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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 2001
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
</Table>
TREMONT ADVISERS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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TREMONT ADVISERS, INC.
555 THEODORE FREMD AVENUE
RYE, NEW YORK 10580
SPECIAL MEETING OF STOCKHOLDERS
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
August 20, 2001
Dear Tremont Stockholder:
On behalf of the board of directors of Tremont Advisers, Inc. ("Tremont"),
I cordially invite you to attend the special meeting of the stockholders of
Tremont to be held at 11:00 a.m. on September 25, 2001, at our offices at 555
Theodore Fremd Avenue, Rye, New York 10580.
At the special meeting, we will ask you to adopt the merger agreement that
was entered into on July 10, 2001 with Oppenheimer Acquisition Corp.
("Oppenheimer") pursuant to which Tremont will be merged with a wholly-owned
subsidiary of Oppenheimer. If we complete the merger, you will receive $19.00 in
cash (subject to a possible upward or downward adjustment) for each share of
Tremont common stock you own and Tremont will become a 100% wholly-owned
subsidiary of Oppenheimer. The $19.00 per share being paid in the merger
represents a significant premium over the market price for our shares prevailing
before there was public speculation that we were pursuing a potential
transaction.
We cannot complete the merger unless the conditions to closing are
satisfied or waived, including the adoption of the merger agreement by holders
of shares of Tremont common stock representing a majority of the voting power of
Tremont, the obtaining of consents from a certain percentage of investment
advisory clients of our subsidiaries, and the satisfaction of various regulatory
requirements and of certain other conditions that are described in the proxy
statement. We expect that the requisite conditions will be satisfied on or
before September 25, 2001 and, assuming the merger agreement is adopted by the
holders of shares of Tremont common stock representing a majority of the voting
power of Tremont, that the merger will be completed promptly thereafter,
although Oppenheimer can postpone completion of the merger to October 1, 2001 in
the event that we successfully satisfy these conditions before then. Shares of
Tremont common stock representing approximately 37% of the voting power of
Tremont have been committed to be voted in favor of adopting the merger
agreement. However, we cannot assure you that the requisite regulatory
requirements will be satisfied or, if satisfied, when they will be satisfied.
The board of directors carefully reviewed and considered the terms and
conditions of the proposed merger. Based on its review, the board of directors
has determined that the terms of the merger agreement and the merger itself are
advisable and are fair to, and in the best interests of, Tremont and its
stockholders. In making this determination, the board of directors considered,
among other things, an opinion of our financial advisor, Putnam Lovell
Securities, Inc., to the effect that, as of the date of the merger agreement and
based upon and subject to the factors and assumptions explained to the board of
directors and set forth in the opinion, the cash consideration to be received by
you in the merger is fair from a financial point of view.
THE BOARD OF DIRECTORS OF TREMONT, BASED ON ITS DETERMINATION THAT THE
MERGER AGREEMENT AND THE MERGER ITSELF ARE ADVISABLE AND ARE FAIR TO, AND IN THE
BEST INTERESTS OF, TREMONT AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE MERGER. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
The attached notice of special meeting and proxy statement explain the
proposed merger and the merger agreement and provide specific information
concerning the special meeting. Please read these materials (including
appendices) carefully.
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YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the special
meeting, please take the time to vote by completing, signing, dating and
promptly returning the enclosed proxy card to us at the address set forth in the
proxy statement. If you attend the special meeting and wish to vote in person,
you may withdraw your proxy and vote in person.
If you have any questions or need assistance with the voting procedures,
please call James McCormick, our proxy solicitor, or Stephen Clayton in our
investor relations department, at (914) 925-1140.
/s/ Sandra L. Manzke
Sandra L. Manzke
Chairman of the Board and
Co-Chief Executive Officer
This proxy statement is dated August 20, 2001 and was first mailed to Tremont
stockholders on or about August 21, 2001.
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TREMONT ADVISERS, INC.
555 THEODORE FREMD AVENUE
RYE, NEW YORK 10580
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 2001
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To the Stockholders of Tremont Advisers, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Tremont
Advisers, Inc. will be held on September 25, 2001, at 11:00 a.m., local time, at
our offices at 555 Theodore Fremd Avenue, Rye, New York 10580, for the purpose
of considering and voting upon a proposal to adopt an Agreement and Plan of
Merger, dated as of July 10, 2001, among Oppenheimer Acquisition Corp., Joshua
Acquisition Corp., and Tremont Advisers, Inc., as described in the attached
proxy statement. No other matters, except upon appropriate motion of a
stockholder vote to adjourn the special meeting, may be brought before the
special meeting.
The merger agreement and the merger are described in the attached proxy
statement, and a proxy card for voting on the adoption of the merger agreement
is enclosed.
The Tremont Advisers, Inc. board of directors has fixed the close of
business on August 6, 2001 as the record date for determining stockholders
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement of the meeting. A list of stockholders entitled to vote at the
special meeting will be available for examination at Tremont Advisers, Inc.'s
principal offices, during ordinary business hours, from September 12, 2001 until
the meeting.
If you do not vote to adopt the merger agreement and you follow the
procedural requirements of the Delaware General Corporation Law, you may receive
the fair cash value of your shares as appraised by the Delaware Court of
Chancery. See "Special Factors -- Appraisal Rights of Stockholders" in the
attached proxy statement.
You should not send any certificates representing Tremont Advisers, Inc.
shares with your proxy card.
Whether or not you plan to attend the special meeting, you should complete,
sign, date and promptly return the enclosed proxy card to ensure that your
shares will be represented at the meeting. If you attend the special meeting and
wish to vote in person, you may withdraw your proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Suzanne S. Hammond
Suzanne S. Hammond
Secretary
Dated: August 20, 2001
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TABLE OF CONTENTS
<Table>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
The Parties............................................... 3
The Special Meeting of Stockholders....................... 3
The Merger and the Merger Agreement....................... 4
Certain U.S. Federal Income Tax Consequences.............. 6
Opinion of our Financial Advisor.......................... 6
Stockholders Agreement.................................... 7
Interests of Certain Persons in the Merger................ 7
Additional Information.................................... 7
PARTIES TO THE MERGER....................................... 8
SPECIAL MEETING OF STOCKHOLDERS............................. 9
Date, Time and Place of the Special Meeting............... 9
Purpose of the Special Meeting............................ 9
Recommendation of our Board of Directors.................. 9
Record Date; Quorum; Outstanding Common Stock Entitled to
Vote................................................... 9
Voting Rights............................................. 9
Voting and Revocation of Proxies.......................... 9
Solicitation of Proxies................................... 10
Other Matters............................................. 10
PAYMENT OF CASH MERGER CONSIDERATION........................ 10
SPECIAL FACTORS............................................. 11
Background of the Merger.................................. 11
Purpose of the Merger; Certain Effects of the Merger...... 14
Recommendation of our Board of Directors; Reasons for the
Merger................................................. 15
Opinion of Our Financial Advisor.......................... 16
Interests of Certain Persons in the Merger................ 21
Merger Financing; Source of Funds......................... 25
Certain U.S. Federal Income Tax Consequences.............. 25
Accounting Treatment...................................... 25
Appraisal Rights of Stockholders.......................... 25
Stockholders Agreement.................................... 27
THE MERGER AGREEMENT........................................ 29
The Merger................................................ 29
Representations and Warranties............................ 31
Covenants Relating to Conduct of Business................. 33
Conditions Precedent to the Merger........................ 38
Termination............................................... 39
Termination Fee........................................... 40
Amendment and Waiver...................................... 41
REGULATORY APPROVALS........................................ 41
</Table>
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<Table>
DIRECTORS AND MANAGEMENT.................................... 41
PRICE RANGE OF STOCK AND DIVIDENDS.......................... 42
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 44
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 46
FUTURE STOCKHOLDER PROPOSALS................................ 46
WHERE YOU CAN FIND MORE INFORMATION......................... 47
APPENDIX A: AGREEMENT AND PLAN OF MERGER.................... A-1
APPENDIX B: OPINION OF PUTNAM LOVELL SECURITIES, INC........ B-1
APPENDIX C: SECTION 262 OF THE DELAWARE GENERAL CORPORATION
LAW....................................................... C-1
</Table>
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QUESTIONS AND ANSWERS ABOUT THE MERGER
WHAT WILL I RECEIVE IN THE MERGER?
If the merger is consummated, you will receive $19.00 per share for each
share of common stock you own in Tremont, without interest, subject to possible
upward or downward adjustment.
UNDER WHAT CIRCUMSTANCES COULD I RECEIVE MORE OR LESS THAN $19.00 PER SHARE?
You will receive more or less than $19.00 per share in the event that our
tangible net worth shown on our balance sheet as of the end of the most recent
month-end not less than fifteen business days prior to the consummation of the
merger is less than $13,170,290 or more than $15,170,290.
- - To the extent that our tangible net worth is less than $13,170,290, the amount
you receive per share will be reduced by an amount determined by dividing the
amount of the difference by the total number of shares and options to buy
shares currently outstanding.
- - To the extent that our tangible net worth is greater than $15,170,290, the
amount you receive per share will be increased by an amount determined by
dividing the amount of the difference by the total number of shares and
options to buy shares currently outstanding.
For this purpose, tangible net worth means the excess of stockholders'
equity over the sum of goodwill (net of amortization) and investments in joint
ventures, not counting our expenses incurred in connection with the merger.
WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
In general, upon conversion of your Tremont shares into cash pursuant to
the merger, you will recognize gain or loss for U.S. federal income tax purposes
equal to the difference between the amount of cash received and your adjusted
tax basis in your Tremont shares. Provided you hold your Tremont common stock as
a capital asset, that gain or loss will generally be capital gain or loss.
WHAT VOTE OF STOCKHOLDERS IS REQUIRED TO COMPLETE THE MERGER?
A majority of the votes cast at the special meeting of the holders of
shares of our Class A common stock and our Class B common stock outstanding on
the record date, voting together as a single class, must be cast FOR the
adoption of the merger agreement in order for the merger to be completed. Each
share of our Class A common stock is entitled to four votes. Each share of our
Class B common stock is entitled to one vote.
Shares of Tremont common stock representing approximately 37% of the voting
power of Tremont have been committed to be voted in favor of adopting the merger
agreement.
WHAT IS THE RECOMMENDATION OF THE BOARD OF DIRECTORS?
Our board of directors has determined that the merger agreement, the merger
and the other transactions contemplated by the merger agreement are advisable,
fair to you, and in your best interests, and recommends that you vote FOR the
adoption of the merger agreement. In making these recommendations our board of
directors took into account the opinion of our financial advisor, Putnam Lovell
Securities, Inc., stating that, as of July 10, 2001, and based upon and subject
to the factors and assumptions set forth in their opinion, the cash
consideration to be received by you is fair to you from a financial point of
view.
WHAT REGULATORY APPROVALS AND FILINGS AND THIRD-PARTY CONSENTS ARE NEEDED TO
COMPLETE THE MERGER?
Before we can complete the merger contemplated by the merger agreement, the
parties will be required to:
- - await the expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976;
- - obtain the consent of NASD Regulation, Inc., a subsidiary of the National
Association of Securities Dealers, Inc., to the change in control of our U.S.
broker-dealer subsidiary;
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- - obtain the consent of certain state regulators to the change in control of our
U.S. broker-dealer subsidiary;
- - notify certain state regulators of the change in control of our U.S.
broker-dealer subsidiary;
- -obtain the consent of the Ontario Securities Commission to the change in
control of our Canadian subsidiary;
- - obtain the consent of the U.K. Securities and Futures Authority to the change
in control of our U.K. subsidiary; and
- - obtain consents in accordance with the merger agreement from our investment
advisory clients.
WHEN DO YOU EXPECT THE TRANSACTIONS TO BE COMPLETED?
We expect that the requisite regulatory and third-party consent and notice
requirements and closing conditions will be satisfied or obtained on or before
September 25, 2001 and, assuming the merger is approved by Tremont's
stockholders and the other closing conditions are satisfied or waived, that the
merger will be completed promptly thereafter, although Oppenheimer can postpone
completion of the merger to October 1, 2001 in the event that we satisfy these
conditions before then. However, we cannot assure you that such requirements
will be satisfied (or waived where permitted by applicable law) or, if satisfied
or waived, the date by which they will be satisfied or waived.
WHEN AND WHERE IS THE SPECIAL MEETING?
The special meeting will take place at our offices at 555 Theodore Fremd
Avenue, Rye, New York 10580, on September 25, 2001, at 11:00 a.m., local time.
WHAT DO I NEED TO DO NOW?
You should complete, date and sign your proxy card and mail it in the
enclosed return envelope as soon as possible so that your shares of Tremont
stock may be represented at the special meeting, even if you plan to attend the
special meeting in person. Unless contrary instructions are indicated on your
proxy, all of your Tremont shares represented by valid proxies will be voted FOR
the adoption of the merger agreement.
Please do not send us any of your stock certificates at this time. If the
merger is completed, we will send you written instructions for exchanging your
stock certificates for the merger consideration.
WHO CAN HELP ANSWER MY QUESTIONS?
If you would like additional copies of this proxy statement or if you have
questions about the merger agreement, the merger or the other transactions
contemplated by the merger agreement, including how to complete and return your
proxy card, or you would like more information about Tremont, you should call
James McCormick, our proxy solicitor, or Stephen Clayton in our investor
relations department, at (914) 925-1140.
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SUMMARY
This summary, together with the preceding Questions and Answers About the
Merger section, highlights selected information in this proxy statement and does
not contain all of the information that is important to you. You should
carefully read the entire proxy statement to fully understand the merger
agreement. The merger agreement is attached as Appendix A to this proxy
statement. We encourage you to read the merger agreement, as it is the legal
document that governs the merger.
THE PARTIES
Oppenheimer Acquisition Corp.
- - Oppenheimer is incorporated under the laws of the State of Delaware. Its
executive offices are located at Two World Trade Center, New York, New York
10048. Its telephone number is (212) 323-0200.
- - Oppenheimer is a holding company and an indirect majority-owned subsidiary of
Massachusetts Mutual Life Insurance Company, a Massachusetts domiciled mutual
life insurance company. Oppenheimer is the parent of OppenheimerFunds, Inc., a
leading mutual fund manager.
Tremont Advisers, Inc.
- - We are incorporated under the laws of the State of Delaware. Our executive
offices are located at 555 Theodore Fremd Avenue, Rye, New York 10580. Our
telephone number is (914) 925-1140.
- - Tremont is a holding company with three principal areas of business:
developing and managing proprietary investment funds, providing investment
advisory services and retrieving and selling information. All of Tremont's
activities are conducted by its subsidiaries.
- - Tremont's Class A common stock is quoted on the OTC Bulletin Board under the
symbol "TMAVA", and our Class B common stock has traded on the NASDAQ SmallCap
Market since February 2, 2000 under the symbol "TMAV."
Joshua Acquisition Corp.
- - Joshua Acquisition Corp. was formed as a Delaware corporation on June 28, 2001
by Oppenheimer for the purpose of entering into the merger agreement. Joshua
Acquisition Corp. has not engaged in any business activity other than in
connection with the merger and the related transactions.
THE SPECIAL MEETING OF STOCKHOLDERS
Date, Time and Place and Matters to be Considered (page 9)
The special meeting will be held on September 25, 2001, at 11:00 a.m.,
local time, at our offices at 555 Theodore Fremd Avenue, Rye, New York 10580. At
the special meeting, you will be asked to consider and vote upon a proposal to
adopt the merger agreement, a copy of which is attached hereto as Appendix A.
Record Date for Voting (page 9)
The close of business on August 6, 2001 is the record date for determining
holders of shares of our common stock entitled to vote at the special meeting.
Each share of Class A common stock will be entitled to four votes, and each
share of Class B common stock will be entitled to one vote. On the record date,
there were 5,317,222 shares of Class A common stock and 1,668,340 shares of
Class B common stock entitled to vote at the special meeting.
Vote Required (page 9)
A majority of the votes cast at the special meeting of the holders of
shares of our Class A common stock and our Class B common stock outstanding on
the record date, voting together as a single class, must be cast FOR the
adoption of the merger agreement in order for the merger to be completed. Each
share of our Class A common stock is entitled to four votes. Each share of our
Class B common stock is entitled to one vote.
Shares of Tremont common stock representing approximately 37% of the voting
power of Tremont have been committed to be voted FOR the adoption of the merger
agreement.
The Procedures Relating to Your Vote at the Meeting; Appraisal Rights (pages
9-10)
- - You should complete, date and sign your proxy card and mail it in the enclosed
return envelope as soon as possible so that your shares may be represented at
the special meeting, even if you
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plan to attend the meeting in person. Unless contrary instructions are indicated
on your proxy, all of your shares represented by valid proxies will be voted FOR
the adoption of the merger agreement.
- - For those participants who hold shares in the Tremont Advisers, Inc. Savings
Plan, the shares held in your account will be voted by the plan's trustees in
accordance with the terms of the plan.
- - If your shares are held in "street name" by your broker, your broker will vote
your shares only if you provide instructions on how to vote. You should follow
the procedures provided by your broker regarding the voting of your shares.
- - You are entitled to exercise appraisal rights in connection with the merger.
If you elect to exercise appraisal rights, you must deliver to us, before the
stockholder vote to adopt the merger agreement is taken, written notice of
your intent to demand appraisal of your shares if the merger is completed, and
you must not vote to adopt the merger agreement. Neither a failure to vote on
the merger agreement, nor an abstention from voting on the merger agreement,
will be construed as a vote to adopt the merger agreement. However, if you
return your signed proxy left blank, your vote will be counted in favor of the
merger agreement, and you will waive your appraisal rights.
- - A majority of the votes cast at the special meeting of the holders of shares
of our Class A common stock and our Class B common stock outstanding on the
record date, voting together as a single class, must be cast FOR the adoption
of the merger agreement in order for the merger to be completed. Each share of
our Class A common stock is entitled to four votes. Each share of our Class B
common stock is entitled to one vote. If you do not instruct your broker to
vote your shares or if you abstain from voting, it will have the same effect
as a vote against the adoption of merger agreement.
You can revoke your proxy and change your vote in any of the following ways:
- - Deliver to our Secretary at our executive offices, 555 Theodore Fremd Avenue,
Rye, New York, 10580, on or before the business day prior to the special
meeting, a later-dated, signed proxy card or a written revocation.
- - Deliver a later-dated, signed proxy card or a written revocation to us at the
special meeting.
- - Attend the special meeting and vote in person. Your attendance at the meeting
will not, by itself, revoke your proxy.
- - If you have instructed a broker to vote your shares, you must follow the
directions received from your broker to change those instructions.
Please do not send us any of your stock certificates at this time. If the merger
is completed, we will send you written instructions for exchanging your stock
certificates for the merger consideration.
THE MERGER AND THE MERGER AGREEMENT
What You Will Receive in the Merger
You will receive $19.00 per share in cash in exchange for each share of our
common stock that you own, subject to possible upward or downward adjustment.
The $19.00 per share represents a significant premium over the market price for
our shares prevailing before there was public speculation that we were pursuing
a potential transaction.
Background of the Merger (pages 11-14)
For a description of the events leading to the approval of the merger
agreement by the board of directors and the reasons for such approval, you
should refer to "Special Factors -- Background of the Merger" and
"-- Recommendations of our Board of Directors; Reasons for the Merger".
Purpose of the Merger; Certain Effects of the Merger (pages 14-15)
- - The principal purpose of the merger is to enable Oppenheimer to own all of the
equity interests in Tremont and provide you the opportunity to receive a cash
price for your shares at a significant premium over the market prices at which
the common stock traded before there was public speculation that we were
pursuing a potential transaction.
- - The merger will terminate all equity interests in Tremont held by public
stockholders, and Oppenheimer will be the sole beneficiary of any earnings and
growth of our company following the merger, except inasmuch as certain of our
employees will participate in the bonus plan and the retention plan described
on page 23.
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- - Upon completion of the merger, our Class A common stock will be delisted from
the OTC Bulletin Board and our Class B common stock will be delisted from the
NASDAQ SmallCap Market. Both classes of common stock will no longer be
publicly traded.
Recommendation of the Board; Reasons for the Merger (pages 15-16)
Tremont's board of directors has determined that the merger agreement and
the merger are advisable and are fair to you and in your and our best interests
and recommends that you vote "FOR" the adoption of the merger agreement. In
making this determination, the board of directors took into account, among other
things, the opinion of our financial advisor, Putnam Lovell Securities, Inc., to
the effect that, as of the date of the merger agreement and based upon and
subject to the factors and assumptions explained to the board of directors and
set forth in the opinion, the cash consideration to be received by you in the
merger is fair from a financial point of view.
Merger Financing; Source of Funds (page 25)
Oppenheimer has informed us that the aggregate merger consideration of
approximately $145.3 million to be paid to our stockholders (assuming that no
stockholders perfect their appraisal rights under Delaware law) and holders of
options to purchase our shares will be financed through cash on hand and, if
needed, capital contributions from its ultimate parent, MassMutual.
Conditions to the Merger (pages 38-39)
The completion of the transactions contemplated by the merger agreement
(also referred to as the closing) depends on the satisfaction of a number of
customary conditions, including the accuracy of representations and warranties,
compliance with pre-closing covenants, the absence of injunctions or similar
legal impediments that prevent the closing, compliance with certain regulatory
requirements and receipt of necessary government and regulatory approvals and
consents. Particularly noteworthy conditions to the obligations of all parties
to complete the merger include:
- - the expiration or termination of the waiting period under the
Hart-Scott-Rodino Act;
- - approval by NASD Regulation, Inc., the Ontario Securities Commission and the
U.K. Securities and Futures Authority; and
- - approval by our stockholders.
In addition, the obligation of Oppenheimer to complete the merger is subject to
certain additional conditions, including the following:
- - Our annualized investment management fees (also referred to as the revenue
run-rate), calculated as of the most recent calendar month-end not less than
fifteen (15) business days prior to the closing, not having declined to less
than $16,667,627.05, which is 85% of our revenue run-rate as of May 31, 2001;
and
- - the employment agreements with OppenheimerFunds, Inc., a subsidiary of
Oppenheimer, entered into by Sandra Manzke and Robert Schulman, our Co-CEO's,
simultaneously with the merger agreement (but effective as of the closing),
being in full force and effect.
The obligation of Oppenheimer to complete the merger is not subject to a
financing condition or any additional corporate proceedings by Oppenheimer, such
as the approval of its stockholders.
Termination of the Merger Agreement (pages 39-40)
The merger agreement may be terminated, whether before or after receipt of
stockholder approvals, by consent of the parties and for certain failures of
representations, warranties or covenants. It may also be terminated:
- - by us or Oppenheimer if the transactions contemplated by the merger agreement
have not been consummated by December 31, 2001;
- - by us or Oppenheimer if any law or regulation is enacted or promulgated that
materially restricts the merger or makes the merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree permanently
restraining or enjoining the merger becomes final and non-appealable;
- - by Oppenheimer if our board of directors fails to recommend the merger or the
merger agreement, fails to reconfirm its recommendation of the merger or the
merger agreement within three business days after a written request from
Oppenheimer to do so, withdraws or modifies its approval of the merger and the
merger agreement or changes its approval of the merger and the merger
agreement in a manner adverse to Oppenheimer, fails to call a meeting of our
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stockholders for the purpose of approving the merger and the merger agreement,
recommends that we enter into a competing transaction with someone else, or if
our stockholders do not approve the merger and the merger agreement before
December 30, 2001 or if a tender offer or exchange offer for 15% or more of
our common stock is commenced and our board of directors does not recommend
against acceptance of such a tender offer or exchange offer within the time
period required by the federal proxy rules;
- - by Oppenheimer if it has become impossible for Sandra Manzke or Robert
Schulman to be employed by Oppenheimer after the closing; or
- - by us, if we decide to enter an agreement involving a competing acquisition
transaction after our board of directors determines in good faith that the
competing acquisition transaction is better for our stockholders than the
merger.
Termination Fee Payable to Oppenheimer (pages 40-41)
We will be required to pay Oppenheimer a termination fee of $5.8 million if
either:
- - the merger agreement is terminated by us in connection with a decision by our
board of directors to enter into an agreement involving a competing
acquisition proposal;
- - the merger agreement is terminated by Oppenheimer following the withdrawal or
adverse modification by our board of directors of its approval or
recommendation of the merger to our stockholders or the failure of our
stockholders to approve the merger and the merger agreement by December 30,
2001;
- - within 18 months after we terminate the merger agreement because the merger
has not taken place by December 31, 2001, we enter into a binding agreement
for a transaction implementing another acquisition proposal or consummates an
acquisition proposal; or
- - the merger agreement is terminated by Oppenheimer because the employment
agreements between Oppenheimer and Sandra Manzke and Robert Schulman are not
in full force and effect.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES (PAGE 25)
The exchange of Tremont common stock for cash in the merger will be a taxable
transaction for U.S. federal income tax purposes, and accordingly you will
recognize gain or loss equal to the difference between the cash received and
your tax basis in the Tremont common stock exchanged in the merger. You must
generally calculate gain or loss separately for each block of Tremont common
stock that is exchanged in the merger. Provided you hold your Tremont common
stock as a capital asset, this gain or loss will be capital gain or loss, which
will be long-term capital gain or loss if your Tremont common stock has been
held for more than one year at the time of the merger.
You are urged to consult with your tax advisor with respect to the particular
U.S. federal, state, local or foreign income tax or other tax consequences of
the merger to you.
OPINION OF OUR FINANCIAL ADVISOR (PAGES 16-21)
Putnam Lovell Securities, Inc. delivered an opinion on July 10, 2001 to our
board of directors that, as of that date and based upon and subject to the
factors and assumptions set forth in the opinion and reviewed with our board of
directors, the consideration to be received by you in the transactions
contemplated by the merger agreement is fair to you from a financial point of
view. The opinion of Putnam Lovell is dated July 10, 2001, and opines as to the
fairness as of that date only. Putnam Lovell is not obligated to update its
opinion. Events could occur prior to the date of the special meeting which could
result in a different valuation or conclusion if the opinion was reissued on
that date. In the event that there are material changes to the terms of the
proposed transactions or other material changes or conditions affecting Tremont
or its business, our board of directors will consider the advisability of
requesting an updated fairness opinion at that time. As of the date of this
proxy statement, our board of directors does not believe any such material
changes have occurred.
Putnam Lovell will receive $1.9 million in exchange for its services if the
merger is completed. The full text of the written opinion of Putnam Lovell,
which sets forth a description of assumptions made, matters considered and
limitations on its review, is attached as Appendix B to this proxy
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statement. You are urged to read this opinion carefully in its entirety.
STOCKHOLDERS AGREEMENT (PAGES 27-28)
Ten persons holding shares of our common stock have entered into a stockholders
agreement with Oppenheimer pursuant to which they have agreed to vote FOR the
adoption of the merger agreement. Nine of these persons are directors and/or
officers of Tremont and one is a significant stockholder that is represented on
our board of directors. The stockholders agreement also provides that if the
merger agreement is terminated under certain circumstances, Oppenheimer may
purchase shares of our Class A common stock and Class B common stock held by
these ten stockholders at a purchase price per share equal to the merger
consideration. These stockholders hold shares of our Class A common stock and
Class B common stock representing approximately 37% of the votes entitled to be
cast at the special meeting on the proposal to adopt the merger agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGES 21-24)
In considering the recommendation of our board of directors with respect to the
merger, you should be aware that several of our executive officers and members
of the board of directors have interests in the transactions contemplated by the
merger agreement that are different from, or in addition to, the interests of
our stockholders generally.
Our board of directors was aware of these interests and considered them, among
other matters, in making its recommendation.
ADDITIONAL INFORMATION
If you have additional questions about the merger or would like additional
copies of the proxy statement, you should call James McCormick, our proxy
solicitor, or Stephen Clayton in our investor relations department, at (914)
925-1140.
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PARTIES TO THE MERGER
The transactions contemplated by the merger agreement are complex and
involve multiple parties. In order to facilitate your understanding of the
transactions, the following is a list of parties to the transaction.
Tremont Advisers, Inc. We were incorporated under the laws of the State of
Delaware. Our certificate of incorporation was filed with the Secretary of State
of the State of Delaware on September 28, 1987 under the name Lynch Asset
Management Corporation, and was amended to reflect a change in name to Tremont
Advisers, Inc., on October 8, 1991. Our executive offices are located at 555
Theodore Fremd Avenue, Rye, New York 10580. Our telephone number is (914)
925-1140.
Tremont is a holding company with three principal areas of business:
developing and managing proprietary investment funds, providing investment
advisory services and retrieving and selling information. All of Tremont's
activities are conducted by its subsidiaries.
Oppenheimer Acquisition Corp. Oppenheimer is incorporated under the laws
of the State of Delaware. Its executive offices are located at Two World Trade
Center, New York, New York 10048. Its telephone number is (212) 323-0200.
Oppenheimer is a holding company that directly owns OppenheimerFunds, Inc.,
a leading mutual fund manager. Oppenheimer is also an indirect majority-owned
subsidiary of Massachusetts Mutual Life Insurance Company, a Massachusetts
domiciled mutual life insurance company, which with its subsidiaries offers a
broad portfolio of asset management and insurance products and services,
including life insurance, annuities, retirement services products, long term
care products and other investment products.
Joshua Acquisition Corp. Joshua Acquisition Corp. was formed as a Delaware
corporation on June 28, 2001 by Oppenheimer Acquisition Corp. for the purpose of
entering into the merger agreement. Joshua Acquisition Corp. has not engaged in
any business activity other than in connection with the merger and the related
transactions.
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SPECIAL MEETING OF STOCKHOLDERS
DATE, TIME AND PLACE OF THE SPECIAL MEETING
This proxy statement is furnished to you in connection with the
solicitation of proxies by our board of directors for the meeting of
stockholders to be held at 11:00 a.m., local time, on September 25, 2001, at our
offices at 555 Theodore Fremd Avenue, Rye New York 10580 or any postponement or
adjournment of the meeting. This proxy statement, the Notice of Special Meeting
and the accompanying form of proxy card are first being mailed to stockholders
on or about August 21, 2001.
PURPOSE OF THE SPECIAL MEETING
At the special meeting, you will be asked to consider and vote upon a
proposal to adopt the merger agreement.
RECOMMENDATION OF OUR BOARD OF DIRECTORS
Our board of directors has unanimously approved the merger and the merger
agreement and recommends that you vote FOR the adoption of the merger agreement.
See "Special Factors -- Recommendation of our Board of Directors; Reasons for
the Merger".
RECORD DATE; QUORUM; OUTSTANDING COMMON STOCK ENTITLED TO VOTE
All record holders of shares of our common stock at the close of business
on August 6, 2001 are entitled to notice of, and to vote at, the special
meeting. The presence, in person or by proxy, of holders of shares of Tremont
common stock representing a majority of the voting power of Tremont is required
to constitute a quorum for the transaction of business. A list of record holders
will be available for examination at our principal executive offices from August
6, 2001 until the special meeting. At the close of business on August 6, 2001,
there were 5,317,222 shares of Class A common stock and 1,668,340 shares of
Class B common stock outstanding.
VOTING RIGHTS
You are entitled to four votes for each share of our Class A common stock
and one vote for each share of our Class B common stock that you hold as of the
close of business on the record date. A majority of the votes cast at the
meeting of the holders of shares of our Class A common stock and our Class B
common stock outstanding on the record date, voting together as a single class,
must be cast FOR the adoption of the merger agreement in order for the merger to
be completed. In determining whether the adoption of the merger agreement has
received the requisite number of affirmative votes, abstentions and broker
non-votes will have the same effect as a vote AGAINST the adoption of the merger
agreement. "Broker non-votes" are votes entitled to be cast by the beneficial
owners of shares of our Class A common stock or Class B common stock that are
held in street name by brokers who do not receive instructions from the
beneficial owners of those shares as to how those shares are to be voted.
VOTING AND REVOCATION OF PROXIES
A form of proxy card for your use at the special meeting accompanies this
proxy statement. Subject to the following sentence, all properly executed
proxies that are received prior to or at the special meeting and not revoked
will be voted at the special meeting in the manner specified. If you execute and
return a proxy and do not specify otherwise, the shares represented by your
proxy will be voted FOR the adoption of the merger agreement in accordance with
the recommendation of the board of directors. In that event, you will not have
the right to dissent from the merger and seek an appraisal of the fair value of
your shares.
If you have given a proxy pursuant to this solicitation, you may
nonetheless revoke it by attending the special meeting and voting in person. In
addition, you may revoke any proxy you give at any time before
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the special meeting by delivering to our Secretary at our executive offices, on
or before the business day prior to the special meeting, or at the special
meeting itself, a written statement revoking it or a duly executed proxy bearing
a later date. If you hold shares in the Tremont Advisers, Inc. Savings Plan, the
shares held in your account will be voted by the plan's trustees in accordance
with the terms of the plan. If you have executed and delivered a proxy to us,
your attendance at the special meeting will not in and of itself constitute a
revocation of your proxy. If you vote in favor of adopting the merger agreement,
you will not have the right to dissent and seek appraisal of the fair value of
your shares. If you do not instruct your broker to vote your shares or if you
abstain from voting, it will have the same effect as a vote against adoption of
the merger agreement.
SOLICITATION OF PROXIES
We will bear the cost of the solicitation of proxies. We will solicit
proxies initially by mail. Further solicitation may be made by our directors,
officers and employees personally, by telephone or otherwise, but they will not
be specifically compensated for these services. Upon request, we will reimburse
brokers, dealers, banks or similar entities acting as nominees for their
reasonable expenses incurred in forwarding copies of the proxy materials to the
beneficial owners of the shares of common stock they hold of record.
OTHER MATTERS
Except for the vote on the adoption of the merger agreement and upon
appropriate motion, an adjournment of the special meeting, no other matters may
come before the special meeting.
Your vote is important. Please vote by returning your marked proxy card so
your shares can be represented at the meeting, even if you plan to attend the
meeting in person.
You should not send any certificates representing common stock with your
proxy card. If we complete the merger, the procedure for the surrender of
certificates representing common stock will be as described below.
PAYMENT OF CASH MERGER CONSIDERATION
The merger will become effective at the time and on the date specified in
the certificate of merger to be filed with the Secretary of State of the State
of Delaware. We expect the filing of the certificate of merger and the effective
time of the merger to occur as soon as practicable after the special meeting,
subject to adoption of the merger agreement and the satisfaction or waiver of
the other conditions to completing the transactions provided in the merger
agreement, although Oppenheimer can postpone the filing of the certificate of
merger and the effective time of the merger to October 1, 2001 in the event that
we successfully satisfy these conditions before then.
We currently expect to complete the merger, which is subject to obtaining
requisite approvals and to other conditions, during the fourth quarter of 2001,
although there can be no assurance of the date by which the merger will be
completed. See "The Merger Agreement -- Conditions to the Merger". Detailed
instructions with respect to the surrender of your stock certificates, together
with a letter of transmittal, will be forwarded to you promptly following the
effective time of the merger by the paying agent appointed by Oppenheimer and
approved by us. You should not submit your stock certificates to the paying
agent until you receive these materials. The paying agent will send payment of
the merger consideration to you as promptly as practicable following
determination of the merger consideration and receipt by the paying agent of
your certificates and other required documents. No interest will be paid on the
merger consideration.
You should not send in your stock certificates until you receive a letter
of transmittal. You should send them only pursuant to instructions set forth in
the letter of transmittal.
We strongly recommend that stock certificates and letters of transmittal be
transmitted only by registered U.S. mail, return receipt requested,
appropriately insured for the risk of loss. Title to the
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certificates will pass only upon delivery of the certificates to the paying
agent. Stockholders whose certificates are lost will be required to make an
affidavit identifying such certificate or certificates as lost, stolen or
destroyed and, if required by us, to post a bond in such amount as we may
reasonably require to indemnify against any claim that may be made against us
with respect to such certificate.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In December of 2000, Tremont's senior management received an unsolicited
expression of interest from representatives of a European asset management
company regarding a possible strategic transaction and signed a confidentiality
agreement with that company on December 13, 2000. Ms. Manzke and Mr. Schulman
met with those representatives in New York in December 2000 and January 2001 and
discussed with them the compatibility of Tremont's growth strategy with a
European partner who could provide Tremont with increased access to the European
market and potential additional distribution capabilities in the United States.
As a result of these meetings, Ms. Manzke and Mr. Schulman concluded that this
European asset management company was a candidate for further discussions
regarding a strategic transaction and decided to maintain communications with
them.
After the January 2001 meetings, Mr. Schulman contacted Putnam Lovell
Securities, Inc. to discuss the possibility of engaging it as a financial
advisor to Tremont in evaluating its strategic alternatives. Putnam Lovell was
retained by Tremont on January 29, 2001, and the unsolicited indication of
interest received from the European asset management company was described to
representatives of Putnam Lovell.
During the first quarter of 2001, Mr. Schulman and Ms. Manzke had numerous
discussions with representatives of Putnam Lovell concerning the strategic
alternatives open to Tremont in pursuit of its growth strategy and objectives,
including the relative merits of remaining independent and of various types of
potential transactions with various counterparties. They discussed the
consolidation trends in the asset management industry generally, and in the
alternative asset management industry particularly. Based upon those discussions
with Tremont's senior management and on information provided by Tremont, Putnam
Lovell conducted a preliminary valuation of Tremont to provide management with a
reasonable fair value range which the market might assign Tremont. Tremont and
Putnam Lovell assembled a package of information on Tremont in early March 2001.
The information compiled included, among other items, a description of Tremont's
various business lines, an overview of its investments and distribution
platform, its strategic relationships, its distribution needs and its financial
projections.
On March 9, Tremont's senior management met with their counterparts at the
European asset management company. This meeting marked the beginning of the due
diligence investigation of Tremont's business by the European asset management
company. The previously compiled information on Tremont was presented to the
European firm and management on both sides presented an overview of their
respective businesses.
At approximately the same time, in early March, Oppenheimer expressed to
Putnam Lovell an interest in exploring a strategic transaction with Tremont.
Oppenheimer had been actively evaluating the alternative asset management
industry and had discussed Tremont with representatives of Putnam Lovell in the
fourth quarter of 2000. Pursuant to senior executive-level telephone
conversations between Oppenheimer and Tremont regarding the potential benefits
of a transaction, the two sides entered into a confidentiality agreement on
March 14, 2001. Subsequent to the signing of the confidentiality agreement, the
previously compiled information package on Tremont was made available to
Oppenheimer and an initial meeting between senior management on both sides was
arranged for later that week. Based on the degree of interest shown by both the
European asset management firm and Oppenheimer, the strong strategic benefit
that either would bring to expanding distribution of Tremont's investment
products, their experience in completing acquisitions of investment management
firms and the risk of business disruption
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that might result from a public auction process, it was decided to continue
discussions with the two interested parties and not put Tremont "in play" with a
public announcement.
Following these initial management presentation meetings with the European
asset management firm and Oppenheimer, several meetings and telephone calls were
arranged at various dates in March and April between senior Tremont personnel,
the two interested parties and Putnam Lovell. The principal objective of these
meetings and telephone calls was to clarify various aspects of Tremont's
business operations, the various assumptions underlying Tremont's financial
projections, the strategic fit between the businesses of Tremont and the
potential buyers and their vision for the management and growth of Tremont's
business should a strategic transaction be completed between them. Also
discussed were possible terms of any proposal to acquire Tremont and the
appropriateness of various methods of valuing Tremont's business.
Representatives of Putnam Lovell were present for and participated in the
majority these meetings.
As part of the ongoing discussions with respect to a potential strategic
fit, on March 29 and 30, Mr. Schulman, Ms. Manzke and Nicola Meaden, who is a
director as well as the CEO of Tremont's European subsidiary, at the invitation
of the European asset management company, traveled to Europe and held meetings
with certain of their management personnel.
On April 9, 2001, a written non-binding preliminary indication of interest
in effecting a transaction with Tremont was received from the European asset
management company, proposing a value of $16 per share of Tremont common stock.
It also proposed an incentive plan for management and key employees to take
effect after closing, providing for a share of the profits in excess of certain
agreed upon hurdles with regard to return on invested capital.
During the weeks of April 23 and April 30, a series of meetings was
arranged between representatives of the European asset management company and
Tremont personnel from various business function areas such as sales and
marketing, accounting and administration and manager research. Simultaneously,
the European firm was provided access to a "data room" which housed an extensive
list of Tremont due diligence material including legal contracts, corporate
documents, regulatory filings, audited and unaudited financial statements and
tax returns.
During the same period, on April 27, 2001, Oppenheimer submitted to
Tremont, in writing, a non-binding preliminary indication of interest for the
purchase of all of the outstanding common stock of Tremont. Oppenheimer's
proposal indicated that it valued Tremont's business at between $100 million and
$140 million, which implied a per share price of $13.40 to $18.30. The other
material term of Oppenheimer's initial proposal was the establishment of a
retention pool to be paid to senior management if certain financial targets were
achieved during the three to five year period after closing in an amount equal
to up to 10% of the purchase price.
During the two weeks ended May 25, 2001, Oppenheimer also scheduled various
meetings with Tremont personnel and conducted due diligence in Tremont's data
room. As with the European asset management company, the meetings focused on
various business function areas, such as sales and marketing, accounting and
administration and manager research.
Following the formal due diligence meetings, through late May and
continuing into early June, Tremont's senior management and representatives of
Putnam Lovell continued to work with each of the prospective buyers in assisting
them with their due diligence investigation of Tremont's business.
In the same period, during the week of May 21, 2001, Putnam Lovell and
Skadden, Arps, Slate, Meagher & Flom LLP, Tremont's legal counsel, drafted and
sent to the European asset management company and Oppenheimer a draft merger
agreement and a "protocol letter" inviting them to submit their final bids for
the acquisition of Tremont and to also submit a mark-up of the draft merger
agreement.
On June 4, the European asset management company submitted a revised bid to
acquire all of the outstanding common stock of Tremont for $17 per share. The
revised bid included a more detailed proposal of a near-term and a long-term
incentive plan for key employees. It also proposed that long-term employment
contracts be signed by certain key employees, including non-competition and
non-solicitation
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covenants, prior to the signing of definitive merger agreement. The revised bid
also proposed a number of closing conditions, including a 90% revenue run-rate
test, other customary conditions and certain regulatory consents and approvals,
including the approval of regulators in its home jurisdiction.
The revised bid also contemplated an upward adjustment in the event Tremont
was able to sell certain of its business lines for a price in excess of the
value the asset management company attributed to them in calculating its revised
bid. It also contemplated a termination fee of $5 million if Tremont's board of
directors were to withdraw its recommendation of the transaction, solicit or
entertain offers for an alternative transaction or fail to call a stockholders'
meeting for the purpose of approving the transaction.
On June 8, Oppenheimer submitted a revised bid to acquire all of the
outstanding common stock of Tremont for $18.25 per share. The other material
terms of Oppenheimer's revised bid included a termination fee of 4% of the
aggregate merger consideration and an adjustment to the purchase price based on
Tremont's working capital at closing. It also proposed a bonus pool for certain
key employees based on a percentage of Tremont's operating income and a
retention pool payable to senior management if certain financial targets were
achieved over the five year period following the closing, with a minimum
cumulative payment of $3 million in the first two years and a maximum cumulative
payment over five years of up to 10% of the aggregate merger consideration. The
revised bid contemplated the signing of a stockholders' agreement by certain
stockholders in support of the transaction and the execution of long-term
employment contracts, containing non-competition and non-solicitation
provisions, by Ms. Manzke and Mr. Schulman as a condition to Oppenheimer's
willingness to proceed with the transaction.
On June 12, at a meeting of the board of directors, senior management
informed the board of directors of the status of the negotiations.
Representatives from Putnam Lovell, who had been invited to the meeting to
report to the board of directors on the bids received from the European asset
management company and Oppenheimer and provide their assessment of the two
proposals, then outlined a comparison of the essential terms of each bid. They
confirmed that the pricing proposals fell within an appropriate range and,
referring in particular to Oppenheimer's bid, reported that, based upon recent
comparable transactions in the asset management industry, the price proposed by
Oppenheimer for the Tremont common stock was competitive. They further informed
the board of directors that both bidders had been asked to submit markups of a
draft merger agreement setting forth the basic terms and conditions of their
respective offers in an effort to allow Tremont to more fully assess the
substance of each proposal. Putnam Lovell also reported that the European
potential buyer had expressed its unwillingness to submit a markup unless and
until it received a more definitive indication of Tremont's willingness to
proceed with them on an exclusive basis. After discussion, the board of
directors concluded that neither proposal was yet sufficiently developed for the
board to determine which proposal was more desirable or to conclude that either
proposal should be accepted. The board therefore directed Putnam Lovell to
pursue possible improvement in the proposals, and scheduled a further meeting to
be held on or about June 28, 2001.
On June 15 Oppenheimer's legal counsel presented an initial draft of a
merger agreement to assist Tremont in evaluating its revised bid. The draft
provided Tremont with an indication of the types of closing conditions
Oppenheimer would expect to obtain, the depth and extent of the representations,
warranties and covenants Oppenheimer would require and the termination rights it
would expect to have.
During the weeks of June 11 and June 18, senior management of Tremont and
representatives of Putnam Lovell had several telephone conversations with
representatives of the European asset management company to further discuss its
valuation of Tremont's business. The bidder was urged to present a draft
acquisition agreement to assist Tremont in evaluating its bid and to provide
more specificity as to the terms of the transaction it proposed to enter into,
but the bidder declined to do so.
During the weeks of June 11, June 18 and June 25, senior management of
Tremont and representatives of Putnam Lovell had several telephone conversations
with representatives of Oppenheimer to further discuss Oppenheimer's valuation
of Tremont's business. As a result of these conversations, Oppenheimer revised
its bid upwards to $19.00 per share.
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Beginning in mid-June, numerous calls and meetings took place involving
senior management of Tremont and Oppenheimer, representatives of Putnam Lovell,
Skadden, Arps and legal counsel to Oppenheimer. During this period, Oppenheimer
completed its due diligence investigation of Tremont's business and during the
course of these negotiations the specific terms of the merger agreement, the
employment agreements, the retention plan and bonus plan for employees and the
stockholders' agreement were discussed.
On June 27, the board of directors held a telephonic meeting at which
Putnam Lovell and Skadden, Arps were present, to review the status of
negotiations regarding the Oppenheimer proposal. Putnam Lovell reviewed with the
board of directors a brief history of the process and negotiations leading up to
the current proposal and outlined the financial consideration proposed to be
paid by Oppenheimer. Putnam Lovell then proceeded to discuss in detail the
process it was undertaking in order to opine on the fairness of the merger
consideration to be paid by Oppenheimer. Among the analyses presented to the
board of directors were current trading values of a universe of comparable
publicly traded firms, valuations in precedent transactions and a discounted
cash flow analysis. Putnam Lovell gave its preliminary view that, based upon
their review of several factors, including but not restricted to the ones
outlined above, they were of the opinion that the merger consideration to be
received by stockholders of Tremont under Oppenheimer's proposal was fair to the
Tremont's stockholders from a financial point of view. Putnam Lovell indicated
its intent to render a formal fairness opinion regarding the transaction at the
time the agreement was signed as to the terms of the definitive merger
agreement. The board of directors authorized senior management and Tremont's
counsel to attempt to conclude the negotiation of the terms of the transaction
documents at which time it would consider approval of the transaction presented.
On the morning of Monday, July 9, the board of directors of Tremont
convened a special telephonic meeting to consider the merger agreement, in
substantially final form, and the specific terms of the proposed transaction
with Oppenheimer. The directors reviewed materials that had been provided to
them earlier, including drafts of the merger agreement and the stockholders
agreement and other materials. After a discussion, the directors unanimously
approved the merger and the merger agreement and directed Tremont's management
to complete the transaction.
Early in the morning of July 10, 2001, Tremont and Oppenheimer finalized
the terms of the transaction and executed the merger agreement. At the same
time, Putnam Lovell delivered to Tremont its written opinion that the merger
consideration was fair to Tremont's stockholders from a financial point of view.
The parties issued press releases regarding the execution of the transaction
documents prior to the opening of business in New York on July 10, 2001.
PURPOSE OF THE MERGER; CERTAIN EFFECTS OF THE MERGER
The principal purpose of the merger is to enable Oppenheimer to own all of
the equity interest in Tremont and afford our public stockholders the
opportunity to receive a cash price for their shares that represents a
significant premium over the market price for our shares prevailing before there
was public speculation that we were pursuing a potential transaction, which
became evident following the publication of unauthorized press reports in
February 2001 that we were pursuing a potential transaction. The principal
purpose will be accomplished by a merger of Joshua Acquisition Corp., a
corporation formed and wholly-owned by Oppenheimer, with and into Tremont, with
Tremont as the surviving corporation. In the merger, all of the shares of Joshua
Acquisition Corp. will be converted into shares of Tremont and all of the shares
of Tremont common stock held by our stockholders (other than Tremont,
Oppenheimer and Joshua Acquisition Corp. and other than dissenting stockholders
who perfect their appraisal rights) will be converted into the right to receive
the cash merger consideration of $19.00 per share, subject to possible upward or
downward adjustment.
The merger will terminate all equity interests in Tremont held by our
stockholders and Oppenheimer will be the sole beneficiary of any earnings and
growth of Tremont following the merger, except inasmuch as certain of our
employees will participate in the bonus plan and the retention plan described on
page 23. Our Class B common stock is currently registered under the Securities
Exchange Act of 1934 (the
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"Exchange Act"). Tremont's Class A common stock is quoted on the OTC Bulletin
Board under the symbol "TMAVA", and our Class B common stock has traded on the
NASDAQ SmallCap Market since February 2, 2000 under the symbol "TMAV."
RECOMMENDATION OF OUR BOARD OF DIRECTORS; REASONS FOR THE MERGER
Recommendation of our Board of Directors
Our board of directors believes that the merger and the terms of the merger
agreement are fair to and in the best interests of our stockholders.
Accordingly, our board of directors unanimously approved the merger agreement
and the merger and recommends adoption of the merger agreement.
Reasons for the Merger
In its determination to approve and recommend the adoption of the merger
agreement, and in reaching its determination that the merger agreement and the
merger are advisable and are fair to and in the best interests of our
stockholders, our board of directors considered the following factors:
- the fact that the merger consideration on a per share basis represents a
significant premium over market prices for our shares prevailing before
there was public speculation that we were pursuing a potential
transaction, including 58% premium over the thirty-day average closing
price of $12.02 per share preceding the unauthorized article appearing in
MarHedge on February 8, 2001 and a 27% premium over the thirty-day
average closing price of $14.93 per share preceding the unauthorized
article appearing in Hedge Fund Alert on April 25, 2001;
- our board of directors' view, based on its knowledge and beliefs
regarding the current and prospective environment in which we operate, of
the globalization of the securities markets, the increasing consolidation
of financial services companies resulting in large and well-capitalized
market participants, and the advantages of becoming part of a large and
well-capitalized financial services company;
- the strategic options available to us and the assessment of our board of
directors that none of these options were reasonably likely to present
superior opportunities or to create greater value for our stockholders
than the prospects presented by the merger with Oppenheimer;
- the written opinion of Putnam Lovell given to our board of directors on
July 10, 2001 that, as of that date and on the basis of and subject to
the matters reviewed with the board of directors, the merger
consideration was fair from a financial point of view to our
stockholders;
- the terms of the merger and the merger agreement as negotiated,
including:
(1) the $19.00 per share cash merger consideration, subject to possible
adjustment;
(2) the absence of any revenue run-rate adjustment;
(3) the ability to terminate the merger agreement under certain
circumstances (including, in the event that a superior acquisition
bid is proposed); and
(4) the payment of a termination fee to Oppenheimer in the event the
transactions are not completed under certain circumstances.
- the likelihood of the merger being approved by requisite regulatory
authorities;
- the likelihood that other conditions contained in the merger agreement
will be satisfied; and
- the interests of certain directors and executive officers that are
different from, or in addition to, the interests of our stockholders
generally as described under "Special Factors -- Interests of Certain
Persons in the Merger".
The above discussion concerning the information and factors considered by
our board of directors is not intended to be exhaustive, but includes all of the
material factors considered by our board of directors
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in making its determination. In view of the wide variety of factors considered
in connection with our evaluation of the merger and the merger agreement, our
board of directors did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the foregoing factors. Rather,
our board of directors viewed its position and recommendation as being based on
the totality of the information presented to and considered by it.
OPINION OF OUR FINANCIAL ADVISOR
On January 29, 2001, Putnam Lovell was retained by Tremont to assist
Tremont in evaluating its strategic alternatives. In connection with this
engagement, Putnam Lovell was requested to evaluate the fairness, from a
financial point of view, of the merger consideration to be received by the
holders of shares of Tremont common stock pursuant to the merger agreement. At a
meeting of Tremont's board of directors held on July 9, 2001 to consider the
merger agreement, Putnam Lovell delivered to the board of directors its oral
opinion that, as of that date and based upon and subject to the matters reviewed
with the board of directors, the merger consideration to be received by the
holders of shares of Tremont common stock was fair to them from a financial
point of view.
Putnam Lovell reaffirmed this oral opinion through a written opinion
delivered on July 10, 2001, the date on which the merger agreement was signed.
The opinion opines as to the fairness as of that date only, and Putnam Lovell is
not obligated to update its opinion. Events could occur prior to the date of the
special meeting which could result in a different valuation or conclusion if the
opinion was reissued on that date. In the event that there are material changes
to the terms of the proposed transaction or other material changes or conditions
affecting Tremont or its business, our board of directors will consider the
advisability of requesting an updated fairness opinion at that time. As of the
date of this proxy statement, the board of directors does not believe any such
material changes have occurred.
THE FULL TEXT OF PUTNAM LOVELL'S WRITTEN OPINION DATED JULY 10, 2001, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT. YOU SHOULD
READ THE OPINION CAREFULLY IN ITS ENTIRETY. THE OPINION OF PUTNAM LOVELL IS
DIRECTED TO TREMONT'S BOARD OF DIRECTORS AND RELATES ONLY TO THE FAIRNESS OF THE
MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF TREMONT
COMMON STOCK. THE OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF THE TRANSACTION
CONTEMPLATED BY THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY TREMONT STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO
THE TRANSACTION CONTEMPLATED BY THE MERGER AGREEMENT. IN ADDITION, THE OPINION
DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION BY TREMONT'S BOARD OF
DIRECTORS TO EFFECT THE TRANSACTION CONTEMPLATED BY THE MERGER AGREEMENT. THE
SUMMARY OF THE OPINION OF PUTNAM LOVELL SET FORTH IN THIS DOCUMENT IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In arriving at its opinion, Putnam Lovell, among other things:
- reviewed certain publicly available historical audited and unaudited
financial statements and other information regarding Tremont;
- reviewed the financial terms and conditions of the merger agreement;
- reviewed and discussed with management of Tremont certain information of
a business and financial nature furnished to Putnam Lovell by Tremont
including financial analyses and projections of Tremont prepared by the
management of Tremont;
- reviewed certain publicly available information concerning the trading
of, and the trading market for, Tremont common stock;
- compared the financial performance of Tremont with certain other
companies in the investment management industry that Putnam Lovell deemed
to be relevant;
- considered the financial terms of selected recent business combinations
of companies that Putnam Lovell deemed to be comparable, in whole or in
part, to the merger;
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- made inquiries regarding and discussed the merger and the merger
agreement and other matters related thereto with Tremont's counsel; and
- performed such other analyses and examinations as Putnam Lovell deemed
appropriate.
In preparing its opinion, Putnam Lovell assumed and relied upon the
accuracy and completeness of the financial and other information supplied or
otherwise made available to it from public sources or by Tremont and did not
independently verify such information. Putnam Lovell neither obtained nor
performed any independent valuation or appraisal of the assets or liabilities of
Tremont. With respect to the financial projections and forecasts of Tremont
provided to Putnam Lovell by Tremont, Putnam Lovell assumed that such financial
projections and forecasts were reasonably prepared and reflect the best
currently available estimates and good faith judgments of the senior management
of Tremont as to the future competitive, operating and regulatory environments
and related financial performance of Tremont. Putnam Lovell's opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information and agreements made available to it as of, July 10, 2001.
In connection with its opinion, Putnam Lovell performed various financial
analyses which it presented to and discussed with the board of directors of
Tremont at a meeting held on June 27, 2001. At the meeting of the board of
directors held on July 9, 2001, Putnam Lovell reviewed in summary form the
material presented to the board of directors on June 27 and re-affirmed its
conclusions in light of intervening market activity. The material analyses
performed by Putnam Lovell in connection with rendering it opinion are described
below. These descriptions of financial analyses include information presented in
tabular format. In order to fully understand the financial analyses performed by
Putnam Lovell, the tables must be read together with the text of each
description. The tables alone do not constitute a complete description of the
financial analyses. Considering the data in the tables without considering the
full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could create a misleading
or incomplete view of the financial analyses performed by Putnam Lovell.
Among the analyses performed by Putnam Lovell were:
- the valuation of the Oppenheimer proposal, taking into account the total
purchase price, including the cost of retiring outstanding stock options
and enterprise value, accounting for the value of the balance sheet and
estimated working capital requirements, as calculated by Putnam Lowell;
- An historical profile of Tremont revenue growth across various business
segments in 1999, 2000 and over the period from 1998 to 2000;
- An analysis of the significant contribution to Tremont's revenues from a
single relationship it has with an investment manager to its proprietary
investment products;
- Analysis of Tremont's weekly stock price and volume history for the
period beginning January 3, 1997 and ending July 6, 2001;
- Analysis of Tremont's daily stock price and volume history for the period
beginning July 10, 2000 and ending July 6, 2001;
- A relative volume analysis comparing Tremont's average daily volume on an
absolute basis and expressed as a percentage of primary shares
outstanding with figures for the four smallest asset managers by market
capitalization (Gabelli Asset Management, W.P. Stewart & Company, Ltd,
Affiliated Managers Group and John Nuveen Company);
- A comparative analysis of select Tremont financial data against a group
of publicly traded asset management firms;
- A discounted cash flow analysis of future after-tax operating cash flows;
and
- An analysis of comparable precedent transactions using publicly available
information and Putnam Lovell estimates.
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Comparable Public Companies Analysis
Using publicly available information, Putnam Lovell analyzed selected
financial data for the Putnam Lovell Index of publicly-traded asset management
companies and compared the data with comparable data for Tremont. The Putnam
Lovell Index is a market cap weighted index comprised of the following
companies:
- Federated Investors, Inc.
- Eaton Vance Corporation
- Neuberger Berman Inc.
- John Nuveen Company
- Gabelli Asset Management Inc.
- BlackRock, Inc.
- Affiliated Managers Group, Inc.
- AMVESCAP PLC
- Waddell & Reed Financial, Inc.
- Alliance Capital Management L.P.
- Franklin Resources, Inc.
- T. Rowe Price Associates, Inc.
- W.P. Stewart & Company, Ltd.
- Stilwell Financial Inc.
- Tremont Advisers Inc.
Putnam Lovell compared the relative stock price performance of Tremont and
the Putnam Lovell Index for the period beginning January 3, 1997 and ending July
6, 2001, and for the period beginning July 10, 2000 and ending July 6, 2001.
Putnam Lovell also compared the price/earnings ratio of Tremont and the Putnam
Lovell Index for the period beginning January 3, 1997 and ending July 6, 2001.
In addition, using publicly available information, Putnam Lovell analyzed
selected financial data for each of five publicly traded asset managers that
Putnam Lovell considered comparable to Tremont (referred to here as the selected
companies), and compared the data with comparable data for Tremont. Given the
fact that Tremont's investment products are unique among the universe of
publicly traded firms, Putnam Lovell chose selected companies from those firms
in the Putnam Lovell Index of publicly-traded asset managers that service the
high net-worth market and that Putnam Lovell anticipates to grow the most
rapidly. In performing its analysis, Putnam Lovell reviewed selected financial
data for the following selected companies:
- Federated Investors, Inc.
- Eaton Vance Corporation
- Neuberger Berman Inc.
- John Nuveen Company
- Gabelli Asset Management Inc.
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Historical Growth Comparison
For each of the selected companies and for Tremont, Putnam Lovell
calculated the historical three-year and one-year compound annual growth rates
as of December 31, 2000 for:
- Assets under management;
- Revenues;
- Earnings before income tax, depreciation and amortization (known as
EBITDA); and
- Net income.
Putnam Lovell's analysis resulted in the following growth ranges:
<Table>
<Caption>
SELECTED
COMPANIES RANGE TREMONT
--------------- -------
ASSETS UNDER MANAGEMENT
-- 3 year compound annual growth rate*................... 0% - 32% 54%
-- 1 year compound annual growth rate.................... 2% - 20% 39%
REVENUES
-- 3 year compound annual growth rate*................... 11% - 30% 47%
-- 1 year compound annual growth rate.................... 5% - 33% 40%
EBITDA
-- 3 year compound annual growth rate*................... 12% - 40% 68%
-- 1 year compound annual growth rate.................... 7% - 132% 79%
NET INCOME
-- 3 year compound annual growth rate*................... -3% - 45% 66%
-- 1 year compound annual growth rate.................... -5% - 635% 57%
</Table>
- ---------------
*For each of Gabelli Asset Management Inc., Neuberger Berman Inc. and Tremont,
the historical compound annual growth rate represents the period 1998-2000.
Valuation Comparison
For each of the selected companies and for Tremont, Putnam Lovell
calculated multiples of fully diluted enterprise value to:
- Estimated revenues for fiscal year 2001;
- Estimated earnings before income tax, depreciation and amortization
("EBITDA") for fiscal year 2001; and
- Estimated net income for fiscal year 2001.
Estimated financial information for the selected companies and Tremont were
based upon estimates furnished by Putnam Lovell's research analysts. Multiples
were calculated assuming the prices of public companies on July 6, 2001 and the
$19.00 per share price for Tremont shares of common stock to be paid by
Oppenheimer. Putnam Lovell's analysis resulted in the following range of
multiples:
<Table>
<Caption>
SELECTED
COMPANIES RANGE TREMONT
--------------- -------
2001 Estimated Revenues.................................... 3.9x - 5.3x 4.7x
2001 Estimated EBITDA...................................... 7.1x - 12.9x 15.2x
2001 Estimated Net Income.................................. 16.5x - 22.3x 25.4x
</Table>
Discounted Cash Flow Analysis
Putnam Lovell also performed a discounted cash flow analysis to estimate
the value of Tremont common stock implied by the present value of estimated
future after-tax operating cash flows. After-tax
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operating cash flow was defined as operating earnings prior to depreciation,
amortization, interest income, interest expense, equity in earnings of
investments and losses from joint venture operations but after taxes, capital
expenditures, and changes in working capital requirements.
This analysis examined the range of implied share prices of Tremont common
stock over a range of forecasted five-year growth rates of EBITDA and assuming a
range of discount rates. In each case the estimated future cash flows beyond the
five-year forecast period was estimated through applying a 9x multiple to the
estimated EBITDA in the fifth year of the forecast period. The range of growth
rates used was 10% to 30% linear growth over the five-year forecast period and
was based upon discussions with management as to their outlook for the business
through December 31, 2003 and Putnam Lovell's view of appropriate long-term
growth rates for Tremont thereafter, including the sustainability of its current
rates of growth. The range of discount rates used was 14% to 20% and reflected
current capital market conditions and risks associated with Tremont's business.
The starting point for the analysis was Tremont's $8.8 million of estimated
EBITDA for the 12 months ended September 30, 2001, the assumed closing date of
the merger transaction.
The value of Tremont common stock was calculated on a fully diluted basis
and equal to the sum of the range of values determined from the above-mentioned
analysis and the value of the estimated September 30, 2001 balance sheet. This
analysis produced values for Tremont that ranged from $11.10 to $26.49 per
share.
Precedent Transaction Analysis
Using publicly available information and Putnam Lovell estimates, Putnam
Lovell considered three transactions within the asset management industry that
involved the acquisition of firms that are comparable to Tremont, in that each
firm operated in the multi-strategy, multi-manager fund-of-hedge funds product
market.
Putnam Lovell compared multiples paid in the precedent transactions to the
proposed consideration to be paid for Tremont. Putnam Lovell's analysis resulted
in the following range of multiples:
<Table>
<Caption>
HIGH MEDIAN LOW TREMONT
----- ------ ---- -------
CLOSING VALUATION
-- multiple of run-rate EBITDA................... 10.0x 9.3x 7.5x 12.2x
-- multiple of management fees................... 7.0x 5.2x 3.4x 5.5x
TOTAL VALUATION (Net Present Value)
-- multiple of run-rate EBITDA................... 11.5x 11.5x 9.3x 12.2x
-- multiple of management fees................... 8.0x 5.2x 5.2x 5.5x
</Table>
Based upon the foregoing and in reliance thereon, it was Putnam Lovell's
opinion on July 10, 2001 that the merger consideration to be received by the
stockholders of Tremont pursuant to the merger is fair to the stockholders, from
a financial point of view, as of July 10, 2001.
While this summary describes the material analyses and factors that Putnam
Lovell Securities considered in rendering its opinion to the Tremont board, it
is not a complete description of all analyses and factors considered by Putnam
Lovell Securities. The preparation of a fairness opinion is a complex process
that involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to partial analysis or summary description. In arriving at its opinion, Putnam
Lovell Securities did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Putnam
Lovell Securities believes that its analyses must be considered as a whole and
that selecting portions of its analyses and any of the factors considered by it,
without considering all analyses and factors, could create a misleading or
incomplete view of the evaluation process underlying its opinion. Several
analytical methodologies were employed and no one method of analysis should be
regarded as critical to
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the overall conclusion reached by Putnam Lovell Securities. Each analytical
technique has inherent strengths and weaknesses, and the nature of the available
information may further affect the value of particular techniques. The
conclusion reached by Putnam Lovell Securities is based on all analyses and
factors taken as a whole and also on application of Putnam Lovell Securities'
own experience and judgment. This conclusion may involve significant elements of
subjective judgment and qualitative analysis. Putnam Lovell Securities therefore
gives no opinion as to the value or merit standing alone of any one or more
parts of the analysis it performed.
In performing its analyses, Putnam Lovell Securities made numerous
assumptions with respect to industry performance, general business and other
conditions and matters that are beyond the control of Tremont or Putnam Lovell
Securities. Any estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by these analyses.
Accordingly, analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which these businesses actually may be
sold in the future, and these estimates are inherently subject to uncertainty.
Putnam Lovell has acted as financial advisor to Tremont's board of
directors in connection with the merger and will receive a fee from Tremont for
its services, a significant portion of which is contingent upon the completion
of the merger. Putnam Lovell provides a full range of financial advisory and
securities services and, in the normal course of trading activities, may from
time to time effect transactions in securities of Tremont for the account of
customers.
Putnam Lovell's opinion is directed to Tremont's board of directors in its
consideration of the merger and is not a recommendation to any stockholder as to
how such stockholder should vote with respect to the merger. Further, Putnam
Lovell's opinion does not address the relative merits of the merger to any
alternatives to the merger, Tremont's decision to proceed or effect the merger,
or any other aspect of the merger. In furnishing its opinion, Putnam Lovell does
not admit that it is an expert within the meaning of the term "experts" as used
in the Securities Act and the rules and regulations promulgated thereunder, nor
does it admit that its opinion constitutes a report or valuation within the
meaning of Section 11 of the Securities Act.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of our board of directors with respect to
the merger, stockholders should be aware that the executive officers and
directors have some interests in the merger that may be different from, or in
addition to, the interests of stockholders generally. The board of directors was
aware of these interests and considered them, among other matters, in making its
recommendation.
Employment Agreements
The merger agreement provides that, in connection with the merger,
employment agreements will be entered into by certain key executives of Tremont.
In addition, Tremont will continue to employ, immediately following the
effective time of the merger, each of its current employees on terms
substantially similar to the terms of their current employment, and will assume
all employment and other related agreements with respect to any current
employee.
Agreements with Ms. Manzke and Mr. Schulman
OppenheimerFunds, Inc. (referred to as OFI), an operating subsidiary of
Oppenheimer, has entered into an employment agreement with each of Sandra Manzke
and Robert I. Schulman, each a Co-Chief Executive Officer of Tremont. The terms
of these employment agreements are substantially the same and provide that Ms.
Manzke and Mr. Schulman will serve as the Co-Chief Executive Officers of Tremont
or in other positions to which they may be appointed from time to time by OFI.
The employment will become effective upon completion of the merger and continue
until December 31, 2006, unless sooner terminated as provided therein.
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Salary; Bonus; Other Benefits. During the term of the employment
agreements, Ms. Manzke and Mr. Schulman will each be paid an annual base salary
of $500,000 and will be eligible to receive an annual discretionary bonus of up
to 150% of the base salary (but in no event less than the lower of $500,000 or
20% of the Tremont bonus pool (described below)). Ms. Manzke and Mr. Schulman
will also be entitled to participate in the retention plan described below in
accordance with its terms. In addition, Ms. Manzke and Mr. Schulman will receive
employee benefits on the same basis as other similarly situated OFI executives.
Termination of Employment. Each executive may terminate his or her
employment and receive severance payments under certain circumstances (a
"Permitted Termination"). Such circumstances include, among other things,
termination of employment by the executive following (i) a material breach of
the terms and provisions of the employment agreement to which the executive is a
party, which breach is not cured within sixty (60) days after written notice,
(ii) a requirement that the executive render his or her regular duties on an
ongoing basis in New York City or more than twenty miles from the location at
which the executive currently performs regular business duties, or (iii) a
material diminution of the level of the executive's title and reporting position
to the board of directors of Tremont, OFI or Oppenheimer from those in effect
immediately following the completion of the merger. In the event of a Permitted
Termination by the executive or a termination of the executive's employment by
OFI other than by reason of death or disability, for cause or due to the
executive's deficient performance, OFI will pay to the executive a severance
payment equal to (i) base salary through the end of the employment term, plus
(ii) the discretionary bonus, prorated through the termination date (based upon
the percentage of the discretionary bonus pool received by the executive in
respect of the year preceding termination). In addition, the terminated
executive shall continue to receive health and welfare benefits for one year
following his or her termination of employment.
Covenant Not to Compete. The agreements contain covenants not to compete,
not to solicit employees or clients, and not to interfere with the business of
Tremont, OFI or Oppenheimer or any of their subsidiaries, for a period of seven
years commencing upon completion of the merger (and continuing throughout the
term of employment, if longer than seven years). However, in the event that the
executive is terminated by OFI (other than for cause or due to the executive's
deficient performance), or the executive terminates employment by a Permitted
Termination, then the non-competition period will end two years following the
executive's termination.
Other Agreements with Messrs. Clayton and Colvin
Tremont will continue to employ Barry Colvin as Chief Operating Officer and
Stephen T. Clayton as Chief Financial and Administrative Officer.
Mr. Colvin is currently employed pursuant to an employment agreement dated
August 14, 2000 which will terminate on January 1, 2002. Mr. Colvin has agreed
to enter into a new employment agreement with Tremont that will become effective
on January 1, 2002, and will terminate on December 31, 2002. Under the new
employment agreement, Mr. Colvin will be paid a salary of $300,000 and an annual
bonus of at least $300,000, provided he meets certain performance
specifications. In addition, Mr. Colvin will be eligible to participate in a
similar manner as other Tremont employees in employee benefit plans and
programs. In the event that Mr. Colvin is terminated without cause, he will
receive a severance payment equal only to the balance of the base salary and
annual bonus due to him through December 31, 2002. Mr. Colvin covenants that (i)
for a period of one year following termination he will not, directly or
indirectly, solicit the employment of any other person employed by Tremont or
its affiliates, and (ii) in the event Mr. Colvin voluntarily terminates his
employment with Tremont, for a period of six months following such termination
(but, in no event beyond December 31, 2002), he will not compete with Tremont in
certain markets or solicit its customers.
Mr. Clayton is currently employed pursuant to an employment agreement dated
January 31, 2001, which will terminate on December 31, 2002. On January 1, 2002,
Mr. Clayton's current employment agreement will be terminated. Mr. Clayton has
agreed to enter into a new employment agreement with
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Tremont that will become effective on January 1, 2002 and will terminate on
December 31, 2003. Under the new employment agreement Mr. Clayton will be paid
an annual base salary of at least $275,000 and a discretionary minimum bonus of
at least $200,000. In addition, Mr. Clayton will be eligible to participate in a
similar manner as other Tremont employees in employee benefit plans and
programs. In the event that Mr. Clayton terminates his employment for good
reason (including (i) a material and adverse change in Mr. Clayton's duties
without his consent and (ii) a reduction in Mr. Clayton's title, reporting
relationship, salary or benefits, except in connection with a general reduction
of salaries and benefits by Tremont) or is terminated by Tremont without cause,
he will receive compensation and benefit (including base salary and bonus based
upon the bonus paid to him in 2001) continuation through December 31, 2003,
which compensation will be offset and reduced by the amount of any compensation
payment he receives from other employment (including self-employment). Pursuant
to the agreements, Mr. Clayton covenants that (i) for a period of one year
following termination he will not, directly or indirectly, solicit the
employment of any other person employed by Tremont and its affiliates, and (ii)
for a period of one year following termination of his employment, he will not
engage in a competitive business in Tremont's market area or solicit or accept
business from any of its customers.
Retention Payments
In connection with the transaction contemplated by the merger agreement, a
retention plan will be adopted which provides for the payment of up to
$14,000,000 in two classes of awards (referred to as "Class A Awards" and "Class
B Awards") to selected employees of Tremont, including Ms. Manzke and Mr.
Schulman.
Class A Awards. Tremont will make payments totaling in the aggregate
$3,000,000, in two equal installments, each totaling in the aggregate
$1,500,000, to selected employees (other than Ms. Manzke and Mr. Schulman) on
each of December 31, 2002 and December 31, 2003.
Class B Awards. The remainder of the retention payments will be
distributed as Class B Awards, which will vest in annual installments but not be
payable until after December 31, 2006. Within 60 days following December 31,
2006, Tremont will pay each holder of a Class B Award his proportionate vested
share of the "Remaining Pool", which will consist of an amount equal to the
excess, if any, of:
(i) 20% of the excess of (a) the total amount of Tremont's EBIT for
the calendar years ending 2002, 2003, 2004, 2005, and 2006 minus (b)
$101,000,000, over
(ii) the "Indemnification Amount" based on the aggregate amount of
damages incurred or sustained by the Oppenheimer parties to the merger
agreement in connection with any inaccuracy in a representation or warranty
by Tremont contained in the merger agreement if, before the execution of
the merger agreement, certain executives of the Tremont knew, avoided
knowing or were grossly negligent in not knowing, that the representation
or warranty was inaccurate, provided that if the aggregate amount of such
damages is less than $2,000,000, the Indemnification Amount will be $0, and
if the aggregate amount of damages is $2,000,000 or greater, the
Indemnification Amount will be $2,000,000.
The Class B Awards will be reduced to the extent necessary to cause the net
present value as of January 1, 2002 of the aggregate amount to be paid in Class
A and Class B Awards to be no more than the excess of $14,000,000 over the
Indemnification Amount.
Bonus Pool
A bonus pool of up to 22.5% of the annual EBITDA of Tremont will be
established for calendar year 2002 and beyond for Tremont employees, consistent
with Oppenheimer's overall bonus arrangements.
Stock Options
Certain employees hold Tremont stock options under the 1998 Stock Plan
(referred to as the Stock Plan) or under freestanding option agreements. Under
the merger agreement, each outstanding option,
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whether or not then vested or exercisable, will be cancelled (subject, in the
case of employees who have freestanding option agreements, to such employees'
consent, which consent has been received from almost all of such employees) on
the completion of the merger in exchange for a cash payment equal to the excess
of the merger consideration over the exercise price of the option, multiplied by
the number of shares subject to such option. Based upon options outstanding as
of June 30, 2001, the options relating to 791,638 shares of Tremont common stock
held by directors and executive officers of Tremont, would be accelerated and
cashed out upon the merger. Each of the directors and executive officers of
Tremont listed below holds stock options which will be cashed out as a result of
the merger, as follows:
<Table>
<Caption>
DIRECTORS AND NAMED EXECUTIVE OFFICERS NUMBER OF OPTIONS EXERCISE PRICE
- -------------------------------------- ----------------- --------------
Sandra L. Manzke.............................. 54,687 $ 2.40
Co-Chief Executive Officer and Chairman of 13,750 $ 8.80
the Board of Directors 12,500 $11.55
Robert I. Schulman............................ 39,062 $ 2.40
President, Co-Chief Executive Officer and
Director 12,500 $ 8.00
12,500 $10.50
Barry H. Colvin............................... 31,250 $ 8.00
Chief Operating Officer 100,000 $10.50
Stephen T. Clayton............................ 15,625 $ 2.40
Chief Financial and Administrative Officer 3,906 $ 5.12
8,750 $ 8.00
35,000 $10.50
Bruce D. Ruehl................................ 7,812 $ 2.40
Chief Investment Strategist and Director 6,250 $ 5.12
6,250 $ 8.00
50,000 $10.50
Nicola Meaden................................. 230,385 $ 5.12
Chief Executive Officer of Tremont (TASS) 38,818 $ 9.60
Europe Limited and Director 6,250 $ 8.00
48,000 $10.50
John L. Keeley, Jr............................ 6,250 $ 8.00
Director 7,812 $ 2.40
Alan A. Rhein................................. 19,531 $ 2.40
Director 6,250 $ 8.00
Jimmy L. Thomas............................... 6,250 $ 8.00
Director
Suzanne S. Hammond............................ 3,125 $ 5.12
Secretary and Treasurer 3,125 $ 8.00
6,000 $10.50
</Table>
Indemnification and Insurance
Pursuant to the merger agreement, Tremont has agreed that for a period of
six years after the effective time of the merger it will indemnify and hold
harmless each present or former officer, director or employee of Tremont and its
subsidiaries against all costs and expenses incurred in connection with any
claim, action, proceeding or investigation arising out of or pertaining to (a)
the fact that the indemnified party is or was an officer, director or employee
of Tremont or any of its subsidiaries or (b) matters existing or occurring at or
prior to the completion of the merger, to the fullest extent that Tremont would
have been permitted under applicable law and its certificate of incorporation
and by-laws.
The merger agreement also provides that Tremont will cause to be
maintained, for a period of six years after the effective time of the merger,
the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by Tremont (but Tremont may substitute
therefor similar policies). However, Tremont will not be required to expend more
than 200% of the annual premiums it currently pays for such insurance.
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MERGER FINANCING; SOURCE OF FUNDS
Oppenheimer has informed us that the aggregate merger consideration of
approximately $145.3 million to be paid to our stockholders (assuming that no
stockholders perfect their appraisal rights under Delaware law) and holders of
options to purchase our shares will be financed through cash on hand and, if
needed, capital contributions from its ultimate parent, MassMutual. The merger
is not conditioned upon obtaining financing from any outside sources.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax consequences
of the merger to stockholders. This discussion is based on provisions of the
Internal Revenue Code of 1986, as amended, (the "Code"), applicable Treasury
regulations promulgated under the Code, Internal Revenue Service ("IRS") rulings
and judicial interpretations thereof all in effect as of the date of this proxy
statement, and all of which are subject to change occurring after such date,
possibly with retroactive effect. There can be no assurance that future
legislative, judicial or administrative action will not affect the accuracy of
the statements or conclusions in this proxy statement.
This summary does not address all the U.S. federal income tax
considerations that may be relevant to stockholders, particularly stockholders
subject to special treatment under the Code, including without limitation
persons who are dealers in securities, who are subject to the alternative
minimum tax provisions of the Code, who are foreign persons, insurance
companies, tax-exempt organizations, financial institutions, or broker-dealers,
who hold their shares as part of a hedge, straddle, conversion or other
risk-reduction transaction, or who acquired their shares in connection with the
exercise of employee stock options or otherwise as compensation. It also does
not address the tax consequences of the merger under foreign, state or local tax
laws. Accordingly, stockholders are urged to consult with their tax advisors
with respect to the particular U.S. federal, state, local or foreign income tax
or other tax consequences of the merger to them.
The exchange of Tremont common stock for cash in the merger will be a
taxable transaction for U.S. federal income tax purposes, and accordingly a
stockholder will recognize gain or loss equal to the difference between the cash
received and such stockholder's tax basis in the Tremont common stock exchanged
therefor. A stockholder must generally calculate gain or loss separately for
each block of Tremont common stock that is exchanged in the merger. Provided a
stockholder holds his Tremont common stock as a capital asset, this gain or loss
will be capital gain or loss, which will be long-term capital gain or loss if
the stockholder's Tremont common stock has been held for more than one year at
the time of the merger.
The exchange agent will be required to back-up withhold on any payment to a
stockholder unless such holder, or other payee, provides the appropriate tax
identification number and certifies that such number is correct, or an exception
from backup withholding applies. Amounts paid as backup withholding do not
constitute additional tax and will be allowed as a refund or credit against the
stockholder's U.S. federal income tax liability, provided the required
information is furnished to the IRS.
ACCOUNTING TREATMENT
The merger will be accounted for using the purchase method of accounting.
Under this method of accounting, the purchase price will be allocated to the
fair value of the net assets acquired. The excess purchase price over the fair
value of the assets acquired will be allocated to goodwill.
APPRAISAL RIGHTS OF STOCKHOLDERS
You have the right to dissent from the merger and to demand and obtain cash
payment of the appraised value of your shares of our common stock under the
circumstances described below. The appraised value that you obtain for your
shares by dissenting may be less than, equal to or greater than the cash
consideration provided for in the merger agreement. If you fail to comply with
the procedural requirements of Section 262 of the Delaware General Corporation
Law, you will lose your right to dissent
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and seek payment of the appraised value of your shares. In accordance with
Section 262, Tremont is obligated to mail to each holder of shares as of the
record date notice that such stockholder is entitled to appraisal rights for
their shares. THIS PROXY STATEMENT AND THE NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS THAT ACCOMPANIES THIS PROXY STATEMENT, CONSTITUTE SUCH NOTICE.
The following is a summary of Section 262, which specifies the procedures
applicable to dissenting stockholders. This summary is not a complete statement
of the law regarding your right to dissent under Delaware law, and if you are
considering dissenting, we urge you to review the provisions of Section 262
carefully. The text of Section 262 is attached to this proxy statement as
Appendix C, and we incorporate that text into this proxy statement by reference.
Among other matters, you should be aware of the following:
- to be entitled to dissent and seek appraisal, you must hold shares of our
common stock on the date you make the demand required under Delaware law,
you must continuously hold those shares until the merger has been
completed, you must not vote in favor of the merger and you must
otherwise comply with the requirements of Section 262 (neither a failure
to vote on the merger agreement, nor an abstention from voting on the
merger agreement, will be construed as a vote in favor of the merger
agreement; however, if you return your signed proxy left blank, your vote
will be counted in favor of the merger agreement, and you will waive your
appraisal right);
- before the special meeting, you must deliver a written notice that states
your identity and your intent to demand appraisal to Tremont Advisers,
Inc., 555 Theodore Fremd Avenue, Rye, New York, 10580, Attention: General
Counsel (you should be aware that simply voting against the merger is not
a demand for appraisal rights);
- within ten days after the effective time of the merger, the surviving
corporation will notify all of the dissenting stockholders who have
complied with Section 262 and who have not voted in favor of the merger;
- within 120 days after the effective time of the merger, the surviving
corporation or any stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Court of Chancery
demanding a determination of the value of the stock of the dissenting
stockholders;
- the Delaware Court of Chancery will determine which dissenting
stockholders complied with the requirements of Section 262 and are
entitled to appraisal rights;
- the Delaware Court of Chancery may require the stockholders who have
demanded an appraisal for their shares (and who hold stock represented by
certificates) to submit their stock certificates to the Register in
Chancery for notation; and the Delaware Court of Chancery may dismiss the
proceedings as to any stockholder that fails to comply with such
direction;
- the Delaware Court of Chancery will then appraise the shares, determining
their fair value exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid on the appraised fair value;
- the Delaware Court of Chancery will consider all relevant factors in
determining the fair value and the fair interest rate (if any);
- the Delaware Court of Chancery will then direct the surviving corporation
to pay the fair value of the dissenting shares, together with any
interest, to the stockholders entitled to payment; payment will be made
when the stockholder surrenders the certificates to the surviving
corporation;
- the costs of the proceeding for appraising the fair value may be
determined by the court and the court may require the parties to bear the
costs in any manner that the court believes to be equitable;
- if you dissent from the merger, you will not be entitled to vote your
shares of common stock for any purpose or to receive dividends or other
distributions (other than dividends or other
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distributions payable to stockholders of record at a date prior to the
effective time of the merger) following the merger;
- you may withdraw your demand for appraisal and accept the cash
consideration provided for in the merger agreement at any time within 60
days after the effective date of the merger; and
- the exchange of shares for cash pursuant to the exercise of appraisal
rights will be a taxable transaction for United States federal income tax
purposes and possibly state, local and foreign income tax purposes as
well. See "Special Factors -- Certain U.S. Federal Income Tax
Consequences".
STOCKHOLDERS AGREEMENT
As an inducement and a condition to entering into the merger agreement,
Oppenheimer and Joshua Acquisition Corp. have required that ten of Tremont's
stockholders enter into a stockholders agreement. The following is a brief
description of the material terms of this agreement.
Under the stockholders agreement, stockholders, who together own 308,950
shares of Tremont's Class A common stock and 3,254,380 shares of Tremont's Class
B common stock, constituting approximately 37% of the voting power of Tremont,
have agreed that, as long as the merger agreement is in effect, they will vote
their shares in favor of the merger and the merger agreement. In furtherance of
the foregoing, as long as the merger agreement is in effect, each of these
stockholders has granted to Oppenheimer and certain of its representatives its
irrevocable proxy to vote their shares in accordance with the stockholders
agreement. In addition, these stockholders have agreed to vote their shares:
- against any action or agreement that would result in the breach in any
respect of any covenant, representation, warranty or other obligation of
Tremont under the merger agreement;
- except as expressly agreed to in writing by Oppenheimer, against (a) any
extraordinary corporate transaction involving Tremont, any of its
subsidiaries or any funds sponsored, formed or controlled by Tremont or
any of Tremont's subsidiaries; (b) a sale, lease or transfer of a
material amount of Tremont's or any of its subsidiaries' assets, or a
reorganization, recapitalization, dissolution or liquidation of Tremont
or any of its subsidiaries; (c) any change in a majority of the persons
on the board of directors; (d) any change in the present capitalization
of Tremont or any amendment to Tremont's charter or bylaws; (e) any other
material change in Tremont's corporate structure or business; or (f) any
other action involving Tremont or any of its subsidiaries or any funds
sponsored, formed or controlled by Tremont or any of its subsidiaries,
which is intended, or could in any manner be expected to adversely affect
the merger, including any action to facilitate any acquisition proposal.
Prior to the termination of the merger agreement, none of the ten stockholders
may elect to convert any Class A common shares into Class B common shares. Each
of the ten stockholders agrees it will not, directly or indirectly, initiate,
solicit, encourage or knowingly facilitate any inquiries or the making of any
acquisition proposal or, prior to the termination of the merger agreement, agree
to approve or endorse any acquisition proposal.
Each of the ten stockholders bound by the stockholders agreement has also
granted Oppenheimer an irrevocable option to purchase all of such stockholders'
shares at a purchase price equal to the merger consideration. These options will
become exercisable in the case that the merger agreement is terminated, except
in the case of a preliminary or final injunction or other court or governmental
order. Oppenheimer covenants that in the event it exercises this option, during
the term of the agreement it will vote the shares for or against any superior
proposal or any action or matter relating to a superior proposal that is
submitted to a stockholder vote pro rata in proportion to the affirmative and
negative votes cast by the other stockholders of Tremont voting on the proposal
or action or matter (excluding abstentions and broker non-votes).
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During the term of the stockholders agreement, none of the ten stockholders
may, directly or indirectly, sell, assign, or otherwise dispose of any of its
shares or any interest in these shares, provided that the stockholders may
tender their shares in response to a bona fide tender offer that is supported by
the board of directors upon giving five business days' advance notice to
Oppenheimer. Furthermore, during the term of the stockholders agreement, none of
the ten stockholders may grant any proxies or powers of attorney, deposit any
shares into a voting trust, enter or amend a voting agreement with respect to
such shares, exercise any right to require Tremont to register any shares, or
take any action that would make any representation or warranty of such
shareholder untrue or incorrect, or would have the effect of preventing or
disabling such stockholder from performing his obligations under this agreement.
Each of the ten stockholders also waived its appraisal rights.
The option granted in the stockholders agreement will terminate upon the
earlier of the effective time of the merger or
- if Tremont terminates the merger agreement after (a) the board of
directors determines that it must terminate the agreement because of a
superior acquisition proposal; (b) the board of directors notifies
Oppenheimer and Joshua Acquisition Corp. that it intends to enter into
another proposal and provides a copy of such proposal; (c) during the
five business days following receipt of Tremont's notice, Tremont and
Oppenheimer have negotiated to adjust the merger agreement and the
superior proposal is still superior; (d) simultaneously with the
termination Tremont pays Oppenheimer the termination fee; and (e) such
termination is within two business days after the termination of the five
business day period described above and the board of directors has made
its determination to continue with the superior proposal prior to the
receipt of the required company vote;
- if Oppenheimer terminates the merger agreement after Tremont's board of
directors has failed to call a meeting of Tremont's stockholders for the
purpose of obtaining the required company vote;
- if Oppenheimer terminates the merger agreement any time after a superior
acquisition proposal has been made after (a) Tremont's board of directors
has failed to recommend or reconfirm or has withdrawn, modified or
changed its approval or recommendation of the merger and or the merger
agreement, or has recommended an alternative acquisition proposal; (b) if
the required company vote has not been obtained on or prior to December
30, 2001; (c) if a tender offer or exchange offer for 15% or more of the
outstanding common stock of Tremont is commenced, and the board of
directors fails to recommend against acceptance of such tender offer or
exchange offer by the Tremont stockholders within the time period
required by the SEC (or the board of directors resolves or fails to
resolve any of the above); or (d) if there shall have been a breach by
Tremont of any of its representations, warranties, covenants or
obligations in the merger agreement, which results in its failure to
satisfy a condition and which is incurable or, if curable, shall not have
been cured within 30 days of receiving written notice; or
- if the required company vote is not obtained and, at or prior to the
meeting of the stockholders called for the purpose of approving the
merger and the merger agreement, (a) one or more of the ten stockholders
has breached the stockholders agreement or (b) an acquisition proposal
has been made, 12 months after any such termination.
If the merger agreement is terminated in accordance with any terms not mentioned
above, other than a termination at the effective time of the merger, the
stockholders agreement shall terminate contemporaneously with the merger
agreement.
None of the ten stockholders who is a party to the stockholders agreement
who is or becomes a director or officer of Tremont during the term of the
stockholders agreement makes any agreement or understanding in its capacity as
such director or officer.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement. The following summary is qualified in its entirety by reference to
the merger agreement, which we have attached as Appendix A to this proxy
statement and which we incorporate by reference into this document. We encourage
you to read the merger agreement in its entirety.
THE MERGER
The merger agreement provides that, following the approval of the adoption
of the merger agreement by our stockholders and the satisfaction or waiver of
the other conditions to the merger, including receipt of the requisite
regulatory approvals, Joshua Acquisition Corp. will be merged with and into us.
Tremont will be the surviving corporation. We expect that the requisite
regulatory and third-party consent and notice requirements and closing
conditions will be satisfied or obtained on or before September 25, 2001 and,
assuming the merger is approved by Tremont's stockholders and the other closing
conditions are satisfied or waived, that the merger will be completed promptly
thereafter, although Oppenheimer can postpone completion of the merger to
October 1, 2001 in the event that we satisfy these conditions before then. The
merger will then become effective upon the filing of the certificate of merger
with the Secretary of State of the State of Delaware or at such later time
agreed to by the parties and specified in the certificate of merger, provided
that Oppenheimer may, at its option and upon written notice, delay the
effectiveness of the merger until October 1, 2001 in the event that we satisfy
the conditions to the merger before then.
When the merger becomes effective, the certificate of incorporation of
Joshua Acquisition Corp. will be the certificate of incorporation of the
surviving corporation, until thereafter changed or amended as provided therein
or by applicable law; provided that the certificate of incorporation of the
surviving corporation shall be amended to change the name of the surviving
corporation to "Tremont Advisers, Inc." The by-laws of Joshua Acquisition Corp.
in effect immediately prior to the effective time of the merger will be the
by-laws of the surviving corporation until thereafter changed or amended as
provided therein or by applicable law.
Conversion of Capital Stock. At the effective time of the merger, pursuant
to the merger agreement and the Delaware General Corporation Law, each issued
and outstanding share of our Class A and Class B common stock, other than any
such shares (i) owned directly or indirectly by us or by Oppenheimer (all of
which will be canceled without consideration) or (ii) held by a dissenting
stockholder exercising and perfecting appraisal rights, will be converted into
the right to receive $19.00 in cash, without interest thereon; provided that:
- if our tangible net worth as shown on our pro forma balance sheet as of
the end of the most recent month-end not less than fifteen business days
prior to the completion of the merger shall be less than $13,170,290,
then each such share (other than such shares held by Oppenheimer, by us,
or by dissenting stockholders perfecting appraisal rights) shall be
converted into the right to receive $19.00 minus the quotient obtained by
dividing (x) the amount by which $13,170,290 exceeds our tangible net
worth as shown on such balance sheet by (y) the total number of shares of
common stock and options to buy shares of common stock outstanding at the
effective time of the merger;
- if our tangible net worth as shown on our pro forma balance sheet as of
the end of the most recent month-end not less than fifteen business days
prior to the completion of the merger shall be more than $15,170,290,
then each such share (other than such shares held by Oppenheimer, by us,
or by dissenting stockholders perfecting appraisal rights) shall be
converted into the right to receive $19.00 plus the quotient obtained by
dividing (x) the amount by which our tangible net worth as shown on such
balance sheet exceeds $15,170,290 by (y) the total number of shares of
common stock and options to buy shares of common stock outstanding at the
effective time of the merger.
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For the purposes of the foregoing, "tangible net worth" means the excess of
stockholders' equity over the sum of goodwill (net of amortization) and
investments in joint ventures, not including our expenses incurred in connection
with the merger.
Exchange of Common Stock Certificates. At the effective time of the
merger, each certificate representing shares of our Class A and Class B common
stock then outstanding, other than any such shares owned by Oppenheimer, by us,
or by dissenting stockholders perfecting appraisal rights, will represent the
right to receive the cash into which such issued and outstanding shares of
common stock may be converted. At the effective time of the merger, all such
shares of our common stock will be canceled and cease to exist, and each holder
of a certificate representing any such shares will cease to have any voting or
other rights with respect to such shares, except the right to receive upon the
surrender of the certificate the cash consideration payable under the merger
agreement, without interest thereon.
Each share of common stock of Joshua Acquisition Corp. issued and
outstanding immediately prior to the effective time of the merger shall be
converted into a number of shares of common stock, par value $0.01, of the
surviving corporation equal to (i) the number of our shares of common stock and
options to buy shares of common stock then outstanding divided by the number of
shares of Joshua Acquisition Corp. then issued and outstanding, or (ii) such
lesser number of shares as Oppenheimer shall determine.
Prior to the effective time of the merger, Oppenheimer will designate a
bank or trust company reasonably acceptable to us to act as exchange agent for
the purpose of exchanging stock certificates for the merger consideration.
Oppenheimer shall deposit or cause to be deposited with the exchange agent in
trust for the benefit of holders of shares of our common stock the aggregate
amount of cash to be paid pursuant to the merger agreement in exchange for
outstanding shares of our common stock (other than any shares owned by
Oppenheimer, by us, or by dissenting stockholders perfecting appraisal rights).
The exchange agent shall invest the moneys so deposited in short-term,
investment grade securities and pay any interest or other income resulting from
such investments to the surviving corporation.
As soon as reasonably practicable after the effective time of the merger,
the surviving corporation shall cause the exchange agent to mail a letter of
transmittal to holders of shares of common stock. The letter of transmittal will
contain instructions as to how to surrender common stock certificates in
exchange for the cash merger consideration. Upon surrender to the exchange agent
of a stock certificate together with the duly executed letter of transmittal and
any other documents as may be reasonably required by the exchange agent, the
holder of such certificate shall be entitled to receive in exchange therefor a
check (or, in the case of any holder that requests a wire transfer and offers to
pay any reasonable costs associated therewith, a wire transfer of immediately
available funds) in the amount equal to the merger consideration multiplied by
the number of shares of our common stock formerly represented by such
certificate minus any taxes withheld as required by law and as provided in the
merger agreement.
Holders of common stock whose certificates are lost will be required to
make an affidavit identifying the certificate or certificates as lost, stolen or
destroyed and, if required by us, to post a bond in such amount as we may
reasonably require to indemnify us against any claim that may be made against us
with respect to such certificate.
Any cash deposited by Oppenheimer with the exchange agent that remains
undistributed to the holders of certificates of our common stock for six months
after the effective time of the merger shall, to the extent permitted by
applicable law, be delivered to the surviving corporation or otherwise on the
instruction of the surviving corporation, and any holders of certificates who
have not theretofore complied with the provisions of the merger agreement
relating to the exchange of their certificates for the merger consideration
shall thereafter look only to the surviving corporation for the merger
consideration with respect to such certificates. In addition, none of the
parties to the merger agreement or the surviving corporation will be liable to
any person in respect of any merger consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
The surviving corporation, Oppenheimer and the exchange agent, as
applicable, shall be entitled to deduct and withhold from the payment otherwise
due holders of shares of our common stock pursuant to
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the merger agreement such amounts as are required to be withheld with respect to
the making of any such payment under the Internal Revenue Code of 1986, as
amended, any rules and Treasury regulations promulgated thereunder, or any
provision of state, local or foreign tax law.
Shares of our common stock issued and outstanding immediately prior to the
effective time of the merger and held by a holder who has not voted in favor of
the merger and who demands appraisal for such shares in accordance with Section
262 of the Delaware General Corporation Law shall not be converted into the
right to receive the merger consideration unless such holder fails to perfect
within the period prescribed by the DGCL, or withdraws or otherwise loses, such
appraisal right. If, after the effective time of the merger, such holder fails
to perfect or withdraws or otherwise loses the right to appraisal, such shares
shall be treated as if they had been converted as of the effective time of the
merger into the right to receive the merger consideration, without interest
thereon.
Stock Options. We have agreed to take all actions necessary so that, as of
the effective time of the merger, the Tremont 1998 Stock Plan shall terminate.
At such time, all outstanding options will be canceled and will be converted
into the right to receive a single lump sum cash payment from the surviving
corporation equal to the product of (x) the number of shares of our common stock
subject to such option and (y) the excess, if any, of the merger consideration
for a share of our common stock at the effective time of the merger over the
exercise price per share of such option. Such payment shall be made by the
surviving corporation as soon as practicable following receipt from the option
holder of a release or other documentation reasonably satisfactory to
Oppenheimer and the surviving corporation.
Officers and Directors. Our officers as of the effective time of the
merger shall be the officers of the surviving corporation, until the earlier of
their resignation or removal or otherwise ceasing to be an officer or until
their respective successors are duly elected and qualified, as the case may be.
The directors of Joshua Acquisition Corp. as of the effective time of the merger
shall be the directors of the surviving corporation until the earlier of their
resignation or removal or otherwise ceasing to be a director or until their
respective successors are duly elected and qualified.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties with respect
to us and our subsidiaries relating to, among other things:
- organization, qualification, capitalization and similar corporate
matters;
- authorization, execution, delivery, performance and enforceability of the
merger agreement and other documents relating thereto;
- required regulatory filings, consents, approvals and authorizations;
- the absence of violation of organizational documents, laws or contracts
as a result of entering into the merger agreement;
- the accuracy of the information contained in the reports and financial
statements that we and our subsidiaries have filed with the Securities
and Exchange Commission and other governmental authorities;
- the absence of material adverse changes since December 31, 2000;
- the absence of material legal proceedings;
- property owned, leased or operated;
- contracts and the absence of any material default in these contracts;
- compliance with applicable laws, permits and agreements;
- absence of any administrative proceeding or investigation with respect to
us or our subsidiaries;
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- proper registration, qualification and/or certification in all relevant
jurisdictions of us and/or of our subsidiaries and affiliates, as
applicable, to serve in certain capacities under the Investment Company
Act of 1940, as amended, the Investment Advisers Act of 1940, as amended,
the Securities Exchange Act of 1934, as amended, and the Commodity
Exchange Act of 1936, as amended;
- absence of any requirement that we or any of our subsidiaries be
registered as an investment company under the Investment Company Act of
1940, as amended;
- certain environmental, labor and employment, intellectual property,
employee welfare and benefit plans and tax matters;
- approval by our board of directors of the merger, the merger agreement
and the transactions contemplated thereby for purposes of Section 203 of
the Delaware General Corporation Law;
- the stockholder vote required to adopt the merger agreement;
- the absence of undisclosed broker's fees;
- maintenance by us and our subsidiaries of insurance sufficient for the
operation of our business and that of our subsidiaries;
- the receipt by us of a fairness opinion from Putnam Lovell Securities,
Inc.;
- absence of direct or indirect ownership by us of shares of common stock
of Oppenheimer, or of other Oppenheimer capital stock, or of any options,
warrants or other rights to acquire Oppenheimer capital stock;
- maintenance of relationships with material clients; and
- the absence of any unlawful payments.
The merger agreement contains customary representations and warranties by
Oppenheimer and Joshua Acquisition Corp. relating to, among other things:
- their organization, standing authority to carry on business and similar
corporate matters;
- the absence of violation of organizational documents, laws or contracts
as a result of entering into the merger agreement;
- authorization, execution, delivery, performance and enforceability of the
merger agreement and other documents relating thereto;
- required regulatory filings, consents, approvals and authorizations;
- the absence of material legal proceedings;
- approval by the boards of directors of Oppenheimer and Joshua Acquisition
Corp. of the merger agreement, the merger and the transactions
contemplated thereby;
- absence of broker, finder or agent fees or commissions or similar
compensation with respect to the merger;
- absence of direct or indirect ownership by Oppenheimer or Joshua
Acquisition Corp. of shares of our common stock or other capital stock,
or of any options, warrants or other rights to acquire our capital stock
other than pursuant to the merger agreement or the Stockholders
Agreement;
- availability of funds sufficient to pay the merger consideration; and
- the creation of Joshua Acquisition Corp. solely for the purpose of
engaging in the transactions contemplated by the merger agreement.
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The foregoing representations and warranties are subject, in some cases, to
specified exceptions and qualifications. Except for purposes of indemnification
under the Retention Plan (described on pages 27-28), the representations and
warranties of each of the parties will expire upon completion of the merger.
COVENANTS RELATING TO CONDUCT OF BUSINESS
Our covenants. Under the merger agreement, we have agreed that from the
date of the merger agreement until the effective time of the merger, we shall
take, and shall cause our controlled subsidiaries and investment funds to take,
except as otherwise contemplated by the merger agreement or to the extent that
Oppenheimer shall in its sole discretion otherwise consent in writing, the
following actions:
- carry on our respective businesses in the usual, regular and ordinary
course in the same manner as heretofore conducted;
- preserve intact present lines of business, business organizations and
reputations, maintain rights, franchises and permits, keep available the
services of key officers and key employees, maintain assets and
properties in good working order and condition, ordinary wear and tear
excepted, and preserve relationships and goodwill with clients, suppliers
and others to the end that the ongoing businesses shall not be impaired
in any material respect at the effective time of the merger; and
- not (i) enter into any new material line of business, (ii) commit to any
capital expenditures other than capital expenditures in the usual,
regular and ordinary course of business consistent with past practice and
not individually or in the aggregate in excess of $100,000, or (iii)
delay or postpone the payment of accounts payable and other liabilities
or accelerate the collection of accounts receivable, or revalue in any
material respect any assets, including, without limitation, writing down
the value of inventory or writing-off notes or accounts receivable other
than in each case in the usual, regular and ordinary course of business
consistent with past practice or as required by GAAP.
We have further agreed to use commercially reasonably efforts to cause our
non-controlled subsidiaries to take the foregoing actions. In addition, we have
agreed not to do any of the following, and to cause our controlled subsidiaries
and investment funds not to do any of the following, except as otherwise
contemplated by the merger agreement or to the extent that Oppenheimer shall in
its sole discretion otherwise consent in writing:
- declare, set aside or pay any dividends on, or make any other
distributions in respect of, capital stock, other than dividends by one
of our wholly-owned subsidiaries to its parent;
- adopt a plan of liquidation, merger, recapitalization or other
reorganization other than in the usual, regular and ordinary course of
business consistent with past practice;
- purchase, redeem or otherwise acquire any shares of our capital stock or
of our subsidiaries' capital stock, other than in the usual, regular and
ordinary course of business consistent with past practice in connection
with funding the Tremont Advisers, Inc. Savings Plan;
- split, combine, or reclassify any of our capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of,
or in substitution for our capital stock;
- change the methods of accounting in effect at December 31, 2000, change
the fiscal year, settle any action relating to any material tax, make or
rescind any material tax election or, subject to certain exceptions, make
any changes to our tax accounting methods unless required by a change in
generally accepted accounting principles, SEC accounting regulations or
guidelines or applicable law;
- enter into, modify, amend or terminate any material contract to which we
or one of our subsidiaries is a party, other than modifications,
amendments or terminations in the ordinary course consistent with past
practice or as expressly permitted in the merger agreement;
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- settle or compromise any pending or threatened claims or arbitrations,
other than settlements that involve solely the payment of money (without
admission of liability) that would not result in an uninsured payment by
us or liability in excess of $100,000 in the aggregate above the reserves
established therefor on our books as of the date of the merger agreement;
or
- take any action that would, or fail to take any action which failure
would, or that could reasonably be expected to, result in, (i) any of our
representations and warranties set forth in the merger agreement being or
becoming untrue in any material respect, (ii) a material breach of any
provision of the merger agreement, (iii) any of the conditions to the
merger set forth in Article VI of the merger agreement not being
satisfied, or (iv) a material delay in the completion of the merger and
the transactions contemplated by the merger agreement.
We have further agreed not to do any of the following, to cause our
controlled subsidiaries and investment funds not to do any of the following, and
to use commercially reasonable efforts to cause each of our non-controlled
subsidiaries not to do any of the following, except as otherwise contemplated by
the merger agreement or to the extent that Oppenheimer shall in its sole
discretion otherwise consent in writing:
- issue, deliver, sell, pledge or otherwise encumber any shares of our
capital stock, any other equity or voting interests or any securities
convertible into, or exchangeable for, or rights to acquire shares of our
capital stock, except for the issuance of shares as a result of the
exercise of stock options existing when we entered into the merger
agreement;
- amend our respective certificates of incorporation or bylaws;
- acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets (other than
the acquisition of assets used in the operations of their respective
businesses in the usual, regular and ordinary course of business
consistent with past practice);
- subject to certain exceptions, lease, transfer, pledge, encumber or
otherwise dispose of any of our assets, or agree to do any of the
foregoing;
- subject to certain exceptions, incur any new indebtedness of a long-term
or otherwise substantial nature;
- make any increase in or commitment to increase the amount of wages,
bonus, severance or other compensation of any executive officer, director
or employee (other than in the ordinary course of business consistent
with past practice), make any increase in or commitment to increase any
profit sharing, retirement, deferred compensation, insurance or other
employee benefits, issue any additional stock options, equity-based
awards or shares of our common stock (other than the issuance of common
stock upon the exercise of stock options outstanding on the date hereof
or in connection with the Tremont Advisers, Inc. Savings Plan in
accordance with its present terms), adopt or make any commitment to enter
into, adopt, amend in any material manner or terminate any employee
benefit plan, or any other agreement, arrangement, plan or policy between
us or one of our subsidiaries and one or more of our or our subsidiaries'
directors, officers or employees, or make any contribution, other than
regularly scheduled contributions, to any benefit plan; or
- adopt, approve, ratify or enter into any collective bargaining agreement,
side letter, memorandum of understanding or similar agreement with any
labor union covering our or our subsidiaries' employees.
Advisory Agreement Consents. We have agreed to obtain written consent to
the assignment or deemed assignment of any investment advisory agreement between
us or one of our subsidiaries and any investment fund client that is controlled
by us. We have agreed to use our reasonable best efforts to obtain written
consent to the assignment or deemed assignment of any investment advisory
agreement between us
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or one of our subsidiaries and any other investment fund client, each client
whose investment advisory agreement requires written consent in the event of any
assignment and each key client specified in the merger agreement. We have agreed
to seek written or implied consents to the assignment or deemed assignment of
the other investment advisory agreements between us or one of our subsidiaries
and any other client.
Acquisition Proposals. We have agreed that we will not (and will cause our
subsidiaries not to) directly or indirectly:
- initiate, solicit, encourage or knowingly facilitate (including by way of
furnishing information or assistance) any inquiries or expressions of
interest or the making of any proposal or offer that constitutes, or
could reasonably be expected to lead to (x) a proposal or offer with
respect to a merger, reorganization, share exchange, recapitalization,
liquidation, dissolution, consolidation or similar transaction involving,
or any purchase or series of related purchases directly or indirectly
(including, by way of lease, exchange, sale, mortgage, pledge, tender
offer, exchange offer or otherwise, as may be applicable), of 5% or more
of the assets (based on fair market value) or any equity interests (in
economic or voting power) in, us or any of our subsidiaries, (y) a breach
of the merger agreement or the stockholders agreement or any interference
with the completion of the merger or (z) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement
to engage in any of the foregoing (any of the foregoing inquiries,
expressions of interest, proposals, or offers being referred to as an
acquisition proposal);
- engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating
to an acquisition proposal, or otherwise facilitate the making of, or any
effort or attempt to make or implement, an acquisition proposal;
- agree to or recommend to our stockholders any acquisition proposal;
provided that nothing contained in the merger agreement shall prevent the
Company from:
- based on the advice of outside legal counsel, complying with Rule
14e-2 promulgated under the Securities Exchange Act of 1934, with
regard to an acquisition proposal or providing any other legally
required disclosure to our stockholders (provided that, except as
otherwise permitted in the merger agreement, we do not withdraw or
modify, or propose to withdraw or modify, our position with respect to
the merger or approve or recommend, or propose to approve or
recommend, an acquisition proposal);
- prior to receipt of the affirmative vote of the holders of a majority
of the voting power of our common stock to adopt the merger agreement,
and subject to our compliance with the immediately following sentence
regarding notice to Oppenheimer, providing information to, or engaging
in any negotiations or discussions with, any person who has made an
unsolicited bona fide written acquisition proposal if, and only to the
extent that:
- our board of directors determines, in good faith after consultation
with, and based upon the advice of, outside legal counsel, that
providing such information and engaging in such discussions or
negotiations is required to comply with our fiduciary duties to our
stockholders under applicable law;
- such acquisition proposal is not subject to any financing
contingencies;
- our board of directors determines in good faith that such
acquisition proposal, if accepted, is reasonably likely to be
completed taking into account all legal, financial, regulatory and
other aspects of the proposal and the person making the proposal,
and believes in good faith, after consultation with Putnam Lovell
Securities, Inc., such acquisition proposal would, if completed,
result in a transaction more favorable to our stockholders from a
financial point of view than the merger (any such more favorable
acquisition proposal being referred to as a superior proposal); and
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- prior to taking such action and furnishing any information to any
such party, we (x) provide reasonable notice to Oppenheimer to the
effect that we are taking such action, (y) provide such information
to Oppenheimer (if and to the extent we have not already done so),
and (z) shall have entered into a confidentiality/ standstill
agreement on customary terms as advised by outside legal counsel,
and in any event containing terms at least as stringent as those
contained in the confidentiality agreement by and between us and
Oppenheimer, dated as of March 14, 2001; or
- prior to receipt of the affirmative vote of the holders of a majority
of the voting power of our common stock to adopt the merger agreement,
recommending such a superior proposal to the holders of our common
stock and withdrawing the prior recommendation of the merger
agreement, if and only to the extent that our board of directors
determines, in good faith after consultation with, and based upon the
advice of, outside legal counsel, that taking such action is required
to comply with our fiduciary duties to our stockholders under
applicable law; provided our board of directors may not approve or
recommend (and in connection therewith, withdraw or modify its
approval or recommendation of the merger agreement or the merger) an
acquisition proposal unless such an acquisition proposal is a superior
proposal (and we shall have first terminated the merger agreement in
accordance with such agreement).
Prior to providing any information to or entering into discussions or
negotiations with any person in connection with an acquisition proposal by such
person, we shall notify Oppenheimer immediately (orally and in writing) if any
such inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of our representatives indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers and thereafter shall keep Oppenheimer
reasonably and promptly informed on the status and terms of any such proposals
or offers and provide Oppenheimer with a copy of any written acquisition
proposal, and all amendments and supplements thereto and the status of any such
discussions or negotiations.
We have further agreed that neither our board of directors nor any
committee thereof, except in connection with a superior proposal and subject to
compliance with the relevant sections of the merger agreement, shall:
- withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Oppenheimer, the approval or recommendation by such
board of directors or such committee of the merger or the merger
agreement;
- approve or recommend, or propose publicly to approve or recommend, any
acquisition proposal; or
- cause us to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any
acquisition proposal.
Required Company Vote. We have agreed that we shall as promptly as
practicable following the execution of the merger agreement take all action
necessary in accordance with applicable law, our articles of incorporation and
our bylaws to duly call, give notice of, convene and hold as soon as practicable
after the date of the merger agreement a meeting of our stockholders for the
purpose of obtaining the affirmative vote of the holders of a majority of the
voting power of our common stock to adopt the merger agreement and, except in
connection with a superior proposal and subject to compliance with the relevant
provisions of the merger agreement, shall take all lawful action to solicit the
adoption of the merger agreement by such vote. We have further agreed that our
board of directors shall recommend adoption of the merger agreement by our
stockholders. Notwithstanding the foregoing and regardless of whether our board
of directors has withdrawn, amended or modified its recommendation that our
stockholders approve and adopt the merger agreement, unless the merger agreement
shall have been terminated pursuant to its termination provisions (see
"-- Termination", below), we shall be required to hold such a meeting of our
stockholders for the purpose of obtaining such a vote.
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Access to Information. We have agreed to afford to Oppenheimer and its
representatives reasonable and prompt access to our information, assets and
personnel and to make available to Oppenheimer on a timely basis a copy of each
material document filed, furnished or received by us pursuant to the
requirements of domestic or foreign laws and all other information reasonably
requested by Oppenheimer concerning our business, properties and personnel,
subject to confidentiality or legal restrictions.
Covenants of Oppenheimer. Under the merger agreement, Oppenheimer has
agreed that from the date of the merger agreement until the effective time of
the merger, Oppenheimer and its subsidiaries shall, except as otherwise
contemplated by the merger agreement or to the extent that we shall in our sole
discretion otherwise consent in writing, not take any action that would, or fail
to take any action which failure would, or could reasonably be expected:
- to impair Oppenheimer's ability to have available sufficient funds to pay
the merger consideration and satisfy its other obligations under the
merger agreement;
- to impede or delay receipt of specified consents or otherwise impede or
delay completion of the merger and the transactions contemplated thereby;
- to result in any of Oppenheimer's representations and warranties set
forth in the merger agreement being or becoming untrue in any material
respect;
- to result in a material breach of any provision of the merger agreement;
- to result in any of the conditions to the merger as set forth in the
merger agreement not being satisfied; or
- to result in a material delay in the completion of the merger and the
transactions contemplated in the merger agreement.
Offers of Employment. Oppenheimer agrees that, except as provided in
certain employment agreements with specified employees, it shall immediately
following the effective time of the merger cause the surviving corporation to
continue the employment of each of the persons then employed by us on terms
substantially similar to the terms of their current employment.
Employee Benefits. Oppenheimer agrees that, except as provided in certain
employment agreements with specified employees, it shall assume all employment
and other related agreements with our current employees. Further, our
obligations under any employee or director benefit plan in effect as of the
signing of the merger agreement shall become obligations of the surviving
company as of the effective date of the merger; provided that as soon as
practicable Oppenheimer shall provide or cause the surviving corporation to
provide to such employees the same benefits which are provided to similarly
situated employees of Oppenheimer immediately prior to the effective time of the
merger, subject to certain conditions and exceptions.
Directors' and Officers' Indemnification and Insurance. Oppenheimer has
agreed that through the sixth anniversary of the effective time of the merger
the surviving corporation shall indemnify and hold harmless each of our or our
subsidiaries' present or former officers, directors or employees (when acting in
such capacity) against all claims, losses, liabilities, damages, judgments,
fines and reasonable fees, costs and expenses incurred in connection with any
claim, action, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to (A) the fact
that such person is or was an officer, director or employee of Tremont or of our
subsidiaries or (B) matters existing or occurring at or prior to the effective
time of the merger, in each case subject to certain exceptions and conditions.
Oppenheimer has further agreed that the surviving corporation shall cause to be
maintained through the sixth anniversary of the effective time of the merger the
current policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by us (or policies no less advantageous than the
current policies maintained by us) with respect to claims arising from facts or
events that occurred at or before the effective time of the merger, subject to
certain conditions and exceptions, provided that in no event shall the surviving
corporation be required to expend in any one year an amount in excess of 200% of
the annual premiums currently paid by us for such policies.
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Preparation of Proxy Statement; Tremont Shareholders' Meeting. We have
agreed to prepare this proxy statement in cooperation with Oppenheimer, to use
all reasonable efforts to have this statement cleared by the SEC as promptly as
practicable after filing and to mail this proxy statement to our stockholders at
the earliest practicable date following such clearance. We have further agreed
to provide Oppenheimer with any comments, whether oral or written, received from
the SEC concerning the proxy statement and to review in good faith all comments
offered by Oppenheimer.
Reasonable Best Efforts. Each party to the merger agreement has agreed to
use its reasonable best efforts to take, or cause to be taken, all actions
necessary, proper or advisable under applicable law to cause the merger and the
other transactions contemplated by the merger agreement to be completed, and to
cooperate with the other parties to the merger agreement in furtherance of the
foregoing.
Fees and Expenses. Each party to the merger agreement has agreed to bear
its own expenses incurred in connection with the merger agreement and the
transactions contemplated thereby, subject to, among other things, the following
exceptions: (i) if the merger is completed, the surviving corporation shall pay
any and all property and transfer taxes imposed on us or our subsidiaries, and
(ii) we shall pay a termination fee to Oppenheimer under certain circumstances
(see "-- Termination Fees", below).
Confidentiality. Each of the parties to the merger agreement has agreed
that it shall hold in confidence any "Confidential Information" as defined in
the Confidentiality Agreement, dated March 14, 2001, as amended, by and between
us and OppenheimerFunds, Inc., to the extent required by and in accordance with
the provisions of the Confidentiality Agreement.
Public Announcements. The parties to the merger agreement have agreed to
consult with each other prior to issuing any press releases or making any public
announcements concerning the merger agreement or the transactions contemplated
thereby.
Takeover Statutes. If any anti-takeover or similar statute or regulation
is or may become applicable to the merger or the other transactions contemplated
by the merger agreement, each of the parties to the merger agreement shall grant
such approvals and take all such actions as are legally permissible so that such
transactions may be completed as promptly as practicable on the terms
contemplated under the merger agreement and otherwise act to eliminate or
minimize the effects of any such statute or regulation on such transactions.
Revenue Run Rate; Tangible Net Worth. We have agreed to provide to
Oppenheimer on or before the fifteenth business day of each month prior to the
closing date a certificate setting forth our annualized investment management
fees (also referred to as the revenue run-rate) and our tangible net worth, in
each case as of such month-end. The parties have further agreed to work in good
faith to resolve any disagreement concerning the calculation of the revenue
run-rate or tangible net worth.
Employment Agreements. We have agreed to use our reasonable best efforts
to enter into amendments satisfactory to Oppenheimer to certain employment
agreements with specified employees prior to the effective date.
CONDITIONS PRECEDENT TO THE MERGER
Conditions to Each Parties Obligations to Effect the Merger. The
respective obligations of each of the parties to the merger agreement to effect
the merger and the transactions contemplated by the merger agreement are subject
to the satisfaction or waiver of several conditions, including:
- the adoption of the merger agreement by our stockholders;
- the absence of any statute, law, ordinance, rule, regulation, judgment,
decree, injunction or other order that prohibits completion of the
transactions contemplated by the merger agreement; and
- the expiration or termination of the waiting period under the
Hart-Scott-Rodino Act and the receipt of certain written consents as
specified in the merger agreement.
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Additional Conditions to Our Obligations. Except as may be waived by us,
our obligations to effect the transactions contemplated in the merger agreement
are subject to the satisfaction or waiver of the following conditions:
- subject to materiality standards set forth in the merger agreement, the
accuracy of the representations and warranties of each of Oppenheimer and
Joshua Acquisition Corp. in the merger agreement as of the date of the
merger agreement and the closing;
- the performance in all material respects by Oppenheimer of all
obligations required to be performed by it prior to the closing; and
- the taking of all necessary action by Oppenheimer to ensure that the
employee Retention Plan and Bonus Pool, as defined in the merger
agreement, shall be in full force and effect following the effective time
of the merger.
Additional Conditions to the Obligations of Oppenheimer and Joshua
Acquisition Corp. Except as may be waived by Oppenheimer, the obligations of
Oppenheimer and Joshua Acquisition Corp. to effect the transactions contemplated
in the merger agreement are subject to the satisfaction or waiver of the
following conditions:
- subject to materiality standards set forth in the merger agreement, the
accuracy of our representations and warranties in the merger agreement as
of the date of the merger agreement and the closing;
- the performance in all material respects by us of all obligations
required to be performed by us prior to the closing;
- the non-occurrence of any event that shall have caused, or be reasonably
likely to cause, a material adverse effect with respect to our business;
- the investment management revenue run-rate of us and our subsidiaries
(calculated to exclude the effects of market and currency fluctuations)
as of the calendar month-end prior to the closing, in respect of which
consents have been obtained, being not less than $16,667,627.05;
- the employment agreements between OppenheimerFunds, Inc. and certain
employees specified in the merger agreement shall be in full force and
effect, Oppenheimer shall not be aware of any basis that would reasonably
be expected to cause any of such agreements to no longer be in full force
and effect, and none of the Key Employees (as defined in the merger
agreement) shall have died, become incapacitated or otherwise not be in a
position to perform his or her obligations thereunder;
- the number of shares of common stock held by holders who did not vote to
approve the merger agreement and who demand appraisal for such shares in
accordance with Section 262 of the DGCL shall constitute not more than
10% of the shares of our common stock outstanding immediately prior to
the effective time of the merger; and
- the adoption by us of the employee Retention Plan and Bonus Pool, as
defined in the merger agreement.
TERMINATION
The merger agreement provides that prior to the closing, the merger
agreement may be terminated at any time by mutual written consent of Oppenheimer
and Tremont, or by action of our respective boards of directors.
The merger agreement may be terminated at any time prior to the closing by
either us or Oppenheimer if:
- the transactions contemplated by the merger agreement have not been
completed by December 31, 2001, so long as the terminating party did not
prevent completion by materially failing to fulfill any of its
obligations under the merger agreement;
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- any court or other governmental authority has issued or promulgated any
statute, law, ordinance, rule, regulation, judgment, decree, injunction
or other order that has become final and non-appealable, permanently
restraining, enjoining or otherwise prohibiting the completion of the
merger; or
- there shall have been a breach by the other party of any of its
representations, warranties, covenants or obligations contained in the
merger agreement if such breach would result in the failure to satisfy
one or more of the conditions to the merger and such breach shall be
incapable of being cured, or, if capable of being cured, shall not have
been cured within 30 days after written notice thereof shall have been
received by the party alleged to be in breach; provided that the right to
terminate the merger agreement pursuant to this clause shall not be
available to either party, if such party, at such time, is in material
breach of any representation, warranty, covenant or agreement set forth
in the merger agreement.
The merger agreement may be terminated at any time prior to the closing by
Oppenheimer if:
- our board of directors has failed to recommend, has withdrawn or has
adversely modified its approval or recommendation of the merger
agreement;
- our board of directors has failed to reconfirm its recommendation of the
merger agreement or the merger within three business days after being
requested in writing by Oppenheimer to do so;
- our board of directors has recommended a competing acquisition proposal
to our stockholders;
- our board of directors has failed to call a meeting of our stockholders
for the purpose of obtaining the vote required to approve the merger
agreement and the transactions contemplated thereby;
- a tender offer or exchange offer for 15% or more of the outstanding
shares of common stock is commenced and our board of directors has failed
to recommend against acceptance of such tender offer or exchange within
the time period required pursuant to Rule 14e-2 of the Exchange Act of
1934; or
- the condition to closing that the employment agreements between
OppenheimerFunds, Inc. and certain employees specified in the merger
agreement be in full force and effect shall not have been satisfied or
waived by Oppenheimer.
At any time prior to approval of the merger agreement by our stockholders,
we may terminate the merger agreement if after receipt of a competing
acquisition proposal, (i) our directors determine, in good faith, after
consultation with their advisors, that termination of the merger agreement is
required to comply with its fiduciary duties under applicable law; (ii) after
receiving requisite notice of that acquisition proposal from us, Oppenheimer
does not make, within five business days, an offer that is at least as favorable
as such acquisition proposal; and (iii) simultaneous with such termination we
pay the required termination fee described below.
TERMINATION FEE
We have agreed to pay Oppenheimer a termination fee of $5,800,000 if any of
the following events occur:
- the merger agreement is terminated by us following receipt of a competing
acquisition proposal;
- the merger agreement is terminated by Oppenheimer because our board of
directors (i) failed to recommend, withdrew or adversely modified its
approval or recommendation of the merger agreement, (ii) failed to
reconfirm its recommendation of the merger agreement or the merger within
three business days of being requested by Oppenheimer to do so, (iii)
failed to recommend against acceptance of a tender offer for 15% or more
of the outstanding shares of our common stock or (iv) has recommended a
competing acquisition proposal to our stockholders;
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- the merger agreement is terminated by Oppenheimer because our
stockholders shall have failed to vote to approve the merger and the
merger agreement by December 30, 2001;
- within 18 months of our termination of the merger agreement for the
merger not having taken place by December 30, 2001, we enter into a
binding agreement with a third party to implement an acquisition proposal
or complete an acquisition proposal; or
- the employment agreements between OppenheimerFunds, Inc. and certain
employees specified in the merger agreement shall not be in full force
and effect.
AMENDMENT AND WAIVER
The merger agreement may be amended by the parties thereto, by action taken
or authorized by their respective boards of directors, but, after approval of
the merger agreement and the transactions contemplated thereby by our
stockholders, no amendment shall be made which by applicable law or in
accordance with the rules of any relevant stock exchange requires further
approval by our stockholders without such further approval. The merger agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties thereto.
REGULATORY APPROVALS
The Hart-Scott-Rodino Act provides that transactions such as the merger may
not be completed until certain information has been submitted to the Federal
Trade Commission and the Antitrust Division of the U.S. Department of Justice
and specified waiting requirements have been satisfied. We and Oppenheimer made
the required filings under the Hart-Scott-Rodino Act on August 13, 2001, and
therefore expect the waiting period to expire on September 12, 2001 (assuming
that no additional information is requested by the Federal Trade Commission or
Antitrust Division of the U.S. Department of Justice).
Tremont Securities, Inc., one of our subsidiaries, is registered as a
broker-dealer with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. The National Association of Securities Dealers, Inc. is a self-
regulatory organization which, through its subsidiary NASD Regulation, Inc.,
regulates securities markets and the activities of broker-dealers. The rules
promulgated by NASD Regulation, Inc., provide that the merger may not be
completed until an application containing certain information has been submitted
to and approved by NASD Regulation, Inc. Tremont Securities, Inc. submitted the
required application on August 2, 2001. We received written notification from
NASD Regulation, Inc. that our application was approved as of August 8, 2001.
Tremont Investment Management, Inc., one of our subsidiaries, is subject to
regulation by the Ontario Securities Commission under the Securities Act
(Ontario). The rules and regulations promulgated by the Ontario Securities
Commission provide that the merger may not be completed until certain
information has been submitted to the Ontario Securities Commission. We expect
to submit the required application on or before August 23, 2001. We expect that
the Ontario Securities Commission will grant our application on or before
September 22, 2001.
Tremont TASS (Europe) Limited, one of our subsidiaries, is subject to
regulation by the U.K. Securities Futures Authority under the English Financial
Services Act of 1986. The rules and regulations promulgated by the Securities
Futures Authority provide that the merger may not be completed until certain
information has been submitted to the Securities Futures Authority. Tremont TASS
(Europe) Limited submitted the required application on August 13, 2001. We
expect that the Securities Futures Authority will grant our application on or
before September 10, 2001.
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DIRECTORS AND MANAGEMENT
Information with respect to the management of Tremont is set forth in Part
III of Tremont's Annual Report on Form 10-KSB for the year ended December 31,
2000. See "Where You Can Find More Information".
In addition, a description of other contracts, arrangements, understandings
or relationships relating Tremont and its common stock is set forth and
described in Tremont's Annual Report on Form 10-KSB for the year ended December
31, 2000.
Our board of directors' reasons for approving the merger agreement, the
merger and the other transactions contemplated by the merger agreement are set
forth in the section entitled "Special Factors -- Reasons for the Merger". In
coming to its decision to approve the transactions contemplated by the merger
agreement, subject to approval by Tremont's stockholders, our board of directors
did not have a committee of independent directors or independent third party
review or approve the contemplated transactions.
Ten persons holding shares of our common stock have entered into a
stockholders' agreement with Oppenheimer pursuant to which they have agreed to
vote FOR the adoption of the merger agreement. Nine of these persons are
directors and/or officers of Tremont and one is a significant stockholder that
is represented on our board of directors. Pursuant to the stockholders'
agreement, approximately 308,950 shares of our Class A common stock and
3,184,070 shares of our Class B common stock, comprising approximately 37% of
the votes required to adopt the merger agreement, are already committed to be
voted FOR the adoption of the merger agreement. The stockholders' agreement also
provides that if the merger agreement is terminated under certain circumstances,
Oppenheimer may purchase shares of our Class A common stock and Class B common
stock held by these ten stockholders at a purchase price per share equal to the
merger consideration. To Tremont's knowledge, none of the executive officers or
directors of Tremont has made a recommendation in support of or opposed to the
transactions contemplated by the merger agreement, other than the recommendation
described in this proxy statement.
PRICE RANGE OF STOCK AND DIVIDENDS
For the period commencing on January 1, 1999 and ending on February 1,
2000, both the Class A common stock and the Class B common stock were quoted on
the OTC Bulletin Board. Since February 2, 2000, the Class B common stock has
traded on the NASDAQ SmallCap Market under the symbol "TMAV". The Class A common
stock continues to be quoted on the OTC Bulletin Board under the symbol "TMAVA".
The following table sets forth the range of high and low bid prices of the Class
A common stock and the range of high and low bid prices or trade prices of the
Class B common stock, as applicable. The quotations below are, up until February
2, 2000, dealer prices without retail mark-ups, mark-downs or commissions and
may not represent actual transactions. The bid prices and trade prices
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have been restated to reflect the impact of a five-for-four stock split paid on
August 8, 2000 to stockholders of record on July 31, 2000.
PRICE RANGE OF CLASS A COMMON STOCK
<Table>
<Caption>
BID PRICES
----------------
HIGH LOW
------ ------
1999:
First Quarter............................................ $ 6.40 $ 3.84
Second Quarter........................................... 6.88 5.12
Third Quarter............................................ 8.40 6.20
Fourth Quarter........................................... 8.80 7.20
2000:
First Quarter............................................ $ 8.40 $ 8.00
Second Quarter........................................... 8.60 6.40
Third Quarter............................................ 14.00 7.00
Fourth Quarter........................................... 12.00 9.50
2001:
First Quarter............................................ 13.00 9.00
Second Quarter........................................... 17.00 10.75
</Table>
PRICE RANGE OF CLASS B COMMON STOCK
<Table>
<Caption>
BID PRICES
--------------
HIGH LOW
----- -----
1999:
First Quarter............................................. $6.72 $4.00
Second Quarter............................................ 7.04 5.12
Third Quarter............................................. 8.80 6.40
Fourth Quarter............................................ 9.40 4.80
2000:
January 1, 2000 - February 1, 2000........................ 8.00 7.60
</Table>
<Table>
<Caption>
TRADE PRICES
----------------
HIGH LOW
------ ------
2000:
February 2, 2000 - March 31, 2000........................ $ 8.80 $ 6.40
Second Quarter........................................... 9.00 7.20
Third Quarter............................................ 12.00 7.50
Fourth Quarter........................................... 15.00 10.00
2001:
First Quarter............................................ 15.50 9.50
Second Quarter........................................... 20.00 12.25
</Table>
Since its organization, Tremont has not paid any cash dividends on its
Class A common stock or its Class B common stock.
On July 9, 2001, the last full trading day prior to the public announcement
of the signing of the merger agreement, the closing sale price of our Class A
common stock was $22.00 per share, as were both the high and low bid prices per
share, and the closing sale price of our Class B common stock was $19.75 per
share and the high and low trading prices per share were $20.00 and $19.75,
respectively. On
43
50
August 17, 2001, the most recent practicable date prior to the printing of this
proxy statement, the closing price of our Class A common stock was $18.00 per
share, as were both the high and low bid prices per share, respectively, and the
closing sale price of our Class B common stock was $18.71 per share, as were
both the high and low trading prices per share, respectively. You are urged to
obtain current market quotations for our common stock prior to making any
decision with respect to the proposed merger.
As of the record date, there were approximately 64 holders of record of
Tremont's Class A common stock and approximately 128 holders of record of
Tremont's Class B common stock, as shown on the records of our transfer agent.
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51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information pertains to common stock beneficially owned (i)
by all directors and executive officers of Tremont and (ii) any person known to
us from our records and from reports filed with the SEC on Schedules 13D and/or
13G to be the beneficial owner of more than 5% of our common stock. Unless
indicated otherwise by footnote, the owner exercises sole voting and investment
power over the securities (other than unissued securities, the ownership of
which has been imputed to such owner).
<Table>
<Caption>
NUMBER OF PERCENTAGE OF
SHARES OWNED CLASS OWNED
DIRECTOR -------------------- ------------------
NAME OR OFFICER CLASS A CLASS B CLASS A CLASS B
- ---- ---------- ------- --------- ------- -------
Sandra L. Manzke(1)....................... Yes 256,194 599,648 15% 11%
Robert I. Schulman(2)..................... Yes 12,286 521,658 * 10%
Barry H. Colvin(3)........................ No 105 43,324 * *
John L. Keeley, Jr.(4).................... Yes 107,379 557,223 6% 10%
Alan Rhein(5)............................. Yes -- 53,904 -- 1%
Jimmy L. Thomas(6)........................ Yes -- 81,249 -- 2%
Suzanne S. Hammond(7)..................... No 20,131 43,637 1% *
Stephen T. Clayton(8)..................... No 6,947 68,334 * 1%
Bruce D. Ruehl(9)......................... Yes 6,097 187,075 * 4%
Nicola Meaden(10)......................... Yes -- 384,593 -- 7%
Mario J. Gabelli(11)...................... No 654,291 308,365 41% 5%
Brighton Communications Corporation(12)... No -- 102,063 -- 3%
Legion Insurance Company(13).............. No -- 1,351,536 -- 25%
Oppenheimer Acquisition Corp.(14)......... No 308,950 3,254,380 18% 62%
Directors and officers as a group......... 409,139 2,540,645 25% 48%
</Table>
- ---------------
* Less than 1%. Percentages are shown only where they exceed one percent of
the number of shares outstanding and are based on shares of common stock
outstanding on June 30, 2001.
(1) Ms. Manzke is the Chairman of the Board of Directors and Co-Chief Executive
Officer of Tremont. Her address is 555 Theodore Fremd Ave., Rye, New York.
Includes 60,482 shares of Class A common stock and 67,851 shares of Class B
common stock owned by the Tremont Advisers, Inc. Savings Plan over which
Ms. Manzke has investment discretion and 64,687 shares of Class B common
stock subject to currently exercisable stock options (together with such
options held by other directors and officers of Tremont, the "Currently
Exercisable Options").
(2) Mr. Schulman is President, Co-Chief Executive Officer and a director of
Tremont. His address is 555 Theodore Fremd Ave., Rye, New York. Includes
12,286 shares of Class A common stock and 13,208 shares of Class B common
stock owned by the Savings Plan over which Mr. Schulman has investment
discretion and 48,437 shares of Class B common stock subject to Currently
Exercisable Options.
(3) Mr. Colvin is the Chief Operating Officer of Tremont. His address is 555
Theodore Fremd Ave., Rye, New York. Includes 105 shares of Class A common
stock owned by the Tremont Advisers, Inc. Savings Plan over which Mr.
Colvin has investment discretion as well as 40,624 shares of Class B common
stock subject to Currently Exercisable Options.
(4) Mr. Keeley is a director of Tremont. His address is 401 South LaSalle St.,
Chicago, Illinois. Includes 31,250 shares of Class B common stock owned by
Mr. Keeley's wife, 14,062 shares of Class B common stock owned by the John
L. Keeley Jr. Foundation, 54,687 shares of Class B common stock owned by
the KIC Profit Sharing Plan & Trust, 54,687 shares of Class B common stock
owned by the KIC Pension Plan & Trust, 102,675 shares of Class B common
stock owned by Kamco Limited Partnership No. 1, 312 shares of Class B
common stock owned by the Keeley Family Limited Partnership, and 30,802
shares of Class B common stock owned by JGJ Partnership.
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Mr. Keeley is deemed to have beneficial ownership of the foregoing. Also
includes 10,936 shares of Class B common stock subject to Currently
Exercisable Options.
(5) Mr. Rhein is a director of Tremont. His address is 405 Park Avenue, New
York, New York. Includes 156 shares of Class B common stock owned by Mr.
Rhein's wife and children, over which Mr. Rhein is deemed to have
beneficial ownership. Also includes 22,655 shares of Class B common stock
subject to Currently Exercisable Options.
(6) Mr. Thomas is a director of Tremont. His address is 205 Fox Meadow Drive,
Orchard Park, New York. Includes 3,124 shares of Class B common stock
subject to Currently Exercisable Options.
(7) Ms. Hammond is Secretary and Treasurer of Tremont. Her address is 555
Theodore Fremd Ave., Rye, New York. Includes 14,272 shares of Class A
common stock owned by the Savings Plan and 2,557 shares of Class B common
stock owned by the Savings Plan over which Ms. Hammond has investment
discretion, and 6,187 shares of Class B of common stock subject to
Currently Exercisable Options.
(8) Mr. Clayton is Chief Financial and Administrative Officer of Tremont. His
address is 555 Theodore Fremd Ave., Rye, New York. Includes 6,947 shares of
Class A common stock and 6,027 shares of Class B common stock owned by the
Savings Plan over which Mr. Clayton has investment discretion and 32,654
shares of Class B common stock subject to Currently Exercisable Options.
Also includes 5,624 shares of Class B common stock owned by his wife, as to
which Mr. Clayton specifically disclaims beneficial ownership, and 312
shares owned by his minor children which Mr. Clayton is deemed to own
beneficially.
(9) Mr. Ruehl is Chief Investment Strategist and a director of Tremont. His
address is 555 Theodore Fremd Ave., Rye, New York. Includes 6,097 shares of
Class A common stock and 2,140 shares of Class B common stock owned by the
Savings Plan over which Mr. Ruehl has investment discretion and 29,686
shares of Class B common stock subject to Currently Exercisable Options.
(10) Ms Meaden is Chief Executive Officer of Tremont Tass (Europe) Limited and
is a director of Tremont. Her address is Charter House, 13-15 Carteret St.,
London, England. Includes 284,328 shares of Class B common stock subject to
Currently Exercisable Options.
(11) Mr. Gabelli's address is Gabelli Asset Management, 555 Theodore Fremd Ave.,
Rye, New York. Includes 407,465 shares of Class A common stock and 3,540
shares of Class B common stock owned by a family partnership over which Mr.
Gabelli has sole voting power and investment power. Includes 3,201 shares
of Class A common stock and 2,325 shares of Class B common stock owned by a
family foundation over which Mr. Gabelli has voting and investment power,
of which Mr. Gabelli disclaims beneficial ownership. Does not include
shares listed elsewhere in this table which are held by Brighton
Communications Corporation ("Brighton"), of which Mr. Gabelli specifically
disclaims beneficial ownership.
(12) Brighton's address is 401 Theodore Fremd Ave., Rye, New York. Mr. Gabelli
is Chairman of the Board and Chief Executive Officer of Brighton, and he
and his affiliates and their clients are principal shareholders of Lynch
Corporation ("Lynch"). Mr. Gabelli may be deemed to be a beneficial owner
of the shares of the Company owned by Brighton, a subsidiary of Lynch, by
virtue of his and certain affiliated parties' significant beneficial
ownership of the common stock of Lynch. Mr. Gabelli, however, specifically
disclaims beneficial ownership of all of the shares of the Company's Common
Stock held by Brighton.
(13) Legion Insurance Company's address is One Logan Square, Philadelphia,
Pennsylvania. A wholly-owned subsidiary of Mutual Risk Management, Ltd
(known as MRM), MGL Investment, Ltd., purchased these shares during 1997
and 1999. These shares were transferred, effective December 31, 1999, to
Legion Insurance Company, another of MRM's wholly-owned subsidiaries.
(14) As of July 19, 2001, Oppenheimer Acquisition Corp. has, pursuant to the
stockholders' agreement, shared voting power and shared dispositive power
with respect to (and therefore beneficially owns) an aggregate of (i)
308,950 Class A shares representing 18.4% of the outstanding shares of
Class A Common Stock and (ii) 3,254,380 Class B shares representing 61.3%
of the outstanding shares of
46
53
Class B Common Stock. By virtue of (i) MassMutual Holding Trust I's
("Trust") control of Oppenheimer, (ii) MassMutual Holding Company's
("Holding") control of Trust and (iii) Massachusetts Mutual Life Insurance
Company's ("MassMutual") control of Holding, each of Trust, Holding and
MassMutual may be, for the purposes of this proxy statement, a beneficial
owner of all of the shares of which Oppenheimer is a beneficial owner. Each
of Trust, Holding and MassMutual disclaims beneficial ownership of the
308,950 shares of Class A Common Stock and the 3,254,380 shares of Class B
Common Stock referred to above as to which they may be deemed to have
beneficial ownership. The address of Oppenheimer is Two World Trade Center,
New York, New York. The address of Trust is 1295 State Street, Springfield,
Massachusetts. The address of Holding is 1295 State Street, Springfield,
Massachusetts. The address of MassMutual is 1295 State Street, Springfield,
Massachusetts.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Tremont has made forward-looking statements in this document and the
documents referenced herein that are subject to risks and uncertainties. These
statements are based on management's beliefs and assumptions, based on
information currently available to management. Forward-looking statements
include the information concerning possible or assumed future results of
operations of Tremont set forth (i) under "Summary", "Special Factors" and "The
Merger Agreement" and (ii) in this document and the documents referenced
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates," "should" or similar expressions.
Some statements contained in this proxy statement may constitute "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements involve a number of risks, uncertainties
and other factors that could cause actual results to differ materially,
including the performance of financial markets, the investment performance of
Tremont's and its subsidiaries' sponsored investment products and separately
managed accounts, general economic conditions, future acquisitions, competitive
conditions and government regulations, including changes in tax laws. Tremont
cautions you to carefully consider such factors. Further, such forward-looking
statements speak only as of the date on which such statements are made. Tremont
undertakes no obligation to update any forward-looking statements to reflect
events or circumstances after the date of such statement even if new
information, future events or other circumstances have made them incorrect or
misleading. For those statements, Tremont claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
Stockholders should understand that the following important factors, in
addition to those discussed elsewhere in the documents which are referenced in
this proxy statement, could affect the future results of Tremont and could cause
results to differ materially from those expressed in such forward-looking
statements: competitive pressures among financial services companies may
increase significantly; general economic conditions, either internationally or
nationally or in the states in which Tremont or its subsidiaries are doing
business, may be less favorable than expected; legislative or regulatory changes
may adversely affect the business in which Tremont is engaged; and technological
changes may be more difficult or expensive than anticipated.
FUTURE STOCKHOLDER PROPOSALS
If the merger is not completed, Tremont will hold a 2002 annual meeting of
stockholders. If such meeting is held, for a stockholder proposal to be
considered for inclusion in Tremont's proxy statement for the 2002 annual
meeting, the proposal must have been received at Tremont's offices no later than
January 15, 2002. SEC Rule 14a-8 contains standards as to what stockholder
proposals are to be included in a proxy statement.
47
54
In the event the merger is not completed and the Tremont 2002 annual
meeting is held, if a stockholder intends to present a proposal for
consideration at the 2002 annual meeting outside the process of SEC Rule 14a-8,
Tremont must receive the notice of such proposal on or before March 14, 2002.
WHERE YOU CAN FIND MORE INFORMATION
Tremont files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information we file at the Securities and
Exchange Commission's Public Reference Room, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Securities and Exchange Commission's regional offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Securities and Exchange Commission filings are
also available to the public from commercial document retrieval services and at
the website maintained by the Securities and Exchange Commission at
http://www.sec.gov. You may inspect infor-mation that Tremont files with the
NASDAQ at the offices of the National Association of Securities Dealers at 1735
K Street NW, Washington DC 20006.
In addition to the information provided in this proxy statement, the
following documents contain important information about our company and its
finances.
<Table>
<Caption>
TREMONT SEC FILINGS PERIOD OR DATE FILED
Annual Report on Form 10-KSB Year ended December 31, 2000
Quarterly Reports on Form 10-QSB Quarter ended March 31, 2001 and June 30,
2001.
Current Report on Form 8-K Filed on July 10, 2001.
</Table>
Company stockholders may obtain the above-mentioned documents, which are
incorporated herein by this reference, by requesting them in writing or by
telephone from the appropriate party at the following addresses:
Tremont Advisers, Inc.
555 Theodore Fremd Avenue
Rye, New York 10580
Attention: Investor Relations
Telephone: (914) 925-1140
If you would like to request documents from us, please do so by September
19, 2001 to receive them before the special meeting.
You should rely only on the information contained in this proxy statement
or other documents to which we refer to vote on the merger. We have not
authorized anyone to provide you with information that is different from what is
contained in this proxy statement. This proxy statement is dated August 20,
2001. You should not assume that the information contained in this proxy
statement is accurate as of any date other than the date hereof, and the mailing
of the proxy statement to stockholders shall not create any implication to the
contrary.
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55
Your vote is important. To vote your shares, please complete, date, sign
and return the enclosed proxy card as soon as possible in the enclosed
postage-prepaid envelope or follow the instructions on your voting card to vote
by telephone. Please call our proxy solicitor, James McCormick, or Stephen
Clayton in our investor relations department, at (914) 925-1140 if you have
questions or need assistance with the voting procedures.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Sandra L. Manzke
Sandra L. Manzke
Chairman of the Board and
Co-Chief Executive Officer
Rye, New York
August 20, 2001
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56
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 10, 2001
AMONG
OPPENHEIMER ACQUISITION CORP.,
JOSHUA ACQUISITION CORP.
AND
TREMONT ADVISERS, INC.
57
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
ARTICLE I DEFINITIONS................................................. A-1
1.1 Definitions................................................. A-1
ARTICLE II THE MERGER.................................................. A-8
2.1 The Merger.................................................. A-8
2.2 Closing..................................................... A-8
2.3 Effective Time.............................................. A-8
2.4 Effects of the Merger....................................... A-8
2.5 Certificate of Incorporation................................ A-8
2.6 By-Laws..................................................... A-8
2.7 Officers and Directors of Surviving Corporation............. A-8
2.8 Effect on Capital Stock; Merger Consideration............... A-9
2.9 Stock Options............................................... A-10
2.10 Further Assurances.......................................... A-10
ARTICLE III EXCHANGE OF CERTIFICATES.................................... A-10
3.1 Exchange Fund............................................... A-10
3.2 Exchange Procedures......................................... A-11
3.3 No Further Ownership Rights in Company Common Stock......... A-11
3.4 Termination of Exchange Fund................................ A-11
3.5 No Liability................................................ A-11
3.6 Investment of the Exchange Fund............................. A-11
3.7 Lost Certificates........................................... A-11
3.8 Withholding Rights.......................................... A-12
3.9 Stock Transfer Books........................................ A-12
ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................. A-12
4.1 Representations and Warranties of the Company............... A-12
4.2 Representations and Warranties of the Parent and the Merger
Sub......................................................... A-27
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS................... A-29
5.1 Covenants of the Company.................................... A-29
5.2 Advisory Agreement Consents................................. A-32
5.3 Acquisition Proposals....................................... A-32
5.4 Obtaining Required Company Vote............................. A-34
5.5 Access to Information....................................... A-34
5.6 Covenants of the Parent..................................... A-34
5.7 Offers of Employment........................................ A-35
5.8 Employee Benefits........................................... A-35
5.9 Directors' and Officers' Indemnification and Insurance...... A-36
5.10 Retention Plan and Bonus Pool............................... A-37
5.11 Mutual Covenants of the Company and the Parent.............. A-37
5.12 Revenue Run Rate............................................ A-39
5.13 Tangible Net Worth.......................................... A-40
5.14 Employment Agreements....................................... A-40
ARTICLE VI CONDITIONS PRECEDENT........................................ A-40
6.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-40
6.2 Additional Conditions to Obligations of Company............. A-40
6.3 Additional Conditions to Obligations of the Parent and the
Merger Sub.................................................. A-41
</Table>
i
58
<Table>
<Caption>
PAGE
----
ARTICLE VII TERMINATION................................................. A-41
7.1 Termination................................................. A-41
7.2 Effect of Termination....................................... A-43
7.3 Payment by the Company...................................... A-43
ARTICLE VIII GENERAL PROVISIONS.......................................... A-43
8.1 Non-Survival of Representations, Warranties and
Agreements.................................................. A-43
8.2 Amendment................................................... A-43
8.3 Extension; Waiver........................................... A-44
8.4 Notices..................................................... A-44
8.5 Interpretation.............................................. A-45
8.6 Counterparts................................................ A-45
8.7 Entire Agreement; Third Party Beneficiaries................. A-45
8.8 Governing Law............................................... A-45
8.9 Venue....................................................... A-45
8.10 Waiver of Jury Trial........................................ A-46
8.11 Severability................................................ A-46
8.12 Assignment.................................................. A-46
8.13 Enforcement................................................. A-46
8.14 Other Agreements............................................ A-46
</Table>
ii
59
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 10, 2001 (this "Agreement"),
among OPPENHEIMER ACQUISITION CORP., a Delaware corporation (the "Parent"),
JOSHUA ACQUISITION CORP., a Delaware corporation and a wholly owned Subsidiary
of the Parent (the "Merger Sub"), and TREMONT ADVISERS, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Parent, the Merger Sub
and the Company have each determined that this Agreement and the merger of the
Merger Sub with and into the Company (the "Merger") in accordance with the
provisions of this Agreement are advisable and in the best interests of their
respective stockholders, and such Boards of Directors have approved such Merger,
upon the terms and subject to the conditions set forth in this Agreement,
pursuant to which each share of Company Common Stock (as defined in Section
4.1(c)(i)(B)) issued and outstanding immediately prior to the Effective Time (as
defined in Section 2.3) (other than shares of Company Common Stock that are
owned or held directly or indirectly by the Parent or the Company which shall be
canceled as provided in Section 2.8(c), and Dissenting Shares (as defined in
Section 2.8(e)) will be converted into the right to receive the Merger
Consideration (as defined in Section 2.8(a)), and the Company will become a
wholly owned Subsidiary of the Parent; and
WHEREAS, as an inducement to the Parent and the Merger Sub to enter into
this Agreement and consummate the transactions contemplated hereby, concurrently
with the execution of this Agreement, the Parent and the Merger Sub are entering
into one or more stockholder agreements with certain stockholders of the Company
listed on Schedule I hereto (collectively, the "Company Stockholders") pursuant
to which, among other things, each Company Stockholder has agreed to vote the
Company Common Stock then owned by such Company Stockholder in favor of the
Merger; and
WHEREAS, certain employees of the Company have entered into Employment
Agreements with the Parent and the Company concurrently with the execution of
this Agreement which are attached hereto as Schedule 6.3(e) to the Company
Disclosure Schedule (the "Employment Agreements"); and
WHEREAS, the Parent, the Merger Sub and the Company desire to make certain
representations, warranties and covenants in connection with the transactions
contemplated hereby and also to prescribe various conditions to the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For all purposes in this Agreement, the following terms
shall have the respective meanings set forth in this Section 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms herein defined):
"Acquisition Proposal" shall have the meaning set forth in Section 5.3(a).
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
the rules and regulations promulgated thereunder by the SEC.
"Advisory Agreement" means, with respect to any Person, each contract or
agreement relating to its rendering of investment management or investment
advisory services, including any sub-advisory or similar agreement and
including, in the case of the Funds that are organized in any jurisdiction
within the United States, the organizational documents of such Funds.
60
"Affiliate", with respect to any Person, means a Person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Annuity Policy" shall have the meaning set forth in Section 4.1(j)(xxi).
"Applicable Law" means any domestic or foreign federal, state or local
statute, law, ordinance, rule, administrative interpretation, regulation, order,
writ, injunction, directive, judgment, decree, policy, guideline or other
requirement (including those of any Governmental Authority other than any law,
regulation, administrative interpretation, order, directive or judgment in
relation to Taxes, whether United States or foreign), applicable to any of the
parties to this Agreement, any of each of their respective Subsidiaries, or any
of the Funds or any of the properties or assets of the parties to this Agreement
or any of their Subsidiaries or any of the Funds, as the case may be.
"Base Date" means May 31, 2001.
"Base Revenue Run-Rate" means $19,608,973, which the Parent and the Company
have determined represents the Revenue Run-Rate as of the Base Date, and has
been calculated using the methodology set forth in Schedule II hereto.
"Benefit Plans" means each employee or director benefit plan, program,
arrangement and contract (including any "employee benefit plan", as defined in
Section 3(3) of ERISA, and any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, stay
agreement or bonus, change in control and severance plan, program, arrangement
and contract) in effect on the date of this Agreement or disclosed on Schedule
4.1(l)(iii) of the Company Disclosure Schedule, to which the Company or any of
its ERISA Affiliates is a party, which is maintained or contributed to by the
Company or any of its ERISA Affiliates, or with respect to which the Company or
any of its ERISA Affiliates could incur material liability under Section 4069,
4201 or 4212(c) of ERISA which covers employees, directors or former employees
or directors of the Company and its Subsidiaries.
"Board of Directors" means the Board of Directors of any specified Person
and any committees thereof.
"Bonus Pool" shall have the meaning set forth in Section 5.10.
"Business Day" means any day on which banks are not required or authorized
to close in the City of New York.
"CEA" means the Commodity Exchange Act, as amended, and the rules and
regulations promulgated thereunder by the CFTC.
"Certificate" shall have the meaning set forth in Section 2.8(b).
"Certificate of Merger" shall have the meaning set forth in Section 2.3.
"CFTC" means the Commodity Futures Trading Commission.
"Class A Common Stock" shall have the meaning set forth in Section
4.1(c)(i)(A).
"Class B Common Stock" shall have the meaning set forth in Section
4.1(c)(i)(B).
"Closing" shall have the meaning set forth in Section 2.2.
"Closing Date" shall have the meaning set forth in Section 2.2.
"Closing Revenue Run-Rate" means the Revenue Run-Rate as of the most recent
calendar month-end prior to the Effective Time in respect of which a Monthly
Run-Rate Schedule has been delivered pursuant to Section 5.12; provided, that if
the Parent exercises its right pursuant to Section 2.2 to extend the date of the
Closing to October 1, 2001, the Revenue Run-Rate as of August 31, 2001 shall be
utilized. The calculation of the Closing Revenue Run-Rate shall be made using
substantially the same methodology as used in the calculation of the Base
Revenue Run-Rate (as set forth on Schedule II hereto).
A-2
61
"Closing Tangible Net Worth" means the Tangible Net Worth shown on the
balance sheet of the Company as of the end of the most recent calendar month-end
prior to the Closing Date in respect of which a Monthly Balance Sheet has been
delivered pursuant to Section 5.13, calculated in a manner consistent with the
Target Tangible Net Worth.
"Code" means the Internal Revenue Code of 1986, as amended, and any rules
and Treasury regulations promulgated thereunder.
"Company" shall have the meaning set forth in the Preamble.
"Company Capital Stock" shall have the meaning set forth in Section
4.1(c)(i)(C).
"Company Common Stock" shall have the meaning set forth in Section
4.1(c)(i)(B).
"Company Contract" means any contract, agreement, indenture, mortgage, deed
of trust, note, bond, franchise, lease, plan, license or other instrument,
arrangement or other obligation, whether written or oral, including all
amendments, modifications, and supplements thereto and all side letters
affecting the obligations of any party thereunder, relating to the ownership of
or use by the Company or any of its Subsidiaries or the Funds of any of their
respective properties or assets or relating to the conduct of their respective
businesses, binding upon the Company, any of its Subsidiaries or the Funds,
other than Advisory Agreements.
"Company Disclosure Schedule" shall have the meaning set forth in Section
4.1.
"Company Financial Advisor" means Putnam Lovell Securities, Inc.
"Company Preferred Stock" shall have the meaning set forth in Section
4.1(c)(i)(C).
"Company Stock Option Plan" means the Tremont 1998 Stock Plan.
"Company Stock Options" shall have the meaning set forth in Section 2.9.
"Company Stockholders" shall have the meaning set forth in the recitals.
"Confidential Information" shall have the meaning set forth in the
Confidentiality Agreement.
"Confidentiality Agreement" shall have the meaning set forth in Section
5.11(e).
"control" (including the terms "controlling", "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of any Person,
whether through the ownership of voting securities, by contract, or otherwise.
"DGCL" shall mean the Delaware General Corporation Law.
"Dissenting Shares" shall have the meaning set forth in Section 2.8(e).
"DOJ" means the Department of Justice.
"Effective Time" shall have the meaning set forth in Section 2.3.
"Employee" shall have the meaning set forth in Section 4.1(l).
"Employment Agreements" shall have the meaning set forth in the recitals.
"Encumbrance" means any lien, claim, mortgage, encumbrance, pledge,
security interest, or any other restriction with respect to transferability or
assignability.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business, whether or not incorporated,
that, together with the Company or any of its Subsidiaries which is or has ever
been treated as a "single employer" with any of them within the meaning of
section 4001(b) of ERISA or Sections 414(b), (c), (m) or (o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder by the SEC.
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"Exchange Agent" shall have the meaning set forth in Section 3.1.
"Exchange Fund" shall have the meaning set forth in Section 3.1.
"Expenses" shall have the meaning set forth in Section 5.11(d).
"FSA" means the Financial Services Act 1986, and the rules and regulations
promulgated thereunder.
"FITX" means FITX Group Limited, an exempted Bermuda company, and its
Subsidiaries.
"Foreign Plan" shall have the meaning set forth in Section 4.1(l).
"Fund" means a vehicle for collective investment sponsored, formed or
controlled by the Company or any Subsidiary of the Company.
"GAAP" means generally accepted accounting principles in the United States.
"Governmental Approvals" means all approvals, permits, qualifications,
authorizations, rights, licenses, franchises, consents, orders, registrations or
other approvals of or granted by any Governmental Authority, whether United
States or foreign, which are necessary or required under Applicable Law in order
to permit the Company, any Subsidiary of the Company or any of the Funds to
carry on their respective businesses or for the performance by the Company of
this Agreement and any of the agreements and transactions contemplated hereby.
"Governmental Authority" means any United States or foreign government,
nation, state, territory, province, county, city or other unit or subdivision
thereof or any entity, authority, agency, department, board, commission,
instrumentality, court or other judicial body authorized on behalf of any of the
foregoing to exercise legislative, judicial, regulatory or administrative
functions of or pertaining to government, including any Self-Regulatory
Organization or other authority of any state or foreign jurisdiction, and any
court, tribunal or arbitrator(s) of competent jurisdiction, and any governmental
organization, agency or authority, in each case whether United States or
foreign.
"GBA" means the Gramm-Leach-Bliley Act.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Immediate Family" means, with respect to any individual, (a) such
individual's spouse, parents, siblings and children, (b) any spouse, parent,
sibling or child of any Person specified in clause (a) above and (c) any estate,
trust, partnership or other entity or legal relationship of which a majority of
the equity interests at all times in question are, directly or indirectly, held
by or for the benefit of one or more of the Persons described above and/or such
individual.
"Indemnified Parties" shall have the meaning set forth in Section 5.9(a).
"Index LLC" means Credit Suisse First Boston Tremont Index LLC, a Delaware
limited liability company.
"Insurance Policy" shall have the meaning set forth in Section 4.1(j)(xx).
"Intellectual Property" means all domestic and foreign copyrights, patents,
proprietary models, processes, formulas and databases, client lists, service
marks, Software, know-how, trade names, trademarks and trade secrets, and all
registrations or applications for registration of any of the foregoing.
"Investment Company" has the meaning set forth in the Investment Company
Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated thereunder by the SEC.
"IRS" means the Internal Revenue Service.
"Key Client" shall have the meaning set forth in the letter agreement,
dated as of the date hereof, among the Parent, the Merger Sub and the Company,
relating to certain Advisory Agreements.
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"Knowledge" when used with respect to the Company means the actual
knowledge of any executive officer of the Company or any of its Subsidiaries
after due inquiry, except as provided in the definition of Subsidiary.
"Material Adverse Effect" means, with respect to any Person, any effect
that is material and adverse to the business, assets, revenues, financial
condition, results of operations, or assets under management of such Person and
its Subsidiaries, taken as a whole, or to the ability of such Person to complete
the Merger, other than to the extent resulting from declines in U.S. or global
securities markets or economic conditions in general, if the effect on the
Company and its Subsidiaries, taken as a whole without giving effect to the
Merger or the transactions contemplated by this Agreement, is not either (A)
particularized or unique to the Company and its Subsidiaries, taken as a whole,
or (B) disproportionate relative to the effect on the competitors of the Company
and its Subsidiaries (without taking into account the Merger or the transactions
contemplated by this Agreement); provided that a reduction in the Revenue
Run-Rate between the Base Date and the date as of which the Closing Revenue
Run-Rate is determined in and of itself shall not constitute a Material Adverse
Effect with respect to the Company.
"Material Contract" shall have the meaning set forth in Section 4.1(o).
"Merger" shall have the meaning set forth in the Preamble.
"Merger Consideration" shall have the meaning set forth in Section 2.8(a).
"Merger Sub" shall have the meaning set forth in the Preamble.
"Monthly Run-Rate Schedule" shall have the meaning set forth in Section
5.12.
"Monthly Tangible Net Worth Schedule" shall have the meaning set forth in
Section 5.13.
"NASD" means the National Association of Securities Dealers, Inc. or any
one or more of its Subsidiaries, as the context may require, and any successor
to any of them.
"NFA" means the National Futures Association.
"Notice" shall have the meaning set forth in Section 5.2.
"Number of Shares and Options Outstanding" means the sum of the number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock that are 100% owned or
held directly or indirectly by the Parent or directly by the Company and
Dissenting Shares) plus the number of shares of Company Common Stock issuable
upon the exercise of all Company Stock Options outstanding immediately prior to
the Effective Time.
"Option Consideration" shall have the meaning set forth in Section 2.9(a).
"Parent" shall have the meaning set forth in the Preamble.
"Parent Disclosure Schedule" shall have the meaning set forth in Section
4.2.
"Permitted Encumbrances" means all Encumbrances which are:
(1) Encumbrances set forth pursuant to Article IV on the Company
Disclosure Schedule or the Parent Disclosure Schedule;
(2) statutory liens for Taxes or assessments that are not yet due and
payable or otherwise being contested in good faith;
(3) matters which would be shown on an accurate survey and any other
defect or exception which would be disclosed by a search of title, which in
each case does not materially impair the use, operation, value or
marketability of the asset to which it relates;
(4) liens of landlords and liens of carriers, warehousemen, mechanics
and materialmen and other like liens arising in the ordinary course of
business for sums not yet due and payable; or
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(5) other liens or imperfections in title on assets which individually
or in the aggregate do not exceed $250,000 and do not materially detract
from the value of or materially impair the existing use of the assets
affected by such liens or imperfections.
"Person" means an individual, corporation, company, limited liability
company, partnership (limited or general), joint venture, association, trust,
unincorporated organization, other entity or group.
"Privacy Rules" shall have the meaning set forth in Section 4.1(w).
"Pro Forma Balance Sheet" means the projected pro forma balance sheet of
the Company as of August 31, 2001 attached hereto as Schedule III.
"Proxy Statement" means the preliminary proxy materials relating to the
meeting of the Company stockholders, and any amendments or supplements thereto.
"Regulatory Reports" shall have the meaning set forth in Section 4.1(d).
"Representative" means any officer, director, employee, representative,
agent or Affiliate, including any investment banker, financial advisor, attorney
or accountant, which is employed or retained by the Parent or the Company, as
the case may be.
"Required Company Vote" shall have the meaning set forth in Section 4.1(n).
"Retention Plan" shall have the meaning set forth in Section 5.10.
"Revenue Run-Rate" means, as of any date, the aggregate annualized
investment advisory, investment management and subadvisory fees for all
investment advisory clients who pay fees based on assets under management
(excluding, in each case, any portion thereof attributable to investment
advisory clients that have notified the Company prior to the effective time of
their intention to terminate the services of the Company or any Subsidiary, and,
excluding in the case of the Closing Revenue Run-Rate, any portion thereof
attributable to investment advisory clients that have not consented prior to the
Closing (either expressly or by implication in accordance with Section 5.2
hereof) to the assignment or deemed assignment of their respective Advisory
Agreements resulting from the transactions contemplated by this Agreement or
that have withdrawn such consents prior to the Closing) by the Company or any
Subsidiary of the Company and payable to the Company or such Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder by the SEC.
"Securities Act (Ontario)" means the Securities Act, R.S.O. 1990, as
amended, and the rules and regulations promulgated thereunder by the Ontario
Securities Commission.
"Securities Laws" means the Securities Act, the Exchange Act, the
Investment Company Act, the Advisers Act, the CEA, the securities or "blue sky"
laws of any state or territory of the United States and the rules and
regulations of the NASD and the comparable laws, rules and regulations in effect
in any other country.
"Self-Regulatory Organization" means the NASD, the NFA, the SFA, each
national securities or commodities or futures exchange in the United States and
each other commission, board, agency or body, whether United States or foreign,
that is charged with the supervision or regulation of brokers, dealers,
securities underwriting or trading, stock exchanges, commodities or futures
exchanges, insurance companies or agents, investment companies, investment
advisers, commodity pool operators or commodity trading advisors.
"SFA" means the Securities Futures Authority.
"Software" means all computer programs, software, databases, firmware and
related documentation utilized by the referenced Person or Persons in their or
its business.
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"Stockholders Agreement" means the Stockholders Agreement dated as of the
date hereof among the Parent, the Merger Sub and the Company Stockholders.
"Subsidiary" means, with respect to any Person, any controlled Affiliate of
such Person, provided that a Fund shall be deemed not to be a Subsidiary of the
Company, and provided further that solely for purposes of Article IV, the term
Subsidiary with respect to the Company shall also be deemed to include Index
LLC, TII, TMRM and FITX and each of their Subsidiaries; provided, however, that
any representation or warranty made with respect to Index LLC, TII, TMRM or FITX
or any of their Subsidiaries or the Funds controlled by such Persons in Article
IV shall be made, unless otherwise stated, to the actual Knowledge of the
Company (without any requirement of due inquiry).
"Superior Proposal" shall have the meaning set forth in Section 5.3(a).
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"Tangible Net Worth" means the excess of (i) "stockholders equity" over
(ii) the sum of "goodwill net of amortization" and "investments in joint
ventures," as reflected on the Pro Forma Balance Sheet or the Monthly Tangible
Net Worth Schedule, as the case may be (it being understood that Expenses,
whether paid, accrued or accruable, shall be excluded from both the Pro Forma
Balance Sheet and the Monthly Tangible Net Worth Schedule).
"Target Tangible Net Worth" means $14,170,290, which is the Tangible Net
Worth shown on the Pro Forma Balance Sheet.
"Taxes" means all federal, provincial, territorial, state, municipal,
local, foreign or other taxes (including, without limitation, governmental
imposts, levies and other assessments) including, without limitation, all
income, franchise, gains, capital, profits, gift, real property, goods and
services, transfer, value added, gross receipts, windfall profits, severance, ad
valorem, personal property, production, sales, use, license, stamp, documentary
stamp, mortgage recording, excise, employment, payroll, social security,
unemployment, disability, estimated or withholding taxes, customs and import
duties, fees, assessments, and charges of any kind whatsoever imposed by a
Governmental Authority which is not a Self-Regulatory Organization, together
with any interest, additions, fines or penalties with respect thereto or in
respect of any failure to comply with any requirement regarding Tax Returns and
any interest in respect of such additions, fines or penalties and shall include
any liability in respect of Taxes as a transferee or as indemnitor, guarantor,
surety or in a similar capacity under any contract, arrangement, agreement,
understanding or commitment (whether oral or written).
"Taxing Authority" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or other imposition of Taxes.
"Tax Return" means any return, report, information statement, schedule or
other document (including, without limitation, any such document prepared on a
consolidated, combined or unitary basis and also including any supporting
schedules or attachments thereto) filed or required to be filed with respect to
Taxes.
"Technology Systems" means the electronic data processing, information,
record-keeping, communications, telecommunications, portfolio trading and
computer systems (including Software) which are used by the Company, its
Subsidiaries and the Funds, as applicable, in their respective businesses.
"Termination Date" shall have the meaning set forth in Section 7.1(b).
"Termination Fee" shall have the meaning set forth in Section 7.3(a).
"TFI" shall have the meaning set forth in Section 4.1(i)(xi).
"TII" means Tremont International Insurance, Ltd., a Cayman Islands
exempted limited company, and its Subsidiaries.
"TMRM" means Tremont MRM Services Limited, an exempted Bermuda company, and
its Subsidiaries.
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"TPI" shall have the meaning set forth in Section 4.1(i)(v).
"TSI" shall have the meaning set forth in Section 4.1(i)(viii).
"TTEL" shall have the meaning set forth in Section 4.1(i)(xiv)
"WARN" shall have the meaning set forth in Section 4.1(l).
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with DGCL, the Merger Sub shall be merged with
and into the Company on the Closing Date. Following the Merger, the separate
corporate existence of the Merger Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation").
2.2 Closing. The closing of the Merger (the "Closing") will take place at
the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York
10153, unless another place is agreed to in writing by the Parent and the
Company. The Closing will take place at 10:00 a.m., New York City time, as soon
as practicable, but in any event not later than the fifth Business Day, after
the satisfaction or waiver (subject to any Applicable Law) of the conditions
(excluding conditions that, by their terms, cannot be satisfied until the
Closing Date) set forth in Article VI (the "Closing Date") unless another time
or date is agreed to in writing by the Parent and the Company; provided,
however, that if in accordance with the foregoing the Closing would occur prior
to October 1, 2001, the Parent may extend the date of the Closing until October
1, 2001 by written notice given to the Company prior to the fifth Business Day
referred to above. The Closing will be deemed to have occurred at the opening of
business on the Closing Date.
2.3 Effective Time. On the Closing Date, the parties shall (a) file a
certificate of merger (the "Certificate of Merger") in such form as is required
by and executed in accordance with the relevant provisions of the DGCL and (b)
make all other filings or recordings required under the DGCL. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Office of the Secretary of State of the State of Delaware or at such
subsequent time as the Parent and the Company shall agree and be specified in
the Certificate of Merger (the date and time the Merger becomes effective being
the "Effective Time").
2.4 Effects of the Merger. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all of the property,
rights, privileges, powers and franchises of the Company and the Merger Sub
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of the Company and the Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
2.5 Certificate of Incorporation. At the Effective Time, the Certificate
of Incorporation of the Merger Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation; provided, however, that Article FIRST of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows: "FIRST: The name of the corporation is "Tremont Advisers,
Inc." and as so amended shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by the DGCL and such
Certificate of Incorporation.
2.6 By-Laws. At the Effective Time, the by-laws of the Merger Sub as in
effect immediately prior to the Effective Time shall be the by-laws of the
Surviving Corporation until thereafter changed or amended as provided by the
DGCL, the Certificate of Incorporation of the Surviving Corporation and such
by-laws.
2.7 Officers and Directors of Surviving Corporation. The officers of the
Company as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or
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otherwise ceasing to be an officer or until their respective successors are duly
elected and qualified, as the case may be. The directors of the Merger Sub as of
the Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or otherwise ceasing to be a director or
until their respective successors are duly elected and qualified.
2.8 Effect on Capital Stock; Merger Consideration.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock that are 100% owned or held directly or indirectly by the
Parent or the Company, which shall be canceled as provided in Section 2.8(c),
and Dissenting Shares) shall be converted into the right to receive, subject to
the provisions of Article II, without interest, an amount in cash equal to
$19.00 (such amount, as it may be adjusted in accordance with this Section
2.8(a), the "Merger Consideration"); provided, however, that (i) if Target
Tangible Net Worth exceeds Closing Tangible Net Worth by an amount greater than
$1 million, the Merger Consideration shall be decreased by an amount equal to
the quotient obtained by dividing (A) the amount of such excess above $1 million
by (B) the Number of Shares and Options Outstanding and (ii) if the Closing
Tangible Net Worth exceeds Target Tangible Net Worth by an amount greater than
$1 million, the Merger Consideration shall be increased by an amount equal to
the quotient obtained by dividing (A) the amount of such excess above $1 million
by (B) the Number of Shares and Options Outstanding.
(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Company Common Stock shall
cease to be outstanding and shall be canceled and shall cease to exist, and each
holder of a certificate which immediately prior to the Effective Time
represented any such shares of Company Common Stock (each, a "Certificate")
shall thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right to receive the applicable Merger Consideration,
other than with respect to Company Common Stock to be canceled in accordance
with Section 2.8(c) and Dissenting Shares, in accordance with Article II upon
the surrender of such Certificate.
(c) Each share of Company Common Stock issued that is 100% owned or held
directly or indirectly by the Parent or the Company at the Effective Time shall,
by virtue of the Merger, cease to be outstanding and shall be canceled and no
payment or other consideration shall be delivered in exchange therefor.
(d) Each share of common stock, par value $0.01 per share, of the Merger
Sub issued and outstanding immediately prior to the Effective Time, shall be
converted into a number of shares of common stock, par value $0.01 per share, of
the Surviving Corporation equal to (i) the Number of Shares and Options
Outstanding divided by the number of shares of Merger Sub common stock issued
and outstanding immediately prior to the Effective Time, or (ii) such lesser
number of shares as the Parent shall determine prior to the Effective Time.
(e) Notwithstanding any other provision of this Agreement, shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger and who
demands appraisal for such shares in accordance with Section 262 of the DGCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration unless such holder fails to perfect within the period prescribed
by the DGCL or withdraws or otherwise loses such holder's right to appraisal
under the DGCL. If, after the Effective Time, such holder fails to perfect or
withdraws or loses such holder's right to appraisal, such Dissenting Shares
shall be treated as if they had been converted as of the Effective Time into the
right to receive the Merger Consideration, without interest or dividends
thereon. The Company shall give the Parent (i) prompt notice of any written
demands received by the Company for appraisal of shares of Company Common Stock,
attempted withdrawals of such demands, and other instruments served pursuant to
the DGCL and received by the Company and relating thereto and (ii) the
opportunity to direct all negotiations and proceedings with respect to such
demands for appraisals. Prior to the Effective Time, the Company shall not,
except with
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the prior written consent of the Merger Sub, make any payment with respect to,
or settle or offer to settle, any such demands.
2.9 Stock Options.
(a) Each option held by any Person to acquire shares of Company Capital
Stock ("Company Stock Option") that is outstanding immediately prior to the
Effective Time, whether or not then vested or exercisable, shall, effective as
of the Effective Time, be cancelled in exchange for a single lump sum cash
payment, to be paid by the Surviving Corporation as soon as practicable
following the Closing upon its receipt of a release or other documentation by
such Person reasonably satisfactory to the Parent and the Surviving Corporation,
equal to the product of (i) the number of shares of Company Common Stock subject
to such Company Option and (ii) the excess, if any, of the Merger Consideration
for a share of Company Common Stock at the Effective Time over the exercise
price per share of such Company Stock Option (the aggregate amount payable under
this Section 2.9, the "Option Consideration").
(b) Prior to the Effective Time, the Company shall (i) use its reasonable
best efforts to obtain any consents from holders of Company Stock Options and
(ii) amend, in a manner reasonably acceptable to the Parent, the terms of its
equity incentive plans or arrangements or any other agreements entered into
thereunder, in each case as is necessary to give effect to the provisions of
paragraph (a) of this Section 2.9.
(c) Except as otherwise agreed to by the parties, prior to the Effective
Time, (i) the Company shall cause the Company Stock Option Plan to be terminated
as of the Effective Time and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of Company Capital Stock or any equity securities in any of the Subsidiaries to
be deleted as of the Effective Time, and (ii) the Company shall take all action
necessary to ensure that the payments or conversions into the right to receive
cash set forth in Section 2.9(a) extinguish all rights of participants under the
Company Stock Option Plan and such plans, programs and arrangements to receive
equity securities of the Company or any of its Subsidiaries and that following
the Effective Time no such participant shall have any right thereunder to
acquire equity securities of the Company, the Surviving Corporation, the Parent
or any of their respective Subsidiaries.
2.10 Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or the Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or the Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
ARTICLE III
EXCHANGE OF CERTIFICATES
3.1 Exchange Fund. Prior to the Effective Time, the Parent shall designate
a commercial bank or trust company selected by the Parent and reasonably
acceptable to the Company to act as exchange agent hereunder for the purpose of
exchanging Certificates for the Merger Consideration (the "Exchange Agent"). At
or prior to the Effective Time, the Parent shall deposit or cause to be
deposited with the Exchange Agent, in trust for the benefit of holders of shares
of Company Common Stock, the aggregate amount of cash to be paid pursuant to
Section 2.8 in exchange for outstanding shares of Company Common Stock (other
than shares of Company Common Stock that are 100% owned or held directly or
indirectly by the Parent or the Company which shall be canceled as provided in
Section 2.8(c) and Dissenting Shares). Any cash deposited with the Exchange
Agent shall hereinafter be referred to as the "Exchange Fund".
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3.2 Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
(or, in the case of any holder that appears at the applicable office of the
Exchange Agent and so requests, to provide) to each holder of a Certificate (a)
a letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent, and which letter shall be in customary form
and have such other provisions as the Parent may reasonably specify and (b)
instructions for effecting the surrender of such Certificates in exchange for
the Merger Consideration. Upon surrender of a Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a check (or, in the case of
any holder that so requests, provides wire transfer instructions and offers to
pay any reasonable cost of a wire transfer of immediately available funds) in
the aggregate amount equal to the Merger Consideration multiplied by the number
of shares of Company Common Stock formerly represented by such Certificate less
any required withholding of Taxes as provided in Section 3.8. No interest will
be paid or will accrue on any cash payable pursuant to the preceding sentence.
In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a check in the proper amount
of cash for the appropriate Merger Consideration may be paid with respect to
such Company Common Stock to such a transferee if the Certificate formerly
representing such shares of Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer Taxes have been paid
or are not payable. The Exchange Fund shall not be used for any purpose other
than as set forth in this Article III.
3.3 No Further Ownership Rights in Company Common Stock. Cash paid upon
conversion of shares of Company Common Stock in accordance with the terms of
Article II and this Article III shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common Stock.
3.4 Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Certificates for six months after the
Effective Time shall be delivered to the Surviving Corporation or otherwise on
the instruction of the Surviving Corporation, and any holders of the
Certificates who have not theretofore complied with this Article III shall
thereafter look only to the Surviving Corporation for the Merger Consideration
with respect to the shares of Company Common Stock formerly represented thereby
to which such holders are entitled pursuant to Section 2.8 and Section 3.2.
3.5 No Liability. None of the Parent, the Merger Sub, the Company, the
Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
Applicable Law.
3.6 Investment of the Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund only in one or more of the following
investments as directed by the Surviving Corporation from time to time: (a)
obligations of the United States government maturing not more than 180 days
after the date of purchase; (b) certificates of deposit maturing not more than
180 days after the date of purchase issued by a bank organized under the
Applicable Laws of the United States or any state thereof having a combined
capital and surplus of at least $500,000,000; (c) a money market mutual fund,
which may be managed by an Affiliate of the Parent, having assets of at least
$1,000,000,000; or (d) tax-exempt or corporate debt obligations maturing not
more than 180 days after the date of purchase given the highest investment grade
rating by Standard & Poor's and Moody's Investor Service. Any interest and other
income resulting from such investments shall promptly be paid to the Surviving
Corporation.
3.7 Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such form and
amount as
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the Surviving Corporation may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the shares of Company Common
Stock formerly represented thereby and unpaid dividends, if any, on shares of
Company Common Stock deliverable in respect thereof, pursuant to this Agreement.
3.8 Withholding Rights. The Surviving Corporation and the Parent or the
Exchange Agent acting pursuant to this Section 3.8 shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock or Company Stock Options, as the
case may be, such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or the Parent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock or Company Stock Options, as the case may be,
in respect of which such deduction and withholding was made by the Surviving
Corporation or the Parent, as the case may be.
3.9 Stock Transfer Books. At the close of business, New York City time, on
the day Effective Time occurs, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers of shares of
Company Common Stock thereafter on the records of the Company. From and after
the Effective Time, the holders of Certificates shall cease to have any rights
with respect to such shares of Company Common Stock formerly represented
thereby, except as otherwise provided herein or by Applicable Law. At or after
the Effective Time, any Certificates presented to the Exchange Agent or the
Parent for any reason shall be exchanged for the Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. Except as set forth in
writing in the disclosure schedule delivered by the Company to the Parent prior
to the execution of this Agreement (the "Company Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant to the extent specified therein), the Company represents
and warrants to the Parent and Merger Sub as follows:
(a) Organization, Standing and Power. The Company, each of its
Subsidiaries and each of the Funds has been duly organized or formed as a
corporation, limited partnership, limited liability company, trust or other
entity, as the case may be, and is validly existing and, if applicable, in
good standing under the Applicable Laws of its jurisdiction of
organization, has all the corporate or other power and authority to own,
lease and operate its properties and assets and to carry on its business as
now and currently planned to be conducted, and is duly qualified and, if
applicable, in good standing to do business in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such licensing, qualification or, if applicable, good
standing necessary other than in such jurisdictions where the failure to be
so licensed or qualified, if applicable, or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company. Copies of the charter and
by-laws or comparable organizational documents and any amendments thereto
of the Company, each of its Subsidiaries and each of the Funds were
previously furnished to the Parent and are true, complete and correct
copies of such documents as in effect on the date of this Agreement.
Schedule 4.1(a) of the Company Disclosure Schedule sets forth a complete
and accurate list of each direct and indirect Subsidiary of the Company
including each Subsidiary's name, jurisdiction of incorporation and
authorized and outstanding ownership interests, including the record and
beneficial owners thereof, and the jurisdictions in which each of them is
licensed or qualified or, if applicable, in good standing to do business.
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(b) Authority of the Company; Execution and Delivery. The Company has
the corporate power and authority to enter into and carry out its
obligations under this Agreement, subject in the case of the consummation
of the Merger to the adoption of this Agreement by the Required Company
Vote. The execution and delivery by the Company of this Agreement and the
performance by the Company of the transactions contemplated hereby have
been duly and validly authorized and approved by all necessary corporate
action on the part of the Company, and no other corporate or stockholder
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby other than,
in the case of the consummation of the Merger, to the adoption of this
Agreement by the Required Company Vote and thereby. The Company has duly
executed and delivered this Agreement. Assuming the due authorization,
execution and delivery of this Agreement by the Parent and the Merger Sub,
this Agreement constitutes and, assuming the due authorization, execution
and delivery thereof by each other party thereto, all instruments of
conveyance and other documents executed and delivered or to be executed and
delivered by the Company, as contemplated by this Agreement, constitute, or
when so executed and delivered will constitute, the legal, valid and
binding agreements, instruments and obligations of the Company, enforceable
against the Company in accordance with their respective terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization and similar Applicable Laws
of general application relating to or affecting the rights and remedies of
creditors and by the application of general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity
or at law).
(c) Capital Structure.
(i) The authorized capital stock of the Company consists of (A)
5,000,000 shares of Class A Common Stock, par value $0.01 per share (the
"Class A Common Stock"), (B) 20,000,000 shares of Class B Common Stock,
par value $0.01 per share (the "Class B Common Stock," and, together
with the Class A Common Stock, the "Company Common Stock") and (C)
1,000,000 shares of Preferred Stock, par value $1.00 (the "Company
Preferred Stock" and, together with the Company Common Stock, the
"Company Capital Stock"). As of the date of this Agreement, (A)
1,730,430 shares of Class A Common Stock are issued and outstanding, (B)
5,254,258 shares of Class B Common Stock are issued and outstanding, (C)
no shares of Company Preferred Stock are issued and outstanding, (D)
250,000 shares of Class A Common Stock, 27,250 shares of Class B Common
Stock and no shares of Company Preferred Stock are issued and held in
the treasury of the Company and (E) no shares of Class A Common Stock,
1,050,194 shares of Class B Common Stock and no shares of Company
Preferred Stock are reserved for issuance upon the exercise of Company
Stock Options or otherwise. All issued and outstanding shares of Company
Capital Stock are, and all shares of Company Capital Stock which may be
issued pursuant to the exercise of outstanding Company Stock Options,
when issued in accordance with the terms thereof will be, duly
authorized, validly issued, fully paid and nonassessable. None of the
issued and outstanding shares of Company Capital Stock is entitled to
any preemptive or anti-dilution rights, by agreement or otherwise.
Schedule 4.1(c)(i) of the Company Disclosure Schedule sets forth a
complete list of each Company Stock Option outstanding as of the date of
this Agreement, including the name of the optionee, class of Company
Capital Stock, number of shares, exercise price, date of grant, vesting
schedule and whether the consent of the optionee is required to give
effect to the provisions of Section 2.9(a). Except as set forth on
Schedule 4.1(c)(i) of the Company Disclosure Schedule, there are
outstanding as of the date of this Agreement no options, warrants,
calls, rights, commitments, agreements, arrangements, undertakings of
any kind or other rights to acquire capital stock from the Company
(whether or not such options, warrants or other rights are "in-
the-money" and whether or not exercisable).
(ii) As of the date of this Agreement, no bonds, debentures, notes
or other indebtedness of the Company or any of its Subsidiaries having
the right to vote on any matters on which stockholders may vote are
issued or outstanding.
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(iii) There are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind
obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, or reserve for issuance,
delivery or sale, additional shares of capital stock or other ownership
interests of the Company or any of its Subsidiaries or, securities
convertible into or exchangeable for shares of capital stock or other
ownership interests of the Company or any of its Subsidiaries, or
obligating the Company or any of its Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no
outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any ownership interests of the
Company or any of its Subsidiaries or to provide funds or contribute
capital to, or make any investment in, any other Person, other than a
direct wholly owned Subsidiary of the Company.
(iv) All of the outstanding equity interests of each Subsidiary of
the Company are duly authorized, validly issued, fully paid and
nonassessable and are owned, beneficially and of record, by the Company
or a Subsidiary which is wholly owned, directly or indirectly, by the
Company, free and clear of any Encumbrances. Other than the Subsidiaries
of the Company and the Funds, the Company does not directly or
indirectly beneficially own any securities or other ownership interests
in any other entity. Schedule 4.1(c)(iv) of the Company Disclosure
Schedule sets forth, with respect to each of Index LLC, TII, TMRM and
FITX, without qualification as to the Knowledge of the Company, the
ownership interests in such entities held by the Company, its
Subsidiaries and any of their respective officers, directors and
employees and, to the Knowledge of the Company, the other equity owners
thereof.
(v) There are no voting trusts or other agreements or
understandings to which the Company or any Subsidiary of the Company is
a party with respect to the voting, ownership or transfer of the
ownership interests of the Company or any Subsidiary of the Company.
None of the issued and outstanding ownership interests of any Subsidiary
is entitled to any preemptive or anti-dilution rights, by agreement or
otherwise.
(vi) No indebtedness of the Company or any Subsidiary of the
Company contains any restriction upon (A) the prepayment of any
indebtedness of the Company or any Subsidiary of the Company, (B) the
incurrence of indebtedness by the Company or any Subsidiary of the
Company or (C) the ability of the Company or any Subsidiary of the
Company to grant any Encumbrance on the properties or assets of the
Company or any Subsidiary of the Company.
(d) Reports and Financial Statements. The Company, each of its
Subsidiaries and each of the Funds have timely filed (i) all reports,
schedules, forms, statements and other documents (other than Tax Returns),
together with any amendments made with respect thereof (collectively,
"Reports"), required to be filed by them with the SEC and (ii) all material
Reports required to be filed by them with any other Governmental Authority
since January 1, 1998 (the items described in clauses (i) and (ii),
collectively, including all exhibits thereto, the "Regulatory Reports") and
have paid all fees and assessments due and payable in connection therewith.
No Subsidiary of the Company is required to file any report, schedule,
form, statement or other document with the SEC. None of the reports,
schedules, forms, statements and other documents filed by the Company, any
of its Subsidiaries or Funds with any Governmental Authority since January
1, 1998, as of their respective dates (and, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing), contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the audited consolidated financial statements
and unaudited interim financial statements (including the related notes)
included in the Regulatory Reports filed with any Self-Regulatory
Organization complied as to form, as of its respective date of filing with
such Self-Regulatory Organization, in all material respects with applicable
accounting requirements and the published rules and regulations of the Self
Regulatory Organization with respect thereto, have been prepared in
accordance with GAAP (except, in the case of unaudited statements,
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as permitted by Form 10-Q of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
present fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of the
Company and each Subsidiary of the Company as of the respective dates or
for the respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments that are not
material. All of such Regulatory Reports, as of their respective dates (and
as of the date of any amendment to the respective Regulatory Report prior
to the date of this Agreement), complied in all material respects with the
applicable requirements of Applicable Law.
(e) Absence of Liabilities. Except for liabilities or obligations
which are accrued or reserved against in the Company's most recent
financial statements (or in the related notes thereto) included in the
Regulatory Reports publicly disclosed and filed with the SEC or which were
incurred in the usual, regular and ordinary course of business and
consistent with past practices since the date of the Company's most recent
financial statements included in the Regulatory Reports publicly disclosed
and filed with the SEC, the Company and each of its Subsidiaries do not
have any material liabilities or obligations (whether absolute, accrued,
contingent or otherwise).
(f) Absence of Certain Changes or Events. Except as publicly
disclosed in the Regulatory Reports filed with the SEC prior to the date
hereof and copies of which have been provided or made available by the
Company to the Parent, since December 31, 2000 the businesses of the
Company, its Subsidiaries and Funds have been conducted in the ordinary
course, consistent with past practices and there has not been any event,
occurrence, development or state of circumstances or facts that has had, or
would, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect with respect to the Company and there has not been
(i) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, ownership interests or property) with
respect to any of the Company's or its Subsidiaries' ownership interests,
(ii) any split, combination or reclassification of any of the Company's or
any of its Subsidiaries' ownership interests or any redemption or other
acquisition by the Company or any of its Subsidiaries of any shares of its
ownership interests or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for
ownership interests of the Company or any Subsidiary (iii) (A) any granting
by the Company or any of its Subsidiaries to any director, officer or
employee of the Company of any increase in compensation, bonus or other
benefits, except for normal increases in the usual, regular and ordinary
course of business or in connection with the hiring or promotion of any
such person or increases required under any employment agreements in effect
as of the date of the most recent audited financial statements included in
the Regulatory Reports filed and publicly available prior to the date of
this Agreement, (B) any granting by the Company or any of its Subsidiaries
to any such director, officer or employee of any increase in severance or
termination pay, except in the usual, regular and ordinary course of
business or in connection with the hiring or promotion of any such person
or (C) any entry by the Company or any of its Subsidiaries into, or any
amendment of, any employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such director, officer or
employee, other than in the ordinary course of business or in connection
with the hiring or promotion of any such person, (iv) except insofar as may
be required by a change in GAAP, any change in accounting methods,
principles or practices by the Company, (v) any Tax election that
individually or in the aggregate would reasonably be expected to have a
material effect on the Company or any of its Tax attributes or any
settlement or compromise of any material Tax liability, (vi) any amendment
to any term of any outstanding security of the Company or any of its
Subsidiaries, (vii) any entry into any agreement, commitment or transaction
by the Company or any of its Subsidiaries which is material to the Company
and its Subsidiaries taken as a whole, except for agreements, commitments
or transactions entered into in the usual, regular and ordinary course of
business or (vii) any agreement or approval to do any of the foregoing.
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(g) Consents; No Conflict.
(i) Other than filings and/or notices (A) pursuant to Section 2.3,
(B) under the HSR Act or the Securities Laws, (C) required under a
foreign antitrust or trade regulation law or (D) required to be made
with any applicable Self-Regulatory Organization, neither the Company
nor any Subsidiaries of the Company nor any Fund is required to obtain
the consent, authorization or approval of, or submit any notice, report
or any other filing with, any Governmental Authority or any third party
or to obtain any consent, permit, license or franchise in connection
with the execution, delivery and performance of this Agreement, except,
in the case of any third party, as would not reasonably be expected to
have a Material Adverse Effect with respect to the Company.
(ii) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated hereby
will not constitute or result in any change in the rights or obligations
of any party under any Company Contract, and will not conflict with,
result in the termination of, contravene or constitute a default under,
or be an event which, with the giving of notice or passage of time or
both will become a default under, or give to any other Person any right
of termination, amendment, cancellation, acceleration or receipt of
payment pursuant to any of the terms, conditions or provisions of or
under (A) any Applicable Law (provided, as to consummation of the
transactions contemplated hereby or thereby, the filings, reports and
notices are made, and approvals are obtained, as referred to in Section
4.1(g)(i)), (B) the charter and by-laws or comparable organizational
documents of the Company, any Subsidiary of the Company or any of the
Funds or (C) any Company Contract, except in the case of clause (A) or
(C) as, individually and in the aggregate, would not reasonably be
expected to have a Material Adverse Effect with respect to the Company.
Schedule 4.1(g) of the Company Disclosure Schedule sets forth a correct
and complete list of all Company Contracts pursuant to which consents or
waivers (whether as result of a change of control, default, right of
termination or acceleration or other such comparable provision) are
required prior to or in connection with the consummation of the
transactions contemplated by this Agreement (whether or not subject to
the exception set forth with respect to clause (C) above).
(h) Assets.
(i) None of the Company, any Subsidiary of the Company or any Fund
owns or has owned any real property. Each leasehold interest of the
Company, any Subsidiary of the Company or any Fund in any real property
is described on Section 4.1(h)(i) of the Company Disclosure Schedule.
(ii) The Company, each Subsidiary of the Company and each Fund
owns, or otherwise has sufficient and legally enforceable rights to,
free and clear of all Encumbrances other than Permitted Encumbrances,
all of the properties and assets (real, personal or mixed, tangible or
intangible) necessary to operate its businesses as currently operated.
(i) Compliance.
(i) Except as set forth in the Regulatory Reports publicly
disclosed and filed with the SEC prior to the date hereof, all material
Governmental Approvals have been obtained and are in full force and
effect. There has been no violation, cancellation, suspension,
revocation of or default under any Governmental Approval or receipt by
the Company nor any Subsidiary of the Company nor any of the Funds of
any notice of any violation, cancellation, suspension, revocation,
non-renewal, default or dispute affecting any Governmental Approval, and
no basis exists for any such action, including, without limitation, as a
result of the consummation of the transactions contemplated by this
Agreement other than violations, cancellations, suspensions, revocations
or defaults that individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect with respect to the
Company. The Company, each Subsidiary of the Company and each of the
Funds has complied, and is currently in compliance, with
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Applicable Law applicable to their respective businesses, except where
the failure to comply individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect with respect to
the Company, and neither the Company nor any Subsidiary of the Company
nor any of the Funds has received any notice alleging any failure to so
comply.
(ii) Since January 1, 1998, the Company has not received any notice
that any Governmental Authority has initiated any administrative
proceeding or investigation into the business or operations of the
Company, any of its Subsidiaries or any of the Funds or any principal
employees of any of them. There is no unresolved violation or exception
by any Governmental Authority with respect to any report or statement by
any Governmental Authority relating to any examination of the Company,
any of its Subsidiaries or any of the Funds.
(iii) None of the Company or any of its Subsidiaries is ineligible
pursuant to Section 203 of the Advisers Act or Section 15(b) of the
Exchange Act to serve as a registered investment adviser or
broker-dealer and no "Associated Person" (as defined in the Advisers Act
or the Exchange Act) of the Company, any of its Subsidiaries or any of
the Funds is ineligible pursuant to Section 203 of the Advisers Act or
Section 15(b) of the Exchange Act to serve as an Associated Person of a
registered investment adviser or broker-dealer.
(iv) None of the Company, any of its Subsidiaries, any of the Funds
is registered as, or is required to be registered as, an Investment
Company. No other Person to whom the Company or any of its Subsidiaries
renders investment management or investment advisory services is
registered as an Investment Company.
(v) Except for Tremont Partners, Inc. ("TPI"), neither the Company
nor any Affiliate of the Company has been during the past five years an
"investment adviser" required to be registered, licensed or qualified as
an investment adviser under the Advisers Act or other Applicable Law or
subject to any material liability or disability by reason of any failure
to be so registered, licensed or qualified, except for any such failure
to be so registered, licensed or qualified that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect with respect to the Company.
(vi) TPI is, and at all times required by the Advisers Act during
the past five years has been, duly registered as an investment adviser
under the Advisers Act. TPI is, and at all times required by Applicable
Law (other than the Advisers Act) during the past five years has been,
duly registered, licensed or qualified as an investment adviser in each
state or any other domestic or foreign jurisdiction where the conduct of
its business required such registration, licensing or qualification,
except for any such failure to be so registered, licensed or qualified
that, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect with respect to the Company.
(vii) Each Form ADV filed (or deemed to be filed) by TPI, including
any amendments thereto filed (or deemed to be filed) with the SEC,
complied in all material respects with the Advisers Act and was complete
and correct in all material respects and omitted no material facts
required to be stated therein.
(viii) Except for Tremont Securities, Inc. ("TSI"), neither the
Company nor any Affiliate of the Company has been during the past five
years a "broker-dealer" required to be registered, licensed or qualified
as a broker-dealer under the Exchange Act or other Applicable Law or
subject to any material liability or disability by reason of any failure
to be so registered, licensed or qualified, except for any such failure
to be so registered, licensed or qualified that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect with respect to the Company.
(ix) TSI is, and at all times required by the Exchange Act during
the past five years has been, duly registered as a broker-dealer under
the Exchange Act. TSI is, and at all times required by Applicable Law
(other than the Exchange Act) during the past five years has been,
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duly registered, licensed or qualified as a broker-dealer in each state
or any other domestic or foreign jurisdiction where the conduct of its
business required such registration, licensing or qualification, except
for any such failure to be so registered, licensed or qualified that,
individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect with respect to the Company.
(x) Each Form BD filed by TSI, including any amendments thereto
filed with the SEC or the NASD, complied in all material respects with
the Exchange Act and was complete and correct in all material respects
and omitted no material facts required to be stated therein.
(xi) Except for Tremont Futures, Inc. ("TFI"), neither the Company
nor any Affiliate of the Company has been during the past five years a
"commodity pool operator" or "commodity trading advisor" required to be
registered, licensed or qualified as such under the CEA or other
Applicable Law or to be a member of the NFA or subject to any material
liability or disability by reason of any failure to be so registered,
licensed or qualified, except for any such failure to be so registered,
licensed or qualified that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to
the Company.
(xii) TFI is, and at all times required by the CEA during the
past five years has been, duly registered as a commodity pool operator
and commodity trading advisor under the CEA and is a member in good
standing of the NFA, and has, to the extent required by the NFA Bylaw
1101, ensured that: (A) the sponsors of, advisors to, or other
appropriate Persons with respect to, any collective investment vehicle
in which any of the Funds has invested (or in which any Person with
respect to which TFI has acted as a commodity trading advisor under the
CEA has invested) has been, to the extent required under the CEA, duly
registered as a commodity pool operator or commodity trading adviser
under the CEA and is a member in good standing of the NFA; and (B) any
futures commission merchants, introducing brokers, floor brokers or
floor traders with which TFI, any of the Funds, or any Person with
respect to which TFI has acted as a commodity trading advisor under the
CEA, has done business has been, to the extent required under the CEA,
duly registered in its appropriate capacity under the CEA and is a
member in good standing of the NFA.
(xiii) Each Form 7-R and, to the Knowledge of the Company, each
Form 8-R filed by TFI, or by any "principal" or "Associated Person" (as
such terms are defined in the CEA or the rules of the NFA) thereof,
including any amendments thereto filed with the CFTC or NFA, complied in
all material respects with the CEA and was complete and correct in all
material respects and omitted no material facts required to be stated
therein; and TFI and, to the Knowledge of the Company, each such
principal or Associated Person thereof has filed any such forms 7-R or
8-R required to be filed under the CEA or rules of the NFA. Except as
set forth in Schedule 4.1(i) (xiii) of the Company Disclosure Schedule,
(A) no form 7-R or form 8-R to which the immediately preceding sentence
refers, including any amendments thereto, has contained a "Yes" response
by the applicable registrant, or Person to be listed as a principal or
Associated Person of a registrant to any item under the "Disciplinary
History" section of such Form 7-R or Form 8-R. Each commodity pool
operator or commodity trading advisor disclosure document provided by
the Company or any of its Subsidiaries to any client did not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(xiv) Tremont TASS (Europe) Limited ("TTEL") is regulated by the
SFA. All investment business activities of TTEL have been carried on in
accordance with the provisions of the FSA, any regulation made under the
FSA and the rules of the SFA. All directors and employees of TTEL
required to be registered persons under the rules of the SFA are so
registered. TTEL has adopted, and in all respects observed, procedures
complying with all laws and regulations intended to combat
money-laundering and insider dealing which apply to TTEL, its directors
and employees. TTEL has not received any notice that SFA has initiated
any
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administrative proceeding or investigation into the business or
operations of TTEL or any of its principal employees. There is no
unresolved violation or exception by SFA with respect to any report or
statement by SFA relating to any examination of TTEL. TTEL has not, and
none of its directors or employees has, been the subject of any censure,
disciplinary hearings or fines by the SFA or any other Governmental
Authority. Since it became an authorized person, TTEL has not had cause
to notify the SFA of any material matter and there are no entries on the
Complaints and Breaches Register of TTEL kept in accordance with the
rules of the SFA.
(xv) Tremont Investment Management, Inc. ("TIMI") has timely filed,
or caused the timely filing of, all material forms, reports,
registration applications, prospectuses (and other similar offering
documents) schedules and other documents, together with any amendments
required to be made with respect thereto, that were required to be filed
with any Governmental Authority, in connection with The Tremont Masters
Fund and has paid all fees and assessments due and payable in connection
therewith. TIMI is and has been duly registered as an advisor in the
categories of investment counsel and portfolio manager and limited
market dealer under the Securities Act (Ontario). All directors,
officers and employees of TIMI required to be registered persons under
the Securities Act (Ontario) are so registered. Such registrations are
in full force and effect and good standing and TIMI is not in default or
breach of any condition of its registrations and no proceeding is
pending or threatened to revoke or limit such registrations.
(j) Taxes. Except insofar as disclosed in Schedule 4.1(j) to the
Company Disclosure Schedule:
(i) (A) All federal, state and other material Tax Returns with
respect to the Company, any of its Subsidiaries or any of the Funds or
any affiliated, combined or unitary group of which the Company or any
Subsidiary of the Company is or has been a member required to be filed
on or prior to the Closing Date (taking into account any extensions of
time to file) have (or by the Effective Time will have) been duly and
timely filed and all such Tax Returns are complete and accurate in all
material respects and (B) the Company, all Subsidiaries of the Company
and the Funds have timely paid (or there have been paid on their behalf)
all Taxes shown as due and payable on such Tax Returns (other than Taxes
that are being contested in good faith) or have been properly reserved
for in the books and records of the Company, such Subsidiary of the
Company or such Fund in accordance with GAAP;
(ii) The Company and each Subsidiary of the Company, have complied
with all material requirements in relation to the payment and
withholding of Taxes;
(iii) No agreement or other document waiving or extending the
statute of limitations or the period of assessment or collection of any
Taxes payable by the Company or any Subsidiary of the Company has been
filed or entered into with any Governmental Authority;
(iv) The Company has not received any written notice of any action,
suit, proceeding, audit, deficiency or claim now proposed or pending
against or with respect to the Company or any Subsidiary of the Company;
(v) Neither the Company nor any Subsidiary of the Company is a
party to or bound by or has any obligation under any Tax allocation,
sharing, indemnity or similar agreement or arrangement; (including any
advance pricing agreement, closing agreement or other agreement relating
to Taxes with any Taxing Authority);
(vi) Neither the Company nor any Subsidiary of the Company is, or
has been, a United States real property holding company within the
meaning of Section 897(c)(2) of the Code;
(vii) Neither of the Company nor any Subsidiary of the Company is a
"bank" as defined in Section 581 of the Code;
(viii) No power of attorney with respect to any Taxes of the
Company or any Subsidiary of the Company has been executed or filed with
any taxing authority;
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(ix) No liens for Taxes exist with respect to any assets or
properties of the Company, or any Subsidiary of the Company except for
statutory liens for Taxes not yet due or contested in good faith;
(x) No federal, state, local or non-U.S. audits or other
administrative proceedings or court proceedings are presently pending
with regard to any federal, state, local or non-U.S. income or franchise
Taxes or material other federal, state, local or non-U.S. Taxes or Tax
Returns of the Company or any Subsidiary of the Company. The Company has
not received any written notice of any material issues relating to Taxes
raised from the relevant Taxing Authority during any presently pending
audit or examination;
(xi) Neither the Company nor any Subsidiary of the Company has
agreed to or is required to make any material adjustment under Section
481(a) of the Code or any similar provision of non-U.S. law that would
affect any taxable year beginning after the date hereof;
(xii) Neither the Company nor any Subsidiary of the Company has
with regard to any assets or property held or acquired by any of them,
filed a consent to the application of Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of
a subsection (f) asset (as such term is defined in Section 341(f)(4) of
the Code) owned by the Company or any Subsidiary of the Company;
(xiii) Each Fund which is qualified as a "registered investment
company" under subchapter M of the Code has been managed in a manner
consistent with its qualification as a "registered investment company"
under Subchapter M of the Code. No such Fund is subject to the payment
of Tax for any taxable year by reason of its failure to satisfy the
minimum distribution requirements of Section 852(a)(1) of the Code;
(xiv) Neither the Company nor any Subsidiary of the Company has
constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in
a distribution of stock qualifying for tax-free treatment under Section
355 of the Code (i) in the two (2) years prior to the date of this
Agreement or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning
of Section 355(e) of the Code) in conjunction with the Merger;
(xv) Parent has received complete copies of (A) all material
federal, state and other material income or franchise Tax Returns of the
Company and each Subsidiary of the Company relating to the taxable
periods ended since December 31, 1998 and (B) any audit report issued
within the last three years relating to any material Taxes due from or
with respect to the Company or any Subsidiary of the Company;
(xvi) The Company has not received any written notice of any claim
by a Taxing Authority in a jurisdiction where the Company or any
Subsidiary of the Company does not file Tax Returns stating that the
Company, or such Subsidiary, is or may be subject to taxation by that
jurisdiction;
(xvii) No property owned by the Company or any Subsidiary of the
Company (i) is property required to be treated as being owned by another
Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt
use property" within the meaning of Section 168(h)(1) of the Code or
(iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code;
(xviii) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise
to the payment of any amount that would not be deductible by the Parent,
the Company or any of their respective Affiliates by reason of
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Section 280G of the Code, or would constitute compensation in excess of
the limitation set forth in Section 162(m) of the Code; and
(xix) Neither the Company nor any Subsidiary of the Company is
subject to any private letter ruling of the IRS or comparable rulings of
other Taxing Authorities issued solely in respect of the Company or any
Subsidiary of the Company.
(xx) At the time of issuance of each of the life insurance policies
(each individually, an "Insurance Policy") issued by TII and for the
life of each Insurance Policy: (i) provided that each purchaser of such
Insurance Policy has an insurable interest in the life of the insured
under each Insurance Policy and in the amount of insurance applied for,
(A) each Insurance Policy qualifies as life insurance under applicable
insurance law, (B) each Insurance Policy qualifies as a life insurance
contract under the guideline premium test of Section 7702 of the Code
and will be treated as life insurance for current federal income Tax
purposes, (C) neither the Company nor any of its Subsidiaries has caused
any Insurance Policy to fail the guideline premium test of Section 7702
of the Code or some other current Tax law provision thereby causing the
purchaser to be in receipt or accrual of the account value of an
Insurance Policy, including increments thereon, (D) neither the Company
nor any of its Subsidiaries has caused any Insurance Policy to fail the
guideline premium test of Section 7702 of the Code or some other current
Tax law provision thereby causing the death benefits paid under the
policies to be ineligible for the exclusion from gross income under
Section 101(a) of the Code, (ii) each of the Insurance Policies are
variable contracts as defined in Section 817(d) of the Code, (iii) the
segregated asset account(s) underlying the Insurance Policies comply
with Section 817(h) of the Code, (iv) no purchaser of an Insurance
Policy will be treated as owner for Tax purposes of the assets of any
separate account to which Insurance Policy account values have been
allocated, and, (v) provided that, for each Insurance Policy, premiums
are paid, death benefits are reduced and each policy owner exercises its
rights under the Insurance Policy only in accordance with the plan for
such Insurance Policy as specified by TII at issue and from time to time
thereafter, no Insurance Policy has become a modified endowment contract
under Section 7702A of the Code.
(xxi) At the time of issuance of each of the annuity policies (each
individually, an "Annuity Policy") issued by TII and for the life of
each Annuity Policy: (i) each of the Annuity Policies are variable
contracts as defined in Section 817(d) of the Code, (ii) the segregated
asset account(s) underlying the Annuity Policies comply with Section
817(h) of the Code; and (iii) no purchaser of an Annuity Policy will be
treated as owner for Tax purposes of the assets of any separate account
to which Annuity Policy account values have been allocated.
(k) Litigation. There is not, and since January 1, 1998, there has
not been, any litigation, administrative, arbitral or other proceeding,
claims, actions, or governmental or regulatory investigations pending or,
to the Knowledge of the Company, threatened against the Company, any
Subsidiary of the Company or any of the Funds in connection with their
respective businesses or the transactions contemplated by this Agreement
and there is no injunction, judgment, decree or regulatory restriction
imposed upon either the Company or any Subsidiary of the Company. With
respect to the pending litigations, proceedings, claims, actions or
investigations listed on Schedule 4.1(k) of the Company Disclosure
Schedule, individually and in the aggregate, no adverse determination would
reasonably be expected to have a Material Adverse Effect with respect to
the Company. There is no lawsuit or claim by the Company or any Subsidiary
of the Company currently pending or which the Company or any Subsidiary of
the Company currently intends to initiate against any other Person.
(l) Labor and Employment Matters; Benefit Plan Obligations.
(i) Neither the Company nor any of its Subsidiaries is delinquent
in any respect in payments to any of its current or former officers,
directors, employees, consultants, or agents for any wages, salaries,
commissions, bonuses, benefits, expenses or other compensation for any
services performed by them or amounts required to be reimbursed to them;
and in the event of termination of the employment of any employee of the
Company, any of its Subsidiaries or any
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of the Funds ("Employee"), none of the Company or any of its
Subsidiaries will be liable to any such Employee under any agreement in
effect at the Effective Time for so-called "severance pay", incentive
pay, liquidated damages or any other payments or benefits, including,
without limitation, post-employment health care, pension or insurance
benefits.
(ii) Since January 1, 1998, none of the Company or any Subsidiary
of the Company has had any claim made against it by any Person before
any Governmental Authority in respect of employment with it for
discrimination or harassment on account of sex, race or other
characteristic protected by Applicable Law and there are no such
proceedings pending or, to the Company's Knowledge, threatened.
(iii) Schedule 4.1(l)(iii) of the Company Disclosure Schedule
contains a true and complete list of each Benefit Plan. With respect to
each Benefit Plan, the Company has heretofore delivered or made
available to Parent true and complete copies of each of the following
documents: (A) a copy of the Benefit Plan and any amendments thereto;
(B) a copy of the most recent annual report on IRS Form 5500; (C) a copy
of the most recent summary plan description (including supplements)
required under ERISA with respect thereto; (D) if the Benefit Plan is
funded through a trust or any third party funding vehicle, a copy of the
trust or other funding agreement and the latest financial statements
thereof and all related agreements; and (E) the most recent
determination letter or pending determination letter received from the
IRS with respect to each Benefit Plan intended to qualify under Section
401 of the Code.
(iv) None of the Company or any Subsidiary of the Company or any
ERISA Affiliate (A) has ever maintained any Benefit Plan which has been
subject to Title IV of ERISA or any similar Applicable Law of any other
jurisdiction or (B) has ever provided or agreed to provide health care
or any other welfare benefits (as described in Section 3(1) of ERISA) to
any Employees after their employment is terminated (other than as
required by part 6 of Subtitle B of title I of ERISA or any similar
Applicable Law of any other jurisdiction).
(v) No Benefit Plan is a "multiemployer pension plan", as defined
in section 3(37) of ERISA.
(vi) Each Benefit Plan has been operated in all material respects
in accordance with its terms and Applicable Law, including but not
limited to ERISA and the Code. Each Benefit Plan which is intended to be
"qualified" within the meaning of Code section 401(a) is so qualified
and has received a favorable determination letter to such effect.
(vii) To the Knowledge of the Company, there is no matter pending
with respect to any of the Benefit Plans before any Governmental
Authority. There are no pending or, to the Knowledge of the Company,
threatened or anticipated actions, suits, or claims by or on behalf of
any Benefit Plan, by any Employee or beneficiary covered thereunder, or
otherwise involving any such Benefit Plan (other than routine claims for
benefits).
(viii) No stock or other security issued by the Company forms or
has formed a material part of the assets of any Benefit Plan.
(ix) To the Knowledge of the Company, any individual who performs
services for the Company, any of its Subsidiaries or any of the Funds
(other than through a contract with an organization other than such
individual) and who is not treated as an Employee of the Company, any of
its Subsidiaries or Funds for federal income tax purposes by the
Company, such Subsidiary or Fund is not an Employee for such purposes.
(x) None of the Funds has or has had any employees.
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(xi) With respect to each Benefit Plan that is maintained outside
of the U.S. primarily for the benefit of persons substantially all of
whom are nonresident aliens (a "Foreign Plan"):
(1) all employer and Employee contributions to each Foreign
Benefit required by law or by the terms of such Foreign Plan have
been made, or, if applicable, accrued in accordance with normal
accounting practices.
(2) the fair market value of the assets of each funded Foreign
Plan, the liability of each insurer for any Foreign Plan funded
through insurance or the book reserve established for any Foreign
Plan, together with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations, as of the
Closing Date, with respect to all current or former participants in
such plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such Foreign
Plan and no transaction contemplated by this Agreement shall cause
such assets or insurance obligations to be less than such benefit
obligations; and
(3) each Foreign Plan required to be registered has been
registered and has been maintained in good standing with applicable
regulatory authorities.
(xii) None of the Employees is represented in his or her capacity
as an Employee by any labor organization; Neither the Company nor any of
its Subsidiaries has recognized any labor organization nor has any labor
organization been elected as the collective bargaining agent of any of
such Employees, nor has the Company or any of its Subsidiaries entered
into any collective bargaining agreement or union contract recognizing
any labor organization as the bargaining agent of any Employees; there
is no union organization activity involving any of the Employees,
pending or, to the Knowledge of the Company or any of its Subsidiaries,
threatened, nor has there ever been union representation involving any
of the Employees; there is no picketing, pending or, to the Knowledge of
the Company or any of its Subsidiaries, threatened, and there are no
strikes, slowdowns, work stoppages, other job actions, lockouts,
arbitrations, grievances or other labor disputes involving any of the
Employees, pending or, to the Knowledge of the Company, threatened;
there are no complaints, charges or claims against the Company or any of
its Subsidiaries pending or, to the Knowledge of the Company, threatened
which could be brought or filed, with any public or governmental
authority, arbitrator or court based on, arising out of, in connection
with, or otherwise relating to the employment or termination of
employment or failure to employ by the Company or any of its
Subsidiaries, of any individual; the Company and each of its
Subsidiaries is in compliance with all laws, regulations and orders
relating to the employment of labor, including all such laws,
regulations and orders relating to wages, hours, the Worker Adjustment
and Retraining Notification Act and any similar state or local "mass
layoff" or "plant closing" law ("WARN"), collective bargaining,
discrimination, civil rights, safety and health, workers' compensation
and the collection and payment of withholding and/or social security
taxes and any similar tax except for immaterial non-compliance; and
there has been no "mass layoff" or "plant closing" as defined by WARN
with respect to the Company or any of its Subsidiaries within the six
(6) months prior to the Closing.
(m) Board Approval. The Board of Directors of the Company, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way, has duly (i) determined that
this Agreement and the Merger are advisable and in the best interests of
the Company and its stockholders, (ii) approved this Agreement and the
Merger and (iii) recommended that the stockholders of the Company adopt
this Agreement. Assuming the accuracy of the representations and warranties
set forth in Section 4.2(i), the Board of Directors of the Company has
taken the necessary action to make inapplicable to this Agreement, the
Stockholders Agreement and the transactions contemplated hereby and thereby
the restrictions on business combinations set forth in Section 203 of the
DGCL and any other "fair price," "moratorium," "control share," "business
combination," "affiliate transaction" or other applicable antitakeover
laws.
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(n) Vote Required. Assuming the accuracy of the representations and
warranties set forth in Section 4.2(i), the affirmative vote of the holders
of a majority of the voting power of the Company Common Stock to adopt this
Agreement (the "Required Company Vote") is the only vote of the holders of
any class or series of Company Capital Stock necessary to adopt this
Agreement and approve the transactions contemplated hereby.
(o) Contracts.
(i) Schedule 4.1(o) of the Company Disclosure Schedule sets forth
under separate headings, and the Company has made available to the
Parent true, correct and complete copies of: (A) each Company Contract
that is not cancelable without penalty by the Company, any of its
Subsidiaries or any Fund party thereto upon 90 days or less notice or
that involves the receipt or payment by the Company, such Subsidiary or
such Fund in the prior fiscal year (or is reasonably likely to involve
the receipt of payment by the Company, such Subsidiary or such Fund in
the current fiscal year) of an amount in excess of $100,000, (B) each
Company Contract with any one or more of the directors or executive
officers or members of their Immediate Families or entities in which any
of them has greater than a 5% equity interest, (C) each Company Contract
that is required to be described in the Regulatory Reports publicly
disclosed and filed with the SEC or to be filed as an exhibit thereto
(which Company Contract is described in the Regulatory Reports publicly
disclosed and filed with the SEC or filed as an exhibit thereto), (D)
each Advisory Agreement, (E) each Company Contract with respect to or
involving employment, severance, product design or development, personal
services, consulting, non-competition or indemnification (including,
without limitation, any Company Contract involving employees of the
Company, any of its Subsidiaries or any of the Funds); (F) each Company
Contract with respect to or involving licensing, merchandising or
distribution; (G) each Company Contract granting a right of first
refusal or first negotiation; (H) each Company Contract that is a
shareholders, partnership, joint venture or similar agreement; (I) each
Company Contract for the acquisition, sale or lease of material
properties or assets of the Company, any of its Subsidiaries or any Fund
(by merger, purchase or sale of assets or stock or otherwise) entered
into since its inception; (J) each Company Contract with any
Governmental Authority; (K) each loan or credit agreement, mortgage,
indenture, instrument or other Company Contract evidencing indebtedness
for borrowed money by the Company, any of its Subsidiaries or Funds or
any such Company Contract pursuant to which indebtedness for borrowed
money may be incurred; (L) each Company Contract that purports to limit,
curtail or restrict the ability of the Company, any of its Subsidiaries
or any of the Funds to compete in any geographic area, line of business
or otherwise or with any Person, or to obtain products or services from
or engage in business transactions with, any other Person; (M) each
Company Contract with or with respect to Mutual Risk Management Ltd.;
(N) each Company Contract between the Company, any of its Subsidiaries
or any of the Funds and any other Person (other than a wholly owned
Subsidiary of the Company) in which the Company, any of its Subsidiaries
or any of the Funds owns an equity interest; (O) each other Company
Contract material to the business, governance, operations or financial
condition of the Company, any of its Subsidiaries or any of the Funds,
and (P) each commitment and agreement to enter into any of the
foregoing. Each Company Contract set forth or required to be set forth
in Schedule 4.1(o) of the Company Disclosure Schedule is referred to
herein as a "Material Contract."
(ii) Each of the Company, each of its Subsidiaries and each Fund
which is a party to any Material Contract has duly performed all its
material obligations under such Material Contract, in each case to the
extent that such obligations have accrued; each Material Contract is in
full force and effect and constitutes the valid and legally binding
obligation of the Company, such Subsidiaries and each Fund, as
applicable, enforceable according to its terms; and no breach or
default, alleged breach or default, or event which constitutes or would
(with the passage of time, notice or both) constitute a material breach
or default thereunder on the part of the Company, any of its
Subsidiaries or any Fund, or, to the Knowledge of the Company, any other
party
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thereto, has occurred or, as a result of this Agreement or the
performance by the Company of any of its covenants or obligations
hereunder, will occur.
(iii) Except for those limits or requirements in cases (A) or (B)
immediately below as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect with respect to
the Company, no Company Contract to which the Company, any of its
Subsidiaries or any of the Funds is a party or subject to (A) limits the
freedom of the Company, or any of its Subsidiaries or any of the Funds
to compete in any line of business, any geographic area or otherwise or
with any Person; or (B) contains any requirement of exclusive dealing
with any other Person anywhere in the world or with respect to any
product, and no such Contract as described in such clauses (A) and (B)
or any other Company Contract would be or purports to be valid and
legally binding on the Parent or any of its Affiliates (other than the
Company and its Subsidiaries) upon, and at any time after, the Closing,
regardless of the scope of limits or requirements.
(iv) The Company has made or caused to be made available to the
Parent copies of all sales, marketing and account solicitation
agreements and marketing arrangements relating to its investment
advisory activities.
(p) Brokerage or Finder's Fees. Other than the Company Financial
Advisor, whose fees and expenses will be borne by the Company, neither the
Company nor any of its Subsidiaries has incurred any liability to any
broker, finder or agent for any fees or commissions or similar compensation
with respect to the transactions contemplated by this Agreement.
(q) Insurance. The Company, its Subsidiaries and the Funds maintain
with reputable insurers such worker's compensation, comprehensive property
and casualty, liability, errors and omissions, fidelity and other insurance
as is described on Schedule 4.1(q) of the Company Disclosure Schedule,
which insurance is, in the reasonable opinion of the Company, sufficient in
all material respects for the operation of the business of the Company and
its Subsidiaries and Funds as currently conducted.
(r) Opinion of the Company Financial Advisor. The Company has
received the opinion of the Company Financial Advisor, dated the date of
this Agreement, to the effect that, as of such date, the Merger
Consideration is fair, from a financial point of view, to the holders of
Company Common Stock, a copy of which opinion has been made available to
the Parent.
(s) No Parent Capital Stock. The Company does not own or hold
directly or indirectly any shares of common stock of the Parent or any
other capital stock of the Parent, or any options, warrants or other rights
to acquire any capital stock of the Parent, or in each case, any interests
therein.
(t) Sponsored Collective Investment Vehicles and Commodities Advisory
Matters.
(i) Schedule 4.1(t) of the Company Disclosure Schedule sets forth a
true, correct and complete list of each Fund, including each Fund's
name, its jurisdiction of organization and authorized ownership
interests (and the ownership interests of the Company and its
Subsidiaries in each Fund), and the jurisdictions in which each of them
is licensed or qualified or registered to do business.
(ii) True, correct and complete copies of the offering documents,
subscription agreements, administrative services agreements,
distribution or placement agency agreements, solicitation agreements and
custody agreements, as applicable, or any similar agreements, in any
case pertaining to the Funds and used since January 1, 1998 have been
made available to the Parent. Such offering documents did not, at any
time such offering documents were made available to investors or
prospective investors in the Funds, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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(iii) True, correct and complete copies of the audited financial
statements of each of the Funds for the fiscal years completed on or
after December 31, 1998 or its inception, whichever is later, through
its most recent fiscal year ended on or prior to December 31, 2000 have
been made available to the Parent. Each of such financial statements
presents fairly, in all material respects, the consolidated financial
position of such Fund in accordance with GAAP applied on a consistent
basis (except as otherwise noted therein) at the respective date of such
financial statements.
(iv) All securities of which any of the Funds is the issuer were
sold pursuant to a valid exemption from the registration requirements of
the Securities Act and other applicable Securities Laws and in
compliance with Applicable Law.
(v) Since its inception, each Fund has been operated and is
currently operating in compliance in all material respects with its
respective investment objectives and policies, its constituent documents
and Applicable Law. Since its inception, each of the Funds that has been
(i) offered to United States investors or (ii) organized in any
jurisdiction within the United States has been excluded from the
definition of an "investment company" under the Investment Company Act
by virtue of Section 3(c)(1) or Section 3(c)(7) thereof. Since its
inception, each of the Funds that is a commodity pool within the meaning
of the CEA is an "exempt pool" within the meaning of Rule 4.7
promulgated by the CFTC under the CEA, each Person with respect to which
TFI acts as a commodity trading advisor is a "Qualified Eligible Person"
within the meaning of such Rule 4.7, and TFI and the Fund have been in
compliance with the disclosure reporting and record keeping requirements
of such Rule 4.7(b).
(vi) None of TFI, the Funds or any direct or indirect "principal"
or "Associated Person" (as such terms are defined in the CEA or the
rules of the NFA) thereof has been enjoined, indicted, convicted or made
the subject of disciplinary proceedings, consent decrees or
administrative orders on account of any violation of the Securities
Laws, the CEA or the rules or interpretations of any Self-Regulatory
Organization or, except as set forth in Schedule 4.1(t)(vi) of the
Company Disclosure Schedule, has been criticized by the CFTC or NFA in,
as a result of or following any regulatory audit by the NFA.
(u) Termination of Relationships. As of the date hereof, neither the
Company nor any of its Subsidiaries has received any notice since June 30,
2000, and no other notice is pending, that any Fund or any other Person to
whom the Company or any of its Subsidiaries renders investment management
or investment advisory services that individually or in the aggregate are
material to the business of the Company is terminating or is planning to
terminate its relationship with the Company and/or any of its Subsidiaries
or will reduce materially its use of the services of the Company and any of
its Subsidiaries. As of the date hereof, the Company has no Knowledge that
any Fund or any other Person to whom the Company or any of its Subsidiaries
renders investment management or investment advisory services that
individually or in the aggregate are material to the business of the
Company plans to terminate its relationship with the Company and/or any of
its Subsidiaries or plans to reduce materially its use of the services of
the Company and any of its Subsidiaries. For the purposes of this Section
4.1(u), each of the Funds will be deemed to be material to the business of
the Company and its Subsidiaries.
(v) Absence of Certain Payments. To the Knowledge of the Company,
none of the Company, any of its Subsidiaries or any Person acting on behalf
of the Company and any of its Subsidiaries has made any payment to, or
conferred any benefit, directly or indirectly, on suppliers, clients,
employees or agents of suppliers or clients, or officials or employees of
any Governmental Authority or any political parties or candidates for
office, that was unlawful in the place where, and at the time when, such
payment or benefit was given or received, or, in the case of payments to or
benefits conferred upon representatives of a Governmental Authority
referred to above, would have been unlawful under the laws of the United
States if such laws were applicable to such payment or benefit and to such
officials or employees.
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(w) Privacy Rules. The Company and its Subsidiaries and the Funds, to
the extent each is a "financial institution" (as defined in the GBA), have
complied, to the extent required, with the GBA and the rules and
regulations promulgated pursuant thereto, including, without limitation,
Regulation S-P issued by the SEC and the privacy rules issued by the
Federal Trade Commission and expected to be issued by the CFTC
(collectively, the "Privacy Rules"), and each such Financial Institution
has provided the privacy notices, in the form and to the extent required by
the GBA and the Privacy Rules, and has taken such other actions as may be
required thereunder.
(x) Technology and Intellectual Property.
(i) The Technology Systems are adequate in all material respects
for their intended use and for the operation of the respective
businesses of the Company and its Subsidiaries as are currently operated
and as necessary after the Closing Date in substantially the same manner
as such businesses have been operated prior thereto. The Company or one
or more of its wholly owned Subsidiaries owns or has the right to use,
free and clear of Encumbrances, all components of the Technology Systems
that are reasonably necessary to the normal operations of such
businesses. There has not been any material malfunction with respect to
any of the Technology Systems since January 1, 1998 that has not been
remedied or replaced in all material respects. The completion of the
transactions contemplated by this Agreement will not materially alter or
impair the ownership or right of the Company or its Subsidiaries to use
the components of the Technology Systems. No trade secret, know-how,
model, process, formula, database or Software created by the Company or
any of its Subsidiaries included in the Intellectual Property of the
Companies has been disclosed or authorized to be disclosed to any third
party other than for use in connection with the businesses of the
Company and its Subsidiaries or pursuant to a confidentiality or
non-disclosure agreement that reasonably protects the interest of the
Company and its Subsidiaries and the Funds in and to such matters.
(ii) Schedule 4.1(x)(ii) of the Company Disclosure Schedule sets
forth, for the Intellectual Property owned by, or licensed to, the
Company or any of its Subsidiaries, including those jointly with others
(such schedule specifies any as such), a complete and accurate list of
all (whether registered or unregistered, any applications therefor and
whether owned or licensed) patents, trademarks, copyrights, trade
secrets and Software. The Company and its wholly owned Subsidiaries own
or possess adequate licenses or other rights to use, free and clear of
Encumbrances, orders and arbitration awards, all of their Intellectual
Property for the operation of the respective businesses of the Company
and the Subsidiaries as are currently operated and as necessary after
the Closing Date in substantially the same manner as such businesses
have been operated prior thereto. All Intellectual Property
registrations owned by the Company or any Subsidiary of the Company are
valid and subsisting, are held in the name of the Company or one of its
Subsidiaries and are validly maintained. No Intellectual Property
application or registration owned by the Company or any Subsidiary of
the Company is the subject of any pending, existing or threatened
opposition, interference, cancellation proceeding or other legal or
governmental proceeding before any registration authority in any
jurisdiction. The conduct of the respective businesses of the Company
and its Subsidiaries and the Funds does not infringe in any material
respect upon any Intellectual Property right owned or controlled by any
third party. There are no material claims, proceedings or actions
pending or, to the Company's Knowledge, threatened, and none of the
Company, any of its Subsidiaries or any of the Funds has received any
notice of any claim or suit (A) alleging that the activities of the
Company, any of its Subsidiaries or any of the Funds infringe upon or
constitute the unauthorized use of the proprietary rights of any third
party or (B) challenging the ownership, use, validity or enforceability
of any Intellectual Property owned or controlled by the Company or any
Subsidiary of the Company, nor is there, to the Company's Knowledge, a
valid basis for any such claim or suit. To the Company's Knowledge, no
third party is infringing upon any Intellectual Property owned by the
Company or any of its Subsidiaries, and no such claims have been made by
the Company.
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4.2 Representations and Warranties of the Parent and the Merger
Sub. Except as set forth in writing in the disclosure schedule delivered by the
Parent to the Company prior to the execution of this agreement (the "Parent
Disclosure Schedule") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent specified
therein) each of the Parent and the Merger Sub represents and warrants to the
Company as follows:
(a) Organization, Standing and Power. Each of the Parent and the
Merger Sub has been duly incorporated and is validly existing and in good
standing under the Applicable Laws of the State of Delaware, has all the
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, and is duly
qualified and in, if applicable, good standing to do business in each
jurisdiction in which the nature of its business or the ownership, leasing
or operation of its properties makes such licensing, qualification or, if
applicable, good standing necessary other than in such jurisdictions where
the failure to be so licensed or qualified or, if applicable, in good
standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect with respect to the Parent. The
copies of the charter and by-laws and any amendments thereto of the Parent
and the Merger Sub that were previously furnished to the Company are true,
complete and correct copies of such documents as in effect on the date of
this Agreement. All of the outstanding shares of capital stock of Merger
Sub are duly authorized validly issued and nonassessable and are owned
beneficially and of record, by the Parent or a Subsidiary which is wholly
owned, directly or indirectly, by the Parent, free and clear of any
Encumbrances other than Permitted Encumbrances.
(b) Authority of the Parent and the Merger Sub; Execution and
Delivery. Each of the Parent and the Merger Sub has the corporate power
and authority to enter into and carry out its obligations under this
Agreement. The execution and delivery by each of the Parent and the Merger
Sub of this Agreement and the performance by each of them of the
transactions contemplated hereby have been duly and validly authorized and
approved by all necessary corporate action on the part of each of them, and
no other corporate or stockholder proceedings on the part of either of them
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby and thereby. Each of the Parent and the Merger Sub has
duly executed and delivered this Agreement. Assuming the due authorization,
execution and delivery of this Agreement by the Company, this Agreement
constitutes and assuming the due authorization, execution and delivery
thereof by each other party thereto, all instruments of conveyance and
other documents executed and delivered or to be executed and delivered by
them, as contemplated by this Agreement, constitute, or when so executed
and delivered will constitute, the legal, valid and binding agreements,
instruments and obligations of each of them, enforceable against each of
them in accordance with their respective terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization and similar Applicable Laws
of general application relating to or affecting the rights and remedies of
creditors and by the application of general principles of equity
(regardless of whether such enforcement is sought in a proceeding in equity
or at law).
(c) Consents; No Conflict.
(i) Other than filings and/or notices (A) pursuant to Section 2.3,
(B) under the HSR Act or the Securities Laws, (C) required under a
foreign antitrust or trade regulation law, or (D) required to be made
with any applicable Self-Regulatory Organization, neither the Parent nor
the Merger Sub is required to obtain the consent, authorization or
approval of, or submit any notice, report or any other filing with, any
Governmental Authority or any third party or to obtain any consent,
permit, license or franchise in connection with the execution, delivery
and performance of this Agreement by the Parent or the Merger Sub,
respectively, except, in the case of any third party, as would not
reasonably be expected to have a Material Adverse Effect with respect to
the Parent.
(ii) The execution, delivery and performance of this Agreement by
each of the Parent and the Merger Sub and the consummation of the
transactions contemplated hereby will not conflict
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with, result in the termination of, contravene or constitute a default
under, or be an event which, with the giving of notice or passage of
time or both will become a default under, or give to any other Person
any right of termination pursuant to any of the terms, conditions or
provisions of or under (A) any Applicable Law (provided, as to
consummation, the filings, reports and notices are made, and approvals
are obtained, as referred to in Section 4.2(c)(i)), (B) the charter and
by-laws of the Parent or the Merger Sub or (C) any contract, agreement,
indenture, mortgage, deed of trust, note, bond, franchise, lease, plan,
license or other instrument, arrangement or other obligation binding
upon the Parent or the Merger Sub, or to which the property of the
Parent or the Merger Sub is subject, except in the case of clause (A) or
(C) as would not reasonably be expected to have a Material Adverse
Effect with respect to the Parent.
(d) Litigation. Except as set forth on Schedule 4.2(d) of the Parent
Disclosure Schedule, as of the date hereof, there are no claims, actions,
suits, proceedings or investigations pending or, to the Parent's Knowledge,
threatened against the Parent or any Subsidiary of the Parent, or any
properties or rights of the Parent or any Subsidiaries of the Parent,
before any Governmental Authority that (i) seek to question, delay or
prevent the consummation of the Merger or the other transactions
contemplated hereby or (ii) would reasonably be expected to affect
adversely the ability of the Parent to fulfill its obligations hereunder,
including the Parent's obligations under Article II and Article III.
(e) Board Approval of the Parent. The Board of Directors of the
Parent, by resolutions duly adopted at a meeting duly called and held and
not subsequently rescinded or modified in any way, has duly (i) determined
that this Agreement and the Merger are in the best interests of the Parent
and its stockholders; and (ii) approved this Agreement and the Merger.
(f) Board Approval of the Merger Sub. The Board of Directors of the
Merger Sub, by resolutions duly adopted without a meeting by unanimous
consent thereto in writing and not subsequently rescinded or modified in
any way, has duly (i) determined that this Agreement and the Merger are
advisable and in the best interest of the Merger Sub and its stockholder,
(ii) approved this Agreement and the Merger and (iii) recommended that the
stockholder of the Merger Sub adopt this Agreement. Following the adoption
of such resolutions by the Board of Directors of the Merger Sub, the sole
stockholder of the Merger Sub, without a meeting by consent in writing, has
duly adopted this Agreement.
(g) No Other Vote Required. No vote of the holders of any class or
series of the capital stock of the Parent and, except as provided in
Section 4.2(f), any Subsidiary of the Parent is necessary to approve this
Agreement, the Merger or the other transactions contemplated hereby.
(h) Brokerage or Finder's Fees. The Parent has not incurred any
liability to any broker, finder or agent for any fees, commissions or
similar compensation with respect to the transactions contemplated by this
Agreement.
(i) No Company Capital Stock. Neither of the Parent or the Merger Sub
owns or holds directly or indirectly any shares of Company Common Stock or
any other capital stock of the Company, or any options, warrants or other
rights to acquire any shares of Company Common Stock or any other capital
stock of the Company, or in each case, any interests therein, other than
pursuant to the Merger as contemplated by this Agreement or pursuant to the
Stockholders Agreement.
(j) Financing. The Parent has and will have available, prior to the
Effective Time, sufficient funds to pay the Merger Consideration and the
Option Consideration pursuant to this Agreement.
(k) No Business Activities. The Merger Sub has not conducted any
activities other than in connection with its organization, the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby. The Merger Sub has no Subsidiaries.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or as otherwise indicated under separate headings in Schedule
5.1 of the Company Disclosure Schedule or to the extent that the Parent (in its
sole discretion) shall otherwise consent in writing):
(a) Ordinary Course.
(i) The Company and each of its Subsidiaries shall (and shall cause
the Funds to), and the Company shall use its commercially reasonable
efforts to cause each of Index LLC, TII, TMRM and FITX to, carry on
their respective businesses in the usual, regular and ordinary course in
the same manner as heretofore conducted, and, to the extent consistent
therewith, shall (and shall cause the Funds to) use all reasonable best
efforts to, and the Company shall use its commercially reasonable
efforts to cause each of Index LLC, TII, TMRM and FITX to, preserve
intact their present lines of business, business organizations and
reputations, maintain their rights, franchises and permits, keep
available the services of their key officers and key employees, maintain
their assets and properties in good working order and condition,
ordinary wear and tear excepted, and preserve their relationships and
goodwill with clients, suppliers and others having business dealings
with them to the end that their ongoing businesses shall not be impaired
in any material respect at the Effective Time.
(ii) The Company shall not, and shall not permit any of its
Subsidiaries or the Funds to, and the Company shall use its commercially
reasonable efforts to cause each of Index LLC, TII, TMRM and FITX not
to, (A) enter into any new material line of business, (B) commit to any
capital expenditures other than capital expenditures in the usual,
regular and ordinary course of business consistent with past practice
and not individually or in the aggregate in excess of $100,000, or (C)
delay or postpone the payment of accounts payable and other liabilities
or accelerate the collection of accounts receivable, or revalue in any
material respect any of its assets, including, without limitation,
writing down the value of inventory or writing-off notes or accounts
receivable other than in each case in the usual, regular and ordinary
course of business consistent with past practice or as required by GAAP;
(b) Dividends; Changes in Share Capital. The Company shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare, set aside or pay any dividends on or make other distributions in
respect of any of its ownership interests, (ii) split, combine, subdivide
or reclassify any of its ownership interests or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or
in substitution for, ownership interests, (iii) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization, (iv) directly or indirectly
repurchase, redeem or otherwise acquire any ownership interests or any
securities convertible into or exercisable for any ownership interests
except, subject to and in accordance with Applicable Law, for the purchase
from time to time by the Company of Company Common Stock in the usual,
regular and ordinary course of business consistent with past practice in
connection with funding the Tremont Advisers, Inc. Savings Plan, or (v)
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or other ownership interests or otherwise
make any payments to stockholders or equityholders in their capacity as
such.
(c) Issuance of Securities. The Company shall not, and shall not
permit any of its Subsidiaries to, and shall use its commercially
reasonable efforts to cause each of Index LLC, TII, TMRM and FITX not to,
issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any ownership interests of any class, or enter into any agreement
with respect to any ownership interests, other than the issuance of Company
Common Stock upon the exercise of Company Stock Options
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outstanding on the date hereof or in connection with the Tremont Advisers,
Inc. Savings Plan in accordance with its present terms or the issuance of
ownership interests by FITX in connection with capital-raising activities
consistent with past practice.
(d) Governing Documents. The Company shall not, and shall not permit
any of its Subsidiaries or the Funds to, and shall use its commercially
reasonable efforts to cause each of Index LLC, TII, TMRM and FITX not to,
amend or propose to amend their respective certificates of incorporation,
by-laws or other governing documents.
(e) No Acquisitions. The Company shall not, and shall not permit any
of its Subsidiaries to, and shall use its commercially reasonable efforts
to cause each of Index LLC, TII, TMRM and FITX not to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets (other than the acquisition of assets used in
the operations of their respective businesses in the usual, regular and
ordinary course of business consistent with past practice).
(f) No Dispositions. Other than dispositions made in the usual,
regular and ordinary course of business consistent with past practice and
not individually or in the aggregate in excess of $100,000, the Company
shall not, and shall not permit any Subsidiary of the Company to, and shall
use its commercially reasonable efforts to cause each of Index LLC, TII,
TMRM and FITX not to, sell, lease, transfer, pledge, encumber or otherwise
dispose of, or agree to sell, lease, transfer, encumber or otherwise
dispose of, any of its assets (including ownership interests of
Subsidiaries of the Company).
(g) Investments; Indebtedness. The Company shall not, and shall not
permit any of its Subsidiaries to, and shall use its commercially
reasonable efforts to cause each of Index LLC, TII, TMRM and FITX not to,
(i) make any loans, advances or capital contributions to, or investments
in, any other Person, (ii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted, or
otherwise), other than payments, discharges or satisfactions incurred or
committed to in the usual, regular and ordinary course of business
consistent with past practice or reflected in the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
most recent Regulatory Reports filed prior to the date of this Agreement,
or (iii) create, incur, assume or suffer to exist any indebtedness,
guarantees, loans or advances not in existence as of the date of this
Agreement except for short-term indebtedness incurred under the Company's
current short-term facilities (and any replacements thereof) in the usual,
regular and ordinary course of business consistent with past practice, and
which is not individually or in the aggregate in excess of $500,000 and is
reasonably expected by the Company to be repaid by the Company from cash
from continuing operations within 12 months of the incurrence thereof in
each case as such facilities and other existing indebtedness may be
amended, extended, modified, refunded, renewed, refinanced or replaced
after the date of this Agreement, but only if the aggregate principal
amount thereof is not increased thereby, the term thereof is not extended
thereby (or, in the case of replacement indebtedness, the term of such
indebtedness is not for a longer period of time than the period of time
applicable to the indebtedness so replaced) and the other terms and
conditions thereof, taken as a whole, are not less advantageous to the
Company and its Subsidiaries than those in existence as of the date of this
Agreement.
(h) Compensation. The Company shall not, and shall not permit any of
its Subsidiaries to, and shall use its commercially reasonable efforts to
cause each of Index LLC, TII, TMRM and FITX not to, (i) make any increase
in or commitment to increase the amount of wages, bonus, severance or other
compensation of any executive officer, director or employee (except with
respect to normal base wage and base salary increases that are granted in
the usual, regular and ordinary course of business consistent with past
practice in connection with normal periodic performance reviews and related
compensation and benefit increases (but not to officers and directors of
the Company or its Subsidiaries); provided that the Company shall notify
the Parent in writing prior to any such
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increases), (ii) make any increase in or commitment to increase any profit
sharing, retirement, deferred compensation, insurance or other employee
benefits, (iii) issue any additional Company Stock Options, equity-based
awards or shares of Company Common Stock (other than the issuance of
Company Common Stock upon the exercise of Company Stock Options outstanding
on the date hereof or in connection with the Tremont Advisers, Inc. Savings
Plan in accordance with its present terms), adopt or make any commitment to
enter into, adopt, amend in any material manner or terminate any Benefit
Plan, or any other agreement, arrangement, plan or policy between the
Company or one of its Subsidiaries and one or more of its directors,
officers or employees, (iv) make any contribution, other than regularly
scheduled contributions, to any Benefit Plan or (v) adopt, approve, ratify
or enter into any collective bargaining agreement, side letter, memorandum
of understanding or similar agreement with any labor union covering the
employees of the Company or any of the Subsidiaries.
(i) Accounting Methods; Income Tax Matters. Except as required by a
Governmental Authority, the Company shall not, nor shall it permit any of
its Subsidiaries to, change its methods of accounting in effect at December
31, 2000, except as required by changes in GAAP as concurred in by the
Company's independent auditors. The Company shall not, nor shall it permit
any of its Subsidiaries to, (i) change its fiscal year, (ii) make or
rescind any material Tax election, (iii) settle or compromise any material
claim, action, suit, litigation, proceeding, arbitration, investigation,
audit, or controversy in respect of Taxes or (iv) change in any material
respect any of its methods of reporting income, deductions or accounting
for federal income Tax purposes from those employed in the preparation of
its federal income Tax Return for the taxable year ending December 31,
2000.
(j) Contracts. The Company shall not, and shall not permit any of its
Subsidiaries to, (i) except as expressly contemplated or expressly
permitted in this Section 5.1, enter into any Company Contract, other than
in the usual, regular and ordinary course of business consistent with past
practice, enter into a contract that would constitute a Material Contract
amend in any material respect any of the Material Contracts, (ii) enter
into any Company Contract providing for, or amend any Company Contract to
provide for, the taking of any action that would be prohibited hereunder,
(iii) enter into any Company Contract that would be or would purport to be
valid and legally binding on the Parent or any of its Affiliates (other
than the Company and its Subsidiaries) upon, and at any time after, the
Closing, including without limitation any that limits or otherwise
restricts the Company or any of its Subsidiaries or any successor thereto
or that could, after the Closing, limit or restrict the Surviving
Corporation and its Affiliates (including but not limited to the Parent or
its Affiliates) or any successor thereto, from engaging or competing in any
line of business, in any geographic area or otherwise or with any Person,
or (iv) terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party. The Company
shall, and shall cause any Subsidiary to, take all steps necessary to
enforce, to the fullest extent permitted under Applicable Law, the
provisions of any Material Contract or any confidentiality or standstill
agreements to which it is a party.
(k) Compromise; Settlement. Neither the Company nor any of its
Subsidiaries shall settle or compromise any pending or threatened claims or
arbitrations, other than settlements that involve solely the payment of
money (without admission of liability) that would not result in an
uninsured payment by or liability of the Company in excess of $100,000 in
the aggregate above the reserves established therefor on the books of the
Company as of the date hereof.
(l) Other Actions. The Company shall not, and shall not permit any of
its Subsidiaries to, take any action that would, or fail to take any action
which failure would, or that could reasonably be expected to, result in,
(i) any of the Company's representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, (ii) a material
breach of any provision of this Agreement, (iii) any of the conditions to
the Merger set forth in Article VI not being satisfied, or (iv) a material
delay in the consummation of the Merger and the transactions contemplated
by this Agreement.
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(m) The Company shall not, and shall not permit any of its
Subsidiaries to, authorize or enter into any agreement to do any of the
foregoing in this Section 5.1.
5.2 Advisory Agreement Consents.
(a) The Company shall obtain written consent to the assignment or deemed
assignment of each Advisory Agreement to which either:
(i) a Fund that is organized in any jurisdiction within the United
States; or
(ii) a Fund that is controlled, directly or indirectly, by the Company
and that is organized in any jurisdiction outside of the United States is a
party.
(b) The Company shall use its reasonable best efforts to obtain written
consent to the assignment or deemed assignment of each Advisory Agreement to
which a Fund, other than any Fund described in either Section 5.2(a)(i) or
5.2(a)(ii), is a party.
(c) The Company shall use its reasonable best efforts to obtain written
consent to the assignment or deemed assignment of (i) each Advisory Agreement
with respect to which, as a result of the transactions contemplated hereby,
written consent to its assignment or deemed assignment is expressly required by
such Advisory Agreement and (ii) each Advisory Agreement to which a Key Client
is a party (in the case of each of clauses (i) and (ii) of this Section 5.2(c),
other than any Advisory Agreement described in Section 5.2(a) or (b)); provided,
however, that the Company shall not be required to take any actions in
attempting to obtain the written consent of any client that could, in the good
faith judgment of the Company, adversely affect the client relationship.
(d) As soon as reasonably practicable following the date hereof, the
Company shall send (or cause to be sent) a notice in form and substance
acceptable to the Parent (the "Notice") to any Person to whom the Company or any
of its Subsidiaries renders investment management or investment advisory
services requesting written consent to the assignment of each Advisory Agreement
and informing the party to such Advisory Agreement: (x) of the intention to
complete such transactions, which will result in a deemed assignment of such
Advisory Agreement; and (y) of the Company's intention to continue to provide
the advisory services pursuant to the existing Advisory Agreement with such
party after the Closing. The Parent shall be provided a reasonable opportunity
to review all such consent materials to be used by the Company prior to
distribution.
(e) The Parent agrees that, in the case of each Advisory Agreement other
than any Advisory Agreement described in Section 5.2(a), 5.2(b) or 5.2(c),
consent to the assignment or deemed assignment of such Advisory Agreement
resulting from the transactions contemplated by this Agreement shall be deemed
given for all purposes under this Agreement if the party to such Advisory
Agreement shall not have affirmatively stated prior to the Effective Time to the
Company or any Subsidiary thereof that it does not consent to such assignment or
deemed assignment or intends to terminate such Advisory Agreement and at least
forty-five (45) days have elapsed since the mailing of Notice to such party
pursuant to Section 5.2(d).
(f) Notwithstanding anything to the contrary contained herein, the
covenants of the parties contained in this Section 5.2 are intended only for the
benefit of the parties and for no other Person.
5.3 Acquisition Proposals.
(a) The Company shall not, and shall cause each of its Subsidiaries, and
its and any such Subsidiaries' respective Representatives not to, directly or
indirectly, (i) initiate, solicit, encourage or knowingly facilitate (including
by way of furnishing information or assistance) any inquiries or expressions of
interest or the making of any proposal or offer that constitutes, or could
reasonably be expected to lead to (x) a proposal or offer with respect to a
merger, reorganization, share exchange, recapitalization, liquidation,
dissolution, consolidation or similar transaction involving, or any purchase or
series of related purchases directly or indirectly (including, by way of lease,
exchange, sale, mortgage, pledge, tender offer, exchange offer or otherwise, as
may be applicable), of 5% or more of the assets (based on fair market
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value) or any equity interests (in economic or voting power) in, the Company or
any of its Subsidiaries, (y) a breach of this Agreement or the Stockholders
Agreement or any interference with the completion of the Merger or (z) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing (any of the foregoing
inquiries, expressions of interest, proposals, or offers being referred to in
this Agreement as an "Acquisition Proposal"), (ii) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any Person relating to an Acquisition Proposal, or otherwise
facilitate the making of, or any effort or attempt to make or implement, an
Acquisition Proposal, or (iii) agree to or recommend to its stockholders any
Acquisition Proposal; provided, however, that nothing contained in this Section
5.3 shall prevent the Company from (i), based on the advice of outside legal
counsel, complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal or providing any other legally required
disclosure to the stockholders of the Company (provided that, except as
otherwise permitted in this Section 5.3, the Company does not withdraw or
modify, or propose to withdraw or modify, its position with respect to the
Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal), (ii) prior to receipt of the Required Company Vote, and
subject to compliance by the Company with the immediately following sentence,
providing information to, or engaging in any negotiations or discussions with,
any Person who has made an unsolicited bona fide written Acquisition Proposal
if, and only to the extent that (A) the Board of Directors of the Company
determines, in good faith after consultation with, and based upon the advice of,
outside legal counsel, that providing such information and engaging in such
discussions or negotiations is required to comply with its fiduciary duties to
the Company's stockholders under Applicable Law, (B) such Acquisition Proposal
is not subject to any financing contingencies, (C) the Board of Directors
determines in good faith that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated taking into account all legal, financial,
regulatory and other aspects of the proposal and the Person making the proposal,
and believes in good faith, after consultation with the Company Financial
Advisor, would, if consummated, result in a transaction more favorable to the
Company's stockholders from a financial point of view than the Merger (any such
more favorable Acquisition Proposal, a "Superior Proposal") and (D) prior to
taking such action and furnishing any information to any such party, the Company
(x) provides reasonable notice to the Parent to the effect that it is taking
such action, (y) provides such information to the Parent (if and to the extent
it has not already done so), and (z) shall have entered into a
confidentiality/standstill agreement on customary terms as advised by outside
legal counsel, and in any event containing terms at least as stringent as those
contained in the Confidentiality Agreement, or (iii) prior to receipt of the
Required Company Vote, recommending such a Superior Proposal to the holders of
Company Common Stock and withdrawing the prior recommendation of this Agreement,
if and only to the extent that, in each case referred to in clause (ii) or (iii)
above, the Board of Directors of the Company determines, in good faith after
consultation with, and based upon the advice of, outside legal counsel, that
taking such action is required to comply with its fiduciary duties to the
Company's stockholders under Applicable Law; provided, however, the Board of
Directors of the Company may not approve or recommend (and in connection
therewith, withdraw or modify its approval or recommendation of this Agreement
or the Merger) an Acquisition Proposal unless such an Acquisition Proposal is a
Superior Proposal (and the Company shall have first terminated this Agreement in
accordance with, and complied with its obligations set forth in, Section 7.1(g)
and the time period referred to in Section 7.1(g) has expired). Prior to
providing any information to or entering into discussions or negotiations with
any Person in connection with an Acquisition Proposal by such Person, the
Company shall notify the Parent immediately (orally and in writing) if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of its Representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals or offers and thereafter shall keep the Parent
reasonably and promptly informed on the status and terms of any such proposals
or offers and provide the Parent with a copy of any written Acquisition Proposal
and all amendments and supplements thereto and the status of any such
discussions or negotiations. The Company shall, and shall cause each of its
Subsidiaries and each of the Company's and such Subsidiaries' Representatives
to, immediately cease and cause to be terminated any activities, discussions or
negotiations conducted prior to the date of this Agreement with any parties
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other than the Parent and the Merger Sub with respect to any of the foregoing.
The Company agrees that it will immediately take the necessary steps to inform
promptly the individuals or entities referred to in the first sentence of this
Section 5.3(a) of the obligations undertaken in this Section 5.3(a).
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to the Parent, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition Proposal
or (iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Acquisition Proposal, except in each case, in connection with a Superior
Proposal and subject to compliance with Sections 5.3(a) and 7.1(g).
5.4 Obtaining Required Company Vote. The Company shall, as promptly as
practicable following the execution of this Agreement, take all action necessary
in accordance with Applicable Law and its certificate of incorporation and
by-laws to duly call, give notice of, convene and hold as soon as practicable
after the date of this Agreement a meeting of its stockholders for the purpose
of obtaining the Required Company Vote with respect to the transactions
contemplated by this Agreement and, except in connection with a Superior
Proposal and subject to compliance with Sections 5.3(a) and 7.1(g), shall take
all lawful action to solicit the adoption of this Agreement by the Required
Company Vote and the Board of Directors of the Company shall recommend adoption
of this Agreement by the stockholders of the Company. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
the first sentence of this Section 5.4 shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of an Acquisition Proposal. Notwithstanding the foregoing, regardless of whether
the Board of Directors of the Company has withdrawn, amended or modified its
recommendation that its stockholders approve and adopt this Agreement, unless
this Agreement has been terminated pursuant to the provisions of Article VII,
the Company shall be required to hold such a meeting of its stockholders for the
purpose of obtaining the Required Company Vote.
5.5 Access to Information. Upon reasonable notice, the Company shall (and
shall cause its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financial advisors and other Representatives of the Parent reasonable
access during normal business hours, during the period prior to the Effective
Time, to all its facilities, operations, officers, employees, agents and
accountants and its properties, books, contracts, commitments and records and,
during such period, the Company shall (and shall cause its Subsidiaries to)
furnish promptly to the Parent (i) a copy of each report, schedule, form,
statement and other document filed or deemed to be filed, published, announced
or received by it during such period pursuant to the requirements of Federal or
state Securities Laws, as applicable; and (ii) each report, schedule, form,
statement and other document filed or deemed to be filed with any other
Governmental Authority (other than, in the case of clause (i) or (ii), documents
which such party is not permitted to disclose under Applicable Laws), and (iii)
consistent with its legal obligations, all other information concerning its
business, properties and personnel as the Parent may reasonably request;
provided, however, that the Company may restrict the foregoing access to the
extent that (x) a Governmental Authority requires the Company or any of its
Subsidiaries to restrict access to any properties or information reasonably
related to any such contract on the basis of Applicable Laws with respect to
national security matters or (y) any Applicable Law requires the Company or its
Subsidiaries to restrict access to any properties or information.
5.6 Covenants of the Parent. During the period from the date of this
Agreement and continuing until the Effective Time, the Parent agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or as otherwise indicated under separate headings in Schedule
5.6 of the Parent Disclosure Schedule or to the extent that the Company (in its
sole discretion) shall otherwise consent in writing):
(a) Payment of the Merger Consideration. The Parent shall not take
any action that would, or fail to take any action which failure would, or
could reasonably be expected to, impair the Parent's
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ability to have available sufficient funds to pay the Merger Consideration
and the Option Consideration pursuant to this Agreement and otherwise to
satisfy its obligations hereunder.
(b) Consents. The Parent shall use its reasonable commercial efforts
not take any action that would, or fail to take any action which failure
would, or could reasonably be expected to, impede or delay any consent set
forth on Schedule 4.2(c) of the Parent Disclosure Schedule or Schedule
4.1(g) of the Company Disclosure Schedule or otherwise impede or delay the
consummation of the Merger and the other transactions contemplated by this
Agreement. Prior to the Closing, neither the Parent nor any of its
Subsidiaries shall knowingly contact, in writing or otherwise, any client
of the Company or its Subsidiaries or any other Person who acts as an
adviser to or "gatekeeper" for any client of the Company or its
Subsidiaries with respect to matters related to this Agreement without the
prior written approval of the Company.
(c) Control of the Company's Business. Nothing contained in this
Agreement shall be deemed to give the Parent, directly or indirectly, the
right to control or direct the Company's operations prior to the Effective
Time. Prior to the Effective Time, the Company shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its operations.
(d) Other Actions. The Parent shall not take any action that would,
or fail to take any action which failure would, or that could reasonably be
expected to, result in, (i) any of the Parent's representations and
warranties set forth in this Agreement being or becoming untrue in any
material respect, (ii) a material breach of any provision of this
Agreement, (iii) any of the conditions to the Merger set forth in Article
VI not being satisfied, or (iv) a material delay in the consummation of the
Merger and the transactions contemplated by this Agreement.
(e) The Parent shall not, and shall not permit the Merger Sub to,
authorize or enter into any agreement to do any of the foregoing in this
Section 5.6.
5.7 Offers of Employment. Except as provided in the Employment Agreements,
the Parent agrees that, immediately following the Effective Time, it will cause
the Surviving Corporation to continue employment of each of the persons then
employed by the Company on terms substantially similar to the terms of their
current employment by the Company, including, without limitation, with respect
to salary, vacations and benefits (other than equity-based arrangements or
benefit plans).
5.8 Employee Benefits.
(a) Obligations of the Parent; Comparability of Benefits. Except as
provided in the Employment Agreements, the Parent shall cause the Surviving
Corporation to assume all employment and other related agreements with respect
to any current employee of Company, which shall be performed in accordance with
their terms. In addition, the obligations under each Benefit Plan as to which
Company or any of its Subsidiaries has any obligation with respect to any
current or former employee shall become the obligations of the Surviving
Corporation at the Effective Time; provided, however, as soon as practicable,
the Parent shall, or shall cause the Surviving Corporation to, provide to the
Employees the same benefits which are provided to similarly situated employees
of the Parent immediately prior to the Effective Time. Notwithstanding the
foregoing, nothing herein shall require (A) the continuation of any particular
Benefit Plan or prevent the amendment or termination thereof or (B) the Parent
or the Surviving Corporation to continue or maintain any stock purchase or other
equity plan related to the equity of Company or the Surviving Corporation or the
Parent.
(b) Pre-Existing Limitations; Deductibles; Service Credit. With respect to
any Benefit Plans of the Parent or any Subsidiary of the Parent in which any
current or former employees participate effective as of the Effective Time, the
Parent shall, or shall cause the Surviving Corporation to: (A) not impose any
limitations more onerous than those currently in effect as to pre-existing
conditions, exclusions (other than such exclusions which would cause the Parent
or the Surviving Corporation to self-insure such excluded benefits) and waiting
periods with respect to participation and coverage requirements applicable to
such current or former employees under any Benefit Plan, (B) provide each such
current or former Employee with credit for any years of service with the Company
or any of its Subsidiaries acknowledged by the
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Benefit Plans with respect to employee benefit plans of the Parent or any of its
Affiliates with respect to eligibility, vesting and waiting periods (but not for
purposes of benefit accrual), co-payments and deductibles paid in accordance
with such Benefit Plans, and (C) provide each current or former Employee with
credit for any co-payments and deductibles paid in accordance with such Benefit
Plans.
5.9 Directors' and Officers' Indemnification and Insurance.
(a) After the Effective Time through the sixth anniversary of the Effective
Time, the Surviving Corporation shall indemnify and hold harmless each present
or former officer, director or employee of the Company and its Subsidiaries
(when acting in such capacity), determined as of the Effective Time (the
"Indemnified Parties"), against all claims, losses, liabilities, damages,
judgments, fines and reasonable fees, costs and expenses (including the
reasonable fees and expenses of only one law firm for the Indemnified Parties as
a group) incurred in connection with any claim, action, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to (A) the fact that the Indemnified Party is or was an
officer, director or employee of the Company or any of its Subsidiaries or (B)
matters existing or occurring at or prior to the Effective Time (including this
Agreement and the transactions and actions contemplated hereby; it being
understood that a reduction under the Retention Plan in the amount of the
Remaining Pool as a consequence of an Indemnification Amount (as such terms are
defined in the Retention Plan) shall not be subject to indemnification
hereunder), whether asserted or claimed prior to (and, in the case of claims,
actions, proceedings or known investigations, disclosed to the Parent in writing
before the Effective Time), at or after the Effective Time, to the fullest
extent that the Company would have been permitted under Applicable Law and its
certificate of incorporation and by-laws in effect with respect to the date
hereof to indemnify such Indemnified Party. Each Indemnified Party will be
entitled to the fullest extent permitted by Applicable Law and the Company's
certificate of incorporation and by-laws on the date hereof to advancement of
expenses incurred in the defense of any claim, action, proceeding or
investigation from the Surviving Corporation; provided that any Person to whom
expenses are advanced provides an undertaking, to the extent required by the
DGCL, to repay such advances if it is ultimately determined that such Person is
not entitled to indemnification.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 5.9, upon learning of any such claim, action, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnified Party to the extent such failure does
not prejudice the indemnifying party. In the event of any such claim, action,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall have the right to assume the defense
thereof and neither the Parent nor the Surviving Corporation shall be liable to
such Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Surviving Corporation elects not to
assume such defense, the Indemnified Parties may retain counsel satisfactory to
the Surviving Corporation, and the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that the
Surviving Corporation shall be obligated pursuant to this paragraph (b) to pay
for only one firm of counsel for all Indemnified Parties, (ii) the Indemnified
Parties will cooperate in the defense of any such matter, and (iii) neither the
Parent nor the Surviving Corporation shall be liable for any settlement effected
without the prior approval of the Surviving Corporation (which approval shall
not be unreasonably withheld or delayed); and that neither the Parent nor the
Surviving Corporation shall have any obligation hereunder to any Indemnified
Party if and when a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by Applicable
Law.
(c) The Surviving Corporation shall cause to be maintained in effect for a
period of six years after the Effective Time, the current policies of directors'
and officers' liability insurance and fiduciary liability insurance maintained
by the Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are, in the
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aggregate, no less advantageous to the insured and which policies may include a
"tail policy") with respect to claims arising from facts or events that occurred
at or before the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend in any one year an amount in excess
of 200% of the annual premiums currently paid by the Company for such insurance
(the most recent annual renewal of which, in the aggregate, cost $318,338, as
set forth in Schedule 4.1(q) to the Company Disclosure Schedule); and, provided,
further, that if the annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall be obligated to obtain a policy in its
reasonable judgment with as much coverage as can be obtained for a cost not
exceeding such amount.
(d) In the event that the Surviving Corporation or any of its successors or
assigns (A) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (B) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, proper provision shall be
made so that the successors or assigns of the Surviving Corporation shall
succeed to the obligations set forth in this Section 5.9.
5.10 Retention Plan and Bonus Pool. At or prior to the Effective Time, the
Company shall establish the Retention Plan for employees of the Company in the
form attached as Schedule 5.10-1 to the Company Disclosure Schedule (the
"Retention Plan") and the Bonus Pool for employees of the Company (the "Bonus
Pool"), as described in Schedule 5.10-2 to the Company Disclosure Schedule.
5.11 Mutual Covenants of the Company and the Parent. During the period
from the date of this Agreement and continuing until the Effective Time, each of
the Company and the Parent agrees as to itself and its respective Subsidiaries
that (except as expressly contemplated or permitted by this Agreement or as
otherwise indicated in Schedule 5.11 of the Company Disclosure Schedule or
Section 5.11 of the Parent Disclosure Schedule or to the extent that the other
party shall otherwise consent in writing):
(a) Preparation of Proxy Statement; Company Stockholders Meeting. As
promptly as practicable following the date hereof, the Company shall, in
cooperation with the Parent, prepare and file with the SEC the Proxy
Statement. The Proxy Statement shall comply as to form in all material
respects with the applicable provisions of the Exchange Act and the rules
and regulations thereunder, and, subject to Section 5.3, shall include a
statement that the Board of Directors finds the Merger to be advisable,
fair to and in the best interests of the Company. The Company shall use all
reasonable efforts with the Parent's cooperation to have the Proxy
Statement cleared by the SEC as promptly as practicable after filing with
the SEC. The Company shall, as promptly as practicable after receipt
thereof, provide copies of any written comments received from the SEC with
respect to the Proxy Statement to the Parent and advise the Parent of any
oral comments with respect to the Proxy Statement received from the SEC.
The Company shall cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable date following clearance of the
Proxy Statement by the SEC and, subject to Section 5.3, shall include in
the Proxy Statement the recommendation of the Board of Directors of the
Company that the stockholders of the Company vote in favor of the adoption
of this Agreement.
The Parent agrees that none of the information supplied or to be
supplied by the Parent for inclusion or incorporation by reference in the
Proxy Statement and each amendment or supplement thereto, at the time of
mailing thereof and at the time of meeting of the Company stockholders,
held for the purpose of obtaining the Required Company Vote with respect to
the transactions contemplated by this Agreement, will contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company
agrees that none of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Proxy Statement
and each amendment or supplement thereto, at the time of mailing thereof
and at the time of the meeting of the Company stockholders, held for the
purpose of obtaining the Required Company Vote with respect to the
transactions contemplated by this Agreement, will contain an untrue
statement of a material fact or omit to state a material fact required to
be stated
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therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. For purposes of
the foregoing, it is understood and agreed that information concerning or
related to the Parent will be deemed to have been supplied by the Parent
and information concerning or related to the Company and the meeting of the
Company stockholders, held for the purpose of obtaining the Required
Company Vote with respect to the transactions contemplated by this
Agreement, shall be deemed to have been supplied by the Company. The
Company will provide the Parent and its counsel with a reasonable
opportunity to review and comment on the Proxy Statement and all responses
to requests for additional information by and replies to comments of the
SEC prior to filing such with, or sending such to, the SEC, and will
provide the Parent and its counsel with a copy of all such filings made
with the SEC. The Company shall consider all comments provided by the
Parent in good faith and no amendment or supplement to the information
supplied by the Parent for inclusion in the Proxy Statement shall be made
without the approval of the Parent, which approval shall not be
unreasonably withheld or delayed.
(b) Reasonable Best Efforts.
(i) Subject to the terms and conditions of this Agreement, each
party will use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper
or advisable under Applicable Laws to consummate the Merger and the
other transactions contemplated by this Agreement as soon as practicable
after the date hereof. In furtherance and not in limitation of the
foregoing, each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable after the
date hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to
the HSR Act and to take all other actions necessary to cause the
expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable.
(ii) Each of the Parent and the Company shall, in connection with
the efforts referenced in Section 5.11(b)(i) to obtain all requisite
approvals and authorizations for the transactions contemplated by this
Merger Agreement under the HSR Act or any other Applicable Law, use its
reasonable best efforts to (A) make all appropriate filings and
submissions with any Governmental Authority that may be necessary,
proper or advisable under Applicable Laws in respect of any of the
transactions contemplated by this Agreement, (B) cooperate in all
respects with each other in connection with any such filing or
submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party, (C) promptly
inform the other party of any communication received by such party from,
or given by such party to, the Antitrust Division of the DOJ or any
other Governmental Authority and of any material communication received
or given in connection with any proceeding by a private party, in each
case regarding any of the transactions contemplated hereby and (D)
consult with each other in advance of any meeting or conference with the
DOJ or any such other Governmental Authority or, in connection with any
proceeding by a private party, with any other Person.
(iii) In furtherance and not in limitation of the covenants of the
parties contained in Sections 5.11(b)(i) and 5.4(b)(ii), if any
administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement
as violative of any Applicable Law, each of the Parent and the Company
shall cooperate in all respects with each other and use its respective
reasonable best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents
or restricts consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 5.11(b) shall limit a party's right
to terminate this Agreement pursuant to Section 7.1(b) or 7.1(c) so long
as such party has up to then complied in all respects with its
obligations under this Section 5.4(c).
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(c) Employee Benefits Matters. The Company and the Parent agree that,
for purposes of the Benefit Plans, the approval or consummation of the
transactions contemplated by this Agreement, as applicable, shall
constitute a "Change in Control", as applicable under such Benefit Plans.
(d) Fees and Expenses. Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses,
except (i) if the Merger is consummated, the Surviving Corporation shall
pay, or cause to be paid, any and all property or transfer taxes imposed on
the Company or its Subsidiaries and (ii) as provided in Section 7.3. As
used in this Agreement, "Expenses" includes all out-of-pocket expenses
(including all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its Affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Proxy Statement and the
solicitation of stockholder approvals and all other matters related to the
transactions contemplated hereby.
(e) Confidentiality. Each of the Company and the Parent will hold any
information constituting Confidential Information (as defined in the
Confidentiality Agreement, dated March 14, 2001, as amended, between the
Company and OppenheimerFunds, Inc. (the "Confidentiality Agreement"))
provided to the other, including the information under Section 5.5 that is
Confidential Information, in confidence to the extent required by, and in
accordance with, the provisions of the Confidentiality Agreement.
(f) Public Announcements. The Company and the Parent shall use all
reasonable efforts to develop a joint communications plan and each party
shall use all reasonable efforts (i) to ensure that all press releases and
other public statements with respect to the transactions contemplated
hereby shall be consistent with such joint communications plan, and (ii)
unless otherwise required by Applicable Law or by obligations pursuant to
any listing agreement with or rules of any securities exchange, to consult
with each other before issuing any press release or otherwise making any
public statement with respect to this Agreement or the transactions
contemplated hereby.
(g) Takeover Statutes. If any anti-takeover or similar statute or
regulation is or may become applicable to the transactions contemplated
hereby, each of the Parent and the Company and its Board of Directors shall
grant such approvals and take all such actions as are legally permissible
so that the transactions contemplated hereby may be consummated as promptly
as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
5.12 Revenue Run Rate. On or prior to the 15th Business Day following the
end of each month prior to the Closing Date, the Company shall provide to the
Parent a certificate of the Company's chief financial officer setting forth the
Revenue Run-Rate as of such month-end (which shall include the details of the
Company's calculations and the Company's confirmation that such Revenue Run-Rate
has been calculated according to the methodology mutually agreed upon prior to
the date hereof by the Parent and the Company (as set forth in Schedule II
hereto) (each, a "Monthly Run-Rate Schedule"). No later than five Business Days
after receipt of such schedule, the Parent may notify the Company of any
disagreement it may have with the information set forth in such Monthly Run-Rate
Schedule and the reasons for such disagreement. The Parent and the Company will
work in good faith to resolve any such disagreement and mutually agree on the
amount of the Revenue Run-Rate as of such month-end within the following period
of five Business Days.
5.13 Tangible Net Worth. On or prior to the 15th Business Day following
the end of each month (commencing with August 2001) prior to the Closing Date,
the Company shall provide to the Parent a certificate of the Company's chief
financial officer setting forth the Tangible Net Worth as of such month-end
(which shall include the details of the Company's calculations and the Company's
confirmation that such Tangible Net Worth has been calculated according to the
methodology mutually agreed upon prior to the date hereof by the Parent and the
Company (as set forth in Schedule III hereto) (each, a "Monthly
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Tangible Net Worth Schedule"). No later than five Business Days after receipt of
such Monthly Tangible Net Worth Schedule, the Parent may notify the Company of
any disagreement it may have with the information set forth in such schedule and
the reasons for such disagreement. The Parent and the Company will work in good
faith to resolve any such disagreement and mutually agree on the amount of the
Tangible Net Worth as of such month-end within the following period of five
Business Days.
5.14 Employment Agreements. The Company shall use its reasonable best
efforts to enter into amendments, satisfactory to the Parent, to the employment
agreements prior to the Effective Date with the executives specified on Schedule
5.14 to the Parent Disclosure Schedule.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the Company, the Parent and the Merger Sub to effect
the Merger are subject to the satisfaction or waiver at or prior to the Closing
of the following conditions:
(a) Stockholder Approval. The Company shall have obtained the
Required Company Vote for the adoption of this Agreement by the
stockholders of Company.
(b) No Injunctions or Restraints; Illegality. No federal, state,
local or foreign, if any, Applicable Law shall have been adopted or
promulgated, and no temporary restraining order, preliminary or permanent
injunction or other order issued by a court or other Governmental Authority
of competent jurisdiction shall be in effect, having the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger.
(c) HSR Act; Governmental and Self-Regulatory Organization
Approvals. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have
expired, and the written consents set forth on Schedule 6.1(c) of the
Parent Disclosure Schedule shall have been received and shall be in full
force and effect.
6.2 Additional Conditions to Obligations of Company. The obligations of
the Company to effect the Merger are subject to the satisfaction of, or waiver
by the Company, at or prior to the Closing of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Parent and the Merger Sub set forth in this Agreement
shall be true and correct in all material respects (other than any
representation or warranty, or any portion of a representation or warranty,
that is qualified as to materiality or Material Adverse Effect, which
representations and warranties (or such portions thereof) shall be true and
correct in all respects), as if such representations or warranties were
made as of the Effective Time, except (i) to the extent given as of a
certain date and (ii) for changes specifically permitted by this Agreement,
and the Company shall have received a certificate of the chief executive
officer and the chief financial officer of the Parent to such effect.
(b) Performance of Obligations of the Parent. The Parent shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior
to the Effective Time, and the Company shall have received a certificate of
the chief financial officer and one other executive officer of the Parent
to such effect.
(c) Retention Plan and Bonus Pool. The Parent shall have taken all
action necessary to ensure that the Retention Plan and the Bonus Pool shall
be in full force and effect following the Effective Time.
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6.3 Additional Conditions to Obligations of the Parent and the Merger
Sub. The obligations of the Parent and the Merger Sub to effect the Merger are
subject to the satisfaction of, or waiver by the Parent, at or prior to the
Closing of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement shall be true and
correct in all material respects (other than any representation or
warranty, or any portion of a representation or warranty, that is qualified
as to materiality or Material Adverse Effect, which representations and
warranties (or such portions thereof) shall be true and correct in all
respects), as if such representations or warranties were made as of the
Effective Time, except (i) to the extent given as of a certain date and
(ii) for changes specifically permitted by this Agreement, and the Parent
shall have received a certificate of the co-chief executive officers and
the chief financial officer of the Company to such effect.
(b) Performance of Obligations of Company. The Company shall have
performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior
to the Effective Time, and the Parent shall have received a certificate of
the chief executive officer and the chief financial officer of the Company
to such effect.
(c) No Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any event or circumstance that shall have
caused, or would be reasonably likely to cause, a Material Adverse Effect
with respect to the Company.
(d) Revenue Run-Rate. The Closing Revenue Run-Rate shall not be less
than 85% of the Base Revenue Run-Rate.
(e) Employment Agreements. The Employment Agreements, between
OppenheimerFunds, Inc. and the individuals listed on Schedule 6.3(e) of the
Parent Disclosure Schedule (the "Key Employees") shall be in full force and
effect, the Parent shall not be aware of any basis that would reasonably be
expected to cause any of such agreements to no longer be in full force and
effect, and none of the Key Employees shall have died, become incapacitated
or otherwise not be in a position to perform his or her obligations
thereunder.
(f) Dissenters. The Dissenting Shares shall constitute not more than
ten percent (10%) of the Company Common Stock outstanding immediately prior
to the Effective Time.
(g) Retention Plan and Bonus Pool. The Retention Plan and the Bonus
Pool shall have been adopted by the Company and shall be in full force and
effect.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (except as provided below),
notwithstanding any approval of this Agreement by the Required Company Vote:
(a) By mutual written consent of the Parent and the Company, by action
of their respective Boards of Directors;
(b) By either the Company or the Parent, by written notice to the
other party if the Merger has not been consummated as of December 31, 2001
(the "Termination Date"); provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any
party whose failure to fulfill in any material respect any obligation under
this Agreement has caused or resulted in the failure of the Effective Time
to occur on or before the Termination Date;
(c) By either the Company or the Parent, if there shall be any law or
regulation that materially restricts the consummation of the Merger or
makes consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining the Parent or the Company
from
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consummating the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided that the terminating
party has fulfilled its obligations under Section 5.11(b);
(d) By the Parent, if (i) the Board of Directors of the Company shall
have (A) failed to recommend, (B) failed to reconfirm its recommendation of
this Agreement within three Business Days after a written request by the
Parent to do so, (C) withdrawn or modified or changed, in a manner adverse
to the Parent, its approval or recommendation of this Agreement or the
Merger, whether or not permitted by the terms hereof, (D) failed to call a
meeting of the Company stockholders for the purpose of obtaining the
Required Company Vote with respect to the transactions contemplated by this
Agreement, or (E) recommended an Acquisition Proposal, (ii) the Required
Company Vote shall not have been obtained on or prior to December 30, 2001,
or (iii) a tender offer or exchange offer for 15% or more of the
outstanding Company Common Stock is commenced, and the Board of Directors
of the Company fails to recommend against acceptance of such tender offer
or exchange offer by the stockholders of the Company within the time period
required pursuant to Rule 14e-2 of the Exchange Act (or the Board of
Directors of the Company shall resolve or fail to resolve, as applicable,
to do any of the foregoing);
(e) By the Parent, if the condition set forth in Section 6.3(e) shall
have become incapable of fulfillment, and shall not have been waived by the
Parent;
(f) By either the Company or the Parent, if there shall have been a
breach by the other party of any of its representations, warranties,
covenants or obligations contained in this Agreement, which breach would
result in the failure to satisfy one or more of the conditions set forth in
Article VI and in such case such breach shall be incapable of being cured,
or, if capable of being cured, shall not have been cured within 30 days
after written notice thereof shall have been received by the party alleged
to be in breach; provided, however, that the right to terminate this
Agreement pursuant to this Section 7.1(f) shall not be available to the
Company or the Parent, if such party, at such time, is in material breach
of any representation, warranty, covenant or agreement set forth in this
Agreement; or
(g) By the Company, at any time that the Company is not in material
breach of Section 5.3 and prior to the time at which the Required Company
Vote shall have been obtained if (i) after receiving a bona fide Superior
Proposal, the Board of Directors of the Company determines, in good faith
and after consulting with, and based upon the advice of, outside legal
counsel, that taking such action is required to comply with its fiduciary
duties to the Company's stockholders under Applicable Law, (ii) the Board
of Directors of the Company notifies the Parent and Merger Sub in writing
that it intends to enter into such agreement, attaching the most current
version of such agreement to such notice, (iii) during the five Business
Days following receipt of the Company's written notification of its
intention, (A) the Company shall have negotiated with, and shall have
caused its financial and legal advisors to have negotiated with, the Parent
to attempt to make such commercially reasonable adjustments in the terms
and conditions of this Agreement as would enable the Company to proceed
with the transactions contemplated herein, and (B) the Board of Directors
of the Company shall have determined, after considering the results of such
negotiations and any revised proposals made by the Parent, that any
Superior Proposal giving rise to the Company's notice continues to be a
Superior Proposal, (iv) simultaneously with such termination the Company
pays to the Parent in immediately available funds the Termination Fee and
Expenses described in Section 7.3, and (v) such termination (A) is within
two Business Days after the termination of the five-Business Day period
referred to in clause (iii) above and (B) takes place prior to receipt of
the Required Company Vote. The Company agrees that it will not enter into a
binding agreement or consummate the transaction constituting a Superior
Proposal referred to in clause (iii) above until at least the sixth
Business Day after it has provided the notice to the Parent required
thereby.
The party desiring to terminate this Agreement pursuant to clause (b),
(c), (d), (e), (f) or (g) of this Section 7.1 shall give written notice of
such termination to the other party in accordance with Section 8.4,
specifying the provision hereof pursuant to which such termination is
effected.
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7.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 7.1, this Agreement shall become void and of no effect with no liability
on the part of any party hereto, except (i) as set forth in Section 7.3, (ii)
that the agreements contained in this Section 7.2, in Section 5.11(d), and in
the Confidentiality Agreement (other than the provisions of paragraphs 7 and 9
therein, which paragraphs, the parties thereto hereby agree, shall be of no
further force and effect upon termination of this Agreement) shall survive the
termination hereof and (iii) no such termination shall relieve any party of any
liability or damages resulting from any willful breach by that party of this
Agreement.
7.3 Payment by the Company.
(a) In the event that (i) this Agreement is terminated by the Parent
pursuant to Section 7.1(d) or Section 7.1(e) (other than pursuant to Section
7.1(e), by reason of death of any of the individuals referred to in Section
6.3(e) or by the Company pursuant to Section 7.1(g), or (ii) if within 18 months
of the termination of this Agreement by the Company pursuant to Section 7.1(b)
any Acquisition Proposal by a third party is entered into, agreed to or
consummated by the Company, then, in any such event, the Company shall pay the
Parent a fee of $5,800,000 (the "Termination Fee") (which amount shall be
payable by wire transfer in immediately available funds to an account designated
by the Parent) on the date of such termination, in the case of clause (i), or
the earlier of the date an agreement is entered into with respect to an
Acquisition Proposal or an Acquisition Proposal is consummated in the case of
clause (ii).
(b) In the event that the Parent terminates this Agreement pursuant to
Section 7.1(f), then the Company shall pay in same-day funds to the Parent,
within two-Business Days after demand is made by the Parent, the Parent's
Expenses. No such payment to the Parent will be deemed to affect or limit any
claims that the Parent may have under Applicable Law in respect of such
termination.
(c) The Company acknowledges that the agreements contained in this Section
7.3 are critical provisions of the transactions contemplated hereby and that
without these agreements the Parent and Merger Sub would not enter into this
Agreement. Accordingly, if the Company fails to pay promptly the Termination Fee
due pursuant to this Section 7.3(a) and, in order to obtain such payment, the
Parent or Merger Sub commences litigation which results in a judgement against
the Company for the Termination Fee, the Company shall pay to the Parent its
costs and expenses (including attorneys' fees) in connection with such
litigation, together with interest on the amount of the Termination Fee at the
prime rate of Citibank, N.A., in effect on the date and from the date such
amounts were originally required to have been paid.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except as
otherwise contemplated by the Retention Plan and for those covenants and
agreements contained herein and therein that by their terms apply or are to be
performed in whole or in part after the Effective Time. Nothing in this Section
8.1 shall relieve any party for any breach of any representation, warranty,
covenant or other agreement in this Agreement occurring prior to termination.
8.2 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company and the Merger Sub, but, after any such
approval, no amendment shall be made which by Applicable Law or in accordance
with the rules of any relevant stock exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
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8.3 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
8.4 Notices. All notices and other communications hereunder shall be in
writing (including telecopy or other similar writing) and shall be deemed duly
given (a) on the date of delivery if delivered personally, or by telecopy or
telefacsimile, upon confirmation of receipt, (b) on the first Business Day
following the date of dispatch if delivered by a recognized next-day courier
service, (c) on the tenth Business Day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid or (d) if given by any other means, when received at the address
specified in this Section 8.4, except, in each case, for a notice of a change of
address, which shall be effective only upon receipt thereof. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
(a) If to the Parent or the Merger Sub, to
Oppenheimer Acquisition Corp.
Attn: President
Two World Trade Center
New York, New York 10048-0203
Facsimile: (212) 323-0280
Telephone: (212) 323-0200
with copies to
Oppenheimer Acquisition Corp.
Attn: General Counsel
Two World Trade Center
New York, New York 10048-0203
Facsimile: (212) 321-1159
Telephone: (212) 323-0200
Howard Chatzinoff, Esq.
Jeffrey E. Tabak, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
Facsimile: (212) 310-8007
Telephone: (212) 310-8000
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(b) If to the Company to
Tremont Advisers, Inc.
Attn: President
555 Theodore Fremd Avenue, Suite 206C
Rye, New York 10580
Facsimile: (914) 921-3499
Telephone: (914) 925-1140
with a copy to
Ralph Arditi, Esq.
Russell G. D'Oench, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Facsimile: (212) 735-2000
Telephone: (212) 735-3000
8.5 Interpretation. When a reference is made in this Agreement to
Sections, Annexes or Schedules, such reference shall be to a Section of or Annex
or Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The inclusion of any matter in the Company
Disclosure Schedule or the Parent Disclosure Schedule in connection with any
representation, warranty, covenant or agreement that is qualified as to
materiality or "Material Adverse Effect" shall not be an admission by the party
delivering such disclosure schedule that such matter is material or would
reasonably be expected to have a Material Adverse Effect.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when each party shall have received counterparts hereof
signed by all other parties hereto, it being understood that the parties need
not sign the same counterpart.
8.7 Entire Agreement; Third Party Beneficiaries.
(a) This Agreement together with the Company Disclosure Schedule, the
Parent Disclosure Schedule and Annexes hereto, the Consent and Voting Agreement
and the Confidentiality Agreement constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 5.9 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons).
8.8 Governing Law. This Agreement shall be governed and construed in
accordance with the internal laws of the State of Delaware, without regard to
the principles of conflict of laws thereof.
8.9 Venue. Each party (a) consents to submit itself to the personal
jurisdiction of any federal court or New York State Court located in the state
and city of New York in the event any dispute arises under or relates to this
Agreement or the transaction contemplated herein, (b) agrees it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, including, without limitation, a motion to dismiss on
the grounds of forum non conveniens and (c) agrees that it will not bring any
action arising under or relating to this agreement or the transactions
contemplated herein in any court other than a federal court or New York State
Court sitting in the state and city of New York.
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8.10 Waiver of Jury Trial. Each party acknowledges and agrees that any
controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore it hereby irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any litigation directly or indirectly arising out of or relating to this
Agreement, or the breach, termination or validity of this Agreement, or the
transactions contemplated by this Agreement. Each party certifies and
acknowledges that (a) no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver, (b) it understands
and has considered the implications of this waiver, (c) it makes this waiver
voluntarily and (d) it has been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications in this Section 8.10.
8.11 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Applicable Law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
8.12 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of Applicable Law or otherwise), without
the prior written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void, except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct or indirect wholly owned
Subsidiary of the Parent without the consent of the Company, upon which all
references in this Agreement to Merger Sub shall thereafter be deemed to be
references to such assignee for all purposes under this Agreement. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
8.13 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at Applicable Law or in
equity.
8.14 Other Agreements. The parties hereto acknowledge and agree that,
except as otherwise expressly set forth in this Agreement, the rights and
obligations of the Company and the Parent under any other agreement between the
parties shall not be affected by any provision of this Agreement.
[SIGNATURES BEGIN ON THE NEXT PAGE]
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IN WITNESS WHEREOF, the Parent, the Merger Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first above written.
OPPENHEIMER ACQUISITION CORP.
By:
--------------------------------------
Name: Jeremy Griffiths
Title: Chief Financial Officer and
Treasurer
JOSHUA ACQUISITION CORP.
By:
--------------------------------------
Name: Jeremy Griffiths
Title: Vice President and
Treasurer
TREMONT ADVISERS, INC.
By:
--------------------------------------
Name: Robert I. Schulman
Title: President and Co-Chief
Executive Officer
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APPENDIX B
OPINION OF PUTNAM LOVELL SECURITIES INC.
Board of Directors Tremont Advisers, Inc. July 10, 2001
555 Theodore Fremd Avenue
Rye, NY 10580 CONFIDENTIAL
Ladies and Gentlemen:
We understand that Tremont Advisers, Inc., a Delaware corporation (the
"Company"), and Oppenheimer Acquisition Corp. ("OAC"), a Delaware corporation,
have entered into an Agreement and Plan of Merger dated as of July 10, 2001 (the
"Merger Agreement"), pursuant to which, among other things, the Company will be
merged with and into a wholly-owned subsidiary of OAC (the "Merger") and each
issued and outstanding share of the Class A Common Stock of the Company, $.01
par value per share, and Class B Common Stock of the Company, $.01 par value per
share (together the "Company Common Stock") will be converted into the right to
receive cash in the amount of $19.00 (the "Merger Consideration"). In addition,
each option to acquire shares of Company Common Stock (a "Company Stock Option")
shall be cancelled in exchange for a single lump sum cash payment equal to the
excess, if any, of the Merger Consideration over the exercise price per share of
such Company Stock Option. In certain circumstances, the Merger Consideration is
subject to adjustment as provided in the Merger Agreement.
You have asked for our opinion as to whether the Merger Consideration to be
paid by OAC in the Merger is fair, from a financial point of view, to the
shareholders of the Company.
In connection with rendering our opinion, we have, among other things:
(i) reviewed certain publicly available historical audited and
unaudited financial statements and other information regarding the Company;
(ii) reviewed the financial terms and conditions of the Merger
Agreement;
(iii) reviewed and discussed with management of the Company certain
information of a business and financial nature furnished to us by the
Company including financial analyses and projections of the Company and its
subsidiaries prepared by the management of the Company;
(iv) reviewed certain publicly available information concerning the
trading of, and the trading market for, the Company Common Stock;
(v) compared the financial performance of the Company with certain
other companies in the investment management industry that we deemed to be
relevant;
(vi) considered the financial terms of selected recent business
combinations of companies that we deemed to be comparable, in whole or in
part, to the Merger;
(vii) made inquiries regarding and discussed the Merger and the Merger
Agreement and other matters related thereto with the Company's counsel; and
(viii) performed such other analyses and examinations as we deemed
appropriate.
In preparing our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of the financial and other
information supplied or otherwise made available to us from public sources or by
the Company and have not independently verified such information. We have
neither obtained nor performed any independent valuation or appraisal of the
assets or liabilities of the Company. With respect to the financial projections
and forecasts of the Company provided to us by the Company, we have assumed that
such financial projections and forecasts have been reasonably prepared and
reflect the best currently available estimates and good faith judgments of the
senior management of the Company as to the future competitive, operating and
regulatory environments and related financial performance of the Company. Our
opinion is necessarily based on economic, market and other conditions
THE PARK AVENUE TOWER, 65 EAST 55TH STREET, NEW YORK, NY 10022
108
Board of Directors Tremont Advisers, Inc.
July 10, 2001
Page 2
as in effect on, and the information and agreements (or drafts thereof) made
available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Merger and will receive a fee from the Company for our
services, a significant portion of which is contingent upon the consummation of
the Merger. Putnam Lovell Securities Inc. provides a full range of financial
advisory and securities services and, in the normal course of trading
activities, may from time to time effect transactions in securities of the
Company for the account of customers.
Based upon the foregoing and in reliance thereon, it is our opinion on the
date hereof that the Merger Consideration to be received by the shareholders of
the Company pursuant to the Merger is fair to such shareholders, from a
financial point of view, as of the date hereof.
This opinion is directed to the Board of Directors of the Company in its
consideration of the Merger and is not a recommendation to any shareholder as to
how such shareholder should vote with respect to the Merger. Further, this
opinion does not address the relative merits of the Merger to any alternatives
to the Merger, the Company's decision to proceed or effect the Merger, or any
other aspect of the Merger. This opinion may not be used or referred to by the
Company, or quoted or disclosed to any person in any manner, without our prior
written consent, which consent is hereby given to the inclusion of this opinion
in a proxy statement filed with the Securities and Exchange Commission in
connection with the Merger. In furnishing this opinion, we do not admit that we
are experts within the meaning of the term "experts" as used in the Securities
Act and the rules and regulations promulgated thereunder, nor do we admit that
this opinion constitutes a report or valuation within the meaning of Section 11
of the Securities Act.
Very truly yours,
PUTNAM LOVELL SECURITIES INC.
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109
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
8 Del. C. Section 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to 8 Del. C.
Section 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to 8 Del. C. Section 251 (other than a merger effected
pursuant to 8 Del. C. Section 251 (g) of this title), 8 Del. C. Section 252, 8
Del. C. Section 254, Section 8 Del. C. Section 257, 8 Del. C. Section 258, 8
Del. C. Section 263 or 8 Del. C. Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of 8 Del. C. Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to 8 Del.
C. Section 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof,
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
110
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to 8 Del. C.
Section 228 or 8 Del. C. Section 253 of this title, each constituent
corporation, either before the effective date of the merger or
consolidation or within ten days thereafter, shall notify each of the
holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice
is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all
such holders of any class or series of stock of a constituent corporation
that are entitled to appraisal rights. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the
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facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such stock
holder's demand for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
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112
submitted such stockholder's certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is
finally determined that such stockholder is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
(68 Del. Laws, c. 337, Sections 3, 4; 69 Del. Laws, c. 61, Section 10; 69 Del.
Laws, c. 262, Sections 1-9; 70 Del. Laws, c. 79, Section 16; 70 Del. Laws, c.
186, Section 1; 70 Del. Laws, c. 299, Sections 2, 3; 70 Del. Laws, c. 349,
Section 22; 71 Del. Laws, c. 120, Section 15; 71 Del. Laws, c. 339, Sections
49-52.)
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113
PROXY
TREMONT ADVISERS, INC.
555 THEODORE FREMD AVENUE
RYE, NEW YORK 10580
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 2001
The undersigned hereby appoints Catherine G. Sweeney and Joseph A. Soares, and
each of them, proxies (each with power of substitution) of the undersigned to
attend the above special meeting of stockholders of Tremont Advisers, Inc. at
11:00 a.m., local time, on September 25, 2001, and any adjournment or
postponement thereof (the "Special Meeting"), and thereat to vote all shares of
Class A common stock held by the undersigned, as specified on the reverse side,
and on any other matters that may properly come before said meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IN ADDITION, UPON APPROPRIATE MOTION, THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN FAVOR OF ANY ADJOURNMENT OF THE
SPECIAL MEETING FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES IN ORDER TO
APPROVE THE AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY 10, 2001, AMONG
OPPENHEIMER ACQUISITION CORP., TREMONT ADVISERS, INC. AND JOSHUA ACQUISITION
CORP. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD
OF DIRECTORS OF TREMONT ADVISERS, INC. THE PROXIES CANNOT VOTE YOUR SHARES
UNLESS YOU SIGN AND RETURN THIS CARD.
(CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
114
Votes MUST
be indicated by
a distinct mark /X/
[X] in black or
blue ink.
THE BOARD OF DIRECTORS OF TREMONT RECOMMENDS A VOTE FOR PROPOSAL 1.
1. To adopt the Agreement and Plan of Merger, dated as of July 10, 2001, among
Oppenheimer Acquisition Corp., Tremont Advisers, Inc. and Joshua
Acquisition Corp., as described in the accompanying proxy statement.
FOR / / AGAINST / / ABSTAIN / /
Please sign and date this proxy and
return it in the enclosed return
envelope, whether or not you expect to
attend the Special Meeting. You may also
vote in person if you do attend.
Signature(s)_____________________________________________Date __________________
Note: Please sign exactly as name appears hereon. If shares are held as joint
tenants, both joint tenants should sign. Attorneys-in-fact, executors,
administrators, trustees, guardians, corporate officers or others signing in a
representative capacity should indicate the capacity in which they are signing.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
115
PROXY
TREMONT ADVISERS, INC.
555 THEODORE FREMD AVENUE
RYE, NEW YORK 10580
CLASS B COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 2001
The undersigned hereby appoints Catherine G. Sweeney and Joseph A. Soares, and
each of them, proxies (each with power of substitution) of the undersigned to
attend the above special meeting of stockholders of Tremont Advisers, Inc. at
11:00 a.m., local time, on September 25, 2001, and any adjournment or
postponement thereof (the "Special Meeting"), and thereat to vote all shares of
Class B common stock held by the undersigned, as specified on the reverse side,
and on any other matters that may properly come before said meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IN ADDITION, UPON APPROPRIATE MOTION, THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN FAVOR OF ANY ADJOURNMENT OF THE
SPECIAL MEETING FOR THE PURPOSE OF SOLICITING ADDITIONAL PROXIES IN ORDER TO
APPROVE THE AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY 10, 2001, AMONG
OPPENHEIMER ACQUISITION CORP., TREMONT ADVISERS, INC. AND JOSHUA ACQUISITION
CORP. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD
OF DIRECTORS OF TREMONT ADVISERS, INC. THE PROXIES CANNOT VOTE YOUR SHARES
UNLESS YOU SIGN AND RETURN THIS CARD.
(CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
116
Votes MUST
be indicated by
a distinct mark /X/
[X] in black or
blue ink.
THE BOARD OF DIRECTORS OF TREMONT RECOMMENDS A VOTE FOR PROPOSAL 1.
1. To adopt the Agreement and Plan of Merger, dated as of July 10, 2001, among
Oppenheimer Acquisition Corp., Tremont Advisers, Inc. and Joshua
Acquisition Corp., as described in the accompanying proxy statement.
FOR / / AGAINST / / ABSTAIN / /
Please sign and date this proxy and
return it in the enclosed return
envelope, whether or not you expect to
attend the Special Meeting. You may also
vote in person if you do attend.
Signature(s)_____________________________________________Date __________________
Note: Please sign exactly as name appears hereon. If shares are held as joint
tenants, both joint tenants should sign. Attorneys-in-fact, executors,
administrators, trustees, guardians, corporate officers or others signing in a
representative capacity should indicate the capacity in which they are signing.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -