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 o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted
by Rule
14a-6(e)(2))
x Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Materials Pursuant to Rule 14a-11(c) or Rule
14a-12
THE SHERWOOD GROUP, INC.
(Name of Registrant as Specified in Its Charter)
THE SHERWOOD GROUP, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
x $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1),
14a6(i)(2) or Item 22(a)(2) of Schedule 14A.
o $500 per each party to the controversy pursuant to
Exchange Act
Rule 14a-6(i)(3).
o Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and
O-11.
1) Title of each class of securities to which transaction
applies: N.A.
2) Aggregate number of securities to which transaction
applies:
N.A.
3) Per unit price or other underlying value of transaction
computed
pursuant to Exchange Act Rule O-11:
(Set for th the amount on which the filing fee is calculated
and
state how it was determined):
N.A.
4) Proposed maximum aggregate value of transaction:
N.A.
5) Total fee paid:
N.A.
o Check box if any part of the fee is offset as provided
by Exchange Act Rule O-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:
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3) Filing Party:
4) Date Filed:
<PAGE>
The Sherwood Group, Inc.
Ten Exchange Place Centre
Jersey City, New Jersey 07302
Notice Of Annual Meeting Of Stockholders
To Be Held October 22, 1996
The 1996 Annual Meeting of the Stockholders of The
Sherwood Group, Inc. (the "Company") will be held at
the Company's offices at 10 Exchange Place, Jersey
City, New Jersey 07302, 15th Floor, on October 22, 1996
at 4:00 p.m., New York City time for the following
purposes:
(1) To elect three Class 3 directors to
hold office for a term of three years or until their
successors have been duly elected and qualified.
(2) To ratify the appointment of KPMG Peat
Marwick LLP as the Company's independent
auditors for the fiscal year ending May 31,
1997.
(3) To approve The Sherwood Group, Inc.
1996 CEO Bonus Plan.
(4) To approve The Sherwood Group, Inc.
1996 Executive Incentive Award Plan.
(5) To transact such other business as
may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on
August 28, 1996, as the record date for determining the
stockholders entitled to notice of and to vote at the
meeting and any adjournment thereof.
Your attention is directed to the accompanying Proxy
Statement for further information regarding each proposal
to be made.
All stockholders are asked to complete, sign and date
the enclosed proxy and return it promptly by mail in
the enclosed self-addressed envelope, which does not
require postage if mailed in the United States.
By Order of the Board of Directors
Dennis Marino
Secretary
September 10, 1996
New York, New York
<PAGE>
The Sherwood Group, Inc.
Ten Exchange Place Centre
Jersey City, New Jersey 07302
Proxy Statement For Annual Meeting
This Proxy Statement is furnished by the Board of
Directors (the "Board of Directors" of The
Sherwood Group, Inc., a Delaware corporation (the
"Company"), in connection with the solicitation
of proxies to be used at the Annual Meeting of
Stockholders (the "Meeting") to be held at the
Company's offices at Ten Exchange Place Centre,
Jersey City, New Jersey 07302, 15th Floor, on
October 22, 1996 at 4:00 p.m. New York City time,
and at any adjournment thereof. This Proxy
Statement and the accompanying Annual Report,
Notice and Proxy are being mailed to stockholders on
or about September 10, 1996. The principal executive
offices of the Company are located at the address
indicated above.
Only stockholders of record at the close of
business on the record date, August 28, 1996, will
be entitled to vote at the Meeting and at all
adjournments thereof.
On August 28, 1996, there were outstanding and
entitled to vote 13,017,161 shares of the Company's
common stock, $.01 par value per share (the "Common
Stock"). Each outstanding share of Common Stock is
entitled to one vote on each matter to be voted upon.
A majority of the shares of Common Stock entitled to
vote at the Meeting will constitute a quorum for
the transaction of business. Holders of Common Stock
have no cumulative voting rights.
Voting Of Proxies
If a proxy is properly signed by a stockholder
and is not revoked, the shares represented
thereby will be voted at the Meeting in the manner
specified on the proxy, or if no manner is specified
with respect to any matter therein, such shares will
be voted by the persons designated therein (with
respect to the matters as to which the
stockholder is entitled to vote) (a) "FOR" the
election of each of Carl H. Hewitt, John P. Duffy
and Thomas Neumann as Class 3 directors of the
Company ("Proposal 1"), (b) "FOR" the ratification
of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year
ending May 31, 1997 ("Proposal 2"), (c) "FOR" the
approval of The Sherwood Group, Inc. 1996 CEO Bonus
Plan ("Proposal 3"), (d) "FOR" the approval of The
Sherwood Group, Inc. 1996 Executive Incentive Award
Plan ("Proposal 4") and (e) in connection with the
transaction of such other business as may properly be
brought before the Meeting, in accordance with the
judgment of the person or persons voting the proxy.
If any of the nominees for director is unable to
serve or for good cause will not serve, an event
that is not anticipated by the Company, the shares
represented by the accompanying proxy will be voted
for a substitute nominee designated by the Board of
Directors or the Nominating Committee thereof or
the Board of Directors may determine to reduce the
size of the Board of Directors.
A proxy may be revoked by the stockholder at any
time prior to the voting thereof by giving notice
of revocation in writing to the Secretary of the
Company, by duly executing and delivering to the
Secretary of the Company a proxy bearing a later date
or by voting in person at the Meeting.
Directors of the Company will be elected by a
plurality of the vote of the outstanding shares of
Common Stock present, in person or by proxy, and
entitled to vote at the Meeting. The
affirmative vote of the holders of at least a
majority of the outstanding shares of Common
Stock present, in person or by proxy, and
entitled to vote at the Meeting is required for the
ratification and approval of, unless otherwise
required by the Delaware General Corporation Law
or the Company's Restated Certificate of
Incorporation, any other matter which may be put to
a stockholder vote at the Meeting. Except for the
election of directors, as to any
<PAGE>
particular proposal, abstentions will have the same effect as a vote
against that proposal, and broker non-
votes will not be counted as votes for or against the
proposal, and will not be included in
counting the number of votes
necessary for approval of the proposal. Votes cast,
either in person or by proxy, will be tabulated by The
American Stock Transfer Company, the Company's transfer agent.
Voting Securities and Principal Holders Thereof
Security Ownership Of Certain Beneficial Owners
The following table sets forth certain information,
as of August 28, 1996, regarding the beneficial
ownership of the Common Stock by each person known by
the Company to be the beneficial owner of more than
five percent of the outstanding shares of the Common
Stock. The Company has been advised that each
stockholder listed below has sole voting and
dispositive power with respect to such shares unless
otherwise noted in the footnotes following the
table.
<TABLE>
<CAPTION>
Name and Address Amount of
of Beneficial Owner Beneficial Ownership Percentage of Class
<S> <C> <C>
S.G.I. Partners,L.P.
412 Harwood Building 4,000,000 (1)<F1> 30.73%
Scarsdale, NY 10583
Carl H. Hewitt
120 Broadway
New York, NY 10006 4,000,000 (1)<F1> 30.73%
Arthur Kontos
10 Exchange Place
Jersey City, NJ 07302 2,881,100 (2)<F2> 21.77%
Peter A. Kellogg
120 Broadway
New York, NY 10006 1,025,000 (3)<F3> 7.87%
Richard J. Marino
10 Exchange Place 627,635 (4)<F4> 4.82%
Jersey City, NJ 07302
<FN>
<F1>(1) Comprised of 4,000,000 shares of Common Stock held
by S.G.I. Partners, L.P. ("S.G.I."). See "Certain
Relationships and Related Transactions."
</FN>
<FN>
<F2>(2) Comprised of 1,315,708 shares of Common Stock held by
Mr. Kontos and 219,533 shares of Common Stock underlying Mr. Kontos'
currently exercisable stock options. Also includes
125,000 shares of Common Stock held by Arthur Kontos
Foundation, 778,562 shares of Common Stock held by
limited partnerships of which Mr. Kontos is the general
partner and Mr. Kontos' children are sole limited partners
and 442,297 shares over which he has only sole voting
power which are subject to a voting trust agreement with
his former wife.
</FN>
<FN>
<F3>(3) Comprised of 675,000 shares of Common Stock held by Mr.
Kellogg and 350,000 shares of Common Stock held by a corporation,
all of whose voting stock is held by Mr. Kellogg and of
which Mr. Kellogg is president.
</FN>
<FN>
<F4>(4) Consists of 615,341 shares of Common Stock held by Mr.
R. Marino and 12,294 shares of Common Stock underlying Mr. R.
Marino's currently exercisable stock options. Does not
include 1,523 shares of Common Stock currently held by the
Employee Stock Ownership Trust (the "ESOP") with respect
to which Mr. R. Marino and two other officers of the
Company are trustees. See "Employee Stock Ownership Plan"
for a description of how shares of the Common Stock held
by the ESOP are voted.
</FN>
</TABLE>
Security Ownership Of Management
The following table sets forth certain information, as of
August 28, 1996, regarding the beneficial ownership of
the Company's Common Stock by each director and
named executive officer (see "Compensation of
Directors and Executive Officers") of the Company and
by all directors and executive officers as a
group. The Company has been advised that each
stockholder listed below has sole voting and
dispositive power with respect to such shares
unless otherwise noted in the footnotes below.
Sherwood Securities Corp. ("Sherwood Securities")
is a wholly-owned subsidiary of the Company
specializing in the wholesale market making of over-
the-counter securities.
<TABLE>
<CAPTION>
Amount
Name and Title of Beneficial Percentage of
Ownership(1)<F1> Class
<S> <C> <C>
Arthur Kontos, 2,881,100(2)<F2> 21.77%
Vice Chairman of
the Board
and Chief
Executive
Officer
of the Company
James H. Lynch, 35,000 *
Jr., Chairman of
the Board and
Director
John P. Duffy, 32,000(3)<F3> *
Director
Carl H. Hewitt, 4,000,000(4)<F4> 30.73%
Director
Dennis Marino, 218,698(5)<F5> 1.67%
Executive Vice
President and
Chief Administrative
Officer
of the Company;
President of
Sherwood
Securities
Richard J. 627,635(6)<F6> 4.82%
Marino,
Chairman of the
Board
of Sherwood
Securities
Thomas Neumann, 223,810(7)<F7> 1.71%
Executive Vice
President of the
Company; Head of
Capital Markets
of Sherwood
Securities
Ralph N. Del Deo 30,000(8)<F8> *
Director
William Karsh, 35,501(9)<F9> *
Executive
Vice President
and Treasurer
of the Company
Stephen J. DiLascio 0 *
Director,
Managing General
Partner of
Equitrade Partners
<PAGE>
Amount
Name and Title of Beneficial Percentage of
Ownership(1)<F1> Class
Directors and 8,083,744 60.32%
Executive
Officers as a
Group
(10 Persons)
* Less than 1%
<FN>
<F1>(1) Does not include 1,523 shares of Common Stock held by
the ESOP with respect to which Messrs. R. Marino and D. Marino
are trustees. See "Employee Stock Ownership Plan" for
a description of how shares of Common Stock held by the ESOP
are voted.
</FN>
<FN>
<F2>(2) Consists of 1,315,708 shares of Common Stock held by Mr.
Kontos, 219,533 shares of Common Stock underlying Mr.
Kontos' currently exercisable stock options, 125,000 shares
of Common Stock held by the Arthur Kontos Foundation, 778,562
shares of Common Stock held by limited partnerships of which
Mr. Kontos is the general partner and Mr. Kontos' children
are sole limited partners and 442,297 shares over which
he has only sole voting power which are subject to a voting
trust agreement with his former wife.
</FN>
<FN>
<F3>(3) Consists of 30,000 shares of Common Stock held by Mr.
Duffy and 2,000 shares of Common Stock held in trust for
Mr. Duffy's children.
</FN>
<FN>
<F4>(4) Consists of 4,000,000 shares of Common Stock held by
S.G.I. Partners, L.P. ("S.G.I."). See "Certain Relationships and
Related Transactions."
</FN>
<FN>
<F5>(5) Consists of 173,508 shares of Common Stock held by Mr.
D. Marino and 45,190 shares of Common Stock underlying Mr. D.
Marino's currently exercisable stock options.
</FN>
<FN>
<F6>(6) Consists of 615,341 shares of Common Stock held by Mr.
R. Marino and 12,294 shares of Common Stock underlying Mr. R.
Marino's currently exercisable stock options.
</FN>
<FN>
<F7>(7) Consists of 129,783 shares of Common Stock held by Mr.
Neumann and 94,027 shares of Common Stock underlying Mr. Neumann's
currently exercisable stock options.
</FN>
<FN>
<F8>(8) Consists of 20,000 shares of Common Stock held by Mr.
Del Deo and 10,000 shares of Common Stock held by his wife.
</FN>
<FN>
<FN9>(9) Consists of 23,162 shares of Common Stock held by Mr.
Karsh and 12,339 shares of Common Stock underlying Mr.
Karsh's currently exercisable stock options.
</FN9>
</TABLE>
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation, which became
effective on February 4, 1987, requires that the Board of
Directors be divided into three classes. In accordance with the
Company's Restated Certificate of Incorporation, at the 1987
annual meeting, Class 1 directors were initially elected for a
term that expired as of the 1988 annual meeting of the
stockholders of the Company, Class 2 directors were initially
elected for a term that expired as of the 1989 annual meeting of
stockholders and Class 3 directors were initially elected for a
term that expired as of the 1990 annual meeting of stockholders.
At each annual meeting, directors will be elected for a term of
three years so that the term of office of one class of directors
shall expire each year.
Three individuals are being nominated for election at the Meeting
to serve as Class 3 directors for a term of three years or until
the election and qualification of their successors.
The affirmative vote of the holders of a plurality of the shares
of Common Stock voted in person or by proxy at the Meeting is
required for the election of each director. Unless otherwise
directed, each proxy executed and returned by a stockholder will
be voted for the election of Carl H. Hewitt, John P. Duffy and
Thomas Neumann. If Mr. Hewitt, Mr. Duffy or Mr. Neumann becomes
unable to serve or for good cause will not serve, an event that is
not anticipated by the Company, (i) the shares represented by the
proxies will be voted for a substitute nominee or substitute
nominees designated by the Board of Directors or the Nominating
Committee of the Board of Directors or (ii) the Board of Directors
may determine to reduce the size of the Board of Directors. At
this time, the Board of Directors knows of no reason why Mr.
Hewitt, Mr. Duffy and Mr. Neumann may not be able to serve as
directors if elected.
The Board of Directors recommends that each of the above nominees
be elected as a director.
The name and age of each of the nominees and each of the incumbent
directors whose term will continue following the Meeting, their
respective positions with the Company and the period during which
each such individual has served as a director are set forth below.
Additional biographical information concerning each of the
nominees and each of the incumbent directors and executive
officers of the Company follows the table.
<TABLE>
<CAPTION>
Name Age Position with the Director
Company Since
<S> <C> <C> <C>
Class 1
Directors
Dennis 50 Director, Executive 1981
Marino Vice President,
Secretary and Chief
Administrative Officer
James H. 65 Chairman of the Board 1989
Lynch, Jr.
Stephen J. 41 Director, Managing 1995
DiLascio General Partner of
Equitrade Partners
Class 2
Directors
Arthur 50 Director, Vice Chairman 1988
Kontos of the Board, Chief
Executive Officer
Richard J. 52 Director, Senior Vice 1981
Marino President, Chairman of
the Board of Sherwood
Securities
Ralph N. Del 71 Director 1993
Deo
Class 3
Directors
Carl H. 45 Director 1991
Hewitt
John. P. 55 Director 1992
Duffy
Thomas 32 Director, Executive 1992
Neumann Vice President
Certain Biographical Information Concerning
Incumbent Directors and Executive Officers
James H. Lynch, Jr. became Chairman of the Board of Directors in
July 1989. He is also an independent consultant to the securities
industry. Mr. Lynch was a general partner and member of the
Executive Committee of Spear, Leeds & Kellogg, L.P. a New York
limited partnership ("S.L.K."), for more than five years prior to
his retirement from S.L.K. in June 1985. S.L.K. is a broker
dealer and a member of all major United States stock exchanges and
acts as a specialist on the New York and American Stock Exchanges.
Mr. Lynch also served as President of Spear, Leeds & Kellogg
Securities, Inc. and as an officer and director of its
wholly-owned subsidiaries, First Options of Chicago and Troster
Singer Corporation. Mr. Lynch is a director of Consolidated
Purchasing Services, Inc. and Business Link Communications, Inc.
Arthur Kontos became Vice Chairman of the Board and Chief
Executive Officer of the Company in October 1988. Mr. Kontos was
a managing director of S.L.K. from June 1988 until October 1988,
when he joined the Company. He became a general partner of S.L.K.
in 1982 and President of S.G.I. Capital Holdings, Inc., a general
partner of S.G.I. in 1988, from which positions he resigned in
December 1991. S.G.I. currently holds 30.73% of the Common Stock
and has the right to appoint two directors to the Company's Board
of Directors pursuant to the terms of an agreement between the
Company and S.G.I. From July 1978 until May 1988, Mr. Kontos
served as a director and as President and Chief Executive Officer
of Troster Singer Corporation, currently a division of S.L.K.
Richard J. Marino is a founder of Sherwood Securities, a
subsidiary of the Company, and was Secretary of Sherwood
Securities from its inception in 1968 until June 1988. In August
1987, Mr. Marino was elected Chairman of the Board of Sherwood
Securities. Mr. Marino has served as director of International
Equity Trading for Sherwood Securities since 1979. In January
1988, he assumed the responsibility of director of all equity
trading. In April 1988, he ceased his individual trading activity
to serve full time as director of all equity trading. In August
1988, Mr. Marino returned to trading a list of securities. Mr.
Richard J. Marino and Mr. Dennis Marino are brothers.
Dennis Marino has served as the Company's Chief Administrative
Officer since 1986 and was appointed President of Sherwood
Securities, a subsidiary of the Company, in January 1988. He has
been employed by Sherwood Securities since February 1969. Mr.
Marino has been an Executive Vice President of the Company since
1977. Mr. Marino served as President of the Securities Traders
Association of New York for a term which expired in 1991 and
presently serves as Senior Vice Chairman of the International
Securities Traders Association for a term expiring in 1997. Mr.
Marino has been nominated to serve as Chairman of the
International Securities Traders Association for a term to expire
in 1998.
Thomas Neumann is also an Executive Vice President of the Company
and Head of Capital Markets of Sherwood Securities in charge of
institutional sales. Mr. Neumann joined Sherwood Securities in
October 1988 and held various trading positions with that company
prior to being appointed a senior vice president in
1990. From June 1986 until October 1988, Mr. Neumann was an
employee of Troster Singer Corporation.
John P. Duffy retired from his position as a managing director of
S.L.K. in 1991, a position he held from prior to September 1987
until his retirement. As a managing director of S.L.K., Mr. Duffy
acted as a specialist on the New York Stock Exchange ("NYSE").
Carl Hewitt was appointed at the request of S.G.I. under the terms
of an agreement between the Company and S.G.I. pursuant to which
S.G.I. has the right to designate two directors. S.G.I. has not
currently designated a second director under the agreement. Mr.
Hewitt became a member of the Board of Directors in July 1991.
Mr. Hewitt is also a managing director and the general counsel of
S.L.K. Mr. Hewitt joined S.L.K. in 1985 as an assistant general
counsel. He became the general counsel in June 1988 and became a
managing director in January 1991.
Ralph N. Del Deo is a senior partner of Crummy, Del Deo, Dolan,
Griffinger & Vecchione, a New Jersey law firm which provides legal
services to the Company. His practice areas include corporation
law, patent, trademark and copyright law, litigation and general
practice. Mr. Del Deo is also on the National Board of Trustees
of the Foundation Fighting Blindness of Baltimore, Maryland.
William Karsh has been Treasurer and Executive Vice President of
the Company since March 4, 1991. He also served as Chief
Financial Officer of the Company and of Sherwood Securities until
October 1995. In addition, Mr. Karsh serves as Chairman of the
Board of National Discount Brokers. Prior to his employment with
the Company, Mr. Karsh was an independent consultant providing
expert securities related testimony. He also worked on various
other assignments in the securities industry. In addition, from
March 1989 until November 1990, Mr. Karsh was the chief financial
officer of a derivative products trading firm in New York. Prior
to March 1989, Mr. Karsh was the Chief Financial Officer, Senior
Vice President, Secretary and Treasurer of Refco Securities, Inc.,
a fully integrated broker dealer, a position held by him since
1983.
Stephen J. DiLascio is the managing partner of Equitrade Partners
("Equitrade"), a NYSE specialist firm in which the Company is a
60% limited partner. He began his career on the trading floor in
1973 with Weiss, Peck & Greer's specialist operation, the
predecessor to Equitrade. He became a specialist in 1978, a
partner in 1980 and the managing partner in 1989. As the managing
partner, he is responsible for all aspects of Equitrade's
operations. Mr. DiLascio is a director of Securities Industry
Automation Corporation ("SIAC"), a governor of the NYSE, a member
of the Alliance of Floor Brokers and a member of the Technology,
Planning and Oversight Committee at the NYSE.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires
the Company's executive officers and directors, and persons who
beneficially own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Based solely on a review of the
copies of reports furnished to the Company and written
representations from the Company's executive officers, directors
and persons who beneficially own more than ten percent of the
Company's equity securities, the Company believes that, during the
preceding year, all filing requirements applicable to its
officers, directors and ten percent beneficial owners were met,
with the exception that an initial report (Form 3) of beneficial
ownership by Stephen DiLascio was filed late. In addition, one
report of change in beneficial ownership (Form 4) regarding one
transaction was filed late by William Karsh.
<PAGE>
Meetings of the Board and Committees
During fiscal year 1996, the Board of Directors held six meetings.
Each of the directors attended at least 75% of the aggregate of
all meetings of the Board of Directors and the total number of
meetings held by all committees of the Board of Directors of which
each respective director was a member during the time he was
serving as such during the fiscal year ended May 31, 1996.
The Board of Directors has created an Executive Committee, a
Compensation Committee, an Audit Committee, an Employment
Agreement Committee and a Nominating Committee. The Executive
Committee is comprised of James H. Lynch, Jr., Arthur Kontos and
Dennis Marino. During part of the fiscal year ended May 31, 1996,
the Compensation Committee was comprised of John P. Duffy, Carl H.
Hewitt and Ralph N. Del Deo. The Compensation Committee was
reconstituted in that fiscal year to be comprised of James H.
Lynch, Jr. and John P. Duffy. The Audit Committee is comprised of
Carl H. Hewitt, James H. Lynch, Jr. and Ralph N. Del Deo. The
Nominating Committee is comprised of Arthur Kontos, Carl H. Hewitt
and John P. Duffy and the Employment Agreement Committee was
comprised of John P. Duffy and Carl H. Hewitt. The Employment
Agreement Committee was disbanded during 1996 and its functions
were transferred to the Compensation Committee
The Executive Committee, which held four meetings during fiscal
year 1996, is authorized, among other things, to exercise such
powers as may lawfully be delegated to it by the Board of
Directors including the appointment of officers, the appointment
of agents of the Company, and the determination of general policy
with regard to business of the Company. Action by the Executive
Committee is subject to review and revision by the Board of
Directors.
The Compensation Committee, which held one meeting during fiscal
year 1996, has jurisdiction on behalf of the Company to approve,
disapprove, modify or amend all plans to compensate employees
including bonuses, stock options, performance achievement or other
incentive plans unless such compensation is subject to the
jurisdiction of the Employment Agreement Committee which has been
disbanded. No member of the Compensation Committee is eligible
for any award or any grant of stock options under any such plans.
The Compensation Committee determines the salaries of employees of
the Company who are directors and also determines the salaries of
all other employees of the Company who are officers or who occupy
such other positions as may be designated by the Committee.
The Audit Committee, which held one meeting during fiscal year
1996, reviews and monitors the Company's financial reports and
accounting practices and, among other things, makes
recommendations to the Board with respect to audit policies and
procedures and the scope and extent of audits, reviews the
Company's unaudited quarterly financial results, and reviews the
annual year end audit with the Company's independent auditors.
The Nominating Committee was created by the Board of Directors in
August 1993 for the purpose of nominating a slate of nominees for
election to the Board of Directors by the stockholders of the
Company at each Annual Meeting of Shareholders commencing with the
annual meeting of stockholders held in 1994. The Nominating
Committee is also responsible for nominating candidates to fill
the position of each director, if any, whose term as director
terminates prior to the date of any annual meeting of stockholders
and who is to be replaced by the Board of Directors. The
Nominating Committee does not consider nominees recommended by
stockholders in its deliberations. The Nominating Committee held
no meetings in fiscal year 1996.
The Employment Agreement Committee was created by the Board of
Directors in September 1993 for the purpose of ratifying and
approving employment agreements between the Company or its
subsidiaries and officers of the Company or its subsidiaries and
for the purpose of determining or ratifying and approving the
criteria pursuant to which the Company or such subsidiaries will
make certain payments under employment agreements entered into
between the Company and its officers. The Employment Agreement
Committee held no meetings in fiscal year 1996 and was disbanded
in 1996.
<PAGE>
Compensation Of Directors And Executive Officers
The following table sets forth information concerning the annual
and long-term compensation for services in all capacities to the
Company and its subsidiaries for each of the fiscal years ended
May 31, 1996, 1995 and 1994 of those persons who were, at May 31,
1996, (i) the chief executive officer and (ii) the other four most
highly compensated executive officers of the Company for the
fiscal year ended May 31, 1996 (the "named executive officers"):
</TABLE>
<TABLE>
<CAPTION>
Executive Compensation Table
Annual Compensation
Name and Other Securities
Principal Fiscal Annual Underlying All Other
Position Year Salary($) Bonus($) Compensation(1)<FN1> Options(#) Compensation($)(1)<FN1>
<S> <C> <C> <C> <C> <C>
Arthur Kontos, 1996 $300,000 $6,137,012 219,533 $7,119,375(3)<FN3>
Vice Chairman of 1995 300,000 3,131,745
the Board and 1994 300,000 2,836,069 281,250(3)<FN3>
Chief Executive
Officer of the
Company
Dennis Marino 1996 150,000 515,000 45,190 663,181(3)<FN3>
Executive Vice 1995 150,000 175,000
President and 1994 150,000 185,965 84,375(3)<FN3>
Chief
Administrative
Officer of the
Company;
President of
Sherwood
Securities
Thomas Neumann 1996 248,939 1,015,000 94,027 1,093,376(3)<FN3>
Executive Vice 1995 200,000 450,000
President of the 1994 196,153 460,965 28,125(3)<FN3>
Company
Richard J. 1996 -- 486,654(2)<FN2> 12,294 196,875(3)<FN3>
Marino 1995 -- 319,600(2)<FN2>
Chairman of the 1994 -- 849,100(2)<FN2>
Board of
Sherwood
Securities
William Karsh 1996 150,000 515,000 12,339 190,625(3)<FN3>
Executive Vice 1995 129,000 175,000
President and 1994
Treasurer of the
Company and
Sherwood
Securities
No named executive officer received personal benefits or perquisites
during the fiscal year ended May 31, 1996 in excess of the lesser of
$50,000 or 10% of his aggregate salary and bonus.
<FN>
<F1>(1) Amounts do not include for fiscal year 1994 $165,016 paid to Mr.
Kontos for the purchase of Triak Services Corp. See "Certain
Relationships and Related Transactions".
</FN>
<FN>
<F2>(2) Cash bonuses for Mr. R. Marino include commissions, representing
a percentage of gross commissions on sales/trades and discretionary
incentive bonuses. Commissions for Mr. R. Marino for the fiscal year
ended May 31, 1996 equaled $477,904, for the fiscal year ended May 31,
1995 equaled $302,100 and for the fiscal year ended May 31, 1994
equaled $834,1000. Discretionary incentive bonuses for Mr. R. Marino
for the fiscal year ended May 31, 1996 equaled $8,750, for the fiscal
year ended May 31, 1995 equaled $17,500 and for the fiscal year ended
May 31, 1994 equaled $15,000.
</FN>
<FN>
<F3>(3) Represents gain recognized upon exercise of options.
</FN>
</TABLE>
<PAGE>
Compensation Arrangements
Mr. Kontos is compensated by the Company pursuant to an Employment
Agreement (the "Employment Agreement") by and between Mr. Kontos
and the Company dated as of September 12, 1995. The Employment
Agreement covered the fiscal year ended May 31, 1996 and Mr.
Kontos has exercised an option to extend its term through the
fiscal year ended May 31, 1997. Under the terms of the Employment
Agreement, the Company has agreed to pay Mr. Kontos an annual base
salary of $300,000. In addition, Mr. Kontos is entitled to a
bonus ("Bonus") based on the Company's "Income". "Income" is
defined in the Employment Agreement to mean the Company's
consolidated pre-tax net income during any fiscal year in which
the Employment Agreement is in effect without any deductions for
amounts payable as a Bonus under the Employment Agreement or any
related accruals. For fiscal years commencing with the fiscal
year ended May 31, 1996, Mr. Kontos is entitled to an annual Bonus
based on performance goals, therein defined as 10% of the first
$5,000,000 of Income, 15% of the next $8,000,000 of Income and 18%
of the Income over $13,000,000. In March 1996, Mr. Kontos signed
a waiver wherein his Bonus on any Income over $19,746,019, for the
fiscal year ended May 31, 1996, will be paid at a rate of 15%,
rather than 18%.
The Employment Agreement may be terminated (i) by Mr. Kontos
either on thirty (30) days prior written notice or at any time
following a Change in Control, as defined, (ii) by the Company for
Cause, as defined, and (iii) automatically upon the death or
disability of Mr. Kontos. If the Company terminates the
Employment Agreement without cause, Mr. Kontos is entitled to
receive as liquidated damages the amount which he would have been
entitled to receive for a termination in connection with a Change
in Control. Generally, a Change in Control will be deemed to have
occurred under the Employment Agreement if any person (other than
Mr. Kontos or persons under his control) or group acting in
concert acquires beneficial ownership of more than 50% of the
voting stock of the Company and the control so acquired is
exercised in any manner. If a Change in Control occurs during the
term of the Employment Agreement and in connection with the Change
in Control or within one year thereafter, Mr. Kontos' employment
with the Company is terminated either voluntarily or
involuntarily, Mr. Kontos shall be entitled to receive certain
liquidated damages in an amount which shall not constitute an
excess parachute payment under Section 280G of the Internal
Revenue Code of 1986, as amended.
Compensation of Directors
Independent directors are paid at a rate of $18,000 annually plus
$1,000 for each committee meeting attended.
<PAGE>
Option Grants in Last Fiscal Year
Shown below is information with respect to the options to purchase
Common Stock granted to the chief executive officer and named
executive officers.
<TABLE>
Option Grants In Last Fiscal Year
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Price
Appreciation
for Option
Term
Number % of Total
of Options
Securities Granted to Excercise
Underlying Employees in or Base Expiration
Name Options Fiscal Year Price ($/SH) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Arthur 14,840 3.76% $7.9375 11/16/05 $ 74,079 $ 187,731
Kontos 14,650 3.71 8.6250 1/10/06 79,465 201,379
53,591 13.58 8.8125 1/18/06 297,008 752,671
48,232 12.22 8.8125 1/30/06 267,308 677,411
88,220 22.35 9.0000 2/13/06 499,330 1,265,400
Dennis 7,420 1.88 7.9375 11/16/05 37,040 93,865
Marino 4,366 1.11 8.6250 1/10/06 23,682 60,015
5,355 1.36 8.8750 1/21/06 29,889 75,744
28,049 7.11 9.0625 2/15/06 159,861 405,120
Thomas 6,616 1.68 7.9375 11/16/05 33,026 83,695
Neumann 7,495 1.90 8.6250 1/10/06 40,655 103,026
16,077 4.07 8.8125 1/18/06 89,101 225,799
18,757 4.75 8.8125 1/30/06 103,954 263,439
45,082 11.42 9.1875 2/21/06 260,482 660,114
Richard 12,294 3.11 8.8750 1/14/06 68,618 173,892
J. Marino
William 12,339 3.13 8.6250 1/10/06 66,929 169,612
Karsh
</TABLE>
<PAGE>
Option Exercises and Fiscal Year-End Values
Shown below is information with respect to the exercise of options
to purchase Common Stock by the chief executive officer and the
named executive officers and unexercised options to purchase
shares of Common Stock for the chief executive officer and the
named executive officers.
<TABLE>
Aggregated Option Exercises In Last Fiscal Year,
And May 31, 1996 Option Value
<CAPTION>
Number of Value of
Unexercised Unexercised
Number of Value Options at In-the-money
Name Shares Realized Fiscal Year-End Options at
Acquired on Exercisable Unexercisable Fiscal Year-End(1)<F1>
Exercise Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Arthur 900,000 $7,119,375 14,840 204,693 $41,738 $382,798
Kontos,
Vice
Chairman of
the Board
and Chief
Executive
Officer of
the Company
Dennis 85,000 $663,181 7,420 37,770 $20,869 $66,651
Marino
Executive
Vice
President
and Chief
Administrative
Officer
of the
Company;
President
of Sherwood
Securities
Thomas 161,000 $1,093,376 6,616 87,411 $18,608 $153,858
Neumann
Senior Vice
President
of Sherwood
Securities
Richard J. 25,000 $196,875 0 12,294 0 $23,051
Marino
Chairman of
the Board
and
Director of
International
Equity
Trading of
Sherwood
Securities
William 25,000 $190,625 0 12,339 0 $26,220
Karsh
Executive
Vice
President
and
Treasurer
of the
Company and
Sherwood
Securities
<FN>
<F1>(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 May 31, 1996.
</FN>
</TABLE>
<PAGE>
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.
Set forth below is a discussion of the Company's compensation
philosophy, together with a discussion of the factors considered
by the Committee in determining the compensation of the Company's
Vice Chairman of the Board and Chief Executive Officer and other
executive officers named in this Proxy Statement for the fiscal
year ended May 31, 1996.
Members of the Compensation Committee during the fiscal year ended
May 31, 1996 were John P. Duffy, Ralph N. Del Deo, Carl H. Hewitt
and James H. Lynch, Jr. In 1996, the Compensation Committee was
restructured so that only Messrs. Lynch and Duffy serve as members
of the Compensation Committee. During the fiscal year ended May
31, 1996, entities with which certain members of the Compensation
Committee are associated received payments from the Company.
Each of Sherwood Securities and Equitrade Partners, L.P., a New
York limited partnership in which the Company holds a 60% limited
partnership interest, clear certain of their securities
transactions through Spear, Leeds & Kellogg, L.P., a New York
limited partnership ("S.L.K."). Each of Messrs. Hewitt and
Kellogg are managing directors of S.L.K. During the Company's
1996 fiscal year, the Company and its subsidiaries paid fees in
the aggregate amount of $905,157 to S.L.K. in connection with
clearing activities performed by S.L.K.
During the fiscal year ended May 31, 1996, Crummy, Del Deo, Dolan,
Griffinger & Vecchione, a law firm of which Mr. Del Deo is a
partner, rendered legal services to the Company and its
subsidiaries and received $1,113,979 in payment from the Company
and its subsidiaries for such services.
Compensation Philosophy
The Company's compensation philosophy focuses on providing
executives with annual compensation that rewards individual
performance during the year, and provides incentives to executives
to improve the long-term performance of the Company. By paying
relatively modest base salaries to executive officers, and making
a significant portion of their compensation contingent on their
performance during the year, the Company seeks to provide
executives with significant incentives to promote the interests of
the Company and its stockholders.
Compensation Decisions for Fiscal Year Ended May 31, 1996
Salaries. Consistent with its compensation philosophy, the
Company has paid relatively modest base salaries to its salaried
officers and has supplemented these salaries with performance
based bonuses. Traders generally receive no base salaries, and
are compensated on a commission basis. In making decisions with
respect to the base salaries of executive officers for the fiscal
year ended May 31, 1996, the committee considered the performance
of each of the individuals in question during the prior year, the
Company's results of operations for the fiscal year ended May 31,
1995 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 make only modest changes in the base
salaries of certain executives, and to maintain salaries for most
executive officers at the same level as the prior year.
<PAGE>
Bonuses. The bonuses paid to the Company's executive officers
with respect to the fiscal year ended May 31, 1996 were determined
in accordance with the Company's previously enumerated policy.
Performance of officers is measured by reference to the volume of
business generated by them or under their direction during the
fiscal year. The performance of the Company's Vice Chairman of
the Board and Chief Executive Officer is measured primarily by
reference to the Company's financial performance for the fiscal
year.
Chief Executive Officer Compensation
The compensation arrangements for Mr. Kontos with respect to the
fiscal year ended May 31, 1996 were based on the Company's
compensation philosophy. The committee determined not to make any
adjustments to Mr. Kontos' base salary for the year, in an effort
to provide Mr. Kontos with additional incentives to continue to
improve the Company's performance. Mr. Kontos' bonus with respect
to the fiscal year ended May 31, 1996 was determined in accordance
with the provisions of the Employment Agreement, including an
additional 3% bonus on Income (as defined in the Employment
Agreement) above $13,000,000.
THE COMPENSATION COMMITTEE
James H. Lynch, Jr.
John P. Duffy
Indemnification of Directors and Officers
The Company has entered into indemnification agreements with its
directors and officers which obligate the Company to indemnify the
directors or officers for all expenses (including attorney fees)
and costs, judgments, fines and settlement amounts paid or
incurred by them in connection with claims, actions and
proceedings in which they are parties, witnesses and subjects as a
result of their activities on behalf of the Company, including,
but not limited to, their activities as directors and officers of
the Company and its subsidiaries. Pursuant to the agreements, the
directors will be indemnified to the extent permitted under
Delaware law. The agreements cover all indemnified claims and
proceedings brought within ten years after the resignation of the
director or officer from all positions held as a director, officer
or otherwise on behalf of the Company. The agreements may provide
indemnity to or limit liability of directors or officers for
events which occurred prior to the date of the agreement.
However, the enforceability of these retroactive provisions has
not been determined under Delaware law.
Employee Stock Ownership Plan
In 1976, the Company adopted a Profit Sharing Plan which was
subsequently replaced by an Employee Stock Ownership Plan (the
"ESOP"). On July 15, 1992, the Board of Directors resolved to
discontinue the ESOP. Under the provisions of the ESOP, all
employees over 21 years of age who had completed six months of
service were eligible to participate. On July 12, 1993, prior to
the final distribution of shares from the ESOP, the Company
offered to buy those shares from the ESOP participants at $3.875
per share. 192,795 shares out of 567,819 of such shares held by
ESOP participants were accepted for payment and 373,501 shares
have been distributed to the participants, of which 297,377 shares
were rolled over to the Sherwood Securities Corp. 401(k) Plan (the
"401(k) Plan"). Participants representing 1,523 shares have not
yet responded.
Vesting terms provided for complete vesting of contributions by
the Company after five years of service with the Company or its
subsidiaries. Annual contributions were made at the discretion of
the Board of Directors, not to exceed 15% of eligible
compensation. During the ESOP plan year ended April 30, 1996, the
Company made no contributions to the ESOP and made no payments
pursuant to the ESOP to the named individuals in the foregoing
Executive Compensation Table. Of the 297,377 shares rolled over
into the 401(k) Plan, 31,154 shares and 112,235 shares were for
the benefit of Mr. Dennis Marino and Mr. Richard J. Marino,
respectively. Shares of Common Stock held in the ESOP are voted
by the trustees of the ESOP in the manner directed by the
Compensation Committee of the Board of Directors.
<PAGE>
Stock Options
Stock Option Plan. Certain directors and officers of the Company
hold options to purchase shares of Common Stock under the
Company's 1983 Stock Option Plan, which was adopted in August 1983
and amended and restated in January 1987 (the "Option Plan"). The
Board of Directors voted on August 5, 1993 to allow the Option
Plan to expire as of August 9, 1993. Accordingly, while stock
options previously issued pursuant to the Option Plan will remain
in effect in accordance with their respective terms, no additional
stock options will be issued pursuant to the terms of the Option
Plan.
The Option Plan provided for the issuance of incentive and
non-incentive stock options (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended, and the rules and
regulations of the Department of the Treasury promulgated
thereunder) covering a maximum of 10,000,000 shares of the Common
Stock and was administered by the Compensation Committee with
approval of the Board of Directors. Stock options were granted
for terms of up to ten years. The Option Plan provided that the
exercise price of an incentive stock option would be not less than
the fair market value of the shares of Common Stock on the date
the option was granted. Generally, options granted under the
Option Plan remain exercisable only if the optionee is an officer,
director or employee of the Company or its subsidiaries on the day
the options vest.
In August 1995, the Board of Directors adopted The Sherwood Group,
Inc. 1995 Stock Option Plan (the "1995 Plan"). Under the 1995
Plan, 767,200 shares of the Company's common stock has been
authorized for issuance for the granting of options and stock
appreciation rights. The maximum number of shares subject to
stock options which may be granted to any one optionee during any
calendar year may not exceed 300,000 shares. The Plan provides
for the granting of both incentive and non-incentive stock
options.
Stock Option Information. Options covering 394,697 shares of
Common Stock were granted by the Company under the 1995 Plan
during the fiscal year ended May 31, 1996.
401(k) Plan
In April 1992, the Company formed the 401(k) Plan which is a
profit sharing plan qualified under Section 401(k) of the Code.
Under the terms of the 401(k) Plan, all employees employed on
February 1, 1992 were immediately eligible to participate. All
other employees are eligible to participate in the 401(k) Plan
after completing six months of service and attaining age 21.
Employees may elect to have deductions made from their salaries
and contributed to the 401(k) Plan. In addition, the Company may
make matching contributions to the 401(k) Plan in such amounts as
may be determined in the discretion of the Board of Directors.
During the fiscal year ended May 31, 1996, there was a
discretionary Company contribution to the 401(k) Plan of $48,029.
<PAGE>
Certain Relationships And Related Transactions
S.G.I. Partners, L.P. On October 18, 1988, the Company closed a
transaction pursuant to a stock purchase agreement whereby the
Company issued and sold to S.G.I. Partners, L.P. ("S.G.I."), a
Delaware limited partnership, 2,193,600 shares of Common Stock.
In addition, the Company appointed Arthur Kontos, then the
president of the corporate general partner of S.G.I., as director,
Vice Chairman of the Board and Chief Executive Officer of the
Company effective as of October 18, 1988. Mr. Kontos resigned as
President of S.G.I. as of December 31, 1991. The Company also
agreed to use its best efforts to appoint up to two individuals
designated by S.G.I. as directors of the Company subsequent to
October 18, 1988, provided that S.G.I. continued to own in excess
of one million shares of the Company's issued and outstanding
Common Stock. S.G.I. has designated Mr. Hewitt pursuant to such
agreement. Mr. Hewitt is the President and sole shareholder of
SHD Capital, Inc., the sole general partner of S.G.I.
Triak Services Corp. On June 1, 1993, the Company acquired 100%
of the capital stock of Triak Services Corp. ("Triak") from Arthur
Kontos for $165,016 pursuant to the terms of an oral agreement
between the Company and Mr. Kontos. Triak is a broker-dealer
currently registered with the Securities and Exchange Commission
and the National Association of Securities Dealers, as well as in
all 50 states and Washington, D.C. The purchase price paid for
Triak was equal to the sum of the book value of Triak plus all
amounts paid by Mr. Kontos on behalf of Triak.
Thomas Neumann. On March 24, 1993, the Company loaned to Thomas
Neumann and his wife the sum of $600,000 pursuant to the terms of
a Secured Note, a Mortgage and Security Agreement and a
Construction Loan Agreement. The loan bears interest at the rate
of 5% per annum. Interest accrued through August 15, 1993 was
paid. On or before August 15, 1994 and on each August 15
thereafter during the term of the loan, Mr. Neumann is obliged to
make annual payments of principal and interest in the aggregate
amount of $40,000. Such payments have been made as scheduled.
Spear, Leeds & Kellogg. See "Compensation Committee Report on
Executive Compensation-General".
Ralph N. Del Deo. See "Compensation Committee Report on Executive
Compensation-General".
<PAGE>
Company Performance
Set forth below is a line graph comparing the percentage change in
the cumulative total stockholder return on the Common Stock
against the cumulative total return of the S&P Composite-500 Stock
Index and the Dow Jones Securities Brokers Index ("D J Brokers
Index"). The graph assumes that the value of the investment in
the Common Stock and each index was $100 at May 31, 1991 and that
all dividends, if any, were reinvested.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*<F1>
AMONG THE SHERWOODGROUP,INC., THE S & P 500 INDEX
AND THE DOW JONES SECURITIES BROKERS INDEX
<CAPTION>
Cumulative Total Return
5/91 5/92 5/93 5/94 5/95 5/96
<S> <C> <C> <C> <C> <C> <C>
100 225 267 475 458 717
Sherwood Group, Inc.
S & P 500 100 110 123 128 154 197
D J Securities Brokers 100 114 155 168 198 253
<FN>
<F1>* $100 invested on 5/31/91 in stock or index -
including reinvestment of dividends.
Fiscal year ending May 31.
</FN>
</TABLE>
<PAGE>
PROPOSAL 2. RATIFICATION AND APPROVAL OF THE APPOINTMENT
OF INDEPENDENT AUDITORS
The Company, subject to stockholder ratification, has selected KPMG
Peat Marwick LLP to serve as its independent auditors for the fiscal
year ending May 31, 1997. If the stockholders do not ratify the
appointment of KPMG Peat Marwick LLP the Company may reconsider its
selection.
A representative of KPMG Peat Marwick LLP is expected to be present at
the Meeting to respond to appropriate questions and will be given the
opportunity to make a statement if he or she desires to do so.
The affirmative vote of the holders of a majority of the shares of
Common Stock of the Company present, in person or by proxy, and
entitled to vote at the Meeting is required for the ratification and
approval of the appointment of auditors.
The Board of Directors recommends ratification and approval of the
appointment of KPMG Peat Marwick LLP as independent auditors.
PROPOSAL 3. APPROVAL OF THE SHERWOOD GROUP, INC. 1996 CEO BONUS PLAN
The Board of Directors is asking stockholders to approve The Sherwood
Group, Inc. 1996 CEO Bonus Plan (the "Plan"). The purposes of the
Plan are to (i) assist the Company in motivating, and retaining its
chief executive officer, (ii) promote the identification of his
interests with those of the Corporation's stockholders, and (iii)
enable the Corporation to pay an annual bonus which is based upon the
achievement of specified levels of performance and deductible for
purposes of federal income taxation.
REASONS FOR THE PROPOSAL
The Company and its subsidiaries have paid cash bonuses to its chief
executive officer for a number of years as part of its executive
compensation program. Under applicable Delaware law, the payment of
such cash compensation to officers and employees is a matter within
the authority of the Board of Directors (or a committee thereof) and
does not require the approval of stockholders.
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Code") disallows federal income tax deductions for certain executive
compensation in excess of $1 million per year ("$1 million limit").
Under Section 162(m), compensation that qualifies as "performance
based compensation" is not subject to the $1 million limit. One of
the conditions to qualify cash bonuses as "performance-based
compensation" is shareholder approval of the material terms of the
performance goals for which the bonuses are paid. To permit the
Compensation Committee to make an annual Bonus that is comparable to
those found in the marketplace in which the Company competes for
executive talent and allow the Company to pay a Bonus that qualifies
as deductible "performance-based compensation" under Section 162(m),
the Board of Directors has adopted the Plan, subject to stockholder
approval.
<PAGE>
DESCRIPTION OF THE PLAN
The following summary of the material aspects of the Plan is qualified
in its entirety by reference to the full text of the Plan, a copy of
which is set forth as Exhibit "A" to this Proxy Statement. Unless
otherwise specified, capitalized terms used in this discussion have
the meanings assigned to them in the Plan.
The Plan provides that a Bonus may be made to the Chief Executive
Officer of the Corporation as of the last day of a Bonus Period, which
generally will be the Corporation's fiscal year ("Bonus Period").
Only a person who serves as the Chief Executive Officer of the
Corporation during the Bonus Period is eligible to participate in the
Plan.
The Plan is administered by the Compensation Committee of the Board or
such other committee of directors as may be designated by the Board in
the future ("Committee"). Each member of the Committee, which must
have at least two members, must meet the standards of independence
necessary to be classified as an "outside director" for purposes of
Section 162(m) of the Code. As a result, no Participant or other
employees of the Corporation or its Subsidiaries are permitted to
serve on the Committee.
If the Plan is approved by the stockholders, the first Bonus Period
will be the fiscal year of the Corporation commencing in 1997. A
Bonus is payable in cash.
Following the end of a Bonus Period, the Committee will compute the
size of the Bonus based upon a formula. The formula is 10% of the
first $10,000,000 of Income and 15% of Income over $10,000,000.
"Income" means the consolidated pre-tax net income of the Corporation
as determined within seventy-five days after the end of each of the
Corporation's fiscal years in accordance with generally accepted
accounting principles, without any deductions for the payment or
accrual of a Bonus. Once the Committee has determined the amount of
the Bonus to be made for a Bonus Period, it must certify the amounts
in writing and authorize the Corporation to pay the Bonus to the Chief
Executive Officer in accordance with the terms and conditions of the
Plan.
The Chief Executive Officer will be entitled to receive, on a monthly
basis, an advance against the Bonus, payable in the then current
fiscal year in an amount equal to one-half of the aggregate Bonus
accrued for such fiscal year through the last day of the month
immediately preceding the month in which such payment is to be made,
less all amounts previously paid as Bonus advances to the Chief
Executive Officer for the fiscal year. The Chief Executive Officer
will not be entitled to receive any Bonus advance during any month if
the Corporation's Income through the end of the preceding month of the
relevant fiscal year has averaged less than $250,000 per month. Prior
to the payment of an advance the Committee must determine the amount
of the advance and certify in writing the amount of the advance and
authorize the Corporation to pay the advances to the Chief Executive
Officer in accordance with the terms and conditions of the Plan.
The Board may amend, modify or terminate the Plan in any respect at
any time; provided, however so long as Arthur Kontos is Chief
Executive Officer of the Corporation the Plan may not be amended or
terminated without his consent. The Plan will remain in effect until
terminated by the Board. No Bonus may be granted under the Plan after
its termination. Once the Plan is approved by stockholders,
termination of the Plan would not affect any Bonus outstanding on or
after the date of termination and such Bonus would continue to be
subject to the terms of the Plan notwithstanding its termination.
<PAGE>
ASSUMED BONUS AWARDS
Because the fiscal year commencing in 1997 is the first Bonus Period
established under the Plan, the size of the Bonus for that Bonus
Period cannot be computed until the Corporation's Income for the
fiscal year commencing in 1997 is known. As a result, the Bonus, if
any, that may be made to the Chief Executive Officer for the 1997
fiscal year Bonus Period is not currently determinable.
For purposes of illustration only, the Bonus which would have been
paid to the Chief Executive Officer of the Corporation for the fiscal
year ended May 1996 if the Plan had been in effect for that fiscal
year is set forth under the caption "Assumed Incentive Awards and CEO
Bonus."
SHAREHOLDER APPROVAL REQUIRED
Approval of the Plan requires the affirmative vote of a majority of
the votes cast by the holders of the Common Stock, in person or by
proxy, at a meeting at which a quorum is present. The Plan will be
terminated unless the Plan is approved by the Company's stockholders.
The Board might nevertheless decide to continue to pay an annual bonus
to the chief executive officer in accordance with its historical
practices. In such event, however, payments made to the chief
executive officer may not be deductible for federal income tax
purposes under Section 162(m) of the Code.
The Board of Directors unanimously recommends a vote for this
Proposal.
PROPOSAL 4. THE SHERWOOD GROUP, INC. 1996 EXECUTIVE INCENTIVE AWARD PLAN
The Board of Directors is asking shareholders to approve The Sherwood
Group, Inc. 1996 Executive Incentive Award Plan ("Incentive Plan").
The purposes of the Incentive Plan are to (i) assist the Corporation
and its Subsidiaries in attracting, motivating, and retaining the
senior executive officers most critical to the long-term success of
the Corporation and its Subsidiaries, (ii) promote the identification
of their interests with those of the Corporation's shareholders, and
(iii) enable the Corporation to pay annual bonuses which are based
upon the achievement of specified levels of performance and deductible
for purposes of federal income taxation. Participants in the proposed
Incentive Plan will not be paid awards under the CEO Bonus Plan (See
"The Sherwood Group, Inc. 1996 CEO Bonus Plan").
REASONS FOR THE PROPOSAL
The Company and its subsidiaries have paid cash bonuses to its
executive officers for a number of years as part of its executive
compensation program. Under applicable Delaware law, the payment of
such cash compensation to officers and employees is a matter within
the authority of the Board of Directors (or a committee thereof) and
does not require the approval of stockholders.
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Code") disallows federal income tax deductions for certain executive
compensation in excess of $1 million per year ("$1 million limit").
Under Section 162(m), compensation that qualifies as "performance
based compensation" is not subject to the $1 million limit. One of
the conditions to qualify cash bonuses as "performance-based
compensation" is shareholder approval of the material terms of the
performance goals for which the bonuses are paid. To permit the
Compensation Committee to make annual Incentive Awards that are
comparable to those found in the marketplace in which the Company
competes for executive talent and allow the Company to pay Incentive
Awards that qualify as deductible "performance-based compensation"
under Section 162(m), the Board of Directors has adopted the Incentive
Plan, subject to stockholder approval.
<PAGE>
DESCRIPTION OF THE INCENTIVE PLAN
The following summary of the material aspects of the Incentive Plan is
qualified in its entirety by reference to the full text of the
Incentive Plan, a copy of which is set forth as Exhibit "B" to this
Proxy Statement. Unless otherwise specified, capitalized terms used
in this discussion have the meanings assigned to them in the Incentive
Plan.
The Incentive Plan provides that Incentive Awards may be made to
senior executive officers consisting of the vice chairman, or any
executive or senior vice president of the Corporation (as long as the
officer does not receive substantially all his compensation from the
Corporation and its Subsidiaries in the form of commissions) (the
"Participants"). Only the three Participants with the highest base
salary for an Award Period determined as of the date the Committee
establishes the Incentive Award Amount shall be eligible for an
Incentive Award. The Committee can require that the officer be
employed by the Corporation or its Subsidiaries as of the last day of
an Award Period, which generally will be the Corporation's fiscal year
("Award Period"). Directors of the Corporation who are not salaried
employees of the Corporation or a Subsidiary and the Chief Executive
Officer are not eligible to participate in the Incentive Plan.
The Incentive Plan is administered by the Compensation Committee of
the Board or such other committee of directors as may be designated by
the Board in the future ("Committee"). Each member of the Committee,
which must have at least two members, must meet the standards of
independence necessary to be classified as an "outside director" for
purposes of Section 162(m) of the Code. As a result, no Participants
or other employees of the Corporation or its Subsidiaries are
permitted to serve on the Committee. The Committee may, in its
discretion, authorize the Corporation's Chief Executive Officer to act
on its behalf, except with respect to matters which are required to be
established, approved, or certified by the Committee under the
Incentive Plan or by Section 162(m) of the Code and the regulations
promulgated thereunder.
If the Incentive Plan is approved by the stockholders, the first Award
Period will be the fiscal year of the Company commencing in 1996. An
Incentive Award is a share of a Compensation Pool and is payable in
cash. A Participant shall not receive an Incentive Award Amount in
excess of 25% of the Compensation Pool, except that the Participant
with the highest base salary for an Award Period determined as of the
date the Committee establishes the Incentive Award Amounts shall not
receive an Incentive Award Amount in excess of 50% of the Compensation
Pool. The Committee may eliminate or reduce an Incentive Award
Amount, and any elimination or reduction shall not result in an
increase in the Incentive Award payable to any other Participant.
No later than 90 days after commencement of an Award Period, the
Committee shall, upon the recommendation of the Chief Executive
Officer and in its sole discretion, establish in writing an Incentive
Award Amount for each Participant based on the attainment of
Performance Goals. Performance Goals are based on Net Income, gross
revenues and expenses during the Award Period, and are established by
the Committee upon the recommendation of the Chief Executive Officer.
Following the end of an Award Period, the Committee will compute the
size of the Compensation Pool, which will be 4.25% of Net Income for
the Award Period ("Compensation Pool"). "Net Income" means the
consolidated pre-tax net income of the Corporation as determined in
accordance with generally accepted accounting principles, after
adjustment to exclude or include unusual, infrequently occurring or
extraordinary items or cumulative effects of changes in accounting
principles and not taking into account the payment or accrual of the
Incentive Awards under the Incentive Plan. The Committee will then
compute the amount of the Incentive Awards, if any, to be made to each
Participant for the Award Period, which amount shall not exceed the
assigned Incentive Award Amount, but may, in the Committee's sole
discretion, be reduced or eliminated to reflect such qualitative or
quantitative performance factors as the Committee deems appropriate.
Once the Committee has determined the amount of any Incentive Awards
to be made for an Award Period, it must certify the amounts in writing
and authorize the Corporation to pay the Incentive Awards to the
Participants in accordance with the terms and conditions of the
Incentive Plan.
<PAGE>
The Board may amend, modify or terminate the Incentive Plan in any
respect at any time without the consent of the Participants. The
Incentive Plan will remain in effect until terminated by the Board.
No Incentive Awards may be granted under the Incentive Plan after its
termination. Once the Incentive Plan is approved by stockholders,
termination of the Incentive Plan would not affect any Incentive
Awards outstanding on or after the date of termination and such awards
would continue to be subject to the terms of the Incentive Plan
notwithstanding its termination.
SHAREHOLDER APPROVAL REQUIRED
Approval of the Incentive Plan requires the affirmative vote of a
majority of the votes cast by the holders of the Common Stock, in
person or by proxy, at a meeting at which a quorum is present. The
Incentive Plan will be terminated unless the Incentive Plan is
approved by the Company's stockholders. The Board might nevertheless
decide to continue to pay annual incentive awards in accordance with
its historical practices. In such event, however, payments made to
certain of the Corporation's executive officers may not be deductible
for federal income tax purposes under Section 162(m) of the Code.
The Board of Directors unanimously recommends a vote for this
Proposal.
ASSUMED INCENTIVE AWARDS AND CEO BONUS
Because the fiscal year commencing in 1996 is the first Award Period
established under the Incentive Plan and the fiscal year commencing in
1997 is the first Bonus Period under the Plan, the size of the
Compensation Pool for that Award Period under the Incentive Plan and
the size of the Bonus cannot be computed until the Corporation's Net
Income or Income, as the case may be, for such fiscal year is known.
As a result, the Incentive Awards, if any, or the Bonus, if any, that
may be made to Participants or the Chief Executive Officer for the
1996-97 fiscal year Award Period in the case of the Incentive Plan and
the 1997-98 fiscal year in the case of the Plan are not currently
determinable.
For purposes of illustration only, the table below sets forth the
Incentive Awards and Bonus which the Committee has concluded it would
have granted had the Incentive Plan and the Plan been in effect for
the fiscal year ended May 1996.
<TABLE>
NEW PLAN BENEFITS
THE SHERWOOD GROUP, INC.
<CAPTION>
Assumed Fiscal Year
End May 1996
Name and Position Incentive
Award Dollar Value ($)
<S> <C>
Arthur Kontos $5,750,218
Dennis Marino 399,246
Thomas Neumann 798,492
Richard Marino 0
William Karsh 399,246
Executive Officer Group (1)<F1> 7,347,208
Non-Executive Director Group 0
Non-Executive Officer Employee
Group 0
<FN>
<F1>(1) Includes named executives
</FN>
</TABLE>
Stockholder Proposals For Next Annual Meeting
Any stockholder proposals intended to be presented at the Company's
next annual meeting of stockholders must be received by the Company at
its offices at 10 Exchange Place Centre, Jersey City, New Jersey
07302, on or before June 4, 1997, for consideration for inclusion in
the proxy material for such annual meeting of stockholders.
Expenses Of Solicitation
The cost of the solicitation of proxies will be borne by the Company.
In addition to the use of the mails, proxies may be solicited by
regular employees of the Company, either personally or by telephone or
telegraph. The Company does not expect to pay any compensation for
the solicitation of proxies, but may reimburse brokers and other
persons holding shares in their names or in the names of nominees for
expenses in sending proxy material to beneficial owners and obtaining
proxies of such owners.
Other Matters
The Board of Directors does not intend to bring any matters before the
Meeting other than as stated in this Proxy Statement, and is not aware
that any other matters will be presented for action at the Meeting.
If any other matters come before the Meeting, the persons named in the
enclosed form of proxy will vote the proxy with respect thereto in
accordance with their best judgment, pursuant to the discretionary
authority granted by the proxy. Whether or not you plan to attend the
Meeting in person, please complete, sign, date and return the enclosed
proxy card promptly.
By Order of the Board of Directors
Dennis Marino
Secretary
Dated: September 10, 1996
<PAGE>
EXHIBIT A
THE SHERWOOD GROUP, INC.
1996
CEO BONUS PLAN
1. General Purposes of Plan
The Sherwood Group, Inc. 1996 CEO Bonus Plan is designed to (i)
assist the Corporation in motivating and retaining its Chief
Executive Officer, (ii) promote the identification of his
interests with those of the Corporation's shareholders, and (iii)
enable the Corporation to pay an annual cash bonus which is based
upon the achievement of specified levels of performance and
deductible for purposes of federal income taxation.
2. Definitions
Terms not otherwise defined herein shall have the following
meanings:
2.1 "Bonus" means the cash bonus paid to the Chief
Executive Officer for a Bonus Period, as determined by
the Committee in the manner described in Sections 3 and
5 hereof.
2.2 "Bonus Period" means the Corporation's fiscal year,
provided that the last day of a Bonus Period must be the
last day of the Corporation's fiscal year.
2.3 "Board" means the Board of Directors of the Corporation.
2.4 "Chief Executive Officer" means the person
designated as Chief Executive Officer of the Corporation
from time to time by the Board.
2.5 "Code" means the Internal Revenue Code of 1986, as
amended.
2.6 "Committee" means the committee appointed by the
Board to establish and administer the Plan as provided
herein; provided, that the Committee shall have two or
more members and each member of the Committee shall be
an "outside director" as defined for purposes of Section
162(m) of the Code. Unless otherwise determined by the
Board, the Compensation Committee of the Board shall be
the Committee.
2.7 "Income" means the consolidated pre-tax net income
of the Corporation, as determined in accordance with
generally accepted accounting principles, without any
deductions for the payment or accrual of a Bonus and
accruals or payments of awards under The Sherwood Group,
Inc. 1996 Executive Incentive Award CEO Bonus Plan or
any successor thereto.
2.8 "Plan" means The Sherwood Group, Inc. 1996 CEO
Bonus Plan.
3. Administration
Subject to the express provisions of the Plan, the Committee shall
have plenary authority to interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it and to make all
other determinations deemed necessary or advisable for the
administration of the Plan. The determinations of the Committee
pursuant to this authority shall be conclusive and binding.
4. Eligibility
Bonus for a Bonus Period may be made only to person or persons who
serve(s) as the Chief Executive Officer during all or a portion of
the Bonus Period; provided, however that if during a Bonus Period
more than one Bonus is to be paid with respect to such Bonus
Period due to the service of more than one person as Chief
Executive Officer during such Bonus Period, such Bonuses may not
exceed the Bonus which would have been paid if only one person had
occupied such position.
5. Bonus
5.1 As soon as practicable following the end of a Bonus
Period, but in all events prior to making paying any
Bonus, the Committee shall compute and certify in
writing the Bonus for that Bonus Period. In performing
such computation, the Committee may rely upon financial
statements supplied by the Corporation's officers,
provided that the Committee believes such statements to
have been prepared in accordance with generally accepted
accounting principles. A Bonus shall equal 10% of the
first $10,000,000 of Income in a Bonus Period and 15% of
Income in the Bonus Period over $10,000,000.
5.2 As soon as practicable following the Committee's
completion of the actions specified in Section 5.1, the
Committee shall certify in writing the Bonus, if any, to
be made paid to the Chief Executive Officer for that
Bonus Period and shall authorize the Corporation to make
pay such Bonus to the Chief Executive Officer in
accordance with the terms and conditions of the Plan.
5.3 If the Chief Executive Officer is not the Chief
Executive Officer for the whole Bonus Period, the
Committee may reduce the Bonus for such Bonus Period pro
rata by multiplying the Bonus for such Bonus Period by a
fraction of the numerator of which is the number of days
in the Bonus Period that the Chief Executive Officer
served as Chief Executive Officer and the denominator is
365.
5.4 Bonuses shall be subject to applicable federal,
state and local withholding taxes and other applicable
withholding in accordance with the Corporation's payroll
practices as in effect from time to time.
5.5 The Committee, subject to such terms and conditions
as it may determine, and the Chief Executive Officer
pursuant to any deferred compensation plan of the
Corporation, shall have the right ability to defer the
payment of a Bonus; provided, in either case, that any
additional amounts credited to such deferred payment
will be based either on a reasonable rate of interest or
the actual rate of return of one or more predetermined
actual investments.
5.6 The Corporation shall each month of a Bonus Period
pay to the Chief Executive Officer as an advance against
the Bonus for such Bonus Period an amount equal to one-
half of the aggregate Bonus accrued for such Bonus
Period through the last day of the month immediately
preceding the month in which such payment is to be made
less all amounts previously paid as a Bonus advance to
the Chief Executive Officer for such Bonus Period;
provided that the Corporation shall not
pay a Bonus advance during any month if the Income
through the end of the preceding month of the Bonus
Period has averaged less than $250,000 per month. In
determining the aggregate Bonus accrual, the dollar
amounts of the Income during such Bonus Period shall be
calculated on a pro-rata basis. Prior to payment of any
such advance, the Committee shall determine and certify
the amount of the advance and authorize the Corporation
to make such payment.
6. Transferability
Until paid to the Chief Executive Officer, a Bonus shall not be
subject to the claims of creditors and may not be assigned,
alienated, transferred or encumbered in any way other than by will
or pursuant to the laws of descent and distribution.
7. Termination or Amendment
The Board may not amend, modify or terminate the Plan in any
respect at any time without the consent of the Chief Executive
Officer so long as Arthur Kontos is the Chief Executive Officer.
During the period any other person is Chief Executive Officer, the
Board may amend, modify or terminate the Plan in any respect at
any time without the consent of the Chief Executive Officer.
8. Effectiveness of Plan and Awards
The Plan shall be void ab initio unless the Plan is approved by a
vote of the Corporation's stockholders at the first meeting of the
Corporation's stockholders following adoption of the Plan by the
Board.
9. Effective Date; Term of the Plan
Subject to stockholder approval pursuant to Section 8, the Plan
shall be effective as of June 1, 1997 and the first Bonus Period
shall be the fiscal year of the Corporation commencing in 1997.
The Plan shall remain in effect until terminated by the Board
pursuant to Section 7. No Bonuses may be made under the Plan
after its termination, provided that termination of the Plan shall
not affect any Bonuses payable on or after the date of termination
and such Bonuses shall continue to be subject to the terms of the
Plan notwithstanding its termination.
10. Indemnification of Committee
In addition to such other rights of indemnification as they may
have as Directors or as members of the Committee, each of the
members of the Committee shall be indemnified by the Corporation
against the reasonable expenses, including attorneys' fees,
actually and reasonably incurred in connection with the defense of
any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a part by reason of
any action taken or failure to act under or in connection with the
Plan or any Bonus made hereunder, and against all amounts
reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding
to the maximum extent permitted by law.
11. General Provisions
11.1 The establishment of the Plan shall not confer upon
the Chief Executive Officer any legal or equitable right
against the Corporation or any Subsidiary, except as
expressly provided in the Plan.
11.2 The Plan does not constitute an inducement or
consideration for the employment of the Chief Executive
Officer, nor is it a contract between the Corporation,
or any Subsidiary, and the Chief Executive Officer.
Participation in the Plan shall not give Chief Executive
Officer any right to be retained in the employ of the
Corporation or any Subsidiary.
11.3 Nothing contained in this Plan shall prevent the
Board or the Committee from adopting other or additional
compensation arrangements, subject to stockholder
approval if such approval is required, and such
arrangements may be either generally applicable or
applicable only in specific cases.
11.4 The Plan shall be governed, construed and
administered in accordance with the laws of the State of
Delaware.
<PAGE>
EXHIBIT B
THE SHERWOOD GROUP, INC.
1996 EXECUTIVE INCENTIVE AWARD PLAN
1. General Purposes of Plan
The Sherwood Group, Inc. 1996 Executive Incentive Award Plan is designed to
(i) assist The Sherwood Group, Inc. and its Subsidiaries in attracting,
motivating, and retaining the senior executive officers most critical to the
long-term success of the Corporation and its Subsidiaries, (ii) promote the
identification of their interests with those of the Corporation's
shareholders, and (iii) enable the Corporation to pay an annual bonuses
which are based upon the achievement of specified levels of performance and
deductible for purposes of federal income taxation.
2. Definitions
Terms not otherwise defined herein shall have the following meanings:
2.1 "Award Period" means the Corporation's fiscal year, except to
the extent the Committee determines otherwise, provided that the
last day of an Award Period must be the last day of the
Corporation's fiscal year.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Chief Executive Officer" means the person designated as
chief executive officer of the Corporation by the Board from time
to time.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means the committee appointed by the Board to
establish and administer the Plan as provided herein; provided,
that the Committee shall have two or more members and each member
of the Committee shall be an "outside director" as defined for
purposes of Section 162(m) of the Code. Unless otherwise
determined by the Board, the Compensation Committee of the Board
shall be the Committee.
2.6 "Compensation Pool" means with respect to each Award Period,
an amount equal to 4.25% of the Net Income of the Corporation for
the Award Period.
2.7 "Corporation" means The Sherwood Group, Inc. and its
successors and assigns and any corporation which shall acquire
substantially all of its assets.
2.8 "Incentive Award" means the share of the Compensation Pool
paid to a Participant for an Award Period, as recommended by the
Chief Executive Officer and as determined by the Committee in the
manner described in Sections 3 and 5 hereof.
2.9 "Incentive Award Amount" means with respect to each
Participant, the amount, expressed as a percentage, of the
Compensation Pool which he or she may be paid as an Incentive
Award, as recommended by the Chief Executive Officer and as
established by the Committee pursuant to Section 5.1.
2.10 "Net Income" means the consolidated pre-tax net income of the
Corporation, as determined in accordance with generally accepted
accounting principles, after adjustment to exclude or include
unusual, infrequently occurring or extraordinary items or
cumulative effects of changes in accounting principles, and not
taking into account the payment or accrual of a cash bonus for the
Chief Executive Officer for the relevant period or the payment or
accrual of the Incentive Awards under this Plan.
2.11 "Participant" means a "covered employee" within the meaning
of Section 162(m) of the Code who is a vice chairman, chief
administrative officer, or an executive or senior vice president
of the Corporation and eligible to receive an Incentive Award,
subject to the terms of the Plan including without limitation the
restrictions provided in Section 5.1 of the Plan, except the Chief
Executive Officer of the Corporation and except any "covered
employee" who receives substantially all his compensation from the
Corporation and its Subsidiaries in the form of commissions .
2.12 "Performance Goals" shall be based upon the following
factors: goals for the Award Period recommended by the Chief
Executive Officer and as set by the Committee within 90 days of
the commencement of such Award Period for Net Income, gross
revenues and expenses.
2.13 "Plan" means The Sherwood Group, Inc. 1996 Executive
Incentive Award Plan.
2.14 "Subsidiary" means a corporation of which at least 540% of
the total combined voting power of all classes of stock is owned
by the Corporation either directly or through one or more other
subsidiaries and shall also include any partnership the results of
which are consolidated with those of the Corporation for
accounting purposes under generally accepted accounting
principles.
3. Administration
Subject to the express provisions of the Plan, the Committee shall have
plenary authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it and to make all other determinations
deemed necessary or advisable for the administration of the Plan, including,
but not limited to, determinations regarding whether to make Incentive
Awards, the terms of all Incentive Awards, the Participants who receive
Incentive Awards, the time or times at which Incentive Award Amounts are
established, the Award Period to which each Incentive Award shall relate,
and the actual dollar amount of any Incentive Award and whether the
entitlement to any Incentive Award shall be subject to the approval of
stockholders. The determinations of the Committee pursuant to this
authority shall be conclusive and binding. The Committee may, in its
discretion, authorizes the Chief Executive Officer of the Corporation to
act on its behalf, except with respect to matters which are required to be
certified by the Committee under the Plan, or by Code Section 162(m) and or
the regulations promulgated thereunder.
4. Eligibility
Incentive Awards may be made only to a Participant who is not paid a bonus
pursuant to the Corporation's CEO Bonus Plan or any successor plan, with
respect to that Award Period.
5. Incentive Awards; Terms of Awards; Payment
5.1 No later than 90 days after the commencement of an Award
Period and upon the recommendation of the Chief Executive Officer,
the Committee shall, in its sole discretion, establish in writing
an Incentive Award Amount for each Participant for such Award
Period based on attainment of the Performance Goals established by
the Committee. For this purpose, each Participant may be
identified in terms of position or title held, or base salary
paid, during that Award Period, or by such other means as the
Committee may deem appropriate. The sum of all Incentive Award
Amounts for an Award Period shall not exceed 100% of the
Compensation Pool under any circumstances, and any elimination or
reduction of an Incentive Award Amount shall not result in an
increase in the Incentive Award payable to any other Participant.
A Participant shall not receive an Incentive Award Amount in
excess of 25% of the Compensation Pool, except that the
Participant with the highest base salary for an Award Period
determined as of the date the Committee establishes the Incentive
Award Amount, shall not receive an Incentive Award Amount in
excess of 50% of the Compensation Pool and provided that, in all
events, only the three Participants with the highest base salary
for an Award Period determined as of the date the Committee
establishes the Incentive Award Amount shall be eligible for an
Incentive Award.
5.2 As soon as practicable following the end of an Award Period,
but in all events prior to making paying any Incentive Awards, the
Committee shall compute and certify in writing the size of the
Compensation Pool for that Award Period. In performing such
computation, the Committee may rely upon financial statements
supplied by the Corporation's officers, provided that the
Committee believes such statements to have been prepared in
accordance with generally accepted accounting principles.
5.3 As soon as practicable following the Committee's completion
of the actions specified in Section 5.2, the Committee shall
certify in writing the Incentive Award, if any, to be made to each
Participant for that Award Period and shall authorize the
Corporation to make such Incentive Award to each Participant in
accordance with the terms and conditions of the Plan.
5.4 The Committee may, in its sole discretion, determine not to
make an Incentive Award or reduce an Incentive Award below the
applicable Incentive Award Amount, without the consent of a
Participant. The Committee can require as a condition to the
receipt of an Incentive Award that the Participant be employed by
the Corporation or a Subsidiary as of the last day of the Award
Period to which the Incentive Award relates.
5.5 Incentive Awards shall be subject to applicable federal,
state and local withholding taxes and other applicable withholding
in accordance with the Corporation's payroll practices as in
effect from time to time.
5.6 The Committee, subject to such terms and conditions as it
may determine, and a Participant pursuant to any deferred
compensation plan of the Corporation, shall have the right ability
to defer the payment of an Incentive Award; provided, in either
case, that any additional amounts credited to such deferred
payment will be based either on a reasonable rate of interest or
the actual rate of return of one or more predetermined actual
investments.
6. Transferability
Until paid to a Participant, Incentive Awards shall not be subject to the
claims of creditors and may not be assigned, alienated, transferred or
encumbered in any way other than by will or pursuant to the laws of descent
and distribution.
7. Termination or Amendment
The Board may amend, modify or terminate the Plan in any respect at any time
without the consent of the Participants.
8. Effectiveness of Plan and Awards
The Plan shall be void ab initio unless the Plan is approved by a vote of
the Corporation's stockholders at the first meeting of the Corporation's
stockholders following adoption of the Plan by the Board.
9. Effective Date; Term of the Plan
Subject to stockholder approval pursuant to Section 8, the Plan shall be
effective as of June 1, 1996 and the first Award Period shall be fiscal year
commencing in 1996. The Plan shall remain in effect until terminated by the
Board pursuant to Section 7. No Incentive Awards may be made under the Plan
after its termination, provided that termination of the Plan shall not
affect any Incentive Awards payable on or after the date of termination and
such awards shall continue to be subject to the terms of the Plan
notwithstanding its termination.
10. Indemnification of Committee
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, each of the members of the
Committee shall be indemnified by the Corporation against the reasonable
expenses, including attorneys' fees, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any Incentive Award made hereunder, and against all amounts
reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding to the
maximum extent permitted by law.
11. General Provisions
11.1 The establishment of the Plan shall not confer upon any
Participant any legal or equitable right against the Corporation
or any Subsidiary, except as expressly provided in the Plan.
11.2 The Plan does not constitute an inducement or consideration
for the employment of any Participant, nor is it a contract
between the Corporation, or any Subsidiary, and any Participant.
Participation in the Plan shall not give a Participant any right
to be retained in the employ of the Corporation or any Subsidiary.
11.3 Nothing contained in this Plan shall prevent the Board or
Committee from adopting other or additional compensation
arrangements, subject to stockholder approval if such
approval is required, and such arrangements may be either
generally applicable or applicable only in specific cases.
11.4 The Plan shall be governed, construed and
administered in accordance with the laws of the State of
Delaware.
<PAGE>
The Sherwood Group, Inc.
The undersigned hereby appoints Carl H. Hewitt, John P.
Duffy and Thomas Neumann and each of them, with full power
of substitution, as proxies for the undersigned, to
attend the annual meeting of stockholders of The
Sherwood Group, Inc. (the "Company"), to be held at the
Company's offices at 10 Exchange Place Centre, Jersey City,
New Jersey 07302, 15th Floor on October 22, 1996, at 4:00
p.m., New York City time, or any adjournment thereof,
and to vote the number of shares of common stock of the
Company that the undersigned would be entitled to vote,
and with all the power the undersigned would possess,
if personally present, as follows:
1. / / For or / / Withhold Authority to vote for the
following nominees for election as Class 3 directors:
Carl H. Hewitt
John P. Duffy
Thomas Neumann
(Instruction: To withhold authority to vote for any
individual nominee, write the nominee's name on the line
provided below.)
2. Approval of the appointment of KPMG Peat Marwick LLP as
the Company's independent auditors for the fiscal year
ending May 31, 1997.
/ / For or / / Against or / / Abstain
3. Approval of The Sherwood Group, Inc. 1996 CEO Bonus Plan.
/ / For or / / Against or / / Abstain
4. Approval of The Sherwood Group, Inc. 1996 Executive Incentive
Award Plan.
/ / For or / / Against or / / Abstain
5. In their discretion, on such other business as may
properly come before the meeting or any adjournment
thereof.
<PAGE>
The Proxies will vote as specified herein or, if a
choice is not specified, they will vote For the nominees
listed in Item 1, For the proposal set forth in Item 2,
For the proposal set forth in Item 3, For the proposal
set forth in Item 4 and in their discretion with respect
to the matters referred to in Item 5.
This Proxy is solicited by the Board of Directors of the Company.
Receipt of the Notice of Annual Meeting of
Stockholders, Proxy Statement dated
September 10, 1996 and Annual Report to
Stockholders is hereby acknowledged:
Date:_____________________________, 1996
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(Signatures)
(Please sign exactly as your names appear
hereon, indicating, where proper, official
position or representative capacity.)