<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934.
-----
For the quarterly period ended October 31, 1995
----------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
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For the transition period from _________ to __________
Commission file number: 1-9597
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OPPENHEIMER CAPITAL, L.P.
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3412614
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
OPPENHEIMER TOWER
WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281
- ------------------------------------------- -----------
(Address of principal executive office) (Zip Code)
(212) 667-7000
---------------------------------------------------
(Registrant's telephone number including area code)
NOT APPLICABLE
--------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The issuer is a Limited Partnership. There were 15,242,870 Units of
limited partnership interest outstanding at December 10, 1995.
<PAGE>
OPPENHEIMER CAPITAL, L.P.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION 3
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME 4
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS 5
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS 6
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 8
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME 9
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS 10
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
PART II - OTHER INFORMATION 18
SIGNATURES 19
- 2 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
October 31, 1995 April 30, 1995
----------------------- -------------------
ASSETS
<S> <C> <C>
Cash and short-term investments $ 10 $ 60
Investment in Oppenheimer Capital 12,517 9,707
Distribution receivable (Note 3) 8,875 9,545
10% Note due 2012 from Oppenheimer Equities, Inc. 32,193 32,193
Interest receivable 538 538
Other assets 134 109
Goodwill, net 43,177 44,481
----------------------- -------------------
TOTAL ASSETS $ 97,444 $ 96,633
======================= ===================
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
Distribution payable to partners $ 9,623 $ 10,321
----------------------- -------------------
TOTAL LIABILITIES 9,623 10,321
----------------------- -------------------
General partner's capital 892 876
Limited partners' capital; 15,242,870 and 15,136,837
Units outstanding, respectively 86,929 85,436
----------------------- --------------------
TOTAL PARTNERS' CAPITAL 87,821 86,312
----------------------- --------------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 97,444 $ 96,633
======================= ====================
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME
(In Thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
------------------------- ------------------------
1995 1994 1995 1994
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Equity in earnings of Oppenheimer Capital $ 9,715 $ 8,204 $ 18,764 $ 16,244
Interest 812 813 1,625 1,626
----------- ---------- ----------- ----------
TOTAL REVENUES 10,527 9,017 20,389 17,870
----------- ---------- ----------- ----------
EXPENSES
Amortization of goodwill 652 652 1,304 1,304
Other expenses (Note 4) 34 396 67 721
----------- ---------- ----------- ----------
TOTAL EXPENSES 686 1,048 1,371 2,025
----------- ---------- ----------- ----------
NET INCOME $ 9,841 $ 7,969 $ 19,018 $ 15,845
=========== ========== =========== ==========
NET INCOME PER UNIT (NOTE 5) $ .64 $ .52 $ 1.24 $ 1.04
=========== ========== =========== ==========
DISTRIBUTIONS DECLARED PER UNIT $ .625 $ .50 $ 1.175 $ 1.00
=========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
- 4 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
October 31,
-----------------------------
1995 1994
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 19,018 $ 15,845
Adjustments to reconcile net income to net cash provided
by operating activities:
Distributions received in excess of (less than) equity in
earnings of Oppenheimer Capital (1,563) 786
Amortization of goodwill 1,304 1,304
(Increase) in other assets (25) -
Increase in accrued expenses and other liabilities - 41
------------- -------------
Net cash provided by operating activities 18,734 17,976
------------- -------------
Cash flows from investing activities
Capital contributions to Oppenheimer Capital (48) (86)
------------- -------------
Cash flows from financing activities
Distributions to partners:
General partner (188) (180)
Limited partners (18,596) (17,783)
Issuance of limited partnership units on exercise of
restricted options 48 86
------------- -------------
Net cash (used in) financing activities (18,736) (17,877)
------------- -------------
Net (decrease) increase in cash and short term investments (50) 13
Cash and short term investments at beginning of period 60 75
------------- -------------
Cash and short term investments at end of period $ 10 $ 88
============= =============
Supplemental disclosure of cash flow information:
New York City unincorporated business taxes paid $ 90 $ 680
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
- 5 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital, L.P. (the "Partnership") holds a 67.30% general
partnership interest in Oppenheimer Capital (the "Operating Partnership"),
a general partnership. The Partnership (through the Operating Partnership)
engages in the investment management business. The limited partners and
Oppenheimer Financial Corp., the Partnership's general partner (the "General
Partner"), hold a 99% interest and 1% interest, respectively, in the
Partnership.
The financial statements of the Partnership should be read in
conjunction with the consolidated financial statements of the Operating
Partnership.
The Operating Partnership is part of an affiliated group of
companies operating in the financial services industry.
2. Basis of Presentation:
The interim financial information in this report has not been audited.
The financial statements should be read in conjunction with the financial
statements included in the Partnership's 1995 Annual Report. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position and results of operations
for all periods presented have been made. The results of operations for any
interim period are not necessarily indicative of the operating results for a
full year.
3. Distribution Receivable:
On October 31, 1995, the Operating Partnership declared distributions
to its partners, payable on November 30, 1995, of which $8,875,000 was received
by the Partnership.
4. Other Expenses:
Other expenses consist of New York City unincorporated business tax
("UBT") at a rate of 4% of taxable income. The decline in New York City UBT is
due to a change in the tax law effective January 1, 1995. After that date, the
New York City UBT is imposed on the total income of the Operating Partnership
and the Partnership is allowed to claim a credit for its pro rata share of any
New York City UBT paid by the Operating Partnership.
The Partnership is not otherwise subject to Federal, state or local
income taxes which are instead obligations of the individual partners. However,
under current tax law the Partnership will be taxable as a corporation
beginning in 1998.
- 6 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
5. Net Income Per Unit:
(In thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
-------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------- ----------
<S> <C> <C> <C> <C>
Net Income $ 9,841 $ 7,969 $ 19,018 $ 15,845
Less 1% applicable to the General Partner 98 80 190 158
------------ ------------ ------------- ----------
Net income available to the Limited Partners $ 9,743 $ 7,889 $ 18,828 $ 15,687
============ ============ ============= ==========
Weighted average number of units outstanding 15,240 15,137 15,237 15,136
============ ============ ============= ==========
Net income per unit $ .64 $ .52 $ 1.24 $ 1.04
============ ============ ============= ==========
</TABLE>
6. Subsequent Event
On November 22, 1995, the Operating Partnership completed the sale of
the investment advisory and other contracts and business relationships for
its twelve Quest for Value mutual funds to Oppenheimer Management Corporation
("OMC"), which is unrelated to the Operating Partnership, for a price of
$41.7 million. An additional purchase price payment of up to $1.8 million may
be received by the Operating Partnership on the first anniversary of the closing
if the assets of the six merged fixed income funds are then at stated levels.
Total assets of the twelve funds were $1.7 billion at November 21, 1995.
The six equity funds involved, representing $1.4 billion of those assets,
will continue to be managed by Opcap Advisors (formerly Quest for Value
Advisors), an affiliated investment adviser, under a subadvisory contract
with OMC, which will allow the current portfolio management teams to remain
in place. The six fixed income funds, representing approximately $300 million
of those assets, have been merged into comparable funds managed by OMC.
- 7 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
October 31, 1995 April 30, 1995
------------------- ------------------
<S> <C> <C>
ASSETS
Cash and short-term investments $ 7,937 $ 9,214
Investment management fees receivable 35,404 33,177
Furniture, equipment and leasehold improvements
at cost, less accumulated depreciation and
amortization of $2,221 and $1,867 3,557 3,733
Intangible assets, less accumulated amortization
of $513 and $395 3,158 3,012
Investments in affiliated mutual funds and other
sponsored investment products 5,638 2,887
Other assets (Note 6) 6,593 4,106
------------------- ------------------
TOTAL ASSETS $ 62,287 $ 56,129
=================== ==================
<CAPTION>
LIABILITIES, MINORITY INTEREST AND PARTNERS' CAPITAL
<S> <C> <C>
Accrued employee compensation and benefits $ 11,387 $ 8,324
Accrued expenses and other liabilities 5,658 6,878
Note payable 800 1,200
Loan payable to bank 10,187 9,182
Deferred investment management fees 2,315 1,716
Distribution payable to partners 13,187 14,282
------------------- ------------------
TOTAL LIABILITIES 43,534 41,582
------------------- ------------------
Minority interest 154 87
PARTNERS' CAPITAL 18,599 14,460
------------------- ------------------
TOTAL LIABILITIES , MINORITY INTEREST
AND PARTNERS' CAPITAL $ 62,287 $ 56,129
=================== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
- 8 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Investment management fees $ 38,207 $ 30,232 $ 73,867 $ 60,254
Net distribution assistance and commission income 1,026 1,725 2,082 3,205
Interest and dividends 82 60 184 105
----------- ----------- ------------- -----------
TOTAL OPERATING REVENUES 39,315 32,017 76,133 63,564
----------- ----------- ------------- -----------
OPERATING EXPENSES
Compensation and benefits 17,428 13,682 33,807 27,012
Occupancy 1,745 1,642 3,414 3,267
General and administrative 2,952 1,810 5,581 4,027
Promotional 2,022 2,687 4,131 5,126
----------- ----------- ------------- -----------
TOTAL OPERATING EXPENSES 24,147 19,821 46,933 39,432
----------- ----------- ------------- -----------
OPERATING INCOME 15,168 12,196 29,200 24,132
Income taxes (Note 3) (682) (450) (1,233) (590)
----------- ----------- ------------- -----------
INCOME BEFORE MINORITY INTEREST 14,486 11,746 27,967 23,542
Minority interest (51) 24 (83) 63
----------- ----------- ------------- -----------
NET INCOME $ 14,435 $ 11,770 $ 27,884 $ 23,605
=========== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 9 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
October 31,
--------------------------
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 27,884 $ 23,605
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of restricted unit compensation expense 759 640
Depreciation and amortization 472 574
Minority interest, net of distributions 67 449
(Increase) decrease in:
Investment management fees receivable (2,227) (1,260)
Other assets (2,865) (2,652)
Increase (decrease) in:
Accrued employee compensation and benefits 3,063 1,201
Accrued expenses and other liabilities (1,220) 857
Deferred investment management fees 599 (51)
----------- ------------
Net cash provided by operating activities 26,532 23,363
----------- ------------
Cash flows from investing activities
Purchases of fixed assets (178) (670)
Intangible assets resulting from acquisitions - (2,129)
Proceeds from sales of mutual fund shares and other investments 399 -
Purchases of mutual fund shares and other investments (3,025) (436)
----------- -----------
Net cash (used in) investing activities (2,804) (3,235)
----------- -----------
Cash flows from financing activities
Net proceeds from bank loans 1,005 7,300
Issuance of note payable - 1,200
Payment of note payable (400) -
Distributions to partners:
Oppenheimer Financial Corp. (8,458) (8,197)
Oppenheimer Capital, L.P. (17,200) (17,030)
Contributions by Oppenheimer Capital, L.P. 48 86
---------- -----------
Net cash (used in) financing activities (25,005) (16,641)
---------- -----------
Net increase (decrease) in cash and short term investments (1,277) 3,487
Cash and short term investments at beginning of period 9,214 3,702
---------- -----------
Cash and short term investments at end of period $ 7,937 $ 7,189
========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 492 $ 239
========== ===========
New York City unincorporated business taxes paid $ 1,060 $ 525
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 10 -
<PAGE>
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital (the "Operating Partnership"), a general partnership,
engages in the investment management business. Oppenheimer Capital, L.P.
(the "Partnership") holds a 67.30% general partnership interest in the Operating
Partnership and Oppenheimer Financial Corp. ("Opfin") holds the remaining
32.70% general partnership interest. The Operating Partnership is part of
an affiliated group of companies operating in the financial services industry.
2. Basis of Presentation:
The interim financial information in this report has not been audited.
The financial statements should be read in conjunction with the financial
statements included in the Partnership's 1995 Annual Report. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position and results of operations
for all periods presented have been made. The results of operations for any
interim period are not necessarily indicative of the operating results for a
full year.
3. Income Taxes:
Although the Operating Partnership is not otherwise subject to Federal,
state or local income taxes, it was subject to New York City unincorporated
business tax ("UBT") of $682,000 and $1,233,000, respectively, for the three
months and six months ended October 31, 1995 and $450,000 and $590,000,
respectively, for the three months and six months ended October 31, 1994.
The increase in New York City UBT is due to a change in the tax law effective
January 1, 1995. After that date, the New York City UBT is imposed on the
total income of the Operating Partnership and the Partnership is allowed
to claim a credit for its pro rata share of any New York City UBT paid by the
Operating Partnership.
4. Acquisitions of Businesses:
In May, 1994, a subsidiary of the American Medical Association ("AMA")
and the Operating Partnership formed AMA Investment Advisers, L.P. to acquire
the assets of AMA Investment Advisers, Inc. and American Medical Investment
Company, Inc. The Operating Partnership and Opfin acquired a 79.1% and 1.0%
partnership interest, respectively, for their pro rata portions of $500,000
and a $1,200,000 promissory note bearing interest at the prime rate. On
May 1, 1995, $400,000 was paid on the promissory note, with the remainder
due in two equal installments of $400,000 on May 1, 1996 and May 1, 1997. AMA
Investment Advisers, L.P. and its subsidiary offer investment services and
products tailored especially for members of the AMA, other health care
professionals and medical organizations.
On May 1, 1994, the Operating Partnership acquired Liberty Street Trust
Company from Oppenheimer Holdings, Inc., an affiliate, for its net book value
of approximately $1,629,000 and renamed it Oppenheimer Capital Trust Company.
This company offers collectively-managed portfolios of specialized asset
classes.
On May 10, 1994, the Operating Partnership formed Saratoga Capital
Management, a joint venture, to provide asset allocation services to
broker-dealers utilizing mutual funds managed by independent investment
advisers and Opcap Advisors (formerly Quest for Value Advisors), an affiliated
investment adviser.
5. Prior Period Financial Information:
Certain prior period financial information has been reclassified to
conform with the current period presentation.
- 11 -
<PAGE>
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Other Assets:
Included in other assets is an investment in Orange County securities.
On December 7, 1994, in response to the bankruptcy filing by Orange County,
California, the Operating Partnership voluntarily purchased $2,000,000
principal amount at par of Orange County Tax and Revenue Anticipation Notes
from a mutual fund for which Opcap Advisors acts as the sole investment adviser.
This investment is being recorded at the market value. In February 1995,
the Operating Partnership sold a total of $1,000,000 principal amount of the
Orange County Tax and Revenue Anticipation Notes and realized a loss of
approximately $100,000. The remaining principal amount was sold on
November 2, 1995 and the Operating Partnership realized an additional loss
of approximately $60,000.
7. Restricted Unit Plan and Restricted Option Plan
On August 15, 1995, the Board of Directors of Opfin approved (i)
the extension of the term of the Restricted Unit Plan and the Restricted
Option Plan (the "Plans"), effective as of July 9, 1994, until July 9, 1999
or until such earlier time as the units authorized for issuance under the
Plans have been granted and have been vested, and (ii) an increase in the
aggregate number of units authorized for issuance under the Plans to
2,475,000.
8. Subsequent Event
On November 22, 1995, the Operating Partnership completed the sale
of the investment advisory and other contracts and business relationships
for its twelve Quest for Value mutual funds to Oppenheimer Management
Corporation ("OMC"), which is unrelated to the Operating Partnership,
for a price of $41.7 million. An additional purchase price payment of up
to $1.8 million may be received by the Operating Partnership on the first
anniversary of the closing if the assets of the six merged fixed income funds
are then at stated levels.
Total assets of the twelve funds were $1.7 billion at November 21, 1995.
The six equity funds involved, representing $1.4 billion of those assets,
will continue to be managed by Opcap Advisors under a subadvisory contract
with OMC, which will allow the current portfolio management teams to remain
in place. The six fixed income funds, representing approximately $300 million
of those assets, have been merged into comparable funds managed by OMC.
- 12 -
<PAGE>
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPPENHEIMER CAPITAL, L.P.
General
The primary sources of income for Oppenheimer Capital, L.P. ( the
"Partnership") are its proportionate share of the net income of Oppenheimer
Capital (the "Operating Partnership") and interest income on a $32,193,000
par value 10% note due 2012 from Oppenheimer Equities, Inc. ("Equities"),
an affiliate.
Revenues and Expenses
The Partnership recorded equity in earnings of the Operating
Partnership for the three months ended October 31, 1995 and October 31, 1994
of $9,715,000 and $8,204,000, respectively. For the six months ended
October 31, 1995 and October 31, 1994, the Partnership recorded equity in
earnings of the Operating Partnership of $18,764,000 and $16,244,000,
respectively.
Other expenses consist of New York City unincorporated business tax
("UBT"). For the three months ended October 31, 1995 and October 31, 1994, New
York City UBT totaled $34,000 and $396,000, respectively, and for the six
months ended October 31, 1995 and October 31, 1994, New York City UBT
totaled $67,000 and $721,000, respectively. The decline in New York City
UBT is due to a change in the tax law effective January 1, 1995. After that
date, the New York City UBT is imposed on the total income of the Operating
Partnership and the Partnership is allowed to claim a credit for its pro rata
share of any New York City UBT paid by the Operating Partnership.
Net income for the three months ended October 31, 1995 and October 31,
1994 amounted to $9,841,000 and $7,969,000, respectively, or $.64 per unit
and $.52 per unit, respectively. Net income for the six months ended October 31,
1995 and October 31, 1994 amounted to $19,018,000 and $15,845,000,
respectively, or $1.24 per unit and $1.04 per unit, respectively.
Liquidity and Capital Resources
The only business activity carried on by the Partnership is
its investment in the Operating Partnership. The Partnership receives
quarterly cash distributions from the Operating Partnership and receives
interest income from Equities. Available cash flow, which equals cash
distributions from the Operating Partnership plus interest income from the
Equities note less New York City UBT, is distributed by the Partnership to its
partners. Consequently, the Partnership does not require any additional
liquidity or capital resources.
The Partnership makes quarterly distributions in an amount equal to
99% of available cash flow to the limited partners (the "Unitholders") and 1%
to the general partner, Oppenheimer Financial Corp. ("Opfin"). For the three
and six months ended October 31, 1995, the Partnership declared distributions
to Unitholders of $.625 per unit and $1.175 per unit, respectively. The
Partnership intends to make a special distribution of part of the net gain
on the sale to Oppenheimer Management Corporation ("OMC") of the investment
advisory business with respect to the Operating Partnership's Quest for Value
Funds.
- 13 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL
General
The Operating Partnership's results of operations include those of
its basic institutional investment management business and those of Opcap
Advisors (formerly Quest For Value Advisors), OCC Distributors (formerly
Quest For Value Distributors), Oppenheimer Capital Futures Management,
Oppenheimer Capital Limited, AMA Investment Advisers, L.P., American Medical
Investment Co., L.P. ("Amico"), Oppenheimer Capital Trust Company and
Saratoga Capital Management.
For the periods presented, the Operating Partnership's operations
have been characterized by increases in assets under management. This growth
has been from three principal sources. First, new clients have entered into
investment management agreements with the Operating Partnership and existing
clients have added funds to their accounts under management. Second, rising
securities price levels have increased the market values of investment
portfolios. Third, mutual funds managed by Opcap Advisors have added to
assets under management. Revenues are generally derived from charging a fee
based on the net assets of clients' portfolios. Revenues for all periods
presented consist principally of investment management fees.
The value of assets under management increased 25.7% to $36.8
billion at October 31, 1995 from $29.2 billion at October 31, 1994.
Institutional and private account assets under management increased 23.2% to
$29.3 billion from $23.8 billion. Mutual fund assets under management
increased 36.3% to $7.5 billion from $5.4 billion for the same period.
Revenues
Total operating revenues increased 22.8% for the three months ended
October 31, 1995 to $39,315,000 from $32,017,000 for the three months ended
October 31, 1994 and increased 19.8% for the six months ended October 31,
1995 to $76,133,000 from $63,564,000 for the six months ended October 31, 1994.
Total operating revenues include investment management fees, net distribution
assistance and commission income, and interest and dividends.
Investment management fees increased 26.4% for the three months
ended October 31, 1995 to $38,207,000 from $30,232,000 for the three months
ended October 31, 1994 as average assets under management for the three
months ended October 31, 1995 increased 23.0% to $36.4 billion from $29.6
billion for the three months ended October 31, 1994. Investment management
fees increased 22.6% for the six months ended October 31, 1995 to
$73,867,000 from $60,254,000 for the six months ended October 31, 1994 as
average assets under management for the six months ended October 31, 1995
increased 18.7% to $35.0 billion from $29.5 billion for the six months ended
October 31, 1994. In addition, investment management fees increased
due to higher fee realizations resulting from a shift in the asset mix toward
higher effective fee rate businesses, including mutual funds, variable
annuities and wrap fee accounts. The above increase was offset in part
by lower performance fees recorded during the current fiscal year.
Net distribution assistance and commission income decreased 40.5%
to $1,026,000 for the three months ended October 31, 1995 from $1,725,000
for the three months ended October 31, 1994, and decreased 35.4% to
$2,082,000 for the six months ended October 31, 1995 from $3,205,000 for the
six months ended October 31, 1994. These decreases reflect lower certificate
of deposit commission income resulting from less demand for funds by banks,
and were partially offset by increased unit investment trust commission
income due to increased sales of unit investment trusts.
- 14 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Expenses
Total expenses increased 21.8% for the three months ended
October 31, 1995 to $24,147,000 from $19,821,000 for the three months ended
October 31, 1994 and increased 19.0% for the six months ended October 31, 1995
to $46,933,000 from $39,432,000 for the six months ended October 31, 1994.
For both periods presented, the increase in expenses reflected the expansion
of the Operating Partnership's business, including new businesses, products
and services, including Oppenheimer Capital Trust Company, Saratoga Capital
Management, and our International, Wrap Fee, and Unit Investment Trust
divisions. In order to service an expanding institutional investment
management business, the Operating Partnership added to its client service
staff. To increase efforts to obtain new institutional business, additional
marketing and support staff was added. In addition, the international
division continued to expand with additional portfolio managers,
researchers, and support staff. As a result of the expansion outlined above,
staff support services such as Information Systems, Legal, Accounting and
Human Resources were expanded. These increases were offset in part by staff
reductions at OCC Distributors, AMA Investment Advisers and in mutual fund
accounting.
As a result of the sale of the investment advisory and other
contracts for the twelve Quest for Value mutual funds, there will continue to
be a reduction of staff at OCC Distributors. However, to support the growth
in some of our newer businesses and the increase in the number of accounts
serviced in our core business, we will continue to add staff to these areas.
The major category of expense of the Operating Partnership is
employee compensation and benefits. Compensation and benefits expense
increased 27.4% for the three months ended October 31, 1995 to $17,428,000 from
$13,682,000 for the three months ended October 31, 1994 and increased 25.2%
for the six months ended October 31, 1995 to $33,807,000 from $27,012,000 for
the six months ended October 31, 1994. Compensation and benefits expense
increased due to additions to staff in the new businesses entered into
during the past year and in the core investment management business, and
was offset in part by staff reductions at OCC Distributors, AMA Investment
Advisers and in mutual fund accounting. Compensation and benefits expense
also increased due to staff salary increases. In addition, compensation and
benefits increased as a result of higher incentive compensation costs due to
increased new business, higher operating profits and increased participation
by key executives in incentive compensation plans as a result of their
individual contribution to firm profitability.
Occupancy expenses increased 6.3% for the three months ended
October 31, 1995 to $1,745,000 from $1,642,000 for the three months ended
October 31, 1994 and increased 4.5% for the six months ended October 31, 1995
to $3,414,000 from $3,267,000 for the six months ended October 31, 1994.
The slight increases reflected increased amortization expense relating to
leasehold improvements made during the past year.
General and administrative expenses increased 63.1% for the three
months ended October 31, 1995 to $2,952,000 from $1,810,000 for the three
months ended October 31, 1994. For the six months ended October 31, 1995,
general and administrative expenses increased 38.6% to $5,581,000 from
$4,027,000 for the six months ended October 31, 1994. For both the three and
six months ended October 31, 1995, general and administrative expenses
increased as a result of costs incurred in connection with the development
of new businesses and increased activities in traditional businesses of the
Operating Partnership. This increase reflected increased investments in
computer equipment and software, higher professional services expenses due
to the expansion of the Operating Partnership's business, and higher interest
expense due to higher average bank borrowings.
Promotional expenses decreased 24.8% for the three months ended
October 31, 1995 to $2,022,000 from $2,687,000 for the three months ended
October 31, 1994 and decreased 19.4% for the six months ended October 31,
1995 to $4,131,000 from $5,126,000 for the six months ended October 31,
1994. The decrease in promotional expenses was due primarily to a reduction
in promotional expenses incurred by OCC Distributors and was offset in part
by increased expenses in the Operating Partnership's new businesses due
to increased staff size and increased new business.
- 15-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Income
Operating income for the three months ended October 31, 1995
increased 24.4% to $15,168,000 from $12,196,000 for the three months ended
October 31, 1994 and increased 21.0% for the six months ended October 31, 1995
to $29,200,000 from $24,132,000 for the six months ended October 31, 1994. The
increase in operating income was a result of greater increases in operating
revenues than in operating expenses as described above.
Income Taxes
The Operating Partnership is not subject to Federal, state, or
local income taxes, which are the obligations of the individual partners.
The Operating Partnership, however, was subject to New York City UBT of
$682,000 and $1,233,000, respectively, for the three months and six months
ended October 31, 1995 and $450,000 and $590,000, respectively, for the three
months and six months ended October 31, 1994. The increase in New York City UBT
is due to a change in the tax law effective January 1, 1995. After that date,
the New York City UBT is imposed on the total income of the Operating
Partnership and the Partnership is allowed to claim a credit for its pro rata
share of any New York City UBT paid by the Operating Partnership.
Liquidity and Capital Resources
The Operating Partnership has established a $20 million credit
facility with a commercial bank to meet operating and financing needs. These
funds have currently been used to support increased management fees
receivable, to expand its facilities to accommodate the growth of its business
and to finance acquisitions.
The Operating Partnership also entered into an agreement with a
commercial bank to sell the right to receive 12b-1 fees and contingent
deferred sales charges from the sale of Class B shares of the Quest for Value
Family of Funds as a means to raise funds for the payment of commissions paid
to brokers associated with the sale of Class B shares. As a result of the sale
to Oppenheimer Management Corporation ("OMC") of the investment advisory and
other contracts and business relationships for the twelve Quest for Value mutual
funds this agreement was canceled.
The Operating Partnership intends to distribute on a quarterly basis
substantially all its net income to the Partnership and to Opfin. The
Operating Partnership may distribute to the Partnership and to Opfin excess
cash, taking into account the Operating Partnership's financial condition,
results of operations, cash requirements and general economic conditions.
On October 31, 1995, the Operating Partnership declared a distribution
to its partners of $13,187,000, payable on November 30, 1995.
The Operating Partnership has two broker-dealer subpartnerships,
OCC Distributors and Amico, both of which are subject to the rules and
regulations of the Securities and Exchange Commission, which require the
maintenance of minimum net capital. For the six months ended October
31, 1995, these broker-dealer subpartnerships met these minimum net capital
requirements.
Subsequent Event
On November 22, 1995, the Operating Partnership completed the sale of
the investment advisory and other contracts and business relationships for
its twelve Quest for Value mutual funds to Oppenheimer Management
Corporation ("OMC"), which is unrelated to the Operating Partnership,
for a price of $41.7 million. An additional purchase price payment of up
to $1.8 million may be received by the Operating Partnership on the first
anniversary of the closing if the assets of the six merged fixed income funds
are then at stated levels.
- 16 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Subsequent Event (Continued)
Total assets of the twelve funds were $1.7 billion at November 21,
1995. The six equity funds involved, representing $1.4 billion of those
assets, will continue to be managed by Opcap Advisors (formerly Quest for
Value Advisors), an affiliated investment adviser, under a subadvisory
contract with OMC, which will allow the current portfolio management teams to
remain in place. The six fixed income funds, representing approximately
$300 million of those assets, have been merged into comparable funds managed by
OMC.
Annual sub-advisory fees related to these six equity funds are
projected at $5.5 million annually, based on assets under management as of
November 21, 1995, down from the previous $15.7 million for the twelve Quest
for Value Funds. This decrease in revenues is expected to be offset by
cost reductions related to mutual fund distribution efforts. The Operating
Partnership had already implemented a portion of these cost reductions in
anticipation of the sale; these reductions are reflected in the Operating
Partnership's second fiscal quarter results. Now that the sale is completed,
costs will be reduced further as the Operating Partnership withdraws from the
mutual fund distribution business. In addition, as a result of the sale,
significant expenditures that would have been made in systems, technology,
sales and marketing capabilities, and new product development will not be
made. These savings will emerge over time.
The Operating Partnership intends to declare a special distribution
of part of the net gain of the above transaction and to retain the remainder
for operating and financing needs.
- 17 -
<PAGE>
Part II. Other Information
Items 1-5. Not applicable.
Item 6. (a) The Partnership filed a Form 8-K on August 30, 1995 to
disclose the definitive agreement between Oppenheimer
Management Corporation and the Operating Partnership
regarding the sale of the investment advisory and other
contracts and business relationships of twelve of the
Operating Partnership's Quest for Value Funds.
(b) The following exhibits are required by Item 601 of
Regulation S-K and are filed herewith:
(10.1) Acquisition Agreement dated August 17, 1995 among
Oppenheimer Capital, Quest for Value Advisors,
Quest for Value Distributors and Oppenheimer
Management Corporation.
(27) Financial data schedule.
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Oppenheimer Capital, L.P.
By: Oppenheimer Financial Corp.,
its General Partner
Date: December 10, 1995 By: /s/ Joseph M. La Motta
-----------------------------------------
Joseph M. La Motta
Executive Vice President and Director
of Oppenheimer Financial Corp.;
President and Chief Executive Officer
of Oppenheimer Capital
By: /s/ Sheldon M.Siegel
-----------------------------------------
Sheldon M. Siegel
Managing Director and Chief Financial
Officer of Oppenheimer Capital
- 19 -
<PAGE>
ACQUISITION AGREEMENT
among
OPPENHEIMER MANAGEMENT CORPORATION,
QUEST FOR VALUE ADVISORS,
QUEST FOR VALUE DISTRIBUTORS,
and
OPPENHEIMER CAPITAL
----------
August 17, 1995
<PAGE>
Table of Contents
Page
----
1. Purchase and Sale of Assets....................................... 1
2. Assets and Liabilities............................................ 2
2.1 Sale of Assets. ........................................ 2
2.2 Liabilities Assumed by the Buyer. ...................... 2
2.3 Liabilities Not Assumed by the Buyer. .................. 3
2.4 Discharge of the Sellers' Obligations. ................. 3
3. Purchase Price and the Closing.................................... 3
3.1 Purchase Price........................................... 3
3.2 Agreement Not to Compete. .............................. 6
3.3 Subadvisory Agreements. ................................. 6
3.4 License Agreements. .................................... 6
3.5 Citibank Arrangement. .................................. 6
3.6 Closing.................................................. 6
4. Distribution Assistance. ........................................ 7
5. Representations and Warranties of the Sellers. .................. 7
5.1 Due Incorporation and Qualification. ................... 7
5.2 Certain Financial Data................................... 7
5.3 No Material Adverse Change. ............................ 7
5.4 Compliance with Laws. ................................... 8
5.5 Authority to Execute and Perform Agreements. ............ 9
5.6 No Defaults Under Agreements. .......................... 10
5.7 Litigation............................................... 10
5.8 Agreements. ............................................. 10
5.9 Beneficial Ownership. ................................... 11
5.10 Intangible Property...................................... 11
5.11 Liens. .................................................. 11
5.12 Acquired Funds. ........................................ 11
5.13 Insurance................................................ 11
5.14 Operations of the Sellers. ............................. 12
5.15 No Broker. .............................................. 12
<PAGE>
Page
----
6. Representations and Warranties of the Buyer. .................... 13
6.1 Due Incorporation. ..................................... 13
6.2 Corporate Power of the Buyer............................. 13
6.3 Compliance with Laws..................................... 13
6.4 No Conflicts. .......................................... 14
6.5 Litigation............................................... 14
6.6 Brokers. ............................................... 14
6.7 Financing................................................ 14
6.8 No Material Adverse Change. ............................. 14
7. Covenants and Agreements.......................................... 14
7.1 Conduct of Business...................................... 15
7.2 Insurance. ............................................. 15
7.3 Litigation............................................... 15
7.4 Continued Effectiveness of Representations and Warranties.15
7.5 Corporate Examinations and Investigations. ............. 16
7.6 Premerger Notification................................... 16
7.7 Change and Use of Name. ................................ 16
7.8 Expenses of Sale......................................... 16
7.9 Further Assurances. ......... .......................... 17
7.10 No Solicitations........... ............................. 17
7.11 Sellers' Access. ........................................ 17
7.12 Purchase Price Allocation................................ 17
8. Securities Law Matters............................................ 17
8.1 Proxy Statement and Reorganization....................... 17
8.2 Required Continuing Fund Actions. ....................... 19
8.3 Forms ADV and BD......................................... 19
8.4 Section 15(f)............................................ 20
8.5 Subsequent Compliance. ............. ................... 20
8.6 Conditions Precedent to Effectiveness of Agreement. .... 20
9. Conditions Precedent to the Obligation of the Buyer to Close. ... 21
9.1 Representations and Covenants. ......................... 21
9.2 Governmental Permits, Approvals and Filings. ........... 21
9.3 Third Party Consents..................................... 21
9.4 Opinion of Counsel to the Sellers. ..................... 21
9.5 Litigation............................................... 21
9.6 Operative Agreements. .................................. 22
9.7 Hart-Scott-Rodino. ..................................... 22
9.8 Fund Consents............................................ 22
<PAGE>
Page
----
10. Conditions Precedent to the Obligation of the Sellers to Close.... 22
10.1 Representations and Covenants............................ 22
10.2 Opinion of Counsel to the Buyer. ....................... 22
10.3 Litigation............................................... 22
10.4 Hart-Scott-Rodino. ..................................... 23
10.5 Operative Agreements. .................................. 23
10.6 Compliance by Funds with 15(f). ........................ 23
10.7 Governmental Permits, Approvals and Filings.............. 23
11. Survival of Representations and Warranties. ..................... 23
12. Indemnification................................................... 23
12.1 Obligation of the Sellers to Indemnify. .... ........... 23
12.2 Obligation of the Buyer to Indemnify. .................. 24
12.3 Notice and Opportunity to Defend......................... 24
12.4 Limitation on Indemnification. ......................... 26
12.5 Payment Procedure........................................ 26
13. Termination of Agreement. ....................................... 26
14. Miscellaneous..................................................... 27
14.1 Certain Definitions. ................................... 27
14.2 Publicity. ............................................. 28
14.3 Notices..................... ............................ 28
14.4 Entire Agreement. ...................................... 29
14.5 Waivers and Amendments. ................................ 29
14.6 Governing Law...................... ..................... 29
14.7 No Assignment. ................... ..................... 29
14.8 Severability............................................. 29
14.9 Variations in Pronouns. ................................ 30
14.10 Counterparts............................................. 30
14.11 Exhibits and Schedules. ................................ 30
14.12 Headings................................................. 30
<PAGE>
EXHIBITS TO THE ACQUISITION AGREEMENT
-------------------------------------
A Form of Bill of Sale
B Form of Assumption Agreement
C Form of Agreement Not to Compete
D Form of Subadvisory Agreement
E Form of License Agreement
F [Not Referenced]
G Form of Opinion of Buyer's Counsel
H Form of Opinion of Sellers' Counsel
8.1(a) Form of Advisory Agreement w/Continuing Fund
8.2(a) Form of Written Distribution Agreement
8.2(b) Form of Written Transfer Agency Agreement
8.2(c) Form of Distribution and Service Plan Agreement
8.2(g) Form of Written Administrative Agreement
<PAGE>
SCHEDULES TO THE ACQUISITION AGREEMENT
--------------------------------------
A Acquired Funds
2.1(a) List of Agreements, Contracts and Property
2.1(b) Quest Letter Agreement
2.1(c) Permits, Trademarks, Tradenames etc.
3.1(c) Example of Deferred Purchase Price Calculation
5.1 Foreign Qualification
5.2 Certain Financial Data
5.4 Compliance with Laws
5.5 Consents
5.6 Defaults
5.7 Litigation
5.8 Contracts and Agreements
5.10 Intangible Property
5.11 Liens
5.12 Net Asset Value
5.13 Insurance
5.14 Interim Operations
6.3 Compliance with Laws
6.4 Conflicts
6.5 Litigation
7.8 Expenses
7.10(b) No Solicitation
7.12 Purchase Price Allocation
14.1 Knowledge
<PAGE>
ACQUISITION AGREEMENT
---------------------
AGREEMENT, dated August 17, 1995, among OPPENHEIMER CAPITAL, a Delaware
general partnership ("OpCap"); QUEST FOR VALUE ADVISORS, a Delaware general
partnership ("Advisors"); QUEST FOR VALUE DISTRIBUTORS, a Delaware general
partnership ("Distributors"; OpCap, Advisors and Distributors being sometimes
referred to herein collectively as the "Sellers" and individually as a
"Seller"); and OPPENHEIMER MANAGEMENT CORPORATION, a Colorado corporation (the
"Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires
to acquire, all of the Sellers' investment advisory and other contracts and
business relationships relating to the funds identified on Schedule A hereto
(the "Acquired Funds") and certain assets and liabilities of the Sellers
relating thereto, as specifically set forth herein;
WHEREAS, it is contemplated that each of the Acquired Funds identified
on Schedule A as a Reorganized Fund (each a "Reorganized Fund" and collectively
the "Reorganized Funds") will enter into one or more Agreements and Plans of
Reorganization (each a "Reorganization Agreement") pursuant to which such
Reorganized Fund will be acquired by or reorganized into one or more funds
currently advised by the Buyer or a subsidiary of the Buyer (each a "Surviving
Fund");
WHEREAS, it is contemplated that each of the Acquired Funds identified
on Schedule A as a Continuing Fund (each a "Continuing Fund" and collectively
the "Continuing Funds") will enter into an Investment Management Agreement with
the Buyer or its designee and that the Buyer or its designee will enter into a
Subadvisory Agreement for the benefit of each Surviving Fund with Advisors or
its successor in interest; and
WHEREAS, subject to the terms hereof, the Buyer may contribute, or
assign the right to acquire, all or a portion of the acquired assets to
wholly-owned subsidiaries of the Buyer;
NOW THEREFORE, in consideration of the premises and the mutual
covenants, conditions, warranties and representations contained herein, and for
other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged by each party), the parties hereto, intending to be legally
bound, agree as follows:
1. Purchase and Sale of Assets. Upon the terms and subject to the
conditions contained herein, at the closing provided for in Section 3.6 (the
"Closing") the Sellers shall sell and transfer, and the Buyer shall acquire,
buy and accept, or cause to be acquired, bought and accepted, all of the
Purchased Assets and Assumed Liabilities (as such terms are hereinafter defined)
of the Sellers (collectively, the "Acquired Business") in the manner set forth
in Section 2 hereof. Notwithstanding anything to the contrary in this Agreement,
the Buyer may cause the Purchased Assets to be acquired by, and the Assumed
Liabilities to be assumed (in substantially the form of Exhibit B) by, one or
more wholly-owned subsidiaries of the Buyer designated by the Buyer prior to the
Closing (each a "Designated Subsidiary"); provided, however, that the Buyer and
its successors and assigns, if any, shall remain fully liable in respect of all
of its obligations hereunder.
<PAGE>
2. Assets and Liabilities.
1 Sale of Assets. At the Closing, the Sellers shall sell,
assign, transfer and deliver to the Buyer all of the following assets,
properties, rights and businesses of the Sellers (all of such assets,
properties, rights and businesses being hereinafter sometimes collectively
called the "Purchased Assets"):
(a) the Sellers' interest in and claims and rights under
all investment advisory, selling, dealer, administration and other agreements
and contracts and all business relationships pertaining thereto, and the other
property described in Schedule 2.1(a) hereof;
(b) the Sellers' interest in and rights with respect to the
names "Quest for Value" and "Quest," except as otherwise provided in the Letter
Agreement attached hereto as Schedule 2.1(b);
(c) the Sellers' interest in and claims and rights under
Permits (as hereinafter defined) relating to the Acquired Business (to the
extent permitted by law to be transferred) and the trademarks, tradenames,
copyrights and applications therefor and other intangible property described in
Schedule 2.1(c) hereto;
(d) the books and records of Advisors and Distributors
relating to the Acquired Business; and
(e) the Sellers' interest in and rights with respect to all
contingent deferred sales payments and payments pursuant to plans adopted by the
Acquired Funds pursuant to Rule 12b-1 of the Investment Company Act of 1940, as
amended (the "Investment Company Act") (the "Commissions") which are accrued but
unpaid at Closing (including, without limitation, the Commissions described in
Section 3.5.)
In confirmation of the foregoing sale, assignment and transfer, the Sellers
shall execute and deliver to the Buyer at the Closing a Bill of Sale in the
form of Exhibit A.
<PAGE>
1 Liabilities Assumed by the Buyer. As of the Closing Date,
the Buyer shall assume (and pay, perform and discharge when due) all liabilities
and obligations of the Sellers relating to the Acquired Business arising or
required to be performed on or after the Closing Date under the contracts, other
agreements and other property identified in Schedule 2.1(a), and to which the
Buyer or a subsidiary of the Buyer becomes a party or an assignee, other than
liabilities or obligations arising or required to be performed prior to the
Closing Date.
The liabilities to be assumed by the Buyer pursuant to this Agreement
are hereinafter sometimes collectively referred to as the "Assumed Liabilities".
In confirmation of the foregoing assumption, the Buyer shall execute and deliver
to the Sellers at the Closing an Assumption Agreement in the form of Exhibit B.
1 Liabilities Not Assumed by the Buyer. Anything in this
Agreement to the contrary notwithstanding, the Buyer shall not assume, or in any
way be liable or responsible for, any liabilities or obligations of the Sellers
except as specifically provided in Section 2.2.
2 Discharge of the Sellers' Obligations. The Sellers and the
Buyer agree, from and after the Closing Date, to duly pay, satisfy and discharge
any and all valid claims, debts, liabilities and all obligations existing prior
to the Closing Date that are not Assumed Liabilities with respect to the
Acquired Business, in the case of the Sellers, and that are Assumed Liabilities
with respect to the Acquired Business, in the case of the Buyer, to their
respective creditors, as the same become due and payable; it being understood,
however, that the Sellers and the Buyer, respectively, reserve the right to
contest or settle the same when they determine, in their reasonable judgment,
that it is appropriate to do so.
2. Purchase Price and the Closing.
1 Purchase Price.
(a) The aggregate purchase price for the Acquired
Business (the "Purchase Price") shall be an amount equal to the sum of (i) the
Initial Purchase Payment (as hereinafter defined) payable in cash at the
Closing, (ii) the Unamortized Commissions (as hereinafter defined) payable in
cash at the Closing, (iii) the amount payable by the Buyer in respect of the
Citibank Arrangement (as hereinafter defined) in cash at the Closing pursuant
to Section 3.5, and (iv) the Deferred Purchase Payment (as hereinafter defined)
payable pursuant to Section 3.1(c).
<PAGE>
(b) The "Initial Purchase Payment" shall be an amount equal
to the sum of (x) 225% of the Annualized Fee Amount (as hereinafter defined) of
each Reorganized Fund and (y) 270% of the Annualized Fee Amount of each
Continuing Fund, other than Quest for Value Officers Fund. The "Annualized Fee
Amount" of an Acquired Fund shall equal the product of (i) such Acquired Fund's
Closing Net Assets (as hereinafter defined) and (ii) the annual advisory fee
payable to Advisors by such Acquired Fund at the rate indicated in the most
recent prospectus of such Acquired Fund at the Closing Date (plus, in the case
of Quest for Value Global Income Fund and Quest for Value Global Equity Fund,
the annual administrative fee payable to the Sellers by such Acquired Fund at
the rate indicated in such prospectus). "Closing Net Assets" for an Acquired
Fund shall mean the aggregate net asset value of such Acquired Fund (calculated
in accordance with the Investment Company Act and as described in the current
prospectus of such Acquired Fund) as of the close of business on the last
business date preceding the Closing Date. Closing Net Assets for each Acquired
Fund will be determined by the Chief Financial Officer of OpCap and the
respective amounts thereof for each Acquired Fund shall be provided to the Buyer
by written notice (certified as to the accuracy thereof in all material respects
by such Chief Financial Officer) delivered not later than 9:00 a.m., New York
City time, on the Closing Date. The Chief Financial Officer of OpCap may adjust
the Closing Net Assets for any Acquired Fund by delivering a written
certification for such Acquired Fund not later than 5:00 p.m. on the third
business day after the Closing Date and an appropriate adjustment to the
Purchase Price and the amount paid pursuant to Paragraph 3.1(a) promptly will be
made.
(c) The Deferred Purchase Payment shall be an amount equal
to the aggregate amounts determined for all Reorganized Funds pursuant to the
following formula: the Closing Payment (as hereinafter defined) times the
Applicable Percentage (as hereinafter defined). The "Closing Payment" shall
be the aggregate amount calculated for all Reorganized Funds pursuant to clause
(x) of the first sentence of Section 3.1(b). The "Applicable Percentage" shall
be 100% if the Continuing Net Asset Percentage (as hereinafter defined) is 75%
or more, 0% if the Continuing Net Asset Percentage is 50% or less and the
percentage determined in accordance with the following formula if the Continuing
Net Asset Percentage is between 75% and 50%:
100% - (4) (75% - Continuing Net Asset Percentage)
Schedule 3.1(c) sets forth examples of the calculations contemplated by this
Section 3.1(c) using certain assumed values.
(d) The "Continuing Net Asset Percentage" shall equal the
percentage obtained by dividing the Anniversary Net Assets (as hereinafter
defined) by the Closing Net Assets. The "Anniversary Net Assets" shall mean the
aggregate net asset values of all Reorganized Funds as of 8:00 p.m. on the first
anniversary of the last date on which a Closing involving a Reorganized Fund
occurs (the "Determination Time") (calculated in accordance with the Investment
Company Act and as described in the prospectuses of the relevant Surviving
Funds) which are eligible to be included in Anniversary Net Assets in accordance
with the following principles:
<PAGE>
o if such account was in existence in a Surviving Fund as
of the Closing (a "Closing Account") and continuously
maintained through such first anniversary (the
"Eligibility Period"), Anniversary Net Assets shall
include the net asset value, at the Determination Time,
of such account;
o if the Buyer determines that the Applicable Percentage
would be less than 75% if only continuously maintained
Closing Accounts were included in calculating
Anniversary Net Assets, the Buyer will use its
reasonable best efforts to trace any transfers made by
Closing Accounts to other registered investment
companies sponsored by the Buyer and shall include in
Anniversary Net Assets the amounts that such transfers
represent at the Determination Time;
o neither OpCap nor any of its Affiliates shall take any
action that would cause the Anniversary Net Assets of
any Reorganized Fund to be artificially inflated; and
o no account beneficially owned by OpCap or any
non-natural person who is an "affiliate" or "associate"
(within the meaning of Regulation 12B of the
Securities Exchange Act of 1934, as amended (the "1934
Act")) of OpCap that is not a qualified plan pursuant
to the provisions of Section 401 of the Internal
Revenue Code of 1986, as amended, shall be included in
Anniversary Net Assets or the Closing Net Assets.
The Deferred Purchase Payment shall be calculated by the Buyer, which shall
deliver a written notice thereof to OpCap not later than the 15th business day
after such first anniversary, together with payment without interest (by wire
transfer of immediately available funds) to OpCap as agent for the Sellers of
the Deferred Purchase Payment so calculated. Such notice shall also contain the
certification of the Chief Financial Officer of the Buyer of the accuracy of
such calculation. Such calculation, if not timely objected to by OpCap, shall
be conclusive and binding on all parties. OpCap will have 15 business days
after receipt of such notice and certification within which to object to such
calculation (which objection shall be in a written notice accompanied by the
certification of its Chief Financial Officer as to the basis for such
objection). If the parties are unable to resolve such objection on mutually
satisfactory terms within 30 days after the date of such objection, either party
may require that such objection be submitted to arbitration by an independent
public accounting firm mutually acceptable to the Buyer and OpCap. The
determination of such arbitration shall be final and any deficiency determined
by the arbitrator shall be paid by the Buyer to OpCap without interest within
seven business days after such determination. The costs of such arbitration
shall be borne equally by the Buyer and OpCap.
<PAGE>
(e) "Unamortized Commissions" shall mean the aggregate
amount of all unamortized prepaid Commissions as of the end of the business day
immediately preceding the Closing Date as recorded on the books and records of
the Sellers and which relate to the Acquired Funds, but excluding any
Repurchased Commissions (as defined in Section 3.5). OpCap shall deliver to the
Buyer by not later than 9:00 a.m., New York City time, on the Closing Date a
certificate of its Chief Financial Officer as to the amount of Unamortized
Commissions and the amount of Repurchased Commissions and certifying as to the
accuracy thereof. The Chief Financial Officer of OpCap may adjust the
Unamortized Commissions with respect to such Acquired Fund by delivering a
written certification to the Buyer not later than 5:00 p.m. on the third
business day after the Closing Date and an appropriate adjustment to the
Purchase Price and the amount paid pursuant to Paragraph 3.1(a) promptly will be
made.
(f) If pursuant to Section 9.8 a Closing occurs involving
fewer than all Acquired Funds, the Purchase Price (other than the Deferred
Purchase Payment) shall be calculated only with respect to the Acquired Funds
subject to such Closing, the parties shall continue to use their respective
reasonable best efforts to effect a subsequent closing relating to the remaining
Acquired Funds and any such subsequent closing shall be subject to all terms and
conditions hereof as if it were the Closing.
2 Agreement Not to Compete. At the Closing, in order to
accord the Buyer the full value of the Acquired Assets, to protect the Buyer's
acquisition of and investment in the Acquired Business (including the goodwill
thereof) and to facilitate continuity in the operation thereof by the Buyer, the
Buyer and each Seller shall enter into an Agreement Not to Compete in the form
of Exhibit C hereto (the "Agreement Not to Compete").
3 Subadvisory Agreements. At the Closing, the Buyer (or one
or more subsidiaries of the Buyer designated by the Buyer) and Advisors (or its
successor) shall enter into the several Subadvisory Agreements substantially in
the form of Exhibit D hereto (the "Subadvisory Agreements").
4 License Agreements. At the Closing, the Buyer and OpCap
shall enter into a License Agreement substantially in the form of Exhibit E
hereto (the "License Agreement").
<PAGE>
5 Citibank Arrangement. At the Closing, (x) the Sellers shall
have purchased all right, title and interest of Citibank N.A. (the "Citibank
Arrangement") in all Commissions subject to the Citibank Arrangement (the
"Repurchased Commissions"), (y) all claims, liens, pledges and security
interests of Citibank N.A. therein shall have been released and discharged and
(z) the Buyer shall pay the Sellers, with respect to the Citibank Arrangement
an amount equal to (i) the aggregate amount of all unamortized prepaid
Repurchased Commissions minus (ii) $250,000.
6 Closing.
(a) The Closing of the sale and purchase of the Acquired
Business shall take place at the offices of the Buyer, at the 34th Floor, Two
World Trade Center, New York, New York 10048-0203 as soon as practicable, but
in no event later than five business days following satisfaction or waiver of
the conditions precedent set forth in Sections 9 and 10 of this Agreement, at
10:00 a.m. local time, or at such other time and place as the Buyer and the
Sellers mutually agree in writing. The date upon which the Closing occurs is
herein called the "Closing Date."
(b) At the Closing, the Sellers shall deliver to the Buyer
the Bill of Sale and such other deeds, bills of sale, endorsements, assignments,
documents of title, and other instruments of transfer and conveyance necessary
to transfer the Purchased Assets to the Buyer, free and clear of all liens,
claims and charges except for the Assumed Liabilities.
(c) At the Closing, the Buyer shall deliver to the Sellers
the payment contemplated by clauses (i), (ii) and (iii) of Section 3.1(a) (the
"Purchase Payment"), the Assumption Agreement and such other instruments
necessary to effect the assumption of the Assumed Liabilities by the Buyer. The
Purchase Payment shall be made by wire transfer of immediately available funds
to accounts to be designated by the Sellers at least five days before the
Closing Date.
2 Distribution Assistance. Within a reasonable period (but in
no event later than 90 days) after the Closing, the Buyer will include each
Continuing Fund in the Oppenheimer Funds Dealer Fact book, fund spectrum and
dealer agreements. The Buyer will include each Continuing Fund in its primary
source of information for dealers, on a basis substantially similar as for its
other mutual funds, until the termination of such Continuing Fund's Subadvisory
Agreement with Advisors. From and after the Closing until the fourth
anniversary of the Closing Date, the Buyer will, in each calendar year in which
it does two or more equity fund promotions in which additional commission
dollars are paid to brokers and dealers whose sales of specified funds during a
specified period exceed specified thresholds, include at least one Continuing
Fund in one such promotion; provided, however, that at least one Continuing Fund
then has a Morningstar's three-year rating of at least three stars.
<PAGE>
3 Representations and Warranties of the Sellers. Each of the
Sellers jointly and severally represents and warrants to the Buyer as follows:
1 Due Incorporation and Qualification. Each Seller is a
general partnership duly formed and validly existing under the laws of the State
of Delaware, and each has all requisite partnership power and lawful authority
to own, lease and operate its assets, properties and business and to carry on
its business as now conducted. Each of the Sellers is qualified to transact
business and is in good standing in each jurisdiction (listed on Schedule 5.1)
in which the nature of its business or location of its properties requires such
qualification with respect to the Acquired Business, and in which the failure so
to qualify would reasonably be expected to have a material adverse effect on
such Seller (or its assets, properties or business) with respect to the Acquired
Business. With respect to the Acquired Business, none of the Sellers owns or
leases property, or has an employee with a home office, in any jurisdiction
other than the State of Delaware and the jurisdictions set forth on Schedule
5.1.
2 Certain Financial Data. Schedule 5.2 sets forth, for each
Acquired Fund, the management fees, administrative fees, shareholder maintenance
fees, underwriting fees and commissions (gross and net) and other revenue,
separately stated, paid to any of the Sellers and the expenses reimbursed or
reimbursable to the Sellers, in respect of the most recent fiscal year for each
Acquired Fund and the interim period ended May 31, 1995.
3 No Material Adverse Change. Since December 31, 1994, there
has been no material adverse change in the assets, properties, business or
condition, financial or otherwise, of the Acquired Business, and none of the
Sellers knows of any such change which is threatened, nor has there been any
damage, destruction or loss materially affecting the assets, properties,
business or condition, financial or otherwise, of the Acquired Business, whether
or not covered by insurance.
4 Compliance with Laws. (a) Except as set forth in Schedule
5.4, no license, permit, exemption, order or approval of any governmental or
regulatory body (collectively, the "Permits") is material to or necessary to
permit the operation of the Acquired Business in the manner in which it is
currently being conducted. All Permits of each of the Sellers required to be
set forth on Schedule 5.4 are in full force and effect; no violations are or
have been recorded in respect of any Permit, and no proceeding is pending or, to
the knowledge of the Sellers, threatened, to revoke or limit any such Permit.
Except as set forth in Schedule 5.4, none of the Sellers has received any
written notice from any person that, in respect of the Acquired Business, any of
the Sellers is in violation of any law or is the subject of any investigation
relating to the possible violation of any law, ordinance, regulation or order.
<PAGE>
(a) Distributors is duly registered as a broker-dealer
under the 1934 Act, and under similar applicable state statutes in the states
listed in Schedule 5.4 and Advisors is duly registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
under similar applicable state statutes in the states listed in Schedule 5.4.
Distributors is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"). No other material registration or
qualification is required for any of the Sellers under any law in order to own
and operate the Acquired Business. The Sellers have delivered to the Buyer a
true and complete conformed copy of their respective current Forms ADV, ADV-S
and BD filed with the SEC and will make available for inspection by the Buyer
all state registration forms and all reports required to be kept by any Seller
since January 1, 1992 by the Advisers Act, the 1934 Act and the Investment
Company Act, similar state statutes, and the rules promulgated thereunder, in
each case with respect to the Acquired Business. The information contained in
such forms and reports, as amended or supplemented to the date hereof, is true
and correct in all material respects. All required amendments and supplements
to such forms and reports have been filed except where a failure to file would
not have a material adverse effect on the Acquired Business. None of the
Sellers nor any person associated with any of them is subject to any
disqualification which would be a basis for denial, suspension or revocation
of registration of any of the Sellers as an investment adviser or broker-dealer,
as the case may be, with respect to the Acquired Business. For purposes of this
Section 5.4(b) and Section 6.3(a), a "person associated with" an entity shall
mean any person within the meaning of the phrase "persons associated with" as
used in Section 202(a)(17) of the Advisers Act and Sections 3(a)(18) and 3(a)
(49) of the 1934 Act.
(b) Each Acquired Fund is duly registered as an investment
company under the Investment Company Act and during the Advisory Period all
shares of each Acquired Fund which have been or are being offered for sale have
been duly registered or qualified or are exempt from registration or
qualification under the 1933 Act and have been duly registered, qualified or are
exempt from registration or qualification under the securities laws of each
state or other jurisdiction in which such shares have been or are being offered
for sale. Advisors, Distributors and each Acquired Fund are currently in
compliance and, to the best knowledge of the Sellers, each Acquired Fund during
the period during which Advisors has acted as an investment adviser to the
Acquired Funds has been in compliance, in all material respects with the
Investment Company Act, the Advisers Act, the 1933 Act, the 1934 Act, all
applicable state securities laws and the respective applicable rules and
regulations thereunder, and with all other material and applicable laws, rules
and regulations.
<PAGE>
(c) The Sellers have provided the Buyer with: (i) true and
complete copies of the annual reports and semi-annual reports for the past five
years for each Acquired Fund, as well as any additional report or other material
delivered to shareholders of the Acquired Funds during the past five years; and
(ii) the prospectus and statement of additional information for each Acquired
Fund for the past five years including the most recent prospectus and Statement
of Additional Information for each Acquired Fund which include audited financial
statements with regard to each Acquired Fund (all of the foregoing being
collectively referred to as "Acquired Fund Statements"). The Acquired Fund
Statements did not contain, at the time of filing or delivery, any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make any material statements therein not
misleading, and there has occurred no event or condition other than as relating
to this transaction, which would require any Acquired Fund to file an additional
amendment, registration statement, prospectus, prospectus supplement, report or
other document with the SEC, which document has not been so filed with the SEC
and delivered to the Buyer. Since January 1, 1994, there has not been any
material adverse change in the financial condition of the Acquired Funds, or
incurrence of any liability, not reflected on the audited balance sheet and
income statement filed with the Acquired Fund Statements. The financial
statements, including, without limitation, the Statement of Assets and
Liabilities, the Statement of Operations and the Statement of Changes in Net
Assets, and the notes thereto set forth in any such Annual or Semi-Annual
Report, fairly present the financial position of the Acquired Funds as at the
date of such statements and the results of their operations for the periods
covered thereby in accordance with generally accepted accounting principles
consistently applied (except as noted therein).
5 Authority to Execute and Perform Agreements. The Sellers
have all requisite partnership right, power and authority required to enter
into, execute and deliver, to the extent that they are a party thereto, this
Agreement, the Bill of Sale, the Agreement Not to Compete, the Subadvisory
Agreements and the License Agreement (collectively, the "Operative Agreements")
and to perform fully their respective obligations hereunder and thereunder.
Each of the Operative Agreements has been, or at the Closing will be, duly
executed and delivered and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) constitutes or, at the
Closing, will constitute the valid and binding obligation of the Sellers to the
extent that they are parties thereto, enforceable in accordance with its terms
(subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) (the "Bankruptcy Exception")). Except as described in Schedule 5.5,
no approval or consent of any foreign, federal or state governmental or
regulatory body, and (except as otherwise specified in this Agreement or any
Schedule hereto) no approval or consent of any other person, is required in
connection with the execution and delivery by the Sellers of the Operative
Agreements and the consummation and performance by the Sellers of the
transactions contemplated hereby and thereby. Except as set forth in Schedule
5.5, the execution and delivery of the Operative Agreements, the consummation
of the transactions contemplated hereby and thereby, and the performance by the
Sellers of the Operative Agreements, in accordance with their respective terms
and conditions, will not conflict with or result in the breach or violation of
any of the terms or conditions of, or constitute (or with notice or lapse of
time or both would constitute) a default under, (i) the certificate or articles
of incorporation or by-laws, trust agreement, partnership agreement or any
constituent document of any Seller or Acquired Fund, (ii) any material
instrument, contract or other agreement to which any Seller or Acquired Fund is
a party or by or to which it or its assets or properties are bound or subject
applicable to the Acquired Business; (iii) any statute or any regulation, order,
judgment or decree of any court or governmental or regulatory body applicable to
the Acquired Business; or (iv) any Permit applicable to the Acquired Business.
<PAGE>
6 No Defaults Under Agreements. None of the Sellers is in
default under any contract or other agreement relating to the Acquired Business,
nor does any condition exist (except as described on Schedule 5.6) which with
notice or lapse of time or both would constitute such a default, and each such
contract or other agreement is in full force and effect as to the Sellers,
except for such defaults as to which requisite waivers or consents have been
obtained or which, individually or the aggregate, would not have a material
adverse effect on the Acquired Business.
7 Litigation. Except as set forth on Schedule 5.7, none of
the Sellers or the Acquired Funds is a party to or, to the knowledge of the
Sellers, threatened with any litigation or judicial, governmental,
administrative or arbitration proceeding or any investigation or governmental
inquiry with respect to the Acquired Business. None of the Sellers knows of any
dispute with any person under contract with any of them or any present or, to
the knowledge of the Sellers, threatened walkout, strike or any other similar
occurrence which would have a material adverse effect on the Acquired Business.
8 Agreements. Except for the Operative Agreements, Schedules
2.1(a) and 5.8 identify all of the following contracts and other agreements to
which any of the Sellers is a party or by or to which it or its assets or
properties are bound or subject, in each case relating to the Acquired Business:
(i) contracts and other agreements for investment advisory, selling,
administration, distribution, transfer agent or other services performed or to
be performed by any of the Sellers; (ii) contracts and other agreements for the
sale of any of its assets, properties or services other than in the ordinary
course of business or for the grant of any preferential rights to purchase any
of its assets, properties or services; (iii) joint venture agreements;
(iv) contracts relating to indemnification or non-competition; and (v) any other
material contract or agreement whether or not it was entered into in the
ordinary course of its business. After giving effect to the receipt of the
consents and approvals contemplated by Sections 9.3 and 9.8, no approval or
consent of any person is needed in order that the contracts or other agreements
identified on Schedule 5.8 and other Schedules hereto continue in full force and
effect following the consummation of the transactions contemplated by this
Agreement. Except as otherwise affected by this Agreement and the transactions
contemplated hereby, each of the investment advisory, selling, administration,
distribution, transfer agent, dealer agreements and stockholder service
agreements identified on Schedules 2.1(a) and 5.8 is a valid and binding
obligation of such Seller that is a party thereto and enforceable in accordance
with its terms (subject to the Bankruptcy Exception).
<PAGE>
9 Beneficial Ownership. OpCap owns beneficially and of record
a 99% interest in profits and losses of each of Advisors and Distributors.
Oppenheimer Financial Corp., a Delaware corporation, owns beneficially and of
record a 1% interest in profits and losses of each of Advisors and Distributors.
10 Intangible Property. Schedule 5.10 sets forth all
trademarks, copyrights, service marks, trade names and franchises, all
applications for any of the foregoing, and all permits, grants and licenses or
other rights running to or from any of the Sellers relating to any of the
foregoing which are material to the Acquired Business. Except as set forth on
Schedule 5.10, none of the Sellers has received written notice of any adversely
held patent, copyright, invention trademark, service mark or trade name of any
other person or written notice of any claim of any other person relating to any
of the property set forth on Schedule 5.10 or any proprietary or confidential
information of any of them.
11 Liens. Other than as set forth on Schedule 5.11, each of
the Sellers has good title to all of the Purchased Assets, in each case free and
clear of any lien or other encumbrance, except for (i) immaterial assets and
properties; (ii) liens or other encumbrances securing taxes, assessments,
governmental charges or levies, or the claims of materialmen, carriers,
landlords and like persons, which are not yet due and payable; or (iii) minor
liens or other encumbrances of a character which do not substantially impair
its assets or properties or materially detract from its business.
12 Acquired Funds. No Acquired Fund has canceled or otherwise
terminated, or (except as contemplated hereby) threatened to cancel or otherwise
terminate, its relationship with any of the Sellers. Except for termination
arising automatically as a result of law due to the transactions contemplated
hereby (as set forth on Schedule 5.5), none of the Sellers has received any
notice that any Acquired Fund intends to take any of the actions described in
the preceding sentence. Schedule 5.12 sets forth, as of the close of business
on the business day immediately preceding the date hereof, the dollar amount
of the assets under management of each Acquired Fund and the net asset value
per share of each Acquired Fund.
13 Insurance. Schedule 5.13 identifies all policies or binders
of professional liability, D&O, E&O, fidelity, uncollectible items of deposit,
securities lending, transfer agent, underwriters, custodian or liability
insurance held by each of the Sellers with respect to the Acquired Business or
the Acquired Funds and, to the extent coverage under any insurance policy is
required under applicable federal or state securities laws for the conduct of
the Acquired Business and such policy is held by an affiliate of any Seller,
each such policy (specifying the insurer, the policy number or covering note
number with respect to binders, the type of insurance, the coverage limitations
and deductibles, and describing each pending claim thereunder of more than
$10,000). To the knowledge of the Sellers, such policies and binders are in
full force and effect and satisfy all legal requirements as to the Sellers'
insurance coverage. To the knowledge of the Sellers, there is no default with
respect to any provision contained in any such policy or binder or any failure
to give any notice or present any claim under any such policy or binder in due
and timely fashion. Except for claims set forth on Schedule 5.13, there are, to
the knowledge of the Sellers, no outstanding unpaid claims under any such policy
or binder. No notice of cancellation or non-renewal of any such policy or
binder has been received by any of the Sellers or the Acquired Funds for any
policy or binder currently in effect. None of the Sellers has any knowledge of
any inaccuracy in any application for such policies or binders, any failure to
pay premiums when due or any similar state of facts which might form the basis
for termination of any such insurance.
<PAGE>
14 Operations of the Sellers. Except as set forth on Schedule
5.14, since December 31, 1994, none of the Sellers has with respect to the
Acquired Business:
(a) waived any right of material value to the Acquired
Business;
(b) materially changed any of its business policies
relating to the Acquired Business, including, without limitation, advertising,
marketing, pricing, purchasing, personnel, sales or budgets;
(c) sold or abandoned, or granted or suffered any material
lien or other encumbrance on, any Purchased Asset; entered into or amended any
contract or other agreement to which it is a party or by or to which it or the
Purchased Assets are bound or subject or pursuant to which it agrees to
indemnify any party or refrain from competing with any party;
(d) made any acquisition of all or any part of the assets,
properties, capital stock or business of any other person other than in the
ordinary course of its business;
(e) except in the ordinary course of business or as
expressly provided for in this Agreement, entered into any other material
contract or other agreement or other material transaction relating to the
Acquired Business; or
(f) modified or proposed to modify materially its
fundamental investment policies and restrictions for any of the Acquired Funds.
15 No Broker. The Sellers will be solely responsible for the
fees and expenses of any broker, finder, agent or similar intermediary
(including, without limitation, Putnam Lovell & Thornton Inc.) which acted for
or on behalf of any Seller in connection with this Agreement or the transactions
contemplated hereby.
4 Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers as follows:
1 Due Incorporation. Each of the Buyer and any Designated
Subsidiary is a corporation, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and lawful authority to own, lease and operate its
assets and properties and to carry on its business as now conducted. Each of
the Buyer and any Designated Subsidiary is qualified to transact business and
is in good standing in each jurisdiction identified in Schedule 5.1 and in which
the failure so to qualify would reasonably be expected to have a material
adverse effect on the Buyer's ability to operate the Acquired Business.
2 Corporate Power of the Buyer. The Buyer has the full legal
right and power and all authority and approval required to enter into, execute
and deliver this Agreement and the Buyer and any Designated Subsidiary has the
full legal right and power and all authority and approval required to enter
into, execute, deliver and perform fully its obligations under this Agreement,
the Assumption Agreement and the Operative Agreements. This Agreement has been,
and at the Closing the Assumption Agreement and each Operative Agreement will
be, duly executed and delivered by the Buyer or a Designated Subsidiary and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) constitutes, or will constitute, as the case may be, the
valid and binding obligation of the Buyer or such Designated Subsidiary, as the
case may be, enforceable against it in accordance with its terms (subject to the
Bankruptcy Exception).
<PAGE>
3 Compliance with Laws. (a) The Buyer is duly registered as
an investment adviser under the Advisers Act and under similar applicable state
statutes in the states in which it is required to be so registered (except as
otherwise noted in Schedule 6.3). To the knowledge of the Buyer, each
subsidiary of the Buyer listed in Schedule 6.3 (a "Distribution Subsidiary") is
duly registered as a broker-dealer under the 1934 Act and under similar
applicable state statutes in the states in which Distributors is so registered
as set forth in Schedule 5.4 (except as otherwise noted in Schedule 6.3) and is
a member in good standing of the NASD. Neither the Buyer nor, to the knowledge
of the Buyer, any Distribution Subsidiary nor any person associated with the
Buyer or any such Distribution Subsidiary is subject to any disqualification
which would be a basis for denial, suspension or revocation of the Buyer as an
investment advisor or such Distribution Subsidiary as a broker-dealer, as the
case may be, with respect to the operation by the Buyer of the Acquired
Business.
(b) Each of the Buyer and, to the knowledge of the Buyer,
such Distribution Subsidiary is currently in compliance in all material respects
with the Advisers Act, the 1934 Act and the rules and regulations thereunder
(including, without limitation, the filing requirements of Rule 204-1) and,
except as disclosed to the Sellers in writing or as stated in a deficiency
letter from the SEC, to the best of its knowledge, has been in compliance in all
material respects with the Advisers Act, the 1934 Act and the rules and
regulations thereunder (except for noncompliance that would not materially and
adversely effect the ability of the Buyer to operate the Acquired Business).
The Buyer has (or will have at or prior to the Closing) all Permits required to
operate the Acquired Business in the jurisdictions identified in Schedule 5.4.
1 No Conflicts. Except as described in Schedule 6.4, no
approval or consent of any foreign, federal or state governmental or regulatory
body, and (except as otherwise specified in this Agreement or any Schedule
hereto) no approval or consent of any other person, is required in connection
with the execution and delivery by the Buyer of the Assumption Agreement and the
Operative Agreements and the consummation and performance by the Buyer or any
Designated Subsidiary of the transactions contemplated hereby and thereby. The
execution and delivery by the Buyer of the Assumption Agreement and the
Operative Agreements, the consummation of the transactions contemplated hereby
and thereby, and the performance by the Buyer or any Designated Subsidiary of
the Assumption Agreement and the Operative Agreements, in accordance with their
respective terms and conditions, will not conflict with or result in the breach
or violation of any of the terms and conditions of, or constitute (or with
notice or lapse of time or both would constitute) a default under, (i) the
certificate of incorporation or by-laws of the Buyer or any Designated
Subsidiary; (ii) any instrument, contract or other agreement to which the Buyer
or any Designated Subsidiary is a party or by or to which it or its assets or
properties are bound or subject; (iii) any statute or any regulation, order,
judgment or decree of any court or governmental or regulatory body applicable
to the Acquired Business; or (iv) any Permit of the Buyer or any Designated
Subsidiary applicable to its purchase or operation of the Acquired Business.
<PAGE>
2 Litigation. Except as set forth in Schedule 6.5, neither
the Buyer nor any Designated Subsidiary is a party to or, to the knowledge of
Buyer, threatened with any litigation or judicial, governmental, administrative
or arbitration proceeding or any investigation or governmental inquiry with
respect to the Acquired Business.
3 Brokers. The Buyer (or its subsidiaries) will be solely
responsible for the fees and expenses of any broker, finder, agent or similar
intermediary which acted for or on behalf of the Buyer in connection with this
Agreement or the transactions contemplated hereby.
4 Financing. The Buyer has and will have at the Closing
sufficient financing to pay the Purchase Payment at the Closing in cash.
5 No Material Adverse Change. Since December 31, 1994, there
has been no material adverse change in the assets, properties, business or
condition, financial or otherwise, of the Buyer that would materially and
adversely affect its ability to operate the Acquired Business (other than
changes in its portfolio managers and senior personnel and changes in the net
sales or redemption rates for its existing registered investment companies).
2 Covenants and Agreements. From the date hereof through and
including the earlier of the Closing or the termination of this Agreement
(unless the context provides for a different period) the parties covenant and
agree as follows:
1 Conduct of Business. The Sellers agree that:
(a) Each of the Sellers shall conduct its business in the
ordinary course with respect to the Acquired Business. With respect to the
Acquired Business, each of the Sellers shall meet all of its obligations as they
become due (it being understood that the Sellers reserve the right to contest or
settle the same when they determine, in their reasonable judgment to do so),
and shall use its reasonable best efforts to continue to offer investment
advisory services to the Acquired Funds in the ordinary course of business, to
maintain its records, to preserve its business organization, properties and
Permits intact, to keep available the services of its employees, and to preserve
the goodwill of the Acquired Funds, suppliers, and others with whom business
relationships exist.
(b) The Sellers shall not take any action described in
Section 5.14 without the prior written consent of the Buyer.
(c) The Sellers shall not undertake any special promotion
or sales incentive or take any action that might have the effect of temporarily
increasing the Acquired Assets or the net assets of the Acquired Funds without
the prior written consent of the Buyer.
<PAGE>
2 Insurance. Each of the Sellers shall use its reasonable
best efforts to maintain in force (including necessary renewals thereof) its and
each Acquired Fund's insurance policies, except to the extent that such policies
are replaced with policies equivalent to those presently in effect and
appropriate to comply with law and to insure the assets, properties and business
of each of the Sellers and the Acquired Funds to the same extent as currently
insured at the same or lower rates or at rates approved by the Buyer. At or
prior to the Closing, the Sellers shall purchase extended "discovery period"
protection with respect to any "claims made" policy described in Schedule 5.13.
3 Litigation. Each party shall promptly notify each other
party of any lawsuits, claims, proceedings or investigations which after the
date hereof are commenced or, to the knowledge of such party, threatened against
such party or against any partner, officer, director, employee, consultant,
agent of such party with respect to the affairs of such party (to the extent
such lawsuit, claim, proceeding or investigation is related to the Acquired
Business) or any Acquired Fund or the transactions contemplated by this
Agreement.
4 Continued Effectiveness of Representations and Warranties.
Each of the Sellers and the Buyer shall use its reasonable best efforts to
conduct its business in such a manner so that the representations and warranties
contained in Section 5 and Section 6, as applicable, shall continue to be true
and correct in all material respects on and as of the Closing Date as if made on
and as of the Closing Date. Each party shall promptly be given notice of any
event, condition or circumstance occurring from the date hereof through the
Closing Date which would constitute a violation or breach by any other party or
by such party of the representations, warranties, covenants or agreements
contained in this Agreement.
5 Corporate Examinations and Investigations. The Buyer shall
be entitled, through its employees, agents and representatives, to make such
investigation of the property and such examination of the books, records and
financial condition of each of the Sellers relating to the Acquired Business as
the Buyer reasonably requests upon reasonable notice. Any such investigation
and examination shall be conducted at reasonable times and under reasonable
circumstances and the Sellers shall cooperate fully therein. No investigation
by the Buyer shall, however, diminish or obviate in any way any of the
representations, warranties, covenants or agreements of any of the Sellers under
this Agreement. In order that the Buyer may have full opportunity to make such
business, accounting and legal review, examination or investigation as it may
reasonably require of the business and affairs of each of the Sellers relating
to the Acquired Business, including discussions with management of the Acquired
Funds, each of the Sellers shall furnish the representatives of the Buyer during
such period with all such information concerning the affairs of the Sellers
relating to the Acquired Business as such representatives may reasonably request
and cause its officers, employees, consultants, agents, accountants and
attorneys to cooperate fully with such representatives in connection with such
review and examination; provided, however, that the foregoing is not intended,
and does not, constitute a waiver of any applicable privilege. If the Sellers
or its officers, employees, consultants, agents, accountants or attorneys shall
claim privilege, the Sellers shall notify Buyer in writing of the nature of the
information not being disclosed pursuant to the claim of privilege. The
Confidentiality Agreement dated April 13, 1995 between the Buyer and OpCap shall
remain in full force and effect as if restated herein (and shall survive any
termination of this Agreement) and any disclosure made by any Seller to the
Buyer pursuant to this Section 7.5. will be subject thereto.
<PAGE>
6 Premerger Notification. No later than 15 days after the
date of this Agreement, the Sellers and the Buyer each will file notification
and report forms with respect to the transactions contemplated by this Agreement
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act").
7 Change and Use of Name. Effective at the Closing, each of
Advisors and Distributors shall change and thereafter maintain its name to a
name that does not contain "Quest for Value," "Quest" or any derivative thereof
and at the Closing shall deliver to the Buyer evidence that all filings
necessary in those jurisdictions, if any, in which either of them is organized
or qualified to do business to effect such name change have been made.
8 Expenses of Sale. Except as set forth in Schedule 7.8, the
Sellers and the Buyer agree that each of them shall bear their own direct and
indirect expenses incurred in connection with the negotiation and preparation
of this Agreement and the consummation and performance of the transactions
contemplated hereby. The Buyer shall pay all transfer, documentary, gross
receipts, sales and use taxes and similar liabilities, if any, resulting from
the sale, assignment, transfer and delivery hereunder of the Purchased Assets.
This Section 7.8 shall survive any termination of this Agreement.
9 Further Assurances. From the date hereof through and after
the Closing each of the parties shall execute such documents and perform such
further acts as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby. Each such party
shall use its reasonable best efforts to fulfill or obtain the fulfillment as
promptly as practicable of the conditions to the Closing, including, without
limitation, the execution and delivery of any documents or other papers, and the
obtaining of any required Permits, the execution and delivery or obtaining of
which are conditions precedent to the Closing.
10 No Solicitations. (a) The Sellers agree not to solicit,
negotiate or enter into any agreement with any other person concerning the sale
of any Purchased Asset or Assumed Liability or to furnish any person interested
in making such acquisition with any information concerning any Purchased Asset
or Assumed Liability.
(b) Without the consent of OpCap, the Buyer will not (and will
not permit anyone by or on behalf of the Buyer to) advise, solicit or induce any
Executive or Portfolio Manager (as such terms are hereinafter defined) to leave
his or her employment with any Seller prior to the first anniversary of the
earlier of the Closing and any termination of this Agreement pursuant to
Section 13. "Executive" means any person listed on Schedule 7.10(b) or the
successor of any such person in the position currently held by such person.
"Portfolio Manager" means any portfolio manager of an Acquired Fund. Upon a
Closing, the Buyer's obligation not to solicit Portfolio Managers shall lapse
and be replaced by its obligation under the applicable provision of the
Subadvisory Agreements.
<PAGE>
1 Sellers' Access. After the Closing, the Buyer and its
subsidiaries shall make the books and records acquired from the Sellers, as well
as the Buyer's employees, accountants, attorneys and representatives, available
to the Sellers upon reasonable notice for the Sellers' tax or other purposes for
review and to make copies of extracts of such books and records.
2 Purchase Price Allocation. The Purchase Price shall be
allocated in the manner set forth in Schedule 7.12 and the Buyer and the Sellers
shall, for all purposes, be bound by such allocation. The Buyer and the Sellers
agree that any report filed by any of them after the Closing for federal, state
or local tax or other purposes that states, is based on or in any way relates to
an allocation of the Purchase Price will reflect and be consistent with the
allocation contemplated by Schedule 7.12.
2. Securities Law Matters.
1 Proxy Statement and Reorganization.
(a) The parties shall cooperate with one another to obtain
approvals from each Continuing Fund for a new investment management agreement
between such Continuing Fund and the Buyer on substantially the same terms,
including such management and sub-advisory fees as may be agreed upon by the
Buyer and the Sellers, with the present agreement between such Continuing Fund
and Advisors in the form of Exhibit 8.1(a), and the applicable Subadvisory
Agreement. The Sellers agree to use their reasonable best efforts to cause each
Continuing Fund to call a meeting of the governing body and shareholders of each
such Continuing Fund to consider and approve the entering by such Continuing
Fund into such new investment management agreement.
(b) The Sellers shall use their reasonable best efforts to
cause the governing body and shareholders of (1) each Reorganized Fund to
consider and approve the applicable Reorganization Agreement and the action
contemplated therein and the applicable Advisory Agreement; and (2) each
Continuing Fund to approve the applicable Advisory Agreement and Subadvisory
Agreement. The Buyer shall use its reasonable best efforts to cause the
governing body of each Surviving Fund to consider and approve the applicable
Reorganization Agreement and applicable Advisory Agreement.
(c) The Sellers shall assist each of the Acquired Funds to
prepare and file with the SEC as soon as is reasonably practicable a preliminary
proxy statement, together with a form of proxy, to be used in connection with
the meeting of the shareholders of each such Acquired Fund and, as promptly as
practicable thereafter, subject to compliance with the rules and regulations of
the SEC, definitive proxy statements with respect to such meetings shall be
mailed to the shareholders of such Acquired Funds. The Buyer shall assist each
Surviving Fund to prepare and file with the SEC, concurrently with the
preliminary proxy statement of the applicable Reorganized Fund, a preliminary
prospectus of such Surviving Fund relating to the securities of such Surviving
Fund to be issued upon consummation of its acquisition of and reorganization
with such Reorganized Fund and, concurrently with the filing by such Reorganized
Fund of a definitive proxy statement with respect thereto, subject to compliance
with the rules and regulations of the SEC, a final prospectus of such Surviving
Fund relating to such issuance. The term "Proxy Statement" shall mean each
proxy statement and related proxy and, to the extent applicable the related fund
prospectus of a Surviving Fund, at the time such documents are initially mailed
to any such Acquired Fund's shareholders and all amendments or supplements
thereto, if any, similarly filed and mailed. None of the information provided
and to be provided by the Sellers or the Buyer for use in each Proxy Statement
shall, on the date such Proxy Statement is first mailed to shareholders and on
the date of the meeting called to consider such matter, be false or misleading
with respect to any material fact or omit to state any material fact required to
be stated therein, and such information or facts shall not be, in light of the
circumstances in which they are made, misleading, and each of the Sellers and
the Buyer agrees to correct at its sole expense any information provided by it
for use in such Proxy Statement which shall have become false or misleading in
any material respect. Each Proxy Statement shall comply as to form in all
material respects with all applicable requirements of federal securities laws.
<PAGE>
(d) The Sellers (with respect to the Acquired Funds) shall
assist in the solicitation of proxies for the meetings referred to herein and
shall use their respective reasonable best efforts to obtain approval from the
shareholders and the governing bodies thereof of the matters referred to herein.
The Buyer (with respect to the Surviving Funds) shall use its reasonable best
efforts to obtain approval from the governing bodies thereof of the matters
referred to herein.
2 Required Continuing Fund Actions. The Sellers shall use
their reasonable best efforts to cause each Continuing Fund to:
(a) approve entering into a written distribution agreement
(as complies with the Investment Company Act) with the Buyer or the Buyer's
designated subsidiary substantially in the form of Exhibit 8.2(a);
(b) approve entering into a written transfer agency
agreement with the Buyer or the Buyer's designated subsidiary providing for
transfer agency, dividend disbursing and shareholder services to such fund
substantially in the form of Exhibit 8.2(b);
(c) approve the assignment of, or entering into, any plan
of distribution adopted pursuant to Rule 12b-1 under the Investment Company Act
and any contracts and agreements related thereto on terms substantially similar
to those presently in effect including, without limitation, the assignment, if
applicable, of such Continuing Funds' underwriting agreement with Distributors
(except as set forth in Exhibit 8.2(c));
(d) approve entering into a joint insured fidelity bond and
D&O and E&O insurance policy between each Continuing Fund, the other Oppenheimer
Funds (if requested by the Buyer) and the Buyer or its designated subsidiary on
terms similar to the current agreement with such Continuing Fund;
(e) approve continuation after consummation of the
transactions contemplated hereby of operating policies and procedures heretofore
from time to time adopted by the Board of Directors of such Continuing Fund;
(f) approve any amendment or other modification to any
existing licensing agreement between any Seller and a Continuing Fund to conform
the same to the terms of the License Agreement and to permit such Continuing
Fund to use "Quest for Value"; and
(g) approve entering into a written administrative
agreement with the Buyer or the Buyer's designated subsidiary substantially in
the form of Exhibit 8.2(g).
<PAGE>
3 Forms ADV and BD. Prior to the Closing, the Sellers shall
consult with the Buyer in the Buyer's preparation and filing of all forms and
amendments to forms, including, without limitation, Forms ADV and BD of the
Buyer and such of its subsidiaries as the Buyer may designate to be filed with
federal agencies and self-regulatory organizations and the state securities
commissions, and all other documents required to be filed or delivered under
applicable federal and state laws, and regulations promulgated thereunder,
including, without limitation, the Advisers Act, the 1934 Act and the Investment
Company Act and applicable related state acts and insurance laws, as a result of
the consummation of the transactions contemplated by this Agreement and in order
to put the Buyer and its subsidiaries in the position to fully operate and
engage in the Acquired Business from the Closing Date. The Buyer will provide
the Sellers with a copy of its proposed amended Forms ADV and BD prior to filing
such forms with the federal agencies.
4 Section 15(f).
(a) The Buyer and the Sellers intend to structure and
complete the transactions contemplated by this Agreement and the Buyer and the
Sellers have entered into this Agreement in reliance upon the benefits and
protections provided by Section 15(f) of the Investment Company Act, and (i)
each Seller covenants that prior to the Closing it will conduct its business and
the business of each Acquired Fund and (ii) the Buyer covenants that following
the Closing it will conduct the business of the Buyer and will use its
reasonable best efforts to assure that the business of each Acquired Fund which
elects to enter into an investment management agreement with the Buyer or any
affiliate of the Buyer conduct its business, in each case so as to assure that:
(A) for a period of three years after the Closing, at
least 75% of the members of the board of directors or trustees of each Acquired
Fund are not (x) interested persons of the then current investment manager of
such Acquired Fund or (y) interested persons of the Seller or any affiliate of
the Seller that was the investment manager of such Acquired Fund on the date
immediately preceding the Closing Date; and
(B) there is not imposed on any such Acquired Fund an
"unfair burden" as a result of the transactions contemplated by this Agreement,
any payments in connection therewith, or understandings applicable thereto.
(b) The Buyer further covenants that following the Closing
it will use its reasonable best efforts to encourage and assist such Acquired
Funds and the Boards of Directors or trustees of such Acquired Funds to conduct
the respective businesses of the Acquired Funds in accordance with Section
8.4(a) hereof.
(c) The terms used in this Section 8.4 shall have the
meanings set forth in Section 15(f) of the Investment Company Act.
<PAGE>
2 Subsequent Compliance. The Buyer covenants that, for a
period of three years from the Closing Date, neither it nor any subsidiary or
affiliate will voluntarily engage in any transactions which would constitute an
assignment of any investment management agreement with any Acquired Fund to
which the Buyer, any subsidiary or affiliate is a party without first obtaining
a covenant in all materials respects the same as that contained in Section 8.4
hereof. The reorganization of an Acquired Fund with a Surviving Fund shall not
be considered such an assignment.
3 Conditions Precedent to Effectiveness of Agreement.
Notwithstanding any other provision of this Agreement, none of the Sellers shall
have any obligation hereunder or otherwise, directly or indirectly, to sell,
assign or transfer or take any action which would constitute an assignment (as
"assignment" may, at any time, be defined under the Investment Company Act) of
any investment advisory agreement which Advisors now has or shall have with any
person until, as a condition precedent thereto, the Board of Directors or other
governing body and shareholders of each Acquired Fund shall have approved
entering into new investment advisory agreements with the Buyer or its
designated subsidiary in compliance with Section 15 of the Investment Company
Act and not revoked or withdrawn such approval.
2. Conditions Precedent to the Obligation of the Buyer to Close.
The obligation of the Buyer to enter into and complete the Closing is subject,
at the option of the Buyer, to the fulfillment on or prior to the Closing Date
of the following conditions, any one or more of which may be waived by it:
1 Representations and Covenants. The representations and
warranties of the Sellers contained in this Agreement (a) that are qualified as
to materiality shall be true and correct on and as of the Closing Date and (b)
that are not qualified as to materiality shall be true and correct in all
material respects on and as of the Closing Date, with the same force and effect
as though made on and as of the Closing Date. The Sellers shall have performed
and complied in all material respects with all covenants and agreements required
by this Agreement to be performed or complied with by the Sellers on or prior to
the Closing Date. The Sellers shall have delivered to the Buyer a certificate,
dated the Closing Date and signed by each of the Sellers, to the foregoing
effect and stating all conditions to the Buyer's obligations hereunder have been
satisfied.
2 Governmental Permits, Approvals and Filings. Any and all
permits and approvals from any governmental or regulatory body required to be
disclosed on Schedule 5.5 shall have been obtained.
3 Third Party Consents. Subject to Section 9.8, all consents,
permits and approvals from parties to any contracts or other agreements with the
Sellers and included in the Purchased Assets, including all of the Sellers'
investment advisory and other fund agreements, which are required in a
connection with the performance by the Sellers of their respective obligations
under this Agreement or the continuation of such contracts or other agreements
after the Closing, shall have been obtained.
4 Opinion of Counsel to the Sellers. The Buyer shall have
received the respective favorable opinions of Weil, Gotshal & Manges, counsel to
the Sellers, Thomas E. Duggan, General Counsel of OpCap, and Delaware counsel to
the Sellers reasonably satisfactory to the Buyer, dated the Closing Date,
addressed to the Buyer and covering the matters set forth on Exhibit G.
<PAGE>
5 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental body or instituted or threatened by
any governmental agency or body to restrain or prevent the consummation of the
transactions contemplated hereby, or which would have, in the reasonable opinion
of the Buyer, a material adverse effect on the Acquired Business. The SEC shall
not have issued an unfavorable advisory report under Section 25(b) of the
Investment Company Act nor instituted nor threatened to institute any proceeding
seeking to enjoin consummation of the reorganizations contemplated hereby under
Section 25(c) of the Investment Company Act.
6 Operative Agreements. At the Closing, the Sellers shall
have executed and delivered to the Buyer the Operative Agreements to which they
are contemplated hereunder to be parties.
7 Hart-Scott-Rodino. The waiting period specified in the HSR
Act, including any extensions thereof, shall have expired or terminated.
8 Fund Consents. The governing bodies and, where required,
shareholders of Acquired Funds which in the aggregate have at least 75% of the
Closing Net Assets of all Acquired Funds shall have taken all necessary action
to authorize and approve the actions proposed pursuant to Sections 8.1, 8.2 and
8.4, and there shall have been delivered to the Buyer true and complete copies,
certified by the respective Secretaries of such Acquired Funds, of the
resolutions of the governing bodies and shareholders of each Acquired Fund
effecting such actions. The composition of the boards of trustees of each
Continuing Fund and Reorganized Fund on the Closing Date shall be consistent
with Section 8.4(a)(A).
3. Conditions Precedent to the Obligation of the Sellers to Close.
The obligation of the Sellers to enter into and complete the Closing is subject,
at the option of the Sellers, to the fulfillment of the following conditions,
any one or more of which may be waived:
1 Representations and Covenants. The representations and
warranties of the Buyer contained in this Agreement (a) that are qualified as to
materiality shall be true and correct on and as of the Closing Date and (b) that
are not qualified as to materiality shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. The Buyer shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date. The Buyer shall have delivered to the Sellers a certificate, dated the
Closing Date and signed by an officer of the Buyer, to the foregoing effect and
stating that all conditions to the Sellers' obligations hereunder have been
satisfied.
<PAGE>
2 Opinion of Counsel to the Buyer. The Sellers shall have
received the favorable opinion of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, counsel to the Buyer and Colorado counsel to the Buyer reasonably
satisfactory to the Sellers, dated the Closing Date, addressed to the Sellers,
and covering the matters set forth on Exhibit H.
3 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or instituted or
threatened by any governmental or regulatory body to restrain or prevent the
consummation of the transactions contemplated hereby. The SEC shall not have
issued an unfavorable advisory report under Section 25(b) of the Investment
Company Act nor instituted nor threatened to institute any proceeding seeking
to enjoin consummation of the reorganizations contemplated hereby under Section
25(c) of the Investment Company Act.
4 Hart-Scott-Rodino. The waiting period specified in the HSR
Act, including any extensions thereof, shall have expired or terminated.
5 Operative Agreements. At the Closing, the Buyer or a
Designated Subsidiary shall have executed and delivered to the Sellers the
Operative Agreements and the Assumption Agreement to which it is contemplated
hereunder to be a party.
6 Compliance by Funds with 15(f). The Board of Directors or
Trustees of each Acquired Fund shall have adopted a resolution that for a period
of three years after the Closing, at least 75% of the members of the board of
directors or trustees of each Acquired Fund will not be (a) interested persons
of the then current investment manager of such Acquired Fund or (b) interested
persons of the Seller or any affiliate of the Seller that was the investment
manager of such Acquired Fund on the date immediately preceding the Closing Date
(within the meaning of such terms under Section 15(f) of the Investment Company
Act).
7 Governmental Permits, Approvals and Filings. Any and all
permits and approvals from any governmental or regulatory body which are
material to or necessary to permit the operation of the Acquired Business by the
Buyer or filings required to be made under Section 8.3 shall have been obtained
or filed, as the case may be.
4. Survival of Representations and Warranties. Notwithstanding any
right of any party fully to investigate the affairs of the other party or
parties and notwithstanding any knowledge of facts determined or determinable
by such party pursuant to such investigation or right of investigation, such
party has the right to rely fully upon the representations, warranties,
covenants and agreements of the other party or parties contained in this
Agreement, in connection with the transactions contemplated by this Agreement.
All such representations and warranties, and all such covenants and agreements
required to be performed prior to the Closing Date, shall survive the execution
and delivery hereof and the Closing hereunder until twelve months after the
Closing Date. All other covenants and agreements of any party shall survive such
execution, delivery and Closing indefinitely.
<PAGE>
5. Indemnification.
1 Obligation of the Sellers to Indemnify. (a) Subject to the
limitations contained in Section 11, the Sellers jointly and severally shall
indemnify, defend and hold harmless the Buyer and any of its affiliates and
assigns from and against any losses, liabilities, damages, deficiencies or
expenses (including interest, penalties and reasonable attorneys' fees, but net
of any identifiable insurance proceeds actually received) ("Losses") arising out
of or due to:
(i) a breach of any representation or warranty of any of
the Sellers contained in this Agreement; provided, however, that, solely for the
purpose of this clause (i) the existence of a breach, and the measurement of any
resulting Losses, arising from any representation and warranty of the Sellers
contained in Section 5 shall be determined as if such representation and
warranty did not include any qualification as to materiality;
(ii) a breach of any covenant or agreement of any of the
Sellers contained in this Agreement; or
(iii)any liability or obligation with respect to the
Acquired Business or the Purchased Assets (other than the Assumed Liabilities),
including, without limitation, any liability to which it may become subject as
a result of the fact that the transactions contemplated by this Agreement are
being effected, at the request of the Sellers, without compliance with the
provisions of any Bulk Sales Act or any similar statute as enacted in any
jurisdiction, domestic or foreign.
(b) Subject in all cases to Section 12.4, the Buyer shall be
entitled to offset against any amounts owed by the Buyer or its affiliates to
any Seller any Losses of the Buyer or its affiliates for which the Sellers are
obligated to indemnify hereunder as follows:
(i) subject to compliance with Section 12.3, to the extent
such Losses consist of final judgments against the Buyer or an affiliate,
amounts owing under a settlement agreement entered into in accordance with this
Section 12, the liquidated amount of any Losses as to which the Sellers do not
dispute liability hereunder and any claims (and any related Losses) as to which
the Sellers have failed to assume the defense in accordance with Section
12.3(b), the Buyer may immediately offset such Losses; and
(ii) to the extent of any other Losses, the Buyer may
immediately offset such Losses unless and for so long as the Sellers (x)
promptly provide to and for the benefit of the Buyer and its affiliates an
irrevocable letter of credit, in form and with a money center bank reasonably
satisfactory to the Buyer, in an amount equal to the lesser of (A) the amount
of such other Losses and (B) $5,000,000 and having a term of not less than two
years and (y) within a reasonable period have provided in their financial
statements reserves for such Losses that are adequate in the reasonable
determination of the Sellers after consultation with their independent public
accountants.
<PAGE>
2 Obligation of the Buyer to Indemnify. The Buyer shall
indemnify, defend and hold harmless the Sellers from and against any Losses
arising out of or due to (i) a breach of any representation or warranty of the
Buyer contained in this Agreement, (ii) a breach of any covenant or agreement of
the Buyer contained in this Agreement and (iii) the Assumed Liabilities;
provided, however, that, solely for the purpose of clause (i), the existence of
a breach, and the measurement of any resulting Losses, arising from any
representation or warranty of the Buyer contained in Section 6 shall be
determined as if such representation and warranty did not include any
qualification as to materiality.
3 Notice and Opportunity to Defend. (a) If any person
entitled to indemnification pursuant to this Section 12 (an "Indemnified
Person") receives notice of any claim or the commencement of any suit, action,
proceeding or investigation with respect to which any other person (or persons)
is obligated to provide indemnification (an "Indemnifying Person") pursuant to
this Section 12, the Indemnified Person shall promptly give the Indemnifying
Person notice thereof (an "Indemnification Notice"), but the failure to give an
Indemnification Notice to the Indemnifying Person shall not affect the
Indemnified Person's right to indemnity hereunder except to the extent that the
Indemnifying Person shall have been prejudiced in its ability to defend the
suit, action, claim, proceeding or investigation for which such indemnification
is sought by reason of such failure. Any Indemnification Notice shall state
specifically the representation, warranty or covenant with respect to which the
claim is made, the facts giving rise to an alleged basis for the claim, and the
amount of the liability (if ascertainable) asserted against the Indemnifying
Person by reason of the claim.
(a) Upon receipt of an Indemnification Notice, the
Indemnifying Person shall have the absolute right after receipt of the
Indemnification Notice at its option and at its cost and expense to assume the
defense of such suit, action, claim, proceeding or investigation with respect to
which it is called upon to indemnify an Indemnified Person pursuant to this
Section 12; provided, however, that notice of the Indemnifying Person's
intention to assume such defense shall be delivered by the Indemnifying Person
to the Indemnified Person within a reasonable time in light of the circumstances
then and there existing. If the Indemnifying Person elects to assume the
defense of such suit, action, claim, proceeding or investigation, as the case
may be, the Indemnifying Person shall promptly retain counsel reasonably
satisfactory to the Indemnified Person. The Indemnified Person shall have the
right to employ its own counsel in any such suit, action, claim, proceeding or
investigation, but the reasonable fees and expenses of such counsel shall be at
the expense of the Indemnified Person unless: (i) the employment of such
counsel shall have been authorized by the Indemnifying Person; (ii) the
Indemnifying Person shall not have retained counsel reasonably satisfactory to
the Indemnified Person to take charge of the defense of such suit, action,
claim, proceeding or investigation within a reasonable time after written demand
by the Indemnified Person; or (iii) independent counsel for the Indemnified
Person shall have reasonably concluded that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Person, in which event, such reasonable fees and
expenses (including, without limitation, any fees paid to witnesses) shall be
borne by the Indemnifying Person.
<PAGE>
(b) If an Indemnifying Person elects to assume the defense
of any suit, action, claim, proceeding or investigation for which it is called
upon to indemnify an Indemnified Person pursuant to this Section 12: (a) no
compromise, settlement or consent to judgment thereof may be effected by the
Indemnifying Person without the Indemnified Person's written consent (which
shall not be unreasonably withheld or unreasonably delayed) unless: (i) there
is no finding or admission or any violation of any judgment, ruling, order,
writ, award, decree, statute, law, ordinance, code, rule or regulation of any
court or foreign, federal, state, county, or local government or any other
governmental, regulatory or administrative agency or authority or any violation
of the rights of any person by the Indemnified Person and no effect on any other
suit, action, claim, proceeding or investigation that may be made against the
Indemnified Person; and (ii) the sole relief provided is monetary damages that
are paid in full by the Indemnifying Person; and (b) except as set forth in
clause (a), the Indemnified Person shall have no liability with respect to any
compromise or settlement thereof effected without its consent (which shall not
be unreasonably withheld or unreasonably delayed).
(c) If the Indemnifying Person fails to give written notice
to the Indemnified Person of its election to assume the defense of any suit,
action, claim, proceeding or investigation for which it is called upon to
indemnify any Indemnified Person pursuant to this Section 12 within 30 days
after the Indemnified Person gives the Indemnification Notice to the
Indemnifying Person, the Indemnifying Person shall,subject to Section 12.4, be
bound by any determination made in such suit, action, claim proceeding or
investigation or compromise or settlement thereof effected by the Indemnified
Person, provided that the Indemnified Person shall give the Indemnifying Party
ten days written notice prior to entering into a compromise or settlement or
consenting to a judgment and no compromise, settlement or consent to judgment
may be effected by the Indemnified Person without the Indemnifying Person's
written consent (which shall not be unreasonably withheld or unreasonably
delayed).
12.4 Limitation on Indemnification. Notwithstanding Sections 12.1 and
12.2 hereof, no Indemnifying Person shall be obligated to indemnify, defend or
hold harmless any Indemnified Person with respect to any breach of any of its
respective representations and warranties and Section 7.4 unless the aggregate
amount of Losses incurred by such Indemnified Person exceeds $250,000, but if
the aggregate amount of such Losses does exceed $250,000 such Indemnifying
Person shall only be obligated to indemnify, defend and hold harmless such
Indemnified Person for the amount of all Losses in excess of such $250,000
amount; provided, however, in no event shall the aggregate liability of the
Sellers or the Buyer to indemnify, defend and hold harmless any Indemnified
Person for the breach of any such representations and warranties hereunder and
Section 7.4 exceed $5,000,000.
<PAGE>
12.5 Payment Procedure. After any final judgment or award shall have
been rendered by a court, arbitration board or administrative agency of
competent jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement shall have been consummated pursuant to the
procedures set forth in Section 12.3, or the Indemnifying Person and the
Indemnified Person shall have arrived at a mutually binding agreement with
respect to each separate matter indemnified hereunder, the Indemnified Person
shall forward to the Indemnifying Person notice of any sums due and owing by it
pursuant to this Agreement with respect to such matter and the Indemnifying
Person shall be required to pay all of the sums so owing to the Indemnified
Person by certified or bank cashier's check in New York Clearing House funds,
within 10 days after the date of such notice.
1. Termination of Agreement.
1 This Agreement may be terminated with respect to any Acquired
Fund prior to the Closing as follows:
(a) at the election of the Sellers, if any one or more of
the conditions to their obligation to close with respect to such Acquired Fund
has not been fulfilled on or before February 29, 1996;
(b) at the election of the Buyer, if any one or more of the
conditions to its obligation to close with respect to such Acquired Fund has not
been fulfilled on or before February 29, 1996; and
(c) at any time on or prior to the Closing Date, by mutual
written consent of the Sellers and the Buyer.
2 If this Agreement so terminates with respect to any Acquired
Fund, it shall become null and void and have no further force or effect only
with respect to such Acquired Fund, except as otherwise provided in this
Agreement, but no such termination shall relieve any party hereto of any
liability to another party hereto (a) with respect to any Acquired Fund for
which a Closing has occurred and (b) for any breach of this Agreement prior to
the date of such termination.
2. Miscellaneous
1 Certain Definitions. As used in this Agreement, the
following terms have the following meanings unless the context otherwise
requires:
(a) "affiliate" with respect to any person, means and
includes any person controlling, controlled by or under common control with
such person.
<PAGE>
(b) "contracts and other agreements" means and includes all
contracts, agreements, indentures, bonds, leases, mortgages, franchises,
licenses, commitments or binding arrangements.
(c) "document or other papers" means and includes any
document, agreement, instrument, certificate, notice, consent, affidavit,
letter, telegram, telex, statement, schedule (including any Schedule to this
Agreement) exhibit (including any Exhibit to this Agreement) or any other paper
whatsoever.
(d) "knowledge" means with respect to the Buyer or the
Sellers, the actual knowledge of the respective officers or other persons
identified on Schedule 14.1 or, in either case, the actual knowledge any such
person would have had after reasonable inquiry.
(e) "lien or other encumbrance" means and includes any
lien, pledge, mortgage, security interest, claim, lease, charge, option, right
of first refusal, easement or any other encumbrance whatsoever.
(f) "person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust
unincorporated organization or other entity.
(g) "property" means real, personal or mixed property.
2 Publicity. Prior to the Closing or termination of this
Agreement, and except as required by law, no press release or announcement
concerning this Agreement or the transactions contemplated hereby shall be
issued without advance approval of the form and substance thereof by the
Sellers and the Buyer.
3 Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, telecopied, sent by certified, registered or express mail, postage
prepaid or sent by national next-day delivery service and shall be deemed given
when so delivered personally or telecopied, or it mailed, two days after the
date of mailing, or if by next-day delivery service, on the business day
following delivery thereto, as follows or to such other location as any party
notifies any other party:
(i) if to the Buyer to:
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Attention: Andrew J. Donohue,
Executive Vice President and
General Counsel
Telecopier: 212-321-1159
with a copy to:
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
Attention: Jay G. Baris
Telecopier: 212-715-8000
<PAGE>
(ii) if to the Sellers to:
Oppenheimer Capital
Oppenheimer Tower
World Financial Center
New York, New York 10281
Attention: Thomas E. Duggan
Secretary and General Counsel
Telecopier: 212-349-4759
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Jeffrey E. Tabak
Telecopier: 212-310-8007
1 Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto and other documents required to be delivered hereunder or
incorporated by reference herein) contains the entire agreement among the
parties with respect to the subject matter hereof and related transactions and
supersedes all prior agreements, written or oral, with respect thereto.
2 Waivers and Amendments. This Agreement may be amended,
modified, superseded or canceled, and the terms and conditions hereof may be
waived only by a written instrument signed by the parties or, in the case of a
waiver, the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. Except as provided
in Section 12 (which shall be the exclusive remedy of any party for money
damages in respect of any Loss), the rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which any party may
otherwise have at law or in equity. The rights and remedies of any party
arising out of or otherwise in respect of any inaccuracy in or breach of any
representation, warranty, covenant or agreement contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy or breach is
based may also be the subject matter of any other representation, warranty,
covenant or agreement contained in this Agreement (or in any other agreement
between the parties) as to which there is no inaccuracy or breach.
<PAGE>
3 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State (without regard
to the conflicts of laws principles of such State).
4 No Assignment. This Agreement is not assignable by act of
any party or by operation of law except with the written consent of the
non-assigning party (which consent will not be unreasonably withheld or
delayed), but no such assignment shall relieve the assigning party of any
obligation or liability hereunder.
5 Severability. In case one or more of the provisions
contained in this Agreement shall be or become invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
6 Variations in Pronouns. All pronouns and any various
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person of persons may require.
7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8 Exhibits and Schedules. The Exhibits and Schedules to this
Agreement are hereby made a part of this Agreement as if set forth in full
herein.
9 Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
interpretation of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
OPPENHEIMER MANAGEMENT CORPORATION
By:_____________________________________
OPPENHEIMER CAPITAL
By: Oppenheimer Financial Corp., a general partner
By:_________________________________
QUEST FOR VALUE ADVISORS
By: Oppenheimer Financial Corp., a general partner
By:_________________________________
QUEST FOR VALUE DISTRIBUTORS
By: Oppenheimer Financial Corp., a general partner
By:_________________________________
<PAGE>
Schedule A
The following are the Acquired Funds:
A. The Reorganized Funds
Quest For Value U.S. Government Income Fund
Quest For Value Investment Quality Income Fund
Quest For Value Global Income Fund
Quest For Value National Tax-Exempt Fund
Quest For Value California Tax-Exempt Fund
Quest For Value New York Tax-Exempt Fund
B. The Continuing Funds
Quest For Value Fund
Quest For Value Global Equity Fund
Quest For Value Opportunity Fund
Quest For Value Small Capitalization Fund
Quest For Value Growth & Income Fund
Quest For Value Officers Funds
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF FINANCIAL CONDITION AND STATEMENTS OF INCOME FOUND ON PAGES 3 AND
4 OF THE PARTNERSHIP'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000814562
<NAME> OPPENHEIMER CAPITAL, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> MAY-01-1995
<PERIOD-END> OCT-30-1995
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,557<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 97,444<F2>
<CURRENT-LIABILITIES> 9,623
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 87,821<F3>
<TOTAL-LIABILITY-AND-EQUITY> 97,444
<SALES> 0
<TOTAL-REVENUES> 20,389
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,018
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,018
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
<FN>
<F1>CURRENT ASSETS IS COMPRISED OF CASH ($10), DISTRIBUTION RECEIVABLE ($8,875),
INTEREST RECEIVABLE ($538), AND OTHER ASSETS ($134)
<F2>TOTAL ASSETS INCLUDES CURRENT ASSETS PLUS INVESTMENT IN OPPENHEIMER CAPITAL
($12,517), A NON-TRADE NOTE RECEIVABLE ($32,193), AND GOODWILL ($43,177)
<F3>OTHER SHAREHOLDERS EQUITY IS COMPRISED OF GENERAL PARTNER'S CAPITAL ($892)
AND LIMITED PARTNERS' CAPITAL ($86,929)
</FN>
</TABLE>
