<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 approximate 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 (Section) 240.14a-11(c) or (Section)
240.14a-12
HOENIG GROUP INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] 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:
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<PAGE>
HOENIG GROUP INC.
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 20, 1999, at 11:00 a.m. local time, to
consider and vote upon:
1. The election of one Class II director for a three-year term; and
2. Such other matters as may properly come before the Annual Meeting.
The close of business on March 26, 1999 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 12, 1999
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.
4 INTERNATIONAL DRIVE
RYE BROOK, NEW YORK 10573
------------------
PROXY STATEMENT
------------------
April 12, 1999
This proxy statement and the accompanying form of proxy are being
furnished on or about April 12, 1999 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 1999 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 20, 1999, at 11:00 a.m. local time and any adjournment thereof.
RECORD DATE
The close of business on March 26, 1999 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 accompanying form of proxy is solicited by the Board of Directors
(the "Board"). The Chief Operating Officer and the Secretary have been
designated by the Board to vote as proxies. All references to proxies herein
refer to the proxies solicited by the Board, 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 form of proxy or a written notice of revocation
signed in the same manner as the original form of 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, 1998, 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. Stockholders should address such
written requests to Hoenig Group Inc., 4 International Drive, Rye Brook, New
York 10573, Attention: Stockholder Relations.
VOTING PROCEDURES
This proxy statement and the accompanying form of proxy are being
mailed beginning on or about April 12, 1999 to Stockholders as of the record
date in connection with the solicitation of proxies by the
<PAGE>
Board 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 nominee for
director listed thereon. 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.
If a Stockholder wishes to give a proxy to someone other than the
persons designated by the Board, 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, under Proposal I the nominee for Class II 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 represented 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. 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 26, 1999 record date, there were 8,563,740 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 26, 1999 by (i) each
person known to the Company to beneficially own more than 5% of the outstanding
Common Stock, (ii) each director of the Company, (iii) the Company's Chief
Executive Officer and the 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 1998 (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 26, 1999. Each person named in the table has sole voting and
dispositive power with respect to the shares, except as otherwise indicated.
2
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<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 The Qualified Terminable Interest Trust B established
under the Last Will and Testament of
Ronald H. Hoenig(2) ................................. 1,115,788(5) 13.0%
Wellington Management Company, LLP(2) ............... 829,000(6) 9.7%
Fredric P. Sapirstein(2)(3)(4) ...................... 1,277,400(7) 13.6%
Alan B. Herzog(2)(3)(4) ............................. 1,038,282(8) 12.1%
Max H. Levine(2)(3)(4) .............................. 965,100 11.3%
Robert Spiegel(4) ................................... 361,718(9) 4.2%
Kathryn L. Hoenig(4) ................................ 127,499(10) 1.5%
Robin A. Green(3) ................................... 79,484(11) 0.9%
Martin F.C. Emmett(4) ............................... 69,000(12) 0.8%
Seth M. Lynn, Jr.(3) ................................ 15,000(13) 0.2%
Robert L. Cooney(4) ................................. 12,000(14) 0.1%
All executive officers and directors
as a group (10 people) .............................. 4,070,483(15) 42.8%
</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 Wellington Management Company, LLP, is
in care of the Company, 4 International Drive, Rye Brook, New York 10573.
The Hoenig Trust's address is c/o Swidler Berlin Shereff Friedman, LLP,
919 Third Avenue, New York, New York 10022. Wellington Management
Company, LLP, is a U.S. registered investment adviser located at 75 State
Street, Boston, MA 02109.
(2) Beneficial owner of more than 5% of the outstanding Common Stock.
(3) Named Executive Officer.
(4) Director.
(5) 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 the Trustees of the Hoenig Trust. The
Trustees collectively 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 disclaims
beneficial ownership of the shares owned by the Hoenig Trust.
(6) The amount of shares beneficially owned by Wellington Management Company,
LLP are as reported on a Schedule 13-G as of December 31, 1998.
(7) Includes options to purchase 835,000 shares of Common Stock granted under
the Company's 1991 Stock Option Plan (the "1991 Plan"), the 1994 Stock
Option Plan (the "1994 Plan"), and the 1996 Long-Term Stock Incentive
Plan (the "1996 Incentive Plan").
(8) Includes 121,100 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, 28,500 shares owned by his minor children and 12,600
shares owned by a private foundation of which Mr. Herzog is a director.
(9) Includes non-employee director options to purchase 14,000 shares of
Common Stock granted under the 1994 Plan. Does not include any shares
owned by the Hoenig Trust, with respect to which Mr. Spiegel is a
Trustee. Mr. Spiegel disclaims beneficial ownership of the shares owned
by the Hoenig Trust.
(10) Includes options to purchase 15,833 shares of Common Stock granted under
the 1991 Plan and 1996 Incentive Plan. Does not include any shares owned
by the Hoenig Trust, with respect to which Ms. Hoenig is a Trustee. 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 disclaims beneficial ownership of the shares owned
by the Hoenig Trust and her brother.
(11) Includes options to purchase 30,000 shares of Common Stock granted under
the 1991 Plan, the 1994 Plan and the 1996 Incentive Plan.
(12) Includes non-employee director options to purchase 14,000 shares of
Common Stock granted under the 1994 Plan.
(13) Includes options to purchase 15,000 shares of Common Stock granted under
the 1991 Plan.
(14) Includes non-employee director options to purchase 7,000 shares of Common
Stock granted under the 1994 Plan.
(15) Includes options to purchase 920,833 shares of Common Stock granted to
certain executive officers under the 1991 Plan, the 1994 Plan, and the
1996 Incentive Plan, and options to purchase 35,000 shares granted to
non-employee directors under the 1994 Plan. Does not include 1,115,788
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 56 Chairman of the Board, Chief Executive Officer,
President, and Class III Director, and Chairman and
Chief Executive Officer of Hoenig & Co., Inc.
Max H. Levine 58 Executive Vice President and Class II Director, and
President of Hoenig & Co., Inc.
Alan B. Herzog 41 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 37 Vice President, General Counsel, Secretary, and Class
III Director, and Secretary of Hoenig & Co., Inc.
Robert L. Cooney 65 Class III Director
Martin F.C. Emmett 64 Class I Director
Robert Spiegel 62 Class I Director
Robin A. Green 34 Managing Director of Hoenig (Far East) Limited
Nigel Johnson-Hill 52 Managing Director of Hoenig & Company Limited
Seth M. Lynn, Jr. 50 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 1997. Mr. Herzog also has served at Hoenig as Chief
Executive Officer from November 1995 until April 1997, as Treasurer since 1982,
and as a director since 1987. 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 of Axe-Houghton since December
1993. He also is a director of Hoenig & Company Limited ("Limited") and Hoenig
(Far East) Limited ("Far East"), which are wholly-owned 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 Directors 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
in 1991 and of Axe-Houghton since October 1994. He also has served as a
director of Hoenig from 1987 until May 1995. Mr. Spiegel
4
<PAGE>
served as 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 currently serves as a
director of Gunther International, Ltd., (a Nasdaq Bulletin Board listed
company) based in Norwich, Connecticut which designs, develops, assembles,
markets and services high tech systems that assemble and bind printed
documents. He also is a member of the Advisory Board of Ivy Asset Management, a
registered investment adviser specializing in alternative investments. Mr.
Spiegel graduated from The Wharton School, University of Pennsylvania.
Class II Directors
Max H. Levine, a founder of Hoenig, has been a director and Executive Vice
President of the Company since its formation in 1991, 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 served as a director of
Axe-Houghton from September 1994 until May 1997 and from April 1993 until
February 1994, and of Far East from October 1994 until May 1997. 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 1996. He also
has served as Chief Executive Officer of Hoenig since April 1997. Mr.
Sapirstein has served as a director of all of the Company's subsidiaries since
September 1996. 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.
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 from April 1992 until September 1998. 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. 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 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 1997, Mr. Cooney was Managing Director, Equity Capital Markets at
Credit Suisse First Boston. He serves as a director of Edison Control
Corporation, a Nasdaq National Market company which manufactures and
distributes systems of pipes, couplings, hoses and other equipment used in
pumping concrete. Mr. Cooney also serves as a director of Equity ONE, Inc. a
New York Stock Exchange listed diversified real estate trust based in Miami,
Florida. Mr. Cooney is a graduate of the College of the Holy Cross and Harvard
Business School.
Non-Director Executive Officers
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 member
of the Institute of Chartered Accountants of Scotland and a graduate of the
University of Glasgow.
Nigel Johnson-Hill, has been Managing Director of Limited since 1988
and a director of Limited since 1985. 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 1997.
5
<PAGE>
Seth M. Lynn, Jr., has served as Chief Executive Officer, President
and a director of Axe-Houghton since 1984. He also has served as Chairman of
the Board of Directors of Axe-Houghton since October 1996 and from 1984 through
August 1994. 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. Pursuant to their employment
or other agreements, each of Messrs. Sapirstein, Levine and Herzog have agreed
that, if their employment with the Company terminates for any reason, he will
no longer serve as a director of the Company. See "Employment Agreements with
Certain Named 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 has fixed the number of directors at seven.
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 2001, 1999 and 2000, respectively. The Class I directors are
Martin F.C. Emmett, Alan B. Herzog and Robert Spiegel; the Class II director is
Max H. Levine; and the Class III directors are Robert L. Cooney, Kathryn L.
Hoenig and Fredric P. Sapirstein.
One Class II director is to be elected at the Annual Meeting for a
term of three years and until the election and qualification of a successor.
The Board recommends that the Stockholders elect Max H. Levine as a Class II
director. Mr. Levine currently is a director. Proxies will be voted for Mr.
Levine as a Class II director, unless otherwise specified on the form of proxy.
Class I and Class III directors will not be elected at the Annual Meeting.
If the nominee should become unavailable to serve at the time of the
Annual Meeting, the shares represented by proxies will be voted for any
substitute nominee designated by the Board. If no substitute is designated, the
size of the Board may be reduced. The Board knows of no reason why the nominee
will be unavailable to serve.
COMPENSATION OF DIRECTORS
During 1998, 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 or any committee thereof. In addition, each non-employee director
serving as Chairman of any committee of the Board received an annual stipend of
$3,000. Each non-employee director has been 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 "Director Option"). Each non-employee
director will be granted a 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 Director Options.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board 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
6
<PAGE>
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 are held four times per year and special
meetings are scheduled when required. The Board held four regular meetings and
six special meetings in 1998.
The Board 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 their relationship with management. The Audit Committee met
three times in 1998. The Audit Committee is composed entirely of independent,
non-employee directors. In 1998, Robert Cooney served as Chairman of the Audit
Committee, the other members of which were Martin F.C. Emmett and Robert
Spiegel.
The Board also 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 purchase plans, stock option plans, the
Section 162(m) Cash Bonus Plan (the "Section 162(m) Plan") and the 1996
Incentive Plan. The Compensation and Stock Option Committee held eleven
meetings in 1998. The Compensation and Stock Option Committee is composed
entirely of non-employee directors. In 1998, Martin F.C. Emmett served as
Chairman of the Compensation and Stock Option Committee, the other members of
which were Robert Spiegel and Robert L. Cooney.
The Board has a Nominating Committee which is responsible for
reviewing potential director candidates and for 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. In 1998, the Nominating Committee
consisted of Robert Spiegel (Chairman), Robert Cooney, Martin F.C. Emmett and
Fredric P. Sapirstein. The Nominating Committee met three times in 1998. The
Nominating Committee will consider qualified director candidates recommended by
Stockholders. In addition, under the advance notice provision of the Company's
By-laws, a Stockholder who wishes to propose a candidate for election to the
Board at an Annual Meeting of Stockholders must give written notice of such
intention to the Secretary of the Company not later than ninety (90) days in
advance of the date upon which notice of the prior year's Annual Meeting of
Stockholders was first given. In the case of a special meeting of Stockholders,
such written notice must be given to the Secretary of the Company not later
than the close of business on the seventh day after the date on which notice of
such meeting was first given. The deadline for such notice with respect to the
Company's 2000 Annual Meeting of Stockholders is January 11, 2000. Such notice
must contain the information and follow the procedures contained in the
Company's By-laws.
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, 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 and for making
awards under those plans. The Committee also reviews the terms of formal
employment agreements of executive officers and those employment agreements
providing for annual compensation in excess of certain levels. The purpose of
this report is to describe the Company's executive compensation program and to
discuss
7
<PAGE>
the factors that the Committee considered in determining the 1998 compensation
of the Company's Chief Executive Officer and the other executive officers,
including the Named Executive Officers.
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 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. From time to time, the
Committee consults with William M. Mercer, Incorporated ("Mercer"), a
compensation consultation firm which advises the Committee, and other
compensation specialists regarding compensation issues.
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 1996 Incentive Plan; and (iv) contributions to
employee benefit plans (e.g., profit-sharing plans). With respect to certain
executives, the Company is contractually committed under employment agreements
to provide specified minimum salaries, cash bonuses and perquisites and to
grant 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.
Increasingly, annual performance bonuses and, in some cases equity awards, for
executives with execution, sales or other revenue generating responsibilities
are determined based on objective, revenue- or profit-based formulas. While the
Committee believes in the use of objective performance measures, such as those
described in the Company's Section 162(m) Plan, it recognizes that there are
important corporate goals, which are not capable of objective measurement, that
management should be incentivized to achieve. Accordingly, the Committee may
approve the payment of subjective performance bonuses that are not based on
objective formulas to reward the achievement of non-quantitative goals.
For those executives serving primarily in managerial or administrative
roles, performance bonuses generally 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 long-term development of the
Company's business. Recommendations regarding annual performance bonuses are
made by management to the Committee, which is responsible for reviewing and
approving annual performance bonuses for executive officers.
The Company's long-term, stock-based compensation to date has
consisted of grants of U.S. incentive stock options, U.K. tax-qualified stock
options, non-qualified stock options, deferred stock awards and restricted
stock grants. Stock-based awards typically are granted to those executive
officers and employees who have contributed to the growth and profitability of
the Company or have demonstrated outstanding performance, as well as to those
who can be expected to make such contributions in the future. The majority of
stock-based awards approved by the Committee are intended to compensate the
recipient for past performance; however, the Committee believes in using
equity-based awards to attract new talent to the Company. The 1996 Incentive
Plan affords the Committee flexibility to award a variety of equity-based
incentives to executive officers and other key employees and consultants.
It is the Committee's general policy to grant stock-based awards
subject to time-based or performance-based vesting. As a general rule, stock
options and deferred stock grants are subject to three-year vesting, with
one-third of the award vesting 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 those
of Stockholders and help to retain key employees. These awards serve the
interests of the Company and Stockholders by encouraging recipients 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
8
<PAGE>
makes discretionary contributions to these plans based on, among other things,
the Company's performance. For the year ended December 31, 1998, the Company
contributed a total of $524,345 to these plans.
The Company also maintains employee stock purchase plans which enable
eligible employees (both U.S.-based and, where permissible, foreign) to
purchase up to $25,000 worth of the Company's Common Stock a year at a 15%
discount to the market price. The Company has reserved 500,000 shares for
issuance under these plans. Employees owning 1% or more of the Company's Common
Stock are not eligible to participate in the plans.
As indicated in previous Committee reports and reflected by the
adoption of the Section 162(m) Plan in 1996, the Company generally intends to
take steps necessary to comply with the deduction limitation of Section 162(m)
of the Internal Revenue Code of 1986, as amended (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.
1998 Executive Officer Compensation
The 1998 compensation of executive officers consisted of three
principal components: (i) a fixed cash salary, generally determined prior to
the beginning of the year; (ii) a cash performance 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
employees, including executive officers, with respect to policies owned by such
employees, made contributions to the Company's profit-sharing plans and, in the
case of one executive officer who was relocated to a foreign subsidiary in
1995, 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 1998 pursuant to employment agreements which
provide for certain minimum annual salaries, cash bonuses, stock options and
other compensation, such as perquisites. One of these agreements was entered
into during the year, effective beginning April 9, 1998. The terms of these
agreements, including the provisions requiring the Company to make certain
payments to these executive officers in the event of a termination "other than
for cause", for "good reason" or upon a "change of control" (as defined in the
agreements), are described more fully in "Employment Agreements with Certain
Named Executive Officers" in this Proxy Statement.
In reviewing management's recommendations with respect to 1998 cash
performance bonuses and stock-based awards for the executive officers, the
Committee reviewed the following: (i) the terms of any employment agreement
between the executive and the Company and any applicable bonus formula; (ii)
for each executive officer, information concerning salary, cash bonus,
perquisites, life insurance premiums paid, payments made to the Company's
employee benefit plans and stock-based awards for the last three years; (iii)
compensation data; (iv) the executive officer's individual performance and
contribution to the Company's short- and long-term results; and (v) the
Company's financial results for 1998. In reviewing the Company's 1998 financial
performance, the Committee considered the improvement in the Company's
operating results in 1998, particularly with respect to the Company's domestic
brokerage and asset management operations.
The Committee used pre-determined formulas based on profitability in
determining 1998 cash performance bonuses for three Named Executive Officers.
With respect to the other executive officers, the Committee attempted to
provide total compensation which was competitive yet consistent with the
executive officer's individual performance and the Company's financial results
in 1998. With respect to executive officers with managerial responsibility for
the Company's brokerage subsidiaries, the Committee considered the financial
performance of the subsidiary, including growth in revenues and profitability,
in determining such executive officers' cash bonuses for 1998.
9
<PAGE>
The Committee made long-term stock-based awards to two executive
officers, including the Chief Executive Officer. Based on the recommendation of
management, the Committee approved salary increases for 1999 with respect to
certain executive officers, including two Named Executive Officers.
Chief Executive Officer Compensation
Mr. Sapirstein's 1998 compensation consisted of salary, a cash bonus,
stock options, the payment of life insurance premiums and a contribution to the
Company's profit-sharing plan. All amounts paid to Mr. Sapirstein as salary in
1998 were based on the terms of his employment agreement, which is described in
"Employment Agreements with Certain Named Executive Officers" herein. Under the
terms of his employment agreement, Mr. Sapirstein is guaranteed an annual
minimum bonus of $300,000, which for 1998 was intended to be deducted from any
amounts due Mr. Sapirstein under an incentive plan that was approved by the
Committee and the Board in March 1998 (the "1998 CEO Incentive Plan"). The 1998
CEO Incentive Plan consists of two components: (i) an objective, formula
component under the Section 162(m) Plan based on the achievement of
pre-determined financial goals, and (ii) a subjective component based on the
Committee's assessment of non-financial measures. The 1998 CEO Incentive Plan
also provides that Mr. Sapirstein's total cash compensation for 1998 cannot
exceed 45% of the Company's 1998 net income, after total compensation expenses,
and that the subjective component of the plan cannot exceed approximately
$600,000.
Mr. Sapirstein received a total cash bonus of $1.1 million under the
1998 CEO Incentive Plan. Based on the objective component of the 1998 CEO
Incentive Plan, Mr. Sapirstein earned a cash bonus of $1,528,000 due to the
fact that the Company's financial results in 1998 surpassed each of the
pre-determined financial goals. The Committee determined in its judgment to
reduce the cash bonus award to Mr. Sapirstein under the objective component of
the 1998 CEO Incentive Plan to $1.1 million for reasons unrelated to his
performance and in recognition of the unusual circumstances that all of the
objective financial goals for 1998 were exceeded. The Committee did not make a
separate cash bonus award under the subjective component of the 1998 CEO
Incentive Plan.
The Committee also determined to award Mr. Sapirstein long-term,
stock-based compensation in recognition of his performance in 1998. The
Committee awarded Mr. Sapirstein a ten-year, incentive stock option to purchase
45,000 shares of Common Stock at $6.50, the market price of the Common Stock on
the date of grant, which vests one-third on each of the first three
anniversaries of the grant date. The Committee awarded Mr. Sapirstein the stock
option in recognition of his strong performance in 1998 and to provide Mr.
Sapirstein with long-term compensation whose value is dependent upon the future
success of the Company.
COMPENSATION AND STOCK OPTION COMMITTEE
Martin F.C. Emmett, Chairman
Robert L. Cooney
Robert Spiegel
10
<PAGE>
COMPENSATION TABLES
The following tables contain compensation data for the Named Executive
Officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -----------------------------------
RESTRICTED SECURITIES ALL OTHER
SALARY BONUS STOCK UNDERLYING COMPENSATION(1)
NAME AND PRINCIPAL POSITION YEAR ($) ($) AWARDS ($) OPTIONS (#) ($)
- ------------------------------- ------ ---------------- ----------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Fredric P. Sapirstein 1998 400,000(2) 1,100,000 45,000(3) 9,974
Chairman, Chief Executive 1997 400,000(2) 410,000 180,000(3) 7,000
Officer and President 1996 126,154(2) 100,000 1,000,000(3) 216
Max H. Levine 1998 400,000(2) 792,302 -- 9,974
Executive Vice President 1997 400,000(2) 732,121 -- 7,000
1996 369,434(2) 525,000 -- 94,793
Alan B. Herzog 1998 275,000 175,000 -- 9,974
Executive Vice President, 1997 275,000 135,000 -- 7,000
COO, CFO and Treasurer 1996 250,000(2) 125,000 -- 63,122
Seth M. Lynn, Jr. 1998 321,230(2) 115,212 -- 9,974
Chief Executive Officer 1997 240,000(2) 100,154 -- 7,000
Axe-Houghton Associates, Inc. 1996 -- -- -- --
Robin A. Green 1998 230,000 175,000 -- 162,056
Managing Director 1997 230,000 230,000 30,000(4) 165,194
Hoenig (Far East) Limited 1996 230,000 170,000 262,500(4) -- 154,098
</TABLE>
- ----------
(1) For 1998, consists of annual contributions on behalf of the following
Named Executive Officers to the Company's profit-sharing plans as
follows: Fredric P. Sapirstein ($9,974); Max H. Levine ($9,974); Alan B.
Herzog ($9,974); Robin A. Green ($23,000); and Seth M. Lynn ($9,974). For
Mr. Green, also includes a housing allowance of $127,877 in 1998 and
personal travel expenses of $11,179 in 1998 provided in connection with
his assignment in Hong Kong.
(2) The 1998 salaries of Messrs. Sapirstein, Levine and Lynn were as provided
in their respective employment agreements. See "Employment Agreements
with Certain Named Executive Officers". The salary paid to Mr. Lynn in
1998 is based on an annualized salary of $240,000 for the period January
1, 1998 until April 8, 1998 and an annualized salary of $350,000 for the
period April 9, 1998 until December 31, 1999. 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. The annual salaries
of Mr. Levine and Mr. Herzog for 1996 include cost-of-living increases
provided in their respective employment agreements, which terminated on
December 31, 1996.
(3) On January 20, 1999, Mr. Sapirstein was granted a ten-year, qualified
option to purchase 45,000 shares of Common Stock at an exercise price of
$6.50 per share, which vests one-third on each of January 20, 2000,
January 20, 2001 and January 20, 2002, as part of his 1998 compensation.
On January 29, 1998, Mr. Sapirstein received a ten-year, non-qualified
option to purchase 180,000 shares of Common Stock at an exercise price of
$6.1875 per share, which vests one-third on each of January 29, 1999,
January 29, 2000 and January 29, 2001, as part of his 1997 compensation.
Pursuant to the terms of his employment agreement, on September 5, 1996,
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 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.
(4) On January 29, 1998, Mr. Green received a ten-year, non-qualified option
to purchase 30,000 shares of Common Stock at an exercise price of $6.1875
per share, which vests one-third on each of January 29, 1999, January 29,
2000 and January 29, 2001, as part of his 1997 compensation. On January
14, 1997, Mr. Green received a deferred stock award of 50,000 shares of
Common Stock, 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
of the deferred stock award is listed in the summary compensation table
and 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 cash value of the deferred stock award on
December 31, 1998 was $362,500.
11
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
---------------------------------------------------------------------- --------------------
NUMBER OF SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE OR
OPTIONS GRANTED GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME (#) IN FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ----------------------- ---------------------- ---------------------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fredric P. Sapirstein 180,000(2) 56.7% 6.1875 01/29/08 307,709 679,956
Max H. Levine -- -- -- -- -- --
Alan B. Herzog -- -- -- -- -- --
Seth M. Lynn, Jr. -- -- -- -- -- --
Robin A. Green 30,000(2) 9.4% 6.1875 01/29/08 51,285 113,326
</TABLE>
- ----------
(1) The dollar amounts shown in this table are the result of calculations at
stock price appreciation rates specified by the Securities and Exchange
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.
(2) Each of these non-qualified options has a ten-year term and vests with
respect to one-third of the shares on each of the first three
anniversaries of the date of grant, which was January 29, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
----------------------------- ------------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($)
- ----------------------- ----------------- ----------------- ------------- --------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Fredric P. Sapirstein 0 0 775,000 305,000 2,121,875 644,285
Max H. Levine 45,000 124,875 0 0 0 0
Alan B. Herzog 10,000 16,500 0 0 0 0
Seth M. Lynn, Jr. 0 0 15,000 0 48,750 0
Robin A. Green 8,750 28,438 13,334 36,666 64,001 63,835
</TABLE>
- ----------
(1) Based on the last sale price of the Common Stock on December 31, 1998
less the exercise price.
(2) Based on the last sale price of the Common Stock on the date of exercise
less the exercise price.
12
<PAGE>
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total
stockholder 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 (U.S. Companies) ("Nasdaq Composite"), the Lipper Composite
Brokerage Index (the "Lipper Index") and a "peer group" consisting of twelve
publicly-traded brokerage and financial services firms. The Company had
previously used the Lipper Index for comparison purposes, but in 1998, the
Lipper Index was no longer published. Consequently, the Company has substituted
the peer group for the Lipper Index. All of the companies in the peer group
formerly were included in the Lipper Index. In accordance with the requirements
of the Commission, the returns of the Lipper Index are included in the
performance graph as described below.
[GRAPH OMITTED]
NOTES: Assumes $100 invested on 12/31/93 in Hoenig Group Inc. Common Stock, in
the Nasdaq Composite, in the Lipper Index and in a Peer Group. Reflects
month-end dividend reinvestment and annual reweighting of the Lipper
Index and Peer Group portfolio.
For the period December 31, 1997 through December 31, 1998, the Lipper
Index was not published. Consequently, for this period the following
sixteen companies, which formerly constituted the Lipper Index, were
included: Advest Group Inc., Bear Stearns Companies Inc., Dain Rauscher
Corp., Donaldson Lufkin & Jenrette, Inc., Edwards (AG) Inc., First
Albany Companies Inc., Hoenig Group Inc., Interstate/Johnson Lane Inc.,
Jefferies Group Inc., Kinnard Investments Inc., Legg Mason Inc., Schwab
(Charles) Corp., Scott & Stringfellow Financial Inc., Southwest
Securities Group Inc., Stifel Financial Corp., and Ziegler Co., Inc.
The companies included in the Peer Group are: Advest Group Inc., Dain
Rauscher Corp., Edwards (AG) Inc., First Albany Companies Inc.,
Interstate/Johnson Lane Inc., Jefferies Group Inc., Kinnard Investments
Inc., Legg Mason Inc., Scott & Stringfellow Financial Inc., Southwest
Securities Group, Inc., Stifel Financial Corp., and Ziegler Co., Inc.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INDEX DATA Dec93 Dec94 Dec95 Dec96 Dec97 Dec98
Hoenig Group Inc. $100 $77 $ 90 $120 $148 $162
Nasdaq Composite $100 $97 $135 $166 $202 $282
Lipper Index $100 $84 $115 $172 $341 $459
Peer Group $100 $81 $115 $166 $313 $299
</TABLE>
13
<PAGE>
EMPLOYMENT AGREEMENTS WITH CERTAIN NAMED EXECUTIVE OFFICERS
On September 5, 1996, Fredric P. 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. The minimum cash bonus will operate as a draw against
amounts due under an annual incentive plan to be determined by the Committee
that includes performance goals under the Company's Section 162(m) Plan. The
Company is required during the term of his employment to include Mr. Sapirstein
in the management slate for election as a director of the Company and to use
its best efforts to cause him to be elected to the Company's Board.
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"). The Service-Based Options and the Performance
Options were granted on September 5, 1996, the date Mr. Sapirstein commenced
employment. All of the Performance Options have vested. 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 for
"good reason" or "other than for cause" if such termination occurs after
September 5, 1997. The Sapirstein Agreement also provided 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.
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) any
salary due through the date of termination, any earned but unpaid bonus and any
amount accrued under the Company's benefit plans (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 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.
On October 8, 1998, Max H. Levine executed a new employment agreement
with the Company (the "Levine Agreement") which amended certain terms of his
prior employment agreement dated November 25, 1996, that expired on December
31, 1998. The Levine Agreement has a three-year term commencing on January 1,
1999, 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, which is unchanged
from the prior agreement, plus an increased percentage of the net pre-tax
profits (as defined) of commission business for which Mr. Levine is
responsible. The Levine Agreement also provides for the grant of a ten-year,
non-qualified option to purchase 50,000 shares of Common Stock at an exercise
price equal to the market price on the date of grant, which was granted on
January 4, 1999. The option vests one-third on each of the first three
anniversaries of the grant date.
14
<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) the Accrued Obligations; (ii) an
amount equal to the greater of $500,000 or $500,000 multiplied by the remaining
term of the Levine Agreement; and (iii) an amount equal to Mr. Levine's
percentage of net pre-tax profits of commission business for which Mr. Levine
is responsible for the year (beginning January 1) in which the termination of
employment occurs.
The Levine Agreement further provides that, in the event of
termination of employment as a result of "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 to 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.
Effective April 9, 1998, Seth M. Lynn, Jr. executed a new employment
agreement with Axe-Houghton for a three-year term (the "Lynn Agreement"),
unless earlier terminated in accordance with its terms. The Lynn Agreement
provides for Mr. Lynn's employment as President of Axe-Houghton Associates,
Inc. and Managing Director of the Axe Core Disciplines (as defined) at an
annual salary of $350,000 and a minimum bonus of $100,000 only for the year
ended December 31, 1998, and participation in an annual bonus pool consisting
of a percentage of the pre-tax profits (as defined) of the group of people
responsible for managing the Axe Core Disciplines, which includes Mr. Lynn.
The Lynn Agreement provides that, in the event of a termination of
employment by the Company "other than for cause" or by Mr. Lynn for "good
reason", the Company will pay Mr. Lynn (i) the Accrued Obligations; (ii) for
termination of employment occurring after December 31, 1998, an amount equal to
$350,000 multiplied by the remaining term of the Lynn Agreement; and (iii) an
amount equal to the bonus pool for the year in which termination of employment
occurs, multiplied by the percentage, if any, of the bonus pool that was paid
to Mr. Lynn with respect to the year immediately prior to the termination. In
the event of termination of employment due to death or "disability", the
Company will pay to Mr. Lynn or his estate only the Accrued Obligations.
All three agreements (Sapirstein, Levine and Lynn) 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 under the Sapirstein Agreement consists of: (i) the
employment term; (ii) the lesser of one-year or the remaining term of the
Agreement if employment is terminated by the Company for "cause" or by Mr.
Sapirstein other than for "good reason"; and (iii) the period during which Mr.
Sapirstein is receiving termination payments. The Non-Competition Period under
the Levine Agreement consists of: (i) the employment term; and (ii) the lesser
of one year or the remaining term of the Agreement if employment is terminated
by the Company for "cause" or by Mr. Levine other than for "good reason". The
Non-Competition Period under the Lynn Agreement includes: (i) the employment
term; (ii) one year if employment is terminated by the Company for "cause" or
by Mr. Lynn other than for "good reason"; and (iii) the period during which Mr.
Lynn is receiving termination payments.
Each of the Sapirstein, Levine and Lynn Agreements also provides that,
in the event of termination of employment for any reason, the executive shall
no longer serve as a director of the Company or any of its subsidiaries.
15
<PAGE>
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
On May 27, 1998, the Company purchased 25,000 shares of Common Stock
from Max H. Levine, a Named Executive Officer and director, for $7.00 per
share, resulting in a total purchase price of $175,000. The Board approved the
purchase by a unanimous vote, excluding Mr. Levine, under the stock repurchase
program approved by the Board in 1994. At the time of the repurchase, the
opening bid and ask quotations for the Common Stock were $7.0625 and $7.125 per
share, respectively, and the last sale was at $7.0625 per share.
Pursuant to the employment agreement between the Company and Ronald H.
Hoenig, in 1998 the Company paid the Estate of Ronald H. Hoenig (the "Estate")
$285,692, which represented the third and final installment of a $857,077 death
benefit that was payable in three equal annual installments over the three-year
period following Mr. Hoenig's death in October 1995. In addition, pursuant to
the employment agreement, the Company was 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 until October 12,
1998.
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.
Max H. Levine, and his son, Michael Levine, who also is employed by Hoenig,
each maintains a margin account with Hoenig's U.S. clearing broker, Sanford C.
Bernstein & Co., Inc. Credit extended to Max Levine and Michael Levine in these
accounts in 1998 was done in the ordinary course of business, was made on
substantially the same terms (including interest rates and collateral
requirements) as those for comparable transactions by others, and did not
involve more than the normal risk of collectibility or present other
unfavorable features.
SHAREHOLDER'S AGREEMENTS AND CERTAIN TRANSACTIONS RELATING TO INSURANCE
Effective upon the closing of the Company's 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 (30) 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 maintained in 1998 life insurance
policies on certain Stockholders who hold such options. Some of these
Stockholders also serve as directors and executive officers of the Company. The
face value of these policies on directors and executive officers as of December
31, 1998 were as follows:
<TABLE>
<S> <C>
Max H. Levine .............. $3,587,250
Alan B. Herzog ............. 2,812,300
Robert Spiegel ............. 1,000,000
Nigel Johnson-Hill ......... 1,000,000
----------
Total: ..................... $8,399,550
==========
</TABLE>
16
<PAGE>
The Company's aggregate annual premium cost in 1998 for the life
insurance policies was $65,500, and the cash surrender value of these policies
was $565,832 as of December 31, 1998. The Company intends to maintain the life
insurance policies on the Stockholders listed above and continues to evaluate
the benefits of obtaining insurance policies on other Stockholders who hold
such options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MAX H.
LEVINE AS A CLASS II DIRECTOR. THE NOMINEE 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.
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP have acted as the Company's independent public
accountants since June 1994. The Audit Committee 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 1999, subject
to the approval of the Board.
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 submitted to the Company pursuant to
Commission Rule 14a-8 for inclusion in the Company's proxy statement and form
of proxy relating to 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 12, 1999 for consideration
at that meeting. Any such proposal must comply in all respects with the rules
and regulations of the Commission.
The Company must receive written notice of any other matter which a
Stockholder may wish to raise at next year's Annual Meeting of Stockholders,
including any non-Rule 14a-8 matter, by February 26, 2000. The proxies
solicited by the Company will confer general discretionary authority with
regard to such matters for which the Company did not receive notice by the
February 26, 2000 deadline.
OTHER MATTERS
The Board 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
17
<PAGE>
HOENIG GROUP INC.
ANNUAL MEETING OF STOCKHOLDERS -- MAY 20, 1999
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 20,
1999, and any adjournment thereof, hereby revoking any proxy heretofore given.
The undersigned instructs such proxies to vote:
I. ELECTION OF CLASS II DIRECTOR.
[ ] FOR THE NOMINEE LISTED BELOW [ ] WITHHOLD AUTHORITY
TO VOTE FOR THE NOMINEE
LISTED BELOW
MAX H. LEVINE
(Continued and to be signed and dated on the reserve side)
<PAGE>
and to vote upon such other matters as may properly come before the Annual
Meeting, and any adjournment thereof, all as described in the Proxy Statement
dated April 12, 1999. By signing below, the undersigned hereby acknowledges
receipt of the Proxy Statement and the 1998 Annual Report.
Either of the proxies or their respective substitutes, who shall be present and
acting, shall have and may exercise all of the powers hereby granted.
UNLESS OTHERWISE INSTRUCTED HEREIN, THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED FOR PROPOSAL I. SAID PROXIES WILL VOTE THE PROXIES RECEIVED IN
ACCORDANCE WITH A DETERMINATION BY A MAJORITY OF THE BOARD OF DIRECTORS WITH
RESPECT TO SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
Signed: ---------------------------
---------------------------
Dated: ---------------------------
(Please sign exactly as name(s)
appears below. For joint accounts,
each joint owner should sign.
Persons signing as executors,
administrators, trustees, etc.,
should so indicate when signing.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE.
