Document:

Exhibit 10.4

 

EXECUTION COPY

 

PLEDGE AND SECURITY
AGREEMENT

 

PLEDGE AND
SECURITY AGREEMENT dated as of August 30, 2004 made by Affiliated Managers
Group, Inc., a Delaware corporation (the “Pledgor”),
to The Bank of New York, as agent (together with any successor agent, the “Agent”) for the Bridge Lenders (as defined
below) (the Agent and the Bridge Lenders, collectively, the “Secured Parties”).

 

RECITALS

 

(1)           The Pledgor has consummated its offer
to purchase for cash any and all of its outstanding 6% Senior Notes due 2006,
originally issued by the Pledgor as a constituent of the Income PRIDES (the “Senior Notes”), by purchasing all of the
Senior Notes tendered pursuant to the terms thereof (such offer to purchase,
the “Tender Offer”).  Pursuant to the terms of the Tender Offer,
$50,744,135.04 of the cash payable to tendering holders of such Senior Notes
has been used to purchase principal strips of U.S. Treasury securities with the
CUSIP No. 912803AB9 (all such purchased U.S. Treasury securities, the “Treasury Strips”).  Upon consummation of the Tender Offer, the
Pledgor issued Growth PRIDES, CUSIP No. 008252603 (the “Growth PRIDES”), to the tendering holders
of such Senior Notes that were not previously separated from the related Income
PRIDES, which securities consist of (a) Purchase Contracts (as such term is
defined the Purchase Contract Agreement, dated as of December 21, 2001 (such
agreement, as amended, supplemented or otherwise modified in accordance with
its terms from time to time, the “Purchase
Contract Agreement”)), between the Pledgor and The Bank of New York
(as successor purchase contract agent pursuant to the Instrument of
Resignation, Appointment and Acceptance dated January 15, 2003 among the
Company, Wachovia Bank, National Association, and The Bank of New York (the “Instrument of Registration”)), as purchase
contract agent thereunder (The Bank of New York in such capacity, the “Purchase Contract Agent” and such Purchase
Contracts, the “Growth PRIDES Purchase
Contracts”), and (b) that number of Treasury Strips comprising the
amount required to be delivered to release the Senior Notes from the pledge
arrangement under the Income PRIDES (such Treasury Strips, the “Conveyed Securities”).  Pursuant to the terms of the Purchase
Contract Agreement, the Conveyed Securities are subject to the security
interest granted to the Pledgor under the Pledge Agreement, dated as of
December 21, 2001 (as amended, supplemented or otherwise modified in accordance
with its terms from time to time, the “Holders
Pledge Agreement”), between the Pledgor and The Bank of New York (as
successor collateral agent, custodial agent, securities intermediary and
Purchase Contract Agent pursuant to the Instrument of Resignation), as
collateral agent, custodial agent, securities intermediary and purchase
contract agent thereunder, which security interest in the Conveyed Securities
secures, inter alia, the payment
and performance of the Growth PRIDES Purchase Contracts.

 

(2)           Pursuant to the Pledge Agreement, the
Pledgor has security entitlements (the “Pledged
Security Entitlements”) with respect to financial assets (the “Pledged Financial Assets”) (a) that consist
of all cash and other property credited from time to time to Pledgor’s account,
account no. 293629, maintained in the name “The Bank of New York, as agent, for
the secured parties under the Pledge Agreement dated as of August 30, 2004 made
by Affiliated

 

 

Managers Group, Inc.” (such
account and any successor securities accounts thereto, the “Pledgor’s Securities Account”), with BNY at
its office at 101 Barclay Street, Fl. 8W, New York, New York, and (b) that
consist of the Conveyed Securities and all cash and other property paid or
otherwise delivered in respect thereof and credited from time to time to the
account maintained on behalf of the holders of Growth PRIDES, account no.
293627 in the name “The Bank of New York, as Purchase Contract Agent on behalf
of the holders of certain securities of Affiliated Managers Group, Inc.,
Collateral Account subject to the security interest of The Bank of New York, as
Collateral Agent, for the benefit of Affiliated Managers Group, Inc., as
pledgee” (such account and any successor securities accounts thereto, the “PRIDES  Securities
Account”, and together with the Pledgor’s Securities Account, the “Securities Accounts” and each a “Securities Account”), with BNY at its
office at 101 Barclay Street, Fl. 8W, New York, New York.

 

(3)           The Pledgor is entering into a Credit
Agreement, dated as of the date hereof (said agreement, as it may hereafter be
amended, amended and restated, supplemented or otherwise modified from time to
time, the “Bridge Loan Agreement”),
among the Pledgor, as borrower, the Agent, as administrative agent, and the
other lenders from time to time parties thereto (collectively, the “Bridge Lenders”).  Pursuant to the Bridge Loan Agreement, the Bridge Lenders have
agreed to make loans and otherwise extend credit to the Pledgor, the proceeds
of which loans may be used by the Pledgor to finance or refinance the purchase
by the Pledgor of the Senior Notes pursuant to the Tender Offer.  It is a condition precedent to the Bridge
Lenders making any loans or otherwise extending any credit to the Pledgor that
the Pledgor execute and deliver to the Agent this Agreement for the benefit of the
Secured Parties.

 

(5)           Unless otherwise defined in this
Agreement, terms defined in Article 8 or 9 of the Uniform Commercial Code in
effect in the State of New York (the “UCC”)
and/or the Federal Book Entry Regulations (as defined below) are used in this
Agreement as such terms are defined in such Article 8 or 9 and/or the Federal
Book Entry Regulations.  The term
“Federal Book Entry Regulations” means (a) the federal regulations contained in
Subpart B (“Treasury/Reserve Automated Debt Entry System (TRADES)”) governing
book-entry securities consisting of U.S. Treasury bonds, notes, bills and other
securities (as defined therein) and Subpart D (“Additional Provisions”) of 31
C.F.R Part 357, 31 C.F.R. §357.2, §357.10 through § 357.14 and §357.44 and (b)
to the extent substantially identical to the federal regulations referred to in
clause (a) above (as in effect from time to time), the federal regulations
governing other book-entry securities.

 

NOW,
THEREFORE, in consideration of the premises contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

Section
1.  Grant of Security.  The Pledgor hereby assigns and pledges to
the Agent for the ratable benefit of the Secured Parties, and hereby grants to
the Agent for the ratable benefit of the Secured Parties a security interest
in, the Pledgor’s right, title and interest in and to the following, in each
case whether now owned or hereafter acquired by the Pledgor and whether now or
hereafter existing or arising (collectively, the “Collateral”):

 

(a)         the Securities
Accounts, the Pledged Security Entitlements with respect to the Pledged
Financial Assets from time to time credited to any Securities Account, and all

 

2

 

interest, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Pledged Security
Entitlements or such Pledged Financial Assets;

 

(b)        all accounts, payment
intangibles and other general intangibles of the Pledgor arising in respect of
the Growth PRIDES Purchase Contracts;

 

(c)         the following rights
and claims under and with respect to each of the Purchase Contract Agreement
and the Holders Pledge Agreement (collectively, the “Assigned Agreements”) and the Growth PRIDES Purchase
Contracts: (i) all rights of the Pledgor to receive moneys due and to become
due under or pursuant to the Assigned Agreements and the Growth PRIDES Purchase
Contracts, (ii) all rights of the Pledgor to receive proceeds of any indemnity,
warranty or guaranty, (iii) all claims of the Pledgor for damages arising out
of or for breach of or default under the Assigned Agreements and the Growth
PRIDES Purchase Contracts, and (iv) the right of the Pledgor to compel
performance and otherwise exercise all remedies under the Assigned Agreements
and the Growth PRIDES Purchase Contracts, in the case of each of subclauses (i)
through (iv) with respect to the Assigned Agreements, solely with respect to
the Collateral described in the preceding clauses (a) and (b);

 

(d)        all proceeds of any and
all of the Collateral (including, without limitation, proceeds that constitute
property of the types described in clauses (a) through (c) of this Section 1
and this clause (d)) and, to the extent not otherwise included, all (i)
payments with respect to any of the foregoing Collateral and (ii) cash received
in respect of any of the foregoing Collateral; provided that the
inclusion of such proceeds in the Collateral shall not be deemed to be a
consent by the Secured Parties to any sale or other disposition of any
Collateral not otherwise specifically permitted or contemplated by the terms
hereof or of the other Loan Documents.

 

Notwithstanding anything to the
contrary herein, the security interest granted under this Section 1 is subject
to the terms of the Assigned Agreements and the Growth PRIDES Purchase
Contracts, including, without limitation, Article V of the Purchase Contract
Agreement.

 

Section
2.  Security for Obligations.  This Agreement secures the payment and
performance of all Obligations (as defined below) now or hereafter existing,
whether direct or indirect, absolute or contingent, and whether for principal,
reimbursement obligations, interest, fees, premiums, penalties,
indemnifications, contract causes of action, costs, expenses or otherwise.  For the purposes of this Agreement, “Obligations” shall mean, (a) the full and
prompt payment when due (whether at the stated maturity, by acceleration or
otherwise) of all obligations of the Pledgor now existing or hereafter incurred
under, arising out of or in connection with the Bridge Loan Agreement, the
promissory note(s) issued by the Pledgor thereunder, and each other agreement,
instrument and document delivered thereunder or in connection therewith
(collectively, the “Loan Documents”)
and the due performance and compliance by the Pledgor with the terms of each
such Loan Document; (b) any and all sums advanced by the Agent in order to
preserve the Collateral or to preserve its security interest in the Collateral;
(c) in the event of any proceeding for the collection or enforcement of any
obligations or liabilities, after an Event of Default (as defined below) shall
have occurred and be continuing, the reasonable expenses of holding, preparing
for sale, selling or otherwise disposing of or

 

3

 

realizing on the Collateral, or of any
exercise by the Agent of its rights hereunder, together with reasonable
attorneys’ fees and court costs; and (d) all amounts paid by any indemnitee as
to which such indemnitee has the right to reimbursement under this Agreement.

 

Section
3.  Delivery and Control of
Collateral.  With respect to any
Collateral in which the Pledgor has any right, title or interest and that
constitutes a security entitlement (including, without limitation, the Pledged
Securities Entitlements), the Pledgor will cause the securities intermediary
with respect to such security entitlement either (i) to identify in its records
the Agent as the entitlement holder of such security entitlement against such
securities intermediary or (ii) to agree in writing with the Pledgor and the
Agent that such securities intermediary will comply with entitlement orders
originated by the Agent without further consent of the Pledgor, such agreement
to be in substantially the form of Exhibit A hereto or otherwise in form and
substance satisfactory to the Agent (such agreement being a “Control Agreement”).

 

Section
4.  Representations and Warranties.  The Pledgor represents and warrants as
follows:

 

(a)         The Pledgor is the
legal and beneficial owner of the Collateral (other than the interests of the
holders of Growth PRIDES in the Treasury Strips credited to the PRIDES
Securities Account) free and clear of any Lien, claim, option or right of
others, except for the security interest created under this Agreement and the
Liens created thereon pursuant to the Holders Pledge Agreement.  No effective financing statement or other
instrument similar in effect covering all or any part of such Collateral or
listing the Pledgor as debtor is on file in any recording office, except such
as may have been filed in favor of the Agent relating to the Loan Documents or
as otherwise relating to the Liens created thereon pursuant to the Holders
Pledge Agreement.

 

(b)        The Assigned
Agreements, true and complete copies of which have been furnished to the Agent,
and the Growth PRIDES Purchase Contracts have been duly authorized, executed
and delivered by all parties thereto, have not been amended, amended and
restated, supplemented or otherwise modified except as evidenced by such copies
so furnished, are in full force and effect and are binding upon and enforceable
against all parties thereto in accordance with their terms.  There exists no default under any Assigned
Agreement or Growth PRIDES Purchase Contract by any party thereto.

 

(c)         All of the investment
property constituting Pledged Financial Assets in which the Pledgor has or will
have any interest are and will be maintained in the Securities Accounts.

 

(d)        All filings and other
actions necessary or desirable to perfect and protect the security interest in
the Collateral created under this Agreement have been duly made or taken and
are in full force and effect, and this Agreement creates in favor of the Agent
for the benefit of the Secured Parties a valid and, together with such filings
and other actions, perfected first priority security interest in the Collateral
securing the Obligations.

 

(e)         No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other third party is required for (i)

 

4

 

the grant by the Pledgor of the assignment,
pledge and security interest granted hereunder or for the execution, delivery
or performance of this Agreement by the Pledgor, (ii) the perfection or
maintenance of the assignment, pledge and security interest created hereunder
(including the first priority nature of such assignment, pledge or security
interest), or (iii) for the exercise by the Agent of its voting or other rights
provided for in this Agreement or the remedies in respect of the Collateral pursuant
to this Agreement, except as may be required in connection with the disposition
of any portion of the Collateral by laws affecting the offering and sale of
securities generally.

 

(f)            As of the date hereof:

 

(i)            The exact legal
name of the Pledgor, as such name appears on its certificate of incorporation,
is “Affiliated Managers Group, Inc.” and the Pledgor had no other legal name
within the past five years.

 

(ii)           The Pledgor has not
changed its identity or corporate structure in any way within the past five
years, including by merger, consolidation or acquisition and any change in its
form, nature or jurisdiction of organization.

 

(iii)          The Pledgor (and no
division or other business unit of the Pledgor) has not used any name other
than as set forth in Section 4(f)(i) (including trade names or similar
appellations) in connection with the conduct of its business or the ownership
of its properties at any time during the past five years.

 

(iv)          The Organizational
Identification Number, if any, issued by the jurisdiction of incorporation of
the Pledgor is: 2365895.

 

(v)           The chief executive
office of the Pledgor is located at the address at: 600 Hale Street, Prides
Crossing, Massachusetts  01965, and the
Pledgor does not maintain any books or records relating to any Collateral at
any other location.

 

Section 5.  Assigned
Agreements and Growth PRIDES Purchase Contracts.

 

(a)         The Pledgor will at
its expense:

 

(i)            perform and observe
all terms and provisions of the Assigned Agreements and the Growth PRIDES Purchase
Contracts to be performed or observed by it, maintain the Assigned Agreements
and the Growth PRIDES Purchase Contracts in full force and effect, enforce the
Assigned Agreements and the Growth PRIDES Purchase Contracts in accordance with
the terms thereof and take all such action to such end as may be requested from
time to time by the Agent; and

 

(ii)           furnish to the
Agent promptly upon receipt thereof copies of all notices, requests and other
documents received by it under or pursuant to the Assigned Agreements and the
Growth PRIDES Purchase Contracts, and from time to time (A) furnish to the
Agent such information and reports regarding the Assigned Agreements and the
Growth PRIDES Purchase Contracts as the Agent may reasonably request and (B)
upon request of the Agent, make to each other party to any Assigned

 

5

 

Agreement or
any holder of any Growth PRIDES Purchase Contract such demands and requests for
information and reports or for action as the Pledgor is entitled to make
thereunder.

 

(b)        The Pledgor agrees that
it will not:

 

(i)            cancel or terminate
any Assigned Agreement or any Growth PRIDES Purchase Contract or consent to or
accept any cancellation or termination thereof other than in accordance with the
terms of such Assigned Agreement or the Growth PRIDES Purchase Contracts;

 

(ii)           amend, amend and
restate, supplement or otherwise modify any Assigned Agreement or any Growth
PRIDES Purchase Contract or give any consent, waiver or approval thereunder if
the same would materially and adversely affect the security interest granted
hereunder, or the other interests hereunder of the Agent and the other Secured
Parties hereunder;

 

(iii)          waive any default
under or breach of any Assigned Agreement or any Growth PRIDES Purchase
Contract without the prior written consent of the Agent; or

 

(iv)          take any other
action in connection with any Assigned Agreement or any Growth PRIDES Purchase
Contract that would impair the value of the interests or rights of the Pledgor thereunder
or that would impair the interests or rights of any Secured Party.

 

Section 6.  Further
Assurances; Authorization to File Financing Statements.

 

(a)         The Pledgor agrees
that from time to time, at its expense, the Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Agent may reasonably request,
in order to perfect and protect any pledge, assignment or security interest
granted or purported to be granted by the Pledgor hereunder or to enable the
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.

 

(b)        The Pledgor hereby
authorizes the Agent to file one or more financing or continuation statements,
and amendments thereto, relating to all or any part of the Collateral of the
Pledgor without the signature of the Pledgor where permitted by law.

 

Section
7.  Transfers and Other Liens;
Additional Shares.  The Pledgor
agrees that it will not (a) sell, assign or otherwise dispose of, or grant any
option with respect to, any of the Collateral, other than the conveyance of the
Treasury Strips in accordance with the terms hereof and of the Purchase
Contract Agreement and the Holders Pledge Agreement; or (b) create or suffer to
exist any Lien upon or with respect to any of the Collateral except for the
pledge, assignment and security interest created under this Agreement and Liens
arising under the Holders Pledge Agreement.

 

Section
8.  Agent May Perform.  If the Pledgor fails to perform or observe
any of the terms, conditions, covenant and agreements to be observed or
performed by it hereunder, the

 

6

 

Agent may do the same or cause it to be done
or performed or observed, either in its name or in the name and on behalf of
the Pledgor or take such other action, as the Agent deems reasonably necessary
to protect the security interest granted hereunder in the Collateral or to
protect the value thereof and the Pledgor hereby authorizes the Agent to do so,
but without any obligation to do so and without notice, itself perform, or
cause performance of, such agreement, and the expenses of the Agent incurred in
connection therewith shall be payable by the Pledgor under Section 11(b)
hereof.

 

Section 9.  The Agent’s
Duties.  The powers conferred on the
Agent hereunder are solely to protect the Secured Parties’ interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.  Except for the obligation to use reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as to
any Collateral, as to ascertaining or taking action with respect to exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
any Secured Party has or is deemed to have knowledge of such matters, or as to
the taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral. 
The Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which it accords its own
property.

 

Section
10.  Remedies.  If any “Event of Default” (as such term is
defined under the Bridge Loan Agreement) (each, an “Event of Default”) shall have occurred and be continuing:

 

(a)         The Agent may exercise
in respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of a
secured party upon default under the UCC (whether or not the UCC applies to the
affected Collateral) and also may:  (i)
without notice except as specified below sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Agent’s
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Agent may deem commercially
reasonable; and (ii) exercise any and all rights and remedies of the Pledgor
under or in connection with the Assigned Agreements, the Growth PRIDES Purchase
Contracts or otherwise in respect of the Collateral.  The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days’ notice to the Pledgor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  The
Agent shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given.  The
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.  Notwithstanding anything in this Agreement
to the contrary, the Agent may not take any action with respect to any
Collateral that the Pledgor is not entitled to take with respect to such
Collateral, and prior to being required to take any action hereunder, the
Pledgor shall be entitled to receive written notice of such request, and, at
its expense, to obtain advice of counsel satisfactory to it that any such
action to be taken by it pursuant to the Agent’s request is permitted under the
terms of the Growth PRIDES Purchase Contracts, the Assigned Agreements and/or
any other indenture, agreement, instrument or document relating thereto.

 

7

 

(b)        Any cash held by or on
behalf of the Agent and all cash proceeds received by or on behalf of the Agent
in respect of any sale of, collection from, or other realization upon all or
any part of the Collateral shall, at any time after payment of any amounts
payable to the Agent pursuant to Section 11 hereof, be applied by the Agent for
the ratable benefit of the Secured Parties against all or any part of the
Obligations, as provided herein.

 

(c)         All payments received
by the Pledgor under or in connection with any Growth PRIDES Purchase Contract,
any Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the Agent in the same
form as so received (with any necessary endorsement), to the Agent’s account
no.
[                       ],
ABA#[                       ],
in the name of the Agent, maintained at its office located at One Wall Street,
New York, NY 10286, Attn: Diane Scott, or such other account(s) as the Agent
may instruct by written notice delivered in accordance with Section 14 hereof.

 

Section 11.  Indemnity and
Expenses.

 

(a)         The Pledgor agrees to
indemnify, defend and save and hold harmless each Secured Party, each of their
respective affiliates and the respective officers, directors, employees, agents
and advisors of the foregoing (each, an “Indemnified
Party”) from and against, and shall pay on demand, any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except to the extent such claim, damage, loss,
liability or expense is found in a final, non appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party’s gross
negligence or willful misconduct.

 

(b)        The Pledgor will pay to
the Agent upon demand the amount of any and all reasonable expenses, including,
without limitation, the reasonable fees and expenses of its counsel and of any
experts and agents, that the Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of the
Agent and/or the other Secured Parties hereunder or (iv) the failure by the
Pledgor to perform or observe any provision hereof.

 

(c)         The Pledgor hereby
authorizes the Secured Parties, if and to the extent any amount payable by the
Pledgor under the Bridge Loan Agreement is not otherwise paid when due, to
charge such amount against any or all of the Bank Accounts of the Pledgor with
the Secured Parties or any of its Affiliates, with the Pledgor remaining liable
for any deficiency.

 

(d)        Except as otherwise provided
herein, the Agent may exercise its rights and remedies under the Security
Documents (i) without resistance or interference by the Pledgor, (ii) without
payment of any kind to the Pledgor and (iii) for the account, and at the
expense, of the Pledgor.

 

8

 

(e)         The Pledgor waives (i)
the right to assert in any action or proceeding between it and the Secured
Parties any offsets or counterclaims that it may have, and (ii) all rights to
the marshalling of assets.

 

Section
12.  Amendments; Waivers; Etc.  None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Pledgor and the Agent (or, to the extent
required by the Bridge Loan Agreement, the required number or percentage of the
Bridge Lenders, as applicable).  Unless
otherwise specified in such waiver, a waiver of any right under this Agreement
shall be effective only in the specific instance and for the specific purpose
for which given.  No election not to
exercise, failure to exercise or delay in exercising any right, nor any course
of dealing or performance, shall operate as a waiver of any right of the Agent
under this Agreement or applicable law, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or
the exercise of any other right of the Agent under this Agreement or applicable
law.

 

Section
13.  Payments; Application of
Collateral.  All payments made hereunder
to the Agent or any other Secured Party, including, without limitation, the
application of proceeds of the Collateral and any of it, shall be applied by
the Agent against payment of the Obligations as provided in the Bridge Loan
Agreement, and if not expressly provided therein, in the sole judgment and
discretion of the Agent.

 

Section
14.  Notices; Etc.  All notices and other communications
provided for hereunder shall be in writing (including facsimile) and mailed,
sent by facsimile or delivered to any party, addressed to it at its address set
forth opposite its name on the signature pages hereto or, as to any party, at
such other address as shall be designated by such party in a written notice to
the other parties.  All such notices and
other communications shall be effective five Business Days after being
deposited in the U.S. mails, postage prepaid, when sent by facsimile and
electronic confirmation of receipt is received (except that any notice received
during non-business hours shall be deemed received at the next time the
relevant location of the recipient if open for business) or when delivered (or
delivery is refused), in each case addressed as aforesaid, provided that
notices and other communications to the Agent shall not be effective until received
by the Agent.

 

Section
15.  Release; Termination.  Upon the payment in full in cash of the
Obligations, the pledge, assignment and security interest granted hereunder
shall terminate and all rights to the Collateral shall revert to the Pledgor.  Upon any such termination, the Agent will,
at the Pledgor’s expense, promptly execute and deliver to the Pledgor such
documents as the Pledgor shall reasonably request to evidence such
termination.  The Pledgor shall have no
authority to file termination, release or other amendments to financing
statements without specific written authorization from the Agent.

 

Section
16.  Obligations Absolute.  The obligations of the Pledgor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) subject to the terms of the Purchase Contracts, including, as
provided in Section 5.7 of the Purchase Contract Agreement, any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or the like of any other Person; (b) any exercise or non-exercise, or any

 

9

 

waiver of, any right, remedy, power or
privilege under or in respect of this Agreement or any other Loan Document; or
(c) any amendment to or modification of any Loan Document or any security for
any of the Obligations whether or not the Pledgor shall have notice or
knowledge of any of the foregoing.

 

Section
17.  Execution in Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.  Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of an original executed counterpart of this
Agreement.  Delivery by facsimile of an
executed counterpart of any amendment or waiver of any provision of this
Agreement shall be effective as delivery of an original executed counterpart
thereof.

 

Section
18.  Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.

 

Section
19.  WAIVER OF JURY TRIAL; VENUE.  EACH OF THE AGENT, THE PLEDGOR AND (BY
ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT) EACH OTHER SECURED PARTY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT, OR ANY OTHER DOCUMENTS CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING, WITHOUT
LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT OR ACTION OF
THE AGENT OR ANY OTHER SECURED PARTY RELATING TO THE ADMINISTRATION OF OR
ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS CONTEMPLATED
HEREBY, AND AGREES THAT NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  EXCEPT AS PROHIBITED BY LAW, THE PLEDGOR
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY
SPECIAL, INDIRECT, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. 
THE PLEDGOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
AGENT OR ANY OTHER SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
THE AGENT OR ANY OTHER SECURED PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER. 
THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE AGENT AND THE
OTHER SECURED PARTIES TO ENTER INTO THIS AGREEMENT.  THE PLEDGOR AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH of MANHATTAN, NEW YORK
AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON THE PLEDGORS, BY MAIL AT THE ADDRESS
SPECIFIED PURSUANT TO IN SECTION 14. 
THE PLEDGOR HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR

 

10

 

HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT
OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.

 

Section
20.  Entire Agreement.  This Agreement embodies the entire agreement
among the Pledgor, the Agent and the other Secured Parties relating to the
subject matter hereof and supersedes all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.

 

Section
21.  Successors and Assigns.  All of the provisions of this Agreement
shall be binding on and inure to the benefit of the parties thereto and their
respective successors and assigns.

 

11

 

IN WITNESS
WHEREOF, each the Pledgor and the Agent has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.

 

	
  Address for
  Notices:

  	
  AFFILIATED MANAGERS GROUP, INC.,

  as Pledgor

  
	
   

  	
   

  	
   

  
	
  Attention:  Chief Financial Officer

  	
   

  	
   

  
	
  600 Hale
  Street

  	
  By:

  	
  /s/JOHN
  KINGSTON, III

  
	
  Prides
  Crossing, MA  01965

  	
   

  	
  John
  Kingston, III

  
	
   

  	
   

  	
  Senior Vice
  President, General Counsel and

  Secretary

  

 

 

	
  Address for
  Notices:

  	
   

  	
  THE BANK OF
  NEW YORK, as Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/DIANE H.
  SCOTT

  
	
   

  	
   

  	
   

  	
  Name:  Diane H. Scott

  
	
   

  	
   

  	
   

  	
  Title:  Vice President

  

 

 

With a copy to:

 

THE BANK OF NEW YORK

 

101 Barclay Street, F1, 8W

New York, NY  10286

Attn: Kisha HolderExhibit 10.3a

 

FORM OF
 
OPTION AGREEMENT
 
Between
 
The Estee Lauder Companies Inc.
 
And
 
[Name of Optionee]
 
and dated as of              ,       
 
The within OPTION AGREEMENT dated as of              ,                        ,               (the “Grant Date”) provides for the granting of options by The Estee Lauder Companies Inc., a Delaware corporation (the “Company”), to [name of optionee], an employee of the Company (the “Employee”) to purchase shares of the Company’s Class A Common Stock, par value $.01 per share (the “Shares”), on the terms and subject to the conditions hereinafter provided.
 
The stock options to be granted pursuant hereto shall not be Incentive Stock Options as defined in Section 422A of the Internal Revenue Code of 1986, as amended.
 
1.                                       NUMBER OF SHARES.  The Company hereby awards to the Employee options to purchase           Shares (the “Stock Options”).
 
2.                                       EXERCISE PRICE.   For the Stock Options granted hereunder, the per-share exercise price shall be           United States dollars (US$          ), the price at which the shares last traded on the New York Stock Exchange on the Grant Date.
 
3.                                       PAYMENT OF EXERCISE PRICE. The Stock Option exercise price may be paid in cash, by the delivery of shares of Class A Common Stock of the Company then owned by the Employee, or by a combination of these methods.  Payment may also be made by delivering a properly executed  exercise  notice to the Company  together  with a copy of  irrevocable  instructions  to a broker to deliver  promptly to the Company the amount of sale
 
1

 
or loan  proceeds to pay the exercise  price.  The Company may prescribe  any other  method of paying the exercise  price  that  it  determines  to be  consistent  with  applicable  law, including,  without  limitation,  in lieu of the  exercise of a Stock  Option by delivery of shares of Class A Common  Stock of the  Company  then  owned by the Executive,  providing  the Company with a notarized  statement  attesting to the number of shares owned, where upon verification by the Company,  the Company may issue to the  Employee only the  number  of  incremental  shares  to which the Executive is entitled upon exercise of the Stock Options.  In determining which methods the Employee may utilize to pay the exercise price, the Company may consider such factors as it determines are appropriate.
 
4.                                       EXERCISE PERIOD.  Stock Options granted hereunder shall be exercisable as set forth below:
 
shall be exercisable as of January 1,      
 
shall be exercisable as of January 1,       
 
shall be exercisable as of January 1,       
 
Subject to the last sentence of this Paragraph 4, no Stock Option awarded hereunder shall be exercisable later than ten years after the date it is awarded.  The Stock Option awarded hereunder shall not be transferable otherwise then by will or the laws of descent and distribution, and shall be exercisable during the Employee’s lifetime only by the Employee.  In the event of the Employee’s death, each Stock Option awarded but unexercised as of the date of death shall become immediately exercisable, and may be exercised for a period commencing as of the day after the date of death and continuing for one year thereafter.
 
5.                                       POST-EMPLOYMENT EXERCISES. The exercise of any Stock Option after termination of the Employee’s employment with the Company shall be subject to satisfaction of the conditions precedent that the Employee  neither (i)  competes  with,  or takes other  employment  with or renders  services to a competitor of, the Company,  its subsidiaries or affiliates  without the written consent  of the  Company,  nor  (ii)  conducts himself  in a  manner  adversely affecting the Company.
 
2

 
6.                                       ADJUSTMENT PROVISIONS; CHANGE IN CONTROL.
 
(a)                                  If  there  shall  be any  change  in the  Class A Common  Stock of the Company,  through  merger,  consolidation,  reorganization, recapitalization,  stock dividend,  stock split,  reverse stock split, split up, spinoff,  combination of shares,  exchange of shares,  dividend in kind or other like  change in capital  structure  or  distribution  (other  than  normal  cash dividends) to all holders of Class A Common Stock of the Company,  an adjustment shall be made to each outstanding  Stock Option such that each such Stock Option shall thereafter be exercisable for such securities,  cash and/or other property as would have been  received in respect of the Class A Common  Stock subject to such Stock Option had it been exercised in full immediately prior to such change or distribution, and such an adjustment shall be made successively each time any such  change  shall  occur.  In  addition,  in the  event of any such  change or distribution,  in order to prevent  dilution or enlargement  of the  Executive’s rights  hereunder,  the Company will have  authority to adjust,  in an equitable manner,  the number and kind of shares  that may be issued  with  respect to any Stock Option  hereunder,  the number and kind of shares  subject to  outstanding Stock Options,  the exercise price applicable to outstanding Stock Options, and the Market Value of the Class A Common  Stock and other  value  determinations applicable to outstanding  Stock Options.  Appropriate adjustments may also be made by the Company in the terms of any Stock Options to reflect such changes or distributions and to modify any other terms of outstanding Stock Options on an equitable basis. In addition,  the Company is authorized to make adjustments to the  terms and  conditions  of Stock  Options,  in  recognition  of  unusual  or nonrecurring  events  affecting the Company or the  financial  statements of the Company,  or  in  response  to  changes  in  applicable  laws,  regulations,  or accounting principles.
 
(b)                                 Notwithstanding any other provision hereunder, if there is a “Change in Control” (as hereinafter defined) of the Company, all then outstanding Stock Options shall immediately become exercisable. For purposes of this Section 6(b), a “Change in Control” of the Company shall be deemed to have occurred upon any of the following events:
 
3

 
(i)                                     A change in control of the direction and administration of the Company’s business of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); or
 
(ii)                                  During any period of two (2) consecutive  years, the  individuals  who at the beginning of such period  constitute  the Company’s Board of Directors or any  individuals  who would be “Continuing  Directors” (as hereinafter  defined)  cease for any  reason to  constitute  at least a majority thereof; or
 
(iii)                               The Company’s Class A Common Stock shall cease to be publicly traded; or
 
(iv)                              The Company’s Board of Directors shall approve a sale  of all  or  substantially  all of the  assets  of the  Company,  and  such transaction shall have been consummated; or
 
(v)                                 The Company’s Board of Directors shall approve any merger, consolidation, or like business combination or reorganization of the Company, the consummation of which would result in the occurrence of any event described in Section 6(b)(ii) or (b)(iii) above, and such transaction shall have been consummated.
 
Notwithstanding  the  foregoing,  (A) changes in the relative beneficial  ownership  among members of the Lauder family and  family-controlled entities  shall  not,  by  themselves,  constitute  a Change in  Control  of the Company,  (B) any  spin-off  of a division or  subsidiary  of the Company to its stockholders  and (C) any event listed in clauses (i) through (v) above that the Board of  Directors  determines  not to be a Change in Control  of the  Company, shall not constitute a Change in Control of the Company.
 
For purposes of this Section 6(b), “Continuing Directors” shall mean (x) the directors of the Company in office on the date that shares of the Company’s Class A Common Stock are first offered for sale to the public and (y) any successor to any such director
 
4

 
and any additional director who after such date was nominated or selected by a majority of the Continuing Directors in office at the time of his or her nomination or selection.
 
The Company, in its discretion,  may determine that, upon the occurrence of a Change in Control of the Company,  each Stock Option outstanding hereunder shall terminate  within a specified number of days after notice to the Executive,  and the Executive shall receive,  with  respect  to each share of Class A Common  Stock  subject to such Stock  Option,  an amount equal to the excess of the Market Value of such shares of Common Stock  immediately  prior to the  occurrence of such Change in Control over the  exercise  price  per share of such  Stock  Option;  such  amount to be payable in cash, in one or more kinds of property  (including  the property,  if any, payable in the transaction) or in a combination thereof, as the Company, in its  discretion,  shall  determine.  The  provisions  contained in the preceding sentence shall be inapplicable to any Stock Option awarded  hereunder within six (6) months  before the  occurrence  of a Change in Control if the  Executive  is subject to the reporting  requirements  of Section 16(c) of the Exchange Act and no exception from liability under Section 16(b) of the Exchange Act is otherwise available to the Executive.
 
7.                                       WITHHOLDING.  All payments or distributions of Stock Options  made  hereunder  shall be net of any  amounts  required  to be withheld pursuant to applicable  Federal,  state and local tax withholding  requirements.  The Company may require the  Executive  to remit to it an amount  sufficient  to satisfy  such  tax  withholding  requirements  prior  to  the  delivery  of  any certificates  for such Class A Common Stock.  The Company may, in its discretion and subject to such rules as it may adopt  (including  any as may be required to satisfy  applicable  tax and/or  non-tax  regulatory  requirements),  permit the Executive  to pay all or a portion of the federal,  state and local  withholding taxes  arising  in  connection  with any Stock  Option by  electing  to have the Company  withhold  shares of Class A Common Stock having a Market Value equal to the amount of tax to be  withheld,  such tax  calculated  at rates  required  by statute or regulation.
 
8.                                       TENURE.  The Executive’s right to continue to serve the Company or any of its subsidiaries as an officer, employee, or
 
5

 
otherwise, shall not be enlarged or otherwise affected by his award hereunder.
 
9.                                       INVESTMENT REPRESENTATION AND RELATED MATTERS.  The Executive hereby represents that Stock Options awarded hereunder are being acquired for investment purposes and not for sale or with a view to distribution thereof. The Executive hereby acknowledges that as of the date hereof there does not exist a Registration  Statement on an appropriate  form under the Securities Act and applicable  state securities laws that has become effective and includes a  prospectus  which is current  with  respect to shares of Class A Common Stock subject  to  Stock  Options  awarded  hereunder.   Accordingly,   the  Executive acknowledges  and agrees that any subsequent  offer for sale or sale of any such shares  of  Class  A  Common  Stock  shall  be  made  either  pursuant  to (i) a Registration  Statement on appropriate  form under the Securities Act and, where applicable,  state  securities  laws,  which  Registration  Statement shall have become  effective  and shall be  current  with  respect to the shares of Class A Common  Stock being  offered  and sold,  or (ii) a specific  exemption  from the registration  requirements  of the Securities Act and any applicable  securities laws, but in claiming such exemption,  the Executive  shall,  prior to any offer for sale or sale of such shares,  obtain a favorable written opinion of counsel, in form  and  substance  satisfactory  to  counsel  for the  Company,  as to the applicability of such exemption.
 
The  Executive  agrees that the  Company  shall have the authority to endorse  upon the  certificate  or  certificates  representing  the Shares acquired  hereunder such legends referring to the foregoing  restrictions and any other applicable restrictions, as it may deem appropriate.
 
10.                                 NOTICES. Any notice required or permitted under this Option  Agreement  shall  be  deemed  to have  been  duly  given  if  delivered, telecopied or mailed, certified or registered mail, return receipt requested to the  Employee at such address as the Company shall maintain for the Employee or its personnel records.
 
11.                                 FAILURE TO ENFORCE NOT A WAIVER.  The failure of the Company to enforce at any time any provision of this agreement
 
6

 
shall in no manner be construed to be a waiver of such provision or of any other provision hereof.
 
12.                                 GOVERNING LAW.  This Option Agreement shall be governed by and construed according to the laws of the State of New York, applicable to agreements made and performed in that state.
 
13.                                 PARTIAL INVALIDITY.  The invalidity or illegality of any provision herein shall not be deemed to affect the validity of any other provision.
 
IN WITNESS WHEREOF, the Company has executed this Option Agreement in duplicate on the date and year first above written.
 
 

	 
	THE ESTEE LAUDER COMPANIES INC.

	 
	 

	 
	By:

	 
	 

	 
	Name:

	 
	 

	 
	Title:

 
 
The undersigned hereby accepts, and agrees to, all terms and provisions of the foregoing Option Agreement.
 
 
[Name]
 
7

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