<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Southwest Securities Group, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Preliminary Copy
----------------
SOUTHWEST SECURITIES
GROUP, INC.
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
<PAGE>
September 26, 1996
Dear Stockholder:
The 1996 Annual Meeting of Stockholders of Southwest Securities Group, Inc. will
be held at the Cityplace Conference Center, 2711 N. Haskell, Dallas, Texas on
Wednesday, November 6, 1996, at 11:00 a.m. local time.
The enclosed material includes the Notice of Annual Meeting and Proxy Statement
which describes the business to be transacted at the meeting.
We will be reporting on your Company's activities, and you will have an
opportunity to ask questions about its operations.
We hope you are planning to attend the Annual Meeting personally, and we look
forward to seeing you. It is important that your shares be represented at the
meeting whether or not you are able to attend in person. Accordingly, the
return of the enclosed proxy as soon as possible will be greatly appreciated and
will ensure your shares are represented at the Annual Meeting. If you do attend
the Annual Meeting, you may, of course, withdraw your proxy should you wish to
vote in person.
The Company cordially invites you and your fellow stockholders to a luncheon
following the meeting. To help us prepare properly for your attendance, we ask
that you R.S.V.P. by checking the appropriate box on your proxy. On behalf of
the Board of Directors and management of Southwest Securities Group, Inc., we
would like to thank you for your continued support and confidence.
Sincerely yours,
Don A. Buchholz David Glatstein
Chairman of the Board President and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 6, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Southwest
Securities Group, Inc. (the "Company") will be held at the Cityplace Conference
Center, 2711 N. Haskell, Dallas, Texas, on Wednesday, November 6, 1996, at 11:00
a.m. local time for the following purposes.
1. To elect Directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected and qualified;
2. To consider and vote upon a proposal to approve the Company's Stock
Option Plan;
3. To consider and vote upon a proposal to approve the Company's Phantom
Stock Plan;
4. To consider and vote upon a proposal to approve an amendment to the
Company's Certificate of Incorporation that would increase the
authorized number of shares of Common Stock from 10,000,000 to
20,000,000; and
5. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
Holders of the Company's Common Stock of record as of the close of business on
September 16, 1996 are entitled to receive notice of and to vote at the Annual
Meeting and any adjournments thereof.
It is important that your shares be represented at the Annual Meeting. For that
reason, we ask that you promptly sign, date and mail the enclosed proxy in the
return envelope provided. Stockholders who attend the Annual Meeting may revoke
their proxies and vote in person. To help us prepare properly for your
attendance at the Annual Meeting, we ask that you indicate on your proxy whether
you plan to attend and whether you will join us for the luncheon following the
meeting.
By Order of the Board of Directors,
Barbara A. Hart
Secretary
Dallas, Texas
September 26, 1996
<PAGE>
SOUTHWEST SECURITIES GROUP, INC.
1201 ELM STREET, SUITE 3500
DALLAS, TEXAS 75270
---------------------------
PROXY STATEMENT
---------------------------
ANNUAL MEETING OF STOCKHOLDERS, NOVEMBER 6, 1996
- - --------------------------------------------------------------------------------
This Proxy Statement and the accompanying Notice of Annual Meeting and proxy are
being furnished to the stockholders of Southwest Securities Group, Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board") for use at the 1996 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at the Cityplace
Conference Center, 2711 N. Haskell, Dallas, Texas on Wednesday, November 6,
1996, at 11:00 a.m. local time, and any adjournments thereof. These proxy
materials are being mailed on or about September 26, 1996 to holders of record
on September 16, 1996 of the Company's Common Stock.
A proxy may be revoked by a stockholder prior to its exercise by written notice
to the Secretary of the Company, by submission of another proxy bearing a later
date, or by voting in person at the Annual Meeting. Such notice or later proxy
will not affect a vote on any matter taken prior to the receipt thereof by the
Secretary of the Company. The mere presence at the Annual Meeting of the
stockholder appointing the proxy will not revoke the appointment. If not
revoked, the proxy will be voted at the Annual Meeting in accordance with the
instructions indicated on the proxy by the stockholder, or, if no instructions
are indicated, will be voted FOR the slate of directors and each other matter of
business described herein; and, as to any other matter of business that may
properly be brought before the Annual Meeting, in accordance with the judgment
of the person or persons voting the same.
All expenses of the Company in connection with this solicitation will be borne
by the Company. In addition to solicitation by mail, proxies may be solicited
by directors, officers and other employees of the Company, by telephone,
telegraph, FAX, telex, in person or otherwise, without additional compensation.
The Company will also request brokerage firms, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners of the Company's
Common Stock and will reimburse those brokerage firms, nominees, custodians and
fiduciaries and the Company's transfer agent for their reasonable out-of-pocket
expenses in forwarding such materials.
THE COMPANY
The Company is a Dallas-based holding company providing securities transaction
processing, securities brokerage and investment banking services to brokers,
dealers, corporations, municipalities and individuals across the country through
its wholly owned subsidiaries.
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VOTING SECURITIES
Holders of record at the close of business on September 16, 1996 of the
Company's Common Stock, par value $0.10 per share ("Common Stock"), are entitled
to notice of and to vote at the Annual Meeting and any adjournments thereof.
Each outstanding share of Common Stock entitles the holder thereof to one vote.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of such shares shall constitute a quorum. Abstentions and broker
nonvotes are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions are counted in tabulations
of the votes cast on proposals presented to stockholders to determine the total
number of votes cast. Abstentions are not counted as votes for or against any
such proposals. Broker nonvotes are not counted as votes cast for purposes of
determining whether a proposal has been approved. The Company's Certificate of
Incorporation does not provide for cumulative voting. Assuming the presence of
a quorum at the Annual Meeting, the affirmative vote of a plurality of the votes
cast by holders of Common Stock is required for the election of directors. All
other matters will be determined by a majority of the votes cast.
On September 16, 1996, 8,783,630 shares of Common Stock were outstanding.
ELECTION OF DIRECTORS
The Board has nominated and recommends the election of each of the nominees set
forth below in the table under the caption "Nominees for Directors" as a
director of the Company to serve until the next Annual Meeting of Stockholders
or until a successor is duly elected and qualified. Each nominee is currently
serving as a director of the Company.
Should any nominee become unable or unwilling to accept nomination or election,
it is intended that the person named in the enclosed proxy will vote the shares
that they represent for the election of a nominee designated by the Board,
unless the Board reduces the number of directors to eliminate the vacancy. At
present, it is not anticipated that any nominee will not be a candidate.
NOMINEES FOR DIRECTORS
DON A. BUCHHOLZ (67)/1,3/
A founder of the Company. Director and Chairman of the Board since August 1991;
Chief Executive Officer of the Company from 1984 until July 1994; Chairman of
the Board of Southwest Securities, Inc., the Company's principal subsidiary
("Southwest"), since August 1993; President of the Company from 1984 until
August 1991; Associated with Southwest in various executive capacities since
its inception in 1972. Past director of the Securities Industry Association
(the "SIA"); past Chairman of the Executive Committee of the South Central
District
2
<PAGE>
of the SIA; past member of the Boards of Governors of the New York
Stock Exchange (the "NYSE") and the National Association of Securities Dealers
(the "NASD"); past President and director of the Texas Stock and Bond Dealers
Association (the "TSBDA").
RAYMOND E. WOOLDRIDGE (57)/1/
Chief Executive Officer of the Company from July 1994 until May 1996; President
and Chief Operating Officer of the Company from August 1991 until July 1994;
director of the Company since 1986; Vice Chairman of the Board since May 1996;
Chief Executive Officer of Southwest since August 1993. Vice Chairman of the
Board of Governors of the NASD; member of the Regional Firms Advisory Committee
of the NYSE; President and director of the TSBDA; past Chairman of the Board of
Directors of National Securities Clearing Corporation, a national clearing
agency registered with the Securities and Exchange Commission (the "SEC"); past
director of the SIA.
DAVID GLATSTEIN (47)/1/
Chief Executive Officer of the Company since May 1996; President and director of
the Company and President of Southwest since May 1995; President of Barre &
Company Incorporated from its founding in 1980 until its acquisition by
Southwest in 1995; First Vice President of the Securities Division of Lehman
Brothers Kuhn Loeb, Inc. 1978-1980; securities broker with White, Weld &
Company, Inc. 1973-1978. Past member of the District 6 Business Conduct
Committee of the NASD (Chairman in 1992); member of the SIA and the TSBDA.
SUSAN M. BYRNE (50)
President and Chief Executive Officer of Westwood Management Corporation, a
professional money management firm with offices in Dallas and New York, which
was acquired by the Company in June 1993.
ALLEN B. COBB (68)
A founder of the Company. Director of the Company since 1984; Vice Chairman of
the Board since August 1991; Chairman of the Board from 1984 to August 1991;
associated with Southwest in various executive capacities since its inception in
1972.
J. JAN COLLMER (61) /2,3,4/
Founder and President of Collmer Semiconductor, Inc., an importer, marketer and
manufacturer of industrial electronic components and systems since 1979. Prior
to founding Collmer Semiconductor, served in various engineering and executive
positions with Varo, Inc., a defense electronics firm. Currently serves on the
NASD Arbitration Panel.
FREDERICK R. MEYER (68)/2,3,4/
Chairman of the Board of Aladdin Industries, Inc., a diversified company
principally engaged in the manufacture of children's lunch kits, thermosware,
insulated food delivery systems and related products, since 1985; President from
1987 to 1994; President and Chief Operating Officer of Tyler Corporation, a
diversified manufacturing corporation, from 1983 to 1986; Consultant to
3
<PAGE>
Tyler Corporation from 1986 to 1989. Currently a director of Tyler Corporation,
Arvin Industries, Inc. and Palm Harbor Homes, Inc.
JON L. MOSLE, JR. (67)/2,3,4/
Director of Private Capital Management for Ameritrust Texas Corporation from
1984-1992. From 1954 to 1984, affiliated with Rotan Mosle, Inc., a regional
NYSE member firm, which was acquired by PaineWebber Incorporated in 1983.
Experience at Rotan Mosle included supervisory responsibility for both over-the-
counter trading and municipal departments, as well as participating in corporate
finance activities. Served as Branch Manager, Regional Manager, Vice Chairman
of the Board and member of Rotan Mosle's Operating Committee. Currently a
director of Wiser Oil and Aquila Gas Pipeline, an Associate Director of First
National Bank of Park Cities Texas and an Advisory Director of Trust Company of
Texas.
- - ---------------------
/1/ Executive Committee
/2/ Audit Committee
/3/ Compensation Committee
/4/ Stock Option Committee
COMPENSATION OF DIRECTORS
Members of the Board who are not officers or employees of the Company receive a
fee of $1,500 per quarter plus $500 for each directors' meeting they attend.
Directors are reimbursed for expenses relating to attendance at meetings. In
August of 1995, outside directors Meyer, Mosle and Collmer were paid an
additional sum of $6,859, $6,859 and $5,415, respectively, due to the favorable
financial performance of the Company. See also "Approval of Proposal to Adopt
the Southwest Securities Group, Inc. Phantom Stock Plan".
ORGANIZATION OF THE BOARD OF DIRECTORS
The Executive Committee of the Board of Directors of the Company has the
authority, between meetings of the Board of Directors, to take all actions with
respect to the management of the Company's business that require action by the
Board of Directors, except with respect to certain specified matters that by law
must be approved by the entire Board.
The Audit Committee is responsible for (i) reviewing the scope of, and the fees
for, the annual audit, (ii) reviewing with the independent auditors the
corporate accounting practices and policies, (iii) reviewing with the
independent auditors their final report, (iv) reviewing with internal and
independent auditors overall accounting and financial controls, and (v) being
available to the independent auditors during the year for consultation purposes.
4
<PAGE>
The Compensation Committee determines the salaries of the executive officers of
the Company and its subsidiaries, assists in determining the salaries of other
personnel, and performs other similar functions.
The Company has no nominating committee; the entire Board of Directors is
responsible for selecting nominees for election as directors.
The Board of Directors held four meetings during fiscal year 1996. All of the
directors were present for at least three-quarters of the meetings. The Audit
Committee held one meeting during fiscal year 1996; all committee members were
present. The Compensation Committee held one meeting during fiscal year 1996;
all committee members were present.
STOCK OWNERSHIP OF PRINCIPAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial ownership
of the Company's Common Stock as of August 31, 1996 by (i) each person who is
known by the Company to own beneficially more than 5% of the Common Stock, (ii)
each director of the Company, (iii) each of the executive officers of the
Company named in the Summary Compensation Table included elsewhere herein, and
(iv) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned/1/ /2/ Number Percent
------------------------- ------ -------
<S> <C> <C>
Buchholz Arlington Banshares, a Limited Partnership/3/ 650,000 7.4%
1201 Elm St., Suite 3500, Dallas, TX 75270
Buchholz Investments, a Partnership /4/ 203,253 2.3%
1201 Elm St., Suite 3500, Dallas, TX 75270
Don A. Buchholz /5/ 56,800 *
1201 Elm St., Suite 3500, Dallas, TX 75270
Cobb Partners /6/ 460,800 5.2%
1201 Elm St., Suite 3500, Dallas, TX 75270
Allen B. Cobb /7/ 204,150 2.3%
1201 Elm St., Suite 3500, Dallas, TX 75270
Raymond E. Wooldridge /8/ 423,575 4.8%
1201 Elm St., Suite 3500, Dallas, TX 75270
David Glatstein /9/ 430,147 4.9%
1201 Elm St., Suite 3500, Dallas, TX 75270
Susan M. Byrne 172,468 2.0%
300 Crescent Ct., Suite 1320, Dallas, TX 75201
J. Jan Collmer /10/ 11,000 *
14368 Proton Rd., Dallas, TX 75244
William D. Felder 100,000 1.1%
1201 Elm St., Suite 3500, Dallas, TX 75270
W. Norman Thompson 1,300 *
1201 Elm St., Suite 3500, Dallas, TX 75270
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned/1/ /2/ Number Percent
------------------------- ------ -------
<S> <C> <C>
Richard H. Litton 29,411 *
1201 Elm St., Suite 3500, Dallas, TX 75270
Frederick R. Meyer 45,700 *
2121 San Jacinto St., Suite 895, LB-5, Dallas, TX 75201
Jon L. Mosle, Jr. 11,000 *
4809 Cole, Suite 145, Dallas, TX 75205
All directors and executive officers 2,799,604 31.9%
as a group (11 persons)
</TABLE>
- - --------------------
* Denotes less than 1% ownership
/1/ The rules of the SEC provide that, for the purposes hereof, a person is
considered the "beneficial owner" of shares with respect to which the
person, directly or indirectly, has or shares the voting or investment
power, irrespective of his economic interest in the shares. Unless
otherwise noted, each person identified possesses sole voting and
investment power over the shares listed, subject to community property
laws.
/2/ Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and officers, and
persons who beneficially own more than 10 percent of a registered class
of the Company's equity securities to file reports of ownership and
changes in ownership with the SEC and with the NASD. Directors, officers
and greater-than-ten percent beneficial owners are required by SEC rule
or regulation to furnish the Company with copies of all Section 16(a)
reports they file. Based solely on its review of copies of such reports
received by it, or written representations from certain reporting
persons that no such reports were required for those persons, the
Company believes that during fiscal year 1996 all filing requirements
applicable to its directors, officers and greater-than-ten percent
beneficial owners were complied with.
/3/ Buchholz Arlington Banshares, a Limited Partnership, is a limited
partnership, the partners of which are Don A. Buchholz and Don A.
Buchholz's wife and adult son and daughter. Pursuant to the terms of the
partnership agreement governing Buchholz Arlington Banshares, a Limited
Partnership, Don A. Buchholz is general partner and has sole investment
power. The partnership agreement further provides that any partner may
withdraw from the partnership only upon unanimous agreement of all the
partners. Excludes shares directly held by individual partners.
/4/ Buchholz Investments, a Partnership, is a general partnership, the
partners of which are Robert A. Buchholz, Don A. Buchholz and Don A.
Buchholz's wife and adult daughter. Pursuant to the terms of the
partnership agreement governing Buchholz Investments, a Partnership,
Robert A. Buchholz has sole voting and investment power with regard to
the shares owned by the partnership. The partnership agreement further
provides that any partner may withdraw from the partnership upon 30
days' notice and, unless the Partnership is liquidated, that partner
shall receive the value of his or her capital account. Excludes shares
directly held by individual partners.
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<PAGE>
/5/ Excludes shares held by Buchholz Arlington Banshares, a Limited
Partnership, and Buchholz Investments, a Partnership. Don A. Buchholz
and his wife have an aggregate economic interest of approximately 41% in
these partnerships. See Notes 3 and 4 above.
/6/ Cobb Partners is a general partnership, the partners of which are Allen
B. Cobb and his children. Mr. Cobb has sole voting and investment power
with regard to the shares owned by the partnership.
/7/ Excludes shares held by Cobb Partners.
/8/ Includes 9,135 shares held by an individual retirement account for the
benefit of Mr. Wooldridge's wife.
/9/ Includes 63,528 shares held by Mr. Glatstein as custodian for his two
minor children. Mr. Glatstein disclaims beneficial ownership of these
shares.
/10/ Includes 7,000 shares owned by Collmer Semiconductor which is 90% owned
by Mr. Collmer.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation during
each of the Company's last three fiscal years of each person serving as the
Chief Executive Officer during the last fiscal year and each of the other
executive officers.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- - -----------------------------------------------------------------------------------------------------------------------
FISCAL Other Re- Option Long- All
YEAR annual stricted s/ term other
NAME AND PRINCIPAL POSITION ENDED compen- stock SARs incen- compensa-
THE LAST SALARY ($) BONUS/1/($) sation awards (#) tive tion/2/
FRIDAY ($) ($) plan ($)
OF JUNE pay-outs
($)
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond E. Wooldridge 1996 250,008 293,201 - - - - 22,500
Vice Chairman of the Board 1995 249,818 214,846 - - - - 22,500
1994 225,797 210,711 45,066/3/ - - - 30,000
David Glatstein 1996 100,000 236,444/4/ - - - - 22,500
President and Chief 1995 18,909 21,570 - - - - -
Executive Officer
William D. Felder 1996 123,340 135,518 - - - - 22,500
Senior Executive Vice 1995 123,800 97,055 - - - - 22,500
President 1994 121,217 120,639 - - - - 22,466
W. Norman Thompson 1996 126,104 48,846 - - - - 16,008
Senior Executive Vice 1995 44,643 5,000 - - - - -
President and Chief
Information Officer
Richard H. Litton 1996 148,631 - - - - - 9,955
Senior Executive Vice
President
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- - -------------------
/1/ Includes the amount of contributions in excess of allowable qualified
plan contributions paid directly to the participant.
/2/ Consists of the Company's annual contributions to its Profit Sharing Plan
and Trust.
/3/ Includes $15,397 for club transfer fee.
/4/ Mr. Glatstein's bonus was derived as a percentage of fees and commissions
he directed to the Company.
8
<PAGE>
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
In fiscal 1996, executive compensation was determined by the Compensation
Committee (the "Committee") of the Board. The Committee is comprised of the
Chairman of the Board and three non-employee directors. The Chairman of the
Board serves as Chairman of the Committee. Decisions by the Committee are
reviewed by the Board. Pursuant to rules of the SEC designed to enhance
disclosure of companies' policies regarding executive compensation, the
following report is submitted by Messrs. Don Buchholz (Chairman), Jan Collmer,
Frederick Meyer and Jon Mosle in their capacity as members of the Committee
addressing the Company's compensation policies for fiscal 1996 in general and as
they affected executive officers, including Messrs. Wooldridge, Glatstein,
Felder, Thompson, and Litton, who were the Company's five key executive officers
in fiscal 1996.
GENERAL
The company's compensation program is designed to fairly compensate executives
for their performance and contribution to the Company as well as to provide
incentives which attract and retain the executives, instill a long-term
commitment to the Company, and develop pride and a sense of Company ownership,
all in a manner consistent with stockholder interests. Given these objectives,
the executive officers' compensation package includes three elements: base
salary, annual incentive compensation, and a profit sharing plan.
Base Salary. The base salaries of the Company's executive officers are set to be
competitive within the industry. They are reviewed annually and are adjusted in
light of the individual executive's performance.
Incentive Compensation. Incentive bonuses are routinely paid to those persons
making significant contributions to the Company. The Company maintains several
bonus pools, including the Management Incentive Compensation Program described
below, which are distributed among officers and employees by the Committee,
based upon such factors as gross commission, production, contribution to the net
income of the Company, new client development, contribution to Company
management, management of individual profit centers and demonstrated Company
leadership.
Profit Sharing. The Company makes contributions to a defined contribution profit
sharing plan to provide certain retirement benefits. The plan covers
substantially all employees of the Company, and contributions to the plan are
dependent upon the profitability of the Company.
MANAGEMENT INCENTIVE COMPENSATION PROGRAM
For the fiscal year ended June 28, 1996 certain key executives participated in
the Management Incentive Compensation Program. Under the program, which
expired June 30, 1996, incentive compensation was payable if the Company's
pretax return on beginning equity equaled or
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<PAGE>
exceeded 10%. The Management Incentive Fund was credited with 10% of the amount
by which pretax net income exceeded 10% of beginning equity. The incentive
compensation under the program could not exceed 100% of the aggregate base
compensation of the participants. The Fund was allocated based on the relative
base salaries for the participants as well as the participant's overall
contribution to the Company's performance for the fiscal year. The incentive
compensation under the program is payable to each recipient in four equal
installments in August of each of the succeeding four years after the end of the
applicable fiscal year. Each participant must be a full time employee of the
Company or one of its subsidiaries on the immediately preceding June 30 in order
to qualify for an installment (subject to certain exceptions relating to death
and retirement). The Management Incentive Compensation Program was terminated
effective June 30, 1996.
CHIEF EXECUTIVE OFFICERS' COMPENSATION
In keeping with the general compensation philosophy outlined above, Messrs.
Wooldridge's and Glatstein's base salaries were established to place greater
emphasis on incentive compensation while remaining competitive with others in
the Company's industry. The committee reviewed various indicators of the
Company's performance, compensation of the chief executives of other publicly
traded regional brokerage firms as well as subjective measures of Messrs.
Wooldridge's and Glatstein's individual performance to determine the bonus
portion of the annual compensation. Mr. Wooldridge was a participant in the
Management Incentive Compensation Plan outlined above, and, consequently, his
bonus was determined under the provisions of that plan. Mr. Glatstein did not
participate in the Management Incentive Compensation Plan for fiscal 1996. His
bonus was determined based on a percentage of the fees and commissions he
directed to the Company. Both executives were subject to the same profit sharing
plan as the other executive officers and employees outlined above. The committee
believes that the total compensation paid to Messrs. Wooldridge and Glatstein is
commensurate with the compensation paid to the chief executive officers of
corporations within the Company's peer group after adjustment to compensate for
differences in the size and business mix of the companies reviewed.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
Don A. Buchholz, Chairman
J. Jan Collmer
Frederick R. Meyer
Jon L. Mosle, Jr.
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder return
on its Common Stock for 56 months from the Company's initial public offering in
October of 1991 through its latest fiscal year-end in June 1996, with the
cumulative total return of the Wilshire 5000 Index and the Nasdaq Financial
Index over the same period. The graph depicts the results of investing $100 in
the Company's Common Stock on its initial public offering on October 11, 1991
and the Wilshire 5000 Index and the Nasdaq Financial Index on September 30,
1991, including reinvestment of dividends.
10
<PAGE>
[graph appears here]
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------
10/91 6/92 6/93 6/94 6/95 6/96
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Southwest Securities Group, Inc. 100 96 147 100 130 186
Wilshire 5000 100 107 124 126 157 198
Nasdaq Financial Index 100 128 168 189 217 282
</TABLE>
11
<PAGE>
APPROVAL OF PROPOSAL TO ADOPT THE
SOUTHWEST SECURITIES GROUP, INC.
STOCK OPTION PLAN
SUMMARY OF THE PLAN
On February 2, 1996, the Board of Directors of the Company adopted the
Stock Option Plan, pursuant to which options will automatically be granted to
eligible non-employee directors of the Company and may be granted to eligible
employees of the Company or its subsidiaries for the purchase of an aggregate
of 1,000,000 shares of Common Stock of the Company. All shares are available
for options to any one employee. The Board of Directors is submitting the
adoption of the Stock Option Plan to the stockholders for approval in order to
(i) comply with Section 422 of the Code and (ii) establish for officers and
directors of the Company an exemption from the provisions of Section 16(b) of
the Securities Exchange Act of 1934 for options acquired under the Stock
Option Plan. Section 16(b) provides for a recovery by the Company of profits
made by officers and directors on short term trading in shares of Common Stock
of the Company. If the adoption is approved by the Company's stockholders,
acquisition of options to purchase Common Stock of the Company under the Stock
Option Plan by officers and directors of the Company will be exempt, under the
Rules and Regulations of the Securities and Exchange Commission, from the
operation of Section 16(b). The following summary description of the Stock
Option Plan is qualified in its entirety by reference to the full text thereof
which is attached hereto as Exhibit A.
As of August 31, 1996, there were 639 employees and three non-employee
directors who were eligible for grants under the Stock Option Plan. No
options have been issued pursuant to the Stock Option Plan. Employees
eligible under the Stock Option Plan are those employees whose performance and
responsibilities are determined by the Company's Board of Directors or a
committee thereof to be influential to the Company's success. The Stock
Option Plan is administered by the Stock Option Committee, which determines,
in its discretion, the number of shares subject to each employee option
granted and the related purchase price and option period. The Stock Option
Committee may grant either nonqualified stock options or incentive stock
options ("ISOs"), as defined in the Internal Revenue Code of 1986, as amended
(the "Code").
Non-employee directors of the Company elected at the annual shareholders'
meeting will receive an automatically granted nonqualified option, effective
as of the date of each annual shareholders' meeting, to purchase 2,000 shares
of Common Stock of the Company. Each non-employee director of the Company who
is elected or appointed to the Board other than at the annual shareholders'
meeting and who has not, during the 24-month period preceding the date of his
election or appointment, served as a director of the Company will receive a
similar option, effective as of the date of his election or appointment.
These options become fully exercisable if the grantee remains a director for
six months following the date of grant. The option period for all options
issued to non-employee directors will begin on the date of the grant and will
end five years thereafter. However, such term may be reduced for reasons of
disloyalty. The exercise price for these options will be the closing price of
the Common Stock on the date of grant of the option. Each automatically
granted option will be to purchase 2,000 shares of
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Common Stock of the Company. Non-employee directors of the Company may elect
by written notice to the Company not to receive one or more automatically
granted options.
The Stock Option Plan requires that the purchase price under each ISO
must not be less than 100% of the fair market value of the Common Stock at the
date of grant of the option. The option period for any option may not be more
than ten years from the date the option is granted. No ISO, however, may be
granted to an employee who owns more than 10% of the total combined voting
power of all classes of outstanding stock of the Company or its subsidiaries
unless the option price is at least 110% of the fair market value of the
Common Stock at the date of grant and the option period does not exceed five
years. Employee options may be exercised in annual installments as specified
by the Stock Option Committee, and all installments that become exercisable
are cumulative and may be exercised at any time after they become exercisable
until expiration of the option.
There is no limit on the fair market value of ISOs or nonqualified stock
options that may be granted to an employee in any calendar year, except that
no employee may be granted ISOs that first become exercisable during a
calendar year for the purchase of stock with an aggregate fair market value
(determined as of the date of grant of each option) in excess of $100,000. An
ISO (or an installment thereof) counts against the annual limitation only in
the year it first becomes exercisable. Options are not assignable.
Full payment for shares purchased upon exercise of an option must be made
at the time of exercise, and no shares may be issued until full payment is
made. The Stock Option Plan provides that an option agreement may include a
provision permitting an optionee the right to tender previously owned shares
of Common Stock in partial or full payment for shares to be purchased on
exercise of an option. Unless sooner terminated by action of the Board of
Directors, the Stock Option Plan will terminate on February 1, 2006, and no
options may thereafter be granted under the Stock Option Plan. Except under
certain circumstances, the Stock Option Plan may be amended, altered or
discontinued by the Board of Directors without the approval of the
stockholders.
TAX STATUS OF STOCK OPTIONS
Pursuant to the Stock Option Plan, the Stock Option Committee may provide
for an option to qualify either as an ISO or as a nonqualified option.
ISOs. All stock options that qualify under the rules of Section 422 of
----
the Code will be entitled to ISO treatment. To receive ISO treatment, an
optionee must not dispose of the acquired stock within two years after the
option is granted or within one year after exercise. In addition, the
individual must have been an employee of the Company for the entire time from
the date of granting of the option until three months (one year if the
employee is disabled) before the date of the exercise. The requirement that
the individual be an employee and the two-year and one-year holding periods
are waived in the case of death of the employee. If all such requirements are
met, no tax will be imposed upon exercise of the option, and any gain upon
sale of the stock will be entitled to capital gain treatment. The employee's
gain on exercise (the
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excess of fair market value at the time of exercise over the exercise price)
of an ISO is a tax preference item and, accordingly, is included in the
computation of alternative minimum taxable income.
If an employee does not meet the two-year and one-year holding
requirement (a "disqualifying disposition"), but does meet all other
requirements, tax will be imposed at the time of sale of the stock. In such
event, the employee's gain on exercise will be treated as ordinary income
rather than capital gain, and the Company will get a corresponding deduction
at the time of sale. Any remaining gain on sale will be short-term or long-
term capital gain, depending on the holding period of the stock. If the
amount realized on the disqualifying disposition is less than the value at the
date of exercise, the amount includible in gross income, and the amount
deductible by the Company, will equal the excess of the amount realized on the
sale or exchange over the exercise price.
An optionee's stock option agreement may permit payment for stock upon
the exercise of an ISO to be made with other shares of the Company's Common
Stock. In such a case, in general, if an employee uses stock acquired
pursuant to the exercise of an ISO to acquire other stock in connection with
the exercise of an ISO, it may result in ordinary income if the stock so used
has not met the minimum statutory holding period necessary for favorable tax
treatment as an ISO.
Nonqualified Stock Options. In general, no taxable income will be
--------------------------
recognized by the optionee, and no deduction will be allowed to the Company,
upon the grant of an option. Upon exercise of a nonqualified option an
optionee will recognize ordinary income (and the Company will be entitled to a
corresponding tax deduction if applicable withholding requirements are
satisfied) in an amount equal to the amount by which the fair market value of
the shares on the exercise date exceeds the option price. Any gain or loss
realized by an optionee on disposition of such shares generally is a capital
gain or loss and does not result in any tax deduction to the Company.
The foregoing statements are based upon present federal income tax laws
and regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, are changed.
REQUIRED VOTE
The favorable vote of the holders of a majority of the shares of Common
Stock present and entitled to vote at the meeting in person or by proxy is
required to approve the adoption of the Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION OF
---
THE STOCK OPTION PLAN.
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APPROVAL OF PROPOSAL TO ADOPT THE
SOUTHWEST SECURITIES GROUP, INC.
PHANTOM STOCK PLAN
SUMMARY OF THE PLAN
On September 17, 1996, the Board of Directors adopted the Southwest
Securities Group, Inc. Phantom Stock Plan (the "Phantom Stock Plan"). The
Phantom Stock Plan is administered by a committee appointed by the Board from
time to time. Members of the Board of Directors of the Company who are not
employees of the Company or any subsidiary of the Company are eligible to
participate in the Phantom Stock Plan. Currently, three of the members of the
Board are eligible to participate in the Phantom Stock Plan. The Board of
Directors is submitting the adoption of the Phantom Stock Plan to the
stockholders for approval in order to establish for officers and directors of
the Company an exemption from the provisions of Section 16(b) of the
Securities Exchange Act of 1934 for phantom stock units acquired under the
Phantom Stock Plan. The following summary description of the Phantom Stock
Plan is qualified in its entirety by reference to the full text thereof which
is attached hereto as Exhibit B.
On or before December 31 of each year, each eligible participant must
elect by written notice to the committee what portion (which may be a
percentage or a specified dollar amount), if any, of his or her quarterly
director's fees, other director's fees, or both for the following calendar
year will be paid in the form of stock equivalent units. The number of units
shall be determined by dividing the dollar amount of director's fees that
would otherwise be paid to the participant by the reported last sales price
per share of the Common Stock of the Company: (i) for quarterly director's
fees, on the date of the regular quarterly Board meeting; and (ii) for other
director's fees, on the date of the Board meeting at which they are
authorized. For eligible directors who are first elected or appointed to the
Board during a particular calendar year, their written election for that year
must be made within 30 days after the commencement of their service as a
director, and the election will apply to fees received after the date of
election. Elections shall only apply to a single calendar year but shall be
irrevocable for that year. Participants shall be fully vested in their stock
equivalent units at all times until the units expire.
In the discretion of the committee, but in any event within 12 months
following the earlier of (i) the date the participant's service as a director
terminates (including when such service ends due to the death of the
participant) or (ii) the date of a change in control of the Company (as
defined in the Phantom Stock Plan), the Company shall cash out a participant.
For purposes of a participant's termination of service as a director, the
Company shall pay to the participant (or as otherwise provided in the
agreement between the Company and the participant) an amount equal to the
product of the number of stock equivalent units held by the participant
multiplied by the average of the last sales prices per share of the Common
Stock for the 90 days prior to the date of payment. For purposes of a change
in control, the Company shall pay to the participant (or as otherwise provided
in the agreement between the Company and the participant) an amount equal to
the product of the number of stock equivalent units held by the participant
multiplied by the highest price received by holders of the Common Stock in
connection with the change in control, as determined by the Board. If a
participant's service as a director terminates at the same time as a change in
control of the Company, the valuation of payments shall be made in the same
manner as if there was only a change in control of the Company.
15
<PAGE>
The Phantom Stock Plan may be amended or discontinued by the Board
without the approval of the stockholders of the Company. In the event of a
complete termination of the Phantom Stock Plan, the Board, in its sole
discretion, may direct the committee to cash out and distribute each
participant's stock equivalent units at such time and based on such stock
price as the Board shall determine, in its sole discretion.
REQUIRED VOTE
The favorable vote of the holders of a majority of the shares of Common
Stock present and entitled to vote at the meeting in person or by proxy is
required to approve the adoption of the Phantom Stock Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION OF
---
THE PHANTOM STOCK PLAN.
PROPOSAL TO AUTHORIZE ADDITIONAL SHARES OF COMMON STOCK
The Board of Directors has proposed the amendment of Article 4 of the
Restated Certificate of Incorporation of the Company to increase the number of
authorized shares of Common Stock from 10,000,000 shares to 20,000,000 shares.
The full text of Section A.1 of Article 4, as proposed, is as follows:
"SECTION A.1. Capitalization. The Corporation is authorized to issue
--------------
Twenty Million (20,000,000) shares of capital stock, all of which
shall be Common Stock, ten cents ($0.10) par value each ("Common
Stock")."
The Board of Directors believes that the proposed amendment is advisable
in order to make shares of Common Stock available, as needed, to meet
potential equity financing requirements of the Company, for use in connection
with possible acquisitions of other businesses, stock dividends and other
corporate purposes. The Company has no present arrangements, commitments,
plans or intentions with respect to the sale or issuance of any additional
shares of Common Stock.
If the proposed amendment is authorized, the additional shares of Common
Stock would be available for issuance at the Board of Directors' discretion
without the accompanying delay and the expense involved in further action by
stockholders, except as required by applicable laws or regulations.
Stockholders presently do not have preemptive or preferential rights to
receive or acquire any new shares issued by the Company. The additional
authorized shares of Common Stock could be issued to make any attempt to
change control of the Company more difficult if the Board of Directors were to
determine that such an attempt was not in the best interests of the Company.
For example, additional shares of Common Stock could be sold in private
placement transactions to persons, groups or entities who are considered by
the Board of Directors to support the policies of the current Board of
Directors, thereby diluting the voting strength of any
16
<PAGE>
person or entity seeking to obtain control of the Company. Issuance of
additional shares of Common Stock would also have the effect of diluting the
percentage voting power of existing stockholders and, depending on the
consideration for which the shares were issued, could dilute earnings per
share.
REQUIRED VOTE
The favorable vote of the holders of a majority of the shares of Common
Stock is required to approve the amendment to Article 4 of the Certificate of
Incorporation of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE INCREASE
---
IN AUTHORIZED SHARES OF COMMON STOCK CONTAINED IN THE PROPOSED AMENDMENT TO
ARTICLE 4 OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as independent auditors of the Company and its
subsidiaries for fiscal year 1996 and has been selected by the Board to
continue in such capacity for fiscal year 1997. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting. They will have
the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
OTHER MATTERS
At the date of this Proxy Statement, the Company has no knowledge of any
business other than that described above that will be presented at the Annual
Meeting. If any other business should come before the Annual Meeting, it is
intended that the persons named in the enclosed proxy will have discretionary
authority to vote the shares that they represent.
Any stockholder who wishes to submit a proposal for inclusion in the proxy
materials to be distributed by the Company in connection with its Annual
Meeting of Stockholders to be held in 1997 must do so not later than May 29,
1997. To be eligible for inclusion in the 1997 proxy materials of the
Company, proposals must conform to the requirements set forth in Regulation
14A under the Exchange Act.
UPON THE RECEIPT OF A WRITTEN REQUEST FROM ANY STOCKHOLDER, THE COMPANY WILL
MAIL, AT NO CHARGE TO THE STOCKHOLDER, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES REQUIRED TO BE
FILED WITH THE SEC PURSUANT TO RULE 13A-1 UNDER THE EXCHANGE ACT, FOR THE
COMPANY'S MOST RECENT FISCAL YEAR. WRITTEN REQUESTS FOR THE COMPANY'S ANNUAL
REPORT ON FORM 10-K SHOULD BE DIRECTED TO:
JAMES R. BOWMAN, VICE PRESIDENT
SOUTHWEST SECURITIES GROUP, INC.
1201 ELM STREET, SUITE 3500
DALLAS, TEXAS 75270
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<PAGE>
You are urged to sign and return your proxy promptly in the enclosed envelope
to make certain your shares will be voted at the Annual Meeting.
By Order of the Board of Directors,
Barbara A. Hart
Secretary
September 26, 1996
18
<PAGE>
Exhibit A
SOUTHWEST SECURITIES GROUP, INC.
STOCK OPTION PLAN
INTRODUCTION
On February 2, 1996, the Board of Directors of the Company adopted the
following Stock Option Plan:
1. PURPOSE. The purpose of the Plan is to provide employees and non-
employee directors with a proprietary interest in the Company through the
granting of Incentive Options and Nonqualified Options which will:
(a) increase the interest of the employees and non-employee directors
in the Company's welfare;
(b) furnish an incentive to the employees and non-employee directors
to continue their services for the Company; and
(c) provide a means through which the Company may attract able persons
to enter its employ or serve on its Board.
2. ADMINISTRATION. The Plan shall be administered by the Committee.
3. PARTICIPANTS. The Committee shall, from time to time, select the
particular employees of the Company and its Subsidiaries to whom options are to
be granted, and who will, upon such grant, become participants in the Plan. The
individuals eligible for selection by the Committee shall be those employees
whose performance and responsibilities are determined by the Committee to be
influential to the success of the Company. Additionally, non-employee directors
of the Company will automatically become participants in the Plan commencing
with their service as non-employee directors and will be granted options as
provided in Section 7.
<PAGE>
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be granted to an
employee who owns more than 10% of the voting power of all classes of stock of
the Company or its Parent or Subsidiaries. This limitation will not apply if
the option price is at least 110% of the fair market value of the stock at the
time the Incentive Option is granted and the Incentive Option is not exercisable
more than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. Options may not be granted pursuant to the
terms of the Plan for more than 1,000,000 shares of Common Stock of the Company,
but this number shall be adjusted to reflect, if deemed appropriate by the
Committee, any stock dividend, stock split, share combination, recapitalization
or the like, of or by the Company. Shares to be optioned and sold may be made
available from either authorized but unissued Common Stock or Common Stock held
by the Company in its treasury. Shares that by reason of the expiration of an
option or otherwise are no longer subject to purchase pursuant to an option
granted under the Plan may be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value (determined at
the time of grant) of the shares of Common Stock which any employee is first
eligible to purchase in any calendar year by exercise of Incentive Options
granted under this Plan and all incentive stock option plans of the Company or
any Parent or Subsidiaries shall not exceed $100,000. For this purpose, the
fair market value (determined at the respective date of grant of each option) of
the stock purchasable by exercise of an Incentive Option (or an installment
thereof) shall be counted against the $100,000 annual limitation for an employee
only for the calendar year such stock is first purchasable under the terms of
the option.
7. ALLOTMENT OF SHARES. Grants of options under the Plan shall be
described in this Section 7 of the Plan provided that the grant of an option to
an employee or non-employee director shall not be deemed either to entitle the
employee or non-employee director to, or to
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<PAGE>
disqualify the employee or non-employee director from, participation in any
other grant of options under the Plan.
(a) The Committee shall determine the number of shares of Common Stock
to be offered from time to time by grant of options to employees
of the Company or its Subsidiaries.
(b) Each non-employee director of the Company elected at the annual
shareholders meeting shall be granted an option, effective as of
the date of the annual shareholders' meeting (the "Annual Grant
Date"), to purchase 2,000 shares of Common Stock of the Company.
This Section 7(b) shall not apply to a director whose Initial
Grant Date (see below) is on the same date as the Annual Grant
Date.
(c) Each non-employee director of the Company who has not, during the
24-month period preceding the date of his election or appointment
to the Board, served as a director of the Company shall be granted
an option, effective as of the date of his election or appointment
to the Board (the "Initial Grant Date"), to purchase 2,000 shares
of Common Stock of the Company.
(d) Non-employee directors may elect by written notice to the Company
not to receive one or more option grants hereunder, by so electing
on or before the Initial Grant Date, or at least six months in
advance of the Annual Grant Date (unless the non-employee director
was elected or appointed less than six months in advance of the
Annual Grant Date, in which case he may then so elect on or before
the Initial Grant Date), whichever is applicable, of the option.
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<PAGE>
8. GRANT OF OPTIONS. The maximum number of shares that may be granted
under the Plan in accordance with Section 6 of the Plan may be granted to any
one employee. All options granted under the Plan to non-employee directors
shall be nonqualified options and shall be automatically granted as provided in
Section 7 of the Plan. The Committee is authorized to grant Incentive Options
and Nonqualified Options under the Plan only to employees. The grant of options
shall be evidenced by stock option agreements containing such terms and
provisions as are approved by the Committee but not inconsistent with the Plan,
including provisions that may be necessary to assure that any option that is
intended to be an Incentive Option will comply with Section 422 of the Internal
Revenue Code of 1986, as amended. Stock option agreements may provide that an
option holder may request approval from the Committee to exercise an option or a
portion thereof by tendering shares of Common Stock of the Company at the fair
market value per share on the date of exercise in lieu of cash payment of the
exercise price. Moreover, stock option agreements for Nonqualified Options for
employees may provide that the option holder may request approval from the
Committee to pay any withholding associated with the Nonqualified Option by
tendering shares of Common Stock of the Company at the fair market value per
share on the date of exercise. The Company shall execute stock option
agreements upon instructions from the Committee. The Plan shall be submitted to
the Company's shareholders for approval. The Committee may grant options, and
automatic grants may occur, under the Plan prior to the time of shareholder
approval, which options will be effective when granted, but if for any reason
the shareholders of the Company do not approve the Plan prior to one year from
the date of adoption of the Plan by the Board, all options granted under the
Plan will be terminated and of no effect, and no option may be exercised in
whole or in part prior to such shareholder approval.
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<PAGE>
9. OPTION PRICE. The option price for an Incentive Option shall not be
less than 100% of the fair market value per share of the Common Stock on the
date the option is granted. The Committee shall determine the fair market value
of the Common Stock on the date of grant and shall set forth the determination
in its minutes, using any reasonable valuation method.
10. OPTION PERIOD. The Option Period for options granted to employees will
begin on the date the option is granted, which will be the date the Committee
authorizes the option unless the Committee specifies a later date. The Option
Period for all options issued to non-employee directors will begin on the date
of the grant and will end five years thereafter. Moreover, options granted to
non-employee directors, which are exercisable, shall not terminate due to a non-
employee director's termination of service as a non-employee director unless
such termination is for reasons of dishonesty, whether in the course of his
service on the Board or otherwise, or for assisting a competitor without
permission, or for interfering with the Company's relationship with a customer,
or for any similar action or willful breach of duty to the Company. No other
option may terminate later than ten years from the date the option is granted.
The Committee may provide for the exercise of options for employees in
installments and upon such terms, conditions and restrictions as it may
determine. The Committee may provide for termination of an option for employees
in the case of termination of employment or any other reason.
11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant dies or
becomes disabled [within the meaning of Section 22(e)(3) of the Internal Revenue
Code] prior to termination of his right to exercise an option in accordance with
the provisions of his stock option agreement without having totally exercised
the option, the option agreement may provide that it may be exercised, to the
extent of the shares with respect to which the option could have been exercised
by the participant on the date of the participant's death or disability, (i) in
the case
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<PAGE>
of death, by the participant's estate or by the person who acquired the right to
exercise the option by bequest or inheritance or by reason of the death of the
participant, or (ii) in the case of disability, by the participant or his
personal representative, provided the option is exercised prior to the date of
its expiration or 180 days from the date of the participant's death or
disability, whichever first occurs. The date of disability of a participant
shall be determined by the Committee.
12. PAYMENT. Full payment for shares purchased upon exercising an option
shall be made in cash or by check or, if allowed by the stock option agreement
and approved by the Committee, by tendering shares of Common Stock at the fair
market value per share at the time of exercise. Likewise, any withholding
associated with a Nonqualified Option may, if allowed by the stock option
agreement and approved by the Committee, be paid by tendering shares of Common
Stock at the fair market value per share at the time of exercise. No shares may
be issued until full payment of the purchase price therefor has been made, and a
participant will have none of the rights of a shareholder until shares are
issued to him.
13. EXERCISE OF OPTION. Options granted under the Plan may be exercised
during the Option Period, at such times, in such amounts, in accordance with
such terms and subject to such restrictions as are set forth below. In no event
may an option be exercised or shares be issued pursuant to an option if any
requisite action, approval or consent of any governmental authority of any kind
having jurisdiction over the exercise of options shall not have been taken or
secured. An option granted to a non-employee director shall be 100% exercisable
at any time on or after six months following the date of grant provided that the
grantee is still a non-employee director six months following the date of grant.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares of
Common Stock covered by each outstanding option granted under the Plan and the
option
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<PAGE>
price shall be adjusted to reflect, as deemed appropriate by the Committee, any
stock dividend, stock split, share combination, exchange of shares,
recapitalization, merger, consolidation, separation, reorganization, liquidation
or the like, of or by the Company.
15. NON-ASSIGNABILITY. Options may not be transferred other than by will
or by the laws of descent and distribution. During a participant's lifetime,
options granted to a participant may be exercised only by the participant or as
provided in section 11 hereof.
16. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe such rules and regulations in connection with the operation of the
Plan as it determines to be advisable for the administration of the Plan. The
Committee may rescind and amend its rules and regulations.
17. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued
by the Board without the approval of the shareholders of the Company, except
that any amendment that would (1) materially increase the number of securities
that may be issued under the Plan, or (2) materially modify the requirements of
eligibility for participation in the Plan must be approved by the shareholders
of the Company.
18. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any employee or non-employee
director any right to be granted an option to purchase Common Stock of the
Company or any other rights except as may be evidenced by the stock option
agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company and then only to the extent and on the terms
and conditions expressly set forth therein.
19. TERM. Unless sooner terminated by action of the Board, this Plan will
terminate on February 1, 2006. The Committee may not grant options under the
Plan after that date, but options granted before that date will continue to be
effective in accordance with their terms.
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<PAGE>
20. DEFINITIONS. For the purpose of this Plan, unless the context requires
otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the committee of the Board appointed by the
Board to administer the Plan, or in the absence of such a
committee, shall mean the entire Board.
(c) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized
to issue (as long as the common stock varies from that currently
authorized, if at all, only in amount of par value).
(d) "Company" means Southwest Securities Group, Inc., a Delaware
corporation.
(e) "Incentive Option" means an option granted under the Plan which
meets the requirements of Section 422 of the Internal Revenue Code
of 1986, as amended.
(f) "Nonqualified Option" means an option granted under the Plan which
is not intended to be an Incentive Option.
(g) "Option Period" means the period during which an option may be
exercised.
(h) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company if, at the time of granting
of the option, each of the corporations other than the Company
owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in
the chain.
(i) "Plan" means this Stock Option Plan, as amended from time to time.
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<PAGE>
(j) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of the option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of stock
in one of the other corporations in the chain, and "Subsidiaries"
means more than one of any such corporations.
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<PAGE>
EXHIBIT B
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SOUTHWEST SECURITIES GROUP, INC.
PHANTOM STOCK PLAN
INTRODUCTION
On _________________________________, 1996, the Board of Directors of
Southwest Securities Group, Inc. adopted the following Phantom Stock Plan.
1. PURPOSE. The purpose of the Plan is to provide non-employee directors
of the Company with a phantom stock interest in the Company through the granting
of stock equivalent units which will:
(a) increase their interest in the Company's welfare;
(b) furnish them an incentive to continue their services for the
Company; and
(c) provide a means through which the Company may attract able persons
to serve on the Board of Directors.
2. ADMINISTRATION. The Plan will be administered by a Committee
appointed by the Board from time to time.
3. PARTICIPANTS. Members of the Board of Directors of the Company who
are not employees of the Company or any subsidiary of the Company
("Participants") are eligible to participate in the Plan.
4. GRANT OF STOCK EQUIVALENT UNITS. On or before December 31 of each
year, each eligible Participant must elect by written notice to the Committee
what portion (which may be a percentage or a specified dollar amount), if any,
of his quarterly director's fees, other director's fees, or both for the
following calendar year will be paid in the form of stock equivalent units. The
number of units shall be determined by dividing the dollar amount of director's
fees that would otherwise be paid to the Participant by the reported last sales
price per
<PAGE>
share of the Common Stock of the Company:
(a) for quarterly director's fees, on the date of the regular
quarterly Board meeting; and
(b) for other director's fees, on the date of the Board meeting at
which they are authorized.
For eligible directors who are first elected or appointed to the Board
during a particular calendar year, their written election for that year must be
made within 30 days after the commencement of their service as a director, and
the election will apply to fees received after the date of election.
For the year 1996, eligible directors must elect in writing on or before
______________, 1996 with respect to fees received after the date of election.
Elections shall only apply to a single calendar year but shall be
irrevocable for that year. Participants shall be fully vested in their stock
equivalent units at all times until the units expire.
All grants of stock equivalent units under the Plan shall be made by the
Committee. Each grant of stock equivalent units under the Plan shall be
evidenced by resolution of the Committee, but such resolution may not be
inconsistent with the Plan. Each grant of stock equivalent units shall also be
evidenced by an agreement (the "Agreement") between the Company and the
Participant containing such terms and provisions as are approved by the
Committee but not inconsistent with the Plan. The Company shall execute each
Agreement upon instructions from the Committee.
5. CASH OUT OF STOCK EQUIVALENT UNITS. In the discretion of the
Committee, but in any event within 12 months following the earlier of (i) the
date the Participant's service as a director terminates (including when such
service ends due to the death of the Participant) or (ii) the date of a change
in control of the Company, the Company shall cash out a Participant. For these
purposes a change in control means the sale by the
<PAGE>
Company of all or substantially all of its assets to any individual,
partnership, firm, trust, corporation or other similar entity or the
consolidation or merger of the Company with an entity as a result of which
transaction the Company is not the surviving entity. For purposes of a
Participant's termination of service as a director, the Company shall pay to the
Participant (or as otherwise provided in the Agreement between the Company and
the Participant) an amount equal to the product of the number of stock
equivalent units held by the Participant multiplied by the average of the last
sales prices per share of the Common Stock for the 90 days prior to the date of
payment. For purposes of a change in control, the Company shall pay to the
Participant (or as otherwise provided in the Agreement between the Company and
the Participant) an amount equal to the product of the number of stock
equivalent units held by the Participant multiplied by the highest price
received by holders of the Common Stock in connection with the change in control
as determined by the Board of Directors of the Company. If a Participant's
service as a director terminates at the same time as a change in control of the
Company, the valuation of payments shall be made in the same manner as if there
was only a change in control of the Company.
6. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of stock
equivalent units covered by each outstanding grant under the Plan may be
adjusted to reflect, as deemed appropriate by the Committee in its sole
discretion, any stock dividend, stock split, share combination, exchange of
shares, recapitalization, merger, consolidation, separation, reorganization,
liquidation or the like, of or by the Company. Amounts shall be accrued for any
cash dividends paid on the Common Stock, and the Committee may, in its sole
discretion, make any adjustments it deems appropriate in the case of other
distributions made to holders of Common Stock.
7. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe
<PAGE>
such rules and regulations in connection with the operation of the Plan as it
determines to be advisable for the administration of the Plan. The Committee may
rescind and amend its rules and regulations.
8. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued
by the Board without the approval of the stockholders of the Company. In the
event of a complete termination of the Plan, the Board, in its sole discretion,
may direct the Committee to cash out and distribute each Participant's stock
equivalent units at such time and based on such stock price as the Board shall
determine, in its sole discretion.
9. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of
the Committee or the Board shall be deemed to give any Participant any right to
be granted stock equivalent units or any other rights. Nothing in this Plan
shall be construed as conferring upon any Participant the right to continue as a
director.
10. APPLICABLE LAW. This Plan shall be construed in accordance with and
governed by the laws of the State of Texas.
11. DEFINITIONS. For the purpose of this Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated below:
(a) "Plan" means this Phantom Stock Plan, as amended from time to
time.
(b) "Company" means Southwest Securities Group, Inc., a Delaware
corporation.
(c) "Board" means the board of directors of the Company.
(d) "Committee" means the committee appointed to administer the Plan
consisting of the individuals designated by the Board pursuant to
Section 2 of this Plan.
(e) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized
to issue (as long as the common stock varies from that currently
authorized, if at all, only in amount of par value).
<PAGE>
Preliminary Copy
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SOUTHWEST SECURITIES GROUP, INC. ANNUAL MEETING PROXY NO. SHARES
NOVEMBER 6, 1996 IN YOUR NAME
The undersigned hereby (1) acknowledges receipt of the Notice of the Annual
Meeting of Stockholders of Southwest Securities Group, Inc. (herein sometimes
called the "Company") to be held on Wednesday, November 6, 1996, at 11:00 a.m.
Dallas time; and (2) appoints Don A. Buchholz and Raymond E. Wooldridge, and
each of them, with full power of substitution or revocation, his proxies to vote
upon and act with respect to all of the shares of Common Stock of the Company
standing in the name of the undersigned or with respect to which the undersigned
is entitled to vote and act, at the Annual Meeting and at any adjournment
thereof, and the undersigned directs that this proxy be voted as shown on the
reverse side of this card.
This Proxy must be dated and signed exactly as shown hereon.
Dated: , 1996
-----------------------------------
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(Sign Here)
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(Print Name and Title, if applicable)
When signing as an attorney, administrator, executor,
guardian or trustee, please add your title as such. If
executed by a corporation, this Proxy should be signed
by a duly authorized officer.
<PAGE>
SOUTHWEST SECURITIES GROUP, INC. ANNUAL MEETING CONTINUED FROM OTHER SIDE
NOVEMBER 6, 1996
This Proxy when properly executed will be voted in the manner described herein
by the above signed stockholder.
1. The election of the following persons to serve on the Board of Directors:
Don A. Buchholz [ ] For [ ] Withhold Authority
Raymond E. Wooldridge [ ] For [ ] Withhold Authority
David Glatstein [ ] For [ ] Withhold Authority
Susan M. Byrne [ ] For [ ] Withhold Authority
Allen B. Cobb [ ] For [ ] Withhold Authority
J. Jan Collmer [ ] For [ ] Withhold Authority
Frederick R. Meyer [ ] For [ ] Withhold Authority
Jon L. Mosle, Jr. [ ] For [ ] Withhold Authority
2. Proposal to approve the Company's Stock Option Plan.
[ ] For [ ] Against [ ] Abstain
3. Proposal to approve the Company's Phantom Stock Plan.
[ ] For [ ] Against [ ] Abstain
4. Proposal to amend the Company's Certificate of Incorporation.
[ ] For [ ] Against [ ] Abstain
5. In their discretion, on such other matters as may properly come
before the Annual Meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO ABOVE.
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED ENVELOPE.
The above signed stockholder hereby revokes any proxy or proxies heretofore
given to vote or act with respect to such Common Stock and hereby ratifies and
confirms all that the proxies appointed herein, their substitutes, or any of
them, may lawfully do by virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
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[ ] I PLAN TO ATTEND THE ANNUAL MEETING [ ] I WILL STAY FOR THE LUNCHEON
AFTERWARD.
