<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:
[X] Preliminary Proxy Statement
[ ] 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)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:________________________________________________
(2) Form, Schedule or Registration Statement no.:__________________________
(3) Filing Party:__________________________________________________________
(4) Date Filed:____________________________________________________________
================================================================================
<PAGE> 2
MCDONALD & COMPANY
INVESTMENTS, INC.
McDonald Investment Center
800 SUPERIOR AVENUE
CLEVELAND, OH 44114 - 216/443-2300
June 26, 1997
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, July 30, 1997, at the McDonald Investment Center Auditorium, 20th
Floor, McDonald Investment Center, 800 Superior Avenue, 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,
/s/ Thomas M. O'Donnell
THOMAS M. O'DONNELL
Chairman
/s/ William B. Summers, Jr.
WILLIAM B. SUMMERS, JR.
President and Chief Executive Officer
<PAGE> 3
MCDONALD & COMPANY
INVESTMENTS, INC.
McDonald Investment Center
800 SUPERIOR AVENUE
CLEVELAND, OH 44114
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 30, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of McDonald
& Company Investments, Inc. (the "Company") will be held at the McDonald
Investment Center Auditorium, 20th Floor, McDonald Investment Center, 800
Superior Avenue, Cleveland, Ohio, on Wednesday, July 30, 1997 at 9:30 A.M.
(EDT), for the following purposes:
1. To nominate and elect three individuals as Directors of the Company
for a three-year term ending at the Annual Meeting of Stockholders in 2000;
2. To consider and act upon a proposal to approve and adopt an
amendment to the Company's Certificate of Incorporation to increase the
number of authorized shares of the Company's Common Stock from 15,000,000
to 50,000,000;
3. To consider and act upon a proposal to approve and adopt an
amendment to the Company's 1995 Stock Bonus 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 May 30,
1997 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, 1997
<PAGE> 4
MCDONALD & COMPANY
INVESTMENTS, INC.
PROXY STATEMENT
MAILED ON OR ABOUT JUNE 26, 1997
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 30, 1997
------------------
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 July 30, 1997, 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 all of the individuals nominated
by the Board of Directors, FOR the proposal to approve and adopt an amendment to
the Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock from 15,000,000 to 50,000,000, and FOR the
proposal to approve and adopt an amendment to the Company's 1995 Stock Bonus
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 May 30, 1997. On that date, there
were outstanding and entitled to vote 9,018,938 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.
1
<PAGE> 5
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 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 May 30, 1997, 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 May 30, 1997, and the percentage of the
outstanding shares represented thereby:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER, DIRECTOR, EXECUTIVE AMOUNT AND NATURE OF PERCENT
OFFICER OR NUMBER OF PERSONS IN GROUP BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------------------------- ----------------------- ---------
<S> <C> <C>
Peter R. Kellogg(1)
120 Broadway
New York, New York 10271.......................... 600,000 6.65%
Daniel F. Austin(2)................................. 56,997(5)(6) *
Rena J. Blumberg(3)................................. 8,000(5) *
Jeanette Grasselli Brown(3)......................... 2,500(5) *
Robert T. Clutterbuck(4)............................ 135,864(5)(6)(7) 1.50
David W. Ellis III(2)............................... 76,138(6)(8) *
Edward Fruchtenbaum(3).............................. 3,000(5) *
James A. Karman(3).................................. 8,000(5) *
David W. Knall(2)................................... 117,991 1.31
David N. McCammon(3)................................ 1,000(5) *
Frederick R. Nance(3)............................... 6,890(5) *
Thomas M. O'Donnell(4).............................. 134,636(6)(9) 1.49
William B. Summers, Jr.(4).......................... 181,181(5)(6) 2.00
Donald E. Weston(4)................................. 281,001(6)(10) 3.12
All Directors and executive officers
as a group (25 persons)........................... 1,425,410(5)(6) 15.65
<FN>
- ---------------
* Less than one percent.
(1) Based solely upon information contained in a Schedule 13D filed with the
Securities and Exchange Commission.
(2) Executive officer of the Company.
(3) Director of the Company.
(4) Director and executive officer of the Company.
(5) 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 (i) the exercise of stock
options: 11,280 shares (Mr. Austin); 6,800 shares (Ms. Blumberg); 2,000
shares (Ms. Brown); 7,200 shares (Mr. Clutterbuck); 2,000 shares (Mr.
Fruchtenbaum); 6,800 shares (Mr. Karman); 1,000 shares (Mr. McCammon);
5,840 shares (Mr. Nance); 24,000 shares (Mr. Summers); and 77,768 shares
(all Directors and executive officers as a group) and (ii) awards of shares
of Common Stock to be distributed on June 13, 1997 pursuant to the
Company's 1995 Stock Bonus Plan: 146 shares (Mr. Clutterbuck); and 11,227
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 and shares of Common Stock
to be issued on June 13, 1997 pursuant to the Company's 1995 Stock Bonus
Plan are deemed to be outstanding.
(6) Includes shares of Common Stock owned under the Company's 1995 Stock Bonus
Plan and the Company's 1993 Stock Bonus Plan.
(7) 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.
(8) Includes 6,306 shares of Common Stock beneficially owned by Mr. Ellis
through a trust.
(9) Includes 1,000 shares of Common Stock owned by the T.M. and M.A. O'Donnell
Foundation of which Mr. O'Donnell serves as the Trustee.
(10) Includes 2,000 shares held by the Weston Family Foundation and 277,831
shares owned by the Donald E. Weston Revocable Trust.
</TABLE>
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. On February 5,
1997, in accordance with the Company's By-laws and Certificate of Incorporation,
the Company's Board of Directors set the number of Directors at 10 and elected
David N. McCammon to fill the vacancy thereby created in the class of Directors
whose term of office will expire at the 1999 Annual Meeting. At the Annual
Meeting, three Directors will be elected to serve a three-year term until the
Annual Meeting in 2000 and until their successors have been elected and
qualified. At its May 7, 1997 meeting, the Board of Directors nominated Thomas
M. O'Donnell, Donald E. Weston and Edward Fruchtenbaum to stand for election as
Directors at the Annual Meeting. All of the nominees are presently Directors of
the Company.
Unless otherwise directed, the persons named in the accompanying Proxy will
vote for the election of the three 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 any 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
three 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>
Thomas M. O'Donnell (2)(7)(8) 61 Director of the Company since June 7, 1983; Chair-
man of the Board of the Company since April 1,
1989; Chairman of McDonald Securities from April
1, 1989 to June 1, 1995; 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 (2) 62 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.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND DIRECTORSHIPS(1)
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Edward Fruchtenbaum (2)(5) 49 Director of the Company since November 25, 1995;
President and Chief Operating Officer of American
Greetings Corporation since March 1, 1992; Presi-
dent, U.S. Greeting Card Division of American
Greetings Corporation from January 1, 1990 to
February 29, 1992.
DIRECTORS CONTINUING IN OFFICE
William B. Summers, Jr. (3)(8) 47 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 since April 1, 1989; President of
McDonald Securities from April 1, 1989 to June 1,
1995; 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 (3)(5)(6) 43 Director of the Company since July 28, 1992;
Partner since 1987 and member of the Management
Committee of Squire, Sanders & Dempsey L.L.P.,
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.
Jeanette Grasselli Brown (3)(5)(7) 68 Director of the Company since January 31, 1996;
Retired Director of Corporate Research, Environ-
mental and Analytical Sciences, BP America, Inc.
since January 1989; Distinguished Visiting
Professor and Director, Research Enhancement,
Ohio State University from 1989 to 1995; past
Chair of the Board of Trustees of Ohio
University; Member, Ohio Board of Regents, Board
of Trustees of the Great Lakes Science Center,
Holden Arboretum and the Musical Arts
Association, White House Joint High Level
Advisory Panel on US/Japan Science and Technology
Agreements; Chair of the Board of Trustees of the
Cleveland Scholarship Programs, Inc.
James A. Karman (4)(5)(6)(7) 60 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 (4)(5)(6) 62 Director of the Company since July 31, 1990; Chief
Executive Officer of Rainmaker, Inc. since
January 1, 1992, a corporate advisory organiza-
tion; Community 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 pub-
lisher of suburban newspapers. Ms. Blumberg also
serves as a Trustee of Brandeis University, and
as a director of various other civic and
charitable organizations.
Robert T. Clutterbuck (4) 46 Director of the Company since August 7, 1996; Trea-
surer of the Company since January 1, 1994;
President and Chief Operating Officer of McDonald
Securities since June 1, 1995; Chief Financial
Officer of McDonald Securities from January 1,
1994 to June 14, 1996; Executive Managing
Director of McDonald Securities from January 1,
1994 to June 1, 1995; Senior Managing Director
(Municipal Bond Trading and Underwriting) from
June 1, 1992 to December 31, 1993; Managing
Director from May 1, 1987 to May 31, 1992; Senior
Vice President from May 1, 1984 to April 30,
1987; First Vice President from June 7, 1983 to
April 30, 1984; Partner from 1978 to 1990.
David N. McCammon (4)(5) 63 Director of the Company since February 5, 1997;
From October 13, 1987 until his retirement on
January 1, 1997, he served as Vice President --
Finance of Ford Motor Company; Mr. McCammon also
serves as Vice Chairman of the Board of Trustees
for the Henry Ford Health Care System.
<FN>
- ---------------
(1) The following Directors of the Company also serve as directors for the
publicly-held corporations listed opposite their names below:
</TABLE>
<TABLE>
<S> <C>
Jeanette Grasselli Brown AGA Gas, Inc.
BDM International, Inc.
USX Corp.
B. F. Goodrich Company
Edward Fruchtenbaum American Greetings Corporation
James A. Karman RPM, Inc.
Metropolitan Financial Corp.
A. Schulman, Inc.
Shiloh Industries, Inc.
David N. McCammon Stone & Webster, Incorporated
Thomas M. O'Donnell Seaway Food Town, Inc.
<FN>
(2) Term as Director expires in 1997. Nominee for election to three-year term to
expire in 2000.
(3) Term as Director expires in 1998.
(4) Term as Director expires in 1999.
(5) Member of the Audit Review Committee.
(6) Member of the Compensation Committee.
(7) Member of the Nominating Committee.
(8) Member of the Management Committee.
</TABLE>
6
<PAGE> 10
The Company pays its Directors who are not officers of the Company an
annual retainer of $16,000 plus $1,500 for each Board of Directors meeting
attended. Each Director who is not an officer of the Company receives $1,000 for
each Committee meeting attended. The Chairperson of each Committee receives
$1,500 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 1995 Stock
Bonus Plan, the 1995 Key Employees Stock Option Plan and the 1995 Stock Option
Plan for Non-Officer Directors and has the authority, under these 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.
Although the Nominating Committee did not formally meet during the last fiscal
year, a number of informal discussions were held among the members of this
Committee concerning potential Director nominees. 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 executive offices, 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, with the exception of Mr. Fruchtenbaum, 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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 L.L.P.,
which rendered legal services to the Company during fiscal 1997.
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.
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 28, 1997, March 29, 1996 and March 31, 1995 of
those persons who were (i) the chief executive officer during the fiscal year
ended March 28, 1997 and (ii) the other four most highly compensated executive
officers of the Company for the fiscal year ended March 28, 1997 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------
------------------------------------------------------- RESTRICTED NUMBER OF
OTHER ANNUAL STOCK SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPEN- AWARDS UNDERLYING COMPEN-
POSITION YEAR SALARY BONUS SATION(1) (2)(3) OPTIONS SATION(4)
- ------------------------- ---- -------- ---------- ------------ --------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
William B. Summers, Jr., 1997 $200,000 $1,128,750(5) $4,500 $ 19,122 -- $ 3,328
President and Chief 1996 200,000 820,000 4,500 211,786 -- 2,504
Executive Officer 1995 200,000 757,371(2)(6) 3,000 -- -- 1,738
of the Company,
Chief Executive Officer
of McDonald Securities
David W. Knall, 1997 0 2,016,541(7) 0 -- -- 0
Senior Managing Director, 1996 0 1,953,338(7) 0 -- -- 0
Investment Consultant and 1995 0 1,764,659(7) 3,000 -- -- 0
Co-Resident Manager
(Indianapolis, IN) of
McDonald Securities
David W. Ellis III,
C.P.A., 1997 0 1,334,761(2)(6)(7) 4,500 -- -- 2,404
Managing Director/ 1996 5,000 1,230,786(2)(6)(7) 4,500 -- -- 2,404
Portfolio Manager, 1995 16,250 1,048,457(2)(6)(7) 3,000 -- -- 2,404
Gradison-McDonald Asset
Management
Division of McDonald
Securities
Robert T. Clutterbuck, 1997 170,833 983,242(5) 4,500 24,630 -- 6,179
Treasurer of the 1996 150,000 740,000 4,500 188,258 -- 5,131
Company, President and 1995 143,333 757,371(2)(6) 3,000 -- -- 4,096
Chief Operating Officer
of McDonald Securities
Daniel F. Austin, 1997 132,500 1,170,210(5) 4,500 23,551 -- 7,198
Vice Chairman of 1996 120,000 620,000 4,500 152,969 -- 6,652
McDonald Securities 1995 118,333 509,938(2)(6) 3,000 -- -- 7,182
<FN>
- ---------------
No Named Executive Officer received personal benefits or perquisites during
fiscal 1997 in excess of the lesser of $50,000 or 10% of his aggregate salary
and bonus.
(1) Represents amounts contributed to the McDonald & Company Securities, Inc.
Retirement Savings Trust and Plan.
(2) Includes the value of awards of shares of Common Stock under the Company's
stock bonus plans. The Company's 1995 Stock Bonus Plan and 1993 Stock Bonus
Plan provide for issuance of shares of the Company's Common Stock in lieu of
a portion of the cash bonus that participants in the Plan would otherwise be
entitled to receive. For fiscal years 1997 and 1996 under the 1995 Stock
Bonus Plan, participants may elect to receive shares of Common Stock which
are subject to forfeiture for a period of three years from the June 1st
following the end of the plan year with respect to which such shares are
awarded. If such an election is not made, the shares of Common Stock issued
to the participant may not be sold or transferred for a period of two years
from the June 1st following the end of the plan year with respect to which
such shares are awarded. Shares issued under the 1995 Stock Bonus Plan which
are subject to forfeiture for three years are issued at an Adjusted Purchase
Price equal to 85% of the market value of the Common Stock, as determined
under the provisions of the Plan. Shares issued under the Plan which are
subject to restriction from sale or transfer for two years are issued at an
Adjusted Purchase Price equal to 95% of the market value of the Common
Stock, as determined under the provisions of the Plan. For fiscal year 1995
under the 1993 Stock Bonus Plan, shares are restricted from transfer
8
<PAGE> 12
for a period of two years from the date of grant. Dividends were paid on the
shares issued pursuant to the 1995 Stock Bonus Plan and the 1993 Stock Bonus
Plan.
(3) For fiscal 1997, Messrs. Summers, Clutterbuck and Austin elected to receive
shares of Common Stock under the 1995 Stock Bonus Plan which were subject to
forfeiture for three years. Shares were valued based on the market value of
the Company's Common Stock, as determined under the provisions of the Plan.
The number of shares of Common Stock granted to each of these individuals
during fiscal 1997 was as follows: 639 shares (Mr. Summers), 785 shares (Mr.
Clutterbuck) and 787 shares (Mr. Austin). As of the end of fiscal 1997, the
number and value of the aggregate restricted stock holdings which are still
subject to forfeiture under the provisions of the 1995 Stock Bonus Plan for
each of these individuals was as follows: 11,614 shares valued at $435,525
(Mr. Summers), 10,409 shares valued at $390,338 (Mr. Clutterbuck) and 8,740
shares valued at $327,750 (Mr. Austin). Dividends are paid on the restricted
shares held by these individuals. For fiscal 1996, Messrs. Summers,
Clutterbuck and Austin elected to receive shares of Common Stock under the
1995 Stock Bonus Plan which were subject to forfeiture for three years.
Shares were valued based on the market value of the Company's Common Stock,
as determined under the provisions of the Plan. The number of shares of
Common Stock granted to each of these individuals during fiscal 1996 was as
follows: 10,975 shares (Mr. Summers), 9,770 shares (Mr. Clutterbuck) and
7,953 shares (Mr. Austin).
(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) For fiscal 1997, the bonus amounts reported for Messrs. Summers, Clutterbuck
and Austin include amounts which were deferred to subsequent periods
pursuant to the Company's Deferred Compensation Plan in order to comply with
Section 162(m) of the Internal Revenue Code. Portions of such bonus amounts
would have been stock grants under the 1995 Stock Bonus Plan; however,
subject to the approval of the stockholders of the proposed amendment to the
1995 Stock Bonus Plan, the amounts of such stock grants have been reduced so
that such individual's compensation does not exceed the $1 million deduction
limitation set forth under Section 162(m). Such individual's account under
the Company's Deferred Compensation Plan was credited with an amount equal
to the value of the shares under the 1995 Stock Bonus Plan by which his
award was reduced. The amount of bonus deferred to a subsequent period for
each of these individuals was as follows: $329,255, including a stock
portion of $192,750 representing 6,011 shares of Common Stock (Mr. Summers);
$160,089, including a stock portion of $159,242 representing 4,992 shares of
Common Stock (Mr. Clutterbuck); and $382,370, including a stock portion of
$198,000 representing 6,175 shares of Common Stock (Mr. Austin).
(6) For fiscal 1997, the bonus amount reported for Mr. Ellis includes (i)
commissions, (ii) cash bonus awards and (iii) $74,161, the value of 1,975
shares granted under the Company's 1995 Stock Bonus Plan. For fiscal 1996,
the bonus amount reported for Mr. Ellis includes (i) commissions, (ii) cash
bonus awards and (iii) $66,290, the value of 3,417 shares granted under the
Company's 1995 Stock Bonus Plan. Under the terms of the 1995 Stock Bonus
Plan, Mr. Ellis elected to receive shares which were subject to restriction
from sale or transfer for a period of two years from the June 1 following
the date of grant. For fiscal 1995, the bonus amount reported for Messrs.
Summers, Ellis, Clutterbuck and Austin includes (i) cash bonus awards and
(ii) the value of shares granted under the Company's 1993 Stock Bonus Plan.
Under the 1993 Stock Bonus Plan, shares were issued subject to a two year
restriction from sale or transfer. Shares were valued based on the market
value of the Company's Common Stock, as determined under the provisions of
the Plan. The number of shares and the value of the shares of Common Stock
granted to each of these individuals during fiscal 1995, respectively, was
as follows: 9,182 shares valued at $147,371 (Mr. Summers); 6,508 shares
valued at $87,370 (Mr. Ellis); 9,182 shares valued at $147,371 (Mr.
Clutterbuck); and 6,002 shares valued at $95,812 (Mr. Austin).
9
<PAGE> 13
(7) Bonuses for Messrs. Knall and Ellis include (i) sales commissions,
representing a percentage of gross commissions on sales and (ii) incentive
bonuses, based on a formula relating to gross commissions on sales. Sales
commissions for Messrs. Knall and Ellis, respectively, for the 1997 fiscal
year equalled $1,783,156 and $1,180,159; for the 1996 fiscal year equalled
$1,739,501 and $1,091,535; and for the 1995 fiscal year equalled $1,556,917
and $918,421. Incentive bonuses for Messrs. Knall, and Ellis, respectively,
for the 1997 fiscal year were $233,385 and $154,602; for the 1996 fiscal
year were $213,837 and $139,251; and for the 1995 fiscal year were $207,742
and $130,036.
</TABLE>
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 28, 1997 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 24,000 6,000 $ 595,008 $ 148,752
David W. Knall -- 0 0 0 0 0
David W. Ellis III -- 0 0 0 0 0
Robert T. Clutterbuck -- 0 7,200 4,800 179,251 119,500
Daniel F. Austin 4,800 55,603 11,280 6,720 288,576 167,301
<FN>
- ---------------
(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
27, 1997 (the last trading day of the Company's fiscal year ended March 28,
1997).
</TABLE>
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 are non-employee 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). The
Committee intends to seek to preserve the tax deductibility of compensation to
executive officers to the extent possible without impairing the operation and
effectiveness of the Company's compensation policies, plans and programs. To
this end, the Board of Directors has adopted, subject to stockholder approval,
an amendment to the Company's 1995 Stock Bonus Plan. Likewise, the Committee has
in recent years determined that it
10
<PAGE> 14
may, at its discretion, require that all compensation subject to 162(m) in
excess of $1,000,000 which may be paid to an executive subject to Section 162(m)
be deferred to subsequent periods pursuant to a deferred compensation program.
However, in determining compensation for the Company's executive officers, the
primary consideration is achievement of the Company's strategic goals, taking
into consideration competitive practices, market conditions and other factors.
To the extent that fulfilling these goals is consistent with obtaining tax
deductions, the Company is committed to making compensation awards that will
qualify for tax deductions.
FISCAL 1997 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 for persons other than investment brokers, 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
1997 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 1997 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 and average equity, net revenues
per employee, pre-tax earnings per employee, compensation as a percent of net
revenues, 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 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. The Committee did not grant any stock options during the
1997 fiscal year.
11
<PAGE> 15
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
1997. 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 fact that the Company achieved its highest level of revenues, net
income and earnings per share during fiscal 1997. In assessing Mr. Summers'
contribution to achieving the Company's strategic objectives, the Committee
considered the fact that during the year, the Company further expanded the range
of services that it was able to provide to customers, increased the number of
its sales personnel, continued its cost containment efforts and made certain
enhancements to its operations.
After considering the foregoing factors, the Committee determined to pay
Mr. Summers total compensation, including salary and bonus, $1,345,000 for
fiscal 1997.
THE COMPENSATION COMMITTEE
James A. Karman, Chairman
Rena J. Blumberg
Frederick R. Nance
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 on Forms 3, 4 and 5 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 Forms 3, 4 and 5 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 28, 1997 all Section 16(a)
filing requirements applicable to its executive officers, Directors and greater
than ten-percent beneficial owners were complied with.
12
<PAGE> 16
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, 1992 to March 31,
1997. The companies comprising the Lipper Regional Brokerage Firm Index are: The
Advest Group, Inc.; Alex. Brown Incorporated; First Albany Companies Inc.;
Interra Financial Incorporated; Interstate/Johnson Lane, Inc.; Kinnard
Investments, Inc.; Legg Mason, Inc.; Morgan Keegan & Company, Inc.; Piper
Jaffray Companies Inc.; Raymond James Financial, 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, 1992 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
MEASUREMENT PERIOD MCDONALD & REGIONAL FIRM
(FISCAL YEAR COVERED) COMPANY (MDD) S&P 500 (S&P) INDEX (LRI)
<S> <C> <C> <C>
3/31/92 100 100 100
3/31/93 149 115 111
3/31/94 162 117 122
3/31/95 159 135 133
3/31/96 219 178 183
3/31/97 418 213 262
</TABLE>
PROPOSAL TO APPROVE AND ADOPT AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
GENERAL
The Company's Certificate of Incorporation (the "Certificate") presently
provides for authorized capital stock of 200,000 shares of Preferred Stock and
15,000,000 shares of Common Stock. On May 7, 1997, the Board of Directors
unanimously approved, subject to stockholder approval, an amendment to the
Certificate to increase the number of authorized shares of Common Stock to
50,000,000 shares.
The proposed increase in the number of authorized shares has been deemed
advisable by the Board of Directors in order to provide additional authorized
but unissued shares for issuance from time-to-time for such proper corporate
purposes as may be determined by the Board, without further action or
authorization by the stockholders. Such corporate purposes might
13
<PAGE> 17
include the raising of additional capital through the issuance of stock, the
acquisition of other companies, or the declaration of stock splits and/or stock
dividends. Although the Company from time to time considers possible financing
transactions and acquisitions involving the issuance of stock, it is not
presently engaged in negotiations concerning any transaction involving the
issuance of additional shares.
On June 13, 1997, there were issued and outstanding 9,191,159 shares of
Common Stock. In addition, a total of 1,657,292 shares were reserved for
issuance pursuant to the 1995 Stock Bonus Plan, 173,358 shares were reserved for
issuance pursuant to the Company's Stock Option Plan, 14,400 shares were
reserved for issuance pursuant to the 1990 Stock Option Plan for Outside
Directors, 50,000 shares were reserved for issuance pursuant to the 1995 Stock
Option Plan for Non-Officer Directors and 500,000 shares were reserved for
issuance pursuant to the 1995 Key Employees Stock Option Plan.
The proposed increase in the number of authorized shares of Common Stock
will not change the rights of holders of presently outstanding shares of Common
Stock. The newly authorized shares will have the same rights as presently
outstanding shares. Present stockholders of the Company would not have any
preemptive rights to purchase a portion of the newly authorized shares.
The increase in authorized but unissued shares may have an incidental
anti-takeover effect in that additional shares could be used to dilute the stock
ownership of persons seeking to obtain control of the Company. The resulting
effect may be to render more difficult or to discourage the possibility of
certain mergers, tenders offers or proxy contests.
If the proposed amendment is approved, all or any part of the authorized by
unissued shares may thereafter be issued without further approval from the
stockholders, except as required by law or the policies of the New York Stock
Exchange, for such purposes and on such terms as the Board of Directors may
determine. The Company is not presently subject to any law or stock exchange
policy which would require further stockholder approval prior to the issuance of
Common Stock, except in limited situations involving the issuance of a
substantial block of stock.
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 shares
representing a majority of the total number of shares of Common Stock of the
Company issued and outstanding as of the record date is required to approve and
adopt the amendment to the Company's Certificate of Incorporation.
APPROVAL AND ADOPTION OF AN AMENDMENT TO
THE COMPANY'S 1995 STOCK BONUS PLAN
At the Annual Meeting, stockholders will be asked to approve and adopt the
First Amendment (the "Amendment") to the Company's 1995 Stock Bonus Plan (the
"Stock Bonus Plan" or the "Plan"). The Amendment would reduce the number of
shares of Common Stock (the "Shares") that may be awarded to certain employees
of the Company under the Stock Bonus Plan in order to allow the Company to
comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and thereby deduct from income the amount of compensation paid to its
highly compensated executives.
BACKGROUND
Section 162(m) of the Code disallows a publicly held corporation's
deduction for compensation in excess of $1 million (per taxable year) paid to
the corporation's chief executive officer and other four most highly compensated
executives (each a "Covered Employee") unless
14
<PAGE> 18
certain exceptions are satisfied. The Company has complied with Section 162(m),
and thereby benefits from the deduction for compensation to its highly paid
executives, by requiring its affected executives to defer receipt of
compensation in excess of $1 million. On May 7, 1997, the Board of Directors
unanimously approved and adopted, subject to stockholder approval, an amendment
to the Stock Bonus Plan that reduces the number of Shares that may be awarded to
a Covered Employee to an amount which ensures that a Covered Employee's
compensation, including any Shares awarded under the Plan, does not exceed the
$1 million deduction limitation set forth under Section 162(m) of the Code. Such
executive's account under the Company's Deferred Compensation Plan is credited
with an amount equal to the Adjusted Purchase Price (as defined below) of that
number of Shares by which his or her award was reduced. Additionally, upon the
termination of the three (3) year restriction placed on certain of the Shares
awarded under the Plan, the Amendment would also permit the forfeiture to the
Company of that number of Shares that would cause a Covered Employee to exceed
the $1 million deduction limit and the subsequent credit of an amount equal to
the value of the forfeited Shares to the Covered Employee's account under the
Company's Deferred Compensation Plan. The affirmative vote of a majority of the
shares of the Company's Common Stock represented in person or by proxy is
required for approval of the Amendment.
The following is a summary of the principal provisions of the Stock Bonus
Plan and the Amendment and is qualified in its entirety by reference to the
Amendment and the Plan. A copy of the Amendment is attached hereto as Appendix
B. A copy of the Plan is available upon written request to the Secretary of the
Company.
PURPOSE OF THE PLAN AND AMENDMENT
The purpose of the Plan is to further the growth, success and interest of
the Company, McDonald Securities and the stockholders of the Company by
requiring certain Covered Employees of McDonald Securities who participate in
the Company's bonus programs to receive a portion of their annual incentive
bonuses in Shares under the terms and conditions of and in accordance with the
Plan, thereby increasing their direct involvement in the future success of the
Company. The purpose of the Amendment is to allow the Company and its
stockholders to continue to benefit from the deduction of compensation paid from
taxable income while continuing to provide performance incentives to the Covered
Employees.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee is composed of no fewer than three
members of the Board of Directors of the Company who are designated by the Board
of Directors. Each member of the Committee must be a "non-employee director"
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended, and any successor to such rule as may be in effect from
time to time.
The Committee is authorized to (i) 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 PLAN
Any employee of McDonald Securities is eligible to participate in the Plan
if the individual has been awarded a bonus under McDonald Securities' Incentive
Compensation Program or its Sales and Sales Management Programs. An individual
who may be eligible to participate in the Plan may elect not to participate in
the 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:
15
<PAGE> 19
(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 on the first day
of the relevant plan year:
(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.
SHARES SUBJECT TO THE AMENDED PLAN
The Plan authorizes the Company to issue stock bonuses with respect to an
aggregate of 2,000,000 Shares. As of June 13, 1997, an aggregate of 342,708
Shares have been awarded as bonuses under the Plan.
The Shares awarded under the Plan are 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 may be made available for re-offering under the Plan.
In the event that the outstanding Shares of the Company should be changed by
reason of stock splits or dividends, then the number of Shares issued under the
Plan may be appropriately adjusted by the Committee to reflect such change.
AWARD OF SHARES
Incentive Bonuses. The number of Shares awarded to a participant is
determined by dividing the stock portion of a participant's Incentive Bonus by
the Adjusted Purchase Price (as defined below) of one Share. The stock portion
of a participant's Incentive Bonus is calculated as a specific percentage of the
individual's bonus determined on the basis of a graduated scale formula that is
approved by the Committee and appended to the Plan. A participant's Incentive
Bonus may 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 Committee may adopt as many different formulas as it deems necessary
for each class of employees who receive Incentive Bonuses. The Company typically
pays Incentive Bonuses in December and June.
Sales Bonuses. The number of Shares awarded to a participant entitled to a
Sales Bonus is determined on the same basis as for Incentive Bonuses except that
a different graduated percentage scale formula, approved by the Committee and
appended to the Plan, is used which varies depending on the specific service
provided by the individual to the Company. As with the Incentive Bonuses, the
Committee may adopt as many different formulas as it deems necessary for each
class of employees who receive a qualifying bonus.
The Adjusted Purchase Price of one Share will be determined by calculating
the average closing price of one Share for the five (5) trading days ending on
the last day of the month immediately preceding the month during which payment
of the Incentive Bonus or Sales Bonus is actually made, and multiplying such
average price by either (a) ninety-five percent (95%) if the employee elects to
receive Shares that are restricted from sale for two years or (b) eighty-five
percent (85%) if the employee elects to receive 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 fractional amount to the
next larger whole share.
16
<PAGE> 20
LIMITATIONS ON TRANSFER
Under the terms of the Stock Bonus Plan, an employee must elect to receive
the stock portion of his or her bonus subject to one of two forms of
restrictions on transfer. The employee may elect to receive Shares valued at
ninety-five percent (95%) of fair market value, in which case the Shares 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.
Alternatively, an employee may elect to receive Shares valued at
eighty-five percent (85%) of fair market value. Shares awarded under such an
election will be subject to forfeiture to the Company for a three (3) year
period. The three (3) year forfeiture restriction will not apply if a
participant's employment is terminated by reason of death or total disability
prior to 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.
If the Amendment is adopted, the stock portion of the bonus to a Covered
Employee will be automatically reduced by that number of Shares necessary to
permit the total compensation paid to such Covered Employee to be deductible by
the Company after taking into account Section 162(m) of the Code. The number of
Shares by which the stock portion of the Covered Employee's bonus is reduced
will thereupon be immediately liquidated to a value equal to the Adjusted
Purchase Price of such amount of Shares. The Covered Employee's account under
the Company's Deferred Compensation Plan will then be credited with an amount
equal to such Adjusted Purchase Price. When the Adjusted Purchase Price of the
number of Shares by which the Covered Employee's bonus is reduced is transferred
to the Covered Employee's account under the Company's Deferred Compensation
Plan, it will be deferred compensation and will not be included in the
compensation calculation for purposes of Section 162(m) until the deferred
amounts are actually paid to the Covered Employee at a later date.
Additionally, the Amendment will also permit a Covered Employee who has
previously elected to take Shares subject to a three-year forfeiture restriction
and who has not elected, under Section 83(b) of the Code, to be taxed on the
value of those Shares, to forfeit such number of Shares necessary so that the
compensation amount attributable to the remaining Shares that would otherwise
become unrestricted at the end of the three (3) year restriction period will not
be non-deductible by the Company under Section 162(m) at that time. The
Amendment will then permit the Covered Employee to receive a per Share credit to
his or her account under the Company's Deferred Compensation Plan equal to the
average closing price of a Share for the five (5) trading day period ending on
the May 31 prior to the June 1 cessation of the three-year restriction period.
Upon transfer to the Covered Employee's account under the Company's Deferred
Compensation Plan, the value of the forfeited Shares will be deemed deferred
compensation and will not be included in the compensation calculation for
purposes of Section 162(m) until the deferred amounts are actually paid to the
Covered Employee at a later date.
If approved by the stockholders, the Amendment would improve the ability of
the Company to tie the performance of its employees with the long-term
performance of the Company while enabling the Company to grant bonuses within
the deductibility limit of Section 162(m).
TERMINATION OF THE PLAN
The 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
17
<PAGE> 21
award any Shares shall terminate after the last award of Shares with respect to
the plan year ending in 1998.
FEDERAL INCOME TAX CONSEQUENCES
If a participant in the Plan elects to receive Shares which will be
restricted from sale for two years, the participant will be taxed on the value
of the Shares 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 the time.
If a participant in the Plan elects to receive Shares which will be subject
to a risk of forfeiture for three years, the participant will be taxed on the
value of the Shares 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 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 when he or she is taxed on the value of the Shares.
If a participant receives a credit to his or her account under the Deferred
Compensation Plan, the participant will recognize as income the amount paid to
him at ordinary income tax rates in effect at that time.
Subject to the restrictions of Section 162(m) as explained above, the
Company is entitled to a deduction of the fair market value of the Shares or the
amount paid from the Deferred Compensation Plan at the time the participant
recognizes income on such Shares or amount.
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 of Common Stock on the record date is
required for the adoption of the proposal.
18
<PAGE> 22
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.
DATE TO SUBMIT STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
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 1997 must do so no later than February 26, 1998.
To be eligible for inclusion in the 1998 proxy materials of the Company,
proposals must conform to the requirements set forth in Regulation 14A under the
Exchange Act.
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.
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, 1997
19
<PAGE> 23
APPENDIX A
PROPOSED AMENDMENT TO ARTICLE IV
OF THE CERTIFICATE OF INCORPORATION
OF MCDONALD & COMPANY INVESTMENTS, INC.
That Article IV of the Certificate of Incorporation be amended by deleting
the first full sentence in its entirety and substituting in lieu thereof the
following:
"The total authorized capital stock of the Corporation consists of fifty
million two hundred thousand (50,200,000) shares, of which number two
hundred thousand (200,000) are shares of Preferred Stock, without par value
("Preferred Stock"), and fifty million (50,000,000) are shares of Common
Stock, par value $1.00 per share ("Common Stock")."
A-1
<PAGE> 24
APPENDIX B
FIRST AMENDMENT TO THE
MCDONALD & COMPANY INVESTMENTS, INC.
1995 STOCK BONUS PLAN
WHEREAS, McDONALD & COMPANY INVESTMENTS, INC. (the "Parent Corporation")
adopted the McDONALD & COMPANY INVESTMENTS, INC. 1995 STOCK BONUS PLAN (the
"Plan") effective April 1, 1995; and
WHEREAS, pursuant to Section 9.1 of the Plan, the Board of Directors of the
Parent Corporation has the right to amend the Plan; and
WHEREAS, the Board of Directors of the Parent Corporation desires to amend
the Plan to adopt certain coordination provisions with the McDonald & Company
Securities, Inc. Deferred Compensation Plan to facilitate compliance with
Section 162(m) of the Internal Revenue Code;
NOW, THEREFORE, the Plan is hereby amended effective March 30, 1996 as set
forth below; provided, however, that this Amendment shall be of no force or
effect if it is not approved by the shareholders of the Parent Corporation:
The Plan is hereby amended by the addition of a new Article 13 at the end
thereof to read as follows:
"13. COORDINATION WITH DEFERRED COMPENSATION PLAN.
13.1 Notwithstanding anything in this Plan to the contrary, the Shares
awarded or held by a participant who is a covered employee under Section
162(m) of the Internal Revenue Code ("Section 162(m)") shall be subject to
the following provisions:
(a) in the event that an award of Shares to such a participant would
result in the receipt of an amount of compensation in excess of the
amount that may be deducted under Section 162(m), then the following
actions shall be taken:
(i) the number of Shares that would otherwise be awarded to such a
participant hereunder shall be reduced by the number of Shares
necessary so that the compensation amount attributable to the
remaining Shares awarded to the participant hereunder will be
deductible by the Corporation after taking into account Section
162(m); and
(ii) an amount equal to the Adjusted Purchase Price of the total
number of Shares that are not awarded to the participant
pursuant to subparagraph (i) above shall be credited to the
account of such participant under the terms of the Amended and
Restated McDonald & Company Securities, Inc. Deferred
Compensation Plan ("Deferred Compensation Plan"); and
(b) in the event that such a participant has previously received an
award of Shares that are subject to the restrictions set forth in
Section 6.2 above, such a participant has not made an election under
Section 83(b) of the Internal Revenue Code and the lapse of such
restrictions will result in the receipt of an amount of compensation
in excess of the amount that may be deducted under Section 162(m),
such participant may make an election to forfeit such number of
Shares necessary so that the compensation amount attributable to the
remaining Shares that will become unrestricted on the next immediate
June 1 will be deductible by the Corporation after taking into
account Section 162(m) and to receive as a credit to his account
under the Deferred Compensation Plan an amount equal to (i)
multiplied by (ii) where:
(i) equals the average closing price of one Share for the five (5)
trading day period
B-1
<PAGE> 25
ending on the May 31 immediately prior to such June 1; and
(ii) equals the number of Shares that the participant has elected to
forfeit pursuant to this paragraph (b).
The participant may make such an election only during the period
commencing May 1 and ending May 21 which immediately precedes the
June 1 on which the restrictions for such Shares lapse pursuant to
Section 6.2 above. Such election shall be made on such form and be
subject to such further requirements as determined by the Company in
its sole discretion."
B-2
<PAGE> 26
MCDONALD & COMPANY INVESTMENTS, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- JULY 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints 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
McDonald Investment Center Auditorium, 20th Floor, McDonald Investment Center,
800 Superior Avenue, Cleveland, Ohio, on Wednesday, July 30, 1997, 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 THREE DIRECTORS NOMINATED BY THE
BOARD OF DIRECTORS, "FOR" THE PROPOSAL TO APPROVE AND ADOPT AN AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF THE COMPANY'S COMMON STOCK FROM 15,000,000 TO 50,000,000 AND "FOR" THE
PROPOSAL TO APPROVE AND ADOPT AN AMENDMENT TO THE COMPANY'S 1995 STOCK BONUS
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>
THOMAS M. O'DONNELL, DONALD E. WESTON and EDWARD FRUCHTENBAUM
(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 an amendment to the Company's Certificate
of Incorporation to increase the number of authorized shares of the
Company's Common Stock from 15,000,000 to 50,000,000.
[ ] FOR the Proposal [ ] AGAINST the Proposal [ ] ABSTAIN
(3) PROPOSAL to approve and adopt an amendment to the Company's 1995 Stock
Bonus 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:................ , 1997
.............................
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 PROPOSALS
LISTED ABOVE
