EXCHANGE AGREEMENT

by and among

THE INVESTORS AND MANAGEMENT STOCKHOLDERS

NAMED ON SCHEDULE A HERETO

and

HIGHBURY FINANCIAL INC.

August 10, 2009

 

 

TABLE OF CONTENTS

 

TABLE OF CONTENTS

(Cont’d.)

 

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  THE SECURITIES PURCHASED HEREUNDER ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND RESALE UNDER AN INVESTOR RIGHTS AGREEMENT, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS PURSUANT TO REGISTRATION OR EXEMPTION FROM REGISTRATION REQUIREMENTS THEREUNDER AND UNDER SUCH AGREEMENT.

EXCHANGE AGREEMENT

This Exchange Agreement (the “ Agreement ”) is made as of this 10th day of August, 2009 by and among the persons named as Investors set forth on Schedule A hereto (each an “ Investor ”, and, collectively, the “ Investors ”), the persons named as Management Stockholders set forth on Schedule A hereto, and Highbury Financial Inc., a Delaware corporation (the “ Company ”), with reference to the following background.

RECITALS

WHEREAS, the Investors own 350 Series B LLC Units of Aston Asset Management LLC, a Delaware limited liability company (“ Aston ”), which constitutes all of the issued and outstanding Series B LLC Units of Aston; and

WHEREAS, pursuant to the terms of this Agreement, the Investors wish to exchange their respective Series B LLC Units (the “ Exchange ”) for shares of Series B Preferred Stock (as defined below), having the rights and preferences set forth in the form of Certificate of Designation of Series B Convertible Preferred Stock of Highbury Financial Inc. attached hereto as Exhibit A (the “ Certificate of Designation ”);

AGREEMENT

NOW, THEREFORE, in consideration of the premises and of the mutual agreements hereinafter contained, the parties hereby agree as follows, with the obligations of each Investor and Management Stockholder being several and not joint:

ARTICLE I

DEFINITIONS

Section 1.01.    Definitions .  As used in this Agreement, the following terms have the following meanings:

“ 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 (herein the “ first party ”), any other Person 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 (b) otherwise direct the management or policies of such Person by contract or otherwise (other than solely as a director of a corporation (or similar entity) that has five (5) or more directors). For the purposes of this Agreement, the Company shall not be deemed to be an Affiliate of Aston.

“ Agreement ” means this Exchange Agreement, as amended from time to time.

“ Asserted Liability ” shall have the meaning set forth in Section 7.11(a).

“ Aston ” shall have the meaning set forth in the recitals.

“ Board ” means the Board of Directors of the Company.

“ Certificate of Designation ” shall have the meaning set forth in the recitals

“ Claims ” shall have the meaning set forth in Section 7.11.

“ Claims Notice ” shall have the meaning set forth in Section 7.11(a).

“ Client ” shall mean all Past Clients, Present Clients and Potential Clients, subject to the following general rules: (i) with respect to each Client, the term shall also include any Persons which are known to the Investor or Management Stockholder to be Affiliates of such Client, directors, officers or employees of such Client or any such Affiliates thereof, or Persons who are known to the Investor or Management Stockholder to be members of the Immediate Family of any of the foregoing Persons or Affiliates of any of them and (ii) with respect to any Client that is a Fund, the term shall also include any investor or participant in such Fund and any Person that has participated in the distribution or sale of such Fund.

“ Closing ” shall have the meaning set forth in Section 2.05

“ Closing Date ” shall have the meaning set forth in Section 2.05.

“ Common Stock ” means the common stock of the Company, $0.0001 par value per share.

“ Company ” shall have the meaning set forth in the preamble.

“ Contractual Obligation ” shall have the meaning set forth in Section 4.06.

“ Controlled Affiliate ” shall mean, with respect to a Person, any Affiliate of such Person under its “ control ,” as the term “ control ” is defined in the definition of Affiliate.

“ Current Aston LLC Agreement ” shall mean that certain Second Amended and Restated Limited Liability Company Agreement of Aston dated January 7, 2008.

“ Financial Statements ” shall have the meaning set forth in Section 5.07(b).

“ Exchange ” shall have the meaning set forth in the recitals.

“ Fund ” shall mean any Mutual Fund or other commingled fund for which Aston provides Investment Services.

“ Governmental Authority ” shall have the meaning set forth in Section 4.05.

“ Immediate Family ” shall mean, with respect to any natural person, (a) such person’s spouse, parents, grandparents, children, grandchildren and siblings, (b) such person’s former spouse(s) and current spouses of such person’s children, grandchildren and siblings and (c) estates, trusts, partnerships and other entities of which substantially all of the interests are held directly or indirectly by the foregoing.

“ Intellectual Property ” shall have the meaning specified in Section 2.07(d) hereof.

“ Investment Services ” shall mean any services which involve (a) the management, administration, solicitation or distribution of an investment account, Mutual Fund or other commingled fund (or portions thereof or a group of investment accounts, Mutual Funds or other commingled funds) for compensation, (b) the giving of advice with respect to the investment and/or reinvestment of assets or funds (or any group of assets or funds) for compensation, or (c) otherwise acting as an “investment adviser” within the meaning of the Advisers Act.

“ Investor(s) ” shall have the meaning set forth in the preamble.

“ Investor Rights Agreement ” shall mean that certain Investor Rights Agreement of even date herewith among the Company, the Investors and Management Stockholders in the form attached hereto as Exhibit B .

“ Management Agreement ” shall mean that certain Management Agreement of even date herewith between Aston, the Company and the Management Stockholders in the form attached hereto as Exhibit C .

“ Management Committee ” shall have the meaning specified in the Management Agreement.

“ Management Stockholder(s) ” shall mean (a) in the case of any Investor which is a natural person, such Investor, and (b) in the case of any Investor which is not a natural person, that certain employee of Aston (or one of its Controlled Affiliates) who is the owner of the issued and outstanding capital stock of, or other equity interests in, such Investor and is listed as such on Schedule A hereto (including any such employee after such employee has transferred any of its, his or her interest in such Investor to a Permitted Transferee (as such term is defined in the Investor Rights Agreement)).

“ Mutual Fund ” shall mean a registered investment company (or series of registered investment companies).

“ Past Client ” shall mean at any particular time, any Person who at any point prior to such time had been engaged to distribute or sell any Fund, an advisee or investment advisory customer of, or otherwise a recipient of Investment Services from, Aston, a Controlled Affiliate of Aston, a Predecessor Business or any such predecessor, or any shareholder, partner, member, director or officer of any such Person (in each case whether directly or through one or more intermediaries, e.g., a wrap sponsor, or through investment in a Fund), but at such time is not an advisee or investment advisory customer or client of, or recipient of Investment Services from, Aston or any of its Controlled Affiliates (directly or indirectly).

“ Person ” means any individual, partnership (limited or general), corporation, limited liability company, limited liability partnership, association, trust, joint venture, unincorporated organization or other entity.

“ Potential Client ” shall mean, at any particular time, any Person or any shareholder, partner, member, director, officer, employee, agent or consultant (or Persons acting in any similar capacity) of any such Person to whom Aston, a Controlled Affiliate of Aston or the Predecessor Business has, within two (2) years prior to such time, offered (whether by means of a personal meeting, telephone call, letter, written proposal or otherwise) to serve as investment adviser or otherwise provide Investment Services or solicited to invest in, or participated in the distribution or sale of, any Fund, but who is not at such time an advisee or investment advisory customer of, or otherwise a recipient of Investment Services from, Aston, any of its Controlled Affiliates (directly or indirectly) or any investor in, or participant in the distribution or sale of, any Fund. The preceding sentence is meant to exclude (i) advertising, if any, through mass media in which the offer, if any, is available to the general public, such as magazines, newspapers and sponsorships of public events and (ii) “cold calls” and mass-mailing form letters, in each case to the extent not directed towards any particular Person and not resulting in an indication of interest or a request for further information.

“ Predecessor Business ” shall mean the business of the parties to the Purchase Agreement immediately prior to the Closing (as such term is defined in the Purchase Agreement).

“ Present Client ” shall mean, at any particular time, any Person who is at such time an advisee or investment advisory customer of, or otherwise a recipient of Investment Services from, Aston, any of its Controlled Affiliates (directly or indirectly) or any investor in, or participant in the distribution or sale of, any Fund.

“ Prohibited Competition Activity ” shall mean any of the following activities:

(a)           directly or indirectly, whether as owner, part owner, member, director, officer, trustee, employee, agent or consultant for or on behalf of any Person other than Aston or any Controlled Affiliate of Aston: (i) diverting or taking away any funds or investors from any Fund; (ii) soliciting or otherwise inducing or attempting to cause any Person to divert or take away any assets or funds invested in such Funds; or (iii) soliciting or otherwise inducing or attempting to cause any subadviser, distributor or seller of the Funds to terminate or reduce its services on behalf of the Funds; and

(b)           directly or indirectly, whether as owner, part owner, partner, member, director, officer, trustee, employee, agent or consultant for or on behalf of any Person other than Aston or any Controlled Affiliate of Aston, performing any Investment Services.

“ Promissory Note ” shall mean a promissory note issued by the Corporation in substantially the form attached hereto as Exhibit D .

“ Purchase Agreement ” shall mean that certain Asset Purchase Agreement, dated as of April 20, 2006, by and among ABN AMRO Asset Management Holdings, Inc., ABN AMRO Investment Fund Services, Inc., ABN AMRO Asset Management, Inc., Montag & Caldwell, Inc., Tamro Capital Partners LLC, Veredus Asset Management LLC, River Road Asset Management LLC and Aston.

“ Requirement of Law ” shall have the meaning set forth in Section 4.06.

“ SEC ” shall mean the Securities and Exchange Commission, and any successor Governmental Authority thereto.

“ SEC Reports ” shall have the meaning set forth in Section 5.07(a).

“ Securities Act ” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder by the SEC from time to time.

“ Securities Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Series B LLC Unit ” means the Series B limited liability company interests of Aston.

“ Series B Preferred Stock ” means the Series B Convertible Preferred Stock of the Company, $0.0001 par value per share.

“ Transaction Documents ” shall mean this Agreement, the Investor Rights Agreement and the Management Agreement.

ARTICLE II

EXCHANGE

Section 2.01.           Exchange of Series B LLC Units for Series B Preferred Stock by Management Stockholders .  On the terms and subject to the conditions of this Agreement, at the Closing, the Company hereby agrees to issue to each of the Investors such numbers of shares of Series B Preferred Stock listed next to the name of such Investor on Schedule A hereto (based on an exchange ratio of 2.85714 shares of Series B Preferred Stock to one Series B LL