<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or
ss.240.14a-12
HOENIG 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] No fee required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
1) Title of each class of securities to which
transaction applies:
------------------------------------------------
2) Aggregate number of securities to which transaction
applies:
------------------------------------------------
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):(1)
------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------
5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing:
1) Amount Previously Paid:
----------------------------------------
2) Form, Schedule or Registration Statement
No.:
----------------------------------------
3) Filing Party:
----------------------------------------
4) Date Filed:
----------------------------------------
<PAGE>
HOENIG GROUP INC.
ROYAL EXECUTIVE PARK
4 INTERNATIONAL DRIVE
RYE BROOK, NEW YORK 10573
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
To the Stockholders of
Hoenig Group Inc.
The Annual Meeting of Stockholders of Hoenig Group Inc. (the "Company")
will be held at the Rye Town Hilton, 699 Westchester Avenue, Rye Brook, New
York 10573, on Thursday, May 15, 1997, at 11:00 a.m. local time, to consider
and vote upon:
1. The election of three Class III directors, each for a three-year term;
2. Approval of the Company's Section 162(m) Cash Bonus Plan;
3. Approval of the Company's 1996 Long-Term Stock Incentive Plan; and
4. Such other matters as may properly come before the Annual Meeting.
The close of business on March 27, 1997 has been fixed as the record date
for the determination of the stockholders entitled to notice of, and to vote
at, the Annual Meeting, and any adjournment thereof. The Company's stock
transfer books will not be closed.
By Order of the Board of Directors,
KATHRYN L. HOENIG
Secretary
Dated: April 17, 1997
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE ANNUAL MEETING. IF
YOU DO NOT EXPECT TO ATTEND THE MEETING AND WISH TO HAVE YOUR STOCK
REPRESENTED AT THE MEETING, PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING
FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
<PAGE>
HOENIG GROUP INC.
ROYAL EXECUTIVE PARK
4 INTERNATIONAL DRIVE
RYE BROOK, NEW YORK 10573
---------------
PROXY STATEMENT
---------------
April 17, 1997
This proxy statement and the accompanying form of proxy are being
furnished on or about April 17, 1997 to the holders of record (the
"Stockholders") of common stock, par value $.01 per share (the "Common
Stock") of Hoenig Group Inc., a Delaware corporation (the "Company"), in
connection with the 1997 Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the Rye Town Hilton, 699 Westchester Avenue, Rye
Brook, New York 10573, on Thursday, May 15, 1997, at 11:00 a.m. local time,
and any adjournment thereof.
RECORD DATE
The close of business on March 27, 1997 has been fixed as the record date
for the determination of Stockholders entitled to receive notice of, and to
vote at, the Annual Meeting and any adjournment thereof.
SOLICITATION
The enclosed form of proxy is solicited by the Board of Directors. The
Chief Operating Officer and the Secretary have been designated by the Board
of Directors to vote as proxies. All references to proxies herein refer to
the proxies solicited by the Board of Directors, unless otherwise specified.
All proxies delivered pursuant to this solicitation are revocable at the
option of the person executing the same at any time prior to the voting of
the proxy by delivering a valid superseding proxy or a written notice of
revocation signed in the same manner as the original proxy or by attending
the Annual Meeting and voting in person.
EXPENSES
The cost of this solicitation will be borne by the Company. In addition to
the solicitation of proxies by mail, certain officers and employees of the
Company, who will receive no compensation for their services other than their
regular compensation, may solicit proxies in person or by mail, telephone,
telegram, or otherwise. These persons will be reimbursed by the Company for
any expenses they incur. The Company also will reimburse brokers and other
nominees for their expenses.
ANNUAL REPORTS
The Company's Annual Report to Stockholders accompanies this proxy
statement. The Annual Report includes the financial statements and related
sections of the Annual Report on Form 10-K (the "Form 10-K") for the fiscal
year ended December 31, 1996, without exhibits, which was filed by the
Company with the Securities and Exchange Commission (the "Commission").
The Company will provide without charge to each Stockholder, upon written
request, a copy of the Form 10-K, including schedules and exhibits included
or incorporated by reference therein. Stockholders should address such
written requests to Hoenig Group Inc., Royal Executive Park, 4 International
Drive, Rye Brook, New York 10573, Attention: Stockholder Relations.
1
<PAGE>
VOTING PROCEDURES
This proxy statement and the accompanying form of proxy are being mailed
beginning on or about April 17, 1997 to Stockholders as of the record date in
connection with the solicitation of proxies by the Company for the Annual
Meeting. The form of proxy, if returned properly executed and not
subsequently revoked, will be voted in accordance with the choices made by
the Stockholder with respect to the proposals listed thereon. If the
Stockholder does not specify on the form of proxy how the Stockholder's
shares are to be voted, they will be voted "FOR" the election of the nominees
for directors listed herein, "FOR" the approval of the Company's Section
162(m) Cash Bonus Plan (the "Section 162(m) Plan"), and "FOR" the approval of
the Company's 1996 Long-Term Stock Incentive Plan (the "1996 Incentive
Plan"). If any other matters should be presented at the Annual Meeting, the
holders of the proxies will vote on such matters in accordance with a
determination by a majority of the Board of Directors.
If a Stockholder wishes to give a proxy to someone other than the persons
designated by the Board of Directors, the two names appearing on the enclosed
form of proxy may be crossed out and the name of another person may be
inserted. The signed form of proxy should be presented at the Annual Meeting
by the person representing the Stockholder. Such person should have proof of
identification.
If a Stockholder is a corporation or other entity, the accompanying form
of proxy should be signed in the entity's name by an officer or other
authorized person. If signed as attorney, executor, administrator, trustee or
guardian, the signer's full title should be given and a certificate or other
evidence of appointment should be furnished.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote, as of the record date, present in person or
represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. Stockholders will be entitled to cast one
vote, in person or by proxy, for each share of Common Stock they hold. If a
quorum is present, the three nominees for director receiving the highest
number of votes will be elected. For all other matters to be voted upon at
the Annual Meeting, the affirmative vote of a majority of shares present in
person or by proxy and entitled to vote on the matter is necessary for
approval. Shares represented by proxies which are marked "withhold" for
Proposal I will have no effect on the election of directors, and those marked
"abstain" for Proposal II or III will have the same effect as a negative vote
on such matter. In addition, where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not provided voting
instructions (commonly referred to as "broker non-votes"), those shares will
have no effect on the outcome of any matter.
OUTSTANDING STOCK
As of the March 27, 1997 record date, there were 9,550,477 shares of
Common Stock outstanding. The Common Stock constitutes the only class of
voting securities issued by the Company.
OWNERSHIP OF COMMON STOCK OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of March 27, 1997 by (i) each
person known to the Company to beneficially own 5% or more of the outstanding
Common Stock, (ii) each director of the Company and nominee for director,
(iii) each individual who served as Chief Executive Officer during 1996 and
the Company's four most highly compensated executive officers (determined
pursuant to the Commission's Regulation S-K Item 402(a)(3)), other than the
Chief Executive Officer, as of the end of 1996 (such persons including the
Chief Executive Officer are referred to herein as the "Named Executive
Officers"), and (iv) all executive officers and directors of the Company as a
group. The number of shares deemed beneficially owned by a person includes
shares of Common Stock which such person has a right to acquire within sixty
days of March 27, 1997. Each person named in the table has sole voting and
dispositive power with respect to the shares, except as otherwise indicated.
2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENTAGE
TITLE OF CLASS OF BENEFICIAL OWNER(1) OWNERSHIP OF CLASS
- -------------- ---------------------------------------------------- --------------- ------------
<S> <C> <C> <C>
Common Stock Alan B. Herzog(2)(3)(4) ............................. 1,147,782 (7) 11.8%
Max H. Levine(2)(3)(4) .............................. 1,133,800 (8) 11.8%
The Qualified Terminable Interest Trust B established
under the Last Will and Testament of
Ronald H. Hoenig(2) .............................. 1,120,788 (9) 11.7%
Travelers Group Inc.(2) ............................. 563,202(10) 5.9%
Fredric P. Sapirstein(3)(4).......................... 452,400(11) 4.7%
Robert Spiegel(4) ................................... 355,718(12) 3.7%
Robert F. Donahue(5) ................................ 272,282(13) 2.9%
Nigel Johnson-Hill(3)(5) ............................ 167,934(14) 1.8%
Kathryn L. Hoenig(4) ................................ 107,500(15) 1.1%
Martin F.C. Emmett(4) ............................... 63,000(16) 0.7%
Robin A. Green(3) ................................... 36,317(17) 0.4%
Joseph A. D'Andrea(3)(4) ............................ 36,000 0.4%
Robert L. Cooney(4) ................................. 5,000 0.1%
Nicholas E.E. DeStefano(6) .......................... 6,000(18) 0.1%
All executive officers and directors
as a group (14 people) ........................... 4,004,348(19) 40.6%
</TABLE>
- ------------
(1) The address of each person listed above, except the Qualified
Terminable Interest Trust B established under the Last Will and
Testament of Ronald H. Hoenig (the "Hoenig Trust") and Travelers Group
Inc., is in care of the Company, Royal Executive Park, 4 International
Drive, Rye Brook, New York 10573. The Hoenig Trust's address is c/o
Shereff, Friedman, Hoffman & Goodman, 919 Third Avenue, New York, NY
10022. Travelers Group Inc.'s address is 388 Greenwich Street, New
York, NY 10013.
(2) Beneficial owner of 5% or more of the outstanding Common Stock.
(3) Named Executive Officer.
(4) Director.
(5) Robert F. Donahue served as a director and executive officer of the
Company until April 10, 1997. Nigel Johnson-Hill served as a director
of the Company until February 11, 1997.
(6) Mr. DeStefano has indicated that he will not stand for election as a
director in 1997. His term as a Class III director will expire as of
the date of the Annual Meeting.
(7) Includes options to purchase 22,500 shares of Common Stock, which are
immediately exercisable under the Company's 1991 Stock Option Plan (the
"1991 Plan"). Also includes 115,600 shares of Common Stock that Mr.
Herzog may be deemed to beneficially own, which includes 80,000 shares
of Common Stock owned by Mr. Herzog's wife, 21,000 shares owned by his
minor children, and 14,600 shares owned by a private foundation of
which Mr. Herzog is a director.
(8) Includes options to purchase 70,000 shares of Common Stock, which are
immediately exercisable under the 1991 Plan.
(9) Kathryn L. Hoenig (a director of the Company), Laura H. Hoenig, Susan
C. Hoenig, and Robert Spiegel (a director of the Company) (collectively
the "Trustees") have been appointed trustees of the Hoenig Trust, and
thus share voting and dispositive power with respect to the shares
beneficially owned by the Hoenig Trust. Kathryn L. Hoenig, Laura H.
Hoenig, Susan C. Hoenig, and Ronald H. Hoenig, Jr. are beneficiaries
under the Hoenig Trust. Each of the Trustees has disclaimed beneficial
ownership of the shares owned by the Hoenig Trust.
(10) Reflects information as of December 31, 1996 reported on a Schedule
13G, dated February 6, 1997, filed by Travelers Group Inc.
(11) Includes options to purchase 125,000 shares of Common Stock, which are
immediately exercisable under the 1991 Plan and the Company's 1994
Stock Option Plan (the "1994 Plan").
(12) Includes director options to purchase 8,000 shares of Common Stock,
which are immediately exercisable under the 1994 Plan. Does not include
any shares owned by the Hoenig Trust, with respect to which Mr. Spiegel
shares voting and dispositive power with the other Trustees. Mr.
Spiegel has disclaimed beneficial ownership of the shares owned by the
Hoenig Trust.
(13) Includes options to purchase 10,000 shares of Common Stock, which are
immediately exercisable under the 1991 Plan.
(14) Includes options to purchase 23,334 shares of Common Stock, which are
immediately exercisable under the 1991 Plan.
(15) Includes options to purchase 7,500 shares of Common Stock, which are
immediately exercisable under the 1991 Plan. Does not include any
shares owned by the Hoenig Trust, with respect to which Ms. Hoenig
shares voting and dispositive power with the other Trustees. Also does
not include 100,000 shares owned by her brother, Ronald H. Hoenig, Jr.,
which are held in a custodial account for which she acts as custodian.
Ms. Hoenig has disclaimed beneficial ownership of the shares owned by
the Hoenig Trust and her brother.
<PAGE>
(16) Includes director options to purchase 8,000 shares of Common Stock,
which are immediately exercisable under the 1994 Plan.
(17) Includes options to purchase 20,167 shares of Common Stock, which are
immediately exercisable under the 1991 Plan and the 1994 Plan.
(18) Includes director options to purchase 6,000 shares of Common Stock,
which are immediately exercisable under the 1994 Plan.
(19) Includes options to purchase 251,848 shares of Common Stock granted to
certain executive officers under the 1991 Plan, options to purchase
36,319 shares of Common Stock granted under the 1994 Plan, and director
options to purchase 22,000 shares granted to non-employee directors
under the 1994 Plan. Does not include 1,120,788 shares of Common Stock
owned by the Hoenig Trust.
3
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the directors and executive officers of the
Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- ----- ------------------------------------------------------------------------
<S> <C> <C>
Fredric P. Sapirstein 54 Chairman of the Board, Chief Executive Officer, President
and Class III Director, and Chief Executive Officer of Hoenig & Co.,
Inc.
Max H. Levine 56 Executive Vice President and Class II Director, and President
of Hoenig & Co., Inc.
Alan B. Herzog 39 Executive Vice President, Chief Operating Officer, Chief Financial
Officer, Treasurer, and Class I Director, and Chief Operating Officer
and Chief Financial Officer of Hoenig & Co., Inc.
Kathryn L. Hoenig 35 Vice President, General Counsel, Secretary, and Class III
Director, and Vice President, General Counsel and Secretary
of Hoenig & Co., Inc.
Robert L. Cooney 63 Class III Director
Joseph A. D'Andrea 72 Class II Director
Martin F.C. Emmett 62 Class I Director
Robert Spiegel 60 Class I Director
Thomas J. Compono 44 Senior Vice President -Floor Operations of Hoenig & Co., Inc.
Robin A. Green 32 Managing Director of Hoenig (Far East) Limited
Nigel Johnson-Hill 50 Managing Director of Hoenig & Company Limited
Seth M. Lynn, Jr. 48 President and Chief Executive Officer of Axe-Houghton
Associates, Inc.
</TABLE>
Information with respect to the business experience and affiliations of the
directors and executive officers is set forth below:
Class I Directors
Alan B. Herzog, has been the Executive Vice President, Chief Operating
Officer, Treasurer, and a director of the Company since its formation in
1991. He also has served as Chief Financial Officer of the Company and of
Hoenig & Co., Inc. ("Hoenig"), a wholly-owned subsidiary of the Company,
since February 1997 and from 1982 until November 1995, and as Chief Operating
Officer of Hoenig since April 10, 1997. Mr. Herzog also has served at Hoenig
as Chief Executive Officer from April 1995 until April 10, 1997, as Treasurer
since 1982, and as a director since 1987. Mr. Herzog was Secretary of the
Company and of Hoenig from 1982 to May 1992. Mr. Herzog has served as a
director of Axe-Houghton Associates, Inc. ("Axe-Houghton"), a wholly-owned
subsidiary of the Company, since April 1993, and as Treasurer since December
1993. He also is a director of Hoenig & Company Limited ("Limited") and
Hoenig (Far East) Limited ("Far East"), which are subsidiaries of the
Company. Mr. Herzog is a Certified Public Accountant and a graduate of The
Wharton School, University of Pennsylvania.
Martin F.C. Emmett, has been a director of the Company since May 1994.
From April 1989 until June 1993, Mr. Emmett served as Chief Executive Officer
and Chairman of the Board of Tambrands, Inc., a manufacturer and marketer of
Tampax tampons. From 1983 until 1989, he was Chairman of Security Pacific
Burns Fry, a New York investment banking firm. Mr. Emmett currently serves on
the Board of Visitors of the Fuqua School of Business at Duke University.
Robert Spiegel, has been a director of the Company since its formation and
of Axe-Houghton since October 1994. He also served as a director of Hoenig
from 1987 until May 1995. Mr. Spiegel served as
4
<PAGE>
Chairman of the Board, Chief Executive Officer and President of RJR Drug
Distributors, Inc., a privately-owned discount drug retailer based in
Louisville, Kentucky, from 1984 until May 1995. He is currently a director of
Graham Field Health Products, Inc., a manufacturer and supplier of health
care products whose stock is listed on the New York Stock Exchange (the
"NYSE"), and of Drug Emporium, an Ohio-based discount drug store chain whose
stock is listed on the Nasdaq National Market. Mr. Spiegel graduated from The
Wharton School, University of Pennsylvania.
Class II Directors
Joseph A. D'Andrea, formerly served as Chairman of the Board and Chief
Executive Officer of the Company from April 21, 1995 until September 5, 1996.
From September 5, 1996 until October 31, 1996, Mr. D'Andrea served as Vice
President of the Company in charge of business development. From March 1994
until April 21, 1995, he served as Vice President of the Company responsible
for, among other things, the development of the Company's investment
management business. He also has been a director of the Company since
November 1991, a director of Axe-Houghton since February 1994, and a director
of Far East since May 1995. From January 1993 until March 1994, Mr. D'Andrea
provided consulting services to the Company. From 1991 to March 1992, Mr.
D'Andrea was a consultant to J. E. Sheehan & Company, Inc. ("Sheehan"), the
representative of the underwriters in connection with the Company's initial
public offering in 1991, and became a director of the Company pursuant to an
agreement between the Company and Sheehan. Mr. D'Andrea is a graduate of St.
John's University and St. John's University School of Law.
Max H. Levine, a founder of Hoenig, has been a director and Executive Vice
President of the Company since its formation, and has served as President of
Hoenig since November 1995 and as a director and Head of Trading at Hoenig
since Hoenig's inception in 1970. He also has served as a director of
Axe-Houghton since September 1994 and from April 1993 until February 1994,
and of Far East since October 1994. He is a member of the Board of Trustees
of Ithaca College, the Executive Committee of Albert Einstein College of
Medicine, and the Wall Street Committee for St. Jude's. Mr. Levine is a
graduate of Colgate University.
Class III Directors
Fredric P. Sapirstein, has served as Chairman of the Board, Chief
Executive Officer and President of the Company since September 5, 1996. He
also has served as Chief Executive Officer of Hoenig since April 10, 1997.
Before joining the Company, Mr. Sapirstein was employed by Bear Stearns &
Co., Inc. as Managing Director, Head of Asian Investment Banking since 1995,
and as Managing Director, Head of International Equity Capital Markets from
1994 until 1995. From 1991 until 1994, Mr. Sapirstein was a principal of FPS
Management, Inc., a private investment management and consulting firm which
he founded. From 1968 until 1990, he was employed at Schroder Wertheim & Co.,
Inc. in various positions, including as Chief Executive Officer of Equities
Services. Mr. Sapirstein is a graduate of Tulane University and a director of
Northside Center for Child Development.
Kathryn L. Hoenig, has been a director of the Company since January 1996,
and has served as Vice President, General Counsel of the Company since
November 1995 and of Hoenig since April 1992. She also has served as
Secretary of the Company and of Hoenig since May 1992. She has been Secretary
of Axe-Houghton since December 1993, and a director of Axe-Houghton since
October 1994. From 1986 until April 1992, Ms. Hoenig was associated with the
law firm of Cadwalader, Wickersham & Taft in New York, New York. Ms. Hoenig
is a graduate of Duke University and New York University School of Law.
Robert L. Cooney, has been a director of the Company since February 20,
1997. He currently serves as a partner of Cooney, Schroeder & Co., a private
financial consulting firm that he founded in February 1997. From 1977 until
January 31, 1997, Mr. Cooney was Managing Director, Equity Capital Markets at
Credit Suisse First Boston. Mr. Cooney is a graduate of the College of the
Holy Cross and Harvard Business School.
Non-Director Executive Officers
Thomas J. Compono, has been Senior Vice President -Floor Operations of
Hoenig since 1978, acting as head of all floor operations, including NYSE
floor operations. Mr. Compono has been a member of the NYSE since April 1981.
Mr. Compono is a graduate of Brooklyn College.
5
<PAGE>
Robin A. Green, has been Managing Director of Far East since April 1995,
and a director of Far East since February 1995. From July 1988 until April
1995, he served as Chief Financial Officer and Secretary of Limited, and he
has been a director of Limited since 1990. He also was a Vice President of
Hoenig from February through March 1995. From August 1985 until July 1988,
Mr. Green was employed by Touche Ross & Co., Chartered Accountants. Mr. Green
is a graduate of the University of Glasgow and a member of the Institute of
Chartered Accountants of Scotland.
Nigel Johnson-Hill, has been Managing Director and a director of Limited
since 1988. He also has served as a director of Far East since October 1994.
Mr. Johnson-Hill served as a director of the Company from November 1991 until
February 11, 1997.
Seth M. Lynn, Jr., has served as a director, Chief Executive Officer and
President of Axe-Houghton since 1984. He also acted as Chairman of the Board
of Axe-Houghton from 1984 through August 1994. From June 1988 to March 1992,
Mr. Lynn served as a director of Axe-Houghton, Ltd., an affiliated investment
management firm, and from July 1991 to July 1992, Mr. Lynn served as a
director, Chief Executive Officer and President of Axe-Houghton Management,
Inc., then the parent company of Axe-Houghton. Mr. Lynn is a graduate of Yale
University and The Wharton School, University of Pennsylvania.
Pursuant to the By-laws of the Company and its subsidiaries, each
executive officer generally serves until his or her successor is chosen or
until his or her earlier resignation or removal. See "Employment Agreements
with Certain Executive Officers".
There is no current family relationship among any of the directors or
executive officers of the Company. Kathryn L. Hoenig and Robert Spiegel each
serves as an executor of the Estate of Ronald H. Hoenig and as a trustee of
the Hoenig Trust.
PROPOSAL I
ELECTION OF DIRECTORS
Pursuant to the provisions of the Company's Certificate of Incorporation
and By-laws, the Board of Directors has fixed the number of directors at
eight following the resignations of certain directors and Mr. DeStefano's
decision not to stand for re-election.
The directors are divided into three classes, designated Class I, Class II
and Class III. The Class I, Class II and Class III directors have been or
will be elected to serve for a term of three years and until their respective
successors are elected and qualified at the Annual Meeting of Stockholders in
1998, 1999 and 1997, respectively. The Class I directors are Martin F.C.
Emmett, Alan B. Herzog, and Robert Spiegel; the Class II directors are Joseph
A. D'Andrea and Max H. Levine; and the Class III directors are Robert L.
Cooney, Nicholas E.E. DeStefano, Kathryn L. Hoenig, and Fredric P.
Sapirstein. Mr. DeStefano has indicated that he will not stand for
re-election as a director in 1997. His term as a Class III director will
expire as of the date of the Annual Meeting.
Three Class III directors are to be elected at the Annual Meeting, with
each director being elected for a term of three years and until the election
and qualification of a successor. The Board of Directors recommends that the
Stockholders elect Robert L. Cooney, Kathryn L. Hoenig, and Fredric P.
Sapirstein, as Class III directors. Each nominee currently is a director.
Proxies will be voted for Messrs. Cooney and Sapirstein and Ms. Hoenig as
Class III directors, unless otherwise specified on the form of proxy. Class I
and Class II directors will not be elected at the Annual Meeting.
If one or more of the nominees should become unavailable to serve at the
time of the Annual Meeting, the shares represented by proxies will be voted
for the remaining nominees or nominee and for any substitute nominee or
nominees designated by the Board of Directors. If no substitute is
designated, the size of the Board may be reduced. The Board knows of no
reason why any of the nominees will be unavailable to serve.
6
<PAGE>
COMPENSATION OF DIRECTORS
During 1996, non-employee directors (i.e., directors who are not employed
by the Company or any of its subsidiaries) received an annual retainer of
$15,000, reimbursement of expenses, and $500 for attendance at each meeting
of the Board of Directors or any committee thereof. In addition, each
non-employee director serving as Chairman of any committee of the Board of
Directors received an annual stipend of $3,000. Pursuant to the Company's
1994 Plan, on May 16, 1996, the date the First Amendment to the 1994 Plan was
approved by Stockholders, each non-employee director was granted a five-year
option to purchase 10,000 shares of Common Stock at an exercise price per
share equal to the fair market value on the date of grant, which vests as
follows: 4,000 shares on the first anniversary of the date of grant; 3,000
shares on the second anniversary of the date of grant; and 3,000 shares on
the third anniversary of the date of grant (each a "New Director Option"). In
addition, Joseph A. D'Andrea received a New Director Option on November 1,
1996 when he became a non-employee director, and Robert L. Cooney received a
New Director Option on February 20, 1997 when he joined the Board. Each
non-employee director will be granted a New Director Option upon joining the
Board (the "Appointment Date"), and on the third anniversary of such
Appointment Date and every three years thereafter. Directors who are officers
or employees of the Company or any of its subsidiaries receive no
compensation for their services as directors, other than their regular
compensation for services as such officers or employees; nor are they
eligible to be granted New Director Options.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors has responsibility for establishing broad corporate
policies and for the overall performance of the Company, although it is not
involved in day-to-day operating details. The members of the Board who are
not senior officers of the Company are kept informed of the Company's
business by reports and documents given to them from time to time, as well as
by operating, financial, and other reports made at Board and committee
meetings. The standing committees established by the Board to assist it in
the discharge of its responsibilities are described below.
Regular meetings of the Board of Directors are held four times per year
and special meetings are scheduled when required. The Board held four regular
meetings and eight special meetings in 1996. Nigel Johnson-Hill, who served
as a director of the Company until February 11, 1997, attended eight of the
twelve meetings (66.67%) held by the Board in 1996 and did not serve on any
Board committees.
The Board of Directors has an Audit Committee which recommends to the
Board the accounting firm to be selected as independent public accountants of
the Company, reviews recommendations made by the independent public
accountants concerning the Company's accounting methods and systems of
internal controls, reviews and reports to the Board with respect to the
annual audit conducted by the Company's independent public accountants, and
reviews with the independent public accountants the firm's relationship with
management. The Audit Committee met four times in 1996. In 1996, the Audit
Committee was composed of Nicholas E.E. DeStefano (Chairman), Robert Spiegel,
and Martin F.C. Emmett.
The Board of Directors disbanded the Executive Committee on May 16, 1996.
Until October 12, 1995, the Executive Committee was composed of Ronald H.
Hoenig, Max H. Levine, and Alan B. Herzog, and from October 12, 1995 until
May 16, 1996, it was composed of Messrs. Levine and Herzog. The Executive
Committee had, subject to certain exceptions, all the powers and duties of
the Board in the management of the Company when the Board was not in session
that were not in conflict with specific powers conferred by the Board upon
any other committee. The Executive Committee did not meet in 1996.
The Board of Directors has a Compensation and Stock Option Committee which
is responsible for determining and overseeing the policies and plans which
relate to the compensation of the Company's executive officers and certain
other employees. The Compensation and Stock Option Committee also is
responsible for administering the Company's stock option plans, the Section
162(m) Plan, and the 1996 Incentive Plan described in Proposal II and
Proposal III herein. The Compensation and Stock Option Committee held seven
meetings in 1996. The Compensation and Stock Option Committee is composed
7
<PAGE>
of only non-employee directors. In 1996, the Compensation and Stock Option
Committee was composed of Martin F.C. Emmett (Chairman), Robert Spiegel, and
Nicholas E.E. DeStefano.
On November 14, 1996, the Board of Directors created a Nominating
Committee, consisting of Robert Spiegel (Chairman), Nicholas E.E. DeStefano,
Martin F.C. Emmett, and Fredric P. Sapirstein. The Nominating Committee is
responsible for reviewing possible director candidates and recommending
qualified candidates for nomination and election to the Board, including the
slate of nominees of directors to be elected by the Stockholders and any
directors to be elected by the Board to fill vacancies. At the present time,
the Nominating Committee has not determined whether to consider candidates
recommended by the Stockholders.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
This report is being made by the Compensation and Stock Option Committee
(the "Committee") of the Board of Directors, which is composed entirely of
non-employee directors. The Committee is responsible for determining and
overseeing the policies and plans which relate to the compensation of the
Company's executive officers and certain other employees, including the Named
Executive Officers referred to in this proxy statement. In addition, the
Committee is responsible for administering the Company's stock option plans
and other long-term incentive and executive compensation plans, including
those described in Proposals II and III herein, and for making awards under
those plans. The purpose of this report is to describe the Company's
executive compensation program and to discuss the factors that the Committee
considered in determining the 1996 compensation of the Company's Chief
Executive Officer and the other Named Executive Officers. Because Fredric P.
Sapirstein and Joseph A. D'Andrea each served as Chief Executive Officer
during 1996, compensation information is provided with respect to each.
Executive Compensation Program
The Company's executive compensation program is based on the philosophy
that maintaining and motivating a qualified management team are essential for
the growth and prosperity of the Company, which will inure to the benefit of
the Stockholders. To that end, the Company's compensation policies and
practices are designed to attract, retain, and reward executive officers who
contribute to the success of the Company's business. Compensation
determinations also are made in consideration of specific industry
compensation data collected and analyzed by William M. Mercer, Incorporated
("Mercer"), a compensation consultation firm, which advises the Committee.
The Company's compensation program consists of the following components:
(i) base salary; (ii) performance bonuses generally awarded after the end of
the year or the applicable performance period; (iii) long-term, equity-based
compensation in the form of stock options and other stock-based awards under
the Company's stock option plans and the 1996 Incentive Plan, which is
described in Proposal III herein; and (iv) contributions to employee benefit
plans (i.e., profit-sharing plans). With respect to certain executives, the
Company is contractually committed under employment agreements to providing
specified minimum salaries, cash bonuses, and perquisites and to granting
stock options on certain pre-determined terms subject to the Committee's
approval.
Base salaries for executives are set at levels which the Committee
believes are generally competitive with salaries of similarly positioned
executives at comparable brokerage and financial services companies. As a
general rule, management's proposals to the Committee regarding performance
bonuses have been determined on a subjective basis after consideration of the
executive's individual and departmental performance, his or her contribution
to the Company's financial results for the year, and the executive's
importance to the future growth and development of the Company's business. In
the case of executives with trade execution or sales responsibilities,
bonuses are based in part on commission-and profit-based formulas.
During the past year, the Committee has sought to develop more objective
methods of evaluating an executive's performance and determining bonuses and
other compensation awards. In November 1996,
8
<PAGE>
the Committee recommended, and the Board of Directors approved, the Company's
Section 162(m) Plan, which provides a framework for developing
performance-based cash bonuses for executives and complies with Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Section 162(m) Plan is subject to the approval of Stockholders, as described
in Proposal II herein.
The Company's long-term, stock-based compensation to date has consisted of
grants of incentive stock options, U.K. tax-qualified stock options, and
non-qualified stock options under the 1991 Plan and 1994 Plan and deferred
stock awards under the 1996 Incentive Plan. Stock-based awards typically are
granted to those executives and employees who have contributed to the growth
and profitability of the Company or have demonstrated outstanding
performance, as well as those who can be expected to make such contributions
in the future. Consistent with a policy adopted by the Committee in late
1995, stock-based awards typically include vesting provisions which provide
for one-third of the award to vest on each anniversary of the grant date. The
Committee believes that stock options, deferred stock, and other long-term,
stock-based compensation serve to align the interests of executives with
Stockholders and help to retain key employees. With these goals in mind, in
November 1996, the Committee recommended and the Board of Directors adopted
the 1996 Incentive Plan to be approved by a vote of the Stockholders at the
Annual Meeting, as more fully described in Proposal III herein. The 1996
Incentive Plan provides the Committee with increased flexibility to award a
greater variety of long-term, equity-based incentives to key employees and
consultants to the Company. The flexibility of the 1996 Incentive Plan serves
the interests of the Company and Stockholders by encouraging such individuals
to focus on the long-term growth of stockholder value.
The Company also maintains voluntary contributory profit-sharing plans
which cover substantially all of its employees in the United States, United
Kingdom, Hong Kong, and Tokyo. The Company generally makes discretionary
contributions to these plans based on, among other things, the Company's
performance. For the year ended December 31, 1996, the Company contributed
$423,000 to these plans, of which $28,581 was used to pay plan expenses and
$394,419 was allocated to plan participants.
As indicated in previous Committee reports and reflected by the adoption
of the Section 162(m) Plan, the Company generally intends to take steps
necessary to comply with the deduction limitation of Section 162(m) of the
Code and the regulations thereunder. However, there may be circumstances
where it may be in the best interests of the Company and its Stockholders to
pay compensation which exceeds the limitations of Section 162(m) even though
such compensation may not be fully deductible.
1996 Executive Compensation
As indicated in the compensation tables in this proxy statement, the 1996
compensation of Named Executive Officers consisted of three principal
components: (i) a fixed cash salary, generally determined prior to the
beginning of the year; (ii) a cash bonus, generally paid after the end of the
year or the applicable performance period; and (iii) stock-based awards. In
addition, the Company paid life insurance premiums on behalf of certain Named
Executive Officers with respect to policies owned by such Named Executive
Officers, purchased additional health insurance for Joseph A. D'Andrea
following his employment by the Company, made contributions to the Company's
profit-sharing plans, and, in the case of one Named Executive Officer
reassigned to a foreign subsidiary, provided a housing allowance and paid
certain personal travel expenses incurred during trips to the executive's
previous home.
Fredric P. Sapirstein and two other Named Executive Officers were employed
by the Company during 1996 pursuant to employment agreements which provide
for certain minimum annual salaries, cash bonuses, stock options and other
compensation, such as perquisites. Of the three employment agreements with
Named Executive Officers, those of Max H. Levine and Alan B. Herzog were
entered into at the time of the Company's initial public offering in 1991 and
terminated on December 31, 1996. On November 25, 1996, the Company entered
into a new employment agreement with Mr. Levine for the period January 1,
1997 through December 31, 1998. Mr. Herzog continues to be employed by the
Company without a formal agreement. The terms of these agreements, including
the provisions requiring the Company to make certain payments to these
executives in the event of a termination "other than for cause" or upon a
"change of control" (as defined in the agreements), are described more fully
in "Employment Agreements with Certain Executive Officers" in this proxy
statement.
9
<PAGE>
The Committee did not approve uniform salary increases for 1997 with
respect to executive officers. With respect to Mr. Levine, his salary for
1997 was increased pursuant to the terms of a new employment agreement that
took effect on January 1, 1997. With respect to Mr. Herzog, who does not have
a formal employment agreement, and three other executive officers, the
Committee approved salary increases for 1997 in order to bring those
executives' compensation in line with the market and to compensate certain of
the executives for undertaking additional responsibilities.
In reviewing management's recommendations with respect to 1996 performance
bonuses and stock-based awards for the Named Executive Officers, the
Committee reviewed the following: (i) for each Named Executive Officer,
information concerning salary, cash bonus, perquisites, life insurance
premiums paid, payments made to the Company's employee benefit plans, and
prior stock-based awards; (ii) the terms of any employment agreement between
the Named Executive Officer and the Company; (iii) compensation data and
analyses provided by Mercer; (iv) the executive's individual performance and
contribution to the Company's short-and long-term results; and (v) the
Company's financial results for 1996. In reviewing the Company's 1996
financial performance, the Committee considered the improvement in the
Company's operating results in 1996, particularly for the Company's Far East
brokerage and asset management operations.
With the exception of one executive, the Committee did not apply any fixed
formula or assign relative weights to the various factors it considered.
Rather, it attempted to provide total compensation which was competitive yet
consistent with the executive's individual performance and the Company's
financial results in 1996. As in prior years, the Committee considered
information provided by Mercer regarding compensation levels and practices of
comparable public companies in the brokerage and financial services
industries. Many of these companies are included in the Lipper Composite
Brokerage Index selected for use in the performance graph provided in this
proxy statement. With respect to the one Named Executive Officer with trade
execution responsibilities, the Committee applied a formula based on the
profitability of commission revenues in determining the executive's cash
bonus for 1996.
The Committee approved management's recommended 1996 cash bonuses. The
Committee also approved a deferred stock award of 50,000 shares, which vests
over three years, for one Named Executive Officer to reward him for strong
performance in 1996 and to encourage the executive to focus on the long-term
growth of the Company and Stockholder value.
Chief Executive Officer Compensation
Fredric P. Sapirstein was appointed Chairman of the Board, Chief Executive
Officer and President on September 5, 1996. Mr. Sapirstein's 1996
compensation consisted of salary, a minimum cash bonus, stock options, and
the payment of life insurance premiums, as set forth in the compensation
tables herein.
All amounts paid to Mr. Sapirstein as salary in 1996 were based on the
terms of his employment agreement, which is described in "Employment
Agreements with Certain Executive Officers" herein. Mr. Sapirstein received a
cash bonus of $100,000, which was slightly greater than the $96,164 minimum
bonus provided for by his employment agreement. Pursuant to the terms of his
employment agreement, Mr. Sapirstein was granted (i) ten-year options to
purchase 500,000 shares of Common Stock at $3.625 per share, which vest 25%
on the date of grant and on each of the next three anniversaries thereof; and
(ii) ten-year options to purchase 500,000 shares of Common Stock at $5.00 per
share (the "Performance Options"). The Performance Options vest on the ninth
anniversary of the date of grant, subject to accelerated vesting as follows:
(i) 50% vests if the average closing price of the Common Stock equals or
exceeds $7.00 per share for twenty consecutive trading days; and (ii) 100%
vests if the average closing price of the Common Stock equals or exceeds
$8.00 per share for twenty consecutive trading days. In addition, pursuant to
the terms of his employment agreement, Mr. Sapirstein purchased 250,000
shares of Common Stock from the Company for $3.625 per share, which was the
closing price on the last trading day immediately prior to September 5, 1996.
See "Interest of Management in Certain Transactions" herein.
Joseph A. D'Andrea served as the Company's Chief Executive Officer from
April 21, 1995 until Mr. Sapirstein's appointment on September 5, 1996, and,
with respect to this period, he received an annualized
10
<PAGE>
salary of $300,000. Thereafter, he served as a Vice President of the Company
until October 31, 1996. During this period, Mr. D'Andrea continued to receive
an annualized salary of $300,000, which the Committee believed to be fair in
light of Mr. D'Andrea's assistance to Mr. Sapirstein during the transition
period. Mr. D'Andrea did not receive a cash bonus with respect to 1996. He
received a non-discretionary, automatic grant of a five-year, non-qualified
stock option to purchase 10,000 shares of Common Stock (a New Director
Option) when he ceased to be employed by the Company and continued to serve
as a non-employee director. He also has been receiving director fees since
November 1, 1996. Following his termination of employment on October 31,
1996, the Company purchased for Mr. D'Andrea a supplemental health insurance
policy for $5,406, which provides health care coverage for Mr. D'Andrea and
his dependents until May 31, 1998.
COMPENSATION AND STOCK OPTION COMMITTEE
Martin F.C. Emmett, Chairman
Nicholas E.E. DeStefano
Robert Spiegel
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board of Directors is
composed solely of non-employee directors. In 1996, the following directors
served on the Compensation and Stock Option Committee: Martin F.C. Emmett,
Nicholas E.E. DeStefano, and Robert Spiegel. Martin Emmett has been Chairman
of the Compensation and Stock Option Committee since March 1995.
On December 17, 1996, Robert Spiegel purchased from the Company a whole
life insurance policy on his life for $101,455, the cash surrender value of
the policy. The Company previously purchased the policy in 1987 to fund the
Company's potential liability to Mr. Spiegel's estate to repurchase shares of
Common Stock under a shareholder's agreement entered into upon the closing of
the Company's initial public offering in 1991. The Company agreed to sell the
policy to Mr. Spiegel after management had decided that it was in the best
interests of the Company and the Stockholders to cancel the policy and
discontinue paying premiums. The sale of the insurance policy was approved by
the unanimous vote of the Board of Directors (including the members of the
Audit Committee), excluding Mr. Spiegel. Mr. Spiegel paid all of the 1996
premiums on the policy.
11
<PAGE>
COMPENSATION TABLES
The following tables contain compensation data for the Named Executive
Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
--------------------------------------------------- ---------------------------------------------
OTHER RESTRICTED SECURITIES ALL OTHER
SALARY BONUS ANNUAL STOCK UNDERLYING COMPENSATION(2)
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION(1) AWARDS($) OPTIONS (#) ($)
- --------------------------- ------ ------------ ------------ --------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fredric P. Sapirstein 1996 126,154(3) 100,000 -- 1,000,000(4) $ 216
Chairman, Chief Executive
Officer and President 1995 -- -- -- -- --
(commencing 9/5/96) 1994 -- -- -- -- --
Joseph A. D'Andrea 1996 253,846(3) 0 $ 3,500(5) 10,000(4) 11,445
Chief Executive Officer 1995 168,046(3) 75,000 20,000 1,755
(4/21/95 -9/5/96) 1994 101,538(3) -- 22,000(5) -- --
Max H. Levine 1996 369,434(3) 525,000 -- -- 94,793
Executive Vice President 1995 358,679(3) 440,000 -- -- 93,453
1994 349,569(3) 280,431 -- 92,986
Robin A. Green 1996 230,000 170,000 -- 262,500(6) -- 154,098
Managing Director, 1995 199,823 80,000 -- 20,000 109,178
Hoenig (Far East) Limited 1994 -- -- -- -- --
Alan B. Herzog 1996 250,000(3) 125,000 -- -- 63,122
Executive Vice President, 1995 250,000(3) 75,000 -- -- 61,629
COO, CFO, Treasurer 1994 250,000(3) 25,000 -- -- 61,595
Nigel Johnson-Hill 1996 234,150(7) 93,660(7) -- -- 26,056
Managing Director of 1995 218,240(7) 125,000(7) -- 25,000 20,000
Hoenig & Company
Limited 1994 187,920(7) 158,949(7) -- -- 28,188
</TABLE>
- ------------
(1) The value of perquisites and other personal benefits paid to each Named
Executive Officer did not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus for each such Named Executive Officer.
(2) For 1996, consists of life insurance premiums paid on behalf of the
following Named Executive Officers: Fredric P. Sapirstein ($216);
Joseph A. D'Andrea ($1,654); Max H. Levine ($88,953); Alan B. Herzog
($57,282); and Nigel Johnson-Hill ($2,641), each of whom owns the
respective insurance policies, including the cash surrender value. Also
includes annual contributions for 1996 on behalf of the following Named
Executive Officers to the Company's profit-sharing plans as follows:
Joseph A. D'Andrea ($4,386); Max H. Levine ($5,840); Alan B. Herzog
($5,840); Robin A. Green ($22,163); and Nigel Johnson-Hill ($23,415).
For Robin A. Green, includes a housing allowance of $125,001 in 1996
and personal travel expenses of $6,934 in 1996 provided in connection
with his assignment in Hong Kong. For Mr. D'Andrea, includes $5,406,
which represents the premium paid in 1996 on a supplemental health
insurance policy for him and his dependents through May 31, 1998.
(3) The salary paid to Mr. Sapirstein in 1996 is based on an annualized
salary of $400,000 for the period September 5, 1996 through December
31, 1996. Joseph A. D'Andrea served as Chief Executive Officer from
April 21, 1995 until September 5, 1996. The salary paid to Mr. D'Andrea
in 1996 through October 31, 1996 is based on an annualized salary of
$300,000, and the salary paid to him in 1995 is based on an annualized
salary of $120,000 for the period January through April 1995, $156,000
for the period May through October 1995, and $300,000 for the period
November through December 1995. The salary paid to Mr. D'Andrea in 1994
is based on an annualized salary of $120,000 for the period March
through December 1994. The annual salaries of Max H. Levine and Alan B.
Herzog include cost-of-living increases provided for in their
respective employment agreements which terminated on December 31, 1996.
See "Employment Agreements with Certain Executive Officers."
12
<PAGE>
(4) Pursuant to the terms of his employment agreement, Fredric P.
Sapirstein was granted: (i) ten-year options to purchase 500,000 shares
of Common Stock at $3.625 per share, which vest 25% on the date of
grant and on each of the first three anniversaries of the date of
grant; and (ii) ten-year options to purchase 500,000 shares of Common
Stock at an exercise price of $5.00 per share, which vest on the ninth
anniversary of the grant date, subject to earlier vesting as follows:
(a) 50% vests if the average closing price of the Common Stock equals
or exceeds $7.00 per share for 20 consecutive trading days; and (b)
100% vests if the average closing price of the Common Stock equals or
exceeds $8.00 per share for 20 consecutive trading days. Pursuant to
the Company's 1994 Plan, on November 1, 1996, Joseph A. D'Andrea was
granted a five-year, non-qualified option to purchase 10,000 shares of
Common Stock at $3.875, when his employment by the Company ceased and
he became a non-employee director. The option vests 4,000 shares on
November 1, 1998 and 3,000 shares on each of November 1, 1999 and
November 1, 2000.
(5) Represents director fees paid to Joseph D'Andrea during November and
December 1996 after his employment by the Company ceased, and
consulting and director fees paid to him during the period January 1994
through February 1994 prior to his employment by the Company. Mr.
D'Andrea received $3,500 in director fees in 1996, and $18,000 in
consulting fees and $4,000 in director fees in 1994.
(6) Represents the cash value of a deferred stock award of 50,000 shares of
Common Stock made to Robin A. Green on January 14, 1997, which vests
16,667 shares on each of January 14, 1998 and January 14, 1999, and
16,666 shares on January 14, 2000. The cash value was determined by
multiplying the number of shares covered by the award by the market
price of the Common Stock on the date the award was made. Dividends or
dividend equivalents are not payable with respect to the deferred stock
award. The deferred stock award was made pursuant to the 1996 Incentive
Plan and is subject to Stockholder approval of the 1996 Incentive Plan
at the Annual Meeting. See "Proposal III" herein.
(7) The annual compensation paid to Nigel Johnson-Hill for the years
indicated in the above compensation table was paid in U.K. Pounds
Sterling. The annual salary for 1996, 1995 and 1994 was pounds
sterling150,000, pounds sterling140,800 and pounds sterling120,000,
respectively, and the bonuses were pounds sterling60,000, pounds
sterling81,000 and pounds sterling101,500, respectively. In converting
these amounts to U.S. Dollars, exchange rates of 1.5610, 1.550 and
1.5660 U.S. Dollars to U.K. Pounds Sterling were used for the years
1996, 1995 and 1994, respectively.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------------------- ------------------------------------
NUMBER OF % OF TOTAL MARKET
SECURITIES OPTIONS PRICE ON
UNDERLYING GRANTED TO EXERCISE DATE OF
OPTIONS EMPLOYEES PRICE GRANT EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR ($/SHARE) ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- ------------ -------------- ---------- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fredric P. Sapirstein 500,000(2) 41.8% $3.625 $3.625 9/4/06 500,760 1,106,549
132,500(2) 11.1% $ 5.00 $3.625 9/4/06 0 111,048
367,500(2) 30.8% $ 5.00 $ 4.25 11/14/06 155,892 677,915
Joseph A. D'Andrea 10,000(3) 0.8% $3.875 $3.875 10/31/01 10,706 23,657
Max H. Levine -- -- -- -- -- -- --
Robin A. Green(4) -- -- -- -- -- -- --
Alan B. Herzog -- -- -- -- -- -- --
Nigel Johnson-Hill -- -- -- -- -- -- --
</TABLE>
- ------------
(1) The potential realizable values shown in this table are the result of
calculations at stock price appreciation rates specified by the
Commission and are not intended to forecast actual future appreciation
rates of the price of the Common Stock. The Named Executive Officers
will realize no value if the price of the Common Stock does not
appreciate above the exercise price.
<PAGE>
(2) Pursuant to his employment agreement with the Company, on September 5,
1996 Mr. Sapirstein was granted ten-year options to purchase 500,000
shares of Common Stock at $3.625 per share as follows: an incentive
stock option to purchase 110,000 shares and a non-qualified option to
purchase 390,000 shares. These options were granted under the 1991 Plan
and 1994 Plan and vest 25% on the date of grant and 25% on each of the
first three anniversaries of the grant date. In addition, Mr.
Sapirstein was granted ten-year, non-qualified options to purchase
500,000 shares of Common Stock at $5.00 per share as follows: a
non-qualified option to purchase 132,500 shares which was granted on
September 5, 1996 under the 1994 Plan, and a non-qualified option to
purchase 367,500 shares, which was granted on November 14, 1996 under
the 1996 Incentive Plan. The 1996 Incentive Plan and the option granted
to Mr. Sapirstein thereunder are subject to Stockholder approval at the
Annual Meeting as described in Proposal III herein. These non-qualified
options to purchase 500,000 shares vest on the ninth anniversary of the
date of grant, subject to accelerated vesting as follows: (i) 50% vests
if the average closing price of the Common Stock equals or exceeds
$7.00 per share for twenty consecutive trading days; and (ii) 100%
vests if the average closing price of the Common Stock equals or
exceeds $8.00 per share for twenty consecutive trading days.
13
<PAGE>
(3) Mr. D'Andrea received a non-discretionary, automatic grant of a
five-year, non-qualified stock option under the 1994 Plan to purchase
10,000 shares of Common Stock at the market price on the grant date of
November 1, 1996, when he ceased to be employed by the Company and
became a non-employee director. Mr. D'Andrea's New Director Option
vests 4,000 shares on November 1, 1997 and 3,000 shares on each of
November 1, 1998 and November 1, 1999.
(4) On February 14, 1996, Mr. Green was granted a ten-year, non-qualified
stock option under the 1994 Plan to purchase 13,334 shares of Common
Stock at $3.625 per share and a five-year, non-qualified stock option
under the 1991 Plan to purchase 6,666 shares at $0.10 per share. Each
option vests one-third on each of the first three anniversaries of the
date of grant. These options were granted to Mr. Green with respect to
his performance in 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
VALUE ------------------------------ --------------------------------
SHARES ACQUIRED REALIZED UNEXERCISABLE
NAME ON EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) ($)
- --------------------- --------------- ------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Fredric P. Sapirstein 0 0 125,000 875,000 218,750 843,750
Joseph A. D'Andrea 0 0 20,000 10,000 51,240 15,000
Max H. Levine 20,000 70,375 70,000 0 13,938 0
Robin A. Green 0 0 13,500 20,000 5,469 58,498
Alan B. Herzog 10,000 34,875 22,500 0 5,094 0
Nigel Johnson-Hill 0 0 23,334 16,666 28,074 44,581
</TABLE>
- ------------
(1) Based on the last sale price of the Common Stock on December 31, 1996
less the exercise price.
(2) Based on the last sale price of the Common Stock on the date of
exercise less the exercise price.
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total return
(assuming reinvestment of cash dividends, to the extent applicable) of the
Common Stock with the CRSP Total Return Index for the Nasdaq Stock Market (US
Companies) ("Nasdaq") and the Lipper Composite Brokerage Index (the "Lipper
Index"). The Lipper Index consists of twenty-nine brokerage and financial
services firms, including the Company.
FIVE-YEAR TOTAL STOCKHOLDER RETURN
HOENIG GROUP INC. VS. NASDAQ AND LIPPER INDEX
COMPARISON OF TOTAL RETURN FROM DECEMBER 31, 1991 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
(GRAPH OMITTED)
<S> <C> <C> <C> <C> <C> <C>
INDEX DATA DEC91 DEC92 DEC93 DEC94 DEC95 DEC96
Hoenig Group Inc. $ 100 $ 66 $ 71 $ 55 $ 64 $ 85
Nasdaq $ 100 $ 116 $ 134 $ 131 $ 185 $ 227
Lipper Index $ 100 $ 105 $ 140 $ 118 $ 161 $ 242
</TABLE>
Sources: Standard & Poor's Compustat, Nasdaq, and Lipper Analytical
Services Inc.
15
<PAGE>
EMPLOYMENT AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
In November 1991, Messrs. Levine and Herzog each executed an employment
agreement for a term which commenced on October 30, 1991 and terminated on
December 31, 1996 (the "1991 Employment Agreements"). Mr. Levine's 1991
Employment Agreement provided for his employment by the Company as Executive
Vice President at an annual salary of $330,000, plus cost-of-living
increases, and bonus and other compensation of $170,000, or such greater
compensation as the Committee may from time to time determine. Mr. Herzog's
1991 Employment Agreement provided for his employment by the Company as
Executive Vice President and Chief Operating Officer at an annual salary of
$200,000, plus cost-of-living increases, and bonus and other compensation of
$50,000, or such greater compensation as the Committee may from time to time
determine. The 1991 Employment Agreements provided that, during the
respective terms of such Agreements, the Company would cause each of Messrs.
Levine and Herzog to be nominated to the Company's Board of Directors, and
that the Company would use its best efforts to cause each of them to be
elected to the Board of Directors. Each 1991 Employment Agreement also
included a non-competition covenant, pursuant to which each executive agreed
not to compete with the Company's business during the term of the Agreement.
Each 1991 Employment Agreement provided that, if the executive's employment
were terminated for "cause", he would be bound by the non-competition
covenant for a period of one year from the date of termination. The 1991
Employment Agreements provided that the executive would not be subject to the
non-competition covenant upon a termination of employment by the Company (i)
other than for "cause" or (ii) as a result of a "change in control".
In the event of a termination of employment by the Company "other than for
cause prior to a change in control", each of the 1991 Employment Agreements
provided for the Company to pay the executive the balance of his salary due
through the date of termination, a cash bonus based on the previous year's
bonus prorated through the date of termination, any previously deferred
compensation, and any amounts or benefits owing under then applicable
employee benefit plans or policies (the "1991 Accrued Obligations"). In
addition, the 1991 Employment Agreements required the Company to pay the
executive the average annual compensation for the three prior fiscal years,
including contributions to profit-sharing and retirement plans, for each
year, or portion thereof, of the remaining term of the Agreement and two
times the executive's average annual compensation (calculated on a weekly
basis) for each period of twenty-seven weeks or more of employment by the
Company or any of its subsidiaries.
Upon the occurrence of a "change in control", either the Company, or, in
the event that certain additional changes occur (including a change in the
executive's responsibilities, noncompliance by the Company with the terms of
the 1991 Employment Agreement or certain relocations of the executive), the
executive was entitled to terminate the 1991 Employment Agreement. Upon such
a termination, the Company would have been obligated to pay the executive the
1991 Accrued Obligations and three times the average annual compensation for
the three prior fiscal years, including contributions to profit-sharing and
retirement plans. In addition, the Company would have been required to
continue to make contributions on the executive's behalf in all
Company-sponsored health and welfare plans on terms no less favorable than
those in effect on the date of termination until the earlier of: (i) three
years from the date of termination; (ii) attainment of normal retirement;
(iii) the executive's coverage under plans provided by a new employer; or
(iv) the executive's death. The 1991 Employment Agreements also provided for
the following payments to be made to the executive's estate following his
death: (i) the 1991 Accrued Obligations; (ii) a death benefit equal to three
times the executive's average annual compensation for the three prior fiscal
years, including contributions to profit-sharing and retirement plans,
payable over the next three years; and (iii) employee health and welfare
benefits for the executive's surviving dependents for three years.
On November 25, 1996, Mr. Levine executed a new employment agreement with
the Company (the "Levine Agreement") for a two-year term commencing on
January 1, 1997, unless earlier terminated in accordance with the terms of
the Levine Agreement. The Levine Agreement provides for Mr. Levine's
employment as Executive Vice President of the Company and President of Hoenig
at an annual salary of $400,000 and an annual minimum bonus of $150,000, plus
a percentage of the net pre-tax profits (as defined) of commission business
for which Mr. Levine is responsible. The Company also will provide Mr. Levine
with a leased automobile until November 30, 1998.
16
<PAGE>
The Levine Agreement provides that, in the event of a termination of
employment by the Company other than for "cause" or by Mr. Levine for "good
reason", the Company will pay Mr. Levine (i) any accrued but unpaid salary,
any earned but unpaid bonus, and any amount accrued under the Company's
benefit plans, ("Accrued Obligations"); (ii) an amount equal to the
three-year average of the salary and bonus paid to Mr. Levine, multiplied by
the remaining term of the Levine Agreement; and (iii) an amount equal to any
bonus paid to Mr. Levine for the year immediately prior to the termination of
employment, multiplied by a fraction, the numerator of which is the number of
days elapsed in the year of termination, and the denominator of which is 365.
The Levine Agreement further provides that, in the event of termination of
employment as a result of executive's "disability", the Company will pay him
the Accrued Obligations and an amount equal to his salary plus $150,000,
multiplied by the number of years (or fraction thereof) remaining in the
employment term. In addition, the Company would be required to make
contributions on his behalf in all Company-sponsored health and welfare plans
on terms no less favorable than those in effect on the date of termination
until the earlier of (i) one year from the date of termination; (ii)
entitlement to coverage under plans provided by a new employer; (iii) death;
or (iv) the end of the employment term under the Levine Agreement. In the
event of a termination of employment due to Mr. Levine's death, the Levine
Agreement provides that the Company will pay Mr. Levine's estate or
designated beneficiaries (i) the Accrued Obligations; (ii) $150,000; and
(iii) the amount of any bonus paid to Mr. Levine for the immediately
preceding fiscal year, multiplied by a fraction, the numerator of which is
the number of days elapsed in the year of such termination, and the
denominator of which is 365.
On September 5, 1996, Mr. Sapirstein executed an employment agreement with
the Company for a term which commenced on that date and ends on December 31,
1999 (the "Sapirstein Agreement"). The Sapirstein Agreement provides for his
employment as Chairman of the Board, Chief Executive Officer, and President
of the Company at an annual salary of $400,000 and minimum cash bonus of
$300,000 (pro-rated for 1996 only). The minimum cash bonus will operate as a
draw against amounts due under certain performance goals to be determined by
the Committee pursuant to a plan which meets the requirements of Section
162(m) of the Code, such as the Company's Section 162(m) Plan, which was
adopted on November 14, 1996 and is subject to Stockholder approval at the
Annual Meeting under Proposal II herein. See "Proposal II" herein. The
Company is required during the term of his employment to include Mr.
Sapirstein in the management slate for election as a director and to use its
best efforts to cause him to be elected to the Company's Board of Directors.
The Sapirstein Agreement also provides for the grant of (i) ten-year
options to purchase 500,000 shares of Common Stock at an exercise price equal
to the market price of the Common Stock on the date he commenced employment,
which vest 25% on the date of grant and 25% on each of the first three
anniversaries of the date of grant (the "Service-Based Options"); and (ii)
ten-year options to purchase 500,000 shares of Common Stock at an exercise
price of $5.00 per share, which vest on the ninth anniversary of the grant
date, subject to earlier vesting as follows: (a) 50% vests if the average
closing price of the Common Stock equals or exceeds $7.00 per share for 20
consecutive trading days; and (b) 100% vests if the average closing price of
the Common Stock equals or exceeds $8.00 per share for 20 consecutive trading
days (the "Performance Options"). All options generally will vest immediately
upon a "change of control", and the Service-Based Options will vest
immediately following termination of Mr. Sapirstein's employment other than
for "cause" or for "good reason" if such termination occurs after September
5, 1997. The Sapirstein Agreement also provides for Mr. Sapirstein's purchase
from the Company of 250,000 shares of Common Stock at the closing price on
the last trading day immediately prior to September 5, 1996; such shares may
not be sold before September 5, 1999. See "Interest of Management in Certain
Transactions."
The Sapirstein Agreement further provides that in the event of a
termination of employment by the Company other than for "cause" or by Mr.
Sapirstein for "good reason", the Company will pay Mr. Sapirstein (i) the
Accrued Obligations; and (ii) certain termination payments based upon when
such termination occurs. If such termination occurs prior to the first
anniversary of employment, the termination payment will be $700,000. If such
termination occurs after the first anniversary of employment and on or before
the second anniversary, the termination payment will be $1,400,000. If such
17
<PAGE>
termination occurs after the second anniversary of employment, the
termination payment will equal the three-year average of salary and bonus
paid to Mr. Sapirstein, multiplied by the number of years (or fraction
thereof) remaining in the employment term. In addition, if such termination
occurs after the second anniversary of employment, Mr. Sapirstein will be
entitled to receive an amount equal to any bonus paid to Mr. Sapirstein for
the year immediately prior to the termination of employment, multiplied by a
fraction, the numerator of which is the number of days elapsed in the year of
termination, and the denominator of which is 365. In the event of termination
of employment due to death or disability, the Sapirstein Agreement provides
that Mr. Sapirstein or his estate will receive only the Accrued Obligations.
The Sapirstein Agreement and the Levine Agreement contain similar
provisions regarding non-competition and non-solicitation. Each Agreement
includes non-competition and non-solicitation covenants which preclude the
executive from competing with the Company's business or soliciting the
Company's customers or employees during the "Non-Competition Period." The
Non-Competition Period includes: (i) the employment term; (ii) the lesser of
one-year or the remaining term of the Agreement if the Agreement is
terminated by the Company for "cause" or by the executive other than for
"good reason"; and (iii) the period during which the executive is receiving
termination payments.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
Pursuant to the Sapirstein Agreement, on September 5, 1996, Mr. Sapirstein
purchased 250,000 shares of Common Stock from the Company for $3.625 per
share, which was the closing price on the last trading day before his
employment began. Mr. Sapirstein may not sell or dispose of these shares
before September 5, 1999. The Sapirstein Agreement also provides that the
shares will be "restricted securities" under Rule 144. The Company has agreed
to provide one registration statement on demand to any person to whom Mr.
Sapirstein pledges these shares.
The officers and employees of the Company and its operating subsidiaries
are ordinarily required to execute personal securities transactions through
the Company's broker-dealer subsidiaries. Such orders are executed at a
discount from commission rates offered to unaffiliated customers.
Pursuant to the employment agreement between the Company and Ronald H.
Hoenig, in 1996 the Company paid the Estate of Ronald H. Hoenig $285,692,
which represents one-third of a $857,077 death benefit which is payable in
three equal annual installments over the three-year period following Mr.
Hoenig's death on October 12, 1995. In addition, pursuant to the employment
agreement, the Company is required to provide Mr. Hoenig's wife and
dependents with benefits (i.e., health insurance) similar to those provided
to executives under the Company's benefit plans and policies for three years
following October 12, 1995.
SHAREHOLDER'S AGREEMENTS AND CERTAIN TRANSACTIONS RELATING TO INSURANCE
Effective upon the closing of the initial public offering in 1991, the
Company and holders of shares of Common Stock outstanding prior to the
initial public offering, including certain directors and executive officers
of the Company, entered into an agreement (each a "Shareholder's Agreement",
and collectively, the "Shareholder's Agreements") which provides that, upon
the death of each such holder, the Stockholder's estate will have an option
to sell shares of Common Stock to the Company, as described below. At the
option of the estate, exercisable within thirty days after the appointment of
an executor or representative of the estate, the Company is obligated to
purchase, at a purchase price equal to 10% below the market value of the
shares of Common Stock, the number of shares of Common Stock which results in
an aggregate purchase price of the greater of the actual amount of insurance
proceeds received by the Company upon the death of the holder, if any, or $1
million. The market value will be determined based on the average of the last
twenty days' closing prices of the Common Stock prior to the death of such
holder. The Company will have the right, but shall not be obligated, to
increase the number of shares of Common Stock to be purchased by it up to the
maximum number of shares the Stockholder's estate desires to sell.
In order to fund its obligations under the aforementioned Shareholder's
Agreements, the Company currently maintains life insurance policies on
certain Stockholders who hold such options as follows:
18
<PAGE>
PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
<S> <C>
Max H. Levine...... $ 3,587,250
Alan B. Herzog..... 2,812,300
Thomas J. Compono . 1,000,000
Nigel
Johnson-Hill....... 1,000,000
Kathryn L. Hoenig . 525,000
Robin A. Green..... 434,000
OTHER STOCKHOLDERS . 1,609,000
------------
Total:........... $10,967,550
============
</TABLE>
The Company's aggregate annual premium cost in 1996 for the life insurance
policies was $81,227, and the cash surrender value of these policies was
$662,649 as of December 31, 1996. The Company intends to maintain the life
insurance policies on the principal Stockholders, directors and executive
officers listed above and continues to evaluate the benefits of maintaining
the policies on the other Stockholders.
On March 3, 1997, Robert F. Donahue purchased from the Company a whole
life insurance policy on his life for $14,590, the cash surrender value of
the policy. At the time of the purchase, Mr. Donahue was a director and
executive officer of the Company. The Company previously purchased the life
insurance policy in 1987 to fund the Company's potential liability to Mr.
Donahue's estate to repurchase shares of Common Stock under a Shareholder's
Agreement. The Company agreed to sell the policy to Mr. Donahue after
management had decided that it was in the best interests of the Company and
the Stockholders to cancel the policy and discontinue paying premiums. The
sale of the insurance policy to Mr. Donahue was approved by a unanimous vote
of the Board of Directors (including members of the Audit Committee),
excluding Mr. Donahue. Mr. Donahue paid all of the 1996 premiums on the
policy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ROBERT L.
COONEY, KATHRYN L. HOENIG, AND FREDRIC P. SAPIRSTEIN AS CLASS III DIRECTORS.
THE THREE NOMINEES FOR DIRECTOR RECEIVING THE HIGHEST NUMBER OF VOTES OF
SHARES OF COMMON STOCK PRESENT IN PERSON OR BY PROXY AND ENTITLED TO VOTE ON
THE MATTER WILL BE ELECTED.
PROPOSAL II
APPROVAL OF THE COMPANY'S SECTION 162(M) CASH BONUS PLAN
GENERAL
At the Annual Meeting, Stockholders will be asked to approve the Section
162(m) Plan. Section 162(m) of the Code generally disallows a public
company's tax deduction in excess of $1 million for compensation paid to
Named Executive Officers, subject to several exceptions, including an
exception for compensation paid under a Stockholder-approved plan that is
"performance-based" within the meaning of Section 162(m). The Section 162(m)
Plan provides a means for the payment of performance-based cash bonuses to
certain key executives of the Company while preserving the Company's tax
deduction with respect to the payment thereof.
The Section 162(m) Plan has been unanimously recommended by the Committee
and adopted by a unanimous vote of the Board of Directors, effective for the
performance periods commencing on or after January 1, 1997, subject to
Stockholder approval. Should Stockholder approval not be obtained, the
Section 162(m) Plan will be void, and any awards outstanding under the Plan
will be canceled.
The Board of Directors and the Committee believe that, as a matter of
general policy, the Company's incentive compensation plans should be
structured to facilitate compliance with Section 162(m), but that
19
<PAGE>
the Committee should reserve the right to establish separate annual and other
incentive compensation arrangements for Named Executive Officers that may not
comply with Section 162(m) if it determines, in its sole discretion, that to
do so would be in the best interests of the Company and the Stockholders.
The principal terms of the Section 162(m) Plan are summarized below, and a
copy of the Plan is annexed to this proxy statement as Annex A-1. The summary
of the Section 162(m) Plan set forth below is not intended to be a complete
description thereof, and such summary is qualified in its entirety by the
actual text of the Section 162(m) Plan to which reference is made.
SUMMARY DESCRIPTION OF THE SECTION 162(M) PLAN
The purpose of the Section 162(m) Plan is (i) to retain and motivate key
executives of the Company who have been designated as participants in the
Section 162(m) Plan for a given performance period (generally, any period
used to determine whether the established goals have been attained, which may
be one or more fiscal years or portions thereof), by providing them with the
opportunity to earn bonus awards that are based on the extent to which
specified performance goals for such performance period have been achieved or
exceeded and (ii) to structure bonus opportunities in a way that will qualify
the awards as "performance-based" for purposes of Section 162(m) so that the
Company will be entitled to a tax deduction on the payment of such incentive
awards to Named Executive Officers.
The Section 162(m) Plan will be administered by the Section 162(m) Plan
Committee (in such capacity, the "Plan Committee"), consisting of at least
two non-employee directors, each of whom is intended to qualify as an
"outside director" within the meaning of Section 162(m) of the Code. The Plan
Committee has broad administrative authority to, among other things,
designate participants, establish performance goals and performance periods,
determine the effect of termination of employment and "change in control"
transactions (as defined in the Section 162(m) Plan, which is the same
definition as that set forth in the 1996 Incentive Plan) prior to the payment
of an award, and interpret and administer the Section 162(m) Plan. The
Committee currently constitutes the Plan Committee.
Participants in the Section 162(m) Plan for any given performance period
may include any key employee of the Company or a subsidiary who is an
executive officer of the Company and who is designated as a participant for
such period by the Plan Committee. The participants in the Section 162(m)
Plan for any given period will be designated by the Plan Committee, in its
sole discretion, within the earlier of the first 90 days of each performance
period or the date on which 25% of such performance period has been completed
(such period, the "Applicable Period"). This determination may vary from
period to period, and will be based primarily on the Plan Committee's
judgment as to which executive officers are likely to be Named Executive
Officers of the Company for proxy purposes as of the end of such performance
period, and which are reasonably expected to have compensation in excess of
$1 million.
Within the Applicable Period, the Plan Committee will specify the
applicable performance criteria and targets to be used under the Section
162(m) Plan for such performance period. These performance criteria may vary
from participant to participant and will be based on one or more of the
following Company, subsidiary, operating unit, or division financial
performance measures: pre-tax or after-tax net income; operating income;
gross revenue; profit margin; stock price or cash flows; or strategic
business criteria consisting of one or more objectives based upon meeting
specified revenue, market penetration, geographic business expansion goals,
cost targets, and goals relating to acquisitions or divestitures. These
performance criteria or goals may be (i) expressed on an absolute or relative
basis; (ii) based on internal targets; (iii) based on comparison(s) with
prior performance; (iv) based on comparison(s) to capital, stockholders'
equity, shares outstanding, assets or net assets; and/or (v) based on
comparison(s) to the performance of other companies. For example, an
income-based performance measure could be expressed in a number of ways, such
as net earnings per share, or return on equity, and with reference to meeting
or exceeding a specific target, or with reference to growth above a specified
level, such as prior year's performance, or current or previous peer group
performance. The Section 162(m) Plan provides that the achievement of such
goals must be substantially uncertain at the time they are established, and
awards are subject to the Plan Committee's right to reduce the amount of any
award payable as a result of such performance as discussed below.
20
<PAGE>
The target bonus opportunity for each participant may be expressed as a
dollar-denominated amount or as a percentage share of a bonus pool to be
created under the Section 162(m) Plan, provided that, if a pool approach is
used, the total bonus opportunities represented by the shares designated for
the participants may not exceed 100% of the pool, and the Plan Committee has
the sole discretion to reduce (but not increase) the actual bonuses awarded
under the Section 162(m) Plan. The actual bonus awarded to any given
participant at the end of a performance period will be based on the extent to
which the applicable financial performance goals for such performance period
are achieved, as determined by the Plan Committee. The maximum bonus payable
under the Section 162(m) Plan to any one individual in any one calendar year
is $5 million.
The Board of Directors may at any time amend or terminate the Section
162(m) Plan, provided that (i) without the participant's written consent, no
such amendment or termination will adversely affect the annual bonus rights
(if any) of any already designated participant for a given performance period
once the participant designations and performance goals for such performance
period have been announced; and (ii) the Board of Directors will be
authorized to make any amendments necessary to comply with applicable
regulatory requirements, including, without limitation, Section 162(m).
Amendments to the Section 162(m) Plan will require Stockholder approval only
if required under Section 162(m).
NEW PLAN BENEFITS
The Committee has designated Fredric P. Sapirstein, the Company's Chairman
of the Board, Chief Executive Officer, and President, as a participant in the
Section 162(m) Plan for 1997 and has awarded him a bonus opportunity which is
a function of earnings per share and revenues achieved during 1997. The 1997
bonus opportunity provides Mr. Sapirstein with certain fixed dollar amounts
assuming the achievement of certain earnings per share and revenue targets.
Each performance target is to be evaluated separately, and the corresponding
payment will be made without regard to whether the other performance target
was met. In order for Mr. Sapirstein to receive any amounts under the bonus
opportunity for 1997, the Company must achieve certain minimum earnings per
share or revenue targets. Under the Sapirstein Agreement, Mr. Sapirstein is
entitled to a minimum bonus for 1997 of $300,000, which amount shall operate
as a draw against any amounts due Mr. Sapirstein under the bonus award
opportunity under the Section 162(m) Plan. Mr. Sapirstein's 1997 bonus
opportunity under the Section 162(m) Plan, other than amounts guaranteed to
him under the Sapirstein Agreement, is subject to a maximum of 45% of the
Company's net income for 1997. It is not possible to predict who, other than
Mr. Sapirstein, will participate in the Section 162(m) Plan in 1997, or who
will be granted awards under the Section 162(m) Plan in the years after 1997.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax
consequences generally arising with respect to awards that may be granted
under the Section 162(m) Plan. This discussion is intended for the
information of Stockholders considering how to vote at the Annual Meeting and
not as tax guidance to individuals who may participate in the Section 162(m)
Plan.
Under present federal income tax law, participants will realize ordinary
income equal to the amount of the award received under the Section 162(m)
Plan in the year of such receipt. The Company will receive a deduction for
the amount constituting ordinary income to the participant, provided that the
participant's total compensation is below the Section 162(m) limit or the
Section 162(m) Plan award satisfies the requirements of the performance-based
exception of Section 162(m) of the Code. It is the Company's intention that
the Section 162(m) Plan be adopted and administered in a manner that
preserves the Company's deductibility of compensation under Section 162(m) of
the Code.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE SECTION 162(m) PLAN. THE
VOTE REQUIRED FOR APPROVAL OF THE SECTION 162(m) PLAN IS A FAVORABLE VOTE OF
A MAJORITY OF SHARES OF COMMON STOCK PRESENT IN PERSON OR BY PROXY AND
ENTITLED TO VOTE ON THE MATTER.
21
<PAGE>
PROPOSAL III
APPROVAL OF THE COMPANY'S 1996 LONG-TERM STOCK INCENTIVE PLAN
GENERAL
At the Annual Meeting, Stockholders will be asked to approve the 1996
Incentive Plan. The 1996 Incentive Plan has been unanimously recommended by
the Committee and adopted by a unanimous vote of the Board of Directors,
subject to Stockholder approval. Should Stockholder approval not be obtained,
the 1996 Incentive Plan will be void, and any awards outstanding under the
Plan will be canceled.
In the Board of Directors' judgment, the 1996 Incentive Plan provides a
critical long-term incentive for management, employees, and non-employee
directors of the Company and its subsidiaries as well as for consultants. The
Board believes that the Company's policy of granting stock options will
continue to provide it with a critical advantage in attracting and retaining
qualified candidates. In addition, the 1996 Incentive Plan is intended to
provide the Committee with maximum flexibility to award various types of
long-term, equity-based incentives to plan participants. It is expected that
such flexibility will be an integral part of the Company's policy to
encourage participants to focus on the long-term growth of Stockholder value.
The Board believes that important advantages to the Company are gained by a
comprehensive compensation program, such as the 1996 Incentive Plan, which
includes different types of awards for motivating and rewarding outstanding
service, while at the same time promoting a closer identity of interests
between participants and Stockholders.
The principal terms of the 1996 Incentive Plan are summarized below, and a
copy of the 1996 Incentive Plan is annexed to this proxy statement as Annex
A-2. The summary of the 1996 Incentive Plan set forth below is not intended
to be a complete description thereof, and such summary is qualified in its
entirety by the actual text of the 1996 Incentive Plan to which reference is
made.
SUMMARY DESCRIPTION OF THE 1996 INCENTIVE PLAN
The purpose of the 1996 Incentive Plan is to advance the interests of the
Company and its Stockholders by providing a means to attract, retain, and
reward directors, officers, and other key employees and consultants of the
Company and its subsidiaries and to enable such persons to acquire or
increase a proprietary interest in the Company.
The Committee, which administers the 1996 Incentive Plan, has authority
under the Plan, among other things, to: (i) select the officers and other key
employees and consultants entitled to receive awards under the 1996 Incentive
Plan; (ii) determine the form of awards, or combinations thereof, and whether
such awards are to operate on a tandem basis or in conjunction with other
awards; (iii) determine the number of shares of Common Stock or units or
rights covered by an award; and (iv) determine the other terms and conditions
of any awards granted under the 1996 Incentive Plan, including any
restrictions or limitations on transfer, any vesting schedules or the
acceleration thereof, and any forfeiture or termination provisions or waivers
thereof and (v) in the event of a stock split, recapitalization,
reorganization or similar corporate event that affects the Common Stock, make
appropriate adjustments in the kind and number of shares available for
issuance under the Plan, the kind and number of shares subject to the annual
per-employee awards, the kind and number of shares and exercise price of
shares subject to outstanding awards, and the kind and number of shares to be
granted subject to non-employee director options. The 1996 Incentive Plan
also permits the Committee to impose performance conditions with respect to
any award to key employees, thereby requiring forfeiture of all or a part of
any award if performance objectives are not met, or linking the time of
exercisability or settlement of an award to the achievement of performance
conditions. Awards granted under the 1996 Incentive Plan generally are not
assignable or transferable other than by the laws of the descent and
distribution, or as may be permitted by the Committee during a participant's
lifetime.
Awards to participants may include: (i) options to purchase shares of
Common Stock, including (a) incentive stock options ("ISOs") granted to
employees of the Company or its subsidiaries, (b) non-qualified stock
options, both of which may include automatic reload features, (c) options
granted to
22
<PAGE>
employees of the Company or a subsidiary who at the time of grant are
resident in the United Kingdom ("U.K. Options"), and (d) options granted
automatically to non-employee directors ("Director Options"); (ii) stock
appreciation rights ("SARs"), whether in conjunction with the grant of stock
options or independent of such grants, or SARs that are only exercisable in
the event of a "change in control" of the Company (as defined in the 1996
Incentive Plan); (iii) restricted stock, in which shares of Common Stock are
granted to participants subject to restrictions on transferability and other
restrictions that lapse over time; (iv) deferred stock, in which delivery of
shares of Common Stock occurs upon expiration of a deferral period; (v) bonus
stock, consisting of a right to receive shares of Common Stock in an amount
determined with reference to a bonus award; (vi) dividend equivalents,
consisting of a right to receive cash, shares of Common Stock, other awards,
or other property equal in value to dividends paid with respect to a
specified number of shares of Common Stock; (vii) performance-based equity
awards, based on criterion set forth in the Company's Section 162(m) Plan,
that are intended to qualify for deductibility under Section 162(m) of the
Code; and (viii) other stock-based awards not otherwise specifically provided
for, the value of which are based in whole or in part upon the value of
Common Stock.
Director Options consist of non-discretionary, automatic stock option
grants to each individual who becomes, on or after the date of the Annual
Meeting, a non-employee director of the Company. The automatic grants will be
made upon initial election or appointment to the Board of Directors, and on
each three-year anniversary of the date of such initial election or
appointment to the Board of Directors. The number of shares of Common Stock
subject to each Director Option grant is 10,000 (or such lesser amount if
there are insufficient shares available under the 1996 Incentive Plan at such
time). The exercise price of each Director Option will be equal to the fair
market value of a share of Common Stock on the date the option is granted.
Director Options will expire five years from their date of grant, and shall
vest 4,000 shares on the first anniversary of the date of grant and 3,000
shares on each of the second and third anniversaries thereof.
Other than with respect to the grant of (i) Director Options, (ii) ISOs,
and (iii) U.K. Options, the exercise price at which shares of Common Stock
may be purchased as well as the exercise period of stock options under the
1996 Incentive Plan will be determined by the Committee in its discretion at
the time of grant. This discretion includes the ability to set an exercise
price that is below the fair market value of shares of Common Stock covered
by such grant at the time of grant. With respect to the grant of Director
Options, ISOs, and U.K. Options, the exercise price of such options must be a
price not less than the fair market value of shares of Common Stock on the
date of grant. Unless otherwise provided by the Committee, all restrictions
relating to the continued performance of services and/or the achievement of
performance objectives will immediately lapse upon a change in control of the
Company.
The total number of shares of Common Stock that may be delivered pursuant
to the exercise or settlement of awards under the 1996 Incentive Plan may not
exceed (i) 1,000,000 shares of Common Stock, plus (ii) the number of shares
of Common Stock that, on the date of Stockholder approval of the 1996
Incentive Plan, otherwise would have been available under the Company's 1991
Plan and 1994 Plan (i.e., the unused shares), or otherwise would have become
available after such date (i.e., by reason of termination, expiration, or
forfeiture of stock options outstanding under such plans). The anticipated
number of unused shares of Common Stock that would otherwise have been
available under the Company's 1991 Plan and 1994 Plan as of the date of the
Annual Meeting is 1,173,000. Upon approval of the Stockholders of the 1996
Incentive Plan, no further grants of stock options will be made by the
Company pursuant to the 1991 Plan and 1994 Plan. Under the terms of the 1996
Incentive Plan, no individual may receive awards in any one calendar year
relating to more than 750,000 shares of Common Stock.
The 1996 Incentive Plan may be amended, altered, suspended, discontinued,
or terminated by the Board of Directors without Stockholder approval unless
such approval is required by law or regulation or under the rules of any
stock exchange or automated quotation system on which Common Stock is then
listed or quoted. Thus, Stockholder approval will not necessarily be required
for amendments which might increase the cost of the Plan or broaden
eligibility.
23
<PAGE>
NEW PLAN BENEFITS
The following table sets forth the number of shares of Common Stock
subject to awards that have been granted pursuant to the 1996 Incentive Plan,
subject to Stockholder approval of the Plan at the Annual Meeting, to (i)
each Named Executive Officer, (ii) all current executive officers as a group,
(iii) all current non-employee directors as a group (assuming all nominees
for election are in fact elected), and (iv) all non-executive officer
employees as a group:
NEW PLAN BENEFITS(1)
1996 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES
- -------------------------------------------------------------------- ----------------
<S> <C>
1. Fredric P. Sapirstein, Chairman, CEO and President................ 367,500
2. Joseph A. D'Andrea, former Chairman and CEO....................... 0
3. Max H. Levine, Executive Vice President........................... 0
4. Robin A. Green, Managing Director of Hoenig (Far East) Limited ... 50,000
5. Alan B. Herzog, Executive Vice President, COO, CFO, Treasurer .... 0
6. Nigel Johnson-Hill, Managing Director of Hoenig & Company Limited. 0
7. Executive Officer Group........................................... 427,500
8. Non-Employee Director Group....................................... 0
9. Non-Executive Officer Employee Group.............................. 42,000
</TABLE>
(1) Mr. Sapirstein's awards under the 1996 Incentive Plan consist of
non-qualified stock options. All other awards consist of deferred Common
Stock grants.
It is not possible at present to predict the number of awards that will be
issuable under the 1996 Incentive Plan after the Annual Meeting. With respect
to the Company's non-employee directors, there are no non-employee directors
who will be granted Director Options under the 1996 Incentive Plan as of the
Annual Meeting. With respect to the number of awards that will be issuable
under the 1996 Incentive Plan to the Company's non-employee directors after
the date of the Annual Meeting, on each three-year anniversary of the date of
a non-employee director's initial appointment or election to the Board of
Directors, such non-employee director will receive a Director Option.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax
consequences generally arising with respect to awards that may be granted
under the 1996 Incentive Plan (other than with respect to the U.K. Options,
which generally have tax implications to non-residents of the United States
in the United Kingdom). This discussion is intended for the information of
Stockholders considering how to vote at the Annual Meeting and not as tax
guidance to individuals who may participate in the 1996 Incentive Plan.
The grant of an option, SAR, or other stock-based award in the nature of a
purchase right will create no tax consequences for the participant or the
Company. A participant will not recognize taxable income upon exercising an
ISO (except that the alternative minimum tax may apply), and the Company will
receive no deduction at that time. Upon exercising an option other than an
ISO, an SAR or other stock-based award in the nature of a purchase right, the
participant must generally recognize ordinary income equal to the difference
between the exercise price and the fair market value of the freely
transferable and non-forfeitable shares received. In each case, the Company
will be entitled to a deduction equal to the amount recognized as ordinary
income by the participant.
A participant's disposition of shares acquired upon the exercise of an
option, SAR, or other stock-based award in the nature of a purchase right
generally will result in short-term capital gain or loss measured by the
difference between the sale price and the participant's tax basis in such
shares (the
24
<PAGE>
exercise price of the option in the case of shares acquired by exercise of an
ISO and held for the applicable ISO holding periods). Generally, there will
be no tax consequences to the Company in connection with a disposition of
shares acquired under an option, SAR or other award, except that the Company
will be entitled to a deduction (and the participant will recognize ordinary
income) if shares acquired upon exercise of an ISO are disposed of before the
applicable ISO holding periods have been satisfied.
With respect to awards granted under the 1996 Incentive Plan that may be
settled either in cash or in Common Stock or other property that is either
not restricted as to transferability or not subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair market value of the shares or other property received.
The Company will be entitled to a deduction for the same amount. With respect
to awards involving shares or other property that is restricted as to
transferability and subject to a substantial risk of forfeiture, the
participant must generally recognize ordinary income equal to the fair market
value of the shares or other property received at the time the shares or
other property become transferable or not subject to a substantial risk of
forfeiture, whichever occurs earlier. The Company will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant. A participant may elect to be taxed at the time of receipt of
shares or other property rather than upon the lapse of the restriction on
transferability or the substantial risk of forfeiture, but if the participant
subsequently forfeits such shares or property the participant would not be
entitled to any tax deduction, including a capital loss, for the value of the
shares or property on which the participant previously paid tax. Such
election must be made and filed with the Internal Revenue Service within
thirty days of receipt of the shares or other property.
Section 162(m) of the Code generally disallows a public corporation's tax
deduction for compensation to a Named Executive Officer in excess of $1
million. Compensation that qualifies as "performance-based compensation" is
excluded from the $1 million deductibility cap, and therefore remains fully
deductible by the corporation that pays it. The Company intends that options
granted with an exercise price at least equal to 100% of fair market value of
the underlying stock at the date of grant, and other awards the settlement of
which is conditioned upon achievement of performance goals, will qualify as
"performance-based compensation," although other awards under the 1996
Incentive Plan may not so qualify.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE 1996 INCENTIVE PLAN. THE
VOTE REQUIRED FOR APPROVAL OF THE 1996 INCENTIVE PLAN IS A FAVORABLE VOTE OF
A MAJORITY OF SHARES OF COMMON STOCK PRESENT IN PERSON OR BY PROXY AND
ENTITLED TO VOTE ON THE MATTER.
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP have acted as the Company's independent public
accountants since June 1994. Upon the recommendation of the Audit Committee,
the Board of Directors has voted to appoint Deloitte & Touche LLP to act as
the Company's independent public accountants responsible for auditing the
Company's financial statements for 1997.
A representative of Deloitte & Touche LLP will be present at the Annual
Meeting, will be given an opportunity to make a statement if he or she so
desires, and is expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any Stockholder proposal to be presented at next year's Annual Meeting of
Stockholders must be received at the principal executive offices of the
Company (the address of which is set forth on the cover page of this proxy
statement), directed to the attention of the Secretary, no later than
December 17, 1997 for consideration for inclusion in the Company's proxy
statement and form of proxy relating to that meeting. Any such proposal must
comply in all respects with the rules and regulations of the Commission.
25
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters which may come before the
Annual Meeting. If any matters other than those referred to above should
properly come before the Annual Meeting, it is the intention of the persons
designated by the Board to serve as proxies to vote the proxies received in
accordance with a determination by a majority of the Board.
By Order of the Board of Directors,
KATHRYN L. HOENIG
Secretary
26
<PAGE>
ANNEXES TO
HOENIG GROUP INC.
PROXY STATEMENT
<PAGE>
ANNEX A-1
HOENIG GROUP INC.
SECTION 162(m) CASH BONUS PLAN
<PAGE>
HOENIG GROUP INC.
SECTION 162(m) CASH BONUS PLAN
1. Purpose. The purpose of this Section 162(m) Cash Bonus Plan (the "Plan") of
Hoenig Group Inc. (the "Company") is (i) to retain and motivate key senior
executives of the Company who have been designated as Participants in the Plan
for a given Performance Period, by providing them with the opportunity to earn
bonus awards that are based on the extent to which specified performance goals
for such Performance Period have been achieved or exceeded; and (ii) to
structure such bonus opportunities in a way that will qualify the awards made
as "performance-based" for purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended (or any successor section) so that the Company will
be entitled to a tax deduction on the payment of such incentive awards to such
employees.
2. Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Annual Base Salary" shall mean the amount of base salary paid to
a Participant for a given year, adjusted to include the amount of any base
salary deferrals for such year, unless the Plan Committee otherwise specifies
at the time that the Participant's award opportunity for a given Performance
Period is established.
(b) "Applicable Period" shall mean, with respect to any Performance
Period, a period commencing on or before the first day of such Performance
Period and ending no later than the earlier of (i) the 90th day of such
Performance Period, or (ii) the date on which 25% of such Performance Period
has been completed. Any action required under the Plan to be taken within the
period specified in the preceding sentence may be taken at a later date if,
but only if, the regulations under Section 162(m) of the Code are hereafter
amended, or interpreted by the Internal Revenue Service, to permit such later
date, in which case the term "Applicable Period" shall be deemed amended
accordingly.
(c) "Board" shall mean the Board of Directors of the Company as
constituted from time to time.
(d) "Cause" shall mean "cause" as defined in any employment agreement
then in effect between the Participant and the Company or if not defined
therein or, if there shall be no such agreement, where the Participant: (i)
commits any act of fraud, willful misconduct or dishonesty in connection with
his employment or which injures the Company or its direct or indirect
subsidiaries; (ii) breaches any other material provision of any agreement
between the Participant and the Company or a subsidiary of the Company
<PAGE>
relating to the Participant's employment or breaches any fiduciary duty to the
Company or its direct or indirect subsidiaries; (iii) fails, refuses or
neglects to timely perform any material duty or obligation relating to his
position; (iv) commits a material violation of any law, rule, regulation or
by-law of any governmental authority (state, federal or foreign), any
securities exchange or association or other regulatory or self-regulatory body
or agency applicable to the Company or its direct or indirect subsidiaries or
any general policy or directive of the Company or its direct or indirect
subsidiaries communicated in writing to the Participant; (v) is charged with a
crime involving moral turpitude, dishonesty, fraud or unethical business
conduct, or a felony; (vi) is subject to the occurrence of an event or
condition which makes it unlawful for the Participant to perform his duties,
including the issuance of any order, decree, decision or judgment, which
remains in effect for eight weeks or more; (vii) gives or accepts undisclosed
commissions or other payments in cash or in kind in connection with the
affairs of the Company or any of its direct or indirect subsidiaries or their
respective clients; (viii) is expelled or suspended in excess of eight weeks,
or is subject to an order temporarily (for a period in excess of eight weeks)
or permanently enjoining the Participant from the securities, investment
management or investment banking business or from acting in the capacity
consistent with his position by the SEC, the NASD, any national securities
exchange or any self-regulatory agency or governmental authority, state,
foreign or federal; or (ix) fails to obtain or maintain any registration,
license or other authorization or approval that the Company or its direct or
indirect subsidiaries in their discretion reasonably believe is required for
the Participant to perform his duties.
(e) "Change of Control" shall have the same meaning as set forth in
the Hoenig Group Inc. 1996 Long-Term Stock Incentive Plan, as amended from
time to time (the "1996 LTSIP").
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" or "Plan Committee" shall mean the committee for the
Board consisting solely of two or more non-employee directors (each of whom is
intended to qualify as an "outside director" within the meaning of Section
162(m) of the Code) designated by the Board as the committee responsible for
administering and interpreting the Plan.
(h) "Company" shall mean Hoenig Group Inc., a corporation organized
under the laws of the State of Delaware, and any successor thereto.
(i) "Disability" shall mean "disability" as defined in any employment
agreement then in effect between the Participant and the Company or, if not
defined therein or if there shall be no such agreement, as defined in the
Company's long-term disability plan as in effect from time to time, or if
there shall be no plan or if not defined therein, the Participant's becoming
physically or mentally incapacitated and consequent inability for a
2
<PAGE>
period of 120 days in any twelve consecutive month period to perform his
duties to the Company.
(j) "Executive Officer" shall have the meaning set forth in Rule 3b-7
promulgated under the Securities Exchange Act of 1934, in each case as amended
from time to time.
(k) "Individual Award Opportunity" shall mean the performance-based
award opportunity for a given Participant for a given Performance Period as
specified by the Plan Committee within the Applicable Period, which may be
expressed in dollars or on a formula basis that is consistent with the
provisions of this Plan.
(l) "Negative Discretion" shall mean the discretion authorized by the
Plan to be applied by the Committee to eliminate, or reduce the size of, a
bonus award otherwise payable to a Participant for a given Performance Period,
provided that the exercise of such discretion would not cause the award to
fail to qualify as "performance-based compensation" under Section 162(m) of
the Code. By way of example and not by way of limitation, in no event shall
any discretionary authority granted to the Committee by the Plan including,
but not limited to, Negative Discretion, be used (i) to provide for an award
under the Plan in excess of the amount payable based on actual performance
versus the applicable performance goals for the Performance Period in
question, or in excess of the maximum individual award limit specified in
Section 6(b) below, or (ii) to increase the amount otherwise payable to any
other Participant.
(m) "Participant" shall mean, for any given Performance Period with
respect to which the Plan is in effect, each key employee of the Company
(including any subsidiary, operating unit or division) who is an Executive
Officer of the Company and who is designated as a Participant in the Plan for
such Performance Period by the Committee pursuant to Section 4 below.
(n) "Performance Period" shall mean any period commencing on or after
January 1, 1997 for which performance goals are set under Section 5 and during
which performance shall be measured to determine whether such goals have been
met for purposes of determining whether a Participant is entitled to payment
of a bonus under the Plan. A Performance Period may be coincident with one or
more fiscal years of the Company, or a portion thereof.
(o) "Plan" or "Section 162(m) Plan" shall mean the Hoenig Group Inc.
Section 162(m) Cash Bonus Plan as set forth in this document, and as amended
from time to time.
(p) "Retirement" shall mean any termination of employment with the
Company and its subsidiaries (other than a termination by the Company (or any
of its subsidiaries) for Cause) that (i) qualifies as a "retirement" event
under the terms of the Hoenig & Co., Inc. 401(K) and Profit Sharing Plan (or
any successor pension plan in which the Company participates), and (ii) is
approved in writing as a "Retirement" event for purposes of this Plan by (or
pursuant to procedures established by) the Plan Committee.
3
<PAGE>
3. Administration.
(a) General. The Plan shall be administered by the Committee. Subject
to the terms of the Plan and applicable law (including, but not limited to,
Section 162(m) of the Code), and in addition to any other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall
have the full power and authority, after taking into account, in its sole and
absolute discretion, the recommendations of the Company's Chief Executive
Officer:
(i) to designate (within the Applicable Period) the
Participants in the Plan and the individual award
opportunities and/or, if applicable, bonus pool
award opportunities for such Performance Period;
(ii) to designate (within the Applicable Period) and
thereafter administer the performance goals and
other award terms and conditions that are to apply
under the Plan for such Performance Period;
(iii) to determine and certify the bonus amounts earned
for any given Performance Period, based on actual
performance versus the performance goals for such
Performance Period, after making any permitted
Negative Discretion adjustments;
(iv) to decide (within the Applicable Period) any issues
relating to the impact on the bonus awards for such
Performance Period of (A) a termination of
employment (due to death, Disability, Retirement,
voluntary termination (other than Retirement),
termination by the Company other than for Cause, or
termination by the Company for Cause), provided, in
each case, that no payment shall be made for any
given Performance Period prior to the time that the
Plan Committee certifies, pursuant to Section
6(c)(i) below, that the applicable performance
goals for such Performance Period have been met or
(B) a Change of Control, that are not resolved
under the express terms of the Plan;
(v) to decide whether, under what circumstances and
subject to what terms bonus payouts are to be paid
on a deferred basis, including automatic deferrals
at the Committee's election as well as elective
deferrals at the election of Participants;
(vi) to adopt, revise, suspend, waive or repeal, when
and as appropriate, in its sole and absolute
discretion, such administrative rules,
4
<PAGE>
guidelines and procedures for the Plan as it deems
necessary or advisable to implement the terms and
conditions of the Plan;
(vii) to interpret and administer the terms and
provisions of the Plan and any award issued under
the Plan (including reconciling any
inconsistencies, correcting any defaults and
addressing any omissions in the Plan or any related
instrument or agreement); and
(viii) to otherwise supervise the administration of the
Plan.
It is intended that all amounts payable to Participants
under the Plan who are "covered employees" within the meaning of Treas. Reg.
Sec. 1.162-27(c)(2) (as amended from time to time) shall constitute "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code and Treas. Reg. Sec. 1.162-27(e) (as amended from time to time), and, to
the maximum extent possible, the Plan and the terms of any awards under the
Plan shall be so interpreted and construed.
(b) Binding Nature of Committee Decisions. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions made under or with respect to the Plan or any award under the
Plan shall be within the sole and absolute discretion of the Committee, and
shall be final, conclusive and binding on all persons, including the Company,
any Participant, and any award beneficiary or other person having, or
claiming, any rights under the Plan.
(c) Other. No member of the Committee shall be liable for any action
or determination (including, but limited to, any decision not to act) made in
good faith with respect to the Plan or any award under the Plan. If a
Committee member intended to qualify as an "outside director" under Section
162(m) of the Code does not in fact so qualify, the mere fact of such
non-qualification shall not invalidate any award or other action made by the
Committee under the Plan which otherwise was validly made under the Plan.
4. Plan Participation.
(a) Annual Participant Designations By Plan Committee. For any given
Performance Period, the Plan Committee, in its sole and absolute discretion,
shall, within the Applicable Period, designate those key employees of the
Company (including its subsidiaries, operating units and divisions) who shall
be Participants in the Plan for such Performance Period. Such Participant
designations shall be made by the Plan Committee, in its sole and absolute
discretion, based primarily on its determination as to which key employees:
(i) are likely to be Executive Officers of the Company
as of the last day of the fiscal year for which the
Company would be entitled to a
5
<PAGE>
Federal tax deduction for payment of the award in
respect of such Performance Period;
(ii) are reasonably expected by the Plan Committee to
have individual compensation for such fiscal year
that may be in excess of $1 million, excluding any
compensation that is grandfathered for Section
162(m) purposes or is otherwise excluded for
Section 162(m) purposes based on an existing or
other "performance-based" plan other than this
Plan; and
(iii) are reasonably expected by the Plan Committee to be
"covered employees" for such fiscal year for
Section 162(m) purposes,
and such other consideration as the Committee deems appropriate, in its sole
and absolute discretion.
(b) Impact Of Plan Participation. An individual who is a designated
Participant in the Section 162(m) Plan for any given Performance Period shall
not also participate in the Company's general bonus plans for such Performance
Period if such participation would cause any award hereunder to fail to
qualify as "performance-based" under Section 162(m).
5. Performance Goals.
(a) Setting Of Performance Goals. For a given Performance Period, the
Plan Committee shall, within the Applicable Period, set one or more objective
performance goals for each Participant and/or each group of Participants
and/or each bonus pool (if any). Such goals shall be based exclusively on one
or more of the following corporate-wide or subsidiary, division or operating
unit financial measures:
(1) pre-tax or after-tax net income,
(2) operating income,
(3) gross revenue,
(4) profit margin,
(5) stock price,
(6) cash flow(s),
(7) strategic business criteria, consisting of one or
more objectives based on meeting specified revenue,
market penetration, geographic
6
<PAGE>
business expansion goals, cost targets, and goals
relating to acquisitions or divestitures,
or any combination thereof (in each case before or after such objective income
and expense allocations or adjustments as the Committee may specify within the
Applicable Period). Each such goal may be expressed on an absolute and/or
relative basis, may be based on or otherwise employ comparisons based on
current internal targets, the past performance of the Company (including the
performance of one or more subsidiaries, divisions and/or operating units)
and/or the past or current performance of other companies, and in the case of
earnings-based measures, may use or employ comparisons relating to capital
(including, but limited to, the cost of capital), shareholders' equity and/or
shares outstanding, or to assets or net assets. In all cases, the performance
goals shall be such that they satisfy any applicable requirements under Treas.
Reg. Sec. 1.162-27(e)(2) (as amended from time to time) that the achievement
of such goals be "substantially uncertain" at the time that they are
established, and that the award opportunity be defined in such a way that a
third party with knowledge of the relevant facts could determine whether and
to what extent the performance goal has been met, and, subject to the Plan
Committee's right to apply Negative Discretion, the amount of the award
payable as a result of such performance.
(b) Impact Of Extraordinary Items Or Changes In Accounting. The
measures used in setting performance goals set under the Plan for any given
Performance Period shall be determined in accordance with GAAP and in a manner
consistent with the methods used in the Company's audited financial
statements, without regard to (i) extraordinary items as determined by the
Company's independent public accountants in accordance with GAAP or (ii)
changes in accounting, unless, in each case, the Plan Committee decides
otherwise within the Applicable Period.
6. Bonus Pools, Award Opportunities And Awards.
(a) Setting Of Individual Award Opportunities. At the time that
annual performance goals are set for Participants for a given Performance
Period (within the Applicable Period), the Plan Committee shall also establish
each Individual Award Opportunity for such Performance Period, which shall be
based on the achievement of stated target performance goals, and may be stated
in dollars or on a formula basis (based, for example, on a designated share of
a bonus pool or on a multiple of Annual Base Salary), provided:
(i) that the designated shares of any bonus pool shall
not exceed 100% of such pool; and
(ii) that the Plan Committee, in all cases, shall have
the sole and absolute discretion, based on such
factors as it deems appropriate, to apply Negative
Discretion to reduce (but not increase) the actual
7
<PAGE>
bonus awards that would otherwise actually be
payable to any Participant on the basis of the
achievement of the applicable performance goals.
(b) Maximum Individual Bonus Award. Notwithstanding any other
provision of this Plan, the maximum bonus payable under the Plan to any one
individual in any one calendar year shall be $5.0 million.
(c) Bonus Payments. Subject to the following, bonus awards determined
under the Plan for given Performance Period shall be paid to Participants in
cash, or, if permitted under the Company's 1996 LTSIP, in shares of Company
stock, as soon as practicable following the end of the Performance Period to
which they apply, provided:
(i) that no such payment shall be made unless and until
the Plan Committee, based on the Company's audited
financial results for such Performance Period (as
prepared and reviewed by the Company's independent
public accountants), has certified (in the manner
prescribed under applicable regulations) the extent
to which the applicable performance goals for such
Performance Period have been satisfied, and has
made its decisions regarding the extent of any
Negative Discretion adjustment of awards (to the
extent permitted under the Plan);
(ii) that the Plan Committee may specify that a portion
of the actual bonus award for any given Performance
Period shall be paid on a deferred basis, based on
such award payment rules as the Plan Committee may
establish and announce for such Performance Period;
(iii) that the Plan Committee may require (if established
and announced within the Applicable Period), as a
condition of bonus eligibility (and subject to such
exceptions as the Committee may specify within the
Applicable Period) that Participants for such
Performance Period must still be employed as of end
of such Performance Period and/or as of the later
date that the actual bonus awards for such
Performance Period are announced, in order to be
eligible for an award for such Performance Period;
and
(iv) that, within the Applicable Period and subject to
Section 6(c)(i) above, the Committee may adopt such
forfeiture, pro-ration or other rules as it deems
appropriate, in its sole and absolute discretion,
regarding the impact on bonus award rights of a
Participant's death, Disability, Retirement,
voluntary termination (other than Retirement),
termination by the Company other than for Cause, or
termination by the Company for Cause.
8
<PAGE>
7. General Provisions.
(a) Plan Amendment Or Termination. The Board may at any time amend or
terminate the Plan, provided (i) that, without the Participant's written
consent, no such amendment or termination shall adversely affect the bonus
rights (if any) of any already designated Participant for a given Performance
Period once the Participant designations and performance goals for such
Performance Period have been announced, and (ii) that the Board shall be
authorized to make any amendments necessary to comply with applicable
regulatory requirements (including, without limitation, Section 162(m) of the
Code).
(b) Applicable Law. All issues arising under the Plan shall be
governed by, and construed in accordance with, the laws of the State of New
York, applied without regard to conflict of law principles.
(c) Tax Withholding. The Company (and its subsidiaries) shall have the
right to make such provisions and take such action as it may deem necessary or
appropriate for the withholding of any and all Federal, state and local taxes
that the Company (or any of its subsidiaries) may be required to withhold.
(d) No Employment Right Conferred. Participation in the Plan shall
not confer on any Participant the right to remain employed by the Company or
any of its subsidiaries, and the Company and its subsidiaries specifically
reserve the right to terminate any Participant's employment at any time with
or without cause or notice.
(e) Impact of Plan Awards on Other Plans. Plan awards shall not be
treated as compensation for purposes of any other compensation or benefit
plan, program or arrangement of the Company or any subsidiary, unless and
except to the extent that the Board or its Compensation Committee so
determines in writing. Neither the adoption of the Plan nor the submission of
the Plan to the Company's stockholders for their approval shall be construed
as limiting the power of the Board or the Plan Committee to adopt such other
incentive arrangements as it may otherwise deem appropriate.
(f) Beneficiary Designations. Each Participant shall designate in a
written form filed with the Committee the beneficiary (or beneficiaries) to
receive the amounts (if any) payable under the Plan in the event of the
Participant's death prior to the bonus payment date for a given Performance
Period. Any such beneficiary designation may be changed by the Participant at
any time without the consent of the beneficiary (unless otherwise required by
law) by filing a new written beneficiary designation with the Committee. A
beneficiary designation shall be effective only if the Company is in receipt
of the designation prior to the Participant's death. If no effective
beneficiary designation is made, the beneficiary of any amounts shall be the
Participant's estate.
(g) Costs & Expenses. All award and administrative costs and expenses
of the Plan shall be borne by the Company.
9
<PAGE>
(h) Non-Transferability of Rights. Except as and to the extent
required by law, a Participant's rights under the Plan may not be assigned or
transferred in whole or in part either directly or by operation of law or
otherwise (except, pursuant to Section 7(f) above, in the event of the
Participant's death), including, but not limited to, by way of execution,
levy, garnishment, attachment, pledge, bankruptcy or in any other manner, and
no such right of the Participant shall be subject to any obligation or
liability of the Participant other than any obligation or liability owed by
the Participant to the Company (or any of its subsidiaries).
8. Effective Date.
The Plan was adopted by the Board on November 14, 1996,
effective for the Performance Period commencing on or after January 1, 1997,
subject to stockholder approval of the Plan at the 1997 annual shareholders'
meeting. No payments shall be made under the Plan prior to the time such
stockholder approval is obtained in accordance with applicable law. If
approved, the Plan will remain effective until the end of the fiscal year
ending December 31, 2002, unless the Board terminates the Plan earlier.
10
<PAGE>
ANNEX A-2
HOENIG GROUP INC.
1996 LONG-TERM STOCK INCENTIVE PLAN
<PAGE>
HOENIG GROUP INC.
1996 LONG-TERM STOCK INCENTIVE PLAN
l. Purpose. The purpose of this 1996 Long-Term Stock Incentive Plan (the
"Plan") of Hoenig Group Inc., a Delaware corporation, is to advance the
interests of the Company and its stockholders by providing a means to attract,
retain, and reward directors, officers and other key employees and consultants
of the Company and its subsidiaries (including consultants providing services
of substantial value) and to enable such persons to acquire or increase a
proprietary interest in the Company, thereby promoting a closer identity of
interests between such persons and the Company's stockholders.
2. Definitions. The definitions of awards under the Plan, including U.S. Stock
Options, U.K. Stock Options, SARs (including Limited SARs), Restricted Stock,
Deferred Stock, Stock granted as a bonus or in lieu of other awards, Dividend
Equivalents, and Other Stock-Based Awards, are set forth in Section 6 of the
Plan. Such awards, together with any other right or interest granted to a
Participant under the Plan, are termed "Awards." For purposes of the Plan, the
following additional terms shall be defined as set forth below:
"Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
"Beneficiary" shall mean the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under this Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
"Board" means the Board of Directors of the Company.
A "Change in Control" shall be deemed to have occurred if:
(i) on the date of the acquisition by any "person" (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), excluding the
Company or any of its subsidiaries, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of 50% or more of either the
then outstanding shares of Stock, or the then outstanding voting securities
entitled to vote generally in the election of directors;
(ii) on the date the individuals who constitute the Board of
Directors as of the effective date of this Plan ("Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors of the
Company, provided that any person becoming
<PAGE>
a director subsequent to the effective date of this Plan whose election, or
nomination for election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be, for purposes of this Plan, considered as though such person were a
member of the Incumbent Board; or
(iii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization, or reorganization of the Company, a reverse
stock split of outstanding voting securities, the issuance of shares of stock
of the Company in connection with the acquisition of the stock or assets of
another entity, or consummation of any of the foregoing transactions if
stockholder approval is not sought or obtained, provided, however, that a
Change in Control shall not occur under this clause (iii) if consummation of
the transaction would result in at least 75% of the total voting power
represented by the voting securities of the Company (or if the Company does
not survive, the surviving entity) outstanding immediately after such
transaction being beneficially owned (within the meaning of Rule 13d-3
promulgated pursuant to the Exchange Act) by at least 75% of the holders of
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder relative to
other such continuing holders not substantially altered in the transaction; or
(iv) the stockholders of the Company shall approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or a substantial portion of the Company's assets (i.e., 85% or
more of the total assets of the Company).
Notwithstanding the foregoing, for the purposes of subsection (i) only, the
definition of "person" shall not include any beneficial holder of more than 5%
of Common Stock as of September 30, 1996, or any person, trust, or entity
which is a successor by will or by the laws of descent and distribution to any
such holder or any combination of such holders or group of such holders
(including, without limitation, any such person or persons acting as a
partnership, limited partnership, syndicate or other group whether formally
organized or not).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.
"Committee" means the Compensation and Stock Option Committee of the
Board, or such other Board committee as may be designated by the Board to
administer the Plan. In appointing members of the Committee, the Board will
consider whether each member will qualify as a "Non-Employee Director" within
the meaning of Rule 16b-3(b)(3) and as an "outside director" within the
meaning of Treasury Regulation 1.162-27(e)(3) under Code Section 162(m), but
such members are not required to so qualify at the time of appointment or
during their term of service on the Committee.
2
<PAGE>
"Common Stock" means the shares of common stock, $.01 par value per
share, of the Company.
"Company" means Hoenig Group Inc., a corporation organized under
the laws of the State of Delaware, and any successor thereto; provided that
unless otherwise provided in this Plan, all references in this Plan to
employment by the Company shall include employment by any subsidiary of the
Company.
"Covered Employee" means a person defined as a "covered employee" in
Section 162(m)(3) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include rules thereunder and successor provisions and rules thereto.
"Fair Market Value" means, with respect to Stock, Awards, or other
property, (i) in the case of U.S. Stock Options and the Stock underlying such
U.S. Stock Options, (a) if the Stock is listed on a securities exchange or is
traded over the NASDAQ National Market System, the closing sales price of the
Stock on such exchange or over such system on such date or, in the absence of
reported sales on such date, the closing sales price on the immediately
preceding date on which sales were reported, or (b) if the Stock is not listed
on a securities exchange or traded over the NASDAQ National Market System, the
mean between the bid and offered prices of the shares as quoted by the
National Association of Securities Dealers through NASDAQ for such date,
provided, that if the Committee determines that the fair market value of the
Stock is not properly reflected by such NASDAQ quotations, the "Fair Market
Value" of the Stock will mean the fair market value as determined by such
other method as the Committee determines in good faith to be reasonable; and
(ii) in the case of U.K. Stock Options and the Share underlying such U.K.
Stock Options, "Fair Market Value" as determined in accordance with the
foregoing clause (i) of this definition, or as agreed from time to time with
the Inland Revenue, if different.
"Inland Revenue" means the Board of the Inland Revenue of the United
Kingdom of Great Britain and Northern Ireland.
"ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
"Non-Employee Director" shall mean a member of the Board who is not
otherwise an employee of the Company or any subsidiary.
"Participant" means a person who, at a time when eligible under
Section 5 hereof, has been granted an Award under the Plan.
3
<PAGE>
"Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
"Stock" means the Common Stock and such other securities as may be
substituted for Stock or such other securities pursuant to Section 4.
"U.K. Stock Option" means a Stock Option granted to a Participant
which is subject to the provisions of Section 6(c) of this Plan.
"U.S. Stock Option" means a Stock Option other than a U.K. Stock
Option.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions
of the Plan:
(i) to select Participants to whom Awards may be granted;
(ii) to determine the type or types of Awards to be granted
to each Participant;
(iii) to determine the number of Awards to be granted, the
number of shares of Stock to which an Award will relate, the terms
and conditions of any Award granted under the Plan (including, but
not limited to, any exercise price, grant price, or purchase price,
any restriction or condition, any schedule for lapse of restrictions
or conditions relating to transferability or forfeiture,
exercisability, or settlement of an Award, and waivers or
accelerations thereof, and waivers of or modifications to performance
conditions relating to an Award, based in each case on such
considerations as the Committee shall determine), and all other
matters to be determined in connection with an Award;
(iv) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an
Award may be paid, in cash, Stock, other Awards, or other property,
or an Award may be canceled, forfeited, or surrendered;
(v) to determine whether, to what extent, and under what
circumstances cash, Stock, other Awards, or other property payable
with respect to an Award will be deferred either automatically, at
the election of the Committee, or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which
need not be identical for each Participant;
4
<PAGE>
(vii) to adopt, amend, suspend, waive, and rescind such
rules and regulations and appoint such agents as the Committee may
deem necessary or advisable to administer the Plan;
(viii) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to construe and interpret
the Plan and any Award, rules and regulations, Award Agreement, or
other instrument hereunder; and
(ix) to make all other decisions and determinations as may
be required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
Other provisions of the Plan notwithstanding, the Board may perform any
function of the Committee under the Plan, including without limitation for the
purpose of ensuring that transactions under the Plan by Participants who are
then subject to Section 16 of the Exchange Act in respect of the Company are
exempt under Rule 16b-3. In any case in which the Board is performing a
function of the Committee under the Plan, each reference to the Committee
herein shall be deemed to refer to the Board.
(b) Manner of Exercise of Committee Authority. Unless authority is
specifically reserved to the Board under the terms of the Plan, the Company's
Certificate of Incorporation or By-laws, or applicable law, the Committee shall
have sole discretion in exercising authority under the Plan. Any action of the
Committee with respect to the Plan shall be final, conclusive, and binding on
all persons, including the Company, subsidiaries of the Company, Participants,
any person claiming any rights under the Plan from or through any Participant,
and stockholders. The express grant of any specific power to the Committee,
and the taking of any action by the Committee, shall not be construed as
limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any subsidiary of the Company the
authority, subject to such terms as the Committee shall determine, to perform
administrative functions and to perform such other functions as the Committee
may determine.
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants, or any
executive compensation consultant, legal counsel, or other professional
retained by the Company to assist in the administration of the Plan. No member
of the Committee, nor any officer or employee of the Company acting on behalf
of the Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
their behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination, or
interpretation.
5
<PAGE>
4. Stock Subject to Plan.
(a) Amount of Stock Reserved. The total number of shares of Stock
that may be delivered pursuant to the exercise or settlement of an Award shall
not in the aggregate exceed (i) 1,000,000 shares plus (ii) the number of
shares of Stock that, on the date of approval of this Plan by the Company's
stockholders, would otherwise have been available under the Company's 1991
Stock Option Plan and 1994 Stock Option Plan (i.e., unused shares), or would
have otherwise become available after such date (i.e., by reason of the
termination, expiration or forfeiture of stock options outstanding under such
plans); provided, however, that shares subject to Awards shall not be deemed
delivered if such Awards are forfeited, expire or otherwise terminate without
delivery of shares to the Participant. If an Award valued by reference to
Stock may only be settled in cash, the number of shares to which such Award
relates shall be deemed to be Stock subject to such Award for purposes of this
Section 4(a). Any shares of Stock delivered pursuant to an Award may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
(b) Annual Per-Participant Limitations. During any calendar year, no
Participant may be granted Options and other Awards under the Plan that may be
settled by delivery of more than 750,000 shares of Stock, subject to
adjustment as provided in Section 4(c). In addition, with respect to Awards
that may be settled in cash (in whole or in part), no Participant may be paid
during any calendar year cash amounts relating to such Awards that exceed the
greater of the Fair Market Value of the number of shares of Stock set forth in
the preceding sentence at the date of grant or the date of settlement of
Award. This provision sets forth two separate limitations, so that awards that
may be settled solely by delivery of Stock will not operate to reduce the
amount of cash-only Awards, and vice versa; nevertheless, Awards that may be
settled in Stock or cash must not exceed either limitation.
(c) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Stock, or
other property), recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase or share exchange, or
other similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan (such event, upon the Committee's
determination, a "Material Change"), then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and kind of
shares of Stock reserved and available for Awards under Section 4(a), (ii) the
number and kind of shares of outstanding Restricted Stock or other outstanding
Award in connection with which shares have been issued, (iii) the number and
kind of shares that may be issued in respect of other outstanding Awards, (iv)
the exercise price, grant price, or purchase price relating to any Award (or,
if deemed appropriate, the Committee may make provision for a cash payment
with respect to any outstanding Award), and (v) the number of shares with
respect to which Awards may be granted or measured in any calendar year, as
set forth in Section 4(b). In addition, the Committee is authorized to make
adjustments in the terms
6
<PAGE>
and conditions of, and the criteria included in, Awards (including, without
limitation, cancellation of outstanding Awards after advance notice thereof or
substitution of Awards using stock of a successor or other entity) in
recognition of unusual or nonrecurring events (including, without limitation,
events described in the preceding sentence and events constituting a Change in
Control) affecting the Company or any subsidiary or the financial statements
of the Company or any subsidiary, or in response to changes in applicable
laws, regulations, or accounting principles. With respect to U.K. Stock
Options, in the event that a Material Change occurs and a surviving
corporation does not assume all outstanding U.K. Stock Options, all such
outstanding U.K. Stock Options shall continue to be exercisable for a period
of 6 months after the date the Material Change occurs, as determined by the
Committee.
5. Eligibility. Executive officers and other key employees of the Company and
its subsidiaries, including any director or officer who is also such an
employee, and persons who provide consulting or other services to the Company
deemed by the Committee to be of substantial value to the Company, are
eligible to be granted Awards under the Plan. In addition, a person who has
been offered employment by the Company or its subsidiaries is eligible to be
granted an Award under the Plan, provided that such Award shall be canceled if
such person fails to commence such employment, and no payment of value may be
made in connection with such Award until such person has commenced such
employment.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
8(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service of the Participant. Except as provided in Sections 6(f), 6(h), or
7(a), or to the extent required to comply with requirements of the Delaware
General Corporation Law that lawful consideration be paid for Stock, only
services may be required as consideration for the grant (but not the exercise)
of any Award.
(b) U.S. Stock Options. The Committee is authorized to grant Options
to Participants (including "reload" options automatically granted to offset
specified exercises of options) on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee.
(ii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part, the methods by which such exercise price may be
paid or deemed to be paid, the form of such payment, including,
without limitation, cash, Stock, other Awards or awards
7
<PAGE>
granted under other Company plans, or other property (including notes
or other contractual obligations of Participants to make payment on a
deferred basis, such as through "cashless exercise" arrangements, to
the extent permitted by applicable law), and the methods by which
Stock will be delivered or deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the Plan
shall comply in all respects with the provisions of Section 422 of
the Code, including but not limited to the requirement that no ISO
shall be granted with an exercise price less than 100% (110% for an
individual described in Section 422(b)(6) of the Code) of the Fair
Market Value of a share of Stock on the date of grant and granted no
more than ten years after the effective date of the Plan. Anything in
the Plan to the contrary notwithstanding, no term of the Plan
relating to ISOs shall be interpreted, amended, or altered, nor shall
any discretion or authority granted under the Plan be exercised, so
as to disqualify either the Plan or any ISO under Section 422 of the
Code, unless requested by the affected Participant.
(iv) Termination of Employment. Unless otherwise determined
by the Committee, upon termination of a Participant's employment with
the Company and its subsidiaries, such Participant may exercise any
Options during the three-month period (or if such termination is by
reason of disability, as determined by the Committee, or death, the
one-year period) following such termination of employment; provided
that such period does not exceed the remaining term of the Option and
only to the extent such Option was exercisable immediately prior to
such termination of employment. Notwithstanding the foregoing, if the
Committee determines that such termination is for cause, all Options
held by the Participant shall immediately terminate.
(c) U.K. Stock Option. A U.K. Stock Option may only be granted to a
person who is a natural person employed by the Company or a subsidiary thereof
(including employees who are also directors and including persons expected to
become employees, in which case such Stock Option shall be effective as of the
date such person is first treated as an employee for payroll purposes) and who
at the time of grant of the Stock Option is resident and ordinarily resident
in the United Kingdom for the purposes of the tax laws of the United Kingdom
and, in the case of a person who is a director, is required to devote not less
than 25 hours per week to duties to the Company and its subsidiaries. No
person who is, or will be, precluded from being an eligible employee or
director with respect to the Company and its subsidiaries by paragraph 8 of
Schedule 9 Taxes Act 1988 shall be eligible to receive a U.S. Stock Option.
The U.K. Stock Option shall be granted on the following terms and conditions:
(i) Award Agreement. Each U.K. Stock Option shall be clearly
designated as a U.K. Stock Option and shall be evidenced by an Award
Agreement in such form as the Committee may determine from time to
time, which agreement shall not require consideration, but shall be
under seal.
8
<PAGE>
(ii) Shares. Shares of Stock purchased pursuant to the
exercise of U.K. Stock Options shall not be redeemable, shall be
fully paid upon their issuance and shall not be subject to any
restriction other than those applicable to all other shares.
(iii) Exercise Price. The exercise price of U.K. Stock
Options shall be fixed by the Committee but no U.K. Stock Option
shall be granted with an exercise price which is less than 100% of
the Fair Market Value of the underlying Stock at the time such U.K.
Stock Option is granted.
(iv) Exercise Period. No U.K. Stock Option shall be
exercisable more than 10 years after it is granted.
(v) Termination of Employment. Unless otherwise determined
by the Committee, upon termination of a Participant's employment with
the Company and its subsidiaries, such Participant may exercise any
U.K. Stock Options during the three-month period (or if such
termination is by reason of disability, as determined by the
Committee, or death, the one-year period) following such termination
of employment; provided such period does not exceed the remaining
term of the U.K. Stock Option and only to the extent such U.K. Stock
Option was exercisable immediately prior to such termination of
employment. Notwithstanding the foregoing, if the Committee
determines that such termination is for cause, all U.K. Stock Options
held by the Participant shall immediately terminate.
(vi) Allotment. Within 30 days of the date of exercise of
any U.K. Stock Option, shares of Stock shall be allotted to the
Participant or shares of Stock shall be delivered to the Participant,
as the case may be. The allotment or delivery of the shares shall be
evidenced by the issuance of a stock certificate within 30 days of
the date of exercise of such U.K. Stock Option. If a Participant with
respect to a U.K. Stock Option exercises such Stock Option but does
not elect to purchase Stock equal to the full number of shares
evidenced by the Stock Option, the Company shall automatically issue
to such Optionee, within 30 days of the date of such exercise, a
further U.K. Stock Option Agreement entitling the Optionee to acquire
shares of Stock on terms equivalent to the U.K. Stock Option so
exercised but subject to the limitation that the new U.K. Stock
Option so granted will only be for a number of shares of Stock which,
when aggregated with the shares purchased pursuant to such prior
exercises, does not exceed the number of shares of Stock covered by
the partially exercised U.K. Stock Option.
(vii) Payments. For the avoidance of doubt, a payment with
respect to the exercise of a U.K. Stock Option in the form of a bank
draft drawn on a bank acceptable to the Committee for the full
amounts due in the lawful currency of the United States of America
and including any charges for the collection of the said bank draft
shall be considered, at the sole discretion of the Committee, to be
cash.
9
<PAGE>
(viii) Certain Acquisitions. If any person (which shall
include another company) obtains more than 50% of the issued share
capital of the Company as a result of making:
(x) a general offer to acquire the whole of the
issued share capital of the Company which is made on a
condition such that if it is satisfied the person making the
offer will have more than 50% of the issued share capital of
the Company; or
(y) a general offer to acquire all of the shares in
the Company,
then any U.K. Stock Options granted will be subject to the terms of
Section 4(c) of this Plan.
(ix) Disqualifying Dispositions. If Stock acquired by
exercise of a U.K. Stock Option are sold or otherwise disposed of
within two years after the date of grant of the U.K. Stock Option or
within one year after the transfer of such Stock to the Optionee, the
holder of the Stock immediately prior to the disposition shall
promptly notify the Company in writing of the date and terms of the
disposition and shall provide such other information regarding the
disposition as the Company may reasonable require in order to secure
any deduction then available against the Company's or any other
corporation's taxable income.
Any U.K. Stock Option granted to eligible employees
or eligible directors shall be limited and take effect so that the
aggregate Fair Market Value of the Stock subject to such U.K. Stock
Option, when aggregated with the Fair Market Value of the Stock
subject to Stock Options previously granted (and which have not been
exercised, cancelled or lapsed) to that employee or director, shall
not exceed (pound)30,000.
(x) Fair Market Value. In the event that the Fair Market
Value of any Stock with respect to which a U.K. Stock Option is
granted cannot be determined pursuant to the definition of "Fair
Market Value" as set forth in this Plan, then the proviso in such
definition shall not apply unless such Fair Market Value is agreed to
by the Inland Revenue of the United Kingdom.
(xi) Amendments. All amendments to this Plan with respect to
U.K. Stock Options which shall include, without limitation, any
variations made by the Company as provided for in Section 4(b) and
4(c) shall be notified to the Board of the Inland Revenue within 30
days of the amendments being made and no amendments shall have effect
until approved by the Inland Revenue.
10
<PAGE>
(d) Stock Appreciation Rights. The Committee is authorized to grant
SARs to Participants on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant
to whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of Stock on the date
of exercise (or, if the Committee shall so determine in the case of
any such right other than one related to an ISO, the Fair Market
Value of one share at any time during a specified period before or
after the date of exercise), over (B) the grant price of the SAR as
determined by the Committee as of the date of grant of the SAR,
which, except as provided in Section 7(a), shall be not less than the
Fair Market Value of one share of Stock on the date of grant.
(ii) Other Terms. The Committee shall determine the time or
times at which an SAR may be exercised in whole or in part, the
method of exercise, method of settlement, form of consideration
payable in settlement, method by which Stock will be delivered or
deemed to be delivered to Participants, whether or not an SAR shall
be in tandem with any other Award, and any other terms and conditions
of any SAR. Limited SARs that may only be exercised upon the
occurrence of a Change in Control may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
Limited SARs may be either freestanding or in tandem with other
Awards.
(e) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Committee
may determine. Except to the extent restricted under the terms of the
Plan and any Award Agreement relating to the Restricted Stock, a
Participant granted Restricted Stock shall have all of the rights of
a stockholder including, without limitation, the right to vote
Restricted Stock or the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment or service (as determined
under criteria established by the Committee) during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided, however, that the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Restricted Stock will be waived in whole or in part in the event
of termination resulting from specified causes.
11
<PAGE>
(iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, such certificates shall
bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, the Company shall
retain physical possession of the certificate, and the Participant
shall have delivered a stock power to the Company, endorsed in blank,
relating to the Restricted Stock.
(iv) Dividends. Dividends paid on Restricted Stock shall be
either paid at the dividend payment date in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of
such dividends, or the payment of such dividends shall be deferred
and/or the amount or value thereof automatically reinvested in
additional Restricted Stock, other Awards, or other investment
vehicles, as the Committee shall determine or permit the Participant
to elect. Stock distributed in connection with a Stock split or Stock
dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent
as the Restricted Stock with respect to which such Stock or other
property has been distributed.
(f) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, subject to the following terms and conditions:
(i) Award and Restrictions. Delivery of Stock will occur
upon expiration of the deferral period specified for an Award of
Deferred Stock by the Committee (or, if permitted by the Committee,
as elected by the Participant). In addition, Deferred Stock shall be
subject to such restrictions as the Committee may impose, if any,
which restrictions may lapse at the expiration of the deferral period
or at earlier specified times, separately or in combination, in
installments, or otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment or service (as determined
under criteria established by the Committee) during the applicable
deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award Agreement evidencing the Deferred
Stock), all Deferred Stock that is at that time subject to deferral
(other than a deferral at the election of the Participant) shall be
forfeited; provided, however, that the Committee may provide, by rule
or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating
to Deferred Stock will be waived in whole or in part in the event of
termination resulting from specified causes.
(g) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee
is authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of Company obligations to pay cash under other plans or compensatory
arrangements
12
<PAGE>
(including the Company's Section 162(m) Cash Bonus Plan). Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined
by the Committee.
(h) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award.
The Committee may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(i) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock and factors that may influence
the value of Stock, as deemed by the Committee to be consistent with the
purposes of the Plan, including, without limitation, convertible or
exchangeable debt securities, other rights convertible or exchangeable into
Stock, purchase rights for Stock, Awards with value and payment contingent
upon performance of the Company or any other factors designated by the
Committee, and Awards valued by reference to the book value of Stock or the
value of securities of or the performance of specified subsidiaries. The
Committee shall determine the terms and conditions of such Awards. Stock
issued pursuant to an Award in the nature of a purchase right granted under
this Section 6(i) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation,
cash, Stock, other Awards, or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award
under the Plan, may be granted pursuant to this Section 6(i).
(j) Non-Employee Directors Options. Upon appointment to the Board and
in three year intervals thereafter, each person who is a Non-Employee Director
shall receive, without the exercise of the discretion of any person, a
non-qualified stock option under the Plan relating to the purchase of 10,000
shares of Stock. In the event that there are not sufficient shares available
under this Plan to allow for the grant to each Non-Employee Director of an
Option for the number of shares provided herein, each Non-Employee Director
shall receive an Option for his pro rata share of the total number of shares
of Stock available under the Plan. The exercise price of each share of Stock
subject to an Option granted to a Non-Employee Director shall equal the Fair
Market Value of a share of Stock on the date such Option is granted. Each such
Option shall have a term of five years from its grant and shall become
exercisable as to 4,000 shares on the first anniversary of the date the Option
is granted, and as to 3,000 shares on each of the second and third
anniversaries thereof. Upon a Non-Employee Director's cessation of service as
a Non-Employee Director, no further Options shall be granted, and each Option
then outstanding, to the extent it was exercisable upon such cessation, shall
remain exercisable for a period of three months, unless otherwise determined
by the Board.
13
<PAGE>
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Award granted under the Plan or any award granted under any other plan
of the Company, any subsidiary, or any business entity to be acquired by the
Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Awards granted in addition to or
in tandem with other Awards or awards may be granted either as of the same
time as or a different time from the grant of such other Awards or awards.
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided, however, that in no event
shall the term of any ISO or an SAR granted in tandem therewith exceed a
period of ten years from the date of its grant (or such shorter period as may
be applicable under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan
and any applicable Award Agreement, payments to be made by the Company or a
subsidiary upon the grant or exercise of an Award may be made in such forms as
the Committee shall determine, including, without limitation, cash, Stock,
other Awards, or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis. Such payments may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments
denominated in Stock.
(d) Rule 16b-3 Compliance.
(i) Six-Month Holding Period. Unless a
Participant could otherwise dispose of equity
securities, including derivative securities,
acquired under the Plan without incurring liability
under Section 16(b) of the Exchange Act, equity
securities acquired under the Plan must be held for
a period of six months following the date of such
acquisition, provided that this condition shall be
satisfied with respect to a derivative security if
at least six months elapse from the date of
acquisition of the derivative security to the date
of disposition of the derivative security (other
than upon exercise or conversion) or its underlying
equity security.
(ii) Other Compliance Provisions. With
respect to a Participant who is then subject to
Section 16 of the Exchange Act in respect of the
Company, the Committee shall implement transactions
under the Plan and administer the Plan in a manner
that will ensure that each transaction by such a
Participant is exempt from
14
<PAGE>
liability under Rule 16b-3, except that such a
Participant may be permitted to engage in a
non-exempt transaction under the Plan if written
notice has been given to the Participant regarding
the non-exempt nature of such transaction. The
Committee may authorize the Company to repurchase
any Award or shares of Stock resulting from any
Award in order to prevent a Participant who is
subject to Section 16 of the Exchange Act from
incurring liability under Section 16(b). Unless
otherwise specified by the Participant, equity
securities, including derivative securities,
acquired under the Plan which are disposed of by a
Participant shall be deemed to be disposed of in
the order acquired by the Participant.
(e) Loan Provisions. With the consent of the Committee, and subject
at all times to, and only to the extent, if any, permitted under and in
accordance with, laws and regulations and other binding obligations or
provisions applicable to the Company, the Company may make, guarantee, or
arrange for a loan or loans to a Participant with respect to the exercise of
any Option or other payment in connection with any Award, including the
payment by a Participant of any or all federal, state, or local income or
other taxes due in connection with any Award. Subject to such limitations, the
Committee shall have full authority to decide whether to make a loan or loans
hereunder and to determine the amount, terms, and provisions of any such loan
or loans, including the interest rate to be charged in respect of any such
loan or loans, whether the loan or loans are to be with or without recourse
against the borrower, the terms on which the loan is to be repaid and
conditions, if any, under which the loan or loans may be forgiven.
(f) Performance-Based Awards. The Committee may, in its discretion,
designate any Award the exercisability or settlement of which is subject to
the achievement of performance conditions as a performance-based Award subject
to this Section 7(f), in order to qualify such Award as "qualified
performance-based compensation" within the meaning of Code Section 162(m) and
regulations thereunder. The performance objectives for an Award subject to
this Section 7(f) shall consist of one or more business criteria and a
targeted level or levels of performance with respect to such criteria, as
specified by the Committee but subject to this Section 7(f). Performance
objectives shall be objective and shall otherwise meet the requirements of
Section 162(m)(4)(C) of the Code and regulations thereunder. Business criteria
used by the Committee in establishing performance objectives for Awards
subject to this Section 7(f) shall be based on the criteria set forth in the
Company's Section 162(m) Cash Bonus Plan. Performance objectives may differ
for such Awards to different Participants. The Committee shall specify the
weighting to be given to each performance objective for purposes of
determining the final amount payable with respect to any such Award. The
Committee may, in its discretion, reduce the amount of a payout otherwise to
be made in connection with an Award subject to this Section 7(f), but may not
exercise discretion to increase such amount, and the Committee may consider
other performance criteria in exercising such discretion. All determinations
by the Committee as to the achievement of performance objectives shall be in
writing. For purposes of this Section 7(f), the
15
<PAGE>
Committee shall consist of the individuals who serve on the "Plan Committee"
under the Company's Section 162(m) Cash Bonus Plan.
(g) Acceleration upon a Change of Control. Notwithstanding anything
contained herein to the contrary, all conditions and/or restrictions relating
to the continued performance of services and/or the achievement of performance
objectives with respect to the exercisability or full enjoyment of an Award
shall immediately lapse upon a Change in Control, provided, however, that such
lapse shall not occur if (i) it is intended that the transaction constituting
such Change in Control be accounted for as a pooling of interests under
Accounting Principles Board Option No. 16 (or any successor thereto), and
operation of this Section 7(g) would otherwise violate Paragraph 47(c)
thereof, or (ii) the Committee, in its discretion, determines that such lapse
shall not occur, provided, further, that the Committee shall not have the
discretion granted in clause (ii) if it is intended that the transaction
constituting such Change in Control be accounted for as a pooling of interests
under Accounting Principles Board Option No. 16 (or any successor thereto),
and such discretion would otherwise violate Paragraph 47(c) thereof.
8. General Provisions.
(a) Compliance With Laws and Obligations. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the registration
requirements of the Securities Act of 1933, as amended, or any other federal
or state securities law, any requirement under any listing agreement between
the Company and any national securities exchange or automated quotation
system, or any other law, regulation, or contractual obligation of the
Company, until the Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full. Certificates
representing shares of Stock issued under the Plan will be subject to such
stop-transfer orders and other restrictions as may be applicable under such
laws, regulations, and other obligations of the Company, including any
requirement that a legend or legends be placed thereon.
(b) Limitations on Transferability. Awards and other rights under the
Plan will not be transferable by a Participant except by will or the laws of
descent and distribution or to a Beneficiary in the event of the Participant's
death, shall not be pledged, mortgaged, hypothecated or otherwise encumbered,
or otherwise subject to the claims of creditors, and, in the case of ISOs and
SARs in tandem therewith, shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal representative;
provided, however, that such Awards and other rights (other than ISOs and SARs
in tandem therewith) may be transferred to one or more transferees during the
lifetime of the Participant to the extent and on such terms as then may be
permitted by the Committee.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken hereunder shall be construed as giving any employee the right to be
retained in the employ of the Company or any of its subsidiaries, nor shall it
interfere in any way with the right of
16
<PAGE>
the Company or any of its subsidiaries to terminate any employee's employment
at any time.
(d) Taxes. The Company and any subsidiary is authorized to withhold
from any Award granted or to be settled, any delivery of Stock in connection
with an Award, any other payment relating to an Award, or any payroll or other
payment to a Participant amounts of withholding and other taxes due or
potentially payable in connection with any transaction involving an Award, and
to take such other action as the Committee may deem advisable to enable the
Company and Participants to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other property and to make
cash payments in respect thereof in satisfaction of a Participant's tax
obligations; in such case, the shares withheld shall be deemed to have been
delivered for purposes of Section 4(a).
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any such action shall be subject to the approval of
the Company's stockholders at or before the next annual meeting of
stockholders for which the record date is after such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Stock may then be listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to stockholders
for approval; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights of such
Participant under any Award theretofore granted to him. The Committee may
waive any conditions or rights under, or amend, alter, suspend, discontinue,
or terminate, any Award theretofore granted and any Award Agreement relating
thereto; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights of such
Participant under such Award.
(f) No Rights to Awards; No Stockholder Rights. No Participant or
employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants and
employees. No Award shall confer on any Participant any of the rights of a
stockholder of the Company unless and until Stock is duly issued or
transferred and delivered to the Participant in accordance with the terms of
the Award or, in the case of an Option, the Option is duly exercised.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give
any such Participant any rights that are greater than those of a general
creditor of the Company; provided, however, that the Committee may authorize
the creation of trusts or make other arrangements to meet the Company's
obligations under the Plan to deliver cash, Stock, other Awards, or other
property pursuant to any Award, which trusts or other arrangements shall be
consistent with the "unfunded"
17
<PAGE>
status of the Plan unless the Committee otherwise determines with the consent
of each affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other compensatory arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
(i) No Fractional Shares. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards, or other property shall be issued or
paid in lieu of such fractional shares or whether such fractional shares or
any rights thereto shall be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of the
Company that Options granted with an exercise price per share at least equal
to the Fair Market Value of the Stock on the date the Option is granted, SARs
and other Awards designated as Awards subject to Section 7(f) shall constitute
"qualified performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, if any provision of the Plan
or any Award Agreement relating to such an Award does not comply or is
inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, and no provision shall be deemed to
confer upon the Committee or any other person discretion to increase the
amount of compensation otherwise payable in connection with any such Award
upon attainment of the performance objectives.
(k) Governing Law. The validity, construction, and effect of the
Plan, any rules and regulations relating to the Plan, and any Award Agreement
shall be determined in accordance with the Delaware General Corporation Law,
without giving effect to principles of conflicts of laws, and applicable
federal law.
(l) Effective Date; Plan Termination. The Plan shall become effective
as of the date of its adoption by the Board and shall continue in effect until
terminated by the Board, provided, however, that any Awards granted prior to
the approval of such adoption by the Company's stockholders shall be granted
conditional upon such approval.
18
<PAGE>
HOENIG GROUP INC.
ANNUAL MEETING OF STOCKHOLDERS -- MAY 15, 1997
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Alan B. Herzog and Kathryn L. Hoenig, and
each of them, proxies, with full power of substitution, to vote all shares of
Common Stock of Hoenig Group Inc. (the "Company") owned by the undersigned at
the Annual Meeting of Stockholders of the Company to be held on May 15, 1997,
and any adjournment thereof, hereby revoking any proxy heretofore given. The
undersigned instructs such proxies to vote:
I. ELECTION OF CLASS III DIRECTORS.
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE TO VOTE FOR ALL NOMINEES
CONTRARY BELOW) LISTED BELOW
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
ROBERT L. COONEY KATHRYN L. HOENIG FREDRIC P. SAPIRSTEIN
FOR AGAINST ABSTAIN
II. APPROVAL OF THE COMPANY'S SECTION 162(m) [ ] [ ] [ ]
CASH BONUS PLAN.
(Continued and to be signed and dated on the reverse side)
<PAGE>
FOR AGAINST ABSTAIN
III. APPROVAL OF THE COMPANY'S 1996 LONG-TERM STOCK [ ] [ ] [ ]
INCENTIVE PLAN.
and to vote upon other business as may properly come before the Meeting, or
any adjournment thereof, all as described in the Proxy Statement dated April
17, 1997, receipt of which is hereby acknowledged.
Either of the proxies or their respective substitutes, who shall be present
and acting, shall have and may exercise all the powers hereby granted.
UNLESS OTHERWISE INSTRUCTED HEREIN, THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED FOR Proposals I, II, and III. Said proxies will vote the proxies
received in accordance with a determination by a majority of the Board with
respect to any other matters which may properly come before the meeting.
Signed:
--------------------------------------
--------------------------------------
Dated:
--------------------------------------
(Please sign and date exactly as name
appears below. For joint accounts, each
joint owner should sign. Executors,
administrators, trustees, etc. should
also so indicate when signing.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE.
