<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MCDONALD & COMPANY INVESTMENTS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MCDONALD & COMPANY INVESTMENTS, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
/ / 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> 2
MCDONALD & COMPANY
INVESTMENTS, INC.
2100 MCDONALD INVESTMENT CENTER
800 SUPERIOR AVENUE
CLEVELAND, OH 44114 - 216/443-2300
June 26, 1995
To the Stockholders of McDonald & Company Investments, Inc.:
This year's Annual Meeting of Stockholders will be held at 9:30 A.M. (EDT),
on Wednesday, August 2, 1995, at The National City Bank Auditorium, Fourth
Floor, Atrium Building, 1900 East Ninth Street, Cleveland, Ohio.
We will be reporting on your Company's activities and you will have an
opportunity to ask questions about our operations.
We hope that you are planning to attend the Annual Meeting personally, and
we look forward to seeing you. Whether or not you expect to attend in person,
the return of the enclosed Proxy as soon as possible would be greatly
appreciated and will ensure that your shares will be represented at the Annual
Meeting. If you do attend the Annual Meeting, you may, of course, withdraw your
Proxy should you wish to vote in person.
On behalf of the Board of Directors and management of McDonald & Company
Investments, Inc., we would like to thank you for your continued support and
confidence.
Sincerely yours,
THOMAS M. O'DONNELL
Chairman
WILLIAM B. SUMMERS, JR.
President and Chief Executive Officer
<PAGE> 3
MCDONALD & COMPANY
INVESTMENTS, INC.
2100 McDonald Investment Center
800 SUPERIOR AVENUE
CLEVELAND, OH 44114
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 2, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of McDonald
& Company Investments, Inc. (the "Company") will be held at The National City
Bank Auditorium, Fourth Floor, Atrium Building, 1900 East Ninth Street,
Cleveland, Ohio, on Wednesday, August 2, 1995 at 9:30 A.M. (EDT), for the
following purposes:
1. To nominate and elect two individuals as Directors of the Company
for a three-year term ending at the Annual Meeting of Stockholders in 1998;
2. To consider and act upon a proposal to approve and adopt the
Company's 1995 Stock Bonus Plan;
3. To consider and act upon a proposal to approve and adopt the
Company's 1995 Key Employees Stock Option Plan; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Holders of Common Stock of record as of the close of business on June 9,
1995 are entitled to receive notice of and vote at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting. For
that reason we ask that you promptly sign, date and mail the enclosed Proxy card
in the return envelope provided. Stockholders who attend the Annual Meeting may
revoke their Proxies and vote in person.
By order of the Board of Directors
THOMAS F. MCKEE
Secretary
Cleveland, Ohio
June 26, 1995
<PAGE> 4
MCDONALD & COMPANY
INVESTMENTS, INC.
PROXY STATEMENT
MAILED ON JUNE 26, 1995
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 2, 1995
------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of McDonald & Company Investments, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company to be
held on August 2, 1995, and any adjournments thereof. The time, place and
purposes of the Annual Meeting are stated in the Notice of Annual Meeting of
Stockholders which accompanies this Proxy Statement.
The accompanying Proxy is solicited by the Board of Directors of the
Company and will be voted in accordance with the instructions contained thereon,
if it is returned duly executed and is not revoked. If no choice is specified on
the Proxy, it will be voted FOR the election of each of the individuals
nominated by the Board of Directors, FOR the proposal to approve and adopt the
Company's 1995 Stock Bonus Plan and FOR the proposal to approve and adopt the
Company's 1995 Key Employees Stock Option Plan. A stockholder may revoke a Proxy
at any time before it is exercised by delivery of written notice to the
Secretary of the Company or by a duly executed Proxy bearing a later date.
The record date for determination of stockholders entitled to vote at the
Annual Meeting was the close of business on June 9, 1995. On that date, there
were outstanding and entitled to vote 8,944,840 shares of Common Stock of the
Company. Each share of Common Stock is entitled to one vote. The Company's
Certificate of Incorporation does not provide for cumulative voting rights.
The costs of soliciting Proxies will be borne by the Company. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
material to the owners of stock held in their name and the Company will
reimburse them for their out-of-pocket expenses in connection therewith. In
addition to solicitation by mail, the Company's Directors, officers and
employees, without additional compensation, may solicit proxies by telephone,
mail and personal interview.
At the Annual Meeting, in accordance with the Delaware General Corporation
Law and the Company's Certificate of Incorporation, the inspectors of election
appointed by the Board of Directors for the Annual Meeting will determine the
presence of a quorum and will tabulate the results of stockholder voting.
Pursuant to the Company's By-Laws, at the Annual Meeting the holders of a
majority of the outstanding shares of the Company's Common Stock entitled to
vote at the meeting, present in person or by proxy, will constitute a quorum.
The shares represented at the Annual Meeting by proxies which are marked, with
respect to the election of Directors, as "withheld" or, with respect to any
other proposals, "abstain", will be counted as shares present for purposes of
determining whether a quorum is present.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name for beneficial owners have the authority to vote on certain items
when they have not received instructions from such beneficial owners. Under
applicable Delaware law, if a broker returns a proxy and has not voted on a
certain proposal, such broker non-votes will count for purposes of determining a
quorum.
Pursuant to the Company's By-Laws, at the Annual Meeting, a plurality of
the votes cast is sufficient to elect a nominee as a Director. In the election
of Directors, votes may be cast in favor
1
<PAGE> 5
or withheld; votes that are withheld or broker non-votes will have no effect on
the outcome of the election of Directors.
Pursuant to the Company's By-Laws, all other questions and matters brought
before the meeting will be decided by the vote of the holders of a majority of
the outstanding shares entitled to vote thereon present in person or by proxy at
the meeting, unless otherwise provided by law or by the Certificate of
Incorporation. In voting for such other matters, votes may be cast in favor,
against or abstained. Abstentions will count as present for purposes of the
proposal on which the abstention is noted and will have the effect of a vote
against the proposal. Broker non-votes, however, are not counted as present and
entitled to vote for purposes of determining whether a proposal has been
approved and will have no effect on the outcome of such proposal.
THE COMPANY
McDonald & Company Investments, Inc. is a holding company which was
incorporated under the laws of the State of Delaware on May 20, 1983, and
through its principal subsidiary, McDonald & Company Securities, Inc. ("McDonald
Securities"), operates a regional investment banking, investment advisory, and
brokerage business. As used in this Proxy Statement, the "Company" refers,
unless the context requires otherwise, to McDonald & Company Investments, Inc.
and its subsidiaries. The Company succeeded to the business of McDonald &
Company, a partnership (the "Partnership") on July 20, 1983.
2
<PAGE> 6
STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth, as of June 9, 1995, the beneficial
ownership of Common Stock of (i) each person who is known to the Company to own
beneficially more than 5% of the Company's Common Stock, (ii) each Director of
the Company, (iii) each of the executive officers named in the Summary
Compensation Table included elsewhere herein, and (iv) all Directors and
executive officers as a group as of June 9, 1995, and the percentage of the
outstanding shares represented thereby:
<TABLE>
<CAPTION>
PERCENT
NAME OF BENEFICIAL OWNER, DIRECTOR, EXECUTIVE AMOUNT AND NATURE OF OF
OFFICER OR NUMBER OF PERSONS IN GROUP BENEFICIAL OWNERSHIP(1) CLASS
- ------------------------------------------------------- ----------------------- -------
<S> <C> <C>
Peter R. Kellogg (2)
120 Broadway
New York, New York 10271............................. 600,000 6.56%
Bennett E. Bidwell(3).................................. 4,948(7) *
Rena J. Blumberg(3).................................... 6,000(7) *
Eugene H. Bosart III(4)................................ 58,345(8)(10) *
Robert T. Clutterbuck(4)............................... 128,638(7)(8)(11) 1.41
David W. Ellis III(4).................................. 64,589(8)(12) *
James A. Karman(3)..................................... 6,000(7) *
David W. Knall(4)...................................... 136,590 1.49
Frederick R. Nance(3).................................. 3,930(7) *
Willard E. Carmel(5)................................... 204,628(9) 2.24
Thomas M. O'Donnell(6)................................. 153,696(8) 1.68
William B. Summers, Jr.(6)............................. 174,698(7)(8) 1.91
Donald E. Weston(6).................................... 297,435(8) 3.25
All Directors and executive officers
as a group (23 persons).............................. 1,719,574(7)(8) 18.79
</TABLE>
- ---------------
* Less than one percent.
(1) Does not include vested beneficial interests in certain of the Company's
employee benefit plans. See "Compensation of Executive Officers."
(2) Based solely upon information contained in a Schedule 13D filed with the
Securities and Exchange Commission.
(3) Director of the Company.
(4) Executive officer of the Company.
(5) Director and officer of the Company.
(6) Director and executive officer of the Company.
(7) Includes the following number of shares of Common Stock which such
individual or group had the right to acquire within 60 days of the date of
the mailing of this Proxy Statement through the exercise of stock options:
2,880 shares (Mr. Bidwell); 4,800 shares (Ms. Blumberg); 4,800 shares (Mr.
Clutterbuck); 4,800 shares (Mr. Karman); 2,880 shares (Mr. Nance); 12,000
shares (Mr. Summers); and 90,840 shares (all Directors and executive
officers as a group). These individuals directly own the balance of their
shares. For purposes of calculating the percentage of outstanding shares
beneficially owned by such individual or group, the shares which such
individual or group had the right to acquire during that period by exercise
of stock options are deemed to be outstanding.
(8) Includes shares of Common Stock owned under the Company's 1993 Stock Bonus
Plan.
(9) Includes 60,000 shares of Common Stock owned by Mr. Carmel's spouse and
40,000 shares of Common Stock owned by a partnership, of which Mr. Carmel
is a partner.
(10) Includes 680 shares of Common Stock owned by Mr. Bosart's spouse.
(11) Includes 20,122 shares of Common Stock owned by Mr. Clutterbuck's spouse
and 84 shares of Common Stock owned by Mr. Clutterbuck as custodian for his
minor children.
(12) Includes 2,102 shares of Common Stock beneficially owned by Mr. Ellis
through a trust.
3
<PAGE> 7
ELECTION OF DIRECTORS
The members of the Company's Board of Directors are divided into three
classes with the term of office of one class expiring each year. At the Annual
Meeting, two Directors will be elected to serve a three-year term until the
Annual Meeting in 1998 and until their successors have been elected and
qualified. At its May 3, 1995 meeting, the Board of Directors nominated William
B. Summers, Jr. and Frederick R. Nance to stand for election as Directors at the
Annual Meeting. Messrs. Summers and Nance are presently Directors of the
Company. After three years of dedicated service, Bennett E. Bidwell decided not
to stand for election as a Director.
Unless otherwise directed, the persons named in the accompanying Proxy will
vote for the election of the two nominees set forth in the table below as
Directors of the Company for a three-year term. In the event of the death of or
inability to act of either of the nominees, the Proxies will be voted for the
election as a Director of such other person as the Board of Directors may
recommend. The Board of Directors has no reason, however, to anticipate that
this will occur. In no event will the accompanying Proxy be voted for more than
two nominees or for persons other than those named below and any such substitute
nominee for any of them.
The following table lists the nominees for election at the Annual Meeting
and those Directors who will continue in office subsequent to the Annual
Meeting, and certain other information with respect to each individual,
including the year certain individuals were partners in the Partnership, the
predecessor to the Company's business.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND DIRECTORSHIPS(1)
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
William B. Summers, Jr. (2)(5) 45 Director of the Company since June 7, 1983; Chief
Executive Officer of the Company and McDonald
Securities since January 1, 1994; President of
the Company and McDonald Securities since April
1, 1989; Executive Vice President of the Company
and McDonald Securities from November 1, 1988 to
April 1, 1989; Managing Director (Fixed Income
Institutional Sales) of McDonald Securities from
June 7, 1983 to November 1, 1988; Partner from
1975 to 1990.
Frederick R. Nance (2)(6)(7) 41 Director of the Company since July 28, 1992;
Partner since 1987 and member of the Management
Committee of Squire, Sanders & Dempsey,
Attorneys-at- Law, Cleveland, Ohio. Mr. Nance
also serves on the board of various civic and
charitable organizations, including St. Ignatius
High School, Ohio State Legal Services
Association, Parmadale and the Cleveland State
University Foundation.
</TABLE>
4
<PAGE> 8
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND DIRECTORSHIPS(1)
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Thomas M. O'Donnell (3)(5)(8) 59 Director of the Company since June 7, 1983; Chair-
man of the Board of the Company and McDonald
Securities since April 1, 1989; Chief Executive
Officer of the Company and McDonald Securities
from April 1, 1989 to January 1, 1994; President
of the Company and McDonald Securities from July
23, 1984 to April 1, 1989; Secretary of the
Company from June 7, 1983 to July 23, 1984;
Managing Director (Corporate Finance and Special
Products) and Secretary of McDonald Securities
from June 7, 1983 to July 23, 1984; Partner from
1968 to 1990 and Managing Partner from 1989 to
1990.
Donald E. Weston (3) 60 Director of the Company since October 4, 1991;
Chairman and Chief Executive Officer of the
Gradison Division of McDonald Securities since
October 4, 1991; Chairman of the Board and Chief
Executive Officer of Gradison & Company
Incorporated from January, 1982 to October 4,
1991; Trustee and Chairman of the Board of the
Gradison-McDonald U.S. Government Trust from
January, 1982 to September 27, 1993, of the
Gradison Growth Trust since August, 1983, of the
Gradison-McDonald Government Income Fund since
September, 1987 and of the Gradison-McDonald
Municipal Custodian Trust since September, 1992.
Willard E. Carmel (4)(5)(6) 65 Director of the Company since June 7, 1983; Chair-
man of the Board (Retired) of the Company since
1989; Investment Broker of McDonald Securities
since April 1, 1989; Chairman of the Board of the
Company and McDonald Securities from June 7, 1983
to April 1, 1989; President of the Company and
McDonald Securities from June 7, 1983 to July 23,
1984; Partner from 1965 to 1989 and Managing
Partner from 1979 to 1989.
James A. Karman (4)(6)(7)(8) 58 Director of the Company since May 1, 1990;
President and Chief Operating Officer for more
than five years of RPM, Inc., Medina, Ohio, a
diversified manufacturer of products for the
waterproofing, corrosion control and general
maintenance markets, and products for the
do-it-yourself homeowner and hobby markets.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND DIRECTORSHIPS(1)
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Rena J. Blumberg (3)(6) 60 Director of the Company since July 31, 1990; Commu-
nity Relations Director for more than five years
for WRMR-AM/WDOK-FM radio stations, Cleveland,
Ohio; Community Consultant since 1988 for Sun
Newspapers, Inc., Cleveland, Ohio, a publisher of
suburban newspapers. Ms. Blumberg also serves as
a Director of Blue Cross/Blue Shield of Ohio,
Inc., as a Trustee of Brandeis University, and as
a director of various other civic and charitable
organizations.
</TABLE>
- ---------------
(1) The following Directors of the Company also serve as directors for the
publicly-held corporations listed opposite their names below:
<TABLE>
<S> <C>
James A. Karman RPM, Inc.
Sudbury, Inc.
Shiloh Industries, Inc.
Thomas M. O'Donnell Seaway Food Town, Inc.
</TABLE>
(2) Term as Director expires in 1995. Nominee for election to three-year term to
expire in 1998.
(3) Term as Director expires in 1997.
(4) Term as Director expires in 1996.
(5) Member of the Management Committee.
(6) Member of the Compensation Committee.
(7) Member of the Audit Review Committee.
(8) Member of the Nominating Committee.
The Company pays its Directors who are not employees of the Company an
annual retainer of $6,000 plus $1,500 for each Board of Directors meeting
attended. Each Director who is not an executive officer of the Company receives
$1,000 for each Committee meeting attended. The Board of Directors generally
meets quarterly.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Management Committee, an Audit Review
Committee, a Compensation Committee and a Nominating Committee, the members of
each of which are indicated in the foregoing table.
The Management Committee exercises the power and authority of the Board of
Directors in the interim period between Board meetings. The Management Committee
did not meet during the last fiscal year. The Audit Review Committee reviews the
activities of the Company's internal auditors and independent public
accountants, as well as various Company policies and practices. The Audit Review
Committee met three times during the last fiscal year. The Compensation
Committee is responsible for the determination of compensation payable to the
executive officers of the Company and McDonald Securities. The Compensation
Committee is also responsible for the administration of the Company's 1993 Stock
Bonus Plan and has the authority, under both Plans, to determine to whom shares
are granted, the number of shares granted and the time the shares are granted,
all subject to the provisions of the Plans. The Compensation Committee met twice
during the last fiscal year. The Nominating Committee reviews potential
candidates for election as Directors of the Company and makes recommendations to
the Board of Directors as to nominees for election. The Nominating Committee did
not meet during the last fiscal year. Stockholders of the Company desiring to
submit names of potential candidates for consideration by the Nominating
Committee for election as Directors of the Company may do so by writing to the
Chairman of the Nominating Committee, at the address of the Company's principal
6
<PAGE> 10
executive offices, 2100 McDonald Investment Center, 800 Superior Avenue,
Cleveland, Ohio 44114.
The Company's Board of Directors met four times during the last fiscal
year. No Director attended fewer than 75% of the aggregate number of meetings of
the Board of Directors and the committees on which he or she served during the
period for which he or she was a member of the Board, except for Mr. Bidwell.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors includes Willard E.
Carmel, the Chairman of the Board (Retired) of the Company and an Investment
Broker of McDonald Securities.
Frederick R. Nance, a member of the Compensation Committee of the Board of
Directors, is a partner in the law firm of Squire, Sanders & Dempsey, which
rendered legal services to the Company during fiscal 1995.
CERTAIN TRANSACTIONS
In the ordinary course of its business McDonald Securities has extended
credit to employees, including Directors and officers, under Regulation T, which
regulates credit in cash and margin accounts. Such extensions of credit are
performing and are made on the same terms as for customers.
UNTIMELY BENEFICIAL OWNERSHIP REPORTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and Directors, and persons who own
more than ten percent of the Company's Common Stock, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Executive officers, Directors and greater than
ten-percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the fiscal year ended March 31, 1995 all Section 16(a)
filing requirements applicable to its executive officers, Directors and greater
than ten-percent beneficial owners were complied with except that one report,
relating to an exercise of a stock option, was filed late by Mr. Gordon A. Price
and one report, relating to his shares held in the McDonald & Company
Securities, Inc. Retirement Savings Trust and Plan was filed late by Mr. John F.
O'Brien.
7
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for each of
the fiscal years ended March 31, 1995, March 25, 1994 and March 26, 1993 of
those persons who were (i) the chief executive officer during the fiscal year
ended March 31, 1995 and (ii) the other four most highly compensated executive
officers of the Company for the fiscal year ended March 31, 1995 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------------------
------------------------------------------------------- NUMBER OF
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK UNDERLYING COMPEN-
POSITION YEAR SALARY BONUS SATION(3) AWARDS(2) OPTIONS(6) SATION(4)
- ------------------------ ---- -------- ---------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
William B. Summers, Jr. 1995 $200,000 $ 757,371(1)(2) $ 3,000 -- -- $ 1,738
President and Chief 1994 162,500 836,207(1) 6,745 -- 30,000 6,328
Executive Officer 1993 145,833 467,500 5,102 138,604 -- 8,685
of the Company and
McDonald Securities
David W. Knall 1995 0 1,764,659(5) 3,000 -- -- 0
Managing Director, 1994 0 1,985,181(5) 6,745 -- -- 0
Investment Consultant
and 1993 0 1,633,593(5) 5,102 0 -- 0
Co-Resident Manager
(Indianapolis, IN) of
McDonald Securities
David W. Ellis III,
C.P.A. 1995 16,250 1,048,457(1)(2)(5) 3,000 -- -- 2,404
Senior Vice President/ 1994 35,000 1,098,080(1)(5) 6,745 -- -- 1,803
Portfolio Manager, 1993 17,500 958,462 15,152 0 -- 768
Gradison-McDonald Asset
Management
Division of McDonald
Securities
Robert T. Clutterbuck, 1995 143,333 757,371(1)(2) 3,000 -- -- 4,096
Treasurer of the 1994 110,000 641,164(1) 6,745 -- 12,000 5,155
Company, Executive 1993 108,333 407,499 5,102 117,779 -- 6,480
Managing Director and
Chief Financial
Officer of McDonald
Securities
Eugene H. Bosart III 1995 0 696,394(5) 3,000 -- -- 7,289
Managing Director, 1994 0 853,007(5) 6,745 -- -- 8,773
(Regional Sales Manager 1993 0 598,169(5) 5,102 0 -- 11,565
- --Michigan) of McDonald
Securities
</TABLE>
- ---------------
No Named Executive Officer received personal benefits or perquisites during
fiscal 1995 in excess of the lesser of $50,000 or 10% of his aggregate salary
and bonus.
(1) For Mr. Summers, Mr. Ellis, and Mr. Clutterbuck, the bonus amount reported
includes (i) cash bonus awards and (ii) the value of shares granted under
the Company's 1993 Stock Bonus Plan, which provides for the issuance of
shares in lieu of a portion of the cash bonus that participants in the Plan
would otherwise be entitled to receive. Shares were valued at the closing
price of the Company's Common Stock on the dates of grant. The number of
shares and the value of the shares of Common Stock granted to each of these
individuals during fiscal 1995 and 1994, respectively, was as follows: 9,182
shares valued at $147,371, and 11,893 shares valued at $163,807 (Mr.
Summers); 6,508 shares valued at $87,370, and 2,837 shares valued at $45,037
(Mr. Ellis); and 9,182 shares valued at $147,371, and 8,990 shares valued at
$123,163 (Mr. Clutterbuck).
(2) The cumulative number of shares and value of each executive's cumulative
restricted stock awards at March 31, 1995 was 37,454 shares valued at
$533,720 (Mr. Summers), 9,345 shares valued at $133,166 (Mr. Ellis), and
30,940 shares valued at $440,895 (Mr. Clutterbuck). For fiscal years 1995
and 1994 under the 1993 Stock Bonus Plan, shares are restricted from
transfer for a period of two years from the date of grant. For fiscal year
1993, shares granted under the 1992 Restricted Stock Bonus Plan were subject
to vesting requirements. Shares awarded under the terms of the 1992
Restricted Stock Bonus Plan
8
<PAGE> 12
vest on the first day of June two years subsequent to the fiscal year with
respect to which such awards were made. Dividends were paid on the shares
issued pursuant to the 1992 Restricted Stock Bonus Plan and the 1993 Stock
Bonus Plan.
(3) For the fiscal years ended March 1995 and March 1994, includes amounts
contributed to the McDonald & Company Securities, Inc. Retirement Savings
Trust and Plan. For the fiscal year ended March, 1993, includes amounts
contributed to the Company's Profit Sharing Plan and the Company's Employee
Stock Ownership Plan for each of the Named Executive Officers (except David
W. Ellis III for whom the amount represents the contribution to the Gradison
Retirement Savings Plan).
(4) Includes the compensation value of Split Dollar Life Insurance premiums and
Executive Supplemental Life Insurance premiums for each of the Named
Executive Officers.
(5) Bonuses for Messrs. Knall, Ellis, and Bosart include (i) sales commissions,
representing a percentage of gross commissions on sales, (ii) incentive
bonuses, based on a formula relating to gross commissions on sales and,
(iii) with respect to Messrs. Knall and Bosart, a sales manager's bonus,
representing a discretionary bonus earned as resident or regional manager.
Sales commissions for Messrs. Knall, Ellis, and Bosart, respectively, for
the 1995 fiscal year equalled $1,556,917, $918,421, and $453,204; for the
1994 fiscal year equalled $1,747,155, $966,745, and $535,550; and for the
1993 fiscal year equalled $1,402,240, $848,825 and $302,550. Incentive
bonuses for Messrs. Knall, Ellis, and Bosart, respectively, for the 1995
fiscal year were $207,742, $130,036, and $59,678; for the 1994 fiscal year
were $192,813, $131,335 and $58,932; and for the 1993 fiscal year were
$182,942, $109,637 and $51,366. The branch manager's bonus for Mr. Bosart
was $183,512, $258,525, and $244,253, respectively, for fiscal years 1995,
1994 and 1993. The branch manager's bonus for Mr. Knall was $45,213, and
$48,411, respectively, for fiscal years 1994 and 1993.
(6) Options were awarded under the Company's Stock Option Plan, vest in equal
amounts over five years after the date of grant and expire ten years after
the date of grant.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the exercise of options to
purchase the Company's Common Stock by the Named Executive Officers and
unexercised options to purchase the Company's Common Stock for the Named
Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND MARCH 31, 1995 OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William B. Summers, Jr. -- $0 6,000 24,000 $ 9,252 $37,008
David W. Knall -- 0 0 0 0 0
David W. Ellis III -- 0 0 0 0 0
Robert T. Clutterbuck -- 0 2,400 9,600 3,950 15,802
Eugene H. Bosart III -- 0 0 0 0 0
</TABLE>
- ---------------
(1) Based on the difference between the exercise price of the options and the
closing price of the Common Stock on the New York Stock Exchange on March
31, 1995.
9
<PAGE> 13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors reviews the Company's
existing and proposed executive compensation plans and makes recommendations to
the Board of Directors regarding such plans and the awards to be made
thereunder. All members of the Committee, with the exception of Willard E.
Carmel, are outside Directors.
COMPENSATION PHILOSOPHY
The Company seeks to provide executives with compensation that rewards
individual performance during the year and provides incentives to executives to
improve the long-term performance of the Company. The Company has traditionally
paid relatively modest base salaries to its salaried officers and has
supplemented these salaries with performance-based bonuses. A portion of these
bonuses are paid in shares of Common Stock.
In 1993, Congress adopted Section 162(m) of the Internal Revenue Code.
Section 162(m) limits the ability of public companies to deduct compensation in
excess of $1,000,000 paid to certain executive officers, unless such
compensation is "performance based" within the meaning of Section 162(m). While
the Committee believes it is essential that there be a correlation between the
Company's performance and the compensation of its executive officers, it
believes that the criteria under Section 162(m) necessary for items of
compensation to qualify as "performance based" unduly limits the Committee's
flexibility in determining compensation arrangements and in administering
compensation programs. Therefore, the Committee has determined not to make
changes to the Company's compensation programs or to the composition of the
Committee in response to the adoption of Section 162(m). However, the Committee
has determined to require that all amounts in excess of $1,000,000 which may be
paid to an executive subject to Section 162(m) must be deferred to subsequent
periods pursuant to a deferred compensation program.
FISCAL 1995 COMPENSATION DECISIONS
Salaries. Investment brokers generally receive minimal or no base salaries,
and are compensated primarily or exclusively on a commission basis. In making
decisions on base salaries, the Committee evaluated the performance of each
individual considered during the prior year, the Company's results of operations
and the responsibilities of the executive officers. In keeping with its desire
to base much of the compensation of the Company's executives on performance
during the year, the Committee generally determined to only make changes in the
base salaries of certain executives due to their new positions and increased
responsibilities, and to maintain salaries for most other executive officers at
the same level as the prior year.
Bonuses. The bonuses paid to the Company's executive officers for fiscal
1995 were awarded under its incentive bonus program. Participants in this
program have an opportunity to earn significant cash bonuses based on the
Company's financial performance, as compared to certain other regional
investment firms, and the participant's performance during the fiscal year.
The amount allocated to the incentive bonus plan for fiscal 1995 was based
on the Committee's assessment of the Company's financial performance as compared
to prior years and to the performance of five other regional investment banking
firms. Certain companies used for comparative purposes are included in the
Lipper Regional Brokerage Firm Index, and were chosen because their mix of
business was deemed comparable to that of the Company. In measuring the
Company's comparative performance, the Committee considered various financial
ratios, including pre-tax return on revenues, average equity and average
capital, pre-tax earnings gain, common stock performance, increase in equity
capital and profit margin improvement. The incentive bonuses paid to individual
executives were based primarily upon the
10
<PAGE> 14
Committee's assessment of their individual performance. An executive's
individual performance is measured primarily by reference to the volume of
business generated by or under the direction of the executive during the fiscal
year. In determining the overall levels of compensation payable to each of the
Company's executive officers, the Committee also considered the results of an
independent survey of compensation paid by other securities firms to persons
serving in similar capacities. The firms included in the independent survey
included a broader range of securities firms than those included in the Lipper
Regional Brokerage Firm Index.
Stock Options and Bonuses. The Company has established a stock bonus plan,
which provides for participants to receive a portion of their annual incentive
bonus, which would otherwise be paid in cash, in shares of the Company's Common
Stock. In general, the portion of an incentive bonus that is payable in Common
Stock increases with the size of a participant's incentive bonus in accordance
with a formula set forth in the Stock Bonus Plan. The amount of awards to each
executive officer of the Company who participated in the Stock Bonus Plan were
determined by reference to this formula. Participation in the Stock Bonus Plan
was not optional for the participants, except for certain age and stock
ownership limitations. No stock options were awarded to executive officers
during fiscal 1995.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
William B. Summers, Jr. has been Chief Executive Officer of the Company
since January 1, 1994.
Consistent with the Committee's desire to base much of the compensation of
the Company's executives on performance during the year, the Committee
determined not to make any adjustments to Mr. Summers' base salary for fiscal
1995. Mr. Summers' salary was last adjusted in January 1994, when he assumed the
responsibilities of Chief Executive Officer.
Mr. Summers participates in the incentive bonus program and, as with other
participants, the Committee's decisions concerning his bonus are based primarily
upon its assessment of his individual performance. In determining the amount of
Mr. Summers' bonus, the Committee considered the fact that as Chief Executive
Officer, Mr. Summers has responsibility for managing the Company's operations
and has direct responsibility for its financial performance. Therefore, the
Committee primarily measures his performance by reference to the Company's
overall financial performance and its assessment of his contributions to
achieving strategic objectives during the year. In assessing Mr. Summers'
contribution to the Company's financial performance, the Committee took into
account the decline in the Company's revenues and net income during the fiscal
year. However, it also considered the fact that the Company achieved its second
highest level of revenues and third highest level of net income during 1995,
despite difficult market conditions in the securities industry. In assessing Mr.
Summers' contribution to achieving the Company's strategic objectives, the
Committee considered the fact that during the year, the Company had made certain
enhancements to its operations and expanded the range of services that it was
able to provide to customers. While these enhancements represented expense items
during fiscal 1995, the Committee recognized that they are likely to contribute
to growth in revenues and earnings during future periods.
After considering the foregoing factors, the Committee determined to pay
Mr. Summers a bonus of $757,371 for fiscal 1995.
THE COMPENSATION COMMITTEE
James A. Karman, Chairman
Bennett E. Bidwell
Rena J. Blumberg
Willard E. Carmel
Frederick R. Nance
11
<PAGE> 15
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P Composite-500 Stock Index and the Lipper
Regional Brokerage Firm Index for the period from March 31, 1990 to March 31,
1995. The companies comprising the Lipper Regional Brokerage Firm Index are:
Advest Group, Inc.; Alex. Brown & Sons, Inc.; First Albany Companies, Inc.;
InterRegional Financial Group, Inc.; Interstate/Johnson Lane, Inc.; Kinnard
Investments, Inc.; Legg Mason, Inc.; Morgan Keegan & Company, Inc.; Piper
Jaffray Companies, Inc.; Raymond James Financial, Inc.; Rodman & Renshaw Capital
Group, Inc.; Scott & Stringfellow Financial, Inc.; Southwest Securities Group,
Inc.; Stifel Financial Corp.; and the Company. The graph assumes that the value
of the investment in the Company's Common Stock and each index was $100 at March
31, 1990 and that all dividends, if any, were reinvested.
COMPARISON OF THE COMPANY'S COMMON STOCK,
S&P 500 INDEX AND THE LIPPER REGIONAL BROKERAGE FIRM INDEX
<TABLE>
<CAPTION>
LIPPER RE-
MEASUREMENT PERIOD MCDONALD & GIONAL FIRM
(FISCAL YEAR COVERED) COMPANY (MDD) S&P 500 (S&P) INDEX (LRI)
<S> <C> <C> <C>
3/31/90 100 100 100
3/31/91 122 114 123
3/31/92 203 127 230
3/31/93 302 146 256
3/31/94 328 148 280
3/31/95 322 171 306
</TABLE>
PROPOSAL TO APPROVE AND ADOPT THE 1995 STOCK BONUS PLAN
At the Annual Meeting, stockholders will be asked to approve and adopt the
Company's 1995 Stock Bonus Plan (the "Amended Plan" or "Plan"), which amends and
restates the 1993 Stock Bonus Plan (the "Old Plan"), and provides for bonuses of
shares of the Company's Common Stock to eligible employees of McDonald
Securities.
GENERAL
On July 27, 1993, the stockholders ratified the Old Plan, which requires
certain eligible employees of McDonald Securities who participate in the
Company's annual incentive bonus plans to receive a portion of that bonus in
shares of the Company's Common Stock. At its February 8, 1995 meeting, the Board
of Directors of the Company determined to modify the Old Plan in an effort to
broaden the categories of employees who would participate in the Plan and
provide additional flexibility with respect to awards thereunder. In conjunction
with that determination, the Board also determined, subject to stockholder
approval, to amend and restate
12
<PAGE> 16
the Old Plan in its entirety, in order to increase the number of shares of
Common Stock subject to the Old Plan, extend the period of time during which
shares may be awarded under the Plan and make certain other revisions that the
Board deemed appropriate in connection with its decision to modify the Old Plan.
The following summary of the Amended Plan is not intended to be complete
and is qualified in its entirety by reference to the Plan, which is set forth as
Appendix A to this Proxy Statement.
PURPOSE OF THE AMENDED PLAN
As with the Old Plan, the purpose of the Amended Plan is to further the
growth, success and interest of the Company, McDonald Securities and the
stockholders of the Company by requiring certain eligible employees of McDonald
Securities who participate in the Company's bonus programs to receive a portion
of their annual incentive bonuses in shares of Common Stock under the terms and
conditions of and in accordance with the Amended Plan, thereby increasing their
direct involvement in the future success of the Company.
The proposed modifications reflected in the Amended Plan include changes to
the share ownership levels requiring mandatory participation, revision of the
eligibility criteria for participation and the addition of provisions allowing
participants to elect to receive awards of shares at an Adjusted Purchase Price
(as described herein) equal to either (i) 95% of the fair market value of the
shares or (ii) 85% of the fair market value of the shares. In the event that the
participant elects the first option, his or her shares will be subject to
restrictions on transfer for two years. If the participant elects the second
option, his or her shares will be subject to forfeiture in the event of
resignation or termination of employment during the three years following the
date of the Award. The changes to the Old Plan, and the material provisions of
the Amended Plan, are discussed in detail below.
ADMINISTRATION OF THE AMENDED PLAN
The Amended Plan will be administered by the Compensation Committee of the
Board of Directors (the "Committee"). The Committee will be composed of no fewer
than three members of the Board of Directors of the Company who will be
designated by the Board of Directors. Each member of the Committee must be a
"disinterested person" within the meaning of the Rule 16b-3 promulgated under
the Exchange Act and any successor to such rule as may be in effect from time to
time.
The Committee is authorized: (i) to construe and interpret the Plan; and
(ii) to issue such rules and interpretations as, in its judgment, are necessary
in order to administer the Plan effectively.
EMPLOYEES ELIGIBLE FOR THE AMENDED PLAN
Any employee of McDonald Securities will be eligible to participate in the
Amended Plan if the individual has been awarded a bonus under McDonald
Securities' Incentive Compensation Program or its Sales and Sales Management
Compensation Programs. An individual who may be eligible to participate in the
Amended Plan may elect not to participate in the Amended Plan if the individual
delivers a written election not to participate and provides written evidence
that he or she satisfies any of the following conditions:
(a) the individual has attained age fifty-seven (57) on the first day
of the relevant plan year; or
(b) the individual is not a Senior Managing Director, Executive
Managing Director, President, Chief Executive Officer or Chairman of the
Board and owns at least the following number of shares of Common Stock on
the first day of the relevant plan year:
13
<PAGE> 17
(i) 10,000 shares if the individual is awarded a Sales Bonus; or
(ii) 25,000 shares if the individual is awarded an Incentive Bonus
The term "Incentive Bonus" means a bonus paid to an employee under the
Company's Incentive Compensation Program. The term "Sales Bonus" means a bonus
paid to an employee under the Company's Sales and Sales Management Compensation
Programs.
Under the terms of the Old Plan, automatic participation was limited to
those individuals who received an Incentive Bonus or a Sales Bonus, had not
attained age fifty seven (57) on the first day of a relevant plan year and did
not own 25,000 shares of Common Stock if the individual received a Sales Bonus,
75,000 shares of Common Stock if the individual received an Incentive Bonus or
125,000 shares of Common Stock if the individual was the Chairman of the Board,
President or Senior Managing Director of the Company.
SHARES SUBJECT TO THE AMENDED PLAN
The Old Plan currently authorizes the Company to issue stock bonuses with
respect to an aggregate of 960,000 shares. Under the terms of the Amended Plan,
the number of shares with respect to which stock bonuses could be awarded would
increase to 2,000,000. An aggregate of 789,478 shares have been awarded as
bonuses under the Old Plan.
The shares to be awarded and issued to employees under the Amended Plan
will be shares of Common Stock, par value $1.00 per share, of the Company.
Either authorized and unissued shares, or shares re-acquired by the Company as a
result of the transfer restrictions set forth below, may be made available for
re-offering under the Plan.
If the proposal is adopted, the aggregate number of shares which may be
issued under the Amended Plan will be 2,000,000. However, in the event that
subsequent to the date of adoption of the Plan by the Board of Directors, the
outstanding shares of Common Stock should be changed by reason of stock splits
or dividends, then the number of shares of Common Stock issued under the Plan
may be appropriately adjusted by the Committee to reflect such change.
AWARD OF SHARES
Incentive Bonuses. The number of shares of Common Stock awarded to a
participant will be determined by dividing the stock portion of a participant's
Incentive Bonus by the Adjusted Purchase Price (as defined herein) of one share
of Common Stock. The stock portion of a participant's Incentive Bonus will be
determined as set forth on the following chart according to a participant's
bonus amount:
<TABLE>
<CAPTION>
STOCK PORTION OF BONUS
--------------------------------------------------------------
INCENTIVE BONUS AMOUNT
- --------------------------
OVER BUT NOT OVER
- --------- ------------
<C> <C> <S>
$ 0 $ 25,000 $0
$ 25,000 $ 50,000 $0 plus 10% of amount over $25,000
$ 50,000 $100,000 $2,500 plus 15% of amount over $50,000
$ 100,000 $10,000 plus 20% of amount over $100,000
</TABLE>
Under the terms of the Old Plan, a participant's Incentive Bonus was
aggregated with any other incentive bonus awarded during the fiscal year, for
the purpose of determining the stock portion of the Incentive Bonus. Under the
terms of the Amended Plan, a participant's Incentive Bonus will not be
aggregated with any other Incentive Bonus awarded during the fiscal year, for
the purpose of determining the stock portion of the Incentive Bonus. The Company
typically pays Incentive Bonuses in December and June.
Sales Bonuses. The number of shares of Common Stock awarded to a
participant will be determined by dividing the stock portion of a participant's
Sales Bonus by the Adjusted
14
<PAGE> 18
Purchase Price of one share of Common Stock. The stock portion of a
participant's Sales Bonus will be determined as set forth on the following chart
according to a participant's bonus amount:
RETAIL SALESPERSONS
<TABLE>
<CAPTION>
STOCK PORTION OF BONUS
---------------------------------------------------------------
SALES BONUS AMOUNT
- -------------------------
OVER BUT NOT OVER
- -------- ------------
<C> <C> <S>
$ 0 $ 10,000 $0
$ 10,000 $0 plus 50% of the amount over $10,000
</TABLE>
INSTITUTIONAL SALESPERSONS
Fixed Income Institutional Salespersons
<TABLE>
<CAPTION>
STOCK PORTION OF SALESPERSON'S COMMISSION EXPRESSED AS
PERCENTAGE OF TOTAL INSTITUTIONAL GROSS COMMISSIONS ON SALES
------------------------------------------------------------
TOTAL INSTITUTIONAL
GROSS COMMISSIONS ON SALES
- ----------------------------
OVER BUT NOT OVER
- ----------- ------------
<C> <C> <S>
$ 0 $ 300,000 0%
$ 300,000 $ 500,000 0.5%
$ 500,000 $ 750,000 1.0%
$ 750,000 $1,000,000 1.5%
$ 1,000,000 $1,250,000 2.0%
$ 1,250,000 $1,500,000 2.25%
$ 1,500,000 2.625%
</TABLE>
Equity Institutional Salespersons
<TABLE>
<CAPTION>
STOCK PORTION OF SALESPERSON'S COMMISSION EXPRESSED AS
PERCENTAGE OF TOTAL INSTITUTIONAL GROSS COMMISSIONS ON SALES
------------------------------------------------------------
TOTAL INSTITUTIONAL
GROSS COMMISSIONS ON SALES
- ----------------------------
OVER BUT NOT OVER
- ----------- ------------
<C> <C> <S>
$ 0 $ 400,000 0%
$ 400,000 $ 600,000 0.75%
$ 600,000 $ 800,000 1.00%
$ 800,000 $1,000,000 1.25%
$ 1,000,000 1.5%
</TABLE>
Equity Institutional Sales Traders
<TABLE>
<CAPTION>
STOCK PORTION OF SALES TRADER'S COMMISSION EXPRESSED AS
PERCENTAGE OF TOTAL INSTITUTIONAL GROSS COMMISSIONS ON SALES
------------------------------------------------------------
TOTAL INSTITUTIONAL
GROSS COMMISSIONS ON SALES
- ----------------------------
OVER BUT NOT OVER
- ----------- ------------
<C> <C> <S>
$ 0 0.25%
</TABLE>
Under the terms of the Old Plan, the Stock Portion of Sales Bonuses for
retail salespersons with bonus amounts in excess of $25,000 was equal to $7,500
plus 75% of the amount over $25,000. In addition, under the terms of the Old
Plan, for Equity Institutional Salespersons, the Stock Portion of a
Salesperson's Commission Expressed as a Percentage of Total Institutional Gross
Commission on Sales was 1.125% for sales over $600,000 but not over $800,000 and
was 1.5% for sales over $800,000.
Equity Institutional Sales Traders were not eligible to participate in the
Old Plan.
The Adjusted Purchase Price of one share of Common Stock will be determined
by calculating the average closing price of one share of Common Stock for the
five (5) trading days ending on the last day of the month immediately preceding
the month during which payment of
15
<PAGE> 19
the Incentive Bonus or Sales Bonus is actually made, and multiplying such
average price by either (a) ninety-five percent (95%) if the employee receives
Shares that are restricted from sale for two years or (b) eighty-five percent
(85%) if the employee receives Shares that are subject to complete forfeiture
for three years. No fractional shares will be awarded under the Plan. In the
event that a participant is entitled to a fractional share, such participant
shall be entitled to round up such determination to the next larger whole share.
AWARD PROVISIONS
Limitation on Transfer. Under the terms of the Old Plan, the shares of
Common Stock awarded thereunder may not be sold, transferred or otherwise
disposed of, or pledged, until the earliest of (i) the second anniversary of the
June 1st immediately following the end of the plan year for which such shares
were awarded; (ii) a change in control that occurs with respect to the Company
or (iii) the termination of the Plan. The foregoing restrictions on transfer
will not apply if a participant's employment with the Company terminates by
reason of death or total disability prior to the earliest of the events set
forth in clauses (i) through (iii) above.
If the proposal is adopted, the Old Plan would be amended to allow a
participant to receive shares under the Old Plan method or a new alternative,
which will allow participants to receive shares at eighty-five percent (85%) of
fair market value. If a participant elects to receive shares valued at 85% of
fair market value, if such shares will be subject to forfeiture for a three (3)
year period.
AWARDS UNDER THE AMENDED PLAN
No awards have been made subject to stockholder approval of the proposed
Plan. Because the amount of shares which may be awarded to a participant in the
Plan will be based upon the amount of that participant's Incentive Bonus or
Sales Bonus, it is not presently possible to determine the amount of shares that
will be awarded to participants with respect to the 1995 plan year. The table
below sets forth the awards of shares during fiscal 1995 that would have been
made to each of the persons and groups identified in the table if the proposed
amendment had been in effect at that time.
16
<PAGE> 20
NEW PLAN BENEFITS
1995 STOCK BONUS PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF SHARES
- ---------------------------------------------------- --------------- ----------------
<S> <C> <C>
William B. Summers Jr. $ 164,721 10,263
President and Chief Executive Officer of the
Company and McDonald Securities
David W. Knall -0- -0-
Managing Director, Investment Consultant and Co-
Resident Manager (Indianapolis, IN) of McDonald
Securities
David W. Ellis, III, CPA $ 60,882 4,535
Senior Vice President/Portfolio Manager,
Gradison-McDonald Asset Management
Division of McDonald Securities
Robert T. Clutterbuck $ 164,721 10,263
Treasurer of the Company, Executive Managing
Director and Chief Financial Officer of McDonald
Securities
Eugene H. Bosart, III -0- -0-
Managing Director, (Regional Sales Manager -
Michigan) of McDonald Securities
Executive Group (18 persons) $ 668,402 43,207
Non-Executive Director Group -0- -0-
Non-Executive Officer
Employee Group (178 persons) $ 1,742,987 119,310
</TABLE>
- ---------------
(1) These amounts represent the dollar value of assumed awards, based upon the
closing price of a share of Common Stock on the date of grant.
TERMINATION OF THE AMENDED PLAN
If the proposal is adopted, the Amended Plan will terminate on June 30,
2001 or such earlier date as may be determined by the Board of Directors of the
Company. Notwithstanding the foregoing, the Committee's right to award any
shares of Common Stock shall terminate after the last award of shares with
respect to the plan year ending in 1998. The Old Plan was scheduled for
termination on June 30, 1998 and the Committee's right to award any shares of
Common Stock would have terminated after the latest award of shares with respect
to the plan year ending in 1996.
FEDERAL INCOME TAX CONSEQUENCES
If a participant in the Amended Plan elects to receive shares of Common
Stock which will be restricted from sale for two years, the participant will be
taxed on the value of the shares of Common Stock issued pursuant thereto on the
date of the award of such shares. The participant will recognize as income the
full fair market value of the shares at ordinary income tax rates in effect at
that time.
If a participant in the Amended Plan elects to receive shares of Common
Stock which will be subject to a risk of forfeiture for three years, the
participant will be taxed on the value of the shares of Common Stock issued
pursuant thereto on the date the forfeiture provisions lapse, unless a
participant makes an election to be taxed on the value of the shares of Common
Stock on the date of the award of such shares. The participant will recognize as
income the full fair
17
<PAGE> 21
market value of the shares at ordinary income tax rates in effect when he or she
is taxed on the value of the shares.
Under proposed Internal Revenue Service regulations interpreting Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the
current composition of the Compensation Committee would preclude the Company
from deducting the amount of compensation attributable to the value of the
shares of Common Stock awarded to a Named Executive Officer after the Annual
Meeting of Stockholders held in 1996 if and to the extent that, in the year such
income is recognized, that individual's annual compensation exceeded $1 million.
RECOMMENDATION; REQUIRED VOTE
The Board of Directors recommends a vote FOR the proposal. The persons
named in the accompanying Proxy or their substitutes will vote such proxy for
this proposal unless it is marked to the contrary. A favorable vote of a
majority of the outstanding shares Common Stock on the record date is required
for the adoption of the proposal.
PROPOSAL TO APPROVE AND ADOPT THE
1995 KEY EMPLOYEES STOCK OPTION PLAN
BACKGROUND
The stockholders will be asked at the Annual Meeting to vote on a proposal
to approve and adopt the 1995 Key Employees Stock Option Plan (the "Plan"). The
Plan was adopted by the Board of Directors on May 3, 1995, subject to
stockholder approval.
The Board of Directors believes that the ability to issue stock options to
key employees provides substantial benefits to the Company and its stockholders.
Such options encourage employees to acquire a proprietary interest in the
Company through stock ownership and thereby afford them a greater incentive to
enhance the value of the Common Stock through their own efforts in improving the
Company's business. The granting of options also assists in attracting and
retaining key employees. Accordingly, the Board of Directors believes that
approval of the Plan is in the best interests of the Company and recommend that
stockholders vote in favor of the proposal.
The following summary of the Plan is not intended to be complete and is
qualified in its entirety by reference to it. A copy of the Plan is attached
hereto as Appendix B.
GENERAL
The Plan provides for the issuance of incentive stock options (which
qualify under Section 422 of the Code) and non-qualified stock options to
purchase 500,000 shares of Common Stock. Options under the Plan may be issued to
high-level executive officers or other valuable managerial employees of the
Company and its subsidiaries who, in the judgment of the Committee (as
hereinafter defined), are in a position to contribute to the continued growth
and future success of the Company and/or its subsidiaries ("Eligible
Employees").
No options have been awarded under the Plan. The Company is unable to state
with specificity the names of specific Eligible Employees and the exact number
of options to purchase shares of Common Stock which will be granted to such
Eligible Employees.
DURATION AND ADMINISTRATION OF THE PLAN
The Plan will terminate on May 3, 2005, unless earlier terminated by
resolution of the Board of Directors. The Plan will be administered by a
committee (the "Committee") consisting of at least three members, who shall be
designated by the Board. Each member of the Committee will act as an
administrative manager of the Plan and will be a "disinterested person" within
the
18
<PAGE> 22
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"). A majority of the Committee will constitute a quorum, and the
acts of a majority of the members present at any meeting at which a quorum is
present, or act approved in writing by all of the members, are acts of the
Committee.
Subject to the terms and conditions of the Plan, the Committee has full and
final authority in its absolute discretion: (a) to select the key employees to
whom options may be granted; (b) to determine the number of shares of Common
Stock subject to any option; (c) to determine the time when options will be
granted; (d) to determine the option price; (e) to determine the time when each
option may be exercised; (f) to determine at the time of grant of an option
whether and to what extent such option is an incentive stock option; (g) to make
determinations with respect to stock appreciation rights; (h) to prescribe the
form of the option agreements; (i) to adopt, amend and rescind such rules and
regulations as, in the Committee's opinion, may be advisable in the
administration of the Plan; and (j) to construe and interpret the Plan, the
rules and regulations and the instruments evidencing options granted under the
Plan and to make all other determinations deemed necessary or advisable for the
administration of the Plan. Any decision made or action taken by the Committee
in connection with the administration, interpretation and implementation of the
Plan and of its rules and regulations will be, to the extent permitted by law,
conclusive and binding upon all Eligible Employees and upon any person claiming
under or through any Eligible Employees. Neither the Committee nor any of its
members is liable for the act of any other member. No member of the Committee
will be eligible to receive any securities under the Plan. The maximum number of
stock options or stock appreciation rights which may be granted to any
particular employee during any calendar year is 50,000.
SECURITIES SUBJECT TO THE PLAN
Not more than 500,000 shares of Common Stock of the Company may be issued
pursuant to the Plan. In the event of stock splits, stock dividends,
combinations, exchanges of shares or similar capital adjustments, the Committee
may make an appropriate adjustment in the stock subject to the Plan. If any
option expires without having been fully exercised, the shares with respect to
which such option has not been exercised will be available for further option
awards.
GRANT AND EXERCISE OF OPTIONS
Subject to certain conditions, the duration of each option granted under
the Plan will be determined by the Committee, provided that no option shall be
exercisable later than the tenth anniversary of the date the option was granted,
and further provided that no incentive stock option granted to a person who is a
Substantial Stockholder (as hereinafter defined) at the time of the grant of
such option shall be exercisable later than the fifth anniversary of the date
the option was granted. The term "Substantial Stockholder" means any key
employee who owns more than 10% of the total combined voting power of all
classes of stock of either the Company or any subsidiary. The price of each
incentive stock option under the Plan will be determined by the Committee at the
time of grant but may not be less than 100% of the fair market value of a share
of Common Stock on the date the option is granted; provided, however, that if
the key employee is a Substantial Stockholder, the option price per share of
Common Stock will be determined by the Committee but may not be less than 110%
of the fair market value of a share of Common Stock on the date the option is
granted. The option price per share of Common Stock under each option granted
pursuant to the Plan which is not an incentive stock option will be determined
by the Committee at the time of grant and may be above or below the fair market
value of a share of Common Stock on the date the option is granted.
Except as otherwise provided, in the event of an Eligible Employee's death,
only the Eligible Employee may exercise an option, provided that a guardian or
other legal representative who has been duly appointed for such Eligible
Employee may exercise an option on behalf of the Eligible Employee. Upon
satisfaction of all conditions, the option may be exercised in whole or
19
<PAGE> 23
in part at any time until expiration of the right to exercise the option, but
this right is limited to whole shares. Options may be exercised by the Eligible
Employee by giving written notice to the Company of the Eligible Employee's
exercise of the option accompanied by full payment of the purchase price in cash
or its equivalent.
Each option shall be subject to restrictions or conditions with respect to
the right to exercise and the time and method of exercise as shall be prescribed
by the Committee. A dissolution or liquidation of the Company or, unless the
surviving corporation assumes said options, a merger or consolidation in which
the Company is not the surviving corporation, shall cause each outstanding
option to terminate, provided that during the option period each Eligible
Employee shall have the right to exercise his option. In addition, in the event
of a "change in control" of the Company, as defined in the Plan, the Committee
shall have the right, in its sole discretion: (i) to cause all outstanding
options to be immediately exercisable notwithstanding any vesting litigation
otherwise previously imposed on such options; and (ii) to accelerate the
termination date of all such options. Thereafter, upon such determination, an
Eligible Employee may exercise any and all outstanding options (in whole or in
part), whether or not such options are by their terms fully exercisable at such
time, and the Committee may authorize the acceptance of the surrender of the
right to exercise such option or any portion thereof, but in no event after the
expiration of the term of the option. The term "change in control" shall
include, but not be limited to: (i) the first purchase of shares pursuant to a
tender offer or exchange (other than a tender offer or exchange by the Company)
for all or part of the Company's common stock of any class or any securities
convertible into such common stock; (ii) the receipt by the Company of a
Schedule 13D or other advice indicating that a person is the "beneficial owner"
(as that term is defined in Rule 13d-3 under the Securities Exchange Act of
1934) of twenty percent (20%) or more of the Company's Common Stock calculated
as provided in paragraph (d) of said Rule 13d-3; (iii) the date of approval by
stockholders of the Company of an agreement providing for any consolidation or
merger of the Company in which the Company will not be the continuing or
surviving corporation or pursuant to which shares of capital stock, of any class
or any securities convertible into such capital stock, of the Company would be
converted into cash, securities, or other property, other than a merger of the
Company in which the holders of common stock of all classes of the Company
immediately prior to the merger would have the same proportion of ownership of
common stock of the surviving corporation immediately after the merger; (iv) the
date of the approval by stockholders of the Company of any sale, lease,
exchange, or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company; (v) the
adoption of any plan or a proposal for the liquidation (but not a partial
liquidation) or dissolution of the Company; or (vi) such other event as the
Committee shall, in its sole and absolute discretion, deem to be a "change in
control."
During the calendar year in which any incentive stock options granted under
the Plan first become exercisable by an Eligible Employee, the aggregate fair
market value of the shares of Common Stock which are subject to such incentive
stock options (determined as of the date the incentive stock options were
granted) may not exceed the sum of One Hundred Thousand Dollars ($100,000).
Options which are not designated as incentive stock options will not be subject
to the limitation described in the preceding sentence and will not be counted
when applying such limitation.
TERMINATION OF EMPLOYMENT
If an Eligible Employee ceases to be an employee of the Company, such
employee's option shall, unless otherwise provided in the option agreement,
terminate on the date he or she ceases to be so employed and neither the
employee nor any other person shall have any rights after the date he ceases to
be so employed to exercise the option. If the stock option is an incentive stock
option, no option agreement shall (a) permit any Eligible Employee to exercise
any incentive stock option more than three months after the date the Eligible
Employee ceased to be employed by the Company if the reason for the Eligible
Employee's termination of employment was other
20
<PAGE> 24
than death or disability; (b) permit any Eligible Employee to exercise any
incentive stock option more than one year after the date the Eligible Employee
ceased to be employed by the Company if the reason for the Eligible Employee's
termination of employment was due to the Eligible Employee's disability; (c)
permit any person to exercise any incentive stock option more than one year
after the date the Eligible Employee ceased to be employed by the Company if (i)
the reason for the Eligible Employee's termination of employment was death or
(ii) death within three months after ceasing to be employed by the Company. If
any option is exercisable following the Eligible Employee's death, then such
option shall be exercisable by the Eligible Employee's estate, or the person
designated in the Eligible Employee's Last Will and Testament, or the person to
whom the option was transferred by the applicable laws of descent and
distribution. The Committee may waive any restrictions or conditions set forth
in an option agreement concerning an Eligible Employee's right to exercise any
option and/or the time and method of exercise.
AMENDMENTS TO THE PLAN
The Committee is authorized to interpret the Plan and from time to time
adopt any rules and regulations for carrying out the Plan that it may deem
advisable. Subject to the approval of the Board of Directors of the Company, the
Committee may at any time amend, modify, suspend or terminate the Plan. In no
event, however, without the approval of stockholders, may any action of the
Committee or the Board of Directors result in: (a) amending, modifying or
altering the eligibility requirements; (b) increasing or decreasing, except as
set forth in "Securities Subject to the Plan" above, the maximum number of
shares as to which options may be granted; (c) decreasing the minimum option
price per share at which options may be granted under the Plan; (d) extending
either the maximum period during which an option is exercisable or the date on
which the Plan shall terminate; (e) changing the requirements relating to the
Committee; (f) making any other change which would cause any options granted
under the Plan as incentive stock options not to qualify as such options within
the meaning of Section 422 of the Code, except to conform the Plan and the
option agreements to changes in the Code or governing law; or (g) making any
change which would eliminate the exemption provided by Rule 16b-3 for the Plan
and for securities awarded under the Plan.
STOCK APPRECIATION RIGHTS
The Committee may provide, at the time of the grant of a stock option and
upon such terms and conditions as it deems appropriate, that an Eligible
Employee may have the right with respect to all or a portion of the option
granted to him to elect in lieu of exercising such options to surrender such
option in exchange for the consideration described below. Alternatively, the
Committee may provide, at the time of the grant of a stock option and upon such
terms and conditions as it deems appropriate, that an Eligible Employee shall
have the right with respect to all or a portion of the option granted to him to
receive the consideration set forth below upon exercising such option in
addition to any shares of Common Stock purchased upon exercise thereof. Stock
appreciation rights must be specifically granted by the Committee; however, the
Committee will have no authority to grant stock appreciation rights except in
connection with the grant of a stock option pursuant to the Plan, and no
Eligible Employee shall be entitled to such rights solely as a result of the
grant of an option to him. Stock appreciation rights, if granted, may be
exercised either with respect to all or a portion of the option to which they
relate. Stock appreciation rights are not transferrable separate from the option
with respect to which they were granted and are subject to all of the
restrictions on transfer applicable to such option. Stock appreciation rights
are exercisable only at such times and by such persons as are specified in the
option agreement governing the stock option with respect to which the stock
appreciation rights were granted. A stock appreciation right will provide that
an Eligible Employee will have the right to receive a percentage, not greater
than One Hundred Percent (100%) of the excess over the option price, if any, of
the fair market value of the shares of Common Stock covered by the option, as
determined by the Committee as of the date of exercise
21
<PAGE> 25
of the stock appreciation right, in the manner provided for in the Plan. Such
amount will be payable in one or more of the following manners, as determined by
the Committee: (a) in cash; (b) in shares of Common Stock having a fair market
value equal to such amount; or (c) in a combination of cash and shares of Common
Stock. If payment is made in whole or in part in shares of Common Stock, such
payment will reduce the number of shares available for the grant of options
under this Plan.
In no event may any Eligible Employee exercise any stock appreciation
rights granted under the Plan unless such Eligible Employee is then permitted to
exercise the option or the portion thereof with respect to which such stock
appreciation rights relate. If the option agreement with the Eligible Employee
provides that exercise of the stock appreciation right is in lieu of exercise of
the option, then (a) upon the exercise of any stock appreciation rights, the
option or that portion thereof to which the stock appreciation rights relate
will be cancelled, and (b) upon the exercise of the option or that portion
thereof to which the stock appreciation rights relate, the stock appreciation
rights will be cancelled, and the option agreement governing such option will be
deemed amended as appropriate without any further action by the Committee or the
Eligible Employee. If the option agreement with the Eligible Employee provides
that exercise of the stock appreciation rights in addition to exercise of the
option, then (a) upon the exercise of any stock appreciation rights, the option
or that portion thereof to which the stock appreciation rights relate will be
deemed exercised and (b) upon the exercise of the option, the stock appreciation
rights corresponding thereto will be deemed exercised to the extent the option
is exercised. The terms of any stock appreciation rights granted under the Plan
will be incorporated into the option agreement which governs the option with
respect to which the stock appreciation rights are granted, and will be such
terms (not inconsistent with the Plan) as the Committee may prescribe. The
granting of an option or stock appreciation right will impose no obligation upon
the Eligible Employee to exercise such option or right and the Company's
obligation to satisfy stock appreciation rights will not be funded or secured in
any manner.
INCOME TAX TREATMENT
The Company has been advised that under current law certain of the income
tax consequences under the laws of the United States to Eligible Employees and
the Company of options granted under the Plan generally should be as set forth
in the following summary. The summary only addresses income tax consequences for
Eligible Employees and the Company.
An Eligible Employee who is granted an incentive stock option which
qualifies under Section 422 of the Code will not recognize income at the time of
grant or exercise of such option. No federal income tax deduction will be
allowable to the Company upon the grant or exercise of such option. However,
upon the exercise of an incentive option, special alternative minimum tax rules
apply for the Eligible Employee. When the Eligible Employee sells such shares
more than one year after the date of exercise of the option and more than two
years after the date of grant of such option, the employee will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sales price of such shares and the option exercise price. If the
Eligible Employee does not hold such shares for this period, when the employee
sells such shares, the employee will recognize ordinary compensation income and
possible capital gain or loss in such amounts as are prescribed by the Code and
regulations thereunder. Subject to applicable provisions of the Code and
regulations thereunder, the Company generally will be entitled to a federal
income tax deduction int he amount of such ordinary compensation income.
An Eligible Employee to whom a non-qualified option (an option which is not
an incentive stock option) is granted will not recognize income at the time of
grant of such option. When such Eligible Employee exercises such non-qualified
option, the Eligible Employee will recognize ordinary compensation income equal
to the difference, if any, between the option price paid and the fair market
value, as of the date of option exercise, of the share the Eligible Employee
receives. The tax basis of such shares to such Eligible Employee will be equal
to the option price paid plus the amount includable in the Eligible Employee's
gross income, and the Eligible
22
<PAGE> 26
Employee's holding period for such shares will commence on the date on which the
Eligible Employee recognized taxable income in respect of such shares. Subject
to applicable provisions of the Code and regulations thereunder, the Company
generally will be entitled to a federal income tax deduction in respect of
nonqualified options in an amount equal to the ordinary compensation income
recognized by the Eligible Employee. Any compensation includable in the gross
income of an Eligible Employee in respect to a non-qualified option will be
subject to appropriate withholding for federal income and employment taxes.
Under proposed Internal Revenue Service regulations interpreting Section 162(m)
of the Code, the current composition of the Compensation Committee would
preclude the Company from deducting the amount of compensation attributable to
options granted to a Named Executive Officer after the Annual Meeting of
Stockholders held in 1996 if and to the extent that, in the year that such
options are exercised, that individual's annual compensation exceeded $1
million.
The grant of stock appreciation rights will have no immediate tax
consequences to the Company or the Eligible Employee receiving the grant. In
general, the amount of compensation that will be realized by the Eligible
Employee upon exercise of a stock appreciation right is equal to the difference
between the grant date valuation of the shares of Common Stock underlying the
stock appreciation right and the fair market value of the stock or cash received
on the date of exercise. The amount received by the Eligible Employee upon the
exercise of the stock appreciation rights will be included in the Eligible
Employee's ordinary income in the taxable year in which the stock appreciation
rights are exercised. Subject to the applicable provisions of the Code, the
Company generally will be entitled to a deduction in the same amount in that
year.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of options and stock
appreciation rights or the Company or to describe tax consequences based on
particular circumstances. It is based on United States federal income tax law
and interpretational authorities as of the date of this Proxy Statement, which
are subject to change at any time. The discussion does not address state or
local income tax consequences or income tax consequences for taxpayers who are
not subject to taxation in the United States.
RECOMMENDATION; REQUIRED VOTE
The Board of Directors recommends a vote FOR this proposal. The persons
named in the accompanying Proxy or their substitutes will vote such Proxy for
this proposal unless it is marked to the contrary. A favorable vote of a
majority of the outstanding shares of Common Stock on the record date is
required for adoption of the proposal.
OTHER MATTERS
The Board of Directors is not aware of any matter to come before the Annual
Meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. If other matters, however, properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying Proxy to
vote in accordance with their best judgment on such matters insofar as the
Proxies are not limited to the contrary.
A representative of the firm of Ernst & Young LLP, the Company's
independent auditors, will be present at the Annual Meeting and will have an
opportunity to make a statement if so desired and to respond to appropriate
questions from stockholders.
Any stockholder who wishes to submit a proposal for inclusion in the proxy
materials to be distributed by the Company in connection with its Annual Meeting
of Stockholders to be held in 1996 must do so no later than February 27, 1996.
To be eligible for inclusion in the 1996 proxy materials of the Company,
proposals must conform to the requirements set forth in Regulation 14A under the
Exchange Act.
23
<PAGE> 27
Upon the receipt of a written request from any stockholder, the Company
will mail, at no charge to the stockholder, a copy of the Company's Annual
Report on Form 10-K, including the financial statements and schedules required
to be filed with the Securities and Exchange Commission pursuant to Rule 13a-1
under the Exchange Act, for the Company's most recent fiscal year. Written
requests for such Report should be directed to:
Mr. Robert T. Clutterbuck
Treasurer
McDonald & Company Investments, Inc.
2100 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
You are urged to sign and return your Proxy promptly in the enclosed return
envelope to make certain your shares will be voted at the Annual Meeting.
By order of the Board of Directors
THOMAS F. MCKEE
Secretary
June 26, 1995
24
<PAGE> 28
APPENDIX A
MCDONALD & COMPANY INVESTMENTS, INC.
1995 STOCK BONUS PLAN
1. NAME AND PURPOSE.
1.1 The name of this plan is the McDonald & Company Investments, Inc. 1995
Stock Bonus Plan. The Plan amends and restates the McDonald & Company
Investments, Inc. 1993 Stock Bonus Plan in its entirety effective for bonus
payments determined with respect to fiscal years commencing April 1, 1995, and
thereafter. The Plan will continue to be maintained by McDonald & Company
Investments, Inc. (herein referred to as the "Parent Corporation") to further
the growth, success and interest of the Parent Corporation, McDonald & Company
Securities, Inc. (herein referred to as the "Corporation") and the stockholders
of the Parent Corporation by enabling employees of the Corporation who receive a
Qualifying Bonus as defined in Section 3.3 below to acquire shares of common
stock of the Parent Corporation ("Shares") under the terms and conditions of and
in accordance with this Plan, thereby increasing their direct involvement in the
success of the Corporation.
2. ADMINISTRATION OF THE PLAN.
2.1 This Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Parent Company which shall consist
of at least three directors, each of whom shall be a "disinterested person"
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 and any successor to such rule ("Rule 16b-3"). The Committee may, from
time to time, designate one or more persons or agents to carry out any or all of
its administrative duties hereunder; provided that none of the duties required
to be performed by the Committee under Rule 16b-3 or Section 2.3 of the Plan may
be delegated to any other person.
2.2 The Plan shall be administered and operated on the same annual
accounting period as the Parent Corporation (herein referred to as the "plan
year"), which presently is either the fifty-two (52) or fifty-three (53) week
period ending on the last Friday of each March. The first plan year will be
deemed to have commenced March 30, 1991 and to have ended March 27, 1992. In the
event that the Parent Corporation changes its annual accounting period, the plan
year shall automatically change and the Committee may make such adjustments to
the operation of the Plan as appropriate to reflect any short plan years,
adjustments to the dates that Shares are awarded or that restrictions lapse
hereunder or any other adjustments that may be appropriate to reflect the change
in the plan year.
2.3 The Committee shall interpret the Plan, and to the extent and in the
manner contemplated herein, it shall exercise the discretion granted to it. The
Committee shall issue from time to time such rules and interpretations as in its
judgment are necessary in order to administer the Plan effectively. The
Committee shall have the exclusive right in its sole discretion to determine the
number of Shares awarded to each participant, to determine the price or prices
at which Shares shall be awarded to each participant, to determine the time or
times when Shares may be awarded and to prescribe the form, which shall be
consistent with this Plan, of the instruments evidencing any award and issuance
under this Plan and the legend, if any, to be affixed to the certificates
representing Shares issued under this Plan.
3. ELIGIBLE EMPLOYEES AND PARTICIPATION.
3.1 Any employee of the Corporation shall be eligible to participate in the
Plan if he has been awarded a Qualifying Bonus as defined in Section 3.3 below
for the plan year or any portion of the plan year.
A-1
<PAGE> 29
3.2 No member of the Board of Directors of the Parent Corporation, unless
he is also an employee of the Corporation, and no member of the Committee, shall
be eligible to participate in the Plan.
3.3 The words "Qualifying Bonus" shall mean a bonus paid to an employee
under the Incentive Compensation Program or the Sales and Sales Management
Compensation Programs as adopted and operated by the Chairman and President of
the Parent Corporation and as such programs may be amended from time to time.
3.4 In the event an employee would otherwise participate in the Plan, such
an employee may elect not to participate in the Plan for a plan year in which
employee satisfies either of the following conditions if he delivers a written
election not to participate to the Committee within sixty (60) days after the
beginning of such plan year and provides written evidence acceptable to the
Committee that he satisfies such conditions:
(a) he has attained at least age fifty-seven (57) on the first day of
the relevant plan year; or
(b) he is not either a Senior Managing Director, Executive Managing
Director, President, Chief Executive Officer or Chairman of the Board and
owns at least the following number of Shares on the first day of the
relevant plan year:
(i) 10,000 Shares if he is awarded a Sales Bonus; or
(ii) 25,000 Shares if he is awarded an Incentive Bonus.
An election not to participate shall be:
(y) an ongoing election valid from year to year if an employee elects
not to participate under paragraph (a) above; and
(z) an election valid only for the year that the participant provides
satisfactory evidence of ownership of the number of Shares set forth in (b)
above.
An employee may revoke an ongoing election made pursuant to paragraph (y) for
any plan year as long as such revocation is received by the end of the sixty
(60) day period set forth above for a plan year.
3.5 All of the Shares beneficially owned by an employee or his spouse,
beneficially owned by or held for the benefit of his children or grandchildren
who are under the age of nineteen (19) or held for the benefit of the employee
under any qualified retirement plan maintained by the Parent Corporation or the
Corporation including, but not limited to, the McDonald & Company Securities,
Inc. Retirement Savings Trust and Plan, shall be included in determining whether
the employee satisfies the condition set forth in paragraph (b) of Section 3.4
above. Shares subject to an unexercised stock option granted to the employee
shall not be included in such determination. For purposes of this section, and
except as provided in the immediately preceding sentence, a person's "beneficial
ownership" of Shares shall be determined in accordance with the provisions of
Rule 16a-1(a)(2) promulgated under the Securities Exchange Act of 1934 and any
successor to such rule.
3.6 Subject to approval by the Board of Directors of the Parent
Corporation, the Committee shall have the specific right to amend the Plan to
include any class of employees that are excluded under Section 3.1 above upon
such terms and conditions as deemed appropriate by the Committee.
4. STOCK PORTION OF QUALIFYING BONUS.
4.1 The number of Shares that shall be awarded to a participant who is
entitled to receive a Qualifying Bonus shall be determined by dividing the Stock
Portion of a Participant's Qualifying Bonus by the Adjusted Purchase Price of
one Share. The Stock Portion of a Participant's
A-2
<PAGE> 30
Qualifying Bonus shall be determined under a formula according to the
Participant's Qualifying Bonus amount. Such formula may be reflected in a chart
which is adopted and approved by the Compensation Committee each year and is
attached hereto as Exhibit A to incorporate such chart as if fully set forth
herein. The Compensation Committee may adopt as many different formulas and
charts as it deems necessary for each class of employees who receive a
Qualifying Bonus.
4.2 The Stock Portion of a Participant's Qualifying Bonus shall be
determined separately for each Qualifying Bonus paid with respect to a plan
year. The amount of the current Qualifying Bonus for a plan year shall not be
aggregated with any Qualifying Bonuses previously paid with respect to such plan
year to determine the stock portion for the current Qualifying Bonus.
4.3 The Adjusted Purchase Price for one Share shall be determined by
calculating the average closing price of one Share for the five (5) trading day
period ending on the last day of the month immediately preceding the month that
includes the date in which payment of the Qualifying Bonus is actually made to
the participant, and multiplying such average price by either (a) ninety-five
percent (95%) if the employee receives Shares that are restricted pursuant to
Section 6.1 below or (b) eighty-five percent (85%) if the employee receives
Shares that are restricted pursuant to Section 6.2 below.
5. SHARES SUBJECT TO THE PLAN.
5.1 The Shares which may be awarded and issued to employees under this Plan
shall be made available, at the discretion of the Board of Directors, either
from authorized and unissued Shares of the Parent Corporation or from Shares
reacquired by the Parent Corporation, including Shares purchased in the open
market.
5.2 Shares issued to employees under this Plan shall be subject to the
terms, conditions and restrictions specified in Section 6 and to such other
terms, conditions and restrictions as the Committee in its discretion may
provide.
5.3 Subject to the provisions of the succeeding paragraphs of this Section
5, the number of Shares which may be issued under this Plan for a plan year
shall not exceed four percent (4%) of the issued and outstanding Shares as of
the first day of such plan year and the aggregate number of Shares which may be
issued under this Plan shall not exceed 2,000,000 Shares. In the event that
either limitation applies in a plan year, the number of Shares that shall be
awarded to an employee shall be that number of Shares equal to the aggregate
number of Shares as limited by this Section 5.3 multiplied by a fraction where
the numerator is equal to the number of Shares that would have been awarded to
such employee without taking into account the limitations in this Section 5.3
and the denominator is equal to the total number of Shares that would have been
awarded to all employees without taking into account the limitations in this
Section 5.3.
5.4 In the event that the outstanding Shares shall be changed by reason of
shares splits or combinations, recapitalization or reorganizations, or share
dividends, the number of Shares and the class or classes of securities which may
thereafter be issued under this Plan may be appropriately adjusted as determined
by the Committee so as to reflect such change.
5.5 No fractional Shares shall be awarded under the Plan. In the event that
the determination of the number of Shares that a participant is entitled to
under the Plan results in a fractional Share, such participant shall be entitled
to the number of whole Shares that results from rounding up such determination
to the next larger whole Share.
A-3
<PAGE> 31
6. TRANSFER RESTRICTIONS.
6.1 The Shares shall not be sold, transferred or otherwise disposed of and
shall not be pledged or otherwise hypothecated (and any such sale, transfer or
other disposition, pledge or other hypothecation being hereinafter referred to
as "to dispose of" or a "disposition") until the earliest of (a) the second
(2nd) anniversary of the June 1st immediately following the end of the plan year
for which such Shares were awarded; (b) the lapse of the right of the Parent
Company to a return of such Shares pursuant to Section 6.2 below; (c) a change
in control that occurs with respect to the Parent Company; or (d) the
termination of the Plan.
6.2 An employee, who is not an employee hired during the plan year for
which he is first entitled to an award of Shares hereunder, may elect to be
subject to the forfeiture restrictions under this Section 6.2. If such an
employee so elects, his Adjusted Purchase Price for one (1) Share shall be
determined as set forth in paragraph (b) of Section 4.3 above and his Shares
awarded for such plan year shall be subject to complete forfeiture and return to
the Parent Company of such Shares during the period ending on the third (3rd)
anniversary of the June 1st immediately following the end of the plan year for
which such Shares were awarded. Any election made by an eligible employee under
this Section 6.2 must be received by the Committee not later than:
(a) April 14, 1995 with respect to the plan year commencing April 1,
1995; and
(b) the last day before the first day of any plan year commencing
after the 1995 plan year.
Any election made by an employee under this Section 6.2 shall be an ongoing,
valid election for each plan year after the first plan year that the election
applies to unless the employee revokes such election by the dates set forth
above.
6.3 In the event that a participant's employment with the Corporation shall
terminate by reason of death or total disability prior to the earliest of (a)
the second (2nd) anniversary of the June 1st immediately following the end of
the plan year for which such Shares were awarded; (b) the lapse of the right of
the Parent Company to a return of such Shares pursuant to Section 6.2 below; (c)
a change in control that occurs with respect to the Parent Company; or (d) the
termination of the Plan, then the restrictions imposed on such Shares by this
Section 6 shall lapse and be of no further force and effect.
6.4 The Committee, in its sole discretion, shall decide whether a change in
control has occurred. If the Committee shall decide that a change in control has
occurred it shall issue written notice to participants of such fact and shall
issue all Shares which have become unrestricted to participants as soon as
possible after such notice. In determining whether a change in control has
occurred, the Committee shall consider, but shall not be limited to, the
occurrence of the following events: (i) the first purchase of Shares pursuant to
a tender offer or exchange (other than a tender offer or exchange by the Parent
Corporation) for all or part of the Parent Corporation's common stock of any
class or any securities convertible into such common stock; (ii) the receipt by
the Parent Corporation of a Schedule 13D or other advice indicating that a
person is the "beneficial owner" (as that term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of twenty percent (20%) or more of the
Parent Corporation's Shares of common stock calculated as provided in paragraph
(d) of said Rule 13d-3; (iii) the date of approval by shareholders of the Parent
Corporation of an agreement providing for any consolidation or merger of the
Parent Corporation or the Corporation in which the Parent Corporation or the
Corporation will not be the continuing or surviving corporation or pursuant to
which shares of capital stock, of any class or any securities convertible into
such capital stock, of the Parent Corporation would be converted into cash,
securities, or other property, other than a merger of the Parent Corporation in
which the holders of shares of all classes of the Parent Corporation's common
stock immediately prior to the merger would have
A-4
<PAGE> 32
the same proportion of ownership of common stock of the surviving corporation
immediately after the merger; (iv) the date of the approval by shareholders of
the Parent Corporation of any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or substantially all the
assets of the Parent Corporation or the Corporation; or (v) the adoption of any
plan or proposal for the liquidation (but not a partial liquidation) or
dissolution of the Parent Corporation or the Corporation.
6.5 The Committee may require any employee to execute and deliver to the
Parent Corporation a stock power in blank with respect to the Shares issued
subject to the restrictions in Section 6.2 above and may require that the Parent
Corporation retain possession of the certificates for Shares with respect to
which all of the restrictions have not lapsed. Notwithstanding retention of
certificates by the Parent Corporation, the employee in whose name certificates
are issued shall have all rights (including dividend and voting rights) with
respect to the Shares represented by such certificates, subject to the terms,
conditions and restrictions specified under this Plan, and the Shares
represented by such certificates shall be considered as issued and outstanding
for all purposes.
7. OTHER RESTRICTIONS.
7.1 The Committee may impose such other restrictions on any Shares awarded
pursuant to the Plan as it may deem advisable, including, without limitation,
restrictions under the Securities Act of 1933 as amended, under the requirements
of any stock exchange upon, which such Shares are then listed and under any
state blue sky or securities laws applicable to such Shares.
8. ESCROW OR LEGEND.
8.1 In order to enforce the restrictions imposed upon Shares issued
hereunder, the Committee also may require any participant to enter into an
Escrow Agreement providing that the certificates representing Shares issued
pursuant to this Plan shall remain in the physical custody of any escrow holder
until any or all of the restrictions imposed pursuant to this Plan have
terminated. In addition, the Committee may cause a legend or legends to be
placed on any certificates representing Shares issued pursuant to this Plan,
which legend or legends shall make appropriate reference to the various
restrictions imposed hereunder.
9. AMENDMENTS.
9.1 This Plan may be amended at any time by the Board of Directors of the
Parent Corporation, provided, that if this Plan shall have been approved by the
stockholders of the Parent Corporation no such amendment shall increase the
maximum number of Shares that may be issued pursuant to this Plan, except
pursuant to Section 5 hereof, without the further approval of such stockholders;
and provided further, that no amendment to this Plan shall modify or impair the
rights of participants who have been awarded Shares, or who have been granted
the right to an award of Shares hereunder prior to any such amendment.
10. DURATION.
10.1 This Plan became effective upon its adoption by the Board of Directors
for the Plan Year ended March 27, 1992 and shall terminate on June 30, 2001 or
such earlier date as may be determined by the Board of Directors; provided,
however, that the Plan, as amended and restated, shall terminate and all awards
of Shares under the Plan, as amended and restated, shall be revoked if, within
12 months of the date of its adoption by the Board of Directors, the Plan, as
amended and restated, does not receive the approval of a majority of the
outstanding Shares present in person or by proxy and entitled to vote at a
meeting of stockholders of the Parent Corporation. In the event the Plan, as
amended and restated, does not receive such majority shareholder approval, the
Plan, as previously constituted and approved, shall be
A-5
<PAGE> 33
reinstated in its entirety. Notwithstanding anything herein to the contrary, the
Committee's right to award any new Shares shall terminate immediately after the
last award of Shares with respect to the plan year ending in 1998.
11. BENEFICIARY DESIGNATION.
11.1 Unless an employee has designated a beneficiary in accordance with the
provisions of the following sentence, any Shares that become unrestricted and
payable on account of the death of an employee shall be paid to the person or
persons in the first of the following classes in which there are any survivors
of such employee:
(a) his or her spouse at the time of death;
(b) his or her issue per stirpes;
(c) his or her parents; and
(d) the executor or administrator of his or her estate.
Instead of having any Shares that become payable on account of an employee's
death paid to a beneficiary as determined above, an employee may sign a document
designating a beneficiary or beneficiaries to receive such Shares and filing
such designation with the Corporation.
12. CONTINUING EFFECT OF 1993 STOCK BONUS PLAN.
12.1 Notwithstanding anything in this Plan to the contrary, all of the
terms and conditions contained in the Plan prior to its amendment and
restatement herein shall continue in effect and shall apply to Shares awarded
under the Plan in accordance with such terms and conditions prior to the
effective date of this amendment and restatement. The terms and conditions of
the Plan, as amended and restated, shall have no force or effect on such
previously awarded Shares.
A-6
<PAGE> 34
EXHIBIT A
EMPLOYEES ELIGIBLE UNDER INCENTIVE COMPENSATION
AND SALES MANAGEMENT COMPENSATION PROGRAM
Effective for Bonuses Payable for Fiscal Year
Beginning April 1, 1995
<TABLE>
<CAPTION>
INCENTIVE BONUS AMOUNT STOCK PORTION OF BONUS
<S> <C> <C> <C>
-------------------------- ---------------------------------------------
<CAPTION>
BUT NOT
OVER OVER
----------- -----------
<S> <C> <C> <C>
$0 $25,000 $0
$25,000 $50,000 $0 plus 10% of amount over $25,000
$50,000 $100,000 $2,500 plus 15% of amount over $50,000
$100,000 $10,000 plus 20% of amount over $100,000
</TABLE>
EMPLOYEES ELIGIBLE UNDER SALES COMPENSATION PROGRAMS
Effective for Bonuses and Commissions Earned
After January 1, 1995
Retail Salespersons
<TABLE>
<CAPTION>
SALES BONUS AMOUNT STOCK PORTION OF BONUS
<S> <C> <C> <C>
-------------------------- ---------------------------------------------
<CAPTION>
BUT NOT
OVER OVER
----------- -----------
<S> <C> <C> <C>
$0 $10,000 $0
$10,000 $0 plus 50% of amount over $10,000
</TABLE>
Fixed Income Institutional Salespersons
<TABLE>
<CAPTION>
STOCK PORTION OF
SALESPERSON'S COMMISSION
EXPRESSED AS PERCENTAGE
OF TOTAL INSTITUTIONAL
TOTAL INSTITUTIONAL GROSS GROSS COMMISSIONS ON
COMMISSIONS ON SALES SALES
------------------------- -------------------------
<S> <C> <C>
$0-300,000 0%
$300,001-500,000 .5%
$500,001-750,000 1.0%
$750,001-1,000,000 1.5%
$1,000,001-1,250,000 2.0%
$1,250,001-1,500,000 2.25%
$1,500,001-up 2.625%
</TABLE>
Equity Institutional Salespersons
<TABLE>
<CAPTION>
STOCK PORTION OF
SALESPERSON'S COMMISSION
EXPRESSED AS PERCENTAGE
OF TOTAL INSTITUTIONAL
TOTAL INSTITUTIONAL GROSS GROSS COMMISSIONS ON
COMMISSIONS ON SALES SALES
------------------------- -------------------------
<S> <C> <C>
$0-400,000 0%
$400,001-600,000 .75%
$600,001-800,000 1.00%
$800,001-1,000,000 1.25%
$1,000,001-up 1.5%
</TABLE>
A-7
<PAGE> 35
Equity Institutional Sales Traders
<TABLE>
<CAPTION>
STOCK PORTION OF SALES
TRADER'S COMMISSION
EXPRESSED AS PERCENTAGE
OF TOTAL INSTITUTIONAL
TOTAL INSTITUTIONAL GROSS GROSS COMMISSIONS ON
COMMISSIONS ON SALES SALES
------------------------- -------------------------
<S> <C> <C>
Above $0 .25%
</TABLE>
A-8
<PAGE> 36
APPENDIX B
MCDONALD & COMPANY INVESTMENTS, INC.
1995 KEY EMPLOYEES STOCK OPTION PLAN
McDonald & Company Investments, Inc. hereby adopts a stock option plan for
the benefit of certain persons and subject to the terms and provisions set forth
below.
1. DEFINITIONS. The following terms shall have the meanings set forth
below whenever used in this instrument:
(a) The word "Board" shall mean the Board of Directors of the Company.
(b) The word "Code" shall mean the United States Internal Revenue Code
(Title 26 of the United States Code).
(c) The word "Committee" shall mean the Compensation Committee
appointed by the Board.
(d) The words "Common Stock" shall mean Common Stock, par value $1.00
per share, of the Company.
(e) The word "Company" shall mean McDonald & Company Investments,
Inc., a Delaware corporation, and any successor thereto which shall
maintain this Plan.
(f) The word "Disability" shall mean the Optionee's inability, due to
a physical or mental condition, to perform services for the Company or any
Subsidiary substantially consistent with past practice, as determined by
the Committee pursuant to written certification of such Disability from a
physician acceptable to the Committee.
(g) The words "Key Employee" shall mean any person who is a high-level
executive officer or other valuable managerial employee of either the
Company or any Subsidiary.
(h) The word "Optionee" shall mean any Key Employee to whom a stock
option has been granted pursuant to this Plan.
(i) The word "Plan" shall mean this instrument, McDonald & Company
Investments, Inc. 1995 Key Employees Stock Option Plan, as it is originally
adopted and as it may be amended hereafter.
(j) The word "Subsidiary" shall mean any corporation at least 50% of
the common stock of which is owned directly or indirectly by the Company.
(k) The words "Substantial Stockholder" shall mean any person who
would otherwise be a Key Employee except that such person owns more than
10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary. Ownership shall be determined in accordance with
Section 424(d) of the Code and lawful applicable regulations.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide Key Employees
of the Company and its Subsidiaries with an additional incentive to serve and
promote the interests of the Company, its stockholders and the Company's
subsidiary corporations as may be designated for participation herein. The
premise of the Plan is that, if such Key Employees increase their proprietary
interest in the Company as they may already hold, then the incentive of such Key
Employees to work toward the Company's continued success will be commensurately
increased. Accordingly, the Company may, from time to time during the effective
period of the Plan, grant to such Key Employees as may be selected to
participate in the Plan options to purchase shares of Common Stock on the terms
and subject to the conditions set forth in the Plan.
B-1
<PAGE> 37
3. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective on May 3,
1995, subject to approval by holders of a majority of the outstanding shares of
voting capital stock of the Company present in person or by proxy and entitled
to vote on the adoption of the Plan. In the event the Plan is not so approved
within twelve (12) months after the date the Plan is adopted, the Plan and any
options granted hereunder shall be null and void. If, however, the Plan is so
approved, subject to the provisions of Section 8, no further stockholder
approval shall be required with respect to the granting of any options pursuant
to the Plan.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. The Committee shall consist of no fewer than three (3) members, who
shall be designated by the Board. Each member of the Committee shall be a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 or any amendment of or successor to such rule as
may be in effect from time to time. A majority of the Committee shall constitute
a quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by all of the members,
shall be acts of the Committee. Subject to the terms and conditions of the Plan,
the Committee shall have full and final authority in its absolute discretion:
(a) To select the Key Employees to whom options may be granted;
(b) To determine the number of shares of Common Stock subject to any
option;
(c) To determine the time when options will be granted;
(d) To determine the option price of shares of Common Stock subject to
an option;
(e) To determine the time when each option may be exercised;
(f) To determine at the time of grant of an option whether and to what
extent such option is an incentive stock option under Section 422 of the
Code;
(g) To determine whether stock appreciation rights shall be made part
of any option grant pursuant to Section 9 hereof, the method of valuing the
stock appreciation rights and whether the stock appreciation rights may be
exercised in lieu of or in addition to the related option;
(h) To prescribe the form of the option agreements governing the
options which are granted under the Plan and to set the provisions of such
option agreements as the Committee may deem necessary or desirable provided
such provisions are not contrary to the terms and conditions of either the
Plan or, where the option is an incentive stock option, Section 422 of the
Code;
(i) To adopt, amend and rescind such rules and regulations as, in the
Committee's opinion, may be advisable in the administration of the Plan;
and
(j) To construe and interpret the Plan, the rules and regulations and
the instruments evidencing options granted under the Plan and to make all
other determinations deemed necessary or advisable for the administration
of the Plan.
Any decision made or action taken by the Committee in connection with the
administration, interpretation, and implementation of the Plan and of its rules
and regulations, shall, to the extent permitted by law, be conclusive and
binding upon all Optionees under the Plan and upon any person claiming under or
through such an Optionee. Neither the Committee nor any of its members shall be
liable for any act taken by the Committee pursuant to the Plan. No member of the
Committee shall be liable for the act of any other member. No person shall be
appointed to the Committee who was eligible to receive an option or a stock
appreciation right under the Plan or any other plan of the Company or any of its
subsidiary corporations during the one-year period immediately preceding his
appointment to the Committee. If for any reason any member of the Committee
ceases to meet the requirements of Rule 16b-3(c)(2) of the Securities
B-2
<PAGE> 38
Exchange Act of 1934, the Board shall appoint new member(s) of the Committee in
order to comply with such requirements.
Notwithstanding anything herein to the contrary, the maximum aggregate
number of shares of Common Stock (i) for which stock options may be granted, and
(ii) with respect to which stock appreciation rights may be granted, to any
particular employee during any calendar year during the term of this Plan is
50,000, subject to adjustment in accordance with Section 6.
5. PERSONS ELIGIBLE FOR OPTIONS. Subject to the restrictions herein
contained, options may be granted from time to time in the discretion of the
Committee only to such Key Employees, as designated by the Committee, whose
initiative and efforts contribute or may be expected to contribute to the
continued growth and future success of the Company and/or its Subsidiaries. No
option shall be granted to any Key Employee during any period of time when he is
on leave of absence. The Committee may grant more than one option, with or
without stock appreciation rights, to the same Key Employee. Members of the
Committee shall not be eligible to participate in this Plan, or to receive
options or stock appreciation rights under the Plan, while serving on the
Committee.
6. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section 9
concerning payment for stock appreciation rights in shares of Common Stock and
subject to the provisions of the next succeeding paragraph of this Section 6,
the aggregate number of shares of Common Stock for which options may be granted
under the Plan shall be 500,000 shares of Common Stock. Either treasury or
authorized and unissued shares of Common Stock, or both, in such amounts, within
the maximum limits of the Plan, as the Committee shall from time to time
determine, may be issued upon exercise of the options. All shares of Common
Stock which are the subject of any lapsed, expired or terminated options may be
made available for reoffering pursuant to options granted under the Plan to any
Key Employee.
In the event that subsequent to the date of adoption of the Plan by the
Board, the outstanding shares of Common Stock are, as a result of a stock split,
stock dividend, combination or exchange of shares, exchange for other
securities, reclassification, reorganization, redesignation, merger,
consolidation, recapitalization, spin-off, split-off, split-up or other such
change (including, without limitation, any transaction described in Section
424(a) of the Code) or a special dividend or other distribution to the Company's
stockholders, increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company,
then (i) there shall automatically be substituted for each share of Common Stock
subject to an unexercised option granted under the Plan and each share of Common
Stock available for additional grants of options under the Plan the number and
kind of shares of stock or other securities into which each outstanding share of
Common Stock shall be exchanged, (ii) the option price per share of Common Stock
or unit of securities shall be increased or decreased proportionately so that
the aggregate purchase price for the securities subject to the option shall
remain the same as immediately prior to such event, and (iii) the Committee
shall make such other adjustments to the securities subject to options, the
provisions of the Plan, and option agreements as may be appropriate, equitable
and in compliance with the provisions of Section 424(a) of the Code to the
extent applicable and any such adjustment shall be final, binding and conclusive
as to each Optionee. Any such adjustment may, in the discretion of the
Committee, provide for the elimination of fractional shares.
7. OPTION PROVISIONS.
(a) Option Price. The option price per share of Common Stock which is the
subject of an incentive stock option under the Plan shall be determined by the
Committee at the time of grant but shall not be less than one hundred percent
(100%) of the fair market value of a share of Common Stock on the date the
option is granted; provided, however, that if a Key Employee to whom an
incentive stock option is granted is at the time of the grant a Substantial
Stockholder, the option price per share of Common Stock shall be determined by
the Committee but shall
B-3
<PAGE> 39
never be less than one hundred ten percent (110%) of the fair market value of a
share of Common Stock on the date the option is granted. The option price per
share of Common Stock under each option granted pursuant to the Plan which is
not an incentive stock option shall be determined by the Committee at the time
of grant and may be above or below the fair market value of a share of Common
Stock on the date the option is granted. Such fair market value shall be
determined in accordance with procedures to be established by the Committee. The
date on which the Committee approves the granting of an option shall be deemed
for all purposes hereunder the date on which the option is granted.
(b) Period of Option. The Committee shall determine when each option is to
expire but no option shall be exercisable after ten (10) years have elapsed from
the date upon which the option is granted; provided, however, that no incentive
stock option granted to a person who is a Substantial Stockholder at the time of
the grant of such option shall be exercisable after five (5) years have elapsed
from the date upon which the option is granted.
(c) Limitation on Exercise and Transfer of Option. Except as otherwise
provided in the event of an Optionee's death, only the Optionee may exercise an
option, provided that a guardian or other legal representative who has been duly
appointed for such Optionee may exercise an option on behalf of the Optionee. No
option granted hereunder shall be transferable other than by the Last Will and
Testament of the Optionee or, if the Optionee dies intestate, by the applicable
laws of descent and distribution. No option granted hereunder may be pledged or
hypothecated, nor shall any such option be subject to execution, attachment or
similar process. Unless otherwise determined by the Committee, (i) no award
granted under the Plan may be transferred or assigned by the Optionee to whom it
is granted other than by will, pursuant to the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined in the Code, and
(ii) an award granted under this Plan may be exercised, during the Optionee's
lifetime, only by the Optionee or by the Optionee's guardian or legal
representative. Notwithstanding the foregoing, no incentive stock option may be
transferred or assigned pursuant to a qualified domestic relations order or
exercised, during the Optionee's lifetime, by the Optionee's guardian or legal
representative.
(d) Conditions Governing Exercise of Option. The Committee may, in its
absolute discretion, either require that, prior to the exercise of any option
granted hereunder, the Optionee shall have been an employee for a specified
period of time after the date such option was granted, or make any option
granted hereunder immediately exercisable. Each option shall be subject to such
additional restrictions or conditions with respect to the right to exercise and
the time and method of exercise as shall be prescribed by the Committee. Upon
satisfaction of any such conditions, the option may be exercised in whole or in
part at any time during the option period, but this right of exercise shall be
limited to whole shares, unless the Committee shall otherwise provide. Options
shall be exercised by the Optionee giving written notice to the Secretary of the
Company at its principal office, by certified mail, return receipt requested, of
the Optionee's exercise of the option and the number of shares with respect to
which the option is being exercised, accompanied by full payment of the purchase
price either in cash or, with the consent of the Committee, in whole or in part
in shares of Common Stock having a fair market value on the date the option is
exercised equal to that portion of the purchase price for which payment in cash
is not made. Such notice shall be deemed delivered when deposited in the mails.
Notwithstanding anything in the foregoing to the contrary, in the event of a
"change in control" the Committee shall have the authority and power: (i) to
cause all outstanding options to be immediately exercisable notwithstanding any
vesting limitation otherwise previously imposed on such options; and (ii) to
accelerate the termination date of all such options. Thereafter, upon such
determination, an Optionee may exercise any and all outstanding options (in
whole or in part), whether or not such options are by their terms fully
exercisable at such time) and the Committee may authorize the acceptance of the
surrender of the right to exercise such option or any portion thereof, but in no
event after the expiration of the term of the option. The term "change in
control" shall include, but not be limited to: (i) the first purchase of shares
pursuant
B-4
<PAGE> 40
to a tender offer or exchange (other than a tender offer or exchange by the
Company) for all or part of the Company's common stock of any class or any
securities convertible into such common stock; (ii) the receipt by the Company
of a Schedule 13D or other advice indicating that a person is the "beneficial
owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of twenty percent (20%) or more of the Company's Common Stock
calculated as provided in paragraph (d) of said Rule 13d-3; (iii) the date of
approval by shareholders of the Company of an agreement providing for any
consolidation or merger of the Company in which the Company will not be the
continuing or surviving corporation or pursuant to which shares of capital
stock, of any class or any securities convertible into such capital stock, of
the Company would be converted into cash, securities, or other property, other
than a merger of the Company in which the holders of common stock of all classes
of the Company immediately prior to the merger would have the same proportion of
ownership of common stock of the surviving corporation immediately after the
merger; (iv) the date of the approval by shareholders of the Company of any
sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company; (v)
the adoption of any plan or proposal for the liquidation (but not a partial
liquidation) or dissolution of the Company; or (vi) such other event as the
Committee shall, in its sole and absolute discretion, deem to be a "change in
control." The manner of application and interpretation of the foregoing
provisions shall be determined by the Committee in its sole and absolute
discretion.
(e) Termination of Employment, Etc. If an Optionee ceases to be an
employee of the Company or a Subsidiary, his option shall, unless otherwise
provided in the option agreement between the Optionee and the Company, terminate
on the date he ceases to be so employed and neither he nor any other person
shall have any rights after the date he ceases to be so employed to exercise all
or any part of the option. An Optionee's employment shall not be deemed to have
terminated while he is on a military, sick or other bona fide approved leave of
absence from the Company or a Subsidiary as such a leave of absence is described
in Section 1.421-7(h) of the Federal Income Tax Regulations or any lawful
successor regulations thereto. If the stock option is an incentive stock option,
no option agreement shall:
(i) permit any Optionee to exercise any incentive stock option more
than three (3) months after the date the Optionee ceased to be employed by
the Company and all Subsidiaries if the reason for the Optionee's cessation
of employment was other than his death or his Disability; or
(ii) permit any Optionee to exercise any incentive stock option more
than one (1) year after the date the Optionee ceased to be employed by the
Company and all Subsidiaries if the reason for the Optionee's cessation of
employment was the Optionee's Disability; or
(iii) permit any person to exercise any incentive stock option more
than one (1) year after the date the Optionee ceased to be employed by the
Company and all Subsidiaries if either (A) the reason for the Optionee's
cessation of employment was his death or (B) the Optionee died within three
(3) months after ceasing to be employed by the Company and all
Subsidiaries.
If any option is by the terms of the option agreement exercisable following the
Optionee's death, then such option shall be exercisable by the Optionee's
estate, or the person designated in the Optionee's Last Will and Testament, or
the person to whom the option was transferred by the applicable laws of descent
and distribution.
(f) Limitations on Grant of Incentive Stock Options. During the calendar
year in which any incentive stock options granted under the Plan first become
exercisable by any Optionee, the aggregate fair market value of the shares of
Common Stock which are subject to such incentive stock options (determined as of
the date the incentive stock options were granted) shall not exceed the sum of
One Hundred Thousand Dollars ($100,000.00). Options which are not designated as
incentive stock options shall not be subject to the limitation described in the
preceding sentence and shall not be counted when applying such limitation.
B-5
<PAGE> 41
(g) Prohibition of Alternative Options. It is intended that Key Employees
may be granted, simultaneously or from time to time, "incentive stock options"
under Section 422 of the Code, or other stock options, but no Key Employees
shall be granted alternative rights in incentive stock options and other stock
options so as to prevent options granted as incentive stock options under the
Plan from qualifying as such within the meaning of Section 422 of the Code.
(h) Waiver by Committee of Conditions Governing Exercise of Option. The
Committee may, in its discretion, waive any restrictions or conditions set forth
in an option agreement concerning an Optionee's right to exercise any option
and/or the time and method of exercise.
8. AMENDMENTS TO THE PLAN. The Committee is authorized to interpret the
Plan and from time to time adopt any rules and regulations for carrying out the
Plan that it may deem advisable. Subject to the approval of the Board, the
Committee may at any time amend, modify, suspend or terminate the Plan. In no
event, however, without the approval of the Company's stockholders, shall any
action of the Committee or the Board result in:
(a) Amending, modifying or altering the eligibility requirements
provided in Section 5 hereof;
(b) Increasing or decreasing, except as provided in Section 6 hereof,
the maximum number of shares for which options may be granted;
(c) Decreasing the minimum option price per share at which options may
be granted under the Plan, as provided in Section 7(a) hereof;
(d) Extending either the maximum period during which an option is
exercisable as provided in Section 7(b) hereof or the date on which the
Plan shall terminate as provided in Section 12 hereof;
(e) Changing the requirements relating to the Committee;
(f) Making any other change which would cause any option granted under
the Plan as an incentive stock option not to qualify as an incentive stock
option within the meaning of Section 422 of the Code; or
(g) Making any change which would eliminate the exemption provided by
Rule 16b-3 for this Plan and for securities awarded under this Plan;
except as necessary to conform the Plan and the option agreements to changes in
the Code or other governing law.
9. STOCK APPRECIATION RIGHTS. The Committee may provide, at the time of
the grant of a stock option and upon such terms and conditions as it deems
appropriate, that an Optionee shall have the right with respect to all or a
portion of the options granted to him to elect to surrender such options in
exchange for the consideration set forth in this Section 9 in lieu of exercising
such options. Alternatively, the Committee may provide, at the time of the grant
of a stock option and upon such terms and conditions as it deems appropriate,
that an Optionee shall have the right with respect to all or a portion of the
options granted to him to receive the consideration set forth in this Section 9
upon exercising such options in addition to any Shares of Common Stock purchased
upon exercise thereof. Stock appreciation rights must be specifically granted by
the Committee; provided, however, no Optionee shall be entitled to such rights
solely as a result of the grant of an option to him. Stock appreciation rights,
if granted, may be exercised either with respect to all or a portion of the
option to which they relate. Stock appreciation rights shall not be transferable
separate from the option with respect to which they were granted and shall be
subject to all of the restrictions on transfer applicable to the said options.
Stock appreciation rights shall be exercisable only at such times and by such
persons as are specified in the option agreement governing the stock option with
respect to which the stock appreciation rights were granted. A stock
appreciation right shall provide that an Optionee shall have the right to
receive a percentage, not greater than One Hundred Percent (100%), of the
B-6
<PAGE> 42
excess over the option price, if any, of the fair market value of the shares of
Common Stock covered by the option, as determined by the Committee as of the
date of exercise of the stock appreciation right, in the manner provided for
herein. Such amount shall be payable in one or more of the following manners, as
shall be determined by the Committee;
(a) in cash;
(b) in shares of Common Stock having a fair market value equal to such
amount; or
(c) in a combination of cash and shares of Common Stock.
If payment is made in whole or in part in shares of Common Stock, such payment
shall thereby reduce the number of shares available for the grant of options
under this Plan.
In no event may any Optionee exercise any stock appreciation rights granted
hereunder unless such Optionee is then permitted to exercise the option or the
portion thereof with respect to which such stock appreciation rights relate. If
the option agreement with the Optionee provides that exercise of the stock
appreciation right shall be in lieu of exercise of the option, then (i) upon the
exercise of any stock appreciation rights, the option or that portion thereof to
which the stock appreciation rights relate shall be cancelled, and (ii) upon the
exercise of the option or that portion thereof to which the stock appreciation
rights relate, the stock appreciation rights shall be cancelled, and the option
agreement governing such option shall be deemed amended as appropriate without
any further action by the Committee or the Optionee. If the option agreement
with the Optionee provides that exercise of the stock appreciation right shall
be in addition to exercise of the option, then (i) upon the exercise of any
stock appreciation rights, the option or that portion thereof to which the stock
appreciation rights relate shall be deemed exercised and (ii) upon the exercise
of the option, the stock appreciation rights corresponding thereto shall be
deemed exercised to the extent the option is exercised. The terms of any stock
appreciation rights granted hereunder shall be incorporated into the option
agreement which governs the option with respect to which the stock appreciation
rights are granted, and shall be such terms as the Committee shall prescribe
which are not inconsistent with this Plan. The granting of an option or stock
appreciation right shall impose no obligation upon the Optionee to exercise such
option or right. The Company's obligation to satisfy stock appreciation rights
shall not be funded or secured in any manner.
10. INVESTMENT REPRESENTATION, APPROVALS AND LISTING. The Committee may
condition its grant of any option hereunder upon receipt of an investment
representation from the Optionee which shall be substantially similar to the
following:
"Optionee agrees that any share of Common Stock of McDonald & Company
Investments, Inc. which he may acquire by virtue of the exercise of this
option shall be acquired for investment purposes only and not with a view
to distribution or resale; provided, however, that this restriction shall
become inoperative in the event the Common Stock of McDonald & Company
Investments, Inc. which are subject to this option shall be registered
under the Securities Act of 1933, as amended, or in the event McDonald &
Company Investments, Inc. is otherwise satisfied that the offer or sale of
the Common Stock of McDonald & Company Investments, Inc. which are subject
to this option may lawfully be made without registration under the
Securities Act of 1933, as amended."
The Company shall not be required to issue any certificates for Common Stock
upon the exercise of an option or a stock appreciation right granted under the
Plan prior to (i) obtaining any approval from any governmental agency which the
Committee shall, in its sole discretion, determine to be necessary or advisable,
(ii) the admission of such shares to listing on any national securities exchange
on which the Common Stock may be listed, (iii) completion of any registration or
other qualification of the Common Stock under any state or federal law or ruling
or regulations of any governmental body which the Committee shall, in its sole
discretion,
B-7
<PAGE> 43
determine to be necessary or advisable, or the determination by the Committee,
in its sole discretion, that any registration or other qualification of the
Common Stock is not necessary or advisable, and (iv) obtaining an investment
representation from the Optionee in the form set forth above or in such other
form as the Committee, in its sole discretion, shall determine to be adequate.
11. GENERAL PROVISIONS.
(a) Option Agreements Need Not Be Identical. The form and substance of
option agreements and grants of stock appreciation rights, whether granted at
the same or different times, need not be identical.
(b) No Right To Be Employed, Etc. Nothing in the Plan or in any option
agreement shall confer upon any Optionee any right to continue in the employ of
the Company or a Subsidiary, or to serve as a member of the Board, or to be
entitled to receive any remuneration or benefits not set forth in the Plan or
such option agreement, or to interfere with or limit either the right of the
Company or a Subsidiary to terminate his employment at any time or the right of
the stockholders of the Company to remove him as a member of the Board with or
without cause.
(c) Optionee Does Not Have Rights Of Stockholder. Nothing contained in the
Plan or in any option agreement shall be construed as entitling any Optionee to
any rights of a stockholder as a result of the grant of an option until such
time as shares of Common Stock are actually issued to such Optionee pursuant to
the exercise of an option or stock appreciation right.
(d) Successors In Interest. The Plan shall be binding upon the successors
and assigns of the Company.
(e) No Liability Upon Distribution Of Stock. The liability of the Company
under the Plan and any distribution of Common Stock made hereunder is limited to
the obligations set forth herein with respect to such distribution and no term
or provision of the Plan shall be construed to impose any liability on the
Company or the Committee in favor of any person with respect to any loss, cost
or expense which the person may incur in connection with or arising out of any
transaction in connection with the Plan.
(f) Use Of Proceeds. The cash proceeds received by the Company from the
issuance of shares of Common Stock pursuant to the Plan will be used for general
corporate purposes.
(g) Expenses. The expenses of administering the Plan shall be borne by the
Company.
(h) Captions. The captions and section numbers appearing in the Plan are
inserted only as a matter of convenience. They do not define, limit, construe or
describe the scope or intent of the provisions of the Plan.
(i) Number. The use of the singular or plural herein shall not be
restrictive as to number and shall be interpreted in all cases as the context
may require.
(j) Gender. The use of the feminine, masculine or neuter pronoun shall not
be restrictive as to gender and shall be interpreted in all cases as the context
may require.
12. TERMINATION OF THE PLAN. The Plan shall terminate on May 3, 2005, and
thereafter no options shall be granted under the Plan. All options outstanding
at the time of termination of the Plan shall continue in full force and effect
according to the terms of the option agreements governing such options and the
terms and conditions of the Plan.
13. GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Delaware and any applicable federal
law.
B-8
<PAGE> 44
MCDONALD & COMPANY INVESTMENTS, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- AUGUST 2, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints THOMAS M. O'DONNELL, WILLIAM B. SUMMERS,
JR. and ROBERT T. CLUTTERBUCK, and each of them, as Proxy holders and attorneys,
with full power of substitution, to appear and vote all of the shares of Common
Stock of McDonald & Company Investments, Inc. which the undersigned shall be
entitled to vote at the Annual Meeting of Stockholders of the Company, to be
held at The National City Bank Auditorium, Fourth Floor, Atrium Building, 1900
East Ninth Street, Cleveland, Ohio, on Wednesday, August 2, 1995, at 9:30 A.M.
(EDT), and at any adjournments thereof, hereby revoking any and all proxies
heretofore given, and (ii) authorizes and directs said Proxy holders to vote all
of the shares of Common Stock of the Company represented by this Proxy as
follows, WITH THE UNDERSTANDING THAT IF NO DIRECTIONS ARE GIVEN BELOW, SAID
SHARES WILL BE VOTED "FOR" THE ELECTION OF THE TWO DIRECTORS NOMINATED BY THE
BOARD OF DIRECTORS, "FOR" THE PROPOSAL TO APROVE AND ADOPT THE COMPANY'S 1995
STOCK BONUS PLAN AND "FOR" THE PROPOSAL TO APPROVE AND ADOPT THE COMPANY'S 1995
KEY EMPLOYES STOCK OPTION PLAN.
(1) ELECTION OF DIRECTORS
<TABLE>
<S> <C>
/ / FOR all nominees listed / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
</TABLE>
WILLIAM B. SUMMERS, JR. and FREDERICK R. NANCE
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line)
---------------------------------------------------------------------------
(Continued and to be signed on other side)
PROXY NO. SHARES
(Proxy -- continued from other side)
(2) PROPOSAL to approve and adopt the Company's 1995 Stock Bonus Plan.
/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN
(3) PROPOSAL to approve and adopt the Company's 1995 Key Employees Stock
Option Plan.
/ / FOR the Proposal / / AGAINST the Proposal / / ABSTAIN
(4) In their discretion to act on any other matter or matters which may
properly come before the Annual Meeting.
Please date, sign and return
promptly in the accompanying
envelope.
Dated:............... , 1995
............................
Your signature to this Proxy
form should be exactly the
same as the name imprinted
hereon. Persons signing as
executors, administrators,
trustees or in similar
capacities should so
indicate. For joint
accounts, the name of each
joint owner must be signed.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE NOMINEES AND THE TWO
PROPOSALS LISTED ABOVE
