telecopier number given by a holder of Registrable Securities
pursuant to this Section 7.1 and Article 4 is not current.
7.2 Amendments and Waivers. Any provision of this Agreement,
including the provisions of this sentence, may not be amended modified or
supplemented and waivers or consents to departures from the provisions hereof
may not be given, unless Holding has obtained the written consent of holders of
a majority of the then outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of holder of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least a majority of the
then outstanding Registrable Securities being sold by such holders. No consent,
waiver, or similar act shall be effective unless in writing.
7.3 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
7.5 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of New York,
without giving effect to principles of conflicts of laws thereof.
7.6 Assignment.
(a) Except as expressly provided in this Section 7.6, the
rights of the parties hereto cannot be transferred or assigned and any purported
assignment or transfer to the contrary shall be void ab initio.
(b) Notwithstanding Section 7.6(a) but subject to Section
7.6(c), a Unitholder may assign any of its rights under this Agreement without
the consent of Holding to any Person to whom such Unitholder transfers
Registrable Securities or rights to acquire Registrable Securities if, and only
if, such transferee is a Permitted Transferee.
(c) A Unitholder shall provide Holding with prior written
notice of any transfer of Registrable Securities to a transferee that has not
agreed in writing to be bound by the terms and conditions of this Agreement.
Such written notice shall include the identity of the transferee and the number
of securities being transferred, whereupon Holding may amend any
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Registration Statement then in effect that includes such transferred Registrable
Securities of such Unitholder to remove such Registrable Securities from such
Registration Statement.
(d) No Person may be assigned any rights under this Agreement
unless Holding is given written notice by the assigning party at the time of
such assignment stating the name and address of the assignee, identifying the
securities of Holding as to which the rights in question are being assigned, and
providing a detailed description of the nature and extent of the rights that are
being assigned. Any assignee hereunder shall receive such assigned rights
subject to all the terms and conditions of this Agreement, including the
provisions of this Section 7.6. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
7.7 Binding Agreement. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their successors and permitted
assigns. Except as set forth herein and by operation of law, no party to this
Agreement may assign or delegate all or any portion of its rights, obligations,
or liabilities under this Agreement without the prior written consent of each
other party to this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Holding:
Alliance Capital Management Holding L.P.
By: Alliance Capital Management Corporation,
its general partner
By: /s/ Robert Joseph
--------------------------
Name: Robert Joseph
Title: Senior Vice President and
Chief Financial Officer
Bernstein:
Sanford C. Bernstein Inc.
By: /s/ Jean Margo Reid
--------------------------
Name: Jean Margo Reid
Title: Secretary
SCB Partners:
SCB Partners Inc.
By: /s/ Jean Margo Reid
--------------------------
Name: Jean Margo Reid
Title: Secretary
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Schedule A
If to Holding:
Alliance Capital Management Holding L.P.
1345 Avenue of the Americas
New York, New York 10105
Attention: David R. Brewer
Facsimile: 212 969-1334
with a copy to
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Phillip R. Mills
Facsimile: 212 450-4800
If to Bernstein or to SCB Partners:
SCB Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Jean Margo Reid
Facsimile: 212 756-4164
with a copy to
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Donald C. Walkovik
James C. Morphy
Facsimile: 212 558-1600
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Exhibit 5
Joint Filing Agreement
In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act
of 1934, as amended, the undersigned hereby agree to the joint filing on behalf
of each of them of a statement on Schedule 13D (including amendments thereto)
with respect to limited partnership units of Alliance Capital Management L.P.
and that this Joint Filing Agreement be included as an exhibit to such joint
filing. Each person who is a party hereto acknowledges that (i) each is
individually eligible to use Schedule 13D to satisfy its filing obligations
under Rule 13d-1; (ii) each is responsible for the timely filing of such
statement and any amendments thereto, and for the completeness and accuracy of
the information concerning itself; and (iii) neither person is responsible for
the completeness or accuracy of the information concerning the other person
jointly filing on the Schedule 13D referred to herein, unless such person knows
or has reason to believe that such information is inaccurate.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement this
12th day of October, 2000.
SCB INC.
By: /s/ Gerald M. Lieberman
--------------------------------
Name: Gerald M. Lieberman
Title: Senior Vice President
and Treasurer
SCB PARTNERS INC.
By: /s/ Gerald M. Lieberman
--------------------------------
Name: Gerald M. Lieberman
Title: Senior Vice President
and Treasurer