August 20, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: The Sherwood Group, Inc. - Preliminary Proxy Statement for 1997
---------------------------------------------------------------
Dear Sir/Madam:
Enclosed for filing is the Preliminary Proxy Statement for the 1997 Annual
Meeting of Stockholders of The Sherwood Group, Inc. pursuant to Rule 14a-6(a) of
the Securities Exchange Act of 1934, as amended. The release date for this Proxy
Statement is September 2, 1997.
If you have any questions or comments regarding this filing, please call me at
(201) 946-4413 or Frank E. Lawatsch, Jr. at (201) 596-4637.
Very truly yours,
Laura Singer, Esq.
Enclosures
25
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:
x Preliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) 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 forth 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Preliminary Proxy Statement
The Sherwood Group, Inc.
10 Exchange Place Centre
Jersey City, New Jersey 07302
- --------------------------------------------------------------------
Notice Of Annual Meeting Of Stockholders
To Be Held October 21, 1997
- --------------------------------------------------------------------
The 1997 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 21, 1997 at 4:00 p.m., New Jersey
time for the following purposes:
(1) To elect three Class 1 directors to hold office for a term
of three years or until their successors have been duly
elected and qualified.
(2) To approve an amendment to the Company's Restated
Certificate of Incorporation to decrease the number of
authorized shares of the Company's capital stock from
101,000,000 to 51,000,000 shares and to eliminate provisions
related to Class A Common Stock.
(3) To approve an amendment of The Sherwood Group, Inc. 1995
Stock Option Plan.
(4) To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending May
31, 1998.
(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 25, 1997, 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 2, 1997
New York, New York
<PAGE>
Preliminary Proxy Statement
The Sherwood Group, Inc.
10 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 10
Exchange Place Centre, Jersey City, New Jersey 07302, 15th Floor, on October 21,
1997 at 4:00 p.m. New Jersey 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 2, 1997. 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
25, 1997 (the "Record Date"), will be entitled to vote at the Meeting and at all
adjournments thereof.
On August 25, 1997, there were outstanding and entitled to vote 12,694,665
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 Dennis Marino, James H. Lynch, Jr. and Stephen J. DiLascio as Class 1
directors of the Company, (b) "FOR" the approval of an amendment to the
Company's Restated Certificate of Incorporation to decrease the number of
authorized shares of the Company's capital stock from 101,000,000 to 51,000,000
shares and to eliminate all provisions in the Restated Certificate of
Incorporation related to Class A Common Stock, (c) "FOR" the approval of an
amendment to The Sherwood Group, Inc. 1995 Stock Option Plan, (d) "FOR" the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending May 31, 1998, 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 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
<TABLE>
The following table sets forth certain information, as of August 25, 1997,
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.
<CAPTION>
Name and Address Amount
of Beneficial Owner Of Beneficial Ownership Percentage of Class
<S> <C> <C>
S.G.I. Partners, L.P.
412 Harwood Building
Scarsdale, NY 10583 4,000,000 (1) 31.51%
Carl H. Hewitt
120 Broadway
New York, NY 10006 4,000,000 (1) 31.51%
Arthur Kontos
10 Exchange Place
Jersey City, NJ 07302 2,881,100 (2) 22.31%
Peter A. Kellogg
120 Broadway
New York, NY 10006 1,021,500 (3) 8.05%
<FN>
(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>
(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 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>
(3) Comprised of 650,000 shares of Common Stock held by Mr. Kellogg, 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, and 21,500
shares of Common Stock held by the Cynthia and Peter Kellogg Foundation.
Peter A. Kellogg is also a limited partner of S.G.I. Partners, L.P.
</FN>
</TABLE>
Security Ownership of Management
<TABLE>
The following table sets forth certain information, as of August 25, 1997,
regarding the beneficial ownership of the 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. Equitrade Partners ("Equitrade") is an
affiliate of the Company which acts as a specialist on The New York Stock
Exchange. The Company and one of its wholly-owned subsidiaries own an aggregate
of 75% of the capital of Equitrade.
<CAPTION>
Amount
Name and Title of Beneficial Ownership Percentage of Class
<S> <C> <C>
Arthur Kontos, 2,881,100 (1) 22.31%
Vice Chairman of the Board and Chief
Executive Officer of the Company
James H. Lynch, Jr., Chairman of the 35,000 *
Board and Director
John P. Duffy, Director 44,000 (2) *
Carl H. Hewitt, Director 4,000,000 (3) 31.51%
Dennis Marino, 218,698 (4) 1.72%
Executive Vice President and Chief
Administrative Officer of the
Company; President of
Sherwood Securities
Richard J. Marino, 627,635 (5) 4.94%
Chairman of the Board
of Sherwood Securities
Thomas Neumann, 223,810 (6) 1.75%
Executive Vice President of the
Company; Head of Capital Markets of
Sherwood Securities
Ralph N. Del Deo, Director 30,000 (7) *
James Romano, 5,000 *
Senior Vice President
of Sherwood Securities
William Karsh, Executive 39,501 (8) *
Vice President and Treasurer
of the Company
Stephen J. DiLascio 1,000 *
Director, Managing General Partner
of Equitrade
All Directors and Executive Officers 8,108,544 62.03%
as a Group (13 persons) (9)
<FN>
* Less than 1%
</FN>
<FN>
(1) 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>
(2) Consists of 40,000 shares of Common Stock held by Mr. Duffy and
4,000 shares of Common Stock held in trust for Mr. Duffy's children.
</FN>
<FN>
(3) 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>
(4) 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>
(5) 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>
(6) Consists of 135,623 shares of Common Stock held by Mr. Neumann and
88,187 shares of Common Stock underlying Mr. Neumann's currently
exercisable stock options.
</FN>
<FN>
(7) 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>
(8) Consists of 27,162 shares of Common Stock held by Mr. Karsh and
12,339 shares of Common Stock underlying Mr. Karsh's currently
exercisable stock options.
</FN>
<FN>
(9) Includes 377,543 shares of Common Stock underlying stock options
exercisable within 60 days of August 25, 1997.
</FN>
</TABLE>
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 1 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 Dennis Marino, James H. Lynch, Jr.
and Stephen J. DiLascio. If Mr. Marino, Mr. Lynch or Mr. DiLascio 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. Marino, Mr. Lynch and
Mr. DiLascio may not be able to serve as directors if elected. Pursuant to an
agreement between the Company and S.G.I., S.G.I has the right to appoint two
directors to the Board of Directors. S.G.I. has designated Mr. Hewitt as one of
its directors and has not requested that another person be designated pursuant
to this agreement.
The Board of Directors recommends a vote "FOR" the election of each of the above
nominees.
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 Company Director Since
<S> <C> <C> <C>
Class 1 Directors
Dennis Marino 51 Director, Executive Vice President, 1981
Secretary and Chief Administrative Officer
James H. Lynch, Jr. 66 Chairman of the Board 1989
Stephen J. DiLascio 42 Director, Managing General Partner of 1995
Equitrade
Class 2 Directors
Arthur Kontos 51 Director, Vice Chairman of the Board, 1988
Chief Executive Officer
Richard J. Marino 53 Director, Senior Vice President, Chairman 1981
of the Board of Sherwood Securities
Ralph N. Del Deo 72 Director 1993
Class 3 Directors
Carl H. Hewitt 46 Director 1991
John. P. Duffy 56 Director 1992
Thomas Neumann 33 Director, Executive Vice President 1992
</TABLE>
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 ("SLK"), for more than five years prior to
his retirement from SLK in June 1985. SLK 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 SLK from June
1988 until October 1988, when he joined the Company. He became a general partner
of SLK 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. 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 SLK.
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 that expired in 1991 and presently serves as Chairman of
the Securities Traders Association ("STA") for a term expiring in October 1997.
Mr. Marino will serve a two year term as Governor of the STA following his
tenure as Chairman.
Thomas Neumann has served as an Executive Vice President of the Company since
1991 and Head of Capital Markets of Sherwood Securities in charge of
institutional sales since 1995. 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 SLK in 1991, a
position he held from prior to September 1987 until his retirement. As a
managing director of SLK, Mr. Duffy acted as a specialist on The New York Stock
Exchange ("NYSE").
Carl Hewitt was appointed a director of the Company 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. Mr. Hewitt became a member of
the Board of Directors in July 1991. Mr. Hewitt is a managing director and the
general counsel of SLK. Mr. Hewitt joined SLK in 1985 as an assistant general
counsel. He became the general counsel in June 1988 and became a managing
director in January 1991. Mr. Hewitt is also the sole shareholder and director
and the president of the corporation which serves as the general partner of
S.G.I.
Ralph N. Del Deo is a senior partner of Crummy, Del Deo, Dolan, Griffinger &
Vecchione, P.C., a New Jersey law firm that 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.
James Romano, age 50, currently serves as Senior Vice President of Sherwood
Securities and as manager of its trading department. Mr. Romano joined Sherwood
Securities in June 1992 as vice president of trading and as a member of the
Management Committee. In January 1995, he assumed responsibility over the
trading department and was appointed to serve on the Company's Executive
Committee. For eleven years prior to joining the Company, Mr. Romano held
various trading positions at Troster Singer Corporation, including vice
president of trading.
William Karsh, age 44, 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. 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.
Laura R. Singer, age 43, has been General Counsel and Senior Vice President of
the Company since January 6, 1997. Prior to that time, she served for six years
as an Assistant Director in the Division of Enforcement of the Securities and
Exchange Commission in Washington, D.C. Previously, Ms. Singer had been counsel
to Market Surveillance at the National Association of Securities Dealers. Ms.
Singer has been a member of the bar since September, 1978. She has
responsibility for the legal affairs of the Company.
Denise Isaac, age 30, has been Chief Financial Officer of the Company since
October 1995. Prior to her employment with the Company, Ms. Isaac was a Senior
Manager in the financial services practice of KPMG Peat Marwick LLP. Ms. Isaac
was employed by KPMG Peat Marwick LLP since 1986 where she worked on various
assignments and instructed courses to the securities industry.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended 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 Denise
Isaac, the Company's Chief Financial Officer, was filed late. In addition, the
annual statement of change in beneficial ownership (Form 5) was filed late by
each of Denise Isaac, James Romano and Laura Singer. Appropriate corrective
actions has been taken by each of these individuals.
Meetings of the Board and Committees
During fiscal year 1997, the Board of Directors held eight 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, 1997.
The Board of Directors has created an Executive Committee, a Compensation
Committee, an Audit Committee, and a Nominating Committee. The Executive
Committee is comprised of James H. Lynch, Jr., Arthur Kontos and Dennis Marino.
The Compensation Committee is comprised of James H. Lynch, Jr. and John 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.
The Executive Committee, which held two meetings during fiscal year 1997, 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 two meetings during fiscal year 1997, has
jurisdiction on behalf of the Company to approve, disapprove, modify or amend
all plans to compensate employees including bonuses. 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 Compensation Committee.
The Audit Committee, which held one meeting during fiscal year 1997, 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 1997.
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, 1997, 1996 and 1995 of those persons
who were, at May 31, 1997, (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, 1997 (the "named executive officers"):
<TABLE>
<CAPTION>
Executive Compensation Table
Annual Compensation
----------- ---------------- ----------------- -------------------
Name and Securities
Principal Fiscal All Other Underlying
Position Year Salary($) Bonus($) Compensation($) Options (#)
<S> <C> <C> <C> <C> <C>
Arthur Kontos, Vice 1997 $300,000 $3,061,460
Chairman of the Board and 1996 300,000 6,137,012 $7,119,375(2) 219,533
Chief Executive Officer of 1995 300,000 3,131,745
the Company
Dennis Marino 1997 150,000 286,728
Executive Vice President 1996 150,000 515,000 663,181(2) 45,190
and Chief Administrative 1995 150,000 175,000
Officer of the Company;
President of Sherwood
Securities
84,375(3)
Thomas Neumann 1997 250,000 573,455 113,699(2) 88,187
Executive Vice President of 1996 248,939 1,015,000 1,093,376(2) 94,027
the Company 1995 200,000 450,000
Richard J. Marino 1997 -- 614,606(1)
Chairman of the Board of 1996 -- 486,654(1) 196,875(2) 12,294
Sherwood Securities 1995 -- 319,600(1)
William Karsh 1997 150,000 286,728
Executive Vice President 1996 150,000 515,000 190,625(2) 12,339
and Treasurer of the 1995 129,000 175,000
Company and Sherwood
Securities
James Romano 1997 350,000 235,000(1) 15,000
Senior Vice President of 1996 350,000 274,091(1)
Sherwood Securities 1995 148,077 972,000(1)
No named executive officer received personal benefits or perquisites during the
fiscal year ended May 31, 1997 in excess of the lesser of $50,000 or 10% of his
aggregate salary and bonus.
<FN>
(1) Cash bonuses for Mr. R. Marino and Mr. Romano 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, 1997 equaled $614,606, for the fiscal year
ended May 31, 1996 equaled $447,904 and for the fiscal year ended May
31, 1995 equaled $302,100. Discretionary incentive bonuses for Mr. R.
Marino for the fiscal year ended May 31, 1997 equaled $0, for the fiscal
year ended May 31, 1996 equaled $8,750 and for the fiscal year ended May
31, 1995 equaled $17,500. Commissions for Mr. Romano for the fiscal year
ended May 31, 1997 equaled $0, for the fiscal year ended May 31, 1996
equaled $91,091 and for the fiscal year ended May 31, 1995 equaled
$930,000. Discretionary incentive bonuses for Mr. Romano for the fiscal
year ended May 31, 1997 equaled $235,000, for the fiscal year ended May
31, 1996 equaled $183,000 and for the fiscal year ended May 31, 1995
equaled $42,000.
</FN>
<FN>
(2) Represents gain recognized upon exercise of options.
</FN>
</TABLE>
Compensation Arrangements
Through May 31, 1997, Mr. Kontos was 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. Under the terms of the Employment
Agreement, the Company had agreed to pay Mr. Kontos an annual base salary of
$300,000. In addition, Mr. Kontos was 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 was 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, would be
paid at a rate of 15%, rather than 18%.
On May 31, 1997, the Board of Directors approved, and Mr. Kontos signed, a new
employment agreement, (the "New Employment Agreement"). The New Employment
Agreement provides for an initial term of employment from June 1, 1997 to May
31, 2000. The Company has the option to extend the term from June 1, 2000 until
May 31, 2001. Mr. Kontos has the right to extend the term from June 1, 2001 to
May 31, 2002. The New Employment Agreement provides that Mr. Kontos will receive
an annual base salary of $300,000 and an annual cash bonus pursuant to the terms
of The Sherwood Group 1996 CEO Bonus Plan (the "CEO Bonus Plan"). Pursuant to
the CEO Bonus Plan, for fiscal years commencing with the fiscal year ended May
31, 1998, the Chief Executive Officer of the Company is entitled to an annual
cash bonus equal to 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 Company without deductions for the payment or accrual of a bonus under the
CEO Bonus Plan. The New 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, (iii)
automatically upon the death or disability of Mr. Kontos, or (iv) by the Company
without Cause. If the Company terminates the New Employment Agreement without
Cause, or Mr. Kontos terminates his employment for Good Reason (as defined)
following within one year after a Change of Control, Mr. Kontos is entitled to
receive as liquidated damages an amount equal to three times his average
compensation (including base salary, bonus and any other compensation) from the
Company and its subsidiaries as reported for federal income tax purposes for the
five previous calendar years less $1.00 subject to the limitation that the
amount shall not constitute an excess parachute payment under Section 280G of
the Internal Revenue Code of 1986, as amended. Generally, a Change in Control
will be deemed to have occurred under the New Employment Agreement (i) 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, (ii) during
a two year period persons who at the beginning of the period who constitute the
Board of Directors and any new director whose election was approved by at least
2/3 of the directors then still in office, cease for any reason to constitute a
majority of the Board of Directors, or (iii) the Company or a subsidiary of the
Company merges, consolidates or engages in a similar transaction, other than a
transaction where voting securities of the Company outstanding prior to this
Transaction continue to represent 75% of the combined voting power of the voting
securities of the Company or the surviving entity, or the stockholders approve a
plan of complete liquidation or an agreement for the sale or disposition of all
or substantially all of the Company's assets.
The Sherwood Group, Inc. 1996 Executive Incentive Award Plan ("Incentive Plan")
provides for the payment of cash bonuses to senior executive officers of the
Company. Only three participants (other than the Chief Executive Officer of the
Company) with the highest base salary for an Award Period are eligible for the
receipt of an Incentive Award. Generally, the Award Period is the Company's
fiscal year. The Incentive Plan is currently administered by the Compensation
Committee and was effective commencing the fiscal year ended May 31, 1997.
Participating senior executives may not receive an Incentive Award in excess of
25% of the Compensation Pool (as defined), except the participating senior
executive with the highest base salary may not receive an Incentive Award in
excess of 50% of the Compensation Pool. The Compensation Pool is 4.25% of "Net
Income" for an Award Period where "Net Income" means consolidated pre-tax net
income of the Company after adjustment to exclude or include unusual,
infrequently occurring or extraordinary items or the cumulative effects of
changes in accounting principles and not taking into account the payment or
accrual of the Incentive Awards under the Incentive Plan. Messrs. Neumann,
Dennis Marino and Karsh were participants in the Incentive Plan for the fiscal
year ended May 31, 1997.
Compensation of Directors
Independent directors are paid at a rate of $18,000 annually plus $1,000 for
each committee meeting attended.
Option Grants in Last Fiscal Year
Shown below is information with respect to the options to purchase Common Stock
granted to the Chief Executive Officer and the named executive officers of the
Company.
<PAGE>
<TABLE>
Option Grants In Last Fiscal Year
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Grants Appreciation for Option
Term
- ------------------------------------------------------------------------------------------ --------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
---- ----------- ----------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Arthur Kontos 0
Dennis Marino 0
Thomas Neumann(1) 88,187 53.39% $10.1250 2/24/07 $561,536 $1,423,042
Richard J. Marino 0
William Karsh 0
James Romano(2) 15,000 9.08 11.3750 6/27/06 107,305 271,932
<FN>
(1) All options granted became exercisable on August 24, 1997.
</FN>
<FN>
(2) All options granted will become exercisable with respect to one-third
of the shares on each of the first, second and third anniversary of the
date of grant.
</FN>
</TABLE>
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 granted to the Chief
Executive Officer and such named executive officers.
<PAGE>
<TABLE>
Aggregated Option Exercises In Fiscal Year Ended May 31, 1997
And May 31, 1997 Option Value
<CAPTION>
Number of Unexercised Value of Unexercised
Options at In-the-money Options
Number of Shares Value Fiscal Year-End at Fiscal Year-End(1)
Name Acquired on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Arthur Kontos, Vice 0 0 219,533 0 $781,277 0
Chairman of the Board
and Chief Executive
Officer of the Company
Dennis Marino 0 0 45,190 0 $160,954 0
Executive Vice
President and Chief
Administrative
Officer of the
Company; President of
Sherwood Securities
Thomas Neumann 94,027 $113,699 0 88,187 0 $198,421
President of the
Executive Vice
Company
Richard J. Marino 0 0 12,294 0 $43,029 0
Chairman of the Board
and
Director of
International Equity
Trading of Sherwood
Securities
William Karsh 0 0 12,339 0 $46,271 0
Executive Vice
President and
Treasurer of the
Company and Sherwood
Securities
James Romano 0 0 0 15,000 0 $15,000
Senior Vice President
of Sherwood Securities
<FN>
(1) Based on the difference between the exercise price of the options and
the closing price of the Common Stock on The New York Stock Exchange on
May 31, 1997.
</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 Compensation
Committee in determining the compensation of the Company's Vice Chairman of the
Board and Chief Executive Officer and other named executive officers in this
Proxy Statement for the fiscal year ended May 31, 1997.
Members of the Compensation Committee during the fiscal year ended May 31, 1997
were John P. Duffy and James H. Lynch, Jr. During the fiscal year ended May 31,
1997, entities with which certain members of the Compensation Committee were
associated received payments from the Company.
Each of Sherwood Securities and Equitrade clear certain of their securities
transactions SLK. Each of Messrs. Hewitt and Kellogg are managing directors of
SLK. Messrs. Lynch and Duffy were formerly associated with SKL. See "Certain
Biographical Information Concerning Incumbent Directors and Executive Officers."
During the Company's 1997 fiscal year, the Company and its subsidiaries paid
fees in the aggregate amount of $940,347 to SLK in connection with clearing
activities performed by SLK.
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.
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, 1997, 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, 1996 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.
Bonuses. The bonuses paid to the Company's executive officers with respect to
the fiscal year ended May 31, 1997 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 and is measured by a formula
contained in his Employment Agreement. Bonuses paid to participants in the
Incentive Plan were paid in accordance with that plan.
Chief Executive Officer Compensation
The compensation arrangements for Mr. Kontos with respect to the fiscal year
ended May 31, 1997 were based on the Company's compensation philosophy. The
Compensation 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, 1997 was determined in accordance
with the provisions of the Employment Agreement.
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 that occurred prior to the date of the
agreement. However, the enforceability of these retroactive provisions has not
been determined under Delaware law.
Stock Option Plans.
Certain directors and officers of the Company hold options to purchase shares of
Common Stock which were granted under the Company's 1983 Stock Option Plan,
which was adopted in August 1983 and amended and restated in January 1987 (the
"1983 Option Plan"). The Board of Directors voted on August 5, 1993 to allow the
1983 Option Plan to expire as of August 9, 1993. Accordingly, while stock
options previously issued pursuant to the 1983 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 1983 Option Plan.
The 1983 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 (the "Code")) 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 1983 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 1983 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 Stock Option Plan") which plan was approved by the
stockholders at the 1995 Annual Meeting of Stockholders. Under the 1995 Stock
Option Plan, 767,200 shares Common Stock have been authorized for issuance for
the granting of options and stock appreciation rights. The maximum number of
shares subject to stock options that may be granted to any one optionee during
any calendar year under the 1995 Stock Option Plan may not exceed 300,000
shares. The 1995 Stock Option Plan provides for the granting of both incentive
and non-incentive stock options and stock appreciation rights which may be
issued in connection with a stock option. At May 31, 1997, 207,316 shares were
available for future grant under the 1995 Stock Option Plan. Options covering
165,187 shares of Common Stock were granted by the Company under the 1995 Stock
Option Plan during the fiscal year ended May 31, 1997. The Board of Directors
has proposed to amend the 1995 Stock Option Plan. See "Proposal 3. Approval of
Amendment of The Sherwood Group, Inc.
1995 Stock Option Plan."
401(k) Plan
In April 1992, the Company formed the Sherwood Securities Corp. 401(k) Plan (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 of the Company and
its subsidiaries (except Equitrade) 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, 1997, there was a discretionary Company contribution to the 401(k) Plan of
$63,699. Voting rights with respect to shares of Common Stock held in the 401(k)
Plan are voted at the direction of the Compensation Committee of the Board of
Directors.
Equitrade sponsors, for its eligible employees, the Equitrade Partners 401(k)
Savings Plan, which is a profit sharing plan, qualified under Section 401(k) of
the Code. Equitrade contributes a matching contribution equal to one-half of the
first 4% of an employee's compensation. For the fiscal year ended May 31, 1997,
Equitrade contributed $46,749 to the Equitrade Partners 401(k) Savings Plan.
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.
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. On July 23, 1997, the foregoing loan was converted into a loan of
$378,544 secured by shares of Common Stock owned by Mr. Neumann and bearing a
rate of 5% per annum and containing the same amortization requirement.
Spear, Leeds & Kellogg. See "Compensation Committee Report on Executive
Compensation-General".
Ralph N. Del Deo. Mr. Del Deo is a senior partner in the law firm of Crummy, Del
Deo, Dolan, Griffinger & Vecchione, P.C. which performs legal services for the
Company and certain of its subsidiaries.
<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, 1992 and that
all dividends, if any, were reinvested.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE SHERWOOD GROUP, INC. THE S & P 500 INDEX
AND THE DOW JONES SECURITIES BROKERS INDEX
<CAPTION>
Cumulative Total Return
5/92 5/93 5/94 5/95 5/96 5/97
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Sherwood Group, Inc. 100 119 211 204 319 367
S & P 500 100 112 116 140 180 232
Dow Jones Securities Brokers 100 137 148 174 223 342
<FN>
* $100 invested on 5/31/92 in stock or index including reinvestment of
dividends.
Fiscal year ending May 31.
</FN>
</TABLE>
<PAGE>
PROPOSAL 2. APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO DECREASE THE AUTHORIZED SHARES OF CAPITAL STOCK AND
ELIMINATE REFERENCES TO CLASS A COMMON STOCK
The Board has adopted a resolution amending Article 4 of the Company's
Restated Certificate of Incorporation, filed with the Delaware Secretary of
State on February 4, 1987 (the "Restated Certificate of Incorporation"), to
decrease the number of authorized shares of the Company's capital stock from the
current amount of 101,000,000 shares, consisting of 50,000,000 shares of Common
Stock, par value $.01 per share, 50,000,000 shares of Class A Common Stock, par
value $.01 per share ("Class A. Common Stock"), and 1,000,000 shares of
Preferred Stock, par value $.01 per share ("Preferred Stock"), to 51,000,000
shares, which would consist of 50,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock (the "Charter Amendment"). The Charter Amendment will
also eliminate all the provisions in the Restated Certificate of Incorporation
related to the Class A Common Stock. Article 4 of the Restated Certificate of
Incorporation, as amended by the Charter Amendment, is attached as Exhibit A to
this Proxy Statement. The description which follows is qualified in its entirety
by the exact language of the Charter Amendment.
Article 4 of the Restated Certificate of Incorporation currently
authorizes a total of 50,000,000 shares of Common Stock, 50,000,000 shares of
Class A Common Stock and 1,000,000 shares of Preferred Stock. At the close of
business on May 31, 1997, the record date for the Meeting, there were 12,694,665
shares of Common Stock outstanding and no shares of Class A Common Stock or
Preferred Stock outstanding, and as of May 31, 1997 there were 673,173 shares of
Common Stock reserved for issuance pursuant to the 1995 Stock Option Plan. The
decrease in the number of authorized shares is proposed in order to reduce the
annual franchise tax paid by the Company to the State of Delaware, which is
required by virtue of the Company's incorporation under Delaware law. The
Restated Certificate of Incorporation also authorizes the Company to issue up to
50,000,000 shares of Class A Common Stock. Each share of Class A Common Stock is
entitled to one-tenth (1/10th) vote on all matters submitted to the stockholders
of the Company and vote together as one class with the Common Stock; provided
that if the number of shares of Class A Common Stock is at least ten percent
(10%) of the total of the number of shares of Class A Common Stock and Common
Stock which is issued and outstanding, the holders of the Class A Common Stock,
voting separately as a class, have the right to elect twenty-five percent (25%)
of the Board of Directors. Each share of Common Stock issued and outstanding can
be converted into one share of Class A Common Stock once the Company issues
Class A Common Stock. No cash dividend or dividend of property may be declared
or paid per share on the Common Stock, unless a dividend of an equal amount has
been declared and paid per share on the Class A Common Stock, except in the case
of dividends paid on shares of Common Stock or Class A Common Stock. Shares of
either class of common stock may not be divided, subdivided or combined or
reclassified, unless shares of the other class of common stock are similarly
treated. In the event of a liquidation or dissolution of the Company, or a
winding up of its affairs, whether voluntary or involuntary, or a merger or
consolidation of the Company, after payment or provision for payment of the
debts or liabilities of the Company and the amounts to which holders of senior
securities may be entitled, holders of Class A Common Stock and Common Stock are
entitled to share ratably as one class in the remaining assets of the Company.
The Board believes the provisions in the Restated Certificate of Incorporation
regarding Class A Common Stock serve no useful purpose and should be eliminated.
Other than decreasing the number of authorized shares of capital stock
and eliminating provisions relating to the Class A Common Stock, Charter
Amendment will not affect the rights, preferences or privileges of the Company's
stockholders.
The Board has directed that the Charter Amendment be submitted for
stockholder approval. The affirmative vote of a majority of the outstanding
shares of Common Stock voted in person or by proxy at the Meeting is required
for approval of the Charter Amendment. In the absence of approval, the number of
authorized shares of the Company's capital stock will remain as described above
and the provisions regarding the Class A Common Stock will remain in the
Restated Certificate of Incorporation.
The Board of Directors recommends a vote "FOR" the amendment to the Restated
Certificate of Incorporation.
PROPOSAL 3. APPROVAL OF AMENDMENT TO THE SHERWOOD GROUP, INC. 1995 STOCK
OPTION PLAN
At the Meeting, the holders of the Common Stock will be asked to vote
upon a proposal to approve an amendment to The Sherwood Group, Inc. 1995 Stock
Option Plan (the "1995 Stock Option Plan") to increase by 420,000 the number of
shares of Common Stock for which options and stock appreciation rights may be
granted thereunder from 767,200 shares to 1,187,200 shares. The 1995 Stock
Option Plan, as proposed to be amended, is attached as Exhibit B to this Proxy
Statement.
Reasons For The Proposal
Under the 1995 Stock Option Plan as currently in effect, options and
stock appreciation rights for up to 767,200 shares of the Common Stock may be
granted. The Board of Directors has determined that it is advisable to continue
to provide stock-based incentive compensation to the Company's officers and
employees, thereby continuing to align the interests of such employees with
those of stockholders, and that awards under the 1995 Stock Option Plan are an
effective means of providing such compensation. In order to effectuate the grant
of the options and stock appreciation rights by the Compensation Committee set
forth herein and to continue to grant stock-based incentive compensation in the
future, it is necessary to increase the number of shares of Common Stock
available for grant under the 1995 Stock Option Plan. The Board of Directors
also determined that the 1995 Stock Option Plan should be expanded to permit the
grant of stock options and stock appreciation rights to all employees,
independent contractors, agents and consultants rather than only key employees,
independent contractors, agents and consultants of outstanding ability.
Description Of The 1995 Plan And The Proposed Amendments
The following is a summary of the 1995 Stock Option Plan and the
proposed amendments to it under Proposal 3. This summary does not purport to be
complete, and is qualified in its entirety by reference to the text of the 1995
Stock Option Plan, which is attached as Exhibit B to this Proxy Statement.
Purpose. The purpose of the 1995 Stock Option Plan is to provide an additional
incentive to key employees, independent contractors, agents and consultants of
the Company and its subsidiaries, to aid in attracting and retaining employees,
independent contractors, agents and consultants of outstanding ability, and to
closely align their interests with those of stockholders. The 1995 Stock Option
Plan presently authorizes the granting of options and stock appreciation rights
of up to 767,200 shares of Common Stock (collectively, "Options"), and if
Proposal 3 is approved, up to an additional 420,000 shares of Common Stock,
subject to adjustment in the event of mergers, consolidations, reorganizations,
recapitalizations, stock dividends, stock splits or other change in the
corporate structure or capitalization affecting the Company's issued Common
Stock. As indicated above the amendment would expand the number of officers,
employees, independent contractors, agents and consultants who perform services
for the Company or any of its subsidiaries who are eligible to receive grants
under the 1995 Stock Option Plan to eliminate the requirement that the recipient
be a key employee, independent contractor, agents and consultants of outstanding
ability. The Board of Directors believes it is beneficial to consider making
stock option and stock appreciation right grants generally available to
employees rather than to a select group of key employees.
Administration. If amended by Proposal 3 the 1995 Stock Option Plan will be
administered by a committee (the "Committee") of at least two directors who are
Non-Employee Directors as such term is defined in Rule 16b-3 of the Exchange
Act, presently the Compensation Committee. In administering the 1995 Stock
Option Plan, the Committee has the power to interpret its provisions and to
promulgate, amend, and rescind rules and regulations for its administration, to
select individuals to receive grants, and to determine the terms and provisions
of grants of options and stock appreciation rights.
Option Grants. The 1995 Stock Option Plan provides for the granting of both
incentive stock options (an "ISO") and nonqualified stock options (a "NQO") and
in connection with such options the granting of stock appreciation rights (an
"SAR") or additional stock options, progressive stock options in the event the
grantee exercises such stock options by surrendering shares of Common Stock (a
"PSO"). NQO's and SAR's may be issued to any employee or officer of the Company
or its subsidiaries, or any other person who is an independent contractor, agent
or consultant of the Company or its subsidiaries but not any director of the
Company who is not an employee of the Company. ISO's may be issued to employees
and officers of the Company and its subsidiaries, but not to any independent
contractor, agent or consultant. The Committee also determines the times at
which options become exercisable, their transferability and the dates, not more
than ten years after the date of grant, on which options will expire. In the
event of a tender offer for more than 25% of the Company's outstanding stock, or
a "change in control" (as defined in the 1995 Stock Option Plan) of the Company,
all outstanding options become immediately exercisable. The fair market value of
the stock with respect to which ISO's under the 1995 Stock Option Plan or any
other plan of the Company first become exercisable may not exceed $100,000 in
any year. The option price of an ISO is to be at least 100% of the fair market
value on the date of grant (110% in the case of optionees holding more than ten
percent of the combined voting power of all classes of stock of the Company).
The 1995 Stock Option Plan, however, permits the Committee to grant NQO's at any
exercise price consistent with the purposes of the 1995 Stock Option Plan,
whether or not such exercise price is equal to the fair market value of the
stock on the date of grant of the NQO. NQO's with an exercise price of less than
fair market value on the date of grant will not qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") and so any compensation expense generated by the exercise
of such an option would not be deductible by the Company if the optionee is a
"covered employee" who is paid compensation from the Company in an amount in
excess of $1,000,000 in the year of exercise.
Options may be exercised by the payment of the exercise price in cash, Common
Stock or a combination thereof. The Committee may make a loan for the purpose of
exercising any option granted under the 1995 Stock Option Plan to an optionee in
an amount not to exceed 100% of the purchase price of the shares acquired upon
exercise of the options. The loan must be secured by a pledge of shares of the
Company having an aggregate purchase price equal to or greater than the amount
of the loan.
As of May 31, 1997 the Committee has awarded or granted options under the 1995
Stock Option Plan to 13 persons. The following persons and groups were
recipients of these options: Arthur Kontos: 219,533; Dennis Marino: 45,190;
Thomas Neumann: 182,214; Richard Marino: 12,294; William Karsh: 12,339; James
Romano: 15,000; all current executive officers as a group: 508,570; all current
directors who are not executive officers as a group: -0- and all employees
including all current officers who are not executive officers as a group:
51,314. Of the options granted as of May 31, 1997, options covering 482,884
shares were granted to employees exercising options under the 1983 Option Plan
and 1995 Stock Option Plan by delivering Common Stock to the Company. Such new
options were for the number of shares of Common Stock equal to the number of
shares of Common Stock used to exercise the option and to pay withholding taxes
due upon such exercise. Options covering 77,000 shares were granted which were
not the result of the exercise of options granted under the 1983 Option Plan or
the 1995 Stock Option Plan. The Committee has not made any determination with
respect to grants of options or stock appreciation rights to employees in the
future. The Company has 8 executive officers, and approximately 500 employees
who are not executive officers who could potentially qualify for grants of
options and stock appreciation rights under the 1995 Stock Option Plan as
proposed to be amended.
If Proposal 3 is approved by stockholders and based upon shares of Common Stock
utilized or reserved under existing or exercised stock options as of May 31,
1997 under the 1995 Stock Option Plan, up to 627,316 shares of Common Stock will
be available for granting of options and stock appreciation rights under the
1995 Stock Option Plan.
Stock Appreciation Rights. The 1995 Stock Option Plan permits the Committee to
grant SAR's in connection with any option granted under the 1995 Stock Option
Plan. SAR's enable an optionee to surrender an option and to receive a payment
in cash or Common Stock, as determined by the Committee, equal to the difference
between the fair market value of the Common Stock on the date of surrender of
the related option and the option price.
Progressive Stock Options. The 1995 Stock Option Plan also permits the Committee
to grant PRO's in connection with any option granted under the 1995 Stock Option
Plan. PRO's enable an optionee to receive additional stock options in the event
the grantee exercises a stock option, in whole or in part, by surrendering
shares of Common Stock of the Company. Any PRO granted will be for a number of
shares equal to the number of surrendered shares of Common Stock, shall not be
exercisable for a minimum of six months from the grant date of the option, shall
have an option price per share equal to 100% of the fair market value of share
of stock on the grant date and shall be subject to such other terms and
conditions as the Committee may determine.
Termination of Employment. Unless otherwise provided by the Committee, the
following rules apply to all options granted under the 1995 Stock Option Plan.
Options granted under the 1995 Stock Option Plan expire immediately if an
employee is terminated for cause. If termination of employment is voluntary or
involuntary, options granted expire after a three month period. In the event of
an employee's death within such three-month period, the employee's estate may
exercise the option for the number of shares for which it is exercisable at the
date of termination, for one year after death but in no event beyond the
expiration dates of the option. An option outstanding at the time an employee
retires under a Company retirement plan or becomes disabled is exercisable
within one year of termination in the case of an ISO and in the case of a NQO
may be exercisable at any time to the extent that the optionee was otherwise
entitled to exercise it at the time of such cessation of employment with the
Company or a subsidiary thereof, but in no event after the expiration of the
option period. If an employee dies, whether before or after such retirement or
disability, the employee's estate may exercise the option exercisable at the
date of termination of employment for up to three years after death (one year in
the case of voluntary termination of employment), but in no event beyond the
expiration dates of the option.
Income Tax Consequences. Under present law the federal income tax treatment of
stock options under the 1995 Stock Option Plan is generally as follows:
Incentive Stock Options. For regular income tax purposes, an optionee will not
realize taxable income upon either the grant of an ISO or its exercise if the
optionee has been an employee of the Company or a subsidiary at all times from
the date of grant to a date not more than three months before the date of
exercise. The difference between the fair market value of the stock at the date
of exercise and the exercise price of an ISO, however, will be treated as an
item of tax preference in the year of exercise for purposes of the alternative
minimum tax.
If the shares acquired upon an exercise of an ISO are not disposed of by the
optionee within two years from the date of grant or within one year from the
date of exercise, any gain realized upon a subsequent sale of the shares will be
taxable as a capital gain. In that case, the Company will not be entitled to a
deduction in connection with the grant or the exercise of the ISO or the
subsequent disposition of the shares by the optionee. The amount of gain or loss
realized upon such a sale or other disposition will be measured by the
difference between the amount realized and the earlier exercise price of the ISO
(the optionee's basis in the stock).
If the optionee disposes of the shares within two years from the date of grant
of the ISO or within one year from the date of exercise of the ISO, the optionee
will realize ordinary income in an amount equal to the excess of the fair market
value of the shares at the date of exercise (or the amount realized on
disposition, if less) over the option price, and the Company will be allowed a
corresponding deduction. If the amount realized on the disposition exceeds the
fair market value of the shares at the date of exercise the gain on disposition
in excess of the amount treated as ordinary income will be treated as a capital
gain. Any such capital gain will be a long-term capital gain if the optionee
holds the shares for more than one year from the date of exercise.
Nonqualified Stock Options. An optionee will not realize income upon the grant
of a nonqualified option. Upon the exercise of a nonqualified option, an
optionee will be required to recognize ordinary income in an amount equal to the
excess of the fair market value at the date of exercise of the NQO over the
option price. Any compensation includable in the gross income of an employee
with respect to a NQO will be subject to appropriate federal income and
employment taxes. The Company will be entitled to a business expense deduction
in the same amount and at the same time as when the optionee recognizes
compensation income. Upon a subsequent sale of the stock, any amount realized in
excess of such fair market value will constitute a capital gain. Any such
capital gain will be a long-term capital gain if the optionee holds the shares
for more than one year from the date of exercise.
If an optionee exercises an option by tendering Company stock in payment of the
option price the optionee will be deemed to exchange the number of previously
owned shares (e.g. 50 shares) for an identical number of new shares (e.g. 50
shares). This deemed exchange of previously owned Company stock for new Company
stock should be eligible for nonrecognition treatment under Section 1036 of the
Code as an exchange of common stock for common stock in the same corporation.
With regard to the additional number of new Company shares (e.g., the excess
over 50 shares) that an optionee receives pursuant to the exercise of the
option, an optionee will be deemed to have acquired them without paying
consideration. If such extra shares are issued pursuant to a NQO, the fair
market value of such extra shares will be included in the optionees' income as
compensation income and the Company will be allowed a corresponding deduction.
If such extra shares are issued pursuant to an ISO, no income on the exercise of
such options will be recognized by the optionee, and the Company will not be
allowed a compensation deduction. The optionee's basis in the new shares deemed
exchanged for old shares will be equal to the optionee's basis in the
surrendered old shares, and the optionee's holding period in such new shares
will include his or her holding period in the old shares. The optionee's basis
in the additional (or excess) new shares received will equal the amount that the
optionee included in income with respect to those shares (their fair market
value for stock issued pursuant to a NQO; zero for stock issued pursuant to an
ISO), and the optionee's holding period in such additional shares will start as
of the date of acquisition.
In the limited circumstances in which an officer who is subject to Section 16(b)
of the Securities Exchange Act of 1934, as amended (the "1934 Act") exercises a
NQO, which exercise is not exempt under Section 16(b), no income is recognized
for federal income tax purposes at the time of exercise unless the optionee
makes an election under Section 83(b) of the Code within 30 days after the date
of exercise, in which case the rules described in the second preceding paragraph
would apply. Where such an election is not made, the optionee will recognize
ordinary income on the first date that sale of such shares would not create
liability under Section 16(b) of the 1934 Act (this is generally, but not
necessarily, six months after the date of exercise). The ordinary income
recognized to such an optionee will be the excess, if any, of the fair market
value of shares on such later date over the option exercise price.
Stock Appreciation Rights. SAR's will not result in taxable income upon grant.
Upon exercise, the optionee will realize ordinary income in an amount equal to
the cash and/or the fair market value of any shares received which amount will
be subject to appropriate income and employment taxes. The Company will be
entitled to a corresponding compensation deduction.
Progressive Stock Options. For federal income tax purposes, the issuance and
exercise of PSO's will not be treated differently than the issuance and exercise
of the originally granted NQO or ISO, as described above.
The foregoing discussion does not purport to be a complete analysis of all the
potential tax consequences relevant to recipients of options or SAR's or PSO's
or to the Company or its subsidiaries. The above discussion does not take into
account the effect of state and local tax laws. Moreover, no assurance can be
given that legislative, administrative, regulatory or judicial changes or
interpretations will not occur which could modify such analysis. In addition, an
individual's particular tax status and his other tax attributes may result in
different tax consequences from those described above. Therefore, any
participant in the 1995 Stock Option Plan should consult with his own tax
adviser concerning the tax consequences of the grant, exercise and surrender of
such options or stock appreciation rights and the disposition of any stock
acquired pursuant to the exercise of such options or stock appreciation rights.
Amendments. The Board of Directors may amend the 1995 Stock Option Plan at any
time, but may not, without prior shareholder approval, increase the aggregate
number of shares that may be issued thereunder; materially increase the benefits
to participants or materially modify the requirements as to eligibility for
participation in the 1995 Stock Option Plan.
Termination. The 1995 Stock Option Plan terminates by its terms on August 1,
2005.
Vote Required
Pursuant to The New York Stock Exchange stockholder approval policy, the
affirmative vote of a majority of the outstanding shares of Common Stock voted
in person or by proxy at the Meeting is required for approval of the amendment
to the 1995 Stock Option Plan to increase the number of options and stock
appreciation rights which may be issued under the 1995 Stock Option Plan to
1,187,200 and change the persons eligible to participate in the 1995 Stock
Option Plan.
The Board of Directors recommends a vote "FOR" the amendment of the 1995 Stock
Option Plan.
PROPOSAL 4. 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,
1998. 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 a vote "FOR" ratification and approval of the
appointment of KPMG Peat Marwick LLP as independent auditors.
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, 1998,
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 2, 1997
<PAGE>
9
EXHIBIT A1
Article 4
of
Restated Certificate of Incorporation
4. The total number of shares of all classes of stock that the
Corporation shall have authority to issue is 51,000,000, of which 1,000,000
shares shall be Preferred Stock, par value $.01 per share, ("Preferred Stock")
and of which 50,000,000 shares shall be Common Stock, par value $.01 per share
("Common Stock"), and the voting powers, designations, preferences and relative,
participating, optional or other special qualifications, limitations or
restrictions thereof are set forth hereinafter:
1. Preferred Stock
(a) The Preferred Stock may be issued in one or more series, each of
which shall be distinctively designated, shall rank equally and shall be
identical in all respects except as otherwise provided in subsection 1(b) of
this Section 4.
(b) Authority is hereby vested in the Board of Directors to issue from
time to time the Preferred Stock of any series and to state in the resolution or
resolutions providing for the issuance of shares of any series the voting
powers, if any, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions of
such series to the full extent now or hereafter permitted by the law of the
State of Delaware in respect of the matters set forth in the following clauses
(i) to (viii) inclusive;
(i) the number of shares to constitute such series,
and the distinctive designations thereof;
(ii) the voting powers, full or limited, if any, of such
series;
(iii) the rate of dividends payable on shares of such series,
the conditions on which and the times when such dividends are payable,
the preference to, or the relation to, the payment of the dividends
payable on any other class, classes or series of stock, whether
cumulative or non-cumulative and, if cumulative, the date from which
dividends on shares of such series shall be cumulative;
(iv) the redemption price or prices, if any, and the terms and
conditions on which shares of such series shall be redeemable;
(v) the requirement of any sinking fund or funds to be applied
to the purchase or redemption of shares of such series and, if so, the
amount of such fund or funds and the manner of application;
(vi) the rights of shares of such series upon the liquidation,
dissolution or winding up of, or upon any distribution of the assets
of, the Corporation;
(vii) the rights, if any, of the holders of shares of such
series to convert such shares into, or to exchange such shares for,
shares of any other class, classes or series of stock and the price or
prices or the rates of exchange and the adjustments at which such
shares shall be convertible or exchangeable, and any other terms and
conditions of such conversion or exchange;
(viii) any other preferences and relative, participating,
optional or other special rights of shares of such series, and
qualifications, limitations or restrictions including, without
limitation, any restriction on an increase in the number of shares of
any series theretofore authorized and any qualifications, limitations
or restrictions of rights or powers to which shares of any future
series shall be subject.
(c) The number of authorized shares of Preferred Stock may be increased
or decreased by the affirmative vote of the holders of a majority of the votes
of all classes of voting securities of the Corporation without a class vote of
the Preferred Stock, or any series thereof, except as otherwise provided in the
resolution or resolutions fixing the voting rights of any series of the
Preferred Stock.
2. Common Stock
At every meeting of the stockholders of the Corporation (or with
respect to any action by written consent in lieu of a meeting of stockholders),
each share of Common Stock shall be entitled to one (1) vote (whether voted in
person by the holder thereof or by proxy) on all matters which may lawfully be
submitted to a vote of stockholders (except to the extent otherwise required by
law).
At the time at which this Restated Certificate of Incorporation becomes
effective, the par value of each share of Common Stock, par value $.10 per
share, issued and outstanding as at such time, shall be reduced to $.01 per
share.
<PAGE>
EXHIBIT B
THE SHERWOOD GROUP, INC.
1995 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of The Sherwood Group, Inc. Stock Option Plan (the "Plan")
is to provide an additional incentive to employees, independent contractors,
agents and consultants of The Sherwood Group, Inc. (the "Company") and its
subsidiaries, to aid in attracting and retaining employees, independent
contractors, agents and consultants, and to closely align their interests with
those of shareholders.
SECTION 2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms,
when used in this Plan, shall have the meanings set forth in this Section 2.
(a) "Board" shall mean the Board of Directors of the Company .
(b) "Change in Control". A change in control of the Company shall be
deemed to have occurred if, over the initial opposition of the then-incumbent
Board (whether or not such Board ultimately acquiesces therein), (i) any person
or group of persons shall acquire, directly or indirectly, stock of the Company
having at least 25% of the combined voting power of the Company's
then-outstanding securities, or (ii) any shareholder or group of shareholders
shall elect a majority of the members of the Board in each case after January 1,
1995 (except persons or entities which as of January 1, 1995 are identified as
holders of 5% or more beneficial owners of the Company's securities in the
Company's filings under the Exchange Act).
(c) "Code" shall mean the Internal Revenue Code of 1986 and the rules
and regulations thereunder, as it or they may be amended from time to time.
(d) "Committee" shall mean the Compensation Committee of the Board or
such other committee as may be designated by the Board. The Committee shall
consist of two or more members of the Board who are Non-Employee Directors as
such term is defined in Rule 16b-3 of the Exchange Act.
(e) "Date of Exercise" shall mean the earlier of the date on which
written notice of exercise, together with payment in full, is received at the
office of the Secretary of the Company or the date on which such notice and
payment are mailed to the Secretary of the Company at its principal office by
certified or registered mail.
(f) "Employee" shall mean any employee, including any officer of the
Company or any of its Subsidiaries, or any other person, who is an independent
contractor, agent or consultant of the Company or any of its Subsidiaries, and
excluding any director of the Company who is not otherwise an employee of the
Company. For the purposes of any provision of this Plan relating to Incentive
Stock Options, the term "Employee" shall be limited to mean any employee (as
that term is defined under Code Section 3401(c)) or officer of the Company or
any of its Subsidiaries, but not any person who is merely an independent
contractor, agent or consultant of the Company or any of its subsidiaries.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" shall mean for any day the mean of the highest
and lowest selling prices of the Stock as reported on the Composite Tape for
securities traded on the New York Stock Exchange.
(i) "Grantee" shall mean an Employee granted a Stock Option.
(j) "Granting Date" shall mean the date on which the Committee
authorizes the issuance of a Stock Option for a specified number of shares of
Stock to a specified Employee.
(k) "Incentive Stock Option" shall mean a Stock Option granted under
the Plan which is properly qualified under the provisions of Section 422 of the
Code.
(l) "Nonqualified Stock Option" shall mean a Stock Option granted
within the Plan which is not an Incentive Stock Option or otherwise qualified
under similar tax provisions.
(m) "Progressive Stock Options" shall mean either Incentive Stock
Options or Nonqualified Stock Options granted pursuant to Section 5(j) of this
Plan.
(n) "Stock" shall mean the Common Stock, as par value $.01 per share,
of the Company.
(o) "Stock Appreciation Right" shall mean a right granted pursuant to
the Plan to receive Stock, cash, or a combination thereof, upon the surrender of
the right to purchase all or part of the shares of Stock covered by a Stock
Option.
(p) "Stock Option" shall mean an Incentive Stock Option or Nonqualified
Stock Option granted pursuant to the Plan to purchase shares of Stock.
(q) "Subsidiary" shall mean any subsidiary corporation as defined in
Section 424 of the Code.
SECTION 3. SHARES OF STOCK SUBJECT TO THE PLAN
Subject to adjustment pursuant to Section 9, 1,187,200 shares of Stock
shall be reserved for issuance upon the exercise of Stock Options granted
pursuant to this Plan. Shares delivered under the Plan may be authorized and
unissued shares or issued shares held by the Company in its treasury. If any
Stock Options expire or terminate without having been exercised, the shares of
Stock covered by such Stock Option shall become available again for the grant of
Stock Options hereunder. Similarly, if any Stock Options are surrendered for
cash pursuant to the provisions of Section 7, the shares of Stock covered by
such Stock Options shall also become available again for the grant of Stock
Options hereunder. Shares of Stock covered by Stock Options surrendered for
Stock pursuant to Section 7, however, shall not become available again for the
grant of Stock Options hereunder. Shares of Stock covered by Stock Options
surrendered for Stock pursuant to Section 7, however, shall not become available
again for the grant of Stock Options hereunder.
SECTION 4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to it,
to determine the terms and provisions of Stock Option grants, and to make all
other determinations necessary or advisable for the administration of the Plan.
(b) It is intended that the Plan and any transaction hereunder meet all
of the requirements of Rule 16b-3 promulgated by the Securities and Exchange
Commission, as such rule is currently in effect or as hereafter modified or
amended, and all other applicable laws. If any provision of the Plan or any
transaction would disqualify the Plan or such transaction under, or would not
comply with, Rule 16b-3 or other applicable laws, such provision or transaction
shall be construed or deemed amended to conform to Rule 16b-3 or such other
applicable laws or otherwise shall be deemed to be null and void, in each case
to the extent permitted by law and deemed advisable by the Committee.
(c) Any controversy or claim arising out of or related to this Plan
shall be determined unilaterally by and at the sole discretion of the Committee.
SECTION 5. GRANTING OF STOCK OPTIONS
(a) Only Employees shall be eligible to receive Stock Options under the
Plan. Directors of the Company who are not also employees of the Company or one
of its Subsidiaries shall not be eligible for Stock Options.
(b) The option price of each share of Stock subject to an Incentive
Stock Option shall be at least 100% of the Fair Market Value of a share of the
Stock on the Granting Date.
(c) The option price of each share of Stock subject to a Nonqualified
Stock Option shall be 100% of the Fair Market Value of a share of the Stock on
the Granting Date, or such other price either greater than or less than the Fair
Market Value (but in no event less than the par value of the Stock) as the
Committee shall determine appropriate to the purposes of the Plan and to the
Company's total compensation program.
(d) The Committee shall determine and designate from time to time those
Employees who are to be granted Stock Options and whether the particular Stock
Options are to be Incentive Stock Options or Nonqualified Stock Options, and
shall also specify the number of shares covered by and the option price per
share of each Stock Option. Each Stock Option granted under the Plan shall be
clearly identified as to its status as a Nonqualified Stock Option or an
Incentive Stock Option.
(e) The aggregate Fair Market Value (determined at the time the Stock
Option is granted) of the Stock with respect to which Incentive Stock Options
are exercisable for the first time by any individual during any calendar year
(under all such plans of the individual's employer corporation and its parent
and subsidiary corporations) shall not exceed $100,000.
(f) A Stock Option shall be exercisable during such period or periods
and in such installments as shall be fixed by the Committee at the time the
Stock Option is granted or in any amendment thereto; but each Stock Option shall
expire not later than ten years from the Granting Date.
(g) The Committee shall have the authority to grant both transferable
Stock Options and nontransferable Stock Options, and to amend outstanding
nontransferable Stock Options to provide for transferability. Each
nontransferable Stock Option intended to qualify under Rule 16b-3 or otherwise
shall provide by its terms that it is not transferable otherwise than by will or
the laws of descent and distribution and is exercisable, during the Grantee's
lifetime, only by the Grantee. Each transferable Stock Option may provide for
such limitations on transferability and exercisability as the Committee may
designate at the time a Stock Option is granted or is otherwise amended to
provide for transferability.
(h) Stock Options may be granted to an Employee who has previously
received Stock Options or other options whether such prior Stock Options or
other options are still outstanding, have previously been exercised or
surrendered in whole or in part, or are canceled in connection with the issuance
of new Stock Options.
(i) Subject to adjustment pursuant to Section 9, the aggregate number
of shares of Stock subject to Stock Options granted to an Employee under the
Plan during any calendar year shall not exceed 300,000 shares.
(j) Without in any way limiting the authority of the Committee to make
grants of Stock Options under the Plan, and in order to induce Employees to
retain ownership of Stock, the Committee shall have the authority (but not the
obligation) to include within any agreement reflecting a Stock Option a
provision entitling the Grantee of such Stock Option to a further Stock Option
(a "Progressive Stock Option") in the event the Grantee exercises such
Nonqualified Stock Option evidenced by such agreement, in whole or in part, by
surrendering other shares of Stock in accordance with this Plan and the terms
and conditions of such agreement. Any such Progressive Stock Option shall be for
a number of shares of Stock equal to the number of surrendered shares, shall
become exerciseable no sooner than six months after the Granting Date of the
Stock Option or such longer period as the Committee may establish, shall have an
option price per share equal to one hundred percent (100%) of the Fair Market
Value of a share of Stock on the Granting Date of the Progressive Stock Option,
and shall be subject to such other terms and conditions as the Committee may
determine.
(k) Notwithstanding the foregoing, the option price of an Incentive
Stock Option in the case of a Grantee who owns more than ten percent of the
total combined voting power of all classes of stock of the Company or any of its
Subsidiaries, will not be less than one-hundred-ten percent (110%) of the Fair
Market Value of the Stock at the Granting Date and in the case of such a
Grantee, the Incentive Stock Option may be exercised no more than five years
after the Granting Date.
SECTION 6. EXERCISE OF STOCK OPTIONS
(a) Except as provided in Section 8, no Stock Option may be exercised
at any time unless the Grantee is an Employee on the Date of Exercise and, in
the case of holders of Incentive Stock Options, has been an Employee at all
times during the period beginning on the Granting Date and ending on the day 3
months before the date of such exercise.
(b) The Grantee shall pay the option price in full on the Date of
Exercise of a Stock Option in cash, by check, or by delivery of full shares of
Stock of the Company, duly endorsed for transfer to the Company with signature
guaranteed, or by any combination thereof. Stock will be accepted at its Fair
Market Value on the Date of Exercise.
(c) Subject to the approval of the Committee, or of such person to whom
the Committee may delegate such authority ("its designee"), the Company may loan
to the Grantee a sum equal to an amount which is not in excess of 100% of the
purchase price of the shares of Stock acquired upon exercise of a Stock Option,
such loan to be evidenced by the execution and delivery of a promissory note.
Interest shall be paid on the unpaid balance of the promissory note at such
times and at such rate as shall be determined by the Committee or its designee.
Such promissory note shall be secured by the pledge to the Company of shares of
Stock having an aggregate purchase price on the date of purchase equal to or
greater than the amount of such note. A Grantee shall have, as to such pledged
shares of Stock, all rights of ownership including the right to vote such shares
of Stock and to receive dividends paid on such shares of Stock, subject to the
security interest of the Company. Such shares of Stock shall not be released by
the Company from the pledge unless the proportionate amount of the note secured
thereby has been repaid to the Company; provided, however that shares of Stock
subject to a pledge may be used to pay all or part of the purchase price of any
other option granted hereunder or under any other stock incentive plan of the
Company under the terms of which the purchase price of an option may be paid by
the surrender of shares of Stock, subject to the terms and conditions of this
Plan relating to the surrender of shares of Stock in payment of the exercise
price of an option. In such event, that number of the newly purchased shares of
Stock equal to the shares of Stock previously pledged shall be immediately
pledged as substitute security for the pre-existing debt of the Grantee to the
Company, and thereupon shall be subject to the provisions hereof relating to
pledged shares of Stock. All notes executed hereunder shall be payable at such
times and in such amounts and shall contain such other terms as shall be
specified by the Committee or its designee or stated in the option agreement;
provided, however, that such terms shall conform to requirements contained in
any applicable regulations which are issued by any governmental authority.
SECTION 7. STOCK APPRECIATION RIGHTS
(a) The Committee may grant to any Employee, Stock Appreciation Rights
in connection with any Stock Option. Stock Appreciation Rights may be granted at
the time the related Stock Option is granted or at any time thereafter up to six
months prior to the expiration of the related Stock Option.
(b) Stock Appreciation Rights shall be exercisable at such times and to
the extent that the related Stock Option shall be exercisable and only to the
extent the Stock Appreciation Right has a positive value, unless the Committee
specifies a more restrictive period.
(c) Upon the exercise of a Stock Appreciation Right, the Grantee shall
surrender the related Stock Option or a portion thereof and shall be entitled to
receive payment of an amount determined by multiplying the number of shares as
to which the Stock Option rights are surrendered by the difference obtained by
subtracting the exercise price per share of the related Stock Option from the
Fair Market Value of a share of Stock on the Date of Exercise of the Stock
Appreciation Right.
(d) Payment of the amount determined under Section 7(c) shall be made
in Stock, in cash, or partly in cash and partly in Stock as the Committee shall
determine in its sole discretion.
(e) Except as provided in Section 10(b), the exercise of a Stock
Appreciation Right for cash may be made only during the period beginning on the
third business day following the release of quarterly or annual financial data
and ending on the twelfth business day following such date.
SECTION 8. TERMINATION OF EMPLOYMENT
Except as otherwise provided by the Committee at the time the Stock
Option is granted or any amendment thereto, if a Grantee ceases to be an
Employee then:
(a) if termination of employment is voluntary or involuntary without
cause, the Grantee may exercise each Stock Option held by the Grantee within
three months after such termination (but not after the expiration date of the
Stock Option) to the extent of the number of shares subject to the Stock Option
which are purchasable pursuant to its terms at the date of termination;
(b) if termination is for cause, all Stock Options held by the
Grantee shall be canceled as of the date of termination;
(c) subject to the provisions of Section 8(d), if termination is (i) by
reason of retirement at a time when the Grantee is entitled to the current
receipt of benefits under any retirement plan maintained by the Company or any
Subsidiary, or (ii) by reason of disability, each Stock Option held by the
Grantee may be exercised by the Grantee at any time (but not after the
expiration date of the Stock Option) (within one year of termination in the case
of Incentive Stock Options) to the extent of the number of shares subject to the
Stock Option which were purchasable pursuant to its terms at the date of
termination;
(d) if termination is by reason of the death of the Grantee, or if the
Grantee dies after retirement or disability as referred to in Section 8(c), each
Stock Option held by the Grantee may be exercised by the Grantee's estate, or by
any person who acquires the right to exercise the Stock Option by reason of the
Grantee's death, at any time within a period of three years after death (but not
after the expiration date of the Stock Option) to the extent of the total number
of shares subject to the Stock Option which were purchasable pursuant to its
terms at the date of termination; or
(e) if the Grantee should die within three months after voluntary
termination of employment or involuntary termination without cause, as
contemplated in Section 8(a), each Stock Option held by the Grantee may be
exercised by the Grantee's estate, or by any person who acquires the right to
exercise by reason of the Grantee's death, at any time within a period of one
year after death (but not after the expiration date of the Stock Option) to the
extent of the number of shares subject to the Stock Option which were
purchasable pursuant to its terms at the date of termination.
SECTION 9. ADJUSTMENTS
In the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the corporate
structure or capitalization affecting the Stock, there shall be an appropriate
adjustment made by the Board in the number and kind of shares that may be
granted in the aggregate and to individual Employees under the Plan, the number
and kind of shares subject to each outstanding Stock Option and Stock
Appreciation Right and the option prices.
SECTION 10. TENDER OFFER; CHANGE IN CONTROL
(a) A Stock Option shall become immediately exercisable to the extent
of the total number of shares subject to the Stock Option in the event of (i) a
tender offer by a person or persons other than the Company for all or any part
of the outstanding Stock if, upon consummation of the purchases contemplated,
the offeror or offerors would own, beneficially or of record, an aggregate of
more than 25% of the outstanding Stock, or (ii) a Change in Control of the
Company.
(b) The Committee may authorize the payment of cash upon the exercise
of a Stock Appreciation Right during a period (i) beginning on the date on which
a tender offer as described in (a), above, is first published or sent or given
to holders of Stock and ending on the date which is seven days after its
termination or expiration, or (ii) beginning on the date on which a Change in
Control of the Company occurs and ending on the twelfth business day following
such date.
SECTION 11. GENERAL PROVISIONS
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with this Plan, as the
Committee shall approve.
(b) The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any right to be retained
in the employ of the Company or any Subsidiary or interfere in any way with the
right of the Company or such Subsidiary to terminate an Employee's employment at
any time.
(c) Notwithstanding any other provision of the Plan, the Company shall
not be required to issue or deliver any certificate or certificates for shares
of Stock under the Plan prior to fulfillment of all of the following conditions:
(i) The listing, or approval for listing upon notice of
issuance, of such shares on the New York Stock Exchange;
(ii) Any registration or other qualification of such shares
under any state or federal law or regulation, or the maintaining in effect of
any such registration or other qualification which the Committee may, in its
discretion upon the advice of counsel, deem necessary or advisable; and
(iii) The obtaining of any other consent, approval or permit
from any state or federal governmental agency which the Committee may, in its
discretion upon the advice of counsel, determine to be necessary or advisable.
(d) The Company shall have the right to deduct from any payment or
distribution under the Plan any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to take such
other action as may be necessary to satisfy all obligations for the payment of
such taxes. In case distributions are made in shares of Stock, the Company shall
have the right to retain the value of sufficient shares of Stock to equal the
amount of tax to be withheld for such distributions or require a recipient to
pay the Company for any such taxes required to be withheld on such terms and
conditions prescribed by the Committee.
(e) No Grantee shall have any of the rights of a shareholder by reason
of a Stock Option until it is exercised.
(f) This Plan shall be construed and enforced in accordance with the
laws of the State of Delaware (without regard to the legislative or judicial
conflict of laws rules of any state), except to the extent superseded by federal
law.
SECTION 12. AMENDMENT AND TERMINATION
(a) The Plan shall terminate on August 1, 2005 and no Stock Option
shall be granted hereunder after that date, provided that the Board may
terminate the Plan at any time prior thereto.
(b) The Board may amend the Plan at any time without notice, provided
however, that the Board may not, without prior approval by the shareholders, (i)
increase the maximum number of shares of Stock for which Stock Options may be
granted (except as contemplated by the provisions of Section 9), (ii) materially
increase the benefits accruing to participants under the Plan or (iii)
materially modify the requirements as to eligibility for participation in the
Plan.
(c) No termination or amendment of the Plan may, without the consent of
a Grantee to whom a Stock Option shall theretofore have been granted, adversely
affect the rights of such Grantee under such Stock Option.
SECTION 13. EFFECTIVE DATE AND SHAREHOLDERS' APPROVAL
The Plan shall become effective as of August 30, 1995 subject to its
approval by the affirmative votes of the holders of a majority of the securities
of the Company present, or represented, and entitled to vote thereon at the
Annual Meeting of Shareholders of the Company or any adjournment or postponement
thereof.
The Sherwood Group, Inc.
The undersigned hereby appoints Dennis Marino, James H. Lynch, Jr. and Stephen
J. DiLascio 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 21, 1997, 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 1 directors:
Dennis Marino
James H. Lynch, Jr.
Stephen J. DiLascio
(Instruction: To withhold authority to vote for any individual nominee, write
the nominee's name on the line provided below.)
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2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to decrease the number of authorized shares of the
Company's capital stock from 101,000,000 to 51,000,000 shares and to
eliminate provisions related to the Class A Common Stock.
/ / For or / / Against or / / Abstain
3. Approval of amendments to The Sherwood Group, Inc. 1995 Stock Option
Plan.
/ / For or / / Against or / / Abstain
4. Approval of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending May 31, 1998.
/ / 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 2, 1997 and Annual Report
to Stockholders is hereby acknowledged:
Date:___________________________________, 1997
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(Signatures)
(Please sign exactly as your names appear hereon,
indicating, where proper, official position or
representative capacity.)
1 Underscored language represents new language added to Article 4 and language
which is lined out is to be removed from Article 4.
