Filed to Pursuant to Rule 424(b)(5)
Registration No. 333-74558
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 10, 2001)
8,000,000 FELINE PRIDES(SM)
(INITIALLY CONSISTING OF 8,000,000 INCOME PRIDES(SM))
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AFFILIATED MANAGERS GROUP, INC.
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Affiliated Managers Group, Inc. is offering 8,000,000 FELINE PRIDES. The
FELINE PRIDES initially will consist of units referred to as Income PRIDES, each
with a stated amount of $25. Each Income PRIDES will include a purchase contract
pursuant to which you will agree to purchase from us shares of our common stock
on November 17, 2004. Each Income PRIDES will also include $25 principal amount
of our senior notes due November 17, 2006. The notes will bear interest at a
rate of 6% per year, which is expected to be reset on or after August 17, 2004.
The notes will not trade separately from the Income PRIDES unless and until
substitution is made as described in this prospectus supplement.
The Income PRIDES have been approved for listing on the New York Stock
Exchange, or NYSE, under the symbol "AMGPrI," subject to official notice of
issuance. On December 17, 2001, the last reported sale price of our common stock
on the NYSE was $73.10 per share.
INVESTING IN THE FELINE PRIDES INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE S-14 OF THIS PROSPECTUS SUPPLEMENT.
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PER INCOME
PRIDES TOTAL
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Public offering price (1)................................... $25.00 $200,000,000
Underwriting discount....................................... $.75 $6,000,000
Proceeds, before expenses, to Affiliated Managers Group..... $24.25 $194,000,000
(1) Plus accrued interest from December 21, 2001 if settlement occurs after
that date
The underwriters also may purchase up to an additional 1,200,000 Income
PRIDES at the public offering price less the underwriting commission within
30 days of the date of this prospectus supplement to cover overallotments, if
any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The Income PRIDES will be ready for delivery in book-entry form only through
The Depository Trust Company on or about December 21, 2001.
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MERRILL LYNCH & CO.
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The date of this prospectus supplement is December 18, 2001.
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"FELINE PRIDES", "Income PRIDES" and "Growth PRIDES" are service marks of
Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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About this Prospectus Supplement............................ S-3
Prospectus Supplement Summary............................... S-4
Risk Factors................................................ S-14
Forward-Looking Statements.................................. S-26
Accounting Treatment........................................ S-26
Use of Proceeds............................................. S-27
Ratio of Earnings to Fixed Charges.......................... S-27
Capitalization.............................................. S-28
Summary Selected Financial Data............................. S-29
Price Range of Common Stock and Dividends................... S-31
Description of the FELINE PRIDES............................ S-32
Description of the Purchase Contracts....................... S-37
Description of the Notes.................................... S-50
Certain Federal Income Tax Consequences..................... S-55
Certain U.S. Federal Income Tax Consequences to Non-United
States Holders............................................ S-61
ERISA Considerations........................................ S-63
Underwriting................................................ S-65
Validity of the Notes....................................... S-68
Experts..................................................... S-68
S-2
THE ACCOMPANYING PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE
INFORMATION WE HAVE PROVIDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE AND THE UNDERWRITERS HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR DIFFERENT INFORMATION. WE
ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER
IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS ACCURATE ONLY AS OF THE DATE ON
THE FRONT OF THE DOCUMENT AND THAT ANY INFORMATION WE HAVE INCORPORATED BY
REFERENCE IS ACCURATE ONLY AS OF THE DATE OF THE DOCUMENT INCORPORATED BY
REFERENCE. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS MAY HAVE CHANGED SINCE THESE DATES.
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first is this prospectus supplement,
which describes the specific terms of the securities we are offering and certain
other matters relating to us. The second part, the accompanying prospectus,
gives more general information about securities we may offer from time to time,
some of which may not apply to the securities we are offering.
If the description of the offering varies between this prospectus supplement
and the accompanying prospectus, you should rely on the information in this
prospectus supplement.
Unless we have indicated otherwise, or the context otherwise requires,
references in this prospectus supplement and the accompanying prospectus to
"Affiliated Managers Group," "AMG," "we," "us" and "our" or similar terms are to
Affiliated Managers Group, Inc.
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PROSPECTUS SUPPLEMENT SUMMARY
You should read the following summary in conjunction with the more detailed
information contained in this prospectus supplement, the accompanying prospectus
and the documents incorporated by reference.
AFFILIATED MANAGERS GROUP, INC.
Affiliated Managers Group is an asset management company that addresses the
succession and transition issues facing the principals of growing mid-sized
investment management firms. Our strategy is to generate growth through the
internal growth of our existing Affiliates, as well as through investments in
new Affiliates. Our transaction structure allows individual members of each
Affiliate's management team to retain significant direct ownership in their firm
while maintaining operating autonomy. In addition, we provide centralized
assistance to our Affiliates in strategic matters, marketing, distribution,
product development and operations. Pro forma for our recent investments in
Friess Associates, LLC and Welch & Forbes, LLC, our affiliated investment
management firms in the aggregate managed over $75 billion in assets at
September 30, 2001. For more information regarding Affiliated Managers Group and
our Affiliates, see "Where You Can Find More Information" in the accompanying
prospectus.
THE OFFERING--Q&A
WHAT ARE FELINE PRIDES?
The FELINE PRIDES consist of units referred to as Income PRIDES and Growth
PRIDES. The FELINE PRIDES offered will initially consist of 8,000,000 Income
PRIDES (9,200,000 Income PRIDES if the underwriters exercise their overallotment
option in full), each with a stated amount of $25. From each Income PRIDES, the
holder may create a Growth PRIDES, as described below.
WHAT ARE THE COMPONENTS OF INCOME PRIDES?
Each Income PRIDES will consist of a purchase contract and, initially, $25
principal amount of our notes. The note that is a component of each Income
PRIDES is owned by you, but it will be pledged to us to secure your obligations
under the purchase contract. If the notes are successfully remarketed or a tax
event redemption occurs, in each case as described in this prospectus
supplement, the applicable ownership interest in the Treasury portfolio will
replace the note as a component of each Income PRIDES and will be pledged to us
to secure your obligations under the purchase contract.
WHAT IS A PURCHASE CONTRACT?
Each purchase contract underlying a FELINE PRIDES obligates the holder of
the purchase contract to purchase, and obligates us to sell, on November 17,
2004, for $25, a fraction of newly issued shares of our common stock equal to
the "settlement rate." The settlement rate will be calculated, subject to
adjustment as described under "Description of the Purchase
Contracts--Anti-dilution Adjustments," as follows:
- if the applicable market value of our common stock is equal to or greater
than the threshold appreciation price of $84.0650, the settlement rate
will be 0.2974;
- if the applicable market value of our common stock is less than the
threshold appreciation price but greater than the reference price of
$73.10, the settlement rate will be equal to the $25 stated amount divided
by the applicable market value; and
- if the applicable market value is less than or equal to the reference
price, the settlement rate will be 0.3420.
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"Applicable market value" means the average of the closing price per share
of our common stock on each of the twenty consecutive trading days ending on the
third trading day immediately preceding November 17, 2004. The "reference price"
is $73.10, which was the last reported sale price of our common stock on the
NYSE on December 17, 2001.
CAN I SETTLE THE PURCHASE CONTRACT EARLY?
Each holder has a right to settle a purchase contract at any time using
cash, in which case 0.2974 shares of common stock will be issued pursuant to the
purchase contract. In addition, if we are involved in a merger in which at least
30% of the consideration for our common stock consists of cash or cash
equivalents, then each holder of a purchase contract will have the right to
accelerate and settle such contract at the settlement rate in effect immediately
before the cash merger.
Your right to exercise an early settlement right is subject to the condition
that, if required under the U.S. federal securities laws, we have a registration
statement under the Securities Act of 1933 in effect covering the common stock
deliverable upon settlement of a purchase contract.
WHAT ARE THE COMPONENTS OF GROWTH PRIDES?
Each Growth PRIDES will consist of a purchase contract and a 1/40th or a
2.5% undivided beneficial ownership interest in a Treasury security. The
Treasury security is a zero-coupon U.S. Treasury security with a principal
amount at maturity of $1,000 that matures on November 15, 2004. The interest in
the Treasury security that is a component of each Growth PRIDES will be pledged
to us to secure the holder's obligations under the purchase contract.
HOW CAN I CREATE GROWTH PRIDES FROM INCOME PRIDES?
Unless the Treasury portfolio has replaced the notes as a component of
Income PRIDES as a result of a successful remarketing of the notes or a tax
event redemption, each holder of Income PRIDES will have the right, at any time
on or prior to the fifth business day immediately preceding November 17, 2004,
to substitute for the related notes held by the collateral agent zero-coupon
Treasury securities (CUSIP No. 912803AB9) that mature on November 15, 2004 in a
total principal amount at maturity equal to the aggregate principal amount of
the notes for which substitution is being made. This substitution will create a
Growth PRIDES and the applicable notes will be released to the holder. Because
U.S. Treasury securities are issued in multiples of $1,000, holders of Income
PRIDES may make this substitution only in integral multiples of 40 Income
PRIDES. However, if a tax event redemption has occurred prior to November 17,
2004 and the Treasury portfolio has replaced the notes as a component of the
Income PRIDES, holders of Income PRIDES may make this substitution only in
multiples of 8,000 Income PRIDES, at any time on or prior to the second business
day immediately preceding November 17, 2004. In that case, holders would also
obtain the release of the appropriate applicable ownership interest in the
Treasury portfolio rather than a release of the applicable notes.
HOW CAN I RECREATE INCOME PRIDES FROM GROWTH PRIDES?
Unless the Treasury portfolio has replaced the notes as a component of the
Income PRIDES as a result of a successful remarketing of the notes or a tax
event redemption, each holder of Growth PRIDES will have the right, at any time
on or prior to the fifth business day immediately preceding November 17, 2004,
to substitute notes for the related Treasury securities held by the collateral
agent in an aggregate principal amount of such notes equal to the aggregate
principal amount at maturity of the Treasury securities. This substitution would
create Income PRIDES, and the applicable Treasury securities would be released
to the holder. Because Treasury securities are issued in integral multiples of
$1,000, holders of Growth PRIDES may make this substitution only in integral
multiples of 40 Growth PRIDES. If the Treasury portfolio has replaced the notes
as a component of Income PRIDES
S-5
as a result of a successful remarketing of the notes or a tax event redemption,
holders of the Growth PRIDES may make this substitution at any time on or prior
to the second business day immediately preceding November 17, 2004, but using
the applicable ownership interest of the Treasury portfolio instead of notes and
only in integral multiples of 8,000 Growth PRIDES.
WHAT PAYMENTS AM I ENTITLED TO AS A HOLDER OF INCOME PRIDES?
Each holder of Income PRIDES will be entitled to receive total cash
distributions at a rate of 6% of the stated amount per year, payable quarterly
in arrears. These cash distributions will consist of interest on the related
notes or distributions on the applicable ownership interest of the Treasury
portfolio at the rate of 6% of the stated amount per year. Each Income PRIDES
has a stated amount of $25. In addition, original issue discount, or OID, for
United States federal income tax purposes will accrue on each related note.
WHAT PAYMENTS AM I ENTITLED TO IF I CONVERT MY INCOME PRIDES TO GROWTH PRIDES?
Holders of Growth PRIDES will not be entitled to receive any cash
distributions on their Growth PRIDES. However, OID will accrue on each related
Treasury security.
WHAT ARE THE PAYMENT DATES FOR THE FELINE PRIDES?
The payments described above in respect of the Income PRIDES and Growth
PRIDES will be payable quarterly in arrears on each February 17, May 17,
August 17 and November 17, commencing February 17, 2002.
DO YOU HAVE THE OPTION TO DEFER PAYMENTS?
We are not entitled to defer payments on the notes.
WHAT IS REMARKETING?
The notes of Income PRIDES holders will be remarketed on the third business
day immediately preceding August 17, 2004. The remarketing agent will use its
reasonable efforts to obtain a price of approximately 100.5% of the purchase
price for the Treasury portfolio. The portion of the proceeds from the
remarketing equal to the Treasury portfolio purchase price will be applied to
purchase the Treasury portfolio. The Treasury portfolio will be substituted for
the notes and will be pledged to the collateral agent to secure the Income
PRIDES holders' obligations to purchase our common stock under the purchase
contracts. When paid at maturity, an amount of the Treasury portfolio equal to
the principal amount of the notes will automatically be applied to satisfy the
Income PRIDES holders' obligations to purchase common stock under the purchase
contracts.
In addition, the remarketing agent may deduct, as a remarketing fee, an
amount not exceeding 25 basis points (0.25%) of the Treasury portfolio purchase
price from any amount of the proceeds in excess of the Treasury portfolio
purchase price. The remarketing agent will then remit the remaining portion of
the proceeds from the remarketing, if any, for the benefit of the holders.
If the remarketing of the notes on the third business day preceding
August 17, 2004 fails because the remarketing agent cannot obtain a price of at
least 100% of the Treasury portfolio purchase price or a condition precedent to
the remarketing has not been satisfied, the notes will continue to be a
component of Income PRIDES and another remarketing will be attempted on the
third business day preceding November 17, 2004, as described below.
The notes of Income PRIDES holders who have failed to notify the purchase
contract agent on or prior to the fifth business day before November 17, 2004 of
their intention to pay cash in order to satisfy their obligations under the
related purchase contracts, will be remarketed on the third business
S-6
day immediately preceding November 17, 2004. In this remarketing, the
remarketing agent will use its reasonable efforts to obtain a price of
approximately 100.5% of the aggregate principal amount of these notes. The
portion of the proceeds from the remarketing equal to the total principal amount
of the notes will automatically be applied to satisfy in full the Income PRIDES
holder's obligations to purchase common stock under the related purchase
contracts.
The remarketing agent will deduct, as a remarketing fee, an amount not
exceeding 25 basis points (0.25%) of the aggregate principal amount of the
remarketed notes from any amount of the proceeds in excess of the aggregate
principal amount of the remarketed notes. The remarketing agent will remit the
remaining portion of the proceeds from the remarketing, if any, for the benefit
of the holders.
If the remarketing of the notes on the third business day preceding
November 17, 2004 fails because the remarketing agent cannot obtain a price of
at least 100% of the total principal amount of the notes or a condition
precedent to the remarketing has not been satisfied, we will exercise our rights
as a secured party to dispose of the notes in accordance with applicable law and
to satisfy in full, from the proceeds of the disposition, the holder's
obligation to purchase common stock under the related purchase contracts.
WHAT IS THE TREASURY PORTFOLIO?
The Treasury portfolio is a portfolio of zero-coupon U.S. Treasury
securities consisting of:
- interest or principal strips of U.S. Treasury securities that mature on or
prior to November 15, 2004 in an aggregate amount equal to the principal
amount of the notes included in the Income PRIDES, and
- with respect to the scheduled interest payment date on the notes that
occurs on November 17, 2004, in the case of a successful remarketing of
the notes, or with respect to each scheduled interest payment date on the
notes that occurs after the tax event redemption date and on or before
November 17, 2004, in the case of a tax event redemption, interest or
principal strips of U.S. Treasury securities that mature on or prior to
that interest payment date in an aggregate amount equal to the aggregate
interest payment that would be due on that interest payment date on the
principal amount of the notes included in the Income PRIDES assuming no
reset of the interest rate on the notes.
WHAT IS THE RESET RATE?
In the case of a reset on the third business day immediately preceding
August 17, 2004, the reset rate will be the rate determined by the reset agent
as the rate the notes should bear in order for the notes included in Income
PRIDES to have an approximate aggregate market value on the reset date of 100.5%
of the Treasury portfolio purchase price. In the case of a reset on the third
business day immediately preceding November 17, 2004, the reset rate will be the
rate determined by the reset agent as the rate the notes should bear in order
for each note to have an approximate market value of 100.5% of the principal
amount of the note. The reset rate may not exceed the maximum rate, if any,
permitted by applicable law.
IF I AM NOT A PARTY TO A PURCHASE CONTRACT, MAY I STILL PARTICIPATE IN A
REMARKETING OF MY NOTES?
Holders of notes that are not components of Income PRIDES may elect to have
their notes included in the remarketing in the manner described in "Description
of the Purchase Contracts--Optional Remarketing." The remarketing agent will use
its reasonable efforts to remarket the separately held notes included in the
remarketing at a price equal to at least 100.5% of the remarketing value,
determined on the basis of the separately held notes being remarketed. After
deducting its remarketing fee in an amount not exceeding 25 basis points (0.25%)
of the total proceeds
S-7
from the remarketing, the remaining portion of the proceeds, if any, will be
remitted to the holders whose separate notes were sold in the remarketing. If a
holder of notes elects to have its notes remarketed but the remarketing agent
fails to sell the notes during any remarketing period, the notes will be
promptly returned to the holder following the conclusion of that period.
BESIDES PARTICIPATING IN A REMARKETING, HOW ELSE CAN MY OBLIGATIONS UNDER THE
PURCHASE CONTRACT BE SATISFIED?
Besides participating in the remarketing, your obligations under the
purchase contract may also be satisfied:
- if you have created Growth PRIDES or elected not to participate in the
remarketing, by delivering and pledging specified Treasury securities in
substitution for your notes, and applying the cash payments received on
the pledged Treasury securities;
- through the early delivery of cash to the purchase contract agent in the
manner described in "Description of the Purchase Contracts--Early
Settlement;" or
- if we are involved in a merger, acquisition or consolidation prior to
November 17, 2004 in which at least 30% of the consideration for our
common stock consists of cash or cash equivalents, through an early
settlement of the purchase contract as described in "Description of the
Purchase Contracts--Settlement--Early Settlement upon Cash Merger."
In addition, the purchase contracts, our related rights and obligations and
those of the holders of the FELINE PRIDES, including their obligations to
purchase our common stock, will automatically terminate upon the occurrence of
particular events of our bankruptcy, insolvency or reorganization. Upon such a
termination of the purchase contracts, the pledged notes or Treasury securities
will be released and distributed to you. If we become the subject of a case
under the federal bankruptcy code, a delay may occur as a result of the
automatic stay under the bankruptcy code and continue until the automatic stay
has been lifted. The automatic stay will not be lifted until such time as the
bankruptcy judge agrees to lift it and return your collateral to you.
UNDER WHAT CIRCUMSTANCES MAY AFFILIATED MANAGERS GROUP REDEEM THE NOTES BEFORE
THEY MATURE?
If the tax laws change or are interpreted in a way that adversely affects
the tax treatment of the notes, then we, as issuer of the notes, may elect to
redeem the notes. If the notes are redeemed before a successful remarketing, the
money received from the redemption will be used by the collateral agent to
purchase a portfolio of zero-coupon U.S. Treasury securities that mature on or
prior to each payment date of the notes through November 17, 2004, in an
aggregate amount equal to the principal on the senior note included in Income
PRIDES and the interest that would have been due on such payment date on the
notes included in Income PRIDES. These Treasury securities will replace the
notes as the collateral securing your obligations to purchase our common stock
under the purchase contracts. If the notes are redeemed, then each FELINE PRIDES
will consist of a purchase contract for our common stock and an ownership
interest in the Treasury portfolio.
WHAT IS THE MATURITY OF THE NOTES?
The notes will mature on November 17, 2006.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES RELATED TO THE INCOME PRIDES,
GROWTH PRIDES AND NOTES?
We intend to treat the notes as contingent payment debt instruments that are
subject to the contingent payment rules for United States federal income tax
purposes. Accordingly, through August 17, 2004, and possibly thereafter, a
holder of Income PRIDES or notes would be required to
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include in gross income an amount in excess of the interest actually received,
regardless of the holder's usual method of tax accounting, and would generally
recognize ordinary income or loss, rather than capital gain or loss, on the
sale, exchange or disposition of the notes or of the Income PRIDES, to the
extent such income is allocable to the notes. A beneficial owner of Growth
PRIDES will be required to include in gross income any OID with respect to the
Treasury securities as it accrues on a constant yield to maturity basis. If the
Treasury portfolio has replaced the notes as a component of Income PRIDES as a
result of a successful remarketing of the notes, a beneficial owner of Income
PRIDES will be required to include in gross income its allocable share of OID on
the Treasury portfolio as it accrues on a constant yield to maturity basis.
Because there is no statutory, judicial or administrative authority directly
addressing the tax treatment of FELINE PRIDES or instruments similar to FELINE
PRIDES, each holder is urged to consult its own tax adviser concerning the tax
consequences of an investment in FELINE PRIDES.
WILL THE FELINE PRIDES BE LISTED ON A STOCK EXCHANGE?
The Income PRIDES have been approved for listing on the New York Stock
Exchange (NYSE) under the symbol "AMGPrI." Neither the Growth PRIDES nor the
notes will initially be listed; however, in the event that either of these
securities are separately traded to a sufficient extent that applicable exchange
listing requirements are met, we will endeavor to cause those securities to be
listed on the exchange on which the Income PRIDES are then listed.
WHAT ARE THE RIGHTS AND PRIVILEGES OF THE COMMON STOCK?
The shares of common stock that you will be obligated to purchase under the
purchase contracts have one vote per share. For more information, please see the
discussion of our common stock in this prospectus supplement under the heading
"Risk Factors Relating to the FELINE PRIDES" and in the accompanying prospectus
under the heading "Description of Common Stock."
WHAT ARE THE EXPECTED USES OF PROCEEDS FROM THE OFFERING?
We estimate that we will receive net proceeds from the offering of FELINE
PRIDES of $193.1 million, or $222.2 million if the underwriters' option to
purchase additional FELINE PRIDES is exercised in full.
We anticipate using the aggregate net proceeds from this offering to reduce
indebtedness under our credit facility and for general corporate purposes.
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THE OFFERING--EXPLANATORY DIAGRAMS
The following diagrams demonstrate some of the key features of the purchase
contracts, Income PRIDES, Growth PRIDES and the notes, and the transformation of
Income PRIDES into Growth PRIDES and notes.
PURCHASE CONTRACTS
- Income PRIDES and Growth PRIDES both include a purchase contract under
which you agree to purchase shares of our common stock on November 17,
2004.
- The number of shares to be purchased under each purchase contract will
depend on the "applicable market value." The "applicable market value"
means the average of the closing price per share of our common stock on
each of the 20 consecutive trading days ending on the third trading day
immediately preceding November 17, 2004.
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(1) The "reference price" is $73.10.
(2) The "threshold appreciation price" is equal to $84.0650, which is 115% of
the reference price.
(3) For each of the percentage categories shown, the percentage (expressed as a
decimal) of the shares to be delivered on November 17, 2004 to a holder of
Income PRIDES or Growth PRIDES is determined by dividing
- the related number of shares to be delivered, as indicated in the
footnote for each such category, by
- an amount equal to $25, the stated amount of the FELINE PRIDES, divided
by the reference price.
(4) If the applicable market value of our common stock is less than or equal to
the reference price, the number of shares to be delivered will be calculated
by dividing the stated amount of $25 by the reference price.
(5) If the applicable market value of our common stock is between the reference
price and the threshold appreciation price, the number of shares to be
delivered will be calculated by dividing the stated amount of $25 by the
applicable market value.
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(6) If the applicable market value of our common stock is greater than or equal
to the threshold appreciation price, the number of shares to be delivered
will be calculated by dividing the stated amount of $25 by the threshold
appreciation price.
INCOME PRIDES
- Each Income PRIDES consists of two components as illustrated below:
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Income PRIDES
- After remarketing, the Income PRIDES will include the Treasury portfolio
in lieu of the notes if the remarketing is successful.
- If you hold Income PRIDES, you own the notes and, after remarketing, the
Treasury portfolio, but will pledge them to us to secure your obligations
under the purchase contract.
- If you hold Income PRIDES, you may also substitute a specified amount of
Treasury securities for the notes if you decide not to participate in the
remarketing.
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GROWTH PRIDES
- Each Growth PRIDES consists of two components as described below:
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Growth PRIDES
- If you hold Growth PRIDES, you own the Treasury security but will pledge
it to us to secure your obligations under the purchase contract. The
Treasury security is a zero-coupon U.S. Treasury security (CUSIP No.
912803AB9) that matures on November 15, 2004.
NOTES
- Notes will have the terms illustrated below:
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- If you hold a note that is a component of Income PRIDES, you have the
option to either:
- allow the note to be included in the remarketing process, the proceeds
of which will be used to purchase the Treasury portfolio, if the
remarketing is successful, which will be applied to settle the purchase
contract; or
- elect not to participate in the remarketing by delivering Treasury
securities in substitution for the note, the proceeds of which will be
used to settle the purchase contract.
- If you hold a note that is separate and not a component of Income PRIDES,
you have the option to either:
- continue to hold the note whose rate has been reset for the quarterly
payments payable on and after August 17, 2004; or
- deliver the note to the remarketing agent to be included in the
remarketing.
TRANSFORMING INCOME PRIDES INTO GROWTH PRIDES AND NOTES
- To create a Growth PRIDES, you may combine the purchase contract with the
specified zero-coupon U.S. Treasury security that matures on November 15,
2004.
- You will then own the zero-coupon U.S. Treasury security but will pledge
it to us to secure your obligations under the purchase contract.
- The zero-coupon U.S. Treasury security together with the purchase contract
would then constitute a Growth PRIDES. The senior note (or, after
remarketing, the Treasury portfolio), which was previously a component of
the Income PRIDES, is tradable as a separate security.
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- After remarketing, the Income PRIDES will include the specified Treasury
portfolio in lieu of notes.
- You can also transform Growth PRIDES and notes (or, after remarketing, the
Treasury portfolio, if the remarketing is successful) into Income PRIDES.
Following that transformation, the specified zero-coupon U.S. Treasury
security, which was previously a component of the Growth PRIDES, is
tradable as a separate security.
- The transformation of Income PRIDES into Growth PRIDES and notes (or,
after remarketing, the Treasury portfolio) and the transformation of
Growth PRIDES and notes (or, after remarketing, the Treasury portfolio)
into Income PRIDES may generally only be effected in integral multiples of
40 Income PRIDES, as more fully described in this prospectus supplement.
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RISK FACTORS
YOUR INVESTMENT IN THE FELINE PRIDES WILL INVOLVE RISK. YOU SHOULD CAREFULLY
CONSIDER THE FOLLOWING DISCUSSION OF RISK AS WELL AS OTHER INFORMATION CONTAINED
AND INCORPORATED BY REFERENCE INTO THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IN ORDER TO EVALUATE AN INVESTMENT IN THE FELINE PRIDES.
RISK FACTORS RELATING TO THE FELINE PRIDES
YOU ASSUME THE RISK THAT THE MARKET VALUE OF OUR COMMON STOCK MAY DECLINE.
Although as a holder of FELINE PRIDES you are the beneficial owner of the
related notes, Treasury portfolio or Treasury securities, as the case may be,
you are obligated pursuant to the purchase contract to buy our common stock.
Prior to November 17, 2004, unless you pay cash to satisfy your obligation under
the purchase contract or the purchase contracts are terminated due to our
bankruptcy, insolvency or reorganization, either the proceeds derived from the
remarketing of the notes or the principal of the applicable ownership interest
of the Treasury portfolio when paid at maturity, in the case of Income PRIDES,
or the principal of the related Treasury securities when paid at maturity, in
the case of Growth PRIDES, will automatically be used to purchase a specified
number of shares of our common stock on your behalf. There can be no assurance
that the market value of the common stock received by you on the purchase
contract settlement date will be equal to or greater than the price per share
paid by you for our common stock. If the applicable market value of the common
stock is less than $73.10, the aggregate market value of the common stock issued
to you pursuant to each purchase contract on the purchase contract settlement
date will be less than the price per share paid by you for such common stock.
Accordingly, you assume the risk that the market value of the common stock may
decline, and that such decline could be substantial.
YOU WILL RECEIVE ONLY A PORTION OF ANY APPRECIATION IN OUR COMMON STOCK PRICE.
The aggregate market value of the shares of our common stock you will
receive upon settlement of a purchase contract generally will exceed the stated
amount of $25 only if the average closing price per share of our common stock
over the 20-trading day period preceding settlement equals or exceeds $84.0650,
which we refer to as the "threshold appreciation price." The threshold
appreciation price represents an appreciation of 15% over $73.10. Therefore,
during the period prior to settlement, an investment in the FELINE PRIDES
affords less opportunity for equity appreciation than a direct investment in our
common stock. If the applicable average closing price exceeds $73.10, which we
refer to as the "reference price," but falls below the threshold appreciation
price, you will realize no equity appreciation on the common stock for the
period during which you own the purchase contract. Furthermore, if the
applicable average closing price exceeds the threshold appreciation price, the
value of the shares you will receive under the purchase contract will be
approximately 86.96% of the value of the shares you could have purchased with
$25 at the time of this offering.
THE TRADING PRICE FOR OUR COMMON STOCK AND THE GENERAL LEVEL OF INTEREST RATES
AND OUR CREDIT QUALITY WILL DIRECTLY AFFECT THE TRADING PRICES FOR THE FELINE
PRIDES.
It is impossible to predict whether the price of our common stock or
interest rates will rise or fall. Our operating results, prospects and economic,
financial and other factors will affect trading prices of our common stock. In
addition, market conditions can affect the capital markets generally, therefore
affecting the price of our common stock. These conditions may include the level
of, and fluctuations in, the trading prices of stocks generally and sales of
substantial amounts of our common stock in the market after the offering of the
FELINE PRIDES or the perception that those sales could occur. Fluctuations in
interest rates may give rise to arbitrage opportunities based upon changes in
the relative value of our common stock underlying the purchase contracts and of
the other components of the
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FELINE PRIDES. The arbitrage could, in turn, affect the trading prices of the
FELINE PRIDES and our common stock.
YOU MAY SUFFER DILUTION OF OUR COMMON STOCK ISSUABLE UPON SETTLEMENT OF YOUR
PURCHASE CONTRACT.
The number of shares of our common stock issuable upon settlement of your
purchase contract is subject to adjustment only for stock splits and
combinations, stock dividends and specified other transactions. The number of
shares of our common stock issuable upon settlement of each purchase contract is
not subject to adjustment for other events, such as employee stock option
grants, offerings of common stock for cash, or in connection with acquisitions
or other transactions which may adversely affect the price of our common stock.
The terms of the FELINE PRIDES do not restrict our ability to offer common stock
in the future or to engage in other transactions that could dilute our common
stock. We have no obligation to consider the interests of the holders of the
FELINE PRIDES in engaging in any such offering or transaction.
YOU WILL HAVE NO RIGHTS AS COMMON STOCKHOLDERS.
Until you acquire shares of our common stock upon settlement of your
purchase contract, you will have no rights with respect to our common stock,
including voting rights, rights to respond to tender offers and rights to
receive any dividends or other distributions on our common stock. Upon
settlement of your purchase contract, you will be entitled to exercise the
rights of a holder of common stock only as to actions for which the record date
occurs after November 17, 2004.
YOUR PLEDGED SECURITIES WILL BE ENCUMBERED.
Although holders of FELINE PRIDES will be beneficial owners of the
underlying notes or pledged Treasury securities, the holders will pledge those
securities with the collateral agent to secure their obligations under the
related purchase contracts. Therefore, for so long as the purchase contracts
remain in effect, holders will not be allowed to withdraw their pledged notes or
Treasury securities from this pledge arrangement, except upon substitution of
other securities as described in this prospectus supplement.
THE PURCHASE CONTRACT AGREEMENT WILL NOT BE QUALIFIED UNDER THE TRUST INDENTURE
ACT OF 1939; THE OBLIGATIONS OF THE PURCHASE CONTRACT AGENT WILL BE LIMITED.
The purchase contract agreement relating to the FELINE PRIDES will not be
qualified under the Trust Indenture Act of 1939. The purchase contract agent
under the purchase contract agreement, who will act as the agent and the
attorney-in-fact for the holders of the FELINE PRIDES, will not be qualified as
a trustee under the Trust Indenture Act of 1939. Accordingly, holders of the
FELINE PRIDES will not have the benefits of the protections of the Trust
Indenture Act of 1939 other than to the extent applicable to a senior note
included in the FELINE PRIDES. Under the terms of the purchase contract
agreement, the purchase contract agent will have only limited obligations to the
holders of the FELINE PRIDES.
THE SECONDARY MARKET FOR THE FELINE PRIDES MAY BE ILLIQUID.
We are unable to predict how the FELINE PRIDES will trade in the secondary
market or whether that market will be liquid or illiquid. There is currently no
secondary market for the FELINE PRIDES. The Income PRIDES have been approved for
listing on the NYSE. We will not initially list either the Growth PRIDES or the
notes; however, in the event that either of these securities are separately
traded to a sufficient extent that applicable exchange listing requirements are
met, we will attempt to list those securities on the exchange on which the
Income PRIDES are then listed. We have been advised by the underwriters that
they presently intend to make a market for the Income PRIDES;
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however, the underwriters are not obligated to do so and any market making may
be discontinued at any time. There can be no assurance as to the liquidity of
any market that may develop for the Income PRIDES, the Growth PRIDES or the
notes, your ability to sell such securities or whether a trading market, if it
develops, will continue. In addition, in the event that sufficient numbers of
Income PRIDES are converted to Growth PRIDES, the liquidity of Income PRIDES
could be adversely affected. We cannot provide assurance that a listing
application for Income PRIDES, Growth PRIDES or notes will be accepted or, if
accepted, that the Income PRIDES, Growth PRIDES or notes will not be delisted
from the NYSE or that trading in the Income PRIDES, Growth PRIDES or notes will
not be suspended as a result of elections to create Growth PRIDES or recreate
Income PRIDES through the substitution of collateral that causes the number of
these securities to fall below the applicable requirements for listing
securities on the NYSE.
DELIVERY OF THE SECURITIES UNDER THE PLEDGE AGREEMENT IS SUBJECT TO POTENTIAL
DELAY IF WE BECOME SUBJECT TO A BANKRUPTCY PROCEEDING.
Notwithstanding the automatic termination of the purchase contracts, if we
become the subject of a case under the U.S. bankruptcy code, imposition of an
automatic stay under Section 362 of the U.S. bankruptcy code may delay the
delivery to you of your securities being held as collateral under the pledge
arrangement and such delay may continue until the automatic stay has been
lifted. The automatic stay will not be lifted until such time as the bankruptcy
judge agrees to lift it and return your collateral to you.
WE MAY REDEEM THE NOTES UPON THE OCCURRENCE OF A TAX EVENT.
We have the option to redeem the notes, on not less than 30 days nor more
than 60 days prior written notice, in whole but not in part, at any time if a
tax event occurs and continues under the circumstances described in this
prospectus supplement. If we exercise this option, we will redeem the notes at
the redemption price (described later in this prospectus supplement) plus
accrued and unpaid interest, if any. If we redeem the notes, we will pay the
redemption price in cash to the holders of the notes. If the tax event
redemption occurs prior to the successful remarketing of the notes, the
redemption price payable to you as a holder of the Income PRIDES will be
distributed to the collateral agent, who in turn will apply an amount equal to
the redemption price to purchase a portfolio of zero-coupon U.S. Treasury
securities on your behalf, and will remit the remainder of the redemption price,
if any, to you, and the Treasury securities will be substituted for the notes as
collateral to secure your obligations under the purchase contracts related to
the Income PRIDES. If your notes are not components of Income PRIDES, you,
rather than the collateral agent, will receive redemption payments. There can be
no assurance as to the effect on the market prices for the Income PRIDES if we
substitute the Treasury securities as collateral in place of any notes so
redeemed. A tax event redemption will be a taxable event to the holders of the
notes.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE FELINE PRIDES ARE UNCLEAR.
No statutory, judicial or administrative authority directly addresses the
treatment of the FELINE PRIDES or instruments similar to the FELINE PRIDES for
U.S. federal income tax purposes. As a result, the U.S. federal income tax
consequences of the purchase, ownership and disposition of the FELINE PRIDES are
not entirely clear. In addition, because the notes will be treated as contingent
payment debt instruments any gain on the disposition of a senior note prior to
the date on which the interest rate on the senior note is reset generally will
be treated as ordinary interest income; thus, the ability to offset such
interest income with a loss, if any, on a purchase contract may be limited.
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BECAUSE THE NOTES WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT, YOU WILL HAVE TO
INCLUDE INTEREST IN YOUR TAXABLE INCOME BEFORE YOU RECEIVE CASH.
Because the notes will be treated as contingent payment debt instruments,
original issue discount will accrue from the issue date of the notes and will be
included in your gross income for U.S. federal income tax purposes before you
receive a cash payment to which the income is attributable and in an amount
greater than the interest payable on the notes prior to the date on which the
interest rate on the notes is reset.
THE TRADING PRICE OF THE NOTES MAY NOT FULLY REFLECT THE VALUE OF THEIR ACCRUED
BUT UNPAID INTEREST.
The notes may trade at a price that does not fully reflect the value of
their accrued but unpaid interest. If you dispose of your notes between record
dates for interest payments, you will be required to include in gross income the
daily portions of original issue discount through the date of disposition in
income as ordinary income, and to add this amount to your adjusted tax basis in
the notes disposed of. To the extent the selling price is less than your
adjusted tax basis, you will recognize a loss.
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OTHER RISK FACTORS
OUR GROWTH STRATEGY DEPENDS UPON OUR MAKING NEW INVESTMENTS IN MID-SIZED ASSET
MANAGEMENT FIRMS AS WELL AS CONTINUED GROWTH FROM OUR EXISTING AFFILIATES.
Our growth strategy includes acquiring ownership interests in mid-sized
investment management firms. To date, we have invested in 17 such firms. We
intend to continue this investment program in the future, assuming that we can
find suitable firms to invest in and that we can negotiate agreements on
acceptable terms. We cannot be certain that we will be successful in finding or
investing in such firms or that they will have favorable operating results.
While historically our growth has come largely from making new investments,
in recent periods the performance of our existing Affiliates has become
increasingly important to our growth. We may not be successful in making new
investments and the firms we invest in may fail to carry out their growth or
management succession plans. As we continue to execute our business strategy, we
may experience net losses in the future, which could have an adverse effect on
our business, financial condition and results of operations.
WE EXPECT THAT WE WILL NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE TO FUND
INVESTMENTS IN NEW AND EXISTING AFFILIATES.
The acquisition of interests in new Affiliates is a primary element of our
growth strategy. In addition, pursuant to our original investments in our
Affiliates, we may be required to purchase additional equity interests in
existing Affiliates. A large part of the purchase price we pay for the firms in
which we invest usually consists of cash. We believe that our existing cash
resources and cash flow from operations will be sufficient to meet our working
capital needs for normal operations for the foreseeable future. However, we
expect that these sources of capital will not be sufficient to fund future
investments in new and existing Affiliates. Therefore, we will need to raise
capital by making additional long-term or short-term borrowings, or by selling
shares of our stock or other equity or debt securities, including convertible
securities, either publicly or privately, in order to complete further
investments. This could increase our interest expense, decrease our net income
or dilute the interests of our existing stockholders. Moreover, we may not be
able to obtain financing for future investments on acceptable terms, if at all.
WE RELY, IN PART, ON OUR CREDIT FACILITY TO FUND INVESTMENTS AND WORKING CAPITAL
NEEDS; THE CREDIT FACILITY IS SUBJECT TO RISKS ASSOCIATED WITH DEBT FINANCING.
Under our revolving credit facility, we had outstanding borrowings of
approximately $208 million as of November 30, 2001 and the ability to borrow up
to an additional $122 million. We have the option, with the consent of our
lenders, to increase the facility by another $70 million to a total of
$400 million. We can use borrowings under our credit facility for future
investments and for our working capital needs only if we continue to meet the
financial tests under the terms of our credit facility. We anticipate that we
will borrow under the credit facility in the future when we invest in additional
investment management firms and to fund our obligations to purchase additional
equity interests in existing Affiliates. We also may use the credit facility to
refinance other indebtedness, including the Liquid Yield Option Notes Due 2021
(Zero Coupon--Senior) (LYONs) that were issued in May 2001. This will subject us
to the risks normally associated with debt financing.
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Our credit facility contains provisions for the benefit of our lenders which
could operate in ways that restrict the manner in which we can conduct our
business or may have an adverse impact on the interests of our stockholders. For
example:
- Our borrowings under the credit facility are collateralized by pledges of
all of our interests in our Affiliates, as well as and including all
interests indirectly held through wholly-owned subsidiaries.
- Our credit facility contains, and future debt instruments may contain,
restrictive covenants that could limit our ability to obtain additional
debt financing and could adversely affect our ability to make future
investments in investment management firms.
- Our credit facility prohibits us from paying dividends and other
distributions to our stockholders and restricts us, our Affiliates and any
other subsidiaries we may have from incurring indebtedness, incurring
liens, disposing of assets and engaging in extraordinary transactions. We
are also required to comply with the credit facility's financial covenants
on an ongoing basis.
- We cannot borrow under our credit facility unless we comply with its
requirements.
Because indebtedness under our credit facility bears interest at variable
rates, interest rate increases will increase our interest expense, which could
adversely affect our cash flow and ability to meet our debt service obligations.
Although we are currently a party to interest rate hedging contracts designed to
offset a portion of our exposure to interest rate fluctuations, we cannot be
certain that this strategy will be effective. Our credit facility matures in
December 2002. We may not be able to obtain new financing at terms similar to
our current facility, which may have the effect of increasing our interest
expense or decreasing our net income.
THE FAILURE TO RECEIVE REGULAR DISTRIBUTIONS FROM OUR AFFILIATES WOULD ADVERSELY
AFFECT US.
Because we are a holding company, we receive all of our cash from
distributions made to us by our Affiliates. All of our Affiliates, other than
The Managers Funds LLC, have entered into agreements with us under which they
have agreed to pay to us a specified percentage of their gross revenues. In our
agreements with our Affiliates, the distributions made to us by our Affiliates
represent only a portion of our Affiliates' gross revenues. Our Affiliates use
the portion of their revenues not required to be distributed to us to pay their
operating expenses and distributions to their management teams. The payment of
distributions to us by our Affiliates may be subject to the claims of our
Affiliates' creditors and to limitations applicable to our Affiliates under
state laws governing corporations, partnerships and limited liability companies,
state and federal regulatory requirements for the securities industry and
bankruptcy and insolvency laws. Additionally, we may defer the receipt of our
share of an Affiliate's revenue to permit an Affiliate to fund its operating
expenses. As a result, we cannot guarantee that we will always receive these
distributions from our Affiliates.
OUR OBLIGATIONS TO PURCHASE ADDITIONAL EQUITY IN OUR AFFILIATES MAY ADVERSELY
AFFECT US.
When we made our original investments in our Affiliates, we agreed to
purchase the additional ownership interests in each Affiliate from the owners of
these interests on pre-negotiated terms, which are subject to several conditions
and limitations. Consequently, we will have to purchase some of these interests
from time to time for cash, which we may have to borrow, or in exchange for
newly issued shares of our common stock. These purchases are likely to be
substantial and may result in us having more interest expense and less net
income or in our existing stockholders experiencing a dilution of their
ownership of us. In addition, because these pre-negotiated terms are generally
based on trailing revenues, we cannot assure you that the value of the equity we
purchased is equal to the purchase price we must pay. These purchases will also
result in our ownership of larger portions of our Affiliates, which may have an
adverse effect on our cash flow and liquidity.
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WE ARE SUBJECT TO CHANGE IN CONTROL AND PURCHASE OBLIGATION PROVISIONS UNDER THE
LYONS AND CHANGE IN CONTROL PROVISIONS UNDER OUR CREDIT FACILITY, WHICH COULD
LIMIT OUR ABILITY TO SATISFY CERTAIN OBLIGATIONS.
In May of 2001 we issued Liquid Yield Option Notes Due 2021 (Zero
Coupon--Senior) in a private placement. Upon the occurrence of specific kinds of
change in control events occurring on or before May 7, 2006, we will be required
to offer to repurchase all outstanding LYONs. However, it is possible that we
will not have sufficient funds available at such time to make the required
repurchase of the LYONs.
Beginning in May 2002, holders of LYONs may require us to purchase all or a
portion of the notes at predetermined prices. We may choose to pay the purchase
price in cash or common stock or a combination of cash and common stock. At such
time, we may not have sufficient funds available to make the required
repurchase, and the issuance of a significant number of shares of common stock
may cause the price of our common stock to fall.
In addition, we are subject to change in control provisions with respect to
our credit facility. Under that facility, specified change of control events
would result in a deemed event of default and a possible acceleration of the
indebtedness. In such event, the lenders would have the right to require that
the indebtedness under the facility become due and payable. In this case, as
more generally, it is possible that we will not have sufficient funds to repay
bank indebtedness.
WE HAVE SUBSTANTIAL INTANGIBLES ON OUR BALANCE SHEET; ANY RE-EVALUATION OF OUR
INTANGIBLES COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL
POSITION.
At September 30, 2001, our total assets were $948.6 million, of which
$648.8 million were intangible assets consisting of acquired client
relationships and goodwill. We cannot be certain that we will ever realize the
value of such intangible assets. We are amortizing, or writing off, these
intangible assets on a straight-line basis over periods ranging from seven to
28 years in the case of acquired client relationships. Historically, we have
also amortized goodwill on this basis over periods ranging from 15 to 35 years.
However, as discussed below, as the result of new accounting rules this year, we
will cease to amortize goodwill and certain other intangible assets after 2001.
We evaluate each investment and establish appropriate amortization periods based
on a number of factors including:
- the firm's historical and potential future operating performance and rate
of attrition among clients;
- the stability and longevity of existing client relationships;
- the firm's recent, as well as long-term, investment performance;
- the characteristics of the firm's products and investment styles;
- the stability and depth of the firm's management team; and
- the firm's history and perceived franchise or brand value.
After making each investment, we reevaluate these and other factors on a
regular basis to determine if the related intangible assets continue to be
realizable and if the amortization period continues to be appropriate. Any
future determination requiring the write-off of a significant portion of
unamortized intangible assets could adversely affect our results of operations
and financial position. In addition, we intend to invest in additional
investment management firms in the future. While these firms may contribute
additional revenue to us, they will also result in the recognition of additional
intangible assets which will cause further increases in amortization expense.
In July 2001, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 141 ("FAS 141"), "Business Combinations," and Financial
Accounting Standard No. 142
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("FAS 142"), "Goodwill and Other Intangible Assets." FAS 141 limits the method
of accounting for business combinations to the purchase method and establishes
new criteria for the recognition of other intangible assets. FAS 142 requires
that goodwill and other intangible assets with indefinite lives no longer be
amortized, but instead be tested for impairment at least annually.
FAS 141 became effective as of July 1, 2001, except with regard to business
combinations initiated prior to that date. While FAS 142 will generally become
effective January 1, 2002, goodwill and any other intangible assets determined
to have indefinite lives that are acquired in a purchase business combination
completed after June 30, 2001 will not be amortized from the date of their
acquisition.
Upon the effectiveness of FAS 142, FAS 141 requires that intangibles
acquired in prior business combinations be reviewed for impairment. Any
impairment loss will be measured as of the date of the adoption and recognized
as a cumulative effect of a change in accounting principle in the first interim
period. At this time, we do not expect that the adoption of these statements
will result in any material reclassification of our goodwill or material
impairment of our intangible assets. If our understanding of, and assumptions
concerning, FAS 141 and FAS 142 are incorrect, it could have a material adverse
effect on our reported earnings.
WE AND OUR AFFILIATES RELY ON CERTAIN KEY PERSONNEL AND CANNOT GUARANTEE THEIR
CONTINUED SERVICE.
We depend on the efforts of William J. Nutt, our Chairman and Chief
Executive Officer, Sean M. Healey, our President and Chief Operating Officer,
and our other officers. Messrs. Nutt and Healey, in particular, play an
important role in the growth of our existing Affiliates and in identifying
additional suitable investment opportunities for us. Messrs. Nutt and Healey do
not have employment agreements with us, although each of them has a significant
equity interest in us, including options subject to vesting provisions.
In addition, our Affiliates depend heavily on the services of key
principals, who in many cases have managed their firms for many years prior to
our investment. These principals are primarily responsible for all investment
decisions. Although the key principals generally have significant equity
interests in their firms, and in many cases have entered into employment
agreements, these arrangements are not a guarantee that such principals will
remain with their firms.
Our loss of key management personnel or our inability to attract, retain and
motivate sufficient numbers of qualified management personnel may adversely
affect our business. The market for investment managers is extremely competitive
and is increasingly characterized by frequent movement by investment managers
among different firms. In addition, individual investment managers at our
Affiliates often maintain a strong, personal relationship with their clients
based on the clients' trust in individual managers. Therefore, the loss of a key
investment manager at an Affiliate could jeopardize the Affiliate's
relationships with its clients and lead to the loss of client accounts. Losing
client accounts in these circumstances could have a material adverse effect on
the results of our operations and our financial condition and that of our
Affiliates. Although we use a combination of economic incentives, vesting
provisions, and, in some instances, non-solicitation agreements and employment
agreements in an attempt to retain key management personnel, we cannot guarantee
that key managers will remain with us.
BECAUSE OUR AFFILIATES OFFER A BROAD RANGE OF INVESTMENT MANAGEMENT SERVICES AND
UTILIZE A NUMBER OF DISTRIBUTION CHANNELS, CHANGING CONDITIONS IN THE FINANCIAL
AND SECURITIES MARKETS DIRECTLY AFFECT OUR PERFORMANCE.
Prior to the year 2000, the investment management sector had been one of the
fastest growing sectors in the financial services industry. As one example of
this growth, the assets under management of mutual funds increased at a compound
annual growth rate of 25% from 1995 to the end of 1999, to
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a total of $6.8 trillion at the end of 1999, according to the Investment Company
Institute. In 2000 and during the first eleven months of 2001, however, the
investment management sector, like the financial services industry more broadly,
experienced extraordinary volatility, as equity markets declined significantly.
In 2000, the Dow Jones Industrial Average declined 6.2% and the NASDAQ Composite
Index declined 39.3%, and from January 1, 2001 to November 30, 2001, the Dow
Jones Industrial Average declined 8.7% and the NASDAQ Composite Index declined
21.8%.
Domestic and foreign economic conditions and general trends in business and
finance, among other factors, affect the financial markets and businesses
operating in the securities industry. Broader market performance may continue to
be unfavorable in the future. A continued decline in the financial markets or a
lack of sustained growth may result in a corresponding decline in our
Affiliates' performance and may cause our Affiliates to experience declining
assets under management and/or fees, which would reduce cash flow distributable
to us.
Our Affiliates' investment management contracts provide for payment based on
the market value of assets under management, although a portion also provide for
payment based on investment performance. Because most of these contracts provide
for payments based on market values of securities, fluctuations in securities
prices will directly affect our consolidated results of operations and financial
condition. Changes in our Affiliates' clients' investment patterns will also
affect the total assets under management.
Investment management contracts at some of our Affiliates provide that fees
are paid on the basis of investment performance. Fees based on investment
performance are inherently dependent on investment results, and therefore may
vary substantially from year to year. In particular, performance-based fees were
of an unusual magnitude in 1998 and 1999, but were not as significant in 2000,
and may not recur to even the same magnitude as in 2000 in 2001 or future years,
if at all. To the extent contracts are concentrated within styles or sectors,
they are subject to the continuing impact of fluctuating securities prices in
those styles and sectors as well as the performance of the relevant Affiliates.
OUR AFFILIATES' INVESTMENT MANAGEMENT CONTRACTS ARE SUBJECT TO TERMINATION ON
SHORT NOTICES.
Our Affiliates derive almost all of their revenues from investment
management contracts. These contracts are typically terminable without penalty
upon 60 days notice in the case of mutual fund clients or upon 30 days notice in
the case of individual and institutional clients. As a result, our Affiliates'
clients may withdraw funds from accounts managed by the Affiliates at their
election. Moreover, some of our Affiliates' fees are higher than those of other
investment managers for similar types of investment services. The ability of
each of our Affiliates to maintain its fee levels in a competitive environment
depends on its ability to provide clients with investment returns and services
that are satisfactory to its clients. We cannot be certain that our Affiliates
will be able to retain their existing clients or to attract new clients at their
current fee levels. If our Affiliates' clients withdraw a substantial amount of
funds, it could have a material adverse effect on us.
AFFILIATES' AUTONOMY EFFECTIVELY LIMITS OUR ABILITY TO ALTER THEIR MANAGEMENT
PRACTICES AND POLICIES.
Although our agreements with our Affiliates give us the authority to control
some types of business activities undertaken by them and we have voting rights
with respect to significant decisions, our Affiliates manage their own
day-to-day operations, including all investment management policies and fee
levels, product development, client relationships, compensation programs and
compliance activities. As a result, we may not become aware, for example, of one
of our Affiliates' non-compliance with a regulatory requirement as quickly as if
we were involved in the day-to-day business of the Affiliate or we may not
become aware of such non-compliance at all. In these situations, our financial
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condition and results of operations may be adversely affected by problems
stemming from the day-to-day operations of our Affiliates.
WE MAY BE RESPONSIBLE FOR LIABILITIES INCURRED BY OUR AFFILIATES.
Some of our existing Affiliates are partnerships of which we are the general
partner. Consequently, to the extent any of these Affiliates incurs liabilities
or expenses which exceed its ability to pay for them, we are liable for their
payment. In addition, with respect to all of our Affiliates we may be held
liable in some circumstances as a control person for their acts as well as those
of their employees. We and our Affiliates maintain errors and omissions and
general liability insurance in amounts that we and they believe to be adequate
to cover many potential liabilities. We cannot be certain, however, that we will
not have claims which exceed the limits of our available insurance coverage,
that our insurers will remain solvent and will meet their obligations to provide
coverage, or that insurance coverage will continue to be available to us with
sufficient limits or at a reasonable cost. A judgment against us or any of our
Affiliates in excess of our available coverage could have a material adverse
effect on us.
OUR INDUSTRY AND OUR AFFILIATES' INDUSTRY ARE HIGHLY COMPETITIVE.
We are an asset management company which acquires and holds mid-sized
investment management firms. The market for partial or total acquisitions of
interests in investment management firms is highly competitive. Many other
public and private financial services companies, including commercial and
investment banks, insurance companies and investment management firms, have
significantly greater resources than us, and invest in or buy investment
management firms. We cannot guarantee that we will be able to compete
effectively with such competitors, that new competitors will not enter the
market or that such competition will not make it more difficult or impracticable
for us to make new investments in investment management firms.
Our Affiliates compete with a broad range of investment managers, including
public and private investment advisers as well as firms associated with
securities broker-dealers, banks, insurance companies and other entities. From
time to time, our Affiliates may also compete with each other for clients. Many
of our Affiliates' competitors have greater resources than do we and our
Affiliates. In addition to competing directly for clients, competition may
reduce the fees that our Affiliates can obtain for their services. We believe
that each Affiliate's ability to compete effectively with other firms is
dependent upon the Affiliate's products, level of investment performance and
client service, as well as the marketing and distribution of its investment
products. We cannot be certain that our Affiliates will be able to achieve
favorable investment performance and retain their existing clients.
OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO POLITICAL, REGULATORY, ECONOMIC AND
CURRENCY RISKS.
Some of our affiliated investment management firms operate or advise clients
outside of the United States. Furthermore, in the future we may invest in
investment management firms that operate or advise clients outside of the United
States and our existing Affiliates may expand their non-U.S. operations. Our
Affiliates take risks inherent in doing business internationally, such as
changes in applicable laws and regulatory requirements, difficulties in staffing
and managing foreign operations, longer payment cycles, difficulties in
collecting investment advisory fees receivable, political instability,
fluctuations in currency exchange rates, expatriation controls and potential
adverse tax consequences. We cannot be certain that one or more of these risks
will not have an adverse effect on us or our Affiliates, including investment
management firms in which we may invest in the future, and, consequently, on our
consolidated business, financial condition and results of operations.
S-23
OUR AFFILIATES' BUSINESSES ARE HIGHLY REGULATED.
Many aspects of our Affiliates' businesses are subject to extensive
regulation by various U.S. federal regulatory authorities, certain state
regulatory authorities, and non-U.S. regulatory authorities. We cannot assure
you that our Affiliates will fulfill all applicable regulatory requirements. The
failure of any Affiliate to meet regulatory requirements could subject that
Affiliate to sanctions which might materially impact the Affiliate's business
and our business.
THE PRICE OF OUR COMMON STOCK HISTORICALLY HAS BEEN VOLATILE; WE HAVE NOT PAID
DIVIDENDS ON OUR COMMON STOCK.
The market price of our common stock has historically experienced and may
continue to experience high volatility. Our quarterly operating results, changes
in general conditions in the economy or the financial markets and other
developments affecting us or our competitors could cause the market price of our
common stock to fluctuate substantially. In addition, in recent years, the stock
market has experienced significant price and volume fluctuations. This
volatility has affected the market prices of securities issued by many companies
for reasons unrelated to their operating performance and may adversely affect
the price of our common stock. We have never declared or paid a cash dividend on
our common stock. We intend to retain earnings to repay debt and to finance the
growth and development of our business and do not anticipate paying cash
dividends on our common stock in the foreseeable future. Any declaration of cash
dividends in the future will depend, among other things, upon our results of
operations, financial condition and capital requirements as well as general
business conditions. Our credit facility also prohibits us from making dividend
payments to our stockholders.
A SUBSTANTIAL PORTION OF OUR COMMON STOCK IS HELD BY A SMALL NUMBER OF INVESTORS
AND CAN BE RESOLD OR IS SUBJECT TO REGISTRATION RIGHTS.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market,
the market price of our common stock could fall. Such sales may also make it
more difficult for us to sell equity or equity-related securities in the public
market in the future at a time and at a price that we deem appropriate.
In addition, we have registered for resale the 3,250,000 shares of our
common stock reserved for issuance under our stock option plan. As of
November 30, 2001, options to purchase 2,853,908 shares of our common stock were
outstanding and, upon exercise of these options, the underlying shares will be
eligible for sale in the public market from time to time. The possible sale of a
significant number of these shares may cause the price of our common stock to
fall.
In addition, some of the managers of our Affiliates have the right under
some circumstances to exchange portions of their interests in our Affiliates for
shares of our common stock. Some of these managers also have the right to
include these shares in a registration statement filed by us under the
Securities Act of 1933. By exercising their registration rights and causing a
large number of shares to be sold in the public market, these holders may cause
the price of our common stock to fall. In addition, any demand to include shares
in our registration statements could have an adverse effect on our ability to
raise needed capital.
OUR HOLDING COMPANY STRUCTURE RESULTS IN SUBSTANTIAL STRUCTURAL SUBORDINATION
AND MAY AFFECT OUR ABILITY TO MAKE PAYMENTS ON OUR DEBT OBLIGATIONS OR TO PAY
DIVIDENDS OR DISTRIBUTIONS ON OTHER SECURITIES.
We are a holding company and, accordingly, receive substantially all of our
cash, other than funds obtained through financings, from distributions and loans
made to us by our Affiliates and subsidiaries. As a result, our cash flow and
our ability to service our debt and to pay any dividends or other
S-24
distributions to our stockholders is dependent upon the earnings of our
Affiliates and subsidiaries. In addition, we are dependent on the distribution
of revenues by our Affiliates and subsidiaries to us.
Our Affiliates and subsidiaries are separate and distinct legal entities. We
do not own 100% of the equity interests of our Affiliates, other than The
Managers Funds LLC. Our Affiliates and subsidiaries have no obligation to pay
amounts due on our debt obligations. Under the organizational documents of the
Affiliates, the allocations and distributions of cash to us generally take
priority over the allocations and distributions to the other owners of the
Affiliates, but we cannot guarantee that our Affiliates will always make these
distributions. The payment of distributions to us by our Affiliates may be
subject to the claims of our Affiliates' creditors and to limitations applicable
to our Affiliates under state laws governing corporations, partnerships and
limited liability companies, state and federal regulatory requirements for the
securities industry and bankruptcy and insolvency laws. Payments to us by our
Affiliates and subsidiaries will also be contingent upon our Affiliates' and
subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our Affiliates or subsidiaries
upon their liquidation or reorganization, and therefore the right of the holders
of any debt instruments or other securities issued by us to participate in those
assets, will be structurally subordinated to the claims of that Affiliate's or
subsidiary's creditors, including trade creditors. In addition, even if we were
a creditor of any of our Affiliates or subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our Affiliates or
subsidiaries and any indebtedness of our Affiliates or subsidiaries senior to
that held by us. In addition, our borrowings under our credit facility are
collateralized by pledges of all of our interests in Affiliates, including all
interests which are directly held by us, as well as all interests which are
indirectly held by us through wholly-owned subsidiaries, which interests
represent substantially all of our assets.
As of November 30, 2001, our Affiliates and subsidiaries had debt
outstanding on a consolidated basis of approximately $0.8 million, in addition
to other liabilities, including trade payables, to which any of our debt
obligations may be structurally subordinated as described above.
OUR CHARTER AND BY-LAWS AND DELAWARE LAW MAY IMPEDE TRANSACTIONS FAVORABLE TO
OUR STOCKHOLDERS.
Several provisions of our amended and restated certificate of incorporation,
our amended and restated by-laws and Delaware law may, together or separately,
prevent a transaction which is beneficial to our stockholders from occurring.
These provisions may discourage potential purchasers from presenting acquisition
proposals, delay or prevent potential purchasers from acquiring a controlling
interest in us, block the removal of incumbent directors or limit the price that
potential purchasers might be willing to pay in the future for shares of our
common stock. These provisions include the issuance, without further stockholder
approval, of preferred stock with rights and privileges which could be senior to
the common stock or other classes of preferred stock. We are also subject to
Section 203 of the Delaware General Corporation Law which, subject to a few
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any interested stockholder for a period of
three years following the date that such stockholder became an interested
stockholder.
S-25
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain
statements that are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. You can identify forward-looking statements by the use of
the words "believe," "expect," "anticipate," "intend," "estimate," "assume,"
"project" and other similar expressions which predict or indicate future events
and trends and which do not relate to historical matters. These statements
include, among other things, statements regarding our intent, belief or
expectations with respect to:
- potential investment in additional investment management firms;
- the availability of debt and equity financing to fund investments in
firms;
- future borrowing under our credit facility;
- interest rates and hedging contracts;
- the impact of new accounting policies;
- our competition and our Affiliates' competition;
- changing conditions in the financial and securities markets; and
- general economic conditions.
We cannot assure the future results or outcome of the matters described in
any of those statements, which merely reflect our expectations and estimates.
You should not rely on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, some of which are beyond our
control. These risks, uncertainties and other factors may cause our actual
results, performance or achievements to be materially different from the
anticipated future results, performance or achievements expressed or implied by
the forward-looking statements. Some of the factors that might cause these
differences include, but are not limited to, the factors described above under
"Risk Factors" as well as the following:
- changes in the securities or financial markets or in general economic
conditions;
- the availability of equity and debt financing;
- competition for acquisitions of interests in investment management firms;
- our ability to complete pending acquisitions; and
- the investment performance of our Affiliates and their ability to
effectively market their investment strategies.
YOU SHOULD CAREFULLY REVIEW ALL OF THESE FACTORS, AND YOU SHOULD BE AWARE THAT
THERE MAY BE OTHER FACTORS THAT COULD CAUSE SUCH DIFFERENCES.
We caution you that, while forward-looking statements reflect our estimates
and beliefs, they are not guarantees of future performance. We do not promise to
update any forward-looking statements to reflect changes in underlying
assumptions or factors, new information, future events or other changes.
ACCOUNTING TREATMENT
The net proceeds from the sale of the FELINE PRIDES will be allocated
between the purchase contracts and the notes in our financial statements based
on the underlying fair value of each instrument.
S-26
The purchase contracts are forward transactions in our common stock. Upon
settlement of a purchase contract, we will receive $25 on that purchase contract
and will issue the requisite number of shares of our common stock. The $25 we
receive will be credited to stockholders' equity and allocated between our
common stock and additional paid-in-capital accounts.
Before the issuance of shares of our common stock upon settlement of the
purchase contracts, the purchase contracts will be reflected in our diluted
earnings per share calculations using the treasury stock method. Under this
method, the number of shares of our common stock used in calculating diluted
earnings per share is deemed to be increased by the excess, if any, of the
number of shares that would be issued upon settlement of the purchase contracts
less the number of shares that could be purchased by us in the market, at the
average market price during the period, using the proceeds receivable upon
settlement. Consequently, we anticipate that there will be no dilutive effect on
our earnings per share except during periods when the average market price of
our common stock is above $84.0650.
USE OF PROCEEDS
The net proceeds to be received by us from this offering, after deducting
the discount and estimated expenses are estimated to be approximately
$193.1 million (or approximately $222.2 million if the underwriters exercise
their overallotment option in full). The aggregate net proceeds from this
offering of the FELINE PRIDES will be used to reduce the $208 million of
outstanding borrowings under our credit facility and for general corporate
purposes. The outstanding borrowings under our credit facility currently bear
interest at approximately 2.80%.
RATIOS OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
PRO FORMA
----------------------------
NINE MONTHS NINE MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 2001 2000 1999 1998 1997
------------- ------------ ------------- ------------ ------------ ------------ ------------
Ratios............... 6.7x 8.8x 8.8x 9.3x 15.4x 6.1x 2.5x
YEAR ENDED
DECEMBER 31,
1996
------------
Ratios............... 2.3x
For the purpose of computing the ratios of earnings to fixed charges,
earnings consist of consolidated income from continuing operations before
provision for income taxes, minority interest and fixed charges, and fixed
charges consist of interest expense, amortization of debt issuance costs and the
portion of rental expense deemed to represent interest.
S-27
CAPITALIZATION
The following table sets forth our actual capitalization as of
September 30, 2001, and pro forma capitalization which gives effect to (i) our
recent investments in Friess Associates, LLC and Welch & Forbes, LLC and
(ii) this offering of our FELINE PRIDES and the anticipated application of the
estimated net proceeds therefrom to reduce the indebtedness under our credit
facility. From time to time, we may issue additional debt or equity securities.
The following information should be read in conjunction with our consolidated
financial statements, including the notes thereto, which are incorporated herein
by reference. See "Where You Can Find More Information" in the accompanying
prospectus.
SEPTEMBER 30, 2001
----------------------
ACTUAL PRO FORMA
-------- -----------
(IN THOUSANDS)
Long-term senior debt....................................... $277,603 $ 442,503
Subordinated debt........................................... 800 800
-------- -----------
Total debt.................................................. $278,403 $ 443,303
======== ===========
Stockholders' equity:
Common stock................................................ $ 235 $ 235
Additional paid-in-capital.................................. 409,588 405,088
Accumulated other comprehensive loss........................ (1,485) (1,485)
Retained earnings........................................... 177,902 177,902
-------- -----------
586,240 581,740
Less treasury stock, at cost................................ (51,897) (51,897)
-------- -----------
Total stockholders' equity.................................. $534,343 $ 529,843
-------- -----------
Total capitalization........................................ $812,746 $ 973,146
======== ===========
S-28
SUMMARY SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth a summary of our historical financial data
for the periods and as of the dates presented and is qualified in its entirety
by, and should be read in conjunction with, the consolidated financial
statements, the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" filed by us with the SEC which
are incorporated in this prospectus supplement by reference. The financial data
for each of the years ended December 31, 1996 through 2000 has been derived from
our audited consolidated financial statements. The financial data for the nine
months ended September 30, 2001 and September 30, 2000 has been derived from our
unaudited consolidated financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of our financial position and operating results for these
periods have been included. Historical results are not necessarily indicative of
our future results and interim period results are not necessarily indicative of
the results that may be expected for the full year.
NINE MONTHS ENDED
----------------------------- YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT AS INDICATED AND SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------------------
PER SHARE DATA) 2001 2000 2000 1999 1998 1997 1996
-------------------------------------- ------------- ------------- -------- -------- -------- -------- --------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA
Revenues............................. $297,722 $343,898 $458,708 $518,726 $238,494 $ 95,287 $ 50,384
Net income (loss)(1)................. 37,389 41,870 56,656 72,188 25,551 (8,368) (2,372)
Earnings per share--diluted.......... 1.65 1.84 2.49 3.18 1.33 (1.02) (5.49)
-------- -------- -------- -------- -------- -------- --------
Average shares
outstanding--diluted(2)............ 22,684 22,763 22,749 22,693 19,223 8,236 432
-------- -------- -------- -------- -------- -------- --------
OTHER FINANCIAL DATA
EBITDA(3)............................ 96,805 106,023 142,378 166,801 76,312 20,044 10,524
Cash Net Income(4)................... 62,399 64,858 87,676 98,318 45,675 10,201 7,596
Cash earnings per share--diluted(5)... 2.75 2.85 3.85 4.33 2.38 1.24 17.58
-------- -------- -------- -------- -------- -------- --------
AS OF
----------------------------- AS OF DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, ----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------------- ------------- -------- -------- -------- -------- --------
(UNAUDITED)
BALANCE SHEET DATA
Intangible assets(6)................ $648,755 $646,940 $643,470 $571,881 $490,949 $$392,573 $ 71,472
Total assets........................ 948,565 814,628 793,730 909,073 605,334 456,990 101,335
Total debt.......................... 278,403 182,808 151,800 175,300 213,300 160,300 40,779
Stockholders' equity(2)............. 534,343 487,624 493,910 477,986 313,655 259,740 36,989
-------- -------- -------- -------- -------- -------- --------
--------------------------
(1) Net income for 1996 and 1997 reflect extraordinary items of $1.0 million and
$10.0 million, respectively, related to the replacement of AMG's previous
credit facilities with new facilities.
(2) In connection with our initial public offering in November 1997, we raised
$189 million from the sale of 8.7 million shares of common stock and
8.0 million shares of preferred stock converted to shares of common stock.
In March 1999, we raised $102.3 million from our sale of an additional
4.0 million shares of common stock.
(3) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization and extraordinary items. We believe EBITDA may
be useful to investors as an indicator of our ability to service debt, make
new investments and meet working capital requirements. EBITDA is not a
measure of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of operating performance or to cash flows from operating activities
as a measure of liquidity. EBITDA, as calculated by us, may not be
consistent with computations of EBITDA by other companies.
S-29
(4) For these periods, Cash Net Income represents net income plus depreciation
and amortization and extraordinary items. We believe that this measure may
be useful to investors as another indicator of funds available to the
Company, which may be used to make new investments, repay debt obligations,
repurchase shares of Common Stock or pay dividends on Common Stock. Cash Net
Income is not a measure of financial performance under generally accepted
accounting principles and should not be considered an alternative to net
income as a measure of operating performance or to cash flows from operating
activities as a measure of liquidity. Cash Net Income, as calculated by us,
may not be consistent with computations of Cash Net Income by other
companies.
(5) Cash earnings per share represents Cash Net Income divided by average shares
outstanding.
(6) Intangible assets have increased with each new investment in an Affiliate.
From our inception through September 30, 2001, we made investments in
fifteen Affiliates.
S-30
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Our common stock is listed and traded on the New York Stock Exchange under
the symbol "AMG." The following table provides, for the calendar quarters
indicated, the high and low closing prices per share on the New York Stock
Exchange for the periods shown below as reported on the New York Stock Exchange
Composite Tape.
PERIOD HIGH LOW
------ -------- --------
1999:
First Quarter............................................... $33.06 $24.00
Second Quarter.............................................. 32.25 25.00
Third Quarter............................................... 31.38 24.88
Fourth Quarter.............................................. 40.44 23.00
2000:
First Quarter............................................... $50.00 $33.00
Second Quarter.............................................. 45.50 31.38
Third Quarter............................................... 64.25 42.50
Fourth Quarter.............................................. 63.63 44.19
2001:
First Quarter............................................... $62.00 $44.00
Second Quarter.............................................. 63.90 43.60
Third Quarter............................................... 71.90 55.01
Fourth Quarter (through December 17, 2001).................. 73.34 56.79
On December 17, 2001, the last reported sale price of our common stock on
the NYSE was $73.10. As of December 17, 2001, there were approximately 46
holders of record of our common stock.
We have not declared a dividend with respect to the periods presented. We
intend to retain earnings to finance investments in new Affiliates, repay
indebtedness, pay interest and income taxes, repurchase our common stock when
appropriate and develop our existing business. We do not anticipate paying cash
dividends on our common stock in the foreseeable future. Our credit facility
also prohibits us from making dividend payments to our stockholders.
S-31
DESCRIPTION OF THE FELINE PRIDES
We summarize below the principal terms of the units, which we refer to as
the "FELINE PRIDES," and the purchase contracts and notes which comprise the
FELINE PRIDES. The following description is not complete, and we refer you to
the agreements which will govern your rights as a holder of FELINE PRIDES. See
"Where You Can Find More Information" in the accompanying prospectus. In
addition, to the extent that the following description is not consistent with
those contained in the accompanying prospectus under "Description of Debt
Securities" and "Description of Capital Stock," you should rely on this
description.
We will issue the FELINE PRIDES under the purchase contract agreement
between the purchase contract agent and us. The FELINE PRIDES initially will
consist of 8,000,000 Income PRIDES (9,200,000 Income PRIDES if the underwriters
exercise their overallotment option in full), each with a stated amount of $25.
OVERVIEW
Each FELINE PRIDES will have a stated amount of $25. Each FELINE PRIDES will
initially consist of a unit consisting of:
(1) a purchase contract pursuant to which the holder will agree to purchase,
and we will agree to sell, for $25, a fraction of newly issued shares of
our common stock on November 17, 2004, the number of which will be
determined by the settlement rate described below, based on an average
trading price of our common stock for a period preceding that date; and
(2) either
- a senior note with a principal amount of $25, on which we will pay
interest quarterly at the initial annual rate of 6%, or
- following a successful remarketing of the notes on the third business day
immediately preceding August 17, 2004, or the occurrence of a tax event
redemption prior to November 17, 2004, the appropriate applicable
ownership interest in a portfolio of zero-coupon U.S. Treasury securities,
which we refer to as the Treasury portfolio.
"Applicable ownership interest" means, with respect to an Income PRIDES and
the U.S. Treasury securities in the Treasury portfolio:
- a 1/40th, or 2.5%, undivided beneficial ownership interest in a $1,000
principal or interest amount of a principal or interest strip in a U.S.
Treasury security included in the Treasury portfolio that matures on or
prior to November 15, 2004; and
- for the scheduled interest payment date on the notes that occurs on
November 17, 2004, in the case of a successful remarketing of the notes,
or for each scheduled interest payment date on the notes that occurs after
the tax event redemption date and on or before November 17, 2004, in the
case of a tax event redemption, a 0.0375% undivided beneficial ownership
interest in a $1,000 principal or interest amount of a principal or
interest strip in a U.S. Treasury security included in the Treasury
portfolio that matures on or prior to that interest payment date.
The notes will initially be pledged to secure your obligations under the
purchase contract. The purchase contracts, together with the pledged notes or,
after a successful remarketing, the Treasury portfolio, are referred to in this
prospectus supplement as "Income PRIDES." Each holder of Income PRIDES may elect
to withdraw the pledged notes or the Treasury portfolio underlying the Income
PRIDES by substituting, as pledged securities, specifically identified Treasury
securities that will pay $25 on November 17, 2004, the amount due on such date
under each purchase contract. If a holder of Income PRIDES elects to substitute
Treasury securities as pledged securities, the pledged notes or the
S-32
Treasury portfolio will be released from the pledge agreement and delivered to
the holder. The Income PRIDES would then become "Growth PRIDES." Holders of
Growth PRIDES may recreate Income PRIDES by resubstituting the notes (or, after
a successful remarketing, the Treasury portfolio) for the Treasury securities
underlying the Growth PRIDES.
As a beneficial owner of the FELINE PRIDES, you will be deemed to have:
- irrevocably agreed to be bound by the terms of the purchase contract
agreement, pledge agreement and purchase contract for so long as you
remain a beneficial owner of such FELINE PRIDES; and
- appointed the purchase contract agent under the purchase contract
agreement as your agent and attorney-in-fact to enter into and perform the
purchase contract on your behalf.
In addition, as a beneficial owner of the FELINE PRIDES, you will be deemed
by your acceptance of the FELINE PRIDES to have agreed, for all tax purposes, to
treat yourself as the owner of the related notes, or the Treasury securities, as
the case may be, and to treat the notes as our indebtedness.
At the closing of the offering of the FELINE PRIDES, the underwriters will
purchase the FELINE PRIDES. The purchase price of each FELINE PRIDES will be
allocated by us between the related purchase contract and the related senior
note. The notes will then be pledged to the collateral agent to secure the
obligations owed to us under the purchase contracts.
We will enter into:
- a purchase contract agreement with First Union National Bank, as purchase
contract agent, governing the appointment of the purchase contract agent
as the agent and attorney-in-fact for the holders of the FELINE PRIDES,
the purchase contracts, the transfer, exchange or replacement of
certificates representing the FELINE PRIDES and certain other matters
relating to the FELINE PRIDES; and
- a pledge agreement with First Union National Bank, as collateral agent,
custodial agent and securities intermediary creating a pledge and security
interest for our benefit to secure the obligations of holders of the
FELINE PRIDES under the purchase contracts.
CREATING GROWTH PRIDES AND RECREATING INCOME PRIDES
Each holder of Income PRIDES will have the ability to "strip" those Income
PRIDES and take delivery of the pledged notes (or after a successful
remarketing, the Treasury portfolio), creating "Growth PRIDES," and holders of
Growth PRIDES will have the ability to recreate Income PRIDES from their Growth
PRIDES by depositing notes (or after a successful remarketing, the Treasury
portfolio) as described in more detail below. Holders who elect to create Growth
PRIDES or recreate Income PRIDES will be responsible for any related fees or
expenses.
CREATING GROWTH PRIDES. Unless the Treasury portfolio has replaced the
notes as a component of the Income PRIDES as the result of a successful
remarketing of the notes or a tax event redemption, each holder of Income PRIDES
will have the right, at any time on or prior to the fifth business day
immediately preceding November 17, 2004, to substitute for the related notes
held by the collateral agent zero-coupon U.S. Treasury securities (CUSIP
No. 912803AB9) maturing on November 15, 2004, which we refer to as Treasury
securities, in a total principal amount at maturity equal to the aggregate
principal amount of the notes for which substitution is being made. This
substitution will create Growth PRIDES, and the applicable notes will be
released to the holder.
Because Treasury securities are issued in multiples of $1,000, holders of
the Income PRIDES may make this substitution only in integral multiples of 40
Income PRIDES. If the Treasury portfolio has
S-33
replaced the notes as a component of the Income PRIDES as the result of a
successful remarketing of the notes or a tax event redemption, holders of Income
PRIDES may make substitutions only in multiples of 8,000 Income PRIDES, at any
time on or prior to the second business day immediately preceding November 17,
2004. In such a case, holders would also obtain the release of the appropriate
applicable ownership interest in the Treasury portfolio rather than a release of
the applicable notes.
Each Growth PRIDES will consist of a unit with a stated amount of $25 and
will contain two components:
(1) a purchase contract pursuant to which
- the holder will purchase from us no later than November 17, 2004, for the
stated amount, a fraction of a newly issued share of our common stock
equal to the settlement rate described below under "Description of the
Purchase Contracts--Purchase of Common Stock," and
(2) a 1/40th, or 2.5%, undivided beneficial ownership interest in a Treasury
security that matures on November 15, 2004, and has a principal amount at
maturity of $1,000.
To create Growth PRIDES, you must:
- deposit with the collateral agent the Treasury securities described above,
which will be substituted for the pledged notes or Treasury securities
underlying your Income PRIDES and pledged with the collateral agent to
secure your obligation to purchase our common stock under the purchase
contract;
- transfer the Income PRIDES to the purchase contract agent; and
- deliver a notice to the purchase contract agent stating that you have
deposited the specified Treasury securities with the collateral agent and
are requesting that the purchase contract agent instruct the collateral
agent to release to you the pledged notes or Treasury securities
underlying the Income PRIDES.
Upon that deposit and the receipt of an instruction from the purchase
contract agent, the collateral agent will effect the release to the purchase
contract agent of the underlying pledged notes or Treasury securities from the
pledge under the pledge agreement free and clear of our security interest. The
purchase contract agent will:
- cancel the Income PRIDES;
- transfer to you the underlying pledged notes or Treasury securities; and
- deliver to you the Growth PRIDES.
Any notes released to you will be tradable separately from the resulting
Growth PRIDES. Interest on the notes will continue to be payable in accordance
with their terms.
RECREATING INCOME PRIDES. Unless the Treasury portfolio has replaced the
notes as a component of the Income PRIDES as the result of a successful
remarketing of the notes or a tax event redemption, each holder of Growth PRIDES
will have the right, at any time on or prior to the fifth business day
immediately preceding November 17, 2004, to substitute for the related Treasury
securities held by the collateral agent notes in an aggregate principal amount
equal to the aggregate principal amount at maturity of the Treasury securities.
This substitution would create Income PRIDES, and the applicable Treasury
securities would be released to the holder.
Because Treasury securities are issued in integral multiples of $1,000,
holders of Growth PRIDES may make this substitution only in integral multiples
of 40 Growth PRIDES. If the Treasury portfolio has replaced the notes as a
component of the income PRIDES as the result of a successful remarketing of the
notes or a tax event redemption, holders of the Growth PRIDES may make this
substitution at
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any time on or prior to the second business day immediately preceding
November 17, 2004, but using the appropriate applicable ownership interest in
the Treasury portfolio instead of notes and only in integral multiples of 8,000
Growth PRIDES.
To recreate Income PRIDES from Growth PRIDES, you must:
- deposit with the collateral agent:
- if the substitution occurs prior to the remarketing of the notes, notes
having an aggregate principal amount equal to the aggregate stated
amount of your Growth PRIDES; and
- if the substitution occurs after the remarketing of the notes or the
occurrence of a tax event redemption, the applicable Treasury
securities then constituting a part of the Income PRIDES;
- transfer the Growth PRIDES to the purchase contract agent; and deliver
a notice to the purchase contract agent stating that you have deposited
the notes or Treasury securities with the collateral agent and are
requesting that the purchase contract agent instruct the collateral
agent to release to you the pledged Treasury securities underlying
those Growth PRIDES.
The notes or Treasury securities will be substituted for the Treasury
securities underlying your Growth PRIDES and will be pledged with the collateral
agent to secure your obligation to purchase our common stock under your purchase
contract.
Upon the deposit and receipt of an instruction from the purchase contract
agent, the collateral agent will effect the release to the purchase contract
agent of the underlying pledged Treasury securities from the pledge under the
pledge agreement free and clear of our security interest. The purchase contract
agent will:
- cancel the Growth PRIDES;
- transfer to you the underlying Treasury securities; and
- deliver to you the Income PRIDES.
CURRENT PAYMENTS
If you hold Income PRIDES, you will receive payments consisting of quarterly
interest payments on the notes at the annual rate of 6% of the principal amount
of $25 per senior note until a successful remarketing of the notes, and a
quarterly payment on November 17, 2004 from specified pledged Treasury
securities, at the same annual rate as was initially paid on the notes.
If you hold Growth PRIDES, you will not receive periodic payments on the
Growth PRIDES. However, you will be required for U.S. federal income tax
purposes to recognize original issue discount on the Treasury securities on a
constant yield basis or acquisition discount on the Treasury securities when it
is paid or accrues generally in accordance with your regular method of tax
accounting.
If you hold notes separately from the FELINE PRIDES, you will only receive
the interest payment on the notes. The notes, whether held separately or as part
of the FELINE PRIDES, will initially pay interest at the annual rate of 6% of
the principal amount of $25 per senior note. The rate of interest on the notes
will be reset for the quarterly payments payable on and after November 17, 2004,
and interest payments on the notes will be made at the reset rate from the date
the notes are successfully remarketed to maturity of the notes. However, if a
reset rate meeting the requirements described in this prospectus supplement
cannot be established, the interest rate will not be reset and will continue to
be the initial annual rate of 6%, until a reset rate meeting the requirements
described in this prospectus supplement can be established on a later
remarketing date prior to November 17, 2004. If
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no remarketing occurs prior to that date, the initial rate will be the interest
rate through maturity of the notes.
Interest payments on the notes payable for any period will be computed
(1) for any full quarterly period on the basis of a 360-day year of twelve
30-day months and (2) for any period shorter than a full quarterly period, on
the basis of a 30-day month and, for periods of less than a month, on the basis
of the actual number of days elapsed per 30-day month. Interest on the notes
will accrue from December 21, 2001 and will be payable quarterly in arrears on
February 17, May 17, August 17 and November 17 of each year, commencing
February 17, 2002.
Our obligations with respect to the notes will be unsecured and will rank
equally with all our other unsecured and unsubordinated indebtedness. See
"Description of the Notes" below and "Description of Debt Securities" in the
accompanying prospectus.
VOTING AND CERTAIN OTHER RIGHTS
Holders of purchase contracts forming part of the Income PRIDES or Growth
PRIDES, in their capacities as such holders, will have no voting or other rights
in respect of the common stock.
LISTING OF THE SECURITIES
The Income PRIDES have been approved for listing on the NYSE under the
symbol "AMGPrI" subject to official notice of issuance. Unless and until
substitution has been made as described in "--Creating Growth PRIDES" or
"--Recreating Income PRIDES," neither the note nor Treasury portfolio component
of an Income PRIDES nor the Treasury security component of a Growth PRIDES will
trade separately from Income PRIDES or Growth PRIDES. The note or Treasury
portfolio component will trade as a unit with the purchase contract component of
the Income PRIDES, and the Treasury security component will trade as a unit with
the purchase contract component of the Growth PRIDES. If Growth PRIDES or notes
are separately traded to a sufficient extent that the applicable exchange
listing requirements are met, we may endeavor to cause the Growth PRIDES or
notes to be listed on the exchange on which the Income PRIDES are then listed.
MISCELLANEOUS
We or our affiliates may from time to time, to the extent permitted by law,
purchase any of the Income PRIDES, Growth PRIDES or notes which are then
outstanding by tender, in the open market or by private agreement.
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DESCRIPTION OF THE PURCHASE CONTRACTS
PURCHASE OF COMMON STOCK
Each purchase contract underlying a FELINE PRIDES, unless earlier
terminated, or earlier settled at your option or upon specified mergers and
other transactions described below, will obligate you to purchase, and us to
sell, for $25, on November 17, 2004 a number of newly issued shares of our
common stock equal to the settlement rate.
The settlement rate, which is the number of newly issued shares of our
common stock issuable upon settlement of a purchase contract on November 17,
2004, will, subject to adjustment under certain circumstances as described under
"--Anti-dilution Adjustments" below, be as follows:
- If the "applicable market value" of our common stock, which is the average
of the closing prices per share of our common stock on each of the 20
consecutive trading days ending on the third trading day immediately
preceding November 17, 2004, is equal to or greater than the threshold
appreciation price of $84.0650, which is 15% above $73.10, the settlement
rate, which is equal to $25 divided by $84.0650, will be 0.2974 shares of
our common stock per purchase contract.
Accordingly, if the market price for our common stock increases to an amount
that is greater than $84.0650 on the settlement date, the aggregate market value
of the shares of common stock issued upon settlement of each purchase contract,
assuming that this market value is the same as the applicable market value of
our common stock, will be greater than $25, and if the market price equals
$84.0650, the aggregate market value of those shares, assuming that this market
value is the same as the applicable market value of our common stock, will equal
$25.
- If the applicable market value of our common stock is less than $84.0650
but greater than $73.10, the settlement rate will be equal to $25 divided
by the applicable market value of our common stock per purchase contract.
Accordingly, if the market price for our common stock increases but that
market price is less than $84.0650 on the settlement date, the aggregate
market value of the shares of common stock issued upon settlement of each
purchase contract, assuming that this market value is the same as the
applicable market value of our common stock, will equal $25.
- If the applicable market value of our common stock is less than or equal
to $73.10, the settlement rate, which is equal to $25 divided by $73.10,
will be 0.3420 shares of our common stock per purchase contract.
Accordingly, if the market price for our common stock decreases to an
amount that is less than $73.10 on the settlement date, the aggregate
market value of the shares of common stock issued upon settlement of each
purchase contract, assuming that the market value is the same as the
applicable market value of our common stock, will be less than $25, and if
the market price equals $73.10, the aggregate market value of those
shares, assuming that this market value is the same as the applicable
market value of our common stock, will equal $25.
For purposes of determining the applicable market value for our common
stock, the closing price of our common stock on any date of determination means
the closing sale price or, if no closing price is reported, the last reported
sale price of our common stock on the NYSE on that date. If our common stock is
not listed for trading on the NYSE on any date, the closing price of our common
stock on any date of determination means the closing sales price as reported in
the composite transactions for the principal U.S. securities exchange on which
our common stock is so listed, or if our common stock is not so listed on a U.S.
national or regional securities exchange, as reported by the Nasdaq stock
market, or, if our common stock is not so reported, the last quoted bid price
for our common stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization or, if that bid price is not available,
the market value of our common stock on that date as
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determined by a nationally recognized independent investment banking firm
retained by us for this purpose.
A trading day is a day on which our common stock (1) is not suspended from
trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (2) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of our common
stock.
SETTLEMENT
Settlement of the purchase contracts will occur on November 17, 2004,
unless:
- you have settled the related purchase contract prior to November 17, 2004
through the early delivery of cash to the purchase contract agent, in the
manner described in "--Early Settlement;"
- we are involved in a merger prior to November 17, 2004 in which at least
30% of the consideration for our common stock consists of cash or cash
equivalents, and you have settled the related purchase contract through an
early settlement as described in "--Early Settlement" and "--Early
Settlement upon Cash Merger;" or
- an event described under "--Termination of Purchase Contracts" below has
occurred.
The settlement of the purchase contracts on November 17, 2004 will occur as
follows:
- in the case of Income PRIDES, unless the Treasury portfolio has replaced
the notes as a component of the Income PRIDES as the result of a
successful remarketing of the notes or a tax event redemption, we will
exercise our rights as a secured party to dispose of the notes in
accordance with applicable law; and
- in the case of Growth PRIDES or, in the event that the Treasury portfolio
has replaced the notes as a component of the Income PRIDES as the result
of a successful remarketing of the notes or a tax event redemption, in the
case of Income PRIDES, the principal amount of the related Treasury
securities, or the appropriate applicable ownership interest of the
Treasury portfolio, as applicable, when paid at maturity, will
automatically be applied to satisfy in full the holder's obligation to
purchase common stock under the related purchase contracts.
In either event, our common stock will then be issued and delivered to you
or your designee, upon payment of the applicable consideration, presentation and
surrender of the certificate evidencing the FELINE PRIDES, if the FELINE PRIDES
are held in certificated form, and payment by you of any transfer or similar
taxes payable in connection with the issuance of our common stock to any person
other than you.
Prior to the date on which shares of common stock are issued in settlement
of purchase contracts, our common stock underlying the related purchase
contracts will not be deemed to be outstanding for any purpose and you will have
no rights with respect to the common stock, including voting rights, rights to
respond to tender offers and rights to receive any dividends or other
distributions on the common stock, by virtue of holding the purchase contracts.
No fractional shares of common stock will be issued by us pursuant to the
purchase contracts. In place of fractional shares otherwise issuable, you will
be entitled to receive an amount of cash equal to the fractional share,
calculated on an aggregate basis in respect of the purchase contracts you are
settling, times the applicable market value.
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REMARKETING
Pursuant to the remarketing agreement and subject to the terms of the
supplemental remarketing agreement among the remarketing agent, the purchase
contract agent and us, unless a tax event redemption has occurred, the note of
Income PRIDES holders will be remarketed on the third business day immediately
preceding August 17, 2004.
The remarketing agent will use its reasonable efforts to remarket these
notes at an aggregate price of approximately 100.5% of the Treasury portfolio
purchase price described below. The portion of the proceeds from the remarketing
equal to the Treasury portfolio purchase price will be applied to purchase a
Treasury portfolio consisting of:
- interest or principal strips of U.S. Treasury securities that mature on or
prior to November 15, 2004 in an aggregate amount equal to the principal
amount of the notes included in Income PRIDES, and
- interest or principal strips of U.S. Treasury securities that mature on or
prior to November 15, 2004 in an aggregate amount equal to the aggregate
interest payment that would be due on that date on the principal amount of
the notes included in Income PRIDES if the interest rate on the notes was
not reset as described in "Description of the Notes--Market Rate Reset."
The Treasury portfolio will be substituted for the notes and will be pledged to
the collateral agent to secure the Income PRIDES holders' obligation to purchase
our common stock under the purchase contracts.
In addition, the remarketing agent may deduct, as a remarketing fee, an
amount not exceeding 25 basis points (0.25%) of the Treasury portfolio purchase
price from any amount of the proceeds in excess of the Treasury portfolio
purchase price. The remarketing agent will then remit any remaining portion of
the proceeds for the benefit of the holders. Income PRIDES holders whose notes
are remarketed will not otherwise be responsible for the payment of any
remarketing fee in connection with the remarketing.
As used in this context, "Treasury portfolio purchase price" means the
lowest aggregate price quoted by a primary U.S. government securities dealer in
New York City to the quotation agent on the third business day immediately
preceding August 17, 2004 for the purchase of the Treasury portfolio described
above for settlement on August 17, 2004.
"Quotation Agent" means Merrill Lynch Government Securities, Incorporated or
its successor or any other primary U.S. government securities dealer in New York
City selected by us.
If (1) despite using its reasonable efforts, the remarketing agent cannot
remarket the related notes, other than to us, at a price equal to or greater
than 100% of the Treasury portfolio purchase price, or (2) the remarketing has
not occurred because a condition precedent to the remarketing has not been
fulfilled, in each case resulting in a failed remarketing, the note will
continue to be a component of Income PRIDES, and another remarketing may be
attempted as described below.
If the remarketing of the notes on the third business day preceding
August 17, 2004 has resulted in a failed remarketing, and unless a tax event
redemption has occurred, the notes of Income PRIDES holders who have failed to
notify the purchase contract agent on or prior to the fifth business day
immediately preceding November 17, 2004 of their intention to settle the related
purchase contracts with separate cash will be remarketed on the third business
day immediately preceding November 17, 2004.
The remarketing agent will then use its reasonable efforts to remarket these
notes at a price of approximately 100.5% of the aggregate principal amount of
the notes. The portion of the proceeds from this remarketing equal to the
aggregate principal amount of the notes will be automatically applied to satisfy
in full the Income PRIDES holders' obligations to purchase common stock.
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In addition, the remarketing agent may deduct, as a remarketing fee, an
amount not exceeding 25 basis points (0.25%) of the aggregate principal amount
of the remarketed notes from any amount of the proceeds in excess of the
aggregate principal amount of the remarketed notes. The remarketing agent will
then remit any remaining portion of the proceeds for the benefit of the holders.
Income PRIDES holders whose notes are remarketed will not otherwise be
responsible for the payment of any remarketing fee in connection with the
remarketing.
If (1) despite using its reasonable efforts, the remarketing agent cannot
remarket the related notes, other than to us, at a price equal to or greater
than 100% of the aggregate principal amount of the notes, or (2) the remarketing
has not occurred because a condition precedent to the remarketing has not been
fulfilled, in each case resulting in a failed remarketing, we will exercise our
rights as a secured party to dispose of the notes in accordance with applicable
law and satisfy in full each holder's obligation to purchase common stock under
the related purchase contracts.
We will cause a notice of any failed remarketing to be published on the
second business day immediately preceding August 17, 2004 or November 17, 2004,
as applicable, by publication in a daily newspaper in the English language of
general circulation in The City of New York, which is expected to be The Wall
Street Journal. In addition, we will request, not later than seven nor more than
15 calendar days prior to a remarketing date, that the depositary notify its
participants holding notes, Income PRIDES and Growth PRIDES of the remarketing,
including, in the case of a second failed remarketing, the procedures that must
be followed if a note holder wishes to exercise its right to put its note to us
as described in this prospectus supplement. If required, we will endeavor to
ensure that a registration statement with regard to the full amount of the notes
to be remarketed will be effective in a form that will enable the remarketing
agent to rely on it in connection with the remarketing process. It is currently
anticipated that Merrill Lynch, Pierce, Fenner & Smith Incorporated will be the
remarketing agent.
EARLY SETTLEMENT
A holder of Income PRIDES may settle the related purchase contracts (unless
a tax event redemption has occurred) on or prior to the fifth business day
immediately preceding November 17, 2004 by presenting and surrendering the
FELINE PRIDES certificate evidencing those Income PRIDES at the offices of the
purchase contract agent provided that at such time, if so required under the
U.S. federal securities laws, there is in effect a registration statement
covering the common shares to be delivered in respect of the purchase contracts
being settled. The holder should also present the form of election to settle
early on the reverse side of that certificate completed and executed as
indicated, accompanied by payment to us in immediately available funds of an
amount equal to $25 times the number of purchase contracts being settled.
However, if a tax event redemption has occurred prior to November 17, 2004 and
the applicable ownership of the Treasury portfolio has become a component of the
Income PRIDES, holders of those Income PRIDES may settle early only in integral
multiples of 40 Income PRIDES, and the related appropriate applicable ownership
interest of the Treasury portfolio, at any time on or prior to the second
business day immediately preceding November 17, 2004.
A holder of Growth PRIDES may settle the related purchase contracts on or
prior to the second business day immediately preceding November 17, 2004 by
presenting and surrendering the FELINE PRIDES certificate evidencing the Growth
PRIDES at the offices of the purchase contract agent with the form of election
to settle early on the reverse side of that certificate completed and executed
as indicated, accompanied by payment to us in immediately available funds of an
amount equal to $25 times the number of purchase contracts being settled
provided that at such time, if so required under the U.S. federal securities
laws, there is in effect a registration statement covering the common shares to
be delivered in respect of the purchase contracts being settled and provide a
prospectus in connection therewith, in each case in a form that may be used in
connection with the early settlement process. Growth PRIDES holders may settle
early only in integral multiples of 40 Growth PRIDES.
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So long as the FELINE PRIDES are evidenced by one or more global security
certificates deposited with the depositary, procedures for early settlement will
also be governed by standing arrangements between the depositary and the
purchase contract agent.
Upon early settlement of the purchase contracts related to any Income PRIDES
or Growth PRIDES:
(a) as a holder of FELINE PRIDES, you will receive 0.2974 shares of common
stock per Income PRIDES or Growth PRIDES, regardless of the market price
of the common stock on the date of the early settlement. The number of
shares of common stock in both cases will be subject to adjustment under
the circumstances described in "--Anti-dilution Adjustments" below; and
(b) the notes, the applicable ownership interest of the Treasury portfolio
or the Treasury securities, related to the Income PRIDES or Growth
PRIDES, as applicable, will then be transferred to you free and clear of
our security interest.
If the purchase contract agent receives a FELINE PRIDES certificate,
accompanied by the completed election to settle early form and the requisite
amount of immediately available funds, from you by 5:00 p.m., New York City
time, on a business day, that day will be considered the early settlement date.
If the purchase contract agent receives those documents after 5:00 p.m., New
York City time, on a business day or at any time on a day that is not a business
day, the next business day will be considered the settlement date.
Upon early settlement of purchase contracts in the manner described above,
presentation and surrender of the FELINE PRIDES certificate evidencing the
related Income PRIDES or Growth PRIDES and payment of any transfer or similar
taxes payable by the holder in connection with the issuance of the related
common stock to any person other than the holder of the Income PRIDES or Growth
PRIDES, we will cause the shares of common stock being purchased to be issued,
and the related notes or, the appropriate applicable ownership interest of the
Treasury portfolio or the Treasury securities, as the case may be, securing
those purchase contracts to be released from the pledge under the pledge
agreement and transferred, within three business days following the settlement
date, to you or your designee.
EARLY SETTLEMENT UPON CASH MERGER
Prior to the settlement date, if we are involved in a merger in which at
least 30% of the consideration for our common stock consists of cash or cash
equivalents, which we refer to as a cash merger, then on or after the date of
the cash merger, each holder of the FELINE PRIDES will have the right to
accelerate and settle the related purchase contract at the settlement rate in
effect immediately before the cash merger, provided that at such time, if so
required under the U.S. federal securities laws, there is in effect a
registration statement covering the common shares to be delivered in respect of
the purchase contracts being settled. We refer to this right as the "merger
early settlement right." We will provide each of the holders with a notice of
the completion of a cash merger within five business days thereof. The notice
will specify a date, which shall be 10 days after the date of the notice by
which each holder's merger early settlement right must be exercised. The notice
will set forth, among other things, the applicable settlement rate and the
amount of the cash, securities and other consideration receivable by the holder
upon settlement. To exercise the merger early settlement right, you must deliver
to the purchase contract agent, on or one business day before the early
settlement date, the certificate evidencing your FELINE PRIDES, if the FELINE
PRIDES are held in certificated form and payment of the applicable purchase
price in the form of a certified or cashier's check. If you exercise the merger
early settlement right, we will deliver to you on the early settlement date the
kind and amount of securities, cash or other property that you would have been
entitled to receive if you had settled the purchase contract immediately before
the cash merger at the settlement rate in effect at such time. You will also
receive the notes or Treasury securities or applicable ownership interest in the
Treasury portfolio underlying the FELINE PRIDES. If you do not elect to exercise
your merger early
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settlement right, your FELINE PRIDES will remain outstanding and subject to
normal settlement on the settlement date. We have agreed that, if required under
the U.S. federal securities laws, we will use commercially reasonable efforts to
(1) have in effect a registration statement covering the common shares to be
delivered in respect of the purchase contracts being settled and (2) provide a
prospectus in connection therewith, in each case in a form that may be used in
connection with the early settlement upon a cash merger.
NOTICE TO SETTLE WITH CASH
Unless the Treasury securities have replaced the notes as a component of
Income PRIDES as a result of a successful remarketing of the notes or a tax
event redemption, a holder of Income PRIDES may settle the related purchase
contract with separate cash prior to 11:00 a.m., New York City time, on the
business day immediately preceding November 17, 2004. A holder of a Income
PRIDES wishing to settle the related purchase contract with separate cash must
notify the purchase contract agent by presenting and surrendering the Income
PRIDES certificate evidencing the Income PRIDES at the offices of the purchase
contract agent with the form of "Notice to Settle by Separate Cash" on the
reverse side of the certificate completed and executed as indicated on or prior
to 5:00 p.m., New York City time, on the seventh business day immediately
preceding November 17, 2004. If a holder who has given notice of its intention
to settle the related purchase contract with separate cash fails to deliver the
cash to the collateral agent on the business day immediately preceding
November 17, 2004, such holder will be deemed to have directed us to retain the
related senior note in full satisfaction of the holder's obligation to purchase
shares of our common stock under the related purchase contracts.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the settlement rate will be subject to
adjustment, without duplication, upon the occurrence of certain events,
including:
(a) issuances of our common stock as a dividend or distribution to all
holders of our common stock;
(b) the issuance to all holders of our common stock of rights, warrants or
options, other than pursuant to any dividend reinvestment plans,
entitling them, for a period of up to 45 days, to subscribe for or
purchase our common stock at less than the current market price at the
time of announcement of such issuance;
(c) subdivisions, splits and combinations of our common stock;
(d) distributions to all holders of our common stock of our evidences of
indebtedness, shares of capital stock, securities, cash or property,
excluding any dividend or distribution covered by clause (a) or (b) above
and any dividend or distribution paid exclusively in cash;
(e) distributions consisting exclusively of cash to all holders of our
common stock in an aggregate amount that, together with other all-cash
distributions made within the preceding 12 months exceeds 5% of our
aggregate market capitalization on the date of that distribution; the
aggregate market capitalization being the product of the current market
price of the common stock multiplied by the number of shares of common
stock then outstanding; and
(f) the successful completion of a tender or exchange offer made by us or
any subsidiary of ours for our common stock which involves an aggregate
consideration that, together with
- any cash and the fair market value of consideration payable in respect
of any tender or exchange offer by us or a subsidiary of ours for our
common stock concluded within the preceding 12 months, and
- the aggregate amount of any all-cash distributions to all holders of
our common stock made within the preceding 12 months, exceeds 15% of
our aggregate market capitalization on the expiration of the tender or
exchange offer.
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The current market price per share of common stock on any day means the
average of the daily closing prices for the five consecutive trading days
selected by us commencing not more than 30 trading days before, and ending not
later than, the earlier of the day in question and the day before the "ex" date
with respect to the issuance or distribution requiring that computation. For
purposes of this paragraph, the term "ex" date, when used with respect to any
issuance or distribution, shall mean the first date on which the common stock
trades regular way on that exchange or in that market without the right to
receive the issuance or distribution.
The formula for determining the settlement rate will not be adjusted for
other events, such as an offering of our common stock for cash, or in connection
with acquisitions.
In the case of reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions pursuant to which our common stock is
converted into the right to receive securities, cash or property, each purchase
contract then outstanding would, without the consent of the holders of the
related Income PRIDES or Growth PRIDES, become a contract to purchase only the
kind and amount of securities, cash and property receivable upon consummation of
the transaction by a holder of the number of shares of common stock which would
have been received by the holder of the related Income PRIDES or Growth PRIDES
immediately prior to the date of consummation of that transaction if that holder
had then settled that purchase contract.
If at any time (1) we make a distribution of property to our common
stockholders which would be taxable to those stockholders as a dividend for
United States federal income tax purposes, which includes generally
distributions of our evidences of indebtedness or assets, but generally not
stock dividends or rights to subscribe to capital stock and (2) according to the
settlement rate adjustment provisions of the purchase contract agreement, the
settlement rate is increased, that increase may give rise to a taxable dividend
to holders of FELINE PRIDES.
In addition, we may make increases to the settlement rate as our board of
directors deems advisable to avoid or diminish any income tax to holders of our
capital stock resulting from any dividend, distribution of capital stock,
distribution of rights to acquire capital stock or from any event treated
similarly for income tax purposes or for any other reasons.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate shall be required
unless that adjustment would require an increase or decrease of at least one
percent in the settlement rate. We will carry forward and take into account in
any subsequent adjustment any adjustment that would otherwise be required to be
made but for its failure to exceed the percentage threshold.
We will be required to provide an officer's certificate to the purchase
contract agent setting forth the adjusted settlement rate and its calculation
and, within ten business days following the adjustment of the settlement rate,
to provide written notice to the holders of FELINE PRIDES of the occurrence of
that event and a statement specifying in reasonable detail the method by which
the adjustment to the settlement rate was determined and the revised settlement
rate.
Each adjustment to the settlement rate will result in a corresponding
adjustment to the number of shares of common stock issuable upon early
settlement of a purchase contract.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
The notes or Treasury securities underlying the FELINE PRIDES will be
pledged to the collateral agent for our benefit. Under the pledge agreement, the
pledged securities will secure the obligations of holders of FELINE PRIDES to
purchase our common stock under the purchase contract. A holder of a FELINE
PRIDES cannot separate or separately transfer the purchase contract from the
pledged securities underlying the FELINE PRIDES. Your rights to the pledged
securities will be subject to our
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security interest created by the pledge agreement. You will not be permitted to
withdraw the pledged securities related to the FELINE PRIDES from the pledge
arrangement except:
- to substitute specified Treasury securities for the related pledged notes
or other pledged Treasury securities upon creation of a Growth PRIDES;
- to substitute notes or specified Treasury securities for the related
pledged Treasury securities upon the recreation of a Income PRIDES;
- upon delivering specified Treasury securities when electing not to
participate in a remarketing; or
- upon the termination or early settlement of the purchase contracts.
Subject to our security interest and the terms of the purchase contract
agreement and the pledge agreement:
- unless the Treasury portfolio has replaced the notes as a component of the
Income PRIDES as a result of a successful remarketing of the notes or a
tax event redemption, each holder of FELINE PRIDES that include notes will
retain ownership of the notes and will be entitled through the purchase
contract agent and the collateral agent to all of the rights of a holder
of the notes, including interest payments, voting, redemption and
repayment rights; and
- unless the Treasury portfolio has replaced the notes as a component of the
Income PRIDES as a result of a successful remarketing of the notes or a
tax event redemption, each holder of FELINE PRIDES that include Treasury
securities will retain ownership of the Treasury securities.
We will have no interest in the pledged securities other than our security
interest.
TERMINATION OF PURCHASE CONTRACTS
The purchase contracts, our related rights and obligations and those of the
holders of the FELINE PRIDES, including obligations to purchase our common
stock, will automatically terminate upon the occurrence of particular events of
our bankruptcy, insolvency or reorganization.
Upon such a termination of the purchase contracts, the collateral agent will
release the securities held by it to the purchase contract agent for
distribution to the holders. If a holder would otherwise have been entitled to
receive less than $1,000 principal amount at maturity of any Treasury security
upon termination of the purchase contract, the purchase contract agent will
dispose of the security for cash and pay the cash to the holder. Upon
termination, however, the release and distribution may be subject to a delay. If
we become the subject of a case under the federal bankruptcy code, a delay in
the release of the pledged notes or Treasury securities may occur as a result of
the automatic stay under the bankruptcy code and continue until the automatic
stay has been lifted. The automatic stay will not be lifted until such time as
the bankruptcy judge agrees to lift it and return your collateral to you.
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THE PURCHASE CONTRACT AGREEMENT
Distributions on the FELINE PRIDES will be payable, purchase contracts will
be settled and transfers of the FELINE PRIDES will be registrable at the office
of the purchase contract agent in the Borough of Manhattan, The City of New
York. In addition, if the FELINE PRIDES do not remain in book-entry form,
payment of distributions on the FELINE PRIDES may be made, at our option, by
check mailed to the address of the persons shown on the FELINE PRIDES register.
If any quarterly payment date or November 17, 2004 is not a business day,
then any payment required to be made on that date must be made on the next
business day (and so long as the payment is made on the next business day,
without any interest or other payment on account of any such delay), except that
if the next business day is in the next calendar year, the payment or settlement
will be made on the prior business day with the same force and effect as if made
on the payment date. A "business day" means any day other than Saturday, Sunday
or any other day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to be closed.
If your FELINE PRIDES are held in certificated form and you fail to
surrender the certificate evidencing your FELINE PRIDES to the purchase contract
agent on November 17, 2004, the shares of our common stock issuable in
settlement of the related purchase contracts will be registered in the name of
the purchase contract agent. These shares, together with any distributions on
them, will be held by the purchase contract agent as agent for your benefit,
until the certificate is presented and surrendered or you provide satisfactory
evidence that the certificate has been destroyed, lost or stolen, together with
any indemnity that may be required by the purchase contract agent and us.
If your FELINE PRIDES are held in certificated form and (1) the purchase
contracts have terminated prior to November 17, 2004, (2) the related pledged
securities have been transferred to the purchase contract agent for distribution
to the holders and (3) you fail to surrender the certificate evidencing your
FELINE PRIDES to the purchase contract agent, the pledged securities that would
otherwise be delivered to you and any related payments will be held by the
purchase contract agent as agent for your benefit, until you present and
surrender the certificate or provide the evidence and indemnity described above.
The purchase contract agent will not be required to invest or to pay
interest on any amounts held by it before distribution.
No service charge will be made for any registration of transfer or exchange
of the FELINE PRIDES, except for any applicable tax or other governmental
charge.
MODIFICATION
The purchase contract agreement, the pledge agreement and the purchase
contracts may be amended with the consent of the holders of a majority of the
FELINE PRIDES at the time outstanding. However, no modification may, without the
consent of the holder of each outstanding FELINE PRIDES affected by the
modification:
- change any payment date;
- change the amount or type of pledged securities required to be pledged to
secure obligations under the FELINE PRIDES, impair the right of the holder
of any FELINE PRIDES to receive distributions on the pledged securities
underlying the FELINE PRIDES or otherwise adversely affect the holder's
rights in or to the pledged securities;
- change the place or currency of payment for any amounts payable in respect
of the FELINE PRIDES, increase any amounts payable by holders in respect
of the FELINE PRIDES or decrease any other amounts receivable by holders
in respect of the FELINE PRIDES;
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- impair the right to institute suit for the enforcement of any purchase
contract;
- reduce the number of shares of common stock purchasable under any purchase
contract, increase the price to purchase shares of common stock on
settlement of any purchase contract, change November 17, 2004 or otherwise
adversely affect the holder's rights under any purchase contract; or
- reduce the above stated percentage of outstanding FELINE PRIDES the
consent of whose holders is required for the modification or amendment of
the provisions of the purchase contract agreement, the pledge agreement or
the purchase contracts.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
We will agree in the purchase contract agreement that we will not (1) merge
with or into or consolidate with any other entity or (2) sell, assign, transfer,
lease or convey all or substantially all of our properties and assets to any
person, firm or corporation other than, with respect to clause (2), a direct or
indirect wholly-owned subsidiary of Affiliated Managers Group, unless:
- we are the continuing corporation or the successor corporation is a
corporation organized under the laws of the United States of America or
any state or the District of Columbia;
- the successor entity expressly assumes its obligations under the purchase
contract agreement, the pledge agreement, the purchase contracts and the
remarketing agreement; and
- we or such corporation is not, immediately after such merger,
consolidation, sale, assignment, transfer, lease or conveyance, in default
in the performance of any of our or its obligations under the purchase
contract agreement, the pledge agreement, the purchase contracts or the
remarketing agreement.
TITLE
We, the purchase contract agent and the collateral agent may treat the
registered holder of any FELINE PRIDES as the absolute owner of those Income
PRIDES for the purpose of making payment and settling the related purchase
contracts and for all other purposes.
GOVERNING LAW
The purchase contract agreement, the pledge agreement and the purchase
contracts will be governed by, and construed in accordance with, the laws of the
State of New York.
BOOK-ENTRY SYSTEM
The Depository Trust Company ("DTC") will act as securities depositary for
the FELINE PRIDES. The FELINE PRIDES will be issued only as fully-registered
securities registered in the name of Cede & Co., the depositary's nominee. One
or more fully-registered global security certificates, representing the total
aggregate number of FELINE PRIDES, will be issued and deposited with the
depositary and will bear a legend regarding the restrictions on exchanges and
registration of transfer referred to below.
The laws of some jurisdictions require that some purchasers of securities
take physical delivery of securities in definitive form. Those laws may impair
the ability to transfer beneficial interests in the FELINE PRIDES so long as the
FELINE PRIDES are represented by global security certificates.
The depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial
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Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934.
The depositary holds securities that its participants deposit with the
depositary. The depositary also facilitates the settlement among participants of
securities transactions, including transfers and pledges, in deposited
securities through electronic computerized book-entry changes in participants'
accounts, thus eliminating the need for physical movement of securities
certificates. Direct participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. The
depositary is owned by a number of its direct participants and by the NYSE, the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc., collectively referred to as participants. Access to the
depositary system is also available to others, including securities brokers and
dealers, bank and trust companies that clear transactions through or maintain a
direct or indirect custodial relationship with a direct participant either
directly or indirectly, collectively referred to as indirect participants. The
rules applicable to the depositary and its participants are on file with the
SEC.
No FELINE PRIDES represented by global security certificates may be
exchanged in whole or in part for FELINE PRIDES registered, and no transfer of
global security certificates will be made in whole or in part for FELINE PRIDES
registered, and no transfer of global security certificates in whole or in part
may be registered, in the name of any person other than the depositary or any
nominee of the depositary, unless, however, the depositary has notified us that
it is unwilling or unable to continue as depositary for the global security
certificates, has ceased to be qualified to act as required by the purchase
contract agreement or there is a continuing default by us in respect of our
obligations under one or more purchase contracts, the indenture, the purchase
contract agreement, the notes, the FELINE PRIDES, the pledge agreement or any
other principal agreements or instruments executed in connection with this
offering. All FELINE PRIDES represented by one or more global security
certificates or any portion of them will be registered in those names as the
depositary may direct.
As long as the depositary or its nominee is the registered owner of the
global security certificates, the depositary or that nominee will be considered
the sole owner and holder of the global security certificates and all FELINE
PRIDES represented by those certificates for all purposes under the FELINE
PRIDES and the purchase contract agreement. Except in the limited circumstances
referred to above, owners of beneficial interests in global security
certificates will not be entitled to have the global security certificates or
the FELINE PRIDES represented by those certificates registered in their names,
will not receive or be entitled to receive physical delivery of FELINE PRIDES
certificates in exchange and will not be considered to be owners or holders of
the global security certificates or any FELINE PRIDES represented by those
certificates for any purpose under the FELINE PRIDES or the purchase contract
agreement. All payments on the FELINE PRIDES represented by the global security
certificates and all related transfers and deliveries of notes, Treasury
securities and common stock will be made to the depositary or its nominee as
their holder.
Ownership of beneficial interests in the global security certificates will
be limited to participants or persons that may hold beneficial interests through
institutions that have accounts with the depositary or its nominee. Ownership of
beneficial interests in global security certificates will be shown only on, and
the transfer of those ownership interests will be effected only through, records
maintained by the depositary or its nominee with respect to participants'
interests or by the participant with respect to interests of persons held by the
participants on their behalf.
Procedures for settlement of purchase contracts on November 17, 2004 or upon
early settlement will be governed by arrangements among the depositary,
participants and persons that may hold beneficial interests through participants
designed to permit the settlement without the physical movement of certificates.
Payments, transfers, deliveries, exchanges and other matters relating to
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beneficial interests in global security certificates may be subject to various
policies and procedures adopted by the depositary from time to time.
Neither we or any of our agents, nor the purchase contract agent or any of
its agents, will have any responsibility or liability for any aspect of the
depositary's or any participant's records relating to, or for payments made on
account of, beneficial interests in global security certificates, or for
maintaining, supervising or reviewing any of the depositary's records or any
participant's records relating to those beneficial ownership interests.
The information in this section concerning the depositary and its book-
entry system has been obtained from sources that we believe to be reliable, but
we do not take responsibility for its accuracy.
REPLACEMENT OF FELINE PRIDES CERTIFICATES
If physical certificates are issued, we will replace any mutilated
certificate at your expense upon surrender of that certificate to the FELINE
PRIDES agent. We will replace certificates that become destroyed, lost or stolen
at your expense upon delivery to us and the purchase contract agent of
satisfactory evidence that the certificate has been destroyed, lost or stolen,
together with any indemnity that may be required by the purchase contract agent
and us.
We, however, are not required to issue any certificates representing FELINE
PRIDES on or after November 17, 2004 or after the purchase contracts have
terminated. In place of the delivery of a replacement certificate following
November 17, 2004, the purchase contract agent, upon delivery of the evidence
and indemnity described above, will deliver the shares of our common stock
issuable pursuant to the purchase contracts included in the FELINE PRIDES
evidenced by the certificate, or, if the purchase contracts have terminated
prior to November 17, 2004, transfer the pledged securities related to the
FELINE PRIDES evidenced by the certificate.
INFORMATION CONCERNING THE PURCHASE CONTRACT AGENT
First Union National Bank will initially act as purchase contract agent. The
purchase contract agent will act as the agent and attorney-in-fact for the
holders of FELINE PRIDES from time to time. The purchase contract agreement will
not obligate the purchase contract agent to exercise any discretionary authority
in connection with a default under the terms of the purchase contract agreement,
the pledge agreement and the purchase contracts, or the pledged securities.
The purchase contract agreement will contain provisions limiting the
liability of the purchase contract agent. The purchase contract agreement will
contain provisions under which the purchase contract agent may resign or be
replaced. Resignation or replacement of the purchase contract agent would be
effective upon the appointment of a successor.
The purchase contract agent is one of a number of banks with which we and
our subsidiaries maintain ordinary banking and trust relationships.
INFORMATION CONCERNING THE COLLATERAL AGENT
First Union National Bank will initially act as collateral agent. The
collateral agent will act solely as our agent and will not assume any obligation
or relationship of agency or trust for or with any of the holders of the FELINE
PRIDES except for the obligations owed by a pledgee of property to the owner
thereof under the pledge agreement and applicable law.
The pledge agreement will contain provisions limiting the liability of the
collateral agent. The pledge agreement will contain provisions under which the
collateral agent may resign or be replaced. Resignation or replacement of the
collateral agent would be effective upon the appointment of a successor.
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The collateral agent is one of a number of banks with which we and our
subsidiaries maintain ordinary banking and trust relationships.
MISCELLANEOUS
The purchase contract agreement will provide that we will pay all fees and
expenses related to:
- the offering of the FELINE PRIDES;
- the retention of the collateral agent;
- the enforcement by the purchase contract agent of the rights of the
holders of the FELINE PRIDES; and
- with certain exceptions, stock transfer and similar taxes attributable to
the initial issuance and delivery of our common stock upon settlement of
the purchase contracts.
Should you elect to create Growth PRIDES or recreate Income PRIDES, you will
be responsible for any fees or expenses payable in connection with the
substitution of the applicable pledged securities, as well as any commissions,
fees or other expenses incurred in acquiring the pledged securities to be
substituted, and we will not be responsible for any of those fees or expenses.
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DESCRIPTION OF THE NOTES
The notes are to be issued under our indenture, as supplemented by a
supplemental indenture, each dated December 21, 2001, between us and First Union
National Bank, as trustee. The indenture and supplemental indenture are together
referred to herein as the "indenture." A copy of the indenture is on file with
the SEC and may be obtained by accessing the Internet address provided or
contacting us as described under "Where You Can Find More Information" in the
accompanying prospectus. The following description is qualified in its entirety
by reference to the provisions of the indenture. You should read the indenture
carefully to fully understand the terms of the notes.
Unless otherwise indicated, capitalized terms used in the following summary
that are defined in the indenture have the meanings used in the indenture.
GENERAL
The notes will mature on November 17, 2006. The notes will pay interest,
until August 17, 2004 at the annual rate of 6%, on each February 17, May 17,
August 17 and November 17, commencing February 17, 2002. If the notes are
successfully remarketed, they will pay interest at the reset rate from the date
on which they are successfully remarketed until they mature on November 17,
2006. If the remarketing agent cannot establish a reset rate meeting the
requirements described under "Description of the FELINE PRIDES--Remarketing,"
the remarketing agent will not reset the interest rate on the notes and the
reset rate will continue to be the initial annual rate of 6%, until the
remarketing agent can establish such a reset rate on a later remarketing date
prior to November 17, 2004. The notes are not redeemable prior to their stated
maturity except as described below.
The amount of interest payable for any period will be computed on the basis
of a 360-day year consisting of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period for which interest
is computed will be computed on the basis of the actual number of days elapsed
in the 90-day period. In the event that any date on which interest is payable on
the notes is not a business day, the payment of the interest payable on that
date will be made on the next succeeding day that is a business day, without any
interest or other payment in respect of the delay, except that, if the business
day is in the next succeeding calendar year, then the payment will be made on
the immediately preceding business day, in each case with the same force and
effect as if made on the scheduled payment date.
The notes will be issued in denominations of $25 and integral multiples
thereof.
The notes will not have the benefit of a sinking fund.
Payment of the principal and interest on the notes will rank equally with
all of our other unsecured and unsubordinated debt. As of November 30, 2001, we
had approximately $227.8 million of indebtedness that would have ranked equally
with the notes.
The indenture does not limit the amount of additional indebtedness that we
or any of our subsidiaries may incur. The notes will be our exclusive
obligations. Since our operations are partially conducted through subsidiaries,
the cash flow and the consequent ability to service debt, including our notes,
are partially dependent upon the earnings of our subsidiaries and the
distribution of those earnings to, or upon other payments of funds by those
subsidiaries to, us.
Any right of Affiliated Managers Group to receive assets of any of its
subsidiaries upon their liquidation or reorganization (and the resulting right
of the holders of the notes to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that Affiliated Managers Group is itself
recognized as a creditor of such subsidiary, in which case our claims would be
subordinated to any security interests in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by us. As of November 30,
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2001, our Affiliates and subsidiaries had debt outstanding of approximately
$0.8 million on a consolidated basis, in addition to other liabilities.
We may, without the consent of the holders of the notes, create and issue
additional notes ranking equally with the notes and otherwise similar in all
respects so that such further notes would be consolidated and form a single
series of notes.
REMARKETING
The notes will be remarketed as described under "Description of the FELINE
PRIDES--Remarketing."
MARKET RATE RESET
The reset rate will be equal to the sum of the reset spread and the rate of
interest on the applicable benchmark Treasury in effect on the third business
day immediately preceding August 17, 2004 or November 17, 2004, as the case may
be, and will be determined by the reset agent. In the case of a reset on the
third business day immediately preceding August 17, 2004, the reset rate will be
the rate determined by the reset agent as the rate the notes should bear in
order for the notes included in Income PRIDES to have an approximate aggregate
market value on the reset date of 100.5% of the Treasury portfolio purchase
price described under "Description of the Purchase Contracts--Remarketing." In
the case of a reset on the third business day immediately preceding
November 17, 2004, the reset rate will be the rate determined by the reset agent
as the rate the notes should bear in order for each note to have an approximate
market value of 100.5% of the principal amount of the note. The reset rate will
in no event exceed the maximum rate permitted by applicable law.
The "applicable benchmark Treasury" means direct obligations of the United
States, as agreed upon by us and the reset agent (which may be obligations
traded on a when-issued basis only), having a maturity comparable to the
remaining term to maturity of the notes, which will be two years or two and
one-quarter years as applicable. The rate for the applicable benchmark Treasury
will be the bid side rate displayed at 10:00 A.M., The City of New York time, on
the third business day immediately preceding August 17, 2004 or November 17,
2004, as applicable, in the Telerate system (or if the Telerate system is no
longer available on that date or, in the opinion of the reset agent (after
consultation with us), no longer an appropriate system from which to obtain the
rate, such other nationally recognized quotation system as, in the opinion of
the reset agent (after consultation with us), is appropriate). If this rate is
not so displayed, the rate for the applicable benchmark Treasury will be, as
calculated by the reset agent, the yield to maturity for the applicable
benchmark Treasury, expressed as a bond equivalent on the basis of a year of 365
days or 366 days, as applicable, and applied on a daily basis, and computed by
taking the arithmetic mean of the secondary market bid rates, as of 10:30 A.M.,
The City of New York time, on the third business day immediately preceding
August 17, 2004 or November 17, 2004, as applicable, of three leading United
States government securities dealers selected by the reset agent (after
consultation with us) (which may include the reset agent or an affiliate
thereof). It is currently anticipated that Merrill Lynch, Pierce, Fenner & Smith
Incorporated will be the reset agent.
On the tenth business day immediately preceding August 17, 2004 or
November 17, 2004, the applicable benchmark Treasury to be used to determine the
reset rate on the third business day prior to August 17, 2004 or November 17,
2004, as applicable, will be selected, and the reset spread to be added to the
rate on the applicable benchmark Treasury in effect on the third business day
immediately preceding August 17, 2004 or November 17, 2004, as applicable, will
be established by the reset agent, and the reset spread and the applicable
benchmark Treasury will be announced by us (the "reset announcement date"). We
will cause a notice of the reset spread and the applicable benchmark Treasury to
be published on the business day following the reset announcement date by
publication in a
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daily newspaper in the English language of general circulation in The City of
New York, which is expected to be The Wall Street Journal. We will request, not
later than seven nor more than 15 calendar days prior to the reset announcement
date, that the depositary notify its participants holding notes, Income PRIDES
or Growth PRIDES of the reset announcement date and of the procedures that must
be followed if any owner of Income PRIDES wishes to settle the related purchase
contract with cash on the business day immediately preceding November 17, 2004.
OPTIONAL REMARKETING
On or prior to the fifth business day immediately preceding August 17, 2004,
in the case of the remarketing to be conducted on the third business day
preceding August 17, 2004, or November 17, 2004, in the case of the remarketing,
if any, to be conducted on the third business day preceding November 17, 2004,
but no earlier than the payment date immediately preceding August 17, 2004 or
November 17, 2004, as applicable, holders of notes that are not components of
Income PRIDES may elect to have their notes remarketed in the same manner as
notes that are components of Income PRIDES by delivering their notes along with
a notice of this election to the collateral agent. The collateral agent will
hold the notes in an account separate from the collateral account in which the
pledged securities will be held. Holders of notes electing to have their notes
remarketed will also have the right to withdraw the election on or prior to the
fifth business day immediately preceding August 17, 2004 or November 17, 2004,
as applicable.
PUT OPTION UPON A FAILED REMARKETING
If the remarketing of the notes on the third business day immediately
preceding November 17, 2004 has occurred and has resulted in a failed
remarketing, holders of notes following November 17, 2004 will have the right to
put the notes to us on December 31, 2004, upon at least three business days'
prior notice, at a price equal to 100% of the principal amount, plus accrued and
unpaid interest, if any.
TAX EVENT REDEMPTION
If a tax event occurs and is continuing, we may, at our option, redeem the
notes in whole, but not in part, at any time at a price, which we refer to as
the redemption price, equal to, for each senior note, the redemption amount
referred to below plus accrued and unpaid interest, if any, to the date of
redemption. Installments of interest on notes which are due and payable on or
prior to a redemption date will be payable to holders of the notes registered as
such at the close of business on the relevant record dates. If, following the
occurrence of a tax event, we exercise our option to redeem the notes, the
proceeds of the redemption will be payable in cash to the holders of the notes.
If the tax event redemption occurs prior to a successful remarketing of the
notes, the redemption price for the notes forming part of Income PRIDES at the
time of the tax event redemption will be distributed to the collateral agent,
who in turn will purchase the applicable Treasury portfolio described below on
behalf of the holders of Income PRIDES and remit the remainder of the redemption
price, if any, to the purchase contract agent for payment to the holders. The
Treasury portfolio will be substituted for corresponding notes and will be
pledged to the collateral agent to secure the obligations of the holders of the
Income PRIDES to purchase shares of our common stock under the purchase
contracts.
"Tax event" means the receipt by Affiliated Managers Group of an opinion of
nationally recognized tax counsel experienced in such matters to the effect that
there is more than an insubstantial risk that interest payable by us on the
notes on the next interest payment date would not be deductible, in whole or in
part, by us for United States federal income tax purposes as a result of any
amendment to, change in, or announced proposed change in, the laws, or any
regulations thereunder, of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, any amendment to or
change in an official interpretation or application of any such law or
regulations by any legislative body, court, governmental agency or regulatory
authority or any
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official interpretation or pronouncement that provides for a position with
respect to any such laws or regulations that differs from the generally accepted
position on the date of this prospectus supplement, which amendment, change, or
proposed change is effective or which interpretation or pronouncement is
announced on or after the date of this prospectus supplement.
If a tax event redemption occurs prior to a successful remarketing of the
notes, the Treasury portfolio to be purchased on behalf of the holders of the
Income PRIDES will consist of interest or principal strips of U.S. Treasury
securities which mature on or prior to November 17, 2004 in an aggregate amount
equal to the aggregate principal amount of the notes included in the Income
PRIDES and with respect to each scheduled interest payment date on the notes
that occurs after the tax event redemption date and on or before November 17,
2004, interest or principal strips of U.S. Treasury securities that mature on or
prior to that interest payment date in an aggregate amount equal to the
aggregate interest payment that would be due on the aggregate principal amount
of the notes on that date if the interest rate of the notes were not reset on
the applicable reset date. These Treasury securities are non-callable by us.
Solely for purposes of determining the Treasury portfolio purchase price in
the case of a tax event redemption date occurring prior to a successful
remarketing of the notes, "Treasury portfolio" shall mean a portfolio of
zero-coupon U.S. Treasury securities consisting of principal or interest strips
of U.S. Treasury securities that mature on or prior to November 17, 2004 in an
aggregate amount equal to the aggregate principal amount of the notes
outstanding on the tax event redemption date and with respect to each scheduled
interest payment date on the notes that occurs after the tax event redemption
date and no later than November 17, 2004, interest or principal strips of U.S.
Treasury securities that mature on or prior to that interest payment date in an
aggregate amount equal to the aggregate interest payment that would be due on
the aggregate principal amount of the notes outstanding on the tax event
redemption date.
"Redemption amount" means in the case of a tax event redemption occurring
prior to a successful remarketing of the notes, for each senior note the product
of the principal amount of the note and a fraction whose numerator is the
Treasury portfolio purchase price and whose denominator is the aggregate
principal amount of notes included in Income PRIDES, and in the case of a tax
event redemption date occurring after a successful remarketing of the notes, the
par value of the notes.
"Treasury portfolio purchase price" means the lowest aggregate price quoted
by a primary U.S. government securities dealer in New York City to the quotation
agent on the third business day immediately preceding the tax event redemption
date for the purchase of the Treasury portfolio for settlement on the tax event
redemption date.
"Quotation agent" means Merrill Lynch Government Securities, Incorporated,
or its successor or any other primary U.S. government securities dealer in The
City of New York selected by us.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each registered holder of notes to be
redeemed at its registered address. Unless we default in payment of the
redemption price, on and after the redemption date interest shall cease to
accrue on the notes. In the event any notes are called for redemption, neither
we nor the trustee will be required to register the transfer of or exchange the
notes to be redeemed.
BOOK-ENTRY AND SETTLEMENT
Notes that are released from the pledge following substitution or early
settlement will be issued in the form of one or more global certificates, which
we refer to as global securities, registered in the name of the depositary or
its nominee. Except as provided below and except upon recreation of Income
PRIDES, owners of beneficial interests in such a global security will not be
entitled to receive physical delivery of notes in certificated form and will not
be considered the holders (as defined in the
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indenture) thereof for any purpose under the indenture, and no global security
representing notes shall be exchangeable, except for another global security of
like denomination and tenor to be registered in the name of the depositary or
its nominee or a successor depositary or its nominee. Accordingly, each
beneficial owner must rely on the procedures of the depositary or if such person
is not a participant, on the procedures of the participant through which such
person owns its interest to exercise any rights of a holder under the indenture.
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of the securities in certificated form. These
laws may impair the ability to transfer beneficial interests in such a global
security.
In the event that
- the depositary notifies us that it is unwilling or unable to continue as a
depositary for the global security certificates and no successor
depositary has been appointed within 90 days after this notice, or
- the depositary at any time ceases to be a clearing agency registered under
the Securities Exchange Act at which time the depositary is required to be
so registered to act as the depositary and no successor depositary has
been appointed within 90 days after we learn that the depositary has
ceased to be so registered, or
- we determine in our sole discretion that we will no longer have debt
securities represented by global securities or permit any the global
security certificates to be exchangeable or an event of default under the
indenture has occurred and is continuing,
certificates for the notes will be printed and delivered in exchange for
beneficial interests in the global security certificates. Any global note that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
note certificates registered in the names directed by the depositary. We expect
that these instructions will be based upon directions received by the depositary
from its participants with respect to ownership of beneficial interests in the
global security certificates.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of the FELINE
PRIDES, notes, Treasury securities and common stock acquired under a purchase
contract. Unless otherwise stated, this summary deals only with FELINE PRIDES,
notes, Treasury securities and common stock held as capital assets (generally,
assets held for investment) by holders that are U.S. persons (defined below)
that purchase FELINE PRIDES upon original issuance. The tax treatment of a
holder may vary depending on such holder's particular situation. This summary
does not address all of the tax consequences that may be relevant to holders
that may be subject to special tax treatment such as, for example, insurance
companies, broker dealers, tax-exempt organizations, foreign taxpayers,
regulated investment companies, persons holding FELINE PRIDES, notes, or shares
of our common stock as part of a straddle, hedge, conversion transaction or
other integrated investment, persons whose functional currency is not the U.S.
dollar. In addition, this summary does not address any aspects of state, local,
or foreign tax laws. This summary is based on the United States federal income
tax laws, regulations, rulings and decisions in effect as of the date hereof,
which are subject to change or differing interpretations, possibly on a
retroactive basis. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO YOU OF PURCHASING, OWNING, AND DISPOSING OF THE FELINE
PRIDES OR NOTES OR COMMON STOCK, INCLUDING THE APPLICATION AND EFFECT OF UNITED
STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
No statutory, administrative or judicial authority directly addresses the
treatment of FELINE PRIDES or instruments similar to FELINE PRIDES for United
States federal income tax purposes. As a result, no assurance can be given that
the IRS will agree with the tax consequences described herein.
For purposes of this summary, the term "U.S. person" means (1) a person who
is a citizen or resident of the United States, (2) a corporation or partnership
created or organized in or under the laws of the United States or any state
thereof or the District of Columbia, (3) an estate the income of which is
subject to United States federal income taxation, regardless of its source, or
(4) a trust if (a) a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United States
persons have the authority to control all substantial decisions of such trust or
(b) such trust has in effect a valid election to be treated as a domestic trust
for United States federal income tax purposes.
FELINE PRIDES
ALLOCATION OF PURCHASE PRICE. Your acquisition of an Income PRIDE will be
treated as an acquisition of a unit consisting of two components, the note and
the purchase contract constituting such Income PRIDE. The purchase price of each
Income PRIDE will be allocated between the two components in proportion to their
respective fair market values at the time of purchase. Such allocation will
establish your initial tax basis in the note and the purchase contract. We will
report the fair market value of each note as $25 and the fair market value of
each purchase contract as $0. This position will be binding upon you (but not on
the IRS) unless you explicitly disclose a contrary position on a statement
attached to your timely filed United States federal income tax return for the
taxable year in which a FELINE PRIDES is acquired. Thus, absent such disclosure,
you should allocate the purchase price for a FELINE PRIDES in accordance with
the foregoing. The remainder of this discussion assumes that this allocation of
purchase price will be respected for United States federal income tax purposes.
OWNERSHIP OF NOTES OR TREASURY SECURITIES. You will be treated as owning
the notes or Treasury securities constituting a part of the Income PRIDES or
Growth PRIDES, respectively, for United States federal income tax purposes. We
and, by virtue of your acquisition of FELINE PRIDES, you,
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agree to treat the notes or Treasury securities constituting a part of the
FELINE PRIDES as owned by you for United States federal income tax purposes, and
the remainder of this summary assumes such treatment. The United States federal
income tax consequences of owning the notes or Treasury securities are discussed
below (see "--Notes," "--Treasury Securities" and "--Tax Event Redemption of
Notes").
SALES, EXCHANGES OR OTHER TAXABLE DISPOSITIONS OF FELINE PRIDES. If you
sell, exchange or otherwise dispose of FELINE PRIDES in a taxable disposition
(collectively, a "disposition"), you will be treated as having sold, exchanged
or disposed of each of the purchase contract and the notes, the Treasury
portfolio or the Treasury securities, that constitute such FELINE PRIDES, and
the proceeds realized on such disposition would be allocated among the purchase
contract and the notes, the Treasury portfolio or the Treasury securities in
proportion to their respective fair market values. As a result, you generally
will recognize gain or loss equal to the difference between the portion of the
proceeds received by you which are allocable to the purchase contract and the
notes, the Treasury portfolio or Treasury securities, as the case may be, and
your adjusted tax bases in the purchase contract and the notes, the Treasury
portfolio or Treasury securities, except to the extent that you are treated as
receiving an amount with respect to accrued but unpaid interest on the Treasury
portfolio, which amount will be treated as ordinary interest income to the
extent not previously included in income. In the case of the purchase contract,
the Treasury portfolio and Treasury securities, such gain or loss will generally
be capital gain or loss, and such gain or loss generally will be long-term
capital gain or loss if you held such FELINE PRIDES for more than one year
immediately prior to such disposition. Long-term capital gains of individuals
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations. The rules governing the determination of the
character of gain or loss on the disposition of the notes are summarized under
"--Notes--Sales, Exchanges or Other Taxable Dispositions of Notes."
If the disposition of a FELINE PRIDES occurs when the purchase contract has
negative value, you should be considered to have received additional
consideration for the notes, Treasury portfolio or Treasury securities, as the
case may be, in an amount equal to such negative value and to have paid such
amount to be released from your obligation under the purchase contract. Because,
as discussed below, any gain on the disposition of notes prior to the purchase
contract settlement date generally will be treated as ordinary interest income
for United States federal income tax purposes, the ability to offset such
interest income with a loss on the purchase contract may be limited. You should
consult your tax advisor regarding a disposition of a FELINE PRIDES at a time
when the purchase contract has negative value.
NOTES
The discussion in this section will apply to you if you hold Income PRIDES
or notes.
CLASSIFICATION OF THE NOTES. In connection with the issuance of the notes,
Goodwin Procter LLP, our counsel, will deliver an opinion that, under current
law, and based on certain representations, facts and assumptions set forth in
such opinion, the notes will be classified as indebtedness for United States
federal income tax purposes. We and, by virtue of your acquisition of Income
PRIDES, you, agree to treat the notes as indebtedness of us for all United
States federal income tax purposes.
ORIGINAL ISSUE DISCOUNT. Because of the manner in which the interest rate
on the notes is reset, the notes should be classified as contingent payment debt
instruments subject to the "noncontingent bond method" for accruing original
issue discount, as set forth in the applicable Treasury Regulations. We intend
to treat the notes as such, and the remainder of this discussion assumes that
the notes will be so treated for United States federal income tax purposes. As
discussed more fully below, the effects of applying such method will be (1) to
require you, regardless of your usual method for tax accounting, to use an
accrual method with respect to the notes, (2) for all accrual periods through
August 17, 2004
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and possibly for accrual periods thereafter, to require you to accrue interest
income in excess of interest payments actually received and (3) generally to
result in ordinary, rather than capital, treatment of any gain or loss on the
sale, exchange or other disposition of the notes. See "--Sale, Exchange or Other
Taxable Dispositions of Notes."
You will be required to accrue original issue discount on a constant yield
to maturity basis based on the "comparable yield" of the notes. The comparable
yield of the notes will generally be the rate at which we would issue a fixed
rate debt instrument with terms and conditions similar to the notes (which rate
will exceed the current interest payments on the notes). We have determined that
the comparable yield is 7.1% and the projected payments for the notes per $25 of
principal amount are $0.23 on February 17, 2002, $0.38 for each subsequent
quarter ending on or prior to August 17, 2004 and $0.53 for each quarter ending
after August 17, 2004. We have also determined that the projected payment for
the notes, per $25 of principal amount, at the maturity date is $25.53 (which
includes the stated principal amount of the notes as well as the final projected
interest payment). The amount of original issue discount on a note for each
accrual period is determined by multiplying the comparable yield of the note
(adjusted for the length of the accrual period) by the note's adjusted issue
price at the beginning of the accrual period. Based on the allocation of the
purchase price of each unit described above, the adjusted issue price of each
note, per $25 of principal amount, at the beginning of the first accrual period
will be $25, and the adjusted issue price of each note at the beginning of each
subsequent accrual period will be equal to $25, increased by any original issue
discount previously accrued by you on such note and decreased by the amount of
any projected payments on such note through such date. The amount of original
issue discount so determined will then be allocated on a ratable basis to each
day in the accrual period that you hold the note.
If after August 17, 2004, the remaining amounts of principal and interest
payable on the notes differ from the payments set forth on the foregoing
projected payment schedule, negative or positive adjustments reflecting such
difference should generally be taken into account by you as adjustments to
interest income in a reasonable manner over the period to which they relate. We
expect to account for any such difference with respect to a period as an
adjustment for that period.
You are generally bound by the comparable yield and projected payment
schedule provided by us unless either is unreasonable. If you decide to use your
own comparable yield and projected payment schedule, you must explicitly
disclose this fact and the reason that you have used your own comparable yield
and projected payment schedule. In general, this disclosure must be made on a
statement attached to your timely filed United States federal income tax return
for the taxable year that includes the date of your acquisition of the note.
The foregoing comparable yield and projected payment schedule is supplied by
us solely for computing income under the noncontingent bond method for United
States federal income tax purposes and does not constitute a projection or
representation as to the amounts that you will actually receive as a result of
owning notes or Income PRIDES.
ADJUSTMENT TO TAX BASIS IN NOTES. Your tax basis in a note will be
increased by the amount of original issue discount included in income with
respect to the note and decreased by the amount of projected payments with
respect to the note through the computation date
SALES, EXCHANGES OR OTHER TAXABLE DISPOSITIONS OF NOTES. You will recognize
gain or loss on a disposition of a note (including a redemption for cash or the
remarketing thereof) in an amount equal to the difference between the amount
realized by you on the disposition of the note and your adjusted tax basis in
such note. Selling expenses incurred by you, including the remarketing fee, will
reduce the amount of gain or increase the amount of loss recognized by you upon
a disposition of a note. Gain recognized on the disposition of a note prior to
the purchase contract settlement date will be treated as ordinary interest
income. Loss recognized on the disposition of a note prior to the purchase
contract settlement date will be treated as ordinary loss to the extent of your
prior inclusions of original issue
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discount on the note. Any loss in excess of such amount will be treated as a
capital loss. In general, gain recognized on the disposition of a note on or
after the purchase contract settlement date will be ordinary interest income to
the extent attributable to the excess, if any, of the total remaining principal
and interest payments due on the note over the total remaining payments set
forth on the projected payment schedule for the note. Any gain recognized in
excess of such amount and any loss recognized on such a disposition will
generally be treated as a capital gain or loss. Long-term capital gains of
individuals are eligible for reduced rates of taxation. The deductibility of
capital losses is subject to limitations.
TREASURY SECURITIES
The discussion in this section will apply to you if you hold Growth PRIDES
or Treasury securities.
ORIGINAL ISSUE DISCOUNT. If you hold Growth PRIDES, you will be required to
treat your ownership interest in the Treasury securities comprising a Growth
PRIDES as an interest in a bond that was originally issued on the date you
acquired the Treasury securities. Any such Treasury securities that are owned or
treated as owned by you will have OID equal to the excess of the amount payable
at maturity of such Treasury securities over the purchase price thereof. You
will be required to include such OID in income on a constant yield to maturity
basis over the period between the purchase date of the Treasury securities and
the maturity date of the Treasury securities, regardless of your method of tax
accounting and in advance of the receipt of cash attributable to such OID. Your
adjusted tax basis in the Treasury securities will be increased by the amounts
of such OID included in your gross income.
SALES, EXCHANGES OR OTHER TAXABLE DISPOSITIONS OF TREASURY SECURITIES. As
discussed below, in the event that you obtain the release of Treasury securities
by delivering notes to the collateral agent, you generally will not recognize
gain or loss upon such substitution. You will recognize gain or loss on a
subsequent disposition of the Treasury securities in an amount equal to the
difference between the amount realized by you on such disposition and your
adjusted tax basis in the Treasury securities. Such gain or loss generally will
be capital gain or loss and generally will be long-term capital gain or loss if
you held such Treasury securities for more than one year immediately prior to
such disposition. Long-term capital gains of individuals are eligible for
reduced rates of taxation. The deductibility of capital losses is subject to
limitations.
PURCHASE CONTRACTS
ACQUISITION OF COMMON STOCK UNDER A PURCHASE CONTRACT. You generally will
not recognize gain or loss on the purchase of common stock under a purchase
contract, except with respect to any cash paid to you in lieu of a fractional
share of common stock. Your aggregate initial tax basis in the common stock
received under a purchase contract should generally equal the purchase price
paid for such common stock, plus your adjusted tax basis in the purchase
contract (if any), less the portion of such purchase price and adjusted tax
basis allocable to the fractional share. The holding period for common stock
received under a purchase contract will commence on the day following the
acquisition of such common stock.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACT. Any
distribution on common stock paid by us out of our current or accumulated
earnings and profits (as determined for United States federal income tax
purposes) will constitute a dividend and will be includible in income by you
when received. Any such dividend will be eligible for the dividends received
deduction if you are an otherwise qualifying corporate holder that meets the
holding period and other requirements for the dividends received deduction.
Upon a disposition of common stock, you generally will recognize capital
gain or loss equal to the difference between the amount realized and your
adjusted tax basis in the common stock. Such capital
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gain or loss generally will be long-term capital gain or loss if you held such
common stock for more than one year immediately prior to such disposition.
Long-term capital gains of individuals are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations.
EARLY SETTLEMENT OF PURCHASE CONTRACT. You will not recognize gain or loss
on the receipt of your proportionate share of notes, Treasury securities or the
Treasury portfolio upon early settlement of a purchase contract, and you will
have the same adjusted tax basis in such notes, Treasury securities or the
Treasury portfolio as before such early settlement.
TERMINATION OF PURCHASE CONTRACT. If a purchase contract terminates, you
will recognize gain or loss equal to the difference between the amount realized
(if any) upon such termination and your adjusted tax basis (if any) in the
purchase contract at the time of such termination. Such gain or loss generally
will be capital gain or loss and generally will be long-term capital gain or
loss if you held such purchase contract for more than one year immediately prior
to such termination. Long-term capital gains of individuals are eligible for
reduced rates of taxation. The deductibility of capital losses is subject to
limitations. A holder will not recognize gain or loss on the receipt of such
holder's proportionate share of the notes, Treasury securities or Treasury
portfolio upon termination of the purchase contract and will have the same
adjusted tax basis in such notes, Treasury securities or Treasury portfolio as
before such distribution.
ADJUSTMENT TO SETTLEMENT RATE. You might be treated as receiving a
constructive dividend distribution from us if (1) the settlement rate is
adjusted and as a result of such adjustment the proportionate interest of
holders of FELINE PRIDES in our assets or earnings and profits is increased and
(2) the adjustment is not made pursuant to a bona fide, reasonable anti-dilution
formula. An adjustment in the settlement rate would not be considered made
pursuant to such a formula if the adjustment were made to compensate a holder
for certain taxable distributions with respect to the common stock. Thus, under
certain circumstances, an increase in the settlement rate might give rise to a
taxable dividend to you even though you would not receive any cash related
thereto.
SUBSTITUTION OF TREASURY SECURITIES TO CREATE OR RECREATE GROWTH PRIDES
If you hold Income PRIDES and deliver Treasury securities to the collateral
agent in substitution for notes, you generally will not recognize gain or loss
upon your delivery of such Treasury securities or your receipt of the notes. You
will continue to take into account items of income or deduction otherwise
includible or deductible, respectively, by you with respect to such Treasury
securities and notes, and your adjusted tax bases in the Treasury securities,
the notes and the purchase contract will not be affected by such delivery and
release.
SUBSTITUTION OF NOTES TO RECREATE INCOME PRIDES
If you hold Growth PRIDES and deliver notes to the collateral agent in
substitution for Treasury securities, you generally will not recognize gain or
loss upon your delivery of such notes or your receipt of the Treasury
securities. You will continue to take into account items of income or deduction
otherwise includible or deductible, respectively, by you with respect to such
Treasury securities and notes, and your adjusted tax bases in the Treasury
securities, the notes and the purchase contract will not be affected by such
delivery and release.
REMARKETING AND TAX EVENT REDEMPTION OF NOTES
A remarketing or tax event redemption will be a taxable event for holders of
notes which will be subject to tax in the manner described under "Notes--Sales,
Exchanges or Other Taxable Dispositions of Notes."
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OWNERSHIP OF TREASURY PORTFOLIO. In the event of a remarketing of the notes
on the third business day preceding August 17, 2004 or a tax event redemption
prior to the purchase contract settlement date, we and, by virtue of your
acquisition of Income PRIDES, you, agree to treat the Treasury portfolio
constituting a part of your Income PRIDES as owned by you for United States
federal income tax purposes. In such a case, you will be required to include in
income any amount earned on such pro rata portion of the Treasury portfolio for
all United States federal income tax purposes. The remainder of this summary
assumes that holders of Income PRIDES will be treated as the owners of the
applicable ownership interest of the Treasury portfolio constituting a part of
such Income PRIDES for United States federal income tax purposes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT. The Treasury portfolio will
consist of stripped U.S. Treasury securities. Following a remarketing of the
notes on the third business day preceding August 17, 2004 or a tax event
redemption prior to purchase contract settlement date, you will be required to
treat your pro rata portion of each U.S. Treasury security in the Treasury
portfolio as a bond that was originally issued on the date the collateral agent
acquired the relevant U.S. Treasury securities and that has OID equal to your
pro rata portion of the excess of the amounts payable on such U.S. Treasury
securities over the value of the U.S. Treasury securities at the time the
collateral agent acquires them on behalf of holders of Income PRIDES. You will
be required to include such OID (other than OID on short-term U.S. Treasury
securities as defined below) in income for United States federal income tax
purposes as it accrues on a constant yield to maturity basis, regardless of your
method of accounting. The portion of each scheduled interest payment to you in
respect of the Treasury portfolio which exceeds the amount of such OID will be
treated as a return of your investment in the Treasury portfolio and will not be
considered current income for United States federal income tax purposes.
In the case of any U.S. Treasury security with a maturity of one year or
less from the date of its issue (a "short-term U.S. Treasury Security"), you
will generally be required to include OID in income as it accrues only if you
are an accrual basis taxpayer. If you are an accrual basis taxpayer, you would
generally accrue such OID on a straight-line basis, unless you make an election
to accrue such OID on a constant yield to maturity basis.
TAX BASIS OF THE TREASURY PORTFOLIO. The initial tax basis of your
applicable ownership interest in the Treasury portfolio will equal your pro rata
portion of the amount paid by the collateral agent for the Treasury portfolio.
Your adjusted tax basis in the Treasury portfolio will be increased by the
amount of OID included in income with respect thereto and decreased by the
amount of cash received in respect of the Treasury portfolio.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Unless you are an exempt recipient, such as a corporation, interest, OID,
and dividends received on, and proceeds received from the sale of, FELINE
PRIDES, notes, purchase contracts, Treasury securities, the Treasury portfolio,
or common stock, may be subject to information reporting and may also be subject
to United States federal backup withholding tax at the rate of 31%, if you fail
to supply an accurate taxpayer identification number or otherwise fail to comply
with applicable United States information reporting or certification
requirements.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against your United States federal income tax liability provided the
required information is furnished to the IRS.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following discussion applies to you if you are a holder other than a
"U.S. person" as defined in the third paragraph of "Certain Federal Income Tax
Consequences," above. Special rules may apply to you if you are a "controlled
foreign corporation", "passive foreign investment company" or "foreign personal
holding company" and are subject to special treatment under the Code. If you are
such an entity, you should consult your own tax advisor to determine the United
States federal, state, local and other tax consequences that may be relevant to
you.
UNITED STATES FEDERAL WITHHOLDING TAX. The 30% United States federal
withholding tax should not apply to any payment of principal or interest
(including original issue discount) on the notes, Treasury securities or
Treasury portfolio provided that:
- you do not actually (or constructively) own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Code and the Treasury regulations;
- you are not a controlled foreign corporation that is related to us through
stock ownership;
- you are not a bank whose receipt of interest on the notes is described in
section 881(c)(3)(A) of the Code; and
- (a) you provide your name and address on an IRS Form W-8BEN (or a suitable
successor form), and certify, under penalties of perjury, that you are not
a United States person or (b) a financial institution holding the FELINE
PRIDES on your behalf certifies, under penalty of perjury, that it has
received an IRS Form W-8BEN (or a suitable successor form) from the
beneficial owner and provides us with a copy.
We do not intend to withhold on payments of principal and interest if these
requirements are met.
We generally will withhold tax at a rate of 30% on the dividends paid on the
shares of our common stock acquired under the purchase contract. However, if a
treaty applies, you may be eligible for a reduced rate of withholding.
Similarly, dividends that are effectively connected with the conduct of a trade
or business by you within the United States (or, where a tax treaty applies, are
attributable to a United States permanent establishment maintained by you), are
not subject to the withholding tax, but instead are subject to United States
federal income tax, as described below. In order to claim any such exemption or
reduction in the 30% withholding tax, you should provide a properly executed IRS
Form W-8BEN (or a suitable substitute form) claiming a reduction of or an
exemption from withholding under an applicable tax treaty or IRS Form W-8ECI (or
a suitable substitute form) stating that such payments are not subject to
withholding tax because they are effectively connected with your conduct of a
trade or business in the United States.
In general, the 30% U.S. federal withholding tax will not apply to any gain
or income that you realize on the sale, exchange, or other disposition of the
FELINE PRIDES, notes, purchase contracts, Treasury securities or our common
stock acquired under the purchase contracts.
In general, no backup withholding will be required with respect to payments
made by us with respect to the FELINE PRIDES or the notes if you have provided
us with an IRS Form W-8BEN described above and we do not have actual knowledge
or reason to know that you are a U.S. person. In addition, no backup withholding
will be required regarding the proceeds of the sale of FELINE PRIDES, notes,
Treasury securities and our common stock made within the United States or
conducted through certain United States financial intermediaries if the payor
receives the statement described above and does not have actual knowledge or
reason to know that you are a United States person or you otherwise establish an
exemption.
UNITED STATES FEDERAL INCOME TAX. If you are engaged in a trade or business
in the United States (or, if a tax treaty applies, if you maintain a permanent
establishment within the United States) and
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interest (including original issue discount) on the notes, original issue
discount on the Treasury securities and, dividends on our common stock are
effectively connected with the conduct of that trade or business (or if a treaty
applies, of that permanent establishment), you will be subject to United States
federal income tax (but not the 30% withholding tax), on the interest, original
issue discount and dividends on a net income basis in the same manner as if you
were a U.S. holder. In addition, if you are a foreign corporation, you may be
subject to a 30% branch profits tax.
Any gain or income realized on the disposition of a FELINE PRIDES, a
purchase contract, a note, a Treasury security or our common stock acquired
under the purchase contract generally will not be subject to United States
federal income tax unless:
- that gain or income is effectively connected with your conduct of a trade
or business in the United States;
- you are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition, and certain other conditions
are met; or
- in the case of purchase contracts or our common stock, we are or have been
a "U.S. real property holding corporation" for United States federal
income tax purposes.
We do not believe that we are currently a "U.S. real property holding
corporation" for United States federal income tax purposes, and we think it is
unlikely that we will become one, although there can be no assurance that this
will be the case. In any event, if we were to become a U.S. real property
holding corporation, so long as our common stock continued to be regularly
traded on an established securities market, (1) you would not be subject to U.S.
federal income tax on the disposition of a purchase contract (that is a part of
a FELINE PRIDES) if on the day you acquired the purchase contracts, the purchase
contracts you acquired had a fair market value less than the fair market value
of five percent of our common stock or of the outstanding purchase contracts and
(2) you will generally not be subject to U.S. federal income tax on the
disposition of our common stock if you held (at all times during the shorter of
the five year period preceding the date of disposition or your holding period)
less than five percent of the total outstanding shares of our common stock.
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ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
acquisition, holding and disposition of FELINE PRIDES (and the securities
underlying such FELINE PRIDES) by employee benefit plans that are subject to
Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended
("ERISA"), plans, individual retirement accounts and other arrangements that are
subject to Section 4975 of the Code or provisions under any federal, state,
local, non- U.S. or other laws or regulations that are similar to such
provisions of the Code or ERISA (collectively, "similar laws"), and entities
whose underlying assets are considered to include "plan assets" of such plans,
accounts and arrangements (each, a "plan").
GENERAL FIDUCIARY MATTERS
ERISA and the Code impose certain duties on persons who are fiduciaries of a
plan subject to Title I of ERISA or Section 4975 of the Code and prohibit
certain transactions involving the assets of a plan and its fiduciaries or other
interested parties. Under ERISA and the Code, any person who exercises any
discretionary authority or control over the administration of such a plan or the
management or disposition of the assets of such a plan, or who renders
investment advice for a fee or other compensation to such a plan, is generally
considered to be a fiduciary of the plan.
In considering an investment in the securities of a portion of the assets of
any plan, a fiduciary should determine whether the investment is in accordance
with the documents and instruments governing the plan and the applicable
provisions of ERISA, the Code or any similar law relating to a fiduciary's
duties to the plan including, without limitation, the prudence, diversification,
delegation of control and prohibited transaction provisions of ERISA, the Code
and any other applicable similar laws.
Any insurance company proposing to invest assets of its general account in
the securities should consider the extent that such investment would be subject
to the requirements of ERISA in light of the U.S. Supreme Court's decision in
John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank and
under any subsequent legislation or other guidance that has or may become
available relating to that decision, including the enactment of Section 401(c)
of ERISA by the Small Business Job Protection Act of 1996 and the regulations
promulgated thereunder.
PROHIBITED TRANSACTION ISSUES
Section 406 of ERISA and Section 4975 of the Code prohibit plans subject to
Title I of ERISA or Section 4975 of the Code from engaging in specified
transactions involving plan assets with persons or entities who are "parties in
interest," within the meaning of ERISA, or "disqualified persons," within the
meaning of Section 4975 of the Code, unless an exemption is available. A party
in interest or disqualified person who engaged in a non-exempt prohibited
transaction may be subject to excise taxes and other penalties and liabilities
under ERISA and the Code. In addition, the fiduciary of the plan that engaged in
such a non-exempt prohibited transaction may be subject to penalties and
liabilities under ERISA and the Code.
The FELINE PRIDES (and the securities underlying such FELINE PRIDES) will be
deemed to constitute "plan assets" and the acquisition, holding and disposition
of the FELINE PRIDES (and the securities underlying such FELINE PRIDES) may
constitute or result in a direct or indirect prohibited transaction under
Section 406 of ERISA and/or Section 4975 of the Code, if Affiliated Managers
Group, the seller or the purchaser is a party in interest or disqualified person
with respect to such plan, unless an exemption is available. In this regard, the
U.S. Department of Labor (the "DOL") has issued prohibited transaction class
exemptions, or "PTCEs," that may apply to these transactions. These class
exemptions include, without limitation, PTCE 84-14 respecting transactions
determined by independent qualified professional asset managers, PTCE 90-1
respecting insurance company pooled separate
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accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60
respecting life insurance company general accounts, PTCE 96-23 respecting
transactions determined by in-house asset managers, and PTCE 75-1 respecting
principal transactions by a broker-dealer, although there can be no assurance
that all of the conditions of any such exemption will be satisfied.
Accordingly, by its purchase of the FELINE PRIDES (and the securities
underlying such FELINE PRIDES), each holder, and the fiduciary of any plan that
is a holder, will be deemed to have represented and warranted on each day from
and including the date of its purchase of the FELINE PRIDES (and the securities
underlying such FELINE PRIDES) through and including the date of disposition of
the satisfaction of its obligation under the purchase contract and the
disposition of any such FELINE PRIDES (and any security underlying such FELINE
PRIDES) either (i) that it is not a plan or (ii) that the acquisition, holding
and the disposition of any FELINE PRIDES (and any security underlying such
FELINE PRIDES) by such holder does not and will not constitute a prohibited
transaction under ERISA or Section 4975 of the Code or other similar laws unless
an exemption is available with respect to such transactions and the conditions
of such exemption have been satisfied.
In addition, no plan will be permitted to participate in the remarketing
program unless and until such plan provides the remarketing agent with
assurances, reasonably satisfactory to the remarketing agent, that such
participation in the remarketing program will not constitute a prohibited
transaction under ERISA or Section 4975 of the Code or other similar laws for
which an exemption is not available.
Any plan or other entity whose assets include plan assets subject to ERISA,
Section 4975 of the Code or substantially similar federal, state or local law
should consult their advisors and/or counsel.
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UNDERWRITING
We intend to offer the Income PRIDES through the underwriters. Merrill
Lynch, Pierce, Fenner & Smith Incorporated is acting as representative of the
underwriters named below. Subject to the terms and conditions in a purchase
agreement between us and the underwriters, we have agreed to sell to the
underwriters, and the underwriters have severally agreed to purchase from us,
the number of Income PRIDES set forth opposite their names below.
NUMBER OF
INCOME
UNDERWRITER PRIDES
----------- ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... 4,000,000
Goldman, Sachs & Co......................................... 2,000,000
Morgan Stanley & Co. Incorporated........................... 2,000,000
---------
Total............................................. 8,000,000
=========
The underwriters have agreed to purchase all of the Income PRIDES sold
pursuant to the purchase agreement if any of the Income PRIDES are purchased. If
an underwriter defaults, the purchase agreement provides that the purchase
commitments of the nondefaulting underwriters may be increased or the purchase
agreement may be terminated.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect to those
liabilities.
The underwriters are offering the Income PRIDES subject to prior sale, when,
as and if issued to and accepted by them, subject to approval of legal matters
by their counsel, including the validity of the Income PRIDES, and other
conditions contained in the purchase agreement, such as the receipt by the
underwriters of officers' certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the public and to
reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The underwriters have advised us that they propose initially to offer the
Income PRIDES to the public at the public offering price on the cover page of
this prospectus supplement and to dealers at that price less a concession not in
excess of $.45 per Income PRIDES. The underwriters may allow, and the dealers
may reallow, a discount not in excess of $.10 per Income PRIDES to other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The expenses of the offering, not including the underwriting discount, are
estimated to be $900,000 and are payable by us.
The following table shows the per unit and total public offering price,
underwriting discount to be paid by us to the underwriters and proceeds before
expenses to us. The information is presented assuming either no exercise or full
exercise by the underwriters of the overallotment option.
PER INCOME
PRIDES WITHOUT OPTION WITH OPTION
---------- -------------- -----------
Public offering price........................ $25.00 $200,000,000 $230,000,000
Underwriting discount........................ $.75 $6,000,000 $6,900,000
Proceeds, before expenses, to Affiliated
Managers Group, Inc........................ $24.25 $194,000,000 $223,100,000
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OVERALLOTMENT OPTION
We have granted an option to the underwriters to purchase up to an
additional 1,200,000 Income PRIDES at the public offering price less the
underwriting discount. The underwriters may exercise this option for 30 days
from the date of this prospectus supplement solely to cover any overallotments.
If the underwriters exercise this option, each will be obligated, subject to
conditions contained in the purchase agreement, to purchase approximately the
same percentage of additional Income PRIDES as the number set forth next to the
underwriter's name in the preceding table bears to the total number of Income
PRIDES set forth next to the names of all underwriters in the preceding table.
NO SALE OF SIMILAR SECURITIES
We have agreed, with some exceptions, not to directly or indirectly, without
the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated
on behalf of the underwriters, for a period of 60 days after the date of this
prospectus supplement:
- offer, pledge, sell or contract to sell any common stock or any similar
securities or any security convertible into such securities,
- sell any option or contract to purchase any common stock or any similar
securities or any security convertible into such securities,
- purchase any option or contract to sell any common stock or any similar
securities or any security convertible into such securities,
- grant any option, right or warrant for the sale of any common stock or any
similar securities or any security convertible into such securities,
- lend or otherwise dispose of or transfer any common stock or any similar
securities or any security convertible into such securities, or
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of common stock or any similar
securities or any security convertible into such securities.
This agreement does not apply to issuances under our employee or director
compensation plans or our employee or shareholder investment plans or to
issuances as consideration in connection with acquisitions. Merrill Lynch,
Pierce, Fenner & Smith Incorporated, in its sole discretion, may jointly release
any of the securities subject to these lock-up agreements at any time without
notice.
NEW YORK STOCK EXCHANGE LISTING
The Income PRIDES are a new issue of securities with no established trading
market. The Income PRIDES have been approved for listing on the NYSE, subject to
official notice of issuance. We have been advised by the underwriters that they
intend to make a market in the securities, but they are not obligated to do so
and may discontinue market-making at any time without notice. We can provide no
assurance as to the liquidity of, or any trading market for, the securities.
This prospectus supplement, as amended or supplemented, may be used by the
remarketing agent for remarketing.
PRICE STABILIZATION AND SHORT POSITIONS
Until the distribution of the Income PRIDES offered hereby is completed, SEC
rules may limit the underwriters and selling group members from bidding for or
purchasing the Income PRIDES or shares of our common stock. However, the
representatives may engage in transactions that stabilize the
S-66
price of the Income PRIDES or our common stock, such as bids or purchases that
peg, fix or maintain the price of the Income PRIDES or our common stock.
In connection with the offering, the representatives may make short sales of
our Income PRIDES. Short sales involve the sale by the underwriters, at the time
of the offering, of a greater number of Income PRIDES than they are required to
purchase in the offering. Covered short sales are sales made in an amount not
greater than the overallotment option. The underwriters may close out any
covered short position by either exercising the overallotment option or
purchasing Income PRIDES in the open market. In determining the source of Income
PRIDES to close out the covered short position, the representatives will
consider, among other things, the price of Income PRIDES available for purchase
in the open market as compared to the price at which they may purchase the
Income PRIDES through the overallotment option. Naked short sales are sales in
excess of the overallotment option. The representatives must close out any naked
short position by purchasing Income PRIDES in the open market. A naked short
position is more likely to be created if the representatives are concerned that
there may be downward pressure on the price of the Income PRIDES or our common
stock in the open market after pricing that could adversely affect investors who
purchase in the offering. Similar to other purchase transactions, purchases by
the representatives to cover syndicate short positions may have the effect of
raising or maintaining the market price of the Income PRIDES and our common
stock or preventing or retarding a decline in the market price of the Income
PRIDES and our common stock. As a result, the prices of the Income PRIDES and
our common stock may be higher than they would otherwise be in the absence of
these transactions.
Neither we nor any of the underwriters make any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the Income PRIDES or our common stock. In
addition, neither we nor any of the underwriters make any representation that
the representatives will engage in these transactions or that these
transactions, once commenced, will not be discontinued without notice.
ELECTRONIC PROSPECTUS
A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations. Merrill Lynch will be facilitating distribution for
this offering to certain of their internet subscription customers. Merrill Lynch
intends to allocate a limited number of shares for sale to their online
brokerage customers. Other than the prospectus in electronic format, the
information on the Merrill Lynch website is not intended to be part of this
prospectus.
OTHER RELATIONSHIPS
In the ordinary course of business, certain of the underwriters and their
affiliates have provided financial advisory, investment banking and general
financing and banking services to us and certain of our affiliates for customary
fees.
S-67
VALIDITY OF THE NOTES
The validity of the FELINE PRIDES will be passed upon for Affiliated
Managers Group by Goodwin Procter LLP, Boston, Massachusetts and for the
underwriters by Sidley Austin Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements incorporated in this prospectus
supplement by reference to the Annual Report on Form 10-K for the year ended
December 31, 2000 have been so incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
S-68
PROSPECTUS
AFFILIATED MANAGERS GROUP, INC.
$750,000,000
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
------------------
This prospectus provides you with a general description of debt and equity
securities that Affiliated Managers Group, Inc. may offer and sell from time to
time. Each time we sell securities we will provide a prospectus supplement that
will contain specific information about the terms of that sale and may add to or
update the information in this prospectus. You should read this prospectus and
any prospectus supplement carefully before you invest in our securities.
Our common stock is traded on the New York Stock Exchange under the symbol
"AMG."
------------------------
December 10, 2001
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
TABLE OF CONTENTS
PAGE
--------
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Forward-looking Statements.................................. 2
About Affiliated Managers Group, Inc........................ 3
Ratios of Earnings to Fixed Charges......................... 3
How We Intend to Use the Proceeds........................... 3
Description of the Debt Securities.......................... 4
Description of Preferred Stock.............................. 19
Description of Common Stock................................. 25
Description of the Stock Purchase Contracts and the Stock
Purchase Units............................................ 26
How We Plan to Offer and Sell the Securities................ 27
Experts..................................................... 29
Legal Opinions.............................................. 29
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC utilizing a shelf registration process. Under this shelf registration
process, we may sell any combination of the securities described in this
prospectus in one or more offerings up to a total dollar amount of $750,000,000.
This prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that specific
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described under
the heading "Where You Can Find More Information."
You should read this entire prospectus, including the information
incorporated by reference, before making an investment decision. Unless the
context otherwise requires, all references to "we," "us," "our," "our company,"
"Affiliated Managers Group," or similar expressions in this prospectus refer to
Affiliated Managers Group, Inc., a Delaware corporation, and not its affiliates
or other subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. Our SEC filings are also available to the public
from the SEC's Web site at http://www.sec.gov. In addition, you may read our SEC
filings at the offices of the New York Stock Exchange (NYSE), which is located
at 20 Broad Street, New York, New York 10005. Our SEC filings are available at
the NYSE because our common stock is listed on the NYSE.
We have the authority to designate and issue more than one class or series
of stock having various preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption. See "Description of Preferred Stock" and "Description
of Common Stock." We will furnish a full statement of the relative rights and
preferences of each class or series of our stock which has been so designated
and any restrictions on the ownership or transfer of our stock to any
stockholder upon request and without charge. Written requests for such copies
should be directed to: Affiliated Managers Group, Inc., Two International Place,
23rd Floor, Boston, Massachusetts 02110, Attention: Darrell W. Crate--Executive
Vice President, Chief Financial Officer and Treasurer.
The SEC allows us to incorporate by reference the information and reports we
file with it, which means that we can disclose important information to you by
referring you to these documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede the information already
incorporated by reference. We are incorporating by reference the documents
listed below, which we have already filed with the SEC, and any future filings
we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we sell all of the securities.
SEC FILINGS (FILE NO. 001-13459) PERIOD OR DATE FILED
-------------------------------- --------------------------------
Annual Report on Form 10-K................................. Year ended December 31, 2000
Current Report on Form 8-K................................. May 4, 2001
Quarterly Report on Form 10-Q.............................. Quarter ended March 31, 2001
Quarterly Report on Form 10-Q.............................. Quarter ended June 30, 2001
Current Report on Form 8-K................................. August 20, 2001
Current Report on Form 8-K................................. August 20, 2001
Current Report on Form 8-K................................. September 20, 2001
Quarterly Report on Form 10-Q.............................. Quarter ended September 30, 2001
Current Report on Form 8-K................................. November 15, 2001
Current Report on Form 8-K................................. November 15, 2001
YOU MAY REQUEST A COPY OF THESE FILINGS, AND ANY EXHIBITS WE HAVE
SPECIFICALLY INCORPORATED BY REFERENCE AS AN EXHIBIT IN THIS PROSPECTUS, AT NO
COST BY WRITING OR TELEPHONING US AT THE FOLLOWING: AFFILIATED MANAGERS
GROUP, INC., TWO INTERNATIONAL PLACE, 23RD FLOOR, BOSTON, MASSACHUSETTS 02110,
ATTENTION: DARRELL W. CRATE--EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND TREASURER. OUR TELEPHONE NUMBER IS (617) 747-3300.
This prospectus is part of a registration statement we filed with the SEC.
We have incorporated into this registration statement exhibits. You should read
the exhibits carefully for provisions that may be important to you.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus or in the documents incorporated
by reference is accurate as of any date other than the date on the front of this
prospectus or those documents.
FORWARD-LOOKING STATEMENTS
This prospectus, including the information incorporated by reference into
this prospectus, contains statements that are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. You can identify forward-looking statements by
the use of the words "believe," "expect," "anticipate," "intend," "estimate,"
"assume," "project" and other similar expressions which predict or indicate
future events and trends and which do not relate to historical matters. These
statements include, among other things, statements regarding our intent, belief
or expectations with respect to:
- potential investment in additional investment management firms;
- the availability of debt and equity financing to fund investments in
firms;
- future borrowing under our credit facility;
- interest rates and hedging contracts;
- the impact of new accounting policies;
- our competition and our Affiliates' competition;
- changing conditions in the financial and securities markets; and
- general economic conditions.
We cannot assure the future results or outcome of the matters described in
any of those statements, which merely reflect our expectations and estimates.
You should not rely on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, some of which are beyond our
control. These risks, uncertainties and other factors may cause our actual
results, performance or achievements to be materially different from the
anticipated future results, performance or achievements expressed or implied by
the forward-looking statements. Some of the factors that might cause these
differences include, but are not limited to the following:
- changes in the securities or financial markets or in general economic
conditions;
- the availability of equity and debt financing;
- competition for acquisitions of interests in investment management firms;
- our ability to complete pending acquisitions; and
2
- the investment performance of our Affiliates and their ability to
effectively market their investment strategies.
YOU SHOULD CAREFULLY REVIEW ALL OF THESE FACTORS, AND YOU SHOULD BE AWARE THAT
THERE MAY BE OTHER FACTORS THAT COULD CAUSE SUCH DIFFERENCES.
We caution you that, while forward-looking statements reflect our estimates
and beliefs, they are not guarantees of future performance. We do not promise to
update any forward-looking statements to reflect changes in underlying
assumptions or factors, new information, future events or other changes.
ABOUT AFFILIATED MANAGERS GROUP, INC.
Affiliated Managers Group is an asset management company that addresses the
succession and transition issues facing the principals of growing mid-sized
investment management firms. Our strategy is to generate growth through the
internal growth of our existing Affiliates, as well as through investments in
new Affiliates. Our transaction structure allows individual members of each
Affiliate's management team to retain significant direct ownership in their firm
while maintaining operating autonomy. In addition, we provide centralized
assistance to our Affiliates in strategic matters, marketing, distribution,
product development and operations. Pro forma for our recent investments in
Friess Associates, LLC and Welch & Forbes, LLC, our affiliated investment
management firms in the aggregate managed over $75 billion in assets at
September 30, 2001. For more information regarding Affiliated Managers Group and
our Affiliates, see "Where You Can Find More Information."
RATIOS OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 1999 1998 1997 1996
------------- ------------ ------------ ------------ ------------ ------------
Ratios..................... 8.8x 9.3x 15.4x 6.1x 2.5x 2.3x
For the purpose of computing the ratios of earnings to fixed charges,
earnings consist of consolidated income from continuing operations before
provision for income taxes, minority interest and fixed charges, and fixed
charges consist of interest expense, amortization of debt issuance costs and the
portion of rental expense deemed to represent interest.
HOW WE INTEND TO USE THE PROCEEDS
We currently intend to use the net proceeds from the sale of any securities
under this prospectus for general corporate purposes, which may include:
- the repayment of debt;
- the possible repurchase of our common stock;
- the financing of potential investments;
- working capital; and
- other purposes as mentioned in any prospectus supplement.
Pending such use, we may temporarily invest the net proceeds. The precise
amounts and timing of the application of proceeds will depend upon our funding
requirements and the availability of other funds. Except as mentioned in any
prospectus supplement, specific allocations of the proceeds to such purposes
will not have been made at the date of that prospectus supplement.
3
Based upon our historical and anticipated future growth and our financial
needs, we may engage in additional financings of a character and amount that we
determine as the need arises.
DESCRIPTION OF THE DEBT SECURITIES
This prospectus describes the general terms and provisions of the debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the securities in a supplement to this
prospectus. The prospectus supplement will also indicate whether the general
terms and provisions described in this prospectus apply to a particular series
of debt securities. You should read the actual indenture if you do not fully
understand a term or the way we use it in this prospectus.
We may offer senior debt securities or subordinated debt securities. The
senior debt securities will be issued under an indenture, dated as of a date
prior to such issuance, between us and a trustee, as amended or supplemented
from time to time. We will refer to any such indenture throughout this
prospectus as the "senior indenture." Any subordinated debt securities will be
issued under a separate indenture, dated as of a date prior to such issuance,
between us and the trustee. We will refer to any such indenture throughout this
prospectus as the "subordinated indenture" and to a trustee under any senior or
subordinated indenture as the "trustee." The senior indenture and the
subordinated indenture are sometimes collectively referred to in this prospectus
as the "indentures." The indentures will be subject to and governed by the Trust
Indenture Act of 1939. We included copies of the indentures as exhibits to our
registration statement and they are incorporated into this prospectus by
reference. The following summarizes the material provisions of the indentures,
but may not contain all of the information that is important to you. Except as
otherwise indicated, the terms of the indentures are identical. As used under
this caption, the term "debt securities" includes the debt securities being
offered by this prospectus and all other debt securities issued by us under the
indentures.
GENERAL
The indentures:
- do not limit the amount of debt securities that we may issue;
- allow us to issue debt securities in one or more series;
- do not require us to issue all of the debt securities of a series at the
same time;
- allow us to reopen a series to issue additional debt securities without
the consent of the debt securityholders of such series; and
- provide that the debt securities will be unsecured.
Unless we give you different information in the prospectus supplement, the
senior debt securities will be unsubordinated obligations and will rank equally
with all of our other unsecured and unsubordinated indebtedness. Payments on the
subordinated debt securities will be subordinated to the prior payment in full
of all of our senior indebtedness, as described under "Description of the Debt
Securities--Subordination" and in the applicable prospectus supplement.
Each indenture provides that we may, but need not, designate more than one
trustee under an indenture. Any trustee under an indenture may resign or be
removed and a successor trustee may be appointed to act with respect to the
series of debt securities administered by the resigning or removed trustee. If
two or more persons are acting as trustee with respect to different series of
debt securities, each trustee shall be a trustee of a trust under the applicable
indenture separate and apart from the trust administered by any other trustee.
Except as otherwise indicated in this prospectus, any action described in this
prospectus to be taken by each trustee may be taken by each trustee with respect
to, and only with respect to, the one or more series of debt securities for
which it is trustee under the applicable indenture.
4
The prospectus supplement for each offering will provide the following
terms, where applicable:
- the title of the debt securities and whether they are senior or
subordinated;
- the aggregate principal amount of the debt securities being offered, the
aggregate principal amount of the debt securities outstanding as of the
most recent practicable date and any limit on their aggregate principal
amount, including the aggregate principal amount of debt securities
authorized;
- the price at which the debt securities will be issued, expressed as a
percentage of the principal;
- the portion of the principal payable upon declaration of acceleration of
the maturity, if other than the principal amount;
- the date or dates, or the method for determining the date or dates, on
which the principal of the debt securities will be payable;
- the fixed or variable interest rate or rates of the debt securities, or
the method by which the interest rate or rates is determined;
- the date or dates, or the method for determining the date or dates, from
which interest will accrue;
- the dates on which interest will be payable;
- the record dates for interest payment dates, or the method by which we
will determine those dates;
- the persons to whom interest will be payable;
- the basis upon which interest will be calculated if other than that of a
360-day year of twelve 30-day months;
- any make-whole amount, which is the amount in addition to principal and
interest that is required to be paid to the holder of a debt security as a
result of any optional redemption or accelerated payment of such debt
security, or the method for determining the make-whole amount;
- the place or places where the principal of, and any premium (or make-whole
amount) and interest on, the debt securities will be payable;
- where the debt securities may be surrendered for registration of transfer
or exchange;
- where notices or demands to or upon us in respect of the debt securities
and the applicable indenture may be served;
- the times, prices and other terms and conditions upon which we may redeem
the debt securities;
- any obligation we have to redeem, repay or purchase the debt securities
pursuant to any sinking fund or analogous provision or at the option of
holders of the debt securities, and the times and prices at which we must
redeem, repay or purchase the debt securities as a result of such an
obligation;
- the currency or currencies in which the debt securities are denominated
and payable if other than United States dollars, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies and the terms and conditions relating thereto, and
the manner of determining the equivalent of such foreign currency in
United States dollars;
- whether the principal of, and any premium (or make-whole amount) or
interest on, the debt securities of the series are to be payable, at our
election or at the election of a holder, in a
5
currency or currencies other than that in which the debt securities are
denominated or stated to be payable, and other related terms and
conditions;
- whether the amount of payments of principal of, and any premium (or
make-whole amount) or interest on, the debt securities may be determined
according to an index, formula or other method and how such amounts will
be determined;
- whether the debt securities will be in registered form, bearer form or
both and (1) if in registered form, the person to whom any interest shall
be payable, if other than the person in whose name the security is
registered at the close of business on the regular record date for such
interest, or (2) if in bearer form, the manner in which, or the person to
whom, any interest on the security shall be payable if otherwise than upon
presentation and surrender upon maturity;
- any restrictions applicable to the offer, sale or delivery of securities
in bearer form and the terms upon which securities in bearer form of the
series may be exchanged for securities in registered form of the series
and vice versa if permitted by applicable laws and regulations;
- whether any debt securities of the series are to be issuable initially in
temporary global form and whether any debt securities of the series are to
be issuable in permanent global form with or without coupons and, if so,
whether beneficial owners of interests in any such permanent global
security may or shall be required to exchange their interests for other
debt securities of the series, and the manner in which interest shall be
paid;
- the identity of the depository for securities in registered form, if such
series are to be issuable as a global security;
- the date as of which any debt securities in bearer form or in temporary
global form shall be dated if other than the original issuance date of the
first security of the series to be issued;
- the applicability, if any, of the defeasance and covenant defeasance
provisions described in this prospectus or in the applicable indenture;
- whether and under what circumstances we will pay any additional amounts on
the debt securities in respect of any tax, assessment or governmental
charge and, if so, whether we will have the option to redeem the debt
securities in lieu of making such a payment;
- the circumstances, if any, in the applicable prospectus supplement, under
which beneficial owners of interests in the global security may obtain
definitive debt securities and the manner in which payments on a permanent
global debt security will be made if any debt securities are issuable in
temporary or permanent global form;
- any provisions granting special rights to holders of securities upon the
occurrence of such events as specified in the applicable prospectus
supplement;
- the name of the applicable trustee and the nature of any material
relationship with us or any of our Affiliates, and the percentage of debt
securities of the class necessary to require the trustee to take action;
- any deletions from, modifications of, or additions to our events of
default or covenants and any change in the right of any trustee or any of
the holders to declare the principal amount of any of such debt securities
due and payable; and
- any other terms of such debt securities not inconsistent with the
provisions of the applicable indenture.
We may issue debt securities at a discount below their principal amount and
provide for less than the entire principal amount thereof to be payable upon
declaration of acceleration of the maturity of
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the debt securities. We will refer to any such debt securities throughout this
prospectus as "original issue discount securities." The applicable prospectus
supplement will describe the federal income tax consequences and other relevant
considerations applicable to original issue discount securities.
Except as described under "Description of the Debt Securities--Merger,
consolidation or sale of assets" or as may be set forth in any prospectus
supplement, the debt securities will not contain any provisions that (1) would
limit our ability to incur indebtedness or (2) would afford holders of debt
securities protection in the event of (a) a highly leveraged or similar
transaction involving us or any of our Affiliates or (b) a change of control or
reorganization, restructuring, merger or similar transaction involving us that
may adversely affect the holders of the debt securities. In the future, we may
enter into transactions, such as the sale of all or substantially all of our
assets or a merger or consolidation, that may have an adverse effect on our
ability to service our indebtedness, including the debt securities, by, among
other things, substantially reducing or eliminating our assets.
Neither the Delaware General Corporation Law nor our governing instruments
define the term "substantially all" as it relates to the sale of assets.
Additionally, Delaware cases interpreting the term "substantially all" rely upon
the facts and circumstances of each particular case. Consequently, to determine
whether a sale of "substantially all" of our assets has occurred, a holder of
debt securities must review the financial and other information that we have
disclosed to the public.
We will provide you with more information in the applicable prospectus
supplement regarding any deletions, modifications, or additions to the events of
default or covenants that are described below, including any addition of a
covenant or other provision providing event risk or similar protection.
PAYMENT
Unless we give you different information in the applicable prospectus
supplement, the principal of, and any premium (or make-whole amount) and
interest on, any series of the debt securities will be payable at the corporate
trust office of the trustee. We will provide you with the address of the trustee
in the applicable prospectus supplement. We may also pay interest by mailing a
check to the address of the person entitled to it as it appears in the
applicable register for the debt securities or by wire transfer of funds to that
person at an account maintained within the United States.
All monies that we pay to a paying agent or a trustee for the payment of the
principal of, and any premium (or make-whole amount) or interest on, any debt
security will be repaid to us if unclaimed at the end of two years after the
obligation underlying payment becomes due and payable. After funds have been
returned to us, the holder of the debt security may look only to us for payment,
without payment of interest for the period which we hold the funds.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable prospectus supplement, the debt
securities of any series will be issuable in denominations of $1,000 and
integral multiples of $1,000.
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Subject to the limitations imposed upon debt securities that are evidenced
by a computerized entry in the records of a depository company rather than by
physical delivery of a note, a holder of debt securities of any series may:
- exchange them for any authorized denomination of other debt securities of
the same series and of a like aggregate principal amount and kind upon
surrender of such debt securities at the corporate trust office of the
applicable trustee or at the office of any transfer agent that we
designate for such purpose; and
- surrender them for registration of transfer or exchange at the corporate
trust office of the applicable trustee or at the office of any transfer
agent that we designate for such purpose.
Every debt security surrendered for registration of transfer or exchange
must be duly endorsed or accompanied by a written instrument of transfer, and
the person requesting such action must provide evidence of title and identity
satisfactory to the applicable trustee or transfer agent. Payment of a service
charge will not be required for any registration of transfer or exchange of any
debt securities, but we or the trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
If in addition to the applicable trustee, the applicable prospectus supplement
refers to any transfer agent initially designated by us for any series of debt
securities, we may at any time rescind the designation of any such transfer
agent or approve a change in the location through which any such transfer agent
acts, except that we will be required to maintain a transfer agent in each place
of payment for such series. We may at any time designate additional transfer
agents for any series of debt securities.
Neither we nor any trustee shall be required to:
- issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days before the
day that the notice of redemption of any debt securities selected for
redemption is mailed and ending at the close of business on the day of
such mailing;
- register the transfer of or exchange any debt security, or portion
thereof, so selected for redemption, in whole or in part, except the
unredeemed portion of any debt security being redeemed in part; and
- issue, register the transfer of or exchange any debt security that has
been surrendered for repayment at the option of the holder, except the
portion, if any, of such debt security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The indentures provide that we may, without the consent of the holders of
any outstanding debt securities, (1) consolidate with, (2) sell, lease or convey
all or substantially all of our assets to, or (3) merge with or into, any other
entity provided that:
- either we are the continuing entity, or the successor entity, if other
than us, assumes our obligations (A) to pay the principal of, and any
premium (or make-whole amount) and interest on, all of the debt securities
and (B) to duly perform and observe all of our covenants and conditions
contained in each indenture;
- immediately after giving effect to the transaction and treating any
indebtedness that becomes our obligation or the obligation of any of our
subsidiaries as having been incurred by us or by such subsidiary at the
time of the transaction, no event of default under the indentures, and no
event which, after notice or the lapse of time, or both, would become such
an event of default, occurs and continues; and
8
- an officers' certificate and legal opinion covering such conditions are
delivered to each trustee.
COVENANTS
EXISTENCE. Except as permitted under "Description of the Debt
Securities--Merger, consolidation or sale of assets," the indentures require us
to do or cause to be done all things necessary to preserve and keep in full
force and effect our existence, rights and franchises. However, the indentures
do not require us to preserve any right or franchise if we determine that any
right or franchise is no longer desirable in the conduct of our business.
PAYMENT OF TAXES AND OTHER CLAIMS. The indentures require us to pay,
discharge or cause to be paid or discharged, before they become delinquent all
taxes, assessments and governmental charges levied or imposed on us, our
Affiliates or our Affiliates' income, profits or property. However, we will not
be required to pay, discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
PROVISION OF FINANCIAL INFORMATION. The indentures require us, within
15 days of each of the respective dates by which we are required to file annual
reports, quarterly reports and other documents with the SEC, (1) to mail to all
holders of debt securities, as their names and addresses appear in the
applicable register for such debt securities, without cost to such holders,
copies of the annual reports, quarterly reports and other documents that we file
with the SEC under Section 13 or Section 15(d) of the Exchange Act, and (2) to
supply, promptly upon written request and payment of the reasonable cost of
duplication and delivery, copies of such documents to any prospective holder.
ADDITIONAL COVENANTS. The applicable prospectus supplement will set forth
any additional covenants of Affiliated Managers Group relating to any series of
debt securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless the applicable prospectus supplement states otherwise, when we refer
to "events of default" as defined in the indentures with respect to any series
of debt securities, we mean:
- default in the payment of any installment of interest on any debt security
of such series continuing for 30 days;
- default in the payment of principal of, or any premium (or make-whole
amount) on, any debt security of such series at its maturity;
- default in making any sinking fund payment as required for any debt
security of such series;
- default in the performance or breach of any other covenant or warranty of
Affiliated Managers Group contained in the indenture continuing for
60 days after written notice to us as provided in the applicable
indenture;
- (1) a default under any bond, debenture or note having an aggregate
principal amount of at least $30,000,000; or
(2) a default under any indenture or instrument under which there may be
issued, secured or evidenced any existing or later created indebtedness for
money borrowed by us or our Affiliates in an aggregate principal amount of
at least $30,000,000,
if the default results in the indebtedness becoming or being declared due
and payable prior to the date it otherwise would have, without such
indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within 30 days after notice to us specifying such
default;
9
- bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of Affiliated Managers Group or any of our
Affiliates which is considered a significant subsidiary; and
- any other event of default provided with respect to a particular series of
debt securities.
When we use the term "significant subsidiary," we refer to the meaning
ascribed to such term in Rule 1-02 of Regulation S-X promulgated under the
Securities Act.
If an event of default occurs and is continuing with respect to debt
securities of any series outstanding, then the applicable trustee or the holders
of 25% or more in principal amount of the debt securities of that series will
have the right to declare the principal amount of all the debt securities of
that series to be due and payable. If the debt securities of that series are
original issue discount securities or indexed securities, then the applicable
trustee or the holders of 25% or more in principal amount of the debt securities
of that series will have the right to declare the portion of the principal
amount as may be specified in the terms thereof to be due and payable. However,
at any time after such a declaration of acceleration has been made, but before a
judgment or decree for payment of the money due has been obtained by the
applicable trustee, the holders of at least a majority in principal amount of
outstanding debt securities of such series or of all debt securities then
outstanding under the applicable indenture may rescind and annul such
declaration and its consequences if:
- we have deposited with the applicable trustee all required payments of the
principal, any premium (or make-whole amount), and interest, plus
applicable fees, expenses, disbursements and advances of the applicable
trustee; and
- all events of default, other than the non-payment of accelerated
principal, or a specified portion thereof, and any premium (or make-whole
amount), have been cured or waived.
The indentures also provide that the holders of at least a majority in
principal amount of the outstanding debt securities of any series or of all debt
securities then outstanding under the applicable indenture may on behalf of all
holders waive any past default with respect to such series and its consequences,
except a default:
- in the payment of the principal, any premium (or make-whole amount) or
interest;
- in respect of a covenant or provision contained in the applicable
indenture that cannot be modified or amended without the consent of the
holder of the outstanding debt security that is affected by the default;
or
- in respect of a covenant or provision for the benefit or protection of the
trustee, without its express written consent.
The indentures require each trustee to give notice to the holders of debt
securities within 90 days of a default unless such default has been cured or
waived. However, the trustee may withhold notice if specified responsible
officers of such trustee consider such withholding to be in the interest of the
holders of debt securities. The trustee may not withhold notice of a default in
the payment of principal, any premium or interest on any debt security of such
series or in the payment of any sinking fund installment in respect of any debt
security of such series.
The indentures provide that holders of debt securities of any series may not
institute any proceedings, judicial or otherwise, with respect to such indenture
or for any remedy under the indenture, unless the trustee fails to act for a
period of 60 days after the trustee has received a written request to institute
proceedings in respect of an event of default from the holders of 25% or more in
principal amount of the outstanding debt securities of such series, as well as
an offer of indemnity reasonably satisfactory to the trustee. However, this
provision will not prevent any holder of debt
10
securities from instituting suit for the enforcement of payment of the principal
of, and any premium (or make-whole amount) and interest on, such debt securities
at the respective due dates thereof.
The indentures provide that, subject to provisions in each indenture
relating to its duties in the case of a default, a trustee has no obligation to
exercise any of its rights or powers at the request or direction of any holders
of any series of debt securities then outstanding under the indenture, unless
the holders have offered to the trustee reasonable security or indemnity. The
holders of at least a majority in principal amount of the outstanding debt
securities of any series or of all debt securities then outstanding under an
indenture shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the applicable trustee, or
of exercising any trust or power conferred upon such trustee. However, a trustee
may refuse to follow any direction which:
- is in conflict with any law or the applicable indenture;
- may involve the trustee in personal liability; or
- may be unduly prejudicial to the holders of debt securities of the series
not joining the proceeding.
Within 120 days after the close of each fiscal year, we will be required to
deliver to each trustee a certificate, signed by one of our several specified
officers stating whether or not that officer has knowledge of any default under
the applicable indenture. If the officer has knowledge of any default, the
notice must specify the nature and status of the default.
MODIFICATION OF THE INDENTURES
The indentures provide that modifications and amendments may be made only
with the consent of the affected holders of at least a majority in principal
amount of all outstanding debt securities issued under that indenture. However,
no such modification or amendment may, without the consent of the holders of the
debt securities affected by the modification or amendment:
- change the stated maturity of the principal of, or any premium (or
make-whole amount) on, or any installment of principal of or interest on,
any such debt security;
- reduce the principal amount of, the rate or amount of interest on or any
premium (or make-whole amount) payable on redemption of any such debt
security;
- reduce the amount of principal of an original issue discount security that
would be due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect any right
of repayment of the holder of any such debt security;
- change the place of payment or the coin or currency for payment of
principal of, or any premium (or make-whole amount) or interest on, any
such debt security;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any such debt security;
- reduce the percentage in principal amount of any outstanding debt
securities necessary to modify or amend the applicable indenture with
respect to such debt securities, to waive compliance with particular
provisions thereof or defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the applicable indenture;
and
- modify any of the foregoing provisions or any of the provisions relating
to the waiver of particular past defaults or covenants, except to increase
the required percentage to effect such action or to provide that some of
the other provisions may not be modified or waived without the consent of
the holder of such debt security.
11
The holders of a majority in aggregate principal amount of the outstanding
debt securities of each series may, on behalf of all holders of debt securities
of that series, waive, insofar as that series is concerned, our compliance with
material restrictive covenants of the applicable indenture.
We and our respective trustee may make modifications and amendments of an
indenture without the consent of any holder of debt securities for any of the
following purposes:
- to evidence the succession of another person to us as obligor under such
indenture;
- to add to our covenants for the benefit of the holders of all or any
series of debt securities or to surrender any right or power conferred
upon us in such indenture;
- to add events of default for the benefit of the holders of all or any
series of debt securities;
- to add or change any provisions of an indenture (1) to facilitate the
issuance of, or to change or eliminate restrictions on the payment of
principal of, or premium (or make-whole amount) or interest on, debt
securities in bearer form, or (2) to permit or facilitate the issuance of
debt securities in uncertificated form, provided that such action shall
not adversely affect the interests of the holders of the debt securities
of any series in any material respect;
- to change or eliminate any provisions of an indenture, provided that any
such change or elimination shall become effective only when there are no
debt securities outstanding of any series created prior thereto which are
entitled to the benefit of such provision;
- to secure the debt securities;
- to establish the form or terms of debt securities of any series;
- to provide for the acceptance of appointment by a successor trustee or
facilitate the administration of the trusts under an indenture by more
than one trustee;
- to cure any ambiguity, defect or inconsistency in an indenture, provided
that such action shall not adversely affect the interests of holders of
debt securities of any series issued under such indenture; and
- to supplement any of the provisions of an indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series
of such debt securities, provided that such action shall not adversely
affect the interests of the holders of the outstanding debt securities of
any series.
VOTING
The indentures provide that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver under
the indentures or whether a quorum is present at a meeting of holders of debt
securities:
- the principal amount of an original issue discount security that shall be
deemed to be outstanding shall be the amount of the principal thereof that
would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof;
- the principal amount of any debt security denominated in a foreign
currency that shall be deemed outstanding shall be the United States
dollar equivalent, determined on the issue date for such debt security, of
the principal amount or, in the case of an original issue discount
security, the United States dollar equivalent on the issue date of such
debt security of the amount determined as provided in the preceding bullet
point;
12
- the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided for such indexed security
under such indenture; and
- debt securities owned by us or any other obligor upon the debt securities
or by any affiliate of ours or of such other obligor shall be disregarded.
The indentures contain provisions for convening meetings of the holders of
debt securities of a series. A meeting will be permitted to be called at any
time by the applicable trustee, and also, upon request, by us or the holders of
at least 25% in principal amount of the outstanding debt securities of such
series, in any such case upon notice given as provided in such indenture. Except
for any consent that must be given by the holder of each debt security affected
by the modifications and amendments of an indenture described above, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the holders of a
majority of the aggregate principal amount of the outstanding debt securities of
that series represented at such meeting.
Notwithstanding the preceding paragraph, except as referred to above, any
resolution relating to a request, demand, authorization, direction, notice,
consent, waiver or other action that may be made, given or taken by the holders
of a specified percentage, which is less than a majority, of the aggregate
principal amount of the outstanding debt securities of a series may be adopted
at a meeting or adjourned meeting duly reconvened at which a quorum is present
by the affirmative vote of such specified percentage.
Any resolution passed or decision taken at any properly held meeting of
holders of debt securities of any series will be binding on all holders of such
series. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be persons holding or representing a majority in
principal amount of the outstanding debt securities of a series. However, if any
action is to be taken relating to a consent or waiver which may be given by the
holders of at least a specified percentage in principal amount of the
outstanding debt securities of a series, the persons holding such percentage
will constitute a quorum.
Notwithstanding the foregoing provisions, the indentures provide that if any
action is to be taken at a meeting with respect to any request, demand,
authorization, direction, notice, consent, waiver and other action that such
indenture expressly provides may be made, given or taken by the holders of a
specified percentage in principal amount of all outstanding debt securities
affected by such action, or of the holders of such series and one or more
additional series:
- there shall be no minimum quorum requirement for such meeting; and
- the principal amount of the outstanding debt securities of such series
that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action shall be taken into account in
determining whether such request, demand, authorization, direction,
notice, consent, waiver or other action has been made, given or taken
under such indenture.
SUBORDINATION
Unless otherwise provided in the applicable prospectus supplement,
subordinated securities will be subject to the following subordination
provisions.
Upon any distribution to our creditors in a liquidation, dissolution or
reorganization, the payment of the principal of and interest on any subordinated
securities will be subordinated to the extent provided in the applicable
indenture in right of payment to the prior payment in full of all senior debt.
However, our obligation to make payments of the principal of and interest on
such subordinated securities otherwise will not be affected. No payment of
principal or interest will be permitted to be
13
made on subordinated securities at any time if a default on senior debt exists
that permits the holders of such senior debt to accelerate its maturity and the
default is the subject of judicial proceedings or we receive notice of the
default. After all senior debt is paid in full and until the subordinated
securities are paid in full, holders of subordinated securities will be
subrogated to the rights of holders of senior debt to the extent that
distributions otherwise payable to holders of subordinated securities have been
applied to the payment of senior debt. The subordinated indenture will not
restrict the amount of senior debt or other indebtedness of Affiliated Managers
Group and our subsidiaries. As a result of these subordination provisions, in
the event of a distribution of assets upon insolvency, holders of subordinated
securities may recover less, ratably, than our general creditors.
"Senior Debt" will be defined in the applicable indenture as the principal
of and interest on, or substantially similar payments to be made by us in
respect of, the following, whether outstanding at the date of execution of the
applicable indenture or subsequently incurred, created or assumed:
- indebtedness incurred by us for money borrowed or represented by
purchase-money obligations;
- indebtedness incurred by us evidenced by notes, debentures, bonds, or
other securities issued under the provisions of an indenture, fiscal
agency agreement or other agreement;
- our obligations as lessee under leases of property either made as part of
any sale and leaseback transaction to which we are a party or otherwise;
- indebtedness of partnerships and joint ventures which is included in our
consolidated financial statements;
- indebtedness, obligations and liabilities of others in respect of which we
are liable contingently or otherwise to pay or advance money or property
or as guarantor, endorser or otherwise or which we have agreed to purchase
or otherwise acquire; and
- any binding commitment we have to fund any real estate investment or to
fund any investment in any entity making such real estate investment.
In each case, the following will not be Senior Debt:
- any such indebtedness, obligation or liability referred to in the
preceding clauses (1) that is outstanding and (2) the instrument creating
or evidencing such indebtedness, obligation or liability provides that the
same is not superior to or ranks on an equal basis with the subordinated
securities with respect to right of payment;
- any such indebtedness, obligation or liability that is subordinated to
indebtedness incurred by us to substantially the same extent as or to a
greater extent than the subordinated securities are subordinated; and
- the subordinated securities.
No restrictions will be included in any indenture relating to subordinated
securities upon the creation of additional senior debt.
If this prospectus is being delivered in connection with the offering of a
series of subordinated securities, the accompanying prospectus supplement or the
information incorporated in this prospectus by reference will set forth the
approximate amount of senior debt outstanding as of the end of our most recent
fiscal quarter.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable prospectus supplement, the
indentures allow us to discharge our obligations to holders of any series of
debt securities issued under any indenture when:
- either (1) all securities of such series have already been delivered to
the applicable trustee for cancellation; or (2) all securities of such
series have not already been delivered to the applicable trustee for
cancellation but (a) have become due and payable, (b) will become due and
payable within one year, or (c) if redeemable at our option, are to be
redeemed within one year, and we have irrevocably deposited with the
applicable trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such
debt securities are payable, an amount sufficient to pay the entire
indebtedness on such debt securities in respect of principal and any
premium (or make-whole amount) and interest to the date of such deposit if
such debt securities have become due and payable or, if they have not, to
the stated maturity or redemption date;
- we have paid or caused to be paid all other sums payable; and
- we have delivered to the trustee an officers' certificate and an opinion
of counsel stating the conditions to discharging the debt securities have
been satisfied.
Unless otherwise indicated in the applicable prospectus supplement, the
indentures provide that, upon our irrevocable deposit with the applicable
trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such debt securities are
payable at stated maturity, or government obligations, or both, applicable to
such debt securities, which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of, and any premium (or make-whole amount) and
interest on, such debt securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor, we may elect either:
- to defease and be discharged from any and all obligations with respect to
such debt securities; or
- to be released from our obligations with respect to such debt securities
under the applicable indenture or, if provided in the applicable
prospectus supplement, our obligations with respect to any other covenant,
and any omission to comply with such obligations shall not constitute an
event of default with respect to such debt securities.
Notwithstanding the above, we may not elect to defease and be discharged
from the obligation to pay any additional amounts upon the occurrence of
particular events of tax, assessment or governmental charge with respect to
payments on such debt securities and the obligations to register the transfer or
exchange of such debt securities, to replace temporary or mutilated, destroyed,
lost or stolen debt securities, to maintain an office or agency in respect of
such debt securities, or to hold monies for payment in trust.
The indentures only permit us to establish the trust described in the
paragraph above if, among other things, we have delivered to the applicable
trustee an opinion of counsel to the effect that the holders of such debt
securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred. Such opinion of counsel, in the case of defeasance, will be
required to refer to and be based upon a ruling received from or published by
the Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of the indenture. In the event of such defeasance, the
holders of such debt securities would be able to look only to such trust fund
for payment of principal, any premium (or make-whole amount), and interest.
15
When we use the term "government obligations," we mean securities that are:
- direct obligations of the United States or the government that issued the
foreign currency in which the debt securities of a particular series are
payable, for the payment of which its full faith and credit is pledged; or
- obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States or other government that
issued the foreign currency in which the debt securities of such series
are payable, the payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States or such other government,
which are not callable or redeemable at the option of the issuer thereof
and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such government obligation or a
specific payment of interest on or principal of any such government
obligation held by such custodian for the account of the holder of a
depository receipt. However, except as required by law, such custodian is
not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the government obligation or the specific payment of interest
on or principal of the government obligation evidenced by such depository
receipt.
Unless otherwise provided in the applicable prospectus supplement, if after
we have deposited funds and/or government obligations to effect defeasance or
covenant defeasance with respect to debt securities of any series, (a) the
holder of a debt security of such series is entitled to, and does, elect under
the terms of the applicable indenture or the terms of such debt security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such debt security, or
(b) a conversion event occurs in respect of the currency, currency unit or
composite currency in which such deposit has been made, the indebtedness
represented by such debt security will be deemed to have been, and will be,
fully discharged and satisfied through the payment of the principal of, and
premium (or make-whole amount) and interest on, such debt security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such debt security into the currency, currency unit or composite
currency in which such debt security becomes payable as a result of such
election or such cessation of usage based on the applicable market exchange
rate.
When we use the term "conversion event," we mean the cessation of use of:
- a currency, currency unit or composite currency both by the government of
the country that issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within
the international banking community;
- the European Currency Unit both within the European Monetary System and
for the settlement of transactions by public institutions of or within the
European Communities; or
- any currency unit or composite currency other than the European Currency
Unit for the purposes for which it was established.
Unless otherwise provided in the applicable prospectus supplement, all
payments of principal of, and any premium (or make-whole amount) and interest
on, any debt security that is payable in a foreign currency that ceases to be
used by its government of issuance shall be made in United States dollars.
In the event that (a) we effect covenant defeasance with respect to any debt
securities and (b) such debt securities are declared due and payable because of
the occurrence of any event of default, the amount in such currency, currency
unit or composite currency in which such debt securities are payable, and
government obligations on deposit with the applicable trustee, will be
sufficient to pay amounts due on such debt securities at the time of their
stated maturity but may not be sufficient to pay
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amounts due on such debt securities at the time of the acceleration resulting
from such event of default. However, we would remain liable to make payments of
such amounts due at the time of acceleration. Notwithstanding the first sentence
of this paragraph, events of default in (b) above shall not include the event of
default described in (1) the fourth bullet point under "Description of the Debt
Securities--Events of default, notice and waiver" with respect to specified
sections of an indenture or (2) the seventh bullet point under "Description of
the Debt Securities--Events of default, notice and waiver" with respect to any
other covenant as to which there has been covenant defeasance.
The applicable prospectus supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the debt securities are
convertible into common stock or preferred stock will be set forth in the
applicable prospectus supplement. The terms will include whether the debt
securities are convertible into shares of common stock or preferred stock, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at our option or the option of the
holders, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of the debt
securities and any restrictions on conversion.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depository identified in the applicable prospectus supplement relating to
such series. Global securities, if any, issued in the United States are expected
to be deposited with The Depository Trust Company, or DTC, as depository. We may
issue global securities in either registered or bearer form and in either
temporary or permanent form. We will describe the specific terms of the
depository arrangement with respect to a series of debt securities in the
applicable prospectus supplement relating to such series. We expect that unless
the applicable prospectus supplement provides otherwise, the following
provisions will apply to depository arrangements.
Once a global security is issued, the depository for such global security or
its nominee will credit on its book-entry registration and transfer system the
respective principal amounts of the individual debt securities represented by
such global security to the accounts of participants that have accounts with
such depository. Such accounts shall be designated by the underwriters, dealers
or agents with respect to such debt securities or by us if we offer such debt
securities directly. Ownership of beneficial interests in such global security
will be limited to participants with the depository or persons that may hold
interests through those participants.
We expect that, under procedures established by DTC, ownership of beneficial
interests in any global security for which DTC is the depository will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to beneficial interests of
participants with the depository) and records of participants (with respect to
beneficial interests of persons who hold through participants with the
depository). Neither we nor the trustee will have any responsibility or
liability for any aspect of the records of DTC or for maintaining, supervising
or reviewing any records of DTC or any of its participants relating to
beneficial ownership interests in the debt securities. The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
own, pledge or transfer beneficial interest in a global security.
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So long as the depository for a global security or its nominee is the
registered owner of such global security, such depository or such nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by the global security for all purposes under the
applicable indenture. Except as described below or in the applicable prospectus
supplement, owners of beneficial interest in a global security will not be
entitled to have any of the individual debt securities represented by such
global security registered in their names, will not receive or be entitled to
receive physical delivery of any such debt securities in definitive form and
will not be considered the owners or holders thereof under the applicable
indenture. Beneficial owners of debt securities evidenced by a global security
will not be considered the owners or holders thereof under the applicable
indenture for any purpose, including with respect to the giving of any
direction, instructions or approvals to the trustee under the indenture.
Accordingly, each person owning a beneficial interest in a global security with
respect to which DTC is the depository must rely on the procedures of DTC and,
if such person is not a participant with the depository, on the procedures of
the participant through which such person owns its interests, to exercise any
rights of a holder under the applicable indenture. We understand that, under
existing industry practice, if DTC requests any action of holders or if an owner
of a beneficial interest in a global security desires to give or take any action
which a holder is entitled to give or take under the applicable indenture, DTC
would authorize the participants holding the relevant beneficial interest to
give or take such action, and such participants would authorize beneficial
owners through such participants to give or take such actions or would otherwise
act upon the instructions of beneficial owners holding through them.
Payments of principal of, and any premium (or make-whole amount) and
interest on, individual debt securities represented by a global security
registered in the name of a depository or its nominee will be made to or at the
direction of the depository or its nominee, as the case may be, as the
registered owner of the global security under the applicable indenture. Under
the terms of the applicable indenture, we and the trustee may treat the persons
in whose name debt securities, including a global security, are registered as
the owners thereof for the purpose of receiving such payments. Consequently,
neither we nor the trustee have or will have any responsibility or liability for
the payment of such amounts to beneficial owners of debt securities including
principal, any premium (or make-whole amount) or interest. We believe, however,
that it is currently the policy of DTC to immediately credit the accounts of
relevant participants with such payments, in amounts proportionate to their
respective holdings of beneficial interests in the relevant global security as
shown on the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in such global security held
through such participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in street name, and will be the
responsibility of such participants. Redemption notices with respect to any debt
securities represented by a global security will be sent to the depository or
its nominee. If less than all of the debt securities of any series are to be
redeemed, we expect the depository to determine the amount of the interest of
each participant in such debt securities to be redeemed to be determined by lot.
Neither we, the trustee, any paying agent nor the security registrar for such
debt securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global security for such debt securities or for maintaining any
records with respect thereto.
Neither we nor the trustee will be liable for any delay by the holders of a
global security or the depository in identifying the beneficial owners of debt
securities, and we and the trustee may conclusively rely on, and will be
protected in relying on, instructions from the holder of a global security or
the depository for all purposes. The rules applicable to DTC and its
participants are on file with the SEC.
If a depository for any debt securities is at any time unwilling, unable or
ineligible to continue as depository and we do not appoint a successor
depository within 90 days, we will issue individual debt
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securities in exchange for the global security representing such debt
securities. In addition, we may at any time and in our sole discretion, subject
to any limitations described in the prospectus supplement relating to such debt
securities, determine not to have any of such debt securities represented by one
or more global securities and in such event will issue individual debt
securities in exchange for the global security or securities representing such
debt securities. Individual debt securities so issued will be issued in
denominations of $1,000 and integral multiples of $1,000.
The debt securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities that will be deposited with a
depository, or with a nominee for such depository, identified in the applicable
prospectus supplement. Any such bearer global securities may be issued in
temporary or permanent form. The specific terms and procedures, including the
specific terms of the depository arrangement, with respect to any portion of a
series of debt securities to be represented by one or more bearer global
securities will be described in the applicable prospectus supplement.
NO RECOURSE
There is no recourse under any obligation, covenant or agreement in the
applicable indenture or with respect to any security against any of our or our
successor's past, present or future stockholders, employees, officers or
directors.
DESCRIPTION OF PREFERRED STOCK
The following is a description of the material terms and provisions of our
preferred stock. It may not contain all of the information that is important to
you. Therefore, you should read our charter and bylaws before you purchase any
shares of our preferred stock.
GENERAL
Under our charter, we are authorized to issue 5,000,000 shares of preferred
stock, par value $.01 per share, all of which is currently undesignated. As of
December 3, 2001, no shares of preferred stock were issued and outstanding.
Shares of preferred stock may be issued from time to time, in one or more
series, as authorized by our board of directors. Prior to the issuance of shares
of each series, the board of directors is required by the Delaware General
Corporation Law and our charter to fix, for each series, the designations,
powers and preferences and the relative, participating, optional or other
special rights of the shares of each series and any qualifications, limitations
and restrictions thereof, as are permitted by Delaware law. Our board of
directors could authorize the issuance of shares of preferred stock with terms
and conditions that could have the effect of discouraging a takeover or other
transactions that holders of common stock might believe to be in their best
interests or in which holders of some, or a majority, of the shares of common
stock might receive a premium for their shares over the then market price of
such shares of common stock.
TERMS
You should refer to the prospectus supplement relating to the offering of a
series of preferred stock for the specific terms of that series, including:
- the distinctive serial designation and the number of shares constituting
such series;
- the dividend rates or the amount of dividends to be paid on the shares of
such series, whether dividends shall be cumulative and, if so, from which
date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
- the voting powers, full or limited, if any, of the shares of such series;
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- whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
- the amount or amounts payable upon the shares of such series and any
preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the company;
- whether the shares of such series shall be entitled to the benefit of a
sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of
its application, including the price or prices at which such shares may be
redeemed or purchased through the application of such fund;
- whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the company
and, if so convertible or exchangeable, the conversion price or prices, or
the rate or rates of exchange, and the adjustments thereof, if any, at
which such conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
- the price or other consideration for which the shares of such series shall
be issued;
- whether the shares of such series which are redeemed or converted shall
have the status of authorized but unissued shares of undesignated
preferred stock (or series thereof) and whether such shares may be
reissued as shares of the same or any other class or series of stock; and
- such other powers, preferences, rights, qualifications, limitations and
restrictions thereof as the board of directors may deem advisable.
RANK
Unless otherwise specified in the applicable prospectus supplement, the
preferred stock will, with respect to dividend rights and rights upon a
liquidation, dissolution or winding up of our affairs, rank:
- senior to all classes or series of our common stock, and to all equity
securities ranking junior to such preferred stock with respect to dividend
rights or rights upon liquidation, dissolution or winding up of our
affairs;
- on parity with all equity securities issued by us, the terms of which
specifically provide that such equity securities rank on parity with the
preferred stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of our affairs; and
- junior to all equity securities issued by us, the terms of which
specifically provide that such equity securities rank senior to the
preferred stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of our affairs.
The term "equity securities" does not include convertible debt securities.
DIVIDENDS
Holders of the preferred stock of each series will be entitled to receive
cash dividends when, as and if declared by our board of directors. We will pay
dividends out of assets that are legally available for payment of dividends. We
will specify the rate(s) of dividends and the dates that we will pay dividends
in the applicable prospectus supplement. Dividends will be payable to holders of
record as they appear on our stock transfer books on such record dates as fixed
by our board of directors.
Dividends on any series of the preferred stock may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement. If our board of directors fails to declare a
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dividend payable on a dividend payment date on any series of the preferred stock
for which dividends are non-cumulative, then the holders of that series of the
preferred stock will have no right to receive a dividend in respect of the
dividend period ending on that dividend payment date. Accordingly, we will have
no obligation to pay the dividend accrued for that period, whether or not
dividends on that series are declared payable on any future dividend payment
date.
If preferred stock of any series is outstanding, we will not declare, pay or
set aside funds to pay dividends on any other series of our capital stock
ranking, as to dividends, on parity with or junior to the preferred stock of
such series for any period unless:
- if that series of preferred stock has a cumulative dividend, we have
declared and paid or contemporaneously declare and pay or set aside funds
to pay full cumulative dividends on the preferred stock of such series for
all past dividend periods and the then current dividend period; or
- if that series of preferred stock does not have a cumulative dividend, we
have declared and paid or contemporaneously declare and pay or set aside
funds to pay full dividends on the preferred stock of such series for the
then current dividend period.
We must declare all dividends pro rata on all series of preferred stock that
rank on parity with the series of preferred stock upon which we paid dividends
if we did not pay or set aside funds to pay dividends on the series of preferred
stock in full. We must declare dividends pro rata to ensure that the amount of
dividends declared per share of preferred stock bears in all cases the same
ratio that accrued dividends per share of preferred stock bears to each other.
We will not accumulate unpaid dividends for prior dividend periods with respect
to accrued dividends on preferred stock that does not have cumulative dividends.
No interest, or sum of money in lieu of interest, will be payable in respect of
any payments that may be in arrears.
Except as provided in the immediately preceding paragraph, unless:
- such series of preferred stock has a cumulative dividend, and we have
declared and paid or contemporaneously declare and pay or set aside funds
to pay full cumulative dividends for all past dividend periods and the
then current dividend period; or
- such series of preferred stock does not have a cumulative dividend, and we
have declared and paid or contemporaneously declare and pay or set aside
funds to pay full dividends for the then current dividend period,
we will not: (1) declare, pay or set aside funds to pay dividends or declare or
make any other distribution upon the common stock or any other shares of our
stock ranking junior to or on parity with the preferred stock of such series as
to dividends or upon liquidation; (2) redeem, purchase or otherwise acquire for
any consideration any common stock, or any other shares of our stock ranking
junior to or on parity with the preferred stock of such series as to dividends;
nor (3) pay any monies to or make any monies available for a sinking fund to
redeem any such shares, except by conversion into or exchange for other shares
of our capital stock ranking junior to the preferred stock of such series as to
dividends or liquidation. Notwithstanding the preceding sentence, we may declare
or set aside dividends in common stock or other shares of capital stock ranking
junior to the preferred stock of such series as to dividends and upon
liquidation.
Any dividend payment we make on a series of preferred stock shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
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REDEMPTION
If so provided in the applicable prospectus supplement, the preferred stock
will be subject to mandatory redemption or redemption at our option, in whole or
in part, upon the terms, at the times and at the redemption prices set forth in
such prospectus supplement.
The prospectus supplement relating to a series of preferred stock that is
subject to mandatory redemption will specify the number of shares that will be
redeemed in each year commencing after a specified date at a specified
redemption price per share, together with an amount equal to all accrued and
unpaid dividends thereon to the date of redemption. Unless the shares have a
cumulative dividend, such accrued dividends will not include any accumulation in
respect of unpaid dividends for prior dividend periods. We may pay the
redemption price in cash or other property, as specified in the applicable
prospectus supplement. If the redemption price for preferred stock of any series
is payable only from the net proceeds of the issuance of shares of our capital
stock, the terms of such preferred stock may provide that, if no such shares of
our capital stock have been issued or to the extent the net proceeds from any
issuance are insufficient to pay in full the aggregate redemption price then
due, such preferred stock will automatically and mandatorily convert into the
applicable shares of our capital stock under the conversion provisions specified
in the applicable prospectus supplement.
Notwithstanding the foregoing, we will not redeem any preferred stock of a
series unless:
- if that series of preferred stock has a cumulative dividend, we have
declared and paid or contemporaneously declare and pay or set aside funds
to pay full cumulative dividends on the preferred stock for the past and
current dividend periods; or
- if that series of preferred stock does not have a cumulative dividend, we
have declared and paid or contemporaneously declare and pay or set aside
funds to pay full dividends on the preferred stock for the current
dividend period.
However, in no case will we redeem any preferred stock of a series unless we
redeem all outstanding preferred stock of such series simultaneously.
In addition, we will not acquire any preferred stock of a series unless:
- if that series of preferred stock has a cumulative dividend, we have
declared and paid or contemporaneously declare and pay or set aside funds
to pay full cumulative dividends on all outstanding shares of such series
of preferred stock for all past dividend periods and the then current
dividend period; or
- if that series of preferred stock does not have a cumulative dividend, we
have declared and paid or contemporaneously declare and pay or set aside
funds to pay full dividends on the preferred stock of such series for the
then current dividend period.
However, at any time we may purchase or acquire preferred stock of that
series (1) in accordance with a purchase or exchange offer made on the same
terms to holders of all outstanding preferred stock of such series or (2) by
conversion into or exchange for shares of our capital stock ranking junior to
the preferred stock of such series as to dividends and upon liquidation.
If fewer than all of the outstanding shares of preferred stock of any series
are to be redeemed, we will determine the number of shares that may be redeemed
pro rata from the holders of record of such shares in proportion to the number
of such shares held or for which redemption is requested by such holder or by
any other equitable manner that we determine. Such determination will reflect
adjustments to avoid redemption of fractional shares.
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We will mail notice of redemption at least 30 days but not more than
60 days before the redemption date to each holder of record of preferred stock
to be redeemed at the address shown on our stock transfer books. Each notice
shall state:
- the redemption date;
- the number of shares and series to be redeemed;
- the redemption price;
- the place or places where certificates are to be surrendered for payment
of the redemption price;
- that dividends on the shares to be redeemed will cease to accrue on such
redemption date;
- the date upon which the holder's conversion rights, if any, as to such
shares shall terminate; and
- the specific number of shares to be redeemed from each such holder if
fewer than all the shares of any series are to be redeemed.
If notice of redemption has been given and we have set aside the funds
necessary for such redemption in trust for the benefit of the holders of any
shares so called for redemption, then from and after the redemption date,
dividends will cease to accrue on such shares, and all rights of the holders of
such shares will terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
our affairs, then, before we make any distribution or payment to the holders of
any common stock or any other class or series of our capital stock ranking
junior to the preferred stock in the distribution of assets upon any
liquidation, dissolution or winding up of our affairs, the holders of each
series of preferred stock will be entitled to receive, out of assets legally
available for distribution to stockholders, liquidating distributions in the
amount of the liquidation preference per share set forth in the applicable
prospectus supplement, plus any accrued and unpaid dividends thereon. Such
dividends will not include any accumulation in respect of unpaid noncumulative
dividends for prior dividend periods. After full payment of their liquidating
distributions, holders will have no right or claim to any of our remaining
assets. Upon any such voluntary or involuntary liquidation, dissolution or
winding up, if our available assets are insufficient to pay the amount of the
liquidating distributions on all outstanding preferred stock and the
corresponding amounts payable on all other classes or series of our capital
stock ranking on parity with the preferred stock in the distribution of assets,
then the holders of the preferred stock and all other such classes or series of
capital stock will share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be entitled.
Upon liquidation, dissolution or winding up and if we have made liquidating
distributions in full to all holders of preferred stock, we will distribute our
remaining assets among the holders of any other classes or series of capital
stock ranking junior to the preferred stock according to their respective rights
and preferences and, in each case, according to their respective number of
shares. For such purposes, our consolidation or merger with or into any other
corporation, trust or entity, or the sale, lease or conveyance of all or
substantially all of our assets or business will not be deemed to constitute a
liquidation, dissolution or winding up of our affairs.
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VOTING RIGHTS
Holders of preferred stock will have no voting rights, except as described
in the next paragraph, as otherwise from time to time required by law or as
indicated in the applicable prospectus supplement.
Unless otherwise provided for any series of preferred stock, so long as any
preferred stock of a series remains outstanding, we will not, without the
affirmative vote or consent of the holders of at least two-thirds of the
preferred stock of such series outstanding at the time, given in person or by
proxy, either in writing or at a meeting with each of such series voting
separately as a class:
- authorize or create, or increase the authorized or issued amount of, any
class or series of shares of capital stock ranking senior to such series
of preferred stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, or
reclassify any of our authorized shares of capital stock into such shares,
or create, authorize or issue any obligation or security convertible into
or evidencing the right to purchase any such shares; or
- amend, alter or repeal the provisions of our charter or the amendment to
our charter designating the terms for such series of preferred stock,
whether by merger, consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such
series of preferred stock or the holders thereof.
Notwithstanding the preceding bullet point, if the preferred stock remains
outstanding with the terms thereof materially unchanged, the occurrence of any
of the events described above shall not be deemed to materially and adversely
affect the rights, preferences, privileges or voting power of holders of
preferred stock, even if upon the occurrence of such an event we may not be the
surviving entity. In addition, any increase in the amount of (1) authorized
preferred stock or the creation or issuance of any other series of preferred
stock, or (2) authorized shares of such series or any other series of preferred
stock, in each case ranking on a parity with or junior to the preferred stock of
such series with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up, shall not be deemed to materially
and adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required will be
effected, we have redeemed or called for redemption all outstanding shares of
such series of preferred stock and, if called for redemption, have deposited
sufficient funds in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions upon which any series of preferred stock is
convertible into common stock will be set forth in the applicable prospectus
supplement relating to the offering of such series of preferred stock. Such
terms will include the number of shares of common stock into which the shares of
preferred stock are convertible, the conversion price, rate or manner of
calculation thereof, the conversion period, provisions as to whether conversion
will be at our option or at the holders' option, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption.
TRANSFER AGENT
The transfer agent and registrar for the preferred stock will be set forth
in the applicable prospectus supplement.
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DESCRIPTION OF COMMON STOCK
The following is a description of the material terms and provisions of our
common stock. It may not contain all the information that is important to you.
Therefore, you should read our charter and bylaws before you purchase any shares
of our common stock.
GENERAL
Under our charter, we have authority to issue 80,000,000 shares of common
stock, par value $.01 per share, and 3,000,000 shares of Class B common stock,
par value $.01 per share. Under Delaware law, stockholders generally are not
responsible for our debts or obligations. As of December 3, 2001, we had
22,201,453 shares of common stock, and no shares of Class B common stock,
respectively, issued and outstanding. Our common stock is listed on the NYSE
under the symbol "AMG."
DIVIDENDS
Subject to the preferential rights of any other class or series of stock,
holders of shares of our common stock and Class B common stock will be entitled
to receive dividends out of assets that we may legally use to pay dividends, if
and when they are authorized and declared by our board of directors, with each
share of common stock and each share of Class B common stock sharing equally in
such dividends with each share of Class B common stock being equal to the number
of shares of common stock into which it would then be convertible. If dividends
are declared which are payable in shares of common stock or shares of Class B
common stock, dividends shall be declared which are payable at the same rate in
both classes of stock and the dividends payable in shares of common stock shall
be payable to the holders of shares of common stock, and the dividends payable
in shares of Class B common stock shall be payable to the holders of shares of
Class B common stock.
VOTING RIGHTS
Except as otherwise required by law and except as provided by the terms of
any other class or series of stock, holders of common stock have the exclusive
power to vote on all matters presented to our stockholders, including the
election of directors. Holders of common stock are entitled to one vote per
share. There is no cumulative voting in the election of our directors, which
means that, subject to any rights to elect directors that are granted to the
holders of any class or series of preferred stock, a plurality of the votes cast
at a meeting of stockholders at which a quorum is present is sufficient to elect
a director.
To the extent the holders of Class B common stock are entitled to vote under
our charter or applicable law, such holders shall vote together as a single
class with the holders of common stock, except as required by law.
LIQUIDATION/DISSOLUTION RIGHTS
Subject to the preferential rights of any other class or series of stock,
holders of shares of our common stock and Class B common stock share in the same
proportion as our other stockholders in the assets that we may legally use to
pay distributions in the event we are liquidated, dissolved or our affairs are
wound up after we pay or make adequate provision for all of our known debts and
liabilities with each share of Class B common stock being equal to the number of
shares of common stock into which it would then be convertible.
OTHER RIGHTS
Subject to the preferential rights of any other class or series of stock,
all shares of our common stock have equal dividend, distribution, liquidation
and other rights, and have no preference, appraisal
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or exchange rights. Furthermore, holders of shares of our common stock have no
conversion, sinking fund or redemption rights, or preemptive rights to subscribe
for any of our securities, other than the limited conversion rights afforded to
the holders of our Class B common stock which are described below.
Under Delaware law, a corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding a
majority of the shares entitled to vote on the matter, unless a different
percentage is set forth in the corporation's charter, which percentage shall not
in any event be less than a majority of all of the shares entitled to vote on
such matter. Our charter provides that whenever any vote of the holders of
voting stock is required to amend or repeal any provision of the charter, then
in addition to any other vote of the holders of voting stock that is required by
the charter or bylaw, the affirmative vote of the holders of a majority of our
outstanding shares of stock entitled to vote on such amendment or repeal, voting
together as a single class, is required. However, with respect to the amendment
or repeal of any of the provisions of our charter relating to stockholder action
without an annual or special meeting, the election, term or removal of
directors, vacancies on the board of directors, and the limitation of liability
of directors and officers, the affirmative vote of the holders of at least
eighty percent (80%) of the outstanding shares entitled to vote on such
amendment or repeal, voting together as a single class, shall be required.
RIGHTS OF CLASS B COMMON STOCK
The holders of our Class B common stock generally have the same rights and
privileges as holders of our common stock, except that holders of Class B common
stock do not have any voting rights other than those which may be provided by
applicable law. Each share of Class B common stock is convertible, at the option
of the holder, into one share of common stock if such share of Class B common
stock is to be distributed, disposed of or sold by the holder in connection with
any sale; provided, that such conversion is not inconsistent with any
regulation, rule or other requirement of any governmental authority applicable
to the holder.
TRANSFER AGENT
The transfer agent and registrar for the common stock is Mellon Investor
Services.
DESCRIPTION OF THE STOCK PURCHASE CONTRACTS
AND THE STOCK PURCHASE UNITS
We may issue stock purchase contracts representing contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of our common stock (or a range of numbers of shares pursuant to a
predetermined formula) at a future date or dates. The price per share of common
stock and the number of shares of common stock may be fixed at the time the
stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of units,
often known as stock purchase units, consisting of a stock purchase contract and
either:
- our debt securities; or
- debt obligations of third parties, including U.S. Treasury securities;
securing the holders' obligations to purchase the common stock under the stock
purchase contracts.
26
The stock purchase contracts may require us to make periodic payments to the
holders of the stock purchase units or vice versa, and such payments may be
unsecured or prefunded on some basis. The stock purchase contracts may require
holders to secure their obligations in a specified manner and in certain
circumstances we may deliver newly issued prepaid stock purchase contracts,
often known as prepaid securities, upon release to a holder of any collateral
securing such holder's obligations under the original stock purchase contract.
The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units, and, if applicable, prepaid
securities. The description in the applicable prospectus supplement will not
contain all of the information that you may find useful. For more information,
you should review the stock purchase contracts, the collateral arrangements and
depositary arrangements, if applicable, the prepaid securities and the document
contracts or stock purchase units and, if applicable, the prepaid securities and
the document pursuant to which the prepaid securities will be issued. These
documents will be filed with the SEC promptly after the offering of the stock
purchase contracts or stock purchase units. Material United States federal
income tax consideration applicable to the stock purchase contracts and the
stock purchase units will also be discussed in the applicable prospectus
supplement.
HOW WE PLAN TO OFFER AND SELL THE SECURITIES
We may sell the securities in any one or more of the following ways:
- directly to investors;
- to investors through agents;
- to dealers;
- through underwriting syndicates led by one or more managing underwriters;
and
- through one or more underwriters acting alone.
Any underwritten offering may be on a best efforts or a firm commitment
basis. We may also make direct sales through subscription rights distributed to
our stockholders on a pro rata basis, which may or may not be transferable. In
any distribution of subscription rights to stockholders, if all of the
underlying securities are not subscribed for, we may then sell the unsubscribed
securities directly to third parties or may engage the services of one or more
underwriters, dealers or agents, including standby underwriters, to sell the
unsubscribed securities to third parties.
The distribution of the securities may be effected from time to time in one
or more transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
Any of the prices may represent a discount from the prevailing market prices.
In the sale of the securities, underwriters or agents may receive
compensation from us or from purchasers of the securities, for whom they may act
as agents, in the form of discounts, concessions or commissions. Underwriters
may sell the securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
the securities may be deemed to be underwriters under the Securities Act of
1933, and any discounts or commissions they receive from us and any profit on
the
27
resale of securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. The applicable prospectus
supplement will, where applicable:
- identify any such underwriter or agent;
- describe any compensation in the form of discounts, concessions,
commissions or otherwise received from us by each such underwriter or
agent and in the aggregate to all underwriters and agents;
- identify the amounts underwritten; and
- identify the nature of the underwriter's obligation to take the
securities.
Unless otherwise specified in the related prospectus supplement, each series
of securities will be a new issue with no established trading market, other than
the common stock which is listed on the NYSE. Any common stock sold pursuant to
a prospectus supplement will be listed on the NYSE, subject to official notice
of issuance. We may elect to list any series of debt securities or preferred
stock, respectively, on an exchange, but we are not obligated to do so. It is
possible that one or more underwriters may make a market in a series of
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. Therefore, no
assurance can be given as to the liquidity of, or the trading market for, any
series of debt securities or preferred stock.
Until the distribution of the securities is completed, rules of the SEC may
limit the ability of any underwriters and selling group members to bid for and
purchase the securities. As an exception to these rules, underwriters are
permitted to engage in some transactions that stabilize the price of the
securities. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the securities.
If any underwriters create a short position in the securities in an offering
in which they sell more securities than are set forth on the cover page of the
applicable prospectus supplement, the underwriters may reduce that short
position by purchasing the securities in the open market.
The lead underwriters may also impose a penalty bid on other underwriters
and selling group members participating in an offering. This means that if the
lead underwriters purchase securities in the open market to reduce the
underwriters' short position or to stabilize the price of the securities, they
may reclaim the amount of any selling concession from the underwriters and
selling group members who sold those securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security before the distribution is completed.
We do not make any representation or prediction as to the direction or
magnitude of any effect that the transactions described above might have on the
price of the securities. In addition, we do not make any representation that
underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Under agreements into which we may enter, underwriters, dealers and agents
who participate in the distribution of the securities may be entitled to
indemnification by us against some liabilities, including liabilities under the
Securities Act.
Underwriters, dealers and agents may engage in transactions with us, perform
services for us or be our tenants in the ordinary course of business.
28
If indicated in the applicable prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by
particular institutions to purchase securities from us at the public offering
price set forth in such prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on the date or dates stated in such
prospectus supplement. Each delayed delivery contract will be for an amount no
less than, and the aggregate principal amounts of securities sold under delayed
delivery contracts shall be not less nor more than, the respective amounts
stated in the applicable prospectus supplement. Institutions with which such
contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but will in all cases be subject to our
approval. The obligations of any purchaser under any such contract will be
subject to the conditions that (a) the purchase of the securities shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which the purchaser is subject, and (b) if the securities are
being sold to underwriters, we shall have sold to the underwriters the total
principal amount of the securities less the principal amount thereof covered by
the contracts. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
To comply with applicable state securities laws, the securities offered by
this prospectus will be sold, if necessary, in such jurisdictions only through
registered or licensed brokers or dealers. In addition, securities may not be
sold in some states unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K, for the year ended December 31,
2000, have been so incorporated in reliance upon the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
LEGAL OPINIONS
The validity of the securities we are offering will be passed upon for us by
Goodwin Procter LLP, Boston, Massachusetts.
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8,000,000 FELINE PRIDES(SM)
(INITIALLY CONSISTING OF 8,000,000 INCOME PRIDES(SM))
[LOGO]
AFFILIATED MANAGERS GROUP, INC.
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
DECEMBER 18, 2001
"FELINE PRIDES", "Income PRIDES" and "Growth PRIDES" are service marks of
Merrill Lynch & Co., Inc.
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