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EXHIBIT 10.5
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT ("Agreement"), dated as of November 4, 1997, by
and among Xxxxxxxxxxx Group, Inc., a Delaware corporation ("Opgroup"),
Oppenheimer Financial Corp., a Delaware corporation ("Opfin"), PIMCO Advisors
L.P., a Delaware limited partnership ("PIMCO Advisors"), and Value Advisors LLC,
a Delaware limited liability company ("Value Advisors"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in that
certain Agreement and Plan of Merger, dated November 4, 1997 (the "Merger
Agreement"), by and among Opgroup, Opfin, PIMCO Advisors, PIMCO Advisors
Transitory Merger LLC, a Delaware limited liability company, the Seller Trust,
under Declaration of Trust dated July 22, 1997, as amended, and the Indemnity
Trust, under Declaration of Trust dated July 22, 1997, as amended.
WHEREAS, Opgroup owns all of the stock of Opfin, and Opfin owns (i) all
of the member interests of Value Advisors and (ii) a 1% general partner interest
in Xxxxxxxxxxx Capital, L.P., a Delaware limited partnership (the "Opcap LP
Interest"), an approximate 32% general partner interest in Xxxxxxxxxxx Capital,
a Delaware general partnership, a 1% general partner interest in Opcap Advisors,
a Delaware general partnership , a 1% general partner interest in OCC
Distributors, a Delaware general partnership, and a 1% general partner interest
in 000 Xxxxxxx Xxxxxx Advisers, L.P. , a Delaware limited partnership
(collectively, the "Interests");
WHEREAS, Opfin desires to contribute, transfer and assign to PIMCO
Advisors, in exchange for the issuance by PIMCO Advisors of Class C units of
limited partner interest in PIMCO Advisors ("Class C Units"), all right, title,
interest, benefits, burdens and obligations of and to all of Opfin's interest in
the Interests and as a member of Value Advisors; and
WHEREAS, PIMCO Advisors desires to contribute, transfer and assign to
Value Advisors, as a capital contribution thereto, all right, title, interest,
benefits, burdens and obligations of and to all of the Interests other than the
Opcap LP Interest;
NOW THEREFORE, with reference to the foregoing and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Contributions
(a) Effective as of the date hereof, Opfin shall contribute,
transfer and assign to PIMCO Advisors all of Opfin's right, title, interest,
benefits, burdens and obligations as a member of Value Advisors, free and clear
of all liens, security interests and competing claims.
(b) Effective as of the date hereof, and following the
contribution described in Section 1(a), Opfin shall contribute, transfer and
assign to PIMCO Advisors all of Opfin's right, title, interest, benefits,
burdens and obligations, to and under all of the Interests, free and clear of
all liens, security interests and competing claims, and PIMCO Advisors shall
contribute, transfer and assign to Value Advisors all of PIMCO Advisors' right,
title, interest, benefits, burdens and
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obligations, to and under all of the Interests other than the Opcap LP Interest,
free and clear of all liens, security interests and competing claims
(c) The contributions, transfers and assignments described in
Section 1(b), other than with respect to the Opcap LP Interest, shall be
effected through a direct assignment to and assumption by Value Advisors, as
provided in the Assignment and Assumption attached hereto as Exhibits A, B and
C. The parties agree that such assignments and assumptions are being effected
directly to Value Advisors in order to minimize the costs, expenses and
complications that might be associated with multiple and duplicative transfers
of identical assets and liabilities; provided, however, that for purposes of all
tax and other applicable federal and state laws, such assets and liabilities
shall be treated and deemed as having been transferred to PIMCO Advisors and
then transferred by PIMCO Advisors to Value Advisors.
(d) The contributions, transfers and assignments of the Opcap LP
Interest as described in Section 1(b) and the member interest in Value Advisors
as described in Section 1(a) shall be effected as a direct assignment and
assumption by PIMCO Advisors as provided in the Assignment and Assumption
attached hereto as Exhibits D and E, respectively.
Section 2. Unit Issuance
(a) Effective as of the date hereof, in exchange for the
Interests and the member interest in Value Advisors (subject to the related
liabilities), PIMCO Advisors shall issue to Opfin 6,000,000 Class C Units.
(b) The number of Class C Units to be issued pursuant to
subsection (a) above shall be subject to adjustment in accordance with the
provisions of this Agreement.
Section 3. Purchase Price Adjustment
(a) In entering into this Agreement, the parties have attempted,
based on the information available as of the date of this Agreement, to agree on
a purchase price, as reflected in the Class C Units issued pursuant to Section
2, that represents fair consideration for the assets being transferred to PIMCO
Advisors by Opfin pursuant to Section 1. This Section 3 is intended to provide
for adjustments to the consideration being transferred by and to the parties
pursuant to Section 1 upon the occurrence of certain contingent events.
(b) If a Loss (as defined below) is incurred by PIMCO Advisors or
its direct or indirect subsidiaries (other than Opgroup or Opfin) and, as a
result of such Loss, Opgroup receives an Indemnification Payment (as defined
below) in excess of any Loss incurred by Opgroup or Opfin attributable to the
same Loss event (the excess portion thereof, an "Excess Indemnification
Payment"), then (i) if the Indemnification Payment is in the form of a reduction
in Face Amount under the terms of the Certificate of Long-Term Indemnity
Indebtedness dated November 4, 1997 issued by Opgroup (the "Certificate"), Opfin
shall transfer to PIMCO Advisors a number of Class C Units equal to the quotient
of (x) 6,000,000 multiplied by the amount of the reduction in Face Amount
constituting such Excess Indemnification Payment
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divided by (y) $265 million, or (ii) if the Excess Indemnification Payment is in
cash, Opgroup shall contribute such cash to PIMCO Advisors.
(c) As used herein "Losses" shall mean any and all losses,
damages and liabilities, joint or several, and expenses (including, without
limitation, attorney fees and other costs of litigation, arbitration and
settlement) suffered or incurred by a Opgroup, Opfin, PIMCO Advisors or any or
their respective subsidiaries based upon, related to or arising from the Money
Management Business, Value Advisors or the Interests, or which are otherwise
attributable to the Merger Agreement or the transactions contemplated thereby,
(i) reduced by the Present Value Benefit realized or realizable by the person
suffering the Loss in connection with or as a result of the incurrence of such
losses, claims, damages, liabilities and expenses and (ii) reduced by any
applicable insurance proceeds actually received by the person which suffered the
Loss. Without limitation of the foregoing, Losses shall include (x) punitive
damages awarded to a third party and (y) consequential damages.
(d) As used herein the term "Indemnification Payment" means a
reduction in Face Amount of the Certificate or an indemnification payment
received by Opgroup pursuant to the provisions of the Tax Indemnity Agreement or
the Release and Indemnity Agreement.
Section 4. Liquidity Assistance
(a) Following the Class C Unit issuance described in Section 2,
PIMCO Advisors shall loan Opgroup the sum of $35,000,000 (the "Initial
Advance"), and Opgroup shall use a portion of the proceeds of such loan to repay
unpaid principal and interest on that certain 10% note due 2012, in the
principal amount of $32,193,000, originally issued by Xxxxxxxxxxx Equities, Inc.
to Xxxxxxxxxxx Capital, L.P. The Initial Advance shall bear interest at PIMCO
Advisors' cost of funds plus 50 basis points. All principal and unpaid interest
on the Initial Advance and shall be due and payable on demand.
(b) As further consideration for the contributions described in
Section 1, in the event that Opgroup or Opfin has a Loss for which Opgroup does
not receive an Indemnification Payment in cash, then the Company agrees to loan
to Opgroup (each loan a "Loss Advance") an amount of cash sufficient, after any
applicable taxes, to cover the Loss. Loss Advances shall bear interest at PIMCO
Advisors' cost of funds plus 50 basis points. All principal and unpaid interest
on a Loss Advance and shall be due and payable on demand.
(c) In the event that Opgroup requires additional cash to fund
interest payments on its 6% Senior Notes due December 1, 2037 (the "6% Senior
Notes") or that certain Certificate of Long-Term Indemnity Indebtedness dated
November 4, 1997 (the "Certificate"), PIMCO Advisors may in its discretion make
loans to Opgroup (a "Shortfall Loan") to fund such interest obligations.
Shortfall Loans shall bear interest at PIMCO Advisors' cost of funds plus 50
basis points. All principal and unpaid interest on a Shortfall Loan and shall be
due and payable on demand.
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(d) Each of the parties hereto agrees, that obligations under the
Initial Advance and any Loss Advance or Shortfall Loan are subordinated in right
of payment to the prior payment in full of all obligations under the 6% Senior
Notes and the Certificate (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of 6% Senior Notes and the Certificate.
If a default in the payment of any principal or interest on the
6% Senior Notes or the Certificate occurs and is continuing beyond any
applicable grace period, the Company may not make any payment to PIMCO Advisors
with respect to the Initial Advance or any Loss Advance or Shortfall Loan and
may not acquire from PIMCO Advisors any notes evidencing such obligations for
cash or property until all principal and other obligations with respect to the
6% Senior Notes and the Certificate have been paid in full.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, or in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities, holders of the 6% Senior Notes and the
Certificate shall be entitled to receive payment in full of all obligations due
in respect of such indebtedness (including interest after the commencement of
any such proceeding at the rate specified in the applicable instrument) before
PIMCO Advisors or its assigns shall be entitled to receive any payment with
respect to the Initial Advance, Loss Advance or Shortfall Loan, and, until all
obligations with respect to the 6% Senior Notes and the Certificate are paid in
full, any distribution to which PIMCO Advisors or its assignees would be
entitled but for this paragraph (c) shall be made to holders of 6% Senior Notes
and the Certificate.
In the event that PIMCO Advisors or its assigns receives any payment of
any obligations with respect to the Initial Advance or any Loss Advance or
Shortfall Loan at a time when the such payment is prohibited by this paragraph
(c), such payment shall be held by such person in trust for the benefit of, and
shall be paid over and delivered, upon written request, to, the holders of the
6% Senior Notes and the Certificate, for application to the payment of all
obligations with respect thereto remaining unpaid.
Section 5. Amendments, Waiver.
This Agreement may not be amended, modified or waived except by written
instrument executed by the parties hereto.
Section 6. Entire Agreement.
This Agreement (including Exhibits and any documents executed by the
parties simultaneously herewith or pursuant hereto) constitutes the entire
agreement of the parties hereto, except as provided herein, and supersedes all
prior agreements and understandings, written and oral, among the parties with
respect to the subject matter hereof.
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Section 7. Interpretation.
When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of Exhibit to this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other Jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
Section 9. Binding Effect; No Third Party Beneficiaries; No Assignment.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing in
this Agreement is intended or shall be construed to confer upon any person other
than the parties hereto and their respective successors and permitted assigns
any right, remedy or claim under or by reason of this Agreement or any part
hereof. This Agreement may not be assigned by any party hereto without the prior
written consent of the other party hereto.
Section 10. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same agreement, it being understood that all of the
parties need not sign the same counterpart.
Section 11. Governing Law.
This agreement, the legal relations between the parties and the
adjudication and the enforcement thereof, shall be governed by and interpreted
and construed in accordance with the substantive laws of the state of Delaware,
without regard to applicable choice of law provisions thereof.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
Xxxxxxxxxxx Group, Inc., PIMCO Advisors L.P.,
a Delaware corporation a Delaware limited partnership
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXXXX
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Name: Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President Title: Executive Vice President
Xxxxxxxxxxx Financial Corp., Value Advisors LLC,
a Delaware corporation a Delaware limited liability company
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXXXX
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Name: Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President Title: Executive Vice President
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