<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e) (2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MAXCOR FINANCIAL GROUP INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(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) Dated Filed:
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<PAGE>
Maxcor Financial Group Inc.
April 30, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Maxcor Financial Group Inc. (the "Company"), to be held at the
Company's New York City offices at Two World Trade Center, 84th Floor, on
Wednesday, June 9, 1999, at 10:00 A.M. local time.
In addition to electing a class of directors and attending to other
business as described in the attached Proxy Statement, we will review the
Company's results of operations for fiscal 1998 and first quarter 1999 and
report on other matters of interest. There will also be an opportunity following
the formal Meeting for informal questions and discussion.
Whether or not you expect to attend the Meeting, please sign and date
the enclosed proxy card and return it in the accompanying postage-paid return
envelope as promptly as possible. This will not prevent you from voting by
ballot or changing your proxy should you attend the Meeting and wish to vote in
person or simply wish to change your vote.
Also, please mark the appropriate space on the proxy card if you plan
to attend the Meeting in person, so that we can make appropriate arrangements
with security at the World Trade Center for your attendance.
On behalf of the Board of Directors and management of Maxcor Financial
Group Inc., we thank you for your continued support and confidence in the
Company.
Sincerely,
/s/ Gilbert D. Scharf
Gilbert D. Scharf
Chairman, President
and CEO
- ------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
- ------------------------------------------------------------------------------
Two World Trade Center, 84th Floor, New York, New York 10048
o Tel. 212-748-7000 o Fax. 212-748-7329
<PAGE>
MAXCOR FINANCIAL GROUP INC.
Two World Trade Center, 84th Floor
New York, New York 10048
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 9, 1999
The Annual Meeting of Stockholders of Maxcor Financial Group Inc., a
Delaware corporation (the "Company"), will be held at the Company's New York
City offices, Two World Trade Center, 84th Floor, New York, New York 10048, at
10:00 a.m., local time, on Wednesday, June 9, 1999. The meeting will be held for
the purpose of considering and acting upon the following matters:
1. The election of three Class III directors to serve until the third
succeeding annual meeting of stockholders;
2. The ratification of the appointment of PricewaterhouseCoopers LLP
as the Company's independent auditors for the year ending
December 31, 1999; and
3. The transaction of such other business as may properly come before
the meeting or any adjournments or postponements thereof.
Information relating to the matters to be considered and voted on at
the meeting is set forth in the Proxy Statement attached to this Notice. The
Board of Directors has fixed the close of business on April 28, 1999, as the
record date for determining stockholders of the Company entitled to notice of
and to vote at the meeting. For ten days prior to (and at) the meeting, a list
of stockholders entitled to vote at the meeting will be maintained at the
Company's New York City offices and will be subject to inspection during regular
business hours by any stockholder.
You are cordially invited to attend the meeting. However, so that your
shares will be represented whether or not you plan to attend the meeting, please
sign, date and promptly return the enclosed proxy card in the pre-addressed
stamped envelope provided.
By Order of the Board of Directors,
Roger E. Schwed
Secretary
New York, New York
April 30, 1999
<PAGE>
MAXCOR FINANCIAL GROUP INC.
Two World Trade Center, 84th Floor
New York, New York 10048
----------------------------
PROXY STATEMENT
----------------------------
General
The accompanying proxy is solicited on behalf of the Board of Directors
of Maxcor Financial Group Inc., a Delaware corporation (the "Company"), with
principal executive offices at Two World Trade Center, 84th Floor, New York, New
York 10048, for use at the Annual Meeting of Stockholders to be held at 10:00
a.m., local time, on Wednesday, June 9, 1999, and at any adjournments or
postponements thereof (the "Annual Meeting"), for the purposes set forth in the
foregoing Notice.
This Proxy Statement and the accompanying Notice and proxy card are
first being sent to stockholders on or about April 30, 1999. The Company's
annual report to stockholders for the fiscal year ended December 31, 1998 has
been integrated with the Company's annual report on Form 10-K for the same
period. Accordingly, the Form 10-K is being mailed to all stockholders of record
and accompanies this Proxy Statement.
Revocability of Proxies
All stockholders are cordially invited to attend the Annual Meeting.
However, so that your shares will be represented whether or not you plan to
attend the Annual Meeting, please sign, date and promptly return the enclosed
proxy card in the pre-addressed stamped envelope provided. You have the right to
revoke your proxy at any time prior to its being voted at the Annual Meeting by
(i) filing with the Secretary of the Company, at or before the taking of the
vote at the Annual Meeting, a written notice of revocation bearing a later date
than the proxy, (ii) duly executing a subsequent proxy relating to the same
shares and delivering it to the Secretary of the Company before the Annual
Meeting or (iii) attending the Annual Meeting and voting in person (although
presence at the Annual Meeting without further action will not revoke a proxy).
Voting Rights
The Board of Directors has fixed the close of business on April 28,
1999 as the record date (the "Record Date") for the Annual Meeting. Accordingly,
only holders of record of the Common Stock, par value $.001 per share ("Common
Stock"), of the Company at the close of business on such date are entitled to
notice of and to vote at the Annual Meeting. At the close of business on the
Record Date, 11,323,782 shares of Common Stock were issued and outstanding. As
discussed below (see "Certain Other Relationships and Related Transactions"),
the Company has entered into a definitive agreement with its largest
stockholder, the venture capital firm of Welsh, Carson, Anderson & Stowe ("Welsh
Carson"), to repurchase all 2,986,346 shares of Common Stock held by Welsh
Carson's investment partnerships. Under Delaware law, shares
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repurchased by a corporation and held in a corporation's treasury are not
entitled to vote or be counted for quorum purposes. Accordingly, if the
repurchase is consummated prior to the Annual Meeting (as is currently
contemplated, assuming certain conditions precedent are timely satisfied), the
number of shares of Common Stock outstanding and entitled to vote at the Annual
Meeting would be reduced to 8,337,436.
On all matters to be voted upon at the Annual Meeting, holders of
shares of Common Stock vote as a single class with each record holder entitled
to one vote per share. Stockholders do not have cumulative voting rights with
respect to the election of directors.
Voting Procedures; Quorum
Proxies received prior to the Annual Meeting and not revoked will be
voted at the Annual Meeting in accordance with the instructions indicated on
such proxies. If no instructions are indicated on a returned proxy card, the
shares represented thereby will be voted in accordance with the recommendations
of the Board of Directors as follows: (i) "FOR" the election of the three
nominees to the Board of Directors and (ii) "FOR" ratification of the
appointment of PricewaterhouseCoopers LLP as the Company's independent auditors
for fiscal year 1999. The Board of Directors has not received notice, and is not
otherwise aware, of any other matter which is to come before the Annual Meeting.
Accordingly, if any other matter is properly presented for consideration, the
persons named in the enclosed proxy card will have discretion to vote on such
matter in accordance with their best judgment. So-called "street name" shares
that are held of record by brokers or other nominees, in the absence of
instructions or withheld authority from the beneficial owner, may be voted in
the discretion of such brokers or nominees with respect to each of the two
proposals set forth herein (although if any other matter properly comes before
the Annual Meeting, the nature of such matter will determine whether the broker
or nominee has such discretion).
The presence, in person or by properly executed proxy, of holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting will constitute a quorum. For purposes of determining the number
of shares present in person or represented by proxy at the Annual Meeting, all
votes cast "for," "against" or "abstain" are included. "Broker non-votes," which
occur when brokers or other nominees are prohibited by applicable rules from
exercising discretionary voting authority on a particular proposal for
beneficial owners who have not provided voting instructions, are also deemed
present for purposes of determining a quorum, but are not counted for the
purpose of determining the vote required for approval of such proposal. As noted
above, the shares held as of the Record Date by the Welsh Carson investment
partnerships, if repurchased by the Company prior to the Annual meeting, would
not be entitled to vote at or be counted for quorum purposes at the Annual
Meeting.
Required Votes
Assuming the presence of a quorum at the Annual Meeting, (i) directors
will be elected (Proposal 1) if they receive a plurality of the votes of the
shares present and entitled to vote at the Annual Meeting (and, accordingly,
abstentions and broker non-votes have no effect) and (ii) the
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appointment of PricewaterhouseCoopers LLP as the Company's independent auditors
(Proposal 2) will be ratified if the Proposal receives a majority of the votes
of the shares present and entitled to vote at the Annual Meeting (and,
accordingly, abstentions and broker non-votes have the same effect as a negative
vote). A "plurality" means that the director nominees who receive the greatest
number of votes of the shares present and entitled to vote at the Annual Meeting
are elected as the directors (up to the maximum number of three directors to be
elected at the Annual Meeting).
ELECTION OF DIRECTORS
(Proposal 1 on the proxy card)
Article SIXTH of the Company's Restated Certificate of Incorporation
provides that the number of directors shall be not less than three nor more than
twelve, and empowers the Company's Board of Directors to fix the exact number of
directors and to fill any vacancies on the Board of Directors. Article SIXTH
further provides that the Board of Directors shall be divided into three
classes: Class I, Class II and Class III, with each class to consist, as nearly
as possible, of one-third of the members of the Board. The Company's Board of
Directors has set the number of directors at seven, with two directors in each
of Classes I and II and three directors in Class III. The term of the Class III
directors will expire at the Annual Meeting, the term of the Class I directors
will expire at the next annual meeting of stockholders and the term of the Class
II directors will expire at the second succeeding annual meeting of
stockholders. Under Article SIXTH, directors elected at an annual meeting of
stockholders to succeed those whose terms expire are identified as being of the
same class as those directors they succeed and are elected for a term to expire
at the third annual meeting of stockholders after their election.
At the Annual Meeting, three Class III directors will be elected to
hold office until the third succeeding annual meeting of stockholders or until
their successors are elected and shall have been qualified. Gilbert D. Scharf,
Michael J. Scharf, and Larry S. Kopp have been nominated for election as Class
III directors of the Company. Each of these nominees is currently serving as a
Class III director of the Company.
Shares authorized to be voted by the proxies named in a returned proxy
card will be voted "FOR" the election of Messrs. G. Scharf, M. Scharf and Kopp
unless authority to do so is withheld as provided in the proxy card. The
nominees have consented to serve if elected and the Board of Directors has no
reason to believe that the nominees will be unable to accept the office of
director, but if such contingency should arise, it is the intention of the
proxies named in the proxy card to vote for such person or persons as the Board
of Directors may recommend.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE
THREE NOMINEES AS DIRECTORS OF THE COMPANY.
Certain information with respect to the nominees for election as
directors proposed by the Company and the other directors whose terms of office
as directors will continue after the Annual Meeting is set forth below.
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Nominees for Election:
Class III Directors
Gilbert D. Scharf, 50, has been Chairman of the Board, President and
Chief Executive Officer of the Company since its inception in 1994. Since April
1993, Mr. Scharf has been a director and Secretary of Niagara Corporation, a
holding company with operating subsidiaries in the business of manufacturing
cold drawn steel bars ("Niagara"), and until March 1998, was also Vice President
and Treasurer of Niagara. Since 1989, Mr. Scharf has been a private investor and
Chairman of Scharf Advisors, Inc. ("Scharf Advisors"). From 1985 to January
1989, Mr. Scharf was a Managing Director of Lazard Brothers & Co. Ltd. in
London, where he was responsible for establishing and managing capital market
activities. From 1983 to 1985, Mr. Scharf was the General Partner of Mendez,
Scharf & Co., a private investment partnership. From 1978 to 1983, Mr. Scharf
was a Managing Director at Morgan Stanley & Co. Incorporated ("Morgan Stanley"),
where he managed all corporate and international bond trading and new issue
commitments and the money market department, and was co-chairman of the risk
management committee. Upon consummation of the Company's August 1996 acquisition
of Euro Brokers Investment Corporation ("Euro Brokers") in a merger transaction
(the "Merger"), Mr. Scharf became the Vice-Chairman of Euro Brokers and is
currently the Chairman, President and Chief Executive Officer of Euro Brokers,
as well as of a number of its subsidiaries. Mr. Scharf earned a B.A. degree from
Duke University. He is the Chairman of the Board's Executive Committee.
Michael J. Scharf, 56, has been a director of the Company since its
inception in 1994 and, until August 1997, was also Vice President, Secretary and
Treasurer of the Company. Since April 1993, Mr. Scharf has been the Chairman of
the Board, President and Chief Executive Officer of Niagara. From October 1983
to August 1989, Mr. Scharf was the Chairman and Chief Executive Officer of
Edgcomb Steel of New England, Inc. and its successor corporation, Edgcomb
Corporation, which was, from 1984 to 1989, one of the largest independent metals
service center and distribution companies in the United States. Edgcomb
Corporation was sold in 1989 to a company controlled by The Blackstone Group.
From 1989 (when Edgcomb was sold) until 1993 (when Niagara was founded), Mr.
Scharf managed his personal investments. Since December 1997, Mr. Scharf has
been a director of Worlds Inc., a development stage company which designs,
develops and markets three-dimensional music-oriented Internet sites, and, until
April 1999, also served as its Chairman of the Board. Mr. Scharf received an
A.B. degree from Princeton University and an M.B.A. from Harvard Business
School. He is a member of the Board's Executive Committee.
Larry S. Kopp, 56, has been a director of the Company since its
inception in 1994. Since November 1992, Mr. Kopp has been associated with Frank
Russell and Company, a pension consulting firm which currently has $1,000
billion under advisement and over $80 billion in investment funds through its
global investment and administrative relationships. From 1978 to November 1992,
Mr. Kopp held several senior management positions in strategic growth areas of
Citicorp, including General Manager of its bank card business and Chairman of
Citicorp Insurance Services. From 1974 to 1978, Mr. Kopp was involved in venture
capital transactions and was an advisor at E.M. Warburg Pincus and Company,
where he served as a consultant to
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corporations regarding strategic planning, turnarounds, financial restructuring
and sales of assets. Mr. Kopp earned B.A. and M.B.A. degrees from Stanford
University. He is Chairman of the Board's Compensation Committee.
Directors Continuing in Office:
Class I Directors
James W. Stevens, 62, has been a director of the Company since its
August 1996 acquisition of Euro Brokers, when he became the designee to the
Board of Directors, pursuant to the Merger agreement, of Euro Brokers and its
largest stockholder, Welsh Carson, and has since been re-elected by the
Company's stockholders at the Company's 1997 annual meeting. Mr. Stevens has
held various senior positions at The Prudential Insurance Company of America
("Prudential") from October 1987 through December 1994. Mr. Stevens retired from
Prudential in January 1995. As an Executive Vice President of Prudential, from
October 1987 to December 1994, his responsibilities included serving on the
Operating Council since 1993 and serving as Chairman and Chief Executive Officer
of the Prudential Asset Management Group with responsibility for global
institutional money management since 1993. From April 1985 to October 1987, he
was a Managing Director of Dillon Read & Co. Inc. ("Dillon Read") in its
investment banking and private investment origination group. From 1974 to 1985,
Mr. Stevens held several senior positions at Citicorp, including Chairman of
Citicorp Venture Capital Ltd. and Group Executive of the Capital Markets Group,
responsible for the Western Hemisphere merchant banking and investment
management activities of Citicorp. Mr. Stevens currently serves on the boards of
directors of the following companies: Biogen, Inc., Markem Corporation,
Polyfibron Technologies, Inc. and Pen-Tab Industries, Inc. Mr. Stevens received
his B.A. degree from Williams College and his M.B.A. from New York University.
He is Chairman of the Board's Audit Committee.
Frederick B. Whittemore, 67, has been a director of the Company since
its inception in 1994. Mr. Whittemore currently serves as a member of the boards
of directors of Partner Re Services Ltd., Southern Pacific Petroleum, Integon
Insurance and Chesapeake Energy Corporation. Since 1989, Mr. Whittemore has been
an Advisory Director at Morgan Stanley and he is Chairman of several of Morgan
Stanley's mutual funds. Mr. Whittemore started at Morgan Stanley in 1958; he was
a Partner from 1967 to 1970 and a Managing Director from 1970 until 1988. He was
a senior banker in Corporate Finance, Mergers and Acquisitions and Capital
Markets, and Syndicate Manager responsible for organizing and pricing all public
offerings. Mr. Whittemore has also been a member of the Council of Foreign
Relations since 1983 and was Chairman of the Board, Amos Tuck School of Business
Administration at Dartmouth College from 1988 to June 1992. From 1977 to 1984,
Mr. Whittemore was a Governor of the American Stock Exchange ("AMEX") and from
1982 to 1984 he was Vice Chairman of AMEX. Mr. Whittemore earned an A.B. degree
from Dartmouth College and an M.B.A. from the Amos Tuck School of Business
Administration. He is a member of the Board's Audit Committee.
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Class II Directors
William B. Wigton, 52, has been a director of the Company since its
August 1996 acquisition of Euro Brokers. Mr. Wigton was a founding member and
has been a managing partner of Merrion Group, L.P., a broker-dealer, since its
inception in 1989. He is also a managing director of and investor in Merrion
Investors, L.P., a private investment fund, and from 1996 to 1997 served as a
director of Munn, Bernhard & Associates, a registered investment advisor. From
1981 to 1989, Mr. Wigton was employed at Lazard Freres & Co. and was a general
partner from 1987 to 1989, with responsibility for corporate bond sales. From
1979 to 1981, Mr. Wigton was a Senior Vice President at Dillon Read. Prior
thereto, he was associated from 1975 to 1979 with Morgan Stanley and from 1970
to 1975 with Morgan Guaranty Trust Company. Mr. Wigton received his B.A. degree
from Lynchburg College. He is a member of the Board's Compensation Committee.
Keith E. Reihl, 47, has been a director of the Company since April
1997, and Chief Financial Officer of the Company since August 1997. Mr. Reihl
also served as Treasurer of the Company from August 1997 through November 1998.
Mr. Reihl also is the Chief Operating Officer and Treasurer of Euro Brokers and
a number of its subsidiaries, as well as a member of such companies' respective
boards of directors. Prior to being appointed Chief Operating Officer in
November 1996, Mr. Reihl had served since 1983 as the Chief Financial Officer of
Euro Brokers and a number of its subsidiaries. Prior to that time, Mr. Reihl was
employed for nine years by Price Waterhouse LLP, serving lastly as Senior Audit
Manager. Mr. Reihl is a certified public accountant and received his B.A. degree
in accounting from Elizabethtown College in 1974.
Committees, Meetings and Compensation of the Board of Directors
During 1998, the Board of Directors met ten times. All directors
attended at least 75% of the meetings of the Board and Board Committees on which
they serve.
The Board of Directors has standing Executive, Audit and Compensation
Committees. The Executive Committee is currently comprised of Messrs. Gilbert
Scharf (Chairman) and Michael Scharf, and is authorized to exercise all powers
and authority of the Board of Directors, except those reserved to the Board by
law, Board resolution or the Company's Restated Certificate of Incorporation or
By-laws. The Executive Committee did not meet during 1998.
The Audit Committee is comprised of Messrs. Stevens (Chairman) and
Whittemore and recommends to the Board of Directors the accounting firm to be
appointed as independent accountants for the Company; reviews with the Company's
management and independent accountants the Company's quarterly and annual
operating results; and reviews with the Company's independent accountants the
scope and results of their audit and the adequacy of the Company's internal
accounting procedures and systems. The Audit Committee met two times during
1998.
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The Compensation Committee is comprised of Messrs. Kopp (Chairman) and
Wigton and determines or recommends to the full Board the cash and non-cash
compensation payable to executive officers of the Company. The Compensation
Committee also administers the Company's 1996 Stock Option Plan (the "Option
Plan"). The Compensation Committee met three times during 1998.
The members of the Board of Directors are compensated in a manner and
at a rate determined from time to time by the full Board. On August 27, 1996,
each non-employee member of the Board of Directors (which at the time included
Messrs. Stevens, Whittemore, Kopp and Wigton) received as compensation a
one-time grant of options under the Option Plan to acquire 10,000 shares of
Common Stock, exercisable at $5.00 per share, and vesting in equal 50%
increments on the dates respectively six months and twelve months after the date
of grant. On August 6, 1998, these existing grants, along with the Company's
other outstanding options, had their exercise prices reset to $2.00 per share,
which was above the then current market price of $1.875 for the Common Stock.
Also, on August 14, 1998, each non-employee member of the Board of Directors
(consisting of Messrs. Stevens, Whittemore, Kopp, Wigton and M. Scharf) received
as compensation a one-time grant of options under the Option Plan to acquire
10,000 shares of Common Stock, exercisable at $2.00 per share, and vesting in
equal 50% increments on the dates respectively six months and twelve months
after the date of grant. Non-employee directors are also compensated annually in
arrears (on or before the time of the Company's annual meeting) at the rate of
$500 for each Board or Committee meeting attended, plus reimbursement of
reasonable expenses to attend.
Certain Other Relationships and Related Transactions
On August 16, 1996, the Company completed its Merger acquisition of
Euro Brokers, with Euro Brokers becoming a wholly-owned subsidiary of the
Company. In connection with the Merger, the Company entered into a registration
rights agreement with Welsh Carson and certain related investors, certain
members of Euro Brokers then-management (including Messrs. Reihl and Dulski) and
the Company's initial stockholders (including Messrs. G. Scharf, M. Scharf, Kopp
and Whittemore) providing for two demand registration rights, and certain
"piggy-back" registration rights, with respect to their shares of Common Stock.
The first demand may only be initiated by holders of at least a majority of the
total shares of Common Stock issued in the Merger to Welsh Carson and certain
related investors, but will extend to the other stockholders who are parties to
the agreement. The second demand may be made by holders of a majority of the
total shares of Common Stock held by all stockholders who are parties to the
agreement.
On March 24, 1999, the Company executed a definitive agreement with
Welsh Carson for the repurchase by the Company of all 2,986,346 shares of Common
Stock held by Welsh Carson's investment partnerships. The 2,986,346 shares
represent approximately 26.4% of the Common Stock outstanding as of the Record
Date. Under the terms of the agreement, the Company will pay a total of
approximately $5.23 million, or $1.75 per share, to repurchase the shares.
Closing of the repurchase is contingent upon the Company obtaining financing for
the transaction prior to May 31, 1999, in addition to certain other customary
conditions. If the
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repurchase is consummated, it is contemplated that the registration rights
agreement described above would be terminated in its entirety.
Gilbert D. Scharf and Michael J. Scharf are brothers. There are no
other family relationships among the Company's directors, executive officers or
persons nominated or chosen by the Company to become a director or executive
officer.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Set forth below is certain information concerning beneficial ownership
of Common Stock (i) as of the Record Date, by (x) each director and director
nominee of the Company, (y) each named executive officer (see below) of the
Company and (y) all executive officers and directors of the Company as a group
and (ii) based on public filings made through April 27, 1999, by persons known
to the Company to be the beneficial owners of 5% or more of the outstanding
shares of Common Stock.
Beneficial Ownership of Shares of Common Stock
Percentage
Name(1) Number of Shares(2) Beneficially Owned(3)
- ------- ------------------- ---------------------
Gilbert D. Scharf (4).................. 1,168,133 10.2
Michael J. Scharf (5).................. 451,233 4.0
James W. Stevens....................... 25,000 *
Frederick B. Whittemore................ 48,335 *
Larry S. Kopp.......................... 51,500 *
William B. Wigton...................... 15,000 *
Keith E. Reihl......................... 230,780 2.0
Walter E. Dulski (6)................... 205,254 1.8
Roger E. Schwed (7).................... 30,000 *
Steven R. Vigliotti.................... -- --
Donald R.A. Marshall (8)............... 782,616 6.9
Welsh, Carson, Anderson &
Stowe VI, L.P.(9)...................... 2,986,346 26.4
All executive officers and directors as a
group (10 persons) 2,254,735 19.5
- ---------------
* Less than 1%
(1) The address of each stockholder, other than Welsh Carson, is c/o Maxcor
Financial Group Inc., Two World Trade Center, 84th Floor, New York, New
York 10048. The address of Welsh Carson is 320 Park Avenue, Suite 2500,
New York, New York 10022.
(2) Includes shares of Common Stock issuable upon exercise of stock options
held by each stockholder that are currently exercisable or exercisable
within 60 days ("Exercisable Options"). Beneficial ownership of
Exercisable Options is as follows: James W. Stevens - 15,000; Frederick B.
Whittemore - 15,000; Larry S.
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Kopp - 15,000; William B. Wigton - 15,000; Gilbert D. Scharf - 100,000;
Michael J. Scharf - 9,000; Keith E. Reihl - 40,000; Walter E. Dulski -
12,000; Roger E. Schwed - 20,000; Donald R.A. Marshall - 100,000; and all
executive officers and directors as a group - 241,000.
(3) Based on 11,323,782 shares of Common Stock outstanding as of the Record
Date, plus any shares issuable upon exercise of Exercisable Options held
by the stockholder (but not by any other stockholders). If the Company's
contemplated repurchase transaction with Welsh Carson is consummated (see
Note 9 below and "Certain Other Relationships and Related Transactions"),
and assuming no other changes in the Company's capitalization in the
interim, the number of shares outstanding would be reduced to 8,337,436.
In such event, the percentages beneficially owned on a pro forma basis
would be: Gilbert D. Scharf - 13.8%; Michael J. Scharf - 5.4%; Keith E.
Reihl - 2.8%; Walter E. Dulski - 2.5%; Donald R.A. Marshall - 9.3%; and
all executive officers and directors as a group - 25.9%.
(4) Includes 411,294 shares of Common Stock that are held in the Gilbert D.
Scharf Living Trust, of which the Reporting Person is the sole trustee.
(5) Includes 3,733 shares of Common Stock that are held in the Michael J.
Scharf 1987 Grantor Income Trust, of which the Reporting Person is a
trustee, and 9,500 shares of Common Stock that are held in the Scharf
Family 1989 Trust, of which the Reporting Person is a trustee.
(6) Includes 7,000 shares of Common Stock owned by Mr. Dulski's spouse.
(7) Includes 10,000 shares of Common Stock jointly owned with Mr. Schwed's
spouse.
(8) Information with respect to Mr. Marshall and his holdings is derived from
Amendment No. 2 to his Schedule 13D with respect to the Common Stock,
filed with the Securities and Exchange Commission on December 10, 1997.
(9) Includes 50,248 shares of Common Stock owned by WCAS Information Partners,
L.P ("WCAS Information"). Information with respect to Welsh Carson and
WCAS Information and their respective holdings is derived from Amendment
No. 1 to their joint Schedule 13D with respect to the Common Stock, filed
with the Securities and Exchange Commission on February 27, 1998. As
discussed elsewhere in this Proxy Statement (see "Certain Other
Relationships and Related Transactions"), Welsh Carson and WCAS
Information have entered into an agreement with the Company to resell to
the Company all 2,986,346 of the shares of Common Stock held by them.
Closing of the transaction is contingent on the Company obtaining
financing and certain other customary conditions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and persons who
beneficially own more than 10% of a registered class of the Company's equity
securities ("10% stockholders") to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and changes in ownership in
the Company's equity securities and to furnish the Company with copies of all
such forms. Based solely on its review of the copies of such forms received by
it, and written representations from certain of the reporting persons that no
other reports were required, the Company believes that all such Section 16(a)
filing requirements applicable to its directors, officers and 10% stockholders
with respect to the Company's fiscal year ending December 31, 1998 and its prior
fiscal years were complied with on a timely basis.
9
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information with respect to each of the
executive officers of the Company who is not also a director or director nominee
of the Company.
Walter E. Dulski, 58, became an Executive Vice President of Euro
Brokers and a number of its subsidiaries in 1997. Prior thereto, Mr. Dulski had
been a Senior Vice President of Euro Brokers and such subsidiaries. Mr. Dulski
is also a director of Euro Brokers Inc. and a number of other Euro Brokers
subsidiaries. Mr. Dulski joined the predecessor business of Euro Brokers in 1979
and was a member of the American Stock Exchange from 1977 to 1984. Mr. Dulski
received his B.S. degree in Economics from Villanova University in 1963.
Roger E. Schwed, 41, has been Vice President and General Counsel of the
Company since October 1996 and, in August 1997, also became Secretary of the
Company (having previously been Assistant Secretary). Mr. Schwed is also
Executive Vice President, General Counsel and Secretary of Euro Brokers and
Executive Vice President and Secretary of a number of Euro Brokers subsidiaries.
Prior to joining the Company, from March 1995 to September 1996, Mr. Schwed was
Counsel at the law firm Skadden, Arps, Slate, Meagher & Flom LLP in New York,
and, from October 1987 to February 1995, an attorney at the law firm Cleary,
Gottlieb, Steen & Hamilton. Mr. Schwed received an A.B. degree from Princeton
University in 1979 and a J.D. degree from Columbia University School of Law in
1986.
Steven R. Vigliotti, 31, has been Treasurer of the Company since
December 1998, and Chief Financial Officer of Euro Brokers since May 1998. He
has also served as Chief Financial Officer of a number of Euro Brokers'
subsidiaries since July 1998. Prior to joining Euro Brokers, Mr. Vigliotti was
employed by the accounting firm of BDO Seidman, LLP for approximately seven
years, lastly as an audit partner in the firm's financial services group. Mr.
Vigliotti is a certified public accountant and received his B.B.A. degree in
accounting from Hofstra University in 1990.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation paid by the Company and its
subsidiaries, during each of the last three fiscal years, to its Chief Executive
Officer and its four remaining most highly compensated executive officers as of
December 31, 1998 (collectively, the "Named Executive Officers").
10
<PAGE>
Summary Compensation Table and Long-Term Compensation Awards
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Name and Fiscal Securities Underlying All Other
Principal Position Year Salary Bonus Options (# of shares) Compensation(1)
------------------ ---- ------ ----- -------------------- ---------------
<S> <C> <C> <C> <C> <C>
Gilbert D. Scharf, 1998 $443,750 $135,000 325,000 (5) $3,307
Chairman of the 1997 450,000 -- -- 3,302
Board, President 1996 168,750 -- 250,000 --
and Chief Executive
Officer (2)
Keith E. Reihl, 1998 293,750 135,000 150,000 (5) 6,657
Chief Financial Officer 1997 300,000 30,000 -- 6,655
1996 281,250 50,000 100,000 6,419
Walter E. Dulski, 1998 263,750 85,000 50,000 (5) 3,780
Executive Vice President 1997 270,000 90,000 -- 3,778
of Euro Brokers 1996 270,000 75,000 30,000 3,673
Roger E. Schwed, 1998 244,170 85,000 70,000 (5) 2,499
Vice President and 1997 250,000 100,000 -- 2,362
General Counsel (3) 1996 62,500 25,000 50,000 1,780
Steven R. Vigliotti, 1998 100,000 42,500 10,000 1,336
Treasurer (4)
</TABLE>
(1) Amounts for each of Messrs. Scharf, Reihl, Dulski and Schwed include
annual premiums ranging from $539 to $1,347 paid by Euro Brokers Inc. on
travel accident insurance policies providing coverage of $2.5 million for
Mr. Scharf (1998 and 1997 only) and $1 million for each of Messrs. Reihl,
Dulski and Schwed (1998 and 1997 only, for Mr. Schwed). Amounts for each
of Messrs. Reihl and Dulski also include annual premiums ranging from
$1,281 to $4,158 paid by Euro Brokers Inc. on long-term disability
policies currently providing for, in the event of disability, monthly
payments for life to Mr. Reihl of $7,200 and monthly payments for two
years to Mr. Dulski of $3,000. Amounts for all Named Executive Officers
also include (x) $1,000 contributions annually made by Euro Brokers Inc.
to the Euro Brokers Inc. 401(k) Savings Plan and (y) annual premiums of
$960 (a pro-rated annual premium of $576 for Mr. Vigliotti) paid by Euro
Brokers Inc. on life insurance policies providing coverage for such
officers of two times the prior year's reported Form W-2 earnings (or
base salary and guaranteed bonus, if higher or if no prior year history),
up to a maximum coverage of $500,000. Certain perquisites and other
personal benefits that aggregate in each case to less than 10% of the
Named Executive Officer's annual salary and bonus have been omitted
pursuant to item 402(b)(2)(iii)(C)(1) of Regulation S-K.
(2) Mr. Scharf did not draw a salary from the Company prior to the date of
the Merger (August 16, 1996). His compensation disclosed for 1996 relates
only to the partial year following the Merger (reflecting an annual base
salary of $450,000).
(3) Mr. Schwed did not join the Company until October 1, 1996. His
compensation disclosed for 1996 relates only to a partial year
(reflecting an annual base salary, inclusive of guaranteed bonus, of
$250,000). His salary disclosed for 1997 includes $35,000 of guaranteed
bonus. Mr. Schwed's 1996 option grants include 25,000 options granted in
February 1997, but relating to fiscal year 1996.
(4) Mr. Vigliotti did not join the Company until May 4, 1998. His compensation
disclosed for 1998 relates only to a partial year (reflecting an annual
base salary of $150,000).
(5) All options granted to the Named Executive Officer in 1996 were repriced
in 1998 (see "Report of the Compensation Committee on Executive
Compensation - Repricing of Options" below). Accordingly, all such 1996
option grants are treated, under the rules of the Securities and Exchange
Commission, as having been re-granted in 1998 and are included in the
totals presented for 1998.
11
<PAGE>
Stock Option Grants in Last Fiscal Year; Repricing of Options
The following table sets forth certain information concerning grants
of stock options made during the fiscal year ended December 31, 1998 to each
of the Named Executive Officers.
Stock Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
Number of Percentage of at Assumed Annual Rates
Securities Total Options Option of Stock Price
Underlying Granted to Exercise Term Appreciation for
Options Employees in Price Per Expiration Option Term(4)(5)
Name Granted Fiscal Year (2) Share Date 5% 10%
---- ------- --------------- ----- ---- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Gilbert D. Scharf 75,000 (1) 4.8 $ 2.13 (3) 8/13/03 $ 7,762 $ 51,629
100,000 (6) 6.4 2.00 8/26/01 (11,371) 17,473
150,000 (6) 9.6 2.00 8/26/06 61,116 225,363
Keith E. Reihl 50,000 (1) 3.2 2.00 8/13/08 42,528 126,953
100,000 (7) 6.4 2.00 8/26/06 40,744 150,242
Walter E. Dulski 20,000 (1) 1.3 2.00 8/13/08 17,011 50,781
30,000 (7) 1.9 2.00 8/26/06 12,223 45,073
Roger E. Schwed 20,000 (1) 1.3 2.00 8/13/08 17,011 50,781
25,000 (8) 1.6 2.00 9/30/06 10,474 38,396
25,000 (8) 1.6 2.00 2/03/07 14,585 50,542
Steven R. Vigliotti 10,000 (1) 0.6 2.00 8/13/08 8,506 25,390
</TABLE>
(1) Grant is under the Option Plan to acquire shares of Common Stock. Grant
was made on August 14, 1998, is an incentive stock option ("ISO") and
vests in equal 25% increments on each of the first through fourth
anniversaries of the date of grant. Upon the occurrence of a "Change
in Control" (as defined in the Option Plan), any options not then
exercisable will become immediately exercisable.
(2) Percentages calculated using a denominator of 1,560,000, representing a
total of 435,000 new options granted to employees in 1998 and 1,125,000
options originally granted to employees in (or relating to) 1996, but
repriced to $2.00 in 1998 (see "Report of the Compensation Committee on
Executive Compensation Repricing of Options" below).
(3) Mr. Scharf's exercise price represents approximately 110% of $1.93, the
fair market value, as determined under the Option Plan, of the Common
Stock on the date of grant.
(4) These amounts reflect the difference obtained by subtracting (i) the
product of the option's exercise price per share of Common Stock and the
total number of shares of Common Stock underlying the option from (ii)
the stated rate of interest (5% or 10%) applied, on a compounded basis
over the term of the option, to the product of the closing market price
of a share of Common Stock on the option grant date ($1.625 on August 6,
1998 and $1.75 on August 14, 1998) and the total number of shares of
Common Stock underlying the option.
(5) These amounts represent certain assumed rates of appreciation only, in
accordance with SEC rules. Actual gains, if any, on stock option
exercises are dependent upon the future market performance of the Common
Stock and the date(s) on which the options are exercised, and may be
significantly greater or less than the amounts reflected in the table.
(6) Options are grants under the Option Plan to acquire shares of Common
Stock. Options were granted on August 27, 1996, and consist of (i)
100,000 ISOs, with an exercise price of $5.50 per share, vesting in equal
12
<PAGE>
20% increments on each of the first through fourth anniversaries of the
date of grant and on January 1, 2001, and (ii) 150,000 non-qualified
stock options, with an exercise price of $5.00 per share, vesting in
equal 20% increments on each of the first through fifth anniversaries of
the date of grant. Exercise prices for all options were reset to $2.00 on
August 6, 1998. If a "Change in Control" (as defined in the Option Plan)
occurs after August 6, 1999, all outstanding options that are not then
exercisable will become immediately exercisable.
(7) Options are grants under the Option Plan to acquire shares of Common
Stock. Options were granted on August 27, 1996, at an exercise price of
$5.00 per share, are ISOs and vest in equal 20% increments on each of the
first through fifth anniversaries of the date of grant. Exercise prices
for all options were reset to $2.00 on August 6, 1998. If a "Change in
Control" (as defined in the Option Plan) occurs after August 6, 1999, all
outstanding options that are not then exercisable will become immediately
exercisable.
(8) Options are grants under the Option Plan to acquire shares of Common
Stock. 25,000 were granted on October 1, 1996, at an exercise price of
$5.1875, and 25,000 were granted on February 4, 1997 (relating to fiscal
year 1996), at an exercise price of $4.8125. All options are ISOs and vest
in equal 20% increments on each of the first through fifth anniversaries of
the date of grant. Exercise prices for all options were reset to $2.00 on
August 6, 1998. If a "Change in Control" (as defined in the Option Plan)
occurs after August 6, 1999, all outstanding options that are not then
exercisable will become immediately exercisable.
Prior to the repricing of its outstanding options in August 1998, the
Company had never repriced any stock options (or equivalent right) held by any
executive officer. The following table sets forth certain information concerning
all repricings of any stock options held by a Named Executive Officer during the
life of the Company.
10-Year Option Repricings
<TABLE>
<CAPTION>
Market Length of
Number of Price of Exercise Original Option
Securities Stock at Price at New Term Remaining
Underlying Options Time of Time of Exercise at Date of
Name Date Repriced Repricing Repricing Price (1) Repricing
---- ---- -------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gilbert D. Scharf, 8/6/98 150,000 $1.625 $ 5.00 $ 2.00 8 years, 20 days
Chairman of the
Board, President 8/6/98 100,000 1.625 5.50 2.00 3 years, 20 days
and Chief
Executive Officer
Keith E. Reihl, 8/6/98 100,000 1.625 5.00 2.00 8 years, 20 days
Chief Financial
Officer
Walter E. Dulski, 8/6/98 20,000 1.625 5.00 2.00 8 years, 20 days
Executive Vice
President of Euro
Brokers
Roger E. Schwed, 8/6/98 25,000 1.625 5.1875 2.00 8 years, 55 days
Vice President and
General Counsel 8/6/98 25,000 1.625 4.8125 2.00 8 years, 181 days
(1) No vesting terms were amended in connection with the August 6, 1998
repricings (except that the right to an accelerated vesting upon a
"Change in Control" (as defined in the Option Plan) was waived for the
twelve-month period following the date of repricing).
13
<PAGE>
Stock Option Exercises and Fiscal Year End Values
No options were exercised by any of the Named Executive Officers during
the Company's 1998 fiscal year. In addition, based on the December 31, 1998
closing sale price for the Common Stock of $1.625 per share and the exercise
prices for the options held by the Named Executive Officers (ranging from a low
of $2.00 to a high of $2.13), none of such options were "in-the-money" at 1998
fiscal-year end (i.e., none had an exercise price below such closing sale
price).
The following table sets forth, for each Named Executive Officer, the
number of shares of Common Stock underlying the total number of options held by
such Named Executive Officer at the Company's December 31, 1998 fiscal-year end,
with those options that were then exercisable and those that were then
unexercisable separately identified.
Exercisable/Unexercisable Stock Options at Fiscal-Year End
Number of Securities Underlying Unexercised Options
at 1998 Fiscal Year End
-----------------------
Name Exercisable Unexercisable
---- ----------- -------------
Gilbert D. Scharf 100,000 225,000
Keith E. Reihl 40,000 110,000
Walter E. Dulski 12,000 38,000
Roger E. Schwed 15,000 55,000
Steven R. Vigliotti -- 10,000
Employment Agreements
Each of the Named Executive Officers has an employment agreement with
the Company or one of its subsidiaries. Each of Mr. Scharf's and Mr. Reihl's
agreements are with the Company. Mr. Scharf's has a contract term that began on
August 16, 1996 and ends on August 16, 2001, and Mr. Reihl has a contract term
that began on August 14, 1998 and ends on August 14, 2001. The agreements
provide for annual, automatic one-year extensions of the contract term beginning
on the fourth (in the case of Mr. Scharf) or second (in the case of Mr. Reihl)
anniversary of the effective date unless either party gives notice of
non-renewal on or prior to such anniversary. The agreements provide Mr. Scharf
and Mr. Reihl with minimum annual base salaries of $450,000 and $300,000,
respectively, as from time-to-time reviewed and increased by the Board. Each
agreement provides for semi-annual bonuses to be determined in the discretion of
the Board or in accordance with any annual incentive plan adopted by the Company
or a subsidiary, for reimbursement of the executive's reasonable business
expenses and for participation in current and future employee benefit plans. If
the executive's employment is terminated by death, by the Company for "Cause"
(as defined in such agreements) or by the
14
<PAGE>
executive other than for "Good Reason" (as defined in such agreements), he will
be entitled to no further payments under his agreement. If the executive's
employment is terminated for "Disability" (as defined in such agreements), he
will be entitled to an additional six months of base salary, followed by such
benefits as are provided under any applicable disability plan. If the
executive's employment is terminated by the Company without Cause or by the
executive for Good Reason, the executive will be entitled to (i) continuation of
base salary to the end of the contract term or, if longer, for one year (a
"Salary Continuation Period"), (ii) continuation of coverage under all health,
medical and life insurance benefit plans for the longer of one year and the
remainder of the contract term or, if earlier, until the executive is
re-employed and is entitled to similar benefits from his new employer, and (iii)
treatment as an employee to the end of the contract term for purposes of vesting
of stock awards and other contingent incentive plans. Under the agreements, the
executive is subject to certain confidentiality obligations and, if the
executive's employment is terminated by the Company for Cause or by the
executive other than for Good Reason, during the one-year period following any
such termination (the "Non-Compete Period"), is obliged at the Company's request
not to engage in certain competitive businesses (in consideration of the Company
continuing to pay the executive at a rate equal to his base salary). In
addition, for up to the first year of any Salary Continuation Period, the
executive is obliged not to solicit employees of the employer (or its
subsidiaries) to work in such competitive businesses and not to solicit
customers of the employer (or its subsidiaries) for such competitive businesses.
The agreements also provide for the indemnification of the executive, to the
full extent permitted by law, for liabilities and expenses incurred in the
performance of his duties, and, if the executive substantially prevails with
respect to a preponderance of the matters at issue, for the reimbursement of
legal fees and expenses incurred in contesting a termination or enforcing a
right under his agreement.
Both Mr. Scharf's and Mr. Reihl's employment agreements have certain
provisions triggered in the event that there is a "Change in Control" (as
defined in such agreements) with respect to the Company. Following a Change in
Control, (i) the contract term is automatically extended, if necessary, so as to
continue in effect for a minimum of twenty-four months, (ii) if the executive's
employment is terminated by the Company without Cause or by the executive for
Good Reason, the executive is entitled to a lump sum payment equal to three
times the sum of (x) his base salary prior to the Change in Control and (y) the
greater of $200,000 or his annualized bonus (determined in accordance with the
agreements), with such payment to be grossed up by the Company for any federal
excise tax applied to it (and for any federal, state or local taxes applied to
such gross-up), (iii) if a good faith dispute as to termination exists, the
executive continues to receive his full compensation and benefits during the
period of the dispute, and (iv) if the executive's employment is terminated by
the executive for Good Reason, the executive is obligated to observe a
Non-Compete Period of six months.
Mr. Schwed's employment agreement is also with the Company and is
similar to the ones described above, except that (i) it has a contract term that
began on October 1, 1996 and ends on October 1, 2001 (with annual, automatic
one-year extensions beginning on the fourth anniversary of the effective date
unless either party gives notice of non-renewal on or prior to such
anniversary), (ii) it provides for a minimum annual base salary of $250,000,
(iii) it provides for a minimum annual bonus of $50,000, (iv) it permits
unilateral termination of employment by the
15
<PAGE>
executive upon 60 days prior written notice, (v) the continuation of base salary
and minimum bonus after a termination by the Company without Cause or by the
executive for Good Reason will terminate to the extent the executive is
re-employed and is entitled to similar base salary and minimum bonus from his
new employer, (vi) the Non-Compete Period is six months and (vii) if, following
a Change in Control, the executive's employment is terminated by the Company
without Cause or by the executive for Good Reason, the executive is entitled to
a lump sum payment equal to his aggregate base salary and minimum bonus for the
remainder of the contract term or, if longer, one year, but without any gross-up
for excise taxes or otherwise.
Mr. Dulski's employment agreement is with Euro Brokers, and has a
contract term that began on August 14, 1998 and ends on August 31, 2001, subject
to automatically continuing past such termination date unless and until either
party gives the other not less than six months prior written notice of
termination expiring on or after such termination date. Under the agreement, Mr.
Dulski's base salary is $270,000, and he is entitled to be considered for
discretionary semi-annual bonuses. If the executive's employment is terminated
by death, for "Disability" (as defined in the agreement), by the Company for
"Cause" (as defined in the agreement) or by the executive other than for "Good
Reason" (as defined in the agreement), he will be entitled to no further
payments under the agreement. If the executive's employment is terminated by the
Company without Cause or by the executive for Good Reason, the executive will,
for the duration of the contract term, be entitled to continuation of his base
salary and coverage under all health, medical and life insurance benefit plans
(except to the extent the executive is re-employed and is entitled to similar
base salary and benefits coverage from his new employer), and to treatment as an
employee for purposes of vesting of stock awards and other contingent incentive
plans. If, following a Change in Control, a good faith dispute as to termination
exists, the executive continues to receive his full compensation and benefits
during the period of the dispute. The agreement provides for certain
confidentiality obligations, as well as a post-termination non-competition
period with respect to not engaging in certain competitive businesses or
soliciting clients of Euro Brokers (if requested by Euro Brokers and Euro
Brokers continues the executive's base salary during such period) and a
non-solicitation period with respect to employees of Euro Brokers, with each
such period lasting for the longer of the remaining contract term or six months.
The agreement also provides that the prevailing party in any action under it is
entitled to recover from the other party all costs and expenses.
Mr. Vigliotti's employment agreement is with Euro Brokers Inc. and has
a term that began on May 4, 1998 and ends on April 30, 2000, subject to
automatically continuing past such termination date unless and until either
party gives the other not less than three months prior written notice of
termination expiring on or after such termination date. Under the agreement, Mr.
Vigliotti's base salary is $150,000, and he is entitled to be considered for
discretionary semi-annual bonuses. Upon the executive's death or termination of
the executive's employment by the employer for "Cause" (as defined in the
agreement), he is entitled to no further payments under the agreement. The
agreement provides for certain confidentiality obligations and a one-year
post-termination period with respect to non-solicitation of employees.
16
<PAGE>
PERFORMANCE GRAPH
The following graph compares cumulative total return of the Common
Stock with the cumulative total return of (i) the Standard & Poor's MidCap 400
Index (the "S&P MidCap 400 Index") and (ii) an industry peer group index
comprised of seven other publicly-traded financial companies (the "Peer Group
Index"). The graph assumes $100 was invested on December 7, 1994 (the day the
Common Stock was first traded on the OTC Bulletin Board) in shares of Common
Stock, stocks comprising the S&P MidCap 400 Index and stocks comprising the Peer
Group Index, and the reinvestment of all dividends.
The companies comprising the Peer Group Index are publicly-traded
financial companies that either (i) are, or have a subsidiary that is, an
inter-dealer broker (these companies are: Intercapital Group plc (formerly known
as Exco plc) and Trio Holdings PLC) or (ii) are, or have subsidiaries that are,
broker-dealers, share the Company's SIC code and have a market capitalization
within a certain range of the Company's (these companies are: First Albany
Companies Inc., Kinnard Investments, Inc., Rodman & Renshaw Capital Group, Inc.
(through 1997 only), Hoenig Group Inc. and Stifel Financial Corp). The returns
of each company have been weighted according to their respective stock market
capitalization for purposes of arriving at a peer group average.
[GRAPHIC OMITTED]
(1) The comparisons in the performance graph above (and the table below) are
set forth in response to SEC disclosure requirements, and therefore are
not intended to forecast or be indicative of future performance of the
Common Stock (or of any of the indices or the companies comprising them).
(2) The Peer Group Index represented in the performance graph above (and the
table below) includes the weighted stockholder returns of Rodman & Renshaw
Capital Group, Inc. only for the period from December 7, 1994 through
December 31, 1997. Because Rodman & Renshaw's common stock was
deregistered and delisted in March 1998, its stockholder returns for the
period January 1, 1998 through December 31, 1998 were omitted from the
calculation of the Peer Group Index for such period.
</TABLE>
<TABLE>
<CAPTION>
12/7/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Maxcor Financial Group Inc. 100.00 100.00 108.82 72.05 66.16 38.24
S&P MidCap 400 Index 100.00 102.37 134.05 159.78 211.32 251.70
Peer Group Index 100.00 97.44 77.43 70.59 83.24 67.82
</TABLE>
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors, formed in August
1996 after the Merger, is comprised of Messrs. Larry S. Kopp (Chairman) and
William B. Wigton, each of whom is an independent outside director and a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act.
There are no "interlocks," as defined by the SEC with respect to any director
who serves or for any part of fiscal year 1998 served as a member of the
Compensation Committee.
General
The Compensation Committee is responsible for determining the
compensation of the Company's executive officers, including the Chief Executive
Officer and the other Named Executive Officers, and also is charged with
administering the Company's Option Plan, which was adopted and approved by the
Company's stockholders in connection with the Merger. The Committee is also
charged with reviewing the Company's existing compensation and benefit plans and
programs with the goal of revising existing and/or adding new plans and
programs, if and to the extent necessary, in order to enhance the Company's
long-term profitability by attracting, motivating and retaining high-quality
executives and aligning their individual interests with the long-term interests
of the Company and its stockholders.
Currently, the Compensation Committee's objectives are implemented
through compensation packages for executive officers comprised of three major
components - base salary, annual bonus and stock option awards. In considering
and determining (or, in certain instances, recommending to the full Board) these
components, the Committee will for the relevant compensation period, among other
things, review the Company's performance, looking at factors such as its
earnings per share, any increase/decrease in its book value and its financial
and other performance (both compared to prior periods and other financial
companies or industry competitors), review the individual executive's
performance in light of his or her duties (both objectively and subjectively),
compare the individual executive's compensation to comparable executives at
industry competitors, and receive the recommendations of the Chief Executive
Officer. The Committee also takes into account the salary and bonus provisions
in existing employment agreements with certain of the Company's executives. In
making compensation decisions (or recommendations to the full Board), the
Committee exercises its discretion and judgment based on the foregoing and other
criteria, without applying a specific formula to determine the weight of each
factor considered. The Committee also considers equity and fairness when
comparing compensation packages among the Company's executives, in an effort to
maintain consistency throughout the executive compensation program.
18
<PAGE>
CEO Fiscal 1998 Compensation
In reviewing and establishing Mr. Gilbert Scharf's cash compensation in
1998, the Compensation Committee determined, reflective of Mr. Scharf's own
recommendation, not to increase the base salary of $450,000 provided for in his
employment agreement. In making this determination, the Committee primarily
considered the Company's 1998 fiscal year financial performance, including its
results of operations, and the level of Mr. Scharf's base salary compensation as
compared to other executives within the Company.
On his own initiative, as of October 1, 1998, Mr. Scharf took a
voluntary pay cut to $425,000. Mr. Scharf explained to the Committee that this
reduction was appropriate in the context of salary reductions being taken by
other officers and employees of the Company, including two of the other Named
Executive Officers.
In August 1998 the Compensation Committee recommended, and the full
Board of Directors (Mr. G. Scharf abstaining) approved, a restatement and
amendment of Mr. Scharf's employment agreement, along with those of three other
executive officers. Mr. Scharf's restated agreement maintained him at the same
salary level, but removed the requirement therein for the book value of the
Company to have increased prior to the payment to him of any discretionary
bonuses. The new agreement also permitted, as is the case with the Company's
other executives and employees, the payment of such bonuses to Mr. Scharf on a
semi-annual basis and incorporated revised "change in control" provisions. The
new agreement also extended Mr. Scharf's fixed term of employment for an
additional two years (the restated and amended agreement is described in further
detail above - see "Employment Agreements").
In recommending the new agreement for Mr. Scharf, the Compensation
Committee primarily considered the significant efforts being made by Mr. Scharf
to improve the Company's performance, including improving the focus of its
inter-dealer brokerage businesses and initiating diversification projects and
Company-wide cost reduction efforts. In this context, the Committee believed it
was no longer appropriate to have Mr. Scharf's employment agreement structured
to restrict the Committee's discretion to determine for Mr. Scharf, as it does
for the Company's other senior executives, whether and when to recommend payment
of bonuses. With respect to the change in control provisions of the new
agreement, the Committee believed the provisions to be appropriate and
consistent with the provisions found in senior executive officer agreements at
many other public corporations, which provisions are intended, in the face of
the potentially disruptive circumstances that arise if and when a change in
control situation occurs, to reinforce and encourage the continued attention and
dedication of such officers to their assigned duties, without the distraction
that may occur and be to the detriment of both the corporation and its
stockholders.
With respect to fiscal year 1998, the Compensation Committee also
recommended, and the full Board of Directors (Mr. G. Scharf abstaining)
approved, the payment of discretionary bonus compensation to Mr. Scharf totaling
$135,000. One Hundred Thousand Dollars of this amount related to the first half
of 1998, and the balance of $35,000 related to the second half of 1998. The
Committee primarily considered the factors recited above (e.g., the continued
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significant efforts of Mr. Scharf to improve the Company's operating
performance), as well as the materially higher compensation levels of chief
executive officers at a number of the Company's industry competitors and the
fact that, since consummation of the Merger in August 1996, Mr. Scharf had not
recommended for himself, or taken, any bonus compensation.
With respect to non-cash compensation, the Compensation Committee
determined, and the full Board of Directors (Mr. G. Scharf abstaining) approved,
the grant to Mr. Scharf in August 1998 under the Option Plan of 75,000 incentive
stock options, exercisable at $2.13 per share (approximately 110% of the
then-prevailing market price, as determined under the Option Plan, for the
Common Stock), and vesting in equal 25% increments over four years. In making
its determination, the Committee primarily considered that grants of options to
Mr. Scharf (and other executive officers of the Company) were last made
approximately two years ago, in (or related to) fiscal 1996. The Committee also
believed that, in view of the significant efforts being made by Mr. Scharf to
improve the performance of the Company, an increase in the incentive-based
portion of his compensation was appropriate.
Tax Considerations
Section 162(m) of the U.S. Internal Revenue Code limits the tax
deductibility by a company of compensation in excess of $1 million paid to its
chief executive officer and four remaining most highly compensated executive
officers in a taxable year. However, compensation which qualifies as
"performance-based" is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals under a plan approved by
stockholders. Compensation attributable to the Option Plan has been designed to
be, and should qualify as, "performance-based" under Section 162(m).
The Compensation Committee does not presently expect total compensation
payable to any individual Named Executive Officer to exceed the $1 million
taxable year limit. The Committee will continue to monitor the compensation
levels potentially payable under the Company's compensation programs, but
intends to retain the flexibility necessary to provide total compensation in
line with the Company's compensation philosophy and the Company's strategic
goals and best interests.
Repricing of Options
In August 1998, the Compensation Committee determined that it was in
the best interests of the Company to reset to $2.00 the exercise price on all of
the Company's 1,165,000 outstanding stock options previously granted under the
Option Plan. Previously, such exercise prices ranged from a low of $4.8125 to a
high of $5.50.
The Committee recommended, and the full Board approved, the repricing
after determining that existing option awards under the Option Plan, at exercise
prices ranging from approximately 200% to 300% over recent 1998 market prices
for the Common Stock, were not fulfilling their retention and motivation
objectives with the Company's key personnel. The
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Committee observed that, for the most part, the Option Plan was viewed
negatively by such personnel and that it was these same personnel that the
Company was relying upon to be the drivers of future improved operating
performance. Accordingly, in considering the fairness of the repricing to other
stockholders of the Company, the Committee determined that it would be in such
stockholders' long-term interests to improve the retention and motivation of the
Company's key personnel.
To avoid an inappropriate windfall for option holders, the Committee
intentionally selected a reset price that was still above the then current and
recent market prices for the Common Stock. On the date of the repricing (August
6, 1998), the last trade for the Common Stock occurred at $1.625. Over the
thirty trading days preceding the date of the repricing, the average last trade
price for the Common Stock was approximately $1.80. In addition, although the
vesting terms of outstanding options were not amended in connection with the
repricing, the right of an option holder under the Option Plan to an accelerated
vesting upon a "change in control" (as defined) was waived for the twelve-month
period following the repricing.
The Committee believes that the repricing has served the retention and
motivation goals described above and that the Company's outstanding stock
options are now providing renewed and appropriate incentives for the Company's
key personnel.
Compensation Committee
Larry S. Kopp, Chairman
William B. Wigton
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RATIFICATION OF APPOINTMENT OF AUDITORS
(Proposal 2 on the proxy card)
Subject to stockholder ratification, the Board of Directors, upon
recommendation of the Audit Committee, has reappointed PricewaterhouseCoopers
LLP ("PricewaterhouseCoopers"), formerly known as Price Waterhouse LLP, as the
Company's independent auditors for the fiscal year ending December 31, 1999.
PricewaterhouseCoopers has acted as the independent auditors for the Company's
Euro Brokers group of subsidiaries since the organization of Euro Brokers in
1986 (and for the predecessor business of Euro Brokers prior to that time). For
the fiscal year ended December 31, 1998, PricewaterhouseCoopers audited the
Company's consolidated financial statements, consulted in the preparation of the
Company's Annual Report on Form 10-K and provided assistance to Company
personnel on accounting, tax and related matters. In early 1999,
PricewaterhouseCoopers has also conducted certain agreed upon procedures
(mandated by the Securities and Exchange Commission for all broker-dealers
meeting certain net capital thresholds) with respect to the Company's "Year
2000" compliance program and consulted on the Company's new front and
middle-office systems for processing its brokerage transactions. As noted above,
one executive officer of the Company, prior to his employment by the Company,
was an employee of PricewaterhouseCoopers.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS RATIFY SUCH
APPOINTMENT. If no instructions are provided, shares authorized to be voted by
the proxies named in a returned proxy card will be voted "FOR" the ratification
of PricewaterhouseCoopers as the Company's independent auditors for 1999.
Representatives of PricewaterhouseCoopers are expected to attend the
Annual Meeting and will have the opportunity to make a statement if they desire
and to respond to appropriate questions from stockholders.
Form 10-K and Exhibits
THE COMPANY'S ANNUAL REPORT ON FORM 10-K IS BEING MAILED TO ALL
STOCKHOLDERS OF RECORD AND ACCOMPANIES THIS PROXY STATEMENT. STOCKHOLDERS OF
RECORD WHO SO DESIRE MAY OBTAIN COPIES OF ANY EXHIBIT TO THE FORM 10-K BY
WRITING TO MAXCOR FINANCIAL GROUP INC. (ATTENTION OF THE SECRETARY), TWO WORLD
TRADE CENTER, 84TH FLOOR, NEW YORK, NEW YORK 10048 AND SPECIFYING (I) THAT THEY
WERE A STOCKHOLDER OF RECORD AS OF APRIL 28, 1999, (II) THE EXHIBIT OR EXHIBITS
DESIRED AND (III) THEIR AGREEMENT TO REIMBURSE THE COMPANY FOR ITS REASONABLE
COSTS OF COPYING AND MAILING SUCH EXHIBIT(S).
Solicitation of Proxies
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers and
employees of the Company, personally
22
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or by telephone or telegram. Proxy cards and materials also will be distributed
to beneficial owners of shares of Common Stock through brokers, custodians,
nominees and other parties, and the Company expects to reimburse such parties
for their reasonable charges and expenses.
Stockholder Proposals
Recommendations for nominees to be elected to the Board of Directors
and proposals of stockholders intended to be presented at the Company's next
annual meeting of stockholders, to be held in 2000, must be submitted in writing
to Maxcor Financial Group Inc. (to the attention of the Secretary), Two World
Trade Center, 84th Floor, New York, New York 10048. Stockholder proposals must
be received by the Secretary no later than January 1, 2000 in order to be
included in the Company's proxy statement and proxy card for such annual
meeting.
Pursuant to Rule 14a-4 under the Exchange Act, stockholders of the
Company are advised that, in connection with the Company's annual meeting of
stockholders to be held in 2000, proxies solicited on behalf of the Company's
Board of Directors may confer on the persons named as proxies therein
discretionary authority to vote on any stockholder proposal presented at such
meeting that has not been submitted in writing to Maxcor Financial Group Inc.
(to the attention of the Secretary), Two World Trade Center, 84th Floor, New
York, New York 10048, on or prior to March 16, 2000 (45 days in advance of the
date this Proxy Statement was released to stockholders).
Other Matters
The Board of Directors has not received notice, and is not otherwise
aware, of any other matter which is to come before the Annual Meeting.
Accordingly, if any other matter is properly presented for consideration, the
persons named in the enclosed proxy card will have discretion to vote on such
matter in accordance with their best judgment.
By Order of the Board of Directors,
Roger E. Schwed
Secretary
April 30, 1999
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MAXCOR FINANCIAL GROUP INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF MAXCOR FINANCIAL GROUP INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 9, 1999
The undersigned hereby appoints Gilbert D. Scharf, Keith E. Reihl and Roger E.
Schwed, and each of them, proxies for the undersigned with full power of
substitution, to vote all shares of common stock, par value $.001 per share, of
Maxcor Financial Group Inc. (the "Company"), held of record by the undersigned
on April 28, 1999, at the Annual Meeting of Stockholders of the Company, to be
held on June 9, 1999, at 10:00 A.M. local time, and at any and all adjournments
or postponements thereof (the "Annual Meeting"), upon the matters set forth
below and described in the accompanying Proxy Statement and upon such other
business as may properly come before the Annual Meeting. The undersigned hereby
acknowledge(s) receipt of the Notice of Annual Meeting of Stockholders and the
accompanying Proxy Statement. Any and all proxies heretofore given by the
undersigned are hereby revoked.
This proxy, when properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR all of the Proposals. If
any other business properly comes before the Annual Meeting, the proxies will
have discretionary authority to vote this proxy with respect thereto in
accordance with their judgment.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF PROPOSALS 1 AND 2.
Proposal 1. Election of Directors:
Nominees: Gilbert D. Scharf, Michael J. Scharf and Larry S. Kopp
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the "For All Except" box and write that nominee's
name in the space provided below.)
For Withhold For All
All All Except
[ ] [ ] [ ] -----------------------------------
Proposal 2. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for the year ending December 31, 1999:
For Against Abstain
[ ] [ ] [ ]
I PLAN TO ATTEND THE ANNUAL MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
If no boxes are marked, this proxy will be voted in the manner described on the
reverse side
Dated: _____________________________________________________, 1999
Signature: _______________________________________________________
__________________________________________________________________
NOTE: Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, or guardian,
please give your full title as such.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
