U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to _______________________
Commission File Number: 33-89966
TREMONT ADVISERS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 06-1210532
State or other jurisdiction (I.R.S. Employer Identification No)
or incorporation or organization)
555 Theodore Fremd Avenue, Rye, New York 10580
(Address of principal executive offices) (Zip Code)
(914) 925-1140
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period) that the issuer was required to file such reports, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's Class A Common Stock,
$0.01 par value, as of the close of business on November 3, 1998 was 1,284,718,
and the number of shares outstanding of the Registrant's Class B Common Stock,
$0.01 par value, was 2,934,604 as of the same date.
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INDEX
Tremont Advisers, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
Condensed Consolidated Balance Sheets - September 30, 1998 (unaudited)
and December 31, 1997 (audited) 1
Condensed Consolidated Statements of Income -
nine and three months ended September 30, 1998 and 1997 2
Condensed Consolidated Statement of Shareholders' Equity - 3
nine months ended September 30, 1998
Condensed Consolidated Statements of Comprehensive Income -
nine and three months ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
nine months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 15
Exhibit 10.53 - Tremont Advisers, Inc. 1998 Stock Option Plan 16
Exhibit 10.54 - Shareholders' Agreement, dated as of July 17,
1998, by and among Tremont Advisers, Inc.,
Robert J. Parnell and Tremont Investment
Management, Inc. 25
Exhibit 21.1 - Subsidiaries 57
Exhibit 27 - Financial Data Schedule 58
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits The following exhibits are included herein;
Exhibit 10.53 - Tremont Advisers, Inc. 1998 Stock Option Plan
Exhibit 10.54 - Shareholders' Agreement, dated as of July 17, 1998,
by and among Tremont Advisers, Inc., Robert J. Parnell
and Tremont Investment Management, Inc.
Exhibit 21.1 - Subsidiaries Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended September
30, 1998.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tremont Advisers, Inc.
Date: November 6, 1998 /s/ Stephen T. Clayton
Stephen T. Clayton
Chief Financial Officer
(Duly authorized Officer and
Principal Financial and Accounting
Officer)
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Exhibit 10.53
1998 Stock Plan
TREMONT ADVISERS, INC.
1998 STOCK PLAN
1. Purpose. The purpose of the Tremont Advisers, Inc. 1998 Stock Plan
(the "Plan") is to encourage key employees of Tremont Advisers, Inc. (the
"Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.
2. Administration of the Plan.
(a) Board or Committee Administration. The Plan shall be
administered by a committee (the "Committee") of the Board of Directors of the
Company (the "Board"). The Committee, to the extent required by applicable
regulations under Section 162(m) of the Code, shall be comprised of two or more
"outside directors" (as defined in applicable regulations thereunder) who, to
the extent required by Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended, or any successor provision ("Rule 16b-3"), shall be
disinterested administrators within the meaning of Rule 16b-3. All references in
this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each Stock
Right by the Board (if so required by applicable state law), and subject to the
terms of the Plan, the Committee shall have the authority to (i) determine to
whom (from among the class of employees eligible under paragraph 3 to receive
ISOs) ISOs shall be granted, and to whom (from among the class of individuals
and entities eligible under paragraph 3 to receive Non-Qualified Options and
Awards and to make Purchases) Non-Qualified Options, Awards and authorizations
to make Purchases may be granted; (ii) determine the time or times at which
Options or Awards shall be granted or Purchases made; (iii) determine the
purchase price of shares subject to each Option or Purchase, which prices shall
not be less than the Minimum Price specified in paragraph 6; (iv) determine
whether each Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions are to be imposed on shares subject to Options, Awards and
Purchases and the nature of such restrictions, if any, and (viii) interpret the
Plan and prescribe and rescind rules and regulations relating to it. If the
Committee determines to issue a Non-Qualified Option, it shall take whatever
actions it deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem advisable. No member of
the Board or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Stock Right granted under it.
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(b) Committee Actions. The Committee may select one of its
members as its chairman, and shall hold meetings at such time and places as it
may determine. A majority of the Committee shall constitute a quorum and acts of
a majority of the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the members of the
Committee (if consistent with applicable state law), shall be the valid acts of
the Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(c) Grant of Stock Rights to Board Members. Subject to the
provisions of paragraph 3 below, if applicable, Stock Rights may be granted to
members of the Board. All grants of Stock Rights to members of the Board shall
in all other respects be made in accordance with the provisions of this Plan
applicable to other eligible persons. Consistent with the provisions of
paragraph 3 below, members of the Board who either (i) are eligible to receive
grants of Stock Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of the Plan or the
grant of any Stock Rights pursuant to the Plan, except that no such member shall
act upon the granting to himself or herself of Stock Rights, but any such member
may be counted in determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the granting to such member
of Stock Rights.
(d) Exculpation. No member of the Board shall be personally
liable for monetary damages for any action taken or any failure to take any
action in connection with the administration of the Plan or the granting of
Stock Rights under the Plan, provided that this subparagraph 2(d) shall not
apply to (i) any breach of such member's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, (iii) acts or omissions that would
result in liability under Section 174 of the General Corporation Law of the
State of Delaware, as amended, and (iv) any transaction from which the member
derived an improper personal benefit.
(e) Indemnification. Service on the Committee shall constitute
service as a member of the Board. Each member of the Committee shall be entitled
without further act on his or her part to indemnity from the Company to the
fullest extent provided by applicable law and the Company's Certificate of
Incorporation and/or By-laws in connection with or arising out of any action,
suit or proceeding with respect to the administration of the Plan or the
granting of Stock Rights thereunder in which he or she may be involved by reason
of his or her being or having been a member of the Committee, whether or not he
or she continues to be a member of the Committee at the time of the action, suit
or proceeding.
3. Eligible Employees and Others. ISOs may be granted only to employees of
the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
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4. Stock Rights.
(a) Number of Shares Subject to Rights. The stock subject
to Stock Rights shall be authorized but unissued shares of Class B Common Stock
of the Company, par value $.01 per share (the "Common Stock"), or shares of
Common Stock reacquired by the Company in any manner. The aggregate number of
shares which may be issued pursuant to the Plan is 200,000, subject to
adjustment as provided in paragraph 13. If any Stock Right granted under the
Plan shall expire or terminate for any reason without having bee exercised in
full or shall cease for any reason to be exercisable in whole or in part, the
shares of Common Stock subject to such Stock Right shall again be available for
grants of Stock Rights under the Plan.
(b) Nature of Awards. In addition to ISOs and Non-Qualified
Options, the Committee may grant or award other Stock Rights, as follows: (i)
Purchases. Participants may be granted the right to purchase Common Stock,
subject to such restrictions as may be specified by the Committee ("Restricted
Shares"). Such restrictions may include, but are not limited to, the requirement
of continued employment with the Company or a Related Corporation and
achievement of performance objectives. The Committee shall determine the
purchase price of the Restricted Shares, the nature of the restrictions and the
performance objectives, all of which shall be set forth in the agreement
relating to each right awarded to purchase Restricted Shares. The performance
objectives shall consist of (A) one or more in business criteria and (B) a
target level or levels of performance with respect to such criteria. The
performance objectives shall be objective and shall otherwise meet the
requirements of Section 162(m)(4)(C) of the Code. (ii) Awards. Awards of Common
Stock may be made to participants as a bonus or as additional compensation, as
may be determined by the Committee.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan
at any time on or after October 1, 1998 and prior to September 30, 2007. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant. Options granted under the Plan are intended to qualify as performance
based compensation to the extent required under proposed Treasury Regulation
Section 1.162-27.
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6. Minimum Option Price; ISO Limitations.
(a) Price for Non-Qualified Options, Awards and Purchases.
The exercise price per share specified in the agreement relating to each Non-
Qualified Option granted, and the purchase price per share of stock granted
in any Award or authorized as a Purchase, under the Plan shall in no event
be less than the minimum legal consideration required therefor under the laws of
any jurisdiction in which the Company or its successors iinterest may be
organized. Non-Qualified Options granted under the Plan, with an exercise price
less than the fair market value per share of Common Stock on the date of grant,
are intended to qualify as performance-based compensation under Section 162(m)of
the Code and any applicable regulations thereunder. Any such Non-Qualified
Options granted under the Plan shall be exercisable only upon the attainment of
a pre-established, objective performance goal established by the Committee.
(b) Price for ISOs. The exercise price per share specified in
the agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, the price per share specified
in the agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of
grant. For purposes of determining stock ownership under this paragraph, the
rules of Section 424(d) of the Code shall apply.
(c) $100,000 Annual Limitation on ISO Vesting. Each eligible
employee may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the company
and any related Corporation, ISOs do not become exercisable for the first time
by such employee during any calendar year with respect to stock having a fair
market value (determined at the time the ISOs were granted) in excess of
$100,000. The Company intends to designate any Options granted in excess of such
limitation as Non-Qualified Options.
(d) Determination of Fair Market Value. If, at the time an
Option is granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the date of grant or, if the
prices or quotes discussed in this sentence are unavailable for such date, the
last business day for which such prices or quotes are available prior to the
date of grant and shall mean (i) the average (on that date) of the high and low
prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on The American Stock Exchange, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on The American Stock Exchange. If the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market value"
shall mean the fair value of the Common Stock as determined by the Committee
after taking into consideration all factors which it deems appropriate,
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including, without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(b). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
(a) Vesting. The Option shall either be fully exercisable on
the date of grant or shall become exercisable thereafter in such installments as
the Committee may specify.
(b) Full Vesting of Installments. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
(c) Partial Exercise. Each Option or installment may be
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
(d) Acceleration of Vesting. The Committee shall have the
right to accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the consent of
an optionee, accelerate the permitted exercise date of any installment of any
Option granted to any employee as an ISO if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as described
in paragraph 6(c).
9. Termination of Employment. Unless otherwise specified in the
agreements relating to such ISOs, if an ISO optionee ceases to be employed by
the Company and all Related Corporations other than by reason of death or
disability or as otherwise specified in paragraph 10, no further installments of
his or her ISOs shall become exercisable, and his or her ISOs shall terminate on
the earlier of (a) ninety (90) days after the date of termination of his or her
employment, or (b) their specified expiration dates. For purposes of this
paragraph 9, employment shall be considered as continuing uninterrupted during
any bona fide leave of absence (such as those attributable to illness, military
obligations or governmental service) provided that the period of such leave does
no exceed 90 days or, if longer, any period during which such optionee's right
to reemployment is guaranteed by statute. A bona fide leave of absence with the
written approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue the
employment of the optionee after the approved period of absence. ISOs granted
under the Plan shall not be affected by an change of employment within or among
the Company and Related Corporations, so long as the optionee continues to be an
employee of the Company or any Related Corporation. Nothing in the Plan shall be
deemed to give any grantee of any Stock Right the right to be retained in
employment or other service by the Company or any Related Corporation for any
period of time.
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10. Death; Disability; Voluntary Termination; Breach.
(a) Death. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her death, any ISO
owned by such optionee may be exercised, to the extent otherwise exercisable
on the date of death, by the estate, personal representative r beneficiary who
has acquired the ISO by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of the ISO or (ii) one (1) year
from the date of the optionee's death.
(b) Disability. If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or her disability,
such optionee shall have the right to exercise any ISO held by him or her on the
date of termination of employment, for the number of shares for which he or she
could have exercised it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) one (1) year from the date of the termination
of the optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as defined in Section
22(e)(3) of the Code or any successor statute.
(c) Voluntary Termination; Breach. If an ISO optionee
voluntarily leaves the employ of the Company and all Related Corporations or
ceases to be employed by the Company and all Related Corporations by reason of a
finding by the Committee, after full consideration of the facts presented on
behalf of both the Company and the Optionee, that the ISO optionee has breached
his or her employment or service contract with the Company or any Related
Corporation, or has been engaged in disloyalty to the Company or any Relate
Corporation, then, in either such event, in addition to immediate termination of
the Option, the ISO optionee shall automatically forfeit all shares for which
the Company has not yet delivered share certificates upon refund by the Company
of the exercise price of such Option. Notwithstanding anything herein to the
contrary, the Company may withhold delivery of share certificates pending the
resolution of any inquiry that could lead to a finding resulting in a
forfeiture.
11. Assignability. No Stock Right shall be assignable or transferable by
the grantee except by will, by the laws of descent and distribution or, in the
case of Non-Qualified Options only, pursuant to a valid domestic relations
order. Except as set forth in the previous sentence, during the lifetime of a
grantee each Stock Right shall be exercisable only by such grantee.
12. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
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with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company related
to such Option:
(a) Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of
shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.
(b) Consolidations or Mergers. If the Company is to be consolidated with or
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Committee or the board of
directors of any entity assuming the obligations of the Company hereunder (the
"Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on a
equitable basis for the shares then subject to such Options either (A) the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (B) shares of stock of the surviving
corporation or (C) such other securities as the Successor Board deems
appropriate, the fair market value of which shall approximate the fair market
value of the shares of Common Stock subject to such Options immediately
preceding the Acquisition; or (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then exercisable, within a
specified number of days of the date of such notice, at the end of which period
the Options shall terminate; or (iii) terminate all Options in exchange for a
cash payment equal to the excess of the fair market value of the shares subject
to such Options (to the extent then exercisable) over the exercise price
thereof.
(c) Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (b) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he or she would
have received if he or she had exercised such Option prior to such
recapitalization or reorganization.
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(d) Modification of ISO's. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
(e) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
(f) Issuances of Securities. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class,or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(g) Fractional Shares. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company cash in lieu of
such fractional
shares.
(h) Adjustments. Upon the happening of any of the events
described in subparagraphs (a), (b) or (c) above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to Stock
Rights which previously have been or subsequently may be granted under the Plan
shall also be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
14. Means of Exercising Options. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price thereof either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as define din Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
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price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. Term and Amendment of Plan. This Plan was adopted by the Board on
September 17, 1998, subject, with respect to the validation of ISOs granted
under the Plan, to approval of the Plan by the stockholders of the Company at
the next Meeting of Stockholders, or in lieu thereof, by written consent. If the
approval of stockholders is not obtained on or prior to August 31, 1999, any
grants of ISOs under the Plan made prior to that date will be rescinded. The
Plan shall expire at the end of the day on September 30, 2007, (except as to
Options outstanding on that date). Subject to the provisions of paragraph 5
above, Options may be granted under the Plan prior to the date of stockholder
approval of the Plan. The Board may terminate or amend the Plain in any respect
at any time, except that, without the approval of the stockholders obtained
within 12 months before or after the Board adopts a resolution authorizing any
of the following actions: (a) the total number of shares that may be issued
under the Plan may not be increased (except by adjustment pursuant to paragraph
13); (b) the benefits accruing to participants under the Plan may not be
materially increased; (c) the requirements as to eligibility for participation
in the Plan may not be materially modified; (d) the provisions of paragraph 3
regarding eligibility for grants of ISOs may not be modified; (e) the provisions
of paragraph 6(b) regarding the exercise price at which shares may be offered
pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph
13); (f) the expiration date of the Plan may not be extended; and (g) the Board
may not take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may action
of the Board or stockholders alter or impair the rights of a grantee, without
such grantee's consent, under any Option previously granted to such grantee.
16. Application of Funds. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
17. Notice to Company of Disqualifying Disposition. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
18. Withholding of Additional Income Taxes. Upon the exercise of a
Non-Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 17), the vesting or transfer of restricted
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stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value, or
(iv) the vesting or transferability of restricted stock or securities acquired
by exercising an Option, on the grantee's making satisfactory arrangement for
such withholding. Such arrangement may include payment by the grantee in cash or
by check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Common Stock
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of a Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.
19. Governmental Regulation. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
20. Governing Law. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of Delaware.
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Exhibit 10.54
TREMONT INVESTMENT MANAGEMENT, INC.
SHAREHOLDERS' AGREEMENT
AGREEMENT (the "Agreement") made as of the 17th day of July,
1998, by and among TREMONT ADVISERS, INC., a corporation organized under the
laws of Delaware (U.S.A.), with offices at 555 Theodore Fremd Avenue, Rye, New
York 10580 U.S.A. (hereinafter referred to as "Tremont"), ROBERT J. PARNELL,
residing at 230 Guildwood Parkway, Toronto, Ontario M1E 1P7, Canada (hereinafter
referred to as "Parnell") (Tremont and Parnell are sometimes hereinafter
collectively referred to as the "Shareholders" and individually as a
"Shareholder"), and TREMONT INVESTMENT MANAGEMENT, INC., a corporation organized
under the laws of the Province of New Brunswick and the laws of Canada
applicable therein, with its offices located at Suite 5100, One First Canadian
Place, Toronto, Ontario M5X 1K2 Canada (hereinafter sometimes referred to as the
"Corporation").
W I T N E S S E T H :
WHEREAS, the Corporation has been caused to be organized as a
corporation under the New Brunswick Business Corporations Act (the "Act"), with
an authorized capital stock of ten thousand (10,000) common shares (the "Common
Stock") and fifty thousand (50,000) preferred shares (the "Preferred Stock") in
accordance with the intent of the Shareholders as set forth in that certain
Joint Venture Agreement dated as of June 5, 1998 by and between the Shareholders
(the "Joint Venture Agreement"); and
WHEREAS, the parties hereto are the owners of all of the
issued and outstanding shares of Common Stock of the Corporation and the sole
shareholders thereof; and
WHEREAS, it is the desire of the parties to make provision for
the management and control of the Corporation, employment by the Corporation of
Parnell and the purchase and sale of the shares of Common Stock and the
Preferred Stock held by Shareholders; and
WHEREAS, the Corporation concurs in the aforesaid
decision of the Shareholders;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth, the parties hereto hereby consent and agree as
follows:
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ARTICLE I
ORGANIZATION OF CORPORATION
1.1 Formation of Corporation. Tremont Investment Management, Inc. was
incorporated as a business corporation under the Act on July 13, 1998, with an
authorized capital stock of ten thousand (10,000) shares of Common Stock and
fifty thousand (50,000) shares of Preferred Stock.
1.2 Stock Ownership. As of the date hereof, each Shareholder
owns the following number of shares of Common Stock of the Corporation
(collectively, together with any other shares of Common Stock issued to any
shareholder, the "Shares"):
% of Shares Capital
Shareholder # of Shares Outstanding Contribution
Tremont 3,250 65% U.S.$32,500.00
Parnell 1,750 35% U.S.$17,500.00
In addition, as of the date hereof, Tremont owns ten thousand (10,000)
fully paid and non-assessable shares of Preferred Stock of the Corporation
(collectively, together with any other shares of Preferred Stock issued to any
shareholder, the "Preferred Shares") for which Tremont has made an additional
capital contribution to the Corporation in the sum of U.S. One Hundred Thousand
Dollars (U.S.$100,000.00) or U.S.Ten Dollars ($10.00) per Preferred Share (the
"Preferred Share Issue Price"). The Preferred Shares shall have no voting
rights, pay no dividends and be redeemable in accordance with the terms and
conditions set forth in the articles of incorporation of the Corporation (the
"Articles"), which shall be amended as soon as practicable following the date
hereof to reflect such terms and conditions and such other customary additional
terms and conditions for the Preferred Shares, and by execution of this
Agreement, each Shareholder agrees to authorize or cause his or its nominee(s)
on the board of directors of the Corporation (each member of the board of
directors being referred to individually as a "Director," and together with each
other Director, as the "Directors" or the "Board of Directors"), as described in
Section 3.2(a) hereof, to authorize the execution and filing of such amendment
by the Corporation with the appropriate authorities.
1.3 Additional Issuances of Stock.
(a) Additional Capital Contributions. Each Shareholder may, but shall not
be required to, make additional capital contributions to the Corporation,
although, pursuant to the Joint Venture Agreement, Tremont has indicated its
willingness to make additional capital contributions (including its additional
capital contribution set forth in Section 1.2 hereof) to the Corporation of at
least U.S. Three Hundred Thousand Dollars (U.S.$300,000.00). Each Shareholder
shall have the right to make additional capital contributions to the Corporation
pro rata in proportion to the percentage of Shares of the outstanding Common
Stock held by such Shareholder. Each Shareholder making an additional capital
contribution shall receive in exchange Preferred Shares at the Preferred Share
Issue Price. By execution of this Agreement, each Shareholder agrees to
authorize, or cause his or its nominee(s) on the Board of Directors to
authorize, the issuance of Preferred Shares at the price provided for herein to
each Shareholder making additional capital contributions.
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(b) Parnell Clawback. If, within two (2) years
following the Effective Date (the "Initial Period"), the Corporation and the
Shareholders have not required Tremont to make, and Tremont has not made,
additional capital contributions to the Corporation of more than U.S. Two
Hundred Fifty Thousand Dollars (U.S.$250,000.00), then Tremont shall thereupon
transfer or caused to be transferred to Parnell, such number of Shares owned by
it, or authorize, or cause its nominees on the Board of Directors to authorize,
the issuance to Parnell of additional Shares from the Corporation's authorized
but unissued shares of Common Stock, in either case without further
consideration, to cause Parnell to then own thirty eight percent (38%) of the
outstanding Shares. The Shareholders agree to cause the Secretary of the
Corporation to register such transfer on the books of the Corporation.
(c) Tremont Clawback. If, within the Initial
Period, the Corporation and the Shareholders have required, and Tremont
has made, additional capital contributions to the Corporation in excess of U.S.
Four Hundred Thousand Dollars (U.S.$400,000.00), and Parnell has elected
not to make additional capital contributions to the Corporation pro rata in
proportion to the percentage of Shares of the outstanding Common Stock held
by Parnell with respect to all capital contributions required by the
Corporation in excess of U.S. Four Hundred Thousand Dollars (U.S.$400,000.00),
then Parnell shall thereupon transfer or cause to be transferred to Tremont,
such number of Shares owned by him, or authorize, or cause his nominee on the
Board of Directors to authorize, the issuance to Tremont of additional shares
from the Corporation's authorized but unissued shares of Common Stock, in either
case without further consideration, to cause Tremont to then own sixty eight
percent (68%) of the outstanding Shares. The Shareholders agree to cause the
Secretary of the Corporation to register such transfer on the books of the
Corporation.
(d) Additional Stock Issuances. Except as provided
in (a), (b) and (c) hereinabove, the Corporation may not authorize the issuance
of additional capital stock by the Corporation without the unanimous approval of
the Shareholders.
1.4 Restrictions on Stock. All shares issued by the
Corporation with the consent of all of the Shareholders as provided in Section
1.3(d) hereof, shall be subject to the restrictions on sale, encumbrance and
other dispositions as contained in the Articles and by-laws of the Corporation
(the "By-Laws") as well as this Agreement.
1.5 Dividends. No dividends or other distributions shall be
made by the Corporation on the Shares until each of the issued and outstanding
Preferred Shares have been redeemed in full in accordance with the Articles at
the Preferred Share Issue Price. Thereafter, such dividends or other
distributions shall be paid to the holders of the Shares as and when determined
by the Board of Directors, subject to the Articles and applicable law. Th
parties expressly acknowledge their intent, however, that subject to the
provisions of this Section 1.5, all of the Corporation's legally available
funds not otherwise required for the Corporation's working capital, as
determined by the Board of Directors, shall be paid to the Shareholders as
dividends on the Shares.
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ARTICLE II
CONDUCT OF BUSINESS
2.1 Business of Corporation. The Corporation will serve as
Tremont's affiliate in Canada and has been formed for the purpose of engaging in
the business of providing consulting and specialized investment services to
investment funds, investment managers and investors as well as the management
and sponsorship of investment funds in Canada and in such other locations as
shall be determined by Tremont and Parnell, and no other business, without the
written approval of both Shareholders.
2.2 Quorum of Board; Quorum of Shareholders.
(a) Board of Directors. The By-Laws of the Corporation shall provide that
at all meetings of the Board of Directors a majority of Directors will be
required to constitute a quorum for the transaction of any business, and all
decisions of the Board of Directors shall require the majority vote in person of
the Board of Directors.
(b) Shareholders. The By-Laws of the Corporation
shall provide that at all meetings of the Shareholders, the presence, in person
or by proxy, of the holders of all of the issued and outstanding shares will be
required to constitute a quorum for the transaction of any business, and all
decisions of the Shareholders shall require the unanimous vote in person or by
proxy of all of the issued and outstanding shares.
2.3 Banking. The Shareholders agree to cause their respective
nominees on the Board of Directors to pass a resolution to provide that all
checks, notes, drafts, negotiable instruments of the Corporation and other
instruments for payment of money may be executed by either the President or the
Chief Financial Officer, signing alone, up to U.S. Five Thousand Dollars
(U.S.$5,000.00) and jointly for all amounts in excess thereof.
2.4 Access to Records. The business records of the Corporation
shall be available for inspection at all reasonable hours to the Shareholders.
ARTICLE III
BOARD OF DIRECTORS
3.1 Number. The Shareholders agree that the number of members
of the Board of Directors shall at all times consist of three (3) members.
3.2 Appointments.
(a) Vote for Nominees. The Shareholders agree that
as long as they are Shareholders, each of them shall vote his or its respective
Shares so that one person nominated by Parnell and two individuals nominated by
Tremont will at all times be elected to and continue on the Board of Directors.
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(b) Removal of Nominees. Each Shareholder shall
have the right to remove his or its nominee Director or Directors, as the case
may be, or any one of them, at any time and from time-to-time and to appoint a
successor nominee Director for each Director so removed in his or her place and
stead, and each Shareholder agrees to vote his or its respective shares to
approve such removals or appointments. Any successor nominee Director shall
similarly be subject to removal by Tremont or Parnell, as the case may be.
3.3 Initial Board. The initial members of the Board of
Directors shall be:
Robert I. Schulman
Robert J. Parnell
Stephen T. Clayton
3.4 Resignation. If either Shareholder ceases to be a
Shareholder, such Shareholder shall simultaneously with the transfer or
surrender of his or its Shares submit to the Corporation his written resignation
as an officer and as a director, as applicable, and/or the resignation of his or
its nominee director(s), if any.
3.5 Directors' Fees. No Director shall receive a fee
for serving as a director.
3.6 Actions Requiring Unanimous Consent. Each Shareholder, by
its execution of this Agreement, ratifies and confirms that the unanimous
decision of the Board of Directors shall be required with respect to any of the
following matters and no such action may be taken without unanimous decision:
(a) recapitalization of the Corporation's Shares;
(b) liquidation or dissolution of the Corporation
or other cessation of the Corporation's business;
(c) voluntary winding-up of the Corporation or
other action by the Corporation for relief under any laws relating
to bankruptcy or insolvency;
(d) reorganization of the Corporation, including,
without limitation, the sale of substantially all of the assets of the
Corporation, amalgamation, merger or consolidation of the Corporation with any
other entity or the spin-off or split up of the Corporation;
(e) subject to Section 1.5 hereof, recommendation
of the amount of any dividend;
(f) approval of any transaction with any
affiliate of either of the Shareholders, or of any transaction with a
partner, shareholder, officer or director of any affiliate of either of the
Shareholders, except with respect to the services to be provided by Tremont to
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the Corporation as contemplated in the Joint Venture Agreement and provided
for in Section 4.6 hereof, which are hereby approved by the Shareholders
pursuant to this Agreement;
(g) approval of the Corporation's purchase of Shares pursuant to Sections
6.1 or 6.4 hereof (except that the vote of any Director(s) appointed by a
selling Shareholder shall not be required), other than in connection with the
exercise by Parnell of certain put rights described in Section 6.4 hereof and
pursuant to which the Corporation is required to purchase Parnell's Shares, in
which case, by execution of this Agreement, Tremont agrees to authorize, or
cause its nominees on the Board of Directors to authorize, the purchase of such
Shares by the Corporation;
(h) the increase or decrease in the number of
directors on the Board of Directors as provided in Section 3.1
hereof; or
(i) engaging in any business other than that set
forth in Section 2.1 hereof.
ARTICLE IV
OFFICERS AND COMPENSATION; TREMONT'S SERVICES
4.1 Appointments. It being in the best interest of the
Corporation, the Shareholders agree that the following officers are hereby
appointed to and shall continue in (subject, in the case of Parnell, for so long
as he shall be employed by the Corporation and hold Shares) the offices set
forth opposite their respective names:
Chairman and Chief Executive Officer - Robert I. Schulman
President, Chief Operating Officer
and Chief Investment Officer - Robert J. Parnell
Chief Financial Officer
and Secretary - Stephen T. Clayton
At such time as determined by Parnell, Parnell may appoint another officer or
other officers of the Corporation, as contemplated in the Joint Venture
Agreement, subject to the approval of the Board of Directors.
4.2 Employment of Shareholder. The Corporation hereby agrees
to employ Parnell as an officer --to wit, President, Chief Operating Officer and
Chief Investment Officer--and Parnell agrees to accept such employment with the
Corporation in such capacity subject to the terms and conditions of an
employment agreement, dated as of the date hereof, entered into by and between
the Corporation and Parnell (the "Employment Agreement"). Parnell shall perform
such managerial, operational and administrative duties as are assigned him by
the Board of Directors and as are consistent with his position. Among other
duties, Parnell will be responsible to serve as President and Chief Operating
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Officer of the Corporation and responsible for the day-to-day operation and
administration of the Corporation, including: the hiring and firing of
employees; coordinating all activities of the Corporation with Tremont,
including but not limited to all financial audits and reporting requirements,
marketing research and administrative and operational matters; participating in
the design and development of new investment products; doing and performing such
other things as are consistent with his position and as set forth in the
Employment Agreement. Parnell shall devote his full business time and
attention to the business and affairs of the Corporation.
4.3 Compensation; other Terms of Employment. Parnell shall
receive such compensation from the Corporation as set forth in the Employment
Agreement. The Employment Agreement shall set forth such other terms regarding
Parnell's employment, including without limitation, expense reimbursement,
benefits, disability and termination of employment.
4.4 Other Business Interests. During the term of this
Agreement, and so long as he is a Shareholder, Parnell shall devote his best
efforts and his entire business time and energy to the performance of the duties
in his employment and shall perform his duties to the best of his abilities.
Parnell shall not, during the term hereof, and so long as he is a Shareholder,
either directly or indirectly, on his own behalf or in the service or on behalf
of others, engage in any other business or enterprise.
4.5 Services Provided by Tremont.
(a) Tremont Services. In accordance with the Joint
Venture Agreement, Tremont hereby agrees to provide the following services to
the Corporation:
(i) furnish the Corporation with investment
advice with respect to Tremont's and other companies' investment
products;
(ii) counsel the Corporation and furnish it
with advice regarding new investment products developed by Tremont
and Parnell;
(iii) provide marketing services with
respect to the investment management services and products offered
by the Corporation;
(iv) endeavor to introduce clients to the
Corporation that Parnell or the Board of Directors deems
acceptable;
(v) provide advice in the selection of the
Corporation's auditors;
(vi) collaborate with Parnell in the design
and direction of the Corporation's marketing strategy with respect to
investment services and products provided;
(vii) supervise and develop the design and
preparation of the Corporation's marketing materials; and
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(viii) provide the Corporation with access
to Tremont's hedge fund database.
(b) Cost Recovery. The Shareholders hereby agree
that Tremont shall be entitled to cost recovery from the Corporation in
connection with the services provided in Section 4.6(a) hereof in accordance
with the following schedule:
(i) no cost recovery with respect to
services provided during the six (6) month period immediately following the
date hereof;
(ii) all direct costs incurred by Tremont as
furnished by Tremont to the President during the period commencing on the date
which is the first day of the seventh month following the date hereof and ending
on the date which is the last day of the twenty fourth month following the date
hereof; and
(iii) all direct and indirect costs
incurred by Tremont as furnished by Tremont to the President at any time during
the term of this Agreement commencing on the date which is the first day of the
twenty fifth month following the date hereof.
ARTICLE V
INALIENABILITY OF SHARES; RESTRICTIVE LEGEND
5.1 Restrictions Upon Transfer. During the term of this
Agreement, neither Shareholder shall, directly or indirectly, sell, assign,
mortgage, hypothecate, transfer, pledge, create a security interest in or lien
upon, encumber, give, place in trust, or otherwise voluntarily or involuntarily
dispose of any Shares or any Preferred Shares (hereinafter sometimes referred to
as a "Transfer") now owned or hereafter acquired by him or it except as
hereinafter provided. Any proposed transfer further must be in compliance with
all requirements of the Articles and the laws of the Province of New Brunswick
and the laws of Canada as applicable therein.
5.2 Transfers to Affiliates. Notwithstanding anything in this
Agreement to the contrary, a Shareholder may, with the prior written consent
of the other Shareholder, which shall not be unreasonably withheld, make a
gift of, or transfer all, but not less than all, of such Shareholder's interest
in his or its Shares or Preferred Shares to his spouse or issue or to any
corporation, partnership or limited liability company, or any similar Canadian
entity, all of the equity interests of which are owned by such Shareholder or,
in the case of Parnell, his spouse or issue and, also in the case of Parnell,
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all of the officers and directors of which include only Parnell and his
spouse or issue, or any trust with respect to which all of the beneficiaries
include only such Shareholder and/or his spouse or issue (a "Related
Transferee".) In the event of any transfer by a Shareholder to his or its
Related Transferee of such Shareholder's Shares, such Related Transferee shall
receive, hold and vote such Shares subject to the terms of this Agreement and
the rights and obligations hereunder of the Shareholder from whom or which such
Shares were transferred as though such Shares were still owned by such
Shareholder, and such Shareholder (together with his or its Related Transferee)
shall continue to be deemed a single Shareholder, and such Related Transferee
shall not be deemed a Shareholder for the purposes of this Agreement.
5.3 Improper Transfers, etc. Any purported Transfer of the
Shares or Preferred Shares of the Corporation in violation of the terms of this
Agreement, whether voluntary or involuntary, shall be void and the Corporation
shall not recognize or give any effect to such Transfer. The Corporation may
refuse to transfer on its books any Shares or Preferred Shares transferred in
violation of this Agreement.
5.4 Restrictive Endorsement. Each certificate representing
Shares or Preferred Shares now or hereafter issued by the Corporation shall be
subject to this Agreement and shall have stamped, printed or typed thereon the
following legend:
The sale, assignment, transfer, pledge, encumbrance or
hypothecation of the Shares represented by this certificate or
any certificate issued in exchange or transfer therefor is and
will be subject to a Shareholders' Agreement dated as of July
17, 1998, by and among the Corporation and its shareholders,
which Agreement provides for restrictions on the transfer,
encumbrance and disposition of the Shares of the Corporation,
a signed counterpart of which is on file at the office of the
Corporation.
5.5 No Transfer Unless Transferee is Bound. No purported
Transfer of Shares pursuant to this Agreement shall be made or be effective
until the proposed transferee executes and delivers to the parties hereto a
written consent, in a form approved by the Board of Directors, to be bound by
this Agreement and is in compliance with all of the provisions of this
Agreement. Upon the transferee's execution and delivery of such consent, this
Agreement shall be binding upon the transferee as if the transferee were an
original signatory to this Agreement.
ARTICLE VI
VOLUNTARY AND INVOLUNTARY LIFETIME TRANSFERS
6.1 Voluntary Sale of Shares--Bona Fide Offer.
(a) Offered Shares. In the event that either Shareholder shall have
received, and wishes to accept, a bona fide offer from one or more third parties
(with whom or which it is dealing with at arm's length) to purchase all but not
less than all of its Shares or Preferred Shares (the "Offered Shares"),
including such offer received by Tremont pursuant to its desire to "withdraw"
from the Corporation, as contemplated by the Joint Venture Agreement, the
Shareholder (the "Selling Shareholder") shall first offer the Offered Shares to
the Corporation and the other Shareholder pursuant to the procedures set forth
in this Section 6.1.
(b) Offer to Corporation and other Shareholder. In
the event that a Selling Shareholder shall be required to offer the Offered
Shares to the Corporation and/or the other Shareholder pursuant to Section
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6.1(a), the Selling Shareholder shall offer such Shares or Preferred Shares to
the Corporation and the other Shareholder by written notice (the "Offer
Notice"), which Offer Notice shall be given simultaneously to the Corporation
and to the other Shareholder, advising such Shareholder of his or its intention
to make such disposition. The Offer Notice shall (i) set forth the name(s) and
address(es) of the party(ies) having made such offer (the "Offerors") and (ii)
specify the number of Shares or Preferred Shares subject to the offer, the
intended purchase price thereof, the method of payment therefor and any other
material terms of such offer. Such options available to the Corporation and/or
the other Shareholder shall be exercisable in accordance with the provisions of
Section 6.1(c) and Section 6.1(e) hereof.
(c) Corporation Option. The Corporation shall
have the option, exercisable no later than forty-five (45) days after receipt of
the Offer Notice and subject to all applicable laws and regulations (the
"Corporation Exercise Period"), to agree to purchase, at the price determined
and upon the terms provided in Section 6.2 hereof, all or part of the Offered
Shares as indicated in this Section 6.1(c); provided, however, that this Section
6.1(c) shall not apply to any offer made by an Offeror which the Corporation has
reasonable cause to believe may not be a bona fide purchase offer; and provided,
further, that the Corporation shall have the option to purchase less than all of
the Offered Shares only in the event the balance of the Offered Shares are
purchased by the remaining Shareholder as provided in this Section 6.1.
(d) Corporation Purchase. If the Corporation
shall elect to exercise this option, it shall give a written notice of exercise
to the Selling Shareholder, no later than five (5) business days prior to the
expiration of the aforesaid Corporation Exercise Period, which notice
(hereinafter the "Corporation Exercise Notice") shall specify the number of
shares being purchased by the Corporation. In the event the Corporation and/or
the other Shareholder elect to purchase the Offered Shares pursuant to this
Section 6.1 (each such purchaser shall sometimes hereinafter be referred to as a
"Purchaser"), then the closing shall take place at the registered office of
the Corporation or such other place as the Corporation may reasonably
designate (i) in the event the Corporation shall elect to purchase all of the
Offered Shares, within sixty (60) days after the giving of such Corporation
Exercise Notice, or (ii) in the event the Corporation shall elect to purchase
less than all of the Offered Shares, within sixty (60) days after the giving
of the "Shareholder Exercise Notice" (as such term is defined in Section
6.1(e) hereof). At the closing, the purchase price shall be paid and the
Shares or Preferred Shares shall be transferred, as set forth in
Section 6.2 hereof.
(e) Shareholder Option. If the Corporation shall
fail to elect to exercise, in part or in whole, its option to purchase the
Offered Shares, then the other Shareholder shall have the option to purchase the
Offered Shares, other than those Shares purchased by the Corporation pursuant to
Section 6.1(d) hereof. This option to the other Shareholder shall be
exercisable, if at all, within the thirty (30) day period following the
expiration of the Corporation Exercise Period as above provided in Section
6.1(c) (the "Shareholder Exercise Period"). If the other Shareholder shall elect
to exercise its option, such Shareholder shall give a written notice of exercise
to the Corporation and the Selling Shareholder prior to the expiration of the
aforesaid Shareholder Exercise Period (the "Shareholder Exercise Notice").
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(f) Available Funds. In the event that the optio
is exercised by the Corporation and the Corporation does not have available
funds sufficient to enable the Corporation lawfully to make such purchase, then
the Corporation and the Shareholder will promptly take all action which may be
necessary and permitted by law (including without limitation reducing the
capital of the Corporation) in order to make funds available in an amount
sufficient to pay suc sums that may be required on account of the purchase
price. Each Shareholder, by its execution of this Agreement, agrees to vote
its Shares in such manner as to accomplish the availability of such funds,
and the Selling Shareholder shall be deemed to have given the Chief Executive
Officer of the Corporation his or its proxy for such purpose or, if the Chief
Executive Officer of the Corporation is the Selling hareholder or there shall b
no person occupying the office of Chief Executi Office such proxy shall be'
deemed given to the Secretary of the Corporation.
(g) Sale to Third Party. In the event that the options granted to the
Corporation and the other Shareholder pursuant to this Section 6.1 are not
exercised as herein provided, the Selling Shareholder shall, subject to any
regulatory approvals as may be necessary, have the right to dispose of all of
the shares owned by the Selling Shareholder at the price and on the terms
specified in the Offer Notice and subject to the terms of this Agreement;
provided, however, that the offer and sale of the shares shall, in all respects,
comply with the registration provisions of (or be exempt from the registration
provisions of) any applicable securities law and the conclusive written opinion
of the Offeror's counsel that the offer and sale comply with said registration
provisions or are exempt therefrom shall be received by the Corporation. Copies
of all documents relating to such sale shall be forwarded to the Secretary of
the Corporation no later than five (5) days after the date of the sale. If such
sale is not consummated within sixty (60) days after the expiration of the
option period, the Selling Shareholder's Shares or Preferred Shares shall again
be subject to all of the terms and provisions of this Agreement.
6.2 Purchase Price for Sale under Section 6.1.
(a) Purchase Price. In the event that one or
more Purchasers (as defined in Section 6.1(d)) elect to purchase Shares or
Preferred Shares from the Selling Shareholder as provided in Section 6.1
hereinabove, the purchase price for the Offered Shares shall be at the price
and payable on the terms which are designated in the Offer Notice provided for
in Section 6.1(b) hereinabove.
(b) Security. In order to provide security for the payment of the deferred
portion of the purchase price, if any, the Selling Shareholder shall deliver at
closing the certificates evidencing the ' number of Shares or Preferred Shares
being purchased by the Purchaser, together with duly executed instruments of
transfer of such shares, to such person as shall be acceptable to both parties
as escrow agent (the "Escrow Agent"). Upon receipt of payment in full of each
installment of principal and interest on such deferred portion, the Escrow Agent
shall release to the maker of the related note or other evidence of indebtedness
a duly endorsed share transfer certificate with any required transfer tax stamps
affixed thereto, representing that fraction of the Shares or Preferred Shares
which such Purchaser has purchased which corresponds to a fraction the numerator
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of which shall equal the principal payment made and the denominator of which
shall equal the original principal amount of the Purchaser note or other
evidence of indebtedness.
(c) Default. In the event of any default in the
payment of the deferred portion of the purchase price, if any, the Selling
Shareholder shall give notice thereof to the Escrow Agent, and the Escrow Agent
shall thereupon hold the certificates and share transfer instruments in respect
of such Shares or Preferred Shares until there shall be delivered to the Escrow
Agent a copy of a final judgment directing disposition of the Shares or
Preferred Shares or a letter of instructions signed by the Selling Shareholder
and the Purchaser directing disposition of the Shares or Preferred Shares. So
long as a Purchaser's purchased Shares or Preferred Shares shall be held by the
Escrow Agent, he or it shall receive any distributions thereon to hold the same
upon trust. Until notice of default, the Escrow Agent shall deliver such
distributions to the Purchaser; after notice of default, the Escrow Agent shall
hold such distributions pending instructions as set forth above. Voting rights
with respect to such Shares or Preferred Shares shall be exercisable by the
Purchaser so long as the shares are held by the Escrow Agent, and the Selling
Shareholder shall at Closing deliver such instruments of proxy as may be
necessary or appropriate to give effect to the terms of this Section 6.2.
6.3 Come - Along. In the event any Shareholder (the "Selling
Shareholder") shall have given an Offer Notice to the Corporation and the other
Shareholder under Section 6.1 hereof and neither the Corporation nor the other
Shareholder shall have exercised its rights under Section 6.1, the other
Shareholder may require the proposed purchaser to include such Shareholder in
such sale and sell its Shares on the same basis as set forth in the Offer
Notice, pro rata (based upon the percentage of Shares held by the Shareholder)
and at the same time as the Selling Shareholder. The other Shareholder shall
give notice of its intention to so "come-along" by giving notice to the Selling
Shareholder within thirty (30) days after the Offer Notice. Such sale shall
proceed free of any restrictions pursuant to this Agreement. If the purchaser
purchasing Shares and Offered Shares, if any, pursuant to the Offer Notice
does not permit the other Shareholder to "comealong" as provided herein, the
Selling Shareholder shall not be permitted to sell his or its Shares and
Preferred Shares, if any, pursuant to the Offer Notice, and if such Shares and
Preferred Shares are not then otherwise purchased pursuant to the terms hereof,
such Shares and Preferred Shares shall again be subject to all of the terms and
conditions of this Agreement.
6.4 Additional Options to Purchase Shares.
(a) Parnell's Resignation. (i) In the event that
Parnell shall desire to resign from the Corporation for any reason, in addition
to any other rights the Corporation and Parnell may each have hereunder, Parnell
shall notify the Corporation and Tremont by written notice (the "Parnell
Notice"), which Parnell Notice shall be given simultaneously to the Corporation
and Tremont, advising the Corporation and Tremont of his intention to resign.
Tremont shall thereupon have a call right (the "Call Option"), exercisable in
its sole discretion, with respect to all of Parnell's Shares (the "Put/Call
Shares"). Tremont shall have no later than forty-five (45) days after receipt of
the Parnell Notice (the "Tremont Exercise Period") and subject to all applicable
laws and regulations to exercise its Call Option. Tremont may exercise its Call
Option by giving written notice (the "Call Notice") to Parnell no later than
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five (5) business days prior to the expiration of the aforesaid Tremont Exercise
Period that Tremont has determined to exercise such Call Option to purchase all,
but not less than all, of the Put/Call Shares.
(ii) In the event Tremont shall fail to elect
to exercise its Call Option as provided for in Section 6.4(a)(i) hereof, Parnell
shall thereupon have a put right (the "Put Option"), exercisable in his sole
discretion, with respect to all of the Put/Call Shares and Tremont shall
thereupon have the option, and the Corporation shall thereupon have the
obligation, in the event Tremont does not elect to purchase all or any Put/Call
Shares, to purchase all or the remaining Put/Call Shares. Parnell shall have no
later than thirty (30) days following the expiration of the Tremont Exercise
Period as above provided in Section 6.4(a)(i) (the "Parnell Exercise Period")
and subject to all applicable laws and regulations to exercise its Put Option.
Parnell may exercise its Put Option by giving written notice (the "Put Notice"
to the Corporation and Tremont prior to the expiration of the aforesaid Parnell
Exercise Period that Parnell has determined to exercise such Put Option to sell
all, but not less than all, of the Put/Call Shares.
(iii) In the event Tremont elects to
exercise its Call Option or Parnell elects to exercise his Put Option pursuant
to this Section 6.4(a), the purchase price shall be as determined and on the
terms set forth in Section 6.5(a) hereof, and the closing of the transaction
shall take place at the registered office of the Corporation or such other place
as the Corporation may reasonably designate, (A) in the event Tremont shall
elect to exercise its Call Option, within sixty (60) days after the giving
of the Call Notice, or (B) in the event Parnell shall elect to exercise its Put
Option, within sixty (60) days after the giving of the Put Notice.
(iv) In the event Tremont has elected not to
exercise its Call Option and Parnell has elected not to exercise his Put Option,
the Put/Call Shares shall again be subject to the terms and conditions of this
Agreement.
(b) Parnell's Death or Disability. In the event of
the death or "disability" (as such term is defined in the Employment Agreement)
of Parnell, in addition to any other rights Parnell, or his representative, may
have hereunder, Tremont and Parnell, or his representative, as the case may be,
each shall be entitled to exercise its Call Option or Put Option, as the case
may be, as set forth in Section 6.4(a) hereof with respect to Parnell's Shares
pursuant to the procedures, and subject to the same obligations, set forth in
Section 6.4(a). In the case of this Section 6.4(b), the Tremont Exercise Period
shall commence upon the date Parnell becomes deceased or disabled (or, if such
death or disability was not then notified or known or reasonably apparent to the
Corporation and Tremont, after the date of such notification or knowledge or
becoming reasonably apparent) at the price determined and on the terms set forth
in Section 6.5(b) hereof, and the closing of the transaction shall take place at
the registered office of the Corporation or such other place as the Corporation
may reasonable designate no later than sixty (60) days after the giving of the
Call Notice, in the event Tremont exercises its Call Option, or the Put Notice,
in the event Parnell, or his representative, exercises the Put Option as the
case may be.
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(c) Termination of Parnell's Employment Without
Cause or Non-Renewal of Parnell's Employment Agreement. In the event Parnell's
employment with the Corporation is terminated without "cause" (as such term is
defined in the Employment Agreement) or the Corporation elects not to renew the
Employment Agreement, at any time for reasons other than for cause (the
"Corporation Terminating Event"), in addition to any other rights Parnell may
have hereunder or under the Employment Agreement, the Corporation shall
thereupon have a call right (the "Call Option"), exercisable in its sole
discretion, with respect to all of Parnell's Shares (the "Callable Shares"). The
Corporation may exercise its Call Option by giving notice in writing to Parnell
no later than forty-five (45) days after the date of the occurrence of the
Corporation Termination Event of its election to purchase the Callable Shares at
the price determined and on the terms set forth in Section 6.5(c) hereof (the
"Call Notice"), and the closing of the transaction shall take place at the
registered office of the Corporation or such other place as the Corporation may
reasonably designate no later than sixty (60) days after the giving of the Call
Notice.
(d) Termination of Parnell's Employment for Cause;
Newcastle Management Claims. In the event Parnell's employment shall be
terminated for "cause" (as such term is defined in the Employment Agreement) or
any successful claim is brought, or injunctive relief is successfully obtained,
by Newcastle Capital Management Inc. against Parnell which results in his being
prohibited for a period of greater than one hundred twenty (120) days from
engaging on his own behalf or in the service of others in the business in which
the Corporation is engaged or proposes to be engaged (a "Parnell Termination
Event"), in addition to any other rights the Corporation may have hereunder or
under the Employment Agreement, the Corporation and Tremont, to the extent the
Corporation does not elect to exercise its call rights, shall each have a
call right (a "Call Option"), exercisable in its sole discretion, with respect
to all of Parnell's Shares (the "Callable Shares"). The Corporation and/or
Tremont may exercise its or their Call Option(s) by giving notice in writing
to Parnell no later than forty five (45) days after the date of the occurrence
of the Parnell Termination Event of its or their election to purchase the
Callable Shares at the price determined and on the terms set forth in
Section 6.5(d) hereof (the "Call Notice"), and the closing of the transaction
shall take place at the registered office of the Corporation or such other place
as the Corporation and/or Tremont, as the case may be, may reasonably designate
no later than sixty (60) days after the giving of the Call Notice.
(e) Bankruptcy of a Shareholder. In the event of a
bankruptcy or the appointment of a receiver for a Shareholder by any court, or
any insolvency or assignment proceeding brought by, for or against a
Shareholder, or the taking advantage by a Shareholder of any insolvency or
bankruptcy statute (a "Bankruptcy Action") shall occur with respect to any
Shareholder (the "Selling Shareholder"), the Selling Shareholder shall be
deemed, without further action, to have offered all of the Shares and Preferred
Shares then owned by such Shareholder (the "Offered Shares") to the Corporation
and the remaining Shareholder pursuant to the procedures set forth in Section
6.1 hereof. The options available to the Corporation and the other Shareholder
shall be exercisable in writing to the Selling Shareholder commencing no later
than thirty (30) days after the date of the occurrence of the Bankruptcy Action
(or, if such Bankruptcy Action was not then notified or known or reasonably
apparent to the Corporation and the other Shareholder, after the date of such
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notification or knowledge or becoming reasonably apparent) at the price
determined and on the terms set forth in Section 6.5(d) hereof, and the closing
of the transaction shall take place no later than sixty (60) days after the date
on which such options are exercised.
(f) Encumbrance of Shares. In the event all or any of
a Shareholder's Shares or Preferred Shares becomes subject to an encumbrance,
such Shareholder (the "Selling Shareholder") shall be deemed, without further
action, to have offered all of the Shares and Preferred Shares then owned by
such Shareholder to the Corporation and the remaining Shareholder in accordanc
with the provisions and procedures of Section 6.4(e) hereof at the price
determined and on the terms set forth in Section 6.5(d) hereof. If the
aforesaid offer is accepted by the Corporation and/or the other Shareholder,
the closing for such purchase shall be held no later than sixty (60) days after
the date of the exercise of the option.
(g) Material Breach of Agreement. In the event of
a material breach of this Agreement or the Joint Venture Agreement by a
Shareholder which is not remedied within thirty (30) days after written notice
thereof is delivered to such Shareholder by the Corporation and/or the other
Shareholder, if such breach is capable of remedy, such Shareholder (the "Selling
Shareholder") shall be deemed, without further action, to have offered all of
the Shares then owned by such Shareholder to the Corporation and the remaining
Shareholder in accordance with the provisions and procedures of Section 6.4(e)
hereof at the price determined and on the terms set forth in Section 6.5(d)
hereof. If the aforesaid offer is accepted by the Corporation and/or the other
Shareholder, the closing for such purchase shall be held no later than sixty
(60) days after the date of exercise of the option.
(h) Failure to Exercise. In the event the Corporation
or Parnell, or his representative, as the case may be, shall fail to exercise
their respective call and put rights, or the Shareholders or the orporation
otherwise fail to exercise their respectivoptions to purchase Shares pursuant to
this Section 6.4, other than in connection with the exercise of Parnell's put
rights as set forth in Section 6.4(a)(ii) and 6.4(b) hereof, the Shares and
the Preferred Shares subject to such call and/or put rights or such other
options shall again be subject to all the terms and provisions of this
Agreement.
(i) Available Funds. In the event that the
Corporation or Parnell shall exercise their respective call or put rights
resulting in the election or the obligation of the Corporation to purchase
Shares, or the Corporation otherwise exercises its option to purchase the Shares
and Preferred Shares deemed offered pursuant to this Section 6.4, and the
Corporation does not have available funds sufficient to enable the Corporation
lawfully to make such purchase, then the Corporation and the Shareholders will
promptly take all action which may be necessary and permitted by law (including
without limitation reducing the capital of the Corporation) to make funds
available in an amount sufficient to pay such sums that may be required on
account of the purchase price. Each Shareholder, by its execution of this
Agreement, agrees to vote his or its Shares in such a manner, or cause its
nominee(s) on the Board of Directors to authorize such action, as to accomplish
the availability of such funds, and the Shareholder selling his or its Shares
and Preferred Shares pursuant to this Section 6.4 shall be deemed to have given
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the Chief Executive Officer of the Corporation his or its proxy for such
purpose or, if there shall be no person occupying the office of Chief Executive
Officer, such proxy shall be deemed given to the Secretary of the Corporation.
6.5 Purchase Price For Purchases and Sales of Shares
Pursuant to Section 6.4.
(a) Parnell's Resignation. In the event Tremont
shall exercise its call right or Parnell shall exercise his put right in
connection with the purchase and sale of Shares pursuant to Section 6.4(a)
hereof, the purchase price for Parnell's Shares to be purchased by the
Corporation shall be an amount equal to the sum of, (i) measured with respect to
a portion of Parnell's Shares as set forth on Schedule A hereto, Parnell's pro
rata share in proportion to his ownership of Shares of the product obtained by
multiplying the Corporation's revenue (the "Revenue") for the twelve (12) month
period ending on the last day of the calendar month preceding the date of
Tremont's exercise of its call right or Parnell's exercise of his put right, as
the case may be (the "Revenue Calculation Date"), by a multiple of two and
one-half (2.5), and (ii) with respect to the balance of Parnell's Shares, as set
forth on Schedule A hereto, the book value (the "Book Value") of such Shares as
of the Revenue Calculation Date.
(b) Parnell's Death or Disability. In the event
Tremont and/or the Corporation shall exercise their respective call rights or
Parnell, or his representative, as the case may be, shall execute his put right
in connection with the purchase and sale of Shares pursuant to Section 6.4(b)
hereof, the purchase price for Parnell's Shares to be purchased by Tremont
and/or the Corporation, as the case may be, shall be an amount equal to the sum
of, (i) measured with respect to a portion of Parnell's Shares as set forth on
Schedule B hereto, Parnell's pro rata share in proportion to his ownership of
Shares of the product obtained by multiplying the Revenue as of the Revenue
Calculation Date, as such terms are defined in Section 6.5(a) hereof, by a
multiple of three and one-quarter (3.25), and (ii) with respect to the balance
of Parnell's Shares, as set forth on Schedule B hereto, the Book Value (as
defined in Section 6.5(a)) thereof as of the Revenue Calculation Date.
(c) Termination of Parnell's Employment without
Cause or Non-Renewal of Parnell's Employment Agreement. In the event the
Corporation shall exercise its call right in connection with the purchase and
sale of Shares pursuant to Section 6.4(c) hereof, the purchase price for
Parnell's Shares to be purchased by the Corporation shall be an amount equal to
Parnell's pro rata portion in proportion to his ownership of Shares, of the
product obtained by multiplying the Corporation's Revenue (as defined in Section
6.5(a) hereof) by a multiple of five (5).
(d) Parnell's Termination for Cause and Other
Triggering Events Set Forth in Section 6.4(d), 6.4(e), 6.4(f) and 6.4(g). The
purchase price for Shares and Preferred Shares, if any, purchased and sold
pursuant to Section 6.4(d), 6.4(e), 6.4(f) and 6.4(g) hereof shall be the Book
Value (as defined in Section 6.5 (a) hereof) thereof as shown on the Financial
Statements.
(e) Book Value. For purposes of this Section 6.5,
Revenue and Book Value shall be determined by the certified public accountants
regularly retained by the Corporation in accordance with U.S. generally accepted
accounting principles as adjusted to reflect the considerations set forth in
Section 6.5(f) hereinbelow. The accountant shall present the valuation in the
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form of a report to the Shareholders and the Corporation within forty five (45)
days of the Revenue Calculation Date (or such other date as the accountants may
require). The determination of the Book Value by the certified public accountant
referred to in this subsection shall be final, binding and conclusive upon the
Shareholders and the Corporation and shall not be subject to the arbitration
provisions of this Agreement.
(f) In determining Book Value of the Shares, the
following shall be considered by the accountant:
(i) Goodwill, tradenames, trademarks,
copyrights and other intangible assets shall be deemed of no value unless
acquired for a valuable consideration, in which event the cost of the
acquisition shall be applied.
(ii) All real property, furniture, fixtures
and equipment shall be valued at its appraised value as of the date of
calculation.
(iii) Cash in the bank or cash on hand
shall be taken at face value and all negotiable securities owned by the
Corporation shall be taken at market value.
(iv) Accounts receivable shall be taken at
their net value after allowing for all customary discounts and reasonable
reserves in the light of actual prior experience and practice.
(v) All other assets, if any, customarily
mentioned in the books of account of the Corporation shall be taken
at their appraised value.
(vi) There shall be deducted from the
aggregate of the foregoing assets of the Corporation all liabilities as of
the date of calculation, including but not limited to, any and all accrued
wages, vacation pay (whether or not accrued) and commissions or bonuses to
employees.
(vii) There shall also be deducted all
taxes of every kind, nature and description, whether imposed by Federal, state,
provincial or municipal authorities, which then shall be due and payable or
which thereafter may become payable by the Corporation for any periods prior to
the date of calculation.
(viii) The proceeds of any life insurance
policy, if any, collected upon the death of Parnell, as contemplated by Section
6.8 hereof, shall not be deemed an asset of the Corporation. The life insurance
policies if any, owned by the Corporation on the life of any surviving
Shareholder shall be valued as an asset at not more than cash surrender value.
6.6 Purchase Price for Purchases and Sales of Preferred Shares
Pursuant to Section 6.4. The purchase price for each of the Preferred Shares, if
any, purchased pursuant to Section 6.4 hereof shall be the Preferred Share Issue
Price.
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6.7 Payment; Closing
(a) Payment. Payment of the purchase price for the Shares or Preferred
Shares purchased pursuant to Section 6.1 or 6.4 hereof shall be made in cash
unless the Shareholder selling his or its Shares and Preferred Shares and the
Corporation or the other Shareholder, as the case may be, agree to an
alternative method, in which event delivery of the share certificates
representing the Shares or Preferred Shares and other documents evidencing or
connected with the sale of such Shares or Preferred Shares shall be made in the
same manner as is provided for in Section 6.2(b).
(b) Closing. Any closing pursuant to Section 6.1
or 6.4 hereof shall be held at the registered office of the Corporation or such
other place as it may reasonably specify. At such closing the Shareholder
selling his or its Shares and Preferred Shares shall assign and deliver to the
Corporation or the other Shareholder, as the case may be, any certificate or
certificates representing the Shares or Preferred Shares sold by him or it
hereunder, together with share transfer forms, duly executed in blank, free from
any encumbrance, and with any required transfer tax stamps affixed or paid for.
Payment shall be made for such Shares or Preferred Shares at the closing at the
price determined and on the terms set forth in Section 6.2 or 6.5, as
applicable, unless otherwise provided herein.
6.8 Life Insurance. It is acknowledged that the
Corporation may procure insurance on Parnell's life in order to facilitate the
purchase of his Shares.
6.9 Resignations; Releases. In the event of the sale by
a Shareholder of all of his or its Shares and Preferred Shares, pursuant to the
terms, covenants and conditions of this Agreement, then simultaneously with such
sale, he or it shall execute an instrument resigning as a Director or causing
any Director(s) nominated or appointed by such Shareholder as contemplated
hereby to so resign and, in the case of Parnell, also resigning as an officer
and/or employee of the Corporation, and shall also execute and/or cause such
parties to execute a release in favor of the Corporation in connection with such
sale, excepting, however, from the release of any of the obligations to pay any
balance for the Shares in accordance with the provisions of this Agreement
relating to the purchase and sale of the Shares.
6.10 Additional Rights of Parnell in Connection with
Certain Section 6.4 Events.
(a) Tremont's Withdrawal. Notwithstanding the terms
of Section 6.1 hereof, in the event Tremont withdraws from the Corporation and
neither the Corporation nor Parnell elect to purchase Tremont's Shares and
Preferred Shares and such Shares and Preferred Shares are not purchased pursuant
to a third party bona fide purchase offer as contemplated by Section 6.1 hereof,
and the Shareholders elect to dissolve the Corporation in accordance with the
Joint Venture Agreement and pursuant to Section 8.1 hereof, Parnell, or his
representative, as the case may be, with respect to Tremont or any successor to,
or transferee from, Tremont or other party to which Tremont has transferred
the then existing Corporation relationships (the "Corporation Relationships"),
as provided for under the Joint Venture Agreement (the "Successor"), shall be
entitled to receive, and Tremont agrees to cause Parnell or his representative,
as the case may be, to receive, from the Successor, in
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perpetuity, twenty five percent (25%) of all future revenues generated by
the Successor arising from the Corporation Relationships on the date of such
transfer.
(b) Termination of Parnell's Employment Without
Cause or the Non-Renewal of Parnell's Employment Agreement and Certain Other
Triggering Events Described in Section 6.5. In the event (i) Parnell shall
resign from the Corporation as described in Section 6.4(a) hereof, (ii) Parnell
shall become deceased or disabled as described in Section 6.4(b), or (iii)
Parnell's employment with the Corporation is terminated without cause or the
Employment Agreement is not renewed at any time by the Corporation for any
reason other than cause as described in Section 6.4(c) hereof, and in each case
the Corporation does not elect to exercise its call rights as described in
Section 6.4, Parnell, or his representative, as the case may be, shall retain
and hold Parnell's Shares in compliance with the terms of this Agreement, and
shall be entitled to receive, and the Corporation agrees to cause Parnell to
receive, twenty five percent (25%) of all future revenues generated by the
Corporation or the Successor arising from the Corporation Relationships then
existing as of the date of the applicable triggering event described in each of
Sections 6.4(a), 6.4(b) and 6.4(c) hereof (collectively, the "Triggering
Events").
(c) Definition of Future Revenues. For the
purposes of Section 6.10(a) and (b) hereof, "future revenues" shall mean all
revenues generated by the Corporation or the Successor, as the case may be, from
accounts of the Corporation's clients existing on the date of Tremont's
withdrawal or any of the applicable Triggering Events, as the case may be, in
connection with future subscriptions to, and compounding on, the Corporation's
products and funds existing at the time of Tremont's withdrawal or any of the
applicable Triggering Events, as the case may be, but shall not include revenues
generated by the Corporation or the Successor from such accounts in connection
with new and different products or funds introduced following the date of
Tremont's withdrawal or any of the applicable triggering events, as the case may
be.
(d) Inspection by Parnell. At all reasonable
times during regular business hours and upon reasonable notice to Tremont or the
Corporation, as the case may be, Parnell or his representative shall be
permitted to inspect the relevant books and records of Tremont or the
Corporation, as the case may be, for the purposes of verifying Parnell's
entitlements under Section 6.10(a) and (b) hereof.
ARTICLE VII
CERTAIN COVENANTS
7.1 Non-Solicitations.
(a) Parnell Non-Solicitation. Parnell agrees that
during the term of this Agreement and following the earlier of the termination
of his employment with the Corporation or sale of his Shares or Preferred Shares
and his ceasing to be a Shareholder he will not, without the prior written
consent of Corporation, either directly or indirectly, on his own behalf or in
the service or on behalf of others either
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(i) solicit, divert or appropriate, or attempt
to solicit, divert or appropriate, to any Competing Business (i.e., any business
which is engaged in the hedge fund, investment fund or investment management
business, or the same or substantially the same as any other business of the
Corporation, the focus of which is in Canada or its provinces), or any other
business, any client or customer of or investor with the Corporation during the
two (2) years preceding the termination of this Agreement or the sale of his
Shares or his ceasing to be a Shareholder;
(ii) solicit, divert or hire away, or attempt to solicit, divert or hire
away, or hire or engage as an independent contractor, any person employed by the
Corporation, whether as a temporary or permanent employee and whether or not
such employment is pursuant to a written agreement; or
(iii) use the "Tremont" name or any
derivation thereof in connection with the conduct of any business or businesses
development on behalf of himself or in the service or on behalf of others except
as provided in Section 5.5 of the Joint Venture Agreement.
(b) Tremont's Non-Solicitation. Tremont agrees
that during the term of this Agreement and following the sale of its Shares or
its ceasing to be a Shareholder it will not, without the prior written consent
of the Corporation, either directly or indirectly, on its own behalf or in the
service or on behalf of others either
(i) except with respect to Tremont's
relationships or affiliations set forth on Schedule C attached hereto, solicit,
divert or appropriate, or attempt to solicit, divert or appropriate, to any
Competing Business, or any other business, any client or customer of or investor
with the Corporation during the two (2) years preceding the termination of this
Agreement or the sale of its Shares or its ceasing to be a Shareholder; or
(ii) solicit, divert or hire away, or
attempt to solicit, divert or hire away, or hire or engage as an
independent contractor any person employed by Corporation, whether as a
temporary or permanent employee and whether or not such employment is pursuant
to a written agreement and whether or not such employment is for a determined
period or is at will.
7.2 Agreement Not To Engage in Competing Business.
(a) Parnell's Non-Compete. Parnell covenants and
agrees that during the term of this Agreement and for a period of six (6) months
from the date of the sale of his Shares or his ceasing to be a Shareholder, he
will not, either directly or indirectly on his own behalf or in the service or
on behalf of others, engage in any capacity in any Competing Business.
(b) Tremont's Non-Compete. Tremont covenants and
agrees that during the term of this Agreement and for a period of six (6) months
from the date of the sale of its Shares or its ceasing to be a Shareholder, it
will not, either directly or indirectly on its own behalf or in the service or
on behalf of others, engage in any capacity in any Competing Business.
45
<PAGE>
7.3 Extension of Covenant in the Event of Breach. In the event
of a breach of any of the covenants set forth in Section 7.1 or 7.2 hereof, the
running of the period of the restriction shall be tolled during the continuation
of any such breach, and the running of the period of such restrictions shall
commence only upon compliance with the terms of the applicable subsection.
7.4 Parnell Not Bound. Notwithstanding the foregoing, in the
event that Tremont withdraws from the Corporation as contemplated under the
Joint Venture Agreement and referred to in Section 6.1 hereof, whether or not
Parnell elects to purchase Tremont's Shares and Preferred Shares pursuant to
Section 6.1(e) hereof, or in the event Parnell is terminated without "cause" (as
defined in the Employment Agreement) or the Employment Agreement is not renewed
at any time by the Corporation for any reason other than cause, as referred to
in Section 6.4(d) hereof, Parnell shall have no obligations under Section
7.1(a)(i), 7.1(a)(ii) or 7.2(a) hereof.
7.5 Confidential Material.
(a) Confidential Information. The Shareholders
acknowledge and agree that Confidential Information of the Corporation has
been and will be imparted to them, which if disclosed by them or improperly
used by them will result in harm to the Corporation. For the purposes of
this Agreement, "Confidential Information" shall mean all trade secrets, sales
and marketing information, operations material and memoranda, personnel
records, client lists, pricing information, and financial information concernin
or relating to the business, investment funds, accounts, customers, employees,
and affairs of the Corporation and contact persons and other information
maintained by the Corporation, obtained by or furnished, disclosed or
disseminated to a Shareholder, or obtained, assembled or compiled by a
Shareholder or under his or its supervision during the course of his employment
by Corporation or its being a Shareholder of the Corporation, and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to the Corporation, but Confidential Information shall
not include any of the foregoing to the extent the same (i) is or becomes
publicly known through no fault or breach of this Agreement, (ii) can be
shown by ritten documentation to have been in the possession of the recipient
party, free of any obligation to keep it confidential, (iii) has been
independently developed by the recipient party, or (iv) constitutes residuals
held in intangible form in the mind of Parnell or any officer of Tremont who may
be deemed bound by the terms of this Agreement.
(b) Removal of Confidential Information. While he
is a Shareholder and thereafter, Parnell shall not, without Corporation's prior
written authorization, remove or cause to be removed from the Corporation's
premises any Confidential Information or other material whatsoever, belonging to
the Corporation for purposes other than for use in connection with authorized
work Parnell performs for the Corporation.
(c) Disclosure of Confidential Information.
Parnell agrees that he will not, either while he is a Shareholder or at any time
after ceasing to be a Shareholder or an employee of the Corporation, without the
prior written consent of the Corporation, disclose, except as required by law,
or make available any Confidential Information to any person or entity, nor
shall Parnell make or cause to be made, or permit or allow, either on Parnell's
own behalf or on behalf of others, any use of such Confidential Information
other than in the proper performance of Parnell's duties hereunder or as an
46
<PAGE>
employee. All Confidential Information shall be returned to the Corporation
immediately upon request to this effect or immediately following the termination
of Parnell's employment with the Corporation or Parnell's ceasing to be a
Shareholder for any reason.
(d) Tremont's Obligation. As long as Tremont shall
own Shares in the Corporation or otherwise be bound by the provisions of this
Agreement, it agrees not to disclose, divulge or communicate to, or for the
benefit of, any person, firm or business entity, in any manner, except as
required by law, any Confidential Information or other material whatsoever
belonging to the Corporation.
7.6 Miscellaneous. The Shareholders agree that the covenants and agreements
contained in this Article VII, and the subsections of this Article VII, are of
the essence of this Agreement; that each of such covenants is reasonable and
necessary to protect and preserve the interests and properties of Corporation
and the business of Corporation; that irreparable loss and damage will be
suffered by Corporation should there be a breach of any of such covenants and
agreements; that each of such covenants and agreements is separate, distinct and
severable not only from the other of such covenants and agreements but also from
the other and remaining provisions of this Agreement; that the unenforceability
of any such covenant or agreement shall not affect the validity or
enforceability of any other such covenant or agreements or any other provision
or provisions of this Agreement; and that in addition to other remedies
available to it, the Corporation shall be entitled to both temporary and
permanent injunctions to prevent a breach or contemplated breach of any of such
covenants or agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Shareholders. Acceptance by a Shareholder of all or
part of the purchase price for his or its Shares shall constitute an agreement
by such Shareholder to indemnify the Corporation and its remaining Shareholder
from and against any and all claims or liabilities which may arise subsequent to
the date of closing with respect to taxes of any kind or nature found to be due
to any taxing authority for any periods prior to closing. It is understood and
agreed that such Shareholder's liability shall be limited to such proportion as
is equivalent to his or its proportionate stock interest in the Corporation
prior to closing. Such Shareholder shall be entitled to prompt notification by
the Corporation of any and all notices of claims and shall have the right, at
his or its sole cost and expense, to participate in any proceeding, legal or
otherwise, with respect to each claim or liability. The indemnification provided
for herein shall be a continuing one which shall survive closing.
8.2 Indemnification by Corporation. To the fullest extent
permitted by applicable law, the Corporation shall indemnify all of the
Corporation's directors and officers and former directors and officers, the
Shareholders and their respective heirs, representatives, successors and
assigns, against all costs, charges and expenses, including any amount paid to
settle any action or satisfy a judgment, reasonably incurred by him in respect
47
<PAGE>
of any civil, criminal or administrative action or proceeding to which he is
made a party by reason of being or having been a director or officer or
shareholder of the Corporation (other than with respect to any actions which may
presently be pending or threatened, including the potential action or claim
referred to in Section 6.4(d) hereof) if he acted honestly and in good faith
with a view towards the best interests of the Corporation, and, in the case of a
criminal action or proceeding that is enforced by a monetary penalty, he had
reasonable grounds for believing his conduct was lawful.
8.3 Intent. The intention of this Article VIII is that all
persons referred to in this section shall have all benefits provided under the
New Brunswick Business Corporations Act, and any statute that may be substituted
therefor, to the fullest extent permitted by law, and the Corporation shall as
soon as reasonably practicable pass all resolutions and take such other steps as
may be required to give full effect to this Article VIII.
ARTICLE IX
EFFECTIVE DATE; TERMINATION; LIQUIDATION
9.1 Effective Date. This Agreement shall be deemed effective
as of the date first above set forth and shall terminate (except with respect to
any right, option, obligation or duty created or arising hereunder by virtue of
the occurrence of any event prior to the termination of this Agreement, whether
or not any such right, option, obligation or duty shall be continued or
dependent upon the lapse of any period of time, the giving of any notice and/or
the occurrence of any other event after the termination of this Agreement) on
the occurrence of the earlier of:
(a) the unanimous agreement of the Shareholders;
(b) cessation of business by the Corporation or
liquidation of the Corporation;
(c) the amalgamation, merger or consolidation of
the Corporation with any other corporation;
(d) the sale of substantially all of the assets
of the Corporation;
(e) the acquisition by any Shareholder of all of
the Shares; or
(f) the failure of the Corporation to obtain
registration with the Ontario Securities Commission (the "Commission") as an
investment counsel and portfolio manager and/or such additional registrations
with the Commission as the Corporation's business may require as contemplated on
the date hereof within one (1) year of the Effective Date.
48
<PAGE>
9.2 Liquidation.
(a) Order of Payment. Following the termination of
this Agreement, in the event of a winding-up or liquidation of the Corporation,
the assets of the Corporation shall, subject to applicable law, be disposed of
in the following priority:
(i) to the payment in full of all obligations
and liabilities of the Corporation to persons other than the
Shareholders;
(ii) to the payment in full of all obligations
and liabilities of the Corporation to its Shareholders (except in
their capacity as Shareholders);
(iii) to the payment in full of the
outstanding Preferred Shares at the Preferred Share Issue Price per
share;
(iv) to the payment in full of all obligations
to Parnell under the exercise prior to the date of termination of any put right
by Parnell for which the Corporation is obligated to purchase Parnell's Shares
pursuant to Sections 6.4(a) or 6.4(b) hereof; and
(v) the balance to the Shareholders, pro rata
in proportion to the percentage of outstanding Shares owned by each
Shareholder at the time of liquidation.
(b) Successor Appointed. Subject to the provisions of Section 6.10 hereof,
in the event of the termination of this Agreement and the liquidation of the
Corporation in accordance with the terms hereof, the Shareholders, by their
execution of this Agreement, hereby authorize Tremont to appoint the successor
to, and beneficiary of, the Corporation's client relationships and affiliations
existing as at the date of liquidation (excepting, however, those Tremont
relationships and affiliations set forth on Schedule C hereto, which, to the
extent they may have become relationships or affiliations of the Corporation
during the term of this Agreement, shall revert to Tremont) and to collect and
receive any and all future payments, fees or revenues which shall be payable to
the Corporation as a result of the transfer of such relationships. Tremont shall
not appoint a successor to, and beneficiary of, the Corporation's client
relationships unless such successor executes and delivers to Parnell the written
agreement of such party to be bound by the obligations set forth in this Section
6.10 hereof. This Section 9.2(b) shall survive the termination of this
Agreement.
ARTICLE X
FURTHER DOCUMENTS; BOOKS AND RECORDS
10.1 Further Documents. Each of the Shareholders agrees to consent to and
approve any amendment to the Articles or By-Laws which may be necessary or
advisable in order to conform any of the provisions of this Agreement or any
amendments hereto to the applicable laws of
49
<PAGE>
New Brunswick as now or hereafter enacted. The Shareholders further agree
to vote their Shares and to execute and deliver such documents as may be
necessary in order to implement the provisions
of the preceding sentence.
10.2 Books and Records. (a) The accounting and taxable year of
the Corporation shall be the calendar year unless otherwise decided by the Board
of Directors. Parnell shall be responsible for keeping complete and accurate
books of account and records for the Corporation in accordance with applicable
laws. Parnell shall make the books and records available and accessible to
accounting personnel of Tremont in order that they may conduct quarterly audits.
Each and every transaction of the Corporation shall be entered fully and
accurately and kept at the Corporation's principal place of business for five
(5) years from the transaction date or longer as applicable law may require. The
books of account shall be kept in accordance with U.S. generally accepted
accounting principles applied in a consistent manner.
(b) All books, records and accounts relating in any
manner to the Corporation's affairs, whether prepared by any Shareholder or
otherwise coming into any Shareholder's possession, shall be the exclusive
property of the Corporation and shall be returned immediately to the Corporation
on termination of this Agreement or at the Corporation's request at any time.
ARTICLE XI
SUCCESSORS AND ASSIGNS
11.1 All of the terms and provisions of this Agreement shall
inure to the benefit of and be binding upon the heirs, successors, personal
representatives and permitted assigns of the respective Shareholders and parties
hereto.
11.2 Termination of this Agreement shall not effect or
prejudice any rights or obligations which have accrued or arisen under this
Agreement prior to the time of termination, which shall survive the termination
of this Agreement, other than with respect to a party seeking to enforce such
rights or obligations whose breach of this Agreement resulted in its
termination.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. Any notice or other communication under this Agreement shall
be in writing and shall be considered given when received by the party to which
it is addressed. Such notice shall be sent by personal delivery, electronically,
facsimile transmission or recognized overnight courier, receipt acknowledged, to
the respective parties at their addresses as set forth on Schedule D attached
hereto (or at such other address as any party may have previously specified by
notice to the other parties as the address to which notice shall be given to
it). The same shall be deemed received on the date of delivery. Any notice
delivered personally, electronically or by facsimile transmission shall be
followed on the same day by written notice sent via recognized overnight courier
delivery service.
50
<PAGE>
12.2 Mediation and Arbitration. Any controversy or claim
arising out of this Agreement, shall be submitted first to voluntary mediation,
and if mediation is not successful, then to binding arbitration, in accordance
with the following dispute resolution procedures:
(a) A dispute shall be submitted to mediation by
written notice to the other party. In the mediation process, the parties will
attempt to resolve their differences voluntarily with the aid of an impartial
mediator, who will attempt to facilitate negotiations. The mediator will be
selected by agreement of the parties. If the parties cannot agree on a mediator,
the parties shall request that a mediator be designated by the American
Arbitration Association located in New York, New York. Any mediator so
designated must be acceptable to all parties.
The mediation will be conducted as specified by the
mediator in New York, New York and agreed upon by the parties. The parties agree
to discuss their differences in good faith and to attempt, with the assistance
of the mediator, to reach an amicable resolution of the dispute.
The parties shall make a good faith effort to
schedule mediation to resolve the dispute(s) no later than ninety (90) days
thereafter and the mediation shall consist of no greater than nineteen (19)
hours of hearings (or a longer period, if all of the parties involved mutually
agree to extend the mediation).
The mediation will be treated as a settlement
discussion and therefore will be confidential. The mediator may not testify for
either party in any later proceeding relating to the dispute. No recording or
transcript shall be made of the mediation proceedings.
Each party will bear its own costs in the
mediation. The fees and expenses of the mediator will be shared equally by the
parties.
(b) If a dispute has not been resolved within ninety
(90) days after the written notice beginning the mediation process (or a longer
period, if all of the parties involved mutually agree to extend the mediation),
or, in the alternative, if mediation does not take place within thirty (30)
days after delivery of the notice of intent to arbitrate, the mediation shall
terminate and the dispute will be settled by arbitration. The arbitration will
be conducted in New York, New York in accordance with the procedures in this
Agreement and the rules of the American Arbitration Association in effect on the
date of this Agreement. In the event of a conflict, the provisions of this
Agreement will control.
(c) The party desiring the arbitration shall give
written notice to the other party of such desire. Within ten (10) days of such
notice, each party shall designate a single arbitrator. Within ten (10) days of
the designation of the two (2) arbitrators as aforedescribed, the arbitrators
shall jointly designate a third arbitrator. The parties shall thereafter submit
the dispute to the three (3) designated arbitrators for resolution.
(d) In the event the above-mentioned does not take
place within the specified time, then the arbitration will be conducted before a
51
<PAGE>
panel of three arbitrators, regardless of the size of the dispute, to be
selected as provided in the rules of the American Arbitration Association. Any
issue concerning the extent to which any dispute is subject to arbitration, or
concerning the applicability, interpretation, or enforceability of these
procedures, including any contention that all or part of these procedures are
invalid or unenforceable, shall be governed by the relevant laws of New York
resolved by the arbitrators. No potential arbitrator may serve on the panel
unless he or she has agreed in writing to abide and be bound by these
procedures.
(e) The arbitrators may not award non-monetary or
equitable relief of any sort; provided, however, that nothing herein shall be
construed to prohibit any party hereto from seeking non-monetary or equitable
relief of any sort in any court having jurisdiction. In no event, shall the
arbitrators have power to make an award or impose a remedy that could not be
made or imposed by a court deciding the matter in the same jurisdiction.
(f) No discovery will be permitted in connection
with the arbitration unless it is expressly authorized by the arbitration panel
upon a showing of substantial need by the party seeking discovery.
(g) All aspects of the arbitration shall be
treated as confidential. Neither the parties nor the arbitrators may disclose
the existence, content or results of the arbitration, except as necessary to
comply with legal or regulatory requirements. Before making any such disclosure,
a party shall give written notice to all other parties and shall afford such
parties a reasonable opportunity to protect their interests.
(h) The result of the arbitration will be binding
on the parties, and judgment on the arbitrators' award may be
entered in any court having jurisdiction.
12.3 Binding Effect; Conflict with Joint Venture Agreement. (a) The
Shareholders agree that, notwithstanding any conflicting provisions contained in
the Articles, By-Laws or other corporate documents of the Corporation, the
provisions of this Agreement shall be fully and completely binding upon each of
them.
(b) The Shareholders agree that in the event of
any conflict between the terms of this Agreement and the Joint Venture
Agreement, the terms of this Agreement shall govern.
12.4 Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants, or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and the
understandings between the parties with respect to such subject matter.
12.5 Modification. Neither this Agreement nor any of its
provisions may be changed, modified, or cancelled except by mutual written
consent of all the undersigned.
52
<PAGE>
12.6 Law Governing. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without regard to New York's conflict of laws principles.
12.7 Approvals. This Agreement has been presented to a meeting
of the Shareholders of the Corporation duly called and held for approval and
execution thereof, and has been approved and the execution thereof authorized
upon the terms and conditions contained herein. All the parties hereto agree to
execute and deliver to each other upon request any and all future instruments or
documents which may be requisite or desirable to effectuate the intent and the
provisions of this Agreement.
12.8 Construction. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons may require.
12.9 Unenforceable Provisions. If any of the provisions of
this Agreement are or become unenforceable, the remainder of this Agreement
shall nevertheless remain binding to the fullest extent possible, taking into
consideration the purposes and spirit of this Agreement.
12.10 Captions. The captions set forth above in this Agreement
are for convenience only and shall not limit or define the text of this
Agreement.
12.11 No Waiver. The waiver of any breach of this
Agreement by any party at any time shall not be effective unless in
writing, and no such waiver shall constitute the waiver of the same or another
breach on a subsequent occasion.
12.12 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, and all of
which together shall constitute one and the same instrument.
12.13 Best Efforts. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use his reasonable best efforts
under the circumstances to take, or cause to be taken, all action, and to do, or
cause to be done, individually and in cooperation with each other, all things
necessary, proper or advisable to consummate and make effective all of the
actions contemplated by this Agreement. In case at any time any further action
is necessary or desirable to carry out the purposes of this Agreement, each
party hereto shall take all such necessary action to be taken or done by such
party. The parties hereby agree to execute, verify, acknowledge and deliver such
documents, and agree to take such other action, as may be reasonably necessary
or appropriate to carry out the transactions provided for herein.
12.14 No Defense. The existence of any claim, demand, action
or cause of action by a Shareholder against the Corporation, or any parent,
subsidiary or affiliate of the Corporation, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Corporation of any of its rights hereunder.
53
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto, or through their respective duly authorized representatives, as of the
day and year first above written.
------------------------------
Robert J. Parnell
TREMONT ADVISERS, INC.
By:___________________________
Name:
Title:
TREMONT INVESTMENT MANAGEMENT, INC.
By:___________________________
Name:
Title:
54
<PAGE>
<TABLE>
<S> <C>
SCHEDULE A
Vesting Schedule
==========================================================================================================================
Percentage Points
of Percentage Points of
Parnell's Interest Parnell's Interest
Years From(1) - To for for
"Revenue Multiple" Put/Call at "Book
Put/Call Value"
- --------------------------------------------------------------------------------------------------------------------------
<5 years 0% 35%
- --------------------------------------------------------------------------------------------------------------------------
5 years - 6 years 10% 25%
- --------------------------------------------------------------------------------------------------------------------------
6 years - 7 years 20% 15%
- --------------------------------------------------------------------------------------------------------------------------
7 years - 8 years 30% 5%
- --------------------------------------------------------------------------------------------------------------------------
>8 years 35% 0%
==========================================================================================================================
- --------
1 Measured from the date of this Shareholders' Agreement.
</TABLE>
55
<PAGE>
SCHEDULE B
Vesting Schedule
<TABLE>
<S> <C>
==========================================================================================================================
Percentage Points
of Percentage Points of
Parnell's Interest Parnell's Interest
Years From(2) - To for for
"Revenue Multiple" Put/Call at "Book
Put/Call Value"
- --------------------------------------------------------------------------------------------------------------------------
<2 years 0% 35%
- --------------------------------------------------------------------------------------------------------------------------
2 years - 3 years 10% 25%
- --------------------------------------------------------------------------------------------------------------------------
3 years - 4 years 20% 15%
- --------------------------------------------------------------------------------------------------------------------------
4 years - 5 years 30% 5%
- --------------------------------------------------------------------------------------------------------------------------
>5 years 35% 0%
==========================================================================================================================
- --------
2 Measured from the date of this Shareholders' Agreement.
</TABLE>
56
<PAGE>
Exhibit 21.1
Subsidiaries
Jurisdiction of
Subsidiary Incorporation Percent Owned
- ---------- --------------- -------------
Tremont Partners, Inc. Connecticut 100%
Tremont (Bermuda) Limited Bermuda 100%
Tremont Securities, Inc. New York 100%
Tremont Futures, Inc. Delaware 100%
Tremont Investment Management, Inc. Province of New Brunswick 65%
57
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
TREMONT ADVISERS, INC.
SEPTEMBER 30, 1998
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONDENSED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998 AND FOR PERIOD
THEN ENDED. THIS INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONDENSED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000880320
<NAME> Tremont Advisers, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1998
<PERIOD-START> JAN-30-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,322,228
<SECURITIES> 0
<RECEIVABLES> 2,703,509
<ALLOWANCES> (35,000)
<INVENTORY> 0
<CURRENT-ASSETS> 4,195,709
<PP&E> 849,796
<DEPRECIATION> (479,139)
<TOTAL-ASSETS> 6,854,787
<CURRENT-LIABILITIES> 1,389,687
<BONDS> 0
0
0
<COMMON> 42,193
<OTHER-SE> 4,919,834
<TOTAL-LIABILITY-AND-EQUITY> 6,854,787
<SALES> 0
<TOTAL-REVENUES> 7,623,468
<CGS> 0
<TOTAL-COSTS> 5,806,582
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,773,378
<INCOME-TAX> 655,594
<INCOME-CONTINUING> 1,117,784
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,117,784
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.26
58
</TABLE>
