<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 14a-11(c) or 14a-12
</TABLE>
<TABLE>
<S> <C>
WIT CAPITAL GROUP, INC.
- -----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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</TABLE>
<PAGE>
WIT CAPITAL GROUP, INC.
826 BROADWAY, SEVENTH FLOOR
NEW YORK, NEW YORK 10003
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 2000
------------------------
To the Stockholders
of Wit Capital Group, Inc.
The 2000 Annual Meeting of Stockholders of Wit Capital Group, Inc. will be
held at the Peninsula Hotel, 700 Fifth Avenue, New York, N.Y. 10019, on
Thursday, June 1, 2000 at 9:30 a.m., Eastern Standard Time, to consider and act
upon the following matters:
(1) The election of two (2) directors to serve until their successors have
been elected and qualified.
(2) The approval of the proposed amendment to the Company's certificate of
incorporation to change the Company's name to "Wit SoundView
Group, Inc."
(3) The approval of the proposed amendment to the Company's certificate of
incorporation to eliminate the Company's Class C common stock.
(4) Such other business as may properly come before the meeting or any
adjournment or postponement thereof.
Only holders of record of common stock, par value $0.01 per share, of the
Company at the close of business on April 7, 2000, the record date, are entitled
to vote their shares at the Annual Meeting and any adjournment or postponement
of the meeting. Each share of the Company's common stock will entitle its record
holder to one vote on each matter put to a vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
WHETHER OR NOT YOU ARE PERSONALLY ABLE TO ATTEND. STOCKHOLDERS WHO DO NOT EXPECT
TO ATTEND THE MEETING IN PERSON ARE URGED TO PLEASE SIGN, DATE AND MAIL THE
ACCOMPANYING PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL ENSURE THAT YOUR
SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A QUORUM WILL BE
PRESENT AT THE ANNUAL MEETING.
By Order of the Board of Directors,
ROBERT C. MENDELSON
SECRETARY
New York, New York
May 1, 2000
<PAGE>
WIT CAPITAL GROUP, INC.
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 2000
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Wit Capital Group, Inc., a Delaware
corporation, for use at the Company's Annual Meeting of Stockholders to be held
at the Peninsula Hotel, 700 Fifth Avenue, New York, N.Y. 10019, on Thursday,
June 1, 2000 at 9:30 a.m., Eastern Standard Time, and at any adjournment
thereof.
This Proxy Statement and the enclosed form of proxy are first being sent or
given to stockholders of the Company on or about May 1, 2000. The principal
executive offices of the Company are located at 826 Broadway, Seventh Floor, New
York, New York 10003.
PURPOSES OF MEETING
The purposes of the meeting are to consider and act upon the following
matters:
1. The election of two (2) directors until their successors have been
elected and qualified.
2. The approval of the proposed amendment to the Company's certificate of
incorporation to change the Company's name to "Wit SoundView
Group, Inc."
3. The approval of the proposed amendment to the Company's certificate of
incorporation to eliminate the Company's Class C common stock.
4. Such other business as may properly come before the meeting or any
adjournment or postponement thereof.
RECORD DATE; VOTE REQUIRED
The Board of Directors has fixed the close of business on April 7, 2000 as
the record date for determination of the Company's stockholders entitled to
notice of and to vote at the Annual Meeting.
As of the record date, there were 77,609,625 shares of the Company's common
stock outstanding, the holders of which are entitled to vote at the Annual
Meeting. Holders of the Company's Class B common stock are not entitled to vote
at the Annual Meeting. The presence at the meeting, in person or by proxy, of
the holders of a majority of the total number of shares of common stock
outstanding on the record date constitutes a quorum for the transaction of
business at the meeting.
As of the record date, the Company's directors and executive officers and
their affiliates owned an aggregate of 28,482,291 outstanding shares of the
Company's common stock or approximately 37% of the shares entitled to vote at
the Annual Meeting.
SOLICITATION OF PROXIES
The Company has retained the services of Georgeson Shareholder
Communications Inc. to assist in the solicitation of proxies from its
stockholders. The fees to be paid to that firm for these services are not
expected to exceed $8,000. In addition to solicitation by mail, the directors,
officers and employees of the Company may solicit proxies from stockholders by
telephone, facsimile, other electronic means or in person. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy materials to beneficial owners.
<PAGE>
Proxies in the accompanying form are solicited on behalf and at the
direction of the Board of Directors. All shares of common stock represented by
properly executed proxies will be voted at the meeting in accordance with the
instructions made on the proxies, unless the proxies have previously been
revoked.
Regarding the election of directors to serve until the Annual Meeting of
Stockholders in 2003, in voting by proxy, stockholders may vote in favor of the
election of all the nominees or withhold their votes as to all nominees or
withhold their votes as to specific nominees. With respect to the other
proposals to be voted upon, stockholders may vote in favor of the proposals,
against the proposals or may abstain from voting. Stockholders should specify
their choices on the enclosed form of proxy. If authority to vote a proxy has
not been withheld and no instruction is indicated, the shares will be voted FOR
the election of both nominees for the Board of Directors and voted FOR the
approval of the proposed amendments to change the Company's name and to
eliminate the Company's Class C common stock. If any other matters are properly
presented at the meeting for action, including a question of adjourning the
meeting from time to time, the persons named in the proxies and acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment.
A stockholder executing and returning a proxy has the power to revoke it
before it is exercised, and may do so by delivering a subsequently signed and
dated proxy or other written notice to the Secretary of the Company at any time
prior to the vote at the meeting or by appearing at the meeting and voting in
person the shares to which the proxy relates. Any written notice revoking a
proxy should be sent to the Company, attention: Robert C. Mendelson, Secretary.
The mailing address of the Company's executive offices is 826 Broadway, Seventh
Floor, New York, New York 10003.
Directors will be elected by a plurality of the votes cast. Abstentions and
broker non-votes will have no effect on the election of directors. The approval
of each of the two proposed amendments will require the affirmative vote of the
holders of a majority of the shares of common stock outstanding on the record
date. Thus, abstentions and broker non-votes will have the same effect as a
negative vote.
2
<PAGE>
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
As of December 31, 1999, the Company's Board of Directors consisted of nine
directors. The Board is divided into three classes, with one class standing for
election each year for a three-year term. The Board has nominated Joseph R.
Hardiman and Andrew D. Klein for reelection as directors, each to hold office
until the Annual Meeting of Stockholders in 2003 and until his successor is duly
elected and qualified.
If either of these nominees is not available to serve as a director at the
time of the Annual Meeting (which the Board does not anticipate), the proxies
will be voted for the election as director such other person or persons as the
Board may designate, unless the Board, in its discretion, reduces the number of
directors constituting the Board of Directors.
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE ELECTION OF DIRECTORS
The Board of Directors recommends a vote FOR each of Joseph R. Hardiman and
Andrew D. Klein as directors to hold office until the Annual Meeting of
Stockholders in 2003 and until their respective successors are duly elected and
qualified. Proxies received by the Board of Directors will be so voted unless
stockholders specify otherwise in their proxies.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
TERM TO
NOMINEE AGE(1) POSITION AND/OR PRINCIPAL OCCUPATION EXPIRE
- ------- -------- ------------------------------------- --------
<S> <C> <C> <C>
Joseph R. Hardiman................... 62 Director, The Flag Investors Funds, 2003
The ISI Funds and The Nevis Fund
Andrew D. Klein...................... 40 Vice Chairman, Founder and Chief 2003
Strategist of the Company
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
TERM
DIRECTOR AGE(1) POSITION AND/OR PRINCIPAL OCCUPATION EXPIRES
- -------- -------- -------------------------------------- --------
<S> <C> <C> <C>
John H. N. Fisher..................... 40 Managing Director, Draper Fisher 2001
Jurvetson
Gilbert C. Maurer..................... 71 Director, The Hearst Corporation 2001
Ronald Readmond....................... 57 Vice Chairman, Co-Chief Executive 2001
Officer and President of the Company
Russell D. Crabs...................... 42 Co-Head of Wit SoundView 2002
Edward H. Fleischman.................. 67 Senior counsel to Linklaters 2002
Steven M. Gluckstern.................. 48 Founding partner of Capital Z 2002
Partners, non-executive Chairman of
Zurich Re and Zurich Centre
Group/Centre Solutions
Robert H. Lessin...................... 45 Chairman and Co-Chief Executive 2002
Officer of the Company
</TABLE>
- ------------------------
(1) As of March 31, 2000.
3
<PAGE>
BUSINESS EXPERIENCE
NOMINEES FOR ELECTION--TERMS TO EXPIRE IN 2003
JOSEPH R. HARDIMAN, a director of the Company since 1998, served as the
President and Chief Executive Officer of the National Association of Securities
Dealers, Inc. and its wholly owned subsidiary, the Nasdaq Stock Market, Inc.,
from 1987 through January 1997. Previously, he was the Managing Director, Chief
Operating Officer and a member of the Board of Directors of Alex. Brown & Sons.
Mr. Hardiman serves as a director of The Flag Investors Funds, The ISI Funds and
The Nevis Fund.
ANDREW D. KLEIN, a director of the Company since 1996, is presently the Vice
Chairman, founder and chief strategist of the Company. He has been with the
Company since its inception in April 1996. Previously, in January 1993
Mr. Klein founded Spring Street Brewing Company, a microbrewery which two years
later became the first company to complete a public offering over the Internet
and, in March 1996, created the first ever Web-based trading mechanism allowing
investors to buy and sell Spring Street shares. Prior to starting Spring Street
Brewing, Mr. Klein practiced corporate and securities law at Cravath, Swaine &
Moore for six years. In 1997 Mr. Klein was the subject of a civil order of the
Commonwealth of Massachusetts alleging that he and Spring Street used its Web
site to gather names of potential investors and then mailed an unregistered
private placement memorandum to these persons in violation of the Massachusetts
securities laws. While neither admitting nor denying that the violations
occurred, Mr. Klein agreed to offer a refund to six investors and paid a fine of
$3,000.
CONTINUING DIRECTORS
TERMS TO EXPIRE IN 2001
JOHN H.N. FISHER, a director of the Company since 1998, is a Managing
Director of Draper Fisher Jurvetson, a Redwood City, California venture capital
firm providing start-up and early stage financing. On behalf of Draper Fisher
Jurvetson, Mr. Fisher serves on the boards of Central, Convoy Corporation,
Entegrity Solutions Corporation, Praxon Inc., Selectica Inc., Sonnet
Financial Inc., Transactor Networks Inc. and Webline Communications Corporation.
Previously, Mr. Fisher was a venture capitalist at ABS Ventures. Prior to that,
he was an investment banker at Alex. Brown & Sons and an account executive in
the capital markets group at Bank of America.
GILBERT C. MAURER, a director of the Company since 1998, had been employed
since 1973 by The Hearst Corporation, one of the nation's largest private
companies engaged in a broad range of publishing, broadcasting, cable networking
and diversified communications activities. Most recently, he held the position
of Chief Operating Officer from 1990 until his retirement in 1998. Previously,
Mr. Maurer served as President of Hearst's magazines division for 14 years.
Prior to joining Hearst, Mr. Maurer worked for 19 years with Cowles
Communications, Inc. Mr. Maurer is currently a director of The Hearst
Corporation.
RONALD READMOND is the Vice Chairman, Co-Chief Executive Officer and
President of the Company. He joined the Company as an executive officer in
May 1998 and has served as a director since 1997. Before joining the Company, he
had served as Vice Chairman of Charles Schwab & Co., Inc. where he was
responsible for operations, capital markets and trading, international and
mutual funds as well as strategic acquisitions and industry relations. Prior to
that, Mr. Readmond was a managing director of Alex.Brown & Sons. Mr. Readmond
has served as Co-Chairman of the U.S. Working Committee on Clearance and
Settlement of the Group of 30, as a member of the New York Stock Exchange
operations advisory committee and the nominating committee of the Options
Clearing Corporation. Mr. Readmond is the former Chairman of the Board of the
National Securities Clearing Corporation and for five years served on its board
of directors. In addition, he served for two years as a director of NASD Markets
Services, Inc. Mr. Readmond is currently a director of ProBusiness
Services, Inc., Chairman of International Equity Partners and a director of The
American Council for Capital Formation.
4
<PAGE>
TERMS TO EXPIRE IN 2002
RUSSELL D. CRABS became a director of the Company on February, 2000
following the merger of SoundView Technology Group, Inc. with the Company.
Mr. Crabs had been the President, Chief Executive Officer and director of
research of SoundView from 1987. He also served on SoundView's Board of
Directors and Operating Committee.
EDWARD H. FLEISCHMAN, a director of the Company since 1998, has served as
senior counsel to the London based international law firm of Linklaters since
1994, where he specializes in securities and financing law and related areas.
Mr. Fleischman served as a Commissioner of the Securities and Exchange
Commission from 1986 to 1992. Previously, he practiced law for 27 years at
Beekman & Bogue in New York.
STEVEN M. GLUCKSTERN, a director of the Company since 1998, is a founding
partner of Capital Z Partners. Previously, he served as Chief Executive Officer
of both Zurich Re and Centre Re from 1988 to 1998, and, prior to that, as
General Manager of reinsurance operations of the Berkshire Hathaway Insurance
Group. Mr. Gluckstern also serves on the boards of Aames Financial Corporation,
United Payors and United Providers Inc., Channelpoint Inc., Mpower.com, Inc. and
Brodia.com.
ROBERT H. LESSIN, a director of the Company since 1998, is presently the
Chairman and Co-Chief Executive Officer of the Company. Before joining the
Company in April 1998, he was Vice Chairman of Salomon Smith Barney, Inc. having
previously been Vice Chairman of Smith Barney, Inc. from 1993 until the merger
with Salomon Brothers in November 1997. He served as head of investment banking
at Smith Barney from June 1993 to January 1997. Prior to joining Salomon Smith
Barney, Mr. Lessin spent 16 years with Morgan Stanley & Co. in the position of
managing director and was responsible for the firm's financial entrepreneurs,
media and retailing groups. Mr. Lessin was also Vice Chairman of Morgan
Stanley's investment banking operating committee and Chairman of their strategic
planning committee. Currently, he is a director of Marketwatch.com, Inc., iParty
Corp., MaMaMedia Inc. and sixdegrees inc. and a manager of the general partner
of Dawntreader Funds I and II, venture capital funds.
COMMITTEES OF THE BOARD
The Board of Directors has established an audit committee, the members of
which in 1999 and during the first quarter of 2000 were Edward H. Fleischman,
Joseph R. Hardiman and Adam Mizel. The Board of Directors has also established a
compensation committee, the members of which are John H.N. Fisher, Steven M.
Gluckstern, Gilbert C. Maurer and Ronald Readmond. The Stock Incentive Plan is
administered by a subcommittee of the compensation committee consisting of John
H.N. Fisher, Steven M. Gluckstern and Gilbert C. Maurer.
The audit committee is responsible for recommending to the Board of
Directors the engagement of the independent auditors and reviewing with the
independent auditors the scope and results of audits, the internal accounting
controls, audit practices and the professional services furnished by the
independent auditors. The compensation committee is responsible for reviewing
and approving all compensation arrangements for the executive officers, and its
subcommittee is responsible for administering the Stock Incentive Plan.
In 1999, the Board of Directors held 12 meetings, the audit committee held 6
meetings and the compensation committee held 2 meetings.
SPECIAL ADVISORY BOARD
To complement the Board of Directors, the Company has also developed a
special advisory board consisting of accomplished professionals and
entrepreneurs from the fields of technology, new media, finance and law. The
first members of this advisory board are Joseph H. Flom and Edward J. Mathias.
5
<PAGE>
Members of the special advisory board attend but do not vote at meetings of the
Board of Directors. They also provide the management with strategic advice and
other assistance with the planning and development of the Company's business.
GOLDMAN SACHS OBSERVER
An affiliate of Goldman Sachs has appointed a non-voting observer, Joseph
Gleberman, to attend meetings of the Board of Directors.
COMPENSATION OF DIRECTORS AND SPECIAL ADVISORY BOARD MEMBERS
The Company did not pay directors cash compensation. In April 2000, the
Company adopted a compensation plan for non-employee directors who attend
meetings in person and are not directors appointed pursuant to contractual
arrangements. Each director will be paid $5,000 for each board meeting they
attend, not to exceed $20,000 in a year. Members of the special advisory board
will be paid $2,500 for each board meeting they attend, not to exceed $10,000 in
a year. Directors and special advisory board members will not be paid separately
for attending committee meetings. In April 2000, the Company also adopted a
compensation plan whereby new board members will receive options to purchase
30,000 shares and new special advisory board members will receive options to
purchase 15,000 shares. In addition, each year, existing board members will
receive options to purchase 10,000 shares and existing special advisory board
members will receive options to purchase 5,000 shares.
The Company has granted certain non-employee directors as well as the
members of the advisory board options to purchase common stock. The non-employee
directors designated by the Company's venture capital investors do not receive
any compensation from the Company. In addition, Messrs. Flom and Mathias hold,
respectively, 116,666 and 140,000 shares of the Company's common stock.
The following non-employee members of the Board of Directors and of the
Company's special advisory board have received the respective numbers of stock
options indicated below as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING EXERCISE EXPIRATION
NAME OPTIONS GRANTED PRICE DATE
- ---- --------------------- -------- ----------
<S> <C> <C> <C>
Edward H. Fleischman.................................... 35,000 $1.43 11/11/08
17,500 2.14 3/17/09
Joseph R. Hardiman...................................... 35,000 1.43 11/11/08
17,500 2.14 3/17/09
Gilbert C. Maurer....................................... 35,000 1.43 11/11/08
17,500 2.14 3/17/09
Joseph Flom............................................. 35,000 1.43 11/11/08
Edward Mathias.......................................... 35,000 1.43 11/11/08
</TABLE>
PROPOSAL NO. 2:
PROPOSED AMENDMENT
TO CHANGE THE NAME OF THE COMPANY
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE APPROVAL OF THE PROPOSED
AMENDMENT TO CHANGE THE COMPANY'S NAME
The Board of Directors believes that changing the Company's name will
reflect the Company's business after the merger with SoundView Technology
Group, Inc., while maintaining its name recognition. For the same reason, the
Company changed the name of one of its broker-dealer subsidiaries to conform
with this proposed name change.
6
<PAGE>
The Board of Directors has approved and recommends a vote FOR the adoption
and approval of an amendment to the Company's certificate of incorporation to
change the name of the Company from "Wit Capital Group, Inc." to "Wit SoundView
Group, Inc."
Under the proposed amendment, Article FIRST of the certificate of
incorporation of the Company would be amended to read as follows:
FIRST: NAME. The name of the Corporation is Wit SoundView Group, Inc.
The approval of the proposed amendment will require the affirmative vote of
the holders of a majority of the shares of common stock outstanding on the
record date. Thus, abstentions and broker non-votes will have the same effect as
a negative vote.
If approved by the stockholders at the Annual Meeting, the proposed
amendment will become effective upon the filing of the certificate of amendment
of the Company's certificate of incorporation with the Delaware Secretary of
State.
PROPOSAL NO. 3:
PROPOSED AMENDMENT
TO ELIMINATE CLASS C COMMON STOCK
RECOMMENDATION OF THE BOARD OF DIRECTORS CONCERNING THE APPROVAL OF THE PROPOSED
AMENDMENT TO ELIMINATE THE COMPANY'S CLASS C COMMON STOCK
The Company's certificate of incorporation, as currently in effect, provides
that the Company is authorized to issue 159,000,000 shares of Class C common
stock, $.01 par value. On December 7, 1999, all outstanding shares of the
Company's Class C common stock were converted into common stock and no more
Class C shares are outstanding. The Company will not issue any more shares of
Class C common stock.
The Board of Directors has approved and recommends a vote FOR the
elimination of the Company's Class C common stock from the Company's authorized
capital as set forth in its certificate of incorporation.
Stockholders are being asked to approve an amendment of Section 1 and
Section 3 of Article FOURTH of the Company's certificate of incorporation to
eliminate the Company's Class C common stock. The form of the proposed text of
Section 1 and Section 3 of Article FOURTH, marked to show the deletion of text
relating to the Class C common stock, is attached to this Proxy Statement as
Exhibit A.
Under the proposed amendment, the total number of shares of all classes of
stock which the Company shall have authority to issue is 605,000,000 shares,
consisting of 500,000,000 shares of common stock, $.01 par value, 75,000,000 of
non-voting Class B common stock, $.01 par value, and 30,000,000 shares of
Preferred Stock, par value $.001 per share. The elimination of the Class C
common stock will have no effect on the rights and privileges of the Company's
outstanding common stock.
The approval of the proposed amendment will require the affirmative vote of
the holders of a majority of the shares of common stock outstanding on the
record date. Thus, abstentions and broker non-votes will have the same effect as
a negative vote.
If approved by the stockholders at the Annual Meeting, the proposed
amendment will become effective upon the filing of a certificate of amendment of
the Company's certificate of incorporation with the Delaware Secretary of State.
7
<PAGE>
MANAGEMENT OF THE COMPANY
The following table lists the Company's executive officers as of
December 31, 1999.
<TABLE>
<CAPTION>
NAME AGE(1) TITLE
- ---- -------- -----------------------------------------
<S> <C> <C>
Robert H. Lessin......................... 45 Chairman and co-chief executive officer
Ronald Readmond.......................... 57 Vice chairman, co-chief executive officer
and president
Andrew D. Klein.......................... 40 Vice chairman, founder and chief
strategist
Harry Silver............................. 44 Senior vice president and chief
administrative officer
M. Bernard Siegel........................ 44 Senior vice president and chief financial
officer(2)
Mark Loehr............................... 43 Director of investment banking
Elizabeth Schimel........................ 40 Senior vice president and director of
business development
Everett F. Lang.......................... 57 Senior vice president and director of
brokerage
George M. Lieberman...................... 57 Senior vice president and chief
information officer(3)
Daniel DeWolf............................ 42 Senior vice president and director of
venture capital fund group
Lloyd H. Feller.......................... 57 Senior vice president and co-general
counsel
Robert C. Mendelson...................... 49 Senior vice president and co-general
counsel
Jonathan Cohen........................... 35 Director of research
</TABLE>
- ------------------------
(1) As of March 31, 2000.
(2) Effective February 2, 2000, Curtis L. Snyder was named chief financial
officer. Mr. Siegel is no longer employed by the Company.
(3) Effective March 15, 2000, John W. Palmer replaced Mr. Lieberman as chief
information officer. Mr. Lieberman is no longer employed by the Company.
EXECUTIVE OFFICERS
The following discussion sets forth information regarding the Company's
executive officers. Information regarding those executive officers of the
Company who are also directors is set forth under "Proposal No. 1 Election of
Directors--Business Experience."
HARRY SILVER, senior vice president and chief administrative officer, joined
the Company in August 1999. Mr. Silver previously served as the executive
director of the law firm of Cravath, Swaine & Moore where he was responsible for
leading the firm's administrative activities. Prior to that, Mr. Silver spent
over ten years at Goldman, Sachs & Co., where he was head of worldwide
technology and administrative support activities for the investment banking
division and the principal investment area.
M. BERNARD SIEGEL joined the Company in October 1998 as senior vice
president and chief financial officer. In February, 2000, Mr. Siegel was
appointed senior vice president and director of internal audit and risk
management. He has more than twenty years experience in the financial services
industry. He served as chief financial officer and director of risk management
of Waterhouse Investor Services from November 1993 to June 1998. Prior to that,
he was chief financial officer and chief operating officer of Fleet Brokerage
Securities. Mr. Siegel is a CPA who spent eight years with KPMG LLP, last
serving as a senior audit manager in the financial services division.
Mr. Siegel is no longer employed by the Company.
8
<PAGE>
MARK LOEHR joined the Company in March 1999 as director of investment
banking. In February 2000, Mr. Loehr assumed the responsibilities of Co-Head of
Wit SoundView. He spent a total of eight years with Smith Barney, from 1978 to
1983 and from 1994 to 1997, and two years with Salomon Smith Barney, from 1997
to 1999. He spent eleven years with CS First Boston, from 1983 to 1994. While at
Smith Barney and, later, Salomon Smith Barney, he served as head of global
equity sales and head of equity capital markets. While at CS First Boston,
Mr. Loehr served as co-head of U.S. equity capital markets.
ELIZABETH SCHIMEL, senior vice president and director of business
development, joined the Company in August 1999. Prior to joining us and for the
past five years, Ms. Schimel worked for BMG Entertainment in several different
positions. Most recently, she served as vice president and general manager at
GetMusic.com, a joint venture between Bertlesmann A.G. and Universal Music
Group, where she was responsible for creating and rolling-out the company's
online presence. Prior to joining BMG, Ms. Schimel was director of electronic
media development and director of marketing for the electronic publishing
division of Bantam Doubleday Dell (now Random House), a division of Bertlesmann.
Ms. Schimel also worked in international finance and mergers and acquisitions
for PaineWebber Inc. and Banque Indosuez in New York and Hong Kong.
EVERETT F. LANG became president--digital trading facility in
February 1999. Since then, he has assumed the responsibilities of directing and
managing our online broker. Dr. Lang was previously chief executive of National
Discount Brokers where he introduced the concept of "Flat Fee" trading to
consumers. Prior to that, he was chairman and chief executive of BT Brokerage
Corporation, a New York Stock Exchange member firm which he helped to organize.
In 1995, Dr. Lang founded the Discount Brokerage Association which was
assimilated into the Securities Industry Association along with twenty-three
member firms. He currently serves as co-chairman of this entity. Dr. Lang has a
doctoral degree in organizational psychology from the University of Virginia.
GEORGE M. LIEBERMAN, senior vice president and chief information officer,
joined the Company in February 1999. He was first vice president and director of
technology strategy and planning for Merrill Lynch & Co. from June 1991 to
December 1998. Prior to joining Merrill Lynch, he was the chief information
officer for Telerate Inc., the chief information officer for Chargit Inc. and
responsible for the development of major systems projects at many financial
industry companies including Citibank and ADP. Mr. Lieberman is no longer
employed by the Company.
DANIEL DEWOLF, senior vice president and director of the venture capital
fund group, joined the Company in October 1999. Mr. DeWolf was previously a
managing director of the Dawntreader Fund I, L.P. Mr. DeWolf is also currently
of counsel to the law firm of Camhy Karlinsky & Stein LLP in New York, New York
where he has practiced corporate and securities law since 1994 and where he was
a partner from 1994 to 1998. Prior to 1994, Mr. DeWolf was general counsel for
SMR Energy, Inc., an independent oil and gas company. From 1982 to 1984 and 1986
to 1990, Mr. DeWolf was affiliated with the law firm of Shea & Gould in New York
City. From 1984 to 1986, Mr. DeWolf was an associate at the law firm of Pettit
and Martin in San Francisco, California.
LLOYD H. FELLER, senior vice president and co-general counsel, joined the
Company in April 1999. Previously, he was a partner at Morgan, Lewis & Bockius
LLP. Before joining Morgan, Lewis & Bockius LLP in 1979, Mr. Feller served at
the SEC as the Associate Director of the Division of Market Regulation, in
charge of the Office of Market Structure and Trading Practices.
ROBERT C. MENDELSON, senior vice president and co-general counsel, joined
the Company in April 1999. Previously, he was a partner at Morgan, Lewis &
Bockius LLP. Mr. Mendelson was a member of the Legal Advisory Board of the NASD
and formerly chaired the Market Transaction Advisory Committee created by the
SEC.
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<PAGE>
JONATHAN COHEN joined the Company as director of research in 1999, and was
previously head of Merrill Lynch's Internet equity research effort. Mr. Cohen
was named to the 1996, 1997 and 1998 Institutional Investors "All American
Research Team" for the Internet sector. He has been named as one of the 25 Best
U.S. analysts by both Bloomberg and Financial World Magazine. Prior to joining
Merrill Lynch in 1998, Mr. Cohen was a managing director and head of Internet
and PC Software research at UBS Securities from 1993 to 1997, where his coverage
focused on information technology companies.
EXECUTIVE COMPENSATION
The following table sets forth the salaries, and to the extent determinable,
the bonuses that the Company paid its co-chief executive officers and the other
four most highly compensated executive officers during 1999. The Company has
also indicated, where applicable, the compensation paid to these persons during
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------------------
----------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- -------- -------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Lessin........... 1999 $208,332 $1,374,742 -- 200,000 --
Chairman and co-chief 1998 -- 135,685 -- -- --
executive officer
Ronald Readmond............ 1999 250,000 600,000 -- 200,000 $250,000(1)
President and co-chief 1998 146,000 -- -- 1,750,000 116,000(1)
executive officer
Jonathan Cohen............. 1999 226,442 5,150,000 -- 800,000 --
Director of research 1998 -- -- -- -- --
Mark Loehr................. 1999 179,615 650,000 -- 100,000 --
Director of investment 1998 -- -- -- -- --
banking
Lloyd H. Feller............ 1999 169,230 390,000 -- 190,000 --
Senior vice president and 1998 -- -- -- -- --
co-general counsel
Robert C. Mendelson........ 1999 170,923 365,000 -- 190,000 --
Senior vice president and 1998 -- -- -- -- --
co-general counsel
</TABLE>
- ------------------------
(1) Represents expense reimbursement.
10
<PAGE>
STOCK OPTIONS
OPTION GRANTS. The following table sets forth information regarding stock
options granted under the Company's stock option plans in 1999 to the co-chief
executive officers and the other four most highly compensated executive officers
during 1999. The Company has never granted stock appreciation rights.
<TABLE>
<CAPTION>
OPTION GRANTS FOR THE YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS GRANTED PRICE APPRECIATION FOR
UNDERLYING TO EMPLOYEES EXERCISE OR OPTION TERMS (4)
OPTIONS (NET OF FORFEITURES) BASE PRICE EXPIRATION -----------------------
GRANTED (1) IN 1999 (2) ($/SHARE)(3) DATE 5% 10%
------------ -------------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Lessin............. 200,000 2.6% $17.06 12/20/09 $5,558,603 $8,851,146
Ronald Readmond.............. 200,000 2.6 17.06 12/20/09 5,558,603 8,851,146
Jonathan Cohen............... 700,000 9.0 2.14 2/4/09 2,440,084 3,885,426
100,000 1.3 17.06 12/20/09 2,779,301 4,425,573
Mark Loehr................... 100,000 1.3 17.06 12/20/09 2,779,301 4,425,573
Lloyd H. Feller.............. 140,000 1.8 2.14 4/15/09 488,017 777,085
50,000 -- 17.06 12/20/09 1,389,651 2,212,787
Robert C. Mendelson.......... 140,000 1.8 2.14 4/15/09 488,017 777,085
50,000 -- 17.06 12/20/09 1,389,651 2,212,787
</TABLE>
- ------------------------
(1) The options were granted under the Company's Stock Incentive Plan.
(2) Based on an aggregate of 7,797,312 options granted (net of forfeitures) to
employees in 1999, including options granted to the other four most highly
compensated executive officers.
(3) The exercise price per share of each option was equal to the fair market
value of the common stock on the date of the grant. Prior to the Company's
initial public offering, the Board of Directors determined the fair market
value of the common stock on the date of the grant on the basis of the most
recent price paid by an unaffiliated party for the Company's preferred
stock. Subsequent to the Company's initial public offering, the Board of
Directors determined the fair market value of the common stock on the date
of the grant on the basis of the closing price at the end of the Nasdaq
primary trading session.
(4) Amounts represent hypothetical values that could be achieved for the
respective options if exercised at the end of the option term. These values
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date based on the market price of the underlying securities
on the date of the grant. These assumptions are not intended to forecast
future appreciation of the Company's stock price. The potential realizable
value computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock.
11
<PAGE>
OPTION VALUES. The following table sets forth information concerning the
value at December 31, 1999 of exercisable and unexercisable options held by the
co-chief executive officers and the other four most highly compensated executive
officers of the Company during 1999. The values of unexercised in-the-money
options represent the positive spread between the respective exercise prices of
outstanding stock options and the price of the options at December 31, 1999.
OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
--------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert H. Lessin............................... -- 200,000 -- --
Ronald Readmond................................ 110,000 340,000 1,712,857 $2,180,000
Jonathan Cohen................................. 175,000 625,000 2,600,001 7,800,004
Mark Loehr..................................... -- 100,000 -- --
Lloyd H. Feller................................ 26,250 163,750 390,000 1,690,001
Robert C. Mendelson............................ 26,250 163,750 390,000 1,690,001
</TABLE>
EMPLOYMENT AGREEMENTS
ROBERT H. LESSIN. Mr. Lessin has an employment agreement with the Company
to serve as Co-Chief Executive Officer. This agreement expires on December 31,
2000, with an automatic one-year extension, unless either party agrees to
terminate the agreement upon 90 days notice. During the term of this agreement,
Mr. Lessin will receive a minimum annual base salary of $250,000, subject to
annual increases by the Board. Mr. Lessin is entitled to participate in the
Company's Annual Bonus Plan for Executives and Long-Term Incentive Plan. He is
also entitled to participate in the Company's 401(k) Plan, its Stock Incentive
Plan and any other employee benefits provided to senior executives.
The Company has extended to Mr. Lessin an interest-bearing loan in the
amount of $5,750,000 with which he purchased 4,025,000 shares of common stock at
$1.43 per share. He is personally liable for all interest due on the loan and is
similarly liable for up to one-half of the principal amount of the loan. This
loan is secured by the shares he purchased. In the event Mr. Lessin ceases to be
employed by the Company, the Company has the right to repurchase his unvested
shares at the lower of their fair market value or $1.43 per share. A total of
3,130,558 shares will be vested as of March 31, 2000 and the remainder will vest
at the rate of 223,612 per quarter until March 31, 2001. Mr. Lessin's loan
becomes due and payable if his employment terminates or if he disposes of the
shares. Mr. Lessin also has "piggyback" and demand registration rights relating
to the shares.
In addition to the other compensation due under his employment agreement, in
June 2000, June 2001 and December 2001, Mr. Lessin will be entitled to cash
payments of $2 million, $2 million and $1 million, respectively. If the Company
is sold, Mr. Lessin will be entitled to a payment of up to $5 million less any
of the aforementioned payments he previously received. He will not, however, be
entitled to these payments if he violates his non-competition agreement or is
not employed by the Company at the time of the sale. This does not apply if his
employment is terminated by the Company for any reason other than for "cause,"
disability, death or by him for "good reason."
Mr. Lessin has agreed, during the term of his employment or until March 31,
2001, not to own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a director,
officer, employee, or lender with, or be compensated by an entity that is an
NASD
12
<PAGE>
registered broker-dealer, or that provides financial advisory services or
engages in capital raising activities. Mr. Lessin has the right to engage in
financial advisory or capital raising activities only through an entity in which
he is an investor or director, so long as any fee payable in connection with
such activities is pursuant to an arrangement for which registration as a
broker-dealer is not required. He may participate in certain venture capital
activities so long as they do not violate other terms of his employment
agreement.
Mr. Lessin is also a party to the Company's Employee Non-Disclosure,
Non-Competition and Assignment of Inventions Agreement. He has agreed not to
reveal any confidential information belonging to the Company, except as may be
required in the course of performing his duties as the Company's employee. He
has also agreed to assign to the Company any rights which he may have with
respect to inventions, software programs, data, or other developments created or
discovered during his employment term.
RONALD READMOND. Mr. Readmond has an employment agreement with the Company
to serve as Co-Chief Executive Officer. This agreement expires on December 31,
2000, with an automatic one-year extension, unless either party agrees to
terminate the agreement upon 90 days' notice. Under the agreement, Mr. Readmond
is entitled to a minimum annual base salary of $250,000, subject to annual
increases by the Board, and an annual guaranteed bonus of $250,000. If
Mr. Readmond's employment is terminated by the Company without "cause" or by him
for "good reason," the Company must pay him a lump sum equal to his unpaid base
salary through the end of his contractual employment period, unpaid annual bonus
amounts accrued through the date of termination, and unpaid guaranteed bonus
amount prorated through date of termination. If his employment is terminated by
the Company for "cause," by him without "good reason" or if he dies or becomes
disabled, the Company must pay him a lump sum equal to his unpaid base salary
earned to the termination date, unpaid annual bonus accrued through the date of
termination, and unpaid guaranteed bonus prorated to date of termination.
Mr. Readmond is entitled to participate in the Company's Annual Bonus Plan for
Executives and Long-Term Incentive Plan. He is also entitled to participate in
the Company's 401(k) Plan, Stock Incentive Plan and any other employee benefits
provided to senior executives.
The Company has extended to Mr. Readmond an interest-bearing loan in the
amount of $2,787,500 with which he purchased 1,561,000 shares of common stock by
exercising all vested and unvested options, other than incentive stock options,
previously held by him. In the event Mr. Readmond ceases to be employed by the
Company, any unvested shares Mr. Readmond purchased can be repurchased by the
Company at $1.43 per share. He is personally liable for all interest due on the
loan and is similarly liable for up to one-half of the principal amount of the
loan. This loan is secured by the shares he purchased. Mr. Readmond's loan
becomes due and payable on March 31, 2003 or earlier if his employment
terminates or if he disposes of the shares.
Mr. Readmond is also a party to the Company's Employee Non-Disclosure,
Non-Competition and Assignment of Inventions Agreement. Mr. Readmond has agreed
not to reveal any confidential information belonging to the Company, except as
may be required in the course of performing his duties as the Company's
employee. He has also agreed to assign to the Company any rights which he may
have with respect to inventions, software programs, data, or other developments
created or discovered during his employment term. Mr. Readmond agrees that while
he is employed by the Company and for one year after his termination, he will
not compete with any of its businesses or solicit any of the Company's
employees, customers or suppliers.
JONATHAN COHEN. Mr. Cohen's employment agreement with the Company expires
on February 3, 2001. Under the agreement, Mr. Cohen is entitled to a minimum
annual base salary of $250,000. He received a signing bonus of $5,000,000 at the
commencement of his employment. The Company also granted Mr. Cohen options to
purchase 700,000 shares of common stock at $2.14 per share under the Stock
Incentive Plan at the commencement of his employment. Prior to February 4, 2000,
if Mr. Cohen had violated any portion of his non-competition restrictions or
prior to a sale of the Company his
13
<PAGE>
employment had been terminated by the Company for "cause," death, disability or
by him without "good reason," Mr. Cohen would have been required to pay the
Company an amount equal to the product of $2.5 million and a fraction, the
numerator of which is the number of days remaining under the terms of his
employment agreement and the denominator of which is 730. Pursuant to an
amendment to his employment agreement dated February 4, 2000, Mr. Cohen is no
longer obligated to repay this amount if his employment is terminated.
Mr. Cohen is entitled to participate in the Company's Investment Banking Bonus
Pool and Long-Term Incentive Plan. He is also entitled to participate in the
Company's 401(k) Plan, Stock Incentive Plan and any other employee benefits
provided to senior executives.
Mr. Cohen has agreed, while employed by the Company, not to own, manage,
operate, join, control or participate in the ownership, management, operation or
control of, or be connected as a director, officer, employee, or lender with, or
be compensated by any entity that is an NASD registered broker-dealer. He will
be permitted to posses up to 4.9% interest in a publicly traded entity.
Mr. Cohen may not use, disclose, or authorize any use or disclosure of any
confidential information, other than information that is publicly known to him
prior to his employment with the Company, information required to be disclosed
in a legal proceeding, or information the disclosure of which is necessary to
protect his rights in any proceeding in which the Company is involved.
MARK LOEHR. Mr. Loehr's employment agreement with the Company expires on
March 7, 2002, unless either party elects to terminate the agreement earlier
upon 90 days' notice. Under the agreement, Mr. Loehr is entitled to a minimum
annual base salary of $200,000, subject to annual increases by the Board. If his
employment is terminated by the Company without "cause," (specifically
excluding, however, a termination due to his death or disability) or by him for
"good reason," the Company will continue to pay him his base salary through the
end of the contractual employment period. Additionally, he will be entitled to
his share of the unpaid investment banking bonus pool accrued through the date
of termination. However, if his employment is terminated by the Company for
"cause," by him without "good reason" or if he dies or becomes disabled, the
Company must pay him a lump sum cash payment equal to the sum of his unpaid base
salary earned to the termination date and unpaid investment banking bonus pool
accrued through the date of termination. Mr. Loehr is entitled to participate in
the Company's Investment Banking Bonus Pool and Long-Term Incentive Plan. He is
also entitled to participate in the Company's 401(k) Plan, the Stock Incentive
Plan and any other employee benefits provided to senior executives.
The Company has extended to Mr. Loehr an interest-bearing loan in the amount
of $1,875,000 with which he purchased 875,000 shares of common stock at $2.14
per share. He is personally liable for all interest due on the loan and is
similarly liable for one-half of the principal amounts of the loan. This loan is
secured by the shares he purchased. In the event that Mr. Loehr violates his
non-competition agreement or ceases to be employed by the Company, the Company
has the right to repurchase his unvested shares at the lower of their fair
market value or $2.14 per share. If Mr. Loehr's employment is terminated by the
Company without "cause," or by him for "good reason," or if he dies or is
disabled, the Company will not have the right to repurchase these shares. A
total of 218,750 shares will vest as of March 31, 2000 and the remainder will
vest at the rate of 54,688 shares per quarter until March 31, 2003. In addition,
Mr. Loehr's loan becomes due and payable if his employment terminates or if he
disposes of the shares. Mr. Loehr also has "piggyback" and demand registration
rights relating to the shares.
Mr. Loehr is also a party to the Company's Employee Non-Disclosure,
Non-Competition and Assignment of Inventions Agreement. He has agreed not to
reveal any confidential information belonging to the Company, except as may be
required in the course of performing his duties as the Company's employee. He
has also agreed to assign to the Company any rights which he may have with
respect to inventions, software programs, data or other developments created or
discovered during his employment term. Mr. Loehr agrees that while he is
employed by the Company and for one year after his termination, he will not
compete with any of its businesses or solicit any of the Company's employees,
customers or suppliers.
14
<PAGE>
LLOYD H. FELLER. Mr. Feller's employment agreement with the Company expires
on April 14, 2002, unless either party agrees to terminate the agreement earlier
upon 90 days' notice. Under the agreement, Mr. Feller is entitled to a minimum
annual base salary of $240,000, subject to annual increases by the Board and an
annual guaranteed bonus of $480,000 for 1999 and $720,000 for 2000 and 2001. If
Mr. Feller's employment is terminated by the Company without "cause" or by him
for "good reason," the Company must pay him a lump sum equal to his unpaid base
salary through the end of his contractual employment period, unpaid annual bonus
amounts accrued through the date of termination, and unpaid guaranteed bonus
amount prorated through the date of termination plus fifty percent his unpaid
guaranteed bonus for the period commencing with the date of termination through
the end of the employment period. If his employment is terminated by the Company
for "cause," by him without "good reason" or if he dies or becomes disabled, the
Company must only pay him a lump sum equal to his unpaid base salary earned to
the termination date, unpaid annual bonus accrued through the date of
termination, and unpaid guaranteed bonus prorated to date of termination.
Mr. Feller is entitled to participate in the Company's Annual Bonus Pool for
Executives and Long-Term Incentive Plan. He is also entitled to participate in
the Company's 401(k) Plan, the Stock Incentive Plan and any other employee
benefits provided to senior executives.
The Company has extended to Mr. Feller an interest-bearing loan in the
amount of $975,000 with which he purchased 455,000 shares of common stock at
$2.14 per share. He is personally liable for all interest due on his loan and is
similarly liable for one-half of the principal amounts of his loan. This loan is
secured by the shares he purchased. In the event Mr. Feller violates his
non-competition restrictions or ceases to be employed by the Company (except for
termination without "cause" or for "good reason"), the Company has the right to
repurchase his unvested shares at the lower of their fair market value or $2.14
per share. If Mr. Feller's employment is terminated by the Company without
"cause" or by him for "good reason," or if he dies or is disabled, the Company
will not have the right to repurchase these shares. A total of 113,750 shares
will vest as of March 31, 2000 and the remainder will vest at the rate of 28,438
shares per quarter until March 31, 2003. In addition, Mr. Feller's loan becomes
due and payable if his employment terminates or if he disposes of the shares.
Mr. Feller also has "piggyback" and demand registration rights relating to the
shares.
Mr. Feller is also a party to the Company's Employee Non-Disclosure,
Non-Competition and Assignment of Inventions Agreement. He has agreed not to
reveal any confidential information belonging to the Company, except as may be
required in the course of performing his duties as the Company's employee. He
has also agreed to assign to the Company any rights which he may have with
respect to inventions, software programs, data or other developments created or
discovered during his employment term. Mr. Feller agrees that while he is
employed by the Company and for one year after his termination, he will not
compete with any of its businesses or solicit any of the Company's employees,
customers or suppliers.
ROBERT C. MENDELSON. Mr. Mendelson's employment agreement with the Company
expires on April 14, 2002, unless either party agrees to terminate the agreement
earlier upon 90 days' notice. Under the agreement, Mr. Mendelson is entitled to
a minimum annual base salary of $240,000, subject to annual increases by the
Board and an annual guaranteed bonus of $480,000 for 1999 and $720,000 for 2000
and 2001. If Mr. Mendelson's employment is terminated by the Company without
"cause" or by him for "good reason," the Company must pay him a lump sum equal
to his unpaid base salary through the end of his contractual employment period,
unpaid annual bonus amounts accrued through the date of termination, and unpaid
guaranteed bonus amount prorated through the date of termination plus fifty
percent his unpaid guaranteed bonus for the period commencing with the date of
termination through the end of the employment period. If his employment is
terminated by the Company for "cause," by him without "good reason" or if he
dies or becomes disabled, the Company must only pay him a lump sum equal to his
unpaid base salary earned to the termination date, unpaid annual bonus accrued
through the date of termination, and unpaid guaranteed bonus prorated to date of
termination. Mr. Mendelson is entitled to participate in
15
<PAGE>
the Company's Annual Bonus Pool for Executives and Long-Term Incentive Plan. He
is also entitled to participate in the Company's 401(k) Plan, the Stock
Incentive Plan and any other employee benefits provided to senior executives.
The Company has extended to Mr. Mendelson an interest-bearing loan in the
amount of $975,000 with which he purchased 455,000 shares of common stock at
$2.14 per share. He is personally liable for all interest due on the loan and is
similarly liable for one-half of the principal amounts of the loan. This loan is
secured by the shares he purchased. In the event Mr. Mendelson violates his
non-competition restrictions or ceases to be employed by the Company (except for
termination without "cause" or for "good reason"), the Company has the right to
repurchase his unvested shares at the lower of their fair market value or $2.14
per share. If Mr. Mendelson's employment is terminated by the Company without
"cause," or by him for "good reason," or if he dies or is disabled, the Company
will not have the right to repurchase these shares. A total of 113,750 shares
will vest as of March 31, 2000 and the remainder at the rate of 28,438 shares
per quarter until March 31, 2003. In addition, Mr. Mendelson's loan becomes due
and payable if his employment terminates or if he disposes of the shares.
Mr. Mendelson also has "piggyback" and demand registration rights relating to
the shares.
Mr. Mendelson is also a party to the Company's Employee Non-Disclosure,
Non-Competition and Assignment of Inventions Agreement. He has agreed not to
reveal any confidential information belonging to the Company, except as may be
required in the course of performing his duties as the Company's employee. He
has also agreed to assign to the Company any rights which he may have with
respect to inventions, software programs, data or other developments created or
discovered during his employment term. Mr. Mendelson agrees that while he is
employed by the Company and for one year after his termination, he will not
compete with any of its businesses or solicit any of the Company's employees,
customers or suppliers.
MANAGEMENT BENEFIT PLANS
STOCK INCENTIVE PLAN
The Company has a Stock Incentive Plan which permits the Company to grant
stock and stock-based awards to the Company's employees, officers, directors and
consultants, including stock options, stock appreciation rights, restricted and
unrestricted stock, phantom stock awards, performance awards, convertible
debentures and other stock and cash awards. The purpose of the plan is to
promote the Company's long-term growth and profitability by providing the people
with incentives to improve stockholder value and contribute to the Company's
growth and financial success. The awards also enable the Company to attract,
retain and reward the best available people for positions of substantial
responsibility.
Under the Stock Incentive Plan, the Company is authorized to issue up to
27,350,000 shares of common stock. As of March 31, 2000, a total of 400 current
and former employees and consultants hold options to purchase 10,215,303 shares
of the Company's common stock under the Stock Incentive Plan, of which the
options are vested with respect to 3,231,542 shares. As of March 31, 2000, a
total of 93 current and former employees and consultants hold 1,709,473 shares
of common stock as a result of restricted stock awards, granted under the
Company's Stock Incentive Plan, from the Company's retention pool.
As part of the Company's merger with SoundView Technology Group Inc. on
January 31, 2000, the Company adopted SoundView's Stock Option Plan, although no
additional options to purchase will be granted under SoundView's Plan. As of
March 31, 2000, options to purchase 7,791,871 shares of the Company's common
stock, originally granted as options to purchase SoundView's common stock, were
outstanding and held by a total of 125 persons who became employees of the
Company following the merger or were formerly employees or consultants of
SoundView.
A subcommittee of the compensation committee of the Board of Directors
administers the Stock Incentive Plan. The subcommittee has authority to take all
actions necessary to carry out the purpose of
16
<PAGE>
the plan, including the authority to select the participants, to determine the
sizes and types of the awards to grant, to establish the terms and conditions of
the awards, and to modify outstanding awards.
ANNUAL BONUS PLANS
The Company has an annual bonus plan for its executives. Under the plan
performance-based bonuses are awarded to executive officers and key executives
as incentives for the participants to contribute to the Company's growth and
profitability. The compensation committee of the Board administers the plan.
Each year, the committee determines the amount of the bonus pool from which the
bonuses will be paid. The bonus pool is determined based on a formula adopted by
the committee and takes into account one or more of the following measures of
the Company's financial performance: (a) pre-tax or after-tax return on equity;
(b) earnings per share; (c) pre-tax or after-tax net income; (d) pre-tax
operating income; (e) net revenues; (f) profits before taxes; (g) book value per
share; (h) market price per share and (i) earnings available to common
stockholders. The committee determines the percentage of the bonus pool payable
to each participant, subject to adjustment based on achievement of individual,
group or corporate performance goals. The Company will pay the bonuses in cash,
stock or stock-based awards under the Stock Incentive Plan, or in any
combination of these methods. Subject to the terms of the deferred compensation
plan, a participant may elect to defer payment of his bonus and receive the
payment under the deferred compensation plan.
During 1999, the Company also had an annual bonus plan for the investment
banking group to foster the same motivation among the Company's investment
bankers and analysts and to contribute to the Company's profitability. The
bonuses under this plan were paid periodically from a bonus pool that consists
of 32% of the revenue generated by the investment banking group. A committee,
appointed by the Board, selected the participants each year and determined the
formula for allocating the bonus pool among them. Based on a participant's
performance and any other factors identified by the committee, a participant's
bonus could be increased or decreased by up to 20%. The Company paid the bonuses
in cash, securities given to the Company as compensation in transactions in
which the investment banking group had participated, stock or stock-based awards
under the Stock Incentive Plan, or any combination of these methods. Subject to
the terms of the Company's deferred compensation plan, a participant could elect
to defer payment of his or her bonus and receive the payment under the deferred
compensation plan. A portion of the annual bonus plan for the investment banking
group pool could be allocated to the annual bonus plan for executives.
LONG-TERM INCENTIVE PLAN
The Company has adopted a long-term incentive plan to attract and retain
employees who contribute to the Company's continued growth, development and
financial success. The compensation committee of the Board will administer the
plan and will select the executives and key employees who participate in the
plan. The plan provides for the payment of performance awards if certain
objective performance goals are met over a three-year performance period.
Performance goals and corresponding performance awards will be set by the
committee at the beginning of the three-year period and are based on one or more
of the following measures of the Company's financial performance: (a) net
revenue or income; (b) stock price; (c) return on equity; (d) earnings per
share; (e) profits before taxes; (f) operating income and (g) any other factors
identified by the committee. The committee may adjust the amount of performance
award payable to any participant based on additional factors such as individual
performance and contributions to the Company's success. Performance awards are
payable only to participants who are employed by the Company at the end of the
three-year performance period. Performance awards will be paid in cash, stock,
or a combination of these methods. Subject to the terms of the Company's
deferred compensation plan, a participant may elect to defer payment of a
performance award and receive the payment under the deferred compensation plan.
The Company has not yet implemented the long-term incentive plan.
17
<PAGE>
DEFERRED COMPENSATION PLAN
The Company has adopted a deferred compensation plan for the employees
participating in the three bonus plans (the long-term incentive plan, the annual
bonus plan for executives and the annual bonus plan for the investment banking
group). Participation in the deferred compensation plan will be limited to those
bonus plan participants who would represent a "select group of management and
highly compensated employees" under applicable federal law governing employee
benefit plans. The plan permits the participants to make annual elections to
defer all or a portion of the bonuses they might earn under the bonus plans. The
deferred amounts will be credited to the participants' accounts, which will not
hold assets but be maintained only for the purpose of recordkeeping. The cash
bonuses deferred under the plan will be credited with gains and losses as if
they were actually invested in the investment alternatives selected by the
participants from a menu available under the plan. The deferred bonuses based on
shares of the Company's common stock will be credited with gains and losses
based on the value of the stock and stock dividends. If there are cash dividends
and distributions on the shares credited to the accounts, these amounts will be
credited with earnings at a fixed annual percentage rate. The participants'
interests in their accounts will be vested and not forfeitable. Each account
will be paid out at the time and in the manner and form as selected by the
participant from a menu of alternatives available under the plan. The Company
has not yet implemented this plan.
401(K) PLAN
The Company maintains a 401(k) retirement savings plan. All employees
meeting certain minimum eligibility requirements are eligible to participate in
the 401(k) plan. Under the 401(k) plan, an employee may contribute up to 15% of
his or her pre-tax gross compensation. The contribution cannot exceed a
statutorily prescribed annual limit. Although not required, the 401(k) plan
permits the Company to make additional contributions to the plan. The amounts
contributed by the employees fully vest at the time of contribution. The Company
did not contribute to the 401(k) plan in 1997, 1998 or 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that, during 1999, all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934, as amended, applicable to
its officers, directors and greater than ten percent Stockholders were complied
with on a timely basis, except that one director of the Company, Gilbert C.
Maurer, as of June 4, 1999 filed his Form 3 25 days late due to his absence on
an extended foreign trip.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For 1999, the Compensation Committee performed the functions of a board
compensation committee.
During 1999, the compensation committee of the Board of Directors consisted
of John H.N. Fisher, Steven M. Gluckstern, Gilbert C. Maurer and the Company's
Co-Chief Executive Officer and President, Ronald Readmond.
The Company has extended to Mr. Readmond an interest-bearing loan in the
amount of $2,787,500 with which he purchased 1,561,000 shares of common stock by
exercising all vested and unvested options, other than incentive stock options,
previously held by him. In the event Mr. Readmond ceases to be employed by the
Company, any unvested shares Mr. Readmond purchased can be repurchased by the
Company at $1.43 per share. He is personally liable for all interest due on the
loan and is similarly liable for up to one-half of the principal amount of the
loan. This loan is secured by the shares he purchased. Mr. Readmond's loan
becomes due and payable on March 31, 2003 or earlier if his employment
terminates or if he disposes of the shares.
18
<PAGE>
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHOULD NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
REPORT OF THE COMPENSATION COMMITTEE
The compensation committee of the Board of Directors is composed of Ronald
Readmond, the Company's co-chief executive officer and president and three
non-employee directors, John H.N. Fisher, Steven M. Gluckstern and Gilbert C.
Maurer.
The compensation committee is responsible for reviewing and approving all
compensation of the Company's executive officers. The compensation committee
reviews the compensation of the Company's executive officers on an ongoing basis
and develops plans that are designed to support arrangements for the Company's
business strategies, reflect the competitive environment in which it competes,
and provide cost and tax-effective forms of remuneration.
TOTAL COMPENSATION STRATEGY
OVERVIEW
The Company believes strongly in pay-for-performance and has developed
compensation policies to reflect this:
- To attract and retain the best qualified and most talented executives
available to lead the Company in the creation of stockholder value,
- To motivate and reward annual and long-term results achieved for
stockholders based on corporate, business unit and individual performance,
- To align management's interests with stockholders, by increasing executive
ownership of the Company's common stock, and
- To pay competitive salaries as measured against other companies in the
industry.
In implementing these policies, the compensation committee has taken a total
compensation approach. The three elements of total compensation for executive
officers are base salary, cash bonus and stock options. The compensation
committee has devised a compensation mix of cash and stock that provides
executive officers with a powerful incentive to achieve the Company's strategic
objectives and to maximize long-term shareholder value.
BASE SALARIES
This is the only fixed portion of the executive officer's annual
compensation. All other compensation components are at risk and based on
performance, except for those executive officers with a guaranteed minimum
bonus. Executive officer base salaries will be reviewed periodically based on
factors determined by the compensation committee at the time of review.
ANNUAL CASH INCENTIVE COMPENSATION
Annual cash incentives are based on annual revenues and operating income
improvement so that significant focus is on Company growth and on profitability.
19
<PAGE>
APPROVAL PROCESS
Consistent with the Company's policies, the compensation committee assesses
the performance of the co-chief executive officers and all other executive
officers and recommends the annual cash incentive amounts and stock option
awards for these individuals to the Board of Directors for approval.
The compensation committee retains the discretion to adjust awards for each
executive officer based on an assessment of each executive's performance. As
part of this assessment, the compensation committee considers various
quantitative as well as qualitative factors without assigning specific
quantifiable or relative weights. Performance factors taken into consideration
include, but are not limited to, strategic planning, quality of client service,
market share, corporate reputation, financial results, compliance and risk
control, management development, workforce diversity, technology and innovation.
COMPETITIVE BENCHMARKING
The compensation committee evaluates performance and progress relative to
the achievement of strategic business objectives, year-over-year results, and
results over multiple years. Further, the compensation committee will assess
when the external economic and business conditions may produce results that are
unrelated to management performance. As part of this evaluation, the
compensation committee also considers competitive performance and pay levels
based on a peer group of financial services and Internet companies selected and
surveyed by Towers Perrin, a third-party compensation consulting firm. This peer
group represents the marketplace in which the Company competes for talent and is
comprised of twenty-eight publicly owned companies. The compensation committee's
philosophy is to position the Company's compensation between the median and the
75th percentile of the peer group based upon performance, with the opportunity
for total compensation and individual compensation to rise above this level upon
achievement of exceptional results.
1999 COMPENSATION PLANS
Based on the above assessment, executive officer compensation, including
that of Mr. Readmond, is determined and administered by the compensation
committee on the basis of total compensation. Therefore, the total compensation
program established by the compensation committee is comprehensive and
integrates all components including salary, annual cash, and stock option
awards.
SALARY
Salaries are reviewed periodically by the compensation committee for
appropriateness and adjusted periodically in its judgment, based primarily on
each individual executive officer's performance and responsibility level as well
as competitive salary levels for similar positions at peer companies. The
salaries of several executive officers were increased from 1998 levels.
AWARDS UNDER ANNUAL BONUS PLAN
Under the Annual Bonus Plan, bonuses are paid to executive officers and key
executives as an incentive for the executives to contribute to the Company's
growth and profitability. Each year, the compensation committee determines the
amount of the bonus pool from which the bonuses will be paid. The bonus pool is
determined based on a formula, as adopted at the compensation committee's
discretion, which takes into account one or more of the following measures of
our financial performance: (a) pre-tax or after-tax return on equity;
(b) earnings per share; (c) pre-tax or after-tax net income; (d) pre-tax
operating income; (e) net revenues; (f) profits before taxes; (g) book value per
share; (h) market price per share and (i) earnings available to common
stockholders. The compensation committee determines the percentage of the bonus
pool payable to each executive, subject to adjustment based on achievement of
individual, group or corporate performance goals.
20
<PAGE>
STOCK INCENTIVE PLAN
A subcommittee of the compensation committee, comprised of the non-employee
members of the compensation committee, made stock option grants under the Stock
Incentive Plan to executive officers to continue to link a major portion of
executive officers' compensation and financial interests to the performance of
the Company's common stock. The size of such annual grants reflects the
subcommittee's judgment as to the individual executive officer's current and
future role in the Company's growth and profitability of its business units and
to the creation of long-term shareholder value.
CO-CHIEF EXECUTIVE OFFICER COMPENSATION
The same criteria described above is applied in assessing the performance
and determining the compensation of the co-chief executive officers, who
participate in the Company's compensation plans on the same basis as all other
executive officers.
The compensation committee, in setting their compensation, has taken into
account that 1999 was the Company's first year as a publicly held company.
Factors considered by the compensation committee include the Company's initial
public offering, the rapid growth in the number of clients and customers, and
the successful negotiations in connection with the merger with SoundView
Technology Group. The compensation committee believes that the Company has
performed exceptionally well and is well positioned with high potential for
future growth and profitability.
In 1999, Mr. Readmond's salary was increased to $250,000 from $200,000 in
1998. He also received an annual cash incentive award of $600,000 in 1999. He
received no cash incentive award in 1998. In 1999, Mr. Readmond received an
annual stock option grant of 200,000 shares. He received options to purchase
1,750,000 shares upon joining the Company in 1998.
On March 1, 1999, Mr. Lessin began receiving $250,000 base salary from the
Company. Prior to April 1, 1999, Mr. Lessin received 50% of fees generated on
advisory agreements brought to the Company which totaled $774,741 for 1999 and
$135,685 for 1998. In 1999 he also received an annual cash incentive award of
$600,000 and an annual stock option grant of 200,000 shares.
TAX CONSIDERATIONS
As noted above, the compensation committee's compensation strategy is to be
cost and tax effective. Therefore, the compensation committee's policy is to
preserve corporate tax deductions, while maintaining the flexibility to approve
compensation arrangements that it deems to be in the best interests of the
Company and its stockholders, but that may not always qualify for full tax
deductibility.
WIT CAPITAL GROUP, INC.
John H.N. Fisher
Steven M. Gluckstern
Gilbert C. Maurer
Ronald Readmond
21
<PAGE>
PERFORMANCE ANALYSIS
The following performance graph compares the cumulative total returns of the
Company, the Standard & Poor's 500 Composite Stock Price Index (S&P 500) and the
Bloomberg US Internet Financial Services Index for the period June 3, 1999
through December 31, 1999. The Bloomberg US Internet Financial Services Index
consists of Ameritrade, DLJ Direct, E-Trade, E-Loan, Knight-Trimark, Lending
Tree, Mortgage.com, NDB, Netbank, Next Card, Schwab, TD Waterhouse, Webstreet
and the Company.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
6/3/99 6/15/99 6/30/99 7/15/99 7/30/99 8/13/99 8/31/99 9/15/99 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wit Capital Group, Inc. 0 6.94 277.78 270.83 172.22 121.53 115.28 120.83 102.78
S&P 500 Index 0 0.17 5.71 8.61 2.41 2.41 1.9 1.79 -0.89
Bloomberg US Internet Financial Services Index 0 -15.05 14.02 13.53 -13.1 -17.09 -24.39 -30.89 -34.5
<CAPTION>
10/15/99 10/29/99 11/15/99 11/30/99 12/15/99 12/31/99
<S> <C> <C> <C> <C> <C> <C>
Wit Capital Group, Inc. 79.17 95.14 161.81 116.67 86.11 88.89
S&P 500 Index -3.58 -5.38 7.89 7.52 9.48 13.86
Bloomberg US Internet Financial Services Index -40.93 -29.16 -11.24 -22.87 -24.46 -26.27
</TABLE>
22
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth in alphabetical order the beneficial
ownership of the Company's voting stock as of March 31, 2000 by: (a) each person
or entity the Company knows beneficially owns 5% or more of its voting stock;
(b) the Company's co-chief executive officers and the other four most highly
compensated executive officers as of December 31, 1999; (c) each of the
Company's directors; and (d) all the Company's current directors and executive
officers as a group. The following percentage information is calculated based on
77,614,332 shares of common stock outstanding, excluding the 11,666,666 shares
of non-voting Class B common stock held by Goldman Sachs.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF VOTING
NAME OF BENEFICIAL OWNER OWNED(1) STOCKS BENEFICIALLY OWNED
- ------------------------ ---------------- -------------------------
<S> <C> <C>
Capital Z Financial Services Fund II, L.P.............. 11,666,666 15.0%
One Chase Manhattan Plaza, 44(th) Floor
New York, NY 10005
Jonathan Cohen(2)...................................... 110,000 *
Russell D. Crabs (3)................................... 1,871,827 2.4%
Draper Fisher Jurveston................................ 1,906,444 2.5%
400 Seaport Court
Redwood City, CA 94063
Lloyd H. Feller(4)..................................... 493,125 *
John H.N. Fisher(5).................................... 80,608 *
400 Seaport Court
Redwood City, CA 94063
Edward H. Fleischman(6)................................ 28,146 *
Steven Gluckstern(7)................................... -- --
One Chase Manhattan Plaza, 44(th) Floor
New York, NY 10005
Joseph R. Hardiman(6).................................. 50,313 *
Andrew D. Klein........................................ 4,354,537 5.6%
Robert H. Lessin(8).................................... 4,754,365 6.1%
Mark Loehr(9).......................................... 891,250 1.1%
Gilbert C. Maurer(6)................................... 15,313 *
Robert C. Mendelson(4)................................. 493,125 *
Adam Mizel(7).......................................... -- --
One Chase Manhattan Plaza, 44(th) Floor
New York, NY 10005
Ronald Readmond(10).................................... 1,822,000 2.3%
All executive officers and directors as a group 15,648,664 20.2%
(20 persons)(11).....................................
</TABLE>
- ------------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
In general, a person who has voting power and/or investment power with
respect to securities is treated as a beneficial owner of those securities.
For purposes of this table, shares subject to options, warrants or rights
currently exercisable or exercisable within 60 days of March 31, 2000 are
considered as beneficially owned by the person holding such options,
warrants or rights. Unless indicated otherwise, the Company believes that
the persons named in this table have sole voting and investment power with
respect to the shares shown.
(2) Has an additional 575,000 options exercisable after 60 days.
23
<PAGE>
(3) Has an additional 409,750 options exercisable after 60 days.
(4) Has an additional 151,875 options exercisable after 60 days.
(5) Mr. Fisher is a managing director of Draper Fisher Jurvetson and therefore
may be deemed to beneficially own shares held by Draper Fisher Jurvetson.
(6) Has an additional 37,187 options exercisable after 60 days.
(7) General partner of Capital Z Partners and therefore may be deemed to
beneficially own shares held by Capital Z Financial Services
Fund II, L.P.
(8) In addition to his purchases from the Company, Mr. Lessin purchased shares
from two of the Company's stockholders. Has an additional 187,500 options
exercisable after 60 days.
(9) Has an additional 93,750 options exercisable after 60 days.
(10) Has an additional 310,000 options exercisable after 60 days.
(11) If the Company includes shares beneficially owned by Capital Z Financial
Services Fund II, L.P. and Draper Fisher Jurvetson, each of which has
designated one or more members of the Board of Directors, then the number
of shares and percentages would be 29,221,774 and 37.6%.
24
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as described below, none of the Company's directors, officers or
principal security holders has or has had a direct or indirect material interest
in any transaction to which the Company is or has been a party. The Company
believes that the terms of each of the transactions described below were no less
favorable to the Company than could have been obtained from unaffiliated third
parties. In addition, the Company will not enter into additional transactions or
agreements with directors, officers, principal security holders or other
affiliated parties unless the terms thereof are no less favorable to the Company
than could be obtained from unaffiliated third parties. In any event, the
Company will not enter into any transaction with directors, officers or
principal security holders without the affirmative vote of a majority of
disinterested directors.
LOANS TO OFFICERS
Messrs. Lessin, Loehr, Feller and Mendelson received loans from the Company
to purchase shares of common stock pursuant to their respective employment
agreements as described above under "Employment Agreements." In addition,
Messrs. Readmond, Lang and Lieberman accepted the Company's offer to exercise
all their vested and unvested stock options on April 30, 1999, excluding
incentive stock options. The shares they purchased by exercising these options
have not yet vested and can be repurchased by the Company, unless they remain in
the Company's employ through the respective periods when these options would
have vested. The individuals are personally liable for all interest due on their
loans and are similarly liable for one-half of the principal amounts of their
loans. Each loan is secured by the shares purchased with the proceeds of the
loan. Each loan becomes due and payable on March 31, 2003 or earlier, if the
individual's employment is terminated or he disposes of the shares. The number
of shares purchased by the individuals and the amounts loaned to them are set
forth in the table below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
ACQUIRED ON LOAN
EXERCISE AMOUNT
----------- ----------
<S> <C> <C>
Robert H. Lessin............................................ 4,025,000 $5,750,000
Mark Loehr.................................................. 875,000 1,875,000
Lloyd H. Feller............................................. 455,000 975,000
Robert C. Mendelson......................................... 455,000 975,000
Ronald Readmond............................................. 1,561,000 2,787,500
Everett F. Lang............................................. 157,864 338,281
George M. Lieberman(1)...................................... 93,333 200,000
</TABLE>
- ------------------------
(1) Effective upon Mr. Lieberman's termination of employment, the Company
repurchased his unvested shares and his loan, including interest thereon,
was paid in full.
25
<PAGE>
STOCK ISSUANCES TO EXECUTIVE OFFICERS, DIRECTORS AND THE COMPANY'S LARGEST
STOCKHOLDERS
The following table sets forth issuances of common stock to the Company's
largest stockholders, executive officers and directors since January 1, 1999.
All purchases during April 1999 by officers were pursuant to the exercise of
their outstanding options.
<TABLE>
<CAPTION>
STOCKHOLDER PRICE PER SHARE SHARE AMOUNTS ISSUANCE DATE
- ----------- --------------- ------------- -----------------
<S> <C> <C> <C>
The Goldman Sachs Group, Inc.(1).............. $ 2.14 11,666,666 April 8, 1999
Capital Z Financial Services
Fund II, L.P.(2)............................ 2.14 11,666,666 February 23, 1999
Draper Fisher Jurvetson(3).................... 2.14 933,333 March 8, 1999
1.43 483,021 November 15, 1999
Ronald Readmond............................... 1.43 1,561,000 April 30, 1999
1.43 30,000 December 16, 1999
Mark Loehr.................................... 2.14 875,000 March 5, 1999
Lloyd H. Feller............................... 2.14 455,000 March 22, 1999
Robert C. Mendelson........................... 2.14 455,000 March 22, 1999
M. Bernard Siegel............................. 1.43 35,000 April 5, 1999
Everett F. Lang............................... 2.14 157,864 April 30, 1999
George M. Lieberman........................... 2.14 17,500 April 14, 1999
2.14 93,333 April 30, 1999
Harry Silver.................................. 17.125 40,000 August 4, 1999
Elizabeth Schimel............................. 18.125 40,000 August 9, 1999
</TABLE>
- ------------------------
(1) The Goldman Sachs Group, Inc. owns 11,666,666 shares of non-voting Class B
common stock. It also owns warrants to purchase up to 5,637,295 shares of
Class B common stock. In addition, Goldman Sachs has the right to receive
warrants to purchase an additional 153,247 shares of Class B common stock in
certain circumstances. All warrants issued to Goldman Sachs become
exercisable in October 2000.
(2) Steven Gluckstern, a director of the Company, and Adam Mizel, a director of
the Company who is not standing for reelection, are general partners of
Capital Z Partners which is a general partner of Capital Z Financial
Services Fund II, L.P.
(3) John H.N. Fisher, one of the Company's directors, is a Managing Director of
Draper Fisher Jurvetson.
VENTURE CAPITAL FUND MANAGEMENT
The Company established its Venture Capital Fund Group in October 1999 when
several of the members of the management team of Dawntreader Fund I LP joined
the Company. The Venture Capital Fund Group currently manages Wit VC Fund I LP
(formerly called Arista Capital Partners, LP) and a series of four funds
collectively known as Dawntreader Fund II, LP. The Company derives revenue
through management fees and sharing in profits realized by the funds.
The Company owns one half of the profits interest of the general partner in
Wit VC Fund I LP with the other one half going to five individuals, including
Daniel DeWolf and three of the members of the management teams of Dawntreader
Fund I LLP that joined the Company.
When Wit VC Fund I LP was formed, the arrangements among the Dawntreader
group, Robert H. Lessin and the Company contemplated future funds in which
Mr. Lessin would have received a material portion of the general partner's share
of profits in future funds organized or sponsored by the Company. However, when
members of the Dawntreader management team joined the Company, those
arrangements were terminated.
26
<PAGE>
Currently, the Company owns 35% of the profits interest of the general
partner in three of the Dawntreader Fund II partnerships. The fourth Dawntreader
Fund II partnership only permits investment by employees of the Company and its
subsidiaries and the Company has no profits interest in that fourth fund. The
remainder of the profits interest in the three Dawntreader Funds is shared among
the management team of our Venture Capital Fund Group including Daniel DeWolf,
Company employees who are on these funds' investment committee, including
Jonathan Cohen, and our chairman and co-CEO Robert H. Lessin, who has a 25%
profits interest.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP audited the Company's financial statements for the year
ended December 31, 1999. As has been the prior practice, the Board of Directors
will appoint an auditor for the current fiscal year prior to the commencement of
the audit.
OTHER BUSINESS
It is not intended to bring before the Annual Meeting any matters except the
election of Directors and the two proposed amendments to the Company's
certificate of incorporation. The management is not aware at this time that any
other matters are to be presented for action. If, however, any other matters
properly come before the meeting, the persons named as proxies in the enclosed
form of proxy intend to vote in accordance with their judgment on the matters
presented.
PROVISION OF CERTAIN ADDITIONAL INFORMATION
The Company's Annual Report for year ended December 31, 1999 is being
furnished with this Proxy Statement.
27
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders in 2001 pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended, must be received by the Company no later than December 31,
2000 to be considered for inclusion in the Company's proxy materials for that
meeting. The proposal must be mailed to the Company's principal executive
offices at 826 Broadway, Seventh Floor, New York, New York 10003, Attention:
Secretary.
A stockholder that intends to present business at the 2001 annual meeting
other than pursuant to Rule 14a-8 must comply with the requirements set forth in
the Company's Bylaws. To bring business before an annual meeting, the Company's
Bylaws require, among other things, that the stockholder submit written notice
thereof complying with the Bylaws, to the Secretary of the Company not less than
90 days nor more than 120 days prior to the anniversary of the preceding year's
annual meeting. Therefore, the Company must receive notice of the stockholder
proposal submitted other than pursuant to Rule 14a-8 no sooner than February 1,
2001 and no later than March 5, 2001. If the notice is received before
February 1, 2001 or after March 5, 2001, it will be considered untimely and the
Company will not be required to present such proposal at the 2001 annual
meeting.
By Order of the Board of Directors,
ROBERT C. MENDELSON
SECRETARY
New York, New York
May 1, 2000
28
<PAGE>
EXHIBIT A
FROM THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
WIT CAPITAL GROUP, INC.
------------------------
FOURTH: Section 1. CAPITAL STOCK. The total number of shares of capital
stock which the Corporation shall have authority to issue is
<#>[764,000,000]</#> 605,000,000 shares, consisting of (i) 500,000,000 shares of
Common Stock, par value $0.01 per share (the "Common Stock"), (ii) 75,000,000
shares of Class B Common Stock, par value $0.01 per share (the "Class B Common
Stock")<#>[,]</#> AND (iii) <#>[159,000,000 shares of Class C Common Stock, par
value $.01 per share (the "Class C Common Stock") and (iv)]</#> 30,000,000
shares of Preferred Stock, par value $0.001 per share (the "Preferred Stock").
Shares of any class of capital stock of the Corporation may be issued for such
consideration and for such corporate purposes as the Board of Directors of the
Corporation may from time to time determine.
The following is a statement of the designations and the powers, preferences
and rights, and the qualifications, limitations or restrictions thereof, in
respect of the Preferred Stock which the Board of Directors is herein authorized
to fix and the designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, in respect of the Common
Stock<#>[,]</#> AND the Class B Common Stock <#>[and the Class C Common
Stock]</#>.
Section 3. COMMON STOCK <#>[and Class C Common Stock]</#>.
(a) VOTING RIGHTS. Except as otherwise provided herein or as otherwise
required by law, the entire voting power and all voting rights shall be vested
exclusively in the Common Stock <#>[and the Class C Common Stock]</#>, the
holders of which shall vote together on all matters to be voted on by the
stockholders of the Corporation. Each outstanding share of Common Stock <#>[and
each outstanding share of Class C Common Stock]</#> shall entitle the holder
thereof to one vote, in person or by proxy, on all matters submitted to a vote
of the stockholders of the Corporation. <#>[The Common Stock and Class C Common
Stock shall vote together as a single class.</#>
<#>(b) TRANSFER RESTRICTIONS. Prior to the Transfer Restriction
Termination Date (as hereinafter defined), no holder of Class C Common Stock may
transfer or dispose of any share of Class C Common Stock or any interest in any
such share. Any purported transfer or disposition of a share of Class C Common
Stock in violation of the aforesaid restriction shall be null and void and the
Corporation shall not be required to register the same or otherwise give effect
thereto. Certificates evidencing shares of Class C Common Stock shall bear a
legend evidencing the foregoing restriction. For purposes hereof, the term
"Transfer Restriction Termination Date" shall mean the earlier of (i) the date
which is 180 days following the closing by the Corporation of an initial public
offering of shares of the Common Stock registered under the Securities Act of
1933, as amended, in which (a) the aggregate net proceeds to the Corporation are
at least $5,000,000 and (b) the per share price to the public is not less than
$3.00 (appropriately adjusted for any stock splits, combinations or stock
dividends) and (ii) February 1, 2000.</#>
<#>(c) CONVERSION. Each share of Class C Common Stock shall be
automatically and irrevocably converted into one share of Common Stock, without
further action on the part of the holder thereof, upon the Transfer Restriction
Termination Date and thereafter all rights of the holders of shares of Class C
Common Stock, as holders of Class C Common Stock, shall cease and such holders
shall be treated for all purposes as having become the holders of shares of
Common Stock.</#>
29
<PAGE>
<#>(d) Corporation to Reserve Shares of Common Stock for Conversion of
Class C Common Stock. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon conversion or exchange of the shares of Class C
Common Stock, at least the number of shares of Common Stock that is equal to the
number of shares of Class C Common Stock then outstanding plus the number of
shares of Class C Common Stock issuable upon exercise of warrants, options and
rights to acquire shares of Class C Common Stock then outstanding or upon
conversion or exchange of other securities exercisable for or exchangeable into
shares of Class C Common Stock then outstanding.</#>
<#>(e) Class C Common Stock to Receive Equal Treatment. The Class C
Common Stock shall, with respect to any reclassification, recapitalization,
stock split or similar transaction and in any merger, consolidation or share
exchange, be treated in all respects identical to the Common Stock except as
otherwise required by law.]</#>
30
<PAGE>
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
PROXY
WIT CAPITAL GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 1, 2000
The undersigned hereby appoints Lloyd H. Feller and Robert C. Mendelson
as Proxies, each with power to appoint his substitute, and hereby authorizes
them, to represent and vote, as designated on the reverse side of this card, all
shares of Common Stock of Wit Capital Group, Inc. (the "Company"), held of
record by the undersigned on April 7, 2000, at the Annual Meeting of
Stockholders (the "Annual Meeting"), to be held on June 1, 2000 or any
postponements or adjournments thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY WILL BE
VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR THE
BOARD OF DIRECTORS' TWO NOMINEES FOR ELECTION AND FOR PROPOSALS 2 AND 3.
- ------------ ------------
SEE REVERSE SEE REVERSE
SIDE TO BE SIGNED ON REVERSE SIDE SIDE
- ------------ ------------
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
Thursday, June 1, 2000
9:30 A.M. Eastern Standard Time
Peninsula Hotel
700 Fifth Avenue
New York, NY
INSTRUCTIONS FOR VOTING YOUR PROXY
Wit Capital is now offering stockholders of record three alternative ways of
voting your proxies: -BY TELEPHONE (using a touch-tone telephone) -THROUGH THE
INTERNET (using a browser) -BY MAIL (traditional method)
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you had returned your proxy card. We encourage you to
use these cost effective and convenient ways of voting, 24 hours a day, 7 days a
week.
- ----------------
TELEPHONE VOTING Available only until 5:00 p.m. Eastern time
- ---------------- on May 31, 2000.
o This method of voting is available for residents of the U.S. and Canada.
o On a touch tone telephone, call TOLL FREE 1-877-816-0835 24 hours a day, 7
days a week.
o You will be asked to enter ONLY the control number shown below.
o Have your proxy card ready, then follow the simple instructions.
o Your vote will be confirmed and cast as you directed.
- ----------------
INTERNET VOTING Available only until 5:00 p.m. Eastern time
- ---------------- on May 31, 2000
o Visit our internet voting website at HTTP://PROXY.GEORGESON.COM.
o Enter the Company Number AND Control Number shown below and follow
the instructions on your screen.
o You will incur only your usual internet charges.
- ----------------
VOTING BY MAIL
- ----------------
o Simply mark, sign and date your proxy card and return it in the postage-paid
envelope.
o IF YOU ARE VOTING BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL
YOUR PROXY CARD.
---------------- -----------------
COMPANY NUMBER CONTROL NUMBER
---------------- -----------------
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
- ---- Please mark
X votes as in
- ---- this example.
FOR WITHHOLD
1. Election of Directors. ---- ----
Nominees (term expiring in 2003): Joseph R. Hardiman
and Andrew D. Klein ---- ----
---------------------------------------------------
For all nominees EXCEPT as noted above
FOR AGAINST ABSTAIN
---- ---- ----
2. Approval of proposed amendment to change the name of
the Company. ---- ---- ----
---- ---- ----
3. Approval of proposed amendment to eliminate the Class
C common stock. ---- ---- ----
4. In their discretion, upon such other business as may
properly come before the Annual Meeting or any
postponement or adjournment thereof.
NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS ON THIS PROXY CARD. ALL
JOINT OWNERS SHOULD SIGN. WHEN
SIGNING AS EXECUTOR, ADMINISTRATOR,
ATTORNEY, TRUSTEE OR GUARDIAN OR AS
CUSTODIAN FOR A MINOR, PLEASE GIVE
FULL TITLE AS SUCH. IF A CORPORATION,
NAME AND INDICATE THE SIGNER'S
OFFICE. IF A PARTNER, SIGN IN THE
PARTNERSHIP NAME.
-----------------------------------------------
SIGNATURE
-----------------------------------------------
SIGNATURE (IF HELD JOINTLY)
-----------------------------------------------
DATE