<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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-2.
</TABLE>
Investment Technology Group, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 0-12.
(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):
------------------------------------------------------------------------
(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> 2
INVESTMENT TECHNOLOGY GROUP, INC.
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 6, 1997
------------------------
To the Stockholders of Investment Technology Group, Inc.:
The Annual Meeting of Stockholders of Investment Technology Group, Inc.
will be held at the Rihga Royal Hotel in the Broadway Room, located at Fifth
Avenue and Central Park South, New York, New York 10019, on Tuesday, May 6,
1997, at 2:00 p.m. local time, to consider and act upon:
(i) The election of nine directors to serve until the next Annual
Meeting of Stockholders and until their successors have been duly elected
and qualified;
(ii) Approval of the Company's 1994 Stock Option and Long-Term
Incentive Plan, as amended and restated;
(iii) Approval of the Company's Pay-for-Performance Incentive Plan;
and
(iv) Any other business which may properly come before the meeting or
any adjournment thereof.
Stockholders of record at the close of business on March 31, 1997 are
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
Such stockholders may vote in person or by proxy. A list of such stockholders
will be open to examination by any stockholder at the Annual Meeting and for a
period of 10 days prior to the meeting during ordinary business hours at the
offices of the Company located at 900 Third Avenue, Second Floor, New York, New
York 10022.
You are cordially invited to attend the Annual Meeting. If you do not
expect to attend, we urge you to return your proxy promptly in the enclosed,
postage-prepaid envelope. The return of the proxy does not affect your right to
vote in person should you decide to attend the meeting.
For the Board of Directors,
JOHN R. MACDONALD
Chief Financial Officer
Investment Technology Group, Inc.
April 9, 1997
<PAGE> 3
INVESTMENT TECHNOLOGY GROUP, INC.
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1997
April 9, 1997
This Proxy Statement and the accompanying form of proxy are being furnished
to the stockholders of Investment Technology Group, Inc., a Delaware corporation
(the "Company"), in connection with the solicitation of proxies by the Board of
Directors for use at the Annual Meeting of Stockholders to be held at the Rihga
Royal Hotel in the Broadway Room, located at Fifth Avenue and Central Park
South, New York, New York 10019, on Tuesday, May 6, 1997, at 2:00 p.m. local
time, and at any adjournment thereof (the "Annual Meeting"). Only stockholders
of record at the close of business on March 31, 1997 (the "Record Date") are
entitled to notice of, and to vote at, the meeting. The Notice of Annual
Meeting, Proxy Statement and form of proxy are being sent or given to
stockholders commencing on or about April 9, 1997.
At the Annual Meeting, the stockholders will be asked to (i) elect nine
directors to serve until the next Annual Meeting of Stockholders and until their
successors have been duly elected and qualified, (ii) approve the Company's 1994
Stock Option and Long-Term Incentive Plan, as amended and restated, (iii)
approve the Company's Pay-for-Performance Incentive Plan and (iv) transact such
other business as may properly come before the Annual Meeting or any adjournment
thereof.
The principal executive offices of the Company are located at 900 Third
Avenue, Second Floor, New York, New York, 10022, and the Company's telephone
number at that address is (212) 755-6800.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING FORM
OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PREPAID ENVELOPE.
<PAGE> 4
GENERAL
Solicitation of Proxies
If the accompanying proxy is properly executed and returned, the shares of
the Company's common stock, par value $.01 per share (the "Common Stock")
represented thereby will be voted in accordance with the instructions specified
in the proxy. In the absence of instructions to the contrary, such shares will
be voted in favor of the election of the nine nominees for director whose names
are listed herein and in favor of the 1994 Stock Option and Long-Term Incentive
Plan, as amended and restated, and the Pay-for-Performance Incentive Plan. The
Board of Directors does not intend to bring any other matters before the Annual
Meeting and is not aware of any matters which will come before the Annual
Meeting other than as described herein. In the absence of instructions to the
contrary, it is the intention of the persons named in the accompanying proxy to
vote such proxy in their discretion with respect to such other matters, if any,
that may properly come before the Annual Meeting.
All costs of solicitation of proxies will be borne by the Company. Although
there are no formal agreements to do so, the Company will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials and annual reports to the
beneficial owners of Common Stock. In addition to solicitation by mail, proxies
may be solicited in person, or by telephone, telegraph or facsimile
transmission, by directors and officers of the Company, who will not receive
special compensation for such solicitation.
Revocation of Proxy
Any stockholder may revoke his or her proxy at any time prior to the voting
thereof on any matter (without, however, affecting any vote taken prior to such
revocation). Any stockholder who signs and returns a proxy may revoke it at any
time before it has been voted by (i) delivering written notice of its revocation
to the Company, (ii) delivering to the Company a duly executed proxy bearing a
later date or (iii) attending the meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute revocation
of a proxy).
Voting at the Meeting
At March 31, 1997, the outstanding voting securities of the Company
consisted of 18,251,500 shares of Common Stock. Each share is entitled to one
non-cumulative vote for each director to be elected and one vote on each other
matter of business properly brought before the meeting.
The election of directors will be determined by a plurality of the votes of
the shares at the meeting. Approval of the 1994 Stock Option and Long-Term
Incentive Plan, as amended and restated, the Pay-for-Performance Incentive Plan
and any other items properly brought before the meeting will require the
affirmative vote of holders of a majority of the shares present in person or
represented by proxy and entitled to vote on such items at the Annual Meeting.
Accordingly, in the case of shares that are present or represented at the
Annual Meeting for quorum purposes, not voting such shares for a particular
nominee for director, including by withholding authority on the proxy, will not
operate to prevent the election of such nominee if the nominee otherwise
receives a plurality of votes. An abstention on any other item will operate to
prevent approval of the item to the same extent as a vote against approval of
such item. A broker "non-vote" (which results when a broker holding shares for a
beneficial owner has not received timely voting instructions on certain matters
from such beneficial owner) will be counted for quorum purposes, but it will
have no effect on the outcome of the election of directors or on the vote with
respect to the approval of any other item.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock (and, in footnotes, the common stock of
the Company's parent, Jefferies Group, Inc. ("Jefferies Group")) (i) for each
director of the Company, (ii) for each executive officer named in the Summary
Compensation Table appearing under the caption "EXECUTIVE COMPENSATION," (iii)
for all directors and executive officers as a group and (iv) for each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock of the Company. The information set forth in the table
below is as of March 15, 1997. The information set forth in the accompanying
footnotes is as of the dates indicated therein.
<TABLE>
<CAPTION>
NUMBER OF
SHARES (1) PERCENT
---------- -------
<S> <C> <C>
DIRECTORS
Raymond L. Killian, Jr.............................................. 204,493(2) 1.1
Frank E. Baxter..................................................... --(2) --
Richard G. Dooley................................................... 17,000(2) *
William I. Jacobs................................................... 22,900(3) *
Robert L. King...................................................... 15,000 --
Michael L. Klowden.................................................. 1,000(2) *
Dale A. Prouty...................................................... 762,000(2) 4.0
Scott P. Mason...................................................... 283,321(2) 1.5
Mark A. Wolfson..................................................... 25,000(2) *
OTHER NAMED EXECUTIVE OFFICERS
Yossef A. Beinart................................................... 73,083(2) *
Robert K. Laible.................................................... 48,460(2) *
Joshua D. Rose...................................................... 73,197(2) --
All Directors and Executive Officers as a Group (16 persons)........ 1,542,891(4) 7.8
5% STOCKHOLDERS
Jefferies Group, Inc................................................ 15,000,000(5) 82.2
T. Rowe Price Associates, Inc....................................... 970,500(6) 5.3
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated in a footnote and subject to applicable community
property and similar statutes, each person listed as the beneficial owner of
shares of Common Stock possesses sole voting and dispositive power with
respect to such shares. Beneficial ownership includes stock options granted
by the Company that are exercisable at March 15, 1997, or within 60 days
thereafter, as follows: Mr. Killian: 182,993; Mr. Dooley: 10,000; Mr.
Jacobs: 15,000; Mr. King: 15,000; Mr. Prouty: 750,000; Mr. Mason: 278,321;
Mr. Wolfson: 15,000; Mr. Beinart: 70,083; Mr. Laible: 46,960; Mr. Rose:
73,197; and all directors and executive officers as a group: 1,473,991. Mr.
Mason's option with respect to 200,000 shares of Common Stock is subject to
approval by the Company's stockholders of the 1994 Stock Option and
Long-Term Incentive Plan, as amended and restated. See "APPROVAL OF THE 1994
STOCK OPTION AND LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED."
(2) Each such person also beneficially owns shares of the outstanding common
stock of Jefferies Group. Such beneficial ownership as of February 28, 1997
(including the percentage, where greater than 1%, of the shares outstanding
at that date, and, where noted, stock options that are exercisable within 60
days of such date) is as follows: Mr. Killian (245,475 shares, or 2.4%,
including stock options to purchase 30,000 shares), Mr. Baxter (914,907
shares or 9.1%, including stock options to purchase 30,000 shares), Mr.
Dooley (30,670 shares, including stock options to purchase 18,670 shares),
Mr. Klowden (128,393 shares, or 1.3%, including stock options to purchase
109,332 shares), Mr. Prouty (5 shares), Mr. Mason
3
<PAGE> 6
(60,801 shares), Mr. Wolfson (23,733 shares, including stock options to
purchase 7,160 shares), Mr. Beinart (20,041 shares), Mr. Laible (9,029
shares) and Mr. Rose (7,855 shares).
(3) Includes 300 shares of Common Stock owned by a son of Mr. Jacobs, and 100
shares of Common Stock owned by a daughter of Mr. Jacobs, as to which Mr.
Jacobs disclaims beneficial ownership.
(4) All directors and executive officers as a group beneficially own a total of
1,490,909 shares or 14.6% of the common stock of Jefferies Group, including
stock options to purchase an aggregate of 203,017 shares which are
exercisable within 60 days of February 28, 1997.
(5) The business address of Jefferies Group is 11100 Santa Monica Boulevard,
Tenth Floor, Los Angeles, California 90025.
(6) T. Rowe Price Associates, Inc. ("Associates") has advised the Company that
it is a beneficial owner of 970,500 shares of Common Stock. Associates
further advised the Company that it has sole voting power over 6,400 shares
and sole dispositive power over all shares. Associates is an investment
adviser registered under the Investment Advisers Act of 1940. The business
address for Associates is 100 East Pratt Street, Baltimore, Maryland 21202.
ELECTION OF DIRECTORS
Under the Company's By-laws, the Board of Directors is authorized to
determine the number of directors of the Company. The number of directors to be
elected at the Annual Meeting has been fixed at nine. Such directors will be
elected to serve until the next annual meeting of stockholders and until their
successors shall have been duly elected and qualified.
Each nominee listed below has consented to being a nominee and to serving
as a director if elected. In the event that any nominee shall be unable to serve
as a director (which is not now anticipated), proxies will be voted for
substitute nominees recommended by the Board of Directors or the Board of
Directors may elect to reduce the number of directors. All of the nominees for
election as a director are presently members of the Board of Directors.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR AND
EXECUTIVE OFFICERS
Nominees
The following information is submitted concerning the nominees for election
as directors.
RAYMOND L. KILLIAN, JR., 59, a nominee, has been the Chairman of the Board
of the Company since January, 1997, a director of the Company since March, 1994,
and served as the President and Chief Executive Officer of the Company from
March, 1994 through January, 1997. He has been a director of Jefferies Group
since January 1997, has directed the activities of the Company's wholly-owned
broker-dealer subsidiary, ITG Inc. ("ITG"), since 1987 and has been President,
Chief Executive Officer and a director of ITG since 1992. Mr. Killian was an
Executive Vice President of Jefferies Group from 1985 to 1995, a director and an
Executive Vice President of Jefferies Group's wholly-owned broker-dealer
subsidiary, Jefferies & Company, Inc. ("Jefferies"), from 1985 to 1991 and
served as National Sales Manager of Jefferies from 1985 to 1990. Mr. Killian is
Chairman of the Company's Executive Committee.
FRANK E. BAXTER, 60, a nominee, has been a director of the Company since
March, 1994 and was a director of ITG from January, 1994 through January, 1997.
Mr. Baxter is a member of the Company's Executive Committee. Mr. Baxter has been
Chairman of the Board of Jefferies Group since 1990, Chief Executive Officer of
Jefferies Group since 1987, President of Jefferies Group since 1986 and a
director of Jefferies Group and Jefferies since 1975. Mr. Baxter has previously
served as Executive Vice President, National Sales Manager and New York Branch
Manager of Jefferies and as the Managing Director of Jefferies Group's U.K.
subsidiary.
4
<PAGE> 7
RICHARD G. DOOLEY, 67, a nominee, has been a director of the Company since
March, 1996 and a director of Jefferies Group since November, 1993. From 1978
until his retirement in June, 1993, Mr. Dooley was Executive Vice President and
Chief Investment Officer of Massachusetts Mutual Life Insurance Company ("Mass
Mutual"). Mr. Dooley is currently a consultant to Mass Mutual. Mr. Dooley has
been a director of Advest Group, Inc. since 1983, Hartford Steam Boiler
Inspection and Insurance Company since 1984, Kimco Realty Corporation since
1990, and various Mass Mutual sponsored investment companies. Mr. Dooley is also
a trustee of Saint Anselm College and Chairman of the Board of The New England
Education Loan Marketing Corporation. Mr. Dooley has been a member of the
Company's Audit and Compensation Committees since March, 1996.
WILLIAM I. JACOBS, 55, a nominee, has been Executive Vice President-Global
Resources of MasterCard International, Inc. since January, 1995. From 1993 to
1994, Mr. Jacobs served as a financial consultant to several firms and
universities. Mr. Jacobs was founder, Executive Vice President, Chief Operating
Officer and a director of Financial Security Assurance, a monoline bond insurer,
from 1985 to 1993 and, prior to 1985, the President and Managing General Partner
of S&B Insurance Services Company. Mr. Jacobs has been a director of the Company
since June, 1994, is Chairman of the Company's Audit Committee and is a member
of the Company's Compensation Committee.
ROBERT L. KING, 46, a nominee, has been the President, Chief Operating
Officer and a director of Corporate Express, Inc., a distributor of office and
computer supplies, since 1993. Prior to 1993, Mr. King was employed by FoxMeyer
Corporation, a distributor of health and pharmaceutical products, where he was
Chief Executive Officer from 1989 to 1993, President from 1988 to 1993 and Chief
Operating Officer from 1988 to 1989. Mr. King has been a director of the Company
since June, 1994 and is a member of the Company's Audit and Compensation
Committees.
MICHAEL L. KLOWDEN, 52, a nominee, has been the President and Chief
Operating Officer of Jefferies since December, 1996, Vice Chairman of the Board
of Jefferies Group and Jefferies from May, 1995 to December, 1996 and a director
of Jefferies Group since May, 1987. From 1978 to 1995, Mr. Klowden was a senior
partner at Morgan, Lewis & Bockius a law firm that renders legal services to the
Company, and has been a trustee of the University of Chicago since 1986. Mr.
Klowden has been a director of the Company since January, 1997.
SCOTT P. MASON, 49, a nominee, has been the President and Chief Executive
Officer of the Company since January, 1997 and has been a director of the
Company since March, 1994. Mr. Mason was previously the Edmund Cogswell Converse
Professor of Finance and Banking and the Chairman of the Finance Area at the
Harvard University Graduate School of Business Administration, where he was a
professor from 1978 through 1996. He was a consultant to the Company from 1987
through 1996, and has been a director of ITG since 1992. Mr. Mason is a member
of the Company's Executive Committee.
DALE A. PROUTY, 43, a nominee, is an Executive Vice President and director
of the Company. Mr. Prouty was an Executive Vice President and a director of the
Company from 1994 to 1997. From 1987 to 1991, Mr. Prouty was Chief Executive
Officer of Integrated Analytics Corporation ("IAC"), a company that he founded
in 1987 and that was acquired by Jefferies Group in 1991. From 1983 to 1986, Mr.
Prouty was a Technical Consultant for Inference Corporation, a company engaged
in the development of artificial intelligence systems. Prior to 1983, Mr. Prouty
worked in the aerospace industry. Mr. Prouty is a member of the Company's
Executive Committee.
MARK A. WOLFSON, 44, a nominee, has been a director of Jefferies Group
since July, 1991, a principal of Arbor Investors, LLC, a private investment
company, since 1995, President of MW General, Inc. since 1994, Vice President of
Keystone, Inc., the primary investment vehicle of Robert M. Bass, since 1995 and
Vice President since 1996 of each of Group 31, Inc., Schoodic Point, LLC and
Strategic Genpar, Inc. He is also a professor at the Graduate School of
Business, Stanford University, where he has been a faculty member since 1977,
including a term as Associate Dean from 1990 through 1993. He has also taught at
the University of Chicago and Harvard University. Mr. Wolfson has been a
director of Oreck Corp. since 1996, a director of Regina Home Care Corp. since
1997 and a member of the Board of Advisors of FEP Capital
5
<PAGE> 8
Holdings, L.P. since 1995. Mr. Wolfson has been a director of the Company since
June, 1994, and is Chairman of the Company's Compensation Committee and a member
of the Company's Audit Committee.
Other Executive Officers
The executive officers of the Company are appointed by, and serve at the
discretion of, the Board of Directors. Other than Messrs. Killian, Mason and
Prouty, for whom information is provided above, the following sets forth
information as to the executive officers of the Company.
YOSSEF A. BEINART, 40, joined ITG in 1992. As Executive Vice President, he
is responsible for research and development and technology matters, and is the
Chief Information Officer of ITG. Mr. Beinart has been a director of ITG since
June, 1994. From 1988 to 1991, Mr. Beinart was Vice President of Development of
IAC.
DAVID C. CUSHING, 35, is Executive Vice President and Director of Research
for ITG. He has been a director of ITG since February, 1996. He joined the firm
in 1991 as a Vice President of Sales and Trading and formed the research
department in 1992. From 1986 to 1991, Mr. Cushing was a Vice President in the
Equity Derivatives and Program Trading Department at Lehman Brothers.
ROBERT K. LAIBLE, 35, has been involved with the activities of ITG since
1987. Mr. Laible is an Executive Vice President of ITG responsible for the daily
operation of the Company's trading desk. Mr. Laible has been a director of ITG
since June, 1994.
JOHN R. MACDONALD, 41, is Senior Vice President and Chief Financial Officer
of the Company. Mr. MacDonald is also a Senior Vice President and Chief
Financial Officer of ITG. Mr. MacDonald joined the Company (and ITG) as Vice
President and CFO in March, 1994. Prior to joining the Company, from November,
1989 through March, 1994, Mr. MacDonald was a Vice President and Group Manager
of the Financial Division of Salomon Brothers Inc, a registered broker-dealer.
Mr. MacDonald has been a director of ITG since February, 1995.
JOSHUA D. ROSE, 39, has been involved with the activities of ITG since 1987
and is an Executive Vice President of ITG with general responsibility for all
international activities, both domestic and international. Mr. Rose joined
Jefferies in 1985. Mr. Rose has been a director of ITG since June, 1994.
ROBERT J. RUSSEL, 42, joined ITG in November, 1996 as Senior Vice
President. He is leading ITG's Strategic Planning and Business Development
efforts. Prior to joining ITG, Mr. Russel spent nine years with Reuters in a
variety of senior roles including General Management, Business Development,
Technology, and Marketing and Sales.
JAMES MARK WRIGHT, 37, has been a Senior Vice President and director of ITG
since December, 1994. From 1992 through November, 1994, Mr. Wright was a Vice
President of ITG. From 1990 through 1991, Mr. Wright was a Vice President of
IAC. From 1984 through 1990, Mr. Wright was the Director of Development of
Inference Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors of the Company held six meetings during 1996. Each
incumbent member of the Board of Directors who was a director during 1996
attended, during his term of office, at least 75% of the total number of
meetings of the Board of Directors and committees thereof of which such director
was a member.
The Board of Directors has an Audit Committee, a Compensation Committee and
an Executive Committee. The Board does not have a Nominating Committee.
The current Audit Committee members are William I. Jacobs, Chairman,
Richard G. Dooley, Robert L. King and Mark A. Wolfson. The Audit Committee is
responsible for reviewing with the independent auditors of the Company the
independent auditors' audit and review programs and procedures, the financial
statements and the adequacy of the Company's system of internal accounting
controls. The Audit Committee also reviews the professional services provided by
the Company's independent auditors and makes recommendations to the
6
<PAGE> 9
Board as to the engagement or discharge of the Company's auditors. During 1996,
there were three meetings of the Audit Committee.
The current Compensation Committee members are Mark A. Wolfson, Chairman,
Richard G. Dooley, William I. Jacobs and Robert L. King. The Compensation
Committee is responsible for developing and implementing compensation policies,
plans and programs for the Company's executive officers and for the
administration of the Company's 1994 Stock Option and Long-Term Incentive Plan.
During 1996, there were three meetings of the Compensation Committee.
The current Executive Committee members are Raymond L. Killian, Jr.,
Chairman, Frank E. Baxter, Scott P. Mason and Dale A. Prouty. The Executive
Committee acts on routine matters requiring the approval of the Board of
Directors of the Company and as otherwise permitted by Delaware law. During
1996, there were no formal meetings of the Executive Committee.
DIRECTOR COMPENSATION
Directors who are employees of the Company, Jefferies Group or subsidiaries
of Jefferies Group are not compensated for serving as directors. Currently,
directors who are not employees of the Company, Jefferies Group or subsidiaries
of Jefferies Group receive an annual retainer fee of $20,000, plus fees of
$1,000 for attendance at each of six regular meetings of the Board of Directors
and $2,000 for attendance at each special meeting of the Board of Directors. The
chairman of each committee receives an annual retainer of $3,000, and all
committee members receive $750 for attendance at each meeting of a committee of
the Board of Directors. Directors of the Company are also reimbursed for
out-of-pocket expenses.
Mr. Mason was retained by the Company during 1996 as a consultant and
received approximately $20,000 per month from the Company for consulting fees.
Mr. Mason provided the Company with strategic short-term and long-term guidance
and planning. Mr. Mason was compensated at a rate that the Company believes is
comparable to rates paid to persons with similar experience and qualifications.
During 1996, Mr. Mason received from the Company a total of $240,000 for
consulting services provided to the Company.
Under the Company's Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") adopted in 1995, an option to purchase 10,000 shares is
granted to each person who first becomes a non-employee director of the Company
at the time of initial election or appointment, and an option to purchase 2,500
shares is granted to each non-employee director on the 45th day after the Annual
Meeting of Stockholders each year. Such options are granted with an exercise
price per share equal to 100% of the fair market value of a share on the date of
grant. Such options expire at the earlier of five years after the date of grant,
12 months after death, disability or retirement after reaching age 65 or 60 days
after an optionee ceases to serve as a director for reasons other than death,
disability or such retirement (except options will in no event expire before
June 3, 1997). Options become exercisable at the later of three months after the
date of grant or May 4, 1997, except an option granted to a director less than
three months before a cessation of service for reasons other than death,
disability or retirement after reaching age 65 will not thereafter become
exercisable. Directors who are not employees of the Company or Jefferies Group
are eligible to participate in the Directors' Plan.
Each director of the Company may participate in the Jefferies Group
Charitable Gifts Matching Program pursuant to which Jefferies Group will match
50% of charitable contributions made by such directors up to a maximum dollar
amount of $1,500 per person per year.
The children of directors of the Company may also participate (along with
the children of all employees of the Company and Jefferies Group) in the Stephen
A. Jefferies Educational Grant Program which provides scholarship awards for
secondary and post-secondary education based on factors such as financial need,
academic merit and personal statements. The grants are made by an independent
scholarship committee, none of whose members are affiliated with the Company or
with Jefferies Group.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual
and long-term compensation for services in all capacities to the Company during
the past three fiscal years of those persons who were, at December 31, 1996, the
Chief Executive Officer and the other four most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers").
Information relating to compensation for services to the Company's predecessor
in a portion of 1994 is included in the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($) BONUS($) ($)(2) SARS(#) ($)(3)
- ---------------------------------- ---- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Raymond L. Killian, Jr............ 1996 295,184 725,957 11,477 -- 59,981
Chairman of the Board 1995 300,000 450,000 9,492 365,986 43,082
1994 341,667 1,350,000 13,909 750,000 10,049,894(4)
Yossef A. Beinart................. 1996 150,000 299,767 4,132 -- 38,417
Executive Vice President 1995 150,000 281,135 4,708 25,766 111,175
of ITG Inc. 1994 150,000 183,413 13,845 110,000 2,543,379(4)
Robert K. Laible.................. 1996 150,000 501,332 6,705 -- 46,113
Executive Vice President 1995 150,000 409,482 6,072 43,920 31,902
of ITG Inc. 1994 150,000 279,363 10,128 115,000 367,830(4)
Dale A. Prouty.................... 1996 295,184 360,212 223 -- 39,861
Executive Vice President 1995 300,000 450,000 109,908 -- 25,838
1994 283,334 1,050,000 108,111 750,000 17,781,724(4)
Joshua D. Rose.................... 1996 200,000 438,092 6,533 -- 49,519
Executive Vice President 1995 150,000 397,123 6,658 146,394 37,419
of ITG Inc. 1994 150,000 396,519 13,871 300,000 818,127(4)
</TABLE>
- ---------------
(1) The Named Executive Officers did not become executive officers of the
Company until March, 1994. Such persons held comparable positions with the
Company's predecessor.
(2) Each Named Executive Officer participating in a voluntary deferral plan, the
Jefferies Group Capital Accumulation Plan for Key Employees (the "CAP"), was
credited with units representing shares of Jefferies Group's Common Stock
("CSUs") at a price equal to 85% of Jefferies Group's average cost per share
of the shares available for distribution in the CAP. Jefferies Group's
average cost per share is based upon the average cost of shares repurchased
specifically for purposes of the CAP and held as treasury shares pending
distribution upon settlement of CSUs. During each calendar quarter, each CAP
participant defers receipt of compensation, a portion of which is credited
to a cash account. At the end of each quarter, the cash account is debited
by an amount equal to the number of CSUs multiplied by 85% of the average
cost per share. During 1996, the amounts of the 15% discount on the CSUs
with respect to the Named Executive Officers were as follows: Mr. Killian:
$11,477, Mr. Beinart: $4,132, Mr. Laible: $6,705, Mr. Prouty: $223 and Mr.
Rose: $6,533.
(3) The total amounts for 1996 shown in the "All Other Compensation" column
consist of the following:
(a) The Company's matching contributions under the Section 401(k) plan
of Jefferies Group during the plan year ended November 30, 1996,
as follows: Mr. Killian: $7,885, Mr. Beinart: $4,132, Mr. Laible:
$7,885, Mr. Prouty: $7,885 and Mr. Rose: $7,885.
(b) Forfeitures under the Employee Stock Ownership Plan of Jefferies
Group. During the plan year ended November 30, 1996, each Named
Executive Officer's account was credited with 12
8
<PAGE> 11
shares at an original cost of $10.51 per share, for a total of $126,
as a result of reallocations resulting from forfeitures.
(c) Matching contributions by the Company to the Employee Stock
Purchase Plan of Jefferies Group. During 1996, Mr. Killian
received 95 shares of the common stock of Jefferies Group at
prices ranging from $27 to $64, for a total matching contribution
of $3,600. Mr. Laible received 121 shares of the common stock of
Jefferies Group at prices ranging from $27 to $64, for a total
matching contribution of $4,630.
(d) Contributions of $6,119 and allocations of forfeitures of $745 for
each of the Named Executive Officers under the 1996 Profit Sharing
Plan of Jefferies Group.
(e) Dividends and interest payments to the cash accounts of the Named
Executive Officers under the CAP, paid as of December 31, 1996
(the most recent date for which the information is available), at
a rate equal to the average rate Jefferies paid on its margin
accounts carrying credit balances as follows: Mr. Killian: $2,672,
Mr. Beinart: $1,772, Mr. Laible: $1,830, Mr. Prouty: $1,508 and
Mr. Rose: $2,300.
(f) An amount of "deemed interest" credited to each CAP participant
for 1996, determined by multiplying (i) the daily weighted average
amount in the CAP participant's Profit-Based Deferred Compensation
Account by (ii) an interest rate equal to the fully-diluted
earnings per share (if any) of Jefferies Group common stock for
that fiscal year divided by the fair market value of a share at
the end of the preceding fiscal year. In 1996, the Named Executive
Officers received the following amounts of such "deemed interest":
Mr. Killian: $38,834, Mr. Beinart: $25,523, Mr. Laible: $24,778,
Mr. Prouty: $23,478 and Mr. Rose: $32,344 .
(4) Each Named Executive Officer received certain payments at the time of the
Company's initial public offering in May, 1994. Depending on the
then-existing arrangements with each Named Executive Officer, such payments
were generally made in connection with the termination of pre-existing
options, the termination of existing employment agreements and/or the
termination of various phantom equity and profit bonus plans.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information concerning the exercise
of options, the number of shares of Common Stock (and, in Note 2, of common
stock of Jefferies Group) underlying unexercised stock options held by the Named
Executive Officers and the value of unexercised in-the-money stock options at
December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raymond L. Killian, Jr...... -- -- 30,000(2) 548,978 956,250 4,494,297
Yossef A. Beinart........... -- -- -- 95,849 -- 673,906
Robert K. Laible............ -- -- -- 90,878 -- 695,569
Dale A. Prouty.............. -- -- -- 750,000 -- 4,687,500
Joshua D. Rose.............. -- -- -- 219,591 -- 1,797,718
</TABLE>
- ---------------
(1) At fiscal year end, the closing price of the Company's Common Stock was
$19.25 per share, and the closing price of the common stock of Jefferies
Group was $40.375 per share.
(2) Represents an option (or the exercise of an option) to acquire shares of
common stock of Jefferies Group.
9
<PAGE> 12
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION AND THE PERFORMANCE GRAPH
INCLUDED HEREIN SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, the members of which
are Messrs. Wolfson, Dooley, Jacobs and King, has furnished the following report
on executive compensation:
To: The Board of Directors and Stockholders of Investment Technology Group,
Inc.
Introduction
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for developing and implementing compensation
policies, plans and programs for the Company's executive officers to enhance the
profitability of the Company, and thus stockholder value, by providing for
competitive levels of compensation, rewarding performance that enhances
profitability and encouraging long-term service to the Company. Each of the
Compensation Committee's members is a person who is not a current or former
employee of the Company, Jefferies Group or affiliates of Jefferies Group.
Messrs. Dooley and Wolfson are also outside directors of Jefferies Group.
The principal components of ongoing compensation of executive officers are
salary, an annual bonus tied to performance and stock option awards providing
incentives and rewards for long-term service and performance. The Compensation
Committee's functions include reviewing salary levels for executive officers on
an annual basis, establishing and determining the level of performance targets
upon which payment of annual bonuses is conditioned and other terms of such
annual bonuses, granting stock options and otherwise administering the Company's
1994 Stock Option and Long-Term Incentive Plan (the "1994 Plan"). The
Compensation Committee acts on behalf of the Company in negotiating the terms of
employment agreements (including modifications to existing employment
agreements) with executive officers and advises and makes recommendations to the
Board of Directors regarding the approval of such employment agreements and
adoption of compensation and benefit plans (including amendments to existing
plans) in which executive officers and directors may participate.
The Compensation Committee intends that compensation paid to the Company's
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table not be subject to the limitation on tax deductibility under
Section 162(m) of the Internal Revenue Code, as amended (the "Code"), so long as
this can be achieved in a manner consistent with the Compensation Committee's
other objectives. Code Section 162(m) generally eliminates a corporation's tax
deduction in a given year for payments to certain named executive officers in
excess of $1 million, unless such payments result from "qualified performance-
based compensation." The Compensation Committee has been advised that
compensation paid in 1996 should not be subject to the limitation on
deductibility under Code Section 162(m). As discussed below, the Board of
Directors has amended and restated the 1994 Plan in order that options and other
awards thereunder granted in the future, as well as the recent grant of an
option to Scott P. Mason, upon his assuming the positions of President and Chief
Executive Officer, will not be subject to a limitation on deductibility under
Code Section 162(m). See "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS." Likewise, the Board of Directors has adopted
the Pay-for-Performance Incentive Plan in order that annual incentive payments
(bonuses) to executives which might, together with salary, exceed $1 million in
a given year will qualify as "performance-based compensation" that is fully
deductible under Code Section 162(m). These plans are being submitted to a vote
of stockholders at the Annual Meeting, in order to meet the stockholder approval
requirement of regulations under Code Section 162(m). See "APPROVAL OF THE 1994
STOCK OPTION AND LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED," and
"APPROVAL OF THE PAY-FOR-PERFORMANCE INCENTIVE PLAN."
10
<PAGE> 13
Compensation of the Chief Executive Officer
Mr. Killian, who served as Chief Executive Officer throughout 1996,
received compensation for 1996 which was generally specified in his 1994
employment agreement, the terms of which are described in greater detail under
the caption "EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS." The Compensation Committee has been advised that the base
annual salary levels, the annual bonus levels and other terms of annual bonuses
specified in the employment agreement were determined by the Company and
Jefferies Group in 1994 through negotiations with and subject to the agreement
of Mr. Killian, and in consultation with the underwriters of the Company's
initial public offering. Mr. Killian's base salary and target annual bonus were
set at a total of $750,000, an amount believed to be consistent with the general
practice of comparable companies for chief executive officers. No attempt was
made to peg this targeted cash compensation to a particular percentile of
compensation paid by comparable companies. The Compensation Committee has been
advised that, under the employment agreement, the division of Mr. Killian's
targeted compensation between annual salary of $300,000 and a target annual
bonus of $450,000 was intended to link annual cash compensation to performance
to a degree generally similar to comparable companies reviewed in 1994, and to
provide a strong link between pay and performance.
Under the terms of Mr. Killian's employment agreement governing annual
bonus, the targeted annual bonus of $450,000 (a target not adjusted by the
Compensation Committee) was to be payable if an after-tax profit target
specified by the Compensation Committee for the year was achieved. The amount of
the bonus was to be decreased below $450,000, down to zero, by an amount equal
to 20% of the shortfall of net after-tax profit below the targeted amount, and
was to be increased above $450,000, subject to no upper limit, by an amount
equal to 5% of the excess of net after-tax profit above the targeted amount. In
early 1996, the Compensation Committee established the net after-tax profit
target for 1996 at approximately 19.5% above the 1995 net after-tax profit,
based substantially on the Compensation Committee's assessment of the Company's
budgets for 1996. Due to the Company's outstanding performance in 1996, which
substantially exceeded the net after-tax profit target, Mr. Killian's bonus for
1996 was $725,957. Mr. Killian's salary for 1996 was reduced by $4,816, to
$295,184, as an adjustment reflecting the fact that the estimated bonus amounts
paid for 1995 exceeded slightly the amount payable determined upon completion of
the Company's audit for 1995.
The Compensation Committee authorized the grant of no options to Mr.
Killian in 1996. Although stock options represent an important component of
overall compensation, Mr. Killian received substantial option grants prior to
1996, including under the terms of his employment agreement, which options
continued to serve as the long-term compensation component of Mr. Killian's
compensation for 1996.
Mr. Killian is permitted to participate in the Jefferies Group CAP Plan.
CAP permits executive officers and other key employees of the Company to defer
receipt of (and thus defer taxation on) a substantial portion of their cash
compensation. Under the CAP, part of such deferred amounts are deemed invested
in common stock of Jefferies Group at a 15% discount from the average cost of
shares repurchased by Jefferies Group for purposes of the CAP, and part of such
deferred amounts are deemed invested in a hypothetical instrument that pays
interest based on the rate represented by the earnings per share (if any) of
Jefferies Group's common stock for a given year divided by the fair market value
of a share of such common stock on the last day of the preceding fiscal year.
Amounts deferred by Mr. Killian under the CAP in 1996 include both salary and
bonus. The amount of earnings on deferred compensation credited to Mr. Killian
under the CAP is disclosed in the Summary Compensation Table under the "Other
Annual Compensation" and "All Other Compensation" columns. The Company
reimburses Jefferies Group for the costs of participation by Company executives
in the CAP and other employee benefit plans maintained by Jefferies Group.
Compensation of Other Executive Officers
The Company's compensation program for other Named Executive Officers in
1996 was generally similar to that for Mr. Killian, described above. The Company
entered into employment agreements with the other Named Executive Officers
serving at the time of the 1994 initial public offering. The base salaries and
target
11
<PAGE> 14
annual bonus amounts were generally determined at that time in accordance with
the above-described review of comparable companies, such that the amounts were
generally consistent with the range paid by such companies, but without pegging
such amounts to a specific percentile. As in the case of Mr. Killian, the
targeted annual bonuses were intended to provide more than half of each Named
Executive Officer's total annual cash compensation at the target level of
performance. This is intended to provide a strong link between pay and
performance.
The Company's strong performance in 1996 resulted in bonus payouts which
were substantially above targeted levels. The annual bonuses payable to the
Named Executive Officers other than Messrs. Killian and Prouty are payable out
of a "bonus pool" under the ITG Incentive Compensation Plan. The amount of the
bonus pool is determined based upon specified increases in client revenues (less
certain costs), with the total amount of the bonus pool increasing as specified
levels of revenues are achieved. Such executives are entitled to receive bonus
payments equal to an allocation that is determined annually with respect to the
bonus pool. For 1996, the annual bonus pool was funded at $8.4 million for such
executives, based on the level of revenues earned in 1996. Mr. Prouty's annual
bonus was based on the same after-tax profit performance as applied to Mr.
Killian's bonus, as described above.
The Committee authorized the grant of no options to the other Named
Executive Officers in 1996. Previously granted options, some of which first
become exercisable in 1997, continued to serve as a stock-based long-term
compensation component of the total compensation of such executive officers
through 1996.
The other executive officers also participate in the CAP, the terms of
which are described above.
The foregoing report has been furnished by:
Mark A. Wolfson, Chairman
Richard G. Dooley
William I. Jacobs
Robert L. King
12
<PAGE> 15
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on the Company's Common Stock against the cumulative total return of the
Russell 2000 Index and the mean of the Lipper Analytical Brokerage Composite and
Nasdaq Computer and Data Processing Services Stock Composite Indices, for the
period commencing May 4, 1994, when the Company completed its initial public
offering and the Company's Common Stock began publicly trading, and ending
December 31, 1996.
COMPARISON OF TOTAL RETURN*
INVESTMENT TECHNOLOGY GROUP, INC. COMMON STOCK, RUSSELL 2000 INDEX AND
MEAN OF THE LIPPER ANALYTICAL BROKERAGE COMPOSITE AND
NASDAQ COMPUTER AND DATA PROCESSING SERVICES
STOCK COMPOSITE INDICES
<TABLE>
<CAPTION>
MEAN OF LIPPER
ANALYTICAL
BROKERAGE|COMPOSITE
AND NASDAQ
COMPUTER|AND DATA
PROCESSING
'INVESTMENT SERVICES
MEASUREMENT PERIOD TECHNOLOGY GROUP, RUSSELL 2000 STOCK|COMPOSITE
(FISCAL YEAR COVERED) INC.' INDEX INDICES
<S> <C> <C> <C>
5/4/94 100.00 100.00 100.00
12/31/94 51.90 98.40 105.30
12/30/95 71.20 124.20 154.00
12/31/96 148.10 142.50 204.80
</TABLE>
- ---------------
* Normalized so that the value of the Company's Common Stock and each index
presented was $100 on May 4, 1994. The presentation also assumes the
reinvestment of dividends.
13
<PAGE> 16
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During 1996, the members of the Compensation Committee were Messrs. Dooley,
Wolfson, Jacobs and King, none of whom is, or during the previous year was, an
officer or employee of the Company, Jefferies Group or an affiliate of Jefferies
Group. Mr. Dooley became a member of the Compensation Committee in March, 1996.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
The Company entered into an employment agreement with Scott P. Mason in
1997, in order to secure his services as President and Chief Executive Officer.
The term of employment under the agreement extends through 2001, with annual
renewals thereafter. The agreement provides for annual salary of $300,000
(subject to periodic review and raises), and an additional payment of $450,000
in each of 1997 and 1998. The agreement also provides for an annual incentive
payment, the target amount of which is currently $450,000 in each of 1997 and
1998 and $900,000 per year thereafter, which is payable based upon achievement
of growth in the Company's earnings before income taxes (as defined
hereinafter). The annual incentive payment is subject to stockholder approval of
the Company's Pay-for-Performance Incentive Plan; that plan, and certain other
terms of the annual incentive under the agreement, are described below under the
caption "APPROVAL OF THE PAY-FOR-PERFORMANCE INCENTIVE PLAN." The agreement also
provided for the grant to Mr. Mason of a five-year option to purchase 1 million
shares of the Company's Common Stock, exercisable at $22.175 per share
(approximately $4.00 above the market price of Common Stock at the time the
terms of the option were agreed to and at the time the option was granted). The
option is subject to stockholder approval of the Company's 1994 Stock Option and
Long-Term Incentive Plan, as amended and restated; that plan, and the vesting
and certain other terms of the option, are described below under the caption
"APPROVAL OF THE 1994 STOCK OPTION AND LONG-TERM INCENTIVE PLAN, AS AMENDED AND
RESTATED." The agreement also provides for payment of severance benefits to Mr.
Mason. Benefits payable if employment is terminated by the Company without cause
or by Mr. Mason for good reason (as defined in his employment agreement) include
(i) a lump sum payment equal to the amount of the fixed payment and target
annual incentive for the year of termination (to the extent not previously
paid), prorated for the period of service in that year, (ii) a lump sum payment
of two times the sum of salary plus fixed payment plus target annual incentive
and (iii) participation in welfare benefit and pension or retirement plans for
two years following termination. Benefits payable if, in connection with a
change in control or during the two years following such event, employment is
terminated by the Company without cause or by Mr. Mason for good reason (as
defined in his employment agreement) are the same as in the preceding sentence
except the multiplier referred to in clause (ii) will be three times rather than
two and the post-termination period referred to in clause (iii) will be three
years rather than two. In the event of death or disability, a benefit would be
payable as a lump sum equal to the amount of the fixed payment and target annual
incentive for the year of termination (to the extent not previously paid),
prorated for the period of service in that year plus, in the case of disability,
periodic payments equal to 60% of base salary through age 65. The agreement
provides for payment of a tax "gross-up" payment to Mr. Mason to offset any
effects of golden parachute and certain other taxes on payments following a
change in control. The agreement also restricts Mr. Mason from competing with
the Company for a period of six months or 18 months following termination of
employment, the period depending on the nature of the termination.
In 1994, the Company entered into an employment agreement with Mr. Killian
for a term ending April 30, 1997. The Company is required to pay Mr. Killian an
annual salary of $300,000, subject to increase in the discretion of the Board of
Directors, and to pay him an annual bonus with a target of $450,000, based upon
the Company's net after-tax profits. Prior to the beginning of each year, the
Compensation Committee will determine a target net after-tax profit that is
reasonable and appropriate, based upon an analysis of peer companies, and that
is commensurate with a target level of profits set by the Company. Mr. Killian's
annual bonus is increased or decreased by specified amounts if the Company's net
after-tax profits exceed or are less than the target net after-tax profits. Mr.
Killian's agreement may be terminated, with or without cause, or if
14
<PAGE> 17
Mr. Killian becomes permanently disabled. Mr. Killian may terminate his
agreement for good reason, consisting of a material reduction in title, duties
or responsibilities. Upon termination for cause or by reason of death,
disability or resignation other than for good reason, Mr. Killian will not be
entitled to any compensation or, except as required under applicable laws,
benefits. Upon termination without cause or upon resignation for good reason,
the Company is required to pay base salary in effect at the time of termination
or resignation until April 30, 1997, to pay the bonus in the year termination
occurs and to provide benefits required by applicable laws. Mr. Killian's
agreement further provides that, upon termination of employment, Mr. Killian
will not compete with the Company for a period of six months following such
termination provided that the Company continues to pay base salary during such
period. The non-competition period may be extended until any date on or prior to
December 31, 1997, if the Company agrees to continue to pay during that period
base salary and, in the case of termination without cause or resignation for
good reason, the bonus in effect at the time of termination.
In 1994, the Company entered into an employment agreement with Mr. Prouty,
for a term ending April 30, 1997. Under Mr. Prouty's employment agreement (the
terms of which are substantially similar to the terms of Mr. Killian's
employment agreement), Mr. Prouty is employed as Executive Vice President of the
Company and the Company is required to pay him an annual salary of $300,000,
subject to increase in the discretion of the Board of Directors. Mr. Prouty's
agreement may be terminated with or without cause or if Mr. Prouty becomes
permanently disabled. Mr. Prouty may terminate his agreement for good reason (as
defined in the employment agreement and amendments thereto). Mr. Prouty's
employment agreement provides that, upon termination of employment, Mr. Prouty
will not compete with the Company for a period of six months following such
termination provided the Company continues to pay his base salary during such
period. In 1996, the Company and Mr. Prouty amended Mr. Prouty's employment
agreement (the "Amendment"). Under the Amendment, Mr. Prouty relocated his
principal place of employment to the Company's Culver City, California, office,
and Mr. Prouty agreed to spend one week per month, as needed by the Company, at
the Company's New York office. The Amendment further provides that (i) Mr.
Prouty will be entitled to receive, for the period commencing July 1, 1996, and
ending April 30, 1997, a discretionary bonus based on performance, as determined
by the Chief Executive Officer, such discretionary bonus being subject to
proration, rather than a bonus based on the Company's achievement of certain
performance goals; (ii) a reduction in Mr. Prouty's duties or responsibilities
in connection with his relocation will not constitute good reason to terminate
his employment; (iii) in the event of a termination by the Company without cause
(or by Mr. Prouty's for good reason), Mr. Prouty will receive his salary in
effect at his termination through March 31, 1997, and, for such termination
occurring in 1997, a bonus through April 30, 1997; and (iv) if the Company
elects to extend a post-termination non-competition period for Mr. Prouty, it
will pay his bonus then in effect for such period of time.
In 1994, the Company entered into employment agreements with Messrs. Rose,
Beinart and Laible for terms ending April 30, 1997. Under the terms of these
agreements, each individual is employed as a Senior Vice President of ITG
(though each was, during 1997, promoted to Executive Vice President). The
Company is required to pay Mr. Rose an annual salary of $200,000, and Messrs.
Beinart and Laible annual salaries of $150,000 each, subject to increase in the
discretion of the Board of Directors, and annual bonuses based upon the
Company's net revenue. Prior to the beginning of each year, the Compensation
Committee will determine a bonus pool percentage share that is reasonable and
appropriate based upon an assessment of each individual's contribution to the
Company, experience and period of employment. The termination and non-
competition provisions in such agreements are generally the same as the
agreement with Mr. Killian, as described above. In addition to the employment
agreements, the Company has separate agreements with Messrs. Laible and Rose
providing for participation by such executive officers under the ITG Incentive
Compensation Plan. See "REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION -- Compensation of Other Executive Officers."
15
<PAGE> 18
PENSION PLAN
All employees of the Company employed prior to April 1, 1997, who are
citizens or residents of the United States, who are 21 years of age and who have
completed one year of service with the Company are covered by the Jefferies
Group Employees' Pension Plan (the "Pension Plan"), a defined benefit plan,
which was originally adopted in 1964 and amended in 1967. The Pension Plan is
funded through contributions by the Company and earnings on existing assets in
conformance with annual actuarial evaluations. The Pension Plan provides for
annual benefits following normal retirement at age 65 equal to 1% of the
employee's covered remuneration from January 1, 1987 until termination of
employment plus 20% of the first $4,800 and 50% of amounts exceeding $4,800 of
annual average covered remuneration for 1985 and 1986, reduced proportionately
for service of less than fifteen years (as of December 31, 1986). Benefits
payable under the Pension Plan are not subject to deduction for Social Security
benefits or other offsets.
Covered remuneration for purposes of the Pension Plan includes the
employee's total annual compensation (salaries, commissions, and bonuses) not to
exceed $100,000 for 1985 and 1986, and $200,000 for 1987. From 1988 through
1993, this latter dollar limitation was adjusted automatically for each plan
year to the amount prescribed by the Secretary of the Treasury, or his delegate,
for such plan year. From 1994 until 1996, the maximum covered remuneration was
$150,000. The maximum covered remuneration for 1997 is $160,000. An employee who
retires upon normal retirement at age 65 with at least four years of service
will receive a full vested benefit. An employee who retires at or after age 55
with at least four years of service will receive the normal retirement benefit
reduced by 1/2% for each month benefit payments commence before age 65.
Employees who terminate employment with the Company for reasons other than death
or retirement will be entitled to the vested portion of their benefits at their
normal or early retirement age. Benefits vest at the rate of 0% for the first
year of service, 33% for each of the next two years of service, and 34% for the
fourth year of service. The retirement benefits payable at age 65 for those
employees with service prior to January 1, 1987 are composed of two items: (1) a
benefit for service up to December 1, 1986, in accordance with the original
Pension Plan formula recognizing pay as the average of 1985 and 1986
remuneration up to $100,000, and (2) a benefit for service commencing on January
1, 1987 equal to 1% of covered remuneration through the date of termination.
Total years of credited service apply to both the original and amended Pension
Plans for purposes of determining vesting and eligibility.
As of December 31, 1996, the estimated annual benefits payable upon
retirement at normal retirement age for each of the Named Executive Officers of
the Company were: Mr. Killian: $38,047, Mr. Beinart, $50,067, Mr. Laible:
$64,008, Mr. Prouty, $46,071, and Mr. Rose: $63,847.
16
<PAGE> 19
CERTAIN RELATED TRANSACTIONS
Tax Sharing Agreement
The Company is a member of the Jefferies affiliated group (the "Group")
which expects to continue to file a consolidated federal income tax return. A
tax sharing agreement between Jefferies Group and the Company (the "Tax Sharing
Agreement") provides the method by which the federal, state and local income or
franchise tax liabilities of the Group will be allocated and the manner in which
allocated liabilities will be paid.
Under the Tax Sharing Agreement, in any year in which a consolidated
federal income tax return is filed or is expected to be filed by the Group, the
Company is required to pay to Jefferies Group its "separate tax liability" and
Jefferies Group is required to pay to the Company the "additional amount." The
Company's "separate tax liability" is an amount equal to (x) that portion of the
consolidated federal income tax liability of the Group that the taxable income
of the Company bears to the aggregate taxable income of all members of the Group
plus (y) the excess, if any, of the Company's tax liability (assuming the filing
of a separate return by the Company) over the amount determined pursuant to
clause (x) above. The "additional amount" is the amount by which the
consolidated tax liability of the Group has been decreased by reason of the
inclusion of the Company in the Group. Payments of the "separate tax liability"
or "additional amount," as applicable, are required to be made on or before each
date on which Jefferies Group makes quarterly estimated tax payments and are
subject to adjustment to account for changes in the estimated amounts of such
payments. After the end of each taxable year, payments are subject to return if
the aggregate payments made exceed amounts actually required to be paid. Amounts
paid under the Tax Sharing Agreement are subject to redetermination in
subsequent years to take into account any consolidated investment credits,
unused foreign tax credits, excess charitable contributions, net capital losses
or net operating losses which are carried back to a prior year and any portion
of such consolidated credits or losses which are attributable to a member of the
Group. Amounts paid under the Tax Sharing Agreement are also subject to
redetermination in subsequent years to take into account any adjustments made to
the income, gains, losses, deductions or credits of the Group for a year during
which the Company is a member of the Group. The Tax Sharing Agreement provides
for similar treatment of state income and franchise tax liabilities during years
in which the Group files a single return for California franchise and income tax
purposes or joins in a consolidated return in any other state in which a member
of the Group may be required to file a return. In 1996, the Company paid
approximately $18.8 million to Jefferies Group under the Tax Sharing Agreement.
Service Agreements
Pursuant to a service agreement between Jefferies and the Company (the
"Jefferies Service Agreement"), Jefferies provides various services to the
Company, consisting of (i) accounting services, payroll accounting and
preparation of regulatory accounting reports, (ii) compliance services,
including performance of regulatory oversight functions, quarterly compliance
audits, preparation of periodic regulatory reports, serving as liaison for the
Company in compliance matters, performance of reviews and analysis of employee
and customer trading and providing compliance related training and education,
(iii) personnel services, including services customarily performed by an
internal personnel department, maintaining employee files, administering
employee benefit plans and establishing multi-employer benefit plans, (iv)
operations services, including operations support consistent with the terms of
the Clearing Agreement (as defined hereinafter) between the Company and
Jefferies and advisory services for back office activities, (v) legal services,
including consultation with Jefferies' compliance department, (vi) data
processing services, including POSIT(R) execution processing and related trade
reporting services and (vii) certain administrative services, including
invoicing and billing, maintenance of Lotus Notes and programming and software
development. The Company has agreed to amend the Jefferies Service Agreement to
increase certain retainers and other charges paid to Jefferies, including a
$330,000 annual retainer for accounting services, an $85,000 annual retainer for
certain compliance services, a $2,340 annual per employee charge for personnel
services (other than direct benefit costs which are charged to the Company at
cost), a per trade clearing charge for operations services consistent with the
terms of the Clearing Agreement, and a $25,000 annual retainer for legal
services, with a
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<PAGE> 20
$250 per hour charge for additional legal services. Additionally, the Jefferies
Service Agreement requires the Company to pay Jefferies a $3,000 annual fee for
invoicing and billing services, a $79,000 annual fee for maintaining Lotus Notes
on behalf of the Company and, when requested by the Company, a fee for
programming and software development at a rate of $10,000 monthly per employee
used for this service. Under the Jefferies Service Agreement, the Company has
indemnified Jefferies and its affiliates for certain liabilities. The Jefferies
Service Agreement is for a term of five years and may be terminated by either
party on 180 days' written notice or immediately upon the failure of the other
party to perform its duties and responsibilities under the agreement. In
addition, the parties may elect to terminate the provisions of the agreement
applicable to one or more services.
Pursuant to a service agreement between W & D Securities, Inc. ("W & D"),
an affiliate of Jefferies Group and the Company (the "W & D Service Agreement"),
W & D is responsible for trade execution and trade entry on the books and
records of Jefferies for all trades executed by W & D on the New York Stock
Exchange, on regional exchanges and in the OTC market and is also responsible
for the clearance and settlement of trades executed on the New York Stock
Exchange. The Company pays varying per share fees depending on the number of
shares for which W & D provides trade execution services during a calendar
month. The W & D Service Agreement is for a term of five years and may be
terminated by either party on 180 days' written notice or immediately upon the
failure of the other party to perform its duties and responsibilities under the
agreement.
The aggregate amounts paid in 1996 by the Company under the Jefferies
Service Agreement and W & D Service Agreement were $690,000 and $6.5 million,
respectively.
Clearing Agreement
Pursuant to a Fully Disclosed Clearing Agreement (the "Clearing
Agreement"), Jefferies, as clearing broker, provides certain execution and
clearing services for customer and proprietary accounts of the Company (the
"Introduced Accounts"). These services include, among others, (i) execution of
orders, (ii) mailing of confirmations, notices and monthly statements, (iii)
providing reports to the Company, (iv) settling certain contracts and
transactions, (v) engaging in all cashiering functions and (vi) record keeping.
Jefferies is required to remit fees to the Company on a monthly basis after
deduction of amounts due. Introduced Accounts may only be charged such fees or
other charges as the Company may direct. The Clearing Agreement establishes
procedures applicable to Introduced Accounts and the processing of transactions
for such accounts and establishes the various responsibilities of the parties.
With certain exceptions, the Company is responsible for all Introduced Accounts
and transactions in such accounts. Jefferies reserves the right to reject any
proposed account and to terminate any Introduced Account. The Clearing Agreement
also requires the Company to indemnify Jefferies against certain liabilities
arising from, among other things, failed settlements, failure of Introduced
Accounts to satisfy any applicable margin requirements, failure of the Company
to perform its duties and obligations and claims between the Company and its
customers. The Clearing Agreement is for a term of five years and is subject to
termination at any time by either party on 180 days' written notice or upon a
default by the other party. In 1996, the Company paid $7.3 million to Jefferies
for services performed under the Clearing Agreement.
Development Rights Agreement
Jefferies Group and the Company intend to cooperate in the future in
connection with the development and marketing of technology-based products and
may enter into joint ventures for such purpose. Jefferies Group and the Company
also anticipate that such companies may enter into non-exclusive cross licenses
with respect to technology developed by either company which may be used in the
other's operations. Any such joint venture or cross license will be on terms
substantially no less favorable to the Company than the Company believes would
be available from unaffiliated parties.
In furtherance of these intentions, Jefferies Group and the Company have
entered into a development rights agreement (the "Development Rights
Agreement"), pursuant to which Jefferies Group and the Company agree to provide
each other with the opportunity to form and participate in limited purpose joint
ventures to develop, market, license or otherwise exploit new software
opportunities with third parties. These
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<PAGE> 21
new software opportunities include, but are not limited to, computerized
mechanisms or software which provide for trade analysis, order entry, execution
services or the matching of portfolios of equity, debt or other securities. The
Development Rights Agreement provides each party with a right of first option to
participate with the other party in a joint venture to develop the new software
for or with a third party. The Development Rights Agreement is for a term of
five years and is subject to termination by either party on 180 days' written
notice.
Intercompany Borrowing Agreement
Pursuant to an intercompany borrowing agreement (the "Intercompany
Borrowing Agreement"), Jefferies Group may lend funds to the Company in the
amount of up to $15.0 million. Amounts outstanding under the facility are
prepayable at any time without penalty. Interest will be payable on the
outstanding balance at a floating rate equal to 1.75% above the average one
month London Interbank Offered Rate. Jefferies Group is not committed to advance
funds, and the Company is not obligated to borrow funds, under the facility. The
Company may borrow from third parties. The Company covenants that while any
amounts are outstanding under the facility, it will neither commence a new line
of business nor invest in a new business without the prior written consent of
Jefferies Group. Any outstanding principal balance under the facility plus
accrued interest is payable in full on or before March 31, 1999, unless renewed
at the mutual agreement of Jefferies Group and the Company. The facility is for
a term of five years and may be terminated by Jefferies Group in the event of an
uncured default by the Company. In 1996, the Company did not borrow any amounts
under the Intercompany Borrowing Agreement.
Revenue Sharing Agreement
Pursuant to a revenue sharing agreement between the Company and Jefferies
(the "Revenue Sharing Agreement"), the parties have agreed that each will pay
the other a portion of the transaction fees generated on each transaction by
customers introduced to such party by the other party. The amount of such
payments will equal 40% of transaction fees generated in the first year in which
a customer commences doing business with a party, 25% of transaction fees in the
second year and 15% of transaction fees in the third through fifth years after
the customer commences doing business with a party. In 1996, the Company paid
$502,000 to Jefferies pursuant to the Revenue Sharing Agreement.
Other
During 1996, the Company paid approximately $248,000 to Jefferies
International Limited (an affiliate of Jefferies Group) for certain brokerage
and administrative services provided by Jefferies International Limited in
connection with the Company's international activities. Of such amount, the
entire amount paid was reimbursed to the Company by its affiliate ITG Global
Trading, Inc.
Jefferies has extended credit to certain of the Company's directors,
officers, employees and stockholders in connection with their purchase of
securities on margin. Receivables from the Company's executive officers and
directors were $849,896.2 at December 31, 1996. Such extensions of credit were
made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable features.
APPROVAL OF THE 1994 STOCK OPTION AND
LONG-TERM INCENTIVE PLAN, AS AMENDED AND RESTATED
Introduction
On January 29, 1997, the Board of Directors of the Company amended the
Company's 1994 Stock Option and Long-Term Incentive Plan (the "1994 Plan"),
subject to approval of the Company's stockholders at the Annual Meeting. The
amendment was adopted in order to permit the grant of an option to Mr. Mason in
connection with his employment as President and Chief Executive Officer, to
respond to changes in laws
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<PAGE> 22
and regulations that have become effective since the original adoption of the
1994 Plan, to authorize the settlement of certain awards by delivery of shares
rather than solely in cash, to clarify the 1994 Plan, and to extend the
expiration date of the 1994 Plan by three years, from 2004 until 2007.
The Board of Directors believes that stock options granted under the 1994
Plan have provided an important means by which the Company has attracted,
retained, and rewarded officers, other key employees, and directors, and that
options and other stock-based incentive awards under the 1994 Plan will serve
this vital function in the future. In addition, in the Board's view, the 1994
Plan enables the Compensation Committee to structure such awards as a
cost-effective component of executive compensation which provides officers and
key employees with a proprietary interest in the growth and performance of the
Company and serves as an incentive to long-term and outstanding service to the
Company.
As discussed above under the caption "REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION," Code Section 162(m) and the regulations thereunder
generally limit the Company's tax deductions for compensation to the Named
Executive Officers to the extent the individual's compensation exceeds $1
million. Stockholder approval of the 1994 Plan, as amended and restated, is
being sought in order that certain awards granted under the 1994 Plan will
qualify as "performance-based compensation" that is tax deductible by the
Company without limitation under Code Section 162(m)'s $1 million deductibility
cap. In addition, stockholder approval of the three-year extension of the 1994
Plan is being sought to comply with requirements of the Nasdaq National Market,
to qualify certain stock options that may be granted during the extension as
incentive stock options ("ISOs") under Code Section 422, and to meet certain
other legal requirements. Other changes included in the amendments conform the
1994 Plan to the modified version of Rule 16b-3 under the Securities Exchange
Act of 1934 ("Rule 16b-3") adopted by the Securities and Exchange Commission
during 1996.
In this regard, in securing Mr. Mason's services as President and Chief
Executive Officer, the Compensation Committee concluded that it would be
desirable and advisable to provide a component of compensation in the form of a
stock option grant under the 1994 Plan. Accordingly, Mr. Mason has been granted
an option to purchase 1 million shares of Company Common Stock at an exercise
price of $22.175 per share, under the terms of his employment agreement. This
exercise price was approximately $4.00 above the market price of Common Stock at
the time the terms of the option were agreed to and at the time the option was
granted. The terms of the option are discussed below under the caption "Mr.
Mason's Stock Option." This option grant is subject to the approval of the
amendment to the 1994 Plan, which would conform the Plan to the requirements of
Code Section 162(m) and thus ensure that any compensation resulting from the
option would be fully deductible by the Company.
For purposes of Code Section 162(m), stockholder approval of the 1994 Plan,
as amended and restated, relates particularly to eligibility, per-person award
limitations, the performance objectives inherent in stock options and stock
appreciation rights ("SARs"), and the business criteria incorporated in
performance objectives under certain designated performance awards. See "Plan
Term and Eligibility," "Shares Subject to the 1994 Plan and Per-Person
Limitations," "Options and SARs," and "Performance Awards" below. In the event
that stockholders fail to approve the amendment, which includes these material
terms of the performance goals relating to 1994 Plan awards to be granted after
the Annual Meeting, such awards would not be granted to the extent necessary to
meet the stockholder approval requirements of Treasury Regulation
1.162-27(e)(4). In addition, in the event stockholders fail to approve the
amendment, the option granted to Mr. Mason would be cancelled.
Summary of Terms of 1994 Plan
The following summary describes the material terms of the 1994, Plan as
amended and restated (noting parenthetically the specific changes made by the
amendments). This summary is qualified in its entirety by reference to the full
text of the 1994 Plan, attached hereto as Exhibit A.
Administration. The 1994 Plan generally is administered by the
Compensation Committee. The Board may, however, itself perform the functions of
the Compensation Committee or may appoint a different committee to administer
the 1994 Plan. If any member of the Compensation Committee or other committee
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<PAGE> 23
administering the 1994 Plan does not qualify as a "Non-Employee Director" under
Rule 16b-3 or an "outside director" under Code Section 162(m), the Compensation
Committee may function through a subcommittee composed solely of two or more
qualifying members, or the non-qualifying member of the Compensation Committee
may abstain or recuse himself from actions that would be affected by his or her
non-qualifying status. (The provisions described in this paragraph, other than
the first sentence, were added by the amendment.)
Subject to the terms and conditions of the 1994 Plan, the Compensation
Committee has discretionary authority to determine the employees to whom, and
the times at which, awards may be granted, the number of shares to be subject to
each award and the terms, conditions, and limitations of each award. This
includes authority to determine the times at which options or SARs will be
exercisable, the times awards will vest and become nonforfeitable, the
performance conditions, if any, that will attach to any award, and whether
settlement of any award will be subject to mandatory or optional deferral. The
Compensation Committee is also authorized to specify any other condition of an
award that is not inconsistent with 1994 Plan terms, prescribe forms of award
agreements, specify rules and regulations relating to the 1994 Plan, and make
all other interpretations and determinations and take all other actions which
may be necessary or advisable for the administration of the 1994 Plan. The
Compensation Committee's determinations and interpretations under the 1994 Plan
are binding on all interested parties.
Plan Term and Eligibility. The 1994 Plan authorizes the granting of awards
until March 31, 2007 (extended by the amendment from March 31, 2004) to selected
officers and other key employees of the Company and its subsidiaries and
affiliates and directors of the Company (the requirement that the directors not
be members of the Compensation Committee has been deleted by the amendment
because such requirement was eliminated from Rule 16b-3; the amendment also
clarifies that any type of award may be granted to a director). Approximately
110 persons would be eligible for awards under the 1994 Plan; awards which are
currently outstanding have been granted to a total of 90 participants under the
1994 Plan.
Shares Subject to the 1994 Plan and Per-Person Limitations. Under the 1994
Plan, the maximum number of shares of Common Stock with respect to which awards
may be granted in any calendar year is 20% of the issued and outstanding shares
as of the first day of the calendar year, except that this maximum number is
reduced by the number of shares reserved for issuance with respect to, or
underlying, any award that is outstanding under the 1994 Plan as of such date.
Based on the number of shares reserved for issuance under awards at March 31,
1997 (including the option granted to Mr. Mason), the maximum number of shares
currently available for grants under the 1994 Plan would be approximately
265,000 shares. As a further limitation, the total number of shares which may be
subject to grants of ISOs under the 1994 Plan is 500,000, subject to adjustment,
as described below. On March 31, 1997, the last reported price of Common Stock
on the Nasdaq National Market was $19.00 per share.
In addition, the 1994 Plan imposes annual "per-person" limitations on the
amount of awards, to comply with Code Section 162(m). Under these limitations
(added by the amendment), no single employee may be granted during any fiscal
year options and SARs to purchase more than 1 million shares or performance
awards designated as qualifying awards under Code Section 162(m) relating to
more than 100,000 shares, subject in each case to adjustment, as described
below. With respect to performance awards so designated but not valued by
reference to shares at the date of grant, the maximum amount payable to a
participant in settlement of such an award in any fiscal year shall be the fair
market value of 1 million shares at the date of grant or at the date of
settlement of the award, whichever is greater; the number of a participant's
performance awards not relating to shares that may be granted or settled in a
given year is not affected by separate grants to the participant of performance
awards relating to shares in that year, and vice versa.
In the event of a merger, consolidation, reorganization, recapitalization,
stock split, stock dividend, and certain other extraordinary dividends or
changes in corporate structure or capitalization affecting the Common Stock, the
Compensation Committee is authorized to appropriately adjust the number and kind
of shares subject to outstanding options, rights, and other awards and the
exercise price and other terms and conditions of such awards, make appropriate
provision for supplemental payments of cash, other awards, or other property,
and appropriately adjust the maximum number and kind of shares which may be
granted under the
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<PAGE> 24
1994 Plan generally, may be granted in respect of ISOs (as clarified by the
amendment), and are specified as the annual per-person limitations (as added by
the amendment). Similar adjustments may be made for certain non-extraordinary
cash dividends, but such adjustments may not include a reduction in exercise
price.
Options and SARs. The Compensation Committee is authorized to grant
options to purchase shares at a fixed price, including both ISOs which can
result in potentially favorable tax treatment to the participant and
non-qualified stock options (i.e., options not qualifying as ISOs), and SARs
entitling the participant to receive the excess of the fair market value of a
share on the date of exercise over the base price of the SAR. The exercise price
per share subject to an option and the grant price of an SAR is determined by
the Compensation Committee; the exercise price of an ISO must be at least equal
to 100% of the fair market value of a share at the date of grant (or higher in
certain cases specified by the Code), but this limitation does not apply to a
non-qualified stock option. The maximum term of each option or SAR, the times at
which each option or SAR will be exercisable, and provisions requiring
forfeiture of unexercised options at or following termination of employment
generally are fixed by the Compensation Committee, except the options may not be
exercisable more than ten years after the date of grant. Options may be
exercised by payment of the exercise price in cash or shares, as the
Compensation Committee may determine from time to time.
Other Awards. The Compensation Committee is authorized to grant other
stock-based awards the value of which is based in whole or in part on the value
of shares and the terms of which are not otherwise specified in the 1994 Plan.
For example, other stock-based awards may include awards of shares as a bonus
free of restrictions, as restricted stock, or in lieu of Company obligations to
pay cash under other plans or compensatory arrangements, subject to such terms
as the Compensation Committee may specify. Similarly, the Compensation Committee
could grant deferred stock as an other stock-based award, which would confer
upon a participant the right to receive a specified number of shares at the end
of a specified deferral period; such an award may or may not be subject to
possible forfeiture in the event of certain terminations of employment prior to
the end of a specified period. (The amendment permits other stock-based awards
to be settled by or involve the issuance of shares as well as cash.) The
Compensation Committee is also authorized to grant dividend equivalents
conferring on participants the right to receive cash, shares, other awards, or
other property equal in value to dividends paid with respect to a specified
number of shares of Common Stock, or other periodic payments. Dividend
equivalents may be awarded on a free-standing basis or in connection with
another award, and may be paid currently or on a deferred basis.
Performance Awards. The Compensation Committee is authorized to grant
performance awards which confer upon participants a right to receive either (i)
shares or the cash value thereof, or a combination of both, or (ii) a fixed
dollar amount payable in cash or shares, or a combination of both, at the end of
a specified period, based on the achievement of preset performance goals. (The
amendment permits performance awards to be settled by issuance of shares as well
as cash, and adds the terms relating to Code Section 162(m) described in the
remainder of this paragraph.) Performance awards and other awards granted to
persons the Compensation Committee expects will be named executives, will, if so
designated by the Compensation Committee, be subject to provisions that should
qualify such awards as "performance-based compensation" not subject to the
limitation on tax deductibility by the Company under Code Section 162(m). The
performance goals to be achieved as a condition of payment or settlement of such
a designated performance award will consist of (i) one or more business
criteria, and (ii) a targeted level or levels of performance with respect to
each such business criteria. Such business criteria must be among those
specified in the 1994 Plan, although for non-designated performance awards the
Compensation Committee may specify other business criteria. The business
criteria specified in the 1994 Plan are (1) appreciation in the fair market
value or book value of shares; (2) earnings per share; (3) revenues; (4) cash
flow or cash flow return on investment; (5) return on assets, return on
investment, return on capital, or return on equity; (6) economic value added;
(7) operating margin; (8) net income or profits, net operating income, earnings,
or operating earnings, in each case, before or after taxes, and as applied to
the Company as a whole or a specified business unit or function; (9) total
stockholder return; and (10) any of the above goals as compared to the
performance of a published or special index specified by the Compensation
Committee, such as the Standard & Poor's 500 Stock Index or other indices, or to
one or more comparable companies. The performance period over which such
performance will be measured will be specified by the Compensation Committee. In
granting performance awards, the
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<PAGE> 25
Compensation Committee may establish an unfunded incentive award "pool," the
amount of which will be based upon the achievement of a performance goal or
goals based on one or more of the business criteria described above. The
Compensation Committee may, in its discretion, determine that the amount payable
in settlement of a designated performance award will be reduced, but may not
exercise discretion to increase any such amount.
Certain Other Terms of Awards. Awards are granted for no consideration
other than services, except as may be otherwise required by law. The
Compensation Committee may, however, grant awards alone or in addition to, in
tandem with or in substitution for any other award under the 1994 Plan or other
Company plans or other rights to payment from the Company. Each award will be
evidenced by an award agreement setting forth the specific terms and conditions
applicable to that award. The Compensation Committee may condition any payment
relating to an award on the withholding of taxes and may provide that a portion
of any shares to be distributed will be withheld (or previously acquired shares
surrendered by the participant) to satisfy tax withholding obligations. The
Compensation Committee may also provide additional cash payments to a
participant to offset taxes relating to awards. Awards granted under the 1994
Plan generally may not be pledged or otherwise encumbered and/or transferred
except by will or by the laws of descent and distribution, or to a designated
beneficiary upon the participant's death, except that the Compensation Committee
may permit transfers of awards for estate planning or other purposes deemed not
inconsistent with the purposes of the 1994 Plan (this exception was added by the
amendment in response to a change in Rule 16b-3).
Future Awards. Awards that may be granted under the 1994 Plan after the
Annual Meeting cannot presently be determined. Nothing contained in the 1994
Plan prevents the Company from adopting or continuing in effect other or
additional compensation arrangements.
Mr. Mason's Stock Option
As discussed above, Mr. Mason has been granted an option, subject to
stockholder approval of the 1994 Plan, as amended and restated. The option has
an exercise price of $22.175 (representing an above-market exercise price at the
date of grant, as discussed above), and expires at the earlier of January 5,
2002, 24 months after termination of employment due to death or disability, or
60 days after termination of employment by the Company for cause or voluntarily
by Mr. Mason without good reason, except that following a change in control (as
defined in Mr. Mason's employment agreement) while Mr. Mason remains employed by
the Company the option will expire only on January 5, 2002. The option will
become exercisable as to 200,000 shares on May 4, 1997, and for an additional
200,000 shares on December 10, 1997 and each anniversary thereof, until it is
fully exercisable, subject to accelerated vesting in the event of a change in
control or if the moving average closing price of Common Stock over a 10-day
period exceeds $50 per share. In the event of termination of Mr. Mason's
employment for cause or voluntarily without good reason, the unexercisable
portion of the option will be forfeited.
The following table lists the 1994 Plan awards that are subject to
stockholder approval of the 1994 Plan, as amended and restated:
NEW PLAN BENEFITS
1994 STOCK OPTION AND LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED
<TABLE>
<CAPTION>
NUMBER OF OPTIONS GRANTED
SUBJECT TO STOCKHOLDER
APPROVAL OF AMENDED
NAME AND POSITION AND RESTATED PLAN
------------------------------------------------------ -------------------------
<S> <C>
Scott P. Mason, President and Chief Executive
Officer............................................. 1,000,000
Executive Officers as a group......................... 1,000,000
Non-Executive Directors as a group.................... -0-
Non-Executive employees as a group.................... -0-
</TABLE>
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Amendments. The Board may amend the 1994 Plan in any respect, except that
amendments are subject to subsequent stockholder approval if such stockholder
approval is required by any federal or state law or regulation or the rules of
the Nasdaq National Market or such other stock exchange or automated quotation
system on which shares may then be listed or quoted. Thus, stockholder approval
will not necessarily be required for amendments which might increase the cost of
the 1994 Plan or broaden eligibility.
Certain Federal Income Tax Consequences
The following is a brief summary of the federal income tax consequences
relating to certain 1994 Plan awards. The grant of an option or SAR generally
will create no tax consequences for the participant or the Company. A
participant will have no taxable income upon exercise of an ISO, except that the
alternative minimum tax may apply. Upon exercise of an option other than an ISO,
a participant generally must recognize ordinary income equal to the fair market
value of the shares acquired minus the exercise price. Upon a disposition of
shares acquired by exercise of an ISO before the end of the applicable ISO
holding periods, the participant generally must recognize ordinary income equal
to the lesser of (i) the fair market value of the shares at the date of exercise
minus the exercise price or (ii) the amount realized upon the disposition of the
ISO shares minus the exercise price. Otherwise, a participant's disposition of
shares acquired upon the exercise of an option (including an ISO for which the
ISO holding periods are met) generally will result in only capital gain or loss
to the participant. Other awards under the 1994 Plan generally will result in
ordinary income to the participant at the later of the time of delivery of cash
or shares or the time that either the risk of forfeiture (including forfeiture
in the event performance goals are not achieved) or restriction on
transferability lapses. Except as discussed below, the Company generally will be
entitled to a tax deduction equal to the amount recognized as ordinary income by
the participant in connection with an option, SAR, or other award, but no tax
deduction relating to amounts that represent a capital gain to a participant.
Thus, the Company will not be entitled to any tax deduction with respect to an
ISO if the participant holds the shares for the ISO holding periods.
As discussed above, Code Section 162(m) disallows certain tax deductions by
the Company. The Company intends that options and SARs granted with an exercise
or base price at least equal to fair market value of the underlying shares on
the date of grant, and designated performance awards granted under the 1994
Plan, will qualify as "performance-based compensation" not subject to Code
Section 162(m)'s $1 million deductibility cap. A number of requirements must be
met in order for particular compensation to so qualify, however, so there can be
no assurance that such compensation under the 1994 Plan will be fully deductible
under all circumstances. In addition, other awards under the 1994 Plan, such as
other stock-based awards and performance awards not designated as qualifying
Code Section 162(m) awards, generally will not so qualify, so that compensation
paid to a named executive in connection with such awards could be subject to
Code Section 162(m)'s $1 million deductibility cap. See "REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION." Finally, under current
regulations performance awards granted under the 1994 Plan after the Company's
Annual Meeting of Stockholders in the year 2002 will require further stockholder
approval in order to qualify as such "performance-based compensation."
The foregoing general discussion is intended for the information of
stockholders considering how to vote with respect to this proposal and not as
tax guidance to participants in the 1994 Plan. Different tax rules may apply to
specific participants and transactions under the 1994 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
INVESTMENT TECHNOLOGY GROUP, INC. 1994 STOCK OPTION AND LONG-TERM INCENTIVE
PLAN, AS AMENDED AND RESTATED.
APPROVAL OF THE PAY-FOR-PERFORMANCE INCENTIVE PLAN
The Compensation Committee has established and the Board of Directors of
the Company has adopted the Investment Technology Group, Inc.
Pay-for-Performance Incentive Plan (the "Plan" as used in this APPROVAL OF THE
PAY-FOR-PERFORMANCE INCENTIVE PLAN section), subject to approval by the
stockholders of the Company. The purpose of the Plan is to assist the Company in
attracting, retaining, and rewarding Company executive officers through payment
of competitive levels of compensation, and
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<PAGE> 27
motivating such employees to expend greater efforts in promoting the growth and
annual profitability of the Company and its subsidiaries and other business
units.
The Company seeks to compensate its executive officers in large part
through annual cash incentives the payment of which is directly related to
performance. As discussed above in the "REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION," Code Section 162(m) generally disallows the Company's
tax deduction for compensation to the ("named executive Officers") in excess of
$1 million in any year. Under Code Section 162(m), however, compensation that
qualifies as "performance-based compensation" is excluded from the $1 million
deductibility cap, and therefore remains fully deductible.
The Company believes that the design and implementation of the Plan will
permit compensation resulting from annual incentive awards made under the Plan
to qualify as "performance-based compensation" and therefore remain fully
deductible under Code Section 162(m), even though payments under the Plan may
represent compensation to a named executive in excess of $1 million. The Company
is seeking stockholder approval of the Plan in order to meet one of the
requirements of Code Section 162(m). For purposes of Code Section 162(m),
stockholder approval of the Plan relates particularly to the eligibility,
per-person award limitations, and the business criteria incorporated in annual
incentive awards, as discussed below. In the event that stockholders fail to
approve the Plan (including these material terms), the Plan will be terminated
and awards granted to date under the Plan (discussed below) will be cancelled.
The following is a brief description of the material terms of the Plan.
Such description is qualified in its entirety by reference to the full text of
the Plan, a copy of which is attached hereto as Exhibit B.
Under the Plan, the Compensation Committee is authorized to select for
participation those key employees who have Company-wide responsibilities, who
are in charge of a business unit, or whose performance can be expected to have a
substantial effect on the results of a business unit. For purposes of the Plan,
a "business unit" is defined to mean the Company as a whole or any department,
division, subsidiary, or other business unit or function of the Company for
which operational financial results are available. Approximately nine persons,
comprising the executive officers of the Company, currently are eligible to be
selected to participate in the Plan. For 1997, awards have been granted to two
executive officers, as discussed below. The Plan does not preclude the
Compensation Committee from granting annual incentive awards or other
compensation apart from the Plan; in this regard, the Compensation Committee
expects to make annual incentive awards and pay bonuses to those executives who
are unlikely to receive cash compensation in excess of $1 million in a given
year apart from the Plan.
For each participant, the Compensation Committee will specify an award and
performance objectives (except as described below) upon which payment of the
award will be conditioned. The performance objectives will be based on (i)
"business unit income," meaning the pre-tax net income of the participant's
business unit (from which the Compensation Committee may specify that certain
amounts are to be subtracted, such as bonuses under the Plan or otherwise,
capital charges, taxes and/or general and administrative expenses), (ii) the
revenues of the participant's business unit, or (iii) the participant's business
unit's economic value added ("EVA"), a measure of the amount of the business
unit's after-tax income that exceeds the cost of the capital used by the
business unit during the performance period. In establishing a performance
objective based on EVA, the Compensation Committee will determine the average
cost of capital (stated as a percentage); this cost of capital will be
multiplied by the amount of capital actually used by the business unit.
Generally, awards and performance objectives will relate to a specified year,
although shorter performance periods may be specified for a participant who
becomes employed in a new position or who is assigned increased duties.
An award generally will provide for payment of either a specified
percentage or percentages of business unit income, revenues, and/or EVA, or an
amount specified or determined by formula in some other manner but conditioned
upon achievement of such specified percentage or percentages of business unit
income, revenues, and/or EVA. The Compensation Committee may require a threshold
amount of such income, revenues, or EVA to be achieved before any portion of an
award will become payable, and may express performance objectives by way of a
comparison with like measures of business unit performance in one or more prior
periods or like measures of performance of comparable companies or business
units thereof. In all
25
<PAGE> 28
cases, the terms of the performance objective must be such that, at the time the
performance objective is set, its achievement is substantially uncertain.
The Plan imposes certain limitations on the amount that may be paid in
respect of annual incentive awards, including annual per-person limitations. The
maximum percentages of business unit income, revenues, and EVA that may be
potentially payable under an award in any performance year to a single
participant, and to all participants granted awards with respect to a single
business unit, is 30% of business unit income, 10% of business unit revenues,
and 25% of EVA.
One performance objective -- the objective required under Mr. Mason's
employment agreement with the Company as the condition for payment of an annual
incentive thereunder -- is specified in the Plan, including the targeted levels
of performance required to achieve such performance objective. Achievement of
this performance objective at target levels in any year requires a 25% increase
in the Company's earnings before income taxes ("EBIT"), as compared to the
previous year's EBIT or, if higher, the EBIT for any prior year after 1996.
Achievement of the target level of performance will result in a payment to Mr.
Mason each year equal to 300% of his salary as in effect on a date specified by
the Compensation Committee but not later than the 90th day of the performance
year (under the employment agreement, such salary will not be less than $300,000
per year in any event), subject to a reduction in 1997 and 1998 (explained
below) and subject to the Plan's annual per-person limitation (30% of annual
EBIT of the Company, as discussed above). Achievement of growth in annual EBIT
that is positive but less than 25% will result in a proportionate reduction in
the amount payable (thus, if annual EBIT growth is 10%, the amount payable would
be 40% (i.e., 10% divided by 25%)) of the annual incentive payable for target
performance. Likewise, achievement of growth in annual EBIT greater than 25%
will result in a proportionate increase in the amount payable. For 1997 and
1998, the annual incentive payable to Mr. Mason will be reduced by $450,000 in
each year (but not below zero). Thus, failure to achieve annual EBIT growth
greater than 12.5% in each of 1997 and 1998, and failure to achieve positive
EBIT growth in any other year, will result in no payment under the annual
incentive awards incorporating this performance objective. The Plan would permit
the Compensation Committee to grant other annual incentive awards to Mr. Mason,
in accordance with the terms of the Plan.
In administering the Plan, the Compensation Committee has the power and
authority to construe and interpret the Plan, define terms, implement rules and
regulations, and make all determinations relating to the Plan. Although the
Compensation Committee has no discretion to increase the amounts of previously
established awards, the Plan permits the Compensation Committee to reduce the
amount of or cancel final awards, in view of business strategy, performance of
comparable organizations, economic and business conditions, personal performance
of the participant, or other performance considerations. (The Compensation
Committee may agree in advance not to exercise such discretion, however, and has
done so in the case of the awards to Mr. Mason under his employment agreement.)
The Compensation Committee may also provide that income of a business unit may
be adjusted downward to reflect specified charges, expenses, and other amounts,
or adjust or modify awards and performance objectives in recognition of unusual
or nonrecurring events, in response to changes in applicable laws, regulations,
accounting principles, or other circumstances, or specify performance periods
for awards less than one year with respect to a participant whose position or
duties change or in the case of a new participant during a performance year.
At the end of each performance year, the Compensation Committee must
determine the extent to which awards have been earned and performance objectives
achieved, and the amounts therefore payable to each participant, setting forth
these determinations in writing. Awards are non-transferable.
The Plan permits interim payments, but requires that the participant repay
the Company to the extent that such interim payments exceed the amount of the
final award payment for a performance year. Payment of an award may be deferred
by the participant under deferral plans available to participants (currently
through the Jefferies Group's Capital Accumulation Plan for Key Employees), if
and to the extent permitted by the Compensation Committee. If a participant
ceases to be employed due to death, disability, or retirement (including early
retirement with the approval of the Compensation Committee), the Compensation
Committee will determine the amount payable as a final award achieved or
resulting from the portion of the performance year completed at the date
employment ceased (which may be a pro rata payment of the final
26
<PAGE> 29
award, determined at the end of the performance year), except that no payout
shall be made if it is duplicative of severance payments. If a participant's
employment terminates during a performance year for any other reason, no final
award will be paid to the participant.
The Board of Directors may amend, modify, suspend, or terminate the Plan.
Such changes will be subject to stockholder approval if and to the extent
required by law, regulation, stock exchange or Nasdaq National Market rule, or
to comply with Code Section 162(m). These provisions do not necessarily require
stockholder approval for all Plan amendments that might increase the cost of the
Plan or broaden eligibility.
For federal income tax purposes, payments under the Plan will constitute
ordinary income to participants at the time payment is received by the
participant. If compensation under the Plan qualifies as "performance-based
compensation" under Code Section 162(m), as the Company believes will be the
case, the Company will be entitled to a tax deduction equal to the amount of any
payments to a participant, whether or not such payments exceed $1 million in a
given year.
As discussed above, the Compensation Committee has granted, subject to
stockholder approval of the Plan, an award for 1997 under the Plan, and
authorized the grant of awards in future years under the Plan, to Mr. Mason, the
President and Chief Executive Officer of the Company. The Compensation Committee
took such actions by approving and authorizing the Company to enter into an
employment agreement with Mr. Mason. In addition, the Compensation Committee has
granted an award to Raymond L. Killian, Jr., Chairman of the Board, for 1997.
Mr. Killian's award provides for an annual incentive payment of $600,000 if
Company earnings for 1997 meet a specified target, with the amount of the
payment reduced by 20% of the amount by which such earnings fall short of the
target (but not reduced below zero) and increased by 5.5% of the amount by which
such earnings exceed the target. The Compensation Committee specified that the
earnings performance criteria for Mr. Killian's 1997 award will be determined on
an after-tax basis, consistent with the performance criteria applied to Mr.
Killian's annual incentive in recent years.
The following table lists the 1997 awards to Mr. Mason and Mr. Killian. No
other awards have been granted under the Plan to date:
NEW PLAN BENEFITS
PAY-FOR-PERFORMANCE INCENTIVE PLAN
<TABLE>
<CAPTION>
PAYOUT UNDER 1997
AWARDS FOR ACHIEVEMENT
OF TARGETED PERFORMANCE
NAME AND POSITION LEVELS(1)
--------------------------------------------------------- -----------------------
<S> <C>
Scott P. Mason, President and Chief Executive Officer.... $ 450,000
Raymond L. Killian, Jr., Chairman of the Board........... 600,000
Executive Officers as a group............................ 1,050,000
Non-Executive Directors as a group....................... -0-
Non-Executive employees as a group....................... -0-
</TABLE>
- ---------------
(1) No amount will be payable if specified threshold levels of performance are
not achieved, proportionately reduced amounts will be payable if performance
is achieved above such threshold but below targeted levels, and
proportionately increased amounts (subject to maximum levels specified in
the Plan, but not presently determinable) will be payable if performance is
achieved above targeted levels.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
INVESTMENT TECHNOLOGY GROUP, INC. PAY-FOR-PERFORMANCE INCENTIVE PLAN.
27
<PAGE> 30
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who beneficially own
more than 10% of the Company's outstanding Common Stock, to file with the
Securities and Exchange Commission initial reports of beneficial ownership and
reports of changes in beneficial ownership of Common Stock and other equity
securities of the Company. Directors, executive officers and greater-than-10%
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. During
1996, an annual statement of change in beneficial ownership required to be filed
by William I. Jacobs to report a small acquisition was filed late.
OTHER MATTERS
Management does not know of any other matters to come before the Annual
Meeting. However, if any additional matters are properly presented at the
meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment on such matters.
ANNUAL REPORT AND INDEPENDENT AUDITORS
The Company's 1996 Annual Report and the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 accompany this Proxy Statement,
but are not deemed a part of the proxy soliciting material. KPMG Peat Marwick
LLP was the Company's independent auditor for the year ended December 31, 1996.
The appointment of independent auditors is approved annually by the Board of
Directors, which approval is based, in part, on the recommendations of the Audit
Committee. In making its recommendations, the Audit Committee reviews both the
audit scope and estimated audit fees for the coming year. Stockholder approval
is not sought in connection with this selection.
A representative of KPMG Peat Marwick LLP, the independent auditors who
examined the consolidated financial statements of the Company for 1996, is
expected to be present at the meeting to respond to appropriate questions of
stockholders and will have the opportunity to make a statement if he or she so
desires.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy material relating to the
Annual Meeting of Stockholders to be held in 1997 must be received by the
Company at its principal executive offices in New York, New York, at the address
set forth on the first page hereof, no later than December 12, 1997. Nothing in
this paragraph shall be deemed to require the Company to include in its proxy
materials relating to such Annual Meeting of Stockholders any stockholder
proposal which does not meet all of the requirements for inclusion established
by the Securities and Exchange Commission and the Company's By-laws at that time
in effect.
For the Board of Directors,
John R. MacDonald
Chief Financial Officer
Investment Technology Group, Inc.
April 9, 1997
28
<PAGE> 31
EXHIBIT A
INVESTMENT TECHNOLOGY GROUP, INC.
1994 STOCK OPTION AND LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED JANUARY 29, 1997
1. Purposes
The purposes of the Investment Technology Group, Inc. 1994 Stock Option and
Long-Term Incentive Plan (the "Plan") are to advance the interests of the
Company, to increase stockholder value by providing its directors, officers and
other key employees with a proprietary interest in the growth and performance of
the Company and with incentives for continued service with and rewards for
outstanding service to the Company and its subsidiaries, and to provide the
Company with an additional means to attract and retain qualified officers and
other key employees. To this end, the Committee, as hereinafter designated, may
grant stock options, stock appreciation rights, performance units, dividend
equivalents and/or other incentive awards to directors, officers and other key
employees of the Company and its subsidiaries, on the terms and subject to the
conditions set forth in this Plan.
2. Definitions
As used in the Plan, the following terms shall have the meanings set forth
below:
2.1 "Award" means any form of stock option, stock appreciation right,
performance unit, dividend equivalent or other incentive award granted under the
Plan, whether singly, in combination, or in tandem, to a Participant by the
Committee pursuant to such terms, conditions, restrictions, and/or limitations,
if any, as the Committee may establish.
2.2 "Award Agreement" means a written agreement setting forth the terms of
an Award.
2.3 "Base Price Per Share" means a price per share fixed by the Committee
at the time of grant of a Stock Appreciation Right that may be equal to, greater
than, or less than the Fair Market Value of the shares of Common Stock covered
thereby, but not less than the amount required by such laws, rules or
regulations as may be applicable.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Code" means the Internal Revenue Code of 1986, as amended. References
to any provision of the Code shall be deemed to include successor provisions
thereto and rules and regulations thereunder.
2.6 "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan;
provided, however, that Committee action shall be taken by act of such members
specified in, and otherwise in accordance with, Section 3.3. The Committee shall
consist solely of two or more directors of the Company. In appointing members of
the Committee, the Board will consider whether a member is or will be a
Qualified Member, but such members are not required to be Qualified Members at
the time of appointment or during their term of service on the Committee.
2.7 "Common Stock" means the Common Stock of the Company.
2.8 "Company" means Investment Technology Group, Inc., and successors
thereto.
2.9 "Dividend Equivalent" means a right granted to a Participant 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, or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award, and may be paid
currently or on a deferred basis.
2.10 "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 successor provisions thereto and rules and regulations
thereunder.
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2.11 "Fair Market Value," unless otherwise required by an applicable
provision of the Code, as of any date, means the mean of the closing bid/ask
prices of the Common Stock as reported on the Nasdaq National Market as
determined on a daily basis and averaged over the day as of which the valuation
is be made and the four trading days immediately prior thereto; provided,
however, that at any time that the Common Stock is not quoted on the Nasdaq
National Market on such trading days, Fair Market Value shall be determined by
the Committee in its discretion.
2.12 "Incentive Stock Option" ("ISO") means any Stock Option intended to
be, and designated and qualifying as, an "incentive stock option" within the
meaning of Section 422 of the Code.
2.13 "Non-Qualified Stock Option" means any Stock Option awarded under
this Plan that is not intended to be an Incentive Stock Option or that fails to
meet the requirements applicable to an Incentive Stock Option.
2.14 "Officer" means a person who is considered to be an officer of the
Company under Exchange Act Rule 16a-1(f).
2.15 "162(m) Award" means an Award intended by the Committee to constitute
"qualified performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Such Awards would include Options or SARs
granted with an exercise price or base price per share equal to or greater than
100% of the Fair Market Value of a share of Common Stock, or Awards granted in
accordance with Section 7.
2.16 "Option" or "Stock Option" means a right granted pursuant to the Plan
to purchase shares of Common Stock, and includes both Incentive Stock Options
and Non-Qualified Stock Options.
2.17 "Option Price" or "Exercise Price" means the price per share at which
Common Stock may be purchased upon the exercise of an Option.
2.18 "Participant" means any individual to whom an Award has been granted
under this Plan.
2.19 "Performance Award" means the right to receive either (i) shares of
Common Stock or cash in an amount determined with reference to Common Stock
value (performance shares), or (ii) a fixed dollar amount payable in cash or
shares (performance units), or a combination of both, at the end of a specified
Performance Period.
2.20 "Performance Period" means a period of not less than one nor more
than ten years during which corporate, division, subsidiary, group or other
performance objectives shall be utilized for purposes of determining the amount
of a Performance Award.
2.21 "Qualified Member" means a member of the Committee who is a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) under the
Exchange Act and an "outside director" within the meaning of Treasury Regulation
1.162-27(e)(3) under Code Section 162(m).
2.22 "Stock Appreciation Right" or "SAR" means the right to receive, for
each unit of the SAR, cash or shares of Common Stock equal in value to the
excess of the Fair Market Value of one share on the date of exercise of the SAR
over the Base Price Per Share established on the date the SAR was granted.
3. Administration
3.1 The Plan shall be administered and interpreted by the Committee. The
foregoing and other provisions of the Plan notwithstanding, the Board may
perform any function of the Committee under the Plan, including 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, except where the context otherwise requires.
3.2 The Committee shall have the authority to (a) establish such rules and
regulations as it deems necessary for the proper operation and administration of
the Plan; (b) select the Officers and other key
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<PAGE> 33
employees of the Company and its subsidiaries to receive Awards under the Plan;
(c) determine the form of an Award, or combinations thereof, and whether such
Awards are to operate on a tandem basis and/or in conjunction with or apart from
other awards made by the Company, either within or outside of this Plan; (d)
determine the number of shares of Common Stock or units or rights to be covered
by each such Award granted hereunder; (e) determine the terms and conditions,
not inconsistent with the terms of this Plan, of any Award granted hereunder
(including, but not limited to, any restriction or limitation on transfer, any
vesting schedule or acceleration thereof, and any forfeiture provisions or
waiver thereof), regarding any Award and the shares of Common Stock relating
thereto, based on such factors as the Committee shall determine, in its sole
discretion; (f) determine whether Common Stock to be issued and other amounts
payable with respect to an Award under this Plan shall be deferred, either
automatically or at the election of the Participant; and (g) make any other
determination or take any other action that the Committee deems necessary or
desirable for the administration of the Plan.
3.3 At any time that a member of the Committee is not a Qualified Member,
any action of the Committee relating to an Award granted or to be granted to a
Participant who is then subject to Section 16 of the Exchange Act in respect of
the Company, or relating to a 162(m) Award, may be taken either (i) by a
subcommittee, designated by the Committee, composed solely of two or more
Qualified Member, or (ii) by the Committee, but with each such member who is a
not a Qualified Member abstaining or recusing himself or herself from such
action; provided, however, that, upon such abstention or recusal, the Committee
remains composed solely of two or more Qualified Members. Such action,
authorized by such a subcommittee or by the Committee upon the abstention or
recusal of such non-Qualified Member(s), shall be the action of the Committee
for purposes of the Plan. The Committee may delegate to officers or managers of
the Company or any subsidiary the authority, subject to such terms as the
Committee shall determine, to perform such functions, including administrative
functions, as the Committee may determine, to the extent that such delegation
will not result in the loss of an exemption under Rule 16b-3(d) for Awards
granted to Participants subject to Section 16 of the Exchange Act in respect of
the Company and will not cause Awards intended to be 162(m) Awards to fail to so
qualify. Any decision, interpretation or other action made or taken in good
faith by or at the direction of the Company, the Board, or the Committee (or any
of its members pursuant to any authority duly delegated to any such member)
arising out of or in connection with the Plan shall be within the absolute
discretion of all or any of them, as the case may be, and shall be final,
binding and conclusive on the Company and its subsidiaries, all employees and
Participants and their respective beneficiaries, transferees, heirs, executors,
administrators, successors and assigns.
4. Eligibility
Officers and other key employees of the Company and its present and future
subsidiaries (including those who may also be directors of the Company) and
non-employee directors of the Company, who are responsible for or contribute to
the management, growth and profitability of the business of the Company and its
subsidiaries, are eligible to receive Awards under this Plan.
5. Shares Available for Awards
5.1 The maximum number of shares of Common Stock of the Company that may
be used in conjunction with the grant of Incentive Stock Options under the Plan
is 500,000.
5.2 Except as provided in Section 5.1 above, the maximum number of shares
of Common Stock of the Company with respect to which any Awards may be made in
any calendar year during the term of this Plan shall not exceed twenty percent
(20%) of the number of shares of Common Stock issued and outstanding as of the
first day of the calendar year in which Awards are made, less the number of
shares of Common Stock reserved for issuance with respect to, or underlying, any
Award made and outstanding pursuant to this Plan as of such date. In addition,
in each fiscal year during any part of which the Plan is in effect, a
Participant may be granted (i) Options and SARs under Sections 6.1 and 6.2
relating to no more than 1,000,000 shares of Common Stock and (ii) Performance
Awards pursuant to Section 7 relating to no more than 100,000 shares of Common
Stock, subject in each case to adjustment as provided in Section 5.5. With
respect to Performance Awards pursuant to Section 7 not valued by reference to
Common Stock at the date of grant, the maximum
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<PAGE> 34
amount payable to a Participant in settlement of such an Award in any fiscal
year shall be the Fair Market Value of the number of shares of Common Stock
specified in the preceding sentence (subject to adjustment) to which Performance
Awards may relate valued at the date of grant or at the date of settlement of
the Award whichever is greater (this limitation is separate and not affected by
the limitation on shares of Common Stock set forth in clause (ii) of the
preceding sentence).
5.3 Shares of Common Stock which are attributable to Awards which expire
or are otherwise terminated, cancelled, surrendered or forfeited are available
for issuance or use in connection with future Incentive Stock Option grants, and
future Awards during the calendar year in which they expire or otherwise become
available.
5.4 Shares of Common Stock to be issued under the Plan may be authorized
and unissued shares of Common Stock, treasury stock or a combination thereof.
5.5 In the event of a merger, consolidation, reorganization,
recapitalization, stock split, stock dividend, other extraordinary dividend or
other changes in corporate structure or capitalization affecting the Common
Stock, the Committee may make appropriate adjustment in the number or kind of
shares subject to options, rights and other Awards granted under the Plan, and
other terms and conditions of Awards and/or the exercise price of Awards in the
event of any stock dividend, stock split, spin-off or recapitalization in the
form of large, special and non-recurring dividends, appropriate provision for
supplemental payments of cash, other Awards, or other property, or appropriate
adjustment in the maximum number of shares referred to in Section 5 of the Plan
(including the number of shares specified in Section 5.1 and in each of clauses
(i) and (ii) of the second sentence of Section 5.2), as the Committee may
determine to be necessary or appropriate in order to prevent dilution or
enlargement of the rights of Participants. In the event that the Company
declares a cash dividend (other than one constituting a large, special and
non-recurring dividend), the Committee may make appropriate adjustment to the
number of shares subject to options, rights and other Awards granted under the
Plan or make appropriate provision for supplemental payments of cash, other
Awards or other property, but shall not make any adjustment to the exercise
price of Awards.
6. Awards Under the Plan
6.1 Stock Options. The Committee may grant Incentive Stock Options,
Non-Qualified Stock Options or both to purchase shares of Common Stock from the
Company, in such amounts and subject to such terms and conditions as the
Committee shall determine in its sole discretion, subject to the provisions of
the Plan, provided, however, that in no event may any Stock Option granted
hereunder be exercisable prior to May 4, 1997, except upon the occurrence of a
change in control of the Company (as defined by the Committee), or after the
expiration of ten years from the date of such grant. The automatic or
discretionary grant of "reload" Stock Options is specifically authorized.
In the case of Incentive Stock Options, the terms and conditions of such
grants, including the exercise price for the purchase of Common Stock, shall be
subject to and comply with the requirements of Section 422 of the Code, as from
time to time amended, and any implementing regulations.
The exercise price at which shares of Common Stock may be purchased
pursuant to the grant of a Non-Qualified Stock Option shall be fixed by the
Committee at the time of grant and may be equal to, greater than, or less than
the Fair Market Value of the shares of Common Stock covered thereby.
6.2 Stock Appreciation Rights. The Committee may grant Stock Appreciation
Rights (SARs), in such amounts and subject to such terms and conditions as the
Committee shall determine in its sole discretion, subject to the provisions of
the Plan.
SARs may be granted in connection with all or any part of, or independently
of, any Stock Option granted under the Plan. An SAR granted in connection with a
Non-Qualified Stock Option may be granted at or after the time of grant of such
option. An SAR granted in connection with an ISO may be granted only at the time
of grant of such option.
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<PAGE> 35
Limited SARs that may only be exercised in connection with a change in
control or other event (as specified by the Committee) may be granted on such
terms, not inconsistent with this Section 6.2, as the Committee may determine.
Limited SARs may be either freestanding or in tandem with other Awards.
Upon the exercise of an SAR granted in connection with an option, the
number of shares subject to the option shall be reduced by the number of shares
with respect to which the SAR is exercised. Upon the exercise of an option in
tandem with which an SAR has been granted, the number of shares subject to the
SAR shall be reduced by the number of shares with respect to which the option is
exercised.
6.3 Performance Awards. The Committee may grant Performance Awards in
such amounts and subject to such terms and conditions, as the Committee shall
determine in its sole discretion, subject to the provisions of the Plan.
The Committee may condition the grant or vesting of a Performance Award
upon the attainment of specified performance goals; the appreciation in the Fair
Market Value, book value or other measure of value of the Common Stock, the
performance of the Company, including based on earnings or cash flow; the
performance of any subsidiary or affiliate of the Company; or such other facts
or criteria as the Committee shall determine. Such goals may be revised by the
Committee at any time and from time to time during the Performance Period to
take into account significant unforeseen events or changes in circumstances. The
foregoing notwithstanding, any Performance Award intended to constitute a 162(m)
Award shall be subject to the limitations set forth in Section 7.
6.4 Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Participants. The Committee may provide that Dividend Equivalents
shall be paid or distributed when accrued or shall be deemed to have been
reinvested in additional shares, Awards, or other investment vehicles as the
Committee may specify.
6.5 Other Stock-Based Awards. The Committee may from time to time grant
Awards under this Plan, the value of which are based in whole or in part on the
value of Common Stock, that may not be defined in Sections 6.1 through 6.4 of
this Plan.
Other stock-based Awards may be awards of shares of Common Stock or may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to the value of Common Stock (including, without
limitation, phantom securities convertible or exchangeable into or exercisable
for Common Stock), as deemed by the Committee consistent with the purposes of
the Plan.
6.6 Consideration; Tandem and Substitute Awards. Except as provided in
this Section 6.6 or to the extent that payment of lawful consideration may be
required under the Delaware General Corporation Law, only services may be
required as consideration for the grant (but not the exercise) of any Award.
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 affiliate, or any business entity to be
acquired by the Company or a subsidiary or affiliate, or any other right of a
Participant to receive payment from the Company or any subsidiary or affiliate.
If an Award is granted in substitution for another Award or award, the Committee
shall require the surrender of such other Award or award in consideration for
the grant of the new Award. 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.
6.7 Award Agreements. Awards under the Plan shall be evidenced by an
agreement approved by the Committee that sets forth terms, conditions and
limitations of an Award. The Committee may amend agreements theretofore entered
into, either prospectively or retroactively, including, but not limited to, the
acceleration of, vesting of or lapse of restrictions on an Award and the
extension of time to exercise an Award, except that no such amendment shall
affect the Award in a materially adverse manner without the consent of the
Participant.
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7. Performance Awards
7.1 Performance Awards Granted to Designated Covered Employees. If the
Committee determines that a Performance Award to be granted to a person who is
designated by the Committee as likely to be a Covered Employee (as hereinafter
defined) should qualify as a 162(m) Award, the grant and/or settlement of such
Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 7.
7.2 Performance Goals Generally. The performance goals for such
Performance Awards 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 consistent with this Section 7. Performance goals shall be
objective and shall otherwise meet the requirements of Code Section 162(m) and
Treasury Regulation 1.162-27 thereunder. The Committee may determine that such
Performance Awards shall be granted, exercised, and/or settled upon achievement
of any one performance goal or that two or more of the performance goals must be
achieved as a condition to settlement of such Performance Awards. Performance
goals may differ for Performance Awards granted to any one Participant or to
different Participants.
7.3 Business Criteria. One or more of the following business criteria for
the Company, on a consolidated basis, and/or for specified subsidiaries,
affiliates, or business units of the Company (except with respect to the
measures relating to Common Stock), shall be used by the Committee in
establishing performance goals for such Performance Awards: (1) appreciation in
Fair Market Value or book value of Common Stock, (2) earnings per share; (3)
revenues; (4) cash flow or cash flow return on investment; (5) return on assets,
return on investment, return on capital, or return on equity; (6) economic value
added; (7) operating margin; (8) net income; net operating income; earnings; or
operating earnings (before or after income taxes); (9) total stockholder return;
and (10) any of the above goals as compared to the performance of a published or
special index deemed applicable by the Committee including the Standard & Poor's
500 Stock Index or other indexes, or compared to one or more comparable
companies specified by the Committee.
7.4 Performance Period; Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such Performance Awards
shall be measured over a Performance Period specified by the Committee (or, if
so determined by the Committee, for a specified portion of a Performance
Period). Performance goals shall be established not later than 90 days after the
beginning of any Performance Period applicable to such Performance Awards, or at
such other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
7.5 Performance Award Pool. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of measuring Company
performance in connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of a performance goal
or goals based on one or more of the business criteria set forth in Section 7.3
during the given Performance Period, as specified by the Committee in accordance
with Section 7.4 hereof. The Committee may specify the amount of the Performance
Award pool as a percentage of any such business criteria, a percentage thereof
in excess of a threshold amount, or another amount which need not bear a
strictly mathematical relationship to such business criteria.
7.6 Settlement of Performance Awards; Other Terms. Settlement of such
Performance Awards shall be in cash, Common Stock, other Awards, or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Performance Awards, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of Performance Award
subject to this Section 7. The Committee shall specify the circumstances in
which such Performance Awards shall be forfeited in the event of termination of
employment prior to the end of a Performance Period or settlement of Performance
Awards, and other terms relating to such Performance Awards in accordance with
Section 6 and this Section 7.
7.7 Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool or
potential individual Performance Awards and as to
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the achievement of performance goals relating to Performance Awards under this
Section 7 shall be made in writing.
7.8 Status of 162(m) Awards. It is the intent of the Company that
Performance Awards granted to persons who are designated by the Committee as
likely to be Covered Employees within the meaning of Code Section 162(m) and
regulations thereunder shall, if so designated by the Committee, constitute
"qualified performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of this Section 7,
including the definitions of Covered Employee and other terms used herein, shall
be interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term "Covered
Employee" as used herein shall mean only a person designated by the Committee,
at the time of grant of a Performance Award, as likely to be a Covered Employee
with respect to that fiscal year. If any provision of the Plan or any agreement
relating to such Performance Awards 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.
8. Effect on Other Plans
8.1 Neither the adoption of the Plan nor anything contained in the Plan
shall prevent the Company from adopting or continuing other or additional
compensation arrangements, or discontinuing or terminating such arrangements,
and such other arrangements as may be either generally applicable or applicable
only in specific cases.
8.2 In no event shall the value of, or income arising from, any Awards
issued under the Plan be treated as compensation for purposes of any pension,
profit sharing, life insurance, disability or other retirement or welfare
benefit plan now maintained or hereafter adopted by the Company, unless such
plan specifically provides to the contrary.
9. Miscellaneous Provisions Related to Participants
9.1 The grant of an Award shall not be construed as giving a Participant
the right to be retained in the employ of the Company. The Company may at any
time dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement. No Participant or other person shall have any claim to be granted any
Award, and there is no obligation for uniformity of treatment of Participants or
holders or beneficiaries of Awards.
9.2 Except as may be otherwise provided under Section 6.4, no Award
granted under the Plan, unless otherwise provided in the Award Agreement, shall
entitle the holder of such Award to any dividend, voting or other right of a
stockholder unless and until the date of issuance under the Plan of the shares
that are subject to such Award.
9.3 The purchase price of the shares of Common Stock as to which an option
is exercised shall be paid in cash or by check, except that the Committee may,
in its discretion, allow the payment to be by surrender of unrestricted shares
of Common Stock (valued at their then Fair Market Value at the date of
exercise), or by a combination of cash, check and unrestricted shares of Common
Stock.
9.4 A Participant may be required to pay to the Company, and the Company
shall have the right to deduct from all amounts paid to a Participant (whether
under the Plan or otherwise), any taxes required by to be paid or withheld in
respect of Awards hereunder to such Participant. The Committee may provide
additional cash payments to holders of Awards to defray or offset any tax
arising from the grant, vesting, exercise or payment of any Award or, at the
election of the holder of the Award, the Committee may withhold shares or accept
the transfer of shares to the Company, in such amounts as are equivalent to the
Fair Market Value of the withholding obligations.
9.5 If the Committee determines that such action is advisable, the Company
may assist any Participant in obtaining financing from the Company or from any
bank or other third party, on such terms as determined
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by the Committee, and in such amount as is required to accomplish the purposes
of the Plan, including, but not limited to, permitting the exercise of an Award
and/or paying any taxes in respect thereof to the extent permitted by law. Such
assistance may take any form that the Committee deems appropriate, including,
but not limited to, a direct loan from the Company, a guarantee of the
obligation by the Company, or the maintenance by the Company of deposits with
such bank or third party.
9.6 Awards (and rights or interests therein) shall not be assignable or
transferable by a Participant except by will or the laws of descent and
distribution (or pursuant to a beneficiary designation authorized under Section
9.7), and during the Award holder's lifetime, such Awards and rights shall be
exercisable only by such holder or such holder's duly appointed guardian or
legal representative. The foregoing notwithstanding, the Committee may provide
that Awards (or rights or interests therein), other than Incentive Stock Options
and Awards in tandem with such Incentive Stock Options, shall be transferable,
including permitting transfers to a Participant's immediate family members
(i.e., spouse, children, grandchildren, or siblings, as well as the
Participant), to trusts for the benefit of such immediate family members, and to
partnerships in which such family members are the only parties, or other
transfers deemed by the Committee to be not inconsistent with the purposes of
the Plan.
9.7 Each Participant may file and maintain with the Company a written
designation of one or more persons as the beneficiary or beneficiaries who shall
be entitled to receive the Award or related payment payable under the Plan upon
the Participant's death. If no such designation is in effect at the time of a
Participant's death, or if no designated beneficiary survives the Participant or
if such designation conflicts with the law, the Participant's estate shall be
entitled to receive the Award or related payment, if any, payable under the Plan
upon the Participant's death.
10. 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 laws of the State of Delaware and applicable federal law.
11. Severability
If any provision of the Plan or any Award is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction or as to any Participant
or Award under any law deemed applicable by the Committee, such provision or
Award shall be construed or deemed amended to conform to applicable laws, or if
it cannot be construed or deemed amended, in the determination of the Committee,
without materially altering the intent of the Plan or the Award, such provision
shall be stricken as to such jurisdiction, Participant or Award and the
remainder of the Plan and any such Award shall remain in full force and effect.
12. Unfunded Plan
The Plan is intended to constitute an "unfunded" plan. Unless otherwise
determined by the Committee, the Plan shall be unfunded and shall not create (or
be construed to create) a trust or a separate fund or funds. To the extent that
any person acquires a right to receive payments from the Company pursuant to an
Award, such right (unless otherwise determined by the Committee) shall be no
greater than the right of any unsecured general creditor of the Company.
13. Rule 16b-3 Compliance
13.1 Unless a Participant could otherwise transfer an equity security,
derivative security, or shares issued upon exercise of a derivative security
granted under the Plan without incurring liability under Section 16(b) of the
Exchange Act, (i) an equity security issued under the Plan, other than an equity
security issued pursuant to the exercise of a derivative security granted under
the Plan, shall be held for at least six months from the date of acquisition,
and (ii) at least six months shall elapse from the date of acquisition of a
derivative security to the date of disposition of the derivative security (other
than upon exercise or conversion)
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or disposition of any underlying equity security issued pursuant to the exercise
or conversion of such derivative security.
13.2 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 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 repurchase of any Award or shares resulting from any Award in order to
prevent a Participant from incurring or potentially incurring liability under
Section 16(b) of the Exchange Act. 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.
14. Effective Date and Term of Plan
14.1 The Plan was approved by the stockholder of the Company by written
consent and became effective in March 1994. The amendment and restatement of the
Plan adopted by the Board of Directors on January 29, 1997, was effective upon
adoption by the Board, subject to approval of Company stockholders at the
Company's 1997 Annual Meeting of Stockholders by the affirmative vote of the
holders of a majority of the shares of Common Stock present, or represented, and
entitled to vote on the subject matter at the Meeting. In the event stockholders
of the Company do not so approve the amendment and restatement, the amendment
and restatement shall not be effective, Awards granted subject to such
stockholder approval shall be cancelled and Awards shall not be made thereafter
to the extent required under Treasury Regulation 1.162-27(e)(4) in order that
the submission of the matter for stockholder approval meets the requirements of
that Regulation.
14.2 The Plan shall remain in effect until March 31, 2007, unless sooner
terminated by the Board. After this date, no further Awards may be granted but
previously granted Awards shall remain outstanding in accordance with their
applicable terms and conditions, as stated in the Award Agreement, and
conditions of the Plan.
15. Amendment and Termination of the Plan
15.1 The Plan may be amended by the Board in any respect, without the
consent of stockholders or Participants, except that any such amendment
(although effective when made) shall be subject to the approval of the Company's
stockholders at the annual meeting of stockholders the record date of which next
follows the taking of 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 Common Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit any
other amendment to the Plan to stockholders for approval. In addition, no
amendment may materially impair the rights of a Participant under any Award
previously granted under the Plan without the consent of such Participant,
unless such amendment is required by law.
15.2 The Plan may be terminated at any time by the Board. No further
Awards may be made under the Plan after termination, but termination shall not
affect the rights of any Participant under, or the authority of the Committee
with respect to, any grants or awards made prior to termination.
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EXHIBIT B
INVESTMENT TECHNOLOGY GROUP, INC.
PAY-FOR-PERFORMANCE INCENTIVE PLAN
1. PURPOSE
The purpose of this Pay-For-Performance Incentive Plan (the "Plan") is to
assist Investment Technology Group, Inc. (the "Company") and its subsidiaries in
attracting, retaining, and rewarding, by payment of competitive levels of
compensation, employees who occupy key positions relating to the Company and
specified business units, and motivating such employees to expend greater
efforts in promoting the growth and annual profitability of the Company and its
subsidiaries, through the award of annual incentives.
2. DEFINITIONS
In addition to the terms defined in Section 1 hereof, the following terms
used in the Plan shall have the meanings set forth below:
(a) "Award" means the amount potentially payable to a Participant upon
achievement of specified Performance Objectives for a Performance Year, as
provided in Section 4, subject to possible forfeiture and other terms and
conditions of the Plan.
(b) "Business Unit" means the Company or any department, division,
subsidiary, or other business unit or function of the Company for which
separate operational financial results are available to the Committee, as
designated by the Committee from time to time.
(c) "Business Unit Income" means the pre-tax net income of a specified
Business Unit for the Performance Year, subject to the provisions of
Section 4(b).
(d) "Code" means the Internal Revenue Code of 1986, as amended.
References to any provision of the Code or regulation thereunder shall be
deemed to include successor provisions or regulations.
(e) "Committee" means the Compensation Committee of the Board of
Directors, or such subcommittee thereof as may be designated by the Board
of Directors or the Compensation Committee to administer the Plan. In
appointing members of the Committee, the Board shall consider whether each
member qualifies as an "outside director" for purposes of Section 162(m) of
the Code and regulations thereunder.
(f) "Eligible Employee" means each executive officer or key employee
who is in charge of a Business Unit or whose performance can be expected to
have a substantial effect on the results of a Business Unit, as determined
by the Committee.
(g) "Participant" means an Eligible Employee granted an Award by the
Committee for a designated Performance Year.
(h) "Performance Objectives" means the measures of performance
pre-established by the Committee in accordance with Section 4, the
achievement of which, in a given Performance Year, is a condition of
payment of final Awards.
(i) "Performance Year" means the fiscal year to which an Award
relates; provided, however, that, with respect to a Participant who becomes
employed in a new position or whose duties are enhanced such that the
Committee determines to grant an Award after the start of a fiscal year,
the Performance Year shall be the portion of the fiscal year subsequent to
such event, as determined by the Committee.
(j) "Revenues" means all revenues generated by a specified Business
Unit for the Performance Year.
(k) "EVA" (economic value added) means the amount by which a Business
Unit's after-tax income exceeds the cost of the capital used by the
Business Unit during the Performance Year. To determine such cost of the
capital used, the Committee will, when it establishes a Performance
Objective based on EVA, determine the average cost of capital for the
Company (stated as a percentage) for the
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Performance Year, which cost of capital will be multiplied by the amount of
capital actually used by the Business Unit during the Performance Year.
3. ADMINISTRATION
(a) Generally. The Committee shall administer the Plan in accordance with
its terms, and shall have all powers necessary to accomplish such purpose. The
Committee shall have the power and authority to construe and interpret the Plan,
to define the terms used herein, to prescribe, amend, and rescind rules and
regulations as well as forms and notices relating to the administration of the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan. Any action or determination of the Committee with
respect to the Plan shall be conclusive and binding upon all persons, including
the Company, Participants, and stockholders.
(b) 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. Neither a member of
the Committee nor any officer or employee of the Company or a subsidiary 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 such persons shall, to the extent permitted by law, be fully
indemnified, reimbursed, and protected by the Company, as provided in the
Company's Certificate of Incorporation and By-Laws, with respect to any such
action, determination, or interpretation.
4. AWARDS
(a) Granting of Awards. Prior to the date on which Performance Objectives
must be established in order to comply with Section 162(m) of the Code with
respect to each Performance Year, the Committee, in its sole discretion, shall
select the Eligible Employees to whom Awards will be granted for such
Performance Year and will establish the amount of each Award or the formula by
which such amount may be determined, the Performance Objectives relating to such
Award, and other terms of such Award. An Eligible Employee may be granted an
Award for more than one Business Unit.
(b) Performance Objectives. The Performance Objectives for an Award shall
consist of a specified percentage or percentages of the Business Unit Income,
Revenues and/or EVA of a Business Unit, the results of which the Committee
believes will be substantially affected by the performance of the Participant.
The Committee may specify that the final Award shall be a payment of such
specified percentage or percentages to the Participant, or shall be a payment of
an amount specified or determined by formula in some other manner but
conditioned upon achievement of such specified percentage or percentages (in
each case subject to the terms of the Plan). The Committee may specify in the
Performance Objectives a target amount of Business Unit Income, Revenues, or EVA
of such Business Unit required before any or specified parts of the Award will
become payable, and may express the Performance Objectives by way of a
comparison with like measures of Business Unit performance in one or more prior
periods or similar measures of performance of other companies or businesses;
provided, however, that the Committee shall include such terms in the case of a
Performance Objective based on Revenues as may be necessary so that achievement
of the Performance Objective is substantially uncertain. The Committee shall, in
its sole discretion, establish Awards and Performance Objectives, subject to
Section 4(c). Performance Objectives shall be objective and shall otherwise meet
the requirements of Section 162(m)(4)(C) of the Code and regulations thereunder
(including Treasury Regulation 1.162-27(e)(2)). Performance Objectives may
differ for Awards to different Participants. Only the business criteria
specified in this Section 4(b) may be used in establishing Performance
Objectives upon which the maximum amount of final payment of an Award is
conditioned, although the Committee may consider other measures of performance
as a basis for reducing such amount (including under Section 4(d)). To the
extent consistent with Section 162(m)(4)(C) of the Code and regulations
thereunder (including Treasury Regulation 1.162-27(e)(2)), the Committee may do
the following:
(i) provide that the Business Unit Income, Revenues, or EVA of the
Business Unit considered as the Performance Objective shall be adjusted
downward to reflect specified charges, expenses, and other
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amounts (including amounts that would otherwise constitute bonuses (under
the Plan or otherwise), capital charges, general and administrative
expenses, or taxes);
(ii) adjust or modify Awards or terms of Awards and Performance
Objectives (x) in recognition of unusual or nonrecurring events affecting
the Company or any Business Unit, or the financial statements or results
thereof, or in response to changes in applicable laws (including tax,
disclosure, and other laws), regulations, accounting principles, or other
circumstances deemed relevant by the Committee, (y) with respect to any
Participant whose position or duties with the Company or any subsidiary
changes during a Performance Year, or (z) with respect to any person who
first becomes a Participant after the first day of the Performance Year, in
each case subject to Section 4(h);
(iii) defer all or any part of any interim payments until
certification of the final Award for the Performance Year;
(iv) defer all or any part of final Award payments, including until
the earliest time such payments may be made without causing them to fail to
be deductible by the Company under Section 162(m) of the Code; such
deferrals may include deferrals in the form of units valued by reference to
the value of Company stock, settleable in cash or by issuance of shares
drawn from any other plan of the Company under which issuance of such
shares to a Participant is authorized; and
(v) consider other performance criteria in exercising discretion under
Section 4(d) hereof.
In furtherance of the foregoing, the Performance Objective for payment of the
annual incentive award specified in Section 5.3 of the employment agreement
between the Company and Scott P. Mason, dated as of January 6, 1997, shall be
based upon the rate of growth in the Company's earnings before income taxes
("EBIT"), such growth rate to be determined by dividing the excess (if any) of
(A) EBIT for a given year over (B) the highest EBIT for any prior fiscal year
ending on or after December 31, 1996 by (2) such highest EBIT. The targeted rate
of growth in EBIT for such Performance Objective shall be 25%, with payment of
annual incentive amounts proportionately reduced in the event such growth is
less than 25% (but with no payment authorized if such growth is not positive)
and proportionately increased in the event such growth is greater than 25%.
Amounts payable under this Performance Objective shall not exceed 30% of the
EBIT of the Company in any year, in accordance with Section 4(c).
(c) Maximum Award. The maximum percentage of Business Unit Income,
Revenues and EVA of a Business Unit that may be specified as the Performance
Objectives and therefore potentially payable under an Award to any Participant
for any Performance Year shall be 30%, 10%, and 25%, respectively. In addition,
the maximum combined percentage of the Business Unit Income, Revenues and EVA of
a Business Unit that may be specified as the Performance Objectives for Awards
to all Participants with respect to any one Business Unit shall be 30%, 10% and
25%, respectively.
(d) Determination of Amounts Payable; Limits on Discretion. As promptly as
practicable following the end of each Performance Year, the Committee shall
determine whether and the extent to which the terms of Awards have been
satisfied, including the extent to which Performance Objectives have been
achieved and other material terms of Awards have been satisfied, and the amounts
payable to each Participant with respect to his or her Award. Such
determinations shall be set forth in a written certification (including for this
purpose approved minutes of the meeting at which such determinations were made).
The Committee may, in its sole discretion, in view of its assessment of the
business strategy of the Company and Business Units thereof, performance of
comparable organizations, economic and business conditions, personal performance
of the Participant, and any other circumstances deemed relevant, decrease the
amount determined to be payable as a final Award or cancel such Award. Other
provisions of the Plan notwithstanding, the Committee shall have no discretion
to increase the amounts payable with respect to an Award.
(e) Termination. If a Participant ceases to be employed by the Company or
a participating subsidiary prior to the end of a Performance Year for any reason
other than death, disability (as determined by the Committee), normal
retirement, or early retirement with the approval of the Committee, no final
Award for such Performance Year shall be payable to such Participant. If such
cessation of employment results from such Participant's death, disability (as
determined by the Committee), normal retirement, or early retirement with the
approval of the Committee, the Committee shall determine, in its sole discretion
and in such manner
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as it may deem reasonable (subject to Section 4(h)), the amount payable as a
final Award under Section 4(d) achieved or resulting from the portion of such
Performance Year completed at the date of cessation of employment, and the
amount of the final Award payable based on such determinations. The Committee
may base such determination on the performance achieved for the full year, in
which case its determination shall be made as promptly as practicable following
the Performance Year. Such determinations shall be set forth in a written
certification, as specified in Section 4(d). Such Participant or his or her
beneficiary shall be entitled to receive payment of such final Award, reduced by
any payments previously received, at the earliest time such payment may be made
without causing the payment to fail to be deductible by the Company under Code
Section 162(m) and provided that, in the event the final Award is less than the
payments previously made to the Participant, the Participant shall repay such
amounts to the Company forthwith. The foregoing notwithstanding, no payment
shall be made hereunder if such payment shall be duplicative of severance
amounts paid to the participant or his or her beneficiary.
(f) Payment of Awards. Except as provided in Section 4(e) and this Section
4(f) and subject to the other provisions of Section 4, each participant may
receive interim payments as frequently as semimonthly, at the Committee's
discretion, provided, however, that any such payments made exceeding the final
Award as certified by the Committee shall be repaid to the Company forthwith. If
and to the extent specified by the Committee, each Participant shall have the
right to defer his or her receipt of part or all of any payment due with respect
to an Award under and in accordance with the terms and conditions of any
deferred compensation plan then available to Participant as an employee of the
Company. If a Participant dies prior to payment (including deferred payment) of
a final Award hereunder, any payments due to such Participant shall be paid to
person(s) designated as beneficiary(ies) in an election form filed with the
Company's Secretary and specifically applicable to amounts payable under the
Plan, without regard to any deferral election.
(g) Tax Withholding. The Company and any participating subsidiary shall
have the right to deduct from any amount payable hereunder any amounts that
federal, state, local, and foreign tax laws require to be withheld with respect
to such payment.
(h) Conformity of Plan to Code Section 162(m). It is the intent of the
Company that compensation under the Plan (other than post-termination
compensation) shall constitute "performance-based compensation" within the
meaning of Code Section 162(m)(4)(C) and regulations thereunder (including
Treasury Regulation 1.162-27(e)). Accordingly, terms used in the Plan shall be
interpreted in a manner consistent with Section 162(m) of the Code and
regulations thereunder (including Treasury Regulation 1.162-27). If any
provision of the Plan or any agreement evidencing an Award hereunder does not
comply or is inconsistent with the provisions of Code Section 162(m)(4)(C) or
regulations thereunder (including Treasury Regulation 1.162-27(e)) required to
be met in order that compensation (other than post-termination compensation)
shall constitute "performance-based compensation," such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements, and no adjustment to an Award or its related Performance
Objectives shall be authorized or made, and no post-termination payment shall be
authorized or made under Section 4(e), if and to the extent that such
authorization or the making of such adjustment or payment would contravene such
requirements.
5. GENERAL PROVISIONS
(a) No Rights to Final Award or Rights to Participate. Until the Committee
has determined to make a final Award to a Participant under Section 4(d) or (e),
a Participant's selection to participate, grant of an Award, and other events
under the Plan shall not be construed as a commitment that any Award shall
become a final Award or that payment will be made with respect to an Award under
the Plan. Nothing in the Plan shall be deemed to give any Eligible Employee any
right to participate in the Plan except upon determination of the Committee
under Section 4. The foregoing and Section 5(b) notwithstanding, the Committee
may authorize legal commitments with respect to Awards under the terms of an
employment agreement or other agreement with a Participant, to the extent of the
Committee's authority under the Plan, including commitments that limit the
Committee's future discretion under the Plan, but in all cases subject to
Section 4(h).
A-13
<PAGE> 44
(b) No Rights to Employment. Nothing contained in the Plan or in any
documents evidencing an Award shall confer upon any Eligible Employee or
Participant any right to continue as an Eligible Employee or in the employ of
the Company or a subsidiary or constitute any contract or agreement of
employment, or interfere in any way with the right of the Company or a
subsidiary to reduce such person's compensation, to change the position held by
such person, or to terminate the employment of such person, with or without
cause.
(c) Non-Transferability. No benefit payable under, or interest in, this
Plan shall be transferable by a Participant except upon a Participant's death by
will or the laws of descent and distribution or to a designated beneficiary, or
otherwise be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any such attempted action shall
be void.
(d) Unfunded Plan. The Plan is intended to constitute an "unfunded" plan
for incentive and deferred compensation. With respect to any amounts payable to
a Participant pursuant to an Award, nothing contained in the Plan (or in any
documents related thereto), nor the creation or adoption of the Plan, the grant
of any Award, or the taking of any other action pursuant to the provisions of
the Plan shall give any such Participant any rights that are greater than those
of a general creditor of the Company.
(e) Participation in Other Compensation or Benefit Plans. Nothing in the
Plan shall preclude any Participant from participation in any other compensation
or benefit plan of the Company.
(f) Governing Law. The Plan and all related documents shall be governed
by, and construed in accordance with, the laws of the State of New York (except
to the extent the Delaware General Corporation Law and provisions of federal law
may be applicable), without reference to principles of conflict of laws. If any
provision hereof shall be held by a court of competent jurisdiction to be
invalid and unenforceable, the remaining provisions of the Plan shall continue
to be fully effective.
(g) Amendment and Termination of Plan and Awards. The Board of Directors
may, at any time, terminate or, from time to time, amend, modify, or suspend the
Plan, provided that any such action shall be subject to stockholder approval if
and to the extent required by law, regulation, or the rules of any stock
exchange or automated quotation system upon which the Company's Common Stock may
be listed or quoted, or to comply with Code Section 162(m). Except as provided
in Section 4 (including the limitation under Section 4(h)) and under Section
5(a), the Committee may modify the terms and provisions of any Awards
theretofore awarded to any Participants which have not become final Awards and
been settled by payment (or would have been settled by payment but for an
election to defer payment pursuant to Section 4(f)).
(h) Effective Date. The Plan shall become effective as of January 1, 1997,
for Performance Years beginning on or after such date, and shall remain in
effect until such time as it may be terminated pursuant to Section 5(g).
(i) Stockholder Approval. Prior to completion of the initial Performance
Year under the Plan, the Plan shall be submitted to, and must be approved in a
separate vote by, the affirmative votes of the holders of a majority of voting
securities present in person or represented by proxy and entitled to vote on the
subject matter, at a meeting of Company stockholders duly held in accordance
with the Delaware General Corporation Law, or any adjournment thereof, or by the
written consent of the holders of a majority of voting securities entitled to
vote, in accordance with applicable provisions of the Delaware General
Corporation Law and Section 162(m) of the Code. Any Awards granted under the
Plan prior to such approval of stockholders shall be effective when granted, but
if stockholders fail to approve the Plan as specified hereunder, any previously
granted Award shall be forfeited and cancelled and any payments previously made
with respect to such Awards shall be repaid to the Company forthwith, and no
Awards shall be thereafter granted under the Plan. In addition, the Committee
may determine to submit the Plan to stockholders for reapproval at such times,
if any, required in order that compensation under the Plan shall qualify as
"performance-based compensation" under Code Section 162(m) and the regulations
thereunder.
As approved by the Compensation Committee and adopted by the Board of Directors
on March 26, 1997.
A-14
<PAGE> 45
INVESTMENT TECHNOLOGY GROUP, INC.
Proxy Card for Annual Meeting of Stockholders on May 6, 1997
This Proxy is solicited by the Board of Directors of the Company. The
undersigned hereby appoints Raymond L. Killian, Jr., Scott P. Mason and Dale A.
Prouty, and each of them, as proxies, with full power of substitution, to
represent the undersigned and to vote all shares of Common Stock of Investment
Technology Group, Inc., held of record by the undersigned on March 31, 1997, or
which the undersigned would otherwise be entitled to vote at the Annual Meeting
of Stockholders to be held on May 6, 1997 and any adjournment thereof, upon all
matters that may properly come before the meeting. All shares votable by the
undersigned will be voted by the proxies named above, in the manner specified
on the reverse side of this card, and such proxies are authorized to vote in
their discretion on such other matters as may properly come before the meeting.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE
Please sign this Proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
________________________________ _______________________________
________________________________ _______________________________
________________________________ _______________________________
[ITGCM - INVESTMENT TECHNOLOGY GROUP, INC.] [FILE NAME: ITGCM2.ELX]
[VERSION - 3] [4/3/97]
<PAGE> 46
<TABLE>
<S> <C> <C> <C> <C> <C>
_________
|
|
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. Election of Directore.
Nominee for Director.
_________________________________ Frank E. Baxter Robert L. King With- For All
Richard G. Dooley Dale A. Prouty For hold Except
INVESTMENT TECHNOLOGY GROUP, INC. William L. Jacobs Scott P. Mason
_________________________________ Raymond L. Killian, Jr. Mark A. Wolfson [ ] [ ] [ ]
If you wish to withhold authority to vote your shares from any individual
nominee, mark the "For All Except" box and strike a line through the
nominee's(s') name(s).
For Against Abstain
RECORD DATE SHARES: 2. Approval of the 1994 Stock Option and [ ] [ ] [ ]
Long-term Incentive Plan, as Amended and
Restated.
3. Approval of the Pay-for-Performance [ ] [ ] [ ]
Incentive Plan.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the election of Directors, FOR approval of the 1994 Stock Option
and Long-Term Incentive Plan as Amended and Restated, and FOR the Pay-for-
Performance Incentive Plan.
The Undersigned hereby acknowledges receipt of the Annual Report, the Form
10-K, the Notice of Annual Meeting of Stockholders and the Proxy Statement,
and hereby revokes all previously granted receipts.
Please be sure to sign Date Mark box at right if an address change or comment has been noted [ ]
and date this Proxy. on line reverse side of this card.
_____________________________________
| |
| Stockholder |
| sign here Co-owner sign here |
| |
|___________________________________|
DETACH CARD DETACH CARD
</TABLE>
INVESTMENT TECHNOLOGY GROUP, INC.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to the management and operation of your Company
that require your immediate attention and approval. These are discussed in
detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy card in the enclosed
postage paid envelope.
Your proxy card must be received prior to the Annual Meeting of Stockholders,
May 8, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
John R. MacDonald
Chief Financial Officer
Investment Technology Group, Inc.
[ITGCM - INVESTMENT TECHNOLOGY GROUP, INC.] [FILE NAME: ITGCM1.ELX]
[VERSION - 3] [4/3/97]
