Mr. Gabelli (or, at his option, his designee) receives an incentive-based management fee in the amount of 10% of our aggregate annual pre-tax profits, if any, as computed for financial reporting purposes in accordance with U.S. generally accepted accounting principles (before consideration of this fee) so long as he is an executive of the Company and devotes the substantial majority of his working time to our business. This incentive-based management fee is subject to the Compensation Committee’s review at least annually for compliance with the terms of the Amended Employment Agreement. The Amended Employment Agreement may not be amended without the approval of the Compensation Committee and Mr. Gabelli.
In accordance with the Amended Employment Agreement, Mr. Gabelli chose to allocate $1,935,000, $4,220,000, $2,320,000, and $710,000$2,320,000 of his management fee to certain other professional staff members of the Company in 2015, 2014 2013 and 2012,2013, respectively. He also elected to waive receipt of $73,205, $7,352, and $1,380,231 of his management fee in 2015, 2014 and 2013, respectively, and to waive receipt of $2,500,000 of his portfolio manager and other variable remuneration in 2012.respectively. Mr. Gabelli earned (after allocations and waiver) the following incentive-based management fees during the past five years:
Consistent with the Company’s practice since its inception in 1977, Mr. Gabelli will also continue receiving a percentage of revenues or net operating contribution, which are substantially derived from assets under management, as compensation relating to or generated by the following activities: (i) managing or overseeing the management of various investment companies and partnerships, (ii) attracting mutual fund shareholders, (iii) attracting and managing separate accounts and alternative funds, and (iv) otherwise generating revenues for the Company. Such payments are made in a manner and at rates as agreed to from time to time by GAMCO, which rates have been and generally will be the same as those received by other professionals at GAMCO performing similar services. With respect to our institutional and high net worth asset management and mutual fund advisory business, we pay out up to 40% of the revenues or net operating contribution to the portfolio managers and marketing staff who introduce, service or generate such business, with (i) payments involving the separate accounts being typically based on revenues and (ii) payments involving the mutual funds being typically based on net operating contribution.
In accordance with the terms of his Amended Employment Agreement, Mr. Gabelli has agreed that while he is employed by us he will not provide investment management services outside of GAMCO, except for certain permitted accounts or except for services to be performed for former subsidiaries that are spun off from the Company such as Teton. During 2014,2015, Mr. Gabelli served as a portfolio manager for Teton and as a portfolio manager for various privately offered funds.
The following table summarizes the number of securities underlying outstanding equity awards for the named executives as of December 31, 2014.2015.
There was no nonqualified deferred compensation payable to the named executives during 2014.2015.
Potential Payments upon Termination of Employment or Change-of-Control.
2231
(3) | As reported in Amendment No. 5 to Schedule 13G that was filed with the SEC by Keeley Asset Management Corp., Keeley Small Cap Value Fund and John L. Keeley, Jr., on February 9, 2015. According to this filing, Keeley Asset Management Corp. and Keeley Small Cap Value Fund share beneficial ownership over the same 345,000 shares. |
(4) | As reported in Amendment No. 5 to Schedule 13G that was filed with the SEC by E.S. Barr & Company on February 17, 2015. According to this filing, E.S. Barr & Company beneficially owns 392,988 shares, Edward S. Barr beneficially owns 396,603 shares (6.06% of the shares) which includes 3,615 shares he holds individually (or through retirement accounts for his benefit), and E.S. Barr Holdings, LLC beneficially owns 392,988 shares. |
(5) | Includes 35,00040,000 shares held by GGCP.GGCP and 4,393,055 shares held by Gabelli Securities, Inc. Mr. Gabelli has voting and dispositive control of these shares. |
(6)(4) | Of this amount, 224,942463,295 are owned directly by Mr. Gabelli and 18,643,74118,373,741 of these shares are owned by Holdings via GGCP. Mr. Gabelli may be deemed to have beneficial ownership of the Class B Stock held by Holdings on the basis of (i) his position as the Chief Executive Officer of, a director of, and the controlling shareholder of GGCP which is the manager and the majority member of Holdings, and (ii) a certain profit interest in Holdings. Mr. Gabelli disclaims beneficial ownership of the shares owned by Holdings except to the extent of his pecuniary interest therein. |
(7)(5) | Includes 2,460 shares for which Mr. Jamieson is the Uniform Gift to Minors Act Custodian for his minor childrens’ accounts and 820 shares held by one of his children who has reached the age of legal majority but who continues to reside in Mr. Jamieson’s household. Mr. Jamieson has voting and dispositive control of these shares. |
(8)(6) | Includes 60,000 shares that are owned by two entities for which Mr. Avansino serves as a director and officer. Mr. Avansino disclaims beneficial ownership of these 60,000 shares. |
(9)(7) | Mr. McGrath has shared voting and dispositive power with respect to these shares. |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of filings made under Section 16(a) of the Securities Exchange Act of 1934, we believe that our directors and executive officers and our shareholders who own 10% or more of our Class A Stock or Class B Stock have complied with the requirements of Section 16(a) of the Securities Exchange Act of 1934 to report ownership, and transactions which change ownership, on time for 2014, except for one Form 4 filing reporting a transaction occurring on June 9, 2014 by Mario J. Gabelli, which was not filed on a timely basis.2015.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GGCP, through Holdings, owns a majority of our Class B Stock and, at December 31, 2014, 36,000 shares of our Class A Stock, together representing approximately 94%91% of the combined voting power and approximately 72%62% of the outstanding shares of our common stock at December 31, 2014.2015. Mr. Mario Gabelli serves as the Chief Executive Officer, a director and is the controlling shareholder of GGCP. Various family members of Mr. Mario Gabelli are shareholders of GGCP including Mr. Marc Gabelli and Ms. Wilson. Mr. Marc Gabelli serves as President and Managing Director of GGCP.
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GSI, a subsidiary of Associated Capital, owns 4.4 million shares of our Class A Stock, representing approximately 2% of the combined voting power and 15% of the outstanding shares of our common stock at December 31, 2015.For 2014,2015, the Company incurred variable costs of $457,842$432,384 for actual usage (but not the fixed costs) relating to our use of aircraft in which GGCP owns the fractional interests.
We lease an approximately 60,000 square foot building located at 401 Theodore Fremd Avenue, Rye, New York as our headquarters (the “Building”) from M4E, an entity that is owned by family members of Mr. Mario Gabelli, including Mr. Marc Gabelli and Ms. Wilson. Under the lease for the Building, which was extended for an additional five year term on June 11, 2013 with no change to the base rental of $18 per square foot and now expires on December 31, 2028, we are responsible for all operating expenses, costs of electricity and other utilities and taxes. For the period January 1, 20142015 through December 31, 2014,2015, the rent was $1,174,571,$1,183,805, or $19.58$19.73 per square foot. As members of M4E, Mr. Marc Gabelli and Ms. Wilson each are entitled to receive their pro-rata share of payments received by M4E under the lease.
We sublease approximately 3,300 square feet in the Building to LICT, a company for which Mr. Mario Gabelli serves as Chairman and CEO and is deemed to be the controlling shareholder. LICT pays rent to us at the rate of $28 per square foot plus $3 per square foot for electricity, subject to adjustment for increases in taxes and other operating expenses. The total amount paid to us in 20142015 for rent and other expenses under this lease was $117,640.$119,686. This sublease expires on December 5, 2023.
We also sublease approximately 1,600 square feet in the Building to Teton.Teton, a company for which Mr. Mario Gabelli serves as a portfolio manager. Teton pays rent to us at the rate of $37.75 per square foot plus $3 per square foot for electricity, subject to adjustment for increases in taxes and other operating expenses. The total amounts paid in 20142015 to us for rent and other expenses under this lease were $68,697.$69,632.
We lease approximately 1,599 square feet of office space in Reno, Nevada from Miami Oil Producers, Inc., for which Mr. Avansino serves as the Chairman and President. We pay a base rent of $3,118 per month plus the cost of parking and subject to adjustment annually for changes in the CPI.consumer price index. We entered into the current lease on January 1, 2011 with a 3 year term and thereafter subject to an option to extend the term for a year at a time. We extended the term by one year on January 1, 20142015 with it remaining subject to an option to extend the term for one year at a time. We further extended the term by one year on January 1, 2016 with it remaining subject to an option to extend the term for one year at a time. For the period January 1, 20142015 through December 31, 2014,2015, the rent was $38,880,$39,495, or $24.32$24.70 per square foot. In 2009, GAMCO entered into a sublease of a portion of this office space in Reno, Nevada to CIBL, Inc. (“CIBL”). Mr. Mario Gabelli is a director of CIBL and its largest shareholder. Under the terms of the Reno sublease, the Company granted CIBL the right to use such part of GAMCO’s Reno office as the Company and CIBL shall from time to time agree. The sublease granted CIBL the right to use space in the Reno office until July 31, 2009 with an automatic renewal for one additional calendar year which extended the sublease until July 31, 2010. Since August 1, 2010, the space has been subleased on a month-to-month basis. For 2014,2015, the rent for the Reno sublease was $6,000.
In addition to the sublease of space in the Building, we entered into a number of agreements in connection with the Company’s distribution of the shares of Class A and B Common Stockcommon stock in Teton.Teton in March 2009. These agreements are as follows: a Separation and Distribution Agreement, an Administrative and Management Services Agreement (“Administrative Agreement”) and Service Mark and Name License Agreement (the “License Agreement”). Pursuant to the Administrative Agreement, we provide certain services to Teton including senior executive functions, strategic planning and general corporate management services; mutual fund administration services; treasury services, including insurance and risk management services and administration of benefits; operational and general administrative assistance including office space, office equipment, administrative personnel, payroll, and procurement services as needed; accounting and related financial services; legal, regulatory and compliance advice, including the retention of a Chief Financial Officer and a Chief Compliance Officer; and human resources functions, including sourcing of permanent and temporary employees as needed, recordkeeping, performance reviews and terminations. Effective January 1, 2011, the Administrative Agreement was amended to be based on a tiered formula as opposed to a fixed rate. Under the amended agreement, the Company is compensated by Teton 20 basis points annually on the first $370 million of average assets under management (“AUM”) in the Teton funds, 12 basis points annually on the next $630 million of average AUM in the Teton funds, and 10 basis points annually of average AUM in the Teton funds in excess of $1 billion. The License Agreement provides Teton and the funds that it manages the use of certain names and service marks. Effective April 1, 2014, the Administrative Agreement was further amended to increase the fixed monthly component of it from $15,000 per month to $25,000 per month. Pursuant to the Administrative Agreement and the License Agreement, the Company was compensated in 20142015 by Teton in the amount of $15,000 per month for three months and $25,000 per month, for nine months, or $270,000$300,000 for the full year, plus an average of 13.213.4 basis points of the average AUM in the Teton funds (pursuant to the tiered formula) for providing mutual fund administration services to these funds, or $2,032,807$1,934,852 for 2014.2015. We sublease space in the Building to Teton as discussed above. G.distributors, LLC (“G.distributors”), an affiliated broker-dealer of the Company, served as distributor to the seven mutual funds that are managed by Teton during 2014.2015. In 2014,2015, the funds managed by Teton paid G.distributors $4,815,588$4,259,404 in distribution fees, of which $4,192,373$3,842,257 was reallocated to other broker dealers by G.distributors. In 2014,2015, Mr. Mario Gabelli earned $1,792,279$1,741,117 in portfolio manager compensation for acting as co-manager of the GAMCO Westwood Mighty Mites Fund, a Teton micro-cap fund, andfund; such amount is included inexcluded from his compensation earned for 20142015 shown earlier in the Summary Compensation Table for 20142015 as indicated in footnote (c) to that table.
Mr. Gabelli and Gabelli Securities, Inc. (“(which is a majority-owned subsidiary of Associated Capital subsequent to the spin-off), for G.research, LLC to provide them with the same types of research services that it provides to its other clients. In 2015, GAMCO and Funds Advisor paid G.research, LLC $725,000 and $805,000, respectively.
In connection with the spin-off of Associated Capital in November 2015, we entered into certain other agreements with Associated Capital to define our ongoing relationship with Associated Capital after the spin-off. These other agreements define responsibility for obligations arising before and after the distribution date, including certain transitional services and taxes and are summarized below.
Separation and Distribution Agreement
On November 30, 2015, we entered into a Separation and Distribution Agreement with Associated Capital (the “Separation Agreement”), which contains the key provisions relating to the separation of Associate Capital’s business from that of GAMCO and the distribution of the Associated Capital common stock. The Separation Agreement identified the assets transferred, liabilities assumed and contracts assigned to Associated Capital by GAMCO and by Associated Capital to GAMCO in the spin-off and describes when and how these transfers, assumptions and assignments occurred. The Separation Agreement also includes procedures by which GAMCO and Associated Capital became separate and independent companies. The Separation Agreement also provides that, as of November 30, 2015, each party released the other party and their respective affiliates and their directors, officers, employees and agents from all claims, demands and liabilities, in law and in equity, against such other party, which such releasing party has or may have had relating to events, circumstances or actions taken by such other party prior to the distribution. This release does not apply to claims arising from the Separation Agreement.
Indemnification
GAMCO has agreed to indemnify Associated Capital and its directors, officers, employees, agents and affiliates (collectively, ‘‘Associated Capital indemnitees’’) against all losses, liabilities and damages incurred or suffered by any of the Associated Capital indemnitees arising out of:
•GAMCO’s business;
•the failure or alleged failure of GAMCO or any of its subsidiaries to pay, perform or otherwise discharge in due course any of GAMCO liabilities;
•a breach by GAMCO of any of its obligations under the Separation Agreement; and
•any untrue statement or alleged untrue statement of a material fact: (i) contained in any document filed with the SEC by GAMCO pursuant to any securities rule, regulation or law, (ii) otherwise disclosed by GAMCO or its subsidiaries to investors or potential investors in GAMCO or its subsidiaries or (iii) furnished to any Associated Capital indemnitee by GAMCO or any of its subsidiaries for inclusion in any public disclosures to be made by any Associated Capital indemnitee; or any omission or alleged omission to state in any information described in clauses (i), (ii) or (iii) a material fact necessary to make the statements not misleading. The indemnity described in this paragraph is available only to the extent that Associated Capital losses are caused by any such untrue statement or omission or alleged untrue statement or omission, and the information which is the subject of such untrue statement or omission or alleged untrue statement or omission was not supplied after the spin-off by Associated Capital or its agents.
Similarly, Associated Capital has agreed to indemnify GAMCO and its directors, officers, employees, agents and affiliates (collectively, ‘‘GAMCO indemnitees’’) against all losses, liabilities and damages incurred or suffered by any of the GAMCO indemnitees arising out of:
•Associated Capital’s business;
•the failure or alleged failure of Associated Capital or any of its subsidiaries to pay, perform or otherwise discharge in due course any of Associated Capital liabilities;
•a breach by Associated Capital of any of its obligations under the Separation Agreement; and
•any untrue statement or alleged untrue statement of a material fact: (i) contained in any document filed with the SEC by Associated Capital following the distribution pursuant to any securities rule, regulation or law, (ii) otherwise disclosed following the distribution by Associated Capital or its subsidiaries to investors or potential investors in Associated Capital or its subsidiaries or (iii) furnished to any GAMCO indemnitee by Associated Capital or any of its subsidiaries for inclusion in any public disclosures to be made by any GAMCO indemnitee; or any omission or alleged omission to state in any information described in clauses (i), (ii) or (iii) a material fact necessary to make the statements not misleading. The indemnity described in this paragraph is available only to the extent that GAMCO losses are caused by any such untrue statement or omission or alleged untrue statement or omission, and the information which is the subject of such untrue statement or omission or alleged untrue statement or omission was not supplied by GAMCO or its agents.
Transitional Administrative and Management Services Agreement
On November 30, 2015, we entered into a Transitional Administrative and Management Services Agreement with Associated Capital (the “Transition Services Agreement”) pursuant to which GAMCO will provide Associated Capital with a variety of services and Associated Capital will provide payroll services to GAMCO following the spin-off. Among the principal services GAMCO will provide to Associated Capital are:
accounting, financial reporting and consolidation services, including the services of a financial and operations principal;
treasury services, including, without limitation, insurance and risk management services and administration of benefits;
• tax planning, tax return preparation, recordkeeping and reporting services;
• human resources, including but not limited to the sourcing of permanent and temporary employees as needed, recordkeeping, performance reviews and terminations;
• legal and compliance advice, including the services of a Chief Compliance Officer;
• technical/technology consulting; and
•operations and general administrative assistance, including office space, office equipment and furniture, payroll, procurement, and administrative personnel.
In providing the services pursuant to this agreement, GAMCO may, subject to the prior written consent of Associated Capital, employ consultants and other advisers in addition to utilizing its own employees. Services provided by GAMCO to Associated Capital or by Associated Capital to GAMCO under the Transition Services Agreement are charged at cost and for the fiscal year ended December 31, 2015, we paid Associated Capital approximately $1,862,353, and Associated Capital paid $838,504 to us.
The Transition Services Agreement has a term of twelve months, and may be extended in whole or in part by agreement of the parties. The Transition Services Agreement is terminable by either party on 30 days’ prior written notice to the other party.
Tax Indemnity and Sharing Agreement
On November 30, 2015, we entered into a Tax Indemnity and Sharing Agreement with Associated Capital that provides for certain agreements and covenants related to tax matters involving Associated Capital and us. This agreement covers time periods before and after the distribution. Among the matters addressed in the agreement are filing of tax returns, retention and sharing of books and records, cooperation in tax matters, control of possible tax audits and contests and tax indemnities. The agreement also provides for limitations on certain corporate transactions that could affect the qualification of the spin-off as tax free under the Internal Revenue Code.
Promissory Note
In connection with the spin-off of Associated Capital on November 30, 2015, the Company issued a $250 million promissory note (the “AC 4% PIK Note”) payable to Associated Capital. The AC 4% PIK Note bears interest at 4.0% per annum. The original principal amount has a maturity date of November 30, 2020. Interest on the AC 4% PIK Note will accrue from the date of the last interest payment, or if no interest has been paid, from the effective date of the AC 4% PIK Note. At the election of the Company, payment of interest on the AC 4% PIK Note may be paid in kind (in whole or in part) on the then-outstanding principal amount (a “PIK Amount”) in lieu of cash. The Company will repay the original principal amount of the AC 4% PIK Note to Associated Capital in five equal annual installments of $50 million on each interest payment date up to and including the maturity date. All PIK Amounts added to the outstanding principal amount of the AC 4% PIK Note will mature on the fifth anniversary from the date the PIK Amount was added to the outstanding principal of the AC 4% PIK Note. In no event may any interest be paid in kind subsequent to November 30, 2019. The Company may prepay the AC 4% PIK Note (in whole or in part) prior to maturity without penalty. During 2015, GAMCO accrued interest expense of $833,333 for the AC 4% PIK Note. As of December 31, 2015, $250 million aggregate principal amount was outstanding under the AC 4% PIK Note.
Service Mark and Name License Agreement
On November 30, 2015, we entered into the Service Mark and Name License Agreement with Associated Capital pursuant to which Associated Capital has certain rights to use the ‘‘Gabelli’’ name and the ‘‘GAMCO’’ name.
Other Related Party Transactions
Gabelli Securities”Securities, Inc. (“GSI”), a majority-owned subsidiary of Associated Capital after the spin-off, previously owed GAMCO a demand loan of $16 million bearing interest at 5.5% annually. On December 28, 2015, GSI repaid the demand loan in full plus accrued and unpaid interest. The interest paid by GSI to GAMCO during 2015 was $870,538.
On November 18, 2015, the Company serve as co-general partnerscommenced a tender offer (the “Offer”) to purchase for cash up to $100 million aggregate principal amount of Gabelli Associates Fund, LP (“GAF”). Mr. Gabelli receives portfolio manager and relationship manager compensation through an incentive allocation directly from GAF. In 2014, Mr. Gabelli earned $348,274 in incentive fees from GAF,its senior unsecured notes due June 1, 2021 at a price of which he allocated $107,172 to other professional staff, and his net compensation of $241,102 is included in his compensation shown earlier in the Summary Compensation Table for 2014.
Gabelli Securities International Limited (“GSIL”) was formed in 1994 to provide management and investment advisory services to certain offshore funds and accounts. Mr. Marc Gabelli, a director and a son of our Chairman, owns 55% of GSIL, and Gabelli Securities owns the remaining 45%. In 1994, Gabelli International Gold Fund Limited (“GIGFL”), an offshore investment company investing primarily in securities of issuers with gold-related activities, was formed, and GSIL entered into an agreement to provide management services to GIGFL. Gabelli Securities in turn entered into an agreement with GSIL to provide investment advisory services to GIGFL in return for receiving all investment management fees paid by GIGFL. Pursuant to such agreement, Gabelli Securities received investment management fees of $11,096 and no incentive fees for 2014.
In April 1999, Gabelli Global Partners, Ltd., an offshore investment fund, was incorporated. GSIL and Gemini Capital Management, LLC (“GCM”), an entity owned by Mr. Marc Gabelli, was engaged by the fund as co-investment advisors as of July 1, 1999. The fund paid all101% of the management fees for 2014, inprincipal amount. In connection with the amountOffer, the Company borrowed $35.0 million from GGCP. The loan has a term of $286,360,one year and allbears interest at 90-day LIBOR plus 3.25%, reset and payable quarterly. Under the terms of the incentive fees, inloan agreement, the amountCompany is required to fully pay the loan prior to any accelerated payment of $20,886, to GSIL.
In April 1999, Gabelli Securities formed Gabelli Global Partners, L.P., an investment limited partnership for which Gabelli Securities and GCM are the co-general partners. In March 2002, Gabelli Global Partners, L.P. changed its name to Gemini Global Partners, L.P. The fund paid Gabelli Securities $156,576AC 4% PIK Note. During 2015, GAMCO recorded interest expense of management fees in 2014, which, in turn, paid GCM half of this amount or $78,288. The fund paid Gabelli Securities $356 of incentive fees in 2014, which, in turn, paid GCM half of this amount or $178. $15,000.
GAMCO Asset Management Inc. (“GAMCO Asset Management”), a wholly-owned subsidiary of the Company, has entered into an agreement to provide advisory and administrative services to MJG Associates, which has been wholly-owned by our Chairman and CEO, Mr. Mario Gabelli, since 1990, with respect to the private investment funds that it manages. Pursuant to this agreement, MJG Associates paid GAMCO Asset Management $10,000 (excluding reimbursement of expenses) for 2014.2015. Mr. John Gabelli, the brother of our Chairman and CEO, is the sole shareholder of an entity that is the general partner of two investment partnerships - Manhattan Partners I, L.P. (“Manhattan I”) and Manhattan Partners II, L.P. (“Manhattan II”). Manhattan I and Manhattan II paid GAMCO Asset Management investment advisory fees in the amount of $14,483$13,595 for 2014. In turn, GAMCO Asset Management paid John Gabelli $5,792, a fee consistent with the payouts of all investment relationship staff of GAMCO Asset Management, for serving as the relationship manager for both Manhattan I and Manhattan II for 2014.2015. In addition, an entity that Mr. John Gabelli’s wife is the sole shareholder of is the co-general partner of S.W.A.N. Partners, LP (“S.W.A.N.”), which is a separately managed account of GAMCO Asset Management. S.W.A.N. paid GAMCO Asset Management investment advisory fees in the amount of approximately $22,094$20,406 for 2014. In turn, GAMCO Asset Management paid John2015.
On June 30, 2015, G.research LLC (“G.research”) was formed as a single member LLC of Distributors Holdings, Inc. (“DHI”), a 100% subsidiary of Gabelli $2,207,Securities, Inc. (“GSI”) to transfer the distribution assets of G.research, Inc. (a majority-owned subsidiary of GSI) through a fee consistent with the payoutsseries of all investment relationship staffsteps to G.distributors, LLC (a subsidiary of GAMCO Asset Management, Inc. which is a wholly-owned subsidiary of the Company). On July 1, 2015, G.research, Inc. was merged into G.research. As a result of the merger, a deferred tax liability of $1,937,670 was transferred to G.research’s sole member, DHI, resulting in a capital contribution to G.research. The distribution assets were then transferred from G.research to DHI for servingtheir fair value of $234,000, also resulting in a capital contribution to G.research. DHI transferred G.research to GSI resulting in a deferred tax asset of $88,227 (tax effect of the transferred distribution assets of $234,000) to be recorded on DHI’s books and a deferred tax liability of $88,227 to be recorded on the books of G.research. GSI transferred DHI to GAMCO Asset Management Inc. GAMCO Asset Management Inc. subsequently transferred its 100%-owned subsidiary, G.distributors LLC, to DHI. DHI then transferred the distribution assets to G.distributors, LLC.
Pursuant to an agreement between Gabelli Securities, Inc. (a majority-owned subsidiary of Associated Capital after the spin-off) and Gabelli Funds, LLC, (a wholly-owned subsidiary of the Company), Gabelli Funds, LLC pays to GSI 90% of the net revenues received by Funds related to being the advisor to the SICAV. Net revenues is defined as relationship managergross advisory fees less expenses related to payouts and expenses of the SICAV paid by Gabelli Funds, LLC. The amount paid by Gabelli Funds, LLC to GSI for S.W.A.N. for 2014.2015 is $1,007,164 and is included in management fees on the consolidated statements of operations.
We incur expenses for certain professional and administrative services, and purchase services from third party providers, such as payroll, transportation, insurance and public relations services, on behalf of GGCP and MJG Associates. GGCP and MJG Associates reimburse us for these expenses. GGCP also incurs expenses for certain professional and administrative services on behalf of the Company, and we reimburse GGCP for these expenses. The net amount reimbursable from GGCP and MJG Associates to us for such expenses for 20142015 was approximately $137,556$104,193 ($73,039 of which was allocated to the carve-out financials of Associated Capital in the pre-spin 2015 period (January 1, 2015 to November 30, 2015)) and $414,838,$559,203, respectively. Of these amounts, $20,361At December 31, 2015, $3,797 was owed by the Company to GGCP, and $414,838 were owing$559,203 was owed to the Company at December 31, 2014 by GGCP and MJG Associates, respectively.Associates. The GGCP amount was paid in full by the Company on February 25, 2015,March 16, 2016, and the MJG Associates amount was paid in full to the Company on March 27, 2015.February 19, 2016.
Certain directors and executive officers have immediate family members who are employed by us, our subsidiaries, and certain related entities. The base salaries and bonuses of each of these immediate family members are established in accordance with our compensation practices applicable generally to staff members with equivalent qualifications and responsibilities and holding similar positions. None of the directors or executive officers has a material interest in any of these employment relationships of their immediate family members, and all of the immediate family members of our directors mentioned below are financially independent adult children. None of the immediate family members mentioned below is an executive officer with us.
A daughter of Mr. Avansino, one of our directors, is employed by one of our subsidiaries in a sales and marketing role and earned in 2014 a base salary of $100,000 and2015 incentive-based variable compensation based on revenues generated by certain relationships (“Variable Compensation”) of $505,655$319,273 plus usual and customary benefits. She also received 2,000 restricted stock awards on August 6, 2013 with a grant date fair value of $57.86 per share and 500 restricted stock awards with an effective grant date, under FASB guidance, of December 23, 2014 and a legal grant date of January 15, 2015 with a grant date fair value of $87.99 per share. As with all Company restricted stock awards, fair value equals the closing price of the Company’s Class A Stock on the day preceding the effective grant date. Compensation expense of $24,681$34,590 was recognized by the Company for theseall of her awards for financial statement reporting purposes for the fiscal year ended December 31, 20142015 calculated in accordance with FASB guidance.
A sister-in-law of Mr. Jamieson, our President and Chief Operating Officer, is employed by one of our subsidiaries in a marketing role and earned in 20142015 a base salary of $90,000,$82,500, a bonus of $30,000$22,917, and $15,979$7,416 in Variable Compensation plus usual and customary benefits. She also received 500 restricted stock awards on August 6, 2013 with a grant date fair value of $57.86 per share, 500 restricted stock awards on November 27, 2013 with a grant date fair value of $81.55 per share (the vesting on this grant was accelerated and this grant, and 200 restricted stock awards with an effective grant date, under FASB guidance, of December 23, 2014 and a legal grant date of January 15, 2015 with a grant date fair value of $87.99 per share. As with all Company restricted stock awards, fair value equals the closing price of the Company’s Class A Stock on the day preceding the effective grant date. CompensationThe November 27, 2013 grant was fully vested, and the remaining unvested portion was recognized as expense for financial statement purposes, on October 19, 2015 when the Board of Directors accelerated the lapsing of restrictions on this grant for all holders of these awards. Total compensation expense of $16,021$39,522 was recognized by the Company for theseall of her awards for financial statement reporting purposes for the fiscal year ended December 31, 20142015 calculated in accordance with FASB guidance. This excludes the portion recognized directly by Associated Capital in December 2015 (post-spin) of $850. The $152,355 total compensation that she earned in 2015 included an amount of $151,461 that was allocated to the carve-out financials of Associated Capital in the pre-spin 2015 period (January 1, 2015 to November 30, 2015) but excluded an amount of $13,448 that she earned from Associated Capital for the month of December 2015 (post-spin).
A son of our Chairman, who has been employed by one of our subsidiaries since 1998, earned in 2014 a2015 no base salary, of $250,000, a bonus of $100,000, an allocation of $100,000$200,000 of the incentive-based management fee (10% of GAMCO pre-tax profits)fees received by Mr. Gabelli for creating and acting as portfolio manager and/or attracting and providing client service to a large number of GAMCO’s separate accounts, as described in the “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2014,2015, and $710,287$632,686 in Variable Compensation plus usual and customary benefits. In August 2006, he was given responsibility for managing a proprietary investment account on which he would be paid, on an annual basis, 20% of any net profits earned on the account for the year. The account was initially funded with approximately $40 million during 2006, and subsequent withdrawals have totaled $31$40 million from 2009 through 2014.2015. For 2014,2015, this account was up 1.6%2.5% while performance in prior years was 2.7%, 5.0%, (3.7%), 2.8%, 5.7%, (7.6%), 14.3%, 41.9%, and 41.9%1.6% per annum for each of the years 2006 through 2013.2014. Based on the 1.6%2.5% performance gain in 2014,2015, he earned $64,602$82,074 for managing this account, which is included in his Variable Compensation. He also received 4,000 restricted stock awards on August 6, 2013 with a grant date fair value of $57.86 per share, 1,000 restricted stock awards on November 27, 2013 with a grant date fair value of $81.55 per share, 1,000 restricted stock awards on September 15, 2014 with a grant date fair value of $73.41 per share, and 500 restricted stock awards with an effective grant date, under FASB guidance, of December 23, 2014 and a legal grant date of January 15, 2015 with a grant date fair value of $87.99 per share. As with all Company restricted stock awards, fair value equals the closing price of the Company’s Class A Stock on the day preceding the effective grant date. CompensationThe November 27, 2013 grant was fully vested, and the remaining unvested portion was recognized as expense for financial statement purposes, on October 19, 2015 when the Board of Directors accelerated the lapsing of restrictions on this grant for all holders of these awards. Total compensation expense of $73,632$134,572 was recognized by the Company for theseall of his awards for financial statement reporting purposes for the fiscal year ended December 31, 20142015 calculated in accordance with FASB guidance. The $967,258 total compensation that he earned in 2015 included an amount of $595,373 that was allocated to the carve-out financials of Associated Capital in the pre-spin 2015 period (January 1, 2015 to November 30, 2015) but excluded an amount of $122,200 that that he earned from Associated Capital for the month of December 2015 (post-spin).
A son of our Chairman, who is employed by one of our subsidiaries (which became a subsidiary of Associated Capital after the spin-off), earned in 20142015 a base salary of $225,000,$206,250, a bonus of $175,000,$68,750, an allocation of $250,000$100,000 of the incentive-based management fee (10% of GAMCO pre-tax profits) by Mr. Mario Gabelli as described in the “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2014,2015, an allocation of $175,000 of fees received by Mr. Gabelli for creating and $162,025acting as portfolio manager of several open-end Gabelli Funds, as described in the “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2015, and $897,487 in Variable Compensation plus usual and customary benefits. He also received 6,000 restricted stock awards on August 6, 2013 with a grant date fair value of $57.86 per share, 1,500 restricted stock awards on November 27, 2013 with a grant date fair value of $81.55 per share, 1,500 restricted stock awards on September 15, 2014 with a grant date fair value of $73.41 per share, and 2,000 restricted stock awards with an effective grant date, under FASB guidance, of December 23, 2014 and a legal grant date of January 15, 2015 with a grant date fair value of $87.99 per share. As with all Company restricted stock awards, fair value equals the closing price of the Company’s Class A Stock on the day preceding the effective grant date. CompensationThe November 27, 2013 grant was fully vested, and the remaining unvested portion was recognized as expense for financial statement purposes, on October 19, 2015 when the Board of Directors accelerated the lapsing of restrictions on this grant for all holders of these awards. Total compensation expense of $111,527$216,272 was recognized by the Company for theseall of his awards for financial statement reporting purposes for the fiscal year ended December 31, 20142015 calculated in accordance with FASB guidance. This excludes the portion recognized directly by Associated Capital in December 2015 (post-spin) of $11,432. The $1,663,759 total compensation that he earned in 2015 included an amount of $1,204,802 that was allocated to the carve-out financials of Associated Capital in the pre-spin 2015 period (January 1, 2015 to November 30, 2015) and excluded an amount of $266,432 that he earned directly from Associated Capital in December 2015 (post-spin).
Mr. Marc Gabelli, a director and a son of our Chairman, is employed by the Company. He earned in 2014 no2015 a base salary a bonus of $300,000,$275,000, an allocation of $500,000$325,000 of the incentive-based management fee (10% of GAMCO pre-tax profits) by Mr. Mario Gabelli as described in the “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2014,2015, and $42an allocation of $125,000 of fees received by Mr. Mario Gabelli for creating and acting as portfolio manager and/or attracting and providing client service to a large number of GAMCO’s separate accounts, as described in Variablethe “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2015, plus usual and customary benefits. He also received 10,000 restricted stock awards with an effective grant date, under FASB guidance, of December 23, 2014 and a legal grant date of January 15, 2015 with a grant date fair value of $87.99 per share. As with all Company restricted stock awards, fair value equals the closing price of the Company’s Class A Stock on the day preceding the effective grant date. Compensation expense of $8,616$189,547 was recognized by the Company for this award for financial statement reporting purposes for the fiscal year ended December 31, 20142015 calculated in accordance with FASB guidance.
Our Chairman’s spouse, who has been employed by a subsidiary of the Company in a sales and marketing role since 1984, has been a director of that subsidiary since 1991 and has been his spouse since 2002, earned in 20142015 no base salary, an allocation of $310,000$25,000 of the incentive-based management fee (10% of GAMCO pre-tax profits) by Mr. Gabelli as described in the “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2014,2015, an allocation of $300,000 of fees received by Mr. Gabelli for creating and $5,367,348acting as portfolio manager and/or attracting and providing client service to a large number of GAMCO’s separate accounts as described in the “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2015, an allocation of $25,000 of fees received by Mr. Gabelli for creating and acting as portfolio manager of several open-end Gabelli Funds, as described in the “Variable Compensation” section of the Compensation and Discussion Analysis and in footnote (c) to the Summary Compensation Table for 2015, and $5,151,572 in Variable Compensation plus usual and customary benefits. She also received 5,000 restricted stock awards on August 6, 2013 with a grant date fair value of $57.86 per share, 2,000 restricted stock awards on November 27, 2013 with a grant date fair value of $81.55 per share, 1,500 restricted stock awards on September 15, 2014 with a grant date fair value of $73.41 per share, and 2,000 restricted stock awards with an effective grant date, under FASB guidance, of December 23, 2014 and a legal grant date of January 15, 2015 with a grant date fair value of $87.99 per share. As with all Company restricted stock awards, fair value equals the closing price of the Company’s Class A Stock on the day preceding the effective grant date. CompensationThe November 27, 2013 grant was fully vested, and the remaining unvested portion was recognized as expense for financial statement purposes, on October 19, 2015 when the Board of Directors accelerated the lapsing of restrictions on this grant for all holders of these awards. Total compensation expense of $109,187$245,752 was recognized by the Company for theseall of her awards for financial statement reporting purposes for the fiscal year ended December 31, 20142015 calculated in accordance with FASB guidance. The $5,747,324 total compensation that she earned in 2015 included an amount of $76,167 that was allocated to the carve-out financials of Associated Capital in the pre-spin 2015 period (January 1, 2015 to November 30, 2015) but excludes an amount of $39,602 that she earned directly from Associated Capital in December 2015 (post-spin).
A daughter-in-law of our Chairman earned $117,736$116,078 in Variable Compensation in 2014. 2015 which consisted entirely of an amount of $116,078 that was allocated to the carve-out financials of Associated Capital in the pre-spin 2015 period (January 1, 2015 to November 30, 2015) but excluded an amount of $30,770 that she earned directly from Associated Capital in December 2015 (post-spin).
A brother of our Chairman earned $491,305$451,587 in Variable Compensation in 20142015 plus usual and customary benefits. He alsoThis compensation included an amount of $6,576 that was allocated to the carve-out financials of Associated Capital in the pre-spin 2015 period (January 1, 2015 to November 30, 2015) but excluded an amount of $1,564 that he earned $275,462 upon exercise of 10,000 optionsdirectly from Associated Capital in 2014.December 2015 (post-spin).
Ms. Wilson, a director and the daughter of our Chairman, is also a professional staff member of the Company. Ms. Wilson has been on extended unpaid leave from the Company since January 1, 2004 and therefore received no compensation during 20142015 other than compensation she received as a director disclosed in the “Director Compensation Table for 2014”2015” and her previously-discussed entitlement, as a member of M4E, to receive her pro-rata share of payments received by M4E under the lease on the Building.
The spouse of Ms. LaPointe, our ControllerSenior Vice President and Co-Chief Accounting Officer, is employed as the Executive Vice President and Chief Financial Officer of LICT, the Interim Chief Executive Officer and Chief Financial Officer of CIBL, and the Chief Financial Officer and a Director of Morgan Group Holding, Inc. (“Morgan”). In addition to serving as the Chairman and Chief Executive Officer of LICT and as a Director of CIBL, our Chairman and CEO, Mr. Mario Gabelli, also serves as the Chairman of Morgan.
On May 31, 2006, we entered into an Exchange and Standstill Agreement (“Standstill Agreement”) with Frederick J. Mancheski, a significant shareholder, pursuant to which, among other things, he agreed to exchange his 2,071,635 shares of Class B Stock for an equal number of shares of Class A Stock. The substance of the Standstill Agreement is disclosed in footnote 2 to the beneficial ownership table under the heading “Certain Ownership of Our Stock.” Pursuant to a Registration Rights Agreement that we entered into with Mr. Mancheski, we filed a shelf registration statement that was declared effective by the SEC on September 1, 2006 and amended on November 25, 2013, for the sale by Mr. Mancheski and others, including certain of our officers and employees, of up to 2,486,763 shares of Class A Stock. Mr. Mancheski continues to hold 1,725,974 shares of the Company’s Class A Stock as reported in his FormAmendment No. 6 to Schedule 13D filed with the SEC on January 9, 2013.July 2, 2015. The standstill agreement expires on May 31, 2016.
As required by our Code of Ethics, our staff members are required to maintain their brokerage accounts at G.research Inc. unless they receive permission to maintain an outside account. G.research Inc. offers all of these staff members the opportunity to engage in brokerage transactions at discounted rates. Accordingly, many of our staff members, including the executive officers or entities controlled by them, have brokerage accounts at G.research Inc. and have engaged in securities transactions through it at discounted rates. From time to time, we, through our subsidiaries, in the ordinary course of business have also provided brokerage or investment advisory services to our directors, the substantial shareholders listed in the table under “Certain Ownership of Our Stock” or entities controlled by such persons for customary fees.
REPORT OF THE AUDIT COMMITTEE
Messrs. Artzt, Avansino, Bready, McGrath and Prather, each of whom is an independent director, are the members of the Audit Committee. In this report, the term “we” refers to the members of the Audit Committee.
The Board has adopted a written charter for the Audit Committee. A copy of that charter can be found on our website at http://www.gabelli.com/corporate/corp_gov.html. Our job is one of oversight as set forth in our charter. The Company’s management is responsible for preparing its financial statements and for maintaining internal controls. The independent registered public accounting firm is responsible for auditing the financial statements and expressing an opinion as to whether those audited financial statements fairly represent the financial position, results of operations and cash flows of the Company in conformity with U.S. generally accepted accounting principles.
We have reviewed and discussed the Company’s audited 20142015 financial statements with management and with Deloitte & Touche LLP (“D&T”), the Company’s independent registered public accounting firm.
We have discussed with D&T the matters required to be discussed by Statement on Auditing Standard No. 16, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board (the “PCAOB”).
We have received from D&T the written statements required by the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence and have discussed with the independent accountant the independent accountant’s independence.
Based on the review and discussions referred to above, we have recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20142015 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Robert S. Prather, Jr. (Chairman)
Edwin L. Artzt
Raymond C. Avansino, Jr.
Richard L. Bready
Eugene R. McGrath
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Selection of Deloitte & Touche LLP
Our Audit Committee approved the engagement of Deloitte & Touche, LLP (“D&T”) as the Company’s independent registered public accounting firm for the year-ending December 31, 2015.2016. D&T has been the auditor of the Company since March 27, 2009. In deciding to engage D&T, the Audit Committee reviewed auditor independence and existing commercial relationships with D&T and concluded that D&T has no commercial relationship with the Company that would impair its independence. During the fiscal year ended December 31, 20142015 and in the subsequent interim period through March 31, 2015,2016, neither the Company nor anyone acting on its behalf has consulted with D&T on any of the matters or events set forth in Item 304(a)(2) of Regulation S−K.
A representative of D&T will be present at the
20152016 Annual Meeting. The representative will have the opportunity to make a statement and respond to appropriate questions from shareholders.
Deloitte & Touche LLP Fees For 20132014 and 20142015
Fees for professional services provided by our independent registered public accounting firm in 20132014 and 2014,2015, in each of the following categories are:
| | 2013 | | | 2014 | | | 2014 | | | 2015 | |
Audit Fees | | $ | 1,881,080 | | | $ | 1,571,000 | | | $ | 1,571,000 | | | $ | 1,149,750 | |
Audit-Related Fees | | $ | 9,000 | | | $ | 4,000 | | | $ | 4,000 | | | $ | 450,333 | |
Tax Fees | | $ | 7,900 | | | $ | 600 | | | $ | 600 | | | $ | 600 | |
All Other Fees | | $ | 2,362 | | | $ | 2,362 | | | $ | 2,362 | | | $ | 2,792 | |
Audit fees include fees relating to the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q. Audit fees also include fees for services related to Section 404 of the Sarbanes-Oxley Act which consist of the review of documentation and testing of our procedures and controls. Audit–related fees for 2015 consist of fees relating to the audit of carve-out financial statements included in our Form 10 filing for the spin-off of Associated Capital and fees for a consent letter provided in connection with the filing of a registration statement on Form S-3. Audit–related fees for 2014 consist of fees for services provided in connection with the Securities Investor Protection Corporation assessment for one of the Company's registered broker-dealer subsidiaries. Audit–related fees for 2013 consist of fees for services provided in connection with the Securities Investor Protection Corporation assessment for one of the Company's registered broker-dealer subsidiaries and for a consent letter provided in connection with the filing of post-effective amendments to our registration statements on Forms S-3 and S-8 and a registration statement on Form S-8. Tax fees were for assistance with federal tax filings, state sourcing, and foreign tax work. All other fees were for access to online technical research services.
SHAREHOLDER PROPOSALS FOR THE 20162017 ANNUAL MEETING
Qualified shareholders who want to have proposals included in our proxy statement in connection with our 20162017 Annual Meeting pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must deliver such proposals so that they are received at our principal executive offices at One Corporate Center, Rye, New York 10580 by December 28, 201523, 2016 in order to be considered for inclusion in next year’s proxy statement and proxy. For any shareholder proposal submitted outside Rule 14a-8 of the Exchange Act to be considered timely under our Amended and Restated Bylaws, the Company must receive notice of such proposal, or any nomination of a director by a shareholder, no earlier than January 6, 20163, 2017 and no later than February 5, 2016.2, 2017.
OTHER MATTERS
We know of no other matters to be presented at the 20152016 Annual Meeting other than the election of directors, the ratification of auditors, and the vote to re-approveapprove the Amended Employment Agreement with Mario J. Gabelli,Potential Issuance, the vote to approve an amendment to the Company’s 2002 Stock Award and Incentive Plan and the Reclassification Proposal, all as described above. If other matters are properly presented at the 20152016 Annual Meeting, the proxies will vote on these matters in accordance with their judgment of the best interests of the Company.
We will provide a free copy of our Annual Report on Form 10-K for the year ended December 31, 2014.2015. Requests should be in writing and addressed to our Secretary at GAMCO Investors, Inc., One Corporate Center, Rye, NY 10580-1422.
EXHIBIT A
SECOND AMENDMENT
TO
GAMCO INVESTORS, INC.
2002 STOCK AWARD AND INCENTIVE PLAN
WHEREAS, pursuant to Article 8(e) of the GAMCO Investors, Inc. 2002 Stock Award and Incentive Plan, as amended to date (the “Plan”), the Board of Directors (the “Board”) of GAMCO Investors, Inc. (the “Company”) may, subject to certain limitations, alter, amend, suspend, or terminate the Plan or any portion thereof at any time; and
WHEREAS, capitalized terms used herein but not otherwise defined herein shall have the meaning ascribed to them in the Plan; and
WHEREAS, the Plan, as adopted by the Board, provided that the maximum number of shares of Stock that could be delivered pursuant to Awards granted under the Plan was 3,500,000, subject to adjustment as provided therein; and
WHEREAS, the Board wishes to increase the number of Shares available for issuance under the Plan by 500,000 Shares; and
WHEREAS, subject to shareholder approval, the Board approved the terms of this Amendment.
NOW, THEREFORE, In accordance with Article 8(e) of the Plan, the Plan shall be amended effective upon shareholder approval as follows:
| 1. | The first sentence of Article 5 of the Plan is hereby amended and restated as follows: |
“The number of shares of Stock reserved for the grant of Awards under the Plan shall be 4,000,000, subject to adjustment as provided herein.”
| 2. | As hereby amended, the Plan shall continue in full force and effect. This Amendment shall be effective upon shareholder approval. |
| GAMCO INVESTORS, INC. |
| |
| By: | |
| | Name: | |
| | Title: | |
EXHIBIT B
GUIDELINES FOR DIRECTOR INDEPENDENCE
For a director to be deemed “independent,” the Board shall affirmatively determine that the director has no material relationship with GAMCO Investors, Inc. (together with its consolidated subsidiaries, “GAMCO”) or its affiliates or any member of the senior management of GAMCO or his or her affiliates. This determination shall be disclosed in the proxy statement for each annual meeting of GAMCO’s shareholders. In making this determination, the Board shall apply the following standards:
· | A director who is an employee, or whose immediate family member is an executive officer, of GAMCO will not be deemed independent until three years after the end of such employment relationship. Employment as an interim Chairman or Chief Executive Officer will not disqualify a director from being considered independent following that employment. |
· | A director who received, or whose immediate family member received in any twelve month period over the last three years more than $120,000 in direct compensation from GAMCO will not be deemed independent. In calculating such compensation, the following will be excluded: |
o | director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); |
o | compensation received by a director for former service as an interim Chairman or Chief Executive Officer; and |
o | compensation received by an immediate family member for service as a non-executive officer employee of GAMCO. |
· | A director will not be considered independent if: |
o | the director is a current partner or employee of a firm that is GAMCO’s internal or external auditor; |
o | the director has an immediate family member who is a current partner of GAMCO’s internal or external auditor; |
o | the director has an immediate family member who is a current employee of GAMCO’s internal or external auditor and personally works on GAMCO’s audit; or |
o | the director or an immediate family member was within in the last three years a partner or employee of GAMCO’s internal or external auditor and personally worked on GAMCO’s audit within that time. |
· | A director who is, or whose immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of GAMCO’s current executive officers serve on that company’s compensation committee will not be deemed independent. |
· | A director who is, a current employee, or whose immediate family member is an executive officer, of an entity that makes payments to, or receives payments from, GAMCO for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other entity’s consolidated gross revenues, will not be deemed independent. |
· | A director who serves as an executive officer of a tax-exempt entity that receives significant contributions (i.e., more than 2% of the annual contributions received by the entity or more than $1 million in a single fiscal year, whichever amount is greater) from GAMCO, any of its affiliates, any executive officer or any affiliate of an executive officer within the preceding twelve-month period may not be deemed independent, unless the contribution was approved by the Board and disclosed in GAMCO’s proxy statement. |
For purposes of these Guidelines, the terms:
· | “affiliate” means any consolidated subsidiary of GAMCO and any other company or entity that controls, is controlled by or is under common control with GAMCO, as evidenced by the power to elect a majority of the board of directors or comparable governing body of such entity; and |
· | “immediate family” means spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone (other than domestic employees) sharing a person’s home, but excluding any person who is no longer an immediate family member as a result of legal separation or divorce, or death or incapacitation. |
The Board shall undertake an annual review of the independence of all non-employee directors. In advance of the meeting at which this review occurs, each non-employee director shall be asked to provide the Board with full information regarding the director’s business and other relationships with GAMCO and its affiliates and with senior management and their affiliates to enable the Board to evaluate the director’s independence.
Directors have an affirmative obligation to inform the Board of any material changes in their circumstances or relationships that may impact their designation by the Board as “independent.” This obligation includes all business relationships between, on the one hand, directors or members of their immediate family, and, on the other hand, GAMCO and its affiliates or members of senior management and their affiliates, whether or not such business relationships are subject to the approval requirement set forth in the following provision.
EXHIBIT B
EMPLOYMENT AGREEMENT
AGREEMENT made this 6th day of February, 2008 (the “Effective Date”) by and between GAMCO Investors, Inc. (the “Company”), a New York corporation, and Mario J. Gabelli (the “Executive”).
WHEREAS, the Executive has served as an executive of the Company since the inception of the Company and its predecessors in 1976.
WHEREAS, the Executive’s skills, position, knowledge and expertise in the management of portfolios such as those managed by the Company are unique.
WHEREAS, the Company is dependent upon the efforts of the Executive, in the capacities described herein in which he serves, and as the primary portfolio manager for a significant majority of the Company’s assets under management.
WHEREAS, the loss of the Executive’s services would have a material adverse effect on the Company.
WHEREAS, since the inception of the Company and its predecessors in 1976, up until the Company’s initial public offering in February 1999 (“IPO”), the Executive received an incentive-based management fee of twenty percent (20%) of the pre-tax profits, if any, as computed for financial reporting purposes in accordance with generally accepted accounting principles as applied by the Company and its subsidiaries and consolidated affiliates for financial reporting purposes (together, “Subsidiaries”) from time to time, for each fiscal year of each of the operating divisions of the Company and each of its Subsidiaries before consideration of this fee, less applicable payroll and tax deductions, accrued monthly and payable at least annually.
WHEREAS, the Company and the Executive entered into an Employment Agreement dated February 9, 1999, in connection with the Company’s IPO, which Employment Agreement, among other things, reduced the Executive’s incentive-based management fee to ten percent (10%) of the Company’s pre-tax profits, if any, as computed for financial reporting purposes in accordance with generally accepted accounting principles as applied by the Company and its Subsidiaries from time to time, for each fiscal year of each of the operating divisions of the Company and its Subsidiaries before consideration of this fee, less applicable payroll and tax deductions, accrued monthly and payable at least annually.
WHEREAS, the Company and the Executive desire to amend and restate the Employment Agreement entered into in 1999 to eliminate outdated provisions, allow for services to be performed for former Subsidiaries that are spun off to shareholders or otherwise cease to be Subsidiaries in similar transactions, allow for the management fee to be paid to the Executive or an entity designated by him, and reflect the Company’s name change, among other things.
WHEREAS, the Compensation Committee of the Board of Directors of the Company has reviewed and approved this amended and restated Employment Agreement and believes it to be in the best interests of the Company.
WHEREAS, the Company desires that the Executive or his designee continue to receive a management fee to provide an incentive for the achievement of the Company’s performance goals and the enhancement of shareholder value.
NOW THEREFORE, in consideration of the foregoing and of the mutual promises hereinafter set forth, the parties hereto agree as follows:
1. Employment.
The Company hires and employs the Executive, and the Executive agrees to work for the Company, under the terms and conditions set forth herein.
2. Duties.
The Executive shall serve as Chairman of the Board, Chief Executive Officer and Chief Investment Officer of the Company, as an executive in various capacities for certain of the Company’s Subsidiaries as determined by the Executive, and as Portfolio Manager for certain investment companies and separate accounts managed by the Company and its Subsidiaries as determined by the Executive. The Executive or the Company may at any time limit or terminate the Executive’s service in one or more of the capacities referred to above.
3. Term.
The Term of this Agreement shall commence on the Effective Date and continue through the third anniversary of the Effective Date (the “Expiration Date”). On each anniversary of the Effective Date commencing on the first anniversary (each, an “Anniversary Date”), this Agreement shall automatically be renewed and the Term extended for an additional one (1) year period, unless such renewal is objected to by either the Company or by the Executive on written notice delivered to the other not less than ninety (90) days prior to an Anniversary Date. The last day of each such extension shall become the new Expiration Date.
4. Fees from Revenue Generating Activities (Revenue Fees).
For managing or overseeing the management of investment companies or partnerships, attracting mutual fund accounts or partnership investments, attracting or managing separate accounts, providing investment banking services or otherwise generating revenues for the Company or its Subsidiaries, the Executive will be paid a percentage of the revenues or net operating contribution related to or generated by such business activities, in a manner and at payment rates as agreed to from time to time by the Executive and the Company or the affected Subsidiaries, which rates have been and generally will be the same as those received by other professionals in the Company or the affected Subsidiaries performing similar services. The Executive shall be entitled to receive such payments within seventy-five (75) days of the date the Company actually receives the funds related to the business activities from which the Executive will receive payment. Unless and until the Company receives such funds, the Executive shall not be entitled to receive payment.
5. Incentive-Based Management Fee (The Management Fee).
The Executive or an entity designated by him will be entitled to receive an incentive-based management fee in the amount of ten percent (10%) of the aggregate annual pre-tax profits, if any, as computed for financial reporting purposes in accordance with generally accepted accounting principles as applied by the Company and its Subsidiaries from time to time, of the Company and each of its Subsidiaries before consideration of this fee, less applicable payroll and tax deductions, accrued monthly and payable at least annually (the “Management Fee”) but in no event later than March 15 of the year following the year with respect to which the Management Fee is being paid. A committee or subcommittee (comprised solely of independent directors) of the Board of Directors of the Company will review at least annually all Management Fee payments for compliance with the terms hereof. In the event that the Executive is no longer an executive of the Company or is no longer devoting the substantial majority of his working time to the business of the Company and its Subsidiaries, the Executive’s right to accrue any additional Management Fee payments will terminate. The Management Fee is separate and distinct from the Executive’s revenue fees pursuant to Paragraph 4 above.
6. Extent of Service-Restrictive Covenant.
During the term of this Agreement, the Executive shall not provide investment management services for compensation other than in his capacity as an officer or employee of the Company or its Subsidiaries, except to (a) the funds in existence on February 10, 1999 (the “IPO Date”) (which serve no investors other than those in the funds as of the IPO Date, their successors, heirs, donees or immediate family, or new investors pursuant to the next sentence) and accounts managed by the Executive outside the Company under performance fee arrangements as of the IPO Date or pursuant to the next sentence, and (b) successor funds and accounts (“New Outside Accounts”) which funds serve no investors other than those in the funds referred to in clause (a) or their successors, heirs, donees or immediate family and which accounts are for no investors other than those having an interest in the accounts referred to in clause (a) or their successors, heirs, donees or immediate family, which funds and accounts operate according to an investment style similar to such other funds or accounts, which style was not used at the Company as of the IPO Date, and which are subject to performance fee arrangements (collectively, “Permissible Accounts”). The Permissible Accounts may include new investors if all of the performance fees, less expenses, earned on assets attributable to those investors are paid to the Company or its Subsidiaries. If any Subsidiaries of the Company are spun off from the Company or otherwise cease to be Subsidiaries in similar transactions, the Executive may continue providing investment management services for compensation to such entities. Prior to providing investment management services for compensation to any New Outside Accounts during the term hereof, the Executive agrees to have a committee or subcommittee (comprised solely of independent directors) of the Board of Directors of the Company review any proposed New Outside Accounts for compliance with the terms hereof and accept the determination of such committee or subcommittee as final. The Company understands that the Executive intends to serve as a director, Chief Executive Officer and Chief Investment Officer of GGCP, Inc. and its affiliates and be compensated for such service, and the Company agrees that such service and compensation is permissible under this Agreement.
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7. Benefits.
The Executive shall be entitled to participate in all group health and insurance programs and all other fringe benefit or retirement plans which the Company may, in its sole and absolute discretion, elect to make available to its senior executives generally, provided that the Executive meets the qualifications therefor.
8. Reimbursement of Expenses.
The Company shall reimburse the Executive for all reasonable and legitimate business expenses incurred after the date of employment by the Executive while conducting business, provided that the Executive submits vouchers for such expenses in a manner and form prescribed from time to time by the Company, except that up to $50,000 per year of such expenses may be non-accountable.
9. Section 409A Compliance.
This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended, so as to avoid the imposition of any tax pursuant to Section 409A, and, in the case of any ambiguity, shall be interpreted accordingly. In the event that the Company or the Executive subsequently determine that the provisions of this Agreement would subject the Executive to tax under Section 409A, Company and the Executive shall negotiate in good faith to revise the Agreement so as to prevent the imposition of such tax, if possible, while preserving the original intent of the Agreement.
10. Assignability Clause.
This Agreement is binding upon the Company, the Executive and their respective successors and assigns. The rights and obligations set forth under this Agreement may be assigned by the Company or by the Executive to a successor or to an assign, except the Executive acknowledges that the duties set forth in Paragraph 2 of this Agreement are personal to him.
11. Governing Law.
This Agreement shall be governed by the law of the State of New York, without giving effect to the principles of conflicts of laws thereof. The Executive and the Company agree that any claim arising hereunder shall be brought before the state or federal courts sitting in New York, New York, and the Executive and the Company each consent to jurisdiction and venue in New York, New York, as being proper and appropriate for the resolution of any such claim.
Table of contents12. Entire Agreement; Modification.
This Agreement supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, written or oral, of the parties hereto, relating to the matters covered by this Agreement. This Agreement may not be modified or amended except by a further written instrument duly executed by the Executive and the Company with the approval of a committee or subcommittee (comprised solely of independent directors) of the Board of Directors of the Company.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the date first written above.
/s/ Mario J. Gabelli
Mario J. Gabelli
GAMCO INVESTORS, INC.
By: /s/ Douglas R. Jamieson
President and Chief Operating Officer