The Managers Funds LLC of Norwalk, Conn., will pay up to $7 million to acquire the retail mutual fund business of Smith Breeden Associates of Chapel Hill, N.C., according to a recent Securities and Exchange Commission filing.

Managers has agreed to pay Smith Breeden up to $3 million in cash when the transaction closes in July, according to a preliminary proxy statement the Smith Breeden retail funds filed with the SEC May 23. That amount could be reduced if assets in the funds decrease, according to the proxy statement. Any reduction, however, could be recouped if assets later increase.

Managers also could pay up to an additional $4 million if assets in the funds meet growth targets in the future, according to the proxy statement. The targets were not disclosed in the filing.

Agreements to make additional payments after a sale based on increases in assets under management - known as earn outs - are common in the sale of asset-management businesses. Managers and Smith Breeden announced the sale on May 23, without disclosing the deal's price or the existence of the earn out.

The sale calls for Managers to acquire Smith Breeden's retail fund business, which includes three no-load mutual funds. The funds have about $243 million in assets under management. Smith Breeden will serve as sub-adviser to the funds after the sale.

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