1
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
2
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 10, 2001
among
XXXXXXXXXXX ACQUISITION CORP.,
XXXXXX ACQUISITION CORP.
and
TREMONT ADVISERS, INC.
3
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 10, 2001 (this
"Agreement"), among XXXXXXXXXXX ACQUISITION CORP., a Delaware corporation (the
"Parent"), XXXXXX 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:
4
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.
"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
2
5
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).
"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.
3
6
"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 Xxxxxx Xxxxxx 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.
4
7
"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.
"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 Xxx 0000, 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
5
8
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 Xxxxx-Xxxxx-Xxxxxx Act.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx 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.
"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.
6
9
"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.
7
10
"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
(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
8
11
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.
"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
9
12
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.
10
13
"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.
"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 & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, 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
11
14
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
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
12
15
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
13
16
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 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.
14
17
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".
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.
15
18
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 Xxxxx'x 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 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
16
19
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
17
20
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.
(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
18
21
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.
(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
19
22
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
20
23
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,
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
21
24
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.
(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
22
25
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 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
23
26
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.
24
27
(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,
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
25
28
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
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,
26
29
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
27
30
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;
(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;
28
31
(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 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
29
32
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
30
33
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 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).
31
34
(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.
(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
32
35
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
33
36
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.
(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
34
37
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 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.
35
38
(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
36
39
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(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
37
40
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.
(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,
38
41
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.
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:
39
42
(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
40
43
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
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
41
44
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.
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
42
45
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
43
46
into any agreement with respect to any ownership interests, 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 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
44
47
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 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.
45
48
(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.
(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:
46
49
(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).
47
50
(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 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
48
51
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
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,
49
52
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.
50
53
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 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).
51
54
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
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
52
55
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
53
56
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 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
54
57
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 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
55
58
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).
(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.
56
59
(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
57
60
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 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.
58
61
(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.
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.
59
62
(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;
60
63
(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 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
61
64
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.
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
62
65
(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.
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
63
66
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
Xxxxxxxxxxx Acquisition Corp.
Attn: President
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copies to
Xxxxxxxxxxx Acquisition Corp.
Attn: General Counsel
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxx Xxxxxxxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
64
67
(b) If to the Company to
Tremont Advisers, Inc.
Attn: President
000 Xxxxxxxx Xxxxx Xxxxxx, Xxxxx 000X
Xxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to
Xxxxx Xxxxxx, Esq.
Xxxxxxx X. D'Oench, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
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.
65
68
(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.
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.
66
69
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]
67
70
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.
XXXXXXXXXXX ACQUISITION CORP.
By:
-----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Chief Financial Officer and
Treasurer
XXXXXX ACQUISITION CORP.
By:
-----------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President and Treasurer
TREMONT ADVISERS, INC.
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President and Co-Chief
Executive Officer
71
SCHEDULE I
LIST OF COMPANY STOCKHOLDERS
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxxx
Xxxxxx Xxxxxx
Xxxxx X. Xxxxx
Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxx X. Xxxxxx, Xx.
Xxxxx X. Xxxxxx
Xxxx Xxxxx
Legion Insurance Company
72
SCHEDULE II
REVENUE RUN-RATE METHODOLOGY
73
SCHEDULE III
PRO FORMA BALANCE SHEET
74
SCHEDULE 5.10-1
Retention Plan:
75
SCHEDULE 5.10-2
Bonus Pool:
A Bonus Pool of up to twenty-two and one half percent (22.5%)
of the annual EBIDTA of the Surviving Corporation will be established for
calendar year 2002 and beyond consistent with Parent's overall bonus
arrangements. SAR expenses related to Parent options granted to employees of the
Surviving Corporation shall, unless otherwise determined by the Board of the
Surviving Corporation, be charged to the Bonus Pool. Management of the Surviving
Corporation may make recommendations for employee bonuses, however, all
determinations with respect to the Bonus Pool and payments thereof will be made
by the Board of the Surviving Corporation or a committee thereof. To be eligible
for payment of a bonus, employees of the Surviving Corporation must be full time
employees at the time the bonus is paid. The Board of the Corporation may
combine the Bonus Pool with the Bonus Pool of the Parent.
76
SCHEDULE 6.1(c)
1. NASD to the change of control of TSI
2. SFA to the change of control of TTEL
3. Ontario Securities Commission to the change of control of TIMI