OMERS Pushes Back Against Tim Patterson's 'Baseless' Lawsuit

David Milstead of the Globe and Mail reports OMERS pushes back on employee lawsuit over compensation:

The Ontario Municipal Employees Retirement System is pushing back against a lawsuit from a former top investing professional, saying he was not wrongfully dismissed and that his claim for $65-million in back pay is wildly inflated.

Tim Patterson’s statement of claim, filed in July in a Toronto court, alleges OMERS fired him and one other professional in the pension fund’s private-equity division for refusing to accept changes to their pay plans. Mr. Patterson participated in an incentive plan for OMERS Private Equity Inc. (OMERS PE) professionals that allowed them a cut of profits from their deals, a commonplace arrangement in private-equity firms – but not common among Canada’s public-sector pensions.

Mr. Patterson, who joined OMERS in 2010, says in his statement of claim that OMERS repeatedly scaled back the terms of the incentive plan, making it less lucrative for him and others. The changes, according to Mr. Patterson, included introducing a lifetime cap on employee earnings, lowering an annual earnings cap and cutting the share of profits on deals.

In its statement of defence filed with the court Wednesday, OMERS says it “always had the discretion to amend, adjust, or replace” the plan, and that this was expressly stated in plan documents that Mr. Patterson acknowledged annually with his signature. “At no point” did OMERS “make any prior commitments, guarantees or representations that the [plan] would be indefinitely annually renewed on substantially the same or similar terms,” the statement says.

OMERS also denies some of Mr. Patterson’s allegations about the terms of the compensation plan, including his assertion that the plan initially calculated returns on investments cumulatively, over many years, rather than expecting the investments to exceed a particular return on an annual basis. The cumulative-return calculation underlies Mr. Patterson’s estimate of what he is owed.

In its response, OMERS does not specifically counter Mr. Patterson’s $65-million claim with a lower estimate of what he is owed.

OMERS decided to replace the plan in 2021 with a new compensation scheme that aligned with employee objectives and provided “appropriate incentive compensation,” according to the pension’s statement of defence.

When Mr. Patterson “signalled his rejection” of the new plan, “OMERS recognized that Mr. Patterson’s employment could not practicably continue” and began severance talks, which led to an agreed termination date of Feb. 1. OMERS says it has already paid Mr. Patterson more than $2-million in severance, and it has asked for most of it back as part of its counterclaim.

In its statement of defence, OMERS denies that Mr. Patterson was constructively dismissed (in other words, that the terms of his employment were so severely altered that he was effectively fired) or that he was wrongfully terminated.

“This claim at its very core is grossly exaggerated and entirely without merit,” OMERS spokesperson Shelagh Paul said in a statement e-mailed to The Globe and Mail. She called it “flatly inconsistent with the annual reporting to Mr. Patterson of his entitlements and how they are calculated.”

“As stewards of the plan and on behalf of our members, we will vigorously defend our position,” Ms. Paul said. “Mr. Patterson was a member of our OMERS family for years and we are surprised and disappointed in both his claim and his approach.”

Howard Levitt, Mr. Patterson’s lawyer, said Thursday in a written statement that OMERS’s defence “belies the very principle of constructive dismissal. Basically they are saying that they dramatically reduced Mr. Patterson’s remuneration [retroactively and prospectively] and, because he did not accept that, and they would not continue with the existing incentive plan, it is somehow acceptable to fire him because the alternative would be to pay him too little.”

A private-equity-style compensation plan “lasts for the time period that those investments are held by the fund, and payouts are made to both the Investors [OMERS] and the Plan members when assets are sold,” Mr. Levitt said. “Therefore, to retroactively delete the plan is outrageous.”

OMERS also pushed back on Mr. Patterson’s assertions in his claim that “he was far and away [OMERS PE’s] highest performer, meaningfully outperforming his managing director peers” and was personally responsible for generating 60 per cent of the realized profits at OMERS Private Equity over the past eight years.

“Contrary to Mr. Patterson’s pleading, the investment work of OMERS PE is very much a team effort and one that relies upon the efforts of many OMERS PE employees, rather than the contributions of any one individual,” OMERS writes in its statement of defence. “OMERS PE’s successes and results are not attributable to any one individual and are certainly not singly attributable to Mr. Patterson as his pleading suggests.”

Kelsey Rolfe of Postmedia Network also reports that former OMERS exec's $65-million wrongful termination suit 'baseless,' pension fund alleges: 

A former Ontario Municipal Employees Retirement System executive’s claim of wrongful termination is a “baseless” attempt to “extract a higher payout for himself” at OMERS members’ expense, the pension fund has alleged in its statement of defence and counterclaim.

Tim Patterson, OMERS Private Equity’s former senior managing director and head of health-care investing, sued the fund in July, seeking $65 million in damages and alleging his former employer made repeated cuts to its compensation plan for investment professionals over the past few years and fired him for refusing to sign on to the most recent changes.

His lawsuit said the changes to the compensation scheme prompted an “outflow of talent,” with Patterson and one other professional allegedly fired and eight other employees resigning after accepting “stay bonuses” offered by the firm to ward off anger about the changes.

OMERS contended in its defence that Patterson’s rejection of the most recent change to its compensation plan meant his employment “could not practicably continue without variable compensation going forward” as the pension manager doesn’t offer different compensation plans to employees in the same group, so it offered Patterson a severance arrangement.

The fund said the severance package included all of Patterson’s vested entitlements in the long-term incentive plan for investment professionals at the fund, and contended the agreement was “entirely amicable.” Patterson also received severance, totalling more than $560,000, for his 18-month notice period, and almost $1.4 million in in short-term incentives.

“At its heart, the plaintiff’s claim is about attempting to increase the size of his already significant ‘bonus’ entitlements,” the statement of defence alleged, “and also to obtain additional bonus amounts for the period he is no longer working or contributing to value creation activities with OMERS PE, all to the detriment of OMERS’ 525,000 members.”

In the counterclaim, the pension manager is seeking damages equal to its severance and short-term incentive payout to Patterson, minus what it would have been obligated to pay him in the minimum notice period under the provincial Employment Standards Act.

Neither OMERS’ nor Patterson’s allegations have been tested in court.

In an email to the Financial Post, Patterson’s lawyer Howard Levitt said OMERS’ assertions that it is protecting the interest of pensioners “is rather rich.”

“That interest would be better served by paying competitively so it would attract top investment private equity professionals such as Mr. Patterson, rather than losing so many of them by dramatically reducing compensation as occurred,” Levitt said.

Levitt, who is also a columnist at the Financial Post, took issue with OMERS’ request for damages, calling it “absurd.”

“Imagine if employees in Canada had to worry that, if they challenged (their) severance, already paid, they risked paying it all back.”

The dispute with Patterson centres on OMERS Private equity’s long-term incentive plan, which began in 2013. Patterson’s statement of claim said the plan gave investment professionals a portion of the profits of their deals, as long as their group of deals achieved an annualized eight per cent return over the course of their life.

Patterson contended OMERS made a series of changes to the plan since 2013, including an annual employee earnings cap, a lifetime cap and, in 2019, cutting investment professionals’ share of deal profits. In February 2020, Patterson’s claim said, the plan was “fundamentally altered,” to require all deals to achieve an eight per cent return each year, instead of a cumulative return, prompting an “employee revolt.

OMERS contested the description of the plan, writing that the long-term incentive plan was “never” based on the annualized eight per cent hurdle, and has been “consistently operated, administered, documented and interpreted” since 2013 as requiring all deals to achieve an eight per cent return each year.

It said Patterson’s assertions on how his long-term incentive entitlements should be calculated were “opportunistic” and “made with the benefit of hindsight.”

The changes OMERS introduced to the plan were to employees’ benefit, the statement of defence said. The lifetime earnings cap, it said, was implemented to address concerns about the annual earnings cap — the career cap ensured employees would continue to benefit in cases where certain years didn’t meet the eight per cent hurdle.

Patterson also acknowledged and accepted the long-term incentive plan terms annually between 2013 and 2019, the pension fund’s claim said.

In 2020, OMERS said, it determined the existing long-term incentive plan was “no longer meeting performance objectives” and decided to replace it with a new compensation plan that aligned with the firm’s objectives as of January 1, 2021, but introduced a bridge plan to “ease the transition” for investment professionals.

Patterson’s lawsuit argued the bridge plan further reduced employee compensation and that investment professionals were “unduly pressured” to sign off, at risk of termination. Patterson and one other professional were terminated, his lawsuit said, while eight other employees resigned.

OMERS said it had designed the bridge and 2021 compensation plans in consultation with OMERS Private Equity leadership, and that employees’ decision to sign onto the bridge plan was “entirely voluntary.” Employees, however, were advised no other incentive plan would be available as of Jan. 1.

“Basically they are saying that they dramatically reduced Mr. Patterson’s remuneration (retroactively and prospectively) and, because he did not accept that, and they would not continue with the existing incentive plan, it is somehow acceptable to fire him because the alternative would be to pay him too little,” Levitt said in an email. “It is absurd on its face and totally inconsistent with the principle of constructive dismissal.”

OMERS argued making the compensation change was “entirely within (its) rightful discretion,” and it had never made commitments or guarantees that the long-term incentive plan would always be annually renewed.

Lastly, Paula Sambo of Bloomberg reports Omers says executive lawsuit over pay ‘grossly exaggerated’:

The Ontario Municipal Employees Retirement System said a claim by a former managing director that he was wrongfully dismissed is baseless.

Tim Patterson filed a lawsuit in Toronto in July, saying he and a colleague were dismissed from Omers in retaliation for not accepting changes to their compensation package. The former managing director claimed he was owed C$65 million ($51 million) after being fired, which Omers called “grossly exaggerated” in a statement of defense and counterclaim filed with the Superior Court of Justice in Ontario Wednesday. The Globe and Mail previously reported on the counterclaim.

Patterson’s suit said that in 2013, Omers created a new long-term incentive plan for him and other employees in its private equity unit, which allowed them to keep 10% of gains above an 8% annual hurdle rate.

That compares to a 20% sharing rate for workers at independent private equity firms Omers competes with, according to the claim. The pension fund then made numerous changes to make the plan less attractive and reduce the amount paid to staff, including introducing a lifetime cap on employee earnings and later lowering this cap, Patterson alleged in court documents.

Omers dismissed much of this, including the assertion that the plan was based upon an 8% return hurdle. 

“At its heart, the plaintiff’s claim is about attempting to increase the size of his already significant ‘bonus’ entitlements and also to obtain additional bonus amounts for the period he is no longer working or contributing to value creation activities within Omers PE, all to the detriment of Omers 525,000 members,” the counterclaim said.

The pension fund had offered Patterson a severance arrangement to which he was “amenable,” and has already paid him more than C$2 million, including his 18 months’ severance -- C$562,500 -- as well as the short-term incentive plan for the period -- C$1,365,000 -- and a pro-rated value of C$75,835 for the part-year he worked in January 2021, it said. 

Alright, Election Monday in Canada, hope you all went to vote on this beautiful day.

Stocks got slammed hard today and began the week deeply in the red as investors continued to flock to the sidelines in September amid several emerging risks for the market, least of which is fear of contagion sweeping financial markets from the troubled China property market.

But forget stocks, you'll have to wait till Friday to read my market thoughts (read my latest market comment here going over how inflation uncertainty is weighing markets down). 

Today, I want to discuss the Tim Patterson lawsuit against OMERS in detail.

The former managing director at OMERS Private Equity claims he is owed C$65 million ($53 million) after being fired.

First, a little background. When this story first broke out in July, everyone was hounding me: "Did you hear about Tim Patterson's lawsuit? Are you going to blog on it?"

At the time, I resisted my urge to blog on this topic. I took my time to contact OMERS' representatives to find out what's going on.

Someone told me they received the claim from Patterson's lawyer on a Thursday before the long Canada Day weekend and he demanded a reply the next day or else they'd go to the media.

Patterson's lawyer, Howard Levitt, is a columnist for the Financial Post, and he made good on his threat to head straight to the media.

The lawsuit got plenty of media attention, all part of Mr. Levitt's tactic to increase exposure, and post-Canada Day, everyone knew Tim Patterson was suing OMERS for the outrageous sum of $65 million (read on and you'll understand why I think it's outrageous, absurd, etc).

I resisted to blog about it until OMERS had a chance to file its statement of defense, which it did last week (now public record) and I had a chance to review it over the weekend.

Let me provide you with points number 4-15 of the overview (added emphasis is mine):

4. This action is not based on any breach of obligation or duties owed to the Plaintiff by either of the Defendants. Instead, the Plaintiff – who has to date received significant variable compensation under the OMERS Private Equity Compensation Plan (the “OMERS PE Plan”) – has launched a baseless claim of wrongful dismissal and is seeking to extract a higher payout for himself under the OMERS PE Plan than his entitlement, to the detriment of the OMERS pensioners. The Plaintiff’s Claim is contrary to the express terms of the OMERS PE Plan and how the OMERS PE Plan has been consistently administered and operated since inception. His Claim is also contrary to OMERS AC’s consistent annual reporting to the Plaintiff regarding the value of his entitlements under the OMERS PE Plan.

5. When he was an employee of OMERS PE, Mr. Patterson was eligible to participate in the OMERS PE Plan, which included both a Short Term Incentive Plan (“STIP”) and a Long Term Incentive Plan (“LTIP”). The LTIP was a bespoke “vintage year” incentive plan that was consistently operated, administered, documented, reported and interpreted on a vintage year (or calendar year) basis.

6. In 2020, OMERS AC determined that the existing LTIP was no longer meeting its objectives. Accordingly, OMERS AC decided to replace the LTIP for current OMERS PE employees effective January 1, 2021 with a new 2021 compensation plan that is more aligned with OMERS AC’s objectives and traditional compensation frameworks (the “2021 Compensation Plan”). OMERS AC has always had the discretion to amend, adjust, or replace the LTIP as is expressly stated in the language of the LTIP documentation that was accepted and acknowledged annually by all OMERS PE Plan participants, including Mr. Patterson.

7. In order to ease the transition for current employee LTIP participants to the new 2021 Compensation Plan, OMERS AC created a temporary Bridge Incentive Plan (“Bridge Plan”) effective January 1, 2021. OMERS AC designed the Bridge Plan and the 2021 Compensation Plan in consultation with the leadership of the OMERS PE group. OMERS AC’s intention in designing and implementing both the Bridge Plan and the 2021 Compensation Plan was to treat current employees who were LTIP participants fairly, to appropriately compensate employees during the transition process, and ultimately to provide for appropriate incentive compensation that aligned with the objectives for existing and new OMERS PE employees beginning January 1, 2021.

8. When OMERS AC made the decision to move from the LTIP to the Bridge Plan and 2021 Compensation Plan, OMERS AC was transparent with the OMERS PE employees that the decision to sign onto the Bridge Plan and the 2021 Compensation Plan was entirely voluntary. Employees were further advised that no other incentive plan would be available beginning January 1, 2021. The replacement of the LTIP with the Bridge Plan and 2021 Compensation Plan was entirely within the rightful discretion of OMERS AC, such right being expressly reserved to OMERS AC under the LTIP documentation. At no point did OMERS AC make any prior commitments, guarantees or representations that the LTIP would be indefinitely annually renewed on substantially the same or similar terms.

9. Contrary to the Plaintiff’s allegation, he was not dismissed for “refusing to agree to forfeit millions of dollars which he had already earned” or for the purpose of the Defendants “retaining the considerable compensation that he was entitled to”. To the contrary, when the Plaintiff signalled his rejection of the Bridge Plan and new 2021 Compensation Plan, OMERS PE recognized that Mr. Patterson’s employment could not practicably continue without variable compensation going forward (there being no alternative to the Bridge Plan and 2021 Compensation Plan available after January 1, 2021). Accordingly, OMERS PE approached the Plaintiff and offered him a severance arrangement to which the Plaintiff was amenable in concept. A predicate of this severance arrangement was that the Plaintiff would receive all of his vested LTIP entitlements under the OMERS PE Plan and would also receive all of his legal entitlements upon termination. As a result, OMERS PE and the Plaintiff mutually agreed that the Plaintiff’s effective termination date would be February 1, 2021, in order to afford Mr. Patterson sufficient time to wrap up his ongoing matters in a professional and orderly manner, which he did. The agreement to enter into a severance arrangement was entirely amicable.

10. There has not been any attempt to somehow “deprive” the Plaintiff of his earned entitlements under the LTIP. To the contrary Mr. Patterson’s LTIP entitlements have been expressly confirmed to him. He will receive any additional payments to which he is entitled under the LTIP in accordance with the plan terms and consistent with the timing of payments that are made to all of the other OMERS PE former employees who are participants in the LTIP. No entitlement to further payments under the LTIP have as yet crystallized, nor are any further payments to Mr. Patterson under the LTIP currently owed to him.

11. OMERS PE has also paid Mr. Patterson 18 months’ severance ($562,500) as is stipulated in his employment contract, as well as STIP for the 18 months’ notice period ($1,365,000) as is also stipulated in his employment contract, and a pro-rated STIP ($75,835) for the part-year he worked in January 2021. As well, OMERS PE has maintained Mr. Patterson’s contractually- entitled benefits and has confirmed that these will remain in place for the 18 months’ notice period.

12. There is no legal or factual basis supporting Mr. Patterson’s claim for wrongful dismissal damages representing 30 months’ reasonable notice. His employment contract specifies 18 months, and even if such contractual notice period is not enforceable (which OMERS PE denies), 18 months’ notice is, in any event, at the highest end of what Mr. Patterson would be entitled to under common law.

13. The LTIP under the OMERS PE Plan effective January 1, 2019 (the “2019 OMERS PE Plan”) (which is the last annual LTIP that Mr. Patterson acknowledged and which terms he accepted and are applicable to Mr. Patterson) also expressly states that vesting of LTIP points does not continue nor do LTIP career cap entitlements continue to increase during the notice period following termination and that Mr. Patterson is not entitled to receive additional LTIP awards during the notice period. Furthermore, Mr. Patterson’s assertions about how his LTIP entitlements are supposedly to be calculated (on a “cumulative preferred return” basis instead of the “vintage year” basis that has always been used) are opportunistic, made with the benefit of hindsight and flatly inconsistent with: (i) the express provisions of the LTIP documentation under the OMERS PE Plan that he has acknowledged, accepted and agreed annually since 2013; (ii) OMERS AC’s consistent administration of the LTIP since inception; and (iii) the annual reporting made to Mr. Patterson regarding his LTIP entitlements.

14. At its heart, the Plaintiff’s Claim is about attempting to increase the size of his already significant “bonus” entitlements and also to obtain additional bonus amounts for the period he is no longer working or contributing to value creation activities within OMERS PE, all to the detriment of OMERS 525,000 members. His Claim is an attempt to rewrite and ignore the express terms of the LTIP in order to significantly inflate his existing (and already significant) entitlements under the LTIP. Mr. Patterson has already been paid a significant amount for LTIP out of his total potential maximum entitlement based upon his cumulative career cap that is tied to the number of years he participated in the OMERS PE Plan. While his vested interest in the OMERS PE Plan may entitle him to receive in future additional amounts for LTIP up to his total cumulative career cap depending on the performance of the underlying LTIP investments, Mr. Patterson’s claim to a further $65 million on account of LTIP is completely out of step with his LTIP entitlements. His $65 million claim is a grossly exaggerated number that appears to have been intentionally selected with a view to attracting media and stakeholder attention to his Claim, building a media campaign in an attempt to advance his interests, and seeking to embarrass the Defendants. Indeed, the Plaintiff’s pre-occupation with generating media attention for his Claim is evidenced, by amongst other things, the fact that he or his counsel evidently reached out to various media outlets and provided them with a copy of his Statement of Claim even before taking any steps to attempt to serve such Statement of Claim on the Defendants.

15. OMERS AC has a fiduciary obligation to the OMERS members to ensure that the OMERS PE Plan is administered in accordance with its terms and that Mr. Patterson is paid his entitlements under the OMERS PE Plan and no more than his entitlements. OMERS AC’s refusal to accede to Mr. Patterson’s claims to inflated LTIP entitlements is essential to this fiduciary obligation and ensuring that the portion of the returns on the OMERS pension plan funds invested by OMERS PE that OMERS AC is entitled to as trustee of the OMERS pension plan assets remain available for the benefit of OMERS members.

So where did Tim Patterson and his lawyer come up with the $65 million figure? Did they base it on something factual?

Well, here is what I heard through the grapevine.

OMERS had accepted a compensation package for OMERS Ventures when John Ruffolo was running that group.

John is a great guy, he bounced back after a tragic bike accident left him paralyzed last year and he's 100% focused in his new firm, Maverix Private Equity, after a successful stint at OMERS Ventures;

Ruffolo has been a major figure in the Canadian tech and innovation scene. In 2011, he founded OMERS Ventures, the venture capital arm of pension plan organization OMERS, kicking off the firm’s first $200 million venture fund. Ruffolo led OMERS Ventures into some of the most notable Canadian tech investments of the last decade, including Shopify and Hootsuite, among others. He has led investments in D2L, Wave, Vidyard, Wattpad, and more.

My sources tell me at the time, OMERS AC Board accepted a compensation package for OMERS Ventures which is more in line with what traditional venture capital funds were charging (not the 2% management fee but 20% performance fee).

Then pension envy kicked and when other executives at OMERS Private Equity caught wind of this, apparently they demanded the exact same compensation terms and they got it.

In my opinion, this was a huge mistake from OMERS AC Board which includes 2 CUPE Ontario members and they really bungled it up at the time.

Why? Because the economics of this compensation plan don't work for a pension managing billions in private equity assets. This type of comp plan works for a venture capital group managing less than $500 million and even there, we can debate whether this was appropriate to hand out to OMERS Ventures (I think so as they delivered and were many individuals).

Importantly, executives working at a public pension fund no matter how successful they are cannot demand the same compensation as executives working at premiere private equity funds like Blackstone, Brookfield, Apollo, Carlyle, KKR, TPG, you name it.

 Why? Well, let me be brutally honest here and explain why.

When you are working at a public pension fund in Canada, you're already being compensated extremely well by any market standard but the critical difference between a senior executive working at OMERS, OTPP, CPPIB, etc and a premiere private equity fund boils down to this:

  1. You manage billions from captive clients: You never have to raise one penny externally to meet your capital raise, billions are allocated to you for free with no sweat equity.
  2. You never have to risk your own capital: Not one penny, you can screw up royally and walk away a multi-millionaire after signing off on a severance package.

These are two critical points that are often lost on people who think they are worth a lot more than they are being compensated at Canada's top pension investment managers.

No you're not, if you want to collect multi-millions every year, go out and hustle, start your own fund and let Mr. Market determine your compensation package.

I used to work for a stubborn and tough-minded Irish guy at a pension fund running the PE group and he was obsessed with his compensation package.

"They better pay me what I'm worth or else I'll walk," he often lamented to me privately.

I felt like blurting "so walk, if you're as good as you think, go make it on your own."

Of course, he wisely stuck around, delivered the long-term results and was compensated millions over the years he was running PE and when he was fired after a new CEO took the helm (along with many others),  he collected a few more millions (each Canadian pension fund should keep a running tab on the severance packages they paid out since their inception and make it transparent on their website).

The point I'm trying to make here is everyone THINKS they are worth more than they actually receive and don't get me wrong, some people are grossly underpaid at public pensions in Canada (like some senior analysts doing all the hard work while others get all the glory and big bucks), but the majority are paid extremely well for what they produce by any standard.

I am flabbergasted by Tim Patterson's $65 million claim, it's beyond outrageous, it's pure egregious greed!

Worse still, I don't know the guy from a hole in the wall but people who have met him tell me "he's an unknown, second-rate managing director who has a grossly inflated ego and he makes it out to look like produced all the value add at OMERS Private Equity."

Maybe, maybe not (I don't know the guy) but he sure comes off that way with this outrageous lawsuit.

For me, it's pensioners' money, period. It's a sin to pay out anyone working at a Canadian pension this type of compensation, a real sin.

Obviously, he’s asking for $65 million hoping to settle for $30 or $20 million but that's still so wrong on so many levels, especially after he walked away from OMERS (after refusing to accept new terms) with more than $2 million.

Regular hardworking Canadians going to the polls today cannot ever fathom receiving these payouts, unless they win the Lotto Max tomorrow which is next to impossible:

In all seriousness, even if Tim Patterson walks away with a third of what he's suing OMERS for, it's a huge victory for him and a gross miscarriage of pension justice, in my humble opinion.

Still, I am not in agreement with OMERS' counterclaim here, think that's ridiculous and vindictive and should have never been part of their counterstrategy.

Alright, I've laid out my thoughts on OMERS vs Tim Patterson, I was brutally honest, some of you will agree with me, others won't. That's what makes a market.

Speaking of which, below, CNBC's "Squawk on the Street" team discusses China's Evergrande, the market selloff, Fed week and more. 

I can just see PE firms licking their chops hoping to buy assets on the cheap but IF the selloff continues, it's not good for exits and distributions.