<PAGE> 1
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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)
(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:
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<PAGE> 2
MCDONALD & COMPANY
INVESTMENTS, INC.
McDonald Investment Center
800 SUPERIOR AVENUE
CLEVELAND, OH 44114 - 216/443-2300
June 26, 1998
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 29, 1998, 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,
<TABLE>
<S> <C>
/s/ Thomas M. O'Donnell /s/ William B. Summers, Jr.
THOMAS M. O'DONNELL WILLIAM B. SUMMERS, JR.
Chairman President and Chief Executive Officer
</TABLE>
<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 29, 1998
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 29, 1998, 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 2001;
2. To consider and act upon a proposal to approve and adopt the
McDonald & Company Investments, Inc. 1998 Deferred Bonus Plan; and
3. 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 23,
1998 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, 1998
<PAGE> 4
MCDONALD & COMPANY
INVESTMENTS, INC.
PROXY STATEMENT
MAILED ON OR ABOUT JUNE 26, 1998
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 29, 1998
------------------
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 29, 1998, 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 and FOR the proposal to approve and adopt the McDonald
& Company Investments, Inc. 1998 Deferred 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 June 23, 1998. On that date, there
were outstanding and entitled to vote 18,665,821 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 any proposal requiring the
affirmative vote of the holders of a majority of the outstanding shares present
and entitled to vote.
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.
RECENT DEVELOPMENT
On June 15, 1998, the Company entered into an Agreement and Plan of Merger
with KeyCorp pursuant to which the Company will be acquired by KeyCorp. Under
the terms of the Agreement and Plan of Merger, stockholders of the Company will
receive, in a tax-free exchange, $35.00 of KeyCorp common stock for each share
of the Company's common stock, subject to possible adjustments if KeyCorp's
common stock price is below $33 or above $44.50 per common share at the time of
closing. In addition, KeyCorp has established a $68 million employee retention
program to be paid in cash and options over a three-year period to certain
employees of the Company. The merger is expected to close during the fourth
calendar quarter of 1998, subject to approval of the Company's stockholders,
certain regulatory approvals and certain other conditions to closing.
2
<PAGE> 6
STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth, as of June 23, 1998, 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 23, 1998, 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.............................. 1,200,000 6.43%
Daniel F. Austin(2)..................................... 133,522(5)(6)(7) *
Rena J. Blumberg(3)..................................... 18,000(5) *
Jeanette Grasselli Brown(3)............................. 7,000(5) *
Robert T. Clutterbuck(4)................................ 291,787(5)(6)(8) 1.56
Ralph M. Della Ratta, Jr.(2)............................ 60,241(5)(6) *
Edward Fruchtenbaum(3).................................. 8,000(5) *
James A. Karman(3)...................................... 18,000(5) *
David W. Knall(2)....................................... 167,288 *
David N. McCammon(3).................................... 4,000(5) *
Frederick R. Nance(3)................................... 11,200(5) *
Thomas M. O'Donnell(4).................................. 261,160(6)(9) 1.40
William B. Summers, Jr.(4).............................. 384,444(5)(6) 2.05
Donald E. Weston(4)..................................... 493,667(6)(10) 2.64
All Directors and executive officers
as a group (26 persons)............................... 2,701,847(5)(6) 14.34
</TABLE>
- ---------------
* 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 after June 23,
1998 through the exercise of stock options: 33,600 shares (Mr. Austin);
15,600 shares (Ms. Blumberg); 6,000 shares (Ms. Brown); 24,000 shares (Mr.
Clutterbuck); 1,479 shares (Mr. Della Ratta); 6,000 shares (Mr.
Fruchtenbaum); 15,600 shares (Mr. Karman); 4,000 shares (Mr. McCammon);
9,100 shares (Mr. Nance); 60,000 shares (Mr. Summers); and 181,379 shares
(all Directors and executive officers as a group). 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.
(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 1,176 shares of Common Stock owned by Mr. Austin's spouse.
(8) Includes 40,244 shares of Common Stock owned by Mr. Clutterbuck's spouse
and 168 shares of Common Stock owned by Mr. Clutterbuck as custodian for
his children.
(9) Includes 7,900 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 8,000 shares held by the Weston Family Foundation and 484,200
shares owned by the Donald E. Weston Revocable 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, three Directors will be elected to serve a three-year term until the
Annual Meeting in 2001 and until their successors have been elected and
qualified. At its May 6, 1998 meeting, the Board of Directors nominated William
B. Summers, Jr., Frederick R. Nance and Jeanette Grasselli Brown 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>
William B. Summers, Jr. (2)(8) 48 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 (2)(6) 44 Director of the Company since July 28, 1992;
Partner since 1987 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 the Urban
League, St. Ignatius High School, Ohio State
Legal Services Association, Parmadale and the
Cleveland State University Foundation.
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND DIRECTORSHIPS(1)
---- --- --------------------
<S> <C> <C>
Jeanette Grasselli Brown (2)(5)(7) 69 Director of the Company since January 31, 1996;
Until her retirement in January 1989, served as
Director of Corporate Research, Environmental and
Analytical Sciences, BP America, Inc.; Distin-
guished Visiting Professor and Director, Research
Enhancement, Ohio 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.
DIRECTORS CONTINUING IN OFFICE
James A. Karman (3)(5)(6)(7)(9) 61 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.
Rena J. Blumberg (3)(5)(6) 63 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 (3)(8) 47 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.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AGE AND DIRECTORSHIPS(1)
---- --- --------------------
<S> <C> <C>
David N. McCammon (3)(5)(9) 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.
Thomas M. O'Donnell (4)(7)(8) 62 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 (4) 63 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 U.S. Government Trust from January, 1982
to September 27, 1993, of the Gradison Growth
Trust since August, 1983, of the Gradison
Government Income Fund since September, 1987 and
of the Gradison Municipal Custodian Trust since
September, 1992.
Edward Fruchtenbaum 50 Director of the Company since November 25, 1995;
(4)(5)(6)(9) 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.
</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>
Jeanette Grasselli Brown AGA Gas, 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 Pulte Corporation
Stone & Webster, Incorporated
Thomas M. O'Donnell Seaway Food Town, Inc.
</TABLE>
6
<PAGE> 10
(2) Term as Director expires in 1998. Nominee for election to three-year term to
expire in 2001.
(3) Term as Director expires in 1999.
(4) Term as Director expires in 2000.
(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.
(9) Member of the Business Review Committee.
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. Directors who are not officers of the Company also are granted
options for the purchase of 2,000 shares of the Company's Common Stock, annually
on the first day of the Company's fiscal year; such options are granted
automatically, in accordance with the terms of the Company's 1995 Stock Option
Plan for Non-Officer Directors, and have an exercise price equal to the fair
market value of the Common Stock on the date of grant.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Management Committee, an Audit Review
Committee, a Compensation Committee, a Nominating Committee and a Business
Review 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 and the 1995 Key Employees Stock Option Plan 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 three times 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.
On June 18, 1997, the Board of Directors established the Business Review
Committee to provide ongoing involvement by the Board of Directors in the
monitoring and assessment of developments in the securities industry and changes
in the Company's business and regulatory environment. The Business Review
Committee met twice during the last fiscal year.
The Company's Board of Directors met five times during the last fiscal
year. No Director, with the exception of Mr. Nance, 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.
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<PAGE> 11
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 1998.
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.
8
<PAGE> 12
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 27, 1998, March 28, 1997 and March 29, 1996 of
those persons who were (i) the chief executive officer during the fiscal year
ended March 27, 1998 and (ii) the other four most highly compensated executive
officers of the Company for the fiscal year ended March 27, 1998 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- -----------------------
RESTRICTED NUMBER OF
STOCK SECURITIES ALL OTHER
AWARDS UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1)(2) OPTIONS SATION(3)
--------------------------- ---- ------ ----- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
William B. Summers, Jr., 1998 $200,000 $1,780,000(4) $494,141 10,000 $ 8,650
President and Chief 1997 200,000 1,128,750(4) 19,122 -- 7,828
Executive Officer 1996 200,000 820,000 211,786 -- 7,004
of the Company,
Chief Executive Officer of
McDonald Securities
Daniel F. Austin, 1998 135,000 1,352,000(4) 368,270 8,000 14,101
Vice Chairman of 1997 132,500 1,170,210(4) 23,551 -- 11,698
McDonald Securities 1996 120,000 620,000 152,969 -- 11,152
Robert T. Clutterbuck, 1998 175,000 1,400,000(4) 382,365 10,000 11,159
Treasurer of the 1997 170,833 983,242(4) 24,630 -- 10,679
Company, President and 1996 150,000 740,000 188,258 -- 9,631
Chief Operating Officer of
McDonald Securities
Ralph M. Della Ratta, Jr. 1998 100,000 2,451,694(1)(4)(5) -- 5,000 11,749
Senior Managing Director, 1997 100,000 1,011,573(1)(5) -- -- 12,187
McDonald Securities 1996 100,000 569,908(1)(5) -- -- 11,087
David W. Knall, 1998 0 3,606,699(6) -- 2,500 0
Senior Managing Director, 1997 0 2,016,541(6) -- -- 0
Investment Consultant and 1996 0 1,953,338(6) -- -- 0
Co-Resident Manager
(Indianapolis, IN) of
McDonald Securities
</TABLE>
- ---------------
No Named Executive Officer received personal benefits or perquisites during
fiscal 1998 in excess of the lesser of $50,000 or 10% of his aggregate salary
and bonus.
(1) Includes the value of awards of shares of Common Stock under the Company's
stock bonus plans. The Company's 1995 Stock Bonus Plan provides 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.
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.
Dividends were paid on the shares issued pursuant to the 1995 Stock Bonus
Plan.
9
<PAGE> 13
(2) For fiscal 1998, fiscal 1997 and 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 1998 was as
follows: 16,882 shares (Mr. Summers), 13,101 shares (Mr. Clutterbuck) and
12,513 shares (Mr. Austin). The number of shares of Common Stock granted to
each of these individuals during fiscal 1997 was as follows: 1,278 shares
(Mr. Summers), 1,570 shares (Mr. Clutterbuck) and 1,574 shares (Mr. Austin).
The number of shares granted to each of these individuals during fiscal 1996
was as follows: 21,950 shares (Mr. Summers), 19,540 shares (Mr. Clutterbuck)
and 15,906 shares (Mr. Austin). As of the end of fiscal 1998, 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: 24,589 shares valued at $734,596 (Mr.
Summers), 22,471 shares valued at $671,321 (Mr. Clutterbuck) and 17,934
shares valued at $535,778 (Mr. Austin). Dividends are paid on the restricted
shares held by these individuals.
(3) Includes (i) the compensation value of Split Dollar Life Insurance premiums
for each of the Named Executive Officers and (ii) amounts ($4,800 in fiscal
1998, and $4,500 in each of fiscal 1997 and fiscal 1996) contributed by the
Company to the McDonald & Company Securities, Inc. Retirement Savings Trust
and Plan on behalf of each Named Executive Officer.
(4) The bonus amounts reported for Messrs. Summers, Clutterbuck, Austin and
Della Ratta 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. Such individual's account under
the Company's Deferred Compensation Plan was credited with the amount
required to be deferred to reduce such individual's compensation to comply
with the Section 162(m) limitation. For fiscal 1998, the amount of bonus
deferred to a subsequent period for each of these individuals was as
follows: $1,474,670 (Mr. Summers); $957,987 (Mr. Clutterbuck); $855,923 (Mr.
Austin); and $1,662,799 (Mr. Della Ratta). For fiscal 1997, the amount of
bonus deferred to a subsequent period for each of these individuals was as
follows: $329,255 (Mr. Summers); $160,089 (Mr. Clutterbuck); and $382,370
(Mr. Austin).
(5) For fiscal 1998, the bonus amount reported for Mr. Della Ratta includes (i)
commissions, (ii) cash bonus awards and (iii) $489,367, the value of 16,703
shares granted under the Company's 1995 Stock Bonus Plan. For fiscal 1997,
the bonus amount reported for Mr. Della Ratta includes (i) commissions, (ii)
cash bonus awards and (iii) $189,498, the value of 10,992 shares granted
under the Company's 1995 Stock Bonus Plan. For fiscal 1996, the bonus amount
reported for Mr. Della Ratta includes (i) cash bonus awards and (ii)
$97,908, the value of 10,430 shares granted under the Company's 1995 Stock
Bonus Plan. Under the terms of the 1995 Stock Bonus Plan, Mr. Della Ratta
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.
(6) Bonuses for Mr. Knall includes (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 commission for
Mr. Knall for the 1998 fiscal year equalled $3,266,706; for the 1997 fiscal
year equalled $1,783,156; and for the 1996 fiscal year equalled $1,739,501.
Incentive bonus for Mr. Knall for the 1998 fiscal year was $339,993; for the
1997 fiscal year was $233,385; and for the 1996 fiscal year was $213,837.
10
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
OPTION GRANTS
Shown below is information with respect to grants of stock options pursuant
to the Company's 1995 Key Employees Stock Option Plan to the Named Executive
Officers during the fiscal year ended March 27, 1998.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
---------------------------------------------------------- AT
PERCENTAGE ASSUMED ANNUAL
OF RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION -----------------
NAME GRANTED(#)(1) YEAR ($ PER SHARE) DATE 5%($) 10%($)
- ----------------------------- ------------- ------------- ------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
William B. Summers, Jr. 10,000 4.88% 24.125 1/22/08 151,720 384,490
Daniel F. Austin 8,000 3.91% 24.125 1/22/08 121,376 307,592
Robert T. Clutterbuck 10,000 4.88% 24.125 1/22/08 151,720 384,490
Ralph M. Della Ratta, Jr. 5,000 2.44% 24.125 1/22/08 75,860 192,245
David W. Knall 2,500 1.22% 24.125 1/22/08 37,930 96,123
</TABLE>
- ---------------
(1) The options were granted at an exercise price equal to the market value of
the Common Stock at the date of grant. The options vest over a period of
five years from the date of grant and expire ten years from 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 27, 1998 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. -- -- 60,000 10,000 $1,411,260 $ 57,500
Daniel F. Austin -- -- 33,600 8,000 848,628 46,000
Robert T. Clutterbuck -- -- 24,000 10,000 565,752 57,500
Ralph M. Della Ratta, Jr. 5,913 $110,573 1,479 5,000 34,864 28,750
David W. Knall -- -- -- 2,500 -- 14,375
</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
27, 1998.
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.
11
<PAGE> 15
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.
Likewise, the Committee has in recent years determined that it 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 1998 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
1998 were awarded under its Incentive Compensation Plan. Participants in the
Incentive Compensation Plan have an opportunity to earn significant incentive
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 Compensation Plan for fiscal 1998 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 results of operations 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
12
<PAGE> 16
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 also granted options to purchase Common Stock under the
Company's stock option plan. In an effort to provide a greater incentive for
such individuals to serve and promote the interests of the Company and its
stockholders, the Committee granted options to purchase 204,750 shares of Common
Stock to the executive officers of the Company. All option awards were made at
the fair market value of a share of Common Stock on the date of grant, vest over
a five-year period commencing on the first anniversary of the date of grant, and
expire ten years from the date of grant. In determining the executive officers
who would receive options and the number of options to be granted to each
executive officer, the Committee considered each recipient's appropriate level
of long-term incentive compensation including, among other things, the
performance, experience and responsibilities of the individuals in question. The
amount of an individual's share ownership and the number of options previously
awarded to that individual were not a factor in the Committee's decisions with
respect to option awards.
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
1998. Mr. Summers' salary was last adjusted in January 1994, when he assumed the
responsibilities of Chief Executive Officer.
Mr. Summers participates in the Incentive Compensation Plan 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 1998. 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.
13
<PAGE> 17
After considering the foregoing factors, the Committee determined to pay
Mr. Summers, including a salary of $200,000 and a bonus of $2,200,000, total
compensation of $2,400,000 for fiscal 1998.
THE COMPENSATION COMMITTEE
James A. Karman, Chairman
Rena J. Blumberg
Edward Fruchtenbaum
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 27, 1998 all Section 16(a)
filing requirements applicable to its executive officers, Directors and greater
than ten-percent beneficial owners were complied with except for one Form 4 for
Bradley E. Turner, which was inadvertently filed late, one transaction by Thomas
O'Donnell, which was inadvertently not reported on a Form 4 and was subsequently
reported on a Form 5, and one transaction by Thomas M. McDonald, which was
inadvertently not reported on a Form 4 or a Form 5 and was subsequently reported
on an amended Form 5.
14
<PAGE> 18
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, 1993 to March 31,
1998. The companies comprising the Lipper Regional Brokerage Firm Index are: The
Advest Group, Inc.; Dain Rauscher Inc.; 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, 1993 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
MCDONALD REGIONAL
MEASUREMENT PERIOD & COMPANY S&P 500 FIRM INDEX
(FISCAL YEAR COVERED) (MDD) (S&P) (LRI)
<S> <C> <C> <C>
3/31/93 100 100 100
3/31/94 109 101 109
3/31/95 107 117 120
3/31/96 147 155 164
3/31/97 281 186 236
3/31/98 468 274 525
</TABLE>
15
<PAGE> 19
PROPOSAL TO APPROVE AND ADOPT THE 1998 DEFERRED BONUS PLAN
At the Annual Meeting, stockholders will be asked to approve and adopt the
Company's 1998 Deferred Bonus Plan (the "Plan"), which replaces the 1995 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
At its May 6, 1998 meeting, the Board of Directors of the Company
determined to replace the Old Plan in an effort to improve the provisions
related to retaining and incentivizing professionals. Specifically, the Plan has
been designed to provide a greater emphasis on incentivizing highly compensated
professionals who have not attained a significant amount of share ownership.
IMPACT OF ANNOUNCEMENT OF PENDING MERGER WITH KEYCORP ON THE PLAN
On June 15, 1998, the Company entered into an Agreement and Plan of Merger
with KeyCorp pursuant to which the Company will be acquired by KeyCorp. The
merger is expected to close during the fourth calendar quarter of 1998, subject
to approval of the Company's stockholders, certain regulatory approvals and
certain other conditions to closing. In the Agreement and Plan of Merger, the
Company represented to KeyCorp that it would not, pending the merger, issue any
shares of Common Stock under the Plan without KeyCorp's consent. Consequently,
no awards will be made under the Plan unless (i) such awards are made prior to
the merger, with the consent of KeyCorp, or (ii) the merger with KeyCorp is not
consummated.
The following summary of the 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 PLAN
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 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 Plan, thereby increasing their direct involvement in the
future success of the Company.
ADMINISTRATION OF THE PLAN
The 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any successor to such
rule as may be in effect from time to time.
The Committee is authorized: (i) to determine, consistent with the Plan,
the amount, price and timing of awards under the Plan; (ii) to prescribe
instruments evidencing awards; (iii) to construe and interpret the plan; and
(iv) 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 will be 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 Compensation
Programs (a "Qualifying Bonus"). An individual who may be eligible to
participate in the Plan may elect not to participate in the
16
<PAGE> 20
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 ("Senior Management Employee") and owns at least the following
number of shares of Common Stock 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 and Sales Management Compensation Programs. The
term "Sales Bonus" means a bonus paid to an employee under the Company's Sales
Program.
SHARES SUBJECT TO THE PLAN
The Plan authorizes the Company to issue stock bonuses with respect to an
aggregate of 2,000,000 shares. 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. The shares to be awarded and
issued to employees under the 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.
AWARD OF SHARES
Incentive Bonuses. The number of shares of Common Stock awarded to a
participant will be determined by dividing either the stock portion or adjusted
stock portion (as explained below) of a participant's Incentive Bonus by the
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, whether or not a
participant is a Senior Management Employee and, if a participant is a Senior
Management Employee, the number of shares owned by the participant:
SENIOR MANAGEMENT EMPLOYEES
<TABLE>
<CAPTION>
NUMBER OF SHARES INCENTIVE BONUS STOCK PORTION
OWNED BY EMPLOYEES AMOUNT OVER OF BONUS
- ------------------ ------------------- --------------
<S> <C> <C>
0 to 49,999 $100,000 20%
50,000 and above $100,000 10%
</TABLE>
ALL OTHER EMPLOYEES UNDER INCENTIVE COMPENSATION
OR SALES MANAGEMENT COMPENSATION PROGRAM
<TABLE>
<CAPTION>
INCENTIVE BONUS AMOUNT OVER STOCK PORTION OF BONUS
- --------------------------- -----------------------
<S> <C>
$100,000 20%
</TABLE>
Sales Bonuses. The number of shares of Common Stock awarded to a
participant will be determined by dividing the stock portion or adjusted stock
portion (as explained below) of a participant's Sales Bonus by the 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:
17
<PAGE> 21
RETAIL SALESPERSONS
<TABLE>
<CAPTION>
INCENTIVE BONUS AMOUNT OVER STOCK PORTION OF BONUS
- --------------------------- -----------------------
<S> <C>
$10,000 50%
</TABLE>
INSTITUTIONAL SALESPERSONS
Fixed Income Institutional Salespersons
<TABLE>
<CAPTION>
STOCK PORTION OF SALESPERSON'S COMMISSION
TOTAL INSTITUTIONAL GROSS EXPRESSED AS PERCENTAGE OF TOTAL INSTITUTIONAL
COMMISSIONS ON SALES GROSS COMMISSIONS ON SALES
- ----------------------------- ------------------------------------------------
<S> <C> <C> <C>
0 to $ 500,000 0.00%
$500,001 to $ 750,000 2.00%
$750,001 to $1,100,000 2.00%
$1,100,001 to $1,500,000 3.00%
Greater than $1,500,000 3.00%
</TABLE>
Equity Institutional Salespersons
<TABLE>
<CAPTION>
STOCK PORTION OF SALESPERSON'S COMMISSION
TOTAL INSTITUTIONAL GROSS EXPRESSED AS PERCENTAGE OF TOTAL INSTITUTIONAL
COMMISSIONS ON SALES GROSS COMMISSIONS ON SALES
- ----------------------------- ------------------------------------------------
<S> <C> <C> <C>
0 to $ 600,000 0.75%
$600,001 to $ 800,000 1.00%
$800,001 to $1,000,000 1.25%
$1,000,001 to $1,200,000 1.50%
Greater than $1,200,000 1.50%
</TABLE>
Equity Institutional Sales Traders
<TABLE>
<CAPTION>
STOCK PORTION OF SALESPERSON'S COMMISSION
TOTAL INSTITUTIONAL GROSS EXPRESSED AS PERCENTAGE OF TOTAL INSTITUTIONAL
COMMISSIONS ON SALES GROSS COMMISSIONS ON SALES
-------------------- ------------------------------------------------
<S> <C>
Above 0 0.67%
</TABLE>
The 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 the Incentive Bonus or Sales Bonus is actually
made. 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.
ADJUSTED STOCK PORTION OF BONUS AMOUNT
The adjusted stock portion of a participant's Qualifying Bonus is
determined by multiplying the stock portion of a bonus amount by either one
hundred and twenty-five percent (125%) or one hundred and ten percent (110%).
The adjustment factor is one hundred and twenty-five percent (125%) if the
participant receives shares that are subject to forfeiture for three (3) years
or if the participant is a Senior Management Employee who has elected to receive
an additional portion of his Incentive Bonus in shares that are subject to
forfeiture for three (3) years. The adjustment factor is one hundred and ten
percent (110%) if the participant is not a Senior Management Employee who has
elected to receive an additional portion of his Incentive Bonus in shares that
are subject to forfeiture for three (3) years.
18
<PAGE> 22
VOLUNTARY DEFERRAL
In addition to receiving the portion of a Qualifying Bonus in shares of
Common Stock as described above, a participant in the Plan may also elect to
receive an additional portion of his or her Qualifying Bonus that would
otherwise be paid in cash in shares of Common Stock or shares of Investment
Funds (as described below). If a Senior Management Employee elects an additional
deferral, he or she must receive a portion of the voluntary deferral in shares
equal to the greater of (a) one-half ( 1/2) of the elected amount or (b) either
ten percent (10%) of the cash portion of his or her Qualifying Bonus or the
entire amount if less than ten percent (10%) of the cash portion of his or her
Qualifying Bonus. The Investment Funds will be investment funds selected by the
Company and may include, without limitation, money market funds, common stock
funds, bond funds, balanced funds, investment funds primarily invested in
insurance contracts, or investment funds provided for under insurance contracts.
The maximum amount of a participant's Qualifying Bonus for which a participant
may elect to receive shares of Common Stock or Investment Funds in lieu of cash
is set forth in the following chart:
<TABLE>
<CAPTION>
NUMBER OF MAXIMUM PERCENTAGE OF
SHARES THE CASH PORTION OF
OWNED BY QUALIFYING BONUS ELIGIBLE
CATEGORY OF EMPLOYEE EMPLOYEE FOR VOLUNTARY DEFERRAL
-------------------- -------------- ---------------------------
<S> <C> <C>
Senior Management Employees 0 to 49,999 20%
Senior Management Employees 50,000 or more 30%
Salespersons N/A 100%
Employees who are not Senior Management N/A 20%
Employees or Salespersons
</TABLE>
The amount of a Qualifying Bonus which a participant elects to receive in
Investment Funds will be adjusted by multiplying that portion of a Qualifying
Bonus by an adjustment factor of one hundred and ten percent (110%) if the
participant receives Investment Funds that are subject to forfeiture for three
(3) years.
FORFEITURE RESTRICTIONS
The shares and Investment Funds awarded under the Plan are subject to
complete forfeiture for the period ending on the anniversary of the June 1st
immediately following the award. An employee may elect instead to have the
forfeiture period end on the third (3rd) anniversary of the June 1st immediately
following the award. If an employee elects the three (3) year forfeiture period,
he or she is entitled an adjusted stock portion of his or her bonus amount as
set forth above. If an employee makes an initial election for a three (3) year
forfeiture period, he or she may make a similar voluntary election to continue
the forfeiture restriction for another two (2) year period as long as the
election is made by the June 1st which is one (1) year in advance of the June
1st when the forfeiture restriction would otherwise expire. An employee may make
as many subsequent elections to continue the forfeiture restrictions as he or
she desires.
AWARD PROVISIONS
Neither shares of Common Stock awarded under the Plan, nor shares of Common
Stock or Investment Funds which a participant elects to receive pursuant to the
Plan, may be sold, transferred or otherwise disposed of, or pledged, until the
earliest of (i) the lapse of applicable forfeiture restrictions as set forth
above; (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.
19
<PAGE> 23
AWARDS UNDER THE PLAN
No awards will be made until stockholder approval of the proposed Plan has
been obtained. 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
Qualifying Bonus, it is not presently possible to determine the amount of shares
that will be awarded to participants with respect to the 1999 plan year. The
table below sets forth the awards of shares during fiscal 1998 that would have
been made to each of the persons and groups identified in the table if the
proposed Plan had been in effect at that time, and the awards of shares during
fiscal 1998 that were made to such persons and groups pursuant to the Old Plan,
which will be terminated if the proposed Plan is approved and adopted.
NEW PLAN BENEFITS
1998 DEFERRED BONUS PLAN
<TABLE>
<CAPTION>
COMPARISON TO 1995 PLAN(2)
--------------------------
NUMBER OF NUMBER OF
NAME AND POSITION DOLLAR VALUE(1) SHARES DOLLAR VALUE SHARES
----------------- ---------------- --------- ------------- ----------
<S> <C> <C> <C> <C>
William B. Summers Jr. $ 262,500 7,104 $ 494,141 16,882
President and Chief Executive
Officer of the Company and
McDonald Securities
Daniel F. Austin $ 195,625 5,294 $ 368,270 12,513
Vice Chairman of McDonald
Securities
Robert T. Clutterbuck $ 203,125 5,497 $ 382,365 13,101
Treasurer of the Company,
Executive Managing Director
and Chief Financial Officer
of McDonald Securities
Ralph M. Della Ratta Jr. $ 581,081 15,725 $ 489,367 16,703
Senior Managing Director of
McDonald Securities
David W. Knall 0 0 0 0
Manager Director, Investment
Consultant and Co-Resident
Manager (Indianapolis, IN) of
McDonald Securities
Executive Group (20 persons) $1,881,607 51,997 $2,380,385 80,330
Non-Executive Director Group 0 0 0 0
Non Executive Officer Employee
Group (665 persons) $4,720,297 159,801 $6,852,646 246,026
</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.
(2) These amounts represent the dollar value and number of shares of actual
awards made under the 1995 Plan during fiscal 1998.
20
<PAGE> 24
TERMINATION OF THE PLAN
If the proposal is adopted, the Plan will terminate on June 30, 2004 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 2001.
FEDERAL INCOME TAX CONSEQUENCES
The participant will be taxed on the value of the shares of Common Stock or
Investment Funds issued pursuant to the Plan on the date the forfeiture
restrictions lapse. A participant may make 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 market value of the shares at
ordinary income tax rates in effect when he or she is taxed on the value of the
shares.
The Plan contains provisions that permit participants who are subject to
Section 162(m) of the Internal Revenue Code to make appropriate elections to
forfeit shares under the Plan and receive a corresponding credit under the
McDonald & Company Securities, Inc. Deferred Compensation Plan. The effect of
such an election is intended to preserve the compensation deduction for the
Company for compensation paid to a covered employee under Section 162(m) up to
$1,000,000.
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 the
holders of a majority of the outstanding shares of Common Stock of the Company
present, either in person or by proxy, at the Annual Meeting is required to
approve and adopt the 1998 Deferred Bonus Plan. Thus, stockholders who vote to
abstain will in effect be voting against the proposal. Broker non-votes,
however, are not counted as present for determining whether this proposal has
been approved and have no effect on its outcome.
21
<PAGE> 25
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.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
AND ADDITIONAL INFORMATION
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 1999 must do so no later than February 26, 1999.
To be eligible for inclusion in the 1999 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, 1998
22
<PAGE> 26
APPENDIX A
MCDONALD & COMPANY INVESTMENTS, INC.
1998 DEFERRED BONUS PLAN
1. NAME AND PURPOSE.
1.1 The name of this plan is the McDonald & Company Investments, Inc. 1998
Deferred Bonus Plan. The Plan is effective for bonus payments determined with
respect to fiscal years commencing March 28, 1998, and thereafter. The Plan will
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 Corporation 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 28, 1998 and to have ended March 26, 1999. 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.
3.2 No member of the Board of Directors of the Parent Corporation, unless
he is also an
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<PAGE> 27
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 The words "Senior Management Employee" shall mean an employee who is
either a Senior Managing Director, Executive Managing Director, President, Chief
Executive Officer or Chairman of the Board.
3.5 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
the 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 a Senior Management Employee 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.
3.6 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 3.5
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.
3.7 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 either
the Stock Portion of a Participant's
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<PAGE> 28
Qualifying Bonus or the Adjusted Stock Portion of a Participant's Qualifying
Bonus by the Purchase Price of one Share. The Stock Portion of a Participant's
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. The Adjusted Stock Portion of a Participant's Qualifying Bonus
shall be determined as set forth in Section 4.3 below.
4.2 The Stock Portion of a Participant's Qualifying Bonus and the Adjusted
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 Stock Portion of a Participant's Qualifying Bonus shall be
determined by multiplying the Stock Portion of a Participant's Qualifying Bonus
by a percentage determined as follows: (a) one hundred and twenty-five percent
(125%) if the employee has elected to restrict the Shares awarded pursuant to
Section 4.1 above by making an election as set forth in Section 7.3 below; (b)
one hundred and twenty-five percent (125%) if the employee is a Senior
Management Employee and has elected both to receive additional Shares as set
forth in Section 4.5 below and to restrict such additional Shares as set forth
in Section 7.3 below; or (c) one hundred and ten percent (110%) if the employee
is not a Senior Management Employee and has elected both to receive additional
Shares as set forth in Section 4.5 below and to restrict such additional Shares
as set forth in Section 7.3 below.
4.4 The 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.
4.5 In addition to the Shares otherwise awarded to an employee under
Section 4.1 above, an employee may elect to receive all or a portion of his
Qualifying Bonus in Shares or Investment Funds as set forth in Section 6 below
that would otherwise be paid in cash. The portion of an employee's Qualifying
Bonus that may be paid under this Section 4.5 shall be as set forth on attached
Exhibit B. If a Senior Management Employee makes an election under this Section
4.5, he shall receive a portion of such elected amount in Shares which shall be
at least equal to the greater of (a) one-half (1/2) of such elected amount or
(b) either ten percent (10%) of the cash portion of his Qualifying Bonus or the
entire elected amount if less than ten percent (10%) of the cash portion of his
Qualifying Bonus. Any election to have any part or all of the cash portion of
his Qualifying Bonus paid in Shares or Investment Funds shall be made on or
before the last day before the first day of the plan year during which the
Participant earns such Qualifying Bonus. Any additional portion of an employee's
Qualifying Bonus that an employee elects to have paid in Shares or Investment
Funds pursuant to this Section 4.5 shall be subject to all the other terms and
conditions of this Plan including, but not limited to, the elections permitted
under Sections 7.3 and 7.4 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.
A-3
<PAGE> 29
5.2 Shares issued to employees under this Plan shall be subject to the
terms, conditions and restrictions specified in Section 7 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
share 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.
6. INVESTMENT FUNDS
6.1 An employee who has made an election under Section 4.5 above to have
all or a portion of his Qualifying Bonus paid in Investment Funds rather than in
cash shall have an account established in the name of such employee on the books
and records of the Corporation. All such amounts so credited to the account of
any employee shall constitute a general, unsecured liability of the Corporation
to such employee.
6.2 The amount credited to an employee's account shall equal either: (a)
one hundred percent (100%) of the amount so elected by the employee under
Section 4.5; or (b) one hundred and ten percent (110%) of the amount so elected
by the employee under Section 4.5 provided that the employee also elects to
restrict such amounts as set forth in Section 7.3 below.
6.3 The Corporation shall credit each account of each employee with
earnings, gains and losses on such account as if an amount equal to the
employee's account balance had been invested in accordance with any investment
directions the Corporation permits such employee to make pursuant to Section 6.4
below.
6.4 The Corporation from time to time may permit employees who have made an
election under Section 4.5 above to have all or a portion of his Qualifying
Bonus paid in Investment Funds rather than in cash to elect that their accounts
shall be credited with earnings, gains and losses as if such accounts held
actual assets and such assets were invested in accordance with such individuals'
directions among such investment funds as the Corporation may designate
("Investment Funds"). Any such direction of investment shall be subject to such
rules as the Corporation may prescribe, including, without limitation, rules
concerning the manner of providing investment directions, the frequency of
changing such investment directions, and method of crediting earnings, gains and
losses for any portion of an account which is not covered by any valid
investment directions. The Investment Funds which the Corporation may designate
shall include but not be limited to the following types of funds, which can be
managed on an individual basis or as part of a mutual fund, as the Corporation
shall determine:
(a) money market funds;
A-4
<PAGE> 30
(b) common stock funds;
(c) bond funds;
(d) balanced funds;
(e) investment funds which are primarily invested in insurance
contracts; and
(f) investment funds which are provided for under insurance contracts.
The Corporation shall have the sole discretion to determine the number of
Investment Funds to be designated hereunder and the nature of the funds and may
change or eliminate the Investment Funds provided hereunder from time to time.
The Corporation shall in its sole discretion determine the rate of earnings,
gains and losses to be credited to accounts under this Plan with respect to any
such Investment Fund for any period, taking into account the return, net of any
expenses, of such Investment Funds for such period.
7. TRANSFER RESTRICTIONS.
7.1 The Shares and Investment Funds 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 lapse of the right of the Parent Corporation to a return of
such Shares and Investment Funds pursuant to either Section 7.2, 7.3 or 7.4
below, as applicable; (b) a change in control that occurs with respect to the
Parent Corporation; or (c) the termination of the Plan.
7.2 Except as set forth either in Section 7.3 or 7.4 below, any Shares
either awarded under Section 4.1 or paid pursuant to an employee's election made
under Section 4.5 and any Investment Funds shall be subject to complete
forfeiture and return to the Parent Corporation or the Corporation of such
Shares or such Investment Funds during the period ending on the anniversary of
the June 1st immediately following the end of the plan year for which such
Shares or Investment Funds were either awarded or elected as payment by the
employee.
7.3 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 have
either the Shares awarded to him under Section 4.1 above or the Shares or
Investment Funds that the employee has voluntarily elected to receive under
Section 4.5 above to be subject to the forfeiture restrictions under this
Section 7.3 instead of the restrictions set forth in Section 7.2 above. If such
an employee so elects, his Adjusted Stock Portion of a Participant's Qualifying
Bonus shall be determined as set forth in Section 4.3 above, the amount credited
to his account for investment in the Investment Funds shall be determined as set
forth in Section 6.2 above and his Shares and Investment Funds for such plan
year shall be subject to complete forfeiture and return to the Parent
Corporation or the Corporation of such Shares or Investment Funds 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 or Investment Funds
were awarded. Any election made by an eligible employee under this Section 7.3
must be received by the Committee not later than the last day before the first
day of the plan year during which the eligible employee earns the Qualifying
Bonus and the right to such Shares or Investment Funds under this Plan. Any
election made by an employee under this Section 7.3 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 date set forth above.
7.4 In the event that an employee makes an election under Section 7.3 above
to have the three (3) year forfeiture restriction apply to Shares or Investment
Funds hereunder, such employee may elect with respect to the Shares or
Investment Funds that are so restricted to make a similar election to continue
such forfeiture restriction for another two (2) year period provided that such
employee makes such subsequent election before the June 1st which is one
A-5
<PAGE> 31
(1) year before the June 1st on which such forfeiture restrictions will expire.
If an employee makes such a subsequent election to continue the forfeiture
restrictions, such forfeiture restrictions will expire on the second (2nd)
anniversary of the June 1st on which the prior forfeiture restriction would have
expired, unless the employee makes a subsequent similar election to continue
such forfeiture restriction for another two (2) year period before the June 1st
which is one (1) year before the June 1st on which such forfeiture restriction
will expire. Any subsequent election to continue the forfeiture restrictions
shall not be an on-going election and must be made by the June 1st set forth
above in order to continue the forfeiture restriction.
7.5 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 lapse of the right of the Parent Corporation or the Corporation to a return
of such Shares or Investment Funds pursuant to Section 7.2, 7.3 or 7.4 above;
(b) a change in control that occurs with respect to the Parent Corporation; or
(c) the termination of the Plan, then the restrictions imposed on such Shares by
this Section 7 shall lapse and be of no further force and effect.
7.6 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 and pay all Investment Funds 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 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.
7.7 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 Sections 7.2, 7.3 or 7.4 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.
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8. OTHER RESTRICTIONS.
8.1 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.
9. ESCROW OR LEGEND.
9.1 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.
10. AMENDMENTS.
10.1 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 Investment Funds, or who
have been granted the right to an award of Shares or Investment Funds hereunder
prior to any such amendment.
11. DURATION.
11.1 This Plan became effective upon its adoption by the Board of Directors
for the Plan Year ended March 26, 1999 and shall terminate on June 30, 2004 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 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 2001.
12. BENEFICIARY DESIGNATION.
12.1 Unless an employee has designated a beneficiary in accordance with the
provisions of the following sentence, any Shares or Investment Funds 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.
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Instead of having any Shares or Investment Funds 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 or Investment Funds and filing such designation with the Corporation.
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 Stock Portion of a Participant's
Qualifying Bonus equal to 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
Sections 7.2, 7.3 or 7.4 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 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 hereunder.
Such election shall be made on such form and be subject to such
further requirements as determined by the Company in its sole
discretion.
A-8
<PAGE> 34
EXHIBIT A
EMPLOYEES ELIGIBLE UNDER INCENTIVE COMPENSATION
AND SALES MANAGEMENT COMPENSATION PROGRAM
EFFECTIVE FOR BONUSES PAYABLE FOR FISCAL YEAR
BEGINNING MARCH 28, 1998
SENIOR MANAGEMENT EMPLOYEES
<TABLE>
<CAPTION>
NUMBER OF SHARES INCENTIVE BONUS STOCK PORTION
OWNED BY EMPLOYEE AMOUNT OF BONUS
- ----------------- --------------- -------------
<S> <C> <C>
0 to 49,999 over $100,000 20%
50,000 and above $100,000 10%
</TABLE>
ALL OTHER EMPLOYEES UNDER INCENTIVE COMPENSATION
OR SALES MANAGEMENT COMPENSATION PROGRAM
<TABLE>
<CAPTION>
INCENTIVE BONUS AMOUNT STOCK PORTION OF BONUS
- ---------------------- ----------------------
<S> <C>
Over $100,000 20%
</TABLE>
EMPLOYEES ELIGIBLE UNDER SALES COMPENSATION PROGRAMS
EFFECTIVE FOR BONUSES AND COMMISSIONS EARNED
AFTER JANUARY 1, 1998
RETAIL SALESPERSONS
<TABLE>
<CAPTION>
INCENTIVE BONUS AMOUNT STOCK PORTION OF BONUS
- ---------------------- ----------------------
<S> <C>
Over $10,000 50%
</TABLE>
FIXED INCOME INSTITUTIONAL SALESPERSONS
<TABLE>
<CAPTION>
STOCK PORTION OF SALESPERSON'S COMMISSION
TOTAL INSTITUTIONAL GROSS EXPRESSED AS PERCENTAGE OF TOTAL INSTITUTIONAL
COMMISSIONS ON SALES GROSS COMMISSIONS ON SALES
- ----------------------------- ------------------------------------------------
<S> <C> <C> <C>
0 to $ 500,000 0.00%
$500,001 to $ 750,000 2.00%
$750,001 to $1,100,000 2.00%
$1,100,001 to $1,500,000 3.00%
Greater than $1,500,000 3.00%
</TABLE>
EQUITY INSTITUTIONAL SALESPERSONS
<TABLE>
<CAPTION>
STOCK PORTION OF SALESPERSON'S COMMISSION
TOTAL INSTITUTIONAL GROSS EXPRESSED AS PERCENTAGE OF TOTAL INSTITUTIONAL
COMMISSIONS ON SALES GROSS COMMISSIONS ON SALES
- ----------------------------- ------------------------------------------------
<S> <C> <C> <C>
0 to $ 600,000 0.75%
$600,001 to $ 800,000 1.00%
$800,001 to $1,000,000 1.25%
$1,000,001 to $1,200,000 1.50%
Greater than $1,200,000 1.50%
</TABLE>
EQUITY INSTITUTIONAL SALES TRADERS
<TABLE>
<CAPTION>
STOCK PORTION OF SALES TRADERS' COMMISSION
TOTAL INSTITUTIONAL GROSS EXPRESSED AS PERCENTAGE OF TOTAL INSTITUTIONAL
COMMISSIONS ON SALES GROSS COMMISSIONS ON SALES
- ------------------------- ----------------------------------------------
<S> <C>
Above 0 0.67%
</TABLE>
<PAGE> 35
EXHIBIT B
Maximum Percentage of the Cash Portion of a Qualifying Bonus Payable in Shares
or Investment Funds as Elected by an Employee Under Section 4.5 of the Plan
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE OF
NUMBER OF SHARES THE CASH PORTION OF
OWNED BY QUALIFYING BONUS ELIGIBLE
CATEGORY OF EMPLOYEE EMPLOYEE FOR VOLUNTARY DEFERRAL
-------------------- ----------------- -------------------------
<S> <C> <C>
Senior Management Employees 0 to 49,999 20%
Senior Management Employees 50,000 or more 30%
Salespersons N/A 100%
Employees who are not Senior Management
Employees or Salespersons N/A 20%
</TABLE>
<PAGE> 36
MCDONALD & COMPANY INVESTMENTS, INC.
PROXY
ANNUAL MEETING OF STOCKHOLDERS -- JULY 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints ROBERT T. CLUTTERBUCK and THOMAS F.
MCKEE, 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 29, 1998, 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 AND "FOR" THE PROPOSAL TO APPROVE AND ADOPT THE MCDONALD &
COMPANY INVESTMENTS, INC. 1998 DEFERRED 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>
WILLIAM B. SUMMERS, JR., FREDERICK R. NANCE and JEANETTE GRASSELLI BROWN
(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 McDonald & Company Investments, Inc.
1998 Deferred Stock Bonus Plan.
[ ] FOR the Proposal [ ] AGAINST the Proposal [ ] ABSTAIN
(3) 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:................ , 1998
.............................
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
