EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DEERFIELD TRIARC CAPITAL CORP.,
DFR MERGER COMPANY, LLC,
DEERFIELD & COMPANY LLC
AND
TRIARC COMPANIES, INC.
AS SELLERS' REPRESENTATIVE
______________________________
DATED AS OF APRIL 19, 2007
______________________________
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS.....................................................2
1.1
DEFINED
TERMS...................................................2
ARTICLE II
THE
MERGER.....................................................13
2.1
THE
MERGER.....................................................13
2.2
EFFECTIVE
TIME.................................................14
2.3
CLOSING........................................................14
2.4
EFFECTS OF THE
MERGER..........................................14
2.5
ORGANIZATIONAL
INSTRUMENTS.....................................14
2.6
DIRECTORS AND
OFFICERS.........................................14
2.7
BUYER BOARD DESIGNATION
RIGHTS.................................15
2.8
FURTHER
ASSURANCES.............................................15
ARTICLE III
CONVERSION OF MEMBERSHIP INTERESTS AND MERGER
CONSIDERATION....15
3.1
CALCULATION OF AGGREGATE MERGER
CONSIDERATION..................15
3.2
EFFECT ON MEMBERSHIP
INTERESTS.................................16
3.3
CLOSING PAYMENTS; EXCHANGE OF MEMBERSHIP
INTERESTS.............17
3.4
MEMBER WRITTEN
CONSENT.........................................19
3.5
ALLOCATION OF AGGREGATE MERGER
CONSIDERATION...................19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY..................21
4.1
DUE ORGANIZATION;
QUALIFICATION................................21
4.2
SUBSIDIARIES;
INVESTMENTS......................................21
4.3
AUTHORIZATION; ENFORCEABILITY; VOTING
REQUIREMENTS.............21
4.4
CAPITALIZATION.................................................22
4.5
FINANCIAL STATEMENTS; CASH ON
HAND.............................23
4.6
NO MATERIAL ADVERSE CHANGE; ORDINARY
COURSE....................23
4.7
NO UNDISCLOSED
LIABILITIES.....................................23
4.8
COMPLIANCE WITH
LAWS...........................................24
4.9
PERMITS........................................................24
4.10
REGULATORY
COMPLIANCE..........................................24
4.11
ENVIRONMENTAL
COMPLIANCE.......................................25
4.12
CLIENTS........................................................25
4.13
NON-CONTRAVENTION; CONSENTS AND
APPROVALS......................29
4.14
CONTRACTS......................................................30
4.15
PROPERTY.......................................................32
4.16
INTELLECTUAL
PROPERTY..........................................33
4.17
LITIGATION.....................................................33
4.18
TAXES..........................................................34
4.19
EMPLOYEE BENEFIT
PLANS.........................................34
4.20
EMPLOYEES......................................................35
4.21
BROKERS........................................................36
4.22
RELATED PARTY
TRANSACTIONS.....................................36
(i)
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4.23
INFORMATION
PROVIDED...........................................36
4.24
INSURANCE......................................................37
4.25
BOOKS AND
RECORDS..............................................37
4.26
CODE OF
ETHICS.................................................37
4.27
ANTI-MONEY LAUNDERING
POLICY...................................38
4.28
DISCLAIMER REGARDING ESTIMATES AND
PROJECTIONS.................38
4.29
EXCLUSIVITY OF
REPRESENTATIONS.................................38
ARTICLE V REPRESENTATIONS
AND WARRANTIES OF THE
BUYER AND BUYER SUB.....38
5.1
DUE INCORPORATION;
QUALIFICATION...............................38
5.2
SUBSIDIARIES;
INVESTMENTS......................................39
5.3
AUTHORIZATION;
ENFORCEABILITY..................................39
5.4
CAPITALIZATION.................................................40
5.5
SEC REPORTS AND FINANCIAL
STATEMENTS...........................40
5.6
REIT QUALIFICATION; INVESTMENT COMPANY
ACT.....................41
5.7
NON-CONTRAVENTION..............................................41
5.8
INFORMATION
PROVIDED...........................................42
5.9
OPINIONS OF BUYER'S FINANCIAL
ADVISORS.........................43
5.10
FINANCING......................................................43
5.11
BROKERS........................................................43
5.12
INVESTMENT
INTENT..............................................43
5.13
INDEPENDENT
INVESTIGATION......................................44
5.14
EXCLUSIVITY OF
REPRESENTATIONS.................................44
ARTICLE VI
COVENANTS AND
AGREEMENTS.......................................44
6.1
CONDUCT OF BUSINESS OF THE
COMPANY.............................44
6.2
CONDUCT OF BUSINESS OF THE
BUYER...............................47
6.3
ACCESS TO INFORMATION;
CONFIDENTIALITY.........................49
6.4
EXPENSES.......................................................50
6.5
PUBLICITY......................................................50
6.6
FURTHER
ACTIONS................................................51
6.7
REQUIRED CONSENTS AND NOTICES FROM GOVERNMENTAL
AUTHORITIES................................................51
6.8
CLIENT
CONSENTS................................................52
6.9
PROXY STATEMENT; STOCKHOLDERS MEETING; NYSE
LISTING............55
6.10
PRESERVATION OF RECORDS; POST-CLOSING ACCESS TO
INFORMATION AND COOPERATION................................56
6.11
TERMINATION OF RELATED PARTY
TRANSACTIONS......................57
6.12
EMPLOYEE
MATTERS...............................................57
6.13
OFFICERS AND
DIRECTORS.........................................58
6.14
RELEASE........................................................60
6.15
TAX
MATTERS....................................................60
6.16
FINANCING......................................................61
6.17
ESCROW AGREEMENT; REGISTRATION RIGHTS AGREEMENT;
REIT QUALIFICATION OPINION.................................63
6.18
MODIFICATION OF EXISTING RESTRICTIONS ON TRANSFER
AND OWNERSHIP OF SHARES....................................63
(ii)
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6.19
NO
SHOP........................................................63
6.20
NON-COMPETITION;
NON-SOLICITATION..............................64
6.21
DISTRIBUTION AND VESTING OF BUYER COMMON
STOCK.................65
6.22
DFP
TRANSACTION................................................66
6.23
PERMISSIBLE
ACTIVITIES.........................................66
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE BUYER AND
AND BUYER SUB TO
CLOSE.........................................67
7.1
HSR ACT
FILINGS................................................67
7.2
STOCKHOLDER
APPROVAL...........................................67
7.3
PROXY
STATEMENT................................................67
7.4
NO
ORDERS......................................................67
7.5
ACCURACY OF REPRESENTATIONS AND
WARRANTIES.....................67
7.6
PERFORMANCE OF COVENANTS AND
AGREEMENTS........................67
7.7
CERTIFICATE....................................................68
7.8
NO COMPANY MATERIAL ADVERSE
EFFECT.............................68
7.9
CLIENT
CONSENTS................................................68
7.10
ESCROW
AGREEMENT...............................................68
7.11
FINANCING......................................................68
7.12
SATISFACTION OF PUT
RIGHT......................................68
7.13
INVESTMENT BANKING FIRM
DETERMINATION..........................68
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO
CLOSE.......................................................69
8.1
HSR ACT
FILINGS................................................69
8.2
STOCKHOLDER
APPROVAL...........................................69
8.3
NYSE
LISTING...................................................69
8.4
PROXY
STATEMENT................................................69
8.5
NO
ORDERS......................................................69
8.6
ACCURACY OF REPRESENTATIONS AND
WARRANTIES.....................69
8.7
PERFORMANCE OF COVENANTS AND
AGREEMENTS........................70
8.8
CERTIFICATE....................................................70
8.9
NO BUYER MATERIAL ADVERSE
EFFECT...............................70
8.10
REGISTRATION
STATEMENT.........................................70
8.11
REIT QUALIFICATION
OPINION.....................................70
8.12
MODIFICATION OF EXISTING RESTRICTIONS ON TRANSFER
AND OWNERSHIP OF SHARES....................................70
8.13
NAME
CHANGE....................................................71
8.14
ESCROW
AGREEMENT...............................................71
8.15
SATISFACTION OF PUT
RIGHT......................................71
8.16
INVESTMENT BANKING FIRM
DETERMINATION..........................71
ARTICLE IX
SELLERS'
REPRESENTATIVE........................................71
9.1
APPOINTMENT OF SELLERS'
REPRESENTATIVE.........................71
9.2
AUTHORITY......................................................72
9.3
LIMITATION OF
LIABILITY........................................72
9.4
RELIANCE.......................................................72
9.5
SUCCESSOR TO SELLERS'
REPRESENTATIVE...........................73
9.6
EXPENSES.......................................................73
(iii)
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ARTICLE X TERMINATION OF
AGREEMENT.......................................73
10.1
TERMINATION....................................................73
10.2
SURVIVAL AFTER
TERMINATION.....................................74
ARTICLE XI
SURVIVAL; INDEMNIFICATION;
MISCELLANEOUS.......................74
11.1
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES.....................74
11.2
INDEMNIFICATION................................................75
11.3
INDEMNIFICATION
PROCEDURES.....................................76
11.4
LIMITATIONS ON
INDEMNIFICATION.................................78
11.5
INDEMNITY
ESCROW...............................................79
11.6
TAX
MATTERS....................................................80
11.7
NON-RECOURSE...................................................80
11.8
EXCLUSIVITY OF
INDEMNITY.......................................80
11.9
CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER
OF JURY TRIAL..............................................80
11.10
NOTICES........................................................81
11.11
ENTIRE
AGREEMENT...............................................82
11.12
WAIVERS
AND AMENDMENTS.........................................83
11.13 GOVERNING
LAW..................................................83
11.14
BINDING
EFFECT; ASSIGNMENT.....................................83
11.15
USAGE..........................................................83
11.16
ARTICLES
AND SECTIONS..........................................83
11.17
INTERPRETATION.................................................83
11.18
DISCLOSURE.....................................................84
11.19
SEVERABILITY OF
PROVISIONS.....................................84
11.20
COUNTERPARTS...................................................84
11.21
NO THIRD
PARTY BENEFICIARIES...................................84
11.22
SPECIFIC
PERFORMANCE...........................................85
(iv)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND
PLAN OF MERGER, dated as of April 19, 2007 (this
"AGREEMENT"), by
and among Deerfield Triarc Capital Corp., a Maryland
corporation (the
"BUYER"), DFR Merger Company, LLC, an Illinois limited
liability company and
an indirect wholly
owned subsidiary
of Buyer ("BUYER
SUB"), Deerfield &
Company LLC, an
Illinois limited
liability company (the
"COMPANY"), and solely
for the purposes of Article IX and Sections 2.7, 3.3,
3.5, 6.5, 6.10, 6.15, 6.16, 6.17 and 6.20, Triarc Companies, Inc., a Delaware
corporation (in such capacity, the "SELLERS' REPRESENTATIVE").
WHEREAS, the Buyer and
Deerfield Capital
Management
LLC, a Delaware
limited liability company and a wholly owned subsidiary of the
Company ("DCM"),
are parties to that certain Management Agreement, dated December 23, 2004 (as
amended, supplemented
or otherwise modified from time to time, the "MANAGEMENT
AGREEMENT");
WHEREAS, a special
committee comprised of members of the Board of
Directors of the Buyer who are not directors, officers, employees
or affiliates
of the Company
or any of its Subsidiaries (the "SPECIAL COMMITTEE") has
unanimously determined
that this Agreement and the transactions contemplated
hereby are in the best
interests of the Buyer
and those stockholders
of the
Buyer that are not also, directly or indirectly,
beneficial
owners of equity
interests of DCM, and has unanimously recommended to the Board of
Directors of
the Buyer that the Board of Directors of the Buyer adopt this
Agreement and the
transactions contemplated hereby;
WHEREAS, the Board of
Directors of the Buyer and the sole
member of
Buyer Sub each
have determined that this Agreement and the transactions
contemplated hereby,
including the merger of Buyer Sub with and into the
Company (the
"MERGER"), are
advisable and in the best interests of the Buyer
and those stockholders of the Buyer that are not also, directly or indirectly,
beneficial owners of
equity interests of DCM and have adopted or approved this
Agreement and the transactions contemplated hereby, including the Merger, and
resolved to recommend
that stockholders
of the Buyer approve
the issuance of
shares of common stock of the Buyer pursuant to this Agreement;
WHEREAS, the Board of Directors of the Company has determined that
this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable and in the
best interest
of the members of the Company and have
adopted or approved this Agreement and the transactions contemplated hereby,
including the Merger,
and resolved to
recommend that members of the Company
approve this Agreement;
WHEREAS, the parties
intend that this Agreement constitute a "plan of
merger" within the meaning of Section 37-20 of the Illinois
Limited Liability
Company Act, as amended (the "ILLCA");
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2
WHEREAS, concurrently
with the execution and delivery by the
parties
hereto of this Agreement, the Buyer, the Sellers'
Representative
and certain
persons who are
entitled to receive shares of capital stock of the Buyer
pursuant to the Merger or as otherwise contemplated by this Agreement, are
executing and delivering a Registration Rights Agreement substantially in the
form attached hereto as ANNEX A (the "REGISTRATION RIGHTS AGREEMENT"), which
Registration Rights Agreement also contemplates the execution and
delivery from
time to time after the
date hereof by any
other person
who is entitled to
receive such shares; and
WHEREAS, the
parties desire to make certain representations,
warranties, covenants
and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger.
NOW, THEREFORE,
in consideration of the mutual covenants,
representations,
warranties and agreements entered into herein, and
intending
to be legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1
DEFINED TERMS.
(a)
For all purposes of this Agreement, the following terms
shall have the
respective
meanings set forth in this Section 1.1 (such
definitions to be
equally applicable to
both the singular and plural forms of
the terms herein defined):
"ADVISORY CONTRACT"
shall mean any Contract pursuant to which the
Company or any of its Subsidiaries provides Investment Management Services to
any Person, excluding the Management Agreement.
"AFFILIATE" means,
with respect to any Person, any other Person,
directly or
indirectly
through one or more intermediaries, controlling,
controlled by or under
common control with
such Person.
The term "control"
(including, with
correlative
meaning, the terms "controlled by" and "under
common control with"), as applied to any Person, means the
possession, directly
or indirectly, of the
power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting or
other
securities, by
contract or otherwise.
Notwithstanding the foregoing, for the
avoidance of doubt, no Client (including, prior to the Closing, the Buyer and
its Subsidiaries)
shall be deemed to be
an Affiliate of the Company or any of
its Subsidiaries.
"ANCILLARY DOCUMENT"
means the Escrow
Agreement and the
Registration
Rights Agreement.
"BENEFIT PLAN" means any employee benefit plan, arrangement or policy
(whether or not an employee benefit plan within the meaning of
Section 3(3) of
<PAGE>
3
ERISA),
including any
employment,
consulting
or deferred compensation
agreement, executive
compensation, change
in control, severance,
retention,
bonus, incentive, pension, profit-sharing, savings, retirement, equity,
stock
option, restricted
stock, stock purchase or severance pay plan, any life,
health, disability
or accident insurance plan or any holiday or vacation
practice, other than any multiemployer plan within the meaning of
Section 3(37)
of ERISA ("MULTIEMPLOYER PLAN"), as to which the Company or any of its
Subsidiaries (or any trade or business, whether or not incorporated,
which is
or has ever been treated as a single employer with any of them under
Section
414(b), (c), (m) or (o) of the Code ("ERISA AFFILIATE")) has, or in the
future
may have, any material liability.
"BUSINESS DAY" means a
day other than
Saturday, Sunday or
any day on
which banks located in New York, New York are authorized or
obligated by Law to
close.
"BUYER COMMON
STOCK" means the common stock, par value $0.001 per
share, of the Buyer.
"BUYER MATERIAL
ADVERSE EFFECT" means any effect, change, event,
circumstance,
impairment, condition, development, occurrence or state of
facts
(i) that would
reasonably be
expected to prevent or materially impair the
ability of the Buyer or Buyer Sub to consummate the transactions contemplated
hereby or (ii) that has been or would be materially adverse to the financial
condition,
business, results
of operations, liabilities (contingent or
otherwise), properties
or assets of the Buyer
or Buyer Sub, taken as
a whole
(after taking into
account any insurance or other third party recourses
available in respect
thereof), except that events, circumstances, changes,
developments,
impairments or conditions resulting from (A) events, changes,
developments,
conditions or
circumstances
in worldwide, national or local
conditions or
circumstances
(political,
regulatory
or otherwise, but not
economic or
related to the
financial markets) but only to the extent
such
events, changes, developments, conditions or circumstances are not
specifically
relating to, or
disproportionately
affecting, the Buyer
or Buyer Sub, (B) an
outbreak or escalation of war, armed hostilities, acts of
terrorism,
political
instability, natural
catastrophe or other national or international calamity,
crisis or emergency, or any governmental or other response to any of the
foregoing, in each case, whether occurring within or outside the
United States,
(C) the announcement of this Agreement and the transactions
contemplated hereby
or other communication by or on behalf of the Company or the Sellers'
Representative of
their plans or intentions with respect to any aspect of
the
business of the Company, the Buyer and their Subsidiaries, (D) any change in
Law or GAAP, or (E)
any action or omission
of the Buyer or Buyer Sub taken or
omitted (x) in connection with the performance of the Buyer's or Buyer Sub's
obligations under
this Agreement or the consummation of the transactions
contemplated hereby,
(y) to comply with any Law or Order or (z) with the prior
written consent of the Company, in each case of clauses (A)
through (E), shall
not be deemed to
constitute or give
rise to, and shall not be considered in
determining whether there has occurred, a Buyer Material Adverse
Effect.
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4
"BUYER PREFERRED STOCK" means the preferred stock, par value $0.001
per
share, of the Buyer.
"CDO" means each of the issuers of collateralized debt obligations to
which the Company or
any of its
Subsidiaries currently
provides Investment
Management Services.
"CDO DOCUMENTS"
shall mean each final or supplemental offering
memorandum, indenture,
supplemental
indenture,
management agreement,
trust
agreement, collateral
administration
agreement,
insurance agreement,
hedge
agreement and swap
agreement entered into, or used in connection with an
offering of securities, by a CDO.
"CLASS A-1
INTERESTS"
has the meaning set forth in the Existing
Operating Agreement.
"CLASS A-2
INTERESTS"
has the meaning set forth in the Existing
Operating Agreement.
"CLASS B INTERESTS" has the meaning set forth in the Existing
Operating
Agreement.
"CLASS C PROFITS
ONLY INTERESTS" has the meaning set forth in the
Existing Operating Agreement.
"CLIENT" means
any Person to whom the Company or any of its
Subsidiaries provides
Investment
Management
Services; PROVIDED, that no
investor in any such Person shall be deemed a Client; PROVIDED, FURTHER, that
any Pipeline
Fund or other
prospective
hedge fund or collateralized debt
obligation the
closing of which has not yet occurred shall not be deemed a
Client.
"CLOSING PAY-OFF
DEBT" means the
Closing Debt incurred by the Company
and its Subsidiaries
under the Revolving
Note, dated February 2, 2006, by and
between DCM and Fifth
Third Bank, as amended, supplemented or otherwise
modified from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended
(including
any successor code), and the rules and regulations promulgated
thereunder.
"COMMODITY EXCHANGE ACT" shall mean the Commodity Exchange Act of
1936,
as amended, and the rules and regulations promulgated
thereunder.
"COMPANY EXPENSES"
means all costs,
fees and expenses incurred by
Triarc Companies, Inc.
on behalf of all Members generally or by the Company or
any of its
Subsidiaries, in each
case in connection with the consummation of
the transactions
contemplated hereby or other possible transactions (including
the potential spin-off of the Company) considered previously by
such Persons in
connection with the Company or its Subsidiaries (in each case,
whether incurred
<PAGE>
5
prior to or after the
date hereof)
including (i) the fees and expenses of
Goldman, Sachs &
Co. and Jefferies
& Co., (ii) the fees and expenses of Paul,
Weiss, Rifkind,
Wharton & Garrison
LLP and other
legal counsel engaged by
Triarc Companies,
Inc., the Company or
any of its
Subsidiaries in connection
with the transactions contemplated by this Agreement, (iii) the fees and
expenses of Skadden,
Arps, Slate,
Meagher & Flom LLP
in connection with
the
potential spin-off of the Company, (iv) the fees and expenses of
the Investment
Banking Firm (as defined in the Existing Operating Agreement) incurred by the
Company or any of its
Subsidiaries in
connection with an
Investment Banking
Firm Determination,
if applicable,
and (v) any retention
bonus, "stay-put,"
"change of control" or other similar payments made to employees of the
Company
or any of its Subsidiaries in contemplation of the transactions contemplated
hereby and the employer portion of any employment Taxes payable with respect
thereto. For the
avoidance of doubt,
Other Expenses
shall not be
considered
Company Expenses for any purpose under this Agreement.
"COMPANY MATERIAL
ADVERSE EFFECT" means any effect,
change, event,
circumstance,
impairment, condition, development, occurrence or state of
facts
(i) that would
reasonably be
expected to prevent or materially impair the
ability of the Company to consummate the transactions contemplated hereby or
(ii) that has been or would be materially adverse to the financial
condition,
business, results
of operations, liabilities (contingent or otherwise),
properties or assets
of the Company
and the Subsidiaries, taken as a whole
(after taking into
account any insurance or other third party recourses
available in respect
thereof), except that events, circumstances, changes,
developments,
impairments or conditions resulting from (A) events, changes,
developments,
conditions or
circumstances
in worldwide, national or local
conditions or
circumstances
(political,
regulatory
or otherwise, but not
economic or
related to the
financial markets) but only to the extent
such
events, changes, developments, conditions or circumstances are not
specifically
relating to,
or disproportionately affecting, the Company or any of its
Subsidiaries, (B) an
outbreak or escalation of war, armed hostilities, acts of
terrorism, political
instability,
natural catastrophe or other national or
international
calamity, crisis or
emergency,
or any governmental or other
response to any of the foregoing, in each case, whether occurring within or
outside the United
States, (C) the
announcement
of this Agreement and the
transactions
contemplated hereby or other communication by or on behalf of
the
Buyer or Buyer Sub of
their plans or
intentions
(including
in respect of
employees and
Clients) with respect to any aspect of the
businesses
of the
Company and its
Subsidiaries or the identity of or involvement of the Buyer or
its Affiliates, (D) any change in Law or GAAP, or (E) any action or
omission of
the Company or any of its Subsidiaries taken or omitted (x) in connection
with
the performance
of the Company's obligations under this Agreement or the
consummation of the transactions contemplated hereby, (y) to comply with any
Law or Order or (z) with the prior written consent of the Buyer, in each case
of clauses (A) through (E), shall not be deemed to constitute
or give rise to,
and shall not be
considered in
determining
whether there has occurred, a
Company Material Adverse Effect.
<PAGE>
6
"CONTRACT" means any
written contract, agreement, lease, license,
indenture, note,
bond, mortgage, loan, instrument, commitment or other
arrangement, understanding, undertaking or obligation.
"DEBT" means, as to any Person, without duplication (i) all
obligations
of such Person for borrowed money, excluding any notes payable
issued by, or
repurchase agreements
entered into by, the
Company or any of its Subsidiaries
in connection with a
CDO Financing, and
(ii) all guarantees of such Person in
respect of any
obligations of any
other Person for
borrowed money;
for the
avoidance of doubt, an
obligation
of a Person
which is accounted for as a
guarantee in
accordance
with GAAP shall be deemed "Debt" only if it is in
respect of any obligations of any other Person for borrowed
money.
"DFP" means Deerfield Financial Products LLC or any other Person
formed
by or on behalf of the Company as a credit derivative products
company.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended.
"ESCROW AGENT" means Wilmington Trust Company, a Delaware
corporation,
or such other
Person mutually determined by the Buyer and the Sellers'
Representative in its capacity as Escrow Agent under the Escrow
Agreement.
"ESCROW AGREEMENT"
means the escrow
agreement to be dated as of the
Closing Date
by and among the Company, the Buyer and the Escrow Agent
substantially in the form of Exhibit A hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended,
and the rules and regulations promulgated thereunder.
"EXISTING OPERATING
AGREEMENT"
means the Fourth
Amended and Restated
Operating Agreement of
Deerfield & Company LLC, dated as of June 26, 2004, by
and among the Members and the Company, as supplemented by (i) the First
Supplement to the Fourth Amended and Restated Operating
Agreement of
Deerfield
& Company LLC,
dated as of July 22, 2004, (ii) the Second Supplement to the
Fourth Amended and
Restated Operating Agreement of Deerfield &
Company LLC,
dated as of August
16, 2004 and (iii) the Third Supplement to the Fourth
Amended and Restated
Operating Agreement of
Deerfield & Company LLC, dated as
of August 20, 2004.
"GOVERNMENTAL
AUTHORITY" means any
foreign, federal,
state or local
governmental,
judicial, legislature,
regulatory or
administrative agency or,
commission or
authority,
court, arbitral authority or national securities
exchange.
"HEDGE FUND" shall mean each of the private investment funds to which
the Company or any of its Subsidiaries currently provides
Investment Management
Services and
identified
as a Hedge
Fund in Section
4.12(a) of the
Company
Disclosure Letter.
<PAGE>
7
"HEDGE FUND DOCUMENTS"
shall mean each final or supplemental offering
memorandum, management
agreement,
organizational
instrument, and side letter
with an investor
entered into, or used in connection with an offering of
securities, by a Hedge Fund.
"HSR ACT" means the
Hart-Scott-Rodino
Antitrust Improvements
Act of
1976, as amended, and the rules and regulations promulgated
thereunder.
"INDEMNITY ESCROW
FUND" means the Share Indemnity Escrow Amount,
together with all dividends or distributions declared and paid
thereon (and any
income or interest
earned or accrued
thereon) in accordance
with the Escrow
Agreement.
"INTELLECTUAL
PROPERTY" means all
right, title and interest in or
relating to intellectual property, whether protected, created or arising under
the laws of the United
States or any other
jurisdiction,
including: (i) all
patents and applications therefor, including all continuations,
divisionals,
and
continuations-in-part
thereof and patents issuing thereon, along with all
reissues,
reexaminations and extensions thereof; (ii) all trademarks,
service
marks, trade names,
service names,
brand names,
trade dress rights,
logos,
corporate names, trade styles, logos and other source or business
identifiers
and general intangibles of a like nature, together with the
goodwill associated
with any of the foregoing, along with all applications,
registrations, renewals
and extensions
thereof; (iii) all
Internet domain names;
(iv) all copyrights
and all mask work,
database and design
rights, whether or not
registered or
published, all
registrations and recordations thereof and all applications
in
connection therewith,
along with all reversions, extensions and renewals
thereof; (iv) all
trade secrets; (v) all
other intellectual
property rights
arising from or relating to Technology; (vi) all financial models or
analyses,
proprietary formulae
or strategies,
ratings agency
analysis; and (vii) all
Contracts granting any right relating to or under the
foregoing.
"INVESTMENT ADVISERS ACT" means the Investment Advisers Act of
1940, as
amended, and the rules and regulations promulgated thereunder.
"INVESTMENT COMPANY
ACT" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder.
"INVESTMENT
MANAGEMENT
SERVICES" means
any services (including
sub-advisory services)
which involve (i) the management of an investment
account or fund (or
portions thereof
or a group of
investment
accounts or
funds) of any third party for compensation, and performing activities related
or incidental
thereto, or (ii) the rendering of advice with respect to the
investment and
reinvestment
of assets or funds (or any group of assets or
funds) of any third party (including any "business development company" under
the Investment Company Act of 1940, as amended, or any "real estate investment
trust") for
compensation, and
performing
activities
related or
incidental
thereto; PROVIDED,
that with respect to a third party that is a legal
organization,
Investment Management
Services shall not be
deemed provided to
any owner of the third
party unless
the services in (i) or (ii) above are
provided to such owner
separate and apart from such services provided to the
third party.
<PAGE>
8
"KNOWLEDGE OF
THE BUYER" means the actual knowledge (without
independent
investigation) of any of the individuals whose names are set
forth
on Section 1.1(a) of the Buyer Disclosure Letter.
"KNOWLEDGE OF
THE COMPANY" means the actual knowledge (without
independent
investigation) of any of the individuals whose names are set
forth
on Section 1.1(a)(i) of the Company Disclosure Letter.
"LAW" means any statute, code, Order, law, ordinance, rule, regulation
or other requirement of any Governmental Authority.
"LEGAL PROCEEDING" means any judicial, legislative, administrative or
arbitral actions,
suits, investigations, claims or other proceedings by or
before a Governmental Authority.
"LIEN" means any lien, pledge, encumbrance, mortgage, deed of trust,
security interest,
claim, lease, license, charge, option, adverse right, right
of first refusal,
easement or transfer restriction of any kind or nature
whatsoever.
"LOSS" means
any and all judgments, liabilities, amounts paid in
settlement, damages,
fines, penalties, deficiencies, diminution in value,
losses and expenses
(including
interest, court costs, reasonable fees of
attorneys, accountants
and other experts or other reasonable expenses of
litigation or other
proceedings or of any claim, default or assessment),
but
only to the extent
such losses are not
covered by a payment
from some third
party or by insurance or otherwise recoverable from third parties; PROVIDED,
that in no
event shall Losses include any lost profits, consequential,
indirect, incidental,
punitive, special or other similar damages,
other than
any such damages awarded to any third party against an indemnified
party.
"MEMBER WRITTEN
CONSENT" means a written consent executed by Members
holding a majority of the Voting Membership Interests in accordance
with the
Existing Operating
Agreement, approving
the Merger upon the terms and subject
to the conditions set forth in this Agreement.
"MEMBERS" has the meaning set forth in the Existing Operating
Agreement.
"MEMBERSHIP INTERESTS"
has the meaning set forth in the Existing
Operating Agreement.
"NYSE" means The New York Stock Exchange.
"ORDER" means any judgment, order, injunction, decree, writ, doctrine,
ruling, assessment or arbitration award of any Governmental
Authority.
"OTHER EXPENSES"
means all costs,
fees and expenses
incurred by the
Company or any of its Subsidiaries or by the Company or any of its
Subsidiaries
<PAGE>
9
on behalf of any
Member, in each
case, in connection with the previously
contemplated
repurchase by the
Company of the
Membership Interests
held by
Triarc Deerfield
Holdings, LLC. For the avoidance of doubt,
Other Expenses
shall not include any costs, fees and expenses incurred by the Company or any
of its Subsidiaries in connection with the previously contemplated spin-off of
the Company, including the fees and expenses of Skadden, Arps,
Slate, Meagher &
Flom LLP.
"PERMITTED LIENS" means (i) Liens incurred by the Company or any of
its
Subsidiaries in
connection with the
financing (the "CDO
FINANCING")
of any
purchase by the Company or its Subsidiaries of any debt or equity
securities of
a CDO on the closing
date of the related CDO transaction, Liens incurred in
connection with
a CDO Financing in respect of any such debt or equity
securities and future distributions on any such debt or equity
securities, and
Liens incurred
in connection with a CDO Financing in respect of future
management fees payable to the Company or any of its Subsidiaries
for providing
Investment Management
Services to such CDO,
(ii) Liens
relating to
purchase
money security interests entered into in the ordinary course of
business, (iii)
statutory Liens of mechanics, materialmen, workmen, repairmen,
warehousemen and
carriers, (iv) Liens for Taxes (and assessments and other
governmental charges)
not yet due and
payable or that are being contested in good faith by
appropriate
proceedings and for which adequate reserves have been established
on the Company
Financial Statements
in accordance with GAAP, (v) all defects,
exceptions,
restrictions,
easements, rights of way and encumbrances disclosed
in policies of title
insurance that have
been delivered
to the Buyer,
(vi)
Liens in respect of pledges or deposits under workers' compensation Laws or
similar legislation,
unemployment insurance or other types of social security,
(vii) municipal by-laws, facility costs, sharing and
servicing contracts,
and
zoning, building,
planning, entitlement and other land use and
environmental
regulations by
any Governmental Authority, (viii) minor defects or
irregularities in
title that do not, in the aggregate, materially affect the
value or current use of the underlying asset and (ix) restrictions on transfer
or assignment, including those imposed by Federal or state
securities Laws.
"PERSON" means
any individual, corporation, partnership, limited
liability company,
limited
liability partnership, firm, joint venture,
association,
joint-stock
company, trust,
unincorporated
organization,
Governmental Authority or other entity.
"PIPELINE FUNDS" means each of the hedge funds and collateralized
debt
obligations set forth in Section 1.1(a)(ii) of the Company
Disclosure Letter.
"PREFERRED MEMBERSHIP
INTERESTS"
has the meaning set forth in the
Existing Operating Agreement.
"RATINGS AGENCY"
means each of
Moody's, Standard & Poor's or
Fitch,
Inc. or any
other Person providing ratings to any securities issued in
connection with
any CDO to which the Company or any of its Subsidiaries
provides Investment Management Services.
"SEC" means the United States Securities and Exchange
Commission.
<PAGE>
10
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the
rules and regulations promulgated thereunder.
"SHARE INDEMNITY
ESCROW AMOUNT" means 2,504,817 shares of Buyer Common
Stock.
"SPECIFIED PERSONS"
means the Sellers'
Representative and one or more
Persons that
beneficially
own more than 25% of
the total voting power of the
outstanding capital stock of the Sellers' Representative as of the
date hereof.
"SPECIFIED VALUE PER SHARE" means $15.051.
"STRATEGIC FINANCING AGREEMENT" means any side letter agreement,
trust
agreement,
confirmation, pledge
agreement,
guaranty or any other
agreement
and/or instrument
pursuant to which the Company and/or any of its Subsidiaries
is obligated to pay,
pledge, subordinate
or, in any other manner, relinquish
its rights to receive
compensation (whether
in the form of
management fees,
incentive fees, equity
dividends or otherwise) under any Advisory Contract in
respect of any investment.
"STOCKHOLDER APPROVAL"
shall mean (a) the approval of the Stock
Issuance by the
affirmative vote of a
majority of the total votes cast by the
holders of Buyer Common Stock at a Stockholders Meeting (or any adjournment or
postponement thereof)
and (b) the approval of the Stock Issuance by the
affirmative vote of a
majority of the total votes cast by the holders of Buyer
Common Stock who are not Affiliates of the Company, the Sellers'
Representative
or their respective
Subsidiaries at a Stockholders Meeting (or any adjournment
or postponement thereof).
"SUBSIDIARY" means,
with respect to any Person, a corporation or other
Person of which more than 50% of the voting power of the outstanding voting
equity securities or more than 50% of the outstanding economic equity interest
is held, directly or indirectly, by such Person; PROVIDED, for the
avoidance of
doubt, that no Client
(including
the Buyer and its Subsidiaries) shall be
deemed to be a Subsidiary of the Company or any of its
Subsidiaries.
"TAX RETURNS" means any and all reports, returns, declarations,
claims
for refund, elections,
disclosures,
estimates, information reports or returns
or statements
supplied or required
to be supplied to a
taxing authority
in
connection with
Taxes, including any schedule or attachment thereto or
amendment thereof.
"TAXES" means
(i) any and all federal, state, provincial, local,
foreign and
other taxes, levies, fees, imposts, duties, and similar
governmental charges (including any interest, fines, assessments,
penalties or
additions to tax
imposed in connection
therewith or with respect thereto)
including, without
limitation
(x) taxes imposed on,
or measured by,
income,
franchise, profits or
gross receipts, and (y) ad valorem, value added, capital
gains, sales,
goods and services, use, real or personal property, capital
stock, license,
branch, payroll,
estimated withholding,
employment,
social
security (or
similar), unemployment, compensation, utility, severance,
<PAGE>
11
production, excise, stamp, occupation, premium, windfall profits,
transfer and
gains taxes, and customs duties, and (ii) any liability in respect
of any items
described in clause
(i) above as a transferee or successor, pursuant to
Treasury Regulation
ss. 1.1502-6 (or any similar provision of state, local or
foreign Law), or as an indemnitor, guarantor, surety or in a similar
capacity
under any contract, arrangement, agreement, understanding or commitment
(whether oral or written).
"TECHNOLOGY" means, collectively, all software, information, designs,
formulae, algorithms,
procedures,
methods,
techniques,
ideas, know-how,
research and
development,
technical
data, programs, subroutines, tools,
materials,
specifications,
processes, inventions
(whether patentable or
unpatentable and
whether or not reduced to practice), apparatus, creations,
improvements, works
of authorship and other similar materials, and all
recordings, graphs,
drawings, reports, analyses, and other writings, and other
tangible embodiments of the foregoing, in any form whether or not
specifically
listed herein, and all related technology, that are used in, incorporated
in,
embodied in,
displayed by or relate to, or are used in
connection
with the
foregoing.
"TRIARC RELATED PARTIES" means each of Triarc Companies,
Inc. and each
of its Subsidiaries
(other than the
Company or any of its Subsidiaries or any
Client of the Company or any of its Subsidiaries).
"VOTING MEMBERSHIP INTERESTS" has the meaning set forth in the
Existing
Operating Agreement.
(b)
The following
capitalized
terms are defined in the
following Sections of this Agreement:
TERM
SECTION
----
-------
Acquisition Transaction
6.19
Aggregate Cash Consideration
3.1(a)
Aggregate Merger Consideration
3.1(a)
Aggregate Share Consideration
3.1(a)
Agreement
Preamble
Allocation Objection Notice
3.5
Allocation Schedule
3.5
Alternative Debt Financing
6.16(a)
Antitrust Authorities
6.7(c)
Articles of Merger
2.2
Base Date
4.12
Base Date AUM
4.12
Basket
11.4(a)
Bear Stearns Confidentiality Agreement
6.3(a)
Board Recommendation
6.9(b)
Buyer
Preamble
Buyer Consents and Notices
5.7(b)
Buyer Disclosure Letter
4.29
<PAGE>
12
Buyer Financial Statements
5.5(b)
Buyer Indemnified Parties
11.2(a)
Buyer SEC Reports
5.5(a)
Buyer Sub
Preamble
CDO Consent Parties
6.8(a)
CDO Financing
1.1(a)
Client Consents
4.13(b)
Closing
2.3
Closing Date
2.3
Closing Date Aggregate Cash Consideration
3.2(a)(i)
Closing Date Aggregate Share Consideration
3.2(a)(i)
Closing Debt
3.1(a)
Code of Ethics
4.26
Company
Preamble
Company Consents and Notices
4.13(b)
Company Disclosure Letter
3.5
Company Financial Statements
4.5
Company Indemnified Parties
11.2(b)
Confidentiality Agreement
6.3(a)
DCM
Recitals
Debt Commitment Letter
6.16(a)
Director and/or Officer Indemnified Party
6.13(b)
DOJ
6.7(b)
Effective Time
2.2
Environmental Laws
4.11
ERISA Affiliate
1.1(a)
ERISA Client
4.12
Exchange Agent
3.3(b)(i)
Exchange Fund
3.3(b)(i)
Final Allocation Schedule
3.5
Financing
6.16(a)
Follow-Up CDO Consent Request Letter
6.8(b)
Follow-Up Client Consent Request Letter
6.8(b)
Follow-Up Hedge Fund Consent Request
6.8(b)
FTC
6.7(b)
Fully Diluted Percentage Interests
3.3(b)(iii)(B)
GAAP
4.5
Hedge Fund Resolutions
6.8(a)
ILLCA
Recitals
Indemnifiable Expenses
11.2(a)(vi)
Indemnification Claim
11.3(a)
Initial CDO Consent Request Letter
6.8(a)
Initial Client Consent Request Letter
6.8(a)
Initial Hedge Fund Consent Request
6.8(a)
Investment Banking Firm Determination
3.3(b)(iii)
<PAGE>
13
Management Agreement
Recitals
Material Contracts
4.14(a)
Merger
Recitals
Most Recent Balance Sheet Date
4.5
Multiemployer Plan
1.1(a)
New CDO Consent Party
6.8(d)
New Client
6.8(d)
Outside Date
10.1(b)
Permits
4.9
Plan Asset Regulation
4.12
Policies
4.24
Pre-Closing Statement
3.1(b)
Proxy Statement
5.7(b)
Real Property Lease
4.15
Real Property Leases
4.15
Registration Rights Agreement
Recitals
REIT
5.6
Releasee
6.14
Releasor
6.14
Representatives
6.19
Required Consents and Notices
5.7(b)
Restricted Business
6.20(a)(i)
Restricted Period
6.20(a)
Restricted Persons
6.20(a)
Sellers' Representative
Preamble
Sellers' Representative Expense Fund
3.3(a)(iii)
Special Committee
Recitals
Stock Issuance
5.3
Stockholders Meeting
5.3
Straddle Period
11.2(a)(v)
Survival Period
11.1
Surviving LLC
2.1
Unpaid Expenses
3.1(b)(ii)
Unresolved Claims
11.5
WARN
4.20
ARTICLE II
THE MERGER
2.1
THE MERGER. At the
Effective Time, upon
the terms and subject
to the conditions of this Agreement, and in accordance with the ILLCA, Buyer
Sub shall be merged with and into the Company, the separate limited liability
company existence
of Buyer Sub shall cease and the Company shall be the
surviving limited
liability company in
the Merger (the "SURVIVING LLC"). As a
<PAGE>
14
result of the Merger, all of the respective outstanding membership
interests of
the Company
and Buyer Sub
shall be converted or cancelled in the manner
provided in Article III.
2.2
EFFECTIVE TIME.
As soon as
practicable
on the Closing
Date,
articles of
merger in the form reasonably agreed to by the Buyer and the
Company (the "ARTICLES
OF MERGER") shall be
duly prepared and executed by the
Company and Buyer Sub and thereafter delivered to the Secretary of
State of the
State of Illinois for filing, as provided in Section
37-25 of the ILLCA.
The
Merger shall
become effective at the time of the filing of the
Articles of
Merger with the
Secretary of State of the State of Illinois, or at such later
time as may be agreed by the Buyer and the Company and stated in the Articles
of Merger (the date
and time of such
filing (or stated
later time,
if any)
being referred to herein as the "EFFECTIVE TIME").
2.3
CLOSING. The closing
of the Merger (the "CLOSING") shall take
place at 10:00 a.m.
(New York City time) at the offices of Paul, Weiss,
Rifkind, Wharton &
Garrison LLP, 1285 Avenue of the Americas, New York, New
York 10019 on the third Business Day following the
satisfaction
or waiver of
each of the conditions
set forth in Articles
VII and VIII hereof
(other than
those conditions that can only be satisfied on the Closing Date,
but subject to
the satisfaction or waiver of such conditions), or at such other
time and place
as may be mutually
agreed to by the
parties hereto. Such time and date are
referred to in this Agreement as the "CLOSING DATE."
2.4
EFFECTS OF THE MERGER.
At the Effective Time,
the effects of
the Merger shall be as provided in this Agreement, the Articles of Merger and
in the applicable
provisions of the ILLCA. Without limiting the generality
of
the foregoing and subject thereto, at the Effective Time, all the property,
rights, privileges,
immunities, powers and franchises of the Company and Buyer
Sub shall vest in the Surviving LLC, and all debts, liabilities, obligations,
restrictions, disabilities and duties of the Company and Buyer Sub
shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving LLC.
2.5
ORGANIZATIONAL
INSTRUMENTS. The
articles of
organization of
Buyer Sub in effect
immediately prior to the Effective Time shall be, from and
after the Effective
Time, the articles of
organization
of the Surviving
LLC
until thereafter
changed or amended as
provided therein or by
the ILLCA. The
limited liability company agreement of Buyer Sub in effect
immediately prior to
the Effective
Time shall be, from
and after the Effective Time, the limited
liability company
agreement of the
Surviving LLC until thereafter changed or
amended as provided therein or by the ILLCA.
2.6
DIRECTORS AND OFFICERS. Each of the parties hereto shall take
all necessary action
to cause the directors of Buyer Sub immediately prior to
the Effective
Time to be the directors of the Surviving LLC immediately
following the
Effective Time, until their respective successors are duly
elected or appointed
and qualified or their
earlier death, resignation or
removal in accordance
with the limited
liability company agreement of the
Surviving LLC. The officers of the Company immediately prior to the Effective
Time shall
be the officers of the Surviving LLC until their respective
<PAGE>
15
successors are duly appointed and qualified or their earlier death,
resignation
or removal in accordance with the limited liability company agreement of the
Surviving LLC.
2.7
BUYER BOARD
DESIGNATION RIGHTS.
The Buyer shall,
subject to
compliance with the fiduciary duties of the Board of Directors of
the Buyer and
applicable Law, take
such actions as are necessary and appropriate to nominate
one individual
designated by the
holders of a majority of the shares of Buyer
Common Stock held by the Specified Persons for election to serve as a
Class I
director on the Board of Directors of the Buyer in connection with the 2008
annual meeting of stockholders of the Buyer.
2.8
FURTHER ASSURANCES.
Each party hereto shall execute such
further documents
and instruments and take such further actions as may
reasonably be requested by one or more of the others to consummate
the Merger,
to vest the Surviving
LLC with full title or
interest in, to or
under any of
the rights, privileges, powers, franchises, properties or assets of Buyer
Sub
or the Company, as
applicable,
or to otherwise effect the purposes of this
Agreement.
ARTICLE III
CONVERSION OF MEMBERSHIP INTERESTS AND
MERGER CONSIDERATION
3.1
CALCULATION OF AGGREGATE MERGER CONSIDERATION.
(a)
As used herein,
"AGGREGATE MERGER CONSIDERATION" means
an amount equal to (i) 9,635,192 shares of Buyer Common Stock (the
"AGGREGATE
SHARE CONSIDERATION")
and (ii) an amount in cash (the "AGGREGATE CASH
CONSIDERATION") equal
to the sum of $145,000,000 MINUS the principal amount of
Debt outstanding
(together with all accrued and unpaid interest thereon) as of
the close of business on the date immediately prior to the Closing Date, as
reflected in the Pre-Closing Statement ("CLOSING DEBT").
(b)
No later than one
Business Day prior to the Closing
Date, the Company shall cause to be prepared
and delivered to the Buyer a
statement (the "PRE-CLOSING STATEMENT") setting forth in
reasonable detail the
following:
(i)
the amount of the Closing Debt which, in the
case of the Closing Pay-Off Debt, shall be as reflected in the
customary pay-off letters received by the Company from the lender
under
such Closing
Pay-Off Debt related to the payment in full of such
Closing Pay-Off Debt at the Closing;
(ii) the
amount of the Company
Expenses and Other
Expenses, in each case to the extent they remain unpaid as of 5:00
p.m.
(New York City time) on the date immediately prior to the Closing Date
(the "UNPAID Expenses"); and
<PAGE>
16
(iii) the
calculation
of the Closing Date
Aggregate
Cash Consideration.
3.2
EFFECT ON MEMBERSHIP
INTERESTS.
At the Effective Time, by
virtue of the Merger
and without
any action on the part
of the holder of any
membership interest of the Company or Buyer Sub:
(a)
the Membership
Interests
issued
and outstanding
immediately prior to
the Effective Time
shall be converted
into the right to
receive in the aggregate the following:
(i)
(A) a number of shares
of Buyer Common
Stock
equal to the Aggregate Share Consideration (subject to the payment of
cash in lieu of
fractional shares as
provided in Section
3.3(b)(iv))
MINUS the Share Indemnity Escrow Amount (such number, the "CLOSING
DATE
AGGREGATE SHARE
CONSIDERATION") and (B) an amount of cash equal to the
Estimated Aggregate Cash Consideration, MINUS the Unpaid Expenses that
are Company Expenses,
MINUS the Sellers'
Representative Expense
Fund
(such amount, the "CLOSING DATE AGGREGATE CASH CONSIDERATION") (and
the
amount calculated in
accordance with this clause (i) shall be allocated
among the Members that hold such Membership Interests in accordance
with Section 3.3(b)(iii)); PLUS
(ii) the
amount of cash, if any, payable to the
holders of such Membership Interests pursuant to Section 3.3(a)(iii)
(and the amount calculated in accordance with this clause (ii)
shall be
allocated among the
Members that hold such
Membership
Interests in
accordance with Section 3.3(a)(iii)); PLUS
(iii) the
amount of cash and the
number of shares of
Buyer Common Stock, if any, payable or issuable (as
applicable) to the
holders of such Membership Interests pursuant to the Escrow
Agreement
(and the amount and number calculated in accordance with this clause
(iii) shall be allocated among the Members that hold such Membership
Interests in accordance with Section 11.5).
(b)
the membership
interests of Buyer Sub issued and
outstanding
immediately prior to
the Effective Time shall be converted into a
corresponding amount of membership interests of the Surviving
LLC;
(c)
all Membership Interests shall no longer be outstanding
and shall
automatically be cancelled and retired and shall cease to exist,
and
the Members shall
cease to have any rights with respect thereto, except the
right to receive the cash payments and shares of Buyer Common Stock
set forth
in this Section 3.2; and
(d)
the membership
interest transfer
books of the Company
will be closed
and thereafter there will be no further registration of
transfers on the membership interest transfer books of the
Surviving LLC of any
membership interests of the Company.
<PAGE>
17
3.3
CLOSING PAYMENTS; EXCHANGE OF MEMBERSHIP INTERESTS.
(a)
CLOSING PAYMENTS.
At the Closing,
in addition to the
deposits required to
be made by the Buyer pursuant to Section 3.3(b)(i), the
Buyer shall pay, or cause to be paid, cash in the following
amounts and to the
following Persons,
by wire transfer of
immediately available
funds to a bank
account designated in writing by the Person receiving such payment
at least two
Business Days prior to the Closing Date:
(i)
an amount equal to the Closing Pay-Off Debt, on
behalf of the Company
and its Subsidiaries, to the holders of the
Closing Pay-Off Debt;
(ii) an
amount equal to the Unpaid Expenses that are
Company Expenses to the Persons entitled to be paid such expenses;
and
(iii) an
amount equal to $250,000 (the "SELLERS'
REPRESENTATIVE EXPENSE
FUND") to the Sellers'
Representative to
fund
the fees, costs and expenses incurred after the Effective Time by
or at
the direction
of the Sellers'
Representative
for the benefit of
the
Members under this
Agreement and, to the extent any portion of the
Sellers'
Representative Expense
Fund remains after payment in full of
any amounts owed under
Section 3.4, disbursed at such time to each
Member that held
issued and outstanding
Membership
Interests as of
immediately prior
to the Effective Time in accordance with such
Member's Fully Diluted Percentage Interests.
(b)
EXCHANGE OF MEMBERSHIP INTERESTS.
(i)
EXCHANGE AGENT.
At the Effective Time, the
Buyer shall (x)
deposit with the Escrow Agent a number of shares of
Buyer Common Stock equal to the Share Indemnity Escrow Amount and (y)
deposit with its transfer agent for its shares of Buyer
Common Stock,
or with such other bank or trust company mutually agreed by the Buyer
and the Sellers'
Representative
prior to the Effective Time (the
"EXCHANGE AGENT"),
for the benefit of the holders of Membership
Interests issued and
outstanding
immediately
prior to the
Effective
Time and for
exchange in accordance with this Article III, (A)
certificates representing
the Closing Date Aggregate Share
Consideration issuable
pursuant to Sections
3.2(a)(i) and 3.3(b)(iii)
and (B) immediately
available funds in an
amount equal to the Closing
Date Aggregate Cash
Consideration (such
certificates and funds
being
hereinafter referred
to as the "EXCHANGE
FUND") in exchange for
such
Membership Interests.
(ii)
LETTER OF TRANSMITTAL. Promptly (and in any
event no later than two Business Days) after the Effective
Time, the
Buyer shall
cause the Exchange Agent to deliver to each Member
that
held issued and
outstanding Membership
Interests as of immediately
prior to the Effective Time a letter of transmittal in customary
form,
specifying (i) that delivery shall be effected, and title thereto
shall
pass, only upon
returning such letter of transmittal duly executed by
<PAGE>
18
such Member to the Exchange Agent and (ii) that by signing
such letter
of transmittal, such
Member (x) agrees to and confirms acknowledgment
of the terms and conditions of this Agreement and the Escrow
Agreement,
including such Member's obligations (if any) under Sections 3.5,
6.4(b)
and 6.10(b)
and Article IX, and the rights of the Sellers'
Representative under
this Agreement, the Escrow Agreement and the
Registration Rights Agreement, (y) certifies that such Member is
not a
foreign person
within the meaning of
Section 1445 of the Code and (z)
represents and
warrants that such Member qualifies as an "accredited
investor," as such term is defined in Rule 501(a) promulgated
pursuant
to the Securities Act.
(iii) PAYMENTS
IN RESPECT OF
MEMBERSHIP
INTERESTS.
Upon execution and
delivery to the Exchange Agent of the duly executed
letter of transmittal,
the Buyer shall cause the Exchange Agent to
deliver promptly (and
in any event no later than two Business Days) to
each Member that held issued and outstanding Membership Interests
as of
immediately prior to the Effective Time the portion of the
certificates
representing the
Closing Date Aggregate
Share Consideration
and the
Closing Date Aggregate Cash Consideration allocable to each such
Member
determined as follows:
(A)
FIRST, deliver
PRO RATA to each
such
Member that held issued and outstanding Class A-1 Interests,
Class A-2 Interests
or Class B
Interests as of immediately
prior to the Effective
Time a portion
of the shares of
Buyer
Common Stock
included in the
Closing Date Aggregate Share
Consideration and a
portion of the Closing Date Aggregate Cash
Consideration based on
the percentages set
forth next to each
such Member's
name under the heading "Initial Percentage
Interests" in Section 4.4(a) of the Company Disclosure Letter
until the aggregate
value of the shares of
Buyer Common Stock
(based upon
the Specified Value Per Share) and cash so
delivered equals the amount set forth in Section 3.3(b)(iii) of
the Company Disclosure Letter; and
(B)
SECOND, deliver the remaining amount of
the Closing Date Aggregate Share Consideration and the Closing
Date Aggregate Cash Consideration, PRO RATA to each Member that
held issued
and outstanding Membership Interests as of
immediately
prior to the Effective Time, based on the
percentages set forth next to each such Member's name under the
heading "Fully Diluted Percentage Interests" in Section 4.4(a)
of the Company Disclosure Letter (the "FULLY DILUTED PERCENTAGE
INTERESTS");
PROVIDED THAT
Members shall receive payments of cash in lieu of
fractional shares as provided in Section 3.3(b)(iv); PROVIDED,
FURTHER,
that, notwithstanding
the foregoing, if the
Company becomes obligated
under the Existing
Operating Agreement to
have the allocation of
the
payment of the Closing Date Aggregate Share Consideration and Closing
Date Aggregate Cash
Consideration to the
Members be determined by the
<PAGE>
19
Investment
Banking Firm
(as defined in the Existing Operating
Agreement) selected in
accordance with the
Selection Procedures
(as
defined in the Existing Operating Agreement), such allocation and the
payments to be made to the Members under this Section 3.3(b)(iii)
shall
instead be made as
determined by such
Investment
Banking Firm (the
"INVESTMENT BANKING FIRM DETERMINATION").
(iv)
FRACTIONAL SHARES.
Each holder of
Membership
Interests issued and
outstanding
immediately
prior to the
Effective
Time who would
otherwise have been entitled to receive a fraction of a
share of Buyer Common
Stock issuable pursuant to Section 3.2(a)(i)
shall receive
from the Exchange Agent, in accordance with the
provisions of
this Article III, a cash payment in lieu of such
fractional share interest based upon the Specified Value Per Share.
The
Buyer shall pay to the Exchange Agent simultaneously with the payment
made pursuant to Section 3.3(b)(i) an amount in cash sufficient for
the
Exchange Agent to pay
each holder of Membership Interests issued and
outstanding
immediately prior to
the Effective Time an amount in cash
equal to the product
obtained by
multiplying
(A) the fraction of a
share of Buyer Common Stock issuable pursuant to Section 3.2(a)(i) to
which such
holder would otherwise have been entitled by (B) the
Specified Value Per Share.
(v)
INVESTMENT OF EXCHANGE FUND. The Exchange Agent
shall invest the cash
portion of the Exchange Fund as directed by the
Buyer in one or more Permitted Investments (as defined in the
agreement
to be entered into among the Buyer, the Company and the Exchange
Agent
prior to the Closing
Date). Any interest
and other income
resulting
from such investment
shall become a part of the Exchange Fund, and any
amounts in excess of the amounts payable under Section 3.2(a)(i) shall
be paid promptly to the Buyer.
(vi)
TERMINATION OF
EXCHANGE FUND.
Any portion of
the Exchange Fund that
remains unclaimed by
the holders of Membership
Interests issued and
outstanding
immediately
prior to the
Effective
Time 180 days after
the Effective Time shall be delivered by the
Exchange Agent to the
Buyer upon
demand. Any holder of Membership
Interests issued and
outstanding
immediately
prior to the
Effective
Time who has not complied with this Article III shall look
thereafter
only to the Buyer
for payment or issuance of the portion of the
certificates
representing the
number of shares of Buyer Common Stock
issuable pursuant to
Section 3.2(a)(i) and
the amount of cash payable
pursuant to Section 3.2(a)(i) allocable to such holder.
3.4
MEMBER WRITTEN CONSENT. Immediately after the execution of this
Agreement, the Member
Written Consent shall be executed and delivered by
Members holding a
majority of the Voting Membership Interests and a copy
thereof shall be delivered to the Company and the Buyer.
3.5
ALLOCATION OF
AGGREGATE MERGER
CONSIDERATION.
The Aggregate
Merger Consideration,
as adjusted,
plus the amount of any
liabilities of the
Company and its Subsidiaries for Tax purposes as of the Effective
Time shall be
<PAGE>
20
allocated consistent with past practice among the assets of the
Company and its
Subsidiaries (including the Management Agreement) as reasonably
proposed by the
Sellers'
Representative in good
faith and shall be set forth in a
schedule
produced by the
Sellers'
Representative and
delivered to the Buyer within
seventy-five (75) days following the Closing Date (the "ALLOCATION
SCHEDULE").
The Buyer shall have an opportunity to review the proposed
Allocation
Schedule
for a period of 20 days after receipt of the proposed Allocation
Schedule. If
the Buyer disagrees with any aspect of the proposed Allocation Schedule, the
Buyer shall notify the Sellers' Representative, in writing, prior
to the end of
such 20-day
period (an
"ALLOCATION
OBJECTION NOTICE"), setting forth the
Buyer's proposed Allocation Schedule and specifying, in reasonable detail, any
good faith dispute as to the Sellers' Representative's Allocation Schedule. If
prior to the conclusion of such 20-day period, the Buyer notifies the
Sellers'
Representative in
writing that it will
not provide any
Allocation
Objection
Notice or if the Buyer does not deliver an Allocation Objection Notice within
such 20-day period, then the proposed Allocation Schedule shall be
deemed final
and conclusive and binding upon each of the parties hereto (a
"FINAL ALLOCATION
SCHEDULE"). The
Sellers'
Representative and the
Buyer shall use commercially
reasonable efforts
to resolve any objection by the Buyer to the proposed
Allocation Schedule and to agree upon a Final Allocation Schedule.
If within 10
days after the Sellers' Representative receives an
Allocation Objection Notice
the Buyer and the Sellers' Representative have not resolved
all objections and
agreed upon
a Final Allocation Schedule, the Buyer and the Sellers'
Representative shall engage a mutually acceptable independent accounting firm
of national
recognition
(the "INDEPENDENT ACCOUNTING FIRM") to determine
whether the Sellers'
Representative's
position with respect
to any remaining
disputed items,
as set forth in the proposed Allocation Schedule, are
reasonable. Any
disputed items that are so determined by the Independent
Accounting Firm to be
reasonable
shall be included
in the Final
Allocation
Schedule as proposed by the Sellers' Representative. Any disputed items that
are so determined by the Independent Accounting Firm not to be
reasonable shall
be adjusted by the
Independent
Accounting
Firm to be
reasonable,
and such
adjusted amounts shall be included in the Final Allocation
Schedule. The
Buyer
and the Sellers'
Representative shall
have the opportunity
to present their
position with respect to any disputed items to the Independent
Accounting Firm
and shall use commercially reasonable efforts to cause the Independent
Accounting Firm,
within
20 days after its selection, to make the
above-described
determinations and to
prepare a Final Allocation Schedule in
accordance therewith.
Unless
the Buyer and the Sellers' Representative
otherwise agree,
such Final Allocation Schedule shall not modify items
previously agreed.
The fees and
disbursements of the
Independent
Accounting
Firm shall be shared
equally by the Buyer,
on the one hand, and
the Members
that held issued and outstanding Membership Interests as of immediately
prior
to the Effective Time (PRO RATA in proportion to the respective
amounts paid to
such Members pursuant to Section 3.2(a)), on the other hand;
PROVIDED, HOWEVER,
that the Buyer may (but shall not be obligated to) elect, at any time, to
withdraw all (but not less than all) of the aggregate amount of such fees and
disbursements
allocable to such
Members from the Indemnity Escrow Fund in
accordance with the Escrow Agreement. The parties shall, and shall cause
their
respective Affiliates to, use the allocations set forth in the
Final Allocation
Schedule for all Tax purposes, file all Tax Returns in a manner
consistent with
<PAGE>
21
such Final Allocation
Schedule and take no position contrary thereto, in each
case, unless
required to do so by a
change in applicable
Tax Laws or a good
faith resolution of a Tax contest.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Letter which is being delivered
to the Buyer
concurrently herewith
(the "COMPANY
DISCLOSURE
LETTER"), the
Company represents and warrants to the Buyer and Buyer Sub as
follows:
4.1
DUE ORGANIZATION; QUALIFICATION.
(a)
The Company
is a limited liability company duly
organized and validly existing and in good standing under the laws
of the State
of Illinois and has all requisite limited liability company power
and authority
to own, lease and
operate its properties
and to carry on its
business as now
being conducted.
(b)
The copies
of the certificate of formation of the
Company and the Existing Operating Agreement that previously have been made
available to the Buyer
are true and correct
copies of such
documents as in
effect on the date of this Agreement.
(c)
The Company
and each of its Subsidiaries is duly
qualified or
licensed to do business and is in good standing in all
jurisdictions where
the Company or such Subsidiary, as applicable, currently
conducts business that requires such qualification or licensing,
except where
the failure to be so
qualified or licensed
would not have a Company Material
Adverse Effect.
4.2
SUBSIDIARIES; INVESTMENTS.
(a)
Section 4.2(a) of the Company Disclosure Letter hereto
sets forth the name and jurisdiction of organization of
each Subsidiary of the
Company. Each of the
Company's Subsidiaries is an entity duly organized,
validly existing and
(to the extent the concept of good standing exists in the
applicable jurisdiction) in good standing under the laws of its
jurisdiction of
organization. Each of the Company's Subsidiaries has all requisite
corporate or
other similar
organizational power and authority to own, lease and operate
its
properties and to carry on its business as now being conducted. The copies of
the articles of incorporation, bylaws and similar governing
documents of each
of the Company's
Subsidiaries that
previously have been made available to the
Buyer are true and correct copies of such documents as in effect on
the date of
this Agreement.
(b)
Other than any interests in the Company's Subsidiaries,
except as set forth in Section 4.2(b) of the Company Disclosure
Letter, neither
the Company nor any of its Subsidiaries owns any capital stock or other
equity
interests in any Person.
<PAGE>
22
4.3
AUTHORIZATION; ENFORCEABILITY; VOTING REQUIREMENTS.
(a)
The Company has all requisite limited liability company
power and authority to execute and deliver this Agreement and each applicable
Ancillary Document and to perform its obligations hereunder and
thereunder. The
execution and delivery
by the Company of this
Agreement and each
applicable
Ancillary Document
and the performance by the Company of its obligations
hereunder and
thereunder have been
duly authorized by all
requisite limited
liability company
action of the Company other than the adoption of this
Agreement by the
requisite vote of the Members (which shall be obtained
pursuant to the Member Written Consent immediately following the execution and
delivery of this Agreement). Except as provided for in the
preceding sentence,
no other limited liability company action on the part of the Company is
necessary to authorize the execution, delivery and performance by the Company
of this Agreement and each applicable Ancillary Document and the consummation
by it of the transactions contemplated hereunder and thereunder.
This Agreement
and each applicable
Ancillary Document has been duly executed and delivered by
the Company and, assuming this Agreement and each applicable
Ancillary Document
has been duly
authorized, executed
and delivered by the other parties hereto,
constitutes the legal, valid and binding obligation of the Company,
enforceable
against the
Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent
transfer,
reorganization,
moratorium or similar laws,
laws of general applicability relating to or affecting creditors'
rights and to
general equity principles.
(b)
The affirmative
vote of the
Members pursuant to the
Member Written Consent is the only vote or approval of the holders
of any class
or series of capital stock of the Company or any of its
Subsidiaries
which is
necessary to adopt this Agreement and approve the Merger.
4.4
CAPITALIZATION.
(a)
Section 4.4(a) of the
Company Disclosure
Letter sets
forth a list as of the date hereof of the authorized, issued and outstanding
Class A-1 Interests, Class A-2 Interests, Class B Interests and
Class C Profits
Only Interests and each registered holder thereof. All of such authorized,
issued and outstanding
Membership
Interests are duly
authorized and
validly
issued, fully paid and
non-assessable. No
other class or series of Membership
Interests or other equity interests in the Company is authorized, issued or
outstanding, except
for the Preferred
Membership Interests
(of which none is
issued or outstanding). Except as provided in the Existing
Operating Agreement
or in any grant
agreement related to
the Class C Profits Only Interests or as
may be required in connection with a CDO Financing, there are no outstanding
securities,
options, warrants,
calls, rights, commitments, agreements,
arrangements or
undertakings of any kind to which the Company is a party or by
which the Company is bound, obligating the Company to issue,
deliver or sell,
or cause to be issued,
delivered or sold,
additional Membership
Interests or
other ownership
interests of the
Company or obligating
the Company to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement,
arrangement or
undertaking. Except as
provided in the
Existing Operating
Agreement or in any
grant agreement related to the Class C
Profits Only
Interests or as may be required in connection with a CDO
Financing, there are
no outstanding
contractual obligations of the Company to
<PAGE>
23
repurchase, redeem or
otherwise acquire any Membership Interests or other
ownership interests in the Company or make any material investment
(in the form
of a loan, capital contribution or otherwise) in any Person.
(b)
The Company's
Subsidiaries are as set forth in Section
4.4(b) of the Company
Disclosure
Letter. All of the outstanding shares of
capital stock
of or other equity interests in each of the Company's
Subsidiaries are
duly authorized and validly issued, fully paid and
nonassessable. All shares of capital stock of or other equity
interests in each
Subsidiary of the Company are owned by the Company or another
Subsidiary of the
Company free and clear of any Liens, other than Permitted
Liens.
4.5
FINANCIAL STATEMENTS;
CASH ON HAND. The Company has previously
made available to the
Buyer copies of audited consolidated balance sheets of
the Company and its
Subsidiaries as of
December 31, 2006 (the "MOST RECENT
BALANCE SHEET DATE") and December 31, 2005 and the related audited
consolidated
statements of operations, members' equity and cash flows of the
Company and its
Subsidiaries, for the
fiscal years ended December 31, 2006, December 31, 2005
and December 31, 2004,
together with all related notes and schedules thereto,
accompanied by the
corresponding
audit reports of Deloitte & Touche LLP,
independent auditors
of the Company
(collectively,
the "COMPANY FINANCIAL
STATEMENTS"). The
Company Financial
Statements fairly present in all material
respects the
consolidated
financial
position
of the Company and its
Subsidiaries as of the respective dates thereof, and the consolidated results
of the operations of the Company and its Subsidiaries for the
respective fiscal
periods covered
thereby, in each case in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved,
except as indicated in
any notes thereto (and except in
the case of the Unaudited Financial Statements, for the absence of footnotes
otherwise required by
GAAP and subject to year-end audit adjustments). As of
the date hereof, the Company and its Subsidiaries have cash and cash
equivalents of at least $5,997,000 in the aggregate.
4.6
NO MATERIAL ADVERSE
CHANGE; ORDINARY
COURSE. Since the Most
Recent Balance
Sheet Date,
(a) except as set
forth in Section
4.6(a) of the
Company Disclosure
Letter, each of the Company and its Subsidiaries has
conducted its business only in the ordinary course and consistently with past
practice (except
for actions taken in connection with the transactions
contemplated by this Agreement or the Ancillary Documents) and (b) neither the
Company nor any of its Subsidiaries has suffered any event, change,
occurrence
or circumstance in the financial condition, business, results of operations,
properties or
assets of the Company or any of the Subsidiaries that,
individually or in the aggregate with any such events, changes,
occurrences or
circumstances, has had
or would reasonably be expected to have a Company
Material Adverse Effect.
4.7
NO UNDISCLOSED LIABILITIES. Neither the Company nor any of
its
Subsidiaries has any
liabilities or obligations of any kind (whether accrued,
absolute, contingent
or otherwise), except for any such liabilities or
<PAGE>
24
obligations (a)
reflected or reserved against in the Company Financial
Statements, (b) set
forth in Section 4.7 of the Company Disclosure Letter, (c)
incurred in the ordinary course of business since the Most Recent
Balance Sheet
Date or in connection with the transactions contemplated by this Agreement
and
the Ancillary
Documents, (d) that
are the subject of any other representation
or warranty contained
in this Article IV and
are disclosed
pursuant to such
other representation
or warranty or are not
required to be disclosed because
such other
representation or
warranty is limited or qualified with respect to
time, dollar amount,
Knowledge of the Company, materiality, Company Material
Adverse Effect or any similar qualification or (e) that,
individually or in the
aggregate, are not
material to the
Company and its
Subsidiaries, taken as
a
whole.
4.8
COMPLIANCE WITH LAWS. The Company and its Subsidiaries are in
compliance in
all material respects with all Laws applicable to their
respective operations
or assets.
Except as set forth in
Section 4.8 of the
Company Disclosure Letter, neither the Company nor any of its
Subsidiaries has
received any written
notice from a
Governmental
Authority of the material
violation of any Laws.
Neither the Company nor any of its Subsidiaries is in
violation of any Order or Law which violations would have a Company Material
Adverse Effect; PROVIDED, however, that nothing in this Section 4.8
is intended
to address
any compliance issues that are the subject of any other
representation or
warranty contained in this Article IV and are disclosed
pursuant to such other
representation or
warranty or are not
required to be
disclosed because such other representation or warranty is limited
or qualified
with respect to time,
dollar amount,
Knowledge of the
Company,
materiality,
Company Material Adverse Effect or any similar qualification.
4.9
PERMITS. Each
of the Company and its Subsidiaries has all
licenses,
franchises,
permits and
authorizations
of any Governmental
Authorities
(collectively,
"PERMITS") as are necessary for the lawful conduct
of the business of the Company and the Subsidiaries, except where the failure
to have such
Permits would not have a Company Material Adverse Effect;
PROVIDED, HOWEVER,
that nothing in this Section 4.9 is intended to address any
permit issues
that are the
subject of any other
representation
or warranty
contained in
this Article IV and are disclosed pursuant to such other
representation or
warranty or are not
required to be
disclosed because
such
other representation
or warranty is limited or qualified with respect to time,
dollar amount, Knowledge of the Company, materiality, Company Material Adverse
Effect or any similar qualification.
4.10
REGULATORY COMPLIANCE.
DCM is duly registered as an investment
adviser under the Investment Advisers Act and is in material
compliance
with
its obligations
under the Investment Advisers Act. The Company has made
available to the Buyer true and complete copies of DCM's most recent Form
ADV
(in the case of ADV Part II, either the brochure in lieu of Part II
pursuant to
Investment Advisers
Act rule 204-3 or the form version of Part II), as amended
to the date of this Agreement. DCM has made all material amendments
to its Form
ADV (or brochure, as applicable) as it is required to make prior to
the date of
this Agreement under
the Investment
Advisers Act. DCM is duly registered as a
commodity trading
adviser and a
commodity pool
operator under the
Commodity
<PAGE>
25
Exchange Act.
The Company has made
available to the Buyer true and complete
copies of all material
documents related to such registrations. DCM is not a
"broker" or "dealer" within the meaning of the Exchange Act.
4.11
ENVIRONMENTAL
COMPLIANCE. Each
of the Company and its
Subsidiaries is in compliance with all applicable Laws relating to
pollution or
protection of the environment (collectively, "ENVIRONMENTAL LAWS"), except
as
would not have a Company Material Adverse Effect. There are no material Orders
outstanding, or any
actions, suits, proceedings, or investigations pending or,
to the Knowledge of the Company, threatened relating to the compliance by
the
Company or any of its Subsidiaries with, or the liability of the
Company or any
of its Subsidiaries
under, any
Environmental Law,
except for any such Orders
that would not have a Company Material Adverse Effect.
4.12
CLIENTS.
(a)
The aggregate assets
under management by
DCM, (x) for
each Client
other than a Client that is a CDO, as of the most recent
practicable date prior
to the date hereof as calculated by DCM consistent with
past practice, (y) for
each Client that is a CDO (other than any CDO for which
no trustee report is
available prior to the
date hereof), as of
the date set
forth in the most recently available trustee report for such CDO prior
to the
date hereof and (z) for each Client that is a CDO for which no
trustee report
is available
prior to the date
hereof, as of the date on which the
closing
occurs for such Client
(each applicable
date in (x),
(y) and (z) above
with
respect to such Client, the "BASE DATE") are accurately set forth in Section
4.12(a) of the Company
Disclosure Letter (the
"BASE DATE AUM"). Set
forth in
Section 4.12(a)
of the Company Disclosure Letter is a list as of the date
hereof of all Advisory Contracts and Strategic Financing Agreements, setting
forth with respect to
each such Advisory
Contract and Strategic Financing
Agreement, as applicable:
(i)
the name of each Client to which the Company or
any of its Subsidiaries provides Investment Management Services
(except
to the extent that the
disclosure of any such
name is restricted by a
confidentiality agreement), indicating (A) any such Client
that is the
Company, its
Subsidiaries,
a holder of
Membership
Interests or an
Affiliate of the Company or a holder of Membership Interests, and (B)
in the case of any Client that is a pooled investment vehicle, any of
the foregoing Persons described in clause (A) that had an
investment in
such Client
as of the Base Date (indicating the amount of such
investment);
(ii) the
amount of assets under management pursuant
to such Advisory
Contract at the Base Date, and the nature of the
Investment
Management Services
provided (i.e., discretionary or
non-discretionary);
(iii) with
respect to each Client that is a Hedge
Fund, the amount of each investor's investment in such Hedge Fund
as of
the Base Date (without revealing the identity of such
investor);
<PAGE>
26
(iv) the
fee schedule in effect with respect to such
Advisory
Contract
(including
identification
of any applicable
sub-components of
such fees, e.g., investment management fees,
performance fees,
fees for any other
fiduciary services, etc., as
applicable), and a
description of any
fees payable by the
underlying
Client in connection
with Investment Management Services (or other
services) provided
by the Company or any of its other Subsidiaries
other than pursuant to such Advisory Contract;
(v) as of the applicable date specified in this
Section 4.12(a)(v) and
not as of the date hereof, (x) for each Client
other than a Client that is a CDO, as of the most recent practicable
date prior to the Closing Date as calculated by DCM consistent with
past practice,
(y) for each
Client that is a CDO
(other than any CDO
for which no trustee report is available prior to the Closing
Date), as
of the date set forth in the most recently available trustee report
for
such CDO prior to the
Closing Date and (z)
for each Client that
is a
CDO for which no trustee report is available prior to the Closing
Date,
as of the date on which the closing occurs for such Client (it being
understood that the
Company shall be
permitted to provide the Buyer
with a supplement
to Section
4.12(a)(v)
of the Company Disclosure
Letter solely for
purposes of making the
representation and
warranty
specified in
this Section 4.12(a)(v) as of the applicable dates
specified in
this Section 4.12(a)(v)), (A) a description of any
material fee
changes (including any caps, waivers, offsets or
reimbursements) under
such Advisory
Contract or Strategic
Financing
Agreement and (B) a description of any material changes in the amount
of assets in any
Client's account as a
result of deposits
(including
reinvestments of
dividends and distributions) or withdrawals, or
redemptions or repayments, made by such Client or, based
solely on the
contents of the most
recently available
trustee report prior to the
Closing Date,
defaults (as defined
under the applicable indentures
relating to the
assets) in assets
owned by such Client that is a CDO,
in each case from the
Base Date to (x) for each Client other than a
Client that is a CDO, as of the most recent practicable date prior to
the Closing Date as calculated by DCM consistent with past practice,
(y) for each Client
that is a CDO
(other than any CDO for which no
trustee report is available prior to the Closing Date), as of
the date
set forth in the most recently available trustee report for such CDO
prior to the Closing
Date and (z) for each
Client that is a CDO for
which no trustee
report is available
prior to the Closing Date, as of
the date on which the closing occurs for such Client, and a
description
of any such changes
as of such date (it
being understood
and agreed
that, solely
for purposes of this clause (v), net deposits or
withdrawals, or
redemptions
or repayments, with respect to any one
Client account or defaults (as defined under the applicable
indentures
relating to the assets) in assets owned by such Client in the
aggregate
in excess of $5,000,000 shall be deemed material); and
(vi) the
manner
of consent required for the
"assignment" (or deemed assignment) under applicable Law, including
the
Investment Advisers
Act and relevant state
law, by the Company or its
Subsidiaries, as
applicable, of such
Advisory Contract in
connection
with the transactions
contemplated by this Agreement and the Ancillary
Documents, for those
Advisory Contracts which will be assigned
(or
<PAGE>
27
deemed assigned) in connection with such transactions (which contracts
are so identified),
in each case so that
any such consent or approval
(as applicable)
will be duly and
validly obtained in
accordance with
all applicable Law and the terms of any contracts, agreements and
other
instruments relating thereto.
(b) Except
as set forth in Section 4.12(b) of the Company
Disclosure Letter and expressly described thereon, as of the date
hereof, there
are no Contracts pursuant to which either the Company or any of its
Subsidiaries has
undertaken
or agreed to cap,
waive, offset, reimburse or
otherwise reduce any
or all fees or charges
payable by or with respect to any
of the Clients set forth in Section 4.12(a) of the Company
Disclosure Letter or
pursuant to any of the
contracts set forth in
Section 4.12(a) of the
Company
Disclosure Letter (it
being understood that
the Company shall be permitted to
provide the
Buyer with a supplement to Section 4.12(b) of the Company
Disclosure Letter to reflect any such understanding or agreement
after the date
hereof and prior to the Closing Date entered into in compliance with this
Agreement). As of the
date hereof, except as
set forth in Section
4.12(b) of
the Company Disclosure Letter, (i) since the date that is one year
prior to the
date hereof, (x) no
Client of the Company or any of its Subsidiaries (or, in
the case of any Clients that are pooled investment vehicles (other than any
CDOs), underlying
investors therein,
as applicable) has
stated in writing to
the Company or any of its Subsidiaries an intention to
terminate or reduce its
investment relationship with the Company or any of its
Subsidiaries, or make an
adjustment to the fee
schedule with respect
to any contract in a manner which
would reduce
the fees to the
Company or any of its
Subsidiaries
(including
after giving
effect
to the Closing) in connection with such Client
relationship, and (y)
no investor
in any CDO has
stated in writing to the
Company or any of its Subsidiaries an intention to cause,
either individually
or collectively with others, an optional redemption of any
securities issued by
such CDO, and (ii) (x) no Client of the Company or any of its
Subsidiaries (or,
in the case of any Clients that are pooled investment vehicles (other than any
CDOs), underlying
investors therein,
as applicable) has
stated in writing to
the Company or any of its Subsidiaries such an intention described in clause
(i)(x) of this Section
4.12(b) prior to the date that is one year prior to the
date hereof that is expected to become effective on or prior to the date that
is one year after the date hereof, and (y) no investor in any CDO
has stated in
writing to the Company or any of its Subsidiaries an intention to
cause, either
individually or
collectively
with others, an optional redemption of any
securities issued by such CDO.
(c)
Section 4.12(c)
of the Company Disclosure Letter
identifies, with an
appropriate footnote,
each Client to which the Company or
any of its Subsidiaries provides Investment Management Services
that is, to the
Knowledge of the Company, (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"). To the Knowledge of the
Company, the
Company and its Subsidiaries have complied in all material
respects with ERISA,
Section 4975 of the Code and the regulations promulgated
under either ERISA or Section 4975 of the Code in connection with
the provision
<PAGE>
28
of Investment
Management
Services to any ERISA Client. The assets of any
partnership, trust,
or investment fund managed by the Company or any
of its
Subsidiaries, or of which the Company or any of its Subsidiaries is
the general
partner or managing
member, that are not
intended to constitute "plan assets"
under 29 C.F.R.
2510.3-101 (the "PLAN ASSET REGULATION") are, to the Knowledge
of the Company, not
reasonably likely to be determined to be "plan assets" for
purposes of the Plan Asset Regulation.
(d)
To the Knowledge of
the Company,
neither the
Company
nor any of its Subsidiaries provides Investment Management
Services to (i) any
issuer or other Person
that is required to be registered as an investment
company (within the meaning of the Investment Company Act) under
the Investment
Company Act,
or (ii) any issuer or
other Person that is
or is required to be
registered under the laws of the appropriate securities regulatory
authority in
the jurisdiction in which the issuer is domiciled, which is or
holds itself out
as engaged primarily
in the business of investing, reinvesting or trading in
securities. Neither
the Company nor any of its Subsidiaries is required to be
registered as an
investment
company (within the meaning of the Investment
Company Act) under the Investment Company Act.
(e)
Except as set forth in Section 4.12(e) of the Company
Disclosure Letter,
no exemptive orders, "no-action" letters or similar
exemptions or
regulatory
relief have been obtained, nor are any requests
pending therefor,
by or with respect to either of the Company or its
Subsidiaries, any
holder of Membership
Interests or any
employee of any such
Person in connection with the business of the Company and its
Subsidiaries, or
to the Knowledge
of the Company, by any Client of the Company and its
Subsidiaries in connection with the provision of Investment
Management Services
to such Client by the Company and its Subsidiaries.
(f)
Section 4.12(f) of the
Company Disclosure
Letter sets
forth a true, correct
and complete list of
(i) the Hedge Fund
Documents (it
being understood that
the Company shall be permitted to provide the Buyer with
a supplement to Section 4.12(f) of the Company Disclosure Letter to
reflect the
entering into, or
amendment, supplement
or other modification
of, any Hedge
Fund Document after the date hereof and prior to the Closing Date
in compliance
with this Agreement)
and (ii) the CDO Documents (it being understood that the
Company shall be
permitted to provide
the Buyer with a supplement to Section
4.12(f) of the Company
Disclosure Letter to
reflect the
entering into, or
amendment, supplement or other modification of, any CDO Document
after the date
hereof and prior to the Closing Date in compliance with this Agreement). The
Company provided the
Buyer with true and correct copies of all CDO Documents
and Hedge Fund Documents as of the date hereof (and as of the
Closing will have
provided true and
correct copies of any CDO Documents and/or Hedge Fund
Documents entered
into after the date
hereof and prior to the Closing Date in
compliance with this
Agreement),
and the offering circulars or memoranda
included in such CDO
Documents and Hedge
Fund Documents
did not at the
time
such CDO or Hedge Fund issued any securities related to such CDO Documents
and
Hedge Fund Documents contain any untrue statement of a material
fact concerning
the Company
or any of its
Subsidiaries
or omit to
state a material fact
concerning the Company
or any of its
Subsidiaries necessary
in order to make
the statements contained therein, in the light of the circumstances
under which
<PAGE>
29
they were made, not
misleading.
Each of the CDO
Documents and the Hedge Fund
Documents to which the Company or its Subsidiaries is a party, to the extent
applicable, is in full
force and effect and
binding upon the
Company or its
Subsidiary party
thereto and, to the Knowledge of the Company, the other
parties thereto,
except as (i) limited by applicable bankruptcy, insolvency,
reorganization,
moratorium, fraudulent
conveyance
and other similar laws
of
general application
affecting enforcement of creditors' rights
generally and
(ii) the availability
of the remedy of
specific performance
or injunctive or
other forms of equitable relief may be subject to equitable
defenses and would
be subject to the discretion of the court before which any
proceeding
therefor
may be brought. None
of the Company or any of its Subsidiaries is in material
default under any CDO
Document or Hedge Fund
Document to which it is a party,
nor, to the Knowledge of the Company, has any event occurred
which, with the
giving of notice or the passage of time, or both, would give rise to such a
material default.
Except as set forth in Section 4.12(f) of the Company
Disclosure Letter,
to the Knowledge of the Company,
each of the CDOs was
in
compliance as of the Base Date with each of its
overcollateralization tests and
interest coverage tests.
(g)
Each of the Client Consents obtained in accordance with
Section 6.8 (including each of the Consents included in the determination of
whether the condition
contained in Section 7.9 has been satisfied) will, as of
the Closing Date, have
been duly obtained
under all applicable Law and the
requirements of the applicable Advisory Contract.
(h)
Nothing in
this Section 4.12 (other than the
calculation of the
Base Date AUM) is
intended to address
any matters with
respect to the Buyer or any of its Subsidiaries.
4.13
NON-CONTRAVENTION;
CONSENTS AND
APPROVALS. The
execution and
delivery by the
Company of this Agreement and each applicable Ancillary
Document, the consummation of the transactions contemplated hereby
and thereby,
and the performance
by the Company of this Agreement and each applicable
Ancillary Document in accordance with its terms will not:
(a)
except as set forth in Section 4.13(a) of the Company
Disclosure Letter,
violate the Existing Operating Agreement or any comparable
organizational instruments of any of the Company's
Subsidiaries;
(b)
require the Company to obtain any consents, approvals,
authorizations or
actions of, or make any filings with or give any notices to,
any Governmental
Authorities
or any other Person, except for (i) the
notification
requirements of the
HSR Act, (ii) the
filing of the Articles of
Merger with the Secretary of State of the State of Illinois, (iii)
as set forth
in Section 4.13(b) of the Company Disclosure Letter (the "COMPANY
CONSENTS AND
NOTICES"), (iv) as
contemplated by Section 6.8 (the "CLIENT CONSENTS") or (v)
any such consents, approvals, authorizations or actions of, or
filings with or
notices to any Person
(other than a
Governmental
Authority)
the failure to
obtain or make which would not have a Company Material Adverse
Effect;
<PAGE>
30
(c)
assuming all of the
Client Consents
and the Company
Consents and Notices are obtained or made, violate or result in the breach
of
any of the material terms and conditions of, cause the
termination of or
give
any other contracting
party the right to
terminate, or
constitute
(or with
notice or lapse of time, or both, constitute) a default under, or
result in the
acceleration of any
monetary liabilities under, any Material Contract or
material Permit to
which the Company or any of its Subsidiaries is a party or
by which any of their
respective properties
or assets are bound, or result in
the creation
of any Lien, other than a Permitted Lien, upon any of the
properties or assets of the Company or any of its Subsidiaries
pursuant to the
terms of any Material
Contract or material
Permit to which the Company or any
of its Subsidiaries is a party or by which any of their
respective
properties
or assets are bound,
except for any such violations, breaches, terminations,
defaults,
accelerations or
creations under any Material Contracts that would
not have a Company Material Adverse Effect; or
(d)
assuming all of the
Client Consents
and the Company
Consents and Notices are obtained or made, violate or result in the breach
of
any applicable Orders or Laws of any Governmental Authorities.
4.14
CONTRACTS.
(a)
Section 4.14 of the
Company Disclosure Letter sets
forth a list of all of the following Contracts to which the Company or
any of
its Subsidiaries is a
party or is bound by and that remain in effect as of the
date hereof (collectively, the "MATERIAL CONTRACTS"):
(i)
any Advisory Contract
or Strategic
Financing
Agreement;
(ii) any
Contract relating to
(x) the engagement of
any financial
institution (other than with any rating agency, trustee
or routine
service provider) in respect of engagements not yet
completed or (y) the
warehousing
of securities, in each case, in
connection with the
formation or offering of any securities of any CDO
the closing of which has not yet occurred under which it is reasonably
likely that the Company or any of its Subsidiaries has any continuing
material obligations;
(iii) any
Contract for the purchase of any data,
assets, material or
equipment, other than
any such Contract
entered
into in the ordinary
course of business or in an amount not exceeding
$250,000 annually;
(iv) any
other Contract under
which the Company and
its Subsidiaries have paid or are required to pay in excess of
$250,000
annually;
(v)
any Contract
for the sale of all or any
material assets of the Company or any of its Subsidiaries other
than in
the ordinary course of business;
<PAGE>
31
(vi) any
Contract relating to
the acquisition
(by
merger, purchase of stock or assets or otherwise) by the Company or
any
of its Subsidiaries of any operating business or material assets or
the
capital stock or other equity interests of any other Person;
(vii) any
partnership, strategic alliance, sharing of
profits or joint venture agreements or other similar Contracts;
(viii) any
Contracts containing covenants of the
Company or any of its
Subsidiaries
not to compete in any line of
business or with any Person in any geographical area or covenants of
any other Person not to compete with the Company or any of its
Subsidiaries in any line of business or in any geographical
area;
(ix) any
Contract relating to Debt of the Company or
any of its Subsidiaries;
(x)
any Contracts, excluding any Benefit Plan, with
any (A) current
officer, director,
stockholder
or Affiliate of the
Company or any of its Subsidiaries or (B) any former officer,
director,
stockholder or
Affiliate of the Company or any of its Subsidiaries
pursuant to
which the Company or any of its Subsidiaries has any
material continuing obligations thereunder;
(xi) any
Contracts
with
any labor union or
association
representing any
Employee of the Company or any of its
Subsidiaries;
(xii) any
Contracts imposing a Lien (other than
Permitted Liens)
on any of the
assets of the
Company or any of its
Subsidiaries;
(xiii) any
Contracts,
excluding any Benefit Plan,
under which the Company or any of its Subsidiaries has made
advances or
loans to any other Person;
(xiv) any
outstanding Contracts
of guaranty,
direct
or
indirect, by the
Company or any of its Subsidiaries under which the
Company or any of its
Subsidiaries may be required to pay in excess of
$250,000; or
(xv) any
Contracts with any
investment or
research
consultant, solicitor
or sales agent, or otherwise with respect to the
referral of
business to either of the Company or any of its
Subsidiaries
(including any agreement with respect to solicitation of
prospective investors in any CDOs or Hedge Funds).
(b)
Except as would not
have a Company
Material Adverse
Effect or as disclosed in Section 4.14(b) of the Company Disclosure
Letter, (i)
each Material
Contract, assuming such Material Contract has been duly
authorized, executed
and delivered by the other parties thereto, constitutes
the legal, valid and
binding obligation of the Company or the applicable
<PAGE>
32
Subsidiary of the Company, enforceable against the Company or the
applicable
Subsidiary of the Company in accordance with its terms,
subject to
bankruptcy,
insolvency, fraudulent
transfer,
reorganization,
moratorium or similar laws,
laws of general applicability relating to or affecting creditors'
rights and to
general equity
principles
and (ii) neither the Company nor any of the
Subsidiaries has
received written
notice of any uncured or unwaived material
default by the Company or any of the Subsidiaries.
(c)
Nothing in this Section 4.14 is intended to address any
matters with respect to the Buyer or any of its Subsidiaries.
4.15
PROPERTY.
(a)
Neither the Company
nor any of its
Subsidiaries owns
any real property.
Section 4.15(a) of the Company Disclosure Letter sets forth
a list of all real
property and
interests in real property leased by the
Company and the
Subsidiaries
(individually,
a "REAL PROPERTY LEASE" and
collectively, the
"REAL PROPERTY
LEASES") as lessee or lessor, including a
description of each such Real Property Lease (including the name of the
third
party lessor or lessee and the date of the lease or sublease and
all amendments
thereto). Except as
set forth in Section
4.15(a) of the
Company Disclosure
Letter, the Real
Property Leases constitute all interests in real property
currently used,
occupied or
currently held for use in connection with the
business of the Company and the Subsidiaries and which are necessary for the
continued operation of
the business of the Company and the Subsidiaries as the
business is currently conducted. Each of the Company and the
Subsidiaries, as
applicable, has a
valid, binding and enforceable leasehold interest under each
of the Real Property
Leases under which it is a lessee, free and clear of all
Liens other than Permitted Exceptions. Each of the Real Property Leases
is in
full force and
effect. Except as would not have a Company
Material Adverse
Effect or as disclosed in Section 4.15(a) of the Company Disclosure
Letter, (i)
each Real Property
Lease, assuming such Real Property Lease has been duly
authorized, executed
and delivered by the other parties thereto, constitutes
the legal, valid and
binding obligation of the Company or the applicable
Subsidiary of the Company, enforceable against the Company or the
applicable
Subsidiary of the Company in accordance with its terms,
subject to
bankruptcy,
insolvency, fraudulent
transfer,
reorganization,
moratorium or similar laws,
laws of general applicability relating to or affecting creditors'
rights and to
general equity
principles
and (ii) neither the Company nor any of the
Subsidiaries has
received written
notice of any uncured or unwaived material
default by the Company or any of the Subsidiaries. The Company has
delivered to
Purchaser true,
correct and complete copies of the Real Property Leases,
together with all amendments, modifications or supplements
thereto.
(b)
The Company and the Subsidiaries have good title to all
of the material items of tangible personal property used in the
business of the
Company and the Subsidiaries, free and clear of any and all
Liens, except (i)
as set forth in
Section 4.15(b)
of the Company Disclosure Letter and (ii)
Permitted Liens;
PROVIDED, HOWEVER, that nothing in this Section 4.15 is
intended to address any intellectual property matters, which are
the subject of
Section 4.16. All such items of tangible personal property which,
individually
or in the aggregate,
are material to the operation of the business of the
<PAGE>
33
Company and the
Subsidiaries
are in good
condition and in a state of good
maintenance and repair
(ordinary wear and
tear excepted) and are suitable for
the purposes used.
4.16
INTELLECTUAL PROPERTY.
(a)
Section 4.16(a) of the Company Disclosure Letter sets
forth a true and complete list of all (i) registrations for material
Intellectual Property,
(ii) applications to register
material Intellectual
Property and (iii) material unregistered trademarks or service marks, in
each
case owned by the
Company or one of its Subsidiaries. Except as listed in
Section 4.16(a) of the
Company Disclosure
Letter, to the Knowledge of the
Company, the Company or one of its Subsidiaries is the sole and
exclusive owner
of all right, title and interest in and to such Intellectual
Property listed in
Section 4.16(a) of the Company Disclosure Letter, free and clear of all Liens
other than Permitted Liens.
(b)
Except as set forth in Section 4.16(b) of the Company
Disclosure Letter,
each of the Company
and its Subsidiaries
owns or has the
right to use all
material Intellectual
Property to the extent
necessary to
conduct the
business of the Company and its Subsidiaries as presently
conducted.
(c)
No actions, suits or proceedings are pending nor to the
Knowledge of the
Company, is any claim threatened in writing against the
Company or any of its
Subsidiaries that
challenges the
Company's or any such
Subsidiary's ownership
or right to use any material Intellectual Property that
is necessary to
conduct the business
of the Company and its
Subsidiaries as
presently conducted.
(d)
To the Knowledge of
the Company,
neither the
Company
nor any of its Subsidiaries are infringing any material
intellectual
property
rights of any third party.
4.17
LITIGATION. As of the
date of this
Agreement,
there are no
Legal Proceedings
pending or, to the
Knowledge of the Company, threatened in
writing, against the
Company or any of its
Subsidiaries, except
for any such
Legal Proceedings set forth in Section 4.17 of the Company
Disclosure Letter or
that are not material to the Company and its Subsidiaries, taken as
a whole. As
of the Closing
Date, there will be no Legal
Proceedings
pending or, to the
Knowledge of the Company, threatened in writing, against the
Company or any of
its Subsidiaries,
except for any such
Legal Proceedings set
forth in Section
4.17 of the Company
Disclosure Letter or that could not reasonably be expected
to have, individually
or in the aggregate, a
Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is subject to or in breach or
violation of any Orders, except for any Orders set forth in Section
4.17 of the
Company Disclosure
Letter or that could
not reasonably
be expected to
have,
individually or in the aggregate, a Company Material Adverse
Effect. Nothing in
this Section 4.17 is intended to address any Legal Proceedings or Orders that
are the subject of any
other representation
or warranty contained in this
Article IV and are disclosed pursuant to such other representation or warranty
<PAGE>
34
or are not required
to be disclosed because such other representation or
warranty is limited or qualified with respect to time, dollar
amount, Knowledge
of the Company,
materiality, Company
Material Adverse Effect or any similar
qualification.
4.18
TAXES. The
Company and each of its Subsidiaries has timely
filed, or caused
