Exhibit 10.2 EMPLOYMENT AGREEMENT August 8, 2000
Name Address Timothy B. Murphy 21 Moreland Road Quincy, MA 02169
In consideration of the premises and the mutual promises and covenants contained herein and for other good and valuable consideration, Investors Capital Holdings, Ltd. (the "Company") and you agree as follows: 1. POSITION AND RESPONSIBILITIES. 1.1 The Company will employ you, and you agree to be employed by the Company, as Chief Financial Officer and Treasurer. You will have the responsibilities, duties and authority commensurate with your position as Chief Financial Officer and Treasurer. You shall perform such duties at Lynnfield, Massachusetts or such other place as you and the Company shall mutually agree. 1.2 You will, to the best of your ability, devote your full time and best efforts to the performance of your duties hereunder and to the business and affairs of the Company subject to your involvement in activities permitted by Section 5 hereof. 2. TERM OF EMPLOYMENT. 2.1 The term of your employment shall be three (3) years (the "Initial Term commencing with the date hereof (the "Commencement Date"), provided your employment shall automatically terminate upon your death and may be terminated at any time as provided in Section 2.2 (the "Employment Term"). On the third anniversary of the Commencement Date, your employment hereunder shall be automatically extended for a three year period and thereafter shall be automatically extended at the end of each three year period for an additional three year period unless earlier terminated in accordance with the terms hereof, and unless either you or the Company shall have given written notice to the other of a desire that such automatic extension not occur, which notice was given no later than thirty days (30) days prior to the relevant anniversary of the Commencement Date. If either party gives such notice and absent earlier termination in accordance with the terms hereof, the Termination Date (as defined below) shall be the last day of the Employment Term. 1
As used herein, "Termination Date" shall mean the last day of your employment, as determined in accordance with this Agreement. 2.2 The Company shall have the right, on written notice to you specifying the applicable subsection below, to terminate your employment: (a) immediately for Cause (as defined in Section 2.4), or (b) subject to Section 2.6 hereof, in the event of your death or disability which, in the reasonable opinion of the Board of Directors, renders you unable or incompetent to carry out your duties, responsibilities, and assignments for a period of one hundred and twenty (120) consecutive days; or 2.3 You shall have the right, on written notice to the Company, to terminate your employment if you "resign for just cause," which shall mean a resignation of your employment as a direct result of (a) a material breach by the Company of its obligations to you under this Agreement, provided that, if such breach is capable of remedy, a written notice within sixty (60) days of such breach and opportunity to cure such breach shall be afforded the Company and, in such event, just cause shall exist if the Company shall fail to cure such breach within a reasonable period of time not to exceed thirty (30) days; or (b) a significant decrease by the Board of Directors of your duties or authority (except in connection with a termination pursuant to Section 2.2), provided that you have given the Company notice of such decrease within three (3) months of its occurrence. 2.4 The term "Cause" shall mean: (i) your continued failure to substantially perform your duties hereunder (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure); (ii) your willful engagement in misconduct which is materially injurious to the Company's business or reputation, monetarily or otherwise; (iii) your violation of any material provision of this Agreement; or (iv) your conviction of an act of fraud, embezzlement or another crime involving moral turpitude, in any such case either (x) involving the Company or (y) not involving the Company but which, in the opinion of a majority of the Board of Directors (other than you), is materially injurious to the Company's business or reputation. You shall not be deemed to have been terminated for Cause unless (1) prior written notice has been delivered to you setting forth the reasons for the Company's intention to terminate for Cause, and (2) a period of twenty (20) days has elapsed since delivery of such notice during which you were afforded an opportunity to cure to the reasonable satisfaction of a majority of the Board of Directors (other than you), if capable of remedy, the reasons for the Company's intention to terminate for Cause. 2.5 If you are terminated for Cause or your employment is terminated due to death or disability pursuant to Section 2.2(b), neither the Company nor any affiliate of the Company shall have any further obligation to you or your personal representatives under this Agreement, except for salary, and bonus earned hereunder and unpaid at the date of termination (plus reimbursement of permitted business expenses in accordance with Company policy). On or before the date of termination of your employment, you shall return to the Company all records and other personal property of the Company in your possession or control, including all confidential, proprietary or trade secret information of the Company and its subsidiaries and affiliates. 2
2.6 SEVERANCE BENEFITS. (a) If the Company fails to renew your Employment Term pursuant to Section 2.1 hereof or terminates your employment either with or without Cause under Section 2.2 or you terminate your employment under Section 2.3 hereof, the Company shall pay to you an aggregate of (i) thirty-sixty (36) months' Base Salary at the time of termination, less applicable taxes and withholding, plus (ii) to the extent earned and not already paid, any bonus payable pursuant to Section 3.3 for the prior fiscal year, plus (iii) an amount equal to any bonus payable with respect to the fiscal year prior to that in which your termination occurs (the "Severance Payment"), in the manner and subject to the terms and conditions as hereinafter provided, and the Company shall provide you during such period medical, dental, life and disability insurance benefits on the same basis the Company would have provided you such benefits during such period had you continued to be an employee of the Company (collectively, the "Severance Benefits"). (b) The Base Salary component of the Severance Payment shall be payable in installments on such date or dates on which Base Salary would have been paid to you had your employment not been terminated, and any bonus component of the Severance Payment shall be payable in a lump-sum within thirty (30) days of termination. 2.7 In the event of the termination of your employment associated with a "change in control" of the Company (including if you "resign for just cause" as defined in Section 2.3), (a) all stock options held by you to purchase shares of the Company's Common Stock shall become immediately exercisable, notwithstanding the vesting provisions of any stock option award agreement concerning such options; provided that such acceleration of vesting shall not occur if and to the extent that (i) the Company's independent accountant has advised the Board of Directors of the Company that such acceleration could prohibit the accounting treatment of the transaction which is a change in control as a pooling of interests under Accounting Principles Board Opinion No. 16 (or any successor opinion) and (ii) the Board of Directors of the Company intends to treat such transaction as a pooling of interests, in which case options would continue to vest as permitted within the terms of the applicable stock plans, and (b) you will be entitled to any bonuses for the then current fiscal year under any bonus plans then in effect as if fully earned. Benefits payable under this Section 2.7 upon a change in control may subject you to an excise tax as "excess parachute payments" under Section 280G of the Code. The Company will reimburse you for all excise taxes paid, but the reimbursement will constitute an excess parachute payment and will be subject to further excise tax. Such further excise tax will trigger further reimbursement by the Company. For purposes of this Section 2.7, a "change in control" of the Company shall be deemed to have taken place if (i) a third person, including a "person" as defined in Section 13(d)(3) of the Exchange Act, becomes the beneficial owner (as defined in Rule l3d-3 under the Exchange Act) directly or indirectly, of securities of the Company representing seventy-five percent (75%) or more of the total number of votes that may be cast for the election of the directors of the Company; or (ii) as the result of, or in connection with, any tender or exchange offer, merger, consolidation or other business combination, sale of assets or one or more contested elections, or any combination of the foregoing transactions (a 3
"Transaction"), the persons who were directors of the Company immediately prior to the Transaction shall cease to constitute a majority of the Board of Directors of the Company or of any successor to the Company. 3. COMPENSATION. 3.1 Base Salary. The Company shall pay to you for the services to be rendered hereunder a Base Salary ("Base Salary") at an annual rate of two hundred thousand dollars ($200,000), subject to customary withholding for federal, state and local taxes. Such Base Salary shall be payable periodically in conformity with the prevailing practice of the Company for executives' compensation as such practice shall be established or modified from time to time. Such Base Salary shall be subject to increase from time to time to take into account appropriate cost of living adjustments and general compensation increases based on performance, in the discretion of the Board of Directors of the Company. 3.2 BUSINESS EXPENSES. You shall be entitled to be reimbursed for all reasonable and necessary expenses incurred in connection with the performance of your duties hereunder provided that you shall, as a condition of reimbursement, submit verification of the nature and amount of such expenses in accordance with the reimbursement policy from time to time adopted by the Company. 3.3 BONUS. On an annual basis, you will present to the Compensation Committee your proposal as to an annual bonus or incentive program for you and other selected employees for the upcoming fiscal year. The Compensation Committee will consider your proposal in good faith and, after such consideration, will present a program to the Board of Directors for approval. You will be entitled to participate in the plan approved by the Board, as well as any other plans generally applicable to senior executives. 3.4 LIFE INSURANCE. The Company shall continue to pay the premiums for the existing whole life insurance policy on your life with your designee as the beneficiary. 4. OTHER BENEFITS. 4.1 VACATION. You shall be entitled to vacation in accordance with the vacation policy of the Company, as the same may be in effect from time to time, without loss of compensation or other benefits to which you are entitled under this Agreement, to be taken at such times as you may reasonably select. 4.2 OTHER BENEFIT PROGRAMS. The Company will provide to you all other qualified and unqualified employee benefits generally available to employees of equivalent position, as the same may be in effect from time to time, including, without limitation, incentive compensation plans, stock option plans and restricted stock plans. 4.3 INCENTIVE COMPENSATION. You shall be eligible to receive additional compensation, including awards of performance bonuses at levels commensurate with employees of equivalent position in the discretion of the Compensation Committee. 4
5. OTHER ACTIVITIES DURING EMPLOYMENT. 5.1 Except with the prior written consent of the Company's Board of Directors, you will not during the term of this Agreement undertake or engage in any other employment or occupation except as permitted by Section 5.3. This provision shall not be deemed to preclude your participation or membership in professional societies, service on the board or similar governing body of any not for profit organization, lecturing or the acceptance of honorary positions, that are in any case incidental to your employment by the Company, which are not adverse or antagonistic to or competitive with the Company or its subsidiaries or affiliates, their business or prospects, financial or otherwise and are consistent with your obligations regarding the confidential, proprietary and trade secret information of the Company and its subsidiaries and affiliates pursuant to the Proprietary Information and Inventions Agreement referenced below. 5.2 Except as permitted by Section 5.3, you will not assume or participate in, directly or indirectly, any position or interest adverse or antagonistic to the Company or its subsidiaries or affiliates, their business or prospects, financial or otherwise, or take any action towards any of the foregoing. 5.3 During the term of your employment by the Company, except on behalf of the Company or its subsidiaries or its affiliates, you will not, directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative or otherwise, become or be interested in any other person, corporation, firm, partnership or other entity whatsoever which directly competes with the Company or its subsidiaries or affiliates, in any part of the world, in any line of business engaged in (or planned to be engaged in) by the Company or its subsidiaries or affiliates (or any successor to their business). With respect to any company or partnership which does directly compete with the Company or its subsidiaries or affiliates, this Section 5.3 shall not prohibit you from owning (i) as a passive investor only, an aggregate of not more than ten percent (10%) of the total stock or equity interests of such company or partnership if the same are publicly traded, or (ii) stock or equity interests of such company or partnership through mutual funds or other similar investment vehicles over which you retain no investment discretion. 6. INDEMNIFICATION. As a condition of your employment the Company will indemnify and insure you against personal liability for acts in connection with service to the Company for the Employment Term and six (6) years thereafter. 7. POST-EMPLOYMENT ACTIVITIES. 7.1 You understand and acknowledge that the provisions of this Section 7 are necessary to protect the legitimate business interests of the Company and are fair and reasonable for numerous reasons, including your receipt of the specific consideration expressed in the second paragraph of this Agreement, In addition, as a result of your executive position with the Company, you have had, and will continue to have, access to significant confidential, proprietary or trade secret information of the Company, so that, if you were employed by a competitor of the Company, there would be a substantial risk to the Company of your use of its confidential, proprietary or trade secret information. Based on the foregoing, for a period of six (6) months after the termination of your employment with the Company, absent the Company's prior written 5
approval (with concurrence by the Board of Directors of the Company), you will not directly or indirectly: (a) render any services to, or engage in any activities for, any other person, firm, corporation or business organization with respect to any product, process, technology or service, in existence or under development which substantially resembles or competes with a product, process, or service of the Company in existence or under development upon which you worked or exercised supervisory responsibility at any time during your employment with the Company; (b) solicit employees of the Company to leave their employ or offer or cause to be offered employment to any person who is or was employed by the Company at any time during the six (6) months prior to the termination of your employment with the Company; (c) entice, induce or encourage any of the Company's other employees to engage in any activity which, were it done by you, would violate any provision of this Section 8; or (d) otherwise attempt to interfere with or disrupt the business or activities of the Company or its subsidiaries or affiliates after written notice and a 60-day cure period. You agree that if you act in violation of this Section 7, the number of days that you are in violation will be added to the time period specified in this Section 7. 7.2 Regardless of the foregoing, the provisions of this Section 7 shall not apply to you (i) in the event that the Company breaches any of the terms and provisions hereof, (ii) the Company terminates you for any reason (other than Cause), or (iii) you "resign for just cause" (as described in Section 2.3 hereof). 8. REMEDIES. Your duties under Section 7, if any, shall survive termination of your employment with the Company. You acknowledge and agree that any breach by you of any of the provisions of Section 7.1 of this Agreement will result in irreparable and continuing damage to the Company and that a remedy at law for any breach or threatened breach by you of the provisions of Section 7.1 would be inadequate, and you therefore agree that the Company shall be entitled to temporary, preliminary and permanent injunctive relief in case of any such breach or threatened breach, The prevailing party in an action under this Agreement shall be entitled to recover its costs and expenses, including attorneys' fees. Nothing in this Agreement shall be construed to prohibit you or the Company from pursuing any other remedy available to it at law or in equity, the parties having agreed that all remedies are cumulative, 9. MISCELLANEOUS. 9.1 ASSIGNMENT. This Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of any successor or successors of the Company by reorganization, merger or consolidation and any assignee of all or substantially all of its business and properties or the business or properties of the Company or any subsidiary or division thereof, 6
but, except as to any such successor or assignee of the Company, neither this Agreement nor any rights or benefits hereunder may be assigned by the Company or you. 9.2 INTERPRETATION. In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or enforceability shall not affect the other provisions of this Agreement. If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, the parties expressly agree that a court may rewrite and modify such provisions so as to be enforceable to the fullest extent compatible with the applicable law as it shall then appear. 9.3 NOTICES. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties):
If to the Company: Investors Capital Holdings, Ltd., 230 Broadway, Lynnfield, MA 01940 Timothy B. Murphy, 21 Moreland Road, Quincy MA 02169
If to you:
9.4 WAIVERS. If either party shall waive any breach of any provision of this Agreement, he or it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement. 9.5 HEADINGS. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning hereof 9.6 APPLICABLE LAW. This Agreement shall be governed by and construed (both as to validity and performance) and enforced in accordance with the laws of the Commonwealth of Massachusetts applicable to agreements made and to be performed wholly within such jurisdiction. The Company and Employee hereby agree that the courts of the Commonwealth of Massachusetts located in Boston and the United States District Court for the District of Massachusetts each shall have personal jurisdiction and proper venue with respect to any dispute between parties. 9.7 COMPLETE AGREEMENT, AMENDMENTS, PRIOR AGREEMENTS. The foregoing is the entire agreement of the parties with respect to the subject matter hereof and may not be amended, supplemented, canceled or discharged except by written instrument executed by both parties hereto. 7
9.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of which when so executed and delivered shall constitute a complete and original instrument but all of which together shall constitute one and the same agreement, and it shall not be necessary when making proof of this Agreement or any counterpart thereof to account for any other counterpart. 9.9 OPPORTUNITY FOR REVIEW. You acknowledge that you had the opportunity to have this Agreement reviewed by an attorney prior to your execution of this Agreement. If you are in agreement with the foregoing, please so indicate by signing and returning the enclosed copy of this letter. INVESTORS CAPITAL HOLDINGS, LTD.
By: /s/ JAMES J. MCCARTHY ----------------------------JAMES J. MCCARTHY Title: DIRECTOR
Accepted and agreed:
/s/ Timothy B. Murphy ---------------------------Timothy B. Murphy
Name of Employee: Date: August 9, 2000
Exhibit 10.3 INVESTORS CAPITAL HOLDINGS, LTD. 1996 STOCK INCENTIVE PLAN SECTION I PURPOSES The purpose of the INVESTORS CAPITAL HOLDINGS, LTD, 1996 Stock Incentive Plan (the "Plan") is twofold. First, the Plan will further the interest of INVESTORS CAPITAL HOLDINGS, LTD., (the "Company" or "INVESTORS"), any subsidiaries it may have and its stockholders by providing incentives in the form of stock options grants and/or restricted stock grants to key employees who contribute materially to the success and profitability of the Company. The grants shall recognize and reward outstanding individual performances and contributions and shall give such persons a propriety interest in the Company, thus enhancing their personal interest in the Company's continued success and progress, This Plan also shall assist the Company and any subsidiaries it may have in attracting and retaining key persons. Second, the Plan will provide the Company flexibility and the means to reward directors and other non-employees who render valuable contributions to the Company. SECTION 2 DEFINITIONS The following terms when used in the Plan, shall have the meanings set forth below: Award: An award or grant of a Stock Option or Restricted Stock by the Committee to a Participant under the Plan. Beneficiary: Beneficiary shall mean the person or persons designated concurrently, successively or contingently by a Participant in his or her last effective writing filed with the Company prior to the Participant's death.
Board: Code: Committee: The Board of Directors of the Company. The Internal Revenue Code of 1986, as amended. The Compensation Committee of the Board, or such
other committee as may be duly appointed by the Board from time to time to administer the Plan, in accordance with Section 3 of the Plan.
Common Stock: The Common Stock of the Company, par value $.01, or such other securities to which the Man may apply pursuant to Section 8 of the Plan. Company: INVESTORS CAPITAL HOLDINGS, LTD., a Massachusetts corporation, referred to also as "INVESTORS". Disability: Complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed or the services for which the Participant was retained when such disability commenced, as determined by the Committee based on medical evidence acceptable to it. Eligible Person: A person who performs or has in the past performed services for the Company or any direct or indirect partially or wholly owned subsidiary thereof, whether as a director, officer, employee, consultant or other independent contractor, and any person who performs services relating to the Company in his or her capacity as an employee or independent contractor of a corporation or other entity that provides services for the Company. Exchange Act: The Securities Exchange Act of 1934 as amended and in effect from time to time, or any successor statute. Fair Market Value: As applied to the Common stock on any given day, the closing sale price of such stock in the trading day next preceding such date as reported on the registered national exchange providing the primary market in such securities, or if the Common Stock was not traded on such market, the average of the closing bid prices as reported by the NASD Automated Quotation System for the previous ton consecutive trading days, or if such stock is not so traded or reported, the value of a share of Common Stock as may be determined, with or without an independent appraisal, in good faith by the Board of Directors. Incentive Stock Option: Any Stock Option, granted to an employee of the Company pursuant to the provisions of Section 6 of the Plan, that qualifies as an "incentive stock option" within the meaning of Section 422 of the Code. Non-Qualified Stock Option: Any Stock Option granted pursuant to the provisions of Section 6 of the Plan that does not qualify as an Incentive Stock Option. Participant: Any Eligible Person who is selected to participate in the Plan by the Committee. Plan: THE INVESTORS CAPITAL HOLDINGS, LTD. 1996 Stock Incentive Plan, as herein set forth, and as amended from time to time. Restricted Period: The period of time during which Restricted Awards are subject to the vesting restrictions determined in accordance with Section 7(e) of the Plan.
Restricted Stock: Shares of Common Stock awarded pursuant to the provisions of Section 7 of the Plan. Retirement: Separation from service under conditions which would constitute normal retirement under any Company's tax-qualified plans, or at such earlier time as may be permitted by the Committee in its sole discretion, Rule 16-b-3: Securities Exchange Commission Regulation 240.16b-3, or any successor regulation.
Share Reserve: 5 of the Plan. Stock Option: The share reserve established pursuant to section
An option to purchase shares of Common Stock
granted pursuant to the provisions of Section 6 of the Plan. SECTION 3 ADMINISTRATION The Plan shall be administered by a Committee which shall be constituted so as to permit the Plan to comply with the disinterested administration requirements of Rule 16b-3, as currently in effect or as hereafter modified or amended. The members of the Committee shall be members of the Board and shall be appointed by the Board. The Committee shall have the power to interpret the Plan and, subject to its provisions, to prescribe, amend, waive and rescind rules and regulations, to determine the terms of the Awards and to make all other determinations necessary or desirable for the Plan's administration, All action taken BY the Committee in the administration and interpretation of the Plan shall BE final and binding on all concerned. SECTION 4 PARTICIPATION Subject to the provisions of the Plan, the Committee may at any time, and from time to time, make Awards under the plan in any farm provided pursuant to Sections 6 and 7 of the Plan. the Committee shall select the Participants to be granted Awards, determine the amounts and type or types of Awards to be made, set forth the terms, conditions and limitations applicable to each Award and prescribe the form of the instruments embodying Awards made under the Plan. No individual shall at any time have the, night to be selected as a Participant. Any Participant, having previously been granted an Award, may be granted an additional Award in the future. 3
Any Eligible Person that the Committee in its sole and absolute discretion designates is eligible to receive an Award under the Plan. Only employees of the Company shall be eligible to receive grants of Incentive Stock Options. The Committee's grant of an Award to a Participant in any year does not require the Committee to grant an Award to the Participant in any other year. Furthermore, the Committee may grant different Awards to different Participants and has full discretion to choose whether to grant Awards to any Eligible Person- The Committee may consider such factors as it deems pertinent in selecting Participants and determining the amount of their Awards, including, without limitation, (i) the financial condition of the Company or its Subsidiaries; (ii) expected profits for the current or future years; (iii) the contributions of a prospective Participant to the profitability and success of the Company or its Subsidiaries-, and (iv) the adequacy of the prospective Participant's other compensation. Participants may include persons to whom stock, stock options, stock appreciation rights, or other benefits previously were granted under this or another plan of the Company or any Subsidiary, whether or not the previously granted benefits have been fully exercised or vested. SECTION 5 Share Reserve Subject to adjustment as permitted under this Section 5 or as permitted by Section 8 hereof, the aggregate number of shares of Common Stock that may be distributed to Participants under the Plan may not exceed 300,000 shares (the "Share Reserve"). Such shares may be either authorized but unissued shares, treasury shares or shams issued and thereafter acquired by the Company. For the purpose of computing the total number of shares of Common Stock available for Awards under the Plan, there shall be counted against the foregoing limitations the number of shares of Common Stock subject to issuance upon exercise or settlement of Awards determined as at the dates on which such Awards are granted. If any Award or any portion of any Award is forfeited, terminated, expired, unexercised or settled in cash in lieu of stock or exchanged for other Awards, the shares of Common Stock which were thereto subject to such Awards shall again -be available for Awards under the Plan to the extent of such forfeiture, termination, expiration, settlement or exchange. No fractional shares of Common Stock shall be issued under the Plan. SECTION 6 Stock Options (a) Awards of Stock Options. Stock Options may be granted under the Plan on such terms and conditions not inconsistent with the provisions of the Plan and in such form as the Committee may from time to time approve. Awards of Stock Options made 4
pursuant to the Plan may be in the form of Incentive Stock Options or Non-Qualified Stock Options. Stock Options may be granted alone or in addition to other Awards under the Plan However, no Participant shall be granted Stock Options in any one year to purchase a number of shares of the Company's Common Stock in excess of one (1%) percent of the number of shares of Common Stock outstanding as of the effective date of the Plan in accordance with Section 13. (b) Exercise Price. The exercise price per share of Common Stock deliverable upon the exercise of each Stock. Option shall be determined by the Committee at the date such Stock Option is granted. Such exercise price may be less than the Fair Market Value of Common Stock on the date of grant but in no event shall the exercise price be less than the par value of the Common Stock; provided, that in no event shall the exercise price of an Incentive Stock Option be less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the date of grant thereof. If the exercise price of the Stock Option is less than the Fair Market Value, the Committee shall establish either the exercise price or the method used for determining the exercise price in respect of Stock Options to be made to individuals. The Committee may grant to Participants holding outstanding Stock Options, in exchange for the surrender and cancellation of such Stock Options, new Stock Options having exercise prices higher or lower than the exercise price as provided in the surrendered Stock Options and containing such other terms and conditions as the Committee may deem appropriate. (c) Exercise Period. Stock Options shall become exercisable in whole or in part on such date or dates as shall be determined by the Committee at the date of grant. The Committee may, in its sole discretion, accelerate the time at which any Stock Option may be exercised whether or not such right is set forth in the terms of any option agreement evidencing such Stock Option. Except as otherwise permitted by the Committee, each Stock Option which is not yet exercisable by the Participant shall terminate and be forfeited back to the Company if and when the Participant shall terminate employment With the Company. Notwithstanding the foregoing, any exercisable Stock Options shall remain exercisable for such period, after termination of employment as shall be determined by the Committee at the time the Stock Option is granted which period may extend beyond the expiration of the original exercise period of the Stock Option; provided, that, with respect to Incentive Stock Options, the exercisable period beyond termination of employment shall not exceed the maximum period permitted under the Code (d) Stock Option Term. Subject to the provisions of subparagraph (c) above, each Stock Option shall expire on such date or dates as the Committee may determine at the time the Stock Option shall be granted; provided, that the term of Incentive Stock Options shall not exceed the date ten (10) years after the date of grant. (e) Method of Exercise. Any Stock Option granted under the Plan may be exercised solely by the Participant to whom granted (or by his or her guardian or legal representative) or, in the case of such Participant's death, by the Participant's legal 5
representative. Each Stock Option shall be exercised by written notice to the Company in the manner Set forth in the option agreement evidencing such Stock Option. As soon as practicable after receipt by the Company of the notice of exercise and of payment of the option price for all shares of Common Stock with respect to which a Stock Option has been exercised, a certificate or certificates representing such shares shall be REGISTERED IN the name or names of the Participant or his or her successor and shall be delivered to the Participant or his or her successor at the Participant's address as it appears in the records of the Company or such other address as may be designated by the Participant. Payment for shares purchased upon exercise of a Stock Option shall be made (a) in full in cash or by check at the time of exercise, (b) with the consent of the Committee, in whole or in part BY the surrender of shares of Common Stock, such Common Stock to be credited against the option price in an amount equal to its Fair Market Value on the date of exercise, or (c) with the consent of the Committee and subject to any applicable restrictions imposed by law, by notes or other means and upon such terms and conditions including provision for securing the payment of the same, as the Committee, in its discretion, shall determine are consistent with the Plan's purposes and applicable law. In no event, however, shall, the Committee provide for the payment OF any option price unless, at the time of exercise of the Stock Option to which such option price relates, the holder of the Stock Options pays in cash or by check an amount equal to not less that the aggregate par or stated value of the shares being acquired (f) Stock Option Agreement. No Participant shall have any rights or privileges as a stockholder with respect to any shares of Common Stock subject to option hereunder until said shares of Common Stock have been issuedEach Stock Option shall be evidenced by a written stock option agreement which will expressly identify the option as an incentive stock option or as a non-qualified stock option and which shall contain such provisions, consistent with the provisions of this Plan, as may be established at any time or from time to time by the Committee. Each option agreement may provide, in the discretion of the Committee, that the issuance of the Common Stock shall be conditioned upon the receipt from the person exercising such Stock Option of a representation, or other instruments in form and substance satisfactory to the Committee, indicating that at the time of such exercise that it is his or her present intention to acquire the Common Stock being purchased for investment and not with a view to the resale or distributor of any part thereof- The form of option agreement authorized by the Plan may contain such other provisions as the Committee shall deem advisable- The Committee may vary the terms and provisions of individual option agreements on a case-by-case basis and shall not be required to make all option agreements uniform (g) Special Rules for Incentive Stock Options. With respect to Incentive Stock Options granted under the Plan, the aggregate Fair Market Value (determined as of the date the Incentive Stock Options were granted) or the number of shares first exercisable by a Participant during any calendar year shall not exceed one hundred thousand dollars ($ 100,000) or such other limit as may be required by the Code. 6
A Participant who owns stock possessing more than 10 percent of the combined voting power of all classes of stock of the Company (or its parent or subsidiary, if any) shall not be granted any Incentive Stock Options unless, at the time the Stock Option is granted, the exercise price is a least 110 percent of the Fair Market Value of the Common Stock subject to the Stock Option as of that date and such Stock Option is not exercisable after the expiration of five years after the date the Stock Option is granted. (h) Suspension or Termination of Option. If the Board of Directors of the Company believes that a Participant other than, a non-employee director has committed an act of misconduct as described in this Section, the Board may suspend the Participant's right to exercise any Stock Option pending a more complete determination by the Board. If the Board determines a participant other than a non-employee director has committed an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to INVESTORS, breach of fiduciary duty or deliberate disregard of INVESTORS' rules resulting in loss, damage or injury to INVESTORS, or if a Participant makes an unauthorized disclosure of any INVESTORS proprietary or confidential information, engages in any conduct constituting unfair competition, induces any INVESTORS' business relationship to breach a contract with INVESTORS or induces any principal for whom INVESTORS acts as agent to terminate such agency relationship, neither the Participant nor his or her estate shall be entitled to exercise an option whatsoever. In making such determination, the Board shall act fairly and shall give the participant an opportunity to appear and present evidence on his or her behalf at a hearing before a committee of the Board. SECTION 7 Restricted Awards (a) Awards of Restricted Stock. Awards of Restricted Stock may be granted under the Plan in such form and on such terms and conditions as the Committee may from time to time approve including' without limitation, restrictions on the sale, assignment transfer or other disposition or encumbrances of such sham during the Restricted Period and the requirement that the Participant forfeit such shams back to the Company without any consideration paid by the Company therefore upon termination of employment within the Restricted Period Restricted Stock may be granted alone or in addition to other Awards under the Plan. (b) Restricted Period. Restricted Stock that is not yet vested in accordance with Section 7(e) may be transfer red by a Participant to a trust for the benefit of the Participant or a member of such Participant's immediate family, but may not otherwise be sold, assigned, transferred, made subject to gift, or otherwise disposed of, mortgaged, pledged or encumbered. The Committee May, in its sole discretion, at the time an Award of Restricted Stock is made, prescribe conditions for the lapse or termination of 7
restrictions upon the satisfaction of other conditions in addition to or other than the expiration of the Restricted Period with respect to all or any portion of the Restricted Stock. The Committee may also, in its sole discretion, shorten or terminate the Restricted Period or waive any conditions for the lapse or termination or restrictions with respect to all or any portion of the Restricted Stock. (c) Rights of Holders of Restricted Stock. Except for the restrictions described in Section 7(b), the Participant shall be the owner of the Restricted Stock and shall have all the rights of a shareholder, including the right to receive dividends paid on such Restricted Stock and the right to vote such Restricted Stock. (d) Delivery of Restricted Stock. Restricted Stock awarded to a Participant under the Plan may be held under the Participant's name in a book entry account maintained by the Company or, if not so held, stock certificates for Restricted Stock awarded pursuant to the Plan may be registered in the name of the Participant and issue and deposited, together with a stock power endorsed in blank, with the Company or an agent appointed by the Company and shall bear an appropriate legend restricting the transferability thereof- A Participant shall be entitled to delivery of stock certificates ONLY when they become vested in accordance with the provisions of this Section and upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee. (e) Vesting. AD Participants, unless otherwise specified by the Committee, shall be 100% vested in their Restricted Stock after five (5) years, measured from the effective date of an Award- Notwithstanding any other provisions of the Plan, the Committee may, in its sole discretion, provide That a Participant shall be vested in 100% of all or any portion of such Participant's Awards not previously vested if his or her employment by the Company is terminated because of death, Disability or Retirement, Except as otherwise provided by the Committee, a Participant shall cease vesting in all or any portion of an Award as of the date of his or her termination or employment-for whatever reason. Any Awards that are not vested as of the date of such termination shall be forfeited. The Committee may amend the vesting schedules, restrictions or other conditions in any Award; provided, that no such amendment shall reduce interests in the Plan that were vested prior to the date of such amendment without the consent of the Participant holding such vested interest, (f) Forfeitures. Except to the extent that the Participant has vested in his or her Restricted Stock and subject to the provisions of Section 7(e) above, each Participant's right to Restricted Stock shall be forfeited if an when such Participant's employment or affiliation with the Company ceases or when any prescribed condition for the lapse or termination of restrictions is not satisfied. If forfeited, all such Restricted Stock shall become the property of the Company and shall again immediately become available for 8
award under the Plan and all of the rights of such Participant to such Restricted Stock and as a stockholder with respect to such Restricted Stock shall terminate without further obligation an the part of the Company. (g) Designation of Beneficiary. A Participant may designate a Beneficiary to receive, in the event Of the Participant's death, any rights to which the Participant may be entitled under the Plan Designation of a Beneficiary by a Participant shall be made in writing and shall be filed with the COMMITTEE. SUCH designation may be changed from time TO TIME at the election of the Participant by filing of a new written designation with the Committee. The consent of the Beneficiary to any revocation or change in designation shall not be required. The Committee shall be entitled to rely on the last written designation of a beneficiary received by the Committee and shall not be liable to any person by reason of making payments pursuant to the Plan to such Beneficiary. If a Participant shall have failed to make an effective designation of Beneficiary, the governing law of descent and distribution shall apply. (h) Section 83(b) Election. A Participant who files an election with the Internal Revenue Service to include the fair market value of any Restricted Stock in gross income while they are still subject to restrictions promptly shall furnish the Company with a copy of such election together with the amount of any federal, state, local or other taxes required to be withheld to enable the Company to claim an income tax deduction with respect to such election. SECTION 8 Adjustment Provisions In the event that the Common Stock should, as a result of a stock split or stock dividend or combination of shares or other changes or exchange for other securities by reclassification or otherwise, be increased or decreased or changed into, or exchanged for, a different number of kind of shares or other securities of the Company or any other corporation, or in the event of a spin-off, spin-out or other distribution of assets to shareholders or the assumption or conversion of outstanding grants pursuant to an acquisition, the number and kind of shares then subject to Awards granted under the Plan and the number of shares then remaining in the Share Reserve and the exercise price per sham of outstanding Stock Options, may be appropriately adjusted by the Committee in its sole discretion to reflect such action. 9
SECTION 9 Amendment of Discontinuance of the Plan The Plan may be amended, suspended or terminated by the Board in whole or part at any time, with prospective or retroactive effect, provided that no amendment, suspension or termination of the Plan shall adversely affect, except with the consent of the holder, any rights or obligations with respect of Awards theretofore granted and provided further that no amendment shall be made which would cause the Plan to no longer comply with Rule 16b-3 or other regulatory requirement to the extent applicable to the Participants subject to Section 16 of the Exchange Act. Notwithstanding any provisions hereof to the contrary, without shareholder approval, the Board may not (a) materially increase the benefits accruing to participants under the Plan, (b) materially increase the number of Shares which may be issued under the Plan (other than as provided by Section 8 of the Plan), or (c) materially modify the requirements as to eligibility for participation under the Plan. SECTION 10 Listing and Qualification of Shares The Company, in its discretion, may postpone the issuance or delivery' of shares of Common Stock pursuant to any Award until completion of such stock exchange listing, or other qualifications of such shares under any state of Federal law, rule or regulation as the Company may consider appropriate, and may require any Participant to make such representations, including, but not limited to a written representation that the shares am to be acquired for investment and not for resale or with a VIEW to the distribution thereof, and furnish such information as it may consider appropriate in connection with the issuance or delivery of the shares in compliance with applicable laws, rules and regulations. The Committee may cause a legend or legends to be placed on the certificates representing shares to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable Federal or state securities laws. 10
SECTION 11 HOLDING PERIOD All equity securities granted pursuant to the Plan to any participant subject to Section 16 of the Exchange Act shall be held by such participant or by the Plan for the benefit of that Participant for a period of not less than six (6) months from the date of such grant to the date of disposition of the option OR underlying Common Stock (other than upon exercise or conversion) by the Participant. SECTION 12 OTHER PROVISIONS The following miscellaneous terms and conditions are also in effect under the Plan: (a) NO RIGHT TO EMPLOYMENT OR SERVICE. No person shall have any claim or right to be granted an Award under the Plan, and no Participant shall have any right under the Plan to be retained in the employ or service of the Company. No Participant or other person shall have any right with respect to the Plan or in any Award, contingent or otherwise, until written evidence of the Award shall have, been delivered to the recipient and all the terms, conditions and provisions of the Plan and the Award applicable to such recipient (and each person claiming under or through him or her) have been met, (b) NON-TRANSFERABILITY OF AWARDS. Except as set forth in Section 7(b) and except by will or the laws of descent and distribution, no security, right or interest of any Participant in the Plan shall be assignable or transferable and no security, right or interest of any Participant shall be liable for, or subject to, any lien, obligation or liability of such Participant (c) EXPENSES. Any expenses of administering the Plan shall be borne by the Company. (d) INDEMNIFICATION. No member of the Committee or, the Board shall be personally liable by reason of any contract or other instrument executed by such member or on such member's behalf in his or her capacity as a member of the Committee for any mistake of judgment made in good faith, and the Company shall, indemnify and hold harmless each employee, officer or director of the Company to whom any duty or power 11
relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the plan unless arising out of such person's own fraud or bad faith, SECTION 13 APPROVAL AND EFFECTIVE DATE This Plan shall become effective sixty (60) days following its approval by the HOLDERS OF the Company's voting common stock, and Awards may be granted upon the effective, date of the Plan and from time to time thereafter, Notwithstanding any provisions of the Plan to the contrary, no Incentive Stock Options may be granted at any time on or after the tenth anniversary of the DATE OF the Plan's adoption 12
Exhibit 10.4 STOCK PURCHASE AGREEMENT THIS AGREEMENT is made and entered into this 9th day of August, 2000 by and between Theodore Charles and Janice Charles, (hereinafter referred to as "Sellers") and Investors Capital Holdings, Ltd., (hereinafter referred to as "Purchaser"); W I T N E S S E T H: WHEREAS, the Sellers are the record owners and holders of the issued and outstanding shares of the capital stock of ICC Insurance Agency, Inc., (hereinafter referred to as the "Corporation"), a Massachusetts corporation, which Corporation has issued capital stock of one thousand (1,000) shares of no par value common stock, and WHEREAS, the Purchaser desires to purchase said stock and the Sellers desire to sell said stock, upon the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, and in order to consummate the purchase and the sale of the Corporation's Stock aforementioned, it is hereby agreed as follows: 1. PURCHASE AND SALE. Subject to the terms and conditions hereinafter set forth, at the closing of the transaction contemplated hereby, the Sellers shall sell, convey, transfer, and deliver to the Purchaser certificates representing such stock, and the Purchaser shall purchase from the Sellers the Corporation's Stock in consideration of the purchase price set forth in this Agreement. The certificates representing the Corporation's Stock shall be duly endorsed for transfer or accompanied by appropriate stock transfer powers duly executed in blank, in either case with signatures guaranteed in the customary fashion, and shall have all the necessary documentary transfer tax stamps affixed thereto at the expense of the Sellers. The closing of the transactions contemplated by this Agreement (the "Closing"), shall be held at 230 Broadway, Lynnfield, Massachusetts, on August 9, 2000 at 10:00 a.m., or such other place, date and time as the parties hereto may otherwise agree. 2. AMOUNT AND PAYMENT OF PURCHASE PRICE. The total consideration and method of payment thereof are fully set out in Exhibit "A" attached hereto and made a part hereof. 3. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby warrant and represent: a. ORGANIZATION AND STANDING. Corporation is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has the corporate power and authority to carry on its business as it is now being conducted. b. RESTRICTIONS ON STOCK. The Sellers are not parties to any agreement, written or oral, creating rights in respect to the Corporation's Stock in any third person or relating to 1
the voting of the Corporation's Stock. Sellers are the lawful owners of the Stock, free and clear of all security interests, liens, encumbrances, equities and other charges. There are no existing warrants, options, stock purchase agreements, redemption agreements, restrictions of any nature, calls or rights to subscribe of any character relating to the stock, nor are there any securities convertible into such stock. 4. REPRESENTATIONS AND WARRANTIES OF SELLERS AND PURCHASER. Sellers and Purchaser hereby represent and warrant that there has been no act or omission by Sellers, Purchaser or the Corporation which would give rise to any valid claim against any of the parties hereto for a brokerage commission, finder's fee, or other like payment in connection with the transactions contemplated hereby. 5. GENERAL PROVISIONS. a. ENTIRE AGREEMENT. This Agreement (including the exhibits hereto and any written amendments hereof executed by the parties) constitutes the entire Agreement and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof. b. SECTIONS AND OTHER HEADINGS. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. c. GOVERNING LAW. This Agreement, and all transactions contemplated hereby, shall be governed by, construed and enforced in accordance with the laws of the Commonwealth of Massachusetts. The parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in Essex County, Commonwealth of Massachusetts. In the event that litigation results from or arises out of this Agreement or the performance thereof, the parties agree to reimburse the prevailing party's reasonable attorney's fees, court costs, and all other expenses, whether or not taxable by the court as costs, in addition to any other relief to which the prevailing party may be entitled. 2
IN WITNESS WHEREOF, this Agreement has been executed by each of the individual parties hereto on the date first above written. Signed and sealed: Sellers:
/s/ Theodore E. Charles -----------------------Theodore E. Charles Purchaser: Investors Capital Holdings, Ltd. By: /s/ Timothy B. Murphy ------------------------Timothy B. Murphy 8/9/00 -----------------------Date /s/ Janice Charles -----------------------Janice Charles
EXHIBIT "A" AMOUNT AND PAYMENT OF PURCHASE PRICE 1. CONSIDERATION. As total consideration for the purchase and sale of the Corporation's Stock, pursuant to this Agreement, the Purchaser shall pay to the Sellers the sum of one hundred thousand dollars ($100,000.00), such total consideration to be referred to in this Agreement as the "Purchase Price". 2. PAYMENT. The Purchase Price shall be paid as follows: i. The sum of one hundred thousand dollars ($100,000.00) to be delivered to the Sellers upon the execution of this Agreement. 4
Exhibit 21.1 SUBSIDIARIES Investors Capital Corporation 230 Broadway Lynnfield, MA 01940 Incorporated in the Commonwealth of Massachusetts Eastern Point Advisors, Inc. 230 Broadway Lynnfield, MA 01940 Incorporated in the Commonwealth of Massachusetts ICC Insurance Agency, Inc. 230 Broadway Lynnfield, MA 01940 Incorporated in the Commonwealth of Massachusetts
EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm) included in or made a part of this registration statement. Cayer Prescott Clune & Chatellier, LLP Providence, Rhode Island August 14, 2000
ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INVESTORS CAPITAL HOLDINGS, LTD AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED
YEAR MAR 31 2001 APR 01 1999 MAR 31 2000 844,603 253,087 1,845,254 0 0 3,308,333 494,845 97,094 3,869,276 1,833,036 0 0 0 31,628 1,988,612 3,869,276 0 22,888,022 0 18,605,882 4,106,852 0 13,130 243,230 108,550 134,680 0 0 0 166,628 .04 .04
3 MOS MAR 31 2001 APR 01 2000 JUN 30 2000 669,672 241,048 1,992,515 0 0 3,180,304 499,999 114,765 3,774,511 1,593,521 0 0 0 31,628 2,109,362 3,774,511 0 7,591,920 0 6,306,548 1,068,540 0 4,921 235,373 101,000 134,373 0 0 0 120,750 .03 .03