<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Knight/Trimark Group, Inc.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
KNIGHT/TRIMARK GROUP, INC.
Newport Tower, 29th Floor
525 Washington Boulevard
Jersey City, New Jersey 07310
(201) 222-9400
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
To the Stockholders of Knight/Trimark Group, Inc.:
NOTICE IS HEREBY GIVEN that an Annual Meeting of the Stockholders (including
any adjournments or postponements thereof, the "Annual Meeting") of
Knight/Trimark Group, Inc., a Delaware corporation ("Knight/Trimark" or the
"Company"), will be held at The Waldorf=Astoria, 301 Park Avenue, New York, New
York 10022 on May 19, 1999 at 1:00 p.m., for the following purposes, which are
more fully described in the accompanying Proxy Statement:
1. To elect 15 members of the Company's Board of Directors to serve until
the Company's next annual meeting and until such directors' successors
are duly elected and shall have qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for 1999; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
A proxy statement describing the matters to be considered at the Annual
Meeting is attached to this notice. Only holders of record of shares of
Knight/Trimark Class A Common Stock at the close of business on March 31, 1999
are entitled to notice of, and to vote at, the Annual Meeting. A complete list
of stockholders entitled to vote at the Annual Meeting will be available for
examination, for proper purposes, during ordinary business hours at
Knight/Trimark's corporate offices, Newport Tower, 29th Floor, 525 Washington
Boulevard, Jersey City, New Jersey 07310, and at ChaseMellon Shareholders
Services, 450 West 33rd Street, 10th Floor, New York, New York 10001, during
the 10 days before the Annual Meeting.
Your vote is very important regardless of how many shares of Knight/Trimark
Class A Common Stock you own. Regardless of whether you plan to attend the
Annual Meeting, you are requested to sign, date and return the enclosed proxy
without delay in the enclosed postage-paid envelope. You may revoke your proxy
at any time before its exercise by (1) attending and voting in person at the
Annual Meeting, (2) giving notice of revocation of the Proxy at the Annual
Meeting, or (3) delivering to the Secretary of Knight/Trimark (a) a written
notice of revocation or (b) a duly executed proxy relating to the same shares
and matters to be considered at the Annual Meeting, bearing a date later than
the proxy previously executed.
By order of the Board of
Directors,
/s/ Steven L. Steinman
Steven L. Steinman
Chairman
April 16, 1999
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE>
KNIGHT/TRIMARK GROUP, INC.
----------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1999
----------------
PROXY STATEMENT
This Proxy Statement (the "Proxy Statement") is being furnished to
stockholders of Knight/Trimark Group, Inc., a Delaware corporation (together
with its subsidiaries, except where the context otherwise requires,
"Knight/Trimark" or the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board of Directors" or
the "Board") for use at an Annual Meeting of Stockholders, which will be held
at The Waldorf=Astoria, 301 Park Avenue, New York, New York 10022 on May 19,
1999 at 1:00 p.m. (the "Annual Meeting"). This Proxy Statement, the
accompanying form of proxy (the "Proxy") and the other enclosed documents are
first being mailed to stockholders on or about April 16, 1999.
At the Annual Meeting, the Knight/Trimark stockholders will be asked to
consider and vote on proposals to (i) elect 15 members of the Company's Board
of Directors to serve until the Company's next annual meeting and until such
directors' successors are duly elected and shall have qualified, (ii) ratify
the selection of PricewaterhouseCoopers LLP as the Company's independent
auditors for 1999 and (iii) transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
The principal executive offices of the Company are located at Newport Tower,
29th Floor, 525 Washington Boulevard, Jersey City, New Jersey 07310, and the
telephone number is (201) 222-9400.
Solicitation and Voting of Proxies; Revocation
Shares of Knight/Trimark Class A Common Stock that are entitled to vote and
are represented by a Proxy properly signed and received at or before the Annual
Meeting, unless subsequently properly revoked, will be voted in accordance with
the instructions indicated thereon. If a Proxy is signed and returned without
indicating any voting instructions, shares of Knight/Trimark Class A Common
Stock represented by such Proxy will be voted as follows:
FOR the election of each of the 15 nominees to the Company's Board of
Directors, and
FOR the ratification of the selection of PricewaterhouseCoopers LLP as
the Company's independent auditors for 1999.
The Board of Directors is not currently aware of any business to be acted
upon at the Annual Meeting other than as described herein. If, however, other
matters are properly brought before the Annual Meeting or any adjournments or
postponements thereof, the persons appointed as proxies will have the
discretion to vote or act thereon in accordance with their best judgment,
unless authority to do so is withheld in the Proxy.
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the shares represented by such Proxy are voted at
the Annual Meeting by (i) attending and voting in person at the Annual Meeting,
(ii) giving notice of revocation of the Proxy at the Annual Meeting, or (iii)
delivering to the Secretary of Knight/Trimark (a) a written notice of
revocation or (b) a duly executed Proxy relating to the same shares and matters
to be considered at the Annual Meeting, bearing a date later than the Proxy
previously executed. Attendance at the Annual Meeting will not in and of itself
constitute a revocation of a Proxy. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed as
follows: Knight/Trimark Group, Inc., Newport Tower, 29th Floor, 525 Washington
Boulevard, Jersey City, New Jersey 07310, Attention: Secretary, and must be
received before the taking of the votes at the Annual Meeting.
The Company will bear the cost of the solicitation of Proxies and the cost
of printing and mailing this Proxy Statement. In addition to solicitation by
mail, the directors, officers and employees of the Company may
1
<PAGE>
solicit Proxies from stockholders of the Company by telephone, telegram or by
personal interview. Such directors, officers and employees will not be
additionally compensated for any such solicitation but may be reimbursed for
reasonable out-of-pocket expenses in connection therewith. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the beneficial
owners of shares held of record by such persons and the Company will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith.
Record Date; Outstanding Shares; Voting at the Annual Meeting
Only holders of Knight/Trimark Class A Common Stock at the close of business
on March 31, 1999 will be entitled to receive notice of and to vote at the
Annual Meeting. At the close of business on March 31, 1999, the Company had
outstanding and entitled to vote 52,856,904 shares of Knight/Trimark Class A
Common Stock. Shares of Knight/Trimark Class A Common Stock represented by
Proxies which are marked "abstain" or which are not marked as to any particular
matter or matters will be counted as shares present for purposes of determining
the presence of a quorum on all matters, but will not be counted as votes
casted in favor of the matters brought before the stockholders at the Annual
Meeting. Proxies relating to "street name" shares that are voted by brokers
will be counted as shares present for purposes of determining the presence of a
quorum on all matters, but will not be treated as shares having voted at the
Annual Meeting as to any proposal as to which authority to vote is withheld by
the broker.
The presence, in person or by proxy, at the Annual Meeting of the holders of
at least a majority of the votes entitled to be cast at the Annual Meeting is
necessary to constitute a quorum for the transaction of business. Because the
ratification of PricewaterhouseCoopers LLP requires the approval of a majority
of the votes entitled to be cast by the stockholders of the outstanding shares
of Knight/Trimark Class A Common Stock, abstentions will have the same effect
as a negative vote on this proposal. However, abstentions from voting on the
election of directors (including broker non-votes) will have no effect on the
outcome of the vote.
PROPOSAL 1--ELECTION OF DIRECTORS
Directors of the Company will be elected by a plurality vote of the
outstanding shares of Knight/Trimark Class A Common Stock present in person or
represented by proxy at the Annual Meeting. Under applicable Delaware law, in
tabulating the votes, abstentions from voting on the election of Directors
(including broker non-votes) will be disregarded and have no effect on the
outcome of the vote.
The Board of Directors has been informed that all persons listed below are
willing to serve as Directors, but if any of them should decline or be unable
to act as a Director, the individuals named in the proxies will vote for the
election of such other person or persons as they, in their discretion, may
choose. The Board of Directors has no reason to believe that any such nominees
will be unable or unwilling to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES LISTED HEREIN FOR DIRECTOR.
Nominees for Election as Directors
The name, age (as of December 31, 1998), principal occupation for the last
five years, selected biographical information and period of service as a
Director of the Company of each of the nominees for Director are set forth
hereafter.
Steven L. Steinman (50), Chairman of the Board of Directors of the Company,
has more than 20 years of experience in the securities industry. For the past
12 years, Mr. Steinman has been the Chief Executive Officer of the Company's
wholly-owned subsidiary Trimark Securities, Inc. ("Trimark") and its
predecessor Trimark Securities, L.P., which he founded in 1986. Mr. Steinman is
a co-founder of Roundtable Partners, L.L.C. (the "LLC"), along with Messrs.
Pasternak, Raquet and Lazarowitz, and served as the Chairman of the LLC until
the Company's initial public offering and has served as Chairman of the Company
since then. Before founding Trimark Securities, L.P., Mr. Steinman held trading
positions at a number of trading firms, including Troster Singer and M.H.
Meyerson & Co., Inc., and was Trading Room Manager for Stix Friedman and Co.,
Gattini & Co., Traubner Bach Co. Inc. and Monvest Securities. Mr. Steinman
attended Columbia University.
2
<PAGE>
Kenneth D. Pasternak (44), President, Chief Executive Officer and Director
of the Company, has 20 years of experience in the securities industry. For the
past three years, Mr. Pasternak has been the President, Chief Executive Officer
and a trading room supervisor for the Company's wholly-owned subsidiary Knight
Securities, Inc. ("Knight") and its predecessor Knight Securities, L.P. Before
co-founding the LLC and Knight Securities, L.P., Mr. Pasternak served as Senior
Vice President, Limited Partner and Trading Room Manager for Spear Leeds &
Kellogg/Troster Singer, a trading firm, from July 1979 to July 1994. Mr.
Pasternak received his B.A. degree from the State University of New York at New
Paltz in 1976.
Walter F. Raquet (54), Executive Vice President and Director of the Company
and Chief Operating Officer of Knight, has 30 years of experience in the
securities industry. For the past three years, Mr. Raquet has been the Chief
Operating Officer of Knight and its predecessor Knight Securities, L.P. Mr.
Raquet was one of the co-founders of the LLC and Knight. From 1992 to 1994, he
was a Senior Vice President with Spear, Leeds & Kellogg/Troster Singer managing
their technology and marketing functions. From 1982 to 1992, Mr. Raquet was a
Partner at Herzog Heine & Geduld, Inc., a trading firm, where he directed the
firm's technology and marketing efforts. Mr. Raquet was also Corporate
Controller for PaineWebber Incorporated between 1980 and 1982. He was Executive
Vice President of Cantor Fitzgerald from 1977 to 1980 and Controller for Weeden
& Co. from 1968 to 1976. He is a CPA and practiced at the accounting firm of
Price Waterhouse. Mr. Raquet received a B.S. degree in Accounting from New York
University in 1966.
Robert I. Turner (46), Executive Vice President, Chief Financial Officer,
Treasurer and Director of the Company and Chief Financial Officer of Knight,
has 20 years of experience in the financial services and securities industries.
For the past three years, Mr. Turner has served as the Chief Financial Officer
for Knight and its predecessor Knight Securities, L.P. and in April 1996 he was
elected to the advisory board of the LLC on which he served until the Company's
initial public offering, at which time he joined the Board of Directors of the
Company. From 1988 to 1995, Mr. Turner was a Corporate Vice President at
PaineWebber Incorporated, serving in a variety of financial management
positions in the fixed income, financial services, merchant banking and
commodities trading divisions. From 1982 to 1987, Mr. Turner worked for
Citicorp in the treasury and investment banking divisions. From 1979 to 1981,
Mr. Turner practiced at the accounting firm of Price Waterhouse where he became
a CPA. Mr. Turner received his B.A. from the State University of New York at
Binghamton in 1973 and his M.S.B.A. from the University of Massachusetts at
Amherst in 1976.
Robert M. Lazarowitz (42), Executive Vice President and Director of the
Company and Chief Operating Officer of Trimark, has 20 years of experience in
the securities and financial services industries. For the past 10 years, Mr.
Lazarowitz served first as Chief Financial Officer and then as Chief Operating
Officer of Trimark and its predecessor Trimark Securities, L.P. Mr. Lazarowitz
was also a co-founder of the LLC. From 1985 to 1987, he served as Chief
Financial Officer of Bach Management/Investment Banking and, from 1984 to 1985,
as Chief Operating Officer of Traubner Bach Co. Inc. He has been a member of
the NASD's Intermarket Trading System Committee for the past three years. Mr.
Lazarowitz received his B.S. in Accounting from the University of South Florida
in 1978.
Anthony M. Sanfilippo (42), Executive Vice President and Director of the
Company and President of Trimark, has over 22 years of experience in the
securities industry. For the past year, he has been the President of Trimark
and its predecessor Trimark Securities, L.P. From 1993 to 1997, Mr. Sanfilippo
was President and Chief Executive Officer of Tradetech Securities, a market
maker in the Third Market which he founded in 1993. From 1988 to 1993, he
served as Executive Vice President at Mesirow Financial, managing the
Institutional Equity Division and Regional Exchange Specialist Operations. From
1980 to 1986, he was Vice President of Jefferies & Co., an investment bank,
where he co-managed the firm's capital commitments in listed securities. Mr.
Sanfilippo is a member of the National Organization of Investment
Professionals. He has also served as President of the Security Traders
Association in Chicago and is currently serving on the NASDR Business District
Conduct Committee. Mr. Sanfilippo attended DePaul University.
Martin Averbuch (46), Director of the Company, has served on the Board of
the Company since the Company's initial public offering and as an advisory
board member of the LLC since 1996. Mr. Averbuch is a founder of the
International Securities Exchange, and is President and Chief Executive Officer
of Adirondack
3
<PAGE>
Trading Partners LLC. Mr. Averbuch has been with Adirondack Trading Partners
since August 1998. From August 1993 until August 1998, Mr. Averbuch served in
various positions at E*TRADE Group, Inc., including President of E*TRADE
Capital, Vice President of On-Line Ventures and Vice President of Special
Projects. Mr. Averbuch is also a member of the TAG Industry Advisory Board on
Execution Quality. Mr. Averbuch was a member of the Hofstra University faculty
from 1977 to 1978 as a Professor in the Finance Department. He received a B.S.
in Economics, magna cum laude, from The Wharton School of Business at the
University of Pennsylvania in 1974 and a J.D./M.B.A. from the University of
Chicago in 1977.
Charles V. Doherty (65), Director of the Company, has served on the Board of
the Company since the Company's initial public offering, and before that, as an
advisory board member of the LLC since March 1995. He has also been a Managing
Director of Madison Asset Group, an investment advisory firm, since 1993. From
1986 to 1992, Mr. Doherty was President and Chief Operating Officer of the
Chicago Stock Exchange specializing in information technology, marketing, floor
operations and compliance. He is a CPA and founder of Doherty, Zable & Company,
an accounting firm, where he served as President between 1974 and 1985. Mr.
Doherty received his B.A. in Accounting, magna cum laude, from the University
of Notre Dame in 1955 and his M.B.A. from the University of Chicago in 1967.
Gene L. Finn (66), Director of the Company, has served on the Board of the
Company since the Company's initial public offering and, before that, as an
advisory board member of the LLC since March 1995. He served as Vice President
and Chief Economist of the NASD from 1983 to 1995 and as Chief Economist and
Senior Economic Adviser for the SEC from 1969 to 1982. In such capacities, Mr.
Finn provided policy advice on stock market and investment company regulation
and oversight. Mr. Finn is an independent consultant and has been a Director of
Ameritrade Holding Corporation since December 1996. Mr. Finn holds a Ph.D. in
Economics from the University of Wisconsin.
Gary R. Griffith (56), Director of the Company, has served on the Board of
the Company since the Company's initial public offering and, before that, as an
advisory board member of the LLC since March 1995. He has been an independent
financial consultant since 1990 and has been in investment banking and
financial consulting since 1980. Before 1980, Mr. Griffith was with CBS, Inc.
and Price Waterhouse. Mr. Griffith is a CPA. Mr. Griffith received a B.S. in
Business Administration from Ohio State University.
Bruce R. McMaken (39), Director of the Company, has served on the Board of
the Company since the Company's initial public offering and, before that, as an
advisory board member of the LLC since March 1995. He also has been employed by
Sanders Morris Mundy, Inc. ("SMM"), an investment banking firm, since 1992, and
is currently serving as a Managing Director of Corporate Finance. Mr. McMaken
serves as one of the managers of Environmental Opportunities Fund, Ltd. and
Environmental Opportunities Funds II, two private equity funds managed by
affiliates of SMM. Before joining SMM, Mr. McMaken provided independent
corporate finance and venture capital advisory services to clients primarily in
the environmental services, biotechnology and real estate development
industries. He is also a director of Independent Environmental Services, Inc.,
a private solid waste collection and disposal company. He received his B.A.
degree from Cornell University in 1981.
J. Joe Ricketts (57), Director of the Company, is Chairman and Chief
Executive Officer of Ameritrade Holding Corporation. Mr. Ricketts has been with
Ameritrade since 1975. Previously, Mr. Ricketts was an investment advisor with
Ricketts & Co., a registered representative with Dean Witter, and a branch
manager at Dun & Bradstreet. Mr. Ricketts is a member of the Board of Directors
of Creighton University, a director of CSS Management, Inc. of Denver, Colorado
and a member of the District Business Conduct Committee of the NASD, District
No. 4. In 1968, he received his B.A. degree in economics from Creighton
University in Omaha, Nebraska.
Rodger O. Riney (53), Director of the Company, has served on the Board of
the Company since the Company's initial public offering and, before that, as an
advisory board member of the LLC since March 1995. He is also the President of
Scottsdale Securities, Inc., a discount brokerage firm he founded in 1980. In
1969, he joined Edward Jones & Co., a brokerage firm, and in 1975 became a
General Partner of that firm. Mr. Riney
4
<PAGE>
received a B.S. degree in Civil Engineering in 1968 and an M.B.A. in 1969, both
from the University of Missouri-Columbia.
V. Eric Roach (35), Director of the Company, has served on the Board of the
Company since the Company's initial public offering and, before that, as an
advisory board member of the LLC since 1995. He founded Lombard Brokerage, a
brokerage firm, in 1992 and was Chairman and Chief Executive Officer until Dean
Witter, Discover & Co. acquired the company in 1997. Until July 1998, he was
President of Discover Brokerage Direct, Inc., a wholly-owned subsidiary of
Morgan Stanley, Dean Witter & Co., managing the company's strategy, marketing
and public relations areas. In July 1998, he joined the direct business group
of Morgan Stanley Dean Witter. He attended Brigham Young University and also
attended the Executive M.B.A. program of Pepperdine University.
Charles A. Zabatta (56), Director of the Company, is President and Chief
Operating Officer of Wall Street Connect, a national financial services
company. He has over 30 years of brokerage experience. From January 1995 until
1998, Mr. Zabatta served as Executive Vice President of Corporate Development
at Waterhouse Investor Services. From January 1993 until January 1995, Mr.
Zabatta served as Executive Vice President of Marketing at Kennedy Cabot & Co.
He also served as Director of Marketing for Securities Settlement, a national
clearing organization. He received his B.A. degree from Iona College in 1964.
Board of Directors and its Committees
For the period from the Company's initial public offering on July 8, 1998
through December 31, 1998, the Board of Directors met three times and took
actions by unanimous written consent on other occasions.
The Company has, as standing committees, a Finance and Audit Committee, a
Compensation Committee and a Nominating Committee.
All members of the Board of Directors attended at least 75% of its meetings
and the meetings of any Committees of the Board of Directors of which they were
members in 1998.
The current members of the Finance and Audit Committee are Messrs. Griffith,
Zabatta and McMaken. The Finance and Audit Committee provides assistance to the
Board of Directors with respect to corporate accounting, reporting practices of
the Company and the quality and integrity of the financial reports of the
Company. The Finance and Audit Committee recommends to the Board of Directors
the engagement of the independent auditors of the Company and oversees audits
and investigations of the business and financial affairs of the Company,
including, without limitation, any audits or investigations which may be
required by any governmental regulatory authority. The Finance and Audit
Committee periodically reviews the financial arrangements for the Company and
its current and anticipated financial requirements and recommends any changes
it considers advisable, including whether to engage in the terms of any new
debt or equity financings. The Finance and Audit Committee also reviews and
approves all new material acquisitions and investments by the Company.
The current members of the Compensation Committee are Messrs. Doherty,
Averbuch and Finn. The Compensation Committee provides assistance to the Board
of Directors to ensure that the Company's officers, key executives and
Directors are compensated in accordance with the Company's total compensation
objectives and executive compensation policies, strategies and pay levels
necessary to support organizational objectives.
The current members of the Nominating Committee are Messrs Pasternak,
Averbuch, Doherty and Sanfilippo. The Nominating Committee makes
recommendations to the Board of Directors as to whom to nominate as Directors
and officers of the Company.
In 1998, the Finance and Audit Committee and Compensation Committee met
before regularly scheduled meetings of the Board of Directors and each took
actions by unanimous written consent. The Nominating Committee did not come
into existence until 1999.
5
<PAGE>
Compensation of Directors
Messrs. Steinman, Pasternak, Raquet, Lazarowitz, Sanfilippo and Turner,
officers of the Company, receive no remuneration for serving on the Board of
Directors. Each of the independent Directors receive an annual fee of $18,000
and a meeting fee of $1,000 for each of the Board of Directors or Committee
meetings attended. Committee chairpersons received an additional fee of $3,000
per year. All directors are reimbursed for out-of-pocket expenses. At the time
of its initial public offering, under the Company's 1998 Nonemployee Director
Stock Option Plan, the Company granted each of the independent Directors an
option to purchase 8,000 shares of Class A Common Stock. In addition, on the
first business day following each annual meeting of our stockholders, each
continuing independant director will be granted an option to purchase 4,000
shares of Class A Common Stock. At the time of its initial public offering, the
Company granted 5,000 shares of restricted Class A Common Stock to each of
Messrs. Doherty, Finn and Griffith under the Company's 1998 Long-Term Incentive
Plan. For the period from the Company's initial public offering on July 8, 1998
through December 31, 1998, members of the Board of Directors received $114,000
in directors' fees.
Executive Officers
The executive officers serve at the discretion of the Board of Directors.
The following table sets forth certain information concerning the executive
officers of the Company as of March 31, 1999 (none of whom has a family
relationship with another executive officer):
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Steven L. Steinman............... 50 Chairman of the Board of Directors
President, Chief Executive Officer and
Kenneth D. Pasternak............. 44 Director
Walter F. Raquet................. 54 Executive Vice President and Director
Robert I. Turner................. 46 Executive Vice President, Chief
Financial Officer, Treasurer and
Director
Robert M. Lazarowitz............. 42 Executive Vice President and Director
Anthony M. Sanfilippo............ 42 Executive Vice President and Director
</TABLE>
For selected biographical information with respect to each of the executive
officers, please see "Nominees For Election as Directors" beginning on page 4.
6
<PAGE>
Executive Compensation
The following table sets forth information regarding compensation paid for
each of the last three completed fiscal years for Kenneth Pasternak, the
Company's Chief Executive Officer, and the company's four other most highly
paid executive officers (together with the Chief Executive Officer, the Named
Executive Officers):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------------- ------------
Securities
All Other Underlying
Name and Principal Year Salary Bonus(1) Compensation(2) Options(3)
------------------ ---- -------- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Kenneth Pasternak...... 1998 $250,000 $5,081,905(4) $3,714,990 1,000,000
President and Chief 1997 250,000 3,084,742 5,421,289 --
Executive Officer 1996 250,000 1,907,442 4,618,608 --
Steven Steinman........ 1998 250,000 626,855 3,714,990 175,000
Chairman of the Board 1997 250,000 780,936 5,421,289 --
of Directors 1996 250,000 730,095 5,280,835 --
Walter Raquet.......... 1998 250,000 1,829,588 3,714,990 375,000
Executive Vice 1997 250,000 1,219,788 5,421,289 --
President 1996 250,000 861,527 2,279,374 --
Robert Lazarowitz...... 1998 250,000 878,752 3,714,990 175,000
Executive Vice 1997 250,000 872,038 5,421,289 --
President 1996 250,000 730,094 3,775,256 --
Anthony Sanfilippo .... 1998 250,000 496,399 385,457 175,000
Executive Vice 1997 33,753 40,972 -- --
President 1996 -- -- -- --
</TABLE>
- --------
(1) Includes discretionary incentive cash bonuses paid pursuant to the
Incentive Plan described below.
(2) Includes self-employment earnings reported for the LLC, as well as $5,000
contributed on behalf of each of the executive officers by the Company
under the Company's 401(k) defined contribution plan.
(3) The number of shares covered by options to purchase the Company's Class A
Common Stock granted during the year ended December 31, 1998.
(4) Includes $1,273,709 paid as trading compensation to Mr. Pasternak for
fiscal 1998.
Option Grants During Fiscal 1998
The following table sets forth grants of stock options to each of the named
executive officers during the year ended December 31, 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at
Assumed Annual Rates
of
Stock Price
Appreciation for
Individual Grants Option Term(1)
---------------------------------------------- ----------------------
Percent of
Total
Number of Options
Securities Granted
Underlying to Employees Exercise or
Options in Base Price Expiration
Name Granted Fiscal Year Per Share Date 5% 10%
---- ---------- ------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth Pasternak....... 1,000,000 19.3% $14.50 7/8/08 $9,118,972 $23,109,266
Steven Steinman......... 175,000 3.4 14.50 7/8/08 1,595,820 4,044,121
Walter Raquet........... 375,000 7.2 14.50 7/8/08 3,419,615 8,665,975
Robert Lazarowitz....... 175,000 3.4 14.50 7/8/08 1,595,820 4,044,121
Anthony Sanfilippo...... 175,000 3.4 14.50 7/8/08 1,595,820 4,044,121
</TABLE>
7
<PAGE>
- --------
(1) Amounts that may be realized upon exercise of the options immediately
before the expiration of their term, assuming the specified compound rates
of appreciation (5% and 10%) on the market value of the common stock on the
date of option grant over the term of the options. These numbers are
calculated based on rules promulgated by the SEC and do not reflect the
Company's estimate of future stock price growth. Actual gains, if any, on
stock option exercises and common stock holdings are dependent on the
timing of exercise and the future performance of the common stock. There
can be no assurance that the rates of appreciation assumed in this table
can be achieved or that the amounts reflected will be received by the
individuals.
Fiscal Year-End Option Values
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the named executive officers on
December 31, 1998. None of the named executive officers exercised stock options
in the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Number of Shares
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1998 December 31, 1998(1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth Pasternak........... -- 1,000,000 -- $9,440,000
Steven Steinman............. -- 175,000 -- 1,652,000
Walter Raquet............... -- 375,000 -- 3,540,000
Robert Lazarowitz........... -- 175,000 -- 1,652,000
Anthony Sanfilippo.......... -- 175,000 -- 1,652,000
</TABLE>
- --------
(1) Assumes a per share fair market value equal to $23 15/16, the closing price
per share on December 31, 1998 of the Class A Common Stock as reported in
the Nasdaq National Market.
Management Contracts and Change in Control Agreements
Shortly before the Company's initial public offering, the Company entered
into a new employment agreement substantially the same as the prior LLC
employment agreement with Mr. Pasternak and amended the LLC agreements of
Messrs. Raquet, Steinman and Lazarowitz, as well as the prior employment
agreement with Mr. Sanfilippo (collectively, the Executives). The term of Mr.
Pasternak's agreement (the New Agreement) is four years, beginning on the date
of the consummation of the Company's initial public offering, with annual,
automatic one-year extensions beginning on the fourth anniversary of such date
unless either party gives notice of nonrenewal at least 60 days before such
anniversary. The term of the amended agreements of the remaining Executives
(the Amended Agreements) ends on March 23, 2000, subject to annual automatic
one-year extensions beginning on such date, unless either party serves notice
of nonrenewal at least 60 days before such date.
Mr. Pasternak's New Agreement provides that he is President and Chief
Executive Officer of the Company and President and Chief Executive Officer of
Knight. Each of Messrs. Raquet and Lazarowitz's Amended Agreements provides,
respectively, that the Executive is Executive Vice President of the Company;
Mr. Raquet is also Chief Operating Officer of Knight and Mr. Lazarowitz is also
Chief Operating Officer of Trimark. Mr. Steinman's Amended Agreement provides
that he is Chairman of the Board of the Company and Chief Executive Officer of
Trimark. Mr. Sanfilippo's Amended Agreement provides that he is Executive Vice
President of the Company and President of Trimark. Each Executive receives an
annual salary of $250,000, which may be, from time to time, increased by the
Board of Directors.
The New Agreement and each of the Amended Agreements provide for the payment
of annual bonuses pursuant to the Company's 1998 Incentive Plan and for
participation in current and future employee benefit plans. In addition, the
New Agreement of Mr. Pasternak and the Amended Agreement of Mr. Sanfilippo
provide for the payment of profit sharing equal to a percentage (in the case of
Mr. Pasternak, 35%; in the case
8
<PAGE>
of Mr. Sanfilippo, a percentage consistent with the Company's other traders) of
the net, before-tax trading profits of the Executive's personal trading
account; and the respective Amended Agreements of Messrs. Steinman and
Lazarowitz provide for the payment of an additional amount bonus until March
31, 2000, equal in each case to 5% of the before-tax earnings of Trimark.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Messrs. Steinman, Pasternak, Raquet, Lazarowitz, Sanfilippo and Turner, as
members of the Board of Directors of the Company, participated in the
deliberations of the Board of Directors of the Company concerning executive
compensation.
The Compensation Committee was formed in April 1998. Set forth below is a
description of the policies and practices that the Compensation Committee will
implement with respect to future compensation determinations.
Compensation Philosophy. The Company's compensation program is designed to
attract, reward and retain highly qualified executives and to encourage the
achievement of business objectives and superior corporate performance. The
program ensures the Board of Directors and stockholders that (1) the
achievement of the overall goals and objectives of the Company can be supported
by adopting an appropriate executive compensation policy and implementing it
through an effective total compensation program and (2) the total compensation
program and practices of the Company are designed with full consideration of
all accounting, tax, securities law and other regulatory requirements and are
of the highest quality.
The Company's executive compensation program consists of two key elements:
(1) an annual compensation component composed of base salary and bonus, and (2)
a long-term compensation component composed of equity-based awards pursuant to
the 1998 Long-Term Incentive Plan.
Annual Compensation. Base salaries will be determined by evaluating the
responsibilities associated with the position being evaluated and the
individual's overall level of experience. In addition, the compensation of the
Executives determined by the Compensation Committee is subject to the terms of
each Executive's existing employment agreement. Annual salary adjustments will
be determined by giving consideration to the Company's performance and the
individual's contribution to that performance.
The Company has established a profit-pool incentive plan (the Incentive
Plan), currently consisting of three sub-profit pools, one for the Company
(disregarding its subsidiary companies) (the Company Sub-Pool), one for Knight
(the Knight Sub-Pool) and one for Trimark (the Trimark Sub-Pool). The Incentive
Plan also provides for the creation of a new sub-pool at the time of each
future formation or acquisition of a new Company subsidiary, to be allocated by
such person or persons as determined by a committee of the Board of Directors
consisting of its executive officers (the Executive Board).
The annual Company Sub-Pool will equal 15% of the before-tax profits of the
Company (on an unconsolidated basis) earned by the Company during each fiscal
quarter (not taking into account amounts paid out pursuant to the Incentive
Plan) and will be allocated on a quarterly basis by the Chief Executive Officer
of the Company. The annual Knight Sub-Pool equals 15% of the before-tax profits
earned by Knight during each fiscal quarter (not taking into account amounts
paid out pursuant to the Incentive Plan), and is allocated on a quarterly basis
by the President, Chief Executive Officer and Chief Operating Officer of
Knight. The annual Trimark Sub-Pool equals 15% of the before-tax profits earned
by Trimark during each fiscal quarter (not taking into account amounts paid out
pursuant to the Incentive Plan), and is allocated on a quarterly basis by the
President, Chief Executive Officer and Chief Operating Officer of Trimark. Such
officers may not themselves receive an allocation from any sub-profit pool in
any year unless the entire Company, on a consolidated basis, earns a before-tax
profit. All allocations will be subject to the approval of the Chief Executive
Officer of the Company.
9
<PAGE>
All of the Company's named executive officers are currently under employment
contracts. See "Management Contracts and Change in Control Agreements."
Increases in the base salaries of the named executive officers and the bonus
portion of their annual compensation will be based upon the considerations
noted above.
Long-term Compensation. To align stockholder and executive officer
interests, the long-term component of the Company's executive compensation
program utilizes equity-based awards whose value is directly related to the
value of the Knight/Trimark Class A Common Stock. These equity-based awards
will be granted by the Compensation Committee pursuant to the 1998 Long-Term
Incentive Plan. Individuals to whom equity-based awards are to be granted and
the amount of Knight/Trimark Class A Common Stock related to equity-based
awards will be determined at the discretion of the Board of Directors. Because
individual equity-based award levels will be based on a subjective evaluation
of each individual's overall past and expected future contribution, no specific
formula is used to determine such awards for any executive.
Compensation of Chief Executive Officer. In 1998, Mr. Pasternak's
compensation consisted of four components: (1) his base salary under his New
Agreement ($250,000); (2) 35% of profits from his personal trading account in
calendar 1998, as provided by his New Agreement ($1,273,709); (3) his share of
profits distributed by the LLC ($3,709,990); and (4) his share of the Knight
Sub-Pool for calendar 1998 ($3,808,196). The Knight Sub-Pool was allocated by
Mr. Pasternak, as president and chief executive officer of Knight, and Mr.
Raquet, as chief operating officer of Knight. No bonuses were paid out of the
Company Sub-Pool in 1998. Mr. Pasternak received no compensation in 1998 that
was within the discretion of the Board of Directors or the Compensation
Committee.
Compensation Committee
Charles V. Doherty
Martin Averbuch
Charles A. Zabatta
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, and before the formation of the Compensation Committee,
decisions concerning the compensation of executive officers were made by the
entire Board of Directors. Since the Company's initial public offering, the
Company's Compensation Committee consists of Messrs. Doherty, Averbuch and
Finn, none of whom has ever been an officer or employee of the Company. Kenneth
Pasternak is a member of the Board of Directors of Adirondack Trading Partners
LLC., whose President and Chief Executive Officer, Martin Averbuch, serves on
the Company's Board of Directors. No other executive officer of the Company
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee. Certain members of the
Company's Board of Directors are parties to transactions with the Company.
10
<PAGE>
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the total cumulative return of the Knight/Trimark
Class A Common Stock from July 8, 1998 (the date trading of the Knight/Trimark
Class A Common Stock commenced) through December 31, 1998, to the Standard &
Poor's 500 Index, the SNL All Broker/Dealer Index and an industry peer group.
The graph assumes that dividends were reinvested and is based on an investment
of $100 on July 8, 1998.
Total Return Performance
Knight/Trimark SNL All
Index Group, Inc. S&P 500 Broker/Dealer Index Peer Group
- ----- -------------- ------- ------------------- ----------
7/8/98 100 100 100 100
7/31/98 108.66 96.13 93.86 94.74
8/31/98 41.73 82.26 63.41 66.49
9/30/98 50.39 87.5 52.96 58.54
10/31/98 51.18 94.62 68.63 71.44
11/30/98 99.61 100.35 80.07 89.27
12/31/98 150.79 106.14 83.73 101.22
<TABLE>
<CAPTION>
Cumulative
Total Return
---------------
7/8/98 12/31/98
------ --------
<S> <C> <C>
Knight/Trimark Group, Inc................................... $100 $150.79
Standard & Poor's 500 Index................................. 100 106.14
SNL All Broker/Dealer Index................................. 100 83.73
Industry Peer Group......................................... 100 101.22
The Company included the following companies in its industry
peer group:
Ameritrade Holding Corporation
E*TRADE Group, Inc.
Merrill Lynch & Co. Inc.
The Charles Schwab Corporation
National Discount Brokers Group, Inc.
</TABLE>
11
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
The Company's executive officers, directors and ten percent stockholders are
required under Section 16(a) of the Exchange Act, to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the Commission and the The
Nasdaq Stock Market. Copies of these reports must also be furnished to the
Company. Based solely upon its review of copies of such reports furnished to
the Company through the date hereof, or written representations that no reports
were required to be filed, the Company believes that during the fiscal year
ended December 31, 1998, all filing requirements applicable to its officers,
directors and ten percent stockholders were complied with in a timely manner,
except the initial reports of beneficial ownership on Form 3 of Martin
Averbuch, Charles Doherty, Gene Finn, Gary Griffith, Robert Lazarowitz, Bruce
McMaken, Kenneth Pasternak, Walter Raquet, J. Joe Ricketts, Rodger Riney, V.
Eric Roach, Anthony Sanfilippo, Steven Steinman, Robert Turner, Charles Zabatta
and Waterhouse Investor Services.
12
<PAGE>
PROPOSAL 2--RATIFICATION OF SELECTION OF AUDITORS
The Finance and Audit Committee and the Board of Directors of the Company
has appointed PricewaterhouseCoopers LLP as the Company's independent auditors
for the fiscal year ending December 31, 1999. Although stockholder action on
this matter is not required, this appointment is being recommended to the
stockholders for ratification. Pursuant to applicable Delaware law, the
ratification of the selection of PricewaterhouseCoopers LLP requires the
affirmative vote of the holders of a majority of the votes cast at the Annual
Meeting, in person or by proxy, and entitled to vote. Abstentions and broker
non-votes will be counted and will have the same effect as a vote against the
proposal.
PricewaterhouseCoopers LLP representatives will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR 1999.
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth, as of March 31, 1999, certain information
regarding the beneficial ownership of Knight/Trimark Common Stock by (i) each
of the Company's executive officers, (ii) each Director of the Company, (iii)
each nominee for election as a Director of the Company, (iv) each person who is
known to the Company to own beneficially more than 5% of the Common Stock and
(v) all officers and Directors of the Company as a group. Such information is
based, in part, upon information provided by certain stockholders of the
Company. In the case of persons other than the officers and Directors of the
Company, such information is based solely on a review of Schedules 13D and 13G
filed with the Commission. As of March 31, 1999 there were 227 holders of
record of Knight/Trimark Common Stock.
<TABLE>
<CAPTION>
Number of Percentage
Shares of Shares
Beneficially Beneficially
Name and Address of Beneficial Owner Owned (1)(2) Owned(1)
- ------------------------------------ ------------ ------------
<S> <C> <C>
Steven L. Steinman(3)............................... 3,979,699 7.18%
Kenneth D. Pasternak................................ 3,904,644 7.04
Walter F. Raquet.................................... 3,829,753 6.91
Robert M. Lazarowitz(4)............................. 3,904,644 7.04
Anthony M. Sanfilippo............................... 365,971 *
Robert I. Turner.................................... 15,000 *
Michael T. Dorsey................................... 6,000 *
Simon D. Spenser.................................... 7,000 *
Martin Averbuch..................................... 1,500 *
Charles V. Doherty.................................. 5,000 *
Gene L. Finn........................................ 7,000 *
Gary R. Griffith.................................... 10,000 *
Bruce R. McMaken.................................... -- --
J. Joe Ricketts..................................... -- --
Rodger O. Riney(8).................................. 815,606 1.47
V. Eric Roach....................................... -- --
Charles A. Zabatta.................................. 2,000 *
Ameritrade Holding Corporation(6)................... 3,953,675 7.13
Waterhouse Investor Services, Inc.(5)(7)............ 4,732,321 8.53
All executive officers and directors as a group (17
persons)........................................... 16,853,817 30.4%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and includes voting or investment power with respect to the shares.
(2) Unless otherwise indicated, the address for each beneficial owner is c/o
Knight/Trimark Group, Inc. Newport Tower, 29th Floor, 525 Washington
Boulevard, Jersey City, New Jersey 07310.
(3) Mr. Steinman owns a nominal amount of the Company's Class A Common Stock,
and the remainder of the shares attributed to him are owned by Steinman
Family Associates, L.P., a Delaware limited partnership, in which he is the
general partner and the limited partners are his wife and a trust for the
benefit of certain members of his immediate family.
(4) Mr. Lazarowitz owns a nominal amount of the Company's Class A Common Stock,
and the remainder of the shares attributed to him are owned by Lazarowitz
Family Associates, L.P., a Delaware limited partnership, in which he is the
general partner and the limited partners are his wife and a trust for the
benefit of certain members of his immediate family.
(5) 2,592,698 of such shares beneficially owned are shares of Class B Common
Stock which are non-voting.
(6) The address of Ameritrade Holding Corporation is Fourteen Wall Street, New
York, NY 10005-2176.
(7) The address of Waterhouse Investor Services, Inc. is 100 Wall Street, 29th
Floor, New York, NY 10005-2176.
(8) The shares attributed to Mr. Riney are owned by four trusts for the benefit
of Mr. Riney and his immediate family. Mr. Riney has voting power over all
of these shares.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Reorganization
We were organized in April 1998 for the purpose of succeeding to the
business of the LLC. Immediately before the closing of our initial public
offering, all of the member interests of the LLC were exchanged for 36,662,415
shares of our Class A common stock and 3,942,698 shares of our Class B common
stock. Before the reorganization, management owned 40% and the broker-dealer
owners owned 60% of the LLC. By agreement among the members of the LLC, the
allocation of common stock to the broker-dealer owners was based upon an
approximation of the fair market value of each broker-dealer owner's
respective interest in the LLC. One broker-dealer owner of common units of the
LLC received Class B common stock for some of its common units in lieu of
Class A common stock due to certain regulatory constraints that limit the
amount of voting stock this particular broker-dealer can own. In connection
with the reorganization, Knight became the successor entity to Knight
Securities, L.P., and Trimark became the successor entity to Trimark
Securities, L.P.
Brown & Company Securities Corporation
On April 24, 1996, we entered into a $500,000 subordinated note agreement
with Brown & Company Securities Corporation, one of our major customers, which
paid interest quarterly at a market rate approximating the prevailing Federal
Funds Rate. We repaid the subordinated note in full on July 13, 1998. At the
same time as the execution of the subordinated note, we granted Brown certain
benefits, including the right to receive additional payments based on the
amount of order flow provided to us by Brown. For the period from March 27,
1995 through December 31, 1995 and for the years ended December 31, 1996, 1997
and 1998, Brown was the source of 4.0%, 4.6%, 4.3% and 3.1%, respectively, of
our order flow. Payments by us to Brown during these periods amounted to $2.1
million, $6.2 million, $7.5 million and $6.3 million, respectively.
Additionally, in April 1996, we granted Brown the right to purchase 7,143
common units in the LLC at the then prevailing market price of $10.00 per
common unit. As of the date of grant, the right to purchase the common units
had de minimis value. Brown elected to exercise its option at the closing of
our initial public offering for 394,887 shares of our Class A common stock at
an aggregate price of $71,430. Under the terms of the subordinated note, Brown
shared in the LLC's profits based on the quantity of order flow it directed to
us. This arrangement was discontinued at the time of the reorganization.
Transactions with Affiliates
Transactions with Affiliates. Immediately before the reorganization, 60% of
the common units of the LLC were owned by a consortium of 27 broker-dealers or
their affiliates. One of the broker-dealer owners, Gruntal & Co. L.L.C., sold
all of its shares in our initial public offering. Immediately after the
closing of our initial public offering, broker-dealer owners owned 42.5% of
our common stock and at March 31, 1999, the broker-dealer owners owned 29.7%
of our common stock.
Set forth below is a list of broker-dealers which directly or indirectly
own or owned our capital stock:
Direct Access Brokerage Primevest Financial
Ameritrade Inc. Services, Inc. Services, Inc.
BHC Securities, Inc. Discover Brokerage R.J. Forbes Group,
BHF Securities Corp. Direct Inc.
Bidwell & Company E*TRADE Securities, Inc. Sanders Morris Mundy,
Brown & Company Fiserv Correspondent Inc.
Securities Corporation Services, Inc. Scottsdale Securi-
Burke, Christensen & Howe Barnes Investments, ties, Inc.
Lewis Securities Inc. Southwest Securities,
Cowles, Sabol & Co., International Inc.
Inc. Correspondents Trading, Stockcross, Inc.
Dain Rauscher Inc. Thomas F. White & Co.
Incorporated J.W. Charles Securities, Van Kasper & Company
David A. Noyes & Co. Inc. Waterhouse Securi-
Josephthal & Co. Inc. ties, Inc.
Nathan & Lewis
Securities, Inc.
15
<PAGE>
For the period from March 27, 1995 through December 31, 1995 and the years
ended December 31, 1996, 1997 and 1998, the broker-dealer owners were the
source of 31.3%, 35.1%, 39.8% and 40.6% of our order flow, respectively. For
the period from March 27, 1995 through December 31, 1995 and for the years
ended December 31, 1996, 1997 and 1998, aggregate payments we made to our
broker-dealer owners for order flow amounted to $14.4 million, $46.4 million,
$50.7 million and $57.1 million, respectively. For the period from March 27,
1995, through December 31, 1995, for the years ended December 31, 1996 and
1997 and for the period from January 1, 1998 through July 13, 1998, the date
of the reorganization, we made aggregate profit distributions to broker-dealer
owners amounting to $1.7 million, $10.6 million, $13.4 million and $44.6
million, respectively. Under the limited liability company agreement of the
LLC, the LLC's broker-dealer owners shared in the LLC profits partially in
proportion to their equity interest and partially in proportion to the
quantity of order flow they directed to us. This arrangement was discontinued
at the time of the reorganization. The broker-dealer owners no longer receive
any special inducements to send order flow to us and are not contractually or
otherwise obligated to provide us with any order flow in the future. Although
we believe that, based on the high-quality execution services we provide,
these broker-dealer owners will continue to use our services, we cannot assure
you that the absence of such incentives will not cause our broker-dealer
owners to reduce the level of or discontinue order flow they direct to us in
the future.
Ameritrade. At March 31, 1999, Ameritrade Holding Corporation owned
3,953,675 shares of our Class A common stock. Mr. J. Joe Ricketts, the
chairman and chief executive officer of Ameritrade, is a director of
Knight/Trimark. For the period from March 27, 1995 through December 31, 1995
and the years ended December 31, 1996, 1997 and 1998, Ameritrade was the
source of 6.8%, 5.7%, 5.8% and 9.2%, respectively, of our order flow. During
the same periods, aggregate payments by us to Ameritrade for order flow,
equaled $3.1 million, $8.2 million, $6.9 million and $11.7 million,
respectively. Additionally, we made profit distributions to Ameritrade for the
period from March 27, 1995 through December 31, 1995, for the years ended
December 31, 1996 and 1997 and for the period from January 1, 1998 through
July 13, 1998 aggregating $529,000, $2.7 million, $2.6 million and $8.9
million, respectively.
Discover Brokerage Direct. At March 31 , 1999, Discover Brokerage Direct,
Inc. owned 551,963 shares of our Class A common stock. Mr. V. Eric Roach, the
president of Discover, is a director of Knight/Trimark. For the period from
March 27, 1995 through December 31, 1995 and the years ended December 31,
1996, 1997 and 1998, Discover was the source of 2.1%, 2.3%, 3.5% and 2.5%,
respectively, of our order flow. During the same periods, aggregate payments
by us to Discover for order flow, equaled $1.0 million, $4.4 million, $5.5
million and $4.2 million, respectively. Additionally, we made profit
distributions to Discover for the period from March 27, 1995 through December
31, 1995, for the years ended December 31, 1996 and 1997 and for the period
from January 1, 1998 through July 13, 1998 aggregating $185,000, $964,000,
$1.3 million and $3.5 million, respectively.
E*TRADE. At March 31, E*TRADE Securities, Inc. owned 1,566,432 shares of
our Class A common stock. For the period from March 27, 1995 through December
31, 1995 and the years ended December 31, 1996, 1997 and 1998, E*TRADE was the
source of 1.8%, 3.2%, 5.7% and 7.5%, respectively of our order flow. During
the same periods, aggregate payments by us to E*TRADE for order flow, equaled
$645,000, $3.5 million, $5.3 million and $8.4 million, respectively.
Additionally, we made profit distributions to E*TRADE for the period from
March 27, 1995 through December 31, 1995, for the years ended December 31,
1996 and 1997 and for the period from January 1, 1998 through July 13, 1998
aggregating $190,000, $825,000, $1.7 million and $4.9 million, respectively.
Gruntal & Co. After the reorganization, Gruntal owned 1,311,754 shares of
our Class A common stock, all of which shares were sold by Gruntal in our
initial public offering. For the period from March 27, 1995 through December
31, 1995 and the years ended December 31, 1996, 1997 and 1998, Gruntal was the
source of 1.0%, 0.6%, 0.3% and 0.1%, respectively, of our order flow. During
the same periods, aggregate payments by us to Gruntal for order flow equaled
$421,000, $434,000, $415,000 and $337,000, respectively. Additionally, we made
profit distributions to Gruntal in the period from March 27, 1995 through
December 31, 1995, for the years ended December 31, 1996 and 1997 and for the
period from January 1, 1998 through July 13, 1998 aggregating
16
<PAGE>
$341,000, $1.2 million, $845,000 and $2.9 million, respectively. In addition,
from its inception until March 1998, we utilized Gruntal as our clearing
broker. For the period from March 27, 1995 through December 31, 1995 and the
years ended December 31, 1996, 1997, and 1998, we paid Gruntal clearing fees
in the amount of $11.7 million, $21.5 million, $14.8 million and $1.6 million.
We terminated our clearing arrangements with Gruntal in March 1998.
Sanders Morris Mundy. At March 31, 1999, Sanders Morris Mundy, Inc. did not
own any shares of our Class A common stock. Mr. Bruce R. McMaken, a managing
director of Sanders Morris Mundy, is a director of Knight/Trimark. For the
period from March 27, 1995 through December 31, 1995 and the years ended
December 31, 1996, 1997 and 1998, Sanders Morris Mundy was the source of 0.1%,
0.046%, 0.033% and 0.011%, respectively, of our order flow. During the same
periods, aggregate payments by us to Sanders Morris Mundy for order flow,
equaled $34,000, $64,000, $45,000 and $5,600, respectively. Additionally, we
made profit distributions to Sanders Morris Mundy for the period from March
27, 1995 through December 31, 1995, for the years ended December 31, 1996 and
1997 and for the period from January 1, 1998 through July 13, 1998 aggregating
$31,000, $115,000, $85,000 and $289,000, respectively.
Scottsdale Securities. At March 31, 1999, employees and affiliates of
Scottsdale owned 1,004,680 shares of our Class A common stock. Mr. Rodger O.
Riney, the president of Scottsdale, is a director of Knight/Trimark, and has
beneficial ownership of 815,606 of such shares. For the period from March 27,
1995 through December 31, 1995 and the years ended December 31, 1996, 1997 and
1998, Scottsdale was the source of 0.9%, 1.5%, 1.4% and 1.5%, respectively, of
our order flow. During the same periods, aggregate payments by us to
Scottsdale for order flow equaled $662,000, $2.2 million, $1.3 million, and
$1.8 million, respectively. Additionally, we made profit distributions to
Scottsdale for the period from March 27, 1995 through December 31, 1995, for
the years ended December 31, 1996 and 1997 and for the period from January 1,
1998 through July 13, 1998 aggregating $170,000, $798,000, $649,000 and $2.2
million, respectively.
Southwest Securities. At March 31, 1999, Southwest Securities, Inc. owned
1,674,850 shares of our Class A common stock. For the period from March 27,
1995 through December 31, 1995 and the years ended December 31, 1996, 1997 and
1998, Southwest was the source of 2.7%, 2.3%, 1.4% and 1.1%, respectively, of
our order flow. During the same periods, aggregate payments by us to Southwest
for order flow, equaled $1.6 million, $3.1 million, $1.8 million and $1.3
million, respectively. In addition, Southwest acted as an underwriter in
connection with our initial public offering and our recent follow-on offering
of our Class A Common Stock, in which we sold 2,424,720 shares and selling
stockholders sold 6,575,280 shares. Additionally, we made profit distributions
to Southwest for the period from March 27, 1995 through December 31, 1995, for
the years ended December 31, 1996 and 1997 and for the period from January 1,
1998 through July 13, 1998 aggregating $451,000, $1.6 million, $1.1 million
and $3.9 million, respectively.
Waterhouse Investor Services, Inc. At March 31, 1999, Waterhouse Investor
Services, Inc. owned 2,139,623 shares of our Class A common stock and
2,592,698 shares of our Class B common stock. Waterhouse is an affiliate of
Waterhouse Securities, Inc. For the period from March 27, 1995 through
December 31, 1995 and the years ended December 31, 1996, 1997 and 1998,
Waterhouse was the source of 5.8%, 6.5%, 10.1% and 10.7%, respectively, of our
order flow. During the same periods, aggregate payments by us to the
Waterhouse entities for order flow equaled $2.0 million, $6.8 million, $10.2
million and $15.6 million, respectively. In addition, Trimark utilizes
National Investor Services Corp., a subsidiary of Waterhouse, as its clearing
broker. In the years ended December 31, 1997 and 1998, we paid National
Investor Services Corp. clearing fees in the amounts of $9.5 million and $22.1
million, respectively. Additionally, we made profit distributions to the
Waterhouse entities for the period from March 27, 1995 through December 31,
1995, for the years ended December 31, 1996 and 1997 and for the period from
January 1, 1998 through July 13, 1998 aggregating $697,000, $2.9 million, $3.9
million and $12.6 million, respectively.
Trimark Leasing. Through August 1998, we leased certain computer and
telephone equipment and furniture from Trimark Leasing, Inc., an entity which
is wholly-owned by Steven L. Steinman and Robert M. Lazarowitz, executive
officers and directors of Knight/Trimark. For the period from March 27, 1995
through
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December 31, 1995 and the years ended December 31, 1996, 1997 and 1998, rental
expenses under such leases were $261,000, $530,000, $539,000, and $293,000,
respectively.
Adirondack Trading Partners LLC. We hold a minority stake in Adirondack
Trading Partners LLC, the funding vehicle for the International Securities
Exchange which, upon approval by the SEC, will be the first entirely
electronic options market maker in the United States. Our investment in
Adirondack Trading Partners amounted to approximately $1.5 million. Martin
Averbuch, a member of Knight/Trimark's board of directors, is president and
chief executive officer of Adirondack Trading Partners.
PaineWebber Incorporated
Knight clears all its trades through Correspondent Services Corp., a
subsidiary of PaineWebber. In the year ended December 31, 1998, we paid
Correspondent Services Corp. clearing fees in the amount of $9.0 million.
PaineWebber acted as an underwriter in connection with our initial public
offering and our recent follow-on offering of our Class A Common Stock.
PaineWebber Capital, an affiliate of PaineWebber, loaned $30.0 million to the
LLC under a loan agreement dated as of June 19, 1998. Knight/Trimark
guaranteed the LLC's obligations under this loan. After the closing of our
initial public offering, Knight/Trimark assumed all of the LLC's obligations
under the loan and the LLC was dissolved. We made principal repayments under
the loan of $5.0 million, $9.0 million and $6.0 million on September 15, 1998,
October 20, 1998 and December 15, 1998, respectively. Additionally, we paid
the final $10.0 million outstanding on January 19, 1999. In 1998, aggregate
interest payments to PaineWebber under the loan totaled $913,000. We believe
that the terms and conditions of this loan were reasonable and customary for
loans of this type.
ADDITIONAL INFORMATION
The Company will make available a copy of its Annual Report on Form 10-K
for the fiscal year ended December 31, 1998 and any Quarterly Reports on Form
10-Q filed thereafter, without charge, upon written request to the Secretary,
Knight/Trimark Group, Inc. Newport Tower, 29th Floor, 525 Washington
Boulevard, Jersey City, New Jersey 07310. Each such request must set forth a
good faith representation that, as of the Record Date, March 31 1999, the
person making the request was a beneficial owner of Common Stock entitled to
vote.
To ensure timely delivery of such documents before the Annual Meeting, any
request should be received by the Company promptly.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 2000 Annual
Meeting must be received by the Company not later than December 15, 1999 for
inclusion in the proxy materials for such meeting. Such proposals should be
sent by Certified Mail--Return Receipt Requested to the attention of the
Secretary of the Company, Knight/Trimark Group, Inc. Newport Tower, 29th
Floor, 525 Washington Boulevard, Jersey City, New Jersey 07310.
OTHER BUSINESS
Management of the Company knows of no other matters that may properly be,
or which are likely to be, brought before the Annual Meeting. However, if any
other matters are properly brought before such Annual Meeting, the persons
named in the enclosed Proxy or their substitutes intend to vote the Proxies in
accordance with their judgment with respect to such matters, unless authority
to do so is withheld in the Proxy.
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KNIGHT/TRIMARK GROUP, INC.
PROXY FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth D. Pasternak and Walter F.
Raquet, and each or any of them as Proxies of the undersigned, with full power
of substitution, and hereby authorizes them to represent and to vote, as
designated below, all of the shares of Class A Common Stock of Knight/Trimark
Group, Inc., held of record by the undersigned on March 31, 1999 at the Annual
Meeting of Shareholders of Knight/Trimark Group, Inc. to be held May 19, 1999 at
1:00 p.m. local time, or at any adjournment thereof.
1. Election of Directors
[ ] 1 FOR all nominees listed [ ] 2 WITHHOLD AUTHORITY
below (Except as marked to vote for all
to the contrary below) nominees listed below
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
Steven L. Steinman, Kenneth D. Pasternak, Walter F. Raquet, Robert M.
Lazarowitz, Anthony M. Sanfilippo, Robert I. Turner, Martin Averbuch, Charles
V. Doherty, Gene L. Finn, Gary R. Griffith, Bruce R. McMaken, J. Joe Ricketts,
Rodger O. Riney, V. Erich Roach, Charles A. Zabatta
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants of the Company.
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NOS. 1 and 2. THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ABOVE. THIS PROXY
WILL BE VOTED FOR PROPOSAL NOS. 1 AND 2 IF NO SPECIFICATION IS MADE.
Please sign exactly as your name(s) is (are) shown on the share
certificate to which the Proxy applies. When shares are held by joint tenants,
both should sign. When signing as an attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DATED:________________________________, 1999
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Signature
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(Additional signature if held jointly)
PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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