UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INVESTORS CAPITAL HOLDINGS, LTD.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO OF INVESTORS CAPITAL HOLDINGS]
Notice of 2005 Annual Meeting
and
Proxy Statement
July 29, 2005
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Meeting") of Investors Capital Holdings, Ltd. (the "Company") to be held on
Wednesday, September 21, 2005, at 10:00 a.m. local time, at the Eastern Point
Yacht Club located at 125 Eastern Point Boulevard, Gloucester, Massachusetts.
Your Board of Directors and management look forward to greeting those
stockholders who are able to attend.
The Notice of Annual Meeting of Stockholders and Proxy Statement containing
information pertaining to the business to be transacted at the Meeting appear on
the following pages.
Whether or not you plan to attend, it is important that your shares be
represented and voted at the Meeting. You are requested to complete, sign, date,
and mail the enclosed proxy card at your earliest convenience.
On behalf of the Board of Directors and management I would like to thank
you for your interest and participation in the affairs of the Company.
Sincerely,
Theodore E. Charles
Chairman of the Board and Chief Executive Officer
2
INVESTORS CAPITAL HOLDINGS, LTD.
230 Broadway East
Lynnfield, Massachusetts 01940
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, SEPTEMBER 21, 2005
July 29, 2005
To the Stockholders:
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Stockholders (the
"Meeting") of Investors Capital Holdings, Ltd. (the "Company") will be held at
10:00 a.m. local time on Wednesday, September 21, 2005 at the Eastern Point
Yacht Club located at 125 Eastern Point Boulevard, Gloucester, Massachusetts for
the following purposes:
* To elect seven directors, each to serve for a term of one year or
until their successors are elected and qualified;
* To ratify the appointment by the Board of Directors of independent
auditors to audit the Company's books and records for the fiscal year
ending March 31, 2006;
* To approve the 2005 Stock Incentive Plan; and
* To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
Only holders of common stock of record as of the close of business on July
25, 2005 will be entitled to notice of, and to vote at, the Meeting, or any
adjournments or postponements thereof.
Stockholders are cordially invited to attend the Meeting. It is important
that your shares be represented and voted at the Meeting. Because many of our
stockholders cannot personally attend the Meeting, it is necessary that a large
number be represented by proxy in order to participate in the Meeting.
Therefore, if you do not expect to attend the Meeting, but wish your stock to be
voted for the business to be transacted thereat, you are requested to complete,
sign and date the enclosed proxy card and return it by mailing it in the
accompanying postage-paid envelope.
By Order of the Board of Directors,
Steven C. Preskenis, Esq.
Assistant Secretary
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PROXY STATEMENT
General
This Proxy Statement and the accompanying Proxy Card are being furnished in
connection with the solicitation by the Board of Directors (the "Board") of
Investors Capital Corporation, Ltd., a Massachusetts corporation (the
"Company"), of proxies to be voted at the Annual Meeting of Stockholders of the
Company (the "Meeting") to be held on Wednesday, September 21, 2005 at 10:00
a.m. local time at the Eastern Point Yacht Club located at 125 Eastern Point
Boulevard, Gloucester, Massachusetts, or any adjournments or postponements
thereof, for the purposes set forth in the attached Notice of Annual Meeting of
Stockholders.
Only the holders of record of the Company's Common Stock, par value $.01
per share, as of the close of business on July 25, 2005 (the "Record Date"), are
entitled to notice of, and to vote on, all matters properly brought before the
Meeting or any adjustments or postponements thereof. As of July 28, 2005, there
were 5,758,978 shares of common stock outstanding.
Voting and Proxy Procedures
Each stockholder is entitled to one vote for each share of common stock
held by him or her at the close of business on the Record Date. Pursuant to the
Company's Bylaws, to constitute a quorum for the transaction of business at any
meeting of stockholders, there must be present, in person or by proxy, the
holders of a majority of the voting power of the issued and outstanding shares
of voting stock of the Company. Once a share is represented for any purpose at
the meeting, it is deemed present for quorum purposes for the remainder of the
meeting. A plurality of the votes cast by the shares of stock entitled to vote,
in person or by proxy, at the Meeting will elect directors as long as a quorum
is present. If a quorum exists, action on each other question to be voted upon
will be approved if votes, in person or by proxy, cast by stockholders favoring
the action exceed the vote cast by stockholders opposing the action. When
proxies in the enclosed form are returned properly executed, the shares
represented thereby will be voted at the Meeting and, where instructions have
been given by the stockholder, will be voted in accordance therewith. If the
stockholder does not otherwise specify, the stockholder's shares will be voted
FOR each of the nominees for director, FOR the proposal to ratify the
appointment of the independent auditors, all as set forth in this Proxy
Statement, and in accordance with their best judgment as to any other business
which may come properly before the Meeting. Votes will be counted manually.
Abstentions and broker "non-votes" are not counted for purposes of the
election of a director. On all other proposals, abstentions will be considered
as a vote against the proposal, and broker non-votes will not be counted at all.
A stockholder executing the accompanying proxy has the power to revoke it at any
time prior to the exercise thereof by appearing at the Meeting and voting in
person or by filing with the Secretary or Assistant Secretary of the Company,
(i) a properly executed, later-dated proxy, or (ii) a written instrument
revoking the proxy.
This Proxy Statement and the accompanying Proxy Card are first being mailed
to stockholders on or about August 1, 2005. A copy of the Company's Annual
Report to Shareholders for the year ended March 31, 2005, is included with this
Proxy Statement.
The solicitation of proxies in the accompanying form is made by, and on
behalf of, the Board of Directors. We have engaged the services of Computershare
Trust Company, Inc., the Company's Transfer Agent, to assist us in the
distribution of proxies, for which a fee of approximately $1100 will be paid.
There will be no solicitation by officers and employees of the Company. The
Company will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of proxy materials to the beneficial
owners of shares held of record by such persons, and such persons will be
reimbursed for reasonable expenses incurred by them in connection therewith.
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PROPOSAL 1.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting to hold office until the
next Meeting or until their successors have been duly elected and qualified. It
is the intention of the proposed proxies named in the accompanying Proxy Card to
vote FOR the election of the seven persons listed below as directors of the
Company, unless authority to do so is withheld. The nominees, all of whom are
currently are directors of the Company, have consented to being nominated and
named herein and to serving as directors if elected at the Meeting. In the event
that any of the below listed nominees for director should become unavailable for
election for any presently unforeseen reason, the proposed proxies named in the
accompanying Proxy Card have the right to use their discretion to vote for a
substitute.
The Bylaws of the Company provide that the number of Directors shall be
determined by vote of the stockholders or the Board of Directors, but shall
consist of not less than three Directors. Each director presently is elected for
a one-year term at each annual meeting of the stockholders. Officers are elected
by, and serve at the pleasure of, the Board of Directors.
The following sets forth, as of July 1, 2005, certain information with
respect to each of the Board's nominees for election as a director:
Theodore E. Charles, age 62, has served as a director of the Company since
July 1995. A founder of Investors Capital Holdings, Mr. Charles has served as
the Company's chairman of the board, chief executive officer and president since
its inception in 1995. Mr. Charles also has served as the chief executive
officer of our subsidiaries, Investors Capital Corporation ("ICC") and Eastern
Point Advisors, Inc ("EPA") since their founding in 1994 and 1995, respectively.
Mr. Charles served on the Board of Directors of Revere Savings Bank of
Massachusetts from 1997 to 2001 and served on the Advisory Board of Danvers
Savings Bank from 2001 to 2003. Mr. Charles currently holds various securities
licenses, including series 6, 63, 7 and 24, has been a member of the Financial
Planning Association since 1985 and formerly served as Chairman of the
Shareholder Advisory Board of Life USA Insurance Company.
Timothy B. Murphy, age 40, has served as a director of the Company since
July 1995. A founder of the Company, Mr. Murphy has served as executive vice
president, treasurer and chief financial officer of the Company since its
inception, and as president of its subsidiaries, ICC and EPA, since their
respective inceptions. He entered the securities industry in 1991 as an
operations manager in the Boston regional office of Clayton Securities. By 1994,
he was serving as compliance officer of Baybanks Brokerage and a vice president
of G.R. Stuart & Company, another brokerage firm. Mr. Murphy holds various
securities licenses including series 4, 7, 24, 27, 53, 63 and 65.
C. Troy Shaver, Jr., age 59, has served as a director since February 2001.
Mr. Shaver has served as President of Dividend Growth Advisors, LLC since 2004.
Mr. Shaver served from 2000 to 2004 as the Vice Chairman of GoldK, Inc., a
full-service retirement company and a leading provider of online retirement
plans, and as President and CEO of GoldK Investment Services, Inc., a division
of GoldK that offers a self-directed brokerage option for 401(k) plans. Prior to
joining GoldK, Mr. Shaver was President of State Street Research Investment
Services Inc., President and CEO of John Hancock Funds, Inc. and Executive Vice
President and Director of Oppenheimer Management Corporation. He also held
similar positions at State Street Research, Hancock and Oppenheimer dealing with
mutual funds and the development and restructuring of strategies for sales,
marketing, distribution and customer service.
A. Marshall Acuff, Jr., age 65, has served as a director since June 2005.
Mr. Acuff and has served as president of AMA Investment Counsel, LLC, a business
consulting firm, and Senior Advisor to the London Company, an investment
management firm, since 2001 and 2004, respectively. He retired as a senior vice
president and managing director of Salomon Smith Barney to start AMA Investment
Counsel, LLC. He is a Chartered Financial Analyst and a member of the Institute
of Chartered Financial Analysts, as well as a fellow of the Association for
Investment Management & Research and a member of the New York Society of
Security Analysts, of which he is a past director. Mr. Acuff is a 13-time member
of Institutional Investor magazine's All-American Team. An adjunct professor of
business administration at the College of William and Mary since 2002, he also
currently serves on several other boards primarily related to education.
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William J. Atherton, age 66, has served as a director since November
2004. Since 2004, Mr. Atherton has been managing director of the Atherton Group,
consulting on relationships between insurers, investment and product managers,
and distributors in the variable annuity industry. From 1997 until his
retirement in 2004, Mr. Atherton was the first President of Ameritas Variable
Life Insurance Company, a joint venture between Ameritas Life Insurance Corp. of
Lincoln, Nebraska, and AmerUs Life Insurance Corp. of Des Moines, Iowa. Mr.
Atherton has been a senior executive in the annuity business since 1985, when he
formed North American Security Life (NASL) in Boston, a variable annuity
subsidiary of North American Life Assurance of Toronto. Mr. Atherton has been
the president and a director of two Variable Insurance Trusts and recently
received the John D. Marsh Memorial Award as a 2003 inductee into the NAVA Hall
of Fame.
Robert Martin, age 37, has served as a director since July 2005. Mr.
Martin has been the owner and president of Mercury Brewing Company of Ipswich,
Massachusetts since acquiring and renaming Ipswich Brewing Company in 1999.
Mercury Brewing is a renowned brewer of ales, lagers and sodas. A graduate of
Rensselaer Polytechnic Institute, Mr. Martin holds a degree in Architecture and
practiced in the Boston area in the 1990's prior to his employment at the
brewing company. In addition to being a successful businessman, Mr. Martin
builds fine furniture and participates in endurance athletic events such as the
Iron Man Triathlon and Ultra Marathons.
Arthur Stickney, age 70, has served as a director since August 2004. From
1970 through 2003, Mr. Stickney served as the head of Stickney Associates, a
marketing and advertising company whose clients included such brand companies as
Alex Brown, Bessemer Trust, Fidelity Investments, Fiduciary Trust, StockCross
and Tucker Anthony. Mr. Stickney also served as a partner in charge of business
development for Hill Holiday in the late 1960's, as well as New England and
Canadian Advertising Manager for The Wall Street Journal.
Meetings and Attendance
During fiscal year ending March 31, 2005, (hereinafter referred to as
"fiscal 2005") the Board held four meetings. The Company has no policy regarding
director attendance at annual stockholder meetings; however, all directors
attended the Company's 2004 annual meeting of stockholders.
Communications with the Board
Stockholder desiring to send communications, other than proposals for
stockholder meetings, to the Board or individual directors should address such
communications to the Company's General Counsel, who will forward such
communications to the full Board, or individual directors, as appropriate.
Director Nominee Selection Process
The Company does not have a nominating committee or committee charter.
However, all nominees are recommended for selection by the full Board by
majority vote of those directors who, by American Stock Exchange (AMEX) rule,
are deemed to be independent directors -- currently, Messrs. Acuff, Atherton,
Martin and Stickney. The Board exams from time to time the characteristics,
skills, and experiences appropriate for the Board as a whole and its individual
members. In evaluating the suitability of candidates, the Board considers many
factors, including general understanding of marketing, finance, and other
disciplines relevant to the success of a publicly traded company in today's
business environment; understanding of the Company's business and technology;
educational and professional background; and personal accomplishments. The Board
evaluates each individual in the context of the Board as a whole, with the
objective of recommending a group that can best ensure the success of the
Company's business and represent shareholder interests. In determining whether
to recommend a director for re-election, the Board also considers the director's
past attendance at meetings and participation in and contributions to the
activities of the Board.
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The Board, including its independent directors, will consider shareholder
recommendations for candidates for the Board. The name of any recommended
candidate for director, together with a brief biographical sketch, a document
indicating the candidate's willingness to serve, if elected, and evidence of the
nominating shareholder's ownership of Company stock should be sent to the
attention of the General Counsel of the Company.
Audit Committee
The Board has a separately-designated standing Audit Committee that
oversees the accounting and financial reporting processes of the Company and
audits of the Company's financial statements. The Audit Committee consults with
the Company's independent auditors and management with respect to the adequacy
of internal controls, the Company's audited financial statements and, where
appropriate, the Company's interim financial statements before they are made
public, and makes recommendations to the Board of Directors regarding the
appointment of independent auditors for the Company. The Audit Committee
currently is comprised of Messrs. Acuff, Atherton and Stickney, all of whom are
"independent directors" as defined by applicable Securities and Exchange
Commission (SEC) rule and AMEX listing standards. The Board has determined that
Mr. Acuff is an "audit committee financial expert" as defined by applicable SEC
rule. The Audit Committee held one meeting during fiscal 2005.
Compensation Committee
The Board's Compensation Committee, currently comprised of independent,
non-employee directors Acuff and Atherton, determines the compensation and
benefits of the chief executive officer and reviews and approves, or modifies if
deemed appropriate, the recommendations of the chief executive officer with
respect to the compensation and benefits of the other executive officers. The
Compensation Committee also approves the issuance of grants pursuant to the
Company's equity incentive plans. The Compensation Committee met once during
fiscal 2005.
Compensation of Directors
Directors who are not employees receive $1,500 in cash compensation for
their attendance in person at each meeting of the Board of Directors. In
addition, in each of fiscal 2005 and 2004, each director received under the
Company's 2001 Incentive Stock Plan five-year vesting options to purchase 1,666
shares of Common Stock at market, as of date of award.
PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of Brown & Brown, LLP of Boston, Massachusetts to serve as
our independent public accountants for the fiscal year ending March 31, 2006.
Brown & Brown, LLP has served as our independent public accountants for the past
two fiscal years and is considered to be well qualified by our management.
Although stockholder ratification is not required, the Board of Directors has
directed that such appointment be submitted to the stockholders of the Company
for ratification at the Meeting as a matter of good corporate governance. If the
stockholders do not ratify the appointment of Brown & Brown, LLP, the Board of
Directors may reconsider the appointment. Further, whether or not stockholder
approval is given, the Audit Committee in its discretion may appoint another
independent registered public accounting firm at any time during the year if the
Committee believes that such a change would be in the best interest of the
Company and its stockholders.
No representatives of Brown & Brown, LLP are expected to attend the
Meeting.
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Audit Fees
The aggregate fees billed for fiscal years ended March 31, 2005 and 2004
for professional services rendered by Brown & Brown, LLP for the audit of the
Company's annual financial statements for those fiscal years totaled $79,309 and
$40,994, respectively.
Audit-Related Fees
The aggregate fees billed in fiscal years ended March 31, 2005 and 2004
for assurance and related services by Brown & Brown, LLP that are reasonably
related to the performance of the auditor review of the Company's financial
statements totaled $34,998 and $18,269, respectively. Said services consisted of
a review of the Company's 2005 and 2004 quarterly reports filed on Form 10-Q.
Tax fees
The aggregate fees billed during fiscals years ended March 31, 2005 and
2004 for professional services rendered by Brown & Brown, LLP for tax
compliance, tax advice, and tax planning totaled $16,800 and $5,400,
respectively. Said services included preparation and filing of federal and state
returns for the years ended March 31,2004 and projections for the year ended
March 31, 2005.
All Other Fees
In fiscal year ended March 31, 2005 and 2004 the Company was billed $22,375
and $2,725, respectively by Brown & Brown, LLP. Such services consisted of GAAP
related research, business operation advisory services, and various matters
related to SEC compliance.
Pre-Approval of Audit and Non-Audit Services
All audit and non-audit services provided to the Company by accountants,
including Brown & Brown, LLP, must be pre-approved by the Audit Committee unless
the following conditions are met:
o The service is one of a set of permitted services that the independent
auditor is allowed to provide;
o The total amount of such services is less than or equal to 5% of the
total amount of compensation paid to the service provider during the
fiscal year in which the services are provided; and
o The services must be brought to the attention of the Audit Committee
and approved prior to the completion of the annual audit.
All other permitted services must be pre-approved by either the Audit
Committee or a delegate of the Audit Committee. If pre-approval is obtained from
a delegate of the Audit Committee, the service may be performed provided that
the service must be presented to the Audit Committee at the next scheduled
meeting. In determining whether or not to approve non-audit accounting services
from the Company's independent auditors, the Audit Committee considers whether
the provision of such services is compatible with maintaining the independence
of the auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE
APPOINTMENT OF BROWN & BROWN, LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING MARCH 31, 2006.
8
PROPOSAL 3.
APPROVAL OF THE 2005 STOCK INCENTIVE PLAN
The Investors Capital Holdings, Ltd. 2005 Equity Incentive Plan (the
"Plan") was adopted by the Board on May 17, 2005, but is effective only if
approved by vote of the Company's stockholders at the Meeting. The purpose of
the Plan is (i) to attract and retain employees, directors, officers,
representatives and other individuals upon whom the responsibilities of the
successful administration, management, planning and/or organization of the
Company may rest, and whose present and potential contributions to the welfare
of the Company, a parent corporation or a subsidiary are of importance ("Key
Contributors"), and (ii) to motivate Key Contributors with a view toward
enhancing profitable growth of the Company over the long term.
Options ("Options") to purchase the Company's common stock ("Common
Stock"), and grants ("Grants") of Common Stock (collectively, "Awards"), may be
made under the Plan. Options may be designated as incentive stock options
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or may be designated as options not intended to be ISOs
("Non-Qualified Stock Options").
The text of the Plan has been electronically filed with the SEC as an
appendix to this proxy statement. The following description of the Plan is
intended merely as a summary of the Plan's principal features and is qualified
in its entirety by reference to the provisions of the Plan itself.
Number of Shares. Up to an aggregate maximum of 1,000,000 shares of Common
Stock may be issued pursuant to Grants and the exercise of Options. The shares
issued under the Plan may be authorized but unissued shares or shares that are
reacquired in the open market or otherwise, and the Company may purchase shares
required for this purpose if it deems such purchase to be advisable.
Administration. The Plan is administered by the Company's Board of
Directors, whose members are elected annually by the Company's stockholders,
and/or the Board's delegees (collectively, the "Administrator"). The
Administrator has sole authority, in its discretion, to determine the nature
(i.e., Grant, ISO or Non-Qualified Stock Option), the number of covered shares,
the recipient, the timing, the vesting, performance and other restrictions, and
the other terms and conditions of each Award. To date, no Awards have been
granted under the Plan.
Eligibility. All Key Contributors are eligible to receive Non-Qualified
Stock Options, whereas ISOs may be granted only to employees of the Company and
any parent or subsidiary corporations (as defined in Section 424 of the Code).
Term of Plan and Options. No Award may be granted under the Plan after May
17, 2015, although then-outstanding Options and restrictions imposed on Grants
may extend beyond that date. All Options terminate on the earlier of (a) the
expiration of the term specified in the Option agreement, which may not exceed
ten years from the date of award (or five years after the date of award of an
ISO if the optionee on the date of award owns, directly or indirectly, shares
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (a "Ten Percenter")) or (b) the date, if any, set by the
Administrator as an accelerated expiration date.
Exercise of Option. The Administrator determines the conditions to the
exercisability of each Option at the time of the award thereof.
Option Price. The Board determines the exercise price of each Option,
provided that the exercise price shall not be less than the following percentage
of the fair market value of Common Stock on the date of award: (i) 100% for ISOs
(or 110% if the optionee is a Ten Percenter); (ii) 85% for Non-Qualified Stock
Options; and (iii) 110% if the optionee is a Ten Percenter.
Payment. An optionee may pay for shares covered by an Option in whole or
in part (i) in cash or its equivalent, (ii) in shares of Common Stock previously
acquired by the optionee (subject to certain holding period requirements), or,
in the discretion of the Administrator, (iii) on a "net exercise basis" where
shares otherwise issuable under the Option are retained by the Company. In the
Administrator's discretion, an optionee is permitted to pay in cash pursuant to
a so-called "cashless exercise" whereby the Company receives the exercise price
directly from the optionee's broker out of the proceeds from the sale or loan
against all or a portion of the shares being purchased under the Option.
9
Award Documentation; Restrictions on Transferability of Option. All
Options and Grants will be evidenced by a written document containing provisions
consistent with the Plan and such other provisions as the Board deem
appropriate. No Option granted under the Plan may be transferred other than by
will or the laws of descent and distribution.
Corporate Change. Anything herein to the contrary notwithstanding, in the
event of a Corporate Change (as defined in the Plan), the Administrator may, in
its sole discretion and depending upon the circumstances (as described in the
Plan), (i) accelerate the exercisability of all Options so that they are fully
exercisable, but only for a limited period of time prior to such Corporate
Change, (ii) require the surrender of some or all Options in return for the
payment of an amount equal to the excess of the Change of Control Value (as
defined in the Plan) of the Option shares over their exercise price, (iii) make
adjustments to outstanding Options as deemed appropriate to reflect such
Corporate Change, (iv) provide that, upon Option exercise, the optionee will
receive, in lieu of Common Stock, other stock or property to which the optionee
would have been entitled in such Corporate Change if the optionee had held, just
prior to such Corporate Change, the number of shares of Common Stock subject to
such Option, or (v) cancel Options if the fair market value of the Common Stock
subject to such Options is below the Option exercise price.
Amendments to Options and to the Plan; Discontinuance of the Plan. The
Administrator may suspend, terminate or amend the Plan, and may amend any
outstanding Option, from time to time in any respect whatsoever, provided that,
no such amendment, suspension or termination shall materially impair the rights
of the holder of any outstanding Option without such holder's consent, and
further provided that, the approval by the affirmative votes of holders of at
least a majority of the shares of Common Stock present, or represented, and
entitled to vote at a duly held meeting of stockholders of the Company is
required for any amendment which would (i) increase the maximum aggregate number
of shares issuable in connection with Awards under the Plan (except as permitted
under the Plan with respect to capital adjustments), (ii) change the minimum
option exercise price of Options, (iii) change the class of persons or entities
eligible to receive Awards under the Plan, (iv) extend the maximum period during
which Awards may be made under the Plan, (v) materially modify the requirements
for eligibility for participation in the Plan or (vi) decrease any authority
granted to the Administrator under the Plan in contravention of Rule 16b-3.
Tax Aspects of the Plan. The U.S. federal income tax consequences to the
Company and recipients of Awards Plan are complex and subject to change. The
following discussion is only a summary of the general rules applicable to the
Plan. Recipients of Awards should consult their own tax advisors since a
taxpayer's particular situation may be such that some variation of the rules
described below will apply. As discussed above, several different types of
instruments may be issued under the Stock Plan. The tax consequences related to
the issuance of each is discussed separately below. Based on the advice of
counsel, the Company believes that, under present Federal tax law and
regulations, the Federal income tax consequences to the Company and recipients
of Awards under the Plan may be summarized as follows:
ISOs. If the Option is treated as an ISO, the optionee will recognize
no income upon grant or exercise of the Option unless the alternative minimum
tax rules apply. Upon an optionee's sale of shares purchased under an ISO
(assuming that the sale occurs no sooner than two years after grant of the ISO
and one year after exercise of the ISO), any gain will be taxed to the optionee
as long-term capital gain. If the optionee disposes of such shares prior to the
expiration of the above holding period, the optionee generally will recognize
ordinary income in an amount measured as the difference between the exercise
price and the lower of the fair market value of Common Stock at the exercise
date or the sale price of the shares. Any gain or loss recognized on such a
disposition of shares in excess of the amount treated as ordinary income will be
characterized as capital gain or loss. The Company will be allowed a business
expense deduction only if, when and to the extent the optionee recognizes
ordinary income provided that the deduction is not otherwise disallowed under
the Code.
The exercise of an ISO may subject an optionee to alternative minimum
tax liability. The excess of the fair market value of the shares at the time an
ISO is exercised over the purchase price of the shares is included in income for
purposes of the alternative minimum tax even though it is not included in
taxable income for purposes of determining the regular tax liability of an
employee. Consequently, an optionee may be obligated to pay alternative minimum
tax in the year he or she exercises an ISO.
10
Non-Qualified Stock Options. If the option is a Non-Qualified Stock
Option, the optionee will not recognize any taxable income at the time of grant.
However, upon exercise of the Option, the optionee will recognize ordinary
income for Federal income tax purposes in an amount generally measured as the
excess of the then fair market value of the shares over the exercise price, and
the Company will be entitled to a deduction in the same amount at the time of
exercise, provided that the deduction is not otherwise disallowed under the
Code. Upon an optionee's sale of such shares, any difference between the sale
price and fair market value of such shares on the date of exercise will be
treated as capital gain or loss and will qualify for long-term capital gain or
loss treatment if the shares have been held for more than one year.
Grants. Generally, the recipient of a stock award will recognize
ordinary compensation income at the time the stock associated with the Grant is
received in an amount equal to the excess, if any, of the fair market value of
the stock received over any amount paid by the recipient in exchange for the
stock. If, however, the stock is non-vested (e.g.., if the employee is required
to work for a period of time in order to have the right to sell the stock) when
it is received under the Plan and the recipient had not elected otherwise, the
recipient generally will not recognize income until the stock becomes vested, at
which time the recipient will recognize ordinary compensation income equal to
the excess, if any, of the fair market value of the stock on the date it becomes
vested over any amount paid by the recipient in exchange for the stock. The
income realized by the recipient will generally be subject to U.S. income and
employment taxes.
The recipient's basis for determination of gain or loss upon the
subsequent disposition of shares acquired as Grants will be the amount paid for
such shares plus any ordinary income recognized either when the stock is
received or when the stock becomes vested, as applicable. Upon the disposition
of any stock received as a stock award under the Plan, the difference between
the sale price and the recipient's basis in the shares will be treated as a
capital gain or loss and generally will be characterized as long-term capital
gain or loss if, at the time of disposition, the shares have been held for more
than one year since the recipient recognized compensation income with respect to
such shares.
In the year that the recipient of a Grant recognizes ordinary taxable
income in respect of such Award, the Company will be entitled to a deduction for
federal income tax purposes equal to the amount of ordinary income that the
recipient is required to recognize, provided that the deduction is not otherwise
disallowed under the Code..
Other Tax Consequences. Different rules for measuring ordinary income
may apply if the optionee is subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
Section 162(m) of the Code disallows tax deductions to public companies
for compensation in excess of $1 million paid or accrued in a taxable year to
certain executive officers (generally consisting of the chief executive officer
and the four other most highly compensated executive officers), unless such
compensation is of a type that qualifies for exemption from that limitation. One
such exemption is for performance-based compensation, which can include
compensation under a stock incentive plan, provided that certain requirements
are met, including administration of the plan by "outside directors" and
stockholder approval of the plan. The Administrator intends to try to comply
with such requirements with respect to the Plan to the extent reasonably
practicable, but there can be no assurance that the Plan will so comply.
Various additional tax consequences may apply, such as those applicable
to the granting, acceleration and exercise of Options and to the disposition of
shares acquired thereunder, but such consequences are beyond the scope of this
summary. The foregoing does not purport to be a complete summary of the effect
of Federal income taxation upon recipients of Awards or upon the Company, is not
intended to constitute tax advice, and does not cover possible state, local or
foreign tax consequences.
11
EQUITY COMPENSATION PLAN INFORMATION
As of March 31, 2005: (a) (b) (c)
Number of Weighted-average Number of securities
securities xercise price of Remaining available
to be issued upon outstanding option for
exercise of warrants and future issuance
outstanding rights under
options, equity compensation
warrants and plans (excluding
rights(1) securities
reflected in
Plan category
column (a))
Equity compensation plans approved by security holders 421,076 $5.59 0
----------------- ----------------- ------------------
Equity compensation plans not approved by security
holders(2) 150,000 $1.00 0
- ------------------------------------------------------------------------- ----------------- ------------------
Total
571,076 $3.56 0
----------------- ----------------- ------------------
(1) Includes 140,695 shares issuable upon future vesting of outstanding awards
granted under the Company's 1996 Stock Incentive Plan and 2001 Equity
Incentive Plan.
(2) Includes the 1994 Stock Plan, described in Note 16 to the Consolidated
Financial Statements contained in the Company's Form 10-K for fiscal year
2005, incorporated herein by this reference.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMPANY 2005
STOCK INCENTIVE PLAN.
ADDITIONAL INFORMATION
Common Stock Ownership by Certain Beneficial Owners and Management
The following table presents information regarding beneficial ownership of
our common stock as of July 15, 2005 by: (1) each person who owns beneficially
more than five percent (5%) of our outstanding common stock, (2) our Chief
Executive Officer and any other executive officers whose annual salary and bonus
compensation exceeded $100,000 (the "Named Executive Officers"), (3) each
director/nominee, and (4) all director/nominees and Named Executive Officers as
a group. The persons named in the table below have sole voting and dispositive
power over all shares of common stock shown as beneficially owned by them,
except as may be otherwise indicated. The following persons hold immediately
exercisable options to purchase the following number of shares of common stock
from the Company: Mr. Charles - 1,666, Mr. Murphy - 151,666, Mr. Shaver - 1,334
and Ms. McCraine - 9,303. The shares underlying these options are reflected in
the numbers below. The business address of Mr. Charles, Mr. Murphy and Ms.
McCraine is c/o Investors Capital Holdings, Ltd., 230 Broadway East, Lynnfield,
Massachusetts 01940. The business address of Mr. Shaver is c/o Dividend Growth
Advisors, LLC, 108 Traders Cross, Suite 105, Bluffton, S.C. 29910. The business
address of Mr. Martin is c/o Mercury Brewing Company, 23 Hayward Street,
Ipswich, Massachusetts. Correspondence to Messrs. Acuff, Stickney or Atherton
may be directed to the above address for Investors Capital Holdings, Ltd.
attention of the Assistant Secretary, who will promptly forward same to the
intended recipient.
12
Name of Number of Shares Percent Beneficially
Beneficial Owner Beneficially Owned Owned
---------------- ------------------ -----
Theodore E. Charles 3,142,332 54.5%
Timothy B. Murphy 284,566 4.8%
Arthur Stickney 1,666 *
C. Troy Shaver, Jr. 7,000 *
William Atherton 0 *
Robert Martin 0 *
A. Marshall Acuff, Jr. 0 *
Susan McCraine 10,303 *
All directors/nominees and
executive officers as a group
(8 Persons) 3,446,867 59.7%
* Less than 0.1%.
Susan A. McCraine, aged 52, has served as Executive Vice President of the
Company since 2002. Heading our Compliance Department since 2003, Ms. McCraine
has compiled a successful record in multiple positions during her eleven years
in the financial services industry at Investors Capital including Vice President
for Marketing and Representative Relations from 1999 to 2002. She currently
holds the NASD series 7, 24, and 66 licenses and retains membership in several
securities associations.
Executive Compensation
The following table summarizes all compensation received for the fiscal
years ended March 31, 2003, 2004 and March 31, 2005 by the Named Executive
Officers. The aggregate amount of perquisites and other personal benefits did
not exceed the lesser of $50,000 or 10% of the total of Messrs. Charles' and
Murphy's annual salary and bonus. Other Annual Compensation is the Company's
matching 401(k) contributions. All Other Compensation is personal life insurance
premiums paid by the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Name and Principal Fiscal Year Salary Bonus Other Annual Restricted Options All Other
position ($) ($) Compensation Stock (#) Compensation
Awards
($)
Theodore E. Charles 2005 $400,000 $101,205 $32,877 $6,081 $4,163
Chief Executive Officer 2004 $400,000 $15,385 $3,150 $6,635
2003 $512,068 $1,000 $4,788 1,666
Timothy B. Murphy 2005 $300,000 $76,250 $6,088 $6,081 $1,397
Chief Financial Officer 2004 $200,000 $7,292 $3,000 $3,150 $1,265
2003 $190,170 $1,000 1,666
Susan McCraine 2005 $142,000 $16,803
Vice President 2004 $124,023 $4,423 $3,150
2003 $110,810 $1,000
13
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or SARs were granted to any of the Named
Executive Officers during fiscal 2005.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table provides information on option exercises in fiscal 2005
by the Named Executive Officers and the value of their unexercised options at
March 31, 2005.
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money
on Value Options at Fiscal Year-End Options at Fiscal Year-End
Exercise Realized (#) ($)
Name (#) ($) Exercisable / Unexercisable Exercisable / Unexercisable
Theodore E. Charles 0 0 1,666 / 0 $5,131 / $0
Timothy B. Murphy 0 0 151,666 / 0 $598,500 / $0
Susan A. McCraine 0 0 9,303 / 0 $0 / $0
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
No long-term incentive plan (LTIC) awards were made to any Named Executive
Officers during fiscal 2005.
Executive Employment Agreements
On August 8, 2000 the Company entered into full-time employment agreements
with Theodore E. Charles and Timothy B. Murphy. For each, the term of employment
is three years, which, on the third anniversary of the commencement date,
automatically extends for a three-year period unless earlier terminated. Under
the employment agreements, Messrs. Charles and Murphy are entitled to receive an
annual base salary of $400,000 and $200,000, respectively. Adjustments to the
annual base salary amounts are at the discretion of the Board, taking into
account appropriate cost of living adjustments and general compensation
increases based on performance.
Also, Messrs. Charles and Murphy may present to the Compensation Committee
proposals as to an annual bonus or incentive program, which proposals may or may
not be accepted by the Board, acting in good faith, and at their discretion.
If the Company fails to renew the employment term or terminates the
employment of Mr. Charles, either with or without cause, or if there is a
"change in control", Mr. Charles is entitled to receive sixty (60) months' base
salary at the time of termination plus, to the extent earned and not already
paid, any bonus payable for the prior fiscal year plus an amount equal to any
bonus payable with respect to the current fiscal year. The base salary is
payable in installments on such dates on which it would be paid if Mr. Charles
had not been terminated. The bonus payment is payable in a lump-sum within
thirty (30) days of termination.
If the Company fails to renew the employment term or terminates the
employment of Mr. Murphy, either with or without cause, or if there is a "change
in control", Mr. Murphy is entitled to receive thirty-six (36) months' base
salary at the time of termination plus, to the extent earned and not already
paid, any bonus payable for the prior fiscal year plus an amount equal to any
bonus payable with respect to the current fiscal year. The base salary is
payable in installments on such dates on which it would be paid if Mr. Murphy
had not been terminated. The bonus payment is payable in a lump-sum within
thirty (30) days of termination.
A "change in control" shall be deemed to have taken place if a person
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 75% or more of the total number of votes that may be cast
for the election of the directors of the Company or 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 in which 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.
14
The employment agreements also contain a provision that neither Mr. Charles
nor Mr. Murphy will compete or engage in a business competitive with our current
or anticipated business during the term of the employment agreement and for a
period of six months thereafter. A state court may determine not to enforce this
provision or to otherwise limit its enforceability.
Susan McCraine does not have a written employment agreement with the
Company.
Compensation Committee Report on Executive Officer Compensation
Compensation for Messrs. Charles and Murphy is determined by the terms of
their respective employment agreements outlined above. In addition to his base
salary, in fiscal 2005 Mr. Charles was paid a cash bonus that was based upon the
achievement of a Company gross profits target set by the Compensation Committee.
As part of a management compensation pool, Ms. McCraine received compensation
during fiscal 2005 comprised of a base salary and a cash bonus that was based
upon a percentage of Company gross profits determined by senior management.
COMPENSATION COMMITTEE
A. Marshall Acuff, Jr. and William J. Atherton
Performance Graph
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG INVESTORS CAPITAL HOLDGINS, LTD., STANDARD & POORS 500 INDEX AND DOW
JONES FINANCIAL SERVICES INDEX
The chart below compares the five-year cumulative total return, assuming
the reinvestment of dividends, on Investor Capital Holdings, Ltd. common stock
(ICH) with that of the Standard & Poors 500 Index (sp 500) and the Dow Jones
Financial Services Index (iyg). This graph assumes $100 was invested on March
31, 2001, in each of Investors Capital Holdings, Ltd. common stock and the
indicated indices.
Note: stock price performance shown in the graph below should not be
considered indicative of potential future stock price performance.
15
[SEE SUPPLEMENTAL PDF FOR STOCK PERFORMANCE CHART]
3/31/2001 3/31/2002 3/31/2003 3/31/2004 3/31/2005
ich $ 100.00 $ 41.96 $ 32.68 $ 100.00 $ 89.10
sp 500 $ 100.00 $ 98.14 $ 72.61 $ 96.91 $ 101.08
iyg $ 100.00 $ 106.28 $ 84.15 $ 119.34 $ 117.07
Compensation Committee Interlocks and Insider Participation
During fiscal 2005, director C. Troy Shaver, Jr. served on the Compensation
Committee. Mr. Shaver is currently President of Dividend Growth Advisors, LLC.
Dividend Growth Advisors acts as sub-advisor to Eastern Point Advisors, our
investment advisor subsidiary, and, more specifically, its mutual fund, the
Eastern Point Advisors Rising Dividend Growth Fund. The aggregate fees paid to
Dividend Growth Advisors for these advisory services during fiscal year 2005 and
estimated to be paid during the current fiscal year are $83,964 and
approximately $95,000, respectively.
Certain Relationships and Related Transactions
Our principal executive offices are located in a 9,432 square foot facility
at 230 Broadway East, Lynnfield, Massachusetts. This facility is comprised of
several office condominiums owned by different entities, which lease the office
space to the Company. We rent approximately 6,822 square feet of our principal
executive offices from Arlsburg Trust and Investors Realty, LLC of which Mr.
Charles is the trustee and a member, respectively. The annual rent for this
portion of our space was $225,671 in fiscal 2005. In addition, the Company
leases office space from the Arlsburg Trust for its investment center in
Topsfield, Massachusetts. The annual rent for the investment center for fiscal
2005 was $36,000. Both of these rental amounts, which are projected to remain
essentially the same during the current fiscal year, are believed to be
comparable to current market rates for similar space in the geographic area.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors and officers of the
Company and persons, or "groups" of persons, who own more than 10% of a
registered class of the Company's equity securities (collectively, "Covered
Persons") to file with the Securities and Exchange Commission, The American
Stock Exchange and the Company, within specified time periods, initial reports
of beneficial ownership, and subsequent reports of changes in ownership, of
certain equity securities of the Company. Based solely on its review of copies
of such reports furnished to it and upon any written representations of Covered
Persons that no other reports were required, the Company believes that the only
failure of Covered to meet such filing requirements during fiscal year 2005 were
the failure of Messrs. Charles, Murphy and Stickney and former director David R.
Smith to file a Form 4 upon the granting to each of them of 1,666 shares of
common stock.
16
Code of Ethics
The Company has adopted, filed with the SEC and posted on its
www.investorscapital.com website a written Code of Ethics that applies to the
Company's principal executive officer, principal financial officer and principal
accounting officer and that conforms to the requirements of applicable SEC rule.
The Code of Ethics is designed, among other things, to deter wrongdoing and to
promote (i) honest and ethical conduct, (ii) full, fair, accurate, timely, and
understandable disclosures in reports and documents filed with the SEC and in
other public communications, (iii) compliance with applicable governmental law,
rules and regulations, (iv) prompt internal reporting of violations of the Code
and (v) accountability for adherence to the Code.
Audit Committee Report
The Board of Directors of the Company has appointed an Audit Committee
composed of three independent directors.
The Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is included as Appendix A hereto. The Audit Committee
will review and assess the adequacy of the charter on an annual basis. The Audit
Committee's job is one of oversight as set forth in its Charter. It is not the
duty of the Audit Committee to prepare the Company's financial statements, to
plan or conduct audits, or to determine that the Company's financial statements
are complete and accurate and are in accordance with accounting principles
generally accepted in the United States of America. The Company's management is
responsible for preparing the Company's financial statements and for maintaining
internal controls. The independent auditors are responsible for auditing the
financial statements and for expressing an opinion as to whether those audited
financial statements fairly present the financial position, results of
operations, and cash flows of the Company in conformity with accounting
principles generally accepted in the United States of America.
The Audit Committee has reviewed and discussed the Company's audited
consolidated financial statements with management and with Brown & Brown, LLP
(the "Auditors"), the Company's independent auditors for fiscal 2005.
The Audit Committee has discussed with the Auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees."
The Audit Committee has received from the Auditors a formal written
statement describing all relationships between the Auditors and the Company that
might bear on the Auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the Auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the Auditors' independence.
Based on the review and discussions referred to above, the Audit Committee
has recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10- K
for the fiscal year ended March 31, 2005 for filing with the Securities and
Exchange Commission.
AUDIT COMMITTEE
A. Marshall Acuff, Jr., William Atherton and Arthur Stickney
17
Annual Report to StockholderS / Form 10-K
The Company's 2005 Annual Report to its stockholders (which includes a
reproduction of its Annual Report on Form 10-K for fiscal year 2005, as filed
with the SEC, that is restated to incorporate the amendment thereto also filed
with the SEC, excluding the Index to Exhibits and any filed exhibits or
financial statement schedules) is being mailed to all stockholders concurrently
with this Proxy Statement. Additional copies of the Company's Form 10-K (without
exhibits or financial statement schedules) and the amendment thereto, as filed
with the SEC, may be obtained at no cost by writing to the Corporate Clerk,
Investors Capital Holdings, Ltd., 230 Broadway East, Lynnfield, Massachusetts
01940. The Company's Form 10-K, amended and restated as aforesaid, also may be
accessed on the internet at http://www.investorscapital.com. Exhibits or
financial statement schedules listed in the Company's Form 10-K are available
upon request to the Corporate Secretary at a nominal charge for printing and
mailing.
Proposals for Next Annual Meeting
No person who intends to present a proposal for action at a forthcoming
annual stockholders' meeting of the Company may seek to have the proposal
included in the proxy statement or form of proxy for such meeting unless that
person (a) is a record or beneficial owner of at least 1% or $2,000 in market
value of shares of Common Stock, has held such shares for at least one year at
the time the proposal is submitted, and such person shall continue to own such
shares through the date and the dates upon which he acquired such shares with
documentary support for a claim of beneficial ownership, (e) notifies the
Company of his intention to appear personally at the meeting or by a qualified
representative under Massachusetts law to present his proposal for action, and
(d) submits his proposal timely. A proposal to be included in the proxy
statement and form of proxy for the Company's next annual meeting of
stockholders will be submitted timely only if the proposal has been received at
the Company's principal executive office no later than April 2, 2006. However,
if the date of such meeting is changed by more than 30 calendar days from
September 21, 2006, or if the proposal is to be presented at any meeting other
than the next annual meeting of stockholders, the proposal must be received at
the Company's principal executive office at a reasonable time before the
solicitation of proxies for such meeting is made.
A person may submit only one proposal with a supporting statement of not
more than 500 words, and under certain circumstances enumerated in the SEC's
rules relating to the solicitation of proxies, the Company may be entitled to
omit the proposal and any statement in support thereof from its proxy statement
and form of proxy.
The Company will be permitted to vote proxies in its discretion on any
proposal properly coming before the Company's next annual meeting of
stockholders if the Company:
o does not receive notice of the proposal a reasonable period of time
before the Company mails its proxy materials, or
o receives notice of the proposal a reasonable period of time before the
Company mails its proxy materials and advises stockholders in its proxy
statement about the nature of the matter and how the Company intends to
vote on such matter, all except as otherwise provided by applicable SEC
rules.
Notices of intention to present proposals at the Company's next annual
stockholders meeting should be addressed to the Company's Assistant Secretary,
Steven C. Preskenis, Esq., Investors Capital Holdings, Ltd., 230 Broadway East,
Lynnfield, MA 01940.
18
Other Matters
As of the date of this Proxy Statement, the Board knows of no other
business to be presented at the Meeting. However, if any other matters properly
come before the Meeting, the persons named in the enclosed form of proxy are
expected to vote the proxy in accordance with their best judgment on such
matters.
By order of the Board of Directors,
THEODORE E. CHARLES
Chairman of the Board and Chief Executive Officer
19
Appendix A
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
INVESTORS CAPITAL HOLDINGS, LTD.
CHARTER
Adopted October 9, 2000
Revised as of July 28, 2005
I. Purpose
The Corporation's bylaws authorize the Board of Directors (the "Board") to
designate an Audit Committee to exercise the power and authority of the full
board within a specified segment of the business and affairs of the Corporation.
In accordance therewith, the Board has established the Audit Committee. The
primary function of the Audit Committee is to assist the Board in fulfilling its
oversight responsibilities by reviewing the financial reports and other
financial information provided by the Corporation to any governmental body or
the public, the Corporation's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established, and the Corporation's auditing, accounting and financial reporting
processes generally. Consistent with this function, the Audit Committee should
encourage continuous improvement of, and should foster adherence to, the
Corporation's policies, procedures and practices at all levels. The Audit
Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control systems;
2. Review and appraise the audit efforts of the Corporation's independent
accountants; and
3. Provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of
Directors.
II. Composition
The Audit Committee shall be comprised of three or more directors as determined
from time to time by the Board, each of whom shall be an independent,
non-employee director and free from any relationship that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgment as a
member of the Committee. All members of the Committee shall have a working
familiarity with basic finance and accounting practices and, to the extent
possible, at least one member of the Committee shall have accounting or related
financial management expertise. Committee members shall be encouraged to enhance
their familiarity with finance and accounting by participating in educational
programs conducted by the Corporation or, at the Corporation's expense, outside
consultants.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and whenever the Board determines to fill
any vacancies. Each member of the Committee shall serve as such at the pleasure
of the Board and, subject to earlier death, resignation or removal, until his or
her successor shall be duly elected and qualified. Unless a Chair is elected by
the Board, the members of the Committee may designate a Chair by majority vote
of the full Committee membership.
III. Meetings
The Committee shall meet at least once annually, and more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee or at least its Chair should meet with the independent
accountants and management quarterly to review the Corporation's financials.
20
IV. Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee shall:
1. Review and recommend to the Board revisions to this Charter as
conditions dictate.
2. Review the Corporation's annual financial statements and any reports or
other financial information submitted to any governmental body or the
public, including any certification, report, opinion, or review
rendered by the independent accountants.
3. Review the regular internal reports to management prepared by the
accounting department and, to the extent applicable, management's
response.
4. Review with financial management and the independent accountants
reports on Forms 10-Q and earnings releases prior to their filing or
release. The Chair of the Committee may represent the entire Committee
for purposes of this review.
5. Recommend to the Board the selection of the independent accountants,
considering independence, effectiveness and cost, and approve the fees
and other compensation to be paid to the independent accountants. On an
annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the Corporation's financial statements.
8. In consultation with the independent accountants, review the integrity
of the Corporation's financial reporting processes, both internal and
external.
9. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied
in its financial reporting.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants or management.
11. Establish regular and separate systems of reporting to the Audit
Committee by management and the independent accountants, regarding any
significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such
judgments.
12. Following completion of the annual audit, review separately with
management and the independent accountants, any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
13. Review any significant disagreement among management and the
independent accountants in connection with the preparation of the
financial statements.
14. Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as
approved by the Audit Committee, have been implemented.
15. Ensure that management has the proper review system in place to verify
that the Corporation's financial statements, reports and other
financial information disseminated to governmental agencies and the
public satisfy legal requirements.
21
16. Review, with the Corporation's counsel, any legal matter that could
have a significant impact on the Corporation's financial statements.
17. Review, with the Corporation's counsel, legal compliance matters,
including corporate securities trading policies.
18. Perform any other activities in furtherance of the purposes, powers and
duties set forth above, consistent with the provisions of this Charter,
the Corporation's bylaws and governing law, as the Committee or the
Board deem necessary or appropriate.
22
Investors Capital Holdings, Ltd. 2005 Equity Incentive Plan
SECTION 1
PURPOSE
The purpose of the Investors Capital Holdings, Ltd. 2005 Equity Incentive Plan
is to provide a means whereby Investors Capital Holdings, Ltd., a Massachusetts
corporation (the "Corporation"), may attract able persons to remain in or to
enter the employ of the Corporation, a Parent Corporation, or a Subsidiary and
to provide a means whereby those employees, directors, officers, and other
individuals upon whom the responsibilities of the successful administration,
management, planning, and/or organization of the Corporation may rest, and whose
present and potential contributions to the welfare of the Corporation, a Parent
Corporation or a Subsidiary are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the long-term welfare of the
Corporation. A further purpose of the Plan is to provide such employees and
other individuals with additional incentive and reward opportunities designed to
enhance the profitable growth of the Corporation over the long term.
Accordingly, the Plan provides for granting Common Stock, Incentive Stock
Options, options which do not constitute Incentive Stock Options, or any
combination of the foregoing, as is best suited to the circumstances of the
particular employees and other individuals as provided herein.
SECTION 2
DEFINITIONS
The following definitions shall be applicable during the term of the Plan unless
specifically modified by any paragraph:
(a) Administrator means the Board and/or such person(s), committee(s) or other
group(s) as the Board may designate from time to time to administer the
Plan or any portion(s) thereof, all at the pleasure of the Board.
(b) Award means, individually or collectively, any Grant or Option granted
pursuant to the Plan.
(c) Board means the board of directors of the Corporation.
(d) Change of Control Value of an Option means the amount determined in Clause
(i), (ii) or (iii), whichever is applicable, as follows: (i) the per share
price offered to stockholders of the Corporation in any merger,
consolidation, sale of assets or dissolution transaction, (ii) the price
per share offered to stockholders of the corporation in any tender offer or
exchange offer whereby a Corporate Change takes place or (iii) if a
Corporate Change occurs other than as described in Clause (i) or Clause
(ii), the fair market value per share determined by the Administrator as of
the date determined by the Administrator to be the date of cancellation and
surrender of an Option. If the consideration offered to stockholders of the
Corporation in any transaction described in this Paragraph or Paragraphs
(d) and (e) of Section 8 consists of anything other than cash, the
Administrator shall determine the fair cash equivalent of the portion of
the consideration offered which is other than cash.
1
(e) Code means the Internal Revenue Code of 1986, as amended. Reference in the
Plan to any Section of the Code shall be deemed to include any amendments
or successor provisions to such Section and any regulations under such
Section.
(f) Common Stock means the common stock of the Corporation.
(g) Corporation means Investors Capital Holdings, Ltd.
(h) Corporate Change means one of the following events: (i) the merger,
consolidation or other reorganization of the Corporation in which the
outstanding Common Stock is converted into or exchanged for a different
class of securities of the Corporation, a class of securities of any other
issuer (except a Subsidiary or Parent Corporation), cash or other property
other than (a) a merger, consolidation or reorganization of the Corporation
which would result in the voting stock of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the
Corporation, at least sixty percent (60%) of the combined voting power of
the voting stock of the Corporation or such surviving entity outstanding
immediately after such merger, consolidation or reorganization of the
Corporation, or (b) merger, consolidation or reorganization of the
Corporation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no person acquires more than forty-nine
percent (49%) of the combined voting power of the Corporation's then
outstanding stock; (ii) the sale, lease or exchange of all or substantially
all of the assets of the Corporation to any other corporation or entity
(except a Subsidiary or Parent Corporation); (iii) the adoption by the
stockholders of the Corporation of a plan of liquidation and dissolution;
(iv) the acquisition (other than acquisition pursuant to any other clause
of this definition) by any person or entity, including without limitation a
"group" as contemplated by Section 13(d)(3) of the Exchange Act, of
beneficial ownership, as contemplated by such Section, of more than
twenty-five percent (25%) (based on voting power) of the Corporation's
outstanding capital stock or acquisition by a person or entity who
currently has beneficial ownership which increases such person's or
entity's beneficial ownership to fifty percent (50%) or more (based on
voting power) of the Corporation's outstanding capital stock; or (v) as a
result of or in connection with a contested election of directors, the
persons who were directors of the Corporation before such election shall
cease to constitute a majority of the Board. The provisions of clause (iv)
above notwithstanding, a Corporate Change shall not be considered to have
occurred upon the acquisition (other than acquisition pursuant to any other
clause of the preceding sentence) by any person or entity, including
without limitation a "group" as contemplated by Section 13(d)(3) of the
Exchange Act, of beneficial ownership, as contemplated by such Section, of
more than twenty-five percent (25%) (based on voting power) of the
Corporation's outstanding capital stock or the requisite percentage to
increase their ownership to fifty percent (50%) resulting from a public
offering of securities of the Corporation under the Securities Act of 1933,
as amended.
(i) Exchange Act means the Securities Exchange Act of 1934, as amended.
(j) Fair Market Value means, as of any specified date, the closing price of the
Common Stock on the American Stock Exchange (or, if the Common Stock is not
listed on such exchange, such other national securities exchange on which
the Common Stock is then listed) on that date, or if no prices are reported
on that date, on the last preceding date on which such prices of the Common
Stock are so reported. If the Common Stock is not then listed on any
national securities exchange but is traded over the counter at the time
determination of its Fair Market Value is required to be made hereunder,
its Fair Market Value shall be deemed to be equal to the average between
the reported high and low sales prices of Common Stock on the most recent
date on which Common Stock was publicly traded. If the Common Stock is not
publicly traded at the time a determination of its value is required to be
made hereunder, the determination of its Fair Market Value shall be made by
the Administrator in such manner as it deems appropriate (such
determination will be made in good-faith as required by Section 422(c)(1)
of the Code and may be based on the advice of an independent investment
banker or appraiser recognized to be expert in making such valuations).
2
(k) Grant means individually or collectively, any granting of Common Stock made
pursuant to the Plan.
(l) Grantee means an employee, director, officer or other individual who is the
recipient of a Grant pursuant to the Plan.
(m) Incentive Stock Option means an Option within the meaning of Section 422 of
the Code.
(n) Option means a stock option granted under Section 7 of the Plan and
includes both Incentive Stock Options to purchase Common Stock and Options
that do not constitute Incentive Stock Options to purchase Common Stock.
(o) Option Agreement means a written agreement between the Corporation and an
Optionee with respect to an Option.
(p) Optionee means an employee, director, officer or other individual who is
the recipient of an Option.
(q) Parent Corporation shall have the meaning set forth in Section 424(e) of
the Code.
(r) Plan means the Investors Capital Holdings, Ltd. 2005 Equity Incentive Plan.
(s) Rule 16b-3 means Rule 16b-3 of the General Rules and Regulations of the
Securities and Exchange Commission under the Exchange Act, as such rule is
currently in effect or as hereafter modified or amended.
(t) Subsidiary means a company (whether a corporation, partnership, joint
venture or other form of entity) in which the Corporation, or a corporation
in which the Corporation directly or indirectly owns a majority of the
shares of capital stock or other equity interest, except, solely with
respect to the issuance of Incentive Stock Options, the term "Subsidiary"
shall have the same meaning as the term "subsidiary corporation" as defined
in Section 424(f) of the Code.
SECTION 3
EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon adoption by the Board, provided that the Plan
is approved by the stockholders of the Corporation on or prior to the date of
the first annual meeting of stockholders of the Corporation held subsequent to
such Board adoption. Any provision of the Plan or of any Award Agreement to the
contrary notwithstanding, no Option shall be exercisable and no Grant shall be
awarded prior to such stockholder approval. The Plan shall terminate and no
further Awards may be made under the Plan after ten (10) years from the date the
Plan is adopted by the Board. Subject to the provisions of Section 9, the Plan
shall remain in effect until all Options granted under the Plan have been
exercised or have expired by reason of lapse of time and all restrictions
imposed upon Grants have lapsed. Any Option exercised or Grant made before
shareholder approval is obtained must be rescinded if such shareholder approval
is not obtained, and any shares purported to be issued pursuant to any such
Option exercise or Grant shall not be counted in determining whether such
shareholder approval is obtained.
3
SECTION 4
ADMINISTRATION
(a) Administration of Plan. The Plan shall be administered by the Administrator
in compliance with applicable laws, rules and regulations. The Plan also
shall be administered by the Administrator and in such manner as to secure
available exemptions from Section 16(b) of the Exchange Act (such as, among
other things under Rule 16b-3 as currently constituted, by having Awards to
directors and officers of the Corporation specifically approved by the
Board or a committee thereof that is comprised solely of Non-Employee
Directors, as such term is used in said rule). Individuals comprising the
Administrator shall abstain from participating in and deciding matters
which directly affect their individual ownership interests under the Plan.
(b) Powers. Subject to the terms of the Plan, the Administrator shall have sole
authority, in the Administrator's discretion, to determine (i) which
employees, officers, directors or other individuals shall receive an Award,
(ii) the time or times when such Award shall be made, (iii) whether a
Grant, an Incentive Stock Option or nonqualified Option shall be awarded,
(iv) the number of shares of Common Stock which may be issued under the
Award, (v) any vesting, performance or other restrictions upon the
exercisability of an Option, (vi) any vesting, performance, forfeiture,
repurchase or other restrictions upon Grants, (vii) and any other terms and
conditions of the Award. In making such determinations, the Administrator
may take into account the nature of the services rendered by these
individuals, their present and potential contribution to the success of the
Corporation, a Parent Corporation or a Subsidiary, and such other factors
as the Administrator in its discretion shall deem relevant.
(c) Additional Powers. The Administrator shall have such additional powers as
are provided for by the provisions of the Plan. Subject to the express
provisions of the Plan, the Administrator is authorized in its sole
discretion, exercised in a nondiscriminatory manner, to construe and
interpret the Plan and the respective agreements executed thereunder, to
prescribe such rules and regulations relating to the Plan as it may deem
advisable to carry out the Plan, and to determine the terms, restrictions
and provisions of each Award, including such terms, restrictions and
provisions as shall be requisite in the judgment of the Administrator to
cause designated Options to qualify as Incentive Stock Options, and to make
all other determinations necessary or advisable for administering the Plan.
The Administrator may correct any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award in the
manner and to the extent it shall deem expedient to carry it into effect.
The determination of the Administrator on the matters referred to in this
Section 4 shall be conclusive and binding upon all recipients and
beneficiaries of Awards.
(d) Compliance With Code Section 162(m). The Corporation may establish a
committee of outside directors meeting the requirements of Code Section
162(m) to (i) approve the making of Awards that might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income
tax purposes by the Corporation pursuant to Code Section 162(m) and (ii)
administer the Plan with respect to such Awards.. In addition, Awards under
the Plan shall be made upon satisfaction of the conditions to such Awards
provided pursuant to Code Section 162(m) and any Treasury Regulations
promulgated thereunder.
SECTION 5
STOCK SUBJECT TO THE PLAN
(a) Award Limits. The Administrator may from time to time make Awards to one or
more employees, directors, officers or other individuals determined by the
Administrator to be eligible for participation in the Plan in accordance
with the provisions of Section 6 of the Plan. The aggregate number of
shares of Common Stock that may be issued under the Plan shall not exceed
1,000,000 shares. The aggregate number of shares of Common Stock that may
be issued to any given individual under all Awards shall not exceed 10%
percent of the aggregate number of shares referred to in the preceding
sentence. Any of such shares which remain unissued and which are not
subject to outstanding Awards at the termination of the Plan shall cease to
be subject to the Plan but, until termination of the Plan, the Corporation
shall at all times reserve a sufficient number of shares to meet the
requirements of the Plan. Shares shall be deemed to have been issued under
the Plan only to the extent actually issued and delivered pursuant to an
Award. To the extent that an Award lapses or the rights of its Optionee or
Grantee terminate, any shares of Common Stock subject to such Award shall
again be available for the making of an Award. The aggregate number of
shares which may be issued under the Plan shall be subject to adjustment in
the same manner as provided in Section 8 of the Plan with respect to shares
of Common Stock subject to Options then outstanding. Separate stock
certificates shall be issued by the Corporation for those shares acquired
pursuant to a Grant, the exercise of an Incentive Stock Option and for
those shares acquired pursuant to the exercise of any Option which does not
constitute an Incentive Stock Option.
4
(b) Stock Offered. The stock to be offered pursuant to an Award may be
authorized but unissued Common Stock or Common Stock previously issued and
outstanding and reacquired by the Corporation.
SECTION 6
ELIGIBILITY
An Incentive Stock Option Award made pursuant to the Plan may be awarded only to
an individual who, at the time of award, is an employee of the Corporation, a
Parent Corporation or a Subsidiary. An Award of a Grant or an Option which is
not an Incentive Stock Option may be made to an individual who, at the time of
Award, is an employee of the Corporation, a Parent Corporation or a Subsidiary,
or to an individual who has been identified by the Administrator to receive an
Award due to such individual's contribution or service to the Corporation,
including members of the board of directors of the Corporation, a Parent
Corporation or a Subsidiary. An Award made pursuant to the Plan may be made on
more than one occasion to the same person, and such Award may include a Grant,
an Incentive Stock Option, an Option which is not an Incentive Stock Option, or
any combination thereof. Each Award shall be evidenced by a written instrument
duly executed by or on behalf of the Corporation and by the Optionee or Grantee.
SECTION 7
OPTIONS
(a) Stock Option Agreement. Each Option shall be evidenced by an Option
Agreement between the Corporation and the Optionee which shall contain such
terms and conditions as may be approved by the Administrator and agreed
upon by the Optionee. The terms and conditions of the respective Option
Agreements need not be identical. Each Option Agreement shall specify the
effect of termination of employment, total and permanent disability,
retirement or death on the exercisability of the Option. Under each Option
Agreement, the Optionee shall have the right to appoint any individual or
legal entity in writing as his or her beneficiary under the Plan in the
event of the Optionee's death. Such designation may be revoked in writing
by the Optionee at any time and a new beneficiary may be appointed in
writing on the form provided by the Administrator for such purpose. In the
absence of such appointment, the beneficiary shall be the legal
representative of the Optionee's estate.
(b) Option Period. The term of each Option shall be as specified by the
Administrator at the date of award and shall be stated in the Option
Agreement; provided, however, that an option may not be exercised more than
one hundred twenty (120) months from the date it is awarded.
(c) Limitations on Exercise of Option. Any Option awarded hereunder shall be
exercisable at such times and under such conditions as determined by the
Administrator and as shall be permissible under the terms of the Plan,
which shall be specified in the Option Agreement evidencing the Option. An
Option may not be exercised for fractional shares.
5
(d) Special Limitations on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is awarded) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the
Corporation (and any Parent Corporation or Subsidiary) exceeds One Hundred
Thousand Dollars ($100,000) (within the meaning of Section 422 of the
Code), such excess Incentive Stock Options shall be treated as Options
which do not constitute Incentive Stock Options. The Administrator shall
determine, in accordance with applicable provisions of the Code, Treasury
Regulations and other administrative pronouncements, which of an Optionee's
Incentive Stock Options will not constitute Incentive Stock Options because
of such limitation and shall notify the Optionee of such determination as
soon as practicable after such determination. No Incentive Stock Option
shall be awarded to an individual if, at the time the Option is awarded,
such individual owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation or
of its Parent Corporation or a Subsidiary, within the meaning of Section
422(b)(6) of the Code, unless (i) at the time such Option is awarded the
Option price is at least one hundred ten percent (110%) of the Fair Market
Value of the Common Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date
of award.
(e) Option Price. The purchase price of Common Stock issued under each Option
shall be determined by the Administrator and shall be stated in the Option
Agreement, but such purchase price shall, in the case of Incentive Stock
Options, not be less than the Fair Market Value of Common Stock subject to
the Option on the date the Option is awarded, and, in the case of Options
which do not constitute Incentive Stock Options, not be less than
eighty-five percent (85%) of the fair value of the stock at the time the
option is awarded, except that the price shall be one hundred ten percent
(110%) of the fair value in the case of any person who owns stock
comprising more than ten percent (10%) of the total combined voting power
of all classes of stock of the Corporation or its Parent Corporation or
Subsidiary.
(f) Options and Rights in Substitution for Stock Options Made by Other
Corporations. Options may be awarded under the Plan from time to time in
substitution for stock options held by employees of corporations who
become, or who became prior to the effective date of the Plan, employees of
the Corporation, of any Parent Corporation or of any Subsidiary as a result
of a merger or consolidation of the employing corporation with the
Corporation, such Parent Corporation or such Subsidiary, or the acquisition
by the Corporation, a Parent Corporation or a Subsidiary of all or a
portion of the assets of the employing corporation, or the acquisition by
the Corporation, a Parent Corporation or a Subsidiary of stock of the
employing corporation with the result that such employing corporation
becomes a Subsidiary.
(g) Manner of Payment. The Option price shall be payable:
(i) in cash or its equivalent;
(ii) in shares of Common Stock previously acquired by the Optionee if,
in the case of an Incentive Stock Option, the Administrator in its
discretion causes the Option Agreement so to provide or if, in the case
of an option not constituting an Incentive Stock Option, the
Administrator in its discretion so determines at or prior to the time
of exercise, provided that if such previously acquired shares (A) were
acquired through the exercise of an Incentive Stock Option and are used
to pay the Option exercise price of an Incentive Stock Option, such
shares shall have been held by the Optionee for a period of not less
than the holding period described in section 422(a)(1) of the Code on
the date of exercise, or (B) were acquired through exercise of an
option not constituting an Incentive Stock Option or of an option under
a similar plan or through exercise of an Incentive Stock Option and are
used to pay the Option exercise price of an option not constituting an
Incentive Stock Option, such shares have been held by the Optionee for
a period of more than 12 months on the date of exercise;
6
(iii) in the discretion of the Administrator, in any combination of (i)
and (ii) above; or
(iv) in the discretion of the Administrator, on a net exercise basis as
to a number of Option shares specified by the Optionee on the Form of
Exercise (the "Exercise Number"). Such election shall be honored if the
per share Fair Market Value of Common Stock exceeds the per share
exercise price hereunder as of the exercise date. In such case, the
number of Option shares as to which the Option may thereafter be
exercised (subject to the other provisions hereof) shall be reduced by
the Exercise Number, and the Corporation shall issue to Optionee a
lesser number of Option shares equal to E(V-P)/V where:
E = the Exercise Number;
V = the per share Fair Market Value of Common Stock; and
P = the per share exercise price hereunder.
In the event an Option exercise price is paid, in whole or in part,
with shares of Common Stock as contemplated by subsection (ii) or (iii)
above, the portion of the Option exercise price so paid shall equal the
Fair Market Value on the date of exercise of the Option of the shares
surrendered in payment of such Option exercise price.
In the discretion of the Administrator, an Optionee may pay an Option
exercise price in cash, as contemplated by subsection (i) above,
pursuant to a so-called "cashless exercise" whereby the Company
receives the exercise price directly from the Optionee's broker out of
the proceeds from the sale or loan against all or a portion of the
shares being purchased under the Option.
SECTION 8
RECAPITALIZATION OR REORGANIZATION
(a) Except as hereinafter otherwise provided, Awards shall be subject to
adjustment by the Administrator in its discretion as to the number and
price of shares of Common Stock in the event of changes in the outstanding
Common Stock by reason of stock dividends, stock splits, reverse stock
splits, reclassifications, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of the award of any such Options or
Common Stock.
(b) The existence of the Plan and the Awards made hereunder shall not affect in
any way the right or power of the Board or the stockholders of the
Corporation to make or authorize any adjustment, recapitalization,
reorganization or other change in the capital structure of the Corporation,
a Parent Corporation or a Subsidiary or their business, any merger or
consolidation of the Corporation, a Parent Corporation or a Subsidiary, any
issue of debt or equity securities having any priority or preference with
respect to or affecting Common Stock or the rights thereof, the dissolution
or liquidation of the Corporation, a Parent Corporation or a Subsidiary, or
any sale, lease, exchange or other disposition of all or any part of their
assets or business or any other corporate act or proceeding.
(c) The shares with respect to which Options may be awarded are shares of
Common Stock as presently constituted but if and whenever, prior to the
expiration of an Option theretofore awarded, the Corporation shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on Common Stock without receipt of consideration by the
Corporation, the number of shares of Common Stock with respect to which
such Option may thereafter be exercised (i) in the event of an increase in
the number of outstanding shares shall be proportionately increased, and
the purchase price per share shall be proportionately reduced, and (ii) in
the event of a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall be
proportionately increased.
7
(d) If the Corporation recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore awarded,
the Optionee shall be entitled to purchase under such Option, in lieu of
the number of shares of Common Stock as to which such Option shall then be
exercisable, the number and class of shares of stock and securities, and
the cash and other property to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to such
recapitalization, the Optionee had been the holder of such record of the
number of shares of Common Stock then covered by such Option.
(e) In the event of a Corporate Change, unless otherwise deemed to be
impractical by the Administrator, then no later than (i) two business days
prior to any Corporate Change referenced in Clause (i), (ii), (iii), (v) or
(vi) of the definition thereof or (ii) ten business days after any
Corporate Change referenced in Clause (iv) of the definition thereof, the
Administrator, acting in its sole discretion without the consent or
approval of any Optionee or Grantee, shall act to effect the following
alternatives with respect to outstanding Options which acts may vary among
individual Optionees and, with respect to acts taken pursuant to Clause (i)
above, may be contingent upon effectuation of the Corporate Change: (A) in
the event of a Corporate Change referenced in Clauses (i), (ii) and (vi)
acceleration of exercise for all Options then outstanding so that such
Options may be exercised in full for a limited period of time on or before
a specified date (before or after such Corporate Change) fixed by the
Administrator, after which specified date all unexercised Options and all
rights of Optionees thereunder shall terminate; (B) in the event of a
Corporate Change referenced in Clauses (iii), (iv) and (v) require the
mandatory surrender to the Corporation by selected Optionees of some or all
of the outstanding Options held by such Optionees (irrespective of whether
such Options are then exercisable under the provisions of the Plan) as of a
date (before or after such Corporate Change) specified by the
Administrator, in which event the Administrator shall thereupon cancel such
Options and pay to each Optionee an amount of cash per share equal to the
excess, if any, of the Change of Control Value of the shares subject to
such Option over the exercise price(s) under such Options for such shares;
(C) in the event of a Corporate Change referenced in Clauses (iii), (iv)
and (v), make such adjustments to Options then outstanding as the
Administrator deems appropriate to reflect such Corporate Change (provided,
however, that the Administrator may determine in its sole discretion that
no adjustment is necessary to Options then outstanding); (D) in the event
of a Corporate Change referenced in Clauses (iii), (iv) and (v), provide
that thereafter upon any exercise of an Option theretofore awarded the
Optionee shall be entitled to purchase under such Option, in lieu of the
number of shares of Common Stock as to which such Option shall then be
exercisable, the number and class of shares of stock or other securities or
property (including, without limitation, cash) to which the Optionee would
have been entitled pursuant to the terms of the agreement of merger,
consolidation or sale of assets or plan of liquidation and dissolution if,
immediately prior to such merger, consolidation or sale of assets or any
distribution in liquidation and dissolution of the Corporation, the
Optionee had been the holder of record of the number of shares of Common
Stock then covered by such Option; or (E) in the event of a Corporate
Change referenced in Clauses (iii), (iv) and (v), cancel the Options
awarded if the Fair Market Value of the Common Stock underlying the Options
is below the Option exercise price.
(f) Except as hereinbefore expressly provided, issuance by the Corporation of
shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon
the exercise of rights or warranty to subscribe therefore, or upon
conversion of shares or obligations of the Corporation convertible into
such shares or other securities, and in any case whether or not for fair
value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of shares of Common Stock subject to Options
theretofore awarded, or the purchase price per share of Common Stock
subject to Options.
8
SECTION 9
AMENDMENT OR TERMINATION OF THE PLAN
The Administrator in its discretion may terminate the Plan or any Award or alter
or amend the Plan or any part thereof or any Award from time to time; provided
that no change in any Award previously made may be made which would impair the
rights of the Optionee or Grantee without the consent of the Optionee or
Grantee, and provided further, that the Administrator may not, without approval
of the stockholders, amend the Plan:
(a) to increase the aggregate number of shares which may be issued pursuant to
the provisions of the Plan on exercise or surrender of Options or upon
Grants;
(b) to change the minimum Option exercise price;
(c) to change the class of individuals eligible to receive Awards or increase
materially the benefits accruing to individuals under the Plan;
(d) to extend the maximum period during which Awards may be made under the
Plan;
(e) to modify materially the requirements as to eligibility for participation
in the Plan; or
(f) to decrease any authority granted to the Administrator hereunder in
contravention of any exemption available under Rule 16b-3.
SECTION 10
OTHER
(a) No Right to an Award. Neither the adoption of the Plan nor any action of
the Administrator shall be deemed to give an employee any right to be
awarded an Option to purchase Common Stock, to receive a Grant or to any
other rights hereunder except as may be evidenced by an agreement duly
executed on behalf of the Corporation, and then only to the extent of and
on the terms and conditions expressly set forth therein. The Plan shall be
unfunded. The Corporation shall not be required to establish any special or
separate fund or to make any other segregation of funds or assets to assure
the payment of any Award.
(b) No Employment Rights Conferred. Nothing contained in the Plan or in any
Award made hereunder shall (i) confer upon any employee any right with
respect to continuation of employment with the Corporation or any Parent
Corporation or Subsidiary, or (ii) interfere in any way with the right of
the Corporation or any Parent Corporation or Subsidiary to terminate his or
her employment at any time.
(c) Other Laws; Withholding. The Corporation shall not be obligated to issue
any Common Stock pursuant to any Award made under the Plan at any time when
the offering of the shares covered by such Award has not been registered
(or exempted) under the Securities Act of 1933 and such other state and
federal laws, rules or regulations as the Corporation or the Administrator
deems applicable and, in the opinion of legal counsel for the Corporation,
there is no exemption from the registration requirements of such laws,
rules or regulations available for the issuance and sale of such shares. No
fractional shares of Common Stock shall be delivered, nor shall any cash in
lieu of fractional shares be paid. The Corporation shall have the right to
deduct in connection with all Awards any taxes required by law to be
withheld and to require any payments necessary to enable it to satisfy its
withholding obligations. The Administrator may permit the holder of an
Award to elect to surrender, or authorize the Corporation to withhold
shares of Common Stock (valued at their Fair Market Value on the date of
surrender or withholding of such shares) in satisfaction of the
Corporation's withholding obligation, subject to such restrictions as the
Administrator deems necessary to satisfy the exemption and other
requirements of Rule 16b-3.
9
(d) No Restriction of Corporate Action. Nothing contained in the Plan shall be
construed to prevent the Corporation or any Parent Corporation or
Subsidiary from taking any corporate action which is deemed by the
Corporation or such Parent Corporation or Subsidiary to be appropriate or
in its best interest, whether or not such action would have an adverse
effect on the Plan or any Award made under the Plan. No employee,
beneficiary or other person shall have any claim against the Corporation or
any Parent Corporation or Subsidiary as a result of such action.
(e) Restrictions on Transfer. An Option shall not be transferable otherwise
than by will or the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionee only by such Optionee or
the Optionee's guardian or legal representative.
(f) Effect of Death, Disability or Termination of Employment. The Option
Agreement or other written instrument evidencing an Option shall specify
the effect of the death, disability or termination of employment of the
Optionee on the Option; provided, however that an Optionee shall be
entitled to exercise (i) at least six (6) months from the date of
termination of employment with the Corporation if such termination is
caused by death or disability or (ii) at least thirty (30) days from the
date of termination of employment with the Corporation if such termination
is caused by reasons other than death or disability.
All outstanding Incentive Stock Options will automatically be converted to
a nonqualified stock option if the Optionee does not exercise the
Incentive Stock Option (i) within three (3) months of the date of
termination caused by reasons other than death or disability; or (ii)
within twelve (12) months of the date of termination caused by
disability.
(g) Information to Employees. Optionees under the Plan shall receive financial
statements annually regarding the Corporation during the period the Options
are outstanding.
(h) Rule 16b-3. It is intended that the Plan and any Award made to a person
subject to Section 16 of the Exchange Act meet all of the exemption
requirements of Rule 16b-3. If any provisions of the Plan or any such Award
would disqualify the Plan or such Award hereunder, or would otherwise not
comply with Rule 16b-3, such provision or Award shall be construed or
deemed amended to conform to Rule 16b-3.
(i) Withholding and Use of Shares to Satisfy Tax Obligations. The obligation of
the Company to deliver Common Stock or pay cash to an Optionee pursuant to
any Award under the Plan shall be subject to applicable federal, state and
local tax withholding requirements. In connection with an Award that is
subject to the withholding requirements of applicable federal tax laws, the
Administrator, in its discretion (and subject to such withholding rules
("Withholding Rules") as shall be adopted by the Administrator), may permit
the holder of the Award to satisfy the minimum required federal, state and
local withholding tax, in whole or in part, by electing to have the Company
withhold (or by returning to the Company shares of Common Stock, which
shares shall be valued, for this purpose, at their Fair Market Value on the
date shares are issued pursuant to the Award or exercise thereof (or if
later, the date on which the Optionee recognizes ordinary income with
respect to such issuance) (the "Determination Date"). An election to use
shares of Common Stock to satisfy tax withholding requirements must be made
in compliance with and subject to the Withholding Rules. The Company may
not withhold shares in excess of the number necessary to satisfy the
minimum required federal, state and local income tax withholding
requirements. In the event shares of Common Stock acquired under the
exercise of an Incentive Stock Option are used to satisfy such withholding
requirement, such shares of Common Stock must have been held by the
Optionee for a period of not less than the holding period described in
section 422(a)(1) of the Code on the Determination Date, or if such shares
of Common Stock were acquired through exercise of an option not
constituting an Incentive Stock Option or of an option under a similar
plan, such option must have been granted to the Optionee at least six
months prior to the Determination Date.
10
(j) Registration of Shares. Each Option shall be subject to the requirement
that, if at any time the Administrator shall determine, in its discretion,
that the registration or qualification of the shares covered thereby under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary as a condition of, or in connection with, the
granting of such Option or the purchase or vesting of shares thereunder, or
that action by the Company or by the Optionee should be taken in order to
obtain an exemption from any such requirement, no such Options may be
exercised , in whole or in part, sale, unless and until such registration,
qualification, consent, approval, or action shall have been effected,
obtained or taken under conditions acceptable to the Administrator. Without
limiting the generality of the foregoing, each Optionee or his or her legal
representative or beneficiary may also be required to give satisfactory
assurance that shares purchased upon exercise of an Option are being
purchased for investment and not with a view to distribution, and
certificates representing such shares may be legended accordingly.
(k) Governing Law. The Plan shall by construed in accordance with the laws of
the State of Massachusetts and all applicable federal law. The securities
issued hereunder shall be governed by and in accordance with the Corporate
Securities Laws of the State of Massachusetts.
ADOPTED BY INVESTORS CAPITAL HOLDINGS, LTD.'S BOARD OF DIRECTORS AS OF MAY 17,
2005.
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Annual Meeting Proxy Card
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A Election of Directors PLEASE REFER TO THE REVERSE SIDE
FOR TELEPHONE AND INTERNET
VOTING INSTRUCTIONS.
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold For Withhold
01 - Theodore E. Charles [] [] 05 - C. Troy Shaver, Jr. [] []
02 - Timothy B. Murphy [] [] 06 - Robert Martin [] []
03 - Arthur Stickney [] [] 07 - A. Marshall Acuff, Jr. [] []
04 - William Atherton [] []
B Issues
The Board of Directors recommends a vote FOR the following proposals.
For Against Abstain
2. Ratification of the appointment of Brown & Brown, [] [] [] Please mark here if you plan
LLP as independent auditors for the Company's to attend the Meeting. []
fiscal year ending March 31, 2006.
3. Approval of the 2005 Stock Incentive Plan. [] [] []
C Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed. Please sign exactly as name(s) appear(s) on
your stock certificate. When signing as attorney, executor, administrator,
trustee, or guardian, state full title as such. If more than one name is
shown on the stock certificate, as in the case of joint tenancy, each
party should sign.
This Proxy is revocable and each of the above signatories reserves the
right to attend the Meeting and vote in person.
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Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
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Proxy - INVESTORS CAPITAL HOLDINGS, LTD.
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PROXY SOLICITED BY THE BOARD OF DIRECTORS Annual Meeting of Stockholders -
September 21, 2005
Each of the undersigned, revoking all prior proxies, hereby appoints
Theodore E. Charles and Timothy B. Murphy, or either of them acting alone,
the true and lawful proxies and attorneys-in-fact of the undersigned to
attend and vote, as specified in this proxy, such shares of Common Stock
of Investors Capital Holdings, Ltd. (the "Company") as were held of record
in the name(s) of the undersigned as of the July 25, 2005 record date (the
"Shares"), at the Annual Meeting of the Stockholders of the Company to be
held Wednesday, September 21, 2005, at 10:00 a.m. local time, at the
Eastern Point Yacht Club located at 125 Eastern Point Boulevard,
Gloucester, Massachusetts and at any adjournments or postponements thereof
(the "Meeting").
Each of the undersigned hereby instructs said proxies to vote the Shares
as specified on the reverse side regarding Proposals 1, 2 and 3 set forth
in the Board of Directors' Proxy Statement dated July 29, 2005 and, IN THE
ABSENCE OF SUCH SPECIFIC INSTRUCTIONS, TO VOTE THE SHARES FOR EACH OF THE
BOARD'S NOMINEES LISTED ON THE REVERSE SIDE AND PROPOSALS 2 AND 3.
Further, each of the undersigned hereby instructs said proxies to vote the
Shares in accordance with their judgment regarding any other matters that
may come properly before the Meeting.
THE BOARD OF DIRECTORS URGES THAT YOU COMPLETE, SIGN AND DATE THE PROXY
CARD AND RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE.
Telephone and Internet Voting Instructions
You can vote by telephone OR Internet! Available 24 hours a day 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy.
To vote using the Telephone (within U.S. and Canada)
o Call toll free 1-800-231-9914 in the United States or Canada any time on a
touch tone telephone. There is NO CHARGE to you for the call.
o Follow the simple instructions provided by the recorded message. o Enter
the information requested on your computer screen and follow the simple
instructions.
C0123456789
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To vote using the Internet
o Go to the following web site: WWW.COMPUTERSHARE.COM/US/PROXY/XXXXX
o Enter the information requested on your computer screen and follow the
simple instructions
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If you vote by telephone or the Internet, please DO NOT mail back this proxy
card.
Proxies submitted by telephone or the Internet must be received by 5:30 p.m.,
Central Daylight Time, on September 20, 2005.
THANK YOU FOR VOTING