Skyline Asset Management Agreement

PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE COMMISSION.


SKYLINE ASSET MANAGEMENT, L.P.
(A DELAWARE LIMITED PARTNERSHIP)


AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT


AUGUST 31, 1995 2


SKYLINE ASSET MANAGEMENT, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT


TABLE OF CONTENTS


Page
---- ARTICLE I - DEFINITIONS.............................................................................1
Section 1.1 Definitions......................................................................1


ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS....................................................8
Section 2.1 Continuation of Partnership......................................................8
Section 2.2 Name of the Partnership..........................................................8
Section 2.3 Purposes of the Partnership......................................................9
Section 2.4 Place of Business; Registered Agent..............................................9
Section 2.5 Duration of the Partnership......................................................9
Section 2.6 Title to Property................................................................9
Section 2.7 Liability of Partners; No Deficit Restoration Obligation........................10
Section 2.8 Exculpation of Liability........................................................10
Section 2.9 Indemnification.................................................................10
Section 2.10 Fiscal Year.....................................................................11


ARTICLE III - MANAGEMENT OF THE PARTNERSHIP........................................................11
Section 3.1 Management in General...........................................................11
Section 3.2 Officers of the Partnership and Mandatory Retirement............................12
Section 3.3 Operation of the Business of the Partnership....................................13
Section 3.4 Compensation and Expenses of the Partner........................................15
Section 3.5 Other Business of the General Partner and its Affiliates........................15
Section 3.6 Non Solicitation and Non Disclosure by Limited Partners and Employee
Stockholders....................................................................15
Section 3.7 Remedies Upon Breach............................................................17
Section 3.8 Repurchase Upon Termination of Employment.......................................17
Section 3.9 Puts............................................................................20
Section 3.10 Exchange Rights of Limited Partners of the Partnership..........................22
Section 3.11 No Employment Obligation........................................................22
Section 3.12 Miscellaneous...................................................................22


ARTICLE IV - REGISTRATION RIGHTS...................................................................23
Section 4.1. Piggy-back Registrations........................................................23
Section 4.2. Registrable Securities..........................................................23
Section 4.3. Further Obligations of AMG......................................................23
Section 4.4. Registration Expenses...........................................................24
Section 4.5. Indemnification; Contribution...................................................24
Section 4.6. Limitations.....................................................................25
Section 4.7. Limitation of Registration Rights...............................................26


(i) 3
Page
---- ARTICLE V - CAPITAL CONTRIBUTIONS; DISTRIBUTIONS CAPITAL ACCOUNTS AND ALLO............................27
Section 5.1 Capital Contributions..............................................................27
Section 5.2 Capital Accounts; Allocations......................................................27
Section 5.3 Distributions......................................................................29
Section 5.4 Distributions Upon Liquidation; Establishment of a Reserve Upon
Liquidation........................................................................31
Section 5.5 Proceeds from the Sale of Securities; Insurance Proceeds; Certain Special
Allocations........................................................................31
Section 5.6 Federal Tax Allocations............................................................32


ARTICLE VI - TRANSFER OF PARTNERSHIP INTERESTS BY
LIMITED PARTNERS, ADMISSION OF ADDITIONAL PARTNERS,
REDEMPTION AND WITHDRAWAL........................................................................32
Section 6.1 Assignability of Interests.........................................................32
Section 6.2 Substitute Limited Partners........................................................34
Section 6.3 Allocation of Distributions Between Assignor and Assignee..........................34
Section 6.4 Redemptions and Withdrawals........................................................34
Section 6.5 Issuance of Additional Limited Partnership Interests; No Preemptive Rights.........35
Section 6.6 Representation of Partners.........................................................36


ARTICLE VII - TRANSFER OF PARTNERSHIP INTEREST BY GENERAL
PARTNER; REDEMPTION, REMOVAL AND WITHDRAWAL......................................................36
Section 7.1 Assignability of Interest..........................................................36
Section 7.2 Resignation, Redemption, and Withdrawal............................................37


ARTICLE VIII - DISSOLUTION AND TERMINATION............................................................37
Section 8.1 Events of Dissolution..............................................................37


ARTICLE IX - RECORDS AND REPORTS......................................................................38
Section 9.1 Books and Records..................................................................38
Section 9.2 Accounting.........................................................................38
Section 9.3 Financial Reports..................................................................39
Section 9.4 Budget Meetings....................................................................40
Section 9.5 Tax Matters........................................................................40


ARTICLE X - MISCELLANEOUS.............................................................................41
Section 10.1 Notices............................................................................41
Section 10.2 Successors and Assigns.............................................................41
Section 10.3 Amendments.........................................................................41


(ii) 4
Section 10.4 No Partition.......................................................................41
Section 10.5 No Waiver..........................................................................41
Section 10.6 Prior Agreements Superseded........................................................42
Section 10.7 Captions...........................................................................42
Section 10.8 Counterparts.......................................................................42
Section 10.9 Applicable Law.....................................................................42
Section 10.10 Singular and Plural................................................................42
Section 10.11 Creditors..........................................................................42


SCHEDULES AND EXHIBITS


Exhibit A Partners and Partnership Points


Exhibit B Form of Non Solicitation Agreement


Schedule 5.1(a) Assets contributed by Mesirow Asset Management, Inc.


(iii) 5
SKYLINE ASSET MANAGEMENT, L.P.


AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT


This Amended and Restated Limited Partnership Agreement (the "Agreement") is made and entered into as of ___________, 1995 (the "Effective Date"), by and among Affiliated Managers Group, Inc., a Delaware corporation ("AMG"), as general partner, and the limited partners named on Exhibit A hereto. AMG and any Person who succeeds AMG as general partner of the partnership is sometimes referred to herein as the "General Partner." The General Partner and the Limited Partners are sometimes herein referred to collectively as the "Partners" and individually as a "Partner."


This Agreement amends and completely restates that certain Limited Partnership Agreement of Skyline Asset Management, L.P. entered into as of June 6, 1995 by and among the Initial Limited Partners and Mesirow Asset Management, Inc.


FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, and in consideration of the mutual agreements hereinafter set forth, including, but not limited to, their capital contributions, the parties hereby agree as follows:


ARTICLE I - DEFINITIONS.


SECTION 1.1 DEFINITIONS. For purposes of this Agreement:


"Additional Limited Partner" shall have the meaning specified in Section 6.5.


"Advisers Act" shall mean the Investment Advisers Act of 1940, as it may be amended from time to time, and any successor to such Act.


"Affiliate" shall mean, with respect to any person or entity (herein the "first party"), any other person or entity that directly or indirectly controls, or is controlled by, or is under common control with, such first party. The term "control" as used herein (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to (a) vote twenty-five percent (25%) or more of the outstanding voting securities of such person or entity or (b) otherwise direct the management or policies of such person or entity by contract or otherwise. Notwithstanding the foregoing, no Limited Partner or Employee Stockholder shall be an Affiliate of the Partnership for purposes of this Agreement.


"Agreement" shall mean this Amended and Restated Limited Partnership Agreement, as it may from time to time be amended, supplemented or restated.


"AMG Stock" shall have the meaning specified in Section 3.10(a).


"Annual Put Limit" shall have the meaning specified in Section 3.9(b)(A). 6
"Asset Transfers" shall have the meaning specified in the Partnership Interest Purchase Agreement.


"Average Free Cash Flow" shall mean fifty percent (50%) of the Partnership's Free Cash Flow (net of Free Cash Flow Expenditures) for the twenty-four (24) month period ending on a date specified as the ending date for the calculation of Average Free Cash Flow; provided, however, that if any portion of such twenty-four (24) month period would precede the effective date of the Asset Transfers, then "Average Free Cash Flow" shall mean fifty percent (50%) of (a) the Partnership's Free Cash Flow for the period from the effective date of the Asset Transfers to the last day of such twenty-four (24) month period, plus (b) ********** percent (**%) of the revenues of the Institutional Business from investment management and advisory fees (determined on an accrual basis in accordance with generally accepted accounting principles, consistently applied) from the start of such twenty-four (24) month period to the effective date of the Asset Transfers.


"Bankruptcy Event" shall have the meaning specified in Section 3.8 hereof.


"Capital Account" shall mean the capital account maintained by the Partnership with respect to each Partner in accordance with the capital accounting rules described in Section 5.2 hereof.


"Capital Contribution" shall mean, as to each Partner, the amount of money and/or the agreed fair market value of any property (net of any liabilities encumbering such property that the Partnership is considered to assume or take subject to) contributed to the capital of the Partnership by such Partner.


"Carry-Over Put Limit" shall have the meaning specified in Section 3.9(b)(B) hereof.


"CEO" shall have the meaning specified in Section 3.2(a) hereof.


"Certificate of Limited Partnership"shall mean the certificate of limited partnership for the Partnership required under the Partnership Act, as such Certificate may be amended or restated from time to time.


"Code" or "Internal Revenue Code" shall mean the United States Internal Revenue Code of 1986, as from time to time amended, and any successor thereto, together with all regulations promulgated thereunder.


"Effective Date" shall have the meaning specified in the preamble of this Agreement.


"Employee Stockholder" shall mean that certain Officer and/or employee of the Partnership who is the owner of the issued and outstanding capital stock of a Limited Partner, and listed as such on Exhibit A hereto; provided, however, that if a Limited Partner is a natural person, the term Employee Stockholder shall refer to such natural person.


2 7
"Exercise Period" shall mean, with respect to any fiscal year, the period of thirty (30) calendar days following the last day on which the Partnership distributes to its Partners (promptly after receipt thereof from the Independent Public Accountants) the audited financial statements of the Partnership for such fiscal year; provided however that if AMG has completed a Registration and is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act of 1934, as amended, the period shall instead be the period of thirty (30) calendar days following the date on which the audited financial statements of AMG for such fiscal year are filed with the Securities and Exchange Commission pursuant to such reporting requirements.


"Fair Market Value" shall mean the fair market value as reasonably determined in good faith by the Board of Directors of the General Partner.


"For Cause" shall mean, with respect to the termination of an Employee Stockholder, any of the following:


(a) the Employee Stockholder either has committed an act of embezzlement or misappropriation against the Partnership or has (i) been convicted by a court of competent jurisdiction, (ii) pleaded nolo contendere or (iii) entered into a settlement with, or consented to the issuance of an order to be issued by, any Governmental Authority, which settlement or order involves any penalty, fine, admission of guilt or liability or other sanction, and which, in the case of (i), (ii) or (iii), occurs in connection with any proceeding involving (A) a violation of federal or state securities laws or (B) a theft or other crime involving dishonesty;


(b) the Employee Stockholder has persistently and willfully neglected his duties or has failed to spend sufficient amounts of his working time, energy and skills so as to perform diligently and faithfully his responsibilities and duties to the Partnership, after the Partnership has given the Employee Stockholder written notice specifying such conduct by the Employee Stockholder and giving the Employee Stockholder a reasonable period of time (not less than thirty (30) days), to conform his conduct to such duties; or


(c) The Employee Stockholder has engaged in Prohibited Competition Activity or violated or breached any material provision of his Non-Solicitation Agreement or engaged in any of the activities prohibited by Section 3.6 hereof, other than an isolated, insubstantial and inadvertent action which the Employee Stockholder does not take in bad faith and does remedy promptly (and, in any event, in not more than thirty (30) days) after receipt of notice of such action given by the Partnership.


"Free Cash Flow" shall mean, for any period, ********** percent (**%) of the Revenues From Operations of the Partnership for such period, provided that if the compensation arrangements with respect to Skyline Fund, a registered investment company for which the Partnership serves as investment adviser are changed to reduce the expenses of the Fund borne by the Partnership, then the percentage of Revenues from Operations that constitutes Free Cash Flow shall be increased so that after such became expenses, the net result for the Parties is unchanged.


"Free Cash Flow Expenditures" shall have the meaning specified in Section 3.3(c).


"General Partner" shall have the meaning specified in the preamble of this Agreement.


"Good Reason" with respect to any Employee Stockholder shall mean any action by the General Partner that results in a breach by the Partnership or the General Partner (x) of Section 2.4(c)(i) (change in principal office of the Partnership), Section 2.9 (indemnification) or Section 7.1(a)(iv) (certain transfers to Affiliates of the General Partner), (y) of the obligation to obtain a Majority Vote under any of the following Sections: 2.3(c), 2.7(c), 3.1(a) (only with respect to the last full sentence thereof), 5.3(b), 6.5(a), 6.5(b), 6.5(d), 7.1(a), 7.1(c), 7.2, 8.1(a)(i) or 10.3, or (z) of the obligation under either of the last two sentences of Section 10.3 to obtain the consent of the Limited Partner controlled by such Employee Stockholder; provided, however, that if (a) such breach is not the result of bad faith of the General Partner, (b) the General Partner in good faith investigates and, to the extent necessary to satisfy the provisions of clause (c) of this definition, remedies such breach reasonably promptly after receipt of notice of such breach given by such Employee Stockholder, and (c) either (i) such breach (after the effects of any remedy in accordance with the foregoing clause (b)) does not have a material adverse effect on the Employee Stockholder or the Partnership, or (ii) a Majority Vote (or, if applicable, consent of such Limited


3 8 Partner) is obtained where such breach resulted from the failure to obtain such vote or consent, then such breach shall not constitute Good Reason hereunder.


"Governmental Authority" shall mean any foreign, federal, state or local court, governmental authority, agency or regulatory body.


"Holders" shall have the meaning specified in Section 4.1.


"Immediate Family" shall mean the spouse, parents, grandparents, children and siblings of an individual.


"Independent Public Accountants" shall mean any independent certified public accountant satisfactory to the General Partner and retained by the Partnership.


"Initial Limited Partners" shall mean those Persons who are Limited Partners on the Effective Date.


"Institutional Business" shall have the meaning specified in Section 2.6 of the Partnership Interest Purchase Agreement.


"Investment Company Act" shall mean the Investment Company Act of 1940, as it may be amended from time to time, and any successor to such Act.


"Investment Management Services" shall mean any services which involve (a) the management, for a fee or other remuneration, of an investment account or fund (or portions thereof or a group of investment accounts or funds), or (b) the giving of advice, for a fee or other remuneration, with respect to the investment and/or reinvestment of assets or funds (or any group of assets or funds).


"IRS" shall mean the Internal Revenue Service of the United States Department of the Treasury.


"Limited Partner" shall mean any Person who is or becomes a Limited Partner pursuant to the terms hereof.


"Majority Vote" shall mean the affirmative approval by vote or written consent of Limited Partners holding a majority of the outstanding Vested Partnership Points then held by all Limited Partners (other than the General Partner and its Affiliates).


"Mandatory Retirement" shall mean, with respect to an Employee Stockholder, when that Employee Stockholder reaches age sixty-five (65); provided, however, that with the consent of the General Partner and a Majority Vote, Mandatory Retirement may be extended up to age sixty-eight (68) with respect to any particular Employee Stockholder.


"NASD" shall have the meaning specified in Section 4.4.


4 9
"Non Solicitation Agreement" shall mean a Non Solicitation/Non Disclosure Agreement in form of Exhibit B hereto or in such other form and substance as is satisfactory to the General Partner.


"Operating Cash Flow" shall mean, for any period, an amount equal to the difference between Revenues From Operations of the Partnership for such period and Free Cash Flow for such period.


"Partners" shall mean the General Partner and the Limited Partners, unless otherwise indicated.


"Partnership" shall mean the partnership organized under the Predecessor Agreement and continued under this Agreement, as the same may be amended and/or restated from time to time.


"Partnership Act" shall mean the Delaware Revised Uniform Limited Partnership Act (6 Del. C. Section 17-101 et seq.), as it may be amended from time to time, and any successor to such Act.


"Partnership Interests" shall mean the interests (including Capital Accounts and Partnership Points) of all the Partners in the Partnership.


"Partnership Interest Purchase Agreement" shall mean that certain Partnership Interest Purchase Agreement dated as of June 6, 1995, by and among the General Partner, the Partnership, Mesirow Asset Management, Inc., Mesirow Financial Holdings, Inc., certain managers of Mesirow Asset Management, Inc. and certain manager-owned corporations, as the same has been amended from time to time prior to the date hereof.


"Partnership Points" shall mean as of any date, with respect to a Partner, the aggregate number of Partnership Points (representing the right to receive certain distributions after the Effective Date) of such Partner (including both Vested Partnership Points and unvested Partnership Points) as set forth on Exhibit A hereto, as amended from time to time in accordance with its terms and the terms hereof, and as in effect on such date.


"Percentage Exchanged" shall have the meaning specified in Section 3.10(a).


"Permanent Incapacity" shall mean, with respect to an Employee Stockholder, (a) the inability of the Employee Stockholder, by reason of injury, illness or other similar cause, to have performed his duties and responsibilities, for a continuous period of one hundred eighty (180) days (as determined by a licensed physician agreed upon for the purpose by the General Partner and such Employee Stockholder or his representative, or failing selection of such physician within ten (10) days of a written request thereof by either party to the other, then designated by an independent representative of the American Medical Association) or (b) the incompetence, metal incapacity or insanity of such Person (as determined by a licensed physician agreed upon for the purpose by the General Partner and such Employee Stockholder or his representative, or failing selection of such physician within ten (10) days of a written request thereof by either party to the other, then designated by an independent representative of the American Medical Association).


5 10 If an Employee Stockholder's employment with the Partnership is terminated because of the Permanent Incapacity of such Employee Stockholder, the date of such termination shall be deemed to be the later of (x) the date such Permanent Incapacity is finally determined, or (y) the date such Employee Stockholder's employment with the Partnership is terminated.


"Person" shall mean any individual, partnership (general or limited), corporation, limited liability company, limited liability partnership, association, trust, joint venture, unincorporated organization, and any government, governmental department or agency or political subdivision thereof.


"Predecessor Agreement" shall mean that certain Limited Partnership Agreement of Skyline Asset Management, L.P. entered into on June 6, 1995 by and among the Initial Limited Partners and Mesirow Asset Management, Inc., pursuant to which this Partnership was formed, which partnership agreement is being amended and restated by this Agreement.


"Prohibited Competitive Activity" shall mean any of the following activities:


(a) directly or indirectly, whether as owner, part owner, shareholder, partner, director, officer, trustee, employee, agent or consultant for or on behalf of any Person, firm, corporation or other entity other than the Partnership or an Affiliate of the Partnership, (i) providing Investment Management Services with respect to any funds or investments with respect to which the Partnership is performing Investment Management Services, or (ii) soliciting any person or entity for the purpose of causing any funds or investments with respect to which the Partnership provides Investment Management Services to be withdrawn from such management; or


(b) directly or indirectly, whether as owner, part owner, shareholder, partner, director, officer, trustee, employee, agent or consultant for or on behalf of any Person, firm, corporation or other entity other than the Partnership or an Affiliate of the Partnership, performing any Investment Management Services.


"Purchase Date" shall have the meaning specified in Section 3.9(d).


"Put" shall have the meaning specified in Section 3.9(a).


"Put Price" shall have the meaning specified in Section 3.9(e).


"Registrable Securities" shall have the meaning specified in Section 4.2.


"Registration" shall have the meaning specified in Section 3.10(a).


"Registration Expenses" shall have the meaning specified in Section 4.4.


"Repurchase" shall mean a purchase or repurchase of Partnership Interests made pursua ...