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-------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] Bear Xxxxxxx ----- ACQUISITION OF XXXXXX XXXXX MERCATOR, LLC New York February 2001 -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] TRANSACTION SUMMARY & RATIONALE Overview of the Specialist Business Overview of Xxxxxx Xxxxx Bear -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] TRANSACTION SUMMARY o Bear Hunter, a joint-venture between Bear Xxxxxxx and Xxxxxx Specialists, to acquire Xxxxxx Xxxxx Mercator, LLC the 4th largest NYSE specialist o The combined company, to be called Xxxxxx Xxxxx Bear Specialists, LLC will be the 3rd largest NYSE specialist with over 18% of dollar volume traded o Consideration of approximately $625 million comprised of cash and membership interests in Xxxxxx Xxxxx Bear o Over 30 of Xxxxxx Xxxxx'x 54 current members to continue as members at Xxxxxx Xxxxx Bear o Bear Xxxxxxx increases its ownership in the combined company from approximately 40% to just under 50% o Expected to be immediately accretive to Bear Xxxxxxx 2001 fully diluted GAAP EPS before any synergies o Magnitude of the accretion depends primarily on the level of revenue synergies realized -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] STRATEGIC RATIONALE o SOLIDIFIES MARKET POSITION IN AN ATTRACTIVE BUSINESS - Transaction creates the 3rd largest NYSE specialist firm - The specialist business has exhibited 35% earnings growth and 25% revenue growth over the past five years - Returns on equity and capital employed have been in the high 20%/low 30% range over the last few years o COMPLEMENTS BEAR XXXXXXX' EXISTING FRANCHISES - Bolstering the specialist business is a vital extension of Bear Xxxxxxx' strategy of being a leading provider of liquidity, execution and clearing services - Potential synergies with Bear Xxxxxxx' industry leading clearance operation, equity sales and trading franchise and investment banking effort o ENHANCES EXISTING SPECIALIST BUSINESS - Diversifies portfolio of specialist stocks - Adds significant talent and management depth o FAMILIAR BUSINESS TO BEAR XXXXXXX - BEAR HUNTER JOINT-VENTURE STARTED IN 1975 -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] Transaction Summary & Rationale OVERVIEW OF THE SPECIALIST BUSINESS Overview of Xxxxxx Xxxxx Bear -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] THE NYSE IS THE WORLD'S LARGEST EQUITY MARKET Daily Average Shares Traded 1.04 billion in 2000 25% CAGR over 5 years Total Value of Shares Traded $11.0 trillion Market Cap of Listed Companies $12.3 trillion Share Trading Volume as % of Total 44% of the US/25% of the World Total Number of NYSE Listed Firms 2,862 (347 are non-US) Source: NYSE Reference Sheet January 2001, 1999 NYSE Fact Book -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] AVERAGE DAILY REPORTED SHARE VOLUME NYSE volume, a key driver of specialist revenues, has shown strong long term growth [Bar Chart depicting the following:] YEAR REVENUE IN MILLIONS 1990 $ 157 1991 179 1992 202 1993 265 1994 291 1995 346 1996 412 1997 527 1998 674 1999 809 2000 1,042 Source: NYSE Reference Sheet January 2001, 1999 NYSE Fact Book -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] NYSE SPECIALIST RETURNS The Specialist business has been consistently profitable and growing with consolidation contributing to better margins [Bar graph depicting the following:] YEAR SPECIALIST REVENUES 1995 702 1996 808 1997 1,028 1998 1,172 1999 1,566 2000 (1) 2,124 YEAR Specialist After-tax Profit XXX 1995 162 16.4% 1996 201 16.8% 1997 268 21.1% 1998 305 20.0% 1999 461 22.0% 2000 (1) 741 27.5% Source: NYSE (1) For the nine months ended September 30, 2000, annualized -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] CONSOLIDATION OF NYSE SPECIALISTS There has been a dramatic consolidation among specialists which are expected to number fewer than ten by 2005 [Bar graph depicting the following:] YEAR NUMBER OF SPECIALISTS 1987 55 1994 39 2001 15 (1) 2005E 6-10 o NYSE is encouraging the emergence of fewer, better capitalized firms. - Required to execute a greater number of trades in a shorter time with greater price volatility. - Called upon to take longer positions in their specialist stocks. o Able to transition more easily to more automated marketplace. o Reduce/avoid internal opposition to NYSE as it attempts to modernize. Source: SSB Research October 1999, XxXxxxxxx Annual Report. (1) Pro Forma for three pending mergers, including Xxxxxx Xxxxx Bear. -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] RECENT SPECIALIST ACQUISITIONS ---------------------------------------- --------------------------------------- ACQUIRER RECENT TRANSACTIONS ---------------------------------------- --------------------------------------- XxXxxxxxx & Co. o Xxxx Xxxx XxXxxxx o Henderson Brothers o Webco Securities ---------------------------------------- --------------------------------------- Xxxxxxx Xxxxx o Spear, Leeds & Xxxxxxx o Xxxxxxxx Xxxxxxxx ---------------------------------------- --------------------------------------- Xxxxxx Xxxxx Bear x Xxxx Xxxxxxx o CMJ Partners ---------------------------------------- --------------------------------------- FleetBoston Financial x Xxxxxxx Xxxxx Specialists o X.X. Xxxxxx ---------------------------------------- --------------------------------------- Van der Moolen o Fagenson, Xxxxxxx & Xxxxxxxxx ---------------------------------------- --------------------------------------- -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] NEW STOCK ALLOCATIONS Size is an increasingly important factor in getting new listings. The top three players won well over half of the new stock listings in 2000 compared to just over 40% in 1999 [Pie chart depicting that in 2000(1), the top three players in the industry had 55% of the new stock listings, compared to 45% for all other players. (Based on a total of 100 stocks).] [Pie chart depicting that in 1999, the top three players in the industry had 41% of the new stock listings, compared to 59% for all other players. (Based on a total of 144 stocks).] (1) For the eleven months ended November 30, 2000. Source: Bear Hunter -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] TOP NYSE SPECIALISTS The acquisition of Xxxxxx Xxxxx by Bear Hunter places Xxxxxx Xxxxx Bear in a powerful position, among the top 5 specialists who control over 90% of NYSE volume 2000 (1) RANK SPECIALIST % OF $ % OF SHARE # OF NYSE ---- VOLUME (2) VOLUME (2) COMMON STOCKS (3) 1 XxXxxxxxx & Co. 26.7% 26.9% 514 2 Xxxxx, Leeds & Xxxxxxx 20.1 20.3 498 3 XXXXXX XXXXX BEAR 18.2 16.4 359 4 Fleet Xxxxxx 17.6 17.1 416 5 Van der Moolen 9.1 8.8 240 ----------------------------------------- Top Five Market Share 91.7% 89.5% 77% 6-15 Remaining Ten Market 8.3% 10.5% 22% Share (1) Pro Forma for all pending and recently completed acquisitions. (2) For the twelve months ended 12/31/00. (3) As of February 5, 2001. Source: NYSE -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] Transaction Summary & Rationale Overview of the Specialist Business OVERVIEW OF XXXXXX XXXXX BEAR -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] XXXXXX XXXXX BEAR SPECIALISTS, LLP o 3rd Largest NYSE specialist responsible for over 18% of all NYSE dollar volume traded o Specialist for 359 NYSE common stock issues - 4 of the 30 Dow Xxxxx Industrial Average Stocks - 73 of the S&P 500 stocks - 40 of the 250 most active issues on the NYSE in 2000 -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] OVERVIEW OF BEAR HUNTER Rank by Dollar Volume o 6th largest Dollar Volume o 6.7% of NYSE Net Revenues (LTM - 12/31/00) o $271 million Stock Listings (domestic) o 133 NYSE common stock listings o 1 of the 30 DJIA stocks and 21 of the stocks comprising the S&P 500 o Key Listings include: Xxxxxx Labs, Alcoa, Aetna, AMD, American General, Bank of New York, Bank One, EMC, Texaco, Texas Instruments and Xxxxxxxx Xxxxx Stock Listings (ADR's) o Key Listings include: Telefonica Espana, Kyocera, British Telecom, London Pacific Group, Rostelecom Employees o 193 full-time employees including 18 specialists -------------------------------------------------------------------------------- [Bear Xxxxxxx Logo] OVERVIEW OF XXXXXX XXXXX Rank by Dollar Volume o 4th largest Dollar Volume o 11.5% of NYSE Net Revenues (LTM - 12/31/00) o $210 million Stock Listings (domestic) o 226 NYSE common stock listings o 3 of the 30 DJIA stocks and 52 of the stocks comprising the S&P 500 o Key Listings include: Avon Products, Citigroup, Corning, Hasbro, Lockheed Xxxxxx, Xxxxx & XxXxxxxx, Xxxxxxx Xxxxx, Motorola, PepsiCo, Pharmacia and Xxxxxxx & Xxxxxx Stock Listings (ADR's) o Key Listings include: Vodafone, Deutsche Telekom, Toronto-Dominion Bank, China Eastern Airlines and Infineon Technologies Employees o 163 full-time employees including 47 specialists