SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Kinnard Investments, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
KINNARD INVESTMENTS, INC.
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
May 20, 1999
<PAGE>
KINNARD INVESTMENTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 20, 1999
TO THE SHAREHOLDERS OF KINNARD INVESTMENTS, INC.
The 1999 Annual Meeting of Shareholders of Kinnard Investments, Inc.
will be held at the Northland Inn, 7025 Northland Drive, Brooklyn Park,
Minnesota, at 3:30 p.m. (Minneapolis time) on Thursday, May 20, 1999, for the
following purposes:
1. To consider and act upon a proposal to adopt an amendment to
the Bylaws to provide for staggered election of directors.
2. To set the number of members of the Board of Directors at
eight (8).
3. To elect members of the Board of Directors.
4. To take action on any other business that may properly come
before the meeting or any adjournment thereof.
Accompanying this Notice of Annual Meeting is a Proxy Statement, form
of Proxy and the Company's Annual Report to Shareholders for the year ended
December 31, 1998.
Only Shareholders of record as shown on the books of the Company at the
close of business on April 9, 1999, will be entitled to vote at the Meeting or
any adjournment thereof. Each Shareholder is entitled to one vote per share on
all matters to be voted on at the Annual Meeting.
Please note that whether you own one or many shares, it is important
that your shares of Common Stock be represented at the Annual Meeting.
Therefore, please complete, date and sign the enclosed form of Proxy and mail it
promptly in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
George F. Stroebel
Secretary
Dated: April 16, 1999
Minneapolis, MN
<PAGE>
KINNARD INVESTMENTS, INC.
Annual Meeting of Shareholders
May 20, 1999
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of Directors of
Kinnard Investments, Inc. (the "Company") for use at the Annual Meeting of
Shareholders of the Company to be held Thursday, May 20, 1999, at the location
and for the purposes set forth in the Notice of Annual Meeting, and at any
adjournment thereof.
The cost of soliciting Proxies, including the preparation, assembly and
mailing of the Proxies and soliciting material, as well as the cost of
forwarding such material to the beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular remuneration, solicit Proxies personally
or by telephone.
Any shareholder giving a Proxy may revoke it at any time prior to its
use at the Annual Meeting by giving written notice of such revocation to the
Secretary or other officer of the Company or by filing a new written Proxy with
an officer of the Company. Personal attendance at the meeting is not, by itself,
sufficient to revoke a Proxy unless written notice of the revocation or a
subsequent Proxy is delivered to an officer before the revoked or superseded
Proxy is used at the meeting.
Proxies not revoked will be voted in accordance with the choice
specified by shareholders by means of the ballot provided on the Proxy for that
purpose. Proxies which are signed but which lack any such specification will,
subject to the following, be voted in favor of the proposals set forth in the
Notice of Meeting and in favor of the number and slate of directors proposed by
the Board of Directors and listed herein. If a shareholder abstains from voting
as to any matter, then the shares held by such shareholder shall be deemed
present at the Meeting for purposes of determining a quorum and for purposes of
calculating the vote with respect to such matter, but shall not be deemed to
have been voted in favor of such matter. Abstentions, therefore, as to any
proposal will have the same effect as votes against such proposal. If a broker
returns a "non-vote" proxy, indicating a lack of voting instruction by the
beneficial holder of the shares and a lack of discretionary authority on the
part of the broker to vote on a particular matter, then the shares covered by
such non-vote shall be deemed present at the Meeting for purposes of determining
a quorum but shall not be deemed to be represented at the Meeting for purposes
of calculating the vote required for approval of such matter.
The mailing address of the principal executive office of the Company is
Kinnard Financial Center, 920 Second Avenue South, Minneapolis, Minnesota 55402.
The Company expects that this Proxy Statement, the related Proxy and Notice of
Meeting will first be mailed to Shareholders on April 16, 1999.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed April 9, 1999, as the
record date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders on such date will not be allowed to vote at
the Annual Meeting. At the close of business on April 9, 1999, 5,116,215 shares
of the Company's Common Stock, par value $.02, were issued and outstanding. The
Common Stock is the only outstanding class of capital stock of the Company
entitled to vote at the Annual Meeting. Each share of Common Stock is entitled
to one vote on each matter to be voted upon at the meeting. Holders of Common
Stock are not entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS
The following table provides information concerning persons known to
the Company to be the beneficial owners of more than 5% of the Company's
outstanding Common Stock as of April 9, 1999:
Shares Percent
Name and Address Beneficially of
of Beneficial Owner Owned (1) Class (2)
- ------------------- ------------ ---------
William F. Farley 726,603 (3) 13.2%
920 Second Avenue S.
Minneapolis, MN 55402
John G. Kinnard and 676,696 (4) 13.2%
Company, Incorporated
Employee Stock Owner-
ship Plan and Trust
920 Second Ave. S.
Minneapolis, MN 55402
Robert S. Spong 307,415 (5) 6.0%
920 Second Avenue S.
Minneapolis, MN 55402
Dimensional Fund Advisors, Inc. 275,200 5.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401-1038
<PAGE>
(1) Unless otherwise indicated, each person or entity named or included in
the group has sole power to vote and sole power to direct the
disposition of all shares listed as beneficially owned by such person
or entity.
(2) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of April 9, 1999, or within 60
days of such date are treated as outstanding only when determining the
percent of the class owned by such individual and when determining the
percent owned by the group.
(3) Includes 391,000 shares which may be purchased pursuant to options and
warrants which were exercisable as of April 9, 1999, or will become
exercisable within 60 days of such date and 78 shares allocated to his
account under the ESOP.
(4) Such shares are held in trust for the benefit of participants in the
John G. Kinnard and Company, Incorporated Employee Stock Ownership Plan
and Trust (the "ESOP"). The participants have voting power over shares
held by the ESOP which have been allocated to their accounts, and the
Trustees vote shares, if any, which have not been allocated to
participants' accounts.
(5) Includes 117,297 shares held by Mr. Spong's wife, 12,458 shares
allocated to his account under the ESOP and 72,507 shares held for Mr.
Spong in the Company's 401(k) Profit Sharing account (over which Mr.
Spong has dispositive power but not voting power).
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of April 9, 1999, by each director and nominee for
director of the Company, by each executive officer of the Company named in the
Summary Compensation table, and by all directors and executive officers
(including the named individuals) as a group:
Shares Percent
Name of Beneficially of
Beneficial Owner Owned (1) Class (2)
- ---------------- ------------- ---------
William F. Farley 726,603 (3) 13.2%
Robert S. Spong 307,415 (4) 6.0%
Andrew J. O'Connell 133,324 (5) 2.6%
Stephen H. Fischer 110,642 (6)(7) 2.2%
George F. Stroebel 30,000 (8) *
Daniel R. Sass 19,190 (9) *
John J. Fauth 12,500 (7)(10) *
Ronald A. Erickson 12,500 (7)(10) *
John H. Grunewald 7,500 (7)(10) *
Robert D. Potts 0 *
All Directors and Executive
Officers as a Group
(10 persons) 1,359,674 (11) 24.4%
*Less than one percent
<PAGE>
(1) See footnote (1) to preceding table.
(2) See footnote (2) to preceding table.
(3) Includes 391,000 shares which may be purchased pursuant to options and
warrants which were exercisable as of April 9, 1999, or will become
exercisable within 60 days of such date and 78 shares allocated to his
account under the ESOP.
(4) Includes 117,297 shares held by Mr. Spong's wife, 12,458 shares
allocated to his account under the ESOP and 72,507 shares held for Mr.
Spong in the Company's 401(k) Profit Sharing account (over which Mr.
Spong has dispositive power but not voting power).
(5) Includes 36,000 shares which may be purchased pursuant to options which
were exercisable as of April 9, 1999, or will become exercisable within
60 days of such date, and 24,001 shares allocated to the ESOP accounts
of Mr. O'Connell (19,299 shares) and his wife (4,702 shares) and 45,923
shares held for Mr. O'Connell in the Company's 401(k) Profit Sharing
account (over which Mr. O'Connell has dispositive power but not voting
power). Mr. O'Connell disclaims beneficial ownership of the shares
allocated to his wife's ESOP account.
(6) Includes 5,000 shares which may be purchased pursuant to options which
were exercisable as of April 9, 1999 or will become exercisable within
60 days of such date.
(7) Does not include 2,500 shares which will become purchasable by such
individual on May 20, 1999 pursuant to an automatic grant under the
Company's 1997 Stock Option Plan if such individual is re-elected as a
director of the Company
(8) Includes 5,000 shares which may be purchased pursuant to options which
were exercisable as of April 9, 1999 or will become exercisable within
60 days of such date.
(9) Includes 9,000 shares which may be purchased pursuant to options which
were exercisable as of April 9, 1999, or will become exercisable within
60 days of such date, 2,492 shares allocated to Mr. Sass' account under
the ESOP and 1,998 shares held for Mr. Sass in the Company's 401(k)
Profit Sharing Plan (over which Mr. Sass has dispositive power but not
voting power).
<PAGE>
(10) Includes 2,500 shares which may be purchased pursuant to options which
were exercisable as of April 9, 1999 or will become exercisable within
60 days of such date.
(11) Includes 453,500 shares which may be purchased pursuant to options and
warrants which were exercisable as of April 9, 1999, or will become
exercisable within 60 days of such date, 39,029 shares allocated to
accounts under the ESOP, and 124,953 shares held in the Company's
401(k) Profit Sharing Plan (over which participants have dispositive
power but not voting power).
AMENDMENTS TO BYLAWS
(Proposal #1
Text attached as Appendix A)
Staggered Election of Directors. Directors are currently elected to the
Company's Board of Directors at each annual meeting for a term that expires at
the next annual meeting of shareholders. The Bylaws of the Company currently
provide that the number of directors shall not be less than the minimum required
by law, which is one, and that such number shall be determined at each annual
meeting by the shareholders. Like the current Bylaws, proposed Section 3.2 also
provides that the shareholders shall determine the number of directors at each
annual meeting, but restricts the number of directors to not less than three and
provides that the Board shall be divided into three classes of directors.
If the proposed amendments to Bylaw Sections 3.2 and 3.3 are adopted,
the Company's directors will be divided into three classes. It is also proposed
that eight directors be elected at the 1999 annual meeting. Three directors will
be elected to serve for a term of one year expiring at the 2000 annual meeting
of shareholders (Class I); three directors will be elected to serve for a term
of two years expiring at the 2001 annual meeting of shareholders (Class II); and
two directors will be elected to serve for a term of three years expiring at the
2002 annual meeting of shareholders (Class III), and in all cases until their
respective successors are duly elected and qualified. See Proposals #2 and #3,
"Election of Directors," as to the composition of each class of directors if
this proposal is adopted. Starting with the 2000 annual meeting of shareholders,
one class of directors will be elected each year for a three-year term. If the
proposed amendments to the Bylaws are not adopted, it is proposed that the eight
directors nominated by the Board of Directors and identified in Proposals #2 and
#3 below be elected for a term of one year and until their successors have been
duly elected and qualified.
Number of Directors; Removal of Directors. As under the Bylaws
currently in effect, proposed Section 3.2 provides that the number of directors
shall be determined at each annual meeting and that between annual meetings the
authorized number of directors may be increased by the shareholders or the Board
of Directors. However, proposed Section 3.2 would require that any increase or
decrease, whether instituted by the directors or by the shareholders at an
annual meeting, be apportioned among the classes so as to maintain, as nearly as
possible, an equal number of directors in each class. As provided in the Bylaws
currently in effect, no decrease may shorten the term of an incumbent director.
<PAGE>
Reasons and Effects; Possible Advantages. The proposed amendments to
the Bylaws are designed to obtain for the Company the benefits of greater
continuity of membership on the Board and to obtain from directors a longer term
commitment to service on the Board. The proposed amendment does not, however,
change the provisions of the existing Bylaws or Minnesota Statutes which allow
shareholders to remove directors with or without cause and, therefore, does not
have any anti-takeover effect.
Vote Required. The Company's Board of Directors has determined that the
amendments to the Company's Bylaws described above are advisable and has voting
unanimously to propose and recommend that the Company's Bylaws be amended as set
forth in Appendix A to this Proxy Statement. Under applicable Minnesota law,
adoption of the amendments to the Bylaws requires the affirmative vote of the
holders of the greater of (1) a majority of the voting power of the shares
represented in person or by proxy at the Annual Meeting with authority to vote
on such matter or (2) a majority of the voting power of the minimum number of
shares that would constitute a quorum for the transaction of business at the
Annual Meeting.
ELECTION OF DIRECTORS
(Proposals #2 and #3)
General Information
The Board of Directors recommends that the Bylaws of the Company be
amended to provide for the election of three classes of directors with staggered
terms. This proposed amendment is described above at Proposal #1. The Board
recommends that the number of directors be set at eight and that eight directors
be elected, two directors for a term of three years as Class III, three
directors for a term of two years as Class II, and three directors for a term of
one year as Class I. All directors so elected will hold office until their
successors have been duly elected and qualify. If Proposal #1 relating to the
classification of the Board of Directors is not approved, it is proposed that
eight directors be elected at the meeting to hold office until the next annual
meeting of shareholders and until their successors have been duly elected and
qualified. Under applicable Minnesota law, approval of the proposal to set the
number of directors at eight, as well as the election of each nominee, requires
the affirmative vote of the holders of the greater of (1) a majority of the
voting power of the shares represented in person or by proxy at the Annual
Meeting with authority to vote on such matter or (2) a majority of the voting
power of the minimum number of shares that would constitute a quorum for the
transaction of business at the Annual Meeting.
In the absence of other instructions, each proxy will be voted for each
of the nominees listed below who have been nominated by the Board of Directors
into the classes and for the terms indicated following each nominee's name in
the biographical section below. If Proposal #1 relating to the classification of
the Board of Directors is not adopted, the proxies solicited hereby will, unless
authority is withheld, be voted for the election as directors of the eight
individuals named below for a term of one year until the next annual meeting of
shareholders and until their successors have been duly elected and qualify.
<PAGE>
All of the nominees are members of the present Board of Directors. If,
prior to the meeting, it should become known that any of the nominees will be
unable to serve as a director after the meeting by reason of death, incapacity
or other unexpected occurrence, the proxies will be voted for such substitute
nominee as is selected by the Board of Directors or, alternatively, not voted
for any nominee. The Board of Directors has no reason to believe that any
nominee will be unable to serve.
<TABLE>
<CAPTION>
Nominee Current Position(s) Principal Occupation(s) Director
and Class Age With Company During Past Five Years Since
- --------- --- ------------------- ---------------------- ---------
<S> <C> <C> <C> <C>
William F. Farley 55 Chief Executive Officer, Chief Executive Officer and Chairman April 1997
(Class III) Chairman and Director since May 1998, Chief Executive
Officer and Chairman
of John G. Kinnard and
Company, Incorporated
("JGK") since April
1997. From April 1996
to April 1997,
independent investor.
From March 1990 to
April 1996, Vice
Chairman of US Bancorp
(formerly First Bank
System).
Robert S. Spong 64 Director Senior Vice President of JGK. May 1981
(Class I)
Stephen H. Fischer 55 Director Independent investor, business February 1991
(Class I) consultant and investment executive
since February 1998.
Chief Executive
Officer (from March
1992 to February 1998)
and President and
Chief Financial
Officer (from August
1986 to February 1993)
of PRIMEVEST Financial
Services, Inc., a
subsidiary of
ReliaStar Financial
Corporation. Treasurer
of the Company from
February 1993 to
November 1996.
Andrew J. O'Connell 44 Director Investment Executive with JGK since July 1994
(Class II) 1978. Senior Vice President of JGK
since May 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
John J. Fauth 53 Director President and Chief Executive Officer July 1997
(Class I) of The Churchill Companies, a private
investment company, since 1982.
John H. Grunewald 62 Director Independent investor since January January 1998
(Class III) 1997. From September 1993 to January
1997, Chief Financial
Officer of Polaris
Industries, a
manufacturer of
recreational vehicles.
From July 1976 to June
1993, Chief Financial
Officer of Pentair,
Inc., a diversified
industrial
manufacturer. Also, a
director of the
following public
companies: Nash Finch
Company and Advantage
Learning Systems, Inc.
Ronald A. Erickson 62 Director President since 1970 of Holiday January 1998
(Class II) Companies, a private business entity
owning and operating
gasoline/convenience stores,
supermarkets, sporting goods stores
and wholesale food distribution
businesses. Also a director of
Carriage Services, Inc.
Robert D. Potts 56 Director Consultant since January 1998. From May 1999
(Class II) April 1994 to December 1997,
Director, President
and Chief Operating
Officer, and from
October 1993 to April
1994 Executive Vice
President of GreenTree
Financial Corporation,
a diversified
financial services
company.
</TABLE>
<PAGE>
Board and Committee Meetings
The Board of Directors has the following Committees: Compensation,
Audit and Executive. The Compensation Committee reviews and recommends
compensation for officers and directors of the Company and administers the
Company's employee stock plans. The Compensation Committee consists of Messrs.
Ronald A. Erickson and John J. Fauth, and met two times during fiscal 1998. The
Audit Committee reviews with the Company's independent accountants the annual
financial statements and the results of the annual audit. The Audit Committee
consists of Messrs. Stephen H. Fischer, John H. Grunewald and Robert D. Potts,
and met four times during 1998. The Executive Committee is composed of the five
outside directors, Messrs. Erickson, Fauth, Fischer, Grunewald and Potts, and
its function is to represent the full board on issues that require independence.
The Executive Committee met two times in 1998.
During fiscal 1998, the Board of Directors held seven meetings. Each
incumbent director attended 75% or more of the total number of meetings (held
during the period(s) for which he has been a director or served on committee(s))
of the Board and of committee(s) of which he was a member.
Directors Fees
Under current compensation plans, the Company pays the directors who
are not employees of the Company or a subsidiary, for their services as
directors of the Company, the sum of $750 per month plus $500 per regular board
meeting and $250 per special board and each committee meeting attended.
Under the Company's 1997 Stock Option Plan, each nonemployee director
receives, upon election or re-election to the Board by the shareholders, an
option to purchase 2,500 shares of the Company's Common Stock at a price equal
to the fair market value of the Company's Common Stock as defined in the Plan.
On May 21, 1998 the Company granted options to purchase 2,500 shares, at an
option price of $6.875 per share, to Messrs. Erickson, Fauth, Fischer, and
Grunewald, who were re-elected as directors at the 1998 annual meeting of
shareholders.
Certain Relationships and Related Transactions
(a) Andrew J. O'Connell and Robert S. Spong, directors of the Company,
are employees of JGK. They earned in 1998 commissions, bonuses and other
compensation and benefits from JGK, on the same bases and under the same
policies as other employees, in the aggregate amounts of $618,823 and $181,984,
respectively.
(b) Certain directors and officers of the Company (and members of the
immediate families of such persons) maintain margin accounts with JGK and have
margin account indebtedness outstanding from time to time. All such indebtedness
is incurred in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and do not involve more than
normal risk of collectibility or present other unfavorable features.
<PAGE>
(c) In October 1996, the Company entered into a Deferred Compensation
Agreement with Stephen H. Fischer in connection with the Company's sale of
PRIMEVEST Financial Services, Inc., which provided for the payment to Mr.
Fischer of the sum of $100,000 plus interest at a rate equal to Prime plus one
point on the earlier of (i) January 4, 1999, (ii) within 60 days after a "change
of control" as defined in such Agreement or (iii) Mr. Fischer's death. Such
amount was paid to Mr. Fischer in January 1999.
(d) In conjunction with Mr. Farley's employment agreement dated April
7, 1997, the Company loaned Mr. Farley $95,000 in exchange for a non-interest
bearing promissory note which is due at the termination of his employment.
(e) In conjunction with Mr. Stroebel's employment agreement dated
February 23, 1998, the Company loaned Mr. Stoebel an amount sufficient to
purchase 25,000 shares of the Company's common stock at market prices. The loan
accrues interest at the broker call rate, and interest and principal are due and
payable on the fifth anniversary of issuance. The principal balance of the note
at December 31, 1998 was $154,856.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Board of Directors during fiscal 1998 was composed
of two outside directors, Ronald A. Erickson and John J. Fauth, and a third
director, Robert S. Spong. The Committee is responsible for developing and
making recommendations to the Board with respect to the compensation to be paid
to the Chief Executive Officer of the Company and to the other principal
executive officers of the Company and its operating subsidiary, JGK.
Overview and Philosophy. The Company's executive compensation program
is comprised of base salaries, annual cash bonuses, long-term incentive
compensation in the form of stock options, and various benefits, including
participation in the Company's pension plan and employee stock ownership plan
("ESOP"), both of which are generally available to all employees of the Company
and have contribution formulas which are related to the Company's performance
and vesting schedules which reward long-term service to the Company.
The Company has followed a policy of paying annual base salaries which
are less than the industry's average as reported by the Securities Industry
Association and relying on annual cash bonuses and long-term incentive
compensation to retain executive officers. The Compensation Committee believes
long-term incentives enhance the concept of ownership which emphasize profits
and directly ties executive compensation to shareholder value. Annual cash
bonuses and long-term stock option incentives are tied to the profitability and
goals of the Company.
<PAGE>
Compensation. The Company has continued the compensation policies and
practices which have included moderate increases during profitable periods and
reductions during unprofitable periods. Base salaries of some officers were
increased in 1998 to reflect individual performance and responsibilities.
Contributions to the Company's pension plan and ESOP are determined for
executive officers on the same basis as for all other employees. Annual
contributions to the pension plan are made at the rate of 5% of total
compensation paid during the year subject to IRS limitations. Contributions to
the ESOP are made at the discretion of the Company's Board of Directors. No
contribution was made to the ESOP for calendar year 1998.
The Company provides medical and insurance benefits to its executive
officers which are generally available to all Company employees. Some executive
officers of the Company participate in the Company's employee stock purchase
plan which is also generally available to all employees and to which the Company
does not contribute. The amount of perquisites allowed to executive officers, as
determined in accordance with the rules of the Securities and Exchange
Commission, did not exceed 10% of salary for 1998.
Chief Executive Officer Compensation. In May 1998, William F. Farley
was named Chief Executive Officer and Chairman of Kinnard Investments, Inc., in
addition to his position as Chief Executive Officer and Chairman of JGK. Mr.
Farley was paid during 1998 pursuant to the terms of his employment contract
dated April 7, 1997.
Ronald A. Erickson
John J. Fauth
Robert S. Spong
Members of the Compensation Committee
Summary Compensation Table
The following table sets forth certain information regarding
compensation earned during each of the Company's last three fiscal years by each
of the Company's executive officers whose salary and bonus compensation exceeded
$100,000 for fiscal 1998.
<PAGE>
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
--------------------------- ------------
Securities
Underlying All Other
Name and Principal Fiscal Options Compensation
Position Year Salary ($)1 Bonus ($) /SARs (#) ($)
- ------------------------------ ------ ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
William F. Farley, Chief 1998 250,000 250,000 0 6,9582
Executive Officer and 1997 185,577 280,000 165,000 0
Chairman
Daniel R. Sass, 1998 93,334 10,000 0 5,2413
Treasurer 1997 85,002 18,750 0 5,708
1996 75,012 95,000 5,000 15,928
George F. Stroebel, 1998 148,846 0 25,000 0
Secretary
1 Includes commission income.
2 Amount reflects Company contributions to the Pension Plan and ESOP of $6,250 and $708, respectively.
3 Amount reflects Company contributions to the Pension Plan and ESOP of $4,667 and $574, respectively.
</TABLE>
Employment Agreements
(a) The Company has entered into an employment agreement with William
F. Farley pursuant to which he was elected President, Chief Executive Officer
and Chairman of the Board of Directors of JGK and Chief Operating Officer and a
director of the Company. The Agreement will expire December 31, 1999 subject to
annual one-year extensions if notice of termination is not given by either party
six months prior to an expiration date. Mr. Farley was paid base salary at a
rate of $250,000 per annum in 1998 and was guaranteed a minimum bonus for 1998
of $250,000. For 1999 and any extension years, his base salary and bonus is to
be subject to a plan to be adopted by the Board of Directors. In addition, Mr.
Farley will participate in all Company and JGK employee benefit plans and be
reimbursed for certain expenses.
Mr. Farley's agreement contains provision for payments to him in the
event of his termination of employment with the Company and JGK for certain
reasons. If he is terminated by the Company without "cause" or resigns for "good
reason," as such terms are defined in the agreement, he will be paid his base
salary, bonus and benefits for the balance of the term of the agreement. In
addition, he will be paid his base salary and a bonus equal to two times his
base salary, for an additional 12 months. Further, Mr. Farley will become vested
in all stock options, benefits and perquisites to which he would have been
entitled to receive had he remained through the term of the agreement.
In the event of a "change of control" in the Company, as defined in the
employment agreement, vesting of Mr. Farley's stock options will accelerate and
he will be entitled to payment to cover all base salary, bonuses, benefits and
perquisites that he would receive if he were to remain employed for an
additional 36 months at his then current base salary, with his annual bonus
calculated at two times his current base salary. The payment will not be made
during any month following the change of control in which he continues in the
employment of the Company. If the change of control is not initiated by the
Company, payments to Mr. Farley will be grossed up to adjust for the impact of
any excise tax imposed on amounts exceeding limits under the Internal Revenue
Code.
<PAGE>
Mr. Farley is subject to confidentiality restrictions under the terms
of his employment agreement and may not compete with the Company or its
subsidiaries for the longer of the period one year after his termination of
employment or until December 3, 1999.
(b) The Company has entered into an employment agreement with George F.
Stroebel pursuant to which he was elected Senior Vice President, Director of
Corporate Development of JGK. The Agreement will expire September 1, 1999, after
which employment will continue at will. Pursuant to such Agreement, Mr. Stroebel
receives an annual salary of $180,000, may receive an annual discretionary
bonus, will participate in all Company and JGK employee benefit plans, and was
granted an option to purchase 25,000 shares at an exercise price of $6.06 per
share.
Option/SAR Grants During 1998 Fiscal Year
The following options were granted to the named executive officers
during fiscal 1998. The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- ----------------------------------------------------------------------------------- ----------------------
Number of
Securities Percent of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or
Granted Employees Base Price Expiration
Name (#) in Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ------- -------------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
William F. Farley 0 -- -- -- -- --
Daniel R. Sass 0 -- -- -- -- --
George F. Stroebel 25,0001 10% $6.06 2/23/04 51,524 116,891
1 Option was granted on February 23, 1998, and vests at a rate of 20% per year
beginning February 15, 1999.
</TABLE>
<PAGE>
Option/SAR Exercises During 1998 Fiscal
Year and Fiscal Year End Option/SAR Values
The following table provides information related to options exercised
by the named executive officers during the 1998 fiscal year and the number and
value of options held at fiscal year end.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable1
- ---- --------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
William F. Farley 0 N/A 66,000 / 99,000 0 / 0
Daniel R. Sass 0 N/A 9,000 / 0 2,844 / 0
George F. Stroebel 0 N/A 0 / 25,000 0 / 0
1 Based on the difference between the closing price of the Company's Common
Stock as reported by Nasdaq at fiscal year end and the option exercise price.
</TABLE>
Stock Performance Chart
The following chart compares the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock during the
five fiscal years ended December 31, 1998 with the cumulative total return on
the Nasdaq Composite Index and the Nasdaq Financial Index. The comparison
assumes $100 was invested on December 31, 1993 in the Company's Common Stock and
in each of the foregoing indices and assumes reinvestment of dividends.
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
Kinnard $100.00 $ 39.57 $ 77.29 $122.60 $149.26 $101.28
Nasdaq
Composite $100.00 $ 97.75 $138.26 $170.01 $208.58 $293.21
Nasdaq
Financial $100.00 $100.24 $145.98 $187.13 $285.87 $276.58
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANT
On June 30, 1997, the Company dismissed Deloitte & Touche, LLP
("Deloitte") as its independent auditor. Deloitte's reports on the Company's
financial statements for the prior two years had not contained any adverse
opinion or disclaimer of opinion, or been qualified or modified as to
uncertainty, audit scope or accounting principles. The dismissal of Deloitte was
recommended by the Audit Committee and approved by the Board of Directors of the
Company.
During the Company's two most recent fiscal years and the subsequent
interim period preceding Deloitte's dismissal, there were no disagreements
between the Company and Deloitte regarding any matter of the Company's
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Deloitte, would have caused Deloitte to make reference to the subject matter of
the disagreement in connection with its report on the Company's financial
statements.
The Company dismissed Deloitte as its auditor because, in the Company's
view, the filing of a class action lawsuit against the Company involving a
company whose financial statements were audited by Deloitte may impair, or may
be perceived by others as impairing, Deloitte's independence with respect to
future services to the Company.
KPMG Peat Marwick LLP has been selected by the Board of Directors as
the Company's independent auditor for the current fiscal year. Representatives
of KPMG Peat Marwick LLP are expected to be present at the Annual Meeting, will
be given an opportunity to make a statement regarding financial and accounting
matters of the Company if they so desire, and will be available at such meeting
to respond to appropriate questions from the Company's shareholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent shareholders ("Insiders") are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company, during the fiscal year ended December 31,
1998, all Section 16(a) filing requirements applicable to Insiders were complied
with except that Mr. John J.Fauth was late filing a Form 4 covering one
transaction.
<PAGE>
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the annual meeting in calendar year 2000 must be
received by the Company by December 17, 1999, to be includable in the Company's
proxy statement and related proxy for the 2000 annual meeting.
Also, if a shareholder proposal intended to be presented at the 2000
annual meeting but not included in the Company's proxy statement and proxy is
received by the Company after March 2, 2000, then management named in the
Company's proxy form for the 2000 annual meeting will have discretionary
authority to vote the shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If
any other matter properly comes before the meeting, the appointees named in the
Proxies will vote the Proxies in accordance with their best judgment.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1998, including its Report on Form 10-K filed with the
Securities and Exchange Commission, accompanies this Notice of Annual Meeting
and Proxy Statement. No part of such Annual Report is incorporated herein and no
part thereof is to be considered proxy soliciting material.
Dated: April 16, 1999
Minneapolis, MN
<PAGE>
APPENDIX A
PROPOSED
AMENDMENTS OF BYLAWS
RESOLVED, that Sections 3.2 and 3.3 of the Bylaws of Kinnard
Investments, Inc. be amended in their entirety to read as follows:
3.2) Number of Directors. At each annual meeting of shareholders, the
shareholders shall determine the number of directors, which shall be not less
than three. Between annual meetings of shareholders, the authorized number of
directors may be increased by the shareholders or by the board of directors or
decreased by the shareholders. However, notwithstanding the foregoing no
increase or decrease in the number of directors may be effected except according
to the provisions contained in Section 3.3.
3.3) Election of Directors and Term of Office. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the 1999 Annual Meeting
of Shareholders, Class I directors shall be elected for a one-year term, Class
II directors for a two-year term and Class III directors for a three-year term.
At each succeeding annual meeting of the shareholders beginning in 2000,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. A director shall hold office until the
annual meeting for the year in which his or her term expires and until his or
her successor shall be elected and shall qualify, or until his or her earlier
death, resignation, disqualification or removal from office. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain, as nearly as possible, an equal number of directors
in each class. In the event an increase or decrease makes it impossible to
maintain an equal number of directors in each class, increases shall be
allocated to the class or classes with the longest remaining term, and decreases
shall be allocated to the class with the shortest remaining term. Any director
elected to fill a vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of that class. In
no event will a decrease in the number of directors result in the elimination of
an entire class of directors, cause any class to contain a number of directors
two or more greater than any other class, or shorten the term of any incumbent
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his or
her predecessor.
<PAGE>
KINNARD INVESTMENTS, INC.
PROXY FOR ANNUAL MEETING
May 20, 1999
The undersigned hereby appoints WILLIAM F. FARLEY and GEORGE F.
STROEBEL, and each of them, with full power of substitution, his or her Proxies
to represent and vote, as designated below, all shares of the Common Stock of
Kinnard Investments, Inc. registered in the name of the undersigned at the 1999
Annual Meeting of Shareholders of the Company to be held at the Northland Inn,
7025 Northland Drive, Brooklyn Park, Minnesota, at 3:30 p.m., Minneapolis time,
on May 20, 1999, and at any adjournment thereof. The undersigned hereby revokes
all proxies previously granted with respect to such Meeting.
The Board of Directors recommends that you vote FOR each proposal.
1. Amend the Bylaws to provide for staggered election of
directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Set the number of directors at eight (8).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Elect directors. Nominees: J. Fauth, S. Fischer, R. Spong -
Class I; one-year term. R. Erickson, A. O'Connell, R. Potts
Class II; two-year term. W. Farley, J. Grunewald - Class III;
three-year term.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
above (except those whose vote for all nominees
names have been written listed above
on the line below)
______________________________________________________________
4. Other Matters. In their discretion, the Proxies are authorized
to vote upon such other business as may properly come before
the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date ________________________, 1999
_____________________________________
_____________________________________
PLEASE DATE AND SIGN ABOVE exactly
as name appears at the left,
indicating, where proper, official
position or representative capacity.
For stock held in joint tenancy,
each joint owner should sign.
