SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: Commission file number: 33-89966
December 31, 1998
TREMONT ADVISERS, INC.
(Name of small business issuer in its charter)
Delaware 06-1210532
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
555 Theodore Fremd Avenue, Rye, New York 10580
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (914) 925-1140
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the Issuer (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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Issuer's knowledge, in the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. x
State issuer's revenues for its most recent fiscal year = $10,656,100
The aggregate market value of the Class A Common Stock held by nonaffiliates of
the Issuer was approximately $4,307,800, based upon the average bid and ask
prices of such stock on March 8, 1999, quoted by the National Quotation Bureau,
LLC in the over-the counter market. The aggregate market value of the Class B
Common Stock held by nonaffiliates of the Issuer was approximately $6,523,400,
based upon the average bid and ask prices of such stock on March 8, 1999, quoted
by the National Quotation Bureau, LLC in the over-the-counter market.
The number of outstanding shares of the Issuer's Class A Common Stock, $.01 par
value was 1,284,718 as of March 8, 1999 and the number of outstanding shares of
the Issuer's Class B Common Stock, $.01 par value was 2,947,104 as of March 8,
1999.
DOCUMENTS INCORPORATED BY REFERENCE
None
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TABLE OF CONTENTS
PART I .................................................................... 1
Item 1. Description of Business.................................... 1
Item 2. Description of Properties.................................. 8
Item 3. Legal Proceedings.......................................... 8
Item 4. Submission of Matters to a Vote of Security Holders........ 9
PART II .................................................................... 10
Item 5. Market For the Registrant's Common Equity and Related
Stockholder Matters...................................... 11
Item 6. Management's Discussion and Analysis....................... 12
Item 7. Financial Statements....................................... 20
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure...................... 43
PART III ...................................... ........................... 44
Item 9. Directors and Executive Officers of the Registrant......... 44
Item 10. Executive Compensation..................................... 45
Item 11. Security Ownership of Certain Beneficial
Owners and Management.................................... 50
Item 12. Certain Relationships and Related Transactions............. 54
Item 13. Exhibits, List and Reports on Form 8-K..................... 57
EXHIBIT INDEX................................................................ 62
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PART I
Item 1. Description of Business
General
Tremont Advisers, Inc. (the "Company" or "Tremont") is a holding
company incorporated in the State of Delaware on June 18, 1987. The Company's
clients are investment funds, investment managers, institutional investors and
high-net worth individuals to whom the Company's subsidiaries provides advice
concerning the organization and management of their investment portfolio or
programs. The Company also provides specialized investment services, sponsors
and manages its own proprietary single-manager and multi-manager investment
funds, and provides marketing and business development consulting services to
investment management firms and individual investment advisers. The Company
derives a significant portion of its revenues from consulting services
agreements with single-manager and multi- manager investment funds or their
sponsors and advisers.
The Company's principal domestic subsidiary, Tremont Partners, Inc.
("TPI"), is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended (the "Advisers Act") and serves either as a co-general
partner or general partner of, and provides investment advisory services to,
three investment limited partnerships.
Tremont (Bermuda) Limited ("TBL"), the Company's principal foreign
subsidiary, is based in Hamilton, Bermuda and provides investment advisory
services to several multi-manager offshore funds. It also acts as the fund
sponsor, primary placement agent and, in some cases, administrator, for a select
group of offshore funds managed by U.S.-based money managers.
Tremont Securities, Inc. ("TSI") is a registered broker dealer and
which assists the Company's other subsidiaries in the purchase and sale of
investment funds and other equities and facilitates soft-dollar arrangements.
On July 13, 1998, the Company formed Tremont Investment Management,
Inc. ("TIMI"), an investment adviser and portfolio manager located in Toronto,
Canada. TIMI, which is 65% owned by the Company, is registered with the Ontario
Securities Commission as an investment counsel and portfolio manager, as well as
a limited market dealer under the Securities Act (Ontario).
On July 14, 1998, the Company formed Tremont Futures, Inc. ("TFI"), a
commodity pool operator and commodity trading adviser registered with the
Commodity Futures Trading Commission and the National Futures Association. TFI
serves as a general partner to one investment limited partnership which also
receives advice from TPI.
On March 11, 1999, the Company acquired all of the outstanding
ordinary (common) shares of TASS Management Limited ("TASS"), a London, England
- - based company specializing in the sale of electronic databases. (See
"Management's Discussion and Analysis - Business Combination" and "Certain
Relationships and Related Transactions - Business Combination.")
Subsidiaries' Services and Operations
The Company's primary objectives are to develop and sponsor its own
proprietary single-manager and multi-manager investment funds and to maintain
and expand its services for single-manager and multi-manager investment programs
or funds. The Company conducts its business through the activities and
operations of its subsidiaries, TPI, TBL, TSI, TIMI, TFI and TASS. Since each
subsidiary markets its services to a distinct and separate group of clients,
some clients may utilize the services of more than
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one of the Company's subsidiaries. At present, the Company's principal revenues
are derived from TPI and TBL which have been actively engaged in seeking new
single-manager and multi-manager investment fund clients. The Company will
continue to develop its own proprietary investment funds, as well as develop its
own distribution for select global and institutional markets.
The significant operations during fiscal 1998 of each of the Company's
then subsidiaries are summarized below.
1. TPI. TPI was formed in 1984 as an asset management firm assisting
pension and profit sharing plans in the design and structure of specialized
investment programs. TPI specializes in non-traditional approaches to management
and its client base includes financial intermediaries, individuals and pension,
retirement and profit sharing plans. TPI also provides consulting services to
several multi-manager investment funds, as well as to institutional and high net
worth investors, although its primary clients have been and continue to be
rendered to plan sponsors or managers of single-manager and multi-manager
investment funds. During the years ended December 31, 1998 and 1997,
approximately 61% and 53%, respectively, of the Company's consolidated revenues
have been derived from TPI's operations. The principal services rendered by TPI
are set forth below.
A. Proprietary Investment Funds. TPI is the general
partner or co-general partner of three domestic limited partnerships to which it
also provides investment advisory and management services for asset-based fees.
Revenues from these proprietary products accounted for approximately 31% and 19%
of the Company's consolidated revenues for the years ended December 31, 1998 and
1997, respectively. TPI's proprietary investment funds are as follows:
The Broad Market Fund, L.P. ("BMF") is a Delaware limited partnership
formed to achieve capital growth through hedged investments. TPI is the general
partner and receives a monthly management fee based upon BMF's net asset value
as of the end of each month. At December 31, 1998, approximate net asset value
was $187.7 million, of which $807,200 was contributed by TPI.
The Broad Market Prime Fund, L.P. ("BMPF") is a
Delaware limited partnership formed to achieve capital growth through a
leveraged investment strategy. TPI is the general partner and receives a monthly
management fee based upon BMPF's net asset value as of the end of each month.
TPI is also reimbursed for certain allocable expenses. At December 31, 1998,
BMPF's approximate net asset value was $149.1 million, of which $56,700 was
contributed by TPI.
GamTree, L.P. ("GamTree") is a multi-manager Delaware
limited partnership formed to achieve long-term capital growth through
diversified asset management. TPI and an affiliate of one of the Company's
principal shareholders, GAMCO Investors, Inc., are co-general partners of
GamTree and receive a quarterly management fee based upon GamTree's net asset
value as of the end of each quarter. In addition, the general partners may
receive an incentive allocation based upon the net asset value of the capital
accounts of the limited partners at the end of each year if there is a gross
profit, after obtaining certain pre-established benchmarks, from GamTree's
investment activities in the relevant fiscal year. At December 31, 1998,
GamTree's approximate net asset value was $1.6 million, of which $177,600 was
contributed by TPI.
During 1998, TPI also served as the general partner of The F.W.
Thompson Fund, L.P. However, due to its weak performance this fund was
dissolved. In addition, effective July 1, 1998, TPI resigned as a co-general
partner of the Meridian Horizon Fund, L.P., ("Meridian"). Subsequently, Meridian
hired TPI as a consultant and as its administrator.
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B. Non-Proprietary Investment Funds. TPI's consulting
services to its non- proprietary investment funds or their sponsors accounted
for approximately 24% and 19% of the Company's consolidated revenues for the
years ended December 31, 1998 and 1997, respectively. TPI has been instrumental
in the organization and structure of its current major single-manager and multi-
manager investment fund clients. TPI assists the sponsor in the organization of
these funds by: (i) establishing investment objectives and guidelines consistent
with the client's purposes and market; (ii) defining suitable asset classes for
investment; (iii) negotiating fees and other arrangements with investment
advisers and other professionals rendering services to the funds; and
(iv) providing advise regarding fund structure and administration.
Upon organization of a fund, TPI: (i) monitors its investment
performance, including the performance of its investment advisers; (ii)
recommends the retention or replacement of such investment advisers; (iii)
furnishes specialized reports requested by the sponsor or managers of the fund;
and (iv) provides other administrative services as required. In several
instances TPI is also the investment adviser to a fund and, in that capacity,
advises the fund as to the investment of its portfolio assets.
TPI also renders advisory services to investment partnerships, bank
trust funds, and insurance companies in the selection of their investments in
other investment partnerships, funds, and/or separate accounts. In addition to
receiving management fees, TPI may receive consulting fees based on the value of
assets of funds under management of its investment fund clients for which it
provides its consulting or advisory services. From time to time, TPI receives a
performance fee at the end of a fund's first fiscal year and yearly thereafter
in addition to the fees received based on assets under management.
C. Institutional and High Net-Worth Investors. TPI
renders consulting services and investment advice to corporate pension and
profit-sharing plans, state and local retirement systems, and high net worth
individuals. Such services may include: (i) designing and implementing
investment programs, which includes establishing objectives and guidelines; (ii)
identifying and selecting appropriate investment advisers for such programs;
(iii) monitoring the performance of such programs; and/or (iv) administering the
reporting involved in such programs. TPI generally receives annual retainer fees
or asset-based fees for these services.
D. Investment Adviser Research Program. TPI maintains a
continuing research program evaluating and reviewing both domestic and foreign
investment advisers and advisory firms. TPI's employees meet with and interview
over 250 advisory individuals and firms each year. Interviews are conducted with
each adviser or the senior investment personnel of an advisory firm in order to
evaluate such factors as investment approach, style, personnel turnover,
delegation of investment decision making responsibilities, and the number and
type of accounts under management. As a result of this research, TPI has
developed a proprietary computerized database of more than 2,000 investment
advisers and investment advisory firms, including domestic equity, international
equity and fixed income advisers, mutual funds, private limited partnerships,
and offshore funds. This database allows TPI to monitor and evaluate investment
management performance and to simulate the match of a fund's objectives with the
investment characteristics of different or combined investment advisers. In
addition, TPI utilizes its database in advising clients in the selection of
appropriate investment advisers and investment programs.
2. TBL. TBL is as an exempted company organized under the laws of
Bermuda to provide investment management services to offshore investors. TBL
currently provides investment consulting and advisory services to several
multi-manager offshore funds and acts as the fund sponsor and, in some cases,
administrator, for a select group of offshore funds managed by U.S. based money
managers. For the years ended December 31, 1998 and 1997, TBL accounted for
approximately 33% and 40%, respectively, of the Company's consolidated revenues.
Given the growth during recent years
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in the amount of money invested in offshore funds, management believes that TBL
will continue to be a significant contributor to the Company's revenues in the
future. The services rendered by TBL are set forth below.
A. Proprietary Investment Funds. TBL is the sponsor or
co-sponsor of several offshore mutual-funds. TBL provides investment advisory
and management services to these funds and receives asset based fees for its
services. Revenues from these proprietary products accounted for approximately
15% and 7% of the Company's consolidated revenues for each of the years ended
December 31, 1998 and 1997, respectively. TBL's proprietary products are as
follows:
Kingate Global Fund, Ltd.- Class B Shares ("Kingate") is a British Virgin
Islands hedge fund marketed to high net worth individuals who accept a high
degree of risk in their investment. TBL receives compensation at the end of each
month from Kingate's Class B Shares based on a percentage of the net asset value
of the shares owned by investors introduced to Kingate by TBL. As of December
31, 1998, Kingate's approximate net asset value was $666.2 million of which
$126.3 million was attributable to investors introduced by TBL.
American Masters Fund Ltd. - Twin Series ("AMF-Twin")
is a Cayman Island exempt company that employs a market neutral strategy to seek
market-like returns with an insignificant or slightly negative correlation to
market direction. At the end of each quarter TBL receives a percentage of the
management fees paid to AMF-Twin. As of December 31, 1998, AMF's approximate net
asset of value was $32.2 million.
American Masters Fund "Hilspen Series" Limited
("AMF-Hilspen") is an open-end investment company which was organized as an
exempted company under the laws of the Cayman Islands. AMF-Hilspen seeks to
significantly outperform traditional equity indices by attempting to identify
the best and worst performing styles among Big Cap Value, Big Cap Growth, Small
Cap Value and Small Cap Growth companies. As AMF-Hilspen's investment manager,
TBL receives monthly compensation based upon AMF-Hilspen's net assets.
AMF-Hilspen opened January 1, 1999 with $34 million of initial capital.
B. Insurance Products.
Tremont International Insurance, Ltd. ("TIIL") is a
Cayman Island insurance company which offers a variety of insurance products,
including variable life insurance policies and deferred variable annuities, to
customers who are not residents of the Cayman Islands. In July 1997, Mutual Risk
Management, Ltd. ("MRM"), an international risk management company, invested $5
million in TIIL.
Tremont MRM Services Limited ("TMRM") was formed under Bermuda law by TBL,
MRM and The Anglo Dutch Insurance Company Limited, a Cayman Island life
insurance company ("Anglo-Dutch"), to provide product development, marketing and
administrative services to TIIL. MRM invested $1 million in TMRM and received a
20% interest therein. TBL owns 24.5% of TIIL and 40% of TMRM. As a result of
certain transactions described below in "Management's Discussion and Analysis -
Liquidity and Capital Resources," MRM indirectly owns Class B Common Stock equal
to 19.4% of the aggregate of the Company's outstanding Class A Common Stock and
Class B Common Stock.
Tremont Broad Market, LDC (the "Fund") is an open-ended
investment company registered in the Cayman Islands as an exempted limited
duration company. The Fund seeks long-term capital growth and is open
exclusively to insurance companies. TBL, as investment advisor and
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administrator, receives compensation on a monthly basis. As of December 31,
1998, the Fund's approximate net asset value was $18.4 million.
C. Placement Agent Services. Until 1998, TBL offered
placement agent services to a select group of offshore mutual funds. This
activity was discontinued when the Company decided to focus its efforts on the
development of additional proprietary investment products. However, TBL will
continue to receive placement agent fees from pre-existing clients as long as
they remain invested in the funds in which TBL placed them.
3. TSI. TSI is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended. TSI acts as an introducing broker for security
transactions initiated by nonaffiliated companies and facilitates soft-dollar
arrangements. TSI sells private investment partnerships, variable annuity and
variable life products. TSI accounted for approximately 6% and 7%, respectively,
of consolidated revenues for the years ended December 31, 1998 and 1997.
4. TFI. TFI was formed in July 1998 and is a commodity pool operator
and commodity trading advisor registered with the Commodity Futures Trading
Commission and the National Futures Association to be the general partner of the
first domestic limited partnership in the Company's "American Masters" series.
Effective September 1, 1998, the American Masters Market Neutral Fund, L.P.
("AMM") became the newest addition to the Company's domestic line of proprietary
products. AMM was formed to achieve long term capital appreciation irrespective
of stock market volatility. TFI receives a monthly management fee based upon
AMM's net asset value as of the end of each month. At December 31, 1998, AMM's
approximate net asset value was $1.2 million of which $614,600 was contributed
by TFI.
5. TIMI. TIMI, a 65% owned subsidiary of the Company, was formed in
Canada in July, 1998 and is registered with the Ontario Securities Commission as
an investment counsel and portfolio manager, as well as a limited market dealer
under the Securities Act (Ontario). TIMI is the sponsor of The Tremont Masters
Fund, a Canadian fund launched in February, 1999 with $500,000.
Clients
The Company's principal clients continue to be investment funds formed by
or with the assistance of TPI or TBL, or the sponsors and managers of such
investment funds. Investment funds include limited partnerships, bank trust
funds and offshore mutual funds. TPI and TBL consulting agreements with non-
proprietary investment fund clients accounted for approximately 29% of the
Company's consolidated revenues for each of the years ended December 31, 1998
and 1997.
The significant non-proprietary client relationships of the Company,
by subsidiary, are described below.
1. TPI
The DaimlerChrysler Minority Equity Trust (the "Trust")
is a multi-manager program using minority owned and operated investment
management firms. TPI advises the Trust on the selection and monitoring of
managers, as well as on the allocation of funds among them. TPI's compensation
is based upon a percentage of the Trust's net asset value at the end of each
month. As of December 31, 1998, the Trust had a net asset value of approximately
$420.8 million.
Meridian Horizon Fund, L.P. ("Meridian") is a
multi-manager Delaware limited partnership employing diversified investment
strategies utilizing a multi-manager approach. Effective July
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1, 1998, TPI resigned as a co-general partner of Meridian. Subsequent to TPI's
resignation, Meridian hired TPI as a consultant and to be its administrator. TPI
receives compensation from Meridian based on a percentage of Meridian's assets
at the end of each month, as well as a fixed consulting fee. At December 31,
1998, Meridian's approximate net asset value was $244.3 million, of which
$378,600 was contributed by TPI's.
Security Equity Life Insurance Company is a New York
based company offering a Group Flexible Premium Variable Life Insurance contract
with separate accounts for different investments. TPI acts as the investment
manager of one of these separate accounts using a multi-manager approach. The
primary investment objective of this account is to achieve above-average,
long-term capital growth. At December 31, 1998, the account had an approximate
net asset value of $52.5 million. TPI receives compensation from the account
based upon a percentage account's net assets.
Preferred Investors, L.P. ("Preferred") is a multi-manager Delaware limited
partnership designed for high-net worth individuals who accept a high degree of
risk in their investment. Preferred focuses on investment strategies that tend
to counterbalance one another during periods of both market strength and
weakness. TPI serves as consultant to Preferred's general partner and assists in
the monitoring and selection of the Preferred's investment vehicles. TPI
receives compensation from the general partner based on a percentage of the
Preferred's assets at the end of each month. As of December 31, 1998,
Preferred's approximate net asset value was $182.0 million.
Sage Capital, L.P. ("Sage") is a multi-manager Delaware
limited partnership composed of a diverse selection of skilled investment
managers. TPI serves as consultant to Sage's general partners and assists in the
monitoring and selection of Sage's investment vehicles. TPI receives
compensation from Sage's general partners based on a percentage of Sage's assets
at the end of each month. As of December 31, 1998, Sage had a net asset value of
approximately $93.5 million.
2. TBL
Starvest Fund, Ltd. ("Starvest") is a Bermuda-based
hedge fund that is marketed to high net worth individuals who accept a high
degree of risk in their investment. TBL serves as its investment advisor and
receives compensation based on a percentage of Starvest's average net assets at
the end of each month. In addition, TBL is entitled to a performance fee when
and if Starvest's sponsor receives a performance fee. The performance fee for
the year ended December 31, 1998 is subject to adjustment pending completion of
Sage's final audit. As of December 31, 1998, Sage's approximate net asset value
was $115.4 million.
Credit Suisse Financial Products. Credit Suisse's
Master Fund ( the "Fund") is a multi-manager limited partnership advised by a
diverse group of skilled investment managers. The Fund is a principal guaranteed
funds of funds, designed for high-net worth individuals with low risk tolerance.
Its portfolio funds have been selected to counter balance each other in periods
of market strengths and weaknesses. TBL serves as a consultant to the Fund's
general partner and assists in the monitoring and selection of investment
vehicles. TBL receives a fee based on the percentage of the Fund's assets at the
end of each month. As of December 31, 1998, the Fund's approximate net asset
value was $268.9 million.
The percentage of revenues that any client pays to the Company can
fluctuate substantially over time due to the nature of the capital markets and
the nature of the fee arrangements with the client. As the Company continues to
grow, it is expected that total revenue will be less dependent on any one
client.
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The Company, through its subsidiaries, enters into written agreements
with its clients. Under these agreements, TPI's and TBL's fees are typically
based on a percentage of assets under management or a percentage based on the
performance of the fund. The fees are payable periodically, usually monthly or
quarterly. In certain instances, TPI and TBL receive an initial fixed fee from
multi-manager investment funds for its services in organizing the fund. Other
arrangements are based on annual retainer fees payable periodically during the
term of the consulting agreement or as a single fee for individual consulting
projects. Fees for offshore placement agent services are based on assets placed
in the offshore funds by TBL. TBL may receive a one-time fixed fee for services
rendered in organizing the offshore funds from these clients. Several contracts
entered into by TBL require the payment of asset-based fees to TBL, for so long
as investors placed by TBL remain investors, which period may be well beyond the
termination of a particular contract.
The Company's ability to generate and sustain revenues from its
multi-manager investment fund clients is primarily dependent on the size of the
assets under management in each fund and on the continuation of its agreements
with the funds. Each of these agreements is generally terminable upon 30 to 60
days written notice, or on the expiration of a stated term of up to two years,
subject to earlier termination in certain circumstances. Other annual retainer
or ongoing agreements are also generally terminable on short-term notice from
clients.
Although the Company expects that its multi-manager investment fund
agreements will continue for the duration of such funds, there can be no
assurance that an arrangement will not be earlier terminated by the client.
During 1998, TBL terminated its relationship with two clients whose businesses
had ceased operations. In 1997, TPI and TBL agreed to terminate consulting
relationships with three clients for what they believed to be the clients'
internal business reasons. These terminations have not resulted in a significant
loss of revenues. However, the Company will continue to endeavor to expand its
client base and further diversify its consulting business in an effort to reduce
the adverse impact of termination with respect to any one or more of its
clients.
Competition
The Company encounters intense competition in all aspects of the
securities business and competes directly with other securities firms, a
significant number of which have substantially greater capital, resources and
services. There has recently been increasing competition from commercial banks
and insurance companies. The Company believes that the principal competitive
factors in the securities industry are the quality and ability of professional
personnel, as well as the relative price of services and products offered. The
Company believes that there are several important factors which affect the
success of the Company among investment consulting firms. These factors include
the abilities and reputations of the consulting and professional personnel, the
ability to develop new investment management products and technologies for
clients, and the marketing of existing services.
The Company is committed to maintaining the firm's competitive
position through the continued involvement of its professional management in all
aspects of business development.
Regulation
The Company is subject to or restricted by various federal and state
governmental laws or regulations relating to the investment consulting services
rendered to its clients. To the extent that the Company renders such services,
it is subject to compliance with the Advisers Act and state law, including
limitations on the amount of fees charged by it and the transactions to be
effected by it. Even though management believes the Company is in compliance
with applicable regulations, changes in the regulations may affect the expense
of operation and require adjustments in the Company's business
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procedures to ensure compliance. TPI is registered as an investment adviser with
the Securities and Exchange Commission (the "Commission") under the Advisers
Act. However, such registration does not imply in any manner that TPI has been
approved by the Commission or any state or foreign regulatory authority, nor
imply that TPI's qualifications have been passed upon by the Commission or any
state regulatory authority.
The Company may be deemed, in certain instances, to be a "fiduciary"
for its clients and their funds under ERISA and U.S. Department of Labor
regulations. In such event, the Company could be subject to certain sanctions
and fines for its noncompliance with a particular law and its regulations.
The Company obtains a significant amount of its revenues from sponsors
and managers of single- manager and multi-manager investment funds. These
sponsors and managers are subject to regulation under the Investment Company Act
and the Advisers Act respecting the amount of the fees that they may charge to
their funds. Since the Company is generally paid out of the fees received by
such sponsors or managers, any regulatory limits on such fees has a direct
impact on the fees to be received by the Company. In addition, the
aforementioned acts generally require that the agreements between the sponsors
or managers and their funds be terminable by the funds on 30 to 60 days' notice.
Accordingly, the Company's agreements with these sponsors and managers are also
subject to such termination provisions.
Employees
At December 31, 1998, the Company had 31 full-time employees and no
part-time employees.
Item 2. Description of Properties
The Company owns no real property but leases 10,910 square feet for
executive offices. This lease expires August 2002 and requires monthly payments
of approximately $22,700.
TBL's lease for corporate offices was renewed through February 2000.
The lease for this 3,250 square foot office requires monthly payments of
approximately $5,800.
Item 3. Legal Proceedings.
Payroll Express. In 1991, the Company engaged KPM, Inc. d/b/a Payroll
Express ("Payroll Express") to perform certain data processing services,
including preparing Forms 941 and filing them with Internal Revenue Service
("IRS") and paying payroll and other taxes on behalf of the Company. The Company
terminated its relationship with Payroll Express upon being informed by the
Chapter 11 Trustee for Payroll Express that the Company had suffered a potential
loss as a result of a fraudulent scheme undertaken by Payroll Express and its
principal, David S. Kast. It appears that Payroll Express failed to make certain
payments to the IRS on the Company's behalf and falsely and fraudulently
misrepresented to the Company the dollar amount of taxes actually paid to the
IRS. It also appears that a substantial portion of these funds (approximately
$400,000) was wrongfully appropriated by Payroll Express and Kast. This theft
has created an additional federal tax liability for the Company in the amount of
$307,500 for the years 1995 and 1996. These sums do not include interest or
penalties since the Company has been informed by the IRS that, based upon its
initial review of this matter, interest and penalties may not be assessed.
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The Company is cooperating with the authorities in its ongoing
criminal investigation of Payroll Express and Kast and has filed a Proof of
Claim in the Payroll Express bankruptcy proceeding. The Company also believes
that, subject to a $50,000 deductible, its losses are covered by a fidelity bond
issued by the Gulf Insurance Group ("Gulf"). A Proof of Loss seeking recovery of
the Company's losses and reimbursement for professional fees incurred in
connection with this matter has been filed with Gulf which is in the process of
investigating the Company's claim. The Company is not aware of any reason for
denial of coverage by Gulf.
Vasu. In May 1998, a law suit was initiated against the Company and
its wholly-owned subsidiary, Tremont Securities, Inc., in the United States
Bankruptcy Court District of Connecticut, by Richard M. Coan as Chapter 7
Trustee for William Vasu and Linda M. Vasu alleging breach of contract and
defamation. The Company has filed a motion to compel arbitration of the case
under the rules of the National Association of Securities Dealers, Inc. and to
move jurisdiction to New York.
The case is in the early stages and the Company intends to defend its
position vigorously. The Company believes that the suit is without merit;
however, should the plaintiff prevail, the Company believes that it is likely
that the damages will not be material to the Company's consolidated financial
condition or operations.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of the holders of either the Class A
Common Stock or Class B Common Stock in the fourth quarter of 1998.
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PART II
Item 5. Market For the Registrant's Common Equity and Related Stockholder
Matters
The Class A Common Stock ("TMAVA") and Class B Common Stock ("TMAVB")
are closely held and thinly traded. The Class A Common Stock and Class B Common
Stock are quoted on the OTC Bulletin Board.
The quotations are dealer prices without retail mark-ups, mark-downs
or commissions and may not represent actual transactions. The following table
sets forth the range of high and low bid prices of the Class A Common Stock and
Class B Common Stock, respectively, from January 1, 1997 through March 8, 1999.
10
<PAGE>
<TABLE>
<S> <C> <C>
Price Range of Class A Common Stock
Bid Prices
High Low
1997
January 1, 1997 - March 31, 1997 $3.75 $3.75
April 1, 1997 - June 30, 1997 4.25 3.75
July 1, 1997 - September 30, 1997 4.25 3.25
October 1, 1997 - December 31, 1997 6.25 3.25
1998
January 1, 1998 - March 31, 1998 $6.25 $4.63
April 1, 1998 - June 30, 1998 8.25 4.13
July 1, 1998 - September 30, 1998 8.00 4.75
October 1, 1998 - December 31, 1998 7.75 2.00
1999
January 1, 1999 - March 8, 1999 $10.00 $6.00
Price Range of Class B Common Stock
Bid Prices
High Low
1997
January 1, 1997 - March 31, 1997 $ 2.50 $ 2.50
April 1, 1997 - June 30, 1997 3.50 1.88
July 1, 1997 - September 30, 1997 3.50 3.50
October 1, 1997 - December 31, 1997 4.75 3.50
1998
January 1, 1998 - March 31, 1998 $4.75 $4.50
April 1, 1998 - June 30, 1998 9.25 2.13
July 1, 1998 - September 30, 1998 8.00 4.00
October 1, 1998 - December 31, 1998 8.13 4.00
1999
January 1, 1999 - March 8, 1999 $10.50 $6.25
</TABLE>
11
<PAGE>
Holders
As of March 8, 1999 there were approximately 301 holders of record of the
Company's Class A Common Stock and approximately 272 holders of record of the
Company's Class B Common Stock.
Dividends
Since its organization, the Company has not paid any dividends on its
Class A Common Stock or its Class B Common Stock nor does it plan to do so in
the foreseeable future.
Item 6. Management's Discussion and Analysis
Financial Condition
The Company believes its relationships with its present clients are
stable. The agreements with the Company's single-manager and multi-manager
investment funds generally are terminable upon 30 to 60 days' notice or on the
expiration of a stated term of up to two years, subject to earlier termination
in certain circumstances. At December 31, 1998, the Company expected that its
arrangements with its larger single-manager and multi-manager investment fund
clients will continue for the duration of such funds and the Company has not
received any notice that any of such clients intends to terminate its
arrangement after December 31, 1998. There can be no assurance that any such
arrangement will not be earlier terminated by the client. The Company is not
currently aware of any event or events which would cause its clients to
terminate their arrangements with the Company. Several contracts entered into by
TBL require the payment of asset-based fees to TBL so long as the investors
placed by TBL remain investors in those funds, which may be well beyond the
termination of a particular contract.
The Company believes that its product development efforts in fiscal
1998, as well as client relationships formed abroad, have placed the Company in
a good position for 1999 and thereafter. Management expects to concentrate on
developing new proprietary products and taking full advantage of its growing
relationships world-wide to increase its revenues and to develop independent
product distribution channels. Profitability is dependent on the Company's
ability to maintain existing consulting relationships.
Results of Operations
The Company's revenues are derived from consulting and specialized
investment services provided to institutional and other clients, as well as
management fees from certain funds under management. Consulting fees are
generally a function of the amount of assets under management and the percentage
fees charged to clients. Management fees are based on a percentage of the assets
of the managed fund and are usually paid on a monthly or quarterly basis. The
Company also receives asset- based fees for investments placed by TBL in certain
offshore mutual funds. The Company provides other consulting services generally
on a fixed fee basis, whether as annual retainer fees or single project fees.
The Company's principal operating expenses consist of its costs of personnel and
independent consultants.
Fiscal year ended December 31, 1998 compared to Fiscal year ended
December 31, 1997.
Consulting fees earned by the Company for the year ended December 31,
1998 increased by $3,957,700, or approximately 67.8%, from $5,840,300 for the
year ended December 31, 1997 to $9,798,000 for the year ended December 31, 1998.
At the Company's primary domestic subsidiary, TPI, consulting fees increased
from $3,437,500 for the year ended December 31, 1997 to $6,469,300 for the
12
<PAGE>
year ended December 31, 1998, due largely to increases in revenues from its
proprietary products such as The Broad Market Fund, L.P. ($421,300 increase) and
The Broad Market Prime Fund, L.P. ($1,476,000 increase). In addition, 1998
consulting fees also increased due to increases in fees from non- proprietary
investment funds, such as The Meridian Horizon Fund, L.P. ($471,600 increase),
The DaimlerChrysler Minority Equity Trust Fund ($354,800 increase) and The
Security Equity Life Insurance program ($263,700 increase). Consulting fees also
increased when Tremont Securities, Inc. ("TSI") realized fees from the sale of
limited partnerships. These fees amounted to $105,600 and $173,000, for the
years ended December 31, 1998 and 1997, respectively. During the years ended
December 31, 1998 and 1997, certain proprietary investment funds accounted for a
significant percentage of the Company's consolidated revenues: The Broad Market
Fund, L.P. accounted for approximately 14.7% and 17%, respectively, and The
Broad Market Prime Fund, L.P. accounted for approximately 15.8% and 3%,
respectively, of consolidated revenues.
At the Company's foreign subsidiary, TBL, consulting fees increased
from $2,229,800 for the year ended December 31, 1997 to $3,223,100 for the year
ended December 31, 1998. This increase was primarily due to increases in
revenues from proprietary products, such as the Class B Shares of the Kingate
Global Fund, Ltd. ($681,100 increase) and Tremont Broad Market, LDC ($126,800
increase), as well as the commencement of revenues from new institutional
clients ($434,200 increase). The increase in the Company's revenues resulted
primarily from increases in the value of the assets within the respective
investment vehicles.
Performance fees for the year ended December 31, 1998 were $434,600,
compared to $884,300 for the year ended December 31, 1997. This $449,700
decrease is primarily due to the unfavorable changes in the market conditions
during part of 1998, as a result of which fewer clients outperformed their
pre-established bench marks. The significant performance fees earned by TBL in
1998 were from Cambridge Energy Fund International Ltd. ($242,900) and Starvest
Fund Ltd. ($38,300). The sole significant fee earned by TPI in 1998 was $50,000
from The Dillon Flaherty Market Neutral Fund, L.P. The performance fees earned
for the year ended December 31, 1998 are subject to adjustment pending
completion of final audit of the respective funds. Management expects
performance fee revenue to increase during periods of positive market
conditions, but management cannot predict with any accuracy whether such income
from performance fees will continue in the future due to changing market
conditions and other outside factors.
Commissions increased by $121,400 or approximately 40.2%, from
$302,100 for the year ended December 31, 1997, as compared to $423,500 for the
year ended December 31, 1998. This increase resulted from TSI having additional
clients and more trading activity in 1998.
Operating profits at TBL were $874,700 and $490,200 for the years
ended December 31, 1998 and 1997, respectively. The increase in operating
profits from 1997 to 1998 ($384,500) was primarily due to increased revenues
from assets raised in proprietary products such as the Class B Shares of Kingate
Global Fund Ltd., and American Masters Fund Limited - TWIN Series. Identifiable
assets of TBL were $2,282,800 and $1,531,700 at December 31, 1998 and 1997,
respectively.
Compensation expense increased for the year ended December 31, 1998 by
$823,100, or approximately 24.8%, over the similar period in 1997, as a result
of the Company's continued efforts to attract and retain qualified employees.
Compensation expense primarily increased due to salary increases for certain
employees that became effective January 1, 1998, increased health care costs due
to the increase in the number of employees during the year, and an increase in
bonuses granted by the Company to its employees. At December 31, 1998 and 1997,
respectively, the Company had 31 and 27 full-time employees. As part of
compensation expense, $1,150,000 and $701,000 for the years ended December 31,
1998 and 1997, respectively, were attributable to employee bonuses.
13
<PAGE>
General and administrative expenses consist primarily of rent,
telecommunications, travel and entertainment, outside professional fees and
other related expenses. General and administrative expenses were $2,684,500 and
$1,506,900 for the years ended December 31, 1998 and 1997, respectively. The
increases in general and administrative expenses were primarily due to costs
related to the Company's continued expansion to service its business growth. The
largest component of the general and administration expense increase was the
Company's outside professional fees, including legal and accounting expenses.
Such fees increased $440,600, or 143%, from $309,100 for the year ended December
31, 1997 to $749,700 for the year ended December 31, 1998. Part of this increase
is as a result of the Company expanding its businesses and forming two new
subsidiaries, Tremont Futures, Inc., a registered commodity pool operator and
commodity trading adviser, and Tremont Investment Management, Inc., a registered
investment adviser in Toronto, Canada. In addition, professional fees increased
in 1998 due to the defense of the lawsuit filed against the Company in May 1998,
the Payroll Express Company bankruptcy investigation, amendments to the
Company's Certificate of Incorporation, amendments to TSI's NASD Restriction
Agreement, as well as other items in the normal course of business.
Consulting expenses increased by $242,100, approximately 21.6%, from
$1,119,000 for the year ended December 31, 1997 to $1,361,000 for the year ended
December 31, 1998 as a result of the increase in revenues from clients that
participate in revenue sharing arrangements. For example, TSI has an arrangement
for securities clearance services with a clearing broker dealer whereby a
certain percentage of the commissions earned is shared. Also, TPI and TBL have
revenue sharing arrangements with respect to certain clients whose products were
launched during late 1997.
The increase in depreciation is a result of fixed asset purchases
during the year ended December 31, 1998. These purchases totaled $229,200 and
consisted of computer equipment for the new employees hired during the year,
software purchases, as well as a computer system network for TBL. At December
31, 1998, the Company has commitments for additional capital expenditures of
approximately $80,000.
Equity in earnings of limited partnerships decreased by $32,700 or
approximately 15.2%, from $215,100 for the year ended December 31, 1997 to
$182,400 for the year ended December 31, 1998, as a result of unfavorable
investment results from certain limited partnerships, as well as unfavorable
market conditions during part of 1998.
Loss from operations of joint ventures, net increased by $105,000 or
approximately 89.6% from $117,100 for the year ended December 31, 1997 to
$222,100 for the year ended December 31, 1998, primarily as a result of a
twenty-five percent owned joint venture operation incurring significant
operating costs during the year and less than anticipated revenues from
operations. The Company closed this joint venture effective December 31, 1998.
Other income, net increased by $36,700 or approximately 26.6%,
primarily due to higher interest rates and the higher amounts of investable cash
and cash equivalents provided by operations and invested in 1998 than in 1997.
In 1998 and 1997, other income, net included loss from other investments of
$2,035 and $10,500, respectively.
Profitability is dependent on the ability of the Company to maintain
existing client relationships, several of which currently account for a
significant portion of the Company's revenues, to increase assets under
management for its clients, and to market its services to new accounts.
14
<PAGE>
Fiscal year ended December 31, 1997 compared to Fiscal year ended
December 31, 1996.
Consulting fees earned by the Company for the year ended December 31,
1997 increased by $1,557,300, or approximately 36.4%, as compared to the year
ended December 31, 1996. At the principal domestic subsidiary, TPI, consulting
fees increased from $2,599,700 for the year ended December 31, 1996 to
$3,437,500 for the year ended December 31, 1997, primarily due to increases in
revenues from The Broad Market Fund, L.P. ($619,100), The Broad Market Prime
Fund, L.P. ($210,500) and The Security Equity Life program ($187,800). These and
other increases were partially offset by declines in revenues, including a
decline in revenues from Pine Street Associates, L.P. ($100,000) and from
Minority Equity Trust ($320,000 resulting from a 1996 one-time termination fee),
among others. Consulting fees also increased domestically in 1997 as a result of
a 1996 amendment of TSI's restriction agreement with the NASD so that TSI may
sell limited partnership interests. For the year ended December 31, 1997,
consulting fees from this activity equalled $173,000. During the years ended
December 31, 1997 and 1996 certain clients accounted for a significant
percentage of the Company's consolidated revenues: The Broad Market Fund, L.P.
accounted for approximately 17% and 10%, respectively, of consolidated revenues
and revenues from related entities accounted for approximately 28% and 20%,
respectively, of consolidated revenues.
At the foreign subsidiary, TBL, consulting fees increased from
$1,683,400 for the year ended December 31, 1996 to $2,229,800 for the year ended
December 31, 1997. This increase is primarily due to increases in revenues from
the Class B Shares of the Kingate Global Fund, Ltd. ($322,100) and Winston
Partners II Offshore Ltd. ($91,100), as well as the commencement of revenues
from Tremont MRM Services, Ltd. ($154,800). These and other increases in TBL's
revenues, were partially offset by declines in revenues from Global Advisors
Portfolio, N.V. ($230,000), among others. The increase or decrease in revenues
was primarily as a result of increases or decreases in the value of the assets
within the respective investment vehicles.
Performance fees for the year ended December 31, 1997 were $884,300
compared to $780,700 for the year ended December 31, 1996. This $103,600
increase is primarily due to the underlying investment vehicles outperforming
pre-established benchmarks. The significant performance fees earned by TBL in
1997 were from Starvest Fund Ltd. ($191,800), B.P. Overseas Partners, Ltd.
($102,300) and Cambridge Energy Fund International Ltd. ($131,300). The sole
significant performance fee earned by TPI in 1997 was $246,500 from The F.W.
Thompson Fund, L.P. The performance fees earned for the year ended December 31,
1997 are subject to adjustment pending completion of final audit of the
respective funds.
Each of Global Advisors Portfolio, N.V. and Global Advisors Portfolio
II, N.V. terminated TBL as their advisor effective as of the close of business
on November 15, 1996 and, as a result, no further fees were, nor will be,
generated from them after that date. Management believes these terminations will
not have a material future impact on the Company. Management expects performance
fee revenue to increase during periods of positive market conditions, but
management cannot predict with any accuracy whether such income from performance
fees will continue in the future due to changing market conditions and other
outside factors.
Commissions increased $72,000 for the year ended December 31, 1997, or
approximately 31%, as compared to the year ended December 31, 1996, as a result
of TSI having additional clients and more trading activity in 1997.
Operating profits at TBL were $490,200 and $625,800 for the years
ended December 31, 1997 and 1996, respectively. The decrease in operating profit
from 1996 to 1997 ($135,559) was primarily
15
<PAGE>
due to an investment gain of $130,900 in 1996 which did not recur in 1997.
Identifiable assets of TBL were $1,531,700 and $1,563,800 at December 31, 1997
and 1996, respectively.
Compensation expense increased for the year ended December 31, 1997 by
$624,200, or approximately 23%, over the similar period in 1996, as a result of
the Company's continued efforts to attract and retain qualified employees.
Compensation expense primarily increased due to salary increases for certain
employees that became effective January 1, 1997 and increased health care costs
due to the increase in the number of employees during the year. As part of
compensation expense, $701,000 and $780,800 for the years ended December 31,
1997 and 1996, respectively, were attributable to bonuses granted by the Company
to its employees.
General and administrative expenses consist primarily of rent,
telecommunications, travel and entertainment, outside professional fees and
other related expenses. General and administrative expenses were $1,506,800 and
$1,306,000 for the years ended December 31, 1997 and 1996, respectively,
representing 21.4% and 24.7% of revenues, respectively. The increases in general
and administrative expenses were primarily due to costs related to the Company's
continued expansion to service its business growth. The decrease, however, in
general and administrative expense as a percentage of revenues was attributable
to the increase in revenues from the Company's proprietary products, expansion
of its client base, and the positive results from cost containment measures.
Consulting expenses increased by $476,400 during the year 1997, as
compared to the similar period of 1996, primarily as a result of the increase in
revenues from the clients that participate in revenue sharing arrangements. For
example, TSI has an arrangement for securities clearance services with a
clearing broker dealer whereby a certain percentage of the commissions earned is
shared; this agreement became effective in June 1995 when TSI became a
registered broker dealer. Also, TPI and TBL have revenue sharing arrangements
with respect to certain clients whose products were launched during 1997.
The increase in depreciation and amortization is a result of fixed
asset purchases during the year ended December 31, 1997. These purchases totaled
$299,700 and consisted of computer equipment for the new employees hired during
the year, software purchases, as well as a computer system network for TBL. At
December 31, 1997, the Company has no significant commitments for additional
capital expenditures.
Other income decreased for the year ended December 31, 1997 by
$131,100 over 1996. Other income in 1996 includes an investment gain of $130,900
resulting from the exercise of warrants to purchase 57,639 shares of common
stock of an unaffiliated public corporation and the subsequent sale of such
shares. At December 31, 1997, TBL owned warrants to purchase common stock of the
same unaffiliated public corporation at $3.78 per share until October 19, 1998
(87,500 shares), and 18,750 shares at $3.63 per share until October 30, 1998,
respectively. Such warrants have been valued at zero on December 31, 1997.
Liquidity and Capital Resources
At December 31, 1998, the Company had $1,893,800 in cash and cash
equivalents and working capital of $2,992,900, as compared to cash and cash
equivalents of $820,800 and working capital of $1,819,300 at December 31, 1997.
Cash flows provided by operating activities was $1,799,600 for the
year ended December 31 1998, compared to cash flows used by operating activities
of $56,300 for the year ended December 31, 1997. The increase in cash provided
by operations was primarily as a result of profitable operations, the
16
<PAGE>
increase in accounts payable, and the decrease in receivable from officer offset
by increases in accounts receivable and other assets. Cash flows used in
investing activities were $1,109,600 and $397,900 in 1998 and 1997,
respectively. 1998 and 1997 cash flows used in investing activities were
investments in limited partnerships and joint ventures, as well as the purchase
of fixed assets offset partially by the sale of limited partnership interests,
joint venture interests and other investments.
Cash flows provided by financing activities of $383,000 in 1998
resulted from the issuance of 137,500 shares of the Company's Class B Common
Stock through the exercise of certain stock options by employees and directors
of the Company.
The Company owns options expiring in 2001 to purchase 8,000 shares of an
unregistered investment adviser specializing in 401(k) investment allocation
advice over the Internet. The options were granted at $10 per share and were
fully vested at December 31, 1998. The options have a five year term and have
been valued at zero by the Company at December 31, 1998.
The Company owns 30,000 shares of a nonpublic financial services
company as a result of an employee's participation as a board member of such
company. As a result of consulting services performed for this entity, TPI
received $36,000 and $56,200, respectively for the years ended December 31, 1998
and 1997. At December 31, 1998, the Company valued these shares of common stock
at zero.
The Company believes that it has adequate capital resources and
working capital to bring to market the products it developed in late 1998 and
those it expects to develop in early 1999, and that the revenue stream from
these products, as well as from existing products, will be sufficient to support
future growth. The Company has no material short or long term debt obligations.
Facilities
On October 1 1997, the Company moved to a larger facility and entered
into a lease agreement for new executive offices. The Company was completely
released from its obligation under the old lease. The lease for the new facility
expires August 31, 2002 and requires monthly payments of approximately $17,100.
Effective October 1, 1998, the Company leased additional office space for its
corporate offices. This new lease is for 2,688 square feet, expires August 2002
and requires monthly payments of approximately $5,600.
TBL's lease for corporate offices extends through February 2000. The
lease requires monthly lease payments of approximately $5,800.
Investments in Limited Partnerships
The Company, through its subsidiaries, is invested in five limited
partnerships at December 31, 1998 and 1997 as follows:
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<TABLE>
<S> <C> <C> <C> <C>
Fair Value of
Investments at Rate of Return
Fund December 1998 December 1997 1998 1997
The Broad Market Fund, L.P. $ 807,200 $ 688,600 17.2% 16.4%
The Broad Market Prime Fund, L.P. 56,700 -- 20.6 7.8(1)
Gamtree, L.P. 177,600 186,700 (4.9) 16.1
The Meridian Horizon Fund, L.P. 378,600 299,500 17.2 17.6
The F.W. Thompson Fund, L.P. -- 46,700 (18.2) 21.9
American Masters Market
Neutral Fund, L.P. 614,600 -- 1.7(2) --
------------ ------------
$ 2,034,700 $ 1,221,500
============ ============
</TABLE>
(1) Rate of return for period July 1, 1997 (date of formation) through December
31, 1997.
(2) Rate of return for period September 1, 1998 (date of formation) through
December 31, 1998.
The significant proprietary products of the Company are as follows:
The Broad Market Fund, L.P. is a Delaware limited partnership formed
to achieve capital growth through hedged investments.
The Broad Market Prime Fund, L.P. is a Delaware limited partnership
formed to achieve capital growth through a leveraged investment strategy.
American Masters Market Neutral Fund, L.P. is a Delaware multi-manager
limited partnership formed to achieve long term capital appreciation
irrespective of stock market volatility.
During 1998, TPI was the general partner of The F.W. Thompson Fund,
L.P. However, due to its weak performance, this partnership was closed. In
addition, effective July 1, 1998, TPI resigned as a co-general partner of The
Meridian Horizon Fund, L.P., ("Meridian"). Subsequently, TPI was hired as a
consultant to Meridian and as its administrator.
Business Combination
On March 11, 1999, the Company acquired all of the outstanding ordinary
(common) shares of TASS Management Limited ("TASS"), a London, England - based
company specializing in the sale of electronic databases. Tremont issued 190,477
shares of its Class B Common Stock in exchange for the TASS common shares. TASS
thus became another subsidiary of the Company, although its preferred stock will
not be owned by the Company. TASS serves a large institutional client base whose
subscribers include money center banks, investment banks, private banks, central
banks, foundations, endowments, insurance companies, prime brokers, family
offices, academics, government agencies and high-net worth individuals. The
acquisition will be accounted for using the purchase method of accounting.
Accordingly, the excess of cost over the fair market value of net assets
acquired (approximately $1.7 million) will be amortized on a straight line basis
over a ten year period. The operations of TASS will be included in the
consolidated statement of operations from the date of closing. In connection
with the acquisition, employment agreements were entered into with two key
employees of TASS, who were also granted options to purchase shares of the
Company's Class B Common Stock and certain registration rights.
Inflation
The impact of inflation on the Company's revenues and results of
operations has not been significant.
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<PAGE>
Impact of Year 2000
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to determine the applicable year. Any computer
programs that have date sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing significant disruptions of
operations, including, among other things, a temporary inability to process
transactions or engage in similar normal business activities. Based on recent
assessments, the Company determined that it will be required to modify or
replace certain portions of its software and certain hardware so that those
systems will properly utilize dates beyond December 31, 1999. The Company
presently believes that with modifications or replacements of certain existing
software and certain hardware, the Year 2000 Issue can be mitigated. However, if
such modifications and replacements are not made, or are not completed timely,
the Year 2000 Issue could have a material impact on the operations of the
Company.
The Company's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, remediation, testing, and implementation. To
date, the Company has fully completed its assessment of all systems that could
be significantly affected by the Year 2000. The completed assessment indicated
that certain of the Company's significant information technology systems could
be affected, particularly the network computing platform's operating system
software, certain spreadsheet applications and the Company's proprietary Hedge
Fund Research database software. In addition, the Company has gathered
information about the Year 2000 compliance status of its significant suppliers
and subcontractors and continues to monitor their compliance.
To date the Company has completed approximately 25% of the remediation
phase and expects to complete software reprogramming and replacement no later
than June 30, 1999. Once software is reprogrammed or replaced, the Company will
begin testing and implementation. These phases run concurrently for different
systems. To date, the Company has completed approximately 10% of its testing and
has implemented none of its remediated systems. Completion of the testing phase
for all significant systems is expected by June 30, 1999, with 100% completion
targeted for September 30, 1999.
The Company has queried its important suppliers and subcontractors
that do not share information systems with the Company (external agents). To
date, the Company is not aware of any external agent Year 2000 issue that would
materially impact the Company's results of operations, liquidity, or capital
resources. However, the Company has no means of ensuring that external agents
will be Year 2000 ready. The inability of external agents to complete their Year
2000 resolution process in a timely fashion could materially impact the Company.
The effect of non-compliance by external agents is not determinable.
In the event that the Company does not complete any additional phases
of the remediation process, the Company would be able to provide the minimum
necessary level of investment research information which is critical to its
consulting services, and it would be able to process the relevant accounting
transactions. In addition, disruptions in the economy generally resulting from
Year 2000 Issues could also materially adversely effect the Company. In
particular, unexpected volatilities within the investment industry could
adversely impact the Company's revenues due to a significant portion of the
Company's revenues being based solely upon the net asset value of funds under
management. The amount of potential lost revenue cannot be reasonably estimated
at this time.
The Company will utilize both internal and external resources to
reprogram, replace, test and implement the software and operating equipment for
Year 2000 modifications. The total cost of the Year
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<PAGE>
2000 project is estimated at $400,000 and is being funded through operating cash
flows. To date, the Company has incurred approximately $70,000, which is
capitalized for the new systems and equipment. Of the total remaining project
costs, approximately $290,000 is attributable to the purchase of new software
and hardware, which will be capitalized. The remaining $40,000 relates to
consulting fees which will be expensed as incurred.
Management of the Company believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. As noted above, the
Company has not completed all necessary phases of the Year 2000 program, but
expects to be completed in the third quarter of 1999. The Company has
contingency plans for certain critical applications and is working on such plans
for others. These contingency plans involve, among other actions, manual
workarounds, and adjusting staffing strategies.
Forward Looking Statements
Certain statements in this Management's Discussion and Analysis
constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance, or achievements of the Company to be materially
different from any future results, performance, or achievements expressed or
implied by such forward looking statements. These forward looking statements
were based on various factors and were derived utilizing numerous important
assumptions and other factors that could cause actual results to differ
materially from those in the forward looking statements, including, but not
limited to: uncertainty as to the Company's future profitability and the
Company's ability to develop and implement operational and financial systems to
manage rapidly growing operations, competition in the Company's existing and
potential future lines of business, and other factors. Other factors and
assumptions not identified above were also involved in the derivation of these
forward looking statements, and the failure of such other assumptions to be
realized, as well as other factors, may also cause actual results to differ
materially from those projected. The Company assumes no obligation to update
these forward looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward looking
statements.
Item 7. Financial Statements. Page
Reports of Independent Auditors.............................................. 21
Consolidated Balance Sheets as of December 31, 1998 and 1997 ................ 23
Consolidated Statements of Income for the years ended
December 31, 1998 and 1997 ............................................... 24
Consolidated Statements of Shareholder' Equity for the years ended
December 31, 1998 and 1997 ............................................... 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997 ............................................... 26
Notes to Consolidated Financial Statements................................... 27
20
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Tremont Advisers, Inc.
We have audited the accompanying consolidated balance sheets of Tremont
Advisers, Inc. as of December 31, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements of The Broad Market
Fund, L.P. (a limited partnership in which the Company had a .43% and .51%
interest at December 31, 1998 and 1997, respectively) have been audited by other
auditors whose reports have been furnished to us; insofar as our opinion on the
consolidated financial statements relates to data included for The Broad Market
Fund, L.P., it is based solely on their reports. In the consolidated financial
statements, the Company's investment in The Broad Market Fund, L.P. is stated at
$807,200 and $688,600 at December 31, 1998 and 1997, respectively, and the
Company's equity in the net income of The Broad Market Fund, L.P. is stated at
$118,600 and $128,700, for the years ended December 31, 1998 and 1997,
respectively.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, and the reports of other auditors, provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Tremont Advisers, Inc.
at December 31, 1998 and 1997, and the consolidated results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
White Plains, New York
March 5, 1999
21
<PAGE>
To the Partners of
The Broad Market Fund, L.P.
We have audited the statement of financial condition of The Broad Market
Fund, L.P. (a limited partnership) as of December 31, 1998 and 1997, and the
related statements of income, changes in Partners' capital, and cash flows for
the two years then ended (not presented herein). These financial statements are
the responsibility of the General Partner. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Broad Market Fund, L.P.
as of December 31, 1998 and 1997, the results of its operations and its cash
flows for each of the two years then ended in conformity with generally accepted
accounting principles.
Goldstein Golub Kessler LLP
New York, New York
February 13, 1999
22
<PAGE>
Tremont Advisers, Inc.
Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
1998 1997
---------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 1,893,800 $ 820,800
Accounts receivable, less allowance for bad debts of $35,000 and
$25,000 2,111,600 2,011,400
Receivable from officer - 200,000
Income taxes receivable 82,800 -
Prepaid expenses and other assets 327,900 123,100
---------------------------------------
Total current assets 4,416,100 3,155,300
Investments in limited partnerships (cost -- $1,428,600 and $803,400) 2,034,700 1,221,500
Other investments (cost -- $469,900 and $457,700) 200,300 174,800
Fixed assets:
Furniture and equipment 893,200 706,600
Leasehold improvements 82,700 53,700
Less accumulated depreciation (526,200) (359,100)
---------------------------------------
Fixed assets, net 449,700 401,200
Other assets 192,900 29,000
---------------------------------------
Total assets $ 7,293,700 $ 4,981,800
=======================================
Liabilities and Shareholders' Equity Current liabilities:
Accounts payable $ 283,300 $ 50,500
Accrued expenses 1,111,200 1,112,800
Income taxes payable - 1,200
Deferred income taxes payable 29,000 171,500
---------------------------------------
Total current liabilities 1,423,500 1,336,000
Deferred income taxes payable 559,400 160,600
Minority interest - -
Redeemable preferred stock:
Series A Preferred Stock, $1 par value, 650,000 shares
authorized, none issued and outstanding - -
Shareholders' equity:
Preferred Stock, $1 par value, 350,000 shares authorized, issued
and outstanding - none - -
Class A Common Stock, $0.01 par value, 5,000,000 shares
authorized, 1,284,718 shares issued and outstanding 12,800 12,800
Class B Common Stock, $0.01 par value, 10,000,000 shares authorized,
2,939,604 and 2,802,104 shares issued and
outstanding 29,400 28,000
Additional paid in capital 5,106,900 4,725,300
Retained earnings (deficit) 167,000 (1,280,900)
Cumulative foreign currency translation adjustment (5,300) -
---------------------------------------
Total shareholders' equity 5,310,800 3,485,200
---------------------------------------
Total liabilities and shareholders' equity $ 7,293,700 $ 4,981,800
=======================================
</TABLE>
See accompanying notes.
23
<PAGE>
Tremont Advisers, Inc.
Consolidated Statements of Income
<TABLE>
<S> <C> <C>
1998 1997
----------------------------------------
Revenues:
Consulting fees $ 9,798,000 $5,840,300
Performance fees 434,600 884,300
Commissions 423,500 302,100
----------------------------------------
Total revenues 10,656,100 7,026,700
Expenses:
Compensation 4,148,100 3,325,000
General and administrative 2,684,500 1,506,900
Consulting 1,361,100 1,119,000
Depreciation 180,700 137,800
----------------------------------------
Total expenses 8,374,400 6,088,700
Equity in earnings of limited partnerships 182,400 215,100
Loss from operations of joint ventures, net (222,100) (117,100)
Other income, net 50,600 13,800
Minority interest 17,500 -
----------------------------------------
Income before income taxes 2,310,100 1,049,800
Provision for income taxes 862,200 349,900
----------------------------------------
Net income $ 1,447,900 $ 699,900
========================================
Net income per common share $ 0.35 $ 0.18
------------------------------------
Net income per common share - assuming dilution $ 0.33 $ 0.17
====================================
See accompanying notes.
24
</TABLE>
<PAGE>
Tremont Advisers, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<S> <C> <C> <C> <C>
Common Stock Additional Retained Total
Par Value Paid in Earnings Shareholders'
Class A Class B Capital (Deficit) Equity
-------------------------------------------------------------------------------------
Balance at December 31, 1996 $12,800 $26,000 $4,004,000 $(1,980,800) $2,062,000
Issuance of Class B Common Stock-MGL
purchase (202,365 shares) - 2,000 721,300 - 723,300
Net income - - - 699,900 699,900
-------------------------------------------------------------------------------------
Balance at December 31, 1997 12,800 28,000 4,725,300 1,280,900) 3,485,200
Comprehensive income:
Net income - - - 1,447,900 1,447,900
Foreign currency translation adjustment - - - - (5,300)
-------------------------------------------------------------------------------------
Comprehensive income 1,442,600
Issuance of Class B Common Stock -
Director Options (7,500 shares) - 100 28,000 - 28,100
Issuance of Class B Common Stock -
Employee Options (130,000 shares) - 1,300 227,500 - 228,800
Income tax benefits related to exercise of
options - - 126,100 - 126,100
-------------------------------------------------------------------------------------
Balance at December 31, 1998 $12,800 $29,400 $5,106,900 $ 167,000 $5,310,800
=====================================================================================
</TABLE>
See accompanying notes.
25
<PAGE>
Tremont Advisers, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<S> <C> <C>
Year ended December
31
1998 1997
--------------------------------------
Operating activities
Net income $ 1,447,900 $ 699,900
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation 180,700 137,800
Equity in earnings of limited partnerships (182,400) (215,100)
Loss from operations of joint ventures, net 222,100 117,100
Loss from other investments 2,000 10,600
Deferred income taxes 256,300 138,000
Allowance for bad debts 10,000 -
Foreign currency translation adjustment (5,300) -
Changes in operating assets and liabilities:
Accounts receivable (110,200) (591,900)
Receivable from officer 200,000 (200,000)
Income taxes, net (84,000) (1,900)
Accounts payable 232,800 (40,100)
Accrued expenses (1,600) (19,200)
Prepaid expenses and other assets (368,700) (91,500)
--------------------------------------
Net cash provided (used) by operating activities 1,799,600 (56,300)
Investing activities
Purchase of fixed assets (229,200) (299,700)
Investments in limited partnerships (710,000) (685,000)
Withdrawals from limited partnerships 79,200 550,000
Investments in other investments (289,600) (56,800)
Proceeds from sale of other investments 40,000 93,600
--------------------------------------
Net cash used by investing activities (1,109,600) (397,900)
Financing activities
Net proceeds from issuance of Class B Common Stock - 723,300
Exercise of Class B Common Stock Options 256,900 -
Tax benefits from exercise of stock options 126,100 -
--------------------------------------
Net cash provided by financing activities 383,000 723,300
Net increase in cash and cash equivalents 1,073,000 269,100
Cash and cash equivalents at beginning of year 820,800 551,700
--------------------------------------
Cash and cash equivalents at end of year $1,893,800 $ 820,800
======================================
</TABLE>
See accompanying notes.
26
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements
December 31, 1998
1. Basis of Presentation
The consolidated financial statements include the accounts of Tremont
Advisers, Inc. ("the Company") and its wholly-owned subsidiaries, Tremont
Partners, Inc., ("TPI"), Tremont (Bermuda) Limited ("TBL"), Tremont Securities,
Inc. ("TSI") and Tremont Futures, Inc. ("TFI"). The consolidated financial
statements also include the accounts of Tremont Investment Management, Inc.
("TIMI"), a 65% owned subsidiary. TPI is an investment advisor registered under
the Investment Advisers Act of 1940, as amended. TBL is incorporated under
Bermuda law and provides advisory services to clients located offshore. TSI, a
registered broker-dealer, assists customers in the purchase and sale of
investments in other entities. TIMI, formed on July 13, 1998, is registered with
the Ontario (Canada) Securities Commission as an investment counsel and
portfolio manager, and as a limited market dealer under the Securities Act
(Ontario). On July 14, 1998, the Company formed TFI. TFI is registered with the
Commodity Futures Trading Commission and the National Futures Association as a
commodity pool operator and commodity trading advisor.
The Company is a holding company, specializing in investment management and
consulting services through its wholly-owned and majority-owned subsidiaries.
The Company advises institutional investors, high net worth individuals, and
investment managers on their organization and management of investment
portfolios and programs. The Company also sponsors and manages its own
proprietary single-manager and multi-manager investment funds.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. All material intercompany transactions and
accounts have been eliminated in consolidation.
Fair Value of Financial Instruments
The estimated fair value of amounts reported in the consolidated financial
statements have been determined by using available market information and
appropriate valuation methodologies. The carrying value for all current assets
and current liabilities approximates fair value because of their short-term
nature. The fair value of long-term investments also approximate their carrying
value.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from such estimates.
27
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Revenue Recognition
Consulting fees are recorded as earned and are derived from consulting and
specialized investment services provided to institutional and other clients, as
well as fees earned from certain funds under management. These fees are
generally a percentage of the amount of assets under management as well as fees
for investments placed by TBL in certain offshore funds. The Company provides
other consulting services generally on a fixed fee basis, either as annual
retainer fees or single project fees. The revenues from such other consulting
arrangements are recognized ratably over the contract terms. Performance fees
are recorded based on the achievement of investment performance in excess of
established benchmarks and are recognized only when they are no longer subject
to market conditions. Commissions earned by TSI are recorded on a trade date
basis.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents. At December 31,
1998, cash and cash equivalents is comprised primarily of deposits with
financial institutions. Such deposits are generally in excess of the amounts
covered by FDIC insurance.
Concentrations of Credit Risk
The Company's accounts receivable are not concentrated in any specific
geographic region, but are concentrated in the investment industry. The
Company's exposure to credit risk associated with nonpayment by customers is
affected by conditions within the investment industry.
Investments
The equity method of accounting is used for investments in limited partnerships
and investments in joint ventures.
Fixed Assets
Fixed assets are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets (3-5
years). During 1998, $13,600 of fully depreciated fixed assets were written off.
28
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Income Taxes
The provision for income taxes includes federal and state taxes currently
payable and those deferred because of temporary differences between the
financial statement and tax basis of assets and liabilities. A valuation
allowance is recorded based on available evidence when it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Minority Interest
The Company presently owns 65% of TIMI. For financial reporting purposes, the
assets, liabilities and earnings of TIMI have been included in the Company's
consolidated financial statements. The joint venture partner's 35% interest in
TIMI has been recorded as minority interest.
Stock Compensation
In 1997, the Company adopted Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation". As permitted under this
standard, the Company has elected to follow Accounting Principles Board Opinion
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees" in accounting for
its stock options and other stock-based employee awards. The Company derives a
tax deduction measured by the excess of the market value over the option price
at the date nonqualified options are exercised. The related tax benefit is
credited to additional paid in capital. Pro forma information regarding net
income and earnings per share, as calculated under the provision of SFAS 123,
are disclosed in Note 8.
Foreign Currency Translation
The Company accounts for translation of foreign currency in accordance with
Statement of Financial Accounting Standards No. 52 "Foreign Currency
Translation." The assets and liabilities of the Company's Canadian subsidiary
are translated at the current exchange rate as of the balance sheet date, while
capital accounts are translated at historical rates. The revenues and expenses
are translated using an average exchange rate during the period. Adjustments
resulting from these translations are reflected as a separate component of
shareholders' equity titled "Cumulative foreign currency translation
adjustment."
Earnings Per Share
Basic earnings per share is computed based on the weighted average number of
common shares outstanding. Diluted earnings per share reflects the increase in
the weighted average common shares outstanding that would result from the
assumed exercise of outstanding stock options, calculated using the treasury
stock method.
Reclassifications
Certain prior year balances have been reclassified to conform with the current
year's presentation.
29
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
3. Prepaid Expenses and Other Assets
<TABLE>
<S> <C> <C>
December 31
1998 1997
-------------------------------------------
Current:
Insurance receivable $257,500 $ -
Prepaid expenses 70,400 123,100
-------------------------------------------
$327,900 $ 123,100
===========================================
Non-Current:
Deferred acquisition costs $162,900 $ -
Security deposits 30,000 29,000
-------------------------------------------
$192,900 $ 29,000
===========================================
</TABLE>
Payroll Express, the Company's payroll preparation and withholding tax data
processing service from 1991 through September 1998, filed Chapter 11
bankruptcy. Payroll Express engaged in a fraudulent scheme by diverting the
Company's federal payroll tax withholdings amounting to $307,500 for the years
ended December 31, 1995 and 1996.
The Company is cooperating with the authorities in the ongoing criminal
investigation of Payroll Express and its principal and filed a proof of claim in
the Payroll Express bankruptcy. The Company also believes that its losses are
covered by its fidelity bond. A proof of loss, which seeks recovery of the
Company's losses and reimbursement for related professional fees, has been filed
with its insurance provider. Included in other assets at December 31, 1998 is
$257,500 which represents a receivable from the insurance provider pursuant to
this claim. This amount reduced the related loss of $307,500 recorded by the
Company in general and administrative expenses.
The Company has agreed to acquire TASS Management Limited ("TASS"), a London
based company specializing in alternative investment and research services (see
Note 16). The acquisition is expected to be completed during the first half of
1999. Accordingly, acquisition costs of $162,900 incurred through December 31,
1998, primarily legal and accounting professional fees, have been recorded as
deferred acquisition costs at December 31, 1998.
4. Investments in Limited Partnerships
The Broad Market Fund, L.P.--The Broad Market Fund L.P. is a Delaware limited
partnership ("Broad Market Fund") that was organized for the purpose of
achieving capital growth through hedged investments. At December 31, 1998 and
1997, TPI, the General Partner, had an investment of $807,200 (cost - $423,600)
and $688,600 (cost - $423,600), respectively, in the Broad Market Fund. For the
years ended December 31, 1998 and 1997, TPI's proportionate share of the Broad
Market Fund's income ($118,600 and $128,700, respectively) is reflected in
equity in earnings of limited partnerships in the consolidated statements of
income. At December 31, 1998 and 1997, TPI's investment in the Broad Market Fund
represented .43% and .51%, respectively, of the Broad Market Fund's net assets.
The summarized audited financial information of the Broad Market Fund, based
solely on the report of other auditors, is as follows:
30
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
4. Investments in Limited Partnerships (continued)
<TABLE>
<S> <C> <C>
December 31
1998 1997
--------------------- ----------------------
Total assets $198,415,000 $162,511,000
Total liabilities 10,725,000 28,568,000
Year ended December 31,
1998 1997
-------------------------------------------
Net investment income $ 3,794,000 $ 2,658,000
Net realized gain on investments 22,101,000 15,765,000
-------------------------------------------
Net income $ 25,895,000 $ 18,423,000
===========================================
</TABLE>
GamTree, L.P.--GamTree, L.P., a Delaware limited partnership ("GamTree") was
organized for the purpose of achieving long-term capital growth through
diversified asset management. At December 31, 1998 and 1997, TPI, a Co-General
Partner with GAMCO Investors, Inc., an affiliate of a shareholder, had an
investment of $177,600 (cost - $100,000) and $186,700 (cost - $100,000),
respectively, in GamTree. For the years ended December 31, 1998 and 1997, TPI's
proportionate share of GamTree's (loss)/income (($9,100) and $28,300,
respectively) is reflected in equity in earnings of limited partnerships in the
consolidated statements of income. At December 31, 1998, TPI's investment in
GamTree represented 12.6% of GamTree's net assets.
Meridian Horizon Fund, L.P.--Meridian Horizon Fund, L.P. is a Delaware limited
partnership ("Meridian") that was organized for the purpose of achieving a high
total return and preservation of capital utilizing a multi-manager approach to
investing. At December 31, 1998 and 1997, TPI had an investment of $378,600
(cost $250,000) and $299,500 (cost $250,000), respectively, in Meridian, which
represents .16% and .23%, respectively, of Meridian's net assets. For the years
ended December 31, 1998 and 1997, TPI's proportionate share of Meridian's income
($79,100 and $47,900, respectively), is reflected in equity in earnings of
limited partnerships in the consolidated statements of income. Effective July 1,
1998, Meridian's Limited Partnership Agreement was amended and restated whereby
TPI resigned as a co-general partner.
The F.W. Thompson Fund, L.P.--At December 31, 1998, The F.W. Thompson Fund,
L.P., a Delaware limited partnership, was closed resulting in a $5,600 loss,
which is included in equity in earnings of limited partnerships in the
consolidated statements of income. At December 31, 1998 and 1997, TPI, the
General Partner, had no investment and an investment of $46,700 (cost -
$29,800), respectively. For the years ended December 31, 1998 and 1997, TPI's
proportionate share of the limited partnership's (loss)/income(($22,500) and
$10,100, respectively) is reflected in equity in earnings of limited
partnerships in the consolidated statements of income.
The Broad Market Prime Fund, L.P.--The Broad Market Prime Fund, L.P., a Delaware
limited partnership ("BMPF"), was formed on July 1, 1997 for the purpose of
achieving capital growth through a leveraged investment strategy. At December
31, 1998, TPI, as General Partner, had an investment of $56,700 (cost $50,000)
representing .03% of the funds' net assets. TPI had no investment at December
31, 1997 in this fund. In addition, the Company has a commitment to fund up to
1% of the limited partnership losses if and when such losses occur. For the year
ended December 31, 1998, TPI had $6,700 of equity earnings related to BMPF and
none in 1997.
31
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
4. Investments in Limited Partnerships (continued)
The aggregated summarized unaudited financial information of GamTree, Meridian,
the Thompson Fund and BMPF is as follows:
<TABLE>
<S> <C> <C>
December 31
1998 1997
--------------------- -------------------
Total assets $482,073,000 $249,504,000
Total liabilities 86,271,000 60,805,000
Year Ended December 31
1998 1997
--------------------- -------------------
Net investment loss $ (8,726,000) $ (2,509,000)
Net realized and unrealized gain on investments 59,593,000 16,488,000
-----------------------------------------
Net income $ 50,867,000 $13,979,000
=========================================
</TABLE>
American Masters Market Neutral Fund, L.P. --Effective September 1, 1998,
American Masters Market Neutral Fund, L.P. ("AMF") became the newest addition to
the Company's line of proprietary products. This domestic multi-manager limited
partnership was formed for the purpose of achieving long term capital
appreciation irrespective of stock market volatility. TFI is the General Partner
of the limited partnership and, as such, is involved in the day-to-day
management of the partnership. At December 31, 1998, TFI had an investment of
$614,600 (cost - $605,000) in AMF representing 54.7% of the funds' net assets.
The summarized unaudited financial information of AMF is as follows:
<TABLE>
<S> <C>
December 31
1998
--------------------
Total assets $1,158,000
Total liabilities 34,000
Period ended
December 31
1998
--------------------
Net investment loss $ (18,000)
Net realized and unrealized gain on investments 36,000
--------------------
Net income $ 18,000
=====================
32
</TABLE>
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
5. Other Investments
At December 31, 1998 and 1997, TBL's investment representing 24.5% of Tremont
International Insurance Ltd. ("TIIL"), a Cayman Islands corporation, formed in
July 1996, was $61,200 (cost - $62,300). TIIL offers certain deferred variable
annuities, variable life insurance and other insurance contracts to customers
not resident in the Cayman Islands. For the period ended December 31, 1998 and
1997, TBL's proportionate share of operating income was none and $1,000,
respectively.
In July 1997, TBL formed with Mutual Risk Management, an international risk
management company ("MRM") and another party, and acquired a 40% interest in
Tremont MRM Services Limited ("TMRM"), a company incorporated under the laws of
Bermuda. TMRM provides product development, marketing and administrative
services to TIIL. At December 31, 1998 and 1997, TBL's investment was $3,700
(cost - $4,800) and for the period ended December 31, 1998 and 1997 its
proportionate share of operating losses was none and $1,100, respectively.
At December 31, 1998 and 1997, TBL's investment in American Master Fund Limited,
a Cayman Islands exempt Company, which was incorporated in July 1991, was
$49,400 (cost - $50,000) and $51,400 (cost - $50,000), respectively. The
principal activity of this Company is to operate as an investment fund to invest
primarily in offshore investment vehicles. The Fund's investment objective is to
achieve a high total rate of return by utilizing the expertise of a number of
investment managers, while preserving capital for its investors.
TBL has a 40% interest ($6,000 cost) in an offshore non-public venture
("investee") that is developing an independent electronic commerce online
community to service the needs of the hedge fund industry. At December 31, 1998,
TBL's investment was written down to zero to account for its proportionate share
of operating losses of $126,400. Also included in other investments is a $67,000
advance from TBL to the investee.
In October 1994, TBL entered into an agreement to form N-Compass Financial
Services Limited, a joint venture, to provide investment advisory services to
offshore clients. For the years ended December 31, 1998 and 1997, TBL's
proportionate share (40%) of operating losses of the joint venture were $12,700
and $83,500, respectively. The investment in this joint venture at December 31,
1998 and 1997 was none and $10,400 (cost - $277,200), respectively.
At December 31, 1998, the Company has options, expiring in 2001, to purchase
8,000 shares of a nonpublic company. This registered investment adviser
specializes in 401(k) investment allocation advice over the internet. The
options were granted at $10 per share and have vested as of December 31, 1998.
The options have been valued at zero at December 31, 1998 and 1997,
respectively.
At December 31, 1998, the Company owns a beneficial interest in 30,000 shares of
a nonpublic financial services company formed in 1996. Such shares were received
by the Company as a result of an employee's participation as a board member of
such company. As a result of consulting services performed for this nonpublic
entity, TPI has received $33,000 and $56,200, respectively, for the years ended
December 31, 1998 and 1997. At December 31, 1998 and 1997, respectively, the
shares of common stock have been valued at zero.
33
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
5. Other Investments (continued)
At December 31, 1998 and 1997, the Company has other investments aggregating
$19,000 (cost - $2,600) and $48,100 (cost - $63,400), respectively. During 1998,
the Company had net losses of $222,100 from joint ventures. Included in this
amount is realized losses of $237,400 of which $203,400 relates to a certain
twenty-five percent owned joint venture that was discontinued effective December
31, 1998.
6. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<S> <C> <C>
December 31
1998 1997
--------------------- ---------------------
Professional and consulting fees $ 579,300 $ 741,100
Compensation 300,000 200,000
Note payable 39,800 87,800
Employee benefit plan 110,000 46,600
Printing and graphics 37,500 18,000
Other 44,600 19,300
-------------------------------------------
$ 1,111,200 $ 1,112,800
===========================================
</TABLE>
7. Shareholders' Equity
The Company's Class A Common Stock and Class B Common Stock are entitled to
equal rights and privileges, except that:
a. with respect to voting rights, each Class A Common Stock shareholder is
entitled to four votes for each share held of record, while the Class B
Common Stock shareholders are entitled to one vote for each share held of
record; and,
b. upon liquidation, dissolution or winding up of the Company, before any
distribution in respect of the Class B Common Stock, the shareholders of
the Class A Common Stock are entitled to receive an amount equal to the
aggregate liquidation preference of $0.40 per share. The shareholders of
the Class B Common Stock are then entitled to $0.40 per share, and the
remaining assets of the Company are then distributed in equal amounts per
share.
In July 1997, the Company entered into a series of transactions whereby MRM
indirectly acquired an equity interest in the Company. In June 1997, MGL
Investment Ltd. ("MGL"), a wholly-owned subsidiary of MRM, began a tender offer
to purchase 615,000 shares of outstanding Class B Common Stock, par value $0.01
at a price of $3.75 per share. This transaction was completed on July 7, 1997
for the entire 615,000 shares. In addition, pursuant to a certain stock purchase
agreement, the Company sold to MGL 202,365 shares of its Class B Common Stock,
par value $0.01 at a price of $3.75 per share. The transaction was completed for
net proceeds of $723,300, which is net of $35,600 of costs incurred. As a result
of these transactions, MRM then indirectly owned, through MGL, Class B Common
Stock equal to 20% of the aggregate of the Company's outstanding Class A
Common Stock and Class B Common Stock.
34
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
7. Shareholders' Equity (continued)
On August 7, 1998, the Company amended its Certificate of Incorporation
increasing the authorized number of shares of Class B Common Stock, $.01 par
value per share, from five million (5,000,000) shares to ten million
(10,000,000) shares. The amendment also provided that all or any shares of Class
A Common Stock, $.01 par value per share, be convertible, at the option of the
holder thereof, into an equivalent number of shares of Class B Common Stock.
8. Stock Options
On September 17, 1998, the Company's Board of Directors adopted, subject to
shareholder approval, the Tremont Advisers, Inc. 1998 Stock Option Plan (the
"1998 Plan"). The 1998 Plan provides for the issuance of up to 200,000 shares of
Class B Common Stock in connection with stock options and other awards granted
under such plan. The 1998 Plan authorizes the grant of incentive stock options
and non-qualified stock options and stock rights. The exercise price for
incentive stock options shall not be less than the fair market value of the
underlying shares on the date of grant. The exercise price for non-statutory
stock options and stock rights shall not be less than the minimum legal
consideration required therefore under the laws of any jurisdiction in which the
Company, or its successors in interest, may be organized. The 1998 Plan is
administered by a committee of the Board of Directors. The committee has the
authority to determine the employees to whom awards will be made, the amount of
awards, and the other terms and conditions of the awards. As of December 31,
1998, 23,400 incentive stock options at $8.00 per share have been granted to
employees under the 1998 Plan. These options have a five year term and vest and
become exercisable on the following schedule: 25 percent on the date of grant,
25 percent on the first anniversary of the date of grant and 50 percent on the
second anniversary of the date of grant.
During May and June 1997, options to purchase 145,000 shares of Class B Common
Stock were granted to the directors and certain executive employees at $3.75 per
share. The options vest and become exercisable on the following schedule: 25
percent on the date of the agreement, 25 percent on the first anniversary of the
execution of the agreement and 50 percent on the second anniversary of the
agreement. In the event of the termination of the directors or employees, the
Company will have the option, exercisable no later than seven days after the
date of termination, to purchase all of the directors or employees shares and
vested options. The purchase price for each share of stock shall be equal to the
best bid price on the date of such termination, and the purchase price for each
option shall be the greater of (i) $3.75, or (ii) the amount of the best bid
price for a share of stock on the date of such termination less $3.75. During
1997, 13,334 of such options lapsed due to the termination of an employee.
During 1998, directors exercised options and purchased 7,500 shares of Class B
Common Stock at $3.75 per share.
During 1994, an option to purchase 10,000 shares of Class B Common Stock at
$2.00 per share was granted to an employee. During 1998, the employee exercised
options and purchased 5,000 shares of Class B Common Stock at $2.00 per share.
The employee's remaining 5,000 options are fully vested and expire during
December 1999, unless they are exercised prior thereto. In the event of the
termination of the employee's employment, the Company will have the option,
exercisable no later than seven days after the date of termination, to purchase
all of the employee's stock and vested options. The purchase price for each
share of stock shall be equal to the best bid price on the date of such
termination, and the purchase price for each option shall be the greater of (i)
$2.00 or (ii) the amount of the best bid price for a share of stock on the date
of such termination less $2.00.
35
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
8. Stock Options (continued)
In 1994, the Board of Directors granted to the president and chief operating
officer an option to purchase 275,000 shares of Class B Common Stock at $1.75
per share, the then current fair market value of the stock. The options are
fully vested and expire on the anniversary of the grant date in 2001. During
August 1998, 125,000 of these options were exercised. In the event of the
termination of the executive's employment, TPI will have the option, exercisable
no later than seven days after the date of termination, to purchase all of the
executive's stock and vested options. The purchase price of each share of stock
shall be equal to the best bid price on the date of such termination, and the
purchase price for each option shall be the greater of (i) $1.75 or (ii) the
amount of the best bid price for a share of stock on the date of such
termination less $1.75.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1998;
risk-free interest rate of 5.0%; dividend yield of 0%; volatility factor of the
expected market price of the Company's common stock of .83%, and a
weighted-average expected life of the options of 5 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
36
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
8. Stock Options (continued)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information for 1998 and 1997 follows:
<TABLE>
<S> <C> <C>
1998 1997
------------------------------------------
Pro forma net income $1,337,100 $ 640,900
Pro forma earnings per share
Basic $ 0.32 $ 0.16
Diluted $ 0.30 $ 0.16
A summary of the Company's stock option activity and related information for the
years ended December 31 follows:
1998 1997
----------------------------------------- ----------------------------------------
Weighted-Average Weighted-Average
Options Exercise Price Options Exercise Price
------------------------------------------- -----------------------------------
Outstanding - beginning of year 416,666 $2.39 285,000 $1.76
Granted 23,400 8.00 145,000 3.75
Exercised (137,500) 1.87 -
Lapsed - (13,334) 3.75
--------- ---------
Outstanding - end of year 302,566 $3.06 416,666 $2.39
========== =========
Exercisable at end of year 222,510 $2.47 322,916 $1.99
Weighted-average fair value of options
granted during the year $5.51 $1.71
The following table summarizes stock options outstanding at December 31, 1998:
Exercise Price Average Average
Range Options Life (a) Exercise Price
- -----------------------------------------------------------------------------------------------
$1.75 - $2.00 155,000 2.2 $1.76
3.75 124,166 3.4 3.75
8.00 23,400 4.9 8.00
- ----------------------------------------------------------------------------------------------
$1.75 - $8.00 302,566 2.9 $3.06
===============================================================================================
(a) Average contractual life remaining in years.
9. Other Income, Net
1998 1997
--------------------------------------
Interest income $52,600 $ 24,400
Loss from other investments (2,000) (10,600)
---------------------------------------
$50,600 $ 13,800
=======================================
37
</TABLE>
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
10. Income Taxes
The provision for income taxes is summarized as follows:
<TABLE>
<S> <C> <C>
1998 1997
Current: ---------------------------------------
Federal $450,000 $158,000
State 155,900 53,900
---------------------------------------
605,900 211,900
Deferred:
Federal 249,500 128,700
State 6,800 9,300
---------------------------------------
Total tax expense $862,200 $349,900
=======================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and deferred tax assets as of December
31, 1998 and 1997 are as follows:
<TABLE>
<S> <C> <C>
1998 1997
-----------------------------------------
Deferred tax liabilities:
Tax over book depreciation $ 25,600 $ 23,500
Unrealized appreciation in limited partnerships 33,100 9,600
Undistributed earnings of foreign subsidiary 536,100 306,700
----------------------------------------
Total deferred tax liabilities 594,800 339,800
Deferred tax assets:
Net operating loss carryforward of foreign subsidiary 36,000 -
Bad debt reserves 4,100 4,000
Organization costs 2,300 3,700
Valuation allowance (36,000) -
----------------------------------------
Total deferred tax assets 6,400 7,700
----------------------------------------
Net deferred tax liability $588,400 $332,100
=========================================
</TABLE>
The income tax provision gives effect to permanent differences between financial
and taxable income, resulting in a higher effective tax rate than the statutory
income tax rate. The reconciliation of income tax attributable to income before
income taxes computed at the U.S. federal statutory tax rates to income tax
expense is:
<TABLE>
<S> <C> <C> <C> <C>
1998 1997
Amount Percent Amount Percent
Statutory federal income tax rate $785,400 34.0 $356,900 34.0
State taxes, net of federal benefit 107,400 4.6 41,700 4.0
Permanently reinvested foreign income (68,000) (2.9) (68,000) (6.6)
Change in valuation allowance 36,000 1.6 - -
Other 1,400 - 19,300 1.9
-------------------------------------------------------------------
$862,200 37.3 $349,900 33.3
===================================================================
38
</TABLE>
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
10. Income Taxes (continued)
In 1998, the Company made estimated federal income tax payments of $415,000. In
1998 and 1997, the Company paid $154,700 and $53,700, respectively, in state
income, minimum and capital taxes.
Deferred income taxes were not provided on certain undistributed foreign
earnings (cumulatively $400,000 at December 31, 1998) of TBL because such
undistributed earnings are expected to be reinvested indefinitely overseas. If
these amounts were not considered permanently reinvested, additional deferred
taxes of approximately $136,000 would have been provided.
At December 31, 1998 and 1997, the Company had no net operating loss
carryforwards for U.S. federal tax purposes. At December 31, 1998, TIMI, the
Canadian subsidiary, has generated a net operating loss of approximately
$80,000, against which a full valuation allowance has been recorded.
11. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<S> <C> <C>
1998 1997
------------------------------------------
Numerator:
Net income - numerator for basic and dilutive earnings per share
(income available to common stockholders) $1,447,900 $ 699,900
Denominator:
Denominator for basic earnings per share - weighted average 4,139,664 3,985,640
shares
Effect of dilutive securities:
Employee stock options 215,935 136,928
------------------------------------------
Denominator for diluted earnings per share - adjusted weighted
average shares and assumed conversions 4,355,599 4,122,568
=================== ======================
Basic earnings per share $ 0.35 $ 0.18
==========================================
Diluted earnings per share $ 0.33 $ 0.17
==========================================
</TABLE>
12. Contingencies
The Company is being sued by a former employee for alleged breach of contract
and defamation. The Company believes that the suit is without merit; however,
should the plaintiff prevail, the Company believes that it is likely that the
damages will not be material to the Company's consolidated financial condition
or results of operations.
39
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
13. Commitments
On December 9, 1998, the Company entered into a amendment to the employment
contract with the Chairman of the Board of Directors that expires on December
31, 1999. Under the terms of this agreement, the Chairman is entitled to receive
a minimum annual base salary of $380,000. In addition, the Chairman could
receive incentive compensation, to be determined by the Board of Directors, at
the end of each fiscal year.
On December 9, 1998, the Company entered into an amendment to the employment
contract with the President and Chief Operating Officer of the Company that
expires on December 31, 1999. Under the terms of such amended agreement, the
executive is entitled to receive a minimum annual base salary of $342,000. In
addition, the executive will receive incentive compensation equal to an amount
pursuant to a predetermined percentage of the incentive compensation paid to the
Company's Chairman of the Board of Directors.
On July 17, 1998, TIMI entered into an employment agreement with the President,
Chief Operating Officer and Chief Investment Officer that expires on July 31,
2000. Under the terms of the Agreement, the executive is entitled to receive an
annual salary of $125,000 for the period commencing August 1, 1998 and ending
July 31, 1999 and $150,000 for the period commencing on August 1, 1999 and
ending on July 31, 2000.
In September 1997, the Company moved to a larger facility and entered into a
lease agreement for its executive offices. The Company was completely released
from its obligation under the old lease (which required monthly payments of
approximately $8,450). The lease for the new facility expires August 31, 2002
and requires monthly payments of approximately $17,100. Effective October 1,
1998, the Company leased additional office space for its corporate offices. This
new lease expires August 31, 2002 and requires monthly payments of approximately
$5,600.
TBL's lease for corporate offices expires during February 2000. Such lease
requires monthly payments of approximately $5,800.
Rent expense for the years ended December 31, 1998 and 1997 was $343,500 and
$218,000, respectively. Future minimum obligations under noncancelable operating
leases at December 31, 1998 is: 1999-$382,000, 2000-$317,400, 2001-$300,600,
2002-$196,800 and 2003-$3,700.
14. Employee Benefit Plan
The Company has a defined contribution plan, the Tremont Advisers 401(k) Savings
Plan (the "Plan"), which has been designed to provide retirement benefits for
the Company's employees. All employees who have attained the age of eighteen and
who have completed one month of service with the Company are eligible to
participate in the Plan. An employee may elect to defer up to 15% of his or her
compensation per year to contribute to the Plan and may allocate such
contributions among eight investment mutual funds and the Class A or Class B
Common Stock of the Company.
On September 17, 1998, the Board of Directors amended the Tremont Advisers,
Inc. 401(k) Savings Plan, effective January 1, 1998, to allow employer matching
contributions and to allocate the Company's employer discretionary contributions
based upon the Company's fiscal year profitability, as related to
pre-established financial objectives. The Company's matching contribution for
the year ending December 31, 1998 will be 25 cents for each $1 a participant
contributes as an employee salary deferral up to a limit of 6.25% of eligible
compensation ($160,000 maximum for 1998). Company contributions will be made
annually, subsequent to year end, based upon the previous year's salary
deferrals.
40
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
14. Employee Benefit Plan (continued)
For the years ended December 31, 1998 and 1997, the Company's expenses under the
Plan were $110,000 and $46,600, respectively.
15. Segment and Geographic Data
The Company operates principally in a single segment. It provides various
alternative investment services using a single and multi-manager investment
approach to placing investment funds with independent asset managers. This
segment consists of one operating unit that provides services to two types of
clients: the Company's proprietary investment funds sponsored by certain
subsidiaries and to nonaffiliated investment fund sponsors, institutional
investors and high net-worth individual investors.
For the proprietary investment funds (typically structured as limited
partnerships) the Company serves as the general or co-general partner
participating in organizing the funds, selecting the asset classes for
investment and providing the day-to-day management and administration for the
operation of the funds, other than making direct investment decisions.
For the non-affiliated investment fund sponsors, institutional investors and
high net-worth investors the Company provides the following services: consulting
regarding the organization of funds, establishment of investment objectives and
guidelines, definition of suitable asset classes, negotiation of fees with asset
managers and other professionals, monitoring of investment performance and
periodic reporting to clients.
The following table provides a summary of the types of fees earned with respect
to each of the two primary client types discussed above.
<TABLE>
<S> <C> <C>
1998 1997
Revenues
Proprietary investment funds
Asset-based fees $ 4,928,200 $2,170,900
Performance-based fees - 260,300
---------------------------------------
Total revenue from proprietary investment funds 4,928,200 2,431,200
Consulting clients
Asset-based fees 3,688,000 2,953,400
Performance-based fees 434,600 624,000
Annual retainer and special project fees 996,800 568,500
Administration fees 185,000 147,500
---------------------------------------
5,304,400 4,293,400
Other revenue (1) 423,500 302,100
---------------------------------------
Total consolidated revenues $10,656,100 $ 7,026,700
=======================================
(1) Other revenue consists of commissions earned through TSI (the
Company's wholly-owned introducing broker/dealer).
27
</TABLE>
41
<PAGE>
Tremont Advisers, Inc.
Notes to Consolidated Financial Statements (continued)
15. Segment and Geographic Data (continued)
<TABLE>
<S> <C> <C>
Revenues (a)
---------------------------------------
1998 1997
------------------------------------------
United States $ 7,107,900 $4,224,800
Bermuda 3,548,200 2,801,900
Canada - -
------------------------------------------
Consolidated total $10,656,100 $7,026,700
==========================================
</TABLE>
(a) Revenues are attributed to countries based on the location of the
subsidiary performing the services.
Long-lived assets are substantially all located in the United States.
During the periods presented in the consolidated statements of income, certain
clients accounted for a significant percentage of the Company's consolidated
revenues. For the years ended December 31, 1998, and 1997, the Broad Market
Fund, L.P. accounted for approximately 15% and 17%, respectively of consolidated
revenues. In addition, for the years ended December 31, 1998 and 1997 the Broad
Market Prime Fund, L.P. accounted for approximately 16% and 3%, respectively, of
consolidated revenues. For the years ended December 31, 1998 and 1997, revenues
from other related entities (see Note 4) accounted for approximately 7% and 8%
of consolidated revenues, respectively.
16. Subsequent Events
On March 11, 1999, the Company entered into a definitive agreement to purchase
all of the outstanding shares of TASS Management Limited ("TASS"), a London
based company specializing in alternative investment and research services for
approximately $1.4 million. The transaction, which is expected to be consummated
in the first half of 1999, will be accounted for using the purchase method of
accounting. Accordingly, the excess of cost over the fair market value of net
assets acquired, (approximately $1.7 million), will be amortized on a straight
line basis over ten years. The operations of TASS will be included on the
statement of income of the Company from the date of the closing. The Company
expects to finance this transaction by issuing approximately 190,500 shares of
Class B Common Stock. TASS had unaudited revenues of $1,632,500 and unaudited
net income of $84,900 for the year ended December 31, 1998.
Subsequent to December 31, 1998, an employee exercised options and purchased
5,000 shares of Class B Common Stock at $3.75 per share.
42
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not Applicable
43
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant.
The present Directors and Executive Officers of the Company are set forth below:
<TABLE>
<S> <C> <C>
Name Age Position
Sandra L. Manzke 50 Chairman of the Board of Directors
and Chief Executive Officer
Robert I. Schulman 53 Director, President and Chief Operating Officer
John L. Keeley, Jr. 58 Director
Alan A. Rhein 56 Director
Richard O'Brien 41 Director
Jimmy L. Thomas 57 Director
Suzanne S. Hammond 52 Secretary and Treasurer
Stephen T. Clayton 38 Chief Financial Officer
Bruce D. Ruehl 38 Senior Vice President-Director of Manager Research
</TABLE>
All directors of the Company hold office until the next annual meeting
of stockholders of the Company and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal. Executive
officers are elected by the Board of Directors on an annual basis and serve at
the discretion of the Board of Directors. Sandra L. Manzke and Robert I.
Schulman are the only officers subject to the terms of an employment agreement.
There are no family relationships among any of the directors or executive
officers of the Company.
Sandra L. Manzke is the Company's Chairman of the Board and Chief
Executive Officer. Ms. Manzke was one of the principal founders of Tremont
Partners, Inc. ("TPI") in 1984 and has been its Chairman and President since its
inception. When the Company acquired TPI in 1987, Ms. Manzke also became a
director of the Company and, prior to becoming its Chief Executive Officer in
May 1994, was its President. Ms. Manzke has served as a director of the Company
since 1987 and also serves as Director of Tremont (Bermuda) Limited ("TBL").
Robert I. Schulman became the Company's President and Chief Operating
Officer as of May 31, 1994. He has been a Director of the Company since October
1993. Mr. Schulman also became President, Chief Executive Officer and a Director
of Tremont Securities, Inc. as of June 1994. Prior to May 31, 1994, he was
Executive Vice President, Director of Products & Services at Smith Barney
Shearson. Mr. Schulman is a member of the Company's Audit Committee.
John L. Keeley, Jr. became a Director of the Company in January 1994.
Mr. Keeley is President, Treasurer and a Director of Keeley Investment
Corporation, a registered broker-dealer. He has held these positions since 1977.
He is also President, Treasurer and a Director of Keeley Asset Management
Corporation, a registered investment advisor, Keeley Small Cap Value Fund, Inc.,
an open- end mutual fund, various investment partnerships and the John L.
Keeley, Jr. Foundation. Mr. Keeley also became a Director of the Marquette
National Corporation in 1994. Mr. Keeley is a member of the Company's Audit
Committee.
Alan A. Rhein, became a Director of the Company in June 1997. Mr.
Rhein is a founding principal of Lockwood Financial Group Ltd., an investment
management consulting firm, and is President and Chief Executive Officer of
Lockwood Financial Services, the broker-dealer division of Lockwood Financial
Group Ltd. In 1993, Mr. Rhein was recruited by Prudential Securities to serve as
Executive Vice President in charge of their entire Retail Branch system. Mr.
Rhein is a member of the Company's Audit Committee.
44
<PAGE>
Richard O'Brien, 41, became a Director of the Company in June 1998. He
has been the Vice President, Secretary and General Counsel of Mutual Risk
Management Ltd., since March 1995. From 1990 until 1995, Mr. O'Brien was a
partner in Dunnington, Bartholow & Miller, a law firm located in New York City.
Mr. O'Brien is a member of the Company's Audit Committee.
Jimmy L. Thomas became a Director of the Company in November 1994. Mr.
Thomas retired in 1998 and prior to retirement was Senior Vice President -
Financial Services and Treasurer of Gannett Co., Inc. since December 1991. He
also serves on the Regional Advisory Board of Marine Midland Bank. Mr. Thomas is
a member of the Company's Audit Committee.
Suzanne S. Hammond has been the Secretary and Treasurer of the Company
since August 1991. Ms. Hammond also currently serves as a Senior Vice President,
Treasurer and Secretary of TPI, and as a Director of TBL.
Stephen T. Clayton joined the Company on January 10, 1994 and was
appointed Chief Financial Officer on January 19, 1994. Mr. Clayton also became
the Financial and Operations Principal and a Director of TSI in June 1994, and
Chief Financial Officer and Director of TFI and TIMI in 1998.
Bruce D. Ruehl joined the Company in August 1993 and was appointed
Senior Vice President- Director of Manager Research of TPI in 1994.
Item 10. Executive Compensation.
The following table sets forth the annual and long-term compensation
for the Company's Chief Executive Officer and other executive officers whose
total cash compensation exceeded $100,000 for services rendered to the Company
and its subsidiaries for the fiscal year ended December 31, 1998 (the "Named
Officers").
45
<PAGE>
<TABLE>
<S> <C> <C>
Summary Compensation Table
Annual Compensation
- ---------------------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation
-------------------------------------------------
Awards Payouts
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Restricted Securities
Name and Bonus Annual Stock Underlying LTIP All other
Principal Position Salary Bonus Compen- Award(s) Options/ Payout Compen-
Year ($)(a) ($)(b) sation ($) ($) SARs (#) ($) sation ($)
- ---------------------------------------------------------------------------------------------------------------------
Sandra L. Manzke, 1998 373,000 310,000 - - - - -
Chief Executive Officer
--------------------------------------------------------------------------------------------
1997 362,000 135,000 - - 35,000 - -
--------------------------------------------------------------------------------------------
1996 262,500 325,000 - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Robert I. Schulman, 1998 335,700 279,000 - - - - 295,000
Chief Operating
Officer
--------------------------------------------------------------------------------------------
1997 326,250 121,500 - - 25,000 - -
--------------------------------------------------------------------------------------------
1996 236,250 292,500 - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Bruce D. Ruehl, Senior 1998 150,000 150,000 - - 4,000 - -
Vice President and
Director of Manager
Research for TPI
--------------------------------------------------------------------------------------------
1997 140,000 100,000 - - 10,000 - -
--------------------------------------------------------------------------------------------
1996 85,000 55,000 - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Stephen T. Clayton 1998 130,000 65,000 - - 2,500 - 12,650
Chief Financial Officer
--------------------------------------------------------------------------------------------
1997 120,000 50,000 - - 10,000 - -
--------------------------------------------------------------------------------------------
1996 110,000 32,500 - - - - -
- ---------------------------------------------------------------------------------------------------------------------
Suzanne S. Hammond, 1998 107,000 20,000 - - 2,000 - -
Secretary and Treasurer
--------------------------------------------------------------------------------------------
1997 100,417 14,000 - - - - -
--------------------------------------------------------------------------------------------
1996 85,000 7,000 - - - - -
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) On December 9, 1998, the Company entered into an amendment to Ms. Manzke's
employment agreement dated September 15, 1995. Under the terms of the amended
agreement which expires on December 31, 1999, Ms. Manzke is entitled to receive
a minimum annual base salary of $380,000. In addition, Ms. Manzke may receive
incentive compensation to be determined by the Board of Directors. On December
9, 1998, the Company entered into an amendment to Mr. Schulman's employment
agreement dated April 22, 1994. Under the terms of this amended agreement which
expires on December 31, 1999, Mr. Schulman is entitled to receive minimum annual
base compensation of $342,000. In addition, Mr. Schulman must receive incentive
compensation equal 90% of the incentive compensation paid to Ms. Manzke in any
year.
(b) A portion of the bonuses for Ms. Manzke, Mr. Ruehl, Mr. Clayton and Ms.
Hammond, which accrued in 1997 were actually paid in 1998. These amounts were
$150,000, $20,000, $12,000 and $6,000, respectively. In addition, a portion of
the bonuses for Ms. Manzke and Mr. Schulman which accrued in 1996 were actually
paid in 1997. These amounts were $75,000 and $67,500, respectively.
46
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Presented below is information with respect to unexercised stock options to
purchase the Company's Class B Common Stock held by each Named Officer as of
December 31, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money Options
Options at at December 31,
December 31, 1998
1998 (#) ($)
Shares Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------
Sandra L. Manzke - - 17,500/17,500 $74,400/$74,400
Robert I. Schulman 125,000 $295,000 162,500/12,500 $990,600/$53,100
Bruce D. Ruehl - - 6,000/8,000 $21,300/$21,300
Stephen T. Clayton 5,000 $12,650 10,625/6,875 $51,300/$21,300
Suzanne S. Hammond - - 500/1,500 --/--
</TABLE>
Directors' Compensation
Directors of the Company who are salaried employees of the Company do
not receive any additional compensation for serving as a director. Non-employee
directors of the Company receive $2,500 for each Board of Directors meeting
attended and $1,250 for each telephonic Board Meeting attended.
Employment Contracts, Termination of Employment and Change in Control
Arrangements.
The Company and Sandra L. Manzke, the Company's Chairman of the Board
and Chief Executive Officer, entered into an amended employment agreement
pursuant to which Ms. Manzke is entitled to a minimum base salary of $380,000
per annum. She is also entitled to a bonus as determined by the Board of
Directors. Ms. Manzke's employment may be terminated due to illness, disability
or other incapacity such that she is unable to perform her duties for a period
of ninety (90) consecutive days. If her employment is so terminated, she will be
entitled to receive her base salary and accrued bonus until December 31, 1999.
In the event of her death, her right to compensation will cease.
In the event of the termination of Ms. Manzke's employment for any
reason, including death, the Company shall have the option, provided it is
exercised within ninety (90) days, to reacquire all of Ms. Manzke's shares of
capital stock in the Company for a price per share equal to the market value on
the date of such termination. Ms. Manzke has agreed that she will not sell or
dispose of her stock in the Company without first offering to sell the stock to
the Company at a price per share equal to its then market value.
Robert I. Schulman, the President and Chief Operating Officer of the
Company, entered into an amendment, as of December 9, 1998, to his employment
agreement. The amended agreement expires
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<PAGE>
on December 31, 1999 and will be automatically renewed from year to year unless
either party terminates it in a timely manner. Mr. Schulman is entitled to a
minimum base salary of $342,000 plus a bonus as the Board of Directors may
determine; provided, however, that in no event will Mr. Schulman's base salary
in any year be less than 90% of the base salary payable to Ms. Manzke for such
year and in no event will Mr. Schulman's bonus be less than 90% of the incentive
compensation payable to Ms. Manzke in such year. If Mr. Schulman is disabled or
his employment is terminated by the Company without cause or by him with cause,
then he will be entitled to receive his base salary and accrued bonus until
December 31, 1998. In the event his employment is terminated by the Company with
cause or by him without cause, or in the event of his death, his right to
compensation will cease upon the date of termination or death.
Upon executing his employment agreement in 1994, Mr. Schulman was
granted options to purchase 275,000 shares of the Company's Class B Common Stock
at an exercise price of $1.75 per share, the then current fair market value of
the Class B Common Stock. The options are fully vested and will expire on the
anniversary of the grant date in 2001. During August 1998, Mr. Schulman
exercised options to purchase and purchased 125,000 shares of Class B Common
Stock. In the event Mr. Schulman's employment is terminated for any reason,
including the expiration of the employment agreement, any unvested options will
lapse; vested but unexercised options will remain outstanding and exercisable
under the original terms and conditions, subject to an option in favor of TPI to
purchase all of Mr. Schulman's stock no later than seven days after the date of
termination for a per share price equal to the best bid price on the date of
termination and the purchase price for each option shall be the greater of (i)
$1.75 or (ii) the amount of the best bid price for a share of Common Stock on
the date of termination less $1.75. Mr. Schulman has agreed that he will not
dispose of the Class B Common Stock he acquires pursuant to the options or the
unexercised options without first offering them to TPI for the per share price
applicable in the case of the termination of his employment.
On July 17, 1998, TIMI entered into an employment agreement with
Robert Parnell, the President, Chief Operating Officer and Chief Investment
Officer that expires on July 31, 2000. Under the terms of the agreement, Mr.
Parnell is entitled to receive an annual salary of $125,000 for the period
commencing August 1, 1998 and ending July 31, 1999 and $150,000 for the period
commencing on August 1, 1999 and ending on July 31, 2000.
Class B Options
During May and June 1997, options to purchase 20,000 shares and
125,000 shares, respectively, were granted to the directors and certain
executive employees at $3.75 per share. At September 30, 1997, 13,334 options
lapsed due to an employee's termination of employment. The remaining options
have vested or will vest and become exercisable on the following schedule: 25
percent on the date of the grant, 25 percent on the first anniversary of the
grant and 50 percent on the second anniversary of the grant. In the event a
director or employee ceases to serve as such, the Company will have the option,
exercisable no later than seven days after the date of termination of the
relationship, to purchase all of the director's or employee's vested options.
The purchase price for each share of Class B Common Stock shall be equal to the
best bid price on the date of such termination, and the purchase price for each
option shall be the greater of (i) $3.75, or (ii) the amount of the best bid
price for a share of Class B Common Stock on the date of such termination less
$3.75.
In December 1994, options to purchase 10,000 shares of Class B Common
Stock were granted to an officer. These options are fully vested and will expire
on December 15, 1999, the fifth anniversary
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<PAGE>
of the date of grant. In the event the officer's employment is terminated, the
Company will have the option, exercisable no later than seven days after the
date of termination, to purchase all of the officer's stock and vested options.
The purchase price for each share of Class B Common Stock shall be equal to the
best bid price on the date of such termination, and the purchase price for each
option shall be the greater of (i) $2.00 or (ii) the amount of the best bid
price for a share of Class B Common Stock on the date of such termination less
$2.00.
As of December 31, 1998, options to purchase 150,000 shares, 5,000
shares and 61,666 shares of Class B Common Stock for $1.75, $2.00 and $3.75,
respectively, were exercisable by the Company's directors and executives.
1998 Stock Option Plan
On September 17, 1998, the Company's Board of Directors adopted,
subject to shareholder approval, the Tremont Advisers, Inc. 1998 Stock Option
Plan (the "1998 Plan"). The 1998 Plan provides for the issuance of up to 200,000
shares of Class B Common Stock in connection with stock options and other awards
granted under such plan. The 1998 Plan authorizes the grant of incentive stock
options, non-qualified stock options and stock rights. The exercise price for
incentive stock options shall not be less than the fair market value of the
underlying shares on the date of grant. The exercise price for non-statutory
stock options and stock rights shall not be less than the minimum legal
consideration required therefore under the laws of any jurisdiction in which the
Company, or its successors in interest, may be organized. The 1998 Plan is
administered by a committee of the Board of Directors. The committee has the
authority to determine the employees to whom awards will be made, the amount of
awards, and the other terms and conditions of the awards. As of December 31,
1998, 23,400 options have been granted at $8.00 per share under the 1998 Plan.
These options have a five year term and will vest and become exercisable on the
following schedule: 25% on the date of grant, 25% of the first anniversary of
the date of the grant and 50% on the second anniversary of the date of the
grant. At December 31, 1998, 5,850 options were exercisable by employees.
Indemnification for Certain Liabilities
The By-Laws of the Company provide that the Company may indemnify its
directors and officers to the fullest extent permitted by the laws of the
Delaware General Corporation Law against all expenses, liability and loss
(including attorneys' fees, judgment, fines and amounts paid in settlement)
incurred by them in any action, suit or proceeding arising out of certain of
their actions or omissions in their capacities as directors or officers. Article
Seven of the Company's Restated Certificate of Incorporation provides that, with
certain exceptions, no director of the Company may be liable to the Company for
monetary damages as a result of a breach of his fiduciary duties as a director.
The Company has acquired directors' and officers' liability insurance for its
directors and officers.
The Delaware Supreme Court has held the directors' duty of care to a
corporation and its shareholders requires the exercise of an informed business
judgment. Having become informed of all material information reasonably
available to them, directors must act with requisite care in the discharge of
their duties. The Delaware General Corporation Law permits a corporation through
its certificate of incorporation to exonerate its directors from personal
liability to the corporation or its shareholders for monetary damages for a
breach of their fiduciary duty of care as a director, with certain exceptions.
The exceptions include a breach of the director's duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, improper declaration of dividends and
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transactions from which the director derived an improper personal benefit. As
noted above, the Company's Restated Certificate of Incorporation exonerates its
directors, acting in such capacity, from monetary liability to the extent
permitted by this statutory provision. This limitation of liability provision
does not eliminate a shareholder's right to seek non-monetary, equitable
remedies such as an injunction or rescission in order to redress an action taken
by directors. However, as a practical matter, equitable remedies may not be
available in all situations, and there may be instances in which no effective
remedy is available.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table contains information relating to the beneficial
ownership of Common Stock by members of the Board of Directors, and by such
members and by the Company's officers as a group, as well as certain other
beneficial owners as of March 8, 1999. Information as to the number of shares of
Common Stock owned and the nature of ownership has been provided by these
individuals and is not within the direct knowledge of the Company. Unless
otherwise indicated, the named individuals possess sole voting and investment
power with respect to the shares listed. The following information has been
furnished to the Company or is based on Schedules 13D, or any amendments
thereto, received by the Company as filed with the Commission.
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<TABLE>
<S> <C> <C> <C> <C>
Name and Address of Number of
Beneficial Owner Shares Owned % of
Class A Class B Class A Class B
Sandra L. Manzke (1) 183,600 390,076 14% 14%
555 Theodore Fremd Avenue
Rye, New York
Robert I. Schulman(2) 1,964 359,751 * 13
555 Theodore Fremd Avenue
Rye, New York
John L. Keeley, Jr. (3) 81,590 350,427 6 13
401 South LaSalle Street
Chicago, Illinois
Alan Rhein (4) - 12,500 - *
405 Park Avenue
New York, New York
Jimmy L. Thomas - 45,000 - 2
1100 Wilson Boulevard
Arlington, VA 22234
Suzanne S. Hammond (5) - 24,332 - *
555 Theodore Fremd Avenue
Rye, New York
Stephen T. Clayton (6) 759 31,792 * 1
555 Theodore Fremd Avenue
Rye, New York
Bruce D. Ruehl (7) 201 107,370 * 4
555 Theodore Fremd Avenue
Rye, New York
Mario J. Gabelli (8) 569,039 196,695 44 7
Gabelli Funds, Inc.
555 Theodore Fremd Avenue
Rye, New York
Lynch Corporation (9) - 116,189 - 4
8 Sound Shore Drive
Greenwich, CT
MGL Investments Ltd. (10) - 817,365 - 29
One Logan Square
Suite 1400
Philadelphia, PA
Directors and Officers
as a group: 268,114 1,321,248 20% 47%
* Less than one percent.
</TABLE>
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(1) Includes 10,000 shares of Class A Common Stock held by the Tremont Advisers,
Inc., 401(k) Savings Plan for the benefit of Ms. Manzke. The 390,076 shares of
Class B Common Stock include 43,425 shares held by the Tremont Advisers, Inc.
401(k) Savings Plan for the benefit of Ms. Manzke and 17,500 shares represent
certain stock options granted to Ms. Manzke by the Company that have vested.
(2) The shares of Class A Common Stock are held by the Tremont Advisers, Inc.
401(k) Savings Plan for the benefit of Mr. Schulman. Of the 359,751 shares of
Class B Common Stock, 162,500 shares represent certain stock options granted to
Mr. Schulman by the Company that have vested and 8,454 shares are held by the
Tremont Advisers, inc. 401(k) Savings Plan for the benefit of Mr. Schulman.
(3) The 81,590 shares of Class A Common Stock are beneficially owned by Mr.
Keeley. Of the 350,427 shares of Class B Common Stock reported, 162,500 shares
reported are beneficially owned by Mr. Keeley and include 20,000 shares held in
the name of his wife, 10,000 shares held by the John L. Keeley Jr. Foundation,
35,000 shares held by the KIC Profit Sharing Plan & Trust for the benefit of Mr.
Keeley for which Mr. Keeley is Trustee, and 35,000 shares held by the KIC
Pension Plan & Trust for the benefit of Ms. Keeley and for which Mr. Keeley is
Trustee and 2,500 shares represent certain stock options granted to Mr. Keeley
by the Company that have vested. Of the remaining 85,426 shares of Class B
Common Stock, 65,712 shares are owned by Kamco Limited Partnership No. 1 ("KLP")
and 19,714 shares held by JGJ Partnership of which Mr. Keeley is a partner. Mr.
Keeley is the sole general partner of KLP, an investment partnership organized
under the laws of Illinois. Mr. Keeley is deemed to have a beneficial ownership
of securities owned beneficially by each of the foregoing entities.
(4) The 12,500 shares of Class B Common Stock represent certain stock options
granted to Mr. Rhein by the Company that have vested.
(5) Of the 24,332 shares of Class B Common Stock beneficially owned by Ms.
Hammond, 1,500 shares are held by the Tremont Advisers, Inc. 401(k) Savings Plan
for the benefit of Ms. Hammond and 500 shares represent certain stock options
granted to Ms. Hammond that have vested.
(6) The 759 shares of Class A Common Stock are held by the Tremont Advisers,
Inc. 401(k) Savings Plan for the benefit of Mr. Clayton. Of the 31,792 shares of
Class B Common Stock, 10,625 shares represent certain stock options granted to
Mr. Clayton by the Company that have vested, 3,666 shares are held by the
Tremont Advisers, Inc. 401(k) Savings Plan for the benefit of Mr. Clayton and
3,500 shares are held in the name of his wife, for which Mr. Clayton
specifically disclaims beneficial ownership.
(7) The 201 shares of Class A Common Stock are held by the Tremont Advisers,
Inc. 401(k) Savings Plan for the benefit of Mr. Ruehl. Of the 107,370 shares of
Class B Common Stock, 1,370 shares are held by the Tremont Advisers, Inc. 401(k)
Savings Plan for the benefit of Mr. Ruehl and 6,000 shares represent certain
stock options granted to Mr. Ruehl by the Company that have vested.
(8) Includes 325,385 shares of Class A Common Stock and 2,267 shares of Class B
Common Stock owned by family trusts or partnerships over which Mr. Gabelli has
sole voting power and investment power. Does not include shares listed elsewhere
in this table which are held by Lynch Corporation ("Lynch"), of which Mr.
Gabelli specifically disclaims beneficial ownership. Mr. Gabelli is the
principal shareholder, as well as the Chairman of the Board and Chief Executive
Officer, of Gabelli Funds, Inc. ("GFI"), a registered investment adviser under
the Investment Advisers Act of 1940, as amended and the ultimate parent company
for a variety of operating companies engaged in various aspects of the
securities business, including GAMCO Investors, Inc. ("GAMCO"), a wholly-owned
subsidiary of GFI and a registered investment adviser; Gabelli Securities, Inc.
("GSI"), a majority-owned subsidiary of GFI; and Gabelli & Company, Inc.
("Gabelli & Company"), a wholly-owned subsidiary of GSI and a registered
broker-dealer. Mr. Gabelli is also Chairman of the Board and Chief Executive
Officer of GAMCO and a registered representative of Gabelli & Company. GFI,
GAMCO, GSI and Gabelli & Company are herein referred to as "affiliates" of Mr.
Gabelli. Acting in these capacities, Mr. Gabelli has the authority for making
voting and investment decisions on behalf of the affiliates and, therefore, may
be deemed to be the beneficial owner of shares of the Company owned by or held
in accounts of such affiliates. Of the remaining 243,654 shares of Class A
Common Stock owned by Mr. Gabelli and affiliates of Gabelli, 42,000 shares are
held by Gabelli Securities, Inc. and 105,275 shares are held by shareholders of
Gabelli Funds, Inc. (including Mr. Gabelli), which shares are subject to a
stockholders agreement appointing Mr. Gabelli a proxy with voting power until
June 2001.
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<PAGE>
(9) Mr. Gabelli is Chairman of the Board and Chief Executive Officer of
Lynch, and he and his affiliates and their clients are principal shareholders of
Lynch. Mr. Gabelli may be deemed to be a beneficial owner of the shares of the
Company owned by Lynch by virtue of his and certain affiliated parties'
significant beneficial ownership of the common stock of Lynch. Mr. Gabelli,
however, specifically disclaims beneficial ownership of all of the shares of the
Company's Common Stock held by Lynch.
(10) In July 1997, Mutual Risk Management ("MRM"), an international risk
management company, indirectly acquired an equity interest in the Company. In
July 1997, MGL Investments Ltd. ("MGL"), a wholly-owned subsidiary of MRM,
purchased 615,000 shares of outstanding Class B Common Stock at a price of $3.75
per share pursuant to a tender offer. In addition, the Company simultaneously
sold MGL 202,365 shares of Class B Common Stock at a price of $3.75 per share.
As a result of these transactions, MRM then indirectly owned, through MGL, Class
B Common Stock equal to 20% of the aggregate of the Company's outstanding Class
A Common Stock and Class B Common Stock.
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<PAGE>
Item 12. Certain Relationships and Related Transactions.
Certificate of Incorporation Amendment
On August 7, 1998, the Company amended its Certificate of
Incorporation increasing the authorized number of shares of Class B Common
Stock, $.01 par value per share, from five million (5,000,000) shares to ten
million (10,000,000) shares. The amendment also provided that Class A Common
Stock, $.01 par value per share, be convertible, at the option of the holder
thereof, into an equivalent number of shares of Class B Common Stock, $.01 par
value per share.
1998 Stock Option Plan
On September 17, 1998, the Company's Board of Directors adopted,
subject to shareholder approval, the Tremont Advisers, Inc. 1998 Stock Option
Plan (the "1998 Plan"). The 1998 Plan provides for the issuance of up to 200,000
shares of Class B Common Stock in connection with stock options and other awards
granted under such plan. The 1998 Plan authorizes the grant of incentive stock
options, non-qualified stock options and stock rights. The exercise price for
incentive stock options shall not be less than the fair market value of the
underlying shares on the date of grant. The exercise price for non-statutory
stock options and stock rights shall not be less than the minimum legal
consideration required there fore under the laws of any jurisdiction in which
the Company, or its successors in interest, may be organized. The 1998 Plan is
administered by a committee of the Board of Directors. The committee has the
authority to determine the employees to whom awards will be made, the amount of
awards, and the other terms and conditions of the awards. As of December 31,
1998, 23,400 options were granted at $8.00 per share under the 1998 Plan. These
options have a five year term and will vest and become exercisable on the
following schedule: 25% on the date of grant, 25% of the first anniversary of
the date of the grant and 50% on the second anniversary of the date of the
grant. At December 31, 1998, 5,850 options were exercisable by employees.
New Subsidiaries
The Company, with a joint venture partner, formed Tremont Investment
Management, Inc. ("TIMI"). TIMI, 65% owned by the Company, is registered
with the Ontario Securities Commission in the categories of investment counsel
and portfolio manager and as a limited market dealer under the Securities Act
(Ontario).
On July 14, 1998, the Company formed Tremont Futures, Inc. ("TFI").
TFI is registered with the Commodity Futures Trading Commission and the National
Futures Association as a commodity pool operator and commodity trading advisor.
Business Combination
On March 11, 1999, the Company acquired all of the outstanding
ordinary (common) shares of TASS Management Limited ("TASS"), a London, England
- - based company specializing in the sale of electronic databases. Tremont issued
190,477 shares of its Class B Common Stock in exchange for the TASS common
shares. TASS thus became another of the Company subsidiaries, although its
preferred stock will not be owned by the Company. TASS serves a large
institutional client base whose subscribers include money center banks,
investment banks, private banks, central banks, foundations, endowments,
insurance companies, prime brokers, family offices, academics, government
agencies and
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<PAGE>
high-net worth individuals. The transaction will be accounted for using the
purchase method of accounting. Accordingly, the excess of cost over the fair
market value of net assets acquired (approximately $1.7 million) will be
amortized on a straight line basis over a ten year period. The operations of
TASS will be included in the consolidated statement of operations from the date
of closing. In connection with the acquisition, employment agreements were
entered into with two key employees of TASS, who were also granted options to
purchase shares of the Company's Class B Common Stock and certain registration
rights.
Class B Common Stock Sale
In July 1997, MRM indirectly acquired an equity interest in the Company and
MGL Investment Ltd. ("MGL"), a wholly-owned subsidiary of MRM, acquired 615,000
shares of outstanding Class B Common Stock, par value $0.01 at a price of $3.75
per share pursuant to a tender offer. In addition, the Company sold MGL 202,365
shares of Class B Common Stock at $3.75 per share. As a result of these
transactions, MRM then indirectly owned, through MGL, a number of shares of
Class B Common Stock equal to 20% of the aggregate outstanding shares of the
Company's Class A Common Stock and Class B Common Stock.
Class B Options
During May and June 1997, options to purchase 20,000 shares and
145,000 shares, respectively, of Class B Common Stock were granted to the
directors and certain executive employees at $3.75 per share. At September 30,
1997, 13,334 options lapsed due to an employee's termination of employment. The
remaining options have vested or will vest and become exercisable on the
following schedule: 25% on the date of the grant, 25% on the first anniversary
of the grant and 50% on the second anniversary of the grant. In the event a
director or employee ceases to serve as such, the Company has the option,
exercisable no later than seven days after the date of termination of the
relationship, to purchase all of the director's or employee's vested options.
The purchase price for each share of Class B Common Stock shall be equal to the
best bid price on the date of such termination, and the purchase price for each
option shall be the greater of (i) $3.75, or (ii) the amount of the best bid
price for a share of Class B Common Stock on the date of such termination less
$3.75.
Joint Venture Investments
Tremont International Insurance, Ltd. ("TIIL"), is a Cayman Island
corporation that offers deferred variable annuities, variable life insurance and
other insurance contracts to customers who are not resident in the Cayman
Islands. TIIL had been a joint venture between TBL and Anglo-Dutch. Effective
July 1, 1997, Mutual Risk Management ("MRM"), an international risk management
company, purchased 51% of TIIL's issued share capital. Simultaneously, TBL sold
0.4% of TIIL's issued share capital to Anglo-Dutch. As a result of these
transactions, TBL's interest has been reduced to 24.5% of TIIL's issued share
capital. TBL, MRM and Anglo-Dutch formed Tremont MRM Services Limited ("TMRM"),
a Bermuda company to provide product development, marketing and administrative
services to TIIL. TBL owns a 40% interest in TMRM.
Partnership Contributions and Withdrawals
TPI is a limited, as well as general, partner of The Broad Market Fund,
L.P. TPI, as a limited partner, made a capital contribution of $550,000 in 1997
and, in that capacity, received a distribution of $550,000 from the partnership.
55
<PAGE>
Effective September 1, 1998, American Masters Market Neutral Fund,
L.P. ("AMF") became the newest addition to the Company's line of proprietary
products. This domestic multi-manager limited partnership was formed to achieve
long term capital appreciation irrespective of stock market volatility. TFI is
its general partner and, as such, is involved in its day-to-day management. AMF
will pay TFI a monthly management fee based on the net asset value of the
partnership as of the end of each month. At December 31, 1998, TFI had invested
$614,600 in AMF, which amount represents 54.7% of AMF's net assets.
At December 31, 1998, TPI as general partner of The F.W. Thompson
Fund, L.P., closed the fund and, in connection therewith, made a withdrawal of
$79,200.
Selection of Investment Advisers
As part of its services rendered, and in its capacity as investment
consultant to various clients, the Company monitors and evaluates the
performance of investment managers for clients based on a criteria of matching
the objectives of the clients with the investment characteristics of an
investment manager. Based on such monitoring and evaluation, the Company
recommends the selection, continuation or termination of an investment manager
to the Company's clients. The final decision is made by the client. In certain
instances, clients have requested that affiliates of the Company act as
investment manager. GAMCO, an affiliate of Mario J. Gabelli, one of the
Company's principal shareholders, was selected to be one of the investment
managers, along with others, to one of the Company's consulting clients upon the
recommendation of TPI or TBL. Such recommendation was made based on an
evaluation of all relevant factors by TPI or TBL.
In the future, the Company may enter into transactions with its
directors, officers, stockholders of 5% of its Common Stock or affiliates of Mr.
Gabelli, but will do so only if the terms of such transactions are no less
favorable to the Company than could be obtained by the Company from unaffiliated
third parties.
Payment from Officer
Ms. Manzke paid $200,000 to the Company in 1998. Ms. Manzke had
advised the Company that she had provided consulting services for a fee to a
principal of an investment fund for which a subsidiary of the Company then
currently performed services. Ms. Manzke believed that her services were not
within the scope either of her employment or the Company's business activities,
but advised the Company that she will no longer render individual or independent
services to such principal.
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Item 13. Exhibits, List and Reports on Form 8-K.
(a) Documents filed as part of this report:
1. The following consolidated financial statements of the Company
are included in Item 7:
Report of Independent Auditors.......................................21
Consolidated Balance Sheets as of December 31, 1998 and 1997.........23
Consolidated Statements of Income for the years ended
December 31, 1998 and 1997........................................24
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1998 and 1997........................................25
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997........................................26
Notes to Consolidated Financial Statements...........................27
Exhibit No.
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company's Form S-1
filed with the Commission on December 16, 1991).
3.2 By-Laws of the Company (incorporated herein by reference to
the Company's Form S-1 filed with the Commission on December
16, 1991).
3.3 Amendment to the Certificate of Incorporation of the Company,
dated December 23, 1993 (incorporated herein by reference to
the Company's Form 10-K filed with the Commission on March
29, 1994).
3.4 Amendment to the Certificate of Incorporation of the Company,
Dated August 6, 1998.
4.1 Specimen representing the Rights Certificate of the Company
(incorporated herein by reference to the Company's Form S-1
filed with the Commission on December 16, 1991).
4.2 Specimen representing the Class A Common Stock, $0.01 par
value, of the Company (incorporated herein by reference to
the Company's Form S-1 filed with the Commission on December
16, 1991).
10.9 Consulting Services Agreement dated as of May 1, 1991,
between Harold Cohen and Tremont Partners, Inc. (incorporated
herein by reference to the Company's Form S-1 filed with the
Commission on December 16, 1991).
10.22 Letter Agreement dated October 25, 1993, between the Company
and Sandra L. Manzke (incorporated herein by reference to the
Company's Form 10-K filed with the Commission on March 29,
1994).
10.27 Lease between First Properties of Bermuda Ltd. and Tremont
(Bermuda) Limited, dated February 23, 1994 (incorporated
herein by reference to the Company's Form 10-K filed with the
Commission on March 29, 1994).
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10.29 Consulting Services Agreement between Omega Overseas
Partners, Ltd. and Tremont (Bermuda) Limited dated April 1,
1994 (incorporated herein by reference to the Company's Form
10-K filed with the Commission on March 29, 1994).
10.30 Employment Agreement dated April 22, 1994 between the Company
and Robert I. Schulman (incorporated herein by reference to
the Company's Form 10-Q filed with the Commission on May 12,
1994).
10.31 Stock Option Agreement dated April 22, 1994 between the
Company and Robert I. Schulman (incorporated herein by
reference to the Company's Form 10-Q filed with the
Commission on May 12, 1994).
10.33 Stock Option Agreement dated December 15, 1994 between the
Company and Stephen T. Clayton (incorporated herein by
reference to the Company's Registration Statement No.
33-89966 on Form S-1 and Post-Effective Amendment No. 1 to
Registration Statement No. 33-81438 on Form S-1 filed with
the Commission on March 3, 1995).
10.34 Employment Agreement dated September 25, 1995 between the
Company and Sandra L. Manzke (incorporated herein by
reference to the Company's Form 10-Q filed with the
Commission on November 13, 1995).
10.38 Amendment, dated December 13, 1996, to Lease between First
Properties of Bermuda Ltd. and Tremont ("Bermuda") Limited
dated February 23, 1994. (incorporated herein by reference to
the Company's Form 10-KSB filed with the Commission on March
19, 1998).
10.39 Lease between Gateside - Rye Company and the Company dated
April 18, 1997. (incorporated herein by reference to the
Company's Form 10-KSB filed with the Commission on March 19,
1998).
10.40 Stock Option Agreement dated May 15, 1997 between the Company
and Stephen T. Clayton. (incorporated herein by reference to
the Company's Form 10-KSB filed with the Commission on March
19, 1998).
58
<PAGE>
10.41 Stock Option Agreement dated May 15, 1997 between the Company
and Bruce D. Ruehl. (incorporated herein by reference to the
Company's Form 10-KSB filed with the Commission on March 19,
1998).
10.42 Master Agreement dated as of June 5, 1997 among the Company,
Tremont Bermuda Limited, Tremont International Insurance
Ltd., Mutual Risk Management (Holdings) Ltd., MGL Investments
Ltd., Hemisphere Management Limited and The Anglo-Dutch
Insurance Company Limited. (incorporated herein by reference
to the Company's Form 10-KSB filed with the Commission on
March 19, 1998).
10.43 Stock Purchase Agreement dated as of June 5, 1997 between the
Company and MGL Investments Ltd. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998).
10.44 Stock Option Agreement dated June 12, 1997 between the
Company and Sandra L. Manzke. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998).
10.45 Stock Option Agreement dated June 12, 1997 between the
Company and Robert I. Schulman. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998).
10.46 Stock Option Agreement dated June 12, 1997 between the
Company and John L. Keeley, Jr. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998).
10.47 Stock Option Agreement dated June 12, 1997 between the
Company and Alan A. Rhein. (incorporated herein by reference
to the Company's Form 10-KSB filed with the Commission on
March 19, 1998).
10.48 Stock Option Agreement dated June 12, 1997 between the
Company and Jimmy L. Thomas. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998).
10.49 Stock Purchase Agreement dated as of July 1, 1997 between
Tremont MRM Services Limited and Mutual Risk Management
(Holdings) Ltd. (incorporated herein by reference to the
Company's Form 10-KSB filed with the Commission on March 19,
1998).
10.50 Shareholders' Agreement dated as of July 1, 1997 among
Tremont MRM ServicesLimited, Tremont (Bermuda) Limited, The
Anglo-Dutch Insurance Company Limited and Mutual Risk
Management (Holdings) Ltd. (incorporated herein by reference
to the Company's Form 10-KSB filed with the Commission on
March 19, 1998).
59
<PAGE>
10.53 Tremont Advisers, Inc. 1998 Stock Option Plan (incorporated
herein by reference to the Company's Form 10-QSB/A1 filed
with the Commission on November 6, 1998)
10.54 Shareholder's Agreement dated as of July 17, 1998, by and
among Tremont Advisers, Inc., Robert J. Parnell and Tremont
Investment Management, Inc. (incorporated herein by reference
to the Company's Form 10-QSB/A1 filed with the Commission on
November 6, 1998).
10.55 Employment Agreement, dated as of July 17, 1998 between
Tremont Investment Management and Robert Parnell.
10.56 Amendment to Employment Agreement dated as of December 9,
1998, between the Company and Sandra L. Manzke.
10.57 Amendment to Employment Agreement dated as of December 9,
1998, between the Company and Robert I. Schulman.
10.58 Agreement and Plan of Reorganization, dated as of March 8,
1999 by and among Tremont Advisers, Inc., Tass Management
Limited and Nicola Meaden, Laurence Huntington Taylor, II,
Colin Myers, Norma Smith and Valerie Benard.
10.59 Registration Rights Agreement, dated as of March 11, 1999
by and among Tremont Adviers, Inc. and Nicola Meaden,
Laurence Huntington Taylor, II, Valerie Benard, Colin Myers
and Norma Smith.
10.60 Employment Agreement, dated as of March 11, 1999, by and
between Tremont Advisers, Inc. and Laurence Huntington (Hunt)
Taylor, II.
10.61 Employment Agreement, dated as of march 11, 1999, by and
among Tass Management Limited, Tremont Advisers, Inc. and
Nicola Meaden.
10.62 Stock Option and Benefits Agreement, dated as of March 8,
1999, by and between Tremont Advisors, Inc. and Laurence
Huntington Taylor, III.
10.63 Stock Option and Benefits Agreement, dated as of March 8,
1999, by and between Tremont Advisers, Inc. and Nicola
Meaden.
21.1 Subsidiaries of the Company (incorporated herein by reference
to the Company's Form 10-QSB/A1 filed with the Commission on
November 6, 1998).
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Goldstein Golub Kessler LLP, independent auditors.
27.0 Financial Data Schedule
(b) Reports on Form 8-K.
None.
60
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TREMONT ADVISERS, INC.
(Registrant)
By /s/ Stephen T. Clayton
Stephen T. Clayton
Chief Financial Officer
Dated: March 19, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Sandra L. Manzke Chairman of the Board and March 19, 1999
Sandra L. Manzke Chief Executive Officer
/s/ Robert I. Schulman President; Chief Operating March 19, 1999
Robert I. Schulman Officer and Director
/s/ John L. Keeley, Jr. Director March 19, 1999
John L. Keeley, Jr.
/s/ Richard O'Brien Director March 19, 1999
Richard O'Brien
/s/ Alan A. Rhein Director March 19, 1999
Alan A. Rhein
/s/ Jimmy L. Thomas Director March 19, 1999
Jimmy L. Thomas
/s/ Suzanne S. Hammond Secretary & Treasurer March 19, 1999
Suzanne S. Hammond
/s/ Stephen T. Clayton Chief Financial Officer March 19, 1999
Stephen T. Clayton
</TABLE>
61
<PAGE>
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company's Form S-1
filed with the Commission on December 16,
1991)
3.2 By-Laws of the Company (incorporated herein by reference to
the Company's Form S-1 filed with the Commission on December
16, 1991)
3.3 Amendment to the Certificate of Incorporation of the Company,
dated December 23, 1993 (incorporated herein by reference to
the Company's Form 10-K filed with the Commission on March
29, 1994)
3.4 Amendment to the Certificate of Incorporation of the Company,
dated August 6, 1998...................................... 66
4.1 Specimen representing the Rights Certificate of the Company
(incorporated herein by reference to the Company's Form S-1
filed with the Commission on December 16, 1991)
4.2 Specimen representing the Class A Common Stock, $0.01 par
value, of the Company (incorporated herein by reference to
the Company's Form S-1 filed with the Commission on December
16, 1991)
10.9 Consulting Services Agreement dated as of May 1, 1991,
between Harold Cohen and Tremont Partners, Inc. (incorporated
herein by reference to the Company's Form S-1 filed with the
Commission on December 16, 1991)
10.22 Letter Agreement dated October 25, 1993, between the Company
and Sandra L. Manzke (incorporated herein by reference to the
Company's Form 10-K filed with the Commission on March 29,
1994)
10.27 Lease between First Properties of Bermuda Ltd and Tremont
(Bermuda) Limited, dated February 23, 1994 (incorporated
herein by reference to the Company's Form 10-K filed with the
Commission on March 29, 1994)
10.29 Consulting Services Agreement between Omega Overseas
Partners, Ltd. and Tremont (Bermuda) Limited dated April 1,
1994 (incorporated herein by reference to the Company's Form
10-K filed with the Commission on March 29, 1994)
10.30 Employment Agreement dated April 22, 1994 between the Company
and Robert I. Schulman (incorporated herein by reference to
the Company's Form 10-Q filed with the Commission on May 12,
1994)
10.31 Stock Option Agreement dated April 22, 1994 between the
Company and Robert I. Schulman (incorporated herein by
reference to the Company's Form 10-Q filed with the
Commission on May 12, 1994)
62
<PAGE>
10.33 Stock Option Agreement dated December 15, 1994 between the
Company and Stephen T. Clayton (incorporated herein by
reference to the Company's Registration Statement No.
33-89966 on Form S-1 and Post-Effective Amendment No. 1 to
Registration Statement No. 33-81438 on Form S-1 filed with
the Commission on March 3, 1995)
10.34 Employment Agreement dated September 25, 1995 between the
Company and Sandra L. Manzke (incorporated herein by
reference to the Company's Form 10-Q filed with the
Commission on November 13, 1995)
10.38 Amendment, dated December 13, 1996, to Lease between First
Properties of Bermuda Ltd. and Tremont (Bermuda) Limited
dated February 23, 1994. (incorporated herein by reference to
the Company's Form 10-KSB filed with the Commission on March
19, 1998)
10.39 Lease between Gateside-Rye Company and the Company dated
April 1, 1997. (incorporated herein by reference to the
Company's Form 10-KSB filed with the Commission on March 19,
1998)
10.40 Stock Option Agreement dated May 15, 1997 between the Company
and Stephen T. Clayton. (incorporated herein by reference to
the Company's Form 10-KSB filed with the Commission on March
19, 1998)
10.41 Stock Option Agreement dated May 15, 1997 between the Company
and Bruce D. Ruehl. (incorporated herein by reference to the
Company's Form 10-KSB filed with the Commission on March 19,
1998)
10.42 Master Agreement dated as of June 5, 1997 among the Company,
Tremont Bermuda Limited, Tremont International Insurance
Ltd., Mutual Risk Management (Holdings) Ltd., MGL Investments
Ltd., Hemisphere Management Limited and The Anglo-Dutch
Insurance Company Limited. (incorporated herein by reference
to the Company's Form 10-KSB filed with the Commission on
March 19, 1998)
10.43 Stock Purchase Agreement dated as of June 5, 1997 between the
Company and MGL Investments Ltd. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998)
63
<PAGE>
10.44 Stock Option Agreement dated June 12, 1997 between the
Company and Sandra L. Manzke. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998)
10.45 Stock Option Agreement dated June 12, 1997 between the
Company and Robert I. Schulman. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 18, 1998)
10.46 Stock Option Agreement dated June 12, 1997 between the
Company and John L. Keeley, Jr. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 18, 1998)
10.47 Stock Option Agreement dated June 12, 1997 between the
Company and Alan A. Rhein. (incorporated herein by reference
to the Company's Form 10-KSB filed with the Commission on
March 19, 1998)
10.48 Stock Option Agreement dated June 12, 1997 between the
Company and Jimmy L. Thomas. (incorporated herein by
reference to the Company's Form 10-KSB filed with the
Commission on March 19, 1998)
10.49 Stock Purchase Agreement dated as of July 1, 1997 between
Tremont MRM Services Limited and Mutual Risk Management
(Holdings) Ltd. (incorporated herein by reference to the
Company's Form 10-KSB filed with the Commission on March 19,
1998)
10.50 Shareholders' Agreement dated as of July 1, 1997 among
Tremont MRM Services Limited, Tremont (Bermuda) Limited, The
Anglo-Dutch Insurance Company Limited and Mutual Risk
Management (Holdings) Ltd. (incorporated herein by reference
to the Company's Form 10-KSB filed with the Commission on
March 19, 1998)
10.53 Tremont Advisers, Inc. 1998 Stock Option Plan (incorporated
herein by reference to the Company's Form 10-QSB/A1 filed
with the Commission on November 6, 1998). (incorporated
herein by reference to the Company's Form 10-KSB filed with
the Commission on March 19, 1998)
10.54 Shareholder's Agreement dated as of July 17, 1998, by and
among Tremont Advisers, Inc., Robert J. Parnell and Tremont
Investment Management, Inc. (incorporated herein by reference
to the Company's Form 10-QSB/A1 filed with the Commission on
November 6, 1998)
64
<PAGE>
10.55 Employment Agreement dated as of July 17, 1998 between
Tremont Investment Management and Robert Parnell.......... 72
10.56 Amendment to Employment Agreement dated as of December 9,
1998,between the Company and Sandra L. Manzke............. 84
10.57 Amendment to Employment Agreement dated as of December 9,
1998, between the Company and Robert I. Schulman.......... 85
10.58 Agreement and Plan of Reorganization, dated as of March 8,
1999 by and among Tremont Advisers, Inc., Tass Management
Limited and Nicola Meaden, Laurence Huntington Taylor, II,
Colin Myers, Norma Smith and Valerie Benard............... 86
10.59 Registration Rights Agreement, dated as of March 11, 1999
by and among Tremont Adviers, Inc. and Nicola Meaden,
Laurence Huntington Taylor, II, Valerie Benard, Colin Myers
and Norma Smith.......................................... 191
10.60 Employment Agreement, dated as of March 11, 1999, by and
between Tremont Advisers, Inc. and Laurence Huntington (Hunt)
Taylor, II............................................... 209
10.61 Employment Agreement, dated as of march 11, 1999, by and
among Tass Management Limited, Tremont Advisers, Inc. and
Nicola Meaden............................................ 233
10.62 Stock Optoin and Benefits Agreement, dated as of March 8,
1999, by and between Tremont Advisors, Inc. and Laurence
Huntington Taylor, III................................... 258
10.63 Stock Option and Benefits Agreement, dated as of March 8,
1999, by and between Tremont Advisers, Inc. and Nicola
Meaden................................................... 288
21.1 Subsidiaries of the Company (incorporated herein by reference
to the Company's Form 10 QSB/A1 filed with the Commission on
November 30, 1998)
23.1 Consent of Ernst & Young LLP, independent auditors....... 318
23.2 Consent of Goldstein Golub Kessler LLP, independent
auditors................................................. 319
27.0 Financial Data Schedule.................................. 320
65
<PAGE>
Exhibit 3.4
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
TREMONT ADVISERS, INC.
Under Section 242 of the Delaware
General Corporation Law
The undersigned, Sandra L. Manzke, the Chairman of the Board of Directors
of Tremont Advisers, Inc., a Delaware corporation (the "Corporation"), hereby
certifies that:
1. The name of the Corporation is Tremont Advisers, Inc.
2. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 28, 1987 under the name
Lynch Asset Management Corporation, and thereafter amended to reflect a change
in the Corporation's name to Tremont Advisers, Inc. on October 8, 1991.
3. Article "FOURTH" of the Restated Certificate of Incorporation of the
Corporation is hereby amended to read in its entirety as follows:
FOURTH: The aggregate number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is 16,000,000
shares of capital stock, of which amount 1,000,000 shares shall be
designated Preferred Stock, $1.00 par value; 5,000,000 shares shall be
designated Class A Common Stock, $0.01 par value; and 10,000,000 shares
shall be designated Class B Common Stock, $0.01 par value. All cross
references in each part of this Article FOURTH refer to other paragraphs
in such part unless otherwise indicated.
Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby expressly
authorized to provide, by resolution or resolutions duly adopted by it
prior to issuance, for the creation of each such series and to fix the
designation and the powers, preferences, rights, qualifications,
limitations and restrictions relating to the shares of each such series.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determining the
following:
66
<PAGE>
(a) the designation of such series, the number of shares to
constitute such series and the stated value if different from the par
value thereof;
(b) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of
such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and the
preference or relation which such dividends shall bear to the dividends
payable on any shares of stock of any other class or any other class or
any other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such series upon,
and the rights of the holders of such series in, the voluntary or
involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and
the manner in which any such retirement or sinking fund shall be applied
to the purchase or redemption of the shares of such series for
retirement or other corporate purposes and the terms and provisions
relating to the operation thereof;
(g) whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or any other
series of Preferred Stock or any other securities and, if so, the price
or prices or the rate or rates of conversion or exchange and the method,
if any, of adjusting the same, and any other terms and conditions of
conversion or exchange;
(h) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the Corporation of, the
Common Stock or shares of stock of any other class or any other series
of Preferred Stock;
67
<PAGE>
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional
stock, including additional shares of such series or of any other series
of Preferred Stock or of any other class; and
(j) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations
and restrictions, thereof.
The powers, preferences and relative participating, optional and
other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ
from those of any and all other series at any time outstanding. All
shares of any one series of Preferred Stock shall be identical in all
respects with all other shares of such series, except that shares of any
one series issued at different times may differ as to the date from
which dividends thereof shall be cumulative.
Class A and Class B Stock.
The powers, preferences and rights of the shares of Class A Common
Stock and the Class B Common Stock, and the qualifications, limitations
or restrictions thereof are as follows:
1. Dividends
Following the preference distribution of dividends to holders of
outstanding shares of Preferred Stock, the record holders of shares of
Class A Common Stock and Class B Common Stock shall be entitled to
receive such dividends and distributions, payable in cash or otherwise,
as may be declared thereon by the Board of Directors from time to time
out of the assets or funds of the Corporation legally available
therefor; provided, however, that no such dividend or distribution shall
be declared or paid unless the holders of both classes receive the same
per share dividend, payable in the same amount and type of
consideration, as if such classes constituted a single class, except
that in the event that any dividend is declared that is payable in
shares of Class A Common Stock or Class B Common Stock, such dividend
shall be declared and paid at the same rate per share with respect to
the Class A Common Stock and Class B Common Stock, and the dividend
payable on shares of Class A Common Stock shall be payable only in
shares of Class A Common Stock and the dividend payable on shares of
Class B Common Stock shall be payable only in shares of Class B Common
Stock.
68
<PAGE>
2. Liquidation
(a) In the event of a liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary,
following the payment of all indebtedness and any applicable
preferential distribution to the holders of the outstanding shares of
Preferred Stock:
(i) the holders of Class A Common Stock shall be entitled to
receive an amount, in cash and/or other property, equal to $.40 per
share; provided, however, that in the event the available assets of the
Corporation are not sufficient to pay in full the holders of the Class A
Common Stock the amounts to which they are entitled pursuant hereto,
then each share of Class A Common Stock shall share ratably in the
assets available for distribution to them; whereupon thereafter
(ii) the holders of the Class B Common Stock shall be entitled to
receive an amount, in cash and/or other property, equal to $.40 per
share; provided, however, that in the event the available assets of the
Corporation are not sufficient to pay in full the holders of the Class B
Common Stock the amounts to which they are entitled pursuant hereto,
then each share of Class B Common Stock shall share ratably in the
assets available for distribution to them; whereupon thereafter
(iii) all of the remaining assets of the Corporation shall be
distributed in equal amounts per share to the record holders of the
Class A Common Stock and Class B Common Stock, as if such classes
constituted a single class.
(b) The amounts distributable with respect to each share of Class
A Common Stock and Class B Common Stock pursuant to (a)(i) and (a)(ii)
above, respectively, shall be appropriately adjusted to take into
account the effect of any stock split, stock dividend, subdivision of
shares, or combination of shares into a smaller number of shares, with
respect to either or both Classes of such Common Stock.
3. Conversion of Class A Common Stock
(a) Each holder of Class A Common Stock shall be entitled, at any
time and from time to time on or after August 15, 1998 to convert all
or a portion of the shares of Class A Common Stock held by it into an
equal number of shares of Class B Common Stock. Each conversion of
shares of Class A Common Stock into shares of Class B Common Stock
shall be effected by the surrender of the certificate or certificates
representing the shares of Class A Common Stock to be converted at the
principal office of the Corporation (or such other office or agency of
the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Class A Common Stock) at any time
during its usual
69
<PAGE>
business hours, together with written notice by the holder of such Class
A Common Stock stating that such holder desires to convert the shares,
or a stated number of shares, of Class A Common Stock represented by
such certificate or certificates into Class B Common Stock, which notice
shall also state the name or names (with addresses) and denominations in
which the certificate or certificates for Class B Common Stock shall be
issued and shall include instructions for delivery thereof. Promptly
after such surrender and the receipt of such written notice, the
Corporation shall issue and deliver in accordance with such instructions
the certificate or certificates for the Class B Common Stock issuable
upon such conversion. Such conversion to the extent permitted by law
shall be deemed to have been affected as of the close of business on the
date on which such certificate or certificates shall have been
surrendered and such notice shall have been received, and at such time
the rights of the holder of such Class A Common Stock (or specified
portion thereof) as such holder shall cease and the person or persons in
whose name or names the certificate or certificates for shares of Class
B Common Stock are to be issued upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Class B
Common Stock represented thereby.
(b) Shares of Class A Common Stock which are converted into shares
of Class B Common Stock as provided herein shall not be reissued.
(c) The Corporation will at all times reserve and keep available
out of its authorized but unissued shares of Class B Common Stock or its
treasury shares, solely for the purposes of issue upon the conversion of
the Class A Common Stock as provided in this paragraph 3, such number of
shares of Class B Common Stock as shall then be issuable upon the
conversion of all the then outstanding shares of Class A Common Stock.
The Corporation will take all such action as may be necessary to assure
that all such shares of Class B Common Stock may be so issued without
violation of any applicable law or regulation or any requirements of any
domestic stock exchange upon which shares of Class B Common Stock may be
listed.
4. Voting Rights
The holders of shares of Class A Common Stock shall vote together
with the holders of shares of Class B Common Stock as a single voting
group; provided, however, that, with respect to each matter properly
brought before the shareholders for their consideration and vote,
including, without limitation, the election of directors, each record
holder of shares of Class A Common Stock shall have four (4) votes for
each such share held of record in his name on the stock transfer records
of the Corporation and each record holder of shares of Class B Common
Stock shall have one (1) vote for each such share held of record in his
name on the stock transfer records of the Corporation.
70
<PAGE>
5. Pre-Emptive Rights. The holders of Class A Common Stock and Class
B Common Stock shall have no pre-emptive rights.
4. The foregoing amendment was authorized by the Board of Directors,
followed by authorization by a statutory majority of stockholders who, through
their own written consent, approved and authorized this same amendment.
IN WITNESS WHEREOF, the undersigned has signed this Amendment to the
Restated Certificate of Incorporation and affirms that the statements made
herein are true under penalties of perjury this ____ day of August, 1998.
_________________________
Sandra L. Manzke
Chairman of The Board
ATTEST:
_________________________
Suzanne Hammond
Secretary
71
<PAGE>
Exhibit 10.55
EMPLOYMENT AGREEMENT
MEMORANDUM OF AGREEMENT (the "Agreement") made as of this 17th day of
July, 1998.
BETWEEN:
Tremont Investment Management, Inc., a
company organized under the laws of the
Province of Nova Scotia and the laws of Canada
as applicable therein
hereinafter called "the Corporation"
AND:
Robert J. Parnell
hereinafter called "Parnell"
WHEREAS, Tremont Advisers, Inc., a Delaware (United States)
Corporation with offices at 555 Theodore Fremd Avenue, Rye, New York 10580
U.S.A. ("Tremont") and Parnell, residing at 230 Guildwood Parkway, Toronto,
Ontario M1E 1P7 Canada, have entered into a Joint Venture Agreement (the "Joint
Venture") dated as of June 5, 1998;
WHEREAS, the Joint Venture stipulated for Tremont and Parnell, or
their respective affiliates, to cause the Corporation to be organized and in
accordance with which Tremont and Parnell are the sole shareholders of the
Corporation;
WHEREAS, in accordance with the Joint Venture, the Corporation wishes
to hire and retain the services of Parnell as an employee of the Corporation in
the capacities of President, Chief Operating Officer and Chief Investment
Officer;
WHEREAS, Parnell wishes to serve the Corporation in the capacities of
President, Chief Operating Officer and Chief Investment Officer; and
WHEREAS, Tremont, Parnell and the Corporation have entered into and
executed a shareholders' agreement of even date herewith (the "Shareholders
Agreement") for the purposes of, among other things, providing for the
management of the Corporation and which refers to this Agreement therein.
72
<PAGE>
Statement of Agreement
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Employment. The Corporation hereby employs Parnell, and Parnell
hereby accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. Term of Employment. Parnell's employment under this Agreement shall
commence as of the date hereof and continue for an initial term ending on July
31, 2000 (the "Initial Term"), which may be extended in the discretion of the
board of directors of the Corporation (the "Board of Directors"), unless sooner
terminated pursuant to Section 8 hereof.
3. Duties.
(a) The duties of Parnell shall be to serve as President, Chief
Operating Officer and Chief Investment Officer of the Corporation and perform
such other duties consistent with his positions, as may be required by the
Corporation or the Board of Directors from time to time during the Initial Term
hereof including, without limitation, the following:
(i) manage the day-to-day operation and administration of the
Corporation, including the hiring and firing of employees;
(ii) devote 100% of his working time, attention and investment
management efforts solely to the performance of the duties of his employment by
the Corporation and no other business endeavor whatsoever;
(iii) initiate and be available for sales presentations and
client meetings;
(iv) coordinate all activities of the Corporation with Tremont
including, but not limited to, all financial audits and reporting requirements,
marketing research, and administrative and operational matters;
(v) supervise the year-end auditing process of the Corporation;
(vi) participate in the design and development of new investment
products;
(vii) travel on behalf of the Corporation to the extent required
by his position and responsibilities;
73
<PAGE>
(viii) report to the President and Chief Operating Officer of
Tremont, (presently Robert Schulman) at such times as the President and Chief
Operating Officer shall require; and
(ix) work in collaboration with Tremont with respect to the
investment management of multi-manager and single-manager hedge fund products.
(b) Loyal and Conscientious Performance. Parnell agrees that he
shall devote his entire business time and energy to the performance of his
duties hereunder and that to the best of his ability and experience he will at
all times diligently and faithfully perform all the duties and obligations
required of him by the terms of this Agreement.
4. Expenses. The Corporation shall reimburse Parnell for all expenses
reasonably incurred by Parnell in furtherance of Parnell's performance of his
duties hereunder; provided that Parnell renders to the Corporation a complete
and accurate accounting and documentation of all such expenses, and furnishes
information adequate in the Corporation's judgment to permit deduction of such
expenses on the income tax returns of the Corporation.
5. Vacations. Parnell shall be entitled to four (4) weeks of vacation
on a non- cumulative basis measured on an annual basis from the date of this
Agreement. Parnell's vacation will be scheduled at such times as will least
interfere with the business of the Corporation as determined in the reasonable
judgment of the Corporation's Board of Directors (the "Board").
6. Confidential and Proprietary Information.
(a) Definition of Confidential Information. Parnell acknowledges and
agrees that Confidential Information of the Corporation has been and will be
imparted to him, which if disclosed by him or improperly used by them will
result in harm to the Corporation. For the purposes of this Agreement,
"Confidential Information" shall mean all trade secrets, sales and marketing
information, operations material and memoranda, personnel records, client lists,
pricing information, and financial information concerning or relating to the
business, investment funds, accounts, customers, employees, and affairs of
Corporation and contact persons and other information maintained by the
Corporation, obtained by or furnished, disclosed or disseminated to Parnell, or
obtained, assembled or compiled by Parnell or under his supervision during the
course of his employment by the Corporation, and all physical embodiments of the
foregoing, all of which are hereby agreed to be the property of and confidential
to the Corporation, but Confidential Information shall not include any of the
foregoing to the extent the same (i) is or becomes publicly known through no
fault or breach of this Agreement, (ii) can be shown by written documentation to
have been in the possession of the recipient party, free of any obligation to
keep it confidential, (iii) has been independently developed by the recipient
party, or (iv) constitutes residuals held in intangible form in the mind of
Parnell.
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(b) Removal of Confidential Information. During the term of this
Agreement and thereafter, Parnell shall not, without the Corporation's prior
written authorization, remove or cause to be removed from the Corporation's
premises any Confidential Information, or other material whatsoever, belonging
to the Corporation for purposes other than for use in connection with authorized
work Parnell performs for the Corporation.
(c) Disclosure of Confidential Information. Parnell agrees that he
will not, either while he is an employee of the Corporation or at any time after
the termination of his employment with the Corporation, without the prior
written consent of Corporation, disclose, except as required by law, or make
available any Confidential Information to any person or entity, nor shall
Parnell make or cause to be made, or permit or allow, either on Parnell's own
behalf or on behalf of others, any use of such Confidential Information other
than in the proper performance of Parnell's duties hereunder or as an employee.
All Confidential Information shall be returned to the Corporation immediately
upon request to this effect or immediately following the termination of
Parnell's employment with the Corporation.
7. Compensation.
(a) Salary. During the Initial Term, for all the services to be
rendered by Parnell in any capacity hereunder, Parnell shall be paid an annual
salary (the "Salary") as follows:
(i) U.S.$125,000.00 for the annual period commencing on the
August 1, 1998 and ending on July 31, 1999; and
(ii) U.S.$150,000.00 for the annual period commencing on August
1, 1999 and ending on July 31, 2000.
Parnell's salary shall be paid at bi-weekly intervals and shall be
subject to such employment insurance, Canada Pension Plan, withholding taxes and
other payroll deductions as are required to be made by the laws of the Province
of Ontario and the laws of Canada as applicable therein. Following the Initial
Term, the renewal of the terms of Parnell's employment and compensation shall be
determined by the Board of Directors of the Corporation; provided, however, that
Parnell's annual salary shall not exceed U.S.$150,000 until such time as any and
all redeemable preferred shares of the Corporation issued to Tremont in exchange
for additional capital contributions, as contemplated in the Joint Venture and
provided for in the Shareholders' Agreement have been redeemed in full.
(b) Benefits. Parnell shall be entitled to full participation, on a
basis commensurate with his position as President, Chief Operating Officer and
Chief Investment Officer of the Corporation, in all comparable plans of life,
accident, medical payment, health and dental insurance and salary continuation
(pension) which are generally made available by Tremont to its senior
executives.
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8. Termination.
(a) Termination by Consent. This Agreement may be terminated upon the
mutual consent of the Corporation and Parnell for any reason or no reason.
(b) Termination for Cause. The Corporation may terminate this
Agreement for "cause", which, for the purposes of this Agreement, shall include
(i) Parnell's conviction for, or plea to a felony or an indictable offense or a
crime involving moral turpitude; (ii) Parnell's commission of an act of personal
dishonesty or breach of fiduciary duty involving personal profit in connection
with Parnell's employment by the Corporation; (iii) Parnell's commission of an
act involving fraud, willful misconduct or gross negligence in the conduct of
his duties and responsibilities as an employee of the Corporation; (iv) the
suspension or revocation of any licenses or similar regulatory approvals
necessary for the operation of the business of the Corporation due to the
conduct and/or activities of Parnell and which such suspension or revocation
materially injures or damages the Corporation's business and reputation, or any
other act or activities not enumerated in (i), (ii) and (iii) hereinabove, which
have the effect of materially injuring or damaging the Corporation's business or
reputation; or (v) a material breach by Parnell of any of the provisions of this
Agreement, the Shareholders' Agreement or the Joint Venture unless remedied
within thirty (30) days after written notice thereof is delivered to Parnell by
the Corporation, if such breach is capable of remedy.
(c) Death or Disability. This Agreement shall be terminated by the
Corporation upon the death or disability of Parnell. For the purposes of this
Agreement, "disability" shall mean the inability of Parnell during any period of
two (2) consecutive months or three (3) months in any period of twelve (12)
consecutive months to perform those duties of employment required hereunder due
to physical or emotional or mental incapacity or illness as determined by an
independent physician appointed by the Board of Directors for the purpose of
making this determination.
(d) Termination under the Shareholders' Agreement. This Agreement
shall automatically terminate upon the termination of the Shareholders'
Agreement or Parnell's otherwise ceasing to be a shareholder in the Corporation.
(e) Termination Without Cause. The Corporation may terminate this
Agreement at any time without cause, including such termination as a result of
the liquidation of the Corporation arising from the withdrawal of Tremont from
the Corporation, as referred to in the Joint Venture, and other than for the
reasons in Sections 8(a), (b), or (c) hereof.
(f) Payment upon Termination Without Cause. In the event this
Agreement and Parnell's employment hereunder is terminated by the Corporation
without cause, as defined herein, pursuant to Section 8(e) hereof, in addition
to any rights of Parnell and compensation to which he may be entitled under the
Shareholders' Agreement, the Corporation shall pay to pay Parnell (i), on his
regular pay day and in accordance with the
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Corporation's payroll practices, installments on the Salary in effect at the
date of termination for (A) the six (6) month period immediately following such
termination (the "Base Severance Period") or (B) the period of time remaining
until the expiration of the Initial Term or any subsequent renewal term,
whichever is longer; (ii) the value of the pro-rated vacation leave with pay for
that portion of the year in which the employment of Parnell hereunder is
terminated during which Parnell was actively employed to the extent that such
vacation entitlement has not been used by Parnell at the time of termination;
and (iii) the business expenses reasonably incurred by Parnell and payable
hereunder through the date of termination. The Base Severance Period shall
increase by one (1) month, up to a maximum of twelve (12) months, for each year
that Parnell is employed by the Corporation. For the purposes of this Section
8(f), the Corporation's failure to renew this Agreement following the Initial
Term or any subsequent renewal term for reasons other than for cause, as defined
herein, shall constitute "termination without cause" for the purposes of this
Agreement.
(g) Payment upon Termination by Consent, for Cause, upon Parnell's
Death or Disability or as a Result of Successful Claims of Newcastle Capital
Management Inc. Should this Agreement be terminated pursuant to Sections 8(a),
(b) or (c) hereof or Section 8(d) hereof in respect of the termination of the
Shareholders' Agreement or Parnell's ceasing to be a shareholder in the
Corporation arising from Parnell's being restrained from engaging directly or
indirectly in the business of the Corporation as a result of his prior
affiliation with Newcastle Capital Management Inc., as contemplated by Section
6.4(d) of the Shareholders' Agreement, in addition to any rights of Parnell and
compensation to which he is entitled under the terms of the Shareholders'
Agreement, Parnell shall be entitled to payment of his Salary earned up to the
date of termination plus an amount equal to the sum of: (i) the value of the
pro-rated vacation leave with pay for that portion of the year in which Parnell
is terminated during which Parnell was actively employed to the extent that such
vacation entitlement has not been used by Parnell at the time of termination;
and (ii) the business expenses reasonably incurred by Parnell and payable
hereunder through the date of termination.
(h) Payment upon Certain other Terminating Events under the
Shareholders' Agreement. Should this Agreement be terminated as a result of the
termination of the Shareholders' Agreement or Parnell ceasing to be a
shareholder in the Corporation arising from the occurrence of certain bankruptcy
or insolvency events relating to Parnell or the encumbrance of the Shares or
Preferred Shares owned by Parnell, as contemplated by Sections 6.4 (e) and (f)
of the Shareholders' Agreement, in addition to any rights of Parnell and
compensation to which he is entitled under the Shareholders' Agreement, the
Corporation shall pay to Parnell (i), on his regular pay day and in accordance
with the Corporation's payroll practices, installments on his Salary in effect
at the date of termination for the three (3) month period immediately following
such termination; (ii) the value of the pro-rated vacation leave with pay for
that portion of the year in which the employment of Parnell hereunder is
terminated during which Parnell was actively employed to the extent that such
vacation entitlement has not been used by Parnell at the time
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of termination; and (iii) the business expenses reasonably incurred by Parnell
and payable hereunder through the date of termination.
(i) Resignation. Following the termination of Parnell's employment
pursuant to the terms hereof, Parnell hereby agrees to resign, and cause his
nominee to the Corporation's Board of Directors to resign, from any offices,
positions and directorships which he or such nominee may have held with the
Corporation.
(j) Reasonableness. Each of the Corporation and Parnell confirms that
the provisions of Section 8(f) are reasonable and the total amount payable as
outlined therein is an amount which has been agreed between them to be payable
hereunder or, in the alternative, as a reasonable pre-estimate of the damages
which will be suffered by Parnell in the event of termination without cause and
shall not be construed as a penalty.
9. Notice. Any notice to be given hereunder by either party to the
other may be effectuated either by personal delivery in writing, by mail,
registered or certified, postage prepaid, with return receipt requested, or by
telecopier with answerback confirmation. Notices shall be given in accordance
with the following:
If to Parnell: Mr. Robert J. Parnell
230 Guildwood Parkway
Toronto, Ontario M1E 1P7 Canada
Facsimile No.: 416-265-9468
If to the Corporation: Tremont Investment Management Inc.
c/o Tremont Advisers, Inc.
555 Theodore Fremd Avenue
Rye, New York 10580 U.S.A.
Facsimile No.: 914-921-3499
or such other addresses as the Corporation or Parnell may designate by written
notice to each other. Notices delivered personally or by telecopier shall be
deemed duly given on the date of actual receipt or upon answerback confirmation,
respectively, and mailed notices shall be deemed duly given as of the third day
after the date so mailed and post-marked.
10. Non-Solicitation and Non-Compete Covenants.
(a) Non-Solicitation. Parnell agrees that during the term of this
Agreement and following his ceasing to be an employee of the Corporation he will
not, without the prior written consent of Corporation, either directly or
indirectly, on his own behalf or in the service or on behalf of others either
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(i) solicit, divert or appropriate, or attempt to solicit, divert
or appropriate, to any Competing Business (i.e., any business which is engaged
in the hedge fund, investment fund or investment management business, or the
same or substantially the same as any other business of the Corporation, the
focus of which is in Canada or its provinces), or any other business, any client
or customer of or investor with the Corporation at any time during the two (2)
years preceding the termination of this Agreement or Parnell's ceasing to be an
employee of the Corporation;
(ii) solicit, divert or hire away, or attempt to solicit, divert
or hire away, or hire or engage as an independent contractor, any person
employed by the Corporation, whether as a temporary or permanent employee and
whether or not such employment is pursuant to a written agreement; or
(iii) use the "Tremont" name or any derivation thereof in
connection with the conduct of any business or business development on behalf of
himself or in the service or on behalf of others except as provided in Section
5.5 of the Joint Venture.
(b) Agreement Not To Engage in Competing Business. Parnell covenants
and agrees that he will not, during the term of this Agreement and for a period
of six (6) months following his ceasing to be an employee of the Corporation for
any reason, either directly or indirectly on his own behalf or in the service or
on behalf of others, engage in any capacity in any Competing Business.
Notwithstanding the foregoing, the prohibitions against Parnell in subsections
10(a) and 10(b) shall not apply in the event (i) Parnell's employment is
terminated in connection with the liquidation of the Corporation arising from
the withdrawal of Tremont from the Corporation as referred to in the Joint
Venture, or (ii) Parnell's employment with the Corporation is terminated without
cause, as defined herein, which for the purposes of this Agreement shall include
the failure by the Corporation to renew this Agreement following the Initial
Term or any subsequent renewal term for reasons other than for cause.
(c) Extension of Covenant in the Event of Breach. In the event of a
breach of any of the covenants set forth in Section 10(a) or 10(b) hereof, the
running of the period of the restriction shall be tolled during the continuation
of any such breach, and the running of the period of such restrictions shall
commence only upon compliance with the terms of the applicable Section.
(d) Recognition. Parnell recognizes and expressly acknowledges that
the Corporation would be subject to irreparable harm should any of the
provisions of Sections 6 and 10 be infringed or should any of Parnell's
obligations thereunder be breached by Parnell, and that damages alone will be an
inadequate remedy for any breach or violation thereof and that the Corporation,
in addition to all other remedies, shall be entitled as a matter of right to
equitable relief including temporary or permanent injunction to restrain such
breach. Parnell further recognizes and expressly acknowledges that Sections 6
and 10 grant to the Corporation only such reasonable protection as is admittedly
necessary to preserve the
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legitimate interests of the Corporation and Parnell equally recognizes that such
restrictions shall not impair his ability to secure alternate employment
following the termination of his employment hereunder for any reason.
11. Waiver of Breach. The waiver by any party of a breach of any
provision in this Agreement cannot operate or be construed as a waiver of any
subsequent breach by a party.
12. Compliance with Other Agreements. Parnell represents and warrants
that the execution of this Agreement and Parnell's performance hereunder will
not, with or without the giving of notice or the passage of time, conflict with,
result in the breach of or the termination of, or constitute a default under any
agreement to which Parnell is or may be bound. Parnell represents and warrants
that he has provided to the Corporation, prior to execution of this Agreement, a
copy or copies of the pertinent portions of any and all employment agreements or
similar documents executed by Parnell with a former employer or any business
with which Parnell has been associated, which on its face prohibits Parnell,
during a period of time which includes the date of commencement of Parnell's
employment with the Corporation, from (i) competing with, or in any way
participating in a business which competes with Parnell's former employer or
business; (ii) soliciting personnel of the former employer or business to leave
such former employer's employment or to leave such business; or (iii) soliciting
customers of the former employer or business or another business.
13. Severability. The invalidity or unenforceability of any particular
provision in this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
14. Entire Agreement. Except as otherwise provided herein, this
Agreement covers the entire understanding of the parties as to the employment of
Parnell, superseding all prior understandings and agreements, and no
modifications or amendments of the terms and conditions herein shall be
effective unless in writing and signed by the parties or their respective duly
authorized agents.
15. Governing Law. This Agreement shall be interpreted, construed and
governed according to the laws of the Province of Ontario and the laws of Canada
applicable therein, without reference to conflicts of law principles thereof.
16. Capitalized Terms. Capitalized terms not otherwise defined herein
have the meanings ascribed to them in the Shareholders' Agreement.
17. Mediation and Arbitration. Any controversy or claim arising out of
this Agreement shall be submitted first to voluntary mediation, and if mediation
is not successful, then to binding arbitration, in accordance with the following
dispute resolution procedures:
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(a) Mediation. A dispute shall be submitted to mediation by written
notice to the other party. In the mediation process, the parties will attempt to
resolve their differences voluntarily with the aid of an impartial mediator, who
will attempt to facilitate negotiations. The mediator will be selected by
agreement of the parties. If the parties cannot agree on a mediator, the parties
shall request that a mediator be designated by the local arbitration association
or similar alternative dispute resolution organization. Any mediator so
designated must be acceptable to both parties.
The mediation will be conducted as specified by the mediator in
Toronto, Ontario and agreed upon by the parties. The parties agree to discuss
their differences in good faith and to attempt, with the assistance of the
mediator, to reach an amicable resolution of the dispute.
The parties hereto shall make a good faith effort to schedule
mediation to resolve the dispute(s) no later than ninety (90) days thereafter
and the mediation shall consist of no greater than nineteen (19) hours of
hearings (or a longer period, if all of the parties involved mutually agree to
extend the mediation).
The mediation will be treated as a settlement discussion and therefore
will be confidential. The mediator may not testify for either party in any later
proceeding relating to the dispute. No recording or transcript shall be made of
the mediation proceedings.
Each party will bear its own costs in the mediation. The fees and
expenses of the mediator will be shared equally by the parties.
(b) Arbitration.
(i) If a dispute has not been resolved within ninety (90) days
after the written notice beginning the mediation process (or a longer period, if
all of the parties involved mutually agree to extend the mediation), or, in the
alternative, if mediation does not take place within thirty (30) days after
delivery of the notice of intent to arbitrate, the mediation shall terminate and
the dispute will be settled by arbitration. The arbitration will be conducted in
New York, New York accordance with the procedures in this Agreement and the
rules of the American Arbitration Association in effect on the date of this
Agreement. In the event of a conflict, the provisions of this Agreement will
control.
(ii) The party desiring the arbitration shall give written notice
to the other party of such desire. Within ten (10) days of such notice, Tremont
shall designate a single arbitrator and Parnell shall designate a single
arbitrator. Within ten (10) days of the designation of the two (2) arbitrators
as aforedescribed, the arbitrators shall jointly designate a third arbitrator.
The parties shall thereafter submit the dispute to the three (3) designated
arbitrators for resolution.
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(iii) In the event the above-mentioned does not take place within
the specified time, then the arbitration will be conducted before a panel of
three arbitrators, regardless of the size of the dispute, to be selected as
provided in the rules of the American Arbitration Association. Any issue
concerning the extent to which any dispute is subject to arbitration, or
concerning the applicability, interpretation, or enforceability of these
procedures, including any contention that all or part of these procedures are
invalid or unenforceable, shall be governed by the relevant laws of the Province
of Ontario and the laws of Canada applicable therein resolved by the
arbitrators. No potential arbitrator may serve on the panel unless he or she has
agreed in writing to abide and be bound by these procedures.
(iv) The arbitrators may not award non-monetary or equitable
relief of any sort; provided, however, that nothing herein shall be construed to
prohibit any party hereto from seeking non-monetary or equitable relief of any
sort in any court having jurisdiction. In no event, even if any other portion of
these provisions is held to be invalid or unenforceable, shall the arbitrators
have power to make an award or impose a remedy that could not be made or imposed
by a court deciding the matter in the same jurisdiction.
(v) No discovery will be permitted in connection with the
arbitration unless it is expressly authorized by the arbitration panel upon a
showing of substantial need by the party seeking discovery.
(vi) All aspects of the arbitration shall be treated as
confidential. Neither the parties nor the arbitrators may disclose the
existence, content or results of the arbitration, except as necessary to comply
with legal or regulatory requirements. Before making any such disclosure, a
party shall give written notice to all other parties and shall afford such
parties a reasonable opportunity to protect their interests.
(vii) The result of the arbitration will be binding on the
parties, and judgment on the arbitrators' award may be entered in any court
having jurisdiction.
18. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their permitted successors,
assigns, legal representatives and heirs, but neither this Agreement nor any
rights hereunder shall be assignable by Parnell or the Corporation without the
other party's prior written consent.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TREMONT INVESTMENT MANAGEMENT, INC.
By:______________________________________
Robert I. Schulman, Chairman of the Board
_________________________________________
Robert J. Parnell
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Exhibit 10.56
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") dated this 9th of
December, 1998, by and between TREMONT ADVISERS, INC., a Delaware corporation
having its principal executive offices at Corporate Center at Rye, 555 Theodore
Fremd Avenue, Rye, New York ("Tremont"); and SANDRA L. MANZKE, an individual
residing in Pound Ridge, New York ("Executive"). WITNESSETH:
WHEREAS, Executive is employed by Tremont pursuant to and in
accordance with the terms and conditions contained in an employment agreement
dated September 25, 1995 (the "Employment Agreement"), by and between Tremont
and Executive; and
WHEREAS, Executive and Tremont are each desirous of amending the
Employment Agreement in accordance with this Amendment, effective January 1,
1999.
NOW, THEREFORE, in consideration of the promises and mutual covenants,
terms and conditions hereinafter set forth and in the Employment Agreement, the
parties hereto hereby agree as follows:
1. Section 3(a)(i) of the Employment Agreement is hereby amended by
deleting the following phrase: "three hundred seventy-three thousand
dollars ($373,000)" nd inserting in its place "three hundred eighty
thousand dollars ($380,000)."
2. Section 5 shall be amended by deleting all references therein to
"December 31, 1998" and inserting in its place "December 31, 1999."
3. Except to the extent amended by this Amendment, the terms and
conditions of the Employment Agreement shall remain in full force and
effect. In the event of any conflict between the terms of the
Employment Agreement and the Amendment, the Amendment shall control.
4. Each party hereby represents and warrants to the other that each has
read the foregoing provisions and that each has had a sufficient
opportunity to discuss this Amendment with anyone each party might
desire prior to signing below. Further, in signing this Amendment,
each party has not relied on or been induced to execute this Amendment
by any statements, representations, agreements or promises, oral or
written, made by the other except for those expressly contained in
this Amendment.
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first above written.
WITNESS
_____________________ By: ___________________
Suzanne S. Hammond Sandra L. Manzke
Secretary and Treasurer
ATTEST TREMONT ADVISERS, INC.
_____________________ ____________________
Stephen T. Clayton Robert I. Schulman
Chief Financial Officer Chief Operating Officer
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Exhibit 10.57
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") dated this 9th of
December, 1998, by and between TREMONT ADVISERS, INC., a Delaware corporation
having its principal executive offices at Corporate Center at Rye, 555 Theodore
Fremd Avenue, Rye, New York ("Tremont"); and ROBERT I. SCHULMAN, an individual
residing at 18 Green Valley Road, Armonk, New York ("Executive"). WITNESSETH:
WHEREAS, Executive is employed by Tremont pursuant to and in
accordance with the terms and conditions contained in an employment agreement
dated April 22, 1994 (the "Employment Agreement"), by and between Tremont and
Executive; and
WHEREAS, Executive and Tremont are each desirous of amending the
Employment Agreement in accordance with this Amendment, effective January 1,
1999.
NOW, THEREFORE, in consideration of the promises and mutual covenants,
terms and conditions hereinafter set forth and in the Employment Agreement, the
parties hereto hereby agree as follows:
1. Section 3(a)(i) of the Employment Agreement is hereby amended by
deleting the following phrase: "three hundred thirty-five thousand
seven hundred dollars" ($335,700) and inserting in its place "three
hundred forthy-two thousand dollars" ($342,000).
2. Section 5 shall be amended by deleting all references therein to
"December 31, 1998" and inserting in its place "December 31, 1999."
3. Except to the extent amended by this Amendment, the terms and
conditions of the Employment Agreement shall remain in full force and
effect. In the event of any conflict between the terms of the
Employment Agreement and the Amendment, the Amendment shall control.
4. Each party hereby represents and warrants to the other that each has
read the foregoing provisions and that each has had a sufficient
opportunity to discuss this Amendment with anyone each party might
desire prior to signing below. Further, in signing this Amendment,
each party has not relied on or been induced to execute this Amendment
by any statements, representations, agreements or promises, oral or
written, made by the other except for those expressly contained in
this Amendment.
IN WITNESS WHEREOF, this Amendment has been executed and delivered by
the parties hereto as of the date first above written.
WITNESS
_____________________ By: ___________________
Suzanne S. Hammond Robert I. Schulman
Secretary and Treasurer
ATTEST TREMONT ADVISERS, INC.
_____________________ ____________________
Stephen T. Clayton Robert I. Schulman
Chief Financial Officer Chief Operating Officer
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Exhibit 10.58
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of March 8, 1999
by and among
TREMONT ADVISERS, INC.,
TASS MANAGEMENT LIMITED
and
THE SHAREHOLDERS OF TASS MANAGEMENT LIMITED
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Table of Contents
Section Page
ARTICLE I
CERTAIN DEFINITIONS AND TERMS OF DISCLOSURE
1.1 General........................................................... 2
1.2 Specific Terms.................................................... 3
1.3 Terms of Disclosure............................................... 11
ARTICLE II
THE REORGANIZATION
2.1 The Reorganization................................................ 12
2.2 Exchange of Shares................................................ 12
2.3 Closing........................................................... 14
2.4 Actions to be taken at the Closing................................ 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES AS TO TASS
3.1 Organization and Qualification; Subsidiaries...................... 15
3.2 Organizational Documents; Officers and Directors.................. 16
3.3 Capitalization.................................................... 16
3.4 Authority Relative to this Agreement.............................. 18
3.5 No Conflict; Required Filings and Consents........................ 19
3.6 Consents.......................................................... 20
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Table of Contents
(Continued)
Section Page
3.7 Financial Statements.............................................. 20
3.8 Absence of Certain Changes or Events.............................. 21
3.9 Tax Matters....................................................... 23
3.10 Accounts Receivable............................................... 24
3.11 Title to Property................................................. 24
3.12 Software; Furniture, Fixtures and Equipment....................... 25
3.13 Certain Contracts................................................. 27
3.14 Real Property and Leaseholds...................................... 28
3.15 Intellectual Property............................................. 28
3.16 No Violation of Law............................................... 29
3.17 Approvals; Government Regulation.................................. 30
3.18 Litigation........................................................ 34
3.19 Insurance......................................................... 35
3.20 Labor, Benefit and Employment Agreements and Arrangements......... 36
3.21 Affiliated or Inter-Company Transactions.......................... 37
3.22 Banks; Powers of Attorney......................................... 38
3.23 Clients........................................................... 38
3.24 Year 2000 Readiness............................................... 39
3.25 Brokers........................................................... 39
3.26 Adequacy of Representations and Warranties........................ 39
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Table of Contents
(Continued)
Section Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES AS TO THE SHAREHOLDERS
4.1 Ownership of Shares and Preference Shares.......................... 40
4.2 Outstanding Rights to Acquire Shares............................... 40
4.3 Transfer of Title.................................................. 41
4.4 Binding Commitment................................................. 41
4.5 No Conflict; Required Filings and Consents......................... 42
4.6 Securities Matters................................................. 42
ARTICLE V
REPRESENTATIONS AND WARRANTIES AS TO TREMONT
5.1 Organization and Qualification; Subsidiaries....................... 45
5.2 Certificate of Incorporation....................................... 46
5.3 Capitalization..................................................... 46
5.4 Reports............................................................ 47
5.5 Authority Relative to this Agreement............................... 48
5.6 No Conflict; Required Filings and Consents......................... 49
5.7 Absence of Certain Changes or Events............................... 51
5.8 Tax Matters........................................................ 52
5.9 Accounts Receivable................................................ 53
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Table of Contents
(Continued)
Section Page
5.10 Title to Property.................................................. 53
5.11 Intellectual Property.............................................. 54
5.12 No Violation of Law................................................ 55
5.13 Approvals; Government Regulation................................... 55
5.14 Insurance.......................................................... 59
5.15 Affiliated or Inter-Company Transactions........................... 59
5.16 Clients............................................................ 59
5.17 Litigation......................................................... 60
5.18 Year 2000 Readiness................................................ 60
5.19 Brokers............................................................ 61
5.20 Adequacy of Representations and Warranties......................... 61
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE
REORGANIZATION; ACCESS TO COMPANY INFORMATION
6.1 Conduct of Business by TASS Pending the Reorganization............ 62
6.2 No Shopping....................................................... 65
6.3 Investigation; Access to Information.............................. 65
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Table of Contents
(Continued)
Section Page
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Additional Agreements............................................. 67
7.2 Appointments and Resignations..................................... 68
7.3 Certain TASS Obligations.......................................... 69
7.4 Barclays Credit Facility.......................................... 69
7.5 Covenants Relating to Rule 144.................................... 70
7.6 Notification of Certain Occurrences or Failures................... 70
7.7 Audited Financial Statements of TASS.............................. 71
7.8 Payment of Taxes Upon Transfer of Shares.......................... 72
7.9 Public Announcements.............................................. 72
7.10 Further Assurances................................................ 72
7.11 Accuracy of Representations....................................... 72
ARTICLE VIII
CONDITIONS OF REORGANIZATION
8.1 Conditions to Obligations of TASS and the Shareholders............ 73
8.2 Conditions to Obligations of Tremont.............................. 76
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Table of Contents
(Continued)
Section Page
ARTICLE IX
CONFIDENTIAL AND PROPRIETARY INFORMATION
9.1 Definition of Confidential Information............................ 80
9.2 Removal of Confidential Information............................... 81
9.3 Disclosure of Confidential Information............................ 81
9.4 Protection of Interests........................................... 82
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATIONS
10.1 Survival........................................................... 82
10.2 Indemnification.................................................... 83
ARTICLE XI
TERMINATION AND WAIVER
11.1 Termination....................................................... 89
11.2 Effect of Termination............................................. 90
11.3 Waiver............................................................ 90
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Table of Contents
(Continued)
Section Page
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices........................................................... 91
12.2 Expenses.......................................................... 91
12.3 Headings.......................................................... 92
12.4 Severability...................................................... 92
12.5 Entire Agreement.................................................. 92
12.6 Assignment........................................................ 93
12.7 Binding Effect; Benefits.......................................... 93
12.8 Governing Law; Jurisdiction; Venue................................ 93
12.9 Counterparts...................................................... 94
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Schedules
3.1 List of TASS's Subsidiaries
3.2 Names of Officers and Directors of TASS and its Subsidiaries 3.3 Schedule of
TASS Options, Warrants, Conversion Rights, Etc. 3.6 TASS's Required Consents
3.12(a) Information Regarding TASS's Software 3.12(b) List of TASS's Computer
Hardware, Furniture, Fixtures and Equipment 3.13 Certain TASS Contracts 3.14
Description of TASS's Real Property and Leaseholds 3.15 List of TASS's
Intellectual Properties 3.17(a) List of TASS's Governmental Consents and
Licenses 3.18 Schedule of TASS's Litigation 3.19 List and Description of TASS's
Insurance Policies 3.20 Schedule of TASS's Labor, Benefit and Employment
Agreements
and Arrangements
3.21 Schedule of Affiliated or Inter-Company Transactions
3.22 List of TASS's Financial Institutions and Holders of Powers of Attorney
3.23 List of TASS's Clients and Subscribers
3.24 Description of TASS's Year 2000 Readiness
4.1 Ownership of Shares and Preference Shares
5.1 List of Tremont's Subsidiaries
5.2 Certificate of Incorporation and By-laws
5.3 Schedule of Tremont Options, Warrants, Conversion Rights, Etc.
5.6(b) Tremont's Required Consents and Approvals
5.10 Schedule of Liens Against Tremont
5.11 List of Tremont's Intellectual Properties
5.13(a) List of Tremont's Approvals
5.13(b) Certain Regulatory Information
5.16 List of Tremont's Clients
5.17 Schedule of Tremont's Litigation
7.3 Schedule of Certain TASS Liabilities
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Exhibits
A-1 Form of Nicola Meaden Employment Agreement
A-2 Form of Laurence Huntington Taylor, II Employment Agreement
B Form of Registration Rights Agreement
C Form of Special Resolution for Preference Shares
D Form of Tremont's Counsel's Opinion
E Form of TASS's and Meaden's and Taylor's Counsel's Opinion
F Parties' Addresses for Notice Purposes
Attachments
1 Disclosure Letter
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of March 8, 1999 (the
"Agreement"), by and among Tremont Advisers, Inc., a corporation organized under
the laws of the State of Delaware, U.S.A. ("Tremont"), TASS Management Limited,
a private company limited by shares (number 2527691) and incorporated in England
and Wales under the Companies Act 1985 ("TASS"), and Nicola Meaden ("Meaden"),
Laurence Huntington (Hunt) Taylor, II ("Taylor"), Norma Smith ("Smith"), Valerie
Benard ("Benard") and Colin Myers ("Myers"), as the holders of all of the issued
and outstanding ordinary shares of TASS (Meaden, Taylor, Smith, Benard and Myers
are hereinafter sometimes referred to collectively as the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders, as the owners of all the issued and
outstanding ordinary shares of (pound)1 each of TASS (the "Shares"), pursuant to
a plan of reorganization, wish to exchange all of the Shares for shares of
Tremont Class B Common Stock (as defined in Section 2.1), in such amounts and
upon the terms and subject to the conditions set forth herein (the
"Reorganization"); and
WHEREAS, the board of directors of Tremont and TASS have each
determined that it is in the best interests of their respective companies and
their respective shareholders for
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Tremont and TASS to consummate the Reorganization transactions described herein
upon the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such Reorganization, the boards of directors
of Tremont and TASS have each approved the transactions described herein upon
the terms and subject to the conditions set forth herein; and
WHEREAS, it is intended that the Reorganization shall qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the U.S. Internal
Revenue Code of 1986, as amended, and that this Agreement shall constitute a
"plan of reorganization;"
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Tremont, TASS and the Shareholders hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS AND TERMS OF DISCLOSURE
Section 1.1 General. For the purpose of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, (i) the
terms defined in this Article I include the plural as well as the singular, (ii)
the words "herein," "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to
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any particular Article, Section or other subdivision, (iii) Article references,
Section references, Schedule (as defined herein) references and Exhibit
references refer to Articles, Sections, Schedules and Exhibits, respectively, of
and to this Agreement, and (iv) all references to this Agreement and any other
agreement refer to this Agreement and Plan of Reorganization or such other
agreement, as amended, modified and supplemented from time to time in accordance
with the terms hereof or thereof (as applicable). All references to "this
Agreement" shall be construed to include references to the Exhibits and
Schedules hereto.
Section 1.2 Specific Terms. As used herein, the following terms shall
have the following meanings:
"Affiliate" shall mean, with respect to any Person, an individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, incorporated organization, governmental
or regulatory or other entity controlling, controlled by or under common control
with such Person, including but not limited to any subsidiary and holding
company of any Person as defined in section 736 of the Companies Act.
"Agreement" means this Agreement and Plan of Reorganization, dated
March 8, 1999, by and among Tremont, TASS and each of the Shareholders and
Preferred Shareholders of TASS.
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"Articles of Association" means the Articles of Association of TASS, a
amended to the date hereof.
"Board of Directors" shall mean the board of directors of Tremont, as
the same shall be elected from time to time in accordance with Tremont's
by-laws.
"Capital Securities" means, as to any Person that is a corporation, the
authorized shares of such Person's capital stock, including all classes of
common, preferred, voting and non-voting capital stock, and, as to any Person
that is not a corporation or an individual, the ownership interests in such
Person, including without limitation, the right to share in profits and losses,
the right to receive distributions of cash and property, and the right to
receive allocations of items of income, gain, loss, deduction and credit and
similar items from such Person, whether or not such interests include voting or
similar rights entitling the holder thereof to exercise control over such
Person.
"Certificate of Incorporation" means the Certificate of Incorporation
of TASS dated August 3, 1990.
"Certificates of Incorporation on Change of Name" means the
Certificates of Incorporation on Change of Name of TASS dated October 4, 1990
and June 23, 1992, respectively.
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"Change of Control" shall mean (i) an Acquisition, as such term is
defined in the Stock Option Agreements to be executed by Meaden and Taylor,
respectively, or (ii) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors shall cease for any reason to constitute the entire Board of Directors
shall cease for any reason to constitute a majority of the Board of Directors
unless the election or nomination for election by Tremont's shareholders of each
new director was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the beginning of the
period.
"Closing" means the consummation of the transactions contemplated by this
Agreement in respect of the Reorganization.
"Closing Date" has the meaning set forth in Section 2.3 hereof.
"Companies Act" means the Companies Act 1985 under U.K. law.
"Companies House" means the applicable U.K. office of The Registrar of
Companies for companies incorporated in England and Wales under the Companies
Act.
"Disclosure Letter" means that certain letter, dated as of the date
hereof, addressed to Tremont from TASS, Meaden and Taylor, containing certain
information constituting a material and integral part of this Agreement, which
is attached hereto as Attachment 1.
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"Employment Agreements" means, collectively, the Employment Agreements
to be entered into by Meaden and Taylor, respectively, with TASS and Tremont in
the forms of Exhibits A-1 and A-2 annexed hereto and made a part hereof, setting
forth the terms and conditions of Meaden's and Taylor's employment by TASS and
Tremont, respectively, as of the Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
under U.S. law.
"Financial Statements" has the meaning set forth in Section 3.7 hereof.
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
amended, under U.S. law.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, under U.S. law.
"IITSSA" means the International Investment and Trade in Services
Survey Act, under U.S. law.
"Material Adverse Effect" means any change in or effect on the business
of Tremont or TASS, as the case may be, or any of its or their respective
Subsidiaries, that is or will be
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materially adverse to the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, liabilities or
regulatory status of Tremont or TASS, as the case may be, and its or their
respective Subsidiaries, taken as a whole.
"1998 Unaudited Statements" has the meaning set forth in Section 3.7
hereof.
"Memorandum of Association" means the Memorandum of Association of
TASS, as amended to the date hereof.
"Organizational Documents" shall mean with respect to TASS or any of
its Subsidiaries, TASS's Certificate of Incorporation, Certificates of
Incorporation on Change of Name, its Memorandum of Association and its Articles
of Association, and each of such equivalent organizational documents with
respect to TASS's Subsidiaries, including without limitation, any of such
Subsidiary's certificate of incorporation and by-laws, with each of such
documents as amended to the date hereof, to the extent applicable.
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
"Preference Shares" has the meaning set forth in the preamble to this
Agreement.
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"Preferred Shareholders" means all of the holders of the Preference
Shares (namely, Nicola Meaden and Norma Smith, in their respective capacities as
holders of certain Preference Shares, and Kim Lubbock and Brooks Newmark),
collectively.
"Registration Rights Agreement" means the Registration Rights
Agreement, to be executed and delivered by Tremont and the Shareholders on or
prior to the Closing Date, setting forth certain registration rights of the
Shareholders and certain registration obligations of Tremont, in the form of
Exhibit B annexed hereto and made a part hereof.
"Related Agreements" shall mean each of the Employment Agreements, the
Registration Rights Agreement, and certain stock option agreements to be entered
into as of the Closing Date by and between Tremont and each of certain of the
Shareholders and an employee of TASS, providing for the granting of certain
options by Tremont to such Shareholders and to such other individual to purchase
shares of Tremont Class B Common Stock, among other things, which shall be in
the form or forms as have been agreed to between such Shareholders and Tremont
as of the date hereof (collectively, the "Stock Option Agreements").
"Reorganization" has the meaning set forth in the preamble to this
Agreement.
"Schedule" means a disclosure schedule prepared by Tremont, on the one
hand, or TASS and/or the Shareholders, on the other, as the case may be, annexed
hereto and made a
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part hereof containing certain information constituting a material and integral
part of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, under
U.S. law.
"SEC" means the U.S. Securities and Exchange Commission.
"SFA" means The Securities and Futures Authority Limited of the U.K.
"Shareholders" means all of the holders of the Shares (namely, Meaden
and Smith, in their respective capacities as holders of Shares, and Taylor,
Benard and Myers, collectively).
"Shares" has the meaning set forth in the preamble to this Agreement.
"Software" has the meaning set forth in Section 3.12 hereof.
"Special Resolution" means the Special Resolutions of TASS, together
with the Extraordinary Resolution of the Preferred Shareholders, to be passed at
meetings of the Company, the Shareholders and the Preferred Shareholders on or
prior to the Closing Date in the form of Exhibit C annexed hereto and made a
part hereof, setting forth the terms of the Preference Shares, as amended.
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"Stock Option Agreements" has the meaning set forth as used in the
definition of "Related Agreements" in this Section 1.2.
"Stock Options" means options to acquire shares of Tremont Class B
Common Stock granted by Tremont pursuant to the Stock Option Agreements.
"Subsidiary" shall mean any Person of which Tremont or TASS, as the
case may be (either alone or through or together with any other Subsidiary),
owns, directly or indirectly, at least a majority of the outstanding Capital
Securities (or other beneficial interest) or a majority of the voting power of
such Person; and, except as otherwise provided herein, the term "Subsidiaries"
shall mean all of such Persons, collectively, in respect of Tremont or TASS, as
the case may be.
"Taxes" means all U.S., U.K. or other income, gross receipts, sales,
use, employment, franchise, profits, property, corporation, VAT (Value Added
Tax), National Contributions Insurance, excise or other taxes, fees, stamp taxes
and duties, assessments or charges of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto.
"Tremont Class B Common Stock" has the meaning set forth in Section 2.1
hereof.
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"U.K." means the United Kingdom of Great Britain and Northern Ireland.
"U.S." or "U.S.A." means the United States of America.
Section 1.3 Terms of Disclosure. The representations and warranties
made hereunder are made subject to matters fairly and accurately disclosed and
presented in the Disclosure Letter and the Schedules and as specifically set
forth in the Agreement, but no other information relating to TASS, the
Shareholders and the Preferred Shareholders (collectively, the "TASS Parties"),
on the one hand, or Tremont, on the other, of which Tremont or any of the TASS
Parties has knowledge (actual or constructive), as the case may be, shall
prejudice any claim made by Tremont, on the one hand, or any of the TASS
Parties, on the other, under such representations and warranties or operate to
reduce any amount recoverable. Notwithstanding the conditions set forth in the
Disclosure Letter, the parties hereto agree that a matter would be "fairly
presented" in the Disclosure Letter if such matter were discussed or presented
under a heading set forth in the Disclosure Letter which reasonably corresponded
or bore a reasonable relationship to the section in the agreement wherein the
representation and warranty was contained to which such matter was intended to
apply.
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ARTICLE II
THE REORGANIZATION
Section 2.1 The Reorganization. Subject to and upon the terms and
conditions of this Agreement, TASS, the Shareholders and Tremont shall carry out
the Reorganization in a manner such that Tremont shall acquire from the
Shareholders all of the Shares, and the Shareholders shall transfer, assign and
convey with full title guarantee to Tremont, in exchange for shares of Class B
common stock, par value $.01 per share, of Tremont ("Tremont Class B Common
Stock"), all of the Shares. None of the Preference Shares are being redeemed or
exchanged by TASS or Tremont in connection with the Reorganization.
Section 2.2 Exchange of Shares. (a) At the Closing, all of the Shares shall
be exchanged for 190,477 shares of Tremont Class B Common Stock, subject to
adjustment, as described hereinbelow.
At the Closing, the amount of shares of Tremont Class B Common Stock to
be delivered to each of the Shareholders in exchange for the Shares owned by him
or her shall be as follows, which amounts are in proportion to each
Shareholders' ownership of Shares:
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<TABLE>
<S> <C> <C>
No. of Shares of
No. of Tremont Class B
Shareholder Shares of TASS Common Stock to be Issued
Nicola Meaden 789 64,170
Laurence Huntington 417 33,915
Taylor, II
Colin Myers 112 9,109
Valerie Benard 23 1,871
Norma Smith 1001 81,412
</TABLE>
In the event that, subsequent to the date of this Agreement but prior
to the Closing Date, and subject to the written consent of Meaden and Taylor,
the outstanding shares of Tremont Class B Common Stock shall have been, without
consideration, increased, decreased, changed into, or exchanged for a different
number or kind of shares or securities through reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
like changes in Tremont's capitalization, then an appropriate and proportionate
adjustment shall be made in the number and kind of shares of securities to be
thereafter delivered to the holders of the Shares pursuant to the
Reorganization.
(b) The Shareholders shall have certain registration rights
with respect to the shares of Tremont Class B Common Stock to be received by
them hereunder, which shall be set forth in the Registration Rights Agreement.
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Section 2.3 Closing. The closing of the Reorganization (the "Closing")
shall take place at 10:00 a.m., local time, on March 11, 1999, at the offices of
Newman Tannenbaum Helpern Syracuse & Hirschtritt LLP, 900 Third Avenue, New
York, New York 10022, or at such other time and place as Tremont and TASS shall
agree in writing (the date on which such Closing occurs is hereinafter referred
to as the "Closing Date.")
Section 2.4 Actions to be taken at the Closing. (a) Upon the terms and
subject to the conditions set forth herein, at the Closing, against receipt of
certificates of Tremont Class B Common Stock, as referred to in Section 2.4(b),
the Shareholders shall deliver to Tremont share certificates representing all of
the Shares accompanied by properly executed stock transfer forms, free and clear
of any and all liens, claims, charges or encumbrances of any kind.
(b) Upon the terms and subject to the conditions set forth
herein, at the Closing, against the receipt of the certificates for the Shares
from the Shareholders, as described hereinabove in Section 2.4(a), Tremont shall
deliver to each Shareholder stock certificates representing such number of
shares of Tremont Class B Common Stock to be received by such Shareholder in
accordance with Section 2.2.
[
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ARTICLE III
REPRESENTATIONS AND WARRANTIES AS TO TASS
TASS, Meaden and Taylor, severally, hereby represent and warrant to
Tremont as follows:
Section 3.1 Organization and Qualification; Subsidiaries. Except as set
forth in the Disclosure Letter, each of TASS and its Subsidiaries is a
corporation, duly organized and validly existing under the laws of the
jurisdiction of its organization and has the requisite power and authority and
any necessary governmental and regulatory authority to own, operate or lease the
real or personal properties that it purports to own, operate or lease and to
carry on its business as it is now being conducted, and is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, or
holds substantially similar status to such, where applicable, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary under applicable
law, except for such failure to be so qualified or licensed or hold such status,
as the case may be, which, alone or when taken together with all other such
failures, would not have a Material Adverse Effect. A true and complete list of
all of the Subsidiaries of TASS, together with the jurisdiction of incorporation
or organization of each Subsidiary and the percentage of each Subsidiary's
outstanding capital stock or share capital owned by TASS or a Subsidiary, is set
forth in the Disclosure Letter.
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Section 3.2 Organizational Documents; Officers and Directors. TASS has
heretofore furnished to Tremont a true, complete and correct copy of TASS's
Organizational Documents and has made available to Tremont such Organizational
Documents with respect to all of its Subsidiaries. Such Organizational Documents
are in full force and effect. Neither TASS nor any of its Subsidiaries is in
violation of any of the provisions of its Memorandum of Association or Articles
of Association or other equivalent Organizational Documents. Schedule 3.2 sets
forth the names and positions of all of the officers and directors of TASS and
each of its Subsidiaries.
Section 3.3 Capitalization. The authorized share capital of TASS is
(pound)200,000 divided into 52,225 ordinary shares of (pound)1 each of which
there are (i) 2,342 ordinary shares, issued and fully paid, and of which 789
shares are legally and beneficially owned by Meaden, 417 shares are legally and
beneficially owned by Taylor, 1001 shares are legally and beneficially owned by
Smith, 112 shares are legally and beneficially owned by Myers, and 23 shares are
legally and beneficially owned by Benard; and (ii) 147,775 redeemable preference
shares of (pound)1, each, all of which are issued and fully paid (the
"Preference Shares"), and of which 74,176 shares are legally and beneficially
owned by Meaden, 48,999 shares are legally and beneficially owned by Smith,
9,900 shares are legally and beneficially owned by Kim Lubbock, and of which
14,700 are legally owned by Brooks Newmark for the benefit of Taylor. All of the
Shares and the Preference Shares are validly issued and are fully paid. Except
as set forth in the Disclosure Letter and on Schedule 3.3 hereto, there are no
options, warrants, puts, calls, conversion rights or other rights, agreements,
arrangements
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or commitments of any character obligating TASS or any of its Subsidiaries to
acquire, issue or sell any share capital of TASS or other equity interests in
TASS, or any obligations or securities exercisable, convertible into, or
exchangeable for, or exercisable into, any share capital of TASS or other equity
interests in TASS, or any voting trusts, proxies or agreements relating to the
voting of TASS's share capital. The terms and conditions of the Preference
Shares are as set forth in the Special Resolution. Collectively, the
Shareholders and the Preferred Shareholders own all of the issued and
outstanding Shares and Preference Shares, respectively.
All the outstanding capital stock or share capital of each of TASS's
Subsidiaries is duly authorized, validly issued and fully paid and, except as
set forth in the Disclosure Letter, is owned by TASS or a Subsidiary of TASS
free and clear of any liens, security interests, pledges, agreements, claims,
charges or encumbrances of any nature whatsoever. There are no existing options,
warrants, puts, calls, conversion rights or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
share capital or other equity interests in any of TASS's Subsidiaries, or any
voting trusts, proxies or agreements relating to the voting of any of such
Subsidiaries' capital stock or share capital. Except for its Subsidiaries, TASS
does not directly or indirectly own any equity interest in any other
corporation, partnership, joint venture or other business association or entity.
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Section 3.4 Authority Relative to this Agreement. TASS has the
necessary corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by TASS, and each other agreement and instrument to be executed and
delivered by it pursuant hereto, and the consummation by TASS of the
transactions contemplated hereby and thereby, have been or will be, on or prior
to the Closing Date, duly authorized by all necessary action, corporate or
otherwise, on the part of TASS. This Agreement has been duly and validly
executed and delivered by TASS and constitutes, and when executed and delivered
by all parties thereto, all such other agreements and instruments to which TASS
is a party, will be duly and validly executed by TASS, and will constitute, the
legal, valid and binding obligations of TASS, enforceable against it in
accordance with their respective terms (except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies). The board of directors and the Shareholders of TASS have approved
this Agreement, the Reorganization and the transactions contemplated hereby,
including the issuance of a share certificate to Tremont in respect of the
Shares and the entry of Tremont in the register of members of TASS, and TASS, on
or prior to the Closing Date, will deliver to Tremont complete and correct
copies of all resolutions (whether adopted at a meeting or by written consent)
adopted by the board of directors and the shareholders of TASS (including the
Special Resolution) with respect thereto.
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Section 3.5 No Conflict; Required Filings and Consents. Except for
obtaining the Required Consents (as defined in Section 3.6), the execution,
delivery and performance of this Agreement by TASS and each of the Shareholders
and the consummation by TASS and each of the Shareholders of the transactions
contemplated hereby, do not and will not: (i) violate or conflict with any of
the Organizational Documents of TASS or any of its Subsidiaries, including those
containing the terms of the Preference Shares, if any; (ii) violate or conflict
with or constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under any agreement, indenture, instrument
or understanding to which TASS or any of its Subsidiaries is a party or by which
it is bound, or violate any judgment, decree, law, rule or regulation to which
TASS or any of its Subsidiaries is a party or by which it is bound and, where
such violation, conflict or default is likely to have a Material Adverse Effect;
(iii) result in the creation of, or give any party the right to create any lien
or encumbrance upon the property or assets of TASS or any of its Subsidiaries,
which is likely to have a Material Adverse Effect; (iv) terminate or modify, or
give to another the right to terminate or modify the provisions or terms of any
agreement or commitment to which TASS or any of its Subsidiaries is a party or
by which TASS or any of its Subsidiaries is subject or bound the result of which
is likely to have a Material Adverse Effect; (v) result in any suspension,
revocation, impairment, forfeiture or non-renewal of any permit, license,
qualification, authorization or approval applicable to TASS or any of its
Subsidiaries, or any of its or their respective shareholders, directors,
officers or employees, which is likely to have a Material Adverse Effect; or
(vi) materially interfere with or adversely affect the ability of TASS or any of
its Subsidiaries to carry on the business of
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TASS or such Subsidiary after the Closing Date on substantially the same basis
as it is now conducted.
Section 3.6 Consents. In the Disclosure Letter there is set forth a
list of all material consents, approvals or other authorizations which TASS, or
any of its Subsidiaries, or any of its or their respective shareholders,
directors, officers or employees, is required to obtain from, and any filing
which TASS, or any of its Subsidiaries, or any of its or their respective
shareholders, directors, officers or employees, is required to make with, any
governmental or regulatory authority or agency or any other party in connection
with the execution, delivery and consummation of this Agreement and the
consummation of the transactions contemplated hereby, including any and all of
those required by the SFA in respect of registration, transfer of registration,
change of controller, qualification or otherwise, except for such consents,
approvals or other authorizations the failure to obtain which is not likely to
have a Material Adverse Effect or interfere with the ability of TASS or its
Shareholders to perform or carry out its or their obligations under this
Agreement (collectively, the "Required Consents").
Section 3.7 Financial Statements. (a) Except as set forth in the
Disclosure Letter, TASS has heretofore furnished to Tremont the consolidated
balance sheets of TASS and its Subsidiaries (the "Balance Sheets") together with
the profit and loss accounts ("Profit and Loss Accounts") as of December 31,
1997, December 31, 1996 and December 31, 1995 (December 31, 1997 being the "Last
Balance Sheet Date"), certified without qualification by
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TASS's regularly employed certified accountants and registered auditor, Robert
A. Price F.C.C.A., whose opinions therein have been included therewith (all such
Balance Sheets and Profit and Loss Accounts being referred to as the "Financial
Statements"), and its unaudited consolidated Balance Sheet, Profit and Loss
Accounts (the "1998 Unaudited Statements") as of December 31, 1998. The
Financial Statements and the 1998 Unaudited Statements are true and correct,
have been prepared under the historical cost convention and in accordance with
applicable U.K. accounting standards and show a true and fair view of the state
of affairs of TASS and its Subsidiaries as of the respective dates thereof and
have been properly prepared in accordance with the Companies Act 1985.
(b) Except as reflected or reserved against in the Financial
Statements and the 1998 Unaudited Statements, and as otherwise set forth in the
Disclosure Letter, TASS and its Subsidiaries have no indebtedness, liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) which, alone or when taken together with any such other indebtedness,
liabilities or obligations, is likely to have a Material Adverse Effect. Since
the Last Balance Sheet Date, neither TASS nor any of its Subsidiaries has
incurred any material liabilities except (i) liabilities incurred in the
ordinary course of business and consistent with past practice, and (ii)
liabilities incurred in connection with or as a result of the Reorganization.
Section 3.8 Absence of Certain Changes or Events. Since the Last
Balance Sheet Date, except as contemplated in this Agreement or any exhibit of
schedule hereto, there has
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not been or occurred (a) any event or condition which, alone or when taken
together with any other related or similar event or condition, is likely to have
a Material Adverse Effect; (b) any damage, destruction or loss (whether or not
covered by insurance) with respect to any of the assets of TASS or any of its
Subsidiaries which, alone or when taken together with any other damage,
destruction or loss, is likely to have a Material Adverse Effect; (c) any
redemption or other acquisition of TASS's ordinary shares or preference shares
by TASS or any of its Subsidiaries or any declaration or payment of any dividend
or other distribution in cash, stock or property with respect to TASS's ordinary
shares or preference shares; (d) any entry into any material commitment or
transaction (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business or as contemplated by
this Agreement; (e) any transfer of, or rights granted under, any leases,
licenses, agreements, patents, trademarks, trade names or copyrights; (f) any
mortgage, pledge, security interest or imposition of lien or other encumbrance
on any asset of TASS or any of its Subsidiaries; or (g) any change by TASS in
accounting principles or methods. Since the Last Balance Sheet Date, TASS and
its Subsidiaries have conducted their business only in the ordinary course and
in a manner consistent with past practice and have not made any material change
in the conduct of the business or operations of TASS and its Subsidiaries taken
as a whole. Without limiting the generality of the foregoing, except as set
forth in the Disclosure Letter, TASS has not, since the Last Balance Sheet Date,
made any changes in executive compensation or in the manner in which other
employees of TASS or its Subsidiaries are compensated or paid or agreed to pay
any pension, retirement allowance or other employee benefit not required or
permitted by any plan, agreement or arrangement
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existing on such date to any director, officer or employee, whether past or
present, or committed itself to any collective bargaining agreement (except for
renewals of existing collective bargaining agreements) or to any additional
pension, profit-sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other employee benefit plan, agreement or arrangement, or to
any employment or consulting agreement with or for the benefit of any person, or
to amend any of such plans or any of such agreements in existence on such date.
Section 3.9 Tax Matters. TASS and each of its Subsidiaries have filed
or have caused to be filed with all required governmental agencies all tax
returns and reports required to be filed by TASS or any of its Subsidiaries, and
each has paid in full or made adequate provision for the payment of, all Taxes,
interest, penalties, assessments and deficiencies shown to be due or claimed to
be due from any taxing authorities with respect to the periods ending on or
prior to the Closing Date. The provision for income and other Taxes which is set
forth in the Financial Statements is adequate for all accrued and unpaid Taxes
of TASS and each of its Subsidiaries as of December 31, 1997, whether (i)
incurred in respect of or measured by income of TASS or any of its Subsidiaries
for any periods prior to the close of business on that date, or (ii) arising out
of transactions entered into, or any state of facts existing, on or prior to
that date. The provision for income and other Taxes which is set forth in the
1998 Unaudited Statements is adequate for all income and other Taxes of TASS and
each of its Subsidiaries which accrued after December 31, 1997 and up to and
including December 31, 1998, whether (i) incurred in respect of or measured by
income of TASS or
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any of its Subsidiaries for any periods prior to the close of business on that
date, or (ii) arising out of transactions entered into, or any state of facts
existing, on or prior to that date. Neither TASS nor any of its Subsidiaries has
executed or filed with any taxing authority any agreement extending the period
for the assessment or collection of any income or other taxes, and is not a
party to any pending or, to the best of the knowledge of Meaden and Taylor,
threatened, action or proceeding by any governmental authority for the
assessment or collection of income or other taxes. All Taxes and other
assessments and levies which TASS or any of its Subsidiaries are required by law
to withhold or to collect have been duly withheld and collected, and have been
paid over to the proper governmental authorities or are held by TASS, or the
Subsidiary, as the case may be, in bank accounts for such payment.
Section 3.10 Accounts Receivable. The accounts and notes receivables of
TASS and each of its Subsidiaries on the Last Balance Sheet Date and all
accounts and notes receivables acquired by TASS and each of its Subsidiaries
subsequent to the Last Balance Sheet Date and prior to the close of business on
December 31, 1998 have arisen in the ordinary course of business, have not been
and are not subject to valid counterclaims or set-offs, and, except as reserved
for in the Financial Statements and the 1998 Unaudited Statements, or otherwise
set forth in the Disclosure Letter, TASS is not aware of any impediment to their
collection.
Section 3.11 Title to Property. TASS and each of its Subsidiaries have
good and marketable title, or, except as set forth in the Disclosure Letter,
valid leasehold rights in the case of leased property, to all real property and
all personal property (other than personal
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property title to which is specified elsewhere in this Agreement) owned or
leased by them or purported to be owned or leased by them, free and clear of all
liens, security interests, claims, encumbrances and charges, except for (i)
liens for fees, taxes, levies, imposts, duties or governmental charges of any
kind which are not yet due or are being contested in good faith by appropriate
proceedings which suspend the collection thereof, (ii) liens created in the
ordinary course of business in connection with the leasing or financing of
office, computer and related equipment and supplies, (iii) liens or defects in
title or leasehold rights known, or in the exercise of reasonable care, should
be known, to TASS, which alone or when taken together with any other liens or
defects, do not and will not have a Material Adverse Effect, or (iv) liens set
forth in the Disclosure Letter. For the purposes of this Agreement, the term,
"marketable title," is defined as set forth in Black's Law Dictionary (6th ed.
1992), which states in part, that marketable title is "a title which is free
from encumbrances and any reasonable doubt as to its validity, and such as a
reasonably intelligent person, who is well informed as to facts and their legal
bearings, and ready and willing to perform his contract, would be willing to
accept in the exercise of ordinary business prudence."
Section 3.12 Software; Furniture, Fixtures and Equipment. (a) All
computer software, programs and management information systems (including
without limitation, all electronic data processing systems, data banks, program
specifications, source codes (where TASS is the owner) and documentation)
(collectively the "Software") owned, leased or licensed to and used by TASS or
any of its Subsidiaries in its or their business are set forth in the Disclosure
Letter and on Schedule 3.12(a), which indicate which Software is owned by
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TASS and which is leased or licensed. Except as set forth in the Disclosure
Letter and on Schedule 3.12(a), such Software is solely legally and beneficially
owned, leased or licensed by TASS or such Subsidiary free and clear of all
liens, claims, encumbrances or adverse interests of any kind whatsoever. TASS or
such Subsidiary is in possession of all source codes for all of the Software
owned by it. With respect to such Software owned by TASS, such Software was
either created by TASS or good and marketable title thereto was transferred to
TASS and such Software is free of any and all claims, liens, security interests,
encumbrances and charges of any kind. Except as set forth in the Disclosure
Letter and on Schedule 3.12(a), any Software owned by TASS and created by any
present or past employee of TASS is owned by TASS, free of any and all claims,
liens, security interests, encumbrances and charges of any kind. Except as set
forth in the Disclosure Letter and on Schedule 3.12(a), (i) no person has a
right to receive a royalty with respect to any such Software referred to therein
or listed thereon, and (ii) neither TASS nor any of its Subsidiaries has
licenses granted by or to it or other agreements to which it is a party (except
in the ordinary course of business), relating in whole or in part to such
Software, whether owned by TASS or any of its Subsidiaries or otherwise. To the
best of the knowledge of TASS, Meaden and Taylor, neither TASS nor any of its
Subsidiaries is infringing upon, or otherwise violating, the rights of any third
party with respect to any of the Software and the use thereof or any other
related intellectual properties. The computer software described in the
Disclosure Letter and on Schedule 3.12(a) are all those used in the business of
TASS and each of its Subsidiaries, and no other computer software of a material
nature is required to permit the conduct of TASS's and its Subsidiaries'
business in the ordinary course.
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(b) Schedule 3.12(b) contains a complete and correct list
showing all items of computer hardware, furniture, fixtures and equipment of
TASS and each of its Subsidiaries, with respect to which only the computer
hardware can be represented and warranted as being structurally sound with no
known material defects.
Section 3.13 Certain Contracts. Schedule 3.13 contains a complete and
correct list of all contracts, commitments, obligations and understandings which
are not set forth in any other schedule delivered hereunder and to which TASS or
any of its Subsidiaries is a party or otherwise bound, except for each of those
which (i) was made in the ordinary course of business, and (ii) either (A) is
terminable by TASS or such Subsidiary (and will be terminable by Tremont)
without liability, expense or other obligation on 30 days' notice or less, or
(B) may be anticipated to involve aggregate payments to or by TASS or such
Subsidiary of $5,000 (or the equivalent) or less calculated over the full term
thereof, and (iii) is not otherwise material to the business of TASS or such
Subsidiary, taken as a whole, or any of the properties or assets of TASS or such
Subsidiary. Included in such list are all unexpired contracts, commitments,
obligations and understandings of TASS's or any of its Subsidiaries with TASS's
or such Subsidiary's customers or clients or subscribers. Complete and correct
copies of all such contracts, commitments, obligations and understandings set
forth on any of the schedules delivered pursuant to this Agreement have been
furnished by TASS to Tremont. Except as expressly stated on the schedule on
which they are set forth, (i) each warranty obligation under such contracts is
in full force and effect; (ii) each contract, commitment, obligation and
understanding set forth on any of the schedules delivered
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pursuant to this Agreement is in full force and effect, no person or entity
which is a party thereto or otherwise bound thereby is in default thereunder,
and no event, occurrence, condition or act exists which does (or which with the
giving of notice or the lapse of time or both would) give rise to a default or
right of cancellation, acceleration or loss of contractual benefits thereunder;
(iii) there are no outstanding disputes thereunder and there have been no
threatened cancellations thereunder; (iv) none of them restricts, limits or
prohibits any business practices of TASS or any of its Subsidiaries in any area;
and (v) none of them is materially burdensome to TASS or its Subsidiaries.
Section 3.14 Real Property and Leaseholds. Set forth in the Disclosure
Letter and on Schedule 3.14 is (i) a brief description of each parcel of real
property, including plants, structures or improvements thereon, owned by or
leased to TASS or any of its Subsidiaries and (ii) a description of all other
interests, if any, in real property owned or claimed by TASS or any of its
Subsidiaries. Schedule 3.14 contains a true copy of each of the deeds, leases or
other documents evidencing such other interests listed in the Disclosure Letter
and on Schedule 3.14 and such further details as Tremont has requested.
Section 3.15 Intellectual Property. Schedule 3.15 contains a complete
and correct list of all (i) U.K., U.S. and other patents, trademark and trade
name registrations, trademarks and trade names, brandmarks and brand name
registrations, servicemarks and servicemark registrations, assumed names and
copyrights and copyright registrations, owned in whole or in part or used by
TASS or any of its Subsidiaries, and all applications therefor,
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(ii) inventions, discoveries, improvements, processes, formulae, proprietary
rights and trade secrets relating to the business of TASS or any of its
Subsidiaries, and (iii) licenses and other agreements to which TASS or any of
its Subsidiaries is a party or otherwise bound which relate to any of the
foregoing. TASS or any such Subsidiary owns or has the legal and beneficial
right to use all of the foregoing; no proceedings have been instituted, are
pending or, to the best of the knowledge of TASS, Meaden and Taylor, are
threatened, which challenge the rights of TASS or any of its Subsidiaries in
respect thereto or the validity thereof and, to the best of the knowledge of
TASS, Meaden and Taylor, there is no valid basis for any such proceedings; to
the best of the knowledge of TASS, Meaden and Taylor, none of the aforesaid
violates any laws, statutes, ordinances or regulations, or has at any time for
which the statutory period of limitations applicable to such infringement has
expired infringed upon or violated any rights of privacy or libel or any other
rights of others including but not limited to any copyright infringement, or is
being infringed by others including but not limited to any copyright
infringement; and none of the aforesaid is subject to any outstanding order,
decree, judgment, stipulation or charge.
Section 3.16 No Violation of Law. Neither TASS nor any of its
Subsidiaries, nor any of its or their respective employee shareholders,
executive directors, officers or other employees within the scope of their
respective employment is engaging in any activity or omitting to take any action
as a result of which any of them is in violation of any applicable order,
injunction or decree, nor are any of them, to the best of TASS's and Meaden's
and Taylor's actual knowledge, engaging in any activity or omitting to take any
action as a result
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of which (i) any of them is in violation of any law, rule, regulation, zoning or
other ordinance, statute, or any other requirement of any court or governmental,
regulatory or administrative body or agency, applicable to TASS or any of its
Subsidiaries, the business of TASS or any of its Subsidiaries or any of its or
their properties or assets; or (ii) there is likely to be experienced a Material
Adverse Effect.
Section 3.17 Approvals; Government Regulation. (a) Set forth on
Schedule 3.17(a) is a complete and correct list of all governmental and
administrative consents, permits, appointments, approvals, licenses,
certificates and franchises which are necessary for the operation of the
business of TASS and/or its Subsidiaries, including all licenses and
registrations required by the SFA for TASS and/or any of its Subsidiaries and/or
any of its or their respective shareholders, directors, officers or employees,
all of which have been obtained by TASS and/or such Subsidiaries and/or such
shareholders, directors, officers or employees and are in full force and effect.
(b) Except as set forth in the Disclosure Letter, neither TASS
nor any of its Subsidiaries nor any of its or their respective shareholders,
directors, officers or employees, nor any entity presently controlled by TASS or
any of its Subsidiaries or any of its or their respective shareholders,
directors, officers or employees, nor, to the best of the knowledge of Meaden
and Taylor, any former shareholder, director, officer or employee of TASS or any
of its Subsidiaries, or any entity previously controlled by TASS or any of its
Subsidiaries, or any of its or their respective shareholders, directors,
officers or employees,]
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at any time during the five (5) year period prior to the date hereof has been
(i) subject to any expulsion, bar, fine, civil penalty or censure, suspension or
revocation of membership or registration, injunction or other sanction (each, a
"Disciplinary Action") through an adverse determination, voluntary settlement or
otherwise in an action or proceeding brought before the SFA, the SEC or any
other U.K. or U.S. or other agency or regulatory authority, any U.K. or U.S. or
other security or other exchange or any self-regulatory organization, nor is any
such Disciplinary Action pending, or (ii) charged with, been convicted or found
or pled guilty to or nolo contendere to any felony in any U.K. or U.S. or other
court, or been found by or by agreement of settlement with, any U.K., U.S. or
other court or agency or regulatory authority, to have violated any provision,
or rule or regulation thereunder, of the Securities Act, the Exchange Act, the
Investment Advisors Act, the Investment Company Act, the Companies Act or
similar statute, rule regulation of any U.K. or U.S. or other jurisdiction, or
any rule or regulation of the SFA nor is any such charge or action pending.
There does not exist, to the best of the knowledge of Meaden and Taylor, nor is
there reasonably likely to occur, any occurrence or state of facts involving
TASS or any of its Subsidiaries, or any of its or their respective shareholders,
officers, directors or employees, which would reasonably be likely to prohibit,
terminate, suspend or materially and adversely affect any registrations,
licenses or qualifications of TASS, or any of its Subsidiaries, or any of its or
their respective shareholders, directors, officers or employees with the SFA and
any U.K., U.S. or other agency or any regulatory authority, to which it
currently is or proposes to be subject. Set forth on Schedule 3.17(b) is a copy
of any and all filings, reports, notices, or other correspondence filed with or
submitted to any and all governmental agencies and
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regulatory authorities within the past three (3) years with respect to TASS or
any of its Subsidiaries or its or their respective shareholders, officers,
directors and employees.
(c) TASS is and has been since 1991 duly registered as an
adviser with the SFA or its predecessor. TASS is in compliance with all laws,
rules and regulations requiring registration, licensing or qualification, or
otherwise regulating the conduct of its business as an adviser where its failure
to so comply is likely to have a Material Adverse Effect. Each such registration
is in full force and effect. TASS has previously disclosed to Tremont its
communications with the SFA regarding, describing or referring to TASS's
permitted activities under the rules and regulations of the SFA or such other
applicable rules, regulations and laws. Except as set forth in the Disclosure
Letter, TASS has filed all forms, reports and documents required to be filed by
it with the SFA up to and since December 31, 1998. As of their respective dates,
such forms, reports and documents (i) were prepared in accordance with the rules
and regulations of the SFA, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Under the rules and regulations of the
SFA, the following parties are deemed to be "controllers" of TASS: Nicola
Meaden, Laurence Huntington Taylor, II and Norma Smith.
(d) Except as disclosed to Tremont prior to the date hereof,
TASS is and has been since June 7, 1996 duly registered as an investment adviser
under the Investment
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Advisers Act; TASS is registered as an investment adviser in the states
referenced in item 7, Part I of its current Form ADV, and is in compliance with
all state laws requiring registration, licensing or qualification as an
investment adviser; and each such federal and state registration is in full
force and effect. TASS has delivered to Tremont a true and complete copy of its
Form ADV, as amended to date, filed by TASS with the SEC; copies of all state
registration forms, likewise as amended to date; copies of all reports required
to be filed or kept by TASS pursuant to the Investment Advisers Act and the
rules promulgated thereunder and pursuant to applicable state statutes, and
copies of any and all notices, customer complaints or other correspondence of a
regulatory nature filed in connection with TASS or to which TASS or any of its
shareholders, directors, officers or employees is a party or otherwise involves
TASS or any of such other parties. Except as disclosed to Tremont by TASS prior
to the date hereof, TASS has filed all amendments required to be filed to its
Form ADV and state registration forms under federal and state law; and has filed
all reports required to be filed by it under the Exchange Act (including
Sections 13(d), (g) and (f) thereof) and the rules promulgated thereunder.
(e) TASS is not an "investment company," within the meaning of
the Investment Company Act, which is required to be registered under the
Investment Company Act in order to engage in the transactions described in
Section 7 of the Investment Company Act. TASS is not a "broker" or "dealer"
within the meaning of the Exchange Act. Copies of all inspection reports or
similar documents furnished to TASS by the SEC or state regulatory authorities
since December 31, 1997 have been provided to Tremont. TASS is
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not required to disclose any information to clients under SEC Rule 206(4)-4
promulgated under the Investment Advisers Act.
(f) TASS has adopted a formal code of ethics, a true, complete
and accurate copy of which has been provided to Tremont. Its policies with
respect to avoiding conflicts of interest are as set forth in its Form ADV, as
amended, which has been delivered to Tremont. There have been no violations or
allegations of violations of such policies.
(g) As of their respective dates, all reports and notices
filed by or on behalf of TASS, or any of its Subsidiaries, or any of its or
their respective shareholders, directors, officers or employees with any U.K.,
U.S. or other agency or regulatory authority, foreign or domestic, as
contemplated under this Section 3.17, (i) were prepared in accordance with the
rules and regulations of the SFA, the Securities Act, the Exchange Act or any
other similar statute, rule or regulation, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 3.18 Litigation. Except as set forth on Schedule 3.18, there
are no claims, suits or actions, or administrative, arbitration or other
proceedings or governmental investigations or complaints, pending or, to the
best of the knowledge of Meaden and Taylor, threatened against or relating to
TASS, or any of its Subsidiaries, or any of its or their
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respective shareholders, directors, officers, or employees, the business of TASS
or any of its Subsidiaries or any of its or their respective properties or
assets before any U.K., U.S. or other court, administrative, governmental or
regulatory authority or body. There are no judgments, orders, stipulations,
injunctions, decrees or awards in effect which relate to TASS, or any of its
Subsidiaries or any of its or their respective shareholders, directors,
officers, or employees, the business of TASS or any of its Subsidiaries or any
of its or their respective properties or assets, the effect of which is (i) to
limit, restrict, regulate, enjoin or prohibit any business practice in any area,
or the acquisition of any properties, assets or businesses, or (ii) likely to
have a Material Adverse Effect. Neither Meaden nor Taylor knows of any
reasonable basis for any future claim, suit, proceeding, investigation or
complaint against either TASS or any of its Subsidiaries or either Meaden or
Taylor which might have a Material Adverse Effect following the Closing Date.
Section 3.19 Insurance. Schedule 3.19 contains a true and correct copy
of the insurance policy maintained by TASS. Subject to the information set forth
in the Disclosure Letter, all assets and risks of TASS and its Subsidiaries of a
material nature are covered by such policy, which is valid and currently
effective and is of a type and in an amount which is consistent with customary
practices and standards of companies engaged in businesses and operations
similar to those of TASS and its Subsidiaries including, without limitation,
data base businesses.
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Section 3.20 Labor, Benefit and Employment Agreements and Arrangements.
(a) Schedule 3.20 to the Disclosure Letter hereto contains a complete and
correct list and summary description of all (i) union, collective bargaining,
employment, management, termination and consulting agreements to which TASS or
any of its Subsidiaries is a party or otherwise bound, whether under the laws of
England or Wales or otherwise, and (ii) compensation plans and arrangements;
bonus and incentive plans and arrangements; deferred compensation plans and
arrangements; pension and retirement plans and arrangements; profit sharing and
thrift plans and arrangements; stock or share purchase and stock or share option
plans and arrangements; hospitalization and other life, medical expenses, health
or disability insurance or reimbursement programs; holiday, sick leave,
severance, vacation, tuition reimbursement, personal loan and product purchase
discount policies and arrangements; and all other plans or arrangements,
authorized by contract or required or permitted by statute, providing for
benefits for employees of TASS or any of its Subsidiaries. No party to any such
agreement set forth in Schedule 3.20 is in breach thereof or in default
thereunder, and no event has occurred that with the passage of time or the
giving of notice, or both, would constitute such a breach or default.
(b) In addition, Schedule 3.20 sets forth a true and complete
list showing the names of all persons employed by TASS and any of its
Subsidiaries as of the date hereof and the aggregate compensation paid or
payable to each such person for each of the 1998 and 1997 calendar years,
together with such person's renumeration (including accrued but unpaid
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renumeration, as applicable), job title, notice period, date of commencement of
continuous employment and cost of certain benefits.
(c) (i) Except as set forth on Schedule 3.20, neither TASS nor
any of its Subsidiaries is obliged to increase the renumeration to any of its
employees, whether pursuant to a statutory or contractual obligation; (ii)
except as set forth on Schedules 3.20 or 7.3, there are no amounts owing by TASS
or any of its Subsidiaries to any employee or former employee other than for
renumeration accrued, commissions earned or reimbursable business expenses
incurred for the period in which the date of this Agreement falls; and (iii)
neither TASS nor any of its Subsidiaries has incurred any liability within the
last twelve (12) months for any breach of the terms of, or related to the
termination of, the employment of any employee, and, to the best of the
knowledge of Meaden and Taylor, there are no circumstances which reasonably
could give rise to any such liability.
Section 3.21 Affiliated or Inter-Company Transactions. Except as set
forth on Schedule 3.21 or in the Financial Statements, there exist no
inter-company transactions between TASS and any of its Subsidiaries or
affiliates, and none of TASS's shareholders and none of the officers or
directors of TASS or any of its Subsidiaries are indebted to, or otherwise a
party to any transaction involving, TASS or any of its Subsidiaries, and neither
TASS nor any of its Subsidiaries is indebted to, or otherwise a party to any
transaction involving, any of such persons.
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Section 3.22 Banks; Powers of Attorney. Schedule 3.22 contains a
complete and correct list showing (i) the names and addresses of each bank and
other financial institutions in which TASS or any of its Subsidiaries has an
account or safe deposit box and the names of all persons authorized to draw
thereon or who have access thereto, and (ii) the names of all persons or
entities, if any, holding powers of attorney from TASS or any of its
Subsidiaries and a summary statement of the terms thereof.
Section 3.23 Clients. Schedule 3.23 to the Disclosure Letter contains
(except in cases where disclosure prior to Closing would constitute a breach of
agreed client confidentiality, in which case a side letter providing such
information will be delivered at and as of Closing) the name and address of each
of TASS's and its Subsidiaries' clients or subscribers and, in the case of each
of the ten largest clients or subscribers of TASS and its Subsidiaries, by
volume of sales, an approximation of the percentage of total sales dollars
received for the years ended December 31, 1998, December 31, 1997 and December
31, 1996 from each of such clients or subscribers. Since December 31, 1997,
neither TASS nor any of its Subsidiaries has received any notice from any of its
clients or subscribers that they intend to cease doing business with TASS or any
of its Subsidiaries, other than immaterial cancellations of subscriptions, and
neither TASS nor the Controlling Shareholders have any reason to believe that
any of the clients or subscribers of TASS or any of its Subsidiaries intend to
cease doing business to any material extent with TASS or any of its Subsidiaries
as a result of the Reorganization or otherwise.
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Section 3.24 Year 2000 Readiness. TASS is aware and has general
knowledge of what is commonly referred to as "Year 2000" ("Y2K") problems, and,
to the best of the knowledge of Meaden and Taylor, TASS and each of the
Subsidiaries are, and as of the Closing Date will be, in compliance with all
applicable U.K., U.S. and other laws, rules and regulations, including the rules
and regulations of the SEC and those of the SFA relating to Y2K compliance. TASS
and each of its Subsidiaries have taken, or are currently taking, all reasonably
appropriate steps to avoid Y2K problems, including the internal testing of
TASS's and each Subsidiary's software, "point-to-point" testing of software
(i.e., testing with subscribers and service providers), and the implementation
of tested software, and neither the SEC, the SFA nor any other regulatory body
has indicated to TASS or any of its Subsidiaries that the steps it is or they
are taking to address Y2K problems are inadequate, inappropriate or of concern
to it. Schedule 3.24 describes the details of such testing as described herein.
Section 3.25 Brokers. No agent, broker, person or firm acting on behalf
of TASS or any of the Shareholders, or under its, his or her or their authority,
is or will be entitled to a financial advisory fee, brokerage commission,
finder's fee, or other like payment in connection with any of the transactions
contemplated hereby.
Section 3.26 Adequacy of Representations and Warranties. All
representations and warranties of the Shareholders and TASS contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as if made on and as of such date.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES AS TO THE SHAREHOLDERS
The Shareholders, severally and not jointly, hereby represent and
warrant to Tremont with respect to each of themselves only as follows:
Section 4.1 Ownership of Shares and Preference Shares. Each Shareholder
is the legal and beneficial owner of all of the ordinary shares indicated
opposite his or her name on Schedule 4.1. Each Shareholder has good and
marketable title to the Shares owned by him or her, free and clear of any and
all liens, claims, options, charges, encumbrances and restrictions of any nature
whatsoever and each Shareholder has the right, power, authority and capacity to
enter into this Agreement and to sell, assign, transfer and deliver with full
title guarantee the Shares owned by him or her, and the complete right, title
and interest thereto, to Tremont as herein provided.
Section 4.2 Outstanding Rights to Acquire Shares. There are no
outstanding options, warrants, rights, calls, commitments, conversion rights,
puts, plans, agreements or commitments of any character to which such
Shareholder is a party or otherwise bound which provide for the acquisition or
disposition of any share capital or capital stock of TASS or any of its
Subsidiaries owned by him or her; and on the Closing Date, there will be no
options, warrants, rights, calls, commitments, conversion rights, puts, plans,
agreements or commitments of any character to which such Shareholder will have
been a party or otherwise
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bound providing for the acquisition or disposition of any share capital or
capital stock of TASS or any of its Subsidiaries owned by him or her, or any
obligations or securities owned by such Shareholder convertible into, or
exchangeable for, or exercisable into, any share capital or capital stock of
TASS or any of its Subsidiaries or other equity interests in TASS or any of its
Subsidiaries.
Section 4.3 Transfer of Title. At the Closing, upon the delivery by
each Shareholder to Tremont of the share certificates representing the Shares
owned by him or her, and duly executed stock transfer forms in favor of Tremont
in respect of such Shares and the entry of Tremont in the register of members of
TASS as the holder of such Shares, Tremont will have good and marketable title
to such Shares, free and clear of any and all liens, claims, options, charges,
encumbrances and restrictions of any nature whatsoever.
Section 4.4 Binding Commitment. Each Shareholder has the necessary
power and authority to enter this Agreement and to carry out his or her
obligations hereunder. This Agreement has been duly and validly executed and
delivered by each Shareholder and constitutes, and when executed and delivered
by all parties thereto, all such other agreements and instruments referred to
herein to which such Shareholder is a party will be duly and validly executed by
such Shareholder and will constitute, the legal, valid and binding obligation of
such Shareholder enforceable against such Shareholder in accordance with their
respective terms (except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting
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creditors' rights generally or by the principles governing the availability of
equitable remedies).
Section 4.5 No Conflict; Required Filings and Consents. Except for
obtaining the Required Consents, the execution, delivery and performance by each
Shareholder and each Preferred Shareholder of this Agreement or of any agreement
or instrument to be executed and delivered by him or her pursuant hereto, and
the consummation by each Shareholder of the transactions contemplated hereby and
thereby, do not and will not: (i) violate or conflict with, or, in the case, of
each Smith, Benard and Myers, to the best of each of their actual knowledge,
violate or conflict with, the Organizational Documents of TASS; (ii) violate or
conflict with or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under any agreement, indenture,
instrument or understanding to or such Shareholder is a party or by which she or
he is bound or violate any judgment, decree, law, rule or regulation to which
such Shareholder is a party or by which he or she is bound, and, except with
respect to any inability of such Shareholder to transfer his or her Shares or a
breach by such Shareholder of his or her representations and warranties
contained in Section 4.3, to which such qualification shall not apply, where any
such violation, conflict or default is likely to have a Material Adverse Effect;
or (iii) result in the creation of, or give any party the right to create any
lien or encumbrance upon the Shares.
Section 4.6 Securities Matters. With respect to the shares of
Tremont Class B Common Stock to be received by each Shareholder in exchange for
his or her Shares, such
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Shareholder represents and warrants as set forth below. For the purposes of this
Section 4.6, the Shares of Tremont Class B Common Stock to be received by each
Shareholder hereunder shall be referred to as the "Securities."
(a) Each Shareholder understands that the Securities have not
been registered under the Securities Act, or under the securities laws of any
U.S. state jurisdiction or other jurisdiction, by reason of a specified
exemption from the registration provisions thereunder.
(b) Each Shareholder acknowledges that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act and under applicable state securities laws or an exemption from such
registration is available. Each Shareholder has been advised or is aware that
Rule 144 promulgated under the Securities Act, which permits limited resales of
securities purchased in a private placement, is not currently available for
resale of the Securities.
(c) Each Shareholder has received and carefully reviewed all
information which such Shareholder deemed relevant in connection with his or her
investment made hereby, including without limitation this Agreement. In
addition, each Shareholder acknowledges that it has had the opportunity to ask
questions of, and receive answers from, Tremont's representatives concerning
Tremont's business, financial condition and results of operations.
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(d) Each Shareholder is aware that no federal or state or
other agency has passed upon or made any finding or determination concerning the
fairness of the transactions contemplated by this Agreement or any of the
related agreements and instruments or the adequacy of the disclosure of the
exhibits and schedules hereto or thereto.
(e) Each Shareholder understands that all certificates for the
Securities issued to him or her shall bear a legend in substantially the
following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH
REGISTRATION OR UNLESS THE ISSUER RECEIVES AN OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER), SATISFACTORY TO
THE ISSUER (BOTH AS TO THE ISSUER OF THE OPINION AND THE FORM
AND SUBSTANCE THEREOF), THAT SUCH DISPOSITION WILL NOT REQUIRE
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS." THESE
SECURITIES ARE SUBJECT TO FURTHER RESTRICTIONS AS SET FORTH IN
THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF
MARCH [9], 1999."
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ARTICLE V
REPRESENTATIONS AND WARRANTIES AS TO TREMONT
Tremont hereby represents and warrants to TASS and the Shareholders as
follows:
Section 5.1 Organization and Qualification; Subsidiaries. Each of
Tremont and its Subsidiaries is a corporation, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite power and authority and any necessary governmental authority
to own, operate or lease the properties that it owns, operates or leases or
purports to own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which, alone or when taken
together with all other such failures, would not have a Material Adverse Effect.
A true and complete list of all of Tremont's Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity interests owned by
Tremont or a Subsidiary of Tremont, is set forth in Schedule 5.1 hereto. For the
purposes of this Article V, reference to "Subsidiaries" of Tremont shall mean
its significant Subsidiaries unless the context otherwise requires.
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Section 5.2 Certificate of Incorporation. Tremont has heretofore
furnished to TASS a true, complete and correct copy of Tremont's certificate of
incorporation and by-laws, each as amended to the date hereof, which are
contained in Schedule 5.2. Such certificate of incorporation and by-laws of
Tremont are in full force and effect. Neither Tremont nor any of its
Subsidiaries is in violation of any of the provisions of its certificate of
incorporation or by-laws.
Section 5.3 Capitalization. The authorized capital stock of Tremont
consists of 5,000,000 shares of Class A common stock, par value $.01 per share
(the "Tremont Class A Common Stock"), and 10,000,000 shares of Tremont Class B
Common Stock. As of December 31, 1998, 1,284,718 shares of Tremont Class A
Common Stock and 2,939,604 shares of Tremont Class B Common Stock were validly
issued and outstanding, fully paid and nonassessable. Except as set forth on
Schedule 5.3 hereto, since December 31, 1998, no additional shares of Tremont's
capital stock have been issued. All the shares of Tremont Class B Common Stock
issuable in exchange for the Shares in accordance with this Agreement will be,
when so issued, duly authorized and validly issued, fully paid and
nonassessable. Except as set forth on Schedule 5.3, there are no options,
warrants, puts, calls, conversion rights or other rights, agreements,
arrangements or commitments of any character obligating Tremont or any of its
Subsidiaries to acquire, issue or sell any shares of capital stock of Tremont or
other equity interests in Tremont, or any obligations or securities convertible
into or exchangeable, for, or exercisable into, any shares of capital stock of
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Tremont or other equity interests in Tremont, or any voting trusts, proxies or
agreements relating to the voting of Tremont's capital stock.
Section 5.4 Reports. (a) Tremont has filed all forms, reports and
documents required to be filed with the SEC since December 31, 1997 and has
previously furnished TASS and the Shareholders with true and complete copies
(without exhibits) of its (i) Annual Reports on Form 10-KSB for the years ended
December 31, 1996 and 1997, respectively, as filed with the SEC, (ii) Quarterly
Reports on Form 10-QSB for the three months, six months and nine months ended
March 31, 1998, June 30, 1998 and September 30, 1998, respectively (all such
reports set forth in (i) and (ii) being collectively referred to as the "Tremont
Financial Statements"), (iii) proxy statements relating to all meetings of its
stockholders (whether annual or special) since December 31, 1997 and (iv) all
other reports or registration statements filed by Tremont with the SEC since
December 31, 1997. As of their respective dates, such reports and statements (i)
were prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The financial statements contained in such reports and
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes
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thereto) and fairly present the financial position of Tremont as at the
respective dates thereof and the results of operations and changes in financial
position of Tremont for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
(c) Tremont has heretofore furnished to TASS complete and
correct copies of all amendments and modifications that have been filed by
Tremont with the SEC to all agreements, documents and other instruments that
previously had been filed by Tremont with the SEC and are currently in effect.
Section 5.5 Authority Relative to this Agreement. Tremont has the
necessary corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Tremont, and each other agreement and instrument to be executed and
delivered by it pursuant hereto, and the consummation by Tremont of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Tremont. This Agreement has been duly
and validly executed and delivered by Tremont and constitutes, and when executed
and delivered by all other parties thereto, all such other agreements and
instruments to which Tremont is a party will be duly and validly executed by
Tremont and will constitute, the legal, valid and binding obligations of
Tremont, enforceable against it in accordance with their respective terms
(except to the extent that the enforceability thereof
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may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies). The board of directors of
Tremont has approved the Reorganization and the transactions contemplated by
this Agreement, and Tremont has delivered to TASS and Meaden and Taylor complete
and correct copies of all resolutions (whether adopted at a meeting or by
written consent) adopted by the board of directors of Tremont with respect
thereto.
Section 5.6 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by Tremont and the
consummation by Tremont of the transactions contemplated hereby, do not and will
not: (i) violate or conflict with the certificate of incorporation or by-laws of
Tremont or the certificate of incorporation or the by-laws or such equivalent
organizational documents of any of its Subsidiaries; (ii) violate or conflict
with or constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under any agreement, indenture, instrument
or understanding to which Tremont or any of its Subsidiaries is a party or by
which it is bound, or violate any judgment, decree, law, rule or regulation to
which Tremont or any of its Subsidiaries is a party or by which it is bound,
where any such violation, conflict or default is likely to have a Material
Adverse Effect; (iii) result in the creation of, or give any party the right to
create any lien or encumbrance upon the property or assets of Tremont or any of
its Subsidiaries which is likely to have a Material Adverse Effect; (iv)
terminate or modify, or give to another the right to terminate or modify the
provisions or terms of any agreement or
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commitment to which Tremont or any of its Subsidiaries is a party or by which
Tremont or any Subsidiary is subject or bound the result of which is likely to
have a Material Adverse Effect; (v) result in any suspension, revocation,
impairment, forfeiture or non-renewal of any permit, license, qualification,
authorization or approval applicable to Tremont or any of its Subsidiaries which
is likely to have a Material Adverse Effect; or (vi) materially interfere with a
adversely affect the ability of Tremont or any of its Subsidiaries to carry on
the business of Tremont or such Subsidiary after the Closing Date on
substantially the same basis as it is now conducted.
(b) Except for applicable requirements, if any, of the
Exchange Act, the Securities Act, the Investment Advisors Act, the Companies
Act, IITSSA and applicable U.S. blue sky and other U.K. laws, neither Tremont
nor any of its Subsidiaries is required to submit any notice, report or other
filing with any U.S., U.K. or other governmental authority in connection with
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby. Except for obtaining material consents, if
any, set forth in Schedule 5.6(b), no waiver, consent, approval or authorization
of any U.S., U.K. or other governmental or regulatory authority is required to
be obtained or made by either Tremont or any of its Subsidiaries in connection
with its execution, delivery or performance of this Agreement, except for such
waivers, consents, approvals or authorizations the failure to obtain which is
not likely to result in a Material Adverse Effect or interfere with the ability
of Tremont to perform or carry out its obligations under this Agreement.
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Section 5.7 Absence of Certain Changes or Events. Since September 30,
1998, except as contemplated in this Agreement or any exhibit or schedule
hereto, there has not been or occurred (a) any event or condition which, alone
or when taken together with any other related or similar event or condition, is
likely to have a Material Adverse Effect; (b) any damage, destruction or loss
(whether or not covered by insurance) with respect to any of the assets of
Tremont or any of its Subsidiaries which, alone or when taken together with any
other damage, destruction or loss, is likely to have a Material Adverse Effect;
(c) except as otherwise set forth herein, any redemption or, to the best of
Tremont's knowledge, other acquisition of Tremont's common or preferred stock or
any of its Subsidiaries or any declaration or payment of any dividend or other
distribution in cash, stock or property with respect to Tremont's common or
preferred stock; (d) any entry into any material commitment or transaction
(including, without limitation, any borrowing or capital expenditure) other than
in the ordinary course of business or as contemplated by this Agreement; (e) any
transfer of, or rights granted under, any leases, licenses, agreements, patents,
trademarks, trade names or copyrights; (f) any mortgage, pledge, security
interest or imposition of lien or other encumbrance on any asset of Tremont or
any of its Subsidiaries; or (g) any change by Tremont in accounting principles
or methods. Since September 30, 1998, Tremont and its Subsidiaries have
conducted their business only in the ordinary course and in a manner consistent
with past practice and have not made any material change in the conduct of the
business or operations of Tremont and its Subsidiaries taken as a whole. Without
limiting the generality of the foregoing, Tremont has not since such date, made
any changes in executive compensation levels or in the manner in which other
employees of Tremont or its
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Subsidiaries are compensated or paid or agreed to pay any pension, retirement
allowance or other employee benefit not required or permitted by any plan,
agreement or arrangement existing on such date to any director, officer or
employee, whether past or present, or committed itself to any collective
bargaining agreement (except for renewals of existing collective bargaining
agreements) or to any additional pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or to any employment or consulting agreement with or
for the benefit of any person, or to amend any of such plans or any of such
agreements in existence on such date.
Section 5.8 Tax Matters. Tremont and each of its Subsidiaries have
filed or have caused to be filed with all required governmental agencies all tax
returns and reports required to be filed by Tremont or any of its Subsidiaries,
and each has paid in full or made adequate provision for the payment of, all
Taxes, interest, penalties, assessments and deficiencies shown to be due or
claimed to be due from any taxing authorities with respect to the periods ending
on or prior to the Closing Date. The provision for income and other Taxes which
is set forth on the December 31, 1997 consolidated balance sheet of Tremont (the
"December 1997 Balance Sheet") is adequate for all accrued and unpaid Taxes of
Tremont and each of its Subsidiaries as of December 31, 1997, whether (i)
incurred in respect of or measured by income of Tremont or any of its
Subsidiaries for any periods prior to the close of business on that date, or
(ii) arising out of transactions entered into, or any state of facts existing,
on or prior to that date. Neither Tremont nor any of its Subsidiaries has
executed or filed with any
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taxing authority any agreement extending the period for the assessment or
collection of any income or other taxes, and is not a party to any pending or,
to the best of the knowledge of Tremont, threatened, action or proceeding by any
governmental authority for the assessment or collection of income or other
taxes. All Taxes and other assessments and levies which Tremont or any of its
Subsidiaries are required by law to withhold or to collect have been duly
withheld and collected, and have been paid over to the proper governmental
authorities or are held by Tremont, or the Subsidiary, as the case may be, in
separate bank accounts for such payment.
Section 5.9 Accounts Receivable. The accounts and notes receivables of
Tremont and each of its Subsidiaries as of December 31, 1997 and all accounts
and notes receivables acquired by Tremont and each of its Subsidiaries
subsequent to December 31, 1997 and prior to the close of business on September
30, 1998 have arisen in the ordinary course of business, have not been and are
not subject to valid counterclaims or set-offs, and, except as reserved for on
the Tremont Financial Statements, Tremont is not aware of any impediment to
their collection.
Section 5.10 Title to Property. Tremont and each of its Subsidiaries
have good and marketable title, or valid leasehold rights in the case of leased
property, to all real property and all personal property (other than personal
property title to which is specified elsewhere in this Agreement) owned or
leased by them, or purported to be owned or leased by them, free and clear of
all liens, security interests, claims, encumbrances and charges, and is solely
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legally and beneficially entitled to such property, except for (i) liens for
fees, taxes, levies, imposts, duties or governmental charges of any kind which
are not yet due or are being contested in good faith by appropriate proceedings
which suspend the collection thereof, (ii) liens created in the ordinary course
of business in connection with the leasing or financing of office, computer and
related equipment and supplies, (iii) liens or defects in title or leasehold
rights known, or, in the exercise of reasonable care, should be known, to
Tremont, which, alone or when taken together with any other liens or defects, do
not and will not have a Material Adverse Effect, or (iv) liens set forth on
Schedule 5.10 hereto.
Section 5.11 Intellectual Property. Schedule 5.11 contains a complete
and correct list of all (i) U.S. and foreign patents, trademark and trade name
registrations, trademarks and trade names, brandmarks and brand name
registrations, servicemarks and servicemark registrations, assumed names and
copyrights and copyright registrations, owned in whole or in part or used by
Tremont or any of its Subsidiaries, and all applications therefor, (ii)
inventions, discoveries, improvements, processes, formulae, proprietary rights
and trade secrets relating to the business of Tremont or any of its
Subsidiaries, and (iii) licenses and other agreements to which Tremont or any of
its Subsidiaries is a party or otherwise bound which relate to any of the
foregoing. Tremont or any such Subsidiary owns or has the legal and beneficial
right to use all of the foregoing; no proceedings have been instituted, are
pending or, to the best of Tremont's knowledge, are threatened, which challenge
the rights of Tremont or any of its Subsidiaries in respect thereto or the
validity thereof and, to the best of the best of Tremont's knowledge, there is
no valid basis for any such proceedings; to the
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best of Tremont's knowledge, none of the aforesaid violates any laws, statutes,
ordinances or regulations, or has at any time infringed upon or violated any
rights of privacy or libel or any other rights of others including but not
limited to any copyright infringement, or is being infringed by others including
but not limited to any copyright infringement; and none of the aforesaid is
subject to any outstanding order, decree, judgment, stipulation or charge.
Section 5.12 No Violation of Law. Neither Tremont nor any of its
Subsidiaries nor any of its or their respective executive directors, officers or
other employees within the scope of their respective employment is engaging in
any activity or omitting to take any action as a result of which any of them is
in violation of any applicable order, injunction or decree, nor is it or are
they engaging in any activity or omitting to take any action as a result of
which (i) to the best of Tremont's knowledge, none of them are in violation of
any law, rule, regulation, zoning or other ordinance, statute, or any other
requirement of any court or governmental, regulatory or administrative body or
agency, applicable to Tremont or any of its Subsidiaries, the business of
Tremont or any of its Subsidiaries or any of its or their properties or assets;
or (ii) there is reasonably likely to be experienced a Material Adverse Effect.
Section 5.13 Approvals; Government Regulation. (a) Set forth on
Schedule 5.13(a) is a complete and correct list of all governmental and
administrative consents, permits, appointments, approvals, licenses,
certificates and franchises which are necessary for the operation of the
business of Tremont and/or its Subsidiaries, including all licenses and
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registrations required by the SEC for Tremont and/or any of its Subsidiaries
and/or any of its or their respective directors, officers or employees, all of
which have been obtained by Tremont and/or such Subsidiaries and/or such
directors, officers or employees and are in full force and effect.
(b) Except as set forth on Schedule 5.13(b), neither Tremont
nor any of its Subsidiaries nor any of its or their respective directors,
officers or employees, nor any entity presently controlled by Tremont or any of
its or their respective directors, officers or employees, nor, to the best of
Tremont's knowledge, any former director, officer or employee of Tremont or any
of its Subsidiaries, nor any entity previously controlled by Tremont or any of
its Subsidiaries or any of its or their respective directors, officers or
employees, in the previous five (5) years has been (i) subject to any expulsion,
bar, fine, civil penalty or censure, suspension or revocation of membership or
registration, injunction or other sanction (each, a "Disciplinary Action")
through an adverse determination, voluntary settlement or otherwise in an action
or proceeding brought before the SEC or any other domestic or foreign agency or
regulatory authority, any domestic or foreign security or other exchange or any
self-regulatory organization, nor is any such Disciplinary Action pending, or
(ii) charged with, been convicted or found or pled guilty to or nolo contendere
to any felony in any domestic or foreign court, or been found by or by agreement
of settlement with, any court or agency or regulatory authority, domestic or
foreign, to have violated any provision, or rule or regulation thereunder, of
the Securities Act, the Exchange Act, the Investment Advisors Act, the
Investment Company Act or similar statute, rule regulation of any
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domestic or foreign jurisdiction, nor is any such charge or action pending.
There does not exist, to the best of the knowledge of Tremont, nor is there
reasonably likely to occur, any occurrence or state of facts involving Tremont
or any of its Subsidiaries, or any of its or their respective officers,
directors or employees, which would reasonably be likely to prohibit, terminate,
suspend or materially and adversely affect any registrations, licenses or
qualifications of Tremont, or any of its Subsidiaries, or any of its or their
respective directors, officers or employees with the SEC and other agency or any
regulatory authority, foreign or domestic, to which it currently is or proposes
to be subject. Set forth on Schedule 5.13(b) is a copy of any and all filings,
reports, notices, customer complaints or other correspondence filed with or
submitted to any and all governmental agencies and regulatory authorities within
the last three (3) years with respect to Tremont or any of its Subsidiaries or
its or their respective officers, directors and employees.
(c) Tremont's Subsidiary, Tremont Partners, Inc. ("TPI"), is
and has been since April 13, 1985 duly registered as an investment adviser under
the Investment Advisers Act and is in compliance with all relevant laws, rules
and regulations governing investment advisors, foreign and domestic, where the
failure to so comply is likely to result in a Material Adverse Effect.
(d) TPI is not an "investment company," within the meaning of
the Investment Company Act which is required to be registered under the
Investment Company Act in order to engage in the transactions described in
Section 7 of the Investment Company
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Act. TPI is not a "broker" or "dealer" within the meaning of the Exchange Act.
Copies of all inspection reports or similar documents furnished to TPI by the
SEC or state regulatory authorities since December 31, 1997 have been provided
to TASS. TPI is not required to disclose any information to clients under SEC
Rule 206(4)-4 promulgated under the Investment Advisers Act.
(e) TPI has adopted a formal code of ethics, a true, complete
and accurate copy of which has been provided to TASS. Its policies with respect
to avoiding conflicts of interest are as set forth in its Form ADV, as amended,
which has been delivered to TASS. There have been no violations or allegations
of violations of such policies which have occurred or been made.
(f) As of their respective dates, all reports and notices
filed by or on behalf of TPI, or any of its directors, officers or employees
with any agency or regulatory authority, foreign or domestic, as contemplated
under this Section 5.13, (i) were prepared in accordance with the rules and
regulations of the Securities Act, the Exchange Act or any other similar
statute, rule or regulation, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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Section 5.14 Insurance. All assets and risks of Tremont and its
Subsidiaries of a material nature are covered by valid and currently effective
insurance policies in such types and amounts as are consistent with customary
practices and standards of companies engaged in businesses and operations
similar to those of Tremont and its Subsidiaries.
Section 5.15 Affiliated or Inter-Company Transactions. There exist no
inter-company transactions between Tremont and any of its Subsidiaries or
Affiliates, and none of Tremont's shareholders and none of the officers or
directors of Tremont or any of its Subsidiaries are indebted to, or otherwise a
party to any transaction involving, Tremont or any of its Subsidiaries, and
neither Tremont nor any of its Subsidiaries is indebted to, or otherwise a party
to any transaction involving, any of such persons, other than on an arm's length
basis and in accordance with generally accepted accounting principles.
Section 5.16 Clients. Schedule 5.16 contains (except in cases where
disclosure prior to the Closing would constitute a breach of agreed client
confidentiality, in which case a side letter providing such information will be
delivered at and as of closing) the name and address of each of Tremont's and
its Subsidiaries' clients or accounts and, in the case of each of the ten
largest clients or accounts of Tremont and its Subsidiaries, by volume of sales,
an approximation of the percentage of total sales dollars received for the years
ended December 31, 1998, December 31, 1997 and December 31, 1996 from each of
such clients or accounts. Since December 31, 1997, neither Tremont nor any of
its Subsidiaries has received any notice from any of its clients or accounts
that they intend to cease doing business with
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Tremont or any of its Subsidiaries, other than immaterial cancellations of
accounts, and Tremont has no reason to believe that any of the clients or
accounts of Tremont or any of its Subsidiaries intend to cease doing business to
any material extent with Tremont or any of its Subsidiaries as a result of the
Reorganization or otherwise.
Section 5.17 Litigation. Other than as set forth on Schedule 5.17,
there are no claims, suits or actions, or administrative, arbitration or other
proceedings or governmental investigations, pending or, to the best of the
knowledge of Tremont, threatened against or relating to Tremont or any of its
Subsidiaries, the business of Tremont or any of its Subsidiaries or any of its
or their respective properties or assets before any court, administrative,
governmental or regulatory authority or body, domestic or foreign. There are no
judgments, orders, stipulations, injunctions, decrees or awards in effect which
relate to Tremont or any of its Subsidiaries, the business of Tremont or any of
its Subsidiaries or any of its or their respective properties or assets, the
effect of which is (i) to limit, restrict, regulate, enjoin or prohibit any
business practice in any area, or the acquisition of any properties, assets or
businesses, or (ii) likely to have a Material Adverse Effect. Tremont knows of
no reasonable basis for any future claim, suit, proceeding, investigation or
complaint against either Tremont or any of its Subsidiaries which might have a
Material Adverse Effect following the Closing Date.
Section 5.18 Year 2000 Readiness. Tremont is aware and has
general knowledge of what is commonly referred to as "Year 2000" ("Y2K")
problems, and, to the best of the
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knowledge of Tremont, Tremont and each of its Subsidiaries are, and as of the
Closing Date will be, in compliance with all applicable laws, rules and
regulations, including the rules and regulations of the SEC relating to Y2K
compliance. Tremont and each of its Subsidiaries have taken, or are currently
taking, all reasonably appropriate steps to avoid Y2K problems, including the
internal testing of Tremont's and each Subsidiary's software, "point-to-point"
testing of software (i.e., testing with subscribers and service providers), and
the implementation of tested software, and neither the SEC nor any other
regulatory body has indicated to Tremont or any of its Subsidiaries that the
steps it is taking to address Y2K problems are inadequate, inappropriate or of
concern to it.
Section 5.19 Brokers. No agent, broker, person or firm acting on behalf
of Tremont or under its authority, is or will be entitled to a financial
advisory fee, brokerage commission, finder's fee or other like payment in
connection with any of the transactions contemplated hereby.
Section 5.20 Adequacy of Representations and Warranties. All
representations and warranties of Tremont contained herein shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of such date.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE
REORGANIZATION; ACCESS TO COMPANY INFORMATION
Section 6.1 Conduct of Business by TASS Pending the Reorganization.
TASS and each of Meaden and Taylor covenant and agree that, between the date of
this Agreement and the Closing Date or the date of the earlier termination of
this Agreement, unless Tremont shall otherwise consent in writing in advance,
the business of TASS and its Subsidiaries shall be conducted only in, and TASS
and its Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice with a view towards
maximizing sales and profits, and TASS and Meaden and Taylor will use their
reasonable best efforts to (i) preserve substantially intact the business
organization of TASS and its Subsidiaries, (ii) maintain and preserve the
Software and the other assets of TASS and the Subsidiaries and its and their
books and records, properties and business, (iii) keep confidential TASS's
proprietary and confidential business information, (iv) keep available the
services of the present officers and the significant employees, agents and
consultants of TASS and its Subsidiaries, (v) retain TASS's and its
Subsidiaries' good will, and (vi) preserve the present relationships of TASS and
its Subsidiaries with customers, clients, suppliers and other persons with which
TASS or any of its Subsidiaries has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement,
neither TASS nor any of its Subsidiaries shall, between the date of this
Agreement and the Closing Date, directly or indirectly do any of the following
without the prior written consent of Tremont:
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(a) (i) issue, sell, pledge, dispose of, encumber, authorize,
or propose the issuance, sale, pledge, disposition, encumbrance or authorization
of any share capital of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any share capital, or any
other ownership interest, of TASS or any of its Subsidiaries; (ii) amend or
propose to amend the Certificate of Incorporation, the Memorandum of
Association, or the Articles of Association or the equivalent organizational
documents of TASS or any of its Subsidiaries; (iii) split, combine or reclassify
any outstanding share capital of TASS, or declare, set aside or pay any dividend
or distribution payable in cash, stock, property or otherwise with respect to
TASS's shares; (iv) redeem, purchase or otherwise acquire or offer to redeem,
purchase or otherwise acquire any share capital; or (v) authorize or propose or
enter into any contract, agreement, commitment or arrangement with respect to
any of the matters set forth in this Section 6.1(a);
(b) (i) acquire (by merger, consolidation, amalgamation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof; (ii) except in the ordinary course of business
and in a manner consistent with past practices, sell, pledge, dispose of, or
encumber or authorize or propose the sale, pledge, disposition or encumbrance of
any assets of TASS or any of its Subsidiaries; (iii) incur any indebtedness for
borrowed money, or enter into any contract or agreement, except in the ordinary
course of business; (iv) authorize any capital expenditure which is in excess of
$10,000; or (v) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section 6.1(b);
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(c) take any action other than in the ordinary course of
business and in a manner consistent with past practice or as otherwise required
by law with respect to the grant of any severance or termination pay (otherwise
than pursuant to policies of TASS or any of its Subsidiaries in effect on the
date hereof) or with respect to any increase of benefits payable under its
severance or termination pay policies in effect on the date hereof;
(d) make any payments (except in the ordinary course of
business and in amounts and in a manner consistent with past practice) under any
employee plan to any employee of, or independent contractor or consultant to,
TASS or any Subsidiary, enter into any new employee plan, any new employment or
consulting agreement, grant or establish any new awards under such plan or
agreement, or adopt or otherwise amend any of the foregoing;
(e) take any action except in the ordinary course of business
and in a manner consistent with past practice with respect to accounting
policies or procedures (including without limitation its procedures with respect
to the payment of accounts payable);
(f) fail to timely file all forms, reports and documents
required to be filed with Companies House, the SFA or the SEC pursuant to the
Companies Act 1985, the Financial Services Act 1986, the Investment Advisors
Act, the Exchange Act or the rules of the SFA; or
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(g) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action which would make any representation or warranty
of TASS contained in this Agreement untrue or incorrect in any material respect
as of the date when made or as of a future date.
Section 6.2 No Shopping. TASS and its Subsidiaries will not, directly
or indirectly, through any officer, director, agent, financial adviser or
otherwise, solicit, initiate or encourage submission of proposals or offers from
any person relating to any acquisition or purchase of all or a substantial
portion of the assets of, or any material equity interest in, TASS or any of its
Subsidiaries or any business combination with TASS or any of its Subsidiaries,
or participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. TASS shall use its reasonable best
efforts to cause all materials previously furnished to any third parties, if
any, to be promptly returned to TASS and shall cease any negotiations conducted
in connection therewith or otherwise conducted with any such parties. TASS shall
promptly notify Tremont if any such proposal or offer, or any inquiry or contact
with any person with respect thereto, is made, and shall furnish Tremont with a
copy of any written proposal or offer.
Section 6.3 Investigation; Access to Information. (a) From the date hereof
to the Closing Date, Tremont may make such investigation of the properties and
business of TASS
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and its Subsidiaries, as Tremont deems necessary or advisable, and TASS and the
Shareholders, shall and shall cause TASS's Subsidiaries, officers, directors,
employees, auditors and agents to, afford the officers, employees and agents of
Tremont reasonable access at all reasonable times to its and their officers,
employees, agents, properties, offices and other facilities and to all books and
records, and shall furnish Tremont with all financial, operating and other data
and information as Tremont, through its officers, employees or agents, may
reasonably request. No such investigation nor any investigations made prior to
the date hereof shall affect any of the representations and warranties of TASS
or the Shareholders contained herein or in any agreement or instrument delivered
pursuant hereto.
(b) Tremont and TASS each agrees that it shall, and shall
cause its respective affiliates and, in the case of TASS, the Shareholders and
each of their respective officers, directors, employees, financial advisors,
attorneys, accountants, consultants and agents ("Representatives"), to use its
and their reasonable best efforts to hold in strict confidence all data and
information which may be obtained by either of them, or their respective
Representatives, with respect to the other or any Subsidiaries of the other, or
any division, associate, representative, agent or affiliate of the other (unless
such information is or becomes publicly available without the fault of Tremont
or TASS or any Representative thereof, as the case may be, or to the extent
Tremont or TASS, as the case may be, deems public disclosure to be necessary in
order to evaluate the properties and business of TASS and its Subsidiaries, on
the one hand, or Tremont and its Subsidiaries, on the other, or to the extent
public disclosure of such information is required by law or legal process) and
each of
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Tremont and TASS shall insure that their respective Representatives do not
disclose such information except as provided herein without the prior written
consent of the other.
(c) In the event of the termination of this Agreement, Tremont
shall, and shall cause its affiliates and Subsidiaries and each Representative
thereof to, return promptly every document furnished to it by TASS or any of its
Subsidiaries, or any division, associate, Representative, agent or affiliate of
TASS or its Subsidiaries in connection with the transactions contemplated hereby
and any copies thereof which may have been made, and shall cause the
Representatives of Tremont to whom such documents were furnished promptly to
return such documents and any copies thereof any of them may have made, other
than documents filed with Companies House, the SFA or the SEC or otherwise
publicly available other than as a result of the actions of Tremont or any of
its Representatives.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Additional Agreements. TASS and Tremont will each comply in
all respects with all applicable laws and with all applicable rules and
regulations of any governmental authority in connection with their execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. Each of the parties hereto agrees to use reasonable best efforts and to
cooperate with each other to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and
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filings, including any and all filings which may be necessary by Tremont under
IITSSA, and to use all reasonable best efforts to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement.
Section 7.2 Appointments and Resignations. (a) Immediately following
the Closing, the following persons shall be elected as directors and/or officers
of TASS and each of its Subsidiaries and hold such directorships and serve in
the offices set forth opposite their respective names until their earlier
resignation or removal:
<TABLE>
<S> <C> <C>
Name of Company Name Title
TASS Management Limited Nicola Meaden Managing Director and
Chief Executive Officer;
Director
Colin Myers Chief Financial Officer
TASS Management Inc. Nicola Meaden President
TASS Investment Managers Nicola Meaden President
Limited
</TABLE>
TASS will take all corporate action necessary to accomplish the foregoing
including obtaining any necessary resignations of existing directors and
officers which may be required by Tremont on or prior to the Closing Date. As of
the Closing Date, Meaden and Taylor, respectively, shall enter into the
Employment Agreements with TASS and Tremont.
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(b) Tremont shall take all corporate action necessary to
nominate, and effective as of the Closing Date, shall appoint, Meaden to the
Tremont Board of Directors, where she shall serve, pending her election by the
stockholders of Tremont entitled to vote thereon at their next annual meeting.
Thereafter, subject to the terms of her Employment Agreement with TASS, for so
long as Meaden shall be employed by TASS, Meaden shall be nominated and
appointed to the Tremont Board of Directors at each annual meeting at which
directors shall be so nominated, to serve for such term as all such other
directors standing for election shall be so nominated, subject to election at
the annual meeting of the Tremont shareholders.
Section 7.3 Certain TASS Obligations. Within thirty (30) days following
the Closing Date, Tremont shall cause TASS to satisfy certain accrued
liabilities of TASS as set forth on Schedule 7.3. In the event TASS shall not
have sufficient funds for the payment of such liabilities, Tremont shall loan to
TASS or contribute to it as additional capital sufficient funds to make such
payments.
Section 7.4 Barclays Credit Facility. On or prior to the Closing Date,
Tremont and TASS, using their best efforts, shall endeavor to cause to be
discharged that certain Debenture, dated October 22, 1992 (the "Debenture"),
made by TASS in favor of Barclays Bank PLC ("Barclays") securing the borrowed
amounts set forth on Schedule 7.4 hereto, and the related guaranty of Kleinwort
Benson (the "Guaranty").
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Section 7.5 Covenants Relating to Rule 144. With a view to making
available the benefits of certain rules and regulations of the SEC which may at
any time permit the sale of the Shares to the public without registration,
Tremont agrees:
(a) To make and keep public information available with respect
to Tremont as those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the Closing Date; and
(b) To use its best efforts to then file with the SEC in a
timely manner all reports and other documents required to be filed by Tremont
under the Securities Act and the Exchange Act.
Section 7.6 Notification of Certain Occurrences or Failures. TASS shall
give prompt notice to Tremont, and Tremont shall give prompt notice to TASS, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Closing Date, and (ii) any material
failure of TASS or the Shareholders, on the one hand, or Tremont, on the other,
or any officer, director, employee or agent of TASS or Tremont, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this
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Section 7.7 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
Section 7.7 Audited Financial Statements of TASS. Within thirty (30)
days after the Closing Date, TASS shall furnish to Tremont the consolidated
Financial Statements of TASS as of December 31, 1998, certified without
qualification by TASS's regularly employed certified accountants and registered
auditor whose opinions therein shall be included therewith (the "1998 Audited
Statements"). If the 1998 Audited Statements are materially different from the
1998 Unaudited Statements, the Shareholders and Tremont hereby agree that they
shall endeavor in good faith to make such adjustments as may be necessary in the
Reorganization transactions contemplated hereunder to proportionately reflect
such material difference. Notwithstanding the foregoing, Tremont and the
Shareholders expressly agree and acknowledge that no such material difference
shall be deemed to exist in the event such difference arises from (i) the
provision in the 1998 Audited Statements of the accrued liabilities of TASS
referred to in Section 7.3, the fees and expenses of TASS's counsel in
connection with the litigation styled, TASS Management Limit v. Cherryscope
Ltd., in the approximate amount of (pound)18,000, or the costs and expenses
incurred by TASS in connection with the preparation and negotiation of the
Agreement and each of the Related Agreements, or (ii) any accounting
recharacterization with respect to the 1998 Audited Statements proposed or
endorsed by Tremont. In connection with the foregoing, Tremont acknowledges
specifically that all legal bills of Landau & Cohen and Kleinberg, Kaplan, Wolff
& Cohen, P.C. incurred in connection with the transactions
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contemplated by this Agreement are for the account of, and payable by, TASS and
likewise shall not be deemed to require an adjustment as contemplated herein.
Section 7.8 Payment of Taxes Upon Transfer of Shares. TASS and the
Shareholders shall be responsible for, and shall pay all Taxes (other than U.K.
stamp taxes), if any, and any and all filing, recording, registration and
similar fees, arising out of the transactions contemplated by this Agreement.
Section 7.9 Public Announcements. Tremont and TASS shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Reorganization and shall not issue any such press
release or make any such public statement without the prior written approval of
the other, except as may be required by law.
Section 7.10 Further Assurances. TASS and each of the Shareholders, on
the one hand, and Tremont, on the other, hereby agree that they shall, form time
to time after the Closing Date, take any and all actions, and execute,
acknowledge, deliver, file and/or record any and all documents and instruments
as the other party may reasonably request in order to insure consummation of the
transactions contemplated by this Agreement.
Section 7.11 Accuracy of Representations. Each party hereto agrees that
prior to the Closing Date he or she or it will (and the Shareholders shall cause
TASS and each of its Subsidiaries to) enter into no transaction and take no
action, and will use his or her or its
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best efforts to prevent the occurrence of any event, which would result in any
of his or her or its representations, warranties or covenants contained in this
Agreement or in any agreement, document or instrument delivered pursuant hereto
not to be true and correct, or not to be performed as contemplated, at and as of
the time immediately after the occurrence of such transaction or event.
ARTICLE VIII
CONDITIONS OF REORGANIZATION
Section 8.1 Conditions to Obligations of TASS and the Shareholders. The
obligation of TASS and the Shareholders to effect the transactions contemplated
by this Agreement is subject to the fulfillment of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Tremont contained in this Agreement, including, without
limitation, the Schedules thereto, shall be true and correct in all material
respects on the date hereof and shall also be true and correct in all material
respects on and as of the Closing Date, except for changes contemplated by this
Agreement, with the same force and effect as if made on and as of the Closing
Date.
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(b) Agreements, Conditions and Covenants. Tremont shall have
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by it
on or before the Closing Date.
(c) Related Agreements. Each of the Related Agreements,
including each of the Employment Agreements, the Registration Rights Agreement
and the Stock Option Agreements, shall have been executed and delivered in
substantially the form annexed hereto, or as described herein, in the case of
the Stock Option Agreements, and each of the Related Agreements shall be in full
force and effect in accordance with their respective terms. All agreements,
conditions and covenants contained in the Related Agreement that are to
performed or complied with by Tremont on or before the Closing Date shall have
been performed or complied with.
(d) Barclays Debenture. The Barclays Debenture and the
Guaranty shall be discharged to the reasonable satisfaction of TASS.
(e) Certificate. Tremont shall have furnished TASS with a
certificate dated the Closing Date, to the effect that it has fulfilled the
conditions specified in Section 8.1(a) and 8.1(b).
(f) Statutory Requirements. All domestic and foreign statutory
requirements for the valid consummation by Tremont of the transactions
contemplated by this
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Agreement shall have been fulfilled; and all filings, authorizations, consents
and approvals of all domestic and foreign governmental authorities and agencies,
including the SFA pursuant to that certain notice, dated February 4, 1999,
submitted by TASS in respect of the proposed change in controllers of TASS in
accordance with SFA Rule 2-23A(1), required to be obtained in order to permit
consummation by Tremont of the transactions contemplated by this Agreement shall
have been obtained.
(g) Consents under Agreements. Tremont shall have obtained the
consent, approval or authorization of each party whose consent, approval or
authorization shall be required in connection with the transactions contemplated
hereby including those under any agreement, indenture, instrument or
understanding to which Tremont is a party, except those for which the failure to
obtain such consents, approvals or authorizations would not materially and
adversely affect the consummation of the transactions contemplated hereby.
(h) Litigation or Proceedings. No order, judgment,
stipulation, injunction or decree of any court or other governmental or
regulatory agency shall be in effect which restrains or prohibits the
transactions contemplated hereby, and no suit, action or administrative,
arbitration or other proceeding or governmental or regulatory investigation
shall be pending before any court or other governmental or regulatory agency in
which it is sought to restrain or prohibit the execution and delivery of this
Agreement, or any of the related documents and instruments executed in
connection herewith, or the consummation of the transactions contemplated hereby
and thereby, to subject the Shareholders, TASS or any
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of its Subsidiaries to liability on the basis that it or they have breached any
law or duty or otherwise acted improperly, nor shall any such suit, action or
administrative, arbitration or other proceeding or governmental investigation be
threatened.
(i) Opinion of Counsel for Tremont. TASS shall have received a
favorable opinion of counsel to Tremont, dated the Closing Date, in such form as
shall be reasonable and customary in transactions of the type described herein
and as shall be reasonably agreed upon between counsel for Tremont and counsel
for TASS, the form of which the parties agree they shall cause to be annexed
hereto as Exhibit D on or prior to the Closing Date. In rendering its opinion
such counsel may rely as to factual matters upon certificates or other documents
furnished by officials of Tremont and by government officials, and upon such
other documents and data as such counsel deems appropriate as a basis for their
opinions.
Section 8.2 Conditions to Obligations of Tremont. The obligations of
Tremont to effect the transactions contemplated by this Agreement is subject to
the following conditions:
(a) Representations and Warranties. The representations and
warranties of TASS and each of the Shareholders contained in this Agreement,
including, without limitation, the Schedules thereto and the Disclosure Letter,
shall be true and correct in all material respects on the date hereof and shall
also be true and correct in all material respects
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on and as of the Closing Date, except for changes contemplated by this
Agreement, with the same force and effect as if made on and as of the Closing
Date.
(b) Agreements, Conditions and Covenants. TASS and each of the
Shareholders shall have performed or complied in all material respects with all
agreements, conditions and covenants required by this Agreement to be performed
or complied with by it or them on or before the Closing Date.
(c) Employment Agreements and Special Resolution. (i) Each of
the Employment Agreements shall have been executed and delivered in the form
provided herein, and each of the Employment Agreements shall be in full force
and effect in accordance with their respective terms. All agreements, conditions
and covenants contained in the Employment Agreements that are to be performed or
complied with by Meaden and Taylor, respectively, on or before the Closing Date
shall have been performed or complied with.
(ii) Tremont shall have received satisfactory evidence from TASS of the due
filing of the Special Resolution with the appropriate governmental authorities
in accordance with the Companies Act.
(d) Barclays Debenture. The Barclays Debenture and the
Guaranty shall be discharged to the reasonable satisfaction of Tremont.
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(e) Certificate. TASS and the Shareholders shall have
furnished Tremont with a certificate dated the Closing Date, to the effect that
it and they have fulfilled the conditions specified in Section 8.2(a) and
8.2(b).
(f) Statutory Requirements. All domestic and foreign statutory
requirements for the valid consummation by TASS and the Shareholders of the
transactions contemplated by this Agreement shall have been fulfilled; and all
authorizations, consents and approvals of all domestic and foreign governmental
authorities and agencies, including the SFA, required to be obtained in order to
permit consummation by TASS and the Shareholders of the transactions
contemplated by this Agreement shall have been obtained.
(g) Consents under Agreements. TASS and the Shareholders shall
have obtained the consent, approval or authorization of each party whose
consent, approval or authorization shall be required in connection with the
transactions contemplated hereby under any agreement, indenture, instrument or
understanding to which TASS or any of the Shareholders is a party, including the
Required Consents, except those for which the failure to obtain such consents,
approvals or authorizations would not materially and adversely affect the
consummation of the transactions contemplated hereby.
(h) Litigation or Proceedings. No order, judgment,
stipulation, injunction or decree of any court or other governmental or
regulatory agency shall be in effect which restrains or prohibits the
transactions contemplated hereby, and no suit, action or
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administrative, arbitration or other proceeding or governmental or regulatory
investigation shall be pending before any court or other governmental agency or
regulatory in which it is sought to restrain or prohibit the execution and
delivery of this Agreement, or any of the related documents and instruments
executed in connection herewith, or the consummation of the transactions
contemplated hereby and thereby, to subject Tremont or any of its Subsidiaries
to liability on the basis that it or they have breached any law or duty or
otherwise acted improperly, nor shall any such suit, action or administrative,
arbitration or other proceeding or governmental investigation be threatened.
(i) Opinion of Counsel for TASS and the Shareholders. Tremont
shall have received favorable opinions of counsel to TASS and the Shareholders,
dated the Closing Date, in a form reasonable and customary in the type of
transactions described herein and as shall be reasonably agreed upon between
counsel for TASS and counsel for Tremont, the forms of which the parties agree
they shall cause to be annexed hereto as Exhibit E on or prior to the Closing
Date. In rendering its opinion such counsel may rely as to factual matters upon
certificates or other documents furnished by officials of TASS and by the
Shareholders and by government officials, and upon such other documents and data
as such counsel deems appropriate as a basis for their opinions.
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ARTICLE IX
CONFIDENTIAL AND PROPRIETARY INFORMATION
Section 9.1 Definition of Confidential Information. Each of Meaden and
Taylor acknowledges and agrees that Confidential Information of TASS and Tremont
and their respective Subsidiaries has been and will be imparted to them, which
if disclosed by either of them or improperly used by either of them will result
in harm to Tremont's operation of TASS or any of its or their respective
Subsidiaries. For the purposes of this Agreement, "Confidential Information"
shall mean all research, information, software, databases, trade secrets, sales
and marketing information, subscriber information, operations material and
memoranda, personnel records, client lists, information relating to investment
funds, accounts and customers, pricing information, and financial information
concerning or relating to the business, clients, subscribers, employees, and
affairs of TASS or Tremont, or any of its or their respective Subsidiaries and
contact persons and other information maintained by TASS or Tremont or any of
its or their respective Subsidiaries, obtained by or furnished, disclosed or
disseminated to either Meaden or Taylor, or obtained, assembled or compiled by
either Meaden or Taylor or under his or her supervision during the course of his
or her employment by Tremont or TASS, as the case may be, or any of its or their
respective Subsidiaries, and all physical embodiments of the foregoing, all of
which are hereby agreed to be the property of and confidential to TASS and
Tremont and its or their respective Subsidiaries. "Confidential Information"
shall not include any of the foregoing to the extent
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the same can be shown by written documentation by Meaden or Taylor, as the case
may be, to be available to the public through no fault or breach of this
Agreement by them.
Section 9.2 Removal of Confidential Information. Each of Meaden and
Taylor hereby agrees that he or she shall not, without Tremont's prior written
consent, remove or cause to be removed from Tremont's or TASS's, or any of its
or their respective Subsidiaries' premises any Confidential Information, or
other material whatsoever, belonging to TASS or Tremont or any such Subsidiary,
for purposes other than for use in connection with authorized work Meaden or
Taylor may perform for TASS or Tremont or any of its or their respective
Subsidiaries or Affiliates.
Section 9.3 Disclosure of Confidential Information. Each of Meaden and
Taylor hereby agrees that without the prior written consent of Tremont, he or
she will not, disclose, except as required by law, or make available to any
person or entity any Confidential Information, nor shall Meaden or Taylor make
or cause to be made, or permit or allow, either on Meaden's or Taylor's own
behalf or on behalf of others, any use of such Confidential Information other
than in the proper performance of Meaden's or Taylor's duties as an employee.
All Confidential Information shall be returned to Tremont promptly upon request
or promptly following the termination of Meaden's or Taylor's employment with
TASS or Tremont or any of their respective Subsidiaries.
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Section 9.4 Protection of Interests. In the event of the termination of
either Meaden's or Taylor's employment by TASS or Tremont, respectively, Meaden
and Taylor each hereby undertake to comply with the terms of Section 10(b)-(f)
of their respective Employment Agreements.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATIONS
Section 10.1 Survival. Each of the parties hereto hereby agrees that
all representations and warranties made by such party or on behalf of such party
in this Agreement or in any exhibit, certificate, document or instrument
delivered pursuant to this Agreement, shall survive the Closing Date and the
consummation of the transactions contemplated hereby for a period lasting until
and including the earlier to occur of March 31, 2000 or the effective date of a
Change in Control (as such term is defined in the Stock Option Agreements) of
Tremont (the "Survival Period"); provided, that the Survival Period shall not so
limit the survival of (i) claims arising out of or relating to representations
or warranties made in Sections 3.3, 4.1, 4.2 and 4.3 which representations and
warranties shall be deemed to be continuing and shall survive as aforesaid for
the applicable statutory period of limitations, (ii) claims arising out of a
misrepresentation of fact or breach of any warranty as to which written notice
thereof shall have been given to the Indemnitor (as defined in Section 10.2(e))
not later than the expiration of the Survival Period, or (iii) claims for
misrepresentation of fact or breach of any warranty pertaining to Tax matters
set forth in
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Section 3.9, as to which written notice thereof shall have been given to the
Indemnitor not later than 60 days following the expiration of the statutory
period of limitations applicable to the tax claim involved in the
misrepresentation or breach of warranty.
Section 10.2 Indemnification. (a) Tremont agrees to indemnify and hold
TASS and its Subsidiaries and their respective directors, officers, employees
and agents, and each of the Shareholders harmless from, against and in respect
of, and shall on demand reimburse TASS, such Subsidiary or any of such
Shareholders for: (i) any and all loss, cost, expense, liability or damage
resulting from any untrue representation, breach of warranty or nonfulfillment
of any covenant or agreement by Tremont contained herein or in any exhibit,
certificate, document or instrument delivered to TASS or any of the Shareholders
hereunder; (ii) any and all loss, cost, expense, liability or damage arising out
of or attributable to the ownership or operation of TASS or any of its
Subsidiaries by Tremont or any of its Subsidiaries from and after the Closing
Date; (iii) any claim for finder's fees or brokerage or other commissions by any
person, firm or corporation, arising by reason of any services alleged to have
been rendered to or at the instance of Tremont with respect to this Agreement or
any of the transactions contemplated hereby; and (iv) any and all actions,
suits, proceedings, claims, demands, assessments, judgments, reasonable costs
and expenses, including without limitation, legal fees and expenses, incident to
any of the foregoing or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in enforcing this indemnity.
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(b) Meaden and Taylor, as provided in Section 10.2(d) with
respect to the representations and warranties contained in Article III and the
nonfulfillment of any covenant or agreement by TASS or any of the Shareholders
contained herein or in any schedule exhibit, certificate, agreement, document or
instrument delivered to Tremont hereunder, and severally, with respect to
Meaden's and Taylor's representations and warranties contained in Article IV,
agree to indemnify and hold Tremont and its Subsidiaries and their respective
directors, officers, employees and agents harmless from, against and in respect
of, and shall on demand reimburse Tremont or such Subsidiary for: (i) any and
all loss, cost, expense, liability or damage resulting from (A) any untrue
representation or breach of warranty contained in Article III, (B) any untrue
representation or breach of warranty with respect to themselves, individually,
contained in Article IV, or (C) the nonfulfillment of any covenant or agreement
by TASS or any of the Shareholders contained herein or in any schedule, exhibit,
certificate, agreement, document or instrument delivered to Tremont hereunder;
(ii) any and all loss, cost, expense, liability or damage arising out of or
attributable to the ownership or operation of TASS or any of its Subsidiaries
prior to the Closing Date; (iii) any claim for finder's fees or brokerage or
other commissions by any person, firm or corporation, arising by reason of any
services alleged to have been rendered to or at the instance of TASS or any of
the Shareholders or Preferred Shareholders with respect to this Agreement or any
of the transactions contemplated hereby; and (iv) any and all actions, suits,
proceedings, claims, demands, assessments, judgments, reasonable costs and
expenses, including without limitation, legal fees and expenses, incident to any
of the foregoing or
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incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
(c) Notwithstanding anything in this Agreement to the
contrary, no party hereto shall be entitled to any indemnification hereunder
until the aggregate of all indemnification claims hereunder exceeds U.S. Twenty
Five Thousand Dollars (US $25,000) in which case the indemnifying party shall be
liable for any and all indemnification claims in excess of such amount. The
parties hereto do not intend that this amount be deemed to be a definition of
materiality for any purpose under this Agreement.
(d) Notwithstanding anything in this Agreement to the
contrary, Meaden's and Taylor's cumulative liability under this Article X or
otherwise under this Agreement and the documents executed in connection herewith
shall in no event exceed, and the total amount of indemnification payments that
Meaden and Taylor can be required to make hereunder shall be limited in the
aggregate to, a maximum of the lesser of, calculated at the time the
indemnification obligation is due (the "Indemnification Date"), (i) such number
of shares of Tremont Class B Common Stock and Stock Options received (or so
exercised) pursuant to the terms hereof, subject to Section 2.2(a) in respect of
any conversion or exchange of such securities (collectively, the
"Indemnification Securities"), by Meaden and Taylor having a Current Market
Price, as such term is defined in the Stock Option Agreements entered into with
Meaden and Taylor, respectively, equal to U.S. Two Million Five Hundred Thousand
Dollars (US $2,500,000), and (ii) all of Meaden's and Taylor's Indemnification
Securities if
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they have a Current Market Price of less than U.S. $2,500,000 (the "Maximum
Indemnity Amount"). In the event Tremont shall seek indemnification pursuant to
the terms of this Agreement other than in respect of the breach of a
representation or warranty contained in Article IV hereto, Meaden shall be
responsible for two-thirds (2/3) of the indemnification obligation, in an amount
up to two-thirds (2/3) of the Maximum Indemnity Amount (the "Meaden Maximum"),
and Taylor shall be responsible for one-third of such indemnification
obligation, in an amount up to one-third (1/3) of the Maximum Indemnity Amount
(the "Taylor Maximum"); provided, further, that Tremont must simultaneously seek
indemnification from Meaden and Taylor, pro rata on a two-thirds (2/3)/one-third
(1/3) basis or not seek indemnification from either; provided that, in the event
of a breach by either Meaden or Taylor of any of his or her representations or
warranties contained in Article IV hereof, Tremont shall seek indemnification
solely from the breaching party up to the Meaden Maximum or the Taylor Maximum,
as the case may be. Meaden and Taylor shall have no obligation to pay
indemnification to Tremont except in Indemnification Securities as provided
herein, with the amount of Indemnification Securities to be determined based
upon Current Market Price. The indemnification under this Section 10.2(d) shall
be the sole remedy of Tremont against Meaden and Taylor. Tremont shall have no
remedies against any of the other individual parties hereto who are Shareholders
except for a breach of any such party's representations and warranties made
pursuant to Article IV, which shall be limited with respect to each such party
in an amount equal to the lesser of, calculated as of the Indemnification Date,
(i) such number of such party's Indemnification Securities, having a Current
Market Price in the amount set forth opposite such party's name below, and (ii)
all
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of such party's Indemnification Securities if they have a Current Market Price
of less than the amount set forth opposite such party's name below.
Name Limit on Indemnification
Smith US $200,000
Myers US $75,000
Benard US $20,000
(e) If any action, suit or proceeding shall be commenced
against, or any claim or demand be asserted against, TASS or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents, or the Shareholders, on the one hand, or Tremont or any of its
Subsidiaries, or any of their respective officers, directors, employees or
agents, on the other, as the case may be (hereinafter in this Section 10.2(e)
called the "Indemnitee"), in respect of which such Indemnitee proposes to demand
indemnification under this Section 10.2, the person from whom indemnification is
sought (hereinafter in this Section 10.2 called the "Indemnitor"), shall be
notified to that effect with reasonable promptness and shall have the right to
assume the entire defense of such action, suit, proceeding, or claim or demand
control of (including the selection of counsel) provided it shall post security
for the payment of any judgment or settlement in form and amount reasonably
satisfactory to the Indemnitee subject to the right of the Indemnitee to
participate at its expense and with counsel of its choice (except to the extent
that the named parties to any suit, action or proceeding include both the
Indemnitor and the Indemnitee, and the
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Indemnitee shall have been advised by counsel that there may be one or more
legal defenses available to the Indemnitee which are different from or in
addition to those available to the Indemnitor, in which case the Indemnitor
shall pay the fees and expenses of counsel) the defense, compromise or
settlement thereof, and in connection therewith the Indemnitee shall cooperate
fully in all aspects with the Indemnitor in any such defense, compromise or
settlement, including, without limitation, by making available to the Indemnitor
all pertinent information under the control of the Indemnitee. The Indemnitor
will not compromise or settle any such action, suit, proceeding, claim or demand
without the prior written consent of the Indemnitee which consent shall not be
unreasonably withheld, except in the event such settlement or compromise may
involve, potential criminal, administrative or similar sanctions to which the
Indemnitee may become subject in which case such consent may be arbitrarily
withheld. In the event approval the consent to which is subject to
reasonableness as provided hereinabove is withheld, following written request
therefor, then the liability of the Indemnitor with respect to such action,
suit, proceeding claim or demand shall be limited to the total amount which
would have been paid by the Indemnitor with respect thereto if the proposed
compromise or settlement had been approved, including the amount of counsel fees
and other legal expenses attributable thereto accumulated at the time such
approval is withheld.
(f) The respective indemnification rights of any party shall
not be limited or affected by the existence, non-existence or extent of
insurance coverage.
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ARTICLE XI
TERMINATION AND WAIVER
Section 11.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) By mutual written consent of the boards of directors of Tremont and
TASS;
(b) By either Tremont or TASS if the Reorganization shall not
have been consummated by March 31, 1999, provided that no party in breach of
this Agreement may terminate this Agreement pursuant to this Section 11.1(b);
(c) By TASS or the Shareholders if any of the conditions
specified in Section 8.1 has not been met as of the Closing Date, or shall have
become incapable of fulfillment, and shall not have been waived by TASS or the
Shareholders; or
(d) By Tremont if any of the conditions specified in Section
8.2 has not been met as of the Closing Date, or shall have become incapable of
fulfillment, and shall not have been waived by Tremont; or.
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(e) If an order, judgment, stipulation, injunction or decree
shall have been issued by any court or other governmental or regulatory agency
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, judgment, stipulation, injunction
or decree shall have become final and non-appealable; provided, that the party
seeking to terminate this Agreement pursuant to this Section 11.1(e) shall have
used all reasonable best efforts to remove such judgment, stipulation,
injunction or decree.
Section 11.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 11.1, this Agreement shall forthwith become
void and there shall be no liability on the part of Tremont, on the one hand or
TASS, the Shareholders or the Preferred Shareholders, on the other, except (i)
with respect to the parties' obligations under Section 6.2 and with respect to
Section 12.2, and (ii) nothing herein shall relieve any party from liability for
any willful breach hereof.
Section 11.3 Waiver. At any time prior to the Closing Date, Tremont, on
the one hand, and TASS, the Shareholders and the Preferred Shareholders, on the
other, may (i) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties of the other party hereto contained herein or in
any document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions of the other party hereto contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
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valid only as against such party and only if set forth in an instrument in
writing signed by such party.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made when received by the party to which it is addressed. Such notices
shall be sent by personal delivery, electronically, facsimile transmission or
recognized overnight courier, receipt acknowledged, to the parties at their
addresses set forth on Exhibit F annexed hereto and made a part hereof (or at
such other address as any party may have previously specified by notice to the
other parties as to the address to which notice shall be given to such party).
The same shall be deemed received on the date of delivery. Any notice delivered
personally, electronically or by facsimile transmission shall be followed on the
same day by written notice sent via recognized overnight courier delivery
service.
Section 12.2 Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses, except to the extent that if TASS
or any of the Shareholders or the Preferred Shareholders, on the one hand, or
Tremont, on the other, shall willfully terminate this Agreement in violation of
Section 11 hereof, such party shall pay all costs and expenses
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(including attorneys' fees and expenses of the other party in connection with
the preparation, negotiation and execution of this Agreement and its enforcement
of the provisions of this Section 12.2.
Section 12.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 12.4 Severability. If any term or other provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect to the fullest extent possible so as to effect the original
intent of the parties and the fulfillment of the transactions contemplated
hereby.
Section 12.5 Entire Agreement. This Agreement (together with the other
documents being delivered pursuant to or in connection with this Agreement)
constitutes the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and supercedes any and all other
prior agreements and understandings, both written and oral, among the parties
hereto, or any of them, with respect to the subject matter contained herein.
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Section 12.6 Assignment. Without the prior written consent of all of
the parties hereto, this Agreement shall not be assigned by operation of law or
otherwise, except that Tremont may assign all or any of its rights hereunder to
any affiliate of Tremont provided that no such assignment shall relieve the
signing party of its obligations hereunder.
Section 12.7 Binding Effect; Benefits. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
Nothing herein contained, express or implied, is intended to confer upon any
person other than the parties hereto and their respective hears, legal
representatives, successors and permitted assigns, any rights or remedies under
or by reason of this Agreement.
Section 12.8 Governing Law; Jurisdiction; Venue. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts executed in and to be performed entirely within
that State, without regard to New York's conflicts of law principles. TASS and
each of the Shareholders expressly submit to the exclusive jurisdiction of the
courts of the State of New York and of any federal court located therein over
any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby, and each party hereby agrees that all claims
in respect of such dispute shall be heard and determined in such court.
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Section 12.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, Tremont, TASS and each of the Shareholders have
executed, or have caused to be executed through there respective officers
thereunto duly authorized, this Agreement as of the date first written above.
TREMONT ADVISERS, INC.
By:
Name:
Title:
TASS MANAGEMENT LIMITED
By:
Name:
Title:
Nicola Meaden
Laurence Huntington Taylor, II
The other
Shareholders as to
Articles II, IV,
VII, VIII, X, XI,
and XII only:
Colin Myers
Norma Smith
Valerie Benard
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Exhibit 10.59
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into as of March 11, 1999 by and among TREMONT ADVISERS, INC., a
Delaware corporation (the "Company"), and each of those Persons whose names
appear on the signature page hereof (the "TASS Parties").
This Agreement is made in connection with that certain Agreement and
Plan of Reorganization, dated as of March 8, 1999, by and among the Company,
TASS Management Limited, a company incorporated in England and in Wales
("TASS"), and each of the TASS Parties (the "Reorganization Agreement"),
pursuant to which the TASS Parties are receiving Common Stock of the Company. In
addition, in connection with the Reorganization Agreement, certain of the TASS
Parties are receiving Options to acquire Common Stock of the Company (such TASS
Parties being referred to as the "Option Holders") pursuant to the terms and
conditions of certain stock option agreements, dated as of the date hereof,
executed by and between each of the Option Holders and the Company
(collectively, the "Stock Option Agreements"). The execution of and delivery of
this Agreement is a condition precedent to the obligations of TASS and each of
the TASS Parties under the Reorganization Agreement.
Unless otherwise defined herein, capitalized terms so used herein and
not defined shall have the same meaning as provided in the Reorganization
Agreement.
The parties hereby agree as follows:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in
this Section 1 shall have the meanings specified for all purposes under this
Agreement applicable to both the singular and plural forms of any of the terms
herein defined. Terms defined in the preamble hereof shall have the meanings
assigned to such terms therein. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Business Day" means any day, other than a Saturday,
Sunday or legal holiday, on which banks in the State of New York are open for
business.
(c) "Commission" means the United States Securities and Exchange
Commission.
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(d) "Common Stock" means the Class B Common Stock, par value
$.01 per share, of the Company, any shares into which such Common Stock shall
have been changed, or any shares resulting from any reclassification of such
Common Stock.
(e) "Exchange Act" means the U.S. Securities Exchange Act of
1934, as amended, or any successor statute thereto, and the rules and
regulations of the Commission promulgated thereunder, all as the same shall be
in effect at the time.
(f) "Holders" means the Persons (other than the Company) whose
names appear on the signature page hereof, and any other Person holding
Registrable Securities to whom these registration rights have been assigned
pursuant to Section 9(f) of this Agreement; provided however, that a Person
shall cease to be a Holder when such Person ceases to hold Registrable
Securities.
(g) "Holders of a Majority of the Registrable Securities"
means the Person or Persons who are the Holders of greater than 50% of the
Registrable Securities then outstanding.
(h) "Options" means any and all options issued by the Company
to the Option Holders pursuant to the Stock Option Agreements, which are
exercisable for the purchase of Common Stock.
(i) "Person" shall mean an individual, partnership,
corporation, association, trust, joint venture, unincorporated organization and
any government, governmental department or agency or political subdivision
thereof.
(j) "Registrable Securities" means (i) any Common Stock
acquired by the TASS Parties pursuant to the Reorganization Agreement as set
forth as Schedule A hereto to the extent the same is not, at the time, subject
to any vesting or similar restrictions; (ii) any Common Stock issued or issuable
to any Holder upon exercise of any Options outstanding on the date of this
Agreement, as listed on Schedule A hereto, or issued in replacement of such
Options; and (iii) any securities issued or issuable with respect to the Common
Stock referred to in clauses (i) and (ii) by way of stock split, stock dividend
or in connection with a combination of shares, reclassification,
recapitalization, merger or consolidation or reorganization.
(k) "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration, filing, listing and National Association of
Securities Dealers, Inc. ("NASD") fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, all messenger and delivery expenses, any transfer taxes, the
reasonable fees and expenses of the Company's legal counsel and independent
public accountants, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and compliance, and
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities; provided, however, that Registration
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Expenses shall not include underwriting discounts and commissions.
(l) "Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as shall be in effect at the time.
(m) "Securities Act" means the U.S. Securities Act of 1933, as
amended, or any successor statute thereto, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.
2. Registration.
(a) Requested Registration. (i) If at any time after ninety
(90) days from the date hereof, upon written request by the Holders of a
Majority of the Registrable Securities that the Company effect the registration
under the Securities Act of all or part of the Registrable Securities (a
"Requested Registration"), the Company will use its best efforts to effect the
registration under the Securities Act of the Registrable Securities which the
Company has been so requested to register by the Holders of a Majority of the
Registrable Securities as promptly as practicable after receipt of such request;
provided, however, that the Company shall not be obligated to effect a Requested
Registration pursuant to this paragraph (a): (A) during the twelve (12)
consecutive months following the effective date of the registration statement
filed in connection with any previous registration in which the Holders of
Registrable Securities had incidental registration rights to register all their
Registrable Securities pursuant to this Agreement; or (B) at any time when
another registration statement (other than on Form S-8) of the Company, (1) has
been filed and not yet become effective, or (2) has become effective less than
six (6) months prior to the date of request for the Requested Registration.
Whenever the Company shall, pursuant to this Section 2(a), be requested by the
Holders of a Majority of the Registrable Securities to effect the registration
of any Registrable Securities under the Securities Act, the Company shall
promptly give written notice of such proposed registration to all Holders of
Registrable Securities. Upon the written request of any Holder within twenty
(20) days after the giving of such notice, the Company will use its best efforts
to cause any of the Registrable Securities specified by any such Holder to be
included in such registration statement under and in accordance with the
Securities Act. The Company shall be obligated to effect at least one (1)
Requested Registration, and up to two (2) Requested Registrations in the event
that if during the forty eight (48) month period commencing ninety (90) days
from the date hereof the Company shall not have effected a registration
statement in which the Holders of Registrable Securities had incidental
registration rights to register all their Registrable Securities pursuant to
this Agreement, under this Section 2(a); provided, however, that if upon
expiration of such forty eight (48) month period, the Company shall not have
been requested to effect a Requested Registration, the Company shall thereafter
be obligated to effect only one (1) Requested Registration under this Section
2(a).
(ii) Subject to the requirements of paragraph (f) below, the Company may
include in such Requested Registration other securities of the Company for sale,
for the Company's account or for the account of any other Person, if and to the
extent that the
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managing underwriter determines that the inclusion of such additional shares
will not interfere with the orderly sale of the underwritten securities at a
price range acceptable to the Holders of a Majority of the Registrable
Securities.
(b) Incidental Registration. If the Company for itself or any
of its security Holders shall at any time or times after the date hereof
determines to register under the Securities Act any shares of its capital stock
or other securities (other than: (i) the registration of an offer, sale or other
disposition of securities solely to employees of, or other persons providing
services to, the Company, or any subsidiary pursuant to an employee or similar
benefit plan; or (ii) relating to a merger, acquisition or other transaction of
the type described in Rule 145 under the Securities Act or a comparable or
successor rule, registered on Form S-4 or similar or successor forms), on each
such occasion the Company will notify each Holder of such determination at least
twenty (20) days prior to the filing of such registration statement, and upon
the request of any Holder given in writing within fifteen (15) days after the
receipt of such notice, the Company will use its best efforts as soon as
practicable thereafter to cause any of the Registrable Securities specified by
any such Holder to be included in such registration statement to the extent such
registration is permissible under the Securities Act and subject to the
conditions of the Securities Act (an "Incidental Registration").
(c) Registration Statement Form. The Company shall, if
permitted by law, effect any registration requested under Section 2 by the
filing of a registration statement on Commission Form S-3, or any successor or
similar short-form registration statement ("Commission Form S-3") and shall use
its best efforts to take any action necessary to maintain its eligibility to
utilize Commission Form S-3 to permit resales as requested by the Holders with
respect to Transactions Involving Secondary Offerings as described in General
Instruction I.B.3 of Commission Form S-3.
(d) Expenses. The Company shall pay all Registration Expenses
incurred in connection with any Incidental Registration. The Holders of the
Registrable Securities included in the registration statement with respect to a
Requested Registration shall pay all Registration Expenses incurred in
connection therewith except (i) to the extent the Company includes other
securities of the Company in a Requested Registration pursuant to Section
2(a)(ii), in which case it shall pay its pro rata share of Registration
Expenses, and (ii) with respect to any Requested Registration effected following
the expiration of the forty eight (48) month period referred to in Section
2(a)(i), if during such period, the Company shall not have effected a
registration statement in which the Holders of Registrable Securities had
incidental registration rights to register all their Registrable Securities
pursuant to this Agreement, in which case the Company shall pay all Registration
Expenses incurred in connection therewith.
(e) Effective Registration Statement. A Requested Registration
or an Incidental Registration requested pursuant to Section 2(a) or Section
2(b), respectively, shall not be deemed to have been effected unless it has
become effective with the Commission. Notwithstanding the foregoing, a
registration statement will not be deemed to have been effected if: after it has
become effective with the Commission, such registration is interfered with by
any
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stop order, injunction, or other order or requirement of the Commission or other
governmental agency or any court proceeding for any reason other than a
misrepresentation or omission by any Holder.
(f) Priority in Requested or Incidental Registration. (i) In
cases of underwritten offerings, if the managing underwriters in any Requested
Registration or Incidental Registration shall give written advice to the Company
that, in their opinion, market conditions dictate that no more than a specified
maximum number of securities (the "Underwriter's Maximum Number") could
successfully be included in such Requested Registration or Incidental
Registration, then, subject to any conflicting rights of any Person (other than
a Holder) of registration rights granted prior to the date hereof as set forth
on Schedule B hereto
(A) if such registration is not a Requested Registration, the
Company (A) shall be entitled to include in such registration that
number of securities which the Company proposes to offer and sell for
its own account in such registration and which does not exceed the
Underwriter's Maximum Number; and (B) will be obligated and required to
include in such registration that number of shares of Registrable
Securities which shall have been requested by the Holders to the full
extent of the remaining portion of the Underwriter's Maximum Number;
(B) if such registration is a Requested Registration, then the Compan shall
be entitled to include in such registration, but only to the extent
that the amount of shares of Registrable Securities for which the
Holders have requested registration is not reduced, that number of
securities which the Company proposes to offer and sell for its own
account in such registration to the full extent of the remaining
portion of the Underwriter's Maximum Number;
(C) if less than all of the Registrable
Securities requested to be included in any such registration by the
Holders can be so included due to the above priority requirements,
then each requesting Holder's request, as the case may be, shall be
granted (subject to the next paragraph) on a pro rata basis with the
other requesting Holders, based upon the relative amounts of
Registrable Securities so requested to be included.
(ii) Notwithstanding any other provision of this Agreement, as among the
TASS parties, in the event and to the extent the TASS Parties have registration
rights hereunder that do not allow in a particular instance for the pro-rata
registration of all Registrable Securities held by the TASS Parties, then in
such case, Colin Myers ("Myers") and Valerie Benard ("Benard") shall be given
the opportunity, upon written request to Nicola Meaden ("Meaden") and Laurence
Huntington Taylor, II ("Taylor"), to register all of their Registrable
Securities in preference to and before any of the Registrable Securities held by
Meaden and Taylor are registered. If such written request is made by Myers and
Benard, then only to the extent that all of the Registrable Securities for which
Myers and Benard request registration are duly registered hereunder shall Meaden
and Taylor have their Registrable Securities registered,
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whereupon such Registrable Securities of Meaden and Taylor shall be registered
pro-rata to their holdings as of the date of this Agreement. As between Myers
and Benard, if less than all their Registrable Securities can be registered,
their Registrable Securities will be registered pro-rata to their holdings as of
the date of this Agreement. Nothing in this provision will alter the aggregate
number of Registrable Securities which the Company may at one time be obligated
to register, and nothing shall reduce Norma Smith's right to have her
Registrable Securities registered on a pro-rata basis.
(g) Notwithstanding anything set forth in paragraphs (a) and
(b) of this Section 2, the Company shall have the right to delay any
registration of Registrable Securities requested pursuant to paragraph (a) or
(b) of this Section 2 for up to the minimum period necessary not to exceed
ninety (90) days if such registration would, in the judgment of the Board,
substantially interfere with any material transaction being negotiated at the
time of receipt of the request from the Holders; provided, however, that the
Company may not exercise its rights under this Section 2(g) more than once in
any twelve (12) month period.
3. Registration Procedures.
(a) If and whenever the Company is required to use its best
efforts to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2, the Company, as expeditiously as
possible and subject to the terms and conditions of Section 2, will:
(i) prepare and file with the Commission the requisite registration
statement to effect such registration and use its best efforts to cause such
registration to become and remain effective as provided herein;
(ii) permit any Holder which, in the reasonable judgment of the Holder
and the Company, might be deemed to be an underwriter or a controlling person of
the Company, to participate in the preparation of such registration statement
and to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such Holder and its counsel should
be included;
(iii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement or the expiration of one hundred twenty (120) days (or,
if such registration statement has been filed on Form S-3, for a period of one
year) (in each case excluding days the Holders are unable to sell thereunder
because of acts or omissions of the Company or because of Blackout Periods (as
defined in Section 3(d))) after such registration statement becomes effective;
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(iv) furnish to the Holders such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as any Holder of Registrable Securities to be sold
under such registration statement may reasonably request;
(v) use its best efforts to register or qualify all Registrable Securities
covered by such registration statement under such other United States state
securities or blue sky laws of such jurisdictions as any Holder of Registrable
Securities to be sold under such registration statement shall reasonably
request, to keep such registration or qualification in effect for so long as
such registration remains in effect, and take any other action which may be
reasonably necessary or advisable to enable the Holder of Registrable Securities
to be sold under such registration statement to consummate the disposition in
such jurisdictions of the securities owned by such Holder, except that the
Company shall not for any such purpose be required to (a) qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this paragraph (v) be obligated to be so qualified,
or (b) subject itself to taxation in any such jurisdiction.
(vi) use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
United States state governmental agencies or authorities as may be necessary to
enable the Holder of Registrable Securities to be sold under such registration
statement to consummate the intended disposition of such Registrable Securities;
(vii) in the event of the issuance of any stop order suspending the
effectiveness of the registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Registrable Securities included in such registration statement for sale in
any jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(viii) immediately notify the Holders of Registrable Securities included in
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and at the request of the Holders promptly prepare and furnish
to the Holders a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
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(ix) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission;
(x) provide a transfer agent for all Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement; and
(xi) use its best efforts to list and maintain the listing and trading of
all Registrable Securities covered by such registration statement on any
securities exchange or market on which any of the Registrable Securities are
then listed.
(b) The Company may require each Holder of Registrable
Securities to be sold under such registration statement to furnish the Company
with such information and undertakings as it may reasonably request regarding
such Holder and the distribution of such securities as the Company may from time
to time reasonably request in writing. Information provided by the Holders
regarding the Holders and their plan of distribution shall be included in such
registration statement without unreasonable alteration or, in the case of an
Incidental Registration, to the extent reasonably determined by the managing
underwriters.
(c) Each Holder, by execution of this Agreement, agrees (i)
that upon receipt of any notice of the Company of the happening of any event of
the kind described in paragraph (a)(viii) of this Section 3, such Holder will
forthwith discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until the receipt
by such Holder of the copies of the supplemented or amended prospectus
contemplated by paragraph (a)(viii) of this Section 3 and, if so directed by the
Company, will deliver to the Company or destroy all copies other than permanent
file copies, then in possession of the Holders of the prospectus relating to
such Registrable Securities current at the time of receipt of such notice, and
(ii) that it will immediately notify the Company in writing, at any time when a
prospectus relating to the registration of such Registrable Securities is
required to be delivered under the Securities Act, of the happening of any event
as a result of which information previously furnished by such Holder to the
Company for inclusion in such prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made. In the event the Company or any such
Holder shall give any such notice, the period referred to in paragraph (a)(iii)
of this Section 3 shall be extended by a number of days equal to the number of
days during the period from and including the giving of notice pursuant to
paragraph (a)(viii) of this Section 3 to and including the date when such Holder
shall have received the copies of the supplemented or amended prospectus
contemplated by paragraph (a)(viii) of this Section 3.
(d) Nothing herein, including the Company's obligations under
Sections 2(a) and 2(b), shall restrict the Company's ability to suspend the
effectiveness of the registration statement, at any time, for such reasonable
period of time (not, in any instance, to exceed sixty (60) days (a "Blackout
Period")) which the Board determines is necessary to prevent the
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premature disclosure of any events or information having a material effect on
the Company. In addition, the Company shall not be required to keep the
registration statement effective, or may, without suspending such effectiveness,
instruct the Holders of Registrable Securities included in the registration
statement, not to sell such shares, during any period during which the Company
is instructed, directed, ordered or otherwise requested by any governmental
agency or self-regulatory organization to stop or suspend such trading or sales.
4. Underwritten Offerings.
(a) Selection of Underwriters. If a Requested Registration
pursuant to Section 2(a) involves an underwritten offering, then the Company
shall select the underwriter, which must be reasonably acceptable to the Holders
of a Majority of the Registrable Securities.
(b) Underwritten Offering. In connection with any underwritten
offering pursuant to a registration requested under Section 2(a), the Company
will enter into an underwriting agreement with the underwriters for such
offering, such agreement to be in form and substance reasonably satisfactory to
the Holders of a Majority of the Registrable Securities and such underwriters in
their reasonable judgment and to contain such representations and warranties by
the Company and such other terms as are customarily contained in agreements of
that type, including, without limitation, indemnities to the effect and to the
extent provided in Section 6. Each Holder participating in such registration
shall be a party to such underwriting agreement.
(c) Holdback Agreements. Each Holder agrees, if so reasonably
required by the managing underwriter or the Company in a registration pursuant
to Section 2, not to effect any sale or distribution of Registrable Securities
(including sales pursuant to Rule 144) during the seven (7) days prior to and
the one hundred eighty (180) days after any registration pursuant to Section 2
or any other registration by the Company has become effective (except as part of
such underwritten registration) or, if the managing underwriter advises the
Company that, in its opinion, no such public sale or distribution should be
effected for a period of not more than one hundred eighty (180) days after such
underwritten registration in order to complete the sale and distribution of
securities included in such registration and the Company gives notice to such
effect to such Holders of such advice, each Holder shall not effect any sale or
distribution of Registrable Securities during such period after such
underwritten registration, except as part of such underwritten registration,
whether or not such Holder participates in such registration.
5. Preparation, Reasonable Investigation.
In connection with the preparation and filing of each
registration statement under the Securities Act, the Company will give Holders'
counsel, the underwriters, if any, and their respective counsel and accountants,
one set each of drafts and final copies of such registration statement, each
prospectus included therein or filed with the Commission and each amendment
thereof or supplement thereto, as promptly as reasonably practicable, but in no
event less than five (5) business days prior to the filing thereof with the
Commission, and will give each of
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them such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be reasonably necessary, in
the opinion of Holders' Counsel and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
6. Indemnification and Contribution.
(a) Indemnification by the Company. In the event of any
registration under the Securities Act pursuant to Section 2 of any Registrable
Securities covered by such registration, the Company will, and hereby does,
indemnify and hold harmless each Holder of Registrable Securities to be sold
under such registration statement, each such Holder's legal counsel, each other
person who participates as an underwriter in the offering or sale of such
securities (if so required by such underwriter as a condition to including the
Registrable Securities of the Holders in such registration) and each other
person, if any, who controls any such Holder or any such underwriter within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which the Holders or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein or any document
incorporated therein by reference, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
arise out of any violation by the Company of any rule or regulation promulgated
under the Securities Act or state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, and the Company will reimburse such parties for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding or enforcing
their rights under this Section 6(a); provided, however, that the Company shall
not be liable to any such party in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such party or arises out of or is based upon such
party's failure to deliver a prospectus in accordance with applicable law;
provided, further however, that the indemnification contained in this paragraph
(a) with respect to any Preliminary Prospectus shall not inure to the benefit of
any such party on account of any such loss, claim, damage, liability or expense
arising from the sale of the Registrable Securities by such party to any person
if a copy of the Prospectus shall not have been delivered or sent to such person
within the time required by the Securities Act and the regulations thereunder,
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Preliminary
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Prospectus was corrected in the Prospectus, provided that the Company has
delivered the Prospectus to such party in requisite quantity on a timely basis
to permit such delivery or sending.
(b) Indemnification by the Holders. To the extent permitted by
law, each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors,
officers and controlling persons, and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of the Securities Act or the
Exchange Act or the rules and regulations thereunder, each other such Holder
including Registrable Securities and other securities in the securities as to
which such registration, qualification or compliance is being effected, and each
of their officers, directors, members and partners, and each person controlling
such Holder, against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, directors,
officers, members, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
and defending or settling any such claim, loss, damage, liability, action or
proceeding or enforcing their rights under this Section 6(b), in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of such Holder hereunder shall be limited to an amount equal to the
net proceeds to each such Holder of securities sold as contemplated herein.
(c) Notices of Claims, etc. Promptly after receipt by a party
(an "Indemnified Party") of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding paragraphs of this
Section 6, such Indemnified Party will, if a claim in respect thereof is to be
made against a party required to provide indemnification (an "Indemnifying
Party"), give written notice to the latter of the commencement of such action,
provided, however, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligation under
the preceding paragraphs of this Section 6, except to the extent that the
Indemnifying Party is actually prejudiced by such failure to give notice. In
case any such action is brought against an Indemnified Party, unless in such
Indemnified Party's reasonable judgment a conflict of interest between such
Indemnified and Indemnifying Parties may exist in respect of such claim, the
Indemnifying Party shall be entitled to participate in and to assume the defense
thereof, jointly with any other Indemnifying Party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party shall not be liable to such
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Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof. No Indemnifying Party shall
consent to entry of any judgment or enter into any settlement without the
consent of the Indemnified Party which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 6 (with appropriate
modifications) shall be given by the Company and each Holder of Registrable
Securities included in any registration statement with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority, other than the Securities Act.
(e) Indemnification Payment. The indemnification required by
this Section 6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Survival of Obligations. The obligations of the Company
and of the Holders under this Section 6 shall survive the completion of any
offering of Registrable Securities under this Agreement.
(g) Contribution. If the indemnification provided for in this
Section 6 is unavailable or insufficient to hold harmless an Indemnified Party,
then each Indemnifying Party shall contribute to the amount paid or payable to
such Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in this Section 6 an amount or additional amount, as the case may
be, in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party or parties on the one hand and the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
losses, claims, demands or liabilities as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or parties on the one hand or the
Indemnified Party on the other and the parties' relative, intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid to an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this Section 6(g) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any action or claim which is the subject of this Section 6. No
person guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
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7. Covenants Relating to Rule 144.
With a view to making available the benefits of certain rules
and regulations of the Commission which may at any time permit the sale of
securities of the Company to the public without registration, the Company
agrees:
(a) to keep effective its registration under the Exchange Act
and to make and keep public information available with respect to the Company as
those terms are understood and defined in, and to the extent necessary to permit
sales under, Rule 144 under the Securities Act;
(b) to use its best efforts to file with the Commission in a
timely manner all reports and other documents required to be filed by the
Company under the Securities Act and the Exchange Act; and
(c) so long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the foregoing requirements of Section 7(a) and of
Section 7(b), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as a Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration.
8. Certain Representations and Agreements.
The Company hereby represents and warrants that, except for
the rights granted under this Agreement and rights granted under the agreements
and provisions described on Schedule B hereto, no Person holds any registration
rights with respect to securities of the Company and neither the Company nor any
holder of the Company's securities is bound by, or subject to, any agreement
with any holder of the Company's securities with respect to the voting or
transfer of the Company's securities or obligating the Company to take or
refrain from taking any actions of any type. The Company, at its discretion, may
grant registration rights, pari passu with the rights granted in Section 2 of
this Agreement, to persons who become holders of other securities of the Company
subsequent to the date of this Agreement, and shall not be obligated to seek or
obtain the consent of the Holders in order to do so; provided such persons are
officers or directors of the Company or investors acquiring at least ten percent
(10%) of the outstanding Common Stock when such rights are granted.
9. Miscellaneous.
(a) Termination. The rights of each Holder set forth in
Sections 2, 3, 4, 5 and 7 shall terminate on the date which is six (6) years and
ninety (90) days from the date of this Agreement.
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(b) Specific Performance. The parties hereto acknowledge that
there may be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any such
failure, and accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled to compel
specific performance of the obligations of any other party under this Agreement
in accordance with the terms and conditions of this Agreement.
(c) Notices. All demands, notices, requests, consents and
other communications required or permitted under this Agreement shall be in
writing and shall be personally delivered or sent by facsimile machine (with a
confirmation copy sent by one of the other methods authorized in this Section),
commercial (including FedEx) or U.S. Postal Service overnight delivery service,
or, deposited with the U.S. Postal Service mailed first class, registered or
certified mail, postage prepaid, as set forth below:
(i) if to the Company, addressed to:
Tremont Advisers, Inc.
Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
Facsimile: 914-925-9337
Attention: Stephen T. Clayton
Chief Financial Officer
(ii) if to the Holders, to their addresses set
forth on the signature pages hereof.
Notices shall be deemed given upon the earlier to occur of (i) receipt by the
party to whom such notice is directed; (ii) if sent by facsimile machine, on the
day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which
such notice is directed) such notice is sent if sent (as evidenced by the
facsimile confirmed receipt) prior to 5:00 p.m. Eastern Time and, if sent after
5:00 p.m. Eastern Time, on the day (other than a Saturday, Sunday or legal
holiday in the jurisdiction to which such notice is directed) after which such
notice is sent; (iii) on the first (second in the case of non-U.S. destinations)
business day (other than a Saturday, Sunday or legal holiday in the jurisdiction
to which such notice is directed) following the day the same is deposited with
the commercial carrier if sent by commercial overnight delivery service; or (iv)
the fifth day (other than a Saturday, Sunday or legal holiday in the
jurisdiction to which such notice is directed) following deposit thereof with
the U.S. Postal Service as aforesaid. Each party, by notice duly given in
accordance therewith may specify a different address for the giving of any
notice hereunder.
(d) Governing Law; Jurisdiction; Venue. This Agreement shall
be governed by and construed in accordance with the internal laws of the State
of New York, without regard to conflicts of law principles thereof. Any
litigation or arbitration between or among the parties
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which arises out of this Agreement shall be instituted and prosecuted only in
the appropriate New York or federal court or other tribunal, situated in New
York. Each party specifically submits him, her or itself to the exclusive
jurisdiction of such courts for purposes of any such action and the enforcement
of any judgment or order arising therefrom. To the fullest extent they may do
so, the parties hereto waive any right to a change of venue and any and all
objections to the jurisdiction of New York courts. Notwithstanding the
foregoing, each party may take such actions in a foreign jurisdiction which such
party deems necessary and appropriate to enforce or collect any court judgment
in any dispute arising out of this Agreement or to seek and obtain other relief
as is necessary to enforce the terms hereof.
(e) Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for convenience only, and do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) Entire Agreement; Amendments. This Agreement and the other
writings referred to herein or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Agreement supersedes all prior agreements and
understandings between or among any of the parties hereto with respect to
registration rights involving securities of the Company. This Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a written instrument duly executed by the Company and the Holders of a
Majority of the Registrable Securities; provided however, that to the extent any
amendment would adversely affect the rights of certain Holders ("Adversely
Affected Holders") in a way that is substantially dissimilar from its effect on
other Holders, then such amendment shall not be effective as to the Adversely
Affected Holders unless it shall have been approved by the Holders of a majority
of the Registrable Securities held by such Adversely Affected Holders.
(g) Assignability. Without the consent of any other Holders,
the rights and obligations of any Holder under this Agreement may be transferred
to any transferee to whom Registrable Securities may be transferred pursuant to
all documents and agreements between the Company and the Holder making such
transfer; provided, however, that: (i) such transfers are in compliance with all
such other documents and agreements between the Company and the Holder making
such transfer including without limitation the Reorganization Agreement and such
Holder's Stock Option Agreement; (ii) the Holder making such transfer provides
the Company with written notice of the transfer of such Registrable Securities
at or prior to such transfer, advising the Company of the name and address of
the proposed transferee and identifying the securities to be transferred; and
(iii) such proposed transferee agrees in writing to be bound by all of the
provisions of this Agreement. In such event, such transferee shall be added to
the signature page hereof and become a Holder under this Agreement.
(h) Counterparts. This Agreement may be executed in two
or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) Notwithstanding any other provision of this Agreement, the
Company will not (i) in any 365 day period restrict the ability of Holders to
sell Registrable Securities for more than (A) 187 days in any circumstance or
series of circumstances involving Section 4(c) hereof, or (B) 60 days in any
other circumstance of series of circumstances, and (ii) in any 545 day period
restrict the exercise of registration rights under this Agreement by the Holders
for more than 12 months.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TREMONT ADVISERS, INC.
By:
Name:
Title:
HOLDERS:
Nicola Meaden
Laurence Huntington Taylor, II
Valerie Benard
Colin Myers
Norma Smith
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SCHEDULE A
Schedule of Common Stock and Options owned by the TASS Parties
<TABLE>
<S> <C> <C>
No. of Shares of Tremont No. of Shares
TASS Party Class B Common Stock of Stock Options
Meaden 64,170 24,844
Taylor 33,915 78,007
Myers 9,109 2,500
Benard 1,871 7,500
Smith 81,412 -
Holzhausen - 2,000
</TABLE>
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SCHEDULE B
Prior Registration Rights
Pursuant to a Stock Purchase Agreement, dated June 5, 1997, by and
between Tremont Advisers, Inc. ("Tremont") and MGL Investments Ltd. ("MGL"), MGL
has certain "piggyback" and demand registration rights with respect to 202,365
shares of Tremont's Class B common stock (the "Shares"). Those rights allow MGL
to (i) require Tremont to register the Shares owned by them, under certain
circumstances and subject to certain limitations, in the event Tremont proposes
to file a registration statement, and (ii) demand, under certain circumstances,
that Tremont register the Shares, and Tremont is required to use its best
efforts to cause such registration to become effective.
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Exhibit 10.60
EXECUTION COPY
EMPLOYMENT AGREEMENT
AGREEMENT, made as of March 11, 1999, by and between TREMONT ADVISERS,
INC., a Delaware (U.S.A.) company with its principal executive offices at 555
Theodore Fremd Avenue, Rye, New York 10580, U.S.A. (the "Employer"), and
LAURENCE HUNTINGTON (HUNT) TAYLOR, II, an individual residing in Basking Ridge,
New Jersey, U.S.A. ("Taylor").
W I T N E S S E T H:
WHEREAS, in connection with the agreement and plan of reorganization,
dated as of the date hereof (the "Plan of Reorganization"), among Employer, TASS
Management Limited, a company incorporated in England and Wales ("TASS"), and
the holders of all of the ordinary shares of Employer and TASS, Employer desires
to employ Taylor desires to be so employed by Employer, as the Senior Vice
President of Global Marketing and Sales of Employer, pursuant to the terms and
conditions set forth in this Agreement;
WHEREAS, this Agreement is referred to in, and is subject to the terms and
conditions
of, the Plan of Reorganization;
NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are specifically acknowledged, the parties
agree as follows:
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Section 1. Definitions. The terms defined in this Section 1, whenever
used in this Agreement, shall, unless the context otherwise requires, have the
respective meanings specified in this Section 1.
(a) "Affiliate" shall mean, with respect to any Person, an individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, incorporated organization, governmental
or regulatory or other entity controlling, controlled by or under common control
with such Person, including but not limited to any subsidiary and holding
company of any Person as defined in section 736 of the U.K. Companies Act 1985.
(b) "Agreement" means this Employment Agreement, dated as of March 11,
1999, by and between the Employer and Taylor.
(c) "Annual Bonus" means the Guaranteed Bonus (which is not in the
Board of Directors' discretion), together with any additional bonus which may be
granted to Taylor by the Company in the sole and absolute discretion of the
Board of Directors or any authorized committee thereof.
(d) "Base Compensation" means the annual base salary payable to Taylor
pursuant to Section 5 of this Agreement.
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(e) "Board of Directors" means the board of directors of Tremont, as
elected from time to time in accordance with the by-laws of Tremont.
(f) "Cause" shall have the meaning set forth in Section 6(a)(ii) of
this Agreement.
(g) "Client" shall mean any Person which, at the date of termination of
this Agreement or within a period of six (6) months immediately preceding such
termination, is a client of or subscriber to Employer, or any of its Affiliates,
or its or their services, and being a Person (i) with which Taylor or any person
reporting directly to Taylor has had personal dealings in the course of her or
his duties; or (ii) of which Taylor has personal knowledge.
(h) "Company" means TASS and Tremont, in its capacity as the parent
corporation of TASS, collectively.
(i) "Competing Business" shall mean any Person which is engaged in (i)
electronic database subscription services or personalized alternative investment
counseling services for investment funds, including hedge funds, derivatives,
managed future funds, foreign exchange, venture capital, emerging market funds,
leveraged buyouts or arbitrage funds, or (ii) any other business which is
substantially the same as any other business in which Employer or any of its
Affiliates is engaged as at the date of termination of this Agreement and being
a business in which Taylor is directly engaged at any time during the twelve
(12) month period immediately preceding such termination.
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(j) "Guaranteed Bonus" means the minimum guaranteed bonus of U.S. Fifty
Thousand Dollars (US$50,000) payable annually, or in such more frequent
installments as permitted hereunder, to Taylor in accordance with Section 5(a)
hereof, which is not in the Board of Directors' discretion.
(k) "Person" shall mean any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, incorporated organization, governmental or regulatory or other
entity.
(l) "Potential Client" shall mean any Person with which there are as at
the date of termination of this Agreement negotiations ongoing with a view to
such Person becoming a client of or subscriber to Employer or any of its
Affiliates, and being a Person (i) with which Taylor or any person reporting
directly to Taylor has had personal dealings in the course of her or his duties,
or (ii) of which Taylor has personal knowledge.
(m) "President" shall mean the duly elected President of Tremont.
(n) "TASS" means TASS Management Limited, a company incorporated in
England and Wales.
(o) "Term" shall mean the stated period of Taylor's employment as set
forth herein, unless sooner terminated pursuant to the terms hereof.
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(p) "Termination Date" shall mean the date this Agreement is terminated
pursuant to the terms hereof.
(q) "Tremont" means Tremont Advisers, Inc., a Delaware corporation and
the sole ordinary shareholder of TASS.
(r) "U.K." means the United Kingdom of Great Britain and Northern
Ireland.
(s) "U.S." means the United States of America.
Section 2. Employment. Employer hereby hires and employs Taylor, and
Taylor hereby accepts employment with Employer, as Senior Vice President of
Global Marketing and Sales of Employer, upon the terms and subject to the
conditions set forth in this Agreement.
Section 3. Term of Employment. The Term shall be for a period of two
years, commencing on March 11, 1999 and continuing until March 11, 2001 unless
sooner terminated pursuant to the terms and conditions of this Agreement. Upon
completion of the Term this Agreement shall terminate automatically without the
need for prior notice.
Section 4. Duties. Taylor shall serve Employer faithfully and honestly and
use his best efforts and abilities on behalf of Employer in the position of
Senior Vice President of Global Sales and Marketing of Employer and shall devote
all of his business time, attention,
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skills and efforts solely to the performance of his duties on behalf of Employer
and each of its Affiliates, as may be required by the Employer, consistent with
the terms of this Agreement, and, subject to the terms of this Agreement, shall
not engage or be involved, directly or indirectly, in any other business
endeavor whatsoever without the express written consent of Employer. Taylor
shall perform such duties consistent with his position or such duties as may
reasonably be assigned by Employer, acting through the President, from time to
time during the Term hereof, including without limitation, the following:
(a) Taylor shall serve as Senior Vice President of Global
Marketing and Sales of Employer, responsible for the development and
coordination of worldwide marketing and sales activities for the Employer;
(b) Taylor shall diligently represent the interests of
Employer and each of its Affiliates in the United States and in each such other
countries as Taylor and the Employer shall determine;
(c) Taylor shall promote, endorse, publicize, and market
proprietary investment vehicles, and database management, research and
consulting services offered by Employer and each of its Affiliates and shall
advise Employer's quantitative research analysts as may be appropriate;
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(d) Taylor shall work initially at Employer's offices at 555
Theodore Fremd Avenue, Rye, New York 10580, U.S.A. and, as may be required by
the Employer, to work on a temporary or permanent basis at such other location
within the United States, and to travel to such places, both within and outside
the United States, as may be required for the proper performance of his duties,
except that during the Term, without Taylor's consent, (i) Taylor shall not be
required to relocate his place of employment to any area beyond a fifty (50)
mile radius of the boundaries of the City of New York, New York; and (ii) Taylor
shall not be required to travel to destinations on behalf of Employer or any of
its Affiliates (A) such that during the course of any year during the Term he
shall have spent more than fifty percent (50%) of his business time in
connection with the performance of his duties hereunder engaged in such travel,
(B) for any period extending longer than three (3) consecutive weeks within
which he is not reasonably within commuting distance of Employer's offices, and
(C) otherwise inconsistent with his past practices as Senior Vice President of
Global Marketing and Sales, or comparable position, with TASS; and
(e) Taylor shall report to the Employer at such times as
Employer, acting through the President, may reasonably require.
Section 5. Compensation. (a) In consideration for all the services to be
rendered by Taylor to Employer and its Affiliates as may be required pursuant to
the terms of this Agreement, and any rights granted by Taylor under this
Agreement, Employer shall pay compensation to Taylor as follows:
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(i) Base Compensation. During the Term of this Agreement, Employer shall
pay Taylor Base Compensation, payable in monthly installments, and subject to
normal withholding taxes and deductions, at the rate of U.S. One Hundred Fifty
Thousand Dollars (US$150,000) per annum. In the event that Taylor shall be
employed by Employer after the expiration of the Term, but Employer and Taylor
have not mutually agreed to extend the terms of this Agreement, the period of
employment, the Base Compensation payable to Taylor and the other terms and
conditions of his employment shall be as agreed by Taylor and the Company;
(ii) Annual Bonus.
(A) Guaranteed Bonus. In addition to the Base Compensation set forth in
Section 5(a)(i) above, subject to the terms and conditions of Section 9, Taylor
shall receive a Guaranteed Bonus for each year of the Term, which shall be paid
upon the later of five (5) days following the conclusion of each year of the
Term or the date on which Tremont customarily pays its senior officers their
annual bonuses for Tremont's preceding fiscal year ending December 31, or at
such earlier time or times as the Company acting through the President shall
determine.
(B) Discretionary Bonus. In addition to the Base Compensation and
Guaranteed Bonus set forth in Sections 5(a)(i) and 5(a)(ii)(A), Taylor shall
also be eligible to receive an additional annual bonus from the Company at the
determination of the Board of
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Directors, or any committee thereof, which determination shall be at the sole
and absolute discretion of the Board of Directors or such committee.
(b) Notwithstanding the provisions of this Section
5(a)(ii)(B), Tremont shall not be required to pay any additional compensation to
Taylor beyond that specified in Section 5(a)(i) and 5(a)(ii)(A) hereof.
Section 6. Benefits. In addition to the compensation described in
Section 5, Taylor shall be entitled to participate in any comparable employee
health, medical or other benefits that Employer may now or hereafter establish
which are generally available to the senior officers of Employer, to the extent
such benefits are available to Taylor under applicable law, on a basis
commensurate with his position as Senior Vice President of Global Sales and
Marketing of Employer.
Section 7. Expenses. Employer shall reimburse Taylor for all expenses
reasonably incurred by Taylor in furtherance of Taylor's performance of his
duties to Employer and its Affiliates hereunder and in accordance with any
policy on expenses issued by the Employer, provided that Taylor renders to
Employer, or to Tremont, as may be required by the Company, a complete and
accurate accounting and documentation of all such expenses, and furnishes
information adequate in Employer's reasonable judgment, to permit deduction of
such expenses on the income tax returns of Employer.
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Section 8. Vacations. (a) Taylor shall be entitled to twenty-one (21)
working days' paid vacation per vacation year (in addition to New York bank and
other public holidays) to be taken upon advance notice to Employer, acting
through the President, subject to the reasonable objection of the President.
Vacation entitlement shall be deemed to accrue from day to day. For the purposes
of this Agreement, Employer's vacation year with respect to Taylor shall run
from March 11 to March 11.
(b) Taylor shall not be entitled to carry over any unused
vacation entitlement from one vacation year to another and will not be paid in
lieu thereof for any untaken vacation except upon termination of employment as
provided herein. Employer will pay to Taylor one day's vacation pay for each
complete day of vacation entitlement for that vacation year which has accrued
but remains untaken at the date of termination. A day's vacation pay for this
purpose shall be one-three hundred sixty fifth (1/365) of Base Compensation.
Section 9. Termination. (a) This Agreement may be terminated as follows:
(i) Termination by Consent. This Agreement may be terminated upon the
mutual written consent of Employer and Taylor for any reason or no reason.
(ii) Termination for Cause. Employer may terminate this Agreement by
summary notice for "Cause," which, for the purposes of this Agreement, shall
mean:
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(A) Taylor's conviction for any criminal offense other than an offense
under road traffic legislation for which Taylor is not sentenced to imprisonment
(whether immediate or suspended);
(B) Taylor's commission of an act of personal dishonesty or breach of
fiduciary duty involving personal profit in connection with Taylor's employment
by Employer;
(C) Taylor's commission of an act involving fraud, willful misconduct or
serious negligence in the conduct of his duties and responsibilities as an
employee of Employer; or
(D) a material breach by Taylor of any of the provisions of this
Agreement unless remedied within thirty (30) days after written notice thereof
is delivered to Taylor by Employer, if such breach is reasonably capable of
remedy.
(iii) Death or Disability.
(A) Death. This Agreement will automatically terminate upon Taylor's death.
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(B) Disability. Employer may terminate Taylor's employment upon twelve (12)
weeks' prior written notice if Taylor shall have been prevented by illness,
injury or accident from fully discharging his duties under this Agreement for
three (3) consecutive months or for a total aggregate period of eighty (80)
working days (i.e., Monday through Friday inclusive) in the preceding twelve
(12) calendar months, provided that Taylor is not performing his duties on the
day on which such notice is issued.
(iv) Termination Without Cause. Employer may terminate this Agreement at
any time without Cause.
(v) Resignation. Upon termination of Taylor's employment pursuant
to the terms hereof, Taylor shall immediately resign as a member of the board of
directors of Employer to the extent he is serving in such capacity at the time
of termination and shall immediately resign from any offices, positions and
other directorships which he may then hold with Employer or any of its
Affiliates.
(b) (i) Payment Upon Termination Without Cause. In the event
this Agreement and Taylor's employment hereunder are terminated by Employer
without Cause (for reasons other than those set forth in Sections 9(a)(i), (ii)
and (iii)) prior to March 11, 2001, Employer shall pay or shall be obligated to
pay, as the case may be, to Taylor in full and final settlement (subject to
statutory rights) of all (if any) claims which Taylor may have against Employer
or any of its Affiliates arising out of his employment or its termination by
Employer,
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amounts equal to (A) installments on the Base Compensation in effect at the
Termination Date, in accordance with Employer's payroll practices, until March
11, 2001 (such period being referred to as the "Severance Period"); (B) the
Guaranteed Bonus (or any unpaid portion thereof) for each year ending March 11,
2000 and March 11, 2001, respectively, under the terms of this Agreement,
payable to Taylor in accordance with Section 5(a)(ii)(A) hereof, plus any
discretionary bonus awarded pursuant to Section 5(a)(ii)(B) prior to the
Termination Date and not yet paid; (C) the value of Taylor's pro-rated vacation
entitlement with pay accrued for that portion of the vacation year in which the
employment of Taylor hereunder is terminated, calculated in accordance with
Section 8 hereof, to the extent that such vacation entitlement has not been used
by Taylor as of the Termination Date; and (D) the business expenses reasonably
incurred by Taylor up to and including the Termination Date and payable in
accordance with Section 7 hereof. In addition, Employer agrees that, in the
event Taylor is terminated without Cause, for a period ending upon the earlier
of the date which is twelve (12) months from the Termination Date, or the date
upon which Taylor secures employment which offers him the opportunity to
participate in a benefit plan comparable to Employer's on the same terms and
conditions as Employer, Taylor shall be entitled to continue to participate in
Employer's health, medical or other benefits, to the extent of his entitlement
while he was an employee of Employer in accordance with Section 6 hereof.
(ii) Offset for Employment by Competing Business. In the event this
Agreement and Taylor's employment are terminated by Employer without Cause prior
to the end of the Term, and commencing on a date thereafter (the "New
Affiliation Date"), Taylor shall
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commence rendering services (whether directly or indirectly and whether as
partner, principal, agent, consultant or otherwise) to, or become employed by, a
Competing Business, Taylor promptly shall notify Employer in writing of such new
employment and certify the amount by which his guaranteed compensation in such
new employment during any period within the Severance Period exceeds or fails to
equal his Base Compensation and Guaranteed Bonus hereunder for such period. If
such guaranteed compensation shall fail to equal his Base Compensation plus
Guaranteed Bonus for such period, the payments by Employer of Base Compensation
plus Guaranteed Bonus for such period shall continue in an amount equal to the
difference between the Base Compensation plus Guaranteed Bonus, on the one hand,
and such guaranteed compensation from such new employment on the other. Payments
of any Base Compensation plus Guaranteed Bonus shall immediately cease during
any such period if (A) Taylor fails to provide such written notice and
certification within thirty (30) days of commencing such new employment, or (B)
upon Employer's receipt of such notice and certification stating that the amount
of Taylor's guaranteed compensation in such new employment during such period
exceeds his Base Compensation plus his Guaranteed Bonus during such period. By
way of example only, if during a twelve (12) month Severance Period Taylor
accepts a consulting assignment for a Competing Business for six (6) months for
guaranteed compensation in excess of the Base Compensation plus Guaranteed Bonus
payable during such six (6) month period, then Employer shall not be obligated
to pay Taylor Base Compensation plus Guaranteed Bonus during such six (6) month
period, but shall again be obligated to renew such payments at the end of such
six (6) month period and for the remainder of the Severance Period as described
herein.
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(iii) Payment Upon Termination Other Than Without Cause. Should
this Agreement and Taylor's employment be terminated pursuant to Sections
9(a)(i), (ii) or (iii) hereof, Taylor shall be entitled to payment of his Base
Compensation earned up to the Termination Date plus an amount equal to the sum
of: (A) any discretionary bonus awarded pursuant to Section 5(a)(ii)(B) prior to
the Termination Date and not yet paid; (B) the value of Taylor's pro-rated
vacation entitlement with pay for that portion of the vacation year in which the
employment of Taylor hereunder is terminated, calculated in accordance with
Section 8 hereof, to the extent that such vacation entitlement has not been used
by Taylor as of the Termination Date; and (C) the business expenses reasonably
incurred by Taylor up to and including the Termination Date and payable to
Taylor pursuant to Section 7 hereof through the Termination Date. In addition,
if Taylor's employment is terminated prior to the end of the Term under Section
9(a)(i), (ii) or (iii), he shall also be entitled to receive with respect to the
year during the Term in which his employment was terminated a portion of the
Guaranteed Bonus in an amount equal to the Guaranteed Bonus for such year
multiplied by a percentage representing that portion of such year which elapsed
up to the Termination Date less any payments of the Guaranteed Bonus already
received by Taylor with respect to such year. All amounts for which Employer is
liable to Taylor (or his estate, as the case may be) under this Section
9(b)(iii) for Guaranteed Bonus shall be payable within thirty (30) days
following the Termination Date or the date upon which annual bonuses for
Employer's fiscal year ending the December 31 prior to the year of Taylor's
termination, would be paid to Employer's senior officers in accordance with
Employer's customary practices, whichever is later. All other amounts owed to
Taylor under this Section 9(b)(iii) shall be payable within thirty (30) days of
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the Termination Date. By way of example only, if for the purposes of this
Section 9(b)(iii), the Termination Date is April 1, 2000, and the date on which
Employer would customarily pay its senior officers their annual bonuses for the
year ending December 31, 1999 is April 15, 2000, the amounts owing to Taylor for
Guaranteed Bonus pursuant to this Section 9(b)(iii) shall be payable by Employer
no later than May 1, 2000.
(iv) Reasonableness. Employer, on the one hand, and Taylor, on the other,
hereby confirm that the provisions of Section 9(b) are reasonable and the total
amount payable as outlined therein is an amount which has been agreed between
them to be payable hereunder or, in the alternative, as a reasonable preestimate
of the damages which will be suffered by Taylor in the event of termination
without Cause and shall not be construed as a penalty.
Section 10. Confidential and Proprietary Information.
(a) Definition of Confidential Information. Taylor
acknowledges and agrees that Confidential Information of Employer and its
Affiliates has been and will be imparted to him, which if disclosed by him or
improperly used by him will result in harm to Employer or any of its Affiliates.
For the purposes of this Agreement, "Confidential Information" shall mean all
research, information, software, databases, trade secrets, sales and marketing
information, subscriber information, operations material and memoranda,
personnel records, client lists, information relating to investment funds,
accounts and customers, pricing information, and
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financial information concerning or relating to the business, clients,
subscribers, employees, and affairs of Employer, or any of its Affiliates and
contact persons and other information maintained by Employer or any of its
Affiliates, obtained by or furnished, disclosed or disseminated to Taylor, or
obtained, assembled or compiled by Taylor or under his supervision during the
course of his employment by Employer, or any of its Affiliates, and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to Employer and its Affiliates. "Confidential Information"
shall not include any of the foregoing to the extent the same can be shown by
written documentation by Taylor, to be available to the public through no fault
or breach of this Agreement.
(b) Removal of Confidential Information. Taylor hereby agrees
that, during the Term of this Agreement and thereafter, he shall not, without
Employer's prior written consent, remove or cause to be removed from Employer's,
or any of its Affiliates' premises any Confidential Information, or other
material whatsoever, belonging to Employer or any of its Affiliates, for
purposes other than for use in connection with authorized work Taylor may
perform for Employer or any of its Affiliates.
(c) Disclosure of Confidential Information. Taylor hereby
agrees that, during the Term of this Agreement and thereafter, without the prior
written consent of Employer, he will not, disclose, except as required by law or
in the normal course of Employer's business, or make available to any person or
entity any Confidential Information, nor shall Taylor make or cause to be made,
or permit or allow, either on Taylor's own behalf or on behalf of others,
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any use of such Confidential Information other than in the proper performance of
Taylor's duties as an employee. All Confidential Information shall be returned
to Employer promptly upon request or promptly following the termination of
Taylor's employment with Employer. Notwithstanding the foregoing, except as
otherwise required by law, Taylor shall at all times maintain as confidential
such Confidential Information which is also confidential to, or contains
confidential information concerning any officer, director, shareholder, client
or account of Employer without the prior written consent of the party to whom
such confidential information applies.
(d) The obligations of this Section 10 shall survive the
expiration or termination of the Agreement to the extent set forth in Section
10(c) above.
Section 11. Protection of Interests. (a) Taylor shall not during the
Term of this Agreement, without the prior written consent of Employer, acting
through the President, be concerned or interested in any capacity in any trade,
business or occupation (other than the business of Employer or any of its
Affiliates), whether or not of a similar nature to or competing in any material
respect with any of the businesses of Employer any of its Affiliates. Such
restriction shall not prevent Taylor from holding or being interested in not
more than one percent (1%) of the total issued share capital or capital stock in
any publicly traded or private company the shares of which are listed or quoted
on a recognized stock exchange or in the over-the-counter market. In addition,
with the prior consent of Employer, acting through the President, Taylor may
hold, directly or indirectly, interests as a passive investor in publicly traded
or
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private hedge funds or managed funds representing investments therein, in the
aggregate, of not more than U.S. Five Million Dollars (US $5,000,000), and in
such case, the terms of this Section 11 shall not prevent any such investment by
Taylor, within the foregoing limitations, representing up to five percent (5%)
of the total issued share capital or equity interests in any such hedge fund or
managed fund.
(b) Taylor shall not at any time after the Termination Date
represent himself as being in any way connected with or interested in the
business of Employer or any of its Affiliates or knowingly make any untrue or
misleading statement in relation to Employer or any of its Affiliates.
(c) In the event Taylor shall be terminated for Cause, Taylor
shall not directly or indirectly and whether as employee, director, consultant,
owner or otherwise during the period of twelve (12) months following the
termination of his employment by Employer engage or be interested or concerned
in any Competing Business, except by holding or being interested as a passive
investor in the investments referred to in Section 11(a).
(d) Taylor shall not, directly or indirectly and whether as
employee, director, consultant, owner or otherwise during the twelve (12) month
period following the termination of his employment with Employer and in
competition with Employer or any of its Affiliates canvas or solicit the custom
of or seek to entice away from Employer or any of its Affiliates (i) any Client;
or (ii) any Potential Client.
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(e) Taylor shall not, directly or indirectly and whether as
employee, director, consultant, owner or otherwise during the twelve (12) month
period following the termination of his employment with Employer and in
competition with Employer or any of its Affiliates do business with (i) any
Client or (ii) any Potential Client.
(f) Taylor shall not directly or indirectly and whether as
employee, director, consultant, owner or otherwise during the twelve (12) month
period following the termination of his employment with Employer entice or
endeavor to entice away from Employer or any of its Affiliates or any of its or
their employees (whether or not the departure of such employee would constitute
a breach of contract on his or her part). For the purposes of this paragraph,
"employee" means any person employed or retained by Employer or any of its
Affiliates with management or senior level sales responsibilities, whether on a
permanent or consultancy basis, with whom Taylor shall have had personal
dealings in the course of performing his duties under this Agreement. Nothing in
this provision will prevent Taylor from hiring an employee responding to a
general solicitation appearing in a newspaper, trade publication or similar
medium.
Section 12. Notices. Any notice or other communication under this
Agreement shall be in writing and shall be considered given when received by the
party to whom or which it is addressed. Such notice shall be sent by personal
delivery, electronically, facsimile transmission or recognized overnight
courier, receipt acknowledged, to the respective parties at their addresses set
forth below (or at such other address as any party may have previously specified
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by notice to the other parties as the address to which notice shall be given to
it). The same shall be deemed received on the date of delivery. Any notice
delivered personally, electronically or by facsimile transmission shall be
followed on the same day by written notice sent via recognized overnight courier
delivery service.
If to Employer:
Tremont Advisers, Inc.
Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
U.S.A.
Attention: Mr. Stephen T. Clayton, Chief Financial Officer
Facsimile No.: 914-925-9337
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
U.S.A.
Attention: Michael G. Tannenbaum, Esq.
Facsimile No.: 212-371-1084
If to Taylor:
Laurence Huntington Taylor, II
83 Tuxford Terrace
Basking Ridge, New Jersey 07920
U.S.A.
Facsimile No.: 908-630-0461
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, NY 10176
Attention: Frederic A. Kleinberg, Esq.
Facsimile No.: 212-986-8866
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Section 13. General.
(a) As from the date of this Agreement, all other agreements or
arrangements (whether written or oral and express or implied) between Taylor and
Employer or any of its Affiliates relating to the services or employment of
Taylor shall be deemed to have been terminated by mutual consent.
(b) The parties agree and acknowledge that there are no collective
agreements applicable to Taylor's employment with Employer.
(c) This Agreement shall be governed by the laws of the State of New
York and the laws of the United States of America applicable therein, and each
party submits to the jurisdiction of the New York courts with respect to any
claim or matter arising under this Agreement, and each party agrees that all
such claims or matters shall be heard and determined in such courts, without
reference to conflict of law principles thereof.
Section 14. Taylor's Representations and Warranties. Taylor hereby
represents and warrants to Employer and any of its Affiliates that the execution
of this Agreement and Taylor's performance hereunder will not, with, or without
the giving of notice or the passage of time, conflict with, result in the breach
of or the termination of, or constitute a default under any agreement to which
Taylor is or may be bound.
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Section 15. Headings. The headings used in this Agreement are solely for
convenience of reference and shall not effect its interpretation.
Section 16. Waiver of Breach. The waiver by any party of a breach of any
provision in this Agreement shall not operate or be construed as a waiver of any
subsequent breach by a party.
Section 17. Severability. If any paragraph, term or provision of this
Agreement shall be held or determined to be unenforceable, the balance of this
Agreement shall nevertheless continue in full force and effect unaffected by
such holding or determination. In addition, in any such event, the parties agree
that it is their intention and agreement than any such paragraph, term or
provision which is held or determined to be unenforceable as written, shall
nonetheless be enforced and binding to the fullest extent permitted by law as
though such paragraph, term or provision had been written in such a manner and
to such extent as to be enforceable under the circumstances.
Section 18. Amendments. No amendment, modification or waiver of any
provisions of this Agreement shall be made except by an instrument in writing
signed by the parties charged.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Employer:
TREMONT ADVISERS, INC.
By:
Name:
Title:
Laurence Huntington Taylor, II
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Exhibit 10.61
EXECUTION COPY
EMPLOYMENT AGREEMENT
AGREEMENT, made as of March 11, 1999, by and between TASS MANAGEMENT
LIMITED, a company incorporated in England and Wales, having its registered
office at 27 Palace Street, London 5W1E 5HN ("TASS"), TREMONT ADVISERS, INC., a
corporation incorporated under the laws of the State of Delaware (U.S.A.),
having its principal office at Corporate Center at Rye, 555 Theodore Fremd
Avenue, Rye, New York 10580 ("Tremont"), and NICOLA MEADEN, an individual
residing in London, England ("Meaden").
W I T N E S S E T H:
WHEREAS, in connection with the agreement and plan of reorganization,
dated as of the date hereof (the "Plan of Reorganization"), among Tremont, TASS
and the holders of all of the ordinary shares of TASS, TASS desires to continue
to employ Meaden, and Meaden desires to be so employed by TASS, as the Managing
Director and Chief Executive Officer of TASS, pursuant to the terms and
conditions set forth in this Agreement;
WHEREAS, this Agreement is referred to in, and is subject to the terms and
conditions of, the Plan of Reorganization;
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NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are specifically acknowledged, the parties
agree as follows:
Section 1. Definitions. The terms defined in this Section 1, whenever
used in this Agreement, shall, unless the context otherwise requires, have the
respective meanings specified in this Section 1.
(a) "Affiliate" shall mean, with respect to any Person, an individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, incorporated organization, governmental
or regulatory or other entity controlling, controlled by or under common control
with such Person, including but not limited to any subsidiary and holding
company of any Person as defined in section 736 of the U.K. Companies Act 1985.
(b) "Agreement" means this Employment Agreement, dated as of March 11,
1999, by and between the Company and Meaden.
(c) "Annual Bonus" means the Guaranteed Bonus (which is not in the
Board of Directors' discretion), together with any additional bonus which may be
granted to Meaden by the Company in the sole and absolute discretion of the
Board of Directors or any authorized committee thereof.
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(d) "Base Compensation" means the annual base salary payable to Meaden
pursuant to Section 5 of this Agreement.
(e) "Board of Directors" means the board of directors of Tremont, as
elected from time to time in accordance with the by-laws of Tremont.
(f) "Cause" shall have the meaning set forth in Section 6(a)(ii) of
this Agreement.
(g) "Client" shall mean any Person which, at the date of termination of
this Agreement or within a period of six (6) months immediately preceding such
termination, is a client of or subscriber to TASS, or any of its Affiliates, or
its or their services, and being a Person (i) with which Meaden or any person
reporting directly to Meaden has had personal dealings in the course of her or
his duties; or (ii) of which Meaden has personal knowledge.
(h) "Company" means TASS and Tremont, in its capacity as the parent
corporation of TASS, collectively.
(i) "Competing Business" shall mean any Person which is engaged in (i)
electronic database subscription services or personalized alternative investment
counseling services for investment funds, including hedge funds, derivatives,
managed future funds, foreign exchange, venture capital, emerging market funds,
leveraged buyouts or arbitrage funds, or (ii) any other business which is
substantially the same as any other business in which TASS or any of its
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Affiliates is engaged as at the date of termination of this Agreement and being
a business in which Meaden is directly engaged at any time during the twelve
(12) month period immediately preceding such termination.
(j) "Guaranteed Bonus" means the minimum guaranteed bonus of U.S. Fifty
Thousand Dollars (US$50,000) payable annually, or in such more frequent
installments as permitted hereunder, to Meaden in accordance with Section 5(a)
hereof, which is not in the Board of Directors' discretion.
(k) "Person" shall mean any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, incorporated organization, governmental or regulatory or other
entity.
(l) "Potential Client" shall mean any Person with which there are as at
the date of termination of this Agreement negotiations ongoing with a view to
such Person becoming a client of or subscriber to TASS or any of its Affiliates,
and being a Person (i) with which Meaden or any person reporting directly to
Meaden has had personal dealings in the course of her or his duties, or (ii) of
which Meaden has personal knowledge.
(m) "President" shall mean the duly elected President of Tremont.
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(n) "SFA" means The Securities and Futures Authority Limited of the
U.K.
(o) "TASS" means TASS Management Limited, a company incorporated in
England and Wales.
(p) "Term" shall mean the stated period of Meaden's employment as set
forth herein, unless sooner terminated pursuant to the terms hereof.
(q) "Termination Date" shall mean the date this Agreement is terminated
pursuant to the terms hereof.
(r) "Tremont" means Tremont Advisers, Inc., a Delaware corporation and
the sole ordinary shareholder of TASS.
(s) "U.K." means the United Kingdom of Great Britain and Northern
Ireland.
(t) "U.S." means the United States of America.
Section 2. Employment. TASS hereby hires and employs Meaden, and Meaden
hereby accepts employment with TASS, as President of TASS, upon the terms and
subject to the conditions set forth in this Agreement. For so long as TASS shall
be obligated to Meaden
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hereunder, Tremont hereby guarantees the performance by TASS and the payment of
its obligations hereunder to Meaden, upon the terms and subject to the
conditions set forth herein.
Section 3. Term of Employment. The Term shall be for a period of two
years, commencing on March 11, 1999 and continuing until March 11, 2001 unless
sooner terminated pursuant to the terms and conditions of this Agreement. Upon
completion of the Term this Agreement shall terminate automatically without the
need for prior notice.
Section 4. Duties. Meaden shall serve TASS faithfully and honestly and
use her best efforts and abilities on behalf of TASS in the position of Managing
Director and Executive Officer of TASS and shall devote all of her business
time, attention, skills and efforts solely to the performance of her duties on
behalf of TASS and each of its Affiliates, as may be required by the Company,
consistent with the terms of this Agreement, and, subject to the terms of this
Agreement, shall not engage or be involved, directly or indirectly, in any other
business endeavor whatsoever without the express written consent of the Company.
Meaden shall perform such duties consistent with her position or such duties as
may reasonably be assigned by the Company, acting through the President, from
time to time during the Term hereof, including without limitation, the
following:
(a) Meaden shall serve as chief executive officer of TASS with
the designation of Managing Director and Chief Executive Officer, responsible
for the daily supervision of the
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business of TASS and the administration of its operations and shall be deemed
Senior Executive Officer, Compliance Officer, and Finance Officer in accordance
with the rules of the SFA;
(b) Meaden shall serve as a director on the board of directors
of TASS for so long as the Company shall require the same;
(c) Meaden shall diligently represent the interests of TASS
and each of its Affiliates in the United Kingdom and on the continent of Europe;
(d) Meaden shall promote, endorse, publicize, and market
proprietary investment vehicles, and database management, research and
consulting services offered by TASS and each of its Affiliates and shall advise
Tremont's quantitative research analysts as may be appropriate;
(e) Meaden shall work initially at TASS's offices at 27 Palace
Street, London 5W1E 5HN, England and, as may be required by the Company, to work
on a temporary or permanent basis at such other location within the U.K., and to
travel to such places, both within and outside the U.K., as may be required for
the proper performance of her duties, except that during the Term, without
Meaden's consent, (i) Meaden shall not be required to relocate her place of
employment to any area beyond a ten (10) mile radius of the boundaries of the
City of London, England; and (ii) Meaden shall not be required to travel to
destinations on behalf of TASS or any of its Affiliates (A) such that during the
course of any year during the Term she
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shall have spent more than fifty percent (50%) of her business time in
connection with the performance of her duties hereunder engaged in such travel,
(B) for any period extending longer than three (3) consecutive weeks within
which she is not reasonably within commuting distance of TASS's offices, and (C)
otherwise inconsistent with her past practices as Managing Director and Chief
Executive Officer of TASS; and
(f) Meaden shall report to the Company at such times as the
Company, acting through the President, may reasonably require.
Section 5. Compensation. (a) In consideration for all the services to be
rendered by Meaden to TASS and its Affiliates as may be required pursuant to the
terms of this Agreement, and any rights granted by Meaden under this Agreement,
TASS shall pay compensation to Meaden as follows:
(i) Base Compensation. During the Term of this Agreement, TASS shall pay
Meaden Base Compensation, payable in monthly installments, and subject to normal
withholding taxes and deductions, at the rate of U.S. One Hundred Fifty Thousand
Dollars (US$150,000) per annum. In the event that Meaden shall be employed by
TASS after the expiration of the Term, but the Company and Meaden have not
mutually agreed to extend the terms of this Agreement, the period of employment,
the Base Compensation payable to Meaden and the other terms and conditions of
her employment shall be as agreed by Meaden and the Company;
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(ii) Annual Bonus.
(A) Guaranteed Bonus. In addition to the Base Compensation set forth in
Section 5(a)(i) above, subject to the terms and conditions of Section 9, Meaden
shall receive a Guaranteed Bonus for each year of the Term, which shall be paid
upon the later of five (5) days following the conclusion of each year of the
Term or the date on which Tremont customarily pays its senior officers their
annual bonuses for Tremont's preceding fiscal year ending December 31, or at
such earlier time or times as the Company, acting through the President, shall
determine.
(B) Discretionary Bonus. In addition to the Base Compensation and
Guaranteed Bonus set forth in Sections 5(a)(i) and 5(a)(ii)(A), Meaden shall
also be eligible to receive an additional annual bonus from the Company at the
determination of the Board of Directors, or any committee thereof, which
determination shall be at the sole and absolute discretion of the Board of
Directors or such committee.
(b) Notwithstanding the provisions of this Section
5(a)(ii)(B), neither TASS nor Tremont shall be required to pay any additional
compensation to Meaden beyond that specified in Section 5(a)(i) and 5(a)(ii)(A)
hereof.
Section 6. Benefits. In addition to the compensation described in Section
5, Meaden shall be entitled to participate in any comparable employee health,
medical or other benefits that
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TASS may now or hereafter establish which are generally available to the senior
officers of Tremont, to the extent such benefits are available to Meaden under
applicable law, on a basis commensurate with her position as President of TASS.
Section 7. Expenses. TASS shall reimburse Meaden for all expenses
reasonably incurred by Meaden in furtherance of Meaden's performance of her
duties to TASS and its Affiliates hereunder and in accordance with any policy on
expenses issued by the Company, provided that Meaden renders to TASS, or to
Tremont, as may be required by the Company, a complete and accurate accounting
and documentation of all such expenses, and furnishes information adequate in
the Company's reasonable judgment, to permit deduction of such expenses on the
income tax returns of TASS.
Section 8. Holidays. (a) Meaden shall be entitled to twenty-one (21)
working days' paid holiday per holiday year (in addition to English bank and
other public holidays) to be taken upon advance notice to the Company, acting
through the President, subject to the reasonable objection of the President.
Holiday entitlement shall be deemed to accrue from day to day. For the purposes
of this Agreement, TASS's holiday year with respect to Meaden shall run from
March 11 to March 11.
(b) Meaden shall not be entitled to carry over any unused
holiday entitlement from one holiday year to another and will not be paid in
lieu thereof for any untaken holiday except upon termination of employment as
provided herein. TASS will pay to Meaden one day's
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holiday pay for each complete day of holiday entitlement for that holiday year
which has accrued but remains untaken at the date of termination. A day's
holiday pay for this purpose shall be one-three hundred sixty fifth (1/365) of
Base Compensation.
Section 9. Termination. (a) This Agreement may be terminated as follows:
(i) Termination by Consent. This Agreement may be terminated upon the
mutual written consent of the Company and Meaden for any reason or no reason.
(ii) Termination for Cause. Company may terminate this Agreement by summary
notice for "Cause," which, for the purposes of this Agreement, shall mean:
(A) Meaden's conviction for any criminal offense other than an
offense under road traffic legislation for which Meaden is not sentenced to
imprisonment
(whether immediate or suspended);
(B) Meaden's commission of an act of personal dishonesty or breach of
fiduciary duty involving personal profit in connection with Meaden's employment
by TASS;
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(C) Meaden's commission of an act involving fraud, willful misconduct or
serious negligence in the conduct of her duties and responsibilities as an
employee of TASS;
(D) Except as otherwise permitted or instructed by the Company,
Meaden's ceasing to be a registered Person of Employer with the SFA;
(E) the suspension or revocation of any licenses or similar regulatory
approvals necessary for the operation of the business of TASS due, in whole, or
substantially in whole, to the conduct and/or activities of Meaden and which
such suspension or revocation materially injures or damages TASS's or any of its
Affiliates' business and reputation; or
(F) a material breach by Meaden of any of the provisions of this Agreement
unless remedied within thirty (30) days after written notice thereof is
delivered to Meaden by the Company, if such breach is reasonably capable of
remedy.
(iii) Death or Disability.
(A) Death. This Agreement will automatically terminate upon
Meaden's death.
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(B) Disability. Company may terminate Meaden's employment upon twelve (12)
weeks' prior written notice if Meaden shall have been prevented by illness,
injury or accident from fully discharging her duties under this Agreement for
three (3) consecutive months or for a total aggregate period of eighty (80)
working days (i.e., Monday through Friday inclusive) in the preceding twelve
(12) calendar months, provided that Meaden is not performing her duties on the
day on which such notice is issued.
(iv) Termination Without Cause. Company may terminate this Agreement at any
time without Cause.
(v) Resignation. Upon termination of Meaden's employment pursuant
to the terms hereof, Meaden shall immediately resign as a member of the board of
directors of TASS to the extent she is serving in such capacity at the time of
termination and shall immediately resign from any offices, positions and other
directorships which she may then hold with TASS or any of its Affiliates.
(b) (i) Payment Upon Termination Without Cause. In the event
this Agreement and Meaden's employment hereunder are terminated by the Company
without Cause (for reasons other than those set forth in Sections 9(a)(i), (ii)
and (iii)) prior to March 11, 2001, TASS shall pay or shall be obligated to pay,
as the case may be, to Meaden in full and final settlement (subject to statutory
rights) of all (if any) claims which Meaden may have against TASS or any of its
Affiliates arising out of her employment or its termination by the Company,
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amounts equal to (A) installments on the Base Compensation in effect at the
Termination Date, in accordance with TASS's payroll practices, until March 11,
2001 (such period being referred to as the "Severance Period"); (B) the
Guaranteed Bonus (or any unpaid portion thereof) for each year ending March 11,
2000 and March 11, 2001, respectively, under the terms of this Agreement,
payable to Meaden in accordance with Section 5(a)(ii)(A) hereof, plus any
discretionary bonus awarded pursuant to Section 5(a)(ii)(B) prior to the
Termination Date and not yet paid; (C) the value of Meaden's pro-rated holiday
entitlement with pay accrued for that portion of the holiday year in which the
employment of Meaden hereunder is terminated, calculated in accordance with
Section 8 hereof, to the extent that such holiday entitlement has not been used
by Meaden as of the Termination Date; and (D) the business expenses reasonably
incurred by Meaden up to and including the Termination Date and payable in
accordance with Section 7 hereof. In addition, the Company agrees that, in the
event Meaden is terminated without Cause, for a period ending upon the earlier
of the date which is twelve (12) months from the Termination Date, or the date
upon which Meaden secures employment which offers her the opportunity to
participate in a benefit plan comparable to the Company's on the same terms and
conditions as the Company, Meaden shall be entitled to continue to participate
in TASS's health, medical or other benefits, to the extent of her entitlement
while she was an employee of TASS in accordance with Section 6 hereof.
(ii) Offset for Employment by Competing Business. In the event this
Agreement and Meaden's employment are terminated by the Company without Cause
prior to the end of the Term, and commencing on a date thereafter (the "New
Affiliation Date"), Meaden
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shall commence rendering services (whether directly or indirectly and whether as
partner, principal, agent, consultant or otherwise) to, or become employed by, a
Competing Business, Meaden promptly shall notify the Company in writing of such
new employment and certify the amount by which her guaranteed compensation in
such new employment during any period within the Severance Period exceeds or
fails to equal her Base Compensation and Guaranteed Bonus hereunder for such
period. If such guaranteed compensation shall fail to equal her Base
Compensation plus Guaranteed Bonus for such period, the payments by the Company
of Base Compensation plus Guaranteed Bonus for such period shall continue in an
amount equal to the difference between the Base Compensation plus Guaranteed
Bonus, on the one hand, and such guaranteed compensation from such new
employment on the other. Payments of any Base Compensation plus Guaranteed Bonus
shall immediately cease during any such period if (A) Meaden fails to provide
such written notice and certification within thirty (30) days of commencing such
new employment, or (B) upon the Company's receipt of such notice and
certification stating that the amount of Meaden's guaranteed compensation in
such new employment during such period exceeds her Base Compensation plus her
Guaranteed Bonus during such period. By way of example only, if during a twelve
(12) month Severance Period Meaden accepts a consulting assignment for a
Competing Business for six (6) months for guaranteed compensation in excess of
the Base Compensation plus Guaranteed Bonus payable during such six (6) month
period, then TASS shall not be obligated to pay Meaden Base Compensation plus
Guaranteed Bonus during such six (6) month period, but shall again be obligated
to renew such payments at the end of such six (6) month period and for the
remainder of the Severance Period as described herein.
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(iii) Payment Upon Termination Other Than Without Cause. Should
this Agreement and Meaden's employment be terminated pursuant to Sections
9(a)(i), (ii) or (iii) hereof, Meaden shall be entitled to payment of her Base
Compensation earned up to the Termination Date plus an amount equal to the sum
of: (A) any discretionary bonus awarded pursuant to Section 5(a)(ii)(B) prior to
the Termination Date and not yet paid; (B) the value of Meaden's pro-rated
holiday entitlement with pay for that portion of the holiday year in which the
employment of Meaden hereunder is terminated, calculated in accordance with
Section 8 hereof, to the extent that such holiday entitlement has not been used
by Meaden as of the Termination Date; and (C) the business expenses reasonably
incurred by Meaden up to and including the Termination Date and payable to
Meaden pursuant to Section 7 hereof through the Termination Date. In addition,
if Meaden's employment is terminated prior to the end of the Term under Section
9(a)(i), (ii) or (iii), she shall also be entitled to receive with respect to
the year during the Term in which her employment was terminated a portion of the
Guaranteed Bonus in an amount equal to the Guaranteed Bonus for such year
multiplied by a percentage representing that portion of such year which elapsed
up to the Termination Date less any payments of the Guaranteed Bonus already
received by Meaden with respect to such year. All amounts for which the Company
is liable to Meaden (or her estate, as the case may be) under this Section
9(b)(iii) for Guaranteed Bonus shall be payable within thirty (30) days
following the Termination Date or the date upon which annual bonuses for
Tremont's fiscal year ending the December 31 prior to the year of Meaden's
termination, would be paid to Tremont's senior officers in accordance with
Tremont's customary practices, whichever is later. All other amounts owed to
Meaden under this Section 9(b)(iii) shall be payable within thirty (30) days of
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the Termination Date. By way of example only, if for the purposes of this
Section 9(b)(iii), the Termination Date is April 1, 2000, and the date on which
Tremont would customarily pay its senior officers their annual bonuses for the
year ending December 31, 1999 is April 15, 2000, the amounts owing to Meaden for
Guaranteed Bonus pursuant to this Section 9(b)(iii) shall be payable by the
Company no later than May 1, 2000.
(iv) Reasonableness. TASS and Tremont, on the one hand, and Meaden, on the
other, hereby confirm that the provisions of Section 9(b) are reasonable and the
total amount payable as outlined therein is an amount which has been agreed
between them to be payable hereunder or, in the alternative, as a reasonable
preestimate of the damages which will be suffered by Meaden in the event of
termination without Cause and shall not be construed as a penalty.
(c) Meaden hereby agrees to waive any right to make a claim of
unfair dismissal if this Agreement terminates upon the expiration of the Term
without it being extended or renewed.
Section 10. Confidential and Proprietary Information.
(a) Definition of Confidential Information. Meaden
acknowledges and agrees that Confidential Information of the Company and its
Affiliates has been and will be imparted to her, which if disclosed by her or
improperly used by her will result in harm to the Company
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or any of its Affiliates. For the purposes of this Agreement, "Confidential
Information" shall mean all research, information, software, databases, trade
secrets, sales and marketing information, subscriber information, operations
material and memoranda, personnel records, client lists, information relating to
investment funds, accounts and customers, pricing information, and financial
information concerning or relating to the business, clients, subscribers,
employees, and affairs of the Company, or any of its Affiliates and contact
persons and other information maintained by the Company or any of its
Affiliates, obtained by or furnished, disclosed or disseminated to Meaden, or
obtained, assembled or compiled by Meaden or under her supervision during the
course of her employment by TASS, or any of its Affiliates, and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to the Company and its Affiliates. "Confidential
Information" shall not include any of the foregoing to the extent the same can
be shown by written documentation by Meaden, to be available to the public
through no fault or breach of this Agreement.
(b) Removal of Confidential Information. Meaden hereby agrees
that, during the Term of this Agreement and thereafter, she shall not, without
the Company's prior written consent, remove or cause to be removed from TASS's,
or any of its Affiliates' premises any Confidential Information, or other
material whatsoever, belonging to the Company or any of its Affiliates, for
purposes other than for use in connection with authorized work Meaden may
perform for TASS or any of its Affiliates.
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(c) Disclosure of Confidential Information. Meaden hereby
agrees that, during the Term of this Agreement and thereafter, without the prior
written consent of the Company, she will not, disclose, except as required by
law or in the normal course of TASS's business, or make available to any person
or entity any Confidential Information, nor shall Meaden make or cause to be
made, or permit or allow, either on Meaden's own behalf or on behalf of others,
any use of such Confidential Information other than in the proper performance of
Meaden's duties as an employee. All Confidential Information shall be returned
to Tremont promptly upon request or promptly following the termination of
Meaden's employment with TASS. Notwithstanding the foregoing, except as
otherwise required by law, Meaden shall at all times maintain as confidential
such Confidential Information which is also confidential to, or contains
confidential information concerning any officer, director, shareholder, client
or account of TASS or Tremont without the prior written consent of the party to
whom such confidential information applies.
(d) The obligations of this Section 10 shall survive the
expiration or termination of the Agreement to the extent set forth in Section
10(c) above.
Section 11. Protection of Interests. (a) Meaden shall not during the Term
of this Agreement, without the prior written consent of the Company, acting
through the President, be concerned or interested in any capacity in any trade,
business or occupation (other than the business of TASS or any of its
Affiliates), whether or not of a similar nature to or competing in any material
respect with any of the businesses of TASS or any of its Affiliates. Such
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restriction shall not prevent Meaden from holding or being interested in not
more than one percent (1%) of the total issued share capital or capital stock in
any publicly traded or private company the shares of which are listed or quoted
on a recognized stock exchange or in the over-the-counter market. In addition,
with the prior consent of the Company, acting through the President, Meaden may
hold, directly or indirectly, interests as a passive investor in publicly traded
or private hedge funds or managed funds representing investments therein, in the
aggregate, of not more than U.S. Five Million Dollars (US $5,000,000), and in
such case, the terms of this Section 11 shall not prevent any such investment by
Meaden, within the foregoing limitations, representing up to five percent (5%)
of the total issued share capital or equity interests in any such hedge fund or
managed fund.
(b) Meaden shall not at any time after the Termination Date
represent herself as being in any way connected with or interested in the
business of TASS or any of its Affiliates or knowingly make any untrue or
misleading statement in relation to TASS or any of its Affiliates.
(c) In the event Meaden shall be terminated for Cause, Meaden
shall not directly or indirectly and whether as employee, director, consultant,
owner or otherwise during the period of twelve (12) months following the
termination of her employment by TASS engage or be interested or concerned in
any Competing Business, except by holding or being interested as a passive
investor in the investments referred to in Section 10(b).
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(d) Meaden shall not, directly or indirectly and whether as
employee, director, consultant, owner or otherwise during the twelve (12) month
period following the termination of her employment with TASS and in competition
with TASS or any of its Affiliates canvas or solicit the custom of or seek to
entice away from the Company or any of its Affiliates (i) any Client; or (ii)
any Potential Client.
(e) Meaden shall not, directly or indirectly and whether as
employee, director, consultant, owner or otherwise during the twelve (12) month
period following the termination of her employment with TASS and in competition
with the Company or any of its Affiliates do business with (i) any Client or
(ii) any Potential Client.
(f) Meaden shall not directly or indirectly and whether as
employee, director, consultant, owner or otherwise during the twelve (12) month
period following the termination of her employment with TASS entice or endeavor
to entice away from the Company or any of its Affiliates or any of its or their
employees (whether or not the departure of such employee would constitute a
breach of contract on his or her part). For the purposes of this paragraph,
"employee" means any person employed or retained by the Company or any of its
Affiliates with management or senior level sales responsibilities, whether on a
permanent or consultancy basis, with whom Meaden shall have had personal
dealings in the course of performing her duties under this Agreement. Nothing in
this provision will prevent Meaden from hiring an employee responding to a
general solicitation appearing in a newspaper, trade publication or similar
medium.
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Section 12. Notices. Any notice or other communication under this
Agreement shall be in writing and shall be considered given when received by the
party to whom or which it is addressed. Such notice shall be sent by personal
delivery, electronically, facsimile transmission or recognized overnight
courier, receipt acknowledged, to the respective parties at their addresses set
forth below (or at such other address as any party may have previously specified
by notice to the other parties as the address to which notice shall be given to
it). The same shall be deemed received on the date of delivery. Any notice
delivered personally, electronically or by facsimile transmission shall be
followed on the same day by written notice sent via recognized overnight courier
delivery service.
If to TASS or Tremont:
Tremont Advisers, Inc.
Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
U.S.A.
Attention: Mr. Stephen T. Clayton, Chief Financial Officer
Facsimile No.: 914-925-9337
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
U.S.A.
Attention: Michael G. Tannenbaum, Esq.
Facsimile No.: 212-371-1084
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If to Meaden:
Ms. Nicola Meaden
12 Wynnstay Gardens
Allen Street
London W8 6UP
ENGLAND
Facsimile No.: _________________
with a copy to:
Landau & Cohen, Solicitors
130-132 Burnt Oak Broadway
Edgeware, Middlesex HA8 0BB
ENGLAND
Attention: Richard Cohen, Esq.
Facsimile No.: 011-44-181-951-1317
Section 13. General.
(a) As from the date of this Agreement, all other agreements or
arrangements (whether written or oral and express or implied) between Meaden and
TASS or any of its Affiliates relating to the services or employment of Meaden
shall be deemed to have been terminated by mutual consent.
(b) The parties agree and acknowledge that there are no collective
agreements applicable to Meaden's employment with TASS.
(c) This Agreement shall be governed by the laws of England and Wales,
and each party submits to the jurisdiction of the English courts with respect to
any claim or matter arising
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under this Agreement, and each party agrees that all such claims or matters
shall be heard and determined in such courts.
Section 14. Meaden's Representations and Warranties. Meaden hereby
represents and warrants to TASS and any of its Affiliates that the execution of
this Agreement and Meaden's performance hereunder will not, with, or without the
giving of notice or the passage of time, conflict with, result in the breach of
or the termination of, or constitute a default under any agreement to which
Meaden is or may be bound.
Section 15. Headings. The headings used in this Agreement are solely for
convenience of reference and shall not effect its interpretation.
Section 16. Waiver of Breach. The waiver by any party of a breach of any
provision in this Agreement shall not operate or be construed as a waiver of any
subsequent breach by a party.
Section 17. Severability. If any paragraph, term or provision of this
Agreement shall be held or determined to be unenforceable, the balance of this
Agreement shall nevertheless continue in full force and effect unaffected by
such holding or determination. In addition, in any such event, the parties agree
that it is their intention and agreement than any such paragraph, term or
provision which is held or determined to be unenforceable as written, shall
nonetheless be enforced and binding to the fullest extent permitted by law as
though such paragraph, term
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or provision had been written in such a manner and to such extent as to be
enforceable under the circumstances.
Section 18. Amendments. No amendment, modification or waiver of any
provisions of this Agreement shall be made except by an instrument in writing
signed by the parties charged.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TASS MANAGEMENT LIMITED
By:
Name:
Title:
Nicola Meaden
TREMONT ADVISERS, INC.
By:
Name:
Title:
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Exhibit 10.62
EXECUTION COPY
STOCK OPTION AND BENEFITS AGREEMENT
THIS STOCK OPTION AND BENEFITS AGREEMENT (the "Agreement"), made as of
March 8, 1999, by and between TREMONT ADVISERS, INC., a Delaware (U.S.A.)
corporation with its principal executive offices at 555 Theodore Fremd Avenue,
Rye, New York 10580, U.S.A. ("Tremont"), and LAURENCE HUNTINGTON TAYLOR, II, an
individual residing in Basking Ridge, New Jersey, U.S.A. ("Taylor").
W I T N E S S E T H:
WHEREAS, in connection with the plan of reorganization among TASS,
Tremont and the holders of all of the ordinary shares of TASS, Tremont employs
Taylor as the Senior Vice President of Global Sales and Marketing of Tremont;
WHEREAS, in connection with Taylor's employment by Tremont, Tremont has
agreed to grant and Taylor wishes to accept the option to purchase from Tremont
Shares in accordance with and subject to the terms and conditions contained in
this Agreement;
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WHEREAS, the Exercise Price set forth herein for the Group I Options
granted to Taylor hereunder reflects the approximate Fair Market Value per Share
determined as of December 9, 1998 by the Board of Directors; and
WHEREAS, in addition to granting Taylor options to purchase Shares,
Tremont wishes to provide to Taylor certain other benefits as set forth herein
in the event there shall occur one or more transactions involving Tremont
constituting a Covered Acquisition as described herein;
NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are specifically acknowledged, the parties
agree as follows:
Section 1. Certain Definitions. The terms defined in this Section 1,
whenever used in this Agreement, shall, unless the context otherwise requires,
have the respective meanings hereinafter specified in Section 1.
(a) "Acquisition" shall mean the acquisition of Tremont by
another unaffiliated entity in a merger, consolidation, a sale of all or
substantially all of Tremont's assets or securities, a reorganization
transaction (other than a mere reincorporation or the creation of a holding
company), a liquidation of Tremont or similar transaction.
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(b) "Acquisition Consideration" shall mean the amount to be
allocated to one Share out of the Acquisition Proceeds in a Covered Acquisition.
(c) "Acquisition Proceeds" shall mean all cash, deferred
payments, securities and other articles of value received by Tremont and/or the
holders of any of Tremont's securities in consideration for the sale by Tremont
of its assets or the transfer by such holders of their securities in any Covered
Acquisition.
(d) "Actual Distribution" shall mean the actual distribution
on a date or dates specified of Acquisition Consideration to the holders of the
Shares in connection with a Covered Acquisition.
(e) "Affiliate" shall mean, with respect to any Person, an
individual, corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, incorporated organization,
governmental or regulatory or other entity controlling, controlled by or under
common control with such Person.
(f) "Agreement" means this Stock Option and Benefits
Agreement, dated March 11, 1999, by and between Tremont and Taylor.
(g) "Anti-Dilution Premium" shall mean the benefit or benefits
calculated pursuant to Section 4.
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(h) "Board of Directors" means the board of directors of
Tremont, as elected from time to time in accordance with the by-laws of Tremont.
(i) "Business Day" shall mean a day on which the New York
Stock Exchange is open for trading.
(j) "Change in Control" shall mean (i) an Acquisition, as such
term is defined in the Stock Option Agreements to be executed by Meaden and
Taylor, respectively, or (ii) during any one (1) year period, individuals who at
the beginning of such period constitute the entire Board of Directors shall
cease for any reason to constitute a majority of the Board of Directors unless
the election or nomination for election by Tremont's shareholders of each new
director was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who were directors at the beginning of the period.
(k) "Common Stock" means Tremont's authorized Class B Common
Stock, par value $.01 per share.
(l) "Computation Date" shall mean the date upon which the
transactions contemplated in a Covered Acquisition are actually consummated and
closed.
(m) "Computation Statement" shall mean the statement which may
be issued by the Board of Directors pursuant to Section 4(f).
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(n) "Covered Acquisition" shall mean an Acquisition the
Computation Date for which shall occur before the third anniversary of the
Effective Date.
(o) "Current Market Price" per Share or for any other security
for purposes of any provision of this Agreement as of a Determination Date shall
mean:
(i) If any of the Shares or any of such securities is then Publicly Traded,
the average of the daily market prices of the Shares or such securities over a
period of five (5) consecutive days prior to such date on which the Shares or
such securities have traded.
As used in this clause (i), "market price" shall mean the average of the
closing price of Shares or such securities on any Business Day, as reported with
respect to the market (or the composite of markets, if more than one) on all
primary national securities exchanges in the United States on which any of the
Shares or such securities are then listed, or, if there shall have been no sales
on any such exchange on such day, the average of the closing bid and asked
prices on all such exchanges at the close of trading on such day, or, if the
Shares or such securities shall not be so listed, if applicable, the last sale
price, or, if there shall have been no sales on such day, the average of the
representative bid and asked prices at the close of trading on such day as
quoted by Nasdaq or as listed on the OTC Bulletin Board (Nasdaq and the OTC
Bulletin Board being collectively referred to as the "OTC Market"), or, if there
shall have been no sales in the OTC Market on such day or if
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the Shares or such securities are not quoted or listed in the OTC Market, the
average of the closing bid and asked prices as furnished by two members of the
NASD selected from time to time by the Company for that purpose.
(ii) If the Shares or such other securities shall not be listed on any
domestic exchange or quoted on Nasdaq or on the OTC Bulletin Board or the bid
and asked prices for which cannot be obtained from two members of the NASD, as
described above, then the Current Market Price shall be the Fair Market Value
per Share or per share or unit of any of such other securities as of such
Determination Date.
(p) "Deemed Distribution" shall mean a distribution of
Acquisition Consideration to the holders of the Shares deemed to have occurred
for the purposes of this Agreement immediately following a Covered Acquisition
involving a sale of assets by Tremont.
(q) "Determination Date" shall mean any date as of which,
pursuant to any provision of this Agreement, a determination of Current Market
Price shall be required or permitted.
(r) "Effective Date" shall mean the date upon which the
Employment Agreement shall have become effective and Taylor's employment with
Employer shall have commenced.
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(s) "Employer" means Tremont.
(t) "Employment Agreement" means the Employment Agreement
among Tremont and Taylor made as of March 11, 1999.
(u) "Exercise Price" shall mean the per Share option exercise
price for each of the Group I Options and the Group II Options set forth in
Section 2 hereof.
(v) "Expiration Date" means the date on which the Stock
Options and their right of exercise shall expire, as provided in Section 2
hereof.
(w) "Fair Market Value" as of any Determination Date or
Computation Date shall mean, as determined in good faith by the Board of
Directors (subject to Section 10), (i) as to Common Stock, as of such date, the
price of Common Stock in a sale of Tremont as a going concern in an arm's length
transaction to an independent Third Party, without regard to the lack of
liquidity of the Common Stock due to any restrictions or other limitations
contained in this Agreement, and (ii) as to any other property or securities
referred to herein, the price of such property or securities as of such date in
an arm's length transaction to an independent Third Party. Such valuation shall
assume a sale to a hypothetical "ready, willing and able" Third Party without
consideration given to any potential forced sale occurring by virtue of the
absence of actual Third Party purchasers on any Determination Date or
Computation Date.
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(x) "Floor Price" shall mean a price per share for the Common
Stock of U.S. Seven Dollars and 50/100 (US $7.50).
(y) "Group I Options" shall mean options to acquire Shares
granted by Tremont as of the Effective Date pursuant to Section 2(a) of this
Agreement, having an Exercise Price of U.S. Eight Dollars (US $8.00) per Share.
(z) "Group II Options" shall mean options to acquire Shares
granted by Tremont as of the Effective Date pursuant to Section 2(b) of this
Agreement, having an exercise price of U.S. Fifteen Dollars (US $15.00) per
Share.
(aa) "Taylor Affiliate" shall mean any of Taylor's spouse,
parents, siblings, lineal descendants, spouses of any lineal descendants, lineal
descendants of siblings and trusts for the benefit of all or any of the
foregoing.
(ab) "NASD" means The National Association of Securities Dealers, Inc.
(ac) "Nasdaq" means the NASD Automated Quotation System.
(ad) "Offered Shares" shall mean the number of Shares Taylor
wishes to sell pursuant to any Third Party Offer and for which Tremont shall
have a right of first refusal in accordance with Section 7(c) hereof.
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(ae) "OTC Bulletin Board" means the quotation system for the non-Nasdaq
over-the-counter market.
(af) "Person" shall mean any individual, corporation,
partnership, limited liability company, firm, joint venture, association,
joint-stock company, trust, incorporated organization, governmental or
regulatory or other entity.
(ag) "Potential Realizable Value" shall mean, with respect to
any Stock Option, its potential realizable value, as determined in good faith by
the Board of Directors, using models and methods as reasonably, determined by
the Board of Directors to be customary in the securities and financial services
industries, which take into account, among other things, the period remaining
until the expiration of the option, the volatility of the security and current
interest rates.
(ah) "Publicly Traded" shall mean, as to any security referred
to herein, if listed or admitted to unlisted trading privileges on a national
securities exchange or designated as a National Market System security on an
interdealer quotation system by the NASD or if sales or bid and offer quotations
are reported for that class of such security by Nasdaq or the OTC Bulletin
Board.
(ai) "Reference Price" per Share shall mean with respect to a
Covered Transaction the greater of the Acquisition Consideration and the Floor
Price.
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(aj) "Right of First Refusal" shall mean Tremont's option to
purchase Shares pursuant to Section 7(c) hereof in the event that Taylor shall
have received, and wishes to accept, a Third Party Offer with respect to all or
any of the Shares owned by him.
(ak) "Securities" shall mean any exercisable Stock Options and
Shares issued upon the exercise of Stock Options.
(al) "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.
(am) "Share" or "Shares" shall mean one or more shares of Common Stock.
(an) "Stock Option" or "Stock Options" shall mean, singularly
or collectively, as the case may be, the Group I Options and the Group II
Options.
(ao) "TASS" shall mean TASS Management Limited, a company
incorporated in England and Wales.
(ap) "Third Party" or "Third Parties" shall mean a Person who is not an
Affiliate of Taylor or Tremont, or any of Tremont's officers, directors,
employees or agents
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or any of their respective relatives, or an individual otherwise related in
any capacity to
Taylor.
(aq) "Third Party Offer" shall mean a bona fide written offer
from a Third Party to purchase Shares from Taylor.
(ar) "Tremont" means Tremont Advisers, Inc., a corporation
organized and existing under the laws of the State of Delaware.
(as) "U.S." means the United States of America
Section 2. Options. As of the Effective Date, Tremont hereby grants to
Taylor, and Taylor hereby accepts options described below to purchase the number
of Shares specified below on the terms and subject to the conditions described
herein, during a term (the "Term") which commences on the Effective Date and
ends at 12:00 midnight (prevailing local time at Tremont's principal offices) on
the Expiration Date, which is the day that is the date of the sixth anniversary
of the Effective Date, subject to the provisions for vesting described herein,
at the Exercise Price specified below.
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(a) Group I Options. Subject to Section 4:
(i) Number of Shares; Exercise Price. The Group I Options
hereby granted to Taylor entitle Taylor to subscribe for and purchase, at any
time or from time to time subject to vesting as provided below, until the
Expiration Date, up to 78,007 Shares at an Exercise Price equal to U.S. Eight
Dollars (US $8.00) per Share.
(ii) Vesting. The Group I Options shall vest and become
exercisable in installments as follows:
(A) Up to sixty percent (60%) of the total number of Shares optioned
pursuant to this Section 2(a) may be exercised on and after the Effective Date,
for up to an aggregate of 46,846 Shares; and
(B) At any time on or after March 11, 2000, the Group I Options may be
exercised as to all Shares optioned for which they have not been previously
exercised until the Expiration Date, whereupon the Group I Options shall expire
and may no longer be exercised.
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(b) Group II Options. Subject to Section 4:
(i) Number of Shares; Exercise Price. The Group II Options
hereby granted to Taylor entitle Taylor to subscribe for and purchase subject to
vesting as provided below, at any time or from time to time, until the
Expiration Date, up to 13,154 Shares at an Exercise Price equal to Fifteen
Dollars (US $15.00) per Share.
(ii) Vesting. The Group II Options shall vest and become
exercisable in installments as follows:
(A) Up to an aggregate of 4,384 Shares optioned pursuant to this
Section 2(b) may be exercised on or after the Effective Date;
(B) Up to an aggregate of 8,768 Shares optioned
pursuant to this
Section 2(b) may be exercised at any time on or after March 11, 2000; and
(C) At any time on or after March 11, 2001, the Group
II Options
may be exercised as to all Shares optioned for which they have not been
previously exercised until the Expiration Date, whereupon the Group II Options
shall expire and may no longer be exercised.
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(c) Acceleration. Notwithstanding Section 2(a) and (b) but otherwise
subject to the terms and conditions hereof, the Stock Options shall immediately
become exercisable for all of the Shares upon the effective date of a Change in
Control, including the portion thereof which would, but for this Section 2(c),
not yet be exercisable, unless, in the event of an Acquisition, the agreement
with respect to which includes a provision reasonably acceptable to Taylor for
the assumption of the Stock Options or the substitution for the Stock Options of
an option or options covering the stock of a Publicly Traded successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments
made in accordance with Section 4 hereof as to the number and/or nature of the
Shares purchasable upon the exercise of the Stock Options, then in such case the
Stock Options shall continue in the manner and under the terms so provided.
Section 3. Anti-Dilution In The Event Of A Covered Acquisition. (a) In
the event of the occurrence of a Covered Acquisition in which the Acquisition
Consideration shall be less than U.S. Eight Dollars (US $8.00) per share, Taylor
shall be entitled to receive, as an Anti-Dilution Premium, an amount equal to
the consequent reduction in the Potential Realizable Value of the Group I
Options and a result of the Reference Price being less than the Group I Options'
Exercise Price.
(b) The Anti-Dilution Premium shall be calculated by Tremont,
and delivered, at Tremont's option, in any combination of the following,
together with a
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Computation Statement, as soon as practicable after the Computation Date, but in
no event later than ten (10) days following the Computation Date:
(i) A payment by certified or cashier's check for an amount in
United States Dollars;
(ii) A reduction in the Group II Options Exercise Price thereby increasing
the Potential Realizable Value of the Group II Options, provided that the Group
II Options shall be assumed by the acquiring Person in the Covered Acquisition;
and/or
(iii) The issuance of Shares, Stock Options or other
securities valued
as provided in Section 3(e) hereof.
(c) Taylor's right to receive an Anti-Dilution Premium shall
terminate on the date which is the third anniversary of the Effective Date,
unless a Computation Date occurs before such anniversary in which case such
right shall survive until such time as Taylor shall receive the Anti-Dilution
Premium in accordance with this Section 3(a) in respect of the Covered
Acquisition to which such Computation Date relates.
(d) The Anti-Dilution Premium shall apply in respect of Shares
issuable upon the exercise of the Group I Options owned only by Taylor and not
to any transferee or assignee of Taylor's Shares other than to a Taylor
Affiliate.
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(e) In determining the amount of any Acquisition Consideration
for the purposes of this Agreement, the following considerations shall apply:
(i) in the case of any Covered Acquisition, the computation of
Acquisition Consideration shall be effected on a fully diluted basis, i.e., all
options, warrants and other securities convertible into Common Stock shall be
deemed to have been exercised or converted, as the case may be, with the
consideration therefor having been paid at the instant prior to any Actual
Distribution or Deemed Distribution to the holders of the Shares;
(ii) United States currency or other currencies to be received as part of
Acquisition Proceeds shall be valued at face value;
(iii) each fixed non-contingent deferred payment to
be received as
part of Acquisition Proceeds shall be valued at present value at the Computation
Date, using a discount factor equal to the prime rate of Citibank, NA, or any
successor thereto, as in effect at the Computation Date, plus;
(iv) marketable securities to be received as part of such proceeds shall be
valued at the Current Market Price at the Computation Date;
(v) all other property shall be valued at Fair Market Value at the
Computation Date;
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(vi) in the case of a sale of substantially all of its assets by Tremont,
or any other transaction in which Acquisition Consideration is not paid directly
to the holders of the Shares, in order to determine the amount of Acquisition
Proceeds to be allocated to all of the Shares, it shall be assumed that the
Acquisition Proceeds to be received by Tremont, valued in accordance with this
Section 3(d), after payment of all outstanding liabilities, shall be immediately
distributed to all of the security holders of Tremont in a manner such that
there shall first be allocated to any holders of preferred shares or other
senior securities of Tremont such amounts owing to such holders as determined by
the Board of Directors in accordance with the terms of such shares or
securities, including any accrued and unpaid dividends, with the balance of such
consideration being allocated to the holders of all of the Shares and any other
shares of common stock of Tremont in accordance with their terms;
(vii) in the case of a transaction in which the Acquisition Consideration
shall be payable directly to Tremont's security holders, the amount to be
allocated to the Shares shall be the actual amount so payable, valued in
accordance with this Section 3(d);
(viii) any determination of value to be made pursuant
to this Section
3(d) shall be initially made by the Board of Directors, utilizing the services
of such appraiser(s) or other expert(s) as the Board of Directors shall deem
appropriate, and the Board of Directors shall cause there to be delivered to
Taylor a Computation Statement showing such valuations and computations; and
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(ix) any Anti-Dilution Premium payable to Taylor or any other person shall
be deducted as a liability of Tremont in calculating Acquisition Consideration.
(f) In the event that Taylor shall not agree with the
computations and valuations set forth in the Computation Statement, then the
parties shall submit such matter for resolution to an "independent" committee of
the Board of Directors, consisting of all directors then sitting and who are not
then and were not previously executive officers of Tremont (the "Committee"). If
such matter has not been resolved within thirty (30) days following its
submission to the Committee the parties shall submit such matter to any one of
the five largest nationally known accounting firms in the United States, or
their successors, as may be jointly selected by Taylor and Tremont (the
"Accountants"); provided, however, that Tremont specifically agrees that its
auditors shall not be considered for selection. The parties agree that the
decision of the Accountants with respect to the computations and valuations set
forth in the Computation Statement will be binding on the parties and shall not
be subject to arbitration in accordance with Section 10 hereof. Each of Taylor
and Tremont shall bear him or its own costs with respect to the dispute
resolution process described in this Section 9(f), and shall share equally the
fees and disbursements of the Accountants.
Section 4. Adjustments. Upon the occurrence of any of the following events
described below, Taylor's rights with respect to the Stock Options and the
optioned Shares shall be adjusted as follows:
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In the event the Company shall after the date of this Agreement (i)
declare a dividend or make a distribution on its Common Stock in shares of its
capital stock, (ii) subdivide its outstanding shares of Common Stock through
stock split or otherwise, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or (iv) issue by
reclassification of its Common Stock (including any reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation) other securities of the Company, the number and/or nature of the
Shares purchasable upon exercise of each Stock Option and/or the Exercise Price
shall be adjusted so that Taylor shall be entitled to receive the kind and
number of Shares or other securities of the Company which he would have owned or
been entitled to receive after the happening of any of the events described
above, had such Stock Option been exercised immediately prior to the happening
of such event or any record date with respect thereto. Any adjustment made
pursuant to this Section 4 shall become effective retroactively as of the record
date of such event. In the event of any such adjustment, Tremont shall send to
Taylor a notice of such adjustment prepared and signed by the Chief Financial
Officer of Tremont, which shall set forth the number of Shares purchasable upon
the exercise of each Stock Option and the Exercise Price of the Shares after
such adjustment, a brief statement of the facts requiring such adjustment and
computation by which such adjustment was made.
Section 5. Method of Exercise. (a) The Stock Options may be exercised by
Taylor hereunder by giving ten (10) Business Days' notice of exercise to Tremont
specifying the number of Shares to be purchased and the total purchase price
therefor accompanied by
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cash, certified check for the amount in United States Dollars, Shares, or any
combination thereof, as may be elected by Taylor, in payment of such price. If
payment is made in Shares, the Common Stock must then be Publicly Traded and the
value of the Shares received by Tremont for purposes of determining the amount
of payment shall be their Current Market Price as of the date of exercise.
(b) In lieu of exercise of any portion of the Stock Options
for cash provided in Section 5(a) hereof, the Stock Options (or any portion
thereof) may, at the election of Taylor, be converted in a cashless exercise
into the nearest whole number of shares of Common Stock equal to (i) the product
of (A) the number of Stock Options to be so converted, (B) the number of Shares
of Common Stock then issuable upon the exercise of each Stock Option, and (C)
the excess, if any, of the Current Market Price per share with respect to the
date of conversion over the Exercise Price in effect on the Business Day next
preceding the date of conversion, divided by (ii) the Current Market Price per
share with respect to the date of conversion.
Section 6. Requirements Of Law; Delivery. (a) In accepting the Stock
Options,
Taylor understands and specifically acknowledges that:
(i) the Securities have not been registered under the Securities Act or
under the securities laws of any U.S. state jurisdiction, or under the laws of
any other jurisdiction, by reason of a specified exemption from the registration
provisions thereunder;
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(ii) the Securities must be held indefinitely unless they are subsequently
registered under the Securities Act and under other applicable securities laws
or an exemption from such registration is available; and
(iii) all certificates for the Securities issued to him may bear a legend
in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH
REGISTRATION OR UNLESS THE ISSUER RECEIVES AN OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER), SATISFACTORY TO
THE ISSUER (BOTH AS TO THE ISSUER OF THE OPINION AND THE FORM
AND SUBSTANCE THEREOF), THAT SUCH DISPOSITION WILL NOT REQUIRE
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE
SECURITIES ARE SUBJECT TO FURTHER RESTRICTIONS AS SET FORTH IN
THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF
MARCH 8, 1999."
(b) No Shares shall be delivered upon the exercise of a Stock
Option until the Exercise Price shall have been paid in full and, if required by
Tremont in its sole discretion, until Taylor has given Tremont a written
statement reasonably satisfactory to it that he is purchasing the Shares as an
investment and not with a view to sale or distribution of any of such Shares.
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Section 7. Transfer Restrictions. (a) Stock Options may not be transferred
at any time without the prior written consent of Tremont and may be exercised
pursuant to the terms hereof only by Taylor.
(b) Taylor shall at no time sell, assign, encumber, transfer,
pledge or hypothecate or otherwise dispose of all or any part of the Shares now
owned or hereafter acquired by him or any interest therein except as
specifically permitted in this Agreement. Any such purported encumbrance,
transfer or disposition in violation of this Agreement shall be invalid and
shall be of no force and effect and shall not be registered, or otherwise
recognized, or caused to be registered by Tremont.
(c) Notwithstanding anything to the contrary contained in this
Agreement, Taylor is under no restrictions as to the transfer by him of any or
all of the Shares owned by him to one or more Taylor Affiliates provided that
each such Taylor Affiliate shall execute and deliver to Tremont a written
consent, in a form to be acceptable to Tremont and Taylor, to be bound by all of
the provisions of this Agreement. In the event of any transfer by Taylor to a
Taylor Affiliate of all or any part of the Shares owned by him (or in the event
of any subsequent transfer by any such Taylor Affiliate to another Taylor
Affiliate), such Taylor Affiliate shall receive and hold such Shares subject to
the terms of this Agreement and the rights and obligations hereunder of Taylor
as though such Shares were still owned by Taylor, and Taylor (together with all
of him Taylor Affiliates) shall continue to be deemed a single
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shareholder. There shall be no further transfer of such Shares by a Taylor
Affiliate except between and among such Taylor Affiliate, Taylor and the other
Taylor Affiliates.
(d) (i) In the event that Taylor shall at any time desire to
sell Offered Shares pursuant to a Third Party Offer, Taylor shall first offer
such Offered Shares to Tremont pursuant to a written notice (the "Offer
Notice"), advising Tremont of him intention to make such disposition. The Offer
Notice shall set forth and specify, (x) the name(s) and address(es) of the Third
Parties, and (y) the number of Shares subject to the Third Party Offer, the
intended purchase price thereof, the method of payment therefor and any other
material terms of such Third Party Offer.
(ii) Tremont shall have the option (the "Tremont Option"), exercisable no
later than ten (10) Business Days (the "First Refusal Period") after receipt of
the Offer Notice from Taylor, and subject to all applicable laws and
regulations, to agree to purchase any or all of the Offered Shares, at the price
and on the terms contained in the Third Party Offer.
(iii) If Tremont shall elect to exercise the Tremont Option, it shall give
a written notice to Taylor prior to the end of the First Refusal Period of its
intention to exercise (the "Tremont Notice") and specifying the number of
Offered Shares Tremont is electing to purchase. In the event that Tremont shall
elect to purchase all or any part of the Offered Shares, then the closing of the
purchase and sale of such Offered Shares shall take
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place on a date as agreed to between Taylor and Tremont, which shall be no later
than thirty (30) Business Days following Tremont's delivery of the Tremont
Notice at the principal executive offices of Tremont, or such other place as
Tremont may reasonably designate.
(iv) If Tremont shall not elect to exercise the
Tremont Option prior
to the end of the First Refusal Period, Taylor shall have the right, for a
period of thirty (30) days after the expiration of the First Refusal Period, to
sell to the Third Party all or any portion of the Offered Shares as to which
Tremont shall not have exercised the Tremont Option but only pursuant to the
Third Party Offer. In addition to the foregoing, any offer and sale of Offered
Shares pursuant to a Third Party Offer shall, in all respects, comply with the
registration provisions of any applicable securities law (or be exempt
therefrom) and the conclusive written opinion of Taylor's counsel that such
offer and sale comply with said registration provisions or are exempt therefrom
shall be received by Tremont as a condition to Tremont's registering or causing
to be registered the transfer of any Offered Shares. Copies of all documents
relating to such sale shall be forwarded to the Secretary of Tremont no later
than five (5) days prior to the proposed date of such sale. If such sale by
Taylor pursuant to the terms of the Third Party Offer is not consummated within
thirty (30) days after the expiration of the First Refusal Period, Taylor's
Shares shall again be subject to all of the terms and provisions of this
Agreement.
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(e) For so long as Taylor shall be employed by Employer, or
any of its Affiliates, Tremont's Right of First Refusal shall apply to all
Shares now or hereafter acquired by him whether pursuant to an exercise of a
Stock Option or otherwise.
Section 8. Termination Under Employment Agreement. In the event that
the Employment Agreement is terminated by the Employer with or without Cause, as
such term is defined in the Employment Agreement, or the Employer does not elect
to renew the Employment Agreement beyond the "Term" (as such term is defined in
the Employment Agreement and not in this Agreement), and Taylor ceases to be
employed by Employer, or the Employment Agreement is terminated as a result of
Taylor's death or disability, Taylor (or him estate, as the case may be), in all
cases, shall retain the right to exercise the unexercised portion of the Stock
Options, at any time or from time to time until the Expiration Date in
accordance with Section 2.
Section 9. Rights In Stock Before Issuance And Delivery. Taylor shall
not be entitled to the privileges of stock ownership in respect of any Shares
issuable upon exercise of the Stock Options, unless and until such Shares have
been issued to Taylor as fully paid shares.
Section 10. Stock Option Administration. Other than as set forth in Section
3(e) hereof, in the event of a disagreement as to the interpretation of this
Agreement or the terms of the Stock Options, or any amendment hereto or any
procedure hereunder, or as to any
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right or obligation arising from or related to this Agreement, the matter shall
be submitted for resolution by the parties to the Committee. If such
disagreement has not been resolved within thirty (30) days following its
submission to the Committee, the disagreement will be settled by arbitration.
Such arbitration shall be held in accordance with the United Nations Commission
on International Trade Law Arbitration Rules, with the American Arbitration
Association acting as the appointing authority. Any arbitration proceeding as
described herein shall be held in the City of New York. The parties hereto agree
that any arbitration shall be a final and binding determination as to such
matters as described therein and a judgment of any federal, state or other court
having jurisdiction thereof may be entered upon the award made pursuant to the
arbitration.
Section 11. No Employment Contract. This Agreement shall not confer
upon Taylor any right to continued employment by Tremont or any of its
Affiliates, nor shall this Agreement interfere in any way with the rights of
TASS and Tremont under the terms of the Employment Agreement.
Section 12. Notices. Any notice or other communication under this
Agreement shall be in writing and shall be considered given when received by the
party to whom or which it is addressed. Such notice shall be sent by personal
delivery, electronically, facsimile transmission or recognized overnight
courier, receipt acknowledged, to the respective parties at their addresses set
forth below (or at such other address as any party may have previously specified
by notice to the other parties as the address to which notice
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shall be given to it). The same shall be deemed received on the date of
delivery. Any notice delivered personally, electronically or by facsimile
transmission shall be followed on the same day by written notice sent via
recognized overnight courier delivery service.
If to Tremont:
Tremont Advisers, Inc.
Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
U.S.A.
Attention: Stephen T. Clayton, Chief Financial Officer
Facsimile No.: 914-925-9337
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
U.S.A.
Attention: Michael G. Tannenbaum, Esq.
Facsimile No.: 212-371-1084
If to Taylor:
Laurence Huntington Taylor, II
83 Tuxford Terrace
Basking Ridge, New Jersey 07920
U.S.A.
Facsimile No.: 908-630-0461
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attention: Frederic A. Kleinberg, Esq.
Facsimile No.: 212-986-8866
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Section 13. Tax Consequences. Taylor has reviewed with him own tax advisors
the foreign and local tax consequences of the transactions contemplated by this
Agreement. Taylor is relying solely on such advisors and not on any statements
or representations of the Company or any of its agents.
Section 14. Headings. The headings used in this Agreement are solely for
convenience of reference and shall not affect its interpretation.
Section 15. Waiver Of Breach. The waiver by any party of a breach of any
provision in this Agreement shall not operate or be construed as a waiver of any
subsequent
breach by a party.
Section 16. Governing Law. This Agreement shall be interpreted,
construed and governed according to the laws of the State of New York, the
United States of America, without reference to conflicts of law principles
thereof. Except with respect to disputes wherein the parties have expressly
agreed herein to submit such dispute to arbitration, the parties hereto submit
to the jurisdiction of the courts of the State of New York and of any federal
court located therein over any dispute arising out of or relating to this
Agreement or any of the transactions contemplated hereby, and each party hereby
agrees that all claims in respect of such dispute shall be heard and determined
in such court.
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Section 17. Severability. If any section, term or provision of this
Agreement shall be held or determined to be unenforceable, the balance of this
Agreement shall nevertheless continue in full force and effect unaffected by
such holding or determination. In addition, in any such event, the parties agree
that it is their intention and agreement that any such section, term or
provision which is held or determined to be unenforceable as written, shall
nonetheless be enforced and binding to the fullest extent permitted by law as
though such section, term or provision had been written in such a manner and to
such extent as to be enforceable under the circumstances.
Section 18. Amendments. No amendment, modification or waiver of any
provisions of this Agreement shall be made except by an instrument in writing
signed by the parties charged.
Section 19. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the matters set forth herein and
supersedes any prior understanding or agreement, oral or written, with respect
thereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TREMONT ADVISERS, INC.
By:
Name:
Title:
LAURENCE HUNTINGTON TAYLOR, II
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Exhibit 10.63
EXECUTION COPY
STOCK OPTION AND BENEFITS AGREEMENT
THIS STOCK OPTION AND BENEFITS AGREEMENT (the "Agreement"), made as of
March 8, 1999, by and between TREMONT ADVISERS, INC., a Delaware (U.S.A.)
corporation with its principal executive offices at 555 Theodore Fremd Avenue,
Rye, New York 10580, U.S.A. ("Tremont"), and NICOLA MEADEN, an individual
residing in London, England ("Meaden").
W I T N E S S E T H:
WHEREAS, in connection with the plan of reorganization among TASS,
Tremont and the holders of all of the ordinary shares of TASS, Tremont has
caused TASS to employ Meaden as the President of TASS;
WHEREAS, in connection with Meaden's employment by TASS, Tremont has
agreed to grant and Meaden wishes to accept the option to purchase from Tremont
Shares in accordance with and subject to the terms and conditions contained in
this Agreement;
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WHEREAS, the Exercise Price set forth herein for the Group I Options
granted to Meaden hereunder reflects the approximate Fair Market Value per Share
determined as of December 9, 1998 by the Board of Directors; and
WHEREAS, in addition to granting Meaden options to purchase Shares,
Tremont wishes to provide to Meaden certain other benefits as set forth herein
in the event there shall occur one or more transactions involving Tremont
constituting a Covered Acquisition as described herein;
NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are specifically acknowledged, the parties
agree as follows:
Section 1. Certain Definitions. The terms defined in this Section 1,
whenever used in this Agreement, shall, unless the context otherwise requires,
have the respective meanings hereinafter specified in Section 1.
(a) "Acquisition" shall mean the acquisition of Tremont by
another unaffiliated entity in a merger, consolidation, a sale of all or
substantially all of Tremont's assets or securities, a reorganization
transaction (other than a mere reincorporation or the creation of a holding
company), a liquidation of Tremont or similar transaction.
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(b) "Acquisition Consideration" shall mean the amount to be
allocated to one Share out of the Acquisition Proceeds in a Covered Acquisition.
(c) "Acquisition Proceeds" shall mean all cash, deferred
payments, securities and other articles of value received by Tremont and/or the
holders of any of Tremont's securities in consideration for the sale by Tremont
of its assets or the transfer by such holders of their securities in any Covered
Acquisition.
(d) "Actual Distribution" shall mean the actual distribution
on a date or dates specified of Acquisition Consideration to the holders of the
Shares in connection with a Covered Acquisition.
(e) "Affiliate" shall mean, with respect to any Person, an
individual, corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, incorporated organization,
governmental or regulatory or other entity controlling, controlled by or under
common control with such Person.
(f) "Agreement" means this Stock Option and Benefits
Agreement, dated March 11, 1999, by and between Tremont and Meaden.
(g) "Anti-Dilution Premium" shall mean the benefit or benefits
calculated pursuant to Section 4.
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(h) "Board of Directors" means the board of directors of
Tremont, as elected from time to time in accordance with the by-laws of Tremont.
(i) "Business Day" shall mean a day on which the New York
Stock Exchange is open for trading.
(j) "Change in Control" shall mean (i) an Acquisition, as such
term is defined in the Stock Option Agreements to be executed by Meaden and
Taylor, respectively, or (ii) during any one (1) year period, individuals who at
the beginning of such period constitute the entire Board of Directors shall
cease for any reason to constitute a majority of the Board of Directors unless
the election or nomination for election by Tremont's shareholders of each new
director was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who were directors at the beginning of the period.
(k) "Common Stock" means Tremont's authorized Class B Common
Stock, par value $.01 per share.
(l) "Computation Date" shall mean the date upon which the
transactions contemplated in a Covered Acquisition are actually consummated and
closed.
(m) "Computation Statement" shall mean the statement which may
be issued by the Board of Directors pursuant to Section 4(f).
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(n) "Covered Acquisition" shall mean an Acquisition the
Computation Date for which shall occur before the third anniversary of the
Effective Date.
(o) "Current Market Price" per Share or for any other security
for purposes of any provision of this Agreement as of a Determination Date shall
mean:
(i) If any of the Shares or any of such securities is then Publicly
Traded, the average of the daily market prices of the Shares or such securities
over a period of five (5) consecutive days prior to such date on which the
Shares or such securities have traded.
As used in this clause (i), "market price" shall mean the average of the
closing price of Shares or such securities on any Business Day, as reported with
respect to the market (or the composite of markets, if more than one) on all
primary national securities exchanges in the United States on which any of the
Shares or such securities are then listed, or, if there shall have been no sales
on any such exchange on such day, the average of the closing bid and asked
prices on all such exchanges at the close of trading on such day, or, if the
Shares or such securities shall not be so listed, if applicable, the last sale
price, or, if there shall have been no sales on such day, the average of the
representative bid and asked prices at the close of trading on such day as
quoted by Nasdaq or as listed on the OTC Bulletin Board (Nasdaq and the OTC
Bulletin Board being collectively referred to as the "OTC Market"), or, if there
shall have been no sales in the OTC Market on such day or if
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the Shares or such securities are not quoted or listed in the OTC Market, the
average of the closing bid and asked prices as furnished by two members of the
NASD selected from time to time by the Company for that purpose.
(ii) If the Shares or such other securities shall not
be listed on any domestic exchange or quoted on Nasdaq or on the OTC
Bulletin Board or the bid
and asked prices for which cannot be obtained from two members of the NASD, as
described above, then the Current Market Price shall be the Fair Market Value
per Share or per share or unit of any of such other securities as of such
Determination Date.
(p) "Deemed Distribution" shall mean a distribution of
Acquisition Consideration to the holders of the Shares deemed to have occurred
for the purposes of this Agreement immediately following a Covered Acquisition
involving a sale of assets by Tremont.
(q) "Determination Date" shall mean any date as of which,
pursuant to any provision of this Agreement, a determination of Current Market
Price shall be required or permitted.
(r) "Effective Date" shall mean the date upon which the
Employment Agreement shall have become effective and Meaden's employment with
Employer shall have commenced.
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(s) "Employer" means TASS.
(t) "Employment Agreement" means the Employment Agreement
among Employer, Tremont and Meaden made as of March 11, 1999.
(u) "Exercise Price" shall mean the per Share option exercise
price for each of the Group I Options and the Group II Options set forth in
Section 2 hereof.
(v) "Expiration Date" means the date on which the Stock
Options and their right of exercise shall expire, as provided in Section 2
hereof.
(w) "Fair Market Value" as of any Determination Date or
Computation Date shall mean, as determined in good faith by the Board of
Directors (subject to Section 10), (i) as to Common Stock, as of such date, the
price of Common Stock in a sale of Tremont as a going concern in an arm's length
transaction to an independent Third Party, without regard to the lack of
liquidity of the Common Stock due to any restrictions or other limitations
contained in this Agreement, and (ii) as to any other property or securities
referred to herein, the price of such property or securities as of such date in
an arm's length transaction to an independent Third Party. Such valuation shall
assume a sale to a hypothetical "ready, willing and able" Third Party without
consideration given to any potential forced sale occurring by virtue of the
absence of actual Third Party purchasers on any Determination Date or
Computation Date.
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(x) "Floor Price" shall mean a price per Share for the Common
Stock of U.S. Seven Dollars and 50/100 (US $7.50).
(y) "Group I Options" shall mean options to acquire Shares
granted by Tremont as of the Effective Date pursuant to Section 2(a) of this
Agreement, having an Exercise Price of U.S. Eight Dollars (US $8.00) per Share.
(z) "Group II Options" shall mean options to acquire Shares
granted by Tremont as of the Effective Date pursuant to Section 2(b) of this
Agreement, having an exercise price of U.S. Fifteen Dollars (US $15.00) per
Share.
(aa) "Meaden Affiliate" shall mean any of Meaden's spouse,
parents, siblings, lineal descendants, spouses of any lineal descendants, lineal
descendants of siblings and trusts for the benefit of all or any of the
foregoing.
(ab) "NASD" means The National Association of Securities Dealers, Inc.
(ac) "Nasdaq" means the NASD Automated Quotation System.
(ad) "Offered Shares" shall mean the number of Shares Meaden
wishes to sell pursuant to any Third Party Offer and for which Tremont shall
have a right of first refusal in accordance with Section 7(c) hereof.
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(ae) "OTC Bulletin Board" means the quotation system for the non-Nasdaq
over-the-counter market.
(af) "Person" shall mean any individual, corporation,
partnership, limited liability company, firm, joint venture, association,
joint-stock company, trust, incorporated organization, governmental or
regulatory or other entity.
(ag) "Potential Realizable Value" shall mean, with respect to
any Stock Option, its potential realizable value, as determined in good faith by
the Board of Directors, using models and methods as reasonably, determined by
the Board of Directors to be customary in the securities and financial services
industries, which take into account, among other things, the period remaining
until the expiration of the option, the volatility of the security and current
interest rates.
(ah) "Publicly Traded" shall mean, as to any security referred
to herein, if listed or admitted to unlisted trading privileges on a national
securities exchange or designated as a National Market System security on an
interdealer quotation system by the NASD or if sales or bid and offer quotations
are reported for that class of such security by Nasdaq or the OTC Bulletin
Board.
(ai) "Reference Price" per Share shall mean with respect to a
Covered Transaction the greater of the Acquisition Consideration and the Floor
Price.
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(aj) "Right of First Refusal" shall mean Tremont's option to
purchase Shares pursuant to Section 7(c) hereof in the event that Meaden shall
have received, and wishes to accept, a Third Party Offer with respect to all or
any of the Shares owned by her.
(ak) "Securities" shall mean any exercisable Stock Options and
Shares issued upon the exercise of Stock Options.
(al) "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.
(am) "Share" or "Shares" shall mean one or more shares of Common Stock.
(an) "Stock Option" or "Stock Options" shall mean, singularly
or collectively, as the case may be, the Group I Options and the Group II
Options.
(ao) "TASS" shall mean TASS Management Limited, a company
incorporated in England and Wales.
(ap) "Third Party" or "Third Parties" shall mean a Person who
is not an Affiliate of Meaden or Tass, or any of Tass's officers, directors,
employees or agents or any of their respective relatives, or an individual
otherwise related in any capacity to Meaden.
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(aq) "Third Party Offer" shall mean a bona fide written offer
from a Third Party to purchase Shares from Meaden.
(ar) "Tremont" means Tremont Advisers, Inc., a corporation
organized and existing under the laws of the State of Delaware.
(as) "U.K." means the United Kingdom of Great Britain and Northern Ireland.
(at) "U.S." means the United States of America
Section 2. Options. As of the Effective Date, Tremont hereby grants to
Meaden, and Meaden hereby accepts options described below to purchase the number
of Shares specified below on the terms and subject to the conditions described
herein, during a term (the "Term") which commences on the Effective Date and
ends at 12:00 midnight (prevailing local time at Tremont's principal offices) on
the Expiration Date, which is the day that is the date of the sixth anniversary
of the Effective Date, subject to the provisions for vesting described herein,
at the Exercise Price specified below.
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(a) Group I Options. Subject to Section 4:
(i) Number of Shares; Exercise Price. The Group I Options
hereby granted to Meaden entitle Meaden to subscribe for and purchase, at any
time or from time to time subject to vesting as provided below, until the
Expiration Date, up to 147,447 Shares at an Exercise Price equal to U.S. Eight
Dollars (US $8.00) per Share.
(ii) Vesting. The Group I Options shall vest and become
exercisable in installments as follows:
(A) Up to sixty percent (60%) of the total number of Shares optioned
pursuant to this Section 2(a) may be exercised on and after the Effective Date,
for up to an aggregate of 88,468 Shares; and
(B) At any time on or after March 11, 2000, the Group
I Options
may be exercised as to all Shares optioned for which they have not been
previously exercised until the Expiration Date, whereupon the Group I Options
shall expire and may no longer be exercised.
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(b) Group II Options. Subject to Section 4:
(i) Number of Shares; Exercise Price. The Group II Options
hereby granted to Meaden entitle Meaden to subscribe for and purchase subject to
vesting as provided below, at any time or from time to time, until the
Expiration Date, up to 24,844 Shares at an Exercise Price equal to Fifteen
Dollars (US $15.00) per Share.
(ii) Vesting. The Group II Options shall vest and become
exercisable in installments as follows:
(A) Up to an aggregate of 8,281 Shares optioned pursuant to this Section
2(b) may be exercised on or after the Effective Date;
(B) Up to an aggregate of 16,563 Shares optioned
pursuant to this Section 2(b) may be exercised at any time on and after
March 11, 2000; and
(C) At any time on or after March 11, 2001, the Group II Options may be
exercised as to all Shares optioned for which they have not been previously
exercised until the Expiration Date, whereupon the Group II Options shall expire
and may no longer be exercised.
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(c) Acceleration. Notwithstanding Section 2(a) and (b) but otherwise
subject to the terms and conditions hereof, the Stock Options shall immediately
become exercisable for all of the Shares upon the effective date of a Change in
Control, including the portion thereof which would, but for this Section 2(c),
not yet be exercisable, unless, in the event of an Acquisition, the agreement
with respect to which includes a provision reasonably acceptable to Meaden for
the assumption of the Stock Options or the substitution for the Stock Options of
an option or options covering the stock of a Publicly Traded successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments
made in accordance with Section 4 hereof as to the number and/or nature of the
Shares purchasable upon the exercise of the Stock Options, then in such case the
Stock Options shall continue in the manner and under the terms so provided.
Section 3. Anti-Dilution In The Event Of A Covered Acquisition. (a) In
the event of the occurrence of a Covered Acquisition in which the Acquisition
Consideration shall be less than U.S. Eight Dollars (US $8.00) per share, Meaden
shall be entitled to receive, as an Anti-Dilution Premium, an amount equal to
the consequent reduction in the Potential Realizable Value of the Group I
Options and a result of the Reference Price being less than the Group I Options'
Exercise Price.
(b) The Anti-Dilution Premium shall be calculated by Tremont,
and delivered, at Tremont's option, in any combination of the following,
together with a
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Computation Statement, as soon as practicable after the Computation Date, but in
no event later than ten (10) days following the Computation Date:
(i) A payment by certified or cashier's check for an amount in United
States Dollars;
(ii) A reduction in the Group II Options Exercise
Price thereby
increasing the Potential Realizable Value of the Group II Options, provided that
the Group II Options shall be assumed by the acquiring Person in the Covered
Acquisition; and/or
(iii) The issuance of Shares, Stock Options or other
securities valued
as provided in Section 3(e) hereof.
(c) Meaden's right to receive an Anti-Dilution Premium shall
terminate on the date which is the third anniversary of the Effective Date,
unless a Computation Date occurs before such anniversary in which case such
right shall survive until such time as Meaden shall receive the Anti-Dilution
Premium in accordance with this Section 3(a) in respect of the Covered
Acquisition to which such Computation Date relates.
(d) The Anti-Dilution Premium shall apply in respect of Shares
issuable upon the exercise of the Group I Options owned only by Meaden and not
to any transferee or assignee of Meaden's Shares other than to a Meaden
Affiliate.
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(e) In determining the amount of any Acquisition Consideration
for the purposes of this Agreement, the following considerations shall apply:
(i) in the case of any Covered Acquisition, the computation of Acquisition
Consideration shall be effected on a fully diluted basis, i.e., all options,
warrants and other securities convertible into Common Stock shall be deemed to
have been exercised or converted, as the case may be, with the consideration
therefor having been paid at the instant prior to any Actual Distribution or
Deemed Distribution to the holders of the Shares;
(ii) United States currency or other currencies to be received as part of
Acquisition Proceeds shall be valued at face value;
(iii) each fixed non-contingent deferred payment to be received as part of
Acquisition Proceeds shall be valued at present value at the Computation Date,
using a discount factor equal to the prime rate of Citibank, NA, or any
successor thereto, as in effect at the Computation Date, plus __%;
(iv) marketable securities to be received as part of such proceeds shall be
valued at the Current Market Price at the Computation Date;
(v) all other property shall be valued at Fair Market Value at the
Computation Date;
[
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(vi) in the case of a sale of substantially all of its assets by Tremont,
or any other transaction in which Acquisition Consideration is not paid directly
to the holders of the Shares, in order to determine the amount of Acquisition
Proceeds to be allocated to all of the Shares, it shall be assumed that the
Acquisition Proceeds to be received by Tremont, valued in accordance with this
Section 3(d), after payment of all outstanding liabilities, shall be immediately
distributed to all of the security holders of Tremont in a manner such that
there shall first be allocated to any holders of preferred shares or other
senior securities of Tremont such amounts owing to such holders as determined by
the Board of Directors in accordance with the terms of such shares or
securities, including any accrued and unpaid dividends, with the balance of such
consideration being allocated to the holders of all of the Shares and any other
shares of common stock of Tremont in accordance with their terms;
(vii) in the case of a transaction in which the Acquisition
Consideration shall be payable directly to Tremont's security holders, the
amount to be allocated to the Shares shall be the actual amount so payable,
valued in accordance with this Section 3(d);
(viii) any determination of value to be made pursuant to this Section 3(d)
shall be initially made by the Board of Directors, utilizing the services of
such appraiser(s) or other expert(s) as the Board of Directors shall deem
appropriate, and the Board of Directors shall cause there to be delivered to
Meaden a Computation Statement showing such valuations and computations; and
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(ix) any Anti-Dilution Premium payable to Meaden or any other
person shall be deducted as a liability of Tremont in calculating
Acquisition Consideration.
(f) In the event that Meaden shall not agree with the
computations and valuations set forth in the Computation Statement, then the
parties shall submit such matter for resolution to an "independent" committee of
the Board of Directors, consisting of all directors then sitting and who are not
then and were not previously executive officers of Tremont (the "Committee"). If
such matter has not been resolved within thirty (30) days following its
submission to the Committee the parties shall submit such matter to any one of
the five largest nationally known accounting firms in the United States, or
their successors, as may be jointly selected by Meaden and Tremont (the
"Accountants"); provided, however, that Tremont specifically agrees that its
auditors shall not be considered for selection. The parties agree that the
decision of the Accountants with respect to the computations and valuations set
forth in the Computation Statement will be binding on the parties and shall not
be subject to arbitration in accordance with Section 10 hereof. Each of Meaden
and Tremont shall bear her or its own costs with respect to the dispute
resolution process described in this Section 9(f), and shall share equally the
fees and disbursements of the Accountants.
Section 4. Adjustments. Upon the occurrence of any of the following events
described below, Meaden's rights with respect to the Stock Options and the
optioned Shares shall be adjusted as follows:
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<PAGE>
In the event the Company shall after the date of this Agreement (i)
declare a dividend or make a distribution on its Common Stock in shares of its
capital stock, (ii) subdivide its outstanding shares of Common Stock through
stock split or otherwise, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or (iv) issue by
reclassification of its Common Stock (including any reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation) other securities of the Company, the number and/or nature of the
Shares purchasable upon exercise of each Stock Option and/or the Exercise Price
shall be adjusted so that Meaden shall be entitled to receive the kind and
number of Shares or other securities of the Company which she would have owned
or been entitled to receive after the happening of any of the events described
above, had such Stock Option been exercised immediately prior to the happening
of such event or any record date with respect thereto. Any adjustment made
pursuant to this Section 4 shall become effective retroactively as of the record
date of such event. In the event of any such adjustment, Tremont shall send to
Meaden a notice of such adjustment prepared and signed by the Chief Financial
Officer of Tremont, which shall set forth the number of Shares purchasable upon
the exercise of each Stock Option and the Exercise Price of the Shares after
such adjustment, a brief statement of the facts requiring such adjustment and
computation by which such adjustment was made.
Section 5. Method of Exercise. (a) The Stock Options may be exercised by
Meaden hereunder by giving ten (10) Business Days' notice of exercise to Tremont
specifying the number of Shares to be purchased and the total purchase price
therefor
306
<PAGE>
accompanied by cash, certified check for the amount in United States Dollars,
Shares, or any combination thereof, as may be elected by Meaden, in payment of
such price. If payment is made in Shares, the Common Stock must then be Publicly
Traded and the value of the Shares received by Tremont for purposes of
determining the amount of payment shall be their Current Market Price as of the
date of exercise.
(b) In lieu of exercise of any portion of the Stock Options
for cash provided in Section 5(a) hereof, the Stock Options (or any portion
thereof) may, at the election of Meaden, be converted in a cashless exercise
into the nearest whole number of shares of Common Stock equal to (i) the product
of (A) the number of Stock Options to be so converted, (B) the number of Shares
of Common Stock then issuable upon the exercise of each Stock Option, and (C)
the excess, if any, of the Current Market Price per share with respect to the
date of conversion over the Exercise Price in effect on the Business Day next
preceding the date of conversion, divided by (ii) the Current Market Price per
share with respect to the date of conversion.
Section 6. Requirements Of Law; Delivery. (a) In accepting the Stock
Options, Meaden understands and specifically acknowledges that:
(i) the Securities have not been registered under the Securities Act or
under the securities laws of any U.S. state jurisdiction, or under the laws of
any other jurisdiction, by reason of a specified exemption from the registration
provisions thereunder;
307
<PAGE>
(ii) the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act and under other applicable
securities laws or an exemption from such registration is available; and
(iii) all certificates for the Securities issued to
her may bear a legend in substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH
REGISTRATION OR UNLESS THE ISSUER RECEIVES AN OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE ISSUER), SATISFACTORY TO
THE ISSUER (BOTH AS TO THE ISSUER OF THE OPINION AND THE FORM
AND SUBSTANCE THEREOF), THAT SUCH DISPOSITION WILL NOT REQUIRE
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE
SECURITIES ARE SUBJECT TO FURTHER RESTRICTIONS AS SET FORTH IN
THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF
MARCH 8, 1999."
(b) No Shares shall be delivered upon the exercise of a Stock
Option until the Exercise Price shall have been paid in full and, if required by
Tremont in its sole discretion, until Meaden has given Tremont a written
statement reasonably satisfactory to it that she is purchasing the Shares as an
investment and not with a view to sale or distribution of any of such Shares.
308
<PAGE>
Section 7. Transfer Restrictions. (a) Stock Options may not be transferred
at any time without the prior written consent of Tremont and may be exercised
pursuant to the terms hereof only by Meaden.
(b) Meaden shall at no time sell, assign, encumber, transfer,
pledge or hypothecate or otherwise dispose of all or any part of the Shares now
owned or hereafter acquired by her or any interest therein except as
specifically permitted in this Agreement. Any such purported encumbrance,
transfer or disposition in violation of this Agreement shall be invalid and
shall be of no force and effect and shall not be registered, or otherwise
recognized, or caused to be registered by Tremont.
(c) Notwithstanding anything to the contrary contained in this
Agreement, Meaden is under no restrictions as to the transfer by her of any or
all of the Shares owned by her to one or more Meaden Affiliates provided that
each such Meaden Affiliate shall execute and deliver to Tremont a written
consent, in a form to be acceptable to Tremont and Meaden, to be bound by all of
the provisions of this Agreement. In the event of any transfer by Meaden to a
Meaden Affiliate of all or any part of the Shares owned by her (or in the event
of any subsequent transfer by any such Meaden Affiliate to another Meaden
Affiliate), such Meaden Affiliate shall receive and hold such Shares subject to
the terms of this Agreement and the rights and obligations hereunder of Meaden
as though such Shares were still owned by Meaden, and Meaden (together with all
of her Meaden Affiliates) shall continue to be deemed a single shareholder.
There shall be no further transfer of such
309
<PAGE>
Shares by a Meaden Affiliate except between and among such Meaden Affiliate,
Meaden and the other Meaden Affiliates.
(d) (i) In the event that Meaden shall at any time desire to
sell Offered Shares pursuant to a Third Party Offer, Meaden shall first offer
such Offered Shares to Tremont pursuant to a written notice (the "Offer
Notice"), advising Tremont of her intention to make such disposition. The Offer
Notice shall set forth and specify, (x) the name(s) and address(es) of the Third
Parties, and (y) the number of Shares subject to the Third Party Offer, the
intended purchase price thereof, the method of payment therefor and any other
material terms of such Third Party Offer.
(ii) Tremont shall have the option (the "Tremont Option"),
exercisable no later than ten (10) Business Days (the "First Refusal Period")
after receipt of the Offer Notice from Meaden, and subject to all applicable
laws and regulations, to agree to purchase any or all of the Offered Shares, at
the price and on the terms contained in the Third Party Offer.
(iii) If Tremont shall elect to exercise the Tremont Option, it shall give
a written notice to Meaden prior to the end of the First Refusal Period of its
intention to exercise (the "Tremont Notice") and specifying the number of
Offered Shares Tremont is electing to purchase. In the event that Tremont shall
elect to purchase all or any part of the Offered Shares, then the closing of the
purchase and sale of such Offered Shares shall take 23
310
<PAGE>
place on a date as agreed to between Meaden and Tremont, which shall be no later
than thirty (30) Business Days following Tremont's delivery of the Tremont
Notice at the principal executive offices of Tremont, or such other place as
Tremont may reasonably designate.
(iv) If Tremont shall not elect to exercise the Tremont Option prior to the
end of the First Refusal Period, Meaden shall have the right, for a period of
thirty (30) days after the expiration of the First Refusal Period, to sell to
the Third Party all or any portion of the Offered Shares as to which Tremont
shall not have exercised the Tremont Option but only pursuant to the Third Party
Offer. In addition to the foregoing, any offer and sale of Offered Shares
pursuant to a Third Party Offer shall, in all respects, comply with the
registration provisions of any applicable securities law (or be exempt
therefrom) and the conclusive written opinion of Meaden's counsel that such
offer and sale comply with said registration provisions or are exempt therefrom
shall be received by Tremont as a condition to Tremont's registering or causing
to be registered the transfer of any Offered Shares. Copies of all documents
relating to such sale shall be forwarded to the Secretary of Tremont no later
than five (5) days prior to the proposed date of such sale. If such sale by
Meaden pursuant to the terms of the Third Party Offer is not consummated within
thirty (30) days after the expiration of the First Refusal Period, Meaden's
Shares shall again be subject to all of the terms and provisions of this
Agreement.
311
<PAGE>
(e) For so long as Meaden shall be employed by Employer, or
any of its Affiliates, Tremont's Right of First Refusal shall apply to all
Shares now or hereafter acquired by her whether pursuant to an exercise of a
Stock Option or otherwise.
Section 8. Termination Under Employment Agreement. In the event that
the Employment Agreement is terminated by the Employer with or without Cause, as
such term is defined in the Employment Agreement, or the Employer does not elect
to renew the Employment Agreement beyond the "Term" (as such term is defined in
the Employment Agreement and not in this Agreement), and Meaden ceases to be
employed by Employer, or the Employment Agreement is terminated as a result of
Meaden's death or disability, Meaden (or her estate, as the case may be), in all
cases, shall retain the right to exercise the unexercised portion of the Stock
Options, at any time or from time to time until the Expiration Date in
accordance with Section 2.
Section 9. Rights In Stock Before Issuance And Delivery. Meaden shall
not be entitled to the privileges of stock ownership in respect of any Shares
issuable upon exercise of the Stock Options, unless and until such Shares have
been issued to Meaden as fully paid shares.
Section 10. Stock Option Administration. Other than as set forth in Section
3(e) hereof, in the event of a disagreement as to the interpretation of this
Agreement or the terms of the Stock Options, or any amendment hereto or any
procedure hereunder, or as to any
312
<PAGE>
right or obligation arising from or related to this Agreement, the matter shall
be submitted for resolution by the parties to the Committee. If such
disagreement has not been resolved within thirty (30) days following its
submission to the Committee, the disagreement will be settled by arbitration.
Such arbitration shall be held in accordance with the United Nations Commission
on International Trade Law Arbitration Rules, with the American Arbitration
Association acting as the appointing authority. Any arbitration proceeding as
described herein shall be held in the City of New York. The parties hereto agree
that any arbitration shall be a final and binding determination as to such
matters as described therein and a judgment of any federal, state or other court
having jurisdiction thereof may be entered upon the award made pursuant to the
arbitration.
Section 11. No Employment Contract. This Agreement shall not confer
upon Meaden any right to continued employment by Tremont or any of its
Affiliates, nor shall this Agreement interfere in any way with the rights of
TASS and Tremont under the terms of the Employment Agreement.
Section 12. Notices. Any notice or other communication under this
Agreement shall be in writing and shall be considered given when received by the
party to whom or which it is addressed. Such notice shall be sent by personal
delivery, electronically, facsimile transmission or recognized overnight
courier, receipt acknowledged, to the respective parties at their addresses set
forth below (or at such other address as any party may have previously specified
by notice to the other parties as the address to which notice
313
<PAGE>
shall be given to it). The same shall be deemed received on the date of
delivery. Any notice delivered personally, electronically or by facsimile
transmission shall be followed on the same day by written notice sent via
recognized overnight courier delivery service.
If to Tremont:
Tremont Advisers, Inc.
Corporate Center at Rye
555 Theodore Fremd Avenue
Rye, New York 10580
U.S.A.
Attention: Stephen T. Clayton, Chief Financial Officer
Facsimile No.: 914-925-9337
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt LLP
900 Third Avenue
New York, New York 10022
U.S.A.
Attention: Michael G. Tannenbaum, Esq.
Facsimile No.: 212-371-1084
If to Meaden:
Nicola Meaden
12 Wynnstay Gardens
Allen Street
London W8 6UP
ENGLAND
Facsimile No.: _________________
with a copy to:
Landau & Cohen, Solicitors
130-132 Burnt Oak Broadway
Edgeware, Middlesex HA8 0BB
ENGLAND
Attention: Richard Cohen
Facsimile No.: 011-44-181-951-1317
314
<PAGE>
Section 13. Tax Consequences. Meaden has reviewed with her own tax advisors
the foreign and local tax consequences of the transactions contemplated by this
Agreement. Meaden is relying solely on such advisors and not on any statements
or representations of the Company or any of its agents.
Section 14. Headings. The headings used in this Agreement are solely for
convenience of reference and shall not affect its interpretation.
Section 15. Waiver Of Breach. The waiver by any party of a breach of any
provision in this Agreement shall not operate or be construed as a waiver of any
subsequent breach by a party.
Section 16. Governing Law. This Agreement shall be interpreted,
construed and governed according to the laws of the State of New York, the
United States of America, without reference to conflicts of law principles
thereof. Except with respect to disputes wherein the parties have expressly
agreed herein to submit such dispute to arbitration, the parties hereto submit
to the jurisdiction of the courts of the State of New York and of any federal
court located therein over any dispute arising out of or relating to this
Agreement or any of the transactions contemplated hereby, and each party hereby
agrees that all claims in respect of such dispute shall be heard and determined
in such court.
315
<PAGE>
Section 17. Severability. If any section, term or provision of this
Agreement shall be held or determined to be unenforceable, the balance of this
Agreement shall nevertheless continue in full force and effect unaffected by
such holding or determination. In addition, in any such event, the parties agree
that it is their intention and agreement that any such section, term or
provision which is held or determined to be unenforceable as written, shall
nonetheless be enforced and binding to the fullest extent permitted by law as
though such section, term or provision had been written in such a manner and to
such extent as to be enforceable under the circumstances.
Section 18. Amendments. No amendment, modification or waiver of any
provisions of this Agreement shall be made except by an instrument in writing
signed by the parties charged.
Section 19. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the matters set forth herein and
supersedes any prior understanding or agreement, oral or written, with respect
thereto.
316
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TREMONT ADVISERS, INC.
By:
Name:
Title:
Nicola Meaden
317
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 N. 33-78346) pertaining to the Tremont Advisers, Inc. 401(k) Savings
Plan of our report dated March 5, 1999, with respect to the consolidated
financial statements of Tremont Advisers, Inc. included in the Annual Report
(Form 10-KSB) for the year ended December 31, 1998.
ERNST & YOUNG LLP
White Plains, New York
March 15, 1999
318
<PAGE>
Exhibit 23.2
To the Board of Directors of
Tremont Advisers, Inc.
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (no. 33-78346) pertaining to the Tremont Advisers, Inc.
401(k) Savings Plan of our report dated February 13, 1999 on the financial
statements of The Broad Market Fund, L.P. as of December 31, 1998 and for the
year then ended which report is included in the Annual Report on Form 10-KSB of
Tremont Advisers, Inc. for the year ended December 31, 1998.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
March 17. 1999
319
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
TREMONT ADVISERS, INC.
SEPTEMBER 30, 1998
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND FOR THE YEAR THEN
ENDED. THIS INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000880320
<NAME> Tremont Advisers, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,893,800
<SECURITIES> 0
<RECEIVABLES> 2,146,600
<ALLOWANCES> (35,000)
<INVENTORY> 0
<CURRENT-ASSETS> 4,416,100
<PP&E> 975,900
<DEPRECIATION> (526,200)
<TOTAL-ASSETS> 7,293,700
<CURRENT-LIABILITIES> 1,423,500
<BONDS> 0
0
0
<COMMON> 42,200
<OTHER-SE> 5,268,600
<TOTAL-LIABILITY-AND-EQUITY> 7,293,700
<SALES> 0
<TOTAL-REVENUES> 10,656,100
<CGS> 0
<TOTAL-COSTS> 8,374,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,310,100
<INCOME-TAX> 862,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,447,900
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.33
</TABLE>
